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New Article On Legislative-Adjudicative Distinction In Nollan/Dolan Analysis

Heads up on a new article of interest to those of us who deal with exactions and Nollan/Dolan: Matthew Baker, Much Ado About Nollan/Dolan: The Comparative Nature of the Legislative Adjudication Distinctions in Exactions, 42 Urban Lawyer 171 (2010). Here's a summary: 

Much has been made, by both commentators and courts, of the distinction between legislative and adjudicative land use exactions used to determine whether an exaction must meet the "essential nexus" requirement of Nollan v. California Coastal Commission and the "rough proportionality" test of Dolan v. City of Tigard. But practical application of the distinction has been anything but simple, only adding to the "mess" and "muddle" of Takings Clause jurisprudence. While exactions jurisprudence is admittedly messy, the apparent analytical incoherence results primarily from the confused and inconsistent application of the Nollan/Dolan test by lower courts, which would no doubt prefer a more clear and predictable standard of review. Part I of this article briefly describes the Nollan/Dolan analysis and the legislative-adjudicative distinction set forth in Dolan. Part II discusses the divergent approaches to the distinction among the lower courts and outlines the major academic criticisms of the legislative-adjudicative distinction, including several alternative standards. Part III then argues that the legislative-adjudicative distinction is essentially a functional, comparative inquiry into whether the burden imposed by the exaction to achieve a public benefit is being broadly shouldered by the community, or unfairly shouldered by a small group within the community. As a threshold inquiry, the distinction seeks to preserve a measured deference to government in the exactions context. Part III also briefly states the theoretical basis for a comparative analysis of exactions.

The article is available here (may require ABA membership). The article is the winner of the 26th Smith-Babcock-Williams Student Writing Competition.

Curb Appeal In South Dakota: No Special Benefit To Property Means That Special Assessment Is A Taking

A rule of law set out over 100 years ago and which remains (as we say) good law qualifies as "well-established" by any standard. Village of Norwood v. Baker, 172 U.S. 269 (1898) set forth the rule that a special assessment for municipal improvements is only constitutional if the improvements result in the property being assessed enjoying special benefits, and then only to the extent of the benefit. If the benefits are merely those which inure to the public at large, or if the assessment exceeds the benefit conferred, the assessment is invalid.

Think of it as an "anti-givings" requirement: the cost of public benefits get absorbed by the public as a whole, but if property gets some benefit over and beyond those public benefits, it is fair to ask the property owner to pay. Otherwise, it's a no-go.

In Hubbard v. City of Pierre, No. 25312-a-JKM (June 30, 2010), the South Dakota Supreme Court applied the well-established rule of Village of Norwood to invalidate a special assessment as a taking under the U.S. and S.D. constitutions.

The city replaced water mains, resurfaced streets, and replaced portions of curbs, gutters, and driveways. The city proposed levying a special assessment to cover the cost of the curb, gutter, and driveway work. Owners whose properties were on the streets objected, arguing that the assessment was a taking since the assessment exceeded the benefits received.

After the city completed the project and assessed the property owners for "the per linear foot cost for curb and gutter replacement and per square foot for driveway replacement," slip op. at 2, the property owners sought a declaratory and injunctive relief in state court. The court prohibited the city from collecting the assessment, and the city appealed.

The South Dakota Supreme Court noted that municipalities have the authority to assess property owners for local improvements pursuant to two state statutes. One statute allows a "front footage" method, and another based on "accrued benefits." The front footage statue does not require a showing of benefits, while the accrued benefits statute does. The city "primarily used the front foot method of apportionment." Slip op. at 5. The court rejected the city's claim that the statute's silence regarding special benefits meant that no showing of benefit was required because the benefit requirement is based in the constitution.

The court held that the property owners met their burden of showing by "strong, clear and positive" evidence, slip op. at 10, that their properties were not benefited by the curb work. Even though the city's findings were presumed correct, the court concluded that the property owners overcame the presumption of validity. One owner testified that the curb work added no value to his property because his existing curbs and gutters were in good condition and would last another 3 years. Slip op. at 13. The county assessor testified that replacing the existing curbs and gutters did not increase the assessed value of the properties. Id. A real estate agent and an appraiser similarly testified.

The remainder of the opinion is devoted to an evaluation of the other evidence of benefit and value, with the court affirming the trial court's conclusion "that, based on the evidence, the Petitioners had shown that replacement curb and gutter did not provide a measurable benefit to abutting property." Slip op. at 17. The court refused to reweigh the trial court's factual determinations on appeal:

The City claims the circuit court incorrectly weighed the evidence and should have given more weight to the City’s testimony and evidence. It is not our role on appeal to retry this case or substitute our judgment as to credibility and weight of the evidence. This Court defers to the circuit court because of its ability to observe the witnesses. The circuit court was persuaded by the credibility and weight of the Petitioners’ evidence. The circuit court was unable to conclude from the evidence that the replaced curb, gutter, and driveways provided “actual, physical, material and quantifiable special benefits” to the property assessed. The most that could be determined from the City’s evidence was that replacing the curb and gutter extended its useful life by varying estimates and in some cases may have improved the flow of water away from the property. The City’s quantification of the benefits, however, was ambiguous and conclusory in that the City assumed the benefits equaled the cost. The circuit court determined that the Petitioners’ evidence demonstrated that the replaced curb, gutter, and driveway did not provide a benefit above and beyond or differing from the benefit enjoyed by the rest of the community. Because the circuit court’s findings of fact are based on the evidence and not clearly erroneous, we decline to substitute our judgment as to the weight and credibility of the evidence, as urged by the City. The circuit court applied the correct law regarding the question whether the special assessments were constitutional.

Slip op. at 19.

Background on the case in Supreme Court rules for homeowners in curb and gutter case from the Pierre Capital Journal.

Updated Opinion: Impact Fee Not Reasonably Related To Burden Created By Development

Last month, we summarized Homebuilders Ass'n Tulare/Kings Counties, Inc. v. City of Lemoore, No. F057671 (Cal. Ct. App. June 9, 2010), a case about the propriety of impact fees under California's Mitigation Fee Act (Cal. Gov't Code § 66000, et seq.). The court upheld most of the impact fees as reasonably related, but invalidated fire mitigation fees imposed on development in one part of town where fire facilities were adequate would be used to offset the cost of already-built fire facilities in another part of town. The standards for impact fees under the Act are similar to the constitutional Nollan/Dolan standards, and the court concluded the impact fee violated the statute because it was not reasonably related to the burden created by a development. Read our complete summary here.

Today, the court revised the opinion (but did not change the judgment). In this order, the court deleted "the entire discussion under part 2, 'The standard of review and burden of proof'" (page 4), and replaced it with a new section. It looks like some technical tweaks to the court's recitation of the burden of proof.

Permit Condition Requiring "Active" Farming Struck Down Under Nollan/Dolan

We rarely post developments from trial courts, but every now and then a trial court order is so interesting that we deviate from our usual rule. Here's one that's worth sharing.

In Sterling v. California Coastal Comm'n, No. CIV. 482448 (Cal. Super. June 18, 2010), the San Mateo County Superior Court (the county immediately south of San Francisco) invalidated a permit condition imposed by the California Coastal Commission that would have required the property owners maintain their property "in active agricultural use," meaning that they "either personally conduct agriculture on all their land or enter into a lease with a third party willing to engage in agricultural use on the land." In other words, forced farming.

You read that right. Did we mention that the family seeking the permit are not farmers or ranchers, that the vast majority of the 143-acre parcel is not prime ag soil, that the property could not be "viably farmed," and that they sought the coastal development permit to build a house?

Read the court's decision for the procedural details, but here are the highlights. The Sterlings purchased a 147-acre parcel in rural San Mateo County zoned Planned Agricultural Development, a designation that permits up to two homes on the parcel. Only 10 acres of that land are considered prime agricultural soil, and no part of the parcel was farmed. A portion of the upland portion was leased to nearby ranchers to graze 10 head of cattle, with no profit to the Sterlings. The Sterlings sought the permission of the County to build a single home and proposed that the grazing of the 10 head of cattle continue. The County unanimously approved, with 32 conditions (none of which are germane here).

The California Coastal Commission, however, would have none of it. It appealed the approval, "to itself." After a more than two-year delay in which the Coastal Commission refused to hold hearings, it approved of the home building plan subject to 11 new conditions and the 32 conditions already imposed by the County. Here's the agricultural use easement condition:

All areas of the Property [except for the 10,00 square foot development area and driveway] shall at all times be maintained in active agricultural use.

the Sterlings must, as permittees, "either personally conduct agriculture on all their land or enter into a lease with a third party willing to engage in agricultural use on the land;"

"[Prior to issuance of the coastal development permit], the applicants [the Sterlings] shall dedicate an agricultural conservation easement to a public agency or private association approved by the [Commission] Executive Director."

the "easement deed shall run with the land in favor of the People of the State of California...and shall be irrevocable."

Slip op. at 4. Rather than accept the permit with the conditions, the Sterlings sought a writ of administrative mandate.

The court concluded that the agricultural easement was a taking because there was no Nollan nexus between the exaction and any reasons that would support denial of the permit, nor was there Dolan "rough proportionality" between the proposed development (less than one acre), and a perpetual easement of 142 acres. 

On the Nollan issue, the court concluded the property was not being used for agriculture, so the Sterlings' home would not interfere with actual agricultural use, only potential agricultural use. Yet, the exaction required actual agricultural use, "rather than simply ensuring agricultural potential." Slip op. at 6.

The court also rejected the Commission's claim on the Dolan issue that the exaction was proportional since the Sterlings already engage in agricultural use (remember those 10 head of cattle?). The court held the grazing was voluntary, and it was not proportional to impose a mandatory requirement to farm or ranch simply because the property owner voluntarily allowed a few cows to graze his land. The court also concluded that the exaction was disproportionate since it virtually wiped out any further development rights in the parcel when compared to the 10-cattle grazing plan. See slip op. at 8.

Finally, the court rejected the Coastal Commission's argument that the easement was justified to protect agriculture:

Protecting agriculture is a valid government goal. But the means chosen here by the CCC to achieve that goal -- imposing the affirmative agricultural easement on the Sterlings -- cannot pass constitutional muster because they are neither (1) clearly nor (2) proportionately connected to the impact of the Sterlings' home. The easement condition is irreconcilable with Nollan, Dolan and the Constitution, and must be set aside. The petition for writ of mandate is granted.

Slip op. at 9.

A Regulatory Takings Glossary (or, How to Translate Property Rights Lawyerspeak)

The WMA Reporter, the monthly publication of the Western Manufactured Communities Housing Association has published A Regulatory Takings Glossary (or, How to Translate Property Rights Lawyerspeak), my short article that attempts to deconstruct some of the more common terms property lawyers toss about. Here's the Introduction:

One of my law school professors once remarked (hopefully in jest) "if it ain’t Latin, it ain't the law." While thankfully we have moved away from the days when Latin and Norman French were the languages of the law, those of us who regularly represent property owners defending their rights sometimes toss about terms that, although they purport to be standard English, often make normal people look at us askance.

We may forget that not everyone might understand what we mean when we say, for example, "The court dismissed the regulatory takings claim on ripeness grounds under Williamson County because the property owner had not exhausted her administrative remedies. That left for the state court to decide whether the claim was a per se Lucas taking, or whether to apply the ad hoc Penn Central analysis."

If you know what that means, congratulations, you don’t need this guide. However, for those of you not yet familiar with the lingua franca of regulatory takings and eminent domain lawyers, here’s a crash course of some of the more common terms.

Download the full article pdf here.

Impact Fee Not Reasonably Related To Burden Created By Development

Most of the time when we think of impact fees and other development exactions, Nollan and Dolan spring immediately to mind. In those two cases, the Court established the requirement that exactions have a reasonable relationship ("nexus") to some ill caused by a proposed development, and be "roughly proportional" to the impact created by the development.

Absent a nexus and proportionality, an exaction is "not a valid regulation of land use but 'an out-and-out plan of extortion.'" Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987) (citations omitted). The Court was worried that absent a nexus and proportionality, impact fees, in-lieu fees, and development exactions were a form of "pay to play" where local governments take advantage of the fact that a property owner seeks development approvals, to leverage land other property or cash to address impacts not caused by the property owner.

However, Nollan/Dolan is not the only context in which these issues arise. In Homebuilders Ass'n Tulare/Kings Counties, Inc. v. City of Lemoore, No. F057671 (Cal. Ct. App. June 9, 2010), for example, the court invalidated an impact fee under California's Mitigation Fee Act (Cal. Gov't Code § 66000, et seq.) because fees imposed on development in one part of town where fire facilities were adequate would be used to offset the cost of already-built fire facilities in another part of town. The standards for impact fees under the Act are similar to the constitutional Nollan/Dolan standards, and the court concluded the impact fee violated the statute because it was not reasonably related to the burden created by a development.

Update (July 8, 2010): the court issued an amended opinion tweaking the standard of review section, but not changing the judgment.

In 2005, the City of Lemoore commissioned an impact fee study to support the imposition of various impact fees for such things as law enforcement, park land acquisition and improvement, refuse, fire protection, and community recreational facilities. The Homebuilders Association challenged the fees for a variety of reasons, but its petition was eventually whittled down to the Mitigation Fee Act and California's Quimby Act (Cal. Gov't Code § 66477), which limits the ways local governments can impose subdivision exactions. The trial court upheld all of the impact fees except the park land improvement fee, which it invalidated as preempted by the Quimby Act.

