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Anchorage v. Sandberg, Davis and Richards (10/1/93), 861 P 2d 554
Notice: This is subject to formal
correction before publication in the Pacific
Reporter. Readers are requested to bring
typographical or other formal errors to the
attention of the Clerk of the Appellate
Courts, 303 K Street, Anchorage, Alaska
99501, in order that corrections may be made
prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
ANCHORAGE, a Municipal )
Corporation, ) Supreme Court File No. S-4777
) Superior Court File No.
Appellant, ) 3AN-88-2981 Civil
v. ) O P I N I O N
JAMES E. SANDBERG, S. S. DAVIS) [No. 4007 - October 1, 1993]
and THEODORE A. RICHARDS, )
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage, Rene Gonzalez, Judge.
Appearances: Ann Waller Resch, Deputy
Municipal Attorney and Richard L. McVeigh,
Municipal Attorney, Anchorage, for Appellant.
Calvin R. Jones, Hoge and Lekisch, Anchorage,
Before: Moore, Chief Justice,
Rabinowitz, Burke, Matthews, and Compton,
MOORE, Chief Justice.
COMPTON, Justice, dissenting.
In this inverse condemnation action, the Municipality
of Anchorage (municipality) appeals the trial court's grant of
summary judgment in favor of Sandberg, Davis and Richards (SD&R).
The municipality argues that the court erred in finding that its
activities resulted in a taking of SD&R's property pursuant to
art. I, 18 of the Alaska Constitution. We reverse the court's
grant of summary judgment in favor of SD&R and remand the case
for entry of summary judgment in favor of the municipality.
II. FACTS AND PROCEEDINGS
The facts in this case are not disputed. Between April
1982 and March 1983 SD&R acquired 12 lots in an undeveloped
subdivision located in the midtown area of Anchorage with the
intention of improving and reselling the lots. Water, sewer and
road districts were needed to develop the property.
In May 1983 SD&R and other property owners in the
subdivision petitioned for the creation of sewer and water
assessment districts to provide sewer and water to the area.1
The Assembly approved the sewer district in May 1984 and the
water district a few months later. Following this approval,
Anchorage Water and Wastewater Utility informed SD&R that
construction of the water and sewer improvements would take place
at the same time as construction of Altoona Drive in order to
keep costs down. In June 1984 SD&R petitioned the municipality
to create a road improvement district for the construction of
Altoona Drive. However, SD&R requested that actual balloting
for the Altoona Drive improvement district be delayed until it
could be determined whether state funding was available.
In September 1984 SD&R sold nine of its 12 lots to the
municipality for an extension of Gladys Wood Park. A year later,
SD&R acquired the remaining five lots in the area, leaving SD&R
with a total of eight lots. SD&R then obtained preliminary
approval to subdivide these eight contiguous lots into 12 lots.
As a result of SD&R's purchases, all the property within the
pending improvement districts was owned by three entities: the
municipality, SD&R and A-C Investments.
In May 1986, after the municipality informed SD&R that
state money would not be available for the construction of
Altoona Drive, SD&R renewed its petition for the road improvement
district. Later in the summer, SD&R voted in favor of a park
improvement district authorizing the purchase of the 12 acre
parcel owned by A-C Investments for an extension of Gladys Wood
Park. After the Assembly approved the park improvement district
in June, A-C Investments sold the municipality the 12 acre
parcel. This sale left SD&R's eight lots surrounded on three
sides by municipal property designated as park land.
Because the municipality's share of the approved water
and sewer assessments exceeded the assessed value of SD&R's eight
unimproved lots, SD&R wrote to the mayor in July, suggesting that
the municipality purchase its lots.2 Recognizing that its park
acquisitions had created a problem, the Department of Parks and
Recreation (the Department) began negotiating with SD&R in order
to find a mutually satisfactory solution.
In October 1986 the Department informed SD&R that there
was no possibility of a cash purchase and suggested a land trade.
It also informed SD&R that it would oppose the Altoona Drive
improvement district because a road was not necessary for park
use and because construction costs were too high. The suggested
land trade never occurred.
In March 1987 the municipality initiated a petition to
"re-ballot"the approved water and sewer districts, claiming that
new soils information indicated that construction costs would be
significantly higher than originally estimated.3 SD&R protested
the re-balloting, claiming that the municipality was attempting
to walk away from a situation created by its park acquisitions in
the area. In the re-balloting, the municipality voted its
majority interest in opposition to the improvement districts
while SD&R voted its minority interest in favor. The
municipality prevailed and the Assembly abolished the water and
sewer districts in December 1987.
In March 1988 SD&R filed an action for inverse
condemnation. On cross-motions for summary judgment on the issue
of liability, Superior Court Judge Rene Gonzalez found that the
municipality's actions had had an adverse impact on the value of
SD&R's property and that the municipality's actions constituted a
taking.4 This appeal followed.5
A. Standard of Review
We will only reverse a grant of summary judgment if
there exists a genuine issue of material fact or if the
successful movant was not entitled to judgment under the
applicable law. Wassink v. Hawkins, 763 P.2d 971, 973 (Alaska
1988). We review de novo questions of constitutional law.
Diedrich v. City of Ketchikan, 805 P.2d 362, 365 (Alaska 1991).
