Opinion ID: 2631823
Heading Depth: 3
Heading Rank: 1

Heading: Was the MOA's Restriction on Development in the Twenty-Foot-Wide Set-back Band a Compensable Taking?

Text: We apply our independent judgment in reviewing conclusions of law such as the trial court's conclusion that the MOA's imposition of a setback band was not a compensable taking under the United States Constitution and the Alaska Constitution. [7] We review de novo questions of constitutional law, [8] and adopt the rule of law that is most persuasive in light of precedent, reason, and policy. [9] We review the trial court's fact determinations, including the weight it gives to particular factors in the regulatory takings analysis, for clear error. [10]
Article I, section 18 of the Alaska Constitution provides that [p]rivate property shall not be taken or damaged for public use without just compensation. Property owners enjoy broader protection under the Alaska Constitution than under the Fifth Amendment of the United States Constitution. [11] Under both constitutions, if there has been no per se takingeither through physical invasion of land or regulation that has deprived the landowner of all economically valuable use of the landcase-specific analysis is necessary to determine whether a compensable taking has occurred. [12] Alaska courts engaging in this case-specific analysis consider four factors: (1) the character of the governmental action; (2) its economic impact; (3) its interference with reasonable investment-backed expectations; and (4) the legitimacy of the interest advanced by the regulation or land-use decision. [13] These are known as the Sandberg factors. [14]
The trial court considered the landowners' claim that there were two categories of takings: (1) the loss of use of Tract B, and (2) the partial loss of use of Lots 4, 5, 6, and 7 due to the setback requirement. The trial court analyzed both categories in light of the four Sandberg factors. Although the landowners asserted in the trial court that the MOA took a much larger part of their property, in their appellate reply brief and at oral argument before us, their attorney made it clear that their appeal concerns only the twenty-foot-wide setback band beginning eighty feet from the shoreline of Blueberry Lake and extending to 100 feet. We therefore need not consider whether the MOA prevented the landowners from developing Tract B, and we limit our attention to the effect of the twenty-foot-wide setback band on Lots 4 through 7. The landowners argue that the trial court incorrectly applied the four Sandberg factors. They claim that, as a matter of law, the court erred by de-emphasizing the reasonable investment-backed expectations and economic impact factors and overemphasizing the fact that the MOA setbacks caused only minor economic loss. They contend that a compensable taking has occurred whenever there is interference with reasonable investment-backed expectations or damage to property, regardless of how minor the economic damage. We reject this contention because it is contrary to the settled law of the United States and the State of Alaska. And we conclude that the trial court did not err in applying the Sandberg factors.
Concerning the character-of-governmental-action factor, the trial court concluded that the MOA's decisions affected the subdivision both indirectly and directly. By designating Blueberry Lake a preservation wetland and leaving it to the Corps to determine whether a § 404 permit was appropriate, the MOA's decisions had an indirect impact. By imposing a sixty-five-foot setback, the MOA directly affected the land. The trial court also reasoned that the Corps, by denying the 1985 § 404 permit application to drain and fill the lake, affected both Tract B and the four lots: [i]f the Corps had granted [the] § 404 application, there would be no lake and no setback requirements. It further found that there was federal intervention, leading to the federal consent decree and the eighty-foot setback. It concluded that the MOA's conduct regarding the land was mostly indirect. The trial court did not separately consider the character of the MOA's imposition of the additional twenty-foot-wide setback band.
