Zoning and Land Use Planning — Growth Management

February 01, 2002

The trend to “smart growth” once again has focused the planning and legal communities on the question of suburban sprawl, rebuilding inner city infrastructure, and the extent to which open space, farmland, and the like should be preserved. A key issue is how this growth should be managed, given the competing interests of the regulators and the regulated and the fact that their tug of war often plays out in an arena circumscribed by the constitutional rights of property owners./1

The threshold question when considering how to manage growth is whether the fundamental parameters should be established at the state level or at the local level. No one questions the fact that growth should be implemented on a local level. However, strong state guidelines may be necessary to have a statewide imprimatur on the development process. This usually involves state monies for certain infrastructure and for certain other “goods” that the state government may think appropriate. This requires that a state master plan be developed over a period of time by a state agency, a practice embraced by only a few states./2

On the other hand, the vast majority of states leave development to local governments with very broadly articulated goals at the state level. In this regard, the State Constitution of New York, for example, gives great power to local governments to determine their own future and destiny, especially in terms of land use. New York State law requires only that a zoning ordinance, which is the fundamental method of controlling development, be in accordance with a comprehensive plan for the entire community.

This kind of approach very well can result in vastly different development philosophies across a state’s municipal boundaries. For instance, Town “A” may be deeply committed to commercial and industrial growth, leading it to zone property within its geographical borders for those purposes. Directly next door, however, Town “B” might be devoted to large lot zoning with minimum lots of five acres. Although this may seem inconsistent on its face, it would be permitted in states that give local governments the authority to articulate the wishes of the people within their community in a comprehensive plan. Once the decision is made — one government chooses industrial development and commercial development, and the other opts for large lots for estate-like residential zoning — both will be upheld from a substantive point of view.

Frequently, there are major guidelines in place from a state with respect to resources that transcend localities and require consistent regulation. This approach is a hybrid between a strictly local approach and the imposition of a state master plan. A coastline, for example, might be developed in accordance with state guidelines and administered by a state agency.

Resources of statewide value typically are governed by state regulation. Some states, such as New York, Nevada and California, have identified resources of state concern that transcend the regulation of resources at the local level. The Lake Tahoe Regional Planning Agency is based on a compact between Nevada and California (approved by Congress) creating the agency, which governs land use in the designated area. In New York, these resources have given rise to the Adirondack Park Agency and the Long Island Pine Barrens Commission.

The New York Pine Barrens Act, which created the Long Island Pine Barrens Commission, protects the open space in the core area of the Pine Barrens as well as the sole source aquifer that underlies the area. This aquifer is the only source of drinking water for all the suburban communities in Long Island’s Nassau and Suffolk Counties — well over six million people. The state has determined that the proper development in this area must be regulated at the state level because of the fragile and important nature of the resource and because it crosses several municipal boundaries. However, the board that governs development in the Pine Barrens is composed of representatives of local government.

Enabling Legislation

Given the above, the development of an area should be approached by means of the enabling legislation in the state. For example, if a state permits local governments to have carte blanche in this regard, then each local government will have to create its own master plan and a zoning ordinance to effectuate that master plan. Of course, in creating the master plan, public input will be required and will be a very essential element of validating the master plan at a later time. In Udell v. Haas,/3 New York’s highest court, the New York Court of Appeals, extensively discusses the question of master plans and their use in development. In pertinent part, the Court of Appeals advises municipalities as follows:

“Zoning is not just an expansion of the common law of nuisance. It seeks to achieve much more than the removal of obnoxious gases and unsightly uses. Underlying the entire concept of zoning is the assumption that zoning can be a vital tool for maintaining a civilized form of existence only if we employ the insights and the learning of the philosopher, the city planner, the economist, the sociologist, the public health expert and all the other professions concerned with urban problems.

“This fundamental conception of zoning has been present from its inception. The almost universal statutory requirement that zoning conform to a “well-considered plan” or “comprehensive plan” is a reflection of that view. . . . The thought behind the requirement is that consideration must be given to the needs of the community as a whole. In exercising their zoning powers, the local authorities must act for the benefit of the community as a whole following a calm and deliberate consideration of the alternatives, and not because of the whims of either an articulate minority or even majority of the community. . . . Thus, the mandate . . . is not a mere technicality which serves only as an obstacle course for public officials to overcome in carrying out their duties. Rather, the comprehensive plan is the essence of zoning. Without it, there can be no rational allocation of land use. It is the insurance that the public welfare is being served and that zoning does not become nothing more than just a Gallup poll.”

Constitutional Protections

To determine whether the community seeks to encourage sprawl into the countryside or to draw a very strong line at preservation, the government will be able to use environmental studies and then make judgments, circumscribed by Constitutional admonitions, as to the extent of growth and the extent of development that it will permit in the future. These issues frequently are extremely contentious because property owners generally own property for investment purposes or to obtain as large a financial profit as possible.

