SCOTUS Sides With California Developer in Takings Case

In Sheetz v. County of El Dorado, 601 U.S. ____ (2024), the U.S. Supreme Court held that a traffic impact fee imposed by the County of El Dorado based on a fee schedule in the County’s General Plan ran afoul of the Constitution’s Takings Clause. In reaching its decision, the Court clarified that the Takings Clause does not distinguish between legislative and administrative land-use permit conditions.

Facts of the Case

George Sheetz owns property in the center of the County near Highway 50, which the General Plan classifies as “Low Density Residential.” Sheetz and his wife applied for a permit to build a modest prefabricated house on the parcel, with plans to raise their grandson there. As a condition of receiving the permit, the County required Sheetz to pay a traffic impact fee of $23,420, as dictated by the General Plan’s rate schedule. Sheetz paid the fee under protest and obtained the permit.

Sheetz filed suit, alleging 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 support, Sheetz argued that the Supreme Court’s decisions in Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987), and Dolan v. City of Tigard, 512 U.S. 374 (1994), required the County to make an individualized determination that the fee amount was necessary to offset traffic congestion attributable to his specific development. The County’s predetermined fee schedule failed to meet that requirement, according to Sheetz.

The trial court rejected Sheetz’s claim, and the California Court of Appeal affirmed. Relying on precedent from the California Supreme Court, the Court of Appeal asserted that the Nollan/Dolan test applies only to permit conditions imposed “‘on an individual and discretionary basis.’” Fees imposed on “a broad class of property owners through legislative action” need not satisfy that test.

Supreme Court’s Decision

The Supreme Court reversed. It held that the Takings Clause does not distinguish between legislative and administrative land-use permit conditions and, thus, its Nollan/Dolan test applies in both situations.

“The California Court of Appeal rejected that argument because the traffic impact fee was imposed by legislation, and, according to the court, Nollan and Dolan apply only to permit conditions imposed on an ad hoc basis by administrators. That is incorrect,” Justice Amy Coney Barrett wrote on behalf of the unanimous Court. “The Takings Clause does not distinguish between legislative and administrative permit conditions.”

In reaching its decision, the Court explained that a State law that merely restricts land use in a way “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. Moreover, when the government can deny a building permit to further a “legitimate police-power purpose,” it can also place conditions on the permit that serve the same end.

To prevent government abuse of the permitting process, the Court’s decisions in Nollan and Dolan established a two-part test modeled on the unconstitutional conditions doctrine. First, permit conditions must have an “essential nexus” to the government’s land-use interest, ensuring that the government is acting to further its stated purpose, not leveraging its permitting monopoly to exact private property without paying for it. Second, permit conditions must have “rough proportionality” to the development’s impact on the land-use interest and may not require a landowner to give up (or pay) more than is necessary to mitigate harms resulting from new development.

The Court next turned to whether the test applied to the County’s traffic impact fee. It ultimately concluded that nothing in constitutional text, history, or precedent supports exempting legislatures from ordinary takings rules. “Just as the Takings Clause ‘protects private property without any distinction between different types,’ it constrains the government without any distinction between legislation and other official acts,” Justice Barrett explained. “So far as the Constitution’s text is concerned, permit conditions imposed by the legislature and other branches stand on equal footing.”

The Court when on to find that history and precedent also support its conclusion. “In sum, there is no basis for affording property rights less protection in the hands of legislators than administrators,” Justice Barrett wrote. “The Takings Clause applies equally to both—which means that it prohibits legislatures and agencies alike from imposing unconstitutional conditions on land-use permits.”

Finally, the Court emphasized that 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 is an issue for the state courts to consider in the first instance. It found the same is true for issues concerning whether the parties’ other arguments are preserved and how those arguments bear on Sheetz’s legal challenge.