Supreme Court Rejects Lake Tahoe Landowners' Takings Claim

Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 122 S.Ct. 1465 (2002).

S. Beth Windham, 3L
Kristen M. Fletcher, J.D., LL.M.

This spring, the Supreme Court released its latest “takings” decision, holding that a planning agency’s 32-month moratorium on development at Lake Tahoe was not an automatic taking of property under the Fifth Amendment.1 In distinguishing between a government physically taking a property and the adoption of a temporary rule limiting a landowner’s development, the Court found that a temporary moratorium, such as the Tahoe Basin development moratorium, did not automatically constitute a taking.

Conserving the “Noble Sheet of Blue Water”2
Lake Tahoe is considered a national treasure because of its blue color and transparency, which is particularly threatened by development that increases nutrient loading via runoff and erosion.3 To combat this problem, the legislatures of California and Nevada signed the Tahoe Regional Planning Compact in 1972, creating the Tahoe Regional Planning Agency (TRPA) to conserve the Tahoe Basin and its natural resources. After the TRPA failed to limit new residential construction, the two states formed a new compact in 1980 that required the agency to develop standards for water quality, air quality, and vegetation conservation. It also required the TRPA to adopt a regional plan to achieve those standards and directed the TRPA to place a moratorium on development until implementing the plan.

The TRPA instituted two moratoria on development in the Basin that ended thirty-two months later with the adoption of a plan in 1984. The plan specified environmental threshold carrying capacities for protection of the lake, which set standards for air quality, water quality, soil conservation, noise and vegetation preservation. The plan also set out a method of maintaining the carrying capacities after they were achieved. The Compact initially set a deadline for the plan in 1981, but, despite a good faith effort, did not reach it and the TRPA enacted an ordinance imposing the first moratorium on development. It remained in effect until the next deadline in 1982.

Again, the TRPA was unable to complete the plan due to the complexity of defining the carrying capacities. Consequently, TRPA adopted a second moratorium which continued for another eight months until instituting a final plan. After the plan, California obtained an injunction from a federal court preventing the implementation of the plan until approval of yet another plan in 1987. The injunction and the 1987 plan both prevented construction on certain lands in the Tahoe Basin.

The Tahoe Sierra Preservation Council, representing the interests of local landowners, filed suit against the TRPA. The Sierra Preservation Council postured that the moratoria and the 1984 plan constituted a government taking of their property without just compensation, in violation of the Fifth Amend- ment. The lower court held that it was the federal injunction, not the 1984 plan, that resulted in the plaintiffs’ restraints.4 The Supreme Court granted review on whether the two moratoria of 32 months constituted a taking of private property.

Physical vs. Regulatory Takings
The Fifth Amendment prohibits the taking of property by the government for public use without compensation. Takings fall into two general categories: physical and regulatory. Physical takings are those in which the government actually acquires property for its own use or physically intrudes on property, such as taking private property for the construction of an interstate. Regulatory takings, in contrast, are actions by the government that prevent landowners from using their property in a certain way, such as the adoption of a regulation that prevents development

The Supreme Court has developed two “per se” rules for takings. First, when the government physically takes an interest in property, compensation is mandated whether taking all or just a part of an owner’s interest.5 Second, when a government action deprives the landowner of all economically viable use of the land, a taking has occurred.6 However, when a regulation prevents an owner from conducting certain activities without removing all viable use, a court must assess the purpose and the effect of the regulation. Using the “Penn Central Analysis,” named for the case that established it, the court weighs the regulation’s economic effect on the landowner, the extent to which the regulation interferes with reasonable investment-backed expectations, and the character of the government action.7

Court Rejects a Categorical Rule
The plaintiffs claimed that the two moratoria, while temporary in nature, denied landowners all viable economic use of their property and that such a loss should automatically be considered a taking. Thus, rather than weighing factors of how the regulation affects the landowner to determine whether a taking has occurred, the Court should automatically declare a taking if the regulation imposes a temporary loss of all value. By mandating compensation whenever the government institutes such a moratorium, takings jurisprudence would prevent the “[g]overnment from forcing some people alone to bear burdens which, in all fairness and justice, should be borne by the public as a whole.”8

