American Furniture v. Gilbert

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

AMERICAN FURNITURE WAREHOUSE CO., Plaintiff/Appellant,

v.

TOWN OF GILBERT, Defendant/Appellee.

No. 1 CA-CV 16-0773
FILED 7-10-2018

Appeal from the Superior Court in Maricopa County
No. CV2013-009133
The Honorable James T. Blomo, Judge (Retired)

AFFIRMED IN PART, VACATED AND REMANDED IN PART

COUNSEL

Berry Riddell, LLC, Scottsdale
By Martin A. Aronson, Jeffrey D. Gross
Counsel for Plaintiff/Appellant

Grasso Law Firm, P.C., Chandler
By Robert Grasso, Jr., Kim S. Alvarado
Counsel for Defendant/Appellee

Pacific Legal Foundation, Sacramento, California
By James S. Burling
Counsel for Amicus Curiae Pacific Legal Foundation
 AMERICAN FURNITURE v. GILBERT
Opinion of the Court

OPINION

Chief Judge Samuel A. Thumma delivered the opinion of the Court, in
which Presiding Judge Randall M. Howe and Judge Kenton D. Jones joined.

T H U M M A, Chief Judge:

¶1 This appeal arises out of the payment of a development fee,
imposed by a town ordinance, as a condition of securing a permit to
develop land. Plaintiff American Furniture Warehouse Co. (AFW) appeals
from the grant of summary judgment in favor of defendant Town of Gilbert.
AFW argues that the required payment was an unconstitutional taking and,
alternatively, that AFW was denied a required appeals hearing. Although
the required payment was not unconstitutional, because AFW has a right
to a statutory exaction appeals hearing, summary judgment is affirmed in
part and vacated in part and this matter is remanded for further
proceedings consistent with this opinion.

FACTS AND PROCEDURAL HISTORY

¶2 AFW operates regional furniture distribution facilities, each
typically consisting of a building that includes a showroom (which is open
to the public and is used for retail sales), a warehouse and a mezzanine
(including an office and shops to assemble and repair furniture). AFW
decided to develop such a facility in Gilbert, with a building covering nearly
15 acres of a 40-acre parcel of land that AFW purchased in early 2013. The
630,290 square-foot building includes a 177,092 square-foot retail
showroom (about 28 percent of the building), a 397,800 square-foot
warehouse and 50-door loading dock (more than 63 percent), a 49,798
square-foot mezzanine (nearly 8 percent) and a 5,600 square-foot
maintenance area (less than 1 percent).

¶3 To obtain development permits, AFW was required to pay
Gilbert various fees, including a traffic signal System Development Fee
(SDF). In 2009, the town adopted the traffic signal SDF in Gilbert Ordinance
2226, based on projected traffic patterns and “growth-related costs allocated
to traffic signals.” The traffic signal SDF imposes on new commercial
structures different per square foot rates using “Retail,” “Office,”
“Industrial” or “Other Nonresidential” categories. The per square foot rates
differ significantly:

2
 AMERICAN FURNITURE v. GILBERT
Opinion of the Court

Category Rate

Retail $1.593 per square foot

Office $0.570 per square foot

Industrial $0.405 per square foot

Other “To be determined by the Town Engineer. The
Nonresidential Town Engineer will estimate trip generation and
determine the traffic [signal SDF] based on the most
closely aligned category of either: retail, office or
industrial. The [SDF] then is assessed” using Retail,
Office or Industrial rates.

These categories are not defined in Ordinance 2226, which also does not
include provisions addressing multiple or mixed uses on a property. For
multiple or mixed uses, Gilbert identifies one category for the entire project
based on “the main purpose of the building.”

¶4 Gilbert classified AFW’s building as Retail. Applying the
$1.593 per-square-foot Retail rate to the entire 630,290 square-foot building,
Gilbert required AFW to pay more than $1 million as a traffic signal SDF.
Paying under protest, AFW timely challenged the requirement.

