Presentation on Oregon Ballot Measure 37
By Steven W. Abel
Stoel Rives Development Law Group Annual Event
March 2, 2006
As I have mentioned to many in the past, Measure 37 changes the model between business interests, property owners, and the government. My opinion about that hasn't changed since the adoption of Measure 37 fifteen months ago. What I will do today is talk about how the text of Measure 37 is no clearer today than it was two weeks ago, but is much more real.
Measure 37 is not going to be shaped in the short term by the Oregon Supreme Court, following last week's decision, and it is not going to be shaped in the short term by the legislature, because the legislature failed to do anything by the close of the 2005 session.
There wasn't any direct legislative response to Measure 37 in the 2005 session, but there was a mandate in that session for a "Big Look," if you will, of the Oregon land use system. That Big Look calls for an interim report to the 2007 legislature and a final report in 2009. I don't believe the Big Look committee will have very much impact on the claims that have already been made and will be made over the coming months.
Before the Marion County Circuit Court threw out Measure 37 in October 2005, there were about 2,000 claims made throughout the state. It's hard to identify the exact number of claims, because some claims were made at local jurisdictions, some claims were made at the state level and some claims were made in places that you wouldn't imagine. In response to those claims, there has been nothing paid by the government to compensate landowners. Every case so far either has been contested in some way or has resulted in a waiver. Eighty-nine percent of the claims have related to rural lands, meaning that no more than 11 percent of the claims might have related to urban lands. Only 12 of the approximately 2,000 claims have been related to commercial or industrial land. Most of the claims are at the Urban Growth Boundary edge or on farmland, and most of those claims relate to farmland and the use of farmlands for either residential subdivisions or single houses. The rural lands/housing debate has overwhelmed the debate about what Measure 37 does. Focusing on rural lands does not do justice to the reasons why voters approved Measure 37, and that focus does not help in understanding the much deeper problems facing Oregon's land use system.
I recommend an upcoming issue of Lewis & Clark Law School's Environmental Law journal, which will be published in the next couple of months, but can be found currently at the Lewis & Clark College web site. The issue includes a very good set of articles with varying perspectives about Measure 37. In one article, interestingly, the drafters of Measure 37 suggest that maybe one of the ways that we can perhaps get past this Measure 37 debate, again focusing on rural lands, is to create a fund for compensating owners. That suggestion begs the question, where does that money come from? Metro Councilor Robert Liberty in another article claims that some are getting windfalls from Measure 37 and that the windfalls should be taxed. You can imagine the debate that will go on about that. I thought Measure 37 was about compensation, but this may be about exercising your right to payment and paying for that right at the same time.
You should also take a look at the 1000 Friends of Oregon web site. There you will find several initiatives that have been filed with the state that may come before the voters in November 2006. Take a close look at these initiatives, because I think November 2006 is going to be a key date as we move forward on what Measure 37 means.
The Supreme Court Decision
Last week's Supreme Court decision turns on issues relating to the citizens' initiative right to adopt Measure 37, so I won't say much about it here. Nothing in that opinion has anything to do with how Measure 37 works. Measure 37 is just as muddy as it was, but it's more clear now that the measure is real, and it's going to be very real over the space of the next eight or nine months.
Transfer of the Waiver
There are four critical issues that need resolution. These might get resolved at the circuit court level in any county circuit court in this state, or they might go up on appeal, leaving issues in doubt for quite some time. The first one is a very big issue: the transferability of waivers. As we know, the local governments aren't paying compensation; they're granting waivers. People get to build a house; they get to do something with their land. The question is, is the waiver right transferable? The attorney general wrote a Letter of Advice four months after Measure 37 was adopted that said, "No, those are personal rights. The waiver's a personal right, not a property right and thus, is not conveyable or inheritable." The result is harsh. For example, say 75-year-old Hap P. Oldman builds a house under a waiver right, after 15 years of being denied by Washington County. After he dies, can his daughter inherit the house with the waiver? Under the attorney general's Letter of Advice, the answer is no. The waiver is personal and dies with Hap. The house is now built, however, so what results? The question also arises with voluntary conveyances of waivers. The Letter of Advice would have the waivers not be conveyable.
