Alert June 28, 2013

Supreme Court Expands Scope of Fifth Amendment Protection Against Land Use Exactions

Summary

The Supreme Court’s June 25 decision in Koontz v. St. Johns River Water Management District expands the scope of Fifth Amendment protection of landowners against land use exactions.  Koontz makes it clear that the government may not  properly demand that a landowner offer “mitigation” – including monetary payments – absent a “nexus” and “rough proportionality” between the mitigation and proposed land use impacts.  Koontz, however, does not resolve several questions, including how to determine when the government crosses the line and what remedies a landowner may have when the government does so.

In Koontz v. St. Johns River Water Management District, the U.S. Supreme Court, by a 5-4 majority, ruled that the prohibition against land use exactions absent a “nexus” and “rough proportionality” between the effects of the proposed land use and the government’s demand, applies not only to permit conditions that require the conveyance of real property interests, but also to situations in which:

(i) permits are denied; and
(ii) the mitigation the landowner refused to provide is monetary.

In Koontz, the landowner had applied to Florida’s St. Johns River Water Management District (“District”) for permits to build on 3.7 acres of his 14.9 acre property, which was classified as wetlands.  Under Florida’s Wetland’s Protection Act, landowners who wish to build on wetlands must offset any environmental damage they cause by creating, enhancing or preserving wetlands elsewhere. The landowner had offered to deed a conservation restriction on approximately 11 acres of his property, but the District deemed this mitigation to be insufficient. 

The District informed the landowner that it would grant the necessary permits only if he agreed to either (i) reduce the size of his proposed development to one acre and convey to the District a conservation easement on the remainder of the property, or (ii) build on the 3.7 acres and convey to the District a conservation easement on the remainder of his property and pay for improvements on other municipal land several miles away. The landowner sued the District in state court under a Florida statute that allowed property owners to seek monetary damages for “an unreasonable exercise of the state’s police power constituting a taking without just compensation.” 

The Florida trial court ultimately ruled in the landowner’s favor, finding that the mitigation the District sought from him violated the nexus and rough proportionality requirements established in Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987), and Dolan v. City of Tigard, 512 U.S. 374 (1994).  The Florida Supreme Court, however, reversed, ruling that Nollan and Dolan apply only where the government imposes improper conditions in a permit.  Alternatively, the Florida Supreme Court ruled that Nollan and Dolan do not apply to monetary exactions.

Supreme Court Rejects ‘Hobson’s Choice’

The Supreme Court rejected the Florida Supreme Court’s view of Nollan and Dolan, explaining that those cases allow permitting authorities to require only mitigation that is reasonably connected to addressing project impacts and prohibit the government from “leverag[ing] its legitimate interest in mitigation to pursue governmental ends that lack an essential nexus and rough proportionality to those impacts.”

The Court ruled that the permitting authority may not provide the landowner the Hobson’s choice of either building on a significantly smaller portion of his property than he proposed or pursuing the project and offering mitigation – including monetary payments – that lacks a “nexus” and “rough proportionality” to project impacts.  Any other result, the Court reasoned, would enable permitting authorities to force a permit applicant to either surrender an easement that is unconnected to the project’s impacts or to make a payment equal to the easement’s value.

Under the “unconstitutional conditions doctrine,” Constitutional rights are vindicated by preventing the government from coercing people into giving them up.  “Extortionate demands” by government permitting authorities for mitigation payments that fail the “nexus” and “rough proportionality” tests “frustrate the Fifth Amendment right to just compensation, and the unconstitutional conditions doctrine prohibits them,” even where the permit is denied and no formal exaction is actually imposed as a permit condition. 

The Court took care to note, however, that its decision “does not affect the ability of governments to impose property taxes, user fees, and similar laws and regulations that may impose financial burdens on property owners,” and that “[w]e need not decide at precisely what point a land-use permitting charge denominated by the government as a ‘tax’ becomes ‘so arbitrary . . . that it was not the exertion of taxation but a confiscation of property.”  Such issues remain for another day.

Some Questions Remain Unanswered

There are a number of other questions that the Court chose not to answer, including “how concrete and specific a demand [by the permitting authority] must be to give rise to liability under Nollan and Dolan.” Nor did the Court identify what remedies (including damages) may be available to a permit applicant who is the victim of an effort by the permitting authority to extract improper concessions or what procedures must be followed to obtain any such remedy. 

Resolution of these issues must also be left to future decisions.  However, in extending Nollan and Dolan to encompass efforts by permitting authorities to induce landowners to offer concessions, Koontz reduces (although it certainly does not eliminate) the substantial leverage that the government has over permit applicants.