•     Significant Amendments to Administrative Procedure Act

•     Telecommunications Towers, Federal Law and Local Zoning

•     Historic Districts

Significant Amendments to Administrative Procedure Act Are Positive Change For Local Governments

By Thomas R. West

and Pamela A. Scott

Beginning January 2001, the face of administrative law in North Carolina will change dramatically. The North Carolina General Assembly has significantly strengthened the impact of administrative law judges’ (ALJs’) decisions in contested cases between state agencies and individuals or entities appealing agency decisions by amending the Administrative Procedure Act (APA). The amended APA now provides that an agency must adopt an ALJ decision in its final decision, provided the ALJ decision is supported by the greater weight of the evidence in the record. For the most part, the amendments are a positive change for local governments because, except for certain specific personnel cases brought pursuant to the State Personnel Act, local governments will be petitioners against state agencies rather than respondents. Petitions brought pursuant to the APA are brought against "agencies." The APA specifically excludes local government units from that term.

 The amendments are effective January 1, 2001, and apply to contested cases commenced on or after that date.

 What sparked the change?

The amendments, heavily negotiated and passed during the 2000 Short Session, were sparked by a decade-long pattern of final agency decisions that rejected ALJs’ recommended decisions in favor of petitioners and reinstated initial decisions by agencies in their own favor. Under the APA, as it currently exists, the official record of a contested case is developed through an evidentiary hearing conducted by an ALJ. Following the hearing, the ALJ makes a decision containing findings of fact and conclusions of law based on the evidence presented by the parties. The ALJ is the only person in the administrative process who is empowered to conduct a hearing and who has the opportunity to observe firsthand and determine the credibility of witnesses and other evidence presented. However, the ALJ’s decision is only a recommended decision to the agency and does not bind the agency in any way in its final decision.

According to information compiled by the Research Division of the General Assembly regarding contested cases between 1989 and 1999, ALJs have recommended decisions or orders against agencies and for petitioners in approximately 25% of Article 3 contested cases. The agencies have reversed approximately 90% of those ALJ recommended decisions against the agency. Where the ALJs have recommended decisions or orders in favor of agencies, the agencies have adopted the ALJs’ recommended decision almost 100% of the time.

The General Assembly appears to have concluded from this data that administrative agencies rarely rule against themselves and petitioners rarely prevail in those cases where the ALJ rules in their favor. This trend of pro-agency final decisions appears to be what prompted the General Assembly to insert firmer and sharper teeth into the state’s administrative legal process.

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Effective January 1, 2001, most parties in the administrative legal process will be subject to the following new provisions:

• Burden of Proof is Set Forth in the APA

The party with the burden of proof in a contested case must establish the facts required by the preponderance, i.e., greater weight of the evidence. This standard has always been applied, but the APA was silent as to whether this was, in fact, the burden of proof.

• Binding Findings of Fact

The ALJ’s findings of fact are binding on the agency in its final decision unless the finding is clearly contrary to the preponderance of the admissible evidence. Any finding of fact not specifically rejected in accordance with the new law will be deemed accepted for purposes of judicial review of the final agency decision.

• Evidence Must Support Agency’s Rejection of ALJ Finding

For each finding of fact not adopted by the agency, the agency must set forth in detail the reasons for not adopting the finding, as well as the supporting evidence in the record relied upon by the agency.

• Greater Weight of Evidence Must Support New Finding by Agency

For each finding of fact made by the agency that is not contained in the ALJ’s decision, the agency must set forth in detail the evidence in the record relied upon by the agency in making the new finding. A new finding of fact by the agency must be supported by the preponderance of the admissible evidence in the record.

• No Inconsistent Agency Findings

Agencies may not make any new finding of fact that is inconsistent with a finding by the ALJ unless the ALJ’s finding is clearly not supported by the greater weight of the evidence.

• ALJ’s Decision Is Final

The agency must adopt each finding of fact contained in the ALJ’s decision unless the agency demonstrates the ALJ’s finding is clearly contrary to the preponderance of the evidence. For each finding not adopted by the agency, it must set forth its reasoning for the final agency decision.

• State Personnel Cases – Employer Must Show Just Cause

In administrative personnel cases involving career state employees, the department or agency employer has the burden of showing that the "career state employee" was discharged, suspended or demoted for just cause. This is a marked reversal of current law, but could be argued not to apply to local government employees, and their employers by the very language of the amendment.

• Attorney’s Fees Allowed

If an administrative case (other than a disciplinary action by a licensing board under Article 3A of the APA) proceeds to a court of general jurisdiction for judicial review, the court may allow the prevailing party to recover reasonable attorney’s fees pertaining to the administrative review portion of the case.

