LAND USE ASSISTANCE LIFELINE TOOL TO HELP ADDRESS LAND USE LIABILITY

1. LAND USE ASSISTANCE LIFELINETOOL TO HELP ADDRESS LAND USE LIABILITY Born during a development downturn Developers were looking for deep pockets Smaller cities/town out-gunned Risk Pool tool to help city/town attorneys

2. COMPETING OBJECTIVES Police Power Needs Private Property Rights COUNCIL

3. COMPLICATING FACTORS • Economic downturn – developers look to government as deep pocket • Greater public scrutiny. • Complex intersection of legal constraints.

4. GENERAL PLAN COMPLEXITIES “The process for adopting or amending the general plan of a municipality or a county is more comprehensive than the zoning amendment process in terms of involvement of the community and other municipal, county and state agencies. Thus, there are more opportunities for the land use lawyer to create a favorable record on which to base future litigation.” CLE International Seminar

5. THREE BASIC QUESTIONS • What creates liability? • How to avoid liability? • How to induce success?

6. CONSTITUTIONAL CLAIMS • Federal and State Constitutions: “No person shall . . . be deprived of life, liberty or property without due process of law.” • Equal protection – must treat similar property owners similarly. • Due process – must act rationally.

7. SUBSTANTIVE DUE PROCESS • Entitled to a hearing. • Health, safety, morals and welfare. • Zoning ordinance must bear a reasonable relationship to these goals. • “Rational basis.” • “Shocks the conscience.”

8. EQUAL PROTECTION EXAMPLES • No rational basis for treating group homes for mentally challenged and other multi-person homes differently. • There is a rational basis for treating adult theaters and non-adult theaters differently.

9. WAYS PROPERTY RIGHTS CAN BE “TAKEN” • Explicit taking/condemnation. • Regulatory taking/inverse condemnation, but must deprive property owner of “all economically viable use of land.” • Proposition 207 • Exactions • Development fees

10. COMMON LAW VESTED RIGHTS • Historically, Arizona courts have adopted a “building permit” rule. • Special use permit and reliance in the form of substantial monetary expenses may be enough.

11. VESTED RIGHTS • Common law. • Development agreement. • Protected development right plans.

12. DEVELOPMENT AGREEMENTS(ARS § 9-500.05) • Contractually vest rights • Contract zoning? • More than just zoning • Need police power carve outs • If part of pre-annexation agreement, need to address County role • Development Agreements create significant value for the developer • Be sure to get something in return

13. PROTECTED DEVELOPMENT RIGHTS(ARS § 9-1201 et seq.) • Provides developers the ability to vest rights without the formality of a Development Agreement. • Developer submits a PAD or PUD and stamps the words “Protected Development Right Plan” on it. • Even a final subdivision plat can be a Protected Development Rights Plan • Automatically vests the developer’s rights for three years (non-phased) or five years (phased)

14. VESTED RIGHTS The parties agree that the Site plan approval includes approvals of any expansions requested by Developer from time to time without any further discretionary review by the City.

15. VESTED RIGHTS • The City represents and covenants that the Site is zoned R-3. • The City acknowledges that the Developer can redevelop the Site in accordance with presently existing regulations. • The City represents that the zoning stipulations set forth in Attachment No. 5 attached hereto have been legally adopted, are valid and enforceable, and apply to the entire Site.

16. VESTED RIGHTS The City may adopt future updates of, and amendments to, existing buildings, plumbing, mechanical, electrical, dangerous buildings, drainage, and similar construction and safety related codes, such as the Uniform Building Code, which updates and amendments are generated by a nationally recognized construction/safety organization, such as the International Conference of Building Officials, or by the county, state or federal governments or by the Maricopa County Association of Governments, provided such code updates and amendments shall be applied in the most minimal and least intrusive manner which is practicable under the circumstances.

17. OTHER CARVE OUTS FOR NEW REGULATIONS • Imposed by other governments • Needed to address threats to public health and safety • Fees that are uniformly imposed

18. PERMITS AND GOVERNMENTAL APPROVALS The City agrees to use its best efforts to process any variances and use permits requested by Developer in an expeditious manner, without guaranteeing the final outcome. The City will also use its best efforts to process demolition permits, interpretations and administrative actions reasonably necessary to further the redevelopments of the Site in accordance with the provisions hereof and to facilitate reasonable resolutions of building code issues.

19. PROP 207: “LAND USE LAW” • Any new statute, rule, ordinance, resolution, or law that regulates the use or division of land or any interest in land or farming or foresting practices. • Enacted after property acquired.

20. DIMUNITION IN VALUE • Owner entitled to just compensation • If fair market value is reduced

21. PROP 207 INCREASES REGULATORY TAKING RISK • Before: Must deny all economically viable use. • Now: Any diminution in value = liability.

22. REGULATORY TAKINGSThe vultures are circling • If the City adopts a new zoning designation without your consent, we could go to the City and ask them to withdraw the new designation “as it clearly violates the new law.” • If a City adopts any kind of code (subdivision, design regulations, zoning) that makes it more costly, onerous or time consuming to develop your land we can go to them and point out that the action “clearly violates the new law.”

23. Proposition 207 “does not require that you actually apply for a rezoning . . . in order to claim just compensation.” • If the City adopts design guidelines that make your planning more expensive, “we believe you have an action.” • If the City has given you zoning approval and they are holding you up, “we believe you have a potential action.”

24. If a City asks to annex you and cannot give you the exact equivalent of the zoning you have in the unincorporated area, “you likely have an action.” • “This will make it nearly impossible for a City to expand its planning boundaries unless every owner in that boundary consents to the new designation.” • Anytime a City goes to adopt a new provision, “there is likely an action to be taken.”

