Hv Canal v. Adot

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

HV & CANAL LLC, Plaintiff/Appellant,

v.

ARIZONA DEPARTMENT OF TRANSPORTATION, et al.,
Defendants/Appellees.

No. 1 CA-CV 22-0771
FILED 2-13-2024

Appeal from the Superior Court in Maricopa County
No. CV2019-009886
The Honorable Katherine Cooper, Judge

AFFIRMED

COUNSEL

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

Arizona Attorney General’s Office, Phoenix
By Michelle Burton, Joe Acosta, Jr.
Counsel for Defendants/Appellees
 HV & CANAL v. ADOT, et al.
Decision of the Court

MEMORANDUM DECISION

Presiding Judge Jennifer B. Campbell delivered the decision of the Court,
in which Judge Kent E. Cattani and Judge Anni Hill Foster joined.

C A M P B E L L, Judge:

¶1 A.R.S. § 41-1030(B) authorizes agencies to impose licensing
requirements or conditions only when “specifically authorized” by statute
or rule. Here, we hold that A.A.C. R17-3-506 and other regulations
specifically authorized the Arizona Department of Transportation (ADOT)
to condition an encroachment permit on the applicant, HV & Canal LLC
(HVC), building and paying for a right-hand-turn lane into its property. We
also hold that, even if the condition was a taking within the meaning of the
Fifth Amendment, it was not unconstitutional. We affirm the superior
court’s entry of judgment for ADOT.

BACKGROUND

¶2 This case involves a nine-acre parcel of commercial property
(the Property) abutting State Route 179 near Sedona. For decades, the
Property was used as an outlet mall with one main access point from the
state route authorized under an ADOT encroachment permit.

¶3 Beginning in 2008, ADOT undertook a major improvement
project on the state route. The project included the addition of a roundabout
preceding the access to the Property, as well as a raised median in the center
of the roadway eliminating all left-hand turns in and out of the Property.
Though the changes increased right-hand turns into the Property, ADOT
did not install a right-hand-turn lane at the access point as part of the
improvements.

¶4 Nine years later, an HVC affiliate bought the Property
intending to replace the northernmost retail buildings with a hotel. The
project proceeded with the county approving a lot split, issuing building
permits, and granting certificates of occupancy. A third-party company
now owns and operates a hotel on the northern three-acre lot, and HVC
operates retail space on the remaining six acres.

¶5 The redevelopment of the Property did not change its
state-route access point. But HVC had to seek a new encroachment permit

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under ADOT regulations, which require a new application upon changed
ownership or use. See A.A.C. R17-3-502(D), R17-3-504(C)(9). As part of that
process, ADOT required a traffic-impact analysis to assess the need for a
right-hand-turn lane. The engineer who completed the analysis concluded
that though ADOT’s internal guidelines—which ADOT concedes are not
regulations or rules—would require a right-hand-turn lane, “[d]ue to the
decrease in trips generated by the proposed development and the minimal
improvement of the LOS [Level of Service] delay [that a right-hand-turn
lane would provide], it is recommended that the SR 179 geometry remain
unchanged.” (Emphasis added.) But ADOT rejected the engineer’s
conclusion in favor of following its guidelines. ADOT indicated that the
guidelines represent current safety standards, and that though ADOT does
not require landowners to make improvements each time safety standards
are updated, current standards are applied when a new encroachment
permit is requested. ADOT therefore conditioned the issuance of HVC’s
requested encroachment permit on HVC building a right-hand-turn lane at
its expense.

¶6 HVC sued ADOT for declaratory and mandamus relief. The
superior court denied the parties’ cross-motions for summary judgment.
This court and later the supreme court declined to decide HVC’s requests
for special-action relief. The matter proceeded to a bench trial. The superior
court determined that the permit condition was both statutorily authorized
and constitutionally proportional to the impact of the Property’s
redevelopment. The superior court therefore ruled in favor of ADOT and
entered judgment accordingly. HVC appealed.

DISCUSSION

I. Statutory Authority

¶7 HVC first contends that ADOT acted in violation of statute.
ADOT, created by and operating under the authority granted by the
legislature, has exclusive control and jurisdiction over state routes and is
charged with their operation and maintenance. A.R.S. § 28-332(A), (B)(3).
ADOT must administer all maintenance and construction work on state
routes and may “[e]xercise other powers necessary to carry out the work of
the division and perform other duties prescribed by law for the division.”
A.R.S. § 28-7053(A)(2), (D)(2); A.R.S. § 28-6922(A), (B)(6); A.A.C. R17-3-505.
ADOT’s director “shall exercise complete and exclusive operational control
and jurisdiction over the use of state highways and routes and adopt rules
regarding the use as the director deems necessary to prevent the abuse and

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unauthorized use of these highways and routes,” and to promote other
goals, including “[p]ublic safety and convenience.” A.R.S. §§ 28-7045, -366.

