childrightslogoenSometimes called a “case of the race,” the common law doctrine of vested rights is “one of the most troublesome areas of land use regulation.”  Exeter Building Corp v Town of Newburgh, 114 AD3d 774 [2d Dept 2014].

In New York, the “vested rights” doctrine is equitable in nature and implicated when a property owner or developer seeks to continue the use of property in a way that was permissible before an  enactment or amendment of zoning regulations no longer permits it.   Town of Orangetown v. Magee, 88 NY2d 41 [1996].

Generally, an owner of real property can acquire common-law vested rights to develop property in accordance with the prior zoning regulations when (1) in reliance on a legally issued permit, the landowner (2) effects substantial changes and incurs substantial expenses to further the development and (3) the landowner’s actions relying on the valid permit(s) are so substantial that the municipal action results in serious loss rendering the improvements essentially valueless.  Id.  As a result, the “race” becomes whether the developer gets the project completed or at least substantially completed to satisfy the Magee test before the municipality get its zoning code in place.

Recently, in Exeter Building Corp v. Town of Newburgh, the Court of Appeals affirmed a determination by the Appellate Division holding that the developer had not vested a plan to build 136 townhouse units, because it could not have reasonably relied on valid permits when warned repeatedly of a rezoning by the Planning Board.  In Exeter, the Court of Appeals refined the reliance test in Magee, holding that is was not “reasonablefor the developer  to rely on a conditional  site  plan approval placing emphasis on the Town Planning Board’s repeated warnings of the proposed rezoning.

Now, not only must developers listen for the starting gun in a vested rights case, but they must also consider the reasonableness of a municipality’s warning. Such an additional qualifier seems to give the government a head start.

For a detailed discussion of vested rights and the underlying Appellate Division case, see one of our earlier blog posts, Appellate Court Rules on Common-Law Vested Rights.

 

shutterstock_252155278The Town Board of the Town of East Hampton (“Town Board”) is considering progressive new legislation that will require advanced nitrogen-reducing sanitary systems for all new commercial and residential construction and major renovation projects.  This law, loosely modeled after a similar law adopted by the Town of Brookhaven for projects located within the environmentally-sensitive Carmans River watershed, imposes regulations designed to supplement those required by the Suffolk County Department of Health Services (“SCDHS”), pursuant to Article 6 of the Suffolk County Sanitary Code.  At the February 7, 2017, Town Board work session, Supervisor Larry Cantwell justified the need for the law by declaring that “we need to find a way to replace these antiquated cesspools and septic systems that are clearly a threat to the quality of life and the quality of life that we have in the town.”

Under the proposed law, a new, low-nitrogen sanitary system will be mandated in one of three circumstances.  The first is where a proposal involves new commercial or residential construction.  The second is where there is an existing sanitary system, but there is evidence that it is failing. The third circumstance involves the substantial expansion of an existing structure.  Pursuant to East Hampton Town Code § 255-1-20(A), “substantial expansion” occurs where a building addition increases its gross floor area by 50% or more or where the cost of an addition, reconstruction, rehabilitation or other improvement to a structure equals or exceeds 50% of the market value of the structure prior to making or undertaking the addition, reconstruction, rehabilitation or other improvement.

At the outset, a qualifying “Low-Nitrogen Sanitary System” will be defined as one that is approved by the SCDHS and proven to reduce nitrogen levels in wastewater to 19 milligrams or less per liter.  However, the law contemplates that as technology advances and new systems are approved by the SCDHS that reduce nitrogen levels even further, future systems will be required to reduce nitrogen levels to 10 milligrams or less per liter.  By comparison, conventional systems release about 50 milligrams per liter of nitrogen into groundwater.

