US Supreme Court Limits Local Government Land Use "Extortion"

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On June 25, the United States Supreme Court announced an important decision on the ability of local governments to extract environmental (and presumably other) mitigations from private developers seeking land use entitlements. The case, known as Koontz v. St. John’s River Water Management District, severely limits this practice.

In the Koontz case, a Florida landowner named Coy Koontz proposed a development on land containing wetlands that featured a conservation easement on nearly three-fourths of his land. The St. John’s River Water Management District rejected this proposal, and proposed that he either; 1) reduce the size of his development even further; or 2) hire a contractor to make improvements to district-owned wetlands several miles away. Koontz disagreed and filed suit under a state law that provided monetary damages for a government action that is an “unreasonable exercise of the state’s police power constituting a taking without just compensation”. (Note: Washington has a similar statute)

The trial court and Court of Appeals held in favor of Koontz, citing two cases in which there was no “essential nexus” between the extractions demanded by the local government and the public health, safety and welfare. The Florida Supreme Court reversed, because in those cases, the permits were denied, while in this case, they were only conditioned on Koontz either dedicating more land or paying for off-site mitigation.

The US Supreme Court would have none of it. In a split decision, they held that in order to be constitutional, there must be an “essential nexus” between a land use extraction demanded from a landowner and a public benefit that is “roughly proportional” to the impacts of the development. This has been the law since 1987, but in this case, the Court expanded this principle to the denial of a permit, as opposed to the conditioning of a permit. In other words, local governments cannot extract land use mitigations that are disproportionate to the development’s impacts by denying a permit that they think does not suffice.

The language of the majority opinion indicates how strongly the Court felt about this principle. In the Court’s words, the holding “vindicates the Constitution’s enumerated rights by preventing the government from coercing people in to giving (their Constitutional rights) up”. In another passage, the Court stated that, “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.”. The notions of “coercion” and “extortion” are not words to be taken lightly in this context.

The decision is significant not only for these strong words, but also because it introduces an additional test for assessing the constitutionality of a land use extraction – the “unconstitutional conditions doctrine”. In past cases, the Court has either looked at the “essential nexus” test described above, or at whether or not the land use exaction deprives the property of 100% of its value. In either case, the land use exaction was unconstitutional. The Koontz case adds the additional legal theory of the unconstitutional conditions doctrine.

Property owners in Washington facing disproportionate land use exactions should keep this case in mind.

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