A recent decision from the United States Supreme Court may mark the beginning of a shift in how courts review development impact imposed by school districts. Sheetz v. County of El Dorado, a case originating in California, held that courts must apply a higher level of scrutiny to generally-applicable development impact fees than they have in the past.
Public entities have long required that developers pay impact fees before issuing development permits. These impacts may include the need for road improvements, public services, infrastructure, or school facilities.
The Sheetz case involved a home construction project in El Dorado County. To obtain a building permit, the County required property owner George Sheetz to pay $23,420 to mitigate traffic impacts. The fee was based on a fee schedule intended to fund improvements to County roads. Sheetz sued, arguing that the fee was unconstitutional.
The U.S. Supreme Court held that unless impact fees meet certain requirements, they violate the fifth amendment’s “takings clause” because the Court has interpreted “takings” to include the government’s extracting unreasonable fees from property owners. The Court held that for impact fees to be constitutional, they must 1) have connection to the government’s aim for which they are collected, and 2) be “roughly proportional” to a development’s impact. Although courts have applied these requirements to fees imposed against individual projects, prior to Sheetz, California courts required only that impact fees imposed on classes of projects be reasonably related to the fees’ stated purpose. However, Sheetz argued that the more stringent test should apply to impact fees imposed on classes of development too.
The Supreme Court unanimously sided with Mr. Sheetz, and ruled that the stricter test applicable to impact fees on individual projects also applies to fees applicable to an entire class of property owners. The Court reversed the lower courts’ ruling in favor of the County and remanded the case so that the trial court could apply the connection/roughly proportionality test to the County’s traffic mitigation fee.
Until California courts offer further guidance on how to apply this test in practice, it may be unclear to our school district clients whether their impact fees meet the new test. However, school districts should expect that when such fees are challenged in court, courts will apply the new test to determine if the fees are valid. Further, it is likely that those paying such fees will bring more challenges to the imposition of those fees. Before that happens, school districts should consider taking steps to ensure their method for assessing school impact fees meets the new requirements that 1) there be a connection between the fees and the impacts caused by developments on which they are imposed and 2) that those fees are proportional to the impact they cause.
Districts with questions stemming from the Sheetz decision or broader developer fee issues are encouraged to contact the authors of this article or their regular Tao Rossini counsel.