Arizona Land Use Law Basics

CITY ATTORNEY FUNDAMENTALS

ARIZONA LAND USE LAW BASICS

EVERYTHING YOU WANTED TO KNOW ABOUT ZONING IN 75 MINUTES OR LESS

Susan D. Goodwin, Phyllis L. N. Smiley, Trish Stuhan, Gary Verburg and Nicholle Harris, Gust Rosenfeld, PLC Jack Vincent, Assistant Town Attorney, Town of Gilbert

INTRODUCTION:

One of the most important areas of practice for a city attorney is land use law. While interesting and challenging, it can quickly lead an unprepared attorney into disaster. Regulation of private property through general plans and zoning often pits one person’s private property rights against another person’s private property rights. It imposes restrictions on what a property owner may do with his property. It impacts both businesses and residents. Your legal advice can have both legal and political consequences if not carried out well. In short, the power to regulate other people’s property must be exercised carefully, with an understanding of both case law and statutory authority.

In this section we will discuss the important legal issues affecting you as an advisor to your city or town council, planning and zoning advisory commission, board of adjustment and staff.

UNDERLYING LEGAL PRINCIPLES:

Authority to Zone.

Before zoning codes, land use was primarily regulated through nuisance laws or restrictive covenants. As cities became larger and uses more intense, there were efforts to control building height. In Welch v. Swasey,1 the US Supreme Court upheld height restrictions. In the early 20th century there were efforts to protect residential areas and in 1916 the City of New York adopted the country’s first comprehensive zoning code. But it was the zoning code adopted by the small city of Euclid, Ohio that found its way to the United States Supreme Court. In 1922, Euclid adopted a zoning code that established a comprehensive zoning plan for regulating and restricting the location of businesses, industries, apartment houses, two-family and single family houses, hotels, public facilities, and agriculture. It established requirements such as lot size, lot area to be built upon, the size and height of buildings, and other regulations common in zoning codes today. Euclid’s zoning code also adopted a zoning map. Little Euclid was challenged on the grounds that its zoning code violated

1 214 U.S. 91 (1909).

1 the Fourteenth Amendment of the U.S. Constitution because it deprived property owners of liberty and property without due process of law, it denied property owners equal protection of the law, and it offended certain provisions of the constitution of the state of Ohio. The lower court had held the ordinance was unconstitutional and void and enjoined its enforcement. The U.S. Supreme Court in Village of Euclid, Ohio v. Ambler Realty Co.2 had no problem finding that development regulations such as height restrictions were permissible. The Court focused primarily on whether commercial and industrial uses could be excluded from residential districts. The Court held that the creation of zoning districts by a city could be justified on the grounds of protecting the health, welfare and safety of its residents and thus was a valid exercise of police powers. The Court recognized, however, that particular regulations imposed on particular businesses could create a taking, but that was left to individual cases. Important Arizona Statutes You Should Know.

General Plans - A.R.S. § 9-461.01- A.R.S. § 9-462.16:

A.R.S. § 9-461.05: Requires cities to adopt a general plan for the city, which is a comprehensive, long-range general plan for the development of the city. If there is state land in the city, the planning agency (usually the planning commission) coordinates with the state land department. The general plan must define what will constitute a “major amendment.” It is important that this not be too broad, since the requirements to adopt a major amendment are much more onerous than for other amendments. General plans shall include the following elements:

 Land use element addressing distribution of land uses, standards of population density and building intensity, programs to promote infill, consideration of air quality, sources of aggregates “to preserve currently identified aggregates sufficient for future development and policies to avoid incompatible land uses.” Requirements for cities with territory in the vicinity of a military airport are included.

 Circulation element.

For cities (a) with a population of more than 2,500 but less than 10,000 and whose population growth rate exceeded an average of two per cent per year for the ten year period before the most recent United States decennial census, and (b) for cities having a population of ten thousand or more, the general plan shall include:

 Open space element.

 Growth area element that identifies those areas, if any, that are particularly suitable for planned multimodal transportation and infrastructure expansion and improvements.

 Environmental planning element.

 Cost of development element.

2 272 U.S. 365 (1926).  Water resources element.

For cities of 50,000 or more, the general plan shall include the following elements:

 Conservation element for the conservation, development and utilization of natural resources.

 Recreation element.

 Public services and facilities element.

 Public buildings element.

 Housing element.

 Conservation, rehabilitation and redevelopment element for the elimination of slums and blighted areas and community redevelopment.

 Safety element for protection from natural and artificial hazards.

 Bicycling element.

 Energy element.

 Neighborhood preservation and revitalization element.

There are also additional requirements for the circulation element.

For cities with a population of more than 1,000,000, general plans shall include protections from encroaching development for any shooting range that is owned by this state and that is located within or adjacent to the exterior municipal boundaries on or before January 1, 2004.

A.R.S. § 9-461.06: Sets forth the procedures for adoption of a general plan. Prior to adoption, the city must adopt written procedures to provide effective, early and continuous public participation in the development and major amendment of general plans from all geographic, ethnic and economic areas of the municipality. The procedures shall provide for: (a) the broad dissemination of proposals and alternatives, (b) the opportunity for written comments, (c) public hearings after effective notice, (d) open discussions, communications programs and information services, and (e) consideration of public comments. The procedures must provide an opportunity for official comment by public officials and agencies, the county, school districts, associations of governments, public land management agencies, the military airport if the municipality has territory in the vicinity of a military airport, other appropriate government jurisdictions, public utility companies, civic, educational, professional and other organizations, property owners and citizens.

3 At least 60 days before giving notice of the general plan or an element or major amendment of a general plan, the planning agency shall transmit the proposal to the planning commission, if any, and the council shall submit a copy for review and further comment to: (a) the planning agency of the county in which the city is located, (b) each contiguous county or city, (c) the regional planning agency within which the city is located, (d) the Arizona commerce authority or any other state agency that is subsequently designated as the general planning agency for this state, (e) the department of water resources if a water resources element is required, (f) if the general plan or an element or amendment of the general plan is applicable to territory in the vicinity of a military airport or ancillary military facility, the military airport, (f) if the general plan or an element or major amendment of the general plan is applicable to property in the high noise or accident potential zone of a military airport or ancillary military facility, the attorney general, and (g) any person or entity that requests in writing to receive a review copy of the proposal.

The planning commission holds at least one public hearing. If the city has a population of over 25,000 people, two public hearings must be held at different locations. Notice of the time and place of a hearing and availability of studies and summaries related to the hearing shall be given at least fifteen and not more than thirty calendar days before the hearing by: (a) publication at least once in a newspaper of general circulation published or circulated in the municipality. The council must hold at least one public hearing after giving the same notice as was given for the planning commission hearing. The council adopts the general plan or amendment by resolution. No emergency clause may be used.

A "major amendment" is a substantial alteration of the city’s land use mixture or balance as established in the land use element. The general plan defines the criteria to determine if a proposed amendment is a major amendment. The adoption or readoption of a major amendment to the general plan shall be approved by affirmative vote of at least two-thirds of the members of the council. All major amendments shall be “presented” at a single public hearing during the calendar year the proposal is made. There is no requirement that the application be acted upon in the same calendar year.

For cities (a) with a population of more than 2,500 but less than 10,000 and whose population growth rate exceeded an average of two per cent per year for the ten year period before the most recent United States decennial census, and (b) for cities having a population of ten thousand or more, the general plan (but not a major amendment) must be submitted to the voters for approval.

A general plan, with any amendments, is effective for up to ten years from the date the plan was initially adopted (and ratified at an election if an election is required).

In applying an open space element or a growth element of a general plan a city shall not designate private land or state trust land as open space, recreation, conservation or agriculture unless the municipality receives the written consent of the landowner or provides an alternative, economically viable designation in the general plan or zoning ordinance, allowing at least one residential dwelling per acre. A.R.S. § 9-461.07: Requires annual reports to the council on the status of the general plan and its implementation. Each department responsible for planning and construction of major public works must submit to the planning agency a list of the proposed public works recommended for planning, initiation or construction during the ensuing fiscal year. “No public real property may be acquired by dedication or otherwise for street, square, park or other public purposes, no public real property may be disposed of, no public street may be vacated or abandoned and no public building or structure may be constructed or authorized, if an adopted general plan or part thereof applies thereto, until the location, purpose and extent of such acquisition or disposition, such street vacation or abandonment, or such public building or structure have been submitted to and reported upon by the planning agency as to conformity with such adopted general plan or part thereof. The planning agency shall render its report as to conformity with such adopted general plan or part thereof within forty days after the matter was submitted to it. The provisions of this subsection do not apply to acquisitions or abandonments for street widening or alignment projects of a minor nature if the legislative body so provides by ordinance or resolution.”

Zoning Powers – A.R.S. § 9-462.01- A.R.S. § 9-462.08:

A.R.S. § 9-462.01: Authorizes cities/towns to:

 regulate uses, signs, location, height, size of buildings, lots, open space, access, parking, setbacks;

 create and regulate civic districts; require as a condition of zoning dedication of rights-of- way for streets, alleys, public ways, drainage and public utilities;

 establish floodplain zoning districts and special zoning districts or regulations for certain lands characterized by challenging topography, soils, subsidence, high water table, lack of water and other adverse characteristics;

 establish districts of historical significance and age specific community zoning districts;

 establish procedures, methods and standards for transfer of development rights within the city/town;

 divide a city/town into zones; provide for different regulations in different zones and permit conditional uses; adopt overlay zoning districts and regulations applicable to particular buildings, structures and land within individual zones that modify the regulations in the underlying zoning districts;

 allow phased developments;

 provide for overlay districts;

 establish a schedule for development and reversion of the zoning after notice and hearing;

5  adopt overlay zoning districts and regulations applicable to particular buildings, structures and land within individual zones. These are commonly called “planned developments” or “planned area developments. The ordinance creating such a district may modify regulations in an underlying zoning district.

All zoning ordinances must be consistent with and conform to the adopted general plan.