• Attorney’s Fees Taxed Against Agency

On judicial review, if the non-agency party prevails, the court may tax attorney’s fees pertaining to the administrative review portion of the case as court costs against the agency if the court finds that (1) the agency was not substantially justified in pursuing its claim, and (2) there are no special circumstances that would make the award of attorney’s fees unjust. 

In addition to the state agencies already excluded from the administrative hearings process, the new law does not apply to certificate of need or occupational licensing cases under Article 3A of the APA.

Advocates of the amendments to the APA hope that the changes will make more meaningful the decisions of ALJs, particularly in those cases where the ALJ has rendered a decision contrary to the position taken by the agency that will ultimately make the final decision. It is hoped that the binding nature of ALJ decisions under the new law will decrease the significant time and legal fees expended in administrative cases by eliminating the virtually automatic judicial review sought by petitioners to obtain an independent decision on the merits of a case where the ALJ rules in favor of the petitioner and against the agency, but the agency then reverses the ALJ’s recommended decision with little, if any, supporting evidence.

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By Robin L. Tatum

 The demand for wireless communications has rapidly increased, and as a result, wireless service providers have pushed for approval and construction of more cellular towers to keep up with the demand. Although consumers seek the highest quality of wireless service, many citizens oppose the location of cellular towers near their homes. Citizens are often concerned about potential environmental and health effects, as well as the risk that a nearby tower will decrease the aesthetic value of their neighborhoods and reduce the property value of local homes and businesses.

Municipalities and wireless service providers have clashed over the placement, height, appearance, and potential negative effects of wireless facilities since the early 1980s. To speed up the approval and construction of wireless facilities, Congress enacted Section 704 of the Telecommunications Act of 1996 ("the Act" or "Section 704"). In passing the Act, Congress intended to create more favorable land use regulation toward wireless communication facilities. Although the Act provides substantive protections for telecommunication providers, it was not intended to prevent local governments from making decisions regarding the placement of wireless communication facilities within their jurisdictions.

Although local land use laws vary, most local governments require wireless service providers to obtain a special use permit or conditional use permit ("use permit") before placing and constructing any cellular tower. (For more information on use permits visit our web site at www.poynerspruill.com/infocenter/Government/Loc_Govt_Counsel.htm#SpecialUse).

Obtaining a use permit in North Carolina requires a hearing before a local quasi-judicial board. And, while local governments set the standard for whether a use permit will be granted, Section 704 sets forth certain additional requirements with which local governments must comply. Because the requirements of the Act are not necessarily the same as those of the applicable local ordinance, local boards may be required to consider additional factors when making decisions related to cellular towers. The requirements of the Act are set forth below:

1. The local zoning board cannot "unreasonably discriminate among providers of functionally equivalent services."

 

2. The local zoning board cannot "prohibit or have the effect of prohibiting the provision of personal wireless services" that the Federal Communications Commission has licensed to operate in that area.

 

3. In considering an application for a wireless facility, a zoning board must approve or decline the application "within a reasonable period of time . . . taking into account the nature and scope of such request."

 

4. If the zoning board declines the application for a wireless facility, that decision must be "in writing and supported by substantial evidence contained in a written record."

 

5. Zoning boards cannot deny a wireless facility's application because of "environmental effects of radio frequency emissions" if the proposed facility meets FCC standards.

Under state law, an appeal from a local board’s use permit decision is to the Superior Court by Writ of Certiorari. However, Section 704 also gives wireless companies the opportunity for accelerated review in federal court. This raises several issues. Primarily, as a general rule, federal courts do not have jurisdiction to adjudicate appeals of local zoning and land use decisions. Thus, the Act purports to give the federal court jurisdiction it would not otherwise have, and, allows the federal court to decide issues that have historically been exclusively local.

Arguably, federal court review should be limited to issues relating to the Act alone, and not those arising under the local zoning ordinance. However, this is difficult especially when the local standard and the federal standard requiring "substantial evidence" and a written decision are virtually interchangeable. Thus, in addition to adding requirements, the Act gives the federal court the same authority to review use permit decisions that the North Carolina General Statutes have already given the Superior Court of this state. Although no court has rendered a majority ruling on this issue, at least one judge from the Fourth Circuit U.S. Court of Appeals (which includes North Carolina) has found this to be unconstitutional. Regardless, because of the proliferation of cellular towers, it is almost certain that litigation relating to the tension between federal and local governments’ jurisdiction over tower sites will continue.

