Local governments routinely condition the approval of land use permits on fees and dedications. From park fees to land dedications for future public use, such conditions are commonplace. Now, the U.S. Supreme Court will have local governments thinking twice before imposing conditions like these on land developers.

Why?

In Koontz v. St. John’s River Water Management District, No. 11-1447 (U.S. June 25, 2013), the U.S. Supreme Court decided that the federal government is liable for a taking under the Fifth Amendment when it refuses to issue a permit until the developer has agreed to dedicate personal resources to a public use. If a government agency requires that a landowner grant an easement or pay money, the government must establish a nexus between the exaction and the impact of the development. The exaction and the impact also need to be “roughly proportional.” These requirements –  nexus and rough proportionality — stem from two seminal U.S. Supreme Court decisions in the land-use context, Nollan v. California Coastal Commission, 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1994).

What Happened?

Coy Koontz purchases 14.9 acres of undeveloped property and applied to the St. John’s River Water Management District for a permit to develop a 3.7-acre portion of the land. To mitigate the impact of the development, he offered the District a conservation easement on the remaining 11.2 acres. The District rejected that offer and countered that it would approve a permit if Koontz either (1) limited the development to only 1 acre and granted the remaining 13.9 acres to the District; or (2) developed the proposed 3.7 acres but also paid for improvements for 50 acres of District-owned wetlands in another location. Koontz turned down the District’s counteroffer and the District denied his application to develop his property. Koontz brought suit against the District in Florida state court and the case ultimately landed in the lap of the U.S. Supreme Court.

In a 5-4 decision, the U.S. Supreme Court found that the Nollan and Dolan requirements applied to the exactions demanded by the District. Invoking the doctrine of unconstitutional conditions, the Court said that “land-use permit applicants are especially vulnerable to the type of coercion that the unconstitutional conditions doctrine prohibits because the government often has broad discretion to deny a permit that is worth far more than property it would like to take. By conditioning a building permit on the owner’s deeding over a public right-of-way, for example, the government can pressure an owner in voluntarily giving up property for which the Fifth Amendment would otherwise require just compensation.” 

What It Means

Developers are now in a better position to challenge permit conditions that may be disproportionate to the impact of the project and/or have no relationship to the project. Koontz extends application of the taking doctrine to apply to off-site mitigation work in addition to the traditional situation involving forced dedications of interests in real property. Also, Koontz holds that a taking can occur not only when the government approves and issues a permit with conditions but also to permit denials for refusal to meet the exaction demanded by the government. It remains to be seen if and how local governments will alter their permitting processes to address these concerns.