The Government must not demand more than the Constitution allows when it either demands things as a condition of granting a development permit or where it denies the permit because the owner would not agree to excessive demands. In Koontz v. St. Johns River Water Management District, the Court took a second look at its prior decision in Dolan v. City of Tigard and confirmed that the "rough proportionality" standard from Dolan applies to situations where the government demands that a property owner spend money on infrastructure or mitigation to offset the impacts of development.
The Dolan case involved the A-Boy plumbing store in the City of Tigard, Oregon. The City had demanded a dedication of land for a floodplain and a bike path as a condition of an application to expand the plumbing store. The U.S. Supreme Court adopted a rule of reason, holding that such demands, termed "exactions," must be "roughly proportional to the impacts of the development." This placed reasonable limitations on the government's ability to demand mitigation for impacts of development.
The Dolan case was a landmark decision because it attempted to place the Fifth Amendment takings clause on equal footing with the rest of the Bill of Rights. Chief Justice Rehnquist famously stated in the Dolan opinion that "We see no reason why the Takings Clause of the Fifth Amendment, as much a part of the Bill of Rights as the First or Fourth Amendment, should be relegated to the status of a poor relation . . . ."
From 1994 through 2010, it was generally understood in Oregon that the Dolan "rough proportionality" rule applied to situations where the government demanded a real property dedication and to situations where the government demanded the property owner spend money to mitigate impacts through the creation of infrastructure such as street improvements, sewer or water pipes, wetlands mitigation, etc.
However, all that changed when the Oregon Supreme Court decided the West Linn Corporate Park v. City of West Linn case in 2010. In that case, the Oregon Supreme Court held as a matter of state law that the Dolan rule applies only to dedications of real property and not to the much more common situation where the government demands that a property owner spend money on mitigation.
According to the Oregon Supreme Court's 2010 decision, the only limitation on the ability of the government to demand a property owner spend money on mitigation is that the cost of the mitigation cannot exceed the underlying value of the property itself. The Ninth Circuit Court of Appeals reached the same result as a matter of federal law in its companion decision in the West Linn Corporate Park case in 2011.
The U.S. Supreme Court's recent decision in Koontz overrules the West Linn Corporate Park case and establishes that the United States Constitution protects property owners from unreasonable government demands for mitigation, regardless of whether that mitigation is in the form of a real property dedication or a requirement to construct public infrastructure or other types of mitigation.
The Court also held in Koontz that the burden to show that the demanded mitigation is on the government and that the government cannot escape its obligations to show "rough proportionality" by simply denying the application.
The Koontz case will be very helpful to property owners and developers in Oregon who are having issues with local governments overreaching with their demands for mitigation. The Koontz case will also benefit property owners in other states. In the state of Washington, property owners and developers are already protected by statute (RCW 82.02.020), which provides the same level of protection provided by the Koontz case. However, RCW 82.02.020 does not apply to shoreline permits in Washington. Under Koontz government demands for mitigation must be "proportional" for all types of land use permits, including shoreline permits in Washington.