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Wednesday, May 1, 2024

In the Zone: Supreme Court Holds that Legislatively Enacted Impact Fees Are Not Exempt from Nollan and Dolan

The U.S. Supreme Court recently issued an opinion finding that legislatively enacted impact fees are not exempt from the "takings" analysis required by Nollan and DolanSheetz v. County of El Dorado, California

The owners of property in the center of the El Dorado County, California that was zoned in the low density residential district applied for a building permit to build a small, prefabricated house. As a condition to the permit, the County required the owners to pay a $23,420 traffic impact fee as required by the County's General Plan rate schedule. The owners paid the fee under protest and received the permit, but then sued the County in state court.

The owners claimed that the County's condition of a building permit on the payment of a traffic impact fee constituted an unlawful “exaction” in violation of the Takings Cause of the Fifth Amendment. The owners relied on the Supreme Court’s rulings in Nollan v. California Coastal Comm’n and Dolan v. City of Tigard, which they argued required the County to make an individualized determination that the fee imposed on their permit was necessary to offset traffic congestion attributable to their specific development. They claimed that the County's traffic impact mitigation fee was not calculated based on any “individualized determinations” as to the nature and extent of the traffic impacts caused by a particular project on state and local roads and, instead, the fee was established by a formula based on the location of the project (i.e., geographic zone within the County) and the type of project (e.g., single-family residential, multi-family resident, general commercial).

The trial court rejected the owners' claims and the California Court of Appeals affirmed. The Court of Appeals held that the Nollan/Dolan takings test applies only to permit conditions imposed on an individual and discretionary basis and that fees imposed on “a broad class of property owners through legislative action” such as the traffic mitigation fee adopted by the County did not need to satisfy the Nollan/Dolan takings tests. 

This case made its way to the U.S. Supreme Court. That Court recognized the government's authority to regulate land use and condition a building permit to further a “legitimate police-power purpose.” However, the Court held that legislatively-imposed fees are not exempt from the Takings Clause and could violate the Fifth Amendment if they do not have an “essential nexus” to the government’s land use interest and “rough proportionality” to the development’s impact on that interest.

The Supreme Court noted that the text of the Takings Clause does not distinguish between legislative and administrative permit conditions and either could constitute an unconstitutional condition on land-use permitsThe Supreme Court  did not determine the validity of the County’s impact fee in this case, or the degree of specificity required when tailoring an impact fee and instead sent the case back to the state court for further proceedings. 

It is important to note that the Supreme Court's ruling does not prohibit local governments from enacting and enforcing reasonable permitting conditions, including imposing legislative-enacted impact fees on a development. However, local governments will want to make sure that their impact fees comply with the nexus/rough proportionality test set out in Nollan and Dolan

Post Authored by Megan Mack & Julie Tappendorf, Ancel Glink


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