Virginia Real Estate, Land Use & Construction Law : Virginia Construction Lawyers & Attorneys : Bean Kinney & Korman Law Firm : VA Real Estate, Land Use & Zoning

For those of you out there who are following whether commercial real estate can be taxed at a different rate than residential property, FFW Enterprises v. Fairfax County, et al. has been slated for the Supreme Court's September arguments docket.  Like most other states, in the Commonwealth of Virginia the Constitution contains a "Uniformity Clause" which was intended to prevent the General Assembly from allowing the taxation of different classifications of real property in an inequitable manner.  Specifically, Article X, Section 1 of the Constitution of Virginia provides:

"...All taxes shall be levied and collected under general laws and shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax, except that the General Assembly may provide for differences in the rate of taxation to be imposed upon real estate by a city or town within all or parts of areas added to its territorial limits..."

The core of the dispute is whether Fairfax County may tax only commercial property owners, such as FFW Enterprises, without taxing residential property owners, to fund transportation projects.  The General Assembly, through Section 58.1-3221.3 of the Code of Virginia, granted authority to Northern Virginia localities to levy special taxes for  transportation projects, and in combination with this authority, Fairfax County created a special tax to fund portions of the Silver Line metro project using Section 33.1-431 of the Code of Virginia.   In a nutshell, Fairfax County taxed commercial property owners a special transportation surcharge and exempted residential property owners from having to do so to fund metro improvements.

Last summer, the Circuit Court of Fairfax County (see here for opinion) held that the Uniformity Clause does not prohibit localities from "...provid[ing] for differences in the rate of taxation to be imposed upon real estate..." so long as these differences are not imposed upon the "same class of subjects."  However, in 1947 pursuant to City of Hampton v. Ins. Co. of North America, the Supreme Court has already held that the test to determine the constitutionality of such a tax is:

"[Alre there others, who are benefited as much or more than those smarting under the tax imposition, who go unwhipped of its burden?"

FFW Enterprises plead just that, asserting that residential property owners will benefit as much from the construction of the Silver Line as commercial property owners in Fairfax, however commercial property owners will bear the sole brunt of the costs and taxes.  Nonetheless, the Circuit Court of Fairfax County found FFW Enterprises failed to establish this, and that the 1947 standard is no longer relevant or applicable.  These questions will now be put to the Supreme Court in just a few weeks - we'll keep you posted.

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This year's proposed Constitutional Amendments are now up for review prior to being voted on during the November 2, 2010 General Election this fall.  There are three proposed amendments on the table:

1. Property Tax Relief,
2. Veteran Property Tax Exemptions, and
3. Increasing the Revenue Stabilization Fund

The first proposed amendment, while technically a real estate tax amendment, facilitates aging in place policies.  Currently, the General Assembly can give localities the authority to grant exemptions from real estate taxes to persons 65 years of age or older, or for persons permanently and totally disabled, for their residence where the normal tax bill would amount to "an extraordinary tax burden" in relation to their income and financial worth.  The amendment now proposed, however, would allow localities to remove the requirement about the "extraordinary tax burden" and gives the General Assembly the authority to allow localities to determine their own income or financial worth limitations for tax exemptions.  If approved,  the senior citizen vote would then be open for bidding in localities across Virginia.

The second proposed amendment relates to the first, which contemplates allowing localities to extend the same real estate tax exemptions to veterans.   As proposed, the amendment would require the General Assembly to pass a law exempting from local taxation the principal residence owned and occupied by any veteran with a one hundred percent service-connected, permanent, and total disability. Also, the veteran's surviving spouse could continue to claim the exemption so long as he or she does not remarry and continues to occupy the home as his or her principal residence.  I'm not sure what would qualify as a "permanent, total disability" but I would expect subsequently enacted legislation would clarify and define these terms.

