Takings and Mitigation (2016)

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12 Because most of the cases involving highway access permits only address whether the state trans- portation agency has the statutory authority to impose the condition, the cases rarely consider the rough proportionality element of the essential nexus test. This may be because statutes authorizing state transportation agency exactions, and state trans- portation agency policies and regulations imple- menting those statutes, typically limit the state transportation agency to exacting no more than the impact of the development84 (i.e., rough proportion- ality is often built into the state transportation agency’s enabling statute and practices). Section II.A discusses on-site exactions to mitigate the traffic impacts of a development, such as require- ments to dedicate a portion of the developer’s parcel for state highway improvements. Section III.A discusses off-site exactions to mitigate traffic impacts, such as requirements to fund improvements to the state high- way system away from the development site. c. Conditions Imposed Under Permits Granted by Environmental Regulatory Agencies.—Where devel- opment proposals will impact a protected natural resource, the developer will often have to obtain a permit from the agency charged with protecting that natural resource.85 Although Nollan and Dolan both dealt, to one degree or another, with require- ments to perform on-site mitigation of adverse environmental impacts, a number of courts follow- ing Nollan and Dolan tended to apply the more def- erential Penn Central test for regulatory takings to such environmental mitigation conditions, rather than the stricter essential nexus test enunciated in Nollan and Dolan, particularly when the required mitigation was off-site or the environmental agency denied the permit.86 The Koontz decision, however, makes it clear that the essential nexus test applies in such cases, to ensure that the environmental mitigation requirement imposed on the developer is roughly proportional to the adverse impacts of the development. An interesting question moving forward will be whether, in practice, the essential nexus test substan- tively limits mitigation requirements imposed by environmental agencies, which are accustomed to judicial deference. Certainly, with respect to govern- ment construction such as state transportation agency projects, environmental agencies are accustomed to imposing mitigation requirements that may exceed the adverse environmental impact of the project.87 The implication of Koontz, however, is that mitigation requirements imposed on private developers may not exceed the anticipated impact of the development.88 Section II.B discusses on-site exactions to mitigate the environmental impacts of a development, such as requirements to dedicate a conservation easement over a portion of the developer’s parcel. Section III.B discusses off-site exactions to mitigate environmen- tal impacts, such as requirements to fund stormwater improvements or wetlands improvements on govern- ment property away from the developer’s parcel. 3. Questionable Applicability to Legislative Exactions There is a split in authority, not expressly resolved by Koontz, as to whether the essential nexus test applies only to “adjudicative exactions,” in which con- ditions are imposed on a specific development permit by a permitting agency exercising discretion, or also to “legislative exactions,” which are uniform, standard, generally applicable conditions that are automatically applied to all similarly situated permit applications. This is addressed in detail in Section III.C.2. II. On-Site Exactions When permission is sought to develop land, gov- ernment permitting authorities have traditionally used the permitting process to exact concessions from the developer regarding the parcel that is to be developed—either dedications of specific portions of the real property to the public or conditions imposed 84 See, e.g., High Rock Lake Partners, LLC, 720 S.E.2d at 711 (N.C. Ct. App. 2011) (describing North Carolina DOT policy to “require the applicant to provide offsite roadway improvements on public facilities in order to mitigate any negative traffic impacts created by the proposed develop- ment”); Cobb v. Snohomish Cnty., 64 Wash. App. 451, 467, 829 P.2d 169, 178 (Wash. Ct. App. 1991) (describing state statute crafted to satisfy the essential nexus test, which authorizes county to impose impact fees that “mitigate a direct impact that has been identified as a consequence of a proposed development”). See also Newman, supra note 82, at 26 (“Project proponents are required to identify mit- igation measures necessary to maintain the affected high- way system at the same level of capacity and operation (typically expressed as an engineering ‘level of service’) and the same level of safety that it would have without the proposed development.”). 85 Justin R. Pidot, Fees, Expenditures, and the Takings Clause, 41 eCoLogy L.Q. 131, 137–38 (2014) (“Permitting regimes, including those under the Clean Air Act, the Clean Water Act, and the Endangered Species Act, require applicants to take substantial steps to reduce the effect of their activities on the environment.”). 86 See supra notes 41–47 and accompanying text. 87 See supra note 71 and accompanying text. 88 See, e.g., Clark County v. Rosemere Neighborhood Ass’n, 170 Wash. App. 859, 875, 290 P.3d 142, 152 (Ct. App. Wash. 2012) (describing county stormwater permitting approach modified to satisfy constitutional scrutiny, so that “a developer must mitigate only the increased storm water flow caused by its own development,” then the county “assumes the obligation to mitigate to the histori- cal level as required by” the Clean Water Act).

