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Monday, July 15, 2013
Federal Court Strikes Down Kauai Vacation Rental Rules
By Robert Thomas @ 4:22 PM :: 5889 Views :: Kauai County, Tourism

Hawaii Federal Court: Kauai Charter Amendment Limiting Vacation Rentals Is A Prohibited "Zoning Initiative"

by Robert Thomas, InverseCondemnation

Late last year, we posted the Complaint in a federal court lawsuit originating on Kauai. In that case, the owner of a property that has been designated for resort development for 35 years asserted that the adoption of a Charter amendment by the County's voters and a follow-on ordinance adopted by the County Council that together created a new land use classification ("transient accommodation unit"), and severely limit the number of TAU's was an attempt to restrict the number of visitors and part-time residents.

The Complaint contains three major allegations:

(1) the measures are arbitrary and capricious and violate substantive due process as an attempt to limit visitors,

(2) they violate the Hawaii Zoning Enabling Act (Haw. Rev. Stat. § 46-4, the state statute delegating zoning authority to the counties in certain areas for all you land use nerds), which prohibits adopting of zoning ordinances by initiative, and

(3) the Charter measure violated the Kauai Charter's requirement that the ballot question contain an objective summary of the measure.

In an order filed two weeks ago, the District Court addressed the parties' cross-motions for summary judgment on the latter two counts (neither the plaintiff nor the defendants sought judgment on the substantive due process claim).

The court concluded that the Charter amendment adopted by the voters was, in reality, a prohibited zoning initiative. The court relied on the rationale of  Kaiser Hawaii Kai Dev. Co. v. City & County of Honolulu, 777 P.2d 244 (Haw. 1989), a case in which we successfully argued that § 46-4 prohibits a municipality from adopting a zoning ordinance via the initiative process. In Kaiser Hawaii Kai, the Hawaii Supreme Court held that section 46-4 delegates comprehensive zoning authority to the counties, and this requires them to exercise that power in a uniform manner, which is jeopardized by piecemeal voter-adopted measures. The District Court held:

First, although the facts of Kaiser Hawaii Kai are distinguishable from the facts of the instant case, nothing in Kaiser Hawaii Kai indicates that the legal principles which the Hawai`i Supreme Court articulated in that case are limited to initiatives to change the zoning of specific tracts of land. The legal principles in Kaiser Hawaii Kai are clear, and they are equally applicable to other instances in which counties attempt to legislate zoning issues through voter initiative. This Court also rejects Defendants’ argument that Section 3.19 and Ordinance No. 912 merely enacted a permissible shift of internal authority within the County. Section 3.19 and Ordinance No. 912 created a land use classification that did not previously exist, and they established the process developers must follow in order to use their land within that classification. Section 3.19 and Ordinance No. 912 did not merely shift authority over a classification and process that already existed. This Court therefore CONCLUDES that Section 3.19 was an improper zoning initiative and, pursuant to Kaiser Hawaii Kai and Haw. Rev. Stat. § 46-4(a), Section 3.19 is invalid.

Slip op. at 41.

The court also held, however, that the requirement for a not-misleading ballot measure does not apply to Charter amendments. See slip op. at 47 ("Although KBV presents a logical argument that ballot materials describing a proposed Charter amendment should contain an objective summary and should neither mislead nor advocate a position, the courts are not in a position to create such a requirement.").

A couple of unanswered questions:

  • The Order doesn't say how the court concluded that a measure adopted as a Charter Amendment can be treated as an ordinance adopted by the initiative power. Under the Kauai Charter, "initiative" is the "power of voters to propose ordinances." That's an entirely different process, with entirely different adoption requirements than initiative ordinances. For example, initiative proposals require the signatures of 20% of the number of eligible voters in the last election, while Charter amendments require 5% of registered voters in the last general election, and initiative proposals undergo an elaborate pre-election process, whereas Charter amendments, once qualified, simply go to the voters for adoption or rejection. Yet, the court treated the Charter amendment as an initiative ordinance. Did the court simply pierce the veil and conclude this was a disguised zoning initiative? Sorry, we just don't know.
  • In light of the above, would it have been better for the court to have concluded that Kauai voters were simply without the power to amend their Charter to create a new land use or zoning classification? That would have ended up in the same place (the Charter amendment is improper) -- but not because it's an impermissible zoning ordinance, but rather because state law prohibits the counties from creating new zoning classifications, whatever the method used. While it may be an intellectual exercise at this point, if this decision gets appealed to the Ninth Circuit, this seems like it would be an alternative grounds for affirmance.
  • The court also struck down the follow-on TAU ordinance adopted by the County Council, concluding that because the Charter amendment is invalid, the ordinance falls also because "[t]he Council enacted Ordinance No. 912 to implement [the Charter amendment]. See slip op. at 42. The order doesn't provide more analysis and thus we're not sure how independent council action -- while accomplished to implement what turns out to be an invalid Charter amendment -- can deemed illegal. We think that's the right result, mind you, but the conclusion does not seem to flow as an obvious point, so we would have appreciated an analysis, if only to use in our next case.

There will undoubtedly be more on this case, either in the Ninth Circuit or when the court deals with the remaining substantive due process claim. When that happens, we'll be there.

---30---

LINK: Order Granting in Part and Denying in Part Plaintiff's Motion for Summary Judgment on Counts II and III of... 

KGI: TAU not pau

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