OPINION
This takings case is before the court following a trial held December 1st through 9th, 2003 in Washington, D.C. Plaintiffs seek just compensation under the Fifth Amendment, alleging that the government took without compensation 220.85 acres of plaintiffs’ property by requiring plaintiffs to set aside this acreage as mitigation wetlands in consideration of obtaining a Section 404 permit to fill and impact other wetlands under the Federal Water Pollution Control Act (FWPCA) Amendments of 1972, Pub.L. No. 92-500, § 404, 86 Stat. 816 (1972) (codified at 33 U.S.C. § 1344 (2000)). In essence, plaintiffs challenge the Corps’ action to require a landowner to create and build mitigation wetlands in exchange for impacting other wetlands in an effort to assure no net loss of
1. FINDINGS OF FACT
A. Background
The background of this ease spans over a decade of land acquisitions, purchases, sales, development plans, permit applications and issuances, with ever-changing persons, parties, companies, partnerships and entities involved. Because of the complex nature of this matter, the court has taken every measure possible to clearly and accurately describe the facts presented at trial. We ask the reader of this opinion to patiently follow the court as we recount a seemingly endless chronology of transactions and wade through the numerous acreage values, property values and land descriptions necessary to accurately render this opinion.
1. Plaintiffs Purchase The Double Diamond Ranch
Plaintiffs are the father and son real estate development team of Don Roger Norman and Roger William Norman (Normans), and the limited partnership, South Meadows Properties Limited Partnership (South Meadows). Together, they planned to develop commercial and industrial office space in Reno, Nevada on an approximately 2425-acre parcel of land called the Double Diamond Ranch (Ranch). Prior to this time, the Ranch was used for ranching and agricultural activities for nearly eighty years. Because the area where the Ranch was located received an annual average of only 7.14 inches of natural rainfall, the Ranch was irrigated by its previous owners with nearly six acre-feet of water per year per acre, through a complex system of irrigation ditches that criss-cross the Ranch property, in order to support ranching and agricultural activities.
In 1986, the Ranch was purchased by Southmark Corporation (Southmark), which intended to convert the property from agricultural and ranching usage into a large-scale commercial and residential development. Southmark prepared a detailed and comprehensive master plan for the construction of 7000 residential units, 321 acres of commercial space, and 37 acres of retail shops on the former Ranch property (Master Plan). The Master Plan also called for the construction of roads, schools, churches, fire stations, recreational trails, and parks, etc. — in short, the Master Plan contained all of the elements necessary for the development of a self-contained community.
On January 30, 1987, the Reno City Council (City Council) conditionally approved Southmark’s Master Plan and zoning requests by adopting a resolution of intent approval. However the City Council’s resolution of intent approval contained forty-one separate and detailed conditions that South-mark was required to satisfy concerning traffic, transportation, permits, etc. Of particular concern to the matter at bar was Condition 15. Condition 15 required that prior to the issuance of any permit by the City of Reno, or the commencement of any site work, Southmark had to submit plans approved by the United States Army Corps of Engineers (Corps) delineating wetlands or any other lands the development of which were subject to the issuance of federal permits.
Wetlands are areas of land that are inundated or saturated by surface or groundwater, with frequency and duration sufficient to support, and under normal circumstances do support, a prevalence of vegetation typically adapted for life in saturated soil conditions. 33 C.F.R. § 323.2(c) (1978); 40 C.F.R. § 230.41(a)(1) (2004).
A delineation is a several-step process that the Corps undertakes to determine whether or not an area on a property may be within the jurisdiction of the Corps, including whether an area constitutes a protected wet
Once the wetlands have been identified and mapped, usually a report is prepared with a map showing the wetland boundaries. Once an accurate map is completed, the Corps will a prepare a letter to notify the property owner of the official designation of wetlands on the landowner’s property. Areas that are defined as non-wetlands are outside of the Corps’ jurisdiction and do not require a permit for building. However, those areas that are mapped as wetlands require a permit to fill the land and for any building.
The Corps has the primary responsibility for processing wetland permits. Section 404 of the Clean Water Act (CWA) forbids the discharge of a pollutant by any person into wetlands, except in accordance with the statutory scheme requiring a permit for such discharge. 33 U.S.C. § 1344. The Corps may issue permits for the “discharge of dredged or fill material into the navigable waters at specified disposal sites.” Id. § 1344(a).
The Corps had previously contacted South-mark in August 1986 concerning the possible existence of wetlands on the Ranch that might be impacted by the proposed Master Plan. At that time, the Corps conducted a preliminary assessment of the Ranch property and concluded that there existed approximately 1300 acres of potential wetlands vegetation on the Ranch. Although the Corps’ preliminary assessment did not represent a final wetlands determination under the Section 404 regulatory scheme, Southmark disagreed with the Corps’ conclusion on the grounds that most of the vegetation on the property was a direct result of years of artificial flood irrigation. Consequently, on March 16, 1987, Southmark suspended all artificial irrigation of the Ranch in an effort to ensure that the Corps could evaluate hydrogeological conditions in the Ranch under normal circumstances when it did ultimately prepare its final wetlands determination.
In the spring of 1988, the Normans became interested in purchasing a 470-aere commercial portion of the Ranch for development as an industrial park, per the Master Plan. They were unwilling, however, to purchase the 470-acre commercial portion until the Corps completed a final wetlands delineation of the property.
2. The 1988 Wetlands Delineation
Thus, in June 1988, a team of wetlands experts from the Corps was sent to the Ranch to conduct field work necessary to prepare a final wetlands delineation. The delineation team visited the Ranch for one week and gathered data from thirty-two sites throughout the Ranch to determine what portions of the Ranch property, if any, exhibited the characteristics necessary to classify that land as jurisdictional wetlands.
Shortly after the Corps issued this 1988 delineation, Southmark sold the Ranch property to two entities, Double Diamond Ranch Limited Partnership (DDR), and G & E General Contractors (G & E). The sale of the Ranch, for a total purchase price of $20 million, was closed on December 30, 1988.
Following the sale, on January 9, 1989, G & E and DDR entered into an agreement whereby the two entities agreed to work together to develop the Residential and Commercial portions of the Ranch property (Development Agreement). The Development Agreement was signed by Robert Helms, on behalf of DDR, and by Lance Gilman, president of G & E, on behalf of G & E
As of December 30, 1988, the Normans had acquired the Commercial portion through a tax-free exchange with G & E, though title of the Commercial portion was not transferred to the Normans until June 20,1989.
The original Ranch property, bought by Southmark, and then later split into the Commercial and Residential portions sold to G & E/South Meadows and DDR/Helms, respectively, can be described in the following manner. The Ranch property is located in an area called Truckee Meadows, which is located in the southeast portion of Reno, Nevada. The 470-acre Commercial portion purchased from G & E by the Normans, and later deeded to South Meadows, lies west of Double R Boulevard, which was previously referred to as the Moana Lane divide. The Commercial portion generally extends to U.S. Highway 395 (also known as Interstate Route 580). The 1800-acre Residential portion lies to the east of Double R Boulevard and extends beyond Double Diamond Parkway up to and beyond Carat Boulevard. Although these roads did not initially exist in 1988, they were later created when the
Because of the complicated nature of this lawsuit, it is important to identify the location of the wetland parcels delineated by the Corps in 1988 in reference to the Commercial and Residential portions. The seventeen acres of wetlands delineated on the 470-acre Commercial portion of the Ranch, under the Corps’ 1988 wetlands determination, were located as follows:
• A 5.34-acre parcel which borders, and is located east of, Highway 395, referenced as wetland 21 (WL 21);
• A 4.38-acre parcel between the Moana Lane divide and Highway 395, referenced as wetlands 19 and 20 (WL 19 and WL 20);
• A 7.64-acre parcel located south of Thomas Creek Channel, referenced as wetland 17A (WL 17A); and
• A sliver of .14 acres of wetlands located near Whites Creek.
Joint Ex. 8, App. C.; Def.’s Ex. 299.
The other eleven acres of wetlands delineated by the Corps in 1988 are located on the 1800-acre Residential portion sold by South-mark to DDR/Helms. These eleven acres are:
• A 4.81-acre parcel located south of Carat Boulevard, referenced as wetland 5 (WL 5);
• A 5.5-acre parcel located north of Double Diamond Parkway and east of the Moana Lane divide, referenced as wetland 22 (WL 22); and
• A small sliver of .47 acres of wetlands located near Double Diamond Parkway, referenced as wetland 1.5 (WL 1.5).
Joint Ex. 8, App. C.; Def.’s Ex. 299.
3. The 1991 Redelineation Of Wetlands On The Ranch
In the months following the sale of the Ranch from Southmark to plaintiffs, a storm of controversy arose concerning the Corps’ 1988 wetlands delineation. The 1988 delineation was severely criticized by the general public, environmental groups, and even by employees of the Corps and other federal agencies, including the United States Environmental Protection Agency (EPA), and the United States Fish & Wildlife Service (FWS).
Eventually, the Corps revoked the 1988 wetlands delineation and conducted a new delineation under the 1989 version of the Corps’ Wetlands Delineation Manual. The Corps informed the Normans, by letter dated October 10, 1990, that the 1988 wetlands delineation of the Ranch was no longer valid and that a new delineation of the Ranch property was required. The Corps’ October 10, 1990 letter explained that the 1988 wetlands delineation may have been inaccurate because the delineation team utilized a growing season that was not appropriate for the area where the Ranch was located. Therefore, the Corps informed plaintiffs that the Corps would conduct a new delineation, utilizing the proper growing season for the area.
In April 1991, a delineation team from the Corps returned to the Ranch to collect data for a new wetlands delineation. The delineation team collected data from 108 sites across the Ranch over a week-long period. Using this data, and following the procedures set forth in the 1989 version of the Corps’ Wetlands Delineation Manual, the Corps prepared a new delineation of the Ranch property-
Whereas the 1988 wetlands delineation had identified only twenty-eight acres of wetlands on the Ranch (seventeen of which were on the 470-aere Commercial portion purchased by the plaintiffs), the 1991 delineation identified 230 acres of wetlands on the Ranch property. Eighty-seven acres of wetlands, including the original seventeen acres, were now on the Commercial portion, and 143 acres were now on the Residential portion. Whereas the 1988 delineation was based upon an estimated growing season allowed by the 1987 manual, the 1991 redelineation was based upon actual, measured soil temperature, and not an estimated growing season.
Thus, as a result of the new 1991 redelineation of wetlands, in addition to the original seventeen acres, the following areas were
• A 4.19-acre parcel located adjacent to wetland 17A, referenced as wetland 17B (WL 17B);
• An approximately sixty-acre parcel of wetlands located between Double R Boulevard and Highway 395, referenced as wetland 15 (WL 15); and
• A small grouping of wetlands parcels adjacent to WL 15, referenced as wetlands 8 through 14 (WLs 8-14).
Joint Ex. 19; Def.’s Ex. 299.
Similarly, in addition to the original eleven acres delineated in 1988, the following additional areas were designated by the Corps as wetlands on the Residential portion in 1991:
• An approximately 115-acre parcel located adjacent to, and east of, WL 15, referenced as wetland 16 (WL16);
• A parcel located along the North Channel, referenced as wetland 1 (WL 1);
• Small parcels of wetlands located around Whites Creek Channel, referenced as wetlands 2, 3 and 4 (WLs 2-4);
• A parcel located south of, and adjacent to, WL 5, referenced as wetland 6 (WL 6); and
• A parcel located south of WL 16 and east of WLs 8-12, referenced as wetland 7 (WL 7).
Joint Ex. 19; Def.’s Ex. 299.
The effect of the 1991 redelineation is at the heart the dispute adjudicated at trial. Plaintiffs put forth evidence attempting to prove that the Corps’ rescission of the 1988 delineation was fatal to plaintiffs’ and Helms’ efforts to carry out Southmark’s original Master Plan for development of the Ranch property. Shortly after the Corps released the 1991 wetlands delineation, plaintiffs claim that they were forced to go back to the drawing board and embark on a new plan to develop the entire Ranch development. According to the testimony of Lance Gilman, real estate broker for the Normans and partner in South Meadows, plaintiffs were forced into phased development because of the 1991 delineation.
Plaintiffs’ new plan was to try to develop the Ranch property in phases. In November 1991, plaintiffs applied to the City of Reno for a master plan amendment and zoning map amendments to develop 210 acres of the Commercial portion as a planned unit development (PUD). According to documents submitted to the City, plaintiffs intended to develop this 210-acre tract, referred to as “South Meadows Planned Development Phase I,” to include commercial, industrial, office and multi-family residential components (Phase I). On February 25, 1992, the City Council tentatively approved plaintiffs’ plans to proceed with the development of Phase I of the Commercial portion as a PUD.
In 1994, plaintiffs acquired additional, neighboring ranch areas for their development. These properties — the Flindt, Pecetti and Dotta ranches — were developed as Phase II of the new development (Phase II). Combined, these ranches total approximately 130 acres and became part of Phase II of South Meadows’ planned development.
In late 1994, plaintiffs began to pursue acquisition and development of the Residential portion of the Ranch, also as a planned unit development. On September 29, 1994, South Meadows purchased the 1800-acre Residential portion from the bankruptcy estate of Robert Helms, for a total purchase price of $30 million. The $30 million purchase price included $2 million cash, plaintiffs’ assumption of a $22 million note, and plaintiffs’ waiver of a $6 million claim against the Helms’ bankruptcy estate.
In November 1994, plaintiffs filed a petition with the City to re-annex the Residential portion of the Ranch and sought a master plan amendment and zoning for a PUD for the Residential portion so that the 1800-acre Residential portion from the Helms’ bankruptcy estate could constitute Phase III of the South Meadows development project (Phase III). Mr. Helms had previously deannexed his 1800-acre estate. In early 1995, plaintiffs received conditional approval from the City of Reno to develop the Residential
Subsequent to the purchase of the Helms property, plaintiffs sold off a large portion of the Residential portion in bulk to Double Diamond Ranch LLC (also referred to as Double Diamond Homes (DDH)).
