Presenting a live 90-minute webinar with interactive Q&A Municipal Infrastructure Funding: Overcoming Legal Challenges with Exactions and Impact Fees Navigating New Application of Essential Nexus and Rational Relationship Standards, State Law, and Types of Exactions THURSDAY, JULY 24, 2014 1pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Rob Killen, Shareholder, Kaufman & Killen, San Antonio Deborah Rosenthal, Partner, Sheppard Mullin, Costa Mesa, Calif. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.
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MUNICIPAL INFRASTRUCTURE FUNDING July 24, 2014 Deborah M. Rosenthal, AICP, Esq. Rob Killen, Esq. Sheppard Mullin Richter & Hampton LLP 2014
Speakers Deborah M. Rosenthal, AICP, Esq. Sheppard, Mullin, Richter & Hampton, LLC Rob Killen, Esq. Kaufman & Killen, Inc. 6
Definition of Exactions Any development condition that requires a transfer of ownership or the payment of money 7
History of Exactions Subdivision Improvements Infrastructure Programs Mitigation Requirements Social Programs 8
History of Exactions Exactions vs. Taxes and User Fees 9
Types of Exactions Dedication Construction Fees Other Payments 10
Types of Exactions On-Site Off-Site 11
Nollan v. California Coastal Commission (U.S. 1987) The California Coastal Commission required an easement across the Nollans beachfront lot as a condition to issue a permit to demolish an existing bungalow and replace it with a three-bedroom house. The public easement was intended to connect two public beaches that were separated by the Nollan s property. The Coastal Commission said that the condition was imposed to promote the legitimate state interest because a house would prevent the public from realizing a stretch of coastline exists nearby that they have every right to visit. 12
Nollan v. California Coastal Commission (U.S. 1987) The Supreme Court held that the lack of nexus between the condition and the original purpose of the building restriction converts that purpose to something other than what it was. The purpose then becomes, quite simply, the obtaining of an easement to serve some valid governmental purpose, but without payment of compensation. 13
Nollan v. California Coastal Commission (U.S. 1987) Essential Nexus Same public purpose as permit denial Doctrine of unconstitutional conditions 14
Dolan v. City of Tigard (U.S. 1994) Hardware store expansion Floodway dedication Bike path dedication City Subdivision Ordinance 15
Dolan v. City of Tigard (U.S. 1994) We think a term such as rough proportionality best encapsulates what we hold to be the requirement of the Fifth Amendment. No precise mathematical calculation is required, but the city must make some sort of individualized determination that the required dedication is related both in nature and extent to the impact of the proposed development. 16
Dolan v. City of Tigard (U.S. 1994) Rough Proportionality Applicable only to exactions, not development approvals, Del Monte Dunes v. City of Monterey (U.S. 1999) 17
Dolan v. City of Tigard (U.S. 1994) Cities have long engaged in the commendable task of land use planning, made necessary by increasing urbanization, particularly in metropolitan areas such as Portland. The city's goals of reducing flooding hazards and traffic congestion, and providing for public greenways, are laudable, but there are outer limits to how this may be done. A strong public desire to improve the public condition [will not] warrant achieving the desire by a shorter cut than the constitutional way of paying for the change. 18
Koontz v. St. Johns River Water Management District (U.S. 2013) Wetlands development application On-site set-aside or off-site mitigation Application denied State Wetland Program 19
Koontz v. St. Johns River Water Management District (U.S. 2013) Florida Supreme Court decision Trial/appeals court decisions awarding delay damages overturned Nollan-Dolan do not apply to project denials Nollan-Dolan do not apply to fees 20
Koontz v. St. Johns River Water Management District (U.S. 2013) U.S. Supreme Court Decision 5-member majority (Alito) Nollan-Dolan apply to project denials Nollan-Dolan apply to fees Nollan-Dolan apply to off-site mitigations Remedy determined by State law 4-member dissent (Kagan) Nollan-Dolan apply to project denials Nollan-Dolan do not apply to fees 21
Koontz v. St. Johns River Water Management District (U.S. 2013) Nollan and Dolan involve a special application of this doctrine that protects the Fifth Amendment right to just compensation for property the government takes when owners apply for land-use permits. Our decisions in those cases reflect two realities of the permitting process. The first is that land-use permit applicants are especially vulnerable to the type of coercion that the unconstitutional conditions doctrine prohibits because the government often has broad discretion to deny a permit that is worth far more than property it would like to take. 22
Koontz v. St. Johns River Water Management District (U.S. 2013) By conditioning a building permit on the owner's deeding over a public right-of-way, for example, the government can pressure an owner into voluntarily giving up property for which the Fifth Amendment would otherwise require just compensation. So long as the building permit is more valuable than any just compensation the owner could hope to receive for the right-of-way, the owner is likely to accede to the government's demand, no matter how unreasonable. Extortionate demands of this sort frustrate the Fifth Amendment right to just compensation, and the unconstitutional conditions doctrine prohibits them. 23
Koontz v. St. Johns River Water Management District (U.S. 2013) National Effects Ehrlich v. City of Culver City (Cal. 1996) Town of Flower Mound v. Stafford Estates (Tex. 2003) Northern Ill. Home Builders Assn. v. County of Du Page (Ill. 1995) Home Builders Assn. v. Beavercreek (Ohio 2000) 24
Koontz v. St. Johns River Water Management District (U.S. 2013) National Effects Krupp v. Breckenridge Sanitation Dist. (Col. 2001) Home Builders Assn. of Central Arizona v. Scottsdale (Ariz. 1997) McCarthy v. Leawood (Kan.1995). 25
Exactions Statutes California Mitigation Fee Act Texas Rough Proportionality Statute 26
Exactions in Practice How are Nollan-Dolan applied? Essential Nexus Rational Relationship Rough Proportionality 27
Exactions in Practice Is there a Legislative Exception? Ad hoc, individual, quasi-adjudicative decisions Legislative policy decision of general applicability 28
State Issues Voluntary Agreements Variances Affordable Housing Burden of Proof Statues of Limitation 29
Nollan-Dolan Best Practices Nexus Studies Link exaction to impact methodology Least necessary dedication Clear distinction from taxes Phase in exactions Adequate notice 30
Contact Information Deborah M. Rosenthal, AICP, Esq. Sheppard Mullin Richter & Hampton LLC Costa Mesa, California drosenthal@sheppardmullin.com Rob Killen, Esq. Kaufman & Killen, Inc. San Antonio, Texas rob@kk-lawfirm.com 31