Keywords: Koontz v. St. Johns River Water Management District, land-use permit, wetlands, regulatory taking, Nollan-Dolan standard,

Today the Supreme Court issued one decision, described below, of interest to the business community.

  • Takings—Whether Government May Deny Permits Based on Property Owner's Refusal to Pay for Unrelated Improvements

Takings—Whether Government May Deny Permits Based on Property Owner's Refusal to Pay for Unrelated Improvements

Koontz v. St. Johns River Water Management District, No. 11-1447 (previously discussed in the October 8, 2012, Docket Report)

Today, in a 5-4 decision in Koontz v. St. Johns River Water Management District, No. 11-1447, the Supreme Court clarified its holdings in Nollan v. California Coastal Commission, 483 U.S. 825 (1987), and Dolan v. City of Tigard, 512 U.S. 374 (1994), which prohibit the government from conditioning the approval of a land-use permit on an owner's relinquishment of a portion of his property unless there is a nexus and rough proportionality between the government's demand and the effects of the proposed land use.

Justice Alito authored the majority opinion and was joined by Chief Justice Roberts and Justices Scalia, Kennedy, and Thomas. Justice Kagan dissented and was joined by Justices Ginsburg, Breyer, and Sotomayor.

Petitioner Koontz wanted to develop a piece of property that is subject to oversight by the St. Johns Water Management District, a Florida agency that oversees wetlands. The District informed Koontz that it would approve his development only if he mitigated its effects on the local watershed by either (1) reducing the size of his proposed project and deeding a conservation easement to the District on the remainder of the property or (2) improving District-owned wetlands several miles away from his property. Believing that the District's demands for mitigation were excessive in light of the environmental effects that his building proposal would have caused, Koontz sued the District in Florida state court, arguing that the exaction was an impermissible "regulatory taking." The state trial court and intermediate appellate court both ruled for Koontz, holding that the exaction lacked the "essential nexus" and "rough proportionality" required by Nollan and Dolan. But the Florida Supreme Court reversed, holding that Nollan and Dolan do not apply when what is at issue is the payment of money or when the government denies a permit (as opposed to approving a permit on the condition that the owner accede to the government's mitigation demands).

The Supreme Court rejected the Florida Supreme Court's application of Nollan and Dolan. It first held that the government's demand for property from a land-use permit applicant must have a nexus with and rough proportionality to the effects of the proposed land use even when the government denies the permit. The Court reasoned that extortionate demands for property in the land-use permitting context run afoul of the Takings Clause even though they do not take property, because they impermissibly burden the right not to have property taken without just compensation. The Court next held that the nexus and rough proportionality requirements of Nollan and Dolan apply even when the government demands money in exchange for a permit approval, because such a demand is directly linked to a specific parcel of real property.

The dissent agreed that the Nollan-Dolan standard applies when the government denies a permit until the owner meets a particular condition, but disagreed that it applies when the government conditions a permit on the payment or expenditure of money. The dissent claimed that the Court's holding in this regard was contrary to its holding in Eastern Enterprises v. Apfel, 524 U.S. 498 (1998), that the government may impose ordinary financial obligations without triggering the Takings Clause's protections. In the view of the dissent, the boundaries of the majority's new rule are uncertain and therefore threaten the many state and local land-use regulations in place across the country. But even assuming that a demand for money can trigger Nollan and Dolan, the dissent would affirm the Florida Supreme Court's decision for the independent reason that Koontz was not entitled to the monetary damages he sought. First, according to the dissent, the District never demanded anything in exchange for a permit but only made suggestions for mitigation efforts; and second, the monetary damages remedy Koontz sought was available only for a consummated taking, which did not occur in this case.

Koontz is significant for the business community because it substantially limits the ability of regulatory bodies to negotiate conditions with landowners and therefore may cause those agencies to reject more applications outright.

Originally published June 25, 2013

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