Dolan v. City of Tigard , 317 Or. 110 ( 1993 )

VAN HOOMISSEN, J.

Petitioners in this land use case seek review of a Court of Appeals’ decision affirming a Final Opinion and Order of the Land Use Board of Appeals (LUBA) in favor of respondent City of Tigard (city). Dolan v. City of Tigard, 113 Or App 162, 832 P2d 853 (1992). The issue is whether city has demonstrated the required relationship between the conditions that it attached to its approval of petitioners’ proposed land use and the expected impacts of that land use.¹ Petitioners argue that, because city failed to demonstrate an “essential nexus” or a “substantial relationship” between the exactions demanded by city and the impacts caused by their proposed development, city’s exactions constitute a “taking” under the Fifth Amendment of the federal constitution.² City responds that it need only show a “reasonable relationship” between the imposition of the conditions and the legitimate public interest advanced. For the reasons that follow, we affirm the Court of Appeals’ decision.

Petitioners own 1.67 acres of land in downtown Tigard. The land is within city’s “central business district” zone and is subject to an “action area” overlay zone (CBD-AA zone). The land’s current use is as a retail electric and plumbing supply business, a general retail sales use.

Petitioners applied to city for a permit to remove an existing 9,700-square foot building and to construct a 17,600-square foot building in which to relocate the electric and plumbing supply business and to expand their parking lot (phase I). Petitioners eventually intend to build an additional structure and to provide more parking on the site (phase II); however, the exact nature of that additional expansion is not specified. Petitioners’ proposed intensified use (phase I) is permitted outright in the CBD zone; however, the AA overlay zone, which implements the policies of the Tigard Community Development Code, allows city to attach conditions to the development in order to provide for projected transportation and public facility needs.

City granted petitioners’ application, but required as conditions that petitioners dedicate the portion of their property lying within the 100-year floodplain for improvement of a storm drainage system and, further, that they dedicate an additional 15-foot strip of land adjacent to the floodplain as a pedestrian/bicycle pathway.³ Petitioners sought a variance from those conditions, which city denied.⁴

In its 27-page final order, city made the following pertinent findings that petitioners do not challenge concerning the relationship between the dedication conditions and the anticipated impacts of petitioners’ project:

“Analysis of Variance Request. The [City of Tigard Planning] Commission does not find that the requirements for dedication of the area adjacent to the floodplain for greenway purposes and for construction of a pedestrian/ bicycle pathway constitute a taking of applicant’s property. Instead, the Commission finds that the dedication and pathway construction are reasonably related to the applicant’s request to intensify the development of this site with a general retail sales use, at first, and other uses to be added later. It is reasonable to assume that customers and employees of the future uses of this site could utilize a pedestrian/bicycle pathway adjacent to this development for their transportation and recreational needs. In fact, the site plan has provided for bicycle parking in a rack in front of the proposed building to provide for the needs of the facility’s customers and employees. It is reasonable to expect that some of the users of the bicycle parking provided for by the site plan will use the pathway adjacent to Fanno Creek if it is constructed. In addition, the proposed expanded use of this site is anticipated to generate additional vehicular traffic, thereby increasing congestion on nearby collector and arterial streets. Creation of a convenient, safe pedestrian/bicycle pathway system as an alternative means of transportation could offset some of the traffic demand on these nearby streets and lessen the increase in traffic congestion.

“At this point, the report will consider the applicant’s request from the requirement to dedicate portions of the site within the 100-year floodplain of Fanno Creek for storm water management purposes. The applicant’s Statement of Justification for Variance * * * does not directly address storm water draining concerns * * *.

“The Commission does not find that the requirements for dedication of the area within the floodplain of Fanno Creek for storm water management and greenway purposes constitutes a taking of the applicant’s property. Instead, the Commission finds that the required dedication would be reasonably related to the applicant’s request to intensify the usage of this site, thereby increasing the site’s impervious area. The increased impervious surface would be expected to increase the amount of storm water runoff from the site to Fanno Creek. The Fanno Creek drainage basin has experienced rapid urbanization over the past 30 years causing a significant increase in stream flows after periods of precipitation. The anticipated increased storm water flow from the subject property to an already strained creek and drainage basin can only add to the public need to manage the stream channel and floodplain for drainage purposes. Because the proposed development’s storm drainage would add to the need for public management of the Fanno Creek floodplain, * * * the requirement of dedication of the floodplain area on the site is related to the applicant’s plan to intensify development on the site. ’ ’ City of Tigard Planning Commission Final Order No. 91-09 PC at 13, 20-21.

