Leveling the Playing Field: Sheetz v. County of El Dorado and the Expansion of Property Rights in Legislative Exactions

Alyssa Byrnes

I. Introduction

George Sheetz (“Sheetz”), a California homeowner with plans to build a modest single-family home in the quiet countryside, unexpectedly became the focal point of a legal clash that would reverberate through land-use regulation. His plans seemed simple enough—he wanted a place to retire with his wife and grandchild in a prefabricated home. In his path stood the County of El Dorado ( “County”). The County demanded a substantial fee as a condition for granting Sheetz's building permit, seeing this contribution as crucial to fund community improvements needed to support ongoing development. What started as a seemingly routine requirement quickly escalated into a pivotal question: should legislative conditions on property development face the same constitutional scrutiny as administrative conditions under the Takings Clause?^[1] The answer to this question would have far-reaching implications for property owners and governments alike.

II. The Implementation of the Traffic Impact Mitigation Fee

The County is located in a rural area of California.^[2] It was home to the famous Gold Rush in 1849, where Americans quickly settled down in California to mine the plethora of untouched gold.^[3] This jurisdiction has 1,700 square feet of backcountry, which contains the Sierra Nevada Mountain range and the Eldorado National Forest.^[4] In recent years, it had experienced significant growth and increased new developments.^[5] Because of this growth, there became an increased demand for county money to pay for the necessary land improvements, like repaving and widening existing roads, and collection systems for water and other resources. In order to achieve this goal, the County Board of Supervisors (“Board”), being a legislative body under California state law, passed an act to try to address these issues.^[6]

In 2004, the Board adopted a new plan, called “2004 El Dorado County General Plan: A Plan for Managed Growth and Open Roads; A Plan for Quality Neighborhoods and Traffic Relief” (the “General Plan”), which required new development to “pay for road improvements necessary to mitigate the traffic impacts from such development[s].”^[7] The fee at issue in this case was added later as an amendment to the General Plan in 2012.^[8] The traffic impact mitigation fee program (the “TIM fee” or “fee program”) authorized the County to impose the fee program as a condition for approval of new developments. This fee would be collected as a legislative measure designed to address the rising demand for public services, such as traffic management, due to new developments.^[9] The fee program consisted of two components: the Highway 50 and local road segment and the type of development segment. Together, these components assessed fees based on the project's location and type, following a predetermined rate schedule.^[10] The County made no “individualized determinations” for the amount to be paid.^[11]

III. The Legal Landscape

A. The Takings Clause

The Takings Clause of the Fifth, and the Due Process Clause of the Fourteenth Amendments prohibits the government from taking private property for public use without just compensation.^[12] The reason is that by requiring the government to pay for what it takes, individuals do not have to bear the “public burden” that should be carried by the public as a whole.^[13] This principle encompasses both physical and regulatory takings. A common form of land-use regulations is exactions, which are conditions imposed by governments on developers, such as land dedications or payment of fees required for obtaining building permits.^[14] Exactions ensure that developers internalize the costs their developments impose on the community, such as increased traffic or environmental impact.^[15] However, these exactions must conform to constitutional limits under the Takings Clause, particularly as clarified by the U.S. Supreme Court’s rulings in Nollan v. California Coastal Commission and Dolan v. City of Tigard. Koontz v. St. John’s River Water Management District which expanded the scope of Nollan/Dolan to include monetary exactions.^[16]

In Nollan, the Court introduced the "essential nexus" requirement which states that for an exaction to be constitutional, it must have a direct connection to the public interest that the development impacts.^[17] For example, the government cannot demand a public easement in exchange for a permit unless there is a clear connection between demanding such land be used by the government and the development's negative effects, such as dedicating a portion of the land to address drainage issues caused by increased runoff from new developments.^[18] Absent such connection, the condition is “an out-and-out plan of extortion” and improper taking that violates the Takings Clause.^[19] The Court wanted to ensure that for the government to act in furtherance of its stated purpose, it would not leverage its permit-issuing power to obtain unrelated public benefits from property owners.^[20] Nollan emphasized that conditions placed on property owners must directly address the specific problem the development creates; if the exaction is irrelevant, too attenuated, or only tangentially related to the development, it constitutes an unconstitutional taking under the Takings Clause.^[21]

