Issues
Does the Nollan and Dolan standard, which requires the government to show an essential nexus and rough proportionality between a development permit fee and its negative public impact, apply to a blanket legislative regulation that imposes a flat development fee for certain developers?
This case asks the Supreme Court to determine whether El Dorado County’s Traffic Impact Mitigation Fee Program (“TIM Program”) is an unconstitutional taking under the Takings Clause. The Takings Clause prohibits the government from taking individual property without just compensation. For a conditional development fee to be constitutional under the Takings Clause, the Nollan and Dolan standard requires the government to show an essential nexus and rough proportionality between the conditional permit’s fee and the permit’s negative public impacts. George Sheetz argues that the TIM Program’s flat fee to all residential homes within his zone is an unconstitutional taking as it is an exaction that is unrelated to traffic impact and makes no individual determinations. County of El Dorado, California argues that Nollan and Dolan do not apply to legislatively mandated development fees that broadly apply to a class of permit applicants. This case has significant implications for regulating development fees in the legislature and for individuals seeking to construct new properties.
Questions as Framed for the Court by the Parties
Whether a building-permit exaction is exempt from the unconstitutional-conditions doctrine as applied in Nollan v. California Coastal Commission and Dolan v. City of Tigard, Oregon simply because it is authorized by legislation.
Facts
El Dorado County (“the County”) is a county in California. Brief for Petitioner, George Sheetz at 3. In 2004, the County adopted a plan that included a section on “transportation and circulation,” setting standards on how the County approaches the impact of new development on its road and highway network. Id. at 4. This led to the implementation of a one-time “traffic impact fee,” designed to offset the traffic impacts of new developments. Id. The fee amount is governed by a fee schedule set by the County’s Department of Transportation and varies depending on the type and extent of the development. Id. at 5.
This fee, however, is not tied specifically to the cost of actual road improvements attributable to the development. Id. at 4. It is instead an estimation, tied to an approximate “proportion” of needed road improvements “reasonably attributable” to the new development, determined by a multistep process. Id. at 4-5.
To calculate the fee, the County first uses “land use growth” forecasts to project potential development in the county, across a 20-year time horizon, utilizing existing development patterns in the county. Id. at 5. The County uses “industry standard” traffic models to determine the needed road improvements for such development. Id. The County splits these improvements into two portions, first the impact on local roads, then the impact on U.S. Highway 50 (“U.S. 50”), the main “transportation corridor” in the county. Id. It then estimates the construction cost of improvements on these roads, considering the high expense of construction across the County’s rugged mountainous terrain. Id. at 6.
Next, the County apportions the cost of these required improvements to allocate the fees each development pays. Id. They do this by first dividing the county into “zones,” based on their population density and geography. Id. For each road improvement the County’s model forecasts as needed; the model calculates each zone’s share of the traffic on said road. Id. at 7-8. Generally, zones located further away from a road would have a smaller impact, whereas a closer zone would have a larger impact. Id.
Finally, to determine the fee for individual developments, the total costs of each zone’s shares of county road improvements are divided by the “projected growth” of each development type, and the amount of traffic each development type generates, with the latter being a generalized determination, based off expert analysis. Id. at 7. For single-family homes, this comes as a fixed fee, whereas for commercial developments, this fee varies depending on size. Id. at 8.
In 2013, George Sheetz purchased a plot of land in the county along with his wife, intending to erect an 1800-square-foot manufactured home to retire in and raise his grandson. Id. at 4. The land, located in an unincorporated part of the county near Placerville, falls under the county’s Traffic Impact Mitigation (“TIM”) Fee program in Zone 6, assessing a fee for offsetting the traffic impacts of new development. Id. at 3. Zone 6 is more rural, and further away from U.S. 50. Id. at 6. Sheetz was assessed a TIM fee of $23,420 for his home but sought to challenge it as an unconstitutional taking. Brief for Petitioner at 6. The state trial and appeals courts found no constitutional error, as it is “legislatively enacted” and thus not subject to the review established in Nollan v. California Coastal Commission and Dolan v. City of Tigard for “unconstitutional conditions” imposed on development. Id. at 1. The California Supreme Court denied review. Id. Sheetz appealed to the United States Supreme Court, which granted certiorari on September 29, 2023.
