January 7, 2013

We all have something to gain from the Koontz case

By Jonathan Wood Attorney

The Koontz case, which the head of the Constitutional Accountability Center described as “going away the most important takings case the Roberts Court will decide,” continues to receive broad support as the oral argument approaches.  As readers know, Koontz is a case that the Supreme Court will hear this month, in which PLF argues that an “out-and-out plan of extortion” against property owners who need a permit from a local agency is unconstitutional regardless of whether the agency demands land or money.  Last week, Richard Epstein published a column that serves as a useful reminder that these protections for property owners do not come at the expense of the public.  He writes:

The significance of this issue, moreover, not only concerns fairness to individuals in deciding who pays for any repairs. Also relevant is whether the repairs should be made at all. Looming behind these distributional questions lies key issues about economic waste from the misallocation of social resources. By linking the permit to the proposed repairs, the District frames the issue by making the wrong comparison.

Any landowner is likely to yield to exactions when the building permit it receives is worth far more than the conditions imposed upon it. But the right social comparison is whether the social cost of repairs exceeds their social benefits. If the state bears zero cost, it will eagerly order repairs that cost $1,000 but are worth only $100. All too often the landowner will buckle because the permit is worth $5,000 to him. By allowing the state to bundle the repairs with the permit, the law obscures the correct comparison, which is between the cost and value of repairs; this obfuscation leads to excessive repairs. That mismatch of costs and benefits is not the only source of loss. The expensive bargaining process is pure social waste.

Much of the discussion of the Koontz case, and PLF’s earlier victory in Nollan v. California Coastal Commission, focuses on how the permitting process is used to extort money and property from property owners.  But, the practice has broader implications.  As Professor Epstein explains, the costs of permit conditions are likely to exceed the benefits to the public.  Also, agencies that are able to self-fund by extracting concessions from permit applicants are not accountable to the public because they do not rely on them for support and funding.  Instead, like the thankfully defunct California redevelopment agencies, the agencies operate outside the normal political process and are more likely to become beholden to special interests or cronies who stand to disproportionately benefit from extractions.  Agencies like the Coastal Commission, which regularly extracts huge concessions from unfortunate property owners, are even openly antagonistic towards the poor souls who have to come to them for permits.

Correcting this abusive practice is an all too rare win-win.  Property owners can enjoy their property rights in peace and the public will receive the benefit of restoring accountability to agencies and ensuring that resources go to their most socially productive use. The only loss here is the welcome reduction in the power that bureaucrats are able to wield. 

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St. Johns River Water Management District v. Koontz

Coy A. Koontz sought to develop commercial land, most of which lies within a riparian habitat protection zone in Orange County, Florida. He applied for a dredge and fill permit with the St. Johns Water Management District, which  agreed to grant the permit only on the condition that he place a conservation easement over his land, and perform mitigation off-site by replacing culverts and plugging certain drainage canals on distant District-owned properties. When Koontz refused to perform the off-site mitigation, St. Johns denied the permit. PLF successfully represented Koontz before the U.S. Supreme Court, which held that a land-use agency cannot condition a permit on the payment of a mitigation fee to be used to pay for facilities that have no connection to the impacts of the permitted development.

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