In a divided 5-4 opinion, the U.S. Supreme Court (“SCOTUS”) overturned the Florida Supreme Court (“SCOF”) decision in Koontz. The core and critical holdings: the “unconstitutional conditions” doctrine underlying the Nollan and Dolan decisions applies in the land use regulatory context to cash exactions as well as demands for a direct interest in land (land or easements), and also can apply (but may not always) where no cash or exaction changes hands because the government agency denies the application at hand. I will let the majority opinion speak for the Court’s logic:
Nollan and Dolan …. allow the government to condition approval of a permit on the dedication of property to the public so long as there is a “nexus” and “rough proportionality” between the property that the government demands and the social costs of the applicant's proposal. Dolan, supra, at 391, 114 S.Ct. 2309; Nollan, 483 U.S., at 837, 107 S.Ct. 3141. Our precedents thus enable permitting authorities to insist that applicants bear the full costs of their proposals while still forbidding the government from engaging in “out-and-out ... extortion” that would thwart the Fifth Amendment right to just compensation. Ibid. (internal quotation marks omitted). 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.
The full complexity and ramifications of the decision will be debated for years and cases to come, so I will touch only on a few brief and important points.
First, the full application of the decision on the case itself will not be resolved until the Florida Supreme Court addresses it on remand because SCOTUS refused to address or resolve the large number of Florida procedural and statutory law issues the SCOF dodged by (incorrectly) interpreting the federal takings issues. These include when and whether a plaintiff may proceed under special statutory “compensation” provisions (like the one at play here) without going through the full APA process to challenge the validity of the administrative action. This was also mangled by everyone in the Save Our Beaches case. The particular Florida statute created the damages remedy that was at issue here - SCOTUS left open the remedy for an illegal exaction in cases where there is not a statutory damages remedy.
Second, it is very unclear how and when a landowner will be able to bring a Koontz-based claim of extortionate demands under the DRI (or more “standard” local government) development procedures. Here, the District walked (or was walked) into a documented denial based on the demand for off-site improvements without any “formal” analysis or relationship between the impact on wetlands and the demand for off-site improvements. I would note that the essential action occurred in 1993, and could not happen under the current wetland regulatory regime in Florida. In fact, no demand for a valid impact fee or regulatory fee in Florida will fall afoul of Koontz.
However, programs like Pasco County’s recently invalidated right-of-way dedication ordinance, that do not tie required dedications to any rational evaluation (by the government) of the impacts of the development, will either be invalidated, require compensation, or both. And where local governments – openly or through “suggestive” review practices – demand things like parks, schools, sidewalks or other “contributions” in the rezoning or other process that are above, beyond or separate from established impact fees or exactions, those demands may subject the local government to claims – even (and perhaps especially) where the developer was successful in getting the development permit.
However, the majority opinion is clear: like a “taking of all economic use” under Lucas, a violation of the Nollan/Dolan/Koontz prohibition on unconstitutional conditions is a per se taking. Here’s the real warning and the potential problem for all sides: there is no meaningful difference between treating development approvals like a benefit that has to be “bought” (what’s in it for the community) and engaging in “out-and-out extortion.” Landowners are required to offset their legitimate impacts in order to develop – they are not required to provide benefits to the community.
My final point (at least today) is this: the parade of horribles in the SCOF opinion, the SCOTUS dissent, and the dissent of a large number of the land use commentators, all demonstrate an appalling lack of understanding of the day-to-day abuses that occur in the development process today, and how easily the Nollan/Dolan/Koontz test can be met by a government agency acting in good faith. Methods for fairly evaluating the impacts of development on public facilities/infrastructure and environmental resources are readily available today. The problems occur almost entirely from lack of planning and governmental over-reaching – and a culture of land use regulation that has become corrupted (in the general sense – but also leading to the specific) by the huge regulatory discretion enjoyed by local governments and the lack of effective judicial oversight on the use of that discretion.
On October 30, 2013, the Florida Supreme Court remanded the case to the Fifth DCA for further proceedings.
The Case Below: Florida Supreme Court Mangles a Difficult Takings Case.
I have condensed the background for this tangled, fifteen year plus odyssey through the administrative process and three trips for appellate review, as the complete story would take far too long to repeat. Koontz owns a 14.7 acre property that includes a significant proportion of wetlands and is also largely within a “Riparian Habitat Protection Zone of the Econlockhatchee River Hydrological Basin.” Koontz sought to fill 3.4 acres of wetlands for a project. The SJRWMD staff recommended approval with many conditions, one of which was that Koontz pay to perform offsite mitigation by replacing culverts in systems four and a half miles from the property or plug drainage canals seven miles away. The District never introduced any evidence that these actions would mitigate direct impacts created by the proposed development or that they were in any way proportionate to the impacts of the proposed development. Koontz refused to accept the conditions, and the District denied the permit. Koontz then sued under § 373.617, which provides a statutory process and remedies for claims that a permitting action would constitute a taking. In its first and second trips up and down the appellate chain to the Fifth DCA, the ripeness and other issues were addressed. On remand after the second appeal, the circuit court found the condition would create a taking, and the District chose to grant Koontz the permit (after receiving additional evidence that the jurisdictional wetlands on the property were significantly less extensive than originally thought). The circuit court then awarded Koontz $376,154 for a temporary taking by the District.