B. Did the municipality's actions deprive
SD&R of the economic advantages of land
ownership, entitling SD&R to just
compensation under art. I, 18 of the Alaska
Judge Gonzalez found that the municipality's actions
had "an adverse impact on the value of [SD&R's] property and such
adverse impact constitutes a taking and property damage for
which just compensation must be paid under Art. I, Sec. 18 of the
Alaska Constitution." Article I, 18 of the Alaska Constitution
provides: "Private property shall not be taken or damaged for
public use without just compensation." This clause is
interpreted liberally in favor of the property owner. State v.
Doyle, 735 P.2d 733, 736 (Alaska 1987). The inclusion of the
term "damage"in the Alaska Constitution affords the property
owner broader protection than that conferred by the Fifth
Amendment of the Federal Constitution.6 State v. Hammer, 550
P.2d 820, 824 (Alaska 1976). The United States Supreme
Court has recognized two classes of per se takings: (1) cases of
physical invasion and (2) cases where a regulation denies a
landowner of all economically feasible use of the property. See
Lucas v. South Carolina Coastal Council, 112 S. Ct. 2886, 2892-95
(1992).7 When, as here, a case does not fall into either of
these categories, courts must engage in a case-specific inquiry
to determine whether governmental action effects a taking. Id.
at 2895 n.8. In State, Dep't of Natural Resources v. Arctic
Slope Regional Corp., 834 P.2d 134 (Alaska 1991), we identified
several factors which the court should consider: (1) the
character of the governmental action; (2) its economic impact;
and (3) its interference with reasonable investment-backed
expectations. Id. at 138-39 (citing Ruckelshaus v. Monsanto Co.,
467 U.S. 986, 1000-05 (1984)). The legitimacy of the interest
advanced by the regulation or land-use decision is also relevant
to this inquiry. Id. at 143; Agins v. City of Tiburon, 447 U.S.
255, 260-61 (1980).
1. Character of the Governmental Action
The concept of a "taking"has evolved over the years
from the notion of a physical seizure to that of a diminution of
the owner's rights and attributes of ownership. See Penn Central
Transp. Co. v. City of New York, 438 U.S. 104 (1978).
[a] "taking"may more readily be found
when the interference with property can be
characterized as a physical invasion by
government, than when interference arises
from some public program adjusting the
benefits and burdens of economic life to
promote the common good.
Id. at 124 (citations omitted). This is so because regulations
and other land use decisions, unlike physical invasion, do not
typically extinguish the "full bundle"of rights in a particular
piece of property. Andrus v. Allard, 444 U.S. 51, 65-66 (1979).
Government actions become "takings"under principles of inverse
condemnation when a private land owner is forced to bear an
unreasonable burden as a result of the government's exercise of
power in the public interest. Agins v. City of Tiburon, 447 U.S.
255, 260-62 (1980).
This case involves neither a physical invasion nor even
a regulation constraining SD&R's use of its property. Instead,
it involves a series of municipal decisions which, indirectly,
have rendered SD&R's development plans economically infeasible.
To find a taking where the infringement of SD&R's property rights
is so unclear, the severity of the economic impact and the
reasonableness of SD&R's expectations concerning its development
plans must weigh heavily in SD&R's favor.8
2. Economic Impact
The trial court found that the costs of developing
SD&R's property without the improvement districts "would far
exceed the fair market value of the lots as improved." Because
SD&R could no longer feasibly develop its property as planned,
the court concluded that SD&R had lost a significant economic
advantage of ownership.
We have consistently held that a taking occurs when a
landowner is deprived of substantially all beneficial use of
property for a significant period of time due to a threatened or
pending condemnation action. See Homeward Bound Inc. v.
Anchorage Sch. Dist., 791 P.2d 610, 614 (Alaska 1990);9
Ehrlander v. State, Dep't of Transp., 797 P.2d 629 (Alaska 1990).10
In Homeward Bound, we stated:
Private property is taken or damaged for
constitutional purposes if the government
deprives the owner of the economic advantages
791 P.2d at 614. We went on to observe that "[t]he economic
advantages incident to ownership of unimproved property are the
potential for appreciation and the opportunity for development."
Id. at 614 n.6; see also Stewart & Grindle, Inc. v. State, 524
P.2d 1242, 1247 (Alaska 1974).11
This case differs significantly from Homeward Bound,
Ehrlander and Stewart in that the municipality has never
threatened or initiated condemnation proceedings. In fact,
unlike the typical regulatory taking case,12 the municipality has
never placed any direct restrictions on SD&R's right to use and
develop any portion of its property. Nevertheless we recognize
that it has now become economically infeasible for SD&R to
develop its land in part due to the municipality's change of
plans. The real question presented by this case is whether
SD&R's expectations concerning its development plans were
reasonable and whether those expectations should be afforded
3. Reasonable Investment-Backed Expectations
In Arctic Slope, we observed that, for taking purposes,
"_a reasonable investment-backed expectation_ must be more than a
_unilateral expectation or an abstract need._"834 P.2d at 140
(citing Ruckelshaus, 467 U.S. at 1005) (holding that Alaska's Oil
Conservation Act and regulations contained no "guarantee" or
"express promise"that the Department of Natural Resources would
not use well data for internal departmental purposes). It is
undisputed that SD&R's lots could not be developed without the
approval and construction of the necessary water, sewer and road
improvements. In order to find a compensable taking under Arctic
Slope, we would have to conclude that the Assembly's approval of
the water and sewer districts constituted some kind of
"guarantee" or "express promise" that the road improvement
district providing access to SD&R's property would eventually be
approved and constructed.13 There is absolutely no basis for such
Even if the municipality had not rescinded the water
and sewer improvement districts, SD&R still could not have
feasibly developed its property unless the municipality also
voted in favor of the road improvement district. In 1985 the
City Engineers Office estimated it would cost approximately
$634,000 to construct Altoona Drive. If SD&R had borne this cost
alone, its per lot development cost would have skyrocketed to
approximately $89,000. Given that the value of comparable
improved lots in the area ranged between $45,000 and $37,000 in
1985, SD&R would clearly have had no financial incentive to
develop its property.
