Early this year, the Supreme Court of New York, Richmond County issued a comprehensive opinion in Galarza v. City of New York, 58 Misc.3d 1210(A), reaffirming and clarifying the nuances of condemnation, takings and just compensation principles as they relate to wetlands restrictions.  The court held that the owner of a 21,000 square-foot vacant lot (“Property”) condemned by the City of New York (“City”) as wetlands was entitled to just compensation in the amount of $669,000, where the fair market value of the undevelopable land was approximately $200,000.

In awarding upwards of 335% of the Property’s apparent value, the court found that the owner was entitled to an incremental increase in just compensation.  This finding was based upon the nature of the wetlands restrictions vis-à-vis takings precedent.  And, it is significant that the court awarded the higher value despite the owner having purchased the Property after it was already designated as wetlands and known to be undevelopable.  This decision follows a late-2017 decision of the Appellate Division in In re New Creek Bluebelt Phase 3 (Baycrest Manor), 156 A.D.3d 163 (2d Dep’t 2017), where the Second Department affirmed, as modified, an increased award as just compensation for wetlands condemnation.

Claimant Ivan Galarza (“Owner”) purchased the Property at a tax lien foreclosure auction in 2003.  At the time the Owner purchased the Property at auction, the Property was already designated as wetlands.  The City later acquired the Property by condemnation as part of its New Creek Bluebelt Phase 4 project.  The Owner and the City both agreed that the wetlands designation precluded the Owner from obtaining a permit to improve the Property and that the highest and best use of the Property, as regulated, would be to remain vacant.  The parties disagreed, however, as to whether the wetlands restrictions constituted a regulatory taking.  The regulatory taking issue is relevant and forms the crux of this entire case because it is precisely the finding of a “reasonable probability of success” in bringing a hypothetical regulatory taking claim to challenge regulations, e.g. wetlands restrictions, that entitles a property owner to the incremental increase in just compensation.

The Threshold Question: Whether the Regulation Is a Background Principle of New York State Law on Property and Nuisance

First, the court addressed the threshold issue of whether the Owner was barred from bringing a takings claim in the first place, because the Owner purchased the Property subject to the wetlands designation.  Relying on Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), Galarza stated that the “logically antecedent inquiry” into a takings claim is whether “the proscribed use was part of the title to begin with.”  Thus, before any owner can claim deprivation of economically beneficial uses of property, courts must first determine whether the right to use the property in the manner prohibited was actually part of the “bundle of rights” acquired with title.

In Lucas, the U.S. Supreme Court held that in order for a regulation not to constitute a taking where it prohibits all economically beneficial use of land, the regulation cannot be newly legislated or decreed, but must inhere in the title itself; the restriction must be a background principle of a state’s law of property and nuisance – already placed upon the ownership of property.  After Lucas, the New York Court of Appeals issued four opinions simultaneously in 1997 known as the “takings quartet.”[1]  These four cases established the “notice rule” in New York, whereby any owner who took title after the enactment of a restriction was barred from challenging the restriction as a taking because the use prohibited was not part of the bundle of rights acquired with title by a buyer.

Almost a decade after Lucas, the U.S. Supreme Court’s decision in Palazzolo v. Rhode Island, 533 U.S. 600 (2001), up-ended New York’s “notice rule.”  The high Court held that a per se notice rule was untenable and altered the nature of property because an owner would be deprived of the right to transfer an interest acquired with title (prior to the regulation).  Moreover, the Court held that simply because an owner acquired property after the enactment of regulations does not transform those regulations into background principles of state law on property and nuisance.

In determining whether New York State’s wetlands restrictions affecting the Property are part of the background principles of New York’s law on property and nuisance, the Galarza court answered in the negative.  Interestingly, the City argued, among other things, that protection of wetlands was grounded in common law and cited to medieval England’s use of wetlands restrictions.  The court noted, however, that these restrictions pre-dated the creation of fee estates and that as individual ownership rights began to take shape, wetlands regulations were abandoned in favor of development.

In addition, the Galarza court distinguished the Palazzolo decision issued by Rhode Island Superior Court after remand from the U.S. Supreme Court.  The Superior Court found that wetlands designations were part of the background principles of Rhode Island’s state law.  Conversely, the Galarza decision found that “[w]hile development of wetlands constitutes a nuisance under Rhode Island law, development of wetlands was not a nuisance under New York law.”  The court chronicled the filling and draining of wetlands and the history and treatment of land development in the City from its inception until the 1970s, at which time conserving wetlands became a concern.  “Given this history, it is clear the New York wetlands regulations did not simply make explicit a prohibition on activity that was always unlawful, and therefore the wetlands regulations are not part of New York property and nuisance law.”

The Galarza court also distinguished a 2016 Second Department ruling in Monroe Eqs. LLC v. State of New York, 145 A.D.3d 680, which held watershed regulations constituted background principles of New York law.  Unlike wetlands regulations, watershed regulations prohibit a nuisance by preventing poisoning and pollution of water supplies and drinking water.  Based upon this analysis, the court found the Owner in Galarza was not barred from bringing a takings claim.

