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MRSC has joined with Phil Olbrechts, Attorney, Ogden Murphy Wallace, Pat Dugan, Dugan Consulting Services, Arthur Sullivan, Program Manager of ARCH (A Regional Coalition for Housing), and Anindita Mitra, founder of CREÄ Affiliates, LLC, to bring you the "Planning Advisor" article series on planning and growth management issue affecting Washington Local Governments. The "Planning Advisor" will feature a new article each month with timely information and advice you can use.*
Time is Money
October 2007
By Phil Olbrechts, Attorney
Ogden Murphy Wallace
$10,710,000.00! That’s what the City of Burien owes a developer for taking too long to make a permitting decision on a176-unit apartment building.
Now that I have your attention, let's talk about permitting delay. Other than demonstrating that a development corporation can actually draw the sympathies of a jury to the tune of $10,710,000.00, the Burien case shows conclusively that permitting delay can be a major source of liability for municipalities. Despite the importance of timely permit review, there is significant confusion amongst planning professionals and elected officials on their responsibilities to issue permits on time. I’ll lump these misunderstandings into three myths and go over the details of the Burien decision in the process.
Myth No. 1: The Legislature Repealed the 120-day final decision deadline for land use permits.
In 1995 the state legislature enacted the Regulatory Reform Act, which required cities and counties to include in their development regulations a 120-day deadline for issuing final land use permit decisions. I’ve run across several highly competent public officials who adamantly believe that the Regulatory Reform Act no longer imposes a 120-day deadline. Wrong!
The confusion over the 120 day permitting deadline is understandable given the drunken path blazed by the state legislature on local permitting deadlines. When the state legislature initially adopted the Regulatory Reform Act, it included a 120-day deadline via RCW 36.70B.090 for the processing of project permit applications. Recognizing that this deadline would seriously crimp the style of some municipalities that couldn’t approve a two-lot short plat in less than a year, the legislature concurrently provided that the 120-day deadline would not subject municipalities to liability under Chapter 64.40 RCW. Chapter 64.40 makes municipalities liable for failing to meet permit deadlines. When it adopted the 120-day deadline and the immunity from 64.40 liability, the legislature subjected both provisions to a sunset date of June 30, 1998. In 1998 it extended the sunset date to June 30, 2000.
After the provisions expired, the legislature reinstituted the 120-day deadline by amending RCW 36.70B.080(1) to include the following language:
(1) Development regulations adopted pursuant to RCW 36.70A.040 must establish and implement time periods for local government actions for each type of project permit application and provide timely and predictable procedures to determine whether a completed project permit application meets the requirements of those development regulations. The time periods for local government actions for each type of complete project permit application or project type should not exceed one hundred twenty days, unless the local government makes written findings that a specified amount of additional time is needed to process specific complete project permit applications or project types.
New language in italics.
Not only did the legislature bring back the 120-day deadline in 2001, it did so without immunizing municipalities from liability under Chapter 64.40. In short, the 120-day rule is still with us and with greater liability for failing to meet it.
Myth No. 2: The 120-day deadline is the only deadline you have to worry about for a land use permit application.
Some of those that do believe the 120-day deadline is still around think it applies to all permit applications. There are, unfortunately, other state mandated deadlines and they all tend be less than the 120 days. The most commonly overlooked deadline is that which applies to subdivision review. RCW 58.17.140 requires a preliminary plat decision in 90 days and a final plat decision within 30 days of submittal. RCW 35.63.130(3); 35A.63.170(3) and 36.70.970(3) requires hearing examiner decisions issued within ten working days of the close of a hearing. State Environmental Policy Act (“SEPA”) regulations impose deadlines for environmental review. This is just a sampling of other deadlines that apply. Some misguided consultants in the 1990’s even made matters worse for cities and counties by including intermediate deadlines for project review, such as deadlines for completing technical review and submitting recommendations to planning commissions. They inserted these deadlines into zoning codes in order to provide staff with some performance objectives in project review. While a laudable sentiment, these unnecessary deadlines may also serve as Exhibit A in the next ten million dollar lawsuit against a municipality, where the developer shows that staff couldn’t even meet their own deadlines.
Myth No. 3: If there is no permitting deadline, take as much time as you want.
Well, ok, no one has actually told me they believe Myth No. 3, but this is the only way I could finally work in the Burien case. Burien initiated its permit review in 1993, before the 120-day deadline even existed. Liability was not based upon the failure to meet any specific state deadline, but simply because it took an unreasonably long amount of time to make a decision under general principles of negligence.
Division II of the Court of Appeals issued the most recent Burien decision on September 4, 2007. Westmark Development Corporation v. Burien, 166 P.2d 813 (2007). In that opinion Division II affirmed the $10,710,000.00 damages award of the trial court jury against Burien. Granted, the Burien case wasn’t your garden variety “we-fired-our-beatnik-senior-planner-six-months-ago-for-being-high-on-absynth-again-and-forgot-about-the-Smith-application” fiasco. Burien took more than three years to make up its mind on whether to require an environmental impact statement (“EIS”) for a 176-unit apartment building. The project was delayed an additional five years over the enforcement of a settlement agreement that was invalidated at the 11th hour at the urging of Burien because Burien violated the Open Public Meetings Act in its approval (the contract was never subject to an open meeting vote). It didn't help matters that King County was close to making a decision on the EIS requirement just prior to the incorporation of Burien, which took over the project and the EIS decision. The applicant’s attorney also managed to persuade the jury that, in the words of the appellate court, Burien had blocked the processing of the permit “…because of its general opposition to apartments and apartment dwellers…” and because of pressure from a state representative who lived in the area and who was opposed to the project.