On petitioners’ appeal, the Tigard City Council approved the Planning Commission’s final order.

Petitioners appealed to LUBA. They did not challenge the adequacy of city’s above quoted findings or their evidentiary support in the record. Rather, petitioners argued that city’s dedication requirements are not related to their proposed development and, therefore, that those requirements constitute an uncompensated taking of their property under the Fifth Amendment.

In considering petitioners’ federal taking claim, LUBA assumed that city’s findings about the impacts of the proposed development were supported by substantial evidence. Dolan v. City of Tigard, 22 Or LUBA 617, 626 n 9 (1992). Accordingly, LUBA considered only whether those findings were sufficient to establish the requisite relationship between the impacts of the proposed development and the exactions imposed, i.e., do city’s findings support city’s action? LUBA stated:

“Petitioners do not contend that establishing a greenway in the floodplain of Fanno Creek for storm water management purposes, and providing a pedestrian/bicycle pathway system as an alternative means of transportation, are not legitimate public purposes. Further, petitioners do not challenge the sufficiency of the ‘nexus’ between these legitimate public purposes and the condition imposed requiring dedication of portions of petitioners’ property for the greenway and pedestrian/bicycle pathway. Rather, petitioners’ contention is that under both the federal and Oregon Constitutions, the relationship between the impacts of the proposed development and the exactions imposed are insufficient to justify requiring dedication of petitioners’ property without compensation.” Id. at 621 (emphasis in original).

LUBA concluded:

“In view of the comprehensive Master Drainage Plan adopted by respondent providing for use of the Fanno Creek greenway in management of storm water runoff, and the undisputed fact that the proposed larger building and paved parking area on the subject property will increase the amount of impervious surfaces and, therefore, runoff into Fanno Creek, we conclude there is a ‘reasonable relationship’ between the proposed development and the requirement to dedicate land along Fanno Creek for a greenway.

“Furthermore, the city has adopted a Comprehensive Pedestrian/Bicycle Pathway Plan which provides for a continuous network of pedestrian/bicycle pathways as part of the city’s plans for an adequate transportation system. The proposed pedestrian/bicycle pathway segment along the Fanno Creek greenway on the subject property is a link in that network. Petitioners propose to construct a significantly larger retail sales building and parking lot, which will accommodate larger numbers of customers and employees and their vehicles. There is a reasonable relationship between alleviating these impacts of the development and facilitating the provision of a pedestrian/bicycle pathway as an alternative means of transportation.” Id. at 626-27.

LUBA held that the challenged conditions requiring dedication of portions of petitioners’ property did not constitute an unconstitutional taking under the Fifth Amendment. Id. at 627.

The Court of Appeals affirmed, rejecting petitioners’ contention that in Nollan v. California Coastal Comm’n, 483 US 825, 107 S Ct 3141, 97 L Ed 2d 677 (1987), the Supreme Court had abandoned the ‘ ‘reasonable relationship ” test for a more stringent “essential nexus” test. Dolan v. City of Tigard, supra, 113 Or App at 166-67.⁵

On review,⁶ petitioners first argue that city must meet a higher standard than a “reasonable relationship,” that there must be an “essential nexus” or “substantial relationship” between the impacts of the development and the dedication requirements; otherwise, imposing exactions as a condition of land use approval is an unconstitutional taking. They rely on Nollan v. California Coastal Comm’n, supra⁷ Petitioners argue that, because city has not demonstrated an essential nexus between its exactions and the demands that petitioners’ proposed use will impose on public services and facilities, the requisite substantial relationship is missing and, therefore, that the exactions imposed on them by city constitute a taking under the Fifth Amendment. As a fallback position, petitioners argue that city cannot demonstrate even a “reasonable relationship” between their development’s impacts and city’s exactions.⁸

City responds that the “reasonable relationship” test which was widely applied in regulatory takings cases before the Supreme Court’s decision in Nollan was not abandoned in Nollan. Under that test, city asserts, the dedication conditions that it imposed on petitioners do not constitute a taking under the Fifth Amendment.

