Court of Appeals slaps down Crook County in Measure 37 case

Measure 37 may be dead after 62% of Oregonians voted for Measure 49 in 2007, but this attempt to undo our state's highly successful land use laws lives on in the courts -- where a few would-be subdivision developers press on with their efforts to pave over Oregon's farm and forest land.

Today the Bend Bulletin related an all-too-familiar (to land use junkies like me) tale of a clueless Board of Commissioners and Circuit Court judge in a rural county who tried to twist vested rights law to benefit a well-to-do landowner, but were slapped down by the Oregon Court of Appeals.

(Irritatingly, the Bend newspaper doesn't have free online access. I forked out 50 cents for a copy of "Cost appeal delays 59-lot housing project." So I hope you'll appreciate this article if you read it in a continuation to this post.)

Having followed quite a few vested rights cases after the passage of Measure 49, I couldn't resist delving into the particulars of this case.

It didn't take long for me to grasp the broad outlines of this Crook County legal drama, which, as noted above, is depressingly similar to what's happened in Yamhill, Marion, Polk and other Oregon counties where the powers-that-be have a habit of ignoring the law if a big developer wants to go ahead with a Measure 37 project.

In this case, Shelley Hudspeth sought to complete development of a 59-lot residential subdivision. As described in the Court of Appeals ruling that overturned Crook County's green light "go ahead":

For purposes of appeal, the following facts are undisputed. Measure 37 waivers from the county and the state allowed for the development of a 59-lot subdivision on Hudspeth's property. Hudspeth obtained tentative approval from the county for a subdivision and expended hundreds of thousands of dollars to develop the property before Measure 49 became effective on December 6, 2007.

Thereafter, Hudspeth applied for a determination from the county that she had a vested right to complete and continue the use described in the Measure 37 waivers. Hudspeth's application indicated that the total project budget was $5,081,946. That figure, however, did not include the cost of residences that would ultimately be constructed in the subdivision.

Kind of a big oversight, to put it mildly. A residential subdivision without residences isn't much of a subdivison.

Measure 37 waivers don't allow a property owner to sell buildable lots. That's part of Land Use Law 101, which even non-attorneys like me who follow these sorts of cases know full well.

So it should have been obvious to the county planning director who went along with Hudspeth's omission of the expense of building 59 homes in her total cost of development that this was legally wrong, as it also should have been to the County Commissioners who later rubber stamped the vested right approval.

Reading through the minutes of the County Court (that's what some rural counties call their Board of Commissioners) hearing where the Hudspeth application was approved, I saw that some folks from 1000 Friends of Oregon and Central Oregon Landwatch tried to educate the commissioners about what the law required.

Their response: basically "Law, what law? We'll do whatever we want to do."

It's more than a little strange how common this attitude is among conservative county commissioners, who claim to be all big on law and order -- except when they want to ignore the law in order to allow a deep-pocketed developer to do whatever he or she wants.

A Crook County circuit court judge went along with the county's weird legal reasoning.

Even though the Oregon Supreme Court has said that it is the ratio of total project costs to actual expenditures which is an important factor in determining whether someone is vested, both the judge and the commissioners cast a blind eye on what the Hudspeth subdivison would cost to fully build -- including the expense of constructing 59 homes.

The Court of Appeals shot them down.

Consistently with those principles, we conclude, as we did in Friends of Yamhill County, Biggerstaff, and Kleikamp, that the circuit court "should have remanded for the county to determine the extent and general cost of the project to be vested and to give proper weight to the expenditure ratio factor in the totality of the circumstances." Friends of Yamhill County, 237 Or App at 178.

In this case, the county court determined that the denominator need not include the cost of the residences that were sought to be developed and the circuit court determined that it was unnecessary to determine the denominator in the expenditure ratio. Those are legal errors that require reversal.

Motion to dismiss denied; reversed and remanded.

The Bend Bulletin article quotes Hudspeth's attorney, Ed Finch, as predicting that the Crook County commissioners will end up approving the subdivision again, after which the state Department of Land Conservation and Development will appeal the approval again.

Likely, he's right.

But hopefully the commissioners will come to their senses and realize that they aren't above the law. I did some quick calculating and don't see any way that Hudspeth can show that she has spent the 7% or so of total project costs that is typically cited as a benchmark for passing the ratio test.

The Court of Appeals ruling says that both the county and circuit court judge said that Hudspeth had spent about $500,000 on the subdivision, even though the developer claims the total should be around $900,000.

Since Hudspeth and her attorney didn't challenge the $500,000 determination, it seems to me that this is a settled legal fact now. So what's left to determine is the additional cost of building 59 homes, adding that on to the $5,082,000 total project budget without homes.

