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Masonry Building Owners of Oregon v. Wheeler

United States District Court, D. Oregon, Portland Division

May 30, 2019

MASONRY BUILDING OWNERS OF OREGON, an Oregon mutual benefit nonprofit corporation; FOUNTAIN VILLAGE DEVELOPMENT LLC, an Oregon limited liability company; and JIM A. ATWOOD, in his capacity as trustee of the Jim A. Atwood Trust dated August 10, 2017, Plaintiffs,
v.
TED WHEELER, in his official capacity as Mayor of the City of Portland and Commissioner in charge of the Bureau of Development Services; JO ANN HARDESTY, in her official capacity as Commissioner in charge of the Fire Bureau; and CITY OF PORTLAND, an Oregon municipal corporation, Defendants.

          OPINION AND ORDER

          JOHN V. ACOSTA, UNITED STATES MAGISTRATE JUDGE.

         Plaintiffs Masonry Building Owners of Oregon ("MBOO"), Fountain Village Development LLC ("Fountain Village"), and Jim A. Atwood ("Atwood"), (collectively "Plaintiffs") bring this action against Defendants Mayor Ted Wheeler ("Mayor Wheeler"), Commissioner Jo Ann Hardesty ("Hardesty"), and the City of Portland ("the City") (collectively "Defendants"), seeking declaratory and injunctive relief under 28 U.S.C. §§ 2201-2202 and 42 U.S.C. §§1983 and 1988. (Second Am. Compl., ECF No. 43.) Plaintiffs argue that the City's ordinance requiring all owners of unreinforced masonry buildings that do not meet specified seismic standards post a placard and provide notice to prospective tenants stating that the buildings may be unsafe in a major earthquake violates the First Amendment and the Due Process Clause of the Fourteenth Amendment.

         The court has jurisdiction under 28 U.S.C. § 1331, and all parties consent to the jurisdiction of a U.S. Magistrate Judge under Federal Rule of Civil Procedure 73(b). The court conducted a preliminary injunction hearing on May 14, 15, and2l, 2019. For the reasons that follow, the court GRANTS Plaintiffs preliminary injunction.

         Background

         I. History of the Ordinance

         The City of Portland has determined that since 1995 when it required seismic upgrades to unreinforced masonry buildings under certain circumstances, less than 20 percent of Portland's URM building inventory has been retrofitted. (Hr'g Ex. 6 at 1.) In December 2014, the Portland City Council directed the Portland Bureau of Emergency Management, the Portland Development Commission, and the Portland Bureau of Development Services ("BDS") to work with community stakeholders to develop recommendations to reduce Portland's seismic risk from unreinforced masonry buildings. (Hr'g Ex. 13 at 4; Hr'g Ex. 6 at 1.) An unreinforced masonry building or "URM" has been described as "a building with one or more walls that are made of adobe, clay, brick or blocks, with no steel reinforcement inside." (Hr'g Ex. 13 at 17.) URM buildings are "highly vulnerable to seismic damage" and are among the poorest performing buildings in any seismic event. (Hr'g Ex. 13 at 4; Tr. Prelim. Inj. Hearing May 14-15, 2019 ("Hr'g Tr.") at 334.) The recommendations were developed by three committees. The Support Committee developed financial incentives for performing seismic upgrades to URM buildings. (Hr'g Ex, 133 ¶ 5.) The Retrofit Standards Committee ("Standards Committee") comprised of experts in the fields of structural engineering, architecture, and geology, worked with BDS staff to identify best practices from other west coast jurisdictions. (Hr'g Ex. 6 at 1.) The Standards Committee recommended that Portland adopt a "mandatory seismic strengthening program that would require some level of upgrade for all URM structures with the exception of one and two family dwellings." (Id.) The Standards Committee met six times between December 2014 to May 2015. (Id., at 5.) The Standards Committee recognized that "it is neither practical nor financially feasible to retrofit all URM buildings to one standard, or within a single time frame" and created a "prioritization system based on factors such as the degree of risk posed by the building to its occupants and the public, the occupancy type and occupant load of the building, and the function of the building both before and after a seismic event." (Id. at 9.) Additionally, the Standards Committee recommended changes to the existing building code that would include building placards, tenant notifications, and real estate transaction disclosures, (Id. at 2.)