A land-use regulation does not effect a “taking” of property, within the meaning of the Fifth Amendment prohibition against taking private property for public use without just compensation, if it substantially advances a legitimate state interest and does not deny an owner economically viable use of the owner’s land. Nollan v. California Coastal Comm’n, supra, 483 US at 835-36; Keystone Bituminous Coal Assn. v. DeBenedictis, 480 US 470, 495, 107 S Ct 1232, 94 L Ed 2d 472 (1987); Agins v. City of Tiburon, 447 US 255, 260, 100 S Ct 2138, 65 L Ed 2d 106 (1980). Requiring an uncompensated conveyance of the easement outright would violate the Fourteenth Amendment. Nollan, supra, 483 US at 834.

Before the Supreme Court’s decision in Nollan, federal and state courts struggled to identify the precise connection that must exist between the conditions incorporated into a regulation and the governmental interest that the regulation purports to further if the regulation is to be deemed to ‘ ‘substantially advance’ ’ that interest. In the midst of a range of tests set forth by various courts, the Ninth Circuit Court of Appeals concluded in Parks v. Watson, 716 F2d 646, 652 (9th Cir 1983), that, at the very least, a condition requiring an applicant for a governmental benefit to forego a constitutional right is unlawful if the condition is not rationally related to the benefit conferred. By way of example, the Parks court discussed “subdivision exaction” cases, where a city allows a developer to subdivide in exchange for a contribution. In such cases, the court noted, “there is agreement among the states ‘that the dedication should have some reasonable relationship to the needs created by the subdivision.’ ” Id. at 653. Thus, under the Parks analysis, exactions and impacts must be “reasonably related.” In Parks, the court held that the exactions had “no rational relationship to any public purpose related to the [impacts of the development]” and, therefore, that the exactions could not be required without just compensation. Id. at 653.

In Nollan, the Court did not purport to abandon the generally recognized “reasonably related” test and, in fact, noted that its approach was “consistent with the approach taken by every other court that has considered the question, with the exception of the California state courts.” 483 US at 839 (citing a long list of exaction cases, beginning with Parks v. Watson, supra). The Nollan court stated:

“We can accept, for purposes of discussion, the Commission’s proposed test [the ‘reasonably related test’] as to how close a ‘fit’ between the condition and the burden is required, because we find that this case does not meet even the most untailored standards.” Id. at 838.

Thus, we are unable to agree with petitioners that the Nollan court abandoned the “reasonably related” test.⁹ We recognize, however, that the Nollan court’s application of that test does provide some guidance as to how closely “related” exactions must be to impacts. For example, the Nollan court stated that the evident constitutional propriety of an exaction disappears

“if the condition substituted for the prohibition utterly fails to further the end advanced as the justification for the prohibition. When that essential nexus is eliminated, the situation becomes the same as if California law forbade shouting fire in a crowded theater, but granted dispensations to those willing to contribute $100 to the state treasury.” Id. at 837.¹⁰

Petitioners read that passage as indicating that in Nollan the Supreme Court abandoned the “reasonably related” test for a more stringent “essential nexus” test.¹¹ We do not read Nollan that way.

The quoted passage indicates that, for an exaction to be considered “reasonably related” to an impact, it is essential to show a nexus between the two, in order for the regulation to substantially advance a legitimate state interest, as required by Agins v. City of Tiburon, supra, 447 US at 260. In Nollan, the Court stated that, “unless the permit condition serves the same governmental purpose as the development ban, the building restriction is not a valid regulation of land use but ‘an out-and-out plan of extortion.’ ” Nollan v. California Coastal Comm’n, supra, 483 US at 837 (citations omitted). Nollan, then, tells us that an exaction is reasonably related to an impact if the exaction serves the same purpose that a denial of the permit would serve. See Dept. of Trans. v. Lundberg, 312 Or 568, 578, 825 P2d 641, cert den 113 S Ct 467 (1992) (sidewalk dedication requirement serves the same legitimate governmental purposes that would justify denying permits to develop commercially zoned properties).

