Sunday, February 01, 2009

5th DCA - Landmark Takings Case: Off Site Exaction a Taking under Nollan/Dolan Where Applicant Refused Permit Due to Condition

This one came out in early January, and I'm surprised that I didn't hear the gnashing of teeth in Palatka all the way down here in Sarasota.

In what is now pretty much an epic, decade long battle, the 5th DCA in St Johns Water Management District v. Koontz, handed the water management district a major defeat and, in the process, put all government entities on notice that predatory exaction policies may create takings liability.

In the very short version, the water management district conditioned a permit for Koontz property to require significant off-site mitigation in the form of improving drainage facilities. The mitigation was supposedly to offset impacts to a small portion of the property that is within a "Riparian Habitat Protection Zone". Koontz refused to accept the condition, and the District denied the permit.

I don't think a short recap can do the facts justice; you have to read the case - and the four other opinions that have been generated on the way. The long and the short of it is that the circuit court didn't buy that the off site exaction was in any way rationally related to any demonstrable impacts to the protected property, and found that that the exaction violated the Nolan/Dolan nexus and was therefore not just an unconstitutional condition, but one that resulted in a taking of Koontz' property.

The District appears to have had three arguments: First, that the Nollan/Dolan rule didn't apply because (1) only money, not land, was involved, and (2) the exaction was offsite. The court pretty quickly (and I think correctly) did away with that argument.

The second claim was that Koontz couldn't complain because he refused the permit. This took a little longer to address, and its the part that everyone needs to read very carefully.

The third argument went something like "we could have denied the permit anyway, so there wasn't any damages." This took the court a long time to address, and completely got the dissent tangled up. The majority held, in effect, that once the government put the demand on the table, it was stuck with it. But the court got tangled up in the "right to the permit" argument in a way that reflects wrong thinking.

Everyone seems to have taken the position that the District could have denied the permit and there would have been no issue; that Koontz had "no right to the permit." But that's not really true. In Florida, there's a right to use property in any lawful manner. When the government adopts regulations and requires permits, it does not remove the underlying right - it subjects it to regulation. That is, the existence of regulations on the use of land does NOT convert the right to use land into a license from the government - something that the landowner is allowed to do by the grace of the government.

So while it's one thing to suggest that a property owner must demonstrate compliance with regulations, it's another thing altogether to suggest that a local government or agency has the right to simply deny permits where the criteria are otherwise met. And if the criteria are not met, the government really has an obligation to be able to state specifically why not, so that the landowner can comply.

Recognition of this fundamental aspect of the regulation of land might have saved both the majority and the dissent a great deal of confusion and circular logic.

And to anyone who thinks this opinion goes way too far, I suggest you read the other Koontz opinons to get a flavor for what the District has been demanding and the fact that it has been held repeatedly to be unjustified - this history plays out what would happen in many concurrency and environmental exaction cases if the landowner had the time and money to keep fighting.

This case has huge and immediate implications for every land use permitting process, especially those where the local government routinely extracts commitments far in excess of what would legally be proper in order.

But perhaps most important, this may discipline the "concurrency moritoria" extortion racket that many local governments have been practicing. Core issue: many local governments have adopted levels of service - particularly for roads- that they cannot maintain and achieve based on the adopted CIP (which now should be "financially feasible" meaning that LOS's will be met - but they are not). This creates "concurrency moratoria" - areas where the planned improvements in the 5 year (or long range) CIP don't create enough capacity to allow development that is otherwise consistent with the comp plan and LDRs to be approved.

The concurrency management system itself generates and proves the "demand" for the excessive exaction - the ordinances already say that the development can't be approved without concurrency, and the concurrency system requires a proportionate share or development agreement that provides all the improvements needed, whether or not it's proportionate.
And most governments have not adopted "proportionate share" concurrency regulations that address it and guarantee that the development only has to pay a proportionate share of the needed improvements. Lots of reasons, but mostly that they want to create a moratorium and address it through - ta dah - a development agreement or a condition in a development approval that requires the developer to pay more than a proportionate or fair share.

