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July 03, 2013
Supreme Court rules for developers

The ability of permitting authorities to place demands on permit applicants who want to develop property appears to have been limited by a 5-4 decision by the U.S. Supreme Court.  In Koontz v. St. Johns River Water Management District, the high court found that requirements established in two earlier cases (Nollan v. California Coastal Commission and Dolan v. City of Tigard)—that the demands a government agency places on a permit applicant must be have a “nexus” and “rough proportionality” to the proposed land use—were not being met by the water district.  Accordingly, the majority remanded the case for further proceedings.

Offer and counteroffer

The petitioners, Coy Koontz, Sr., deceased, and his son, Coy Koontz, Jr. (Koontz), own 14.9 undeveloped acres near Orlando, Florida.  The state classifies the area containing the property as a wetlands.  The petitioners applied to the St. Johns River Water Management District (District) for a permit to develop 3.7 acres of the property and offered to foreclose any possible future development of the approximately 11 remaining acres by deeding to the District a conservation easement on that portion of the property.

The District found the offer inadequate.  In a counterproposal, the District said it would approve development only if Koontz agreed to one of two conditions.  First, Koontz must confine development to 1 acre and deed to the District a conservation easement on the remaining 13.9 acres.  Alternatively, Koontz could proceed with development on the 3.7 acres and deed a conservation easement to the district for the remaining land provided Koontz agreed to hire contractors to make improvements to District-owned land several miles away.  The District named several specific projects Koontz could undertake on the District’s land, but also said it would look favorably on equivalent alternative projects proposed by Koontz.

Koontz sued on the grounds that the District was violating their constitutional right to be justly compensated for a government taking as specified by the takings clause of the Fifth Amendment to the Constitution.  In fact, since no taking actually occurred, the argument was that the District was making an excessive demand.  A Florida trial court ruled for Koontz, stating that the District had not met the “nexus” and “rough proportionality” requirements; a Florida district court affirmed.  However, the state Supreme Court reversed, stating that the effective demand for money made by the District could not give rise to a claim under Nollan and Dolan.

“Extortionist demand”

Writing for the U.S. Supreme Court majority, Justice Alito disagreed with the Florida high court’s contention that Nollan and Dolan were inapplicable in the case.  

“Under Nollan and Dolan the government may choose whether and how a permit applicant is required to mitigate the impacts of a proposed development, but it may not leverage its legiti­mate interest in mitigation to pursue governmental ends that lack an essential nexus and rough proportionality to those impacts,” wrote Alito.

Moreover, Alito described the District’s counteroffer as an “extortionist demand for money.”

“Extortionate demands for property in the land ­use permitting context run afoul of the Takings Clause not because they take property but because they impermissibly burden the right not to have property taken without just compensation.”   

Towns must meet tests

In a dissent, Justice Kagan wrote that the majority “runs roughshod over Eastern Enterprises v. Apfel, 524 U. S. 498 (1998), which held that the government may impose ordinary financial obligations without triggering the Takings Clause’s pro­tections.

“The boundaries of the majority’s new rule are uncertain. But it threatens to subject a vast array of land-use regulations, applied daily in States and localities throughout the country, to heightened constitutional scrutiny,” Kagan writes. “Cities and towns across the nation impose many kinds of permitting fees every day. Some enable a government to mitigate a new development’s impact on the community, like increased traffic or pollution—or destruction of wetlands.  Others cover the direct costs of providing services like sewage or water to the development.  Still others are meant to limit the number of landowners who engage in a certain activity, as fees for liquor licenses do.  All now must meet Nollan and Dolan’s nexus and proportionality tests.  The Federal Constitution thus will decide whether one town is overcharging for sewage, or another is setting the price to sell liquor too high.  And the flexibility of state and local governments to take the most routine actions to enhance their communities will diminish accordingly.”

Click here for the U.S. Supreme Court’s opinion in Koontz v. St. Johns River Water Management District.

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