13 on the landowner’s use of specific portions of the real property.89 Although such requirements imposed on the landowner outside of the development permit- ting context could be considered an unconstitutional taking of property without just compensation, such exactions in the permitting context have long been upheld as a fair exchange, requiring the developer to ameliorate the burdens that the development will impose on the public.90 The essential nexus test was formulated in Nollan and Dolan specifically in the context of such on-site exactions. Permitting agencies must demonstrate that the on-site exaction serves a legitimate govern- mental interest or public purpose within the agen- cy’s permitting authority, and that the on-site exaction is roughly proportional to the anticipated adverse impact of the proposed development. This section discusses on-site exactions to address traffic impacts (including on-site exactions in the state transportation agency highway access permitting process) and on-site exactions to mitigate other envi- ronmental impacts (e.g., conservation easements or on-site stormwater improvements). Although the essential nexus requirement was not satisfied for the on-site exactions in Nollan and Dolan, it will be seen that it is generally easier for permitting agencies to satisfy the essential nexus requirements for on-site exactions than it is for off-site exactions.91 A. On-Site Highway Exactions Both state transportation agencies and local gov- ernments typically have some authority to exact on-site concessions from the permit applicant for the benefit of the local road system, such as construction of public roads over a portion of the developer’s par- cel. An earlier NCHRP Legal Research Digest on exactions that was published in 1986—1 year before the Nollan decision—concluded that on-site exac- tions to address traffic impacts, such as dedications of a portion of the parcel for highway right-of-way or construction standards for interior streets, are gener- ally more likely to be judicially upheld than other types of exactions.92 Certainly, on-site highway exac- tions prior to Nollan were regularly upheld by courts employing the less stringent “rational nexus” (or “rea- sonable relationship”) test.93 It is generally under- stood and accepted that new development generates new traffic, and that a reasonable exaction is appro- priate in order to improve the transportation system to offset the traffic impact of the new development.94 The exactions overturned in Nollan and Dolan, how- ever, included easements allowing the public to travel over a portion of the developer’s property, which is similar to the type of on-site dedication traditionally exacted to address highway traffic impacts. Following Nollan, several courts overturned on-site highway dedication requirements as not having a sufficient nexus to the permitting agency’s legitimate interests in alleviating traffic congestion or public safety impacts.95 As a general rule, however, on-site dedica- tions for highway improvements remain among the most defensible development exactions. The most common and defensible type of on-site highway exaction is a requirement that the devel- oper construct on-site streets according to certain generally applicable construction standards, par- ticularly where the developer expects the on-site streets to become incorporated into the state or local road system.96 Disputes may arise between 89 Miller, supra note 79, at 920 (“Traditional exactions take the form of physical dedications of real property, such as building roads within a subdivision or deeding the pub- lic an easement for a bike path or for the preservation of wetlands.”). 90 David Ackerly, Exactions for Transportation Corri- dors After Dolan v. City of Tigard, 29 Loy. L.A. L. Rev. 247, 255 (1995) (citing on-site exaction cases from the 1920s and 1930s). 91 CaLLies, supra note 4, at 256. The essential nexus test is most easily undertaken for on-site exactions, such as subdivision fee requirements and land dedica- tions. The goal of providing adequate public facilities to serve a new development is a recognized, valid pub- lic purpose, and if the exactions will mitigate develop- ment impacts proportionally caused by the developer upon whom the exaction is levied, the Nollan/Dolan requirements will be met. 92 vanCe, supra note 5, at 3, 11. 93 See, e.g., Ayres v. City Council of Los Angeles, 34 Cal. 2d 31, 38–39, 207 P.2d 1, 5–7 (Cal. 1949) (upholding numerous on-site exactions, including the dedication of right-of-way to expand adjacent public highways and the requirement to construct interior streets wider than pro- posed by the developer, as “reasonably related to the pro- tection of the public health, safety and general welfare”). 94 Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586, 2595, 186 L. Ed. 2d 697, 708 (2013) (“Where a build- ing proposal would substantially increase traffic conges- tion, for example, officials might condition permit approval on the owner’s agreement to deed over the land needed to widen a public road.”); Dolan v. City of Tigard, 512 U.S. 374, 395, 114 S. Ct. 2309, 2321, 129 L. Ed. 2d 304, 322–23 (1994) (“Dedications for streets, sidewalks, and other public ways are generally reasonable exactions to avoid excessive con- gestion from a proposed property use.”). 95 Newman, supra note 82, at 26 n.19 (citing Paradyne Corp. v. State, Dep’t of Transp., 528 So. 2d 921 (Fla. Dist. Ct. App. 1988); Unlimited v. Kitsap County, 50 Wash. App. 723, 750 P.2d 651 (1988); Dep’t of Transp. ex rel. People v. Amoco Oil Co., 174 Ill. App .3d 479, 528 N.E.2d 1018 (1988)). 96 See, e.g., va. DeP’t oF tRansP., Access Management Design Standards for Entrances and Intersections, VDOT RoaD Design manUaL, App. F, at F 121 (rev. Jan. 2014) (“VDOT will accept as a part of the appropriate high- way system, those service roads constructed by others in accordance with above criteria.”).

