Saturday, December 3, 2011

In Florida, Exactions Limitations Apply Only to Real Property, Not Personal Property

In a recent case, the Florida Supreme Court held that the law of exactions--a part of takings law--only applies to the dedication of real property for public use. St. Johns River Water Mgmt. Dist. v. Koontz, No. SC09-713 (Fla. Nov. 3, 2011). This case has important implications for landowners and city planners in Florida.

The Koontz Decision

In Koontz, a landowner requested permits from his local water management district to develop a greater portion of his commercial property than was authorized under existing regulations. The district agreed to grant the permit if the landowner would deed the remainder of the parcel into a conservation easement and pay for offsite mitigation measures unrelated to the landowner's property. The landowner agreed to the easement term but rejected the offsite mitigation. Consequently, the district denied the permit. The landowner sued, alleging a taking. After more than a dozen years in the Florida courts, the case ended up before the Florida Supreme Court.

The takings clause in the Florida Constitution is more or less equivalent to, or "coextensive" with, the takings clause in the U.S. Constitution. Id. at *2. Therefore, decisions by the U.S. Supreme Court about takings are the law in Florida. The Koontz case implicated two important U.S. Supreme Court decisions: Dolan v. Tigard, 512 U.S. 374, 384 (1994), and Nollan v. California Coastal Commission, 483 U.S. 825, 831-32 (1987). In a post at the Land Use Prof Blog on the Koontz decision, Ken Stahl of Chapman University provided background on Nollan and Dolan:
Some brief background on Nollan and Dolan for those who are not takings geeks: Taken together, the [they] hold that when a regulatory entity demands a condition in exchange for authorizing a use of land that would otherwise be prohibited (known as an "exaction") the condition imposed must have an "essential nexus" with (Nollan) and "rough proportionality" to (Dolan) some anticipated impact of the proposed use of land. Both Nollan and Dolan involved situations where the regulatory authority demanded the landowner physically dedicate some portion of his or her land for public use, and the Court in both cases emphasized that the condition demanded by the regulatory authority required the landowner to forfeit the sacrosanct "right to exclude." As a result, many commentators believed that Nollan and Dolan were limited to circumstances where the "exaction" was a requirement that real property be dedicated for public use, and did not extend, for example, to requirements that landowners pay an "impact fee" or other type of monetary payment in exchange for development permission. 
That interpretation, however, was rejected by one of the most significant lower court decisions to date dealing with Nollan and Dolan, the California Supreme Court's ruling in Ehrlich v. City of Culver City, 911 P.2d 429 (Cal. 1996). There, the court held that Nollan and Dolan did apply to certain types of impact fees, specifically fees imposed on a discretionary, individualized basis. The court emphasized what it saw as the underlying policy rationale of the Nollan/Dolan doctrine, to prevent regulatory authorities from using their monopoly power over the land use permitting process to extort concessions from politically powerless developers. This policy concern, the court noted, would apply equally regardless of whether the exaction was a physical dedication or an impact fee.
After a relatively brief analysis, the Florida Supreme Court concluded that Nollan and Dolan only apply to physical dedications of real property because (1) those cases only involved physical dedications and (2) regulatory agencies would by hamstrung and would likely deny more permits rather than face the uncertainty of negotiations.

The Implications

In the near future, this means that the protections of exactions law do not apply when governments and agencies request personal property, rather than real property, as a condition preceding development. As Robert Thomas pointed out in his blog, Inverse Condemnation, exactions are an important and topical issue these days.

The U.S. Supreme Court recently declined certiorari review of an Oregon case, where a city required a developer to pay money and for infrastructure costs. The developer wanted the city's requirements to be subject to the heightened standard of review set out by the U.S. Supreme Court in Nollan and Dolan. Although there were arguments that Oregon law supported the developer's position, after the case bounced into and out of the federal courts, the Oregon Supreme Court ruled otherwise in its West Linn decision. Just before Supreme Court of the United States denied certiorari, the developer filed a supplemental brief pointing out the Koontz decision here in Florida:
The Florida Supreme Court's decision in Koontz underscores the importance of the issue posed by the petition in this case. Moreover, it demonstrates the deepening divide between the courts such as the Supreme Courts of California and Texas which perceive no principled reason to distinguish between disproportional exactions of personal as opposed to real property and those Courts such as the Supreme Courts of Oregon and Florida, as well as the Ninth Circuit, that erroneously perceive in this Court's decision in Lingle an unstated intent to limit Nollan and Dolan. Only this Court can decide this important conflict and bring clarity to this area of Constitutional law.
The supplemental brief points to the heart of the matter: why should there be any distinction between exactions of personal property and exactions of real property? Unfortunately, because case was denied, we'll have to wait for the U.S. Supreme Court to clarify whether exactions law extends to personal property, as well as real property. Here in Florida, a motion for rehearing was filed on November 18 in the Koontz case. While rarely granted, a rehearing would give the Florida Supreme Court a chance to clarify its decision, which commentators have already said lacks clarity.