Why does inversecondemnation.com, a blog about land use issues, care about Hawaii Insurers Council v. Lingle, No. 27840 (Haw. Dec. 18, 2008) enough to have posted about it, you ask? The case involved whether the State of Hawaii Insurance Commissioner could collect fees from insurance companies, and whether the state legislature could thereafter transfer the money collected into the general fund. The short answer by the Hawaii Supreme Court is that the collection of the fees were proper “regulatory fees,” but that the legislative transfer was an unconstitutional violation of the separation of powers. Not exactly typical land use law fare.
But here’s the interesting part. The Hawaii Insurers case analyzed State v. Medeiros, 89 Haw. 361, 973 P.3d 736 (1999), which set forth the test for when a charge imposed by an administrative agency pursuant to the state’s police powers is valid, and when it crosses the line and becomes an invalid “tax” —
This court adopted a three-pronged test for determining whether such charges were fees as opposed to taxes. The test analyzed whether the charge (1) applied to the direct beneficiary of a particular service, (2) was allocated directly to defraying the costs of providing the service, and (3) was reasonably proportionate to the benefit received. Id. at 367, 973 P.2d at 742.
Hawaii Insurers Council, slip op at ___ (citing Medeiros, 89 Haw. at 367, 973 P.2d at 742). Ah, there is the connection: the Nollan/Dolan test for whether land use exactions violate the Takings Clause. Recall that in Nollan v. California Coastal Comm’n, 483 U.S. 825, 837 (1987), the U.S. Supreme Court held that in order for an exaction (in that case, the agency told the property owners that their development permits would not be granted unless they agreed to allow public access across their land)
The evident constitutional proprietydisappears, however, if the condition substituted for the prohibitionutterly fails to further the end advanced as the justification for theprohibition. When that essential nexus is eliminated, the situationbecomes the same as if California law forbade shouting fire in acrowded theater, but granted dispensations to those willing tocontribute $100 to the state treasury. While a ban on shouting fire canbe a core exercise of the State’s police power to protect the publicsafety, and can thus meet even our stringent standards for regulationof speech, adding the unrelated condition alters the purpose to onewhich, while it may be legitimate, is inadequate to sustain the ban.Therefore, even though, in a sense, requiring a $100 tax contributionin order to shout fire is a lesser restriction on speech than anoutright ban, it would not pass constitutional muster. Similarly here,the lack of nexus between the condition and the original purpose of thebuilding restriction converts that purpose to something other than whatit was. The purpose then becomes, quite simply, the obtaining of aneasement to serve some valid governmental purpose, but without paymentof compensation. Whatever may be the outer limits of “legitimate stateinterests” in the takings and land use context, this is not one ofthem. In short, unless the permit condition serves the samegovernmental purpose as the development ban, the building restrictionis not a valid regulation of land use, but “an out-and-out plan ofextortion.”
Nollan, 483 U.S. at 837 (quoting J. E. D. Associates, Inc. v. Atkinson, 121 N. H. 581, 584, 432 A.2d 12, 14-15 (1981)).