In this case, we conclude that city’s unchallenged factual findings support the dedication conditions imposed by city. The pedestrian/bicycle pathway condition had an essential nexus to the anticipated development because, as the city found in part

“the proposed expanded use of this site is anticipated to generate additional vehicular traffic, thereby increasing congestion on nearby collector and arterial streets. Creation of a convenient, safe pedestrian/bicycle pathway system as an alternative means of transportation could offset some of the traffic demand on these nearby streets and lessen the increase in traffic congestion.” Dolan v. City of Tigard, supra, 22 Or LUBA at 622 (quoting City of Tigard Planning Commission Final Order at 20).

We. are persuaded that the transportation needs of petitioners’ employees and customers and the increased traffic congestion that will result from the development of petitioners’ land do have an essential nexus to the development of the site, and that this condition, therefore, is reasonably related to the impact of the expansion of their business.

Because the development would involve covering a much larger portion of petitioners’ land with buildings and parking, thus increasing the site’s impervious area, the condition requiring petitioners to dedicate a portion of their property for improvement of a storm drainage system also is reasonably related to the impact of the expansion of their business. The increased impervious surface would be expected to increase the amount of storm water runoff from the site to Fanrio Creek. We hold that there is an essential nexus between the increased storm water runoff caused by petitioners’ development and the improvement of a drainage system to accommodate that runoff.

We agree with LUBA’s conclusion that the challenged condition requiring dedication of portions of petitioners’ property is not an unconstitutional taking of petitioners’ property in violation of the Fifth Amendment.

The decision of the Court of Appeals and the order of the Land Use Board of Appeals are affirmed.

1 In land-use cases, this sometimes is called the relationship between the “exactions” and the “impacts.”

2 The Takings Clause of the Fifth Amendment to the Constitution of the United States provides:

“[N]or shall private property be taken for public use, without just compensation.”

That Clause is made applicable to the states by the Due Process Clause of the Fourteenth Amendment. Penn Central Trans. Co. v. New York City, 438 US 104, 122, 98 S Ct 2646, 57 L Ed 2d 631 (1978). See Annot, Supreme Court’s View As to What Constitutes a ‘‘Taking’’ Within Meaning of Fifth Amendment’s Prohibition Against Taking of Private Property For Public Use Without Just Compensation, 89 L Ed 2d 977 (1988).

Petitioners also brought a challenge under Article I, section 18, of the Oregon Constitution (Takings Clause). Before this court, however, they expressly have limited themselves to a federal claim. Therefore, we do not address any Oregon constitutional issue.

3 City’s decision includes the following relevant condition:

“1. The applicant shall dedicate to the City as Greenway all portions of the site that fall within the existing 100-year floodplain [of Fanno Creek] (i.e., all portions of the property below elevation 150.0) and all property 15 feet above (to the east of) the 150.0 foot floodplain boundary. The building shall be designed so as not to intrude into the green way area.”

The dedication required by that condition comprises about 7,000 square feet, or approximately 10 percent of the subject real property.

4 The applicants requested variances to Community Development Code standards requiring among other things dedication of area of the subject parcel that is within the 100-year floodplain of Fanno Creek and dedication of additional area adjacent to the 100-year floodplain for a pedestrian/bicycle path.

5 In Nollan, the California Coastal Commission conditioned a permit to the plaintiffs to replace a bungalow on their beachfront lot with a larger house on allowing a public easement to go across their beach, which was located between two public beaches. The California Court of Appeals had found that there was no taking, because the condition did not deprive the landowners of all reasonable use of their property. In an opinion written by Justice Scalia, th eNollan majority concluded that none of the designated purposes was substantially advanced by preserving a right to public access:

“It is quite impossible to understand how a requirement that people already on the public beaches be able to walk across the Nollans’ property reduces any obstacles to view the beach created by the new house. It is also impossible to understand how it lowers any ‘psychological barrier’ to using the public beaches, or how it helps to remedy any additional congestion on them caused by construction of the Nollans’ new house.” Nollan v. California Coastal Comm’n, 483 US 825, 838-39, 107 S Ct 3141, 97 L Ed 2d 677 (1987).

6 We review pursuant to ORS 197.850(9), which provides:

“The court may affirm, reverse or remand the order. The court shall reverse or remand the order only if it finds:

“(a) The order to be unlawful in substance or procedure, but error in procedure shall not be cause for reversal or remand unless the court shall find that substantial rights of the petitioner were prejudiced thereby;

“(b) The order to be unconstitutional; or

“(c) The order is not supported by substantial evidence in the whole record as to the facts found by the board under ORS 197.830(13).”

