Local Environmental Law: Imposed Versus Proposed Exactions

Local governments routinely attach conditions, or “exactions,” to development permits in an effort to address the environmental and infrastructural impacts of individual projects. However, presumably to protect landowners from exactions that are either unrelated or disproportionate to the problems caused by their proposed development, the U.S. Supreme Court curtailed the exercise of this power in its conveniently rhyming Nollan and Dolan decisions by establishing a constitutional takings framework unique to exaction disputes. Under this framework, it is the government—as the defendant— who has the burden of proving that the exaction bears both an “essential nexus” to and “rough proportionality” with the development’s impacts.

Several outstanding questions as to the applicability of this stringent standard continue to cloud governments’ use of the exactions tool. The Florida Supreme Court recently addressed two such questions in the matter of St. John’s River Water Management District v. Koontz. The first question—whether the Nollan/Dolan test applies to exactions beyond those that require public occupation of private lands—has been the subject of considerable debate in takings literature. The Florida Court answered this question in the negative, siding with a considerable majority of state and lower federal courts that have addressed the issue. The Court’s reasoning on this issue could serve as fodder for a future post. But the second question—whether the Nollan/Dolan test is applicable at the point in time when an exaction is merely proposed—has received far less attention to date and will serve as the subject here.

In Koontz, a permit applicant sought to dredge and fill wetlands that were part of a designated riparian habitat protection zone. While the Water Management District could have exercised its authority to deny this request, it instead identified several possible exactions that, if accepted by the applicant, could allow for the development to proceed. The applicant, however, refused these proposals, and the government ultimately denied the development request outright. At the appellate level, the developer prevailed on the theory that the government had proposed exactions that amounted to an unconstitutional taking for which compensation is due.

Nearly all of the many lower court applications of the Nollan/Dolan test have addressed final permit approvals. Indeed, prior to Koontz, it appears that in only three instances—one federal district court opinion, one federal circuit court opinion, and in a decade-old dissent from a denial of certiorari authored by Justice Scalia—did members of the judiciary assert that a proposed exaction could, in and of itself, implicate the Takings Clause. And across these three cases, the opinions provide thin and contradictory guidance on the complex questions surrounding whether such a novel claim presents a legitimate takings issue.

The Florida Supreme Court ultimately decided in Koontz that proposed exactions are not subject to the Nollan/Dolan test. (Takings buffs may be interested to hear that the author of the majority opinion in Koontz—Justice R. Fred Lewis—authored a scathing dissent to the lower court opinion that was later affirmed by a unanimous U.S. Supreme Court in Stop the Beach Renourishment, Inc. v. Fla. Dep't of Envtl. Prot. in 2010.) However, it is somewhat surprising that the Court did little to confront the rationale set out in any of the three preceding cases on the topic. It is even more surprising that the Court dedicated only two pages of its opinion to this imposed-versus-proposed issue, and provided little justification for its conclusion. The Court said only that applying the Nollan/Dolan test to proposed exactions would prompt local governments to issue more outright denials “rather than risk the crushing costs of litigation.”

One might contend that applying the same tests to all conceivable exactions, whether they are proposed prior to an outright permit denial or imposed in a final development approval, makes sense. Otherwise, this argument might suggest, property owners would be beholden to the government’s extortionate exaction propositions, lest they side with the empty alternative of an absolute development prohibition. There is an instinctive appeal to the argument that the denial of an application based on refusal to comply with an exaction demanded by the government is indistinct from a permit conditioned on that exaction.

However, there are at least three reasons to suggest that such an approach may amount to an over-simplification of, and an ultimately unsound resolution to, what is in fact a complicated theoretical problem. First, where a proposed exaction is refused or withdrawn, nothing has been "taken" from the applicant that can be protected by the Takings Clause. Second, judicial speculation on hypothetical exactions and their hypothetical economic impacts poses a wholly unmanageable system that could require courts to review countless cases that do not present actual controversies. Third, and arguably most importantly as a matter of legal policy, burdening governmental entities with possible takings liability for statements made during negotiation sessions will place a chilling effect on regulator-landowner coordination.

If you are interested in this topic, I expound on the above ideas in this pre-Koontz article. In addition, Mark Fenster (Florida) and David Callies (Hawaii) are publishing post-Koontz symposium essays on the topic, drafts of which are posted here and here.

The Florida Supreme Court recently denied Koontz’s motion for re-consideration, leaving him until April 3, 2012 to decide whether to file a petition for certiorari with the U.S. Supreme Court. Stay tuned to the Environmental Law Professors Blog for any developments in this important case.

-Tim Mulvaney ([email protected])