Guest Commentary
by G. Wilson (Rocky) Horde III and Hans Clausen, Thompson Hine LLP
Can land-use regulators exact cash from developers to pay for off-site environmental mitigation as a precondition to issuing building permits without triggering the just-compensation requirement of the Takings Clause? Today, the U.S. Supreme Court answered this question in Koontz v. St. Johns River Water Management District. In a 5-4 decision, the Court held that the government’s demand for property, including cash, from developers as a precondition for land-use permits must bear an essential nexus and a rough proportionality with the prospective burden imposed by the development. This holding expands the scope of the Takings Clause, restricts the power of regulators to require the satisfaction of preconditions before permits will issue, and provides important protections to developers.
The case was filed by Coy Koontz, who purchased a 14.9-acre lot in 1972 when no environmental laws prevented development. Florida later enacted numerous environmental statutes to protect wetlands. These laws placed all but 1.4 acres of Koontz’s lot within a protected zone and established a legal presumption that any land use within the zone would be harmful. In 1994, Koontz applied for development permits, seeking to develop only 3.7 acres of his more than 14-acre lot. The St. Johns River Water Management District (District) initially suggested a long list of environmental mitigation options to Koontz, which included reducing his proposed development to only 1 acre or expending his own money to improve 50 acres of wetlands outside his property under a variety of scenarios. Koontz agreed to dedicate the remainder of his land for conservation, but he refused to do anything more. Ultimately, the District denied Koontz’s application solely because he refused to pay for off-site mitigation. Koontz won in a Florida trial court and at the intermediate appellate level, but lost in the Florida Supreme Court.
The U.S. Supreme Court reversed the Florida Supreme Court, holding that the “essential nexus” and “rough proportionality” requirements articulated in the landmark precedents Nollan v. California Coastal Comm. and Dolan v. City of Tigard apply when the government denies the permit for failure to comply with a precondition and no property has actually been taken. (Nollan and Dolan concerned exactions after the permit was issued.) Justice Alito, writing for the majority, concluded that extortionate demands for property in the land-use permit context violate the Takings Clause not because they take property but because they impermissibly burden the right not to have property taken without just compensation. Whether the government approves the permit with an extortionate condition to be satisfied after the permit has issued, or denies the permit because an extortionate precondition was not satisfied, makes no difference. The Court also held that it doesn’t matter whether the government attempts to exact real property or cash (or other personal property), because drawing this distinction would allow the government to evade the constitutional limitations of Nollan and Dolan. Cash exactions, Justice Alito concluded, “are functionally equivalent to other types of land use exactions.”
Joining Justice Alito in the majority were Chief Justice John Roberts and Justices Scalia, Kennedy and Thomas. Justice Kagan filed a dissent, joined by Justices Ginsburg, Breyer and Sotomayor.