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In Re: Appeal of Costco

July 31, 2012

IN RE: APPEAL OF COSTCO WHOLESALE CORPORATION FROM THE DECISION DATED DECEMBER 30, 2010, OF THE ZONING HEARING BOARD OF MONTGOMERY COUNTY APPEAL OF: COSTCO WHOLESALE CORPORATION


The opinion of the court was delivered by: Mary Hannah Leavitt, Judge

Argued: May 15, 2012

BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, Judge HONORABLE MARY HANNAH LEAVITT, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge

OPINION BY JUDGE LEAVITT

Costco Wholesale Corporation (Costco) appeals an order of the Court of Common Pleas of Montgomery County (trial court) holding that Costco's proposal to install a gasoline filling station adjacent to its retail store was not permitted as an accessory use. The trial court construed the provision of the Zoning Ordinance that permits "shops, stores or other indoor facilities" for retail sales not to include a gasoline service station, which is an outdoor facility. Because stand-alone gasoline filling stations are not permitted as of right, the trial court held they could not be permitted as an accessory use. Discerning no error in the trial court's holding, we affirm.

On May 8, 2009, Costco wrote to the Zoning Officer for Montgomery Township proposing to install 16 gasoline fueling pumps in the parking lot next to its existing store, which it believed to be permitted as an accessory use. The Zoning Officer responded that the Expressway Corridor Preservation Overlay District (Overlay District), where Costco's store is located, permits indoor retail sales, but not outdoor retail sales, such as gasoline filling stations. MONTGOMERY TOWNSHIP ZONING ORDINANCE of 1952, AS AMENDED IN 1959 (ZONING ORDINANCE), §230-199.B(2)(a); Reproduced Record at 490a (R.R. ___). The Zoning Officer also rejected Costco's proffered theory that the outdoor sale of gasoline was a use subordinate and customarily incidental to an indoor retail store. Costco appealed the Zoning Officer's determination to the Zoning Hearing Board, requesting a reversal of the Zoning Officer's decision or, in the alternative, a variance. The two requests were separately litigated. This appeal concerns the Zoning Officer's denial of Costco's request to build a gasoline filling station as a permitted use accessory to its retail store.

The Board convened a hearing on Costco's variance application; the Township did not appear. The Board denied Costco's application, and Costco appealed to the trial court.*fn1 Next, the Board convened a hearing on Costco's appeal of the Zoning Officer's determination. Costco submitted the record developed at the variance hearing to support its appeal. A summary of that record evidence follows.

Kirk Clauss, a consulting engineer, testified as an expert witness for Costco. He explained that Costco's existing retail store is located on 9.44 acres of land and is surrounded by a parking lot. Adjacent to the Costco store are several other retail stores, including a bank and restaurant. Costco proposes to eliminate 84 parking spaces to construct a canopy with four fuel bays, which will house 16 fueling positions. The pumps will be self-service, but an attendant will be present in a small building to address customer problems and issues. Clauss explained that traffic flow in the parking lot will be reconfigured so that vehicles will travel in a one-way pattern through the fueling stations.

Jeff Rutter, who does real estate development and planning for Costco, also testified. He explained that he has worked at 64 Costco stores, and 59 of them provide gasoline sales. Costco has been installing gas stations at its retail stores since 1999. It has been so successful that Costco's major competitors, Sam's Club and BJ's Wholesale, have followed suit. In fact, the Sam's Club and BJ's Wholesale located closest to Costco each provide their member customers with retail gasoline. Neither of these retail stores is located in the Overlay District.

Rutter presented a demonstrative exhibit that illustrated the progression of Costco's business plan of adding gasoline sales to its existing stores. It showed that 77% of Costco stores now include gasoline sales at their retail store sites, and 19% of Costco customers use the service. The exhibit presented statistics on the growing trend of "big box" stores adding gasoline sales to their existing stores. Rutter testified that 55% to 73% of membership warehouse club chains, such as Costco, now include gasoline sales. Rutter testified that Costco has eight retail stores in Pennsylvania, and four of them provide gasoline service.

