Last week, I spoke at a conference of municipal attorneys about the impacts that the U.S. Supreme Court’s decision in Koontz v. St. Johns River Water Management District may have in Washington state. In broad terms, Koontz recognizes that the Takings Clause places strict limits on the municipal practice of exacting money (e.g., “impact fees”) from land-use applicants. The opinion holds that the government cannot use the permit process to compel landowners to give up land, money, or any other property as the “price” of obtaining development approval, unless the government can show that its demand is necessary to mitigate for some harmful impact caused by the proposed land use.
Without question, Koontz is bad news for the government: it closes off an easy source of funding for public projects and demands that permitting agencies significantly change the way they have been treating applicants. So, it shouldn’t come as a surprise that when I accepted the invitation to speak, I anticipated that I would be walking into a hornet’s nest. After all, the Koontz dissent had fanned the flames of fury by declaring that the Court would come to “rue” its decision once it becomes apparent that subjecting impact fees to heightened scrutiny will “wreck land use permitting throughout the country.” And pro-government scholars immediately decried Koontz as the worst and most harmful Takings Clause decision in the Court’s history.
It goes without saying, therefore, that I was stunned by the neutral reception that Koontz received from the hundred or more municipal attorneys at the conference. The message from the attorneys in attendance was, “welcome to the realities of permitting.” I suppose that I shouldn’t have been so taken aback. Washington courts have subjected impact fees to strict scrutiny for over two decades—neither permitting nor land use regulation have ground to a halt during that time. So, all of the post-Koontz predictions that the sky will fall if monetary exactions are subjected to heightened scrutiny were met with a shrug and a knowing chuckle.
The municipal attorneys were more interested in practical matters than fretting about a decision not going their way. They expressed concerns about where Washington courts will draw the line between monetary exactions (subject to Koontz) and taxes (not subject to Koontz). (That was a question of particular interest due to inconsistent treatment of regulatory impact fees by the state’s intermediate courts.) They were focused on trying to find a bright line where a development condition will or will not be subject to heightened scrutiny. And they were more worried that Koontz could require cities and counties to pay property owners for conditions requiring new development to comply with generally applicable building regulations ) (such as property line setbacks and height restrictions) than having to justify impact fees or dedications.
My take-away from the conference is that land use attorneys should expect less resistance from municipal attorneys when demanding that a permitting agency justify a development condition that clearly falls within the types of land use exactions protected by Koontz. But attorneys should expect more litigation concerning the application of Koontz to generally applicable development fees (those fees that look more like taxes) and conditions that merely restrict the use of property without transferring a property interest from one owner to another.