Supreme Court Curbs Land-Use Fees: Sheetz v. El Dorado County

Those concerned about diminished American freedoms often focus on the overreach of the federal government and its agencies. However, the unjustified power of government can just as well be asserted by local governments. George Sheetz found that out when El Dorado County, east of Sacramento, where he owned a piece of real estate, placed a substantial barrier across his path to home ownership.

In 2016, Sheetz wanted to build a modest (1,854-square-foot) manufactured house on his property and sought the required county building permit to proceed. El Dorado would issue such a permit, but only upon the condition that Sheetz pay the county a $23,420 fee, called a “traffic-impact mitigation fee.” (READ MORE from John Sparks: Nine Justices Preserve President Trump’s Ballot Status)

Sheetz thought, rightly so, that the Traffic Impact Mitigation (TIM) exaction was clearly excessive. That belief was reinforced when he learned that the fee was not based upon an individual assessment of the actual impact that the erection of his home would have on road traffic density, or the need for more roads or widening. Instead, he found out that the TIM program legislated by the county used only two determinants—what kind of structure was being built and in which of eight “zones” would the building occur?

Nevertheless, Sheetz paid the fee, but under protest, and began a legal action against El Dorado County in the California state courts. In that filing he alleged that El Dorado County had attached an unconstitutional condition to the grant of the permit. Unless he agreed to pay the exorbitant monetary exaction — used to fund county-wide road projects — he would not be able to build the retirement home he had planned on his property. His suit maintained that the inordinate permit-fee burdened his property rights in violation of the Fifth Amendment which says, “nor shall private property be taken for public use without just compensation.”

Sheetz’s lawyers relied primarily on two Supreme Court cases, Nollan v. California Coastal Commission (1987) and Dolan v. Tigard (1994) which were clarified and strengthened by the Supreme Court in 2013 in Koontz v. St. Johns River Water Management District.

In Nollan, a local government required the property owners to grant it a public access easement across their ocean-front property in order to get a permit to renovate their bungalow. In Dolan, the government required a plumbing/electrical supply store-owner to dedicate land for a public greenway and a pedestrian/bicycle way in order to get a permit to expand her store and parking lot.

In both cases the court said the conditions were unconstitutional. In order for such exactions to be constitutional the court held that two things must be true of them. First, the government must prove that the exaction is closely related to the building project and, secondly, the governments must show that the exaction is roughly proportional to the amount needed to offset the impact expected by the project. Exactions can be building permit fees as well as actual claims on real estate.

On their face, the facts of Sheetz’s case seemed to favor him under Nollan and Dolan. El Dorado County did not make an individualized assessment of whether the $23,400 fee was related to likely costs created by the home building project. Neither did the county calculate whether the fee charged was roughly proportional to any cost impact on the county roadways.

Unfortunately for Sheetz, California courts had found a way around Nollan and Dolan. Nollan and Dolan, they said, were only intended to counter instances where land-use fees were imposed at the discretion of administrative decision makers like housing officials or planning commissions. But where the land-use fees were imposed by legislation instead, that made them generally and evenly applicable. Since the TIM program was deemed by California courts to fall under its self-created “legislative” exception to Nollan/Dolan, they refused to consider the exaction imposed upon Sheetz as unconstitutional under those cases.

Sheetz, having lost in California, appealed to the U.S. Supreme Court. The court  accepted the case and has now ruled, with a unanimous opinion, in his favor.

The key holding, in an opinion written by Justice Barrett, is that the language of the Fifth Amendment, applied to the state through the Fourteenth, makes no distinction between which governmental body is engaged in the unconstitutional taking of property. It simply says that private property cannot be taken for public use in instances where the governmental entity which is doing the taking does not compensate the owner. Whether the exaction comes from a legislative enactment or from a decision by a building official or planning board, the same two requirements of Nollan and Dolan should be applied. The local government must be able to show that the exactions, in the form of property easement grants or permit fees, have a clear connection or nexus to the development project and are roughly proportional to the impact costs of the project. Will this decision restrict excessive permit fees and extortionate-like requirements to actually give up property to obtain a land-use permit? (READ MORE: Time to Throw Chevron Overboard: Loper Bright Enterprises v. Raimondo)

Yes. First, the court, by recognizing the expanded availability of a Nollan/Dolan reviews will prevent local governments from automatically getting away with insisting upon exorbitant permit fees from property developers, or even citizens like Sheetz. Those concerned about the affordability of housing have noted the steady growth in developer impact fees like the one Sheetz experienced. Municipalities have been glad to avoid the unpopularity of raising local taxes to cover infrastructure costs by imposing exceedingly high permit exactions. However, it is fundamentally unfair and dishonest to shift those costs entirely onto private developers or on to private individuals, like Sheetz, who are seeking to improve their property.

Secondly, local government leaders have been emboldened to demonstrate their environmentally attuned commitments to “green policies” by forcing landowners to grant easements to them without being properly compensated for the land taken. Again, Nollan/Dolan examination by the courts would likely slow the use of these tactics if courts required municipalities to pay owners for such takings. Nollan/Dolan scrutiny by the courts will give citizens a way to curtail the excessively high permit fees and uncompensated land grabs by local governments and help to return land-use restrictions to some semblance of reason and fairness.

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