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Land Use Impact Fees: Does Koontz v. St. Johns River Water Management District Echo an Arkansas Philosophy of Property Rights?

By · July 18, 2014 · 2014 Ark. L. Notes 1626
In categories: Constitutional Law, Extended Article, Land Use, Post Types, Property Law, Real Estate Law, Uncategorized

Carl J. Circo 1


A striking and unusual premise launches the takings clause of the Arkansas Constitution of 1874: “The right of property is before and higher than any constitutional sanction; and private property shall not be taken, appropriated or damaged for public use, without just compensation.” 2 Before and higher than freedom of speech? Before and higher than freedom of religion? Before and higher than life and liberty?

While Arkansas courts have often quoted the before and higher premise, I find little in those cases to show that the phrase significantly influences the outcomes in property rights cases. 3 Do property rights in fact have a peculiarly elevated status in Arkansas, whether due to that special phrase in the constitution or for any other reason? I don’t propose to offer an opinion on that question, although it certainly would be a good one to explore in a later article. Perhaps the framers intended to inculcate a philosophy favoring property rights above all others, but I make no such claim here.

My curiosity about the before and higher proposition contained in the Arkansas Constitution is far less ambitious. It stems from my reflections on the narrow topic of governmental regulation of land use in the form of exactions. These governmental impositions frequently accompany land development permits. Common exactions include demanding a public right of way dedication or assessing impact fees to offset public costs associated with a development. I am particularly interested in monetary exactions as contrasted with land dedication exactions. At least compared to some jurisdictions facing the highest levels of urban growth, the Arkansas legislature and Arkansas municipalities have not been particularly aggressive in the use of monetary exactions. One might expect that to be the case if property rights do in fact occupy an especially privileged status in Arkansas, but I have discovered no evidence that the restrained use of monetary exactions in Arkansas (as discussed below), stems from a distinct property rights preference in the Arkansas Constitution.

Whatever philosophy may have inspired the framers of the Arkansas Constitution of 1874, and whatever its influence may be for the use of exactions in this state, one could scarcely argue that a landowner’s right to develop is before and higher than many other rights recognized by the United States Constitution—at least, that is, not until recently. Simply stated, beginning with a foundational zoning case decided by the U.S. Supreme Court nearly 90 years ago, federal constitutional law has tolerated a wide range of restrictions and regulations relating to land use. 4 In many instances, even relatively burdensome restrictions on an owner’s right to use and develop land routinely survive constitutional challenge provided that they can be defended as reasonable exercises of the police power, which is one of the broadest and most potent bases for governmental action. For example, a zoning regulation or similar restriction affecting land use will typically survive a constitutional challenge unless it is ‘‘clearly arbitrary and unreasonable, having no substantial relation to the public health, safety, morals, or general welfare.’’ 5 Here, I inquire whether a different result would logically follow under a constitutional framework that places property before and higher than other constitutional values.

In truth, the phrase that I have italicized from the Arkansas takings clause is probably little more than a gratuitous flourish characteristic of a style occasionally displayed in Article 2’s declaration of rights. I have no basis for suggesting a more grandiose explanation. With respect to land use exactions in particular, there are so few reported cases in Arkansas that I doubt one could derive from them any special attitude about property rights. Perhaps, the paucity of cases challenging questionable exactions itself indicates that some extraordinary respect for property rights curtails the behavior of land use authorities in Arkansas, but that is mere speculation.

What inspires me to write this article is not the suspicion that Arkansas law affords greater protection to a landowner’s right to develop than does the federal constitution, although I might well have made that argument had I written this article before the U.S. Supreme Court decided Koontz v. St. Johns River Water Management District. 6 Rather, what motivates me is the prospect that Koontz may signal a noteworthy elevation of property rights under the federal constitution. In effect, this essay asks whether Koontzsignifies a convergence of a property rights philosophy at the U.S. Constitutional level today with that suggested in the takings clause of the Arkansas Constitution of 1874. Put another way, what I want to examine is how closely aligned a majority of today’s U.S. Supreme Court might be with the notion that the right of property is before and higher than other constitutional rights.

