Opinion ID: 2630928
Heading Depth: 1
Heading Rank: 6

Heading: Did the City's enactment of a moratorium ordinance prohibiting construction of driveways, culverts, or other improvements within the right-of-way of the Project and on Pacific Avenue exceed the scope of valid police power and result in a taking?

Text: In a related argument, the Fricks contend that the City's enactment of the moratorium ordinanceor interim development control as moratoria are often calledexceeded the scope of valid police power. The moratorium remained in effect from May 2, 2005, until February 25, 2008, and prohibited the construction of driveways, culverts, or other improvements within the right-of-way of the Project and on Pacific Avenue. The Fricks complain that the City exercised total control over the Frick property that [did] not allow the Fricks to develop within the 3-year period of time due to the Moratorium. The Fricks also contend that the moratorium constituted a taking in that it was directed specifically at the Fricks. These contentions lack merit. The United States Supreme Court has identified two types of regulatory action that constitute categorical or per se takings. First, where government requires an owner to suffer a permanent physical invasion of her propertyhowever minorit must provide just compensation. Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 538, 125 S.Ct. 2074, 161 L.Ed.2d 876 (2005) (citing Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 102 S.Ct. 3164, 73 L.Ed.2d 868 [1982]). A second categorical rule applies to regulations that completely deprive an owner of ` all economically beneficial us[e]' of his or her property. (Citation omitted.) Lingle, 544 U.S. at 538, 125 S.Ct. 2074. If the facts of a governmental takings case do not fit within these two categories, then the takings claim must be analyzed under the catch-all standard promulgated in Penn Central Transp. Co. v. New York City, 438 U.S. 104, 124, 98 S.Ct. 2646, 57 L.Ed.2d 631, reh. denied 439 U.S. 883, 99 S.Ct. 226, 58 L.Ed.2d 198 (1978). The Penn Central factors were held to be applicable when an alleged taking is temporary in nature in Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302, 342, 122 S.Ct. 1465, 152 L.Ed.2d 517 (2002). In so holding, the United States Supreme Court declined to adopt a per se categorical test for temporary moratoriums on development. The Court noted: A rule that required compensation for every delay in the use of property would render routine government processes prohibitively expensive or encourage hasty decisionmaking. Tahoe-Sierra, 535 U.S. at 335, 122 S.Ct. 1465. `Government hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law.' [Citation omitted.] Lingle, 544 U.S. at 538, 125 S.Ct. 2074. Hence, to determine whether the moratorium imposed in this case was a taking, we must apply the Penn Central standards. Those factors were defined in the context of the Court considering whether restrictions imposed by the City of New York, which prevented substantial additions to Grand Central Station, amounted to a taking. The Court noted that [t]he question of what constitutes a `taking' for purposes of the Fifth Amendment has proved to be a problem of considerable difficulty and as a result the Court was unable to develop any `set formula' for determining when `justice and fairness' require that economic injuries caused by public action be compensated by the government, rather than remain disproportionately concentrated on a few persons, with the result being ad hoc, factual inquiries. Penn Central, 438 U.S. at 123-24, 98 S.Ct. 2646. Nevertheless, citing Goldblatt v. Hempstead, 369 U.S. 590, 594, 82 S.Ct. 987, 8 L.Ed.2d 130 (1962), the Penn Central Court identified three factors that have particular significance: (1) the economic impact of the regulation on the claimant, (2) the extent by which the regulation has interfered with distinct, investment-backed expectations, and (3) the character of the governmental action. Regarding the third factor, the Court observed: A `taking' may more readily be found when the interference with property can be characterized as a physical invasion by government, [citation omitted], than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good. Penn Central, 438 U.S. at 124, 98 S.Ct. 2646; see also McPherson Landfill, Inc. v. Board of Shawnee County Comm'rs, 274 Kan. 303, 332-34, 49 P.3d 522 (2002) (discussing Penn Central ). The analysis of the Penn Central factors must focus on the parcel as a whole, not discrete segments. Penn Central, 438 U.S. at 130-31, 98 S.Ct. 2646. It is insufficient to establish a taking `by showing that [the landowner has] been denied the ability to exploit a property interest that [it] heretofore had believed was available for development.' Mount St. Scholastica v. City of Atchison, Kansas, 482 F.Supp.2d 1281, 1298 (D.Kan.2007) (quoting Penn Central, 438 U.S. at 130, 98 S.Ct. 2646). Explaining the rationale of Penn Central , this court has indicated that [w]here the government reasonably concludes that the health, safety, morals, or general welfare would be promoted by prohibiting particular contemplated uses of land, compensation need not accompany a reasonable prohibition. [Citations omitted.] Garrett v. City of Topeka, 259 Kan. 896, 916, 916 P.2d 21 (1996). As more specifically relevant to the circumstances of this case, we have held that the private rights of an abutting landowner on an existing street or highway are subordinate to the right of the public to proper use of the street or highway, so that the exercise of rights of abutting