By Guest commentary Friday, July 19th, 2013

By Chuck Cohen on July 19, 2013

It’s been decades since California’s development community found cause for celebration in a Supreme Court decision. However, on June 25, many commentators found reason in Justice Samuel Alito’s majority opinion in Koontz v. St. John’s River Water Management District (11-1447) to shout out a new day for property owners and developers.

I take a more sober view of this 5-4 ruling, particularly as it may relate to development in California.

The Supreme Court majority of justices Alito, Scalia, Kennedy, Thomas and Roberts found for the property owner, to wit: “a unit of government [a special district in this case] may not condition the approval of a land-use permit on the owner’s relinquishment of a portion of his property [or upon a required payment or in lieu fee] unless there is a ‘nexus’ and ‘rough proportionality’ between the government’s demand and the effects of the proposed use.”

Koontz is an extension of earlier opinions on government takings. After St. John’s suggested that to obtain land-use application approvals, the owner sign over a real property interest to make up for the encroachment or removal of a portion of the wetlands within the owner’s property to facilitate coherent project build out, the owner balked and the district denied the application.

The Supreme Court reversed the Florida Supreme Court decision and returned the case for an assessment of takings damages.

The clearest statement of the Supreme Court’s forward reach is provided by Justice Kagan’s dissent, wherein she stated the court’s earlier takings criteria — absence of nexus and lack of rough proportionality — could not be found in this case facts because “nothing has actually been taken.” By denying the project, the dissent reasoned that nothing was being exacted or demanded of the owner.

The dissent fails to recognize the dynamics of land-use processing and the leverage appliable by local government in such negotiations. The government unit gives nothing other than to “allow” a property owner reasonable, compatible use of its land, which also must satisfy its development standards, payment of fees and costs and determine whether special conditions are cost effective in comparison with ongoing unrealized use of owner’s property.

The dissent also posited an unrealistic concern that an avalanche of litigation against governments would ensue.

Recognizing California’s history of cutting edge planning and zoning over the past 50 years, what are the predictable effects of Koontz on California’s land use future?

If history is any measure, will not local government respond with innovative, more inflexible and defensive actions? One would expect that the Leagues of California Cities and Counties and their public lawyers are already devising answers to Koontz. Well-trained city attorneys and county counsels have insulated local government from private-sector claims of egregious government actions.

At least until 2008, generally ascending land values and the capacity of the market place to absorb questionably justifiable government imposed public benefits and improvements made pursuing litigation impractical.

Similarly, litigation costs being fundamentally borne by the private litigant are significant deterrents. Cooperation between the League of Cities and legislators contribute to an annual flow of consumer and local government leaning legislation and regulation.

And finally, the broad interpretation and implementation of police powers and public safety and welfare will continue to justify and enable excessive project conditioning and avoid the Koontz risk of outright denial.

With the California Supreme Court holding in the Mammoth Mountain case expanding the reach of the California Environmental Quality Act, or CEQA, to private projects, local government has been emboldened to increase its array of development conditions.

In the aftermath of Koontz, look for greater deployment of development agreements. Although originated to provide certainty to the private-sector for phased or long term development projects and “insure” against future municipal fickleness while a project is under way, they will continue to be used aggressively.

Devised as an exception to the doctrine of non-bindability of future city and county discretion, more recently local governments started to require development agreements to enforce their appetite for exactions not meeting taking criteria. Moreover, an applicant’s refusal to contract can make its application a non-starter.

CEQA may also become a Koontz battleground. California cities currently control all facets of environmental review under CEQA. Their determination or prediction of project effects is unfettered, but for dilatory and costly court review. There is little restraint on the government’s determination of mitigation, despite CEQA guidelines regarding financial infeasibility.

Lining up this right of review and government requirements all within the government’s column of powers makes for an uneven playing field, which may invite Koontz intervention.

However, for now, CEQA remains a key control tool exercisable by local government outside the potential effect of Koontz.

Finally, again in recognition of Koontz, government counsel can now be expected to intercede early in the planning process to eliminate fingerprints on overreaching conditions. Cities are likely to sharpen their tools, such as the interminable return of applications as incomplete or inaccurate, extending time of review despite control of hearing agendas.

It is to be expected that there will be no written record of city demands for excessive exactions or if there is a record, it will be carefully crafted. The cost in time and money to get to court, even assuming California state courts faithfully follow the Koontz majority is a practical barrier to rectitude.

Thus, I would reduce private-sector expectations under Koontz.

• Charles “Chuck” Cohen is a partner in the environmental and land development group at the Westlake Village office of law firm Alston & Bird. Contact him at [email protected].