In a win for developers and other regulated entities, the US Supreme Court held that the government's "extortionate demands for property in the land-use permitting context" violated the constitution's protection against the government taking property without just compensation.
In the case of Koontz v. St. Johns River Water Management District, No. 11-1447 (June 25, 2013), the Court held that the government cannot condition approval of a land-use permit on an owner giving up his property unless there is an "essential nexus and rough proportionality" between the government's demand and the effects of the proposed land use. The Court stated that any permit condition must possess such a "nexus and rough proportionality", regardless of whether the land-use permit is approved or denied and regardless of whether the "property" sought by the government is money.
The Court explained that an "essential nexus and rough proportionality" exists when the government's proposed conditions do not exceed the impacts that the permitted development activity will have on the environment or local community. The government may propose conditions on land-use permits, and those conditions can include dedication of land to the public or payment of money to off-set impacts of the development. However, the proposed condition must be tailored to mirror the expected impacts of the project. If the project will disturb five acres of wetlands, for example, any proposed permit condition should be limited to a dedication of approximately five acres of land for conservation, payment to develop five acres of wetlands in another area or otherwise related to the fact the project will disturb five acres. A proposed condition that requires the developer to deed a 15 acre conservation easement likely lacks the "essential nexus and rough proportionality" required under Koontz.
In Koontz, a Florida developer sought to develop 3.7 acres of a 14.9 acre tract. Pursuant to Florida law, his development permit application included a proposal to mitigate the environmental effects of construction by deeding the local water management district an 11 acre conservation easement. The district considered the developer's proposal inadequate, and informed him that his permit would only be approved if he agreed to one of two concessions: He could reduce the size of his development to one acre and deed the remaining 13.9 acres to the district in a conservation easement; or he could proceed with construction as planned on 3.7 acres and deed a conservation easement for the remainder of the property, if he also agreed to pay for improvements on 50 acres of wetlands several miles away. The developer correctly believed the district's demands were excessive in light of the environmental effects his proposal would have, and sued the district for "an unreasonable exercise of the state's police power constituting a taking without just compensation".
In its Opinion, the Court held that while the government has a legitimate interest in offsetting the environmental impacts of development through the dedication of property to the public, the government may not "leverage its legitimate interest in mitigation to pursue governmental ends that lack an essential nexus and rough proportionality to those impacts." In short, the constitution enables permitting authorities to insist that applicant's bear the full cost of their proposals, while at the same time prohibiting the government from engaging in "out-and-out extortion" that thwarts the constitutionally protected right to just compensation.
Further, the Court was clear that a nexus must exist between the development activity sought to be permitted and the conditions suggested, even when the permit is denied and even when the condition is the payment of money.
Going forward, developers can look to Koontz for protection against over-reaching land-use permitting authorities. Any government-proposed permit condition involving a dedication of land or payment of money must be proportional to the impact created by the development. Likewise, developers are protected even when the government denies a permit because the developer refuses to accept disproportionate demands for property. Commentators forecast that reaction to the decision from regulators will vary. Some pro-development or gun-shy regulators will respond by more readily approving development proposals, while less-development-friendly regulators who might have been willing to negotiate with property owners will be more likely to deny development proposals.
Regardless, the Court's holding that permit conditions must have an essential nexus to environmental mitigation interests, regardless of whether the permit is approved or denied, levels the field for developers in the often high-stakes arena of land-use permitting.
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