Lost among the U.S. Supreme Court’s decisions this fall term including the high profile topics of voting rights, same gender marriage, and affirmative action, was the High Court’s ruling in Koontz v. St. John’s River Water Management District which expanded the holdings in two seminal Supreme Court property rights cases, Nollan v. California Coastal Commission (1987) and Dolan v. City of Tigard (1994).
The Nollan and Dolan Decisions
Nollan and Dolan generally provide that a local government cannot condition its approval of a land use permit on the owner relinquishing a portion of his property unless there is: (1) a “nexus” between the permit conditions and a legitimate state purpose and (2) whether the degree of the exaction is “rough[ly] proportional” to the impact of the proposed development.
For example, in Dolan, the Court found in favor of the property owner and struck down the City’s requirement that the property owner dedicate to the City property a public greenway, finding that exaction excessive and not “roughly proportional” to the increased traffic that would be caused by the proposed expansion of the property owner’s store.
Koontz Facts and Decision
Koontz owned 14.9 acres of undeveloped land and proposed development on 3.7 acres, dedicating the remaining 11 acres as a conservation easement. Although the St. John’s River Water Management District thought the conservation easement was insufficient it agreed to recommend the approval of the permit provided Koontz took one of two actions: Koontz could either reduce the size of the development while increasing the conservation easement, or perform offsite mitigation, if the proposed development was not reduced. Koontz rejected both alternatives and ceased negotiating after which the District denied the permit. Koontz then sued the District claiming its action was an “unreasonable exercise of the state’s police power constituting a taking without just compensation.”
The lower courts ruled in favor of Koontz, which the Florida Supreme Court reversed holding that the District’s denial of the permit was not a taking of property and drew a distinction between a demand for an interest in real property (like the requirement for property for a public greenway in Dolan), and money (or forced offsite mitigation work that would cost the developer money, as in Koontz). The Court held that a demand for real property met the U.S. Supreme Court Standards outlined in Nollan and Dolan, whereas the office mitigation work would not have to comply with the Nollan and Dolan Standards.
The U.S. Supreme Court overturned the Florida Supreme Court’s decision expanding Nollan and Dolan by finding that “[e]xtortionate 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.”
Impact of the Koontz Decision
The high Court’s ruling in Koontz has two practical effects. First, takings law seems to have been expanded to include permit denials and monetary exactions (and not just property exactions or takings). The second effect is that the decision could hinder or chill the negotiation process between a developer and the local government. Ongoing discussions and pending negotiations could include topics such as the cost of the impact of the development and the developer’s required mitigation of those impacts. Such discussions that accompany a denial of the permit could lead to a claim by the developer that the local jurisdiction’s proposed mitigation or exaction demands rose to an illegal taking. As such, local governments may be extra cautious when engaging in negotiations or discussions with developers on topics like the development impact and the required mitigation.
We will continue to monitor further interpretations of the Koontz decision. Please contact us for any assistance in this area.