On July 29, 2025, on remand from the United States Supreme Court, the Court of Appeal in Sheetz v. County of El Dorado held that (1) the Takings Clause does not prohibit permit conditions, such as impact fees, based on schedules or formulas assessing an entire class of development rather than a specific development; and (2) that El Dorado County's legislatively imposed permit condition, a traffic impact mitigation ("TIM") fee, withstood the Nollan/Dolan requirements of essential nexus and rough proportionality. In doing so, the Court held that a permit condition imposed on a class of development must be tailored and supported with the same degree of specificity as a permit condition that targets a particular development. Thus, while permit conditions for classes of development are permissible and can satisfy Nollan/Dolan, this case serves as an important reminder that public agencies should have ample evidence when adopting land-use permit conditions.
Background
George Sheetz planned to build a single-family residence in El Dorado County. As a condition of receiving the permit to build, the County required Sheetz to pay a TIM fee of $23,420, as established in the County's General Plan. The fees are used to fund improvements to the County's road system. Rather than determining fees project-by-project, the fee was determined by a rate schedule for classes of development, which takes into account the type of development (e.g., residential, commercial) and its location within the county. Sheetz paid the fee under protest and obtained the permit.
The Takings Clause prohibits the government from taking private property for public use without just compensation. Land-use exactions, a type of taking, are when the government demands real property or money from an applicant as a condition of obtaining a building permit. Nollan/Dolan are two U.S. Supreme Court cases that established the framework for balancing the government's interest in land-use regulation and ensuring against extortionate demands for building permits. There are two essential components to the Nollan/Dolan test. First, under Nollan, there must be an "essential nexus" or logical connection between the government's legitimate interest and the permit condition. The required costs must be imposed because of the government's interest and not for other reasons. Second, under Dolan, there must be a "rough proportionality" between the permit condition and the projected public impacts or social costs of the proposed development. The "rough proportionality" requirement requires more than conclusory statements, but it is not a precise mathematical equation. Rather, there must be some sort of individualized determination, and the government must make some effort to quantify its findings to support the permit condition.
Sheetz sought relief in state court, alleging the permit condition was a violation of the Takings Clause. Sheetz argued that Nollan/Dolan required the County to make an individualized determination that the fee was necessary to offset traffic impacts from his development, rather than relying on a schedule applicable to a broad class of development (e.g., residential). Sheetz argued the County's fee schedule failed to meet the requirements of Nollan/Dolan. Sheetz lost at both the trial and appellate court. At the time, California law held that fees imposed through legislative action, as opposed to an administrative fee imposed on an individual and discretionary basis, did not have to meet the Nollan/Dolan test.
In 2024, the U.S. Supreme Court reversed the state appellate court's decision, holding that the Nollan/Dolan test applies to both legislative and administrative permit conditions. The U.S. Supreme Court vacated and remanded the Taking Clause portion of the decision. Thus, on remand, the state courts had to determine whether the County's TIM fee could withstand the Nollan/Dolan test.
The Court of Appeal's Decision
The Court of Appeal held that the County's TIM fee was not an unconstitutional taking because it met the requirements of the Nollan/Dolan test.
Essential Nexus
On remand, the Court had "little difficulty" finding an essential nexus between the County's legitimate interest in reducing traffic congestion for new development and the permit condition that required Sheetz to pay the TIM fee. As the U.S. Supreme Court recognized in Dolan, reducing traffic congestion is a legitimate government interest, and that was the County's interest here. The Court found there was a "logical connection" between the County's interest and the TIM fee. Sheetz's development would lead to increased traffic on public roadways within the County, which is what the TIM fee helps mitigate.
The Court rejected Sheetz's various arguments as to why the essential nexus requirement was not met. Sheetz did not dispute that its development would result in population growth; the record indicated that population growth from residential development increases traffic congestion, and the Court found Sheetz was not singled out to bear the burden of the County's traffic mitigation issues. The Court stated, "[t]his case presents a quintessential or classic instance of a government's legitimate exercise of the police power in the land-use context."
Rough Proportionality
The Court next found the TIM fee met the rough proportionality standard, meaning the TIM fee did not require Sheetz to pay more than was necessary to mitigate the impact resulting from his development. In doing so, the Court analyzed the Dolan case, highlighting that the U.S. Supreme Court adopted an "intermediate standard" when analyzing rough proportionality. Under Dolan, the government must "make some effort to quantify its findings" "beyond mere conclusory statements" to support that the condition will offset anticipated impacts. After reviewing Dolan, the Court held that the Dolan standard applies equally to permit conditions that target classes of development and permit conditions that targets a particular development.
The Court then undertook the Dolan analysis for the TIM fee. The County had the burden to "demonstrate that it used a valid method for imposing the fee in question." After reviewing the administrative record, the Court found the County met its burden in showing rough proportionality.
The Court found "the record establishes a factually sustainable proportionality between the effects of new development on traffic congestion and the amount of the challenged impact fee." The administrative record contained many details of how the TIM fee program was adopted. The County established eight geographical fee zones, with different fee schedules for each zone. The record included a detailed memo explaining the purpose of the fee, what the fee was to be used for, and the methodology for how the fee was calculated. The fees were calculated after considering various factors, such as increase in traffic volumes, and those calculations relied on data published by the Institute of Transportation Engineers. Regarding the fee schedules for each zone, the County identified existing levels of traffic flow, projected population and employment growth from new development over a 20-year period, and estimated the resources needed to complete infrastructure projects to accommodate the increase in traffic. The fee for each type of development was based on a travel demand forecasting model, analyzing traffic contribution from each type of development in a particular zone. The Court found this evidence to be enough to support the rough proportionality requirement.
Sheetz attempted to make new arguments on remand as to why the rough proportionality requirement was not satisfied, which the Court addressed and found not to change the outcome of the case.
Take Aways
Though the U.S. Supreme Court held that legislatively imposed permit conditions must satisfy the Nollan/Dolan test, this case provides relief for public agencies by holding that existing permit conditions, such as TIM fees for classes of development, can satisfy Nollan/Dolan. When reviewing fees or adopting new permit conditions for classes of development, it is crucial that public agencies have ample evidence to support both the essential nexus and, most especially, the rough proportionality of the fee to bolster their position in the event a challenge is brought.
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