"In Morsman II, we described the annexation as follows:
"`[T]he annexation is of the "cherry stem" variety, so called because the bulk of the annexed property (the "cherry") is connected to the city by an annexed, narrow, 300-foot section of the Warm Springs Highway (the "stem"). * * * Much of the annexed area is occupied by an already developed industrial park, the city's sewage treatment plant, its airport, and some residential properties, including petitioners' [Morsmans'] 60-unit low income mobile home park. Some residential developments adjacent to the `stem' portion of the Warm Springs Highway are not included in the annexed territory and remain outside of the city. The newly added area is within the city's urban growth boundary.'
"191 Or.App. at 151-52.
"The city sought to annex the property through a process that does not require an election, generally referred to as the `triple majority' method of annexation. See ORS 222.170(1). Under that process,
"`[t]he legislative body of the city need not call or hold an election in any contiguous territory proposed to be annexed if more than half of the owners of land in the territory, who also own more than half of the land in the contiguous territory and of real property therein representing more than half of the assessed value of all real property in the contiguous territory consent in writing to the annexation of their land in the territory and file a statement of their consent with the legislative body * * *.'
"Id. The city obtained consents from various property owners and, on February 25, 2003, enacted an ordinance annexing the property.
"Petitioners Phillip and Brigitte Morsman, who owned land within the area to be annexed, * * * then filed the initial appeal to LUBA, challenging the city's enactment of the ordinance. The Morsmans raised three overarching arguments. First, they asserted that the city had failed to provide requisite notice and hearing pursuant to ORS 197.763, which governs notice and hearing requirements for quasi-judicial land use decisions. The city did not dispute that appropriate notice had not been given but argued, instead, that its failure in that regard did not require reversal because the Morsmans had, in fact, attended a public hearing pertaining to the annexation and had raised objections at that hearing. LUBA concluded that the lack of notice under ORS 197.763 required a remand[.]
"* * * * *
"Morsman I, 45 Or LUBA at 20.
"Second, the Morsmans, invoking [Portland Gen. Elec. Co. v.] City of Estacada, [194 Or. 145, 241 P.2d 1129 (1952)], raised a battery of challenges to the `reasonableness' of the cherry-stem annexation.
LUBA rejected each of those arguments. Morsman I, 45 Or. LUBA at 21-26.
"Finally, the Morsmans argued that the city had offered improper inducements, both in the form of property tax advantages and land use preferences, to property owners who consented to annexation. The Morsmans contended that the city's alleged selective use of such quid pro quo arrangements was unconstitutional under the analysis of Hussey v. City of Portland, 64 F.3d 1260 (9th Cir.1995), cert. den., 516 U.S. 1112, 116 S.Ct. 911, 133 L.Ed.2d 843 (1996). LUBA concluded that the record was insufficient to establish that the city had selectively and improperly offered property tax advantages. However, LUBA further determined that the Morsmans had presented credible evidence that the city had improperly offered land use regulation preferences as an inducement for securing some property owners' consents to annexation. Accordingly, LUBA remanded for the city either to explain why those arrangements were not improper or to `revise those agreements so they are consistent with Hussey.' Morsman I, 45 Or LUBA at 31. LUBA's decision in Morsman I was rendered on July 7, 2003.
"The Morsmans then petitioned for judicial review in this court, arguing that LUBA had erred in rejecting their `reasonableness' arguments based on City of Estacada. In Morsman II, we held that, until the city had held the hearing required by LUBA's remand, `no definitive conclusion as to reasonableness is possible.' 191 Or.App. at 155, 81 P.3d 711. Accordingly, we reversed LUBA's decision to the extent that it had rejected the Morsmans' `reasonableness' arguments and, by extension, broadened the scope of LUBA's remand to the city. Id. (`LUBA's conclusion was, therefore, at least premature; before deciding whether the annexation is reasonable, LUBA must remand to the city for a determination as to whether the annexation meets statutory land use criteria.'). Our decision in Morsman II was rendered on December 9, 2003.
"Meanwhile—even before LUBA issued Morsman I, and long before we issued Morsman II—the city had not been inactive. Rather than awaiting the outcome of the Morsmans' challenges—and apparently in an effort to cure its noncompliance with ORS 197.763—the city held a series of public hearings on the annexation between June 24, 2003 (two weeks before Morsman I issued) and September 23, 2003. Several aspects of those proceedings are pertinent to our review and, particularly, to our reversal of LUBA's determination that petitioners waived their constitutional challenges to the `triple majority' method of annexation.
"First, the city gave notice of the June 24, 2003, hearing pursuant to ORS 197.763, and both the Morsmans and petitioner Shepherd, who had not been a party to Morsman I, received the notice and appeared. Second, although neither the Morsmans nor Shepherd argued on June 24 that triple-majority annexation was unconstitutional, that hearing was continued, with the record being held open. Third, at a subsequent hearing on August 26, 2003, the Morsmans did, for the first time, raise the argument that ORS 222.170 is unconstitutional. Thereafter, at a continuation of that hearing, on September 23, 2003, petitioner Shepherd specifically endorsed and adopted all arguments raised by the Morsmans. At that same September 23 hearing, the city council received a staff report that addressed at length the question of whether the triple-majority annexation method violated Article I, section 20, of the Oregon Constitution, as well as the question of whether the inducements for the consents violated the Fourteenth Amendment to the United States Constitution. Fourth, also on September 23, the city council voted to alter the area to be annexed, excluding the Morsmans' property; Shepherd's property continued to be included in the annexed area.
"On October 1, 2003, while Morsman II was still pending before this court, the city issued its decision approving the modified annexation. Petitioners timely appealed that decision to LUBA.
"As noted above, our remand in Morsman II occurred in early December 2003. LUBA then remanded the matter to the
city, which, on January 13, 2004, reopened the public hearing on the annexation matter. The city attorney noted that, given the matters that had been determined in the city's October 1 decision and the scope of LUBA's remand following Morsman II, the hearing should address two issues: the `reasonableness' inquiry framed by Morsman II and the constitutionality of the inducements the city had offered to obtain consents to the annexation. The Morsmans and Shepherd appeared at the January 13 hearing. The city council continued that public hearing until January 27, 2004. At that time, the council voted to adopt various findings of fact and conclusions of law and approved the annexation ordinance. Petitioners timely sought LUBA review of that decision.
"LUBA subsequently entered an order consolidating the appeal of the city's January 27, 2004, decision with the previously filed appeal from the October 1, 2003, decision. In the consolidated appeals, petitioners raised five assignments of error, arguing that (1) the triple-majority method of annexation is unconstitutional; (2) the city had failed to comply with procedures for adopting legislative revisions to the comprehensive plan before approving the annexation; (3) and (4) the city had improperly secured consents to annexation both through improper property tax inducements and improper assurances as to future land use regulation preferences; and (5) the annexation violated the `reasonableness' standards of City of Estacada.
"In Morsman v. City of Madras, 47 Or LUBA 80 (2004) (Morsman III),...
