If a governmental authority denies approval of a land-use permit because an applicant refuses to spend money on a government project, such as a mitigation project, the government must defend its denial under heightened constitutional scrutiny. It must show that there is a “nexus” and “rough proportionality” between the condition and the social costs of the application. So held the U.S. Supreme Court in its 5-4 decision in Koontz v. St Johns River Water Management District, which was issued Tuesday. The decision may, according to Justice Kagan’s dissent, “turn[ ] a broad array of local land-use regulations into federal constitutional questions.” Although this ruling involved a Florida case, the decision from the nation’s highest court applies to any local government or special district in California and elsewhere that issues land-use permits.
The case concerned a land owner who had requested permits to make improvements to property classified as wetlands. The permitting authority, a water management district, offered to allow the land owner to develop the property if, among other options, he also agreed to spend funds to enhance district-owned wetlands elsewhere. The land owner sued.
The Supreme Court ruled for the land owner, finding that the government must demonstrate that its condition does not violate the Court’s “unconstitutional conditions” doctrine. Under that doctrine, a government may condition approval of a permit on the applicant’s dedication of property only if there is a “nexus” and “rough proportionality” between the property and the social costs of the applicant’s proposal. Before Koontz, most believed that that this doctrine only applied when the government conditioned its approval on the applicant’s surrender of a specific property interest, such as an easement; not when it required the person to pay or spend money for the government’s benefit. The court ruled otherwise: Requiring an applicant to expend money—such as on a mitigation project—also triggers the “nexus” and “rough proportionality” test. The Court also ruled that a government can run afoul of the doctrine either by granting a permit with an impermissible condition, or—as here—by denying an application because the applicant would not satisfy the condition. The decision could be read to expand a rule that the California Supreme Court had adopted earlier. Ehrlich v. Culver City, 12 Cal.4th 854 (1996)).
The U.S. Supreme Court did attempt to limit the decision’s scope. The court recognized that offering an applicant at least one alternative satisfying the “nexus” and “rough proportionality” tests is sufficient. It also explained that the case “does not affect the ability of governments to impose property taxes, user fees, and similar laws and regulations that may impose financial burdens on property owners.” The dissent laments, however, that the distinction between the lawful and unlawful will be difficult to draw: “[O]nce the majority demands that a simple demand to pay money—the sort of thing often viewed as a tax—can count as an impermissible ‘exaction,’ how is anyone to tell the two apart?”
The decision leaves many key questions to be decided by the lower court, including the proper remedy and how concrete the government’s demand must be.