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U.S. Supreme Court Ruling Empowers Developers and Property Owners to Challenge Excessive or Unjustified Impact Fees

By Mark Grafton
September 01, 2024

An impact fee is a one-time payment levied onto a property developer by a local government meant to offset the new development's impact on public infrastructure. Impact fees frequently seen include water, wastewater, stormwater, roads, mobility, parks and recreation, public safety, library facilities, public art, public administration buildings and facilities, schools, inclusionary housing, and other in-lieu-of-fees. For many years, these impact fee programs — even ones based on poor methodologies — often went largely unchallenged.

The recent U.S. Supreme Court ruling in Sheetz v. County of El Dorado, No. 22–1074 (April 12, 2024), has empowered developers and property owners to challenge excessive or unjustified impact fees as unconstitutional and potentially seek damages and attorney fees. This in turn will cause many local governments to revisit the defensibility of their impact fee regimes.

In Sheetz, the plaintiff, George Sheetz, wanted to build a modest home in a quiet El Dorado, California neighborhood, on his residential parcel of land. However, the county required him to pay a $23,420 traffic impact fee to obtain relevant construction permits. Sheetz challenged this fee as an unlawful "exaction" of money under the takings clause of the Fifth Amendment, which prohibits the government from taking private property without just compensation. He argued that a local government's law-making ability should not override Constitutional safeguards, and the Supreme Court unanimously agreed. This landmark decision confirmed that the takings clause of the Fifth Amendment applies in the context of legislatively imposed impact fees, overruling previous California jurisprudence.

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