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2007-574-Minutes for Meeting May 15,2007 Recorded 6/1/2007DESCHUTES
NANCY
COUNTY CLERKOS CJ 1041'514
COMMISSIONERS' JOURNAL 0610112007 03;20;02 PM
111111111111111111111111111111111
2007-574
Do not remove this page from original document.
Deschutes County Clerk
Certificate Page
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statement, in accordance with ORS 205.244:
Re-recorded to correct [give reason]
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Deschutes County Board of Commissioners
1300 NW Wall St., Bend, OR 97701-1960
(541) 388-6570 - Fax (541) 385-3202 - www.deschutes.org
MINUTES OF BUSINESS MEETING
DESCHUTES COUNTY BOARD OF COMMISSIONERS
TUESDAY, MAY 15, 2007
Commissioners' Hearing Room - Administration Building - 1300 NW Wall St., Bend
Present were Commissioner Michael M. Daly, Dennis R. Luke and Tammy Baney.
Also present were Mark Pilliod and Laurie Craghead, Legal Counsel; Tom
Anderson and Anthony Raguine, Community Development Department; and seven
other citizens. No representatives of the media were in attendance.
Chair Michael M. Daly opened the meeting at 10:00 a.m.
Tom Anderson distributed the Measure 37 opening statement to members of the
audience.
1. Before the Board was Citizen Input.
None was offered.
2. Before the Board was a Hearing and Consideration of Signature of Order
No. 2007-104, a Measure 37 Claim (Claimant: Arney).
Tom Anderson stated that this claim relates to a single parcel, lot 3401, located
west of Redmond and north of Highway 126, near Buckhorn Road. (He
referred to an oversized map showing the location) The parcel is about 80
acres zoned EFU Lower Bridge subzone, with a surface area impact zone
overlay. The claimant would like to partition it for residences. Per a County lot
of record decision issued several years ago, this parcel and lot 3400 are
considered one legal lot. The effect of the claim would allow the partition of
this lot as described in the Order to allow it to be developed for a residence.
However, that issue will not be decided today.
Minutes of Board Business Meeting - Land Use Tuesday, May 15, 2007
Page 1 of 15 Pages
The amount of the claim is $122,500. In terms of ownership, the property was
acquired via a warranty deed on March 11, 1988, and was conveyed to a
revocable trust in 1996, which does not break the chain of ownership. The
claimant has owned it continuously since 1988. At that time is was zoned EFU
80, under PL-15 that was adopted in 1981. There has been one letter of protest
from Central Oregon Land Watch, with general comments about the County's
ability to hear theses claims; there is nothing unique from their previous letters
on other claims.
Commissioner Daly disclosed that he knows Mr. Arney quite well, and did
contracting work for him in the past.
Danielle Strome, representing the claimant, said she has nothing to add, as the
claim is fairly straightforward.
No other testimony was offered; the hearing was closed.
BANEY: Move signature.
LUKE: Second.
VOTE: BANEY:
LUKE:
DALY:
Yes.
Yes.
Chair votes yes.
3. Before the Board was a Hearing and Consideration of Signature of Order
No. 2007-105, a Measure 37 Claim (Claimant: Arney).
Mr. Anderson said this involves a single parcel located on Lower Bridge Way,
lot 400. It is north of the first claim, and consists of 134 acres zoned EFU-
Lower Bridge subzone, with a surface mining overlay.
The claimant would like to subdivide into three 80-acre parcels. The amount of
damage claimed is $335,000. The property was acquired originally as part of a
contract of sale in 1985; full title was obtained in 1990. It was also conveyed to
a revocable trust in 1986. In 1985, the property was zoned EFU-80 under PL-
15. For the record, it was approved last year for non-farm parcels, but nothing
has been done yet. If approved, the claimant would then have a choice. How
they relate would be something to be evaluated as part of a land use action.
One letter of protest was received from Central Oregon Land Watch.
Danielle Strome, representing the claimant, said she has nothing to add.
Minutes of Board Business Meeting - Land Use Tuesday, May 15, 2007
Page 2 of 15 Pages
No other testimony was offered, and the hearing was closed.
LUKE: Move signature.
BANEY: Second.
VOTE: BANEY:
LUKE:
DALY:
Yes.
Yes.
Chair votes yes.
4. Before the Board was a Hearing and Consideration of Signature of Order
No. 2007-106, a Measure 37 Claim (Claimant: Kirkpatrick/Salinas).
Mr. Anderson explained that this claim involves a single parcel, lot 800, located
on Quince Lane, northwest of Redmond outside the urban reserve area. It is ten
acres zoned EFU, Tumalo-Redmond-Bend subzone. The claimants wish to
partition it into two five-acre parcels. The amount of damage claimed is
$127,072.
Mr. Pilliod explained that the original staff report was based up on information
received that is somewhat sketchy regarding the ownership of the property. He
received a message from Gayle Kirkpatrick explaining a name change, and a
copy of a marriage certificate has been provided. Therefore, the staff report has
been changed to reflect the ownership of the property.
Mr. Anderson stated there was one letter received from a neighbor who took no
position on the claim itself, and does not have a bearing on the validity or a
decision regarding this claim.
Gayle Kirkpatrick appeared on behalf of his wife, Marlene Kirkpatrick
(Magdalena Salinas) and asked of he could have some time for his attorney to
review the revised document. He said he was unclear on one of the items in the
staff report. Mr. Pilliod replied that under recital #6, it should read "having
acquired an interest".
LUKE: Move correction.
BANEY: Second.
VOTE: BANEY: Yes.
LUKE: Yes.
DALY: Chair votes yes.
Minutes of Board Business Meeting - Land Use Tuesday, May 15, 2007
Page 3 of 15 Pages
Mr. Kirkpatrick explained there is a sign that indicates Quince Lane, and the
road access does serve several properties.
No other testimony was offered.
BANEY: Move continuance to Monday, May 21 at 10:00 a.m.
LUKE: Second.
VOTE: BANEY:
LUKE:
DALY:
Yes.
Yes.
Chair votes yes.
5. Before the Board was a Hearing and Consideration of Signature of Order
No. 2007-107, a Measure 37 Claim (Claimant: Briles).
Mr. Anderson explained that there are several Briles in title. The property is
located at 64225 Sisemore Road, lot 2000, northwest of Bend, at the south end
of Sisemore and the west end of Tumalo Reservoir Road. It consists of
approximately 59 acres zoned EFU, Tumalo-Redmond-Bend subzone with a
wildlife overlay. A correction needs to be to the staff report, as there is no
flood plain zoning on the property.
The claimant wishes to subdivide the land for residential purposes. The amount
of damage claimed is $6 million. The property was acquired by the claimants,
James, John and Jill Briles and Jennifer Loomis, from their parents, via bargain
and sale deed dated August 29, 1987. The parents had acquired the properties
via contract of sale in June 1973. The Order would show an acquisition date of
August 29, 1987. If compensation was involved, the date would be 1973. In
1987 the property was zoned EFU-20, with a twenty-acre minimum lot size, per
PL-15.
There were no letters of protest submitted.
Commissioner Baney noted that the request form shows 1988 and the County is
indicating 1987; she asked which one is accurate. Mr. Pilliod stated the bargain
and sale deed to the claimants is dated August 29, 1987, and he can't account
for the 1988 date. Commissioner Luke said the claimants might have just
guessed at a date until they obtained the documents. Mr. Pilliod stated that he
has to look at what the record shows and it makes more sense to use the correct
date than to go back later and perhaps have to amend the claim.
Minutes of Board Business Meeting - Land Use Tuesday, May 15, 2007
Page 4 of 15 Pages
LUKE: Move amendments as outlined in the revised staff report.
BANEY: Second.
VOTE: BANEY:
LUKE:
DALY:
Yes.
Yes.
Chair votes yes.
No other testimony was offered; the hearing was closed.
BANEY: Move signature, as amended.
LUKE: Second.
VOTE: BANEY:
LUKE:
DALY:
Yes.
Yes.
Chair votes yes.
6. Before the Board was a Hearing and Consideration of Signature of Order
No. 2007-108, a Measure 37 Claim (Claimant: Dimmick).
Mr. Anderson said the property is located at 50346 Darlene Way, lot 400, south
of the City of La Pine and north of the Klamath County border. It consists of
ten acres zoned F-2 with a wildlife overlay. The claimant wishes to place a
single family residence on the parcel. The amount of damage claimed is
$59,637. Ownership was acquired via deed by the claimant and his wife on
June 15, 1982, and they have owned it continuously since then.
Under PL-15 it was zoned F-2. Under the current zone, criteria must be met;
there needs to be a certain number of legal residences within a specific
proximity of the property. It would not meet this test at this time. Under the
old zoning it is likely a residence could have been sited.
There were no letters of protest received.
Mr. Pilliod said the Dimmicks are divorced but she has released her interest in
the property to Mr. Dimmick.
No other testimony was offered; the hearing was closed.
BANEY: Move signature.
LUKE: Second.
Minutes of Board Business Meeting - Land Use Tuesday, May 15, 2007
Page 5 of 15 Pages
VOTE: BANEY: Yes.
LUKE: Yes.
DALY: Chair votes yes.
7. Before the Board was a Hearing and Consideration of Signature of Order
No. 2007-083, a Measure 37 Claim - continued from April 30 (Claimant:
Johnson).
Mr. Anderson explained the Board heard this claim before. The property is ten
acres located northeast of Sisters, and the claimant wishes to partition it into
two five-acre parcels. The date of acquisition was established as December 109
1979 through a memorandum of contract. There have been discussions on
when PL-15 took effect. The original staff report state this occurred on
November 1, 1979, prior to the acquisition date. The claimant and attorney
question whether PL-15 was actually implemented at that time, since the vote of
the Commissioners on PL-15 was not unanimous.
Because the Board establishes the acquisition date and governing rules are a
part of the land use process that follows a Measure 37 decision, staff is deleting
its reference to the effective date of PL-15. This would be sorted out as part of
a Hearings Officer's land use decision. Both the claimant and the land use
applicant will have an opportunity to present their side of the issue. It would
not be appropriate for the Board to make a land use decision of this type at this
time.
The additional research and correspondence has been added to the record.
Bruce White, attorney for the claimant, and claimant Jim Johnson came before
the Board. Mr. White said he submitted an e-mail on April 30 with information
on PL-15; Mr. Anderson confirmed that it is in the record now. Mr. White
added that he feels it is up to the Board to decide when an Ordinance went into
effect, rather than the Hearings Officer. Commissioner Luke stated that he feels
this is more in the land use decision arena, and at this time the Board is merely
establishing an acquisition date for Measure 37 purposes.
Mr. Johnson said he was not able to find a receipt regarding the acquisition date
and has contacted relatives of the pervious owner in hopes of finding further
information.
Minutes of Board Business Meeting - Land Use Tuesday, May 15, 2007
Page 6 of 15 Pages
Mr. White stated that apparently staff will be taking a position in a land use
application and chooses not to comment at this time. The claimant believes he
acquired the contract right prior to December 10, 1979, and also feels the
Ordinance was not in effect until sometime after that date.
Mr. Pilliod said the statute allows the Board to reopen and consider material
from an earlier claim in most cases. It should not take a refiling or a new claim,
but could be reopened.
Commissioner Baney explained if the Ordinance went into affect at a later date,
the acquisition date won't matter that much. Mr. Pilliod said that if they do not
want to file a land use application, but try to find documentation instead, they
could request a continuance or allow a decision today, and request time later to
reopen it.
Mr. White explained that if it is possible to reopen the claim if additional
evidence is found, they are prepared to proceed on that basis.
Mr. Pilliod stated that the Board may, after giving notice, can reopen or modify
any claim.
No further testimony was offered, so the hearing was closed.
LUKE: Move signature.
BANEY: Second.
VOTE: BANEY: Yes.
LUKE: Yes.
DALY: Chair votes yes.
8. Before the Board was a Hearing and Consideration of Signature of Order
No. 2007-084, a Measure 37 Claim - continued from April 30 (Claimant:
Roberts).
Mr. Anderson stated that this involves a single parcel located off Wilt Road,
northeast of Sisters. The attorney for the claimant, Bruce White, requested
additional time to review letters just received. No changes or modifications to
the staff report or Order have been requested.
Minutes of Board Business Meeting - Land Use Tuesday, May 15, 2007
Page 7 of 15 Pages
Bruce White noted that he reviewed the e-mail received previously from Mr.
Rice, a neighbor. There was a concern that he said the claimants had not
considered the possibility of splitting the property. The ability to claim has
been considered; there would still be a loss in value even though a non-farm
dwelling is approved. The issue is not whether there is some specific amount of
return lost, just a loss in value.
Mr. White said he thought the record was left open just for his response. Mr.
Pilliod confirmed that the previous hearing had been closed to testimony and
was left open only for Mr. White's response.
BANEY: Move signature.
LUKE: Second.
VOTE: BANEY: Yes.
LUKE: Yes.
DALY: Chair votes yes.
9. Before the Board was a Hearing and Consideration of Signature of Order
No. 2007-109, a Measure 37 Claim (Claimant: Cyrus).
Mr. Pilliod stated that claim #M37-05-29, Order No. 2005-075, was submitted,
subject to a writ of review proceeding in Deschutes County Circuit Court. The
court case resulted in a general judgment and remanded the matter back to the
County for further proceedings.
He has discussed the issue with Ross Day, who represents the claimants, and a
letter confirms the conversation that they wish to withdraw and dismiss the
original claim files in 2005. In short, the claimants are having the County
process a more recently filed claim, from December 1, 2006. The case will be
evaluated on what was submitted then and not at all what was submitted in
2005.
Since the matter was noticed per today's hearing, the County received a letter
from Paul Lipscomb, and a letter dated May 11, 2007 from Central Oregon
Land Watch; these are a part of the record. Another letter from Paul Dewey
dated May 15 has been received. (A copy is attached.)
Minutes of Board Business Meeting - Land Use Tuesday, May 15, 2007
Page 8 of 15 Pages
Mr. Day advised the County that he cannot be present today. He also asked the
Board include in the record the final staff report and recommendation made by
the Oregon Department of Land Conservation and Development (DLCD)
relevant to claim #M12089, reports A, B and C. These are not discussed in any
respect in the staff report but do provide some background regarding the State's
view of the claim. (These are attached as part of Exhibit C)
Since the report was published last week, some corrections to the Order and staff
report are needed in regard to references to exhibits and a few other minor changes.
LUKE: Move amendments to the Order and staff report, as discussed.
BANEY: Second.
VOTE: BANEY: Yes.
LUKE: Yes.
DALY: Chair votes yes.
Tom Anderson referred to an oversized map of the area. He said there are ten
parcels involved in the claim. The map indicates the individual tax lots and
they are keyed to acquisition dates. Not all are contiguous, and they are on
separate sides of Highway 126, east of Sisters.
The total acreage is about 815. Zoning is a mix, but includes EFU Sisters-
Cloverdale subzone, MUA-10, and a small strip of flood plain zoning that
follows an irrigation canal. There is also a small portion zoned surface mining,
and some with landscape and surface mining overlays.
The claimants wish to develop the property into a mixed-use visitor-oriented
resort, with both high- and low-density residences, commercial, recreational
amenities, a sewage treatment plant, and so on. The amount of damage claimed
is $29,500,000.
Historical zoning is based on the acquisition dates, various deeds and
documents in the record. He said he won't go through each one, but the
documentation submitted ties back to the acquisition dates shown on the table.
These can be grouped to show what the zoning was for each group at that time.
Parcels 19 2 and 7 were acquired earliest, when there was no County zoning, so
the use would not be limited. Parcels 4, 5, 6, 89 9 and 10 had zoning in place,
PL-2 for a rural subdivision, or PL-5, an A-1 designation with a five-acre
minimum. Specific subdivision rules would apply for this group. Parcel 3 had
a later acquisition date of 1984, and would be governed by PL-15, with EFU-20
zoning.
Minutes of Board Business Meeting - Land Use Tuesday, May 15, 2007
Page 9 of 15 Pages
Mr. Pilliod explained that based on the material received this morning from Mr.
Dewey, it appears he wants to draw the Board's attention to other State land use
limitations regarding the development of farmland. There is some relevance to
this, as PL-5 contains a provision that incorporated non-specific provisions of
State law that were more restrictive. However, the letter does not explain in
what way the earlier references to Goal 3 are more restrictive than PL-5.
The report references statutes adopted in 1975 that PL-5 would have included
by statute and which would more severely restrict the use of property at that
time than PL-5 did. It is not necessary for the County to determine to what
extent it would have limited development. The letter received from Ross Day
says that he fells the County's destination resort overlay was placed on the
property in 1987, and by some further action was later removed from the
property, but doesn't offer any explanation. Mr. Pilliod said he did a quick
search but was unable to verify this information at this time. Code provisions
for destination resorts provide some direction on how the mapping would be
determined, but it is not clear how Mr. Day arrived at this conclusion.
There is also a copy of an e-mail from Matthias Pearl of Newton Consultants
with information relating to the amount of water that would be consumed by
various types of uses, including homes, restaurants, recreation facilities, a hotel,
and so on. This offers a broad estimate as to the cost of obtaining surface water
rights to supply the volume and water pressure needed. Presumably this is
meant to address the question of the feasibility of a large resort.
Commissioner Luke noted that this is all very useful information, but their task
at this time is just to decide when interest in the properties was acquired.
Mr. Pilliod said that the court case criticized or found fault with the Board's
decision previously relating to a waiver being granted without evidence that the
project could be built and is technically feasible. It was indicated that this
feasibility evidence should have been submitted with an appraisal. The Board
and the County amended the procedures Ordinance and Code provision, making
the demonstration of feasibility a matter to be considered as part of an
application for development. It doesn't mean it is irrelevant if it can't
demonstrate a reduction in value.
Commissioner Baney asked about what she though were some discrepancies on
page 3 of the staff report. Mr. Pilliod clarified the references in the footnotes.
Chair Daly opened the hearing at this time.
Minutes of Board Business Meeting - Land Use Tuesday, May 15, 2007
Page 10 of 15 Pages
Matt Cyrus testified that he was not able to review the staff report or Order, but
said that there appear to be some discrepancies in some of the dates, and he may
need to provide additional documents to staff.
Keith Cyrus stated that he is not in a big hurry. He added that parcels 1 and 2
were purchased in 1959.
Mr. Pilliod stated that legislation was adopted last week, and the claim can be
continued for up to a year.
After a brief discussion, it was decided that the issue be continued to the June
18 Board meeting.
LUKE: Move continuance to June 18, 2007.
BANEY: Second.
VOTE: BANEY:
LUKE:
DALY:
Yes.
Yes.
Chair votes yes.
10. Before the Board was Consideration of First and Second Reading and
Adoption of Ordinance No. 2007-013 and Ordinance No. 2007-014,
Amending County Code and Zoning Map to Change a Property's Plan
Designation from Surface Mining to Rural Residential Exception
Area/Multiple Use Agricultural.
Anthony Raguine gave a brief overview of the Ordinances. He said there is a
change needed to Exhibit A, correcting a typographical error in the footer.
LUKE: Move correction.
BANEY: Second.
VOTE: BANEY:
LUKE:
DALY:
Yes.
Yes.
Chair votes yes.
Commissioner Luke asked if the property has been reclaimed. Mr. Raguine
replied there are two letters from DOGAMI in the record indicating the
reclamation has been completed.
Minutes of Board Business Meeting - Land Use Tuesday, May 15, 2007
Page 11 of 15 Pages
Commissioner Luke stated that in the past the Board has been informed of
issues when the Hearings Officer has approved them and the Board is required
to approve them or can call them up. He would like to be informed of these in
the future so the Commissioners might have a chance to call up the Ordinance if
appropriate.
LUKE: Move first and second readings, by title only, of Ordinance 2007-
013, as amended.
BANEY: Second.
VOTE: BANEY:
LUKE:
DALY:
Yes.
Yes.
Chair votes yes.
Chair Daly conducted the first and second readings of the Ordinance, by title
only.
LUKE: Move adoption.
BANEY: Second.
VOTE: BANEY: Yes.
LUKE: Yes.
DALY: Chair votes yes.
LUKE: Move first and second readings, by title only, of Ordinance 2007-
014, as amended.
BANEY: Second.
VOTE: BANEY:
LUKE:
DALY:
Yes.
Yes.
Chair votes yes.
Chair Daly conducted the first and second readings of the Ordinance, by title
only.
LUKE: Move adoption.
BANEY: Second.
VOTE: BANEY: Yes.
LUKE: Yes.
DALY: Chair votes yes.
Minutes of Board Business Meeting - Land Use Tuesday, May 15, 2007
Page 12 of 15 Pages
11. Approval of an Economic Development Grant Request:
• Central Oregon Senior Pro Rodeo Association- $1,000 each from
Commissioners Daly and Baney; $500 from Commissioner Luke
BANEY: Move approval.
LUKE: Second.
VOTE: BANEY: Yes.
LUKE: Yes.
DALY: Chair votes yes.
12. Approval of Minutes of Board Meetings:
• Business Meeting: May 9
• Work Sessions: May 7, May 9
BANEY: Move approval.
LUKE: Second.
VOTE: BANEY: Yes.
LUKE: Yes.
DALY: Chair votes yes.
CONVENED AS THE GOVERNING BODY OF THE 9-1-1 COUNTY
SERVICE DISTRICT
13. Before the Board was Consideration of Approval of Weekly Accounts
Payable Vouchers for the 9-1-1 County Service District in the Amount of
$4,101.27.
BANEY: Move approval, subject to review.
LUKE: Second.
VOTE: BANEY:
LUKE:
DALY:
Yes.
Yes.
Chair votes yes.
Minutes of Board Business Meeting - Land Use Tuesday, May 15, 2007
Page 13 of 15 Pages
CONVENE AS THE GOVERNING BODY OF THE EXTENSION/4-11
COUNTY SERVICE DISTRICT
14. Before the Board was Consideration of Approval of Weekly Accounts Payable
Vouchers for the Extension/4-H County Service District in the Amount of
$1,124.95.
LUKE: Move approval, subject to review.
BANEY: Second.
VOTE: BANEY:
LUKE:
DALY:
Yes.
Yes.
Chair votes yes.
RECONVENE AS THE DESCHUTES COUNTY BOARD OF
COMMISSIONERS
15. Before the Board was Consideration of Approval of Weekly Accounts
Payable Vouchers for Deschutes County in the Amount of $1,818,762.26.
BANEY: Move approval, subject to review.
LUKE: Second.
VOTE: BANEY: Yes.
LUKE: Yes.
DALY: Chair votes yes.
16. ADDITIONS TO THE AGENDA
17. Before the Board were Additions to the Agenda.
Commissioner Luke asked about the process to be followed regarding the
Newberry Caldera/Paulina case. Mr. Pilliod explained that the County would
be served with a writ of review to appear in court regarding the Board's
decision. The County would file the record and furnish the minutes, audio, etc.
within about thirty days. He added that he is not sure if the U.S. Forest Service
will intervene. The case would then be under advisement by Circuit Court, and
could be remanded or appealed.
Minutes of Board Business Meeting - Land Use Tuesday, May 15, 2007
Page 14 of 15 Pages
There are two issues important to the Board; these are insufficient evidence to
support a conclusion, or an error in how the Board interpreted the law. It seems
that in view of the Board's decision, they should have filed an action for
damages under Measure 37. The route they took is must quicker and relates
primarily to mergers.
