The Supreme Court criticized California development fees. A new court ruling just upheld them

A panel of California appellate judges just pumped the brakes on what could have been a revolution in municipal budgeting and building fees across California.

The constitutional skirmish dates back to 2016 when George Sheetz, proposing to build a house on his property, sued El Dorado County over a $23,420 traffic mitigation fee.

Sheetz and his attorneys argued that the county needed to prove that the five-digit traffic impact fee matched the financial toll his new home would actually leave on local roads. 

The case made its way up to the U.S. Supreme Court last year, which sided unanimously with Sheetz — at least in principle. The court ruled that local governments, including county boards of supervisors, need to justify their impact fees. But it stopped short of saying how detailed they need to be. 

In a ruling published Tuesday, a three-judge panel at California’s 3rd Appellate District took up that question and ruled that the county’s fee passed muster, even under the higher degree of scrutiny demanded by the Supremes. 

El Dorado County “used a valid method for imposing the (traffic) fee” and “established a reasonable relationship between the fee charged and the projected burdens,” the judges wrote. 

Translation: Good enough. 

After the U.S. Supreme Court’s ruling last year, construction boosters heralded a possible new dawn of lower impact fees, while local government groups warned of slashed budgets. This latest ruling has put all of that on hold for now. 

Locally imposed impact fees in California are nearly three times the national average, according to a UC Berkeley report that used data from 2015.

Brian Hodges, attorney with the Pacific Legal Foundation, which represented Sheetz, said they were still weighing whether to appeal to the state Supreme Court. 

But he also stressed that though the ruling didn’t deliver the outcome he and his client were hoping for, the U.S. Supreme Court’s order from last year still makes a wide swath of locally imposed requirements on builders in legal jeopardy. That includes impact fees, but also inclusionary zoning rules, in which cities require developers to set aside a certain share of new units for lower-income tenants.

“We won the war but lost the battle,” Hodges said.