         The URM Building Policy Committee ("the Policy Committee"), comprising members of the Incentive Committee and the Standards Committee, as well as advocates from historic preservation, affordable housing, schools, churches, and URM building owners, met from December 2015 through November 2017, to synthesize the technical recommendations and data to create an overall policy report. The Policy Committee issued its final report in December 2017 (the "Final Report"). (Hr'g Ex. 13.) In the Final Report, the Policy Committee indicated that URM buildings pose a life-safety risk to building occupants in an earthquake. (Id. at 4, 6.) The Policy Committee indicated that URM buildings are seismically vulnerable because the roofs and floors can pull away from walls. (Id. at 6.) "With even light shaking, chimneys, parapets, and architectural ornaments may break off and fall." (Id.; see also Hr'g Ex. 6 at 5.)

         The Final Report detailed that in 1995, the City adopted code changes requiring URM building owners, to seismically upgrade their buildings under certain circumstances, such as substantial improvements and re-roofing, so-called "passive triggers." (Id. at 4, 7.) The Policy Committee reported that since the retrofitting code change in 1995, about eight percent of Portland URM buildings have been demolished, about five percent of the remaining URM buildings have been fully retrofitted, about nine percent have been partially retrofitted, and about 85 percent of existing URM buildings have had no retrofits at all. (Id., at 8.)

         The Policy Committee recommended a limited, mandatory seismic strengthening program for Portland URM buildings based on the seismic risks Portland faces, the need to ensure public safety, and to address the lack of current codes. (Id. at 5.) The Policy Committee proposed a tiered approach that would require mandatory upgrades to critical buildings sooner and to a standard that "will enable their use after an earthquake, and lower-risk buildings later, to a cost-effective standard that will still reduce the danger they pose to the public." (Id.) The Policy Committee proposed that the City develop a program of property tax exemptions to help offset the costs of retrofitting, increased funding for schools to retrofit, and an extended timeline for affordable housing retrofits. (Id.) For tax-exempt public assembly spaces, such as churches and synagogues, "which are ineligible for public subsidy and do not benefit from tax exemptions, the Policy Committee recommends a program of minimal upgrades plus warning placards." (Id.)

         The Policy Committee further recommended that the City support a "public education campaign for building owners and tenants, a voluntary building placarding program to mark retrofitted URM buildings, and an earthquake navigator to assist building owners in navigating the permitting, financing, and design of seismic retrofits." (Id.)

         The Policy Committee made its recommendations based on building class. Class 1 URM buildings are those structures that are "essential to emergency response," such as hospitals, police and fire stations, and water treatment plants. The Policy Committee recommended that Class 1 URM buildings meet the "highest proposed performance objective" because they are expected to remain operational after an earthquake event. (Id. at 18.) The Policy Committee identified six Class 1 buildings, five of which are owned by the City, and one by a private utility. (Id.)

         Class 2 URM buildings are schools and high-occupancy buildings, such as schools, churches, and theaters. The Policy Committee recommended that Class 2 URM buildings be retrofitted to "provide greater resistance to collapse or major structural damage" due to their substantial life-safety risk, and with the expectation that such buildings likely would suffer some damage that could be repaired and made usable again with minor repairs immediately after an earthquake. (Id. at 18, ) The Policy Committee estimated that there are 44 schools, 38 churches, and 10 other public assembly Class 2 URM buildings. (Id., at 19.)

         Class 3URM buildings include most non-critical buildings with more than 10 occupants, such as private offices, apartments, restaurants, retail, and storage. The Policy Committee recognized that Class 3 buildings represent the largest group of URM buildings, numbering 1, 332, but that they pose somewhat less risk "because they have no critical uses or large assembly areas." (Id.) The Policy Committee recommended that Class 3 URM buildings be retrofitted to a standard of "Collapse Risk Reduction." (Id.)

         Class 4 URM buildings are low occupancy, with zero to ten occupants, and often are single story. (Id. at 4.) The Policy Committee recommended that Class 4 URM buildings be required to perform upgrades, that protect nearby structures and people outside the buildings. (Id. at 20.) The Policy Committee estimated there are 201 Class 4 URM buildings. (Id.)