Land Use Exactions Before Koontz

For more than the past 50 years, municipalities and other land use authorities have relied on land use exactions to carry some of the public costs of real estate development. 7 Impact fees and other common exactions stem from the economic philosophy that real estate development should internalize some of the social costs, or externalities, that development imposes on a local government. At first, exactions merely shifted to developers some of the most immediate and obvious costs of infrastructure required for their new developments. Land use authorities did this especially by conditioning development permits on the landowner’s agreement to dedicate, without compensation, land needed within the proposed development for streets and sewers. The early schemes, therefore, involved land dedication exactions, not monetary ones. Over time, many municipalities became more aggressive in assessing fees in lieu of land dedications to offset a broader range of off-site infrastructure costs, such as the costs of improving nearby intersections or of building new schools and water treatment facilities that would serve the needs of the broader community as well as those of the specific development for which a landowner sought approval.

Several jurisdictions have extended their exaction programs far beyond traditional infrastructure to what may be called soft infrastructure costs. 8 For example, some regularly assess mitigation fees to address environmental concerns attributable to growth. Others charge fees used to finance costs of affordable housing, low-cost day care, and even public art programs. In light of this trend, I have argued that monetary exactions could possibly be used even to help finance public sustainable development objectives and local responses to global climate change. 9 The land use literature generally uses the label of linkage fees for such progressive monetary exactions because these assessments purport to offset social costs that are linked to new development although not directly caused by the specific project being assessed.

All along, landowners and developers have earnestly attacked the legality of land use exactions. 10 Some challenges have proceeded on the basis that a particular exaction is beyond the limits of the police power or that a particular land use authority lacks the power under state law to impose the fee. Over time, however, courts have generally expanded the reach of the police power as it relates to regulating land use, and many state legislatures (although by no means all) have adopted enabling acts to give municipalities and other land use authorities greater power to impose impact, mitigation, and linkage fees. As a result, in many instances, the legality of an exaction turns on federal and state constitutional law.

The two seminal U.S. Supreme Court cases came down in 1987 and 1994. Both dealt with land dedication exactions. That is, each case involved a real estate development permit conditioned on a requirement that the landowner transfer or dedicate to public use a portion of the land proposed for development. For that situation, the Court ultimately established a two-part analysis that both the Court and the legal commentators have subsequently characterized as a form of heightened scrutiny. The word heightened distinguishes the approach from the far less demanding reasonableness principle that applies to many other land use controls. Simply stated, the test requires that a governmental demand for an easement or other land dedication in exchange for a land use permit (1) must be logically and meaningfully related to some legitimate concern over the public impact of the proposed development and (2) may not impose a burden on the landowner that is disproportionate to that public impact. 11 If the land dedication fails to satisfy either of these two tests, then the Takings Clause of the U.S. Constitution requires the government to pay just compensation for the easement or other property interest being demanded.

The Court articulated the first part of the test in Nollan v. California Coastal Commission. 12 In that case, the Court held that there must be an “essential nexus” between an exaction and a legitimate police power purpose. 13 On that basis, the Court held that the Coastal Commission could not condition a land use permit on a requirement for the landowner to grant an ingress and egress easement over the beachfront side of the owner’s property where the concern about the proposed development, as articulated by the Commission, had nothing to do with how the new construction might impair access to the beach but only with how it might interfere with the public’s view of the ocean from the highway located on the side of the property opposite from the beach. Justice Scalia offered a succinct explanation of the constitutional logic. “It is quite impossible to understand how a requirement that people already on the public beaches be able to walk across the Nollans’ property reduces any obstacles to viewing the beach created by the new house.” 14 What was most significant about this holding at the time was that the Court declined to give the same degree of deference to a land dedication condition that it has afforded to many other forms of land use regulation.

The Court established the second prong of the test, known as “rough proportionality,” in Dolan v. City of Tigard. 15 Rough proportionality calls for “some sort of individualized determination that the required dedication is related both in nature and extent to the impact of the proposed development.” 16 At first blush, rough proportionality might seem to establish a relatively easy standard for a land use authority to satisfy. As applied by the Court, however, it is a high hurdle.

To understand just how demanding this constitutional requirement is, consider the Court’s analysis of one of the land dedication conditions involved in the Dolan case. The City of Tigard, Oregon conditioned a permit for a proposed expansion of a retail store on, among other things, the landowner’s agreement to dedicate a portion of the land for an extension of the City’s bicycle and walking pathway. An essential nexus existed because the record showed that the larger project would generate more traffic, at least some of which could be offset by improving the pedestrian and bicycle path. The city even had specific estimates of the number of additional daily trips that the larger store would produce. On this basis, the Court had no trouble identifying an essential nexus between the city’s traffic concerns and its desire for greater capacity to encourage travel by means other than streets. The city, therefore, had satisfied the first prong of the heightened scrutiny test.

