From the February 1998 issue of Entrepreneur

No one knows the meaning of "You can't fight City Hall" better than the entrepreneur who has tried, in vain--and after the loss of many dollars and nights of sleep--to get zoning approval to expand a business. Sometimes the zoning board's objections are legitimate, if they're based on environmental, historic preservation, traffic or other concerns. Other times, the city or county zoning commission's decisions seem quite arbitrary.

Theoretically, property owners have some leverage. The Fifth Amendment says people should get financial restitution for the "taking" of their property--in other words, the zoning commission's refusal to let them do what they want with their land. So business owners can threaten a lawsuit in federal court.

That's a somewhat hollow threat, though. "Under current law, the hurdles I would face trying to assert my property rights in federal court are so time-consuming and expensive, it's not worth the effort," says Donald Betsworth, president of the North Carolina Home Builders Association, an affiliate of the National Association of Home Builders (NAHB), a leading advocate of legislation that would throw open the door to federal courts for small-business owners fighting mercurial local zoning decisions.

The Private Property Rights Implementation Act (H.R. 1534), strongly supported by small-business groups, passed the House in October by a nonveto-proof vote of 248 to 178. "The blood of small-business people boils quickly when it comes to land-use problems," says John Satagaj, president of the Small Business Legislative Council. "This bill attempts to bring common sense to the zoning equation."

The bill's key language changes the Supreme Court's "ripeness" doctrine, which says a landowner can only appeal a local land-use decision to a federal court (where the landowner can ask for Fifth Amendment compensation) under two conditions. First, the local zoning board's decision must be final. Second, the landowner must have exhausted all avenues of local appeal, including negotiating changes in a project to win zoning approval.

H.R. 1534 allows the landowner to go to federal court after the zoning commission has turned down the developer's first appeal. Moreover, the landowner can avoid even filing that first appeal if the chances of success are "reasonably unlikely." Current law excuses an appeal that appears to be "genuinely futile," a tougher standard to satisfy.

The Senate Judiciary Committee will consider the bill (known on the other side of the Hill as S.1204) early this year. If the bill is to pass Congress and survive a Clinton veto, GOP sponsors will need more Democratic allies--and that means they will need to make some changes to the bill as it moves through the Senate.

The National League of Cities and the National Association of Counties oppose this bill, as do many environmental groups. John Dwyer, acting associate attorney general, says the bill "appears to be directed at local land-use issues, such as where to put a garbage dump, whether to grant a building permit for a liquor store, and how close a noisy industrial plant should be to homes and schools." Local land-use agencies have historically made these decisions, and the bill would take this jurisdiction out of their hands. Echoing the bill's opponents, Dwyer says, "There is no need to do so."

Time will tell whether small-business groups and supporters in Congress can change their minds.


Stephen Barlas is a freelance business reporter who covers the Washington beat for 15 magazines.

Contact Source

National Association of Home Builders, (800) 368-5242, http://www.nahb.com