4. The 1995 Permit
In January 1995, plaintiffs submitted an application to the Corps for a permit under section 404 of the Clean Water Act, 33 U.S.C. § 1344. In them application, plaintiffs sought approval from the Corps to impact thirteen acres of wetlands, and approximately two acres of “other waters” of the United States, as part of plaintiffs’ plan to develop the entire Ranch area for commercial, industrial and residential uses. To mitigate the impact of the proposed development on wetlands and other waters, plaintiffs proposed to create additional wetlands to ensure no net loss of wetlands functions and values. Plaintiffs’ mitigation proposal called for the creation of 20.6 acres of replacement wetlands, or approximately 1.37 acres of mitigation for each acre of wetlands impacted. Plaintiffs’ application, including the proposed mitigation scheme, was approved by the Corps, and a Section 404 permit was issued to plaintiffs on May 22,1995 (1995 Permit).
5. The 1999 Permit
On March 27, 1998, South Meadows submitted another application for a Section 404 permit, seeking to impact wetlands on the 2280-acre Development to construct a multipurpose commercial, industrial and residential development on the property. On January 13, 1999, the Corps informed South Meadows that its project, as proposed, would result in significant environmental impacts and therefore the Corps would have to prepare an Environmental Impact Statement in compliance with the National Environmental Policy Act of 1969, Pub.L. No. 91-190, 83 Stat. 852 (codified in scattered sections of 42 U.S.C. § 4321, et seq. (2000) (as amended)). However, the Corps indicated in its letter that providing a mitigation plan which clearly reduced the project impacts to a less than significant level would preclude the need for an Environmental Impact Statement. The Corps enclosed with its letter an environmental assessment which described a project which would be less environmentally damaging — a modified development alternative.
On March 1, 1999, the Corps explained its proposed modified development alternative to plaintiffs, which would allow the Corps to complete the Section 404 permitting process without preparing an Environmental Impact Statement on plaintiffs’ application to fill additional wetlands in the 2280-acre Development area. In July 1999, South Meadows, along with DDH, submitted a revised mitigation and monitoring proposal for both the Commercial and Residential portions of the 2280-acre Development.
According to the testimony of Kevin Roukey, a project manager for the Corps, the mitigation proposal was a result of a negotiations process between the Corps and plaintiffs. In particular, the parties discussed which areas of property on the 2280-acre Development could be utilized as mitigation wetlands. According to the testimony of Vince Griffith of Reno Engineering, consultant to the Normans and project engineer to
In August 1999, this proposal was approved by the Corps. Consequently, on August 31, 1999, the Corps issued plaintiffs and DDH a Section 404 permit. (1999 Permit). This permit incorporated the conditions and requirements in the 1995 Permit and super-ceded it. The 1999 Permit allowed plaintiffs to:
• Fill 60.24 acres of wetlands (WLs 1, 11.5,12,13,14,15 and 17A);
• Maintain the 1.32 acres of filled waters permitted under the 1995 permit (WLs 10 and 10. 5); and
• Fill 1.42 acres of waters of the United States.
In summation, under the 1999 Permit, plaintiffs were allowed to impact 61.56 acres of wetlands and 1.42 acres of waters of the United States. In exchange, plaintiffs were required under the 1999 Permit to:
• Create 60.24 acres of wetlands (C-l water detention basin);
• Create 1.32 acres of waters of the United States (located in the North Channel);
• Preserve and maintain 17.16 acres of existing wetlands (WLs 20, 21, 22 and 1TB);
• Restore 115.7 acres of existing wetlands (WL 16); and
• Construct 1.42 acres of other waters of the United States as compensatory mitigation (within the Thomas and Browns creek channels).
Thus, under the 1999 Permit, plaintiffs were required to create, preserve, maintain or restore 194.42 acres of wetlands and 1.42 acres of waters of the United States for a total of 195.84 acres. In addition to these requirements, the 1999 Permit also required plaintiffs to:
• Reeord[ ] the formation of a Corps approved funding mechanism for the long term maintenance of the mitigation and preserve areas.
• Reeord[ ] deed restrictions maintaining all mitigation preservation areas as wetland preserves and wildlife'habitat in perpetuity (Deed of Restrictions).
The Deed of Restrictions, attached to the 1999 Permit, is also a point of contention between the parties. The Deed of Restrictions explicitly prohibits development, stating that “no commercial, industrial, agricultural or residential developments, structures or buildings shall be allowed or permitted in the [pjrotected [a]rea.” Def.’s Ex. 31 at 3. The Deed of Restrictions prohibited all development on the wetlands areas, and further prohibited the destruction of vegetation and natural plants in the wetlands area, the plowing or cultivation of any wetlands areas, and required that the wetlands areas be maintained as open space. The 1999 Permit required the plaintiffs to record the Deed of Restrictions maintaining all mitigation preservation areas as wetlands preserves and wildlife habitat “in perpetuity.” Joint Ex. 29 ¶ 9(b). In order to comply with the condition requiring a Corps-approved funding mechanism for the long term maintenance of the mitigation and preservation areas, plaintiffs conveyed title to all of the wetlands mitigation acres to a non-profit property owners association. This property association, the South Meadows Association, was approved by the Corps as a funding mechanism for the long-term maintenance of the mitigation and preservation areas required under the 1999 Permit.
The Deed of Restrictions is broader than the 1999 Permit.
• 66.45 acres of the C-l detention basin;
• 24.25 acres of waters of the North Channel;10
• 7.76 acres of wetlands of area C-2;
• 6 acres of wetlands of WL 22;
• 2.02 acres of waters of the Thomas Channel;
• 1.314 acres of waters of the Delta Channel;
• 2.53 acres of wetlands of WL 20;
• .632 acres of wetlands of WL 11;
• 115.18 acres of wetlands of WL 16;
• 4.19 acres of wetlands of WL 17B; and
• 4.82 acres of wetlands of WL 21.
Plaintiffs set forth evidence at trial that the recordation of the Deed of Restrictions was required under the 1999 Permit, and furthermore, because of it, 220.85 acres of land were required to be set aside as wetlands. Although the 1999 Permit required only 195.84 acres of mitigation wetlands to be maintained as such, and the Deed of Restrictions required a total of 235.14 acres to be maintained as wetlands, plaintiffs’ taking claim is for 220.85 acres of property that was required to be maintained as wetlands under both the 1999 Permit and the Deed of Restrictions when read together as one document.
Plaintiffs achieve the 220.85-acre number in the following way: plaintiffs omitted from their takings claim 14.29 acres of land from the 235.14 acres indicated in the Deed of Restrictions. These 14.29 acres constitute a reduction of 10.38 acres of land from WL 16, a reduction of 1.21 acres of land from WL 20, and a reduction of 2.7 acres of land from various other parcels that had been previously designated as wetlands.
• 4.82 acres of WL 21;
• 4.07 acres of WL 17B;
• 104.8 acres of WL 16;
• 1.32 acres of WL 20;
• 1.314 acres of waters of the Delta Channel;
• 2.02 acres of waters of the Thomas Channel;
• 5.5 acres of WL 22;
• 6.82 acres from area C-2;
• 65.94 acres of C-l detention basin; and
• 24.25 acres of waters of the North Channel.
In summation, the amount of acreage plaintiffs claim to have been taken by the Corps by virtue of the Deed of Restrictions and the 1999 Permit totals 220.85 acres — the areas that the Corps mandated to remain undeveloped by plaintiffs and set aside as mitigation wetlands. As stated above, this acreage was deeded to the South Meadows Association to ensure that the mitigation wetland areas be maintained as wetlands and remain unused and undeveloped by plaintiffs or any other entity. Because of the Corps’ requirement that these areas be transferred to a “Corps approved funding mechanism for the long term maintenance of the mitigation and preserve areas,” plaintiffs claim damages of $34,233,000 (plus 10% interest), allegedly
After the issuance of the 1999 Permit, plaintiffs continued to sell the developable parts of the 2280-acre Development to various independent third parties. From the sale of the developable areas in the Commercial portion, Residential portion and other properties that constituted Phases I, II and III of plaintiffs’ entire development project, at the time of the issuance of the 1999 Permit, plaintiffs only retained ownership of 716 acres of property.
B. Procedural History
This matter has a long and winding history. Plaintiffs commenced this lawsuit on October 5, 1995. In 1996, plaintiffs moved for partial summary judgment solely on the issue of liability and the government cross-moved for summary judgment on the entire case. On August 12, 1997, the trial court issued an opinion granting the government’s cross-motion to dismiss plaintiffs’ breach of contract claim, granting the government’s motion to dismiss the claims of temporary and permanent takings of the residential property, and denying the government’s cross-motion for summary judgment on the claims of permanent and temporary takings of the commercial property. Norman v. United States,
On January 27, 1999, the case was reassigned to the undersigned. On September 21, 1999, the government moved for summary judgment on the claims of a temporary and permanent taking of the commercial property. On November 9, 1999, plaintiffs filed a cross-motion for summary judgment. On February 26, 2001, over the objection of plaintiffs’ counsel on relevancy grounds, the court deferred the resolution of defendant’s motion for summary judgment and plaintiffs’ cross-motion pending the decision of the United States Supreme Court (Supreme Court) in Palazzolo v. Rhode Island, No. 99-2047.
On August 20, 2001, plaintiffs filed a motion for leave to amend their original complaint based, in large part, on the Supreme Court’s decision in Palazzolo v. Rhode Island,
On March 27, 2002, the court issued an order wherein it granted, inter alia, plaintiffs’ motion for leave to amend original complaint, filed August 20, 2001. Thus, defendant’s pending motion for summary judgment and plaintiffs’ cross motion for partial summary judgment were rendered moot through the filing of the amended complaint. On April 10, 2002, the government filed its answer to the amended complaint. Subsequently, on May 21, 2002, the court issued an order granting plaintiffs’ motion to dismiss with prejudice its temporary takings claim raised in the March 27, 2002 amended complaint.
On February 12, 2003, the government filed: (1) its motion for partial summary judgment and corrected memorandum in support of its motion for partial summary judgment; and (2) its corrected motion in limine to bar plaintiffs from challenging the validity of the government action that allegedly effected a taking in this case. In March 2003, the court heard oral argument on the government’s motion for partial summary judgment and motion in limine and plaintiffs’ responses thereto.
On April 17, 2003, this court issued an opinion dismissing plaintiffs’ illegal exaction claim for lack of subject matter jurisdiction. Norman v. United States,
On May 22, 2003, this court issued an order regarding plaintiffs’ motion to strike several of defendant’s witnesses. As a result of the court’s April 17 and May 22, 2003 rulings, on September 16, 2003, the parties submitted Revised Memorandums of Contentions of Fact and Law. On November 3, 2003, plaintiffs then filed a motion in limine to exclude the testimony of several of defendant’s witnesses.
On November 13, 2004, the parties attended a pretrial conference in this matter. At this time, the court heard oral argument with respect to plaintiffs’ November 3, 2003 motion in limine to exclude testimony, and defendant’s response in opposition thereto. The court also heard oral argument regarding exhibits and witnesses objected to by the parties as set forth in their Revised Memorandum of Contentions of Fact and Law, filed September 16, 2003. During the pretrial conference, plaintiffs withdrew their cause of action that related to the taking by the government of 2446 residential units for public use. Also during the pretrial conference, plaintiffs made an eleventh-hour request to amend them complaint to amend the amount of acreage claimed to have been taken by defendant to 220.85 acres, and to amend any additional damages sought by plaintiffs.
On November 18, 2003, the court granted plaintiffs leave to file a motion to amend their complaint, which plaintiffs filed on November 20, 2003. The court also allowed the parties to introduce evidence of plaintiffs’ personal and financial losses from 1988 through the date of the alleged permanent taking in 1999 for the limited purpose of demonstrating or refuting the alleged economic impact of the regulation at issue with regard to the analysis set forth in Penn Central Transportation Co. v. City of New York,
Consequently, on December 1, 2003, the court granted plaintiffs’ motion to retroactively amend their complaint, which plaintiffs submitted on January 5, 2004. Defendant filed a revised answer on January 16, 2004. After trial was held from December 1st through 9th, 2003, on January 15, 2004, per Appendix A, If 19 of the Rules of the United States Court of Federal Claims (RCFC) governing case management procedure, this court ordered the parties to file their post-trial briefs, addressing the parties’ contentions, proposed findings of fact, and legal argument.
II. DISCUSSION
The Takings Clause of the Fifth Amendment commands: “[N]or shall private property be taken for public use, without just compensation.” U.S. Const, amend. V. As explained by the Supreme Court, “[t]he aim of the Clause is to prevent the government ‘from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.’ ” E. Enter. v. Apfel,
The Federal Circuit has developed a two-part test to evaluate whether a governmental action constitutes a taking of private property without just compensation. See Maritrans Inc. v. United States,
A taking can occur via a physical occupation by the government of one’s property, or via a regulation deemed necessary to promote the public interest that so imposes on the owner’s property rights that, in essence, it effectuates a taking. Loretto v. Teleprompter Manhattan CATV Corp.,
With respect to regulatory takings, the threshold inquiry as to the takings issue is “to determine at the onset whether a particular claimed taking was ‘categorical’ or not.” Rith Energy, Inc. v. United States,
Consequently, plaintiffs advance alternative theories to support their contention that the government took without compensation 220.85 acres of plaintiffs’ property when the Corps required that this acreage be set aside and maintained as wetlands “in perpetuity” as a condition for allowing plaintiffs to fill and impact other wetlands areas under the 1999 Permit. First, plaintiffs argue that a physical invasion of property has occurred under Loretto and its progeny. Second, plaintiffs argue that under a regulatory takings analysis, a categorical taking of 220.85 acres of plaintiffs’ property has occurred in that plaintiffs were denied all economically viable use of their property under Lucas. Third, if no categorical taking is found, plaintiffs maintain that a regulatory taking has occurred under the Penn Central ad hoe factual inquiry.