The Regulatory Takings Analysis: Per Se, Partial or Not at All

After having found the Owner’s regulatory taking claims were not barred, the court proceeded to the crux of the case: whether there was a reasonable probability that the wetlands regulations constituted a regulatory taking.  If not, the Owner’s just compensation is limited to the value of the Property as regulated.  If so, then the Owner is entitled to an incremental increase in value as just compensation, i.e. the value of the land as restricted plus an increment.  The increment reflects the premium a hypothetical buyer would pay for the Property in light of the probable success on a takings challenge.  (In other words, the Property would be worth more and, thus, entitled to greater value as just compensation for condemnation.)  To show a reasonable probability of success on a takings claim, the claimant must demonstrate that the regulation renders the property “unsuitable for any economic or private use, and destroy[s] all but a bare residue of its value.”

To determine whether there was a reasonable probability of a successful regulatory takings claim, the court considered Lucas, Tahoe-Sierra Preserv. Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002) and Penn Central Transp. Co. v. City of New York, 438 U.S. 104 (1978).  Under Lucas, a regulation constitutes a taking per se “only in the extraordinary circumstance where no economically beneficial use of the land is permitted and the regulations have extinguished all of the property’s value.”  In this scenario, no further analysis is necessary.  Galarza highlighted the distinction between “economic use” (returns from actual use or development) and a “property’s value” (market value as regulated or otherwise), but noted that Lucas used these terms interchangeably.  Later, the U.S. Supreme Court clarified Lucas in Tahoe-Sierra : “compensation is required when a regulation deprives the owner of all economically beneficial uses of his land…[and] is limited to the extraordinary circumstance when no productive or economic beneficial use of land is permitted.”  Anything short of 100% loss of value is not a regulatory taking per se and requires additional analysis by the factors enumerated in Penn Central.

Specifically in Galarza, the Property had value as regulated because there is a market for wetlands in Staten Island (discussed below), but the Property had no economic beneficial use.  The court considered two other cases in this respect, namely Lost Tree Vill. Corp. v. United States, 787 F.3d 1111 (Fed. Cir. 2015), and Florida Rock Indus., Inc. v. United States, 18 F.3d 1560 (Fed. Cir. 1994), to determine whether having value without any beneficial or economic use(s) precludes a taking per se.  The court in Lost Tree, on the one hand, held that residual non-economic value (i.e. market value) does not preclude a per se taking because there are no longer any underlying economic uses and the market value (selling the property) is not an underlying economic use.  Florida Rock, on the other hand, held that the value of property as a speculative investment is a proper consideration and that the associated market value precludes finding per se taking.[2]

The court in Galarza agreed with Florida Rock, holding that there is an established market for wetlands in Staten Island (for reasons that are not entirely clear) and that these parcels are bought and sold with an expectation that the restrictions may eventually be changed, waived or modified, or that the parcels might be sold at a profit.  Regardless of the motives and intentions, this market exists for parcels without permissible uses and this market must be considered in the takings analysis.  The Property was found to have a market value of $200,000.  Accordingly, because the Property has value in this market, the wetlands designation does not deprive the Property of all of its economic value (although it does deprive economic use entirely).  Therefore, it cannot qualify as a regulatory taking per se under Lucas.

Having failed to meet the Lucas test, the court then turned to a partial regulatory takings analysis under Penn Central.  This analysis is an “ad hoc, factual inquiry” and considers three factors: (1) the regulations’ economic impact upon the claimant, (2) the extent of interference with “reasonable” investment-backed expectations and (3) the character of the regulation as governmental action.

Penn Central Test Part 1: Economic Impact

First, in evaluating the economic impact, courts must compare the value that the regulation has taken from the property with the value that remains with the property.  Here, the court analyzed precedent set by four previous Second Department cases in wetlands taking cases (ranging from 1984 through 2017).[3]  Based upon these cases, the Galarza court found there was a reasonable probability of a successful regulatory takings challenge where regulations deprived the claimant of all rewarding uses of the property, e.g. development prohibition, and reduced the property’s value upwards of 80-90%.

In contrast, the court cited two other Second Department cases: Adrian v. Town of Yorktown, 83 A.D.3d 746 (2d Dep’t 2011), and Putnam County Nat’l Bank v. City of New York, 37 A.D.3d 575 (2d Dep’t 2007).  In Adrian, the court did not find a regulatory taking where the property value was reduced by a 64% reduction and the claimant sold the 15-acre parcel for $3,600,000, although contended it was worth $10,000,000.  In Putnam County Nat’l Bank, the court also did not find a regulatory taking.  There, watershed regulations reduced the value by 80%, and although the claimant was denied a building permit for a 36-lot subdivision because a sewer could not be built within the watershed, approval was granted for an alternative 17-lot subdivision.  The property was ultimately sold for $1,400,000.  That court found this realization was a “reasonable return”, and the economic impact of the watershed restrictions was not sufficient to constitute a taking.

