by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
randolphp@umkc.edu

ZONING AND LAND USE; CONTRACT ZONING; ENFORCEABILITY: A change in zoning of a subdivision plot from a "business" to a "limited business" classification does not violate a development agreement between city and developer where agreement did not contain explicit language amounting to a "regulatory freeze" or agreement for permanent zoning and where new classification fell within the purposes of the subdivision master development plan. Sprenger, Grubb & Assoc. v. City of Hailey, 903 P.2d 741 (Idaho 1995).

The development agreement in question was twenty years old, and there was no question that the developer had fully performed. Also, the city had performed, in part by zoning a 12 acre parcel for business uses. Now the city, spurred by neighborhood opposition to development and led by an aggressive mayor, had elected to downzone that parcel. Developer challenged the city's action on a number of grounds. The court first questioned whether a development agreement could ever bind the city's police power, citing Idaho precedent.

In this case, however, the court concludes that merely agreeing to provide zoning consistent with the original plan does not prevent the city from making "adjustments" to the zoning that retain the integrity of the original scheme. Here, the court concludes, the changes do not really alter the original purpose of the business zoning that the city had originally provided as part of the development agreement. (Note that the developer alleged that the downzoning reduced its land value by $800,000.)

Perhaps the developer's strongest equitable argument was one of estoppel. It had paid substantial amounts to the city, donated substantial tracts of land, and otherwise invested in projects of general public benefit in working out the plan. The court acknowledged that "in exigent circumstances" an estoppel argument might be available even as applied to the police power, but concluded, based upon the reasoning set forth above, that the developer's reliance was not so confounded here as to justify a finding of exigent circumstances.

The court further held that an $800,000 reduction in land value caused by the down-zoning did not constitute an unconstitutional taking where the re-zoned property retained some residual value and opportunity for development; (2) there was no compensable loss of "investment backed expectations" where the land in question was still vacant and undeveloped; (3) the city zoning authority's action carried a presumption of validity, placing the initial burden of proving arbitrariness or unreasonableness on the developer (the burden in this case shifted back to the city when the developer provided some proof of unreasonableness).

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