Overview of Court Rulings on Impact Fees

The recent U.S. Supreme Court ruling in the Sheetz v. El Dorado court case has made the Nollan/Dolan Standards prominent in discussions regarding Development Impact Fees.  In a previous post, Scott Thorpe explained how the Nollan/Dolan Standards could be tested to ensure that Impact Fees charged to new development have a clear nexus and proportionality. 

In this article, I would like to describe each case in more detail and give a high-level view of how these cases combined ensure the intention of Development Impact Fees.

The first case was Nollan v. California Coastal Commission in 1986.  This established the “essential nexus” or the first part of the Standard.  In this case, the Nollan’s wanted to tear down their dilapidated bungalow and build a larger new home.  The California Coastal Commission stated that since the larger house would block the public’s view of the ocean, the Nollan’s would need to dedicate a strip of their land along the beach to allow the public to pass along the beach for 20 years.  The United States Supreme Court ruled in favor of the Nollan’s and found no clear relationship/nexus between the public’s view of the ocean and the California Coastal Commission’s requirement that the Nollan’s dedicate a part of their land for public access to the ocean.  

The second case was Dolan v. City of Tigard in 1993.  This case established “rough proportionality,” the second part of the Standard.  In this case Dolan owned a plumbing supply store and wanted to expand the store and parking lot.  The City of Tigard’s planning commission granted conditional approval of the expansion, dependent on Dolan dedicating 10% of her land to a public greenway along an adjacent creek and constructing a bicycle and pedestrian pathway.  The case went to the United States Supreme Court, which ruled in favor of Dolan.  The Supreme Court found that although an “essential nexus” (in this case, an increase of impervious surfaces increasing runoff) was established, there was no clear proportionality between the expansion of Dolan’s store and the City of Tigard requiring Dolan to dedicate 10% of her land to a public greenway.  Furthermore, the Supreme Court questioned the City’s requirement for Dolan to construct a bike pathway to counteract increased traffic due to her store’s expansion.

Above all else, the intention of Impact Fees is to be fair while simultaneously ensuring that the level of service in a city does not drop due to new development. The Nollan/Dolan Standards ensure that Impact Fees are fair to the city, its residents and businesses, and the developer.