Mr. Pilliod said that he was informed last week that the Circuit Court in Jackson
County decided a similar case regarding a corporate merger. The property
changed hands in the 1980's. The Court found that the surviving date was the
date of the merger, not the date the predecessor company acquired the property.
With this interpretation, LPP Resources would have acquired an interest in
1988, not in 1969 when La Pine Pumice acquired a lease option.
Being no further items to come before the Board, Chair Daly adjourned the
meeting at 11: 55 a. m.
DATED this 15th Day of May 2007 for the Deschutes County Board of
Commissioners.
ATTEST:
Recording Secretary
Attachments
Exhibit A: Agenda
Exhibit B: Backup documents relating to the Kirkpatrick claim
Exhibit C: Backup documents relating to the Cyrus claim
Minutes of Board Business Meeting - Land Use Tuesday, May 15, 2007
Page 15 of 15 Pages
7. A HEARING and Consideration of Signature of Order No. 2007-083, a
Measure 37 Claim - continued from April 30 (Claimant: Johnson) - Tom
Anderson, Community Development; Mark Pilliod, Legal Counsel
8. A HEARING and Consideration of Signature of Order No. 2007-084, a
Measure 37 Claim - continued from April 30 (Claimant: Roberts) - Tom
Anderson, Community Development; Mark Pilliod, Legal Counsel
9. A HEARING and Consideration of Signature of Order No. 2007-109, a
Measure 37 Claim (Claimant: Cyrus) - Tom Anderson, Community
Development; Mark Pilliod, Legal Counsel
10. CONSIDERATION of Second Reading and Adoption of Ordinance No.
2007-013 and Ordinance No. 2007-014, Amending County Code and Zoning
Map to Change a Property's Plan Designation from Surface Mining to Rural
Residential Exception Area/Multiple Use Agricultural - Anthony Raguine,
Community Development
11. Approval of an Economic Development Grant Request:
Central Oregon Senior Pro Rodeo Association - $1,000 each from
Commissioners Daly and Baney
12. Approval of Minutes of Board Meetings:
Business Meeting: May 9
Work Sessions: May 7, May 9
CONVENE AS THE GOVERNING BODY OF THE 9-1-1 COUNTY
SERVICE DISTRICT
13. CONSIDERATION of Approval of Weekly Accounts Payable Vouchers for
the 9-1-1 County Service District
CONVENE AS THE GOVERNING BODY OF THE EXTENSION/4-11
COUNTY SERVICE DISTRICT
14. CONSIDERATION of Approval of Weekly Accounts Payable Vouchers for the
Extension/4-H County Service District
Board of Commissioners' Business Meeting Agenda Tuesday, May 15, 2007
Page 2 of 6 Pages
RECONVENE AS THE DESCHUTES COUNTY BOARD OF
COMMISSIONERS
15. CONSIDERATION of Approval of Weekly Accounts Payable Vouchers for
Deschutes County
16. ADDITIONS TO THE AGENDA
Deschutes County meeting locations are wheelchair accessible.
Deschutes County provides reasonable accommodations for persons with disabilities.
For deaf, hearing impaired or speech disabled, dial 7-1-1 to access the state transfer relay service for TTY.
Please call (541) 388-6571 regarding alternative formats or for further information.
FUTURE MEETINGS:
(Please note: Meeting dates and times are subject to change. All meetings take place in the Board of
Commissioners' meeting rooms at 1300 NW Wall St., Bend, unless otherwise indicated. If you have questions
regarding a meeting, please call 388-6572)
Tuesday, May 15, 2007
2:45 p.m. Executive Session, called under ORS 192.660(2)(a) - Hiring of Personnel
Wednesday, May 16, 2007
1:30 p.m. Administrative Work Session - could include executive session(s)
Thursday, May 17, 2007
7:00 a.m. Regular Meeting with the Redmond City Council, Redmond Council Chambers
9:00 a.m. Executive Session, called under ORS 192.660(2)(a) - Hiring of Personnel
Monday, May 21, 2007
10:00 a.m. Board Land Use Meeting
1:00 P.M. Budget Meetings
Board of Commissioners' Business Meeting Agenda Tuesday, May 15, 2007
Page 3 of 6 Pages
Tuesday, May 22, 2007
7:30 a.m. Legislative Update Conference Call
1:00 P.M. Budget Meetings
Wednesday, May 23, 2007
10:00 a.m. Board of Commissioners' Meeting
1:00 P.M. Budget Meetings
Thursday, May 24, 2007
1:00 P.M. Budget Meetings
Friday, May 25, 2007
1:00 P.M. Budget Meetings
Monday, May 28, 2007
Most County offices will be closed to observe the Memorial Day Holiday.
Wednesday, May 30, 2007
10:00 a.m. Board of Commissioners' Meeting
1:30 p.m. Administrative Work Session - could include executive session(s)
Monday, June 4, 2007
10:00 a.m. Board Land Use Meeting
1:30 p.m. Administrative Work Session - could include executive session(s)
3:30 p.m. Regular Meeting of LPSCC (Local Public Safety Coordinating Council)
Tuesday, June 5, 2007
7:30 a.m. Legislative Update Conference Call
Wednesday, June 6, 2007
10:00 a.m. Board of Commissioners' Meeting
1:30 p.m. Administrative Work Session - could include executive session(s)
Board of Commissioners' Business Meeting Agenda Tuesday, May 15, 2007
Page 4 of 6 Pages
Thursday, June 7, 2007
10:00 a.m. District Attorney Update
11:00 a.m. Community Development Department Update
1:30 p.m. Road Department Update
Wednesday, June 13, 2007
10:00 a.m. Youth Challenge Graduation Ceremony - Fairgrounds
1:30 p.m. Administrative Work Session - could include executive session(s)
Thursday, June 14, 2007
1:00 P.M. Mental Health Department Update
2:00 p.m. Health Department Update
Monday, June 18, 2007
10:00 a.m. Measure 37 Hearings
12:00 noon Regular Meeting with Department Heads
1:30 p.m. Administrative Work Session - could include executive session(s)
Tuesday, June 19, 2007
7:30 a.m. Legislative Update Conference Call
10:00 a.m. Regular Meeting of the Employee Benefits Advisory Committee
Wednesday, June 20, 2007
10:00 a.m. Board of Commissioners' Meeting
1:30 p.m. Administrative Work Session - could include executive session(s)
Thursday, June 21, 2007
7:00 a.m. Meeting with Bend Chamber of Commerce - Legislative Policy Council
9:00 a.m. Juvenile Community Justice Department Update
10:00 a.m. Parole & Probation Department Update
Board of Commissioners' Business Meeting Agenda Tuesday, May 15, 2007
Page 5 of 6 Pages
Monday, June 25, 2007
10:00 a.m. Board Land Use Meeting
1:30 p.m. Administrative Work Session - could include executive session(s)
Wednesday, June 27, 2007
10:00 a.m. Board of Commissioners' Meeting
1:30 p.m. Administrative Work Session - could include executive session(s)
Thursday, June 28, 2007
9:00 a.m. Fair & Expo Department Update
11:00 a.m. Commission on Children & Families' Department Update
Monday, June 25, 2007
10:00 a.m. Board of Commissioners' Meeting for the Week
1:30 p.m. Administrative Work Session - could include executive session(s)
Wednesday 4, 2007
Most County offices will be closed to observe Independence Day.
Thursday, July 5, 2007
8:00 a.m. Regular Meeting with the Sisters City Council, Sisters City Hall
Wednesday, July 11, 2007
10:00 a.m. Board of Commissioners' Meeting
1:30 p.m. Administrative Work Session - could include executive session(s)
Thursday 12, 2007
7:00 a.m. Regular Meeting with the Redmond City Council, Redmond Council Chambers
12:00 noon Regular Meeting of Audit Committee
Board of Commissioners' Business Meeting Agenda Tuesday, May 15, 2007
Page 6 of 6 Pages
May I 4, 2 C07
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05/15/2007 08:25 5036396891 OREGONIANS IN ACTION PAGE 02/04
May 15, 2007
>ria Facsimile and Electronic Mail
Descute County Board of Commissioners
c/o Mark Pilliod
Deschutes County Counsel
1300 NW Wall Street, Suite 200
Bend, OR 97701
RE: Deschutes County Board of Commissioners Order No. 2007-107
'To the Deschutes County Board of County Commissioners:
This letter is in regards to the above-referenced matter and is offered as additional evidence in
support of my clients Keith and Conida Oxus' pending demand for compensation made pursuant
to ORS 197.352.
As an initial matter, I have attached to this letter calculations made by Newton Consultants, Inc.
regarding the estimate water usage for the use proposed by my clients on their property.
Second, I wish to address the comments offered by Mr. Lipscomb regarding the use proposed by
my clients. Throughout the demand for compensation, my clients refer to the use they desire to
put their property to as a "Destination Resort". Mr. Lipscomb correctly points out that
"Destination Resort" was not a use permitted by Oregon statute or by the Deschutes County
Code.
Equally true, however, is that a "Destination Resort' use was not prohibited by Oregon law or by
the Deschutes County Code. Put another way, the type, density, and character of development
nay clients wish to pursue on their property was permitted at the time my clients acquired all but
one of their properties. Although such a use may not have been labeled a "Destination Resort",
the use was nevertheless permitted.
Mr. Lipscomb then goes on to say in his comments that Measure 37 claimants should not be
allowed to "advantage themselves by selectively choosing which of the new provisions they will
seek to enjoy, and which they will seek to avoid." Not surprisingly, however, Mr. Lipscomb fails
to point to any statutory authority to support his claim.
Mailing Address: P. D. Box .230637 • Tigard, OR 97281-0637
Street Address: 8255 S. W. Hunziker Road, Suite 200 1 Tigard, OR 97223
rsna► xnn_n2sR • FAX(Sf).3) 63 9 6891 iWebsite: www.oia.orz
L e e a l C e n t e r
05/15/2007 08:25 5036396891 OREGONIANS IN ACTION PAGE 03/04
Letter to Deschutes Courtly Board of Commissioners
Order No. 2007-107 - Keitb and Conida Cyrus
May 15, 2007
Page 2
Instead, I would direct the Board to the text of Measure 37. Quite simply, subsection (1) of ORS
197.352 entitled a property owner to compensation if the local government enacts or enforces a
regulation that has the effect of reducing the fair market value of the claimant's property.
In 1987,1 believe, a Destination Resort Overlay was placed upon my clients' property. clients'
Subsequently, the overlay zone was removed from my clients' property, taking away my
ability to develop a Destination Resort on their property. It is the County's removal of the
Destination Resort Overlay zone from my clients' property that triggers my clients rights under
ORS 197.352, because removing that overlay zone reduced the fair market value of my clients'
property, as evidenced by the affidavit of Keith Cyrus.
Quite clearly, Measure 37 applies to my clients' claim, despite the unsupportable legal
conclusions of Mr. Lipscomb. I can also represent to t~ Board
to apply in tl~legislatire history of
Measure 37 demonstrates the voters intended
Thank you for taking the time to consider my clients' claim. We look forward to working with
the County and our neighbors as we move forward on this project.
very truly yours,
6~oss Day, sq.
Of Attorneys f and Connie Cyrus
Attachment(s)
cc: Client (First Class Mail Only)
05/15/2007 08:25 5036396891 OREGONIANS IN ACTION PAGE 04/04
Ron Myers
From:
Mathias Perle [mperle@newtonconsultants.com]
Sent;
Thursday, November 09, 2006 5:40 PM
To:
'Matt Cyrus'; 'David Newton'
Subject:
RE: Resort water needs
Hi Matt,
Below are our basic assumptions on water demand estimates and corresponding rates with
some minor changes:
Homes (at 70% occupancy)= 392 ac-ft at 0.54 cfs
- Restaurants = to ac-ft at 0.03 cfs
Recreational Facilities - 39 ac-ft at 0.08 cfs
Hotel = 50 ac-ft at 0.22 cfs
These'total 491 ac-ft for 0.87 cfs
irrigation of 1000 lots assuming 50% of 1/2 acre lots irrigated
- Home irrigation = 750 ac-ft at 3.125 cfs
open Space Irrigation with 250 and 500 acres irrigated options:
- 250 acres = 150 ac-ft at 3,125 cfs
- 500 acres - 1,500 ac-ft at 6.25 cfs
If you add all this together, you are looking at a total volume In the range of 1,991 to
2,741 ac-ft on an annual basis. Thi3 would correspond to rates from 7.12 cfs to 10.25
cfs.
Based on an average consumptive use of 40% applied to quasi-municipal permits, this would
make the mitigation obligation 796-1096 acre-ft. This mitigation obligation could
therefore be satisfied by purchasing 442-609
acres of surface water rights. The OWRD awards 1.S.mitigation credits (1
acre-foot = 1 mitigation credit) per acre of irrigation water right.
Surface water right acres can be purchased for mitigation purposes for prices ranging from
$1,500 to $2,000 per acre. Ball park estimates for 442 acres of mitigation could be
$663,000-$884,000 and *913,50Q-$1,218,000 for
609 acres of mitigation.
Hopes this helps. Let us know if we can provide anything else or answer any other
questions.
Mathias
Mathias Pex•le
Hydrologic / Engineering Technician
Newton Consultants, Inc.
541-504-9960 Ext. 233
Fax: 541-504-9961
mperle@newtonconsultants.com
-----Original Message------
From: Matt Cyrus [mailto:matt@aspenlakes.com)
Sent: Friday, November 03, 2006 8:42 PM
To: Mathias Perle
Subject: Re: Resort water needs
1
Paul D. Dewey Attorney at Law
1539 NW Vicksburg
Bend, Oregon 97701
(541) 317-1993
fax (541) 383-3470
pdeweygbendcable.com
May 15, 2007
Deschutes County Commissioners
1300 NW Wall Street
Bend, OR 97701
Re: Deschutes County Measure 37 Claim No. M3706162
Dear Commissioners:
This letter on behalf of Central Oregon LandWatch is in opposition to this Measure 37 claim for
a destination resort and is to supplement earlier comments already provided on behalf of
LandWatch. Members of LandWatch live near the claimants' property and on Jordan Road and
will be negatively impacted by increased traffic and noise in the area, as well as by diminished
views and disruption of wildlife. We also incorporate by reference comments submitted by Paul
Lipscomb.
The State Legislature in 1961 and 1963 adopted legislation governing zoning of farm use areas.
This legislation required that land within such farm use zones "shall be used exclusively for farm
use, except as provided in [ORS 215.213]." ORS 215.203 (1963 and 1971). The first
designation of farm use areas occurred with farm tax deferrals dating at least back to the 1960s.
The first time non-farm dwellings were allowed was in 1973. Or Laws 1973, ch 503 § 4.
Accordingly, state law at least restricted non-farm dwellings in farm zones adopted after 1963.
Additionally, the interim Goal 3 was to "conserve prime farm lands for the production of crops."
See, for example, ORS 215.515 (1973 ed.). The claimants here have presented inadequate
evidence to substantiate a claim where they have failed to clearly identify prime farm land and
non-prime farm land. No information has been provided establishing whether or to what extent
the claimants' desired division and development of that portion of the property comply with the
interim planning goals and the applicable provisions of ORS 215 for exclusive farm use zones.
For the prime farm land portions of the property, the claim does not establish that the approval of
the proposed lots or parcels complies with the interim planning goals. In fact, the desired
development of the prime farm land would not "conserve prime farm lands for the production of
crops" as required by the interim goals.
Furthermore, ORS 215.213(1)(e) and ORS 215.213(3) authorized farm dwellings only if they are
determined to be "customarily provided in conjunction with farm use" and authorized a non-farm
dwelling only where the dwelling is compatible with farm uses. No information has been
provided showing that the claim complies with either the Goal 3 standard or standards for new
parcels under ORS 215.263, or ORS 215.213.
? May 15, 2007
Page 2
Finally, the claimants have clearly requested approval of a destination resort which the County
Staff Report appropriately recommends against. Where the claimants have not requested
anything else, it is not appropriate for the County to make up or create a new requested use.
Likewise, it is not appropriate for the County to be substituting tax lot 100 of 15-10-13 for the
claimants' specified tax lot 100 of 15-10-12. It is confusing enough when claimants repeatedly
and belatedly change their claims, without the County itself initiating amendments. The
claimants' Measure 37 claim should be denied.
Very truly yours,
PAUL DEWEY
PD:ao
cc: Client
A46-33 Century Dr. S.
Salem, OR 97302
January 29, 2007
Deschutes County
Community Development Department
117 NW Lafayette
Bend, OR 97701
Att: Kevin Harrison, Planning Director
Re: M37-06-162: Measure 37 Claim of Cyrus Family Dated December 1, 2006
Dear Mr. Harrison:
I am an adjacent property owner who may be adversely affected by the above claim. I
have several preliminary concerns about this claim which I wish to bring to your attention
at this time.
First, this is actually the second Measure 37 claim made by the Cyrus family with respect
to these same parcels. Their first claim on these parcels, M37-05-29, is still currently
pending on a Writ of Review before the Deschutes County Circuit Court. I do not
believe that there is any authorization under either Measure 37 itself or under the
applicable provisions of the Deschutes County Code for the maintenance of two separate
Measure 37 claims with respect to the very same properties at the very same time.
Second, the Cyrus Measure 37 claim referenced above now seeks to establish a
Destination Resort on the several parcels included in the present claim. However, at the
various times these several parcels were first acquired by the Cyrus family, a Destination
Resort was not then a permitted use, nor is it now permitted as a matter of right. Measure
37 relief is therefore impermissible as requested.
Third, no particular ordinances or other land use regulations are indentified by claimants
as the offending regulations restricting their present use of the property, as is required by
law.
Fourth, recent state and county land use changes to allow Destination Resorts in certain
locations under stringent conditions include many restrictions on such developments to
avoid or at least mitigate adverse impacts on adjacent land uses. Claimants offer no
rationale as to why they should be permitted to enjoy the benefits of these recent changes
without complying with the conditions imposed to protect their neighbors. Nothing in
Measure 37 allows claimants to advantage themselves by selectively choosing which of
the new provisions they will seek to enjoy, and which they will seek to avoid. If that
were to be the case, each time a new regulatory balance was struck in the future, all
current and future existing landowners could take advantage of any and all beneficial new
provisions, while avoiding the more restrictive tradeoffs and balances. Under that
scenario, no new progressive regulations would ever be passed, even those designed to
promote development, because no controls on their implementation could ever be
effective.
Fifth, State regulations did not permit Destination Resorts at the time each of the subject
parcels were first acquired. County land use ordinances are subject to any and all more
restrictive state statutes, and, in fact, the Deschutes County Code incorporates those more
restrictive provisions by reference.
Please be further advised that I would like to attend any public hearing held on this
application, and in the meantime I would also like to obtain copies of any staff reports
issued with respect to this claim. Thank you for your attention to these matters.
S' ,
N.
e
Pau ' scomb
cc. Ross Day
Mark Pilliod
Thomas Tankersley
RECEIVn
JAN 3 1 2007
OESC:HUTES COUNTY CL
0 RE 11 NPN
I I N S
L e g a 1 C e n t e r May 9, 2007
Via Facsimile and First Class Mail
Mark Pilliod
Deschutes County Counsel
1300 NW Wall Street, Suite 200
Bend, OR 97701
RE: Cyrus Deschutes County Measure 37 Claim No. M370529
Deschutes County Board of Commissioners Order No. 2005-075
Dear Mark,
This letter is in regards to the above-referenced matter. The purpose of this letter is to confirm
our previous telephone conversation wherein I notified you that my clients, Keith and Connie
Cyrus, hereby dismiss the above-referenced demand for compensation made pursuant to ORS
197.352. Mr. and Mrs. Cyrus do not wish the County to take further action on their Measure 37
claim that is subject of the Remand Order from the Deschutes County Circuit Court dated April
10, 2007.
Thank you in advance for your professional courtesies and assistance. If you have any questions
please do not hesitate to call.
Very truly yours,
Ross Day, Esq.
Of Attorneys for Keith and Connie Cyrus
cc: Client (First Class Mail Only)
Mailing Address: P.O. Box 230637 Tigard, OR 97281-0637
Street Address: 8255 S. W. Hunziker Road, Suite 200 a Tigard, OR 97223
(503) 620-0258 -FAX (503) 639-6891 • website: www. oia. org
05/08/2007 14:59 5036396891 OREGONIANS IN ACTION PAGE 02/02
LMAI*%*
C e n t e r
May 8, 2007
Via Facsimile and First Class Mail
Mark Pilliod
Deschutes County Counsel
1300 NW Wall Street, Suite 200
Bend, OR 97701
RE: Cyrus Deschutes County Measure 37,Claim No. M3706162
Dear Mark,
This letter is in regards to the above-referenced matter. The purpose of this letter is to confirm
our previous telephone conversation wherein l notified you that my clients, Keith and Connie
Cyrus, hereby dismiss the above-referenced demand for compensation made pursuant to ORS
197,352. Mr. and Mrs. Cyrus do not wish the County to take furtber action on their Measure 37
claim that is subject of the Remand Order from the Deschutes County Circuit Court dated April
10, 2007.
Thank you in advance for your professional courtesies and assistance. If you have any questions
please do not hesitate to call.
Verv.xours.
Ross Day, E
Of Attorneys erth and Connie Cyrus
cc: Client (First Class Mail Only)
Mailing Address: P.O. Box 230637 , Tigard, OR 97281-0637
Street Address: 8255 S. W. Hunziker,Road, Suite 200 4 Tigard, OR 97223
(503) 620-0258 a FAX (503) 639-6891 i Website: www.oia.org
L e g a 1
CENTRAL OREGON LANDWATCH
'rotecting Central Oregon's natural environment
ind working for sustainable communities.
May 11, 2007
Deschutes County Commissioners
1300 NW Wall Street
Bend, Oregon 97701
Re: Deschutes County Measure 37 Claim M37-06-162 (Cyrus)
Dear Commissioners:
1629 NW FRESNO AVE
BEND, OR 97701
PHONE: (541) 550-7968 x
FAX: (541) 383-3470
ReeflVED
MAUI 11 2007 z4
DELIVERED BY:
Pursuant to DCC 14.10.070 and OAR 125-145-0080, I am writing on behalf of Central Oregon
LandWatcht and its members to urge the Board to reject the Measure 37 claim filed by O. Keith Cyrus
(hereinafter "Claimant"). This claim seeks $29.5 million or the right to subdivide and develop 815 acres
in the County's EFU zones into even smaller lots according to rules in effect in the early 70's and late
60's.
This Measure 37 claim should be rejected for several reasons, including:
1. This is an incomplete application where it fails provide evidence of a threshold requirement for a
Measure 37 claim: that there was a reduction in fair market value due to land use regulations.
2. The claimant has not proven that he could develop his property as sought in this Measure 37 claim
under statutes and regulations in effect as of that date.
3. There is no jurisdiction to hear this claim (for compensation or waiver) under Measure 37 for
regulations which are exempt from Measure 37 as "[r]estricting or prohibiting activities for the
protection of public health and safety."
4. This is not a valid claim under Measure 37 where it involves subdividing property rather than a "use"
under Measure 37. Measure 37 is clear in providing relief only for a "use" of property, not for
partitioning or subdividing property.
