When the government wants to take private property for a public project, it must compensate the owner at fair market value. The just compensation concept comes from the Fifth Amendment’s Takings Clause, which provides: “nor shall private property be taken for public purpose, without just compensation.” These twelve words have produced much litigation, often centering on what is, or is not, a “taking.”
Last week, the Supreme Court seized an opportunity to solidify one area of takings jurisprudence while punting on another. In Sheetz v. County of El Dorado, California, a unanimous high court agreed that the Takings Clause applies to legislation-imposed fees. George Sheetz sought to build a modest home on his private land. When he applied for a building permit, the County conditioned the permit on Mr. Sheetz paying a traffic impact fee. He paid the fee under protest and challenged this County-wide practice in state court. The lower court rejected the challenge, holding that the traffic impact fee did not violate the Takings Clause because it was imposed by legislation. The Supreme Court reversed, reasoning that conditions on building permits are not exempt from takings scrutiny merely because a legislature imposed them.
But – and it’s an important but – the Supreme Court did not decide the companion issue: namely, whether the widespread government practice of imposing permit conditions, including impact fees of every variety, on classes of development rather than specific parcels is a taking. This issue, according to the Supreme Court, was not decided by the lower court and thus not for the Supreme Court to decide. That decision, or lack thereof, leaves those similarly situated to Sheetz with little guidance.
Takings jurisprudence, guided by the so-called Nolan/Dolan test, requires, in general terms, that a permit condition have a sufficient nexus to a legitimate land-use interest. In plain terms, if the government requires a private land owner to pay a fee in exchange for a permit, the payment must be necessary to mitigate harm caused by the owner’s new development. Logic therefore suggests that, if Mr. Sheetz’s new home has no material impact on nearby traffic, he ought not be required to pay a fee to offset phantom traffic.
Given the questions unanswered by the Supreme Court, state courts across the country are certain to confront the issue and, with any luck, state jurists will find a taking if the government imposes a condition on land development that bears little relationship to whatever harm the development may cause. Riddle me this: if a new development does not impact traffic, schools, or other conditions often tied to permit approvals, why should a developer pay any impact fee at all?