Seven years later, Dolan built on the Nollan ruling by adding a second prong to the test: the "rough proportionality" requirement.^[22] In Dolan, the Court held that the City of Tigard's requirement for the dedication of land for a public greenway as a condition for expanding a business was unconstitutional because the burden was disproportionate to the impact of the proposed development.^[23] Having to dedicate land for a public greenway versus having to give 100 feet of land for the improvement of the storm drainage system imposes vastly different burdens; only one has a benefit to the public that is roughly proportional to the state’s interest in preventing floods and mitigating traffic. Therefore, the exaction must be proportional to the impact of the development: the burden imposed on the developer must not exceed the benefits to the public.^[24]

In Koontz v. St. Johns River Water Management District, the Supreme Court expanded the scope of the Nollan/Dolan test to include monetary exactions and permit denials. This further solidified the protections property owners have under the Takings Clause.^[25] The petitioner, Koontz, was denied a development permit after refusing to comply with the government’s demand to either reduce the size of his development or fund unrelated public improvements on government-owned land.^[26] The Court held that monetary exactions, like demands for land, must meet the essential nexus and rough proportionality standards to avoid violating the Takings Clause.^[27] By ruling that the Nollan/Dolan test applies even when the exaction involves money rather than land, the Court prevented “governments [from] circumventing” constitutional scrutiny by imposing financial conditions on developers instead of physical takings.^[28]

B. The Debate: Is There A Difference Between Administrative and Legislative Exactions?

Despite these safeguards, there remained uncertainty about whether the Nollan/Dolan test applied to exactions imposed both by administrative and legislative bodies. Administrative exactions, typically imposed by zoning boards or similar bodies on a case-by-case basis, are subject to strict scrutiny under the Nollan/Dolan test because of the risk of government overreach and the individualized nature of the demands.^[29] These exactions can appear coercive, as developers are often placed in a position where they must comply with specific, discretionary conditions in order to receive a permit, making it important to ensure that there is both an essential nexus and rough proportionality between the condition, and the harm the development causes.^[30]

On the other hand, legislative exactions are imposed through broader statutes or ordinances and typically apply uniformly to a large class of property owners.^[31] Proponents argue that because legislative exactions are developed through a democratic process, they inherently carry more legitimacy and should not be subjected to the same stringent review as administrative exactions.^[32] The reasoning here is that legislative exactions, passed by elected representatives and subjected to public input, are less likely to be arbitrary or coercive.^[33] The involvement of the legislature, rather than a discretionary administrative body, reduces the potential for abuse, as the law is applied generally and not targeted at specific developers.^[34] However, critics argue that legislative exactions can still disproportionately affect certain property owners, especially developers, and may result in an unfair distribution of public burdens.^[35]The concern is that without subjecting legislative exactions to the Nollan/Dolan test, governments could use broad ordinances to circumvent the constitutional limits set by the Takings Clause, imposing burdensome conditions without proper justification. ^[36]

IV. The Judicial System’s Take On Sheetz v. County of El Dorado

Sheetz owned property close to Highway 50, which the County considered “Low Density Residential,” and wanted to build a prefabricated home for his family to live on.^[37] Per the fee schedule and as a requirement of receiving the permit to build, Sheetz was required to pay a TIM fee of $23,420.^[38] Sheetz paid the fee under protest to obtain the necessary permit and later asked the County for a refund, to which they did not respond.^[39] Later, he sought his money back in state court, arguing that, under Nollan/Dolan,^[40] the County violated the Takings Clause because the fee was unconstitutional.^[41]

A. The Lower Court’s Interpretation of the Takings Clause

Sheetz's lawsuit was grounded in the Takings Clause of the Fifth and Fourteenth Amendments. Sheetz claimed that the fee, as applied to his project, lacked an essential nexus to the traffic impact created by his single-family home. Additionally, he argued that the fee failed the rough proportionality requirement since no specific analysis was conducted to show that his development would cause traffic congestions or require infrastructure improvements directly related to the fee.^[42] He alleged that the County was required to make individualized determinations to justify that the traffic impact fee imposed on his specific development was "necessary to offset traffic congestion.”^[43] The blanket application of the fee violated the unconstitutional conditions doctrine, which mandates that such conditions, even in the form of monetary fees, be justified on an individual basis.^[44] Sheetz contended that the Nollan/Dolan "essential nexus" and "rough proportionality" tests should apply to legislative exactions just as they do for discretionary administrative conditions.^[45]

