State Supreme Court Sides With Developers in Recent Land Use Decision of Benchmark and Isla Verde

[August 2002]

Recently, the Supreme Court of the State of Washington issued decisions in two cases that had been of interest to the land use and real estate development arena even when the decisions were merely at the Court of Appeals level: Benchmark Land Co. v. City of Battleground, 103 Wn. App. 721, 14 P.3d 172 (2000), aff’d, 49 P.3d 860 (July 11, 2002); and Isla Verde Int’l Holdings, Inc. v., City of Camas, 99 Wn. App. 127, 990 P.2d 429 (1999), aff’d in part on other grounds, 49 P.2d 867 (July 11, 2002). Both cases involved challenges by developers to development conditions that had been imposed by local governments.

In both cases, the Supreme Court affirmed the Court of Appeals decisions by holding that most of the required improvements and exactions were invalid. In both cases, however, the Supreme Court holdings were much narrower than that of the Court of Appeals. The Court of Appeals in both cases had held that some or all of the conditions amounted to unconstitutional takings or violations of substantive due process. The State Supreme Court, however, did not reach the constitutional questions in either case. In Washington, courts adhere to the principle that if a case can be decided on nonconstitutional grounds, an appellate court should refrain from deciding constitutional issues. Most developers and land use attorneys would have liked the Supreme Court to uphold the Court of Appeals decisions on constitutional grounds; on the other hand, the Supreme Court decisions are still a victory for developers.

Takings Law In a Nutshell

As a matter of law, a local government cannot impose conditions upon a development, no matter how desirable, unless the government can show (1) a legitimate “public problem or problems that the [exaction] is designed to address;” (2) “that the development for which a permit is sought will create or exacerbate the identified public problem;” (3) that the exaction “tends to solve, or at least to alleviate, the identified public problem;” and (4) the exaction “is ‘roughly proportional’ to that part of the problem that is created or exacerbated by the landowner’s development.” The first two elements are commonly referred to as the “nexus” requirement, and the second two elements are commonly known as the “rough proportionality” requirement. The nexus and rough proportionality requirements were set forth by the U.S. Supreme Court in the well-known cases of Nollan and Dolan.

The Benchmark Decision

In Benchmark, the City of Battle Ground conditioned approval of a development upon the developer’s agreement to make half-street improvements to a street bordering the proposed subdivision. The developer alleged that the City’s condition amounted to an unconstitutional taking. The developer alleged that there was no “rough proportionality” between the impacts of the proposed subdivision on the street and the condition being imposed on the developer.

The Court of Appeals agreed with the developer, and held that the City was requiring the developer to address a problem that existed outside the development property (an adjoining street in need of improvement), and the City had not shown that the development caused the problems that the City was requiring the developer to fix. In reaching its decision, the Court of Appeals emphasized the applicability of the Nollan/Dolan requirements to monetary conditions, not just exactions of land—an issue that had been brought into question by a recent U.S. Supreme Court decision, City of Monterey v. Del Monte Dunes, 526 U.S. 687 (1999). The City appealed the Court of Appeals decision in Benchmark.

The State Supreme Court found it unnecessary to reach the issue of whether the City’s condition on development was an unconstitutional taking. Rather, the State Supreme Court affirmed Benchmark on the basis that the City had not provided substantial evidence to support its decision to require Benchmark to make improvements to the adjacent road as a condition of development approval. Under RCW 36.70C.130(1)(c), the court can grant relief in favor of the developer if “the land use decision is not supported by evidence that is substantial when viewed in light of the whole record before the court.” Since the City’s decision was not supported by substantial evidence in the record, the Court of Appeals had a basis for reversing the decision before even reaching the issue of constitutionality. Because Benchmark was able to show that the road did not meet City standards even before the development was proposed, the required expenditure for street improvements was not directly related to the traffic generated by the development, and traffic studies had shown that the subdivision would have little to no impact on safety and operations of the section of roadway Benchmark was being required to improve, the Supreme Court concluded that the record simply lacked substantial evidence to justify the City’s decision.

