Supreme Court Justice Elena Kagan Credit: Credit: Doc Searls

Those campaigning against Albemarle County’s cash proffer system may have been given additional ammunition earlier this summer.

In late June, the U.S. Supreme Court issued a 5-4 ruling that could restrict the way Virginia allows localities to ask developers for payments to offset the impacts of new construction.

“[The ruling] threatens to subject a vast array of land-use regulations, applied daily in states and localities throughout the country, to heightened constitutional scrutiny,” wrote Justice Elena Kagan in her dissenting opinion.

In the case Koontz v. Saint Johns River Water Management District, the court ruled that a Florida agency acted unconstitutionally when it denied a permit to a landowner who refused to pay for improvements on land he did not own.

In Virginia, the court’s ruling could provide a fresh avenue for legal challenges against cash proffers, sewer connection fees and other payments designed to help fund community infrastructure.

Neil Williamson, president of the Free Enterprise Forum, a business advocacy group, said he does not anticipate anyone local making a legal challenge to the proffer system based on the new ruling, but that it could happen elsewhere in Virginia.

“I do anticipate a judicial challenge in a jurisdiction with more intense development activity, such as either Northern Virginia or Hampton Roads,” Williamson said.

In the Florida case, landowner Coy Koontz Sr. had sought a special-use permit to develop nearly four acres of a 15-acre property that is mostly wetlands.

Saint Johns officials suggested two ways they would grant the permit: Either Koontz could limit development to one acre of the land and place the rest of the property under a conservation easement, or he could pay to build infrastructure on nearby land.

Koontz refused both options and sued, asserting that the district exceeded its authority to exact that payment. The Florida Supreme Court sided with the district, and the U.S. Supreme Court agreed to hear the appeal.

The legal issue stems from the Just Compensation Clause, a portion of the Fifth Amendment that requires landowners to be compensated when private property is taken for public use.

Lawyers for the district argued that no property had actually been taken and that Koontz simply chose not to comply with terms the district was legally allowed to make.

“It makes no difference that no property was actually taken in this case,” wrote Justice Samuel Alito in his majority opinion. “Extortionate demands for property in the land-use permitting context run afoul of the Takings Clause not because they take property but because they impermissibly burden the right not to have property taken without just compensation.”

Alito wrote that because the district asked for a specific mitigation, that action must be weighed by two previous Supreme Court rulings that established local governments must prove “essential nexus and rough proportionality to the effects of the proposed new use of the specific property.”

Alito pointed out that the mitigations Koontz was asked to pay for would benefit more than 50 acres of wetlands, far more than the four acres he sought to disturb. As such, the denial of the permit would constitute a taking because he could not realize the potential value of his property.

Kagan said the condition to repair wetlands elsewhere is not itself a taking, so the nexus and proportionality requirements do not apply. She warned that the additional scrutiny could wreak havoc on localities that charge developers proffers for rezonings and connection fees for wastewater.

“The Federal Constitution thus will decide whether one town is overcharging for sewage, or another is setting the price to sell liquor too high,” Kagan wrote. “The flexibility of state and local governments to take the most routine actions to enhance their communities will diminish accordingly.”

Kagan also warned that local governments could be less likely to negotiate with developers because suggested conditions could be considered demands. She pointed out that Koontz was asked to come back with another proposal after the denial.

However, Alito disagreed with Kagan’s fear and said the impact of Koontz v. Saint Johns will be limited.

“We disagree with the dissent’s forecast that our decision will work a revolution in land use law by depriving local governments of the ability to charge reasonable permitting fees,” Alito wrote.

Three weeks after the ruling, planning groups, localities and advocates for development are still examining the details to see if it establishes a precedent.

“We are still reviewing this opinion,” said Larry Davis, Albemarle’s county attorney.

“Our initial analysis is that it will not affect Albemarle’s policies because we are careful to establish a nexus and rough proportionality of proffers with the impact of the development.”

Williamson said he does not believe the “nexus and proportionality” can be established for Albemarle’s cash proffer.

“The cash proffer requirement … is nothing more than a new municipality piggy bank used to pay for long overdue infrastructure improvements needs that have not been created by the new use,” Williamson said.

One legal analyst said it will take time to determine how the ruling will affect land use decisions in Virginia.

“Local governments have the legitimate concern that development will raise the cost of providing services, but Koontz affirms that the local government cannot simply ask developers to pay for or dedicate land for the expansion of services anywhere in a county or city where they appear to be needed,” said Matthew Roberts, an attorney with the firm Bean, Kinney and Korman.

“As Central Virginia continues to develop, large landowners will have a tool that will help them in their negotiations with their local governments as they seek permission to create different land uses on their property,” Roberts continued.

Albemarle County currently expects to receive about $43 million in cash proffers and other improvements required under previous rezonings. The current per unit value is $19,753 per single family home and almost $14,000 for every unit in a multifamily apartment complex.

Business groups across the state are campaigning to eliminate cash proffers.

In June, Dinwiddie County eliminated its cash proffer system, following the lead of Hanover County.

That community’s Board of Supervisors dropped proffers in favor of higher vehicle fees earmarked for the capital improvement fund.

Earlier this month, Albemarle developer William Park indefinitely deferred a rezoning for a 65-unit complex on Rio Road East because the county’s rules would have called for a “voluntary” contribution of $745,000.

The Albemarle Board of Supervisors is expected to take up the matter in the near future.

One proponent of the system said he believes it will remain intact.

“Albemarle’s cash proffer policy is the result of an extensive study and review of the fiscal impacts of new residential development in the county,” said Morgan Butler of the Southern Environmental Law Center. “Because the county’s policy is tied directly to the projected costs of new development, I don’t see anything in this Supreme Court decision that undermines it.”