The dissent skates over this fact in concluding that
SD&R's investment in the property represents the type of
"reasonable investment"which should be protected by the Takings
Clause. SD&R's investment (i.e., obtaining the water and sewer
districts, purchasing five additional lots and obtaining
preliminary approval of its subdivision plan) could not bear
fruit without the participation of area landowners in the road
improvement district. SD&R gambled that the road improvement
district would be approved and they lost this gamble, in part,
because A-C Investments opted to sell its 12 acre parcel to the
municipality instead of proceeding with its own development
plans. To conclude, as does the dissent, that the municipality's
purchase of property in the area and its decision not to
participate in the road district constitutes a taking of SD&R's
property would imply that the municipality assumed a duty to
participate in the road improvement district when it acquired the
area property. In the normal course of events, neither the
municipality nor a private landowner has any obligation to vote
in favor of a proposed improvement district. See Executive
Directive 8 (providing special procedures but still allowing the
municipality to vote in opposition to the majority of private
landowners). In the absence of a viable estoppel claim, no legal
principle requires the municipality to compensate SD&R simply
because it exercised its right as a majority landowner not to
participate in the road improvement district. See supra n.8.
Although SD&R may have hoped and expected to obtain the
road improvement district, its expectation was always contingent
on the agreement of the other landowners in the assessment area.
For this reason, we conclude that development of SD&R's lots
never progressed beyond the planning stage. SD&R's acquisition
of these lots and subsequent petitions for improvement districts
do not evidence a reasonable investment-backed expectation, but
rather, a business gamble.14 See, e.g., Habershaum at Northridge
v. Fulton County, 632 F. Supp. 815, 823-24 (N.D. Ga. 1985)
(holding that the county board's refusal to change a property's
zoning from residential to commercial did not constitute a
taking), aff'd, 791 F.2d 170 (11th Cir. 1986).
4. Governmental Interest
SD&R argues that the municipality's actions constitute
an improper use of municipal authority to avoid the consequences
of its own poor planning. We disagree. We have previously held
that the financial stability of a governing body is a legitimate
governmental purpose in the regulatory takings arena. Arctic
Slope, 834 P.2d at 143. In cases such as this, the municipality
retains the option to change its position for fiscal reasons
after improvement districts are approved.15
On the record presented, SD&R has failed to establish,
as a matter of law, that it is entitled to compensation under the
Alaska constitution. The municipality has not deprived SD&R of
any "vested right" or directly constrained its use of its
property in any way. We also conclude that SD&R has not been
deprived of any reasonable investment-backed expectations. The
municipality declined to participate in the improvement districts
because these improvements were not necessary for park use and
they would have constituted a waste of municipal resources. To
find a taking in a case such as this, where a governing body's
acquisition and planned use of its property indirectly makes a
neighboring landowner's development plan economically infeasible
would create major problems for urban planning. Cf. Ehrlander,
797 P.2d at 636 n.6 ("If a governmental entity . . . were held
subject to a claim for inverse condemnation merely because a
parcel of land was designated for potential public use . . . the
process of community planning would . . . grind to a halt . . .
.") (quoting Selby Realty Co. v. City of San Buenaventura, 514
P.2d 111, 117 (Cal. 1973)). Because SD&R's speculative
development plans do not merit constitutional protection as a
matter of law, we reverse the trial court's grant of summary
judgment in favor of SD&R and remand this case for entry of
summary judgment in favor of the municipality.
REVERSED and REMANDED.
COMPTON, Justice, dissenting.
The superior court found that the conduct of the
Municipality of Anchorage (municipality) resulted in a diminution
of SD&R's rights and attributes of ownership.16 The court stated
that the municipality's conduct made "the development of
plaintiffs' property economically infeasible," and that it
resulted "in denial to the minority property owners the economic
viable use of their land."17 (Emphasis added). Thus, this is not
a case in which the property owner claims that he or she would
have made more but for the government's action, and asks to be
compensated for the difference. Nor is there any argument over
what would be the fair market value of the property depending on
the highest and best use to which it could be put. The property
no longer has any economically viable use.
I agree that the municipality has a legitimate
governmental interest in maintaining its own financial stability.
In fact, the municipality not only has the authority to avoid the
consequences of its own poor planning, it has a duty to do so.
It is thus understandable that the municipality declined to
participate in the improvement districts, because these
improvements were not necessary for park use and might have
constituted a waste of municipal resources. But this conclusion
is only the beginning of a takings analysis.
