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Landwatch v. Deschutes County

Court of Appeals of Oregon

May 3, 2017

CENTRAL OREGON LANDWATCH, Respondent Cross-Petitioner,
v.
DESCHUTES COUNTY, Respondent, and PINE FOREST DEVELOPMENT, LLC, Petitioner Cross-Respondent.

          Argued and submitted February 16, 2017

         Land Use Board of Appeals 2016065

          Steven Hultberg and Seth King argued the cause for petitioner-cross-respondent. With them on the briefs were Radler White Parks & Alexander LLP; and Robert L. Aldisert, and Perkins Coie LLP.

          David Doyle fled the brief for respondent.

          Paul D. Dewey argued the cause and fled the brief for respondent-cross-petitioner.

          Before Ortega, Presiding Judge, and Egan, Judge, and Lagesen, Judge.

         Case Summary:

         Petitioner Pine Forest Development, LLC (Pine Forest) seeks judicial review, and respondent Central Oregon Landwatch (Landwatch) cross-petitions for review, of an order of the Land Use Boards of Appeals (LUBA) that remands to respondent Deschutes County its decision approving Pine Forest's proposal to expand the Caldera Springs destination resort. Pine Forest raises two assignments of error, arguing that (1) LUBA's order was an impermissible collateral attack on prior county decisions concerning the resort and (2) LUBA erred in concluding that certain individual bedrooms in 38 of the resort's vacation homes, which have full bathrooms and lockable interior and exterior doors, are not overnight lodging units, as defined in ORS 197.435(5)(b), for purposes of meeting the criteria for a destination resort under ORS 197.445(4)(b). Landwatch, in its cross-petition, contends that an expansion of a destination resort is not allowed under ORS 197.445 unless the proposed expansion area meets all of the criteria as a stand-alone resort and that LUBA erred in concluding otherwise.

         Held:

         Affirming on the cross-petition and rejecting Pine Forest's impermissible collateral attack argument, LUBA's order was unlawful in substance because LUBA misconstrued the definition for "overnight lodgings, " as set out in ORS 197.435(5) (b), in reaching the conclusion that individually owned units must be separately owned. Rather, where a developer proposes an expanded destination resort that is based, in part, on existing lodgings, for an existing individually owned unit to count as "overnight lodgings, " there must be evidence that the unit is in fact separate and rentable separately from other units; it is not enough that the unit is theoretically separate and separately rentable, particularly when there is affirmative evidence that the claimed separate unit of lodging is, in reality, neither separate nor separately rentable.

         Reversed and remanded on petition; affirmed on cross-petition.

          LAGESEN, J.

         Petitioner Pine Forest Development, LLC (Pine Forest) seeks judicial review, and respondent Central Oregon Landwatch (Landwatch) cross-petitions for review, of an order of the Land Use Board of Appeals (LUBA) that remands to respondent Deschutes County (the county)[1] its decision approving Pine Forest's proposal to expand the Caldera Springs destination resort. The resort was approved in 2006 under the destination-resort land use statutes, ORS 197.435 to 197.467, which were promulgated in accordance with Statewide Planning Goal 8. Pine Forest raises two assignments of error, arguing that (1) LUBAs order was an impermissible collateral attack on prior county decisions concerning the resort and (2) LUBA erred in concluding that certain individual bedrooms in 38 of the resort's vacation homes-which we shall refer to as the "lock-off rooms"- which have full bathrooms and lockable interior and exterior doors, are not overnight lodging units, as defined in ORS l97.435(5)(b), for purposes of meeting the criteria for a destination resort under ORS l97.445(4)(b). Landwatch, in its cross-petition, contends that an expansion of a destination resort is not allowed under ORS 197.445 unless the proposed expansion area meets all of the criteria as a standalone resort and that LUBA erred in concluding otherwise.

