In a highly-anticipated case revolving around development impact fees, the U.S. Supreme Court unanimously held in Sheetz v. County of El Dorado, 144 S.Ct. 893 (2024) that legislatively-imposed conditions on building permits are not exempt from scrutiny. Although the decision can certainly be characterized as a victory for those facing sometimes exorbitant impact fees, the Court left one critical question unanswered, resulting in both sides of this particular case claiming victory.
The plaintiff, George Sheetz (Sheetz), applied to the County of El Dorado (County) for a permit “to build a modest prefabricated house” on land he owned. As a condition of receiving the permit, the County required Sheetz to pay a traffic impact fee of $23,420, as dictated by the County’s General Plan rate schedule. Sheetz paid the fee under protest and obtained the permit. The County did not respond to his request for a refund.
So Sheetz sought relief in state court, asserting that conditioning the building permit on payment of the traffic impact fee was an unlawful exaction that violated the U.S. Constitution’s Takings Clause because the County failed to make an “individualized determination that the fee amount was necessary to offset traffic congestion attributable to his specific development.” Sheetz asserted that, under Supreme Court precedent in Nollan v. California Coastal Comm’n and Dolan v. City of Tigard (together, Nollan/Dolan), it was necessary for the County to demonstrate: (i) an essential nexus between the project’s actual impacts and fees being imposed, and (ii) that any imposed fees be roughly proportional to the project’s impacts. Both the California state trial court and appellate court rejected Sheetz’s claim, ruling that the Nollan/Dolan test applies only to permit conditions imposed on an individual and discretionary basis, and that fees imposed through legislative action need not satisfy the Nollan/Dolan test.
The Supreme Court’s unanimous decision rejected the view of the California courts. After examining historical references and judicial precedent, the Court explained, “The Constitution’s text does not limit the Takings Clause to a particular branch of government.” The Court concluded that “there is no basis for affording property rights less protection in the hands of legislators than administrators. The Takings Clause applies equally to both—which means that it prohibits legislatures and agencies alike from imposing unconstitutional conditions on land-use permits.” The result being that all impact fees—regardless of how they are imposed—must now satisfy the Nollan/Dolan test. The decision is a welcome relief to those who feel their projects are unfairly burdened by impact fees. That said, the Court left one looming question unanswered: whether a permit condition imposed on a class of properties must be tailored with the same degree of specificity as a permit condition that targets a particular development. The unanimous decision explained that that question must be answered by the California state courts on remand. While a concurring opinion by Justice Kavanaugh (joined by Justices Kagan and Jackson) was written to “underscore” this point, a separate concurring opinion by Justice Gorsuch disagreed, stating that judicial precedent already establishes a specificity requirement and wryly noting that “whether the government owes just compensation for taking your property cannot depend on whether it has taken your neighbors’ property too.” Thus, while the Court clarified a critical constitutional rule, the full story is to be continued.
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