The City of Oakland, California, evidently hoping that new multifamily residential and commercial developments will contribute to public art displayed around the city, last year enacted an ordinance requiring art purchases as a condition of development approval.  For new multifamily developments, the city requires art purchases (or an in lieu payment to the city’s public art fund) equivalent to .5 percent of a proposed building’s development costs.  New commercial developments incur purchase requirements or fee payments equal to 1 percent of those costs.  And for developers choosing to purchase art, the city requires that they display it on the property where the development will occur.

The Building Industry Association-Bay Area (“BIA”) challenged the ordinance’s validity, arguing the conditions amounted to Fifth Amendment takings and that they compelled speech in violation of the First Amendment.  The city moved to dismiss both claims, and the district court granted the motion last month.

In its Fifth Amendment claim, the BIA argued the ordinance amounted to an unconstitutional “exaction”—that is, a discretionary government request that a landowner convey a property interest or sum of money, or take some other mitigating action, as a condition of a specific development approval (e.g., “We’ll grant your beach-house building permit if you convey a public easement across your land.”).  Distinguishing Oakland’s ordinance from Ninth Circuit and Supreme Court exaction precedent, however, the district court noted that the ordinance applied to every multifamily or commercial development approval, and was not a one-off attempt to wring money from a developer.  Thus, in the court’s view, the ordinance was better considered a regulatory taking, under which approach, its .5 and 1 percent fees fell far short of rendering developable properties valueless.

The BIA’s First Amendment argument consisted of a claim that, in requiring developers to display art, the city compelled speech in violation of the First Amendment.  Though noting the ordinance implicated the First Amendment, the court rejected the BIA’s contention that the ordinance required heightened scrutiny, reasoning that it neither compelled ideological messages nor required developers to publish others’ messages—forms of compulsion more repugnant to the Constitution.  Instead, because the degree of compelled speech was minimal, and, more importantly, developers could opt out of speaking altogether by contributing funds to the city’s public art fund, the court concluded that it needed to consider only whether a rational basis supported the ordinance.  And, having concluded that much, the court further found that the city’s interests in aesthetics and bolstering property values provided necessary constitutional support to the ordinance and granted Oakland’s motion to dismiss.

Complete opinion available here: