Town of Flower Mound v. Stafford Estates L.P., ___ S.W.3d ___, 2004 WL 1048331 (Tex.) (not yet released for publication).
From the June, 2004 issue of The Title Insurance Law Newsletter
A town's conditioning of its approval of a subdivision plan on the developer's payment for improvements to existing public streets adjacent to the development was a taking without just compensation, says the Texas Supreme Court.
The Town of Flower Mound's ordinances require that a subdivision developer bring existing abutting streets up to town standards, even if the improvements are not necessary to accommodate the impact of the subdivision. Thus, the town conditioned its approval of Stafford Estates Limited Partnership's development of a residential subdivision on Stafford's rebuilding of an abutting road. Stafford sued under Article I, Section 17 of the Texas Constitution, the Fifth Amendment to the United States Constitution, and the federal Civil Rights Act of 1871.
The case made its way to the state Supreme Court, which affirmed a ruling that the ordinance worked a taking under the state constitution. It rested the decision on Nollan v. California Coastal Commission, 483 U.S. 825, 107 S.Ct. 3141, 97 L.Ed.2d 677 (1987) and Dolan v. City of Tigard, 512 U.S. 374, 114 S.Ct. 2309, 129 L.Ed.2d 304 (1994).
We restate the rule of Nollan and Dolan generally as follows: conditioning government approval of a development of property on some exaction is a compensable taking unless the condition (1) bears an essential nexus to the substantial advancement of some legitimate government interest and (2) is roughly proportional to the projected impact of the proposed development.
The town shouted that, if an exaction other than a dedication of land is considered a taking, "Texas cities will be forced to run a fierce constitutional gauntlet that will significantly erode the practical ability of cities to regulate land development to promote the public interest and protect community rights." The court replied mildly that it could not see
any reason why limiting a government exaction from a developer to something roughly proportional to the impact of the development in other words, prohibiting " 'an out and out plan of extortion' " will bring down the government.
The town argued that the problem was that it was given no presumption that the exaction was roughly proportional. The court said that this was exactly what would keep government honest:
[W]e think the burden is essential to protect against the government's unfairly leveraging its police power over land use regulation to extract from landowners concessions and benefits to which it is not entitled. To repeat Dolan: "No precise mathematical calculation is required, but the city must make some sort of individualized determination that the required dedication is related both in nature and extent to the impact of the proposed development."
