Koontz Toolkit - Part 2
June 18, 2014
Tim Hollister

	Well, let’s talk about the Koontz case itself.  The Koontz family owned 14 acres, east of Orlando, at a busy intersection illustrated on the map here.  The property was mostly wetlands but it had some habitat value and Mr. Koontz had a proposal to develop or reclaim and fill as a wetland three of his acres and then dedicate 11 remaining acres to the water management district as permanent open space.  In response, the water management district gave the Koontz family two options.  One, they could develop one acre and dedicate 13 acres as open space or they could pay the district money that the district would use to repair drainage culverts on 50 acres of the district’s own land several miles away from the Koontz property.  So totally unrelated to what Mr. Koontz was proposing to do.  The district’s justification was that, in its view, wetlands mitigation should not be just on a no net loss of wetlands acreage basis but in fact wetlands mitigation and creation should create more wetland than is being disturbed or filled and the basis for that, in their view, was that over the years Florida has lost so many acres of wetlands to development that new applicants should essentially be required to make up for the conduct or the sins of past developers.  And that I think is a very important fact in the case.
	The U.S. Supreme Court opinion came out in June of 2013 and the first thing that’s extraordinary is that it’s the U.S. Supreme Court talking about local land use which hardly ever happens.  But more than that, we have the U.S. Supreme Court using the word extortion to talk about the local land use process.  We don’t normally see the words extortion and government process in the same sentence or the same opinion.  But the court said that Nolan and Dolan balanced two realities of land development and the first reality is that land development can, indeed, impose costs on the public that government can require a developer to mitigate or address but the court said that in this process, government usually has the upper hand.  Government is in a position to make demands that constitute extortion, to take part of the value that the developer is creating and extracting it without a legal basis.
	So the major holdings of the Koontz case are first, a reaffirmation that land development is a right - a very important statement by the court.  Second, that exactions are a separate category of constitutional protection.  Separate from, for example, regulatory takings where courts balance a developer’s reasonable expectations against the government’s objectives.  Exactions stand by themselves.  Third, and this follows from what Ken said, any exaction that doesn’t meet the requirements of nexus and rough proportionality is a violation of the Fifth Amendment Takings Clause of the Federal Constitution.  The case also says that nexus and rough proportionality are required of all conditions, including when the government’s demand is money and when the permit is denied.  And then finally the case reaffirms that government has an obligation to justify or explain its reasoning when it imposes one of these exactions.
	Now let’s put the decision in context in a couple of different ways.  You wouldn’t say that this was an outright win for property owners in the sense that it’s not the end of government regulation of land use.  It wasn’t unconditional surrender by the government and we have to remember that the U.S. Supreme Court speaks in very broad terms.  In fact, you could talk about Nolan and Dolan and now Koontz as essentially establishing a minimum national standard of conduct for states, counties and municipalities in the land use process.  Another context factor is that Koontz is not going to affect those many situations where a developer makes the calculation that even if the condition is excessive or may be even illegal or constitutional, sometimes it’s better to just accept the condition and move on.  This case will not affect those decisions that you may make.  How much Koontz actually affects the land use process will also depend on what state you’re in.  There are some states that have highly developed impact fee ordinances, adequate public facilities ordinances where Nolan and Dolan hopefully have already been incorporated into the system.  So in those states the impact will be a little bit less.  And finally we need to remember that the factual situation in Koontz where the district’s message to the Koontz family was do it our way or not at all is a relatively rare situation.  But, even recognizing those limitations, Koontz is a very, very significant and powerful decision for property owners and developers.  First and foremost, it has this recognition of unequal bargaining power in the land use process.  We now have clearer standards and a broader range in that the Nolan and Dolan standards cover demands for money and denials of permits.  We have a stronger basis for developers to demand an explanation which might be in writing of the government’s justification for the exactions.  But maybe the most important thing is we now have what you might call an extortion watch.  Potential situations where developers and property owners and their representatives and attorneys need to be on the lookout for government actions that might violate the Nolan/Dolan/Koontz standard.  So things like open space dedications.  If a subdivision and cluster context, if there’s an open space dedication that is just out of whack, not having nexus and rough proportionality.  Utility upgrades and repairs and replacements, water and sewer lines - if there’s minimal impact on the sewer system and they’re asking you to give them a brand new public pump station, that would be the kind of thing we’re looking for.  Road improvements, wetlands mitigation - remembering that the Koontz case is a wetlands case.  So anything where you go well beyond this one to one replacement ratio or no net loss.  Anything off site, anything involving the government’s land, anything involving money, anything involving in-lieu fees such as we see in inclusionary zoning regulations, and excessive application fees.  Those are all things we want to be looking for in the context of applying Koontz in the future.
	Now lastly, Koontz leaves us with a couple of questions that everybody will be addressing over the next few months and years.  The first is will government agencies now simply refuse to negotiate or to be specific and will they try to insert into the process wording that is intended to prevent the property owner or developer from thinking that there is now a final position.  So maybe government will now say with more regularity, oh this is really preliminary, we haven’t made a final decision, we intend to work with you when in fact maybe their position is final.  Another question is will government move away from individualized permit conditions.  This very specific kind of conditions they provided for the Koontz family and will they move towards a one size fits all legislative standard that would be imposed by a statute ordinance or regulation.  The third question is how should property owners and their representatives use Koontz.  The first suggestion would be to document your discussions and negotiations, make that paper trail.  Second is when that appropriate time comes, give the government your own Nolan/Dolan analysis of what you think the situation is and at the appropriate time ask the government to give you its Nolan/Dolan analysis, its justification for what they’re doing.  So Koontz is a very powerful tool for property owners and developers if you know where to look.
	Thank you for this opportunity and hopefully the Koontz case will be useful to you in your business endeavors.

Host:	Thank you to our speakers Ken Bley and Tim Hollister for providing the background for this case.  As mentioned, this presentation is part of a toolkit assembled by NAHB to help builders and developers understand and apply the principles from Koontz and help insure that government entities do not take advantage of a builder’s desire to build.  If you have any questions on accessing the toolkit, please email NAHB staff Devala Janardan at djanardan@nahb.org.