PF Dev. Grp., LLC v. Cnty. of Harnett ( 2022 )

IN THE SUPREME COURT OF NORTH CAROLINA
2022-NCSC-93
No. 62PA21/63PA21
Filed 19 August 2022
ANDERSON CREEK PARTNERS, L.P.; ANDERSON CREEK INN, LLC;
ANDERSON CREEK DEVELOPERS, LLC; FAIRWAY POINT, LLC; STONE
CROSS, LLC d/b/a/ STONE CROSS ESTATES, LLC; RALPH HUFF HOLDINGS,
LLC; WOODSHIRE PARTNERS, LLC; CRESTVIEW DEVELOPMENT, LLC;
OAKMONT DEVELOPMENT PARTNERS, LLC; WELLCO CONTRACTORS,
INC.; NORTH SOUTH PROPERTIES, LLC; W.S. WELLONS CORPORATION;
ROLLING SPRINGS WATER COMPANY, INC; and STAFFORD LAND
COMPANY, INC.
v.
COUNTY OF HARNETT
PF DEVELOPMENT GROUP, LLC
v.
COUNTY OF HARNETT
On discretionary review pursuant to N.C.G.S. § 7A-31 of a unanimous decision
of the Court of Appeals, 275 N.C. App. 423 (2020), affirming an order entered on 26
November 2018 by Judge Michael J. O’Foghludha in Superior Court, Harnett County.
Heard in the Supreme Court on 9 May 2022.
Scarbrough, Scarbrough & Trilling, PLLC, by John F. Scarbrough, James E.
Scarbrough, and Madeline J. Trilling; James R. DeMay, for plaintiff-
appellants.
Fox Rothschild, LLP, by Kip David Nelson, Bradley M. Risinger, and Troy D.
Shelton; and Christopher Appel, for defendant-appellee.
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Erin E. Wilcox for amicus curiae Pacific Legal Foundation; and J. Michael
Carpenter, for amicus curiae North Carolina Homebuilders Association.
F. Paul Calamita for amicus curiae North Carolina Water Quality Association
and the National Association of Clean Water Agencies.
ERVIN, Justice.
¶1 This appeal arises from a challenge to an ordinance adopted by defendant
Harnett County that requires residential property developers to pay one-time water
and sewer “capacity use” fees associated with each lot that they wish to develop as a
precondition for obtaining the County’s concurrence in the developer’s application for
the issuance of required water and sewer permits by the North Carolina Department
of Environmental Quality. After the trial court granted the County’s motion for
judgment on the pleadings and dismissed all the claims asserted against the County
by plaintiff PF Development Group and all but one of the claims asserted against the
County by plaintiffs Anderson Creek Partners, L.P.; Anderson Creek, Inc., LLC;
Anderson Creek Developers, LLC; Fairway Point, LLC; Stone Cross, LLC d/b/a Stone
Cross Estates, LLC; Ralph Huff Holdings, LLC; Woodshire Partners, LLC; Crestview
Development, LLC; Oakmont Development Partners, LLC; Wellco Contractors, Inc.;
North South Properties, LLC; W.S. Wellons Corporation; Rolling Springs Water
Company, Inc.; and Stafford Land Company, Inc., the Court of Appeals affirmed the
trial court’s decision. Our review of the Court of Appeals’ decision requires us to
determine whether the challenged “capacity use” fees are monetary land-use
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exactions subject to constitutional review under the “essential nexus” and “rough
proportionality” test articulated by the United States Supreme Court in Nollan v.
California Coastal Commission, 483 U.S. 825 (1987); Dolan v. City of Tigard, 512 U.S.
374 (1994); and Koontz v. St. Johns River Water Management District, 570 U.S. 595(2013). After careful consideration of the parties’ arguments in light of the record
and the applicable law, we reverse the decision of the Court of Appeals and remand
this case to Superior Court, Harnett County, for further proceedings not inconsistent
with this opinion.
I. Factual Background
A. Substantive Facts
¶2 On 20 October 1980, the Harnett County Board of Commissioners established
the Buies Creek-Coats Water and Sewer District for the purpose of collecting and
treating wastewater within the District’s boundaries. On 23 July 1984, the County
and the District entered an interlocal agreement pursuant to which the County
agreed to operate the District’s water and sewer systems. In resolving a legal
challenge to the 1984 agreement, this Court held that counties had the authority to
enter into interlocal cooperative agreements providing for the operation of a water
and sewer system on behalf of a water and sewer district and to exercise all “rights,
powers, and functions granted to water and sewer districts” in the course of doing so,
McNeill v. Harnett County, 327 N.C. 552, 558–59 (1990) (citing N.C.G.S. § 153A-275
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(1987)), with the powers that the County was authorized to exercise including the
District’s authority to “establish, revise, and collect rates, fees or other charges and
penalties for the use of or the services furnished or to be furnished by any sanitary
sewer system, water system or sanitary sewer and water system of the district[,]” id.
(quoting N.C.G.S. § 162A-88 (1987)).
¶3 As of 1998, the County had established eight water and sewer districts for the
purpose of managing water and wastewater services throughout its entire land area.
In May 1998, the County and the districts entered a joint interlocal agreement which
governed the manner in which the County operated each district’s water and sewer
systems. In the 1998 agreement, the County and the districts agreed that the
districts would lease all of their real and personal property to the County, that the
districts would transfer their financial and intangible assets to the County, that the
County would assume most of the districts’ liabilities, and that the County’s
Department of Public Utilities would “administer all operations and maintenance of”
the water and sewer systems in each district. In addition, the County agreed to
“[e]stablish and revise from time to time schedules of rates, fees, charges, and
penalties for the use of or the water and sewer services furnished and to bill and
collect same.”
¶4 On 1 July 2016, acting in accordance with the 1998 Agreement, the County
adopted an ordinance “for the purpose of establishing a schedule of rents, rates, fees,
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charges and penalties for the use of and services furnished by water supply and
distribution systems and sewer collections systems owned or operated by [the
Department of Public Utilities].” Section 28(h) of the ordinance provides for the
collection of “capacity use” fees for the purpose of “partially recover[ing] directly from
new customers the costs of capacity of the utility system to serve them.” More
specifically, the ordinance provides that, for each new residential connection to a
water or sewer system owned or operated by the County, the landowner must pay a
one-time, non-negotiable fee of $1,000 for water service and $1,200 for sewer service,
with the landowner being required to make the required payment prior to the
County’s concurrence in the landowner’s application to the North Carolina
Department of Environment and Natural Resources1 for the issuance of the required
water and/or sewer permits. According to the ordinance, “such charges are
reasonable and necessary and result in a more equitable and economically efficient
method of recovery of such costs to handle new growth and to serve new customers
without placing an additional financial burden on existing customers solely through
inordinate enhancement of water and sewer rates.” Plaintiffs, who are engaged in
the business of developing property in Harnett County, have paid the “capacity use”
1The Department of Environment and Natural Resources is now the Department of
Environmental Quality.
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fees required pursuant to the ordinance in the course of their development-related
activities.
B. Procedural History
¶5 On 1 March 2017, the Anderson Creek plaintiffs filed a complaint in which
they sought (1) a declaration that the County lacked the statutory authority to adopt
and enforce the ordinance; (2) a declaration that the adoption and enforcement of the
ordinance violated the Anderson Creek plaintiffs’ rights to equal protection and
substantive due process pursuant to Article I, Section 19 of the North Carolina
Constitution; (3) a refund of all “capacity use” fees that had been paid to the County
along with prejudgment interest; (4) an award of costs and attorney’s fees; (5) an
accounting for all “capacity use” fees that the Anderson Creek plaintiffs had paid to
the County; and (6) the entry of an order allowing the Anderson Creek plaintiffs to
deposit all future “capacity use” fees into an escrow account pending the entry of a
final judgment in this case. The Anderson Creek plaintiffs claimed to have paid more
than $25,000 in “capacity use” fees to the County pursuant to the ordinance.
¶6 On 19 May 2017, the County filed an amended answer denying the material
allegations of the complaint, asserting numerous affirmative defenses, advancing
counterclaims for breach of various agreements into which the individual Anderson
Creek plaintiffs had entered with the County, and seeking the imposition of sanctions
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against counsel for the Anderson Creek plaintiffs.2 On 16 March 2018, the Anderson
Creek plaintiffs amended their complaint to add claims for breach of a 2018
settlement agreement between Anderson Creek Partners and the County and a
declaration concerning the severability of a provision contained in that agreement
addressing any future determination that the relevant “capacity use” fee payments
were unlawful. On 1 February 2018, the County filed an answer to the Anderson
Creek plaintiffs’ amended complaint and asserted an additional counterclaim seeking
a declaration that the County had the authority to collect the challenged “capacity
use” fees.3 On 12 February 2018, the County filed a motion seeking the entry of
judgment in its favor with respect to all but one of the claims that had been asserted
in the amended complaint and a motion to join necessary parties or, in the
alternative, a motion for permissive joinder of parties.
¶7 On 19 July 2017, plaintiff PF Development Group, LLC, filed a complaint
asserting six claims for relief against the County that were identical to those set out
in the initial complaint filed by the Anderson Creek plaintiffs. On 8 November 2018,
the trial court consolidated the two cases, entered an order granting the County’s
motion for judgment on the pleadings with respect to all but one of the claims asserted
2The County’s initial responsive pleading is not contained in the record on appeal.
3 Although the County’s answer to the amended complaint was filed before the
Anderson Creek plaintiffs received authorization from the trial court to amend their
complaint, no party has raised any issues about the timeliness of either the amended
complaint or the amended answer or the parties’ authority to file either document.
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by the Anderson Creek plaintiffs and all of the claims asserted by PF Development
and dismissing those claims with prejudice and concluded that its substantive
decision had rendered the County’s joinder motions moot. Plaintiffs noted an appeal
to the Court of Appeals from the trial court’s order.
