REGULATORY TAKINGS:PAST, PRESENT, AND FUTURE

Timothy J. Dowling

Chief Counsel

Community Rights Counsel

2002 Minnesota Association of City AttorneysEducational Conference and Annual Meeting

Community Rights Counsel

Nonprofit public interest law firm

Assists towns and other local governments in defending land use controls and other community protections

Emphasis on takings cases

Close working relationship with the International Municipal

Lawyers Association

Community Rights Counsel Cases

Mamaroneck, NY open space protections

Lake Tahoe planning moratoria

Washington, DC historic preservation laws

Anchorage, AK fair housing laws

San Francisco Tenant Protections

Riverside, CA fire safety protections

Pennsylvania & Ohio bans on harmful coal mining

Rhode Island wetland protections

Las Vegas Airport Safety Protections

TAKINGS LITIGATION HANDBOOK: Defending Takings Challenges to Land Use Regulations

To order the Takings Litigation Handbook, contact American Legal Publishing at 1-800-445-5588 or www.amlegal.com.

Takings Litigation Handbook: Defending Takings Challenges to Land Use Regulations

The first ever “soup to nuts” Handbook for defending land use regulations from takings challenges.

• Explains the procedural and substantive defenses that should enable the local government to prevail in takings cases.

• Offers advice for the development of a proper record, obtaining insurance coverage and filing preliminary motions.

Two of the most important issues in takings jurisprudence concern the definition of the relevant parcel and the application of the Penn Central test for non-per se takings. The Colorado Supreme Court recently provided very useful guidance on both issues in Animas Valley Sand & Gravel, Inc. v. Board of County Comm'rs, 2001 WL 1598634 (Colo. Dec. 17, 2001), a takings challenge to restrictions imposed by the La Plata County land-use plan on a mining company. Drawing on both Colorado and federal case law for guidance, the court ruled that to prevail under Penn Central, a claimant "must show that it falls into the rare category of a landowner whose land has a value slightly greater than de minimis but, nonetheless, given the totality of the circumstances, has had its land taken by a government regulation." The court adopted this slightly -greater-than-de-minimis standard in part because after "[r]eading Palazzolo together with the [U.S. Supreme] Court's prior precedent, it is apparent that the level of interference must be very high" for land-use regulation to constitute a taking. The court viewed Penn Central as a "safety valve to protect the landowner in the truly unusual case." The Animas court also rejected the claimant's contention that the relevant parcel for takings analysis should be limited to the claimant’s mineral rights, or that it should look only to the geographic portion of the claimant's land affected by the challenged government action. Instead, the court held that the relevant parcel consists of the entire contiguous parcel of land owned by the mining company, citing Penn Central, Keystone, and Dolan. Like Palazzolo, Animas states that claimants are not limited to the Lucas per se test in seeking relief under the Takings Clause. Yet Animas reaffirms that in pursuing a non-per se claim, a landowner must still show that regulation is extremely severe — the functional equivalent of an expropriation — to constitute a compensable taking.

FEATURE CASE: Good News on Relevant Parcel and Penn Central From the Colorado Supreme Court

OUTRAGE OF THE MONTH: PERC vs. Osama bin Laden?

In our September 2001 newsletter, we lamented that certain politicians and special interest groups were exploiting the tragic events of September 11th to promote their policy agendas. As galling as those early exploiters were, they were pikers when compared to PERC, the Political Economy Research Center in Bozeman, Montana, which bills itself as the "Center for Free Market Environmentalism." PERC's radical brand of free market environmentalism goes far beyond emissions trading and other market-based proposals that merit thoughtful attention. For example, PERC supports passage of a federal takings bill that would gut federal environmental protections, and it advocates auctioning off much of the nation's public land to the highest bidder. So, what does selling the Grand Canyon to Disney have to do with Osama bin Laden? We're given the answer in a November 29, 2001 fundraising letter by PERC Chairman John Tomlin, who has the temerity to make an explicit appeal for donations to PERC based on the September 11th attacks. Mr. Tomlin begins the letter by observing: "At PERC, we have asked ourselves what is the role of free market environmentalism in a world rocked by