The problem was that the record did not establish an appropriate relationship between the specific land dedication demanded and the nature and extent of the impact that the proposed development would have. The Court acknowledged that land dedication exactions for public ways are normally reasonable means for addressing traffic congestion that a proposed project may produce. The city’s generalized determination that the pathway could help with the anticipated traffic problems, however, did not meet the proportionality test that the Court had in mind. “But on the record before us, the city has not met its burden of demonstrating that the additional number of vehicle and bicycle trips generated by petitioner’s development reasonably relate to the city’s requirement for a dedication of the pedestrian/bicycle pathway easement.” 17 Apparently, the city should have introduced into the record reliable studies and projections showing that the proposed expansion of the pathway over the specific strip of the landowner’s property would result in a number of additional bicycle and pedestrian trips that would roughly approximate (and not substantially exceed) the number of additional trips attributable to the store expansion. Do traffic expert possess such a degree of prescience?

In the years following the Nollan and Dolan cases, state courts and lower federal courts, along with legal commentators, dealt extensively with several nettlesome questions about land use exactions that the Court left unanswered. 18 One of the main debates was whether heightened scrutiny should apply only to land dedication exactions and not to impact fees and other monetary exactions. In the Dolan opinion, Justice Rehnquist emphasized that the basis for the heightened scrutiny requirement is the unconstitutional conditions doctrine. He explained that principle in the context of a land dedication exaction in this way: “the government may not require a person to give up a constitutional right—here the right to receive just compensation when property is taken for a public use—in exchange for a discretionary benefit conferred by the government where the benefit sought has little or no relationship to the property.” 19 As will become clear when this article turns to an analysis of the Koontzcase, it is critical to keep the unconstitutional conditions rationale in mind when considering whether monetary exactions should be subjected to heightened scrutiny. But let us not get ahead of the story.

Before Koontz, land use lawyers and planners needed to decide how, as a practical matter, to deal with Nolan and Dolan in light of the growing popularity of impact fees; many, perhaps most, adopted a guarded approach. In particular, the conventional wisdom evolved that to fall safely within constitutional limits, as well as to comport with emerging principles of state land use law, “(1) Impact fees may be no more than the government’s infrastructure costs which are reasonably attributable to the new development, and (2) The new development required to pay impact fees must benefit from the expenditure of those fees.” 20 This cautious attitude informed not only opinions issued by state and lower federal courts, but also many of the enabling acts that state legislatures adopted to authorize impact fees and many of the local ordinances by which cities and other municipalities implemented their impact fee programs.

In 2003, the Arkansas legislature enacted an impact fee statute squarely in this restrained camp. 21 The statute recognizes that some municipalities and political subdivisions in the state were imposing impact fees prior to the statute’s enactment, and to a limited extent it tolerates impact fees already imposed under those earlier programs. But as a general rule, the statute permits development impact fee programs only if they comply with a detailed set of relatively restrictive requirements. 22 Under the Arkansas statute the following specific restrictions apply (references are to the subsection of the statute):

  • Impact fees may be imposed against a real estate development only “to offset costs . . . that are reasonably attributable to providing necessary public facilities to new development.” (b)
  • A municipality may impose and use impact fees “only for the planning, design, and construction of new public facilities or of capital improvements to existing public facilities that expand its capacity or for the recoupment of prior capital improvements to public facilities that create capacity available to serve new development.” (c)(1)
  • Only new development is subject to impact fees and then “only against a particular new development in reasonable proportion to the demand for additional capacity in public facilities that is reasonably attributable to the use and occupancy of that new development.” (d)(1)
  • The owner of the land who pays an impact fee has “the right to make reasonable use of all public facilities that were financed by the impact fee.” (d)(2)
  • An impact fee must be based on an impact fee ordinance that complies with standards consistent with the statutory limitations and that includes an appropriate formula for assessing the fee based on specified service levels relating to the public facilities being financed. (e)
  • Impact fees collected but not expended in accordance with the statute must be refunded, with interest, to the appropriate landowners after 7 years. (h)