C. Court of Appeals Decision
¶8 In seeking relief from the trial court’s orders before the Court of Appeals,
plaintiffs argued that the trial court had erred by entering judgment on the pleadings
in favor of the County on the grounds that (1) the pleadings disclosed the existence of
genuine issues of material fact; (2) the 1998 Agreement did not provide the County
with the authority afforded to water and sewer districts by N.C.G.S. § 162A-88 to
collect fees for water and sewer service “to be furnished;” and (3) plaintiffs had alleged
a valid claim that the challenged “capacity use” fees were an “unconstitutional
condition” for permit approval that failed to satisfy the “essential nexus” and “rough
proportionality” requirements articulated in Koontz. In addition, plaintiffs contended
that the trial court had erred by taking judicial notice of the 1984 and 1998
agreements without giving plaintiffs an adequate opportunity to challenge that
decision.
¶9 In rejecting plaintiffs’ challenges to the trial court’s order, the Court of Appeals
began by observing that “[j]udicial notice is appropriate where a fact is ‘not subject to
reasonable dispute in that it is either (1) generally known within the territorial
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jurisdiction of the trial court or (2) capable of accurate and ready determination by
resort to sources whose accuracy cannot reasonably be questioned,’ ” Anderson Creek
Partners, L.P. v. Cnty. of Harnett, 275 N.C. App. 423, 429 (2020) (quoting N.C.G.S.
§ 8C-1, Rule 201 (2017)), and that trial court decisions to judicially notice particular
facts or items are subject to review on appeal only for abuse of discretion, id. at 429–
30 (citing Muteff v. Invacare Corp., 218 N.C. App. 558, 568 (2012)). After noting that
“important public documents will be judicially noticed,” id. at 429 (quoting State ex
rel Utils. Comm’n v. S. Bell Tel. & Tel. Co., 289 N.C. 286, 287 (1976)), the Court of
Appeals determined that the 1984 and 1998 agreements “are public contracts
between government entities” that are “subject to public review” that and “their
existence is therefore ‘not subject to reasonable dispute,’ ” id. at 430. In addition, the
Court of Appeals reasoned that “[t]he agreements are important public documents
germane to the resolution of this case” and that “some of the [plaintiffs] reference—
or even incorporate—the 1998 Agreement in their pleadings.” Id. As a result, the
Court of Appeals concluded, the trial court did not abuse its discretion by judicially
noticing the 1984 and 1998 agreements. Id.¶ 10 Secondly, the Court of Appeal held that, while the relevant statutory
provisions “authorized the County only to assess fees for the ‘contemporaneous use’
of its water and sewer systems, and otherwise ‘clearly and unambiguously fail[ed] to
give [the County] the essential prospective charging power needed to assess [the
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fees,]” id. at 432 (alterations in original) (quoting Quality Built Homes, Inc. v. Town
of Carthage, 369 N.C. 15, 22 (2016) (Quality Built Homes I)), the water and sewer
districts did have the authority to collect fees for service to be provided in the future
given that, unlike N.C.G.S. §§ 153A-277(a) or 160A-314(a), which govern the
authority of counties and cities, respectively, to set rates for water and sewer service,
N.C.G.S. § 162A-88 allowed water and sewer districts to set rates for “services
furnished or to be furnished,” id. at 433 (emphasis added).4 In addition, the Court of
Appeals observed that “local government entities may generally cooperate through
interlocal agreements to carry out their purposes,” id. (citing N.C.G.S. §§ 153A-275,
153A-278 (2015)), and determined that, in accordance with our decision in McNeill,
“a county may contract with another local government entity to enable the county to
exercise authority given to that entity,” id. As a result, even though the County
lacked the authority to charge fees for water and sewer service to be provided in the
future, the water and sewer districts operating in Harnett County had the authority
to do so and were free to enter into contracts with the County pursuant to which the
County was entitled to exercise the authority that had been granted to the water and
4In 2017, the General Assembly amended N.C.G.S. §§ 153A-277(a) and 160A-314(a)
to permit cities and counties to establish prospective fees like those at issue here. See Public
Water and Sewer System Development Fee Act, S.L. 2017- 138, §§ 3, 4, 2017 N.C. Sess. Laws
996, 1000. However, the amended language did not become effective until 1 October 2017,
with the General Assembly having specified that “[n]othing in this act provides retroactive
authority for any system development fee, or any similar fee for water or sewer services to be
furnished, collected by a local governmental unit prior to October 1, 2017.” Id., § 11, 2017
N.C. Sess. Laws at 1002.
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sewer districts. Id. at 433–34. For that reason, the Court of Appeals concluded that
“the only way the County could have had the authority to charge any prospective fees
would be pursuant to an interlocal agreement through which the county could
exercise authority held by the [d]istricts.” Id. at 434.
¶ 11 Thirdly, the Court of Appeals held that, since “the 1998 Agreement granted
the County the ability to exercise the [d]istricts’ prospective fee-collecting authority,”
the pleadings “failed to present a material issue of fact regarding the County’s
authority to collect prospective fees.” Id. at 436. In rejecting plaintiffs’ contention
that the record revealed the existence of a genuine issue of material fact concerning
the extent to which the County either managed infrastructure owned by the districts
or operated its own facilities, the Court of Appeals determined that this distinction
was immaterial on the grounds that, “[r]egardless of whether the County is operating
its own physical water and sewer infrastructure, the [d]istricts’ infrastructure,
infrastructure it acquired from the [d]istricts, or a combination thereof, the issue is
whether the County had the authority to use any means to assess prospective fees for
water and sewer services to be furnished in the future.” Id. As a result, the Court of
Appeals held that the trial court did not err in concluding that the 1998 agreement
permitted the County to exercise the districts’ fee-collecting authority “by any legal
means.” Id. at 437.
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¶ 12 Finally, the Court of Appeals addressed plaintiffs’ contention that the record
revealed the existence of a genuine issue of material fact concerning the extent to
which the challenged “capacity use” fees were subject to “unconstitutional conditions”
analysis pursuant to Koontz. Id. The Court of Appeals noted that, in accordance with
Nollan and Dolan, “the government is allowed to condition approval of land-use
permits by requiring the landowner to mitigate the impact of his or her proposed use.”
Anderson Creek Partners, 275 N.C. App. at 438 (citing Dolan, 512 U.S. at 391; Nollan,
483 U.S. at 837). As part of this process, the Court of Appeals determined that “[t]he
government may require that the landowner agree to a particular public use of the
landowner’s real property, as long as there is an ‘essential nexus’ and ‘rough
proportionality’ between the public impact of the landowner’s proposed developments
and the government’s requirements.” Id. (citing Nollan, 438 U.S. at 837; Dolan, 512
U.S. at 391). According to the Court of Appeals, Koontz extended the “essential
nexus” and “rough proportionality” test enunciated in Nollan and Dolan to encompass
demands that a landowner make a monetary payment in exchange for permit
approval “where there is a ‘direct link between the government’s demand and a
specific parcel of property.’ ” Id. (quoting Koontz, 570 U.S. at 614).
¶ 13 In the Court of Appeals’ view, the challenged fees “were categorized as impact
fees and referred to as ‘capacity use fees,’ despite the County’s requirement that the
fees be paid prior to approval of a developer’s permits.” Id. at 439. After
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acknowledging the Supreme Court’s statement that the “unconstitutional conditions”
doctrine “did not affect the ability of governments to impose property taxes, user fees,
and similar laws and regulations that may impose financial burdens on landowners,”
citing Koontz, 570 U.S. at 615, the Court of Appeals noted that the Supreme Court
had “otherwise provided little guidance on how courts should tread the fine line
between unconstitutional exactions and constitutional, routine taxes and fees” and
pointed out that “the application of the unconstitutional conditions doctrine to
monetary exactions in North Carolina” was a question of first impression, Anderson
Creek Partners, 275 N.C. App. at 439, 441. The Court of Appeals found the decisions
from other jurisdictions upon which plaintiffs relied “regarding the thin line between
unconstitutional exactions and constitutional user fees” to be unpersuasive given that
they were “part of the pre-Koontz division of authority over whether a demand for
money could give rise to an unconstitutional conditions claim under Nollan/Dolan—
a [question] which Koontz,” in the Court of Appeals’ opinion, “settled in the
affirmative.” Id. at 442 (citing Koontz, 570 U.S. at 603). On the contrary, the Court
of Appeals found Dabbs v. Anne Arundel County, 458 Md. 331 (2018), in which
Maryland’s highest court held that generally applicable fees do not implicate the
“unconstitutional conditions” doctrine, to be persuasive. Anderson Creek Partners,
275 N.C. App. at 442.
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¶ 14 As the Court of Appeals noted, Dabbs involved a challenge to impact fees that
the defendant county had collected in connection with the development of real estate
that were designed to facilitate improvements to the county’s transportation and
education infrastructure, Dabbs, 458 Md. at 336–38, with these fees having been
“legislatively-imposed[,] predetermined, based on a specific monetary schedule, and
applie[d] to any person wishing to develop property in the district,” id. at 353. In
rejecting arguments similar to those that plaintiffs have advanced in this case, the
Maryland Court of Appeals concluded in Dabbs that the challenged fees were not
subject to constitutional scrutiny under Nollan and Dolan because, “unlike Koontz,
the [challenged ordinance] [did] not direct a [land]owner to make a conditional
monetary payment to obtain approval of an application for a permit of any particular
kind, nor [did] it impose the condition on a particularized or discretionary basis.” Id.
(citations omitted). On the contrary, the Maryland Court of Appeals held that the fee
at issue in Dabbs “applied on a generalized district-wide basis” rather than having
been established in the course of determining “whether an actual permit will issue to
a payor individual with a property interest.” Id. (citing Koontz, 570 U.S. at 628
(Kagan, J., dissenting) (suggesting that the Supreme Court should “approve the rule,
adopted in several states, that Nollan and Dolan apply only to permitting fees that
are imposed ad hoc, and not to fees that are generally applicable”)).
