Lenders drive rezoning trend

Decisions based on land use, not specific projects
September 20, 2013

Call it another sign of the economic times: Financial issues are prompting more and more Sussex County property owners to seek zoning changes instead of requesting conditional-use permits.

Conditional-use applications allow property owners and developers to change the way a parcel is used without altering zoning. Many cases involve small commercial projects in residential zones. But what happens if those businesses fail? Lenders could be left with a property whose use is limited by a conditional-use permit.

It appears banks are now fueling the trend toward rezoning because it removes an element of risk for lenders. “A conditional use is usually not a deal killer, but banks are more comfortable with zoning in place,” said Jack Riddle, chief lending office at Community Bank Delaware.

“The financial community's desire for zoning classification is real. That's what lenders want,” said Planning and Zoning Commission President Bob Wheatley. “That way they are not limited should there be a foreclosure and they have to resell the property.”


Deaver: Zoning needs overhaul

When zoning is changed, however, the new designation stays with the parcel, even if a proposed project is never built. County code has no requirement that an applicant provide details of a proposed project for a rezoned parcel during a rezoning pubic hearing. County council is reviewing a rezoning from AR-1, agricultural-residential, to CR-1, commercial-residential, for a 25-acre parcel along Route 24 with no indication of what the use of the parcel would be.

That bothers Councilwoman Joan Deaver, D-Rehoboth Beach. “They don't have to say what they are doing with the land. That has to change,” she said. “Our system allows everything that is permitted under that zoning.”

In the CR-1 and B-1 commercial districts, county code permits more than 50 different uses.

Wheatley said officials can ask what the land is going to be used for, but that can't be the determining factor for approval or denial of a rezoning application. “It's not about the project, it's about the parcel,” he said.

Where does that rationale originate? “It's developed over many, many years and we've adopted what is common practice,” Wheatley said. “And the courts are driving planning and zoning decisions more than anything else.”

Dennis Schrader, a former county attorney who helped write county code, backed up what Wheatley said, adding the county and most towns approach rezoning applications the same way. “The deciding factor is whether the land is appropriate for all the uses; it's code driven,” he said. “The project is not the decision they are being asked to make.”

However, county planning and zoning commissioners do have regulatory powers over any site plans submitted for commercial zones.

The county has several commercial zoning districts: RPC, residential planned commercial; M, marine; L1, limited industrial; LI2, light industrial; HI1, heavy industrial; CR-1, commercial-residential; and B-1, neighborhood business district. Most commercial uses – by far – are in the old C-1, newer CR-1 and B-1 districts.

Each commercial district has specific uses, regulations and restrictions outlined in county code.

Deaver said county officials need to take another look at zoning. “Right now, it's a free for all,” she said. “Our zoning is wide open, and it doesn't protect the people. We need to break down our zoning districts.”

She said in 2010 consultants Urban Research and Development Corp. recommended an overhaul of zoning as part of an update of the county's land-use plan. The proposed changes include C-2 and B-2 zoning districts that would be more restrictive than the current districts providing more moderate, less intensive uses.

Deaver said she plans to approach county administration next week to address her concerns with zoning and to discuss why none of the consultants' proposed changes have been placed on an agenda for debate.


West Rehoboth business seeks rezoning

Rehoboth Appraisal Group LLC, operating as First State Appraisal Inc., is following the trend of requesting a rezoning with an application for a change from GR, general residential, to B-1 neighborhood business district for a 12,500-square-foot parcel at the intersection of Hebron Street and Burton Avenue in West Rehoboth.

During the Sept. 12 county planning and zoning commission meeting, attorney Heidi Gilmore said the conditional use for the parcel was granted in 2004 and the current owners have been at the site for one year. “There are financing issues with conditional uses,” she said. “They do not plan to change anything about the site.”

First State Appraisal Group and an architect are in the two-story office built in a residential style.

Gilmore said B-1 zoning would be in harmony with the surrounding area, which is the entrance off Route 1 to West Rehoboth. “Professional offices are desired in that area,” she said.

Answering concerns expressed in a letter of opposition from the West Rehoboth Community Land Trust, Gilmore said the parcel was too small for many uses permitted under B-1 zoning. “Their intent is to keep this as professional offices. It's an ideal location in accordance with the county's comprehensive land-use plan. We are not asking for CR-1 because it's too much out of character with the area; B-1 is a natural fit,” Gilmore said.

Land trust officials said there are too many possible uses in a B-1 district that would not fit in with the residential character of the community. Gilmore that the size of the parcel would prohibit most of the uses. “And the owner has no plans for any changes,” she said.

Planning and zoning commissioners recommended approval of the application.


Zoning districts provide for residential, commercial development

Some of the county's zoning districts are as follows (see the complete list and all permitted uses on the county's website,

Agricultural-residential, AR-1: By far, this is the largest zoning district in the county designed for low-density housing projects and agricultural-related uses.

General residential, GR: This district allows for medium-density residential development, including manufactured home parks.

Residential planned commercial - RPC: Up to 1 acre of commercial development is permitted for each 100 residential units in an RPC development.

Marine, M: The district allows for a small variety of commercial uses related to boating and seafood processing.

Industrial districts – LI-1, LI-2, HI-1: Most of the uses are industrial with a small number of commercial uses such as restaurants, banks, hotels, motels and offices.

Commercial residential, CR-1: Provides for a wide variety of commercial and residential uses, including large shopping centers. It was created to replace C-1 zoning. There is no limit on building square footage if the project is adjacent to a major road and adequate infrastructure exists or is planned.

Neighborhood business district, B-1: To provide retail and service oriented businesses in smaller areas, primarily in rural, low-density or medium-density residential areas. Total gross floor area of any single building or group of buildings cannot exceed 75,000 square feet.




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