Prior to the Koontzcase, I might have argued that the Arkansas statute reflects the before and higher premise of the Arkansas takings clause. I say this in the first place because my view at that time was that the U.S. Supreme Court’s land use jurisprudence generally left wide discretion for state and local governments to exercise authority over real estate development in the public interest, reserving heightened scrutiny solely for those cases in which government conditioned a land use permit on the transfer from the landowner to the government of an interest in the land (or possibly in some other identifiable property). As a secondary matter, I also believe that the protection that the Arkansas statute affords to a landowner’s right to develop property free of exactions accurately mirrors the fact that Arkansas cities and counties seem to resort to exactions relatively less commonly than do land use authorities in many other jurisdictions. While there are examples of relatively aggressive exaction programs in Arkansas, at least as far as my limited research goes, those examples do not seem to be characteristic of land use planning in the state. 23 In other words, when compared to the more radical use of exactions in other parts of the country, it may be fair to say that an Arkansas a landowner’s right to develop may occupy a relatively high status among the panoply of individual rights. In truth, however, the Arkansas statute was almost certainly a product of national trends in land use planning and not of any peculiarly provincial reverence for property rights.

Caution and guarded planning trends aside, the argument over whether the U.S. Constitution required monetary exactions to meet the essential nexus and rough proportionality tests continued in the courts and the scholarly journals during the years between the Court’s 1987 Nollan opinion until its recent decision in the Koontz case. Property rights advocates and many courts concluded that most or all land use exactions were subject to these same standards. In their views, nothing in the Court’s analysis differentiated land dedication conditions from other kinds of land use exactions. On the other side of the debate, several leading state and lower federal court cases, along with a number of commentators, reached a contrary conclusion, noting that Nollan and Dolan both involved classic land dedication exactions. After all, a governmental demand for land unquestionably constitutes a taking that requires just compensation absent some special exception. Depending on the circumstances, however, a monetary exaction is often hard to distinguish from any number of taxing measures or fee programs that have repeatedly survived constitutional attack.

Importantly, both sides generally framed their arguments within the context of the Court’s takings jurisprudence. Only the most ardent property rights advocates claimed that monetary exactions were subject to heightened scrutiny apart from the Nollan and Dolan rationale. In other words, except for the most extreme property rights groups, no one seemed to be arguing that the U.S. Constitution mandated heightened scrutiny of monetary exactions simply because they burdened property rights; certainly, no one in the mainstream seemed to be arguing for heightened scrutiny because property rights were of a first and higher order among constitutional rights. And as the paragraphs that follow explain, under the Court’s analysis in Nollan and Dolan,absent a demand for an interest in identifiable property, there was no apparent constitutional hook upon which to rest the heightened scrutiny argument.

The Implications of Lingle v. Chevron U.S.A Inc.

In a 2005 opinion, the U.S. Supreme Court seemed finally to provide a definitive statement on how Nollan and Dolan fit into the constitutional restrictions on land use regulation. The opinion hinted strongly that Nollan and Dolan logically should apply only to land dedications. The case was Lingle v. Chevron U.S.A. Inc., which raised a novel takings issue outside of the land use arena—whether the State of Hawaii could, without paying just compensation, restrict the amount of rent that Chevron charged its dealer-lessees. 24 The courts below had upheld Chevron’s challenge on the ground that the regulation did not substantially advance any legitimate state interest and therefore constituted a taking. The Court reversed, rejecting that standard as a basis for a takings claim.

Justice O’Connor wrote for a unanimous Court, which is a rare and seemingly comforting occurrence in the Court’s takings decisions. She offered a comprehensive summary of the Court’s jurisprudence in this area, which she candidly acknowledged “cannot be characterized as unified . . ..” 25 According to Justice O’Connor, the cases establish a finite number of well-settled categories of takings. “The paradigmatic taking requiring just compensation is a direct government appropriation or physical invasion of private property.” 26 In addition to these actual seizures of property, the Court has also recognized regulatory takings, in which “government regulation of private property” becomes “so onerous that its effect is tantamount to a direct appropriation or ouster . . . .” 27 The cases identify two different forms of regulatory interference with property that constitute per se takings. The first per se category applies when a regulation “requires an owner to suffer a permanent physical invasion of her property—however minor . . . .” 28 The other per se category involves regulatory actions that have the effect of denying to the property owner the complete economic benefit of the property. 29 A third kind of regulation is governed by the principles announced in Penn Central Transportation Co. v. New York City. 30 Whether or not a land use regulation constitutes a taking under Penn Central depends on a balancing analysis that takes into account several considerations. Justice O’Connor explained that outside of governmental actions falling into one of the two relatively limited per se categories, most regulatory takings claims must be analyzed under the Penn Central standards. She explained that “the Penn Central inquiry turns in large part, albeit not exclusively, upon the magnitude of a regulation’s economic impact and the degree to which it interferes with legitimate property interests.” 31 Note in particular that, except for outright appropriations and per se regulatory takings, the dominant constitutional limitation on governmental regulation of land use calls on courts to balance the right of property against the government’s legitimate interest in controlling land use in the public interest. It is in this sense that, especially following Justice O’Connor’s lucid clarifications, one might confidently conclude that, at least with respect to land use regulation, the right of property does not occupy a place of first and higher priority than other constitutional rights.