7 In Nollan, the Supreme Court stated:

“Our cases have not elaborated on the standards for determining what constitutes a ‘legitimate state interest’ or what type of connection between the regulation and the state interest satisfies the requirement that the former ‘substantially advance’ the latter. They have made clear, however, that a broad range of governmental purposes and regulations satisfies these requirements.” 483 US at 834-35 (footnote omitted).

The Supreme Court generally has eschewed any “set formula” for determining when and under what circumstances a given regulation would be seen as going “too far” for purposes of the Fifth Amendment, preferring to engage in essentially ad hoc, factual inquiries. Lucas v. So. Carolina Coastal Council, 505 US_, 112 S Ct 2886, 120 L Ed 2d 798 (1992); see McDougal v. County of Imperial, 942 F2d 668, 677-78 (9th Cir 1991) (takings analysis involves essentially ad hoc, factual inquiries).

8 Petitioners also argue that, because city’s dedication conditions would require permanent physical occupation of a portion of their property, they amount to a per se taking. That argument is not well taken. Such dedication conditions are not per se takings, because the occupation may occur only with the owner’s permission. Petitioners may avoid physical occupation of their land by withdrawing their application for a development permit.

The Supreme Court’s analysis in Yee v. City of Escondido, 503 US_, 112 S Ct 1522, 118 L Ed 2d 153 (1992), settles this point. In Yee, the owner of a mobile home park asserted a per se taking when the local city council adopted a rent control ordinance that, as the park owner argued, transferred a discrete interest in land from the park owner to his tenants. The Yee court held:

“The government effects a physical taking only where it requires the landowner to submit to the physical occupation of his land. ‘This element of required acquiescence is at the heart of the concept of occupation.’ ” 118 L Ed 2d at 165 (emphasis in original).

Because the park owner in Yee could have evicted the tenants and used the property for another purpose, any physical invasion that might occur would not be the result of forced acquiescence. Ibid.

9 We are not alone in interpreting Nollan in this manner. In Commercial Builders v. Sacramento, 941 F2d 872 (9th Cir 1991), cert den 112 S Ct 1997 (1992), the Ninth Circuit also held tbatNollan did not demand any different level of scrutiny than the one it used in Parks v. Watson, supra:

“As a threshold matter, we are not persuaded that Nollan materially changes the level of scrutiny we must apply to this Ordinance. The Nollan Court specifically stated that it did not have to decide ‘how close a “fit” between the condition and the burden is required’* * *. It also noted that its holding was ‘consistent with the approach taken by every other court [sic] has considered the question,’ citing Parks as the lead case in its string cite. * * *

“We therefore agree that Nollan does not stand for the proposition that an exaction ordinance will be upheld only where it can be shown that the development is directly responsible for the social ill in question. Rather, Nollan holds that where there is no evidence of a nexus between the development and the problem that the exaction seeks to address, the exaction cannot be upheld.” Id., 941 F2d at 874-75.

10 In Nollan, the Supreme Court said:

“We view the Fifth Amendment’s Property Clause to be more than a pleading requirement, and compliance with it to be more than an exercise in cleverness and imagination. As indicated earlier, our cases describe the condition for abridgement of property rights through the police power as a ‘substantial advancing]’ of a legitimate state interest. We are inclined to be particularly careful about the adjective where the actual conveyance of property is made a condition to the lifting of a land-use restriction, since in that context there is heightened risk that the purpose is avoidance of the compensation requirement, rather than the stated police power objective.” 483 US at 841.

See Lucas v. So. Carolina Coastal Council, supra, 120 L Ed 2d at 813 (the Fifth Amendment is violated when land use regulation does not substantially advance legitimate state interests or denies an owner all economically viable use of land).

11 The term “substantial relationship” is not used in Nollan, although the Court did cite Agins v. City of Tiburon, 447 US 255, 260, 100 S Ct 2138, 65 L Ed 2d 106 (1980), for the proposition that a regulation must “substantially advance legitimate state interests.” Nollan, supra, 483 US at 834.