The permitting delays were translated into dollars through the negligence claim of tortious interference with a business relationship. The elements for such a claim are (1) the existence of a valid contractual relationship or business expectancy (often the expected profits from sale for permit developers); (2) that defendants had knowledge of that relationship (try arguing you didn’t know the developer was trying to make a profit); (3) an intentional interference inducing or causing a breach or termination of the relationship or expectancy; (4) that defendants interfered for an improper purpose or used improper means; and (5) resultant damages.
Applying the criteria above, the Court of Appeals concluded that there was substantial evidence that Burien intentionally interfered with the applicant’s business expectancy for an improper purpose by singling out the apartment project because it was an apartment building and because a state representative opposed it. A developer’s witness testified about closed door meetings about the project between Burien officials and the state representative. The Court also found that the trial court jury could have concluded that Burien used improper means (permit delay) to interfere with the applicant’s business expectancy.
As previously mentioned, in assessing whether the permitting delay was “improper” in the fourth negligence criterion identified above, the jury wasn’t limited to considering state mandated permitting deadlines. The jury was informed about a couple of SEPA deadlines that arguably applied to the EIS decision, but a SEPA expert also provided testimony about what was considered to be a reasonable amount of time to determine whether an EIS should be prepared for a revised permit application. The bottom line is that even in the absence of something as hard and fast as the 120-day rule, municipalities can still get into trouble for taking too long to make a permitting decision.
If you’re thinking that the Burien case shouldn’t concern you because the facts were so egregious, don’t rest too easy. The facts as presented in the Court of Appeals decision appear to be highly circumstantial -- Burien officials and a state representative were opposed to multi-family housing and those officials took a few years to review a multi-family housing project. The court opinion didn’t identify any evidence that linked the two sets of facts, like some memo that directed staff to obstruct the project because apartment residents are evil. The court opinion also noted that there was conflicting evidence on whether the applicant caused the delay by failing to pay for permit fees and to provide requested information. It is certainly within the realm of possibility that Burien officials did not act out of animus towards multifamily housing, or maybe something in-between where they didn’t go out of their way to clarify fee and submission requirements to the applicant.
It is also very important to recognize that the Burien applicant did not use Chapter 64.40 RCW to pursue damages. RCW 64.40.020 entitles a property owner who applies for a permit to damages from a municipality from the “failure to act within time limits established by law”. You’ll notice that the requirement for damages under RCW 64.40.020 is much shorter and simpler than the five criteria for proving the negligence claim of tortious interference with a business relationship. If the Burien applicant had the 120-day rule available when it filed its permit application and it could also meet the procedural requirements for filing a 64.40 claim, it would have theoretically been entitled to its ten million dollars without even mentioning Burien’s opposition to multifamily housing. There is no requirement for “improper means” or “improper purpose” for a 64.40 claim. In other words, if you’re vulnerable to a delay damages claim, the developer may have a much easier time proving its case against you than the applicant in the Burien case.
Pat Dugan has a unique combination of experience in both planning and public finance, spanning 35 years. As a planner, he has been a planning director in two cities (Auburn and Burien), and two regional planning agencies in Oregon and Washington; and was a planning manager in Goleta, California. In public finance, Pat has served as the chief financial officer in four public agencies including the Cities of Auburn and Lynnwood, and the Snohomish County Public Works Department. He has written extensively on financing capital facility programs and on public finance for planners. Pat now offers planning and public finance consulting services and in his own firm, Dugan Consulting Services in Everett and can be reached at consult.dugan@verizon.net.
Anindita Mitra, AICP is the Founder of CREÄ Affiliates, LLC a planning and urban design consultancy that focuses on creating awareness of unsustainable practices, and offers a platform for affected parties to openly communicate and collaborate to arrive at creative sustainable solutions. She is also one of the Co-Chairs of the Climate and Sustainability Initiative of the Washington Chapter of the American Planning Association. Anindita's current interests include the development of sustainable master plans and streetscape designs; establishing sustainable community indicators and their integration into comprehensive plans and governance; identifying creative solutions directing communities towards energy-independence; preparing communities for the challenges potentially brought upon by the Climate Change phenomenon; and advancing the integration of transit and non-motorized travel solutions into community land use planning. She has worked throughout the United States for both the public and private sectors.
Phil Olbrechts is a member (similar to partner) and elected member of the board of directors of Ogden, Murphy, Wallace, LLC. Phil focuses his practice on land use law and currently represents seven municipalities as either City Attorney or Hearing Examiner. He has taught over a dozen credits of land use law at the University of Washington, has taught numerous land use continuing legal education courses and has made over 200 land use presentations to elected and appointed officials throughout Washington State. Phil has served on the Seattle Planning Commission and in the past served as the Planning Director for two municipalities.
Arthur Sullivan is the Program Manager of ARCH (A Regional Coalition for Housing). ARCH is a coalition of 16 public jurisdictions located in East King County. Its purpose is to facilitate efforts of public jurisdictions to create a full range of housing, with an emphasis on affordable housing. In 2004 ARCH was the winner of the inaugural Ash Institute / Fannie Mae Foundation Innovations in American Government Award in Affordable Housing. Previously Arthur was a Senior Manager at BRIDGE Housing and planner for Environmental Impact Planning. He holds a B.A. in Planning from the University of Washington, and a Master of Planning from UC, Berkeley.
*The Articles appearing in the "Planning Advisor" column represent the opinions of the authors and do not necessarily reflect those of the Municipal Research & Services Center.