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Oregon's
November Surprise: Measure 37 Passes
In the last
election, Oregon voters eliminated
the State's exceptional land-use-planning
controls. Is California next? ? by
Paul Sedway
This
article first appeared in the February,
2005 SPUR Newsletter, p. 3.
Since
1969, when Oregon's Senate Bill
100 created the most comprehensive
statewide planning program in
the nation under legendary Governor
Tom McCall, the administering
state agency, the Land Conservation
and Development Commission (LCDC),
has proved a model for planners-and
an irritant for many landowners.
Their irritation was manifested
on election day, November 2,
2004, when Oregon moved from
top to bottom in planning potency,
and from bottom to top in property-rights
protection, when its voters passed
Measure 37 requiring payment
to landowners for any reduction
in land value due to land use
controls, or alternately, removal
of the regulation.
Measure
37 provides that a public entity,
such as a city, county, or state
agency, enacting new regulation
(typically zoning or environmental
controls) or "enforcing" preexisting
regulation (i.e. preventing uses
other than those permitted) that
reduces the fair market value of
land, must compensate owners or
waive the control. Excluded from
its purview is regulation for
public health and safety, pollution
control, and public morality
(regulation of pornographic uses
remains unaffected). Its application
is retroactive, as well as prospective.
Compensation must be given for
the financial effects of any
law enacted after acquisition
by the owner or a family member
(i.e. ancestor) of the owner
(hence the date of eligibility
would be when the first family
member, not the current one,
first acquired the land).
The impact of the measure will be far-reaching with
thousands of owners being able to make some claim,
many noting some monetary effect even on their grandparents,
albeit increasingly smaller in uninflated dollars the
earlier the impact. The lands on the controlled side
of urban growth boundaries likely will be the subject
of most claims. Rural landowners able to show significant
economic potential reduced by regulation in the 1970s
and later, may also be claimants. Depending on how
deep into their pockets public agencies will dig, the
unsullied Oregon wilderness could be defaced by scattered
development allowed by waiver.
The Portland, Oregon, skyline from above the Willamette River.
On
its face, the measure appears eminently
reasonable (except for the notable
omission of the counterpart to compensation
for reduction, namely exaction for
enhancement, discussed later). To the average voter,
largely unaware of its implications, the seemingly
innocuous and outwardly appropriate measure sounded
like the correction of a prior oversight--61 percent
of the voters voted for it, while 39 percent opposed
it. But it is predictably causing great consternation
in the state's government halls. The most problematic
feature of the measure is that when a public agency
cannot or will not pay a claim, likely the case, it
must waive the regulation within 180 days or the owner
may file suit in state circuit court with the plaintiff
entitled to attorney fees and costs.
The
result threatens the role and
even the existence of the state's
Land Conservation and Development
Commission (LCDC), which reviews
and "acknowledges" local plans
and regulations as consistent with LCDC-adopted statewide
goals. Most importantly it could turn outer urban rings
and previously rural areas into a patchwork of scattered
development covering the now-pristine Oregon countryside.
A state famous for its clearly defined urban-rural
boundaries could become notorious for amorphous urbanization
patterns because of what could become almost automatic
entitlements, and because some zoning and other controls
likely will at best remain static and at worst may
be repealed.
In retrospect, the outcome of the vote probably should
have come as no surprise. Measure 7, dealing with compensation
for regulatory impact but without the waiver option,
passed in 2000, but was overturned by the state supreme
court because of the absence of the waiver remedy;
the court seems unlikely to invalidate this version,
which includes it.
Because the state and its localities are fiscally challenged,
the waiver option allowing the owner to establish uses
permitted at the time the owner or his ancestor acquired
the property may be their only choice, and could undo
30 years of progressive and innovative planning and
land-use control in Oregon.
As of this writing there have not yet been a great
many claims filed, but those that have been are substantial.
For instance, Washington County, with a population
of 450,000, has a potential for 17,000 claims according
to the December 26, 2004 Portland Oregonian. Given
that zoning was introduced in most of Oregon in the
mid-1950s and LCDC and localities imposed most regulation
in the 1970s, there are many potential claimants. Cost
projections cannot be confined to land-use-control
agencies. The measure will affect public-transportation,
environmental, public-utility, and community-services
agencies as well.
One can begin to see the enormity of compensation costs,
and local agencies will look in vain for a revenue
source in the new law. It will be their own general
funds. The secretary of state, in the ballot proposition,
forecast a $344 million annual cost for administration
alone, without compensatory payments. State and local
agencies already stretched to the limit to provide
schools and public safety in a weak Oregon economy
simply cannot find the hundreds of millions of dollars
needed to compensate owners submitting large and perhaps
speculative claims for a great number of parcel value
reductions. Even landowners whose land has greatly
appreciated (most farmers, for example) can make a
claim that the land would have been worth far more
without intervening regulation.
