Bargaining for Development Post-Koontz: How the Supreme Court Invaded Local Government

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The Supreme Court’s decision in Koontz v. St. Johns River Water Management District, injected significant confusion into negotiations over land development approvals. The principal source of this confusion is the majority’s unwillingness to clarify when and how a proposed condition offered in a negotiation becomes a demand that triggers heightened scrutiny under the Takings Clause of the Fifth Amendment. The Court decided that government demands made prior to a denial must be evaluated in the same manner as conditions imposed as part of an approval. Specifically, conditions designed to mitigate harmful development impacts that are demanded from an applicant prior to a denial must now satisfy the heightened scrutiny requirements of Nollan and Dolan instead of the relatively deferential Penn Central takings test on rational basis review under the Due Process Clause. This heightened scrutiny will likely cause land use boards to be more rigid, and therefore less creative, in development approval processes. While not fatal to land use negotiations, this expansion of the Nollan-Dollan doctrine will have consequences. Because government’s negotiation offers are now required to meet this more exacting standard, the practical effect of Koontz is that land use boards get more favorable judicial review by denying non-compliant proposals without suggesting mitigating conditions. This will arguably lead prudent boards to favor denials over negotiation as a way to preserve their advantage if their decision is challenged in court.This article explains why Koontz makes land use negotiations less efficient and describes several ways land use boards can protect themselves while still taking advantage of the opportunities in negotiation. Section one looks at the law of exactions in light of Koontz. Section two discusses the important role of negotiation in the land use approval process. The third part explores the consequences of Koontz on future land use negotiations and explains how courts can help maintain the efficiency of land use negotiations in the face of the challenged created by Koontz. The fourth section suggests that land use boards have the following options when approving land use developments: avoid negotiation; facilitate negotiation without participating; negotiate without making proposals; negotiate; and attempt to insulate negotiations.