Knock it Off! The Court Sends a Message to State Regulators in Koontz v. St. Johns River Water Management District

Brian Lindsey, J.D./C.L. 2014, Paul M. Hebert Law Center, Louisiana State University. Senior Associate of the LSU Journal of Energy Law and Resources, Volume II.

Land developers scored a partial victory in their battle against burdensome land use permitting requirements in the recent case of Koontz v. St. Johns River Water Management District.[1] In this case, the Supreme Court expanded Nollan v. California Coastal Commission[2] and Dolan v. City of Tigard,[3] which together limit government infringement on property development rights, as applied to states seeking private landowner exactions in the development permitting process.[4] Thanks to Koontz, nearly any permit exaction or condition must form an “essential nexus and rough proportionality” to the “effects of the proposed land use.”[5]

In Koontz, the landowner, Koontz, sought to develop a 14.9 acre tract of land east of Orlando, Florida.[6] Koontz planned to preserve eleven acres for conservation by deeding a restrictive easement to the St. Johns River Water Management District (“District”).[7] The District countered Koontz’s proposal with two options. First, Koontz could restrict development to all but one acre and install a more costly drainage system. The second option would approve the submitted plan, but suggested Koontz should fund an offsite mitigation project to fifty acres of District held wetlands.[8]

Seeking to escape the essential nexus and rough proportionality requirement of Nollan andDolan, the District did not condition permit approval on Koontz’s funding any offsite projects.[9] Instead, the District’s policy was to not condition permit approval on the funding of any particular offsite project and to consider alternative offsite projects proposed by the applicant.[10]

Koontz brought suit under a Florida state statute seeking compensation for an unreasonable exercise of the state’s police power through a taking without just compensation.[11] The case eventually reached the Florida Supreme Court, which held that Nollan and Dolan did not apply, finding that the permit denial was due to Koontz’s refusal to make concessions, not to the District’s conditions for permit approval.[12]Second, the court found a distinction between a demand for money and a demand for real property rights, in that a demand for money does not give rise to a takings claim.[13]

The United States Supreme Court’s majority, however, rejected that distinction, and held that Nollan and Dolan apply whether the government “approves a permit on the condition that the applicant turn over property or denies a permit because the applicant refuses to do so.”[14] In the majority’s view, any contrary rule would enable the government to circumvent the protections afforded by Nollan and Dolan“simply by phrasing its demand for property as conditions precedent to permit approval.”[15]

Under Koontz, the government permitting process may not “impermissibly burden the right not to have property taken away.”[16]Thus, the government may not “leverage” reduction in development impact “to pursue governmental ends that lack an essential nexus and rough proportionality to those impacts.”[17]This governmental restriction applies whether the government denies the permit, or demands money.[18]

Unfortunately for land developers seeking an end to state circumvention of Nollan and Dolan, the Court acknowledged that where the issue is the denial of a permit in the face of a disproportionate demand, there has been no taking.[19] Therefore, a state action may excessively burden a real right, while not arising to a taking requiring just compensation.[20]Hence, where there is a disproportionate or nexus-lacking permitting demand, but no taking, the availability of a monetary remedy does not rest in federal constitutional law, but on the cause of action relied upon by the landowner.[21] As Koontz had sued under state law, which may provide the compensation remedy, the Court did not search for a federal constitutional remedy.[22]

For developers, the good news from Koontz is that permit requirements and monetary permit exactions are subject to federal constitutional scrutiny,[23] where there is a “direct link between the government’s demand and a specific parcel of real property.”[24] Similarly, the case does not hold that just because an exaction offends those federal constitutional principles articulated in Nollan and Dolan, compensation is owed as a matter of federal constitutional law. If state governments should take one thing away from the holding in Koontz, it is the importance of creating a state-law cause of action for a developer to seek compensation, as without a state provided remedy, they risk a federal court drafting one for them.