         On June 13, 2018, the Portland City Council passed Resolution No. 37364 (the "Resolution"), which directed City staff to undertake a variety of measures to increase the safely of URM buildings. (Hr'g Ex. 16.) In the Resolution, the City acknowledged that it faces a significant risk from a "catastrophic earthquake" from the Cascadia Subduction Zone, and from smaller faults beneath the City. (Id.) The Resolution provided that URM buildings are highly vulnerable to earthquake damage, including collapse and loss of life. (Id.) The Resolution acknowledged that a series of volunteer committees met from December 2014 to November 2017 to review the inventory of URM buildings and a cost-benefit analysis of seismic retrofitting. (Id.) The Resolution provides that seismic retrofitting to achieve collapse prevention is desirable, but a majority of the Policy Committee supported mandatory seismic retrofitting to a "risk reduction standard" to increase public safety in a cost-effective way. (Hr'g Ex. 13 at 1; Hr'g Ex. 16.) The Resolution further recognized that URM building retrofitting will present a financial hardship for many owners. (Hr'g Ex. 16.) The Resolution specifically recognized that URM buildings cannot be identified from the exterior and the proposed retrofitting standards will not prevent collapse; therefore, building occupants may "benefit from knowing when they enter or occupy a URM building." (Id. at 2.) Thus, the Resolution directed city staff to return to the City Council within three months with a proposed placarding ordinance to be enforced by Portland Fire & Rescue with an appeal process administered by BDS. (Id. at 3-4.)

         II. Ordinance 189201

         On October 10, 2018, the City adopted Ordinance No. 189201 ("Ordinance 189201"). Ordinance 189201 applied to building owners the City designated as constructed of unreinforced masonry that were not retrofitted to a designated level to prevent collapse in the event of an earthquake. (Hr'g Ex. 107.) Ordinance 189201 defined "unreinforced masonry" as:

adobe, burned clay, concrete or sand-lime brick, hollow clay or concrete block, hollow clay tile, rubble and cut stone and unburned clay masonry that does not satisfy the definition of reinforced masonry as defined herein. Plain unreinforced concrete shall not be considered unreinforced masonry for the purpose of this Chapter.

(Hr'g Ex. 107 at 5.) It also defined an "unreinforced masonry bearing wall" as "a URM wall that provides vertical support for a floor or roof for which the total superimposed vertical load exceeds 100 pounds per lineal foot of wall." (Id.) Ordinance 189201 defined an "unreinforced masonry bearing wall building" as "a building that contains at least one URM bearing wall." (Id.)

         Ordinance 189201 contained three primary components. First, it required URM building owners to post in a conspicuous place a placard in boldface 50-point type stating the following: "This is an unreinforced masonry building. Unreinforced masonry buildings may be unsafe in the event of a major earthquake." (Id. at 7.) Failure to post the placard or undertake seismic upgrades would subject the URM building owner to fines. Second, Ordinance 189201 required URM building owners to notify existing tenants and prospective tenants in writing that the building was constructed of unreinforced masonry. (Id. at 8.) Third, Ordinance 189201 required URM building owners to record their compliance with the Ordinance as an exception to their titles in the county's real property records. Some aspects of Ordinance 189201 were set to take effect March 1, 2019. (Id.)

         Plaintiffs challenged Ordinance 189201 under the First and Fourteenth Amendments and moved for a preliminary injunction. (Mem. Supp. Pis.5 Mot. Prelim. Injunction at 1-2, ECF No. 25.) Defendants' counsel stated in a February 12, 2019 email that a City commissioner had submitted a proposed amended ordinance which, if passed, could moot some of the issues Plaintiffs' injunction motion placed before the court. After a hearing on February 15, 2019, the court entered a 60-day temporary injunction. (Order Temporary Injunction, ECF No. 34.)

         III. Ordinance 189399

         On February 29, 2019, the City of Portland adopted Ordinance No. 189399 ("Ordinance 189399" or"the Ordinance'), codified at Portland City Code ("P.C.C.") 24.85.065.[1](Hr'g Ex. 108.) On March 22, 2019, Plaintiffs filed an Amended Motion for Preliminary Injunction. The Ordinance did not alter the definitions of "unreinforced masonry" or "unreinforced masonry bearing wall building."

