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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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