¶5 AFW argued the building is Industrial (yielding a lower
traffic signal SDF), because that category more closely described AFW’s
development. AFW also argued that applying the Retail rate was not
reasonably related to costs the development would impose on Gilbert. AFW
also requested a statutory exaction appeals hearing. See Ariz. Rev. Stat.
(A.R.S.) § 9-500.12(A)(1) (2018)1 (affording property owners an
administrative appeal from “a dedication or exaction as a condition of
granting approval for the use, improvement or development of real
property,” unless the dedication or exaction is “required in a legislative act
by the governing body of a city or town that does not give discretion” in
determining “the nature or extent of the dedication or exaction”).

¶6 Gilbert denied AFW’s protest, stating land use (not trip
counts, as AFW argued) determines the traffic signal SDF category; “the
main purpose of the building is to sell furniture and ship furniture to
customers,” meaning the Retail category applied and, as a result, the Other

1Absent material revisions after the relevant dates, statutes and rules cited
refer to the current version unless otherwise indicated.

3
 AMERICAN FURNITURE v. GILBERT
Opinion of the Court

Nonresidential category did not. Concluding that Ordinance 2226 is a
legislative act, meaning AFW had no right to appeal, Gilbert also denied
AFW’s request for a statutory exaction administrative appeals hearing. In
July 2013, AFW timely filed this case in superior court. AFW’s claims were
resolved in two rounds of summary judgment motions.

¶7 The first round addressed AFW’s original complaint. AFW
sought to recover the traffic signal SDF paid under protest, alleging the fee
was an unconstitutional exaction or taking (Counts 1, 3 and 6). AFW also
challenged Gilbert’s denial of its request for a statutory exaction
administrative appeals hearing (Counts 2 and 4).2 After briefing and
argument on competing summary judgment motions, the court ruled in
favor of Gilbert and against AFW on Counts 1, 3 and 6, stating the traffic
signal SDF “is a legislative act that carries a presumption of validity.”
Finding the appeal hearing claims (Counts 2 and 4) should have been filed
as a special action, the court allowed AFW to amend its complaint to seek
special action review.

¶8 AFW filed an amended pleading and the parties filed the
second round of competing summary judgment motions, which addressed
those amended Counts seeking special action review. After briefing and
argument, the court ruled in favor of Gilbert and against AFW. The court
found Gilbert’s denial of AFW’s “protest is supported by competent
evidence and [the] plain language application of the Town Code” and “that
the denial is not arbitrary, capricious or an abuse of discretion.” Entry of
final judgment followed, see Ariz. R. Civ. P. 54(c), and this court has
jurisdiction over AFW’s timely appeal pursuant to Article 6, Section 9, of
the Arizona Constitution and A.R.S. §§ 12-120.21(A)(1) and -2101(A)(1).

DISCUSSION

¶9 Summary judgment is proper when the moving party “shows
that there is no genuine dispute as to any material fact and the moving party
is entitled to judgment as a matter of law.” Ariz. R. Civ. P. 56(a). The court
“view[s] the evidence and reasonable inferences in the light most favorable
to the party opposing the motion,” Andrews v. Blake, 205 Ariz. 236, 240 ¶ 12
(2003), to determine “whether any genuine issues of material fact exist,”
Brookover v. Roberts Enter., Inc., 215 Ariz. 52, 55 ¶ 8 (App. 2007). A ruling
granting summary judgment is reviewed de novo, “both as to whether

2AFW also alleged a proposition violation (Count 5), which was dismissed
by agreement of the parties and is not at issue here.

4
 AMERICAN FURNITURE v. GILBERT
Opinion of the Court

there are any genuine issues of material fact and as to whether the moving
party is entitled to judgment as a matter of law.” Greenwood v. State, 217
Ariz. 438, 442 ¶ 13 (App. 2008).

I. AFW Did Not Waive Its Claims Resolved By The First Summary
Judgment Ruling.

¶10 Gilbert argues AFW waived its right to challenge on appeal
claims that were resolved in the first summary judgment ruling (Counts 1,
3 and 6) because AFW’s amended complaint did not reassert those claims.3
In essence, Gilbert is arguing that AFW was required to do a pointless act
(reassert claims that the superior court had already resolved against AFW
by summary judgment) and that the failure to do so results in a waiver of
AFW’s right to challenge the court’s ruling on appeal.

