In Koontz v. St. Johns River Water Management District (U.S. Supreme Court No. 11-1447, June 25, 2013), the United States Supreme Court overruled the lower courts and extending the “takings” doctrine under the 5th Amendment to the U.S. Constitution to a broad range of local land use decisions. As a result of the decision, local governments now must justify both the nature and extent of any condition placed on a local land use decision that requires the applicant to either dedicate property for or spend money on public improvements, regardless of whether the local government approves the development. Background – Exactions under Nollan, Dolan and the City of West Linn
The 5th Amendment prohibits taking private real property for public use without compensating the property owner. In Nollan v. California Coastal Comm’n, the Supreme Court reviewed a decision in which the Coastal Commission required the property owner to dedicate a public access easement to the beach in return for a permit for residential construction on the property. The Supreme Court held that that was not a reasonable “nexus” between the public’s need for access to the beach and the property owner’s right to the residential permit – therefore, the condition violated the 5th Amendment. In Dolan v. City of Tigard, the Supreme Court held that a local condition that required the dedication of a pedestrian easement along a stream as a condition of approving a permit to expand a lighting store was disproportionate to the impact of the development. Because the condition was not “roughly proportionate” to the impact of the development, the Court held it violated the 5th Amendment.
For a number of years, the question in land use circles was whether Nollan and Dolan applied to any condition of approval or just those that require the property owner to dedicate an interest in the property. That question was answered in Oregon in West Linn Corporate Park v. City of West Linn, in which the city required the developer to make improvements to an intersection the city already owned. The developer argued the cost of the improvements was not roughly proportionate to the impacts of the development; the city argued that Dolan did not apply because the condition did not require the property owner to dedicate any property. The Oregon Supreme Court and the U.S. Ninth Circuit Court of Appeals agreed with the city, focusing on the 5th Amendment’s prohibition against taking real property, not fungible property such as money. This decision was consistent with earlier Oregon decisions such as Tualatin Hills Park and Recreation District v. Oregon Homebuilders, in which Justice Schuman wrote: “Applying that command to the appropriation of money through fees or taxes yields an incoherent result: Government can take money, but only if it pays for it—that is, only if it gives the money back.”
In Koontz, a Florida property owner applied to develop three acres of a 15-acre property that was substantially constrained by wetlands. The Water District agreed, but only if the property owner mitigated impact to the wetlands by improving other wetlands located nearby that the District already owned. Alternatively, the property owner could limit the development to one acre and dedicate the remainder to the Water District. The property owner rejected both alternatives and the Water District denied the permit. The owner then sued, arguing that the proposed conditions violated the 5th Amendment.
The Florida Supreme Court rejected Koontz’s claims. First, it held that because the permit was denied, no property was ever taken. Second, it held that a requirement to spend money on off-site mitigation did not violate the 5th Amendment, which only applies to taking real property and money is not real property. The U.S. Supreme Court rejected both conclusions and held that the decision to deny the permit violated the 5th Amendment.
With respect to denying a permit, the Court said that it doesn’t matter whether the local government approves or denies the permit. “The principles that undergird Nollan and Dolan do not change depending on whether the government approves a permit on the condition that the applicant turn over property or denies a permit because the applicant refuses to do so.” On the question of whether a requirement to spend money falls under the 5th Amendment, the court found that it does. The Court found that the requirement to spend money burdens the ownership of the land in the same way as a lien against the property. “[We] hold that so-called ‘monetary exactions’ must satisfy the nexus and rough proportionality requirements of Nollan and Dolan.”
The decision in Koontz returns a city to the days before the West Linn case clarified city obligations under Dolan. For years after Dolan was decided in 1994, Oregon cities questioned whether its’ rough proportionality requirement applied to conditions of approval that did not require the dedication of private property, but routinely did the analysis analysis out of caution. In the abstract, returning to this practice may not be overly difficult, but Koontz also places the b burden on the city to demonstrate that a condition of approval is roughly proportionate to the impact of the development; it is not the applicant’s burden to demonstrate that it is not. Moreover, it is not at all clear how a city should apply Nollan and Dolan when it denies a permit, but the answer will undoubtedly involve very carefully drafted findings.