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Eugene Weekly : 1.25.07

Looming Sprawl

Will Measure 37 get fixed before it devours Oregon

BY ALAN PITTMAN

There was an old woman named Dorothy who lived on a hill. She'd lived there a long time and lived there still. She'd long dreamed of building another house or two. But that's what the big bad government wouldn't let the little old grandmother do.

So Dorothy English, 94, became a poster child. The media love a poster child, and soon English's fable was retold and broadcast over and over to pass an initiative, Measure 37, to give English back what the government had taken without just compensation.

Photos: LandWatch Lane County
MEASURE 37 CLAIMS IN LANE COUNTY Lane County has about 400 Measure 37 claims covering 34,000 acres. SOURCE: LANE COUNTY

But Measure 37 was much more than a fairy tale. With the widowed grandmother in the spotlight, the media paid little attention to the big developers, loggers and land speculators who spent $1.2 million to pass Measure 37. The measure requires that for those who bought before regulations, governments waive the laws or pay for the lost landvalue.

Now those developer "grasping wastrels of the land," as Oregon Gov. Tom McCall described them three decades ago when he successfully pushed protections against urban sprawl, are cashing in on a major land grab. About 7,000 Measure 37 claims seek more than $6 billion in compensation or the right to build urban sprawl over half a million acres of scenic Oregon.

Development advocates say Measure 37 has finally restored fairness and property rights. But planning advocates say the claims threaten to devour the scenic livability and rural productivity of the state with polluting, choking urban sprawl that will cost taxpayers billions of dollars in public safety and utility services.

Plum Creek Timber has the largest claim, calling for houses on 32,000 acres of coastal forest. A group of ranchers near Pendleton have filed a $17 million claim for 24,000 acres. Other claims include houses along postcard beautiful Wallowa Lake, along the lake in the Newberry Crater National Monument, a huge high rise in Portland, gravel pits near homes and land for thousands of acres of subdivisions on farm and forest land, as well as land for at least two Wal-Marts.

Fewer than a thousand of the claims are the small Dorothy English-sort that voters intended, Gov. Ted Kulongoski said in a Jan. 19 letter calling for action from the Legislature. "For every request filed by a small landowner seeking to build a residence under Measure 37, there have been six claims filed by developers, speculators and corporations."

In Lane County, Greg Demers, one of the region's largest land speculators, was one of Measure 37's largest backers, contributing more than $80,000. Demers and his companies and family members are involved in at least three Measure 37 claims in the county, covering 128 acres.

Neighbors to one of the county's largest claims, for $19 million or a waiver for a 157-lot subdivision outside of Creswell, have alleged that Demers and/or his frequent business partners the McDougal logging and land speculation company are also behind the claim that threatens their livability.

"People are so alarmed," said neighbor mom Amy Pendell, who signed a petition with 35 other residents in the area. Pendell said she and many of her neighbors moved to the rolling hills for the quiet and rural lifestyle that will be lost by the "city" the claim proposes on adjacent farm land.

Many of the people in the area voted for Measure 37 thinking of little old English, but now with their land value threatened by the new law, they feel deceived, Pendell said. "That was how it was represented, to help out mom and pop, not for developers to come in and piggy back on these land owners and make big developments."

The Lane County Commission granted a waiver for the Creswell property to Bernard Bernheim last year, but neighbors allege in a petition for court review and in testimony that the developers may be just using Bernheim's long-term ownership to get a waiver for their subdivision.

McDougal's name is on an open-ended purchase option with Bernheim. The name of Demers' company, Frontier Resources, appeared on the Multiple Listing Service as the buyer of the property and on no trespassing signs on the land, which Frontier now leases, the neighbors and their attorneys allege.

Demers did not return a call requesting comment.

Bernheim's lawyer Joe Willis denies accusations that Bernheim is not the legal owner. Willis's law firm, Schwabe, Williamson & Wyatt of Portland, also list's Demers' Frontier Resources as a top client, but Willis refused to say whether he's also worked for Demers or McDougal on the Creswell property.