Since low-nitrogen systems, by design, need ongoing monitoring and maintenance in order to function properly, the law will require that owners of these systems maintain them in accordance with the manufacturer’s recommendations.  The Town will also require inspections of these systems at least once every three years by qualified persons employed by or for the Town, or at anytime the Town’s Sanitation Inspector has reason to believe that a system is malfunctioning, has been illegally modified or expanded, or is being operated beyond its design limits.

In order to encourage the use of low-nitrogen sanitary systems, the Town Board is also considering a companion law entitled “Low-Nitrogen Sanitary System Rebate Program,” which creates a multi-tiered system of rebates to incentivize qualifying homeowners to voluntarily replace their aging cesspools and conventional septic systems with new sanitary systems that reduce nitrogen emissions.  The rebates would be paid from the Community Preservation Fund (“CPF”), a portion of which is available for water quality improvement projects.  The CPF, which is funded by a 2 percent tax on real estate transactions, is anticipated to have between $4 and $5 million available to fund the rebate program each year.

The largest rebate, covering 100% of the replacement cost of the system up to $15,000, would be offered to all homeowners in a Town Water Protection District, where shallow groundwater tables and proximity to tidal water bodies causes nitrogen in wastewater to quickly reach surface waters.  Homeowners with cesspool systems who are not located in a Water Protection District will be eligible for a 50% rebate, up to $10,000, and if their household income meets the Town’s threshold to qualify for affordable housing, the rebate increases to 75 percent.  Homeowners who are not eligible for either a cesspool or Water Protection District rebate, but wish to replace existing sanitary systems with new, advanced technology systems are eligible for rebates of 25% of the cost, up to a maximum of $5,000.  In order to qualify for the rebate program, the property owners must have an annual household income below the State’s STAR exemption threshold of $500,000.

At the conclusion of the February 7, 2017 Town Board work session meeting, Supervisor Cantwell indicated that both laws are likely to be discussed at a subsequent Town Board work session meeting prior to scheduling a public hearing on the legislation.

East Hampton Town restricts the size of accessory structures to 600 s.f. (each) with no plumbing.   However, because of a long history of artists in the Town (e.g., Pollock, Willem and Elaine DeKooning), an artist’s studio is allowed to have a sink and to be as large as 2,500 s.f., depending on the size of the main house. Of course, you have to be an artist to have an artist’s studio: an “artist’s studio” may be “used only by an individual working in the fine arts on a professional basis.”

shutterstock_596874467For a long time, the building inspector’s office approved artists and their respective artist’s studio expanded accessory structure (greater than 600 s.f.).  The building inspector’s office was a bit loosey-goosey, allowing, for example, studios for knitting sweaters and the like. A few years ago, the Town tightened up the standards and required town board approval of the “artist”  in accordance with the definition set forth in the town code.  The approval is now being transferred to the planning board.

Approval of an artist’s studio requires recording a covenant stating that the non-conforming aspects of the approved studio (the sink and size over 600 s.f.) must be removed once the approved artist’s studio use is discontinued – usually because of the sale of the property to someone without an approved artist in the family. These covenants were almost universally ignored – until recently. The Town is now on a tear to get rid of artists’ studios without artists. The town is screening properties and owners and sending letters to non-artist owners of properties with an approved artist’s studio advising that the approval will expire in six months and that they must cease and desist from occupancy when the artist’s use ceases. The requirement to cease occupancy is usually included in the recorded covenant that was required when the use was approved.

There has been no litigation over the cease and desist regime, at least not so far.  For those who have received the cease and desist letter, or expect to receive one at some time in the future, the available remedies are as follows:

  1. Town board (or planning board) approval of the new owner as a bona fide artist.  This is notably harder than it used to be when applicants pushed the envelope to include studios for knitting sweaters or home repair of furniture.  The standards for compliance set forth in the Code include an application by the artist, who must then comply with the definition of an “artist” set forth in the code.   A person with training, but without exhibitions, might get approval; this is probably not the case for the sweater-knitter or home furniture repair ‘artist’.
  2. Obtain a variance to keep the existing building.  This probably would not work to keep the sink, but might work in particular circumstances – such as keeping a second floor studio space due to the  cost associated with removing it.  The normal balancing test for zoning variances (benefit to applicant v. detriment to neighborhood and community) would apply.  The town planners argue that building owners should not get a variance simply because of the inconvenience of achieving compliance  – especially because buyers had notice of the restrictions through the covenants filed.  The only variance granted recently was for a 150-year old cottage that had been converted to an artist’s studio and then sold by the artist to a non-artist.
  3. Achieve compliance – removing plumbing and reducing size to 600 square feet.
  4. Size reduction by conversion.  Actually making the whole building smaller (or the whole second floor smaller) can be both difficult and expensive. Size reduction by converting a part of the structure to storage might work. In the past, the building department has issued updated certificates of occupancy when a portion of the artist’s studio is converted to non-habitable storage space and is separated from the rest of the studio.  That portion is then not counted as habitable gross floor area, reducing the habitable size of the accessory structure to 600 s.f., thereby conforming to the accessory limits.  This may require a separate entrance to the storage area, no connection between the storage area and the remaining 600 s.f. portion, removal of insulation, etc. and even lowering the joists/cross beams to a non-habitable height, such as five feet.
  5. Litigation challenging the statute on fundamental constitutional issues is feasible. No one wants to go that route, at least so far, because the time and cost is impractical.

 

Two recent New York cases brought to mind the well-known poem about trees. No, not the one written by Joyce Kilmer. The other one, written by Ogden Nash. Who can ever forget those immortal words. “I think that I shall never see a billboard lovely as a tree.” Yes, the cases involve billboards and zoning.

But first some history.evil-trees

Sky Signs

One of the first reported cases on municipal regulation of outdoor advertising, People v Wineburgh Advertising Company, 19 NY 126 [1909], involved the regulation of “sky signs” by the City of New York. That regulation limited rooftop signs on private property to 9 feet above the front wall or cornice and prohibited taller signs no matter how securely the signs were affixed to the building. Wineburgh Advertising sought to install a sign on the roof of the 10-story office building located at 27 East 22nd  Street in Manhattan. The bottom of the proposed sign was to be 5 feet 6 inches above the roof and soar to 20 feet 6 inches above the roof. It was to be set back 40 to 50 feet from the building line. The City refused to approve the sign on the grounds it was a safety hazard and the legal challenge ensued.

In rejecting the City’s decision and finding it arbitrary and unlawful, the New York Court of Appeals noted that no such height restriction applied to other roof-top structures, such as tanks, towers, chimneys, flagpoles, balustrades, finials or ornamental finishes. The Court determined that the City’s objection to the sky sign was not a safety issue, but rather sought to control the advertising that would be placed on the sign. The building was allowed to install its sky sign.

Now for the two new cases.

Colossal Murals

In Matter of Skyhigh Murals – Colossal Media, Inc. v Board of Standards and Appeals of the City of New York, 2017 NY Slip Op 30088(U) [Supreme Court, NY County, January 13, 2017], a 900 square foot hand painted advertising sign was proposed to be located on the side of a building in Williamsburg, Brooklyn. The building is located within a M1-1 manufacturing zoning district. Directly across the street, in a MX-8 Special Mixed Use zoning district, is a residential building. The sign would face this residential building.

First the Department of Buildings, and then the Board of Standards and Appeals (BSA), rejected the application on the grounds the sign violated the City’s Zoning Resolution as it would adjoin a residential zoning district. The Court rejected the argument and castigated the BSA for having “muffed such a simple and obvious statutory interpretation.”    According to the BSA, the building was located in “co-designated” residential and mixed use zones. The Court explained that the Zoning Resolution superimposed the MX-8 zoning district on paired M1 and Residential Districts. Thus, it did not matter that the residential building was located in the residential part of the paired districts. It was located in the MX-8 zoning district. The Court permitted the installation of the sign.

