by Richard Epstein
The Supreme Court's five-to-four decision in favor of the landowners in Koontz v. St. Johns River Water Management District counts as a victory of sorts for the property rights movement. The case involved an all-too common exercise of state permit power. Koontz had applied for a permit to develop some 3.7 acres of his waterfront property and for that privilege he was prepared to offer the state a conservation easement that would make it impossible for him to develop the remaining 11 acres of that parcel. The official reply was that the permit would be denied unless Koontz acceded to one of two conditions. By the first, he had to agree to cut down the site development to one-acre and to make other costly modifications to his project. By the second, the District requested that he hire, for an uncertain sum, contractors to replace culverts or fill in ditches on other parts of the land. Koontz balked; the District stuck to its guns, and nothing happened. In his subsequent law suit, Koontz claimed that the exactions imposed by the District offended the various tests for an appropriate nexus between the permit and condition that had been developed in the important Supreme Court cases of Nollan v. California Coastal Commission (1987) and Dolan v. City of Tigard (1994).
Harms v. Benefits One unfortunate aspect about this case was that Koontz, bending to the current legal realities, had been prepared in his application to deed over some portion of his land to the Water District to get the permit in the first place. But the antecedent question is why he should be required to make any such concession in the first place. In dealing with this issue, Dolan put the right framework on the question by insisting that the condition in question be linked to either a benefit that the state provided or to a harm that the developer's project would create--in that instance additional runoff into public waters.
The implicit subtext of the Koontz application was that the failure to mitigate so-called environmental damage counts as a harm which the Water District is entitled to redress without compensation. But there is no reason why that should be the case. In dealing with the harm/benefit distinction in other private law contexts, it is clear that the operative distinction runs as follows. The defendant engages in harm to the world when he pollutes it. The state demands a benefit from the landowner such as insisting that the land be used as a nature preserve. It ties the English language into impossible knots to say that the defendant harms any plaintiff to whom he does not supply a benefit. That would mean that all landowners harm their neighbors by refusing to allow them to graze their cattle in the fields or to bed down at night on the front lawn. And it would mean that every person in the world has conferred a benefit on all individuals whom they do not summarily execute or rob. It is only if the terms "harm" and "benefit" are placed within a coherent framework of preexisting property rights that they can be used in a coherent sense that makes legal intervention the exception for a targeted case, not a universal imperative in any case where any landowner attempts any development at all.
Second Best Solutions The implicit failure to address the systematic failure in this branch of takings law necessarily limits the utility of this opinion to second-class status. But within that constraint, the good news about the case is that Justice Alito's majority opinion in significant part commanded the support of the four liberal members of the Court for whom Justice Kagan wrote in dissent. More concretely, both sides agreed that the issue of exactions did not go away simply because the permit was denied. In early cases, the permit was granted subject to conditions that proved intolerable, and Justice Alito was manifestly right to conclude that the constitutional guarantees could not be circumvented by the practice of not granting the permit unless the applicant agrees to certain conditions, rather than granting the permit subject to those same conditions. Terminological niceties should not be decisive in takings cases, any more than they are with any other constitutional right.
The two sides of the Court split, however, on the second question before the Court, which was whether the exaction doctrine applied to cash exactions instead of those that were made in kind. The point really matters because, as Justice Alito rightly stressed, if the cash alternatives escape constitutional scrutiny there is a royal road for circumvention of the basic command that the government cannot hold up a particular project in order to fund development projects, such as the ditches and culverts here, that should be funded from general revenues. Justice Kagan's dissent is that we cannot go into this dangerous territory lest we destabilize the current law that gives the state virtual carte blanche on how it imposes real estate and other taxes needed for public development.
Unfortunately, she is wrong for two interrelated reasons. First, the distinction is all too easy to draw in this particular case. A general real estate tax is imposed on all parcels of land based on value in order to fund common improvements from which the community at large benefits. This particular exaction is imposed on a single parcel of land at the time of its possible development and thus singles out one owner for excessive burdens from which it gets no special return benefits. Allowing this form of abuse to take place with cash exactions is a royal road to constitutional evasions.
Second, Justice Kagan is wrong to think that the entire field of real estate taxation should be subject to no constitutional constraints at all. But why? The ideal of any government exaction is to encourage socially beneficial transactions that cannot be achieved through voluntary means because of the large number of parties whose participation is necessary to allow the collective scheme to succeed. A system of real estate taxes that hit an entire community only to provide benefits to one fraction of it fails that test just as much as this special exaction. There is no reason to keep the exaction/taxation line alive, and every reason to abandon a position that Justice Alito too easily accepts, that taxes and fees are normally outside the scope of the takings.
Unfinished Business The difficult portion of the Alito opinion is simply this: because it does not take a robust critique of all exactions, it falters in the remedy stage of the case. At the very least, a landowner who is held up in this fashion should recover damages for economic losses attributable to what is temporary taking of land given that no development could take place. Going forward, the correct response is to treat the Water District actions as a total taking of the land if it is not prepared to rescind its order. At that point, the correct thing to do is to order the state to take title to the entire parcel, paying its full market value if the development could have gone forward without committing a common law nuisance. The key point to note here is that in any sensible system of water and land management, this case is so far from the tipping point that it should never have reached the Supreme Court at all, under any sensible application of the Dolan decision. Remanding the case for further proceedings in Florida courts has the unfortunate but predictable consequence of extending this saga into the yet another tier in Dante's Inferno. A clearer understanding of first principles could have brought much needed coherence to this area of law.
Richard A. Epstein is the Laurence A Tisch Professor Law at New York University, the Peter and Kirsten Senior Fellow at The Hoover Institution, and the James Parker Hall Distinguished Service Professor of Law and senior lecturer at the University of Chicago, as well as a visiting scholar with the Manhattan Institute's Center for Legal Policy.