Here, after various arguments and evidence presented by the parties, the court found the Property to have the following set of values: $200,000 as regulated and undeveloped and $1,701,000 as fully developed.  The court also found that it would cost $469,507 to develop the Property and, when the costs are deducted from the fully developed value ($1,701,000 less $469,507), the value of the return would be $1,231,493.  The difference, then, between the regulated value ($200,000) and the developed value, after costs ($1,231,493), is $1,031,493.  This figure is 84% of the fully developed value.  Another way to view the calculation is that the regulated value ($200,000) is 16% of the fully developed value.  Accordingly, the regulations reduce the Property’s value by 84%.

Penn Central Test Part 2: Extent of Interference with Expectations

Penn Central’s second factor is the extent of interference with investment-backed expectations.  Initially, courts must determine whose expectation to use.  In the regulatory takings context, the expectation of the owner is used because it is his or her land that suffers from the restraint.  To determine just compensation in the condemnation context, the expectation of the hypothetical buyer is used because this perspective determines the owner’s realization upon a sale.

Considering the hypothetical buyer’s expectations, the court must view the reasonableness of the expectation as an objective test: whether the regulation embodied a background principle of New York property and nuisance law.  This is the same consideration in determining whether a regulatory claiming is barred at the outset.  Essentially, it is unreasonable to expect to use property in such a manner prohibited as a background principle of law.  Finding guidance from the U.S. Supreme Court in Palazzolo, Galarza concluded it is reasonable to expect to utilize property as if the regulations did not exist – unless the regulations are background principles, the analysis cannot begin by limiting expectations to only those uses allowed by the regulation if the regulation is not a background principle.

As noted above, the Staten Island wetlands market exists and contemplates that regulations may be changed, waived or modified in favor of future development.  The court here ultimately determined it is not unreasonable for a hypothetical buyer to expect to develop the Property at some future date because, among other things, the wetlands restrictions are not background principles of law.  Accordingly, because any development was totally prohibited by the wetlands designations, then the regulations substantially interfered with reasonable expectations to develop the Property.

Penn Central Test Part 3: Character of the Regulation

The third factor under Penn Central is the character of the regulation.  Courts consider whether it amounts to a physical invasion or, instead, merely affects property interests.  Additionally, courts consider “reciprocity of advantage,” i.e. whether the regulation is part of a general scheme that provides some benefit to the regulated parcel, like a comprehensive zoning plan.  The singling-out of a parcel with a disproportionate burden is indicative of a taking.  The Galarza court found that while wetlands restrictions provide a benefit to the public in general, their burden falls disproportionately on a small group of owners, especially those whose entire parcels are classified as wetlands (as opposed to portions of parcels or parcels that are wetlands adjacent).  Here, the wetlands regulations approach a physical taking because they prohibit development entirely and force the Owner to leave the Property vacant.

Concluding Penn Central

In concluding its Penn Central analysis, Galarza found: (1) the wetlands regulations diminished the value of the Property by 84%, (2) interfered with the reasonable expectations of the Owner or a hypothetical buyer to develop the Property and (3) the character of the regulations is disproportionately burdensome and prohibits all economic use of the Property.  Moreover, the court found that the diminution of value was so great and the prohibitive character so invasive that, even if a hypothetical buyer did not have an expectation to develop, the regulations themselves “nearly approximate a physical appropriation as to constitute a taking under a Penn Central analysis.”

Therefore, the court held just compensation valuation must include the regulated value plus the incremental value to reflect the hypothetical buyer’s likelihood of successfully challenging the wetlands regulations as a regulatory taking.  This increment is a portion of the difference of the valuation over-and-above the regulated value.  Here, the regulated value was $200,000 and the developed value, after costs was $1,231,493; the difference between these figures is $1,031,493, and the increment is a portion of this difference.  (The Owner already receives the regulated, fair-market value as just compensation, so this value is not included in increment calculation).

In determining the actual incremental value, courts consider the time, effort and expense in “de-regulating” the affected land, including without limitation exhausting administrative remedies, prosecuting the takings challenge and the financial cost of “carrying” the affected property.  Here, the court found that the deregulation costs would be $391,882 and deducted these costs from $1,031,493, resulting in a “present day value” figure of $639,611.  The present day value figure must be discounted for inflation and opportunity costs, among other things.  The court determined that the present day value after the applied discount was $469,380 – and this is the incremental value to be applied.  Finally, the court completed its calculation for its award of just compensation: it added the regulated value ($200,000) together with the increment ($469,380), resulting in an award of $669,380 (rounded to $669,000).