14 the developer and the permitting agency over the construction standards (and expense) required, as the developer may consider the permitting agen- cy’s requirements for street width, grade, curva- ture, pavement thickness, pavement drainage, sightlines, and setbacks to be excessive. Although such standards for on-site road construction as a condition for development permits are subject to the essential nexus test, they are regularly upheld.97 Developers typically propose to construct on-site roads without being required to do so by the permitting agency (in order to provide tenants access between the proposed development and the public roads), so there is reduced concern in these situations about the government permitting agency physically appropriating that portion of the developer’s real property for the highway sys- tem.98 Furthermore, in the straightforward appli- cation of generally applicable highway construc- tion standards to a given development proposal, there is reduced concern about disproportionate extortion from an individual developer. Establish- ing generally applicable highway standards is commonly understood to relate to legitimate gov- ernmental interests regarding traffic congestion and public safety. As long as the generally appli- cable standards are directly related to such legiti- mate governmental interests, courts will defer to the permitting agency’s expertise as to what the generally applicable conditions should be.99 Appli- cation of generally applicable standards to a given development proposal will generally satisfy the “individualized determination” requirement, and application of the standards to on-site streets (i.e., those that primarily benefit the development) will generally satisfy the “rough proportionality” requirement.100 When the developer’s proposed change in land use is very minor, however, a per- mit requirement to upgrade all preexisting roads on the site to modern standards can be overturned as disproportionate to the anticipated impact of the developer’s activities.101 Exactions of a portion of the developer’s parcel that are not volunteered by the developer (e.g., required dedications for improvements to the adja- cent highway system that are not solely for the ben- efit of the development) will be viewed by the courts with somewhat more concern.102 To satisfy the essen- tial nexus test, the government permitting agency must demonstrate that the exaction is roughly pro- portional to the impact of the development.103 For example, when a proposed development would block an existing access route, the developer can be required to grant an easement across another por- tion of the property to replace lost access—such a condition is directly proportional to the impact of the 97 See, e.g., Mira Mar Dev. Corp. v. City of Coppell, Tex., 421 S.W.3d 74 (Tex. Ct. App. 2013) (upholding an on-site street-width requirement as a valid condition on subdivi- sion approval); City of Annapolis v. Waterman, 357 Md. 484, 745 A.2d 1000 (2000) (recognizing that on-site road construction standards including street widening, paving, and reconfiguring are commonly upheld). 98 Because applying highway construction standards to roads proposed by the developers does not involve physical appropriations of real property by the gov- ernment, some courts have evaluated these conditions under the less restrictive Penn Central test for regula- tory takings. However, the Supreme Court has not lim- ited the essential nexus test to physical appropriations of real property, but instead has applied it to conditions imposed in exchange for permits to develop real property. The better view seems to be that the essential nexus text applies to on-site highway construction standards that are conditions of permit approval. 99 See, e.g., Mira Mar Development Corp. v. City of Coppell, Tex., 421 S.W.3d 74, 86 (Tex. Ct. App. 2013) (“[T]he street-width requirement the City imposed on appellant bore ‘an essential nexus to the advancement of ’ the legitimate government interest of public safety.”). 100 See, e.g., id. The record conclusively shows the City made an individualized determination that the proposed streets…were too narrow.… The street-width require- ment was limited to the streets in the subdivision and did not require the improvement of any property outside the subdivision. Thus, the requirement was roughly proportional to the projected “impact” of the development. 101 See, e.g., Cheatham v. City of Hartselle, No. CV 14 J 397 NE, 2015 U.S. Dist. LEXIS 25360, at *5 (N.D. Ala. Mar. 3, 2015) (overturning a requirement to dedicate additional highway right-of-way as a condition of subdivid- ing a parcel in order to address traffic impacts of a trailer park on the parcel, where the trailer park was a permitted, existing use that predated the subdivision request). 102 It is uniformly recognized that such exactions of real property, whether in fee simple or easement, are subject to the essential nexus test. Miller, supra note 79, at 933: [C]ourts must first decide whether a Fifth Amend- ment taking would have occurred if the government, instead of asking for the thing it wanted (such as an easement or money) in exchange for permit approval, simply took the thing outright by force, regardless of whether the government granted (or the landowner sought) a permit in return…. Forcing a property own- er to provide an easement is a per se taking. 103 See, e.g., Cheatham v. City of Hartselle, No. CV 14 J 397 E, 2015 U.S. Dist. LEXIS 25360, at *3 (N.D. Ala. Mar. 3, 2015) (stating that there is no dispute that essen- tial nexus applies to right-of-way exaction imposed as a condition of subdivision permit approval); Kottschade v. City of Rochester, 760 N.W.2d 342, 345–46 n.2 (Minn. Ct. App. 2009) (recognizing that a permit condition requiring the developer to dedicate a 50-ft right-of-way for the improvement of an adjacent public roadway is to be evalu- ated under the essential nexus test).

15 development.104 If an easement across the property is demanded not because of loss of access caused by the development, however, but merely to further the gov- ernment’s general interest in improving access, then the condition will fail the essential nexus test.105 In the more typical dedication requirement, when real property adjacent to an existing high- way is exacted from the developer to support improvements to the existing highway, it is the responsibility of the government permitting agency demanding the dedication to demonstrate that the exaction is not disproportionate to the traffic impact of the proposed development.106 Although the essential nexus test puts the burden on permitting agencies such as state transporta- tion agencies to show that exactions for highway improvement are roughly proportional to the traffic impacts of the permitted development, this does not generally present a significant obstacle. Before requiring a dedication of real property, state transportation agencies typically require a traffic impact study,107 in which reliable engineer- ing principles and methods are used to assess and quantify the additional trips generated by a pro- posed development, as well as the increase in high- way capacity resulting from proposed