The U.S. Supreme Court issued its decision today in Koontz v. St. Johns River Water Management District, ruling that a monetary exaction that is improperly imposed as a permit condition can amount to a taking in violation of the Fifth Amendment to the U.S. Constitution.  The decision is significant because it allows a takings claim based on a monetary exaction, whereas prior precedent has limited takings claims to exactions of interests in real property.

Local and state agencies often impose conditions on development permits to offset or mitigate impacts associated with the development.  The Supreme Court decisions in Nollan v. California Coastal Commission and Dolan v. City of Tigard (Nollan/Dolan) provide that where conditions require the provision of an interest in land, those conditions must be roughly proportionate to the impacts of the development.  This decision extends the limitations on permit exactions beyond interests in real property and confirms that a takings claim can arise when a permit is denied based on the applicant’s refusal to accept an improper condition.

The case arose in Florida, and concerns development of a section of Mr. Koontz’ property that was in a wetland zone and, therefore, required a development permit from respondent, St. Johns River Water Management District.  The District demanded that Mr. Koontz reduce the size of his development and deed a conservation easement to the District, or pay for improvements to District-owned wetlands several miles away.  Mr. Koontz refused and the District denied his permit.  Mr. Koontz filed suit in Florida state court, alleging an unlawful taking based on the grounds that the District’s demands were excessive and that there was no nexus or rough proportionality between the development’s impacts and the District’s demands, under the Nollan/Dolan standards.  The case went to the Florida Supreme Court, which rejected Mr. Koontz’ claims holding (1) Nollan/Dolan apply only to exactions of interests in real property,  not monetary exactions, and (2) Nollan/Dolan apply only where a permit has issued with conditions, not where a permit has been denied.

In a 5-4 decision, the U.S. Supreme Court reversed, finding that an unconstitutional taking can result from improper imposition of a monetary exaction, and denial of a permit for refusal to accept a condition is no different than approval of a permit with improper conditions.

The decision expands the opportunity for developers to resist overly burdensome exactions that are imposed as permit conditions.