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The Federal Court Decisions

The holdings of the first federal courts considering cases arising under Section 704 favored wireless service providers. These courts applied expansive interpretations of the procedural requirements of Section 704 and imposed requirements not expressly stated in the legislation. For example, the trial courts stated that when the legislation required a denial to be "in writing," it meant that local governments were required to issue detailed written decisions that included an explanation of their decision and the supporting evidence. This caught local governments by surprise, since most were accustomed to simply issuing letters on permit decisions. The courts also accepted the companies’ arguments that decisions based simply on general statements of opposition by residents were not based on "substantial evidence." Because the opponents rarely had the resources to gather documentation to support their opposition, this again meant that the courts usually found that the decisions to deny a permit were not sufficiently supported under Section 704. Also, the courts holding that a denial of a permit did not comply with Section 704 did not simply return the matter to the local government body for reconsideration. Instead, the courts issued orders directing the local body to issue the permit to the company.

However, in a line of recent decisions involving the placement of telecommunications towers, the Fourth Circuit Court of Appeals has consistently held in favor of local governments. The Fourth Circuit’s views differ substantially from those of other circuits that have considered similar issues. So far, no other federal appellate court has been as willing as the Fourth Circuit to interpret and apply the federal legislation in such a way to consistently favor the local government position.

The Fourth Circuit has decided at least five cases arising under Section 704 to this date. In each of these cases, the Fourth Circuit upheld the decision by a local governmental body to deny a zoning permit for a communications tower. In one recent case, one member of the Court even stated that Section 704 is an unconstitutional imposition on state and local governments. Several of the more significant cases are summarized below: 

• AT&T Wireless PCS, Inc. v. City Council of Virginia Beach, 155 F.3d 423 (4th Cir. 1998)

The Fourth Circuit refused to impose procedural requirements upon the local government that were not stated in the Act. Thus, the court held that a one-word written denial of a permit satisfied the Act’s requirement for a decision "in writing." The Court further held that a decision based primarily on the opposition of local residents, unsupported by expert testimony or factual data, met the requirement that decisions be based on substantial evidence. The Fourth Circuit stated that it was "not only proper but even expected" that a city council would consider the views of its constituents.

• AT&T Wireless PCS, Inc. v. The Winston-Salem Zoning Board of Adjustment, 172 F.3d 307 (4^th Cir. 1998)

The Winston-Salem Zoning Board of Adjustment had found that a proposed tower would not be "in harmony" with the surrounding neighborhood and with a historic building. AT&T argued that the board had no evidence of this lack of harmony other than the opinions stated by residents and a board member. The district court overruled the board of adjustment, finding it had lacked "substantial evidence," but the Fourth Circuit held that the board’s decision was based on sufficient evidence to meet the substantial evidence requirement. Also, in the Winston-Salem case, the Fourth Circuit expressed its view that, even if a federal court found that a local body had violated Section 704, it did not have the authority to issue an order directing the local body to issue a permit.

• Petersburg Cellular Partnership v. Board of Supervisors of Nottoway County, 205 F.3d 688 (4th Cir. 2000)

In this case, the Court dealt with a situation where it was questionable whether the local board had acted upon "substantial evidence." Only four persons had opposed the permit application and one did so only by telephone. The wireless provider countered all specific objections, leaving the general appearance of the towers as the only basis to the objections. Only one of the three judges considering the case concluded that the board had acted with substantial evidence. However, his decision to uphold the denial of the permit became the majority decision when Judge Niemeyer became the first circuit judge to voice the view that Section 704 is unconstitutional. So far, no other federal judge has agreed with this opinion, although the argument has been raised by parties in several cases.

Judge Niemeyer stated that Congress cannot constitutionally leave the zoning and permit authority for siting communications towers with state and local governments and, at the same time, tell them how to exercise that authority. He said that Congress had compromised state and local sovereignty and also confused the electorate as to which governmental unit, federal or local, is accountable for a decision made by the local board. Judge Niemeyer also stated that while local governments could avoid the federal requirements by abandoning the regulation of the towers, this was "not a choice at all. . . .To suggest that a local governmental body withdraw from land-use regulation and leave the construction of structures in the community to the whims of the market is nothing short of suggesting that it end its existence in one of its most vital aspects. As we have noted repeatedly, ‘land use decisions are a core function of local government. Few other municipal functions have such an important and direct impact on the daily lives of those who live or work in a community.’"

• 360º Communications Co. of Charlottesville v. Board of Supervisors of Albemarle County, 211F.3d 79 (4th Cir. 2000)

The Fourth Circuit refused to adopt the test set forth by the Second and Third Circuits as to whether a denial of a permit for a tower constituted a general prohibition of wireless services. The Albemarle County case involved an application to erect a tower on the ridgeline of a mountain that would extend above the height of the tree canopy. The County’s Board of Supervisors concluded that the application violated the county’s comprehensive and open space plan and its zoning ordinance. The primary objection to the proposed tower was that it would be higher than the trees. The company argued that any tower would have to be higher than the trees to be effective and, thus, the denial of this application constituted a general ban on wireless services.

