Respecting Property Rights Means Paying Just Compensation for Takings

There’s no such thing as a free lunch. Or as the Fifth Amendment puts it, “nor shall private property be taken for public use, without just compensation.” Despite the clarity with which the Takings Clause proclaims that government must respect property rights, state and local governments have long been contriving ways to obtain private property without paying the constitutionally required just compensation.

In 2012, San Juan County, Washington—the islands in the Salish Sea between Seattle and Victoria—enacted a rule that conditions shoreline owners’ proposed land uses on dedicating a portion of their property as on-site conservation areas. This isn’t a new tactic. In Nollan v. California Coastal Commission (1987), for example, the Supreme Court rejected the government’s conditioning of a building permit on the landowners’ granting a public easement across their property to access a beach. The Court acknowledged that conditioning a benefit on the property owners’ giving up their Fifth Amendment right to just compensation is “an out-and-out plan of extortion.” The Court elaborated seven years later in Dolan v. City of Tigard (1994), ruling that courts must apply a high level of scrutiny to conditions attached to land-use permits to prevent government “gimmickry.”

In other words, if the condition by itself would be a taking, then the state cannot impose it unless there is a “nexus” and “rough proportionality” between “the property that the government demands and the social costs of the [landowner’s] proposal.” Koontz v. St. John’s River Water Management District (2013).

The San Juan County ordinance fails these tests because shoreline property owners are required to set aside “water quality buffers” as a condition of development not based on any harm the proposed land use itself might cause, but based on the county’s general efforts to reduce pollutants and other surface runoff. A local owners’ association called the Common Sense Alliance challenged the ordinance, but Washington state courts held that the nexus and proportionality tests need not even be applied here because it was the legislature that imposed the condition, not an ad hoc permitting process. The alliance has now asked the U.S. Supreme Court to step in, and Cato, joined by Reason Foundation, has filed an amicus brief supporting that petition.

The state courts’ reasoning is deeply flawed: Despite the common belief that individual permitting decisions are more prone to abuse and corruption than general legislative ones because the political process checks the latter, this simplistic notion ignores the lessons of public-choice economics. As the Texas Supreme Court put it, legislatures can “‘gang up’ on particular groups to force exactions that a majority of constituents would not only tolerate but applaud, so long as burdens they would otherwise bear were shifted to others.” Town of Flower Mound v. Stafford Estates Limited Partnership (2004).

This dynamic is particularly evident in today’s climate when in many states and sub-state political units, the majority is anti-development. Legislative conditions also have a much broader reach than do ad hoc permitting schemes. Unfortunately, Washington State is not alone in holding that the “nexus and proportionality” tests need not be applied to legislative decisions. The U.S. Supreme Court should step in and clarify that its (now well-established) Nollan-Dolan precedents extend to takings via legislative actions, not just executive ones.

The case is Common Sense Alliance v. San Juan County.