landowners is subject to reasonable regulation and restriction for the purpose of providing reasonably safe passage for the public. But regulations or limitations cannot be sustained which unduly or unreasonably curtail or restrict rights of an abutting landowner. Smith v. State Highway Commission, 185 Kan. 445, 452, 346 P.2d 259 (1959). In the present case, the district court applied the Penn Central factors and held that the moratorium passed by the City was a reasonable police power. The court observed that the moratorium was limited to the time of construction and establishment of new traffic patterns. In addition, it applied to the entire construction area. And during the time the moratorium was in effect, the Fricks began submitting building development plans. As for the Fricks' contention that the moratorium was directed specifically at them, the district court stated: The moratorium may have been discussed and passed following the plaintiffs' installation of culvert driveways, but there is no language in the moratorium nor are there any controverted material facts to indicate it affected the plaintiffs in a special or particular manner different from the other property owners in the construction area. In other words, the Fricks' installation of the Lot 3 driveways acted merely as a catalyst for the City's taking action. Examining the Penn Central factors, we cannot conclude that the moratorium resulted in a compensable taking of the Fricks' relocation site. As for the first two Penn Central factorsthe economic impact of the regulation and the impact on investment backed expectations of the owner-the City points out that the subject property had previously been used for agricultural purposes and continued to be used for agricultural purposes throughout the period in which the moratorium remained effective. The Fricks respond that [t]his moratorium was in place for the entire period of time the Fricks were attempting to relocate. This moratorium cost the Fricks [a] $175,000.00 tax credit, issued under I.R.S. Code § 1033. Internal Revenue Code (I.R.C.) § 1033, see 26 U.S.C. § 1033 (2006), provides that a condemnee is taxed on the full gain it realizes on a condemnation award unless it reinvests the condemnation proceeds within a certain period of time. See Baylin v. United States, 30 Fed.Cl. 248, 251 (1993). The Fricks supported this assertion and calculation with the deposition testimony of their tax expert David Rettele, in which he opined that the Fricks had to reinvest any gains within 3 years from the time of the condemnation of 1056 E. Pacific Avenue. According to Rettele, the start of the 3-year period was sometime between August 2003 and November 2004. The City points out that this tax consequence and the loss of any investment-backed expectations in the development of the relocation site is directly attributable to the Fricks' refusal to comply with the City's building permit application requirements. The essence of the City's argument is that the driveway moratorium did not prevent the Fricks from reinvesting, either on the relocation site after acquiring a building permit or on other property if they eventually were unable to obtain a permit to build on the relocation site. As will be more fully discussed in the next issue, while the moratorium was in effect, the City was participating in ongoing communications with the Fricks regarding the potential development of the relocation site. Despite this fact, the Fricks never submitted a completed application. Consequently, it was not the driveway moratorium but the failure to obtain a building permit that prevented the investment of the proceeds into the development of the relocation site; the moratorium itself did not interfere with the Fricks' building application process. Further, if there was any effect on economic viability by temporarily disallowing the installation of driveways, the economic viability of the relocation site was delayed, rather than destroyed. Delaying the sale or development of property during the governmental decision-making process may cause fluctuations in value that, absent extraordinary delay, are incidents of ownership rather than compensable takings. Agins v. Tiburon, 447 U.S. 255, 263 n. 9,100 S.Ct. 2138, 65 L.Ed.2d 106 (1980), overruled on other grounds Lingle, 544 U.S. 528, 125 S.Ct. 2074, 161 L.Ed.2d 876 (2005). In arguing that the delay was a taking, the Fricks cite two cases from other jurisdictions, Robins v. Town of Hillsborough, 361 N.C. 193, 639 S.E.2d 421 (2007), and State ex rel. Hilltop Basic v. Cincinnati, 167 Ohio App.3d 798, 857 N.E.2d 612 (2006). Neither case is particularly helpful. In Robins , the town Board adopted a moratorium temporarily suspending the review, consideration, and issuance of permits and applications for manufacturing and processing operations involving petroleum products. Before the moratorium took effect, the plaintiff had submitted an application seeking approval of his site-specific development plan, in which he proposed to construct an asphalt plant on the property. At the time the moratorium took effect, the plaintiff's asphalt plant was the only development plan under consideration by the Board which was affected. The North Carolina Supreme Court held that by enacting the moratorium, the town had not followed its own rules and ordinances requiring the Board to approve or deny the application. It effectively usurped the Board's responsibility in the matter. Thus, the plaintiff was entitled to have his application reviewed under the ordinances and procedural rules in effect at the time