Do Takings Laws Promote A Healthy Environment For Comprehensive Planning?

PURPOSE OF THE STUDY

The Fifth Amendment of the U.S. Constitution requires government to compensate citizens for the taking of private property. Under U.S. Supreme Court rulings, this constitutional takings clause can require government agencies to pay compensation to property owners for regulations that go too far in depriving owners of economically beneficial use of their property.

Beginning in 1987, the U.S. Supreme Court issued a series of decisions on regulatory takings that tended to strengthen these protections. The rulings expanded the ability of private property owners to seek compensation from government for regulations as well as for exactions imposed on them as a condition of approval for development projects.

Some observers have feared that these rulings would impose a "chilling effect," forcing local governments to either retreat from reasonable use of their regulatory authority or else be overwhelmed by takings lawsuits. Others, more sympathetic to the property rights movement, have hoped the rulings would rein in excessive government regulation. Some have argued the rulings do not go far enough and that additional legislation is needed to protect property rights.

DISCUSSION OF THE RESULTS . . .

Impact on Planning and Regulation

While many jurisdictions have not substantively changed their regulatory behavior in response to the takings rulings, the survey data indicate a sizeable minority of them have done so. This effect is much more prevalent in counties than in cities. This might have to do with the fact that counties are more likely than cities to be in control of large areas of undeveloped land, leading to conflicts over sprawl, open space, habitat, agricultural preservation, and so forth.

The survey and case studies show that local governments are responsive to the threat of litigation. Property owners, especially those with legal representation, can sometimes sway local governments by raising takings objections or litigation threats. In some cases this encourages risk-averse cities and counties to settle lawsuits or change their regulatory practices rather than risk litigation.

Impact on Fees and Exactions

The takings rulings and related concerns have had several impacts on the form and substance of exactions.

• Takings Issue Can Encourage Rationalization of the Planning Process
The rules imposed by takings precedent can encourage the planning process to become more systematic . The takings rules mean that decisions that are made in an ad hoc or improvisatory way will tend to be more vulnerable to legal challenge than those that are carefully formulated as part of a long-range policy.

• Increased Complexity and Red Tape
One unintended consequence of the takings rulings has been to increase the complexity of the planning process. In some respects, this can be viewed as a salutary effect. The increased attention to preparing thorough findings and the reassessment of impact fees and exactions policies are signs that the planning process has become in some jurisdictions more methodical, predictable and transparent.

Reduced Use of Some Exactions

The most commonly affected types of fees and exactions seem to be those for roads and traffic, trails, public access, habitat, open space and parks.

• Impact on Fees and Exactions for Roads, Traffic, and Other Infrastructure
The problem of cumulative impacts has changed how many cities and counties handle fees and exactions for road and traffic improvements. For example, a number of cities have abandoned or reduced the practice of exacting right-of-ways from developers for road widening and other purposes because of concerns about rough proportionality. Some local governments have also become more careful about adopting development fees that burden new development with infrastructure needs created by old development. However, these changes can leave fiscally strapped cities and counties in a bind as to how to finance these needed improvements. The cumulative impacts problem also arises for other types of infrastructure, such as bikeways, sidewalks, and drainage.

Impact for the Environment, Recreation & Quality Of Life . . .

Some cities and counties have become more cautious or uncertain about fees and exactions for environmental, recreational and quality of life purposes. These include habitat or endangered species protection, protection of open space, and recreational trails.

The demand for these amenities reflects how the public's conception of local government infrastructure and services has expanded. But when these are provided through fees or exactions, uncertainties may arise about establishing nexus and rough proportionality. These amenities tend to serve community-wide needs and are not as easily linked directly to the impact of a particular development. In communities that are divided on issues such as environmentalism or growth control, these amenities may be inherently prone to controversy. In addition, the courts may tend to scrutinize these kinds of exactions more carefully, on the grounds that they provide benefits rather than mitigate a public harm.

The Problem of Specific Exactions . . .

The takings rulings seem particularly sensitive to practices involving the exaction of land. This may be because the Court feels that such exactions go directly to the core values of property ownership: the right of private individuals to physically control their property and exclude the public from their land. This tends to arouse both property owner opposition and judicial scrutiny.

In addition, project-specific exactions of land tend to be scaled not to the impacts of the development, but instead to specific needs the local government has at the time. For example, a county might have its eye on a strip of land that would be very useful as a trail link or right-of-way. It would be tempting to require it as a dedication when the owner seeks to develop the land, but this may lead to nexus or rough proportionality objections unless the dedication is related to and proportional to the impacts of the project.

The Impact on Planning Outside the Fee/Exaction Context

Takings issues can also arise when local governments regulate the type or density of land use through general plans, zoning and subdivision approvals. The survey indicates that these stages of planning are often subject to takings objections, and a number of cities and counties are changing policies and decisions to avoid takings issues.

Unlike exactions, the nexus and rough proportionality standards do not apply to these areas of planning. The Lucas precedent establishes that a total wipeout of property value will be a compensable taking, but ambiguity remains about whether a takings occurs when there is a partial loss of property value. Local governments are generally considered to have considerable leeway to impose regulatory losses through downzoning or downplanning (reducing the allowable density of construction) without violating the takings clause.

Even without takings issues, land use planning can be very controversial and involve very high stakes. General plans, zoning and subdivision issues can involve large numbers of property owners and/or large amounts of land. They are often tied to potentially divisive issues such as growth control and environmentalism. Some of the changed regulatory behavior in this area may be attributable to a chilling effect – a desire to avoid the risk of takings litigation. But in many cases the reason is really political. Sometimes elected officials just sympathize with the position of property owners. Or, they may bow to the political pressure exerted by vocal constituencies.

SUMMING UP THE POLICY IMPLICATIONS

Constraints on Exactions as a Public Finance Tool

Takings rules and concerns about litigation can close off avenues of financing public infrastructure and services. For example, a city may see a piece of land being developed that it knows should be set aside for a future freeway interchange. Takings rules might prohibit it from being exacted, since such an exaction would be disproportionate to development's impacts. At the same time, budgetary constraints may prevent it from being purchased.

Similarly, new development cannot be fully burdened with the costs of infrastructure created in part by previous development. Yet the chance to exact the contributions from past development may already have come and gone. While the takings rules promote equity in these situations, there is still the unanswered question of how these infrastructure needs should be funded.

Furthermore, the takings rules raise subtle legal questions about the types of exactions that can be defended successfully. This may make some jurisdictions excessively cautious about using exactions to collect fees where they are concerned about the ability to quantify impacts or establish an airtight nexus between the mitigation measures and the development impacts. In part this reflects uncertainty about legal issues that can only be resolved by the courts. Yet it may also reflect a need for better sharing of information on fee methodologies and ordinances among local governments.

Legal Liability Can Distort Process

While litigation can be one way of holding government accountable, it is probably not desirable for city and county policy decisions to be based solely or mainly on the fear of litigation costs. How can the distorting effect of the takings legal climate be addressed?

Defending a lawsuit can be prohibitively costly even if the takings claim is not valid. Furthermore, takings law is notoriously unpredictable, and unexpected lawsuits or judgments are always a possibility. One issue that deserves further exploration is the lack of insurance among cities and counties.

However, the best way to reduce the distorting influence of takings litigation is to avoid disputes over takings altogether. For this reason, takings can provide strong incentives to plan more systematically, and to plan ahead more. Such changes would yield the most benefit in communities that still have some significant growth ahead of them.