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CRC In The News

"Who knows what's best for this land? A city says it does. A developer says he does. The courts will decide."

The Dallas Morning News
Sunday, June 9, 2002
Roy Appleton

GLENN HEIGHTS -- Gary Sheffield saw opportunity in all the growth and open spaces south of Dallas. He found some land at a bargain. So he bought a piece of Glenn Heights.

His Stone Creek subdivision was to be the "jewel of the town," he says, just what an emerging suburb needed.

Five years later, it's still all blueprints and a 194 acre field of green. A yellow sign warns: "No Trespassing." The project is parked while Mr. Sheffield fights City Hall. And City Hall fights back.

Without warning, the City Council slapped a building moratorium on his land and rezoned it to larger lots. The council said fewer homes, less congestion was the way to grow. Mr. Sheffield sued, claiming he would lose more than lots.

"What they did was pure and simple against the American way," he says.

What they've got, developer and city, is one all American dispute. And with more at stake now, for property owners and cities far beyond Glenn Heights, than a few hundred new homes.

The land around Hampton and Bear Creek roads was mostly trailer homes and farming in 1969 when 37 people voted to incorporate a town. Neighboring DeSoto didn't want them, and residents needed a tax base to expand their water system. For starters, they had Ada Lou Glenn and the acre of land she gave for a Glenn Heights City Hall.

In time, city leaders started flexing the municipal muscle. They levied taxes, adopted building codes, annexed land. And they began zoning private property limiting its uses, and the size and location of its future buildings.

The earliest such regulations in this country aimed to prevent fires and to address nuisances. New York City adopted the nation's first citywide zoning code in 1916, in part to control the shape of sunlight blocking skyscrapers. Ten years later, after courts had rejected zoning in Dallas and other cities, the U.S. Supreme Court blessed the act if it benefited the public. And in 1927, the Legislature said Texas cities could zone land for "health, safety, morals and general welfare."

Purchased in 1996

Mr. Sheffield figured he was responding to a general need in Glenn Heights making way for home builders, investing in the people to come, as he had for a quarter century in North Texas.

He bought the Stone Creek land in 1996 after verifying its decade old zoning and asking city officials for a heads up about changes. "They said, 'Here's what you can do,"' he recalls.

Days after the purchase, though, the City Council barred development of the site and 11 other properties targeted for rezoning. The plan was to cram fewer homes across the land. And 15 months later, Mr. Sheffield's Stone Creek lot count was halved.

"They just lied," he says. "They never told us a thing."

So what, says Jesus Humphrey, a former council member and incoming mayor, who led the rezoning effort. "Just because he asked, so what?"

The council was just doing its job, shepherding growth, shaping the city's future, he and former Mayor Mary Coffman say. By requiring fewer and larger lots, they and others say, such "downzoning" would reduce future congestion, noise and traffic. It would expand the city's housing options and make for a better Glenn Heights. For all.

"There's plenty of room around here to grow right," Ms. Coffman says.

Besides, Mr. Sheffield didn't have a development permit that would have guaranteed his zoning. If he knew what was up, officials feared, he would have spoiled their plans before they could change his.

Always some rules

All private property in the United States is regulated to some extent, whether with building permits, health codes or rules for subdividing land. With Houston among the few exceptions, most cities of any size also have zoning.

Zoning is among the tools, along with master plans and development moratoriums, that local governments are using more aggressively to address sprawl, preserve open space and protect neighborhoods and the environment.

Zoning also can be used to slow growth and disrupt its marketplace, critics say.

Cities clearly have a right and a responsibility to regulate land, Mr. Sheffield says. Here he was, reviving a development that already had scores of houses on the ground. But Glenn Heights changed the rules, he and others say, for no good reason.

"Land owners depend on zoning and expect their property rights will remain in place," says Doug Gilliland, president of the Texas Association of Builders.

Settlement efforts failed, and Mr. Sheffield sued the city in 1997, arguing the rezoning was unconstitutional.

The Fifth Amendment and the Texas Constitution say that if government takes a piece of land, it must fairly compensate the owner.

This protection of property rights generally applies to the actual occupation or expropriation of land for, say, a road, school or park. With the clout of eminent domain, governments condemn property for public use and pay the owner.