5. The claimant is not entitled to a blanket waiver in lieu of compensation. Any waiver to which he
could be entitled is limited to the extent of any reduction in value.
1 Central Oregon LandWatch is a conservation organization whose members live in, or spend a substantial amount of
time in and around Central Oregon, specifically Deschutes and Jefferson Counties. Generally they are concerned
about the orderly and responsible development of the region so that the area remains attractive tourists and current
residents and hence maintains the economic base and property values of the last several years. As residents they are
also concerned about the adverse impacts to wildlife, water and air quality, and tax increases that could result from
inappropriate development related to Measure 37 claims.
LANDWATCH. PAGE 2 OF 7
6. The County does not have the jurisdiction or authority to waive state statutes or Oregon
Administrative Rules.
7. Any relief under this claim is not transferable as Measure 37 restricts any waiver of regulations to the
"owner" of the property.
THIS IS AN INCOMPLETE APPLICATION.
This is an incomplete application where it fails to provide evidence of a threshold requirement for a
Measure 37 claim: that there was a reduction in fair market value due to land use regulations. The
evidence submitted with the claim does not meet the requirements and standards of Measure 37, the
provisions of the Deschutes County Code, or the basic standard of "substantial evidence" on which any
decision by a government must be based.
A government cannot make a decision under Measure 37 to "compensate" or "waive" without having
sufficient facts on which to make a decision. Even if a government is known to lack funds to pay off
most Measure 37 claims, it still needs to know what exactly the tradeoff is before making a decision to
compensate or waive and to be able to determine the extent of that waiver.
NO REDUCTION IN VALUE HAS BEEN SHOWN.
The claimant must prove a reduction in value under ORS 197.352(1) and (2) in order to qualify for relief
under Measure 37 and the County must make findings based on substantial evidence on that issue.
Otherwise, a Measure 37 claim is a non-starter. The County should not reach the decision of whether to
pay compensation or grant a waiver of regulations until after there has been a determination of whether
or not there is a reduction in value to substantiate a Measure 37 claim.
Merely showing that there is a potential income from a preferred, but prohibited use of the property is
not the same as showing that there has been a reduction in the fair market value of the property. A
Measure 37 claim for "just compensation" is defined by Section 2 as "equal to a reduction in the fair
market value of the affected property interest resulting from enactment... of the land use regulation." A
reduction is a diminution from a price that the property once had. The fair market value is the price that
willing, well-informed buyers and sellers would agree upon. It includes the present value of any
speculative future income, but is not equal to all potential future income precisely because that income is
speculative. It may not happen, the market may change, or there may be unforeseen costs. See Andrew
J. Plantinga, Measuring Compensation Under Measure 37: An Economists Perspective 6-11 (2004), available at
http://arec.oregonstate.edu/faculty2/measure37.pdf, (explaining how the market value - purchase price
- of a property contains both the potential income stream and the speculation value at the outset.)
Fortunately, Measure 37 does not require the computation of future income streams. Rather it requires a
demonstration that there has been a reduction in the fair market value. It is retrospective, and asks
whether the property once had a market value that was reduced by the enactment of a land use
regulation. That is why compensation is equal to the difference between the fair market value of the
property before the land use regulation was enacted and the fair market value after the land use
regulation was enacted. That truly measures any loss due to the regulation.
*"Mw~
CENTRAL OREGON LANDWATCH
1629 NW FRESNO AVE. BEND, OR 97701
PHONE (541) 550-7968 FAx (541) 383-3470
LANDWATCH, PAGE 3 OF 7
What the prospective method of measuring valuation fails to take into consideration is what the Supreme
Court has called the "average reciprocity of advantage".2 While each person is burdened somewhat by
land use restriction, each person is also benefited by their neighbors compliance with land use
restrictions. After all, the first three rules of real estate are location, location, location. Land use laws
help create that location-value, and ensure that it will remain. If land use regulations are written well, all
the properties will increase in value more than they would have if no regulations were put in place. If
one property is released from land use laws while all surrounding property remain restricted that one
land owner reaps all the benefit of the location value created by their neighbors, but in turn is able to
decrease that location-value for those neighbors.
This effect is most pronounced in rural areas where the location-value is primarily a result of the
surrounding open space. When one land-owner develops they take advantage of the open space created
by their neighbor's inability to develop. Their neighbors however have their open-space location-value
degraded without accruing any personal benefit.
The rigorous economic analysis of this concept is most coherently explained by William K. Jaeger's
article "The Effects of Land-Use Regulations on Property Values," 36 ENVTL. L. 105,118 (2006) (attached). In
that article Jaeger calls the increase a single property would see the "individual exemption value".
He further breaks down the value of the individual exemption into two elements: The Amenity Value
and the Monopoly Value. The Amenity Value is the value of the open space. The Monopoly Value is
the value of the fact that only one land owner may develop, thus creating a scarce commodity - housing
in the middle of a region that is largely open space.
The article concludes:
"[T]here is no basis for using the value of an individual exemption as a proxy for, or
even an indication of, the reduction in value caused by the enactment of a land-use
regulation."
The article further explains at page 105 the distinction between what the claimant has attempted to prove
and what would truly be a Measure 37 reduction in value due to a regulation:
"In the context of laws like Oregon's Measure 37, requiring that landowners be
compensated if regulations reduce property values, the economic effects of land use
regulations on property values have been widely misinterpreted because two very
different economic concepts are being confused and used interchangeably. The first
concept is `the effect of a land use regulation on property values' which measures the
change in value when a regulation is added to many parcels. The second concept is `the
2 Pengohania Coal Co. P. Mahon, 260 U.S. 393, 415 (1922) Qustice Holmes first articulates the concept behind land use
zoning as the "average reciprocity of advantage"); Penn Central Transportation Co. P. Cit~ofNew York, 438 U.S. 104
(1978) Qustice Brennan spoke of the "rough reciprocity of benefit" and asked if the state must compensate a property
owner for loss of value due to a state regulation, should property owners be given a "bill," or be forced to compensate
the public when state regulations increase the value of their property?); Ke;stone Bituminous CoalAss'n P. De Benedicts, 480
U.S. 470,491 (1987) (Noting that "[w]hile each of us is burdened somewhat by such restrictions, we in turn benefit
greatly by the restrictions that are placed on others").
*_Aftw
CENTRAL OREGON LANDWATCH
1 629 NW FRESNO AVE. BEND, OR 97701
PHONE (541) 550-7968 FAx (541) 383-3470
LANDWATCH, PAGE 4 OF 7
effect of an individual exemption, or variance, to an existing land use regulation,' which
measures the change in value when a regulation is removed from only one parcel.
The effect of a land-use regulation on property values can be positive or negative,
whereas removing a land-use regulation from one property can be expected to have a
positive effect. Indeed, many land-use regulations actually increase property values by
creating positive `amenity effects' and `scarcity effects.' As a result of these differences, a
positive estimate for removing a land-use regulation cannot be interpreted as proof that
the other concept was negative."
The whole premise for a Measure 37 claim is that land use regulations restricting use of
property caused a reduction in value of the property. The focus, then, for determining
any reduction in value is the comparison of the property value before and after the
enactment of the regulations.
Deschutes County Code specifically and appropriately requires evidence of the "before and after"
calculation. DCC 14.10.060 states that:
B. The evidence of the reduction in fair market value shall be limited to the difference
in the fair market value of the property before and after the application of the non-
exempt County land use regulation(s). The evidence shall distinguish the effect or
damage that may result to the property based upon laws or regulations that are
exempt regulations or are not County regulations.
DCC 14.10.060. In short this text requires two important elements
First, it requires historical evidence of the value of the property before the regulation took effect, and
evidence of the value of the property after the regulation took effect. If the "after value" is lower than
the before value, the difference is a qualified reduction in value.
Second, the Code requires a claimant to provide the County with an analysis of the reduction in value
that is actually due to the County's regulations as distinguished from the state regulations, or from non-
exempt regulations. This reasonable request should enable the County to actually weigh its options
because it would allow the county to understand exactly what its liability is prior to making a decision.
Here, the only evidence of a reduction in value provided is an unsupported assertion by the
claimant that the value would increase if he were allowed to develop this property under the
laws in effect 30 years ago.
Hence, there is no evidence that this property has suffered a reduction in value at all. Further, it appears
that the increase in value anticipated by an individual exemption is largely premised on the rural quality
of the surrounding lands. In other words, this claim is specifically taking advantage of the location-value
created by surrounding land use laws. To the extent that any potential future increase in value can be
attributed to the existence of land use laws there simply is no rational basis on which to say land use laws
have created a reduction in fair market value.
As a result, the evidence submitted does not meet the basic requirements of "substantial evidence" on
which a finding may be made that there has been a reduction in value. Without a reduction in value,
Measure 37 simply does not apply, and this claim is invalid.
*Afta_~
CENTRAL OREGON LANDWATCH
1629 NW FRESNO AVE. BEND, OR 97701
PHONE (541) 550-7968 FAx (541) 383-3470
LANDWATCH, PAGE 5 OF 7
ANY CLAIM OF WAIVER IS LIMITED TO REGULATIONS IN EFFECT WHEN THE PRESENT
OWNER ACQUIRED THE PROPERTY, WHICH IS DIFFERENT FOR MOST OF THE PARCELS.
The and deeds submitted by the claimant show that this property has been acquired in a series of
transactions. Apparently some of the deeds record a transfer as late as 1994. No waiver may be granted
for any parcel back to a date prior to when the claimant acquired the property.
THERE IS NO EVIDENCE IN THE RECORD SHOWING THAT THE CLAIMANT COULD DO WHAT
HE WISHES TO DO UNDER REGULATIONS AS OFTHE DATE THE CLAIMANT ACQUIRED THE
PROPERTY.
The claimants land is currently zoned EFU. Oregon law has has restrictons on the subdivision and
development of farmland since 1963. The claimant has not shown that the proposed use was legal at the
time of acquisition. There is no evidence in the record as to what the claimants land was zoned when it
was acquired. For this reason alone this claim should be rejected as incomplete until such information is
furnished.
THERE IS NO EVIDENCE THAT THE PROPOSED DEVELOPMENT IS FEASIBLE UNDER EXISTING
EXEMPT REGULATIONS.
Measure 37 does not apply to land use regulations "[r]estricting or prohibiting activities for the
protection of public health and safety." ORS 197.352(3)(B). Public health and safety regulations that
could substantially reduce the scope of this proposed development would include septic regulations and
road access.
Although development costs have been summarized, there is no evidence in the record that the claimant
has considered infrastructure limitations or health and safety regulations that will continue to apply.
Additionally, there is no public sewer and the only water source is a well on the property. There is no
evidence to suggest that the addition of potentially hundreds of septic systems will not impact the quality
of the well water.
Additionally, besides noting that there is access to an existing road, the claimant has provided no
information about the capacity of the existing roads, or whether they are designed, or could be improved
to carry the additional trips generated by hundreds of new homes.
Even under an erroneous prospective measurement of valuation, no claimant can assert a failure to
increase in value based on the potential value of an infeasible project.
SUBDIVISION IS NOT A "USE" UNDER MEASURE 37.
This Measure 37 claim seeks the ability to partition or subdivide the subject property into smaller parcels
than are currently allowed under the land division ordinances. The problem with this claim is that land
division ordinances are not a restriction on "use" of property under Measure 37 that may be waived.
ORS 197.352(8) allows a governing body to waive a land use regulation to allow the owner to use the
property for a use that was permitted at the time the owner acquired the property.
A "use" of land is the employment of land for a particular purpose (such as residential, commercial, farm
or forest). The Oregon Court of Appeals has recognized that platted but undeveloped land is not
*-maw
CENTRAL OREGON LANDWATCH
1629 NW FRESNO AVE. BEND, OR 97701
PHONE (541) 550-7968 FAx (541) 383-3470
LANDWATCH, PAGE 6 OF 7
regarded as a "use" in zoning law.3 Likewise, the process of subdividing land would not be a "use" of
land. Partitioning and subdividing property adjusts lines on a map. Such exercises are not a "use" of
land subject to ORS 197.352. The distinction between the "use" of land and the "division" of land is
found throughout ORS 215.
Further, the request to subdivide and sell the subsequent parcels without building on the lots is
effectively a request to transfer the claimants waiver of laws to subsequent owners. Purchasers of a sub-
sized acre lot within the EFU zone would not have the right to build on it because they would take the
property subject to all existing land use laws. The Attorney General of the State of Oregon has stated
that "if the current owner of the real property conveys the property before a new use allowed by the
public entity is established, then the entitlement to relief is lost." It is not clear that there is a market for
unbuildable lots.
THE CLAIMANT IS NOT ENTITLED TO A WAIVER IN EXCESS OF THE COMPENSATION DUE.
As an alternative to the County providing compensation, the claimant proposes that he receive a waiver
to do a proposed development. Measure 37 does not allow such a blanket waiver that would result in a
windfall to the claimant far exceeding any actual reduction in value caused by the land use regulations.
Measure 37 is premised on "compensating" for any loss in value. Accordingly, any remedy - whether
compensation or waiver - must be tied to that loss in value.
Any waiver beyond compensation for that loss is a violation of simple justice and the equal protection of
the laws. Once the reduction in value is made up for, the State no longer has a rational basis on which to
grant additional relief from land use regulations to one party more than to any other. Additional waiver
of laws would constitute a violation of Equal Protection under the U.S. Constitution, and the Equal
Privileges and Immunities section of the Oregon Constitution.
Just because a county cannot afford to pay compensation does not mean that the claimant is entitled to a
waiver of regulations that potentially would allow him to make many times the amount of his actual loss
in value, especially when that increase in value is at the direct expense of the claimant's neighbors.
THE COUNTY LACKS AUTHORITY TO WAIVE STATE LAW.
Measure 37 is clear on its face that it allows a government to waive only "regulations." It does not
provide for waiver of "statutes." Further, to the extent the County attempts to waive regulations
implementing the state statutes, such a waiver under Measure 37 would be unconstitutional as an
inappropriate delegation of legislative authority.
MEASURE 37 RESTRICTS ANY WAIVER OF REGULATIONS TO "THE OWNER" OF THE
PROPERTY.
If a government grants a waiver under ORS 197.352, such waiver is limited to "the owner" and "use the
property for a use permitted at the time the owner acquired the property." ORS 197.352(8).
Accordingly, the regulatory relief authorized by the statute as an alternative to compensation is personal
only to the owner. Any approval must be conditioned upon termination and extinction of the use upon
transfer of ownership.
3 Parks v Tillamook County, 11 Or App 177 (1972).
*)"W
CENTRAL OREGON LANDWATCH
1629 NW FRESNO AVE. BEND, OR 97701
PHONE (541) 550-7968 FAx (541) 383-3470
LANDWATCH, PAGE 7 OF 7
CONCLUSION.
Thank you for this opportunity to comment. Please inform me in writing of any further opportunities to
comment and any decisions you make on this matter.
Very truly yours,
MM~ `
Pam Hardy
Staff Attorney
Central Oregon LandWatch
cc: LandWatch Board
Attachments:
1. William K. Jaeger, The Effects ofLand-Use Regulations on Property Values, 36 ENVTL. L.
105, 117 (2006). (Explaining the distinction between a bona fide reduction in value, and the potential
increase that might be expected from an individual exemption because of scarcity and amenity
effects.)
2. Andrew J. Plantinga, Measuring Compensation Under Measure 37: An Economist's
Perspective (2004), available at http://arec.oregonstate.edu/faculty2/measure37.pdf, (explaining how
the market value - purchase price -of a property contains both the potential income stream and the
speculation value at the outset.)
*Aftw
CENTRAL OREGON LANDWATCH
1629 NW FRESNO AVE. BEND, OR 97701
PHONE (541) 550-7968 FAx (541) 383-3470
THE EFFECTS OF LAND-USE REGULATIONS ON PROPERTY
VALUES
BY
WILLIAM K. JAEGER*
Land-use regulations can affect property values in a variety of
complex ways In the context of laws like Oregon's Measure 37,
requiring that landowners be compensated if regulations reduce
properly values, the economic effects of land use regulations on
properly values have been widely misinterpreted because two very
different economic concepts are being confused and used
interchangeably. The first concept is "the effect of a land use regulation
on properly values" which measures the change in value when a
regulation is added to many parcels. The second concept is "the effect
of an individual exemption, or variance, to an existing land use
regulation," which measures the change in value when a regulation is
removed from only one parcel.
The effect of a land-use regulation on property values can be
positive or negative, whereas removing a land-use regulation from one
property can be expected to have a positive effect. Indeed, many land-
use regulations actually increase property values by creating positive
"amenity effects"and "scarcity effects "Asa result of these differences,
a positive estimate for removing a land-use regulation cannot be
interpreted as proof that the other concept was negative. Despite this, a
positive value for an individual exemption to a land-use regulation
continues to be interpreted as proof that compensation is due under
Oregon's Measure 37 Indeed, this mistaken interpretation may be
partlyresponsible forpubllc sentiment that land-use regulations tend to
reduce property values
1. INfRODUCTION 106
H. SCARCITY EFFECTS OF LAND-USE REGULATIONS 108
III. AMENm EFFECTS OF LAND-USE REGULATIONS 112
IV. EMPIRICAL EVIDENCE OF SCARCITY AND AMENITY EFFECTS 115
V. D iE VALUE OF AN INDIVIDUAL EXEMPTION FROM LAND-USE REGULATIONS 118
VL DYNAMIC INTERACTIONS 122
© William K. Jaeger, 2006. Associate Professor of Agricultural and Resource Economics,
Oregon State University, Corvallis, Oregon. Comments on an earlier draft from Emery Castle,
Greg Perry, Andrew Plantinga, and Rob Zako are gratefully acknowledged. However, the author
alone is responsible for the paper's contents.
[105]
106 ENVIRONMENTAL LA W [Vol. 36:105
VII. WHEN LAND-USE REGULATIONS REDUCE PROPERTY VALUES 124
VIII. SUMMARY AND CONCLUSIONS 126
IX. APPENDIX: POTENTIAL MARKET EFFECTS OF LAND-USE REGULATIONS 127
1. INTRODUCTION
Land-use regulations can affect the market value of property in a variety
of ways. Although some of the effects may be straightforward, in most cases
they are complex and can easily be misunderstood or misinterpreted. In
particular, it has been assumed that land-use regulations invariably reduce
property values when, in fact, they often have positive effects.
The positive effect of a land-use regulation on property values can
occur two ways. One way is an "amenity effect"-when land-use regulations
protect, enhance, or create amenities or services that benefit property
owners. Perhaps the most transparent example of this is the property tax:
many communities use property taxes to finance public services like police
and fire protection, public schools, and infrastructure such as roads and
utilities. These public services help these communities prosper, and make
them an attractive place to live, which in turn raises property values.'
Similar kinds of positive amenity effects arise with other kinds of land-
use regulations such as regulations to protect environmental amenities, open
space and farmland, or to control objectionable conditions such as noise,
congestion, and pollution.' Like a property tax, these land-use regulations
impose costs or restrictions on landowners' actions, but they also generate
beneficial effects. Indeed, the motivation behind most land-use regulations is
to protect or enhance amenities that contribute to a community's health,
safety, and welfare.
The other way that land-use regulations can increase land values is
through their "scarcity effects."' By increasing the scarcity of land available
for a particular use in a particular location, the prices for those lands are bid
up in the market. For example, a limit on the land available for development
in one location is likely to increase the price of developed and developable
lands. These effects can be very large, and they can have spillover effects on
land prices in other locations.
Since the cause-and-effect connection between a land-use regulation in
one location and heightened demand for lands in other locations is indirect,
it is unlikely to be apparent to most landowners. What landowners will
I See GORDON C. WORK, LIFE, LBERTY AND PROPERTY 85-86 (1990) (discussing the argument
that services provided by property taxes increase the value of the real estate to which they are
applied).
2 See Village of Euclid, Ohio v. Ambler Realty Co., 272 U.S. 365, 388 (1926) (justifying the
classic use of zoning police power by stating, "[tjhere is no serious difference of opinion in
respect of the validity of laws and regulations fixing the height of buildings within reasonable
limits, the character of materials and methods of construction, and the adjoining area which
must be left open, in order to minimize the danger of fire or collapse, the evils of over-crowding,
and the like, and excluding from residential sections offensive trades, industries and structures
likely to create nuisances").
3 See WORK, supra note 1, at 92-93 (discussing the effect of large-lot residential zoning on
housing scarcity and housing costs).
20061 EFFECTS ONLAND PRICES 107
recognize, however, is the value of an individual exemption. The value of an
individual exemption is defited here as the increase in value for an
individual property, currently subject to a binding land-use regulation that
would occur if it were given an exemption or waiver to the regulation. If a
land-use regulation constrains landowners from actions or uses that would
increase their land's value, then it follows that an exemption to that
regulation will increase the property's value. Evidence that an individual
exemption would increase a property's value has been widely interpreted as
evidence-or even proof-that the land-use regulation had reduced the
property's value in the fast place. This is erroneous, however. Indeed, an
exemption to a binding land-use regulation can be expected to increase a
property's value even in cases where the regulation has raised property
values.
The purpose of this paper is to examine the direct and indirect ways
that land-use regulations can, and do, increase property values as a result of
their amenity and scarcity effects. A second purpose of the paper is to
clearly distinguish between two very different economic concepts: the effect
of a land-use regulation on property values, and the value of an individual
exemption to a land-use regulation. It will be shown that the latter concept
can be expected to be positive whether the former concept is positive or
negative.
These issues are important in the legal debates at the national level
involving takings cases, and they are highly relevant to Oregon's Measure 37,
passed by voters in November 2004.4 Measure 37 requires that when a land-
use regulation "has the effect of reducing the fair market value of the
property," then either a payment must be made to landowners equal to the
reduction in the fair market value, or a waiver must be granted from the
regulation.5 Determining whether land-use regulations have had positive or
negative effects on land values is, of course, a central question in this
context. These same issues have arisen in the context of many federal
regulatory takings cases.' And, while U.S. courts have long recognized that
landowners frequently benefit from land-use regulations because of their
"mutual reciprocity of advantage,"7 other assessments, such as a 1999
Congressional Budget Office report, have failed to recognize or acknowledge
the potential positive amenity and scarcity effects.'
4 Ballot Measure 37 (Or. 2004), available at http://www.sos.state.or.us/elections/nov22004/
guidelmeas/m37_text.html.
5 Id § (1)-(2), (8)•
6 See GEORGE SKOURAS, TAKINGS LAw AND THE SUPREME COURT: JUDICIAL OVERSIGHT OF THE
REGULATORY STATE'S ACQUISITION, USE, AND CONTROL OF PRIVATE PROPERTY 35 (1998) (rioting
that, in the seminal Supreme Court case Village of Euclid, Ohio v Ambler Realty Co., 272 U.S.
365 (1926), land values were reduced from $10,000 per acre to $2,500 per acre as result of the
Village of Euclid using its residential zoning district to preclude Ambler's desire to develop the
land for industrial purposes).
7 See, e.g., Euclid, 272 U.S. at 394-95 (giving an example where apartment houses should
be excluded from a single-family residential district so as to not "utterly destroy[]" the
desirability of that district).
