Sheetz v. County of El Dorado: The Court Explores Legislative Exactions and the Takings Clause

Sheetz v. County of El Dorado: The Court Explores Legislative Exactions and the Takings Clause

Legal Sidebari

Sheetz v. County of El Dorado: The Court
Explores Legislative Exactions and the
Takings Clause
December 27, 2023
On January 9, 2023, the U.S. Supreme Court is scheduled to hear oral argument in Sheetz v. County of El
Dorado. The dispute in this case centers around an “exaction,” which is a government-imposed
requirement that a project developer provide certain public benefits to offset the impacts of the project on
the public. Over thirty-five years ago in Nollan v. California Coastal Comm’n, the Court recognized that
an onerous exaction may constitute a “taking” of property, requiring compensation in accordance with the
Takings Clause of the U.S. Constitution, if there is no “essential nexus” between the condition and the
original purpose of the land use regulation. Seven years later in Dolan v. City of Tigard, the Court
developed the “rough proportionality” test for determining whether an exaction rises to the level of an
unconstitutional taking, finding that the exaction must be sufficiently “related both in nature and extent to
the impact of the proposed development.” Sheetz will be the Court’s first exactions case since its 2013
decision in Koontz v. St. John’s River Water Mgm’t Dist. In that case, the Court held that the “essential
nexus” and “rough proportionality” requirements of Nollan and Dolan apply to government exaction
demands even if the demands are financial and the government denies the application resulting in no
property being taken.
The exaction at issue in Sheetz is a “Traffic Impact Fee” imposed via legislation by the County of El
Dorado, California on any party requesting a building permit from the County. The County imposes the
fee based on the location and type of the proposed project, without regard to the project’s individualized
impact on traffic or the County’s roads. The California intermediate appellate court, applying state law,
held that “‘legislatively prescribed monetary fees’—as distinguished from a monetary condition imposed
on an individual permit application on an ad hoc basis—‘that are imposed as a condition of development
are not subject to the Nollan/Dolan test.’” As a result, the court rejected the claim of the property
developer that the fee was an unconstitutional exaction. The state supreme court denied review.
The case thus presents the U.S. Supreme Court with an opportunity to consider a question of first
impression: whether a legislatively imposed exaction is exempt from the unconstitutional-conditions
doctrine as applied in Nollan and Dolan.
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Legal Background
The Fifth Amendment to the United States Constitution provides in part that private property shall not “be
taken for public use, without just compensation.” This Takings Clause is the foundation for two concepts
related to property rights. First, the Supreme Court has interpreted the clause as an affirmation of the
government’s power to exercise eminent domain or condemnation, a process by which the government
directly acquires property interests from the owner. Second, the Takings Clause offers property owners
constitutional protection against “inverse condemnation,” in which either (1) government action results in
the physical taking of a property interest without the use of eminent domain (i.e., a physical taking) or (2)
a regulatory restriction causes a substantial diminution in the value of an existing property (i.e., a
regulatory taking). The Takings Clause does not bar either physical or regulatory takings, but rather
requires the government to provide “just compensation” for the property that was taken.
For several decades after explicitly recognizing the federal government’s eminent domain authority in
1871, the Court rejected the notion that inverse condemnations that did not result in the physical
occupation of property could constitute a taking. The Court reversed course in its 1922 decision in
Pennsylvania Coal Co. v. Mahon. In Mahon, the Court found that a regulation that made it impractical for
a property owner to use the property for its intended purpose had essentially “the same effect for
constitutional purposes as appropriating or destroying” the property interest and that therefore, “while
property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.”
This extension of the Takings Clause’s application paved the way for the exactions claims at issue in
Nollan and Dolan, both cases in which a local government sought to require some sort of impact
mitigation as a condition of issuing a building permit, a requirement referred to as an “exaction.” In
Nollan, the Supreme Court recognized that while governments may require exactions as an aspect of
lawful land use regulation, an exaction may constitute a “taking” of property that requires compensation
pursuant to the Fifth Amendment if there is no “essential nexus” between the condition and the original
purpose of the land use regulation. In Dolan, the Court held that an exaction would be unconstitutional if
it were not roughly proportional “both in nature and extent to the impact of the proposed development.”
Thus, Nollan dictates that, in order to not be a taking, an exaction condition must have an “essential
nexus” to a legitimate state interest. Under Dolan’s “rough proportionality” test, the government must
establish that “the required dedication is related both in nature and extent to the impact of the proposed
development.” This aggregated “essential nexus/rough proportionality” test is often referred to as the
Nollan/Dolan test or the Nollan/Dolan rule.
Subsequently, the Court in Koontz applied the doctrine of unconstitutional conditions to an exaction.
According to this doctrine, “the government may not deny a benefit to a person because he exercises a
constitutional right.” In Koontz, a government agency negotiated with a permit applicant regarding a set-
aside for conservation. When the applicant did not agree to the government’s proposed set-aside terms,
the agency denied the application, and the applicant sued. The Court, citing the unconstitutional
conditions doctrine, invalidated the government’s proposed exaction even though it was not agreed to by
the applicant. Thus, under Koontz, a proposed exaction that stymies a property development can be
unconstitutional even if the government does not ultimately take any property.
Land use controls often generate inverse condemnation claims because they can affect property values in
many ways. However, the Court’s exaction jurisprudence differs from other takings jurisprudence in a
number of notable ways. First, it shifts the burden of proof, requiring the government to defend the
validity of the exaction rather than requiring the claimant to demonstrate loss of a property interest.
Second, it sets a balancing test that allows a court to peer into the “legitimacy” of a government interest,
something more frequently encountered in due process and equal protection jurisprudence. Finally, it
allows for a court to a find that an exaction amounts to a taking or reject government action even if no
actual taking has occurred. The latter two items highlight a frequent criticism of exactions jurisprudence:

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it allows a property owner to potentially recover compensation for loss of a property interest due to an
unconstitutional exaction attached to a permit that the property owner likely could not have recovered had
the government simply denied the request for a permit.
While the Fifth Amendment protects all landowners, many land use controls and other government
actions governing property interests occur at the state or local level. This makes for a somewhat unusual
confluence of constitutional protections, federal and state government power, and state and local law. For
example, even federal courts hearing eminent domain claims based on federal authority may apply state
law to the eminent domain action. This confluence may give rise to issues related to federalism and the
extent to which federal law should accommodate not just individual property rights, but state and local
interests as well. One such state action is at issue in Sheetz, where the Supreme Court will decide a
question of first impression: whether an exaction is exempt from the unconstitutional-conditions doctrine
as applied in Nollan and Dolan because it is authorized by broadly applicable state or local legislation.
Sheetz Factual and Procedural History
In August 2006, the County of El Dorado, California amended its Growth Plan to incorporate a traffic
impact mitigation (TIM) fee to permits for new construction. The TIM fee is intended to help finance the
building of new roads and widening of existing roads, and to account for the impact of the construction on
state and local roads. The amended Plan allows the County to condition the issuance of a permit on
payment of the TIM fee. The fee amount is dependent upon the location and type of construction
proposed by the applicant. According to the California Court of Appeal, the TIM fee program “requires
that new development pay the full cost of constructing new roads and widening existing roads without
regard to the cost specifically attributable to the particular project on which the fee is imposed.” The court
also noted that “in assessing the fee, the County does not make any ‘individualized determinations’” as to
the nature and extent of the traffic impacts caused by a particular project on state and local roads.
In July of 2016 the plaintiff/appellant, George Sheetz, applied to the County for a permit to construct a
single-family residence. The County assessed Sheetz a $23,420 TIM fee as a condition of granting the
construction permit. Sheetz paid the fee under protest to obtain his permit, and subsequently sent several
letters to the County protesting the assessment and requesting a refund. The County did not respond to the
letters.
In June 2017, Sheetz filed an action in California state court against the County seeking declaratory and
injunctive relief from the TIM fee program as well as a “writ of mandate,” a directive to compel a public
agency to perform an act required by law. The petition/complaint asserted seven causes of action
challenging the fee program. As relevant here, Sheetz alleged that the County violated the
“unconstitutional conditions doctrine” because it mandated a TIM fee that, in Sheetz’s case, would
constitute an unlawful exaction in violation of the Takings Clause.
After years of motion practice, the trial court ultimately held that the TIM fee was not required to be
analyzed under the Nollan/Dolan test because it was legislatively proscribed and broadly applicable. The
trial court upheld the TIM fee under both state and federal law.
Sheetz appealed, continuing to argue that the TIM fee was invalid as an exaction under the doctrine of
unconstitutional conditions. The California Court of Appeal, Third District affirmed the trial court’s
judgment, holding that “the requirements of Nollan and Dolan ... do not extend to development fees that
are generally applicable to a broad class of property owners through legislative action” and that
“‘legislatively prescribed monetary fees’—as distinguished from a monetary condition imposed on an
individual permit application on an ad hoc basis—‘that are imposed as a condition of development are not
subject to the Nollan/Dolan test.’”

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After the state supreme court declined to review the case, Sheetz petitioned for certiorari at the U.S.
Supreme Court in May 2023, and the Court granted certiorari on September 29. Arguments are scheduled
for January 9, 2024.
Issue Before the Court
The sole question presented by Sheetz is whether a legislatively imposed building permit exaction is
exempt from the unconstitutional-conditions doctrine as applied in Nollan and Dolan. The California
appellate court, citing state court precedent, held that such fees are not subject to the Nollan/Dolan test. In
his brief in support of the petition for certiorari, Sheetz first noted a split among federal circuit courts
regarding this question, citing a recent decision from the U.S. Court of Appeals for the Sixth Circuit that
held that the Nollan/Dolan test applied to a challenge to a “sidewalk ordinance” that imposed certain side-
walk related conditions on landowners seeking building permits. After the grant of certiorari, Sheetz
argued that applying the test to legislatively imposed fees “ensures that any exaction serves as genuine
mitigation for public impacts attributable to the proposed use or development rather than a veiled attempt
to skirt the compensation requirement of the Takings Clause.” Sheetz claims that there is no rationale for
differentiating between legislatively imposed and administratively imposed exactions, and argues that the
text of the Takings Clause itself does not provide a basis for the distinction. Sheetz noted that the doctrine
of unconstitutional conditions has been applied to strike down legislative actions in defense of other
rights. Further, Sheetz argued that application of the doctrine would not frustrate all exactions, only those
that do not pass the Nollan/Dolan test, so efforts to ensure appropriate land use controls would not be
frustrated. In its response, the County quoted both Koontz and Dolan in support of the notion that
“governments possess expansive police power to address the impacts of new development.” The County
further argued that the decisions “explicitly disavow that any particularized showing must justify
commonplace fees charged to property owners, such as property taxes, user fees, and similar
governmental assessments.” The County also differentiated the facts in this case from those in Nollan,
Dolan, and Koontz, noting that in those cases the government asked for specific property conveyances to
offset a particular construction, whereas in this case the exaction is a broadly applied and legislatively
imposed fee structure. The County noted the difficulty of conducting parcel-specific analysis regarding
the suitability of legislatively imposed land use controls.
Considerations for Congress
Public and legislative interest in the exercise of eminent domain and takings jurisprudence tends to
increase after a significant Supreme Court decisions on the subject, and it would not be a surprise to see
interest in the wake of the Sheetz decision from both those interested in protecting the rights of property
owners and those interested in reserving the broad authority of state and local governments to regulate
land use. Should the Court rule in favor of the County, there may be a call for federal legislation to restrict
the broad land use authority of state and local governments, as there was in the wake of the Court’s 2005
decision in Kelo v. City of New London. A ruling that clarifies that legislatively imposed exactions are
exempt from Nollan/Dolan review might also empower Congress to impose exactions to regulate land
use. A ruling in favor of Sheetz, on the other hand, would clarify the Constitutional limits on exactions
and might encourage legislators to seek novel means of legislating land use controls.

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Author Information

Adam Vann

Legislative Attorney

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