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¶ 15 The Court of Appeals concluded that Dabbs was “in harmony with” both Koontz
and the definition of an “exaction” articulated in Franklin Road Properties v. City of
Raleigh, 94 N.C. App. 731, 736 (1989) (defining an “exaction” as a fee assessed “in
lieu of compliance with dedication or improvement provisions” or “reflecting
[developers’] respective prorated shares of the cost of providing new roads, utility
systems, parks, and similar facilities serving the entire area”) (citation omitted). In
the Court of Appeals’ view, “[t]his definition did not include fees assessed on a
generally applicable basis in a static quantity indifferent to the particular developers’
prorated share of any resulting impact.” Anderson Creek Partners, 275 N.C. App. at
443. As a result, the Court of Appeals held that
impact and user fees which are imposed by a municipality
to mitigate the impact of a developer’s use of property,
which are generally imposed upon all developers of real
property located within that municipality’s geographic
jurisdiction, and which are consistently imposed in a
uniform, predetermined amount without regard to the
actual impact of the developers’ project do not invoke
scrutiny as an unconstitutional condition under
Nollan/Dolan nor under North Carolina precedent.
Id. In view of the fact that the “capacity use” fees at issue in this case “are
predetermined, set out in the [ordinance], and non-negotiable” and “are not assessed
on an ad hoc basis or dependent upon the landowner’s particular project,” the Court
of Appeals concluded that they did not come within the ambit of the approach adopted
in Koontz. Id. In other words, the Court of Appeals held that, even though the
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challenged fees “are assessed in conjunction with the landowners’ intent to make use
of real property located within the County’s jurisdiction,” they differ from the type of
fee that is subject to the “unconstitutional conditions” doctrine because, “unlike the
conditions imposed in Koontz, the County does not view a landowner’s proposed
project and then make a demand based upon that specific parcel of real property.” Id.
¶ 16 The Court of Appeals noted that Dabbs could be distinguished from this case
on the grounds that the challenged water and sewer “capacity use” fee was “assessed
prior to the County’s grant of building permits, thus making [it] a condition of
approval,” and that Dabbs “expressly [rested], in part, on the fact that the fees at
issue were not ‘a conditional monetary payment to obtain approval of an application
for a permit of any particular kind[.]’ ” Id. at 444 (quoting Dabbs, 458 Md. at 353)
(emphasis in original). According to the Court of Appeals, “this distinction” “speaks
directly to the type of coercive harms that the United States Supreme Court sought
to prevent in Koontz,” that is, “to prevent the government from leveraging its
legitimate interest in mitigating harms by imposing ‘[e]xtortionate demands’ which
may ‘pressure [a] [land]owner into voluntarily giving up property for which the Fifth
Amendment would otherwise require just compensation.’ ” Id. (quoting Koontz, 570
U.S. at 605–06). In the Court of Appeals’ view, this “distinction [was not] material in
this case” because, regardless of “whether the [f]ees were to be paid prior to or after
[plaintiffs] began their projects, the fees were predetermined and are uniformly
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applied—not levied against [plaintiffs] on an ad hoc basis—and thus do not suggest
any intent by the County to bend the will or twist the arm of [plaintiffs].” Id. As a
result, the Court of Appeals held that plaintiffs had “failed to present a constitutional
takings claim under current federal and state unconstitutional conditions
jurisprudence as a matter of law.” Id. This Court allowed plaintiffs’ discretionary
review petitions for the purpose of examining “[w]hether the ‘essential nexus’ and
‘rough proportionality’ test under the application of the doctrine of unconstitutional
conditions to land-use exactions applies to generally applicable legislative impact
fees” and “[w]hether the pleadings demonstrate a genuine issue of material fact as to
whether the County’s ‘capacity use’ fees, as applied to [p]laintiffs, ha[ve] an ‘essential
nexus’ and ‘rough proportionality’ to the impact of [p]laintiff’s developments on the
County’s water and sewer systems.”
II. Analysis
A. Standard of Review
¶ 17 The purpose of a motion for judgment on the pleadings pursuant to N.C.G.S.
§ 1A-1, Rule 12(c), “is to dispose of baseless claims or defenses when the formal
pleadings reveal their lack of merit,” with the entry of judgment on the pleadings
being appropriate when “all the material allegations of fact are admitted in the
pleadings and only questions of law remain.” Ragsdale v. Kennedy, 286 N.C. 130, 137
(1974). In deciding whether to grant or deny a motion for judgment on the pleadings,
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“[t]he trial court is required to view the facts and permissible inferences in the light
most favorable to the nonmoving party,” with “[a]ll well pleaded factual allegations
in the nonmoving party’s pleadings [being] taken as true and all contravening
assertions in the movant’s pleadings [being] taken as false.” Id. “A party seeking
judgment on the pleadings must show that the complaint fails to allege facts
sufficient to state a cause of action or admits facts which constitute a complete legal
bar thereto.” DiCesare v. Charlotte-Mecklenburg Hosp. Auth., 376 N.C. 63, 70 (2020)
(cleaned up). We review a trial court’s ruling granting or denying a motion for
judgment on the pleadings using a de novo standard of review. Id. (citing Old
Republic Nat’l Title Ins. Co. v. Hartford Fire Ins. Co., 369 N.C. 500, 507 (2017)).
B. The Unconstitutional Conditions Doctrine and Land-Use Exactions
¶ 18 According to the “unconstitutional conditions” doctrine, “the government may
not deny a benefit to a person because he [or she] exercises a constitutional right,”
Regan v. Taxation With Representation of Wash., 461 U.S. 540, 545 (1983) (citing
Perry v. Sinderman, 408 U.S. 593, 597 (1972)), which “vindicates the Constitution’s
enumerated rights by preventing the government from coercing people into giving
them up,” Koontz, 570 U.S. at 604. Nollan and Dolan “involve a special application”
of the “unconstitutional conditions” doctrine “that protects the Fifth Amendment
right to just compensation for property the government takes when owners apply for
land-use permits.” Id. Those cases recognize that, in instances involving “land-use
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exactions,” applicants for land use permits “are especially vulnerable to the type of
coercion that the unconstitutional doctrine prohibits because the government often
has broad discretion to deny a permit that is worth far more than property it would
like to take,” thereby creating a situation in which the government can “pressure an
owner into voluntarily giving up property for which the Fifth Amendment would
otherwise require just compensation.” Id. at 604–05 (citing Dolan, 512 U.S. at 385;
Nollan, 483 U.S. at 831). On the other hand, Nollan and Dolan acknowledge that
“many proposed land uses threaten to impose costs on the public that dedications of
property can offset” and that “[i]nsisting that landowners internalize the negative
externalities of their conduct is a hallmark of responsible land-use policy,” with the
Supreme Court having “long sustained such regulations against constitutional
attack.” Id. at 605 (citing Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926)).
As a result, Nollan and Dolan sought to accommodate these two concerns by allowing
the government to condition approval of a land-use permit application on the
landowner’s agreement to dedicate a portion of his or her property to public use if
there is an “essential nexus” and “rough proportionality” between the property that
the government demands and the social costs of the landowner’s proposed use for the
remaining property, Dolan, 512 U.S. at 391; Nollan, 483 U.S. at 837, with this
arrangement serving to “enable permitting authorities to insist that [permit]
applicants bear the full costs of their proposals while still forbidding the government
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from engaging in ‘out-and-out . . . extortion’ that would thwart the Fifth Amendment
right to just compensation.” Koontz, 570 U.S. at 606 (quoting Dolan, 512 U.S. at 387).
¶ 19 In Koontz, the Supreme Court extended the requirement to show an “essential
nexus” and “rough proportionality” to cases involving “monetary exactions.” Id. at
612. Koontz arose when a Florida resident sought to develop a portion of his property
by raising its elevation to make the land suitable for building, grading the land at the
southern edge of the building site down to the height of nearby high-voltage electrical
lines, and installing a dry-bed pond to retain and release stormwater runoff from the
proposed building and associated parking lot. Id. at 601. According to Florida law,
the plaintiff first had to obtain a Wetland Resources Management permit, which
“require[d] that permit applicants wishing to build on wetlands offset the resulting
environmental damage by creating, enhancing, and preserving wetlands elsewhere.”
Id. In an attempt to satisfy this requirement, the plaintiff offered to provide a
conservation easement on the southern 11-acre portion of his 14.9-acre property that
would have precluded the possibility of future development. Id. In response, the St.
Johns River Water Management District, the entity responsible for reviewing the
plaintiff’s permit application, proposed that the plaintiff limit the size of his
development to a single acre and make the remaining 13.9 acres subject to a
conservation easement. Id. In the alternative, the District offered to accept the
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plaintiff’s original proposal if he agreed to pay for improvements to property that the
District already owned at another location. Id. at 602.
¶ 20 In addressing the plaintiff’s claim that the District’s alternative proposal
resulted in a taking of property without just compensation, the Florida Supreme
Court concluded that the Nollan/Dolan rule was inapplicable “because the subject of
the exaction at issue [in the case] was money rather than a more tangible interest in
real property.” Id. at 612 (citing St. Johns River Water Mgmt. Dist. v. Koontz, 77
So.3d 1220, 1230 (Fla. 2011)). On further review, however, the United States
Supreme Court observed that, “if we accepted this argument[,] it would be very easy
for land-use permitting officials to evade the limitations of Nollan and Dolan” by
“simply giv[ing] the [land]owner a choice of either surrendering an easement or
making a payment equal to the easement’s value.” Id. In the Court’s view, since
“[s]uch so-called ‘in lieu of’ fees’ ” were “functionally equivalent to other types of land
use exactions,” they “must satisfy the nexus and rough proportionality requirements
of Nollan and Dolan.” Id.¶ 21 On the other hand, the Supreme Court also stated that “[i]t is beyond dispute
that taxes and user fees are not takings,” so that its decision had no bearing upon
“the ability of governments to impose property taxes, user fees, and similar laws and
regulations that may impose financial burdens on property owners.” Id. at 615
(cleaned up). According to the Supreme Court, “[t]he fulcrum this case turns on is
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the direct link between the government’s demand and a specific parcel of property”
and therefore Koontz
implicate[d] the central concern of Nollan and Dolan: the
risk that the government may use its substantial power
and discretion in land-use permitting to pursue
governmental ends that lack an essential nexus and rough
proportionality to the effects of the proposed new use of the
specific property at issue, thereby diminishing without
justification the value of the property.