A.R.S. § 9-462.02: Authorizes purchase or condemnation of property for the removal of nonconforming uses and structures. It also contains several provisions restricting the ability of cities related to outdoor advertising. A city may not condition a permit on waiving a right to continue use of a non-conforming billboard. The city may require the billboard to move to another site in the city “acceptable to both the municipality and the owner” so long as the city pays all costs of relocation.

A.R.S. § 9-462.03: Requires the adoption of a citizen review process that applies to rezoning and specific plan applications that require a public hearing. That process must include:

 adjacent landowners and other potentially affected citizens will be notified of the application.

 the municipality will inform adjacent landowners and other potentially affected citizens of the substance of the proposed rezoning.

 adjacent landowners and other potentially affected citizens will be provided an opportunity to express any issues or concerns that they may have with the proposed rezoning before the public hearing.

A.R.S. § 9-462.04: Sets forth requirements for public hearings – Very Important:

 no requirement to have a planning commission or hearing officer.

 if there is a planning commission or a hearing officer, must hold public hearing on any zoning ordinance.

 notice of the public hearing must:

1. include the time/place of the hearing, a general explanation of the matter to be considered, a general description of the area affected. This requires that (i) the notice be sufficiently specific so that an interested property owner could ascertain in general how and to what extent his property would be affected by the proposed zoning, and (ii) the notice include what action, if any, is contemplated at the hearing.3

2. notice shall be given at least fifteen days before the hearing and be published at least once in a newspaper of general circulation published or circulated in the city. If

3 Specht v. City of Page, 128 Ariz. 593, 627 P.2d 1091 (1981). a proposed rezoning abuts other municipalities or unincorporated areas of the county, copies of the notice must be sent to the planning agency of such governmental unit abutting such land. There are special provisions related to rezoning of land located within the territory in the vicinity of a military airport or ancillary military facility as defined in A.R.S. § 28-8461.

3. additional notice by first class mail must be given to a property owner if the owner has not initiated the change and to all property owners within three hundred feet of the property to be rezoned.

4. additional notice must be given if any of the following changes are being proposed: (a) a ten percent or more increase or decrease in the number of square feet or units that may be developed; (b) a ten percent or more increase or reduction in the allowable height of buildings, (c) an increase or reduction in the allowable number of stories of buildings, (d) a ten percent or more increase or decrease in setback or open space requirements, (e) an increase or reduction in permitted uses. In these cases, the city must (a) mail the notice to each real property owner whose real property is directly governed by the changes, or (b) include notice of such changes with utility bills or other mass mailings, or (c) publish the changes in a newspaper of general circulation in the municipality in a "display ad" covering not less than one-eighth of a full page.

 the city council may adopt the recommendations of the planning commission or hearing officer without holding a second public hearing if there is no objection, request for public hearing or other protest. However, the city council must hold a public hearing if requested by the party aggrieved or any member of the public or of the city council. If the planning commission or hearing officer did not hold a public hearing, the council is required to hold one.

 if a legal protest if filed, a rezoning ordinance may not be adopted unless three-fourths of all members of the city council vote to approve it. A legal protest exists when “the owners of twenty percent or more either of the area of the lots included in a proposed change, or of those immediately adjacent in the rear or any side thereof extending one hundred fifty feet therefrom, or of those directly opposite thereto extending one hundred fifty feet from the street frontage of the opposite lots, file a protest in writing against a proposed amendment”.

 in applying an open space element or a growth element of a general plan, a parcel of land shall not be rezoned for open space, recreation, conservation or agriculture unless the owner of the land consents to the rezoning in writing.

 no emergency clause is permitted for any decision of the council rezoning land (except land owned by the city).

A.R.S. § 9-462.05: Authorizes penalty clauses and authorizes filing court actions if any construction or maintenance does not comply with a zoning code.

7 A.R.S. § 9-462.06: Sets forth the procedures whereby a variance may be granted from the strict terms of the zoning code if property cannot be developed without some relief from the strict requirements. However, there would be chaos if anyone who did not want to comply with the zoning code could just go get a variance. That is not how it works. A board of adjustment is appointed (or the council may serve this function if provided in an ordinance). The board of adjustment may grant a variance only if: (a) special circumstances are applicable to the property, including its size, shape, topography, location, or surroundings, (b) the strict application of the zoning ordinance will deprive the property of privileges enjoyed by other property of the same classification in the same zoning district, (c) the grant of a variance will not constitute a grant of special privileges inconsistent with the limitations upon other properties in the vicinity/zone, (d) the special circumstances justifying a variance are not self-imposed by the owner. The board of adjustment may not approve a change of use. In addition to variances, the board of adjustment hears appeals from the decisions of the zoning administrator, hears appeals in which it is alleged that the zoning administrator has erred in the enforcement of a zoning ordinance, and exercises other powers granted by ordinance adopted by the council. An appeal of a decision of the board of adjustment usually is filed with the superior court. The decision of the superior court is based on the record (not de novo) for cities. In a city with a population of more than one hundred thousand persons, the council may adopt an ordinance that provides for appeal to the council.

Exactions and Diminution of Value:

A.R.S. § 9-500.12: This statute sets forth the procedures for appeals of exactions imposed by an administrative agency/official: Property owners have the right to appeal the requirement of a dedication or exaction imposed by an administrative agency or official of the city as a condition of granting approval for the use, improvement or development of private property pursuant to A.R.S. § 9-500.12. This right to appeal does not apply to dedications or exactions that are legislatively imposed by the municipality and outside of the discretion of an administrative agency or official of the municipality.

A municipality must notify the property owner of this right to appeal and provide the property owner with the appeal procedures. During the municipality’s consideration of the property owner’s request, the municipality may not request the property owner waive this right to appeal or trial de novo. The appeal shall be in writing and must be filed with or mailed to the municipality’s designated hearing officer within 30 days of the final action affecting the property. The municipality may not charge a fee to the property owner to file the appeal.

Once the appeal is filed, the municipality must submit a takings impact report to the hearing officer. The takings impact report should contain a justification as to the essential nexus between the exaction and a legitimate government interest and how the exaction is roughly proportional to the impact of the use, improvement or development of the property. The hearing officer must schedule a hearing date for the appeal and the property owner shall be given no less than ten days’ notice of the hearing date unless the property owner agrees to a shorter notice period. During the appeal, the municipality carries the burden of proving the government exaction or dedication is constitutional by providing evidence that (i) there is an essential nexus between the dedication or exaction and a legitimate government interest and (ii) the proposed dedication, extraction or zoning regulation is roughly proportionate to the impact of the proposed use, improvement or development.

The hearing officer shall issue a decision no later than five days after the hearing. If the hearing officer determines that the municipality has not met its burden, the hearing officer may modify or delete the exaction or dedication requirement. If the hearing officer determines the municipality has met its burden the hearing officer may affirm the exaction or dedication. The property owner may appeal the hearing officer’s affirmation or modification of the exaction, dedication or zoning regulation to the superior court. The appeal must be filed within 30 days from the date of the hearing officer’s decision. In accordance with the standards for the preliminary injunctions, the superior court may exercise any legal or equitable interim remedies that will permit the property owner to proceed with the use, enjoyment and development of the property but not render moot any decision upholding the dedication, exaction or zoning regulation.

A.R.S. § 9-500.13: This statute sets forth the procedures for appeals of exactions imposed by the council. It is an extension of A.R.S. § 9-500.12, but applies to appeals of the adoption or amendment by the council of a zoning regulation that amounts to a taking of the property pursuant to A.R.S. § 9-500.13. The statute requires that cities comply with the United States Supreme Court cases of Dolan v. City of Tigard,4 Nollan v. California Coastal Commission,5 Lucas v. South Carolina Coastal Council,6 and First English Evangelical Lutheran Church v. County of Los Angeles,7 and Arizona and federal appellate court decisions that are binding on Arizona cities and towns interpreting or applying those cases. In short, all ordinances and regulations related to land use must have an essential nexus to a legitimate government purpose and the ordinance or regulation but be roughly proportional to the proposed use, improvement or development. The appeal process is the same as set forth in A.R.S. § 9-500.12, except that it applies to zoning regulations adopted by the council. If the hearing officer determines the exaction or dedication constitutes a taking in violation of A.R.S. §9-500.13, the officer shall transmit a recommendation to the council to reconsider its prior action. An appeal of the council’s action may be made to superior court.

A.R.S. § 12-1134: This is part of the voter-approved Private Property Rights Protection Act. A land use regulation adopted after the date a property is transferred to a person that diminishes the value of the person’s property is entitled to just compensation from the city that enacted the land use law. There are exceptions, such as land use regulations adopted for the protection of the public's health and safety, including (a) rules and regulations relating to fire and building codes, health and sanitation, transportation or traffic control, solid or hazardous waste, and pollution control; rules that prohibit public nuisance under common law; rules required by federal law. The property owner may make a written demand for compensation. If it is established that the regulation diminished the value of the property, the city has the burden to establish that the regulation falls under an exception. The city may either rescind the regulation, make it not applicable to the property (in which case that will run with the land), or pay the compensation.

4 114 S. Ct. 2309 (1994). 5 483 U.S. 825 (1987). 6 112 S. Ct. 2886 (1992). 7 482 U.S. 304 (1987).

9 An action for just compensation based on diminution in value must be made within three years of the effective date of the land use law, or of the first date the land use law applies to the owner's parcel, whichever is later. Owner may waive its right to claim diminution of value, which is usually required prior to a rezoning ordinance requested by the owner being approved.

Zoning Codes

Not only must land use decisions comply with the legal principles and statutes described above, they must comply with the processes and requirements of the local zoning code. This is the compilation of the city’s requirements for zoning regulations in the city. A.R.S. § 9-462.01 described above sets forth the zoning powers of a city and the matters that may be regulated. Zoning codes create zoning districts, dividing the city into areas with similar uses. They provide buffers and transitions between districts with dissimilar uses, such as industrial and residential. Zoning codes include processes for adoption of text amendments to the zoning code and adoption of re-zoning ordinances that change the zoning from one zoning classification to another. Sometimes the zoning code establishes additional procedural requirements over and above statutory requirements. Adoption of text amendments and re-zoning ordinances that do not follow the requirements of both state law and the zoning code are invalid.

