The addition of Sheetz v. County of El Dorado, California expands the U.S. Supreme Court’s Nollan-Dolan-Koontz trilogy to four regulatory taking cases. In this April 2024 impact fee decision, the Court ruled that monetary
exactions are subject to the regulatory taking tests, whether imposed as permit conditions or legislative enactments.
In other words, the Fifth Amendment’s Takings Clause
does not distinguish between legislative and administrative land-use permit
conditions. On the point of this case, the Takings
Clause applies equally to legislative takings affecting groups of projects and
administrative takings targeting individual projects. This decision is
instructive for impact fees and other types of exactions, which commonly are
applied to classes or types of uses.
The Court clarified
that there is no constitutional, historical, or precedential basis to
differentiate between these scenarios. Thus, the Takings Clause prohibits both
legislatures and administrators from imposing unconstitutional conditions on
land use permits.
The Court remanded the case to the California courts to determine, under the principles enunciated (and past precedents explained), if there was an unconstitutional taking without compensation.
Justice Barrett and the
authors of three brief concurring opinions point out that key issues remain to
be resolved in this remanded case or future litigation: the validity of this traffic impact fee;
whether a permit condition imposed on a class of properties must be tailored
with the same degree of specificity as a permit condition that targets a
particular development; whether the elements of the Taking Doctrine apply the
same way within or outside a permit scheme; and in general how Regulatory
Taking law applies to permit conditions, including impact fees assessed through
“reasonable formulas or schedules” on classes of developments.
This last item has land
use lawyers and planners on alert. The Kavanaugh concurring opinion, joined by
Justices Kagan and Jackson, presages more jurisprudence on the “longstanding
government practice” of imposing “permit conditions” generally and “impact
fees” in particular, “through reasonable formulas or schedules” on classes of
developments. The Supreme Court has an
abiding interest in municipal land use decision making.
Here are the facts. As a
condition of receiving a residential building permit for a lot with a prefab
home, Sheetz was required by the County to pay a $23,420 traffic impact fee.
The fee was part of a “General Plan” enacted by the County to address
increasing demand for public services spurred by new development.
The fee amount
was not based on the costs of traffic impacts specifically attributable to
Sheetz’s particular project, but rather on a rate schedule that took into
account the type of development and its location within the County.
Sheetz paid the
fee under protest, obtained his permit, and sued, claiming that conditioning
the building permit on the payment of a traffic impact fee constituted an
unlawful “exaction” of money in violation of the Takings Clause.
In Sheetz’s view,
the Court’s decisions in Nollan v.
California Coastal Comm’n, 483 U. S. 825, and Dolan v. City of Tigard, 512 U. S. 374, required the County to make
an individualized determination that the fee imposed on him was necessary to
offset traffic congestion attributable to his project. These cases require
an “essential nexus” and “rough proportionality” between government demands and
the impact of the proposed land use.
The
Barrett decision is a condensed survey of Regulatory Taking jurisprudence. It
reads as an authoritative black letter treatise. And it weaves together the
leading precedents seamlessly into a coherent whole.
When the government wants to take private property to build roads, courthouses, or other public projects, it must compensate the owner at fair market value. The just compensation requirement comes from the Fifth Amendment’s Takings Clause, which provides: “nor shall private property be taken for public use, without just compensation.” By requiring the government to pay for what it takes, the Takings Clause saves individual property owners from bearing “public burdens which, in all fairness and justice, should be borne by the public as a whole.” Armstrong v. United States, 364 U. S. 40, 49 (1960).
While States have substantial authority to regulate land use, see Village of Euclid v. Amber Realty Co., 272 U. S. 365 (1926), the right to compensation is triggered if they “physically appropriat[e]” property or otherwise … interfere with the owner’s right to exclude others from it, Cedar Point Nursery v. Hassid, 594 U. S. 139, 149–152 (2021). That sort of intrusion on property rights is a per se taking. Loretto v. Teleprompter Manhattan CATV Corp., 458 U. S. 419, 426 (1982).
Different rules apply to State
laws that merely restrict how land is used. A use restriction that is
“reasonably necessary to the effectuation of a substantial government purpose”
is not a taking unless it saps too much of the property’s value or frustrates
the owner’s investment backed expectations. Penn Central Transp. Co. v. New
York City, 438 U. S. 104(1978); see also Lucas v. South Carolina Coastal
Council, 505 U. S. 1003, 1016 (1992) (“[T]he Fifth Amendment is violated when
land-use regulation does not substantially advance legitimate state interests
or denies an owner economically viable use of his land” ….
