Koontz v. St. Johns River Water Management District

Oral argument: 
January 15, 2013
Court below: 

In 1972, Coy A. Koontz, the petitioner, purchased a vacant lot consisting of 14.9 acres. Due to Florida regulations, all but 1.4 acres of Koontz’s property became a Riparian Habitat Zone, which could not be developed without permission from St. Johns River Water Management District, the respondent. In 1994, Koontz applied for a permit to develop 3.7 acres of this property. After investigating the property, St. Johns River Water Management District agreed to approve the permit if Koontz would agree to one of two conditions: 1) deed the remainder of his property into a conservation area and perform offsite mitigation by either replacing culverts located four and a half miles from his property or plugging drainage canals on a property located seven miles away from his property; or, 2) reduce development to one acre and turn the remaining 13.9 acres into a deed-restricted conservation area. Koontz refused to accept either of these conditions and St. Johns River Water Management District denied the permit. Koontz brought a lawsuit claiming an improper exaction of his property and the case has been through several appeals before the United States Supreme Court granted certiorari. Koontz argues that the constitutional standards set out in Nollan and Dolan should apply to this case and similar cases so that the government can be held liable for improper taking when the government refuses to issue a land-use permit on the sole basis that the permit applicant did not accede to a financial or public service condition. St. Johns River Water Management District argues that the constitutional standards set out in Nollan and Dolan should not apply to this case and similar cases where the government did not actually take any property from the landowner. This decision has the potential to drastically modify takings jurisprudence with regard to exactions. 

Questions as Framed for the Court by the Parties 

  1. Whether the government can be held liable for taking when it refuses to issue a land-use permit on the sole basis that the permit applicant did not accede a permit condition that, if applied, would violate the essential nexus and rough proportionality tests set out in Nollan v. California Coastal Commission, 483 U.S. 825 (1997), and Dolan v. City of Tigard, 512 U.S. 374 (1994); and
  2. Whether the nexus and proportionality tests set out in Nollan and Dolan apply to a land-use exaction that takes the form of a government demand that a permit applicant dedicate money, services, labor, or any other type of personal property to a public use?

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Issue(s)

Whether the constitutional standards set out in Nollan and Dolan apply so that the government can be held liable for an improper taking when the government refuses to issue a land-use permit on the sole basis that the permit applicant did not accede to a condition to dedicate money, services, labor, or any other type of personal property to a public use. 

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Facts

In 1972, Koontz, the petitioner, purchased a vacant lot, which totaled to 14.9 acres. See St. Johns River Water Mgmt. Dist. v. Koontz, 77 So.3d 1220, 1223 (Fla. 2011). Shortly thereafter, the Florida Legislature enacted the Water Resources of Act of 1972 (“WRA”) and, in 1985, the Warren S. Henderson Wetlands Protection Act (“WHWPA”). See Brief for Respondent, St. Johns River Water Management Dist., at 4-5. These acts gave each water management district jurisdiction to control the use of private property containing wetlands and uplands suitable for fish and wildlife habitat. See Brief for Petitioner, Koontz, at 3. Because of these acts, all but 1.4 acres of Koontz’s property became a Riparian Habitat Protection Zone (“RHPZ”), which lies within the jurisdiction of St. Johns River Water Management District (“St. Johns”), the respondent. See Koontz, 77 So.3d at 1223-24. In order to develop his property within the RHPZ, Koontz must obtain a permit from St. Johns. Id.

In 1994, Koontz applied for a permit to develop 3.7 acres of this property. See Koontz, 77 So.3d at 1224. After investigating the property, a staffer for St. Johns agreed to recommend that Koontz’s permit be approved if Koontz would agree to one of two conditions: 1) deed the remainder of his property into a conservation area and perform offsite mitigation by either replacing culverts located four and a half miles from his property or plugging drainage canals on a property located seven miles away from his property; or, 2) reduce his development to one acre and turn the remaining 13.9 acres into a deed-restricted conservation area. Id. Koontz agreed to deed the remainder of his property into a conservation area but refused to perform the off-site mitigation or to reduce his development from 3.7 acres to one acre. Id.Because of Koontz’s denial, St. Johns denied Koontz’s permit request stating that his development would adversely impact the RHPZ fish and wildlife and that his proposed mitigation was insufficient. Id. 

