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Court of Appeal Clarifies "Rough Proportionality" Test for Dedications and Impact Fees Imposed on Developers

By: Paul S. Weiland, Rick E. Rayl, Bradford B. Kuhn
08/20/07

Dedications and impact fees are commonplace components of today’s entitlement process. But developers and public agencies often face the misunderstood question of whether these obligations satisfy the constitutional requirement that they be "roughly proportional." This month, in a decision sure to evoke considerable controversy, especially from developers, the court in State Route 4 Bypass Authority v. Superior Court of Contra Costa County provided clarity: the "rough proportionality" requirement only prohibits public agencies from assessing a developer for more than the impacts caused by the proposed development. It does not require the agency to conduct a comparative analysis of the relative economic burdens imposed on different property owners.

The well-known cases of Nollan v. California Coastal Commission (1987) 483 U.S. 825 and Dolan v. City of Tigard (1994) 512 U.S. 374 provide the two key requirements for dedications and impact fees being imposed on proposed developments:

1. Essential Nexus: Nollan requires that the dedication or impact fee advances the same objective for which it would be imposed; and

2. Rough Proportionality: Dolan requires the public agency to make an individualized determination and find that the required dedication is "roughly proportional" both in nature and extent to the impact of the proposed development.

But what is "roughly proportional" and how is it determined?

In the State Route 4 Bypass Authority case, the Bypass Authority sought to acquire two parcels in connection with the extension of a new highway in eastern Contra Costa County. An issue arose as to the validity of a right-of-way dedication requirement applicable to the properties, which required landowners proposing development to dedicate a 110-foot strip of land for the highway.

The trial court had no difficultly finding that the dedication requirement satisfied the "essential nexus" test (a proposed development would generate transportation-related costs and a dedication for road widening advanced the same objective), but concluded that the dedication failed to meet the "rough proportionality" test. The Court of Appeal disagreed, and its analysis of the "rough proportionality" requirement is a central focus of the opinion.

The court explained that the "rough proportionality" test does not require that all similarly-situated owners be treated the same. Specifically, the U.S. Constitution does not preclude the agency from imposing dedication requirements that would result in some owners bearing a larger burden of the project costs than other owners. Rather, the focus is on whether the burden placed on the particular owner is roughly proportional to the impact of that owner’s proposed development.

While this may seem like a fine line, it becomes crucial in situations where, as is often the case, the fees and dedication requirements will not fully recoup the project costs. In such situations, it is possible that no owner will pay his or her full share, based on the impact the owner’s project will create. Thus, all the dedication requirements would satisfy Dolan, even if some owners are forced to bear a disproportionate share as compared to their neighbors.

This is precisely what happened in State Route 4 Bypass Authority, where the owner argued that he was being forced to contribute a much larger portion of the costs of the project just by virtue of the fact that his property happened to lie within the right-of-way, triggering the dedication requirement that most other owners would not have to bear. Because the court concluded that even this more burdensome share was roughly proportional to the impact of the owners’ proposed development, it did not matter that the owner had to "pay" far more than surrounding property owners.

The court also rejected the property owners’ equal protection claim, reasoning that Dolan’s "rough proportionality" test involves greater scrutiny than the "rational basis" test (applied in equal protection cases when no "suspect classification" exists), meaning that any impact fee or dedication requirement that passes constitutional muster under Dolan would, by definition, pass muster under the rational basis test.

The bottom line: It is likely a losing battle for a developer to challenge a dedication or development fee on the basis that the exaction or financial burden being placed on the developer’s property is greater than a similarly situated developer. The "rough proportionality" test only prohibits public agencies from assessing a property owner for more than the full spillover costs of developing the property.

Paul Weiland counsels clients regarding environmental and land use matters and litigates such matters in trial and appellate courts under a variety of statutes, including the Clean Water Act and Endangered Species Act. Formerly, he worked in the Law and Policy Section, Environmental and Natural Resources Division of the U.S. Department of Justice. He can be reached at (949) 833-7800 or pweiland@nossaman.com.

 

Rick Rayl has experience litigating a broad range of complex civil litigation issues and focuses on real estate development, complex business disputes, and condemnation matters.  He can be reached at rrayl@nossaman.com or (949) 833-7800. 

 

Brad Kuhn specializes in business and commercial litigation with an emphasis on eminent domain, inverse condemnation and other real estate disputes.  He can be reached at bkuhn@nossaman.com or (949) 833-7800.

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