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HomeMy WebLinkAboutCOM 0485.013 2012-2014 Pa e 1 of 1 11 PC Murashige, Laura COMM, L-FS6 From: Jason K. Knable [jknable @carlsmith.com] Sent: Friday, February 14, 2014 11:55 AM To: counciltestimony @ co.hawaii.hi.us Cc: Steven S.C. Lim; Catherine L.M. Hall; Lynn A.H. Gibbs; dkauka @co.hawaii.hi.us; 'wbrilhante @co.hawaii.hi.us'; Duane Kanuha <duanekanuha @co.hawaii.hi.us> Subject: Hualalai Partners-Testimony on Bill 144 - Exaction law and fair share Attachments: 2-14-14 letter to Council.pdf Jason K. Knable Paralegal I Carlsmith Ball LLP 121 WAIANUENUE AVENUE,HILO,HI 96720 Main:(808)935-6644 Fax:(808)935-7975 Web:www.carlsmith.com Email:jknable(a7carlsmith.com Uniquely Positioned to Represent Clients Throughout the Pacific Honolulu ❑❑ Hilo ❑LI Kona ❑ri Maui n Guam ❑❑ Los Angeles IMPORTANT/CONFIDENTIAL:This message may contain confidential and privileged information.If it has been sent to you in error,please reply to inform the sender of the error and then delete this message. - 1 L Comm. No. 'lO S. 13 Ref.To: ',VC--Ref. Date E 8 2014 2/16/2014 CARLSMITH BALL LLP A LIMITED LIABILITY LAW PARTNERSHIP 121 WAIANUENUE AVENUE P.O.Box 686 HILO,HAWAII 96721-0686 TELEPHONE 808.935.6644 FAx 808.935.7975 W W W.CARLSMITH.COM SLIM@CARLSMITH.COM OUR REFERENCE NO.: 058108-00002 February 14, 2014 The Honorable J Yoshimoto, Chair and Members of the Hawaii County Council and Chair Zendo Kern and Members of the Hawaii County Committee on Planning 25 Aupuni Street Hilo, Hawaii 96720 Re: Hualalai Partners of Kona, LLC Bill 144 - Change of Zone Application(REZ 13-000164) Request: A-5a to RS-15 Applicant: Hualalai Partners of Kona, LLC Tax Map Key: (3) 7-5-017:043: Puapua'a 1st. North Kona District, Hawaii Dear Chair Yoshimoto, Chair Kern and Members of the Committee on Planning: On behalf of the Applicant, Hualalai Partners of Kona, LLC ("HPK"), this will respectfully request that the Council take the following new developments in the law governing land use exactions into consideration as you consider rezoning Bill 144. Recent case law on governmental land use exactions has clarified the boundaries under which County exactions may be imposed. We understand that Bill 144 is next being considered for hearing on the February 18, 2014 Council Planning Committee agenda. In light of recent United States Supreme Court precedent, the Planning Committee recommendation for Bill 144 on the land use exactions for this Project should be formulated such that the exactions are "proportional" to the Project impacts. I. Land Use Exactions Law New case law requires that all government exactions must meet certain standards to be constitutional. The dual purposes of government constraint and equitable distribution of public burdens are the basis for the Fifth Amendment's constitutional protections.' These protections U.S. Const.Amend. V("[N]or shall private property be taken for public use,without just compensation."). The Takings Clause of the Fifth Amendment of the United States Constitution,made applicable to the states through the HONOLULU • HILO • KONA • MAUI • GUAM • LOS ANGELES The Honorable J Yoshimoto, Chair February 14, 2014 Page 2 "prevent the government from forcing some people alone to bear public burdens that justice and fairness would require the public as a whole to bear."2 These concepts have been recognized by the County of Hawaii in implementation of its "fair share" policy that requires those assessments to have a "rational nexus" to the impact earned by the development, which should not include major repairs or renovations that correct existing deficiencies.3 A distinct category of regulatory taking occurs when government conditions the approval of a permit or some other type of governmental approval on an exaction from an approval-seeking landowner.4 The recent Supreme Court decisions provide specific guidance on the limitations on governmental powers, which will be instructive as applied to the proposed improvement of Hualalai Road in Bill No. 144. A. Fundamental Requirements A few months ago, in Koontz v. St. Johns River Water Mgmt. Dist., the Supreme Court held that constitutional scrutiny shall be applied to all land-use exactions, including in-lieu fees, monetary exactions, and off-site mitigation demands.5 In order to stay within the boundaries of the law, there must be a direct link between the government's demand for exactions and the impact created by a specific parcel of real property because "governmental ends that lack an essential nexus and rough proportionality to the effects of the proposed new use of the specific property at issue [diminish] without justification the value of the property.r6 This holding is not new; the foundation for Koontz is found in the 1987 Nollan and 1994 Dolan cases. The Hawai`i Supreme Court has already adopted Nollan/Dolan scrutiny in determining whether land development conditions are constitutional in Public Access Shoreline Hawaii v. County of Hawaii Planning Comm'n.7 The following is a brief review of the Nollan/Dolan cases, and the main holdings from each, that formed the seeds for the expanded protections now required under Koontz. Fourteenth Amendment,constrains the powers of the government by requiring compensation whenever private property is taken for public use. 2 Armstrong v. United States,364 U.S.40,49(1960). 3 Fair Share Annual Report as of June 30,2013,transmitted to County Council in January 29,2014 letter from Planning Director. 4 See Lingle v. Chevron U.S.A. Inc.,544 U.S. 528, 548(2005)(referring to"land-use exaction"takings theory). 5 133 S.Ct.2586, 186 L.Ed.2d 697(2013). 