Troubled waters 

Swan Lake development lost at sea

Few developments in the Flathead Valley have seen so many twists and turns, with such potentially high stakes for the state as a whole, as the Milhous Group development on the north end of Swan Lake.

A nonprofit neighborhood group, the Swan Lakers, filed one lawsuit over the development that has dragged on for more than two years and gone all the way to the Montana Supreme Court. And the Swan Lakers filed a second suit over the development in November.

Meanwhile, the Montana Department of Natural Resources and Conservation (DNRC) has prepared to make a fuss. And it doesn’t help that 40 acres of the site where Milhous wants a 42-condo subdivision includes the historic Kootenai Lodge, constructed in the early 1900s.

The Swan Lakers argue that Montana law puts financial pressure on counties to approve developments by giving developers the right to sue county governments for monetary damages caused by land use decisions without specifying the same right for the public.

Should the Swan Lakers prevail on that point, it would set a new precedent for Montana subdivision law, putting the public and developers on a level playing field, says Swan Lakers President Peter Leander.

The suit also claims the Milhous Group hadn’t yet taken ownership of the land before applying for preliminary plat approval, and therefore needed signatures from the owners on their application, per Montana law. The Lake County Planning Department originally turned down the application because it lacked the owners’ signature, but the suit alleges the planning department changed its mind and approved the application after consulting with former Lake County planning director turned Milhous consultant David DeGrandpre.

The legal thicket grew even thornier in August when Missoula District Court Judge Douglas Harkin reversed his own 2005 opinion and declared the Swan Lakers had no standing to bring the suit.

The Swan Lakers immediately appealed Harkin’s decision to the Supreme Court. On Oct. 16 the Swan Lakers asked the District Court to issue an injunction halting any pending property sales and construction activity related to the development until the Supreme Court settled the question of standing.

But two days later, before Judge Harkin reached a decision, the Lake County commissioners gave final approval to Milhous Group, green-lighting the project. Harkin subsequently denied the injunction, ruling it was too late, since final approval of the project had already been granted.

Not surprisingly, the Swan Lakers appealed that decision to the Montana Supreme Court too, and on Dec. 19, the court overturned Harkin’s ruling, granting the injunction until the question of standing is settled. The Supreme Court pledged to expedite the case and come to a quick decision on standing.

The issue of standing in subdivision disputes has never been tested before the Supreme Court, says Lake County’s attorney, Alan McCormick. The law gives standing to landowners “with a property boundary contiguous to the proposed subdivision or…within the county or municipality where the subdivision is proposed if that landowner can show a likelihood of material injury to the landowner’s property or its value.”

McCormick argues the Swan Lakers don’t have standing because the group itself doesn’t own property. Also, he says, individuals within the group have only shown they will experience common effects of subdivisions, such as increased traffic, but nothing constituting “material injury” as required by the law.

With the question of their legal standing in doubt, the Swan Lakers have fired another barrel by bringing a second suit against Lake County, alleging the commissioners “exceeded their legal authority” by granting final approval before Milhous satisfied all preliminary plat conditions. Specifically, the Swan Lakers allege Milhous failed to determine the flood plain for Johnson Creek, which runs through the property and into Swan Lake.

Leander believes allowing the commissioners to grant final approval without a flood plain determination would set a bad legal precedent.

“Protection of Montana’s flood plains has got to be one of all of Montanans greatest concerns, because of the effect it has on water quality and wildlife,” he says. “To allow building in the flood plain before final plat would set a horrible precedent.”

At the very least, it seems, allowing building without flood plain analysis has the potential to cause major headaches. In a letter to Lake County’s planning director, Larry Schock, a DNRC civil engineering specialist who was advising the county on flood plain issues for this subdivision, pointed to a case in which Missoula County granted final approval to a subdivision with no flood plain analysis.

“The homes went in and in 1995 about a dozen of them flooded with about 2 ft. of water. The homeowners association sued the developer, all of the consultants associated with the subdivision, and Missoula County,” he writes. “The initial lawsuit… has been settled, but there is still one lawsuit pending and Missoula County has had to invest millions more in order to mitigate the situation.”

McCormick admits there’s been concern whether the FEMA flood plain is adequate, but points out that the Milhous Group commissioned its own flood plain study and submitted it to the DNRC.

But DNRC director Mary Sexton warns that her department “has found deficiencies in the report,” but details won’t be released until later this month.

With this imminent report on the flood plain analysis, an appeal pending before the Montana Supreme Court and two lawsuits tied around the Milhous Group’s neck, it seems unlikely that condos will land at Swan Lake any time soon.
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