The third proposed amendment, from the fiscal responsibility front, allows the General Assembly to increase the size of its rainy day fund, entitled the "Revenue Stabilization Fund," from 10% to 15% of its revenues derived from annual income taxes and retail sales taxes.  Note that the fund will not be required to be 15% of these revenue, the amendment merely raises the limit of the fund to a maximum of 15% of these revenues.  If the fund exceeds the 15% maximum limit, the excess is required to be transferred to the general fund.

If you're dying to read the amendments yourself before heading to the voting booth this fall, click here for the actual text amendments.

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We have finally reached the last of the five cases from December’s Case Watch with the Virginia Supreme Court’s recent decision in Advanced Towing Company, LLC, et al. v. Fairfax County Board of Supervisors, Record No. 091180.

Virginia Code Section 46.2-1232 (A) allows localities to regulate towing of trespassing vehicles by ordinance, but is silent on the mode or manner of how to carry out that authority. The last sentence of Section 46.2-1232 provides that if a vehicle is towed from one locality to another, the local ordinance of the locality from which the vehicle was towed governs, if that locality has an ordinance.

Fairfax County took advantage of its discretion to have an ordinance regulating the towing of cars, and passed Section 82-5-32, which contains the following language in Subsection (e):

Every site to which trespassing vehicles are towed shall comply with the following requirement: (1) A tow truck operator must tow each vehicle to a storage site located within the boundaries of Fairfax County….

Three towing companies – Advanced Towing in Arlington County, Roadrunner Wrecker in Loudoun County and King’s Towing in the City of Fairfax – got together to challenge Section 82-5-32 (e). The towing companies each had property management clients within Fairfax County, but Section 82-5-32 (e) exposed them to prosecution for towing vehicles to their storage lots outside of Fairfax County. The companies argued that Section 82-5-32 (e) unfairly discriminated against towing companies outside of Fairfax County and favored companies inside the county, with no rational basis for that discrimination. They also argued that the ordinance ran afoul of the Dillon Rule, exceeded the county’s authority under 46.2-1232.

Regarding the Equal Protection argument, the parties agreed that the ordinance did not involve a suspect classification or fundamental constitutional right, so the “rational basis” test applied. The towing companies argued that forcing them to store the cars in Fairfax County was irrational because their storage lots are located within five and a half miles of Fairfax County, and allowing them to tow vehicles to those lots would better serve the public. Fairfax County justified the territorial limitation by arguing that Section 82-5-32 had many provisions for safeguarding towed cars, such as nighttime illumination, fencing and posted signs. Under the last sentence of Virginia Code Section 46.2-1232 (A), if a car was taken from Fairfax County and towed to a different locality, Section 82-5-32 controlled, creating a regulatory nightmare for Fairfax County. The trial court and the Virginia Supreme Court agreed that Fairfax County’s argument provided a rational basis for the territorial limitations in Section 82-5-32.

Regarding the Dillon Rule argument, the towing companies argued that the ordinance went beyond the power conferred on the localities to regulate towing vehicles under Virginia Code Section 46.2-1232. The trial court and the Virginia Supreme Court once again sided with Fairfax County. The ordinance allows localities to permit vehicles to be towed outside their borders, but did not compel the localities to do so. Nothing else in Section 46.2-1232 mandated where vehicles are to be towed. The Court concluded that localities can exercise reasonable discretion in setting territorial limits regarding where towed vehicles may be stored without running afoul of the Dillon Rule.
 

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Back in December, I discussed the Florida Supreme Court’s decision in Stop the Beach Renourishment, and guessed that the United States Supreme Court would affirm the Florida court’s decision, but duck the novel constitutional question of whether there could be a “judicial taking.” I ended up being a little more than half right. The United States Supreme Court did affirm 8-0, but were hardly unanimous about what to do with the concept of a “judicial taking.”