         The Ordinance, like its predecessor, contains three primary compliance provisions. First, the Ordinance requires URM building owners to place a placard at the entrance of their buildings stating the following:

THIS IS AN UNREINFORCED MASONRY BUILDING. UNREINFORCED MASONRY BUILDINGS MAY BE UNSAFE IN THE EVENT OF A MAJOR EARTHQUAKE. P.C.C. 24.85.065.

P.C.C. 24.85.065(C); Hr'g Ex. 110 (attached as Appendix A to this Op. & Order). The placard must be posted in a conspicuous place on the exterior of the building near the main entrance, be no smaller than 8 by 10 inches, and the font must be at least 50-point bold type, legible sans serif. Id., The placard must remain in place until BDS confirms that the building has been retrofitted to a certain specification, or the building is demolished. Id. The estimated cost of a placard is between $30 to $60. Publicly owned URM buildings were required to post the placards by January 1, 2019; all other URM buildings are required to post the placard by November 1, 2020. P.C.C. 24.85.065(C)(6).

         Second, the Ordinance requires URM building owners to provide a statement in every lease or rental application after June 1, 2019 that: "the building is an unreinforced masonry building, and unreinforced masonry buildings may be unsafe in the event of a major earthquake." P.C.C. 24.85.065(D).

         Third, the Ordinance requires that URM building owners must not to remove the placard and acknowledge their compliance with the placarding requirement and the prospective tenant notification requirement by completing a form provided by BDS. P.C.C. 24.85.065(E). Documentation of compliance must be completed by June 1, 2020. Id.

         Buildings that have been retrofitted to the collapse prevention standard for BSE-2 seismic hazards or life safety for BSE-1 seismic hazard as defined in the American Society of Civil Engineers ("ASCE") 41-17 or ASCE 41-13 are exempt from the Ordinance. P.C.C. 24.85.065(F). Additionally, buildings that were retrofitted before January 1, 2018, to the Life Safety standard using FEMA 178, FEMA 310, or ASCE 31; or the Oregon Structural Specialty Code 1993 edition or later are exempt from the Ordinance. Id.

         The Ordinance will be enforced through Portland Fire & Rescue's periodic inspections program. P.C.C. 24.85.065(G), Under that program, the Fire Marshal will inspect URM buildings for compliance. If the Fire Marshal determines there is a violation, the building owner has 40 days to comply and the Fire Marshal then will reinspect Id. If the violation persists at the time of reinspection, the Fire Marshal will charge a reinspection fee and turn over enforcement to BDS. Id. The BDS compliance division then will send a violation letter detailing the fines and process for compliance. (Hr'g Tr. at 442.) The applicable fines vary based upon the use of the building and the number of units, up to $643 per unit per month. (Id., ) At the hearing, Amit Kumar, the Engineering Supervisor for the Engineering Plan Review Section at BDS, testified at the hearing that fines will likely be imposed on a monthly basis, not a per-unit basis. (Hr'g Ex. 133.) However, Mr. Kumar acknowledged that the precise amount of fines for noncompliance with the Ordinance had not yet been determined. (Hr'g Tr. at 442-43.)

         The Ordinance allows for building owners to appeal their designation as URM buildings and whether they have been retrofitted to the requisite standards. P.C.C. 24.85.065(H).

         IV. The Plaintiffs

         MBOO is an Oregon mutual benefit nonprofit corporation that advocates for the interests of owners of masonry buildings, many of whom are subject to the Ordinance. (Mem. Supp. Pis.' Mot. Prelim. Inj. at 2, ECF No. 25.) Fountain Village owns Western Rooms, a mixed use multi-family and commercial building that appears on the City's URM database, but has undergone significant seismic retrofitting. (Hr'g Ex. 73 at ¶¶ 1, 3-8.) Jim A. Atwood, in his capacity as trustee, is an owner of the Glade Hotel, a building that appears on the City's URM database and is subject to the Ordinance. (Hr'g Ex. 72 at ¶¶ 1, 3, 16.)