Koontz brought a lawsuit against St. Johns claiming that St. Johns improperly exacted his property. See Koontz, 77 So.3d at 1223. The trial court applied the constitutional standards enunciated by the Supreme Court of the United States in Nollan v. California Coastal Commission and Dolan v. City of Tigard and concluded that St. Johns had effected an improper taking of Koontz’s property. Therefore, state law required St. Johns to take one of three actions: 1) agree to issue the permit, 2) agree to pay damages, or 3) agree to modify its decision to avoid an unreasonable exercise of police power. Id. at 1224. St. Johns chose to issue the permits to Koontz; the trial court subsequently awarded $376,154 to Koontz for the temporary taking of his property. Id. 

St. Johns appealed to the Fifth District Court of Appeal. See Koontz, 77 So.3d at 1225. First, the court determined that the Supreme Court of the United States has implicitly determined that an exaction claim is cognizable when, as here, the government denies a permit request because the landowner refuses to agree to an improper request. Id.Second, the court stated that in the absence of a more definite pronouncement from the Supreme Court of the United States, there is no legally sufficient distinction between a taking of physical property and a forced expenditure of money. Id. The court affirmed the judgment from the trial court awarding compensation to Koontz. Id. 

Then, St. Johns appealed to the Florida Supreme Court, which reversed the lower court’s decision. See Koontz, 77 So.3d at 1225. First, the court held that St. Johns denial of permits was not an exaction of property. Id. at 1230-31. Further, the court held that the Nollan/Dolan rule is applicable only where the condition/exaction sought by the government involves a dedication of or over the owner’s interest in physical property, and only when the regulatory agency actually issues the permit sought. Id. 

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Discussion

This decision has the potential to drastically modify takings jurisprudence with regard to exactions. In order to prevent government corruption, Koontz argues that the Nollan v. California Coastal Commission and Dolan v. City of Tigard standards should extend to cases such as this, involving the government’s refusal to issue a land-use permit because the applicant did not accede to a condition that affected non-real property interests. On the other hand, St. Johns argues that the Nollan and Dolan standards should not apply in these situations because local governments are best able to make these regulatory decisions and placing further restrictions on local governments would deter them from fulfilling their functions. 

Corruption

According to the Land Use Institute (“LUI”), the power to impose exactions is a coercive tool that leads to vast imbalances of power in favor of the government. See Brief of Amicus Curiae Land Use Institute (“LUI”) in Support of Petitioner at 9. Hillcrest Property, LLP, another Floridian property owner, argues that exaction practices are particularly susceptible to corruption because they promote the government’s monopoly power to extract or extort concessions from developers and landowners who have no choice in the matter. See Brief of Amicus Curiae Hillcrest Property, LLP in Support of Petitioner at 6. The Institute for Justice and the Cato Institute support this proposition by offering examples of how non-real property exactions are abused without judicial review. See Brief of Amicus Curiae Institute for Justice and the Cato Institute in Support of Petitioner at 8. These examples include local governments using exactions to finance municipal pet-projects, to force individuals to give up constitutional rights, to circumvent legal safeguards of private property rights, and to undertake expensive building and mitigation projects. See Id. at 9–30. For example, in Elk Grove, California, a couple wanted to build a single-family home for $500,000 and the local government requested that they pay $240,357 for road improvements around the rural property. See Id. at 12. The amici briefs in support of Koontz argue that extending Nollan and Dolan standards to non-real property exactions would prevent government abuse because it would allow the government to demand non-real property exactions where doing so “makes sense.” See Id. at 33. They argue that the Nollan and Dolan standards would provide the necessary check against the local government’s broad power. See Brief of Hillcrest Property, LLP at 7.  