The
result of these waivers is likely
to be an anomalous zoning and
land-use pattern, arrived at
without benefit of data, analysis,
policy, or public testimony--in
short, without land-use planning.
Spot and spotty zoning and development
may cover the state. The impact
may not stop with the first waiver.
Conceivably, a neighbor of the
recipient could bring a claim
that the waiver given lowered
his or her adjacent property
values and then bring a secondary
claim.
Many
issues will arise. Will the system
be inherently undemocratic in
that it will favor those with
the financial means to file claims?
Will a new "industry" spring
up in the transition period to encourage speculative
or even fraudulent claims? Because this is the first
such law of its kind, there are many unforeseens. Quite
possibly, when infeasibility becomes apparent, owners
may not go to the trouble of filing claims.
The result of the Oregon vote also is not surprising
given growing hostility to LCDC, its regulations and
administration. As the first comprehensive state-monitored
planning and land-use regulatory program in the country,
Oregon did not have the benefit of precedent. Without
a plan map, it chose heavy reliance on pre-stated and
necessarily complex zoning covering diverse settings
throughout the state. At about the same time that LCDC
was established, Sedway Cooke Associates, a planning
consulting firm in which I was a principal, was asked
to help devise the regulatory methods to implement
first the San Francisco Bay Plan and then the California
Coastal Plan. It considered all possible regulatory
idioms. It was easy to foresee, were zoning to be used,
that lengthy and complex regulations would be required
in the future (even for the smaller than whole state
areas involved) which would have to be revised later
for change over time. The amount of regulatory fine
print required would make only an optometrist happy.
So instead, a plan-based administrative review system
was recommended. Although lessening predictability,
available to some extent via the underlying plans,
this approach has withstood the test of time. But Oregon,
in 1973, had to move quickly into a zoning mode without
the benefit of a mapped plan, which both the San Francisco
Bay and California Coastal agencies' study/planning
predecessor agencies had developed.
Obviously
the most critical flaw in the Oregon
property rights crusade that sponsored
the measure is the private sector
economic market myopia involved.
The crusaders ignored the fact that
if the public agencies are considered
responsible for value reductions, they should get the
benefit of value increases they impart, both by zoning
and perhaps by other actions as well. Although that
is politically less palatable and harder to quantify,
to be consistent part or all of those value increases
should be returned to the public sector and are clearly
necessary to fund a feasible compensatory program.
The British devised such a "compensation and betterment" system,
which was repealed when the Conservative party came
to power in the late 1980s.
Sedway
Cooke Associates also undertook three
other studies relevant to the Oregon "crisis." They were
done for Sonoma County, California, in the late 1970s.
The first examined the future of county agriculture,
the second studied options for agricultural preservation,
and the third focused on the most promising of these
options-a density transfer system. Two major impacts
of the proposed system were addressed and responses
developed: a means for dealing both with private-value
enhancement and value reduction, variously called windfalls-and-wipeouts,
boons-and-busts, and givings-and-takings; and a means
for dealing with the other corresponding effect-the
skewing of intergovernmental fiscal returns attributable
to transferring density from "sending" to "receiving" areas.
That
study found the means to facilitate
such transfers between landowners
and between jurisdictions in
an equitable manner. Although
it is a hard sell-and Sonoma
County found it to be so--Oregon is under greater pressure,
and may ultimately be forced, after local government
bankruptcy and/or environmental despoliation, to consider
a variant of the Sonoma County study approach, namely
to confine compensation "rights" received by an owner
in previously protected "sending" (e.g. conservation)
areas, to sale to other landowners in suitable "receiving" (e.g.
development) areas (akin to its use in downtown San
Francisco for historic-building preservation).
Can
a Measure 37--type initiative
pass here? It's possible but
unlikely. The issues of LCDC
and property value reduction
have been before Oregon voters
for decades. There is no state
agency in California analogous
to LCDC that would be a political
target. And our local agencies
taken together seem to be able
to find sites for all land
uses, unlike Oregon where there
is a lack of research and development
and industrially zoned sites.
However, other western states
with strong property-rights
advocacy groups might be fertile ground for this
one-sided and ultimately self-destructive "reform" of
land-use regulation.
Paul Sedway, a SPUR board member and principal of Sedway
Consulting, led Sedway Cooke Associates for 32 years
and taught planning and regulation at U.C. Berkeley.
Paul is co-chair of SPUR's State and Regional Affairs
Committee, and a fellow of the American Institute of
Certified Planners, planning's highest honor.