terrorism and a sense of insecurity." As one wag put it, you might as well ask: “What is the role of broccoli in an MRI exam?” None, as far as we can see. Undeterred, Mr. Tomlin continues: "When we thought about what is under attack, we realized that the terrorists are threatened by those core principles on which PERC was founded." Huh? The terrorists have proffered a number of bogus excuses to justify their evil actions, but so far free market environmentalism has not made the list. Then comes the monetary appeal: "As we stand strong against this menace * * * we need your continued support, now more than ever.” We hope that any recipient of the PERC fundraising letter will instead direct a donation to one of the charitable groups providing assistance to the September 11th victims and their families. Our thanks goes to Dick Schneider, professor at Wake Forest Law School, for bringing PERC’s letter to our attention.

Takings Watch CRC’s Monthly Update on Regulatory Takings

Community Rights Counsel 1726 M Street NW, Suite 703, Washington, DC 20036; www.communityrights.org

J a nua ry 2 0 0 2

Bad News for Local Governments

Many takings lawsuits

Expensive and time-consuming to defend

Many landowner victories in the U.S. Supreme Court

Good News for Local Governments

Local governments win the vast majority of takings cases

Landowner wins in U.S. Supreme Court are narrow

Very strong arguments against an expansive interpretation of the Takings Clause

Today’s Topics Five Themes for Litigating Takings Cases

Three Categories of Takings Claims

Ten Cutting-Edge Issues

RLUIPA

Palazzolo v. Rhode Island

Tahoe Moratorium Case

Five Themes for Litigating Regulatory Takings Cases

1. Narrow Text and Original Meaning

2. Judicial Respect for our Federal System

3. Judicial Deference to the Policymaking Branches

4. Avoiding Unduly Harsh Fiscal Impacts

5. The Government as Guardian of Property Rights and Property Values

THE TAKINGS CLAUSE

“Nor shall private property be taken for public use, without just compensation.”

Minnesota Rule for Gov’t Enterprise Function

McShane v. City of Faribault, 292 N.W.2d 253 (Minn. 1980) (airport zoning: taking based on substantial and measurable decline in market value)

Three Categories of

Inverse Condemnation Claims

1. Physical Occupation Cases

2. Pure Regulatory Takings Cases

3. Dedications and Exactions

Loretto v. Teleprompter Manhattan CATV Corp. (1981)

Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982)

A government-compelled permanent physical occupation of private property is a per se taking

Per se rule is “very narrow”

A continuous right of access is permanent, even if the actual invasion is intermittent

Lucas v. South Carolina Coastal Council (1992)

Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992)

Regulation that denies all economically viable use of land is a per se taking

Avoid per se liability if regulation is justified by “background principles of law”

Penn Central Transportation Company v.

New York City (1978)

Penn Central Transp. Co. v. New York City,438 U.S. 104 (1978)

Multifactor Test:

Character of the government action

Economic impact

Reasonable, investment-backed expectations

Nollan v. California Coastal Commission (1987)

Nollan v. California Coastal Commission (1987)

Nollan v. California Coastal Commission, 483 U.S. 825 (1987)

Compelled dedication must bear a “logical nexus” to the problem or concern posed by the proposed development.

The Nollan dedication failed because enhanced beach-side access is not logically related to the loss of the view from the highway.

Dolan v. City of Tigard (1994)Picture #1

Dolan v. City of Tigard (1994)Picture #2

Dolan v. City of Tigard, 512 U.S. 374 (1994)

Dedication requirement must be “roughly proportional” to the harm anticipated from the proposed development

Precise mathematical calculation is not required

Must make some effort to quantify findings to support the dedication

Kottschade v. City of Rochester, 537 N.W. 2d 301 (Minn. Ct. App. 1995)

DO L A N DIA G R A M

I m p a c t Le g it i m a t e D e d ic a t io n

D o l a n

B ur de n s

D ia g ra m

R o u g h ly P ro p o rt io n a l

D e m a n d e dS t a t eIn t e re s t

o fD e v e lo p m e n t

D o l a n

N o l l a nH e lp s So lv e

Under Dolan, local governments must be prepared to demonstrated that:

1. The proposed development exacerbates or creates the need for a public service;

2. The dedication demanded will benefit the proposed development or help address the need; and

3. The dedication demanded is “roughly proportional” to the harm.

Transfer of Development Rights

Transfer of development rights (TDR) is a tool used to preserve open space or important farm lands by encouraging higher densities in urban areas. Where used, transfer of development rights permits an owner of real property to sell or exchange the development rights associated with that property to another owner in return for compensation. This transfer can only occur from an identified preserva-tion zone to an identified transfer zone.

PRO:

CON:

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Transfer of Development Rights

Preservation Zone Area of identified important natural, cultural, or farm land. Generally the area is zoned with low development density potential (1 unit per 5 acres, for example).

Transfer Zone Identified growth area. Developer can increase the allowable density through purchasing development rights from a property owner located in the preserva-tion zone.

Four basic elements of a success-ful TDR program include the fol-lowing: 1) A sending area, or designated

preservation zone, from which development is transferred away.

2) A receiving area, or designated growth area, to which develop-ment rights are sent.

3) A pool, or bank, of develop-ment rights.

4) A set procedure for transfer of rights.

TDR programs provide incentives for developers to purchase devel-opment rights. They also create permanently protected prime farmland as developers pay farm-ers for increased development potential in other parts of the ju-risdiction.

Program establishment may be difficult where urban growth is currently dispersed throughout the region. Land preservation can be piecemeal.

Top Ten Issues for Local Governments to Win in Regulatory Takings Cases

Procedural Issues

1. Takings cases against local governments generally must be filed in state court. Williamson County Reg’l Planning Comm’n v. Hamilton Bank (U.S. 1985). Issue preclusion prevents re-litigation of the same issues in federal court.

Compensation Ripeness:

Carpenter Outdoor Advertising, Co. v. City of Fenton, 251 F.3d 686 (8th Cir. 2001)

Kottschade v. City of Rochester, Civil No. 01-898 ADM/AJB (D. Minn. Jan. 22, 2002)

Finality Ripeness:

Wheeler v. City of Wayzata, 533 N.W. 2d 405 (Minn. 1995)

Hunkins v. city of Minneapolis, 508 N.W. 2d 542 (Minn. Ctr. App. 1994)

Procedural Issues

2. There is no right in state court to have a jury decide the question of liability.

Top Ten Continued...

Defining the Lucas Box

3. A per se taking under Lucas occurs only where land is rendered valueless.

4. Reasonable planning moratoria and permit delays are not Lucas takings.

Woodbury Place Partners v. City of Woodbury, 492 N.W. 2d 258 (Minn. Ct. App. 1993)

Nuisance Abatement: Zeman v. City of Minneapolis, 552 N.W. 2d 548 (Minn. 1996); City of Minneapolis v. Fisher, 504 N.W. 2d 520 (Minn. Ct. App. 1993)

5. Statutes and regulations may act as “background principles” that defeat takings claims. Palazzolo v. Rhode Island Outdoor Graphics, Inc. v. City of Burlington, 103 F.3d

690 (8th Cir. 1996) (billboard ordinance)

Top Ten Continued...

Top Ten Continued...

Winning Under Penn Central6. Clear rules define the “parcel as a whole” for takings

analysis and prevent segmentation into affected and non-affected portions.

7. The finding of a taking under Penn Central requires a very dramatic (greater than 90 percent) diminution in value.

Animas Valley Sand & Gravel, Inc. v. Board of County Comm'rs, 2001 WL 1598634, No. 00SC151 (Colo. Dec. 17, 2001) (a taking under Penn Central occurs only where regulation leaves a landowner with "slightly greater than de minimis" value)

8. There is no generalized means-end theory of takings liability. The question of whether a land-use law advances a legitimate state interest is a due process inquiry.