A. Cognizable Property Interest
In order for a party to assert a claim for a compensable taking against the government under the Fifth Amendment, the party asserting such a claim must have a cogniza
All real estate property interests are cognizable under the Fifth Amendment. See Cienega Gardens,
There is no question that fee simple ownership of real property constitutes a cognizable property interest. Accordingly, the court finds that plaintiffs’ ownership of the 220.85 acres of wetlands claimed to have been taken by virtue of the 1999 Permit and the Deed of Restrictions constitutes a sufficient cognizable property interest for plaintiffs to assert their claim.
The court at this point gives no credence to any potential argument that the transfer of the 220.85 acres of mitigation and preservation wetlands to the South Meadows Association in 1999 deprives plaintiffs of their cognizable property interest. First, defendant does not challenge plaintiffs’ property interest in the 220.85 acres of land claimed to have been taken. Second, the government acknowledges that the South Meadows Association is an entity in which all business park owners are members and are charged with the duty and responsibility to maintain all open space and common areas in the project. As a business park owner, Don Roger Norman maintains an ownership percentage in the association. In fact, Mr. Norman is president of the association. Accordingly, even if the government did wish to challenge plaintiffs’ property interest on account of plaintiffs’ transfer of ownership of the 220.85 acres of property to the South Meadows Association, such a challenge would fail on the basis of the retained ownership plaintiffs possess by virtue of their interest in the South Meadows Association.
B. Physical Taking
Plaintiffs argue that a permanent, physical occupation of their property occurred in that plaintiffs contend that they no longer have the right to exclude others from the 220.85 acres of land the Corps required be set aside for public use as mitigation wetlands, and because the Normans were required to transfer title to those acres to a non-profit property owners association under the conditions set forth in the 1999 Permit. Defendant counterargues that the Corps did not effectuate a physical taking of plaintiffs’ property, but rather, merely imposed restrictions on plaintiffs’ use of their land. These restrictions, the government contends, were devised by plaintiffs and their own attorneys, and plaintiffs made a voluntary decision to convey these 220.85 acres of land to South Meadows Association.
A physical intrusion by the government has long been considered to be a property restriction of an unusually serious character for the purposes of the Takings Clause. Loretto,
[T]he concept of physical occupation does not require that in every instance the occupation be exclusive, or continuous and uninterrupted. The evidence before the court was that Government vehicles and equipment entered upon plaintiffs’ land from time to time, without permission, for purposes of installing and servicing the various wells. They remained on the land for whatever duration was necessary to conduct their activities, and then left, only to return again when the Government desired.
Id. at 1377.
In Loretto, the Supreme Court recited the traditional rule that a permanent, physical occupation of property is a taking.
[O ]ur holding today in no way alters the analysis governing the State’s power to require landlords to comply with building codes and provide utility connections, mailboxes, smoke detectors, fire extinguishers, and the like in the common area of the building. So long as these regulations do not require the landlord to suffer physical occupation of a portion of his building by a third party, they will be analyzed under the multifactor inquiry generally applicable to nonpossessory governmental activity.
Id. at 440,
The Supreme Court identified an instructive distinction between a physical occupation versus regulatory imposition in Loretto which squarely applies here. The Loretto court referenced United States v. Pewee Coal,
In this instance, the parties stipulate that the combination of the 1999 Permit and Deed of Restrictions required plaintiffs to do the following with respect to the 220.85 acres of land at issue here: (1) record the formation of a Corps-approved funding mechanism for the long term maintenance of the mitigation and preserve areas; (2) record the Deed of Restrictions maintaining all preservation areas as wetland preserves and wildlife habitat in perpetuity; (3) convey title to the wetlands mitigation acres to a non-profit property owners association; (4) not develop the 220.85 acres, forbidding commercial, industrial, agricultural or residential developments, structures or buildings; and (5) not engage in any mowing, burning, dewatering, plowing or cultivation of the wetlands areas, nor engage in any leveling, grading or landscaping within the wetlands areas, nor destroy or remove any natural trees, shrubs or other vegetation that exists upon the wetlands areas. Plaintiffs argue that this combination of restrictions effectively kept plaintiffs from being able to take any action with their land. They maintain that these requirements essentially created a physical occupation of 220.85 acres of plaintiffs’ property by the government because the interference foreclosed any ability on plaintiffs’ part to exercise their bundle of property rights.
Despite the above restrictions, the court does not find that the government physically occupied 220.85 acres of plaintiffs’ property. Although in this instance, the Corps placed a permanent condition on plaintiffs’ 220.85 acres of land, by requiring that the wetlands be maintained as such “in perpetuity,” the government did not occupy or take physical possession of the lands. Instead, title to plaintiffs’ property was transferred from plaintiffs to the South Meadows Association, an entity which plaintiffs control, without property rights ever passing to the government. The term “permanent,” in the context of physical occupations, does not mean forever. Hendler,
It is time that while plaintiffs relinquished their right to control ingress and egress of 220.85 acres of their property, an important right in the bundle of property rights, it was not because the government exerted control over these areas or acted in a way that would indicate to the general public that the government maintained rights as property owners of this land. First, according to the testimony of Vince Griffith, engineering consultant to the Normans, there was no requirement that the mitigation and preservation areas on the property be conveyed to a third party. The requirement was only that a funding mechanism be in place, but not necessarily that property be conveyed to a third party. In fact, the 220.85 acres of wetlands were transferred to South Meadows Association because it was previously anticipated by plaintiffs that this was a “common and reliable means of ensuring the preservation” of the wetlands. Def.’s Ex. 249 at A-10 to A-ll. Second, the government was in no
This case is unlike Kaiser Aetna v. United States,
In this instance, unlike in Kaiser Aetna, the Corps did not impose the physical invasion of plaintiffs’ property by the government or any other person or party. Nor was there a continued government presence on the property. Instead, the government simply restricted plaintiffs’ use of 220.85 acres of land in exchange for allowing plaintiffs to fill and impact other wetland areas on their property. These restrictions were negotiated by plaintiffs and the Corps and documented in the 1999 Permit. Mere restrictions on the use of property do not constitute a physical invasion under Loretto. For example, in Boise Cascade Corp. v. United States,
Likewise, this matter involves the conditions placed upon the issuance of a wetlands permit, which is a classic regulatory taking, and normally does not constitute a physical taking. See Tahoe-Sierra,
Forest Properties,
The Federal Circuit affirmed this court’s finding that the denial of the Section 404 permit under the Clean Water Act constituted a regulatory, not a physical, taking. Id. at 1364. Forest Properties argued unsuccessfully that the action was a physical taking because the net effect of the denial was the reversion to the water district of Forest Properties’ interest in the lake-bottom property, since the lake bottom would not be excavated and filled within three years after execution of the deed to the property. Id. at 1365. However, the Federal Circuit found that this was attributable not to the government’s action, but to the prior contractual arrangement between plaintiff and the water district for such a reversion. The government itself had not required plaintiff to give up or submit to the physical occupation of the submerged land. Id. Because Forest Properties had yet to deed its interest in the lake-bottom property to the water district and continued to retain its title to the submerged land, the court found that no taking claim could arise until the deed transferred to the water district. Id. The court then utilized the three-factor Penn Central analysis to determine whether the Corps’ denial of the permit to dredge and fill the lake-bottom property was a regulatory taking. Id. at 1366.
Plaintiffs rely on Nollan v. California Coastal Commission,
The Nollans filed a petition requesting that the Ventura County Superior Court invalidate the access condition. The request was granted and, on remand, the Commission held a public hearing. The Commission reaffirmed its imposition of the condition, finding that the new house would block the view of the ocean, thus contributing to the development of a “wall of residential structures.” Id. at 828,
The Nollans filed a writ in California Superior Court. The Superior Court ruled in the
The Nollans appealed to the Supreme Court, arguing that conditioning the issuance of the building permit on the access requirement constituted a taking. The Supreme Court noted that if California had simply required the Nollans to make an easement across their beachfront available to the public on a permanent basis in order to increase public access to the beach, rather than conditioning their permit to rebuild their house on their agreeing to do so, there would have been a taking. Nollan,
[I]f the Commission attached to the permit some condition that would have protected the public’s ability to see the beach notwithstanding construction of the new house — for example, a height limitation, a width restriction, or a ban on fences — so long as the Commission could have exercised its police power (as we have assumed it could) to forbid construction of the house altogether, imposition of the condition would also be constitutional. Moreover, ... the condition would be constitutional even if it consisted of the requirement that the Nollans provide a viewing spot on their property for passersby with whose sighting of the ocean their new house would interfere. Although such a requirement, constituting a permanent grant of continuous access to the property, would have to be considered a taking if it were not attached to a development permit, the Commission’s assumed power to forbid construction of the house in order to protect the public’s view of the beach, must surely include the power to condition construction upon some concession by the owner, even a concession of property rights, that serves the same end.
Id. Based on this reasoning, the Supreme Court continued on to hold that if the nexus between the condition and the original purpose of the building restriction was lacking, then the restriction converts the purpose into something other than it was, that being, impermissibly obtaining an easement to serve some valid government purpose without compensation. The Supreme Court then stated that “unless the permit condition serves the same governmental purpose of the development ban, the building restriction is not a valid regulation, but ‘an out-and-out plan of extortion.’ ” Id. at 837,
Albeit unclearly, plaintiffs rely on Nollan to support their position that a physical taking of 220.85 acres of land occurred by the requirement that such land be maintained as mitigation wetlands in exchange for receipt of the 1999 Permit to dredge, fill and develop other wetlands. In Nollan, when the California Coastal Commission required the Nollans to grant the public a right-of-access to the beach in exchange for receiving the requested building permit, the Nollan court
In the case at bar, plaintiffs argue that a similar situation exists with respect to the Normans and South Meadows. They argue that Nollan stands for the proposition that where individuals are given a permanent and continuous right to pass to and fro on private land by the government, it constitutes a categorical taking of private property, essentially equivalent to a physical invasion of property. However, the distinction between plaintiffs’ argument and Nollan is that Nollan specifically stands for the proposition that a building permit could not be conditioned on the allowance of an easement across private property when there is no nexus between the access requirement and the land-use regulation. Id. at 838-39,
In this instance, the same cannot be said. The issuance of the 1999 Permit, based on the requirement that plaintiffs set aside mitigation and preservation wetlands in exchange for the opportunity to fill and dredge other wetlands, epitomizes the connection that was lacking in Nollan. The public interest served by requiring the preservation of wetlands in exchange for the filling and dredging of other lands relates directly to the condition imposed. There is no disconnect. It is clear that the situation at bar is not a physical taking as enunciated by Nollan, but rather, fits within the framework of allegations which might support a classic regulatory takings claim.
Plaintiffs also erroneously rely on Mannatt v. United States,
The court in Mannatt spent a significant amount of time discussing the propriety of the resurvey under the Bureau of Land Management’s regulations. Id. at 155. “Although a survey, standing alone, does not affect title in real property, when the government improperly resurveys lands so as to enlarge its interest in the property, and then effectively takes the property, such resurvey plus the assertion of control of the property will constitute a taking by inverse condemnation.” Id. (citing Sioux Tribe of Indians of Lower Brule Reservation, S.D. v. United States,
Plaintiffs rely on Mannatt to support the proposition that when the government requires a landowner to give up property, based on a mistaken survey, a taking has occurred. However, plaintiffs’ interpretation of Mannatt is incorrect. The Mannatt opinion deals with whether there existed subject matter jurisdiction to entertain plaintiffs’ lawsuit. The court found that plaintiffs there had successfully plead a claim for a compensable taking, despite the fact that the resurvey was not a formal adjudication, since the resurvey was not unlawful, but rather merely improper. Id. at 154. This, the court found, did not divest the court of its jurisdiction over plaintiffs’ claims. Id. By relying on Mannatt, plaintiffs here merely attempt to re-litigate their illegal exaction claim, which was properly disposed of by this court on April 17, 2003. See Norman,
C. Regulatory Taking
1. Categorical Taking
Having determined that there has been no physical taking in this matter, the court must now analyze whether a regulatory taking of plaintiffs’ 220.85 acres of property occurred when the Corps issued plaintiffs a Section 404 permit under the Clean Water Act to fill and impact wetlands in exchange for designating and maintaining as wetlands 220.85 acres of other lands “in perpetuity.” As stated previously, a regulatory taking of private property can be found either under the per se, categorical rules set forth in Lucas, or by applying the ad hoc factors outlined in Penn Central. Plaintiffs first argue that a per se, categorical taking of 220.85 acres of their property has occurred because plaintiffs were denied their right to use, or otherwise exercise their property rights in 100% of this acreage by virtue of the 1999 Permit and the Deed of Restrictions setting forth a multitude of restrictions.
In the regulatory takings context, the Supreme Court in Lucas v. South Carolina Coastal Council,
Lucas endorsed and applied this categorical rule, finding that the property at issue there was rendered valueless when a statute enforcing a coastal-zone construction ban, created two years after Lucas had begun development of his beachfront property, thwarted Lucas’ ability to complete residential development. Id. at 1009,
The emphasis on the word “no” in the text of Lucas was reiterated in a footnote explaining that the categorical rule would not apply if the diminution in value were 95% instead of 100%. Id. at 1019 n. 8,
The test for determining whether there has been a categorical taking of property requires the court “to compare the value that has been taken from the property with the value that remains in the property.” Forest Props.,
Plaintiffs argue that the only area of land that should be included in the “relevant parcel” calculation is the 220.85 acres of lands that were required under the 1999 Permit and Deed of Restrictions to be maintained and designated as wetlands in exchange for allowing plaintiffs to fill and dredge other areas on the Residential and Commercial portions. Accordingly, plaintiffs argue that a prohibition of the right to exclude others from this 220.85 acres of property and the loss of the right to dredge and impact this property constitutes a 100% devaluation of this acreage.
