Recently, the U.S. Supreme Court has accepted review of a case that should decide the extent to which the Nollan/Dolan takings analysis can be applied to development permit conditions. This analysis typically applies when government issues a development permit conditioned on the owner dedicating land to the public for public use without just compensation in order to address an impact of development. Before imposing the condition under this analysis, the permitting authority must show that the permit condition is related to an impact of the development (nexus) and that the condition will lessen the impact only to the extent necessary (rough proportionality). For instance, a new subdivision will create more traffic along the street that serves it so that the permitting authority may require the developer to deed land in order to widen the street. To test the lawfulness of the condition, the questions to ask are these: Does the street improvement relate to the new development (nexus)? And will it alleviate traffic impacts without requiring the developer to make an improvement in excess of what is needed for the development (rough proportionality)? If the answer to both questions is yes, the condition is lawful and the developer must deed the land to the public without compensation.

On October 5, 2012, the U.S. Supreme Court accepted review of Koontz v. St. Johns River Water Management, in which it will consider whether the government can require an owner to pay money and provide labor to a public wetlands mitigation project as a condition of receiving a development permit. The issue in Koontz is whether the Nollan/Dolan analysis applies when the alleged exaction consists of imposition of a monetary obligation rather than a dedication of an interest in real property as a condition of a permit.

A Washington appellate court has already concluded in Benchmark v. Battle Ground that the analysis does apply to monetary exactions. There, the court of appeals held that under the view of “the constitutional role of the consolidated ‘essential nexus’ and ‘rough proportionality’ tests, it matters little whether the local land use permit authority demands the actual conveyance of property or the payment of a monetary exaction.” The U.S. Supreme Court will now weigh in and establish a rule of law across the nation.

The benefit of using the Nollan/Dolan analysis is that it sets a relatively high bar for the government to prove that a condition is a lawful. The argument against extending the Nollan/Dolan analysis to monetary exactions is that the Takings Clause of the Constitution is designed to address circumstances in which government takes real property without just compensation, not whether government can charge developers fees or require public improvements (where the lawfulness of those exactions is tested under a standard more favorable to government).

The Supreme Court will hear argument and issue a decision during its 2012-2013 term.