Zoning codes also set forth penalties for property owners’ failure to comply with the zoning for property.

USEFUL GLOSSARY OF TERMS.

 Board of Adjustment: the official body designated by local ordinance to hear and decide applications for variances from the terms of the zoning ordinance and appeals from the decision of the zoning administrator.

 Conditional Use Permit: Uses permitted in individual zoning districts that, because of potential negative impacts, are required to meet and comply with additional regulations, including site plan review and approval by the planning agency.

 General Plan: A comprehensive long range plan for development of the community.

 Legal Non-Conforming Use or Structure: A use or structure that, at the time of its approval, was in compliance with the land use regulations but that, because of subsequent amendments or changes in the land use regulations, is no longer in compliance.

 Overlay zoning district: A special zoning district that modifies certain specified regulations in the underlying zoning district to which the overlay zoning district is applied.

 Planning agency: Pursuant to the definitions in ARS § 9-462.01, the official body designated by local ordinance to carry out the purposes of municipal zoning. A municipality’s planning agency may be its planning department, planning commission, a hearing officer, the legislative body itself or any combination thereof.  Planning Commission: The municipal board or commission, appointed by the governing body to recommend approval or denial of proposed general plan amendments, rezonings, changes in zoning codes, and other land use regulations pursuant to the municipal zoning code or ordinance.

 Special Use Permit: A permitted exception to a zoning ordinance that allows a property owner to use his property in a way which the zoning regulations expressly permit under the conditions specified in the regulations themselves.

 Variance: An exception or exemption from the strict application of a land use regulation granted by the zoning authority when such application would result in a special hardship to the property owners.

 Zoning: A tool of community planning by which local governments divide land areas into districts according to the present and potential use of the properties and regulate the reconstruction, alteration, repair, or use of buildings, structures, or land within those districts through the application of land use regulations that are uniform for each class or kind of buildings throughout each district but that may vary from district to district.

 Zoning administrator: The official responsible for enforcement of the zoning ordinance.

 Zoning ordinance: A local (municipal or county) ordinance regulating the use of the land or structures, or both.

HOW ENTITLEMENTS ARE OBTAINED.

General Plans

A city attorney’s role in adoption of a city’s general plan is to ensure that the legal requirements for approval of general plans and amendments thereto are complied with by staff, planning commission or hearing officer, board of adjustments and council. This requires you to have full knowledge of the process and of the specific state law and zoning code requirements. For the adoption of a new general plan, the first order of business is for the city to adopt a written process for public participation (See discussion above regarding A.R.S. § 9-461.06(C). The city attorney should review the process and monitor its implementation as well as monitoring to make certain that the notices are sent to the parties required pursuant to A.R.S. § 9-461.06(D) and that all public hearings are properly noticed and held. The notice of public hearings should provide enough detail so that a reasonable person will know if his property will be affected and, if so, to what extent. Therefore, each chapter/element should be described and the principle provisions described. A copy of the notice of public hearing from the Town of Gilbert is attached as an example.

The city attorney should also review the proposed general plan to make sure that all of the required elements are included. The city attorney should prepare the adopting resolution. A sample resolution is included for your information. Once the council has approved the adopting

11 resolution, if the city is required to send the approval to the votes, the city attorney should continue to monitor the election process, ensuring that it is on the ballot and that the city complies with A.R.S. § 9-500.14 (no city resources are used to influence the outcome of the election – other than providing factual neutral information).

General plan amendments require less oversight from the city attorney. Generally, staff determines whether the amendment is major or minor. If major, it must be adopted by a two- thirds majority of the council and must be presented at the same meeting as all other major amendments for that year. Additionally, if your city or town meets the population criteria set forth in ARS § 9-461.06(H), the major amendment will need to be approved by the voters.

For minor amendments, a simple sample resolution is attached. The process requires a public participation/ citizen review process, public notice, a public hearing before the planning commission, and approval by council. The city attorney’s role is to monitor the process and ensure that the notice, public hearings, and resolution are legally adequate. Issues that most commonly arise involve inadequate notice. The notice must be timely and describe the proposed amendment in enough detail so that a reasonable person will know if his property will be affected by the change and, if so, to what extent.

Rezoning

The process of rezoning is generally the same as for minor general plan amendments – citizen review, public notice, public hearing before the planning commission or hearing officer (if there is one), and approval by the council.

The city attorney, in making sure the rezoning is legally sound should:

 Ensure that the proposed rezoning complies with the general plan provisions for the property;  If a general plan amendment is required, make sure that the general plan amendment is approved before the rezoning so that when the rezoning is approved, it is in compliance with the general plan, as amended;  Ensure that the legal process is followed and all notice complies with statutory and zoning code requirements;  If protest or objection letters are received, assist staff in evaluating to determine if a public hearing by the Council is required and/or if a super-majority vote is required for approval by the Council pursuant to A.R.S.§ 9-462.04;  Make certain that the legal description of the property being rezoned is attached to the ordinance;  Ensure that all dedications required and any conditions imposed by the rezoning ordinance are legally permitted by state law. See A.R.S. § 9-500.12 and -500.13.

Conditional/Special Use Permits A.R.S. § 9-462.01C provides that uses may be permitted in a zoning district on a conditional basis under which additional requirements must be met, including requiring site plan review and approval by the planning agency. The statute states that conditional uses are generally characterized by any of the following: (i) infrequency of use, (ii) high degree of traffic generation, (iii) requirement of large land area, and (iv) within residential zones, the regulations may permit modifications to minimum yard lot area and height requirements. The purpose of a conditional use permit requirement in zoning codes it to recognize that some uses that might be appropriate in a zoning district may, nevertheless, cause negative impacts on other owners justifying the imposition of additional requirements. If the conditions are met, the conditional use permit must be granted. Some zoning codes have broad criteria for the issuance of conditional use permits. Typical findings required are: (i) the proposed use will not be detrimental to health, safety, or general welfare of persons living or working in the vicinity, to adjacent property, to the neighborhood, or to the public in general; (ii) the proposed use conforms with the purposes, intent, and policies of the General Plan and its policies and any applicable area, neighborhood, or other plan adopted by the Town Council; (iii) the proposed use conforms with the conditions, requirements, or standards required by the Zoning Code and any other applicable local, State, or Federal requirements; and (iv) the proposed use, as conditioned, would not unreasonably interfere with the use and enjoyment of nearby properties. Most zoning codes are written to give this kind of broad discretion to the planning commission or the council.

One question that often arises is whether, if the holder of a conditional use permit is in compliance with the terms of the use permit, the use permit has a fixed term and the term expires, may the council refuse to renew or grant a new permit after the owner has developed the property and expended substantial sums in reliance on the permit and he is in compliance with the requirements of the permit. Although there are few cases on this issue, there is legal authority that if the holder of the use permit has made a substantial investment in reliance on the permit, it must be renewed or a new permit issued.8

Another question is whether the issuance of a conditional use permit is subject to a referendum. In Redelsperger v. City of Avondale,9 the Arizona Appellate Court held that issuance of conditional use permits under Avondale's city code is an administrative act and, therefore, not subject to referendum. In that case, the zoning code gave the planning commission the authority to issue conditional use permits based on detailed criteria set forth in the zoning code. The planning commission's decision could be appealed to the council. Redelsperger's application for a conditional use permit was approved by the planning commission and the decision was appealed to the council, who upheld the planning commission's decision. Referendum petitions were filed against the council's decision. Redelsperger filed suit in superior court, claiming that the granting of a conditional use permit was an administrative act and therefore not subject to a referendum. Ultimately, the Appellate Court agreed with Redelsperger and held that under the Avondale zoning code the issuance of a conditional use permit is an administrative act because of the detailed criteria set forth in the zoning code and there is no discretion in the issuance of the conditional use permit if those criteria are met. Because it is an administrative act, the issuance of

8 Goat Hill Tavern v. City of Costa Mesa, 6 Cal. App 4th 1519 (1992); Town of Paradise Valley v. Gulf Leisure, Corp., 27 Ariz. App. 600, 557 P.2d 532 (1976). 9 207 Ariz.430, 87 P.3d 843 (App. 2004).

13 the conditional use permit was not subject to a referendum. Although most of the court's discussion focused on the amount of discretion given in the issuance of a conditional use permit, the court also noted that it was the planning commission who approves the conditional use permit, and not the council. The court said that the ability to appeal the decision to the council does not turn it into a legislative decision.

In a later unreported case, GP Properties Carefree Cave Creek, LLC v. Town of Carefree,10 the Arizona Court of Appeals Division One issued a memorandum decision in GP Properties Carefree Cave Creek v. Town of Carefree. Importantly, GP Properties was not a case about a referendum but about whether a use permit could be denied under the Carefree zoning code. In that case, GP Properties ("GP") wanted to build a resort in the Town of Carefree in an area zoned R-70 for rural residences. Under the Carefree z oning code, a person could seek a special use permit for a resort use on land in a zone in which such use was not otherwise permitted. A resort hotel was listed in the zoning code as a use which could be built in another zone with the issuance of a special use permit. The zoning code stated that the grant of any such use permit was discretionary and a "matter of grace" with the council. The town filed a declaratory judgment requesting that the superior court declare any special use permit approval to be a legislative act rather than an administrative act. GP wanted the court to declare a special use permit as an administrative act. The Appellate Court in GP Properties held that the issuance of the special use permit was a legislative act and not an administrative act because of (i) the amount of discretion that the zoning code gave to the council in the grant of the special use permit, and (ii) the fact that under the Carefree zoning code it is the Council and not the planning commission who issues use permits.

Variances

Variances may be granted as authorized by the zoning code and state law. In order to grant a variance, there are certain findings that the board or zoning administrator must make:

1. There are special circumstances applicable to the property, including its size, shape, topography, location, or surroundings, whereby the strict application of the zoning ordinance will deprive such property of privileges enjoyed by other properties of the same classification in the same zoning district;

2. Such special circumstances were not created by the owner or applicants;

3. The variance does not constitute a grant of special privileges inconsistent with the limitations upon other properties in the vicinity and zone in which such property is located; and

4. The variance will not be materially detrimental to persons residing or working in the vicinity, to adjacent property, to the neighborhood, or the public welfare in general.