¶11 The authority Gilbert cites stands for the proposition that an
amended complaint supersedes the pleading it amends because “a plaintiff
may not pursue two complaints in the same action.” Mohave Concrete and
Materials, Inc. v. Scaramuzzo, 154 Ariz. 28, 30 (App. 1987) (citing Campbell v.
Deddens, 21 Ariz. App. 295, 297 (1974)). But the fact that only one complaint
is operative at any given time does not mean, as Gilbert asserts, that an
amended pleading causes a prior pleading to disappear. This is particularly
true where dispositive rulings on the merits resolved claims in the prior
complaint. Although scant, Arizona case law runs counter to Gilbert’s
argument. See Harris v. Cochise Health Sys., 215 Ariz. 344, 349 ¶ 15 (App.
2007) (exercising appellate jurisdiction challenging dismissal of claims
asserted in original complaint but not re-asserted in amended complaint, in
a subsequent appeal from dismissal of claims in amended complaint).
Accordingly, AFW did not waive its right to challenge on appeal claims
resolved against it in the first summary judgment ruling.

II. The Traffic Signal SDF Is A Generally Applicable Legislative Act
That Is Constitutional As Applied.

¶12 AFW argues that, as applied, the traffic signal SDF was not a
valid “generally applicable, legislatively-imposed fee” but, instead, “was

3 Gilbert also states AFW could have “sought entry of” a partial final
judgment “to preserve and appeal these claims.” Although that statement
is true, see Ariz. R. Civ. P. 54(b), Gilbert has not shown that AFW waived its
appeal rights by not seeking entry of partial final judgment.

5
 AMERICAN FURNITURE v. GILBERT
Opinion of the Court

an adjudicative act subject to” the Dolan v. City of Tigard, 512 U.S. 374 (1994)
and Nollan v. California Coastal Commission, 483 U.S. 825 (1987) line of cases
(Nollan/Dolan). In the alternative, even if the traffic signal SDF is construed
as a generally applicable, legislatively-imposed fee, AFW argues
Nollan/Dolan scrutiny applies and it is unconstitutional under Nollan/Dolan.4
Because AFW has not shown that application of the traffic signal SDF was
adjudicative or that Nollan/Dolan applies, AFW’s constitutional challenges
fail.

A. The Traffic Signal SDF Is A Generally Applicable
Legislatively Imposed Fee.

¶13 AFW argues application of the traffic signal SDF in this case
is “an adjudicative act subject to” Nollan/Dolan. Before the superior court,
AFW conceded that Gilbert’s enactment of the traffic signal SDF “was a
legislative act.” The issue, then, is whether a challenge to the application of
a generally applicable, legislatively imposed fee is a challenge to an
adjudicative act for purposes of AFW’s claim that the fee imposed was an
unconstitutional taking.

¶14 AFW bases its argument on Wennerstrom v. City of Mesa, 169
Ariz. 485 (1991), and Redelsperger v. City of Avondale, 207 Ariz. 430 (App.
2004). Wennerstrom addressed whether city council actions approving a
project to widen a street were legislative (meaning they were subject to
referendum under the Arizona Constitution) or administrative (meaning
they were not). See 169 Ariz. at 488 (quoting Ariz. Const. art. IV, pt. 1 § 1(8)).
In that distinguishable context, Wennerstrom held the city council actions
were “not legislative in character and thus [were] not subject to
referendum.” 169 Ariz. at 495. Redelsperger similarly held that “the approval
of a conditional use permit” was not subject to referendum. 207 Ariz. at 431
¶ 1. Neither case, however, addressed whether the approvals were
adjudicative.

4 AFW does not facially challenge the traffic signal SDF, its categories or its
per square foot rates. It also does not claim that a nexus is lacking between
Gilbert’s legitimate interest in the traffic signal SDF and the payment of the
traffic signal SDF or any irregularity in the classification rates under A.R.S.
§ 9-463.05.