There is no rigid formula for determining the appropriate parcel in regulatory takings cases. Tahoe-Sierra,
In Tabb Lakes, Inc. v. United States,
In Walcek v. United States,
On appeal, the Walceks argued that the relevant parcel to consider for the takings analysis was the eleven acres of wetlands the permit required the Walceks to leave undeveloped. The Walceks based their argument on Palazzolo, where the Supreme Court expressed some discomfort with the rule of regulatory takings that the extent of deprivation should be measured against the parcel as a whole. Walcek,
In Ciampitti v. United States,
Of paramount importance for the Ciampitti court was defining the “parcel as a whole.” Id. at 318. Ciampitti contended that the relevant parcel consisted of only those lots for which a federal permit was sought, comprising fourteen acres of federal wetlands. Id. at 319. But the court determined that the parcel as a whole should include “not only those areas as to which dredge and fill permits were denied, but also those areas that had been successfully developed earlier.” Id. at 320. The court reasoned that even though the lots within purchase 7 were not contiguous, the “parcel as a whole” had to include all of purchase 7, since all of the lots therein were treated as a single parcel for purposes of financing and ownership. Id. Ciampitti was forced to purchase and mortgage the land as a package. Id.; see also Cane Tenn., Inc. v. United States,
Plaintiffs rely on Loveladies Harbor, Inc. v. United States,
This is only logical since whatever substantial value that land had now belongs to the state and not to Loveladies. It would seem ungrateful in the extreme to require Loveladies to convey to the public the rights in the 38.5 acres in exchange for the right to develop 12.5 acres, and then to include the value of the grant as a charge against the givers.
Id. at 1181. Thus, the only acres the Federal Circuit considered in determining whether a categorical taking had occurred were the 12.5 acres of wetlands, which was the area covered by the permit, since the remaining acreage was either already developed or was required by the state to remain as wetlands. Id. at 1182.
Plaintiffs also rely on Palm Beach Isles Associates. v. United States,
The court in Appolo Fuels, Inc. v. United States, however, distinguished the facts therein from Loveladies in the same manner that this court distinguishes the facts in this ease from Loveladies.
Appolo Fuels obtained additional leases that granted mining rights both within and outside the petition area and then filed suit in this court alleging, inter alia, that a permanent regulatory taking of its coal mining interests had occurred. With respect to the relevant parcel issue, Appolo Fuels argued that the appropriate parcel for analysis consisted of the surface mineable coal reserves held by Appolo Fuels within the watershed.
The Appolo Fuels court specifically noted that in Loveladies, the parcel had been partially developed prior to the regulatory scheme taking effect. Id. at 727. “The relevant parcel in Loveladies coincided with the area covered by the permit only because the remainder of plaintiffs property was either developed before the imposition of the federal regulatory scheme or was required by the state to remain undeveloped wetlands.” Id. In Appolo Fuels, however, the court noted that there, Appolo Fuels acquired Lease 5A in 1986 and the other leases over a 10-year period. Id. SMCRA was passed in 1977, and, thus, the court was not presented with a Loveladies situation where the plaintiffs expectations were formed before the imposition of a regulatory framework. Id. Because plaintiff in Appolo Fuels had not presented evidence that it considered the petition area distinct from the other leaseholds, the court included in the relevant parcel determination all of Appolo Fuels’ leasehold interests acquired over the years, less those interests not subject to the petition, due to plaintiffs intent to mine the areas as part of one overall plan. Id. at 729-30.
The distinction noted in Appolo Fuels regarding Loveladies (and, by extension, Palm Beach Isles) is applicable here as well. All the parcels purchased by the Normans and South Meadows were acquired after the enactment of the Clean Water Act. Thus, there is no basis to segment certain parcels of wetlands from the parcel as a whole calculation based on Loveladies and Palm Beach Isles. The reasoning is that, in those two cases, land was purchased before the regulatory scheme was enacted. Here, all parcels purchased by the Normans and South Meadows were acquired after the enactment of the Clean Water Act’s permitting process.
The timing of the implementation of the applicable regulatory scheme when calculating the relevant parcel has a great effect on the result of that calculation. This is demonstrated clearly in Deltona Corp. v. United States,
The Normans and South Meadows argue that the only areas of land that should be included in the “relevant parcel” are the 220.85 acres of lands that were required under the 1999 Permit and Deed of Restrictions to be maintained and designated as wetlands in exchange for allowing plaintiffs to fill and dredge other areas on the Residential and Commercial portions. This is a natural argument for plaintiffs to make. The court said it best in Walcek,
To the extent the property captured ... includes only wetlands, the impact of the regulation in diminishing the value ... is more pronounced, and thus more indicative of a taking, than if the [property captured] were to include not only the wetlands but also the uplands and other property restricted by the regulation. Given this, it should come as little surprise that defendant argues that the [property in its entirety, constitutes [the] “parcel as a whole,” while plaintiffs assert that only the wetlands portion of the [property, for which the permit application was actually submitted, should be considered.
Id. If the “relevant parcel” constitutes only the 220.85 acres of lands set aside as mitigation and preservation wetlands, then, accordingly, plaintiffs argue, there has been a denial of 100% of the economic value of these 220.85 acres because plaintiffs are precluded from asserting any property rights on this acreage.
Plaintiffs’ argument is contradictory and too simplistic. For there to be a 100% diminution of value in this matter, then the relevant parcel would have to be the 220.85 acres claimed to have been taken. This cannot be. These acres are located on various pieces of land purchased by plaintiffs throughout the 2280-acre Development. Some of the 220.85 acres are on the Residential portion, while the remainder are on the Commercial portion. These 220.85 acres cannot be viewed in isolation considering that they were part of a broader permitting scheme for the Residential and Commercial portions. The three phases of the development are interconnecting. The water, sewer, and utility structures
Even assuming, arguendo, that the relevant parcel here is only the 220.85 acres claimed to have been taken, there has not been a loss of 100% of the land’s economic value. The evidence reflects that these 220.85 acres continue to serve as part of plaintiffs’ flood control and flood detention facilities with respect to the 2280-acre Development, and have been incorporated into open space requirements, parks, and biking paths. For example, the 2280-acre Development advertised that Phase III of the development would contain 390 acres of open space, trails programs and parks.
In addition, the area designated as the C-l detention basin serves as a detention basin and drainage facility for the 2280-acre Development (approximately sixty-five acres for the detention basin, plus another twenty-five acres of drainage). Trial testimony showed that the detention basin and drainage channels were necessary for the development of the area. The case law clearly states that if there is no destruction of all use, then there is no categorical taking. See Cooley v. United States,
Plaintiffs alternatively argue that the relevant parcel is the original 470-acre Commercial portion that plaintiffs purchased in 1988. Plaintiffs argue that this is the case because had the Corps maintained its original 1988 wetlands determination, plaintiffs would never have needed to purchase the Residential portion and the other ranches (Flindt, Dotta, Peeetti, etc.) because their intent from the onset was only to develop the Commercial Portion. Plaintiffs state that they made these subsequent purchases in an attempt to mitigate the damage inflicted when the Corps retracted its 1988 delineation and invoked the stricter 1991 wetlands delineation. However, even if the relevant parcel at issue here is considered to be the original 470-acre Commercial portion purchased in 1988, it remains impossible for the court to find a 100% loss of all economically viable use of this 470-acre property, since after the issuance of the 1999 Permit (which allowed plaintiffs to fill 60.24 acres of the Commercial Portion), all but 11.54 acres of wetlands and approximately three acres of waters were developed by plaintiffs. The 470-acre parcel was over 90% developable after the issuance
Even more importantly, plaintiffs’ argument that the relevant parcel could consist of only the 470-acre Commercial portion is illogical. The 220.85 acres of land claimed to have been taken he on both the 470-acre Commercial portion and the 1800-acre Residential portion purchased by plaintiffs in 1994. For plaintiffs to claim that the only parcel to be analyzed in terms of whether plaintiffs have suffered a decrease in economic value of their property is the 470-acre Commercial portion, when over 200 acres of the 220.85 acres claimed to have been taken physicahy he on the Residential portion, is baseless and completely illogical. If plaintiffs were only claiming a taking of the approximately eleven acres to be maintained as wetlands on the 470-acre Commercial portion, then perhaps the relevant parcel might be the 470-acre parcel acquired in 1988. But the court does not make that determination here, for plaintiffs are claiming a taking of 220.85 acres of property, which are mainly located on the 1800-acre Residential portion.
The question becomes, then, for the purposes of the Penn Central ad hoc analysis that fohows in this opinion, what is the relevant parcel? As stated above, plaintiffs argue that the relevant parcel at issue here is only the 470-acre Commercial portion. In support of this contention, plaintiffs introduced evidence at trial that had the 1988 delineation remained intact, plaintiffs never would have purchased neighboring properties, nor would they have revised the original Southmark Master Development Plan. This contention is supported by the fact that plaintiffs are commercial developers, not residential developers. Lance Gilman testified that the only reason that plaintiffs purchased the 1800-acre Residential portion from the Helms’ bankruptcy estate was because of the 1991 re-delineation. In essence, plaintiffs argue that the re-delineation rendered plaintiffs unable to develop their property according to the original development plan, and therefore, the only way for the development to be profitable was for plaintiffs to acquire additional land. Their argument went on to contend that this was particularly the ease since plaintiffs also feared that the bankrupt Helms portion would be bought by competitors who would not develop the property in conjunction with plaintiffs’ plans.
Contrary to plaintiffs’ argument, looking at the factors identified in Ciampitti, it is clear that the relevant parcel at issue here is not merely the 470-acre Commercial portion. The “degree of continuity,” “dates of acquisition,” “extent of which the parcel has been treated as a single unit,” and the “extent protected lands increase the value of remaining lands” show that all the lands encompassed in Phases I, II and III of plaintiffs’ development constitute the “parcel as a whole.” Ciampitti,
At trial, Don Roger Norman and Lance Gilman both adamantly testified that plaintiffs would not have pursued purchase of the Residential portion in 1994, nor other ranches (the Dotta, Flindt, Pecetti, etc.), had the 1988 wetlands delineation remained in force. However, what plaintiffs would or would not have done in 1994, or before then, is speculation and conjecture, since five years before the date of the alleged taking, plaintiffs not only purchased the 1800-acre Residential portion from the bankruptcy estate of Robert Helms, plaintiffs also purchased other surrounding ranches years prior to the taking in question. In 1989, for example, plaintiffs acquired the Winkle parcel for access to the development. The Dotta, Flindt and Pecetti ranches were purchased in 1994. The Nevada Bell parcel was purchased in 1996.
The court reiterates that the alleged taking at issue here involves the 1999 Permit and whether the requirement that there be offsetting mitigation lands, in exchange for the filling of already existing wetlands, constituted a taking of plaintiffs’ property. Plaintiffs’ decision to purchase additional lands beyond the 470-acre Commercial portion was a business decision made by the plaintiffs in 1994. The government did not force plaintiffs to purchase these lands. Plaintiffs did so because, at that time, they recognized a financial opportunity created by Mr. Helms’ bankruptcy. Plaintiffs bought the Helms portion out of concern that other individuals might buy pieces of the property at low prices and put plaintiffs at a competitive disadvantage. As for the other, smaller ranches, those too were purchased with the intent that they be included in the development.
Plaintiffs acquired various parcels to continue them integrated, multiple use concept of the properties, creating a large, planned, mixed-use and self-contained community outside of Reno. In their Section 404 application for the 1995 Permit, plaintiffs described their project as the Double Diamond Development, consisting of approximately 2288 total acres in aerial extent. In their 1998 permit application, plaintiffs describe the property as a 2500-acre planned community and indicated that “South Meadows is composed of a number of historic ranches, the most significant of which is the 2100 acre Double Diamond Ranch.” Joint. Ex. 24 at 4. Further, plaintiffs’ Alternatives Analysis, which accompanied the 1998 permit application, indicated that it was necessary to have a large contiguous site with immediate freeway proximity, direct freeway interchange access, arterial street proximity to central Reno, and affordable housing.
Thus, based on the foregoing, the “relevant parcel” must include not only the 470-acre Commercial portion purchased in 1988 constituting Phase I of the development, but also the Winkle, Flindt, Pecetti, Dotta and Nevada Bell ranches (but excluding the Farahi ranch) constituting Phase II of the development, and, the 1800-acre Residential portion, purchased in 1994, constituting Phase III of the development.
2. Penn Central Factors
Having found that there has been no categorical taking of plaintiffs’ property, the court must weigh the three factors of the Penn Central ad hoe analysis to determine whether a regulatory taking has occurred in this matter under the specific facts presented. The Supreme Court, in the seminal case of Penn Central Transportation Co. v. City of New York,
a. Reasonable Investment-Backed Expectations
For any regulatory takings claim to succeed, the claimant must show that the government’s regulatory restraint interfered with his reasonable investment-backed expectations in a manner that requires the government to compensate him. See Loveladies, 28 F.3d at 1179. The general principle is that when a private property owner purchases property in reliance on a state of affairs that included the challenged regulatory scheme, then the owner could be said to have no reliance interest, or to have assumed the risk of any economic loss. See id. at 1177. “[I]t could be said that the market had already discounted for the restraint, so that a purchaser could not show a loss in his investment attributable to it.” Id.
