Key changes

A recent Supreme Court ruling that allows Keys landowners to challenge local municipalities over property issues in federal court — instead of largely pro-preservation state courts — could radically change the landscape for development

Sep.September 20, 2019 10:00 AM

In 2023, owners of more than 7,800 properties could theoretically be stuck with land that had been rendered unbuildable, creating a potential takings liability of $317.7 million.

The Florida Keys, with their strict limits on growth, have long been a property rights battleground.

But while Keys governments have thus far mostly had their way in the courts against disgruntled property owners, a recent U.S. Supreme Court ruling has the potential to be a gamechanger in the high-stakes disputes over the future of Florida’s southernmost string of islands.

“You will see more cases. Many more cases,” said Key Largo attorney Andrew Tobin, who has served as counsel or co-counsel in several high-profile Keys property-takings cases in recent years.

In the June ruling on Knick v. Township of Scott, Pennsylvania, a divided Supreme Court overturned a 34-year-old precedent that had required property owners who are suing local governments for compensation under the Fifth Amendment takings clause to do so first in state court. That takings clause states that private property cannot be taken for public use without just compensation. Landowners who are forbidden from developing their properties (due to, for example, environmental preservation issues) often sue to dispute the compensation determined by local government. At times, part of the compensation is provided by easing the property owner’s path to development on an alternative property.

The ruling comes as the Keys approach what could be a critical juncture. Under the complex growth laws enforced by Keys governments and overseen by the state of Florida, residential home development is currently slated to be capped out in 2023, meaning that further permits could not be issued. As such, Tobin isn’t the only land-use attorney eager for the opportunity to have federal judges take a new look at issues upon which they’ve struggled to gain traction in the state courts for decades.

“By and large, the idea is that you are going to get a little more attention in federal court, because there are less cases, and you are going to get a judge who is not beholden to the local taxpayers,” said Mark Miller, senior attorney for the Pacific Legal Foundation, a nonprofit property rights advocacy group that has litigated Keys takings cases.

The buildout backstory

Driving the fight are development regulations implemented by Monroe County and Keys cities — but largely at the state’s behest. Since 1974, the Keys have been an “Area of Critical State Concern,” a designation put in place by the Florida Legislature in order to protect the archipelago’s natural resources and ensure that the island chain can be efficiently evacuated ahead of hurricanes. The designation empowers the state with what is essentially veto power over the growth-related decisions of Keys governments. Most notably, the state uses its powers under the Critical Concern Act to determine how many new homes the Keys can support while still being able to safely evacuate all residents in the 126 miles from Key West to the mainland in 24 hours or less. 

The state updates the number of new homes, known colloquially as “buildout,” once a decade. It’s based on the U.S. Census, as well as evacuation modeling done by the Department of Economic Opportunity (DEO). The modeling considers a variety of factors, including, critically, highway capacity. When the evacuation model was updated last, in 2012, the DEO allocated 3,550 residential development rights to the Keys to be used through 2023.

It’s Monroe County and Keys municipalities that actually distribute those building rights, however. They do so under growth ordinances that set annual limits for the number of permits they will award. When the number of permit applicants exceeds the number of available allocations, building rights are distributed under a competitive points process designed to tilt development toward less environmentally sensitive lands.

The 3,550 buildout figure has left Keys governments in a bind, namely because at the time of the last modeling, there were nearly 11,400 undeveloped privately owned parcels Keys-wide. As such, in 2023, owners of more than 7,800 properties could theoretically be stuck with land that had been rendered unbuildable, creating a potential takings liability of $317.7 million, according to a 2013 Monroe County analysis. The county is currently working on an updated analysis, Christine Hurley, assistant county administrator, said.

Keys governments aren’t ignoring these concerns. Just since July 2016, for example, Monroe, aided by the state, has spent or encumbered $14 million for land acquisition, according to a county analysis. The Monroe County’s Rate of Growth Ordinance (ROGO) and other local governmental systems also have mechanisms that encourage property owners to donate sensitive lands to local governments in exchange for easing the path to winning a development allocation on another property. 

