Florida Supreme Court: Nollan/Dolan Limited to Dedications of Real Property

For all of our takings geeks out there (you know who you are), and courtesy of the ABA State and Local Government E-News briefs comes a potentially important decision on the reach of the Supreme Court's exactions jurisprudence (aka Nollan/Dolan).  The case is St. Johns River Water Mgmt. Dist. v. Koontz, No. SC09-713 (Fl. Nov. 3, 2011) (and it is attached).  It holds, in short, that the Nollan/Dolan line applies only to exactions requiring the dedication of real property for public use.

Some brief background on Nollan and Dolan for those who are not takings geeks: Taken together, the U.S. Supreme Court's decisions in Nollan v. California Coastal Comm'n., 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1994), 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.

Now, in St Johns, the Florida Supreme Court holds to the contrary:  Nolllan/Dolan apply only to physical dedications.  The court reasons:

1)  Nollan and Dolan themselves both involved physical dedications.  And in dicta in two recent decisions, Monterey v. Del Monte Dunes, 526 U.S. 687 (1999) and Lingle v. Chevron, 544 U.S. 528 (2005), the United States Supreme Court has described Nollan and Dolan as applying to exactions requiring dedications of real property to public use. 

2)   Expanding the exactions jurisprudence beyond physical dedications would unduly hamstring regulatory entities in negotiating with developers and would likely result in more outright denials of development approval (which would not be subject to Nollan/Dolan at all).

Color me unpersuaded, particularly when comparing St Johns with the much more nuanced opinion in Ehrlich.  Ehrlich makes a principled argument for treating physical dedications and impact fees similarly under Nollan and Dolan, although one may not necessarily agree with its principle (Developers are politically powerless?  I don't think so).  St Johns never articulates why physical dedications should be treated differently from impact fees under Nollan and Dolan, other than mechanically applying some pretty meager dicta in Lingle and San Remo while confining Nollan and Dolan to their facts.  The St Johns court could have said something about the fundamentality of the right to exclude, as I mentioned above, but did not do so.  Instead, it made a public policy argument that is less a reason to limit Nollan/Dolan to physical dedications than a reason to scrap the doctrine entirely.  After all, any limitation on exactions is going to limit regulators' bargaining power and incline them toward more denials.  Will a limitation on exactions involving physical dedications hamstring regulators less, or incline them to issue outright denials less frequently, than a limitation on impact fees?  Or is the court more concerned about landowners' rights in the former case than the latter?  The court does not say.

[Update: After taking another look at St. Johns, some brief clarification is in order.  The facts in St Johns are a little convoluted.  The district initially proposed an exaction that would require dedication of some real property, but the developer refused and the permit was denied.  The court held that Nollan and Dolan did not apply because 1) the permit was never issued and 2) there was no dedication of real property.  It is possible to read this as a single holding: Nollan and Dolan do not apply where there is no dedication of property because a permit is never issued.  However, as I read the opinion, these are two separate holdings: Nollan/Dolan do not apply where a permit is not isssued; and Nollan/Dolan do not apply in the absence of an exaction requiring a dedication of real property. 

Where matters get really confusing is in the court's public policy reasoning.  As I mentioned in the initial post, the court says that Nollan/Dolan needs to be so limited so as to avoid unduly confining regulatory discretion and to avoid incentivizing regulators to issue more denials rather than negotiating with developers.  This reasoning is apparently intended to apply to both of the holdings, although as the initial post points out, it doesn't really make sense as a basis of distinguishing impact fees from dedications.  It makes more sense in explaining why Nolan/Dolan should not apply to outright denials where no negotiating is ever involved.  But my underlying point remains: the court has given little reason why Nollan and Dolan should apply only to dedications.  Sorry for the initial confusion.]

Ken Stahl