Concerning the economic impact factor, the trial court concluded that opportunity for development has been lost to Tract B of the property and the designated setback areas on Lots 4 to 7. It found that the lion's share of the economic impact on the subdivision was due to the Corps' denial of the § 404 permit application. [15] On appeal, the landowners argue that the pertinent economic impact is that caused by the twenty-foot-wide setback band. Therefore, the relevant diminution in value must be measured by the loss attributable to the MOA's requirement for the setback band that begins eighty feet from the shoreline and extends to 100 feet. That loss must be compared to the value of the entire subdivision, Tract A, Tract B, and Lots 1 through 7. [16] The trial court estimated that the twenty-foot-wide setback band diminished the value of the relevant property by 1.5% to 2%. The court did not explain how it calculated this estimate. But there was ample evidence before the trial court to support this estimate. We also conclude that the loss in value, however calculated, was small enough to support the trial court's conclusion that the MOA's actions did not amount to a compensable regulatory taking. Although the trial evidence regarding the financial effect of requiring the additional twenty-foot-wide band is obscure, the evidence permits relatively precise calculation of the incremental impact caused by extending the sixty-five-foot setback to 100 feet. Relying upon King's expert testimony, the trial court reasoned: [W]ith a curved 65 foot setback, the value before governmental action is $2,958,900 and the value of the land after governmental action is $2,475,100, a resultant loss in value of $483,800 or 16.35%. Of the loss in value of $483,800, $392,000 or 13.23% is attributable to Tract B, with the remaining $91,800 or 3.2% attributable to the [sixty-five-foot] setback requirement. (Emphasis added.) As the trial court recognized, the experts did not testify regarding the economic impact of a 80 foot setback. But by using the appraisal the court found to be more accurate, the trial court could easily calculate the impact of extending the sixty-five-foot setback by thirty-five feet. That appraisal, prepared by the landowners' expert, found that a 100-foot setback would reduce the value of the land to $2,395,700, a loss in value of $563,200. Again subtracting the $392,000 loss in value for Tract B, the loss in value for Lots 4 through 7 attributable to the 100-foot setback is $171,200, or 5.79% of the total value of the subdivision. By subtracting the loss attributable to the sixty-five-foot setback from the loss attributable to the 100-foot setback, the incremental loss in value caused by extending the sixty-five foot setback to 100 feet can be calculated. It is $79,400 ($171,200$91,800); that is 2.68% of the total value of the subdivision property. The trial court recognized that the evidence did not permit a direct calculation of the impact of the last twenty feet of that thirty-five-foot-wide band, i.e., the twenty-foot-wide setback band lying between the federal consent decree's eighty-foot setback and 100 feet. But the trial court probably estimated the impact of the twenty-foot-wide setback band by somehow prorating the loss in value caused by the entire thirty-five-foot-wide band. The trial court's estimatethat the impact was in the range of 1.5% to 2% of the value of the propertyis consistent with a prorational estimate. Given its findings about the impacts caused by the sixty-five and 100-foot setbacks, and the evidence that the entire thirty-five-foot band increased the impact by about 2.68% of the value of the relevant property, the trial court may have multiplied the latter percentage by 20/35 to estimate what part of the loss in value was attributable to the setback band that formed the last twenty feet of the thirty-five-foot band. The result would have been about 1.5%, a figure within the 1.5% and 2.0% range the trial court mentioned in footnote 9 of its opinion. [17] Further, footnote 23 of the landowners' opening brief estimates a loss in value that confirms that the economic impact of the additional twenty-foot setback is very small relative to the value of the property. [18] Their estimate is consequently consistent with the estimate derived by the trial court. Likewise, the loss in value of Lots 4 through 7 caused by the entire thirty-five-foot band lying between sixty-five and 100 feet was about 2.68% of the subdivision property. This figure was itself so small that it would support the trial court's balancing analysis. We conclude that there was ample support for the trial court's estimate of the economic impact of the twenty-foot-wide setback band.
The trial court found that the Owners' expectations were reasonable and investment backed. This finding was favorable to the landowners. The MOA has not challenged this finding on appeal, and we accept it for purposes of reviewing the trial court's analysis of the Sandberg factors.
The trial court found that the MOA has a legitimate interest in [its] land use decisions: The land use decisions here have to do with the protection of wetlands. The passage of the CWA as well as of the state ACMP and the municipal AWMP all speak to the legitimacy of the governmental action. There has certainly been a diminution of the total acreage of wetlands in the Anchorage area since the 1950's and because such wetlands are a valuable resource in and by themselves, the MOA has a legitimate interest in such land use decisions. The landowners do not challenge this finding. We therefore accept this finding for purposes of this appeal. But given the importance of this factor to the trial court's analysis, we also note that no plausible argument could be made that the MOA has no legitimate interest in land-use decisions concerning wetlands.
