It is not unusual for state and local governments to extract concessions from developers in exchange for necessary development permits. Examples are commonplace and often include traffic mitigation improvements, impact fees, public amenities, and the dedication of open space. However, the United States Supreme Court, in a decision it issued on June 25, 2013,1 further tightened and refined its prevailing view that such exactions, while legal if reasonable, must have a close nexus with and rough proportionality to the impacts of the subject development.2
The facts of Koontz are illustrative. Mr. Koontz purchased a 14.9 acre undeveloped lot, mostly wetlands, in Florida’s St. Johns River Water Management District. Mr. Koontz proposed to develop 3.7 acres, while conserving the remainder. Florida law requires landowners who propose disturbance of wetlands to minimize and replace the resulting environmental damage by creating, enhancing, or preserving wetlands elsewhere. A permit is required for such disturbance.
In his permit application, Mr. Koontz offered to install a dry-bed pond to retain and gradually release storm-water runoff from the proposed building and parking lot, and he offered to deed a conservation easement to St. Johns to prevent development on the remainder of his 14.9 acres. The permitting authority, however, found Mr. Koontz’s offer to be inadequate, and instead offered two different alternatives.
One alternative involved Mr. Koontz reducing his development plan to a single acre, with a deeded conservation easement to St. Johns on the remaining 13.9 acres. The other alternative involved Mr. Koontz making payment to contractors who would be retained to restore approximately fifty acres of wetlands located on other public lands several miles away.
Viewing his initial offer to be reasonably proportional to the impacts triggered by his development proposal, Mr. Koontz refused both options. Thereafter, St. Johns denied Mr. Koontz’s proposal and deprived him of the necessary permits to build. Mr. Koontz then sued St. Johns alleging that the denial of his application was unconstitutional.
The Supreme Court reviewed the facts of Mr. Koontz’s situation and determined that whether conditionally approved or simply denied, conditions of approval and mitigation measures must have a nexus with and a rough proportionality to the impacts of the subject development. The Court further held that unreasonable and unlawful exactions of cash payments, while not the same as exactions of real property rights, also violate the takings clause.
While the Court did not evaluate or judge the specifics of Mr. Koontz’s mitigation offer, or the counteroffers, the Court did sympathize with the longstanding plight of developers – “So long as the building permit is more valuable than any just compensation the owner could hope to receive for the [concession], the owner is likely to accede to the government’s demands, no matter how unreasonable. Extortionate demands of this sort frustrate the Fifth Amendment right to just compensation, and the unconstitutional conditions doctrine prohibits them.” In the end, the Court held that “the government’s demand for property from a land-use permit applicant must satisfy the requirements of [nexus and proportionality] even where the government denies the permit and even when its demand is for money.”
In conclusion, the Supreme Court recognized that land-use permit applicants are “especially vulnerable to the type of coercion that the unconstitutional conditions doctrine prohibits.” Koontz is an important restatement of the prohibition against extortionate demands that cross the lines of nexus and proportionality. Simply put, while all developers must reasonably mitigate their impacts upon municipal resources and abutting owners, this latest land development decision gives developers additional ammunition against unreasonable takings of private property rights.
1. Koontz v. St. Johns River Water Management Dist., 570 U.S. ___ (2013).
2. The National Association of Home Builders (NAHB) led a coalition of 16 associations in filing an amicus brief, which discussed the importance of establishing reasonable limits on the government’s ability to impose conditions on the issuance of permits.
*Ari B. Pollack is admitted in New Hampshire and Massachusetts.
*Caroline Leonard is admitted in New Hampshire.