Development Projects and the Limits of Moratoria

Friday, September 18, 2020

I am always struck at how vigorously some property owners oppose development projects, despite their having previously, and successfully, pursued identical projects. Do they not remember that they did the exact same thing? Is there some definition of fairness I am not aware of? Whatever the cause, it can be exasperating for the developer and detrimental to sound zoning and planning.

A recent case in my small town has really shined a light on just how absurd this can all be.

A landowner, in compliance with state law and as is her right, created a number of lots under the so-called 2 in 5 rule. Subject to a number of exemptions and exclusions, the general rule is that a landowner can create 2 lots in any 5-year period without needing municipal (i.e., planning board) approval. 30-A MRSA section 4401(4):

4. Subdivision. "Subdivision" means the division of a tract or parcel of land into 3 or more lots within any 5-year period that begins on or after September 23, 1971. This definition applies whether the division is accomplished by sale, lease, development, buildings or otherwise. The term "subdivision" also includes the division of a new structure or structures on a tract or parcel of land into 3 or more dwelling units within a 5-year period, the construction or placement of 3 or more dwelling units on a single tract or parcel of land and the division of an existing structure or structures previously used for commercial or industrial use into 3 or more dwelling units within a 5-year period.

For the landowner the benefits of this approach are numerous, but for the most part all revolve around not having to build infrastructure such as roads, sidewalks, electric utilities, water, sanitary sewer, and stormwater infrastructure, as well as not having to set aside or otherwise provide open or common space. For Maine’s relatively “cash poor, land rich” population, the 2 in 5 rule has been a way to monetize their land over time without a lot of upfront development costs or risks.

But back to my town where the land adjacent to this landowner’s 2 in 5 development was bought by a developer “from away,” who applied to the planning board for a residential subdivision approval. Almost a year later, the project is still languishing in front of planning board. The 2 in 5 landowner is now on the planning board and is circulating a citizens petition to enact a 24-month moratorium on any subdivision needing planning board approval. Putting aside the potential conflict of interest issues at play here, a 24-month moratorium is laughably illegal.

State law limits moratoria to a definite term of not more than 180 days. In certain circumstances, a moratoria may be extended for an additional term of not more than 180 days. Moratoria are not intended to simply stop development, but are instead intended to provide a municipality breathing room to thoughtfully look at issues and impacts around development and make evidenced-based policies to guide development.

In order to adopt a moratorium, the municipality must first have evidence that additional development is likely to overburden existing facilities or that there is a shortage of such facilities. What form this evidence takes is subject to some debate, ranging from mere statements from public facilities managers (e.g., school district, water district, sewer district, public works, and so on) to glossy consultant’s reports concluding that existing public facilities are or may be insufficient to adequately address additional development.

The second criteria is that the municipality’s comprehensive plan or ordinances are inadequate to protect resources from serious harm. I find this criteria sort of odd in that municipalities, if they have a zoning ordinance, must enact a zoning ordinance that is in compliance with a comprehensive plan, that, as its principal function is supposed to protect resources from serious harm and guide development in a responsibly and thoughtful way. It might be said that a moratorium allows a municipality to correct an otherwise deficient comprehensive plan.

Anytime a municipality considers a moratorium, it should do so carefully and thoughtfully.

Maine Governor Issues Executive Order Regarding the November Election

Thursday, August 27, 2020

Governor Mills has issued a new executive order to facilitate the November 2020 general election. The stated purpose of the order is to ensure the integrity of the ballot and to protect the public health during the COVID-19 emergency. 

The order includes a limit of 50 or fewer people in each polling place and that the statutory minimum number of voting booths are not required if it would make it difficult to have them more than 6 feet apart. Voter lines must be marked to enforce a six-foot separation between voters. Voter registration is modified to allow voters to register 15 days before the election rather than 21 days. Municipalities may consolidate their polling places with a public hearing 30 days prior to election rather than the standard 90 and move polling places with a public hearing 20 days prior to the election rather than 60. The requirement that all polling workers reside in the municipality or county in which they serve is suspended. School budget elections are simplified. Absentee ballots may be processed 7 days before the election, rather than 4. Voters may vote in person by absentee ballot without giving a reason until 5:00 pm on the second business day before the election (Friday October 30). The Secretary of State will help Clerks have secure external boxes to drop off absentee ballots.

What Is the Municipal Liquidity Facility?

Thursday, August 6, 2020

There is no question that COVID-19 has had a major impact on state and local governments’ revenue and expenses. To what extent it will impact any particular governmental unit will vary depending on its mix of revenue sources. In an effort to address state and local cash flow pressures and tax revenue shortfalls, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the U.S. Treasury established the Municipal Liquidity Facility (the “Facility”). The Facility’s purpose is to support credit and liquidity flow to state and local governments by providing short-term financing to certain governmental issuers. The Facility has the ability to purchase up to $500 billion of debt from impacted state and local governments. The Facility also monitors conditions in the primary and secondary markets for municipal securities in order to determine if any additional action will be necessary. 

Under the Facility, the Federal Reserve purchases short-term municipal notes issued by the states, the District of Columbia, eligible local governments, and Multi-State Entities. Eligible issuers must pay an origination fee of 10 basis points on the principal amount of notes purchased by the Facility. Notes purchased by the Facility may be called by the issuer at par any time before maturity. Unless extended, the Facility will cease buying notes after December 31, 2020. The Facility will be funded until its assets mature or are sold. Through this special purpose vehicle, the U.S. Department of the Treasury will provide $35 billion in initial equity to the program from its Exchange Stabilization Fund, as appropriated under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The remaining funding, up to $465 billion, will come from the twelve regional Federal Reserve Banks.