Id. at 614. As a result, the Supreme Court held that “the government’s demand for
property from a land-use permit applicant must satisfy the requirements of Nollan
and Dolan even when the government denies the permit and even when its demand
is for money.” Id. at 619.
¶ 22 Neither party has cited, nor has our own research discovered, any North
Carolina precedent other than the Court of Appeals’ decision in this case that
addresses the applicability of the “unconstitutional conditions” doctrine to monetary
exactions since the Supreme Court decided Koontz in 2013. In Batch v. Town of
Chapel Hill, which was decided prior to Koontz, the plaintiff applied to the town for
the issuance of a permit authorizing the subdivision of a 20-acre tract of property
located within the town’s extraterritorial jurisdiction into eleven lots. 92 N.C. App.
601, 603 (1989), rev’d on other grounds, 326 N.C. 1 (1990). Although the plaintiff
revised her application in response to concerns expressed by the town’s planning staff,
the planning staff ultimately recommended that the plaintiff’s application be denied
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because, among other things, the plaintiff had “failed to indicate on her subdivision
plat an intent to dedicate to the Town of Chapel Hill a right-of-way through her
property for the proposed Laurel Hill Parkway.” Id. The Chapel Hill Town Council
adopted the planning staff’s recommendation on the grounds that the plaintiff’s
application was “not consistent with the orderly growth and development of the
[t]own” as contemplated in the town’s land use plan and “[did] not have streets which
coordinate with existing and planned streets and highways as required” by town
ordinance. Id. at 603–04. In seeking relief from the town’s decision, the plaintiff
asserted that it (1) violated her due process rights; (2) resulted in an unconstitutional
taking of her property; (3) deprived her of the equal protection of the laws; (4) worked
a temporary taking of her property; (5) violated her civil rights under 42 U.S.C.
§ 1983; and (6) involved an inverse condemnation of her property actionable pursuant
to N.C.G.S. § 40A-51. Id. at 604.
¶ 23 In seeking to defend an order granting summary judgment in her favor on
appeal, the plaintiff argued that “the conditions imposed by the town were unlawful
exactions of defendant’s property and [are subject to] the Fifth Amendment
regulatory taking doctrine enunciated in [Nollan].” Id. at 612. The Court of Appeals
agreed with the plaintiff’s contention, holding that the requirement that the plaintiff
dedicate a right-of-way for the future Laurel Hill Parkway was “an exaction with
Fifth Amendment implications” and defining an “exaction” as
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a condition of development permission that requires a
public facility or improvement to be provided at the
developer’s expense. Most exactions fall into one of four
categories: (1) requirements that land be dedicated for
street rights-of-way, parks, or utility easements and the
like; (2) requirements that improvements be constructed or
installed on land so dedicated; (3) requirements that fees
be paid in lieu of compliance with dedication or
improvement provisions; and (4) requirements that
developers pay “impact” or “facility” fees reflecting their
respective prorated shares of the cost of providing new
roads, utility systems, parks, and similar facilities serving
the entire area.
Id. at 613 (emphasis added) (quoting Richard D. Ducker, “Taking” Found for Beach
Access Dedication Requirement, 30 Local Gov’t Law Bulletin 2, Institute of
Government (1987)). After acknowledging that “[n]ot all exactions are constitutional
takings” and that determining which exactions were and were not constitutionally
permissible required identification of “when an individual property owner should pay
for community improvement and when that cost fairly lies with the ‘public as a
whole,’ ” id. at 614–15 (quoting Nollan, 483 U.S. at 836 n.4), the Court of Appeals,
relying, in part, upon statutory authority delegated to municipalities by the General
Assembly, adopted a “rational nexus test” for the purpose of “guid[ing] the trial court
in evaluating when an exaction is tantamount to a taking,” stating that,
[t]o determine whether an exaction amounts to an
unconstitutional taking, the court shall: (1) identify the
condition imposed; (2) identify the regulation which caused
the condition to be imposed; (3) [and] determine whether
the regulation substantially advances a legitimate state
interest. If the regulation substantially advances a
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legitimate state interest, the court shall then determine (4)
whether the condition imposed advances that interest; and
(5) whether the condition imposed is proportionally related
to the impact of the development.
Id. at 621 (emphasis in original). After conducting what it believed to be the required
analysis, the Court of Appeals held that the challenged condition failed to satisfy the
final component of this “rational nexus” test because it was “not proportionately
related to the impact of the development” and there was “no commensurate benefit
to the subdivision for its forfeit of land to preserve the Parkway Plan.” Id. at 622.5
¶ 24 Shortly after deciding Batch, the Court of Appeals applied the “rational nexus
test” in evaluating the validity of a determination made by the City of Raleigh in
enforcing its setback ordinance by refusing to approve the plaintiff’s application for a
building permit unless the plaintiff agreed to dedicate a portion of its property for use
in widening a portion of the adjacent public street and to pay for the necessary paving
work. Franklin Road Properties, 94 N.C App. at 736–37. Although the “rational
nexus” test and definition of “exaction” utilized in these cases antedated the Supreme
5 Although this Court subsequently reversed the Court of Appeals’ decision in Batch,
our decision rested upon a determination that the town had the authority to deny the
plaintiff’s permit application on the grounds that the proposed subdivision plan failed to
comply and coordinate with the town’s transportation plan, as required by a municipal
ordinance. Batch, 326 N.C. at 12–13. In addition, we determined that the trial court erred
by making its own findings of fact concerning the Town’s justification for denying the
plaintiff’s permit application because those findings were not supported by the evidence in
the record. Id. at 12. In light of these determinations, we concluded that we did not need to
consider the lawfulness of the other reasons upon which the Town relied in denying the
plaintiff’s permit application, expressly declining “to review or decide any of plaintiff’s
constitutional claims or other issues arising in her complaint.” Id. at 14.
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Court’s decisions in Dolan and Koontz, the Court of Appeals appropriately recognized
in this case that the “rational nexus” test enunciated in Batch closely resembles the
“essential nexus” and “rough proportionality” requirements set out in Nollan and
Dolan and that Franklin Road anticipated, at least to some extent, the Supreme
Court’s application of those criteria to “monetary exactions” in Koontz. Anderson
Creek Partners, 275 N.C. App. at 441–42. As a result, we find Batch and Franklin
Road helpful in resolving the issues that are before us in this case.
C. Classification of the “Capacity Use Fee”
¶ 25 A crucial, albeit non-dispositive, determination that we must make at the
beginning of our analysis is the manner in which the “capacity use” fees at issue in
this case should be classified. The County, on the one hand, contends that the
relevant payments are nothing more than the sort of “user fees” that we discussed in
Homebuilders Association of Charlotte v. City of Charlotte, 336 N.C. 37 (1994), and
that the United States Supreme Court discussed in decisions such as United States
v. Sperry Corporation, 493 U.S. 52, 53 (1989). Plaintiffs, on the other hand, assert
that the “capacity use” fees at issue in this case are “impact fees” that result in an
“exaction” as the Court of Appeals defined that term in Batch. 92 N.C. App. 613. In
our view, plaintiffs have the better of this disagreement.
¶ 26 As we clearly determined in Quality Built Homes I, “impact fees,” which are
designed to “offset [the] costs to expand [water and sewer] system[s] to accommodate
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development,” are not the same as “user fees,” which are associated with the
contemporaneous provision of water and sewer service. 369 N.C. at 17, 21. According
to a well-recognized treatise concerning North Carolina land use law, impact fees are
“assessments upon the owners or developers of land made by local governments to
recoup the capital costs for services needed to serve new development” and are
collected as an alternative to the use of general tax revenues “to finance the new
roads, water, sewers, fire stations, public safety services, parks, schools, and other
public facilities that must be provided to service new development.” David C. Owens,
Land Use Law in North Carolina, p. 110 (3d ed. 2020). “User fees,” on the other hand,
are “charge[s] assessed for the use of a particular item or facility,” User Fee, Black’s
Law Dictionary (11th ed. 2019), include fees intended to cover the cost of regulatory
services provided by the relevant unit of government, Homebuilders Ass’n of
Charlotte, 336 N.C. at 42, and are generally upheld in the event that they are
reasonable, id. at 46. See also Sperry Corp., 493 U.S. at 62 (holding that a fee
deducted from money recovered by American claimants appearing before the Iran-
United States Claims Tribunal that was intended to recoup the costs of administering
the tribunal was a reasonable user fee rather than an unconstitutional taking).
¶ 27 Although the County labeled the payments at issue in this case as “capacity
use” fees and has denied that they constituted “impact fees,” the Court of Appeals
correctly treated these payments as “impact fees.” See Anderson Creek Partners, 275
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N.C. App. at 439. As the County admits in its brief, the challenged “capacity use”
fees are intended to “cover the cost of expanding the infrastructure of the water and
sewer system to accommodate the new development,” a description that falls squarely
within the definition of an “impact fee” discussed above.6 The fees at issue in this
case are not water and sewer service fees, paid by customers at a fixed rate in
accordance with their monthly metered water and sewer usage for the purpose of
paying for the service that they used. In addition, the challenged fees are not “tap-
on fees” paid at the time that individual lots are connected to the County’s water and
sewer system.7 Instead, the fees at issue in this case are intended to provide the
County with a contribution toward the cost of expanding its water and sewer
infrastructure to account for the additional customers that will be added as a result
of the developer’s development. Thus, the “capacity use” fees at issue in this case,
which are not intended to cover the cost of any service that is currently being provided
to the person paying them “at the time of actual use,” Quality Built Homes, I, 369
N.C. at 21, are clearly different from those at issue in Homebuilders Association of
Charlotte, which were specifically intended to “cover the costs of regulatory services
provided by the city,” including the labor costs associated with reviewing permit
6 As an aside, we note that the amicus curiae brief filed by the North Carolina Water
Quality Association and the National Association of Clean Water Agencies in support of the
County consistently refers to the challenged “capacity use” fees as “impact fees.”
7 The parties dispute whether plaintiffs have been charged separate “tap-on fees” in
addition to the “capacity use fees,” but resolution of that factual question is not germane to
the issue that is before us in this case.