After this decision, any local government that has been doing that - or does it in the future- is at significant risk. Back in the early 90's, everyone was convinced that this risk would be from "temporary concurrency moratoria" under a combination of Lucas and First English. Now, they're back under Nolan/Dollan and the clear over-reaching of the government.

Different case, same "facial vs as applied" problem

In Shands et al v. City of Marathon, the 3d DCA applied the same mistaken analysis to a takings claim against the city, under facts that provide an additional twist.

That twist is that the landowners didn't start the rights determination process till later, and got caught up further when the City incorporated and adopted and amended the County's land use regulations.

I think there may some different defenses and issues than were presented in the Monroe case ---- in particular, what happens if property is subjected to a limitation by one government agency or local government, then the same restriction is reapplied by another jurisdiction - does a new cause of action get created? But that question is totally buried in the larger mistake regarding facial vs as applied challenges.

3d DCA gets Right Result but Wrong Analysis in Facial v As Applied Taking Case

In Collins et al v Monroe County, the 3d DCA absolutely correctly overturned a trial court decision on summary judgment that held that a takings challenge was a "facial challenge" and was untimely filed based on the 4 year statute of limitations.

The problem is that in the process, the court totally mangled the difference between a "categorical" taking and an "balancing test" taking, confusing them with facial vs. as applied takings. The Court held that a challenge based on the deprivation of "all economic use" of the property was a facial taking and would be subject to the four year statute from the time of adoption, but that these were claims of substantial deprivation of value and the time ran from the final application:

In an as-applied claim, the landowner challenges the regulation in the
context of a concrete controversy specifically regarding the impact of the
regulation on a particular parcel of property. Taylor, 659 So. 2d at 1167. The
standard of proof for an as-applied taking is whether there has been a
substantial deprivation of economic use or reasonable investment-backed
expectations. See generally Penn Central Transp. v. City of New York, 438 U.S.
104 (1978) (considering the economic impact of the regulation on the claimant,
the extent to which the regulation has interfered with distinct investment-backed expectations, and the character of the government action; diminution in the property value alone cannot establish a taking); Taylor, 659 So. 2d at 1167. The question presented is whether the record shows that the Landowners were deprived by the enactment of the 2010 Comprehensive Plan of all economic use of their property, which amounts to a facial taking, or were deprived of substantial use of their property, but left with some economic value, which is an as-applied taking.

Emphasis added.

The problem is that the court's analysis here is totally wrong: a "categorical" Lucas-type claim that a regulation has deprived the landowner of all economic use is almost never a facial claim, nor can it be under the ripeness requirements that the Court discusses later in the opinion.

Here, the application of Monroe County's comp plan and ldr was at issue. On their face, they preclude development in huge areas of the county and require compliance with strict "rate of growth" requirements that preclude even individual building permits for existing lots. But the ordinance has an entire administrative process for both vested rights and for what amounts to an administrative determination that a taking will occur if rights aren't given, with recommendations to either grant a permit or buy the property.

With particular respect to the whole Monroe County regulatory scheme, courts have held that the availability of this remedy precludes takings claims until or unless the process is followed. They also have held that no temporary or permanent taking can occur until after the completion of the process. So the ripeness and other doctrines effectively preclude a facial challenge to the ordinances (and most land use lawyers knew this) .

The core distinctions are categorical takings, which do not require a demonstration of the value of the property taken or remaining in order to demonstrate the taking, and "balancing" type tests where the financial or economic impact must be assessed against the property as a whole.

Which then gets you to the different sub-causes of action under a takings theory:

1. Illegal conditions (Nollan/Dolan) on a development permit or application that require an exaction. This clearly requires a property-specific application, but it is a categorical type taking in that if the exaction is not proportional to the impacts created, it is a taking regardless of the effects on the value of the property as a whole However, the essence of this claim is that the government assessed the exaction against a particular proposal, so it is always as-applied.