When a judgment is made to limit development to less than the ordinary development permitted by cases such as Euclid v. Ambler Realty Company,/4 the government must be careful to make a clear determination as to the applicability of the constitutional protections to the land owner in terms of takings. For example, if a local government sought to protect certain landmarks and prohibit additional development of the landmark site even though other sites in the area may be significantly developed beyond the yield of the landmark site, it may employ the concept of transfer of development rights (TDR) to attempt to give value to the property that is being regulated.

The TDR process would apply, for example, if particular property cannot be developed because the government wants to preserve an aquifer, open space, or a landmark. In this situation, the owners of the properties that are involved might have their ability to develop their property taken from them, thus rendering the property valueless. To attempt to preserve value in these situations, the local government might rely on a TDR regime, as has been employed successfully in New York in the Pine Barrens.

In approaching the problem of compensating owners as required by the Constitution, the governments involved recognized that the right to develop one’s property was “an essential component of the value of the underlying property.”/5 The New York State Legislature determined to use the TDR concept to preserve the Long Island Pine Barrens’ aquifer. (The same philosophy can be utilized in terms of preservation of open space, recreational land, and other land from which most of the value is taken by zoning.)

Faced with a requirement imposed by New York State to preserve the Pine Barrens, the Town of Brookhaven, with extensive Pine Barrens land located in the central portion of the town, invoked the concept of preservation by the transfer of development rights and adopted an ordinance that permitted the use of TDRs in conjunction with the preservation effort. One of Brookhaven’s laws permits third parties or a Pine Barren credit clearing house, which is a “bank” authorized by the Pine Barrens Protection Act, to purchase development rights from property owners in the core preservation area and sell them. The purchaser of the rights of the protected property is given compensation, either by selling the rights to the bank, which provides a ready market, or in the marketplace to developers who will use them elsewhere.

To use those rights at any other location, Brookhaven amended a town ordinance to create areas known as “receiving zones” in which increased development would be not only permitted, but encouraged by the town. Rather than designate in advance certain specific target receiving sites, where the rights could be used by adding them to already designated density, the town wisely designated its entire one-acre and two-acre zones as potential receiving zones for these development rights, thus creating a very broad-based market for the use of development rights. In addition, by employing a floating-zone approach, Brookhaven’s new planned development district allows the town to permit a planned development district anywhere in the town, preferably (but not required) on 50 acres or more, provided certain conditions are met. Thus, the town has embraced the concept of TDRs and uses it to protect the aquifers and to protect open space. The use of the rights are not targeted to specific areas of the town, but to a very broad section of the town, namely its one and two-acre zoning districts, which are potential receiving zones for the uses of these rights.

Further, on areas of 50 acres or more, provided certain conditions are met, the town permits a planned development district (PDD) in which these rights can be used. One of the most appealing features of the PDD law, in addition to allowing the use of the TDRs, is that it can be used to increase residential density in the non-residential receiving zones. This is a novel and dramatic approach to permit TDRs to be used in commercial areas pursuant to a prescribed formula and to increase development of residential use in other areas where the town may wish to embrace smart growth techniques.

The merger of TDRs and smart growth is a very formidable partnership that could be employed by a town or developer who has sufficient land at his disposal. This potential has strong appeal because it will create a very soundly planned community, and has the ability to contain suburban sprawl, and at the same time, give the property owners in the “sprawl area” ample opportunity to obtain real value from their property. This, of course, is far more desirable than requiring government to pay for the value taken pursuant to a theory of inverse condemnation based on Supreme Court takings jurisprudence./6

Interestingly, using residential TDRs to create additional commercial development pursuant to a statutory formula will enable increased commercial development, yield more jobs and generates greater tax payments, without a concomitant increase in the number of residents or school children requiring additional services in the particular area. This could be a very important approach for a community. In addition, if the community wishes to concentrate population and permit additional affordable housing in the receiving area, TDRs can be used in this regard as well. Further, governments can negotiate with developers who seek to use the TDR concept to persuade them to contribute to certain recreational facilities and the construction of schools and certain infrastructure, either through the concepts of exactions or impact fees.

A PDD development should authorize the use of development agreements, under which a developer receives the right to undertake and complete a development and the right to use particular property in accordance with an approved site plan. In exchange, the developer agrees to provide certain amenities and improvements to the municipality. The result is that a developer is protected from having its development plan changed, against its will, by political forces that may come on the scene within a year or two of the approval, and the municipality makes certain that the amenities and public improvements that the developer has promised ultimately will be delivered. This type of agreement is absolutely necessary when dealing with large phased development.

One of the critical ingredients that is required in a proper TDR program is that the “bank” be funded to some extent by government, so that if an owner wishes to sell land to the “bank,” the “bank” will be able to purchase it. The desirable situation is for the bank then to start to sell these rights to developers and create a revolving fund.

