When real estate developers assess the financial viability of a project, many different variables come into play. Of chief importance are the tax breaks and incentives doled out by municipalities for highly desired developments, but the expense of public art does not always enter into the equation. Impact fees for art and the required inclusion of works in a project are relatively common on government-funded projects (like schools, hospitals and libraries), ((Laura Calçada i Barres, A story on Public Art in New York City, Medium (Aug. 17, 2017), https://medium.com/@LauraCalcada/a-story-on-public-art-in-new-york-city-6bfa3f0645b6.)) where cities across the United States stipulate some percentage of the total building costs will go towards art, but this practice is more controversial for private projects.
As construction and redevelopment throughout the country increased during the late 1970s and following decades, the presence of public spaces and aesthetic goods started to vanish while land values soared. Cities like New York instituted Percent for Art programs ((NYC Percent For Art, http://www1.nyc.gov/site/dclapercentforart/index.page (last visited Oct. 31, 2017).)) (beginning in 1982 under mayor Ed Koch) with the intention of fostering and preserving public art. Today, New York’s law requires that 1% ((Best Practices: Percent for Art Program, NYC Percent For Art, https://www1.nyc.gov/assets/globalpartners/downloads/pdf/NYC_PublicArt_Percent%20for%20Art.pdf (last visited Oct. 31, 2017) (The law actually stipulates “that no less than 1% of the first twenty million dollars ($20,000,000), plus no less than one half of 1% of the amount exceeding twenty million dollars be allocated for the art work. Art allocations need not exceed $400,000 per commission.”).)) of the budget for city-funded construction goes to artwork by artists “whose sensibilities reflect the diversity of New York City.” ((NYC Percent For Art, supra note 2.)) These Percent for Art programs bring artists into the design process, thereby greatly benefitting the public at large through the beautification of civic buildings and spaces. ((Id.)) The percentages of budgets that are set aside for art commissions usually fall within the range from 0.5% to 2%, yet many opt for the 1% benchmark. ((Public Art Programs: 1% for the 99% – Part One, SheppardMullin Art Law Blog (Oct. 10, 2012), https://www.artlawgallery.com/2012/10/articles/artists/public-art-programs-1-for-the-99-part-one.))
However, when smaller cities don’t have well-established programs like New York or lack a substantial pipeline for government-funded projects, municipalities sometimes turn to private developers to supplement the desired artistic output. Certain city ordinances may require private developers to incorporate public art into their proposed schemes or pay “in-lieu fees” towards a community fund earmarked for art. The latter option allows a city to choose how to spend the capital on similar aesthetic initiatives. ((Id.)) It is precisely in this situation where most of the legal challenges from developers occur regarding requirements around art in the development context. One case in particular recently caused a stir in both the worlds of real estate development and art, as the Building Industry Association of the Bay Area (“BIA-Bay Area”) challenged the city of Oakland’s (“Oakland”) Percent for Art requirement on private developers. ((Bldg. Indus. Ass’n – Bay Area v. City of Oakland, 3:2015cv03392 (N.D. Cal. July 23, 2015).))