The court of appeal reversed the Quimby Act holding (see slip op. 10-14 if you are interested for the analysis of preemption) and upheld all of the other impact fees, except one part of the Fire Protection Impact Fee, which it invalidated under the Mitigation Fee Act:

For purposes of calculating fire protection impact fees, the Colgan Report divided the City into two service areas, the older established east side and the newer west side. Regarding the east side, the Colgan Report states that "the facilities and equipment needed to serve future development are already in place, so impact fees for that area are intended to recover new development's proportionate share of the cost of the fire protection assets serving the area. The revenue from those fees will be used to offset a portion of the City's recent investments in facility improvements and new equipment, which were funded in part with general fund money." In contrast, the west side will need a new fire station and equipment to serve that area as it develops.

....

As discussed above, the Mitigation Fee Act requires the local agency to determine that the amount of the fee and the need for the public facility are reasonably related to the burden created by the development project. Further, the local agency must identify the facilities to be financed by the fee.

HBA objects to the east side fees on the ground that they are being imposed for general revenue purposes. Since there is no need for additional fire protection facilities in that part of the City to serve new development, HBA contends that no nexus exists between the fees and the burden posed by new housing.

HBA is correct. While a fee may be imposed to cover costs attributable to increased demand for public facilities reasonably related to the development project in order to (1) refurbish existing facilities to maintain the existing level of service or (2) achieve an adopted level of service that is consistent with the general plan (§ 66001, subd. (g)), the existing east side fire protection facilities are already adequate to continue to provide the same level of service. In other words, the new development will not burden the current facilities. The Colgan Report's proposal to reimburse the City for its prior general fund money investments is not authorized by the Mitigation Fee Act. Rather, such a fee would constitute general revenue to the City in violation of section 66008, and therefore is invalid.

Slip op. at 18-19.

However, the court upheld the fire protection fee for developments on the other side of town: 

The Colgan Report concludes that, due to the barrier created by Highway 41 between the east side and the west side of the City, a new fire station will be required to serve the west side as it develops. In calculating the cost per capita for the west side, Colgan included the forecasted population of a 476 acre area that may be annexed to the City in the future. This addition resulted in reducing the west side fire protection impact fees by approximately 28 percent.

HBA objects to the calculation including this potential annexation area as opposed to using the existing legal boundaries of the City. HBA posits that a new fire station might not be needed if the hypothetical annexation does not occur.

Contrary to HBA's position, the Colgan Report provides a reasonable basis for the City's adoption of the west side impact fee. There is no indication that, without the potential annexation, additional fire protection facilities would be unnecessary to serve new development. Rather, it can be inferred from the relatively low percentage of fee reduction, i.e., 28 percent, that fire protection facilities would be required with or without the annexation. The City considered the potential population to be served for the purpose of reducing the fee that would otherwise be charged and spreading the costs more equitably. This action was not arbitrary or capricious.

Slip op. at 19.

This case is worth a read even for non-California practitioners. Even though this opinion deals with the Mitigation Fee Act, the court's handling of Nollan/Dolan-like standards is instructive for anyone who deals with impact fees and exactions.

New Opinions: Inverse Condemnation Statute Of Limitations, Impact Fee Nexus

Here are two opinions just received that look awfully interesting, but that we haven't had a chance to read in detail:

• Homebuilders Ass'n Tulare/Kings Counties, Inc. v. City of Lemoore, No. F057671 (Cal. Ct. App. June 9, 2010) - invalidating a fire protection impact fee under California's Mitigation Fee Act because "it is not reasonably related to the burden created by the development project."

• Beyer v. City of Marathon, No. 3D08-2864 (Fla. Dist. Ct. App. June 9, 2010) - denial of Beneficial Use Determination started limitations period on an as-applied takings claim, meaning that inverse condemnation complaints were timely filed.

More details to follow.

California Court Of Appeal: Takings Claims Brought Too Early, Too Late, And No Damages For Violations Of The Right To Petition (Inter Alia)

The latest skirmish in California's mobile home rent control wars, this time from the California Court of Appeal, Fourth District, in two cases out of San Diego county, MHC Financing Ltd. P'ship v. City of Santee, No. D053345 (Mar. 15, 2010).

The cases present a convoluted series of facts and procedural twists which we are not going to rehash, but recommend that you read yourself. It's a long opinion (50 pages), but it's worth delving into the details. The court held:

• First, the property owner "sustained no legally remediable injury" from the retroactive application of a mobile home rent control ordinance which the city adopted to correct errors in an earlier-adopted mobile home rent control ordinance (the erroneous ordinance was based on the original version of a proposed initiative ordinance, and not the modified initiative ordinance which was certified by petition) (slip op. at 15-19).

• Damages are not an available remedy for violations of the right to petition under the California Constitution (slip op. at 21-28).

• The "as applied" takings challenge was not ripe under Williamson County's "final decision" requirement because the property owner had not submitted an application for a rent adjustment as allowed by the city's rent control ordinance  (slip op. at 30-34).

• The facial takings and substantive due process challenges were brought more than two years after the ordinance had been adopted, and the statute of limitations had therefore expired (slip op. at 34-37).

• The claim for equitable indemnity failed because that doctrine is limited to one tortfeasor being indemnified by another tortfeasor  when they are jointly and severally liable to a third party. Here, the property owner claimed that the city was directly liable to it for damages it allegedly owed to third parties. The court determined this was not a proper claim for equitable indemnity (slip op. at 37-39).  

• The trial court property sustained the city's demurrer (a motion to dismiss, for all you non-Californians) to other claims on a number of grounds: (1) the claim the taking of the property was a private taking was brought too late (slip op. at 40-41); and (2) there was no physical taking (which is based on a government requirement to allow third parties to enter one's land) because the mobile home park operators "voluntarily rented their land" (slip op. at 43) (citing Yee v. City of Escondido, 503 U.S. 519, 527 (1992)).

• Finally, the court reversed summary judgment for the city on one of its affirmative claims against the property owner, restitution. The city claimed that the property owner owed mobile home park tenants restitution for the rent it overcharged them while a lower court order (subsequently reversed) was in effect. The court upheld the property owner's assertion that the city lacked standing to seek restitution on behalf of others (slip op. at 46-47).

ALI-ABA Annual Eminent Domain Conference Wrap-Up

We just wrapped up the annual three-day Festival of Eminent Domain Law, otherwise known as the American Law Institute | American Bar Association's two CLE conferences, "Eminent Domain and Land Valuation Litigation," and "Condemnation 101: How To Prepare and Present an Eminent Domain Case." 

Dana Berliner, Matt Fellerhoff and I spoke about about "Winning Arguments in Challenging the Right to Take and Public Use" in the Land Valuation course, and in the 101 course, I presented a session on "Voir Dire: Selecting a Jury in a Post-Kelo Era in a Down Economy" with William Blake and Susan MacPherson.

The depth of talent teaching and attending these courses is unbelievable, so I always learn more at these conferences than I impart. Among the other presenters were our fellow law bloggers Gideon Kanner, Anthony Della Pelle and Edward McKirdy. Internet marketing strategist Jayne Navarre also presented an interesting session on using social media and other internet tools to help build an eminent domain practice. Many of my Owners Counsel of America colleagues were also on the faculty.

And finally, a shout out to the Planning Chairs for these events -- Leslie Fields and Joe Waldo, and Andrew Brigham and Jack Sperber -- for inviting me to make the presentations.

Getting The "Goodies" And Honolulu's $100 Million Golf Course Exaction

On Wednesday, Honolulu lost its iconic former Mayor, Frank Fasi. Mayor Fasi will be remembered for a lot of things, but we here at inversecondemnation.com will fondly recall his cheek when it came to exactions and in lieu payments. Two of the more well known examples:

• During the second wave of investment in Hawaii from Japan, he announced that any golf course developer who wished to obtain permits from the City and County of Honolulu would have to pay a $100 million impact fee. We're not sure whether anyone ever paid the fee, and we're pretty sure that even in the days before Nollan and Dolan that a court would cast a skeptical eye towards it, but sometimes you just have to admire the pure audacity of something.

• In a case involving Queen's Beach on Oahu's east shore, the director of Mayor Fasi's Department of Land Utilization testified that the City wanted to get "the goodies" from the developer of a proposed resort as a condition of allowing the development. By "the goodies," he meant the most valuable portion of the beachfront parcel, the part along the beach, which would have to be dedicated to the public before any permits would issue. The developer challenged the exaction in federal court, but  lost. This was pre-Nollan/Dolan. We represented the developer in its unsuccessful cert petition to the U.S. Supreme Court (we were ahead of our time!).

Those were the days, Mr. Mayor.

New Book: At the Cutting Edge 2009: Land Use Law from The Urban Lawyer

One of the benefits of doing your own blog is that every now and then you are allowed to engage in a little shameless self-promotion (what's this "every now and then?").

Well, here goes.

The ABA has announced the forthcoming publication of a new book by the State and Local Government Law Section: At the Cutting Edge 2009: Land Use Law from The Urban Lawyer, edited by my colleague Dwight H. Merriam, and which features "[a] compilation of the most recent Section of State and Local Government Law committee reports from The Urban Lawyer."

What this means is that it contains topical and timely articles about the hottest topics in land use law, including exactions and impact fees, green building laws, ethics in land use, regulatory takings, citizen participation in public hearings, and public use and pretext in eminent domain (the piece I authored).

Here's the Table of Contents for a complete list of what the book covers.

University of Hawaii lawprof David Callies authored the Introduction which reads, in part (and here's the shameless self-promotion):

Rob Thomas runs an informative blog on inverse condemnation, http://www.inversecondemnation.com, and follows these developments seemingly by the hour. Thus, he has written "Recent Developments in Public Use and Pretext in Eminent Domain" to describe the hodgepodge of lower federal court rulings that have no apparent pattern or consistency when it comes to determining whether claimed public benefits are pretextual. Maybe this is an area for state legislation, as the U.S. Supreme Court suggested in Kelo (Kelo v. New London, 545 U.S. 469 (2005)): "We emphasize that nothing in our opinion precludes any State from placing further restrictions on its exercise of the takings power. Indeed, many States already impose ‘public use’ requirements that are stricter than the federal baseline."

pp. 2-3.

The book is available for pre-purchase here.

$41.95 Regular price, SLG Section members: $33.95 (discounts are just one of the benefits of section membership). Students get it at an even better price: $29.95.

Eagle On Regulatory Takings (4th ed. 2009)

I just received my copy of the latest edition of Professor Steven J. Eagle's definitive treatise Regulatory Takings (Lexis/Nexis, 4th ed. Dec. 2009).

Like the earlier editions, this is a must-have for every land use and property law attorney's back bookshelf.

Chapters include "Property Rights and Their Sources," "The Ascendancy of Land Use Regulation," "Analytical Issues in Regulatory Takings Litigation," and "Regulatory Takings Remedies."

The book is available here (oddly, the Lexis-Nexis web site only has the 3d edition for purchase, but I expect that to be remedied shortly).

From the preface to the fourth edition:

This book is about "regulatory takings," which is a relatively new term, but not an entirely new idea. The underlying concept is stated simply -- government may "regulate" private property, but not to the extent that it constitutes a "taking," under the United States Constitution, or a state constitution. Owners need not be compensated for losses resulting from regulations, but are entitled to just compensation for losses resulting from takings.

During recent decades the term "regulatory taking" has been used in over 2,500 federal and state legal cases, and in almost 7,500 legal commentaries. The concept also has generated considerable interest in the popular press. This culminated in the immense volume and intensity of reaction to the the United States Supreme Court's 2005 decision in Kelo v. City of New London, which permits as a "public use" the condemnation by local government of unblighted homes for retransfer to private redevelopers for urban revitalization projects.

...

Since the first edition of this book was published in 1996, numerous cases have attempted, without conspicuous success, to define the term "regulatory takings." The U.S. Supreme Court has affirmed that localities must pay compensation when regulatory actions overreach, and that changes in statutes and regulations do not automatically modify the rights of property owners and their successors. The Court also has indicated that government physical incursions are to be treated differently from regulatory contraints. It has not, however, provided any general theory by which the boundaries of the principal attributes of ownership -- the rights of exclusion of others, use, and transfer to successor owners, are to be delineated.

I have the honor of counting Professor Eagle as a colleague, as he is my immediate past predecessor as the Chair of the Condemnation Committee of the ABA's Section of State and Local Government Law.

New Paper On Washington State's Approach To Nollan/Dolan Exactions - Do Generalized Assessments Satisfy The "Essential Nexus" Test?

My Pacific Legal Foundation colleagues Brian Hodges and Daniel Himebaugh have posted a new paper on Nollan/Dolan exactions: Have Washington Courts Lost Essential Nexus to the Precautionary Principle? - Citizens' Alliance for Property Rights v. Sims, available on SSRN here. The authors' summary:

This Article examines how Washington State courts have allowed the precautionary principle to encroach upon the essential nexus test in the context of land use exactions. The essential nexus test requires government to establish a cause-and-effect connection between development and an identified public problem before placing conditions on development. The precautionary principle, however, endorses regulation of land use in the absence of causation. Although U.S. Supreme Court precedent requires government to prove causal connections, recent Washington case law shows that this test of causation is morphing into a less scrutinizing means-end test of rationality. This shift was evident in the recent case of Citizens' Alliance for Property Rights v. Sims. In that case, Washington courts found the government's generalized scientific assessments to satisfy the essential nexus test, even though the science did not establish a causal connection between clearing of rural properties and environmental harm due to stormwater runoff. This Article urges courts to take a more vigorous interest in protecting private property rights by making causation, not precaution, the driving principle of environmental regulation.

The article is available here.

Upcoming Teleconference On Land Use Exactions

Next Tuesday (January 12, 2010) from 1-2pm Eastern Time, I'll be speaking at a teleconference on land use exactions for members of the International Municipal Lawyers Association. I'll be the guest of nationally-renown land use law experts Professor Dan Mandelker and attorney Dwight Merriam.

More information here.

