A property-rights fight that is being escalated to the U.S. Supreme Court revolves around some technical issues for courts, such as when is a government decision “final” and permitting timelines and various development application options.
But the bottom line in the case brought by Pacetta LLC and its owners, Simone and Lyder Johnson, against the Town of Ponce Inlet is whether government officials are allowed to deliberately drive the value of property to nothing by imposing extraordinary limits – all in the hope of snapping up the land for themselves when the price bottoms out.
It is the Pacific Legal Foundation, a many-times winner at the highest court, that is moving the case forward.
Attorney Christina Martin explained the manipulation that occurred after the Johnsons, who had set out with the simple goal of building their dream home in Florida, were encouraged by city officials to buy up millions of dollars worth of additional land and design an entire waterfront for the town.
“The story behind this case began many years ago, when Simone and Lyder Johnson set out to build their dream home, along with some other possible residential development, in the town of Ponce Inlet, Florida. Government officials for the town saw the Johnsons’ interest in the area as a potential boon, and they recommended the couple expand their project into a large, multi-use development that would benefit the community. At these officials’ insistence, and through their company Pacetta, LLC, the couple spent millions of dollars to purchase additional land, and then they began work on this new planned development that included everything the town wanted: a public pier, long public river walk, public parking, preserved trees, and more,” the foundation reported.
But then, as happens, the makeup of the town council changed and its new members opposed the development.
“Rather than just require a more modest plan for the land, the town council went further. It set out to devalue Pacetta’s waterfront property, because it hoped to later purchase the same property at a discount. The town imposed heavy regulations on the property, and passed several years of moratoria to stop any development of the land,” the foundation said.
A lawsuit followed and a trial court called out the town for its misbehavior, awarding the development company some $30 million in damages. Its conclusion was that the town had deliberately deprived the company of “all economically beneficial use” of four of the very expensive parcels of land earlier officials had convinced the couple to buy.
But an appeals court, Florida’s Fifth District Court of Appeal, jumped in, demanding to know whether the conflict was “ripe” for court review. It essentially suggested that the developers could perhaps in some other way plead with the town to let its work go forward.
The higher court also complained that it wasn’t sure whether the loss of use of four of 10 parcels really was a big deal, since there might have been – eventually – some sort of work approved on the other six.
“This case raises two important issues for the Supreme Court to consider. First, how many applications and how far must a property owner go before he can seek to enforce the protections of the Takings Clause in court? In this case, the trial court found that after six years of attempting to appease the town, the town rejected Pacetta’s development plans and would block all economically viable development of Pacetta’s property,” the foundation said.
The appeals court wanted to know whether the developers should have been required to apply for even more permits.
“It was not enough for the appellate court that the town would block all economically viable development of the property; the town would have to block all development, including impractical and unprofitable developments too,” the explanation continued.
Associated with that is the question of “whether government must pay an owner just compensation when it intentionally devalues property with the intent of later buying it at a discount. The trial court found that the town intended to devalue the land and drive Pacetta into financial distress to force a discounted sale of the vacant waterfront land desired by the town.”
The argument to the Supreme Court lays out plainly the requirements in federal law: “Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any state … subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding….”
The Constitution itself, requires “nor shall private property be taken for public use, without just compensation.”
The project involved 10 different parcels that covered 16 acres. Besides the many millions the couple spent – one parcel alone was $8 million – they also spent $2.2 million for architets and engineers, and $1.5 million for initial improvements.
Then, the town “revised its town charter to specifically prohibit Pacetta’s development project.
“That the regulation caused economic harm should be sufficient to find a taking – regardless of whether the ‘parcel as a whole’ was all 10 parcels, or only the four vacant parcels … Any contrary holding would empower any government to avoid the ‘just compensation’ mandate of the Takings Clause by intentionally devaluing land for cheaper subsequent acquisition,” the foundation said.