Posted by: Patricia Salkin | October 21, 2010

Oregon Supreme Court Clarifies That City May Require Off-Site Improvements as Part of an Office Park Development

Developer, West Linn Corporate Park, alleged that the City of West Lynn effected a taking of its property when the City required, as a condition of development, that the developer construct and dedicate to the City numerous public improvements for street and water. It claimed that the cost of the improvements was “well beyond what [was] roughly proportional to the impact of [its] development” and that the City’s action constituted a taking.  It sued, asserting two claims for inverse condemnation (under the state and federal constitutions) and sought payment of just compensation.  The City removed the case to federal court, which required the district court to decide whether the plaintiff’s second claim for relief, based on the Fifth Amendment, was ripe. 

Following a bench trial, the federal district court concluded that it was not, under prong two of Williamson.  Before the plaintiff could file an inverse condemnation action in state court, it was required, by state law, to appeal the City’s requirement that the plaintiff construct off-site improvements to the City’s land use hearings officer, the city council, and, finally, to the state Land Use Board of Appeals (LUBA).  Because the plaintiff had failed to take these administrative steps, it consequently had deprived the state court of the opportunity to award just compensation.  Turning to the claim for relief seeking just compensation under the Oregon Constitution, the court likewise concluded that the failure to pursue available administrative remedies precluded that claim. The parties cross-appealed to the Ninth Circuit.  The Ninth Circuit concluded that state law was unsettled with respect to whether pursuit of administrative remedies was a prerequisite to an inverse condemnation action premised on a taking under Dolan and Nollan, and entered an order certifying several questions to the Oregon Supreme Court. Below are the questions and answers:

1.  “[W]hether a plaintiff bringing an inverse condemnation action alleging that a condition of development amounts to an exaction or a physical taking is required to exhaust available local remedies as a prerequisite to bringing his claim in state court.”

The Supreme Court answered that, assuming Oregon law allowed an inverse condemnation action based on allegations that a condition requiring an exaction that was not roughly proportional to the impacts of the development, Oregon law requires the applicant to pursue available local administrative remedies, but does not require that the local decision be appealed to LUBA first.  The court observed that the developer had not pursued local remedies before bringing its suit and that ORS 197.796, which provides for remedies for unconstitutional or otherwise invalid exactions, was not in effect when this case arose.  The City may now claim that this case may not be ripe under Williamson County Regional Planning Commission v. Hamilton Bank, 473 US 172 (1985).

2.  “[W]hether a condition of development that requires a plaintiff to construct off-site public improvements, as opposed to dedicating an interest in real property such as granting an easement to a municipal entity, can constitute an exaction or physical taking.”

This case dealt not with exactions of real property, but with a required off-site improvement that was allegedly not “roughly proportional” to the impacts of the development.  The Supreme Court responded that such facts do not give rise to a taking claim under the Oregon Constitution.  The court decided that the requirement of the improvement was not cognizable under the Fifth Amendment:

In the absence of a Supreme Court ruling to the contrary, we conclude that a government’s requirement that a property owner undertake a monetary obligation that is  not roughly proportional to the impacts of its development does not constitute an unconstitutional condition under Nollan/Dolan or a taking under the Fifth Amendment, nor does it require payment of just compensation.  We also conclude that a requirement that a property owner construct off-site improvements is the functional equivalent of the imposition of a monetary obligation.  When a governmental entity requires a property owner to construct improvements, it simply requires the property owner to put money to a particular use.  The government could accomplish the same result by requiring the property owner to pay a specified sum, which the government could then use to construct the improvements.  The government, through its exercise of the power of eminent domain, can compel neither off-site construction nor the expenditure of money.

While there may be relief under common law, statute, or other constitutional provisions, there was no relief under the Fifth Amendment.

Moreover, the Court decided:

When government regulates the use of a property, it effects a taking if it deprives the owner of all economically viable use of the land.  In that instance, the regulation of the property is tantamount to the acquisition of the property.  When, instead, the regulation requires that the owner pay a sum of money or use a sum of money for a particular purpose, the regulation is not tantamount to acquisition of the property, even when the obligation exceeds the impact of the development, unless, of course, the obligation is so high that it imposes a burden tantamount to acquisition. Absent additional allegations, a property owner that alleges that a local government has conditioned development on construction of off-site improvements at a cost that is not roughly proportional to the impacts of the development, does not allege a taking under Article I, section 18, of the Oregon Constitution.  Plaintiff in this case did not allege such additional facts, and, consequently, plaintiff’s claim for inverse condemnation under the state constitution was not cognizable in state court.  [footnote omitted]

3.  “[W]hether the vacation of a street approved by the City Council purporting to act pursuant to [ORS 271.110] is ultra vires where the petition does not comply with the landowner consent provisions of [ORS 271.080].”

The court found that failure to follow the landowner consent requirements does not make the unappealed final decision ultra vires, noting that certainty and stability of property are important considerations, and that the street vacation was not void.  

West Linn Corporate Park, L.L.C. v. City of West Linn, 2010 WL 3730348 (Or. 9/23/2010) 

The opinion may be found at accessed at:  

Special thanks to Edward J. Sullivan of Garvey Shubert and Barer of Portland, OR for sending this along. 

The brief of the American Planning Association Amicus Curiae Committee can be accessed here:

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