Urban Lawyer

Affordable Housing Ordinances: Exactions or Use Restrictions in the Post- Koontz Era? An Analysis of California Building Industry Association v. City of San Jose

by James D. O'Donnell

James D. O'Donnell is a J.D., 2017, Northwestern School of Law at Lewis & Clark College; B.A., 2011, Geography, magna cum laude, University of South Florida. I am grateful to Edward J. Sullivan, devoted practitioner, professor, and friend, for his mentorship and inspiration. I would also like to thank the staff of The Urban Lawyer for their thoughtful edits. Finally, I would like to thank my family for their unwavering support.  

MANY LOCAL GOVERNMENTS AND MUNICIPALITIES require a developer or property owner to absorb some of the costs or negative impacts of proposed development. These conditions attached to development approval, commonly known as “exactions,” serve to mitigate potential harm caused by new development, including providing for the need for public services and facilities created by that development.1 For example, if a developer wishes to build a new strip mall, the municipality may condition permit approval on the developer providing infrastructural necessities that the project will require such as streets, sewer lines, water lines, and utility structures, which would otherwise not be needed but for the new development.2 Some other common examples of exactions include impact fees, construction requirements, dedications of land, or conditions on future land use.3 While developers and property owners may consider exactions a burden on development, exactions are essential for local governments to prevent costs associated with new development from being externalized onto taxpayers.4

Despite the importance of exactions in local land use planning, local governments are not without limits in their imposition. Among other state constitutional and statutory limitations, the Takings Clause of the Fifth Amendment and the doctrine of unconstitutional conditions place limits on a local government’s ability to condition development approval on a particular dedication, construction requirement, or fee.5 Most municipalities possess the authority to plan and control growth within their borders through exercise of the police power, often allowed or specifically delegated through state enabling legislation.6 Through the use of the police power, local and state government bodies have broad discretion to protect the health, safety, and general welfare of its citizens.7 Exactions are a primary application of local government’s police powers to control growth and promote the general welfare of its citizens.8 Over the past 40 years, however, the U.S. Supreme Court has placed limitations on governments’ ability to impose exactions by creating tests set forth in Nollan v. California Coastal Commission (Nollan),9 Dolan v. City of Tigard (Dolan),10 and Koontz v. St. Johns River Water Management District (Koontz)11 to determine whether the exaction violates the Fifth Amendment, including the doctrine of unconstitutional conditions.12 Once the tests are triggered, a court reviews the permit condition under heightened scrutiny, and the burden shifts to the local government to present evidence and findings to justify the necessity of the particular condition.

The California Supreme Court recently refused to apply heightened scrutiny to an affordable housing ordinance in San Jose, California, finding that the ordinance did not constitute an exaction. Affordable housing, or the increasing lack thereof, causes concern for local governments across the country.13 Local governments have responded to the lack of affordable housing with various methods including housing linkage fees, fair share programs, and regulatory incentives.14 California, in particular, faces a serious shortage of affordable housing that has been growing at an alarming pace over the past three decades.15

To combat increasing housing costs and provide affordable housing, the City of San Jose, California passed an ordinance in 2010 requiring developers to set aside 15% of their units for sale at an “affordable housing cost.”16 Developers challenged the ordinance in state court as a violation of the Fifth Amendment, among other allegations. The case made its way up to the California Supreme Court, and in California Building Industry Ass’n v. City of San Jose,17 the California Supreme Court held that San Jose’s ordinance was constitutional and, specifically, did not violate the Takings Clause of either the California Constitution or the U.S. Constitution.18 The court disagreed with the developers and found that the conditions imposed by the ordinance were not “exactions.” Therefore, the ordinance did not trigger heightened scrutiny under Nollan, Dolan, or Koontz.19 Rather, the ordinance was a valid exercise of the police power, subject to the more deferential rational basis standard of review.20

On its surface, it may seem that City of San Jose presents an ordinary land use issue, easily resolvable by the lower courts; however, the case highlights an important issue currently lingering in land use and constitutional law, particularly after the Supreme Court’s decision in Koontz. The Court’s decision in Koontz, holding that heightened scrutiny applies to “monetary exactions,” even in instances when a government denies a permit application, represents a drastic departure from the precedent established in Nollan and Dolan. As such, state and federal courts around the country are split over whether a permit condition imposed legislatively is subject to heightened scrutiny under the unconstitutional conditions doctrine as set out in Nollan, Dolan, and Koontz and, if so, what types of permit conditions trigger heightened scrutiny under the tests.21

The U.S. Supreme Court’s expansive reading of the Constitution’s property provisions in Koontz, however, not only greatly expanded constitutional property rights protection,22 it also has generated great confusion as to how government can properly regulate development without violating the Takings Clause of the Fifth Amendment. Cityof San Jose illustrates the confusion and difficulties that local governments, developers, and courts around the country are experiencing in light of Koontz. After Koontz it is unclear precisely what types of land use conditions trigger heightened scrutiny under Nollan, Dolan, and Koontz. The California Supreme Court held that the affordable housing ordinance was merely an exercise of the police power, subject to rational basis review, and outside the purview of Nollan, Dolan, and Koontz.

This article examines the California Supreme Court’s ruling in California Building Industry Ass’n v. City of San Jose.23 By reviewing the U.S. Supreme Court’s precedent in Nollan, Dolan, and Koontz and the evolution of exactions law under the doctrine of unconstitutional conditions and the Takings Clause, the article posits that City of San Jose may be inconsistent with the Court’s precedent. Until the Court definitely determines what types of permit conditions trigger the heightened scrutiny of Nollan, Dolan, and Koontz — and whether exactions imposed through general legislation are to be scrutinized under these tests — courts, local governments, and property owners will continue to traverse gingerly through this unsettled and complex area of law. This article highlights Koontz’s implications and recommends possible solutions local governments and property owners may consider to avoid triggering Nollan, Dolan, and Koontz.

This article proceeds in six parts. Part I discusses the background and procedural history of the City of San Jose case. Part II explores the interplay between the Fifth Amendment and exactions. Part III reviews Supreme Court case law in the area of exactions, specifically Nollan, Dolan, and Koontz. Part IV analyzes the California Supreme Court’s holding in light of Supreme Court precedent, especially the Court’s holding in Koontz. Parts V and VI conclude by discussing Koontz’s implications on land use planning and potential solutions for local governments trying to implement exactions in the post- Koontz era.

I.   California Building Industry Association v. City of San Jose

A.   Background

About 50 years ago, the California Legislature enacted a statute requiring all counties and cities in California to “adopt a comprehensive, long-term general plan for the physical development of the county of city.”24 The comprehensive plan also states that each municipality “have a responsibility to use the powers vested in them to facilitate the improvement and development of housing to make adequate provision for the housing needs of all economic segments of the community.”25

Additionally, in 1978, California voters adopted Proposition 13, which, among other things, limited the effective property tax rate and essentially decreased property taxes by amending the California Constitution.26 Specifically, Proposition 13 reduced the assessed valuation of all property in California to its 1975-76 level27 and, under Proposition 13, the maximum tax rate as a percentage of a property’s assessed value was fixed at 1%.28 The practical effects of the Proposition 13 property tax limitation are obvious. While property owners may have enjoyed lower property taxes, California and its local governments experienced a significant decrease to their budgets. The California legislature, municipalities, and agencies charged with providing affordable housing had to look to alternative solutions and sources of revenue to meet the growing housing demand.

By 1980, California cities were struggling with shrinking budgets and issues associated with increased housing demand, so the California Legislature took action. The legislature declared (1) that the “availability of housing is of vital statewide importance,” (2) that “the early attainment of decent housing and a suitable living environment for every Californian . . . is a priority of the highest order,” (3) that the “early attainment of this goal requires the cooperative participation of government and the private sector in an effort to expand housing opportunities and accommodate the housing needs of Californians of all economic levels,” and (4) that “[l]ocal and state governments have a responsibility to use the powers vested in them to facilitate the improvement and development of housing to make adequate provision for the housing needs of all economic segments of the community.”29

The legislature did not stop at simply declaring the importance of the availability of housing for people of all economic levels. It enacted a statutory scheme that strengthened the requirements of the comprehensive plan as it related to housing. The “Housing Element Law” required municipalities to identify actions to be taken to accommodate the city or county’s share of regional housing need for each income level and to assist in providing adequate housing to meet needs of extremely low and moderate income households.30

After significant research and outreach to the community, the City of San Jose enacted an inclusionary zoning ordinance in 2010 requiring all new residential development projects of 20 or more units to dedicate 15% of the sale units at an affordable price, as defined by  the ordinance.31 Although the legislature did not enact a statute requiring every California municipality to adopt an affordable housing ordinance, 170 California cities and counties have adopted affordable housing ordinances in an effort to meet the Housing Element Law obligations.32 After calculating that about 60% of new housing units in San Jose would be needed to house moderate, low, or extremely low income households, the City of San Jose adopted the citywide affordable housing ordinance to meet its calculated need for affordable housing.33 The ordinance applied to all residential developments within San Jose that create twenty or more dwelling units.34

B.   The Trial Court Decision

Two months after the ordinance was enacted, the California Building Industry Association (CBIA) filed suit in state court against the City of San Jose challenging the ordinance as unconstitutional under Nollan and Dolan.35 The crux of CBIA’s facial challenge was that the City failed to provide substantial evidence “to demonstrate a reasonable relationship between any adverse public impacts or needs for additional subsidized housing units in the City ostensibly caused by or reasonably attributed to the development of new residential development of twenty units or more and the new affordable housing exactions and conditions imposed on residential development by the Ordinance.”36 As such, CBIA argued that the ordinance violated state and federal constitutional standards and requirements governing exactions, particularly Nollan and Dolan. CBIA requested the court declare the ordinance invalid and grant CBIA injunctive relief prohibiting the City from enforcing the ordinance.37

The City, in response, argued that such evidence and findings were not necessary because the ordinance was not subject to heightened scrutiny under Nollan and Dolan.38 Instead, the City argued the ordinance should be evaluated under rational basis review, the ordinary standard of review applicable to land use regulations, because the ordinance did not require developers to convey property.39 The City contended that under rational basis review the ordinance was valid  as long as it promoted the “health, safety, and welfare of the community.”40 The trial court disagreed with the City and held that the ordinance was an exaction, subject to heightened standard of review under Nollan and Dolan. Applying the Nollan and Dolan tests, the trial court found that the affordable housing condition required developers to convey or dedicate a property interest to the public.41 Thus, the trial court held that the ordinance was invalid because the City failed to demonstrate with sufficient findings the constitutionally required relationship between the impacts of the new developments and the requirements to dedicate affordable housing.42

C.   The California Court of Appeal

The California Court of Appeal disagreed with the trial court and reversed its judgment. The Court of Appeal decided the case on state law grounds and did not address CBIA’s claim that the ordinance violated Nollan and Dolan, believing Nollan and Dolan were limited to physical dedications of real property, not monetary exactions.43 The Court of Appeal, therefore, held that the ordinance was subject to rational basis review and remanded to the trial court to review the ordinance under rational basis review.44