6
 AMERICAN FURNITURE v. GILBERT
Opinion of the Court

¶15 At most,5 Wennerstrom and Redelsperger suggest that
application of the traffic signal SDF here was administrative. See
Wennerstrom, 169 Ariz. at 489 (“’The power to be exercised is legislative in
its nature if it prescribes a new policy or plan; whereas, it is administrative
in its nature if it merely pursues a plan already adopted by the legislative
body itself, or some power superior to it.’”) (quoting 5 E. McQuillin, The
Law of Municipal Corporations § 16.56 at 266 (3d rev. ed. 1989)); Redelsperger,
207 Ariz. at 437-38 ¶ 28 (“After due consideration, we conclude that the
issuance of a conditional use permit is an administrative act.”) (citing
authority). Suggesting an action was administrative for purposes of
referendum eligibility, however, does not address whether it was
adjudicative in assessing whether the action was an unconstitutional
taking.6 AFW has not shown the superior court erred in concluding the
traffic signal SDF “is a legislative act that carries a presumption of validity.”

B. Application Of The Traffic Signal SDF Here Was Not
Unconstitutional Under Nollan/Dolan.

¶16 As phrased by the parties, the issue is whether application of
the traffic signal SDF is a proper, constitutional fee required for the
development of land or is an improper, unconstitutional taking. Although
phrased in a binary fashion, the boundary between the two is fuzzy,
meaning analyzing individual cases is necessary to address AFW’s
challenge.

¶17 The Nollan/Dolan test examines the appropriate analytical
framework for assessing whether a government-imposed requirement for
developing property is a taking. Nollan held that a required dedication of a
public easement across private property to obtain a building permit was a
taking. 483 U.S. at 831. The mandated easement meant “a ‘permanent
physical occupation’ has occurred,” thereby triggering the right to just
compensation. Id. at 832. Nollan found the “essential nexus” between
“legitimate state interests” and the required easement, which might have

5See Wennerstrom, 169 Ariz. at 496 (Feldman, V.C.J., dissenting) (“The court
adopts no specific test for distinguishing between legislative and
administrative acts.”).

6 Although AFW argues Gilbert was required to exercise discretion in
applying the traffic signal SDF, Redelsperger noted that, in the referendum
context, “[t]he more discretion afforded, the more likely the act is
legislative.” 207 Ariz. at 434 ¶ 16.

7
 AMERICAN FURNITURE v. GILBERT
Opinion of the Court

removed the requirement from a takings analysis, was lacking. 483 U.S. at
837; see also Dolan, 512 U.S. at 386.

¶18 Dolan involved a city’s requirement that a developer dedicate
a portion of her land for flood control and traffic improvements as a
condition of securing necessary permitting. Dolan set the analytical table
with a quote worth repeating here:

The Takings Clause of the Fifth
Amendment of the United States Constitution,
made applicable to the States through the
Fourteenth Amendment, provides: “[N]or shall
private property be taken for public use, without
just compensation.” One of the principal
purposes of the Takings Clause is “to bar
Government from forcing some people alone to
bear public burdens which, in all fairness and
justice, should be borne by the public as a
whole.”

....

On the other side of the ledger, the
authority of state and local governments to
engage in land use planning has been sustained
against constitutional challenge [generations
ago]. “Government hardly could go on if to
some extent values incident to property could
not be diminished without paying for every
such change in the general law.” A land use
regulation does not effect a taking if it
“substantially advance[s] legitimate state
interests” and does not “den[y] an owner
economically viable use of his land.”

Dolan, 512 U.S. at 383-85 (citations omitted). Dolan added that the cases cited
for these propositions differed in “two relevant particulars from the present
case:” (1) “they involved essentially legislative determinations classifying
entire areas of the city, whereas here the city made an adjudicative decision
to condition petitioner’s application for a building permit on an individual
parcel” and (2) “the conditions imposed were not simply a limitation on use
the petitioner might make of her own parcel, but a requirement that she
deed portions of the property to the city.” Id. at 385.

8
 AMERICAN FURNITURE v. GILBERT
Opinion of the Court

¶19 On those facts, and building on Nollan, Dolan stated that it
“must first determine whether the ‘essential nexus’ exists between the
‘legitimate state interest’ and the permit condition exacted by the city. If we
find that a nexus exists, we must then decide the required degree of
connection between the exactions and the projected impact of the proposed
development.” 512 U.S. at 386. Finding the “essential nexus” existed, Dolan
adopted what it called a “rough proportionality” test for the required
degree of connection. Id. at 386, 391. Although “[n]o precise mathematical
calculation is required,” this test required the city to “make some sort of
individualized determination that the required dedication is related both in
nature and extent to the impact of the proposed development.” Id. at 391.

