Daily Development for Friday, May 5, 1999

 

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

 

 

 

 ZONING AND PLANNING; PRE-EXISTING NONCONFORMING USE; AMORTIZATION:  City's establishment of a two-year amortization period for a ready-mix concrete plant classified as a preexisting nonconforming use (i) is a legislative act afforded great deference by the court and requiring only a rational basis, (ii) is reasonable based on the City's consideration of the plant's useful life and other relevant factors, and (iii) did not violate the property owner's equal protection rights because the property owner did not show disparate treatment of similarly situated property owners. 

 

 AVR, Inc. v. City of St. Louis Park, 585 N.W.2d 411 (Minn. App. 1998).

 

 AVR, Inc. owned a ready-mix concrete plant in the City of St. Louis Park which was classified as a preexisting nonconforming use.  In 1980, the City adopted a new  comprehensive plan and notified AVR that it intended to "phase out" the plant and rezone the property  for less intrusive uses (note that the plant already did not conform to then existing zoning).  AVR obtained a judicial declaration that the City's plan to close down the plant was invalid because the plant was not a nuisance and the city could not "legislate it out of existence." 

 

 In 1990 the City adopted a another new  comprehensive plan phasing out heavy industrial uses, including concrete ready-mix plants, in the area where AVR's plant was located pursuant to an amortization period.  This time, instead of simply announcing that it would close the facility, the City adopted an ordinance requiring all nonconforming uses (defined as uses that were not lawful anywhere in the City) to register with the City, which then would establish amortization periods for the eradication of these uses.  AVR duly registered and the City, after an extensive hearing and fact-finding, established a two-year amortization period for AVR's facility. 

 

 At the conclusion of the amortization period, AVR was required to cease operation.  AVR brought another declaratory judgment  action against the City to invalidate the City's action.  The district court granted summary judgment to the City.  AVR appealed the district court's decision. The appellate court affirmed the court below, determining that  the adoption of the amortization ordinance was a legislative act which must be upheld unless it is proven that the act is unsupported by any rational basis related

 to promoting public heath, safety, morals or the general welfare.  The appellate court determined that AVR did not show that the adoption of the ordinance was unsupported by such a rational basis. 

 

 Further, the appellate court determined that because the ordinance reflected the City's consideration of the plant's useful life and other relevant factors, as required by the general ordinance, the district court did not err in upholding the two-year amortization period.  Finally because AVR did not show disparate treatment of similarly situated property owners, the appellate court found that that the district court did not err in concluding that the City did not violate AVR's equal protection rights.

 

 With regard to the critical issue of whether the two year period was appropriate, the court pointed out that the City relied upon an accounting analysis showing that the plant was fully depreciated for tax purposes, and had already returned a 560% return to its owners over the 23 years that AVR had owned the plant. These factors demonstrated, more or less, than that almost any amortization period would have been adequate, as the owners had recouped all that they deserved to recoup from their investment. 

 

  The court concluded out that it is not appropriate that the City should not be required to look to the replacement cost or market value of the use at that location, since reliance upon either of  these concepts would lead to contradictions with zoning policy.  Market value, of course, assumes that the nonconforming use can last forever, and this is not a useful when one is trying to determine the proper period for shutting it down.  Replacement cost suggests that the owner has a right to replace the components constituting the use, which the court stated is inaccurate.  A holder of a nonconforming use, it asserted, cannot simply repair and replace the use to accomplish perpetual nonconforming status.

 

 Note, in a possibly significant distinguishing comment, the court stated that AVR had not raised below any challenge to the termination of the use of the structure of the plant itself, as opposed to the use in general.  In this case, the structure was a special purpose structure, had no other use, and arguably had a longer useful life, or at least one that should be measure in other ways.  The court said that it was not considering this argument because not raised below. 

 

 Comment 1: As to this last point, how can it be that consideration of the amortization of the activities on the land did not necessarily take into account the fact that the structures had no use other than in conjunction with those activities?  Isn't this hair splitting that fails to progess the analysis?

 

 Comment 2:  Most of the amortization cases involve billboards, and zoning authorities have been slow to realize the potential of the very generous decisions upholding billboard "phase outs" in dealing with other undesired uses.  This case demonstrates that amortization is a potent weapon against what otherwise might be called "investment backed expectations."  Establish a relatively short amortization period, and the court will defer to your judgment and the takings problem, if there was one, simply goes away.

 

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