U.S. Supreme Court To Review Muncipal Development Fee Impositions

On January 9, 2024, the United States Supreme Court will consider the extent to which a municipal entity can impose legislative development-related fees in George Sheetz v. County of El Dorado, California, No. 22-1074 (“Sheetz”). Sheetz questions the level of judicial scrutiny applicable to “legislative” development fees—broadly applied fees established by state or local law imposed on new construction projects. The outcome of this case could have far-reaching impacts on local governments, which often impose such fees on a legislative basis.

In this case, the Court will weigh governmental regulation (and fees) against private property rights, a balancing that has in the past favored private property owners over governmental regulation. (See, e.g., Sackett v. EPA, 598 U.S. 615 (2023) (narrowly defining statutory term “waters of the U.S.” to avoid “uncertainty” to private property owners filling in wetlands adjacent to a lake in Idaho)).

California statutory provisions and lower court opinion

The key statute at issue in Sheetz is California’s Mitigation Fee Act (Cal. Government Code Section 66000 et seq.) (“Fee Act”) which was originally passed “in response to concerns among developers that local agencies were imposing development fees for purposes unrelated to development projects.” (Sheetz v. County of El Dorado, 84 Cal.App.5th 394, 407 (2022) [internal citation omitted].) The Fee Act thus provides “uniform procedures for local agencies to follow in imposing development fees.” (Id.) For example, agencies are required to identify the purpose of the fee and show a “reasonable relationship” between the fee and type of development project for which the fee is imposed.

Consistent with the Fee Act, in 2006, El Dorado County (“County”) amended its general plan to include a traffic impact mitigation fee program to finance road improvements and the construction of new roads in the County. Under the program, the County is authorized to impose a fee as a condition to issuing building permits for construction projects.

Mr. Sheetz is a landowner who applied for a building permit to build a 1,800 square foot manufactured home on his property located within the County’s jurisdiction. The County issued the permit on the condition that Sheetz pay a $23,420 fee. Following the County’s issuance of the permit, the Petitioner challenged the fee and requested a refund. After the County declined to issue a refund, Mr. Sheetz filed a petition for writ of mandate and complaint in the trial court.

After losing in the trial court, Mr. Sheetz filed an appeal and again lost. Sheetz v. County of El Dorado, 84 Cal.App.5th 394 (2022). The California appellate court found: “the County does not make any ‘individualized determinations’ as to the nature and extent of traffic impacts caused by a particular project on state and local roads.” Nonetheless, the Court of Appeal reasoned that because the County’s fee was “legislative” in nature, i.e., applying generally to all new developments within the County, the exacting judicial scrutiny standard imposed in other cases dealing with ad-hoc fee impositions was inapplicable. The Court of Appeal held the County’s traffic mitigation fee only needed to comport with a reasonable relationship test.

The California Supreme Court declined to review the Court of Appeal’s decision, and the Supreme Court granted Mr. Sheetz’s petition for certiorari.

Arguments before the Supreme Court

Mr. Sheetz makes two arguments in his merits brief to the Supreme Court. First, he argues the fee imposed on him for constructing his house constituted a “taking” pursuant to the “unconstitutional conditions doctrine” established in Nollan v. California Coastal Commission, 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1994) (“Nollan/Dolan Test”). Under the Nollan/Dolan test, for an exaction to be valid: (1) there must be an “essential nexus” between a government’s interest and the exaction imposed (Nollan) and (2) the government must also make an “individualized determination that the required dedication is related both in nature and extent to the impact of the proposed development” (Dolan).

Mr. Sheetz argues the U.S. Supreme Court should reverse the California appellate court’s decision because there is “no basis” in the Nollan/Dolan line of cases to distinguish between fees imposed on an individual basis and fees imposed by “legislative” act (in this case, a vote of the El Dorado County Board of Supervisors). He asserts the California Court of Appeal’s opinion conflicts with recent Supreme Court case law, most notably Koontz v. St. Johns River Water Management Dist., 570 U.S. 595 (2013), which supports the position that the Nollan/Dolan test applies to all exactions imposed by a unit of government, whether or not the exactions are legislatively authorized.

Mr. Sheetz also argues the County’s fee effectively constitutes a taking of private property because there was no showing of a reasonable relationship “between the public impact of [the Petitioner’s] development project and the need for improvements to state and local roads.” He argues the  governmental entity (County) was required to evaluate “specific traffic impacts attributable to his particular project.” This is an argument calculated to appeal to a number of Justices who appear to view governmental regulation of private property owners as overreaching or, in this case, a violation of the Fifth Amendment.

Respondent El Dorado County has not yet filed its opposition brief.

Interim Take-away

The outcome of this case cannot be predicted at this time. The interim lesson, however, is that cities and counties seeking to impose development fees, whether general legislative fees or otherwise, should make express findings about the proportional and reasonable nature of such fees for a particular project.

For more information about this case, land use regulation, or “takings” cases under California or federal law, please contact:
Norm Dupont (NDupont@Ringbenderlaw.com),
Jay Tufano (JTufano@Ringbenderlaw.com,), or
Kit Bobko (PBobko@Ringbenderlaw.com).

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