Impact of Supreme Court decision in takings clause case is hazy | Opinion

The U.S. Supreme Court last month added another case to the line of Nollan / Dolan / Koontz decisions considering the limits imposed by the Fifth Amendment’s takings clause on local government ability to impose conditions. In the Sheetz v. County of El Dorado, California decision, the court held that the takings clause applies to exactions (obligations to pay fees undertake public improvements, or dedicate land in exchange for a permit approval) created through a previously adopted legislative scheme, such as system development charges, road standards, inclusionary zoning or fee-in-lieu schemes, just as it does to exactions imposed on a case-by-case basis through review of individual permits. While unanimous in its outcome, the wide diversity of the various opinions in this case shows the effects on local governments and developers is not at all clear.

For background, the plaintiff, George Sheetz, challenged a $23,420 traffic impact fee imposed on a building permit by El Dorado County because of a rate schedule applicable to all building permits under its comprehensive plan, as opposed to an individually determined fee. The California courts determined that such a general policy was not subject to scrutiny under the Fifth Amendment’s takings clause because it was not an individualized imposition, but rather a one-size-fits-all scheme applicable to all permits.

The opinion by Justice Amy Coney Barrett began, as most Fifth Amendment cases do, highlighting the prohibition on the imposition of “public burdens which, in all fairness and justice, should be borne by the public as a whole.” Although local governments have “substantial authority” to regulate land uses, that regulatory power is limited by the takings clause if private property is physically appropriated or by use restrictions that transcend those “reasonably necessary to the effectuation of a substantial government purpose” and thus saps “too much of the property’s value or frustrates the owner’s investment backed expectations.” The Fifth Amendment may also be violated through the imposition of conditions, whether in the form of money, improvement obligations, or land, that fail to further a “legitimate police-power purpose” or are not “roughly proportional” to the impacts from development.

Falling back on its originalist roots, the majority opinion found nothing in the constitutional text, history, or precedent supports exempting legislatures from ordinary takings rules. Citing British, colonial, and early American historical sources to the effect that legislative action to acquire property was subject to a government duty to indemnify the owners and prohibits physical appropriation, the court found that it makes sense to impose the same limitations on conditions that flow from legislative enactment as well as those imposed through a single proceeding. Just as the court scrutinizes legislatively imposed conditions on other constitutional rights of religion, free speech, and right to travel, it said it would review Fifth Amendment takings claims against legislatively imposed restrictions as well.

Noting that the county agreed at oral argument that there was no exemption to the application of the takings clause, the court said it would not address other disputes over the validity of the traffic impact fee, “including 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” and remanded the case to deal with those issues.

Justice Sonia Sotomayor, joined by Justice Ketanji Brown Jackson, concurred, but with a view to future cases said that there was a distinction between exactions made in the land use permitting process (presumably to which “essential nexus” / “rough proportionality” applies) and those outside that process (to which “essential nexus” / “rough proportionality” does not apply).

Justice Neil Gorsuch also concurred, but again with future cases in mind, asked how the “essential nexus” and “rough proportionality” tests could not apply to generalized exaction requirements, noting the impacts of constitutional violations are not different if they are imposed generally or occur in a specific case.

Justice Brett Kavanaugh, with whom justices Kagan and Jackson join, concurring, said that this decision “does not address or prohibit the common government practice of imposing permit conditions, such as impact fees, on new developments through reasonable formulas or schedules that assess the impact of classes of development rather than the impact of specific parcels of property.” Under this view, those issues are specifically left open for future decisions.

This is an important decision because it concludes that the takings clause does apply to legislative or policy decisions applicable to classes of permits but does not say how the takings clause applies. The lack of agreement among the justices is likely to incite a tidal wave of litigation from property owners seeking to reduce the burdens on their developments. This may inspire local governments to reexamine their legislatively imposed impact fees to ensure that they include impact-to-obligation analysis like that which is done for one-off exactions.

In the alternative, local governments could decide to reduce litigation risk by asking existing residents to shoulder the cost of growth demanding infrastructure. But that alternative would place street improvements, for example, in competition with other local government needs, such as public safety. The American Planning Association, in its amicus brief, urged the court to provide some guidance to avoid all the legal wrangling that will now ensue. It is unfortunate that a majority could not be reached to respond to this invitation.

Edward Sullivan is a retired practitioner of land use and municipal law with more than 50 years of experience. Contact him at esulliva@gmail.com.

Carrie Richter is an attorney specializing in land use and municipal law at Bateman Seidel. Contact her at 503-972-9903 or crichter@batemanseidel.com.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the authors and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither author nor the DJC guarantees the accuracy or completeness of any information published herein.

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