St. Johns argues that monetary impact fees imposed on developers represent a common and legitimate way for communities to address the costs that a specific development places on the community. See Brief of Amicus Curiae National Governors Association, et. al. (“NGA”) in Support of Respondent at 33. The National Governors Association, et. al. (“NGA”) further argues that the local governments, not the courts, are in the best position to assess the costs and harms of a specific development to their community. See Id. at 33–34. The NGA also explains that local officials are elected and appointed and thus, work hard to follow the law and to respond to the expressed preferences of voters, who include property owners and developers. See Id. at 27. The NGA contends that property owners and developers play a large role in the political process, which prevents local officials from abusing their power. See Id. St. Johns points out that landowners and developers have other legal protections from corruption; thus, expanding Nollan and Dolan standards to non-real property exactions is not necessary. See Brief for Respondent, St. Johns River Water Mgmt. Dist. at 50. These other legal protections include Due Process claims, Equal Protection claims, state law claims, and arguing that the regulatory framework burdened his or her property right to the extent that it constitutes a taking of real property. Id. 

Effect on the Permitting Process

St. Johns argues that extending the Nollan and Dolan standards to this case and similar cases would cause considerable damage to the flexible process by which landowners and local governments negotiate permit conditions. See Brief for Respondent at 40. The Supreme Court of Florida stated that “if a government could be held liable for an “exaction” taking [in these situations], then [the government] would simply deny permits outright without discussion or negotiation rather than risk the crushing costs of litigation.” See St. Johns River Water Mgmt. Dist. v. Koontz, 77 So.3d 1220, 1223 (Fla. 2011). The NGA explains that even if the government would not deny permits outright, any negotiations between the government and landowners would be one-sided and would consist of the government remaining silent until the landowner made an offer that the officials believed was acceptable. See Brief of NGA at 15. Furthermore, St. Johns argues that extending the Nollan and Dolan standards would create difficult and lengthy litigation. See Brief for Respondent at 41–49. 

On the other hand, the Land Use Institute (“LUI”) provides empirical studies to show that government agencies are capable of incorporating land use rules into their decision-making processes, and that the rules actually improve the process. See Brief of LUI at 12–13. The studies show that the Nollan and Dolan standards nudged many governments into more systematic, comprehensive, and creative planning and decision-making. See Id.Furthermore, The LUI explains that the government will simply alter their conduct to conform to the rules and would not deny permits outright or refuse to engage in negotiations because there are strong incentives for them to participate in the negotiation and to grant permits. See Id. at 10–11. For example, when the government grants a permit with lawful conditions that results in development, both the community and the government leaders receive a benefit. See Id. 

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Analysis

The unconstitutional conditions doctrine instructs that, when the government has the power to grant or deny permits, it cannot condition approval on waiver of constitutional rights. In the realm of land use exactions, two cases embody this doctrine: Nollan v. California Coastal Commission and Dolan v. City of Tigard. In Nollan, the Supreme Court held that the government could condition the granting of a permit if the condition passes the “essential nexus” test; that is, the condition imposed must advance the same government interest as the prohibition of the use. See Nollan v. California Coastal Commission, 483 U.S. 825, 831–837 (1987). In Dolan, the Supreme Court added another limit to the power of the government to exact in the “rough proportionality” test. See Dolan v. City of Tigard, 512 U.S. 687 (1994). The rough proportionality test adds to the essential nexus inquiry of Nollan, requiring the government to go beyond conclusory statements and provide an individualized determination that the condition imposed is related and proportional to the impact of the proposed development project. Id. at 699–703. 

Nollan and Dolan Application to Attempted Exactions or Final Exactions

Koontz argues that the need to safeguard against the imposition of unconstitutional conditions is especially pronounced in the land-use permit context. See Brief for Petitioner, Coy A. Koontz, Jr. at 22. This, argues Koontz, arises from the fact that an unconstitutional permit exaction violates, not one, but two constitutional rights: the right to make reasonable use of one’s land, and the right to be compensated for the exacted property. Id. Although the government may impose a burdensome condition on a benefit to which there is no right, such an imposition is problematic when it concerns a constitutional right because that constitutional right is extinguished when the government demands an exaction before the issuance of a permit. Id.It makes no difference what type of property is at issue or the timing of the exaction: the logic and purpose of the unconstitutional conditions doctrine and the holding of Nollan and Dolan is to prevent the State from using the permit process as a plan to extortion. Id. at 23.

