On Tuesday, June 24, 2025, the California Court of Appeal heard argument in Sheetz v. County of El Dorado. You may recall that the California Court of Appeal previously held that legislatively enacted development impact fees are exempt from Nollan/Dolan scrutiny, consistent with what was at the time longstanding California Supreme Court precedent. In 2024, however, the U.S. Supreme Court held that legislatively imposed exactions are not exempt from the essential nexus test established in Nollan v. California Coastal Commission (1987) 483 U.S. 825 or the rough proportionality test in Dolan v. City of Tigard (1994) 512 U.S. 374. Notably, the Supreme Court did not decide whether the fee program at issue in Sheetz failed to comply with Nollan/Dolan. Instead, it remanded that issue back to the California courts. Justice Sotomayor suggested in a concurring opinion joined by Justice Jackson that it was still possible that the development impact fees at issue may not be subject to Nollan/Dolan scrutiny. Justice Sotomayor stated in her concurrence that if the County could impose the fees outside the permitting context without rising to the level of a compensable taking, then Nollan/Dolan would not apply. A separate concurrence authored by Justice Kavanaugh, and joined by Justices Kagan and Jackson, stated that the Supreme Court's decision "does not address or prohibit the common government practice of imposing permit conditions, such as impact fees, on new development through reasonable formulas or schedules that assess the impact of classes of development rather than the impact of specific parcels of property." In his own concurring opinion, which no other Justice joined, Justice Gorsuch stated that there should be no difference whatsoever in assessing the validity of a general fee program against many property owners as compared to an individualized assessment for a particular proposed development.
After the Supreme Court's decision the case was remanded back to the California Court of Appeal. Both the County and Sheetz stipulated that the facts were undisputed and that the Court of Appeal could resolve the legal issues in the first instance after some additional briefing. In the supplemental briefing Sheetz argued that the County was required to undertake a project specific analysis, looking at the specific impact of his project on traffic and imposing a roughly proportional fee based solely on that impact. The County argued that its fee study and other supporting documentation demonstrated an essential nexus and rough proportionality between the traffic impact fee and the traffic anticipated by the residential development category associated with Sheetz's development. The County also argued that the fee was not subject to Nollan/Dolan, picking up on Justice Sotomayor's concurrence.
At oral argument yesterday, Sheetz did not push the individualized determination argument that was set forth in his briefing. Instead, Sheetz primarily argued that the fee failed to comply with Nollan/Dolan because a percentage of the commercial development trips identified in the County's trip study (between 65% and 80%) were reallocated to various residential development categories, and the County did not provide an adequate justification for this reallocation. Sheetz argued that this reallocation was per se improper, and thus the Court of Appeal did not even need to address what type of evidence would be adequate to demonstrate rough proportionality under Dolan. For their part, the County primarily argued that the reallocation was justified, that the fees were not subject to Nollan/Dolan and that if the fees are subject to Nollan/Dolan then the County's studies demonstrated the necessary essential nexus and rough proportionality.
After the conclusion of oral argument the Court of Appeal took the matter under submission. Be sure to check back once the opinion is issued for our analysis of the ruling.
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