U.S. Supreme Court Rules Government Can Be Guilty of Taking When Denying a Land Use Permit or Requiring Monetary Payment as a Condition of Approval (September 2013)

Land developers will find it easier to challenge coercive exactions and unreasonable impact fees requested by governmental authorities during the land use permitting process in the aftermath of the U.S. Supreme Court's decision in Koontz v. St. Johns River Water Management District, 570 U.S. ____; 133 S.Ct. 2586 (2013).

The Court held that a demand for property from a land use permit applicant as a condition of approval can constitute an unlawful taking even when the government denies the land use permit. It does not matter that the governmental decision-maker might have been able to deny the application outright in the exercise of its discretion. The critical inquiry is whether the proposed condition of approval has a "nexus" and "rough proportionality" between the government's demand and the anticipated effects of the applied-for land use. If the project applicant rejects the proposed condition because it does not meet the "nexus" and "rough proportionality" tests, the project applicant can bring a lawsuit claiming the government's condition is tantamount to a taking of its property.

The Court also held that a local government's demand for money - for example, impact fees - must satisfy the "nexus" and "rough proportionality" tests. In so holding, the Supreme Court took its takings jurisprudence beyond physical or regulatory takings of private property. This portion of the Court's holding is extremely important because, as local governments find themselves with less money for capital improvements and operations, governmental decision-makers have been tempted to solve fiscal shortfalls with impact fees. The Koontz decision should limit the size of impact fees so that such payments are more closely related to the environmental impacts of development.

The facts of the case were straightforward. Koontz applied for permits to develop a portion of his property from the St. Johns River Water Management District. The District required permit applicants who desired to build on wetlands to offset any environmental damage that might be caused by the proposed development. Koontz offered to deed to the District a conservation easement on nearly three-quarters of his property as mitigation. The District refused Koontz's offer, stating that it would approve his requested land use permit only if Koontz (1) reduced the size of his development and, among other things, deeded to the District an even larger conservation easement area or (2) hired contractors...