Zoning; Application of Minimum Variance Test to Blighted Property

Metal Green Inc. v. City of Philadelphia, 237 A.3d 604 (Pa. Cmwlth. 2020), allocatur granted March 1, 2021, appeal docket 9 EAP 2021

Metal Green Inc. (Owner) sought a variance to allow conversion of an unused industrial building in the West Mt. Airy neighborhood of the City of Philadelphia into an apartment building with indoor parking spaces. The City’s Board of Zoning Adjustment held a hearing and accepted testimony from the Owner and multiple other witnesses regarding the necessity of the variance, including from the Kraemers, who lived near the Property.

Section 14-303(8)(e)(.1)(.b) of the City’s zoning code (Code) “requires that, before granting any type of variance, the Board must determine that ‘[t]he variance, whether use or dimensional, if authorized will represent the minimum variance that will afford relief and will represent the least modification possible of the use or dimensional regulation at issue [(Minimum Variance Test)].” Slip op. at 12-13. (emphasis added by Commonwealth Court). In order to grant a use variance, Section 14-303(8)(e)(.2)(.c) of the Code requires that “the Board must also determine that ‘the use variance, if authorized, will not alter the essential character of the neighborhood or district in which the property is located, nor substantially or permanently impair the appropriate use or development of adjacent property, nor be detrimental to the public welfare’” such that “if the criteria in any one section of the Code are not met, the Board must deny the requested variance, regardless of whether other variance criteria are satisfied.” Slip op. at 13.

Applying the Minimum Variance Test, the Board concluded that Owner did not establish that conversion to a smaller number of units was not possible. Specifically, the Board noted that in responding to counsel’s question whether “18 units is not necessarily the least amount of variance … that’s required for that property[,]” Owner’s witness responded that “[t]he choice that’s being asked is to tear down the existing structure, abandon its use, and rebuild it …. [T]his is the least that should be considered[,] given the fact that the structure is there [and] … that it’s being renovated. [A]nd the hope is to retain it.” Slip op. at 5. Notably, the Board “did not expressly state whether Owner failed in (1) its burden of production (i.e., failed to provide sufficient evidence to allow the Board to rule in its favor), or (2) its burden to persuade the Board to credit and rely upon Owner’s evidence and rule in Owner’s favor.” Slip op. at 17.

Owner appealed the Board’s decision to common pleas. Common pleas reversed the Board’s decision and granted the requested variance, reasoning that the Board erred in requiring Owner to demonstrate that the requested variance was the minimum variance necessary to afford relief. Alternatively, common pleas found that Owner presented sufficient evidence and testimony to satisfy the Minimum Variance Test via testimony “that the proposed 18-unit use would be ‘less dense than the adjacent … dwellings’ and that ‘any less[-]dense use of the Property would require demolishing the [Building].’” Slip op. at 11. The Kraemers appealed to Commonwealth Court, arguing that despite prior Commonwealth Court decisions under earlier versions of the Code, the current version of the Code, as amended, requires application of the Minimum Variance Test to both use and dimensional variances. The Kraemers further argued that the record lacked testimony relating to Owner’s ability to build fewer than 18 units and that common pleas erred when “it searched the record for evidence undermining, rather than supporting, the Board’s decision, and substituted its judgment for that of the Board in concluding that Owner satisfied the Minimum Variance Test.” Slip op. at 14. While Owner conceded that the Minimum Variance Test applies under the current version of the Code, Owner argued that pursuant to Liberties Lofts LLC v. Zoning Board of Adjustment, 182 A.3d 513 (Pa. Cmwlth. 2018), in which Commonwealth Court found the Minimum Use Test did not apply to a pure use variance request made under the current Code as amended, the Minimum Variance Test should apply differently to blighted properties. Owner further argued that Liberties Loft suggests that the Minimum Variance Test applies differently or to a lesser extent to use variances as compared to dimensional variances. Alternatively, Owner asserted that it provided adequate testimonial evidence to satisfy the Minimum Variance Test and the Board articulated no basis for its conclusion that Owner did not make that showing.

