July 9, 2018

PLF asks the U.S. Supreme Court to rule that there is no “legislative exception” to the unconstitutional conditions doctrine

By Brian T. Hodges Senior Attorney

It seems that some governments and courts prefer to treat Supreme Court precedent as an option, rather than a requirement. The Supreme Court has ruled—twice—that it’s unconstitutional for government to charge permitting fees when the fees have nothing to do with the reason for the permit. Yet some courts continue to ignore the Constitution.

Perhaps the third time will be the charm. In a petition filed Friday, PLF attorneys have asked the High Court to put an end to this dangerous trend in which courts allow certain permitting conditions to slide by required constitutional scrutiny.

Thirty years ago, in Nollan v. California Coastal Commission (1987), the Supreme Court noted that governments had been using the land use permit process as an opportunity to force landowners to give their land to the public as a condition of permit approval. Calling such demands an “out and out plan of extortion,” the Court devised a special application of the unconstitutional conditions doctrine, requiring the government to show an “essential nexus” between a permit condition and some public impact that a proposed land use will have on the public (such as increased traffic impacts or storm water flow). Without this required connection, a permit condition will be unconstitutional and invalid.

A few years later, the Court refined that test in Dolan v. City of Tigard (1994), to require that government show that a demand is also “roughly proportional” to the public impact. Together, those tests are intended to ensure that government only use permit conditions to mitigate for negative impacts of new development—it cannot use a permit application as an opportunity to grab someone’s property or money, as confirmed by Koontz v. St. Johns River Water Management District (2013).

Although there is no doctrinal basis for distinguishing between a legislative demand for private property and a demand made by any other branch of government (after all, the Fifth Amendment forbids uncompensated takings without limitation to any particular government body), the state courts have divided over the years on the question whether exactions demanded by acts of generally applicable legislation are subject to heightened scrutiny under Nollan, Dolan, and Koontz. Many courts have found there to be no meaningful distinction between legislative and adjudicative demands and hold both subject to the nexus and proportionality tests. Other courts, however, have held that the doctrine of unconstitutional conditions applies only to demands made at the permit desk—demands that originate in the legislature are exempt from heightened scrutiny.

The Maryland Court of Appeals recently added to this deeply entrenched split of authority in Dabbs v. Anne Arundel County, by holding that “Impact fees imposed by legislation applicable on an area-wide basis are not subject to Nollan and Dolan scrutiny.” At issue was a county ordinance requiring that property owners pay a series of so-called “impact fees” as a mandatory conditions on new development. The stated purpose of the impact fee ordinance is to ensure that project proponents “pay [their] proportionate fair share of the costs for land, capital facilities, and other expenses necessary to accommodate development impacts on public schools, transportation, and public safety facilities.”

Despite this nod toward the nexus and proportionality requirements, the ordinance does not require the County to make any project-specific determination regarding actual impacts. Instead, “[t]he legislatively imposed development impact fee is predetermined, based on a specific monetary schedule, and applies to any person wishing to develop property in the district.” The only limit placed on the size of the County’s demand is a requirement that it use the fees to pay for “capital improvements within the development impact fee district from which they are collected, so as to reasonably benefit the property against which the fees were charged.” Thus, over the years, the County has adopted an inexplicable fee schedule where, for example, a family purchasing a mobile home will have to pay twice as much in “school impact fees” as the new owner of a condominium or townhouse.

Under Nollan and Dolan, this scheme would be plainly unconstitutional. But, under the rule adopted by the Maryland Court of Appeals, there is nothing stopping the government from forcing mobile home owners (or anyone else) to bear a disproportionate share of school costs (or any other public cost) from their condo-dwelling neighbors.

Two Justices have already noted the split of authority on this constitutional issue and expressed marked skepticism at the idea that the need for heightened scrutiny is obviated when a legislative body—as opposed to some other government entity—decides to exact a property interest from developers. California Bldg. Indus. Ass’n v. City of San Jose (2016); Parking Ass’n of Georgia, Inc. v. City of Atlanta, Ga., 515 U.S. 1116 (1995).

Notably, in California Bldg. Indus. Ass’n, Justice Thomas indicated that this question should be taken up by the Court as soon as possible:

Until we decide this issue, property owners and local governments are left uncertain about what legal standard governs legislative ordinances and whether cities can legislatively impose exactions that would not pass muster if done administratively. These factors present compelling reasons for resolving this conflict at the earliest practicable opportunity.

And, writing in dissent in Koontz, Justice Kagan noted that the fact that the Court had not yet resolved the legislative exactions question “casts a cloud on every decision by every local government to require a person seeking a permit to pay or spend money.”

PLF’s petition argues that there is no basis in the unconstitutional conditions doctrine generally—or its special application in Nollan, Dolan, and Koontz—to justify a per se rule barring property owners from challenging an exaction mandated by an act of legislation. The U.S. Supreme Court has repeatedly applied to doctrine to invalidate legislative conditions outside the context of land use exactions. Moreover, Dolan, and Koontz all involved conditions mandated by generally applicable legislation. That is because the doctrine of unconstitutional conditions is intended to enforce a limit on government power. Frost & Frost Trucking Co. v. Railroad Comm’n (1926).

We expect the Court to conference on the petition in early Fall 2018.

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