Sheetz v. County of El Dorado: The Supreme Court Closes the Legislative Fee Loophole

Background

Sheetz v. County of El Dorado, No. 22-1074, 601 U.S. ___ (2024), decided April 12, 2024, is the most significant United States Supreme Court takings decision in more than a decade and the most consequential ruling for California local government fee programs since Koontz v. St. Johns River Water Management District (2013). The case resolved a question that had divided courts for decades: does the constitutional scrutiny the Court established in Nollan v. California Coastal Commission (1987) and Dolan v. City of Tigard (1994) apply to impact fees enacted by ordinance — or only to conditions imposed through individualized administrative permitting decisions?

The Court answered unanimously: both. The Takings Clause draws no distinction between legislative and administrative exactions. Impact fees imposed by ordinance are not constitutionally exempt from the Nollan/Dolan essential nexus and rough proportionality tests simply because they were enacted by a legislature rather than imposed case-by-case by an administrator.

The Facts

George Sheetz applied to El Dorado County, California for a residential building permit to place a manufactured home on land he owned. The county denied the permit until he paid a traffic impact mitigation fee of $23,420. The fee was not determined individually for Sheetz's project — it was calculated by looking up Sheetz's proposed project type and location in a standardized fee schedule that the El Dorado County Board of Supervisors had adopted by ordinance, a legislative act.

Sheetz paid the fee under protest and then sued, arguing that the fee was an unconstitutional exaction under the Fifth Amendment's Takings Clause as interpreted in Nollan and Dolan. His core argument: if the county had demanded the same $23,420 outright without the permit process, that would plainly be a taking. The constitutional analysis should not change simply because the demand was embedded in a permit condition.

El Dorado County — and California's courts — disagreed. Both the trial court and the California Court of Appeal ruled against Sheetz, applying a longstanding California rule: Nollan/Dolan heightened scrutiny applies only to exactions imposed through individualized administrative decisions, not to fees set by a legislative fee schedule. This was known as the "legislative exemption" — the rule that a fee adopted by ordinance, applicable uniformly to a category of development, was reviewed only under the rational basis standard used for ordinary legislation, not under Nollan/Dolan's more demanding tests.

The Legal Question

The Supreme Court accepted the case to resolve a straightforward but consequential question: Does the Takings Clause's protection against unconstitutional exactions — as interpreted in Nollan and Dolan — apply to permit conditions imposed by legislative action (a fee schedule adopted by ordinance), or only to conditions imposed through individualized administrative permitting decisions?

The Court's Holding

Justice Amy Coney Barrett, writing for a unanimous Court (9-0), reversed the California Court of Appeal and held that the legislative nature of an exaction does not exempt it from Nollan/Dolan scrutiny.

The Court's core reasoning was textual and structural. The Takings Clause states that private property shall not "be taken for public use without just compensation." The Clause draws no distinction between government action taken through legislation and government action taken through administrative decision-making. Both legislative acts and administrative acts can effect takings. If the government enacted a law requiring all homeowners to dedicate an easement to the public without compensation, that would be a taking — the legislative form of the demand does not insulate it from constitutional scrutiny. The same principle applies to monetary exactions imposed as conditions of receiving a permit.

The Court rejected El Dorado County's argument that the legislative exemption was justified by the difficulty of applying a project-specific proportionality test to a categorical fee schedule. That difficulty, the Court observed, might be relevant to how a legislative fee satisfies Nollan/Dolan — but it is not a reason to conclude that the Constitution does not apply at all.

The Court did not hold that El Dorado County's $23,420 traffic fee was unconstitutional. It held only that the California Court of Appeal had applied the wrong legal standard. The case was remanded to the lower courts to determine in the first instance whether the fee satisfies the essential nexus and rough proportionality requirements of Nollan and Dolan.

What the Court Established: No Legislative Exemption from Exaction Scrutiny

Sheetz establishes a single clear doctrinal rule: the Takings Clause applies equally to exactions regardless of the governmental form through which they are imposed. The Court set out three operative principles:

1. No legislative/administrative distinction in the Takings Clause. The Fifth Amendment's prohibition on uncompensated takings does not contain any exception for government action taken by a legislature. A law requiring a landowner to surrender property without compensation is a taking whether enacted by ordinance or ordered by an administrator.
2. The Nollan/Dolan essential nexus and rough proportionality tests apply to impact fees set by ordinance. A fee adopted by a city council or county board of supervisors and applied uniformly to a category of development must, like any exaction, (a) have an essential nexus to a legitimate government interest that the type of development being charged actually creates, and (b) be roughly proportional in amount to the cost of addressing the impacts of that type of development.
3. The remand does not resolve whether the El Dorado County fee was constitutional. The Court held only that the California Court of Appeal applied the wrong test. The question of whether the specific $23,420 fee satisfied the correct constitutional standard was remanded to the lower courts for determination in the first instance.

