Wisconsin town’s action amounted to defacto rezoning in violation of moratorium

by Allison Arends

State Of Wisconsin Ex Rel. Village of Newburg v. Town of Trenton
(Court Of Appeals Of Wisconsin, August 26, 2009)

Wis. Stat 62.23(7a) allows a municipality to temporarily enact a moratorium that prohibits adjacent unincorporated towns from changing the zoning of land within 1.5 miles of the municipality’s boundaries.  The moratorium gives the municipality time to work with each unincorporated town affected to prepare and adopt a comprehensive plan on how the land in that unincorporated town should be used.  The Village of Newburg adopted a temporary moratorium on  land within 1.5 miles of its boundaries for two years as of November 20th 2006. A parcel of land owned by Deerprint Enterprises, LLC, is located within the neighboring Town of Trenton and also within the Village of Newburg’s extraterritorial zoning moratorium. At the time the moratorium was put in place the parcel was zoned residential allowing, “single-family residential development in a farmette, or estate-type setting.”  The zoning did not permit commercial or industrial units.

While the moratorium was in place the Town approved a six-unit condominium development on the Deerprint land.  The development included an existing non-conforming commercial business, bud as part of the development agreement, the Town agreed to language that stated that “additional commercial units may be created… by subdividing all or a portion of the space included within the original commercial/industrial unit to form one or more additional commercial units.”

The Village argued that the Deerprint development included nonconforming mixed uses, and in order for this to be legal the Town must approve a planned development overlay for the parcel which, in turn, would require a rezoning in violation of the Village’s moratorium. The village argues that the approval of Deerprint parcel was invalid without an overlay and that the moratorium prohibits the Town from changing the zoning of the land.

The Wisconsin Court of Appeals addressed the Town’s argument that the Deerprint development is an issue of condominiums and not an issue of rezoning.  The court rejects this argument by pointing out that, “a change in zoning—or other approval under a zoning ordinance—should not be required for condominium conversion, unless a change in the use of the existing property is involved.”  The Village successfully illustrates that Deerprint development changed the use of the existing property and therefore an overlay or rezoning of the property was needed. The Deerprint parcel is zoned residential, yet one of the condominium units is identified as commercial/industrial. The court stated, “ We simply do not understand how a condominium unit set aside for commercial use does not run afoul of a zoning ordinance prohibiting commercial use just because it lies within an otherwise residential condominium.” In addition, the Town itself prohibits mixed uses, like Deerprint’s development, unless it grants an overlay which causes the court to conclude that the Deerprint development is a nonconforming use, and further more, that the Town Board, “rezoned without seeking the necessary approval.”

The Town argued that the case was moot because the moratorium had expired by the time it was heard by the trial court.  The court rejected the Town’s argument by analogy: ” a person who violates a statute is subject to that statute’s consequences, even if the legislature repeals the statute before the opposing party commences or completes its cause of action for the alleged offense.” The court also rejects the Town’s argument that the Village has no standing to seek declaratory relief when the court concludes that the Village has a legally protected interest that stems from its extraterritorial zoning authority, and if the Town was to grant an overlay to Deerprint, then its approval would violate the moratorium providing the Village with standing.

This case, as the court points out, presents an instance where a Town attempts to avoid the restrictions inherent to an extraterritorial zoning moratorium by framing its action as something different than a zoning change, when in reality the Town attempts to hide its approval of commercial building by making it a part of an otherwise residential condominium plan. As a result, the court found the Town’s approval to be “de facto rezoning” and therefore a violation of the Village’s extraterritorial zoning moratorium.

Iowa S.C. on moratoria, vested rights and bad faith

posted by Gary Taylor

GEISLER V. CITY OF CEDAR FALLS (link to case here)
769 NW2d 162 (Iowa Supreme Court, July 10, 2009)

In this case, the Iowa Supreme Court validates use of moratoria as planning tool and expounds on Iowa’s vested rights doctrine, but remands to district court the landowner’s claim of bad faith actions by the city.