[1] The four cases are as follows: Gazza v. New York State Dep’t of Envt’l Conserv., 89 N.Y.2d 603 (1997), Basile v. Town of Southampton, 89 N.Y.2d 974 (1997), Anello v. Zoning Bd. of Appeals, 89 N.Y.2d 535 (1997), and Kim v. City of New York, 90 N.Y.2d 1 (1997).  Gazza and Basile addressed wetlands restrictions.In determining the actual incremental value, courts consider the time, effort and expense in “de-regulating” the affected land, including without limitation exhausting administrative remedies, prosecuting the takings challenge and the financial cost of “carrying” the affected property.  Here, the court found that the deregulation costs would be $391,882 and deducted these costs from $1,031,493, resulting in a “present day value” figure of $639,611.  The present day value figure must be discounted for inflation and opportunity costs, among other things.  The court determined that the present day value after the applied discount was $469,380 – and this is the incremental value to be applied.  Finally, the court completed its calculation for its award of just compensation: it added the regulated value ($200,000) together with the increment ($469,380), resulting in an award of $669,380 (rounded to $669,000).

[2] The court addressed the nuances of speculation:

The cases that hold that one cannot consider speculative uses in valuing property in condemnation cases refer to non-current uses where it is not probable that the property would be put to such a use in the reasonable near future.  This is different from investors who speculate in property by purchasing it on the possibility of expectation that it will increase in value at some point in the future.  In this [latter] sense, speculative purchases represent investment backed expectation.

In addition, the court noted that dollars are fungible and that the land-speculation market provides owners with monetary compensation the same way as any other market.  Moreover, the key inquiry for purposes of just compensation for condemnation is whether there was a reasonable probability of successfully bringing a takings challenge as of the date of vesting – not whether any expectations of future value might be met.

[3] The cases are as follows: Chase Manhattan Bank v. State of New York, 103 A.D.2d 211 (2d Dep’t 1984), Baycrest Manor, Matter of New Creek Bluebelt, Phase 4 (Paolella), 122 A.D.3d 859 (2d Dep’t 2014), and Friedenburg v. State of New York, 3 A.D.3d 86 (2d Dep’t 2003).

In December 2016, Norwegian developer Statoil won a bid to lease 79,000 acres of underwater land from the federal government for wind energy development.  Statoil’s  wind energy project will be located approximately fourteen miles south of Long Beach and the Rockaways and will extend out to a distance of 30 miles.  The project, to be known as Empire Wind, contemplates erecting 80 to 100 turbines and anticipates producing up to 1,000 megawatts – enough energy to power upwards of one million homes.  Statoil anticipates commencing construction in 2021 and completing construction in 2024.

As part of New York’s plan to reach 50% renewable energy sources by 2030, the State has continued to research, test and identify off-shore areas for wind energy development.  In October 2017, New York identified more than one million acres for the development for future wind farm projects.

Empire Wind hopes to join another wind energy project currently in the planning stages, a 90-megawatt wind farm project located off Long Island’s east end.

In the Village of Bayville, New York (“Village”), a landowner wished to enclose and protect private property (“Lot 18”) , including the roadway thereon, against trespassers and traffic.  The landowner sought to erect crash gates on both sides of its property and across the roadway to prevent public access.  The road upon Lot 18 forms a part of Shore Road (connecting the public part of the roadway north of Lot 18 with Godfrey Avenue farther to the south).  Notably, Lot 18 abuts Mill Neck Creek and preventing traffic and access across the portion of Shore Road located upon Lot 18 may provide unfettered access to the water.

In the summer of 2013, the landowner made applications to the building inspector for a fence permit to construct two twelve-foot wide crash gates across Shore Road at the north and south sides of Lot 18.  The building inspector denied the applications and the landowner appealed to the Zoning Board of Appeals (“Board”).  The Board denied the landowner’s appeal and the landowner commenced a hybrid Article 78 proceeding/action in the Supreme Court against the building inspector and the Board.

In addition to seeking a reversal of the denials and demanding issuance of the building permit for the fences, the landowner sought damages for inverse condemnation.  The landowner argued that the Village had exercised a taking by allowing public access through the private property and upon the private roadway (especially because the building inspector and the Board denied the landowner’s rights to prevent such access).

The trial court issued an initial decision of June 2014, inter alia,  (i) denying the landowner’s petition to reverse the denials and (ii) granting the building inspector’s and the Board’s motions to dismiss, including for failure to state a cause of action for inverse condemnation.  Afterwards, however, the trial court granted the landowner’s application for leave to reargue.  Upon reargument, the trial court’s later decision of December 2014, as clarified by its order of March 2015, affirmed its initial decision – except it denied the motion to dismiss the landowner’s claim for inverse condemnation.  The building inspector and the Board appealed the March 2015 clarification order.

Last month, the Appellate Division, Second Department, affirmed the trial court’s March 2015 clarification order.  The appeals court noted that “[t]he cause of action [for inverse condemnation] should not have been dismissed since [sic], inter alia, it stated a cause of action to recover for damages . . . .”  Accordingly, the landowner can pursue its cause of action for inverse condemnation against the Village where public access upon and across private property is sanctioned by denial of the ability to enclose and protect it.

