Sixth Circuit Applies Unconstitutional Conditions Takings Test to Nashville's Sidewalk Ordinance

The Sixth Circuit ruled that Nashville's requirement that landowners who seek building permits grant an easement and construct a sidewalk is subject to the unconstitutional conditions test, and not the regulatory takings test, under the Takings Clause.

The ruling, along with a key concession by Nashville, means that Nashville's sidewalk ordinance constitutes a taking, and that Nashville must provide just compensation (to be determined on remand). (That doesn't mean that every sidewalk ordinance, or the like, necessarily constitutes a taking, however, even under the unconstitutional conditions test. That's because Nashville didn't argue this point. More on that below.)

The ruling weighs in on a hot issue in the state courts around similar conditioned permit requirements: whether those requirements are subject to the (more rigorous) unconstitutional conditions test, or the (less rigorous) ordinary regulatory takings test. The Sixth Circuit ruled that Nashville's sidewalk ordinance is subject to the unconstitutional conditions test.

The case, Knight v. Metropolitan Government of Nashville, arose when, in order to create more sidewalks, Nashville required property owners who seek a building permit to grant an easement on their property and construct a sidewalk (or pay an "in-lieu" fee that the city would use to build sidewalks elsewhere). Property owners sued, arguing that the requirement constituted an uncompensated taking. In particular, they said that the sidewalk requirement constituted an unconstitutional condition on a building permit.

In order to assess this kind of case and determine whether a condition constitutes a taking, courts use a three-part approach. First, they ask if the condition would qualify as a taking if the government required it directly. If not, there's no taking. But if so, next, the government must demonstrate a "nexus" between the condition and the development. (The condition must be related in kind to the development.) Finally, the government must establish a "rough proportionality" between the condition and the development, so that the condition's burdens on the property owner approximate the development's burdens on the community. (The condition must be related in magnitude to development's costs to the community.) This three-part test comes from Nollan v. California Coastal Commission, Dolan v. City of Tigard, and Koontz v. St. Johns River Water Management District. If the government fails to show a "nexus" or "rough proportionality," the condition is a taking (assuming it's for public use), and the government must pay just compensation.

Nashville countered that the sidewalk requirement was an ordinary regulation, subject to the Court's regulatory takings test. Nashville claimed that because the sidewalk ordinance was "legislative" (that is, imposed on all property owners by the city council), and not "adjudicative" (imposed by zoning officials on individual property owners on a case-by-case basis), the ordinance looked more like an ordinary regulation, and not like an exaction in exchange for a benefit.

In order to assess this kind of case and determine whether a regulation constitutes a taking, courts look to the nature of the regulatory scheme and its effects on the property owner, among other considerations, and, using a kind of totality-of-the-circumstances approach, determine whether the regulatory scheme goes too far. Penn Central Transportation Co. v. New York City. If so, the regulatory scheme is a taking, and the government must pay just compensation.

The court sided with the property owners. It said that nothing in the Taking Clause's history or case-law supported Nashville's claimed distinction between a "legislative" condition and an "adjudicative" one, and that Nashville's sidewalk ordinance looked more like a typical exaction in exchange for a government benefit.

The court then noted that Nashville didn't even bother to argue that the sidewalk ordinance satisfied the "nexus" and "rough proportionality" test. As a result, the court assumed that the ordinance constituted a taking and remanded the case for a determination of an appropriate remedy.

But note that the court's ruling turned on Nashville's concession. This doesn't mean that every sidewalk ordinance (or the like) constitutes a taking, even under the Nollan/Dolan test. The court itself wrote that the "answer is not obvious," noting that dicta in Dolan said "that 'dedications' for 'sidewalks' are often 'reasonable' conditions on permits."