Properly Limiting the Nollan and Dolan Tests

9. The essential nexus/rough proportionality test of Dolan/Nollan applies only to required dedications, not impact fees and other development conditions.

10. The essential nexus/rough proportionality test of Dolan/Nollan does not apply to so-called “unsuccessful exactions.”

Goss v. City of Little Rock, 151 F. 3d 861 (8th Cir. 1998)

Top Ten Continued...

Religious Land Use and Institutionalized Persons Act

Originally passed as the Religious Freedom Restoration Act (RFRA) of 1993.

City of Boerne v. Flores, 521 U.S. 507 (1997) struck down RFRA for exceeding Congress’s enforcement powers under the Fourteenth Amendment.

RLUIPA passed in 2000 to reinstate strict scrutiny for government actions that burden exercise of religion.

RLUIPA (cont.)

General Rule:

“No government shall impose or implement a land use regulation in a manner that imposes a substantial burden on the religious exercise of a person” unless it “is in furtherance of a compelling governmental interest” in the “least restrictive means” possible.

Rooted in Congress’s Spending power and the Commerce Clause

Shifts Burden of Proof to Government

RLUIPA Case Law

Constitutionality upheld in Mayweathers v. Terhune, 2001 WL 804140 (E.D. Cal. 2001)

Relaxed exhaustion and ripeness requirements in Murphy v. Zoning Comm’n for the Town of New Milford, 148 F. Supp.2d 173 (D. Conn. 2001).

Fear of arrest was precisely the type of chilling effect on religious practices Congress intended to trigger RLUIPA. Murphy v. Zoning Comm’n.

RLUIPA Case Law (cont.)Substantial Burden Further Defined: Aesthetic harm of 150-ft. pole on golf course adjacent to

church was not a substantial burden on congregation’s religious exercise. Omnipoint Communications v. City of White Plains, 202 F.R.D. 402 (S.D. N.Y. 2001).

National Park Service’s ban on selling t-shirts on National Mall in Washington, DC was not substantial burden on vocation to spread the gospel. Henderson v. Kennedy, 265 F.3d 1072 (D.C. Cir. 2001).

Importance of Religious Practice also a factor. Henderson v. Kennedy.

RLUIPA’s Affect on Zoning

Chicago changed zoning laws to avoid RLUIPA liability. C.L.U.B. v. City of Chicago, 157 F. Supp.2d 903 (N.D. Ill 2001).

Churches sued under RLUIPA’s discrimination provision because clubs and recreation centers were uses of right in certain areas where churches were not.

Chicago required special use permits of other “church-like uses” and suit failed.

Palazzolo Coastal Wetlands

Palazzolo Coastal Wetlands

Palazzolo Coastal Wetlands

Palazzolo v. Rhode Island121 S. Ct. 2448 (June 28, 2001)

5-4 win for landowner

“Movement” case handled by Pacific Legal Foundation in the Supreme Court

Mush – raises more questions than it answers

Palazzolo: Six Opinions

Justice Kennedy (Majority) -- joined by Chief Justice Rehnquist and Justices O’Connor, Scalia, and Thomas

Justice O’Connor (Concurrence)

Justice Scalia (Concurrence)

Justice Stevens (Dissent)

Justice Ginsberg (Dissent)

Justice Breyer (Dissent)

Four Factual Wrinkles in Palazzolo

1. The Nature of the Takings Claim: Subdivision vs. Beach Club Proposal?

2. The Number of Houses that May be Built: One or Several?

3. Palazzolo’s Acquisition Date: 1978 or 1959?

4. The Trial Court’s Nuisance Finding

Summary of Palazzolo Rulings

Case is ripe

Claim is not barred simply because Palazzolo acquired the land after the rules were issued

No per se take under Lucas because the landretained significant value

The Palazzolo Ripeness Ruling

Reaffirms basic ripeness rule: court must know the extent of permitted development

“[A] landowner may not establish a taking before a land-use authority has the opportunity, using its own reasonable procedures, to decide and explain the reach of a challenged regulation.”