Note:  Law clerk Joanna Lima assisted in drafting this blog post.

Courts have recently expanded what constitutes religious conduct. In particular, in Matter of Sullivan v. Board of Zoning Appeals of City of Albany, 144 A.D. 3d 1480 (3d Dep’t 2016), an appellate court ruled that the use of a portion of a church parsonage for a “home base” for up to 14 homeless individuals was a permissible use of a “house of worship.”

Respondent Bethany Reformed Church owned certain real property, including a sanctuary, an educational and social building, a parsonage, and a parking lot, all of which were located adjacent to petitioner’s property. The properties were located in a residential district, which permitted, among other uses “houses of worship.” The Code of the City of Albany defined “houses of worship” as “a structure or part of a structure used for worship or religious ceremonies.”

The Church advised the City of its desire to partner with a not-for-profit corporation to establish a “home base” for up to 14 homeless individuals who were not attending school, enrolled in training programs or working at their current jobs. The City’s Building Department told the Church that it needed a use variance or special use permit as the proposed use did not appear to be for a religious purpose.   The Church then sought an interpretation from the Board of Zoning Appeals as to whether this intended use was permitted within the zoning district. The Board found that the Church’s intended use was consistent with “the mission and actions of a house of worship…” and did not require a variance or special use permit.  Petitioner brought a proceeding to annul the Board’s determination.

The Supreme Court, County of Albany, did not agree with the Board’s interpretation and annulled the Board’s decision, finding that the proposed use for the parsonage was not reasonably consistent with the term, “house of worship.” The Church appealed.  The Appellate Division reversed the decision of the Supreme Court, noting that, generally, “a zoning board’s interpretation of a zoning law [] is afforded great deference and will only be disturbed if it is irrational or unreasonable.”  An exception to this standard is where the issue is a pure legal interpretation of the zoning law.  Moreover, where a term is not defined by a zoning law, courts can apply the term’s ordinary meaning and that “any ambiguity in the language employed must be resolved in favor of the property owner.”

The Third Department first explained the rules applicable to judicial deference of municipal decisions, whether the issue presented was fact-based warranting judicial deference to the Board’s interpretation or a pure legal question excepting such deference.  Interestingly, the Appellate Division did not apply these rules in its reversal of the lower court.  The Appellate Division held that, regardless of the analytical approach, the Board’s interpretation should be upheld.  The Court noted that the term “worship” was not defined in the applicable zoning law, so the Appellate Division chose to use its ordinary meaning. The Court, relying on the dictionary meaning of the term, determined that the ordinary meaning of “worship” is defined as “any form of religious devotion, ritual, or service showing reverence – especially with respect to a divine being or supernatural power” and also includes “an act of expressing such reverence.” Noting that previous courts have been flexible in their interpretation of religious uses under zoning ordinances and did not limit religious uses solely to mean a house of prayer, the Court found that services to homeless individuals constitute religious conduct because acts of charity play a significant role in religious worship.

After Hurricane Sandy devastated Long Beach and its boardwalk in 2012, officials sought to reconstruct the city’s iconic esplanade. As part of the rebuild, the Long Beach City Council determined to award contracts for the construction of comfort stations along the wooden promenade, including a comfort station at Lincoln Boulevard which would be installed as a “bump-out,” extending northwardly approximately 23 feet from the boardwalk into the street’s dead-end. However, boardwalk residents living in the adjacent condominium complex were dissatisfied with the proposal and opposed construction. Their opposition culminated in the Article 78 litigation captioned Shapiro v. Torres__ A.D.3d __, Docket No. 2015-09420 (2d Dep’t 2017).

The condominium residents, as Plaintiffs-Petitioners, commenced a hybrid proceeding/action seeking review of the Council’s March 2015 determination and a judgment declaring construction of the comfort stations is a prohibited use of a public street, together with related injunctive relief. In their lawsuit, Petitioners-Plaintiffs alleged the Council violated the State Environmental Quality Review Act (SEQRA) and the Long Beach City Charter and that the comfort station at Lincoln Boulevard would interfere with their easement of light, air and access.

The Supreme Court, Nassau County, denied Plaintiffs-Petitioners’ motion for a preliminary injunction, effectively determined that the construction of the structure is not a prohibited use of a public street, denied the petition and dismissed the hybrid proceeding/action. On appeal, the Appellate Division affirmed and modified. In its decision, the Second Department analyzed two distinct issues: (1) whether the Petitioners-Plaintiffs had standing to proffer their SEQRA challenge and (2) whether the construction of the comfort station was a permissible use of Lincoln Boulevard.