he filed his application. Robins, 361 N.C. at 199, 639 S.E.2d 421. In contrast, the Fricks did not have a pending permit application for the construction of a building or driveways at the time the moratorium was passed. It is significant that the City's basis for requiring the removal of the Lot 3 driveways was that the Fricks had failed to obtain a permit or otherwise comply with already enacted City Code provisions, specifically with City Code provisions that had been in effect since 1966. In Hilltop Basic, the City of Cincinnati denied access to a piece of property, leaving it landlocked so that the only access would be by boat. The Ohio Court of Appeals held that the City's denial of the landowners' application for a curb-cut/driveway permit for access to the public road, which denial made the undeveloped riverfront property inaccessible from the land, constituted a taking. See Hilltop Basic, 167 Ohio App.3d at 806-09, 857 N.E.2d 612. Our case is distinguishable from Hilltop Basic in that the Fricks continued to enjoy the same access to the relocation site as they had prior to the Project the access driveway on Lot 1. More similar to this case are the several cases recognizing that comparable moratoria are widely used among land-use planners to preserve the status quo while formulating more permanent development strategies and which find such moratoria are not takings. See, e.g., Santa Fe Village Venture v. City of Albuquerque, 914 F.Supp. 478, 483 (D.N.M. 1995) (30-month moratorium on development of lands within the Petroglyph National Monument was not a taking); Zilber v. Town of Moraga, 692 F.Supp. 1195, 1206-07 (N.D.Cal. 1988) (18-month development moratorium during completion of a comprehensive scheme for open space did not require compensation); Williams v. City of Central, 907 P.2d 701, 703-05 (Colo.App.1995) (10-month moratorium on development in gaming district while studying city's ability to absorb growth was not a compensable taking); Woodbury Place Partners v. Woodbury, 492 N.W.2d 258, 262 (Minn.App.1992), cert. denied 508 U.S. 960, 113 S.Ct. 2929, 124 L.Ed.2d 679 (1993) (moratorium pending review of plan for land adjacent to interstate highway was not a taking even though it deprived property owner of all economically viable use of its property for 2 years); Nolen v. Newtown Tp., 854 A.2d 705, 707-10 (Pa. Commw.2004) (2-year moratorium on development was not a taking because there were other uses available, including farming, that were not affected by the moratorium); see also Riviera Drilling and Exploration Co., Inc. v. United States, 61 Fed.Cl. 395, 404-05 (2004) (6-month delay in issuing permit not a taking). In these cases, the reasonableness of the delay is often dependent on the reason for the moratorium. This consideration is closely tied to the third Penn Central factorthe character of the government action. Here, the City argues that the moratorium was enacted to promote the common good. As stated in the City Council's resolution, the purpose of the moratorium was (1) traffic safety, (2) the need to avoid costs to the public due to delays caused by conflicts with private construction or because of the need to remove private improvements in conflict with the Project's construction, and (3) the need to avoid economic loss to private parties in the event such improvements had to be removed in order to complete the Project. Further, the moratorium was limited to the construction or installation of driveways, culverts, or other improvements within the confines of the Project and within the right-of-way. It did not restrict development of adjacent private property outside the boundaries of the right-of-way. These factors lead us to conclude the moratorium was facially reasonable. Nevertheless, the Fricks contend that the moratorium was discriminatory and made in bad faith because it was specifically directed at them. They cite no evidentiary support for this contention, however. Rather, they merely claim that Mr. [Bengtson]'s statements confirm this. The Fricks offer no explanation for what these statements were, nor do they offer any citation to the record. Our review of the record finds no support for the Fricks' assertion. Our review did discover that Greg Bengtson, one of the attorneys representing the City at the summary judgment hearing, argued there that the moratorium was not directed uniquely to the Fricks. Recognizing that the situation involving the Fricks' Lot 3 driveways created a wake-up call due to the magnitude and effect of the [P]roject on that vicinity, Bengtson argued the City found it was necessary to the overall project that there would be no circumstance under which a [driveway] permit during this particular time would be warranted administratively ... whether it was the Frick property or any of the other properties in the vicinity ... that were affected by the moratorium. These statements do not support the Fricks' arguments. More importantly, the statements are not evidence and do not satisfy Supreme Court Rule 141 (2009 Kan. Ct. R. Annot. 225). The uncontroverted facts are that the Project included the property of landowners other than the Fricks and that the moratorium applied to all properties in the Project area, facilitated a public purpose, and existed for a reasonable length of time corresponding to the Project period and the establishment of traffic flow in the area. The public safety, general welfare, and economic concerns associated with the moratorium constituted reasonable regulation by the City. The implementation of the moratorium did not result in a taking.