Published on:

Court Holds Zoning Focused On Tax Revenue Does Not Violate RLUIPA

The Sixth Circuit Court of Appeals held that  a zoning ordinance that limited permitted uses, based upon potential tax revenue generated by the uses, did not violate the Religious Land Use and Insttutionalized Persons Act (RLUIPA).  In Tree of Life Christian Schools v. City of Upper Arlington, Ohio, the Court held that the School had failed to establish a prima facie RLUIPA claim.

In 2001 the City adopted a Master Plan that included a Development Ordinance with a small area of the City designated for office use in order to generate revenue for the City. It was found by the City that to maintain the revenue generating aspect of the Ordinance, all school uses, whether religious or secular were precluded from the office district. In 2010, despite the prohibition contained in the Ordinance, the Tree of Life School purchased an office building on a 16 acre parcel. After failing to obtain approval from the City to open its religious school, the school sued the City claiming a violation of the equal terms provisions of RLUIPA. The claim was based upon the argument that the religious school was being treated less favorably than comparable nonreligious uses.

After much litigation and two prior appeals to the Circuit Court, the District court found that there was no RLUIPA violation and “…the Development Ordinance is no more onerous to Tree of Life than it is to nonreligious entities that generate comparably small amounts of revenue for the City.” The Circuit Court affirmed finding that Tree of Life had failed to demonstrate a prima facie violation of RLUIPA.

In reviewing the facts, the Court noted the background to the adoption of the Development Ordinance:

Upper Arlington’s Master Plan stresses the need for the City to create new revenue to meet its current capital needs and support its current level of services, noting that commercial office use provides significantly more revenue to the City than any other land use.’ Commercial office use is authorized on less than five percent of the City’s land. And because Upper Arlington is landlocked and fully developed, the preservation of its office districts for commercial use is of utmost importance to the City. The Master Plan also singles out personal income taxes as an important source of Upper Arlington’s revenues and emphasizes that every effort will be made to broaden and expand the City’s employment base in order to increase these tax revenues.

The uses permitted by the Ordinance consisted of various office and research facilities. Places of worship are permitted as a conditional use requiring Zoning Board Approval.  Also, prior to 2011, day care centers were also permitted but as a result of this litigation the Ordinance was amended eliminating the use. In depositions a representative of the City explained that day care was originally permitted as: the City previously intended daycares to be an ancillary use in the office district, designed not to generate revenue but to facilitate the general office district by providing a place where workers in the office complex could drop off their children during work hours in a safe environment.

Tree of Life purchased the property to consolidate its school which was at several locations. The property, which includes a 254,000 square foot office building, is the largest building in the office district and its previous owner generated 29% of the tax revenue of the City. The School’s purchase contract had a contingency for the School to back out if it could not obtain zoning approval before closing. The City made no commitment to rezone the property but the School went ahead with the purchase, even though it did not have zoning approval.

Prior to purchasing the property, the School sought permission to operate as a church with a private school. That application was rejected on the basis that the actual primary use was as a school not a place of worship. Subsequent attempts at seeking a conditional use and amendments to the Ordinance were also unsuccessful.

The Court recited the long history of decisions by the District Court, appeals and remands, which brought the case back before the Circuit Court. While discussing a number of other issues, the key point of the case and the decision involves the issue of whether the maximizing of income by the City is a legitimate basis for restricting the use and whether there was unequal treatment with regard to the school use. The Court determined that the production of income through the methodology of the Ordinance was a legitimate interest of the City.

Tree of Life tried to argue that irrespective of the legitimacy of the income production goals of the City, it was not being treated on equal terms with other permitted uses. First it argued that Tree of Life should be compared to underutilized office space in the City which tends to produce less income than anticipated yet is still permitted. However the court rejected that comparison.

Tree of Life argues that because the Development Ordinance does not set a floor for the number of workers that a user of land can employ, partially used offices are valid comparators.

 But this argument could be used to undercut almost any regulatory purpose behind a land-use ordinance. All zoning decisions require the regulatory authority to project the effects that a particular land use will have on the municipality. A municipality seeking to maximize revenue must project the type of labor force that a particular land use will attract. Similarly, a municipality that is concerned about traffic congestion and noise pollution must project how each particular land use will impact those conditions.

The Court also analyzed the argument that a day care center could be comparable. But the Court noted that even the largest day care center could only use a fraction of the 254,000 square feet being occupied by Tree of Life.

In sum, Tree of Life has not established a prima facie case under RLUIPA’s equal terms provision because it has failed to identify a permitted land use that would generate a comparably small amount of revenue for the City. Even the largest daycare with which Tree of Life’s own expert witness is familiar would use only 35,000 square feet of the existing 254,000 square feet of available space in the office building on the Property. The application of Armstrong’s methodology to Siegel’s and Smith’s data leads to the inexorable conclusion that daycares generate far more revenue on a per-square-foot basis than Tree of Life would. Accordingly, the school’s equal terms claim fails.

-Steven Silverberg