On Monday morning the River City newspaper contains a story on the new phenomenon of internet sweepstakes parlors – how they operate, how they may be technically different from video poker, and their proliferation around the state. Towards the end of the article there is a brief quote from the owner of a chain of these establishments that he plans to expand his operations to a vacant building in downtown River City.

Enjoying a quick breakfast at the diner, the Mayor of River City almost chokes on her sausage biscuit when she reads this tidbit. Trouble in River City. She takes a last gulp of coffee, pays up, and hustles down the block to town hall. Reaching the manager’s office nearly out of breath she asks if the town’s codes would allow one of these businesses downtown. After a quick consult with the planner, the manager answers that the town codes are totally silent on the issue as nobody in River City had ever heard of a “internet sweepstakes parlor” prior to the last month or two, much less put anything about them in the zoning regulations. The mayor asks if the town council can put a hold on the permitting for these cafes while they figure out if they should be allowed at all and if so, where and under what conditions.

Is this possible?

Yes.

Prior to 2005, it was assumed that the power to adopt moratoria was implied by the state’s enabling statutes for local development regulations, but there was nothing in the statues other than an authorization of moratoria on adult businesses. The statutes were amended in 2005 to explicitly allow cities and counties to impose temporary moratoria, but add a number of safeguards to prevent abuse of this powerful development management tool.

Statutory Authority

G.S. 160D-107 allows temporary development moratoria to be placed on any city or county development approval. This includes zoning permits, land subdivision plats, building permits, sign permits, and any other approvals required prior to development.

One very important limit on the authority to adopt moratoria was added to this statute in 2011. G.S. 160D-107(a) provides that a moratorium may not be imposed on residential development if the purpose of the moratorium is “developing and adopting new or amended plans or ordinances.”  This limit does not apply to moratoria on other land uses — such as commercial or industrial uses — while plans or regulations are being updated. It also does not limit moratoria on residential uses adopted for other purposes, such as a lack of necessary infrastructure. But since most moratoria in North Carolina have been adopted to put a hold on things while a plan is done or a regulation is updated, this limit has a significant impact.

Process for Adoption

The first requirement is for a public hearing prior to adoption. G.S. 160D-107(b). f there is an imminent threat to public health and safety, the moratorium may be adopted without notice and hearing, but that situation is rare. Otherwise, a moratorium with a duration of sixty days or less requires a public hearing with a single published notice; a moratorium with a duration of more than sixty days (and any extension of a moratorium so that the total duration is more than sixty days) requires a public hearing with two published notices, just as is required for other land use regulations.

The second requirement is that the adopting jurisdiction must lay out its rationale and plan of action at the time the moratorium is adopted. G.S. 160D-107(d). The ordinance establishing a moratorium must expressly include the following four items:

1.  A clear statement of the problems or conditions necessitating the moratorium, what other courses of action were considered, and why those alternatives were not deemed adequate.
2.  A clear statement of the development approvals subject to the moratorium and how the moratorium will address the problems that led to its imposition.
3.  An express date for termination of the moratorium and a statement setting forth why that duration is reasonably necessary to address the problems that led to its imposition.
4.  A clear statement of the actions, and the schedule for those actions, proposed to be taken by the city or county during the moratorium to address the problems that led to its imposition.

Renewal or extensions of moratoria are also limited by these statutes. Extensions are prohibited unless the city or county has taken all reasonable and feasible steps to address the problems or conditions that led to imposition of the moratorium.

Exceptions to Coverage

The statutes contain several exemptions from the coverage of moratoria.

Absent an imminent threat to public health and safety, moratoria may not be applied to projects with legally established vested rights. This includes projects that already have building permits, those with approved site specific development plans, and those where substantial expenditures have been made after receipt of a valid permit. G.S. 160D-107(c).

This statute also provides that moratoria do not apply to projects for which complete applications for special use permits (and preliminary or final plat approvals) have been accepted by the city or county prior to the call for a public hearing to adopt the moratorium.

Other Pending Applications

Another very important limit on moratoria relates to pending applications.

The common law rule in North Carolina was that a local government applied the rules in effect at the time of permit decisions, not those in effect at the time of application. So if a zoning or other regulation changed after an application was filed, but before a decision was made, the new regulation could be applied to the application.

However, the permit choice rule adopted by the General Assembly gives applicants an option to avoid that common law rule. G.S. 143-755 allows an applicant to choose to be covered by either the rules in effect at the time of application or at the time of permit decision. That statute is reviewed in more detail here.

That permit choice rule has been incorporated into the moratoria statute. G.S. 160D-107(c) provides that if a complete application has been submitted prior to the effective date of the moratoria, G.S. 160D-108(b) and the permit choice rule applies when the moratorium expires. The effect of this is to delay action on an application while the moratorium is in effect, but to limit the application of new rules that may be adopted during the moratorium for those applications pending when the moratorium started.

In addition, as noted above, if a the application is for a special use permit or a subdivision plat approval and the application was received prior to the call for a public hearing on the moratorium (as opposed to the later effective date of the moratorium), then the moratorium is not applicable to those projects. The effect of this is that decisions on this narrower range of applications cannot be delayed until the end of the moratorium, so permit processing and decision-making on these proceed as if the moratorium had not been adopted.

Constitutionality

If a town follows these procedures and adopts a moratorium, would the moratorium be vulnerable to a challenge that it unconstitutionally takes a person’s property without just compensation? In most cases, no. The United States Supreme Court held in Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002), that a temporary moratorium is not in and of itself an unconstitutional taking. The Court noted that temporary moratoria are recognized as an “essential tool” that allows time for necessary studies, public participation, and deliberation. The court ruled that the complexity of the issues involved with developing a management plan justified the moratorium at issue in this case. The Court did note that moratoria lasting longer than a year may well warrant special skepticism.

Use in North Carolina

A study by the School of Government, Development Moratoria:  The Law and Practice in North Carolina, reported on the experience of cities and counties in the three years after the adoption of the N.C. statute in 2005.

It found moratoria were being used, as a third of the responding jurisdictions reported adoption of a moratorium at some point during the three year period. Most moratoria were of relatively short duration, with six months being by far the typical duration. Most were focused on particular types of land uses (much like the internet sweepstakes cafés of our example). A few were based on inadequate public infrastructure for additional development. Most jurisdictions adopted or amended their ordinances during the moratorium to address the issue leading to its imposition. Few moratoria were extended and few jurisdictions had multiple moratoria.

Conclusion

So, can River City hit the pause button on internet sweepstakes cafes?

Yes, if the town moves quickly it can stop and think it over. The town will have to call a public hearing, provide notice of the hearing, and develop a clear plan of action to undertake during a focused moratorium of limited duration. The plan of action required needs to lay out what steps the town will take to address the issue while the moratorium is in effect. In this example it may mean a legal review to determine what management options are open for the town, a survey of how other towns have addressed the issue, a review of the town’s plans and ordinances to determine where these uses may be appropriately located, identification of potential operational standards that may be needed, and opportunities for public input and advisory board recommendations. The plan should schedule how long this will take and the moratorium length needs to be based on this time estimate.

If this is done, River City can adopt a moratorium that will allow the town to preserve the status quo while it studies its options, crafts rules, has public debate and deliberation, and puts appropriate management rules in place.