Opinion ID: 835432
Heading Depth: 1
Heading Rank: 3

Heading: proceedings following county land use decisions

Text: Friends of Douglas County and two individuals who had appeared in the proceedings before the county, including Wetherell, appealed the county's decision with respect to the Great American property to LUBA. Wetherell appealed the county's decision with respect to the Walker property to LUBA. [2] LUBA remanded the county's rezoning determinations for both the subject properties, because it concluded that the county improperly had considered evidence that the properties could not be used profitably for farming or agricultural purposes. In both cases, LUBA based its decision, in substantial part, on OAR XXX-XXX-XXXX, an administrative rule aimed specifically at identifying agricultural land. Paragraph (5) of the rule provides: Notwithstanding the definition of `farm use' in ORS 215.203(2)(a), profitability or gross farm income shall not be considered in determining whether land is agricultural land or whether Goal 3, `Agricultural Land,' is applicable. Under that rule, LUBA reasoned, direct consideration of the profitability of the land or of the gross farm income that could be generated from the land was improper when determining whether the land was, in fact, agricultural land that must remain zoned for that exclusive purpose. Because LUBA remanded to the county for it to determine whether the land was agricultural land without any direct consideration of profitability, LUBA did not consider Wetherell's alternative argument that the county improperly had based its decision on a determination that the land would not support commercial agriculture. Great American and the Walkers filed separate petitions for judicial review of the LUBA decisions, arguing that OAR XXX-XXX-XXXX(5) was invalid because the rule conflicted with the statutory definition of farm use in ORS 215.203(2)(a). That definition provides, in part, that `farm use' means the current employment of land for the primary purpose of obtaining a profit in money  by raising crops or animals or engaging in other farm activities. (Emphasis added.) Petitioners asserted that the rule, by barring consideration of profitability or gross farm income, necessarily conflicted with the profit in money part of the statutory definition of farm use that is used in Goal 3. The Court of Appeals, in an opinion dealing with the Great American property, agreed. Wetherell v. Douglas County (A129999), 204 Or.App. 732, 132 P.3d 41 (2006). [3] The Court of Appeals first noted that, under Goal 3, agricultural land encompassed, among other land, land in Western Oregon suitable for `farm use' and that Goal 3 expressly incorporated the definition of farm use in ORS 215.203(2)(a). [4] The court then observed that, in 1000 Friends v. Benton County, 32 Or.App. 413, 429, 575 P.2d 651, rev. den., 284 Or. 41, 584 P.2d 1371 (1978), it previously had defined profit in money in ORS 215.203(2)(a) to mean gross income and concluded that: OAR XXX-XXX-XXXX(5) is invalid as conflicting with Goal 3 insofar as it precludes consideration of either `profitability or gross farm income' in determining whether land is `agricultural land.' The rule's exclusion of consideration of `gross income' is directly at odds with our holding in 1000 Friends that Goal 3's incorporation of ORS 215.203(2)(a)'s `farm use' definition includes `profit in money' which means `gross income.' Wetherell (A129999), 204 Or.App. at 747, 132 P.3d 41 (emphasis in original). In a, the Court of Appeals also stated that, to the extent that the reference to profitability in OAR XXX-XXX-XXXX(5) could be read to mean profitability in the traditional sense of income minus expenses, its decision in 1000 Friends had upheld the rule's preclusion of profitability so defined. Wetherell, 204 Or.App. at 747 n. 11, 132 P.3d 41. The Court of Appeals thus affirmed LUBA's conclusion that profitability could not be considered in determining whether the land was agricultural land. Id. [5] The Court of Appeals remanded both cases to LUBA, directing LUBA to recraft its remand instructions to the county in light of our conclusion that OAR XXX-XXX-XXXX(5) is invalid insofar as it precludes consideration of `gross income.' Id. at 748 (omitted); Wetherell v. Douglas County (A130181), 204 Or.App. 778, 132 P.3d 50 (2006) (citing Wetherell (A129999) and reversing and remanding to LUBA for reconsideration). Although petitioners prevailed, in part, in the Court of Appeals, they nevertheless filed petitions for review, which we granted. As we describe in greater detail below, petitioners, supported by amicus curiae Oregon Association of Realtors, argue that the Court of Appeals erred in its interpretation of ORS 215.203(2)(a) and, therefore, in the remand instructions that it gave LUBA. In their view, the reference in ORS 215.203(2)(a) to profit in money means net profitrevenues minus expensesrather than gross income, as the Court of Appeals held, and they argue that the challenged rule is invalid in its entirety. Specifically, petitioners contend that, for the purposes of ORS 215.203(2)(a), profit has a tax-derived definition that refersas the Oregon Tax Court held in Everhart v. Dept. of Rev., 15 OTR 76 (1999)to net operating income after deducting operating expenses. They argue that profit should be read the same way here. Wetherell [6] and amicus curiae Land Conservation and Development Commission (LCDC) [7] disagree with petitioners' proposed definition of profit in money as profit in the tax sense, and they agree with the Court of Appeals' rejection of that definition. However, they disagree with the Court of Appeals' conclusion that ORS 215.203(2)(a) permits the consideration of gross farm income and with that court's related holding that OAR XXX-XXX-XXXX(5) is invalid to the extent that it prohibits consideration of gross farm income. They argue that the disputed rule is valid in its entirety. LCDC asks this court to hold that the rule is valid as to profitability[] and [to] affirm the decision of [LUBA] holding that the county improperly considered profitability in determining suitability for farm use. LCDC notes that, under Goal 3, agricultural land includes, in addition to specific soil classes that are particularly suited for farming, soils outside those classes that are nevertheless  suitable for farm use as defined in ORS 215.203(2)(a), taking into consideration soil fertility; suitability for grazing; climatic conditions; existing and future availability of water for farm irrigation purposes; existing land use patterns; technological and energy inputs required; and accepted farming practices[.] OAR XXX-XXX-XXXX(1)(a)(B) (emphasis added). LCDC then contends that, because the land at issue here falls within that suitable for farm use category, neither actual net profit nor gross farm income are appropriate factors to use in determining whether such property is agricultural land. Specifically, LCDC argues that the rule set out above focuses the suitability determination on the characteristics of the land itself and whether such land can be adapted for farming notwithstanding its current use. The characteristics of profitability and gross farm income, LCDC maintains, are not only easily manipulated, but, more importantly, they are not inherent characteristics of land. Therefore, OAR XXX-XXX-XXXX(5) properly prohibits a factfinder from considering them in determining whether particular land is agricultural land for purposes of Goal 3. For that reason, LCDC argues, LUBA correctly decided this case.