§13.3 - Constitutional and other Limitations of Power

• Jurisdiction: Washington

§13.3 CONSTITUTIONAL AND OTHER LIMITATIONS OF POWER

This section will discuss the concept of property, what constitutes a compensable taking, and the public use and necessity limitations that may be placed on a condemnor's exercise of eminent domain powers.

(1) The concept of property

Property, as understood in the law, is not the physical thing but rather a jural construct.

In the early development of American eminent domain law, courts tended to regard the word "property" in eminent domain clauses as referring to physical land, including easements, temporary easements, and fee takes. Over time, there has been increasing judicial recognition that property denotes the nonphysical as well as physical bundle of rights one may have against other persons with respect to the land and other things. In today's world, easements and rights to use may result in very little physical invasion, yet still the taking must be compensated; an example of this is deep tunnel easements for various utilities and transportation.

Property also includes the right to consume, destroy, or alienate it. See Lange v. State, 86 Wn.2d 585, 590, 547 P.2d 282 (1976). Washington has gone as far as any state in that direction, concluding that a mobile home park tenant's right of first refusal to buy property is a constitutionally protected property right. See Manufactured Hous. Cmtys. of Wash. v. State, 142 Wn.2d 347, 366, 13 P.3d 183 (2000).

Caveat: Future profits are not a protected property right. See Schreiner Farms, Inc. v. Smitch, 87 Wn. App. 27, 37, 940 P.2d 274 (1997).

Comment: For further discussion of the concept of property, see Michael M. Berger & Gideon Kanner, Thoughts on the White River Junction Manifesto: A Reply to the "Gang of Five's" Views on Just Compensation for Regulatory Taking of Property 19 Loy. L.A. L. Rev. 685, 744-45 (1986).

(2) What constitutes a taking?

Governments can take property either through the physical invasion of the property or by restricting use of the property to such an extent that it is no longer useful. Although restrictions on property such as safety regulations or zoning are an exercise of police powers and are generally noncompensable takings, when the exercise of police powers becomes so restrictive that all reasonable use of the property is prevented, arguably a regulatory taking has occurred.

Practice Tip: For a governmental action to require just compensation, the action must constitute a taking of property under the United States Constitution, Fifth Amendment (just compensation clause) and the Washington Constitution, article 1, §16 (eminent domain).

(a) Federal takings analysis

The United States Supreme Court has recognized four potential paths for a plaintiff challenging a government action under the just compensation clause, also known as the takings clause, of the Fifth Amendment to the U.S. Constitution:

[A] plaintiff seeking to challenge a government action as an uncompensated taking of private property may proceed under one of four theories: (1) a physical invasion of property, (2) that a regulation completely deprives a plaintiff of all economically beneficial use of property, (3) a general regulatory takings challenge pursuant to Penn Central, or (4) a land-use exaction violating the standards set forth in Nollan and Dolan.

McClung v. City of Sumner, 545 F.3d 803, 809, amended and superseded on denial of rehearing, 548 F.3d 1219 (9th Cir. 2008), cert. denied, 129 S. Ct. 2765 (2009).

In Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 102 S. Ct. 3164, 73 L. Ed. 2d 868 (1982), the Supreme Court held that a law requiring landlords to permit cable companies to install cable facilities on their property was a taking. Accordingly, government regulations that require a property owner to suffer a permanent physical occupation of land, such as installation of utilities, railroad lines, etc., are compensable takings. See, for example, Century Southwest Cable Television Inc. v. CIIF Assocs., 33 F.3d 1068, 1071 (9th Cir. 1994), in which the court stated that "[t]he installation ‘of plates, boxes, wires, bolts, and screws to the building' or of wires and outlets in particular units constitute[d] a physical invasion of the property," and thus entitled the property owner to just compensation.

In Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 112 S. Ct. 2886, 120 L. Ed. 2d 798 (1992), the Supreme Court held that a law preventing a property owner from erecting habitable structures on his property was a compensable taking. The Court found that when a regulation deprives a property owner of "all economically beneficial use[,]" the property owner is entitled to just compensation. Id. at 1027. This category of takings is narrow, however, and only applies when a regulation "wholly eliminate[s] the value" of a property owner's title. Id. at 1017. It is limited to "extraordinary circumstance[s] when no productive or economically beneficial use of the land is permitted. Id. (emphasis in original); see also id. at n.8 (explaining that a property owner whose diminution in value is only 95 percent of the previous value does not suffer a compensable taking under Lucas).