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applications, 336 N.C. at 45. As a result, for all of these reasons, we hold that the
challenged “capacity use fees” are properly categorized as impact fees rather than
“user fees,” a determination that renders much of the authority upon which the
County relies inapplicable.
¶ 28 In addition, we conclude that the challenged “capacity use” fees are “exactions”
as the Court of Appeals used that term in Batch and as contemplated by the Supreme
Court in Koontz. As we have already noted, the definition of “exaction” set out in
Batch encompasses both “requirements that land be dedicated for street rights-of-
way, parks, or utility easements” and “requirements that developers pay ‘impact’ or
‘facility’ fees reflecting their respective prorated shares of the cost of providing new
roads, utility systems, parks, and similar facilities serving the entire area.” Batch,
92 N.C. App. at 613 (emphasis added). Although this Court has yet to specifically
define the term “exaction” for purposes of North Carolina law, we have not rejected
the definition that the Court of Appeals adopted in Batch and reiterated in both
Franklin Road Properties and more recently in TAC Stafford, LLC v. Town of
Mooresville, 2022-NCCOA-217, ¶ 34. The definition adopted by the Court of Appeals
in Batch is consistent with that set out in Black’s Law Dictionary, which defines a
“land-use exaction” as “[a] requirement imposed by a local government that a
developer dedicate real property for a public facility or pay a fee to mitigate the
impacts of the project, as a condition of receiving a discretionary land-use approval.”
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Land-Use Exaction, Black’s Law Dictionary (11th ed. 2019). Finally, inclusion of a
monetary payment within the definition of an “exaction” is, in our view, fully
consistent with how that term was used in Koontz. As a result, we adopt the
definition of “exaction” set forth in the Court of Appeals’ decision in Batch as our own
and hold that the challenged “capacity use fees” constitute both “impact fees” and
“monetary exactions.”
D. Koontz and Generally Applicable Fees
¶ 29 In light of our determination that the challenged “capacity use” fees are
“impact fees” and “monetary exactions,” we must address the issue of whether those
fees are subject to the “unconstitutional conditions” doctrine enunciated in Nollan,
Dolan, and Koontz. According to plaintiffs, any “impact fee” assessed by a local
government should be treated as a “taking” subject to scrutiny under the
“unconstitutional conditions” doctrine regardless of whether the relevant fee is
assessed on an ad hoc basis or pursuant to a uniform, generally applicable
assessment and regardless of the identity of the governmental entity engaging in the
“taking.” In plaintiffs’ view, the challenged “capacity use” fees implicate the same
constitutional concerns that resulted in the adoption of the test delineated in Nollan
and Dolan. More specifically, plaintiffs argue that the ordinance requiring the
payment of “capacity use” fees “does not reflect any supporting analysis or
methodology that would ensure a sufficient ‘nexus’ or ‘proportionality’ to the ‘impact’
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of [p]laintiffs’ developments on the County’s water and sewer systems.” See American
Water Works Association, “M1 Manual, Principals of Water Rates, Fees, and Charges”
p. 324 (7th ed. 2017) (identifying the minimum “key criteria” for use in determining
whether a “rational nexus” exists as including system planning criteria financing
criteria, and compliance with state or local laws)). After noting that the County
doubled its capacity use fees between 2005 and the dates upon which they filed their
complaints in 2017, plaintiffs emphasize that the ordinance requires developers to
construct their own water and sewer infrastructure—in addition to paying the
capacity use fees—which must then be deeded to the county, arguing that
this contributed infrastructure for the County to use in the
operation of its water and sewer system should reasonably
be valued and factored into consideration of the true
“impact” of [p]laintiffs’ developments and whether the fees
still serve to “mitigate” any impact of the development
above the value of [p]laintiffs’ infrastructure contributions,
or if the fees instead lack the necessary “nexus” and
“proportionality.”
Moreover, plaintiffs point out that “the fact that the 1998 [a]greement between the
County and the [water and sewer] districts provides that the impact fee revenue from
the individual districts [is] commingled in the County’s enterprise funds, without a
separate ‘equitable and pro-rata’ accounting for each [d]istrict, violates ‘nexus’ and
‘proportionality’ principles.” See AWWA Manual p. 343 (providing that a utility
should ensure that impact fees are “managed and used for the facilities needed to
provide service to new development in the utility’s service area.”). For all of these
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reasons, plaintiffs contend that “impact fees inherently give rise to concerns involving
coercion and fairness which the ‘unconstitutional conditions’ doctrine is meant to
address.”
¶ 30 Secondly, plaintiffs contend that, contrary to the conclusion reached by the
Court of Appeals, the fact that the challenged “capacity use” fees are generally
applicable and were enacted by a legislative body, rather than being assessed on an
ad hoc basis by an administrative agency, does not exempt them from constitutional
scrutiny. According to plaintiffs, “[t]here is nothing in Nollan, Dolan, or Koontz to
support the view that the Supreme Court meant to limit application of the
unconstitutional conditions doctrine to ‘ad hoc’ or ‘administrative’ decisions,” with
“each of the three decisions [having] involved exactions that were legislatively
mandated,” a conclusion that has led two state appellate courts to apply “a version of
the Nollan/Dolan test” to impact fees. See N. Ill. Home Builders Ass’n v. Cnty. of Du
Page, 165 Ill.2d 25 (1995); Home Builders Ass’n of Dayton & the Miami Valley v.
Beavercreek, 89 Ohio St.3d 121 (2000)).
¶ 31 Plaintiffs assert that the Court of Appeals erred by relying upon Dabbs for a
number of reasons. First, plaintiffs contend that, as the Court of Appeals recognized,
Dabbs did not involve an application for the issuance of a permit conditioned on the
payment of money to the issuing governmental entity. See Anderson Creek Partners,
275 N.C. App. at 444. Secondly, plaintiffs note that “[t]he Court of Appeals went so
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far as to say that ‘[t]his distinction speaks directly to the types of coercive harms that
the United States Supreme Court sought to prevent in Koontz’ ” before concluding
that it “did not find the distinction ‘material’ for the sole reason that ‘the fees were
predetermined and are uniformly applied.’ ” Id. “In essence,” plaintiffs argue, “the
Court of Appeals recognized that the County’s impact fees implicated the coercive
harms which the unconstitutional conditions doctrine seeks to prevent, but the court
was content that the legislative process would prevent those harms from
materializing.” Plaintiffs dispute the validity of this contention, arguing that “one of
the reasons impact fees are popular with local government[s] is the lack of political
opposition,” given that future residents, who will bear the cost of the impact fees in
the form of higher housing prices, do not currently vote. As a result, plaintiffs
conclude that the challenged “capacity use” fees are “monetary exactions” subject to
the “unconstitutional conditions” analysis enunciated in Koontz.
¶ 32 In seeking to persuade us to reach a different result, the County argues that
“[t]he unconstitutional conditions doctrine does not apply to generally applicable fees”
because “[a] fee charged by the government is not a ‘taking’ in the constitutional
sense.” In the County’s view, “[t]he established rule in North Carolina is that a
government’s power ‘to regulate an activity implies the power to impose a fee in an
amount sufficient to cover the cost of regulation,’ ” such that “a local government acts
reasonably ‘by requiring that those who desire a particular service bear some of the
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costs associated with the provision of that service,’ ” quoting Homebuilders Ass’n of
Charlotte, 336 N.C. at 42, 45. According to the County, plaintiffs’ reliance upon
Koontz is misplaced because it “applies to ‘in lieu of’ fees” and plaintiffs “have not
alleged any such fees here.” The County argues that “[t]akings and fees ‘are
essentially different’ ” because, “when the government charges a fee or tax, it ‘only
exacts a contribution from individuals’ that is used ‘for the support of the government,
or to meet some public expenditure authorized by it, for which they receive
compensation in the protection which government affords, or in the benefits of the
special expenditure,’ ” quoting Mobile Cnty. v. Kimball, 102 U.S. 691, 703 (1880). In
the County’s view, “[i]t was a ‘well-settled’ rule even before Koontz ‘that the
government may require fees for public use of certain services without causing a
taking,’ ” quoting Dudley v. United States, 61 Fed. Cl. 685, 689 (2004)), with Koontz
having done nothing to “alter this well-settled rule.” In addition, the County contends
that “[f]ees that apply the same to everyone do not target ‘a specific parcel of real
property’ as required by Koontz, 570 U.S. at 614, citing several decisions from other
jurisdictions that it describes as holding that Koontz does not apply to “generally
applicable fees.”8
8 Among the decisions upon which the County relies in support of this assertion are
Santiago-Ramos v. Autoridad de Energia Electrica de P.R., AEE, 834 F.3d 103, 107 (1st Cir.
2016) (concluding that the plaintiffs “cannot assert a valid property interest in funds paid for
electricity” for purposes of Koontz because “[c]ustomers lose their interest in money paid to
utilities companies for their service”); United States v. King Mountain Tobacco Co., 131 F.
Supp. 3d 1088, 1092–93 (E.D. Wash. 2015) (finding Koontz inapplicable to quarterly
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¶ 33 Next, the County argues that “[t]he overwhelming weight of authority is that
non-discretionary, generally applicable fees are not subject to the unconstitutional
conditions doctrine.” In support of this assertion, the County cites Building Industry
Association-Bay Area v. City of Oakland, in which a federal district court held that
an ordinance requiring developers to display or fund art as a condition of project
approval did not implicate Koontz. See 289 F. Supp. 3d 1056, 1057 (N.D. Cal. 2018).
