Sheetz v. County Of El Dorado, California Could Be Game Changer For Development Impact Fees

• Published date: 20 February 2024
• Subject Matter: Litigation, Mediation & Arbitration, Real Estate and Construction, Trials & Appeals & Compensation, Real Estate
• Law Firm: Thompson Coburn LLP
• Author: Mr Halpin Burke and Chad Burchard

In January, the Supreme Court heard oral arguments for a case many landowners and developers are watching closely: Sheetz v. County of El Dorado, California. The case involves the takings clause of the Fifth Amendment to the U.S. Constitution, and its outcome could dramatically affect the real estate development impact fees state and local governments charge.

In 2004, the County of El Dorado, California, adopted a general development plan. In an effort to limit the impact of new development on roads, the plan was amended in 2006 to include a traffic impact mitigation (TIM) fee program, authorizing the county to condition issuance of building permits on the payment of TIM fees. Those fees would then be used to fund the construction of new roads and the widening of existing ones. The county calculates the fee using a formula, but it does not make any determination as to the specific traffic impact of a particular development project.

In 2016, George Sheetz applied for a permit to build a manufactured home on land he owned in El Dorado County. The county agreed to issue the permit to Sheetz on the condition that he pay a TIM fee of $23,420. Sheetz paid the fee and was issued the permit, but he subsequently filed suit against El Dorado County, alleging the TIM fee to be an unconstitutional taking.

Sheetz has argued that the TIM fee violates the U.S. Supreme Court's holdings in Nollan v. California Coastal Commission, 483 U.S. 825 (1987), Dolan v. City of Tigard, 512 U.S. 374 (1994), and Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595 (2013).

In Nollan, the California Coastal Commission granted a permit to landowners to build a house on their beachfront property subject to the condition that they dedicate a public easement over a portion of their property. The Court held this to be an unconstitutional taking because there was no "essential nexus" between the condition and a "legitimate state interest."

In Dolan, a city granted a building permit to a landowner subject to the condition that she dedicate a portion of her land to the city for flood control and a bicycle/pedestrian pathway. While the Court agreed that there was an "essential nexus" between the condition and a "legitimate public purpose," it held that there must also be a "rough proportionality" regarding the "degree of connection between the exactions and the projected impact of the proposed development." The city failed to meet this second test. "No precise mathematical calculation is...