Municipal Overreach: The Case Against Benefit-Based Land Use Exactions

In the Summer of 2023, a quiet buzz was building in New York City that Madison Square Garden’s Special Permit—the land use vehicle that allows it to operate an arena— was in jeopardy. Contributing to the hubbub were discussions about a controversial form of land use regulation: benefit-based exactions. Exactions are requirements imposed on property owners by local governments whereby, in return for a discretionary land use approval, property owners dedicate a portion of their property to further the government’s interest or pay a fee in lieu thereof. While exactions are primarily used by a municipality when a new development creates negative externalities, a fringe theory has developed that exactions may be based on the benefit accrued to the property owner from the government’s approval of a land use application. This Note argues against such a theory, specifically that benefit-based exactions can lead to abuses of the government’s police power, extortion, and corruption, ultimately subjecting the government to liability under the Takings Clause. This Note, therefore, recommends that the New York State legislature amend the State’s General City Law to explicitly outlaw benefit-based exactions. By banning this form of private property regulation, property owners will be protected from government overreach and abuse.