As reported in this blog yesterday, the U. S. Supreme Court issued a decision on June 25, 2013, that expanded the rights of land owners and developers under the Fifth Amendment to the U.S. Constitution. In Koontz v. St. Johns River Water Management District, the Court held that the Fifth Amendment, which requires just compensation when a government entity takes property from a private property owner, applies not only to dedications of real property in connection with a development permit, but also to requirements of cash payments. This latter requirement will often occur in the form of improvements to off-site public facilities. Prior to Koontz, it was unclear if, under the U.S. Constitution, the requirements of Nollan v. California Coastal Comm’n or Dolan v. City of Tigard applied to permit requirements other than the dedication of real property. Nollan is a California case that requires a nexus between the exaction requested and the impacts of the proposed development. Dolan is an Oregon case that requires rough proportionality between the exaction requested and the development’s impacts.

In 2010, the Oregon Supreme Court held that the takings clause of the Oregon Constitution did not apply to cash payments (or their equivalent) in connection with development permits, only to exactions of real property, such as a road dedication. This left many in the development community feeling very much exposed to possible government over-reaching when requesting permits to develop land. Without a check on demands for off-site improvements or fee-in-lieu payments, developers felt that local governments had a sizeable loophole at their disposal. Although some in the planning community have already expressed a fear that the Court’s decision will hamstring local governments and allow developers to avoid paying for their impacts, Justice Alito, who wrote the decision, was very clear that the principles espoused in Nollan and Dolan are designed to be fair to both the local government and the developer. If properly applied, it is difficult to see how the Nollan/Dolan principles are any less defensible in a situation where a local government requires a monetary instead of a property exaction.