Outside of the instances discussed in Loretto and Lucas, the analysis of where a municipality's police power ends and a compensable regulatory taking begins must proceed under the factors set forth in Penn Central Transportation Co. v. City of New York, 438 U.S. 104, 98 S. Ct. 2646, 57 L. Ed. 2d 631 (1978). In Penn Central the Court set forth the multifactor test to be considered when determining whether a regulatory action rises to the level of a taking: (1) "[t]he economic impact of the regulation ..."; (2) "the extent to which the regulation ...interfere[s] with distinct investment-backed expectations ..."; and (3) "the character of the governmental action." Id. at 124 (citing Goldblatt v. Hempstead, 369 U.S. 590, 594, 82 S. Ct. 987, 990, 8 L. Ed. 2d 130 (1962)).

The Court has also recognized a special category of takings relating to exactions for approval of land use permits. Municipalities often require concessions be made as a condition to approving land use permits, among them dedications of land for public use and payment of impact fees. The Supreme Court has held that heightened scrutiny is required in "the special context of land-use exactions ...." Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 538, 125 S. Ct. 2074, 161 L. Ed. 2d 876 (2005).

If a government body conditions approval of a land use permit on the relinquishment of property, it must show a "nexus" and "rough proportionality" between the demand and the "impact of the proposed development." Dolan v. City of Tigard, 512 U.S. 374, 386, 114 S. Ct. 2309, 129 L. Ed. 2d 304 (1994); see also Nollan v. Cal. Coastal Comm'n, 483 U.S. 825, 836, 107 S. Ct. 3141, 97 L. Ed. 2d 677 (1987). The Court extended the Nollan/Dolan standard of review to all exactions imposed in exchange for approval of land use permits in Koontz v. St. Johns River Water Management District, ___ U.S. ___ , 133 S. Ct. 2586, 186 L. Ed. 2d 697 (2013). The impact of Koontz is to broaden the scope of the Nollan/Dolan unconstitutional exactions inquiry to any condition placed on a land use permit by a municipality, whether a dedication of land or a monetary exaction.

(b) Washington state takings analysis

Washington state courts follow a somewhat different test from federal courts when determining whether a land use regulation or condition is a taking under Washington's constitution, although much of the substance is similar:

First, whether the regulation destroys or derogates any fundamental attribute of property ownership, including the right to possess, to exclude others, to dispose of property, or to make some economically viable use of the property. If the landowner claims less than a "physical invasion" or a "total taking" and if a fundamental attribute of ownership is not otherwise implicated, we proceed to the second question. That question is whether the challenged regulation safeguards the public interest in health, safety, the environment, or the fiscal integrity of an area or whether the regulation "seeks less to prevent a harm than to impose on those regulated the requirement of providing an affirmative public benefit."

If the answer to both threshold questions is no, then there is no taking. If the answer to one or both questions is yes, then additional analysis is required. This additional analysis includes consideration of two additional points. First, whether the regulation advances a legitimate state interest. Second, a balancing test to determine if the state interest in the regulation is outweighed by its adverse economic impact to the landowner, with particular attention to the regulation's economic impact on the property, the extent the regulation interferes with investment-backed expectations, and the character of the government action.

Edmonds Shopping Ctr. Assocs. v. City of Edmonds, 117 Wn. App. 344, 362-63, 71 P.3d 233 (2003) (citing Guimont v. Clarke, 121 Wn.2d 586, 602-04, 854 P.2d 1 (1993) (quoting Robinson v. City of Seattle, 119 Wn.2d 34, 49, 830 P.2d 318 (1992)).

Washington law requires that development regulations and site-specific land use permitting decisions meet strict statutory and constitutional principles. Unless an exception applies, RCW 82.02.020 prohibits municipalities from imposing "any tax, fee, or charge, either direct or indirect, on the construction or reconstruction of residential buildings, commercial buildings, industrial buildings, or on any other building or building space or appurtenance thereto, or on the development, subdivision, classification, or reclassification of land." The municipality is allowed to require payments under a voluntary agreement with the developer in lieu of a dedication of land or to mitigate direct...