The headline of this post shouldn't be that surprising, especially when the the property owner purchased the land already subject to a floodplain designation, and those regulations effectively prohibited development.
But the two twists in the South Carolina Supreme Court's opinion in Columbia Venture, LLC v. Richland County, No. 27563 (Aug. 12, 2015), were (1) when Columbia Venture purchased the land, the floodplain designation didn't encompass as much of the land as it eventually did, and the larger area was only preliminarily designated, and (2) various county agencies had informed Columbia that there was a chance it might get permission to build even if the regulations were eventually adopted.
Those twists, however, were not enough to save Columbia's takings claim, and the court rejected both its categorical and Penn Central arguments.
The facts of the case are somewhat dense, but here's what you need to know. Columbia purchased the property knowing that prior potential buyers (including Columbia's own managing member) had declined to purchase the land because they understood that a large portion of the 4,000 acre parcel next to the Congaree River was in a FEMA-designated floodplain. FEMA updates its floodplain maps every five years, and prior to Columbia's purchase, FEMA preliminarily expanded the floodplain-designated land to encompass nearly 3/4 of the parcel. Between the time FEMA publishes its proposed new maps and their official adoption, the new floodplain designations are required to be recognized by local authorities.But after consultation with county agencies that resulted in a memorandum of understanding that stated the county would consider Columbia's development proposal, Columbia purchased the land anyway, intending to build a $1 billion residential-resort-retail development.
When the inevitable occured -- FEMA officially adopted the proposed maps, which prohibited Columbia from developing its land -- it sued in state court for a regulatory taking of its property.
By consent, the case was tried by a referee, who granted the county summary judgment. The FEMA designation certainly significantly decreased the value of Columbia's land, but the referee concluded this was outweighed by Columbia's unreasonable expectations, In other words, it was not reasonable for Columbia to have purchased the land knowing about the impending floodplain restrictions.
The South Carolina Supreme Court affirmed. It rejected Columbia's argument that the development prohibition was like a flowage easement, holding instead that it was a garden-variety land use restriction and not a physical taking, as when government action causes flooding. In contrast to government-caused flooding, FEMA's floodplain designation and the county's resultant prohibition on development, did not cause any invasion of Columbia's land. Any flooding that might occur was a result of natural forces, and not government regulation or action.
Applying Penn Central, the Supreme Court agreed with the referee and concluded that the floodplain designation did not result in a regulatory taking either. As noted above, the key factor was the "distinct investment-backed expectations" prong, and the court held that the overall regulatory scheme had been adopted decades before Columbia's purchase, Columbia's own managing member had backed out of an earlier proposed purchase because of the uncertainties which resulted from a floodplain designation, and Columbia knew the county and FEMA regulations combined to make development impossible in the portion of the property designated as a floodplain. Yes, Columbia had subjective expectations that, "in spite of all this, it would nevertheless be allowed to develop the extensive Green Diamond project," but the court concluded that expectation "was not objectively reasonable." Slip op. at 21.
Finally, the character of the government action prong weighed against a taking, because the floodplain designations were designed to mitigate the costs of expected flooding along the river, and the regulations don't single out a particular property owner to shoulder public burdens that should be borne by all. All riverfront property is subject to floodplain restrictions.
So there you go. Not an unexpected result mind you, and we were somewhat surprised that the two twists were enough to get this one the full-blown treatment by the South Carolina Supreme Court.