After a Trip to SCOTUS and Back, El Dorado County’s Traffic Mitigation Fee Is Still Not a Taking
October 28, 2025California’s Third Appellate District has once again held that the traffic mitigation fee the County of El Dorado imposes on new development projects is not an unconstitutional taking. The court first reached that conclusion over three years ago, in Sheetz v. County of El Dorado (2022) 84 Cal.App.5th 394. At that time, the court concluded that because the County’s fee had been legislatively imposed, it was not subject to the “essential nexus” and “rough proportionality” requirements set forth in Nollan v. California Coastal Commission (1987) 483 U.S. 825, and Dolan v. City of Tigard (1994) 512 U.S. 374.
After the California Supreme Court denied review, the U.S. Supreme Court took up the case. In a unanimous decision issued last April, the Court vacated the Third District’s opinion. Overruling settled California precedent, the Court held that the Nollan/Dollan test applies equally to development conditions that have been adopted via legislative action – not just fees imposed through an administrative process. The Court did not address whether the County’s mitigation fee satisfied that test.
On remand, the Third Appellate District again held in August that the County’s impact fee passes constitutional muster. This time, it concluded that the fee is not a taking because it satisfies Nollan and Dolan’s essential nexus and rough proportionality standards. And while the bottom-line outcome is the same as it was three years ago, the Third District’s latest decision provides important new insights about how California courts are likely to apply the Nollan/Dolan framework to legislatively imposed development fees.
The Supreme Court’s opinions in Sheetz II
Writing for a unanimous Court, Justice Barrett had held that the Third District erred by “declin[ing] to assess the County’s traffic impact fee for an essential nexus and rough proportionality based on its view that the Nollan/Dollan test does not apply to ‘legislatively prescribed monetary fees.’” In a relatively short opinion, the Court concluded that “[n]othing in constitutional text, history, or precedent supports exempting legislatures from ordinary takings rules.”
Three justices wrote separately, each highlighting issues left open in the majority opinion. Justice Sotomayor, joined by Justice Jackson, called attention to “an important threshold question to any application of Nollan/Dolan scrutiny: whether the permit condition would be a compensable taking if imposed outside the permitting context.” If the answer is no, the Nollan/Dolan does not apply. Justice Sotomayor noted that neither the Court in Sheetz II nor the Third Appellate District in Sheetz I had addressed this “antecedent question,” and thus Sheetz II left open the possibility that Nollan and Dolan would not apply to the County’s fee.
Justice Gorsuch, writing alone, observed that the majority had not addressed whether the Nollan/Dolan test “operates differently when an alleged taking affects a ‘class of properties’ rather than ‘a particular development.’” For Justice Gorsuch, it was clear that the same test must apply in both circumstances. Justice Kavanaugh, joined by Justices Kagan and Jackson, took up a closely related question – whether “a permit condition imposed on a class of properties must be tailored with the same degree of specificity as a permit condition that targets a particular development.” Justice Kavanaugh observed that the majority opinion had neither addressed nor prohibited “the common government practice of imposing permit conditions, such as impact fees, on new developments through reasonable formulas or schedules that assess the impact of classes of development rather than the impact of specific parcels of property.”
Major Takeaways from Sheetz III
Justice Sotomayor’s “antecedent question” appears to have an easy answer
In Sheetz III, the Third Appellate District first addressed Justice Sotomayor’s “threshold” question of whether the County’s fee would amount to a taking if it were imposed outside of the permitting context. It quickly concluded that it would. In doing so, the court agreed with Sheetz that this answer was dictated by the Supreme Court’s decision in Koontz v. St. Johns River Water Management District (2013) 570 U.S. 595. Because the County’s demand for a mitigation fee had a “direct link” to Sheetz’s specific parcel of property, Koontz subjects the fee to Nollan/Dolan scrutiny. The Third District’s cursory handling of this “antecedent question” suggests that virtually all mitigation fees must satisfy Nollan and Dolan.
The “essential nexus” test is a low bar to clear
The court went on to apply the first prong of the Nollan/Dolan test: whether, under Nollan, the mitigation fee bore an “essential nexus” to a legitimate government interest. It concluded that the County’s fee easily cleared this “relatively low threshold,” which requires only “some logical connection” between the permit condition and the government interest. The court found there was an obvious connection between the County’s legitimate interest in reducing traffic congestion associated with new development and its demand for a payment to finance improvements to its public road system.
“Rough proportionality” requires an “individualized” analysis – but not too individualized
The court next turned to Dolan’s “rough proportionality” requirement. This standard generally requires the government to make “some sort of individualized determination that the required [exaction] is related both in nature and extent to the impact of the proposed development.” The court held that the County’s fee also passed this second half of the Nollan/Dolan test, and thus did not cause an unconstitutional taking.
In applying the rough proportionality standard, Sheetz III answered two questions that the Supreme Court had explicitly left open. First, the court held that the “rough proportionality” standard requires the same showing regardless of whether the government is imposing a development condition on a single project or an entire class of projects. By itself, this holding may have sparked concerns about the sort of showing local governments would need to make to justify development fees that are imposed on a formulaic basis.
But in the most significant portion of Sheetz III, the court went on to hold that category- or formula-based fees can readily pass the rough proportionality test – provided the government can demonstrate that it has imposed the fee using a “valid method” that “establish[es] a reasonable relationship between the fee charged and the projected burdens” of the development project. If the government can supply sufficient evidence to support its fee-setting methodology, the burden then shifts to the plaintiff to prove that the fee does not reasonably relate to the project’s impacts.
Here, the court observed that the County had provided “detailed analyses” to substantiate its traffic fee model, including “expert technical reports” that projected the traffic impacts of various categories of new development within different areas of the County. Those records proved that the County “considered the relevant factors and demonstrated a rational connection between those factors” and the mitigation fee it imposed on Sheetz’s project. And because Sheetz failed to show that the record did not support the reasonableness of the County’s approach, Sheetz III concluded that the County’s fee satisfies Dolan.
The court rejected Sheetz’s argument that Dolan required the County to show that its fee was necessary to offset the traffic impacts uniquely attributable to Sheetz’s particular project. Sheetz III observed that the Supreme Court had already entertained that precise version of the “rough proportionality” test in Dolan itself. But it had rejected that standard as excessively demanding.
Sheetz III also implies that the reasonableness of a government’s fee-setting methodology should be evaluated based on the “administrative record” that was before the government when it imposed the fee. But whether parties can ever rely upon evidence that was not in the administrative record to bolster or undermine the reasonableness of the government’s fee-setting methodology remains an open question after Sheetz III.
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For local governments throughout California, Sheetz III should relieve concerns that Sheetz II would effect a sea change in how development impact fees are imposed. Although legislatively imposed fees are now subject to Nollan/Dolan scrutiny, the Third District has fashioned a test that will be relatively easy for careful governments to pass.
For more information, please contact Ryan Gallagher.