The Takings Clause of the Fifth Amendment to the United
States Constitution is "'designed to bar Government from forcing
some people alone to bear public burdens which, in all fairness
and justice, should be borne by the public as a whole.'" Penn
Central Transportation Co. v. City of New York, 438 U.S. 104, 123
(1978) (quoting Armstrong v. United States, 364 U.S. 40, 49
Whether traced to a principle that
society simply should not exploit individuals
in order to achieve its goals, or to an idea
that such exploitation causes too much
dissatisfaction from a strictly utilitarian
point of view unless it is brought under
control, the just compensation requirement
appears to express a limit on government's
power to isolate particular individuals for
sacrifice to the general good.
Laurence H. Tribe, American Constitutional Law 9-6, at 605 (2d
The United States Supreme Court treats legitimate
government action which denies all economically beneficial or
productive use of land as a per se taking. Lucas v. South
Carolina Coastal Council, ___ U.S. ___, 112 S. Ct. 2886 (1992).
In Lucas the Court stated:
Surely, at least, in the extraordinary
circumstance when no productive or
economically beneficial use of land is
permitted, it is less realistic to indulge
our usual assumption that the legislature is
simply "adjusting the benefits and burdens of
economic life"in a manner that secures an
"average reciprocity of advantage" to
everyone concerned. And the functional basis
for permitting the government, by regulation,
to affect property values without
compensation -- that "Government hardly could
go on if to some extent values incident to
property could not be diminished without
paying for every such change in the general
law," -- does not apply to the relatively
rare situations where the government has
deprived a landowner of all economically
Id. at 2894 (citations omitted).
The court recognizes the rule of Lucas and accepts that
it is economically infeasible for SD&R to develop its property.
Nevertheless, the court declines, for no stated reason, to
explain why the Lucas per se rule does not apply.18
In my view, the Lucas rule applies to this case, and requires
the municipality to compensate SD&R for the deprivation of the
economically beneficial use of SD&R's land. Because of this
conclusion, I would find it unnecessary to reach the issue of the
"broader protection"afforded by article I, section 18 of the
Alaska Constitution. State v. Hammer, 550 P.2d 820, 824 (Alaska
However, since the court finds it necessary to analyze
this case under the Alaska Constitution, which until today has
afforded property owners broader protection than that conferred
by the Fifth Amendment to the United States Constitution, I am
compelled to respond. In my view, the court misapplies the "ad
hoc" fact-based standard of State, Department of Natural
Resources v. Arctic Slope Regional Corp., 834 P.2d 134, 138
In Arctic Slope we identified three factors which
should be considered in determining whether governmental action
constitutes a taking: (1) the character of the governmental
action, (2) its economic impact, and (3) its interference with
reasonable investment-backed expectations. Id. at 139 (citing
Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1005 (1984)).
The character of government action is relevant because:
A "taking"may more readily be found
when the interference with property can be
characterized as a physical invasion by
government, than when interference arises
from some public program adjusting the
benefits and burdens of economic life to
promote the common good.
Penn Central, 438 U.S. at 124. In this case the interference
resulted from the municipality's program of acquiring park land
and its efforts to minimize costs associated with the
acquisitions. The municipality's actions were intended to adjust
the benefits and burdens of economic life to promote the common
good.19 Thus, while a taking might be less readily found than had
the municipality physically interfered with the property, absence
of physical interference does not preclude finding an
As for the second factor, the economic impact of the
government's action, the court concedes, as it must, that because
of the municipality's actions "it has now become economically
infeasible for SD&R to develop its land . . . ." Opinion at 11.
The municipality's actions denied SD&R all viable economic use of
I agree that under the court's analysis the "real
question presented by this case is whether SD&R's expectations
concerning its development plans were reasonable and whether
those expectations should be afforded constitutional protection."
Opinion at 11. However, I disagree with the court's
understanding of the reasonableness standard, and with its
conclusion that SD&R's expectations were not reasonable in this
First, the court confuses the reasonableness of a
property owner's expectations with the scope of the owner's
vested rights. It is true there are no "vested"rights in sewer
lines, but that does not answer the question whether SD&R had
reasonable investment-backed expectations in the development of
its property.20 In Lucas, the property owner had no "vested"
rights in the zoning laws, yet the court found a per se taking
when the state's actions denied Lucas the viable economic use of
his land. It makes no sense to require expectations to become
vested in order to be protected. Once an expectation is vested
it becomes a right and is no longer an expectation at all.
Second, the court misinterprets our decision in Arctic
Slope when it states that, to find a compensable taking, "we
would have to conclude that the Assembly's approval of the water
and sewer districts constituted some kind of 'guarantee' or
'express promise' that the road improvement district providing
access to SD&R's property would eventually be approved and
constructed." Opinion at 12. Arctic Slope requires that a
property owner's expectations be reasonable and investment-
backed, not that the law "guarantee"those expectations.21
In fact, the record does not support the court's
characterization of SD&R's development expectations as "never
progress[ing] beyond the planning stage"or a "business gamble."
The superior court found that the "Plaintiffs purchased the lots
for purposes of development and resale."22 SD&R's development
progressed beyond the planning stage as they actually invested in
the property. As in City of Los Angeles v. Tilem, 191 Cal. Rptr.