The state court rejected Sheetz’s argument. On appeal, the California Court of Appeals affirmed that Nollan/Dolanscrutiny was limited to administrative conditions imposed on an individual basis, not legislative conditions.^[46] The court held that the TIM fee was a product of a legislative program, uniformly applied to new developments countywide rather than targeted at his specific project.^[47] This broad application meant that the fee program did not hinge on the particulars of Sheetz’s development but was structured to systematically address the general impacts of new development on the county’s road infrastructure.^[48] The court viewed this kind of legislative fee as inherently less prone to arbitrary enforcement since it was set by elected officials under transparent, statutory guidelines, thus subject to political accountability rather than judicial review under Nollan/Dolan.^[49] The judgment upheld the validity of the fee, rejecting Sheetz’s claims.

In response, Sheetz petitioned for certiorari, raising the central issue of whether the Takings Clause recognizes a distinction between legislative and administrative conditions on land-use permits.^[50] The Supreme Court granted certiorari to address this question and resolve a division among state courts on whether legislative fees must satisfy the Nollan/Dolan standards.^[51]

B. The Supreme Court Finds No Difference Between Administrative and Legislative Exactions

The Supreme Court vacated the judgment of the California Court of Appeal and remanded the case, holding that legislatively imposed exactions are not exempt from scrutiny under the Nollan/Dolan test.^[52] Sheetz lost in the lower courts because the traffic impact fee was deemed a legislatively imposed, generally applicable fee rather than an individualized exaction that would trigger the Nollan/Dolan heightened scrutiny.^[53] The courts ruled that the fee did not trigger the heightened scrutiny of Nollan/Dolan because it applied broadly and was not an ad hoc exaction.^[54] However, the Supreme Court found that even a legislatively set fee, if not reasonably tailored to address specific development impacts, could be an overreach of government power akin to “extortion.”^[55] The Court's decision drew on precedent from cases like Koontz v. St. Johns River Water Management District. By directly comparing Koontz and the present case, the Court underscored that the protections established in Koontz apply broadly to ensure that government demands on property owners meet constitutional standards across all forms of exactions.^[56]

Both cases involve government-imposed monetary demands as conditions for permit approvals. In Koontz, the state’s water management district denied Mr. Koontz a development permit until he either funded public land improvements on district property or paid for costly environmental mitigation efforts, none of which were directly related to the impact of his specific project.^[57] The Court held that government demands for monetary payments in exchange for permit approval could, in fact, be exactions subject to Nollan/Dolan tests because a government’s leverage over permit approvals could lead to coercive demands. This could create an "unconstitutional conditions" problem, where the government essentially “takes” property or its monetary equivalent without providing the just compensation required by the Takings Clause.^[58] The Koontz ruling was significant in reinforcing that the form of the exaction, whether it be land or money, does not exempt it from scrutiny under the Takings Clause.^[59]

The Supreme Court applied this reasoning in Sheetz. The TIM fee was legislatively imposed and calculated based on a rate schedule within the County’s General Plan, designed to address infrastructure needs spurred by development.^[60]The Court found that this distinction between legislative and administrative conditions undermined the protections set forth in Koontz.^[61] The Court reasoned that it is not the method by which an exaction is imposed, but rather the substance of the demand itself and its potential impact on property rights.^[62] Thus, by invoking Koontz, the Court reinforced the principle that the Takings Clause does not permit a legislative workaround to exact conditions that lack a close relationship to the public harm allegedly mitigated by a development.^[63] Legislative demands imposed as a condition for a permit are subject to the same scrutiny as administrative physical or monetary exactions.^[64]

