Hollander Hospitality v. City of Astoria

In 2018, petitioner applied for design review to develop a hotel on property within the Bridge Vista Overlay (BVO) zone. The city council approved the application and subsequently amended the BVO zone standards. Under Astoria Development Code (ADC) 9.100(A)(1), permits expire in 2 years unless substantial construction has taken place, the use has begun, or the city grants an extension. In 2020, petitioner applied for an extension under ADC 9.100(B). The city council denied the extension application. This appeal followed.

Under ORS 197.825, LUBA has jurisdiction to review “land use decisions” and “limited land use decisions.” Under ORS 197.015(10)(a)(A)(iii), a decision is a “land use decision” if it requires, the application of a land use regulation. Under ORS 197.015(12)(a)(B), a decision is a “limited land use decision” if it pertains to design review for a site within an urban growth boundary. Because the extension decision denied an extension of a design review permit for a site within an urban growth boundary, the city argued that the decision was a limited land use decision. Because the city was required to apply ADC 9.100(B), which is a land use regulation, to the extension application, petitioner argued that the extension decision was a land use decision. LUBA agreed with petitioner that, because the extension decision required the application of a land use regulation, and because it was not itself a design review decision, it was a land use decision.

Under ADC 9.100(B)(2)(c), the city may approve an extension if, among other things, “progress has been made on the project since the original decision on the permit,” including submittal of permit applications, signing of contracts for site specific reports, and the beginning of engineering, architectural design, or construction. Under ADC 9.100(B)(2)(d), “[i]n lieu of compliance with Section 2.c,” the city may approve an extension if “poor economic conditions exist in the market that would advise against proceeding with the project.” Because petitioner had submitted no applications or reports, the city council concluded that ADC 9.100(B)(2)(c) was not met. In addition, while the COVID-19 pandemic began impacting the hotel industry in 2020, because petitioner could have but did not make any progress on the project before that impact began, the city council concluded that ADC 9.100(B)(2)(d) was not met. In the first assignment of error, petitioner argued that the city council misconstrued ADC 9.100(B)(2)(d). LUBA agreed with petitioner that, because ADC 9.100(B)(2) allows an applicant to satisfy ADC 9.100(B)(2)(d) “in lieu” of ADC 9.100(B)(2)(c), meaning that it requires either progress or poor economic conditions, whereas the city council’s interpretation required both progress and poor economic conditions, the city council’s interpretation of ADC 9.100(B)(2)(d) was inconsistent with that regulation’s express language. As a result, the city council’s interpretation was not subject to deference under ORS 197.829(1) and Siporen v. City of Medford, and LUBA agreed with petitioner that the city council misconstrued ADC 9.100(B)(2)(d). The first assignment of error was therefore sustained.

The city council also concluded that ADC 9.100(B)(2)(d) was not met because economic conditions did not advise against proceeding with the project. The city council relied on the fact that two other hotel operators had either obtained or applied for building permits in 2020. In response, petitioner noted the differences between those two projects and its own, submitted regional and national market data for the hotel industry showing declines in occupancy, testified regarding difficulties obtaining loans, and submitted letters from lenders corroborating those difficulties. In the second and third assignments of error, petitioner argued that the city council’s conclusion that ADC 9.100(B)(2)(d) was not met was supported by neither substantial evidence nor adequate findings. Because the city did not explain why it chose not to rely on petitioner’s evidence and, indeed, did not address petitioner’s evidence at all, LUBA agreed with petitioner. The second and third assignments of error were therefore sustained.

Due to the use of the word “may” throughout ADC 9.100(B)(2), the city council concluded that, even if that criterion was met, the city would still have authority to deny the extension. In turn, the city chose to exercise that discretion by denying the extension so that petitioner would have to comply with the BVO zone standards as amended after the city’s original design review approval. Under ORS 227.173(1), known as the codification requirement, “[a]pproval or denial of a discretionary permit application shall be based on standards and criteria, which shall be set forth in the development ordinance.” In the fourth assignment of error, petitioner argued that the decision violated ORS 227.173(1) because noncompliance with code changes adopted after an approval is not a codified basis for denying a permit extension. LUBA agreed with petitioner that, although the city may deny a permit extension to ensure consistency with code changes adopted “since the last permit extension” under ADC 9.100(B)(2)(b), because petitioner’s permit had not previously been extended, that provision was not applicable, and the city’s decision was therefore based on uncodified standards in violation of ORS 227.173(1). In addition, LUBA noted that a previous version of the ADC specifically allowed the city to grant extensions “at its discretion.” LUBA concluded that the removal of that language indicated that the city intended to remove such discretion. The fourth assignment of error was therefore sustained and the city’s decision was REMANDED.