Welcome to scots Cast, a project of the Federalist Society for Law and Public Policy Studies. Our contributors join us from around the country to bring you expert commentary on US Supreme Court cases as they are argued and the decisions are issued. The Federalist Society takes no position on particular legal or public policy issues. All expressions are those of the speaker. Hello, and welcome to Scota's Cast. I'm your host, Kyle Hammernis, on behalf of the Faculty division of
the Federalist Society. We are here today to discuss Sheets versus County of El Dorado, California, which was argued before the Supreme Court on January ninth, twenty twenty four. We are joined today by Nancy Marzoula. Nancy is a partner at Marsoula Law and author Namacus brief in this case on behalf of the
Atlantic Legal Foundation. Joining Nancy to discuss this case is David Lamferman. David is a partner at Rutan and Tucker LA and also a brief in this case on behalf of the California Building Industries Association and the National Association of Homebuilders. And with that I like to turn things over to Nancy to discuss how the case got to the Supreme Court and summarize the oil arguments. All right,
well, thank you. I am delighted to be here and delighted to be joined by my colleague Dave Lanferman, and we are here today to talk about a very interesting case and an extremely lively and far reaching argument held by the Supreme Court in the case. Now, the facts that give rise to this case are surprisingly ordinary. They involve a gentleman, George Sheets, who went about trying to get a permit or approval from the County of El Dorado to
construct a very modest manufactured house on his property. Now bear in mind that mister sheets proposed construction complied with all of the applicable zoning laws and requirements. The only hiccup in his approval process was the county's demand that he pay to the county almost twenty four thousand dollars. And if he didn't pay almost twenty four thousand dollars, they wouldn't give him the permit. Well, why did the county want this money? It's what a bit of money? Almost twenty
four thousand dollars They told him they needed the money for traffic. It was a traffic impact mitigation fee. Mister Sheet said, well, what traffic do you anticipate I'm going to be generating by putting this modest house on my property. Well, the county responded by saying, well, that's not the point. The point is we need this money because we have a fund that we need money for that we use to widen streets, repair streets, et cetera.
And this is the way we fund it. When people come to us and want to get a building permit, we look and see where in the county the property is located. That's the first step. Then we say, well, what are you going to build on the property? Is it a single family residence, is it a multifamily residence, or is it commercial? So, depending on the answers to those two questions, we impose a prefixed,
established fee on every building per applicant. And it's our understanding as the county that that's all we have to do to pass constitutional muster, because this is a fee scheme set out by the legislature, the county legislative body, so to speak. And so mister Sheets said, well that doesn't seem right to me. So he in fact challenged. He brought a constitutional taking challenge to this permit exaction fee that was being imposed on him, and it turns
out that the California courts did infect agree with the county. They said, look, if this were a fee imposed by some other process, maybe an individual determination that had been made by the county, we'd really dig into it, and we would require that the county showed that there was a nexus betwe
the fee and the traffic that his proposed use would cause. That's the so called nexus test announced in Nolan. And we would also look to see that the fee was roughly proportional to the traffic burdens or the impact on the roads that mister schuets Is proposed development might create, and that's the so called Dolan test. So in other circumstances those tests would apply the Nolan Dolan test, but in this case, because it's the legislature, we get essentially a free
pass. All we have to show is that, well, there's traffic problems or street construction needs in the county, and we think this is a good idea to fund the construction by imposed in these fees on permit applications. The specific question the Supreme Court agreed to hear was whether there is in fact a legislative exception to what is referred to as the unconstitutional conditions doctrine. That's the Nolan Dolan test I just described. Was the California Pellet Court and lower courts
were they correct. This case has generated a lot of interest among various interests within the across the country. Seven AMIICAS briefs were filed, really eight. The American Planning Association filed a brief which purported to be on behalf of neither party, but it was really on behalf of the county. So there were eight briefs filed, and support of the county, including the Solicitor General of the United States, a variety of states and students, including the state of
California. And their basic argument was everything's working fine. And by the way, look at all those wonderful projects we can fund by requiring people who want to use their property to pay a fee. It's great, it's wonderful.
Well on support of the mister Sheets, he had almost twice as many, really well over twice as many groups jump in and say, wait a minute, it doesn't make any sense to carve out from this heightened review under the unconstitutional conditions doctrine to say that wealth the legislature does the taking that they're exempt from. Nolan Dolan. We have group such as the Southeastern Legal Foundation,
the National Chamber of Commerce, National Association of Realtors. Dave will talk about his brief for the National Association of Homebuilders and the California Building Industry Association, and my brief on behalf of the Atlantic Legal Foundation. I talked about the fact that the constitutional injury is a saying regardless of who does the taking.