D.    The California Supreme Court

The California Supreme Court granted review of CBIA’s claim that the ordinance is subject to the unconstitutional conditions doctrine under the Fifth Amendment Takings Clause.45 The court began its analysis by emphasizing that, under the police power, California municipalities have broad authority to regulate development and land use to further the public welfare.46 The court made clear that general land use restrictions are subject to rational basis review and that great deference is accorded to the local government under the presumption that land use ordinances are constitutional.47 The court then acknowledged that certain constitutional challenges to a municipality’s land use restriction, particularly challenges under the unconstitutional conditions doctrine, may trigger heightened scrutiny and special restrictions to the local government’s otherwise broad authority to regulate land use.48

Against this backdrop the court proceeded to address CBIA’s challenge to the ordinance under the doctrine of unconstitutional conditions. The court analyzed Nollan, Dolan, and Koontz, and held that the San Jose ordinance was subject to rational basis review, not heightened scrutiny, because the ordinance was not an “exaction” under the unconstitutional conditions doctrine.49

The court relied primarily on two reasons to support its holding that the San Jose ordinance did not amount to an exaction triggering the application of the unconstitutional conditions doctrine. First, the court acknowledged that after Koontz, it is not certain whether such  a condition is an exaction.50 The court believed that because the government did not exact “property,” the ordinance did not effect an exaction under the Takings Clause.51 Because the question remained an “ambiguity” after Koontz, the court decided the case on different grounds, specifically likening the affordable housing condition to a rent control measure, subject to rational basis review.52 Thus, the California Supreme Court held that the affordable housing ordinance was not subject to the tests in Nollan, Dolan, and Koontz.53

The second primary basis for the court’s holding was that the unconstitutional conditions doctrine only applies to adjudicative proceedings, not legislatively mandated conditions.54 Again, the court noted that it was ambiguous after Koontz whether the unconstitutional conditions doctrine applies to legislatively imposed conditions.55 The court acknowledged that Koontz did not resolve the issue whether Nollan and Dolan apply to legislatively prescribed monetary permit conditions that apply to a broad class of proposed developments, and went on to look to California case law interpreting the federal Constitution to determine that legislatively imposed conditions are not subject to Nollan and Dolan.56

On February 29, 2016, the U. S. Supreme Court denied CBIA’s petition for certiorari. Justice Thomas issued a concurrence in the denial of certiorari, in which he expressly acknowledged that “[t]his case implicates an important and unsettled issue under the Takings Clause.”57 Justice Thomas explained that Nollan, Dolan, and Koontz would have governed the ordinance had the development conditions clearly been imposed through adjudicative action.58 But, for at least two decades, “lower courts have been divided over whether the Nollan/ Dolan test applies in cases where the alleged taking arises from a legislatively imposed condition rather than an administrative one.”59 Justice Thomas concluded that he continues to doubt “the existence of a taking should turn on the type of governmental entity responsible for the taking.”60

Unfortunately, the Court was not able to resolve the longstanding issues raised in the case for three reasons. First, San Jose raised a number of threshold issues regarding the timeliness of CBIA’s petition for certiorari.61 Second, CBIA did not preserve its Nollan and Dolan arguments for appeal.62 Third, the California Supreme Court did not decide the case based on the distinction between legislative conditions and adjudicative conditions.63 Although these procedural issues precluded the Court from deciding whether the San Jose affordable housing ordinance was subject to higher scrutiny under the tests set forth in Nollan, Dolan, and Koontz, the California Supreme Court may have applied the incorrect standard of review in light of Koontz, the Supreme Court’s most recent exactions case.

As this Article will discuss, the California Supreme Court’s reasoning may be inconsistent with the Supreme Court’s precedent and the evolution of the unconstitutional conditions doctrine.

II. Exactions and the Fifth Amendment

Over the past 40 years, the Supreme Court has developed constitutional constraints on local governments’ ability to attach conditions to development approval.64 These development conditions, also known as exactions,65 cannot violate the Takings Clause of the Fifth Amendment, as applied to the states through the Fourteenth Amendment of the U.S. Constitution. In other words, when a developer or property owner needs to secure a permit for development, the government cannot require an exaction from the property owner or developer in return for development approval that would violate the property owner’s Fifth Amendment right to be protected from government takings without just compensation.66 The determination of whether a condition is an exaction is important because it determines what nature and level of scrutiny applies and who bears the burden of justifying or opposing the exaction.67

The Takings Clause of the Fifth Amendment and doctrine of unconstitutional conditions form the primary basis of exactions law.68 The Supreme Court has interpreted the Takings Clause to mean that the government’s police power includes the government’s ability to take private property to further the health, safety, and welfare of the public, as long as the government provides just compensation to the property owner.69 In the 19th and early 20th centuries, the Takings Clause was originally interpreted to apply only to physical takings of property, such as when the government takes property to build a public road.70 In 1922, however, in Pennsylvania Coal Co. v. Mahon,71 the Supreme Court held that a government regulation could amount to a taking under the Fifth Amendment when the regulation goes “too far.”72 Mahon took takings law one-step further by holding that the Fifth Amendment Takings Clause not only applied to situations when the government engaged in formal appropriations of property  or physical invasions (per se takings), but also that in certain situations the Takings Clause could be triggered when a regulation burdened the property owner to a certain degree — this was the birth of “regulatory takings.”73 And later, in 1978 in Penn Central Transportation Co. v. City of New York,74 the Court created a three-factor test to determine when a regulation goes too far so as to amount to a regulatory taking requiring just compensation.75

The unconstitutional conditions doctrine also forms the constitutional basis of exactions law. First introduced by the Supreme Court  in the mid-1800s, the unconstitutional conditions doctrine essentially forbids the government from denying a “benefit to a person because [that person] exercises a constitutional right.”76 In other words, the doctrine “prohibits the government from doing indirectly what it can- not do directly.”77 While this may seem clear enough, the doctrine has a notorious reputation as being applied inconsistently by courts, if at all, over the past 160 years.78 The doctrine is widely considered to be “ ‘riven with inconsistencies[,]’ ‘a minefield to be traversed gingerly[—]’ [a doctrine that] ‘confound[s] courts’ and suffers from an ‘unfortunate lack of clarity . . . .’ ”79  Considering this history, it is no surprise that exactions law has become notoriously confusing.

III. Judicial Scrutiny of Exactions

Three U.S. Supreme Court decisions determine whether an exaction is unconstitutional. When exactions are at issue in constitutional property rights litigation, the Court does not analyze the constitutionality of the exactions under the Penn Central factors or per se physical takings under takings law. Instead, the Court analyzes exactions as a separate category under the Takings Clause.80 The following cases articulate the proper tests used to determine whether a permit condition violates the Takings Clause or the unconstitutional conditions doctrine.

A.   Nollan v. California Coastal Commission81

In 1987 the U.S. Supreme Court began a shift away from its judicial deference toward local governments’ land use planning decisions, including local governments’ use of exactions, as landowners and developers began challenging exactions under the Takings Clause of the Fifth Amendment.82

The Nollans owned beachfront property in Ventura County, California. The bungalow on their lot had become under disrepair and they sought to demolish and replace the bungalow. California law, however, required the Nollans to secure a permit from the California Coastal Commission (“the Commission”), so the Nollans applied for the permit.83 After reviewing the permit application, the Commission granted the permit subject to the condition that the Nollans “allow the public an easement to pass across a portion of their property.”84 The Commission’s purpose for the condition was that the “new house would increase blockage of the view of the ocean, thus contributing to the development of ‘a wall of residential structures’ that would prevent the public from ‘psychologically . . . realizing a stretch of coastline exists nearby that they have every right to visit.’ ”85

The Nollans objected to the condition, challenging the Commission up to the U.S. Supreme Court. The crux of the Nollans’ argument was that the condition violated the Takings Clause because it was not sufficiently related to the impact of their proposed development.86 The Court noted that the Commission likely had the authority to deny the permit completely, but if the Commission were to impose the easement outside the permit process, the Commission would have to pay the Nollans just compensation under the Takings Clause for the property interest taken.87 The Commission had the authority to condition the issuance of the permit on the easement condition by virtue of its police power because it likely advanced a state interest,88 but the Court acknowledged it had yet to define the limits of the degree of connection between the state interest and the exaction that the constitution demands.89

The Court agreed with the Nollans and held the exaction did not pass constitutional muster. Specifically, the Court found the exaction invalid because it lacked an “essential nexus”— the required connection between the asserted government interest and the exaction.90 In other words, the government had the burden to prove the permit condition bears an essential nexus to the impacts caused by the proposed development.91 The essential nexus was not satisfied here because of the “lack of nexus between the condition and the original purpose of the building restriction.”92 The essence of the state’s interest was about viewing the ocean, but the purpose of the easement was to provide beach access, and because those walking on the easement would already be able to see the beach, the easement would not improve their visual access to the beach.93 The Commission could have conditioned permit approval on the Nollans erecting a “viewing spot on their property,” which would satisfy as an essential nexus, but because the permit condition did not serve the same governmental purpose as the development plan, the condition was “not a valid regulation of land use but ‘an out-and-out plan of extortion.’ ”94

Nollan represents the Court’s willingness to scrutinize a local government’s land use permitting decisions, backing away from traditional deference afforded to a local government’s land use decisions.95 It also established implicitly (and explicitly later in Dolan) that the city now has the burden to establish with sufficient findings that it has satisfied the essential nexus test, rather than the plaintiff property owner having the burden to demonstrate that the city failed to satisfy the test.96 The Court’s strongly worded opinion represents its penchant for property rights and concern for abuse that may occur in local land use permitting decisions, which Justice Scalia penned as “an out-and- out plan of extortion.”97 While the Court in Nollan started to define the limits of exactions by requiring that the condition have an “essential nexus” to the impact caused by the proposed development, the Court did not define the required degree of connection required be- tween the exaction and the effects of the proposed development.98  The Court would answer this question seven years later in Dolan v. City of Tigard.