In addition, the county government is currently working on an ordinance to delay buildout until 2026 by halving the number of market rate allocations it awards annually. In the meantime, explained Hurley, the hope is that when DEO updates the hurricane model in 2022, the state will raise the buildout number to account for increasing second home ownership in the Keys, as well as other potential factors. 

The legal precedents

Strict development rules in the Keys, especially for environmentally sensitive parcels, have led to a series of takings cases in recent decades. Rulings, though, have mostly favored the state.

In one important 2013 decision, Florida’s 3rd District Court of Appeals (DCA) ruled in favor of the city of Marathon and the state of Florida in a case brought by Gordon and Molly Beyer. The couple had purchased a nine-acre offshore island in 1970, which in 1996 was designated as a bird rookery where development was prohibited. When the Beyers petitioned newly incorporated Marathon for takings compensation, the city offered them not cash, but 16 points in its ROGO system, which it valued at $150,000. The DCA ruled that those points met the reasonable economic expectations for the island.

Also in 2013, the 3rd DCA sided against plaintiffs in the Collins v. Monroe County takings case. In that case, the court reasoned that the property owners had not taken meaningful steps to develop their properties before stricter regulations were put in place, sometimes despite having owned those properties for decades before the onset of the tougher rules. To support the ruling, the DCA cited precedent from another signature Keys takings case opinion — 2003’s Monroe County v. Ambrose.

“It would be unconscionable to allow the landowners to ignore evolving and existing land-use regulations under circumstances when they have not taken any steps in furtherance of developing their land,” the state appellate court opined in Ambrose.

Plaintiffs did win one prominent recent Keys takings case: Galleon Bay v. Monroe County. In 2012, after more than a decade of litigation, the 3rd DCA concluded that because the No Name Key property owners had been approved for 14 platted residential home sites shortly before the imposition of ROGO rules that curtailed development, they could reasonably expect to be allowed to continue with the development process.

Those cases, though, were all litigated in the Florida court system, which until now has been the only option for takings case plaintiffs. But in the aftermath of the Supreme Court’s Knick v. Township ruling, the playing field has been expanded to include federal courts. 

If that concerns Monroe County Attorney Bob Shillinger, he isn’t letting on.

“It doesn’t impact in any substantive way how we would defend these cases,” he said.

In fact, Shillinger added, plaintiffs who file a federal takings case against the county could see the move backfire due to the 11th Amendment, which forbids individuals from suing a state in the federal courts. Monroe County has historically brought the Florida government into takings cases as a defendant. 

“They run the risk of the court finding that because these are state-imposed regulations, the state is an indispensable party, and the case would be subject to dismissal,” Shillinger said.

Key Largo’s Tobin, though, dismissed that notion as “absolutely false.”

“I doubt whether or not I will ever file another takings case in state court,” he said. “The state courts are required to follow the U.S. Supreme Court pronouncements on takings issues. There is no reason to go to state court.”

One issue that plaintiffs’ attorneys are eager to take before a federal court is ROGO point values.

In the Beyers case, the 3rd DCA accepted Marathon’s position that the points have financial worth and that a taking can be avoided by rendering them to a property owner. Presently, under a 2018 resolution, Monroe County values each ROGO point at $30,218.

But the Pacific Legal Foundation’s Miller said he’s not ready to acknowledge that the points have value. Miller also questioned the basis for the 3rd DCA’s ruling in the Collins case.

“There’s a perception that if you don’t develop, you’ve lost your ability to develop forever more. That’s fairly preposterous,” he said.

An issue that does concern Shillinger (and other local Keys officials) is the prospect of reaching buildout for residential development. If buildout is reached, the situation, from a legal standpoint, will change, he said.

“The landscape will shift some, but it doesn’t shift entirely,” he said. “You have to look at what was a reasonable expectation for the property as well as the property owner’s efforts.”

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