Final Briefs On Due Process Motions In Maui Affordable Housing Exaction Case

The property owners and the County of Maui have filed their opposition and reply briefs regarding the cross motions for summary judgment in the Maui affordable housing case now being litigated in the U.S. District Court, Kamaole Pointe Development LP v. County of Maui, No. 07-00447 DAE (D. Haw.).

The case is a challenge to the County of Maui's "workforce housing" ordinance, enacted in in 2006, which imposes a 40% to 50% affordable requirement on new housing developments of five or more units, and on an application to subdivide a lot into five or more parcels. In lieu of providing actual units, a developer may either pay a fee equivalent to 30% of the total project sales, donate improved land of the same value, or donate raw land valued at 200% of the in-lieu fee. Ordinance 3418 is posted here.

The complaint asserts claims for "unconstitutional conditions," regulatory takings, substantive and procedural due process, equal protection, and claims under Hawaii law. The Complaint for Declaratory and Injunctive Relief (filed Aug. 23, 2007) is posted here (note: the Complaint was amended on September 6, 2007). The court earlier dismissed the "unconstitutional conditions" claim, holding it was a regulatory takings claim and was not ripe under Williamson County because the plaintiffs had not pursued a state compensation remedy. That order is posted here.

As detailed here, on November 25, 2008, the court issued an Order Denying Plaintiffs' Motion for Partial Summary Judgment; and Order Granting in Part and Denying in Part Defendants' Motion for Summary Judgment. The court held that the Williamson County ripeness rules also apply to the substantive due process and equal protection challenges, which were not ripe because the property owner had not obtained a "final decision" from the County. The court also dismissed the state law claims.

The only count remaining in the case is the due process claim, which is now the subject of cross-motions for summary judgment. The property owners filed this motion asserting the Maui County Council -- which under the ordinance has the power to grant waivers to the affordable housing requirement -- "irrationally refused to grant Plaintiffs' request," because "the members of the Council were so focused on the end goal, they were unable to impartially evaluate Plaintiffs' request for a waiver from the Ordinance."

The County filed this cross motion asserting, in essence, that the County was free to act arbitrarily because the plaintiffs did not have a property interest in a waiver because the Council had discretion not to grant one. No property interest means fair procedures are not merited. The County's motion also argues that even assuming the plaintiffs possessed a property interest, they received due process. 

The property owners' memorandum in opposition to the County's cross motion argues that Maui Councilmembers harbor an "irrational bias against residential developers," especially those who attempted to show a lack of nexus between the ordinance's 40-50% exaction and a proposed residential development, and that "a reasonable juror could not return a verdict for [the County]."

The County's County's memorandum in opposition to the property owners' motion asserts  "[t]his case raises a question that is unusual in the annals of constitutional litigation; namely, what do the Plaintiffs hope to gain by this expensive recourse to the busy federal court?" The County asserts the property owners are not seeking money damages for the due process violations, but a remedy that is not available: a declaration that the ordinance does not apply.

The parting shots by each party -- their reply briefs -- are available here (property owners) and here (County). The property owners clarify their requested remedy (that the request for a waiver from the exaction from the Council should be "deemed approved" because the Council's process was grossly biased and thus null and void), while the County asserts that the property owners have no protectable "property" interest in a waiver, and thus are owed no process.

The hearing on the cross-motions will be held on Monday, September 28, 2009 at 9:45 a.m. in U.S. District Court.

Latest In Maui Affordable Housing Exaction Case: Cross-Motions On Due Process

Here's the latest in the Maui affordable housing case now being litigated in the U.S. District Court, Kamaole Pointe Development LP v. County of Maui, No. 07-00447 DAE (D. Haw.). The case is a challenge to the County of Maui's "workforce housing" ordinance, enacted in in 2006, which imposes a 40% to 50% affordable requirement on new housing developments of five or more units, and on an application to subdivide a lot into five or more parcels. In lieu of providing actual units, a developer may either pay a fee equivalent to 30% of the total project sales, donate improved land of the same value, or donate raw land valued at 200% of the in-lieu fee. Ordinance 3418 is posted here.  We posted on the case earlier here and here.

The complaint asserts claims for "unconstitutional conditions," regulatory takings, substantive due process, equal protection, and claims under Hawaii law. The Complaint for Declaratory and Injunctive Relief (filed Aug. 23, 2007) is posted here (note, the Complaint was amended on Sep. 6, 2007). The court earlier dismissed the "unconstitutional conditions" claim, holding it was a regulatory takings claim and was not ripe under Williamson County because the plaintiffs had not pursued a state compensation remedy. That order is posted here.

As detailed here, on November 25, 2008, the court issued an Order Denying Plaintiffs' Motion for Partial Summary Judgment; and Order Granting in Part and Denying in Part Defendants' Motion for Summary Judgment. The court held that the Williamson County ripeness rules also apply to the due process and equal protection challenges, which were not ripe because the property owner had not obtained a "final decision" from the County. The court also dismissed the state law claims.

The only claim left was due process, which is now the subject of cross-motions for summary judgment. The property owners filed this motion asserting the Maui County Council -- which under the ordinance has the power to grant waivers to the affordable housing requirement -- "irrationally refused to grant Plaintiffs' request," because "the members of the Council were so focused on the end goal, they were unable to impartially evaluate Plaintiffs' request for a waiver from the Ordinance."

The County filed this motion asserting, in essence, that the County was free to act arbitrarily because the plaintiffs did not have a property interest in a waiver because the Council had discretion not to grant one. No property interest means fair procedures are not merited. The County's motion also argues that even assuming the plaintiffs possessed a property interest, they received due process.

We'll post the opposition and reply briefs when they become available.

Cert Denied Update

Last week's cert grant by the Supreme Court in Stop the Beachfront Renourishment, Inc. v. Florida Dep't of Environmental Protection, No. 08-11 (cert. granted, June 15, 2009) got us to thinking about other petitions in takings and land use cases which we've discussed, so here's an update on the cases denied review:

• Empress Casino Joliet Corp. v. Giannoulias, No. 08-945 (cert. petition filed Jan. 21, 2009) - the Illinois Supreme Court held (896 N.E.2d 277 (Ill. 2008) that a regulation which imposes a 3% "surcharge" on Illinois casinos with gross receipts over $200 million per year, and then gives the money to horse racing tracks is not a taking of property. Several casinos challenged the law asserting, among other arguments, that the redistribution of their money to tracks was a taking.  The Illinois Supreme Court held that the regulation was a tax, and not subject to takings analysis. Cert denied June 8, 2009.

• Fairbanks North Star Borough v. U.S. Army Corps of Engineers, 543 F.3d 586 (9th Cir. 2008)- the Ninth Circuit held that since the Corps' jurisdictional determination is not a final agency action, the property owner cannot immediately challenge it under the Administrative Procedures Act. Cert denied June 22, 2009.

• Joy Builders, Inc. v. Town of Clarkstown, 11 N.Y.3d 863 (2008) - the New York Supreme Court Appellate Division upheld the imposition of a fee in lieu of a dedication of land. Cert denied April 20, 2009.

• Navajo Nation v. United States Forest Service, 535 F.3d 1058 (9th Cir. 2008) - the Ninth Circuit determined it was not a "substantial burden" on the religious exercises of Native American tribes under the Religious Freedom Restoration Act for the Forest Service to allow a ski resort to make artificial snow from recycled sewage water on a mountain considered by the tribes to be sacred. Cert denied June 8, 2009.

• McClung v. City of Sumner, 548 F.3d 1219 (9th Cir. 2008) (cert petition filed Mar. 2, 2009) - the Ninth Circuit held that legislatively imposed exactions should be analyzed under the Penn Central ad hoc standards and not under Nollan/Dolan. Cert denied June 8, 2009.

• AmeriSource Corp. v. United States, No. 08-497 (cert. petition filed Oct. 15, 2008) - the Federal Circuit held that the seizure as evidence was not a taking for public use because the seizure was an exercise of the government's "police power," and not an exercise of eminent domain. Cert denied March 23, 2009.

Cert Denied In Ninth Circuit Legislative Exactions Case

Earlier this week, the Supreme Court declined review of the Ninth Circuit's decision in McClung v. City of Sumner, 548 F.3d 1219 (9th Cir. 2008). In that case, the Ninth Circuit held:

This case presents an issue of first impression in this Circuit — whether a legislative, generally applicable development condition that does not require the owner to relinquish rights in the real property, as opposed to an adjudicative land-use exaction, should be reviewed pursuant to the ad hoc standards of Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978), or the nexus and proportionality standards of Nollan v. California Coastal Commission, 483 U.S. 825 (1987), and Dolan v. City of Tigard, 512 U.S. 374 (1994). We affirm, holding that the Penn Central analysis applies to the 12-inch pipe requirement. 

The Ninth Circuit's opinion is available here. The Cato Institute which along with others filed an amicus brief urging the Court to review the case, summarized the case:

When Daniel and Andrea McClung applied for a permit to build a small business on their property, the City of Sumner, Washington, charged them nearly $50,000 to pay for improvements to the City's entire storm drainage system. The McClungs sued the City under the Fifth Amendment to the Constitution, whose Takings Clause prohibits the government from "taking" private property for public use without just compensation. They argue that the City cannot force them to pay fees for off-site pipes absent proof that their development would have a specific detrimental effect on the existing drainage system—and without any evidence that the impact was worth $50,000. The Ninth Circuit ruled in favor of the City, reasoning that money is not property (so there could be no unconstitutional taking) and that because the fees were imposed by ordinance (so the City's determination that the pipes needed upgrading was justification enough for the fees). The McClungs have now asked the Supreme Court to review their case. Cato, joined by the Pacific Legal Foundation and the Building Industry Association of Washington, argues that this case is a perfect vehicle for the Court to revisit the scope of Fifth Amendment protections. Our brief highlights the deep divisions among state and federal courts over several important issues, such as whether the Takings Clause applies to legislative (as opposed to bureaucratic) exactions and whether it applies to monetary exactions (not just burdens on land use). The Court should take this case to ensure that the standard for reviewing development conditions is uniform across the country and make clear that property right protections do not depend on ill-defined distinctions such as the form of property demanded by the government or the manner in which a condition is imposed.

The Supreme Court's denial of review does not establish any precedent, and McClung remains good law in the Ninth Circuit.

Op-Ed: Money Is Property - Monetary Exactions And Nollan/Dolan

The Washington Examiner has published an op-ed about McClung v. City of Sumner, 548 F.3d 1219 (9th Cir. 2008), petition for cert. filed May 2, 2009, "When the Government Takes Your Money, It Takes Your Property," by Cato Institute's Ilya Shapiro and Pacific Legal Foundation's Lauren Wiggins (who filed an amicus brief urging the Court to review the case).

McClung involves an exaction of money, and not land, as a condition of a development permit. The Ninth Circuit held that legislative exactions are not subject to Nollan/Dolan:

Courts are deeply divided over whether the Fifth Amendment applies to the taking of property by means of fees such as the ones the McClungs were assessed.  They are also split as to whether legislatively imposed conditions allow a local government to avoid making individualized determinations of a development’s impact.  Courts like the Ninth Circuit rely on the fact that the Supreme Court has never actually spelled out that money is property (an issue also at the heart of an otherwise unrelated case seeking high court review, Empress Casino v. Giannoulias).  Nor has the Court clearly stated that monetary conditions placed on development are subject to the same scrutiny as other restrictions and regulations.

Our summary of the Ninth Circuit's decision and the cert petition is posted here, along with the authors' amicus brief.

Tuesday Round-Up: Forced Farming, Tax Or Taking, RLUIPA Loophole

Several items of interest:

• California Coastal Commission: "You must farm" - As a condition of allowing a Northern California family to build a home, the California Coastal Commission demanded that they dedicate an "agricultural easement" on their 143-acre parcel.  In other words, as a condition of use, the Commission requires a family that has never farmed its land to use its land for farming.  More about the case from the Half Moon Bay Review here. The complaint is posted here.
  

  "What the Coastal Commission is asking us to do in return for a building permit is to put the remaining acreage into agriculture easement," Dan Sterling said. "But it doesn’t stop there. They want control of what and how we farm. And even then, they can come in here whenever they want." That’s Sterling’s biggest issue. He says he’d lose control over all but 10,000 square feet of his property but still be liable to keep it up to state standards. And as far as he’s aware, no one has ever farmed any portion of the property – terrain marked by steep hills of trees and brush.

• WSJ op-ed: Riverboat Robbery - When does a tax become an illegal 'taking'? - The Opinion Journal's thoughts on the pending cert petition in Empress Casino Joliet Corp. v. Giannoulias, No. 08-945 (cert. petition filed Jan. 21, 2009), a case we discussed here. 
  

In a time of fiscal pressure, Illinois-type actions may be increasingly tempting for state and local governments to get money to prop up politically favored businesses. In the long run, it will only encourage corruption and deny business the kind of transparency they need to operate and expand. As with all takings, for railroads or schools or highways, if the state believes that the increased purses of the Illinois racetrack are in the public interest, the state must be willing to pay for it.

• Closing a big loophole in RLUIPA - RLUIPA and Eminent Domain: How a Plain Reading of a Flawed Statute Creates an Absurd Result.  Eminent domain is not a "land use regulation" under RLUIPA, most courts hold, including Hawaii's. See City & County of Honolulu v. Sherman, 110 Haw. 39, 129 P.3d 542 (Feb. 28, 2006). Thus, while a local government's zoning may be scrutinized under RLUIPA, the actual taking of property is immune from review. 

  This article addresses the Religious Land Use and Institutionalized Persons Act of 2000. It argues that while the courts hearing RLUIPA cases have correctly held that eminent domain is not land use regulation under RLUIPA, Congress intended eminent domain to be covered under RLUIPA, sound public policy holds that sacred property ought to be afforded special protection from burdensome government action, and Congress must cover eminent domain under RLUIPA in order to adequately protect religious liberty in the land use context.

New Cert Petition And Amicus Brief On Nollan/Dolan Applicability To Legislative Exactions, In-Lieu Fees

A cert petition has been filed seeking review of the Ninth Circuit's decision in McClung v. City of Sumner, 548 F.3d 1219 (9th Cir. 2008), the case in which the court held:

This case presents an issue of first impression in this Circuit — whether a legislative, generally applicable development condition that does not require the owner to relinquish rights in the real property, as opposed to an adjudicative land-use exaction, should be reviewed pursuant to the ad hoc standards of Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978), or the nexus and proportionality standards of Nollan v. California Coastal Commission, 483 U.S. 825 (1987), and Dolan v. City of Tigard, 512 U.S. 374 (1994). We affirm, holding that the Penn Central analysis applies to the 12-inch pipe requirement. 

The Ninth Circuit's opinion is available here.  The petition presents three questions:

As a condition for approving their building permit, the City of Sumner required Dan and Andrea McClung to replace a much undersized City-owned storm sewer that served their property and numerous other lots within a several block area.¹  While the McClungs' project contributed little to the need for the new larger pipe, they were nevertheless required to bear 85 percent of its cost. The McClungs ask the Court to resolve whether just compensation is due when a permit applicant is required to upgrade a public facility far beyond what is necessary to mitigate the impacts of the new development. The questions presented are:

1. When government requires a land use permit applicant to upgrade publicly-owned infrastructure facilities to legislatively prescribed standards, is just compensation due where the government fails to show that the burden of the upgrade is roughly proportional to the impacts of the new development?

2. Do the nexus and proportionality standards of Nollan v. California Coastal Commission, and Dolan v. City of Tigard, apply only to required dedications of real property, or do they equally apply to a monetary exaction that requires the permit applicant to upgrade a public infrastructure facility?

3. Is a property owner barred from seeking just compensation because he yields under financial duress to a permit condition that effects a taking of property?

-----------------------------------

1.  The first sentence of the Ninth Circuit opinion inaccurately implies that the storm water pipe at issue belongs to the McClungs: “the McClungs … learned that their underground storm drain pipe did not meet the City’s requirement....” (emphasis added). App. A at 4a. The pipe is not the McClungs’ pipe; it is the City’s pipe. That fact is uncontroverted. App. D at 52a, App. G at 59a–60a.

Download the petition here.  The Pacific Legal Foundation, the Cato Institute and the Building Industry Association of Washington have filed an amicus brief, available here.  The amicus brief is also posted at JD Supra here, along with a summary of the case:

When Daniel and Andrea McClung applied for a permit to build a small business on their property, the City of Sumner, Washington, charged them nearly $50,000 to pay for improvements to the City's entire storm drainage system. The McClungs sued the City under the Fifth Amendment to the Constitution, whose Takings Clause prohibits the government from "taking" private property for public use without just compensation. They argue that the City cannot force them to pay fees for off-site pipes absent proof that their development would have a specific detrimental effect on the existing drainage system—and without any evidence that the impact was worth $50,000. The Ninth Circuit ruled in favor of the City, reasoning that money is not property (so there could be no unconstitutional taking) and that because the fees were imposed by ordinance (so the City's determination that the pipes needed upgrading was justification enough for the fees). The McClungs have now asked the Supreme Court to review their case. Cato, joined by the Pacific Legal Foundation and the Building Industry Association of Washington, argues that this case is a perfect vehicle for the Court to revisit the scope of Fifth Amendment protections. Our brief highlights the deep divisions among state and federal courts over several important issues, such as whether the Takings Clause applies to legislative (as opposed to bureaucratic) exactions and whether it applies to monetary exactions (not just burdens on land use). The Court should take this case to ensure that the standard for reviewing development conditions is uniform across the country and make clear that property right protections do not depend on ill-defined distinctions such as the form of property demanded by the government or the manner in which a condition is imposed.

The Supreme Court's docket for the case is available here.

Court Of Federal Claims Round-Up

Here are the latest opinions of interest from the Court of Federal Claims, which has nationwide jurisdiction over inverse condemnation and regulatory takings claims against the federal government where the compensation sought exceeds $10,000:

• Energy Security of America Corp. v. United States, No 08-373C (Feb. 27, 2009) - "inherently unknowable" for purposes of the statute of limitations and failure to state a claim. 
  

• James v. United States, No. 01-2911L (Mar. 5, 2009) - subject matter jurisdiction, ownership of parcel in question; "scrivener's error."

• Fauvergue v. United States, No. 08-431L (Feb. 24, 2009) - class actions in rails-to-trails takings; applying John R. Sand & Gravel v. United States.

• Biery v. United States, Nos. 07-693L, 07-675L (Feb. 27, 2009) - more rails-to-trails takings - certifying questions of abandonment under Kansas law to the Kansas Supreme Court.

• Strategic Housing Finance Corp. of Travis County v. United States, No. 06-741T (Feb. 27, 2009) - subject matter jurisdiction of CFC and arbitrage tax rebates, conceding the illegality of the government action as precursor to CFC jurisdiction.

New Cert Petition - Dolan Proportionality And Individualized Determination Applies To In-Lieu Fees

A cert petition has been filed seeking review of Joy Builders, Inc. v. Town of Clarkstown, 11 N.Y.3d 863 (2008).  That decision was summarized by Professor Patty Salkin on the Law of the Land blog here. The New York Court of Appeals refused to hear the case, ordering "Appeal dismissed without costs, by the Court sua sponte, upon the ground that no substantial constitutional question is directly involved."

The cert petition was filed on February 27, 2009 and is available here.

The Question Presented:

A government violates the doctrine of unconstitutional conditions when it grants a development permit conditioned upon the compelled dedication of land for municipal purposes if: i) it has not made an "individualized determination" that an exaction is required because of the project's impacts, and ii) the quantity of land compelled is not roughly proportional to those impacts.¹  More and more governments have been conditioning development permits upon the payment of a fee in lieu of the dedication of land. Nationwide there is a split as to whether monetary payments are to be judged by the same constitutional standards. The following questions are thus presented.

1. Is a monetary fee imposed in lieu of a dedication of land held to Dolan's standard?

2. If so, does a fee imposed in lieu of the dedication of recreation land, based on a generic needs study not focusing on the project at hand and deliberately
disregarding an array of available public and private recreational facilities because they are not controlled by the imposing government, meet this test?

-----------------------------------

1.  Dolan v. City of Tigard, 512 U.S. 374, 391 (1994) explained in Lingle v.
Chevron U.S.A., 544 U.S. 528, 546-548 (2005).

The petition points out the disarray in the lower state and federal courts on the issues, always a good indicator of certworthiness. The Court's docket report is here. The town's brief in opposition is due April 3, 2009.

Weekend Round-Up

Several diverse items of interest for your weekend reading enjoyment:

• "Impact Fees" - a response to this commentary about impact fees and the legality of "fair share" exactions by the County of Hawaii.

• "Substantive Due Process at Work" - analysis by our friend Dwight Merriam at the IMLA local government blog of a recent Montana Supreme Court decision that seems to hold that substantive due process in not available to challenge "as applied" zoning laws. You mean that local government is not constrained by the Due Process Clause from arbitrarily and capriciously failing to follow its own zoning laws?  

• "Condemnation Suit Goes to State Supreme Court" - "In order to resolve a condemnation case which questioned whether the city’s motives for property acquisition are indeed for public interest and not for private developers, the state supreme court has agreed to hear the issue on direct appeal." See also this report from the Seattle Post-Intelligencer and this report from the Seattle Times.

• "Planners propose to rejuvenate Balboa Park area" - from the San Francisco Chronicle a report about a plan to "revitalize" an "outdated" part of the city, and "transform the area into a transit village with new dense housing and retail." 

Planners envision a neighborhood where college students and residents linger at coffee shops and gather at a new plaza. They want residents to walk and ride their bikes to commuter trains on what has been a traffic-choked and often precarious Ocean Avenue. 

• "Ruling felt far beyond Superferry" - from Jerry Burris at the Honolulu Advertiser:

Say what you want about the Hawai'i Supreme Court decision that at least temporarily shut down the Hawaii Superferry, this much is for certain: It changes the rules of the game substantially for lawmakers who think they can tinker with, or manipulate, the state's economy. 

Out-Of-Proportion In-Lieu Affordable Housing Exaction Opinion Modified

The modified opinion in Building Industry Ass'n of Central California v. City of Patterson, No. F054785 (Cal. Ct. App. Mar. 2, 2009), a case we summarized here, has been further modified in this order. The latest modifications do not alter the judgment that the a city could not increase an in-lieu affordable housing exaction from $734 to $21,000 per house in a proposed development, because it failed to show the increase was attributable to the development.

Conference: ABA Section Of State & Local Government Law Virtual Spring Meeting

Instead of an in-person Spring Meeting this year, the ABA Section of State & Local Government Law will be "meeting" virtually from March 31-April 2, 2009.  As part of the meeting, the Section will be featuring a series of teleconference and live audio webcasts on a variety of subjects including topics near and dear to us: workforce housing, condemnation, land use, and green regulations. You can register for all programs, or individual subjects. A complete list of programs is posted here.

I will be participating as faculty in two of the programs: Condemnation Hot Topics (April 1, 2009 from 2:00 - 3:30pm EDT) and Hot Topics in Land Use Law (April 2, 2009 from noon - 1:30 EDT).  I'll be speaking about the issue of public use and pretext in eminent domain, and recent cases questioning the government's ability to take property.

Registration information is available on the links. If you can't make it for the live programs, the ABA is making recordings available also.  I hope you can join in.

Impact Fees And "Fair Share" Guest Commentary: "Who Pays For Impacts: You Do"

Thank you to Kamuela attorney Margaret Wille for allowing us to post the commentary she published in West Hawaii Today (Mar. 7, 2009), but which is not available on line. Posting on inversecondemnation.com is not an endorsement of the views expressed or the conclusions reached, but we thought it was worthwhile to hear others' voices on this important subject. Disclosure: we represent the property owners in the eminent domain cases instituted by the County, County of Hawaii v. C&J Coupe Family Ltd. P'ship which she discusses. Our thoughts on the topic are posted here.

Who Pays For Impacts: You Do
by Margaret Wille

Recently there have been several articles in West Hawaii Today about “fair share” versus “impact” fees.  Probably there are many readers who wonder why do these fees matter to me. In other words, does this issue affect the ordinary Big Island taxpayer?  Yes, very much so.  

These fees, regardless of name, are charged to developers to defray a portion of the cost to maintain the current level of service for one or more categories of public facilities impacted by the proposed development.

The first question to ask is whether you believe the developer who reaps the financial benefit of the new development should shoulder a portion of the financial cost to maintain the current level of service for affected public facilities that are off of the developed property, e.g. area roads or police and fire stations. Would you rather all of the resulting costs to maintain the current level of service of these affected public facilities be paid for by us existing taxpayers? By way of example, when Costco went in, who paid the 5.5 million in cost to upgrade the Queen K intersection, just to maintain the current level of service at that intersection (I believe the level of service of that intersection was level D if not worse.) We did, you, me, all of us existing taxpayers and businesses paid for the improvements needed just to continue at that same low level of service (and if bond money was used for a portion of either the County’s or the State’s cost, you could say we saddled our kids with some of this expense).  If the County had passed a development fee ordinance consistent with the State’s 1992 impact fee law, some of the County’s cost of those intersection improvements would instead have been paid by Costco’s owners.  

Cal. Court of Appeal Strikes Down Out-Of-Proportion In-Lieu Affordable Housing Exaction

In Building Industry Ass'n of Central California v. City of Patterson, No. F054785 (Cal. Ct. App. Mar. 2, 2009), the California District Court of Appeal held that the city could not increase an in-lieu affordable housing exaction from $734 to $21,000 per house, because it failed to show the increase was attributable to the development.

The City of Patterson entered into a development agreement with the landowner in which the city agreed the owner would pay only those affordable housing fees in effect at the time the agreement was executed. The agreement recognized, however, that the exaction may be increased and that the city was preparing an "updated analysis." The owner agreed to pay the revised exaction, provided it was "reasonably justified." Predictably, the city revisited the exaction schedule and after study that changed the methodology of calculating the fee, revised it to $20,946 per market rate unit. After the owner sued, the trial court held the new methodology used by the city to calculate the new exaction was reasonable, and ruled the owner must pay the increased exaction.

The court of appeal noted "the critical question in this appeal is whether the increased fee complied with the terms of the Development Agreement." Slip op. at 9. The court rejected the owner's assertion the "reasonably justified" language prohibited the city from changing its method of calculating the affordable housing fee since the owner acknowledged the city was preparing an "updated analysis" which did not limit the city to any particular methodology.

The court turned next to the issue of the meaning of "reasonably justified."  The owner argued this term incorporated existing law and that any increase must conform to the law governing exactions, while the city asserted it in effect waived applicable law.  The court sided with the owner, holding:

Here, we conclude that an objectively reasonable person would expect the term "reasonably justified" to mean that any increase in the affordable housing in-lieu fee would conform to existing law. In other words, part of the way one would show a fee is reasonably justified is to show that it does not violate established legal principles. The contrary interpretation, which would conclude that the term did away with applicable legal requirements, would create much greater change in the relationship between the parties. An objectively reasonable person would expect more explicit language to implement such a change. Thus, it is too great a leap to infer that the term "reasonably justified" demonstrates an intention to waive applicable legal requirements.

Slip op. at 12. The court applied California's law of exactions, which requires a "reasonable relationship" between the amount of the fee and the burdens on public facilities attributable to the development.  The court concluded the city's fee increase was not reasonably related to the need for affordable housing generated by the owner's project. Slip op. at 13. The study conducted by the city did not justify the increase since it did not calculate the fee based upon the project's creation of the need for affordable housing:

Instead, the Fee Justification Study shows that the affordable housing in-lieu fee of $20,946 per market rate unit was calculated based on an estimate of City's need for 642 units of affordable housing. No connection is shown, by the Fee Justification Study or by anything else in the record, between this 642-unit figure and the need for affordable housing generated by new market rate development. Accordingly, the fee calculations described in the Fee Justification Study and Moran's declaration do not support a finding that the fees to be borne by Developer's project reflected the costs attributable to it.

Slip op. at 14.

Cert Denied In California Nollan/Dolan $5.3 Million Seawall "Mitigation Fee" Case

Thanks to James Lawlor of the Land Use Legal Report for letting us know that the U.S. Supreme Court has declined to review Ocean Harbor Homeowners Ass'n v. California Coastal Comm'n, 163 Cal. App. 4th 215, 77 Cal. Rptr. 432 (2008). In that case, the California Court of Appeals held that the California Coastal Commission properly conditioned a permit to build a seawall to protect property from erosion on the landowner's payment of a $5.3 million "mitigation fee." The fee was to be used to purchase other beach property since Commission claimed the construction of the seawall would result in the loss of beach fronting the property. The property owner challenged the exaction under the nexus and proportionality requirements of Nollan v. California Coastal Commission, 483 U.S. 825 (1987), and Dolan v. City of Tigard, 512 U.S. 374 (1994).

A denial of a petition for writ of certiorari does not mean that the Supreme Court approves of the lower court decision or that the issues are not worthy, merely that the case (for whatever reason) is not appropriate for the Court's review.

The Supreme Court's Order List denying review is posted here.

County Of Hawaii "Fair Share"/Impact Fees - What Did The Court Decide?

Thanks to Kona Blogger Aaron Stene for pointing out an article from West Hawaii Today, "County lawyers say fair share legal." The article reports:

Council members who say Judge Ronald Ibarra's 2007 ruling in a contested condemnation case invalidated the county's fair share assessments are basing their argument on too specific a portion of the ruling, attorneys for the Corporation Counsel's Office said.

Following the logic of the argument, the attorneys went on, someone could argue that the county's condemnation powers were also invalidated, because both condemnation and fair share assessment were mentioned in a single sentence. Instead, the county's attorneys said, the references were specific to the Coupe lawsuit in which the ruling was filed, according to written opinions from the office released Friday.

Disclosure: we represent the property owners in the Coupe lawsuit mentioned (more accurately termed the "Coupe condemnation," since the Coupe Family is the defendant not the plaintiff, and was twice sued by the County).  The "single sentence" referred to in the report is located on page 48 of the First Amended Findings of Fact, Conclusions of Law, and Order (Sep. 27, 2007):

Count 2: [Declaratory Judgment That Development Agreement is Illegal]

The condemnation and "fair share" assessment provisions of the Development Agreement are declared illegal. Judgment is hereby ordered to be entered in favor of C&J Coupe Family Limited Partnership and against County of Hawaii, and 1250 Oceanside Partners because County Resolution 266-00 illegally delegated the County's power of condemnation through the Development Agreement to a private party, 1250 Oceanside Partners.

The story continues:

"Judge Ibarra, in essence, found the Development Agreement invalid for a number of reasons, including the impermissible delegation of the condemnation power by the County," Ashida wrote. "To read the above finding to conclude the Judge found the County's fair share assessment illegal would be tantamount to reading the finding to also conclude the Judge found the County's condemnation powers illegal, since the finding simply says, 'The condemnation and fair share assessment provisions of the Development Agreement are declared illegal.' Clearly this is not what the Court intended nor did."

. . .

West Hawaii attorney Robert Kim disagreed with the Corporation Counsel's assessment.

"The letter to the County Council from Lincoln Ashida is too narrowly construed and, with all respect for Mr. Ashida, my reading of Judge Ibarra's order is much broader and calls into question all of the fair share ordinances enacted by the county," Kim said after reviewing the letters and Ibarra's ruling. "It's crystal-clear that Judge Ibarra has held the county does not have authority to enact fair share ordinances."

Here's the complete text of the Conclusion of Law (page 41) that the article refers to.  You make the call about what the court concluded. Pay special attention to paragraph 84:

Impact Fees

81. The Development Agreement also purports to amend, supersede or substitute for ordinances and the impact fee statute. The Development Agreement imposes an impact fee, and the County has not enacted an impact fee ordinance pursuant to section 46-141 of the Hawaii Revised Statutes, as amended. Haw. Rev. Stat. § 46-141.

82. The "fair share" assessment imposed as to the Defendants and the other landowners were based on Oceanside's study and recommendation.

83. The "fair share" assessment is based on benefits and impacts to the  landowners from the Mamalahola Bypass Highway.

84. County does not have statutory authority to impose a "fair share" assessment, but has statutory authority to enact impact fee ordinances pursuant to section 46-141 of the Hawaii Revised Statutes, as amended.

85. The "fair share" assessment under the Development agreement, in substance, is tantamount to an impact fee that does not conform to section 46-141 of the Hawaii Revised Statutes, as amended.

86. The portion of the Development Agreement that imposes the "fair share"
assessment against the Coupe's is void for not being in compliance with section 46-141 of the Hawaii Revised Statutes, as amended.

We've written about this issue before, and commented on WHT's fair share series:

• Even More On Hawaii County's Impact Fee ... Whoops, I Mean "Fair Share"

• More On Hawaii County's "Fair Share" Impact Fees

• West Hawaii Today Series: Is County ["Fair Share" And Impact Fee] Practice Legal?
  

Land Use Round-Up

Some interesting reports filtering across my screen today:

• Thanks to Charley Foster for sending notice about a post at Volokh Conspiracy about whether the Takings Clause was incorporated against the states by the Due Process Clause, "Regulatory Takings and the Fourteenth Amendment."  On that subject, check out "No State Shall Abridge: The Fourteenth Amendment and the Bill of Rights" by Michael Kent Curtis (available on Amazon here), which makes a good case that the Reconstruction Congress meant for the Privileges or Immunities Clause of the Fourteenth Amendment to incorporate all of the provisions of the Bill of Rights against the states as attributes of national citizenship.

• The New York Post -- with its own inimitable headline -- has published an op-ed about the eminent domain controversy in NYC's Manhattanville neighborhood: "College Cheats - Columbia Blighted Own Hood." More on the issue here.

• Reasononline posts "Not One More Acre!" about the opposition by Colorado ranchers, environmentalists, and scientists to the U.S. Army's proposed expansion of a training area.  

• The Maui News reports "Council reviews housing statute" (actually, it's an ordinance, but close enough) about possible amendment to Maui County's 40-50% "workforce" housing (aka affordable housing) ordinance. That ordinance is also being challenged in federal court, and the latest decision in the lawsuit is posted and analyzed here.

Even More On Hawaii County's Impact Fee ... Whoops, I Mean "Fair Share"

Thanks to Kona Blogger Aaron Stene for sending this next item my way, a follow up to the previous two days' reports from West Hawaii Today (posted here and here) about Hawaii County's so-called "fair share" exaction system. In "Council reaffirms belief in fair share legality," WHT reports:

The county's Corporation Counsel spent two-and-a-half hours of a four-hour-long executive session Wednesday apparently trying to convince the County Council the County's fair share cost system is legal.

The effort apparently worked.

Council Chairman J Yoshimoto, Hilo, said after the meeting the "Corporation Counsel explained to us the fair share system is legal."

He said he does not expect the council to hold another executive session on the subject any time soon, as information presented by Corporation Counsel during the meeting clearly showed the fair share cost system is legal.

The county has for years used the system, which is a device that requires residential developers to pay certain fees to cover the impacts their projects have on county infrastructure.

Kohala Councilman Pete Hoffmann, however, believes the system is illegal and should be replaced with a different impact fee system that conforms to state laws.

. . .

Hoffmann's concerns are rooted in a legal decision on a condemnation proceeding handed down by 3rd Circuit Court Judge Ronald Ibarra in 2007 that states the fair share cost system is illegal.

Disclosure: my Damon Key colleagues and I represent the landowner in that case.

The issue is whether the County's system of exacting payments from landowners who seek County permission to develop their land to pay for the impacts their proposals may have on roads, schools, and other items covered by the term "infrastructure" is a legitimate exercise of the County's general power to regulate land uses, or whether it is an "impact fee." State law permits counties to impose "impact fees," but only if the counties have first enacted an ordinance setting forth how the fees are assessed and imposed. See Haw. Rev. Stat. § 46-142. The County of Hawaii has not enacted such an ordinance. State law defines "impact fees" as follows:

"Impact fees" means the charges imposed upon a developer by a county or board to fund all or a portion of the public facility capital improvement costs required by the development from which it is collected, or to recoup the cost of existing public facility capital improvements made in anticipation of the needs of a development.

Haw. Rev. Stat. § 46-141. "Public facility capital improvement costs" is also defined by section 46-141:

"Public facility capital improvement costs" means costs of land acquisition, construction, planning and engineering, administration, and legal and financial consulting fees associated with construction, expansion, or improvement of a public facility.  Public facility capital improvement costs do not include expenditures for required affordable housing, routine and periodic maintenance, personnel, training, or other operating costs.

Until such time as the County Council discloses its reasons for concluding that the fees collected under the "fair share" system are not "impact fees," for "public facility capital improvement costs," we'll just have to speculate why the County believes that if it looks like a duck and quacks like a duck, it isn't a duck.

More On Hawaii County's "Fair Share" Impact Fees

Following up on yesterday's post about the West Hawaii Today series on the legality of Hawaii County's "fair share" impact fee system, the paper posts three stories about the issue:

• How much, for what and when? ("The county may have illegally collected $7.4 million in fair share assessments from housing developers since the early 1990s. Fair share assessments have been under fire since 2007, when 3rd Circuit Court Judge Ronald Ibarra -- as part of his ruling on a condemnation lawsuit -- ruled the county's system is illegal because it doesn't meet state regulations. According to the Hawaii Revised Statutes, "impact fees may be assessed, imposed, levied and collected by (any county) provided that the county enacts appropriate impact fee ordinances.")

• Council members divided on fair share (noting that several council members question the legality of the "fair share" system, while others adhere to the not-disclosed-in-the-story advice of the Corporation Counsel's office that the "fair share" system passes muster)

• Impact fees vary by county (reviewing the impact fee systems in Hawaii's other three counties)

West Hawaii Today Series: Is County ["Fair Share" And Impact Fee] Practice Legal?

Worthwhile article today from West Hawaii Today (the daily newspaper of the Kona side of the Big Island), "Is county practice legal?" The story details the County's practice of demanding "fair share" payments from property owners and developers who wish to make use of their properties and seek County approvals:

The fair share cost system assesses developers a fee whenever their projects require a rezoning as compensation for the impacts the projects will have on county infrastructure. Money collected through fair share assessments could be used toward road and water system improvements, new parks and expansion of police and fire services.

However, a ruling made by 3rd Circuit Court Judge Ronald Ibarra in 2007 in a condemnation proceeding apparently deemed the fair share system illegal.

The county filed two condemnation suits against the Charles and Joan Coupe Trust, one in 2000 and the other in 2005, to obtain a 3-acre property needed to build a planned 5.5-mile bypass of the Mamalahoa Highway in Kona.

Ibarra issued a ruling on both cases in 2007, denying the 2000 condemnation but granting the 2005 action. The Coupe's appealed Ibarra's ruling on the 2005 condemnation and it was later vacated by the Hawaii Supreme Court. [The Hawaii Supreme Court's decision is posted here.]

However, the ruling on the 2000 condemnation -- which was never appealed by the county -- included Ibarra's comments on the county's fair share system.

Ibarra states the "county does not have statutory authority to impose a 'fair share' assessment, but has statutory authority to enact impact fee ordinances."

"The development agreement imposes an impact fee, and the county has not enacted an impact fee ordinance pursuant to section 46-141 of the Hawaii Revised Statutes," Ibarra wrote.

Disclosure: we represent the Coupe family in the cases mentioned. The findings in the 2000 condemnation mentioned in the article are posted here. The article continues:

Deputy Corporation Counsel Amy Self said during a recent interview that Ibarra's findings in the 2000 condemnation proceeding dealt specifically with that case.

She said Ibarra determined that the fashion in which the county reached a fair share agreement with developer 1250 Oceanside Partners was illegal because it never gave the Coupe's and other property owners the opportunity to be part of the fair share assessment negotiations.

In order to build its Hokulia residential development in Kona, 1250 Oceanside entered into an agreement with the county that required the developer to build the Mamalahoa bypass.

"The reason Ibarra concluded the fair share system, as applied to the Coupe's and other property developers, was illegal is because they didn't have the opportunity to negotiate the fair share," Self said.

Deputy Corporation Counsel Ivan Torigoe agreed. "What we're saying is that the judge's decision did not touch the fair share program generally," he said.

Self added that the issue of whether the county's fair share system is legal was not before the court at the time.

Waimea resident Margaret Wille, an attorney was has studied Ibarra's ruling, disagrees with the Corporation Counsel.

Wille said Ibarra makes it clear the fair share system is illegal, and that the county runs the risk of being sued if it doesn't address the matter.

She said the reason the Corporation Counsel maintains the system is legal is because the court battle with the Coupe's continues to rage.

"The county is in a lawsuit right now," Wille said. "If you're an attorney and in a mess with the Coupe case, what else could you say?"

The portions of the circuit court's Conclusions of Law (which, as the article notes, were not appealed, so are final and conclusive) are located on page 41 of the order.  You make the call about what the court concluded:

Impact Fees

81. The Development Agreement also purports to amend, supersede or substitute for ordinances and the impact fee statute. The Development Agreement imposes an impact fee, and the County has not enacted an impact fee ordinance pursuant to section 46-141 of the Hawaii Revised Statutes, as amended. Haw. Rev. Stat. § 46-141.

82. The "fair share" assessment imposed as to the Defendants and the other landowners were based on Oceanside's study and recommendation.

83. The "fair share" assessment is based on benefits and impacts to the  landowners from the Mamalahola Bypass Highway.

84. County does not have statutory authority to impose a "fair share" assessment, but has statutory authority to enact impact fee ordinances pursuant to section 46-141 of the Hawaii Revised Statutes, as amended.

85. The "fair share" assessment under the Development agreement, in substance, is tantamount to an impact fee that does not conform to section 46-141 of the Hawaii Revised Statutes, as amended.

86. The portion of the Development Agreement that imposes the "fair share"
assessment against the Coupe's is void for not being in compliance with section 46-141 of the Hawaii Revised Statutes, as amended.

There will be more to come, surely.

Florida Regulatory Takings Links

Florida's appellate courts have been active lately in the regulatory takings arena.  Here are links to summaries and analysis of the decisions.

First, from the Florida Land Use Law blog:

• 5th DCA - Landmark Takings Case: Off Site Exaction a Taking under Nollan/Dolan Where Applicant Refused Permit Due to Condition (St. Johns Water Mgmt Dist. v. Koontz)

• 3d DCA gets Right Result but Wrong Analysis in Facial v As Applied Taking Case (Collins v. Monroe County)

• Different case, same "facial vs as applied" problem (Shands v. City of Marathon)

• Save Our Beaches - the Review (Walton County v. Stop the Beach Renourishment)

Next, from Grand Theft: Property

• Collins and Shands Regulatory Taking Decisions Reversed by Third DCA (Collins v. Monroe County and Shands v. City of Marathon)

Latest Developments In Maui Affordable Housing Exaction Case

For a while now, we've been meaning to post the latest order in the Maui affordable housing case from the U.S. District Court, Kamaole Pointe Development LP v. County of Maui, No. 07-00447 DAE (D. Haw.), but for one reason or another, haven't had the chance until now. 

The case is a challenge to the County of Maui's "workforce housing" ordinance, enacted in in 2006, which imposes a 40% to 50% affordable requirement on new housing developments of five or more units, and on an application to subdivide a lot into five or more parcels. In lieu of providing actual units, a developer may either pay a fee equivalent to 30% of the total project sales, donate improved land of the same value, or donate raw land valued at 200% of the in-lieu fee. Ordinance 3418 is posted here.  I posted on the case earlier here.

The complaint asserts claims for "unconstitutional conditions," regulatory takings, substantive due process, equal protection, and claims under Hawaii law. The Complaint for Declaratory and Injunctive Relief (filed Aug. 23, 2007) is posted here (note, the Complaint was amended on Sep. 6, 2007). The court earlier dismissed the "unconstitutional conditions" claim, holding it was a regulatory takings claim and was not ripe under Williamson County because the plaintiffs had not pursued a state compensation remedy. That order is posted here.

On November 25, 2008, the court issued an Order Denying Plaintiffs' Motion for Partial Summary Judgment; and Order Granting in Part and Denying in Part Defendants' Motion for Summary Judgment. The court held that the Williamson County ripeness rules also apply to the due process and equal protection challenges, which were not ripe because the property owner had not obtained a "final decision" from the County:

In this case, there is no dispute that Plaintiffs brought an appeal to the County Council requesting a waiver from the strictures of the Ordinance. The appeal for a waiver was denied. It is also undisputed that Plaintiffs have not  filed any formal application or submitted a development plan under the Ordinance. Thus, while Plaintiffs may have received a sufficient denial of a variance in the form of the Council’s waiver rejection, it is clear from the record that Plaintiffs have not received a final decision from the Council rejecting their development plan. Under the final decision jurisprudence, Plaintiffs' as-applied due process and equal protection claims must fail because they are unripe.

Slip op. at 14. The court noted that the Ninth Circuit applies the final decision prong of Williamson County's ripeness rule to substantive due process and equal protection challenges. Slip op. at 11 (citing Hoehne v. County of San Benito, 870 F.2d 529, 532 (9th Cir. 1989); Kinzli v. City of Santa Cruz, 818 F.2d 1449, 1455-56 (9th Cir.), as amended, 830 F.2d 968 (1987), cert. denied, 484 U.S. 1043 (1988); Shelter Creek Dev. Corp. v. City of Oxnard, 838 F.2d 375, 379 (9th Cir. 1988), cert. denied, 488 U.S. 851 (1988); Herrington v. County of Sonoma, 857 F.2d 567, 569 (9th Cir. 1988)). The district court noted "the policy behind requiring a final decision before a court can adjudicate [due process and equal protection] claims is that 'it is generally impossible to determine the extent of the infringement absent a final determination by the relevant governmental body.'" Slip op. at 12 (quoting Sinaloa Lake Owners Ass'n v. City of Simi Valley, 882 F.2d 1398, 1404-05 (9th Cir. 1989), overruled on other grounds Armendiz v. Penman, 75 F.3d 1311, 1326 (9th Cir. 1996)).  

The final decision rule has at least some semblance of logic applied to regulatory takings, where the Supreme Court has established a rule that the value remaining after regulation is applied to property is relevant to the question of whether the property has been taken. But the Ninth Circuit's application of this requirement to due process and equal protection claims has little logical basis, and virtually no support in the constitutional text. Why should it matter that some use might be able to be made of property if the government is acting arbitrarily, without notice and opportunity to be heard, or treating one property owner differently than another? The constitution is violated when even in the course of a preliminary decision about what uses can be made of property the government acts badly, not just when (as in regulatory takings) the government does not recognize its obligation to pay just compensation. But a District Court obviously cannot overrule circuit law, even when a rule makes no sense, so the court was bound to apply the Ninth Circuit's Hoehne rule, so any challenge to the rule itself will have to wait until appeal. 

The court also held that it would not be futile for the property owner to have submitted a development plan, even though the owner claimed that doing so would be cost-prohibitive and would force it to operate at a loss.  Slip op. at 15. The Ninth Circuit's futility rule requires that in order to prove that submitting an application for development would be futile, the property owner must -- and we are not kidding here -- submit an application and see whether it gets denied. And if that application is denied, the property owner must ask for a "variance." See Kinzli v. City of Santa Cruz, 818 F.2d 1449 (9th Cir. 1988). Again, a District Court is in no position to overrule binding circuit precedent, no matter how silly it may be, although the court in Kamaole Pointe at least recognized the "inherent contradiction in having an exception to an application requirement require submission of applications" --

This Court recognizes the inherent contradiction in having an exception to an application requirement require submission of applications. See Zilber v. Town of Moraga, 692 F. Supp. 1195, 1199 (N.D. Cal. 1988) (criticizing the logic of Kinzli’s "meaningful application test). Kinzli and its progeny, however, indicate that the "meaningful application" requirement that triggers the futility exception is designed to provide a forum for developers who have repeatedly submitted legitimate development plans to local agencies only to have them continuously delayed or denied. Moreover, this Court is bound by Ninth Circuit authority which has, in this area of law, repeatedly reinforced the "meaningful application" test. See Zilber, 692 F. Supp. at 1200 (acknowledging that "although this Court is less than comfortable with the Kinzli rule, it is well established in this circuit and therefore binding upon the Court").

Slip op. at 17, n.1. Although it dismissed the substantive due process and equal protection claims, the court held the procedural due process claim was ripe because the plaintiff asserted that the County did not provide adequate procedures in evaluating its appeal for a waiver, and thus was not a "'challenge to the application of land use regulations' to the land." Slip op. at 21. This split-decision underscores the strange dichotomy in the federal courts between "land use" and property cases and cases which seek to vindicate other constitutional rights. See, e.g., slip op. at 18, n.2 (dismissing the substantive due process claim on ripeness grounds because it involved application of land use regulations). We thought the Crown Point case finally ditched that distinction (as we noted here), but maybe, that, like the final decision and futility rules, must wait for appeal.

Finally, the district court disposed of the state law claim the County was without power to enact the ordinance because only the State can impose an "affordable housing impact fee." "Impact fees" as defined in Haw. Rev. Stat. § 46-141 are limited to those imposed to fund public facility capital improvements required by the development. The court held that this definition does not include the in-lieu fee required under the County's ordinance because the money collected goes into the general affordable housing fund and is not earmarked for offsetting capital improvement projects attributable to the development. Slip op. at 32. This seems like circular reasoning, as noted in this post.

Trial on the remaining issue is set for December 2009.

HAWSCT: Separation of Powers Prohibits Legislative Transfer of Agency's Regulatory Fees to General Fund

How often in an appellate opinion does the court use the term "glom?" 

[The Appellee] gloms onto the "police power" aspect of the definition [of regulatory fees] in arguing that "Medeiros plainly concern[ed] the 'police power' of 'criminal investigative services,' not a user fee as suggested by [the state]."

No matter what you may think of the phraseology of Hawaii Insurers Council v. Lingle, No. 27840 (Haw. Dec. 18, 2008), the decision is important because who can take your money,  how they go about doing it, and what happens to your money afterwards, matters. As Chief Justice John Marshall famously wrote in McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819), "the power to tax is the power to destroy," and that may be even more true today where the power to regulate and impose fees may be the same thing.

Under Hawaii law, only the state Legislature and the various County Councils can impose taxes: the Legislature has the general taxation power, and the Councils have -- at least according to a recent decision by the Hawaii Supreme Court -- the exclusive power to determine property taxes. In Hawaii Insurers Council, the Hawaii Supreme Court held that assessments imposed by the state Insurance Commissioner were not unconstitutional "taxes" when imposed -- they were "regulatory fees" -- but the Legislature's transference of $3.5 million of the collected funds into the general fund violated separation of powers. 

The facts of the case are relatively straightforward and are set out in the opinion, so we won't repeat that effort. Read the slip opinion for the details. The short story is that the State of Hawaii no longer funds the Department of Commerce and Consumer Affairs from the general fund, but by user fees and fees imposed on regulated industries, including the insurance industry. The Insurance Regulation Fund contained the monies collected by the Insurance Commissioner. By statute, the money in the IRF could not be transferred to the state's general fund. Included in the insurance division's budget was a "reserve of surplus funds" to be used to cover expenses and contingencies that may  arise in the insurance industry (the rehabilitations, insolvencies, etc., we have all become very aware of recently on a national level). In 2004, the Legislature decided to change the statute and transfer $4 million of this money into the general fund, but that amount was cut by the Governor's line-item veto to $2 million. The following year, the Legislature transferred an additional $1.5 million to the general fund.

A lawsuit by the Hawaii Insurers Council followed, and eventually the Intermediate Court of Appeals held, among other things, that the assessments were "taxes" because they were not allocated to defraying the costs of providing services to the insurance industry and were not proportionate to the benefits received. See Hawaii Insurers Council v. Lingle, 117 Haw. 454, 459-60, 184 P.3d 769, 775 (Haw. Ct. App. 2008). The Hawaii Supreme Court partly agreed, and partly did not. The court first discussed its earlier opinion in State v. Medeiros, 89 Haw. 361, 973 P.3d 736 (1999), which identified two permissible types of fees: user fees (those charged for the use of an item of facility), and regulatory fees which include those imposed by an agency to cover the expenses of regulating an industry. At the end of the day, the Hawaii Supreme Court disagreed with the ICA and held that the fees imposed by the DCCA were not illegal "taxes" or "user fees," but were constitutional "regulatory fees" Ben Lowenthal does a good job of summarizing the court's reasoning here.

The most interesting part of the opinion, however, is not the minutiae of the different legal tests for taxes or user fees or regulatory fees, but the court's conclusion that the transfer of the funds by the Legislature to the General Fund violated the separation of powers doctrine. The court recognized that "separation of powers" is not formally a part of the Hawaii Constitution, but is an implied requirement, and concluded:

The legislature's promulgation of the transfer bills amounted to an impermissible blurring of the distinction between the executive power to assess regulatory fees and the legislative power to tax for general purposes. We therefore hold that the transfer bills unlawfully sought to transform $3,500,000 of legitimate regulatory fees into general tax revenue....As such, the $3,500,000 that was moved into the general fund pursuant to the transfer bills must be returned to the CRF so that they may be used for the regulation or benefit of the parties upon whom the assessments were imposed.

Slip op. at 41-42 (footnote omitted). While the opinion does not expressly say so, what seems to animating the court's decision is that the Legislature's raid of the funds crossed some indistinct and not-quite-defined line because when the IRF funds were placed into the General Fund, they could be spent in the same way as collected taxes. The court established a bright-line rule: agencies collect fees and legislatures tax, and never the twain shall meet. In other words, if the government collects a fee in order to regulate an industry, it better use the money collected to regulate the industry.

Finally, the court easily disposed of the equal protection class-of-one disparate treatment claim, holding there was a rational basis for requiring a regulated industry to pay for the costs of regulation. The court also rejected the State's claim that HIC did not exhaust administrative remedies, holding that the administrative process cannot make constitutional determinations, and consequently, there were no administrative remedies to exahust. 

9th Circuit: Revised Opinion in McClung v. City of Sumner

A panel of the Ninth Circuit has revised its earlier opinion in McClung v. City of Sumner, No. 07-35231 (Sep. 25, 2008), adding a footnote:

On slip Opinion page 13750, insert a new footnote 3 at the bottom of the page after the sentence that ends “. . . applies to Ordinance 1603.” (and renumber the subsequent footnotes) [page 15838 of the revised slip opinion]:

We observe that the ordinance before us concerns a permit condition designed to mitigate the adverse effects of the new development. New construction increases the burden on the City's sewer system and increases the loss that might result from flooding. After experiencing considerable flooding, the City enacted Ordinance 1603 to require most new developments to include specified storm pipes. We are not confronted, therefore, with a legislative development condition designed to advance a wholly unrelated interest. We do not address whether Penn Central or Nollan/Dolan would apply to such legislation.