The 5th DCA upheld the circuit court, holding the demand for off-site mitigation was an exaction under Nolan and Dolan. The Fifth rejected the District’s assertion that Nolan and Dolan did not apply to “cash” demands for mitigation, but only to conditions that require a grant or dedication of lands or easements. The dissent objected to lack of ripeness based on Koontz’s failure to litigate its validity in an administrative challenge, and also asserted that a takings claim is not available for mitigation conditions that do not involve dedications of land or easements.
The Florida Supreme Court overturned the Fifth DCA. It held that while Florida follows federal takings law, it was not clear under existing decisions that Nollan and Dolan apply to exactions that do not take the form of dedications of land or easements, and it would not “extend” those holdings to include such exactions. It also held takings claims are available “only where the regulatory agency actually issues the permit sought, thereby rendering the owner’s interest in the property subject to the dedication imposed.” Justice Polston, joined by Justice Canady, concurred in the result, and would have held the entire issue was an attack on the propriety of the agency action and should have been subject to exhaustion by a challenge to the permit action under the APA.
The Court (and other courts that reached the same conclusion) was simply wrong in holding that the takings analysis does not reach “cash” mitigation. The “unconstitutional conditions” doctrine on which this branch of takings jurisprudence is based, prohibits the government from conditioning a license, permit or benefit on the relinquishment of a constitutional right or protected interest. The doctrine protects against regulatory over-reaching in any context - government employment (which is otherwise wholly discretionary), welfare (you can’t condition receipt), other forms of licenses (you can’t be required to swear allegiance to the United States in order to get a driver’s license), and the list goes on.
Furthermore, it is clear a regulation that requires a person to forego cash or its equivalent can be a taking. This was the issue in Webb’s Fabulous Pharmacy v. Beckworth, 101 S. Ct. 446 (1980), which held a statute allowing the clerk to keep interest on private funds deposited into the registry of the court violated the takings clause. Furthermore, (and directly on point) the Supreme Court characterized the statutory provision that awarded the interest to the clerk as an “exaction [that] is a forced contribution to general governmental revenues and is not reasonably related to the costs of using the courts.” It went on to note that the Fifth Amendment “was designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” The Supreme Court went on to state that “the county’s appropriation of the beneficial use of the fund is analogous to the appropriation of the use of private property in United States v. Causby. . . .”
In addition, this case is a minefield for a number of reasons. If the Court determined that the denial of a permit cannot cause a taking, why did it have to reach the other issue? Moreover, if the denial could not have such effect, why did the majority not agree with Justice Polston that the issue was subject to exhaustion and avoid making a constitutional ruling? The answer is very troubling: the Court wanted to assert that regulatory agencies can, should, and must impose such conditions on permits without fear of takings claims. The Court states:
It is both necessary and logical to limit land-use exactions doctrine to these narrow circumstances. Government agencies must have the authority and flexibility to independently evaluate permit applications and negotiate a permit award that will benefit a landowner without causing undue harm to the community of the environment. If a property owner is authorized to file an inverse condemnation claim on the basis of the exactions theory any time regulatory negotiations are not successful and a permit is denied, two undesirable outcomes inevitably ensure. First, the regulation of land use, deemed by the United States Supreme Court to be “peculiarly within the province of state and local legislative authorities,” would become prohibitively expensive. . . . Second, and as a result of the first consequence, agencies will opt simply to deny permits outright without discussion or negotiation rather than risk the crushing costs of litigation. Property owners will have no chance to amend their applications or discuss mitigation options because the regulatory entity will be unwilling to subject itself to potential liability. Land development in certain areas of Florida would come to a standstill. We decline to approve a rule of law that would place Florida land-use regulation in such an unduly restrictive position.
I cannot understand how the Court allowed itself to take this extreme position, one that cannot be justified by evidence or the law. The Supreme Court had previously held the public interest in the development process is protected by the “local regulations [or statutes], which must be uniformly administered.” Broward County v. G.B.V. Intern’l, Inc, 787 So. 2d 838 (Fla. 2001). Under Florida impact fee vs. tax, delegation of authority/rule adoption and similar requirements, most mitigation requirements are established by statute, rule or ordinance with respect to the extent and nature of required mitigation. Is the Court really saying that government entities are and must be free to demand unauthorized, illegal exactions in order to protect the public interest? The Court seemed frightened by a parade of horribles if it upheld the Fifth’s decision, and ignored the implications of overturning it in the way that it did: Under this decision, agencies and local governments will feel that the Florida Supreme Court has expressly authorized them to demand whatever exactions they want during negotiations. If they are smart, they won’t put those demands in writing. They will simply inform developers that if they don’t “voluntarily donate” to whatever the local issue de jour may be, they won’t get a permit approval, and they will be secure in the inability of the developer to challenge the resulting condition. It will be worse when “negotiating” with elected officials who may hear permit applications.
The Florida Supreme Court’s opinion could have an additional, unintended result that agencies and local governments may like less: frustrated landowners and developers will be able to take claims of illegal “cash” mitigation demands direct to federal court, because Florida has construed its takings clause to exclude a remedy.