There are two doctrines that exist in Oregon law that help to soften the blow as to the transferability of waivers. The first one is the concept of vested rights, which states that if you are in the middle of a project and you are so far invested in that project in time, materials, or money, then you have the right to complete that project. So, if a waiver has been granted, subject to Oregon's judicially created vested rights concept, a property owner may have the right to complete construction.
The other doctrine is the concept of nonconforming uses, which states that you've already got the building, you can continue to use that building under Oregon's statutorily and judicially created nonconforming use provisions.
Neither of these concepts provides complete safety. The parameters for qualifying as a nonconforming use are narrow. And further, there are problems with lenders, title companies, and insurers whenever you're in a circumstance that relies on nonconforming use rights.
When Must Claims Be Made?
Given all this uncertainty, when are claims required to be made? There are several factors here. One is the uncertainty with Measure 37. Are there going to be interim committees on legislative action? What's going to happen as the atmosphere changes and judicial opinions start to color how Measure 37 works? That's a motivator for people to say, "I need to make my claim; I need to start to vest that claim."
Further, Measure 37 itself has a "statute of limitations" for claims. The measure has a two-year statute of limitations for claims from December 4, 2004, which means that early December 2006 is the initial claim period for Measure 37 claims. Having spent 15 months trying to figure out whether the measure was real, we're now in a situation in which in the next eight to nine months claims might have to be made to preserve rights. Is the wait-and-see period over, and do you make a claim? The two-year statute of limitations for claims has a "rolling" provision that states that even if an application is made after that two-year period for a land use entitlement and you're denied based on a "claimable" regulation, you could then make a claim based on that denial for another period of two years. I'd be reluctant to rely on the two-year rolling limitation, because the atmosphere is changing rapidly. Waiting and relying on the rolling limitation is risky. A more cautious approach would be to consider if there's a claim to be made, or if there's something to deal with, and deal with it before early December.
Preserving Claim Rights
The next question is, "Can I make my claim now and put it on the shelf?" Meaning, let me make my claim and decide a year or two from now what we'll do with that claim. The measure doesn't preclude that option, so you could attempt to do that with a local government, although my suspicion is that the local government would say you can't do that; it would probably say, "I don't think that you could put that on the shelf and leave it on the shelf and get all the benefits of it." Or perhaps just, "No," or "You can leave it on the shelf, but nothing's going to protect you if the law changes."
Another problem with shelving the claim is that in order to make a valid Measure 37 claim, you need a plan, and if you don't have a plan and the claim is just speculative, it isn't ripe. So, the only thing to do is to make a claim based on a real plan and go from there.
Nonland Use "Land Use Regulation" Claims
The fourth issue is that Measure 37 applies to lots of regulations not just "land use regulations" as we commonly know them. When we think of land use regulations, we may think of all the things that are in the zoning code. Under Measure 37, however, "land use regulations" is a defined term. It's defined to be a number of things, including statutes related to real estate. The extent of possible types of nontraditional land use regulations has not been reached, and whether it will be reached I can't tell you, but many business owners have Measure 37 considerations that they should be thinking about. Measure 37 is often thought of as a sword: someone decides they want to do something with the land, so they get the sword out and say, "You've got to give me this right." But Measure 37 can also be used as a shield. So if you've got property or a business that some enforcement action is being brought against, it can be used as a shield.
So, what's going to happen now? When I talked about this a year ago, the attitude was "wait and see, wait and see." Everybody was in wait-and-see mode. Now the problem is we've got a limited time and it's almost time to do something. I will give the same advice I gave a year ago: To the extent that you have properties or you are in businesses that have real estate for which Measure 37 may have implications, you should be thinking about auditing those properties and understanding what those rights might be and whether you want to or need to do something with those rights. It's going to be a complicated time over the next eight to 10 months, as judicial decisions come down, those decisions are appealed, and as time starts to run out. There's going to be a lot of scrambling.
There is an article in the Clackamas County edition of The Oregonian this morning about the increase in the number of Measure 37 claims, and Clackamas County expects a dramatic increase after the Supreme Court decision. That does not surprise me. The 2,000 claims that were made in the first 10 months under Measure 37 are probably going to be dwarfed by the number of claims made in the next eight or nine months. There is a backlog in the processing of Measure 37 claims, because local governments and the state did not do any processing from October 2005 to the Supreme Court decision in February 2006. Now, if you want to talk to local government about anything other than Measure 37, they don't have time for it.