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April 17, 2024 - On April 12, the U.S. Supreme Court issued a narrow, unanimous ruling in Sheetz v. El Dorado County, a case focused on the constitutionality of legislatively (rather than administratively) enacted impact fees. In Sheetz, a resident of El Dorado County, California challenged the constitutionality of a traffic mitigation fee required in exchange for a development permit. He argued that because the county did not make an individualized determination that the fee in question met constitutional tests requiring an “essential nexus” and “rough proportionality," it violated the Fifth Amendment’s takings clause. 

• County nexus: Exaction or impact fees are an important way for county governments to balance the benefits of growth with its impacts on the pre-existing community. The petitioner's argument would undermine the ability of county governments to legislatively enact impact fees by requiring a case-by-case determination that the fees meet constitutional conditions outlined in Nollan (which requires “essential nexus” between the condition and the government’s land-use interest) and Dolan (which requires the fee to have "rough proportionality" to the development's interest on the land-use interest.) 
• NACo advocacy: NACo filed an amicus brief with the Local Government Legal Center in support of El Dorado County, arguing that legislatively enacted, generally applicable impact fees should not be subject to Nollan and Dolan.  The brief further emphasized the importance, best practices and ubiquity of legislatively enacted impact fees and stressed that the Court should not require individualized determinations for these fees as doing so would wreak havoc on development. Learn more here.
• The Court’s ruling: In a mixed ruling for counties, the Court ruled in favor of the petitioner that the Nollan and Dolan tests do indeed apply to legislatively enacted impact fees and remanded the case back to the state courts for another look. Importantly, however, the Court declined to address any other arguments made by petitioner, including the question of whether local governments must make individualized determinations regarding impact fees.

Critically, the Court's narrow decision does not prevent local governments from enacting reasonable permitting conditions (including impact fees) via legislation. Moving forward, local governments should ensure that any such fee complies with Nollan and Dolan’s requirements and be prepared for potential legal challenges given the heightened scrutiny required under these precedents. 
Source: National Association of Counties