¶8 ADOT’s authority is limited to what is statutorily permitted.
See A.R.S. §§ 28-331 (establishing ADOT), 41-1001(1) (defining agencies);
Facilitec, Inc. v. Hibbs, 206 Ariz. 486, 488, ¶ 10 (2003) (holding that because
agencies are creatures of statute, they have no powers beyond those
delegated by the legislature). ADOT’s director may allow encroachments
after considering their impact on traffic safety and other factors. A.A.C.
R17-3-506.

¶9 Here, we address whether ADOT exceeded its statutory
authority by conditioning HVC’s encroachment permit on HVC
constructing and paying for a right-hand-turn lane.1 We review all relevant
statutes and regulations de novo, Libra Group, Inc. v. State, 167 Ariz. 176, 179
(App. 1991), interpreting them in accordance with their plain language by
giving effect to each sentence and word, Home Depot USA, Inc. v. Ariz. Dep’t
of Revenue, 230 Ariz. 498, 500, ¶ 10 (App. 2012).

¶10 When dealing with state agencies, the legislature sought to
ensure the public would enjoy “fair and open” regulation by adopting a
Regulatory Bill of Rights in A.R.S. § 41-1001.01. Subsection (A)(7) of that
statute prohibits state agencies from basing licensing decisions in whole or
in part on conditions or requirements “not specifically authorized by
statute, rule or state tribal gaming compact as provided in § 41-1030,
subsection B.” A.R.S. § 41-1030(B) was first adopted in 1995 and was
modified to its current form three years later, at the same time the
Regulatory Bill of Rights was put into place. See 1995 Ariz. Sess. Laws, ch.
251, § 5 (1st Reg. Sess.) (adding first sentence of current subsection but using
term “expressly authorized”); 1998 Ariz. Sess. Laws, ch. 57, § 36 (2d Reg.
Sess.) (replacing “expressly authorized” with “specifically authorized” in
first sentence and adding second sentence); 1998 Ariz. Sess. Laws, ch. 57,
§ 18 (2d Reg. Sess.) (enacting A.R.S. § 41-1001.01). A.R.S. § 41-1030(B)
provides:

1 The parties do not dispute that the Property’s access point encroaches
on the state route within the meaning of A.R.S. § 28-7053(E), that the
Property’s changed ownership and use required HVC to seek a new
encroachment permit under A.A.C. R17-3-502(D) and R17-3-504(C)(9), and
that A.R.S. § 41-1030(B) applied to ADOT’s permit-issuance decision as an
agency making a licensing decision within the meanings of A.R.S.
§ 41-1001(1), (13), and (15).

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An agency shall not base a licensing decision in whole or in
part on a licensing requirement or condition that is not
specifically authorized by statute, rule or state tribal gaming
compact. A general grant of authority in statute does not
constitute a basis for imposing a licensing requirement or
condition unless a rule is made pursuant to that general grant
of authority that specifically authorizes the requirement or
condition.

(Emphases added.)

¶11 Given A.R.S. §§ 41-1001.01(A)(7) and -1030(B), we must
determine whether ADOT was given a “specific” or “general” grant of
authority by the legislature.

A. General Versus Specific Grant of Authority

¶12 To begin, we consider the difference between “specific” and
“general” grants of authority. We are unaware of any case law defining the
difference between the two grants of authority in the context of A.R.S.
§§ 41-1001.01(A)(7) and -1030(B), but we find guidance in case law
predating those statutes.2

¶13 Several cases have distinguished “general” from “specific”
authority. In Gardenhire v. State, our supreme court characterized an
ordinance authorizing a town “[t]o do all other acts, and prescribe all other
regulations, which may be necessary or expedient for the prevention or
suppression of disease” as a “sweeping grant of power,” while
characterizing other ordinances authorizing the adoption of enumerated
disease-prevention measures as giving “specific authority” that did not
preclude alternative action under the general ordinance. 26 Ariz. 14, 17–18
(1923). In Merrick v. Rottman, by contrast, this court concluded that a
legislative act’s expression of particular “specific enforcement powers” for
an agency precluded any implied power to take alternative actions despite
a statute giving the agency a “general grant of authority” to administer and
ensure compliance with the act. 135 Ariz. 594, 598 (App. 1983).

¶14 We also note that our supreme court has drawn similar
distinctions between “general” and “express” authority, defining express
authority as that which is “given in direct terms, definitely and explicitly,”

2 We do not rely on ADOT’s citation to Sullivan v. Planning Board of Acton,
645 N.E.2d 703 (Mass. Ct. App. 1995), because we find ample direction in
the Arizona cases.

