Conditions upon land use permits are so ubiquitous that the authority for imposing them can easily be taken for granted. The Supreme Court's decision in Koontz v. St. Johns River Water Mgmt. Dist., 133 S.Ct. 2586 (2013), however, places a significant constitutional limit upon local boards' ability to do so.
Under Koontz, if a local board wants to deny a permit because the applicant will not accede to a condition that requires either the dedication of the applicant's real property or a monetary exaction, such a condition must satisfy two requirements: it must (1) bear a logical nexus to the project, i.e., the condition must be designed to address the effects of the project itself; and (2) be roughly proportionate to the effects of the project. In other words, a local board cannot, merely by invoking its authority under the Police Powers, force a landowner / applicant to defray the cost of public benefits that bear no relationship to her development plan. For example, approval to improve a public way cannot be conditioned on the purchase of a fire truck for a city or town. Nor, assuming that a condition does bear a relationship to the project, can a local board force a landowner / applicant to remediate the effects of her project to an unreasonable degree. For instance, if an intersection has to be redesigned because of area traffic levels, and a proposed project will only generate a small percentage of the overall traffic, the project proponent cannot be compelled to pay for the entire redesign. If a condition required by a local board fails to satisfy either of these standards, it will violate the Constitution and be unlawful.
The holding of Koontz is based upon the "unconstitutional conditions doctrine" and the so-called Nollan / Dolan test, which is itself a "special application" of "the unconstitutional conditions doctrine", Koontz, supra, at 2594. The "unconstitutional conditions doctrine" ensures, in general, that "'the government may not deny a benefit to a person because he exercises a constitutional right.'" Id., at 2594, quoting Regan v. Taxation With Representation of Wash., 461 U.S. 540, 545 (1983). Under Nollan / Dolan, "a unit of 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." Koontz, supra, at 2591.
This test "reflect[s] two realities of the permitting process. The first is that land-use permit applicants are especially vulnerable to the type of coercion that the unconstitutional conditions doctrine prohibits because the government often has broad discretion to deny a permit that is worth far more than property it would like to take. By conditioning a building permit on the owner's deeding over a public right-of-way, for example, the government can pressure an owner into voluntarily giving up property for which the Fifth Amendment would otherwise require just compensation. So long as the building permit is more valuable than any just compensation the owner could hope to receive for the right-of-way, the owner is likely to accede to the government's demand, no matter how unreasonable. Extortionate demands of this sort frustrate the Fifth Amendment right to just compensation, and the unconstitutional conditions doctrine prohibits them." Id., at 2594-2595 (citations omitted).
"A second reality of the permitting process is that many proposed land uses threaten to impose costs on the public that dedications of property can offset. Where a building proposal would substantially increase traffic congestion, for example, officials might condition permit approval on the owner's agreement to deed over the land needed to widen a public road. . . . Insisting that landowners internalize the negative externalities of their conduct is a hallmark of responsible land-use policy, and [the Court has] long sustained such regulations against constitutional attack." Id., at 2595.
"Nollan and Dolan accommodate both realities by allowing the government to condition approval of a permit on the dedication of property to the public so long as there is a 'nexus' and 'rough proportionality' between the property that the government demands and the social costs of the applicant's proposal. [They] thus enable permitting authorities to insist that applicants bear the full costs of their proposals while still forbidding the government from engaging in 'out-and-out ... extortion' that would thwart the Fifth Amendment right to just compensation. Under Nollan and Dolan the government may choose whether and how a permit applicant is required to mitigate the impacts of a proposed development, but it may not leverage its legitimate interest in mitigation to pursue governmental ends that lack an essential nexus and rough proportionality to those impacts." Id. (citations omitted).
Koontz expands Nollan / Dolan in two ways: (1) by applying the test even where a permit application is denied, not merely when an approval is granted conditionally; and (2) by applying the test to monetary exactions. See Koontz, supra, at 2595-2598, 2598-2603. The majority of the Court decided to so expand the doctrine because, otherwise, cities and towns could do an end run around the requirements of Nollan / Dolan simply based upon how they might structure conditions, and the alternative, thus, "would effectively render Nollan and Dolan a dead letter." Id., at 2596.
It is worthy of note that the facts of Koontz pose a fairly egregious case of governmental overreach. In Koontz, the St. Johns River Water Management District, the local authority with jurisdiction under the state Wetlands Protection Act, rejected the applicant's initial proposal to provide 11 acres of conservation land in return for the approval necessary to develop 3.7 acres of upland. Id., at 2593. Instead, the District required that Koontz agree to one of the following in order to obtain the necessary permitting to develop his land: (1) "reduce the size of his development to 1 acre and deed to the District a conservation easement on the remaining 13.9 acres", id.; or (2) "proceed with the development as proposed, building on 3.7 acres and deeding a conservation easement to the government on the remainder of the property, if he also agreed to hire contractors to make improvements to District-owned land several miles away. Specifically, petitioner could pay to replace culverts on one parcel or fill in ditches on another. Either of those projects would have enhanced approximately 50 acres of District-owned wetlands." Id. It is also important to remember that in Koontz the Court failed to decide whether these alternative conditions violated Nollan / Dolan.
Nevertheless, as we frequently represent developers, Koontz is required reading for our practice and provides a useful legal tool to ward against extortionate demands made by local boards.
Written by Nicholas P. Shapiro, Esq., of Phillips & Angley. Edited by Jeffrey T. Angley, Esq. Copyright (c) 2011-2014 by Jeffrey T. Angley, P.C. All rights reserved.
Disclaimer: The information contained in this post is general in nature and for educational purposes only. No personal legal advice is being provided. If you have an actual legal issue that needs to be addressed, you should seek the advice of competent legal counsel. This post does not create an attorney-client relationship between the reader and Jeffrey T. Angley, P.C., Phillips & Angley or their attorneys.