What the ‘takings’ lawsuit might look like

CAN KEYS DEVELOPMENTS REALLY STOP IN 2023

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#1 How we got to this point (Sept. 27, 2018)
#2 The hurricane evacuation model’s influence on development (Oct. 4, 2018)
#3 What the “takings” lawsuit might look like (Oct. 11, 2018)
#4 Options to detour chaos (Oct. 18, 2018)
#5 In conclusion … (Oct. 25, 2018)

In a little more than five years, new development will come to a grinding halt in the Florida Keys. At least, that is what the State of Florida has decreed for the islands it has designated an “Area of Critical Concern.” Beginning in 2023, it will no longer issue NEW building permits for Keys municipalities. None. Zilch. Zip. Nada. If this comes to pass, what happens next? Will landowners sue because the state (and local governments) is gutting the value of their investment by preventing them from building their dream home on their vacant lot? Will that raise taxes? What will happen to real estate values? Will builders be out of business? The ramifications are wide and far-reaching. The future starts now.

By Frank Greenman& Sara Matthis

When Keys residents and officials talk about what will happen in 2023, when the state stops new development in the Florida Keys, the words most often heard in the next breath is “takings lawsuit.”

What does that mean? Well, most are more familiar with eminent domain. Eminent domain is when the government wants to take a citizen’s property. A takings case is when a property owner says the government is doing the taking.

Both the U.S. and Florida constitutions prohibit the government from “taking” private property without just compensation. However, the definitions of a “taking” and “just compensation” are determined by the government doing the taking. For instance, in order to be eligible for just compensation, the government must have taken “all beneficial use” of the property to be taken. All Keys governments have a “beneficial use” procedure clause on the books.

That means if Joe Keys Property Owner doesn’t have a building permit in hand by 2023, he will not prevail in a takings lawsuit because he can still collect a rental fee to keep bee hives on his property, or watch the sunset from a deck chair, or even build a garage for his RV — the bees, the sunset, or the garage can qualify as “beneficial use.” Or, as the legal battle shapes up in advance of the 2023 deadline, Jill Keys Property Owner will NOT be allowed to build her dream, market rate, five-bedroom mansion, but instead will receive the “beneficial use” of the right to build a deed-restricted affordable house. The legal reasoning is that any beneficial use granted avoids the government from having to pay just compensation. This is the rationale that Monroe County is currently using. (See sidebar.)

But will that rationale stand up in court?The takings lawsuit can only go one of two ways: the governments prevail and the property owner is deprived of his or her building rights; or the property owner prevails and either receives a settlement (compensation), or the right to build.

Key West attorney David Paul Horan started out his career in the Keys back in the 1970s as aMonroe County assistant attorney. He said he was so vocal about how much authority Monroe County was turning over to the state in matters of the Area of Critical Concern and Rate of Growth Ordinance, that his position was “eliminated.”Horan was promptly hired by the City of Key West to continue the same fight.

“This is what I was saying was going to happen if we continued down this path. When we ran out of building right allocations on property people have been paying taxes on for all this time, we were going to face takings lawsuits,” Horan said. “And that’s what it ended up being. I told everyone, ‘You are signing checks that our grandchildren will not be able to cash. Ultimately, you are going to have to tell all these people you screwed up, you trusted us, and you’re not going to be able to use this property. It was an implicit promise, but we were fibbing to you, and we are not able to protect you.’”

Monroe County Attorney Bob Shillinger and other municipal attorneys and planning directors in the Keys say not every person who has a vacant lot in the Keys is eligible to take part in, or benefit from, a takings lawsuit. For example, a property owner in possession of wetlands should have no reasonable expectations of building a home there.

“Not every owner of a vacant lot that doesn’t get a [building permit], will have a takings claim. It’s a very fact-intensive process that involves the investment-backed expectations and efforts of the owner,” Shillinger said. For example, a property owner who has at one time or another applied for a building permit would be in better settlement position than one who never applied. “But the individual calculation sometimes depends on factors that are not knowable to us. The property owner could have expenditures on an architect or engineers, and the county would know nothing about it,”Shillinger said.

If takings lawsuits came to pass in the Keys, who would local property owners be suing? Would “Jill and Joe” sue the City of Marathon for the inability to build on a lot on Grassy Key located within the town limits because the state has told the city not to issue any more permits? Would Jill and Joe sue Monroe County for agreeing to pass restrictive growth management measures mandated by the state? Or would property owners sue the State of Florida for imposing the Area of Critical Concern and the Rate of Growth ordinance in the first place? It will be a combination of all three, most likely.

Monroe County’s position on who is responsible is crystal clear.

