Introduction

On April 12, the United States Supreme Court issued its opinion in Sheetz v. Cnty. Of El Dorado, California, 22-1074 (U.S. Apr. 12, 2024) and unanimously held that legislative actions can still be unconstitutional exactions under the Takings Clause.

George Sheetz was forced to pay a $23,420 traffic mitigation fee for a building permit to construct a small prefabricated home on his land. He challenged the fee as an exaction under Nollan v. California Coastal Comm’n, 483 U. S. 825 (1987) and Dolan v. City of Tigard, 512 U. S. 374 (1994). A California Court of Appeal examined the traffic fee. It concluded that Nollan and Dolan govern permit conditions determined on an ad hoc basis but not to legislatively imposed fees like the one applied to Sheetz. That court allowed the traffic fee to stand.

The Supreme Court overturned that decision.

Background

El Dorado County is a bucolic region of California that has experienced significant population growth in recent years, resulting in increased demand on public infrastructure. To address those demands, the county developed land use fees and restrictions, including traffic impact fees that developers must pay prior to receiving a building permit. A fee schedule determined the fee amount based on the type of development and its location in the county, but the fee schedule does not consider individual impacts attributable to the proposed development in determining the fee.

Sheetz paid the fee under protest and challenged it as an unlawful exaction of money in violation of the Takings Clause as described in Nollan and Dolan. Those cases require courts to analyze a permit condition under a two-part test. First, permit conditions must have an essential nexus to the government’s interest. Second, a permit condition must be roughly proportional to the development’s impact on that interest.

In examining the challenge, the California Court of Appeals concluded that the Nollan and Dolan test applied only to permit conditions imposed on an ad hoc basis by administrators, not those imposed legislatively. Because the fee Sheetz paid was established through a legislative process and not an individualized assessment, the lower court declined to conduct the two-part test.

The Supreme Court’s Decision

The Supreme Court unanimously ruled that the two-part test from Nollan and Dolan applies, regardless of whether a permit condition is imposed through an ad hoc process or legislation. Id. at *11. Examining its Takings Clause precedent, the Court soundly rejected the California Court of Appeal’s holding that Nollan and Dolan do not apply to permit conditions imposed by a legislative body. The Court stressed that its precedent uniformly applied its Takings analyses to both ad hoc processes and legislative acts. The Takings Clause “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 Court supported its conclusion by examining the historical context of takings and prior case law. In looking to historical context, the Court considered whether exempting takings imposed through legislation would make sense, since legislation has been the conventional means of exercising eminent domain power. Just compensation was a hallmark of such power, and the Court supported this by referring to colonial law and early legislative acts of the U.S. Congress. Under colonial law, a state’s use of its eminent domain powers was accompanied by just compensation. The Court also referred to an early act of Congress related to the Northwest Territories. Congress passed legislation in 1787 to settle the region and included just compensation for affected landowners. The Court then concluded that just compensation for takings completed through legislation is a hallmark of the lawful use of a state’s eminent domain power.

Finally, the Court examined whether its takings jurisprudence had previously applied to takings imposed through legislation. It concluded that under both physical takings and regulatory takings cases, the Court had required just compensation for takings imposed legislatively as well as through administrative action. Notably, the Court did not rule on the validity of the fee imposed against Sheetz or of the structure of the traffic mitigation fee schedule, but remanded the case for further analysis.

Conclusion

The Court’s decision lays to rest any question of whether permit conditions imposed through legislative action may be analyzed under the Takings Clause. However, due to the limited factual analysis contained in the decision, its real-world impacts are yet to be realized. Therefore, whether potentially disproportionate fees such as the one levied against Sheetz would pass constitutional muster remains to be seen. In a concurrence, Justice Gorsuch briefly argued that the validity of a fee does not rest on whether it applies to a class of properties versus an individual development. (Gorsuch, N. concurring). Rather, the Nollan/Dolan test requires an essential nexus and rough proportionality, which may imply that both might be absent in the case of Sheetz.

This article summarizes aspects of the law and does not constitute legal advice. For legal advice for ‎your situation, you should contact an attorney.