Contract Zoning: Let's Make a Deal

When the owners of an energy company wanted to build a 700-megawatt, natural-gas-fired electric generating facility in Bellingham, Massachusetts, on land not zoned for such use under local zoning by-laws, it made a deal with the town. The town would rezone the land and issue all necessary permits, and the company would give the town $8 million to defray the town's anticipated share of the cost of a new high school.

It sounded like a deal made in heaven. While the town meeting, the local legislative body, had previously rejected the rezoning, a town-appointed task force recommended industrial development on the property as a way to increase the town's tax base. The task force specifically recommended rezoning the parcel from suburban and agricultural use to industrial use and noted that the subject land was a viable setting for an industrial operation since it was adjacent to other industrial land and was separated from residential areas by wetlands and, the town needed a new high school. The existing high school was said to be in "deplorable" condition. The deal promised to be a good one for the town and for the power plant owner.

The annual town meeting agreed. It voted by the required two-thirds vote to rezone the land in response to the power plant's owner's offer of "a gift of $8 million" to pay for a new high school. Once the rezoning occurred, the power plant owner spent a purported $7 million to develop plans for the plant. Not all were happy with the deal, however, and following the granting of a special permit to the developer by the local zoning board, a number of citizens sued to overturn the town meeting rezoning. After a trial in the Land Court of the Commonwealth of Massachusetts, the Court overturned the town meeting action primarily on the basis of illegal contract zoning. While the matter is now pending before the Massachusetts Supreme Judicial Court, there is a lesson here for developers who attempt to "buy" land- use approvals believing they are engaging in a winning strategy for themselves and for the municipality in which they wish to build a project.

The Land Court judge found that "but for the gift" the town meeting had the power and authority to rezone the land and that were the $8-million gift not in the picture, there would "be little doubt that the . . . rezoning was valid." Where then did the developer go wrong?

Contract zoning is not defined in Massachusetts law. It is legal in some states and disfavored in...