Demers is also involved in a $5 million, 50-acre city of Eugene claim made by Murphy Plywood. Demers owns a controlling interest in Lane Plywood, according to city staff.

Eugene has seven other claims filed including a $3.2 million, 70-acre claim for a subdivision at Rest Haven cemetery on Willamette, a $32 million, 61-acre claim by the First Baptist Church north of town and a $200,000 downtown claim from Eugene Planning Commissioner Rick Duncan and EWEB Commissioner John Brown.

In total, Lane County has about 400 claims, covering about 34,000 acres. Timber company Davidson Industries gave $5,000 to the Measure 37 campaign and now has filed 11 different claims with the county totaling 1,280 acres, including one large parcel near Florence. The Lone Rock timber company has filed three claims totaling 1,243 acres. Rosboro Lumber Company has five claims totaling 894 acres. The Wildish land and gravel company gave $10,000 to pass the measure, and now has a 1,200 acre, $26-million claim next to Mount Pisgah park.

To process the hundreds of pending claims within the 180-day period as enforced by Measure 37 penalties, the county plans to hold mass public hearings for up to two dozen claims at a time.

With the onslaught of claims, the governor and Measure 37 opponents such as 1000 Friends of Oregon are calling on relief from the Legislature in the form of a moratorium on the law and a fix to make it apply only to the small claimants they say voters intended.

The Legislature has failed to act on the issue in the last two years or even since Measure 37's overturned predecessor Measure 7 passed in 2000. But this year both chambers are controlled by Democrats.

State Senator Floyd Prozanski (D-South Eugene) is co-chair of a joint Senate-House committee charged with bringing back a recommendation on what to do.

"We're going to try and move quickly," Prozanski said. The committee has no set timeline or direction, but Prozanski said one possibility is a quick moratorium to freeze the measure followed by a referral to voters in November of a measure to retroactively limit Measure 37 to allowing only one house per claimant. "The voters were intending to give homeowners and individuals a dwelling on their property, single," he said.

But with potential billions in profits at stake, the developers aren't likely to go down without a big fight. Attorney Willis, whose firm is representing scores of claimants, says it's "really funny" how opponents say they think they know what voters intended. "It passed with an overwhelming majority," Willis said. "I don't think that the voters were at all confused."

The Legislature doesn't have much of a history at reforming disastrous ballot measures. In 1990 voters passed Measure 5 property tax limitations with the unintended consequence of decimating school finance. Two decades later legislatures and governors have still failed to bail out the schools.

"Whether the governor, whether the Legislature is willing to go that distance even with the new Democratic majority, I'm pessimistic," said Robert Emmons, president of the LandWatch Lane County environmental group. On the other hand, he said, "a moratorium is the first step, and I'm fairly confident that moratorium will be instituted."

"Your guess is as good as mine," about whether the Legislature will act, said Jim Just, director of the Goal One Coalition, an environmental group. The state has been in an anti-regulatory mood, but "maybe the tide is starting to change."

If the Legislature fails to act, the courts may have to, but that option is also messy.

The attorney general reports that his office is handling 131 separate lawsuits regarding the many legal uncertainties in Measure 37. The only question that has gotten a definitive Supreme Court ruling is that Measure 37 is constitutional.

The biggest unanswered question centers around transferring development rights. The AG and attorneys for cities have argued that Measure 37 doesn't allow a land owner to transfer a waiver to a developer with a land sale.

That could mean that the thousands of waivers the state and county are rubber stamping in lieu of compensation are worth little more than paper.

But the transfer question is working its way up through the courts and hasn't got a final ruling from the Supreme Court.

Lauri Segel, a planner with Goal One, says a recent circuit court opinion from Medford against transferability is a good sign the Supreme Court will agree that waivers can't be sold. "It's just so well reasoned."