Now, interestingly, this case gained so much public public attention that the Wall Street Journal wrote an editorial that was published on Saturday, and it was their lead editorial, and they came out all full force on behalf of mister Sheets, and they said, and I quote, politicians increasingly trample property rights to promote what they deemed to be the public good. Progressive states and cities one that are ruling for mister Sheets could imperils the schemes, perhaps, but the
Constitution doesn't let the government commit highway robbery. So with that, Dag, why didn't I turn to you and get your take and the take from the
building industry of the building industry. Both the California Building Industry Association and the National Association of Homebuilders were very concerned about this case back when it was still in the California State court system and had us join with the petitioner, mister Sheets, asking the California Supreme Court to review and reverse the Court of Appeal because of the conflict and the jurisdictions, and also to the point you made
that there's no principled constitutional reason why an exaction is legitimate if it's made by the Board of Supervisors, but not legitimate if it's made by the Planning Commission. The impact is the same on the subjected property or developer. This California
Supreme Court declined to review the case without comment. The case is really important to the building industry the people that are briefed on behalf of because increasingly, development impact fees are a major factor, perhaps even the primary factor, in the cost of construction of residential housing, depending on what jurisdiction you're in, and a jurisdiction like California in which the courts have declined to apply Nolan, Dolan and Kuntz across the board, and in which the courts say if the
county adopts a schedule fees that's beyond our scrutiny. California and other cases, like other states like it, find that their impact fees continue to rise, whereas a study that was conducted in conducted in twenty nineteen by the California Department of Housing and Community Development reported that on average, development fees continue to rise
in California, while nationally fees have decreased. In the jurisdictions that do apply Dolan, which requires a showing of rough proportionality between the amount of the fee and the impact of new development, those cases have a constraint not just on does there has the government shown a reasonable nexus or connection between the impact of the project, but is the dollar amount of the fee or in faction,
the proportion at least to the impact. So there is a constraint in those states which has been missing in California, and which is one of the reasons that the building industry was very optimistic that the court would not just grant review in this case, but reverse it and make it clear that the standards that it had developed in nineteen ninety six with Dolan and then later on in twenty thirteen with coons that those standards requiring both reasonable nexus and a rough proportionality,
that those standards shild apply across the board, regardless which branch of government or
which level of government establishes the impact fee. So there was briefing by other anarchist groups in addition to the homebuilders, pointing out that a study conducted for the California Housing and Community Development Departs in August of twenty nineteen showed that the average regulatory costs of fees and exactions added twenty three thousand, four hundred and fifty five dollars per single family residents and added over nineteen thousand dollars per multifamily
residential unit. They reported that that was almost three times the national average. As to the amount of fees, those numbers actually seem low to me. I practiced in California and have been dealing with development fees for thirty something years. Those twenty four thousand dollars would be a bargain in most parts, certainly in coastal California. A study by the home Builders of the Greater Central Valley found that on average, bees average fifty thousand dollars per house in Sacramento County
which is not one of the higher priced residential areas in the state. They found that the average fees added ninety seve seven thousand dollars per house, and other examples in the suburbs around Sacramento of up to one hundred and five thousand going back to twenty eighteen. Again, the California's own agency, the Housing and Community Development Agency, conducted a study that found several cities charging up to one hundred and fifty seven thousand dollars per house five years ago. So it
is a significant factor in the cost of housing. California is very visible and audible in terms of recognizing that we have a housing shortage and the housing we
do have is very expensive. The California legislature actually passed a bill in which they made a legislative finding California Government Code sixty five five eight nine point five which the legislature said that the excessive cost so California's housing supply is partially caused by many local governments that require high fees and exactions be paid by producers of housing. In recent years, California state government has been enacting bills to try
to improve the feasibility and reduce the cost of producing housing. Basically, it's put the state government in conflict with local governments who are still generally resistant to having their discretion trimmed in terms of approval of housing, but the state has been pushing in favor of it. That was ironic in this case that the state would weigh in on the side of the county in favor of basically unconstrained fees because in the last four years have been two significant bills passed to require
some standards legislative standards or fees imposed on new housing development, regardless of what the Supreme Court does with the Sheets case. So, Dave, how did you think the argument went. I don't get the opportunity or had the interest to listen to any of these. I thought it was fascinating. I thought that the advocate for the petitioner, Paul Beard, did an excellent job of arguing the issue raised in the Sheets case and addressing the question presented on which
the Supreme Court had granted sert. As you said, the question presented was is a permit exaction exempt from the unconstitutional conditions doctrine as applied in Nolan and Dolan simply because it's authorized by legislation, and he explained both as a matter of constitutional doctrine, there's no reason for carving at an exception in favor of
these imposed by a board of supervisors or a city council. The government attorneys for the County of El Dorado and then the Solicitor General was granted temnists to argue in support of the county. They didn't really seem to be arguing this case. They basically wanted to go back in two cases coming up before this, Like Dolan, they seemed to question why would the Supreme Court require that
there be a showing of re proportionality as to any fee. And then of course they argued that this was not a taking and so that neither Dolan or Dolan should apply. They shouldn't have to show either a nexus or portionality. There were several justices from the Supreme Court, Justice Jackson, Justice Kagan who seemed to refuse to see a difference between development impact fees and taxes or user fees. Now, Dave you, I like you was astonished at how far
a feel the argument seemed to go. At one point, uh Justice Kagan was talking about the fact that she does to give up her easy pass. So I mean this really for such a very narrow, laser pointed issue the courts, for the justices on the court saying well, what about property taxes?