The panel did not otherwise disturb the case's holding:

This case presents an issue of first impression in this Circuit — whether a legislative, generally applicable development condition that does not require the owner to relinquish rights in the real property, as opposed to an adjudicative land-use exaction, should be reviewed pursuant to the ad hoc standards of Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978), or the nexus and proportionality standards of Nollan v. California Coastal Commission, 483 U.S. 825 (1987), and Dolan v. City of Tigard, 512 U.S. 374 (1994). We affirm, holding that the Penn Central analysis applies to the 12-inch pipe requirement.

Read the revised opinion here.

Ninth Circuit: Legislative Exactions Not Subject to Nollan/Dolan

"This case presents an issue of first impression in this Circuit — whether a legislative, generally applicable development condition that does not require the owner to relinquish rights in the real property, as opposed to an adjudicative land-use exaction, should be reviewed pursuant to the ad hoc standards of Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978), or the nexus and proportionality standards of Nollan v. California Coastal Commission, 483 U.S. 825 (1987), and Dolan v. City of Tigard, 512 U.S. 374 (1994). We affirm, holding that the Penn Central analysis applies to the 12-inch pipe requirement." 

McClung v. City of Sumner, No. 07-35231 (Sep. 25, 2008), slip op. at 13744-45.  More, after a chance to review the opinion.

Transcript of Arguments in Maui Affordable Housing Exaction Case

The transcript of the June 2, 2008 arguments in the federal lawsuit challenging Maui's affordable ("workforce") housing exaction has been released. That hearing resulted in a lengthy opinion by the District Court holding that the plaintiff's Nollan/Dolan claims were not ripe, and a recent order holding that the facial due process and equal protection claims should be dismissed.

The most interesting part of the hearing was when the county admitted the motivation for the 40-50% exaction was to not give all infrastructure away to "millionaires from the Mainland," or even "millionaires on Maui."  The court, as one might expect, had a bit of difficulty with that reasoning:

MS. D'ENBEAU: And this is for people, good solid middle income people who find themselves priced out of the market on Maui. So the county council in its wisdom decided, All right, since we have limited water, we have limited roads, we have limited infrastructure, let's not give it all away to these millionaires from the Mainland who are coming. And it doesn't matter if they're from the Mainland, I guess they could be millionaires on Maui.

THE COURT: That was a really bad thing to say because I've declared a statute unconstitutional in this state that was aimed specifically at people coming from the Mainland.   [The decision the court is referring to is Walsh v. City and County of Honolulu, 460 F. Supp. 2d 1207 (D. Haw. 2006), where a state statute which imposed a pre-employment residency requirement for public employment was declared unconstitutional.  More here.]

MS. D'ENBEAU: Right. And I apologize for that. That was a bad remark.

THE COURT: That was a really bad thing to say.

MS. D'ENBEAU: Yes, it was.

THE COURT: But it may well have been what motivated this ordinance.

MS. D'ENBEAU: I don't think it's necessarily. I think the thing about, if I could bring -- now that I've -- now that I've stepped into those treacherous waters of the Mainland. I think one of the important things to realize is that various states have various requirements for when your property interest vests and when something is ripe. And in Hawaii it isn't even enough to have a building permit, it's not enough to -- you have to have your final discretionary approval. 

So developers, of course, are on notice of this information. And the developers in this case didn't purchase the property until 2006. So they knew full well that the county council was considering an ordinance for this workforce housing. And that ordinance at some points was discussed at 80 percent. So, they're looking at the property and deciding to invest in it -- I think in terms of the Penn Central standards anyway, their investment backed expectations -- depends on the same way the Nukolii people had to know that the referendum had been certified. You know, you have to look and make your own investment based decisions. And so, in that case if you were looking at a Penn Central standard but they would have to be able to show all of that. So, even though -- you know, the fundamental argument is they're not there yet because they don't have their final discretionary approval. So we don't know what their project will look like at --

Transcript at 25-26.  As detailed here, both parties have moved for summary judgment on other issues, with a hearing scheduled for late September.

Court Strikes Facial Due Process and Equal Protection Claims in Maui Affordable Housing Exaction Case

The US District Court for the District of Hawaii has granted (in part) the County of Maui's motion for reconsideration of the court's earlier order granting in part and denying in part the County's summary judgment motion.  Here's a copy of the court's latest order.

The court entered summary judgment in favor of the county on the plaintiff's facial equal protection and facial due process claims, and allowed the "class of one" equal protection claim, and the as-applied equal protection and due process claims to proceed. 

The case involves a Maui property owner's challenge to the County's "workforce housing" exaction ordinance, which requires a property owner to commit 40% to 50% of the units in most new housing developments to below-market-rate ownership or rental.  Kamaole Pointe Development LP v. County of Maui, No. 07-00447 DAE.  The plaintiff challenged the ordinance under the Nollan/Dolan doctrine of unconstitutional exactions, which requires the government to show a substantial nexus between the exaction and some problem caused by the property owner before the government may demand tribute as a condition of development, and that the exaction is roughly proportional to the problem. 

In July 2008, the court held the plaintiff's Nollan/Dolan claims are takings claims that are not ripe under Williamson County Regional Planning Comm'n v. Hamilton Bank, 473 U.S. 172 (1985).  The district court's lengthy opinion held that despite labeling its claim as one under the "unconstitutional conditions doctrine," the claim was a facial takings claim which is subject to Williamson County's requirement that the plaintiff first seek -- and be denied -- compensation via state procedures.

Both parties have also moved for summary judgment (briefs available here).  Hearing is scheduled for later this month.

My So-Called Exaction Case: More on Action Apartment

When a court labels the Nollan/Dolan line of decisions "so-called exaction cases" (and your claim is that an exaction is not related or proportional) you know right away you are in trouble.

First, the dry summary.  In Action Apartment Ass'n v. City of Santa Monica, No. B201176 (Aug. 28, 2008) (slip opinion available here), the California Court of Appeal (Second District) denied a facial challenge to the city of Santa Monica's affordable housing exaction ordinance.  The court relied upon the legislative/adjudicative distinction holding that Nollan/Dolan analysis is only applicable to individual decisions regarding permit applications, and cannot be used to challenge legislative decisions generally applicable.

Second, some background on "facial" challenges as contrasted with "as applied" challenges. A "facial" takings challenge to a statute or ordinance asserts that its mere enactment is unconstitutional.  The U.S. Supreme Court recently explained the nature of facial challenges:

Under United States v. Salerno, 481 U. S. 739 (1987), a plaintiff can only succeed in a facial challenge by “establish[ing] that no set of circumstances exists under which the Act would be valid,” i.e., that the law is unconstitutional in all of its applications. Id., at 745.

Washington State Grange v. Washington State Republican Party, No. 06-713 (Mar. 18, 2008). In other words, a facial challenge is a claim that a statute or ordinance is unconstitutional in all situations, whereas an "as applied" challenge is one where the plaintiff claims that the law may be generally valid, but as applied to the plaintiff, it is unconstitutional. 

Third, a summary of the Nollan/Dolan reasoning.  In Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987), the Supreme Court recognized that "a permit condition that serves the same legitimate police-power purpose as a refusal to issue the permit should not be found to be a taking if the refusal to issue the permit would not constitute a taking."  Id. at 836.  But the Court held that government has the burden of establishing an "essential nexus" between a permit condition and the alleged negative burden or impact of the proposed use or development.  Id. at 837.  Absent that logical and factual relationship, the condition is a taking of private property without compensation – "not a valid regulation of land use but 'an out-and-out plan of extortion.'"  Id. (citations omitted).  In other words, there must be some cause-and-effect relationship between the proposed use of land, and the condition imposed on government permissions.  In Nollan, the Court held that a permit condition that required a landowner donate public access across its property was a taking because the landowner's proposed use would not interfere with public access.

In Dolan v. City of Tigard, 512 U.S. 374 (1994), the Court explained how close a fit must exist between a permit condition and a project's negative impacts.  The Court held that even when an essential nexus exists, government must still demonstrate a "degree of connection between the exactions and the projected impact of the proposed development."  Id. at 386.  There must be "rough proportionality" – "some sort of individualized determination that the required [condition] is related both in nature and extent to the impact of the proposed development."  Id. at 391 (emphasis added).  Dolan made clear that this burden is on government – not the property owner – to demonstrate the requisite nexus and rough proportionality demanded by the Takings Clause.  Id.

The Court recently affirmed the continued vitality of the Nollan/Dolan heightened review as Takings Clause tests for conditions on property use.  In Lingle, the Court held that both Nollan and Dolan "involve a special application of the doctrine of 'unconstitutional conditions.'" Lingle, 544 U.S. at 547 (quoting Dolan, 512 U.S. at 385).  Under that doctrine, "the government may not require a person to give up a constitutional right – here the right to receive just compensation when property is taken for a public use – in exchange for a discretionary benefit conferred by the government where the benefit has little or no relationship to the property."  Dolan, 512 U.S. at 385.  Whenever government imposes a condition on the otherwise lawful use or development of property – whether legislatively or administratively, and whether the government demands money or land – courts must apply heightened scrutiny to determine whether the condition is an unconstitutional taking of private property under the Fifth Amendment. 

Back to Action Apartment.  Where the opinion gets interesting is the court's summary of its view of takings law.  It first contrasted what it referred to as "categorical" takings with "regulatory" takings.  Slip op. at 13-15.  "Categorical takings," according to the court, are when "an owner's property is taken in whole or in part, by government for a public purpose."  The court divided "compensable regulatory takings" into two types: those that deprive an owner of all economically beneficial use (aka Lucas wipeouts), and those where a "complex set of factors are considered" (aka Penn Central ad hoc takings).  The court also separated the Nollan/Dolan analysis from the above categories, and treated those cases as a completely separate type of regulatory taking.

These takings classifications are odd. Regulatory takings law defies most attempts to refine a unitary theory, but that is the nature of the enterprise since the government claims it is merely regulating, while the property owner asserts that the regulation has singled it out to bear more than her fair share.  My read of takings law is that claims generally can be put into categories, but not the ones the Action Apartment court recites. 

The first class of takings is straight condemnations, or the affirmative exercise of eminent domain: those cases where the government affirmatively attempts to take property for public use, and acknowledges its obligation to pay just compensation.  You know one of those when you see it.  You get the "dear homeowner" letter, or maybe get served with a complaint for condemnation in which you or your property is the defendant. 

The second type of takings is inverse condemnations, where the government has undertaken some act which has the same effect as if the government exercised eminent domain but the government has not acknowledged that it has affected property or any obligation to pay compensation.  Inverse condemnations are "inverse" because the property owner has to sue the government (not the other way around as in straight condemnations) to stop the taking, or to compel compensation. 

Inverse condemnations can be further broken down into two types: physical takings and regulatory takings.  Physical takings are those where the government invades private property (or invites other to do so under color of right).  Examples of physical takings are flooding caused by government conduct, actual government trespass, and trespass by the public at government invitation.  These actions, like straight condemnations, are considered takings without regard to the impact on the property's value.  Classic Nollan/Dolan cases fall within this category and the last example. 

In a regulatory taking, a regulation does not compel an actual invasion of property, but has some effect on the property's value.  When a regulation deprives the owner of all beneficial use (the Lucas wipeout), the court will not examine anything else since a deprivation of use is the functional equivalent of a physical invasion.  In the last category, if a regulation affects property but does not deprive the owner of all beneficial use, the Penn Central factors are considered, and if, on the whole, the regulation forces an owner to alone bear public burdens which should be shared by all, the regulation is a taking.

Action Apartment's use of the term "compensable regulatory taking" is especially strange.  After all, is there any kind of regulatory taking other than one that is compensable?  If a regulation "goes too far" and takes property, the Fifth Amendment requires compensation, and regulations that do not require compensation aren't regulatory takings at all, are they?  They're just valid regulations.

Having incorrectly categorized Nollan/Dolan claims as a separate branch of regulatory takings, Action Apartment wandered further off course when it stated:

Both the United States and California Supreme Courts have explained the two part Nollan/Dolan test developed for use in land exaction takings applies only in the case of individual adjudicative permit approval decisions; not to generally applicable legislative general zoning decisions.

Slip op. at 15.  While it is true that the California Supreme Court follows this rule, the issue has never been directly addressed, much less settled, by SCOTUS.  If further review of Action Apartment is sought, however, maybe it will.

California Court Rejects Facial Nollan/Dolan Claim to Affordable Housing Exaction

In Action Apartment Ass'n v. City of Santa Monica, No. B201176 (Aug. 28, 2008), the California Court of Appeal (Second District) denied a facial challenge to the city of Santa Monica's affordable housing exaction ordinance.  The court relied upon the legislative/adjudicative distinction holding that Nollan/Dolan analysis is only applicable to individual decisions regarding permit applications, and cannot be used to challenge legislative decisions generally applicable. 

More about the case after a chance to digest it. The court's opinion is available here.

Latest Developments in Maui Affordable Housing Exaction Case

New filings in the federal district court litigation challenging the County of Maui's "workforce housing" ordinance.  Enacted in 2006, the Maui ordinance imposes a 40% to 50% affordable requirement on most development, including the subdivision of land.  A property owner subject to this exaction challenged the ordinance under the Nollan/Dolan doctrine of unconstitutional exactions, which requires the government to show a substantial nexus between the exaction and some problem caused by the property owner before the government may demand tribute as a condition of development.  The exaction must also be roughly proportional to the problem. 