B.   Dolan v. City of Tigard 99

Ms. Dolan owned a hardware store in Tigard, Oregon. Ms. Dolan’s store was along a creek, which was part of the city’s 100-year flood- plain.100 She applied for a permit to increase the size of her store, pave over a gravel parking lot, and add an off-site structure.101 The city approved Ms. Dolan’s permit application based on meeting certain conditions, among which was that she dedicate portions of her land to improving floodplain management by constructing a public green- way and a 15-foot strip of adjacent land as a bicycle path.102

Ms. Dolan challenged the conditions up to the U.S. Supreme Court. Ms. Dolan framed her challenge as violation of the unconstitutional conditions doctrine.103 The crux of Ms. Dolan’s argument was that “the city. . . forced her to choose between the building permit and her right under the Fifth Amendment to just compensation for the public easements.”104

The Court agreed with Ms. Dolan and found that the conditions violated the unconstitutional conditions doctrine. In reaching its holding, the Court expressly used the unconstitutional conditions doctrine for the first time in a land use exactions case.105 The Court applied the “essential nexus” test from Nollan and found that essential nexuses between the government interests, which were mitigating flood risks that may result from the development and reducing traffic congestion, and the exactions.106 After finding that the conditions satisfied the essential nexus test, the Court had to determine “whether the degree of the ex- actions demanded by the city’s permit conditions bears the required relationship to the projected impact of [Ms. Dolan’s] proposed development.”107 The Court held that the Constitution requires “rough proportionality,” which is “some sort of individualized determination that the required dedication is related both in nature and extent to the impact of the proposed development.”108

Under the rough proportionality test, the city failed to show a sufficient relationship between the floodplain easement and the impacts of Ms. Dolan’s proposed development.109 The city failed to articulate “why a public greenway, as opposed to a private one, was required in the interest of flood control.”110 While the Court agreed with the city that the proposed development would increase traffic, and that generally exactions for streets and sidewalks are reasonable, the city failed to meet its burden of demonstrating that the increased traffic resulting from the development reasonably related “to the city’s requirement for a dedication of the pedestrian/ bicycle pathway easement.”111 The city’s finding that the “creation of the pathway ‘could offset some of the traffic demand . . . and lessen the increase in traffic congestion’” was insufficient to satisfy the rough proportionality test that the Constitution demands.112 Dolan’s rough proportionality test expressly shifts the burden to the city to justify the exaction with sufficient findings and evidence, which the city failed to accomplish.

Nollan and Dolan represented a new framework to analyze land use exactions.113 Using the Takings Clause and unconstitutional conditions doctrine, Nollan and Dolan created a heightened scrutiny standard of judicial review of land use permit conditions. This shifted the evidentiary burden to the city, rather than the developer, to demonstrate with sufficient findings that the tests are satisfied.114 This heightened standard of judicial review of exactions represents a unique level of scrutiny in the land use regulation context, as opposed to the more deferential scrutiny applicable in non-exaction land use regulations.115 In land use challenges not involving exactions, the developer generally has the burden of proving that the regulation or restriction violates the factors established in Penn Central,116 and the court applies rational basis review to make its determination.117 After Nollan and Dolan, however, when exactions are at issue, the burden shifts to the government to demonstrate that the exactions pass constitutional muster by presenting sufficient findings.118

For nearly twenty years, courts around the country used the Nollan and Dolan tests to determine the constitutionality of a number of land use exaction cases. But questions started to emerge regarding the limits of the tests and whether dedications of real property were required to trigger heightened scrutiny under Nollan and Dolan. Nineteen years after Dolan, the Court would review its exactions doctrine and the limits of Nollan and Dolan.

C.   Koontz v. St. Johns Water Management District119

The Supreme Court granted certiorari in Koontz v. St. Johns Water Management District in 2013 to clarify some uncertainty in exactions law. The Court sought to determine (1) whether the Nollan and Dolan tests apply not only to permit conditions that require the dedication of interests in real property but also to conditions that require the permit applicant to expend money to mitigate impacts of the development, and (2) whether the Nollan and Dolan tests apply when a permit is denied. In answering both of these questions affirmatively, the Court significantly expanded the reach of Nollan and Dolan, thereby greatly expanding property rights protection.120

Mr. Koontz wanted to redevelop his 14.9 acre lot in Florida, which was partially on wetlands, so he sought the necessary permits from the St. Johns River Water Management District (“District”) required under Florida law.121 Florida law gave the District the authority to impose reasonable conditions if “necessary to assure” that development will “not be harmful to the water resources of the district.”122 Additionally, a Florida environmental statute required permit applicants prove “reasonable assurance” that the proposed development on wetlands is “not contrary to the public interest.”123 To comply with these state laws, the District required landowners wishing to develop on wetlands to “offset the resulting environmental damage by creating, enhancing or preserving wetlands elsewhere.”124

To offset the environment damage of his proposed development, Mr. Koontz offered to deed to the District a conservation easement on 11.2 acres of his property that he did not intend to develop.125 The District considered the 11.2 acre easement offer inadequate, so it presented to Mr. Koontz two alternative counteroffers: (1) Mr. Koontz could reduce the size of his proposed development to one acre and deed to the District an easement on the remaining 13.9 acres, or (2) Mr. Koontz could proceed with his plan to develop the 3.7 acres, deed an easement on 11.2 acres to the District, and pay for improvements to District-owned land several miles away.126 Mr. Koontz rejected the District’s counteroffers, believing the alternatives to be excessive relative to the environmental harm of his proposed development.

Mr. Koontz filed suit in Florida state court under a Florida law, which provided for money damages when a government agency’s action was “an unreasonable exercise of the state’s police power constituting a taking without just compensation.”127 The lower Florida state court granted the District’s motion to dismiss, which was later remanded by the appeals court.128 On remand, the Florida state court found that the District was required to satisfy Nollan’s essential nexus test and Dolan’s rough proportionality test but the District had failed to satisfy both tests129 — and the Florida appeals court affirmed.130 The Florida Supreme Court reversed, finding the case distinguishable from Nollan and Dolan on two grounds.131 First, unlike in Nollan or Dolan, the District did not approve the development application with particular conditions. Instead, the District denied his application because Mr. Koontz refused to concede.132 Second, the District required a cash payment as an exaction, rather than demanding an interest in real property, which had been required of the landowner in Nollan and Dolan.133 Mr. Koontz then petitioned for certiorari to the U. S. Supreme Court.

The U.S. Supreme Court granted certiorari to answer two questions: (1) whether the Nollan and Dolan tests apply to permit denials, and (2) whether the Nollan and Dolan tests apply to exactions not related to real property interests such as monetary exactions.134 Relying on the unconstitutional conditions doctrine and a particular distrust for government motives in the permitting process, the Court held that the Nollan and Dolan tests apply to both permit denials and to monetary exactions and remanded the case to the Florida courts.135

Koontz represents a drastic expansion from precedent established in Nollan and Dolan. A core premise in Nollan and Dolan was that the government or public agency in those cases demanded an interest in real property: a public easement, a public greenway, or land for a  bike lane, for example. The most relevant Supreme Court case dealing with monetary exactions as takings came from an extremely splintered plurality opinion in Eastern Enterprises v. Apfel.136 In Eastern Enterprises, a plurality of the Court read “property” within the meaning of the Takings Clause to only refer to “a specific property interest.”137 In other words, a naked demand for money was not a taking.138 But to reconcile its holding in Koontz with the holding in Eastern Enterprises, the Court determined that the permit that Koontz requested from the local government related to the use of real property.139 To  the majority in Koontz, the demand for money was “functionally equivalent” to demands for real property because they operated on an identified property interest by “directing the owner of a particular piece of property to make a monetary payment.”140 By making the leap to monetary payments that relate to the use of real property, the Court was able to justify its conclusion that a monetary exaction can constitute a taking.141

The Koontz decision has serious implications for land use planning. Koontz suggests that any condition attached to a land use permit affecting the use of real property is sufficient to trigger the Nollan and Dolan tests.142 The implicit premise in Nollan and Dolan was the understanding that had the government required the property owners to dedicate real property outside the permit process, the government would have been required to pay just compensation under the Fifth Amendment.143 From the Court’s perspective in Nollan and Dolan, local governments should not be able to skirt the requirements of   the Fifth Amendment by imposing conditions through the permit process that would violate the Fifth Amendment if imposed outside of the permit process.144 But after Koontz, it stands to reason that any requirement attached to a land use permit may trigger the Nollan and Dolan tests — regardless of whether the condition amounts to a taking outside the permit process — so long as the permit affects the use of real property.145 In other words, it follows that Nollan and Dolan may arguably apply to any number of common land use conditions   if the conditions operate on an “identified property interest.”146 Justice Kagan expressed serious concern in her dissenting opinion, stating that the majority’s decision in Koontz “turns a broad array of land-use regulations into federal constitutional questions.”147 She also noted that the majority’s decision “deprives state and local governments of the flexibility they need to enhance their communities — to ensure environmentally sound and economically productive development.”148

Moreover, the Court’s holding that permit denials trigger Nollan and Dolan also has significant implications for land use planning. Relying on the unconstitutional conditions doctrine, the Court in Koontz held that Nollan and Dolan apply not only when the government approves a permit subject to conditions relating to the use of real property, but also when the government denies a permit because the property owner refuses to accept the conditions.149 Justice Kagan emphasized that the holding will encourage local governments to avoid negotiating with permit applicants and deny the permits outright: “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 [the developer] any advice — even if he asks for guidance.”150 The outright denial of a permit, instead of a mutually beneficial discussion with the property owner during the permit process, will likely stymie development.

Considering how drastically Koontz expanded Nollan and Dolan’s reach into land use land use regulation, the California Supreme Court may have applied the incorrect standard of review to the affordable housing ordinance at issue in City of San Jose. Moreover, it is likely that City of San Jose is only the beginning, and that Justice Kagan’s concerns in her dissenting opinion will materialize as developers and property owners around the country capitalize on Koontz’s broad implications.

IV.   Did the California Supreme Court Apply the Incorrect Standard?

Unfortunately, the Court did not grant certiorari in City of San Jose to determine what types of land use conditions trigger heightened scrutiny after Koontz and whether legislatively imposed exactions also implicate heightened scrutiny. Looking to the rationale of the Court’s exactions doctrine and the Court’s most recent expansion in Koontz, however, the California Supreme Court may have applied the incorrect standard of review.

A.   Rationale of Nollan, Dolan, and Koontz

A core guarantee of the Takings Clause articulated by the U.S. Supreme Court is that an individual or small group alone should not have to “bear public burdens which, in all fairness and justice, should be borne by the public as a whole.”151 The U.S. Supreme Court, through its decisions in Nollan, Dolan and Koontz, has strived to provide protections to landowners subject to the land use permitting process as guaranteed by the Takings Clause and the unconstitutional conditions doctrine. Although the Court expressly disavowed a substantive due process analysis in takings cases in Lingle v. Chevron,152 a closer look at the Court’s analyses in Nollan, Dolan, and Koontz makes clear that the Court has resurrected substantive due process in its exactions tests.153 By focusing on whether the regulation “substantially advances” a legitimate state interest, the Court imposes its “own values over those of local governments with respect to land use regulation”154 and pulls “more land use planning decisions that are not traditional takings into a stricter, substantive judicial review and away from the historic deference afforded land use planners.”155 In its effort to protect property rights, the Court has unwittingly revived the substantive due process analysis in its extractions doctrine.  

Nollan, Dolan, and Koontz reflect the Court’s desire to ensure that government can require a landowner to dedicate a property interest only to mitigate the anticipated harm of the landowner’s proposed development.156 The tests are designed to prevent the government from coercing landowners to relinquish property interests to the public that  the government would otherwise have to pay for under the Fifth Amendment.157 Adhering to the doctrine of unconstitutional conditions, the Koontz Court expressed concern that government can coerce landowners, stating that landowners “are especially vulnerable to the type of coercion that the unconstitutional conditions doctrine prohibits because the government often has broad discretion to deny a permit that is worth far more than the property it would like to take.”158 Not only is the Court concerned with the imposition of unconstitutional conditions in the permitting process, the Court is also concerned that “[e]xtortionate demands for property in the land-use permitting context can run afoul of the Takings Clause not because they take property but because they impermissibly burden the right not to have property taken without just compensation.”159 In determining whether Nollan, Dolan, and Koontz apply to a particular land use condition, it is important to keep this underlying rationale in mind.