highway improvements (e.g., new roads or additional travel lanes for existing roads, or intersection improve- ments such as turn lanes). The traffic impact study thus allows a state transportation agency or local government to demonstrate that an exaction will mitigate congestion in rough proportion to the traffic impact of the development, which should satisfy the essential nexus requirement.108 Difficulties may arise, however, if transportation agencies seek to use on-site exactions to develop alter- native transportation options, such as greenways 104 Dolan v. City of Tigard, 512 U.S. 374, 394, 114 S. Ct. 2309, 2321, 129 L. Ed. 2d 304, 322 (1994) (“If petitioner’s proposed development had somehow encroached on exist- ing greenway space in the city, it would have been reason- able to require petitioner to provide some alternative greenway space for the public either on her property or elsewhere.”); Ocean Harbor House Homeowners Ass’n v. Cal. Coastal Comm’n, 163 Cal. App. 4th 215, 232, 77 Cal. Rptr. 3d 432, 445 (2008) (requiring homeowners to provide “alternate” lateral access across property when construc- tion of a seawall would cause existing public access to erode away). But see Burton v. Clark County, 91 Wash. App. 505, 958 P.2d 343 (Wash. App. 1998) (overturning condition requiring developer to extend an existing public road across its property, because the extended road would not connect to any other roads and thus would not improve access). 105 Nollan v. Cal. Coastal Comm’n, 483 U.S. 825, 841–42, 107 S. Ct. 3141, 3151, 97 L. Ed. 2d 677, 692 (1987) (“California is free to advance its ‘comprehensive pro- gram,’ if it wishes, by using its power of eminent domain for this ‘public purpose,’ …but if it wants an easement across the Nollans’ property, it must pay for it.”); Paradyne Corp. v. State, Dep’t. of Transp., 528 So. 2d 921, 927 (Fla. Dist. Ct. App. 1988) (overturning a permit condition requiring an easement across the property for the benefit of an adjacent landowner, when the new development did not create the adjacent landowner’s access problem). 106 See, e.g., Hillcrest Prop., LLP v. Pasco Cnty., 939 F. Supp. 2d 1240, 1258 (M.D. Fla. 2013) (holding that requir- ing the landowner to prove the absence of “rough pro- portionality”—rather than the government bearing the burden to prove “rough proportionality”—fails to satisfy the essential nexus test); Goss v. City of Little Rock, Ark., 151 F.3d 861, 863 (8th Cir. 1998) (overturning condition requiring developer to dedicate 22 percent of its property to the expansion of an adjacent highway because the City failed to perform an individualized determination of the traffic impacts of the proposed development and demon- strate rough proportionality), cert. denied, 526 U.S. 1050 (1999); B.A.M. Dev., L.L.C. v. Salt Lake Cnty., 2006 UT 2, 128 P.3d 1161, 1171 (2006) (holding that essential nexus test applies to condition requiring developer to dedicate right-of-way for highway widening); Amoco Oil Co. v. Vill. of Schaumburg, 277 Ill. App. 3d 926, 943, 661 N.E.2d 380, 391 (1995) (Town’s “exaction of over twenty percent (20%) of Amoco’s property on the basis of a de minimis increase in street traffic—-four-tenths of one percent (0.4%)—does not correspond with the slightest notions of rough proportional- ity.”). But see Vaughn v. City of N. Branch, 00-2370 MJD/JGL (D. Minn. Oct. 30, 2001) (placing burden on developer to show that there were limitations to City’s authority to impose 66-ft road easement as condition for development permit). 107 See, e.g., CoLoRaDo DeP’t oF tRansP., Traffic Impact Studies, state HigHWay aCCess CoDe, 2 CoLo. CoDe Regs. § 601 1, § 2.3(5) (2002); geoRgia DePt. oF tRansP., Traffic Impact Studies, RegULations FoR DRiveWay anD enCRoaCH- ment ContRoL, at 2–8 (2009); minnesota DeP’t oF tRansP., Traffic Impact Study Guidance, MN/DOT aCCess manage- ment manUaL, ch. 5 (2008); oRegon DeP’t oF tRansP., Traffic Impact Studies, DeveLoPment RevieW gUiDeLines, § 3.3 (2005); Wyoming DeP’t oF tRansP., Traffic Impact Studies, tRaFFiC PRogRam aCCess manUaL, c. V (2014). 108 See, e.g., Jada View, LLC v. Bd. of Sup’rs of Unity Twp., 2084 C.D. 2011, 2013 Pa. Commw. Unpub. LEXIS 319, at *8, 65 A.3d 477 (Apr. 18, 2013) (upholding on-site exactions for road improvements based on traffic impact study showing that the road improvements were required to address the anticipated traffic impacts of the develop- ment); McClure v. City of Springfield, 175 Or. App. 425, 28 P.3d 1222 (2001) (upholding exaction for highway right-of- way based on City’s detailed calculation of additional road- way area needed to accommodate trips that development was anticipated to generate); Sparks v. Douglas Cnty., 127 Wash. 2d 901, 913, 904 P.2d 738, 745–46 (1995) (uphold- ing exactions for highway right-of-way based on county’s calculation that development would approximately double traffic in the area). In Dolan, the pedestrian/bicycle ease- ment condition was overturned because, although the City of Tigard quantified the anticipated traffic impact of the proposed development, it failed to quantify the traf- fic demand that would be offset by the pedestrian/bicycle path. Dolan v. City of Tigard, 512 U.S. 374, 395–96, 114 S. Ct. 2309, 2322, 129 L. Ed. 2d 304, 323 (1994).

16 across the developer’s property.109 Like the pedestrian and bicycle easement in Dolan, it can be difficult to reliably quantify the reduction in highway demand attributable to alternative transportation strate- gies.110 Therefore, on-site exactions to address the traf- fic impacts of development are most likely to satisfy the essential nexus test if the on-site exactions are for improvements to the highway system, rather than alternative transportation strategies.111 In the survey of state transportation agencies con- ducted for this digest, a slight majority of survey respondents (15 out of 27) indicated that they do not regularly exact dedications of a portion of the devel- oper’s parcel as a condition of granting highway access permits. Many of the state transportation agencies who do exact dedications from the developer’s real property indicated in the survey that it is an infre- quent occurrence. The most typical purposes for the on-site exactions are that the traffic impact study or other standard methods employed by the state trans- portation agency indicate that additional lanes (e.g., turn lanes, acceleration or deceleration lanes, or addi- tional travel lanes) are warranted to support the additional traffic generated by the development, and that the existing highway right-of-way is insufficient to construct the additional lanes.112 These exactions generally will satisfy the essential nexus test, as they are individually determined (tailored) to address the quantified impact of the development. A handful of survey respondents indicated that dedications such as strip easements for future highway widening are exacted as standard condi- tions for approving permits within specific high- way corridors, where the state transportation agency expects to need to acquire right-of-way in the future.113 These exactions are more problem- atic from a legal standpoint, because the need for right-of-way had been identified prior to the permit application, so it is unlikely that the pro- posed development created the need.114 Where the planned highway expansion is speculative or in the distant future, it is even less likely that the purpose of the easement requirement is to miti- gate the impact of the proposed development.115 Courts employing the heightened scrutiny of the essential nexus test may be expected to overturn required improvements, the applicant must dedicate the right of way.”); minnesota DeP’t oF tRansP., Development and Permit Review, mn/DOT aCCess management manUaL, ch. 4, at 18 (2008) (“Dedication of right-of-way for improve- ments directly related to the proposed public street connec- tion may be a condition of approval for a Mn/DOT public street connection permit.”). 