Koontz argues that St. Johns did just that. See Brief for Petitioner at 23. St. Johns, argues Koontz, demanded eleven acres of his land and that he finance far-away improvements in exchange for his permit to make rightful use of his property. Id. This, argues Koontz, is exactly the sort of arrangement that Nollan and Dolan intended to control. Id.Furthermore, Koontz argues that because St. Johns did not challenge the trial court’s finding that no connection exists between the off-site improvement demand and the impact of his proposed project, St. Johns’ actions amount to an uncompensated taking under the Takings Clause of the Fifth Amendment, and the Nollan/Dolan holdings should apply to the permit exaction. Id. at 23–24.

St. Johns argues that Koontz does not seek to invalidate a land-use exaction, but rather that Koontz seeks just compensation for a taking of his property. See Brief for Respondent, St. Johns River Water Management District at 28. Furthermore, St. Johns argues that although the timing of the exaction may or may not be relevant when the landowner seeks to invalidate an unconstitutional condition, timing does matter when the landowner seeks compensation. Id.Under Nollan and Dolan, argues St. Johns, a landowner cannot seek compensation for an exaction that was never imposed. Id. St. Johns argues that because Koontz never dedicated any property to St. Johns and he never spent any money on improvements or off-site mitigation, St. Johns cannot owe Koontz compensation for property that he never lost. Id.at 29. 

St. Johns also argues that Koontz’s claim for compensation differs markedly from those of the petitioners in Nollan and Dolan. See Brief for Respondent at 29. In those cases, petitioners did not seek compensation but instead sought freedom from unconstitutional conditions imposed by local land-use agencies. Id. St. Johns argues that Koontz’s case is distinguishable from these because St. Johns never exacted anything from him. Id. at 29–30.

St. Johns argues that Koontz seeks to use the Nollan and Dolan tests of “essential nexus” and “rough proportionality,” respectively, in place of the Lucas and Penn Central standards. See Brief for Respondent at 32. In Lucas, the Supreme Court held that a per se regulatory taking occurs when government regulation of property denies the property owner all “economically viable use of his land.” See Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1014–1019 (1992). In Penn Central, the Supreme Court held that a regulatory taking occurs when the government’s regulatory action interferes with the property owner’s investment-backed expectations. See Penn Central Transportation Co. v. New York City, 438 U.S. 104, 123–28 (1978). St. Johns argues that Koontz sought, and received, relief, not for the alleged exactions, but for the value of the rental value of his property for the time the permit was denied. See Brief for Respondent at 32. St. Johns argues that this sort of relief is appropriate under Lucas and Penn Central, but Koontz abandoned his Lucas and Penn Central claims in state court and pursued compensation under the “essential nexus” and “rough proportionality” tests. Id. at 33. St. Johns argues that this is an expansion of Nollan and Dolan into a new category of regulatory taking. Id. at 33–34.

Would a Condition that the Applicant Conduct a Monetary Payment Work as a Taking?

Koontz argues that the Nollan/Dolan restrictions should apply to all exactions demanded by government in the permit process, regardless of the type of property demanded and the timing of the demand. See Brief for Petitioner at 24–29. Koontz argues that these restrictions do not prohibit the State from demanding property in exchange for the issuing of a permit. Rather, they impose restrictions on the State’s exaction power. Id. at 24–25. To apply the Nollan/Dolan restrictions exclusively to real-estate exactions, argues Koontz, is to allow the government unlimited potential for abuse of landowners undergoing the permit process. Id. at 25. The State could, for example, demand payment of a fee and then use that amount for expenditures unrelated to the impact of the permit-seekers project or the locality’s general land-use scheme. Id. at 25–26.  

Koontz also argues that the Florida Supreme Court erred in holding that Nollan and Dolan do not apply to St. Johns’ monetary exactions. See Brief for Petitioner at 39. Koontz argues that the Takings Clause protects private property in general, not just interests in land or other real property. Id. Nothing in Nollan and Dolan, argues Koontz, implies that the “essential nexus” and “rough proportionality” tests apply only to land dedications. Id.at 40. Koontz relies on Brown v. Legal Foundation of Washington for this proposition. Id. at 40. In Brown, the Supreme Court held that appropriation of IOLTA (interest on lawyers’ trust account) interest could be a taking because it constituted an appropriation of a discrete asset. See Brown v. Legal Foundation of Washington, 538 U.S. 216, 235. Thus, according to Koontz, the essential question is whether the State can do indirectly, through the permit process, what they cannot do directly outside the permit process. See Brief for Petitioner at 40.  

