Earlier this week, the U.S. Court of Appeals for the Sixth Circuit issued a decision in Tree of Life Christian Schools v. City of Upper Arlington concerning a religious school’s RLUIPA equal terms challenge.  The decision is the third time in the past five years that the Sixth Circuit has considered the dispute (our prior posts about the case are available here and here).  The recent decision is noteworthy because the Sixth Circuit created a new test (or, at least, a new name for an existing test) to examine claims brought under RLUIPA’s equal terms provision.  Under the equal terms provision, “No government shall impose or implement a land use regulation in a manner that treats a religious assembly or institution on less than equal terms with a nonreligious assembly or institution.”  42 U.S.C. § 2000cc(b)(1).  Courts considering equal terms claims have struggled with what constitutes “equal” treatment.  The Sixth Circuit noted that “This language provides no guideposts for what Congress meant by the term ‘equal.’”  According to the Sixth Circuit, a plaintiff may prevail on an equal terms challenge if it identifies a nonreligious use that is similarly situated to a proposed religious use based on “legitimate zoning criteria” with respect to the zoning regulation at issue.  The Sixth Circuit’s decision is also significant because it determined that revenue generation, even in the form of taxes levied against property users and their employees, is a legitimate zoning criteria.  In applying this standard, the Sixth Circuit rejected Tree of Life Christian School’s (“TOL”) equal terms challenge for failing to establish that a nonreligious use was treated better than TOL’s proposed religious school.

In 2009, TOL bought a 254,000 square-foot office building – the largest in Upper Arlington – from AOL/Time Warner (the “Property”).  TOL operates a private Christian school for more than 500 students and has 150 employees across three campuses throughout the Columbus, Ohio metropolitan area.  TOL sought to consolidate its campuses on the Property.  Under the purchase and sale agreement, TOL could cancel the purchase if before closing it was unable to obtain approval to rezone the Property to allow for the operation of a school (a use that was prohibited, religious or secular).  Before purchasing the Property, TOL filed a conditional-use application to use the Property as a “church” (a permitted use) with an ancillary school.  Upper Arlington denied the application because in its estimation the primary use of the Property would be as a school, a prohibited use, and not as a church.  TOL purchased the Property even though the Property was not rezoned and the conditional-use application was denied.

Upper Arlington’s Master Plan notes the need for the creation of “new revenue” in order to “meet current capital needs and support its current level of services.”  The Master Plan also notes that commercial office use, which accounts for less than 5% of the City’s land, provides more revenue to the City than any other land use.  It also singles out personal income taxes as being an important source of revenue and states that “every effort will be made to broaden and expand the City’s employment base in order to increase these tax revenues.”  AOL/Time Warner’s use of the Property generated significant revenue for Upper Arlington.  In 2001, AOL/Time Warner’s employees paid 29% of Upper Arlington’s overall income taxes.  Upper Arlington’s decision to exclude schools from this commercial zone was intended to advance revenue generation as explained in the Master Plan.

The issue before the Sixth Circuit was whether Upper Arlington violated RLUIPA’s equal terms provision by denying the proposed school use.  In arriving at the “legitimate zoning criteria” test, the Sixth Circuit reviewed each of the tests used by other courts, noting that they generally require that comparators be similarly situated with regard to the specific zoning regulation at issue.  (For example, the Third Circuit’s “regulatory purpose” test and the Seventh and Ninth Circuits’ “accepted zoning criteria” test).  Relying on the Seventh Circuit’s decision in River of Life Kingdom Ministries v. Village of Hazel Crest, the Sixth Circuit found that revenue maximization is a legitimate zoning criteria to compare religious and nonreligious uses under an equal terms analysis.

TOL argued that there were three nonreligious uses treated better than religious schools in the subject zone: (a) daycares; (b) partially used offices; and (c) publishers and outpatient-surgery centers.  The Sixth Circuit examined whether these comparators generated more revenue for Upper Arlington than TOL’s proposed religious school.  It ruled that a partially used office was not a valid comparator because an equal terms comparison must be evaluated based on “full usage.”  As for publishers and outpatient-surgery centers, the court noted that TOL’s experts did not consider them, so neither did the court.  The daycare use was the closest that TOL came to identifying a valid comparator.  But the Sixth Circuit credited Upper Arlington’s expert witnesses over TOL’s.  The court found that TOL failed to present credible evidence that nonprofit daycares are similarly situated to the proposed religious school in terms of capacity to generate revenue.  Upper Arlington’s former Director of Finance and Administrative Services testified that for-profit daycares generate $4.77 per square foot in annual revenue for the city as compared to $0.62 that TOL’s proposed religious school would generate.  Based on this, the court concluded that daycares generate far more revenue on a square foot basis than TOL, and denying the religious school did not run afoul of RLUIPA’s equal terms provision.