Permit conditions are
more complicated. If the government can deny a building permit to further a
“legitimate police-power purpose,” then it can also place conditions on the
permit that serve the same end. Nollan, 483 U. S., at 836. Such conditions do
not entitle the landowner to compensation even if they require her to convey a
portion of her property to the government….
Thus, if a proposed
development will “substantially increase traffic congestion,” the government
may condition the building permit on the owner’s willingness “to deed over the
land needed to widen a public road.” Koontz v. St. Johns River Water Management
Dist., 570 U. S. 595, 605 (2013).
We have described permit conditions of this nature as “a hallmark of responsible land-use policy.” Ibid. The government is entitled to put the landowner to the choice of accepting the bargain or abandoning the proposed development. … The bargain takes on a different character when the government withholds or conditions a building permit for reasons unrelated to its land-use interests.
Imagine that a local planning commission denies the owner of a vacant lot a building permit unless she allows the commission to host its annual holiday party in her backyard (in propertyspeak, granting it a limited-access easement). The landowner is “likely to accede to the government’s demand, no matter how unreasonable,” so long as she values the building permit more. Koontz, 570 U. S., at 605.
So too if the commission
gives the landowner the option of bankrolling the party at a local pub instead
of hosting it on her land…Because such conditions lack a sufficient connection
to a legitimate land-use interest, they amount to “an out-and-out plan of
extortion.” Nollan, 483 U. S., at 837.
These unusual
illustrations and the invocation of the word extortion from the Nollan case
give extra emphasis to Justice Barrett’s focus on reasons for governmental
land-use interests and what the Court sees as the tests for whether a land use
decision or law causes what she terms as abuse. She goes on:
Our decisions in Nollan
and Dolan address this potential abuse of the permitting process. There, we set
out a two part test modeled on the unconstitutional conditions doctrine. See
Perry v. Sindermann, 408 U. S. 593, 597 (1972) (government “may not deny a
benefit to a person on a basis that infringes his constitutionally protected
interests”).
First, permit conditions
must have an “essential nexus” to the government’s land-use interest. Nollan,
483 U. S., at 837. The nexus requirement ensures that the government is acting
to further its stated purpose, not leveraging its permitting monopoly to exact
private property without paying for it. See id., at 841.
Second, permit conditions must have “‘rough proportionality’” to the development’s impact on the land-use interest. Dolan, 512 U. S., at 391. A permit condition that requires a landowner to give up more than is necessary to mitigate harms resulting from new development has the same potential for abuse as a condition that is unrelated to that purpose. See id., at 393. This test applies regardless of whether the condition requires the land owner to relinquish property or requires her to pay a “monetary exactio[n]” instead of relinquishing the property. Koontz, 570 U. S., at 612–615.
Just as the Takings Clause “protects ‘private property’ without any distinction between different types,” Horne v. Department of Agriculture, 576 U. S. 351, 358 (2015), it constrains the government without any distinction between legislation and other official acts. So far as the Constitution’s text is concerned, permit conditions imposed by the legislature and other branches stand on equal footing. The same goes for history. In fact, special deference for legislative takings would have made little sense historically, because legislation was the conventional way that governments exercised their eminent domain power.
Precedent points the same way as text and history. …A legislative exception to the Nollan/Dolan test “conflicts with the rest of our takings jurisprudence,” which does not otherwise distinguish between legislation and other official acts. Knick v. Township of Scott, 588 U. S. 180, 185 (2019). That is true of physical takings, regulatory takings, and the unconstitutional conditions doctrine in which the Nollan/Dolan test is rooted.
In sum, 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.”
The Supreme Court has
made clear that regulatory takings challenges may be made against legislative
enactments and not just against disapprovals of or conditions imposed in
administrative permits. And impacts fees are vulnerable. What remains
regardless is the difficult to prove at trial the elements of a taking on the
merits.
A
founder of the Boston-based law firm of McGregor Legere & Stevens PC, Greg
McGregor co-chairs the Association’s Environmental Law Section and is a
frequent and welcome contributor to REBA News. His email address is gimcg@mcgregorlaw.com.