Costco's final witness was John Harter, a licensed civil engineer, who was offered as an expert witness in traffic engineering and design. He testified about his traffic and parking study for the Costco gasoline filling station. He did not believe that Costco's proposed filling station would generate more traffic because it would be available only to Costco members, who were not likely to make a special trip for gasoline but, rather, would combine that purchase with other shopping errands at the Costco store. The filling station would be configured to provide a one-way traffic flow with sufficient space for queuing. Costco's parking lot has 723 spaces and is only 60% full at peak hours; the elimination of 84 parking spaces would leave plenty of parking for the store.

In addition to receiving the evidentiary record from the variance hearing, the Zoning Board heard oral argument from Costco and from the Township. The Board denied Costco's appeal of the Zoning Officer's determination that Costco's proposed gasoline filling station was not authorized in the Overlay District.

In its decision, the Zoning Board expressed concern that Costco's proposed use would attract additional motor vehicles and eliminate parking in an already congested area. It believed that the proposed traffic pattern for Costco's gasoline filling station could impede traffic flow in the parking lot. However, the Zoning Board disposition was based upon its construction of the Zoning Ordinance, which it construed not to permit gasoline filling stations in the Overlay District.

The Board explained that accessory uses were permitted where (1) the use is subordinate to the permitted Overlay District use, (2) the use is customarily incidental to the permitted Overlay District use, and (3) the use complies "with the standards applicable to the permitted use to which they are accessory." ZONING ORDINANCE, §230-199.F; R.R. 493a. The Board reasoned that the "standard" applicable to the permitted use of retail sales was that the sales be conducted in an "indoor" facility. Because the sale of gasoline takes place outdoors, that use would not comply with the standard for a permitted retail use. The Board supported this conclusion by reviewing Section 230-199.B(2)(e)[1] of the Zoning Ordinance, which permits auto repair facilities in the Overlay District as "alternative retail" uses by special exception. R.R. 491a. However, that provision specifically excludes gasoline filling stations as an "alternative retail use."*fn2 The Zoning Board reasoned that if gasoline filling stations are not permitted as a special exception, it follows that they are not permitted as of right, as either a principal or accessory use. Neither party had referred to Section 230-199.B(2)(e)[1] in its argument.

Costco appealed to the trial court, and it affirmed. The Zoning Ordinance requires a proposed accessory use to comply with the standards applicable to the permitted use to which it is accessory. The trial court held that Costco's proposed sale of gasoline did not meet the standard that retail uses be conducted in "indoor facilities" because a gasoline service station is conducted outdoors. ZONING ORDINANCE, §230-199.B(2)(a); R.R. 490a (emphasis added). The trial court rejected Costco's argument that a drive-through facility, such as a gasoline filling station, is accessory to Costco's store in the same way that a restaurant's drive-through window, which is specifically allowed in the Overlay District, is accessory to a permitted sit-down restaurant. The trial court reasoned that the drive-through window is predominately indoors because the order is taken from a person sitting inside the restaurant; the food is prepared inside; and the payment is taken by a cashier sitting inside. The customer remains inside his vehicle for the entire transaction. By contrast, at a self-service gasoline filling station, the attendant is outside; the pumps are outside; and the customer must leave his vehicle to pump the gas and pay for it.

The trial court agreed with Costco that the Zoning Board should not have considered Section 199.B(2)(e)[1] of the Zoning Ordinance in its analysis because neither party had done so. The trial court held, however, that the Zoning Board's error was harmless because the Board did address the issue that was raised by Costco, i.e., whether a gasoline filling station is a permitted accessory use in the Overlay District.

Costco appealed to this Court.*fn3 It raises two issues for our review: (1) whether the sale of gasoline is a permitted accessory use under the Zoning Ordinance and (2) whether the Board committed an abuse of discretion or an error of law in addressing the issue of a special exception.

The issue is the proper interpretation of the Zoning Ordinance. The Zoning Ordinance identifies five categories of permitted uses in the Overlay District, and one category is a retail use. The Zoning Ordinance then specifies the retail uses permitted as of right and those authorized as a special exception or a conditional use. That list ...


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