In a 5-4 decision written by Justice Alito, the Supreme Court of the United States reversed the Florida Supreme Court in Koontz v. St. Johns River Water Management District, holding that the government cannot condition the issuance of a land-use permit on the applicant giving up a portion of his property, including financial property, unless there is a “nexus” and “rough proportionality” between the government’s demand and the proposed land use.
Two earlier Supreme Court cases, Nollan v. California Coastal Commission, and Dolan v. City of Tigard, set limits on governments’ ability to impair property interests with land use regulations. Under those decisions, there must be a “nexus” and “rough proportionality” between the government’s demand and the effects of the proposed land use. This test was historically applied when the government requested that the owner relinquish some of his or her property, like an easement, as a condition on a land use permit.
In this case, Koontz sought to develop his land in Florida. The land was classified as wetlands, and Florida law requires permit applicants wishing to build on wetlands to offset the resulting environmental damage by creating, enhancing, or preserving wetlands elsewhere. Koontz offered to mitigate by deeding to the defendant water management district a conservation easement on nearly three-quarters of the property. The district found this mitigation inadequate. The district then suggested that they would grant his permit request if he reduced the size of his development even further (from 3.7 acres to 1 acre) or hired contractors to make improvements to district-owned wetlands several miles away. Koontz did neither; instead he sued under a state law permitting him to seek damages for agency action that is an “unreasonable exercise of the state’s police power constituting a taking without just compensation.”
The trial court and the appellate court in Florida found that the district’s demand failed the Nollan-Dolan test. The Florida Supreme Court reversed, holding that Koontz did not have a claim because: (1) the Nollan-Dolan standard does not apply to the denial of a permit; and (2) the standard does not apply to a demand for the payment of money. Koontz appealed to the U.S. Supreme Court.
Supreme Court’s Decision
On the first issue, both the majority and the dissent (authored by Justice Kagan) agreed that the denial of a permit should be held to the Nollan-Dolan standard. If the government coerces the project applicant into giving up property rights—a condition precedent—that implicates the Fifth Amendment in the same way that granting a permit with conditions does—a condition subsequent. To hold otherwise would allow governments to evade the Nollan-Dolan limitations by framing demands as conditions precedent.
The majority and the dissent disagreed on the second issue: whether monetary exactions were subject to the same limitation. Justice Kagan, joined by Justices Ginsburg, Breyer, and Sotomayor, believed that this issue had already been settled in Eastern Enterprises v. Apfel, 524 U.S. 498 (1998). In Eastern Enterprises, the court held that the Takings Clause did not apply to government-imposed financial obligations “that do not operate upon or alter an identified property interest.” Justice Alito felt that Koontz’ property interest was altered by the District’s demand for money to improve wetlands on a District-owned parcel because of the direct link between the government’s demand and a specific parcel of real property. The dissent disagreed since it was not Koontz’s property that was affected, but the public wetlands. Citing Eastern Enterprises, the court saw this as the government simply imposing “an obligation to perform an act that costs money.” The District did not place any restrictions on Koontz’s property. They did not demand any particular lien, or bank account, or income stream from property. So according to the dissent, Koontz was never asked to relinquish a constitutional right.
The majority believed that this was a clear application of the unconstitutional conditions doctrine, which prevents the government from denying a benefit to a person because he exercises a constitutional right. Here, according to the majority, Koontz was exercising his constitutional right not to have his property taken without just compensation and should not have his permit denied because of that exercise. The majority emphasized 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 the property it would like to take. This makes the landowners likely to accede to the government’s demand, no matter how unreasonable.
The dissent viewed the District’s request as part of a negotiation process with the developer, not as an unconstitutional condition. In his permit application, Koontz suggested one kind of mitigation (a conservation easement on his property). The District found this inadequate and countered with other forms of mitigation that would be acceptable (a larger easement or improving public wetlands). There were no conditions placed on the permit itself, only a suggestion of how the permit application could comply with state law. Had the District denied the permits outright, without providing Koontz with suggestions on how to modify his applications, it would not have run afoul of the Takings Clause under the majority’s test. The dissent expressed concern that the majority’s reasoning will prevent local governments from providing suggestions to or negotiating with project applicants.
This decision extends the Takings Clause into more local land-use actions. Property owners can challenge demands for money during the permit application process, whether the demand comes before or after the permit is granted. This will only result in compensation, however, when property is actually taken. In this case, Koontz was not entitled to just compensation under the Fifth Amendment because he never paid for the improvements to the other wetlands.
The majority emphasized that the decision does not prevent local governments from insisting that the “applicants bear the full costs of their proposals.” Rather, they are only “forbidding the government from engaging in out-and-out extortion that would thwart the Fifth Amendment right to just compensation.” Taxes and user fees are not takings, so this case “does not affect the ability of governments to impose property taxes, user fees, and similar laws and regulations that may impose financial burdens on property owners.” The court did not decide “at precisely what point a land-use permitting charge denominated by the government as a ‘tax’ becomes so arbitrary that it was not the exertion of taxation but a confiscation of property,” but noted that the determining if something is a tax or a taking is more difficult in theory than in practice. The dissent disagreed, and would have preferred the majority provide a more straight-forward, like the one used in California, which states that Nollan-Dolan only applies to permitted fees that are imposed ad hoc, and not to fees that are generally applicable. Finally, the majority emphasized that “so long as a permitting authority offers the landowner at least one alternative that would satisfy Nollan and Dolan, the landowner has not been subjected to an unconstitutional condition.”