10 2008 W.L. 2246905 (Div. 1, May 29, 2008). A hearing officer or board of adjustment may impose additional conditions necessary to make the findings and grant the variance. Such conditions may be needed to:

1. Achieve the general purposes of the zoning code or the specific purposes of the zoning district in which the site is located, or to make it consistent with the general plan;

2. Protect the public health, safety, and general welfare;

3. Insure operation and maintenance of the use in a manner compatible with existing and potential uses on adjoining properties or in the surrounding area.

If the above findings cannot be met, the variance is not permitted pursuant to state law. See A.R.S. § 9-462.06(G).

Granting of a variance is considered to be a quasi-judicial proceeding and, in order to ensure that the process is fair and impartial, ex parte communications are prohibited. Ex parte communications are communications between whoever is making the decision on the variance (the zoning hearing officer or board of adjustment) and an applicant or applicant’s agent regarding the matter that will come before it for approval. It prohibits the Board members or hearing officer from direct or indirect communications – oral or written – related to the matter to be heard which is made to or by the hearing officer or board member that occurs outside the public meeting on the matter. Communications with staff regarding the matter, such as staff reports, must be entered into the public record. Site visits are permissible. If a hearing officer or board member receives an ex parte communication, a statement describing the time, place, and content of the communication shall be entered into the public record of the case.

ISSUES IDENTIFICATION

Other issues that affect local land use regulation are discussed in this section. A new city attorney may not have extensive knowledge of these matters, but should be able to recognize when there might be further research required in order to competently advise the client.

Regulatory Takings

In Nollan v. California Coastal Commission,11 owners of property sued the California Coastal Commission to invalidate a condition on their land permit requiring them to grant the public an easement across their beachfront property. The court of appeals had found the condition to be valid. The United States Supreme Court held that the right to exclude others from private property was an essential right to the ownership of property. If government action resulted in permanent occupation of land, it would effect a taking unless it substantially furthered legitimate state interests. The Court held that the condition was a taking and that, if the state wanted an easement, it would have to compensate appellants. A few years later in Dolan v.

11 483 U.S. 825, 107 S. Ct. 3141 (1987).

15 City of Tigard,12 a landowner had applied to the City of Tigard for a permit to redevelop her business. The city granted the permit conditioned on the landowner dedicating some of her property to the city in furtherance of its land use plan. The owner did not believe that requirement was related to the proposed development and therefore constituted a taking without just compensation under the Fifth Amendment of the U.S. Constitution. The Supreme Court of Oregon found that the conditions were reasonably related to the proposed development. The United States Supreme Court held that there must be an essential nexus between a legitimate state interest and the permit condition. The Court held that if a nexus existed, then exactions imposed by respondent must be roughly proportionate to the projected impact of the proposed development, and that the city’s conditions were not reasonably related to the impact of the proposed development.

Taken together, the Nollan/Dolan cases require that any condition (exaction) imposed on a land use application must substantially further a legitimate government interest and there must be a “nexus” between a condition imposed and the development’s impact on the City and the condition/exaction must be “roughly proportional” to the development’s impact.

In 2013, the United States Supreme Court extended Nollan/Dolan to conditions/exactions related to denials of an application. In Koontz v. St. John’s River Water Management District,13 the United States Supreme Court extended the application of Nollan/Dolan to denials of applications. Koontz owned 14.9 acres of land in Florida which were classified as wetlands. Florida had adopted a statute which requires permit applicants wishing to build on wetlands to offset the resulting environmental damage. The statute authorized the St. John’s River Water Management District to impose conditions on applications to implement the statute. The district negotiated with the owner regarding proposed conditions. Koontz offered to mitigate the environmental effects of his development proposal by deeding to the district a conservation easement on approximately three-quarters of his property. The district eventually rejected Koontz’ proposal and informed him that it would approve construction only if he (1) reduced the size of his development to one acre and deed the remainder as a conservation easement or (2) hired contractors to make improvements to district-owned wetlands several miles away. Koontz refused because he believed the demands were excessive in light of the environmental effects his proposal would have caused. The Supreme Court held that the Nollan/Dolan principles apply to denials of applications, not just approvals. In other words, if a government denies an application because the owner of the property refuses to comply with an unconstitutional condition that results in a taking just as much as if a government approves an application with an unconstitutional condition that does not meet the Nollan/Dolan test.

What is concerning is that under the facts of the case as described in the opinion, the district merely “suggested” some conditions to Koontz that might have been unconstitutional conditions. The court interpreted these to be demands by the district. City staff should be forewarned that it should not even discuss conditions/exactions with an applicant that might violate Nollan/Dolan because in the event the application is denied, that suggestion might become pivotal. Good records should be kept of all discussions with an applicant.

12 114 S. Ct. 2309 (1994). 13 133 S. Ct. 2586 (2013). Free Exercise of Religion Act – Few limits on churches

In 2010, the Arizona Legislature enacted the Free Exercise of Religion Act (the “FERA”), which profoundly affects a municipality’s ability to regulate the location of religious assemblies and institutions and impose other land use regulations on religious assemblies and institutions. A.R.S. § 41-1493.03 prohibits governments from imposing or implementing land use regulations that would affect a church14 in one of the following four ways: (1) unreasonable burden on the church’s exercise of religion; (2) treatment of a church on less than equal terms with nonreligious assembly or institution; (3) discrimination against the church on the basis of religion; and (4) exclusion of the church from a jurisdiction or unreasonable limitation on churches or structures within a jurisdiction.

Unreasonable Burden: Governments shall not impose or implement a land use regulation in a manner that imposes an unreasonable burden on a church’s exercise of religion, regardless of a compelling governmental interest. “Unreasonable burden” means that a church is prevented from using its property in a manner that the church finds satisfactory to fulfill its religious mission. Although “religious mission” is not defined, it may be found to include church activities such as feeding the homeless.

There are three exceptions:

1. The church’s exercise of religion at a particular location violates religion-neutral zoning standards that are in effect at the time of the church’s application for a permit. “Religion-neutral zoning standards” are “numerically definable standards such as maximum occupancy codes, height restrictions, setbacks, fire codes, parking space requirements, sewer capacity limitations and traffic congestion limitations.” Two key considerations under the federal Religious Land Use and Institutionalized Persons Act (“RLUIPA”) that courts have found to be compelling governmental interests justifying land use regulations that impose a substantial burden on a church are specifically excluded from the definition of religion-neutral zoning regulations: (1) synergy with uses the government finds more desirable that are allowed in the same zoning district and (2) ability to raise tax revenues. By specifically excluding these factors from being “religion-neutral zoning regulations,” FERA prohibits municipalities from using compatibility with adjacent uses and increasing tax revenues to justify land use regulation of churches. Additionally, fire codes, maximum occupancy codes and sewer capacity limitations are not normally considered to be “zoning regulations” and are easily corrected by making minor changes to the building or site plan by reducing the building height, changing the location of the building on the property, increasing the number of parking spaces and making adjustments for traffic congestion. Therefore, this exception has little practical effect.

2. The church’s exercise of religion at a particular location would be hazardous due to toxic uses in adjacent properties. The statute does not define “toxic use” nor does it state what would be “hazardous.” We anticipate courts would interpret this provision narrowly, favoring

14 In this memorandum church will be used to mean religious assembly or institution, which includes Christian churches as well as mosques, temples, synagogues and similar assemblies or institutions.

17 the church’s right to use its property. This exception also most likely has little effect, since churches do not normally desire to locate near uses that are considered toxic or pose a hazard.

3. In the church’s opinion, a suitable alternate property exists that the church could use for the exercise of religion. “Suitable alternate property” is a property that is financially feasible for the church (based on the church’s revenue sources and financial obligations) that is within the same zoning district or contiguous area “that the church finds acceptable for conducting the its religious mission and that is large enough to fully accommodate the current and projected seating capacity requirements of the church in a manner that the [church] deems suitable for its religious mission.” This means that the alternative property must be acceptable to the church and it would be the church’s decision whether to locate at the first location or to move to the suitable alternative location. Since the suitability of the alternative site is dependent on the church’s opinion, this exception has little effect.

In general, as long as the church could meet the site regulations of a particular zoning district, a church may locate anywhere, unless adjacent toxic uses pose a hazard to the church.

Equal Treatment: FERA prohibits governments from imposing or implementing a land use regulation in a manner that treats a church on less than equal terms with a non-religious assembly or institution, regardless of a compelling governmental interest. “Non-religious assembly or institution” is defined to include “all membership organizations, theaters, cultural centers, dance halls, fraternal orders, amphitheaters and places of public assembly, regardless of size, that a government or political subdivision allows to meet in a zoning district by code or ordinance or by practice.”

This definition includes a panoply of assembly uses and removes the size of the assembly from consideration. Thus, for purposes of land use regulations, regardless of such compelling governmental interests as noise or impacts on neighboring uses, a 2000-member mega-church cannot be treated on less than equal terms than a 10-member Boy Scout Troop.

No Discrimination: Imposing or implementing a land use regulation that discriminates against a church on the basis of religion, is prohibited, regardless of a compelling governmental interest.

No Exclusion from the Jurisdiction: Government is prohibited from imposing or implementing a land use regulation in a manner that completely excludes a church from a jurisdiction or unreasonably limits churches or structures within a jurisdiction regardless of a compelling governmental interest. Under RLUIPA case law land use regulations that completely exclude a church from locating within a municipality are a violation and, thus, invalid. By specifically including this prohibition in the FERA, the Legislature enacted what, practically speaking, was already in effect under federal law.