The U.S. Supreme Court held through this case that the Takings Clause does not distinguish between legislative and administrative permit conditions.^[65] All land-use permit conditions must satisfy the Nollan/Dolan test to avoid unconstitutional takings. Permit conditions imposed by the legislature or other branches of government are equal in the eyes of the Nollan/Dolan test, as the constitution does not limit the Taking Clause to any particular government or government entity.^[66] This holds true for per se takings, regulatory takings, and unconstitutional condition doctrine. Quoting Cedar Point, the Court found that “[t]he essential question is not . . . whether the government action at issue comes garbed as a regulation (or statute, or ordinance, or miscellaneous decree). It is whether the government has physically taken property for itself or someone else.”^[67]

V. Legal Implications

The Court’s ruling in Sheetz thus clarifies that legislatively imposed exactions cannot bypass the protections of the Takings Clause. This decision underscores the importance of ensuring that even broadly applied fees are connected to the specific impacts of the development and are proportionate to those impacts.

A. What Could Happen To New York

The Supreme Court's decision in Sheetz v. El Dorado County has significant potential implications for New York, particularly in how municipalities handle development impact fees. The Court ruled that legislatively enacted fees, such as New York City's impact fees for infrastructure, must now comply with the Nollan/Dolan test, which requires an essential nexus and rough proportionality between the fees imposed and the specific impacts of the development.^[68]This decision means that even broad legislative fees, which were previously subject to less scrutiny, will now need to be justified with detailed connections to the individual development’s impact on public infrastructure or services. This will likely result in increased legal challenges as developers argue that the fees are not adequately tied to the specific effects of their projects, which could delay development and raise litigation costs​.^[69]

In New York, particularly in high-growth areas like New York City, this could disrupt how municipalities fund necessary infrastructure through standardized development fees.^[70] Cities will need to reassess how they justify these fees to ensure compliance with the heightened scrutiny imposed by the Nollan/Dolan framework. Additionally, the ruling may have a ripple effect on affordable housing projects, where fees play a critical role in financing public-private partnerships. The decision could lead to slower approval times for affordable housing developments, as municipalities are forced to conduct individualized assessments of fees, adding further complexity to the already strained housing market.^[71]

The decision will require New York municipalities to strike a new balance between promoting development and safeguarding property rights under the Fifth and Fourteenth Amendments, making land-use regulations more complex and litigious​.

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^[1] Sheetz v. County of El Dorado, 601 U.S. 267, 271 (hereinafter “Sheetz”).

^[2] Id. at 271.

^[3] 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), The government had George Sheetz ‘over a barrel.’ He took his case to the Supreme Court—and won. | Pacific Legal Foundation (November 1, 2024). This was called the California Dream, the revamp of the American Dream. ““It once was seen glittering in the California gold fields…. Founded on expectation and hope, the California Dream promises to fulfill our deepest longings for opportunity and success, warmth, sunshine and beauty, health and long life, freedom, and even a foretaste of the future.”

^[4] Sheetz, 601 U.S. at 271.

^[5] Id.

^[6] Id.

^[7] Sheetz v. County of El Dorado, 84 Cal. App. 5th 394, 401; 300 Cal. Rptr. 3d 308, 312 (3d Dept 2022) (hereinafter “Sheetz v. County of El Dorado”).

^[8] Id. at 402, 300 Cal. Rptr. 3d at 312.

^[9] Id.

^[10] Id.

^[11] Id.

^[12] Id. (“The just compensation requirement comes from the Fifth Amendment’s Takings Clause, which provides: ‘nor shall private property be taken for public use, without just compensation.’”); Hunter Dominick, Nondelegation and the Legislative Versus Administrative Exactions Divide: Why Legislatively Imposed Exactions Do Not Require A More Searching Standard of Review, 92 Fordham L. Rev. 2195, 2204 (2024) (hereinafter “Legislative Versus Administrative Exactions Divide”).

^[13] Sheetz, 601 U.S. at 273-74.

^[14] Dominick, supra note 12, at 2203.

^[15] Id.

^[16] Id. at 2204.

^[17] Id. at 2204-06; Sheetz, 601 U.S. at 275.

^[18] Dominick, supra note 12, at 2205.

^[19] Id.

