Development Exactions

What are development exactions and how are they related to takings?

In my own personal experience, development exactions seem to be one of the most common types of takings exercised by public entities. An exaction is a form of mandatory contribution provided by developers which are required by public entities. These contributions are generally made as a condition of approval for development. Exactions come in the form of impact fees, connection fees, the dedication of land to the public, the construction of public improvements, and/or money paid in place of land dedication or improvement construction. Any public entity may require an exaction, so long as the exaction meets certain legal standards to preserve and protect constitutional property rights. If an exaction does not meet all of the standards then it may be an illegal taking and the property owner would be entitled to compensation (State of Utah Office of the Property Rights Ombudsman, Exactions, n.d.).

In order for an exaction to be legal and appropriate, it must meet two general standards: 1. An essential link, or nexus, must exist between the required exaction and a legitimate public interest, and 2. The required exaction must be in roughly equal proportion to the impact of the development. These requirements help protect property rights as defined by the constitution, but it can be difficult for property owners and developers to understand these rules or how exactions are properly applied.

The purpose of exactions is to shift some of the cost of resolving some of the impacts of development away from the general public to the developer. In fact, exactions should be thought of and treated like a solution to resolve a problem created by new development. This principle may not always be understood and therefore exactions may be treated as a tool in order to gain something for free for the public or even a private entity. When exactions are treated in this way, they become illegal takings. The public entity holds the burden of responsibility in proving that their exactions are proper and meet the requirements.

Let’s analyze the requirements a little bit further. What is meant by an essential link and what is considered a legitimate public interest? The exaction must directly advance or promote a legitimate public interest. A legitimate public interest is anything that promotes the safety, health, and welfare of the general public. Examples include things such as roads, drainage systems, utilities, etc. In Nollan vs the California Coastal Commission, a property owner was applying to build a home on their beachfront property, the coastal commission granted them the permit on the condition that the property owner grants the public a perpetual access easement across their property. The supreme court found that the exaction did not promote a legitimate public interest related to the development permit and that the commission's desires should be accomplished through other means such as eminent domain. Therefore the exaction was missing that essential link between the development, exaction, and public interest (Nollan v. California Coastal Commission, 1987).

The second requirement is that the required exaction must be in roughly equal proportion to the impact of the development. Theoretically, all development has an impact on the surrounding area and the public in general, whether it be demand on public utilities, drainage systems, roads, etc. These impacts are viewed as problems that need solutions and exactions are intended to be those solutions, but the solution needs to be roughly equal in both nature and extent to the problem.

Utah State Code requires that “each exaction is roughly proportionate, both in nature and extent, to the impact of the proposed development” (MLUDMA, 2016), but in the case of B.A.M. Development v. Salt Lake County (“BAM III”), the court expressed that the term “roughly proportionate” is perhaps inappropriate and that a more appropriate term would be “roughly equal”. The court expressed how technically 1:100 or 1:1000 are both still proportions and therefore doesn’t meet the intent of the code, which they determined to be “roughly equal” (B.A.M. Development v. Salt Lake County (“BAM III”), 2012).

As for the “in nature and extent” portion of the law. “In nature” means that the exaction meets the needs created by the development. “In extent” means that the exaction must be roughly equivalent in regards to finance compared to how much it would cost the public to fix the issue. In the case of Dolan v. City of Tigard, the court stated that even though there is no specific mathematical calculation, the public entity must actually come to a determination that the exaction they are performing is roughly equal to the impact of the development (Dolan v. City of Tigard, 1994).

As for things like application review fees. Application review fees are applied by local governments when processing and reviewing applications for development. Local governments are allowed to apply these fees as long as they are reasonable and do not exceed the actual cost of reviewing and processing the application (State of Utah Office of the Property Rights Ombudsman, Land Use and Development, n.d.). According to Utah state law, applicants are allowed to request an itemized schedule of the fee within 30 days of paying the fee. Within 10 days of this request, the government entity must provide this schedule with any studies, reports, or methods used to calculate the fees (MLUDMA, 2016).

Notes:

1. This article is part of a greater analysis, that analysis can be found in it's entirety here.

2. Disclaimer: Disclaimer: The author of this article is NOT an attorney. The information provided in this document is provided for educational purposes only and is NOT considered legal advice.

References

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Dolan v. City of Tigard, 512 U.S. 374 (1994). https://utahpropertyrights.files.wordpress.com/2012/12/dolannew13.pdf

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