The Bottom Line – Arizona Gutted RLUIPA Justifications for Imposing Zoning Regulations on Religious Institutions: Under RLUIPA, a government is prohibited from imposing or implementing a land use regulation in a manner that imposes a substantial burden on a church’s religious exercise unless the government demonstrates that the burden is in furtherance of a compelling governmental interest and is the least restrictive means of furthering that compelling governmental interest. Now, under the Arizona law, the compelling governmental interest and least restrictive means analysis no longer matters. Hence, all of the justifications under RLUIPA for a municipality to impose land use regulations on a church are eliminated. Governments may impose development standards such as height restrictions, setbacks, parking space requirements and the like, as well as building code provisions and fire codes (religion-neutral “zoning standards” as defined in FERA). All other zoning regulations, including restrictions on uses in zoning districts, are not applicable to churches. Additional zoning regulations related to site development but not specifically mentioned in the statute, such as landscape and open space requirements, would likely be deemed by a court to be religion-neutral zoning standards as long as they are not only applicable to churches.

It is unlikely that a municipality will prevail in a lawsuit where the municipality attempted to impose a land use regulation other than development standards or technical codes upon a church of any size, whether it be three people or 500 people. A.R.S § 41-1493.03 makes RLUIPA in Arizona obsolete, as the state law is much stricter than the federal law.

Location of Retail Liquor Establishments near Churches – Entertainment Districts

The legislation that adopted FERA also amended A.R.S. § 4-207, creating an exception to the restriction on retail liquor establishments from locating within 300 feet of public or private school or church buildings. Now a municipality, on a case-by-case basis, may exempt retail liquor establishments from this restriction if the location of the liquor establishment is in an “entertainment district” established by the municipality. An entertainment district is established by resolution of the Council and is an area of less than one square mile and less than one-eighth of a mile wide in which there are a “significant number of entertainment, artistic and cultural venues, including music halls, concert facilities, theatres, arenas, stadiums, museums, studios, galleries, restaurants, bars and other related facilities.” Such areas are designated by the municipality by resolution.

Development Agreements

Introduction and Purposes

California was the first state to adopt a statute authorizing development agreements in 1979. Members of the development community sought legislation protecting them from changes in development standards after significant funds have been spent but no vested right had accrued under applicable law. In Avco Community Developers Inc. v. South Coast Regional Commission, 17 Cal. 3d 785 (1976), cert. denied, 429 U.S. 1083 (1977), the California Supreme Court upheld the decision of the California Coastal Zone Conservation Commission to reduce a project’s density after the expenditure of several million dollars on the project by the developer. The California rule was that zoning did not vest until a building permit was issued and a substantial investment had been spent in reliance on the building permit. This is similar to the Arizona rule. Developers wanted assurance through a vesting statute that rules would not be changed for large developers after there had been a financial commitment to a project. Although the California

19 legislature did not pass “vested rights” legislation, it did pass legislation authorizing cities to enter into development agreements to provide assurances to developers that, once entered into, they could proceed with their development.

For developers, the primary purpose of development agreements is to assure developers that the rules of the game will not change as a large project is planned and developed, whether or not a building permit is issued or a “vested right” has accrued under applicable law. Development agreements reduce the developer’s risks while giving assurances to the municipality as to what will be built. Development agreements also provide a framework for the city and a developer to negotiate the details of a development, addressing both public and private concerns.

In addition to the above general purposes, there are specific reasons why a developer and a municipality or a county might enter into a development agreement. One of the most important is the desire of a local government to receive benefits or exactions which could not otherwise be obtained through the rezoning process. Under the Nollan/Dolan line of cases, an exaction or condition must promote a legitimate state interest, there must be an essential nexus between the legitimate state interest and the exaction or condition, and there must be a “rough proportionality” between the exaction or condition and the projected impact of the development. While there have been some attempts to argue that these same restrictions should apply to the negotiation of exactions or conditions in development agreements, the argument routinely fails. The developer is getting something more than zoning. The developer believes he is getting an assurance that the developer’s long-term investment is protected and may proceed under a fixed set of rules.15

This is something the local government does not have to give, and when the developer reciprocates with exactions or conditions that could not be obtained through the zoning process, that bargain is generally upheld.

Development agreements for commercial projects are often used to attract a specific commercial development for the benefit of the local government. The new commercial activity might increase the tax base, create jobs, assist in downtown redevelopment and similar purposes. A development agreement might be used to provide economic incentives to attract the development.

Finally, and perhaps most importantly, a development agreement might be desired by a local government to plan for and finance infrastructure that would mitigate the impacts of the developments.

15 Whether or not a development agreement in and of itself constitutes a vested right is a debatable point. Under land use law, zoning is an exercise of the police power. Village of Euclid v. Amber Realty Co., 272 U.S. 365 (1926); Corrigan v. City of Scottsdale, 149 Ariz. 538, 720 P.2d 513, cert. denied, 479 U.S. 986 (1986). A government’s police power cannot be contracted away. City of Bisbee v. Arizona Water Co., 214 Ariz. 368, 153 P.3d 389 (2007); Filer v. Tohono O’odham Nation Gaming Enterprise, 212 Ariz. 167, 129 P.3d 78(App. 2006). Under Arizona case law, generally speaking, a vested right in the land use context does not occur until such time that a building permit is issued and the developer expends significant funds in reliance thereon. Town of Paradise Valley v. Gulf Leisure Corp. 27 Ariz. App. 600, 634 P.2d 396 (App. 1976). Arizona Statutory Authority.

Arizona’s development agreement statute for municipalities is A.R.S. § 9-500.05. It provides that a municipality, by resolution or ordinance, may enter into development agreements relating to property in the municipality and to property located outside the incorporated area of the municipality. A development agreement does not become operative unless annexation proceedings to annex property located outside a municipality into a municipality are completed within the period of time specified by the development agreement. Development agreements must be consistent with the municipality’s general plan or specific plan. The statute provides that a “landowner” or “any other person having an interest in real property” may enter into the development agreement with a municipality or community facilities district with respect to any of the following:

1. The duration of the development agreement. 2. The permitted uses of the property subject to the development agreement. 3. The density and intensity of uses and the maximum height and size of proposed buildings within the subject property. 4. Provisions for reservation or dedication of land for public purposes and provisions to protect environmentally sensitive land. 5. Provisions for preservation and restoration of historic structures. 6. The phasing or timing of construction or development on the property subject to the development agreement. 7. Conditions, terms, restrictions and requirements for public infrastructure and the financing of public infrastructure and subsequent reimbursements over time. 8. Conditions, terms, restrictions and requirements for annexation of property by the municipality and the phasing or timing of annexation of property by the municipality. 9. Conditions, terms, restrictions and requirements of deannexation of property from one municipality to another municipality and the phasing or timing of such deannexation. 10. Conditions, terms, restrictions and requirements relating to the governing bodies intent to form a special taxing district. 11. Any other matters related to the development of the property.

Drafting a Development Agreement

When drafting a development agreement, the first thing that should be done is to identify the important deal points. Just because a developer wants to enter into a development agreement with a local government to assure a vesting of the right to develop his property at an early stage does not mean that there is a good reason for the local government to spend the time and resources needed to negotiate the agreement. Both parties have to have a reason to enter into a development agreement, whether it is infrastructure construction/financing, agreeing to land uses prior to annexation, preserving land while permitting more intense development on other portions of the land, enhanced exactions or other important issues to either the development or the local government. However, many of these objectives may be achievable without the

21 necessity of a development agreement under planned area development (PAD’s) zoning districts. As such, some thought should be given to whether or not a development agreement is necessary or desirable.

It is also important to be sure that the right local government employees are involved in the negotiation. The local government attorney is only one person who will be involved. Representatives from the planning department, finance department and transportation departments may be involved, depending on the purpose of the agreement.

Development Agreements typically contain the following:

Recitals: Recitals should be used to set forth the purposes and intent of the agreement and to set forth facts to support the validity of the agreement. For example, a development agreement will typically recite the developer’s interest in the property and right to enter into the agreement, that it conforms to the general plan of the local government, that it confers an economic benefit on the local government and its residents, that there are burdens that the development might place on a local government, that the developer’s agreement will mitigate those burdens, and what the public benefits will be (economic development, planning for a large development as a harmonious development rather than piece-meal development, entice annexation of a desired parcel, etc). Because the agreement will be treated as a contract, the consideration each party will receive from the other should be clearly stated. It is also helpful if a recital sets forth that the approval of the development agreement is an administrative act, rather than a legislative act.

Definitions: Technical terms used in the agreement should be carefully set forth. For example, “development plan”, “public infrastructure”, “property”, “school dedication site”, “commencement of construction”, “default” and “sales tax revenues”. A development agreement for a large retail development will contain definitions related to the kinds of retail stores required in order to get sales tax benefits (such as “anchor store”). All important terms should be defined.

Parties: Private parties with an interest in the property should be parties to the agreement or should give written consent to the agreement. The capacity of the parties to enter into the agreement should be clearly stated. Property: The property to be governed by the development agreement should be described with a legal description and a map. Prior to recordation, a title report should be obtained to confirm ownership of the property.

Conditions to the Agreement’s Effectiveness: If the agreement will not be effective until other government agencies act or other conditions occur, those conditions should be set forth. For example, if a developer does not yet own the property but has only an option agreement, the development agreement would be conditioned upon the developer acquiring title within a specified time.

Applicable Land Use Regulations: Because one of the primary purposes of a development agreement, from a developer’s viewpoint, is to assure a developer that the rules will not change in the future, development agreements usually set forth an agreement that the development may proceed under the land use regulations that exist on the effective date of the ordinance, with certain exceptions. Those exceptions usually include future regulations applicable to similar properties, future engineering requirements, future regulations required to comply with mandatory requirements imposed on the local government, future regulations to alleviate a threat to public health and safety, future imposition of filing fees charged uniformly, future development fees and amendments to building codes. As a condition of providing this assurance to the developer, it makes sense to require the developer to obtain building permits and commence construction – in essence the common law rule for vesting rights.

Schedule of Development: The local government may want to set forth a schedule for development. For example, it may be more important for a commercial phase of the development to be constructed prior to a residential phase. Such time limits should be negotiated and set forth.

Permit Requirements: The development agreement may set forth what discretionary approvals are required. Developers are more apt to want this included than the local government. If the local government has good comprehensive codes, this should not be necessary. Waiver of permit requirements should not be agreed to unless the applicable code or ordinance would permit a waiver.