¶20 Dolan then suggested a dichotomy in addressing challenges
to requirements for the issuance of a land development permit based on
whether the requirement was imposed by “generally applicable zoning
regulations” or by “an adjudicative decision to condition” development “on
an individual parcel.” Id. at 391 n.8. When required by the application of
“generally applicable zoning regulations, the burden properly rests on the
party challenging the regulation to prove that it constitutes an arbitrary
regulation of property rights.” Id. By contrast, when the requirement is a
result of an “adjudicative decision to condition [the] application for a
building permit on an individual parcel,” the government has the burden
to justify the decision. Id. Dolan did not expound on when the “rough
proportionality” test applied, or how the dichotomy between the “generally
applicable zoning regulations” and “adjudicative decision” unique to a
parcel applied in resolving a challenge, questions that are squarely
presented here. A few years after Dolan, however, the Arizona Supreme
Court provided guidance relevant here.

¶21 Home Builders Ass’n of Cent. Ariz. v. City of Scottsdale indicated
that Dolan’s “rough proportionality” test does not apply to generally
applicable zoning regulations (“a generally applicable legislative decision by
the city”), as opposed to “a city’s adjudicative decision to impose a condition
tailored to the particular circumstances of an individual case.” 187 Ariz.
479, 486 (1997). In City of Scottsdale, the city studied the amount of water
needed to support new development. Id. at 480. Based on that study, the
city adopted an ordinance setting a water resources development fee for
any new development. Id. at 481. The fee was “$1,000 for single family
residence, $600 per apartment unit, and $2,000 per acre foot of consumption
by other uses.” Id. In language that appears to be either an alternative
holding or dicta, City of Scottsdale found the water resources development
fee was a “generally applicable legislative decision,” meaning that

9
 AMERICAN FURNITURE v. GILBERT
Opinion of the Court

Nollan/Dolan did not apply, while acknowledging that the precise “question
has not been settled by the [United States] Supreme Court.” Id. at 486.7

¶22 City of Scottsdale cited additional reasons why the “rough
proportionality” test did not apply to generally applicable legislative
decisions, two of which merit mention here. First, it found “good reason”
to distinguish adjudicative rezoning, which may involve “regulatory
leveraging that occur[s] when the landowner must bargain for approval of
a particular use of its land,” from “a generally applicable legislative
decision” that does not involve a “risk of that sort of leveraging.” Id. at 486.
Second, it noted Dolan involved a requirement that the landowner “cede a
part of her property to the city, a particularly invasive form of land
regulation,” while Scottsdale’s water resources development fee involved
payment of “a fee, a considerably more benign form of regulation.” Id.

¶23 Applying City of Scottsdale, the traffic signal SDF was
established by an ordinance applicable to all development based upon a fee
schedule that AFW does not challenge. AFW’s appeal challenges payment
of the traffic signal SDF, a generally applicable legislative fee. It is not the
product of Gilbert’s “adjudicative decision to impose a condition tailored to
the particular circumstances of an individual case” that would risk
“regulatory leveraging” and does not involve AFW transferring a portion
of the property to Gilbert. Because the traffic signal SDF is analogous to the
fee imposed in City of Scottsdale, the superior court properly found it “is a
legislative act that carries a presumption of validity,” tacitly concluding
Nollan/Dolan does not apply.

¶24 AFW next argues that the legislative/adjudicative dichotomy
discussed in Dolan and City of Scottsdale is “jurisprudentially questionable”
because both effectuate a taking. This argument fails for two very different
reasons. First, City of Scottsdale recognized this precise distinction:

In Dolan, the Chief Justice was careful to point
out that the case involved a city’s adjudicative
decision to impose a condition tailored to the
particular circumstances of an individual case.
Because the Scottsdale case involves a generally

7Even if dicta (as AFW argues), the Arizona Supreme Court’s analysis in
City of Scottsdale is persuasive in this court. Cf. Alejandro v. Harrison, 223
Ariz. 21, 25 ¶ 12 (App. 2009) (noting statements not essential to ultimate
decision are “merely persuasive” but not precedential).

