Exploiting ambiguity in the Supreme Court: cutting through the Fifth Amendment with transferable development rights.

• Author: Vincent, Trevor D.
• Position: NOTES

TABLE OF CONTENTS INTRODUCTION I. THE TDR A. A Brief History of the TDR and Basic Mechanics of a TDR Program B. Basis of the Authority to Create TDR Programs II. FIFTH AMENDMENT ISSUES WITH THE TDR III. TDR BANKS A. What Is a TDR Bank? B. Utility of TDR Banks and the Issues They Help Resolve IV. A SNAPSHOT OF CURRENT TAKINGS LAW A. Two Types of Relevant Takings 1. Total Regulatory Takings 2. Penn Central Takings: Regulations That Go "Too Far" B. Just Compensation V. TAKINGS LAW APPLIED TO TDRS A. The Two Relevant Tests' Relation to TDRs B. Ambiguity in the Supreme Court C. Exploiting the Ambiguity VI. How to Keep the Magic Rolling: TDR Banks CONCLUSION INTRODUCTION

The language of the United States Constitution has weathered the centuries since its adoption in 1787, (1) but the world around it has changed, and continues to change, dramatically. Consequently, the Supreme Court, as the official interpreter of constitutional law, (2) must strive to develop workable frameworks and methodologies to deal with contemporary issues. (3) A brief study of Supreme Court history shows that these frameworks and methodologies rarely develop quickly and are often replete with uncertainty or ambiguity. (4) This is particularly evident regarding the ambiguous relationship between the Fifth Amendment Takings Clause and the relatively new zoning and land use tool known as transferable development rights (TDRs). (5)

TDRs are a "zoning technique used to permanently protect ... natural and cultural resources by redirecting development that would otherwise occur on these resource lands to areas planned to accommodate growth and development." (6) In this context, "redirecting" means restricting a landowner's development rights on her own property but allowing her to either sell or transfer those same rights to another area where she, or another landowner or developer, may use them. (7) TDRs are essentially an intangible commodity created to mitigate potential damages caused by protective zoning techniques. Although the Court has had the opportunity to establish an analytical test to clarify the relationship between such zoning techniques, corresponding TDR programs, and the Takings Clause on several occasions, the issue remains unsettled (8) and has inspired much debate. (9)

Fundamentally speaking, the Fifth Amendment guarantees "private property [shall not] be taken for public use, without just compensation." (10) This language is applicable to the states through the Fourteenth Amendment. (11) Property rights, deeply rooted in American law and tradition, are often characterized as a "bundle of sticks"--meaning one may have various rights in relation to property and each right individually is a "stick." (12) An important "stick" is undoubtedly the right to develop one's property. (13) TDRs are potentially subject to Fifth Amendment scrutiny because they exist in circumstances where a government identifies a "public use" for which it must limit a landowner's ability to develop her property. (14) Some argue such regulatory limitation is effectively a taking of the landowner's property for which TDRs are inadequate compensation. (15) This conclusion is somewhat hasty, however, considering the possible saving grace of the constitutional phrase "public use."

"Public use" in this context historically relates to preservation of "such public goods as open space, agriculture and forestry[,] . historic sites or buildings, and affordable housing." (16) After identifying a legitimate public interest for limiting a landowner's development rights, (17) the government issues TDRs to the landowner in order to mitigate actual or potential harms the restrictions cause. (18) In theory, this is done by allowing the landowner to sell, or transfer, her development rights rather than extinguishing them. (19) Ultimately, the goal of TDR programs is to keep development rights intact by transferring them "from a site or area to be preserved to an area targeted for development." (20) In effect, this is "a land use tool that enables government to restrict development without actually taking, and paying for, property." (21)

Executed as detailed above, TDR programs seem to sidestep, or even preempt, Takings Clause issues. Even so, such transactions have given rise to the question of whether the use of TDRs in these situations implicates constitutional concerns of taking property for public use without just compensation. (22) Furthermore, there is an utter lack of consensus as to which side of the Takings Clause such TDR programs are relevant. Some argue TDRs are more relevant to determining whether a taking has occurred at all, (23) while others are convinced TDRs are relevant only as to whether a government has paid just compensation for a taking. (24)

The Supreme Court has declined to rule on this matter, (25) leaving this particular area of takings law in the relative darkness of doctrinal ambiguity. TDRs may not be constitutionally relevant to the takings analysis at all, (26) but the fair amount of litigation on this matter suggests that it would be foolish for a government to implement TDR programs without giving constitutional concerns careful and calculated consideration. Indeed, even if TDRs and corresponding regulations do not amount to takings for which the government must pay just compensation, considering common constitutional concerns ex ante, at a minimum, serves as a governmental insurance policy of sorts.

