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The US Supreme Court Wrestles in the Swamp of Off-Site Improvement Obligations and Takings

In 2010, the 9th Circuit (the federal appellate court that includes most of the Western United States) ruled in a case involving the City of West Linn that conditions to development approval requiring off-site improvements, such as the installation of a pipeline or road improvement, were not subject to the same “rough proportionality” obligations imposed for when the government requires acquisition of land. West Linn Corporate Park, LLC v. City of West Linn. The Oregon Supreme Court responding to a series of questions asked by the 9th Circuit as part of its deliberations concluded that where a regulation requires that the owner pay a sum of money, “the regulation is not tantamount to acquisition.” The US Supreme Court declined further review and the West Linn case settled this matter until now.

This past month, however, the Supreme Court heard oral argument in Koontz v. St. Johns River Management District, requiring that court to grapple with the right of government to impose off-site conditions in return for permit approval. Coy Koontz Sr. wanted to develop 3.7 acres of wetlands and protected uplands located in a habitat protection zone controlled by the local St. Johns River Water Management District in Florida. Koontz applied for a permit offering to place his remaining 11 acres of his property into a conservation easement. The District determined that additional mitigation to offset the loss of wetlands was required in addition to dedicating the 11 acres. The District asserted Koontz would likely be required to pay for improvements for these off-site wetlands owned by the District but located elsewhere and said it was open to other alternatives. Koontz refused the District’s specific proposal and his permit was denied.

Koontz filed suit in Florida state court arguing that there was no “essential nexus” or “rough proportionality” between the government request for off-site improvements and the impacts from the proposed development. The state trial court ruled in favor of Koontz finding a taking but the Florida Supreme Court reversed finding that there was no “dedication of real property” and therefore, no taking occurred. In October, 2012, the US Supreme Court accepted the case.

As with the plaintiff in the West Linn case, Koontz argued that the off-site mitigation measures suggested by the district in order to allow the development on his property to go forward were not “roughly proportional” to the impacts from this development and further, these tests apply to conditions suggested by the government in a permit negotiation process but never actually imposed. The District and a number of amici argued that Koontz’s claim was inconsistent with the text and history of the Takings Clause, as well as the Court’s takings jurisprudence, and that no taking could have occurred because no property was actually taken. The brief filed by the amicus American Planning Association argued that “a ruling for Koontz would effectively constitutionalize all run-of-the- mill land use negotiations and risk grinding both the land use process and the judicial system itself to a halt.”

This will be one of the first takings case considered by Chief Justice Roberts. Although one should never read too much into the questions or comments raised at oral argument, they may be telling. One of the most conservative members of the court, Justice Scalia stated that he did not see how a taking had occurred in this case. Digging further into the facts of the case, Justice Ginsburg noted, the district had given Koontz a list of possible options and was willing to continue the discussion. "The record is very clear. The district didn't come back and say take it or leave it," she said. Justice Samuel Alito suggested that he may favor Koontz stating: “There's a danger of the balance tilting too far in favor of government agencies, to the extent that the law limiting the ability of government to impose conditions would only be "a trap for really stupid districts.” Justice Sotomayor found the opposite result from ruling in favor of Koontz: “I see an enormous flood gate here, and one in which we are sending a signal that perhaps states should be more quiet rather than more engaging. They should say no, because anything they offer is going to be seen . . . potentially as an unconstitutional taking.”

It could be that the Supreme Court may not have to reach the limits of the unconstitutional conditions question as the 9th Circuit did in West Linn finding instead that the government did not impose any conditions as result of permit denial. However, the Court could go further finding that since no property was taken, no physical exaction occurred. Mr. Koontz was left with the same “economically viable” wetlands property he had before he sought the permit.

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We regularly update clients about changes in real estate law and on industry trends. This includes briefing clients on legislative proposals in the federal tax, housing and other legal areas affecting their businesses. Staying current enables you to anticipate and prevent legal problems as well as capitalize on new developments.
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