But even if that non-transferability provision holds, there will still be plenty of uncertainty.

Like in the Bernheim claim near Creswell, critics allege developers have been using purchase options and other ownership gimmicks to get around the property transfer issue.

For one web site soliciting long-term land owners, Realtors, builders and investors (www.measure37.net),a developer promises that such techniques mean "lucrative" Measure 37 properties in Oregon are "guaranteed to quadruple in price in one year." The ad proclaims that with the "overwhelming" potential of Measure 37, "the most spectacular real estate investment in the world is currently in Oregon."

Creswell neighbor Pendell's attorney, Douglas DuPriest, argued in testimony to the state that such legal contrivances to evade claim transfer restrictions won't hold up in court. The perpetual purchase option with the McDougals for the full purchase price leaves the Bernheims with only an "ephemeral" interest in the property, with nothing left that they can transfer or sell, according to DuPriest.

Even if such options are eliminated, there could still be legal ways to evade the transfer issue. For example, a gravel pit owner leasing land near Sweet Home got a waiver for more blasting and around-the-clock noise based on the landowner's long-term ownership. Billboard advertisers that lease land have also sought waivers through long-time property owners.

Plum Creek timber didn't acquire the 32,000 acres it's claimed exemptions on until five years ago when land use restrictions were already in effect. But the Seattle corporation claims that it's still legally allowed the waiver because it purchased the land by means of a corporate merger that retained the waiver rights.

Some attorneys who argue the waivers aren't transferable concede that they could be legally "vested" if a property owner takes substantial action to develop the land before the transfer.

What exactly "substantial" means and whether developers could use this as a practical loophole remains undecided in the courts.

Jona Maukonen, an attorney with the Harrang Long Gary Rudnick firm in Eugene, wrote in a law journal article last year that while such vested transfers are possible, courts may consider whether the landowner acted in good faith, and courts "will likely disfavor" waiver transfers because of their impact on land use plans.

Also uncertain and untested in court is the effect of the Measure 37 exceptions for health, safety, nuisance and federal regulations. The Portland City Council has denied waivers of local environmental rules, arguing that they involve health and safety issues.

State and local governments could also effectively block Measure 37 development when it comes time for permit approvals by refusing to extend roads and by citing the health and safety risks of septic systems and traffic accidents.

But while some cities and counties may seek ways to control Measure 37 sprawl, many rural counties have long opposed the state land use laws and have seized on the opportunity to waive them.

The "political reality" in many locales is that they aren't likely to look for technical ways to block permits for waived claims, Goal One's Just said. "It just isn't going to happen."

Another big uncertainty is valuation. Right now, state and local governments are simply accepting developer claims that there was a decline in value and granting waivers.

But Rogers and other attorneys argue that the waivers must be substantiated by a real appraisal and that any waiver must be proportionate to the actual decline in value.

Economists and other critics of the developer money claims have said that they fail to consider that, by the law of supply and demand, their land is worth less because it competes for buyers with so many other Measure 37 claims.

Critics also argue that farm and forest tax breaks and new regulations have also enhanced claimants' land value and that it may be worth the most as farm and forest land.

Willis, the development attorney, dismisses all the "blunderbuss attack" of legal challenges as delaying tactics. "They've been able to impose huge delays and problems," he said, but Measure 37 opponents won't prevail in court. "They're so clearly wrong."

Whatever the case, it could take the courts five years or longer to unravel many of the big legal questions surrounding Measure 37.

If the Legislature and courts fail to protect against sprawl, there's always the initiative. But environmentalists say that's an expensive battle that could take at least two years from signatures to passage.

Even with increasing negative publicity, environmental groups say their polling shows that an outright repeal of the measure may not pass. Measure 7 passed by 54 percent while Measure 37 passed by 60 percent.

But Pendell, the neighbor mom, hopes that all the big developer schemes that had nothing to do with Dorothy English will wake opposition to Measure 37. "This is way overboard, this is crazy."