         V. The URM Database

         BDS maintains a URM Building Database ("URM Database"). (Hr'g Exs. 131, 132.) The URM Database is a list of buildings located within the City of Portland believed to be constructed of unreinforced masonry. (Id.) The City conducted a URM building inventory over the course of three summers from 1994 to 1996, following adoption of the first URM building retrofit code requirements. (Hr'g Ex. 13 at ¶ 2; Hr'g Ex. l32at¶2.) The URM Database originally was compiled by City officials and engineering students at Portland State University ("PSU") who identified buildings visually as those most likely constructed of unreinforced masonry, as well as by examining building permit documents and Sanborn[2] maps. (Hr'g Ex. 132.) Michael Hagerty, a structural engineer for the City of Portland from 1975 to 2003, testified at the hearing that he trained and supervised the PSU students and performed random quality control checks of their work. (Hr'g Ex. 132.)

         In 2014, the City updated the URM Database in conjunction with efforts to develop recommendations to reduce Portland's risk from URM buildings. (Hr'g Ex. 131.) The URM database was updated using tools such as Mapworks, Google maps, cross-referencing against permitted seismic upgrades, conducting building owner surveys, and performing site visits. (Id.) The City's URM building data also has been converted into an interactive map. The City warns, however, that "the accuracy of the database cannot be guaranteed due to a number of factors. . . . Some of the buildings may not be of URM construction. Some of the buildings may have been improved to better resist seismic loads." (Id.) In fact, the URM Database contains this disclaimer:

The City of Portland makes no representations, expressed or implied as to the accuracy of this database. There are no assurances as to whether the information presented is correct or comprehensive.
The presence of a building in this database is not a predictor of its performance in a seismic event. . . . The services of a licensed professional engineer are needed to determine the capacity of a building to resist seismic loads.

(Hr'g Ex. 39.) Shelly Duquette, a BDS structural engineer, testified that the City's practice is to keep a building in the URM Database unless it can be conclusively determined that it is not URM construction. (Hr'g Tr. at 346-48.) Additionally, Ms. Duquette explained that if a building has a bearing wall of URM, it will remain on the URM database and subject to the ordinance despite any other seismic upgrades. (Hr'g Tr. at 351.)

         The City initially identified as URM construction approximately 2, 100 buildings. (Hr' g Ex. 131 ¶ 13.) Of those, 250 buildings were removed after confirming they were not URMs, and 185 buildings were removed after confirming they were demolished. (Id.) The URM buildings include approximately 44 schools, 38 churches, and 248 multi-family structures, with more than 7, 000 residential units. (Hr'g Ex. 13 at 10.) Of those residential units, 1, 800 are publicly-financed affordable housing. (Id.) Currently, there are approximately 1, 415 commercial URM buildings in the database. (Id.)

         VI. Retrofitting Expenses and Removal From URM Database

         Plaintiffs contend the City's standards for removing a building from the URM Database are significantly more restrictive than the standards for determining whether a building must comply with the Ordinance in the first instance. See P.C.C. 24.85.065(G). Plaintiff Fountain Village completed a seismic upgrade of the Western Rooms building in 1979 to the 1977 seismic requirement. (Hr'g Ex. 73 at ¶¶ 1-5.) Although the seismic retrofitting was approved by the City and Portland Development Commission helped finance the project, the building remains subject to the placarding requirement. (Id. ¶¶ 5-6.)

         Likewise, Walter McMonies, President of MBOO, is an owner of Trinity Place Apartments, LLC. (Hr'g Ex. 71 ¶ 1.) Mr. McMonies testified that Trinity Place Apartments have undergone two substantial seismic upgrades, including a three-year $1.2 million retrofitting project completed in 2017 and approved by BDS, the State Historic Preservation Office, and the National Park Service. (Id. ¶¶ 6-8.) Despite the significant retrofitting, Trinity Place Apartments also remains subject to the Ordinance. (Id. ¶¶ 10-11.)

         Retrofitting many historic URM buildings to the standards required in the Ordinance likely exceeds their replacement value. (Hr' g Ex. 1.) For example, Mr. Atwood testified that the total cost to seismically upgrade the Glade Hotel would be approximately $1.8 million, about twice the replacement value of the building. (Id; Hr'g Ex, 72; Hr'g Tr. at 95.)

         The Policy Committee recommended "that the City should not move forward with a mandatory seismic retrofit program" until financial assistance and support is in place. (Hr'g Ex. 13 at 22.) The Policy Committee identified multiple potential sources of financial support for URM building owners, including a retrofit tax exemption, federal rehabilitation tax credits, seismic rehabilitation grants, and a Seismic Commercial Property Assessed Clean Energy ("C-PACE") Program. (Id. at 22-23.)