“A ‘reasonable investment backed expectation’ must be more than a ‘unilateral expectation or an abstract need.’” Id. (citations omitted). “This factor ... incorporates an objective test — to support a claim for a regulatory taking, an investment-backed expectation must be ‘reasonable.’ ” Cienega Gardens v. United States,
Prior to 2001, the general premise concerning reasonable investment-backed expectations was that a landowner who bought property with knowledge of a regulatory restraint was assumed to have no reasonable investment-backed expectations. For example, in Forest Properties, Inc. v. United States,
The Federal Circuit affirmed this court’s ruling that Forest Properties did not have reasonable investment-backed expectations in the lake-bottom land. Id. at 1366. When Forest Properties acquired the fifty-three-acre land and the 9.4-acre lake-bottom option, the Corps’ guidelines for issuing Section 404 permits had been in place for a number of years. Id. The guidelines made it clear that filling wetlands to construct housing was disfavored and that such a project was unlikely to be approved. Id. The Federal Circuit then reasoned that “[t]he investment-based expectation criterion ‘limits recovery to owners who can demonstrate that they bought their property in reliance on the nonexistence of the challenged regulation. One who buys with knowledge of a restraint assumes the risk of economic loss.’ ” Id. at 1367 (citing Creppel v. United States,
Similarly, in Good v. United States,
Good sued in state court, alleging that the state had taken his property without just compensation. In the meantime, Good’s federal permits to fill wetlands were set to expire. The Corps denied Good’s request to extend the time limits on the permits, but allowed Good to submit an application for a new permit, which he received in 1988. However, Good was not ultimately able to get county approval and, finally, Good submitted a new scaled-down plan to the Corps in 1990. Unfortunately, between the time the Corps issued Good’s 1988 permit and the time he applied for a permit in 1990, the marsh rabbit had been listed under the Endangered Species Act, 16 U.S.C. § 1533 (1996). The Corps was therefore required to consult with FWS to ensure that the new 1990 permit would not place the rabbit species in jeopardy. FWS recommended denial of the 1990 permit application and also recommended that Good not continue under his 1988 permit. Later, FWS informed the Corps that the silver rice rat had also been listed as an endangered species. The Corps denied Good’s 1990 permit application in 1994 and at the same time, the Corps notified Good that his 1988 permit had expired. The Corps based its denial on the threat of danger to the rat and the rabbit should Good’s development go forward.
Good sued, alleging that the Corps’ denial of his permits created an uncompensated taking in violation of the Fifth Amendment. Good argued that he had reasonable investment-backed expectations in building a residential subdivision on his property. Good,
The original notion that a property owner who acquires property with knowledge of a regulatory imposition or the possibility of a regulatory imposition, (sometimes referred to as the “notice rule”), is essentially precluded from asserting a reasonable investment-backed expectation in the property, was subsequently challenged in the Supreme Court decision, Palazzolo v. Rhode Island,
Palazzolo argued that when the Council promulgated its wetlands regulations, the disputed parcel was not yet owned by Palazzolo, but by the investment corporation of which he was the sole shareholder. When title transferred to Palazzolo, the wetlands regulations were in force. The state argued that Palazzolo was deemed to have notice of the regulations at the time of the transfer, and as such, Palazzolo was barred from claiming that the regulation effected a taking. However, the Supreme Court disagreed. By following the state’s logic, the Supreme Court reasoned, any post-enactment transfer of title would, in effect, place an expiration date on the Takings Clause, no matter how extreme or unreasonable. Id. at 627,
The Federal Circuit visited the reasonable investment-backed expectations prong postPalazzolo in Maritrans Inc. v. United States,
In Rith Energy, Inc. v. United States, the Federal Circuit, on petition for rehearing, and finding no inconsistency with Palazzolo, determined that Rith’s reasonable investment-backed expectations were not frustrated when the government revoked plaintiffs coal mining permit.
Similarly, the Court of Federal Claims found that no reasonable investment-backed expectations were frustrated in the post-Palazzolo decision, Cane Tennessee, Inc. v. United States,
Despite the holdings in Cane Tennessee and Rith, the fact that a private property owner is in a highly-regulated field, does not necessarily mean that such property owner never has a reasonable investment-backed expectation in its right to develop or utilize its property. For example, in Chancellor Manor, Ltd. v. United States,
Two general principles may be discerned from this precedent. First, simply because a private property owner is in a highly-regulated field, does not, by itself, mean that the owner has no reasonable investment-backed expectations in its ability to develop or otherwise utilize its property. Second, the holding in Palazzolo that a property owner may still argue that it maintains a reasonable investment-backed expectation in property purchased while the challenged regulatory scheme was already in effect and known by the owner at the time of purchase is not an absolute renunciation of the “notice rule.” The Palazzolo court specifically stated that there could be “circumstances when a legislative enactment can be deemed background principle.”
Keeping these principles in mind, it is important to identify the regulatory scheme at issue in the case at bar. The Clean Water Act, per the Federal Water Pollution Control Act Amendments of 1972, was enacted in 1972, well before plaintiffs acquired any properties at issue herein. The CWA prohibits the discharge of pollutants into the waters of the United States, except in compliance with, inter alia, Section 404 of the Act. See 33 U.S.C. §§ 1251(a), 1311(a) (2000). There is no doubt, based on the evidence presented at trial, that the Normans were sophisticated real estate developers who had both actual and constructive knowledge of the Section 404 permitting process. Prior to the Normans’ initial purchase of the 470-acre Commercial portion in 1988, Don Roger Norman specifically stated that he would not “close the deal” without a wetlands determination from the Corps. Tr. at 133. It is evident that plaintiffs were unwilling to purchase the 470-acre Commercial portion until the Corps completed a final delineation of the property.
Aware of the fact that the regulatory regimen for filling and dredging wetlands under the CWA was in effect years prior to the property acquisitions at issue here, for the purposes of determining whether plaintiffs had a reasonable investment-backed expectation in their ability to develop the 220.85 acres that plaintiffs claim were taken when the Corps required this acreage to be maintained and designated as wetlands in exchange for the dredging and filling of other wetlands, this court must undertake the reasonable investment-backed expectations determination in steps. Because the 220.85 acres at issue were acquired at different points in the development, plaintiffs’ reasonable investment-backed expectations in this acreage are different for each portion of the claimed land. The court addresses each specific wetland area in turn below.
1. WL 20
The 1.32 acres of WL 20 claimed to have been taken by the Corps’ 1999 Permit requirements are located on the 470-acre Commercial portion. These 1.32 acres of WL 20 were delineated as wetlands as part of the original delineation in 1988 when the Corps delineated a total of seventeen acres of wetlands on the 470-acre Commercial portion. From the court’s perspective, there was no interference with any investment-backed expectation regarding plaintiffs’ ability to develop or otherwise use this 1.32 acres of wetlands because, at the time of purchase, plaintiffs knew that this area had been delineated as wetlands by the Corps, yet plaintiffs
2. WL 21
The 4.82 acres of wetlands situated on WL 21, and claimed to have been taken by the issuance of the 1999 Permit, were also delineated in 1988. This acreage is on the 470-acre Commercial portion purchased by plaintiffs in 1988. As was the case with the 1.32 acres of wetlands on WL 20, the court does not agree that the Corps’ requirements, encompassed in the 1999 Permit, interfered with plaintiffs’ reasonable expectations in developing this acreage because plaintiffs purchased this property with full knowledge that the 1988 wetlands delineation included this area. Plaintiffs were fully aware of this delineation when the property was purchased but nevertheless bought the property. As with WL 20, this area was also incorporated into the design of the overall master development plan. Accordingly, the court finds no reasonable investment-backed expectation in the 4.82 acres of land on WL 21.
3. WL 17B
The 4.07 acres of WL 17B claimed by plaintiffs to have been taken by the Corps through the issuance of the 1999 permit are located on the 470-aere Commercial portion, but were delineated by the Corps in 1991, three years after plaintiffs purchased that parcel in 1988. Defendant argues that any reasonable investment-backed expectations plaintiffs may have had in their ability to develop this land was not thwarted by the mere fact that the Corps designated this land as wetlands in the 1991 delineation, three years after plaintiffs purchased the 470-acre Commercial portion without WL 17B having been designated as protected wetlands in 1988. Defendant contends that this is the case because the 1999 Permit allowed plaintiffs to develop virtually all of the land on the 470-acre Commercial portion, including almost all acreage designated as wetlands by the 1991 re-delineation, while only requiring the maintenance of eleven acres as wetlands. This, defendant argues, is less acreage to be maintained as wetlands than the seventeen acres originally delineated on the Commercial portion in 1988. Consequently, defendant contends that plaintiffs’ reasonable investment-backed interests in all of the land on the 470-acre Commercial portion were enhanced.
Defendant’s argument, the court believes, speaks more to the economic impact prong of the Penn Central analysis than the reasonable investment-backed analysis being conducted here. A property owner’s reasonable investment-backed expectations are defined at the time the property is purchased. Appolo Fuels,
It is the court’s opinion that plaintiffs had a reasonable investment-backed expectation that they would be allowed to develop and utilize WL 17B at the time the Commercial portion was purchased in 1988, and that this area would not be designated as wetlands. The 1991 re-delineation of wetlands by the Corps stripped plaintiffs of their expectation that they could develop wetland 17B. Plaintiffs had no basis to believe, once the 1988 delineation was in place, that the 1991 delineation would subsequently follow. Plaintiffs could not have anticipated that WL 17B would be delineated as wetlands in 1991 at the time that plaintiffs purchased the Commercial portion in 1988. The Corps gave plaintiffs no reason to believe that more wetlands would subsequently be delineated on
4. WL 16
The 104.85 acres of wetlands located on WL 16 that are claimed by plaintiffs to have been taken by the Corps via the issuance of the 1999 Permit and the Deed of Restrictions are located on the 1800-acre Residential portion. This area was delineated as wetlands by the Corps in 1991. Plaintiffs pm-chased the 1800-acre Residential portion in 1994 from the Helms’ bankruptcy estate.
The holding in Palazzolo, at first blush, might appear to aid plaintiffs here. One of defendant’s chief arguments is that any wetlands delineated on the 1800-acre Residential portion pm-chased by plaintiffs in 1994 were known to plaintiffs at that time, since the acquisition of the parcel occurred three years after the 1991 re-delineation of wetlands. According to defendant, plaintiffs should be precluded from asserting that they had any reasonable investment-backed expectations to develop those areas designated as wetlands on the Helms property in 1991, because plaintiffs pm-chased that property in 1994 with full knowledge of the delineation. Plaintiffs counter that the Supreme Court’s holding in Palazzolo allows plaintiffs to assert them takings claim, despite the fact that the Helms portion was acquired after the 1991 re-delineation.
Palazzolo is distinguishable from the facts here. The property at issue in Palazzolo was purchased by plaintiffs investment company, Shore Gardens. At that time, no regulatory scheme was in place to protect Rhode Island’s coastal properties.
This is in stark contrast to the Normans. The 1800-acre Residential portion was purchased by plaintiffs from the Helms’ bankruptcy estate three years after the 1991 delineation of wetlands on that area. Plaintiffs bought this land with an eye toward developing both the Commercial and Residential portions in phases to create one integrated commercial, residential and industrial community. They made the purchase with full knowledge of the delineation, and in fact, asked that the 1991 delineation be extended. Plaintiffs’ acquisition was an affirmative business decision pursued with the intent of developing the South Meadows properties in three phases and to ward off other potential purchasers of the Helms portion who might not develop the 1800-acre Residential portion in conjunction with plaintiffs’ plans. Whereas Palazzolo was not the owner of the property at the time that a regulatory imposition was placed into effect and a potential takings claim had ripened, this is not the scenario here. Plaintiffs in this case already owned the disputed property and were actively engaged in the regulatory process, having sought to have a final delineation issued. Thus, this court finds that the facts in this case distinguish it from Palazzolo, and, since plaintiffs purchased the 104.85 acres of WL 16 in 1994, subsequent to the 1991 delineation and with full knowledge of the wetlands delineations, the court finds no reasonable investment-backed expectations in the 104.85 acres of WL 16 that were frustrated by the issuance of the 1999 Permit.
5. WL 22
The 5.5 acres of wetlands on WL 22 claimed to have been taken by the 1999 Permit were delineated in 1988 and are located on the 1800-acre Residential portion purchased by plaintiffs in 1994. Like the wetlands delineated on the 470-acre Commercial portion in 1988, plaintiffs purchased this land in 1994 with full knowledge of the delineation and the overall regulatory imposition. As discussed by the court with respect to WL16, Palazzolo does not serve to aid plaintiffs here. Plaintiffs had no reasonable invest
6. C-l, C-2 and the Thomas and Delta Channels
Plaintiffs claim that the 1999 Permit and/or the Deed of Restrictions required plaintiffs to designate and maintain as wetlands 65.94 acres on area C-l, 6.82 acres on area C-2, 1.314 acres of waters in the Delta Channel, and 2.02 acres of waters in the Thomas Channel in exchange for obtaining the 1999 Permit. Areas C-l, C-2, and the Thomas and Delta Channels were not delineated as wetlands under either the 1988 or 1991 delineations. Rather, these areas served as part of the Ranch property’s extensive drainage system. Area C-l serves as a large detention basin in the northeast corner of the entire development. Area C-2 is a smaller detention basin located adjacent to WL 22 and was completed in 1997. The C-2 detention basin collected irrigation water from neighboring WL 22. The Delta and Thomas Channels were also constructed to serve for storm drainage runoff.
Plaintiffs constructed the 2280-acre Development’s drainage system based on plans provided by Reno Engineering. Reno Engineering created drawings for the Delta Channel and area C-2 based upon flow data supplied by Nimbus Engineering, a consulting firm specializing in flood control. In 1996, Nimbus Engineering prepared a report on behalf of Reno Engineering and South Meadows which outlined a design concept for the drainage system of the 2280-acre Development area. The C-2 detention basin was specifically constructed for drainage based upon the grade and elevation of the property. The Delta Channel was also to be incorporated into the drainage system. Vince Griffith testified that the design of the flood control system, including the backfilling of large ditches constructed by Helms and the creation of wider, more shallow channels was, in fact, a design contemplated months before the issuance of the 1995 Permit and before the mitigation proposal was provided to the Corps. Construction of both the C-l and C-2 detention basins and drainage canals was completed years prior to plaintiffs’ application for the 1999 Permit.
In their 1998 Section 404 permit application, plaintiffs proposed that the main mitigation area be at the C-l detention basin as part of the land swap negotiated by plaintiffs with the Corps in exchange for filling 60.42 acres of land on the Commercial portion. Area C-l was contemplated to be a water detention basin for the entire 2280-acre Development area as early as 1996, two years prior to the permit application, when Nimbus Engineering produced a design and concept for the storm drainage system. The Nimbus report also specifically called for the creation of the Delta Channel. It is evident that this water detention basin and the water channels leading from it were designed for the entire Ranch area, regardless of the mitigation plan included in the 1999 Permit.