         On review to determine whether LUBA's order is unlawful in substance, ORS l97.85O(9)(a), we conclude that LUBA correctly determined that ORS 197.445 does not prohibit the approval of a proposed expansion of a destination resort provided either that the proposed expanded resort, as a whole, satisfies all applicable statutory requirements for the siting of a destination report, or the expanded area, on its own, meets all applicable requirements. We therefore affirm on the cross-petition. As to LUBA's conclusion that that the lock-off rooms do not qualify as overnight lodging under ORS 197.435(5)(b), we agree with Pine Forest that LUBA misconstrued the statute in reaching that conclusion. We disagree, however, with Pine Forest's assertion that the lock-off rooms qualify as "overnight lodgings" as a matter of law under a correct interpretation of the statute and, for that reason, remand to LUBA to consider the matter in the first instance. We therefore reverse and remand on the petition.

         I. BACKGROUND AND PROCEDURAL HISTORY

         A. Legal Framework

         To provide context, we first summarize the state and local law applicable to the siting of a destination resort in Deschutes County. Statewide Planning Goal 8 speaks to the siting of destination resorts in Oregon. The purpose of Goal 8 is to "'satisfy the recreational needs of the citizens of the state and visitors and, where appropriate, to provide for the siting of necessary recreational facilities including destination resorts'" without the need for an exception to the resource goals if certain criteria are met. Friends of Marion County v. Marion County. 233 Or.App. 488, 494-95, 227 P.3d 198 (2010) (quoting Goal 8).

         To implement Goal 8's objectives regarding the siting of destination resorts, the legislature enacted ORS 197.435 through 197.467. Those statutes set forth the criteria that a proposed resort must meet to be approved as a destination resort. The statutes define a destination resort as "a self-contained development that provides for visitor-oriented accommodations and developed recreational facilities in a setting with high natural amenities." ORS 197.445. Further, the legislature has found that destination resorts are intended "to promote Oregon as a vacation destination and to encourage tourism as a valuable segment of our state's economy, " that Oregon has "a growing need to provide year-round destination resort accommodations to attract visitors and encourage them to stay longer, " and that it is a "difficult and costly process to site and establish destination resorts in rural areas of this state." ORS 197.440.

         For destination resorts sited in "eastern Oregon, "[2]ORS 197.445 sets forth a number of criteria for "proposed developments." A proposed development must have at least 160 acres with half of the site reserved for permanent open space and must include a $7 million expenditure[3] on recreational facilities and visitor-oriented accommodations. Residential homes can be included in a destination resort, but the resort must have at least 150 overnight lodging units and the ratio of residential homes to overnight lodging units cannot exceed 2.5 to 1. ORS l97.445(4)(b)(A), (E). Under ORS 197.435(5)(b), "overnight lodgings" for destination resorts located in eastern Oregon are defined as:

"permanent, separately rentable accommodations that are not available for residential use, including hotel or motel rooms, cabins and time-share units. Individually owned units may be considered overnight lodgings if they are available for overnight rental use by the general public for at least 38 weeks per calendar year through a central reservation system operated by the destination resort or by a real estate property manager, as denned in ORS 696.010. Tent sites, recreational vehicle parks, manufactured dwellings, dormitory rooms and similar accommodations do not qualify as overnight lodgings for the purpose of this definition."

         Deschutes County, in turn, has enacted its own ordinances to govern the approval of destination resorts proposed to be sited in the county. Pertinent to the issues in this proceeding, Deschutes County Code (DCC) 18.113.025[4] authorizes the county to approve an expansion of an existing resort if either (1) the proposed expanded resort, viewed as a whole, satisfies the criteria for approval as a destination resort; or (2) the expanded portion, standing alone, meets the criteria for approval as a destination resort.

