Photo Credit: Sheetz v. Cnty. of El Dorado, Cal., The Federalist Society, https://fedsoc.org/case/sheetz-v-county-of-el-dorado-california (last visited Feb. 22, 2025).
Authored by: Annabelle F. Holliday
Trial attorneys are increasingly arguing that government-imposed development fees, especially when disconnected from a development’s actual impact, violate the Fifth Amendment’s Takings Clause. In the landmark decision Sheetz v. County of El Dorado, California, the Supreme Court reinforced the constitutional safeguard provided to property owners under the Takings Clause.[1] This case involved a challenge to a traffic impact fee of $23,420 that El Dorado County imposed on the property owner, George Sheetz, as a condition of the issuance of a building permit for his manufactured home.[2] In his challenge, Sheetz correctly contended that the impact fee was not an individualized assessment of the actual impact of his development, but was instead a legislatively mandated exaction that constituted an unconstitutional taking.[2] The Court unanimously held that permit fees created by legislation are not exempt from the constitutional review applied to administrative action, and that the government cannot extort developers by imposing arbitrary or excessive fees.[4] Undoubtedly, the case will be spawning additional litigation and policy adjustments at the local level as municipalities review their fee programs to ensure compliance with the constitutional requirements cited in the case.
The Court’s decision in Sheetz is built upon the Fifth Amendment and previous Supreme Court holdings that have strengthened property rights and mandated municipalities to only exact fees that are constitutionally permitted.[5] The Takings Clause asserts that the government may not take private property for public use without paying just compensation.[6] Accordingly, in Nollan v. California Coastal Commission, the Court introduced the “essential nexus” test by holding that there must be a legitimate connection between what the government seeks and what it justifies as a regulatory need.[7] Building on Nollan, the Court in Dolan v. City of Tigard introduced the “rough proportionality” test.[8] Here, the Court held that even if a government condition meets the nexus requirement, it must also be roughly proportional to the development’s impact.[9] Several years later, in Koontz v. St. Johns River Water Management District, the Court extended these principles, holding that the monetary exactions, such as impact fees, must also meet the same constitutional scrutiny as physical land dedications.[10] In response, trial attorneys have since leveraged Koontz as a precedent to argue that when governments impose fees or conditions that are not directly related to the specific impact of a proposed development, the government is effectively taking private property without just compensation which is a clear violation of the Fifth Amendment.[11] Consequently, in Sheetz, when the county implemented a flat rate scheme according to type and place of development, and not based on a case-by-case determination of the real traffic impact caused by Sheetz’s development, Sheetz argued that the fees did not meet constitutional standards.[12]
Nonetheless, the lower courts held that fee schedules enacted legislatively were not subject to the same kind of scrutiny as administrative actions.[13] Accordingly, this position effectively permitted El Dorado County to utilize its legislative power to impose a flat fee on developers without necessarily tying it to the precise impacts of an individual development. However, on appeal, the Supreme Court’s decision overturned the lower courts’ distinction.[14] In the opinion written by Justice Barrett and unanimously agreed to by the Court, the Court followed Sheetz’s reasoning and dismissed the contention that a legislative exaction was different than an administrative agency exaction.[15] The Court asserted that the Takings Clause makes no distinction between permit conditions imposed by legislation and those imposed through administrative actions.[16] Thus, this holding requires that if a fee is charged by statute or by an administrative proceeding, it must meet the “essential nexus” and “rough proportionality” tests established in Nollan and Dolan.[17] Accordingly, the holding prevents municipal governments from abusing statutory authority to demand excessive fees from property developers.[18]
