CITY COUNCIL SUPPLEMENTAL MATERIAL 7-27--26

6 does not substantially advance a legitimate governmental purpose or deprives the landowner of any economically viable use of the land. In contrast, an ad hoc exaction is subject to the heightened Nollan/Dolan “essential nexus” and “rough proportionality” standards. In 2013, Koontz v. St. Johns Rover Water Management District , 570 U.S. 595 (2013), the U.S. Supreme Court held that the Nollan/Dolan test applies to both ad hoc monetary exactions and to denials of permit applications where an applicant refuses to adhere to the requested demands. In 2024, in Sheetz, the U.S. Supreme Court importantly held that there was no constitutional basis to distinguish between exactions imposed on an ad hoc basis or as an ordinance or rule of general applicability. In Sheetz, as a condition of receiving a residential building permit for a modest prefabricated home in El Dorado County, George Sheetz was required to pay a trafﬁc impact fee adopted by El Dorado County as part of its General Plan process. The amount of the fee ($23,420) was not determined based on the extent of trafﬁc impacts speciﬁcally attributable to Sheetz’s new house, but rather was assessed according to a rate schedule that was based on the general type of development and its location within El Dorado County. Sheetz paid the fee under protest and eventually sued El Dorado County, asserting state law claims under the Mitigation Fee Act and federal claims under the Takings Clause. While Sheetz’s state law claims were denied by the California courts, the U.S. Supreme Court invalidated California’s rule of applying Nollan/Dolan heightened scrutiny only to ad hoc, discretionary fees, concluding that “a legislative exception to the ordinary takings rules ﬁnds no support in constitutional text, history or precedent.” (Sheetz v. County of El Dorado, California, 601 U.S. 267, 279 (2024).) C. State Statutory Requirements5 In general, the land use entitlement process provides several ways in which a local agency, through the exercise of police power, can require the payment of fees and/or dedication of land as conditions of project approval. Under state law, the Mitigation Fee Act is of particular relevance. In response to Nollan, in 1987, the California Legislature adopted its “Nexus Litigation,” the Mitigation Fee Act (Gov. Code §§ 66001 to 66020) to provide a statutory framework for the lawful imposition of development fees in California. Local agencies must comply with the Mitigation Fee Act’s procedural and substantive requirements to ensure that all development fees (both legislatively imposed and ad hoc) satisfy legal nexus requirements. At bottom, the Mitigation Fee Act reﬂects an underlying fundamental premise elucidated in Takings Clause jurisprudence and elsewhere: while a developer “should pay its own way” (i.e., offsetting project impacts on the costs to the public), any such payment must reﬂect only the developer’s proportionate fair share of such costs. Anything more would be tantamount to the type of “out-and-out plan of extortion" that the U.S. Supreme Court ruled against in the Nollan/Dolan line of cases. 5 It is beyond the scope of this analysis to identify the myriad ways in which a local agency may seek to impose dedication and/or monetary exaction obligations, including, without limitation, via CEQA, general/special plan provisions, other local ordinances, school fees, special taxes and Proposition 218 assessments/CFD special taxes.