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been able to build single-family residences on the Elbow Lake
property even in the absence of the stricter Federal wetlands
regulations contained in the 1989 Manual and MOA. We agree with
respondent's first argument to the extent that, in substantial
part, it was the zoning limitation that restricted the intended
use of the property. In that regard, the 1989 Manual and the MOA
would have had a relatively small effect, if any, on the property
when used for agricultural purposes. In any event, petitioner
has not advanced an alternative theory or provided us with a
factual predicate for a finding that the 1989 Manual and the MOA
caused a reduction in value for agricultural purposes.
Lakewood faced two obstacles to its residential development
project: (1) Local zoning law, and (2) Federal wetland
regulations. The Elbow Lakes property was zoned as an
agricultural district at the time Lakewood acquired it. In 1988,
Lakewood applied for rezoning of the property from agricultural
to residential. After the City Council initially approved the
rezoning, the rezoning was overwhelmingly defeated in a voter
referendum in 1989, the year that Lakewood claimed the loss
deduction on the property. Lakewood has not applied for rezoning
of the property to residential since this unsuccessful attempt,
and the Elbow Lake property had retained its agricultural zoning
up to the time of trial.
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