Sheetz v. County Of El Dorado: The Supreme Court's Latest Restraint On Development Fees

SCOTUS reverses California appellate decision, further restricting local government mitigation conditions on new development...
United States Real Estate and Construction
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On April 12, 2024, Justice Amy Coney Barrett delivered the U.S. Supreme Court's opinion in Sheetz v. County of El Dorado, California, 601 U.S. 267, 144 S. Ct. 893 (2024). Sheetz concerned El Dorado County's imposition of $23,420 in traffic impact mitigation ("TIM") fees on George Sheetz's permit to site a manufactured home on his property. The County calculated the TIM fees for Sheetz's project based on a legislatively imposed rate schedule that took into account the type of development and its location within the County.

Sheetz paid the applicable TIM fee under protest, claiming that the fee did not make any type of individualized determination that the fee had any connection to or was fair in light of the impact of his development. Sheetz argued that the TIM fee ran afoul of the Takings Clause of the Fifth Amendment and did not accord with the "essential nexus" and "rough proportionality" requirements imposed on development conditions under the landmark cases of Nollan v. California Coastal Comm'n, 438 U.S. 825 (1987), Dolan v. City of Tigard, 512 U.S. 374 (1994), and Koontz v. St. Johns River Water Management Dist., 570 U.S. 595 (2013). El Dorado County argued, and the California Court of Appeal held, that legislatively imposed, generally applicable requirements imposed on new development (like the TIM fee) did not need to comport with the individualized impacts analysis required under Nollan, Dolan, and Koontz because heightened scrutiny applies only to development conditions imposed on an individual and discretionary basis (and not conditions applicable to a broad class of property owners that is imposed through legislative action).

SCOTUS Decision

The Supreme Court reversed the California Court of Appeal, holding that "a legislative exception to the ordinary takings rules finds no support in constitutional text, history, or precedent." Put simply, the Court held that "there is no basis for affording property rights less protection in the hands of legislators than administrators. The Takings Clause applies equally to both—which means that it prohibits legislatures and agencies alike from imposing unconstitutional conditions on land-use permits."

In light of its holding, the Supreme Court vacated the judgment of the California Court of Appeal and remanded the case for further proceedings. In many ways, the Sheetz Court answered a fairly narrow question when it held that legislatively imposed conditions on development are not exempt from scrutiny under the Takings Clause. Following Sheetz, it is now clear that legislatively imposed conditions on development must engage in some form of nexus and proportionality analysis under Nollan, Dolan, and Koontz. The question still to be answered is: how much? How close does a legislatively imposed condition on development need to approximate an individualized analysis before it can pass constitutional muster? Future courts addressing this issue likely will struggle to find the right balance between local jurisdictions' need to promulgate generally applicable development regulations and the need for those regulations to include some nod to Nollan and Dolan's requirements of nexus and proportionality.

Takeaways for Developers in Washington State

In Washington, generally applicable, legislatively imposed conditions on development generally present as impact fees promulgated pursuant to RCW 82.02.050–.090 (the "Impact Fee Statute"). The Impact Fee Statute already includes a requirement that impact fees in Washington must be "reasonably related" to the new development and cannot exceed the new development's "proportionate share" of improvements to be paid by developer. See RCW 82.02.050(4). However, in the wake of Sheetz, it remains unclear whether these requirements provide sufficient assurances that legislatively imposed impact fees pass constitutional muster, especially in jurisdictions that identify the entire municipal corporation as a single "service area" in which the impact fees will be collected. See RCW 82.02.060(8) (requiring that municipalities establish "one or more reasonable service areas within which it shall calculate and impose impact fees for various land use categories"). Single-zone service areas could run afoul of Nollan's nexus requirement, and time will tell.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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