In 2004, Michael Geisler purchased land located in an Overlay District of Cedar Falls, Iowa to develop an eight-unit apartment complex. In May 2005, he submitted a site plan to the Cedar Falls planning and zoning commission. Apparently at the time an amendment to the Overlay District that would have prohibited the project was “under discussion.” At the commission’s May 18, 2005, meeting, the Cedar Falls city planner stated that the site plan met all the basic ordinance requirements; however, because there was substantial resident opposition to the proposed development voiced at the meeting, the commission voted to recommend denial of Geisler’s site plan.

At the Cedar Falls city council meeting held May 23, 2005, the council considered Geisler’s site plan. Several citizens residing in the Overlay District expressed concerns about the plan, including the increase in traffic it would generate and the detrimental effect to single-family homes in the area. The council denied the site plan because it was “inconsistent with the character of the neighborhood due to architectural design … [and was] not of comparable scale and character in relation to adjoining properties.” At the same meeting, a motion also passed to discuss a temporary moratorium to study the issue of multi-family unit construction in the Overlay District. At the next city council meeting on June 13, 2005 the council passed a resolution imposing a moratorium on all development or construction of multi-family housing in the Overlay District. On that same day Geisler submitted a revised site plan that could not be processed in time to be discussed at the meeting. On June 22, 2005 Geisler filed a petition for writ of certiorari in the district court alleging the city acted illegally by denying his site plan and subsequently passing the moratorium. On July 11, 2005 a city official refused to process the revised site plan in light of the moratorium, effectively denying the project. On December 12, 2005 the city council passed an amendment to the Overlay District that prohibited multi-family housing. Geisler did not resubmit the site plan after the enactment of the ordinance.

Moratoria. The city first asserted that the district court did not have jurisdiction to hear the case because a writ of certiorari can only be used to challenge judicial and quasi-judicial actions, and the council’s adoption of the moratorium was a legislative function. The Iowa Supreme Court agreed, stating that in enacting the moratorium, “the city was performing a traditional legislative function.” In doing so, the court gave implicit approval to the use of moratoria by Iowa cities, an issue not previously addressed by the court. It observed that “a moratorium aids a governing body in performing the legislative task of municipal planning….They aid in bridging the gap between planning and its implementation into legal measures. They may be used to preserve the status quo while study of the area and its needs is completed [thus serving] a significant public purpose.”

Vested rights. The discussions of vested rights and bad faith came about in the court’s attempt to address a matter of procedure known as the “pending ordinance rule.” Under this rule, a court is supposed to decide a case “based on the zoning law as it exists at the time of the court’s decision.” The pending ordinance rule thus requires the court to apply the zoning ordinance as amended on December 12, 2005, since both courts’ (district and supreme court) decisions were made subsequent to the city council’s adoption of those amendments.

According to the court, the theory of vested rights acts as one exception to the pending ordinance rule. In a 1998 case, Quality Refrigerated Services v. Spencer, the Iowa Supreme Court determined that a developer acquires a vested right to proceed under the old ordinance if (1) s/he makes substantial expenditures toward the development prior to the zoning change, and (2) those expenditures were made lawfully. In the present case, the court essentially states that only expenditures made pursuant to a validly-issued building permit can be considered “lawful.” Since no building permit had been issued at the point when Cedar Falls rezoned Geisler’s property, he had not acquired a vested right to proceed.

The second exception to the pending ordinance rule is if the local government acted in bad faith. To establish bad faith in the context of a zoning decision, Geisler would need to show that Cedar Falls (1) illegally denied the application, and (2) did so with an improper purpose. The Supreme Court laid out markers for determining both illegality and improper purpose. Citing the 1999 Iowa Supreme Court case U.S. Cellular v. Board of Adjustment, the Court observed that the denial, without any legal justification, of an application that clearly meets all the requirements of the then-existing ordinance is illegal. Then, after providing examples from the Second and Sixth Federal Circuits, and state cases from New Jersey and Wisconsin, the Court “discerned that an improper purpose exists when a zoning authority adopts a new zoning regulation designed to frustrate a particular applicants plans for development.” It went even further in a footnote, saying that “unlike the [examples cited in these other cases] where bad faith was found when the governing body sought to change the rules in response to a particular request, the result may be different where a zoning change is already being contemplated before the particular request is made.” The Court found that the district court failed to consider the issue of bad faith and remanded the case back to the district court to determine whether the city acted illegally and with an improper purpose.

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