In July 2008, the court held that the plaintiff's Nollan/Dolan claims are takings claims that are not ripe under Williamson County Regional Planning Comm'n v. Hamilton Bank, 473 U.S. 172 (1985).  The district court's lengthy opinion held that despite labeling its claim as one under the "unconstitutional conditions doctrine," the claim was a facial takings claim which is subject to Williamson County's requirement that the plaintiff first seek -- and be denied -- compensation via state procedures.  The court allowed the remaining federal claims to go forward.  Professor Patty Salkin summarized the opinion on her Law of the Land blog here.

The County sought reconsideration of the denial of its motion for summary judgment, and has also filed an additional motion for summary judgment on the substantive due process, equal protection, and state law claims.  The property owner has also sought summary judgment:

• The County's Reply Brief for its motion for reconsideration of the denial of the County's motion to dismiss.

• The County's motion for summary judgment (filed Aug. 13, 3008).

• The property owner's motion for summary judgment (filed Aug. 13, 2008).

Hearing on these motions are scheduled for September 2008.

Oral Argument Scheduled in Kona Eminent Domain Appeals: Damages for Failed Condemnations, Abatement, and Pretext

The Supreme Court of Hawaii has scheduled oral arguments in County of Hawaii v. Richards, No. 28882, the consolidated appeal from two eminent domain lawsuits filed by the County in 2000 and 2005.  The issues in the case include:

• application of Haw. Rev. Stat. § 101-27 (1993), the statute that provides that the government must make a property owner whole and pay damages when an attempt to take property by eminent domain is discontinued or dismissed

• whether the government may concurrently prosecute more than one condemnation lawsuit to take the same property, at the same time

• the standards for demonstrating that the government's claim of public use is pretext to hide private benefit

The briefs are posted here, and a summary of the case and the trial court's findings are here.  The argument will be held on Thursday, October 16, 2008, at 9:00 a.m. in the Supreme Court courtroom at the Judiciary Building.

Takings Claim Goes From State Court To Federal Court, And Now Back To State Court

Here is what the ripeness requirements of Williamson County Regional Planning Comm'n v. Hamilton Bank, 473 U.S. 172 (1985) have brought us: a seemingly endless procedural game where property owners are forced to keep guessing which shell the pea is under, all the while paying their attorneys to litigate matters having nothing to do with the question of whether a local government's regulations have gone "too far."  The latest example is West Linn Corporate Park, LLC v. City of West Linn, Nos. 05-36061, 05-46062 (9th Cir. July 28, 2008), a case in which the Ninth Circuit, after removal from state court and trial in federal court, referred the takings issues in the case to the Oregon Supreme Court, effectively handing off the decision in the case to that court. 

Like a good plaintiff is supposed to do under Williamson County, West Linn Corporate Park (WLCP) began this odyssey in state court.  It claimed, among other things, that exactions the City imposed on the approval of its development proposals took its property in violation of the U.S. and Oregon constitutions, and that the City retaliated against it for asserting its constitutional rights. See this post and the comments for an illustration of how the Williamson County rule, coupled with the full faith and credit doctrine, effectively shuts out federal Fifth Amendment claims from being heard in federal courts. The city, however, removed the case to federal court, something it is entitled to do since the federal courts have yet to recognize the illogical asymmetry in the fact that a landowner cannot institute a federal takings claim in federal court because there purportedly is no ripe federal question, but the government can remove a federal takings claim to federal court on the basis of original federal question jurisdiction.  See, e.g., City of Chicago v. Int'l College of Surgeons, 522 U.S. 156 (1997). 

After the trial, the federal district court held partially in favor of the landowner on its inverse condemnation claims and its claims for municipal retaliation.  The court held the remaining  inverse condemnation claims were not ripe since the landowner had not exhausted available state remedies.  See slip op. at 9359.  Up on appeal they went, where the Ninth Circuit punted the federal takings claims back to state court, holding that the outcome of the federal claims turned on questions of state law.  The Ninth Circuit certified three questions to the Supreme Court of Oregon:

(1) Must a landowner alleging that a condition of development amounts to an exaction or physical taking exhaust available local remedies before bringing  his claim of inverse condemnation in an Oregon state court?

(2) Can a condition of development that requires a landowner to improve off-site public property in which the landowner has no property interest constitute an exaction?

(3) Under Or. Rev. Stat. § 271.120, is a City Council’s purported vacation of a street ultra vires when the petition for vacation does not comply with the landowner consent provisions of Or. Rev. Stat. § 271.120?

Slip op. at 9372. 

On the first question, recall that Williamson County ripeness has two components: (1) there must have been a definitive action by the government on what uses it would or would not allow, and (2) the state must have denied compensation.  The first requirement is to fix the government's position to allow the court to assess the scope of the taking, and is not applicable to physical takings or exactions, since the scope of the taking is obvious.  The second requirement is based on the idea that the Fifth Amendment does not prohibit takings, just takings "without just compensation," so there has been no violation of rights until the state has denied compensation.  The Ninth Circuit held that under the second requirement, the Oregon Supreme Court should decide whether there is an available, applicable, and adequate compensation remedy under Oregon law that the landowner must exhaust.  The Ninth Circuit determined  that Oregon law was not clear, asserting that a decision from the Oregon Court of Appeals conflicted with a decision by the Land Use Board of Appeals.  See Nelson v. City of Lake Oswego, 869 P.2d 350 (Or. Ct. App. 1994), and Reeves v. City of Tualatin, 31 Or. LUBA 11, 1996 WL 33118832 (1996).  The Ninth Circuit did not explain how a decision from a non-judicial agency can conflict with a decision by the Court of Appeals for certification purposes.  For a case to merit certification to the Oregon Supreme Court, that court's rules require that "it must appear to the certifying court that there is no controlling precedent in the decisions of this court or the Oregon Court of Appeals.”  Slip op. at 9360 (quoting Western Helicopter Servs., Inc. v. Rogerson Aircraft Corp., 811 P.2d 627, 630 (Or. 1991)).  Nelson is a decision of the Court of Appeals, and it is clear: exhaustion is not required in exaction cases.  It seems as if the Ninth Circuit was stretching to find a conflict.

On the second certified question, the Ninth Circuit was on slightly firmer ground with its claim of unsettled Oregon law.  It determined that the Oregon courts had not definitively determined that requiring a landowner to make off-site improvements is an "exaction" subject to Nollan/Dolan analysis.  The court noted that a 1995 Court of Appeals decision held that  requiring off-site improvements was subject to Nollan/Dolan scrutiny, see Clark v. City of Albany, 904 P.2d 185 (Or. Ct. App. 1995), but that a 2003 Court of Appeals decision had called Clark into question.  See Dudek v. Umatilla County, 69 P.3d 751 (Or. Ct. App. 2003).  While it does appear that there is a question of whether the Oregon courts have settled on doctrine regarding this question, it does not appear that the question is one of Oregon law.  Nollan/Dolan is a requirement of the Fifth Amendment, and the Ninth Circuit does not explain why a federal court cannot answer the question. 

Finally, on the third certified question, the Ninth Circuit noted that there are no Oregon court decisions regarding application of the statute in question, and whether the failure to strictly comply with its provisions renders the result void.  Here, the Ninth Circuit was on its firmest ground in its lateral pass to the Oregon Supreme Court, yet does not explain why this question is of such importance that the federal court could not apply a state statute's terms, as federal courts do all the time, and why it was necessary to throw the question to the Oregon Supreme Court. 

More to follow, as they say. 

Professor Patty Salkin has posted a summary of the decision on Law of the Land here.  Read the Ninth Circuit's opinion here.

Opposition To Reconsideration Motion In Maui Affordable Housing Exaction Case

The property owner has filed its brief in opposition to the County of Maui's motion for reconsideration of the court's recent decision in the federal court challenge to the County's 40-50% affordable housing exaction, Kamaole Pointe Development LP v. County of Maui, No. 07-00447 DAE.  We wrote about the case earlier here (contains a link to the complaint), and analyzed the legal problems with the ordinance under state law here.

County Motion For Reconsideration in Maui Affordable Housing Exaction Case

The County of Maui has asked the federal court to reconsider its recent order granting in part and denying in part the County's summary judgment motion.  A Maui property owner challenged the County's "workforce housing" exaction ordinance, which requires a property owner to commit 40% to 50% of the units in most new housing developments to below-market-rate ownership or rental.  Kamaole Pointe Development LP v. County of Maui, No. 07-00447 DAE.  The plaintiff challenged the ordinance under the Nollan/Dolan doctrine of unconstitutional exactions, which requires the government to show a substantial nexus between the exaction and some problem caused by the property owner before the government may demand tribute as a condition of development, and that the exaction is roughly proportional to the problem.

The court held that the plaintiff's Nollan/Dolan claims are takings claims that are not ripe under Williamson County Regional Planning Comm'n v. Hamilton Bank, 473 U.S. 172 (1985).  The district court's lengthy opinion held that despite labeling its claim as one under the "unconstitutional conditions doctrine," the claim was a facial takings claim which is subject to Williamson County's requirement that the plaintiff first seek -- and be denied -- compensation via state procedures.  The court allowed the remaining federal claims to go forward.  Professor Patty Salkin summarized the opinion on her Law of the Land blog here.

The County's current motion argues the court committed a "manifest error of law" when it did not dismiss the plaintiff's substantive due process and equal protection claims.  The County argues that the plaintiff bears the burden of proof on both claims under rational basis review, and it cannot meet that burden as a matter of law.  The County's motion and supporting memorandum are posted here.

Washington (State) Court Of Appeals: One-Size-Fits-All Open Space Regulation Is Not Roughly Proportional

In Citizens' Alliance for Property Rights v. Sims, No. 59416-8-1 (Wash. Ct. App. July 7, 2008), the Court of Appeals of the State of Washington held that a county ordinance which prohibited  a landowner from clearing 50% to 65% of his property violated a state statute prohibiting counties from imposing a "tax, fee, or charge" on land development.

The court relied on Isla Verde Int. Holdings, Inc. v. City of Camas, 49 P.3d 867 (Wa. 2002) to find that King County Ordinance 15053 §14 violates the prohibition on taxing land development in Rev. Code of Washington 82.02.020.  That statute provides, in part:

Except as provided in RCW 82.02.050 through 82.02.090, no county, city, town, or other municipal corporation shall impose any tax, fee, or charge, either direct or indirect, on the construction or reconstruction of residential buildings, commercial buildings, industrial buildings, or on any other building or building space or appurtenance thereto, or on the development, subdivision, classification, or reclassification of land.  However, this section does not preclude dedications of land or easements within the proposed development or plat which the county, city, town, or other municipal corporation can demonstrate are reasonably necessary as a direct result of the proposed development or plat to which the dedication of land or easement is to apply.

In Isla Verde, the Washington Supreme Court held that imposing an open space set aside as a condition of subdivision was an "indirect" in kind tax, fee, or charge, and the Citizens' Alliance court held that the restrictions imposed by the King County ordinance were "not materially distinguishable."  Slip op. at 10.  The court rejected the county's argument that the limitations on clearing property do not raise revenue because "Washington case law is clear that RCW 82.02.020 applies to ordinances that may require developers to set aside land as a condition of development."  Slip op. at 13. 

In the most interesting portion of the opinion, the court held the county's clearing requirement did not fall within any of the statutory exceptions, in particular the "rough proportionality" requirement.  "There is no persuasive claim that the variation in clearing restrictions is proportionally related to proposed development, a necessary element to satisfy the statutory exception."  Slip op. at 18.  The court held that a one-size-fits-all approach did not meet the requirement that the exaction be tailored to the supposed impact:

KCC 16.82.150 imposes a uniform requirement for cleared area on each lot, unrelated to any evaluation of the demonstrated impact of proposed development. While the ordinance before us prescribes clearing limits in proportion to the size of the lot, it fails to relate the clearing limit to the nature and extent of the proposed development on the lot. Although KCC 16.82.150 contains other criteria, none address the requirement that the clearing limits be impact specific, as the statute requires. Thus, the necessary proportionality that is required to fulfill the statutory exception is not satisfied.

Slip op. at 20. The statutory requirements of nexus and rough proportionality mirror the Fifth Amendment's, as recognized by the Nollan and Dolan cases, so although this case did not deal with constitutional issues, the court's analysis should be very instructive when dealing with blanket exactions that make no attempt at an individualized determination.

Download the slip opinion here.

Nollan/Dolan Challenge to Maui's 50% Housing Exaction Is A Takings Claim Subject To Williamson County

Relying on Williamson County Regional Planning Comm'n v. Hamilton Bank, 473 U.S. 172 (1985), the US District Court for the District of Hawaii today denied a property owner's motion for summary judgment in a case challenging the County of Maui's "workforce housing" exaction ordinance.  Kamaole Pointe Development LP v. County of Maui, No. 07-00447 DAE.

The ordinance requires a property owner to commit 40% to 50% of the units in most new housing developments to below-market-rate ownership or rental.  A property owner subject to this exaction challenged the ordinance under the Nollan/Dolan doctrine of unconstitutional exactions, which requires the government to show a substantial nexus between the exaction and some problem caused by the property owner before the government may demand tribute as a condition of development.  The exaction must also be roughly proportional to the problem.  See this post for more on the nexus analysis.

I posted on the case earlier here (contains a link to the complaint), and analyzed the legal problems with the ordinance under state law here.

The district court's lengthy opinion held that despite labeling its claim as one under the "unconstitutional conditions doctrine," the claim was a facial takings claim which is subject to Williamson County's requirement that the plaintiff first seek -- and be denied -- compensation via state procedures. 

More to follow after I've had a chance to review the 59 page opinion in more detail.