With respect to SEQRA standing, the Second Department reasoned that the alleged environmental injuries were too “speculative and conjectural to demonstrate an actual and specific injury-in-fact.” The Petitioners-Plaintiffs failed to show an environmental injury different from that of the public at-large and that the alleged injury fell within the zone of interests protected by SEQRA. The Court noted “[c]lose proximity alone is insufficient to confer standing where there are no zoning issues involved, and general environmental concerns will not suffice.” Moreover, a party must also demonstrate it will suffer an injury that is environmental and not solely economic in nature.

With respect to the permissible use of Lincoln Boulevard, the Court treated this issue vis-à-vis Petitioners-Plaintiffs’ claims of an interference with their easement of light, air and access.   An owner of land abutting a highway or street has such an easement incident to ownership; however, when fee title of the roadway is transferred to the State, the State may use the roadway for any public purpose not inconsistent with or prejudicial to its use as a roadway. The mere disturbance of light, air and access to abutting owners by imposition of a new use consistent with roadway purposes must be tolerated and does not necessarily create a cause of action for interference with use and enjoyment of the premises.

At the Lincoln Boulevard site, the comfort station “bump-out” will not completely block Petitioners-Plaintiffs ocean view, will not prevent use of the public street, will not substantially affect the turn-around area in the dead-end and does not impact access to the condominium complex. The mere fact that the construction area is proximate to the Petitioners-Plaintiffs’ condominium complex does not signify that an easement of light, air and access creates a cause of action.

Accordingly, the Appellate Division affirmed the Supreme Court, with a minor modification to sufficiently address and resolve the declaratory judgment action.

Petitioners, residents and nearby occupants (“Petitioners”), commenced a hybrid Article 78 proceeding and declaratory judgment action against the Planning Board of the Village of Tuckahoe (“Board”) and others in Murphy v. Planning Board of Tuckahoe (Sup. Ct. Westchester County 2017), to annul a negative declaration issued by the Board. The Board initially issued a conditional negative declaration (“CND“) for a project to construct a hotel, restaurant and parking lot (“Project”) at a former marble quarry and dump site (“Site”). Petitioners filed suit after the Board amended its CND to a negative declaration.

The Site had been a quarry from the late 1800s until the 1930s, after which private entities and municipalities used the Site for dumping. In 2014, the project’s developer, Bilwin Development Affiliates, LLC (“Developer”), conducted environmental testing which revealed concentrations of volatile organic compounds, semi-volatile organic compounds and inorganic compounds at the Site. The Developer applied for admission into the New York State Brownfield Cleanup Program (“BCP”), which the New York State Department of Environmental Conservation (“DEC”) accepted. During plan preparation for the BCP, the Developer submitted an application to the Board for site plan approval for the Project; and the Board declared itself lead agency for SEQRA review.

In July 2015, after its review, the Board issued a draft conditional negative declaration (“CND”) with time for notice and comment. The Board ultimately adopted the CND in September 2015, categorizing the Project as an unlisted action with the condition that the Developer meet all DEC and Department of Health requirements.

Before and after issuance of the CND, the Developer – in conjunction with the DEC and the Board – performed additional Site investigations and prepared plans for remediation and containment. The final plans for the Project included remediation specifications for the contaminated soil, a community air monitoring plan and construction of a hotel and parking lot as a Site cap. The DEC determined that the remediation plan would eliminate or mitigate all significant threats to public health and the environment presented by contamination.

In October 2016, after a number of public meetings and comments, the Board amended the CND to a negative declaration based upon the DEC’s determination, the remediation plans and other documents in the record. This amendment occurred over a year after the issuance of the draft CND (July 2015). Petitioners sued to annul this decision claiming, among other things, that: (1) SEQRA regulations do not allow the amendment or rescission of a CND unless the lead agency later determines a positive declaration is appropriate; and, (2) the lead agency failed to take a “hard look” at evaluating the environmental impact of the methods to be used in removing contaminated soil and monitoring contaminants. Petitioners also challenged the issuance of the CND.

First, although SEQRA regulations require rescission of a negative declaration or CND if new substantive information or changes cause the lead agency to determine a significant adverse environmental impact may result, the regulations do not prohibit amendments to a CND that remove conditions. 6 NYCRR § 617.7(d)(2), (f)(1). Moreover, SEQRA regulations permit a lead agency, at its discretion, to amend a negative declaration (a CND is a type of negative declaration) at any time prior to the decision to approve an action. 6 NYCRR § 617.7(e). Therefore, the Board was allowed to amend or rescind the CND.

Second, with respect to excavating the contaminants, Petitioners argued that the proposed methods to remediate and monitor were unsafe. Notably, Petitioners did not argue that the proposed methods would have an adverse environmental impact. Petitioners cited their experts’ methods and opinions, which the Board already reviewed during the comment period. The Court held that, at best, Petitioners merely indicated a disagreement between Petitioners’ experts and the Board as to the preferred methods to remediate and monitor – which is not grounds to overturn the Board’s decision to issue the negative declaration.

