Real Estate & Property Law

West Hawaii Today Series: Is County ["Fair Share" And Impact Fee] Practice Legal?

By Robert Thomas (inversecondemnation.com)

Worthwhile article today from West Hawaii Today (the daily newspaper of the Kona side of the Big Island), "Is county practice legal?" The story details the County's practice of demanding "fair share" payments from property owners and developers who wish to make use of their properties and seek County approvals:

The fair share cost system assesses developers a fee whenever their projects require a rezoning as compensation for the impacts the projects will have on county infrastructure. Money collected through fair share assessments could be used toward road and water system improvements, new parks and expansion of police and fire services.

However, a ruling made by 3rd Circuit Court Judge Ronald Ibarra in 2007 in a condemnation proceeding apparently deemed the fair share system illegal.

The county filed two condemnation suits against the Charles and Joan Coupe Trust, one in 2000 and the other in 2005, to obtain a 3-acre property needed to build a planned 5.5-mile bypass of the Mamalahoa Highway in Kona.

Ibarra issued a ruling on both cases in 2007, denying the 2000 condemnation but granting the 2005 action. The Coupe's appealed Ibarra's ruling on the 2005 condemnation and it was later vacated by the Hawaii Supreme Court. [The Hawaii Supreme Court's decision is posted here.]

However, the ruling on the 2000 condemnation -- which was never appealed by the county -- included Ibarra's comments on the county's fair share system.

Ibarra states the "county does not have statutory authority to impose a 'fair share' assessment, but has statutory authority to enact impact fee ordinances."

"The development agreement imposes an impact fee, and the county has not enacted an impact fee ordinance pursuant to section 46-141 of the Hawaii Revised Statutes," Ibarra wrote.

Disclosure: we represent the Coupe family in the cases mentioned. The findings in the 2000 condemnation mentioned in the article are posted here. The article continues:

Deputy Corporation Counsel Amy Self said during a recent interview that Ibarra's findings in the 2000 condemnation proceeding dealt specifically with that case.

She said Ibarra determined that the fashion in which the county reached a fair share agreement with developer 1250 Oceanside Partners was illegal because it never gave the Coupe's and other property owners the opportunity to be part of the fair share assessment negotiations.

In order to build its Hokulia residential development in Kona, 1250 Oceanside entered into an agreement with the county that required the developer to build the Mamalahoa bypass.

"The reason Ibarra concluded the fair share system, as applied to the Coupe's and other property developers, was illegal is because they didn't have the opportunity to negotiate the fair share," Self said.

Deputy Corporation Counsel Ivan Torigoe agreed. "What we're saying is that the judge's decision did not touch the fair share program generally," he said.

Self added that the issue of whether the county's fair share system is legal was not before the court at the time.

Waimea resident Margaret Wille, an attorney was has studied Ibarra's ruling, disagrees with the Corporation Counsel.

Wille said Ibarra makes it clear the fair share system is illegal, and that the county runs the risk of being sued if it doesn't address the matter.

She said the reason the Corporation Counsel maintains the system is legal is because the court battle with the Coupe's continues to rage.

"The county is in a lawsuit right now," Wille said. "If you're an attorney and in a mess with the Coupe case, what else could you say?"

The portions of the circuit court's Conclusions of Law (which, as the article notes, were not appealed, so are final and conclusive) are located on page 41 of the order.  You make the call about what the court concluded:

Impact Fees

81. The Development Agreement also purports to amend, supersede or substitute for ordinances and the impact fee statute. The Development Agreement imposes an impact fee, and the County has not enacted an impact fee ordinance pursuant to section 46-141 of the Hawaii Revised Statutes, as amended. Haw. Rev. Stat. § 46-141.

82. The "fair share" assessment imposed as to the Defendants and the other landowners were based on Oceanside's study and recommendation.

83. The "fair share" assessment is based on benefits and impacts to the  landowners from the Mamalahola Bypass Highway.

84. County does not have statutory authority to impose a "fair share" assessment, but has statutory authority to enact impact fee ordinances pursuant to section 46-141 of the Hawaii Revised Statutes, as amended.

85. The "fair share" assessment under the Development agreement, in substance, is tantamount to an impact fee that does not conform to section 46-141 of the Hawaii Revised Statutes, as amended.

86. The portion of the Development Agreement that imposes the "fair share"
assessment against the Coupe's is void for not being in compliance with section 46-141 of the Hawaii Revised Statutes, as amended.

There will be more to come, surely.

Full post as published by inversecondemnation on February 03, 2009 (boomark / email).