Justice O’Connor’s summary of the Court’s takings jurisprudence concluded with one final category, involving “the special context of land-use exactions” dealt with in the Nollan and Dolan cases. 32 Her brief overview explicitly treated those two cases as being limited to situations in which government demands that a landowner give up an interest in land. “Both Nollan and Dolan involved Fifth Amendment takings challenges to adjudicative land-use exactions—specifically, governmental demands that a landowner dedicate an easement allowing public access to her property as a condition of obtaining a development permit.” 33 She emphasized that “Nollan and Dolan both involved dedications of property so onerous that, outside the exactions context, they would be deemed per se physical takings.” 34 She went on to explain that the principle underlying Nollan and Dolan was the unconstitutional conditions doctrine. As explained clearly in the Dolan case, that doctrine prevents the government from requiring someone to give up a constitutional right “in exchange for a discretionary benefit conferred by the government where the benefit has little or no relationship to the property.” 35 And what constitutional right did the local land use authorities require the landowners to give up in the Nollan and Dolan cases? Appreciating the answer to this question is key to understanding how limited the holdings of those cases apparently were, as unanimously interpreted in Lingle. The exactions demanded in Nollan and Dolan were subject to heightened scrutiny because they were governmental attempts to require the landowners to give up their Fifth Amendment rights to just compensation for the interests in land (easements) that the government wanted to acquire. In other words, the exaction conditions in those cases operated as physical takings of identifiable property.

During the years following Lingle, I taught the students in my Land Use classes that Justice O’Connor’s opinion provided definitive guidance whenever the question was whether a governmental action constituted a taking. And according to her, a land use exaction should be subject to heightened scrutiny only if the exaction involves a governmental attempt to acquire property for public use without paying for it. Although I recognized that Justice O’Connor had addressed Nollan and Dolan only briefly and in dictum, after her characterization of those cases, in an opinion delivered on behalf of a unanimous Court, I could not see how a purely monetary exaction, not involving any physical taking and being virtually indistinguishable from a fee or tax, could be the same as a demand for an interest in land or other specific property. Because monetary exactions fell into none of the narrow special categories listed by Justice O’Conner, then they should be subject to the Penn Central standards, which are relatively tolerant of governmental interference with land use.

I was wrong.

Course Correction—Does the Koontz Case Align with the Before and Higher Premise?

In the summer of 2013, as its term drew to an end, the Court decided Koontz. The case presented a situation in which a Florida water management district, after extended negotiations with a landowner, indicated that it would approve a development plan for a tract of land that included and affected wetlands, provided that the landowner agreed to pay for wetlands mitigation projects on publicly owned sites. The issue as presented and addressed involved no demand for land or for any other specific property interest and no physical invasion onto the land. Nor was there any contention that the mitigation costs the district proposed would have the effect of depriving the landowner of the economic benefit of the land he wished to develop. In other words, the case did not involve a physical taking of identifiable property, and it did not present a situation fitting into either of the per se categories of regulatory takings as defined in Lingle. To those who, like me, had read Lingle as providing a comprehensive and definitive summary of the Court’s takings jurisprudence, the landowner’s challenge necessarily required the Court to apply the relatively fluid balancing test of Penn Central. So too, reasoned the four dissenting justices. 36