8 CONGRESSIONAL BUDGET OFFICE, REGULATORY TAKINGS AND PROPOSALS FOR CHANGE (Dec.
1998), available at http://www.ebo.gov/ftpdoes/lOxx/docIO51/taldngs.pdf. For a criticism of the
CBO paper, see C. Ford Runge, The Congressional Budget Office's Regulatory Takings and
108 ENVIRONMENTAL LA W [Vol. 36:105
As Oregon's state and local governments respond to claims under
Measure 37, the way they interpret these relationships could have a
profound effect on how governments respond to claims, and how costly
those responses are to the publics In Oregon's case, the second concept, the
value of an individual exemption, has commonly been interpreted as being
identical to, or a proxy for, the first concept.
In the next two sections of the paper, the two ways in which land-use
regulations may affect property values are discussed, starting with the
scarcity effects in Part II, followed by the amenity effects in Part III. Part IV
presents empirical evidence that land-use regulations often raise property
values. The distinction between the value ofan individual exemption and the
effect of land-use regulations on properly values is elaborated upon in Part
V. Part VI discusses the dynamic and interconnected interactions between
land-use regulations and other private and public actions. Part VII describes
the kinds of circumstances in which land-use regulations can lower property
values. Concluding comments are presented in part VIII.
II. SCARCITY EFFECTS OF LAND-USE REGULATIONS
The purpose of this section is to describe the scarcity effects of land-
use regulations by presenting a simple framework for thinking about how
land markets adjust to land-use regulations-a framework that can be
applied to different kinds of regulations for a range of market conditions. A
standard approach in economics for evaluating the effect on market prices
of a policy change is to consider the market outcome with the change, and to
compare it to the hypothetical alternative: what would have happened
without the policy change. This "with versus without" method considers the
changes in supply and demand, and evaluates how those changes affect
prices in one or several markets.
In the case of land-use regulations, the "with versus without" approach
will require an analysis beyond the standard methods of property appraisal
because appraisal methods are not designed or intended to estimate the
scarcity effects caused by these kinds of market shifts. Appraisers rely on
observed market transactions involving similar or "comparable" properties,
making adjustments for characteristics of the property that have been
observed to increase or decrease the value of a property compared to
average characteristics in the area (e.g., larger acreage, smaller house, view,
etc.). But these methods implicitly assume that a property identical to other
properties that sold for a price X will also be worth X, no matter how many
such properties were to be put on the market.
To clearly see how land-use regulations may affect market prices,
consider a situation where a land-use regulation limits the kind of use
allowed on specified lands. As a result of this, the supply of land available
for the "allowed use" is likely to remain higher than it otherwise would have
Proposals for Change: One-Sided and LTninfortned, ENvTL. L. AND PRAC., Fall 1999, at 5.
9 For additional discussion of the way compensation is defined in Measure 37, see ANDREW
PLANTINGA, MEASURING COMPENSATION UNDER MEASURE 37: AN ECONOMIST'S PERSPECTIVE (Dec.
9, 2004), available athttpJ/aree.oregonstate.edu/faculty2/measure37.pdL
2006] EFFECTS ONLAND PRICES 109
been without the regulation, and the supply of land available for the
"disallowed use" is likely to be lower than it otherwise would have been
without the regulation. With these supply shifts, land prices for one land use
may rise following the enactment of the regulation, and land prices for
alternative land uses may decline following the regulation's introduction.
These market adjustments will give rise to a price differential, or
wedge, between the land prices in the two land markets-one that will equal
the negative price adjustment in one market plus the positive change in the
other market. An example of these kinds of changes in land prices that might
occur over time is illustrated in Figure 1. The effect of the land-use
regulation on regulated lands is the decline in the solid line after the
regulation takes effect; the differential, or wedge, between the prices for the
regulated and unregulated lands is much larger than the reduction in price
for the regulated lands (in this particular example), so that looking only at
this wedge, or differential, could easily be misinterpreted (see appendix for a
more detailed analysis of the market shifts involved).
Price per acre (in "real" or inflation-
adjusted dollars)
Figure 1. Illustrating price changes with land-use regulations.
Given the possibility of a price effect for both regulated and
unregulated land due to the land-use regulation, it would be presumptuous
to attribute the entire price differential between the two markets to a
reduction in property values for the regulated lands. To use an analogy, if
you tie your boat to a coastal pier and then, after a period of hours, notice
that the level of the boat is now below the level of the pier, you are unlikely
to ask: Did the pier move up or did the boat move down? You will
immediately understand that piers don't move up, but that an outgoing tide
could have easily caused the boat to fall.
By contrast, in the case of a price difference between two different land
markets, the answer to the analogous question is not obvious at all, even
though we may instinctively jump to one conclusion. Does the observed
Time line: Regulation takes effect Today
110 ENVIRONMENTAL LA W [Vol. 36:105
price differential measure the price increase for the one land use, or does it
measure the price decrease for the other land use? In order to answer this
question, we need a way to measure and separate the effect of the regulation
on land prices in at least one of these markets in order to distinguish it from
the total price difference or the price effect in the other land market.
Depending on the specific market conditions, the total price differential
between the two markets may be mostly, or entirely, attributable to price
adjustments in one of the two markets, or it may be divided between the
two. Alternatively, of course, we can look only at the changes in the price of
the affected land from before and after the introduction of the land-use
regulation. This approach would avoid some of the ambiguity created when
looking at the value of lands not subject to the land-use regulation, but it
may not avoid the problem of other factors, related or unrelated to the land-
use regulation, that may affect land values over a given period of time.
Indeed, the effect of a land-use regulation on property values will
extend beyond a given, narrowly-defined location or vicinity where
equivalent parcels are "perfect substitutes." When the supply of land in one
market is reduced relative to demand, the scarcity effects not only drive up
prices in that market, but they also cause potential buyers to look at
"imperfect substitutes" (for example, lots in other locations). The pent-up
demand resulting from the land-use regulation will shift demand from one
market or location to another market or location, which in turn may drive up
prices in those markets. If these secondary markets are not subject to the
same land-use regulation, then prices will rise in them. If the secondary
market is subject to the land-use regulation, then landowners will view this
pent-up demand as an opportunity for financial gain that is being blocked by
the land-use regulation.
Consider a city surrounded on all sides by farmlands, and where land-
use regulations such as exclusive farm use (EFU) or urban growth
boundary-type (UGB) restrictions have prohibited development of
properties outside the boundary as depicted in Figure 2. Suppose that in the
absence of the regulation, residential development would have spread only
in areas labeled A, B, C, and D (lying to the north and east of the city center),
but not to the south, west, or more distant zones (parcels in areas labeled E
through L).
With the land-use regulation in effect, however, there is pent-up
demand for developable lots, since development in areas A-D is not
permitted. This unmet demand will extend beyond areas A-D, and may
manifest itself in offers for lots in any or all of the other labeled areas. In the
absence of available parcels to the north and east of the city, developers'
pent-up demand spills over into areas that they would not have been
interested in were it not for the scarcity effects of the land-use regulation. As
a result, farmers with lands in locations to the south and west of the city
center will be aware that if their land could be developed, they could sell it
for a price much higher than its value as farmland. The effect of the land-use
regulation has been to raise their (potential) property's value.
2006] EFFECTS ONLAND PRICES 111
G x
I
I , -
A .y-------- ♦ \
A
1 / \ 1
1 \ 1
I I \ 1
I I 1 I
/ 1 1 1
L F city C
Center ~
1 1 / I /
1 I i
1 1 / /
1 1 N
1 1 / /
1 1 ~ /
I I ' /
1 1 `
1 1 D /
I E 1
1 1
rte, 1 ~
K 1 J Urban
1 growth
1
1 boundary
Figure 2. Potential shift in location of demand for developable lands with
growth limits.
Ironically, those landowners in areas subject to the land-use regulation
may not realize that the developer's interest in buying their land at a high
price is a direct result of the very same land-use regulation that prohibits
them from developing the land (or lands in any of the areas outside the
UGB). In that sense it would be illusory to believe that if the land-use
regulation were removed from all lands the same price premium would be
offered to this particular farmer. This hypothetical example illustrates the
fallacy of confusing the value of an individual exemption with the reduction
in value due to the land-use regulation. Indeed, the pattern of property
values in this hypothetical case may be more like those represented in
Figure 3, where the regulated lands experience no reduction in value, even
though lands not subject to the regulation see an increase in value owing to
the scarcity effects of the regulation.
112 ENVIRONMENTAL LA W [Vol. 36:105
Price per acre (in "real" or
inflation-adjusted dollars)
rr
Figure 3. A case where land-use regulations do not affect prices of regulated
properties.
The increase in value for unregulated lands (where development is not
constrained or prohibited) may be large depending on the scale, or area,
over which the land-use regulation is limiting. The more locations affected
by the land-use regulation, the more the resulting pent-up demand will be
reflected in the value of an individual exemption.
Ill. AMENrry EFFECTS OF LAND-USE REGULATIONS
Amenity effects are the second of the two ways that land-use
regulations can have positive effects on land values. The most transparent
example of amenity effects arises when landowners are required to pay a
property tax, with the resulting revenues used to provide public services
such as police and fire protection, public schools, roads, and other utilities."
Although property taxes are not usually thought of as land-use regulations,
they fit the general profile-government actions that impose a cost on
individual landowners, but at the same time give rise to shared benefits in
the form of amenities and public services."
Less transparent but equally valid examples of amenity effects include
land-use regulations to protect environmental quality, open space,
groundwater availability and quality, or to reduce noise, congestion, or
pollution, as well as agricultural lands and lands with historical
significance.12 Regulations of this kind may require actions having positive
10 WORK, supra note 1, at 85-86.
11 Id
12 Id. at 62 ("Zoning is the land-use control device in general use that extends, limits, and
defines land use, that secures the conferral of valuable environmental amenities, and that
prevents the imposition of undesirable neighborhood effects.").
Time line: Regulation takes effect Today
2006] EFFECTS ONLAND PRICES 113
effects, or limit actions having negative effects. 13 Regulations of this kind in
residential areas include building restrictions, environmental zoning,
restrictions on paint color for houses, and even lawn mowing rules that are
enforced in some communities.14 Like property taxes, these kinds of
regulations impose costs on individuals because they limit options, but they
also confer shared benefits that may result in increased property values. 15
Land-use regulations that confer amenity benefits are likely to give rise
to higher property values like those depicted in Figure 4. So long as the costs
of compliance are small relative to the collective benefits from the
amenities, the net effect should be an increase in property values. 16 This can
occur with regulations such as environmental zoning in residential areas
which limits the "footprint" of houses and other improvements to protect
neighborhood aesthetics and environmental amenities."
This characterization of amenity benefits in economic terminology is
similar to the legal concept of "average reciprocity of advantage" that has
been noted in federal takings cases. Reciprocity of advantage was identified
by Justice Holmes in Pennsylvania Coal Co. v. Mahon as a justification for
denying compensation for takings. 18 More recently the same concept has
been explained as follows: "While each of us is burdened somewhat by such
restrictions [on the uses individuals can make of their property], we, in turn,
benefit greatly from the restrictions that are placed on others."" U.S. courts
appear, in general, to bar compensation for takings claims when there exists
some level of mutual benefits accruing to landowners.20 These rulings do not
appear to consider whether these reciprocal benefits are large enough to
equal or outweigh the costs of the regulations imposed on landowners."
13 See Laurence Katz & Kenneth T. Rosen, The Inteduri%ictional Effects of Growth
Controls on Housing Prices, 30 J.L. & ECON. 149, 150 (1987) (discussing regulations concerning
restrictions and regulations requiring improvements).
14 See, eg., Portland Dev. Code § 29 (2005), available at http://www.portlandordine.com/
auditor/index.cfm?c=28193 (property maintenance regulations); Portland Dev. Code § 33.430,
available at http://www.portlandonline.conVshared/cfnVimage.cfm?id=53343 (environmental
overlay zones).
15 See SKOURAS, supra note 6, at 32 (discussing the average reciprocity of advantage analysis
used by the Supreme Court where the fact that a regulation might also provide benefits to the
burdened party is a factor in takings cases).
16 See Richard K. Green, Land Use Regulation and the Price of Housing in a Suburban
Wisconsin County, 8 J. HOUSING EcON. 144, 144 (1999) (starting with premise that regulations
increase price of housing).
17 See, e.g., Metro (Portland) Title 3 Model Ordinance, at 24, available at http://www.metro-
region.org/library_doc&4and_use/modelord.pdf (setting a maximum footprint of 5,000 square
feet of disturbed area for granting of a variance to allow building in a water quality resource
area, defined as a vegetated corridor around a water resource protected to improve water
quality and provide related environmental benefits).
18 260 U.S. 393, 415 (1922).
19 Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 491 (1987). I am grateful
to Michael Rubin, Chief of the Rhode Island Attorney General's Environmental Unit, for drawing
my attention to "reciprocity of advantage."
20 See RICHARD A. EPSTEIN, TAKINGS: PRIVATE PROPERTY AND THE POWER OF EMINENT DOMAIN
103 (1985) (claiming courts tend to give lawmakers "free rein").
21 Id.
114 ENVIRONMENTAL LA W [Vol. 36:105
In these cases, however, an individual exemption from the land-use
regulation allows one property owner to both avoid the compliance costs
and benefit from the amenities. The result will likely be an (additional)
increase in the value of the exempted property even though the land-use
regulation had already raised property values (see the appendix for a more
detailed analysis of these market adjustments).
Price per acre
(in "real" or inflation-adjusted dollars)
Figure 4. Land price changes when land-use regulations have
"neighborhood" effects.
Environmental zoning is an example that is directly relevant to
Oregon's Measure 37. These types of regulations are frequently motivated by
recognition that environmental amenities, such as habitat protection, may
not be adequately protected by the decisions of individual landowners.22
These regulations may also be motivated by a recognition that there can be
positive neighborhood externalities when a given property is surrounded by
other properties with trees, streams, open space, or other amenities that
make the neighborhood more attractive to residents.23 Even in cases where
such amenities have successfully raised the average value of properties in a
neighborhood, it will still be the case that if a single property in this
neighborhood were exempt from the environmental regulations, the
property owner could increase the value of his property (for example, by
being able to enlarge the "footprint" of the house, adding a garage,
increasing the view or open space by cutting trees, or filling in wetlands or
streambeds). In this case, however, the increase in value for a single
property is dependent on the other nearby properties continuing to conform
to the environmental zoning rules.
22 See id at 121-23 (discussing and criticizing wetlands protection measures, a form of
environmental zoning).
23 See U.S. ENVTL. PROT. AGENCY, ENVIRONMENTAL BENEFITS OF SMART GROWTH,
http://www.epa.gov/smartgrowth/topics/eb.htm (last visited Jan. 22, 2006) (listing
environmental benefits of "smart growth" regulations).
Time line: Regulation takes effect Today
20061 EFFECTS ONLAND PRICES 115
IV. EMPIRICAL EVIDENCE OF SCARCITY AND AMENITY EFFECTS
Numerous studies have examined how land-use regulations affect
property values. Many of these have scrutinized the scarcity effects of land-
use regulations aimed at controlling growth. For example, in a study of
growth-control land-use regulations in the San Francisco Bay area, market
values for houses were between 17% and 38% higher than in uncontrolled
areas. 4 A study in Montgomery County, Maryland found that restrictive
zoning significantly raised home prices over time .21 A study of data based on
many U.S. metropolitan areas found evidence that moving from less
stringent to more stringent regulations generated a premium of 139/0-26% in
housing rents and 329/6-46% for property sales. 26
A comprehensive study of the effects of land-use restrictions from the
one million acre New Jersey Pinelands Protection Act and its
"Comprehensive Management Plan" produced similar results.27 The study
assessed the effect of management districts established for preservation,
forest, agricultural, rural development, and regional growth .28 Each district
was subject to a different set of restrictions.21 The study concluded that
when compared to unregulated control areas, prices in regulated districts
exceeded those in unregulated districts by statistically significant amounts
in five out of the six years where sales data were evaluated.31
Similar to the scarcity effects, studies have documented how
environmental and other amenities can affect property values. For example,
in one study zoning restrictions on lakefront development were estimated to
increase the average price of lakefront properties by 21.5%.31 A study of
Milwaukee examined land-use regulations such as minimum lot sizes;
permitting of mobile homes; minimum frontage setbacks; and requirements
for minimum street widths, sidewalks, curbs, and gutters.32 The study found
that mobile home prohibitions increased home prices by 7.1-8.5%, and that
requiring an additional 10-foot setback was associated with a price increase
of 6.1-7.8%.33
A detailed study of environmental zoning in Portland, Oregon was
conducted in 2005.34 The study is based on data from over 30,000 sales in
z4 Katz, supra note 13, at 159.
25 Henry 0. Pollakowski & Susan M. Wachter, The Effects of Land-Use Constraints on
Housing Prices, 66 LAND ECON. 315, 323 (1990).
26 Stephen Malpezzi, Gregory H. Chun & Richard K. Green, New Place-to-Place Housing
Price Indexes for U.S. Metropolitan Areas and Their Determinants: An Application of Urban
Indicators, 26 REAL. EST. ECON. 235, 262 (1998).
27 Patrick W. Beaton, The Impact of Regional Land-Use Controls on Property Values., Me
Case ofthe NewdeeseyPinelands, 67 LAND ECON. 172,175 (1991).
28 Id
29 Id
30 Id. at 191.
31 Fiorenza Spalatro & Bill Provencher, An Analysis of Minimum Frontage Zoning to
Preserve LakefrontAmenities, 77 LAND ECON. 469,480 (2001).
32 Richard K. Green, Land Use Regulation and the Pence ofHousing in a Suburban Wisconsin
County, 8 J. HOUSING ECON. 144, 149 (1999).
33 Id. at 156.
34 Noelwah Netusil, The Effect of Enviromnental Zoning and Amenities on Property Values:
116 ENVIRONMENTAL LAW [Vol. 36:105
different parts of Portland, and takes into account the characteristics of the
property, the characteristics of the house, the environmental zoning, and a
range of variables related to property amenities on or near each property.35
Using the statistical methods for a hedonic pricing analysis, the study
concludes that for Southwest Portland's environmental "c-zoning" areas, the
zoning and related amenities, such as tree canopy, have a positive but small
net effect on the mean sale price of properties (+0.54%).36
In many cases amenity and scarcity effects will both be present, and
may reinforce one another. For example, land-use regulations to protect
sensitive environmental areas such as wetlands may enhance environmental
amenities and the appeal of an area, while at the same time limiting the
supply of developed and developable parcels. Both these effects may cause
land prices to rise.
A number of studies have examined cases where amenity and scarcity
effects are present. For example, land-use restrictions near Chesapeake Bay
were studied to measure the effect of limits on the locations of residential
and commercial development.37 The restrictions included channeling
development to already developed areas (scarcity effects) as well as
requiring new shorefront developments to conform to landscape
requirements, setbacks, and surface restrictions (amenity effects). 38 The
analysis found that in one county subject to the restrictions, shorefront
houses increased by 46-62% compared to the control area.31 Houses without
water frontage increased by 14-27% compared to the control area.40 And
finally, houses near, but not in, the designated critical area also increased
compared to the control area by 13-21%. This latter result is consistent with
the idea that land-use regulations can have positive effects in other, nearby
markets.41
Another study of the designated critical areas near Chesapeake Bay
found that the value of vacant parcels in one county increased by 33% in
1984, by 53% in 1985, and by 39% in 1986 compared to the control areas .42 In
other counties, the effects were also positive but less statistically
significant.43
Designations such as historic district regulations have also had positive
effects on land values. A 1991 study of historic designations in Chicago
neighborhoods found that historic designation increased average housing
values 29-380/6.1 Once again, areas outside the regulated zones were also
Portland, Oregon, 81 LAND ECON. 227,228 (2005).
35 Id at 231-34.
36 Id at 245.
37 George R. Parsons, The Effect of Coastal Land Use Restrictions on Housing Prices: A
Repeat Sale Anatysis, 22 J. ENvTL. ECON. & MGMT. 25, 25 (1992).
38 Id. at 28-29.
39 Id. at 33.
40 Id
41 Id
42 Patrick W. Beaton & Marcus Pollock, Econonuc Impact of Growth Management Policies
Surrounding the Chesapeake Bay, 68 LAND ECON. 434, 451 (1992).
43 Id.
44 Peter V. Schaeffer & Cecily A. Millerick, The Impact of Historic District Designation on
20061 EFFECTS ONLAND PRICES 117
affected positively.45 The study found that in areas adjacent to the historic
districts land, property values increased by 29%.46
Finally, in the case of non-metropolitan lands designated as farm use
only, one might expect that the designation would raise the value of
developed properties and vacant properties not designated as farm use only,
but have no effect on farmland prices. The effect on farmlands, however,
may be positive in some cases.47 Many farm community members believe
that their local farm economies are interdependent and scale-dependent
because their profitability requires a certain scale of farming activity in the
area (number of total farms and total farm sales) in order to support local
services such as input suppliers, processors, etc. Economies of scale like
this could imply that a reduction in the number of farms and farm acreage in
a given area will give rise to increased costs and a decline in profits, which
would lower farmland prices.' Farm values can also be affected adversely
when residential penetration creates conflicts over farm noise, dust, or
smells.49
Indeed, a study of the effects of farm protection zoning on farmland
prices in Wisconsin found that farmers were willing to pay more for land
zoned for farm use only than for land with a less certain future.50 These
effects were capitalized into higher land prices.51 The premium was found to
be highest on large parcels farthest from urban areas. 12 This represents a
particularly interesting example where the (potentially negative) scarcity
effects on farm lands appear to be outweighed by the amenity benefits in
farming areas.'
Property Values- An Empirical Study, 5 ECON. DEV. Q. 301, 311(1991).
45 Id
46 Id.
47 See GERRIT KNAPP & ARTHUR C. NELSON, THE REGULATED LANDSCAPE, LESSONS ON STATE
LAND USE PLANNING FROM OREGON 142144 (1992) (citing data showing that reduction of non-
agricultural proximate uses removes speculative influences on farmland and more closely ties
value to the land's underlying agricultural productivity).
48 Id at 144.
49 See id at 126-27 (discussing conflicts between farmers and acUacent urban residents).
50 D.M. Henneberry & R.L. Barrows, Capitalization of Exclusive Agriculture Zoning into
Farmland Prices, 66 LAND ECON. 249, 257 (1990).
51 Id
52 Id
53 See C. Ford Runge et al., Goverment Actions Affecting Land and Property Values- An
Empirical Review of Takings and Givings, LINCOLN INSTITUTE OF LAND POLICY 7-23 (1996)
(reviewing empirical evidence on the effects of government action on property values). What
their analysis demonstrates is that government actions including land-use regulations,
provisions of government services, and infrastructure, etc., can have positive or negative effects
on land values. Their interpretation makes the point that consideration of compensation for
regulatory takings (negative effects of government action on property values) should recognize
the prevalence of regulatory "givings" (positive effects of government actions on property
values). Id at 24-25. See also John M. Quigley & Larry A. Rosenthal, The Effects of Land-Use
Regulation on the Price ofHousing.• What Do We Know? What Can We Learn ? 8 CITYSCAPE 69
(2005), available at http://urbanpolicy.berkeley.edu/pdf/QR2005.pdf (surveying studies of the
effect of land-use regulations on housing prices).
