Explaining the Measure 37 "fix"

By State Rep. Greg Macpherson (D-Lake Oswego, SW Portland). [Editor's note: The following explanation of HB 3540 and HB 3546 is excerpted from Rep. Macpherson's floor speech and is published here by permission.]

House Bill 3540 provides a substantive fix for a range of problems with Measure 37 identified by the Fairness Committee. It refers the fix out for a vote of the people at a future special election.

House Bill 3540 provides compensation in the form of additional home sites allowed on property with a valid Measure 37 claim based on land use regulations since the owner acquired it. By limiting the number of home sites, the bill balances the rights of the claimant with the rights of nearby property owners who relied on the land use regulations in locating homes and businesses.

Like the original Measure 37, the bill limits the home sites to the number the owner could have developed when he acquired the property. But under the referral, up to three home sites are allowed without having to prove any reduction in value. This expedited approval will resolve the great majority of claims simply and promptly.

A claimant who wants more than three home sites must prove a reduction in value with an appraisal showing the value of the land before and after the regulation took effect. The amount of the reduction is increased by interest to the present day and then divided by the current value of a home site to arrive at an additional number of home sites. The result is limited to 10 home sites per property and 20 home sites per claimant statewide. These limits assure that Measure 37 primarily benefits the individual Oregonians who were the focus of the campaign to pass it.

The referral protects Oregon’s natural resource economy by allowing only the three home sites on high value farmland that is zoned for exclusive farm use and on high value forestland. It also protects existing water users by applying the same limitation in areas designated by the state as groundwater limited or critical. Furthermore, the three home sites are limited in size and must be clustered in order to preserve the productivity of the remainder of the property.

House Bill 3540 fixes other problems with Measure 37. An owner’s spouse is treated as the owner back to the date of the marriage. The rights resulting from a waiver of land use restrictions are transferable on sale of the property or on death. But those rights expire if not exercised within 10 years after transfer.

Most of House Bill 3540 deals with land use regulations adopted in the past. Measure 37 continues to apply going forward to new land use regulations with clarifications to reduce litigation. The bill defines “land use regulation” primarily as restrictions on residential uses and clarifies the scope of the “public health and safety” exception provided in the original Measure 37.

House Bill 3540 also includes a threshold requiring at least a 10% reduction in the value of property before the right to compensation or waiver is triggered. To prevent governments from avoiding the threshold with a series of new regulations, a 25% threshold applies for a series of actions within a five-year period.

A property owner who prefers the original Measure 37 can proceed under it based on rights that are vested under common law. But that owner won’t get transferability of rights, won’t get protection for widows, and won’t get the clarifications provided by the bill.

Extension of Time for Claim Processing

House Bill 3546 adds 360 days to the processing time for claims filed since November 1, 2006. Under the original Measure 37 the state and counties must act within 180 days. If a waiver of the land use regulation is not granted within that time, the claimant can file a lawsuit in Circuit Court for the compensation claimed plus attorneys' fees.

Over half of the approximately 7,000 claims filed under Measure 37 were filed in the five weeks from November 1 to December 4, 2006. A procedural deadline in the original measure that makes it more difficult to file after the latter date set off this wave of claims. On about May 11, the state will start to miss its 180-day deadline on pending claims if House Bill 3546 is not enacted. The bill includes an “emergency clause”, making it effective when the Governor signs it.

The addition of 360 days to the processing time will allow the state to handle pending claims at the rate it has managed in the past. House Bill 3546 includes protection for claimants who die during the extended processing period. Their heirs step into their shoes without any loss of rights.

  • Confused By Vesting (unverified)

    This statement here is the most confusing thing about the new bill:

    "A property owner who prefers the original Measure 37 can proceed under it based on rights that are vested under common law."

    What exactly grants vested rights? Is it an already approved Measure 37 claim? A building permit? Signifcant construction already underway?

    If someone was willing to forgo transferability, and wanted to start construction before the election, would they be able to? Or will projects be limited to those that have already begun? If someone has an already approved claim, will they be able to proceed sans transferability even after the election?

  • Brian (unverified)

    The previous comment about vesting focuses on my main concern with HB 3540. It doesn't prevent large subdivisions from moving forward between now and the ballot referral vote.

    A lot of damage could be done to Oregon farmland, forestland, and groundwater limited areas over the next six months or so.

    As "Confused by Vesting" said, vesting does indeed generally entail having an approved claim, a building permit, and evidence that substantial construction has taken place.

    My understanding, though, is that determining whether a claim has vested must be done on a case by case basis. This will be a goldmine for land use lawyers--and a nightmare for both claimants and concerned neighbors.

    It'd be much better if the legislature would simply put a hold on Measure 37 claims for over three homes (or maybe ten). Waiting six months wouldn't be a huge deal for claimants wanting to develop a subdivision.

    Building such a development is a complicated and lengthy process. My wife and I have been leading a fight against such a Measure 37 subdivision that's been proposed on groundwater limited farmland in the south Salem hills.

    It's cost us and our neighbors $24,000 so far to challenge the claimant's unfounded assertion that there is plenty of water for the 43 homes he wants to build. An independent hydrogeologist hired by Marion County says that the subdivision may indeed harm existing wells and a spring that feeds a large lake.

    So HB 3540 correctly limits Measure 37 claims in groundwater limited areas. However, the legislature needs to put a hold on large claims until the vote occurs, or much of the benefit of HB 3540 will be lost as claimants rush to become vested before the bill becomes law.

