Koontz v. St. Johns River Water Management District

Supreme Court Expands Takings Test

'Nexus' and 'Rough Proportionality' Tests Apply to Permit Denials, Demands for Cash Payments

In a 5-4 decision in Koontz v. St. Johns River Water Management District, the U.S. Supreme Court has both clarified and expanded application of the Nollan "essential nexus" and Dolan "rough proportionality" takings tests despite a dispute as to the very facts of the case.

Coy A. Koontz wanted to develop 3.7 acres of his property, and 3.4 of the acres were protected wetlands. The district offered a list of possible mitigation measures and solicited additional mitigation suggestions from the landowner. Koontz rejected the proposed mitigation measures and did not suggest any alternative measures, so the district denied his request.

All nine justices agreed that the Nollan and Dolan tests apply even where an applicant has refused a proposed permit condition and the permit was therefore never issued (and nothing "taken"), reasoning that where the condition, if accepted, would resulting in a taking without just compensation, the applicant's Fifth Amendment rights have been burdened.

The majority also extended the tests to demands for cash payments over the arguments of the dissent that "[b]y applying Nollan and Dolan to permit conditions requiring monetary payments — with no express limitation except as to taxes — the majority extends the Takings Clause, with its notoriously 'difficult' and 'perplexing' standards, into the very heart of local land-use regulation and service delivery ... all now must meet Nollan and Dolan's nexus and proportionality tests. The Federal Constitution thus will decide whether one town is overcharging for sewage, or another is setting the price to sell liquor too high."

Under an earlier Supreme Court ruling, cash payments cannot be the subject of takings unless they are from a "specific interest," such as revenue generated from a particular parcel or a separate fund, but the Koontz Court held that a requirement to pay cash in connection with a permit application does "operate upon ... an identified property interest" by directing the owner of a particular piece of property to make a monetary payment." Although the Court excluded such payments as property taxes from these tests, the dissent asks about other types of property-related fees not addressed in the opinion and suggests that, "[p]erhaps [the majority opinion's] most striking feature is its refusal to say even a word about how to make the distinction that will now determine whether a given fee is subject to heightened scrutiny."

But the most fundamental disagreement among the justices is rooted in the facts of the case. The majority based their opinion on the assumption that the water district had unequivocally conditioned permit approval on compliance with one of two alternative mitigation options, one being reduction in the size of the proposed development and granting of a conservation easement over the remainder of the property and the second requiring a smaller easement together with hiring of contractors to perform improvements on off-site wetlands.

According to both the record and the dissenting opinion, "[t]he District never made any particular demand respecting an off-site project (or anything else)." And given that the water district now finds itself in a takings challenge despite having only begun mitigation discussions, the dissent states, "If every suggestion could become the subject of a lawsuit under Nollan and Dolan, the lawyer can give but one recommendation: Deny the permits, without giving Koontz any advice — even if he asks for guidance."