District liable for takings even when no property is taken says U.S. Supreme Court

Koontz v. St. Johns River Water Management Dist., No. 11-1447 (June 25, 2013)

The United States Supreme Court heard this takings/exactions case where a water management district was held liable for requiring certain dedications and property in exchange for a permit, but ultimately denied the permit when the conditions were not met. In a divided 5-4 decision with Justice Kennedy concurring only in the result, the Court held the traditional Nolan/Dolan test applied regardless of whether property is actually taken or not.

Koontz wanted to develop his property in Florida but was required under Florida law to receive permits from the St. Johns River Water Management District (“District”) to develop on wetlands to offset environmental damage. The District rejected Koontz’s proposal for a partial dedication and informed him that it would approve construction only if he (1) reduced the size of his development and deeded to the District a conservation easement larger than he proposed or (2) hired contractors to make improvements to District owned wetlands several miles away. Believing the District’s demands to be excessive in light of the environmental effects his proposal would have caused, Koontz refused and the District denied the permit. The trial court found for Koontz holding the 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  demand and the effects of the proposed land use (commonly known as the Nolan/Dolan analysis). The court of appeals affirmed, but the Florida Supreme Court reversed noting that since the District denied the application and no property was taken, the Nolan/Dolan analysis is not applicable.  Koontz (and later his estate) filed a writ of certiorari which the U.S. Supreme Court granted.

The Court held the Fifth Amendment protects the right to just compensation for property the government takes when owners apply for land-use permits. 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 into voluntarily giving up property for which the Fifth Amendment would otherwise require just compensation. So long as the building permit is more valuable than any just compensation the owner could hope to receive for the right-of-way, the owner is likely to accede to the government’s demand. The “[e]xtortionate demands of this sort frustrate the Fifth Amendment right to just compensation, and the unconstitutional conditions doctrine prohibits them.” However, the Court recognized that development has adverse effects on the public at large and certain conditional grants are permissible, such as dedicated land to widen a roadway to handled additional traffic. To properly balance both realities, the Nolan/Dolan test allows a condition be attached as long as there is a “nexus” and “rough proportionality” between the conditions the government demands and the social costs of the applicant’s proposal. The Court addressed the Florida Supreme Court’s concerns by holding extortionate 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.

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