According to the district court, Koontz did not hold that “generally applicable land-
use regulations are subject to facial challenge under the exactions doctrine” and held,
instead, “that the exactions doctrine applies to demands for money (not merely
demands for encroachments on property).” Id., 289 F. Supp. 3d at 1057–58. In
assessments collected from tobacco manufacturers by the Department of Agriculture), aff’d
745 F. App’x 700 (9th Cir. 2018); Fitchburg Gas & Elec. Light Co. v. Dep’t of Publ. Utils., 467
Mass. 768, 779 (2014) (rejecting an electric company’s claim that an annual assessment for
the benefit of the state’s Storm Trust Fund constituted a per se taking, citing Koontz for the
proposition that “[f]ederal courts have established that an obligation to pay money is not a
per se taking where the obligation does not affect or operate on a specific, identified property
interest.”); Page v. City of Wyandotte, 2018 WL 6331339, at *6 (Mich. Ct. App. Dec. 4, 2018)
(per curiam) (unpublished) (holding that charges for water and cable services provided by the
city were user fees that did not result in a taking); In re Buffets, LLC, 979 F.3d 366, 381 (5th
Cir. 2020) (holding that federal legislation increasing the quarterly fees applicable to
bankruptcy filings was not unconstitutional because “[t]axes and user fees are not takings
under the Fifth Amendment”); Edmonson v. Fregmen, 590 F. App’x 613, 615 (7th Cir. 2014)
(unpublished) (determining that the imposition of a freeze on an indigent prisoner’s trust
account based upon a failure to pay court filing fees did not constitute an unconstitutional
taking and was, instead, a “reasonable user fee” for “reimbursement of the cost of government
services”); Better Hous. for Long Beach v. Newsom, 452 F. Supp. 3d 921, 934–35 (C.D. Cal.
2020) (rejecting an argument that Koontz “expanded the definition of per se takings to include
all government-imposed financial obligations ‘linked to a specific, identifiable piece of
property’ ” and concluding that a state law requiring landlords to pay or waive one month’s
rent before terminating a residential tenancy under certain circumstances did not constitute
a per se taking).
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addition, the County cites Douglass Properties II, LLC v. City of Olympia, in which
the Washington Court of Appeals held that conditioning the issuance of a building
permit upon the payment of a generally applicable traffic impact fee did not implicate
Koontz because, even though “Koontz expanded the scope of takings that require
Nollan/Dolan scrutiny to include ‘monetary exactions,’ it did not expand that scope
to include legislatively prescribed development fees like those at issue here.” 16
Wash. App. 2d 158, 171 (2021). The distinctions made in these cases make sense, in
the County’s view, “because the ‘sine qua non’ for application of the
Nollan/Dolan/Koontz analysis is the ‘discretionary deployment of the police power
in the imposition of land-use conditions in individual cases,’ ” quoting Action
Apartment Ass’n v. City of Santa Monica, 82 Cal. Rptr. 3d 722, 732 (Cal. Ct. App.
2008)).9 According to the County, “[w]hen a government imposes a generally
9 In addition, the County directs our attention to Tex. Manufactured Hous. Ass’n v.
City of Nederland, 101 F.3d 1095, 1105 (5th Cir. 1996) (declining to apply Nollan to a
municipal zoning ordinance that prohibited placement of manufactured homes on any lot
within the city outside a designated trailer park and observing that the plaintiff landowner
had not been singled out for differential treatment like the landowner before the Court in
Nollan); Harris v. City of Wichita, 862 F. Supp. 287, 294 (D. Kan. 1994) (declining to apply
the Dolan “rough proportionality” test to zoning regulations prohibiting the use of property
surrounding an Air Force base on the grounds that the regulations (1) “are land use
restrictions and do not impose upon plaintiffs the obligation to deed portions of their land to
the local government,” (2) that the city’s and county’s decisions “were legislative rather than
adjudicative in nature,” and (3) the regulations affected all of the land surrounding the Air
Force base, “not merely the individual parcels owned by plaintiffs”); Krupp v. Breckenridge
Sanitation Dist., 19 P.3d 687, 696–97 (Colo. 2001) (determining that Nollan and Dolan did
not apply to a one-time “plant-improvement fee” that was intended to defray the cost of
expanding the sanitation district’s infrastructure despite the fact that the payment of the fee
was a prerequisite for the issuance of a building permit on the grounds that the fee was a
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applicable fee, it is not subject to the same test . . . even when the fees have some
connection to property development.”
¶ 34 The County contends that, “as in Dabbs, the County’s water and sewer fees are
‘predetermined, based on a specific monetary schedule,’ and apply ‘to any person
wishing to develop property in the district,’ ” quoting Dabbs, 458 Md. at 353. As a
result, the County asserts that “[f]ees that are ‘imposed on a generally applicable
basis are not subject to a rough proportionality or nexus analysis,’ ” quoting Dabbs,
“generally applicable service fee on all new development within the [d]istrict,” no
adjudication was involved, and the fee was “purely a monetary assessment rather than a
dedication of real property for public use”); Greater Atlanta Homebuilders Ass’n v. DeKalb
Cnty., 277 Ga. 295, 297–98 (2003) (refusing to apply Dolan to a county tree preservation
ordinance because it “involve[d] “a facial challenge to a generally applicable land-use
regulation” that resulted from a “legislative determination” rather than “an adjudicative
decision”); Arcadia Dev. Corp. v. City of Bloomington, 552 N.W. 2d 281, 286 (Minn. Ct. App.
1996) (concluding that the Dolan “rough proportionality” standard did not apply to a city
ordinance requiring mobile home park owners to assist residents with relocation costs when
the park closed on the grounds that a Dolan analysis is only required for “adjudicative
determinations that condition approval of a proposed land use on a property transfer to the
government”); Home Builders Ass’n of N. Cal. v. City of Napa, 108 Cal. Rptr. 2d 60, 65–66
(Cal. Ct. App. 2001) (declining to apply Nollan and Dolan to a city inclusionary zoning
ordinance that required residential property developers to dedicate 10 percent of their
developed land to affordable housing or, in the alterative, to pay an “in-lieu fee” on the
grounds that the ordinance did not involve a “land use bargain between a governmental
agency and a person who wants to develop his or her land” and was, instead, “economic
legislation that is generally applicable to all development in [the] City”) (emphasis in
original); Common Sense Alliance v. Growth Mgmt. Hearings Bd., 2015 WL 4730204, at *7
(Wash. Ct. App. Aug. 10, 2015) (unpublished) (rejecting a facial challenge to a county
ordinance requiring that habitat buffers and tree protection zones be provided as a
prerequisite for development approval within the relevant county on the grounds that “it
appears that the courts have confined Nollan/Dolan analysis to land use decisions that
condition approval of a specific project on a dedication of property to public use” and that
“legislative determinations do not present the same risk of coercion as adjudicative
decisions”).
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458 Md. at 353. In the same vein, the County denies that Dabbs is some sort of
outlier, citing San Remo Hotel L.P. v. City & County of San Francisco, in which the
Supreme Court of California held that the Nollan/Dolan test did not apply to
“development fees that are generally applicable through legislative action because
the heightened risk of the ‘extortionate’ use of the police power to exact
unconstitutional conditions is not present.” 27 Cal. 4th 643, 668 (2002) (cleaned up).
As a result, the California Supreme Court held that, while “individualized
development fees warrant a type of review akin to the conditional conveyances at
issue in Nollan and Dolan . . . generally applicable fees warrant a more deferential
type of review.” Id. (cleaned up).
¶ 35 The County contends that the Court of Appeals “joined [the] overwhelming line
of authority” by holding that Koontz did not apply to generally applicable legislative
fees and that plaintiffs “have not cited a single case” in which a court held to the
contrary. In the County’s view, the cases cited by plaintiffs either did not involve a
generally applicable fee or were decided based upon state law, rather than the federal
constitution. In addition, the County argues that plaintiffs’ argument is flawed
because “[t]he Supreme Court has said that the rough proportionality test requires
the government to ‘make some sort of individualized determination,’ [512 U.S. Dolan
at 391] ” but that “generally applicable fees, by their very nature, cannot contain an
individualized determination” and indeed “are more fair because they lack the ad hoc,
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discretionary nature that comes into play in the unconstitutional conditions
doctrine.” According to the County, generally applicable fees like those at issue in
this case mitigate any concerns about the lack of transparency inherent in ad hoc
exactions because “all landowners are aware of the fees in advance” and, “[i]f they
choose to develop property in the County, they know what the cost will be.”
¶ 36 Next, the County claims that plaintiffs erroneously contend that Koontz
answered the question before the Court in this case on the theory that the issue of
“whether the monetary assessment is made by a legislature or an administrator” is
“a red herring.” From the County’s perspective, the “capacity use” fees at issue in
this case “are not permissible because they are ‘legislative;’ ” instead, the County
contends that the challenged “capacity use” fees “are generally applicable, non-
discretionary, and set in advance,” with “the relevant line” between fees that do and
do not implicate the “unconstitutional conditions” doctrine being “the nature of the
government action, not the branch of government that is acting.”
¶ 37 In the County’s view, plaintiffs’ argument should also fail because “they never
identified a constitutional right that they were coerced into giving up.” According to
the County, “[t]here is no constitutional right to expand or use an existing water and
sewer system” or “not to pay fees for government services.” The County argues that
“the water and sewer districts could ‘command directly’ that those who seek to expand
the water and sewer systems pay for that expansion” and that “the water and sewer
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fees would not ‘otherwise require just compensation,’ ” citing Koontz, 570 U.S. at 604–
05. In addition, the County asserts that, even though the “unconstitutional
conditions” doctrine requires some sort of coercion by the government, plaintiffs have
“not allege[d] coercion of any kind” and that “[r]equiring a developer to pay the same
fee as everyone else for certain services can hardly be described as the ‘out and out
plan of extortion’ targeted by the Supreme Court,” quoting Nollan, 483 U.S. at 837.
In other words, the County argues that, “[w]hen a payment is made in exchange for
services offered by the government, the coercive element is missing,” with the
necessary coercion being absent in this case because “[plaintiffs] wanted to connect to
the County’s water and sewer system.”