B.   Real Property Expanded to Other Property Interests in Koontz

In deciding City of San Jose, the California Supreme Court relied heavily on the fact that because the San Jose ordinance did not require the developers to dedicate real property, the ordinance at issue did “not effect an exaction.”160 Looking to Nollan and Dolan, the California Supreme Court focused on the fact that the landowners in those cases were required to “dedicate a portion of the property to public use” as a condition of obtaining the permits.161 While it is true that the dedications in Nollan and Dolan did involve real property, Koontz drastically departed from this precedent when it held that the expenditure of money as a permit condition also constitutes an exaction and is therefore subject to heightened scrutiny under Nollan and Dolan.162

C.   Fifth Amendment Violation from Unconstitutional Conditions Doctrine: Actual “Taking” No Longer Required After Koontz

Prior to Koontz, it was implicit from the reasoning in Nollan and Dolan, that for those tests to apply, the condition imposed through the permitting process had to amount to a per se taking if it had been applied outside the permitting process — known as the “independent-taking” or “actual taking” requirement. For example, using the facts of Nollan and Dolan, if the government had required a landowner to construct a public easement on his property or to build a public greenway on his property outside the permitting process, the government would have to pay just compensation under the Takings Clause.163 In Lingle v. Chevron U.S.A. Inc., the unanimous Court clarified that, in Nollan and Dolan, “had the government simply appropriated the easement in question, this would have been a per se physical taking.”164 Thus, the Court made clear in Lingle that Nollan and Dolan stand for the proposition that if the dedication of property outside the permit process would constitute a taking, then the condition is an ex- action subject to heightened scrutiny under Nollan and Dolan.

The Court departed drastically from this precedent, however, when the majority held in Koontz that a monetary payment as a condition to development also constitutes an exaction subject to heightened scrutiny. As mentioned previously, the Court had already decided in 1998 in Eastern Enterprises v. Apfel that a government mandate to expend money is not a taking, much less a per se taking outside the land use permitting process.165 Despite the Court’s established principle that Nollan and Dolan apply when the condition constitutes a taking outside the permit process, and that a government demand for monetary payment is not a taking, the Court in Koontz held essentially the opposite — that a monetary demand attached as a permit condition is an exaction subject to heightened scrutiny.166 The Court, in its departure from precedent in Eastern Enterprises, and significant expansion of Nollan, and Dolan, justified its holding by stating that the demand for a monetary payment “ ‘operate[d] upon . . . an identified property interest,’ ” because “the owner of a particular piece of property [had] to make a monetary payment.”167 Essentially, the monetary payment related to Mr. Koontz’s use of his real property.168

The Court in Koontz attempted to distinguish the monetary payment condition from the monetary payment at issue in Eastern Enterprises. The Court explained the primary distinction is that in Koontz, unlike in Eastern Enterprises, the monetary obligation burdened the landowner’s “ownership of a specific parcel of land.”169 The Court in Koontz likened the monetary obligation at issue in the case to other cases where the Court had previously held certain government monetary demands amounted to takings when the monetary demands burdened a specific property interest.170 Specifically, the Court relied on Brown v. Legal Foundation of Washington,171 where it held a state’s seizure of interest on client funds held in escrow amounted to a taking,172 and United States v. Security Industrial Bank,173 where it found a government taking of a lien secured by property implicated the Takings Clause. The Court noted that the primary distinction between Koontz and Eastern Enterprises is that Koontz involved a “direct link between the government’s demand and a specific parcel of real property.”174

The majority recognized somewhat that its decision to expand Nollan and Dolan to “monetary exactions” may cause confusion. The majority acknowledged, and rightly so, that taxes are not takings, and that its decision “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.”175 But as Justice Kagan astutely pointed out in her dissent, “the majority’s distinction between monetary ‘exactions’ and taxes is so hard to apply.”176 Once the majority decides 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?”177 The majority sim- ply stated that its decision does not apply to taxes, but strangely, it did not provide any guidance as to how lower courts, governments, and developers should make the distinction that now determines whether a given monetary payment or fee will trigger heightened scrutiny.

Besides the majority’s obvious failure to provide a principled method for distinguishing between taxes and monetary exactions, there are two major issues with the holding in Koontz, which suggest that the California Supreme Court’s reasoning may be incorrect. First, because a monetary payment is not a per se taking outside the land use permitting process, Koontz arguably stands for the proposition that a simple requirement attached to a land use permit is sufficient to trigger heightened scrutiny under Nollan and Dolan.178 Koontz essentially contradicts the basic premise in Nollan and Dolan that for the tests to apply, a particular development condition must constitute a per se taking outside of the land use permitting process.179 Therefore, the California Supreme Court’s reliance on the foundational premise in Nollan and Dolan — that the condition would amount to a taking out- side the permitting process180 — is arguably misplaced in light of Koontz.

To get around this predicament, the California Supreme Court relied on the simple fact that restricting the use of property outside the permit process does not amount to a taking.181 While that is true, the California Supreme Court brushed over the fact that demanding money, which was the issue in Koontz, is not a taking outside of the permit process either.182 The California Supreme Court simply acknowledged that “the full range of monetary land-use permit conditions to which the Nollan/ Dolan test applies under the Koontz decision remains at least somewhat ambiguous.”183 The court then reasoned that the permit condition at issue did not require a dedication of real property, as was the case in Nollan and Dolan, and that Koontz did not eliminate the independent taking requirement in Nollan and Dolan.184 That may be one way to read Koontz, albeit a rather narrow reading, but California’s highest court may have ignored the second major issue with Koontz, which suggests broad and far reaching implications.

The second major problem with Koontz, which calls the California Supreme Court’s reasoning into question, is that Koontz suggests that the Nollan and Dolan tests apply to any permit condition that relates to the use of real property.185 Koontz’s expansion to include monetary expenditures as exactions implies that “property” is not limited to physical parcels of real property. This proposition is not inconsistent with the Court’s most recent cases on the subject, either. For example, in Horne v. Department of Agriculture, the Court held that “property” under the Fifth Amendment is not limited to real property; rather, the Takings Clause also applies to personal property.186 In Horne, the Court struck down a federal program designed to increase raisin prices by keeping some of them off the market because it amounted to a taking.187 The program required raisin growers to surrender portions of their raisin crops as a condition of selling remaining shares of the crops, which the Court deemed to be a taking, reversing the Ninth Circuit’s decision that the restriction amounted to a general land use restriction.188

And, while it may be unlikely that the majority in Koontz intended to apply Nollan and Dolan to all conditions attached to permits, without the existence of the actual taking requirement and the extension to other permit conditions that burden the use of real property, it is difficult to understand now, after Koontz, what type of condition attached to a permit affecting the use of real property is not subject to heightened scrutiny.189

IV. Implications and Possible Solutions

A.   Implications

Koontz has serious implications for local governments’ ability to effectively and efficiently plan and regulate urban development through the use of the land use permitting process.190 The dissent in Koontz expressed serious concern that the majority’s decision would have far reaching implications that will ultimately hinder local governments’ ability to regulate land use and may also stymie urban development.191 Perhaps the most obvious implication is that local governments will have to expend considerable financial resources to satisfy the heightened scrutiny standard in the form of significant findings, data, and other evidence.192 After Koontz, important questions remain: How far does the decision go? What are potential solutions to remedy its negative implications?

First, the Koontz decision as it stands may severely limit local governments’ ability to regulate land use. The Koontz expansion of Nollan and Dolan to monetary exactions that affect the use of real property raises the question whether these general land use restrictions, particularly those applied across the board by use of a fee schedule, are now subject to heightened scrutiny under the tests if they are imposed through the permitting process.193 If so, then local governments will be severely constrained in their ability to regulate urban development and mitigate potential harm from proposed development because local governments will have to expend considerable resources to satisfy the individualized heightened scrutiny burden that the tests demand. Moreover, because the actual taking requirement is arguably no longer required to trigger the tests, one can make the case that general land use restrictions, which have not been considered a taking outside the permit process, are subject to heightened scrutiny if attached as a condition or otherwise to applicable development. The plaintiff in City of San Jose illustrated this point when it challenged the citywide afford- able housing ordinance, and the California Supreme Court’s decision highlighted the difficulty in answering these unresolved questions after Koontz.

Second, the expansion of Nollan and Dolan to permit denials also has negative implications for local governments’ ability to regulate land use. Local governments will be wary to engage in discussions with permit applicants, and instead may deny the permit outright to avoid getting dragged into litigation challenging the permit denial.194 The Koontz dissent predicted the outright denial of permits would ultimately hinder development.195 Needless to say, not only would this severely disrupt development but also it would be economically catastrophic in the long run.

Third, as the dissent noted, another potential implication of Koontz is that local governments may be compelled to approve the permit application without restrictions. The consequences of approving development permit applications without restrictions or conditions are obvious. Commentators have noted that local governments may be less likely to impose monetary exactions to “recreational, environmental, or natural resource amenities,” which will have clear environmental impacts.196 Furthermore, if local governments choose not to use these exactions, the result may very well be “loss of open space, fewer bike paths and nature trails, and less wetlands and habitat protection.”197 Because of local governments’ fear to impose conditions attached to permit approval, or fear that any discussions with permit applicants may subject the local government to heightened scrutiny, Justice Kagan argues in her dissent that local governments may feel encouraged to either deny the permit applications outright or approve the applications without any restrictions — and both results have negative implications for urban development and environmental mitigation.198

In sum, the Koontz decision leaves many questions unanswered and has potential negative implications for land use planning. There are a few potential solutions, however, which can help to mitigate Koontz’s negative effects.

B.   Possible Solutions

With its decision in Koontz it seems that the Supreme Court may have boxed itself in in the murky area of exactions law. This section discusses some potential solutions that may help to limit Koontz’s expansive reach into local land use planning.