Expedited Review: Developers often want the local government to agree to expedited review of the developer’s plans. Often there is no reason for the local government to agree to this. An exception might be for a large commercial development highly desired by the local government. If an expedited review process is agreed to, the local government should have the discretion to retain outside technical assistance (such as engineers) to review the plans and the developer should be required to pay the extra costs associated with such retention.

Permitted Uses: The development agreement should set forth the uses the local government has agreed will be permitted on the property, including densities, intensities, height, size restrictions and so forth. The agreement should not vary from the land use regulatory scheme in place at the time the development agreement is entered into. The safest, and most expeditious, drafting tool would be to incorporate all city laws, rules, regulations, standards and guidelines by reference. As discussed more fully below, a development agreement may not be used to adopt zoning and avoid the statutorily required notice and hearing. The agreement may not promise particular uses unless the required notice has been given and required hearings have been held. To the extent a developer desires a change from current zoning requirements, this is typically handled by statements such as the local government will “use its best efforts” to permit the uses subject to notice and hearing required by law. Another approach is to make the development agreement contingent upon adoption of the desired changes in land use regulations.

Uses Prohibited on the Property: Even if the applicable zoning on the property would permit a use, a property owner may agree to limit uses on the property and a development agreement may set forth what uses are prohibited. This provision usually comes about because of neighborhood opposition to certain uses. Parties to a development agreement are free to limit themselves as to permissible uses otherwise permitted in a zoning district.

23 Dedications of Land: If land will be dedicated to the local government, a legal description of the land should be set forth.

Infrastructure: All infrastructure required to be constructed by the developer should be set forth. If some off-site infrastructure necessary to the development is required to be constructed by the local government, that should be set forth. A schedule of construction should be included.

Financing Arrangements: If public infrastructure will be constructed by the developer and repaid by the local government, the details should be set forth. If a portion of the sales taxes generated from a commercial development is to be rebated to the developer, those details should be described. (Rebate of sales taxes is generally not a component of development agreements for residential developments.) If it is contemplated that a municipal or county improvement district is to be used to finance improvements, then that should be set forth. However, it is important to note that the statements regarding an agreement to form an improvement district should be contingent upon a benefits assessment prepared by the engineer satisfactory to the governing body and the outcome of any required public hearings.

Duration of the Development Agreement: Typically development agreements have a term of ten to fifteen years.

Default: The agreement should recite what constitutes a default, such as the developer not meeting schedules or the governing body not remitting monies due. There should be a notice and cure provision.

Termination: The agreement should recite the conditions under which the agreement may be terminated, such as failure to meet schedules, or abandonment of the project.

Remedies: Upon the event of a default by a developer, typical remedies of the local government might include (other than termination) a specific agreement that the local government may withhold building permits or occupancy permits. A remedy may include the right of the local government to withhold any payments that may be due to the developer (sales tax reimbursement, etc.). Remedies of a developer upon the local government’s default may include recovery of damages and specific performance. These remedies are in addition to any other remedies that a developer might have under the law. There should be a force majeure clause to address those situations where a delay in performance is not the fault of the defaulting party.

Alternative Dispute Resolution: The agreement may include provisions for alternative dispute resolution as an alternative to litigation. To further cooperation of the parties in implementing the agreement, each party should appoint a representative with authority to resolve problems that might arise.

Indemnification Clause: Because the developer will often be constructing improvements in the public right-of-way, there should be an indemnification clause indemnifying a local government against claims and damages arising out of the developer’s work. Insurance and Bonds: The agreement may include provisions for insurance requirements and bonds. This is typical when the developer is required to construct improvements in the public right-of-way.

Severability: A severability clause is a clause in a contract that provides that if any portion of the contract is declared to be invalid, then such invalidity shall not affect the validity of the other provisions of the contract. A severability clause is often not given much thought. However, if there is an important provision of the contract that, if it were declared to be invalid, one or both parties would not want to proceed with the contract, then a severability clause might not be appropriate.

Construction or Design Standards: A development agreement typically refers to (but does not try to restate) construction or design standards made applicable pursuant to the local government’s codes. However, there may be specific construction issues or design issues particular to the development, or, the local government may not have adopted design standards. In those cases, the specific construction or design standards applicable to the development should be included in the development agreement.

Exactions: If there are exactions or conditions to be imposed on the development, those should be set forth with specificity. For example, a large residential development might burden the local school system or the fire department such that a school site or fire station site might be an appropriate exaction to include in the negotiated development agreement. Financial contributions to mitigate the impacts of a development might be included. Exactions over and above what the Nollan/Dolan line of cases would permit in a rezoning are routinely upheld in development agreements.

Annexation: If annexation is required, the timetable for completing the annexation should be set forth in the development agreement. Note that the Arizona statute provides that a development agreement is not effective until the annexation is complete.

Water Issues: It is becoming more and more common when the development agreement involves a large industrial user or a large residential development that the local government requires the developer to provide its own water resources. With a residential development, this might be accomplished through requiring the developer to join the Central Arizona Groundwater Replenishment District (in which case the future purchasers of lots are taxed to provide a water supply through the District). If the property is not currently within the water service area of the local government (as that is defined in the Groundwater Management Act, A.R.S. § 45-401 et seq.), the development agreement might provide the terms and conditions under which the local government’s service area might be extended, including not only payment for the extension of water lines, but also construction of wells, conversion of irrigation grandfathered rights to Type I grandfathered rights, use of Type II grandfathered rights on the property. There may be requirements for the use of non-potable water and delivery systems on turf areas (open space and golf courses).

Minor Changes: Developers often want a development agreement to authorize the local government’s staff to be able to approve “minor changes” in the plans for the development. In

25 that case, the development agreement should set forth what constitutes “minor changes”. All other changes would be major changes requiring amendments to the development agreement. The development agreement should specifically state that minor changes do not include changes where notice and hearing is required by the applicable zoning statute.

Legal Issues.

Annexation: A.R.S. § 9-500.05A provides that if the development agreement relates to property located outside the incorporated area of the municipality, the development agreement does not become operative unless annexation proceedings to annex the property to the municipality are completed within the period of time specified by the development agreement or an extension of such time. Therefore, no matter what is negotiated in the development agreement, if a petition to annex is not filed by the owner or the governing body fails to adopt the annexation ordinance, those agreements will not become effective until the annexation is complete. This becomes a “catch 22” if one of the goals of the agreement is in fact to require annexation, because the “requirement” to annex is not effective until annexation is complete. The local government should not undertake any significant activities under the agreement until annexation is complete.

Consistency with General Plan: A.R.S. § 9-500.05B requires that development agreement shall be consistent with the municipality's general plan or specific plan, if any, applicable to the property on the date the development agreement is executed. It sometimes happens that the development agreement will lay out the understandings regarding both a future (hoped for) general plan amendment and zoning. But if the development agreement must be consistent with the general plan as of the date the development agreement is entered into, executing the development agreement prior to the adoption of the general plan amendment would not be legal.

Contract Zoning: A.R.S. § 9-462.04 requires that prior to adoption of zoning by a municipality, notice must be given and a public hearing must be held; zoning ordinances may not contain an emergency clause. For county zoning, A.R.S. § 11-829 sets forth the notice and hearing requirements. These are due process requirements that are not eliminated merely because an owner of property and a municipality or county have entered into a development agreement setting forth permitted uses on the property. Notwithstanding the agreements in a development agreement, the notice and hearing requirements must be complied with. It is entirely possible to process the rezoning application concurrently with the approval of the development agreement. Development agreements often contain language such as “use best efforts” to adopt the permitted zoning as set forth in the development agreement, subject to the notice and hearing requirements of law.

Development Fees – Waiver: A.R.S. § 9-463.05 authorizes municipalities to establish development fees to offset the burden imposed by developments. Development fees shall be assessed in a non-discriminatory manner. Development fees are adopted after a written report is prepared and available to the public supporting the development fee. Developers often request a waiver, reduction or freezing of development fees. A.R.S. § 9-463.05(B)(11) authorizes a waiver of development fees, but the city must reimburse the appropriate development fee accounts for the amount that was waived. In other words, the city pays the development fees that it waives for the developer. Referendum: The issue of whether a development agreement is a legislative or administrative act was once an interesting topic of discussion. However, the legislature has now made clear in A.R.S. § 9-500.05(G), which provides: “Notwithstanding section 19-142, subsection B, a decision by the governing body involving a development agreement may not be enacted as an emergency measure and that decision is not effective for at least thirty days after final approval of the development agreement.”

Bidding Requirements: In Achen-Gardner, Inc. v. Superior Court in and for County of Maricopa,16 the City of Chandler had entered into a development agreement with a developer where public improvements were made on public property and the City agreed to reimburse the developer for costs of the improvements from public funds. The developer was required to publicly bid the construction of the improvements and award the contract to the lowest reasonable bidder, except that if for some reason the developer rejected that bid then the developer was required to pay the difference between the lowest bid and the bid selected. Achen-Gardner submitted the lowest bid but the developer refused to award the contract to Achen-Gardner and eventually decided to perform the work itself. The Arizona Supreme Court held that the construction of the improvements was subject to the competitive bidding laws and that the use of the development agreement could not circumvent the bidding requirements, including the requirement to accept the bid of the lowest responsible bidder. Subsequently, the legislature adopted an amendment to A.R.S. § 34-201 that exempts a local government from the bidding requirements and contributions made by the financing of public infrastructure, if the contribution is made pursuant to development agreement and if the local government’s contribution for any single development does not exceed in fiscal year 1994-1995 $100,000 (increased annually by the annual percentage change in the GDP price deflator).

Exactions: It has sometimes been argued that a local government may not use a development agreement to get what it could not get under the Nollan/Dolan line of cases. Nollan/Dolan requires an essential nexus between the exaction/condition and a legitimate state interest and the requirement for “rough proportionality” between the exaction/condition and the projected impact on the development. However, this line of cases does not extend to development agreements.

