Give and take over measure 37: could metro reconcile compensation for reductions in value with a regional plan for compact urban growth and preserving farmland?

• Author: Liberty, Robert
• Position: Oregon

1. INTRODUCTION: MEASURE 37 AND METRO'S REGIONAL PLANNING EFFORTS A. Measure 37 B. Oregon and Metro's Programs to Promote Compact Urban Growth and Protect Rural Lands and Natural Resources C. Results of the State and Metropolitan Planning Efforts D. Metro's Response to Measure 37 E. Impact of Measure 37 on Oregon and Metro's Urban Containment And Farm and Forestland Preservation Objectives II. THE CONCEPT: USING UGB EXPANSION "GIVINGS" TO HELP PAY MEASURE 37 CLAIMS WHILE ACHIEVING OTHER REGIONAL OBJECTIVES A. Metro's UGB Expansion Givings B. Metro's Intent to Adopt a System of "Value Capture "for UGB Expansion Givings III. METRO'S AUTHORITY TO ADOPT A WINDFALL TAX A. Taxes Specifically Authorized for Use by Metro and Their Limits 1. Property Taxes as a Vehicle to Tax UGB Expansion Givings 2. Taxing UGB Givings Through an Income Tax 3. Taxing UGB Expansion Givings through an Urbanization Excise Tax on Persons Benefiting from Metro's UGB Expansion and Urbanization Planning Functions and Services 4. Metro's General Taxing Authority B. Review of Limits on Metro's Taxing Authority 1. Limitations on Metro's General Taxing Authority in the Oregon Constitution 2. Statutory Limits on Metro's Taxing Authority: Real Estate Transfer Taxes and Systems Development Charges 3. Limits on Metro's Taxing Authority Under Its Charter C. Two Potential UGB Expansion Windfall Taxes or Fees 1. Urbanization Excise Tax Under Metro's Specific or General Taxing Authority 2. Would a Metro Urbanization Excise Tax Satisfy Oregon Constitutional Requirements? a. Uniformity Clause Requirements b. Would a Metro Urbanization Excise Tax Constitute a Property Tax Limited by State Statute or the State Constitution? c. Would a Metro Urbanization Excise Tax Constitute an Income Tax Limited to a 1% Rate by State Statute? d. Would a Metro Urbanization Excise Tax Constitute a Real Estate Transfer Tax Prohibited by State Statute? 3. A Potential Income Tax on Urbanization Windfalls Under Metro's General Taxing Authority 4. Either an Urbanization Windfall Excise or Income Tax Would Require Approval of the Voters IV. METRO'S AUTHORITY TO SPEND THE FUNDS ON EASEMENTS AND CAPITAL IMPROVEMENTS A. Metro's Authority to Spend Urbanization Tax Proceeds on UGB Expansion Givings to Acquire Conservation Easements Outside Its Political Boundaries B. Metro's Authority to Distribute Proceeds from an Urbanization Excise Tax to Local Governments and Service Districts to Finance Civic Improvements in UGB Expansion Areas V. CONCLUSION I. INTRODUCTION: MEASURE 37 AND METRO'S REGIONAL PLANNING EFFORTS

   On November 2, 2005, Oregon voters approved Ballot Measure 37 by a margin of 61% to 39%. (1) Measure 37 requires government to compensate landowners for the reduction in value of land caused by any law or regulation adopted after the date the property was acquired by the landowner. If government fails to pay this compensation, it must forego enforcing the law or regulation and allow the landowner to use the land in any way that was permissible when he or she acquired the land. The measure applies retroactively to reductions in value caused by regulations adopted in the past, as well as prospectively, to any reductions in value that result from regulations adopted in the future.

   Measure 37 is widely perceived as posing a major threat to Oregon's efforts to protect farm and forestland and curb urban sprawl through the use of urban growth boundaries and other land-use regulations. That is particularly true in the Portland metropolitan area, where the regional planning efforts of Metro, the regional government charged by the voters with adopting and implementing a regional plan to prevent sprawl, supplement the state's land-use planning program.

   Six weeks after Measure 37 passed, Metro adopted a resolution calling for a special work group to consider "[a]lternative methods to achieve the policies of the Regional Framework Plan and the objectives of the 2040 Growth Concept in a post-Ballot Measure 37 environment and to reduce adverse consequences of claims." (2) This essay examines one way Metro could achieve such a reconciliation--by balancing out the "wipeouts" with the "windfalls" under state and regional land-use planning--and analyzes whether Metro currently has the legal authority to implement this proposal.

