The US Supreme Court’s decision in Sheetz v. County of El Dorado earlier this month will affect how local governments impose impact fees in the future and who pays certain development costs.
El Dorado County, California, stretches from the southern shores of Lake Tahoe westward to the outskirts of Sacramento. Its Board of Supervisors set the amount of a development fee based on project location and type. The purpose of the fee was to defray the transportation impacts from the development, but the County did not make any individualized determinations as to the nature and extent of traffic from a given development.
When George Sheetz wanted to build a manufactured home on a lot he owns, the County required him to pay the required fees before receiving a building permit. Sheetz challenged the constitutionality in Sheetz v. County of El Dorado. The state courts ruled against Sheetz and the California Court of Appeals found a “reasonable relationship between the fee charged and the burden posed by Sheetz’s development.”
On April 12, 2024, however, the US Supreme Court disagreed and tried to weaken the elected branch’s power to make land use decisions by sending the El Dorado County traffic impact fee back to the lower courts. It did this with an opinion that extended its holding in Koontz v. St. Johns River Water Management Dist., a 2013 case. In Koontz, the Court struck down a specific permit requirement where the Water Management District proposed a permit condition that the Court found excessive, the developer declined to accept the permit with that condition, and the Water Management District refused the permit.
The Supreme Court found a violation of the Takings Clause in Koontz even though it conceded that the permit condition was neither arbitrary nor unfair, and Koontz’s property was never taken. Since Koontz, the court has required that administratively set fees have a nexus to the development impact and be roughly proportional to that impact.
In Sheetz, El Dorado County’s Board of Supervisors set the amount of the fee in a planning document, so it applied county-wide, unlike the individual permit condition in Koontz. The Supreme Court found that this was unimportant because El Dorado’s permit fee was not individually tailored to the development’s impacts on the community.
The effect of Sheetz will be to shift development costs onto taxpayers in some cases and to increase development costs in others. Some local governments will avoid imposing impact fees at all, to avoid litigation costs. In those localities, part of the cost of development will fall on taxpayers. Other localities will hire staff or consultants to make individualized determinations of impact fees, thus increasing the cost in money and time of development approvals.
The Supreme Court is likely to continue to expand its Koontz/Sheetz precedent. The next steps will be to require plan review fees and utility connection fees to be individually assessed. While this will be good for lawyers and consultants, it does not serve the public interest.
If you have questions about impact fees, contact Martin Crim or a member of our local government team.