Let's say that each home costs $200,000 to build, a really low-ball figure. That's $11,800,000. Added onto $5,082,000, the total project cost now is $16,082,000. With actual expenditures of $500,000, Hudspeth has spent only 3% of what it would have taken to complete her subdivison.

Almost certainly that's a "fail" on the ratio test, being a long distance from 7%.

So I bet that even if the Crook County commissioners find some way of rationalizing another vested rights approval after dealing with the remand, when the case gets sent back to the Court of Appeals the county will be slapped down again.

Eventually these Measure 37 cases will have run their course and Oregon farm/forest land can breathe a sigh of relief. (Poetically speaking, of course.)

That day can't come too soon for me, though I'll admit that my inner land use attorney gets some enjoyment from following the legal shenanigans in Crook County and other places.

Click on to read the Bend Bulletin article.

Cost appeal delays 59-lot housing project

By Erik Hidle / The Bulletin

Published: May 16. 2011 4:00AM PST

A housing development east of Prineville is on hold after a Court of Appeals ruling this week.

Developer Shelley Hudspeth must wait as Crook County recalculates the cost of a 300-acre, 59-lot project. The court said the county undervalued the project when determining whether it is eligible for development under state land use laws, which were amended by the passage of Measure 37 and, subsequently, by the passage of Measure 49.

Hudspeth began to develop the project using waivers obtained following the passage of Measure 37, a property rights initiative approved by voters in 2004. The project ran into a complication following the 2007 passage of Measure 49, which was designed to limit the scope of projects approved under the expansive rights provided by Measure 37.

A key consideration in the application of Measure 49 limits to projects approved under Measure 37 is the concept of “vesting,” which refers generally to the amount of money already invested in a project that might be curtailed by Measure 49. Measure 37 projects in which large sums had already been sunk were far more likely to move forward than those in which small sums had been sunk.

The dispute over the Hudspeth development involves vesting. More specifically, it involves a ratio that indicates what percentage of a project’s total value already has been invested.

The state Department of Land Conservation and Development said a $5 million estimate on the Hudspeth project’s total value is too low, as the county did not take into account the cost of homes that would be built on the land.

If that cost were added into the project’s total price tag, then the investment-to-total value ratio would drop, potentially falling below a vesting threshold.

The state Appeals Court last week agreed with DLCD and sent the matter back to Crook County to recalculate the project’s total cost with the price of future residences included.

Edward Fitch, Hudspeth’s attorney, said his client invested around $900,000 into the development before Measure 49 went into effect. He believes Hudspeth’s total investment is over the required threshold when compared to the total cost of the project.

Fitch said his client does not plan to appeal, as he believes the project will still meet the law’s requirements even with the value of the homes included.

“We can appeal, but it could take another year (to receive a ruling),” Fitch said. “I think the better approach is to get the record supplemented and I think at that point we’re going to get another approval. I also think the state may appeal that approval as well.”

Fitch said it is unclear how the county will estimate the cost of homes that haven’t been built on land that hasn’t been sold, but he thinks it will likely take into account average home price in the area.

Erik Hidle can be reached at 541-617-7837 or at [email protected].

Comments

[Torridjoe]

Checking out Zillow.com, there isn't much of an active sample east of Prineville, but what's built in 2008 two houses nearby, both for sale) and is standard 3br2a and something a bit under 2ksqft is listing for $289k. That makes $200k as a cost figure pretty reasonable IMO. I perceive the developer's lawyer will get to define it for themselves in their amendment, and county court will be fine with that. Lawyer suggested average comps, which will probably be a lot less than $200k. Even if it's $150k or so, that's still not enough.

Glad to hear people are working hard paying attention to what's napping with land use in every corner of the state.

[Blogger Brian]

Torridjoe, thanks for the research. I find it extremely difficult to believe that new homes in that part of Crook County are being built on average for less than $200,000.

In the course of fighting a Measure 37 subdivision in our area I did a lot of research of my own using Assessor's Office data. Houses in the under $200,000 price range are in a low class, very basic.

People who build houses on small acreages usually construct them to higher standards; that's a rule of thumb in appraising -- cheap small lot and cheap small house go together.

I'm sure the developer's attorney will play the "mobile home card," like so many Measure 37 subdivisions have. But the common law of vesting requires that the total cost of a project be based on development plans prior to the effective date of Measure 49, not a cooked-up plan for cheap mobile homes made in a desperate effort to be vested.

The Court of Appeals is familiar with these sorts of games. I don't think such will succeed in this case.

[county resident]

I too have had problems with this counties planning director following the law. Like you say, he chooses to ignore state laws and do as he pleases. It is called crooked county.