Justice Scalia, writing for Justices Thomas, Roberts and Alito, concluded that there could be such a thing as a “judicial taking” “if a court declares that what was once an established right of private property no longer exists.” However, they concluded that the Florida Supreme Court’s decision did nothing to abolish property rights. Instead, the decision merely clarified that the property rights were not implicated by the project due to the doctrine of avulsion. Basically, Florida law allowed the State to fill in its own seabed, and the State still owned the suddenly exposed land, even though the State itself caused the avulsion.

As I thought would be the case, the other four justices did not want to reach the issue of whether there could be a “judicial taking.” Justices Kennedy and Sotomayor concluded that the “judicial taking” analysis was unnecessary because the Florida decision did not terminate property rights. They suggested that if a true “judicial taking” case were to come along, the Court could tackle the issue then, and should perhaps look to the Due Process Clause.

Justices Breyer and Ginsburg agreed that there was no taking, but felt it was “better left to another day” to determine the issues of when a federal court could review whether a state court decision amounted to a taking, and if so, what the proper test would be. Unlike Justices Kennedy and Sotomayor, Justices Breyer and Ginsburg did not hint at what kind of analysis they might use.

So the question becomes – what impact will this case have on cleaning up after the BP oil spill crisis? Perhaps there was no better time than now to re-affirm the government’s right to protect our beaches.
 

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Back to another of the cases highlighted in Case Watch: Upcoming Virginia Supreme Court Opinions. In Schefer v. City County of the City of Falls Church, the Virginia Supreme Court was confronted with a 2006 amendment to a Falls Church ordinance that specified different building height requirements for one-family dwellings in the same zoning district.

Schefer owned twelve lots in Falls Church, all of which were zoned R1-B, a medium-density residential district. The minimum lot area requirement for one-family dwellings in the R1-B district is 7,500 square feet. Schefer’s lots were less than the minimum of 7,500 square feet, but had been lawfully created prior to that requirement, and were designated as “substandard lots.” For substandard lots, the maximum building height for “residential use” on all R1-B lots was the less of 35 feet or two and a half stories.

In 2006, Falls Church adopted Zoning Ordinance 1799, amending permissible height and yard set-back requirements for one-family dwellings of substandard lots. Ordinance 1799 created a formula for calculating the allowable building height of one-family dwellings on substandard lots within residential zoning districts, resulting in an allowable building height between 25 and 35 feet depending on the size of the lot. The maximum height for one-family dwellings on standard lots in R1-B districts remained 35 feet.

When Schefer discovered that Zoning Ordinance 1799 changed the maximum building height for one of his lots to just over 28 feet, he filed suit against Falls Church, claiming that Ordinance 1799 violated Virginia Code Section 15.2-2282’s uniformity requirement and the Equal Protection Clause.

The Court had no problem rejecting Schefer’s arguments and siding with Falls Church. Looking at the plain language of Section 15.2-2282, the Court pointed out this section is taken verbatim from the Standard State Zoning Enabling Act, except for the addition of the word “uses.” In full, Section 15.2-2282 reads:

All zoning regulations shall be uniform for each class or kind of buildings and uses throughout each district, but the regulations in one district may differ from those in other districts.

To make his argument under Section 15.2-2282, Schefer claimed that one-family dwellings constituted “buildings and uses” that required identical building height requirements. The Court rejected that argument, concluding that this case turned on two kinds of uses – residential use on standard lots and residential use on substandard lots.

The Court gave very short shrift to Schefer’s equal protection argument. Before reaching this issue, the Court noted that Section 15.2-2282’s purpose is to ensure that zoning regulations are not discriminatory, acting as a “statutory reaffirmation” of equal protection. Under its equal protection analysis, Ordinance 1799 was presumptively reasonable, with Schefer carrying the initial burden to show it was unreasonable. Schefer tried to avoid shouldering this burden by arguing that Ordinance 1799 was facially discriminatory, but the Court refused to allow him to escape his burden of proof because there was nothing inherently suspect about Ordinance 1799 and it did not infringe on the exercise of any fundamental right.

