Government Can’t Make Developers "Show Them the Money"

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by: Anthony F. Della Pelle

26 Jun 2013

Big Win For Property Rights in US Supreme Court

Yesterday, the United State Supreme Court issued a decision which has caused property rights advocates and developers to rejoice, and is likely to become a historic property rights precedent for years to come. The 5-4 decision in Koontz v. St. Johns River Water Mgmt District, No. 11-1447 (copy available here) limits the type and scope of “exactions” that can be placed by local government upon developers in exchange for land development permits and approvals.

The Koontz case involves a 15 acre property near Orlando, Florida, which the owner tried to develop for nearly 20 years. The property consisted mostly of freshwater wetlands. The owner sought to develop a portion of the property by dredging and filling it to construct a building and parking lot but, under Florida law, these activities required a “special permit” that local land-use agencies could condition upon mitigation efforts by the owner to offset any environmental damage that the development would cause. Koontz had offered to permanently conserve the rest of his land from development in exchange for the permit to develop 3.7 acres. The St. Johns River Water Management District objected to the as insufficient, instead proposing that Koontz he develop only one acre and conserve the rest, or that he pay for other wetlands mitigation efforts several miles away. Koontz turned down both options and sued instead, the litigation lasted more than 10 years, outliving Koontz who passed away during the process.

While the Florida trial court had awarded Koontz more than $300,000 in damages for the inability to use his property, the Florida Supreme Court reversed, finding that there was no “taking” of property, since only money was demanded.

The United States Supreme Court, by a 5-4 vote, held it was irrelevant that no real property was “taken” and that monetary exactions are subject to the same “essential nexus” and “rough proportionality” requirements set forth in the famous US Supreme Court cases Nollan and Dolan , which standards have long been applied to property exactions and require that government can’t demand some concession from a property owner that is either unrelated to the harm caused, or disproportionate to it. The Court also held that a property owner need not accept the government permit in order to challenge it.

Justice Samuel Alito authored the opinion and wrote:

“It makes no difference that no property was actually taken in this case. 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.”

So the Fifth Amendment rises once again in Koontz.

Where it leads us will be very interesting as the opinion has already generated comment from various property rights advocates lauding it as a milestone, and criticism from environmental and planning concerns who are worried that Koontz will deprive local governments of the ability to insure that the costs of new development are fairly borne by the developers and users of that development.

More on this decision and its impacts is available on the Inverse Condemnation blog of our Owners Counsel of America colleague, Robert Thomas, who filed an amicus brief on behalf of Owners Counsel in the US Supreme Court case. Robert is also leading an American Bar Association webinar next month to update practitioners on Koontz and its implications.