118 ENVIRONMENTAL LA W [Vol. 36:105
V. THE VALUE OF AN INDIVIDUAL EXEMP'T'ION FROM LAND-USE REGULATIONS
Given the analysis and empirical evidence presented above for amenity
and scarcity effects due to land-use regulations, this section looks closely at
their relationship with the value of an individual exemption. Where amenity
or scarcity effects of a land-use regulation have raised land values,
elimination of the land-use regulation on all properties can be expected to
undo these changes, and land values would decline. But what happens if the
land-use regulation is removed from one property only, as is the case if a
landowner is given an exemption to the land-use regulation?
If the land-use regulation is binding, and constrains the landowner from
taking preferred actions or favored land uses, then removing that constraint
will make the landowner better off. If the landowner is acting to maximize
the value of her land, then removing a binding constraint would presumably
raise the value of the land. The landowner is able to avoid the costs
associated with the land-use regulation (paying property taxes, conforming
to building restrictions, etc.) while still enjoying the amenity or scarcity
effects resulting from the continued compliance of all other landowners in
the area.
The implication of this is significant. In cases where land-use
regulations have raised land values, an individual exemption to that
regulation can still be expected to increase the value of the exempted
property. The same will be true for land-use regulations that reduce a
property's value. Since an individual exemption will likely have a positive
value for any binding land-use regulation whether it reduced land values or
raised land values, there is no basis for using the value of an individual
exemption as a proxy for, or even an indication of, the reduction in value
caused by the enactment of a land-use regulation.
Once again, the property tax example is the most transparent. An
exemption from paying current and future property taxes will increase the
value of a property.' The exemption reduces the cost to the landowner
without affecting the public services that have contributed to the property's
high value.
In the case of scarcity effects, the land-use regulation has restricted the
supply and pushed up land prices for the disallowed use, and increased the
supply of lands put to alternative uses. This creates a price differential
between the land markets for these two uses, and, as a result, it creates an
opportunity for financial gain as a result of the exemption to the restriction.
In neither case, however, should one conclude that the positive value of
an exemption to the land-use regulation is evidence that the regulation has,
in fact, reduced the land's value. Indeed, in all cases where land-use
regulations have actually increased land values, we can expect that an
exemption to that regulation will raise the value of an individual parcel even
more.
A hypothetical example can be an instructive way to highlight certain
economic interactions and relationships, and in some cases an exaggerated
54 See KNAPP & NELSON, supra note 47, at 127-28 (discussing the effects of tax reduction for
farm land, both positive and negative).
20061 EFFECTS ONLAND PRICES 119
and unrealistic example is the best way to illuminate those key concepts or
ideas even if the particulars are unrealistic. The following section employs
such an example.
Suppose a large city like Portland (including its surrounding areas)
introduced a land-use regulation 30 years ago that prohibited lands from
having improvements used as restaurants, and that the only exceptions
allowed were the 20 parcels occupied by restaurants at the time the
regulation was implemented. Let's assume that with growth in population
and income over a period of years, this hypothetical city grew to the point
where it could easily support 200 restaurants, but only 20 were allowed. As
you can imagine, the 20 existing restaurants would do a booming business,
and would be able to charge very high prices and earn very large profits. As
a result, the value of these 20 restaurant-eligible parcels would be very high.
Let's suppose that each parcel would be worth $500,000 more than other
similar commercial properties.
If this situation actually existed, we might observe owners of regulated
properties (those not allowed to house restaurants) looking at the
differences between the price of their land and the price of a restaurant
parcel and interpreting the situation as follows: "This regulation that
prohibits me from opening a restaurant, or from selling my parcel to
someone for restaurant use, is costing me $500,000." This interpretation is
also consistent with the idea that if they alone were given an exemption
from the regulation, that exemption would be worth $500,000 because it
would enable them to sell their parcel for $500,000 more than what it is
currently worth.
The problem with this interpretation, however, is that it is not a
measure of the reduction in value caused by the land-use regulation; it is
most likely entirely a result of the increase in value of the 20 properties not
subject to the regulation. True, if one parcel were given an exemption to the
regulation, the property would likely increase in value by about $500,000.
But this observation measures a very different economic relationship than
the "reduction in value" concept. To see this, let's carry this example further.
Suppose this hypothetical city now passes a law like Oregon's Measure
37. Eligible landowners would likely file claims arguing that, because of this
land-use regulation, the value of their property has been reduced by
$500,000, and they would ask to be compensated in that amount. To verify
this claim, the government would likely ask an appraiser to verify the
estimate. The appraiser would look at the values of "comparables" (i.e., the
other 20 restaurants) and, using standard appraisal methods, would indeed
come to the conclusion that if the property in question (and only the
property in question) were not controlled by the land-use regulation, the
landowner could open a restaurant on the property, increasing the value of
their land by about $500,000. Once again, however, the value of an
exemption is a very different economic concept than a measure of the
reduction in value.
Since the standard methods used by appraisers to value properties
typically consider only incremental change (i.e., for a single property), the
likely effects of large changes in restaurant-eligible properties on land prices
120 ENVIRONMENTAL LA W [Vol. 36:105
would tend to be ignored. Yet if we were to ask what would happen to the
land price differentials if the land-use regulation were removed entirely, we
would come to a very different conclusion. In our hypothetical example, the
premium price for a restaurant-eligible parcel is due entirely to the scarcity
created by the land-use regulation.
Just look at other cities. In a city without this kind of regulation, what
do we observe? In general, we find that restaurants compete for land with
other uses, and they compete with each other for customers. As a result,
restaurants succeed and fail, they come and go, but on average, they do not
create a premium on land prices for their owners. Therefore, in this
example, the answer to the question "What is the reduction in fair market
value resulting from enactment or enforcement of the land-use regulation?"
is, generally speaking, "none."
This point is illustrated in Figure 5. Regulated lands (those prohibited
from restaurant use) do not see any change in price after the enactment of
the land-use regulation. Land not subject to the regulation, however, sees a
large increase in price. The increase in price is, however, a direct result of
the regulation, and the price difference would disappear if the land-use
regulation was eliminated.
Price per acre
(in "real" or inflation-adjusted dollars)
Price of altemative
(restaurant-eligible) land ,
Price of regulated land
Timeline: Regulation takes effect Today
Figure 5. Hypothetical example of land-use regulation restricting use as
restaurant
There may be exceptions to this conclusion. Some properties might
have special attributes, making them much more valuable for restaurants
than for other uses (view, prime location, etc). But, even the magnitude of
this kind of "attribute premium" will be influenced significantly by the land-
use regulation, and may also be an attribute that is desirable for other uses
as well.
Instead of observing what restaurant properties are worth in other
cities without such regulations, suppose we asked specifically: What would
have happened-hypothetically-if this particular land-use regulation had
20061 EFFECTS ON LAND PRICES 121
notbeen enacted or enforced? The difference in this approach is that it tries
to consider the dynamic changes that would have occurred in the past thirty
years if the restaurant restrictions had not been put in place instead of
making comparisons to other geographic areas.
Without the regulation, we would expect that many restaurants would
have been opened at various times over the past thirty years, in many
different parts of the city. Some of these ventures would have been
successful, while others would have failed. Restaurants would have
competed with each other, and with alternative land-use options. The
pattern of restaurant expansion that would have arisen would be difficult to
predict or evaluate with any certainty. For example, restaurants might have
been spread evenly throughout the city, or they might have become grouped
in a "restaurant district" that attracted other complementary land uses
(movie theaters, night clubs, etc.). The market for land would have evolved
with land values that might be different than in the current situation, but it
would be very difficult to discern what kinds of differences would have
emerged, in which parts of town, and for which kinds of land uses. What we
could be fairly certain of, however, is that in this alternative scenario
without the land-use regulation, the ability to put a parcel of land to
restaurant use would not cause the value of the parcel to rise by $500,000.
Most likely, in a world with no such restaurant restriction, the value of the
parcel would be the same as its current value.
This hypothetical illustration highlights the following. The reduction in
market value resulting from a land-use regulation is a fundamentally
different concept than the value of an individual exemption to the
regulation. An exemption confers a special right to one individual landowner
to take advantage of an opportunity that is unavailable to other property
owners. Economic analysis suggests that the value of that exemption will
often be the direct result of the denial of that same opportunity to others
(currently and over a period of time).
This issue is highly relevant to Oregon's Measure 37.55 To the extent
that Measure 37 defines compensation based on the "reduction in the fair
market value resulting from enactment or enforcement of the land-use
regulation,"" it would seem to be important to correctly identify and
measure the dollar amount attributable to the reduction in value for the land
subject to the regulation (the direct effect), as distinct from the increase in
value for non-regulated lands (the indirect effect).
In cases where restrictions on development in :multiple markets have
shifted pent-up demand into areas that would otherwise not be of interest to
developers, the land prices for the current use (farm and forest land) may be
unaffected (negatively) by the land-use regulation. This is because the prices
of these lands depend directly on their productivity, and on the value of
what they produce in the marketplace.57 Since these markets tend to be
55 Measure 37 (Or. 2004).
56 Id § (2)
57 See James Ryan et al., Government Payments to Farmers Contribute to Rising Land
Values, AGRIC. OUTLOOK, June-July 2001, at 22, available athttpJ/usda.mannlib.comefl.edu/repo
r&erssor/economics/ao-bb/2001/ao282.pdf (starting with the presumption that earnings from
122 ENVIRONMENTAL LA W [Vol. 36:105
national or even international, the amount of land allocated to farm and
forest production in a local area is unlikely to have any effect on commodity
prices or profits, and therefore these changes are unlikely to affect land
prices. As a result, a regulation that increases or maintains the supply of land
for these uses (e.g., regulations such as exclusive farm use zoning) may not
cause a reduction in their value because the value is unaffected by changes
in the amount of land put to these uses locally. This kind of situation may be
similar to the one illustrated in the appendix, where the land-use regulation
may have a large positive effect on the prices of land not restricted under the
regulation, but little or no negative effect on the prices of lands that are
restricted to farm or forest uses.
VI. DYNAMIC INTERACTIONS
The effects of land-use regulations on property values will, in many
cases, occur gradually over a period of time. When urban growth boundaries
are established, for example, they tend not to be binding initially on the land-
use decisions being made, so they do not typically constrain the existing
demands for different land uses.58 With rising population and urban
expansion, however, these land-use regulations will begin to influence land
prices and land uses. They may also influence other subsequent private and
public land-use decisions, other public and private investments, other
government policies such as taxation, and decisions about infrastructure.59
As the pattern of land uses and land prices evolves, there will be feedback
effects on land markets, land-use decisions, government policy, and even on
demographic changes and economic growth. Over a period of years, this
complex, interdependent pattern of changes that may occur with a given
land-use regulation makes it very difficult, and perhaps impossible, to
ascertain what would have happened withoutthat regulation.
In particular, the direction of causality between land-use regulations
and land prices is ambiguous in some cases. Land-use choices can have
effects on land prices, neighborhood composition, housing quality, and
government services. But these effects may also influence land-use choices.
The causality can occur in either direction or in both directions
simultaneously. Accounting for the simultaneity of these various influences
in order to isolate and identify the effect of land-use regulations on property
values would require a sophisticated and complete dynamic model of all
relevant influences. However, the kinds of data needed to measure each of
the relevant factors are scarce, making such estimation very difficult.so
These issues make it problematic to estimate the effect of any given
land-use regulation on land prices because the "with and without" scenario
farming drive the value of agricultural land).
58 See KNAPP & NELSON, supra note 47, at 51-52 (noting that the original urban growth
boundary for Portland was believed by Oregon's Land Conservation and Development
Commission to be too large).
59 See id. at 40 (stating that the objectives of Oregon's urban growth boundaries included
efficient provision of public facilities and creation of a distinctly urban ambience).
60 Quigley & Rosenthal, supra note 53, at 87.
2006] EFFECTS ONLAND PRICES 123
involves speculating about what would have occurred in the absence of the
regulation, and how those alternative public and private actions would have
affected property values. Roads and utilities that exist today might not have
been built or improved; residential development might have spread in many
directions, rather than primarily in one direction. As with our hypothetical
example in which it was impossible to say where restaurants and other
complementary businesses might have become concentrated in the absence
of restrictions on restaurants, land-use regulations such as exclusive farm
use (EFU) or urban growth boundaries (UGB) present huge obstacles for
evaluating with any confidence what would have occurred over an extended
period of time in the "without" scenario.
The kinds of amenities that give rise to land-use regulations for
environmental or aesthetic reasons can also affect the dynamic pattern of
land development involving urban expansion and other kinds of
development. As discussed above, these dynamics are difficult to predict,
and this can add to the difficulty of distinguishing between the direct costs
of a restrictive land-use regulation and the indirect effects they may have by
preserving amenities and related development opportunities.
Let's look at one example intended to highlight the way in which land-
use regulations can create an impression that highly profitable investment
opportunities are being blocked by the regulation alone, when those
development opportunities may, in fact, exist only because ofthe regulation.
For example, an opportunity to build custom homes in a pastoral setting
surrounded by beautiful farmland can be a tempting and potentially very
profitable investment. But in some cases, the beautiful pastoral setting may
still exist only because of the land-use regulation; without the regulation
being in place for the past thirty years, other landowners would have already
sold off parcels for other uses, or built homes creating a patchwork of mixed
use land and perhaps some not-so-profitable housing developments.
It would be easy to miss the connection between a) a profitable
investment opportunity that is blocked by a land-use regulation, and b) the
fact that this profitable investment opportunity is presenting itself only
because of this very same land-use regulation, which has kept others from
taking advantage of this or similar opportunities for as along as the
regulation has been in effect. The economic forces behind these kinds of
examples are no different than the ones in the hypothetical example above
that make the opportunity to open a restaurant overwhelmingly attractive
precisely because a land-use regulation has kept others from doing so.
In cases where a land-use regulation has kept the competition at bay for
a long period of time, the value of an individual exemption to the land-use
regulation may confer very large rewards tied directly to the fact that the
regulation has held back all the other competing market forces for a period
of many years. Given the dynamic interactions between land-use regulations
and demographic, economic, and political changes, it is very difficult to sort
out which changes may be directly attributable to land-use regulations and
which are due to other related or independent factors. Even detailed
statistical studies have had mixed results trying to identify these
relationships. One study of single-family home sales data in Vancouver
124 ENVIRONMENTAL LA W [Vol. 36:105
between 1957 and 1980 found evidence that zoning impacts were positive in
some cases, negative in some cases, and insignificant in other cases.61
When the focus is on housing prices, studies do suggest that existing
housing prices are raised by land-use regulations.62 The net effect of density
controls (lot sizes) on average land prices, however, may be indeterminate if
restrictions on developable lands and density cause some land prices to rise
and others to fall.'
VII. WHEN LAND-USE REGULATIONS REDUCE PROPERTY VALUES
The focus of this essay has been on understanding the ways in which
land-use regulations can raise property values. Land-use regulations can,
however, reduce the value of properties affected, or they may reduce the
value of some properties subject to the regulation, even if the effect is
positive for some or most other properties affected.' For example, if a land-
use regulation is too onerous, or if the amenities generated are not valued
sufficiently by the residents, then the overall effect may be zero or
negative.65 In the end, it is a "case-by-case" empirical question that would
need to be evaluated using statistical analyses of housing values in a specific
city and for regulations of specific kinds.
One situation where a land-use regulation will indeed cause a reduction
in property value is where a) the supply of land for an "allowed use" is
higher than it would have been without the land-use regulation, and b) this
additional supply causes a drop in the market price due to downward-
sloping demand. This situation is illustrated in the appendix in Figure A2.
For example, if a municipality zoned more land for commercial or industrial
use than the demand would support, the prices for these lands would
decline, and might be lower than they would have been without that
particular zoning. A second situation where a land-use regulation will reduce
property values is where the regulation was intended to generate
neighborhood or local external effects, but the regulations were so onerous,
or the positive external effects so small, that the net effect was a reduction
in property values in the zoned area. 66
A third situation where a land-use regulation will reduce property
values occurs when the external effects represent benefits to society
generally, but do not tend to be reflected in the property values.67 These may
61 J.H. Mark & M.A. Goldberg, A Study of the Impacts of Zoning on Housing Values Over
Tbie, 20 J. URB. ECON. 257, 271(1986).
62 Quigley & Rosenthal, supra note 53, at 85-86.
63 Id. at 86.
64 See, ag, Parsons, supra note 37, at 35 (listing winners and losers of restrictive land-use
regulations abutting Chesapeake Bay).
65 See, e.g., Schaeffer & Millerick, supra note 44, at 311 (asserting that decreased property
values in historic districts regulated through the establishment of the Chicago City Historic
District program were the result of the regulatory burdens of the program exceeding the
benefits of a historic district designation).
66 Id.
67 See, e.g., Parsons, supra note 37, at 35 (noting that property owners of undeveloped and
restricted land within the Chesapeake Bay Resource Conservation Area, such as owners of
20061 EFFECTS ONLAND PRICES 125
include designations for scenic or historical areas, wild and scenic rivers,
etc. Even though the benefits to society generally may be very high, these
benefits accrue to the general public rather than the landowners, so that the
benefits to the landowners may not outweigh the costs of the restrictions.
A fourth situation where land-use regulations impose costs on
landowners is somewhat more difficult to evaluate in terms of market
economics. These situations include ones where a family wishes to transfer
land, such as farm or forest land, to family members for other kinds of uses
like building homes for personal use.68 These instances cannot be easily
evaluated by looking at comparable sized parcels in appropriately zoned
areas, since often the landowners have a personal attachment to the specific
parcel and neighborhood where the family may have farmed for several
generations. Examples of the desire on the part of farm families and woodlot
owners to subdivide a portion of their land for use by family members have
received great attention in the debate over Oregon's Measure 37.69 The
personal values of particular individuals, however, cannot easily be
translated into "fair market value" in cases involving unique circumstances
such as a sentimental attachment to a particular piece of land. Indeed, it
would seem difficult to apply the language from Oregon's Measure 37
(reduction in fair market value) to these kinds of situations.
And finally, for current purposes, we want to distinguish between land-
use regulations that reduce the value of land below its prior value, and the
possibility that a land-use regulation may conflict with some future,
unforeseen windfall gain or increase in value. Unforeseen economic changes
can raise and lower the economic potential of lands for a variety of reasons.
In some cases, these may be directly or indirectly related to the land-use
regulations or complementary government actions. However, in other cases,
lands may become more valuable for unforeseen reasons, and land-use
regulations may begin to conflict with those uses long after enactment. The
distinction between a land-use regulation that reduces a property's value (at
the time it is enacted) versus one that, at some future date, is an impediment
to a windfall gain that was unforeseen at the time of the regulation's
enactment, represents an additional complication for interpreting laws like
Oregon's Measure 37. If land-use regulations are subject to compensation for
reductions in value due to unforeseen events or changes in market
conditions, this would appear to put government in a perpetual position of
liability for future changes in the economy.
farms in the Resource Conservation Area, suffered lost property value).
66 See, ag., Jeff Barnard, OREGONIANS BEGIN FILING MEASURE 37 CLAIMS (Dec. 2, 2004),
http://www.kgw.com/news-local/stories/kgw_120204_life_ore_land_use_.115882f.html
(describing two of the first Measure 37 claimants to file, a woman near Portland who wanted to
subdivide land to give to her children, and a couple in Sisters, Oregon, who wanted to build a
retirement home on a 20-acre farm parcel).
69 See, e.g., Pete Hunt, Tire Grandmother Clause, WILLAMETTE WK., Feb. 16. 2005, available
at http://www.wweek.conVstory.php?story=6010 (highlighting the role of 92-year old
Multnomah County, Oregon resident and property owner Dorothy English as the poster child of
the successful ballot measure).
126 ENVIRONMENTAL LA W [Vol. 36:105
VIII. SUMMARY AND CONCLUSIONS
The analysis presented here spells out how land-use regulations can,
and often do, have positive effects on land values in settings where amenity
effects, scarcity effects, or both kinds of effects are at work. There is also
abundant empirical evidence that documents how land-use regulations have
raised rather than lowered property values in many cases.70
In either case-whether a land-use regulation reduces or increases
property values-an individual exemption from a binding land-use
regulation can be expected to have a positive effect on a property's value.
Logically, if a land-use regulation imposes a cost on landowners, eliminating
that cost is likely to make that particular property more valuable, so long as
the benefits associated with the land-use regulation are unaffected.
The implication of this result is highly significant. Evidence that the
value of an individual exemption to a land-use regulation is positive does
not, by itself, represent proof or unequivocal evidence that the enactment of
the land-use regulation reduced the property's value. As a result, claims that
a land-use regulation has reduced a property's value must be substantiated
with other kinds of evidence and analyses. In particular, an appraiser's
estimate that a property's value would rise if a given land-use regulation
were removed tells us nothing definitive about whether the land-use
regulation has actually reduced the property's value.
Indeed, given the dynamic and complex interconnections between land-
use regulations and their amenity and scarcity effects, as well as other
related government and private actions and responses, it is highly
problematic to disentangle the separate effects of a particular land-use
regulation from the effects of other actions and responses that may be
independent or related to any given land-use regulation. Proof that a land-
use regulation reduced a property's value would appear to face
insurmountable obstacles in many cases. Decisions about zoning and urban
growth boundaries are interdependent with decisions about funding for
roads and other infrastructure development, and all of these will affect the
value (and potential value) of developed and undeveloped properties within
and outside each boundary and zone. Ascertaining the effect of a particular
land-use regulation would appear to be particularly problematic if we
recognize that, had the land-use regulation not be enacted, other public and
private decisions would have had different outcomes, and these in turn
could have altered the current opportunities and limitations in ways that are
impossible to know.
Still, it is completely understandable that landowners limited by a land-
use regulation view the value of being free of that regulation in terms of the
value of an exemption. That view, with the potentially large financial gains
that would appear to result, is no doubt tempting to landowners, and has led
to anger over land-use restrictions. The recognition, however, that in many
cases these potentially large financial gains are actually caused bythe land-
use regulation, is not well understood y the general public, in part because
70 See, e.g., Beaton, supra note 27, at 191 (finding that regulated areas in the New Jersey
Pinelands outstripped unregulated areas in terms of price appreciation).
20061 EFFECTS ONLAND PRICES 127
of the indirect, invisible, and often gradual market forces at work. In most
public discussions that preceded the approval of Measure 37 in Oregon, and
in those that have continued in the year following its passage, there is little
evidence of a public awareness of the critical distinction between the value
of an individual exemption and the reduction in value caused by a land-use
regulation.
IX. APPENDIX: POTENTIAL MARKET EFFECTS OF LAND-USE REGULATIONS
Depending on the specific market conditions, the price differential in
markets affected by a land-use regulation may be mostly, or entirely,
attributable to price adjustments in one of the two markets, or it may be
divided among several markets. A simple diagram provides a way to think
about these kinds of effects. Consider a land-use regulation that allows land
to be put to use A, but restricts certain areas of land from being put to
another use, use B. Prior to the enactment or enforcement of the land-use
regulation, the market can be expected to allocate some land to use A and
some to use B, with the price of land being the same for both (at the
margin), since both uses will compete for land in a single market/supply. Of
course, prices for parcels with unique characteristics will differ because of
those characteristics (soil quality, view, distance from city center, etc.).