What Sheetz does not establish — and explicitly left open — is how exactly a legislatively enacted, categorical fee schedule satisfies the rough proportionality requirement. That question, flagged by Justice Sotomayor's concurrence, will be resolved by future decisions as lower courts work out the implications of the ruling.

Justice Sotomayor's Concurrence: The Open Question

Justice Sotomayor, joined by Justice Jackson, wrote separately to flag an issue the majority expressly declined to resolve: how, exactly, does a legislatively enacted fee schedule satisfy Dolan's rough proportionality requirement?

Dolan requires that the government demonstrate rough proportionality between the exaction and the specific impact of the specific project seeking the permit. That is a project-by-project inquiry. But a legislative fee schedule necessarily works categorically — it sets a fee for all projects of a given type in a given zone, based on generalized impact data, not the particularized impact of any individual project.

Sotomayor's concurrence noted that the majority's decision does not resolve whether a legislative fee schedule can satisfy rough proportionality through categorical findings — that is, by demonstrating that the fee is proportional to the impacts caused by the category of development, rather than to the impacts of each individual project within that category. This open question is significant: it will determine whether a well-crafted nexus study addressing multiple project types can satisfy Dolan or whether each permittee is entitled to demand individualized proportionality analysis of their specific project.

Lower courts and the California Supreme Court will need to resolve this question as Sheetz is applied. In the meantime, fee programs should be defensible on both a categorical and individual-project basis where feasible.

The Pre-Sheetz California Landscape

To understand Sheetz's consequences, it helps to understand what California law looked like before it. California has two parallel frameworks governing impact fees:

• The California Mitigation Fee Act (MFA), Government Code § 66000 et seq., requires local agencies imposing development impact fees to make specific findings: that the fee is imposed for a specific purpose, that there is a "reasonable relationship" between the fee and the type of development being charged, and that the fee does not exceed the cost of the public improvement it funds. The MFA's "reasonable relationship" standard — while meaningful — is less demanding than Nollan/Dolan's "essential nexus" and "rough proportionality" requirements.
• Constitutional scrutiny under Nollan/Dolan, as California courts had interpreted it, applied only to administratively imposed conditions — case-by-case permit conditions imposed by a planning commission or planning director, not fees set by an ordinance applicable to all projects of a given type. Under this "legislative exemption," a traffic fee adopted by city ordinance and applied uniformly to all residential development in a given zone was reviewed only under rational basis — not Nollan/Dolan.

The legislative exemption was not a fringe position. California's Court of Appeal had applied it consistently, and the rule reflected a nationwide majority view that had been adopted by courts in many other states. Sheetz rejected that majority rule categorically.

The MFA's nexus requirements remain in force. Sheetz adds a constitutional floor on top of the MFA — meaning fee programs that satisfy the MFA's reasonable relationship test may nonetheless face Nollan/Dolan challenges if their nexus studies do not also address essential nexus and rough proportionality at a constitutionally sufficient level.

Why This Matters for California Local Government

California cities and counties impose hundreds of development impact fee programs — covering traffic, parks, fire protection, public facilities, libraries, school infrastructure, sewer, water, and more. The vast majority of these programs are adopted by ordinance (a legislative act) and apply uniform fee schedules to project types and geographic zones. Under the pre-Sheetz legislative exemption, none of these fee schedules were subject to Nollan/Dolan scrutiny.