Billboards     

The second case comes from upstate and concerns billboards along an interstate highway. In Matter of Expressview Development Inc. v Town of Gates Zoning Board of Appeals, __ AD3d __2017,2017 Slip Op 00874 [4th Dept. 2017], the zoning provision in question prohibited commercial advertising signs that were not located on the site of the business being advertised. The site in question abutted an interstate highway. It was composed of 6 contiguous vacant parcels that combined into an oddly-shaped site. The site had been acquired back in the mid-1980s and had been approved as an industrial park in 1982. The owner never developed the park and it remained vacant. The site had been on the market for years with little interest.

In 2009, Expressview Development made an offer to purchase the site contingent upon it being able to construct billboards that would be visible from the interstate highway. The prospective purchaser applied for use and area variances to construct the billboards, which were denied by the Zoning Board of Appeals. The board determined that the billboards violated the zoning code restriction as they would be used for advertising of commercial enterprises not operating at the site. The board also found that the proposed billboards would adversely affect the character of the neighborhood and would result in billboard overload as there were already more than enough signs on that stretch of highway.

The Appellate Division agreed with the Zoning Board of Appeals. Wholly unsympathetic to the owner, (the Court referred to the owner as a “careless land buyer”), the Court rejected the property owner’s hardship claim. The Court also noted that the “off-premises” zoning restriction applicable to commercial advertising did not violate free speech rights.

The orientation of a tennis court in a north/south direction is a benefit to competitive players interested in fair tennis play. Even the Appellate Division, Second Department, agrees.

To avoid the impact of sun glare, a Town of Southampton property owner sought several variances to construct a tennis court in a north/south direction. One of the variances requested a 17-foot setback from the street where 90 feet is required.  (Southampton Town Code, Section 330-11.)   This variance would allow the tennis court to be situated in a north/south direction and thus avoid the impact of sun glare that would occur if situated in an east/west direction.

StockSnap_8ODE0WIMD9A neighboring property owner, located across the street, appeared at the public hearing and opposed the requested variances.  In reaching its 2014 determination to grant the variance application, the Southampton Board of Zoning Appeals found that the proposed tennis court was located 158 feet away from the opposing neighbor’s house and therefore would not create a detriment to the property owner or the surrounding neighborhood.

The Board also relied upon no less than eight (8) mitigating factors, including:

  • Proposed landscape screening;
  • Sinking the court into the ground by four feet, thereby mitigating potential noise impacts;
  • The alternative of constructing a 9,000 square foot house was far more impactful;
  • The goal of distancing the court from the immediately contiguous neighbors was more important than any perceived impact to the opposing neighbor located across the street.

Unhappy with the Zoning Board’s determination, the opposing neighbor commenced an Article 78 proceeding in addition to seeking a TRO and preliminary injunctive relief.  After considering the arguments, by Decision and Order dated May 19, 2014, the trial court (J. Garguilo) upheld the Zoning Board’s decision, while at the same time vacating the TRO and denying petitioner’s request for preliminary injunctive relief.   Petitioner’s attempt to appeal the denial of injunctive relief was dismissed by the Appellate Division as the Second Department held that “appeal from the intermediate order in this proceeding must be dismissed because the right of direct appeal therefrom terminated with the entry of a judgment dated November 10, 2014.”  Id.

By further decision of even date, the Appellate Division upheld the Zoning Board determination, finding not only  “there was no evidence that the granting of the variance would produce an undesirable change in the character of the neighborhood, have an adverse effect on physical and environmental conditions, or otherwise result in a detriment to the health, safety, and welfare of the neighborhood or community . . . [but also] the Zoning Board rationally concluded that the benefit sought by [the applicant}, namely, to maximize its use of the proposed tennis court, could not be achieved by the alternative site proposed by the petitioner.”  Id.