This Note concludes that TDRs are directly relevant to both sides of the takings analysis due to their hybrid nature. Although the use of TDRs has not been officially condoned or condemned by the (Supreme Court, (27) there is a reason TDR programs have experienced increasing success and adoption in the last forty to fifty years. (28) Efficient TDR programs exploit the Court's doctrinal ambiguity by preventing regulation that would otherwise constitute a taking from rising to that level, while simultaneously offering landowners just compensation or something closely resembling just compensation. This Note argues further that TDR banks--usually government-sponsored tools designed to create trustworthy and sustainable exchange forums for TDRs (29)--are essential to the continued adoption and success of these programs. Such markets effectively ensure the equivalent of just compensation. (30) TDR banks enable TDR programs to cut through Fifth Amendment concerns, as efficiently operated TDR programs remain under the Supreme Court's "radar." Intuitively speaking, if landowners and developers are satisfied with the ability to exchange development rights for a fair price in a reliable market, they will not engage in lawsuits, and no constitutional challenges will arise. This Note differs from existing scholarship in that it does not propose a new framework of laws, make suggestions as to the ideal judicial treatment of TDR programs, or critique the Supreme Court for failing to address this issue. Rather, this Note analyzes the law as it currently stands, identifies why existing law is sufficient to resolve constitutional concerns surrounding TDRs, and recommends how to effectively exploit the existing doctrinal ambiguities.

Part I discusses a brief history of the TDR, including the circumstances giving rise to its creation, the basic mechanics, and the basis of authority on which governments rely in implementing TDR programs. Part II addresses common concerns related to TDR programs in light of the Fifth Amendment. Part III discusses the rise and use of TDR banks and their relation to resolving constitutional concerns associated with TDR programs. Part IV provides a snapshot of relevant legal tests currently recognized by the Supreme Court to determine whether a taking has occurred, and if so, the calculation of just compensation for that taking. Part V follows with an analysis of the relationship of those recognized tests to TDRs. Part V then highlights the ambiguity currently existing in this Supreme Court doctrine, and it discusses the impact such ambiguity has on the practical use of TDR programs. This Part argues that when constitutional concerns arise, TDRs are directly relevant to both sides of the takings analysis--takings and just compensation. Part VI discusses the particular importance of the TDR banks to the widespread viability of TDR programs. (31) This Note identifies TDR banks as the key to prolonged success of current and future TDR programs, as they ensure the equivalent of just compensation to landowners affected by preservation regulations.

1. THE TDR

   1. A Brief History of the TDR and Basic Mechanics of a TDR Program

      The innovation of TDR programs in American land use law arose largely in response to concerns that overdevelopment would result in the loss of historic buildings, agricultural spaces, and other public goods. (32) Professor John J. Costonis even argued that "[u]rban landmarks merit recognition as an imperiled species alongside the ocelot and the snow leopard." (33) Costonis believed that if the trend of unfettered development "[were] not reversed, the nation ... [would] mourn the loss of an essential part of its architectural and cultural heritage." (34) Many jurisdictions around the nation seem to have agreed: by 1978, "all 50 States and over 500 municipalities [had] enacted laws to encourage or require the preservation of buildings and areas with historic or aesthetic importance." (35) Landmarks and other public goods were in danger because it had often been more profitable to redevelop property for business purposes than to preserve such goods. (36)

      The basic premise of a TDR program is to preserve public goods by restricting development rights in designated preservation areas and transferring those development rights to areas designated for further development. (37) These areas are referred to as "sending" and "receiving" areas, or districts, respectively. (38) The mechanics of a TDR program consist of...