^[20] Sheetz, 601 U.S. at 275.

^[21] Dominick, supra note 12, at 2205-06.

^[22] Id. at 2206-08.

^[23] Id. at 2207 (“In the Court's view, the public nature of the greenway did nothing to mitigate the flood hazards, and the agency did not sufficiently determine that a public greenway would offset increased traffic” and was therefore unconstitutional.).

^[24] Id. at 2208. This idea comes from the unconstitutional conditions doctrine that “prohibits the government from forcing a person to cede a constitutional right for a discretionary government benefit if that benefit is insufficiently related to the right.”

^[25] Id. at 2209 (“In the Court's view, applicants could be coerced into accepting any condition so long as it was less valuable than the building permit.”).

^[26] Id. at 2208.

^[27] Id. at 2209.

^[28] Id.

^[29] Id. at 2199, note 20.

^[30] Id. at 2207-08.

^[31] Id. at 2201.

^[32] Id.

^[33] Id. at 2217.

^[34] Id. at 2218.

^[35] Id.

^[36] Id. at 2201.

^[37] Sheetz, 601 U.S. at 272.

^[38] Id.

^[39] Id.

^[40] Nollan v. California Coastal Comm’n, 483 U. S. 825 (1987); Dolan v. City of Tigard, 512 U. S. 374 (1994). Because of these cases (“Nollan/Dolan”) the Supreme Court has created a two-part test to determine the validity of a condition placed on a land-use permit.

^[41] Sheetz v. County of El Dorado, 84 Cal. App. 5th at 402-03, 300 Cal. Rptr. 3d at 312-13.

^[42] Brief of Appellant-Petitioner at 17, Sheetz v. County of El Dorado, 601 U.S. 267 (2024) (No. 22-1074).

^[43] Sheetz, 601 U.S. at 272.

^[44] Brief of Appellant-Petitioner at 19, Sheetz v. County of El Dorado, 601 U.S. 267 (2024) (No. 22-1074).

^[45] Sheetz v. County of El Dorado, 84 Cal. App. 5th at 402-03, 300 Cal. Rptr. 3d at 312-13.

^[46] Sheetz, 601 U.S. at 273.

^[47] Sheetz v. County of El Dorado, 84 Cal. App. 5th at 410, 300 Cal. Rptr. 3d at 318-19.

^[48] Id. at 410-11, 300 Cal. Rptr. 3d at 319.

^[49] Id. at 415, 300 Cal. Rptr. 3d at 322-23; Sheetz 601 US at 271.

^[50] Sheetz, 601 U.S. at 273.

^[51] Id.

^[52] Id. at 280.

^[53] Id. at 276.

^[54] Sheetz v. County of El Dorado, 84 Cal. App. 5th at 406-07, 300 Cal. Rptr. 3d at 316.

^[55] Sheetz, 601 U.S. at 276, 279.

^[56] Id. at 276.

^[57] Dominick, Legislative Versus Administrative Exactions Divide, 92 Fordham L. Rev. at 2218.

^[58] Sheetz, 601 U.S. at 274-75.

^[59] Id. at 279.

^[60] Id. at 272.

^[61] Id. at 276.

^[62] Id. at 278-79.

^[63] Id. at 279.

^[64] Dominick, supra note 12, at 2209.

^[65] Sheetz, 601 U.S. at 276.

^[66] Id. at 279.

^[67] Id. at 278-79 (quoting Cedar Point Nursery v. Hassid, 594 U.S. 139, 149 (2021)).

^[68] Id. at 279.

^[69] Chris Rizza, Sheetz v. El Dorado County: A Victory Against Overbearing Impact Fees, Harvest Real Estate Law(May 2024), Sheetz v. El Dorado County: A Victory Against Overbearing Impact Fees | Harvest LLP | A Premier Real Estate Law Firm (October 18, 2024).

^[70] Id.

^[71] United States Supreme Court Rules Takings Clause Applies to Legislatively Created Land-Use Permit Fee Schedules, O’Melveny (April 2024), United States Supreme Court Rules Takings Clause Applies to Legislatively Created Land-Use Permit Fee Schedules - O'Melveny (omm.com) (October 18, 2024).