Let's have a talk about the "vested rights" bogeyman and regulating hyperscale digital infrastructure projects

Let's talk about "vested rights" and fears that a hyperscale digital infrastructure project developer will sue Pulaski County if we enact a comprehensive Conditional Use ordinance (Item 26-I-56) that requires it to meet objective standards in that law. That's the bogeyman that gets brought up, so let's think about it. Doing that means talking about the law, so bear with me.

Under Arkansas land-use law, a vested right is a legally protected right to continue a particular property use despite a later zoning or land-use restriction. Arkansas courts set a demanding standard for proving that such a right has arisen.

The leading rule comes from Blundell v. City of West Helena, 258 Ark. 123, 522 S.W.2d 661 (1975), reaffirmed in Potter v. City of Tontitown, 371 Ark. 200, 264 S.W.3d 473 (2007). To establish a vested right, the property owner must show that, before the new restriction takes effect, the owner acted in good faith and substantially entered upon the performance of the acts necessary to accomplish the intended use. The burden is on the property owner claiming the vested right.

So two elements matter: good faith and substantial use or performance.

Good faith means more than simply spending money. In Potter, the developers claimed expenditures approaching $1 million on an RV park. But they began construction knowing their county approval was expressly conditional and could become void if Tontitown had jurisdiction. The Arkansas Supreme Court held that they did not act in good faith.

The second requirement is substantial implementation of the use. Arkansas does not treat every preliminary development activity as sufficient. Potter, quoting Blundell, explains that contemplated use, preliminary planning, preliminary contracts, purchasing property, clearing, grading, excavating, and similar preparations do not necessarily establish vested rights. Even substantial expenditures are not enough if the actual work on the land has not progressed sufficiently toward the intended use.

That aspect of Potter is particularly important for Item 26-I-56, the Conditional Use Permit ordinance the Pulaski County Quorum Court will consider during its August 11 agenda committee meeting at 6 pm at 201 Broadway in Little Rock.

In the Potter case, developers claimed nearly $970,000 in expenditures, had cleared land, spread gravel, moved dirt, prepared for electricity, and were preparing to pour concrete. However, the Arkansas Supreme Court still ruled that did not meet the substantial implementation of the intended land use element of the vested rights test.

By contrast, in the Blundell case, twenty-five mobile-home spaces were already usable or ready for use, with paved concrete roads, driveways, patios, and water and sewer lines. Those facts were sufficient to establish vested rights as to that completed portion of the project.

There is also an older line of Arkansas cases involving building permits. In Wilder v. Little Rock, 150 Ark. 439, 234 S.W. 479 (1921), later reaffirmed in Smith v. City of Arkadelphia, 336 Ark. 42, 984 S.W.2d 392 (1999), the Supreme Court held that merely obtaining a building permit does not automatically create a vested right. A permit ordinarily does not constitute a contract with the government, and property does not become exempt from subsequently enacted reasonable regulations merely because a permit was issued.

Tankersley Brothers Industries v. City of Fayetteville, 227 Ark. 130, 296 S.W.2d 412 (1956) illustrates the other side of the line. There, the owner obtained a permit, actually constructed the permitted commercial building, incurred material expenses, completed construction, and operated the business for several months with the City’s knowledge before the City attempted to restrict it. The Supreme Court held that the City was equitably estopped from forcing removal or denying the established use.

So Arkansas law does not recognize a simple rule such as:

“The developer spent a lot of money, therefore the project is vested.”

Nor is the rule:

“The developer has a permit or utility agreement, therefore the project is vested.”

The better formulation is:

A vested land-use right generally arises when, before the new restriction, the owner has acted in good faith and has substantially implemented the particular use—not merely planned, financed, contracted for, or prepared for it.

That has several consequences for Item 26-I-56.