Eligible local governments include counties with populations of at least 500,000 people, and cities with populations of at least 250,000. In addition, smaller states were given the option to designate a certain number of cities and/or counties to be eligible for the program, even if that city and/or county did not otherwise meet the population requirement. The number of allowed designations depends on the state's size, but the maximum was two designations. As both Maine and New Hampshire were considered to be smaller states, both governors were given the ability to designate a total of two cities and/or counties. Governors that have the ability to designate two Designated Cities and Designated Counties (on a combined basis) may choose any of the following combinations: (i) the most populous city and most populous county; (ii) the most populous city and second-most populous city; or (iii) the most populous county and second-most populous county. Massachusetts was not given the ability to designate any cities or counties based on its size.

In addition, state governors also can designate two "Revenue Bond Issuers" whose revenues are generally derived from operating government activities, such as utilities or airports, that could also sell bonds to the Facility. The municipal debt instruments eligible for purchase by the facility include tax anticipation notes (TANs), revenue anticipation notes (RANs), and bond anticipation notes (BANs), as well as other similar notes. Additionally, eligible debt securities must have terms to maturity of no more than 36 months from their dates of issuance. A given state, county, or city may have multiple entities, authorities, or instrumentalities that issue debt on its behalf. However, the Facility will limit itself to purchasing notes issued by only one issuer per state, county, or city. The Facility also will limit its purchases of notes from a given state, county, or city to an amount equal to 20% of its general revenues during its 2017 fiscal year. However, states may apply for exceptions under which the facility will buy notes in excess of these limits. The Facility is limited to 20% of a Multi-State Entity or Revenue Bond Issuer's gross revenue for fiscal year 2019.

In order to reap the benefits of this program, your municipality must meet the above eligibility requirements or have been specifically designated by the governor of your state as a Designated City or County. While the Facility is limited in eligibility scope and only aimed at new issuance, not secondary market purchases, the establishment of this program generated a positive response in the municipal bond market almost immediately upon its creation.

Parties Close to Settlement of Voting Rights Case

Tuesday, July 28, 2020

A lawsuit was filed in U.S. District Court on July 17, 2020, against the State of Maine and the Cities of Augusta, Portland, and Bangor and the Town of Winslow, alleging violations of the Americans with Disabilities Act on behalf of four visually impaired voters. The aim of the case is to cause the State and municipalities to implement a system which would allow blind voters to vote absentee without help from their personal computers. A system like this is available in a few other states, including Maryland. The plaintiffs allege that because of COVID, accommodations are necessary to avoid vulnerable citizens having to go to the poll or vote absentee and lose their privacy by having a trusted friend help them vote. A conference was held on July 23 with Judge Woodcock and the parties were given two weeks to work out a deal. The State is willing to implement a remote system for blind people to vote by computer based on a system already in place which allows active duty military to vote remotely anywhere in the world. The more complicated part will be figuring out how to make such a system work for local elections. The problem is that each municipality would have its own unique ballot, which would have to be provided to the vendor early enough to be included. There is expected to be a cost to the municipalities, which is unknown at this time. Preti Flaherty attorneys Laura Rideout and Steve Langsdorf are representing Augusta in this case.

Superior Court Supports Portland’s Home Rule Argument

Thursday, June 18, 2020

Justice Kennedy of the Cumberland County Superior Court recently ruled in favor of the City of Portland, giving significant deference to a municipality’s interpretation of its own charter. In the case of Fair Elections Portland v. City of Portland, the Court held that in a disputed factual context the judiciary would defer to the City’s determination that a petition that had been circulated for signatures and presented to the Council to put to the people for a vote, was a charter revision, not an amendment. A revision requires a charter commission and a more extensive process, whereas an amendment may simply be voted on at a municipal election if petitions are properly submitted. The Court implied that she was not convinced that was the proper result but felt constrained due to the deferential standard of review and separation of powers. The continuing lesson is that a municipality is not always compelled to put questions out to vote even if all other standards are met to call for an initiative or referendum. The question may be illegal, inconsistent with the existing charter, or otherwise improper, as here where it purported to be an amendment but was determined to be a revision.

State Issues COVID-19 Guidance Document for Reopening Public and Community Buildings

Thursday, May 21, 2020

As part of Phase 2 of the Restarting Maine's Economy initiative, the State yesterday released guidance on safe reopening of municipal and other government buildings. Read the full COVID-19 Prevention Checklist here.

State Ceases Enforcement of Marijuana Business Residency Requirement

Wednesday, May 13, 2020

The Office of Marijuana Policy issued a letter on May 11, stating that, “Following the advice of the Office of the Attorney General, DAFS and OMP will cease enforcement of the residency requirement included in the Marijuana Legalization Act and the Adult Use Program Rule.” This decision is issued in response to a lawsuit filed against DAFS, which challenged the constitutionality of the requirement under the “dormant Commerce Clause” of the U.S. Constitution.

Many Maine municipalities have adopted marijuana licensing and zoning ordinances which require business owners or applicants to be Maine residents. These were largely considered to be supportive of the existing residency requirements under state law. With OMP and DAFS having concluded that their requirements are void, similar ordinance provisions would also likely be considered unenforceable. Municipalities should work with legal counsel and consider repealing those portions of their marijuana ordinances that require residency. Such requirements will clearly be subject to challenge as local businesses learn of the state’s decision.