6 Id. '79 Haw.425,452,903 P.2d 1246, 1273 (1995)("[C]onditions may be placed on development without effecting a "taking"so long as the conditions bear an "essential nexus"to legitimate state interests and are"roughly proportional"to the impact of the proposed development.")(citing Dolan v. City of Tigard, 512 U.S. 374(1994). The Honorable J Yoshimoto, Chair February 14, 2014 Page 3 1. Nollan: Conditions Must Have an Essential Nexus to Development One case that provides a foundational requirement for land-use regulation law is Nollan v. California Coastal Comm'n.8 The Nollan case began when the Nollans applied for a permit to demolish the small bungalow on their beachfront property and replace it with a larger home. The California Coastal Commission was the permitting agency, and required that the Nollans provide a public easement to pass across their property in exchange for the permit. The Supreme Court eventually held that because the proposed development did not create any increased demand for beach access, the permit condition was unconstitutional. In sum,Nollan stands for the proposition that unless a government permit condition serves a governmental purpose created by the development,the building restriction is not a valid regulation of land use, but rather an "out- and-out plan of extortion." Only conditions with an essential nexus to the development burden being imposed are within government's land-use powers. Without that nexus, government demands on developers are unconstitutional. In this case the Project will create limited additional traffic, and the applicant recognizes that road improvements do have an "essential nexus"to the proposed development. Accordingly, the applicant is willing to pay its fair share of road improvements. 2. Dolan: Conditions Must be Roughly Proportional to Impacts In Dolan v. City of Tigard,9 decided seven years after Nollan, the Supreme Court expanded its land-use exaction protections to address the question of how close the connection between the government exaction and the projected impact of the development must be. The Dolan case began when Ms. Dolan requested a permit to expand an existing store and pave her parking lot. The Planning Commission granted approval subject to the requirement that she dedicate a portion of her property for storm drainage, and an additional strip of land for a bicycle pathway. The Supreme Court reviewed this case and held that there was no connection between the exaction and the projected impact of the proposed development.'° Pursuant to Dolan, the government must provide evidence that conditions imposed are "roughly proportional" to the impacts of the proposed development." B. Impact Fees, Monetary Exactions, and Offsite Mitigation The Koontz case was just decided in 2013, and makes it clear that the exaction limitations in Nollan and Dolan apply to impact fees, monetary exactions, and off-site mitigation. The S 483 U.S. 825,827(1987). 9 512 U.S. 374(1994)("We granted certiorari to resolve a question left open by our decision in Nollan of what is the required degree of connection between the exactions imposed by the city and the projected impacts of the proposed development."(internal citation omitted)). 1°Id. at 386(citing Nollan,483 U.S.at 837). 11 512 U.S.at 391 n.8("the burden [to prove proportionality and nexus]properly rests on the city.") The Honorable J Yoshimoto, Chair February 14, 2014 Page 4 Koontz case was based on a district land use agency which required that a landowner improve off-site parcels as a condition of its proposed development. As applied to this Project, the Supreme Court decision in Koontz will require that all of the road and drainage improvements requested of HPK must: (1)have a nexus to the impacts of HPK's project, and (2) be proportional to the proposed project impacts. Koontz also makes clear that the protections of Nollan/Dolan apply to conditions precedent or conditions subsequent. The nexus and proportionality requirements for exactions are applied whether or not a permit has issued, and claims may be made even when a landowner refuses an improper request. Therefore whether the governmental agency, planning commission or a county council is 1) requiring a landowner to agree to a condition in order for a permit or approval to issue(condition precedent), or 2) granting a permit, but only on compliance with required conditions to follow (condition subsequent), the protections of Nollan and Dolan apply. Although the Supreme Court never reached this point, it should be noted that delays in permit approval required that the District pay compensation. The lower court in Koontz held that because the conditions imposed were unconstitutional, Koontz was entitled to compensation for a temporary taking of his property during the time that the District adhered to the unconstitutional conditions (which continued even after the conditions had been found to violate Nollan/Dolan standards).12 As some courts have recognized, however, a landowner should object to the exaction so as to give the government the opportunity to exercise its discretion to amend an exaction that violates Nollan/Dolan.13 Thus, the applicant Hualalai Partners of Kona, LLC has consistently argued in these proceedings for"fairness" in the application of the conditions of approval for Bill No. 144. II. HPK Road and Drainage Improvements As applied to Bill No. 144, the County is required to provide evidence that any and all exactions including land dedications for shoulder lanes, in lieu fees or "fair-share" fees, and off- site mitigation such as drainage improvements and improvements to Hualalai Road,remain within the Nollan, Dolan, and Koontz standards. Specifically, all parties recognize that Hualalai Road is already in dire need of major repairs and renovation to meet public safety standards, even without development of this Project. Similarly, all parties recognize that the existing drainage coming down from the mauka lands and across the County's IIualalai Road into the HPK property is an existing problem. Thus, the onsite and offsite improvements being proposed by DPW (Bill 144, Draft 1 drainage Conditions K and L, and IIualalai Road Conditions H and I) and discussed by the Committee on Planning must be proportional in order to pass constitutional muster, or they will be in violation of both the U.S. Constitution and the County's own Fair Share policy. 