End of Government Interdiction of Property Exactions

A parenthetical synopsis of the holding of:

SHEETZ v. COUNTY OF EL DORADO, CALIFORNIA CERTIORARI TO THE COURT OF APPEAL OF CALIFORNIA, THIRD APPELLATE DISTRICT No. 22–1074. Argued January 9, 2024—Decided April 12, 2024

The origins of this particular debate date back to another legal dispute brought by Californians trying to build a new house. The end of this analysis may spell doom for the mandatory mobilehome park subleasing law which conditions park owner leasing on forced abdication to subleasing — forced entry by strangers (enjoyment of one constitutional right requires waiver of another). The subjugation to  forced invation of land is already an established taking –and likewise it is a taking in AB861.

In the early 1980s, James and Marilyn Nollan, a Ventura County couple, decided to convert their coastal bungalow into a two-story home. The California Coastal Commission, which regulates land use along the state’s coastline, issued a construction permit, but only on the condition that the couple give up a slice of their property to allow for a public walkway to the beach.

In 1987, the U.S. Supreme Court ruled that the Coastal Commission had overstepped. If the government wants to take someone’s private property in exchange for granting them a land-use permit, there has to be some obvious connection between the property being seized (in this case, a slice of land for a walking path) and the government’s purpose in restricting development in the first place (capping a building for the preservation of ocean views), the court held. Because there was no “essential nexus” between the two in this case, Justice Antonin Scalia wrote in his majority opinion, taking the Nollans’ property was “not a valid regulation of land use,” but amounted to “an out-and-out plan of extortion.”

In subsequent rulings, the Supreme Court laid out further limits on this kind of public-sector “extortion.” In the 1990s, the court found that the cost of getting a permit also has to be roughly proportionate to the impact a development is likely to have on the public. In 2013, the court ruled that these “nexus” and “proportionality” standards don’t just apply to the taking of physical property, but monetary fees made in lieu of giving up land, too.

Sheetz and his legal supporters argue that it’s time for the court to apply the “nexus” and “proportionality” rules to El Dorado — and to local impact fees across the country.

As a condition of receiving a residential building permit, petitioner George Sheetz was required by the County of El Dorado to pay a $23,420 traffic impact fee. The fee was part of a “General Plan” enacted by the County’s Board of Supervisors to address increasing demand for public services spurred by new development.  The fee amount 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.  Sheetz paid the fee under protest and obtained the permit.  He later sought relief in state court, claiming 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 Sheetz’s view, the Court’s decisions in Nollan v. California Coastal Comm’n, 483 U. S. 825, and Dolan v. City of Tigard, 512 U. S. 374, required the County to make an individualized determination that the fee imposed on him was necessary to offset traffic congestion attributable to his project. The courts below ruled against Sheetz based on their view that Nollan and Dolan apply only to permit conditions imposed on an ad hoc basis by administrators, not to a fee like this one imposed on a class of property owners by Board-enacted legislation.  84 Cal. App. 5th 394, 402, 300 Cal. Rptr. 3d 308, 312. Held: The Takings Clause does not distinguish between legislative and administrative land-use permit conditions.  Pp. 4–11.

 (a) When the government wants to take private property for a public purpose, the Fifth Amendment’s Takings Clause requires the government to provide the owner “just compensation.”  The Takings Clause saves individual property owners from bearing “public burdens which, in all fairness and justice, should be borne by the public as a  whole.” Armstrong v. United States, 364 U. S. 40, 49.  Even so, the States have substantial authority to regulate land use, see Village of Euclid v. Ambler Realty Co., 272 U. S. 365, and 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 investmentbacked expectations.  Penn Central Transp. Co. v. New York City, 438 U. S. 104, 123, 127.

Similarly, 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. Nollan, 483 U. S., at 836. For example, if a proposed development will “substantially increase traffic congestion,” the government may condition the building permit on the owner’s willingness “to deed over the land needed to widen a public road.” Koontz v. St. Johns River Water Management Dist., 570 U. S. 595, 605.

But when the government withholds or conditions a building permit for reasons unrelated to its legitimate land-use interests, those actions amount to extortion. See Nollan, 483 U. S., at 837. The Court’s decisions in Nollan and Dolan address the potential abuse of the permitting process by setting out a two-part test modeled on the unconstitutional conditions doctrine. See Perry v. Sindermann, 408 U. S. 593, 597.

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.  See Nollan, 483 U. S., at 837, 841.

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.  See Dolan, 512 U. S., at 391, 393; Koontz, 570 U. S., at 612–615.  Pp. 4–6.

(b) The County’s traffic impact fee was upheld below based on the view that the Nollan/Dolan test does not apply to monetary fees imposed by a legislature, but nothing in constitutional text, history, or precedent supports exempting legislatures from ordinary takings rules.  The Constitution provides “no textual justification for saying that the existence or the scope of a State’s power to expropriate private property without just compensation varies according to the branch of government effecting the expropriation.”  Stop the Beach Renourishment, Inc. v. Florida Dept. of Environmental Protection, 560 U. S. 702, 714 (plurality opinion).

Historical practice similarly shows that legislation was the conventional way that governments at the state and national levels exercised their eminent domain power to obtain land for various governmental purposes, and to provide compensation to dispossessed landowners.  The Fifth Amendment enshrined this long standing practice. Precedent points the same way as text and history.

A legislative exception to the Nollan/Dolan test “conflicts with the rest of [the Court’s] takings jurisprudence,” which does not otherwise distinguish between legislation and other official acts.  Knick v. Township of Scott, 588 U. S. 180, 185. That is true of precedents involving physical takings, regulatory takings, and the unconstitutional conditions doctrine which underlies the Nollan/Dolan test. Pp. 7–10.

(c) As the parties now agree, conditions on building permits are not exempt from scrutiny under Nollan and Dolan just because a legislative body imposed them.  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, as are issues concerning whether the parties’ other arguments are preserved and how those arguments bear on Sheetz’s legal challenge.  Pp. 10–11. 84 Cal. App. 5th 394, 300 Cal. Rptr. 3d 308, vacated and remanded.

In 2016, George Sheetz bought a vacant lot in rural El Dorado County, California, and planned to build a small home where he and his wife would live and raise their grandson. But Mr. Sheetz was told he would have to pay a so-called traffic impact fee of more than $23,000 in exchange for his building permit.

The County claimed he was required to pay under local legislation that sought to shift the cost of addressing existing and future road deficiencies onto new development. Thus, the County imposed the fee without any evidence tying Mr. Sheetz’s new home to any specific public costs or impacts.

The Court ruled that the case must return to the lower court to determine whether the $23,000 fee was an exaction subject to the unconstitutional-conditions doctrine. If so, the lower court must determine whether the fee was disproportionate to the traffic impact caused by a modest manufactured home in a rural area, and thus, unconstitutional.

As Justice Barrett said in her opinion, “In sum, there is no basis for affording property rights less protection in the hands of legislators than administrators. The Takings Clause applies equally to both—which means that it prohibits legislatures and agencies alike from imposing unconstitutional conditions on land-use permits.”