“I can’t make your loan; my zoning’s wrong.”

The idea of traditional zoning is to segregate land uses. For example, zoning should protect the value of ownership of retail or residential real estate from the effects of a tannery locating next door. In a sense, zoning is a mechanism for separating land uses that could be considered nuisances to neighbors.

But in practice, zoning can have the effect of regulating economic activity that has nothing to do with land use. A zoning dispute over a consumer loan office illustrates how zoning applications provide an opportunity to allow the public and the zoning board to get into such non-land-use issues as the size of a loan, the time allowed for repayment, or whether the collateral for the loan is a car or a post-dated check or something else.

In an August 25, 2009 opinion from the Eastern District of the Missouri Court of Appeals, Titlemax v. City of Bridgeton, the court rejected the city’s determination that its B-2 zoning district excluded a loan office based on the board’s finding that the majority of the loans had repayment terms of less than 12 months and were secured by car titles. The city’s board of adjustment said that its decision denying a zoning certificate:

considered the impact that such businesses may have on the willingness of other businesses to locate in the City of Bridgeton, the high rates of interest charged by such businesses and the debt-cycle that many customers of these businesses fall into and the potential for crime related to such businesses.

In Missouri, a board of adjustment’s decision is appealed to the local circuit court, which acts as an appellate court, reviewing the record before the board of adjustment. When the circuit court’s decision is appealed to the court of appeals, the court of appeals disregards the circuit court’s decision and looks through the record to find out if the board of adjustment’s decision was supported by competent and substantial evidence, whether it was “arbitrary, capricious or unreasonable,” or outside the jurisdiction of the board.

The definition of “loan office” in the Bridgeton zoning ordinance required that a “primary or substantial portion of its business is the provision of consumer credit loans of at least $500.00 and a minimum loan term of at least 12 months.” The evidence at the board of adjustment hearing was that the minimum loan amount was $500.00 and that loan agreements were for a period of 24 months, even though there may have been testimony that the average repayment period was 10 months.

Without evidence that the loan term was less than 12 months, the board of adjustment’s decision to deny the zoning certificate was in error and reversed by the court of appeals.

People who are drawn to volunteer service on zoning boards and city councils are often motivated by social goals, many of them admirable. But sometimes their desire to protect their city from “evil,” whether in the form of adult entertainment, Wal-Marts, tattoo parlors, fortune-tellers, manufactured homes, or short-term loans, they sometimes forget to focus on the evidence.

It seems strange that whether a land use is in compliance with zoning regulations would depend on an analysis of the words on paper in a loan document generated in an ordinary office.  This case presents an example of a local government adopting zoning ordinances that have only a very slender connection, if any, with land use.