First, an Entergy or Central Arkansas Water service agreement, interconnection agreement, facilities study, or other utility commitment would not in itself satisfy the Arkansas vested-rights test. Those instruments may demonstrate investment and reliance, but they are not themselves substantial implementation of the land use. And utility approval is legally distinct from County land-use authorization.

Second, land acquisition alone is insufficient. Blundell and Potter make that quite clear. The fact that a developer bought property intending to construct a data center does not freeze the existing land-use regime.

Third, expenditures alone are not dispositive. Potter is unusually powerful on that point because nearly $1 million of claimed expenditure did not establish a vested right.

Fourth, preliminary site work may not suffice. Clearing, grading, dirt movement, gravel roads, engineering work, and preparations for later construction can remain preliminary activity rather than substantial use.

Fifth, the right, if vested, is tied to the use actually established. Blundell is significant because the Court recognized protection only for the portion of the mobile-home park that had actually reached the substantial-use threshold. The doctrine does not transform preliminary plans for an entire future buildout into a vested entitlement.

And sixth, good faith can defeat a claim independently of expenditure. A developer who proceeds knowing that approvals are conditional, disputed, incomplete, or subject to unresolved jurisdictional questions has a much weaker vested-rights argument. That is precisely what happened in Potter.

For Item 26-I-56, this means Article 17’s approach is consistent with the leading Arkansas cases. The ordinance does not declare that vested rights can never exist. Instead, it says that preliminary County actions, utility milestones, expenditures, or similar circumstances do not, standing alone, establish a vested right, yet it expressly preserves any vested right independently established under Arkansas law. That tracks the case law much more closely than an automatic grandfathering rule based simply on contracts, expenditures, or utility progress.

One especially important implication is that “Final County Approval” in 26-I-56 and constitutional/common-law “vested rights” are related but not identical concepts. The ordinance can use Final County Approval as its chosen grandfathering line. Separately, even a project that does not qualify for that ordinance-created exemption could attempt to prove in court that Arkansas vested-rights law independently protects some portion of its development. Article 17 wisely preserves that possibility rather than attempting to legislatively extinguish it.

So if someone says, “Pulaski County cannot apply 26-I-56 because the developer already has vested rights,” the proper response is not to assume that assertion is correct. The proper questions under Arkansas law are:

* What exact land use had actually been implemented before the ordinance?

* What physical work had been substantially completed?

* Was the work merely preliminary, or was the intended use actually usable or substantially established?

* What obligations were directly tied to that use?

* Did the developer proceed in good faith?

* Did the developer know that approvals were conditional, disputed, or incomplete?

* What precise scope of the project, if any, had reached the vested-right threshold?

Those are fact-intensive questions. “Vested rights” is a legal conclusion to be proved, not a label a developer acquires merely by announcing a project, buying land, obtaining utility commitments, or spending a lot of money.

That's the way "vested rights" operates in the context of a Conditional Use Permit ordinance regulating hyperscale digital infrastructure development projects.

Buying land doesn't mean that a developer has "vested rights."

Getting site plans approved doesn't mean a developer has "vested rights."

Clearing land doesn't mean a developer has "vested rights."

Getting building permits, signing contracts, and getting permits from the Public Service Commission, Department of Environmental Quality, U. S. Army Corps of Engineers concerning wetlands, and getting letters from local fire stations doesn't mean a developer has "vested rights."

Threatening to sue doesn't mean a developer has "vested rights."

Filing a lawsuit doesn't mean a developer has "vested rights."

Spending a lot of money on a project doesn't mean a project has "vested rights."

In the words of one of my favorite preachers, the late Dr. J. Alfred Smith, "I'm trying to make it plain."

Pass the word. Let's encourage our Justices of the Peace to vote for Item 26-I-56 on August 11 and enact it on August 25, and not be intimidated by "vested rights" bogeyman scare arguments from the Chamber of Commerce, Entergy, Central Arkansas Water, and hyperscale digital infrastructure project developers.

Am I making it plain?

One County.

One Community.

One Future.

www.griffen4pulaskicounty.org