Originally published in New York Real Estate Law Reporter
The expectations of the regulatory takings industry have suffered at least a temporary setback last month with the 6-3 U.S. Supreme Court decision in Tahoe-Sierra Preservation Counsel Inc. v. Tahoe Regional Planning Agency (7RPA), 2002 U.S. LEXIS 3028.
For two decades, commencing with justice William Brennan's four-judge dissent in San Diego Coast Electric Co. v. San Diego, 450 U.S. 621, 636 (1981), the Supreme Court, on Fifth Amendment grounds, has engaged in a sustained judicial assault on regulatory initiatives of planners. Now, in the Tahoe-Sierra case, the high court has belatedly recognized "the good faith of the planners" and the value of not "rush[ing] through the planning process or...abandon[ing] the practice altogether."
Property owners had brought an inverse condemnation proceeding against TRPA for imposing a 32-month moratorium on all development in the Lake Tahoe Basin, which is shared by California and Nevada. The theory was that it represented a per se taking of property under the precedent established in Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), one of the San Diego progeny. The San Diego dissent in its conclusion had posed the paralyzing question: "After all, if a policeman must know the Constitution, then why not a planner?"
Lucas held that a legislative permanent proscription against beachfront development took away all economic use from the property.
Since it was not part of South Carolina's background nuisance common law, it was an unconstitutional categorical taking, to be remedied only by state payment of just compensation. The planners had guessed wrong on whether their exercise of police power was a "taking," even though their analysis of property damage from storms like Hurricane Hugo may well have been on the mark. Rather than pay more than $1 million to the victorious property owner, the state permitted him to develop his two beachfront lots.
The paralyzing question posed in San Diego was again at issue in Tahoe-Sierra. Even dissenting Justice William H. Rehnquist agreed that "Lake Tahoe is a national treasure and I do not doubt that [TRPA's] efforts at preventing further degradation of the lake were made in good faith in furtherance of the public interest. But as is the case with most governmental action that furthers the public interest, the Constitution requires that the costs and burdens be borne by the public at large, not by a few targeted citizens."
Was a 32-month moratorium a categorical taking? If temporary takings were possible in theory, just compensation of the moratorium's period of regulatory deprivation seemed appropriate to the plaintiffs as a fresh sequel to the Lucas decision. However, the high court disagreed, finding the categorical Lucas rule inapplicable to complex regulatory land use restrictions, and preferred the thoughtful ad hoc balancing approach followed in Penn Central Transportation Co. v. City of New York, 439 U.S. 104 (1978), which rejected a regulatory taking of Grand Central Terminal by the city's Landmark Preservation Law. The Court found the moratorium more akin to the "normal delays in obtaining building permits, changes in zoning ordinances, variances and the like."
How did the planners manage to guess right this time? For one thing, TRPA's proscription was labeled "moratorium," not "proscription." It was a temporary postponement of the right to develop in order to study and determine a plan for the lake's "environmental threshold carrying capacities" with standards governing future land use. Reasonable moratoria in connection with land use planning have been upheld in many states, including New York, as a logical adjunct to the use of state police power.
Since land use regulations interfere with the use of private property, to the extent they are insufficiently studied, vetted or tested, they may well be voided as arbitrary or capricious. The Tahoe-Sierra property owners' position rejected the time implications of a slow and deliberate process of enacting appropriate land use controls. Not to have imposed the moratorium against new construction on sensitive lands within the Lake Tahoe Basin, however, risked permanent damage to the lake ecology before the ameliorative standards could be put into place.
The high court majority in an opinion by justice John Paul Stevens explained and clarified its many property-protective rulings since San Diego but for the first time in a long time recognized the important role of planners in creating property value in the United States. It explicitly called First English Evangelical Lutheran Church v. County of Los Angeles, 482 U.S. 304 (1987), a "remedy" decision rather than a "taking" decision: The remedy for a regulatory taking was just compensation, not a declaration of invalidity. The Tahoe-Sierra Court underlined that case's exclusively theoretical significance by emphasizing that at the subsequent First English trial the flood plain regulation at issue was determined to be a nuisance prevention measure and hence noncompensable in any event.
Even the notorious Nollan v. California Coastal Commission opinion, 483 U.S. 825 (1987), is referenced only for its faint praise of the moratorium as an alternative to local expedition in singling out individual landowners for special burdens. Extortionate planners are airbrushed from this Tahoe-Sierra opinion.
The opinion clearly distinguished physical and regulatory takings based on the text of the Fifth Amendment and refused to carry the clear constitutional just compensation per se rule applicable to physical takings any further than the "relatively rare" Lucas regulatory taking. Proceeding from ordinary public purpose condemnation proceedings, through physical appropriation cases like U.S. v. Causby, 328 U.S. 256 (1946), and Loretto v. TelePrompTer Manhattan CATV Corp., 458 U.S. 419 (1982), the Court noted that "the Constitution contains no comparable reference [i.e., duty to compensate for] ...regulations that prohibit a property owner from making certain uses of her private property." And again in the accompanying footnote, the Court distinguished the "obvious and undisputed" just compensation award for condemnation or physical taking from the case of severe regulatory restrictions whose taking "analysis is more complex" and whose "predicate of a taking is not self-evident."
The Court approvingly cited justice Sandra Day O'Connor's concurrence in Palazzolo v. Rhode Island, 533 U.S. at 636 (2001), in adopting the approach that charges of regulatory temporary taking "require careful examination and weighing of all relevant circumstances." The Lucas per se rule proposed by the Taboe Sierra plaintiffs was, in the Court's language, "simply too blunt an instrument" for identifying regulatory restrictions that interfere with reasonable investment-backed expectations. The Court embraced "moratoria or interim development controls ...[as] an essential tool of successful development." Indeed, it notes that "with the planning ... protected, there is no need for hasty adoption of permanent controls in order to avoid the establishment of nonconforming uses, or to respond in an ad hoc fashion to specific problems. Instead, the planning and implementation process may be permitted to run its full and natural course with widespread citizen input and involvement, public debate, and full consideration of all issues and points of view."
From Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926), until San Diego, planners enjoyed white hat status from the high court together with their tool kit (zoning, variances, etc.). Read Village of Belle Terre v. Boraas, 416 U.S. 1 (1974) for Justice Thurgood Marshall's encomium to zoning in his dissent, for the prevailing flavor of this lengthy honeymoon. The Court's view of planners then darkened in 1981 following San Diego, memorably in justice Antonin Scalia's opinions in Nollan and Lucas.
Perhaps the dark cloud is now lifting, two years after Bush v. Gore.
Norman Marcus, formerly general counsel to the New York Department of City Planning and the City Planning Commission, now practices law with Swidler Berlin Shereff Friedman, LLP. He also serves as adjunct professor of land use regulation at the Wagner School of New York University.
New York Real Estate Law Reporter (ISSN 0894-4903) is published by Law Journal Newsletters, a division of American Lawyer :Media. © 2002 NLP IP Company. All rights reserved. No reproduction of any portion of this issue is allowed without written permission from the publisher. Telephone. (800) 537-2128, est. 9019; editorial e-mail: mhopkins@amlaw.com; circulation e-mail: circ@amlaw.com
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