¶ 38 The County asserts that, while plaintiffs “could have used their properties for
other purposes” or “sought to develop properties that used well water and septic
tanks,” they “elected to use their developments’ connection to the County’s water and
sewer system as a way to increase density and market their homes to potential
buyers.” In the County’s view, “[i]t was not an unlawful ‘exaction’ to ask [plaintiffs]
to pay a standard fee for a service desired to improve the system that buttressed the
sale prospects of their investment” given that new housing developments “place
pressure on the water and sewer system and use portions of its capacity, which is
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why each new development must offset some of the costs of improving and expanding
the existing system.”10
¶ 39 The County argues that the legislative process, rather than the courts, is the
proper forum for consideration of plaintiffs’ complaints on the theory that, “[i]f
someone considers a generally applicable fee exorbitant, the fee is ‘subject to the
ordinary restraints of the democratic political process,’ ” because “[a] government
‘that charged extortionate fees for all property development, unjustifiable by
mitigation needs, would likely face widespread and well-financed opposition at the
next election,’ ” quoting San Remo Hotel, 27 Cal. 4th at 671. On the other hand, the
County asserts that the judicial branch has no role in resolving the present dispute
given that “ ‘the Takings Clause is meant to bar [the] [g]overnment from forcing some
people alone to bear public burdens which, in all fairness and justice, should be borne
by the public as a whole’ ” and that “[j]ustice does not require that current residents
pay for new costs created by incoming developments,” quoting Lingle v. Chevron
U.S.A., Inc., 544 U.S. 528, 542 (2005)). According to the County, “[t]he ‘capacity fees’
at issue here are not ‘cost recovery mechanisms,’ but rather a means to ‘equitably
10 The County also argues in a footnote that “the coercive element is missing here
because the County does not even control the permit at issue” and, instead, “merely
conditions its concurrence on an application for a permit from the State—another
governmental entity,” with this fact serving to distinguish this case from Nollan, Dolan, and
Koontz. However, it is not clear from the record (nor does either party explain) whether the
county’s concurrence is required for the Department of Environmental Quality to approve the
permits at issue. Assuming that it is, the County’s argument on this point is a meaningless
distinction.
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allocate to new users access to an existing system possessing an existing value’ and
a ‘resource through which the utility purveyor may fund necessary capital
improvements to the utility system,’ ” quoting Landmark Dev., Inc. v. City of Roy, 138
Wash.2d 561, 572 (1999), and that “[n]othing in the Constitution forbids ‘permitting
authorities [from] insist[ing] that applicants bear the full costs of their proposals’ so
long as they do not ‘engag[e] in out-and-out extortion,’ ” quoting Koontz, 570 U.S. at
606.
¶ 40 Furthermore, the County contends that a decision to accept plaintiffs’
argument would “subject every fee payment to a governmental entity to the
Nollan/Dolan/Koontz analysis,” a result that would be “unworkable” given that local
governments have been permitted to charge fees for varied purposes, including using
a city’s parking facilities, opening graves in a cemetery, issuing permits for the
operation of flea markets, granting licenses to engage in certain trades and
occupations, registering golf carts, collecting garbage, accessing regional sports
facilities, or using natural gas service. According to the County, “[e]xpanding the
unconstitutional conditions doctrine to cover fees like these would cripple the ability
of governments to tax, mandate fees, and levy other types of monetary payments that
finance and make possible the services that governments provide.” In addition, the
County argues that “[i]t would be improper to allow [plaintiffs] to recoup the fees
when they have presumably passed on those costs to others,” resulting in a “windfall”
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to them. See 36 Am. Jur. 3d Proof of Facts 417 (1996) (describing how developers
pass costs associated with expanding infrastructure to ultimate purchasers in the
form of higher prices for land and construction)).
¶ 41 In addition to their assertion that the challenged “capacity use” fees were
subject to an “unconstitutional conditions” analysis pursuant to Nollan, Dolan, and
Koontz, the County argues that plaintiffs have failed to allege sufficient facts to
support a conclusion that the relevant fees did not satisfy the “essential nexus” and
“rough proportionality” test given the County’s legitimate interests in mitigating the
impact of the cost of expanding existing infrastructure upon existing customers or the
taxpayers. According to the County, plaintiffs have alleged that “the water and sewer
fees are imposed to connect new developments to the County’s existing water and
sewer systems” and have “acknowledge[d] the minimal amounts charged by the
County.” More specifically, the County argues that plaintiffs have “alleged that the
water and sewer fees are used for improvements to the water and sewer system,” so
as to satisfy the “essential nexus” requirement, and that plaintiffs have “alleged no
facts to show that the [$2,200 in fees per residential property] was disproportionate
to the effect of new development on the County’s water and sewer system,” with their
legal conclusion to this effect not needing to “be credited at the Rule 12 stage.” See
Azure Dolphin, LLC v. Barton, 371 N.C. 579, 599 (2018). In addition, the County
claims that showing “rough proportionality” does not require the use of a “formulaic
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analysis” or “invite judges to pull out calculators or create spreadsheets to check a
local government’s math.” On the contrary, the County contends that the inquiry
involves the exercise of “common sense” and that the “capacity use” fees described in
the complaint “meet that common-sense test and do not require a further factual
inquiry.”
¶ 42 A careful review of the record and the applicable law convinces us that the
County’s capacity use fees are subject to scrutiny under the “essential nexus” and
“rough proportionality” tests articulated in Nollan and Dolan. In Koontz, the
Supreme Court specifically held that “the government’s demand for property from a
land-use permit application must satisfy the requirements of Nollan and Dolan even
when the government denies the permit and even when its demand is for money,” 570
U.S. at 619 (emphasis added), with the Supreme Court’s reference to “in lieu of” fees,
rather than limiting the reach of the Supreme Court’s decision, simply being a
response to the Florida Supreme Court’s conclusion that a governmental demand for
money rather than an interference in tangible property rights did not constitute a
taking. As the Supreme Court explained,
if we accepted this argument it would be very easy for land-
use permitting officials to evade the limitations in Nollan
and Dolan. Because the government need only provide a
permit applicant with one alternative that satisfies the
nexus and rough proportionality standards, a permitting
authority wishing to exact an easement could simply give
the owner a choice of either surrendering an easement or
making a payment equal to the easement’s value. Such so-
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called “in lieu of” fees are utterly commonplace and they
are functionally equivalent to other types of land use
exactions. . . . [W]e reject respondent’s argument and hold
that so-called ‘monetary exactions’ must satisfy the nexus
and rough proportionality requirements of Nollan and
Dolan.
Id. at 612. Based upon this logic, the Supreme Court held that “[t]he fulcrum this
case turns on is the direct link between the government’s demand and a specific
parcel of real property,” id. at 614, and that this link
implicates the central concern of Nollan and Dolan: the
risk that the government may use its substantial power
and discretion in land-use permitting to pursue
governmental ends that lack an essential nexus and rough
proportionality to the effects of the proposed new use of the
specific property at issue, thereby diminishing without
justification the value of the property.
Id. As a result, we conclude that the “monetary exactions” with which Koontz was
concerned were not limited to “in lieu of” fees and, instead, encompassed a broader
range of governmental demands for the payment of money as a precondition for the
approval of a land-use permit.11
¶ 43 In arguing that the principles enunciated in Koontz are inapplicable to the
challenged “capacity use” fees on the grounds that “[f]ees that apply the same to
everyone do not target ‘a specific parcel of real property,’ ” Koontz, 570 U.S. at 614,
11The dissent in Koontz objected to the majority’s decision, in part, because it extended
the Nollan/Dolan test “to all monetary exactions” and limited the flexibility of local
governments “to mitigate a new development’s impact on the community[.]” Koontz, 570 U.S.
at 629 (Kagan, J., dissenting) (emphasis in original). As plaintiffs point out, this statement
recognizes that the Court’s holding was not limited to “in lieu of” fees.
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the County overlooks the fact that, by emphasizing the “specific parcel of real
property” at issue in that case, the Supreme Court sought to distinguish Koontz from
Eastern Enterprises v. Apfel, 524 U.S. 498 (1998), in which a majority of the Supreme
Court agreed that a federal statute that required a coal mining company to pay
medical benefits for retired miners and their families did not constitute a taking for
constitutional purposes because “the Takings Clause does not apply to government-
imposed financial obligations that ‘d[o] not operate upon or alter an identified
property interest.’ ” Koontz, 570 U.S. at 613 (quoting E. Enters., 524 U.S. at 540(Kennedy, J., concurring in the judgment)). As the Supreme Court explained in
Koontz, “[u]nlike the financial obligation in Eastern Enterprises, the demand for
money at issue [in Koontz] did ‘operate upon . . . an identified property interest’ by
directing the owner of a particular piece of property to make a monetary payment.”
Id. The same is true in this instance given that, by requiring the payment of the
challenged “capacity use” fees as a precondition for its concurrence in applications for
the issuance of the necessary water and sewer permits, the County is “directing the
owner[s] of [each] particular piece of property to make a monetary payment,”
regardless of whether the same fee is applicable to all tracts of property and
regardless of who owns the property. Id. In other words, the fee at issue in this case
is, in fact, linked to a specific piece of property, in each case the specific parcel of land
that has been proposed for development.
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¶ 44 In addition, a careful examination of Koontz does not suggest that its holding
is limited to “ad hoc” fees or exempts “non-discretionary, generally applicable fees,”
with this position having been advocated for in the dissenting opinion, rather than
that of the majority. See Koontz, 570 U.S. at 628 (Kagan, J., dissenting) (suggesting
that, in the future, “[t]he majority might, for example, approve the rule, adopted in
several States, that Nollan and Dolan apply only to permitting fees that are imposed
ad hoc and not to fees that are generally applicable” while acknowledging that the
majority had not clearly resolved this issue). In the same vein, we are not persuaded
that the non-discretionary, generally applicable nature of the “capacity use” fees at
issue in this case eliminates or mitigates the “coercive pressure” concerns that
motivated the Supreme Court in Nollan, Dolan, and Koontz given that, regardless of
whether the fee is imposed on a single developer or on all developers, the County is
exercising its “substantial power and discretion in land-use permitting” to exact
money from those wishing to develop their land.12 In the absence of any sort of
limitation upon the County’s authority to condition permit approval or concurrence
in permit approval upon the payment of fees, the County would have the unfettered
Despite the fact that the challenged “capacity use” fees are generally applicable, the
12
County retains “discretion” in the sense that it may, at any time, decide to increase the
amount of the impact fee, an authority it exercised when it doubled the fees between 2005
and 2017.