The U.S. Supreme Court widened the field in 1922, saying a "taking" can also occur if a regulation of land "goes too far."

Courts typically have sided with property owners only when restrictions don't serve a public purpose or leave land with little or no value.

Not so in Sheffield Development Company Inc. v. City of Glenn Heights.

Competing interests

In theory, governments both protect the individual and promote the community, whose interests the one and the many are forever at odds.

With property, the tension can be grounded in different perspectives: land as possession, source of wealth; land as resource, part of a larger whole.

For balance minded governments and courts, it's an endless weighing of interests, fuzzy definitions and difficult questions: What is the "public interest"? In this case, any case? Who decides, who benefits and who should pay for it? A state district court judge in Waxahachie and the 10th District Court of Appeals in Waco said the Sheffield rezoning served the public interest in preserving, as the appeals court put it, the "rate and character of community growth."

After hearing from appraisers, the courts also concluded that Mr. Sheffield's land not only still had value, but it was worth more than the $600 an acre he paid for it.

And he was due compensation, they said in rulings that concern cities and planners.

The courts said in part that the city "unreasonably interfered" with Mr. Sheffield's "investment backed expectations" a murky concept the U.S. Supreme Court introduced 24 years ago.

And the Waco appeals court said that even if the rezoning clipped less than half of Mr. Sheffield's property value, it amounted to a taking. Witnesses for the developer estimated the loss at $2.7 million, while the city put it at $291,000. The lesser figure, a 38 percent decline, was enough for the court.

"That's ludicrous," says Ms. Coffman, the former Glenn Heights mayor.

It's only fair, Mr. Sheffield says. "I don't care if it's 1 percent."

The Texas Supreme Court has indicated it will review the decision. The Texas Municipal League, Texas City Attorney's Association and International Municipal Lawyers Association have filed briefs supporting Glenn Heights, as have Dallas, Plano, Irving, Mesquite, Cedar Hill, Rowlett and Frisco.

The Texas Association of Builders, National Association of Homebuilders and Texas Association of Realtors are among those lining up for Mr. Sheffield.

Both sides say the case has landmark potential.

"The idea that you can have a taking with a presumed 38 percent loss of property value is really unprecedented," says Tim Dowling, chief counsel for the Community Rights Counsel, a Washington, D.C., law firm that helps cities defend land use laws.

Courts typically order compensation with losses of at least 90 percent, says Robert Brown, Glenn Heights' attorney, who calls the Waco court's ruling "one of the most radical and destructive readings of 'takings' law."

Landowners "can always find some appraiser to say a property has been reduced by 38 percent," he says.

"It will be land use by appraiser," says Stuart Meck, a senior researcher for the American Planning Association.

At what cost?

If Texas cities must cover losses anywhere near 38 percent, property owners would be emboldened to fight, and cities would face some difficult, potentially costly choices, Glenn Heights and its supporters say.

Cities could regulate land as always and expose taxpayers to lawsuits like never before. Or playing it safe, they might avoid decisions that could benefit the many but draw fire from a few. Particularly vulnerable would be inner city areas where new uses of land are central to revival. So the predictions go.

"You will see local government shying away from protecting the public interest against private development," says Bruce Kramer, a Texas Tech University law professor, who tracks land use litigation.

No, cities are hardly shy and too often heavy handed at the land controls, Mr. Sheffield and his supporters say.

This is a balancing, "an important case for anyone who owns property," says Christopher Senior, director of legal services for the National Association of Home Builders. "It's a good decision if you believe in the Constitution."

But if it stands, he says, cities wouldn't necessarily be liable for every property loss of 38 percent or more. "The sky is not falling."

Rather, the case should tell cities they need to anticipate growth, maintain timely comprehensive plans and fully consider their zoning decisions, says Art Anderson, Mr. Sheffield's attorney.

Cities "should have an overwhelming reason to devalue a person's property by 40 percent," says Mr. Anderson, who questions whether such a threshold would be earthshaking.

"A lot of people are good at expressing dismay," he says.

Few businesses

Glenn Heights needs to land some businesses to take some tax load off homeowners, help pay for overdue street and drainage work, and shore up city finances. For city leaders, past and present, that's a given.