  • Fred Heutte (unverified)

    One side note -- I don't think there is any copyright restriction on public statements in the House and Senate. So if the text here was excerpted from copy supplied by Rep. Macpherson, the proper reference is "acknowledgment" rather than "permission." A small thing perhaps but an important reminder that the people's business belongs to all the people.

  • Fred Heutte (unverified)

    Now -- as they say during floor debate -- "to the bill." The combination of HB 3546 and HB 3540 is dissatisfying in many ways, but I believe it represents the best chance to stabilize the Measure 37 situation, rein in most of the abuses, and perhaps open up enough political space for revitalizing Oregon's land use system to provide protection for farm and forest land, orderly urban development, environmental protection, and enhanced protection for property rights of all property owners, not just those gaining a windfall from Measure 37's peculiar and discriminatory effects.

    The vesting provision already mentioned is one short-term problem in this approach. But remember, this is one of many elements in a political compromise. To name just one positive thing, the valuation approach in HB 3546 would permanently repair a major defect in Measure 37, which requires "proof of loss" for claims with no method for doing so.

    I don't intend to go through all the various components here, but there is one important thing to understand. If HB 3546 passes, it will completely clear the decks on the muddy debate over "what the voters intended." It will undeniably turn Oregon into a "regulatory takings" state, achieving a key goal of the development interests that fund the "property rights" faction. This would freeze the current system into place, at least until a new effort comes along to reshape the Oregon land use process, because under the HB 3546 approach, the prospect of even a handful of 10% loss claims would politically neuter almost any new land regulation.

    That kind of chilling effect would hold back our development as a state. Oregon has changed dramatically in the last 30 years, and will continue to do so in the next 30, with a million new residents in Portland Metro and the growing impact of global warming on farming and forestry in this state, to name just two key factors. We need a land use system that is both viable and evolving. Today we have neither.

    If passed by the legislature and approved by the voters, HB 3546 would also set a new standard to be emulated by other states, and I anticipate another wave of ballot measures elsewhere if that happens. This is another very troubling aspect of the current situation.

    However, in my judgment passing HB 3546 is still the best available way we have to move forward at the current moment. And it will open up the challenge and opportunity of strengthening support for a revitalized land use system that is key to our state's future success.

  • Red Cloud (unverified)

    This Bill is what 37 should have been. I urge voters to support HB 3540 in the November special election.

    At the core of Measure 37 is lost value. This is the loss in value to a property that reputedly followed when the zoning principles of Oregon's landmark land use system came into play.

    Under Measure 37 any loss in value opens the door to any legal development that would have been possible prior to the zone change. There are two very simple key terms here. They are the words "any" and "any."

    The minority party does not like House Bill 3540 because it is a partisan bill and has no minority support. When this Bill comes to a vote and when candidates are up for election or reelection, voters should remember this and it should impact choices they make, for it reflects the minority party's concept of fairness.

    House Bill 3540 recognizes that owners may have lost property value. House Bill 3540, though, removes the windfalls that follow from those two simple words, "any" and "any."

    Oregonians seek fairness. Fairness was the motivation behind 37 and is why so many of us voted for the Measure. The backers of the Measure, though, did not play fair with us. They knew what those two words would do, though neither word is in the Measure.

    HB 3540 corrects that oversight, and is generous as well.

    If you have a claim, you can build at least one residence and up to three additional residences with no questions asked.

    If you want more because you think your property values suffered more, the Bill provides a very simple process, adopted from Oregonians In Action and other, Southern, states. It works like this:

    1. What was the value of the property one year before the zoning change?

    2. What was the property value one year after the zoning change?

    3. Was the loss in value at least 10%?

    If the answer to question three is "yes," then the lost value is brought to the present day using the T-Bill rate. That determines how many residences you can build, not to exceed a total of twenty for all claims. If you have one claim, you can build a maximum of 10 residences, or up to the cumulative loss of value, whichever is smaller.

  • Peter Bray (unverified)

    I discuss common law vested rights here.

    A vested right is a use “under construction” that is inconsistent with a zoning ordinance but which is allowed to be completed, as a nonconforming use, because the property owner took substantial steps toward developing the use prior to the enactment of the zoning ordinance. Whether a landowner has taken sufficient steps to have acquired a vested right is an issue of fact that is decided on a case-by-case basis. The landowner must have taken substantial steps toward beginning construction or incurred substantial costs toward completing the job. The Oregon Supreme Court has recognized the following factors as relevant to whether the right has vested: ratio of expenditure made to total expense of complete project, good faith of the landowner (whether landowner knew of pending land-use regulation), type of expenditure (whether the improvements could apply to other uses), kind of project, location, and ultimate cost. In addition, “the acts of the landowner should rise beyond mere contemplated use or preparation, such as leveling of land, boring test holes, or preliminary negotiations with contractors or architects.” Platted but undeveloped land is not a “use” in zoning law for purposes of establishing a vested right for a prior nonconforming use.

    In all likelihood, we will probably only see a handful of successfully vested M37 claimants before this fall. Even with M37 waivers, much work needs to be done in terms of approvals, permits, and so on. And even after that, they must the significantly develop.

  • Peter Bray (unverified)

    (Incidentally, I didn't write the blockquoted part above... that is a citation from my blog entry.)

  • Peter Bray (unverified)

    I will also point out that it would appear that any claimant who attempts to rapidly develop so as to "beat the clock" to avoid imminent land use restrictions (i.e., HB 354) is probably violating the "good faith" requirement for successful vesting of rights.

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