What about user fees? And on and on and on. It really got very far afeel from this precise issue before the court, and a couple of the Justice justices tried to bring the issue back, bring the court back to the narrow issue before it. I think Justice Alito and Justice Gorsage both tried to refocus the argument and did you hear what I heard, Dave, which was the county attorney agreeing with the petitioner, mister Sheets, that there's
no blanket exception for legislative takings. And I believe it was Alito, it may have been Gorsach who seemed like they didn't really hear that either, and they really wanted to button that really essentially concession down, and they asked it squarely, and the county attorney said, yes, that's correct, that is the county's position, and I think everybody then said, well, what are we doing here? Then? I believe at least that was the implied after
he got that concession from the county's attorney. Yeah, arguments started. Paul Muird for the petitioner mister Sheets went first, and of course he was questioned critically by I thought, but by Justice Jackson Kayan, with a little bit of questioning from Justice Soda Mayor, again not focusing on whether or not there
should be a legislative exemption. I mean, whether there should be an exemption from dolan or legislative fees, but they're questioning kind of went back to trying to re argue kuns whether there should be a distinction between development impact fees and other revenue raising measures used by local governments. And the Petitioner's Council was trying to point out, with some support from Justice Corsage and Justice Alito, that
taxes are different than fees. They have different procedural and constitutional limitations. As an aside, in California, as a result of statewide voter initiatives like Proposition
thirteen in subsequent pretty much any tax has to be voter approval. So these couldn't be Balo state taxes under California's constitution, right, And I think that Paul Beard for mister Sheets made it clear in his in his briefs that this issue was very narrow, and yet nevertheless we wound up spending an enormous amount of time with all of the council addressing the issue well, what's what's a
tax, what's a user fee? What's this? What's that? In fact, the argument even got so attenuated that at one point, just to Salita, Alito got into a disagreement with the attorney for the county who argued tried to argue that the Pellet Court's decision was ambiguous, and he did and then us, what makes you say that? And he actually got out the decision and read portions of it to her, and she said, well, I
still think that's ambus. The Caliperate Court of Appeal had explicitly stated, there's a reason for upholding the county's traffic impact fee schedule was based on the fact that it had been legislatively adopted and was broadly applicable to an undefined number of persons. That was the stason for the decision, and much of the argument
from those who disagreed with the petitioner was far field from that point. You know, there was argument, I think it was Justice Jackson or maybe Justice Kagan said something about well what if what if the County had just required me to put a toll booth in my driveway, and I pay a top to
every time I went on to the public road. I mean, there were some extreme examples, but forth again far Afield and I think there were other justices that pointed out that the question on which Sert had been granted was the narrow issue of you know, is there an expression to the rules set forth in Nolan, Dolan and Coons depending on what branch or government adopted the fees.
I agree with you. I read the California and Pillow decision as being crystal clear that we're not even going to look at any arguments about whether this was a taking, whether it wasn't a taking, anything along those lines, because the rational basis test applies because it's a legislative to take king, and that test, which we all know is a very low bar, that bar has been easily lost, and so therefore that's the end of the discussion.
