City Zoning Decisions Could Cost Millions

By C. T. Carlson
Some property owners say city zoning decisions are trampling on the property rights of individuals and could cost taxpayers millions of dollars. Several current lawsuits highlight a growing number of city property owners who are forced to consider litigation due to city officials changing zoning uses through revisions, sector planning or other zoning changes.
The most costly City zoning change to taxpayers is the nearly 13-year old lawsuit where in February, the New Mexico Supreme Court reversed a Court of Appeals decision that had set aside an $8.3 million jury verdict in favor of Albuquerque Commons Partnership. This means the high court agreed with a District Court decision that the city was in the wrong and should pay the development company millions for the loss of its property rights.
The property at issue is the site of the former St. Pius High School on Louisiana Boulevard and Interstate 40. Part of the property has since been developed by different owners as the new ABQ Uptown shopping district somewhat similar to a retail site the Partnership proposed in the mid-1990s.
In 1995, the Albuquerque Commons Partnership’s development plan complied with the sector plan in place at the time the property was leased. Within months a new sector plan was approved and the partnership’s site development plan no longer complied.
In the lawsuit the Partnership argued the city down-zoned their property during a sector plan revision. Down-zoning means to alter a property’s usage so that it is more restrictive. According to city briefs, sector plans are a regulatory tool which provides policy and regulatory guidance for development within its boundaries. The plan adoption sets land use, design and development standards to ensure development outcomes that are more predictable for the community and affected stakeholders, and supportive of the community’s goals for the area.
According to the partnership’s attorney Timothy Flynn-O’Brien, the $8.3 million verdict plus interest, fees and other costs, means the city could have to cough up more than $10 million. This, he said, may cause the city to have to seek an increase in taxes specifically for this verdict.
Flynn-O’Brien said one problem driving these costs is that economic viability of sector plan revisions is not a part of the city’s planning process. This can lead to sector plan changes, or other zoning revisions, that adversely affect property values without notice or due process.
“With all the money they spend on the plans they should hire an economist to look the plans over to show whether the plan will actually work,” Flynn-O’Brien said.
Flynn-O’Brien says the city down-zoned the Partnership’s property in particular when it adopted the revised sector plan due to neighborhood pressure.
Sector plan revisions do not require the governing body to give individual notice to property owners when zoning is changed. It only requires a general public notice of the planning process.
Acting City Clerk and Deputy City Attorney Randy Autio said it is always controversial when zoning is revised. He said city planners try to be respectful of private property rights.
Other land use attorneys say these types of cases are happening with increasing frequency. “We see these things time and time again where legislative authority is used to change zoning,” Attorney David Campbell said. “The magnitude of the damages in the partnership case is unique. But it is not unique to have a local government change the rules in the middle of the game.”
Campbell said he alone takes more than a dozen cases a year around the state. Most of the cases follow the same fact pattern where government decision-makers are more beholden to groups of neighbors who vote instead of defending private property rights.
“It appears that neighbors or adjacent property owners get the ear of their governing body representative to cause a change in expectation to take place,” he said.
Another example, Campbell said, is the controversial Vista del Norte property on Osuna on the city’s north side where a developer wanted to bring in a Wal-Mart Supercenter.
“The only thing that the property owner really needed to do was pull a permit as the land already had the correct zoning,” Campbell said. “But the city council heard a great cry from some in the nearby neighborhood that they did not want a Wal-Mart on that piece of property.”
In response the neighborhood City Councilor Debbie O’Malley fired a double-pronged salvo and introduced a law against “big box” retailers, and legislation that the property should be preserved for hot air balloon landings. The effect was to change the zoning conditions so that the property owners could no longer comply with existing zoning and build a Wal-Mart. Whether intended or not, this reduced the value of the land.
The city recently closed on the deal to buy the land for about $5 million for a balloon landing park. The developer will have about five acres of light commercial developable land at the front of the property. The 22-acres were appraised at about $7.1 million at the time.
“The government and city councilors are in a tough position. They are elected by people to serve their district but are not explicitly elected to preserve people’s property rights,” Campbell said. “Politics come in and they start using their legislative authority to change site specific land uses to please what they perceive to be a large block of voters.”