1.   LEGISLATIVE VS. ADJUDICATIVE EXACTIONS

It is possible that one limiting principle curbing Koontz’s broad reach is the proposition that exactions imposed through general legislation, as op- posed to adjudicative methods, do not trigger heightened scrutiny under Nollan, Dolan, and Koontz.199 While the California Supreme Court did not engage in a substantive discussion about the legislative and adjudicative distinction, courts across the country are split on the issue whether Nollan, Dolan, and Koontz apply only in adjudicative land use permitting processes or if they apply to exactions imposed through general legislation as well.200

Importantly, Nollan, Dolan, and Koontz involved conditions broadly allowed by general legislation. In Nollan, the California Coastal Act and California Public Residential Code, general state legislation, required Nollan to dedicate beachfront property.201 Similarly, in Dolan, the city’s development code “require[d] that new development facilitate [the comprehensive plan] by dedicating land for pedestrian pathways.”202 In other words, the bike path and greenway exactions were mandated, generally, by the city’s legislation203 and Florida state law required the in lieu fee at issue in Koontz.204

While the conditions in Nollan, Dolan, and Koontz were all broadly authorized by general legislation, the actual decisions to impose the particular conditions at issue in the cases were primarily adjudicative,  or ad hoc, in nature. In other words, broad general legislation existed  that imposed the “ends,” but the “means” to achieve those ends were flexible and at the discretion of the local government or agency charged with approving or denying the permits. For example, in Koontz, the Florida Legislature passed the Henderson Act to protect Florida’s dwindling wetlands. The Act required that permit applicants prove “reasonable assurance” that proposed development on wetlands is “not contrary to the public interest.”205 To comply with the Henderson Act and the Water Resource Act, which allowed local governments to impose reasonable conditions on permit approval, the District required landowners wishing to develop on wetlands “offset the resulting environmental damage by creating, enhancing or preserving wet- lands elsewhere.”206 Essentially, general legislation existed to ensure that the local governments and property owners achieved the particular goal — protection of the dwindling wetlands in the case of Koontz — but the decision as to how to achieve the goal was at the discretion of the permitting authority. It is this discretionary decision that is adjudicative in nature. Thus, assuming the Court finally determines that Nollan, Dolan, and Koontz apply only to adjudicative land use decisions, then the San Jose ordinance and other similar affordable housing ordinances may pass muster because arguably they apply equally to all similarly situated developers or property owners.207

Further, it is this adjudicative decision-making process that the Court was particularly concerned with in Nollan, Dolan, and Koontz. During the permitting process, the government has broad “discretion to deny a permit” and in this situation, “land-use permit applicants are especially vulnerable to . . . coercion.”208 Thus, one of Court’s core concerns in Nollan, Dolan, and Koontz was the potential for extortionate demands during the adjudicative permitting process.

Moreover, applying the Nollan, Dolan, and Koontz tests to adjudicative exactions, not conditions imposed broadly through general legislation, helps to achieve separation of powers and to ensure flexibility for local governments in their land use planning processes. If Nollan, Dolan, and Koontz do indeed apply to conditions imposed through both adjudicative and legislative processes, then the substantive due process analysis, which the Court expressly disavowed in takings cases, will be coming through the back door via exactions imposed through legislation of general applicability. Applying Nollan, Dolan, and Koontz to conditions imposed through an adjudicative-type land use process helps to ensure that the government is not doing something indirectly that it cannot do directly.209 But applying the heightened scrutiny exactions tests to conditions imposed through general legislation seems a bridge too far. Further, because land use issues are inherently particular to each state or municipality, it seems to make practical sense for the Court to defer to local land use policy decisions. In fact, in Metromedia, Inc. v. City of San Diego, a First Amendment case dealing with the issue of a citywide ban on offsite billboards, the Court wisely noted the highly localized and municipality-specific nature of billboards and traffic dangers, stating that “[w]e likewise hesitate to disagree with the accumulated, common-sense judgments of local lawmakers and of the many reviewing courts that billboards are real and substantial hazards to traffic safety. There is nothing here to suggest that these judgments are unreasonable.”210 Thus, the Court has already emphasized the importance of deferring to local legislative judgments in the area of First Amendment billboard cases, so why not afford the same kind of deference to local and state governments with respect to highly specialized, local land use legislative decisions?

In sum, the legislative and adjudicative distinction may possibly be one avenue by which the Court can limit Koontz’s otherwise expansive reach into local land use planning. As Justice Thomas made clear in his concurrence in the denial of certiorari, the legislative and adjudicative distinction in the area of exactions has been unresolved for  over twenty-five years, and courts around the country are split on whether Nollan, Dolan, and Koontz apply only to adjudicative exac- tions or broader, legislatively imposed exactions.211 And while it may be difficult in some instances to determine whether the particular exaction is adjudicative or legislative in nature, the Court could grant certiorari to craft a proper test to determine legislative from adjudicative exactions. The Court might definitely determine that Nollan, Dolan, and Koontz apply only to purely adjudicative exactions, and that broader exactions imposed through general legislation — such as the affordable housing at issue in City of San Jose — are not subject to the heightened scrutiny standard of review under Nollan, Dolan, and Koontz. Doing so would protect property rights that may be jeopardized during the adjudicative permitting process but also limit the scope and reach of Nollan, Dolan, and Koontz so as not to impede on local governments’ ability to properly regulate land use. Assuming legislatively imposed exactions are not subject to Nollan, Dolan, and Koontz, a viable option for state and local governments is to rely on broad legislation to impose exactions, rather than on the discretionary, adjudicative permitting process.212

2.   REGULATORY ALTERNATIVES VIA MITIGATION ACTS

Unless and until the Court definitely resolves the lingering issues remaining in exactions law, particularly after Koontz, state and local governments will have to tread carefully so as not to violate the Court’s exactions doctrine. Fee mitigation regulatory schemes serve as one useful tool for local governments in their land use planning efforts. Generally, fee mitigation schemes allow a developer to continue development while simultaneously challenging a particular land use condition or regulation.213 In other words, fee mitigation schemes provide an alternative to the traditional “all or nothing” approach in which a developer must choose to fully accept the conditions and continue development, or reject the conditions and bring the development project to a complete halt.

Many states have enacted fee mitigation regulatory schemes to pro- vide permit applicants a quicker and less expensive avenue for judicial review of exactions.214 California, for example, requires exactions “not [to] exceed the estimated reasonable cost of providing the service for which the . . . exaction is imposed” and requires local governments to justify monetary exactions.215 In Oregon, ORS 197.796(1)-(2) allows an applicant to accept a condition, and then simultaneously challenge the condition at the Land Use Board of Appeals,216 or in Oregon circuit court, if the applicant is pleading damages.

Besides being a quicker and less expensive avenue for judicial review of exactions, an additional benefit of these regulatory schemes, particularly in the context of exactions, is that such regulatory schemes may provide a way for local governments to impose development conditions but avoid a taking. In Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, the Supreme Court made clear that “a claim that the application of government regulations effects a taking of a property interest is not ripe until the government entity charged with implementing the regulations has reached a final decision regarding the application of the regulations to the property at issue.”217 Further, the Court noted that “if a State provides an adequate procedure for seeking just compensation, the property owner cannot claim a violation of the Just Compensation Clause until it has used the procedure and been denied just compensation.”218 So it stands to reason that perhaps local governments can defend such takings actions, while allowing development to continue under the regulatory mitigation scheme, and if the local government ultimately loses, the remedy could be in the form of continued development. The fact that the property owner won could be considered the remedy, acting somewhat like a variance, and the local government may not be required to pay compensation, unless the property owner was in fact denied compensation.

3.   EXCISE TAXES

Another potential solution for local governments is to use an excise tax to fund affordable housing projects. The Court expressly stated  in Koontz that taxes are not takings, and that its decision “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.”219 Assuming the government can properly distinguish a tax from a monetary exaction, which Justice Kagan pointed out in her dissent is conceptually very difficult,220 perhaps the local government can add a small excise tax onto development projects. The excise tax could then be used to fund affordable housing.

4.   DEVELOPMENT AGREEMENTS

One final solution potentially available for state and local governments to use to avoid the constraints of Nollan, Dolan, and Koontz is to enter into development agreements with property owners. Development agreements legally bind the developer to existing zoning laws and   all conditions of approval, such as exactions.221 Because contracts are entered into voluntarily, judicial review of development agreements is far less likely.222 Further, because ordinances are not contracts and can be changed at any time by the governing body, property owners and particularly developers, have an incentive to consider development agreements to avoid the vested rights issue that may obstruct the proposed development if zoning laws change.223 When a developer enters into a development agreement with a local government, the developer is ensured that its rights have essentially vested because the parties are bound to the particular laws and conditions expressed in the agreement.224 Thus, development agreements can be mutually beneficial to both the local government and the property owner.

Despite the potential advantages of development agreements, a developer could make a strong argument that the local government or public agency has far superior bargaining power than the developer; and, therefore, the development agreement is really a product of coercion — the very kind at issue in Nollan, Dolan, and Koontz. A court could be persuaded by such an argument, especially considering the majority’s concern in Koontz that the standard set out in Nollan and Dolan reflects the reality that “land-use permit applicants are especially vulnerable to the type of coercion that the unconstitutional conditions doctrine prohibits because the government often has broad discretion to deny a permit that is worth far more than the property it would like to take.”225 Thus, a developer could turn around after signing a development agreement and make a potentially persuasive argument that it really had no choice but to sign the agreement and that the government or agency should not be permitted to circumvent the safeguards afforded by Nollan, Dolan, and Koontz. This could persuade a court in light of the fact that the Supreme Court’s precedent reflects a real concern for the government’s ability to exert “coercive pressure” in the land use permitting process.226

Nevertheless, development agreements may still allow for flexible arrangements between local governments and property owners,227 despite the potential argument that such agreements are inherently coercive. If a local government does indeed implement a development agreement with a developer, it should engage in a thorough “bargaining process” with the developer to better protect itself against future claims that the development agreement was a product of coercion and the government’s superior bargaining power. Through the contractual bargaining process, the local government can seek to ensure the developer mitigates potential harm from the proposed development and that the associated costs are not externalized onto taxpayers, while the developer can ensure its development project will immediately vest rights and can bargain for favorable development terms in the agreement.228 Most importantly, for the purposes of this Article, the development agreement may allow the parties to avoid the constitutional constraints set forth in Nollan, Dolan, and Koontz.229

IV.   Conclusion

City of San Jose highlights some of the difficulties courts, developers, and local governments face in the wake of Koontz. A close examination of the evolution of the Court’s exactions doctrine, especially the Court’s expansion from real property dedications in Nollan and Dolan to permit conditions that affect the use of real property in Koontz, raises a number of questions still lingering in land use law, and casts some doubt on the California Supreme Court’s holding in City of San Jose. Put simply, after Koontz it is still an open question whether affordable housing ordinances, like that of San Jose’s, constitute an exaction or a general land use restriction.

The Supreme Court should clear up its exactions doctrine and ultimately allow for more deference to local governments’ land use planning decisions. Perhaps when Justice Scalia’s seat on the bench is filled, the Court will have sufficient votes to clarify the ambiguities that remain after Koontz. In the meantime, however, local governments, developers, and courts will continue to test the limits of the Supreme Court’s exactions doctrine. While affordable housing ordinances similar to the one at issue in City of San Jose will survive scrutiny in California for now, courts around the country may reach different conclusions or follow the California Supreme Court’s interpretation. What is certain, however, is that until the Court defines Koontz’s limits, those of us working within the land use planning process will continue to tread carefully through this woefully unsettled area of exactions law in the post-Koontz era.

