What Does the Koontz Case Mean for Land Trusts?

GUEST POST BY: Tamara Galanter and Fran Layton, Shute Mihaly & Weinberger LLP, San Francisco, CA

In an important decision for land trusts, the United States Supreme Court’s recent decision in Koontz v. St. Johns River Water Management District marks a significant change in “takings” law that merits close and deliberate attention to the way public agencies process permit applications and consider mitigation that benefits land trusts.  Even in states where agencies are already required to address the relationship between project impacts and proposed mitigation, the Koontz decision calls attention to mitigation conditions and exposes public agencies and fees that benefit land trusts to greater risks than previously faced.

The Decision

In the Koontz case, a local water management district denied Koontz’s application for a permit to fill wetlands to build a strip mall. In discussions with Koontz, the district indicated that it would approve the application if Koontz mitigated the adverse impact of his project on wetlands by reducing the size of the project or paying money to the agency to restore wetlands elsewhere. The majority in Koontz assumed that the district denied the permit because Koontz would not agree to these conditions.

Koontz contended that the denial of his application was a “taking” without the payment of just compensation under the “heightened scrutiny” test established in Nollan v. California Coastal Commission, and Dolan v. City of Tigard, Oregon.  This heightened scrutiny test requires a nexus and rough proportionality between a condition of approval involving the dedication of an interest in real property and the effects of the proposed land use.  Koontz argued for an extension of heightened scrutiny to potential mitigation conditions discussed during administrative review of the application where the agency thereafter denied the application, and where the proposed condition did not require the set aside of an interest in real property, but rather the payment of money. In a game-changing 5-4 decision, the Supreme Court held that Koontz was entitled to heightened judicial scrutiny of the agency’s suggested wetlands mitigation condition, even though as a result of the permit denial the condition was never imposed.  The Court left open the question of the remedy to which Koontz would be entitled.

Implications

The mitigation conditions challenged by Koontz were never imposed, yet the Court found that by demanding conditions that would be necessary to mitigate project impacts prior to denying the permit, the agency had subjected its action to judicial review under the constitutional nexus and rough proportionality requirements. The Court did not indicate at what point the district’s explanation of the conditions necessary to mitigate impacts to wetlands would become a sufficiently concrete “demand.”

Koontz expands the constitutional nexus and rough proportionality requirements to demands to pay money, such as in lieu mitigation fees, made ad hoc during project approval.   This puts the burden on the government to justify the fee or approve the project without it.  While in many states, such as California, public agencies are already subject to state law requirements to show that fees are reasonably related to the impacts of the development, Koontz now imports these nexus requirements for fees into the U.S. Constitution.  As a result, a permit applicant successfully challenging the fee under the Takings Clause will be entitled to recover her attorneys’ fees and experts’ fees.

Koontz also adds the requirement that the agency show the “rough proportionality” of the fee to the project’s impacts.  Determining the scope of the constitutional requirement will add additional complexity when local and state agencies impose fees.

Finally, while Nollan, Dolan, and Koontz concern ad hoc fees and property exactions, applicants may argue that under Koontz, heightened scrutiny should also apply to other ad hoc conditions of development approval and to exactions adopted through the legislative process.

What Does this Mean for Land Trusts?

While land trusts do not directly impose fees on development, they often benefit from such conditions.  For example, Koontz will apply to conditions requiring monetary payments to fund mitigation banks, land trust endowments, and the purchase of fee interests or conservation easements.  Thus to avoid successful legal challenges to such requirements, land trusts should work with public agencies to ensure agencies prepare the necessary documentation to support land trust related fees.  Land trusts should also encourage local agencies to enact legislation that imposes mitigation requirements (i.e. in lieu fees or conservation easements) for all projects that destroy habitat or agricultural lands, instead of relying on project specific ad hoc fees.

There is a danger that in reaction to Koontz, public agencies could feel undue pressure either to approve projects that harm the environment without imposing appropriate mitigation, or disapprove worthy projects that could be approved with appropriate mitigation, rather than risk a lawsuit and paying compensation and attorneys’ fees. While Koontz creates new obstacles, it should not stand in the way of reasonable conditions that mitigate project impacts and benefit the environment.

Tamara Galanter, Fran Layton

Shute, Mihaly & Weinberger LLP

396 Hayes Street

San Francisco, CA 94102-4421