Hemenway & Barnes AUTHORED LITERATURE

Rezoning For Cash Ruled OK by State High Court

Joseph L. Bierwirth, Jr.
Hemenway & Barnes

In a recent decision, the Massachusetts Supreme Judicial Court upheld the validity of a Town Meeting vote that rezoned the proposed site of a power plant in exchange for an $8 million cash payment by the developer to the Town. The case is important because the payment was not made in connection with a typical linkage arrangement. Instead, the payment was so-called "extraneous consideration," unrelated to any adverse impact the development might have on the town.

The litigation involved the Town of Bellingham and a developer's quest to build a new power plant. The town, looking for ways to increase its property tax base, identified a parcel of land zoned "agricultural and suburban" as a good candidate for industrial use. A town meeting article to rezone the parcel as industrial was put forward, but failed to pass by eight votes. Enter IDC Bellingham, LLC, which proposed a payment of $8 million to the town if the rezoning was approved and the plant was built and operated on the site. At the next town meeting, the rezoning passed by more than the required two-thirds vote.

Eight owners of land located near the property challenged the rezoning in court. The SJC upheld the rezoning and affirmed the right of IDC to build the plant. First, the Court found that the rezoning was not invalid as "contract zoning" because, although IDC had pledged itself to pay if the zoning article passed, the town had not, and could not, pre-bind itself because the ultimate decision lay in the hands of the unpredictable town meeting voters - the legislative body of the town. Second, the rezoning was not "offensive to public policy", as the plaintiffs has argued, even though IDC's $8 million offer was not tied to the impacts of the project on the town and its residents. The SJC reasoned that courts should not be in the business of looking behind a procedurally-correct legislative act to examine the motive of town meeting voters, even if the legislative body's vote is prompted by the promise of a multi-million dollar gift. A partial dissent from three members of the Court criticized the majority for ignoring precedent; the dissent would have held that the rezoning amounted to an impermissible sale of the town's police power.

The Court's decision will almost certainly lead to more bargaining between towns and developers who seek rezoning of coveted parcels. While developers should have greater confidence that such benefit arrangements will be enforced, they should also anticipate that some towns may aggressively ask for large contributions unrelated to the impact of the development itself.

Joseph L. Bierwirth, Jr. is a lawyer with Hemenway & Barnes in Boston where his practice includes litigation and representation relating to zoning, land use and real property disputes.

Reprinted from the New England Real Estate Journal
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