Ultimately, the Court resisted applying a categorical rule for temporary takings, even if all economic value is lost on a temporary basis. It first noted that the language of the Fifth Amendment supported treating physical takings and regulatory takings differently. It reasoned that the Amendment’s “plain language requires the payment of compensation whenever the government acquires private property for a public purpose. . . . But the Constitution contains no comparable reference to regulations that prohibit a property owner from making certain uses of her private property.”9 Additionally, physical takings were historically analyzed using per se rules while regulatory takings have more recently been analyzed by evaluating the circumstances and facts. The Court concluded that there was no reason to treat regulatory takings and physical takings the same by imposing a rule traditionally used for physical takings on regulatory ones.

The majority also relied on precedent to show the importance of weighing factors on a case-by-case basis for temporary regulatory takings. The Court distinguished previous cases from the Lake Tahoe challenge explaining that “a statute that ‘wholly eliminated the value’ of [a landowner’s] fee simple title clearly qualified as a taking. But our holding was limited to ‘the extraordinary circumstance when no productive or economically beneficial use of land is permitted.”10 Because the government deprived the Lake Tahoe landowners of economic use for 32 months, rather than permanently, the Court did not consider this a permanent deprivation.

The Preservation Council argued that the 32-month time period could be evaluated as a taking on its own. The Court rejected this stance stating, “defining the property interest in terms of the very regulation being challenged is circular. With property so divided, every delay would become a total ban; the moratorium and the normal permit process alike would constitute categorical takings.”11 The Court concluded that a delay did not render a fee simple estate useless; only a permanent restraint would result in a loss of all economic value. Thus, the starting point in the analysis should be whether there was a taking of the entire parcel of land using the factors under the Penn Central analysis.

Fairness and Justice
The Court also expressed concern over the public policy ramifications of treating regulatory takings the same as physical takings, asking “the ultimate constitutional question [of] whether the concepts of ‘fairness and justice’ that underlie the Takings Clause will be better served by one of these categorical rules or by a Penn Central inquiry into all of the relevant circumstances in particular cases.”12

The Justices feared that the plaintiffs’ position would apply to numerous “normal delays in obtaining building permits, changes in zoning ordinances, [and] variances . . . as well as to orders temporarily prohibiting access to crime scenes, businesses that violate health codes, fire-damaged buildings, or other areas that we cannot now foresee.”13 Thus, such a rule would “render routine government practices prohibitively expensive or encourage hasty decision making.”14

The Court even broadened its analysis to view the TRPA efforts as an important regional planning process, explaining that “the interest in protecting the decisional process is even stronger when an agency is developing a regional plan than when it is considering a permit for a single parcel.”15 It found that the government often uses moratoria to keep the status quo in place and it is considered an important tool in the development process while developing a permanent plan. A categorical rule finding an automatic taking would classify all interim measures as takings regardless of the planning agency’s good faith in the matter. Thus, without moratoria, landowners would be tempted to immediately develop property before a final plan was instituted, leading to unwise and haphazard projects. The Court decided to leave the construction of a general rule to the legislature.

Conclusion
In the latest Supreme Court regulatory takings review, the Court determined the two moratoria on the Tahoe Basin did not constitute an automatic taking, rejecting a categorical rule on development moratoria for the more traditional takings analysis based on evaluating multiple factors. It reasoned that treating regulatory takings as per se takings “would transform government regulation into a luxury few governments could afford.”16

ENDNOTES
1. The Fifth Amendment states “. . . nor shall private property be taken for public use, without just compensation.” U.S. Const. Amend. 5.
2. Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 122 S.Ct. 1465, 1471 (2002).
3. 122 S.Ct. at 1470-1472.
4. 34 F. Supp. 2d 1226 (D.Nev. 1999).
5. Id. at 1478-1479.
6. Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992).
7. 122 S.Ct. at 1475, citing Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978).
8. Id. at 1478, quoting Armstrong v. United States, 364 U.S. 40, 49 (1960).
9. Id. at 1478.
10. Id. at 1483.
11. Id.
12. Id. at 1484.
13. 122 S.Ct. at 1485.
14. Id.
15. Id. at 1488.
16. Id. at 1479.