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and which “confers powers to do a particular thing set forth and declared
exactly, plainly and directly with well defined limits”—rather than
“authority that is general, implied, or not directly stated or given.” City of
Flagstaff v. Assoc. Dairy Prods. Co., 75 Ariz. 254, 257 (1953) (citations omitted).
A.R.S. § 41-1030(B) referred to “expressly authorized” instead of
“specifically authorized” until 1998, when that statute’s second sentence
and A.R.S. § 41-1001.01(A)(7) were added. See 1998 Ariz. Sess. Laws, ch. 57,
§§ 18, 36 (2d Reg. Sess.). We do not presume that the changed language
disrupted the meaning because to do so would be to ignore the statutes’
express purpose, as confirmed by the other concurrent amendments. See
State v. Lammie, 164 Ariz. 377, 379 (App. 1990) (“While it is true that when
the legislature amends statutory language, it is presumed that it intends to
make a change in existing law, a statutory amendment ought not to be
interpreted so broadly as to destroy the entire objective of the statutory
scheme.”).

¶15 Relying on the foregoing and the statutory goal of ensuring
fair and open regulation,3 we hold that, in the context of A.R.S.
§§ 41-1001.01(A)(7) and -1030(B), a “general grant of authority” exists
where the agency is given broad discretion to determine how it will act,
while a “specific authoriz[ation]” exists where the agency may choose from
a menu of possible actions.

B. ADOT’s Specific Grant of Authority

¶16 We next decide whether ADOT was specifically authorized
by statute or rule to condition HVC’s encroachment permit on the applicant
building and paying for a right-hand-turn lane. We hold that though no
statute specifically authorized ADOT’s action, ADOT appropriately
enacted rules under its general statutory authority (see supra at ¶¶ 8–9) that
did provide specific authority: A.A.C. R17-3-504 to -507.

¶17 A.A.C. R17-3-505 and -506 provide that ADOT may impose
permit conditions after reviewing documentation “to analyze the proposed
encroachment’s impact on the state highway and right-of-way.” A.A.C.
R17-3-507(C)–(D) provides that ADOT will approve permits only where the
applicant agrees to comply with those conditions. A.A.C. R17-3-504(c)
provides that the applicant “[a]ssume[s] all legal liability and financial
responsibility for the encroachment activity for the duration of the permit.”

3 ADOT’s adoption of regulations requires public notice and a hearing
process under Title 41, Chapter 6, Article 3 of the Arizona Revised Statutes.

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(Emphasis added.) Most important here is A.A.C. R17-3-506, which
provides:

C. An encroachment permit consists of the materials submitted
by an applicant under R17-3-504 and R17-3-505, and
additional requirements from the Department as described in
subsection (B). An encroachment permit will list in detail the
requirements with which the permittee shall comply in order
to perform the requested encroaching activity. Others are
specific to a particular encroachment activity.

D. The Department shall set encroachment permit requirements
to:

1. Maintain the integrity of the Department’s right-of-
way and transportation facilities;

2. Mitigate the risk to traffic safety;

3. Improve traffic movement, efficiency, and capacity;

4. Mitigate adverse drainage on state property or
abutting property affecting state property;

5. Mitigate environmental impacts; Mitigate
maintenance costs to transportation facilities;

6. Mitigate potential liability for the Department or the
state; and

7. Mitigate potential harms to national or state security.

E. By accepting an encroachment permit, a permittee agrees to
the requirements described in the permit. If the permittee
disagrees with the requirements, the permittee shall return
the permit immediately to the District Office.

By its terms, A.A.C. R6-3-506 does not create sweeping powers, but rather
limits ADOT’s authority to the imposition of requirements that serve the
listed goals. To be sure, the regulation does not list every potential
mechanism that ADOT may employ to achieve the stated goals. But
requiring it to do so would be inefficient and impracticable given that each
permit application implicates a myriad of unique variables. See Ariz. Corp.
Comm’n v. Palm Springs Utility Corp., 24 Ariz. App. 124, 128–29 (1975)
(observing that specialized case-by-case orders not expressly or impliedly

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prohibited by statute promoted statute’s effective administration). Because
ADOT is limited to selecting mechanisms that promote the enumerated
goals, we conclude that the regulation confers specific rather than general
authority.

¶18 The requirements that ADOT imposed on HVC receiving an
encroachment permit fell squarely within the bounds of the specific
authority codified in A.A.C. R17-3-504 to -507 consistent with ADOT’s
general statutory powers. The regulations authorize ADOT to impose
conditions that mitigate traffic-safety risks, mitigate potential liability for
ADOT and the state, and improve traffic movement, efficiency, and
capacity. A.A.C. R17-3-506(B)(2), (3), (7). A condition requiring the
applicant to create a right-hand-turn lane is directed to those purposes. And
A.A.C R17-3-504(c) allows the cost of construction of this traffic safety
feature to be apportioned to the applicant. Based on the statutory authority
granted ADOT by the legislature and the regulations adopted by the
agency, we find the requirements imposed for the issuance of the
encroachment permit to be duly authorized and not violative of A.R.S.
§§ 41-1001.01(A)(7) or -1030(B).