   1. Measure 37

      Measure 37 (3) requires government to compensate the owners of land (as well as the owners of crops, timber, and minerals) for any reduction of value in their land (crops, timber, or minerals) resulting from the enactment or enforcement of any state law, state agency rule, local government ordinance, or any regulation by a special district adopted after the owner acquired the property. (4) The measure is retroactive and requires compensation for reductions in value caused by the enactment of laws or regulations adopted prior to the passage of Measure 37. (5) Claims for compensation may even be based on a chain of family ownership, so that a granddaughter acquiring land in 2005 may file a claim based on a reduction in the land's value attributable to a 1950s law or regulation, since the regulation was adopted after her grandfather acquired the property. (6) In lieu of compensation, the government that adopted the regulation(s) "may modify, remove or not apply the regulation." (7)

      Measure 37 has almost no administrative provisions; in fact, it specifically provides that persons filing claims for compensation ("claimants") are not obliged to pay any application fees or to adhere to any administrative review procedures adopted by governments to implement Measure 37's provisions. (8) Although Measure 37 has no administrative framework, it does impose deadlines on state and local governments that have received claims, and provides for the award of attorney fees against governments for failure to provide compensation or waivers. (9) This short outline of Measure 37 barely touches on the many issues raised by its provisions, but discussion of those issues (covered by other essays in this law review) is not necessary to address the subject of this essay.

   2. Oregon and Metro's Programs to Promote Compact Urban Growth and Protect Rural Lands and Natural Resources

      Metro's proposed response to Measure 37 cannot be understood without an explanation of the state and regional efforts, which Measure 37 challenges, to shape development. In 1973, the Oregon Legislature passed Senate Bill 100, declaring that the "[u]ncoordinated use of lands within this state threaten the orderly development, the environment of this state and the health, safety, order, convenience, prosperity and welfare of the people of this state." (10) Senate Bill 100 mandated the establishment of statewide goals for the development and conservation of land. (11) To adopt and implement those goals, Senate Bill 100 also created a new commission, the Land Conservation and Development Commission (LCDC), and a new agency, the Department of Land Conservation and Development (DCLD). (12) The mission of the new commission and agency aimed not to promote planning in the abstract, but rather to define and attain very specific land-use objectives both in cities and in the countryside.

      To accomplish this, the Commission first adopted a set of binding, statewide and regional planning goals. (13) Based on hundreds of informal meetings and formal hearings over the course of three years, and on a preliminary set of topics set out by the legislature, (14) LCDC adopted 14 statewide goals and five regional goals. (15) The statewide goals and the related statutes took effect in binding, mandatory, comprehensive land-use plans and implementing regulations (such as zoning ordinances) adopted by all cities and counties that apply to all private land in the state. (16) (The local land-use plans were reviewed by LCDC for compliance with the goals. (17)

      At the heart of the Oregon program are a few key goals intended to curb urban sprawl and preserve farm and forestlands. These are the goals that could be most significantly compromised by the effects of Measure 37. Statewide Goal 14, Urbanization, mandates urban growth boundaries (UGBs) around every city in Oregon regardless of size. (18) Urban development, such as construction of shopping centers, subdivisions, and office buildings, is allowed inside UGBs (19)--but not outside UGBs--even ff the land is no longer usable for farming or forestry. UGBs prohibit leap-frog development and promote concentric urban development. (20) Goal 11, Public Facilities and Services, encourages the extension of urban services inside urban growth boundaries, and discourages their extension outside of them. (21) Goal 10, Housing, requires all cities and counties to zone and rezone land outside of cities, but inside urban growth boundaries, for all types of housing, including apartments and manufactured housing. (22) Goal 10 has had the effect of curbing sprawl by promoting more efficient patterns of urban development. (23)

      State legislation reinforces the pro-development aspects of Goals 14, 11, and 10 by prohibiting local governments from adopting moratoria on new development or on the extension of urban services (except in very limited circumstances), (24) and by backing up Goal 10's ban on exclusionary residential zoning. (25)

      Two of the statewide planning goals protect the vast majority of Oregon's rural land which is used for farming, ranching, and forestry. Goal 3, Agricultural Lands, requires the preservation of all farmland including grazing land. (26) Goal 4, Forest Lands, requires the protection of private forest lands used for growing and harvesting wood products. (27)

      Both Goal 3 and Goal 4 axe codified in farm (28) and forest (29) zoning statutes (30) that establish 80 to 160 acre minimum lot sizes (31) and regulate the authorization of new houses in these zones. (32) The strictest limits on new houses on farmland apply to "high value farmland" (defined in terms of agricultural...