By Peter Coyle, Larkin Hoffman
From The Voice: Amidst the release of several major decisions dealing with social policy questions at the close of its term last month, the U.S. Supreme Court released a decision likely to have a profound impact on state and local land use policy in Minnesota.
In the case of Koontz v. St. Johns River Water Management District, the Supreme Court found that a local water management district’s denial of a land use application could give rise to a “takings” claim based on the local government’s proposed conditions of approval, including a required financial contribution by the landowner to an off-site drainage project unrelated to the proposed project.
It is settled law that a regulation of land that is too restrictive, can effectively “take” property from its rightful owner; under the Koontz decision, a taking can also arise based on excessive conditions even if the project is denied or when the “taking” is actually a requirement that a permit applicant pay certain costs unrelated to the project for which approval is sought.
Coy Koontz, Sr. owned a 14.9-acre tract of land in Florida, portions of which were in a protected wetland area; out of his total acreage, Koontz sought to develop 3.7 acres. State and local laws required that Koontz mitigate any adverse impact to wetlands caused by development. Koontz applied for a permit for development of his land; as a form of mitigation, he offered to deed to St. Johns River Water Management District (“District”) a conservation easement on the remainder of his land (11.2 acres), preventing any future development of it. The District refused to grant the permit and countered with an offer to approve a permit under one of two conditions: Koontz could develop only one (1) acre provided he granted the District an easement over the remaining 13.9 acres; or Koontz could proceed with his 3.7-acre plan if he agreed to hire contractors to construct wetlands on District-owned land (unrelated to the Koontz proposed development) while also granting the District a conservation easement over the remainder of his property. Koontz felt the District’s demands were excessive and refused to accept them; consequently, his application was denied. Thereafter, the District’s denial was challenged in court.
The “takings” precedent for this issue was previously established by the Supreme Court in Nolan v. California Coastal Comm’n and Dolan v. City of Tigard. In Koontz, the Supreme Court summarized those holdings, stating that the government “may not condition the approval of a land-use permit on the owner’s relinquishment of a portion of his property unless there is a ‘nexus’ and ‘rough proportionality’ between the government’s demand and the effects of the proposed land use.” The District argued that the precedent of Nolan and Dolan did not apply for two reasons: first, because Koontz’s application was denied and the conditions were never imposed, there was no “taking” of land; and second, a demand for money does not give rise to a takings claim under Nolan and Dolan. The Supreme Court rejected the District’s objections, finding that the proposed conditions of approval were “extortionate”.
The Court unanimously held that denial of Koontz’s application was insufficient to shield the District from a regulatory takings claim. Despite the fact that Koontz never suffered a physical taking as the conditions were never imposed, the excessive demands placed on his permit application violated the Takings Clause of the U.S. Constitution. According to the Court, the conditions themselves impermissibly burdened Koontz’s Fifth Amendment right not to have his property taken without just compensation. Additionally, the Court noted that the conditions imposed were coercive in nature and violated the Constitutional Conditions doctrine which forbids the government from forcing people into giving up their enumerated constitutional rights. (Minnesota law prohibits a government agency from compelling the forfeiture of legally-protected non-conforming use rights in exchange for approval of an unrelated land use application.)
As to the monetary demand sought to be imposed by the District, on a 5-4 vote, the Supreme Court determined that monetary exactions imposed in connection with a land use application can be a considered regulatory taking when directly linked to a specific parcel of property. The Court expressed concern that if monetary exactions are not considered takings, the government would be free to use its substantial police power to pursue governmental goals that have little or no connection (“nexus”) or are out of proportion to the proposed use of land, whereas physical land exactions are prohibited under the Takings Clause.
The implications of Koontz, while conjectural, could prove to be significant for landowners in Minnesota. First, the Minnesota Supreme Court has previously determined that the Minnesota Constitution affords broader protections than does the U.S. Constitution. Second, under Minnesota law, local governments are required to demonstrate a connection or “nexus” between a “fee or dedication” when considering a land use application. Moreover, such “fee or dedication must bear a rough proportionality to the need created by the proposed subdivision or development.” MS 462.358, subd. 2c. Unfortunately, far too often local governments ignore the nexus and proportionality requirements when considering conditions of approval for a land use application.
Some communities seek to impose “street utility” fees that are not authorized by statute and prohibited under the Minnesota Supreme Court’s Country Joe decision. Other local jurisdictions impose park fee or dedication requirements on new developments that bear no relationship to the actual impact of the development on the local park system. Still others demand land dedications for future public uses that are unrelated to the proposed project and may never be built. According to Justice Samuel Alito, given the choice of fighting excessive restrictions or proceeding with their project, “[s]o long as the building permit is more valuable than any just compensation the owner could hope to receive…the owner is likely to accede to the government’s demands, no matter how unreasonable.”
Mr. Coyle is a land use attorney at Larkin Hoffman Daly & Lindgren, Ltd. He advises landowners, developers and builders on land use regulatory matters, including those raised in the Koontz decision, as a primary component of his practice. The author received research assistance from Martha Kramer, a law clerk at Larkin Hoffman.