So the argument today was one in which all of the Justice, including Justice Thomas on several occasions, participated and by asking questions, probing responses, and so forth. In fact, Justice Thomas kicked off the questions by stating at the outset that in his question that his understanding of the issue was that it was in fact a very narrow issue, and you would have thought that that would have kept the Council focused on that very specific issue legislative conditions, but
he failed to keep them focused on the issue at hand. I guess one other interesting thing in my mind was the fact that the sg's office did in fact request argument time, and yet I didn't find the sg's argument that compelling.
I don't think they made anything added much to the argument for why this legislative exaction should be exempt from the Nolan Dolan heightened scrutiny, So I think that was kind of a wasted opportunity they had if they actually had anything helpful to say for their side their view, they didn't necessarily managed to get it across very well during the argument. Solicitor General's position the case was a bit
odd. In their application to file their amicus brief or to ask for time for argument, the federal government made a point of saying that the federal government generally doesn't impose development impact fees. We have some mitigation fees for wetlands and other federal programs, but we're not really a player in this development impact fee
arena. Nevertheless, we want to come in on the side of government in general to basically be given as much discretion as possible in raising revenue, and that the standards should be not very stringent when it comes to development impact fees. Again, it was that argument, together with the counties argument about what standard should apply here, made me wonder, Okay, if they agree that there should be a nexus and a rough proportionality requirement for fees imposed on it
as as on at hack project specific basis. If they agree that that's the law, why doesn't that standard apply otherwise or why don't they want it to apply others or are they afraid that they can't meet that standard? If it's if it's applied across the board. That's it point other than we want unfettered discression posing without any limitation. I mean, the just spop that up.
It's kind of an elephant in the room from my point of view that they're arguing that we want new standards but not really telling the court why they want new standards. The implications we will because we want to be able to raise money without having to show of rough proportionality. I thought it was odd. So I'm going to put you on the spot and ask you to call the
case. How do you think it's going to come out? I think I think the majority of the court seems inclined to focus on the narrow pant and I think there's a majority of the justices that will reverse on that basis.
I mean, there was a couple of them that suggested if we just reversed the California Court of Appeal and say there is no blanket exemption, we remanned the case and the court can decide whether or not the county has carried its burden to show that the fees are reasonable, they meet a reasonable nexus stand and they meet a rough proportit extent, that issue can go back and we don't have to get into the weeds on the rest of it. I think
that probably has at least five votes. I wasn't sure where Justice Barrett came out of that. There was some questions she asked. It indicated to me she had some confusion with area distinguishing fees from assessments, which have entirely different constitutional and statutory requirements. But I think it would be reversed and remanded for proceedings applying the Nolan Dolan standards. Yeah, I fully agree with you. I count at least five votes. I'm not sure who the five are.
I mean AMA's Alito, I hope Roberts. I mean I think we've got five. We've got enough for a reversal. I think that we might get a concurring opinion, and that concurrence would delve into this user fee, tolls and so forth, So there might be a concurring opinion that would make it clear that their vote in favor of reversal was very narrowly focused to the extent that we get a dissent. Kagan jumps out at me because she made such a big deal about the fact that she didn't even think this was a taking
at all. I think Jackson fell in that category as well. She didn't understand why the Fifth Amendment was even implicated here, and I do have to say I think that issue. The longer the argument went along, more this issue became sort of diffuse, and we lost track of the fact that this
was an application to use property that was being conditioned. I think as your argument went on, both the County and the Solicitor General seem to be relying morely on practicality and workability type arguments, basically saying, well, if a local agency cannot legislatively adopt a schedule of fees, how is the government supposed to comply with the language in Dolan that says there should be at least a
good faith effort to make an individual determination that the fee amount is roughly proportional. You know, does that mean that each parcel has to go through a separate analysis? And I thought the petitioners counsel and mister Beard did a good job of responding to that, pointing out that there can still be categories of
fees that will be adopted legislatively. And so the thing that was missing in the Sheets case is mister Seats paid a fee based on the category of the county put his house, his single family house in and there was neither an opportunity at the administrative level or in the court level for him to question the applicability of that category. I mean, the county county attorney argued, they linked about the studies that they'd put together and how they had carefully selected the
fee amounts. And that may all be true. But if there's a fee payer who questions that under the California court decision that fee payer doesn't get a day in court to question the government agency as to how they put the fee together or how should apply to him. It's to outful and I think also Petitioners Council pointed out that in the states that don't follow California, which do require some effort to show for portionality, there has not been floodgates have an
open with litigation by property owners and developers questioning fees. It'll be probably more the exception than the rule when there's really anomalous or an exporbatant feed it somebody who wants to spend the time and money in court fighting. Thank you for
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