Two more highlighted cases remain. In TIR Connail Properties, L.C. v. 2401 Wilson, LLC, we have yet to see whether the Virginia Supreme Court will say that the plaintiff should have been allowed to sue using its trade name, and what the Court will do about the scope of use of discovery deposition testimony. In Advanced Towing Company, LLC, et al. v. Fairfax County Board of Supervisors, we’ll find out whether the Court agrees with the trial court regarding the Dillon Rule and the doctrine of ultra vires. Stay posted!
 

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Step 1:  Create Redevelopment and Housing Authority (the "Authority")

Step 2:  Authority  identifies areas of city that it wants to designate as a "blight"

Step 3:  Authority creates a Master Redevelopment Plan for areas of city it has determined are blighted

Step 4:  Authority uses public funds to condemn all the privately owned land in redevelopment area where private property owners are unwilling to sell to the Authority at the Authority's price

Step 5:  Authority sells some of the land obtained from private citizens to private entrepreneurs for sums it deems appropriate, holds surplus land in inventory for no specifically identified public purpose

Apparently, this is the basic recipe Roanoke has been following in pursuit of a 110 acre redevelopment area created for Carilion's Riverside Center business and medical park complex.  This case is boiling again because the Roanoke Redevelopment and Housing Authority, whose board consists of 7 members appointed by the Roanoke City Council, condemned and took land from a private property owner that was not was not a blight and was not wanted by the private interests undertaking the redevelopment of the area; this private property was simply located within the area designated by the Roanoke Redevelopment and Housing Authority's Master Redevelopment Plan area.  In short, private property was taken by governmental authority for no specific public purpose, except that the City apparently did not like its use (a flooring business) and wanted to see it redeveloped at some time in the future, and then the land was to be held in inventory until the City decides how it intends to use it.

This raises some pretty interesting questions, doesn't it?  The government takes extensive areas of land from private property owners for no specific public purposes, entrepreneurs lobby the government to acquire the land for private use (or vice versa), and the government sells the land to private interests of their choice in order to achieve their vision of economic redevelopment of an area.  Without the authority to do this, localities will claim they have little ability to achieve badly needed, large-scale revitalization objectives in blighted areas.  With this authority, localities have the capability to take private property owned by one party and give it to another private party that the locality deems more favorable.

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No state has a longer shoreline than Florida – over 2,000 miles of shoreline, with 825 miles of beaches.  These beaches define Florida's top industry of tourism and are in a constant state of erosion.  Understandably, Florida has embraced the “public trust doctrine,” which dictates that tidal lands are held in trust for the people of Florida. The boundary between state-owned tidal lands and upland properties has traditionally been the “mean high water line” (“MHWL”). The MHWL may move inland due to erosion or seaward when land gradually forms (through accretion). However, the boundary will not shift due to a sudden change in the shoreline (through avulsion).

Recognizing the need to protect Florida’s beaches, Florida’s legislature enacted the Beach and Shore Preservation Act (“BSPA”) in 1965. Since then, Florida has restored approximately 200 miles of beaches through sixty actively managed projects.

The BSPA was amended in 1970 to define the property boundary for restoration projects along critically eroded beaches as the “erosion control line” (“ECL”). By adopting a fixed boundary for restoration projects, the BSPA meant to avoid boundaries that were constantly shifting due to coastal dynamics. Under the BSPA, the state would pump sand into the restoration area primarily on the state side of the ECL, creating a buffer of “sacrificial sand” that would protect the beaches and upland property. The 1970 amendments preserved, and arguably supplemented, the rights of landowners whose properties under the Act extended to the ECL rather than the MHWL.

With the devastating hurricane and storm damage we have seen over the last decade, Florida realized that it could no longer focus solely on its southern beaches. Florida decided to spend a total of $15 million – $4 million of state money and the rest paid by the local community and the town of Destin – to restore approximately seven miles of beach in Walton County, a jurisdiction located in Florida’s panhandle. In keeping with the BSPA, the state set the property line at the wet sandy beach.  The project was designed to create a narrow strip of dry beach by piling new sand where water – and therefore sovereign state land – once was.  What the project also created was a legal quagmire between government officials and private landowners that has now made its way to the United States Supreme Court.

