Supreme Court Holds Monetary Exactions Must Have a Nexus and be Roughly Proportional to Impacts of a Proposed Development

July 16th, 2013

By: Thomas Law Group



For nearly two decades, the U.S. Supreme Court’s decisions in Nollan v. California Coastal Commission, 483 U.S. 825 (1987),and Dolan v. City of Tigard, 512 U.S. 374 (1994), have provided the standard for evaluating the legality of development permit conditions requiring the dedication of interests in real property. Nollan required local governments to show a nexus between the development’s impact and the applicable permit condition (e.g., whether the land dedication would help achieve the government’s stated purpose). Dolan added to the nexus requirement, by mandating a rough proportionality between a development’s impact (e.g., on public facilities) and any condition imposed on an applicant. However, until Koontz v. St. Johns River Water Management District, 2013 U.S. LEXIS 4918 (2013), it was not clear for the purposes of federal law whether the aforementioned nexus and rough proportionality tests applied to monetary exactions on which development permits were conditioned. In Koontz, the U.S. Supreme Court held that such monetary exactions were subject to the Nollan and Dolan tests.

Plaintiff Koontz owned a 14.9-acre, undeveloped parcel in Florida, a large portion of which consisted of wetlands. He sought approval to develop 3.7 acres from the local district charged with wetlands protection, offering the district a conservation easement over the remaining 11 acres. The district determined that the land dedication he offered was insufficient to protect local wetlands. Instead, the district proposed that he could either develop one acre of the site and dedicate a conservation easement over the rest of the site, or develop the site as proposed with the payment of an in-lieu fee to restore off-site wetlands. Plaintiff refused, his permit application was denied, and he filed suit in state court, arguing the government had taken his property without just compensation. The state trial and appellate courts found in his favor, but the Florida Supreme Court reversed, holding that monetary exactions imposed as a condition of development were not subject to the heightened scrutiny given to land dedication requirements imposed by development permits.

The U.S. Supreme Court reversed the Florida Supreme Court’s decision, noting that a per se takings approach (i.e., Nollan/Dolan) is appropriate where the demand for money is related to a particular, identifiable property interest. The Court also explained the applicability of the unconstitutional conditions doctrine, which holds that the government cannot coerce people into relinquishing their constitutional rights—here, the right not to have property taken without just compensation. Furthermore, denial of a permit based on an applicant’s refusal to consent to an unlawful condition would still represent an unconstitutional conditions violation, even though the government never actually takes any property. The Court remanded the case to the Florida Supreme Court for further proceedings, without deciding the merits.

The effect of this case in the CEQA context will be minimal. The State CEQA Guidelines already specify that “[m]itigation measures must be consistent with all applicable constitutional requirements,” specifically citing both Nollan and Dolan. (CEQA Guidelines § 15126.4(a)(4).) Because CEQA already requires ad hoc exactions specified in mitigation measures to be roughly proportional to a project’s impact, the Court’s decision in Koontz basically validates current CEQA practice. (See id. § 15126.4(a)(4)(B).)

Key Point: The principles set forth in Nollan and Dolan have been applied by courts in numerous federal and state decisions. Koontz establishes that these principles apply whether a public agency seeks a concession from a developer in the form a physical dedication or monetary exaction. Because CEQA already reflect the conclusion reached in Koontz, the holding is unlikely to result in a significant change in how development project are evaluated and mitigated pursuant to CEQA.