         The Policy Committee noted in its December 2017 Report that for a "typical" URM building, the benefits of retrofitting exceed the costs. (Hr'g Ex. 13 at 30.) Additionally, the Policy Committee noted that in general, "lower-cost retrofits to lower performance standards increase the benefit-cost ratio." (Id. at 31.) The Policy Committee indicated that for schools and public assembly URM buildings, the cost per square foot for retrofitting is $82.62 per square foot; the cost per square foot for most commercial URM buildings is $51.00 to $69, 00 per square foot; and for small URM buildings and low occupancy buildings, the cost per square foot is around $20, The Policy Committee acknowledged that the benefit-cost ratio can vary significantly from building to building. (Id.) The Policy Committee also noted that Oregon's Legislature adopted Senate Bill 311 ("SB 311"), which permitted local jurisdictions to create a 15-year property tax exemption program for seismic retrofits. (Hr'g Ex. 13 at 22.) At the hearing, the court heard testimony that the City had not yet ratified SB 311 and, therefore, any property tax breaks remain unavailable. (Hr'g Tr. at 94.)

         VII. Exceptions to the Ordinance

         The City initially delayed the implementation date of the Ordinance for thousands of URM buildings. BDS declared that Portland Public Schools would notify parents and staff in URM buildings by January 1, 2019, but BDS has not specified a deadline for placarding or where those placards must be placed, such as in auditoriums versus at main entrances. (Hr'g Ex. 23.) Ordinance 189201 contained different placarding implementation dates for non-profit URM building owners compared to private entities. Ordinance 189399 eliminates the distinction; all private and non-profit URM building owners are required to post the placards by November 1, 2020. However, it is not clear whether any Portland Public School will be required to post placards by November 1, 2020.

         Single-family and dual-family residences of URM construction are not required to comply with the Ordinance. (Papaefthimiou Dep. 75:3-23.) The Ordinance also does not require buildings constructed of non-ductile concrete and soft-story construction to comply with the Ordinance, despite posing seismic risks similar to URM construction in major earthquakes. (Hr'g Ex. 6 at 6; Hr'g Ex. 11.) The Standards Committee identified non-ductile concrete buildings in addition to URMs as "'generally the most dangerous types of buildings in an earthquake, and should not be allowed to remain in service indefinitely unless they are fully upgraded.'" (Hr'g Ex. 6 at 6 (quoting the Oregon Seismic Safety Policy Advisory Commission ("OSSPAC") report The Oregon Resilience Plan). The Policy Committee making URM recommendations to City Council included "other risky buildings'5 in its July 2017 draft report:

The committee recognizes that while URM buldings are dangerous in earthquakes, they are not the only buildings to pose a significant life safety risk. Soft-story buildings that lack a shear wall on the first floor are vulnerable to collapse for that reason. Non-ductile concrete buildings are made of brittle unreinforced concrete and may have many of the same risks as URM buildings. There are far fewer of these building types in Portland. However, in future years, the Committee recommends that the City conduct a complete inventory of both soft-story and non-ductile concrete buildings and consider enacting similar retrofit requirements for these buildings.

(Hr'g Ex. 10 at 32.) However, one member of the Policy Committee recommended against including this section at all in the URM Building Policy Committee Final Report because it "distracts from the URM-specific message and could become a 'lightning rod' to be used by those opposing the mandate as a reason to do nothing for URM buildings." (Hr'g Ex. 11.) City staff removed the section on "other risky buildings" from the December 2017 final report. (Hr'g Ex. 13.)

         Under the initial version of the Ordinance, URM buildings owned by non-profits (including faith organizations) were given longer to comply than other URM building owners. At an October 3, 2018 City Council Meeting, Commissioner Saltzman explained that religious and non-profit organizations should be given more time to comply with the Ordinance to permit those organizations more "time to discuss the issue and to better understand the danger imposed by unreinforced masonry buildings." (Hr'g Ex.. 19.) Jonna B. Papaefthimiou, Planning, Policy, and Community Program Manager for the Portland Bureau of Emergency Management ("PBEM"), also agreed that exemptions for churches and non-profits were provided because they have financial constraints that other building owners ...


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