Binding Future Councils: A.R.S. § 9-500.050 provides that the burdens of a development agreement are binding on and the benefits of the development agreement inure to the parties to the agreement and to their successors in the interest and assigns. Notwithstanding these blanket provisions, they are limited by other statutory requirements of law such as notice and hearing for rezoning and by public bidding requirements. Moreover, zoning is an exercise of the police power and the police power cannot be contracted away. As such, it is a good idea for a drafter of a development agreement to reserve the governmental entity’s police powers.

Standing to Challenge/Third Parties: The Arizona statute does not address who has standing to enforce the development agreement. Some development agreements contain provisions that there are no third party beneficiaries to the agreement. Some specifically describe who are third party beneficiaries, such as a school district where there is a provision requiring dedication of a school site. Even if there is a specific statement that there are no third party beneficiaries of a

16 173 Ariz. 48, 839 P.2d 1093 (1992).

27 development agreement, if the development agreement involves the expenditure of public funds, a taxpayer may have standing to challenge illegal expenditures made or threatened by a public agency, so long as the taxpayer is a contributor to the particular fund to be expended. Blanchard v. Show Low Planning.17 If a provision of the agreement results in “special damage” to another property, most likely, that property owner would have standing to challenge the agreement. See Buckelew v. Town of Parker.18

Economic Development Incentives: Development agreements for large commercial developers that a local government wants to attract for its economic development potential often contain “economic development incentives.” The economic development incentive is usually in the form of a rebate of a percentage of sales taxes. Fifty percent is common. The Arizona Constitution, Article 9, Section 7, prohibits the gifting or donation, including a subsidy, to any private individual, association or corporation. In other words, public funds are to be expended only for public purposes, not to further private or personal interest. Town of Gila Bend v. Walled Lake Door Co.19 This prohibition against donation of public funds to private entities has been the subject of litigation since statehood. While the interpretation of the constitutional prohibition has evolved, the current test for whether an expenditure of public funds violates the Constitution is the following:

1. There must be a public purpose.

2. The consideration must not be so inequitable and unreasonable that it amounts to an abuse of discretion by providing a subsidy to the private entity. Wistuber v. Paradise Valley Unified School District.20

However, in Turken v. Gordon,21 the Arizona Supreme Court clarified and restricted Wistuber’s holding. In Turken, the Court focused on the “consideration” element of traditional “gift clause” analysis. The Court reasoned that indirect benefits, such as increased sales tax revenues could not be “consideration” under the gift clause. The payment of taxes could not be “consideration” because it is an obligation arising under the law, not contract.

17 196 Ariz. 114, 993 P2d 1078 (App. 1999). 18 188 Ariz. 446, 937 P2d 368 (App. 1996). 19 107 Ariz. 545, 490 P.2d 551 (1971). 20 141 Ariz. 346, 687 P.2d 354 (1984). 21 223 Ariz. 342, 224 P.3d 158 (2010). Design Review. Cities have learned that regulating private property through traditional zoning principles do not always result in a pleasant community – a community that preserves its essential character and is aesthetically pleasing. Zoning regulations are intended to protect against inappropriate uses and excessive height and bulk of structures; they do not tell us how to create a beautiful community. Faced with increasing sizes of retail establishments, look- alike residential subdivisions and seas of red tile roofs, walled off subdivisions, and other monotonous visual features, communities began to look for tools to avoid the negative impacts of poor design. Design review is the review of a project that takes into consideration the aesthetics of buildings and structures, site planning and functional relationships between buildings. It considers the relationship of the elements of the project to its users and the public.

There are competing public and private interests when a community starts to focus on design review. On the one hand there are the legitimate government concerns about aesthetics and functionality. Buildings, open space, transportation and sidewalks should relate to each other. For example, people need to be able to find their way around, and the unsightly but necessary elements of a building such as service entrances should be minimized. On the other hand, there are private property interests. Just how far does the public realm extend? Does the government have a right to dictate design? A judgment about design is essentially subjective. Perhaps a person should have a right to an ugly building.

The 1993 case of Anderson v. Issaquah,22 illustrates what good design review standards should include. In that case, the Washington State Court of Appeals reviewed the City of Issaquah design review guidelines as applied to a commercial development. In its decision, the Court said that while the test for vagueness does not require statutes to meet impossibly high standards, the Issaquah design review ordinance lacked the effective and meaningful guidance to either the land use applicant or the public officials charged with enforcing the ordinance. The relevant parts of the guidelines included: (a) buildings and structures shall be made compatible with adjacent buildings of conflicting architectural style by such means as screens, site breaks, or other suitable methods or materials, (b) harmony in texture, lines and masses shall be encouraged, (c) valuation shall be based on its quality of the design and relationship to the natural setting of the valley and surrounding mountains, (d) building components shall have appropriate proportions and relationships to each other, (e) colors shall be harmonious, (f) fixtures, standards and all exposed accessories shall be harmonious with the building design, (g) monotony of design in single or multiple building projects shall be avoided and efforts should be made to create an interesting project.

The Court concluded that it would be impossible from reading the ordinance to determine whether a project would be seen as “interesting” verses “monotonous” and whether or not it was “harmonious with the valley and the mountains”. The Court also found that the public officials responsible for interpreting the design review specifications had no objective guidelines to follow and were forced to rely on their own subjective “feelings” about what the City wanted.

22 851 P.2d 744 (Wash. App. Div. 1, 1993).

29 The City’s argument that other provisions of the zoning code “filled in” any “gaps” in the language of the design review standards was also rejected by the Court. Likewise, the Court ruled that the procedural safeguards found in the municipal code providing for appeal of a denial of land use certification did not cure any constitutional vagueness problems because the code provided no ascertainable criteria by which a court could review decisions at issue regardless of whether the “clearly erroneous” or “arbitrary and capricious” standard was applicable.

In Arizona, the only cases related to regulation of aesthetics in Arizona are cases upholding a municipality’s right to regulate signs. However, design review standards should be upheld if they are sufficiently specific to afford a property owner the ability to reasonably predict what designs will be approved and to provide sufficient guidance to the design review board as to the standards the board must apply to applications that come before it. This does not mean that specific standards have to be mandatory or that standards have to be quantitative or that all projects have to have the same design. It simply means that whatever standards are adopted must be sufficiently specific so as to afford predictability as to the outcome of the application for design review approval. The design guidelines of many communities, if they exist at all, are vague and probably invalid.

Protected Development Rights Plans/ Legal Non-Conforming Uses

Protected Development Rights Plans have been statutorily provided for (but little used) since 2002 when the Arizona legislature adopted A.R.S. §§ 9-1201 through 9-1205. A “Protected Development Right Plan” is a plan submitted by a landowner to a city or town that, if approved by the City or Town Council and if identified as a protected development right plan at the time it is submitted, grants the landowner a protected development right to undertake and develop his property as shown on the plan for a specified period of time. The statutes distinguish between “phased developments” and “non-phased developments”. A phased development must be in the form of a planned unit development, planned community development, planned residential development or planned area development. A non-phased development must provide the final site development approval which would be needed for issuance of a building permit.

A.R.S. § 9-1202(A) authorizes a municipality to provide by ordinance or resolution the requirements for a development of a phased development. If no such ordinance or resolution is adopted, the plan submitted and designated as a protected development right may be identified as a plan for a phased development at the time the plan is submitted. A protected development right plan, at a minimum, must describe: (i) the proposed uses of the site; (ii) boundaries of the site; (iii) significant topographical and other natural features affecting development of the site; (iv) for a non-phased development, the general location on the site of the proposed buildings, structures and other improvements; (v) the number of dwelling units and, for a non-phased development, the square footage and height of the proposed buildings and other structures; and (vi) the location of all existing and proposed utilities and a provision for other infrastructure on the site, including water, sewers, roads and pedestrian walkways. A final subdivision plat that meets the above requirements and the subdivision statutes shall be a protected development right plan. The protected development right is established only for specific elements of the development or other specific matters shown on the approved protected development right plan. A municipality may establish additional requirements for submittal or approval of protected development right plans, including requirements for traffic reports, drainage reports, master street plans, development fees and schedules and phased public infrastructure schedules. A protected development right is valid for three years for a non-phased development or five years for a phased development, but may be extended by the city or town for a maximum of two additional years if more time is warranted by all relevant circumstances, including the size, type and phasing of the development, the level of investment of the landowner, economic cycles and market conditions. A protected development right shall not remain established for more than 5 years for a non-phased development or more than 7 years for a phased development.

Protected development rights plans have not been widely used but recently came to our attention in Chino Valley. There were several medical marijuana cultivation sites that had begun development with one or two greenhouses operating or under construction and several more planned, but not yet approved, in future phases of development. The Council was considering amending the Zoning Ordinance to prohibit medical marijuana facilities in the zoning districts in which these facilities were planning to locate. Without the protected development plans, the existing facilities would become legal nonconforming uses and expansion would have been prohibited. By using the phased protected development rights plans, the landowners will be permitted to develop these uses as shown on the plans.

ADA Accessibility - Reasonable Accommodations and Zoning

Local governments are required to make reasonable modifications to policies, practices, or procedures to prevent discrimination on the basis of disability. This includes making adjustments to zoning code requirements. The Americans with Disabilities Act (“ADA”) and the Fair Housing Act Amendments of 1988 (“FHAA”) may require different types of reasonable accommodations for a person with a disability.

Title II of the ADA provides:

[N]o qualified individual with a disability shall, by reason of such disability, be excluded from participation in or be denied the benefits of the services, programs, or activities of a public entity, or be subjected to discrimination by any such entity.23

Moreover, the FHAA prohibits local governments from making zoning and land use decisions or implementing land use policies that exclude or otherwise discriminate against protected persons, including handicapped persons. The definition of “handicap” under the FHAA24 is the same as that of “disability” under the ADA. Discrimination includes actions against “any person associated with a person “residing in” the dwelling.25 “The FHAA imposes an affirmative duty to reasonably accommodate handicapped persons.”26

23 42 U.S.C. § 12132. 24 42 U.S.C. § 3602(h) defines “Handicap” as: "(i) a physical or mental impairment which substantially limits one or more of a person’s major life activities; (ii) a record of having such an impairment; or (iii) being regarded as having such an impairment." 25 See 42 U.S.C. § 3604.