113 Although some state transportation agencies vol- unteered in their survey responses that they exact easements for future expansion as a condition of high- way access permits, other state transportation agencies expressly forbid such exactions for general expansion. See, e.g., minnesota DeP’t oF tRansP., Development and Permit Review, mn/DOT aCCess management manUaL, ch. 4, at 18 (2008) (“Dedication of right-of-way for general corridor expansion or access control is not a condition of approval for a Mn/DOT public street connection permit.”). 114 Sparks v. Douglas Cnty., 127 Wash. 2d 901, 914, 904 P.2d 738, 745 (1995) (“It is not clear whether, under Dolan, municipalities may take into account future developments and their anticipated cumulative impacts.”). See also id. at 747–48 (Alexander, J., dissenting): Douglas County had previously made a formal announcement of its commitment to make certain improvements to Empire Way. Once these planned improvements are factored into the equation, the exaction of land from the developer for right-of-way cannot be said to be related in any extent, let alone proportionally related, to the traffic impacts arising from the development. 115 Burton v. Clark Cnty., 91 Wash. App. 505, 525–26, 958 P.2d 343, 356 (1998) (overturning requirement for developer to dedicate easement across property to improve highway connectivity when it was speculative when or if county would ever construct connecting road); Unlimited v. Kitsap Cnty., 750 P.2d 651, 654 (Ct. App. Wash. 1988) (overturning requirement for developer to dedicate right- of-way for highway extension when it was speculative when or if county would ever construct extension). 109 Newman, supra note 82, at 25 (Mar./Apr. 1991) (“[A]lternative transportation strategies should only be imposed if such measures are potentially superior to simple, acceptable, environmentally sound highway improvements which adequately address the new development traffic….”). 110 Dolan, 512 U.S. at 395–96 (1994) (“No precise math- ematical calculation is required, but the city must make some effort to quantify its findings in support of the dedi- cation for the pedestrian/bicycle pathway beyond the con- clusory statement that it could offset some of the traffic demand generated.”). However, requirements to provide sidewalks adjacent to on-site roads are likely to be upheld as generally applicable road construction standards, based on the public safety aspect of the sidewalks rather than due to any reduction in highway demand resulting from the added pedestrian capacity. 111 But see David Ackerly, Exactions for Transportation Corridors After Dolan v. City of Tigard, 29 Loy. L.a. L. Rev. 247 (1995): The Supreme Court should relax its new rough proportionality test to allow intermodal transporta- tion solutions. If a municipality shows that a new development will increase traffic congestion, then the Court should allow flexibility in exactions that will encourage city planners to explore all possible solu- tions, not merely more roads and more highways. 112 See, e.g., geoRgia DeP’t oF tRansP., Right of Way Requirements, RegULations FoR DRiveWay anD enCRoaCH- ment ContRoL, at 4–27 (2009) (“If sufficient right of way exists, improvements to the State Highway will be permit- ted without the requirement of additional right of way. …If additional right of way is required in order to construct the

17 such general dedication requirements,116 as they are similar to the “comprehensive program” of extorting easements in exchange for development permits that was considered an uncompensated taking in Nollan.117 B. On-Site Environmental Exactions The essential nexus test applies when permit- ting agencies impose environmental mitigation conditions or restrictions on use of the land as a condition for approving a development permit. This includes situations in which a portion of the developer’s property is required to be dedicated to public purposes, such as permanent conservation easements over a portion of the property in exchange for being permitted to fill wetlands on another portion of the property,118 or on-site drain- age features to mitigate additional stormwater generated by the development,119 or on-site public overlooks to mitigate the loss of visual access to natural resources.120 Mitigation of such adverse environmental impacts of development has long been understood to be a legitimate public purpose, and it is thus typically within the authority of local government land-use authorities and federal and state environmental agencies to impose on- site mitigation conditions.121 For example, when a development will impact a specific natural resource, an agency authorized by statute to pro- tect that natural resource typically has the authority to impose conditions to mitigate the adverse impact. The more difficult question under the essential nexus test is whether the conditions imposed are roughly proportional to the antici- pated impact.122 This can be one of the most misunderstood aspects of legal challenges to permit conditions, because the conditions imposed to mitigate the environmental impacts of development are often similar to general land-use controls imposed for environmental reasons outside of the permitting context. Restrictions on land use outside of the per- mitting context are generally upheld as a legiti- mate application of the government’s police pow- ers. The same goes for restrictions on development, in which a proposed development is not permitted (i.e., denied outright) because of its potential adverse environmental impacts.123 In those cases, the land-use restrictions are evaluated not accord- ing to the essential nexus standard, but rather under the deferential scrutiny of the Penn Central test for regulatory takings.124 Under the Penn Central test, land-use restrictions are likely to be upheld as a legitimate use of the government’s police powers.125 The U.S. Supreme Court has confirmed that outright denials of development permits based on environmental concerns, when development would not be permitted under any circumstances, are not exactions and are to be evaluated under the Penn Central test for regulatory takings rather 116 See, e.g., Hillcrest Prop., LLP v. Pasco Cnty., 939 F. Supp. 2d 1240, 1265 (M.D. Fla. 2013) (holding unconsti- tutional a blanket requirement to dedicate right-of-way within a planned transportation corridor in exchange for a development permit); Dep’t of Transp. ex rel. People v. Amoco Oil Co., 174 Ill. App. 3d 479, 489, 528 N.E.2d 1018, 1023 (1988) (overturning blanket highway access permit condition that would limit the amount paid by the state transportation agency for the developer’s property in future eminent domain condemnation). 