IN SHEETZ V EL DORADO, CALIFORNIA, SCOTUS EXPANDED EXACTION CLAIMS
The Supreme Court applied the exaction test, which limits conditions placed on obtaining zoning approval, to both legislative and administrative permit conditions.
Cases applying the Fifth Amendment of the Constitution balance the degree to which governments can legitimately restrict development or use of property against property owners' right to just compensation if private property is taken for a public use. One aspect of this analysis includes the degree to which governments can place conditions on permits allowing development. Conditions that go too far are called exactions. Sheetz v El Dorado, California, provides a summary of this concept before discussing whether there is a substantive difference between governmental conditions created by different means.
The Takings Clause's right to just compensation coexists with the States’ police power to engage in land-use planning… While States have substantial authority to regulate land use … the right to compensation is triggered if they “physically appropriat[e]” property or otherwise interfere with the owner's right to exclude others from it…. That sort of intrusion on property rights is a per se taking…. Different rules apply to State laws that merely restrict how land is used. A use restriction that is “reasonably necessary to the effectuation of a substantial government purpose” is not a taking unless it saps too much of the property's value or frustrates the owner's investment-backed expectations….
Permit conditions are more complicated. If the government can deny a building permit to further a “legitimate police-power purpose,” then it can also place conditions on the permit that serve the same end…. conditions do not entitle the landowner to compensation even if they require her to convey a portion of her property to the government…. Thus, if a proposed development will “substantially increase traffic congestion,” the government may condition the building permit on the owner's willingness “to deed over the land needed to widen a public road.” … We have described permit conditions of this nature as “a hallmark of responsible land-use policy.” … The government is entitled to put the landowner to the choice of accepting the bargain or abandoning the proposed development…. The bargain takes on a different character when the government withholds or conditions a building permit for reasons unrelated to its land-use interests. Imagine that a local planning commission denies the owner of a vacant lot a building permit unless she allows the commission to host its annual holiday party in her backyard…. The landowner is “likely to accede to the government's demand, no matter how unreasonable,” so long as she values the building permit more…. So too if the commission gives the landowner the option of bankrolling the party at a local pub instead of hosting it on her land…. Because such conditions lack a sufficient connection to a legitimate land-use interest, they amount to “an out-and-out plan of extortion.”
Evaluating whether a requirement becomes an exaction involves a two factor test. First, there must be “an ‘essential nexus’ to the government's land-use interest,” which “ensures that the government is acting to further its stated purpose, not leveraging its permitting monopoly to exact private property without paying for it.” Second, “permit conditions must have ‘rough proportionality’ to the development's impact on the land-use interest” because “a permit condition that requires a landowner to give up more than is necessary to mitigate harms resulting from new development has the same potential for abuse as a condition that is unrelated to that purpose.” This test applies “regardless of whether the condition requires the landowner to relinquish property or requires her to pay a ‘monetary exactio[n]’ instead of relinquishing the property.”
In Sheetz, the property owner “wanted to build a small, prefabricated home on his residential parcel of land” but “the County required Sheetz to pay a traffic impact fee of $23,420.” He “paid the fee under protest and obtained the permit” and then sued when he could not obtain “a refund.”
The Supreme Court addressed whether the County could escape exaction concepts based upon the manner in which they approved and administered the fee. They claimed that because it involved “‘legislatively prescribed monetary fees,’” the rules relating to exaction did not apply. The County (and the lower courts that accepted its argument) was wrong because the “Constitution's text does not limit the Takings Clause to a particular branch of government” and “does not single out legislative acts for special treatment.” “Just as the Takings Clause ‘protects ‘private property’ without any distinction between different types,’ … it constrains the government without any distinction between legislation and other official acts. So far as the Constitution's text is concerned, permit conditions imposed by the legislature and other branches stand on equal footing.”
The Supreme Court got it right. The Fifth Amendment protects all types of property, whether real property like land and buildings or personal property (there is a Supreme Court Fifth Amendment case addressing raisins). And it protects it from any acts of government that go too far, regardless of the branch of government or how they implement it. This case elevates substance over form by demanding that lower courts evaluate the legitimacy of the taking.
While I mostly handle formal takings, which are far more common, I also have extensive experience with a wide variety of de facto takings like exactions. If you believe that the government has gone too far in its permit conditions, please feel free to contact me.