Analysis
WHETHER A LEGISLATIVE MANDATE IS SUBJECT TO THE NOLLAN AND DOLAN TEST
George Sheetz argues that El Dorado County’s Traffic Impact Mitigation (“TIM”) Program has failed to meet constitutionally-required standards under the Takings Clause. Brief for Petitioner, George Sheetz at 25-27. Sheetz observes that the Court’s decisions in Nollan v. California Coastal Commission and Dolan v. City of Tigard established that the Takings Clause requires an essential nexus and basic proportionality between the imposed exaction and the anticipated negative impact. Id. at 21. Sheetz argues that the Court should subject the TIM Program’s legislatively mandated fees to the same scrutiny and should not apply a more deferential “rational relations” standard. Id. at 20-21, 24. Sheetz contends that this better supports the purpose of the Takings Clause because it imposes a limit on the State and its officials that does not exclude a particular branch. Id. at 13, 30. Sheetz further points out that the Court applied the heightened standard in Nollan and Dolan, which both involved a regulation implemented by the legislature and asserts that the Court should do likewise here. Id. at 28. Further, Sheetz argues that the legislature cannot bypass this taking by attaching a fee or property or by giving up a property interest as requirements to obtain a permit. Id. at 33-36. Accordingly, Sheetz contends that the TIM Program fails the Nollan and Dolan standard because it makes no individualized determination about his house’s effect on traffic. Id. at 27. Because it fails the standard, Sheetz asserts that the TIM Program cannot bargain the permit for a fee, either. Id.
El Dorado County (the “County”) asserts that the legislature generally has greater latitude in designating blanket fees, and that a legislative program such as TIM is not subject to the Nollan and Dolan test. Brief for Respondent, County of El Dorado, California at 23. The County notes that the Court’s decision in Koontz v. St. John’s River Water Management District explicitly recognized that legislative action is not subject to the Nollan and Dolan scrutiny when “[excising] taxes, assessment fees, and user fees.” Id. at 24. The County argues that the TIM Program should not be subject to the heightened program because it does not involve exacting an interest in the land or exacting fees in return for it, which the heightened standard attempts to prevent. Id. at 23-24. The County instead contends that such a program is exercising the legislative’s inherent authority. See Id. The County asserts that Sheetz mischaracterizes some legislative mandates, which lack a parcel-specific analysis and therefore are not subject to the Nollan and Dolan standard, as legislative exceptions. Id. at 26-27. The County contends that Nollan and Dolan applied a more stringent rule because officials had furnished specific and tailored conditions for the parcel in question to grant the permit. Id. at 28. The County asserts that the TIM Program’s fee schedule only sets up a blanket condition and amounts to a “ministerial” exercise of the legislative power. Id.
WHETHER THE NOLLAN AND DOLAN TEST APPLIES TO DISCRETIONARY DETERMINATIONS
Sheetz argues that the Nollan and Dolan standard is a universal one that applies equally to all kinds of takings, mandated or discretionary. Brief for Petitioner at 22. Sheetz argues that regardless of whether the legislature delegates the determination of the fee to another government agency, the Nollan and Dolan standard should apply under the Takings Clause. Id. at 29. He contends that the legislature is making a discretionary choice by enacting a permit fee mandate, regardless of whether another agency has the authority to make more specific decisions regarding the exaction, such as its size. Id. Sheetz argues that one of the core objectives of the Taking Clause is to prevent the government from trying to use a conditional permit in an attempt to bypass the Clause. Id. at 28-29, 35. Sheetz contends that most legislative mandates give some sort of discretion to the administrative agency, and it is impossible to ascertain which fees are mandatory and which are discretionary. Id. at 43-44. Sheetz asserts that because the Takings Clause implicates protection for all kinds of taking, not limited to discretionary ones, the stricter Nollan and Dolan test better serves the purpose of the Constitution. See Id. at 22, 44.
El Dorado County contends that the unconstitutional-conditions doctrine designates a higher level of scrutiny for certain land usages. Brief for Respondent at 19. The County asserts that this level of scrutiny only applies to cases where agencies render adjudicative decisions upon individual parcels of land. Id. at 23. The County contends that individual isolation of the parcel of land subject to a discretionary decision warrants a heightened standard because it has the potential danger of unfair decisions. Id. at 37. On the contrary, the County argues that a legislative formula that has no discretionary element has far less concerns about the unfair application of the formula, and thus does not warrant heightened scrutiny. The County further argues that the development impact fee schedules are indistinguishable from other routine government fees. Id. at 38-39. Specifically, the County argues that a zoning regulation is no different from a broad fee imposed on certain districts to compensate for public costs. Id. The County argues that this is a regular exercise of their police power to regulate impacts that are adverse to public safety and health. Id. at 40. The County asserts that while Sheetz attempts to label a fee on new developers as an “exaction,” as long as the fee is imposed on a uniform usage of the land, the range of the fee that the legislature imposes is irrelevant. Id. at 41-43.