117 Nollan v. Cal. Coastal Comm’n, 483 U.S. 825, 841–42, 107 S. Ct. 3141, 3152, 97 L. Ed. 2d 626, 692 (1987). 118 E.g., Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586, 2593, 186 L. Ed. 2d 697, 706 (2013). 119 E.g., Dolan v. City of Tigard, 512 U.S. 374, 380, 114 S. Ct. 2309, 2314, 129 L. Ed. 2d 304, 313 (1994). 120 E.g., Nollan, 483 U.S. at 836 (“[T]he condition would be constitutional even if it consisted of the requirement that the Nollans provide a viewing spot on their property for passersby with whose sighting of the ocean their new home would interfere.”). 121 CaLLies, supra note 4, at 257 (“Under Nollan’s stan- dards these exactions will come under greater scrutiny, although no doubt exists that their purposes are valid police-power objectives.”). 122 Id. (“The problem with imposing exactions for such purposes lies in the difficulty of quantifying adverse development impacts. Nevertheless, to satisfy the Nollan remoteness test, government agencies must document the relationship between development and the need for miti- gating conditions….”). 123 The essential nexus test does not require a permit- ting agency to disregard substantive environmental law enacted to protect natural resources. When the adverse environmental impacts of a proposed development can- not be adequately mitigated at a reasonable cost to the developer, the agency should consider simply denying the permit rather than granting the permit with conditions that might seem so disproportionate as to constitute a taking under the essential nexus test. See, e.g., McAllister v. Cal. Coastal Comm’n, 169 Cal. App. 4th 912, 942, 87 Cal. Rptr. 3d 365, 388 (Cal. Ct. App. 2008) (remanding for agency to reconsider its issuance of a development permit, when the agency had “excused non- conformance with the resource-dependent-use restric- tion to avoid an unconstitutional taking”). 124 See supra notes 58–63 and accompanying text. 125 A 2003 study found that landowners prevail against the government in less than 10 percent of cas- es in which the Penn Central test is applied (including 13.4 percent of cases that reached the merits stage). F. Patrick Hubbard, Shawn Deery, Sally Peace & John Fougerousse, Do Owners Have a Fair Chance of Prevail- ing Under the Ad Hoc Regulatory Takings Test of Penn Central Transportation Company?, 14 DUke env. L. & PoL’y F. 121, 141–42 (2003).

18 than the heightened scrutiny of the essential nexus test.126 There is a large body of pre-Koontz case law in which both state and federal courts have routinely rejected application of the essential nexus test to on- site environmental mitigation conditions, opting instead for the reduced scrutiny of the Penn Central test.127 The logic in these cases seems to be that, if development could be denied outright due to legiti- mate environmental concerns, and such denial would be evaluated under the regulatory takings test, then it is illogical to apply stricter scrutiny to granting a development permit subject to certain conditions to protect the same environmental con- cerns.128 However logical this argument appears, it was specifically rejected in Nollan, in which the U.S. Supreme Court applied the essential nexus test to on-site mitigation conditions even though an uncon- ditional permit denial would have been evaluated according to the test for regulatory takings.129 Nev- ertheless, there remains a large body of post-Nollan, pre-Koontz case law rejecting the essential nexus test for on-site environmental conditions, and many of the cases have not been formally overturned, although they appear to be in conflict with the Court’s exactions jurisprudence. Caution should be exercised when relying on pre-Koontz case law to support challenged on-site environmental mitiga- tion conditions. One representative, and influential, case in which federal courts rejected the application of the essen- tial nexus test to on-site environmental permit con- ditions is Norman v. United States.130 In Norman, developers unsuccessfully challenged a permit granted by the Corps under the Clean Water Act that would allow the developers to fill approximately 60 acres of wetlands, conditioned upon the developers creating or restoring approximately 195 acres of wet- lands and maintaining approximately 220 acres of wetlands in perpetuity.131 To satisfy the Corps requirement to maintain the wetlands in perpetuity, the developers transferred title to the wetlands por- tion of the property to a nonprofit property owners association controlled by the developers.132 Citing cases in which denials of wetland development per- mits were upheld under deferential scrutiny,133 both the U.S. Court of Federal Claims and, on appeal, the U.S. Court of Appeals for the Federal Circuit openly doubted whether the essential nexus test even applied in that situation,134 in which a wetlands development permit was not denied but rather con- ditioned upon the creation and preservation of 126 City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 687, 702–03, 119 S. Ct. 1624, 1635 (1999). 127 See, e.g., McClung v. Sumner, 548 F.3d 1219, 1225 (9th Cir. 2008) (rejecting essential nexus test in favor of Penn Central test for on-site stormwater conditions placed on development permit), abrogated by Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586, 2594, 186 L. Ed. 2d 697, 708 (2013); Walcek v. United States, 49 Fed. Cl. 248, 254, 272 (2001) (employing Penn Central test to uphold wetlands mitigation conditions imposed on development permit). See also supra notes 41–43 and accompanying text. 128 See, e.g., Sierra Club v. Strock, 495 F. Supp. 2d 1188, 1226 n.148 (S.D. Fla. 2007) (“This Court notes that it is somewhat unusual that private purchasers of wetlands might succeed with a takings claim when the regulatory prohibitions on destruction of wetlands clearly have been established for at least two decades.”). 129 Nollan v. Cal. Coastal Comm’n, 483 U.S. 825, 844–46, 107 S. Ct. 3141, 3153, 97 L. Ed. 2d 626, 694 (1987) The Coastal Commission, if it had so chosen, could have denied the Nollans’ request for a development permit, since the property would have remained eco- nomically viable without the requested new develop- ment. Instead, the State sought to accommodate the Nollans’ desire for new development, on the condi- tion that the development not diminish the overall amount of public access to the coastline. …The Court finds fault with this measure because it regards the condition as insufficiently tailored to address the pre- cise type of reduction in access produced by the new development. (Brennan, J., dissenting). 130 63 Fed. Cl. 231 (2004), aff’d, 429 F.3d 1081 (Fed. Cir. 2005), cert. denied, 547 U.S. 1147 (2006). 131 Norman v. United States, 429 F.3d 1081, 1086–87 (Fed. Cir. 2005); Norman v. United States, 63 Fed. Cl. 231, 240 (2004). One troubling aspect of this case is the fact that the Corps had originally concluded that there were only 28 acres of wetlands on the property, but, after public opposition to the development proposal became manifest, the Corps later concluded that there were 230 acres of wetlands on the property. Norman v. United States, 429 F.3d 1081, 1085 (Fed. Cir. 2005); Norman v. United States, 63 Fed. Cl. 231, 237 (2004). 