The US Supreme Court today denied review to an appeal seeking to overturn Olympia, Washington's requirement that a developer pay a "traffic impact fee" as a condition of developing a four-story office building. In Drebick v. City of Olympia, the city demanded the developer pay the traffic impact fee even though the proposed office building was on the edge of town, and would not affect traffic.
Exactions are land use law's version of "pay to play." Local governments often condition development permits on a property owner's agreement to "donate" land (exactions) or cash in-lieu fees (aka "impact fees"). These demands only pass muster under the Fifth Amendment when they meet two requirements:
1. They must have a logical connection (nexus) to the proposed development, and
2. They must be be roughly proportional to the impact anticipated to be created by the proposed use.
They are designed to limit the obvious potential for abuse: if the government has unfettered ability to condition use permits on the owner's concession to turn over property or money, the result, as the Court pointed out in Nollan, would be an "out-and-out plan of extortion," and an impermissible burden on an owner's right to make reasonable use of his or her own property.
An example from my own experience: in a case involving an owner's request to develop its own property, the head of the planning department testified that permission would not be forthcoming unless and until the owner agreed to give up "the goodies" (his word, not mine) for a public park, which just happened to be the most valuable portion of the parcel. This illustration highlights another rationale for the exaction limitations -- the legitimate concern that exactions would substitute as a compensation-and-due-process-free shortcut to an exercise of eminent domain power. If the city needed a public park, it should have condemned and paid for it, not exacted it from the owner as a condition of use. The Nollan/Dolan rules were meant to curb just this sort of demand.
The Drebick petition presented two questions: whether cash in-lieu fees are exempt from Nollan/Dolan, and whether exactions imposed by a legislature are similarly immune(disclosure: Pacific Legal Foundation filed the Drebick petition).
Denials of cert do not establish precedent, so today's action has no effect on the law in other cases.
Sidebar: commenting on the decision, PropertyProf Blog cheekily suggests the Court not grant review to another takings case for a few years to permit the lower courts to flush out doctrine, and to allow legal scholars to focus on other interests for a while. Not to worry: the Kelo-Lingle-San Remo triad may have dampened whatever mojo the federal courts had for eminent domain and regulatory takings cases, even though there remain many issues, like those in the Drebeck petition, deserving of resolution. In-lieu fees are a favorite of local governments (especially in Hawaii), even though they are of questionable constitutionality.