II. Constitutionality

¶19 HVC next contends that the right-hand-turn-lane condition—
which a HVC representative estimated would cost the company at least
$150,000—was an unconstitutional taking.

¶20 The Fifth Amendment, which applies to the states through the
Fourteenth Amendment, provides that private property shall not be taken
for public use without just compensation. U.S. Const. amends. V, XIV. Land
is taken within the meaning of the Fifth Amendment when it is physically
appropriated or when the owner is deprived of beneficial use. Lucas v. South
Carolina Coastal Council, 505 U.S. 1003, 1015–16 (1994). A taking also occurs
when the government demands a fee in lieu of a physical invasion. Koontz
v. St. Johns River Water Mgmt. Dist., 570 U.S. 595, 612 (2013). In the context
of land use and development permits, whether there is an unconstitutional
taking is determined under the “Nollan/Dolan test.” Id. at 595, 604 (referring
to Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987), and Dolan v. City
of Tigard, 512 U.S. 374 (1994)); see also Am. Furniture Warehouse Co. v. Town of
Gilbert, 245 Ariz. 156, 160, ¶ 17 (App. 2018). The Nollan/Dolan test applies
when the government makes case-specific adjudicative decisions
implicating any form of taking. Home Builders Ass’n of Cent. Ariz. v. City of
Scottsdale, 187 Ariz. 479, 486 (1997); Am. Furniture Warehouse, 245 Ariz. at
163, ¶ 27. Under this test, the Fifth Amendment is not violated “so long as

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there is a ‘nexus’ and ‘rough proportionality’ between the property [or
monetary exaction] that the government demands and the social costs of
the applicant’s proposal.” Koontz, 570 U.S. at 605–06. “Rough
proportionality” does not require a precise mathematical calculation, but
“the [government] must make some sort of individualized determination
that the required dedication [or monetary exaction] is related both in nature
and extent to the impact of the proposed development.” Dolan, 512 U.S. at
391; see also Transamerica Title Ins. Co. v. City of Tucson, 23 Ariz. App. 385,
386, 390–91 (1975) (pre-Nollan/Dolan test case finding an unconstitutional
taking where city conditioned rezoning on dedication of land for additional
right-of-way but there was no evidence the rezoning would cause
appreciable extra burden).

¶21 Assuming without deciding that the condition here
implicated application of the Nollan/Dolan test,4 we find no error in the
superior court’s determination that the test was satisfied. On the date HVC
submitted its permit application, the conditions—specifically, the right-
hand-turn-only access to the Property immediately following a roundabout
out of which non-turning vehicles may be accelerating—justified
installation of a right-hand-turn lane under ADOT’s internal guidelines
regardless of the Property’s re-development. Given the foregoing, there
was a nexus between safety and traffic concerns and the requirement that
HVC install a right-hand-turn lane. The requirement was not only
statutorily authorized, but also was related in nature and extent to the
proposed encroachment’s impact.

¶22 We are troubled by ADOT’s role in creating the problematic
conditions by changing the roadway in 2008 without simultaneously
building (at state expense) a right-hand-turn lane into the Property. We also
are troubled by ADOT’s representations at oral argument on appeal that it
may at any time revoke an encroachment permit and require the landowner
to assume the burden of updated safety guidelines made applicable by
ADOT’s own conduct. But because a new permit was required here upon

4 ADOT relies on Third & Catalina Assocs. v. City of Phoenix, 182 Ariz. 203
(App. 1994), to argue that the Nollan/Dolan test does not apply. In that case,
we upheld the constitutionality of a city ordinance requiring a property
owner to retrofit an existing high-rise building with a sprinkler system. Id.
at 205, 210. We held that the financial outlay required for compliance was
not an unconstitutional taking, noting that the property was not being
pressed into public service and that the city was acting to protect human
life within the scope of its police power. Id. at 208–09.

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the change of ownership and use, ADOT was entitled to impose the
updated safety regulations and require the construction of a right-hand-
turn lane. Therefore, we cannot say that ADOT acted beyond the scope of
its statutory authority or the constitution by requiring HVC to shoulder the
responsibility of its proposed encroachment’s impact when it applied for
the new permit.

CONCLUSION

¶23 We affirm the judgment for ADOT for the reasons set forth
above. We deny HVC’s request for attorneys’ fees under A.R.S. §§ 12-2030
and 41-1030.

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

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