10
 AMERICAN FURNITURE v. GILBERT
Opinion of the Court

applicable legislative decision by the city, the
court of appeals thought Dolan did not apply.
We agree, though the question has not been
settled by the Supreme Court.

187 Ariz. at 486 (citations omitted).

¶25 Second, by statute, the traffic signal SDF “shall result in a
beneficial use to the development” and “shall not exceed a proportionate
share of the cost of necessary public services . . . needed to provide
necessary public services to the development.” A.R.S. § 9-463.05(B)(1) & (3).
These statutory requirements are akin to Dolan’s “rough proportionality”
test, see City of Scottsdale, 187 Ariz. at 483-84,8 and limit what development
fees can be imposed. These statutory requirements also negated AFW’s
concerns about municipalities getting a “free pass” by only imposing
development fees established by generally applicable legislative decision.

¶26 AFW next argues Koontz v. St. Johns River Water Mgmt. Dist.,
570 U.S. 595 (2013), rejected the legislative/adjudicative dichotomy. In
Koontz, a land owner applied for required water permits to develop a
specific parcel of land. Id. at 601. The government conditioned issuance of
those permits upon the landowner’s compliance with one of two
requirements: deeding to the government an easement over land not being
developed or requiring the land owner to pay for improvements to non-
contiguous government-owned land. Id. at 601-02. Nothing suggested that
these conditions were based on generally applicable zoning requirements;
instead, Koontz addressed the constitutionality of a government’s
“adjudicative decision” unique to a parcel. In that factually distinct context,
Koontz is significant here both for what it did and did not do.

¶27 Koontz held that, when applicable, Nollan/Dolan provides the
proper analysis when the government conditions issuance of a permit
either upon the payment of a fee or upon the transfer of property. Id. at 619.

8 These statutory requirements also are consistent with the synthesis of
cases from other states in City of Scottsdale as requiring that a generally
applicable legislative development fee “be factually related to the need for
public services created by the proposed development” and that “the nature
and extent of the exaction must bear a reasonable relationship to that
portion of the public burden created by the proposed development.” 187
Ariz. at 483; see also S.B. 1525, 50th Leg., 1st Gen. Reg. Sess. (Ariz. 2011)
(amending A.R.S. 9-463.05 by replacing “reasonable relationship” with
“proportionate share”).

11
 AMERICAN FURNITURE v. GILBERT
Opinion of the Court

What Koontz did not do was replace, negate or (given the facts) even
address Dolan’s legislative/adjudicative dichotomy discussed in City of
Scottsdale. As a result, Koontz did not hold that Dolan applied to generally
applicable legislative development fees like those imposed in the traffic
signal SDF. Id. at 614 n.2, 617 (“because the proposed offsite mitigation
obligation in this case was tied to a particular parcel of land, this case does
not implicate the question whether monetary exactions must be tied to a
particular parcel of land in order to constitute a taking;” “[t]his case does
not require us to say more”); see also id. at 628 (Kagan, J., dissenting)
(“Maybe today’s majority accepts [the legislative versus adjudicative]
distinction; or then again, maybe not.”). Koontz did not abrogate the
legislative/adjudicative dichotomy as AFW suggests.

¶28 Finally, AFW asserts “there is no principled distinction
between an exaction imposed administratively and one imposed
legislatively.” But that argument runs counter to Dolan and City of
Scottsdale. Moreover, to the extent AFW asks that the City of Scottsdale
analysis be altered, such a request is properly addressed to the Arizona
Supreme Court. AFW has not shown that the Nollan/Dolan analysis applies
here, meaning the superior court properly concluded that the traffic signal
SDF is a generally applicable legislative act not subject to scrutiny under
that analysis. Accordingly, AFW has not shown that Gilbert effectuated an
unconstitutional taking by applying the generally applicable traffic signal
SDF to AFW’s development permit request.