Figure Al illustrates this point. It describes the total supply of land on
the horizontal axis. The amount allocated to land use B begins at the left end
of the axis; the amount allocated to use A begins on the right end of the axis.
The demand or willingness to pay for B slopes down to the right, declining
as more land is allocated to B. The demand for A is "flipped" left to right,
since an increase in the amount of land for use A means moving from the
right end of the horizontal axis to the left. In this particular example, the
demand for A is assumed to be relatively flat; whereas the demand for B is
assumed to be relatively steep.
If a land-use regulation limits the amount of land available for B, we can
indicate that amount with a vertical line. All land to the left of the vertical
line is limited to use B; the remaining land (to the right of the vertical line)
may be used for use A. We can therefore evaluate the effects of the land-use
regulation on the price of land for both uses, given the way we have
characterized the demand for each land use.
The land price for use B is indicated by the intersection of the supply
and the demand, or price P,,. The land price for use A is indicated by the
intersection of the supply and the demand for use A. In this case, all land not
available for use B will be included as the supply for use A, so the
intersection of the vertical supply line and the demand for use A gives us the
price in the market for land use A, PA.
128 ENVIRONMENTAL LA W [Vol. 36:105
Sunnly B Sunnly A
P'B
PB
Po
PA
Figure Al
Prior to the introduction of this land-use regulation, how would land
have been allocated and what would the price of land have been? From the
illustration, we see that the vertical supply line would be removed, and the
demand for one land use would play off, or compete against, the demand for
the other use, leading to an equilibrium price and allocation at P. and Q..
Given the particular way this illustration has been drawn, we can see that
most of the price differential created by the land-use regulation is due to the
large increase in the price of B-lands (PB Po), and only a small reduction in
land prices for land use A can be attributed to the land-use regulation (Po PA).
These demand curves, however, can only represent the competing
demand for land in one location or market. If land-use regulations have also
limited the availability of land for use B in other nearby locations, then some
of the pent-up demand that would have been satisfied elsewhere may spill
over into the market illustrated above. This might shift demand B up (to the
dotted line above "demand B"), which would cause P,, to be even higher
(P'J, with even more of the overall differential between P,, and P,, being due
to a rise in P„ rather than a decline in PA.
For a landowner restricted to use A, the value of an individual
exemption will equal the price differential P,, PA (or P'B PA), since they will be
able to shift from use A to use B.
The magnitude of these results depends on assumptions about how
steep or flat the demand curve for B is relative to the demand curve for A,
and also on whether we assume that markets in other locations are affected,
and whether demand shifts from those markets to this market. It is also
possible that the demand for A could be relatively steep, in which case the
Land use B Qo Land use A
20061 EFFECTS ONLAND PRICES 129
diagram would look like Figure A2 below. We can see that the land-use
regulation, when compared to the unregulated case, causes the price of A-
land be reduced (Po PA), whereas the increase in the price of B-land would be
relatively small (PB Po).
Once again, however, if the land-use regulations restrict the availability
of land for use B in other locations, some of that pent up demand may be felt
in the market/location illustrated in Figure A2. If this were the case, demand
A would shift up (as indicated by the dotted line parallel to demand A) so
that PB would rise to P',
Supply B Supply A
P's
PB
Po
PA
Figure A2
We can depict the case of amenity effects for residential properties by
indicating how the benefits and costs of the land-use regulation will affect
the demand for land in a market with a fixed supply of land. Beginning with
a land base of Q. and an initial land price of Pa, consider how land-use
regulations may affect land prices. If amenity benefits like those discussed
above are increased (government services, environmental amenities, etc.)
this can shift the demand from D. to D,. This shift may include the effect of
spill-over demand from other locations or neighborhoods if residents see the
amenity benefits being more attractive in the market being depicted. Land
prices will rise from Po to P, in the case illustrated.
An individual landowner who was exempted from the land-use
regulations, but was surrounded by lands where the regulations were in
force, would be in a position to benefit from the amenities generated but
without the restrictions or costs that produce them. For example, being free
of building restrictions to protect environmental zoning rules, an exempted
landowner could build or expand their residential buildings in ways that
their neighbors could not. The demand, or willingness to pay, for such an
1 4-
Land use B Qo Land use A
130 ENVIRONMENTAL LA W [Vol. 36:105
exempted property might be reflected in the demand curve D2, and the price
that the exempted property could obtain in the market would be higher than
for conforming properties. Here we see a case where the effect of the land-
use regulation on property values is positive, but at the same time the value
of an individual exemption is also positive.
P,
P,
Po
Figure A3
In cases where amenity effects are combined with scarcity effects (e.g.,
if environmental zoning includes setting aside environmentally sensitive
areas or greenbelts), then the result could be more pronounced. This kind of
change can be characterized as a shift in the supply of land from S° to S', so
that prices P,' and P,' would shift up even more, to where S,' intersects D'
and Dz. Compared to Po, land prices will rise even more as a result of the
land-use regulation, but at the same time the value of an individual
exemption will remain positive.
No Qo
Measuring Compensation Under Measure 37:
An Economist's Perspective
Andrew J. Plantinga
Department of Agricultural and Resource Economics
Oregon State University
Corvallis, OR 97331
plantinga a)ore~onstate.edu
Ph: 541-737-1423
December 9, 2004
Helpful comments on earlier drafts from Gail Achterman, Bill Boggess, Dan Bromley, Emery
Castle, and Bill Jaeger are acknowledged. However, the author alone is responsible for the
content of the paper.
Measuring Compensation Under Measure 37: An Economist's Perspective
Governor Kulongoski recently stated his preference for paying claimants under Measure
37 rather than foregoing enforcement of the state's land-use laws. Many have expressed fears
that such claims could run into the billions of dollars, further straining budgets for education and
other publicly-funded programs. If compensation is paid, the costs of Measure 37 will depend
ultimately on how compensation is determined. Measure 37 does not precisely define how to
compute compensation, leaving the door open to different interpretations. There are several
ways in which compensation might be calculated, all of which involve thinking about how land
markets operate. This white paper provides an economist's perspective on measuring
compensation. What are the different ways in which compensation might be determined? What
do these approaches assume about the operation of land markets?
The text of Measure 37 raises many questions. I only address the issue of how to
determine compensation, using the text of the measure as a reference point. I am interpreting the
text as an economist, not as a legal expert. My expertise is the field of economics, not law. In
addition, the consensus of legal experts I have spoken to is that no body of case law provides
guidance on how to determine compensation. One naturally thinks about parallels with
government takings cases-but this parallel is weak, as discussed below. I will then provide a
simple example to focus my discussion on compensation. Following that, I will propose and
evaluate two approaches to computing compensation and, then, end with some concluding
remarks.
2
What does the text of the measure say about compensation?
There are two important passages in the text of Measure 37 that speak to the issue of how
compensation should be measured:
"Just compensation shall be equal to the reduction in the fair market value of the
affected property interest resulting from enactment or enforcement of the land use
regulation as of the date the owner makes written demand for compensation under
the act."
"Subsection (1) of this act shall not apply to land use regulations enacted prior to
the date of acquisition of the property by the owner..."
The two key points in the first passage are that compensation is for the reduction in fair market
value and that compensation is paid for reductions in value that occurred as of the date the owner
submits a claim. The second passage indicates that the property must have been acquired by the
current owner (or family members) prior to enactment of the regulation.
What does fair market value mean?
To understand compensation under Measure 37, we need a definition offair market
value. Fair market value refers to the price that willing and well-informed buyers and sellers
would agree upon for a piece of property. Some definitions emphasize the notion of competitive
markets; namely, it is the price that would result in a market with a large number of potential
buyers and sellers. A market dominated by a single seller (a monopolist) or a few sellers
(oligopolists) would not be competitive, a point I will return to below.
What does the price of property represent assuming it derives from a competitive market?
Let's consider the price for a parcel of land. Suppose that the parcel can generate an annual
income' for its owner of $100 in perpetuity. How much should this parcel sell for? A buyer
1 Throughout this paper, I will define income as the money taken in by the landowner minus money paid out in
costs. This is sometimes referred to as net income or the net return.
would be indifferent between buying the land, and gaining the $100 annual income stream, and
giving up a sum of money that would generate an identical income stream. Suppose that banks
are offering a 5% annual rate of return on deposits. A $2,000 deposit in a bank would generate
$100 per year in interest. Thus, the income streams from owning the land and investing $2,000
at the bank are the same.
In a competitive market, the land would sell for exactly $2,000. If the seller offered the
parcel at a price higher than $2,000, say $2,500, there would be no buyers because the bank
investment is a better deal. Instead of buying the parcel for $2,500, an investor could invest this
amount at the 5% rate offered by the bank and generate an income stream of $125 per year. This
beats the $100 income stream that the land parcel would provide. By the same argument,
nobody would want to buy the parcel for any amount above $2,000, and the seller would be
forced to lower the asking price. If the price is set below $2,000, say $1,500, then a lot of buyers
would want the parcel. $1,500 invested at 5% yields only $75 annually, and so the land parcel
which generates $100 annually is a better investment. Competition among buyers will bid up the
price of the parcel. As long as the price is below $2,000, another buyer will always want to offer
a little bit more.
As shown, competitive market forces push the price of the land parcel toward $2,000.
This price depends on the stream of income ($100 annually) that can be generated by the land
and the interest rate (5%). The exact relationship2 is:
Current price = Annual income
Interest rate
2 The formula is more complicated when the income stream is expected to change in the future and when there is
uncertainty about the income stream.
4
The current price for land (or any other asset) reflects the annual income stream generated in
perpetuity starting from today. Or, in terms used by economists, the price equals the present
value of the future stream of discounted annual net returns (the difference between revenues and
costs).
Is compensation under Measure 37 prospective or retrospective?
Measure 37 requires compensation for the reduction in fair market value due to land use
regulations as of the date a claim is filed. "As of can have different meanings depending on
context. For example, if I say that my insurance policy takes effect as of next Thursday, I mean
that I will be insured beginning next Thursday and on into the future. In this context, "as of
refers to a prospective change. If I say that the reduction in my weight due to my diet is 5
pounds as of today, I mean that I lost 5 pounds between the time my diet began (some time in the
past) and today. In this context, "as of refers to a retrospective change.
Either of these interpretations could apply to compensation under Measure 37. In the
prospective case, compensation would be paid for the reduction in fair market value on the date
the claim is filed. For example, a regulation might be found to reduce the market value of a land
parcel from $2,000 to $1,000 on a specific date, implying compensation of $1,000. The $1,000
would compensate landowners for the future stream of income losses the landowner would
experience beginning on the date the claim is filed and on into the future. In this case,
compensation is provided today for losses that will be experienced in the future.
In the retrospective case, compensation is paid for the reduction in fair market value
between the time the regulation was enacted and today. For example, a regulation might be
found to have reduced the annual income from a parcel from $100 to $50, implying
5
compensation of $50 for each year the regulation has been in effect. Here, compensation is
provided for losses already sustained by the landowner. This is an appropriate interpretation of
the reduction in fair market value because of the equivalence between the sales price of an asset
and the discounted income stream generated by it.
How is Measure 37 compensation different from compensation in a takings case?
Under the U.S. Constitution, the government is required to compensate a property owner
when it takes his or her property for some public purpose. A typical case is when the
government exercises eminent domain to obtain land for the construction of a public road. In
this case, determining the fair market value of the land is relatively straightforward. It is the
amount for which the owner could sell the land in the absence of any government intervention
(i.e., before the taking occurs). We observe this value (or can estimate it with relative precision)
MEASURE 37 TAKINGS
Fair market value
with no regulation
(hypothetical)
Compensation
Current fair market Current fair market value
value with regulation before takings
(observable) (observable)
Compensation
Higher
values
Value to owner with
takings (equal to zero)
6
because it is generated in the land market that exists prior to the government action. After the
takings, the value of the land to the owner is zero and so the takings has reduced the value to the
landowner by exactly the fair market value prior to the takings. This amount is shown on the
right-hand side of the above illustration.
Under Measure 37, we are asked to compute the reduction in value: specifically, how
much the property would have been sold for without the regulation minus its value with the
regulation. This amount is shown on the left-hand side ofthe above illustration. The difficulty
with measuring the reduction in value-and why this is fundamentally different from a typical
takings case-is that it involves an unobservable hypothetical. Namely, we do not observe a
price without the regulation because the regulation is and has been in effect. We do observe (or
can estimate with relative precision) the value with the regulation because it is generated in a
land market that currently exists, but we need the hypothetical value to calculate the change in
value.
Compensation under a takings is prospective. Property owners are compensated for the
lost income stream that starts today and continues into the future. To compensate owners today
for future losses makes sense in a takings case because the property owner has been deprived of
any entitlement to future income streams. As discussed above, Measure 37 also can be
interpreted as requiring prospective compensation. However, under Measure 37 the property
owner still retains the title to the property and, thus, is entitled to whatever income stream the
property produces in the future. One could argue that, therefore, owners should be compensated
for losses as they occur rather than upfront before they occur. For example, suppose that
compensation is provided prospectively for the effects of a regulation that, five years from now,
7
is abolished. The owner will have been compensated for the entire stream of future losses.
However, after five years, the owner does not experience any actual losses because the regulation
has been removed. Because the owner retains title to the property, he or she receives the higher
income stream and, in effect, is compensated twice for the effects of the regulation.
An example
To make the following discussion concrete, I will focus on an example. Suppose there is
a parcel of agricultural land that was purchased prior to a zoning decision that prohibited
development of the parcel for residential housing. Suppose, further, that at some point after the
zoning regulation was put in effect, development became the most profitable use-that is, the use
that would generate the highest income stream. I will assume that the parcel remained in
agricultural use (because of the zoning restriction) and that, next to development, agriculture was
the most profitable use of the land.
What is the simplest approach to determining compensation?
Consider the following method of determining compensation for the example provided
above. We observe, or can estimate, the amount the land would rent for annually when it is used
for agriculture. This is the annual value of the land with the regulation. We can convert this
amount to a sales price for the parcel by dividing through by the interest rate (see the formula
above). To find the sales price without the regulation, we could hire a land appraiser who could
estimate how much the parcel would sell for if development were allowed on the parcel. We
now have two prices for the parcel-the price assuming the land remains in agricultural use (the
price with the regulation) and the price assuming development is an option (the price without the
8
regulation). If compensation is to be prospective, then it should simply equal the difference
between the two prices:
Prospective compensation =
Price without the regulation - Price with the regulation
If, instead, compensation is retrospective, then we need the annual incomes generated by the
parcel. We get these amounts by multiplying the above prices by the interest rate. Thus,
Retrospective compensation =
(Annual income without the regulation -Annual income with the regulation)
X Number of years regulation has been in effect
Here, the annual loss due to the regulation is multiplied by the number of years the regulation has
been in effect.3 Finally, if the landowner is to be compensated for losses as they occur, rather
than before they occur, compensation would be paid annually and would equal:
Annual compensation =
Annual income without the regulation - Annual income with the regulation
These three methods of determining compensation are straightforward, but carry with them
implicit assumptions about the operation of land markets. I will discuss the most problematic of
these next.
The simple approach treats the landowner like a monopolist
To compute compensation, we need to determine the value of the land without the
regulation. A question we must address is: In this hypothetical case, do we remove the
3 I am assuming that annual income is measured in current dollars (see more discussion of current dollars below) and
that landowners are not to be compensated for foregone investment opportunities-namely, the opportunity to have
invested historical losses due to the regulation.
9
regulation from only the single parcel under consideration, or do we remove it from all parcels
subject to the regulation? The simple approach sketched above assumed the regulation was
removed only from the parcel being evaluated. The land appraiser estimated how much the
parcel could sell for if development were allowed. This implicitly assumes the regulation still
applies to other parcels. In other words, we computed compensation under the assumption that
the landowner had exclusive rights to develop land previously subject to the regulation. Or, we
computed the income that would have accrued to a monopolist in the land market. In doing this,
we are allowing the landowner to benefit-get higher compensation-from the restrictions
imposed by the regulation on other properties.
There are two immediate objections to computing development income in this way.
First, anyone whose property is affected by the regulation is eligible for compensation. This is
an argument for why our hypothetical value should be defined under the assumption that all such
landowners pursue development. Second, the text of the measure refers to the reduction in fair
market value. As discussed above, this is often interpreted as the sales price in a competitive
market characterized by a large number of potential buyers and sellers. Assuming that only a
single owner can develop a parcel would be incompatible with the definition of fair market
value.
What would be the value of the land assuming the regulation does not apply anywhere?
If the zoning regulation currently restricts development of a large number of agricultural parcels,
then in the hypothetical world without the regulation a single agricultural parcel will just be one
of many that could be developed. Competition will drive down the value of the parcel for
development. Suppose that the agricultural parcel in our example is located relatively far from
centers of economic activity and does not have any distinguishing characteristics (e.g., a scenic
10
view). If this is the only parcel without the development restriction, then the development value
could be high. But, if the zoning regulation is removed from all parcels, then the development
value of this unexceptional parcel is likely to be quite low. Indeed, it could be the case that in
this hypothetical world, agriculture-not development is the most profitable use of this parcel.
If this is true, then the value with and without the regulation is the same, suggesting
compensation should be zero.
The above discussion suggests that locational advantages and unique characteristics will
increase the value of parcels for development. In a competitive market, these features of the
parcel would "earn" income, relative to parcels without such features. The zoning regulation
denies the landowner the opportunity to realize this income. If we can value these distinguishing
attributes of a parcel, then we have an estimate of the compensation required under Measure 37.
Economists have developed a technique-hedonic price analysis-for doing just this. The
details of hedonic price models are beyond the scope of this paper, but the basic idea is to
separate prices for property (land, houses, etc.) into components measuring the value of each
attribute.4 In principle, the results of these studies could be used to develop compensation
schedules listing how much owners would be paid given the particular attributes of their parcel.
This would, however, be a challenging and substantial undertaking.
Can compensation be based on the original purchase price?
When an individual purchases a parcel of land, he or she is acquiring the income stream
generated by the land. More specifically, the price of the land will reflect the market's valuation
4 For example, Oregon State University researchers estimated the effects of elevation on housing values in Portland,
Oregon. For each 100 foot gain in elevation, the price of housing increased by $2.39 per square feet (or about
$5,000 for a 2,000 square foot house). The citation for this study is: Wu, J., Adams, R.M., and A.J. Plantinga.
2004. Amenities in an Urban Equilibrium Model: Residential Development in Portland, Oregon. Land Economics
80(1):19-32.
11
of the income stream assuming the land is allocated to its most profitable use. Why the most
profitable use? Suppose the price of the land was based on a use that generates a smaller income
stream. Then, buyers could make money by purchasing the parcel and allocating it to its most
profitable use. In a competitive market, many buyers will try to do this, and they will bid up the
price of the land until its price exactly reflects the stream of income from the most profitable use.
Measure 37 provides compensation only to individuals who acquired property before the
regulation went into effect. As such, the original purchase price of the property for qualifying
claimants should reflect the income stream that would have accrued to the landowner in the
absence of the regulation. The regulation forced the owner to accept a lower-valued income
stream. In my example, this is the income from agriculture. Suppose we convert the annual
agricultural income to a price for the parcel by dividing through by the interest rate. Then,
compensation could be calculated as:
Compensation = Original purchase price - Price with the regulation
We would need to express prices in current dollars to account for inflation since the property was
purchased. The point here is that prices for all goods tend to rise over time. This general price
inflation implies, for example, that $1 had greater purchasing power in 1965 than it does today.
The consumer price index can be used to convert dollars from an earlier year to current dollars.s
For example, a parcel of land purchased for $325 in 1965 would have a price of $1,970 in current
dollars.
Compensation calculated in this way would be retrospective and prospective. It would
compensate owners for losses between the time the regulation when into effect and the present
5 See the inflation calculator at littj2.://www.bls.(,oN,/~qpi~/h.ome.htm.
12
and losses from now into the future. This approach has the advantage, in many instances, of
using observable, rather than hypothetical, values. Often, the original purchase price is
observable. In many cases, it will be the value generated when the regulation does not apply to
any parcels-that is, it will be a fair market value.6 Likewise, the income from agriculture is
observable. This is the value generated in the existing world with the regulation.
One possible objection to this approach is that the market might have anticipated the
eventual enactment of the regulation. If participants in the land market could see the regulation
coming, then the original purchase price would not reflect the potential stream of income from
development. This may seem to be a weakness of this approach, but, from one perspective, it is
a strength. If the market anticipated the regulation, the landowner would have paid less for the
property. In the extreme case, if the zoning restriction was predicted perfectly, the original price
of the parcel would have reflected the stream of income from agriculture. As such, there is no
difference between the income stream the landowner paid for originally and the income stream
realized by the landowner. In fact, whatever the market anticipated, this approach always gets it
right. The difference between the original purchase price and the income from agriculture equals
the income stream landowners paid for when they purchased the property, but were later denied
by the regulation.
There is a practical side to basing compensation on the original purchase price.
Presumably, claimants have to demonstrate that they have owned the property since before the
regulation was enacted. They could be required to produce a document at the same time
showing the original purchase price of the property. But, what if the sales price was for a
collection of assets? In our example, the owner may have purchased agricultural land, buildings,
6 Exceptions could arise with regulations that are enacted over time. But, in any case, owners would still be
compensated correctly for lost income (see below).
13
farm equipment, and so on. However, it is only the value of the land that is affected by the
regulation. Thus, we need a price (or appraisal) of the land separate from the other assets. This
may not be available, and could be difficult to reconstruct.
Concluding remarks
My main conclusion is that determining compensation under Measure 37 is not going to
be easy. I have examined what I consider to be two logical approaches to measuring
compensation: 1) a simple approach that considers the difference between current estimates of
market value with and without the regulation and 2) an approach that considers the difference
between the original purchase price and the market value with the regulation. As I have tried to
demonstrate, both approaches have potential problems.
My assessment is that the problems are particularly severe with the simple approach
based on current estimates of market value. This approach requires us to imagine a hypothetical
world without the regulation. Defining that world as one in which landowners are participants in
a competitive land market seems logical and consistent with the idea of fair market value.
Otherwise, we are allowing owners to benefit from restrictions imposed by the regulation on
other property owners. As well, the order in which claims are submitted matters, with early
claimants receiving more compensation. However, obtaining accurate estimates of property
values under the assumption of competitive markets will require the use of sophisticated
valuation techniques such as hedonic price analysis.
Basing compensation on the original purchase price of the property is more
straightforward because it typically would involve observable instead of hypothetical values. In
this case, landowners are compensated for the income stream they paid for when they purchased
14
the property, but that was later denied by the regulation. Basing compensation on the original
purchase price also treats all landowners the same-that is, landowners assumed to be
participants in a competitive, rather than monopolistic, market. As I understand it, there is legal
precedent for viewing compensation in this way. However, the major obstacle to this approach
is that the affected property may be bundled other assets included in the original transaction.
15
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IN THE CIRCUIT COURT OF THE STATE OF OREGON
FOR THE COUNTY OF DESCHUTES
PAUL J. LIPSCOMB,
Plaintiff,
V.
BOARD OF COMMISSIONERS OF
DESCHUTES COUNTY,
Defendant,
No. 05CV-0546ST
GENERAL JUDGMENT
and
0. KEITH CYRUS and CONIDA CYRUS,
Intervenors.