The Appellate Division made the above determinations despite the fact that it found that the variances requested by the property owner were substantial in nature and that the difficulty was self-created. This decision is important to those seeking to uphold a favorable variance grant in the wake of neighboring opposition because this decision demonstrates that focusing on the absence of, or minimal, undesirable change in a neighborhood and detriment to the health, safety, and welfare of a community can trump substantial variance requests, including those that are self-created in nature.

Municipalities on Long Island are struggling to control rental properties. In Southampton, rental properties are governed by Chapter 270 of the Southampton Town Code (the “Code”). Section 270-3 of the Code establishes that an owner of a residential property shall not permit or allow its use or occupancy as a rental without first obtaining a permit. If an owner does rent without a permit, section 270-13(a) of the Code prohibits the owner’s collection of rent.

In Schwartz v. Torrenzano, 49 Misc.3d 943, 16 N.Y.S.3d 697, (Suffolk Co. 2015), the Supreme Court held that Southampton’s rental permit law creates a private cause of action allowing, in certain circumstances, a tenant to recoup rent paid to its landlord. The trial court’s holding in Schwartz was recently cited with approval by the Appellate Division, Second Department in Ader v. Guzman, 135 A.D.3d 671, 23 N.Y.S.3d 292 (2d Dept. 2016).

In Ader, tenants demanded the return of their rent after discovering that their summer rental lacked a permit. The Appellate Division, relying in part upon Schwartz, affirmed the Supreme Court’s holding that the Code affords tenants an implied private right of action and that the Ader lease was unenforceable. The Appellate Division held that because Southampton’s rental permit law is intended to protect the public health and prevent fraud, enforcing the illegal lease and permitting the landlord to keep the tenants’ rent violates public policy.

In a companion case, Ader v. Guzman & Corcoran Realty Group, LLC, et al., 135 A.D.3d 668, 22 N.Y.S.3d 576 (2d Dept. 2016), the Appellate Division held that Real Property Law §443(4)(b) does not impose a duty upon real estate brokers to investigate whether a rental property is properly permitted. Despite the Court’s holding, the New York State Department of State, in a guidance letter dated April 19, 2016, cautioned that “notwithstanding the decision in Guzman, a broker who fails to demonstrate a working knowledge of the property being marketed, fails to demonstrate the level of competency required to transact business as a licensee in violation of Real Property Law §§441 and 441-c.” The Department further warned that a broker’s commission “premised upon an unlawful agreement is ‘unearned’ in violation of Real Property Law §441-c.”

It is clear that from the Department’s perspective that brokers must make reasonable efforts to verify the legal status of the properties they offer and that, where a broker has actual knowledge that a property lacks a permit or is otherwise illegal, such information must be affirmatively disclosed.

 

hempDEREGULATING INDUSTRIAL HEMP

Plans to expand New York’s Industrial Hemp Agricultural Pilot Program were recently announced by Governor Andrew Cuomo at one of his State of the State addresses. The program, which commenced in 2016, was authorized pursuant to the federal government’s passage of its 2014 Farm Bill, which specifically allows universities and state departments of agriculture to grow or cultivate industrial hemp if:

“(1) the industrial hemp is grown or cultivated for purposes of research conducted under an agricultural pilot program or other agricultural or academic research; and

(2) the growing or cultivating of industrial hemp is allowed under the laws of the state in which such institution of higher education or state department of agriculture is located and such research occurs.”

The law also requires that the grow sites be certified by—and registered with—their state.

HEMP NO LONGER A CONTROLLED SUBSTANCE SO LONG AS IT CONTAINS LESS THAN 0.3 THC

In 2015, a bipartisan group of U.S. senators introduced the Industrial Hemp Farming Act of 2015 that would allow American farmers to produce and cultivate industrial hemp. The bill would remove hemp from the controlled substances list as long as it contained no more than 0.3 percent THC.

