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Thursday, November 30, 2023

Court Upholds Road Impact Fees Imposed Through IGA and Annexation Agreement


An Illinois Appellate Court recently validated an intergovernmental agreement (IGA) that required the municipalities subject to the IGA to require, as a condition of annexation, that developers pay impact fees for road improvements and determined that a developer was required to pay the fees. Habdab v. Lake County.

In 2009, Mundelein (Village), Lake County (County), and two other municipalities entered an IGA to provide for construction funding for highway improvements that would serve each municipality. The IGA required that half of the costs of the improvements be paid by the public and the other half be paid by impact fees on future developers who build near the improvements. The fee amounts were calculated depending on the size and location of each parcel. The IGA required the municipalities to require that developers proposing to annex property into the municipality to enter into annexation agreements that would include provisions stating that a developer’s plans would not receive final zoning approvals until the required impact fees were collected.

In this case, a developer purchased various parcels within the highway improvement areas of the Village. Neither the annexation agreement nor its amendments included provisions requiring the developer to pay the road impact fees although two of the agreements included language that the developer did not agree to pay the fees. When the Village and County tried to collect the impact fees, the developer filed a lawsuit to avoid payment. The circuit court ruled in favor of the Village and County finding the developer was responsible to pay the road impact fees.

On appeal, the developer argued the following: 

(1) the road impact fees violated state statute, specifically, the Impact Fee Law; 

(2) the imposition of the road impact fees violated his constitutional rights; and 

(3) the developer never agreed to pay the road impact fees through the annexation agreements.

First, the Appellate Court held that the IGA impact fees were not subject to the Impact Fee Law. Under the Impact Fee Law, “road improvement impact fees” are charged by a unit of local government as a condition for a building permit or certificate of occupancy. Here, the IGA fees were imposed as a condition of an annexation agreement and not a permit or certificate, so the Impact Fee Law did not apply.

Second, the Appellate Court rejected the developer's argument that the impact fees were unconstitutional conditions. First, the Court found a sufficient connection between charging the developer fees for road improvements and the stated purpose for imposing the fees which was to reduce traffic congestion. Second, the Court found the fees were roughly proportional to their impact because they were based on the size and location of each parcel. As a result, the Court found that the doctrine of unconstitutional conditions did not apply to the IGA road impact fees so the fees did not constitute an unconstitutional taking without just compensation.

Finally, the Appellate Court rejected the developer’s argument that it never agreed to pay the IGA fees. The Court noted that the annexation agreement expressly stated the developer would pay the IGA fees if a legal challenge failed and, since the developer’s legal challenge was rejected, the developer was required to pay the IGA impact fees.   

Post Authored by Daniel Lev, Ancel Glink

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