Floodplain Regulation Not a Taking in South Carolina

Yesterday the South Carolina Supreme Court produced an important ruling in a regulatory takings case involving floodplain management.  In Columbia Venture, LLC v. Richland County, the Court issued a unanimous decision affirming a ruling by a Special Referee that county restrictions on development in a federally-designated floodway did not result in a taking.   This ruling is consistent with an apparently unbroken string of precedent from around the country holding that floodplain development restrictions do not represent takings.

The case arose from a failed real estate venture involving some 4461 acres of land on the banks of the Congaree River in Richland County, a few miles from the state capitol of Columbia.  For many years the property was owned by an individual who used it for agricultural and recreational purposes and harbored long-term development ambitions.  A South Carolina firm became interested in developing the property and formed a joint venture with the landowner for the purpose of constructing a large-scale, mixed use development.  At the time of purchase the County had adopted an ordinance prohibiting any development in a floodway that would impede floodwaters and FEMA had issued preliminary map revisions indicating that 70% of the property was in the floodway.   Under FEMA regulations, development might have been possible behind new levees on the property, but construction of levees was blocked by the county rule barring construction in the floodway and by uncertainty over whether the County would agree to assume responsibility for managing the levees.  Eventually the project foundered when FEMA finalized its new floodplain maps, effectively making most of the property off limits to development under the county rules.  A takings lawsuit seeking tens of millions of dollars followed a few years later.

The South Carolina Supreme Court made short work of several of the plaintiff’s theories.   The Court rejected the claim that the county regulations resulted in a per se taking on the theory that the County had appropriated a “flowage easement” over the property, pointing out that the County’s floodway development restrictions were “simply limitations on land use.”  The Court also summarily rejected the plaintiff’s Lucas claim, pointing out that 30% of the property was not subject to the floodway designation and that the entire property retained substantial value for agricultural and other purposes.

The real action in the case focused on the Penn Central analysis.  The Special Referee found that the regulations resulted in a “significant” decrease in the value of the property (without getting a whole lot more specific), leading to the conclusion that the economic impact factor weighed in favor of the takings claim, and the Supreme Court accepted that analysis.  However, the Special Referee also found that the investment-expectations and character factors weighed against the Penn Central claim.  The Supreme Court agreed, and accordingly affirmed.  As to the expectations issue, the Supreme Court stated that the floodway ordinance and the pending FEMA remapping were formidable regulatory obstacles in place when the joint venture acquired the property, and any subjective expectation plaintiff had that it could  overcome these obstacles “was not objectively reasonable.”  As to the character factor, the Court emphasized that the county regulations serve “the important public purposes of mitigating the social and economic costs of flooding,” as well as the fact that the regulation did not target the plaintiff’s property but instead applied to all property in the county within a floodway, some 16,500 acres.

In a modest nod to the climate change dimension of floodplain regulation, the Court explained that the County’s strict floodway regulations went beyond the bare minimum mandated by FEMA.   The Court quoted a former county planning director’s explanation that the County did not wish to rely on FEMA’s “retrospective” approach to hazard assessment but instead wanted to be “forward-looking,”  and focus on “the potential of increased flooding in the future from urbanization or from the possibility of more intense storms due to climate change.”

Full disclosure:  I served as co-counsel representing the County before the South Carolina Supreme Court in this case. The lead counsel was McMullen Taylor of Columbia, South Carolina.