Finally, the trial court concluded that the factors must be weighed to decide whether a `taking' has occurred. It reasoned that, [s]ince the actual extent of the impact of the MOA's decisions is `so unclear, the severity of the economic impact and the reasonableness of [the landowners'] expectations concerning development plans must weigh heavily in [the landowners'] favor.' [19] The trial court found that the MOA setback requirement caused economic loss to the landowners' property. But, in balancing the Sandberg factors, the trial court found that no compensable taking or damage had occurred: On balance ... factors two and three do not weigh heavily enough to tip the scales in favor of the Owners. In this case, Owners were able to realize most of their investment backed expectations and have done so through the sale of Subdivision property. The reduction in value, although significant in terms of actual dollars, represents a small percentage when viewed in the context of the entire property. Lastly, I find that the land-use decisions here [serve] a legitimate purpose. Therefore I find that private property has not been damaged or taken in this case. The landowners would find a compensable taking whenever the government interferes with reasonable investment-backed expectations, or damage to property has occurred, even if the economic damage is minor. But that rule would be inconsistent with established takings doctrine and the economic policies underlying that doctrine. The takings doctrine of this court and the United States Supreme Court clearly holds that, where there has been no physical invasion of property, a per se taking will not be found except upon a showing that all economic value of a particular piece of property has been destroyed. [20] The landowners also suggest that a de facto taking can be established without full consideration of the Sandberg factors when a government's action has damaged private property even when the damage has not destroyed all economic value of the land. This proposed rule offends established takings doctrine, which, outside a narrow set of circumstances resulting in per se takings, requires courts to engage in case-specific analysis guided by the Sandberg factors. We decline to adopt the landowners' alternative legal rule. Rather, we agree with the trial court that even under the more far-reaching terms of the Alaska Constitution, the MOA's regulatory action did not amount to a compensable taking of the landowners' property. Alaska case law does not elaborate on how the Sandberg factors are to be weighed against each other. But it is helpful to consider the policies that animate the federal doctrine from which the Sandberg factors were adopted. [21] At one end of the spectrum, the cases recognize limits on the rightful uses to which owners may put their private property. Long ago it was recognized that `all property in this country is held under the implied obligation that the owner's use of it shall not be injurious to the community.' [22] Furthermore, the doctrine recognizes that in order to protect the public welfare, governments may exercise their police powers, occasionally impairing the use and value of private property. [23] This policy is present in the law of the states as well. [24] Nevertheless, courts also recognize limits on the exercise of police powers that encroach on property rights. [T]here is no dispute about the proposition that a regulation which `goes too far' must be deemed a taking. [25] Thus, regulatory takings doctrine requires courts to reconcile these policies. The reconciling principle employed in the federal doctrine focuses on whether the challenged regulatory action unfairly allocates the burden of preserving the public welfare to a particular landowner. The determination that governmental action constitutes a taking is, in essence, a determination that the public at large, rather than a single owner, must bear the burden of an exercise of state power in the public interest. [26] Although no precise rule determines when property has been taken, [27] the question necessarily requires a weighing of private and public interests. [28] Professor Robert Ellickson explains the policy underlying the doctrine: [t]akings clauses largely aim to prevent horizontal inequity stemming from a government's decision to impose a heavy burden on a few citizens instead of spreading that burden through the tax system. [29] Professor Ellickson suggests that any land use activity can be appraised in terms of its relative desirability to neighbors. [30] He notes that government land-use regulations that restrict neighborly activity (activity that does not impose externalities that are worse than normal, like commercial development in a commercial development zone) are most likely to trigger compensation under takings clauses. [31] Still, the government should be entitled to attempt to prove a defense that, in the long run, a practice of compensating in instances of this sort would not be in the interest of claimants in general, such as when the social desirability of the regulation is unquestionably strong or the transaction costs of rendering payment would be severe. [32] For example, Professor Ellickson explains that the government defense should succeed in justifying a non-compensable prohibition on the neighborly activity of growing wheat when the prohibition is applied to a wide set of landowners to produce a significant social benefit, i.e., when a state enacts a statewide ban on wheat farming to allow nature to remedy the effects of the previous year's dust bowl. [33] The landowners in the present case could make a prima facie showing of a taking under Professor Ellickson's scheme because they have suffered economic loss due to a government regulation that prevents them from engaging in normal land use activities (commercial development in a commercial district). However, the MOA's setback restriction should not trigger compensation because it is part of a city-wide (indeed, nationwide) wetlands preservation scheme which applies broadly to all landowners and which benefits both the public generally and the landowners in particular. Scientists and legislators have recognized the unique ecological and economic value that wetlands provide in protecting water quality, regulating local hydrology, preventing flooding, and preventing erosion. [34] In preserving the valuable functions of wetlands, regulations like those of the MOA provide ecological and economic value to the landowners