229, 235 (App. 1983), SD&R's property was not vacant real estate
owned and held as a speculative business venture, but land that
was intended to be developed from the time it was purchased.23
Compare the activities of SD&R, purchasing property, petitioning
and gaining improvement districts, purchasing more property and
re-subdividing to form uniform lots for development, with the
activity of plaintiff in Habersham at Northridge v. Fulton
County, Georgia, 632 F. Supp. 815, 823-24 (N.D. Ga. 1985):
Plaintiff put up $237,000 for property
which the Fulton County Board of
Commissioners had twice refused to rezone and
which, by its own expert's account, was worth
no more than $50,000 at the time of the
purchase. If the property was rezoned as
sought, the gamble would pay off because the
plaintiff, after putting up an additional
$2,000,000 [$2 million dollars as part of the
original purchase price would only be paid if
the property was rezoned], would own property
worth $6,800,000. If, however, the property
was not rezoned, the plaintiff could simply
walk away from the deal, losing little more
than what it cost to place its bet.
By characterizing SD&R's development of its property as a
business gamble,24 similar to that of the plaintiff in Habersham
and unworthy of protection as part of a property owner's bundle
of rights, the court casts doubt on any business investment which
is not a 100% certainty.25 SD&R's purchase of property for the
purpose of development can be only fairly called an investment.
The reasonableness of SD&R's investment-backed plans to
develop its property is based in part on the improvement
districts. The Anchorage Municipal Code allows re-balloting of a
previously approved improvement district only if the costs rise
by more than 10% between the time of Assembly approval and
eventual construction. AMC 19.30.070. This requirement, which
Judge Gonzalez found the municipality had failed to meet, allows
investors to rely on the improvement districts without fear of
having an improvement district dissolved simply because of a
change of plans by neighboring landowners.
Municipal Executive Directive 8 further protects
private landowners from the possibility of differing priorities
between public and private interest in assessment balloting by
requiring the municipality to follow a special procedure whenever
it votes in opposition to the majority of private landowners in
assessment balloting.26 It is undisputed that the municipality
did not follow this procedure when it voted to abolish the
approved water and sewer districts and decided not to support the
road improvement district. It is reasonable for private property
owners to assume the municipality will follow its own regulations
and directives. SD&R made the type of reasonable
investment that should be protected by the Takings Clause. While
the municipality has the right and the duty to minimize waste of
municipal resources, in this case "in all fairness and justice,
[the cost] should be borne by the public as a whole." Penn
Central, 438 U.S. at 123. SD&R established that there are no
disputed issues of material fact and that they are entitled to
judgment as a matter of law. Because I would affirm the superior
court's grant of summary judgment, I dissent.
1. In 1983 SD&R owned 12 lots in the area; the municipality
owned 12 lots; other individual owners owned five lots. The
proposed sewer and water districts would provide services to all
these lots plus a 12 acre lot owned by A-C Investments, located
on the other side of the dedicated but unconstructed road,
2. Anchorage Water and Wastewater Utility's cost estimates
of the approved water and sewer districts totalled $283,621. As
a result of the 12 acre purchase, the municipality assumed a pro
rata share of $212,736 in the approved improvement districts. In
1986, the assessed value of SD&R's eight lots was $161,900
(approximately $20,230 per lot).
3. AMC 19.30.070 allows re-balloting of a previously
approved improvement district if construction costs increase by
more than 10% between the time of Assembly approval and eventual
construction. The municipality's petition read, in part:
At the time [the sewer and water
improvements were created], costs were
estimated based on the simultaneous
construction of a Road Improvement District
along the proposed alignment. Since the
creation [of the improvement districts],
soils investigations proved the area to be
heavily laden with peat soils ranging in
surface depths from three to twenty-five
feet. The additional cost of excavation
boosted the cost of the project extensively.
Property owners had also requested the road
improvements be contingent on grant funding
or anticipated State appropriations. Three
years have passed, and still funding
priorities have not allowed the road
On cross-motions for summary judgment, Superior Court Judge Rene
Gonzalez found that the municipality had failed to present any
evidence indicating that new soils information existed.
4. The trial court focused on three actions by the
municipality: (1) the municipality's purchases of park land in
the area; (2) its votes against the approved water and sewer
districts; and (3) its decision not to participate in the road
improvement district. The court concluded that SD&R's property
could not be feasibly developed because, as a result of the
municipality's actions, the development costs of SD&R's eight
lots would exceed the fair market value of SD&R's property as
5. In August 1991 the trial court entered final judgment,
ordering the municipality to pay SD&R $417,462 in compensation
pursuant to the parties' stipulation (the municipality reserving
its right to appeal the issue of liability). This figure
represents $265,000 in compensation (approximately $33,120 per
lot), $121,121 in prejudgment interest, $4,322 in costs and
$22,928 in attorney's fees.
6. The Fifth Amendment to the United States Constitution
provides, in part: "nor shall private property be taken for
public use, without just compensation."
7. In 1986 Lucas bought two residential lots on a South
Carolina barrier island, intending to build single-family
residential homes similar to those already constructed on
neighboring parcels. In 1988 South Carolina enacted the
Beachfront Management Act which directly prohibited Lucas from
erecting any permanent habitable structures on his parcels.
Lucas filed suit alleging that the Act deprived him of all
economically viable use of his property and constituted a taking
under the Fifth Amendment. The trial court held in favor of
Lucas, finding that the ban rendered Lucas's parcels "valueless."
Id. at 2889. On appeal, the South Carolina Supreme Court
reversed, holding that when a regulation is intended to prevent
harmful/noxious uses of property akin to public nuisances, no
compensation is owed under the Takings Clause regardless of the
regulation's effect on the property's value. Id. at 2890.