The agreement reached between the Corps and plaintiffs, as set forth in the 1999 Permit, essentially allowed plaintiffs to utilize the C-1 detention basin in a way that plaintiffs had been contemplating since 1996. The water detention basin serves a valuable function to the Ranch property area for storm run-off and flood control. Plaintiffs constructed the detention basin and drainage system pursuant to the requirements of the development and not because of any mandate by the Corps. Plaintiffs received mitigation credit in the detention basin area and nearby drainage channels, yet continued to enjoy the valuable and necessary functions performed by those same drainage facilities. Although the C-l area did not necessarily have to be a drainage area, a drainage area was needed somewhere in the development.
Accordingly, it is the court’s opinion that plaintiffs did not have any reasonable investment-backed expectations to utilize C-l, C-2 or the above-referenced waterways in ways other than how plaintiffs had already been using these lands when they proposed their contemplated mitigation wetlands, as included in the 1999 Permit. In simple terms, plaintiffs essentially received a windfall by being able to utilize already existing drainage lands as mitigation wetlands in exchange for filling valuable commercial property.
7. North Channel
Plaintiffs claim that the Corps took 24.25 acres of the North Channel by requiring that
Given the foregoing analysis of the breakdown of the wetland acreage, plaintiffs only had a reasonable investment-backed expectation in the 4.07 acres of wetlands located on WL 17B that were delineated in 1991, after plaintiffs pm-chased the Residential portion. As to the remaining wetland areas, the court finds that though plaintiffs may have held an internal expectation that they would be able to develop that property without being hindered by any regulatory imposition, such an expectation was not a reasonable investment-backed expectation as defined by takings jurisprudence. See Cienega Gardens,
b. Economic Impact
Having found that plaintiffs only possessed a reasonable investment-backed expectation in the 4.07 acres of wetlands located on WL 17B, the court will next determine what economic impact the alleged taking had on the property at issue.
The “economic impact” criterion of Penn Central is “intended to ensure that not every restraint imposed by government to adjust the competing demands of private owners would result in a takings claim.” Loveladies,
The fair market value of property is most traditionally and frequently calculated using the comparative sales approach. Vaizburd v. United States,
There are, however, instances when the comparable sales method is not suitable for a particular situation. Good,
All direct and indirect costs [of development] and entrepreneurial profit are deducted from an estimate of the anticipated gross sales price of the finished lots; the resultant net sales proceeds are then discounted to present value at a market-derived rate over the development absorption period to indicate the raw value of land.
Id. (citing The Appraisal Institute, Dictionary of Real Estate Appraisal 354 (3d ed.1993)). The court in Good found that this approach “‘is highly speculative, prone to error, and reflects not so much the value as the highest price a developer can afford to pay for the land and still earn the desired profit.’ ” Id. (citing Uniform Appraisal Standards for Federal Land Acquisition A-8 (1992)).
In addition to the “subdivision development method,” the Federal Circuit has also approved the “discounted cash flow method” in at least one instance of mining rights. Whitney Benefits,
Regardless of which method is chosen, trial courts have considerable discretion to select the method of valuation that is most appropriate in light of the facts of each particular case. Seravalli v. United States,
Furthermore, the calculation of the fan-market value for a property does not always include what the highest and best use of the property would have been without the regulatory imposition. Yancey v. United States,
Earlier, this court determined that the relevant parcel, or parcel as a whole, for determining the economic impact of the 1999 Permit and the Deed of Restrictions, is the 2280-acre Development. Having defined the subject property whose value is to be captured in this economic analysis fraction, the court must next place values on the numerator and denominator of that fraction. For that purpose, the court must look to the expert evidence presented at trial.
Plaintiffs employed the expert testimony of Mr. William Kimmel, an independent real estate appraiser and consultant with over thirty years of experience in appraising residential developments, vacant land, and commercial and industrial properties. Mr. Kimmel calculated the fair market value of what plaintiffs argue is the relevant parcel, that is, the 220.85 acres claimed to have been taken as of August 31, 1999 (the date the 1999 Permit and the Deed of Restrictions were issued) by utilizing the comparable sales approach.
Mr. Kimmel found that a comparable sales approach would yield the most accurate assessment of the 220.85-aere Development’s fair market value, especially since in this particular case, Mr. Kimmel was able to utilize actual sales of the portions of the development area that had been sold to independent third parties by plaintiffs before and up to the time of the alleged taking on August 31, 1999. Because Mr. Kimmel had actual sales data of what buyers were willing to pay in the marketplace, he was able to extract a close approximation of what the fair market value of the 220.85 acres would be if they were developed according to their highest and best use. Mr. Kimmel stated:
You try to compare the sales that are as similar as possible to the property that you’re appraising. That would be similar in location aspects, similar in zoning, as similar as possible in size, similar in topography, similar in accessibility and certainly similar as far as utilities and overall amenities____ The more comparable you can find a sale, the less judgment calls you have to make.
Tr. at 756-57. Thus, utilizing the “comparable sales” methodology, Mr. Kimmel determined that the fair market value of the 220.85 acres claimed to have been taken was $34,233,000. He came to this conclusion by determining the highest and best use of each of the individual wetlands areas claimed to have been taken and by evaluating what use such parcels could have served if each had been allowed to be developed at its highest and best use.
Mr. Kimmel determined that WLs 17B, 20, 21 and 42.27 acres of WL 16 could be used primarily as professional office development or for light commercial development. He valued WLs 17B, 20 and 21 to have a value of $8 per square foot, and he calculated 42.27 acres of WL 16 to have a value of $6.50 per square foot. Thus, the total value for this acreage was calculated to be $15,526,000, with $11,986,000 specifically being attributed to 42.27 acres of WL 16. By using the actual sales of parcels in the vicinity, Mr. Kimmel was able to make this appraisal. In particular, with respect to WL 21 and WL 20, Mr. Kimmel determined that these parcels were located in an area of existing professional office development, and accordingly, he determined that the highest and best use of these areas would be for a “professional office type development.” Tr. at 773. With respect to WL 17B, Mr. Kimmel testified that this area could also be used for commercial or professional office space as it is located in the same area as the Washoe Medical Center. With respect to 42.27 acres of WL 16, Mr. Kimmel testified that because this area was located near ten or twelve single-story professional office buildings, this area “would also have office like commercial type of use and utilization.” Tr. at 777.
Mr. Kimmel also determined that 62.53 acres of WL 16 and thirty acres of area C-l could be utilized for multiple residential development. By analyzing the sales of other residential areas in the 2280-acre Development area, Mr. Kimmel theorized that the value of the remaining 62.53 acres of WL 16 would be worth $9,567,000 and the value of thirty acres of area C-l would be worth $4,590,000, for a total value of $14,157,000. Mr. Kimmel testified that thirty acres of area
Lastly, with respect to the remaining areas that serve as mitigation wetlands, those being WL 22, area C-2, 35.94 acres of area C-1, 3.33 acres of the Thomas and Delta Channels and 24.25 acres of the North Channel, Mr. Kimmel determined that these would be worth $60,000 per acre, for a total value of $4,550,000, although Mi’. Kimmel testified that he assumed that those areas could not actually be developed because they already served as mitigation areas. Mr. Kimmel stated:
[Assuming you did not have the restriction from the Corps of Engineers that you had to have those mitigation areas, then you would be free to sell those to other people for mitigation, and that would be the highest and best use for those. They would not be able to be built upon.
Id. at 787. Thus, Mi’. Kimmel did not clearly identify in either his testimony or expert report what functions these wetlands areas could serve if they were developable, other than for mitigation.
Mr. Kimmel did not conduct a “before” and “after” appraisal of the fair market value of the property as would normally be the case under the comparable sales approach. Mr. Kimmel testified that he did not conduct the before and after appraisal of the 220.85 acres of property valued because, in this particular case, such a determination was not workable. He explained that a more accurate appraisal could be made simply by looking at each individual wetland area, since in a normal scenario, one buyer would not typically purchase individual properties with separate uses at one single time. He opined that it would be difficult to conduct a before and after appraisal with respect to the entire 220.85-acre area. Rather, it made more sense, in Mr. Kimmel’s opinion, to simply evaluate the fair market value of each wetland area, without any regulatory restriction, as developed at its highest and best use. That, according to plaintiffs, would have resulted in a fair market value of $34,233,000.
The court does not find Mr. Kimmel’s expert appraisal to be helpful in the analysis of the facts presented herein. First and foremost, Mr. Kimmel did not address the economic impact of what the court has determined to be the relevant parcel in this matter. Second, and despite Mi'. Kimmel’s statement otherwise, Mr. Kimmel failed to conduct a “before” and “after” analysis of the fair market value of the relevant parcel as normally required under the comparable sales approach for determining economic impact. Mr. Kimmel’s appraisal merely results in a summation value. Third, as defendant notes, Mr. Kimmel’s appraisal does not represent the market value of the 220.85 acres of wetlands because it uses retail values of comparables, without consideration of the time and cost of creating and achieving these retail values; and it represents merely the sum of the retail values of the individual parcels claimed to be taken.
2. Defendant’s Expert Appraisal
Defendant’s expert, Mr. Lee Smith, is a real estate appraiser who has been doing appraisals for over thirty years. He was a contributor to various editions of The Appraisal of Real Estate (12th ed.2001) and was also a contributor to the latest text on rural valuation published by the Appraisal Institute and the American Society of Farm Managers and Rural Appraisers.
Unlike Mr. Kimmel, Mi’. Smith appraised the entire 2280-acre Development the court has found to constitute the relevant parcel. However, in finding that the comparable sales approach method could not adequately be used given that no large vacant land parcels compare to the entire 2280-acre relevant parcel in this case, Mr. Smith utilized the “subdivision” method for determining the fair market value before and after the date of the alleged taking. As stated previously, the subdivision method involves an estimate of the anticipated gross sales price of the finished lots and the resultant net sales proceeds are then discounted to present value at a market-derived rate over the development absorption period to indicate the raw value of the land. Good,
Just prior to the time that Mr. Smith calculated his appraisal, all but 716 acres of
The Larger Parcel, for economic evaluation purposes as determined in the appraisal report, is South Meadows Planned Unit Development Phases I, II and III. The South Meadows developers put infrastructure (including underground utilities and roads) to parcels that were, and are to be, sold. Because the project was a PUD, parcel sizes and shapes were created for buyers’ needs____Sales were initiated in 1994. The ± 798-acre single-family residential development in Phase III was sold to a single residential developer. At the date of value ±69% of the project was sold. The Larger Parcel for valuation purposes in this analysis will be the unsold portion of South Meadows Planned Unit development Phases I, II and III, as of August 31,1999.
There were approximately ±715.962 acres unsold in the project as of August 31,1999. The market value in the before and in the after will be based upon what a purchaser would pay in a single bulk sale for the unsold remainder as of August 31, 1999. This appraisal is being prepared in July, August, and September of 2002. This offers the benefit of “hindsight.” The project has had an active and continuing sales program since the date of value, with the last sale for this analysis as of July 2, 2002. The actual sales and expenses that have occurred from August 31, 1999, to July 2, 2002, will be used. These sales and expenses will be discounted at a market interest rate to the date of value. The unsold remainder will be valued and discounted along with the estimated remaining expenses to the date of value.
Def.’s Ex. 255 at 5-6.
The court finds that Mr. Smith’s analysis is an accurate assessment of what occurred with respect to the development of the property. Given that the relevant parcel is the three-phase 2280-acre Development area, there is no need to hypothesize as to the fair market value of the 1564 acres of that land that has already been sold in the open market to individual buyers. Since this number is already known, defendant’s expert only needed to calculate the fair market value of the remaining 716 acres, which includes the 195.84 acres claimed to have been taken solely under the 1999 Permit. As stated, Mr. Smith made this calculation by utilizing the “subdivision method.” This involved breaking down the 716-acre unsold remainder into various sections of land, and determining whether such sections of land would be sold off in a commercial, office, light industrial or residential capacity.
Mr. Smith determined that prior to August 31, 1999, the date of issuance of the 1999 Permit, the value of the 716 acres of unsold land was $24,991,342 (taking into account discounting factors). Using a highest and best use appraisal, Mr. Smith determined that the fair market value per square foot for commercial land would be $10; $5 for light industrial land; $4 for industrial land; and $1 for residential land. Mr. Smith determined that “the subject commercial parcels are located on the southwest, northwest, and northeast corners of the Double R Boulevard and Damonte Ranch Parkway interchange in close proximity to the Damonte Ranch Parkway/I-580 interchange.” Def.’s Ex. 255 at 62. Mr. Smith determined that light industrial land was located in the area primarily between Double R Boulevard on the west and Double Diamond Parkway on the east, north of the Thomas Creek Lumberjack Channel. Mr. Smith determined that the industrial area was located primarily east of the Double Diamond Parkway and north of the South Meadows Parkway, and the residential area could potentially be located in the C — 1 detention basin. Using this appraisal for the unsold 716 acres, and the already
Immediately before the issuance of the August 31, 1999 Permit, Mr. Smith determined that the fair market value of the relevant parcel was $33,105,963. Immediately after the issuance of the 1999 Permit, Mr. Smith calculated that the fair market value of the 2280-acre Development to be $48,005,870. Mi\ Smith came to this valuation by recognizing that the 1999 Permit allowed plaintiffs to develop 62.98 of wetlands on the valuable Commercial portion for “office/light industrial development.” Def.’s Ex. 255 at 74-75. He stated that:
This acreage and additional upland fingers that were undevelopable in the “before” were sold after August 31, 1999 for $6,50/ sq. ft. The 62.98 acres located within Detention Basin C-l identified for creation of wetlands only contained 30 developable acres. The 30 developable acres had future residential development potential, but would have a significantly lower value as of August 31,1999.
The implications of U.S. Army Corps of Engineers’ Permit No. 199825043 on the actual status of the property as of August 31, 1999, recognizing the existing legal and physical restrictions on the property, were financially positive.
Id. at 75.