The rather clear implications of Lingle notwithstanding, Justice Alito, in an opinion joined by Justices Roberts, Scalia, Kennedy, and Thomas, held that “so-called ‘monetary exactions’ must satisfy the essential nexus and rough proportionality requirements of Nollan and Dolan.” 37 Justice Alito acknowledged the line of cases holding that government does not take property for which it must pay just compensation simply by imposing monetary obligations. But he characterized the landowner’s claim as deriving from what he deemed to be the legitimate “proposition that when the government commands the relinquishment of funds linked to a specific, identifiable property interest such as a bank account or parcel of real property” the action amounts to a per se taking for which the government must pay just compensation unless the exaction can survive the heightened scrutiny of the essential nexus and rough proportionality tests. 38 The opinion fails to explain how the proposal for the landowner to pay for off-site mitigation was linked in some constitutionally relevant sense to the land being developed. Those costs would not be taken out of the land; they would have been paid by the landowner out of his general assets. As a constitutional matter, how was the district’s proposal for the landowner to pay mitigation costs any different from an excise tax that might be based on the development or a tax that might be assessed against the land? Justice Alito’s only response to that question was that the district, for reasons having to do with state law, never characterized the expenditure it sought from the landowner as a tax. 39

Of particular importance, is Justice Alito’s firm adherence to the principle that the unconstitutional conditions doctrine provides the basis for Nollan and Dolan. Given that acknowledgment, in what respect was the water management district proposing to exchange the land use permit for the landowner’s agreement to give up a constitutional right? Justice Alito’s analogy to cases in which a governmental entity sought a specific financial asset (such as a bank account) or a lien against specific property is unconvincing because those cases involved seizures of identifiable property rather than the simple expenditure of funds that could be paid from any source. A condition that money be paid is not the same thing as the appropriation of a bank account or a lien, both of which are identifiable property subject to exclusive ownership. As far as I can tell, all that the landowner was asked to give up in exchange for the permit was the right, if such a right exists, to develop his land free of burdensome conditions imposed in the interest of the public welfare. This was, apparently, almost precisely Justice Alito’s rationale, and this is why the case seems to me to conjure the before and higher premise of the Arkansas takings clause.

Justice Alito’s explanation of the holding is brief and largely uninformative. Under his analysis, the water district’s proposal for the landowner to pay off-site mitigation costs involved a taking of property implicating the constitutional right to receive just compensation because it operated on an identifiable property interest “by directing the owner of a particular piece of property to make a monetary payment.” 40 He based his conclusion on the unquestionably correct observation that “the monetary obligation burdened petitioner’s ownership of a specific parcel of land.” 41 Given that as the basis, one must again wonder how the expenditure that the district sought differs in any constitutionally relevant sense from some kind of tax.

Beyond the question of monetary exactions, where might Justice Alito’s logic lead with respect to routine land use controls? Is every regulation, restriction, or demand that burdens the ownership of identifiable property that a landowner wishes to develop an unconstitutional condition unless it can withstand heightened scrutiny? If so, in a few short sentences, Justice Alito has repealed decades of case law recognizing that the police power confers great discretion on the government to regulate land use for the common good. Under this approach, it is hard to see how contemporary growth management tactics or, for that matter, conventional zoning determinations will continue to avoid heightened scrutiny. This is exactly how the dissent read the holding. “The boundaries of the majority’s new rule are uncertain. But it threatens to subject a vast array of land-use regulations, applied daily in States and localities throughout the country, to heightened constitutional scrutiny.” 42


Just how far does Koontzgo in expanding the previously narrow scope of the Nollan and Dolan cases? Having repeatedly committed myself in both my teaching and my published work to what apparently is the losing side of the monetary exactions debate, I am understandably reluctant to express a definitive opinion on that question. I simply don’t know whether we should take literally Justice Alito’s explanation that heightened scrutiny applies whenever a monetary exaction imposes a burden on the ownership of specific property.

Given the facts before the Court in the Koontzcase, there are at least three potential ways to distinguish the monetary exaction there from some of the most popular and, I would argue, most beneficial exaction programs. The first and most direct option is for jurisdictions wishing to pursue innovative and progressive development fee programs to do so by openly invoking the taxing power whenever applicable state law permits such a tax. While the majority and the dissent disagreed about whether the Court could find a “principled way of distinguishing impermissible land-use exactions from property taxes,” all of the justices recognized that taxes and revenue measures such as user fees are not subject to a takings analysis. 43 Justice Alito asserted that the Koontz decision “does not affect the ability of governments to impose property taxes, user fees, and similar laws and regulations that may impose financial burdens on property owners.” 44

Another possibility stems from a line of cases that predates Koontzand that may yet survive it. 45 These cases hold that heightened scrutiny should be limited to ad hoc or adjudicative exactions, meaning exactions imposed when a land use authority rules on a particular landowner’s development application. It is only in that situation, so the reasoning goes, that government will be tempted to use an exaction to pressure a landowner to give up a constitutionally protected property right. With legislative exactions, by contrast, a statute or other legislative scheme of general application provides for all similarly situated landowners proposing to develop their property to pay standardized fees to finance objectives based on policies established through the normal legislative process. In this setting, there is comparatively less risk of the kind of opportunistic or extortionate behavior that the Court discerned in Nollan, Dolan, and Koontz. Legislative exactions could include development taxes as well as certain linkage fee programs.