         B. The Proposed Expansion of the Caldera Springs Destination Resort

         We turn to the particulars of this case. In 2006, the county approved the conceptual master plan (CMP) for the Caldera Springs destination resort on 390 acres of land south of Bend and adjacent to the Sun River destination resort. Caldera Springs includes 320 single-family residential homesites. The resort also includes 38 of what the resort calls "Caldera Cabins, " each of which are privately owned by individuals or entities other than the resort. Each cabin is a three, four, or five bedroom single-family residence that has an added feature-namely, each bedroom has a full bathroom as well as lockable inside and outside entrances. These rooms are referred to as "lock-off rooms." Caldera Springs relies on these cabins, or rather each of the cabin's lock-off rooms, to satisfy the requirement under ORS l97.445(4)(b) that a destination resort must provide at least 150 "overnight lodging" units.

         After its initial approval, the resort purchased adjacent land from the United States Forest Service-614 acres of forest land consisting of lodgepole and ponderosa pines and typical high desert understory plants-zoned as forest and subject to overlay zones for wildlife area (for deer migration) and destination resorts. In 2015, Pine Forest submitted an application to the county under DCC 18.113.025 to modify the Caldera CMP to include an expansion of the resort onto the 614 acres. Of the 614 acres, the proposed expansion would apportion 490 acres (125 acres would remain undeveloped for deer migration) to accommodate up to 395 new single-family houses, which would bring the number of single-family houses in the resort to a total of 715. Also proposed was an increase to change the ratio of residential units to overnight lodgings units from 2:1 to 2.5:1, as allowed by ORS 197.445(4)(b)(E). To satisfy its obligation to provide the required number of overnight lodging units, Pine Forest proposed to construct an additional 95 overnight lodging units, also employing the Caldera Cabin model-individually owned homes with three to five lock-off rooms. Pine Forest did not attempt to demonstrate that the expanded portion of the resort, on its own, would meet the criteria to be approved as a destination resort. Instead, as contemplated by DCC 18.113.025(B), Pine Forest sought to demonstrate that the proposed expanded development, as a whole, would meet the criteria to be approved as a destination resort.

         The county hearings officer held several hearings regarding the proposed expansion. Landwatch, in opposition to the proposed development, argued that the Caldera Cabins were merely 38 luxury homes and, therefore, could not be counted as 152 overnight lodging units for purposes of the requirements of ORS 197.445. In particular, Landwatch asserted that the lock-off rooms contained in the Caldera Cabins could not be counted as separate overnight lodging units for purposes of determining whether the proposed expanded resort met the requirements of ORS 197.445. Landwatch submitted an annual report prepared by the resort in 2014 in compliance with ORS 197.445(9) demonstrating that, for that year, none of the lock-off rooms had been separately rented.[5]

         The hearings officer ultimately determined that Pine Forest's application should be approved, but expressed skepticism about the extent to which the lock-off rooms met Pine Forest's overnight lodgings obligations. The hearings officer found that the annual report

"proves the point that at least in that year each of the 'cabins' was rented in total, and there was not even one instance in which a single bedroom was rented separately from the rest of the home.[6] [Landwatch] argues that at best these rooms should be categorized as 'dormitory rooms' which do not qualify as overnight rentable units under either ORS l97.435(5)(b) or DCC 18.113.060."

         The hearings officer also found that there

"is no dispute that the units are contained within what otherwise appears to be a single family residence. The distinction is that each bedroom has a separate entrance and a separate bathroom. The applicant states that each of the rooms is separately rentable based on the reservation system. Again, the 2014 rental report shows the homes broken down by bedroom-even if all bedrooms in each home that year were always rented by one guest. This circumstance is preferred by most guests, the applicant argues."