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Topic:
  1. See Sean F. Nolon, Bargaining for Development Post-Koontz: How the Supreme Court Invaded Local Government, 67 FLA. L. REV. 171, 174 (2015).
  2. See Timothy M. Mulvaney, Exactions for the Future, 64 BAYLOR L. REV. 511, 517 (2012).
  3. See Michelle Castle Miller, The New Per Se Takings Rule: Koontz’s Implicit Revolution of the Regulatory State, 63AM. U. L. REV. 919, 920 (2014); see also Rebecca L. Matlock, Constitutional Law—Fifth Amendment and Takings—Courts and the Judicial Process Will Impede Orderly City Development by Limiting Local Governments’ Use of Exactions in Development Planning, 37 U. ARK. LITTLE ROCK L. REV. 519, 525 (2015).
  4. See Miller, supra note 3, at 921.
  5. See Matlock, supra note 3, at 519. Provisions of a state constitution and state legislation may impose further limitations on local governments’ ability to impose exactions. Id. at 538-39.
  6. See Susan M. Denbo, Development Exactions: A New Way to Fund State and Local Government Infrastructure Improvements and Affordable Housing?, 23 REAL EST. L.J. 7, 9 (1994). Some local governments operate under home rule authority, wherein the local governments are free to pass local laws and ordinances not forbidden by state or federal constitutions. For an extensive discussion on home rule authority impact on local governments’ ability to regulate urban sprawl and urban development, see generally David J. Barron, Reclaiming Home Rule, 116 HARV. L. REV. 2255 (2003).
  7. Denbo, supra note 6, at 9.
  8. See Miller, supra note 3, at 921.
  9. 483 U.S. 825 (1987).
  10. 512 U.S. 374 (1994).
  11. 133 S. Ct. 2586 (2013).
  12. See Matlock, supra note 3, at 525-26.
  13. See Denbo, supra note 6, at 26; see also Justin D. Cummins, Housing Matters: Why Our Communities Must Have Affordable Housing, 28 WM. MITCHELL L. REV. 197, 199 n.5 (2001) (“ ‘Affordable housing’ [generally] means ”housing (including rent or mortgage payments, utilities, taxes, and insurance) that consumes 30% or less of the income of a household earning 80% or less of the metro area median income.”).
  14. See Denbo, supra note 6, at 26-37 (discussing a number of strategies local governments have employed to confront scarcity of affordable housing, such as housing linkage fees and fair share programs).
  15. See Cal. Bldg. Indus. Ass’n v. City of San Jose, 351 P.3d 974, 977 (Cal. 2015).
  16. SAN JOSE, CAL., CODE § 5.08.400(A)(1).
  17. Cal. Bldg. Indus. Ass’n, 351 P.3d 974.
  18. Id. at 979.
  19. Id. at 992; see also Nollan v. Cal. Coastal Comm’n, 483 U.S. 825 (1987); Dolan v. City of Tigard, 512 U.S. 374 (1994); Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct 2586 (2013).
  20. Cal. Bldg. Indus. Ass’n, 351 P.3d at 991. It is interesting to note that decades ago the New Jersey Supreme Court found that municipalities, through the use of the land use police power, must affirmatively provide for affordable housing, and that the failure to provide affordable housing violates New Jersey’s constitution because such land use regulation fails to advance the general welfare. S. Burlington Cty. NAACP v. Mount Laurel Twp. (Mount Laurel I), 336 A.2d 713, 724-28 (N.J. 1975); S. Burlington Cty. NAACP v. Mount Laurel Twp. (Mount Laurel II), 456 A.2d 390, 415-18 (N.J. 1983). This raises the question whether the U.S. Supreme Court would look to the federal Constitution and reach the same conclusion as the New Jersey Supreme Court with the New Jersey constitution.
  21. Cal. Bldg. Indus. Ass’n v. City of San Jose, 136 S. Ct. 928, 928 (2016) (Thomas, J., concurring).
  22. See John D. Echeverria, The Costs of Koontz, 39 VT. L. REV. 573, 573 (2015) (discussing the negative effects of Koontz and the implications for local governments); see also Mulvaney, supra note 2, at 512; Nolon, supra note 1, at 173-74 (discussing the unresolved questions remaining after Koontz and the new issues the decision created).
  23. Cal. Bldg. Indus. Ass’n, 351 P.3d 974.
  24. CAL. GOV’T CODE § 65300.
  25. Id. § 65580.
  26. Darien Shanske, Public Tax Dollars for Private Suburban Development: A First Report on A National Phenomenon, 26 VA. TAX REV. 709, 718 (2007); CAL. CONST. art. XIII A, § 2(a).
  27. Shanske, supra note 26, at 718; CAL. CONST. art. XIII A, § 2(a).
  28. Shanske, supra note 26, at 718; CAL. CONST. art. XIII A, § 1(a).
  29. CAL. GOV’T CODE § 65580(a)-(b), (d); see also Cal. Bldg. Indus. Ass’n v. City of San Jose, 351 P.3d 974, 979-80 (2015).
  30. CAL. GOV’T CODE § 65583(c)(1)-(2); see also Cal. Bldg. Indus. Ass’n, 351 P.3d at 979-80.
  31. Cal. Bldg. Indus. Ass’n, 351 P.3d at 978, 983; see also SAN JOSE, CAL., CODE § 5.08.250(A); Id. §§ 5.08.400(A)(1), 5.08.130.
  32. Cal. Bldg. Indus. Ass’n, 351 P.3d at 978, 980; see also Margaret F. Brinig & Nicole Stelle Garnett, A Room of One’s Own? Accessory Dwelling Unit Reforms and Local Parochialism, 45 URB. LAW. 519, 568 (2013).
  33. 351 P.3d at 978, 981.
  34. SAN JOSE, CAL., CODE § 5.08.250(A).
  35. Cal. Bldg. Indus. Ass’n, 351 P.3d at 978, 985 (referring to trial court proceedings). Importantly, Koontz had not yet been decided by the U.S. Supreme Court at the time the case was in the trial court.
  36. Id. The trial court complaint raised other allegations as well but are not pertinent for purposes of this Article.
  37. See id. at 985.
  38. Id.
  39. Id.
  40. Id.
  41. Id. at 985-86.
  42. Id. at 986.
  43. Cal. Bldg. Indus. Ass’n v. City of San Jose, 157 Cal. Rptr. 3d 813, 818-21 (Cal. Ct. App. 2013); see also Cal. Bldg. Indus. Ass’n, 351 P.3d at 978, 985-86. At the time of the California Court of Appeal’s holding, Koontz had not yet been decided, and the California Court of Appeal’s decision reflected the thinking of a majority of courts that Nollan and Dolan scrutiny was inapplicable where monetary exactions were at issue. Three weeks after the Court of Appeal ruling, the U.S. Supreme Court decided Koontz.
  44. 157 Cal. Rptr. 3d at 825.
  45. The California Supreme Court also addressed CBIA’s state law claims, which are beyond the scope of this Article.
  46. Cal. Bldg. Indus. Ass’n, 351 P.3d at 978, 986.
  47. Id. at 986-87.
  48. See id. at 987-88.
  49. Id. at 988.
  50. Id. at 989-990.
  51. Id. at 991.
  52. Id. at 978, 991, 990 n.11. It is true general rent control measures can be constitutional because they have not traditionally been classified as exactions. See, e.g., Yee v. Escondido, 503 U.S. 519 (1992). The California Supreme Court likely read the Yee case as the basis for not applying Nollan, Dolan, and Koontz.
  53. Cal. Bldg. Indus. Ass’n, 351 P.3d at 978, 991-97.
  54. Id. at 989-90, 990 n.11.
  55. Id. at 990.
  56. Id.
  57. Cal. Bldg. Indus. Ass’n v. City of San Jose, 136 S. Ct. 928, 928 (2016) (Thomas, J., concurring).
  58. Id.
  59. Id.
  60. Id.. (quoting Parking Ass’n of Ga. v. City of Atlanta, 515 U.S. 1116, 1117-18 (1995)). Justice Thomas expressed skepticism at the idea that there is a distinction between legislatively imposed conditions and adjudicatory exactions 20 years earlier. Parking Ass’n of Ga., 515 U.S. at 1117-18 (Thomas, J., joined by O’Connor, J., dissenting from denial of certiorari) (“It is not clear why the existence of a taking should turn on the type of government entity responsible for the taking. A city council can take the property just as well as a planning commission can. . . . The distinction between sweeping legislative takings and particularized administrative takings appears to be a distinction without a constitutional difference.”).
  61. Cal. Bldg. Indus. Ass’n, 136 S. Ct. at 929 (Thomas, J. concurring).
  62. Id.
  63. Id.
  64. Mulvaney, supra note 2, at 512; see also Nolon, supra note 1, at 173-74.
  65. Mulvaney, supra note 2, at 512.
  66. Nolon, supra note 1, at 174 (citing Dolan v. City of Tigard, 512 U.S. 374 (1994); Nollan v. Cal. Coastal Comm’n, 483 U.S. 825 (1987)).
  67. James S. Burling & Graham Owen, The Implications of Lingle on Inclusionary Zoning and Other Legislative and Monetary Exactions, 28 STAN. ENVTL. L.J. 397, 402 (2009).
  68. See Matlock, supra note 3, at 519. The Takings Clause states that “nor shall private property be taken for public use, without just compensation.” U.S. CONST., amend. V.
  69. See, e.g., United States v. Carmack, 329 U.S. 230, 241-42 (1946); see also Matlock, supra note 3, at 519 (citing Carmack, 329 U.S. at 241-42 (1946)).
  70. See, e.g., Kohl v. United States, 91 U.S. 367 (1875); see also Miss. & Rum River Boom Co. v. Patterson, 98 U.S. 403 (1878); Pumpelly v. Green Bay & Miss. Canal Co., 80 U.S. 166 (1871). For modern landmark physical takings cases, see Kelo v. City of New London, 545 U.S. 469 (2005) and Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982).
  71. Pa. Coal Co. v. Mahon, 260 U.S. 393 (1922).
  72. Id. at 415.
  73. See Robert Meltz, Takings Law Today: A Primer for the Perplexed, 34 ECOLOGY L.Q. 307, 328-29 (2007) (providing an extensive history and overview of takings law).
  74. 438 U.S. 104 (1978).
  75. See Meltz supra note 73, at 329-30 (The three factor test includes: (1) the character of the government action restricting the claimant’s property rights; (2) the economic impact of the regulation; and (3) the extent to which the regulation has interfered with distinct, investment-back expectations.)
  76. Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586, 2594 (2013) (quoting Regan v. Taxation With Representation, 461 U.S. 540 (1983)); see also Peter A. Clodfelter & Edward J. Sullivan, Substantive Due Process Through the Just Compensation Clause: Understanding Koontz’s “Special Application” of the Doctrine of Unconstitutional Conditions by Tracing the Doctrine’s History, 46 URB. LAW. 569, 570 (2014).
  77. Clodfelter & Sullivan, supra note 76, at 570.
  78. Id.
  79. Id. (quoting Lynn A. Baker, The Price of Rights: Toward a Positive Theory of Unconstitutional Conditions, 75 CORNELL L. REV. 1185, 1193-94 (1990); Kathleen M. Sullivan, Unconstitutional Conditions, 102 HARV. L. REV. 1413, 1416 (1989); Planned Parenthood Ass’n of Hidalgo Cnty. Tex., Inc. v. Suehs, 692 F.3d 343, 349 (5th Cir. 2012)).
  80. See id.; see also Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 547-48 (2005).
  81. Nollan v. Cal. Coastal Comm’n, 483 U.S. 825 (1987).
  82. See Mulvaney, supra note 2, at 519.
  83. Nollan, 483 U.S. at 827-28.
  84. Id. at 828.
  85. Id. at 828-29.
  86. See id. at 828 (“[The Nollans] argued that the condition could not be imposed absent evidence that their proposed development would have a direct adverse impact on public access to the beach.”).
  87. Id. at 831, 834; see also Clodfelter & Sullivan, supra note 76, at 596.
  88. The Commissions asserted interests were: (1) “protecting the public’s ability to [physically] see the beach,” (2) the “psychological barrier to using the beach” created by the proposed development, and (3) “preventing congestion on the public beaches.” Nollan, 483 U.S. at 835.
  89. Id. at 834; see also Clodfelter & Sullivan, supra note 76, at 596.
  90. Nollan, 483 U.S. at 837.
  91. See id.
  92. Id.
  93. See id. at 838.
  94. Id. at 837 (quoting J.E.D. Assoc.’s Inc. v. Atkinson, 432 A.2d 12, 14-15 (N.H. 1981)).
  95. Clodfelter & Sullivan, supra note 76, at 599-600.
  96. See Nollan, 483 U.S. at 836-38 (finding that the state actor must establish an “essential nexus” between the asserted government interest and the exaction); see also Dolan v. City of Tigard, 512 U.S. 374, 398 (1994) (Stevens, J., dissenting) (“The Court also decides for the first time that the city has the burden of establishing the constitutionality of its conditions by making an ‘individualized determination’ that the condition in question satisfies the proportionality requirement.”).