The U.S. Department of Agriculture, in consultation with the U.S. Drug Enforcement Agency (DEA) and the U.S. Food and Drug Administration, released a Statement of Principles on Industrial Hemp in the Federal Register on Aug 12, 2016, to inform the public on the applicable activities related to hemp in the 2014 Farm Bill.

Under the pilot program, New York caps the number of sites permitted to farm hemp to ten locations throughout the state. The current research projects are being conducted under the auspices of SUNY Morrisville College and Cornell University’s College of Agriculture and Life Sciences. Governor Cuomo’s proposed amendments will lift the cap and expand the program to private farmers in an effort to “position New York at the forefront of a growing agricultural sector.” In 2015, it is estimated that the industrial hemp industry generated some $573 million in sales in the U.S. alone. Governor Cuomo believes that it could soon be a billion dollar industry; and New York’s Southern Tier, because of its climate and soil, is uniquely suited to be a leader in the industry.

Only time will tell if the industrial hemp industry flourishes as hoped for by the Governor or it goes up in smoke.

mosqueOn December 31, 2016, U.S. District Judge Michael Shipp of the District of New Jersey authored a 57-page opinion granting partial summary judgment to plaintiffs, The Islamic Society of Basking Ridge (“Islamic Society”) holding that defendants, the Township of Bernards (“Bernards”), violated Islamic Society’s rights under the Religious Land Use and Institutionalized Persons Act (“RLUIPA”).  The Bernards Planning Board denied Islamic Society’s site plan application seeking to construct a mosque in a residential zone on the basis that (1) a mosque is not considered a church under Bernards’ zoning code and (2)  Bernards’ parking ordinance was not adhered to.

FACTS

In November 2011, Islamic Society purchased property in a residential section of Bernards with the intention of constructing a 4,252 square foot mosque on the property.  The site plan called for 50 parking spaces based on estimated occupancy of 150 people.  The parking spaces provided were in compliance with Bernards’ parking ordinance applicable to churches at a ratio of 3:1 .

Over the course of three and a half years, Islamic Society’s site plan application underwent 39 meetings and was subjected to intense neighborhood opposition and scrutiny.    According to the decision, competing expert testimony was provided by parking experts and asserted that although Bernards does not, and has never, relied on the Institute of Transportation Engineers (“ITE”)  Parking Generation data,  Bernards required Islamic Society to apply the ITE data applicable to mosques, which estimated required parking spaces between 36 and 110.  Bernards compromised at 107 parking spaces, when in fact, only 50 were required under Bernards accepted church parking ratio of 3:1.

The rationale for the increased parking requirement rested on Bernards’ determination that a mosque is not a church, despite the fact that Bernards’ zoning code does not state that a mosque is not considered a church.  Bernards did not stop there.  Bernards went on to say that only Christian places of worship are considered  churches, and as a result thereof, not only was the 3:1 parking ratio not applicable to Islamic Society’s site plan application, but also, Bernards maintained discretion in reviewing Islamic Society’s application and essentially had unfettered discretion in determining parking requirements.

At the conclusion of all hearings and testimony, Bernards’ planning board denied the site plan application.  Islamic Society commenced an action in federal court alleging violations under RLUIPA.

DECISION

In granting partial summary judgment, the Court rejected Bernards’ position that mosques are not considered churches.   In fact, the Court specifically stated that a mosque or any place of religious worship, whether a church or not, is protected under RLUIPA.  Bernards’ unsupported determination that mosques are not considered churches violated Islamic Society’s rights under the Nondiscrimination Provision of RLUIPA.

Additionally, with respect to the increased parking, and Bernards’ position that it maintained unfettered discretion to determine parking requirements, the Court relied upon its determination that a mosque is entitled to the same protections as a church;  as such, the Bernard parking ordinance ratio of 3:1 should have been applied equally to Islamic Society as it had historically been applied to Christian and Baptist churches and synagogues that were previously approved in Bernards.  Further, the Christian, Baptist and Jewish places of worship were typically granted in less than six months, and in most instances, with less then four public hearings.

