Amidst the much publicized same-sex marriage decisions issued by the Supreme Court the week of June 24, the Supreme Court also issued a decision that alters the Constitutional takings landscape in what many consider to be a dramatic manner. Koontz v. St. Johns River Water Management District redraws the boundaries of when governmental conditions placed on property owners’ ability to use their land violate the Constitution by depriving property owners of use of their lands without just compensation.

I.          THE FACTUAL BACKGROUND OF KOONTZ.

Coy Koontz, Sr. bought a 14.9-acre tract of undeveloped land in Florida that was designated as a wetland. Koontz sought to develop the northern 3.7-acre portion of the land, which was set apart from the southern portion of the property by high voltage power lines surrounded by a 100-foot cleared area. The northern section drained well, typically did not have much standing water, and was described by the Florida Circuit Court as “seriously degraded” due to construction on neighboring land. Nonetheless, because the area was classified as a wetland, Koontz was required to obtain wetland permits from the St. Johns River Water Management District (the “District”). Koontz proposed mitigating the possible environmental effects on the northern portion to be developed by granting the District a conservation easement on the southern undeveloped 11.2 acres, which would prevent that property from being developed in the future.

The District determined this mitigation to be insufficient and instead informed Koontz that it would only grant the permits if Koontz either: (1) reduced the size of the development to 1 acre and granted a conservation easement over the remaining 13.9 acres; or (2) in addition to granting a conservation easement over the undeveloped 11.2 acres, agreed to hire contractors to make improvements to a District-owned parcel several miles away. Koontz refused and the District accordingly denied his permit applications.

II.        PERMIT DENIALS AND MONETARY CONDITIONS AS TAKINGS.

After the case was appealed to the Florida Supreme Court, the United States Supreme Court granted certiorari to clarify how two prior landmark Supreme Court takings cases, Nollan v. California Coastal Commission, 483 U.S. 825 (1987), and Dolan v. City of Tigard, 512 U.S. 374 (1994), should be applied. Nollan and Dolan established that “a unit of government may not condition the approval of a land-use permit on the 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.” Koontz, 2013 WL 3184628, at *4.

Previously, the “nexus” and “rough proportionality” test was construed by many courts to apply to neither monetary conditions nor denials of permit applications. The Koontz Court held that these interpretations were incorrect. First, the Court determined that if a demand for money burdens the ownership of a specific parcel of land, such a demand can constitute a taking. The District relied upon Eastern Enterprises v. Apfel, 524 U.S. 498, 540 (1998), in which the U.S. government instituted a retroactive obligation upon a company to pay the medical benefits of retired miners and their families; a plurality held that this obligation did not constitute a taking. The Koontz Court distinguished the monetary requirement in Eastern Enterprise from Koontz on the basis that the Eastern Enterprise demand did not “operate upon or alter an identified property interest.” Id. at *12. The Court held that because the Koontz monetary demand (to hire contractors to work on other District-owned land) was tied directly to Koontz’s ability to obtain the necessary permits to develop his land, it effectively operated upon and altered Koontz’s interest in his land. Though the dissent argued that this extension of Nollan and Dolan could cause everyday taxes and fees to be litigated as takings, the Court dismissed these concerns, stating that case law had firmly established that such taxes and fees were not takings, even if they would be if not extracted through the government’s power to tax.

Second, the Court held that a taking can occur even where a permit is denied. The Florida Supreme Court had “puzzled over how the government’s demand for property can violate the Takings Clause even though ‘no property of any kind was every taken." Id. at *9. In other words, the Florida Supreme Court reasoned that because the permit was denied and the conditions requiring Koontz’s forfeiture of his property interest were never instituted, no land was ever taken. Both the Koontz majority and dissent agreed that this distinction between a condition precedent and subsequent to permit approval was immaterial, holding 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.” Id.

III.       IMPLICATIONS OF KOONTZ ON PROPERTY OWNERS.

Koontz will likely become a powerful weapon for private property owners in takings cases. First, a broader range of permitting decisions will become subject to a takings analysis as permitting authorities will no longer be able to frame conditions as prerequisites to approval to avoid a takings analysis. Second, property owners may now challenge monetary, and perhaps other non-land-related conditions as takings. In the coming years, landowners are likely to test the boundaries of Koontz to determine what degree of “nexus” and “rough proportionality” must exist between a monetary government demand and a proposed land use’s effects. For example, might standard fees attached to a wide array of permits be reconstituted as takings? The Koontz Court states these fees would not be takings, but provides ample ammunition for a landowner subject to disproportionate fees that are only marginally related to the permit sought.

Although the general consensus among commentators is that Koontz will be a boon for private landowners, at least one analyst, John D. Echeverria of Vermont Law School, argues that Koontz may ultimately hurt developers. Echeverria argues that local governments will be wary that pre-permitting discussions about potential permit conditions could be used to argue that the government imposed a condition precedent on the permit, as arguably occurred in Koontz. Accordingly, these local governments may avoid such pre-permit negotiations, reducing developers’ and governments’ chances of crafting mutually beneficial permitting conditions. Under this theory, development will either be less optimal or worse, never realized. Despite Echeverria’s concerns, Koontz is unlikely to work such a drastic result on permitting decisions, but will instead be a useful tool for land developers to reiterate to government units that permit conditions—whether monetary or not—must be both reasonably related and proportionate to the proposed land use.