The United States Supreme Court rejected the South
Carolina court's harmful/noxious use distinction and held that
when a regulation prohibits all economically beneficial use of
property, compensation is owed unless the regulation merely makes
explicit restrictions on the use of property that background
principles of the state's law of property and nuisance already
place upon land ownership. Id. at 2896-2902. The Court reasoned
that negative regulations such as the Beachfront Management Act,
which typically require land to be left in its natural state, are
the functional equivalent of physical appropriation from the
standpoint of the landowner. Id. at 2894-95.
We conclude that the per se categories enunciated in
Lucas have no application to the case at bar because the
municipality neither sought to appropriate SD&R's property nor
enacted a regulation constraining SD&R's use of its property in
8. This case does not involve a physical seizure of
property, pre-seizure activity which may accelerate the date when
property is taken as in Ehrlander v. State, Dep't of Transp., 797
P.2d 629 (Alaska 1990), or an exercise of regulatory authority by
the municipality. Rather, it primarily entails action by the
municipality as an owner of neighboring property voting to repeal
an improvement district. Where a governmental agency merely
takes action which is substantially similar to that which could
be taken by a private landowner, it seems highly doubtful that a
colorable taking claim can be established. See, e.g., 8,960
Square Feet v. State, Dep't of Transp., 806 P.2d 843, 845-46
(Alaska 1991) (action by state on adjoining railway lands of
raising earth berms gave rise to no claim for loss of visibility
of landowner's property since the railroad could have raised its
tracks or otherwise obstructed visibility of the land in question
for any legitimate reason).
9. In Homeward Bound, a landowner sued the municipality of
Anchorage, seeking, in part, to recover damages equal to the
diminution in value of his property during the period that the
property was designated as a potential school site. Id. at 613-
14. We held that the mere designation of property as a school
site was not a concrete indication that the municipality intended
to condemn the property and affirmed the trial court's dismissal
of the claim.
10. In Ehrlander, we adopted the Washington Supreme Court's
four-part test for determining whether a pending condemnation
action deprives a landowner of the "most important incidents of
ownership." Id. at 634 (citing Lange v. State, 547 P.2d 282, 288
(Wash. 1976)). Under the Lange test, a "taking"occurs only when
(1) marketability of the property is substantially impaired; (2)
the condemning authority has expressed unequivocally its
intention to acquire the specific parcel of land; (3) the owner
acquired the land specifically for subsequent development and
sale; and (4) the owner has taken active steps to accomplish this
11. In Stewart, owners of vacant unimproved land condemned
by the state sought interest running from the date eminent domain
proceedings were instituted to the date of payment of
compensation. We held that a landowner loses the economic
advantages of ownership from the moment an eminent domain action
is initiated because the value of the condemned property is
determined as of that date by statute. Id. at 1245-47. In
reaching this conclusion, we observed that unimproved property is
only a desirable economic asset if (1) the property may
appreciate in value; and (2) the owner is afforded the
opportunity to improve the property toward whatever end he might
desire. Id. at 1247.
12. Cf. Burrows v. City of Keene, 432 A.2d 15 (N.H. 1981).
In Burrows, a city wanted to acquire part of a landowner's
property for park land and made several offers which the
landowner rejected. The city then rezoned the area, designating
part of the landowner's property as an "open-space"zone which
precluded any improvements by the landowner. The New Hampshire
Supreme Court held this rezoning constituted a "taking" because
it unreasonably precluded all beneficial use of the property.
See also Peacock v. County of Sacramento, 77 Cal. Rptr. 391 (Cal.
App. 1969) (adoption of severely restrictive zoning ordinance
prohibiting both structures and vegetation constituted a taking).
13. SD&R's interest in the approved water and sewer
districts does not constitute private property subject to the
protections of the Takings Clause. Even when assessments have
been paid and improvements constructed, courts have generally
held that property owners do not have vested rights in municipal
improvements. See LaSalle Nat'l Bank & Trust Co. v. City of
Chicago, 470 N.E.2d 1239 (Ill. App. 1984) (holding that
revocation of a bank's sewer connection entailed no appropriation
of the bank's sewers or land and thus did not constitute a taking
of private property for public use; court emphasized that the
bank had no vested right to sewer connection). See generally 2
Nichols, The Law of Eminent Domain 6.13 at 6-83 (1990) (weight
of authority indicates that landowners who have been assessed for
the construction of municipal improvements have no greater right
in the improvements than any other taxpayers).
14. Cf. City of Los Angeles v. Tilem, 191 Cal. Rptr. 229,
235 (Cal. App. 1983). In Tilem, the city proposed a road
widening project which required taking a ten-foot strip along
Tilem's property (Tilem's property consisted of two lots -- one
improved, one unimproved). Although the city took no concrete
steps to implement this plan, four years later when Tilem made
preliminary plans to move a building on the unimproved lot, the
city informed Tilem that once the ten-foot strip was condemned,
Tilem would no longer be able to conform to the city setback
requirements. Thus Tilem did not pursue this project. Tilem's
ability to market the improved lot was also substantially
affected because the city planned to assess Tilem's property for
the full cost of the road widening project (the city's cost
projections for this project ranged from $60,000 to $200,000).