The third possible way to limit Koontzwould be to focus on Justice Alito’s use of the phrase “so-called ‘monetary exactions’” with reference to the monetary exaction involved in the case. Perhaps that phrase indicates that the Court might view differently development fees that are in no sense being used in lieu of a demand for a land dedication or interest in other identifiable property. This is a possible reading of the case because the negotiations between the landowner and the water management district began with a proposal for the landowner to subject a large part of his property to a conservation easement to protect the wetlands area. The district only proposed that the landowner pay for off-site mitigation measures as an alternative when the he refused to part with as much land as the district coveted. 46 There is little in Justice Alito’s explanation of the holding to imply this limitation other than his general statement of the facts. He did, however, place some significance on this aspect of the case in arguing that courts would be able to distinguish taxes from exactions. In that part of the opinion, Justice Alito noted that the district, rather than defending the fee as a tax “maintained throughout this litigation that it considered petitioner’s money to be a substitute for his deeding to the public a conservation easement on a larger parcel of undeveloped land.” 47 Unfortunately, if this factor was material to the holding that the monetary exaction was subject to heightened scrutiny, Justice Alito failed to say so.

Although I do not know whether the Court might someday limit the Koontzholding in one of these ways, I can confidently predict that for the time being Koontzwill deter state and local governments from experimenting with mitigation and linkage fee programs that they might otherwise explore to help finance solutions to some of the most important problems that real estate development, especially urban growth, present today. Moreover, the opinion provides powerful, new grounds upon which property rights groups can challenge many existing mitigation and linkage fee programs. Some of these emerging and extant programs propose exactions not merely as devices to recoup or offset the demonstrable public impacts of particular developments, but also as economic tools to cause the real estate development industry as a whole to internalize some of the indirect costs of growth in a broader sense, especially with reference to some of the long-term implications of unsustainable development practices. These are real, critical, and difficult land use problems. Because both the social harms involved and the impact that a particular development may have can be difficult or impossible to quantify, heightened scrutiny, and especially the rough proportionality prong of that test, will likely make it impractical for land use authorities to use monetary exactions for these purposes.

The central question is how much discretion states and local governments have under the U.S. Constitution to use monetary exactions in service of growth management objectives. Of course, in many jurisdictions municipalities and other local governmental entities lack the power under state law to implement such programs. And in some jurisdictions, probably including Arkansas, state and local government and the electorate are, at least for the present, disinclined to enact the necessary statutes or ordinances for these purposes. In those jurisdictions, perhaps the right to develop real estate does, in fact, occupy an elevated status such that it should not generally to be burdened for the sake of the public health, safety, and welfare. With that political judgment I have no fundamental quarrel. I am content to let the democratic process impose strict limits on land use exactions in those jurisdictions. What troubles me is the idea that the U.S. Constitution will not tolerate development exaction programs to be used as economic instruments in service of important land use objectives in those states in which the body politic has or may choose that approach. On this issue, I do not understand how the U.S. Constitution, as contrasted to the Arkansas Constitution, may be said to place the right of property before and higher than any constitutional sanction.


