The U.S. Supreme Court has agreed to hear the case of Sheetz v. County of El Dorado, California. This is a significant property rights case under the 5th Amendment of the U.S. Constitution. The court may once and for all answer the question of whether a land use permit condition in the form of a monetary exaction created by a state legislature, as opposed to a local government permit authority, is completely exempt from constitutional review.
Background of Mr. Sheetz’s Case
George Sheetz applied for a building permit to construct a single-family residence in El Dorado County, California. The County agreed to issue the permit with the condition that Mr. Sheetz pay a $23,420 traffic impact mitigation fee. The County authorized the mitigation fee as part of a general road improvement program intended to offset the impact of new development on the surrounding roadway infrastructure. Mr. Sheetz challenged the fee as unconstitutional in California state court, but ultimately lost at the Third Appellate District of the California Court of Appeal. The California Supreme Court refused to consider his appeal.
The U.S. Supreme Court, however, recently agreed to hear the case.
A History of U.S. Supreme Court Cases Allowing Restrictions on Land Use Permits
The constitutionality of imposing conditions on land use permits has a long history before the U.S. Supreme Court. Three of the more recent important cases establish the existing legal framework. In Nollan v. California Coastal Commission, 483 U.S. 825 (1987), the Court held the government can only require relinquishment of a property interest as a condition to obtaining a land use permit if there is a clear connection between the property interest relinquished and the purpose of the regulation. This is commonly referred to as the nexus requirement.
In Dolan v. City of Tigard, 512 U.S. 374 (1994), a case out of Oregon, the Court stated that even if the nexus requirement is satisfied, the government’s condition must be roughly proportional to the projected impact of the proposed development. So the nature of the government imposed condition can’t be grossly disproportionate to the proposed benefit of imposing it.
Following Nollanand Dolan, lower courts across the country created exceptions to the nexus and proportionality tests. Some courts held that only real property exactions – where the government requires a property owner to give up an interest in land – were subject to the tests, and that monetary exactions – like impact fees – were not.
In Koontzv. St. Johns River Water Mgmt. Dist., 570 U.S. 595 (2013) the U.S. Supreme Court held the tests in Nollan and Dolan also applied to monetary exactions and demands for fees in lieu of a real property exactions, and thus must satisfy the nexus and proportionality tests.
But other lower-court created exceptions to the nexus and proportionality tests set out in Nollanand Dolan still exist. Some jurisdictions, like California, hold that monetary exactions created by legislation rather than imposed on individuals on an ad hoc basis are completely exempt from the nexus and proportionality tests. Other jurisdictions do not recognize these types of distinction.
What Mr. Sheetz Asks the Court To Do
Mr. Sheetz’s petition asks the Court to (1) hold that legislatively created monetary exactions are subject to the nexus and proportionality tests in Nollan and Dolan, and (2) resolve the split that exists among the various jurisdictions across the country on the issue.
Mr. Sheetz argues that the rationale behind exempting legislatively created conditions is irrelevant for purposes of passing constitutional muster. The justification for a legislative exemption is that legislators who enact disproportionate exactions are subject to the democratic process – in the voting booth – which provides an important check on unpopular government action. Fees imposed by unelected government officials on an ad hoc basis, on the other hand, are not subject to democratic challenge, and thus should be subject to a constitutional claim.
Mr. Sheetz argues that a taking is a taking regardless of the government authority doing the taking. There is some sentiment for this position at the Court. In a dissent in a 1995 case, Justices Thomas – still there driving his RV to work – and Justice O’Connor – sadly not still there – stated that, “the distinction between sweeping legislative takings and particularized administrative takings appears to be a distinction without a constitutional difference.” Mr. Sheetz agrees.
Mr. Sheetz also argues that legislative exactions are not inherently more protective of property interests than ad hoc ones. He contends that when given the choice between raising revenue by either raising taxes on all constituents or imposing monetary fees on certain groups or individuals – like property developers – legislators who wish to be re-elected are more likely to pursue the latter option.
What the Court May Do
Whatever the Court’s final decision is it will likely impact local governments and development in significant ways. The Court will either (1) approve monetary exactions that are exempt from the nexus and proportionality tests in Nollan and Dolan, (2) eliminate or curtail those exactions by making them subject to a constitutional takings analysis, or (3) create some kind of alternative test that attempts to balance the competing interests of respecting private property rights and allowing reasonable government regulation or land uses.
It goes without saying that all land use development has an impact on the surrounding environment regardless of whether it’s a single family home or a large mixed use commercial development. The reality is that local governments have limited effective methods to off-set the impacts of development on their communities, and keep up with the demands for providing government services and improving the physical infrastructure created by land use development. In Mr. Sheetz’s case, the fee concerned road improvements. But it should be obvious that local governments struggle to pay for the increased demands that land use development impose on public water supplies, sanitary sewer capacity, storm water management systems, flood prevention, sanitary sewer systems, and public transportation, among other public services. The ability – or inability – to pay for and provide these public services affects local communities in significant ways. Local government’s efforts to off-set the impacts of land use development must also at all times take into consideration the constitutional rights of private property owners. It’s not always an easily balancing act to accomplish.
Where Things Stand
Oral argument before the Court has not been scheduled, but will likely occur sometime after the first of the year. It’s worth noting that Mr. Sheetz’s petition has garnered considerable attention at the Court. Even before El Dorado County filed its reply a number of amicusbriefs were filed with the Court.
About Finkel Law Group
Finkel Law Group, with offices in San Francisco and Oakland, has more than 40 years of experience assisting our clients with real estate, land use and environmental legal issues affecting their property, and securing land use entitlements from local governments. When you need intelligent, insightful, conscientious and cost-effective legal counsel to assist you with the real estate, land use or environmental law issues confronting your property or development, please contact us at (415) 252-9600, (510) 344-6601, or info@finkellawgroup.com to speak with one of our attorneys about your matter.