Lastly, the Court held that Petitioners’ challenge to the underlying CND was untimely. The draft CND was published on July 21, 2015, the period of limitations began to run thirty (30) days later on August 20, 2015, and expired four (4) months later on December 20, 2015. Petitioners could not attack the underlying CND eleven (11) months past the period of limitations by virtue of seeking to annul a later amendment to that CND.

Based upon the foregoing, and other reasons, the Court dismissed these challenges.

In People Theatres of N.Y. Inc. v. City of New York, 2017 N.Y. Slip Op. 04385, various owners of adult businesses (“Plaintiffs”) brought separate actions against the City of New York (“City”) based upon First Amendment challenges seeking relief against zoning ordinances that bar adult establishments from operating in, among other areas, all residential districts and most commercial and manufacturing districts (“Ordinance“). The cases were consolidated; and after the trial court’s initial determination, the cases experienced a complex procedural history, having been appealed to the Court of Appeals twice over the course of fifteen (15) years.  A comprehensive discussion of this case and its lengthy history can be found in this extended blog post.

Here, the Ordinance at issue sought to combat negative secondary impacts relating to sexually focused businesses, which impacts were  demonstrated in a 1994 study conducted by the City.  Whether and how the Ordinance applied to particular adult businesses was the impetus for prior litigation in 1995.  In 1998, the City created the so-called 60/40 rule.  Under this rule, any commercial establishment with at least 40% of its customer-accessible floor/cellar area or stock-in-trade used for adult purposes qualified as an “adult establishment” covered by the Ordinance.  Plaintiffs modified their businesses to comply with the 60/40 rule.   The City, however, believed that while many operators were achieving “technical compliance” with the rule, their compliance was a sham. According to the City, the businesses still primarily focused on sexually explicit activities or materials; and their non-explicit materials were an afterthought that did not generate sales.  To shore up enforcement, the City amended the Ordinance in 2001 to effectively eliminate the 60/40 rule (“2001 Amendments”).

The main issue in this case was the relationship between (1) the standard that applies to First Amendment challenges in the context of ordinances affecting adult uses, and (2) the burden of proof a municipality must meet in order to sustain such ordinances. The Court held that “intermediate scrutiny” applies in this type of First Amendment adult use zoning context, which requires that an ordinance be narrowly tailored to the municipality’s justified purpose and assure reasonable alternative avenues of communication.  When applying intermediate scrutiny, a court must balance the interests at stake while assessing a municipality’s factual judgments.  The burden of proof relative to the municipality’s factual judgments is “modest” (no pun intended) and akin to substantial evidence, which is accorded more deference than that given to administrative agencies.

As such, the standard of review in this case is intermediate scrutiny, while the burden of proof is similar to substantial evidence.

The governing legal precedent is set forth in Los Angeles v. Alameda Books, Inc., 535 U.S. 425 (2002), wherein the Supreme Court set forth the three-part burden shifting test, which describes a municipality’s burden of proof to sustain its laws in the face of a First Amendment challenge.   First, the municipality must “fairly support” its rationale for the ordinance. Second, a challenger must cast direct doubt upon the rationale – either by (I) demonstrating the municipality’s evidence does not support the rationale, or (ii) furnishing evidence disputing the municipality’s factual findings. If the challenger cannot cast doubt, then the municipality wins. If the challenger is able to cast doubt, then the third step comes into play; and the burden shifts back to the municipality to supplement the record with evidence renewing support to justify the ordinance.

Here, after applying the Alameda three-prong test, the Court reversed the Appellate Division holding that  the lower court’s mechanical approach was improper and confused the ultimate standard of review (intermediate scrutiny) with the evidentiary burden (similar to substantial evidence) borne by the City. Because the third step of the Alameda analysis obliges a modest burden of proof akin to substantial evidence, it was an error for the lower courts to determine that the City failed to meet its burden.  In this instance, the City met its burden of showing continued focus on sexually explicit activities and materials by the Plaintiffs’ businesses – despite any 60/40 compliance. Therefore, the Appellate Division was reversed and the Ordinance was sustained.

The State liquor law preempts  local municipalities from restricting hours of operation for businesses selling alcoholic beverages for on-premises consumption.   Accordingly, local municipalities should use caution when imposing conditions upon establishments regulated by the State Liquor Authority and would be wise to consider alternative ways to manage late hours accompanied by public imbibing.

shutterstock_542466670In February 2017, the United States District Court for the Western District of New York issued a decision in Obsession Sports Bar & Grill, Inc. v. City of Rochester involving State law preemption of local laws limiting hours of operation for certain businesses such as bars and restaurants.  The federal Obsession case involved section 1983  claims following successful litigation in State Court. Although the federal Obsession case addressed constitutional claims only,  the decision casted stark attention upon the legal precedent set forth in the underlying State Court case, wherein the Fourth Department upheld the trial court’s holding that the State’s liquor laws preempted the City of Rochester (“City“) from restricting Obsession Sports Bar & Grill’s (“Obsession Sports Bar“) hours of operation.  Id.