  97. See Nollan, 483 U.S. at 837; see also Clodfelter & Sullivan, supra note 76, at 599-600 (discussing how Nollan represents a departure from traditional deference afforded to local governments’ land use decisions and the Court’s concern for abusing property rights.).
  98. Clodfelter & Sullivan, supra note 76, at 599-600.
  99. Dolan, 512 U.S. 374.
  100. Id. at 379.
  101. Id.
  102. Id. at 379-80.
  103. Id. at 385-86. Interestingly, Ms. Dolan did not use the “unconstitutional conditions” label in her brief or in Oral Argument before the Court. See Brief for Petitioner, Dolan, 512 U.S. 374 (No. 93-518), 1994 WL 249537; Transcript of Oral Argument, Dolan, 512 U.S. 374 (No. 93-518), 1994 WL 664939. The practical implications of her argument, however, suggested the unconstitutional conditions doctrine. Brief for Petitioner, Dolan, 512 U.S. 374 (No. 93-518), 1994 WL 249537 at *11 (“Mrs. Dolan’s property receives no special benefits from those public facilities, she is being unfairly and unjustly required to bear the full costs of providing those facilities for general public use.”).
  104. Dolan, 512 U.S. at 385-86.
  105. See Dolan 512 U.S. at 385 (noting the Court had used the doctrine in Nollan as well); Matlock, supra note 3, at 528.
  106. Dolan, 512 U.S. at 386-87.
  107. Id. at 388.
  108. Id. at 391.
  109. See id. at 394-95; Clodfelter & Sullivan, supra note 76, at 602.
  110. Dolan, 512 U.S. at 393.
  111. Id. at 395.
  112. Id.
  113. See Clodfelter & Sullivan, supra note 76, at 602 (explaining that the tests set forth in Nollan and Dolan marked a new application of the unconstitutional conditions doctrine, creating a new formula specifically for exactions analysis).
  114. See id.; see also Nolon, supra note 1, at 174-75.
  115. See Nolon, supra note 1, at 174-75.
  116. Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 123 (1978).
  117. See Nolon, supra note 1, at 174-75.
  118. See id.
  119. Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586 (2013).
  120. See, e.g., Echeverria, supra note 22, at 573-87 (discussing how Koontz greatly departed from Nollan and Dolan and the implications of the Court’s holdings); see also Clodfelter & Sullivan, supra note 76, at 605-16 (discussing how Koontz expanded the scope of Nollan and Dolan); Mark Fenster, Regulating in the Post-Koontz World, 67 FLA. L. REV. F. 26, 26 (2015) (describing how Koontz “further mudd[ied] the notorious swamp of exactions law”).
  121. 1972 Fla. Laws ch. 72-229, pt. IV, § 1(5), pp. 1115-16 (codified as amended at FLA. STAT. § 373.403(5) (2010)). In 1972, the Florida legislature had enacted the Water Resources Act, which required a landowner wishing to develop property to obtain a permit from the District. Id.
  122. 1972 Fla. Laws § 4(1), at 1118 (codified as amended at FLA. STAT. § 373.413(1)). Under the Water Resources Act, the District may impose “reasonable conditions” on the permit if the conditions are “necessary to assure” that development will “not be harmful to the water resources of the district.” Id.
  123. FLA. STAT. § 373.414(1). In 1984, the Florida Legislature passed the Warren S. Henderson Wetlands Protection Act (“Henderson Act”) to protect Florida’s dwindling wetlands. Id.
  124. Koontz, 133 S. Ct. at 2592.
  125. Id. at 2592-93.
  126. Id.
  127. Id. at 2593; FLA. STAT. § 373.617(2).
  128. See Koontz v. St. Johns River Water Mgmt. Dist., 720 So. 2d 560 (Fla. Dist. Ct. App. 1998). The case was appealed to the Florida Court of Appeals four different times. See Koontz v. St. Johns River Water Mgmt. Dist., 720 So .2d 560 (Fla. Dist. Ct. App. 1998) (“Koontz I “); St. Johns River Water Mgmt. Dist. v. Koontz, 861 So. 2d 1267 (Fla. Dist. Ct. App. 2003) (“Koontz II”); St. Johns River Water Mgmt. Dist. v. Koontz, 908 So. 2d 518 (Fla. Dist. Ct. App. 2005) (“Koontz III”); St. Johns River Water River Mgmt. Dist. v. Koontz, 5 So. 3d 8 (Fla. Dist. Ct. App. 2009) (“Koontz IV”).
  129. Koontz, 133 S. Ct. at 2593 (discussing the procedural history of the case).
  130. St. Johns River Water River Mgmt. Dist. v. Koontz, 5 So. 3d 8 (Fla. Dist. Ct. App. 2009), decision quashed, 77 So. 3d 1220 (2011) (Fla. 2011), rev'd, 133 S. Ct. 2586 (2013).
  131. St. Johns River Water Mgmt. Dist. v. Koontz, 77 So. 3d 1220 (2011) (Fla. 2011), rev’d, 133 S. Ct. 2586 (2013).
  132. Id.
  133. Id.
  134. Koontz, 133 S. Ct. at 2594.
  135. Id. at 2594-95, (holding Noolan and Dolan protect “special[ly] vulnerab[le] landowners from “[e]xtortionate demands” of local governments); see also Clodfelter & Sullivan, supra note 76, at 606-07 (the majority in Koontz “expressed distrust of local governments and their potential extortionate motives in the land use permitting process.”).
  136. E. Enters. v. Apfel, 524 U.S. 498 (1998) (plurality opinion).
  137. Id. at 542 (Kennedy, J., concurring in the judgment and dissenting in part) (stating that the Takings Clause only applies in instances of a taking of “a specific property interest”); see also Echeverria, supra note 22, at 578.
  138. See Apfel, 524 U.S. at 540 (Kennedy, J., concurring in the judgment and dissenting in part); see also Echeverria, supra note 22, at 578.
  139. Koontz, 133 S. Ct. at 2599-600; Echeverria, supra note 22 at 578.
  140. Koontz, 133 S. Ct. at 2599-600; Catherine Contino, Monetary Exactions: Not Just Compensation? The Expansion of Nollan and Dolan in Koontz v. St. Johns River Water Management District, 25 VILL. ENVTL. L.J. 465, 466 (2014).
  141. See Koontz, 133 S. Ct. at 2599-600; see also Echeverria, supra note 22, at 578.
  142. See Koontz, 133 S. Ct. at 2607 (Kagan, J., dissenting) (arguing that the Nollan and Dolan tests will apply to a number of basic land use regulations and that local and state governments will lose flexibility and discretion in the land use regulation process); see also Echeverria, supra note 22, at 579.
  143. See Nollan v. Cal. Coastal Comm’n, 483 U.S. 825, 831 (1987) (“Had California simply required the Nollans to make an easement across their beachfront property available to the public . . . , rather than conditioning their permit to rebuild their house on their agreeing to do so, we have no doubt there would have been a taking” requiring just compensation.”); Dolan. v. City of Tigard, 512 U.S. 374, 384 (1994) (“[H]ad the city simply required petitioner to dedicate a strip of land . . . for public use, rather than conditioning the grant of her permit to []develop her property on such a dedication, a taking would have occurred.”)
  144. See Nollan, 483 U.S. at 831; Dolan, 512 U.S. 393-96.
  145. Echeverria, supra note 22, at 579.
  146. Koontz, 133 S. Ct. at 2599.
  147. Id. at 2607 (Kagan, J., dissenting) (“The Federal Constitution thus will decide whether one town is overcharging for sewage, or another is setting the price to sell liquor too high. And the flexibility of state and local governments to take the most routine actions to enhance their communities will diminish accordingly.”). Koontz raises the question whether Nollan and Dolan now apply to general land use restrictions, especially monetary conditions, which affect the use of real property, including set-back requirements, height limitations, monetary conditions relating to sewage and water, and affordable housing conditions.
  148. Id.
  149. Id. at 2594-98.
  150. Id. at 2611 (Kagan, J., dissenting).
  151. Armstrong v. United States, 364 U.S. 40, 49 (1960). In every takings case, the Court engages in a ritual bow to Armstrong, affirming its principle that public burdens should be borne by the public as a whole.
  152. Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 548 (2005).
  153. Edward J. Sullivan, Substantive Due Process Resurrected Through the Takings Clause: Nollan, Dolan, and Ehrlich, 25 ENVTL. L. 155, 155-58 (1995). The substantive due process analysis in takings cases determines whether a land use regulation effects a taking. See, e.g., Agins v. City of Tiburon, 447 U.S. 255, 260-61 (1980) (applying the substantive due process analysis to determine whether the zoning law in question effected a taking), abrogated by Lingle, 544 U.S. 528.
  154. Sullivan, supra note 153, at 155. For example, in Nollan, the Court said that “land-use regulation does not effect a taking of property if it substantially advances a legitimate state interest and does not deny an owner economically viable use of the owner’s land.” Nollan v. Cal. Coastal Comm’n, 483 U.S. 825 (1987) (quoting Agins, 447 U.S. at 260 (internal citations omitted)). The Court followed the same analysis in Dolan and focused on the proportionality of the state’s interest in its “rough proportionality test.” Dolan v. City of Tigard, 512 U.S. 374, 389-90 (1994). For a more comprehensive review on this interesting topic, see Sullivan, supra note 153, and Mark Fenster, Substantive Due Process by Another Name: Koontz, Exactions, and the Regulatory Takings Doctrine, 30 TOURO L. REV. 403 (2014).
  155. Clodfelter & Sullivan, supra note 76, at 623.
  156. See id.; see also Dolan, 512 U.S. at 385.
  157. Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586, 2594-96 (2013); Dolan, 512 U.S. at 385.
  158. Koontz, 133 S. Ct. at 2594.
  159. Id. at 2596.
  160. Cal. Bldg. Indus. Ass’n v. City of San Jose, 351 P.3d 974, 988 (2015).
  161. Id.
  162. See Echeverria, supra note 22, 573-87 (discussing how Koontz greatly departed from Nollan and Dolan and the implications of the Court’s holdings); see also Koontz, 133 S. Ct. at 2606-12 (Kagan, J., dissenting) (“The majority’s approach, on top of its analytic flaws, threatens significant practical harm. By 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.”) (citations omitted).
  163. See Dolan v. City of Tigard, 512 U.S. 374, 384 (1994); see also Nollan v. Cal. Coastal Comm’n, 483 U.S. 825, 837 (1987).
  164. Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 546 (2005); Echeverria, supra note 22 at 578.
  165. E. Enters. v. Apfel, 524 U.S. 498, 539-42 (1998) (Kennedy, J., concurring) (stating that the Takings Clause only applies when there is a taking of a “specific property interest.”); see also Echeverria, supra note 22 at 578-79; Koontz, 133 S. Ct. at 2605-06 (Kagan, J., dissenting) (arguing that the Court in Eastern Enterprises already decided that requiring a person to pay money to the government does not constitute a taking requiring just compensation).
  166. See Koontz, 133 S. Ct. at 2599-601.
  167. Id. (citing Apfel, 524 U.S. at 540).
  168. Echeverria, supra note 22, at 578-79; see also Koontz, 133 S. Ct. at 2598-601.
  169. Koontz, 133 S. Ct at 2599-600.
  170. See id.
  171. Brown v. Legal Foundation of Wash., 538 U.S. 216 (2003).
  172. Id. at 235.
  173. United States v. Sec. Indus. Bank, 459 U.S. 70, 82 (1982).
  174. Koontz, 133 S. Ct. at 2599-600.
  175. Id. at 2600-01.
  176. Id. at 2607-08 (Kagan, J., dissenting).
  177. Id. at 2607.
  178. Echeverria, supra note 22 at 578-79.
  179. Id.
  180. See Cal. Bldg. Indus. Ass’n v. City of San Jose, 351 P.3d 974, 978, 991 (Cal. 2015).
  181. See id. at 989-91.
  182. See id. at 998-99.
  183. Id. at 989-90.
  184. See id. at 989-92 (“[T]here is no exaction—the ordinance does not require a developer to give up a property interest for which the government would have been required to pay just compensation under the takings clause outside of the permit process . . . . This condition does not require the developer to dedicate any portion of its property to the public or pay any money to the public.”)
  185. Echeverria, supra note 22, at 579.
  186. Horne v. Dep’t of Agric., 135 S. Ct. 2419, 2422 (2015) (“The Government has a categorical duty to pay just compensation when it takes your car, just as when it takes your home.”).
  187. Id. at 2428-31.

