Case Studies

Conflict Over Proposed Residential Subdivision in Water Source Protection Area

Landowners proposed a 5 lot residential subdivision on 30 acres in the town of Morrisville, Vermont. The parcel of land was located in a "Rural Residential with Agriculture" zoning district and also included in the overlay zoning district for the Public Community Ground Water Source Protection Area (WSPA). A municipal water department opposed the subdivision because of potential impacts to the groundwater.

Location: Morrisville, Vermont
Objective: For the developer and opponent to come to a common agreement about the future development of the parcel.
Duration: November 2005 – February 2006
Parties: Landowners and a municipal water department

The Issue
Morrisville is a small town in Vermont under tremendous growth pressure due to its close proximity to ski resorts in adjacent Stowe, Vermont. The applicants owned 93 acres of prime land in Morrisville. Sixty of those acres were located in the WSPA. The applicants proposed a residential subdivision on 30 acres in the WSPA. The parties disagreed on whether residential subdivisions were permitted in the WSPA.

History
Local landowners initially applied for a local zoning permit for a 5-lot subdivision on 30 acres in December of 2002. After multiple hearings and a site visit, the Development Review Board (DRB) granted a permit in July 2003. The municipal water department appealed the DRB's decision to the Environmental Court, which vacated the decision and remanded the case back to the DRB because of procedural defects in the DRB's hearing process.

The landowners re-applied for a permit to the DRB in December of 2003. In February of 2004, the DRB approved the subdivision and the municipal water department appealed the ruling to the Environmental Court. In December of 2004, the Environmental Court once again vacated the decision because of other procedural defects and remanded the case back to the DRB.

By this time the parties had devoted two years to combative litigation and were back at square one. After many months of informal negotiations had not resulted in any progress, it was clear to both sides that they were at an impasse. The landowners contemplated submitting a permit application for a third time, but they were losing faith in the process while watching the subdivision's permitting expenses grow. In an effort to move the project forward, the landowners' engineer suggested mediation.
Although neither party had utilized mediation previously, they both agreed that mediation was worth a try before engaging in further litigation. They also agreed that they needed a mediator familiar with land use permitting issues. The parties quickly agreed on a mediator with a background in land use law.

The Process
The original objective of the mediation was to formulate mutually acceptable conditions that would permit the residential subdivision to go forward while protecting the ground water in the WSPA. The challenge for those involved was to find a way to provide sufficient protection to the groundwater while maintaining the economically feasibility of the project.

The landowner and the municipal water department agreed to split the costs of the mediation evenly. No other parties were involved in the dispute or invited to the mediation. The first mediation session between the parties provided each side an opportunity to express their perspectives on the proposed development. As part of a series of proposed permit conditions, the municipal water department maintained that the landowners would have to conduct regular ground water monitoring to protect the wells. The landowners claimed that regular ground water monitoring would make the subdivision cost prohibitive.

Little progress was made in those first hours discussing possible permit conditions. At this point, the mediator met separately with the parties in private caucuses. During the private caucuses, both parties recognized that there was an added incentive to reaching consensus on the 5-lot subdivision on the 30 acres because the landowners would likely subdivide their remaining 63 acres in the near future. Developing mutually acceptable permit conditions for this first project could avoid a costly and contentious process for the landowner's next development in the WSPA.

In the private caucus, the mediator helped each party identify their interests. The landowners explained that their financial needs required subdividing the parcel in order to realize a certain profit. Like most business ventures, their primary interest was a return on their investment. The primary interest of the municipal water department was to protect the ground water in the WSPA. After hearing the landowners' interests back in a general session, the municipal water department revealed that it owned land outside the WSPA and asked whether the landowners might consider a land swap if parcels of similar acreage and value could be offered.

The landowners did express interest in a land swap, and the municipal water department developed a list of possible parcels to trade. It became gradually evident that none of the parcels were appealing to the landowners, and that they were reluctant to start from scratch with plans for a new subdivision. In addition, the municipal water department didn't want to sell land if there were other alternatives.

While the land swap idea didn't generate a solution, the parties now recognized that creative ideas might allow each party to achieve their primary objectives. The parties began discussing the possibility of the municipal water department purchasing the landowners' 60 acres in the WSPA. Because the municipal water department is a governmental entity, such a purchase would create opportunities for significant tax advantages for the landowners if they donated a portion of a market rate sale price back to the municipality. The municipal water department would therefore benefit from purchasing the parcel for a cash outlay below market price. The landowners would benefit if the cash received from the sale plus the tax advantages of the donation were greater than the profits from subdividing the land.

Results
The parties each hired tax advisors to develop scenarios that varied the payment, the amount of the donation to the tax exempt governmental entity, and the number of installment payments. The parties agreed to follow the basic principles of joint fact finding in which their experts shared data and worked collaboratively to produce the best outcome for all.

Although the tax experts disagreed on a few minor issues, both accepted the basic premise that the tax benefits from a donation plus the below market value payment could lead to a better return for the landowners than subdividing the land. In the end, the parties agreed to a deal that balanced maximizing the return to the landowners and minimizing the price paid by the municipal water department.

The municipal water department achieved its primary objective of protecting the groundwater of the WSPA. In addition to purchasing the land at a bargain price, the municipal water department is currently considering selling the development rights of the parcel to a land trust to recoup some of the purchase price. The landowners received an equal to or greater return than they were hoping to make if the subdivision was developed, but without the expense and frustration of the permitting process.

Major Lessons
1) Enter Mediation With an Open Mind
Both parties entered the mediation with the same mindset that they used in the litigation. Their initial efforts were focused at trying to convince the mediator that they were legally right and would prevail at a hearing. After recognizing each others' interests, it became apparent to both sides that reaching consensus on appropriate permit conditions was not only impossible, but not the best approach. Since the landowners were planning on a second development in the WSPA, a global solution that addressed all of their land in the WSPA was more efficient than one which dealt only with the smaller parcel. Moreover, the parties had never considered a purchase and sale of the land in the WSPA prior to the mediation because they had been so focused on permit conditions.

2) Joint Fact Finding
Rather than hiring expert witnesses to battle each other in court, the experts collaborated with each other in formulating a purchase price and donation amount that maximized the benefits to each party. Each party trusted the process and the advice they received from their tax expert. Without that crucial step, it is possible that the parties would have never reached consensus on the details of the purchase agreement.

For Further information, please contact:
Matt Strassberg
Green Mountain Environmental Resolutions
(802) 496-3088
matt@gmer.org