12 St.Johns River Water Management Dist. v. Koontz,77 So. 3d 1220(Fla. 2011). 13 See.e.g.,City of Carrollton v. HEB Parkway South, Ltd.,317 S.W.3d 787(Tex. App. Fort Worth 2010), reh'g overruled,(July 29,2010). The Honorable J Yoshimoto, Chair February 14, 2014 Page 5 The roadway and drainage upgrades required to bring the existing substandard Hualalai Road and mitigate the existing drainage coming from the mauka lands across Hualalai Road onto this Property (without the Project) must be determined and must be kept separate from the individualized impact created by this particular Project. The other adjoining landowners and the public as a whole must bear their fair share or pro rata cost for the improvements to Hualalai Road and the mitigation of flooding from the mauka drainage basin. The Fifth Amendment protections in these cases require equitable distribution of public burdens,14 and these protections prevent the government from forcing an applicant for a land use entitlement to alone bear public burdens that justice and fairness would require the public as a whole to bear.15 The County has already established and implemented its "fair share" policy as the measuring stick by which to determine proportionality. Bill 144 determines that the "fair share" for road and traffic improvements is $5,605.09 per single family residential unit. Thus, the combination of exactions related to Hualalai Road improvements in Bill 144 (which includes in- lieu fees, off-site mitigation, and land dedications) must not exceed the County's previously determined "fair share." To the extent that the County's requested improvements would cost more than this predetermined amount, they will be deemed excessive under Koontz. However, in light of the CounciI's desire to think creatively and find a solution to fund the Hualalai Road improvements, HPK is willing to consider the alternative approach proposed by some Council members. That alternative approach would give the applicant the option to credit all of its costs of land and improvements to Hualalai Road against the overall "fair share" contributions due for all elements (e.g. park and recreational improvements, police, fire, solid waste, road and traffic improvements). This option is especially appropriate in Bill 144 because safety improvements to Hualalai Road will provide a direct benefit to the other fair share elements, e.g., improving traffic safety for the public travelling to the parks and beaches, and allowing police and fire emergency services and solid waste haulers to reach their intended destination along Hualalai Road in a safe manner that will benefit the public interest. We recognize that the above alternative approach has not been implemented to date. However, we also point to the fact that the County has not adopted an impact fee ordinance that would comply with the mandates of Hawaii Revised Statutes § 46-141 et seq., governing impact fees. Thus, while the fair share contributions policy imposed by the County in land use applications for zoning changes is modeled after the statute governing impact fees,the County is not constrained by the same limitations that the statute would impose. For instance, the County would not be required to deposit its funds in a special trust fund subject to recoupment and refund,nor is the County required to expend impact fees for public facilities of the same type for which they are collected as contemplated in § 46-144. 14 U.S.Const. Amend. V,XIV. 13 Armstrong v. United States,364 U.S.40,49(1960). The Honorable J Yoshimoto, Chair February 14, 2014 Page 6 Thus, should the County choose to use its discretion to allow credit of the full amount of the costs of land and road construction for Hualalai Road contributed by this applicant to be applied against all fair share categories because they are related to improved safety and services for parks and recreation, fire, police, solid waste disposal facilities, and roads and traffic improvements within the region impacted,the County would be acting consistently with the policies contemplated by state law and County practice. In the alternative, if the Council is unwilling to allow the applicant to credit all of its costs of land and improvements to Hualalai Road against the total fair share contributions for the Project, then the applicant will comply with the minimal on-site improvements to Hualalai Road as originally proposed by DPW, but only up to a maximum cost of its fair share for road and traffic improvements under the Council's prevailing fair share policy. III. Conclusion In light of the recent case law governing land use exactions, the applicant respectfully requests that the County Council give due consideration to the Nollan/Dolan/Koontz concepts regarding the limitations on land use exactions, and pass forward the version of Bill 144 which provides the Kona community with the economic benefits of a successful project, as well as appropriate improvements to Hualalai Road. Should you have any questions or require additional information regarding this information and proposal, please feel free to contact me. Sincerely,oy Steven S.C. Lim cc: Hualalai Partners of Kona, LLC Corporation Counsel, County of Hawaii 4813-0521-9095.11