CONCLUSION

The decision in this 57-page case cannot be justly analyzed in a short blog post.  Given the state of our country at this time, when it comes to freedom of religion and the consequences that we suffer as a result of our differing beliefs, it would be a worthwhile allocation of any land use attorney’s time to read this decision.  If nothing else, it reminds us all that one of the basic tenets of our American freedoms is the freedom to be different and be accepted.

pinwheel-wind-power-enerie-environmental-technology

Last Wednesday, LIPA unanimously approved Deepwater Wind’s proposal to build the nation’s largest offshore wind farm approximately 30-35 miles off the coast of Montauk, New York.  Construction will include fifteen turbines with a 90 megawatt capacity able to power 50,000 homes.  The turbines will be built out of sight to address vehement public comments against blighted ocean vistas.

IT IS NOT THE FIRST AND IT WILL NOT BE THE LAST

Long Island’s latest offshore wind farm approval is not the first of its kind in the United States.  America’s first offshore wind farm located three miles off the coast of Block Island, Rhode Island, began delivering energy to the Ocean State in December 2016.  Although our neighbor to the north took the inaugural step, New York leads the charge into the future of offshore renewable energy development.  Our coastline boasts some of the world’s strongest offshore winds, and New York State plans to take advantage of these endless oceanic gusts.

The Montauk project is part-and-parcel of a 250-plus square mile area to be developed, with upwards of 200 turbines generating an estimated 2.4 gigawatts to power 1.25 million homes.  New York is studying a 16,740 square-mile area (an area approximately twice the size of New Jersey) stretching from south of Manhattan eastward into the Atlantic, extending out to the break of the continental shelf.  In addition, last month the federal government leased 80,000 acres of land south of Queens County, New York, to international energy giant Statoil for development.  Statoil endeavors to build seventeen miles offshore and provide 800 megawatts of power.  The federal government recently awarded several other offshore leases for development up and down the east coast, from Rhode Island to Virginia.

NOTES FROM BLOCK ISLAND – THE LOCAL IMPACTS OF DEVELOPMENT

Deepwater Wind’s Block Island project boosted the local economy and showcases many benefits of clean, renewable energy development.  Five offshore turbines harness wind energy capable of powering 17,000 homes.  This wind energy meets 90% of Block Island’s power needs, and additional energy is sent back to the electricity grid.  The developer (Deepwater Wind) is a locally-based company and is an expanding business in the region.  During construction, the project employed more than 300 local workers over two years, including local contractors.  Many more workers will be employed to maintain, repair and update the farm.  Atlantic Pioneer, the vessel that transported the project’s crews, was built in Rhode Island and will service the Block Island farm for at least twenty years.  Lastly, and most importantly, the farm accomplished the overall goal of harnessing wind energy by producing upwards of 30 megawatts of clean, renewable energy.

WHAT’S ON THE HORIZON

New York City and Long Island consume almost half of New York’s annual electricity usage, and continued development of Long Island’s East End fuels electricity consumption.  In an effort to suffice 50% of the State’s electricity needs with renewable energy by 2030, public and private parties alike are investing tremendously to research and develop additional sites to harness nature’s invisible gift.  To provide for efficient and cost-effective paths to develop offshore wind farms, the State issued a Blue Print for the New York State Offshore Wind Master Plan in September 2016 and anticipates releasing an Offshore Wind Master Plan by the end of 2017.

shutterstock_527190727In an effort to generate revenue without raising taxes, many municipalities on Long Island, and elsewhere in New York State, are turning to the use of various forms of land development fees to meet their fiscal challenges. In many cases, these fees can be legally and morally justified, such as when they offset the actual administrative costs of processing a land use application, or when a municipality must incur costs to provide additional public infrastructure and services to accommodate a new development. However, in their zeal to raise revenue, some local governments have ignored statutory and judicial authority that establish a narrow framework for collecting and using these fees, which may leave them exposed to a legal challenge.