The California Court of Appeals held that Tilem was entitled to
damages for inverse condemnation because the city's actions had
made it impossible for Tilem to develop the unimproved lot and
because Tilem's ability to market the improved lot was
significantly impaired. Id. at 233. The court of appeals
It seems obvious to us that formidable
obstacles were placed in Tilem's path in the
use of his land. This was not vacant real
estate owned and held as a speculative
business venture but land that was intended
to be developed from the time it was
purchased. Once that development became
feasible, it was prevented by the City's
actions. The proposed Media Drive widening
project, and the activities undertaken by the
City in relation thereto, had a clear and
measurable effect upon Tilem's property
Id. at 235 (emphasis added). In the case at bar, development was
never "feasible"-- it was always contingent on the construction
of the necessary improvements and the construction of those
improvements was itself contingent on the cooperation of
15. SD&R focuses at length on the municipality's failure to
conform with Executive Directive 8 (requiring the municipality to
follow a special procedure whenever it votes in opposition to the
majority of private landowners in assessment balloting). It is
undisputed that the municipality did not follow this procedure
when it voted to abolish the approved water and sewer improvement
districts. However, to the extent that any of the municipality's
actions was improper or beyond the scope of its authority, the
proper vehicle to challenge such action is via a motion for
mandamus. See, e.g., HFH, 542 P.2d at 244-45 (recognizing
mandate action to invalidate zoning ordinance; mandate action
permits a party suffering from improper governmental action to
correct administrative abuse).
16. The Municipality's actions resulted in SD&R's property
becoming an "island." It is surrounded on three sides by
municipal park land and on the fourth by a separate subdivision,
of which SDR's property cannot become a part. Thus the property
is isolated from any other improvement district, destroying its
economic viability by making its development economically
17. The court trivializes Superior Court Judge Rene
Gonzalez's unchallenged findings when it states only that the
superior court "found that the municipality's actions had an
adverse impact on the value of SD&R's property." Opinion at 5.
The superior court made detailed findings, including that the
actions of the Municipality left "the plaintiffs as the only
private land owners in the area having to pay the full costs for
sewer, water and road improvements." As a result of these
actions, SD&R's development costs "would far exceed the fair
market value of the lots as improved. The per lot development
cost would exceed $100,000.00 on lots that would have a fair
market value as improved of approximately $50,000.00."
These findings are consistent with the evidence, which
put the development costs at $89,182, $110,966, or $121,146 per
lot, depending on whether all costs (sewer, water and road) or
some costs were to be included, and the date costs were to be
determined. The average purchase price per lot was $27,500.
Thus the cost of an improved lot ranged from $116,682 to
$148,746. The assessed valuation of an unimproved lot was
$20,300 in 1986. The assessed valuation of a comparable improved
lot was $45,000. It was $37,000 in 1987, the date the average
cost per lot was highest.
18. The court's "conclusion"that the per se categories of
Lucas have no application to this case "because the municipality
neither sought to appropriate SD&R's property nor enacted a
regulation constraining SD&R's use of its property in any way,"
Opinion at 7, n.7, ignores the superior court's findings that the
Municipality's actions "resulted in making the development of
plaintiffs' property economically infeasible."The Lucas court
We think, in short, that there are good
reasons for our frequently expressed belief
that when the owner of real property has been
called upon to sacrifice all economically
beneficial uses in the name of the common
good, that is, to leave his property
economically idle, he has suffered a taking.
Lucas, 112 S. Ct. at 2895.
19. The court doubts even this assertion, suggesting that
the municipality acted primarily as a private landowner. The
court notes that the case does not involve "an exercise of
regulatory authority by the municipality. Rather, it primarily
entails action by the municipality as an owner of neighboring
property voting to repeal an improvement district." Opinion at
9, n.8. The court goes on to state: "Where a governmental
agency merely takes action which is substantially similar to that
which could be taken by a private landowner, it seems highly
doubtful that a colorable taking claim can be established."
This is not a case in which the government is acting as
a private landowner. This case is about a municipal government
acquiring land for a city park. Private landowners do not
acquire land to create city parks. Private landowners do not
(and, in fact, cannot) create or abolish improvement districts,
only the Municipal Assembly can do so. Anchorage Municipal Code
19.20.130 (After the public hearing is closed, the Assembly shall
adopt an ordinance determining either to proceed or not to
proceed with the proposed improvement.). The acquisition of land
and the creation of a city park is "primarily" and solely an
exercise of municipal authority.
Furthermore, the court's statement that a taking claim
cannot be established when the government acts like a private
landowner is contrary to our precedents. In Bakke v. State, 744
P.2d 655 (Alaska 1987), a state logging operation was at issue.
[I]t is clear that if the State's 1964
logging operation was a proximate cause of
the Bakkes' injury, the State has deprived
them of the economic benefits of ownership
even though it may not have intended to do
so, and even though its 1964 logging
operation did not directly and immediately
affect the Bakkes' land. First, it is not
disputed that the logging operation was for a
public purpose. Second, the Bakkes suffered
injury and thus were denied the economic
benefits of ownership.
Id. at 657. We stated that we were persuaded by the approach
taken in Albers v. County of Los Angeles, 398 P.2d 129 (Cal.
1965), which found an inverse condemnation for property damaged
by construction which caused a land slide "[a]lthough it was
conceded that the road was not negligently built." Bakke, 744
P.2d at 657. In State v. Doyle, 735 P.2d 733 (Alaska 1987), we
affirmed a finding of inverse condemnation brought by landowners
for a decrease in the appreciation of their property values
caused by noise attributable to the operation of a new airport
runway. Id. at 738. We did so despite the fact that the
landowners also sued the government for trespass and nuisance,
actions typically taken against private landowners. Id. at 741.
