Explaining the Koontz Decision

A few months ago, the federal Supreme Court issued its decision in the case of Koontz v. St. Johns River Water Management District. I just attended a conference at my school (Touro Law Center) discussing Koontz and other constitutional issues relevant to land use planning, so I thought I would share a bit of what learned about this case from the two speakers who focused on Koontz (Chicago attorney Julie Tappendorf and George Mason University law professor Steven Eagle.)

Koontz is based on the Supreme Court's "exactions" doctrine.  Under this doctrine, just as government cannot take your property without compensation under the Takings Clause of the Fifth Amendment, it cannot always make you give up part of your property in exchange for a permit to build on the rest of your land.  

Such a bargain (called an "exaction") is allowed - but only under certain circumstances.   The government may require a developer to give up property in exchange for a permit ONLY if the dedication of property advances a legitimate state interest and is roughly proportional to the harmful impact of the development.  

So for example, suppose that Wal-Mart wishes to build a new store, and local government wants Wal-Mart to reduce the traffic caused by the new store by building a bike path near the store.  The courts will allow this "exaction" only if the bike path is likely to reduce traffic enough to be "proportional" to the traffic caused by the development.  So if the Wal-Mart adds 10,000 cars to the neighborhood but the bike path only subtracts 1,000, the city cannot make Wal-Mart give up land for the bike path.

In Koontz, the Supreme Court expanded this exactions doctrine in two ways.  First, the Court held that this doctrine applies when the government denies a permit because a developer refuses to give up land-- not just when the government granted a conditional permit as in prior cases.  Second, the Court (by a narrower margin) held that the doctrine applies when the city requires a developer to pay the city money in exchange for a permit - not just when the city requires a dedication of land, as in prior cases.  In both these situations, the dedication must satisfy the "rough proportionality" test discussed above.

There has been a significant division of opinion about Koontz; some commentators say it doesn't change the law very much, while others fear that it significantly limits local environmental regulation.  One reason for this division of opinion may exist because Koontz leaves two major issues open:

*The exactions doctrine applies only when government demands money or property in exchange for a building permit.  But how are courts going to draw the line between permissible negotiation and a possibly impermissible "demand"?

*The exactions doctrine applies when the government wants money in an exchange for a permit, but presumably would not apply to generally applicable taxes and fees affecting all landowners.  But how are courts going to draw the line between a monetary exaction and a routine tax or fee?

Over the next few years, the lower courts will have to sort out these issues.