U.S. Supreme Court Will Clarify the Constitutionality of Legislatively-Authorized Land Use Exaction Fees

The United States Supreme Court granted certiorari on September 29, 2023 in Sheetz v. County of El Dorado, a case that challenges the County of El Dorado’s requirement that a property owner pay a Traffic Impact Mitigation Fee (TIM) as a condition to a development permit. By taking the case under review, the Court is expected to clarify the circumstances under which an exaction authorized under state law violates the Takings Clause of the Fifth Amendment of the United States Constitution.

In 2016, petitioner George Sheetz applied for a building permit to construct a single-family manufactured home on his property in Placerville. The County issued the permit conditioned upon payment of the TIM for $23,420. The County’s General Plan authorized the County to impose the TIM on development projects to finance new roads and widen existing roads under the California Mitigation Fees Act. In connection with Sheetz’s project, the TIM was calculated based on the location and proposed residential use of his property.

Sheetz filed a petition for writ of mandate and complaint for declaratory relief in 2017 alleging, among other things, that the TIM violated the Takings Clause and the Mitigation Fee Act because the County did not make a determination showing an individualized relationship between the project’s impacts and the need for road improvements. Sheetz sought to apply the “Nollan/Dolan test” that courts have applied to takings claims in the context of land use permit exactions. Nollan v. California Coastal Commission (1987) 483 U.S. 825 requires an “essential nexus” between the “government’s legitimate state interest and the exaction imposed.” Dolan v. City of Tigard (1994) 512 U.S. 374 requires a “rough proportionality” between the exaction and the projected impact of the proposed development.

In his appeal before the California Third District Court of Appeal, Sheetz argued that this test applied to the County’s TIM. However, the court relied on other state court precedents that apply an exception to the Nollan/Dolan test, holding that the test does not apply to legislatively authorized fee programs like the TIM. Following those prior decisions, the court applied the Mitigation Fee Act’s less stringent “reasonable relationship” analysis, which only requires a local agency to demonstrate that there is a reasonable relationship, in both the intended use and amount, between a project’s impact and the fee imposed. The case was appealed to the California Supreme Court, which denied review. A more detailed discussion of the decision from the Court of Appeal was prepared by Nicholas DuBroff at Allen Matkins and is available here.

Other states have declined to create an exception to the Nollan/Dolan test and continue to apply it to legislatively approved exaction fee programs. In granting review of Sheetz v. County of El Dorado, the United States Supreme Court will provide further guidance to developers and property owners that may be subject to these fees.