whose surrounding commercially-developed land is directly and especially benefitted by the functioning of Blueberry Lake. The seminal decision of Agins v. City of Tiburon [35] is also illustrative. In Agins, the United States Supreme Court affirmed the California Supreme Court's judgment that a city's open-space land zoning ordinances, which restricted a previously purchased five-acre tract of land to single-family residences and open-space use, did not take the property without just compensation, where the zoning benefitted the landowners as well as the public by assuring careful and orderly development. [36] The Agins Court found it significant that [t]here [was] no indication that the appellants' 5-acre tract [was] the only property affected by the ordinances, [37] and that the landowners therefore [would] share with other owners the benefits and burdens of the city's exercise of its police power. [38] Federal courts have rejected the landowners' any economic loss is compensable position in favor of the more nuanced Agins -type reasoning. [39] These decisions aspire ultimately to allocate economic burdens and benefits fairly and will find an allocation fair when the disputed regulation: (1) applies broadly to many landowners; (2) directly benefits those that it burdens; and (3) permits burdened landowners to engage in viable alternative economic uses of their land. [40] The Federal Circuit Court of Appeals employs a reciprocity of advantage test to determine when government regulations that reduce but do not entirely eliminate the economic value of land have gone too far and ought to be compensable. [41] This test is consistent with the Agins reasoning and Professor Ellickson's expository scheme. The Federal Circuit has explained: When there is reciprocity of advantage, paradigmatically in a zoning case, then the claim that the Government has taken private property has little force: the claimant has in a sense been compensated by the public program adjusting the benefits and burdens of economic life to promote the common good. [42] In determining whether a challenged government action produces a reciprocity of advantage and therefore ought not trigger compensation, the Federal Circuit instructs trial courts to consider whether there are direct compensating benefits accruing to the property, and others similarly situated, flowing from the regulatory environment or whether the benefits, if any, [are] general and widely shared through the community and the society, while the costs are focused on a few. [43] In addition, trial courts may consider whether there are alternative permitted activities economically ... realistically available. [44] When government regulations permit such alternative economic uses, courts have consistently held that no compensation shall be due. [45] The landowners also appear to argue here that the trial court erred in determining that, because the MOA's interest in wetlands regulation is legitimate, no taking could be found. But this was not the trial court's reasoning. The landowners have not shown that the trial court gave inadequate weight to the investment-backed expectations and economic impact factors. The trial court expressly made findings regarding these factors and explained that, because the economic loss was so minor, these factors did not weigh heavily enough to overcome the MOA's legitimate interest in wetlands preservation. The trial court correctly applied the law, and its finding of minor economic impact was both reasonable and supported by expert testimony establishing the value of the setback bands. The crux of the landowners' complaint remains their view that every economic loss due to government regulation must be compensated, no matter how minor the loss. As we have seen, this is not the law. While some minor economic losses may indeed be compensable under our takings doctrine, not every such loss is compensable. A case-specific analysis, guided by the Sandberg factors and the underlying economic principle of equitable distribution of public burden and benefit, determines which losses are compensable. The trial court's decision is consistent with takings doctrine and its underlying principles. They recognize broad governmental authority to regulate in the public interest when that regulation does not unfairly allocate the burden of the public welfare to a particular private party. Here, as in Agins, the landowners were not singled out and made to suffer unduly burdensome economic loss. [46] Instead, they incurred only relatively minor economic loss due to generally applicable wetlands restrictions which govern all land use in Anchorage and benefit all landowners, including these landowners, by preserving the ecologically and economically valuable functions of wetlands. The trial court took a rational and well-reasoned approach to this case. It appropriately considered the Sandberg factors and made reasonable findings regarding the value of the property actually in dispute. We conclude that its decision that there was no taking is supported by the evidence. The landowners moved in June 2001 for leave to file memoranda addressing the United States Supreme Court's recent opinions in Solid Waste Agency of Northern Cook County v. United States Army Corps of Engineers [47] and Palazzolo v. Rhode Island, [48] and for leave to file a motion to stay the appeal pending a possible application by the landowners to the Corps of Engineers for some unspecified relief from restrictions on developing the wetlands. We denied the motion to stay because the question here is whether the MOA's past actions in imposing the twenty-foot-wide setback band entitle the landowners to compensation. The Supreme Court's opinions do not affect our resolution of that question. We express no opinion about the effect of any prospective decisions by the Corps of Engineers or future acts of the MOA with respect to this property. As to the narrow question before us here, we simply hold that the past acts of the MOA with respect to the twenty-foot-wide band have not resulted in a compensable taking.
The landowners raise several other issues. They assert that we should follow a rule of joint and several liability where several governments regulate land use, causing loss. They also assert that it was error to permit the MOA to amend its defenses at trial to assert that these wetlands were subject to joint governmental action. Because the landowners now limit their claim to the last twenty feet of setback, these issues are moot.