         Ultimately, the hearings officer concluded that

"the applicant's system for making 'rentable units' available for overnight accommodation complies with DCC 18.113.060 and the definitions in 18.04.030. There is no evidence which would cause the Hearings Officer to doubt the veracity of the applicant's statements (see also the letter from Caldera Springs at Exhibit 5 of the applicant's December 25, 2015 letter)[7] or the information about the Caldera Springs website as presented by [Landwatch].[8]Caldera Springs has interpreted the state definition of '[o]vernight lodging' in a way that turns a large single family residence into a 'cabin', and a five bedroom five bath house into five 'rentable units.' With the addition of the separate entrance for each bedroom and at least the colorable claim to allowing each room to be rented individually, Caldera Springs appears to have finessed DCC 18.113.060 in a way that minimally satisfies the 150 separate rentable unit standard.
"Although [Landwatch] clearly condemns the method that Caldera Springs uses for renting out the homes, there is no evidence that the Hearings Officer has been pointed to in the record that the 38 houses are really simply used as full or part time residences-which is the heart of the standards set in the destination resort statute. And, while additional evidence (such as a deliberate system of actively discouraging the separate rental of individual bedrooms, or a pricing scheme that accomplished the same result) may have swayed the Hearings Officer to find noncompliance, that evidence does not appear to be in the record. I did not visit the website to search for such evidence since it is outside the record. There also is little help in the legislative findings for ORS 197.435 which might require a conclusion that Caldera Springs's current rental system is forbidden. Consequently, the Hearings Officer finds that the application meets this criterion.
"For all the same reasons stated above, I also find that Caldera Springs's rental system does not transform the rooms or homes into a 'dormitory.'"

(Underscoring and fourth brackets in hearings officer's findings.)

         Landwatch appealed the hearings officer's decision to the county's board of commissioners, which declined to hear the appeal. Landwatch then appealed to LUBA, asserting, among other arguments, that (1) the destination resort statutes do not permit the expansion of a resort; and (2) the proposed expansion did not provide for the requisite number of overnight lodging units because, in Landwatch's view, the lock-off rooms do not qualify as overnight lodgings under ORS l97.435(5)(b) and ORS 197.445. Defending the county's decision, Pine Forest argued that the applicable statutes do not prohibit the approval of the expansion of a destination resort, that the county correctly concluded that the lock-off rooms counted as overnight lodging units, and that Landwatch's argument to the contrary was an impermissible collateral attack on the county's previous approval of the Caldera Springs resort.

         LUBA remanded the decision on several bases, but as relevant on review, concluded that the lock-off rooms did not qualify as overnight lodging units because they were not individually owned and were dormitory rooms. Before doing so, LUBA rejected Landwatch's contention that the destination resort statutes prohibited expansion of an existing resort and rejected Pine Forest's assertion that Landwatch's challenge to counting the lock-off rooms as overnight lodging units was an impermissible collateral attack on prior county decisions. Both parties timely petitioned for judicial review.

         II. STANDARD OF REVIEW

         We review LUBA's order to determine whether it is unlawful in substance, ORS l97.85O(9)(a), and do not substitute our judgment for that of LUBA's as to any factual issue, ORS 197.850(8).[9] In this case, the parties frame the issues on review solely as assertions that LUBA misconstrued two destination resort statutes, ORS 197.445 and ORS 197.435. We review LUBA's interpretation of those statutes for legal error, employing the methodology described in PGE v. Bureau of Labor and Industries, 317 Or 606, 610-12, 859 P.2d 1143 (1993), and State v. Gaines. 346 Or 160, 171-73, 206 P.3d 1042 (2009). TrautmanlConte v. City of Eusene.280 Or.App. 752, 758, 383 P.3d 420 (2016) ("Because LUBA's legal conclusions involve an issue of statutory construction, we apply the principles of statutory construction set out in [PGE and Gaines]); Zimmerman v. LCDC.274 Or.App. 512, 519, 361 P.3d 619 (2015) ("The 'unlawful in substance' review standard for LUBA orders under ORS l97.85O(9)(a) *** is for 'a mistaken interpretation of the applicable law.'" (Quoting Mountain West Investment Corp. v. City of Silverton.175 Or.App. 556, 559, 30 P.3d 420 (2001).)). In ...


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