III. AFW Has A Statutory Right To An Exaction Administrative
Appeals Hearing.

¶29 AFW argues that it should have been granted a statutory
exaction appeals hearing to challenge the application of the traffic signal
SDF to its development. By statute,

a property owner may appeal the following
actions relating to the owner’s property by a city
or town, or an administrative agency or official
of a city or town, in the manner prescribed by
this section:

1. The requirement by a city or town of a
dedication or exaction as a condition of granting
approval for the use, improvement or
development of real property. This section does
not apply to a dedication or exaction required in

12
 AMERICAN FURNITURE v. GILBERT
Opinion of the Court

a legislative act by the governing body of a city
or town that does not give discretion to the
administrative agency or official to determine the
nature or extent of the dedication or exaction.

A.R.S. § 9-500.12(A)(1) (emphasis added). Gilbert denied AFW’s request for
such a hearing, and the superior court denied AFW’s request for special
action relief to compel such a hearing. That court found Gilbert’s denial of
AFW’s protest was “supported by competent evidence and a plain
language application” of Ordinance 2226 and the denial was “not arbitrary,
capricious or an abuse of discretion.”

¶30 Special action relief may be sought for the failure “to perform
a duty required by law as to which [a party] has no discretion,” or from an
“arbitrary and capricious” decision. Ariz. R.P. Spec. Act. 3(a) & (c). This
court reviews the denial of special action relief for an abuse of discretion,
but “to the extent that the resolution of an issue depends on statutory
interpretation, we review the court’s ruling de novo.” Home Builders Ass’n
of Cent. Ariz. v. City of Goodyear, 223 Ariz. 193, 195 ¶ 8 (2009) (citing cases).
“The right to appeal exists only by force of statute and is limited to the terms
of the statute.” City of Phoenix v. Superior Court, 110 Ariz. 155, 158 (1973). In
this case, AFW had a right to an administrative appeal of Gilbert’s
requirement that it pay the traffic signal SDF unless that provision “does
not give discretion to the administrative agency or official to determine the
nature or extent of the dedication or exaction.” A.R.S. § 9-500.12(A)(1).
Gilbert argues it had no discretion under the traffic signal SDF, while AFW
argues it did.

¶31 As stated above, under the traffic signal SDF, the per square
foot rate differs significantly based on whether the structure is categorized
Retail, Office, Industrial or Other Nonresidential. Gilbert Code 10-3.1(a)(5)
(May 21, 2013). Gilbert determines the fee based on information provided
in the permit application. The traffic signal SDF, however, does not define
the categories or provide guidance in determining which category to use or
how mixed-use developments should be categorized. As a result, in this
case, application of the traffic signal SDF necessarily involves discretion.

¶32 Gilbert exercised its discretion when it concluded AFW’s
development should be categorized Retail based on the “main purpose of
the building,” as opposed to the majority use of the building. Gilbert
adopted the International Building Code (IBC), which AFW used in its
permit application. While AFW’s permit application was for a 630,000
square-foot facility, it listed the following IBC occupancy codes: 178,000

13
 AMERICAN FURNITURE v. GILBERT
Opinion of the Court

square feet of mercantile (showroom), 46,000 square feet of factory
(mezzanine for manufacturing and office space) and 407,000 square feet of
storage (warehouse). Even though most of the building is a warehouse,
Gilbert decided “the main purpose of the building is to sell furniture and
ship furniture to customers.” Gilbert then decided that the development
would be categorized as Retail in its entirety and applied the Retail rate to
the entire facility. That determination imposed a traffic signal SDF of
approximately $1,000,000, which is substantially more than would have
been imposed if Gilbert had determined the fee based on the specific uses
for portions of the building or use of an Office or Industrial category.

¶33 Given its mixed use, Gilbert could have decided the
development was Other Nonresidential. Although that phrase is not
defined, Gilbert stated the phrase is “neither retail, office or industrial” and
“might be a school, a church, or a hospital.” Because a mixed-use property
is not entirely Retail, Office or Industrial, and could be considered Other
Nonresidential, Gilbert’s determination that mixed-use properties are not
Other Nonresidential involved the exercise of discretion. And if it had done
so, the traffic signal SDF imposed could have been significantly less than
what Gilbert required AFW to pay based on the Retail category
determination.