After Sheetz, all of them are. The practical consequences:

• Every legislative fee schedule is now subject to constitutional attack. A developer who believes an impact fee is not supported by adequate nexus and proportionality findings can challenge the fee under the Takings Clause — not just under the MFA's reasonable relationship standard.
• Outdated and generic nexus studies are the primary vulnerability. A nexus study that was adequate to support MFA findings in 2012 may not provide sufficient documentation of essential nexus and rough proportionality to survive heightened constitutional scrutiny in 2025. Fee programs that have not been updated in many years — or that rely on regional or statewide cost data without project-specific proportionality analysis — face the greatest risk.
• The fee amount must be proportional to the project's actual impact. The rough proportionality test requires a demonstrated relationship between what the fee charges and what the specific type and scale of development actually costs in public infrastructure needs. A flat per-unit traffic fee that does not vary by project size, density, or location may be more vulnerable than a fee calibrated by trip generation rates that differ across project types.
• Fee programs adopted without adequate findings are exposed retroactively. The question of whether Sheetz applies to fees collected before April 12, 2024 is not yet settled. Developers who paid fees under protest before the decision may attempt to revive claims; fee programs adopted without nexus documentation are most vulnerable.

Practical Guidance for City Attorneys and Planning Directors

1. Audit existing fee schedules and their underlying nexus studies immediately. For each impact fee program adopted by ordinance, ask: (a) Does the fee have a nexus study? (b) How old is the nexus study? (c) Does it address essential nexus — the connection between the fee and a specific public infrastructure need created by the type of development being charged? (d) Does it address proportionality — is the fee amount calibrated to the actual cost of impacts created by that type and scale of development?
2. Prioritize fee programs with the highest litigation exposure. Traffic impact fees, park fees, and public facilities fees are the most commonly litigated categories. Fee programs that have not been updated in five or more years, that rely on generic cost data, or that apply flat per-unit rates regardless of project characteristics are the highest priority for review.
3. Commission updated nexus studies where existing documentation is inadequate. A nexus study adequate for Sheetz purposes should: (a) identify the specific public infrastructure need to which the fee is directed; (b) demonstrate that the type of development being charged actually creates that need (essential nexus); (c) document the cost of infrastructure needed to serve the expected impact from the charged project type (rough proportionality); and (d) calibrate fee amounts by project type, size, or density to reflect actual variation in impact.
4. Document proportionality findings in fee resolutions and staff reports. The Nollan/Dolan test is applied against the administrative record at the time the exaction was imposed. Fee resolutions and accompanying staff reports should include, or incorporate by reference, the nexus study findings that support each fee tier — including the relationship between the fee amount and the estimated cost of the infrastructure impacts from the charged project type.
5. Prepare for individual-project proportionality challenges. While the open question from Sotomayor's concurrence has not been resolved, city attorneys should assume that developers may challenge impact fees on the grounds that the categorical fee schedule is not proportional to their specific project's actual impact. Have a response strategy in place before the first such challenge arrives.
6. Brief elected officials before the next fee update cycle. City councils adopt fee schedules by ordinance. They need to understand that the post-Sheetz constitutional standard means that fee amounts should be tied to defensible proportionality findings — not set at the highest level politically feasible or adjusted only by inflation indices without a proportionality review.

The Relationship to Koontz and the Nollan/Dolan Framework

Sheetz fits within a sequence of Supreme Court decisions expanding the scope of exaction scrutiny:

• Nollan v. California Coastal Commission (1987): Established the essential nexus test — a permit condition requiring dedication of property must be genuinely connected to a public interest that the specific project would harm.
• Dolan v. City of Tigard (1994): Added the rough proportionality requirement — even where nexus exists, the condition must be proportional to the project's actual impact.
• Koontz v. St. Johns River Water Management District (2013): Extended Nollan/Dolan to monetary demands — the government cannot escape constitutional scrutiny by demanding money instead of land as a permit condition.
• Sheetz v. County of El Dorado (2024): Closed the legislative exemption — Nollan/Dolan applies whether the exaction is imposed by an administrative decision or a legislative fee schedule.

Taken together, these four decisions mean that any government demand for money or property as a condition of receiving a permit — whether case-by-case or through a uniform fee schedule, whether imposed by a planner or enacted by a city council — must satisfy essential nexus and rough proportionality.

Key Dates

Sheetz closes the constitutional loophole that California cities had relied on for decades to insulate legislatively enacted fee schedules from heightened takings scrutiny. Every fee program that was designed under the assumption that the legislative exemption would shield it from Nollan/Dolan should be audited against the constitutional standard now in force. Legislaide helps city attorneys and planning directors assess the nexus documentation behind existing fee programs and identify which fee schedules carry the highest post-Sheetz litigation exposure.

Published April 6, 2026 by Legal Team at Legislaide.