THIS MATTER came before the Court on Writ of Review filed by Plaintiff against
Defendant Board of Commissioners of Deschutes County. O. Keith Cyrus and Conida Cyrus
intervened. Briefs were filed by Plaintiff (opening and reply) as well as Defendant and
Intervenors.
On October 2, 2006 the Court heard oral argument. Plaintiff was represented by
Thomas C. Tankersley, of Drabkin, Tankersley & Wright, LLC, Defendant was represented
by Mark Pilliod, Deschutes County Legal Counsel, and Intervenors were represented by Ross
Dal, of Oregonians in Action Legal Center.
The Court having considered the briefs submitted by the parties and the arguments of
counsel, makes the following findings:
1. The most basic principal of Measure 37, ORS 197.352, is that before the
County can grant a compensation claim (or in the alternative, once the requirements
Page I - GENERAL JUDGMENT
DRABKIN, TANKERSLEY & WRIGHT, LLC
P.O. Box 625; 701 N.E. Evans Street
McMinnville, Oregon 97128
(503) 472-0344
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must first find that there is a reduction in the value of real property due to a land use
regulation enacted after the date of acquisition of the real property. The County
cannot make such a finding without identifying the specific regulation(s), the date of
acquisition, and proof of the reduction in value of the property because of the
regulation.
2. The County Commissioners found that there is no evidence demonstrating
current regulations have reduced the value of the subject property:
"The Board concurs with the Administrator's Report that there is no evidence
which demonstrates that the current procedure and regulations for land division and
development applications and approval have reduced the value of the subject
property."
The standard of review is whether there is substantial evidence to support this
finding. This Court finds that the County's conclusion that there is no evidence in the
record of a reduction of value is supported by substantial evidence.
3. In spite of that finding, and in spite of the requirements of the Deschutes
County Code and Measure 37 itself, the County granted a waiver. The Court finds
that this was error by the County. The decision to grant a waiver was inconsistent
with the finding and the Court cannot reconcile the granting of the waiver with the
finding.
4. Similarly, the Court finds that the County's finding that there was insufficient
proof of feasibility presented is also supported by substantial evidence in the record:
"The Board concurs with the administrator that claimants have not
demonstrated that domestic water, septic, and road access for the desired use of the
subject properties are feasible."
Page 2 - GENERAL JUDGMENT
DRABKIN, TANKERSLEY & WRIGHT, LLC
P.O. Box 625; 701 N.E. Evans Street
McMinnville, Oregon 97128
(503) 472-0344
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5. Plaintiff is also correct that the applicable zoning regulations specifically
incorporated by its terms any other applicable more restrictive state or county
regulations. Because Section 2.060 of the county zoning ordinance itself incorporated
them, the more restrictive state regulations must be considered by the Commissioners
in determining whether subsequent County regulations actually reduce the fair market
value of Intervenor's property, and whether the proposed use is feasible in light of
those state regulations:
"If the conditions imposed by a provision of this ordinance are less restrictive
than the comparable conditions imposed by another provision of this ordinance or of
any other County or state regulations. The provision which is more restrictive shall
govern."
6. The County erred in granting the Measure 37 waiver without evidence that a
particular regulation enacted after the date of acquisition has reduced the value of the
property.
7. On remand, the County must follow state law and its own rules and determine
the necessary components for an application to be accepted, to be processed, and to
be approved. As part of its determination the County must determine whether
feasibility is a necessary criteria, to what extent feasibility must be proven, and what
level of proof of reduction in value is required. The County may also reconsider other
matters pertaining to application of its own ordinance.
NOW, THEREFORE, it is ordered and adjudged as follows:
1. This matter is remanded to the Board of Commissioners of Deschutes County,
pursuant to ORS 34.100.
2. The County shall take action in accordance with this Court's decision.
3. The County shall follow state law and its own ordinance.
Page 3 - GENERAL JUDGMENT
DRABKIN, TANKERSLEY & WRIGHT, LLC
P.O. Box 625; 701 N.E. Evans Street
McMinnville, Oregon 97128
(503) 472-0344
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4. The County shall interpret its ordinances to clarify the issues raised in the
II Petition for Review.
5. If the County grants a waiver with respect to any parcel, it shall specify the
particular regulation enacted after the date of acquisition of that parcel that reduced the fair
market value of the specified parcel.
6. As a prerequisite to granting a waiver or ordering compensation, the County
shall determine for each parcel of property the date of acquisition of the property and the
specific land use regulation enacted or enforced after that date which reduced the fair market
value of the real property.
7. The County shall interpret its own ordinance to determine to what extent an
incomplete application can be processed, and whether an incomplete application can be
processed to final order allowing waiver.
8. The County shall determine to what extent and by what evidence feasibility
needs to be established, and what evidence is necessary to establish reduction in value,
although such matters are later subject to judicial review, if requested.
9. The County shall determine the effect of the regulations in place prior to the
date of acquisition by determining what, if any, more restrictive state or county regulations
existed and were incorporated in that regulation, and then compare that with any regulation
presently in effect in determining reduction of value. (This Judgment does not make that
determination.)
10. Nothing in this Judgment precludes the County from determining whether Tax
Lot 15-10-13-100, which Mr. Fitch sought to add to the application by letter, is subject to
Measure 37 compensation or waiver.
Page 4 - GENERAL JUDGMENT
DRABKIN, TANKERSLEY & WRIGHT, LLC
P.O. Box 625; 701 N.E. Evans Street
McMinnville, Oregon 97128
(503) 472-0344
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11. Plaintiff is granted a money award against Defendant and Intervenors, jointly
and severally, for his costs and disbursements incurred herein in the amount of $
DATED this day of January, 2007.
Stephen N. T> tm
Circuit Court Judge
SUBMITTED BY:
Thomas C. Tankersley, OSB #75361
Attorney for Plaintiff
Drabkin, Tankersley & Wright, LLC
Attorneys At Law
701 NE Evans Street
PO BOX 625
McMinnville, OR 97128
(503) 472-0344
Page 5 - GENERAL JUDGMENT
DRABKIN, TANKERSLEY & WRIGHT, LLC
P.O. Box 625; 701 N.E. Evans Street
McMinnville, Oregon 97128
(503) 472-0344
CERTIFICATE OF SERVICE
I hereby certify that I served the foregoing General Judgment on Mark O. Pilliod,
Deschutes County Counsel, and Ross Day, attorney for Intervenors, on the 8t' day of
February, 2007, by causing to be mailed to them a true and correct copy thereof, certified by
me as such. I further certify that said copy was placed in a sealed envelope addressed as
follows:
Mark Pilliod
Deschutes County Counsel
1300 NW Wall St., Suite 200
Bend, OR 97701
Ross Day
Oregonians in Action Legal Center
PO Box 230637
Tigard, OR 97281
said sealed envelope was then deposited in the United States post office at McMinnville,
Oregon, on the day last above mentioned, with the postage thereon fully paid.
/s/ Thomas C. Tankersley
STATE OF OREGON )
) ss.
County of Yamhill )
Thomas C. Tankersley
Attorney for Plaintiff
I hereby certify that I have prepared the foregoing copy of General Judgment and have
carefully compared the same with the original thereof, and that it is a correct copy therefrom
and of the whole thereof.
Dated February 8, 2007.
Tho C. Tankersley
Attorney for Plaintiff
DRABKIN, TANKERSLEY & WRIGHT, LLC
P.O. Box 625; 701 North Evans Street
McMinnville, Oregon 97128
Phone: (503) 472-0344; Fax: (503) 472-7629; E-mail: lawyers@oregon.com
BALLOT MEASURE 37 (CHAPTER 1, OREGON LAWS 2005)
CLAIM FOR COMPENSATION
OREGON DEPARTMENT OF LAND CONSERVATION AND DEVELOPMENT
Final Staff Report and Recommendation
September 2, 2005
STATE CLAIM NUMBER:
M120089
Report B
NAME OF CLAIMANTS:
MAILING ADDRESS:
PROPERTY IDENTIFICATION:
OTHER CONTACT INFORMATION:
DATE RECEIVED BY DAS:
180-DAY DEADLINE:
0. Keith Cyrus and Conida E. Cyrus
16850 Jordan Road
Sisters, Oregon 97759
Township 15S, Range 10E, Section 12,
Tax Lots 500 and 7001
Deschutes County
Edward P. Fitch
P.O. Box 457
Redmond, Oregon 97756
March 10, 2005
September 6, 2005
I. SUMMARY OF CLAIM
The claimants, O. Keith and Conida Cyrus, seek compensation in the amount of $21,000,000 for
the reduction in fair market value as a result of certain land use regulations that are alleged to
restrict the use of certain private real property. The claimants desire compensation or the right to
subdivide and develop the two tax lots into 5-acre parcels. Tax lot 500 is 80-acres and tax lot
700 is 118.8-acres. The property is located at 16580 Jordan Road, Sisters. (See claim.)
II. SUMMARY OF STAFF RECOMMENDATION
Based on the findings and conclusions set forth below, the Department of Land Conservation and
Development (the department) has determined that the claim is valid. Department staff
t In a letter dated August 8, 2005, the claimants' attorney indicated that the original claim incorrectly "lumped
together" tax lot 700 and tax lot 100 of Township 15S, Range 10E, Section 13, referring to both tax lots as tax lot
700 of Section 12. This report addresses only tax lot 700. Tax lot 100, which the attorney now asserts to be 312.2
acres, is not a part of this claim and is not considered in this report. The State of Oregon will consider the
August 8, 2005 letter to be a new claim for compensation under Ballot Measure 37 for tax lot 100 as of the date it
was received, August 10, 2005.
M120089 - O. Cyrus (Report B)
recommends that, in lieu of compensation, the requirements of the following state laws enforced
by the Land Conservation and Development Commission (the Commission) or the department,
not apply to O. Keith and Conida Cyrus' division and development of the properties for
residential purposes: Statewide Planning Goals 3 (Agricultural Lands), ORS 215 and applicable
provisions of OAR 660, division 33. These laws will not apply to the claimants only to the
extent necessary to allow the Cyrus' a use of tax lot 700 permitted at the time they acquired it in
February, 1965 and a use of tax lot 500 permitted at the time they acquired it on July 1, 1974.
(See the complete recommendation in Section VI. of this report.)
III. COMMENTS ON THE CLAIM
Comments Received
On Marchl7, 2005, pursuant to OAR 125-145-0080, the Oregon Department of Administrative
Services (DAS) provided written notice to the owners of surrounding properties. According to
DAS, one written comment was received in response to the 10-day notice. The comment is
relevant to whether the law(s) that are the basis for the claim are exempt under section 3 of
Measure 37, in that it questions whether the soils involved can handle the septic systems required
by the density of the development, and whether the resulting septic systems will threaten
subsurface water supplies. The comment has been considered by the department in preparing
this report.
IV. TIMELINESS OF CLAIM
Requirement
Ballot Measure 37, Section 5, requires that a written demand for compensation be made:
1. For claims arising from land use regulations enacted prior to the effective date of the Measure
(December 2, 2004), within two years of that effective date or the date the public entity applies
the land use regulation as an approval criteria to an application submitted by the owner,
whichever is later; or
2. For claims arising from land use regulations enacted after the effective date of the Measure
(December 2, 2004), within two years of the enactment of the land use regulation, or the date the
owner of the property submits a land use application in which the land use regulation is an
approval criteria, whichever is later.
Findings of Fact
This claim was submitted to DAS on March 10, 2005, for processing under OAR 125,
division 145. The claim identifies "all state land use goals and guidelines and every ordinance of
Deschutes County adopted since 1971/72 that restricts ability to divide and develop the
property." Only laws that were enacted prior to December. 2, 2004, the effective date of
Measure 37 are the basis for this claim. (See citations of statutory and administrative rule history
of the Oregon Revised Statutes and Oregon Administrative Rules.)
M120089 - O. Cyrus (Report B) 2
Conclusions
The claim has been submitted within two years of December 2, 2004, the effective date of
Measure 37, based on land use regulations adopted prior to December 2, 2004, and is therefore
timely filed.
V. ANALYSIS OF CLAIM
1. Ownership
Ballot Measure 37 provides for payment of compensation or relief from specific laws for
"owners" as that term is defined in the Measure. Ballot Measure 37, Section 11(C) defines
"owner" as "the present owner of the property, or any interest therein."
Findings of Fact
The claimants, O. Keith and Conida Cyrus, acquired tax lot 700 on February 12, 1965, as
reflected by a Warranty Deed included with the claim. They acquired tax lot 500 on
July 1, 1974, as reflected by a Warranty Deed included with the claim. Copies of Title Reports
dated February 24 and February 25, 2005, indicate that O. Keith and Conida Cyrus are the
current owners of the subject properties.
Conclusions
The claimants, O. Keith and Conida Cyrus are "owners" of the subject property, as that term is
defined by Section 11(C) of Ballot Measure 37.
2. The Laws that are the Basis for this Claim
In order to establish a valid claim, Section 1 of Ballot Measure 37 requires, in part, that a law
must restrict the claimant's use of private real property in a manner that reduces the fair market
value of the property relative to how the property could have been used at the time the claimant
or a family member acquired the property.
Findings of Fact
Tax Lot
Acreage
Current zoning
Acquisition
Date
Zoning at date
of Acquisition
15-10-12 500
80
EFU
Jul 1, 1974
A-1
116
15-10-12 700
EFU
February 12,
none
Hi h value
1965
M120089 - O. Cyrus (Report B)
The claim identifies "All state land use goals and guidelines and every ordinance of Deschutes
County adopted since 1971/72 that restricts ability to divide and develop properties." The claim
indicates that the claimants intend to divide the properties into 5-acre parcels. Tax lots 500
and 700 are currently zoned Exclusive Farm Use (EFU).
The claim is based on Deschutes County's current EFU Zone and the applicable provisions of
state law that require such zoning. Tax lots 500 and 700 are zoned EFU as required by Goal 3 in
accord with OAR 660, division 33, and ORS 215 because the claimants' property is
"Agricultural Land" as defined by Goal 3. Goal 3 became effective on January 25, 1975, and
required that Agricultural Lands as defined by the Goal be zoned EFU pursuant to ORS 215.
Current land use regulations, particularly ORS 215.263, 215.284, 215.780 and OAR 660,
division 33, as applied by Goal 3, do not allow the subject property to be divided into parcels less
than 80-acres and establish standards for allowing the existing or any proposed parcel(s) to have
farm or non-farm dwellings on them.
ORS 215.780 established an 80-acre minimum size for the creation of new lots or parcels in
EFU zones and became effective November 4, 1993 (Chapter 792, Oregon Laws 1993).
ORS 215.263 (2003 edition) establishes standards for the creation of new parcels for non-farm
uses and dwellings allowed in an EFU zone.
OAR 660-033-0135 (applicable to farm dwellings) became effective on March 1, 1994, and
interprets the statutory standard for a primary dwelling in an EFU zone under
ORS 215.283(1)(f).
OAR 660-033-0130(4) (applicable to non-farm dwellings) became effective on August 7, 1993,
and was amended to comply with ORS 215.284(4) on March 1, 1994. Subsequent amendments
to comply with HB 3326 (Chapter 704, Oregon Laws 2001, and effective January 1, 2002) were
adopted by the Commission effective May 22, 2002. (See citations of administrative rule history
for OAR 660-033-0100, 0130 and 0135.)
The claimants acquired tax lot 700 in February, 1965, prior to the establishment of the Statewide
Planning Goals and their implementing statutes and rules. No Deschutes County zoning applied
to the subject property in 1965.
The claimants acquired tax lot 500 on July 1, 1974. In 1974 County zoning was A-1, an
Exclusive Agricultural zone which allowed buildings and uses customarily provided in
conjunction with farm use. The minimum lot size was 5-acres, with some exceptions. However,
because the claimants acquired tax lot 500 after the adoption of SB 100 (chapter 80, Oregon
Laws 1973, effective October 5, 1973) but before the adoption of the Statewide Planning Goals
effective January 25, 1975, the property was also subject to the Statewide Interim Goals. Under
the Interim Goals, ORS 197.175(1) and 197.280 (1973 edition) required, in addition to any local
plan or zoning provisions, the application of interim land use goals set forth in ORS 215.515
(1973 edition) to the preparation, revision, adoption or implementation of any comprehensive
plan prior to the effective date of the Statewide Planning Goals (see Petersen v. Klamath Falls,
279 Or 249 (1977)).
M 120089 - O. Cyrus (Report B) 4
Conclusions
The zoning requirements, minimum lot size and dwelling standards established by Statewide
Planning Goal 3 (Agricultural Lands) and provisions applicable to land zoned EFU in ORS 215
and OAR 660, division 33 were all enacted after O. Keith and Conida Cyrus acquired ownership
of tax lot 700 in February 1965, and do not allow the division and development of the properties,
thereby restricting the use of the property relative to the uses allowed when the property was
acquired by them in 1965.
OAR division 33 and provisions of ORS 215 were enacted after O. Keith and Conida Cyrus
acquired ownership of tax lot 500 in 1974, and do not allow the division and development of tax
lot 500. While the extent of development permitted on July 1, 1974 is not clear, it may have
been possible to divide and development the property to some extent under provisions in effect
in July, 1974, in accordance with the Interim Planning Goals set forth in ORS 215.515 (1973
edition).
This report addresses only those state laws that are identified in the claim, or that the department
is certain apply to the property based on the use that the claimants have identified. There may be
other laws that currently apply to the claimants' use of the property, and that may continue to
apply to the claimants' use of the property, that have not been identified in the claim. In some
cases it will not be possible to know what laws apply to a use of property until there is a specific
proposal for that use. When the claimants seek a building or development permit to carry out a
specific use, it may become evident that other state laws apply to that use.
3. Effect of Regulations on Fair Market Value
In order to establish a valid claim, Section 1 of Ballot Measure 37 requires that any land use
regulation described in Section V. (2) of this report must have "the effect of reducing the fair
market value of the property, or any interest therein."
Findings of Fact
The claim includes an informal estimate of $21,000,000 as the reduction in the property's fair
market value as a result of regulations enacted after the claimants acquired the subject property.
This estimate is based on the claimants' "information and belief." The calculation (gross
developed value minus current value and development costs) for loss of fair market value for
each property is estimated at $3 million for tax lot 500 and $18 million for tax lot 700.
Conclusions
As explained in section V.(1) of this report, the current owners are O. Keith and Conida Cyrus
who acquired the properties on February 12, 1965, and July 1, 1974. Under Ballot Measure 37,
0. Keith and Conida Cyrus are due compensation for land use regulations that restrict the use of
the subject property in a manner that reduces its fair market value. Based on the findings and
conclusions in Section V.(2) of this report, land use regulations adopted since the claimants
M 120089 - O. Cyrus (Report B) 5
acquired the properties in 1965 and 1974 restrict the use of the properties. The claimants
estimate the reduction in value due to the land use restrictions to be $21,000,000.
Without an appraisal based on the value of five-acre parcels or other documentation, it is not
possible to substantiate the specific dollar amount the claimants demand for compensation.
Nevertheless, based on the submitted information, the department determines that it is more
likely than not that there has been some reduction in the fair market value of the subject property
as a result of land use regulations enforced by the Commission or the department.
4. Exemptions under Section 3 of Measure 37
Ballot Measure 37 does not apply to certain land use regulations. In addition, under Section 3 of
the Measure, certain types of laws are exempt from the Measure.
Findings of Fact
The claim includes a general reference to any state land use regulation that restrict the use of the
property after 1971 or 1972. These provisions include Statewide Planning Goal 3 (Agricultural
Lands), and applicable provisions of ORS 215 and OAR 660, division 33, which Deschutes
County has implemented through its EFU zone. With the exception of provisions of ORS 215 in
effect on July 1, 1974 as to tax lot 500, none of these laws appear to be exempt under
Section 3(E) of Ballot Measure 37, which exempts laws in effect when the claimants acquired
the property.
A comment on this claim by a neighbor raises questions of harm to well water supplies and soils
based on the density of proposed development and septic system requirements for same. Public
healthy and safety regulations are exempt under Section 3(B) of Measure 37.
Conclusions
Without a specific development proposal for the properties, it is not possible for the department
to determine what laws may apply to a particular use of the properties, or whether those laws
may fall under one or more of the exemptions under Measure 37. It does appear that the general
statutory, goal and rule restrictions on residential development and use of farm land apply to the
claimants' use of the properties, and for the most part these laws are not exempt under
section 3(E) of Measure 37. Provisions of ORS 215 in effect when the claimants acquired tax lot
500 in 1974 are exempt under section 3(E) of the Measure and will continue to apply to the
property.
Laws in effect when the claimants acquired the properties are exempt under Section 3(E) of
Measure 37, and will continue to apply to the claimants' use of the property. There may be other
laws that continue to apply to the claimants' use of the properties that have not been identified in
the claim. In some cases it will not be possible to know what laws apply to a use of properties
until there is a specific proposal for that use. When the claimants seek a building or development
permit to carry out a specific use, it may become evident that other state laws apply to that use.
Some of those laws may be exempt under subsections 3(A) to 3(D) of Measure 37. In particular,
M120089 - O. Cyrus (Report B) 6
in addition to others that have not yet been identified, some regulations may be exempt under
Section 3(B) of Measure 37, based on public health and safety requirement including those
related to siting septic systems and protection for drinking water required in conjunction with
residential development.
This report addresses only those state laws that are identified in the claim, or that the department
is certain apply to the properties based on the use that the claimants have identified. Similarly,
this report only addresses the exemptions provided for under Section (3) of Measure 37 that are
clearly applicable given the information provided to the department in the claim. The claimants
should be aware that the less information they have provided to the department in their claim, the
greater the possibility that there may be additional laws that will later be determined to continue
to apply to their use of the property.
VI. FORM OF RELIEF
Section 1 of Measure 37 provides for payment of compensation to an owner of private real
property if the Commission or the department has enforced a law that restricts the use of the
property in a manner that reduces its fair market value. In lieu of compensation, the department
may choose to not apply the law in order to allow the present owner to carry out a use of the
property permitted at the time the current owner acquired the property. The Commission, by
rule, has directed that if the department determines a claim is valid, the Director must provide
only non-monetary relief unless and until funds are appropriated by the legislature to pay claims.
Findings of Fact
Based on the findings and conclusions set forth in this report, laws enforced by the Commission
or the department restrict the division of the subject properties into parcels or lots, and the use of
the property for residential purposes. The claimants cannot create the desired five-acre parcels
out of the subject properties, or develop those lots because laws enacted after the claimants
acquired the properties prohibit lot sizes that small, and establishment of residential dwellings.
The claim asserts the laws enforced by the Commission or department reduce the fair market
value of the subject property by $21,000,000. However, because the claim does not provide an
appraisal or other specific documentation to establish how the specified restrictions reduce the
fair market value of the property, and because the level of development permitted in 1974 when
the claimants acquired tax lot 500 is not clear, a specific amount of compensation cannot be
determined. Nevertheless, based on the record for this claim, the department acknowledges that
the laws on which the claim is based likely have reduced the fair market value of the property to
some extent.
No funds have been appropriated at this time for the payment of claims. In lieu of payment of
compensation, Ballot Measure 37 authorizes the department to modify, remove or not apply all
or parts of certain land use regulations to allow O. Keith and Conida Cyrus to use the subject
property for a use permitted at the time they acquired tax lot 700 in 1965 and tax lot 500 in 1974.