Commonwealth Court held that the Minimum Variance Test applied to Owner’s use variance request. The court explained that its decision in Liberties Loft relied on S. of S. St. Neighborhood Ass’n v. Phila. Zoning Bd. of Adjustment, 54 A.3d 115, 124 (Pa. Cmwlth. 2012) (SOSSNA), appeal dismissed as improvidently granted, 97 A.3d 1200 (Pa. 2014) in which the court held that no minimization requirement applied to a pure use variance application under the City’s prior zoning ordinance. Specifically, Commonwealth Court summarized and distinguished its decision in Liberties Loft as follows:

There, the objector to the requested variance cited a line of cases requiring a developer to show that it could not viably build fewer than the proposed number of units. But the objector did not acknowledge our holding in SOSSNA or offer any basis on which to distinguish that case. Liberties Lofts, 182 A.3d at 538. We observed that the cases the objector cited all dealt with either dimensional variances or failure to prove unnecessary hardship. Then, without acknowledging the 2013 amendment to the Code, we quoted at length from our discussion in SOSSNA, including our conclusion that the minimization requirement does not apply to use variances. Id. Ultimately, however, we based our decision on a different rationale—that the developer had satisfied the requirement anyway: “In any event, the [zoning board] here determined: ‘Applicant presented evidence … sufficient to establish that … the requested variance is the least necessary to afford relief.’ As explained above, the record supports the [Board]’s determination. Thus, to the extent the minimization requirement is present in this context, Applicant satisfied it.” Id. at 538-39 (emphasis added) (citation omitted).

Here, we face the opposite conclusion by the Board: that Owner did not show satisfaction of the minimization requirement. Thus, we distinguish Liberties Lofts because, in that case, our discussion of the application of the minimization requirement was not dispositive—we would have upheld the variance even if we had concluded that the minimization requirement applied. In addition, we note that here, and unlike the parties in Liberties Lofts, Appellants offer a compelling reason for departing from the reasoning in SOSSNA on which we relied in Liberties Lofts: i.e., the 2013 amendment, the sole purpose of which was to clarify that the Minimum Variance Test applies with equal force to use and dimensional variances. Given this analysis, we disagree with Owner’s suggestion that our decision in Liberties Lofts somehow modified or limited the Minimum Variance Test with respect to use variances requested under the current Code. For the same reason, we are not persuaded that the blighted nature of the property at issue in Liberties Lofts implies that blighted properties are subject to a different version of the Minimum Variance Test.

Slip op. at 16-17.

As to the Board’s application of the Minimum Variance Test, Commonwealth Court noted that “based upon the nature of the testimony before the Board, it appears that, although that testimony might have been sufficient to allow the Board to rule in Owner’s favor, the Board chose not to credit and/or weigh that evidence in Owner’s favor.” Slip op. at 17 (emphasis in original). The court, acknowledging that it was not in a position to second-guess the Board’s credibility determinations or substitute its own judgment for that of the Board, reasoned that the “Board, as factfinder, apparently declined to credit and/or weigh this testimony in Owner’s favor” and “[a]lthough the Board did not make the credibility and weight determinations explicit, its conclusion that Owner ‘did not establish’ satisfaction of the Minimum Variance Test fairly encapsulates those implicit determinations.” Slip op. at 18.  Thus, Commonwealth Court held that the Board did not abuse its discretion in concluding that Owner failed to satisfy the Minimum Variance Test.

The Pennsylvania Supreme Court granted allocatur as to the following issues:

(1) Did the Commonwealth Court commit an error of law by relying upon an improper standard for the minimum variance that will afford relief test (“possibility”) as applied to a use variance (conversion to apartments compatible with surrounding uses) for a more than 90 year old non-conforming industrial garage structure judicially determined to be blighted and abandoned under Act 135 (Abandoned and Blighted Conservatorship Act) where the reversal of the use variance threatens its transformation into a productive reuse serving to modernize and revitalize the surrounding neighborhood?

(2) Did the Commonwealth Court misapply the applicable standard of review where it abused its discretion in conducting a substantial evidence analysis based on an erroneous standard of “possibility” for the minimum variance that will afford relief test thereby refusing to apply a capricious disregard of evidence analysis where the Zoning Board did not make actual credibility determinations, declined to credit and or weigh unrebutted expert witness testimony and where it relied on speculative, subjective non-expert testimony from objectors?

For more information, contact Kevin McKeon or Dennis Whitaker.