As anticipated by the “radical agreement” among the parties and justices at oral argument, the Supreme Court’s recently released decision in Sheetz v. County of El Dorado put to rest the question of whether legislatively-imposed land use permit conditions are outside the scope of the takings clause. The unanimous ruling confirms the common-sense proposition that a state action cannot evade constitutional scrutiny simply because it’s a law of general application rather than an administrative decree, and subjects conditions on building permits – whether monetary or not – to the essential nexus and rough proportionality requirements enshrined in the Nollan and Dolan cases.
The narrow ruling reflects the sound principle that, when dealing with constitutional questions, a court shouldn’t address hypotheticals or other issues not in direct contention among the parties. Nonetheless, the majority felt compelled to state that it would not address “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,” which seems to leave open the possibility that the answer might be “no.” Justice Gorsuch, in his concurrence, was astonished by this statement, wondering how a court which had just endorsed the universal applicability of the takings clause could stumble into another arbitrary distinction with no basis in common sense or constitutional law.
The court’s concern was not a jurisprudential one, but apparently a policy one: in another concurrence, Justices Kavanaugh, Kagan and Jackson note that “[i]mportantly, therefore, today’s decision does not address or prohibit the common government practice of imposing permit conditions, such as impact fees, on new developments . . . .” The justices’ impression that applying the current Nollan/Dolan formula to impact fees would or even could “prohibit” them is unfounded. As Emily Hamilton and I wrote in our amicus brief, Florida’s courts have adopted an even stricter test than in Nollan/Dolan, requiring a specific nexus between the government services that impact fees will fund and the needs of new construction, yet impact fees are ubiquitous there. It’s worth underlining: impact fees themselves aren’t the enemy, and Nollan/Dolan doesn’t forbid them.
The absence of mention of the experience of the many state courts which have addressed these same questions going back 30 years is puzzling. After all, the constitutional question in Sheetz has been pending since at least 1995, when the Supreme Court denied certiorari in Parking Association of Georgia v. City of Atlanta, 264 Ga. 764, 450 S.E.2d 200 (1994), cert. den. 515 U.S. 1116, 115 S.Ct. 2268, 132 L.Ed.2d 273 (1995). Justice Thomas, dissenting from the denial of certiorari in that case along with Justice O’Connor, noted “confusion in the lower courts” even at that time, just a year after Dolan had been issued. That the question has been left to fester for so long is unfortunate, particularly where the answer was so straightforward as to command a concise, 9-0 opinion. Writing at the Inverse Condemnation blog in 2017, attorney Robert H. Thomas reasonably surmised than certiorari on the same issue had failed that year as well due to uncertain support for a reversal among the justices, but that now seems difficult to reconcile with the unanimous result in Sheetz.
Underlining the court’s lack of familiarity with state experience is the limited list of cases cited to establish a split in authority. Apart from the California case under petition, the majority lists only four cases, from Ohio, Illinois, Alabama and Arizona, omitting many other applicable cases from states including Florida, Nebraska, Oregon, Colorado, Maryland, Arkansas, Minnesota, Kentucky, Tennessee and North Carolina. Even the Parking Association case from 1995 which resulted in a published opinion is nowhere mentioned. The lack of discussion of this context obscures the experience of many of these states with applying the Nollan/Dolan test to permit conditions and makes the decision perhaps appear more consequential and further reaching than it actually is.
Even in those states where Sheetz overrules precedent – California, Arizona, Nebraska, Alabama, Maryland, Georgia, Oregon, Washington and possibly others – the impact of the decision is likely to be modest, at least in the near term. Starting with the California courts, where the housing stakes are highest, lower courts, courts of appeals and state supreme courts will need to revisit prior decisions and determine how to apply Nollan/Dolan to legislative permit conditions. Fortunately, they have a wealth of jurisprudence from other states to consider in their analysis.* If at least one court accepts the majority’s invitation to apply a watered-down version of the test to legislative exactions, yet another split in authority will emerge.
State courts which do apply the Nollan/Dolan doctrine faithfully will, if Florida is any indication, help unshackle housing production by shifting generalized municipal cost burdens off new construction while still allowing new development to account for any directly related and immediate costs. For California, that result would go a long way to addressing the unjust situation that George Sheetz found himself in years ago, and which adds to the cost and detracts from the production of so much other housing.
*For examples, see Anderson Creek Partners, L.P. v. Cnty. of Harnett, 2022-NCSC-93, 382 N.C. 1, 876 S.E.2d 476, reh’g denied, 878 S.E.2d 145 (N.C. 2022); Home Builders Ass’n of Dayton & the Miami Valley v. Beavercreek, 2000-Ohio-115, 89 Ohio St. 3d 121, 127, 729 N.E.2d 349, 355; Knight v. Metro. Gov’t of Nashville & Davidson Cnty., Tennessee, 67 F.4th 816 (6th Cir. 2023), Kottschade v. City of Rochester, 537 N.W.2d 301, 308 (Minn. Ct. App. 1995); Amoco Oil Co. v. Village of Schaumburg, 277 Ill.App.3d 926, 214 Ill.Dec. 526, 661 N.E.2d 380 (1995), cert. den. 519 U.S. 976, 117 S.Ct. 413, 136 L.Ed.2d 325 (1996); St. Johns Cnty. v. Ne. Fla. Builders Ass’n, Inc., 583 So. 2d 635, 637 (Fla. 1991); William J. (Jack) Jones Ins. Tr. v. City of Fort Smith, Ark., 731 F. Supp. 912, 914 (W.D. Ark. 1990).