  188. Id. at 2423.
  189. See Echeverria, supra note 22, at 579.
  190. See generally id. (discussing the negative effects of Koontz and the implications for local governments); Fenster, supra note 120 (describing how Koontz “further mudd[ied] the notorious swamp of exactions law”).
  191. See Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586, 2610-11 (2013) (Kagan, J., dissenting) (discussing the majority decision’s potential impact on local and state governments); see also Contino, supra note 140, at 496-97.
  192. Will these additional costs ultimately be pushed onto the developers? Sometimes the old adage is true. Be careful what you wish for.
  193. This raises the question whether the Court will review legislatively imposed fee schedules as well, transforming legislative fee schedules into a quasi-judicial process. Some examples of fee schedules include: fees in lieu of providing affordable housing INCLUSIONARY ZONING MODEL BYLAW, SMART GROWTH / SMART ENERGY TOOLKIT BYLAW, http://www.mass.gov/envir/smart_growth_toolkit/bylaws/IZ-Bylaw.pdf, (last visited Sept. 19, 2016); fees in lieu of parking spaces Fees-in-Lieu of Parking Spaces, METROPOLITAN AREA PLANNING COUNCIL http://www.mapc.org/resources/parking-toolkit/strategies-topic/fees-lieu (last visited Sept. 19, 2016) and SAN LUIS OBISPO, CAL., CODE ch. 4.30 (2016); fees in lieu of open space ENVISION UTAH, ENVISION CACHE VALLEY FINAL REPORT & TOOLKIT 47 (2016), http://www.envisionutah.org/projects/project-archive/item/199-envision-cache-valley (click link entitled “Final Report & Toolkit (PDF)” to download report); and impact fees on new infrastructure Impact Fees, SAN FRANCISCO PLANNING DEPARTMENT, http://sf-planning.org/impact-fees (last visited Sept. 19, 2016). If indeed the Court decides to review legislatively imposed fee schedules under heightened scrutiny, there will likely be severe negative consequences for local governments in the land use planning process.
  194. See Koontz, 133 S. Ct. at 2610-11 (Kagan, J., dissenting) (discussing the majority decision’s potential impact on local and state governments); see also Contino, supra note 140, at 496-97.
  195. See Koontz, 133 S. Ct. at 2610-11 (Kagan, J., dissenting) (discussing the majority decision’s potential impact on local and state governments); see also Contino, supra note 140, at 496-97.
  196. See Contino, supra note 140, at 496-97; see also Ann E. Carlson & Daniel Pollak, Takings on the Ground: How the Supreme Court’s Takings Jurisprudence Affects Local Land Use Decisions, 35 U.C. DAVIS L. REV. 103, 107 (2001) (discussing the effect of local governments ability to impose exactions after Nollan and Dolan); Mark Fenster, Takings Formalism and Regulatory Formulas: Exactions and the Consequences of Clarity, 92 CAL. L. REV. 609, 660 (2004) (discussing how Takings jurisprudence may have adverse environmental effects).
  197. See Contino, supra note 140, at 499 (quoting Carlson & Pollak, supra note 196, at 156).
  198. See Koontz, 133 S. Ct. at 2610-11 (Kagan, J., dissenting) (discussing the majority decision’s potential impact on local and state governments); see also Contino, supra note 140, at 496-97.
  199. See Echeverria, supra note 22 at 580; see also Homebuilders Ass’n of Metro. Portland v. Tualatin Hills Park & Recreation Dist., 62 P.3d 404, 410 (Or. Ct. App. 2003) (heightened scrutiny not applicable to legislative exaction); Dudek v. Umatilla Cty., 69 P.3d 751, (Or. Ct. App. 2003).
  200. See California Bldg. Indus. Ass’n v. City of San Jose, 136 S. Ct. 928, 929 (2016) (Thomas, J., concurring).
  201. Nollan v. Cal. Coastal Comm’n, 483 U.S. 825, 828-30, 858 (1987) (Brennan, J., dissenting) (noting that California law requires a public easement for lateral beach access, which “had been imposed [by the land use commission] since 1979 on all 43 shoreline new development projects”).
  202. Dolan. v. City of Tigard, 512 U.S. 374, 378 (1994).
  203. See id. at 377-78.
  204. Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586, 2592 (2013).
  205. FLA. STAT. § 373.414(1).
  206. Koontz, 133 S. Ct. at 2592.
  207. When derived as an impact fee ordinance, for instance, and “then applied equally to all similarly situated property owners, exactions formulas establish a legislative, rather than adjudicative, basis for imposing exactions, thereby arguably sidestepping the reach of the Takings Clause.” Fenster, supra note 196, at 645-46.
  208. Koontz, 133 S. Ct. at 2594.
  209. See id. at 2599-600; see also Dolan v. City of Tigard, 512 U.S. 374, 384 (1994); Nollan v. Cal. Coastal Comm’n, 483 U.S. 825, 831 (1987).
  210. Metromedia, Inc. v. City of San Diego, 453 U.S. 490, 509 (1981).
  211. Cal. Bldg. Indus. Ass’n v. City of San Jose, 136 S. Ct. 928, 929 (2016) (Thomas, J., concurring).
  212. See Fenster, supra note 196, at 645-46 (“Even better, when such [exactions] are imposed under the authority of state legislation, they appear even more likely to be fairly derived and imposed, insofar as statutes require nexus and proportionality findings and property owners in other jurisdictions within the state are subject to similar [conditions].”).
  213. See, e.g., OR. REV. STAT. § 197.796.
  214. Clodfelter & Sullivan, supra note 76, at 622.
  215. CAL. GOV’T CODE § 66005; see also Clodfelter & Sullivan, supra note 76, at 622.
  216. The Land Use Board of Appeals (LUBA) is an administrative board was created by legislation in 1979 (ORS Chapter 197) and has exclusive jurisdiction to review all governmental land use decisions, whether legislative or quasi-judicial in nature. Land Use Board of Appeals, OREGON.GOV, http://www.oregon.gov/luba/Pages/index.aspx (last visited July 10, 2016).
  217. Williamson Cty. Reg’l Planning Comm’n v. Hamilton Bank of Johnson City, 473 U.S. 172, 186 (1985).
  218. Id. at 195 (emphasis added).
  219. Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586, 2601 (2013).
  220. Id. at 2607-08 (Kagan, J., dissenting).
  221. See Michael H. Crew, Development Agreements After Nollan v. California Coastal Commission, 483 U.S. 825 (1987), 22 URB. LAW. 23, 27 (1990) (“In a development agreement, the municipality promises to provide the desired zoning for the project and agrees to preserve the applicable land use regulations for a specific period. In exchange, the developer promises to restrict her use of the property and agrees to make contributions to the public infrastructure.”).
  222. DANIEL P. SELMI, LOYOLA LAW SCH., LEGAL STUDIES PAPER NO 2009-51, LAND USE REGULATION BY CONTRACT 3-4 (2009), http://papers.ssrn.com/sol3/papers.cfm? abstract_id=1523427 (describing increased use of “development agreements”).
  223. Id. at 3-6. The vested rights doctrine occurs when zoning laws change, which the developer had relied upon for its development plans, but can no longer proceed with the proposed development unless rights had vested. In many jurisdictions, for rights to “vest” requires significant financial expenditures towards the project and sometimes the commandment of physical construction. See id. at 19-21.
  224. Id. at 4-5 (describing increased use of “development agreements”).
  225. Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586, 2594 (2013).
  226. See id. at 2496.
  227. SELMI, supra note 222, at 4-5 (describing increased use of “development agreements”).
  228. Id. at 19-21.
  229. Id. at 20-21.