How the Last Supreme Court Takings Case Could Have a Big Impact in California and Why Many Commenters Missed It

Few issues get land use blawgs and legal pundits going like Supreme Court “takings” decisions based on 5th and 14th amendments.  The recently decided decision, Koontz v. St. Johns River Water Management District, 570 U.S. ___; 133 S.Ct. 2586 (2013) falls into that category but many of the pundits missed the decision’s main impact in California.  As some commenters have pointed out, Koontz does not change the landscape (sorry) for land use permitting by municipal agencies in California.  But it does potentially provide some new leverage for some developers and arguably, some California cities, counties and special districts, when negotiating with state and federal regulators. 

In Koontz, the Water District, noting the environmental impacts of Koontz’ land development proposal, denied Koontz’ permit after Koontz had rejected both: a) land dedication; and 2) fees for off-site land purchases proposed by the water district.  The District then denied the permit. But the District didn’t bother to identify a connection between the applicant’s impacts and the off-site mitigation fees and Koontz sued, alleging the District had engaged in a “taking” of his property.  

Previous Supreme Court decisions Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987), and Dolan v. City of Tigard, 512 U.S. 374 (1994) required that regulatory agencies establish a “nexus” and a “rough proportionality” between project impacts and "exactions," or the required dedication of land owned by an applicant.  But it was not clear whether the Nollan Dolan decisions applied to an agency’s demand for compensatory fees to pay for off-site mitigation. All nine justices agreed with the petitioner on the first issue in the case – denial of land development permits is also subject to Nollan Dolan.  On the second issue, the court’s narrow majority held that Nollan Dolan principles do apply to monetary fees exacted by government agencies for mitigation. 

Koontz makes it clear that for case-by-case exactions, agencies must provide a “nexus” and a “rough proportionality” between the project impact and the fee.  The Koontz majority left some uncertainty as it did not make it clear whether its decision applies to legislatively enacted fees.  (See 133 S Ct. at 2608 (Kagan, J dissenting.)  But wait, you say, don’t agencies in California already have to make connections between impacts and mitigation fees?   Yes.  But only local agencies. 

A California Supreme Court case, Ehrlich v. Culver City, 12 Cal.4th 854 (1996) required local agencies to support their case by case fee exactions by documenting the nexus and proportionality of the fees.  The Mitigation Fee Act (Government Code section 66000, et seq.) also required that local agency legislatively enacted fees be subject to nexus and rough proportionality requirements. (Government Code section 66001, Garrick Development Co. v. Hayward Unified School Dist., 3 Cal.App.4th 320, 336 (1992).)  Local agencies regulating land use in California now routinely prepare “nexus studies” for ad hoc and legislatively enacted fees, so Koontz does not change that.  

So does Koontz do anything in California?  And what are so many pundits missing about Koontz’ impact in California?  Yes, Koontz arguably shifts the standard of review of how a judge will view a takings case, meaning planners should: 1) make sure they adequately document all fee calculations; and 2) not  burden one applicant with a large share of off site land purchase or infrastructure development costs.  But good local government planners have been doing this for years. 

The larger change has to with the fact that Federal regulatory agencies, such as the U.S. Fish and Wildlife Service and California statewide regulatory agencies such as the California Dept. of Fish and Game are not subject to the Mitigation Fee Act.  And these agencies now have even more authority to require budget busting endowments when assessing mitigation fees.  (Government Code sections 65965-65968.)  However, after Koontz, state and federal regulators will arguably have to justify their imposition of mitigation fees on applicants for Endangered Species Act, pollution discharge, and wetland fill permits.  Therefore, once applicants prepare a nexus study, if regulators want higher fees than those proposed by the applicant, the regulator will have to comply with language in Dolan and make an “individualized determination that the required dedication is related both in nature and extent to the impact.”

Why did so many pundits miss this point?   Probably because most legal commenters advise private developers seeking local land use permits.  Fewer legal commenters represent developers or public agencies working in sensitive habitat areas; biological services consulting companies often do this regulatory permitting work. 

At this point, private developers in California are accustomed to the Mitigation Fee Act and thus have experience in calculating, debating and negotiating exaction fees.  But those same developers have learned how expensive it is to develop in in waterways, wetlands and areas designated as “critical habitat” and often avoid those areas.   They will now be able to use this experience in dealing with state and federal regulators who have to comply with Koontz.

On the other hand, public works agencies, such as flood protection districts, rarely have needed to get permits from local government, so they have not prepared their own nexus studies.   But these agencies should consider adopting this tool because Koontz could aid municipalities dealing with those same regulators.  Even though Constitutional "takings" are only from private property, local agency applicants could certainly argue that regulators should not regulate them more harshly than private developers.   While Koontz may not provide direct authority to municipalities negotiating development fees with regulatory agencies, it should at least provide an argument that regulators should provide the same kind of individualized determinations to local agencies that they do to private property owners.



Ed Yates, Marinlandlaw.com