In 2024, in what was heralded as a big win for developers in California, the U.S. Supreme Court upended decades of California precedent and held that legislatively enacted development impact fees must satisfy the "essential nexus" and "rough proportionality" tests established in Nollan v. California Coastal Commission (1987) 483 U.S. 825 and Dolan v. City of Tigard (1994) 512 U.S. 374. Sheetz v. County of El Dorado (2024) 601 U.S. 267. But the Supreme Court did not decide whether the legislatively enacted fee program at issue in Sheetz actually failed to comply with Nollan/Dolan. Instead, it remanded that issue back to the California courts so that they could address that issue in the first instance. After supplemental briefing and additional oral argument, the California Court of Appeal has again rejected Mr. Sheetz's takings challenge, holding in a published opinion that the County of El Dorado's legislatively enacted fees satisfy Nollan/Dolan.
On the issue of "essential nexus," the Court of Appeal found it clear "that the required nexus exists between the County's legitimate interest/regulatory goal of minimizing traffic congestion and the [transportation impact mitigation] fee, which is imposed on all new development to finance roadway improvements to meet increased traffic needs caused by such development." On the issue of "rough proportionality," the Court of Appeal established a burden-shifting regime, stating that the "the County has the burden of demonstrating the required degree of connection--'rough proportionality'--between the challenged land-use exaction and burden or projected social costs/public impacts of Sheetz's proposed project." If the County satisfies this initial burden, the burden then shifts to the property owner to demonstrate that the fee is invalid because it "bears no reasonable relationship to the cost of the public facility or portion of the public facility attributable to his development project."
After reciting the history behind the County's development of the fee program--essentially the use of technical reports based on traffic demand modeling to establish a fee schedule for particular types of development--the Court of Appeal found that the County had satisfied its initial burden by establishing "a factually sustainable proportionality between the effects of new development on traffic congestion and the amount of the challenged impact fee." As a result, the burden then shifted to Sheetz. And the Court of Appeal found that "Sheetz failed to establish that the fee is invalid because the amount ($23,420) bears no reasonable relationship to the cost of the public facility or portion of the public facility attributable to his development project."
No doubt, public agencies are now collectively breathing a huge sigh of relief, as the California Court of Appeal has confirmed that legislatively enacted fees can satisfy Nollan/Dolan, and it also expressly rejected the argument that the Fifth Amendment to the U.S. Constitution requires an individualized or project-specific determination of essential nexus and rough proportionality in all instances. But public agencies may want to hold off on celebrating the County of El Dorado's victory for the time being, as one can expect that Sheetz will appeal the decision to the California Supreme Court. And if things don't go his way there, then he will likely file another petition with the U.S. Supreme Court and see if he can get the Supreme Court to hear the same case a second time (an incredibly rare occurrence).
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