“The state, because they imposed the restrictions,” said Shillinger. “They are going to be jointly, if not exclusively, liable.” The county attorney said that theory will be tested in the next couple of years as the 2023 deadline approaches. Or sooner, as the mid-term elections in November will see a new set of leaders elected to office in Tallahassee. “How solid will their commitment be? And there could be litigation where the county sues the state for additional funds. We hope it doesn’t come to that.”

Attorney David Paul Horan said the arguments could encompass the constitutionality of the original agreement.

“When the Monroe County Commission was passing all the rules and regulations that the state Department of Community Affairs wanted them to pass, my advice was don’t do it,” he said, referring the state Department of Economic Opportunity’s predecessor, in charge of development in the Keys. “I told them, ‘Let the state do it’ because otherwise the county is the ‘taking’ agency. The argument that the DCA made us do that won’t hold because the counter-argument is that the DCA can’t make the county do something unconstitutional. I’ve filed pleadings like that before.”

But, back in 1992, the state wasn’t going to allow any permits at all until Monroe County developed its new land use laws.

There’s one more very expensive fact to consider. Even if the state is found liable — it loses the court takings case — the state has no legal obligation to pay. Just as the legislature cannot tell a judge how to rule, the courts cannot tell the legislature to fund a claim. The concept of separation of powers prevents the courts, where the taking claims will be determined, from ordering the legislative branch to pay. There’s an exception to this rule, a settlement in the amount of $250,000 or less is automatically paid in Florida. But when the amount is higher than that, it requires a special act of the state legislature. There are probably thousands of those cases that have been filed, but never funded, or paid.A good example of that is the citrus canker case involving 84,000 households in Broward and Palm Beach who will split $42 million. In 2008, they won the class-action lawsuit, but they waited another decade before the state funded the settlement.

The attorney fees in eminent domain or takings case are often as high as the value of the property being fought over — hundreds of thousands of dollars. It is the government’s “dis-incentive” for these types of lawsuits. How many vacant lots are left in the Keys and what is their value? Using the high side of the equation, there could be as many as 10,000 buildable lots left in the Florida Keys. In 2018, the average lot cost is $200,000. The value of the buildable lots then, is approximately $2 billion in 2018. At least that’s the value of the property five years before the state has told the Keys there will be no more new development.

The Rock & The Hard Place: Competing Policies

Monroe County and local municipalities are stuck between two competing policies — the need to build more affordable housing, and the need to protect the taxpayer from expensive takings lawsuits.

“The position of the county attorneys office is that each affordable housing allocation has a value for resolving a potential takings claim. We have made the recommendation to the Board of County Commissioner that they should distribute these allocations judiciously with that in mind,” said County Attorney Bob Shillinger, referring to the discussion of “beneficial use” in the main body of this article.

The issue is further complicated by the fact that some entities, such as the county, have many affordable building rights stockpiled that could be of use, for example, for a development in the Village of Islamorada. Once upon a time it was a fairly simple process for the county to transfer these rights to a city simply by asking; now not so much because of the “exposure” conceptthat has everything to do with finances.

“Think of it as a Monopoly board with all the little green houses,” Shillinger said. “If you put all the houses on the Baltic and Mediterranean properties, and none on Boardwalk, and Park Place, then all of those are vulnerable to takings cases.”

In other words, taking 70 affordable housing rights and clustering them on two large pieces of property, potentially leaves 68 other lots “exposed” when it comes to takings lawsuits. But because of the very nature of building affordable housing developments — shared walls, driveways and pools and other economies of scale — it’s often financially necessary to build with high densities.

So while it may seem like a no-brainer to issue as many affordable housing building allocations as soon as possible to address the housing crisis in the Florida Keys, there is a also a reason to hold on to them — or as some say, “hoard” — to protect against future takings lawsuits wherein a property owner could theoretically be legally appeased with an affordable housing right deemed “beneficial use.”

— Frank Greenman is a retired general land use attorney living in the Florida Keys. He practiced for 38 years, as well as was one of the first councilmen elected to the City of Marathon, established in 1999. Sara Matthis is the editor of the Weekly Newspapers.

Please send your thoughts and comments about this issue to [email protected]. Comments will be gathered and published, as space permits, with the author’s name and hometown. All of the articles will be available at keysweekly.com as they publish.

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1 COMMENT

  1. I don’t think it is a bad thing to stop development with the exception of affordable/workforce housing. The keys infrastructure can hardly maintain what is already here and, we don’t need more homes that stand empty most of the year.

    A few good reasons to stopping new development and restricting development to needed workforce housing in the future are:

    1) Current values will likely rise,
    2) Many old and rundown properties that are already developed will be replaced or updated and,
    3) If the workforce situation is not fixed, people will simple go somewhere else because service will suck and then property values will drop because who wants to visit or live where there is bad service or hotels and restaurants are always understaffed..?

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