A new attorney general opinion may have set the stage for a court battle over whether Virginia localities can seek early payment of cash proffers from developers.
Some fast-growing localities require builders to make cash payments in exchange for approval of their building plans. The payments are designed to cover the impact of development on local services. The fees can range up to $50,000 per unit.
Builders of residential and commercial projects won some financial relief at the 2010 Virginia General Assembly which passed a bill temporarily banning early collection of cash proffers. It’s codified at Va. Code § 15.2-2303.1:1. The bill took effect July 1, and a few localities took the position that it applied only to agreements made in July or afterwards.
Attorney General Ken Cuccinelli said “no” in an opinion dated Sept. 13. The law applies retroactively, he said.
“It is my opinion that, as of July 1, 2010 and through July 1, 2014, a locality may not accept or demand payment of any uncollected cash proffer payments, including those agreed to prior to July 1, 2010, until the completion of a final inspection and prior to the issuance of a certificate of occupancy for the subject property, notwithstanding the provisions of any such proffer agreement to the contrary,” Cuccinelli wrote.
The opinion was a victory for the Home Builders Association of Virginia which lobbied for the moratorium on early collection.
“Our members believe it’s significant,” said Richmond lawyer William G. Thomas who serves as general counsel for the HBAV. “I think it will help home builders economically. It’ll give them an opportunity to maybe go ahead and build some houses that otherwise they wouldn’t and create a few jobs that otherwise wouldn’t be there,” he said.
The opinion rejects the position of a handful of localities, including Hanover County and Chesterfield County, which sought to collect cash proffers as required by prior agreements with developers despite the 2010 legislation.
“I remain respectfully unpersuaded by this particular opinion of the attorney general,” said County Attorney Sterling E. Rives III of Hanover County. Rives said legislation is normally presumed not to have a retroactive effect unless it expressly says so.
“In addition,” Rives said, “it would be disconcerting if the General Assembly had the broad authority to rewrite contracts to which it is not a party, which is asserted in this opinion,” he said.
Cuccinelli concluded constitutional provisions barring governmental interference with contracts do not prohibit legislation changing the terms of preexisting cash proffer agreements. “[B]ecause localities derive their zoning and conditional zoning authority from the Commonwealth, that power remains subject to the reserved legislative powers of the state,” he wrote. Thus, he said, the state can retroactively modify the payment terms of localities’ cash proffer agreements.
Rives questions such a conclusion. “Could, for example, the General Assembly amend all local government contracts for purchase of gasoline to increase the price to benefit the gas and oil industry?” he wondered. “Is there any boundary to that authority?”
Thomas recognized some local government attorneys may be unpersuaded by the opinion and will ignore it. “I suspect, if that occurs now, we will see litigation, whether it’s an injunction or a mandamus kind of action, to get local governments to acknowledge that legislation and its applicability.”
Rives predicts any litigation could be short circuited by legislative revision. “I think it is likely the General Assembly will take a look at this issue in the spring and may have an opportunity to do so before any litigation is concluded,” he said.