State and local officials argue that the restoration project provides the private landowners with storm damage and erosion protection without taking land or property rights from the landowners. The officials note that, consistent with the BSPA, the project preserves all upland owners’ rights of view, access and use of the waters. You can read more on these arguments in the state’s brief and the brief for Walton County and the City of Destin.

Private landowners instead see a “land grab” that robs them of their right to gain land by accretion and their right to have their property in continuous and direct contact with the water. They complain that the officials dumped sand in their backyard to create what is now considered a public beach. To read more on the landowner’s arguments, read Stop the Beach Renourishment, Inc.’s brief and reply brief.

The Florida Supreme Court’s lengthy opinion concluded that the beach restoration program reflected “the state’s constitutional duty to protect Florida’s beaches in a way that reasonably balances public and private interests.” The court found that landowners maintained their rights to access and view the water, but that Florida law provides no basis for the landowners to own the new narrow strip of dry sand as private property, and therefore no basis for the property owners to demand compensation.

The United States Supreme Court has previously addressed whether a legislative or executive decision can amount to a constitutional taking. But now this case – Stop The Beach Renourishment, Inc. v. Florida, Case No. 08-1151 – raises the question of whether a state court decision can amount to an unconstitutional taking of property.  Based on comments from the Justices during oral argument last week, the opinion will likely not be unanimous, as noted in NPR’s December 2, 2009 article, High Court Appears Divided on Beach-Property Case.  Complicating things is the fact that Justice Stevens, who owns a Florida beachfront apartment, was absent from the oral argument, making it possible that the Justices will not have the votes one way or the other to reach a majority opinion.

My guess is that the United States Supreme Court will find a way to avoid deciding the novel issue of whether the Florida Supreme Court's decision can be considered a taking, and will not disrupt the Florida Supreme Court's determination that the beach preservation project did not take any legally cognizable state property right from the land owners.  Any other thoughts or predictions out there?

Image by:  Melissa Nelson/AP
 

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The Supreme Court of Virginia recently accepted a Petition for Appeal by forty citizens of Gloucester County who were hit with sanctions for circulating a petition for signatures and filing the petition with the Circuit Court for Gloucester County to have some members of the Board of Supervisors removed by the Circuit Court.  These citizens circulated the petition per § 24.2-233 of the Code of Virginia, gaining over six thousand signatures, after a grand jury indictment of certain members of the Board of Supervisors.  After appointment of a special prosecutor, the trial court nonsuited the petition proceedings, ordered Gloucester County to pay for the legal fees incurred by the Board of Supervisors, and then imposed two thousand dollar sanctions on each of the forty citizens who circulated the petition. 

According to the facts set forth in the Petition for Appeal, two new members were elected to the Gloucester County Board of Supervisors in 2007, providing one voting bloc with a new majority of votes.  Among other things, upon being sworn in the members of this new controlling voting block promptly announced the termination of the then current County Administrator and the County Attorney.  This was apparently not discussed with the minority Board members, or announced to the public prior to their action to do so.  Upon learning this, the Commonwealth's Attorney for the county began an investigation and a grand jury was ultimately convened, which returned criminal indictments for the four Board members.

Generally speaking, § 24.2-233 provides a procedural avenue for citizens to have elected officials removed from office by the local circuit court for misuse of public office.  However, until July 1 of this year, § 24.2-238 did not have a Subsection B, which now explicitly prohibits the imposition of the aforementioned sanctions.  While there are several other arguments that have been made why sanctions should not be imposed, the Petition for Appeal begs the general question whether the judicial branch may impose sanctions on citizens who organize and petition the government where sanctions are not expressly statutorily prohibited.  What does Virginia want to discourage more: arguably wasteful and distasteful mass petitioning movements or the judicial branch's authority to suppress such petitions?

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