Supreme Court Reviews “Unconstitutional-Conditions” Doctrine in Permit Exactions Context

In Sheetz v. County of El Dorado, the Supreme Court will decide whether legislative enactments are categorically considered unconstitutional conditions under the Takings Clause. The Petitioner, George Sheetz, applied for a permit to construct a manufactured house on his property in El Dorado County, California. The County’s regulations required him to pay $23,420 as a condition for obtaining the permit. This payment was meant to fund road improvements, even though there was no individualized assessment demonstrating an “essential nexus” and “rough proportionality” between the payment and the expected adverse public impacts of his relatively small-scale project. These legal standards were established in the cases of Nollan v. Cal. Coastal Comm’n, 483 U.S. 825, 837 (1987), and Dolan v. City of Tigard, 512 U.S. 374, 391 (1994).

Sheetz challenged the payment as an unconstitutional condition under Nollan and Dolan. A California trial court upheld the payment condition, concluding that because it was authorized by legislation, the exaction was exempt from Nollan/Dolan scrutiny. The California Court of Appeal affirmed, and the California Supreme Court declined review. Sheetz argued that if the government requires money or property as a condition on the right to use or develop land, Nollan/Dolan scrutiny should apply, regardless of whether the government’s actions are legislatively mandated. He further argued that subjecting legislative exactions to Nollan/Dolan review would not disrupt the government’s legitimate interests in mitigating development impacts because it provides a framework for the government to quantify such impacts to satisfy the essential nexus and proportionality standards.

The County of El Dorado countered that Nollan/Dolan heightened scrutiny applies only in the land-use development context, such as when the government conditions a requested land use on the owner’s giving of an easement. The county further urged that legislatively-imposed development-impact fees are different as they require payment of money alone, not a conveyance of a property interest or its equivalent, such as a dedicatory exaction, and that a contrary rule would require local governments to abandon impact fees altogether.

During oral argument, Chief Justice Roberts pointed out that takings cases normally involve a property interest, and because this case appears to deal specifically with money, it does not seem to fit well in the Takings Clause analysis. Justices Sotomayor, Barrett, and Jackson asked similar questions. Sheetz responded that so long as there is an identifiable property interest tied to the monetary request such that the government is leveraging a permit in return for money or land, then Nollan/Dolan scrutiny applies. Justices Alito and Kagan wondered whether Nollan/Dolan or a different scheme should apply when the impact fee is generally applicable, rather than individualized. Justices Alito and Gorsuch questioned whether the parties actually agree that Nollan/Dolan analysis applies to legislative enactments generally.

This case was argued on January 9, 2024. A decision is expected later in the term. Stay tuned for Dykema’s client alert discussing the Court’s opinion.

For more information, please contact Chantel Febus, James Azadian, David Schenck, Cory Webster, Christopher Sakauye, McKenna Crisp, Monika Harris, or Puja Valera.