After almost 33 years on the map, the city of almost 8,000 people and two traffic lights is still a work in progress. Some 500 houses have been added to the tax rolls since 1998. But businesses are few, and vacant land is plentiful.

Build enough houses, and retail will follow. So goes a common take on municipal growth. Shape Glenn Heights with vision, enough elbow room and reasonable land controls, former Mayor Coffman and others say, and build a community attractive to people and businesses.

"I'm more interested in quality of life than quantity of development," Ms. Coffman says.

That's quantity, as in too many starter homes, too much flux, says Mr. Humphrey. One goal of the rezonings, he says, was to expand the mix of housing options, where people can move up, not out.

"I didn't want this place to be a good place to start. I wanted it to be a good place to live," says Mr. Humphrey, a 14 year Glenn Heights resident, whose home is a short walk from the Sheffield land.

Mr. Sheffield agrees that Glenn Heights needs a heftier tax base and a spectrum of housing for all comers. Better streets and code enforcement would be a plus, too, he and others say, as would less strife at City Hall, where his lawsuit has enriched the discourse.

Mr. Sheffield was banking on an $8.3 million profit, according to his lawsuit. Houses in the subdivision would have sold for up to $150,000 at today's prices, he says, a step up for a city with average home values last year of $62,000.

But the rezoning changed everything, he says. The larger lots would more than double housing prices, beyond buyer demand.

"They doomed the project, trying to force us to offer products for which there's no market," says Mr. Sheffield.

"They used their power to create exclusionary zoning and are saying we don't want these people in our community," he says of entry level homeowners. "They just wanted big, expensive homes to increase their own property values."

Wrong, say Ms. Coffman and Mr. Humphrey. The goal was, and is, balanced growth.

The opinions are entrenched. The words haven't come cheap.

Mr. Sheffield figures he has lost about $1 million a year in potential income and spent about $300,000 for lawyers and other expenses more than double what he paid a British company for the land.

"It was definitely a deal," he says of the land purchase. "Or was it?"

The city's legal fees are around $310,000. A Waxahachie jury said the city owes Mr. Sheffield damages of $485,000 plus 10 percent annual interest, a total he figures has topped $700,000. The appeals court upheld the award and said the moratorium was also a taking, requiring compensation. That amount hasn't been set.

Some Glenn Heights residents keep calling for a settlement. They fear costly payouts would require huge tax increases and cripple the city, which this year expects to operate on $2.4 million.

The lawsuit has spiced past city elections. It was at the heart of an unsuccessful vote last year to remove Ms. Coffman, Mr. Humphrey and three other council members from office. And it helped draw the line in this year's mayor's race.

N.L. "Moe" Craddock, an early Glenn Heights resident, said if elected mayor he would have tried to settle the dispute out of court "put a
plug in it."

"That's the only reason I'm running," says the 67 year old former council member, who lost a runoff by 38 votes. "This was all to satisfy a few people. It's not fair."

Mr. Humphrey, 42, said he wants to lead his hometown of 14 years because "there's a lot to do" to get the city's services and finances on sound footing. He wouldn't give up the court fight, but then again, "the smart thing to do may be to condemn the whole damn thing and pay him for it."

Many what ifs

Ms. Coffman is stepping down after two years as mayor and a three year council stint. If the city wins, it retains the zoning, and Mr. Sheffield keeps his land. A victory by Mr. Sheffield could have the court returning his zoning with damages or upholding only the compensation.

If the city and Mr. Sheffield settle out of court, the 38 percent threshold would become Texas law until the Waco court's decision is overruled.

That can't happen, Ms. Coffman says. The fight must go on and the appeals court's decision must be overturned.

"I'm real proud of our city," she says. "We're small and the legal fees are high, but if we lose the costs will be higher."

"Developers will come in and be gone, and the citizens will be here for a long time," says Ms. Coffman, a Glenn Heights resident for 17 years. "This is about taking a stand and refusing to bring in less than residents deserve."

Mr. Sheffield, a former Texas homebuilders association president, hasn't enjoyed the fight.

"It's so easy to see this as the big, bad developer," the Weatherford resident says. "But why is building places for people to live so bad?"

"They could be sitting there today with 500 new homes on the tax rolls, some of the nicest houses in town, but that just wasn't good enough," he says.

"It's an interesting story. I wish someone else had to live through it."

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