The concept of development rights can be used to encourage smart growth, to limit suburban sprawl, to continue to “pay” for preserving land, and to provide for reasonable smart development. This situation must be accepted by the public at large and public input is necessary. Public hearings, in terms of the overall generic aspects of the development also are essential. These hearings would be held under local environmental statutes that require an environmental analysis as soon as possible in the process. In addition, the environmental procedures identify issues, areas of concern, and, most importantly, resources that should be preserved and protected. The tool with which to do that is the TDR concept.

The one caution sign that has arisen in connection with TDRs is the concurring opinion by Justices Scalia, O’Connor and Thomas in Suitum v. Tahoe Regional Planning Agency./7 In that opinion, written by Justice Scalia, the three Justices made it known that they did not think that TDRs should be utilized to attempt to circumvent the takings jurisprudence of the Supreme Court. Justice Scalia described TDRs, when used to vitiate the concept of taking, as “a clever, albeit transparent device, that seeks to take advantage of a peculiarity of our takings jurisprudence: whereas once there is a taking, the Constitution requires just (i.e. full) compensation . . . a regulatory taking generally does not occur so long as the land retains substantial (albeit not as full) value.”/8 Clearly, what he is saying, is that if TDRs are considered “value,” when a property is completely regulated or taken, the presence of TDRs, ipso facto, negates a taking. Under such circumstances, the three justices would not permit the utilization of TDRs to trump a taking cause of action.

However, they do see a role for TDRs in the development process. Simply put: once a taking is established and damages are calculated, the value of the TDRs is used to reduce the damages which the property owner has incurred. In other words, in the first instance, a taking does not occur because the TDRs give value to the property. In the second instance, a taking does occur and the value of the TDRs is considered in mitigation of the damages. Obviously, which approach is approved is critical to governmental thinking, because if the Scalia view ultimately prevails in the Supreme Court, then government will have to contribute the value of the property that is preserved or not developed, less the value of the TDRs. This could be a formidable issue. Justice Scalia did not hide his feelings for TDRs when he stated, “TDRs have nothing to do with the use or development of the land to which they are (by regulatory degree) ‘attached’. The right to use and develop one’s own land is quite distinct from the right to confer upon someone else an increased power to develop his land. The latter is valuable, to be sure, but it is a new right conferred upon the landowner in exchange for the taking, rather than a reduction of the taking. In essence, the TDR permits the landowner, whose right to use and develop his property has been restricted or extinguished to extract money from others.”/9

Justice Scalia is only speaking for three members of the Court. The remainder of the Court decided the case on a question of ripeness, and did not address the TDR issue. This case and the views of the concurring justices must be considered whenever government gets involved in these TDRs.

Conclusion

The various tools described in this column can play a vital role in growth management. It is essential at the state level to insure that TDRs are fairly created and administered. In this regard, the New York and Brookhaven models in connection with the Pine Barrens development, would provide a very fine reference. In addition, the Brookhaven model, in connection with the use of the TDRs in so many areas of the town and the conversion of the TDRs into commercial TDRs, also is extremely useful.

When it comes to impact fees and development agreements, the states of California and Florida provide, through their statutory schemes, some very useful models. Blending the New York experience, with the impact fee and exaction fee experience, should give a reasonable approach to controlling development and controlling governmental spending as it tries to forge a reasonable development for all stakeholders.

John M. Armentano, a partner with the Long Island law firm of Farrell Fritz, P.C., represents local governments and developers in zoning, land use, and environmental matters, including litigation.

NOTES:

1. The primary source of a property owner’s protections is found in the United States Constitution and in a series of decisions interpreting relevant provisions of the Constitution. The greatest protection of a property owner’s rights is found in the area of due process and takings law under the Fifth and Fourteenth Amendments to the U.S Constitution. See, e.g., Lucas v. South Carolina Coastal Commission, 505 U.S. 1003; Nollan v. California Coastal Commission, 483 U.S. 825; Agins v. City of Tiburon, 447 U.S. 255. The Equal Protection Clause of the Fourteenth Amendment also can apply. See, e.g., Village of Willowbrook v. Olech, 528 U.S. 562.

2. States that have centralized planning with statewide criteria and established policies include Florida, Hawaii, Maine, Minnesota, New Jersey, Oregon, and Vermont. Florida, for example, requires state agency Regulation of proposed developments that have a regional impact. See Fla. Statutes Section 380.0651.

3. 21 N.Y.2d 463.

4. 272 U.S. 365.

5. Fred F. French Investing Co. v. City of New York, 39 N.Y.2d 587; see, also, Penn Central Transportation Co. v. City of New York, 438 U.S.104(approving New York Court of Appeals’ analysis of the value of air rights).

6. See, e.g., Lucas v. South Carolina Coastal Commission, supra.

7. 520 U.S. 725 (1997).

8. Id., 520 U.S. at 747-48 (Scalia, J., concurring in part and concurring in the judgment) (emphasis in original).

9. Id., 520 U.S. at 747 (Scalia, J., concurring in part and concurring in the judgment (emphasis in original).

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