While property owners can only recover from a private
landowner on theories of trespass or nuisance, the government is
held to a different standard. The Alaska Constitution provides
that "Private property shall not be taken or damaged for public
use without just compensation." Alaska Const. art. I, 18.
This clause is liberally interpreted in favor of the property
owner, Alsop v. State, 586 P.2d 1236, 1239 & n.7 (Alaska 1978),
and protects the individual from being forced to bear the burden
of a public project.
"The tendency under our system is too
often to sacrifice the individual to the
community; and it seems very difficult in
reason to show why the State should not pay
for property which it destroys or impairs the
value, as well as for what it physically
Bakke 744 P.2d at 657 (quoting Albers, 398 P.2d at 137).
20. Contrary to the court's suggestions, this case is not
about whether there was a taking of SD&R's interest (or lack
thereof) in approved water and sewer districts. Rather, it is
about the deprivation of one of the most essential aspects of
property ownership -- the right to use and develop land in an
economically beneficial manner. The term "property"
as used in the Takings Clause includes
the entire "group of rights inhering in the
citizen's [ownership]." It is not used in
the "vulgar and untechnical sense of the
physical thing with respect to which the
citizen exercises rights recognized by law.
[Instead, it] denote[s] the group of rights
inhering in the citizen's relation to the
physical thing, as the right to possess, use
and dispose of it. . . . The constitutional
provision is addressed to every sort of
interest the citizen may possess."
PruneYard Shopping Ctr. v. Robins, 447 U.S. 74, 82 n.6 (1980)
(quoting United States v. General Motors Corp., 323 U.S. 373, 377-
78 (1945)). In Lucas the Supreme Court recognized the
importance of the right to productive and economically beneficial
use of land: "'[F]or what is the land but the profits thereof?'"
Lucas, 112 S. Ct. at 2894 (quoting 1 E. Coke, Institutes ch. 1,
1 (1st Am. ed. 1812)).
21. In Arctic Slope we examined the reasonableness of
Chevron's assumptions that the Department of Natural Resources
would not use well data for internal departmental purposes. We
noted that (1) neither Alaska's oil conservation act nor its
regulations contained any guarantee that the data would not be
used, and (2) "companies were 'on notice' that DNR in fact used
confidential data . . . in its decision making on state oil and
gas leasing." Arctic Slope, 834 P.2d at 140. We also stated
that "[n]o matter how reasonable or unreasonable the companies'
expectations may have been, we are not persuaded that they were
'investment-backed.'" Id. at 141.
22. See infra note 8.
23. The court's attempt to distinguish Tilem because use of
the Tilem property became "feasible" is unpersuasive. The
development in Tilem became "feasible"for Tilem when he found a
suitable building to move onto the property. The court's
assertion that "SD&R still could not have feasibly developed its
property unless the municipality also participated in the road
improvement district" is simply untrue. SD&R purchased
unimproved lots between 1981 and 1983. SD&R petitioned for and
created, with the approval of the Anchorage Municipal Assembly,
water and sewer improvement districts in May 1984. At the
suggestion of the Municipality, SD&R postponed its petition for a
road improvement district in an attempt to secure partial state
funding. In March 1985 neighboring property owners petitioned
and received from the Municipality preliminary approval to
subdivide their parcel into approximately 87 lots. During the
summer of 1985, SD&R purchased five additional lots and applied
for and received preliminary approval for the resubdivision of
its property. In May 1986, upon learning that no state funds
were available for the road improvement, SD&R petitioned for a
road improvement district. During this entire period, ongoing
development of SD&R's property was not only feasible, it was a
reasonable investment which SD&R was actively pursuing.
Development of SD&R's property remained reasonable and feasible,
without municipal participation, up until the summer of 1986. At
that time the Municipality undertook the extension of the Gladys
Ward Memorial Park, purchased the 12-acre parcel, and left SD&R
as the only private property owner in the improvement districts.
24. The court never identifies just what activities on
SD&R's part it has chosen to denominate as a "business gamble."
25. The court accuses the dissent of "skat[ing]"over the
fact that SD&R's investment was not 100% certain. However, the
court fails to address the questions presented, first, whether
SD&R's expectations went beyond the planning stage and became
investment-backed, and second, whether its investment was
reasonable. Until today there has been no requirement that
investment-backed expectations also be 100% guaranteed to warrant
26. Unlike a private property owner, Executive Directive 8
"intends" that the Municipality will vote with the majority of
private landowners, and only oppose the majority preference in
2. Petition Process and Voting
Procedures for Municipal Property:
A. Petitions of special interest to
private property owners: When petitions are
circulated to benefit private property owners
it is intended that the majority preference
of the owners, less the share for any
Municipal property, shall determine the
outcome of the petition. . . .
B. Contingency for special
circumstances: If a petition is circulated
and there exist special circumstances that
would require the Municipality to oppose the
majority preference of the owners of private
property, the Department will submit an
Assembly Memorandum to the Mayor, describing
the special circumstances and recommending
that the administration be authorized to sign
the petition in accord with the special
circumstances. . . .
Executive Directive 8 (emphasis added).