The state high court held that Nollan and Dolan did not apply to monetary exactions, only to forced dedications of interests in real property. And the court also ruled that Nollan and Dolan did not apply because the district did not issue the permits and consequently nothing was ever taken from Koontz.
The district counters that the land that Koontz proposed to develop "provided a diversity of habitat and food sources, and served as an important refuge for a variety of wildlife species." The proposed project, the staff found, "would displace natural wildlife habitat," "cause adverse impacts to the conservation of fish and wildlife," and "adversely affect" the "condition and relative value of functions being performed by" the affected wetlands.
The district offered multiple suggestions for ways that Koontz could change his proposal to reduce or offset the adverse impacts of his development. Some of the suggestions involved modifications of the design or scale of his construction and some were for alternatives for mitigation on other property within the basin in lieu of Koontz's proposed on-site mitigation.
Koontz rejected all of the suggestions and was unwilling to consider any additional mitigation options other than what he originally proposed, according to the brief by the district's counsel, Paul R.Q. Wolfson of Wilmer Cutler Pickering Hale and Dorr.
"Indeed, when asked at a subsequent hearing whether he would 'prefer that the permit be turned down' or whether he would like to take '30 days and try to work it out,' his agent responded that petitioner's 'offer was as good as it can get,' " wrote Wolfson.
Nollan and Dolan deal with situations where a government entity issues a permit with a condition requiring the landowner to dedicate some property to public use, for example, turn over some of the land for a public easement or a bike path, explained Vermont Law School's Echeverria.
In order to impose that kind of a condition, he said, the Supreme Court ruled that the government has to meet a fairly strict standard. "It has to show there's an essential nexus between the condition and the regulatory purpose, a logical connection, and secondly, a rough proportionality: What is demanded of landowner through the condition should be roughly proportional to the projected impact of the development that the condition is supposed to address," he explained.
Koontz argues that those decisions should be expanded to cover permit denials. "It would be a major expansion of Nollan and Dolan," said Echeverria. "Local governments impose a variety of exactions on development but for a larger universe of cases, they talk about a larger universe of conditions. If every time they talk about imposing conditions [they raise a takings issue], they would have far greater potential liability than now."
An "equally monumental question" posed by the case is whether Nollan and Dolan apply when the condition is that the landowner spend money, rather than give over property.
"This is an important issue because the government demands payments in a whole variety of circumstancesuser fees and other permitting contexts," added Echeverria. "If that were swept up into the takings clause, it would have enormous implications for governments' ability to operate.