Campbell agreed with Flynn-O’Brien that the city should protect property rights during sector and other plan revisions by conducting an economic analysis before making zone changes and effectively “taking” private property with backdoor down-zoning. But according to the city’s own zoning code, “the cost of land or other economic considerations pertaining to the applicant shall not be the determining factor for a change of zone.”
Attorney Paul Kienzle also handles zoning cases for property owners. He thinks inconsistency is also a problem with the city’s zoning decisions. “In the zoning arena things should be consistent, but it is not consistent from neighborhood to neighborhood or even across streets,” Kienzle said. “It is the taxpayers and developers who end up being hit hard by this inconsistency.”
Whether the inconsistencies are the result of parochial politics is an open question. Kienzle said individuals and the free market are better suited than government to make land use decisions.
“I believe in the free market over government dictation,” he said. “This would resolve a lot of issues.”
In another unsettling and expensive zoning case, some Volcano Cliffs property owners on the city’s West Side have been at odds with the city over zoning and development issues for decades. Two potentially high dollar lawsuits are pending. In one inverse condemnation case, more than a dozen land owners had their undeveloped property outright down-zoned to open space during its sector plan revision. In another case property owners say the city council acted outside of its power when it unilaterally changed the Volcano Heights Sector Plan. Some of the contested changes include “cherry picking” certain pieces of property for open space, according to court documents.
Flynn-O’Brien claims the changes were done outside of the city council’s powers, state and constitutional law. Other legal issues include that it was not under city council purview to change the sector plan which was approved by the city council, but without the approval of the city’s Environmental Planning Commission. The sector plan leaves up to 70-percent of the properties undeveloped. Flynn-O’Brien said that all of this goes above and beyond the city’s private property zoning powers.
“My clients can not sell their land after they were designated for open space,” Flynn-O’Brien said. But the city argues that they may not be liable because the land was not technically “rezoned” as open space but only “targeted” as open space.
Former Albuquerque City Council member and attorney Sam Bregman is one of the three attorneys representing the Volcano Cliffs Property Owners Association. He says the city council did not follow the law in making those zoning decisions but instead dictated what they think should happen with other people’s property without consideration of personal property rights.
“The city council needs to get a clear education from the city’s legal department on private property rights. Otherwise the problem will continue and it will be very expensive for both the taxpayers and the property owners,” Bregman said. Bregman said he gets at least one call a week from city property owners who have potential zoning abuse cases.
“There is a high number of property owners who can not afford or do not understand
the process to defend their rights,” Bregman said.
Volcano Cliffs attorneys claim that the city could end up paying property owners more than $30 million to resolve Volcano Cliffs litigation. City officials dispute that amount.
“It is becoming very expensive for the city to pay lawyers to defend the city’s bad zoning decisions then to have to pay out the judgments,” Bregman said. “I don’t think anyone is against sound reasonable development which we need in order to grow, but not at the expense of personal property rights.”
Carmen Marron, the city’s division manager for planning and urban design, said there are currently ten sector plan revisions being worked on. There are two other zoning studies that are ongoing, and two other Metropolitan Re-Development areas under going planning revisions. Marron said it is usually a city council member who brings forward an idea of revising a sector plan.
City planning spokeswoman Deborah Nason said that the city planning department has spent more than $2.5 million in the last three years on outside planning consultants for sector plan revisions. This amount does not include any monies appropriated by individual city council members for their district sector planning.
Randy Autio said it was hard to gauge what the city spends on city legal staff and contracted attorneys to defend zoning lawsuits. “There are some cases that have been in the system for years,” Autio said. “The 900-pound gorilla case is the Albuquerque Commons case.” Autio said it has cost the city at least $1.8 million so far to defend the Albuquerque Commons Partnership case. And it is not over yet.
“When the city does pay out on the case it will either take the money out of a pre-existing “risk fund” set up to pay for judgments or the city council will take a vote to raise the tax rate,” Autio said.
He said the average annual cost to defend a case is about $150,000.
Earlier this year the city council approved $667,000 in fees and expenses to five outside contracted attorneys to defend a handful of pending city legal issues. According to the city’s current budget the legal department which includes the city clerk’s office has an annual budget of about $5-million, with about 80+plus employees. Autio said there is one full-time and two part-time attorneys who focus on zoning litigation. He said staff attorneys make between $50,000 to $70,000 annually. Head division attorneys make upward of $100,000.
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