31 Cities are public entities, and accordingly, may be subject to liability under the ADA and FHAA.27 "Zoning qualifies as a 'public program or service' and the enforcement of a zoning ordinance constitutes an activity under Title II of the ADA."28 Additionally, cities are required by the FHAA to “make reasonable accommodations in rules, policies, practices or services when such accommodation may be necessary to afford such person equal opportunity to use and enjoy a dwelling.”29 Therefore, cities are required to reasonably accommodate disabled persons by modifying zoning policies, practices and procedures and may not intentionally discriminate against disabled persons.30

Whether a requested accommodation is reasonable is highly fact-specific and determined on a case-by-case basis by balancing the cost to the locality and the benefit to the disabled person. The person making the request must show that the accommodation will affirmatively enhance a disabled person’s quality of life by ameliorating the effects of the disability. The accommodation must not be so at odds with the purposes behind the rule that it would be a fundamental and unreasonable change. Courts have held that requests for variances from regulations to allow reasonable use of a home might be a reasonable accommodation.

For example, in Trovato v. City of Manchester, New Hampshire,31 a mother and daughter who both had muscular dystrophy were denied a variance that would allow them to build a paved parking space in the front of their home. The court found that the denial of the paved parking space adversely affected the plaintiffs’ use and enjoyment of their home and that their request was reasonable.32 In Dadian v. Village of Wilmette,33 an elderly couple, one of whom suffered from osteoporosis and had difficulty walking, sought a hardship exception from the village’s prohibition against front driveway accesses. The court found that in denying the permit, the village failed to provide a reasonable accommodation from its regulations.34

Group Homes and Recovery Residences.

The regulation of group homes and recovery residences implicates both the Americans with Disabilities Act and the Fair Housing Act Amendments. There is no standard definition for

26 City of Edmonds v. Washington State Bldg. Code Council, 18 F.3d 802, 806 (9th Cir. 1994) citing 42 U.S.C. § 3604(f)(3)(B). 27 See generally, McGary v. City of Portland, 386 F.3d 1259 (9th Cir. 2004). 28 A Helping Hand, LLC v. Baltimore County, Maryland, 515 F.3d 356, 361 (4th Cir. 2008); see also Start, Inc. v. Baltimore County, Maryland, 295 F. Supp. 2d 569 (D. Md. 2003). 29 42 U.S.C. § 3604(f)(3)(B). 30 Dadian v. Village of Wilmette, 269 F.3d 831, 839 (7th Cir. 2001); 28 C.F.R. § 35.130(b)(7). 31 992 F.Supp. 493 (D.N.H. 1997). 32 Id. at 498-99. 33 269 F.3d at 835-36. 34 Id. at 839. “group home” and the type of home or facility the term encompasses varies widely by municipality. Generally speaking, however, group homes are homes occupied by groups of unrelated persons with disabilities. Whether those homes are monitored or supervised by an organization or service provider—and the level of services offered there—depends largely on the nature of the disabilities of the residents. The material below makes reference to both “group homes” and “recovery residences.” Both terms are used to emphasize that the laws, regulations, and principles at issue apply equally to homes for the developmentally disabled as well as residences for those recovering from drug or alcohol addiction, also sometimes referred to as “sober homes.”

The Fair Housing Act and its amendments (FHA) render it unlawful “[t]o discriminate in the sale or rental, or to otherwise make unavailable or deny, a dwelling to any buyer or renter because of a handicap[.]”42 U.S.C. § 3604(f)(1). However, it also prohibits municipalities and other local governmental entities from enacting and enforcing zoning practices that discriminate against disabled individuals if such regulations contribute to “mak[ing] unavailable or deny[ing]” them housing.35

Similarly, Title II of the Americans with Disabilities Act (ADA) provides that “no qualified individual with a disability shall, by reason of such disability, be excluded from participation in or be denied the benefits of the services, programs, or activities of a public entity, or be subjected to discrimination by any such entity.”36 Courts have determined that zoning and land use regulations are “services, programs, or activities” of public entities, and as such, may not be exercised in a manner that subjects the disabled to discrimination.37 “The standards regarding disparate treatment claims under the ADA [and the FHA] are typically identical, and courts accordingly interpret them in tandem. . . .”38

Who is (and is not )“Disabled” or “Handicapped” for Purposes of the FHA and ADA?

The scope of who is deemed “disabled” for purposes of the ADA and FHA is broad. Any person who has a physical or mental impairment that substantially limits one or more major life activities, a person who has a history or record of such impairments, or a person who is perceived by others as having such impairments is entitled to the protection of the ADA and FHA. The residents one would typically find in group homes and recovery residences are “disabled” under federal law. Federal regulators have concluded, however, that these laws do not protect a handful of itemized “impairments.” For example, although federal law prohibits discrimination against recovering drug addicts, it does not protect current users of illegal drugs. See 42 U.S.C. § 12210(a). Also, persons are not afforded protected status if their disabilities can

35 City of Edmonds v. Washington State Bldg. Code Council, 18 F.3d 802, 803 (9th Cir. 1994). 36 42 U.S.C. § 12132 (2009). 37 See Bay Area Addiction Research and Treatment, Inc. v. City of Antioch, 179 F.3d 725, 731 (9th Cir. 1999) (concluding that a local ordinance imposing a spacing requirement between residential uses and methadone clinics was discriminatory under the ADA). 38 Pacific Shores Properties, LLC v. City of Newport Beach, 730 F.3d 1142, 1157 (9th Cir. 2013).

33 be classified as impairments involving a “sexual behavior disorder,” pedophilia, voyeurism, exhibitionism, compulsive gambling, kleptomania, or pyromania.39

In addition, the United States Supreme Court has developed a test (used almost exclusively in the context of employment discrimination) by which an otherwise “qualified individual” might lose protected status under federal law. Under the “significant risk test,” an “individual who poses a significant risk to the health or safety of others that cannot be ameliorated by means of a reasonable modification is not a qualified individual” under the ADA.40 The Department of Justice’s Technical Assistance Manual explains that “[a]n individual who poses a direct threat to the health or safety of others will not be ‘qualified’ [as an individual protected by the ADA].” DOJ TA Manual, § II-2.8000. A “direct threat” is:

[A] significant risk to the health or safety of others that cannot be eliminated or reduced to an acceptable level by the public entity’s modification of its policies, practices, or procedures, or by the provision of auxiliary aids or services. The public entity’s determination that person poses a direct threat to the health or safety of others may not be based on generalizations or stereotypes about the effects of a particular disability.41

In order to serve the purposes of the FHA and ADA in protecting disabled persons from discrimination, when applying the significant risk test, “it is not enough that individuals pose a hypothetical or presumed risk. Instead, the evidence must establish that an individual does, in fact, pose a significant risk.”42

Guiding Principles for Local Governments

A zoning regulation that places special restrictions on group homes or recovery residences, but that does not also apply to other residential living arrangements, denies the disabled “the benefits of the services, programs, or activities of a public entity,” and does so “by reason of [his/her] disability.” Therefore, municipalities may not impose conditions such as registration requirements, licensing, use permits, or neighborhood notification unless it is willing to impose those same conditions on all other residential users.

Most municipalities impose spacing requirements between group homes and recovery residences. However, federal courts disfavor such restrictions, and they are routinely stricken as discriminatory under the ADA and FHA. The leading case on recovery homes in the Ninth Circuit did not directly address the spacing requirements in the challenged ordinance, but in a footnote the court suggested that it would have stricken it if asked to do so. In support, the court cited some of the leading cases striking down spacing requirements from other circuits.43 Indeed,

39 See 42 U.S.C. § 12211(b). 40 Bay Area Addiction, 179 F.3d at 735 (citing School Board of Nassau County v. Arline, 480 U.S. 273 (1987) (upholding the discharge of a teacher removed from her job because she had an active case of tuberculosis)). 41 Id. (emphasis added). 42 Bay Area Addiction, 179 F.3d at 737. 43 See Pacific Shores Prop. v. Newport Beach, 730 F.3d 1142, 1153 (9th Cir. 2013). most courts have concluded that the only reasonable justification for spacing requirements is to prevent them from “clustering” in a single housing project or multi-family complex.

In Arizona, the State licenses group homes that provide medical care. These include home for the developmentally disabled and those with behavioral health disorders. As a result, such residences are subject to certain state-mandated safety regulations and inspections. Local governments may impose safety regulations such as fire sprinklers or alarm systems on these residences only where there is clear evidence that the residents require such assistance. In all other instances, requiring safety measures in excess of those that would normally be imposed on the structure at issue would be unlawful.

Regulations limiting the number of unrelated persons who may live together in the same home do not necessarily violate the FHA or ADA, but if such a facility formally asks to be exempted from those restrictions, local governments may be required to do so because of their obligation to provide reasonable accommodations.

Reasonable Accommodation

Where the application of an otherwise neutral regulation denies the disabled access to services, programs, or activities by reason of their disability, then the public entity has a responsibility to provide a “reasonable modification” of its regulation, so long as the modification does not “fundamentally alter the nature of the service, program, or activity.”44 Generally speaking, local governments must not refuse to make modifications or exceptions to regulations, rules, policies, or practices where doing so would provide the disabled with an equal opportunity to reside in a home.

What constitutes a “reasonable modification” is “highly fact-specific, requiring case-by-case inquiry.” Id. However, the refusal to fulfill a request for a truly reasonable accommodation is a violation of the ADA, FHA, or both, depending on the circumstances. All requests for reasonable accommodation should be carefully considered because the potential claim for discrimination might not be obvious. For example, the Department of Housing and Urban Development (HUD) has required that local governments consider the economic hardship a group home operator might incur if denied a request for accommodation.

Finally, HUD routinely audits local governments for compliance with the FHA, and the focus of those audits is often on the number, frequency, and disposition of requests for reasonable accommodation. Therefore, staff should be well-versed on these principles and counseled to maintain accurate records.

44 Crowder v. Kitagawa, 81 F.3d 1480, 1485 (9th Cir. 1996) (concluding that application of a regulation mandating the quarantine of dogs arriving from the mainland had a discriminatory impact on disabled persons travelling to and from Hawaii).