On June 25, 201 the U.S. Supreme Court (SCOTUS) ruled in a 5-4 decision to extend constitutional protection to certain conditions applied to denied permits and to the use of monetary exactions. Reaction has run from “sky is falling” to “meh."
Make no mistake, this ruling (hereafter referred to as Koontz) will affect planning offices throughout the country. Applying conditions to permit approval is an everyday practice. Negotiating permit terms can help both developer and locality. These terms also help cities adapt to development impacts as each proposal comes in, adjusting the livability portfolio with each negotiated improvement.
While the ramifications of Koontz will play out over time, in the short term, the smart money is on a couple of outcomes:
- Local government lawyers will likely advise denying permits rather than negotiating terms and conditions. The dissenting Justices pointed out that offering even one condition could be the first step on the road to a lawsuit.
- There will be more pressure to define permit terms according to “essential nexus” and “rough proportionality” requirements for exactions (often referred to as the Nollan/Dolan test).
- Despite the upheaval, takings claims will still be a relatively rare and Herculean undertaking.
But there are a couple of other areas of local planning where Koontz could actually improve planning. I am not a land use lawyer and there are nuanced layers to the Koontz decision that have yet to play out since the suit was kicked back to the Florida courts. But here is today’s exercise in wishful thinking:
More precision in impact fees - To start with, impact fees are already a joke (Diatribe alert - see this previous post). They don’t actually cover impacts to the degree implied, and over time, courts have narrowed the scope of what can be covered. In 2003, Nick Rosenberg wrote a great article titled “Development Impact Fees: Is Limited Cost Internalization Actually Smart Growth.” The article is required reading in the aftermath of Koontz, but this passage is compelling on the topic of particularized benefits:
“By taking a strict approach to the particularized benefit question, some courts have precluded fees that address anything more than the most immediate and direct infrastructure needed to facilitate development. Courts and municipalities have been slow to recognize that more indirect services and costs incurred by the community as a result of sprawl development are necessary and, in fact beneficial, to new development.”
Let’s look at this for water resources. Impact fees for sanitary sewer, storm sewers/ponds and water lines are typically the immediate and direct investments recognized in fee calculations. However, as watersheds are converted, costs such as source water, aquifer recharge, sinkholes, water quality and sediment deposition hardly get noticed in formulae. In the water world, the raindrop that hits pavement and runs off is recognized as direct, but the raindrop that never makes it into the soil to become water supply is indirect.
This is sloppy. The flow of a raindrop is the flow of a raindrop - it’s all direct. The real distinction is what is easy to measure versus what is diffuse and harder to attribute to an individual development permit. Thanks to new technology and 3-D modeling, hard-to-measure will fade, as will the distinction between direct and indirect. The Court was clear: fees and in lieu of funds are legitimate tools. However, if the Court wanted more respect for nexus and proportionate share, then technology just may deliver more than they ever imagined. Perfecting this technology to more accurately assign impact is Job 1 for the planning profession.
The Impact Horizon - Impact Fees also tend to address installation of improvements, while long term considerations like maintenance and asset replacement often end up in the conditions section. If local governments back away from use of conditions, then long term considerations may be frontloaded as a yes/no threshold in the permit approval process. This is, in essence, what Peter Katz and Joe Minicozzi have been arguing for a long time (see a summary here). As such, if a location inefficient development won’t generate taxes sufficient to cover costs, the permit is denied immediately rather than camouflaged with conditions and approved.
A Boon for Form Based Codes - One outcome with Koontz could be a stampede to codes and plans that eliminate the need for negotiations. This is the essential raison d’etre for Form Based Codes, which merge good place-making with predictability.
A Stronger Role for Upzoning - Pro-growth localities that engage in “recreational upzoning” may be hesitant to now give up their remaining power. Upzonings could become even more valuable currency because there is generally not a property right to an upzoning (and hence no taking). Upzonings are typically at their best when executed in an area plan to orchestrate density, transportation, economic development, open space and whatnot.
Area Plans - As such, communities may focus their land use powers to area plans where off site mitigation, shared parking, dedicated park space are viewed as incentives, not exactions. Instead of ad hoc negotiations, however, local government may need to plan out these shared facilities and mechanisms since some landowners may not need an upzoning. In this case, local governments will need to forecast drainage, parking, parks, land uses, and all those other things that constitute good planning. It should be emphasized that (1) this scale of planning is incredibly important for smart growth and redevelopment and (2) this scale of planning has been decimated by the recession as local governments spend limited dollars on mandated comprehensive plans and site approvals. Koontz could have the effect of elevating this type of planning where applicants know ahead of time what impact mitigation looks like. It is just good planning.
There is also a lot that can go wrong. First, some communities may approve permits rather than face a Koontz- inspired law suit. Because urban and infill areas are more complex, they rely more on negotiated conditions, so Koontz may continue land use's sad history of making sprawl easy and redevelopment more difficult. As Bill Fulton notes , the Court appeared to strike down the California Supreme Court’s 17-year-old ruling in Ehrlich v. Culver City, which gave cities and counties more leeway on exactions when they are imposed as part of a general plan policy rather than through an individual permit. This could cramp the use of small area planning as a method of addressing both good planning and Koontz.
Koontz may also set up a bizarre process where it is up to developers to forecast the terms and conditions that might get them approval. Instead of the local government imposing conditions, it is now up to the development community to assemble the package on the front end. In this way, communities may actually get more than they wanted, however, developers may offer a package of what is not needed. Because localities may not feel they can negotiate, the site plan package has to nail it or be turned down.
Finally, Mark Fenster, a professor of land-use law at the University of Florida put it this way in the Orlando Sun:
"Some pro-development or gun-shy regulators will respond by more readily approving development proposals, while less-development-friendly regulators who might have been willing to negotiate with property owners will be more likely to deny development proposals."