As stated above, the claimants acquired tax lot 500 after the adoption of SB 100 (chapter 80,
Oregon Laws 1973, effective October 5, 1973) but before the adoption of the Statewide Planning
M 120089 - O. Cyrus (Report B) 7
Goals effective January 25, 1975. As such, ORS 197.175(1) and 197.280 (1973 edition)
required, in addition to any local plan or zoning provisions, the application of interim land use
goals set forth in ORS 215.515 (1973 edition) to the preparation, revision, adoption or
implementation of any comprehensive plan prior to the effective date of the Statewide Planning
Goals (see Petersen v. Klamath Falls, 279 Or 249 (1977)).
Conclusion
Based on the record, the department recommends that the claim be approved, subject to the
following terms:
1. In lieu of compensation under Measure 37, the State of Oregon will not apply the following
laws to the Cyrus' division and development of the 198.8-acre property into 5-acre parcels: for
tax lot 700 applicable provisions of Statewide Planning Goals 3, ORS 215, and OAR 660,
division 33, enacted after February 12, 1965; and, for tax lot 500, applicable provisions of
Statewide Planning Goal 3, ORS 215, and OAR 660, division 33, enacted after July 1, 1974.
These land use regulations will not apply to the Cyrus' use of their property only to the extent
necessary to allow the claimants a use permitted at the time they acquired tax lot 700 on
February 12, 1965, and tax lot 500 on July 1, 1974.
2. The action by the State of Oregon provides the state's authorization to the claimants to use
their property subject to the standards in effect on February 12, 1965, for tax lot 700 and
July 1, 1974, for tax lot 500. On July 1, 1974, tax lot 500 was subject to the Interim Planning
Goals, as discussed in Section V(2). Tax lot 500 may also have been subject to provisions of
ORS 215.213.
3. To the extent that any law, order, deed, agreement or other legally enforceable public or
private requirement provides that the property may not be used without a permit, license, or other
form of authorization or consent, the order will not authorize the use of the property unless the
claimants first obtain that permit, license or other form of authorization or consent. Such
requirements may include, but are not limited to: a building permit, a land use decision, a permit
as defined in ORS 215.402 or ORS 227.160, other permits or authorizations from local, state or
federal agencies, and restrictions on the use of the property imposed by private parties.
4. Any use of the property by the claimants under the terms of the order will remain subject to
the following laws: (a) those laws not specified in (1) above; (b) any laws enacted or enforced
by a public entity other than the Commission or the department; and (c) those laws not subject to
Measure 37 including, without limitation, those laws exempted under section (3) of the Measure.
5. Without limiting the generality of the foregoing terms and conditions, in order for the
claimants to use the property, it may be necessary for them to obtain a decision under
Measure 37 from a city and/or county and/or metropolitan service district that enforce land use
regulations applicable to the property. Nothing in this order relieves the claimants from the
necessity of obtaining a decision under Measure 37 from a local public entity that has
jurisdiction to enforce a land use regulation applicable to a use of the property by the claimants.
M 120089 - O. Cyrus (Report B)
VII. COMMENTS ON THE DRAFT STAFF REPORT
The department issued its draft staff report on this claim on August 15, 2005. OAR 125-145-
0100(3), provided an opportunity for the claimant or the claimant's authorized agent and any
third parties who submitted comments under OAR 125-145-0080 to submit written comments,
evidence and information in response to the draft staff report and recommendation. Comments
received have been taken into account by the department in the issuance of this final report.
M120089 - O. Cyrus (Report B) 9
BALLOT MEASURE 37 (CHAPTER 1, OREGON LAWS 2005)
CLAIM FOR COMPENSATION
OREGON DEPARTMENT OF LAND CONSERVATION AND DEVELOPMENT
Final Staff Report and Recommendation
September 2, 2005
STATE CLAIM NUMBER:
M120089
Report C
NAME OF CLAIMANTS:
MAILING ADDRESS:
PROPERTY IDENTIFICATION:
OTHER CONTACT INFORMATION:
DATE RECEIVED BY DAS:
180-DAY DEADLINE:
0. Keith and Conida Cyrus
16850 Jordan Road
Sisters, Oregon 97759
Township 15S, Range 10E, Section 01,
Tax Lot 400
Township 15S, Range 11E, Section 06,
Tax Lots 1500 and 1600
Deschutes County
Edward Fitch
Post Office Box 457
Redmond, Oregon 97756
March 10, 2005
September 6, 2005
1. SUMMARY OF CLAIM
The claimants, O. Keith and Conida Cyrus, seek compensation in the amount of $2,500,000 for
the reduction in fair market value as a result of certain land use regulations that are alleged to
restrict the use of certain private real property. The claimants desire compensation or the right to
divide and develop the approximately 179-acre property into 29 five-acre lots and to establish a
dwelling on each lot. The property consists of three tax lots located at 17198 and 17204
Highway 126 in Deschutes County near the City of Sisters. (See claim.)
II. SUMMARY OF STAFF RECOMMENDATION
Based on the findings and conclusions set forth below, the Department of Land Conservation and
Development (the department) has determined that the claim is valid. Department staff
recommends that, in lieu of compensation, the requirements of the following state laws enforced
by the Land Conservation and Development Commission (the Commission) or the department,
not apply to O. Keith and Conida Cyrus' subdivision of the properties into five-acre lots and the
M 120089 - O. Cyrus (Report C)
establishment of a dwelling on each lot: the applicable provisions of Statewide Planning Goal 3
(Agricultural Lands), ORS 215 and applicable provisions of OAR 660, division 33. These laws
will not apply to the claimants use of the properties only to the extent necessary to allow O.
Keith and Conida Cyrus a use permitted at the time they acquired Tax Lots 1500 and 1600 on
May 15, 1972, and to allow Conida Cyrus a use of Tax Lot 400 permitted at the time she
acquired it on June 1, 1974. (See the complete recommendation in Section VI. of this report.)
III. COMMENTS ON THE CLAIM
Comments Received
On March 17, 2005, pursuant to OAR 125-145-0080, the Oregon Department of Administrative
Services (DAS) provided written notice to the owners of surrounding properties. According to
DAS, one written comment, evidence or information was received in response to the 10-day
notice.
The comment is relevant to whether the law(s) that are the basis for the claim are exempt under
section 3 of Measure 37, in that it questions whether the soils involved can handle the septic
systems required by the density of the development and whether the septic systems will threaten
subsurface water supplies. The comment has been considered by the department in preparing
this report. (See comment letter in the department's claim file.)
IV. TIMELINESS OF CLAIM
Requirement
Ballot Measure 37, Section 5, requires that a written demand for compensation be made:
1. For claims arising from land use regulations enacted prior to the effective date of the measure
(December 2, 2004), within two years of that effective date or the date the public entity applies
the land use regulation as an approval criteria to an application submitted by the owner,
whichever is later; or
2. For claims arising from land use regulations enacted after the effective date of the measure
(December 2, 2004), within two years of the enactment of the land use regulation, or the date the
owner of the property submits a land use application in which the land use regulation is an
approval criteria, whichever is later.
Findings of Fact
This claim was submitted to DAS on March 10, 2005, for processing under OAR 125,
division 145. The claim identifies "all state land use goals and guidelines and every ordinance of
Deschutes County since 1971/1972 that restricts ability to divide and develop property", as laws
that restrict the use of the property as the basis for the claim. Only laws that were enacted prior
to December 2, 2004, the effective date of Measure 37 are the basis for this claim. (See citations
M120089 - O. Cyrus (Report Q 2
of statutory and administrative rule history of the Oregon Revised Statutes and Oregon
Administrative Rules.)
Conclusions
The claim has been submitted within two years of December 2, 2004, the effective date of
Measure 37, based on land use regulations adopted prior to December 2, 2004, and is therefore
timely filed.
V. ANALYSIS OF CLAIM
1. Ownershi
Ballot Measure 37 provides for payment of compensation or relief from specific laws for
"owners" as that term is defined in the Measure. Ballot Measure 37, Section 11(C) defines
"owner" as "the nresent nwnPr of the nrnrnartcr +1-- "
Findings of Fact
The claimants, O. Keith and Conida Cyrus, acquired Tax Lots 1500 and 1600 on May 15, 1972,
as reflected by a Warranty Deed and Contract of Sale included with the claim. Conida Cyrus
acquired Tax Lot 400 on June 1, 1974, as reflected by a Warranty Deed and Contract of Sale
included with the claim. A copy of a Title Report dated February 17, 2005, indicates that Conida
Cyrus is the current owner of Tax Lot 400 and that O. Keith and Conida Cyrus are the current
owners of Tax Lots 1500 and 1600.
Conclusions
The claimants, O. Keith Cyrus and Conida Cyrus, are "owners" of Tax Lots 1500 and 1600, as
that term is defined by Section 11(C) of Ballot Measure 37, as of May 15, 1972. Conida Cyrus is
"an owner" of Tax Lot 400, as that term is defined by Section 11(C) of Ballot Measure 37, as of
June 1, 1974.
2. The Laws that are the Basis for this Claim
In order to establish a valid claim, Section 1 of Ballot Measure 37 requires, in part, that a law
must restrict the claimant's use of private real property in a manner that reduces the fair market
value of the property relative to how the property could have been used at the time the claimant
or a family member acquired the property.
M 120089 - O. Cyrus (Report Q
Findings of Fact
Tax Lot
Acreage
Current zoning
Acquisition
Date
Zoning at date
of Acquisition
15-10-1 400
35.79
EFU
June 1, 1974
A-1
15-11-6 1500
71.16
EFU
High value
May 15, 1972
none
L15-11-6 T16
72.24
EFU
May 15, 1972
none
The claim identifies "All state land use goals and guidelines and every ordinance of Deschutes
County adopted since 1971/72 that restricts ability to divide and develop properties." The claim
indicates intent to divide the properties into five-acre parcels. All properties are currently zoned
Exclusive Farm Use (EFU).
The claim is based, in part, on Deschutes County's current EFU Zone and the applicable
provisions of state law that require such zoning. The claimants' properties are zoned EFU as
required by Goal 3 in accord with OAR 660, division 33 and ORS 215 because the claimants'
properties are "Agricultural Land" as defined by Goal 3. Goal 3 became effective on January
25, 1975, and required that Agricultural Lands as defined by the Goal be zoned EFU pursuant to
ORS 215.
Current land use regulations, particularly ORS 215.263, 215.284, 215.780 and OAR 660 division
33 as applied by Goal 3, do not allow the subject property to be divided into parcels less than 80-
acres and establish standards for allowing the existing or any proposed parcels to have farm or
non-farm dwellings on them.
ORS 215.780 established an 80-acre minimum size for the creation of new lots or parcels in
EFU zones and became effective November 4, 1993 (Chapter 792, Oregon Laws 1993).
ORS 215.263 (2003 edition) establishes standards for the creation of new parcels for non-farm
uses and dwellings allowed in an EFU zone.
OAR 660-033-0135 (applicable to farm dwellings) became effective on March 1, 1994, and
interprets the statutory standard for a primary dwelling in an EFU zone under
ORS 215.283(1)(f).
OAR 660-033-0130(4) (applicable to non-farm dwellings) became effective on August 7, 1993,
and was amended to comply with ORS 215.284(4) on March 1, 1994. Subsequent amendments
to comply with HB 3326, (Chapter 704, Oregon Laws 2001, and effective January 1, 2002) were
adopted by the Commission effective May 22, 2002. (See citations of administrative rule history
for OAR 660-033-0100, 0130 and 0135.)
The claimants acquired Tax Lots 1500 and 1600 in May 1972, prior to the establishment of the
Statewide Planning Goals and their implementing statutes and rules. No county zoning applied
to the subject properties in 1972.
M120089 - O. Cyrus (Report Q 4
Conida Cyrus acquired Tax Lot 400 on June 1, 1974. In 1974, Interim Statewide Goals and
provisions of ORS 215 applied to Tax Lot 400. The property was subject to Deschutes County
A-I Exclusive Agricultural Zone at the time of acquisition in 1974. The A-1 zone allowed
buildings and uses customarily provided in conjunction with farm use. Minimum lot size
allowed was five-acres, with some exceptions. Under the Interim Statewide Goals, any
subdivision of the property had to, among other standards, conserve prime farm lands for the
production of crops, provide an orderly and efficient transition from rural to urban land use, and
ensure that the development of properties "is commensurate with the character and physical
limitations of the land." ORS 197.175, 197.280, 215.515 (1973). It is not clear whether the
claimants' intended use of the property would be consistent with these standards.
Conclusions
The zoning requirements, minimum lot size and dwelling standards established by Statewide
Planning Goal 3 (Agricultural Lands) and provisions applicable to land zoned EFU in ORS 215
and OAR 660, division 33, were all enacted after O. Keith and Conida Cyrus acquired ownership
of Tax Lots 1500 and 1600 in May 1972, and do not allow the division of the properties, thereby
restricting the use of the properties relative to the uses allowed when the properties acquired by
them 1972. In 1972, the Tax Lots were not zoned by Deschutes County. Tax Lot 1500 contains
predominantly high value soils and was thus subject to provisions of ORS 215 in effect at that
time.
The zoning requirements, minimum lot size and dwelling standards established by provisions
applicable to land zoned EFU in ORS 215 and OAR 660, division 33 were enacted after
Conida Cyrus acquired ownership of Tax Lot 400 in June 1974, and do not allow the division of
the property, thereby restricting the use of the property relative to the uses allowed when the
property was acquired by her 1974. In 1974, Tax Lot 400 was subject to the requirements of the
County's A-1 zone, which were adopted pursuant to the provisions ORS 215 then in effect. The
property was also subject to Statewide Interim Goals as set forth in ORS 215.515 (1973 edition).
This report addresses only those state laws that are identified in the claim, or that the department
is certain apply to the properties based on the uses that the claimants have identified. There may
be other laws that currently apply to the claimants' use of the properties, and that may continue
to apply to the claimants' use of the properties, that have not been identified in the claim. In
some cases it will not be possible to know what laws apply to a use of properties until there is a
specific proposal for that use. When the claimants seek a building or development permit to
carry out a specific use, it may become evident that other state laws apply to that use.
3. Effect of Reiulations on Fair Market Value
In order to establish a valid claim, Section 1 of Ballot Measure 37 requires that any land use
regulation described in Section V.(2) of this report must have "the effect of reducing the fair
market value of the property, or any interest therein."
M 120089 - O. Cyrus (Report Q 5
Findings of Fact
The claim includes an informal estimate of $2,500,000 as the property's fair market value, in the
absence of current regulations. This estimate is based on the claimants' "information and belief."
The calculation (gross developed value minus current value and development costs) for loss of
fair market value was made for the three Tax Lots in aggregate.
Conclusions
As explained in section V. (1) of this report, the current owners are O. Keith and Conida Cyrus
who acquired Tax Lots 1500 and 1600 on May 15, 1972. Conida Cyrus acquired Tax Lot 400 on
June 1, 1974. Under Ballot Measure 37, O. Keith and Conida Cyrus are due compensation for
land use regulations that restrict the use of the subject properties in a manner that reduces their
fair market value. Based on the findings and conclusions in Section V. (2) of this report, current
land use laws restrict the division of the subject properties. The claim estimates the reduction in
value due to land use restrictions as $2,500,000.
Without an appraisal based on the value five-acre lots, or other explanation, it is not possible to
substantiate the specific dollar amount the claimants demand for compensation. Nevertheless,
based on the submitted information, the department determines that it is more likely than not that
there has been some reduction in the fair market value of the subject property as a result of land
use regulations enacted or enforced by the Commission or the department.
4. Exemptions under Section 3 of Measure 37
Ballot Measure 37 does not apply to certain land use regulations. In addition, under Section 3 of
the Measure, certain types of laws are exempt from the Measure.
Findings of Fact
The claim includes a general reference to any state land use regulations that restrict the use of the
property after 1971 or 1972. These provisions include Statewide Planning Goal 3 (Agricultural
Lands), and applicable provisions of ORS 215 and OAR 660, division 33, which
Deschutes County has implemented through its EFU zone. With the exception of provisions of
ORS 215 in effect prior to the claimants' acquisition of the properties, none of these laws appear
to be exempt under Section 3(E) of Ballot Measure 37. Provisions of what is now ORS 215
adopted before May, 1972, relative to Tax Lots 1500 and 1600, and June 1, 1974, for Tax
Lot 400, are exempt under Section 3 (E) of the Measure.
A comment on this claim by a neighbor raises questions of harm to well water supplies and soils
based on the density of proposed development and septic system requirements. To the extent
that regulations have been adopted to address public healthy and safety concerns regarding septic
systems and protection of drinking water supplies, these regulations are exempt under
Section 3(B) of Measure 37.
M120089 - O. Cyrus (Report C) 6
Conclusions
Without a specific development proposal for the properties, it is not possible for the department
to determine what laws may apply to a particular use of the properties, or whether those laws
may fall under one or more of the exemptions under Measure 37. It does appear that the general
statutory, goal and rule restrictions on residential development and use of farm land apply to the
claimants' use of the properties, and for the most part these laws are not exempt under
section 3(E) of Measure 37. Provisions of ORS 215 in effect when the claimants acquired Tax
Lots 1500 and 1600 in 1972, and June, 1974 for Tax Lot 400, are exempt under section 3 (E) of
the Measure and will continue to apply to the property.
Laws in effect when the claimants acquired the properties are exempt under Section 3(E) of
Measure 37, and will continue to apply to the claimants' use of the properties. There may be
other laws that continue to apply to the claimants' use of the properties that have not been
identified in the claim. In some cases it will not be possible to know what laws apply to a use of
properties until there is a specific proposal for that use. When the claimants seek a building or
development permit to carry out a specific use, it may become evident that other state laws apply
to that use. And, in some cases, some of these laws may be exempt under subsections 3(A)
to 3(D) of Measure 37. For example, there may be laws regulating the siting of septic systems in
conjunction with residential development.
This report addresses only those state laws that are identified in the claim, or that the department
is certain apply to the property based on the use that the claimants have identified. Similarly,
this report only addresses the exemptions provided for under section (3) of Measure 37 that are
clearly applicable given the information provided to the department in the claim. Claimants
should be aware that the less information they have provided to the department in their claim, the
greater the possibility that there may be additional laws that will later be determined to continue
to apply to their use of the property.
VI. FORM OF RELIEF
Section 1 of Measure 37 provides for payment of compensation to an owner of private real
property if the Commission or the department has enforced a law that restricts the use of the
property in a manner that reduces its fair market value. In lieu of compensation, the department
may choose to not apply the law in order to allow the present owner to carry out a use of the
property permitted at the time the current owner acquired the property. The Commission, by
rule, has directed that if the department determines a claim is valid, the Director must provide
only non-monetary relief unless and until funds are appropriated by the legislature to pay claims.
Findings of Fact
Based on the findings and conclusions set forth in this report, laws enforced by the Commission
or the department restrict the division of the subject properties into parcels or lots, and the use of
the properties for residential purposes. The claimants cannot create the desired five-acre lots out
of the subject properties, or develop those lots for residential use because laws enacted after the
claimant acquired the properties prohibit lot sizes that small. The claim asserts the laws enforced
M 120089 - O. Cyrus (Report C) 7
by the Commission or department reduce the fair market value of the subject properties by
$2,500,000. However, because the claim does not provide an appraisal or other specific
explanation for how the specified restrictions reduce the fair market value of the properties, a
specific amount of compensation cannot be determined. Nevertheless, based on the record for
this claim, the department acknowledges that the laws on which the claim is based likely have
reduced the fair market value of the properties to some extent.
No funds have been appropriated at this time for the payment of claims. In lieu of payment of
compensation, Ballot Measure 37 authorizes the department to modify, remove or not apply all
or parts of certain land use regulations to allow O. Keith and Conida Cyrus to use the subject
properties for a use permitted at the time they acquired Tax Lots 1500 and 1600 on
May 15, 1972 and to allow Conida Cyrus to use Tax Lot 400 at the time she acquired it on
June 1, 1974.
Conclusion
Based on the record, the department recommends that the claim be approved, subject to the
following terms.
1. In lieu of compensation under Measure 37, the State of Oregon will not apply the following
laws to O. Keith and Conida Cyrus' division of the 143-acre Tax Lots 1500 and 1600 into five-
acre lots and the establishment of a dwelling on each lot: applicable provisions of Statewide
Planning Goal 3, ORS 215 and OAR 660, division 33 enacted after May 15, 1972. These land
use regulations will not apply to O. Keith and Conida Cyrus' use of these properties only to the
extent necessary to allow the claimants a use permitted at the time they acquired the property on
May 15, 1972.
In lieu of compensation under Measure 37, the State of Oregon will not apply the following laws
to Conida Cyrus' division of the 35.79-acre Tax Lot 400 into five-acre lots and the establishment
of a dwelling on each lot: applicable provisions of Statewide Planning Goal 3, ORS 215, and
OAR 660, division 33, enacted after June 1, 1974. These land use regulations will not apply to
Ms. Cyrus' use of her property only to the extent necessary to allow the claimant a use permitted
at the time they acquired the property on June 1, 1974.
2. The action by the State of Oregon provides the state's authorization to the claimants to use
Tax Lots 1500 and 1600 subject to the standards in effect on May 15, 1972. On that date, the
property was subject to applicable provisions of ORS 215 then in effect.
The action by the State of Oregon provides the state's authorization to Conida Cyrus to use Tax
Lot 400 subject to the standards in effect on June 1, 1974. On that date, the property was subject
to applicable provisions of Statewide Interim Planning Goals and the provisions of ORS 215 then
in effect.
3. To the extent that any law, order, deed, agreement or other legally enforceable public or
private requirement provides that the property may not be used without a permit, license, or other
form of authorization or consent, the order will not authorize the use of the property unless the
M 120089 - O. Cyrus (Report C)
claimants first obtain that permit, license or other form of authorization or consent. Such
requirements may include, but are not limited to: a building permit; a land use decision; a permit
as defined in ORS 215.402 or ORS 227.160; other permits or authorizations from local, state or
federal agencies; and restrictions on the use of the property imposed by private parties.
4. Any use of the property by the claimants under the terms of the order will remain subject to
the following laws: (a) those laws not specified in (1) above; (b) any laws enacted or enforced
by a public entity other than the Commission or the department; and (c) those laws not subject to
Measure 37 including, without limitation, those laws exempted under section (3) of the Measure.
5. Without limiting the generality of the foregoing terms and conditions, in order for the
claimants to use the property it may be necessary for them to obtain a decision under Measure 37
from a city and/or county and/or metropolitan service district that enforces land use regulations
applicable to the property. Nothing in this order relieves the claimants from the necessity of
obtaining a decision under Measure 37 from a local public entity that has jurisdiction to enforce a
land use regulation applicable to a use of the property by the claimants.
VII COMMENTS ON THE DRAFT STAFF REPORT
The department issued its draft staff report on this claim on August 15, 2005. OAR 125-145-
0100(3), provided an opportunity for the claimant or the claimant's authorized agent and any
third parties who submitted comments under OAR 125-145-0080 to submit written comments,
evidence and information in response to the draft staff report and recommendation. Comments
received have been taken into account by the department in the issuance of this final report.
M120089 - O. Cyrus (Report C) 9