Justice Sanders, in a concurring opinion, attempted to articulate precisely what the constitutional and statutory prerequisites are for a local jurisdiction’s imposition of development conditions upon developers. Specifically, Justice Sanders emphasized the applicability of RCW 82.02.020 which prohibits local governments from imposing fees, taxes, or charges on a development unless the jurisdiction can establish that the condition is reasonably necessary as a direct result of the proposed development. According to Justice Sanders, the City of Battleground would have been unable to satisfy the standards codified in RCW 82.02.020.

The Decision in Isla Verde

The City of Camas approved Isla Verde’s subdivision application subject to conditions that the developer (1) construct a secondary access road, and (2) set aside 30% of the subdivision as open space. The City claimed that local wildlife and steep slopes in portions of the subdivision would be impacted by the development, and that the existing access road was inadequate for emergency purposes. The Supreme Court affirmed the Court of Appeals decision, ruling in favor of the developers on the open space issue and in favor of the City on the secondary access road.

The 30% Set Aside. The Court of Appeals held that the City’s ordinance requiring every proposed subdivision to retain 30 percent of its area as open space violated the two-part Nollan/Dolan test for constitutionality of exactions. The Court of Appeals concluded that the essential nexus requirement existed between a public problem and the impacts of development insofar as the city had identified a public problem (the need to preserve open space for wildlife and recreation) and because the proposed development would destroy 13 acres of open space. The City was, however, unable to show rough proportionality between he required exaction and the impact of the proposed development. The record was devoid of evidence showing a reasonable relationship between the impacts and the 30 percent requirement, and thus the Court of Appeals held that the 30 percent set aside was an unconstitutional taking.

The Supreme Court, while affirming the Court of Appeals decision to invalidate the 30% set aside condition, did not base its holding on constitutional grounds. Rather, the State Supreme Court held that the 30 percent set aside was an illegal in kind “tax, fee, or charge” on new development, which was in violation of RCW 82.02.020. According to RCW 82.02.020, a municipal corporation cannot impose any tax, fee, or charge on development; yet it can impose reasonable mitigation requirements by voluntary agreement if the City can show that the condition is “reasonably necessary as a direct result of the proposed development.” The City asserted that the set aside was necessary to address negative impacts to wildlife in the area, and because the property contained steep slopes. The Supreme Court held that there was no evidence that the 30 percent open space requirement was tied directly to either of these impacts; the City had made no individualized determination that 30 percent was the appropriate set-aside for the impacts caused by the subdivision. The Supreme Court did not hold that the size of the set aside was exorbitant, only that the City did not tie the set aside to a specific, identified impact of the development. Furthermore, the Court acknowledged that RCW 35A.63.100 allows cities to designate open space requirements for subdivisions in appropriately zoned areas. The City was not allowed to rely on this statute because the 30 percent set aside applied to all proposed subdivisions without any due consideration given to the specific circumstances.

Secondary Access Road. The Court of Appeals upheld the City’s requirement that the developer construct a secondary access road as a condition for plat approval. Isla Verde alleged that the requirement violated substantive due process under the 14th Amendment of the U.S. Constitution because, among other things, the requirement would be unduly burdensome. The Court of Appeals held that providing emergency vehicles with reliable access to the subdivision was a legitimate public purpose and the secondary access road was a reasonably necessary means for achieving access, and Isla Verde had shown no great harm, economic loss, or more effective, less drastic measures.

On appeal, the State Supreme Court affirmed the City’s right to require the developer to build a secondary access road for emergency vehicles. According to the Court, the additional access route was reasonably necessary to provide fire protection for the residents of the subdivision. The developer argued that this condition was impossible to satisfy because the neighbor to the east of the subdivision, where the City had proposed an alternate route, would not grant an easement. The Court countered that because the developer had not explored all possible alternatives, the determination of impossibility was premature.

In a dissenting opinion, Justices Sanders and Alexander criticized the majority’s rationale. They claimed that the access road requirement allows neighboring property owners to veto the project, and pointed to other jurisdictions that say land use permits cannot be denied based solely on the opposition of adjacent landowners. The dissent maintained that unlike government, private developers have no power of private condemnation. Allowing a neighboring landowner to exact an exorbitant price for this right of way essentially removes the developer’s right to use and enjoy its property.

This Advisory is a publication of the Real Estate and Land Use Group of Davis Wright Tremaine LLP. Our purpose in publishing this Advisory is to inform our clients and friends of recent developments in real estate and land use law. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.

Copyright © 2002, Davis Wright Tremaine LLP.

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