In this post, which will be presented in multiple segments, we will highlight the various ways that local governments are using impact, administrative review and recording fees as a revenue-generating measure. We will review the propriety of these fees and discuss the potential impact that these fees can have on development, which is typically a good barometer of a community’s economic prosperity.  We will also discuss who ultimately pays these fees that translate into higher housing and other costs.

Local Impact Fees

Impact fees are one-time payments required by local governments in connection with new developments for the purpose of defraying some of the cost of constructing or improving the public infrastructure needed to serve them. Where authorized, such fees are used to shift the financial burden for additional capital improvements and services from taxpayers to private developers who are the beneficiaries of those improvements and services.

To be valid, there must be a “rational nexus” between the impact fee imposed and the infrastructure needs created by the new development. To satisfy the nexus test, the development must create a need for the new infrastructure; and the fee amount must be based on the extent to which the development benefits from the infrastructure. In other words, an impact fee cannot exceed the pro rata or proportionate share of the anticipated costs of providing the new development with the necessary infrastructure.

Roughly half the states have enacted enabling legislation authorizing the imposition of impact fees. New York, however, is not among them. In fact, a number of decisions by New York Courts cast serious doubt on whether municipalities can enact local impact fee legislation pursuant to home rule powers, or otherwise impose such fees on developers.

In the only impact fee case to reach New York’s highest court, the Court of Appeals in 1989 invalidated the Town of Guilderland’s attempt to fund roadway and other transportation improvements under its Transportation Impact Fee Law (“TIFL”) in Albany Area Builder’s Association v. Town of Guilderland . While the Court did not actually rule on the validity of local impact fees, it concluded that the TIFL was impliedly preempted by the State Legislature’s uniform scheme to regulate highway funding set forth in the Town Law and Highway Law. This decision precludes the use of local impact fees to cover costs associated with roads, sewer, water hook-ups and other infrastructure for which State law already provides a comprehensive regulatory scheme for the financing of these improvements.

Notwithstanding the legal precedents, there are local governments on Long Island that continue to impose what amount to significant, but questionable, impact fees on developers. One such fee is the Town of Brookhaven’s Land Use Intensification Mitigation Fee.  The stated purpose is to mitigate any land use intensification associated with the approval of a change of zoning classification from a more restrictive to a less restrictive use through the acquisition of open space. Depending on the existing and proposed zoning classifications and the size of the site, the law has the potential for imposing significant fees on developers and other landowners within the Town.

While the stated goals of this fee law are undoubtedly laudable, the absence of specific enabling legislation authorizing this fee makes Brookhaven’s law susceptible to legal challenge. A Court could find that the fees charged are not commensurate with the potential demand for additional open space created by the less restrictive zoning and, therefore, fails the “rational nexus” test. A Court may also find that the Town Law provisions authorizing a municipality to require that a parkland be set aside, or impose a fee in lieu of parkland, in connection with site plan and subdivision applications impliedly preempts the Town’s fee law. Of course, it is also possible that a Court could uphold this fee, and Brookhaven’s law may become a model for future local impact fees in New York State.

To date, these fees have not been challenged by developers, who instead are simply paying the fees and capitalize them into the land value. However, depending on the nature of the development, these fees are being passed along by developers to new owners and renters of residential, commercial, industrial, office and retail space, and also to consumers who must ultimately pay more for retail goods and services. While these fees make it easier for a municipality to balance its budget, this short-term benefit pales in comparison to the significant negative impact that these fees can have by driving up the cost of living on Long Island and frustrating the market’s ability to deliver much-needed affordable housing.

In the next segment of this post, we will look at administrative review fees, which are another revenue-generating device used by local governments related to the processing of land use applications that are being assessed on developers, often without regard to the legal limitations on such fees.