Consequently, the Sheetz ruling has significant implications for municipalities that use development fees as a source of revenue for public infrastructure improvements. First, by holding legislatively imposed fees to the same strict constitutional requirements as individually tailored administrative conditions, the Court has established an absolute rule that development fees are to be tied directly to the predicted impact of a development. This decision effectively limits the power of governments to approximate flat or discretionary fees that can be utilized to produce revenue at the expense of property holders without a proportionate public gain. Second, the decision reinforces the doctrine that property rights are sacred. Property rights were included in the Constitution not only to protect private property from unauthorized takings, but also to ensure that governments are accountable if they attempt to encumber property with permit requirements or fees.[19] By addressing and then closing the loophole that allowed legislatures to impose fees without individualized review, the Court is able to reaffirm that government power must be exercised in a way that respects property rights. Lastly, although the Supreme Court’s decision leaves unresolved the specifics of how the “rough proportionality” standard will be applied to various types of developments, it makes clear that any condition on a permit will undergo a proportionality analysis.[20] Undoubtedly, the Court’s decision in Sheetz is a victory for property rights and a firm reaffirmation of the principle that government action, whether legislative or administrative, must be subject to strict constitutional scrutiny. This precedent ensures that any fees imposed by the government must be clearly justified by a direct connection to actual community costs imposed by the property development, and thus protecting property owners from government overreach.[21] For trial attorneys, Sheetz provides a powerful tool to challenge unconstitutional land use regulations and fees, and thus empowering developers and property owners to defend their rights when overreach arises.
[1] See 601 U.S. 267, 279 (2024); U.S. Const. amend. V.
[2] Sheetz, 601 U.S. at 272.
[3] Id.
[4] Id. at 279.
[5] See U.S. Const. amend. V; Dolan v. City of Tigard, 512 U.S. 374, 396 (1994) (stating that the “essential nexus” and “rough proportionality” tests establish the narrow conditions under which the government can lawfully condition permit approval on a property owner dedicating land for public use. First, any required dedication must directly address the negative impacts that the proposed development would have on the public. Second, the government cannot leverage the permitting process to pressure landowners into surrendering property that it would otherwise need to purchase).
[6] U.S. Const. amend. V.
[7] 483 U.S. 825, 841 (1987).
[8] Dolan, 512 U.S. at 391 (“[A] term such as ‘rough proportionality’ best encapsulates what we hold to be the requirement of the Fifth Amendment. No precise mathematical calculation is required, but the city must make some sort of individualized determination that the required dedication is related both in nature and extent to the impact of the proposed development.”).
[9] Id.
[10] 570 U.S. 595, 612 (2013) (“[Holding] that so-called ‘monetary exactions’ must satisfy the nexus and rough proportionality requirements of Nollan and Dolan.”).
[11] Koontz, 570 U.S. at 606.
[12] Sheetz, 601 U.S. at 272.
[13] Id. at 273.
[14] Id. at 279.
[15] Id. at 278.
[16] Id. at 270.
[17] Id.
[18] Id. at 276.
[19] The Editorial Board, The Supreme Court’s Road to El Dorado, Wall Street Journal (Jan. 7, 2024, 4:29 PM), https://www.wsj.com/articles/george-sheetz-v-county-of-el-dorado-property-rights-fifth-amendment-69ebc4c9 (“[A]s James Madison wrote in Federalist No. 10, the ‘great object’ of the Constitution was to secure private property ‘against the danger of such a faction, and at the same time to preserve the spirit and the form of popular government.’”).
[20] Sheetz, 601 U.S. at 284 (Kavanaugh, J., concurring) (“[T]he Court has not previously decided—and today explicitly declines to decide—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.’”).
[21] Nicole W.C. Yeatman, The government had George Sheetz ‘over a barrel.’ He took his case to the Supreme Court—and won., Pacific Legal Foundation (April 14, 2024), https://pacificlegal.org/sheetz-supreme-court/; Sheetz v. Cnty. of El Dorado: SLF urges Supreme Court to end Takings Clause debate, Southeastern Legal Foundation, https://www.slfliberty.org/case/sheetz-v-county-of-el-dorado/ (last visited Feb. 23, 2025).
American Journal of Trial Advocacy 