132 Norman v. United States, 429 F.3d 1081, 1087 (Fed. Cir. 2005); Norman v. United States, 63 Fed. Cl. 231, 237 (2004). 133 Norman v. United States, 429 F.3d 1081, 1088 (Fed. Cir. 2005) (citing Forest Props., Inc. v. United States, 177 F.3d 1360, 1364 (Fed. Cir. 1999) (upholding the Corps’ denial of a wetlands dredge-and-fill permit under the less stringent test for regulatory takings)); Norman v. United States, 63 Fed. Cl. 231, 248 (2004) (citing Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l Planning Agency, 535 U.S. 302, 324 (2002) (upholding a temporary moratorium on development while a regional water quality plan could be developed to comply with Clean Water Act requirements)). 134 Norman v. United States, 429 F.3d 1081, 1090 (Fed. Cir. 2005) (“Even if the nexus requirement of the Nollan and Dolan line of exaction cases were applicable here— and we think it clear that it is not—we would agree with the trial court’s conclusion that an appropriate nexus exists between the set-aside of the 220.85 acres and the regulatory purpose.”); Norman v. United States, 63 Fed. Cl. 231, 251 (2004) (“It is clear that the situation at bar is not a physical taking as enunciated by Nollan, but rather, fits within the framework of allegations which might sup- port a classic regulatory taking.”).

19 additional wetlands. Both courts supported their conclusion that the essential nexus test probably did not apply based on the fact that there was no “per- manent physical invasion” of the property—transfer- ring ownership of the wetlands to the developer- controlled property owners association appeared less onerous than the government taking title to, or an easement over, the wetlands.135 Nevertheless, both courts concluded that, even if the essential nexus test applied, it was satisfied because the require- ment to create and preserve wetlands bore a nexus to the opportunity to fill and dredge other wetlands on the property.136 Neither Norman court considered the rough proportionality prong of the essential nexus test—i.e., whether the 195 acres of wetlands that were required to be created or restored, and the requirement to preserve 220 acres of wetlands in perpetuity, were roughly proportional to the 60 acres of wetlands that would be lost due to the proposed development. Both Norman courts proceeded to eval- uate and uphold the permit conditions under the more deferential test for regulatory takings.137 In light of the U.S. Supreme Court in Koontz applying the essential nexus test to wetland mitiga- tion conditions, it seems clear that the Norman courts erred. A “permanent physical invasion” is not a prerequisite to application of the essential nexus test, although it does weigh heavily in favor of find- ing that the condition is disproportionate to the anticipated impact of the development. The mere fact that wetland mitigation requirements were imposed as conditions for granting the development permit means that the Norman courts should have applied the essential nexus test, and thus should have considered whether the requirements were roughly proportional to the impact of the develop- ment on existing wetlands. The wetland mitigation requirements imposed in Norman were not mere restrictions on use of the land, but affirmative requirements to create, restore, and maintain wet- lands in perpetuity—conditions that probably could not have been imposed on the property owner under the guise of environmental regulation in the absence of new development. Nevertheless, the Norman decisions, particularly the long analysis by the Court of Federal Claims weighing the Penn Central factors,138 illustrate how even very substantial affirmative mitigation requirements are likely to be upheld if the permit- ting agency can have the requirements scrutinized under the Penn Central test for regulatory takings, rather than under the essential nexus test. To invite less judicial scrutiny, permitting agencies should consider whether their desired outcome can be accomplished by regulatory action, outside the per- mitting process, rather than by permit conditions.139 As an alternative, permitting agencies may consider simply denying the permit until the developer pro- poses appropriate mitigation measures, rather than the agency proposing mitigation conditions (which would subject the conditions to evaluation under the essential nexus test). For example, in the long-run- ning case of Lost Tree Village Corp. v. United States,140 in which the Corps outright denied a wetlands development permit despite wetland mitigation pro- posals by the developer, both the Court of Federal Claims and the Federal Circuit have repeatedly (and probably correctly) analyzed the permit denial under the less stringent test for regulatory takings, because the Corps has not proposed conditions under which a permit would be granted.141 State court decisions subsequent to Koontz illus- trate the heightened scrutiny under which on-site environmental conditions are to be analyzed.142 A few months after the Koontz decision, the Texas Court of 135 Norman v. United States, 429 F.3d 1081, 1089 (Fed. Cir. 2005); Norman v. United States, 63 Fed. Cl. 231, 248 (2004). 136 Norman v. United States, 429 F.3d 1081, 1090 (Fed. Cir. 2005); Norman v. United States, 63 Fed. Cl. 231, 251 (2004) (“The public interest served by requiring the preservation of wetlands in exchange for the filling and dredging of other lands relates directly to the condition imposed.”). 137 Norman v. United States, 429 F.3d 1081, 1092–94 (Fed. Cir. 2005); Norman v. United States, 63 Fed. Cl. 231, 237 (2004). 138 Norman v. United States, 63 Fed. Cl. 231, 261–87 (2004). 139 See, e.g., Horne v. Dep’t of Agric., 135 S. Ct. 2419, 2428, 192 L. Ed. 2d 388, 399 (2015) (recognizing that regulatory action subject to deferential review under the Penn Central test may be able to accomplish the same ends as a physical taking subject to heightened scrutiny, but the U.S. Constitution “is concerned with means as well as ends”). 140 115 Fed. Cl. 219 (2014) (concluding that the Corps’ permit denial constituted a regulatory taking by depriv- ing the developer of all economically beneficial use of the land, because the land’s residual value as undeveloped wetlands was not economic value), aff’d, 787 F.3d 1111, 1119 (Fed. Cir. 2015). 141 See, e.g., Lost Tree Vill. Corp. v. United States, 787 F.3d 1111, 1114 (Fed. Cir. 2015) (“[T]he Army Corps of Engineers denied Lost Tree’s § 404 fill permit because the Corps determined that Lost Tree could have pursued less environmentally damaging alternatives and because Lost Tree had adequately realized its development pur- pose through the development of the John’s Island com- munity.”). 142 See, e.g., Lynch v. Cal. Coastal Comm’n, 229 Cal. App. 4th 658, 686, 177 Cal. Rptr. 3d 654, 675 (2014) (overturn- ing conditions imposed on seawall construction as lacking nexus or rough proportionality to adverse impacts of sea- wall), review granted, 339 P.3d 328 (2014).

