We've reported in the past that public agencies are more frequently demanding certain off-site public improvements to accommodate proposed private developments as a condition of entitlement approval. These can range from street widenings to accommodate additional traffic, pump stations for additional water capacity, or flood improvements to address drainage or run-off concerns. Additionally, a new condition facing California developers is dedicating or acquiring open space to mitigate wildfire risk.
Recently, the owner of a mixed-use development project in San Diego was faced with this condition of approval, as the County required the owner to obtain fifty easements from the properties adjoining the development to mitigate wildfire risk. The developer did not obtain the easements, and the County denied the proposed development because of fire safety concerns. In Village Communities v. County of San Diego (9th Cir., 2024 U.S. App. LEXIS 21783), the developer sued the County in federal court for inverse condemnation, arguing that the permit condition required the owner to expend money to obtain the easements, and as such, the condition resulted in an unconstitutional taking of property or money under the Takings Clause of the Fifth Amendment.
The district court granted summary judgment in favor of the County, finding no taking. The Court of Appeals for the Ninth Circuit affirmed. The Court explained that under the unconstitutional conditions doctrine, while the government may condition approval of a permit on the dedication of property to the public, there must be a "nexus" and "rough proportionality" between the property that the government demands and the social costs of the development proposal. The doctrine was meant to address the concern that land-use permit applicants are especially vulnerable to coercion because the government often has broad discretion to deny a permit that is worth far more than property it would like to take. By conditioning a building permit on the owner's deeding over a public right-of-way, for example, the government can pressure an owner into voluntarily giving up property for which the Fifth Amendment would otherwise require just compensation.
In this case, the Court held that the developer did not carry its burden to show that the condition requiring the wildfire easements was used to coerce the developer into voluntarily giving up property that would require compensation. Specifically, the Court held that none of the developer's own property was at risk of being taken – the condition required the developer to acquire additional property. The Court held that there is "no authority that requiring that a landowner acquire property as a condition of permit approval constitutes" an unconstitutional taking.
The Court's holding suggests that any development condition requiring a developer to acquire property for off-site improvements is not subject to a takings claim, so long as the condition does not also require the developer to transfer the property to the public agency or a third party, or require that the developer permit the public to use the property. Such a holding seems too broad, and it does not appear the developer created a strong record in this case. For example, California Government Code Section 66462.5 provides that when a condition of a subdivision map approval or a development agreement requires the installation or construction of improvements on off-site property not owned or controlled by a developer, and title cannot be obtained by negotiated purchase, the public agency is required to commence proceedings to acquire off-site property by eminent domain or such off-site improvement conditions will be waived. It is not clear whether the developer followed this process here. If the developer could not reasonably acquire the easements, and the County refused to waive the condition, instead demanding tens of millions of dollars to acquire the off-site easements for wildfire mitigation, the developer would have likely had a much stronger argument that such a monetary demand would not meet the unconstitutional conditions doctrine.
Regardless, the Court's holding raises new questions for public agencies and developers when it comes to conditions of approval involving off-site improvements and property acquisitions.
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