Much of land use, environmental, and natural resources law involves government-administered permitting regimes. For example, someone building a new residential subdivision needs permits from a local government agency approving the subdivision of property and demonstrating compliance with building and zoning codes. Someone building a new factory will need similar local permits, in addition to state and federal permits, for the air and water pollution the factory will release. Each of these permits may contain conditions requiring the permit applicant to take steps to ameliorate harm the proposed activity may cause to the public. These conditions are referred to as "exactions." Until the Supreme Court's June 2013 decision in Koontz v. St. Johns River Water Management District, most types of permit conditions received little scrutiny under the Fifth Amendment's Takings Clause. Courts and scholars often distinguished between conditions that require dedication of an interest in land to the government and those that involve only money. Courts subjected the former category to heightened scrutiny under a pair of Supreme Court cases commonly referred to as Nollan/Dolan, but often applied a more government-friendly test to monetary exactions. The Supreme Court rejected this distinction in Koontz. This Article argues that not all conditions involving money are the same. Some conditions require a permit applicant to directly transfer money to the government conditions which this Article refers to generically as "fees." Other conditions require a permit applicant to spend money to carry out mitigation activities, but do not involve a transfer of property to the government conditions which this Article refers to generically as "expenditures." While the distinction between fees and expenditures has been ignored in the law of exactions, it has a crucial role to play. This Article draws on textual signals in the Constitution itself and formal distinctions developed in case law to demonstrate that heightened scrutiny should apply only to fees, and not to expenditures. The Takings Clause is centrally concerned with direct appropriations of property, and fees fit that mold. Expenditures, on the other hand, resemble regulation generally and should receive narrower judicial review. The Koontz decision threatens to subject permit regimes of all stripes to an exacting and onerous takings standard that substantially aggrandizes the power of the judiciary and distorts the Takings Clause beyond reasonable bounds. Distinguishing between fees and expenditures appropriately insulates many of these regimes from heightened scrutiny, while affording greater protection to property owners subject to direct appropriations of property, thereby allowing regulators to effectively protect the public from the adverse consequences of private development decisions and avoiding a flood of litigation.