Accordingly, by virtue of the issuance of the 1999 Permit, Mr. Smith calculated that plaintiffs achieved an increase in economic value in the relevant parcel of $14,899,907. This resulted from the ability to fill more valuable commercial property close to the freeway in exchange for the preservation and creation of wetlands on less valuable l'esidential property (a portion of which continues to serve as part of plaintiffs’ flood control and flood detention facilities and has been incorporated into open space, parks and biking paths, as amenities). Mr. Smith, however, only evaluated the economic impact of the relevant parcel containing only 195.84 acres of wetlands, as identified in the 1999 Permit. He did not analyze the additional ±25 acres that plaintiffs claim were taken by virtue of the Deed of Restrictions. Although plaintiffs may argue that this failure makes Mr. Smiths’ appraisal faulty, it does not make it fatally so. The court can utilize Mr. Kimmel’s valuation to determine the fair market value of these additional ±25 acres to complete the analysis.
These ±25 acres of land that constitute the difference between what the 1999 Permit required to be set aside as mitigation and preservation wetlands, and what plaintiffs are claiming have been taken by virtue of the Deed of Restrictions, encompass area C-l, approximately fourteen acres of the North Channel, and a few small, additional acres of water areas. Mr. Kimmel, plaintiffs’ expert, determined that these areas would be best suited for residential development. Accordingly, Mr. Kimmel calculated that such areas would be worth $60,000 per acre. Using this figure, the fair market value of the additional ±25 acres would be approximately $1,500,000. Thus, in taking what defendant’s expert, Mr. Smith, calculated the fair market value of the 195.84 wetland acreage identified in the 1999 Permit to be after the date of the taking — that figure being an increase in fair market value of $14,899,907- and subtracting the loss in fair market value of the additional ±25 acres of land from the Deed of Restrictions that Mr. Kimmel calculated was worth $1,500,000, plaintiffs still maintained a net increase in fair market value of approximately $13,400,000 by virtue of the issuance of the 1999 Permit and Deed of Restrictions. The court cannot ignore the fact that, as a result of the permit issuance, plaintiffs were able to fill valuable commercial acreage in exchange for maintaining and preserving less valuable residential land. Thus, plaintiffs’ assertion of severe economic impact is wholly baseless.
In addition to his appraisal evaluating the actual circumstances created as a result of the issuance of the 1999 Permit, Mr. Smith also conducted an hypothetical appraisal— one encompassing what the government believes is plaintiffs’ theory of the case. Defendant believes that plaintiffs’ underlying theory of this matter is that in addition to the mitigation wetlands required to have been created under the 1999 Permit, plaintiffs
Assuming that defendant’s assertion is accurate and that the government has aptly described plaintiffs’ theory, such a theory might be viable if plaintiffs had claimed that the date of the alleged taking was at the time of the 1988 or 1991 delineations. The court might then adopt plaintiffs’ theory that even the wetlands that were delineated in 1988 or 1991, but then were allowed to be filled and developed per the 1999 Permit, would be at issue for the economic impact’ analysis. However, the date of the alleged taking in this case is August 31, 1999, the date of the issuance of the 1999 Permit, not before. It would be illogical to include in the economic impact analysis those lands that had previously been delineated as wetlands in 1988 or 1991 that were allowed to be filled and developed as a result of the 1999 Permit.
Thus, although the court recognizes and acknowledges Mr. Smith’s hypothetical opinion discussing what the economic impact of the relevant parcel would be should plaintiffs be compensated for all of the wetlands delineated in 1988 and 1991, regardless if those wetlands were allowed to be developed under the 1999 Permit, the court finds such an analysis unnecessary. Because the date of the taking in this case is August 31, 1999, and not at the time of the 1988 or 1991 wetland delineations, such a hypothetical analysis is rendered moot. Plaintiffs were allowed to fill valuable wetland areas in exchange for setting aside mitigation wetlands. To calculate the economic impact of the relevant parcel as if the taking claim included all of the wetlands delineated in 1988 and 1991, might have been appropriate in evaluating a temporary takings claim, however plaintiffs have voluntarily and specifically dismissed their temporary takings claim from this action.
3. The Economic Impact and Percentage Diminution of Value of the Relevant Parcel
Having adopted a modified version of the economic analysis approach utilized by Mr. Smith, the court will now discuss the economic impact of the 2280-acre relevant parcel as a result of the issuance of the 1999 Permit and the Deed of Restrictions.
There have been a number of occasions where this court and the Federal Circuit have discussed what constitutes a severe economic impact requiring the taking of private property to be compensated. Many cases focus on the opposite side of the spectrum— what does not constitute a severe economic impact. For example, in Rockefeller Center Properties v. United States,
Once plaintiff regained possession, it was able to seek a new lessee for the premises and to thereby gain an economic benefit from its property. Based on the foregoing, we conclude that the economic impact of the blocking order on [plaintiffs] lease rights ... was not particularly severe, and, in fact, de minimis, at best.
Id.
Similarly in Maritrans Inc. v. United States, the Federal Circuit stated that a 13.1% reduction in economic value was not enough of a diminution to indicate that Mari-trans was carrying an undue portion of the
In Bass Enterprises Production Co. v. United States,
The difference between the present values of the $22.5 million with and without consideration of the delay was $2.6 million. We applied an interest factor to the lost cash flow of $2.6 million to determine fair compensation for the forty-five-month delay. Plaintiffs argue that our finding that the economic impact was $1,137,808 establishes this factor in its favor.
The denominator in this case would be at least $22 million. The diminution in value can be measured only by the forty-five-month delay. The cost of the delay was approximately $1.1 million. Using that measure, plaintiffs’ economic impact is five percent of the value of them property.
Id. Thus, the court found that though plaintiffs had reasonable investment-backed expectations, the negligible economic impact negated the possibility that plaintiffs could prevail on a takings theory. Id.
Similarly in Cane Tennessee, Inc. v. United States,
In Florida Rock, this court held that a 73.1% diminution of value with no chance for recoupment of plaintiffs investment constitutes a taking.
In this instance, we have agreed with Mr. Smith’s determination that the issuance of the 1999 Permit increased the value of the relevant parcel by $14,899,907. Before the date of the alleged taking, Mr. Smith calculated the fan market value of the 2280-acre Development to be $33,105,963. After the date of the alleged taking, the 2280-acre relevant parcel increased in value to $48,005,870. Mr. Smith explained this increase in the following analysis:
The increase in value is attributable to the 62.98 acres allowed to be filled (developed) by the ... permit (8/31/99) being “ripe” for office/light industrial development. This acreage and additional upland fingers that were undevelopable in the “before” were sold after August 31, 1999 for $6.50/sq. ft. The 62.98 acres located within Detention Basin C-l identified for creation of wetlands contained only 30 developable acres. The 30 developable acres had future residential development potential, but would have a significantly lower value as of August 31,1999.
The implications of the U.S. Army Corps of Engineers’ Permit No. 199825043 on the actual sales of the property as of August 31, 1999, recognizing the existing legal and physical restrictions on the property, were financially positive.
Def.’s Ex. 255 at 75.
Mr. Smith, whose analysis this court adopts, came to this conclusion because the issuance of the 1999 Permit allowed plaintiffs to fill valuable commercial property and develop that property in exchange for setting aside other, less valuable property for mitigation. Unlike in prior cases where there has been a slight decrease in value after the date of the taking, in this ease the court is faced with the situation of an increase in economic value.
Even taking into account the approximately twenty-five acres of land that Mr. Smith failed to consider in his economic analysis— that acreage constituting the additional acreage claimed to have been taken by virtue of the Deed of Restrictions — the court nevertheless finds an overall increase of economic value of the entire subject property as a result of the issuance of the 1999 Permit.
4. Plaintiffs’ Ability to Recoup Their Investment
The severity of the economic impact of the 1999 Permit and the Deed of Restrictions appears at most to be de minimis, especially in light of the fact that plaintiffs’ ability to recoup their investment was extremely high. The Federal Circuit in Maritrans observed that “the owner’s opportunity to recoup its investment or better, subject to the regulation, cannot be ignored.”
In Maritrans, the Federal Circuit found under the Penn Central economic impact analysis that plaintiff was able to regain a significant portion of its initial investment in tank barges despite a regulation infringing upon Maritrans’ ability to use its single hull vessels.
In this instance, it is clear that plaintiffs recouped their investment, and then some, from the time that the 1999 Permit was issued until trial. The issuance of the 1999 Permit gave plaintiffs the ability to fill approximately sixty-three acres of valuable commercial property on the Commercial portion. Once this land was filled, the land became developable and subsequently was sold off to various private purchasers in the three-phased community. Plaintiffs’ initial investment in the South Meadows development was nearly $35 million. Up to the date of the alleged taking, plaintiffs’ sales of various parcels in the South Meadows development totaled over $117 million. After the issuance of the 1999 Permit, up through July 2, 2002, plaintiffs had sales in excess of $170 million. In Tabb Lakes, Inc. v. United States,
5. Lost Profits
Plaintiffs also argue that the economic impact resulting from the 1999 Permit and Deed of Restrictions has been exacerbated by the lost profits plaintiffs suffered. Plaintiffs presented evidence at trial that the Normans’ profits on the entire project from 1992 to 1999 totaled $55,189,600. This amount, plaintiffs argue, was far less than plaintiffs’ expected profits of $150 million for the Double Diamond Ranch project. Thus, plaintiffs claim lost profits of $94,810,400.
In Yancey v. United States,
In Forest Properties, Inc. v. United States,
It is the same logic that the Federal Circuit utilized in Forest Properties that applies in the case at bar. Regardless of any perceived loss of future profits or potential return on investment plaintiffs proclaim could have been received, such lost profits are not the metric for determining the economic impact under Penn Central. Rather, the determination involves a calculation of the fair mai'ket value before and after the date of the alleged taking. This calculation does not include a hypothesis of potential future income. Furthermore, the fair market value of the property would in and of itself already incorporate future income potential into the purchase price. Market forces normally would already factor in that potential. Accordingly, the court does not find plaintiffs’ claim for future lost profits to have a bearing on economic impact.
In addition to these aforementioned alleged lost profits, Don Norman testified that his personal economic losses as a result of the Corps’ actions between 1988 and 1994 were $33 million. “I started out with a net worth of $30 to $33 million. And by the time ’94 came around, we were completely out of money.” Tr. at 494. “[I] sold everything. My son sold everything, I mean, he was down to a truck we were sharing. I had borrowed an El Camino from an ex-girlfriend who was a business partner.” Id. “We were completely broke by 1993 .... We went from $30 to $33 million to zero.” Id. at 495. There was testimony that the Normans also spent $1.5 million to form the South Meadows Partnership. Lance Gilman testified that his losses between 1988 and 1995 were approximately $15 million. These losses are in addition to the $34.2 million plaintiffs are claiming as damages for their takings claim.
Plaintiffs set forth this testimony in an effort to further demonstrate the allegedly severe economic impact of the 1999 Permit. However, plaintiffs’ attempt to demonstrate plaintiffs’ alleged economic hardship in this way is weakened by plaintiffs’ failure to actually prove such losses at trial. The testimony of plaintiffs, alone, does not suffice to prove these losses. Don Roger Norman’s proclamation regarding the loss of his “son’s house, his cars, his hangar, my hangar” and “the plane” is not sufficient to prove these losses and, more importantly, is not relevant to the economic impact analysis under Penn Central for it does not show the fair market value of the property at issue before and after the taking. Forest Props.,
Prior to trial, defendant sought permission from the court to introduce evidence of plaintiffs’ tax history to refute plaintiffs’ personal losses claim at trial and in response to plaintiffs’ attempt to “resurrect the issue of the impact of the government’s redelineation on the Normans’ personal financial situation.” See May 22, 2003 Order. Defendant’s position was that a profitability analysis of the federal tax returns and general ledgers would have captured all of the business losses and profits the Normans and the South Meadows Partnership suffered through 2001. The court denied defendant’s request that the government be allowed access to plaintiffs’ tax returns. Instead, the court granted defendant’s alternative request that plaintiffs be prohibited from presenting any evidence of alleged personal losses of income from 1988 until 1999.
However, plaintiffs continued to assert that the court must hear their whole story and continued to express their desire to present evidence regarding the alleged unfairness of the 1991 delineation and possible nefarious motivations of the government. As a result of the pretrial conference held November 13, 2003, the court determined that the parties should be permitted to introduce evidence regarding the plaintiffs’ personal financial losses from 1988 through the date of the alleged permanent taking in 1999, for the limited purpose of demonstrating or refuting the alleged economic impact caused by the regulatory imposition. See Nov. 18, 2003 Order. The parties were afforded the opportunity to present evidence concerning plaintiffs’ initial purchase price and capital expenditures made with respect to the subject property, and profits from sales of various portions of the property.
At trial, defendant set forth testimony from Mr. Gregory Poloniea regarding profits and losses that should be reflected in the South Meadows Partnership books and records. Mr. Poloniea is an expert in the field of accounting, working in the corporate finance unit of the antitrust division of the United States Department of Justice (DOJ). At trial, Mr. Poloniea testified that the South Meadows development was highly profitable. “The partnership as an entity has generated revenues in excess of $81 million.” Tr. at 1644. “According to the partnership’s tax returns, the partners have received distributions through December 31, 2001 totaling over $70 million.” Def.’s Ex. 273 IT 29. Mr. Poloniea’s expert report further explains that additional distributions can be expected in subsequent years.
The court does not find plaintiffs’ tax gain and losses relevant for determining the economic impact suffered by the property. First, because plaintiffs’ personal economic losses do not bear on calculating fair market value, such evidence regarding plaintiffs’ tax gain and losses is not needed for the court’s evaluation of the economic impact on the property. Second, at least one of the Court of Federal Claims’ decisions has suggested that the court should not give deference to tax losses and gains in the ambit of takings claims. For example, in American Pelagic Fishing Co. v. United States,
Third, and quite significantly, the parties themselves, in them post-trial submissions to the court, dismiss the propriety of delving into plaintiffs’ tax returns for purposes of calculating economic impact. Plaintiffs state that they “are aware of no decision giving consideration to the tax implications of government takings of land.” Pis.’ Resp. to Ct.’s Posh-Trial Questions at 95. Defendant also states that “[t]he profitability analysis has no relation to the calculation of fair market value. It is simply another way of looking at economic impact of government action on the South Meadows development.” Def.’s Resp. to Ct.’s Post-Trial Questions at 29. Accordingly, the court does not deem it necessary to include plaintiffs’ tax gains and losses for the purpose of evaluating economic impact.
The court lastly considers the purpose and importance of the public interest reflected in the regulatory imposition. Cienega Gardens,
It is important to note from the onset that there is no contention surrounding the government’s legitimate public welfare obligation to preserve the nation’s wetlands. See Brace,
In Riverside Bayview, the Supreme Court ruled on whether the Clean Water Act, together with regulations promulgated under its authority by the Corps of Engineers, authorized the Corps to require landowners to obtain permits prior to discharging fill material into wetlands for areas adjacent to “waters of the United States.”
A requirement that a person obtain a permit before engaging in a certain use of his or her property does not itself “take” the property in any sense: after all, the very existence of a permit system implies that permission may be granted, leaving the landowner free to use the property as desired. Moreover, even if the permit is denied, there may be other viable uses available to the owner.
Id. at 127,
At the same time, it is also important to note that it is not enough that the government’s purpose in protecting the environment be worthy. See Cane Tenn.,
In the case at bar, plaintiffs craft the character of the governmental action prong in terms of whether the alleged taking is akin to a physical taking by virtue of the fact that
There is little dispute that the purpose of the regulatory action of permit denial was to enhance the water and ecological system of the United States and south Florida in particular by preserving more wetlands. It was to benefit the public, not prevent Florida Rock from doing any harm. Rock mining is widespread in this region of Florida. The only difference between this property and various other mining operations, as the court observed on the site view, is that it was west of an arbitrary line the government decided upon as the limit of wetland protection. Unlike the traditional nuisance case where the government prevents what the citizen had no right to do under the common law, here the activity was perfectly permissible until the permit was denied. Florida Rock’s activity posed no health or safety risk. The government made a permissible policy choice that this land should benefit the public’s supply of wetlands.
Id. at 40. The Florida Rock court found that the plaintiffs activity was otherwise permissible under state nuisance principles. Specifically, the Florida Rock court found that rock mining would cause only superficial pollution and therefore did not constitute a public or private nuisance under Florida law, and that other landowners in the vicinity had been allowed to operate rock quarries. Id. at 30. In line with Florida Rock, in the case at bar, plaintiffs maintain that the severity of the intrusiveness, coupled with their contention that plaintiffs have been singled out to bear a public burden, lends to finding that the character of the governmental action supports a taking here.
Defendant, on the other hand, argues that the character of the government’s action does not establish that a taking occurred in this ease. First, defendant claims that the Corps conformed the 1999 Permit to plaintiffs’ proposals and allowed plaintiffs to develop the vast majority of their property for profit. Second, the government argues that the government has a legitimate public welfare duty to preserve the nation’s wetlands. See Forest Props.,
Third, the government argues that the issuance of a Section 404 permit under the Clean Water Act is considered a proper government action. Defendant argues that the presumption of lawful and proper government action applies where claimants have failed to challenge the agency’s actions in federal court. Because plaintiffs did not challenge the lawfulness of the issuance of the 1999 Permit in federal district court under an administrative review proceeding, defendant argues, the character of the government action here was inherently appropriate. However, the court finds this argument is inapposite. First, it is well established that a takings claim is valid, so long as the underlying governmental action was authorized, even if the government’s action was subject to legal challenge on some other ground.
[A]n uncompensated taking and an unlawful government action constitute ‘two separate wrongs ... give rise to two separate causes of action,’ and that a property owner is free either to sue in district court for asserted improprieties committed in the course of the challenged action or to sue for an uncompensated taking in the Court of Federal Claims.
Rith,
In Brace,
In Maritrans, the Federal Circuit found that the regulation at issue there, the Oil Pollution Act of 1990, which required that all newly constructed tank vessels be constructed with double hulls, did not impose a physical invasion or restraint upon Maritrans’ tank barges, nor did it compel surrender of the barges.
Similarly, in Rith Energy, Inc. v. United States,
In this instance, plaintiffs purchased their property while the Clean Water Act’s permitting process and overall regulatory scheme were in effect, clearly making plaintiffs subject to the Act’s requirements. The court goes on to observe that plaintiffs were not unfairly or disparately treated with respect to the Corps’ overall wetlands permitting scheme. In fact, plaintiffs were never denied a permit to fill wetlands. See Riverside Bayview,
[I]n order to get a [Section 404] permit ... the landowner or developer ... has to demonstrate things in sequential order. The first would be the landowner had done everything possible to avoid filling in the wetlands in the first place. If he can demonstrate total avoidance is not possible. The second thing is that he would have to show that they had done everything they could to minimize the damage to the wetlands. It’s called minimization. But if, after those first two steps, the Corps decides that it’s still in the public interest to let the project move forward, there is a third step. The Corps may permit the applicant, the landowner, to fill a certain amount of wetlands; but it may not do that without compensating for the loss____ In other words, if I’m the landowner, and I get a permit to fill in one acre of wetland, I will have to make up the loss of functional values for that one acre by building some more wetland space someplace else, or restoring some more wetland someplace else, adequate, in the Corps’ point of view, to compensate for the loss ____Mitigation.
Tr. at 451. The issuance of the 1999 Permit allowed plaintiffs to use over 2000 acres of the relevant parcel as desired in exchange for preserving 220.85 acres of wetlands. Plaintiffs, in essence, challenge the whole concept of mitigation at its core. In plaintiffs’ world, no landowner would ever have to create mitigation wetlands in exchange for a fill and dredge permit under the Clean Water Act. The court does not find that the nature of the government action here, that being the Corps’ requirement that plaintiffs preserve wetlands in exchange for filling others, is inappropriate simply because plaintiffs are unhappy with the mitigation plan they negotiated. This is true especially in light of the fact that the government has a legitimate public welfare obligation to preserve wetlands and that the unnecessary destruction of wetlands violates environmental laws and is contrary to public policy. Brace,
The court also does not agree with plaintiffs’ contention that the impact of the regulatory imposition here is akin to a physical taking of 220.85 acres of land and would otherwise demonstrate a severe interference by the government in plaintiffs’ property rights. The court finds that the Corps’ mitigation requirement is clearly a permissible regulatory imposition. In light of the entire
d. Weighing of the Penn Central Factors
Upon weighing the three Penn Central factors in the regulatory takings analysis— the interference with reasonable investment-backed expectations,' the economic impact, and the character of the governmental action — the court finds that no taking occurred. Plaintiffs’ best case scenario is that it had reasonable investment-backed expectations in WL 17B which was the only portion of wetlands delineated after plaintiffs purchased the Commercial portion. Plaintiffs’ investment-backed expectation in this mere 4.07 acres of the total 2280-acre Development area does not, however, support a taking, especially in light of the fact that the other two prongs of the Penn Central analysis, the economic impact and character of the governmental action, do not weigh towards finding a taking. The economic impact analysis of the relevant parcel reflected an increase in fair market value after the issuance of the 1999 Permit. There was no diminution of value of the parcel as a whole. With respect to the character of the governmental action, plaintiffs were never denied a permit to fill and dredge desired wetlands. The Corps’ requirement that other wetlands be created or preserved to off-set the impact of existing wetlands is a perfectly permissible and standard mitigation technique — one that benefited both the environment and plaintiffs. The Corps’ action simply did not unduly burden plaintiffs.
III. CONCLUSION
On this record, the court concludes that the Corps’ issuance of the 1999 Permit, and the related Deed of Restrictions, resulting in 220.85 acres of plaintiffs’ property being set aside as wetlands, did not effect a physical taking of plaintiffs’ property nor a categorical taking of plaintiffs’ property under the Fifth Amendment. Guided by the three-tiered Penn Central analysis, the court finds that, at best, plaintiffs maintained a de minimis reasonable investment-backed expectation in the claimed property. Furthermore, due to the lack of a severe economic impact and plaintiffs’ failure to show that the nature of the governmental action in this instance unduly burdened plaintiffs or was otherwise inappropriate, the court finds that no regulatory taking of property has occurred.
As such, it is hereby ORDERED that the Clerk’s office is directed to ENTER judgment for defendant, DISMISSING the Amended Complaint, filed January 15, 2004, with prejudice; and each party shall bear its own costs.
Notes
. In 1982, the 1977 regulations were replaced by substantially identical regulations that remain in force today. See 33 C.F.R. § 323.2(a)(2) (1982); 33 C.F.R. § 328.2 (2004).
. These characteristics are: (1) hydrology, (2) hydric soil, and (3) hydrophytic vegetation. Tr. at 445-46.
. At times throughout this opinion, the 1800-acre Residential portion acquired by DDR is also referred to as the "Helms portion” after its owner Robert Helms.
. In 1989, plaintiffs also purchased neighboring properties, the Winkle and Farahi ranches, for access to the development project and for the Nevada Department of Transportation (NDOT) right-of-way and interchange.
. On April 3, 1996, plaintiffs also acquired nearby property from Nevada Bell. On May 15, 1998, plaintiffs acquired a small neighboring property from G & E.
. The 2280-acre Development does not include the "Farahi” parcel since it was not included in any phase of development. However the Winkle, Dotta, Pecetti, Flindt and Nevada Bell parcels are all part of Phases I and II of the development. In total, the 2280-acre Development consists of Phases I, II and III, including the residential component of property sold to Double Diamond Ranch LLC, infra, but excluding property conveyed to the Nevada Department of Transportation for the 1-580 right-of-way and the Damonte Parkway interchange. The G & E property purchased in 1998 is not part of the 2280-acre Development.
. According to Lee Smith, defendant's expert, plaintiffs sold 798 acres to DDH.
. The government spent considerable time at trial arguing that the Deed of Restrictions is not the governing document in this matter and that the 1999 Permit trumps any requirements in the Deed of Restrictions. The court does not venture into the issue of whether any requirements contained in the Deed of Restrictions supercedes those in the 1999 Permit. For the most part, it is
. Plaintiffs claim that this acreage was actually required to serve as a flood plain wetland area for the C-l detention basin as a special condition under the 1999 Permit. However, this particular area was specifically designated for that purpose in the Deed of Restrictions.
. These 2.7 acres of land are reduced from plaintiffs' takings claim as follows: .12 acres was subtracted from WL 17B; .632 acres was subtracted from WL 11; .5 acres was subtracted from WL 22; .94 acres was subtracted from area C-2; and .51 acres was subtracted from C-l detention basin.
. The Supreme Court defined the destruction of these interests as follows: (1) possession — “the owner has no right to possess the occupied space himself, and also has no power to exclude the occupier from possession and use of the space”; (2) use — "the permanent physical occupation of property forever denies the owner any power to control the use of property; he not only cannot
. The Federal Circuit in Walcek never addressed the issue of whether there would have been a categorical taking of property if the relevant parcel had been the remaining eleven acres of wetlands.
. The Farahi ranch is not included in the relevant parcel because it was not a part of any phase of the 2280-acre Development. That properly had been purchased solely for access to the development project and for the NDOT right-of-way and interchange. See supra notes 4 and 6.
. The City of Reno viewed the development as a planned development to be conducted in phases. "The PUD standards in effect on Phase III are essentially an extension of the South Meadows Phase I and II standards with regard to roadways, architecture, parking, signs, traffic conditions, etc.” Def.’s Ex. 246 at 2. Vince Griffith, plaintiffs’ engineer, agreed that it is accurate to describe the South Meadows project as a
. Mr. Kimmel actually looked at the fair market value as of August 27, 1999, instead of the date of the alleged taking of August 31, 1999. Mr. Kimmel testified, however, that his same appraisal could be applied to the August 31, 1999 date and that his opinion would not change.
. Some courts look to the purpose and importance of the public interest underlying the regulatory imposition, focusing, in particular, on whether the challenged restraint would constitute a nuisance under state law. Walcek,
In this particular instance, it is not necessary for this court to conduct an inquiry as to whether plaintiffs’ conduct would constitute a nuisance under Nevada law. The Federal Circuit in Appolo Fuels noted that ”[i]t is a settled principle of federal takings law that under the Penn Central analytic framework, the government may defend against liability by claiming that the regulated activity constituted a state law nuisance without regard to the other Penn Central factors.”
. The Code of Federal Regulations discusses a multitude of mitigation methods under the Section 404 permitting process. See 40 C.F.R. §§ 230.70-.77 (2004). The Corps has regulatory authority to require compensatory mitigation at on-site or off-site locations. 33 C.F.R. §§ 230.4(r)(1), (2) (2004). See also Corps of Engineers, Department of the Army, Final Rule for Nationwide Permit Program Regulations and Issue, Reissue, and Modify Nationwide Permits, 56 Fed.Reg. 59,110, 59,146 (Nov. 22, 1991). The Corps can also consider project modifications that are considered feasible, such as reductions in scope of the project, changes in construction methods, etc. 33 C.F.R. § 230.4(r)(i). The Corps derives its mitigation authority from 33 U.S.C.§ 1344(b)(1).
Effective February 7, 1990, the Corps and the EPA entered into a Memorandum of Agreement Concerning the Determination of Mitigation under the Clean Water Act Section 404(b)(1) Guidelines (Feb. 7, 1990) (Mitigation MOA). Theda Braddock Fowler, Wetlands Regulations: Case Law Interpretation and Commentary 273 (Government Institutes 2003). The Mitigation MOA contains a detailed exposition on the mandatory sequence of analysis of when considering applications for individual permits which involve issues of compliance with the guidelines. Id. The Mitigation MOA recognizes that the national goal of no net loss of wetlands functions and values may not be achieved in every individual permit action. Id. The Corps and EPA consider mitigation to be an important aspect of the review and balancing process on many Section 404 permit applications. Id. at 116.
. In Del-Rio Drilling Programs, Inc. v. United States, the Federal Circuit held that the plaintiff could bring a takings claim without first challenging the lawfulness of the government’s action, or establishing the scope of its property interest, in an administrative proceeding.