- Note these distinctions were behind the whole highway reservation as a takings fight in the early 90s. One decision held that the reservation statute, which prohibited all development within reservation areas designated next to state roads, was unconstitutional because it "took" property (the right to use the reserved area) without making any provision for compensation. Later cases clarified that even if such statutes are unconstitutional, there are not actual "takings" of property until or unless the reservation is applied to a particular property so as to deny particular uses and the government refuses to either vary the prohibition or pay compensation.

2. Illegal violation of the right to exclude/imposed right to use (Loretto Teleprompter) - an ordinance or statute that allows another person or the government to use your property (like to hang cable television) is a forced grant of easement or license - this is a "categorical" taking in that it doesn't require a demonstration of the value of the right 'taken' or the remaining rights in the property. However, there is not taking until someone takes advantage of the ordinance or statute, so it almost always an as-applied claim.

3. The Lucas case: total taking of all economic use . This is a "categorical" taking because if all use is removed, the relative burden is irrelevant, but it is an as-applied test. If a regulation prevents ANY use of property, it is a taking. However, in almost any conceivable situation in order to prove that it does that, a landowner would have to apply to use the property and be denied, or to try to get some administrative determination of rights (as here) and be told there are none. So ripeness and damages issues almost always will make this an as-applied challenge.

The big and still unresolved issue in these cases has to do with "use" versus "non-use" value: what if all use is prohibited, but the land has some use to someone other than the owner, perhaps as open space, or as a beach access, or some other function that is totally accessory to a separate parcel. Under the strict language of Lucas, and one critical footnote, the focus is on the value created by the use of the property by the owner, and the potential for some value to the property in its sale or passive use by another would not count. But that isn't followed in a number of cases.

4. Penn Central Balancing -- This is the general and difficult case where there are some uses left to a property, but they are significantly limited in a way that so limits "legitimate, investment backed expectations" so as to create a taking (along with several other considerations described in the opinion). It always is an "as applied" challenge, because it is the particular effect of the regulation on the particular facts of the property and expectations of the owner that are at issue.
The 3d DCA opinion is simply mind-blowingly wrong and perverse: if you claim that an ordinance deprives you of all economic use, you can only raise that within four years of adoption, even if you haven't actually had it applied to your property so you can prove it.

This opinion would create a situation where the government was better off getting someone into the application process and then - four years later- adopting an interpretation that the owner couldn't use the property at all than if the government allowed some (but not much) use of the property.

One can only hope that this will get corrected, and quickly.

3d DCA - "Side" Interpretation of Code Not Separately Reveiwable

In City of Sunny Isles Beach v. Publix, the 3d DCA continued its apparent quest to tell the appellate division of Dade County never to side with a landowner or developer on a land development code issue.

The 3d issued a writ of prohibition preventing the circuit court from hearing a declaratory action brought by Publix against a written interpretation of the local zoning code by the city attorney. The code provided NO local administrative appeal of such a decision.

The 3d granted prohibition on the grounds that the opinion was used in the city commission's denial of Publix's site plan, and that decision was being reviewed by certiorari, so that would be the only review under the rubric that there is no judicial remedy until administrative remedies are exhausted.

Well, all very nice, but the bottom line is that cert review of the denial doesn't get fair review of the issue, for several reasons:
1. If there's any other basis to justify the denial, there's no review of that legal opinion or error.
2. The standard of review at that point is totally unclear because cert review is not to determine "mere legal error" but only "gross" errors that are fundamental (at least when a landowner is seeking review; when it's the government, any error appears to be fundamental in the 3d). Pile on top of that the unclear status of how much discretion to give the local interpretation, and you get a situation where the decision would not be overturned unless there was a finding in the order that flatly contradicted the ordinance AND it was clear from the order that the erroneous construction was the sole reason for the denial.
3 Then throw on top of this the "miscarriage of justice" standard, which was originally added to the 2d tier review standards to indicate further the kind of discretion there is in the discretionary review, but which shows up frequently in circuit court cert opinions.

The upshot is that the issue doesn't actually get resolved and determined. The city will win the cert petition and then claim that this vindicates the interpretation. Which it doesn't and can't.