  1. Senior Associate Dean for Academic Affairs and Professor of Law.
  2. Ark Const. art. 2, §22 (emphasis added). In addition to the introductory assertion, the Arkansas takings clause differs from the Takings Clause of the Fifth Amendment to the U.S. Constitution by including “appropriated or damaged” along with “taken” in identifying the governmental interference with private property for which compensation is due. The addition of damage is fairly common in state constitutions. See Patricia E. Salkin, 2 Am. Law Zoning §16:2 (5th ed., 2014). Neither the original Arkansas Constitution of 1836 nor the Constitution of 1864 included a distinct takings clause. See Francis Newton Thorpe, 1 The Federal and State Constitutions, Colonial Charters, and Other Organic Laws of the States, Territories, and Colonies 261-306 (1909).Article 1, Section 15 of the Constitution of 1868 was a purely traditional takings clause, reading: “Private property shall not be taken for public use without just compensation therefore.” Id. at 308.The before and higher phrase was an innovation of the Constitution of 1874, which is our current constitution.
  3. Most often, the court merely repeats the phrase in the process of quoting from the takings clause. See, e.g., National By-Prods., Inc. v. City of Little Rock, 323 Ark. 619, 624 (1996); Arkansas State Hwy Comm’n v. Turk’s Auto Corp., 254 Ark. 67, 70 (1973). At most, the phrase itself may play a supporting role, but only a minor one. See Tucker v. Sw. Energy Co., 1:11-CV-44-DPM, 2012 WL 528253 (E.D. Ark. Feb. 17, 2012) (isolating on the phrase as the basis for reasoning that “if the Court is going to err at the pleading stage on drawing the line between trespass and nuisance, it will err on the side of the Berrys’ property rights”).
  4. See Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926).
  5. Id. at 395. The Euclid case presented a Fourteenth Amendment challenge to a zoning ordinance. As demonstrated by the cases discussed later in this article, under contemporary analysis, constitutional challenges to land use exactions typically invoke the Takings Clause of the Fifth Amendment, which applies to the states by incorporation into the Fourteenth Amendment.
  6. Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586 (2013).
  7. See generally Julian Conrad Juergensmeyer & Thomas E. Roberts, Land Use Planning and Development Regulation Law 317-45 (3d ed. 2013).
  8. See generally Carl J. Circo, Using Development Financing Tools to Help Cover Costs of Adapting to Climate Change in Tornado Alley and Beyond, 47 John Marshall L. Rev. § III (forthcoming 2014).
  9. Id.
  10. See Juergensmeyer & Roberts, supra note 7, at 326-36.
  11. The summary at this point in the text of the two-part heightened scrutiny test established by the U.S. Supreme Court is a practical rather than a technical one. The discussion of the two leading Supreme Court cases that follows provides a more precise and complete restatement. The test applied by the U. S. Supreme Court for land dedication exactions and the test that state courts have developed as a matter of generally prevailing land use law with respect to impact fees (and possibly other monetary exactions) are similar, but not identical. The state law variant is often referred to as the rational nexus test. See id.; see also infra note 20 and accompanying text.
  12. Nollan v. Cal. Coastal Comm’n, 483 U.S. 825 (1987).
  13. Id. at 834-37.
  14. Id. at 838.
  15. Dolan v. City of Tigard, 512 U.S. 374 (1994).
  16. Id. at 391.
  17. Id. at 395.
  18. See Juergensmeyer & Roberts, supra note 7, at 331-36.
  19. Dolan, 512 U.S. at 385.
  20. Juergensmeyer & Roberts, supra note 7, at 330.
  21. Ark. Code Ann. § 14-56-103 (Supp. 2013).
  22. I will leave to another day the potentially tricky question whether the Arkansas impact fee statute implicitly prohibits land use exaction programs that impose fees, such as mitigation and linkage fees, that seem to fall outside the statutory definition of “development impact fee.”
  23. The Tree Preservation Ordinance of the City of Fayetteville, for example, provides that in some circumstances a developer may be required to pay a mitigation fee into the city’s Tree Escrow Account to offset the adverse impact of the proposed development on the city’s tree canopy. Fayetteville, Ar. Unified Development Code § 167.04 (J)(4), available at
  24. Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005).
  25. Id. at 539.
  26. Id. at 537.
  27. Id.
  28. Id. at 538.
  29. Id.
  30. Penn Central Transp. Co. v New York City, 438 U.S. 104 (1978).
  31. Lingle, 544 U.S. at 540.
  32. Id. at 538.
  33. Id. at 546.
  34. Id. at 547.
  35. Id. (quoting from Dolan v. City of Tigard, 512 U.S. 374, 385 (1994).
  36. Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586, 2604-05 (2013) (Kagan, J., dissenting).
  37. Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586, 2599 (2013). In addition to holding that monetary exactions are subject to heightened scrutiny, the Court also held that, for purposes of the takings analysis, it made no difference that the requested permit, rather than being granted conditioned upon the exaction, had been denied because the landowner would not agree to the exaction. Id. at 2595-97. All of the justices agreed on this point.
  38. Id. at 2600.
  39. Id. at 2601-02.
  40. Id. at 2599.
  41. Id.
  42. Id. at 2604 (Kagan, dissenting).
  43. Id. at 2601-02.
  44. Id. at 2601.
  45. See Circo, supra note 8.
  46. Koontz at 2592-93.
  47. Id. at 2602.