On April 12, 2024, the United States Supreme Court issued its unanimous opinion in Sheetz v. County of El Dorado, holding that the California Court of Appeal had erred in finding that legislatively adopted, uniformly applicable, traffic impact fees adopted by the County’s Board of Supervisors were exempt from judicial review for a potential “taking” of private property under the 5th and 14th Amendments. The Court ruled that the Constitution makes no distinction between governmental takings by legislative action and those through administrative action and that fees such as the County’s traffic impact fees were indeed subject to judicial review. However, the Court did not decide the constitutional adequacy of the County’s fee or rate schedule, instead remanding the case back to the California courts to make these determinations.
In the case below, Mr. Sheetz had sought a permit to build a prefabricated home on his residentially zoned property. The County conditioned granting of the permit on the payment of a $23,420 traffic impact fee, as required by the County’s General Plan, which the County assessed through a previously adopted master rate schedule, and not through an individualized inquiry into the cost specifically attributable to the project. Mr. Sheetz paid the fee under protest and then challenged the imposition of the fee in state court, alleging that the fee was an unlawful “exaction” of money in violation of the “Takings Clause”. The Takings Clause is embodied in the 5th Amendment of the Constitution and states that private property shall not be taken for public use without just compensation. Relying on Supreme Court precedent in the cases of Nollan v. California Coastal Commission and Dolan v. City of Tigard, Mr. Sheetz argued that the Constitution required the County to make an individualized determination regarding the amount of the fee necessary to offset the traffic congestion attributable to his specific project (the “Nollan/Dolan test”). Put differently, Sheetz believed that the application of a uniform traffic impact fee could not account for individual impacts of a project and implied that smaller projects were necessarily subsidizing larger projects.
Both the trial court and the California Court of Appeal rejected Mr. Sheetz’s claim. In its ruling, the Court of Appeal held that the Nollan/Dolan test only applies to permit conditions imposed on an individual and discretionary basis and does not apply to fees imposed on a broad class of property owners through legislative action. The California Supreme Court declined review of the case, but the United States Supreme Court granted review.
The United States Supreme Court held that whether permit conditions such as the payment of fees are imposed through an administrative process or legislative action, such permit conditions must be analyzed under the two-part test articulated in Nollan and Dolan. Specifically, permit conditions first must have an “essential nexus” to the government’s land-use interests. Second, the permit conditions must have a “rough proportionality” between the impacts of the project and the conditions placed on the project to mitigate those impacts. The branch of government imposing the condition, the Court held, is irrelevant.
The Court specifically declined to rule on the question “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.” This question, along with any other arguments concerning the adequacy of the County’s traffic impact fee, the Court remanded to the state courts to decide in the first instance.
Thus, while Sheetz leaves unresolved questions regarding what level of particularity local agencies will need to use when establishing the amount of their development impact fees, the case does make clear that even uniformly-applicable fees must abide by the “essential nexus” and “rough proportionality” requirements of Nollan/Dolan. Undoubtedly, further litigation will follow as the courts seek to answer whether governments must identify the specific impacts of each project before imposing a development impact fee, or whether the widely-used rate schedules applicable to broad categories of development can pass constitutional muster.
Practice Tip: If your agency’s fees are being updated as part of your AB 1600 (Mitigation Fee Act) requirements, now would be a good time to ensure that those fees abide by the essential nexus and rough proportionality requirements.
Questions
If you have any questions regarding this Legal Alert, please contact the following attorney or any of Kronick’s Public Agency Practice Group lawyers.
Ed Grutzmacher
egrutzmacher@kmtg.com | 916.321.4216
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