State law may impose additional ripeness rules -- beyond federal ripeness rules -- to control damage awards based on hypothetical uses.

The Palazzolo “Notice Rule” Ruling

Post-enactment acquisition is not an absolute bar to a takings challenge to a statute or regulation

Fairness concerns

“Background principles” include statutes and rules derived from a State’s legal tradition

Palazzolo: Expectations Analysis

Pre-existing statutes and rules are still relevant to the Penn Central test

O’Connor concurrence plus four dissenters

No other Justice joined Scalia’s view to the contrary

Palazzolo: The Lucas Per Se Rule Issue

$200,000 in value (6.4% of claimed value) defeats a Lucas per se claim; a 93.6% value loss is not enough to trigger the Lucas per se rule

“Token interest” does not defeat a Lucas claim

Palazzolo describes Lucas test both in terms of “use” and “value”

Palazzolo: Concluding Observations

1. Both sides claim victory

2. The Court may have muddled the parcel-as-a -whole rule

3. No discussion of the value of wetlands

4. More charged rhetoric from Justice Scalia

5. More rhetorical flourish from the Court in favor of takings claimants

Lake Tahoe Picture #1

Lake Tahoe Picture #2

Lake Tahoe Picture #3

Tahoe-Sierra Preservation Council, Inc. v.

Tahoe Regional Planning Agency, 216 F.3d 764 (9th Cir. 2000),

cert. granted, 121 S. Ct. 2589 (June 29, 2001)

“Whether the Court of Appeals properly determined that a temporary moratorium on land development does not constitute a taking of property requiring compensation under the Takings Clause of the United States Constitution?”

Lake losing one foot of clarity every year due to uncontrolled development

32-month planning moratorium to allow for preparation of a regional growth plan

450 landowners brought facial takings claim

Tahoe Facts

Moratorium reasonable in scope and duration

No interference with reasonable expectations (average holding period in the Tahoe Basin = 25 years) No Penn Central Taking

Per se taking under Lucas

Tahoe: Trial Court

No Lucas Taking

Must consider all uses, including future uses

Cannot “temporally sever” the landowners’ property interests (parcel-as-a-whole rule)

Agins v. City of Tiburon, 447 U.S. 255 (1980) -- “mere fluctuations in value during the process of government decisionmaking, absent extraordinary delay . . . cannot be considered a ‘taking’ . . .”

Tahoe: Ninth Circuit

Key issue = meaning of the Court’s 1987 ruling in First English

The only issue concerns the Lucas ruling

The trial court found that none of the land is “valueless”

It is now undisputed that the moratorium was reasonable in scope and duration

Restrictions under the regional plan are not before the court

Tahoe: In the Supreme Court

TAHOE ORAL ARGUMENTWoodbury Place Partners v. City of Woodbury,

492 N.W.2d 258 (Minn. Ct. App. 1992)

J. SCALIA: My impression is that most of these moratoriums, or moratoria, whatever they’re called would not be total…..

MR. BERGER: That’s correct, Justice Scalia – and I think that’s the more typical kind of moratorium, and the kind that most of the amici on the agency’s side have been talking about.

C. J. REHNQUIST: There was one Minnesota moratorium that was – seemed somewhat like this that had been sustained by, I think the appellate court.

MR. BERGER: There was one, Your Honor, and I would submit that that court erred. It happens. Lower courts do that sometimes.

(Laughter.)

C. J. REHNQUIST: So we notice.

(Laughter.)

MR. BERGER: And we believe that that simply is not an appropriate precedent for this court to follow.

MCQUEEN V. SOUTH CAROLINA COASTAL COUNCIL

McQueen bought two oceanfront lots in the 1960s

In 1977, South Carolina adopted rules that restrict the filling of coastal wetlands

McQueen took no action for 30 years after his purchase; the lots reverted to their natural condition

In 1991, the State denied McQueen permission to fill and develop the lots

It is undisputed that the permit denial extinguished all economically viable use of the land

Issue: Did McQueen’s inaction for thirty years reflect the lack of a reasonable expectation to develop that defeats his takings claim?