The Fourth Circuit held the appropriate test was the one stated in Section 704, which is whether a denial amounted to a prohibition of the provision of service and, that a carrier contending that such a prohibition did exist had a "heavy burden" of showing "not just that this application has been rejected but that further reasonable efforts are so likely to be fruitless that it is a waste of time to even try." It concluded that 360º Communications had not met that test because testimony from company witnesses showed alternatives involving towers in another location.

In sum, local governments in North Carolina can be more comfortable in denying tower requests than in many other states. Nonetheless, issues still exist and local governments are well served to carefully review Section 704 and the relevant court decisions before making tower decisions.

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 By Kacey C. Sewell

Development in historic districts is often a challenge and a balancing act. However, these districts stimulate growth and increase property values. In fact, studies have revealed that in many circumstances, homes located in designated districts have a more substantial increase in value than those that are not. Moreover, building permit activity and expense of renovation for homes in historic districts does not appear to differ significantly from structures outside the districts. This article summarizes how historic districts came about and some important things to know about establishing districts and administering their regulations.

The General Assembly has recognized that "[t]he historical heritage of our State is one of our most valued and important assets. The conservation and preservation of historic districts and landmarks stabilizes and increases property values in their areas and strengthens the overall economy of the State." Accordingly, cities and counties are authorized by statute to list, regulate, recognize, and acquire (within their respective zoning jurisdictions) districts or landmarks that "embod[y] important elements of its culture, history, architectural history, or prehistory" and to use those areas to promote "education, pleasure and enrichment of the residents of the city or county and the State as a whole."

Local governments are given virtually unlimited discretion to determine whether or not to establish historic districts and preservation programs. Of the roughly 600 local governments in the state, consisting of 100 counties and 500 cities and towns, 125 have taken advantage of the legislation. These municipalities are organized into 81 commissions, some of which are joint efforts by cities and counties.

While local governments are under no obligation to participate in the historic preservation program, if they do, certain procedures must be followed. The first step is to adopt an ordinance creating a preservation commission, which must have a minimum of three individual members. The majority of these individuals must have a special interest in history, architecture, archaeology, or related fields. The commission then, in essence, is the administrator of the district and program, and has specific powers. It may:

• recommend properties to be designated or removed as historic landmarks and districts;
• enter upon private lands for examination or survey;
• acquire, restore, and operate historic properties;

• conduct educational programs regarding historic properties and districts within the jurisdiction;

• issue guidelines and standards for rehabilitation and new construction within historic districts; and

• ensure that property owners within historic districts follow those guidelines.

Historic districts must consist of areas "deemed to be of special significance in terms of their history, prehistory, architecture, and/or culture, and to possess integrity of design, setting, materials, feeling, and association." The municipal governing board may designate and amend historic districts through zoning or other ordinances. Before a district is designated, an investigation and report that describes the boundaries of the proposed district as well as the significance of the buildings, structures, features, sites or surroundings therein must be prepared by the person or group recommending it for designation. Usually, the commission is the one to identify a property or properties as a potential district. In that case, it would analyze the site and write a designation report explaining the significance of the area. Property owners are usually contacted during this time and allowed to give input. The report should then be passed to the State Historic Preservation officer (of the Department of Cultural Resources) for analysis and recommendations. Additionally, where the report was not submitted by the preservation commission, the municipality may choose to refer it to the commission, or in any case, to any other interested body for recommendations. If, 30 days after the Department of Cultural Resources receives a written request for this analysis by the municipal governing board, the Department has made no response, the municipality may act without awaiting the report and may take action to adopt or amend its zoning ordinance. 

Once a district has been designated as a historic district, owners within the district are required to obtain certificates of appropriateness (COAs) from the preservation commission before making changes to the exterior portion of any structure or before placing any kind of outdoor advertising sign on their property. The commission must prepare and adopt procedures and guidelines that can be used by property owners and the commission to determine what changes to new construction, alterations, additions, moving and demolition are "appropriate." A COA must be issued before a building or other required permit may be granted, but under some circumstances, only a COA may be required (e.g., change in exterior color or lighting design).

Applications for COAs will be reviewed and responded to within 180 days from the date of filing. The commission members may view the premises or seek advice, as they deem necessary. Appeals may be taken to the Board of Adjustment according to the procedure set forth by the preservation commission and decisions of the Board of Adjustment may be appealed to the Superior Court of the county where the municipality is located.

If you would like to receive the Local Government Counsel Newsletter and periodic Local Government alerts by e-mail, please call our Client Services Department at (919) 783-1120 or send an e-mail request stating your full name, street address and e-mail address to jspivey@poynerspruill.com.

This bulletin is published by Poyner & Spruill L.L.P. to provide general information about significant legal developments. Because the facts in each situation vary, the legal precedents noted herein may not be applicable to individual circumstances.

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