Among the handful of high-profile cases decided by the Supreme Court today, was one evaluating the government’s ability to exchange a development permit for money. The Court’s ruling was seemingly designed to check the government’s ability to entice property owners to give up their constitutional right to their property, but could the decision result in fewer land use options for property owners?
Today, in Koontz v. St. Johns River Water Management District, the Court ruled that a government must meet a heightened scrutiny when demanding money for a development permit. If a property owner would like to use his property in a way that conflicts with permitted uses for the land, the government could allow it through the use of an exaction. In exchange for receiving a permit, the property owner will give the government a piece of his land to offset harms caused by the new use. The property given to the government is used to mitigate, or internalize, the negative effects, or externalities, of the new use. So for example, if a property owner wants to build a development that is much denser than what is allowed, he can deed a portion of his property to the government to build sidewalks or widen adjacent roads.
The exaction, however, must meet the test laid out in the Dolan and Nollan cases. The criteria requires there to be an “essential nexus” and “rough proportionality” between what the government asks for and the reason why the use was not permitted. Nollan involved the government asking the property owner to give it an easement across the owner’s land so people could reach the beach in exchange for a permit allowing the owner to build a taller structure. The Court thought this deal failed the essential nexus test because what the government was asking for had nothing to with the reason why the owner could not build a taller structure in first place. Zoning prohibited the owner from building taller to prevent the blockage of ocean visibility. However, the requested easement dealt with access to the beach not visibility of the beach, therefore there was no essential nexus. The “rough proportionality” test attempts to guarantee that what the government is asking for is not excessive. In Dolan, the Court ruled that demanding the property owner allow a public greenway and bike path in exchange for building a larger store and parking lot was excessive. Though there was an “essential nexus” between a parking lot, larger store, and bike path (Chief Justice Rehnquist agreed that a bike path offsets the additional drivers on the road caused by increased parking) the government was asking for too much.
To “get around” these requirements, governments started asking for money instead of real property. Prior to today’s ruling, monetary-based exactions were not subject to the Nollan/Dolan criteria, so essentially the government could ask for anything. The majority opinion, written by Justice Alito and joined by Justices Scalia, Thomas, Kennedy, and Roberts states that exactions involving monetary property must be subject to the Nollen/Dollen test as a means of preventing governments from unduly enticing property owners to give up their property in exchange for a permit. The conservative justices are protecting property owner’s rights by restricting the government’s ability to weasel them out of these rights. I agree with Justice Alito in his reaffirmation of the idea that responsible land use development involves mitigating the harmful effects of certain developments and therefore the government should have the right to ask for something in exchange for allowing an otherwise prohibited use. Based on this, the government shouldn’t be allowed to ask for whatever it wants; there should be some link between what they ask for and the harms they are attempting to mitigate. In this sense the Court does a great job of ensuring that when a government asks for money in exchange for a permit, the money must be “roughly proportional” to the harm caused and it must be used in such a way that creates an “essential nexus.” However, the ruling could make governments less willing to negotiate with property owners thereby restricting owners to certain uses. With respect to this, the dissent, authored by Justice Kagan and joined by Justices Ginsberg, Breyer, and Sotomayor, felt that it would be too difficult to apply the Nollan/Dolan standard to monetary exactions and because of this difficulty all parties would be severely burdened.
An exaction only occurs when the property owner wants to build something that is absolutely prohibited. The government has no obligation to give the property owner a permit and it would be perfectly legal to deny a permit. But the exaction allows the government to make an exception. It allows the government to be more flexible and gives the property owner more options. If the property owner wants a permit that would negatively affect 15 acres of land, but the property owner doesn’t have enough land or the right land to satisfy the “rough proportionality” and “essential nexus” test, it gets a bit more complicated. Prior to today, in this situation, the government could just ask for money in exchange for a permit. In addressing this issue, the Court ensured that this money must be used for certain activities, but it also assumed the government is always acting nefariously and needs to be checked. It acts like the government is making property owners give up their land or money, but the exchange is for a permit that the property owner never had a right to! In some circumstances the government may be enticing the owner to give up property, but the enticement is for a permit above and beyond what the zoning ordinance allows – it’s for a privilege.
Adding restrictions to the exaction process invites more litigation and could result in governments simply refusing to entertain the idea of any exchange. This hurts the property owner’s ability to get what he wants and hurts the government’s ability to be flexible in managing land use. The Court’s decision makes sense and adds a logical check on the government, but it will be interesting to see how it affects the relationship between property owners and the government.
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