25. WHAT DOES PROP. 207 APPLY TO? • Rezoning • Text amendments • Overlays • Historical districts • Design review • Subdivision plats • Hillside ordinances

26. IS THE SKY FALLING? • Pull any land use regulation into the list of Prop. 207 exceptions. • Traffic, fire codes, building codes, health and sanitation, transportation, pollution, solid/hazardous waste. • Nuisance • Federal law • Sex, drugs and liquor • Prior regulations • Utilities • Only apply to property owner directly regulated.

27. If an exception is not available: • Consider asking for a waiver. • Document property owner approval. • Show no diminution in value.

28. WAIVE • If really encounter a problem, waive the requirement as to the complaining owner. • Potential equal protection problems – triggers 42 USC § 1983 exposure.

29. EQUITABLE ESTOPPEL • City takes one position. • The property owner reasonably relies. • City takes different position. • The property owner is injured due to the reliance.

30. DETRIMENTAL RELIANCEAPPLIED TO GOVERNMENTS • DOR informs taxpayer that “sales tax” does not apply and later changes its position. • City issues billboard building permit that violates zoning code and property owner relies.

31. DETRIMENTAL RELIANCEAPPLIED TO GOVERNMENTS • Town issues permit for driveway on hillside. • Town requires installation of sewer. • Town induces start of construction. • Town passes hillside preserve ordinance and stops work.

32. TO AVOID DETRIMENTAL RELIANCE CLAIMS • Clearly identify “chain of command.” • Periodic review of communications/correspondence concerning key project. • Try to limit communications to written correspondence.

33. CASES CUTTING GOVERNMENT’S WAY • Cannot use estoppel to enforce a contract that is against public policy. Western Collectors, Inc. v. Tierney, 96 P.3d 1070 (Ariz. App. 2004). • Governments are entitled to some leeway as to how its employees conduct government business. • A government is not estopped by the casual acts, advice or instructions of non-supervisory employees; need formality. Lowe v. Pima County, 217 Ariz. 642 (App. 2008) • Government may correct a mistake of law. Thomas King, Inc. v. City of Phoenix, 92P.3d 429 (Ariz. App. 2004).

34. DAMAGES AND42 USC SECTION 1983 • Create a right • Create damages • If constitutional right denied under color of state law: Nominal Damages $1.2 Million Attorney Fees

35. DISPUTE RESOLUTION • Arbitrate factual disputes. • Mediate all disputes? • Give parties “day in court.” • Litigation: zero sum game. • Mediation: problem resolution. • Avoid recovery of attorneys’ fees. • Leaves the parties (not the lawyers) in control.

36. CONTRACTUALLY REQUIRED MEDIATION If a dispute arises out of or relates to this Agreement, or the breach thereof, and if the dispute cannot be settled through negotiation, the parties agree first to try to settle the dispute through mediation before resorting to arbitration, litigation or some other dispute resolution procedure. In the event that the parties cannot agree upon the selection of a mediator within 7 days, either party may request the presiding judge of the Superior Court to assign a mediator from a list of mediators maintained by [the Arizona Municipal Risk Retention Pool].

37. MEDIATION REQUIRED BY ORDINANCE • Accomplish by ordinance what would accomplish via agreement. • Get the parties before a mediator. • Subject to approval by appropriate person/body. • Mandatory hearing.

38. LIMITATION ON DAMAGES • Limit damages. • Preserve injunctive relief. • Must decide if you want to agree to binding arbitration.

39. INDEMNITYGENERAL V. SPECIFIC • General indemnity – silent on indemnitee’s negligence; entitled to indemnification for passive negligence, but not active negligence. • Specific indemnity – addresses indemnitee’s negligence requiring indemnification for indemnitee’s negligence. • Grubb & Ellis Management Services, Inc. v. 407417 B.C. LLC, 138 P.3d 1210 • Washington Elementary School District No. 6 v. Baglino Corp., 169 Ariz. 58; 817 P.2d 3

40. INDEMNITYPASSIVE V. ACTIVE • Passive – failure to discover, take adequate precautions; mere nonfeasance. • Active – personal participation; affirmative acts; acts or omissions with knowledge or acquiescence. • Estes Company v. Aztec Construction, Inc., 677 P.2d 939

41. RESULT INDEMNITY LANGUAGE Indemnifying for negligence of Indemnitor and for negligence of Indemnitee Indemnity for negligence of Indemnitor in whole or in part Indemnifying for negligence of Indemnitor and silent about negligence of Indemnitee Each indemnify the other for liability caused by indemnitor Worst Outcome Must indemnify for negligence of Indemnitee General indemnity – must indemnify for passive negligence of Indemnitor Best outcome

42. ARIZONA MUNICIPAL RISK RETENTION POOL LESSONS LEARNED • Challenge developer to forge fair deal. • Once fair deal negotiated, do all you can to deliver deal. • Use clear chain of command.

43. ARIZONA MUNICIPAL RISK RETENTION POOL LESSONS LEARNED • Get everyone on same page. • Use executive session when applicable. • Identify problems early on. • Correct mistakes early.

44. WHY ARE LAND USE CLAIMS ON THE RISE? • City/town officials caught in the middle. • Developers are well financed and experienced. • Developers when squeezed by market look for somebody to blame. • Taxpayers are ultimate “deep pocket.” • Land use law complexity. DEVELOPER »CITY/TOWN º TAXPAYER EXPECTATIONS CONCERNS