Which gets to the really interesting problem: a circuit court's review of a local decision really can't be taken as "stare decisis" regarding any interpretation of a local ordinance involved for the simple reason that the court isn't determining whether the interpretation was right or wrong, it's whether it was so totally illegal as applied to particular facts that it created a miscarriage of justice.

Which in turn means that there is no real means in Florida today (and certainly in the 3d District, based on this opinion) to get a full and fair determination of the meaning of local zoning and environmental regulations. Back to the need for a statutory remedy for the review of local ordinances and decisions.

Code Enforcement and the Fact Not Discussed

In City of Miami v. Cortez, the 3d District overturned a circuit court decision in an appeal of a code enforcement board "mitigation order."

The 3d found that the circuit court failed to comport with the essential requirements of law. It found that any objections to the testimony in the mitigation hearing were not preserved, and that due process had been followed.

Here's how the 3d characterized the background facts:

On October 3, 2003, the City’s Code Enforcement Board ("Board") held a hearing
where property owner Amado Sabina pled guilty to a code violation for
performance of work on a residential property without a final permit. The Board
entered an enforcement order on October 10, 2003. Property owners Sabina and
Eumelia Cortes were afforded 60 days to correct the violation or face a fine of
$250 per day.

The property owners failed to correct the violations
and fines totaling $105,750 were assessed. On June 2, 2005, the Board held a
mitigation hearing to determine whether to reduce the amount of the fines
accrued. All of the witnesses at the hearing were duly sworn. At the conclusion
of that hearing, the Board reduced the fine to $10,000 and entered a mitigation

The property owners appealed the mitigation order to the appellate
division of the circuit court, arguing that the mitigation order should be set
aside because the city inspector had improperly delayed inspection for a period
of six months. However the Board had already accepted this argument in reducing
the fine to $10,000. The appellate division nonetheless reversed both the
enforcement and mitigation orders.

The 3d quashed the decision of the circuit court.

However, it's clear to me that the 3d didn't include the truly relevant facts or address the real due process problem.

I suspect that the owners thought that they had fixed the problem and were shocked that fines were still accruing - this happens ALL THE TIME in these cases. The issue is that these orders end up creating "running fines" and (I think unconstitutionally) put the burden of proof on the owners to demonstrate that the violation no longer exists. Once an order imposing fines is issued, the local governments claim that they are under no further obligation to investigate or to determine whether a violation continues.

When the violation is for work without a permit, the violation generally isn't fixed until a permit is issued, any remedial work is done, and the work is inspected and signed off. This creates a situation where the local government can leave a person in violation by delaying permit decisions or imposing improper conditions, by finding inconsequential problems in the inspection, or by not inspecting. And by not notifying the code enforcement people when the inspection is done.

It's quite possible under the fact here that the property owners in fact got a permit and did anything else they needed to do within the 60 day window, but that the inspections were delayed and then even after the inspection the fines were accruing.

I would argue strongly that if that is the case, then the code enforcement statute is being administered unconstitutionally. I KNOW that this happens every day.

And I'm having to speculate because the opinion in this case is so devoid of the truly relevant facts, but I suspect that this is what the owners showed to the circuit court. So, did the 3d District get it wrong? We really can't tell because the opinion doesn't give use the rel event facts.

LESSON: If a client gets into code enforcement problems, get in the board's face and start objecting to EVERYTHING from the first hearing. Object that the hearings violate due process because the written guidelines are inadequate or lacking; demand rulings on right to cross examine; object to every piece of written evidence that is offered (most of it is hearsay, lots of it is inadmissible). Object to the local ordinance if you can. And demand very specific findings from the Board or Special Magistrate regarding EXACTLY what actions need to be taken to correct the violation. And then appeal the VERY FIRST determination (the "violation" determination).

If it gets to a "penalty" hearing, make the same objections. Then enter evidence on the "four factors" in the section 162.09 regarding the amount of penalty.

The code enforcement system has turned into a maze of abusive traps because the processes are badly written, badly administered, and almost always applied against unrepresented respondents.