## Facts

- In 1973, the City of Hailey and a developer (predecessor to Sprenger, Grubb & Associates, Inc. (SGA)) entered a development agreement for a master-planned residential–recreational development covering about 654 acres.
- The master plan included a “small commercial area” intended as a neighborhood convenience-shopping center.
- A 12.6-acre tract within the development was zoned Business (B), while much of the surrounding property was zoned General Residential (GR).
- The development agreement required development in “substantial compliance” with the master plan and contemplated City action needed to implement the plan.
- In 1993, after hearings and planning recommendations, the City adopted Ordinance No. 623, rezoning the 12.6-acre tract from Business (B) to Limited Business (LB).
- The City stated the rezoning was intended to align with its comprehensive plan by discouraging intensive retail uses outside the central business district.
- LB zoning continued to allow multiple commercial uses, including convenience-oriented uses, but restricted more intensive uses permitted in B zoning.
- SGA challenged the rezoning, claiming it breached the development agreement by deviating from the master plan and impairing SGA’s development rights.

## Issues

1. Whether rezoning the 12.6-acre tract from Business (B) to Limited Business (LB) breached the 1973 development agreement requiring “substantial compliance” with the master plan.
2. Whether the change in permitted uses under LB zoning materially conflicted with the master plan’s contemplated neighborhood commercial component.
3. To what extent a municipality’s zoning authority may be limited by contractual commitments in a development agreement.

## Decision

- The Idaho Supreme Court affirmed the district court’s judgment for the City.
- The Court held that the B-to-LB rezoning did not breach the development agreement because it remained in substantial compliance with the master plan.
- The Court concluded LB zoning preserved the neighborhood-scale, convenience-oriented commercial uses contemplated by the master plan, even if it reduced the intensity of potential commercial development.
- The Court upheld the rezoning as a valid exercise of municipal zoning authority consistent with planning objectives reflected in the City’s comprehensive plan.

## Legal Principles

- A development agreement requiring “substantial compliance” with a master plan does not necessarily freeze a specific zoning classification; the controlling question is whether the essential development concept contemplated by the plan remains feasible.
- A municipality retains zoning authority under its police power despite a development agreement, so long as zoning changes do not effectively nullify the basic scheme promised by the agreement.
- A downzoning that restricts some uses but leaves reasonably comparable uses consistent with the master plan’s intended commercial function may be treated as substantial compliance rather than a contract breach.

## Conclusion

The court upheld Hailey’s rezoning of the 12.6-acre parcel from Business to Limited Business because the development agreement required only substantial compliance with the master plan, and the revised zoning still allowed the neighborhood convenience-commercial uses the plan contemplated.


Sprenger, Grubb & Assocs., Inc. v. City of Hailey, 903 P.2d 741 (Idaho 1995)