WHETHER A DEVELOPMENT FEE IS A TAKING OF PROPERTY UNDER THE TAKINGS CLAUSE
Sheetz argues that demanding payment of the TIM Program’s fee is a taking because it implicates a monetary interest. Brief for Petitioner at 25. Sheetz contends that monetary payment suffices as exacting property under the Takings Clause. Id. Specifically, Sheetz argues that paying a fee amounts to an exaction because he is paying it for the property interest he holds in his land, of building a new home. Id. at 26. Sheetz emphasizes that if the County had imposed a fee only on Sheetz, it would clearly be a taking because it would effectively single him out. Id at 25. Sheetz contends that because such a fee would constitute a taking when singled out, labeling such a fee a requirement under the process is merely a disguise to avoid the Takings Clause. See Id. at 25-26.
El Dorado County counters that the county’s impact fee does not amount to a taking because it is not associated with demanding the landowner’s property. Brief for Respondent at 31. The County argues that the fee cannot be a taking because it does not “identify any specific fund of money.” Id. at 32. The County asserts that this connection must be direct, such as requiring the forfeiture of specific real property, or otherwise it would implicate all regulations which attempt to impose fees on properties. Id. at 33-34. The County argues that a blanket fee like the one here does not constitute a direct connection because there is no interest taken from the property from imposing a fee. Id. at 35.
Discussion
EFFECT ON LANDOWNERS
The United States Chamber of Commerce, in support of Sheetz, asserts that allowing the taking in this case would harm rather than protect a property-owning individual from the masses, ultimately rendering landowners vulnerable. Brief of Amicus Curiae Chamber of Commerce of the United States at 18. The Chamber of Commerce elaborates that this unchecked power would lead to development fees to be used to finance “unrelated” projects, such as “public art,” “daycare centers” or affordable housing mitigation programs. Id. at 11. The Cato Institute, also in support of Sheetz, argues this would lead to an “arbitrary, oppressive, and unjust” taking at the expense of landowners, ultimately harming the very class of people relying on the Takings Clause for security. Brief of Amicus Curiae Cato Institute at 10. Furthermore, the California Housing Defense Fund, in support of Sheetz, contends that these fees do not accurately capture the costs of the impact of private development, and they place a burden on developers that developers will pass on to landowners. Brief of Amicus Curiae California Housing Defense Fund at 12.
The California Association of Counties (the “Counties”), in support of the County, counters that a prohibition on development fees would unfairly burden taxpayers, who would have to finance infrastructure connected to new developments as a result. Brief of Amicus Curiae California State Association of Counties, et al. at 6. The Counties assert that contrary to the arguments of those supporting Sheetz, allowing for development fees such as TIM ultimately saves incumbent property owners money. Id. at 6-7. The Counties elaborate that property owners would save money because the development fees prevent the incumbent property owners from otherwise shouldering the cost of paying for this new infrastructure and prevent their property values from decreasing due to the burden that new development places on unimproved infrastructure. Id. at 6-7. The Counties claims that when looking through this lens, the fees El Dorado County levies are fair, since they are much less than the actual cost to the government. Id. at 12.
IMPACT ON CALIFORNIA’S HOUSING SHORTAGE
The California Building Association (“Building Association”), in support of Sheetz, argues these “unchecked” fees will compound existing housing affordability issues. Brief of Amicus Curiae California Building Industry Ass’n at 28. The Building Association asserts that this is especially acute in California, given how common legislative development fees are and how acute their housing shortage is. Id. at 29. The Building Association argues that this ultimately burdens low-income homebuyers the most, eventually “facilitating exclusion” of them from purchasing a home. Id. at 30-31. The Bay Area Council, also in support of Sheetz, asserts that these fees have contributed to a 6-18% increase in the cost of a California home, and without judicial oversight, there can be no remedy. Brief of Amicus Curiae Bay Area Council at 10.
The American Planning Association, in support of neither party, asserts that these legislatively enacted fees allow developers to provide public goods to complement the private property they create, with a prohibition significantly complicating local government’s ability to expand infrastructure in conjunction with private development. Brief of Amicus Curiae American Planning Association at 6. Instead, the American Planning Association argues that these fees “vindicate private property rights” and provide certainty to allow for more housing construction, by facilitating the use of land through the creation of public services, ultimately increasing the value of the buyer’s property. Id. at 11-12. The American Planning Association elaborates that this clear standard for allocating infrastructure dollars prevents governments from picking “winners and losers” when deciding on where to improve public infrastructure and is ultimately more beneficial for current and future homeowners. Id. at 13
Conclusion
Acknowledgments
Additional Resources
- Bernie Pazanowski, Supreme Court Accepts Takings Challenge to Land-Use Exaction, Bloomberg Law (Sep. 29, 2023).
- Richard Frank, A(nother) California “Regulatory Takings” Case Heads to the Supreme Court, Legal Planet (Oct. 10, 2023).
- Bob Egelko, U.S. Supreme Court agrees to decide legality of fees charged to California homebuilders, San Francisco Chronicle (Sep. 29, 2023).