In the BIA-Bay Area case, the association claims that Oakland ((Oakland, Ca., City Council Ordinance No.13275 C.M.S.)) refuses to issue proper building permits unless the developer contributes one percent of the construction costs to public art on their specific property or pay art fees, in-lieu of the stipulation, to the city’s public art fund. ((Laura Gilbert, A Court Case in Oakland Could Radically Affect Public Art Across the U.S., Artsy (Sept. 8, 2015), https://www.artsy.net/article/artsy-editorial-oakland-court-case-percent-for-art.)) BIA-Bay Area’s complaint further alleges that the art fees amounted to an unfair exaction, stating that there was not a “sufficient nexus to an identifiable adverse impact of development,” and is therefore unconstitutional as violative of the Takings Clause of the Fifth Amendment given the holding of earlier decisions in the cases of Nollan and Dolan. ((Geoffrey Robinson, Building Industry Challenges Public Art Requirements, PerkinsCoie California Land Use & Development Law Report (July 30, 2015), https://www.californialandusedevelopmentlaw.com/2015/07/30/building-industry-challenges-public-art-requirements/.)) BIA-Bay Area’s argument appears to rely on the U.S. Supreme Court case, Koontz v. St. Johns River Water Management District from 2013, ((Gilbert, supra note 9.)) which restricts the government’s exaction powers before it can issue building permits—and shifts the burden to the government to prove the mandates are justified under the heightened Nollan-Dolan standard. ((John D. Echeverria, A Legal Blow to Sustainable Development, N. Y. Times (June 26, 2013), http://www.nytimes.com/2013/06/27/opinion/a-legal-blow-to-sustainable-development.html?smid=li-share&goback=%2Egde_1013587_member_253643531&_r=0.)) The Supreme Court in Koontz stated, “Under Nollan and Dolan the government may choose whether and how a permit applicant is required to mitigate the impacts of a proposed development, but it may not leverage its legitimate interest in mitigation to pursue governmental ends that lack an essential nexus and rough proportionality to those impacts.” ((Koontz v. St. Johns River Water Mgmt. Dist., 133 S. Ct. 2586, 2595 (2013).)) This standard is difficult for the government to prove for monetary exactions, and some commentators think the Supreme Court did not actually mean for this same standard to apply in these instances. ((Glen C. Hansen, Jurisprudence Is Catching Up With The California Supreme Court in Ehrlich v. Culver City, Abbot & Kindermann Land Use Law Blog (July 9, 2013), https://blog.aklandlaw.com/2013/07/articles/exactions-impact-fees-service-charges-and-property-taxes/the-us-supreme-courts-nollandolan-jurisprudence-is-catching-up-with-the-california-supreme-court-in-ehrlich-v-culver-city/.))
Oakland argues that it’s not actually a constitutional issue at all. Instead, the city claims that it does not require a specific type of art or artist—that all of those aesthetic decisions are up to the developer. Furthermore, the city relies on the 1996 California Supreme Court case, Ehrlich v. City of Culver City, which holds that aesthetic conditions have long been found to be valid—a decision that has been emulated in many states around the country. ((Ehrlich v. City of Culver City, 911 P2d 429 (Cal. 1996).)) The Court reasoned that if a development project is reasonably accessible to the public, it falls within the aesthetic control of a city’s police power similar to other design and landscaping requirements. ((Id.)) Oakland also contends that this type of exaction for public art falls within the Nollan-Dolan framework and that the proposed development would have a significant impact on the community, thereby justifying a monetary exaction for this connection between project and zoning requirement. ((Id. (“… we conclude, first, that the city has met its burden of demonstrating the required connection or nexus between the rezoning—to permit a residential use of a parcel of land zoned for private recreational use—and the imposition of a monetary exaction to be expended in support of recreational purposes as a means of mitigating that loss. We conclude, however, that the record before us is in sufficient to sustain the city’s determination that plaintiff pay a so-called mitigation fee of $280,000 as a condition for approval of his request that the property be rezoned to permit the construction of a condominium project. Because the city may be able to justify the imposition of some fee under the recently minted standard of Dolan, we follow the Oregon Supreme Court’s disposition in that case and direct that the cause be remanded to the city for additional proceedings in accordance with this opinion.”).))
Although BIA-Bay Area re-filed earlier this year and the Court has not yet addressed the aforementioned claims, it’s important for both proponents and critics of public art requirements connected to private development to stay alert for the outcome. Many people believe that Koontz handed developers a stronger tool to legally challenge communities on the validity of their ordinances—as to which courts have long been deferential in their approach to elected officials and technical experts on issues relating to regulatory policy. ((Echeverria, supra note 13.)) It’s certainly possible that the burden placed upon the government in the wake of Koontz and cases like BIA-Bay Area will invite a number of costly legal challenges to local rules for cities everywhere.
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