St. Johns argues that even if it had required Koontz to spend money to offset the negative impact of his development on the wetlands, that condition would not have amounted to a taking. See Brief for Respondent at 43. St. Johns relies on Eastern Enterprises for this proposition. Id. at 43–46. In Eastern Enterprises, the Court considered whether a federal statute that imposed retroactive liability on a coal company to fund lifetime benefits for its retirees constituted a taking. See id.at 44; Eastern Enterprises v. Apfel, 524 U.S. 498 (1998) (plurality opinion). There, argues St. Johns, a majority of Justices decided that the Just Compensation Clause of the Fifth Amendment does not apply to a requirement to spend fungible money: Justice Kennedy found that a general financial liability is not a taking, and Justices Breyer, Ginsburg, Stevens, and Souter found that the Takings Clause has historically applied to interests in physical or intellectual property and not a liability to pay money. See Brief for Respondent at 44–45; Eastern Enterprises,524 at 541 (Kennedy, J., concurring in the judgment and dissenting in part); Eastern Enterprises, 524 at 554 (Breyer, J., with whom Stevens, Ginsberg, Souter, JJ., join, dissenting). Thus, St. Johns argues the alleged condition required nothing more than Koontz spend money does not rise to the level of the taking. See Brief for Respondent at 45–46. 

Furthermore, St. Johns argues that Koontz’s reliance on Brown is misplaced because that case dealt with interest, a distinct asset a taking of which is analogous to a physical occupation of property. See Brief for Respondent at 46. St. Johns argues this analogy fails here because no property was ever seized from Koontz. Id. at 47. Furthermore, St. Johns argues that monetary liability is not like a physical occupation because money is fungible. Id. at 47–48. St. Johns argues that if a general financial liability is to be construed as a taking, then any fee for services that must be paid in advance, such as a filing fee, would also be considered a taking. Id. at 48. 

Koontz argues that applying Nollan and Dolan to all exactions of property serves the principles driving those decisions. See Brief for Petitioner at 42. Those decisions where driven by the desire to insulate the private property owner from having to bear the burdens that should, in all fairness and justice, be borne by the public as a whole. Id. Koontz argues that there is no real distinction between real property and money; indeed, money may pose an even greater risk of abuse given its fungible nature. Id. at 42–43. 

St. Johns argues that expanded application of the Nollan/Dolan tests to the expenditure of fungible money would expose a broad range of fees, such as application and usage fees, to heightened scrutiny. See Brief for Respondent at 48–49. Further, St. Johns argues that such an expansion would result in exaction litigation every time a permit applicant has to pay money to come within generally applicable standards. Id. at 49. This, argues St. Johns, is unworkable and would severely hinder the scope and power of regulatory agencies. Id.Finally, St. Johns argues that there are many legal avenues for applicants to seek redress if they feel their rights have been infringed, such as filing claims under Lucas or Penn Central; the Equal Protection Clause or the Due Process Clause; or any claim arising under state law. Id. at 49–50. 

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Conclusion

The Supreme Court’s ruling in this case will decide whether the constitutional standard set out in Nollan and Dolan apply so that the government can be held liable for an improper taking when the government refuses to issue a land-use permit on the sole basis that the permit applicant did not accede to a condition to dedicate money, services, labor, or any other type of personal property to a public use. If the Court adopts Koontz’s position, the standards will apply to cases where the government refused to issue a land use permit and to cases involving non-real property exactions. Koontz believes that these standards will protect landowners and developers from government corruption without hindering the government’s decision-making process. If the Court adopts St. Johns’ position, the standards will not apply to this case or similar cases but will continue to apply to cases where the government actually took real property from the landowner. St. Johns believes that these standards are not necessary because there are other safeguards in place to protect landowners and developers from government corruption and instead, these standards would be a detriment to the government and every community. The Supreme Court should consider Environmental Law concerns while making this decision. 

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