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U.S. Supreme Court Holds that All Impact Fees are Subject to a Constitutional Takings Analysis

on Monday, 22 April 2024 in Dirt Alert: David C. Levy, Editor

Plaintiff applied to El Dorado County, California, for a building permit to build a residence on his property.  El Dorado County granted the building permit on the condition that Sheetz pay a $23,420 impact fee pursuant to the county’s traffic mitigation program as set forth in its General Plan.  The County based fee on a predetermined fee schedule that assessed impact fees according to the type of proposed development, as opposed to the actual traffic attributable to Sheetz’s proposed use. 

Sheetz paid the fee under protest.  He then sued.  He was a “coercive condition” and violated the federal Takings Clause. 

The Fifth and Fourteenth Amendments of the U.S. Constitution prohibit state regulators from taking private property without compensating the landowner.  In Nollan v. Cal. Coastal Comm’n, 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1994), the court held land use regulators may not “coercively” demand a portion of landowners’ property in exchange for a permit.  To survive constitutional scrutiny, an exaction must have an “essential nexus” and “rough proportionality” to the public use at issue.  Koontz v. St. Johns River Water Management Dist., 570 U.S. 595, 612 (2013).

The trial court and California Court of Appeal upheld the County’s impact fee by finding that Nollan and Dolan did not apply.  The courts reasoned the unconstitutionally coercive standard only applies to ad hoc impact fees.  By contrast, the Legislature required El Dorado County to impose the fee at issue here.  The courts therefore upheld the impact fee over Sheetz’s challenge.

On appeal, the U.S. Supreme Court reversed.  It held the unconstitutionally coercive standard governs regardless of which branch of government imposes the permit condition.  The court reasoned, “[t]he Constitution’s text does not limit the Takings Clause to a particular branch of government.”

Like ad hoc fees, legislatively imposed development fees must equally have (1) an essential nexus and (2) rough proportionality to the public use at issue.  Because the lower courts had failed to consider Sheetz’s fees under that standard, the U.S. Supreme Court vacated the decision below and remanded for further proceedings.

This decision may help developers overcome impact fees that appear to be unreasonable or without a nexus to the development’s impacts.  Cities and counties throughout Nebraska commonly impose impact fees to fund streets, water facilities and parks.  The U.S. Supreme Court confirmed that all of these impact fees do not escape constitutional scrutiny under Nollan and Dolan merely by reason of being legislatively enacted.

Attorneys at Baird Holm specialize in various subject matter areas including state and local government, land use planning and zoning, and municipal law.  Please do not hesitate to contact us if you have questions about this case or any related matter.

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