Legal Alert

Supreme Court Case Will Clarify Constitutionality of Permit Exaction Fees

by Edward D. Rogers, Lee C. Silverman, and Nathan Farris
October 3, 2023


The Supreme Court of the United States announced that it will hear a Takings Clause case under the Fifth Amendment that will clarify whether permit exaction fees authorized by legislation are exempt from the unconstitutional-conditions doctrine adopted in prior Supreme Court cases. Under earlier Supreme Court decisions, exactions imposed as a condition of a land-use permit required an “essential nexus” and “rough proportionality” between the exaction and the impact of the property owner’s development. 

The Upshot

  • An exaction is a condition imposed by the government upon a property owner or developer to pay money or give a property interest to the government agency before the agency approves a permit.
  • State and federal courts are divided over whether the requirements of a nexus and proportionality extend to a generally applicable, legislatively created exaction.
  • The Supreme Court has agreed to decide this question.

The Bottom Line

The Supreme Court’s decision should provide guidance for those property owners, such as developers, who require land-use permits subject to exactions that do not meet the “essential nexus” and “rough proportionality” tests established by the Supreme Court in earlier decisions.

On Friday, September 29, 2023, the Supreme Court of the United States granted certiorari in George Sheetz v. County of El Dorado, which should clarify the circumstances under which an exaction for a land-use permit created by legislation violates the Takings Clause of the United States Constitution. Specifically, the Court will consider whether an exaction is constitutional even absent an “essential nexus” and “rough proportionality” between the exaction and the impact of the property owner’s development.

The property owner applied for a building permit to develop a modest single family home. A condition of that permit required the owner to pay an impact mitigation fee. The fee was enacted by the county as part of a Traffic Impact Mitigation Fee Program to finance new roads and widen existing roads. The county required a fee of $23,420 from the landowner. The owner paid the fee under protest and commenced suit in the trial court. The trial court denied relief and the owner appealed to the California Court of Appeal, which affirmed the denial. The California Supreme Court denied review.

The Court of Appeal’s reasoning was based on an exception the California courts had created from the standards set down in previous permit exaction cases decided by the Supreme Court. In Nollan v. California Coastal Commission, 483 U.S. 825 (1987), the Supreme Court determined that an exaction of a property interest had to have an “essential nexus” to the proposed project. In Dolan v. City of Tigard, 512 U.S. 374 (1994), the Supreme Court recognized that the exaction of property must be “roughly proportional” to the impact of the proposed project. Then in Koontz v. St. Johns River Water Management District, 570 U.S. 595 (2013), the Supreme Court clarified that compensable takings for land use permits can include money and not just real property.

The California courts established an exception to the Nollan/Dolan review for exactions created by legislation as opposed to those that are ad hoc. Thus, in California, a generally applicable exaction created by legislation is not subject to the nexus and rough proportionality tests. In its petition for certiorari, the owner asks the Supreme Court to invalidate that exception. Other courts have declined to create such an exception, holding, for example, that the legislature will not adequately protect property owner’s constitutional rights. See Town of Flower Mound v. Stafford Estates, 135 S.W.3d 620 (Tex. 2004).

In granting certiorari, the Supreme Court will resolve this division between the courts, and should provide guidance for developers and other property owners who require land-use permits and may be subject to unreasonable exactions.

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