In April, the United States Supreme Court released its opinion in Sheetz v. County of El Dorado, California, 144 S.Ct. 893 (2024) (“Sheetz”) (slip op.). In this case, the Court addressed the question of whether a substantial traffic mitigation fee[1] related to the development of a small residence that was imposed by a legislative body is subject to the 5th Amendment Takings analysis provided under the Nollan and Dolan cases.[2] These now familiar cases created a framework for determining when a condition to development becomes an unlawful taking. In Nollan, the Court held that permit conditions required by local jurisdictions for developing or using real property must have an essential nexus with the development or use, i.e., the permit condition must address a public cost arising directly from the development/use requested by the property owner.[3] Dolan supplemented the Nollan analysis by requiring the permit condition to be roughly proportional to the identified public cost.[4]
In reversing the California Court of Appeals, the Supreme Court in the Sheetz case held that the Takings Clause analysis does not distinguish whether land use permit conditions are administratively imposed ad hoc fees or rather formulaic fees created through a legislative process. Ultimately, the Court’s decision implicitly reverses the California Supreme Court’s decision in San Remo Hotel, L.P. v. City and County of San Francisco, 27 Cal.4th 643, 670 (2002), where the California Supreme Court held that the so-called “stricter scrutiny” of Nollan and Dolan were not appropriate for legislatively-determined, formulaic mitigation fees because they could be modified through the political process and had the statutory guardrails found in California’s Mitigation Fee Act.[5]
While everybody is talking about the potential effects of the Sheetz case on challenges to imposed development conditions, in California it may not have as significant an impact as publicized. The Supreme Court did overrule the California Court of Appeals, but it did not provide any new methodology for analyzing development impact fees or other conditions for land use permits. Justice Kavanaugh specifically stated in his concurring opinion that the question remained open whether a permit condition imposed on a class of properties must be tailored with the same degree of specificity as a permit condition targeting a particular development. Due to California’s Mitigation Fee Act, the types of fees discussed in the Sheetz case are already subject to a similar analysis to that in the Nollan/Dolan takings analysis. California’s Mitigation Fee Act already requires local legislative bodies to implement development-related fees that are both (1) reasonably related to the issue to be mitigated and (2) demonstrate the reasonableness of the relationship between the fee and the development.[6] These two factors seem strikingly similar to the Nollan/Dolan analysis, and the Sheetz case does not provide any assistance in determining whether such a fee is an unconstitutional taking, leaving that issue for the state courts to consider in the first instance.
The Nollan/Dolan analysis, as extended to fees by Koontz,[7] examines whether there is (i) a “sufficient nexus” between the fee and the development and (ii) if there is a “rough proportionality” between the condition and the impact of the development. This type of analysis, while referred to by some California courts as “heightened scrutiny,” is already mentioned, if not used directly, by these same courts when deciding Mitigation Act Fee cases.[8] Even if it is not being integrated into all Mitigation Fee Act cases, the Nollan/Dolan analysis has been influencing the results.
The Sheetz decision may encourage developers to challenge legislatively-created mitigation fees or other development-related exactions from local governments in California either as an alternative to the Mitigation Fee Act or as an attempt for a second bite at the apple; however, the results of this type of challenge are unlikely to be any different than those litigated under the Mitigation Fee Act. Courts may have a difficult time finding that a reasonably-related fee under the Mitigation Fee Act was not also roughly proportional to the subject development under Nollan/Dolan. There may be some wiggle room to relitigate a fee that survived a Mitigation Fee Act challenge because Mitigation Fee Act claims have tight filing deadlines, administrative review requirements, and relation back to prior property owners, which could have ended the challenge prior to any substantive analysis. Even with this possibility, California developers are not likely to see a great benefit from the Sheetz case.
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[1] The fee amount in Sheetz was not based on the costs of traffic impacts specifically attributable to Sheetz’s particular project, but rather was assessed according to a rate schedule that took into account the type of development and its location within the County.
[2] Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987) (“Nollan”) and Dolan v. City of Tigard, 512 U.S. 374 (1994) (“Dolan”).
[3] Nollan, 483 U.S. at 837-41.
[4] Dolan, 512 U.S. at 391.
[5] Cal. Gov’t Code §§ 66000, et seq. (requiring reasonable relationship between fees and conditions to be created by development, among other terms).
[6] City of San Marcos v. Loma San Marcos, LLC, 234 Cal. App. 4th 1045, 1057 (2015) (“City of San Marcos”) (describing the analysis required under the Mitigation Fee Act).
[7] Koontz v. St. Johns River Water Management Dist., 570 U.S. 595, 619 (2013).
[8] See, e.g., City of San Marcos, 234 Cal. App. 4th at 1058-59 (2015) (citing Dolan in its summary of law to be used in analyzing a Mitigation Fee Act claim).
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