In August 2011, Obsession Sports Bar obtained a liquor license from the State Liquor Authority authorizing the retail sale of alcoholic beverages for on-premises consumption of alcoholic beverages at its bar and grill.  Under the State Alcoholic Beverages Control Law (“ABC Law“), as amended by Monroe County local law, persons holding liquor licenses are permitted to sell alcohol, on-premises, Monday through Saturday from 8:00 a.m. until 2:00 a.m. and Sunday from 10:00 a.m. to 2:00 a.m.  In addition, these establishments may remain open an additional one-half hour to permit customers to consume their beverages, i.e. until 2:30 a.m.

Obsession Sports Bar’s business was located in the City’s C-1 zoning district, which permits small-scale commercial uses and restricts evening hours of operation for restaurants and bars to 11:00 p.m.  Although the City partially granted Obsession Sports Bar’s variance by permitting the establishment to remain open until 12:00 a.m. Monday through Thursday and until 2:00 a.m. on Friday and Saturday, the City’s local laws still forced Obsession Sports Bar to close several hours earlier than required by the ABC Law, as well as earlier than similar businesses located in neighboring zoning districts.

In November 2012, Obsession Sports Bar commenced a state court Article 78 proceeding against the City alleging that the ABC Law preempted the local ordinance vis-à-vis hours of operations.   The City argued  that the State law did not preempt the ordinance because the ordinance did not directly address the sale or consumption of alcoholic beverages.  The trial court found in favor of Obsession Sports Bar holding that the City’s local ordinance was an impermissible exercise of municipal zoning power and null and void in the face of the ABC Law’s conflicting and preemptive provisions.  The Fourth Department unanimously affirmed; and in 2014, leave to appeal to the Court of Appeals was denied.

Although Obsession Sports Bar may have prevailed in the State court with respect to the pre-emption question,  the federal court ultimately concluded that the City did not violate Obsession Sports Bar’s constitutional rights because Obsession Sports Bar did not show that the City’s actions were arbitrary, conscience-shocking or oppressive in the constitutional sense.  Despite this holding, the Court did note that the City may have been negligent. The Court opined that municipalities could and should consider alternative means to address the potential adverse effects of bars and restaurants that operate in the later evening hours.  To placate opposition to development, redevelopment and applications of the like, municipalities should consider alternative regulations, including but not limited to outdoor seating restrictions, light pollution, kitchen hour limitations and parking limits.

shutterstock_1842816On April 27, 2017, the Town Board of the Town of Brookhaven approved a change of zone for Rock Hill Golf and Country Club from a one-acre residential lot zone to the Golf Course District.  Manorville’s Rock Hill is the first private course to join the Town’s newly created Golf Course District.

The district is designed to protect and preserve Long Island’s golf courses amidst rapid redevelopment.  The open spaces, vistas, greenery and outdoor recreation have recently experienced a surge of transition into multi-family dwellings and housing complexes.  The new zone removes some of the allure for such transitions and provides golf course owners and operators with more tools to be successful, including added permitted uses and on-site functionality.

Rock Hill joins Mill Pond and Rolling Oaks in the Golf Course District.

This month, U.S.-based energy giant Invenergy expects to break ground on New York’s second largest solar farm project at the former Tallgrass golf course in Shoreham.  A leader in wind and solar development, energy storage and natural gas operations, Invenergy will add the Shoreham Solar Commons to its portfolio.

Tall Grass solar media pic
The Long Island Power Authority approved the solar array in 2016 and, in early 2017, the New York State Comptroller and Attorney General green-lit the project.  Last month, Invenergy finalized its acquisition of the Tallgrass property.  Invenergy awaits the Town of Brookhaven’s issuance of the building permit for the project.

The 150-acre array will generate 24.9 megawatts (50,000 megawatt hours per year) – enough to power approximately 4,500 homes – under a 20-year power-purchase agreement with LIPA.  Notably, the 24.9 megawatts comes in just under the 25 megawatt threshold that would have triggered a more extensive review process under New York’s Power Act of 2011 that was signed into law by Governor Cuomo on August 4, 2011 (codified in Article 10 of the New York Public Service Law).

Unlike many other solar farms proposed on Long Island and elsewhere, Shoreham Solar Commons will not require clearcutting trees.  Tallgrass was fittingly a “links style” golf course, a more traditional style course hosting open spaces, high grass and bunkers rather than trees and brush.  In addition, Invenergy has pledged to plant 2,000 evergreen trees to buffer the array.

Invenergy will employ upwards of 100 people during construction over the next year, but there are no plans for full-time jobs after the array is built.  The Commons will pay approximately $670,000 per year to its local taxing districts – almost ten times more than the taxes paid by Tallgrass.  The tax figure will increase prospectively.