Wednesday, January 10, 2024
The U.S. Supreme Court held oral argument today in Sheetz v. County of El Dorado, a property rights case with the potential to redefine land use regulation nationwide.
It has long been a common practice for local governments to adopt legislation that dictates the types of conditions that will attach to development permits. For a routine example, consider local laws requiring developers to dedicate a defined percentage of their land to retain floodwaters. These conditions affect all corners of community life, as they aim to offset development impacts connected not only to flood risks but also to water and sewer infrastructure, roads, schools, fire and police response, housing affordability, the environment, and beyond.
Mr. Sheetz is questioning the constitutionality of this ubiquitous approach to the permitting process. It follows that anyone who hopes to one day develop land and anyone potentially impacted by the development of land—and most people fall into at least one of these categories—have something on the line.
Mr. Sheetz’s legal challenge revolves around the Takings Clause of the U.S. Constitution’s Fifth Amendment. By way of background, this constitutional provision precludes the government from “tak[ing] private property for public use, without just compensation.” It has been interpreted to apply not only to physical appropriations of property but also to regulations on property’s uses.
In the ordinary “takings” suit, as with civil litigation generally, the complaining party bears the burden of proving their case. However, the Court concluded thirty years ago in the conveniently rhyming cases of Nollan v. California Coastal Commission and Dolan v. City of Tigard that things are different where individual government officials exercise discretion to condition land use permits on the dedication of land or require a fee in lieu of such dedication on a case-by-case basis.
Where these case-by-case impositions are at stake, the Court expressed concern that government officials effectively could hold development permits for ransom. It concluded, therefore, that in this situation it is the government who, upon a landowner’s complaint, must demonstrate that the permit condition meets an exacting standard of “nexus and proportionality” to avoid having to pay compensation. To do so, said the Dolan Court, the government must make an “individualized determination” about the impacts anticipated to result from the claimant’s proposed development and align the permit conditions directly to those impacts.
In the case the Court heard this morning, Mr. Sheetz contends that a local ordinance requiring all similarly situated developers to pay a traffic impact mitigation fee poses the same threat of government extortion that animated the permit condition contexts at issue in Nollan and Dolan. The Sheetz case thus will decide whether heighted scrutiny of the Nollan and Dolan variety applies not only to permit conditions imposed on a case-by-case basis but also in situations in which the government adopts more broadly applicable permit conditions via legislation.
The County conceded at the top that simply because a permit condition is imposed via legislation does not categorically immunize that condition from unconstitutional conditions review. Justices Thomas and Gorsuch raised the prospect of the Court concluding only as much. Were the Court to do so, though, it would leave a range of issues with which lower courts would have to wrestle. It seems possible, then, that the Court will at least begin to do some of that wrestling itself. Among the myriad sticky questions on the table, two seemed to jump out as matters of particular concern to the Justices.
First, should all legislative permit conditions be subject to heightened judicial scrutiny, or only some subset thereof?
The Court’s casting a wide net here risks encapsulating the massive number of legislatively-authorized taxes, fees, special assessments, and tolls associated with land use development, and the Justices showed little appetite for extending heighted scrutiny that far. (Counsel for Mr. Sheetz appeared to stoke the fire on this score when he refused to concede that highway tolls are not compensable takings.) In light of that concern, perhaps such scrutiny, Justice Jackson ruminated, should be applicable only to those legislative permitting schemes that require the dedication of land for the state’s possession. Justice Alito countered, though, that any such framework is manipulable, for a fee could be construed as offsetting the government’s acquisition of a “no-build easement.”
Alternatively, perhaps heightened scrutiny should apply when the government has not drawn sharp lines to delineate the classes of development to which permit conditions will apply. Justices Kagan, Kavanaugh, and Barrett probed counsel for both sides as to how detailed must the classes be to avoid triggering heightened scrutiny. Is, for example, deeming all single-family homes as a single class sufficiently reticulated, or need local governments drill down further to, say, divide single-family homes—to draw on a hypothetical offered by Justice Kavanaugh—into “small, medium, and large?”
Second, what would the analysis will look like in those situations in which at least some subset of legislative permit conditions were subject to heightened scrutiny?
Despite Petitioner’s urging, Chief Justice Roberts and Justices Sotomayor, Kavanaugh, and Kagan all expressed doubts about the workability of requiring local governments to undertake in the legislative context the same type of project-specific analysis that Nollan and Dolan call for in the context of case-by-case administration. Against that backdrop, will the Court create a new standard for examining the relationship between a legislative condition and the types of impacts generated by a specific class of developers that is something short of, or distinct from, the type of individualized reviewed required by Nollan and Dolan?
With so many open questions, the case surely will be an interesting one to watch. A decision from the Court is expected by June.