¶34 As a final example, Gilbert had discretion when it categorized
AFW’s building as entirely retail. Gilbert argues it is not authorized to
categorize “a retail development or structure at anything other than the
retail rate or to apply different rates to various sections within a single
structure.” But just as Ordinance 2226 does not expressly authorize a mixed
category, it does not prohibit Gilbert from assessing the traffic signal SDF
based on proportional use. Proportional use would be consistent with the
purpose of the traffic signal SDF: to cover costs associated with expansion
of the traffic signal network required to serve new development. Gilbert
Code 10-3.1(a)(5). Such a purpose could be achieved by proportioning the
fee imposed by category based on stated use.

¶35 On this record, Gilbert could have selected the category (and
the resulting rate) based on a majority use, used the Other Nonresidential
category or proportioned the category based on stated use of the various
parts of the building. That Gilbert did not do so does not, as Gilbert
suggests, mean it lacked discretion to do so. Because Gilbert had discretion
in determining the appropriate category and resulting fee under the traffic
signal SDF, AFW had a statutory right to an exaction administrative appeals
hearing to challenge its determination. See A.R.S. § 9-500.12(A)(1).
Accordingly, the grant of summary judgment rejecting AFW’s request for

14
 AMERICAN FURNITURE v. GILBERT
Opinion of the Court

special action relief to compel such a hearing pursuant to A.R.S. § 9-500.12
is vacated and this matter is remanded for further proceedings consistent
with this opinion.9

CONCLUSION

¶36 Cities and towns frequently require payment of fees as a
condition for the issuance of building permits. Whether those fees are to be
analyzed using a “rough proportionality” test, and if so how, appears less
than certain under relevant precedent. For decades, United States Supreme
Court Justices have noted the continuing need for clarification in that
analysis.10 This opinion continues down that uncertain path and, in doing
so, perhaps affords courts asked to consider this opinion an opportunity to
further clarify the law, particularly following Koontz.

¶37 For now, however, and for the reasons set forth above,
summary judgment is affirmed in part and vacated in part and this matter
is remanded for further proceedings consistent with this opinion. More
specifically, the superior court properly found the traffic signal SDF was a
generally applicable legislative act and properly granted Gilbert summary
judgment on counts 1, 3 and 6 of AFW’s original complaint. The grant of
summary judgment for Gilbert on counts 2 and 4 of AFW’s amended
complaint is vacated and this matter is remanded for an administrative
appeals hearing to challenge the exaction pursuant to A.R.S. § 9-

9Given this conclusion, this opinion does not address AFW’s argument that
the use of the Retail rate was arbitrary and capricious.

10 See Lingle v. Chevron, 544 U.S. 528, 539 (2005) (noting the Court’s
“regulatory takings jurisprudence cannot be characterized as unified”);
accord Parking Ass’n of Georgia, Inc. v. City of Atlanta, 515 U.S. 1116, 1118
(1995) (Thomas, J., joined by O’Connor, J., dissenting from denial of
certiorari) (“The lower courts should not have to struggle to make sense of
this tension in our case law. In the past, the confused nature of some of our
takings case law and the fact-specific nature of takings claims has led us to
grant certiorari in takings cases without the existence of a conflict. . . .
Where, as here, there is a conflict, the reasons for granting certiorari are all
the more compelling.”) (citing Dolan and Nollan); see also Calif. Bldg. Indus.
Ass’n v. City of San Jose, 136 S. Ct. 928, 928 (2016) (Thomas, J., concurring in
denial of certiorari) (similar); City of Scottsdale, 187 Ariz. at 486 (“Because
the Scottsdale case involves a generally applicable legislative decision by the
city, the court of appeals thought Dolan did not apply. We agree, though
the question has not been settled by the Supreme Court.”).

15
 AMERICAN FURNITURE v. GILBERT
Opinion of the Court

500.12(A)(1). Given the relief granted, the court determines that for
purposes of an award of attorneys’ fees, neither Gilbert nor AFW is the
successful or prevailing party on appeal. AFW is, however, awarded its
taxable costs contingent upon its compliance with Arizona Rule of Civil
Appellate Procedure 21.

AMY M. WOOD • Clerk of the Court
FILED: AA

16