20 Appeals scrutinized a number of conditions imposed by a municipality on a residential development permit,143 including a number of on-site drainage improvements required by the municipality. For example, a requirement to add stormwater drainage inlets to prevent flooding of lots within the subdivi- sion was upheld under the essential nexus stan- dard.144 First, the nexus element was satisfied for the on-site drainage inlet condition, because “[p]reven- tion of flooding is a legitimate government inter- est.”145 Second, “the condition was roughly proportion- ate to the projected impact of the development,” where the additional on-site drainage inlets “affect only the subdivision and not any other property and were required because of the subdivision’s design.”146 The requirement for additional drainage inlets resulted from “an individualized determination based on the unique conditions of the development.”147 Other on-site conditions imposed by the City, however, were overturned using the essential nexus test. For example, the developer proposed to route water collected in the additional stormwater inlets to a floodplain behind the residential lots that the inlets were intended to protect from flood- ing.148 The City, however, required the developer to extend the drainage pipe an additional 120 ft, to an outlet in a nearby creek.149 “[T]he City did not con- clusively establish that the extension of the drain- age pipe to the creek bed was an essential nexus of a legitimate government interest and that the extension was roughly proportionate to the impact of the project,” and thus the drainage pipe exten- sion was a compensable exaction.150 In addition, the City required that some retaining walls proposed by the developer be made steeper—4-to-1 batter as opposed to the 3-to-1 batter proposed by the devel- oper—in order to “further erosion control and improve drainage.”151 The court concluded that the additional expense of constructing steeper walls was a compensable exaction, in which the City “presented no evidence that the four-to-one slope requirement was roughly proportional to the pro- jected impact of the subdivision.”152 Unlike the broad authority of state transporta- tion agencies to regulate traffic impacts of develop- ment, state transportation agencies typically do not have broad statutory authority to regulate gen- eral environmental impacts of development. Most state transportation agencies responding to the survey conducted for this digest indicate that they do not impose on-site conditions to mitigate envi- ronmental impacts aside from traffic impacts. Twelve of the 27 state transportation agencies responding to the survey (44 percent) did indicate, however, that they regularly require some sort of on-site drainage mitigation, such as stormwater retention ponds, to mitigate the stormwater impact of the proposed development on the state highway system.153 State transportation agencies typically have the authority to impose on-site drainage con- ditions in order to prevent a net increase in storm- water released to the highway system. Under the essential nexus test, the state transportation agency must show that its on-site drainage require- ment is roughly proportional to the anticipated stormwater impact of the development. This can be accomplished with drainage impact studies, which (like traffic impact studies) can assess and quantify the impact of the proposed development on the state highway system, as well as the improvement in conditions that can be anticipated from the proposed on-site drainage features.154 Other permitting agencies, including environmen- tal agencies charged with protection of natural resources, often have similar requirements (some- times imposed by statute) to quantify adverse 143 Mira Mar Dev. Corp. v. City of Coppell, Tex., 421 S.W.3d 74, 85 (Tex. App. 2013) (“To resolve these issues, we must first determine whether each requirement was an exaction and, if so, whether the City established (1) an essential nexus to the substantial advancement of a legiti- mate government interest and (2) the rough proportional- ity to the projected impact of the development.”). 144 Id. at 86–87. 145 Id. at 87. 146 Id. 147 Id. 148 Id. at 88. 149 Id. 150 Id. at 89. 151 Id. at 91–92. 152 Id. at 92. 153 See, e.g., geoRgia DeP’t oF tRansP., Drainage Design, RegULations FoR DRiveWay anD enCRoaCHment ContRoL, at 6 2 (2009). When the rate of discharge from the proposed devel- opment to the State Highway System is less than the rate at which runoff was discharged prior to the devel- opment, then detention is not required. Any discharge that exceeds the amount of water by 1 cubic foot per second at post development detention must be provided on the development site. minnesota DePt. oF tRansP., Development and Permit Review, mn/DOT aCCess management manUaL, ch. 4, at 22 (2008) (“Any proposed access should perpetuate the existing drainage patterns and maintain the stability of the highway infrastructure. The size and type of any necessary drainage appurtenances (e.g., culverts, end treatments, ditch widths, etc.) will be a condition of an access permit.”). 154 See, e.g., PennsyLvania DeP’t oF tRansP., Drainage Impact Report, HigHWay oCCUPanCy PeRmit gUiDeLines, at 57–58 (2004).