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ability to increase the relevant fees substantially or to use the proceeds from the
payment of the challenged fees for purposes unrelated to the development.
¶ 45 Similar concerns have been reflected in a number of prior decisions by this
Court. In Lanvale Properties, LLC v. County of Cabarrus, Cabarrus County had
adopted an “adequate public facilities ordinance” that “effectively condition[ed]
approval of new residential construction projects on developers paying a fee to
subsidize new school construction to prevent overcrowding in the [c]ounty’s public
schools.” 366 N.C. 142, 143 (2012). In holding that the county lacked the authority
to implement the ordinance through the exercise of its zoning power on the grounds
that the ordinance did not “define the specific land uses that are permitted, or
prohibited, within a particular zoning district,” we noted that the relevant fees had
increased by over 1,600 percent from 2003 to 2008 and concluded that the ordinance
was nothing more than “a carefully crafted revenue generation mechanism that
effectively establishes a ‘pay-to-build’ system for developers.” Id. at 160–61. After
rejecting the county’s argument that the relevant fees constituted “voluntary
mitigation payments” on the grounds that several members of the county commission
had stated that approval of the required construction permits was conditioned on the
county’s receipt of payment, we opined that “[r]ecognizing that the [c]ounty’s
[ordinance] could generate significant amounts of revenue from a possibly unpopular
group—residential developers—the [board of commissioners] substantially increased
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its adequate public facilities fee over a five year period,” thereby “illustrat[ing] the
precise harm that may occur when [such ordinances] are adopted absent specific
enabling legislation.” Id. at 162.
¶ 46 Similarly, in Quality Built Homes v. Town of Carthage, the Town of Carthage
operated a public water and sewer system for the benefit of its residents and, as part
of that service, adopted two ordinances that required the assessment of “water and
sewer impact fees” for new developments that were designed to cover the cost of
expanding its existing water and sewer infrastructure to accommodate those
developments. 371 N.C. 60, 61–62 (2018) (Quality Built Homes II). After this Court
determined that the town lacked the authority to assess such fees in Quality Built
Homes I, we remanded that case to the Court of Appeals “to address whether [the]
plaintiffs’ claims were barred by the applicable statute of limitations or the doctrine
of estoppel by the acceptance of benefits.” Id. at 62 (describing the Court’s action in
Quality Built Homes I, 369 N.C. at 19–22). In a second appeal arising from the Court
of Appeals’ decision on remand, this Court rejected the town’s estoppel by benefits
argument on the grounds that
plaintiffs do not appear to have received any benefit from
the payment of the challenged water and sewer impact fees
that they would not have otherwise been entitled to
receive. As we held in [Virginia-Carolina Peanut Co. v.
Atlantic Coast Line R. Co., 166 N.C. 62, 74–75 (1914)], in
an instance in which “[t]he only alternative was to submit
to an illegal exaction or discontinue its business,” the
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payment of money “under such pressure[ ] has never been
regarded as a voluntary act.”
Quality Built Homes II, 371 N.C. at 75.
¶ 47 Admittedly, neither Lanvale Properties nor Quality Built Homes II addressed
a Takings Clause claim or referenced Koontz and Lanvale Properties antedates
Koontz. Nevertheless, this Court expressed concern in both of these decisions that
local governments might use impact fee ordinances to force landowners to choose
between paying a monetary exaction or forgoing development of their land entirely.
The Court of Appeals recognized this concern in its discussion of Dabbs when it
acknowledged that the Maryland case “is distinguishable from the present case”
because, unlike the challenged “capacity use” fees, “the fees at issue [in Dabbs] were
not ‘a conditional monetary payment to obtain approval of an application for a permit
of any particular kind,’ ” Anderson Creek Partners, 275 N.C. App. at 444 (quoting
Dabbs, 458 Md. at 353), before observing that “[t]his distinction speaks directly to the
types of coercive harms that the United States Supreme Court sought to prevent in
Koontz” given that “the unconstitutional conditions doctrine seeks to prevent the
government from leveraging its legitimate interest in mitigating harms by imposing
‘[e]xtortinate demands’ which may ‘pressure [a landowner] into voluntarily giving up
property for which the Fifth Amendment would otherwise require just compensation,’
” id. (quoting Koontz, 57 U.S. at 605–06). Even so, the Court of Appeals found this
distinction to be immaterial on the grounds that,
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[r]egardless of whether the [f]ees were to be paid prior to
or after [plaintiffs] began their projects, the fees were
predetermined and are uniformly applied—not levied
against [plaintiffs] on an ad hoc basis—and thus do not
suggest any intent by the County to bend the will or twist
the arm of [plaintiffs].
Id. We do not find this logic to be persuasive.
¶ 48 As an initial matter, the fact that the ordinance at issue in Dabbs did not
condition the issuance of a permit upon the payment of the impact fee was the very
reason that the Maryland Court of Appeals deemed Koontz to be inapplicable in that
case. See Dabbs, 458 Md. at 353. Aside from this significant distinction, we note that
conditioning permit approval upon a landowner’s decision to relinquish a property
right goes to the heart of the manner in which the “unconstitutional conditions”
doctrine has been deemed to be applicable in the land use context and animated the
concerns that led to the Supreme Court’s decision in Koontz. See 570 U.S. at 605
(observing that, “[b]y conditioning a building permit on the owner’s deeding over a
public right-of-way, for example, the government can pressure an owner into
voluntarily giving up property for which the Fifth Amendment would otherwise
require just compensation”). Finally, the Court of Appeals’ determination that,
because the challenged “capacity use” fees were “predetermined” and “uniformly
applied,” they “do not suggest any intent by the County to bend the will or twist the
arm of [plaintiffs],” Anderson Creek Partners, 275 N.C. App. at 444, overlooks the fact
that the test enunciated in Nollan and Dolan is designed to address the risk that local
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governments might use their permitting power to coerce landowners into
relinquishing property, with the extent to which the local government actually
attempted to engage in such conduct representing a separate issue going to the merits
of the claim rather than the identity of the legal standard used to evaluate such
claims. Although the trial court may very well conclude on remand from our decision
in this case that the County’s capacity use fees satisfy both the “essential nexus” and
“rough proportionality” requirements and do not, for that reason, result in a “taking,”
such a determination is irrelevant to the resolution of the issue of whether the
“essential nexus” and “rough proportionality” test must be satisfied in the first place.
As a result, we cannot agree with the Court of Appeals’ determination that Dabbs
provides the appropriate framework for use in deciding this case.
¶ 49 Aside from its reliance upon Dabbs, the County directs our attention to what
it claims to be “[t]he overwhelming weight of authority” that “non-discretionary,
generally applicable fees are not subject to the unconstitutional conditions doctrine.”
A careful analysis of the decisions upon which the County relies in making this
argument shows that most of them were decided prior to Koontz, do not address the
lawfulness of land-use exactions, or both, leaving only decisions such as Building
Industries Association-Bay Area, 289 F. Supp. 3d at 1057–08, Douglass Properties II,
LLC, 16 Wash. App. 2d at 171, and American Furniture Warehouse Co. v. Town of
Gilbert, 245 Ariz. 156 (Ct. App. 2018) (concluding that “Koontz did not hold that Dolan
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applied to generally applicable legislative development fees” such as those used to
develop traffic signal systems), to support the County’s position. Aside from the fact
that none of these decisions are binding on this Court, we are not persuaded by their
reasoning or their interpretation of Koontz, which generally echo the arguments
advanced by the County in its brief and strike us as inconsistent with existing North
Carolina precedent relating to the validity of land use exactions and the logic upon
which Koontz rests. As a result, we do not find these decisions persuasive as we
attempt to understand the force and effect of the principles enunciated in Koontz as
applied to the facts of this case.
¶ 50 In addition, we are not persuaded that the applicability of the test enunciated
in Nollan and Dolan depends upon whether the challenged condition was imposed
administratively or legislatively. As at least one member of the Supreme Court has
recognized, the lower courts have reached differing conclusions with respect to this
issue, which the Supreme Court has yet to address. See Cal. Bldg. Indus. Ass’n v.
City of San Jose, 577 U.S. 1179 (2016) (Thomas, J., concurring in the denial of
certiorari).13 After carefully reviewing the relevant decisions, we agree with plaintiffs
13 A number of courts have applied the test enunciated in Nollan and Dolan to
generally applicable, legislatively imposed impact fees such as those at issue in this case, see
e.g., Beavercreek, 89 Ohio St.3d at 128; Curtis v. Town of S. Thomaston, 1998 Me. 63 (1998);
N. Ill. Home Builders Ass’n, Inc., 165 Ill.2d at 28, while others have limited the applicability
of that test to administratively imposed conditions, see, e.g., St. Clair Cnty. Home Builders
Ass’n v. City of Pell City, 61 So.3d 992 (Ala. 2010); Spinell Homes, Inc. v. Mun. of Anchorage,
78 P.3d 692 (Alaska 2003); Home Builders Ass’n of Cent. Ariz. V. City of Scottsdale, 187 Ariz.
479 (1997).
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that nothing in Nollan, Dolan, or Koontz supports a view that those decisions only
apply in the context of “administrative” decisions,14 with the Supreme Court having
consistently described the “unconstitutional conditions” doctrine as “preventing the
government from coercing people into giving up” a constitutional right rather than
preventing a particular branch of government from acting in a particular manner.
Koontz, 570 U.S. at 604 (emphasis added); see also Dolan, 512 U.S. at 385 (noting that
“the government may not require a person to give up a constitutional right—here the
right to receive just compensation when property is taken for a public use—in
exchange for a discretionary benefit conferred by the government where the benefit
sought has little or no relationship to the property”) (emphasis added).
¶ 51 Admittedly, the fact that the challenged “capacity use” fees were imposed as
the result of a legislative, rather than an administrative, process, may tend to suggest
that those fees “more likely represent[ ] a carefully crafted determination of need
tempered by the political and legislative process rather than a ‘plan of extortion’
directed at a particular landowner.” Curtis, 1998 Me. 63, ¶ 7 (citing Dolan, 512 U.S.
14 A number of courts have focused on language from Dolan distinguishing prior cases
upholding the constitutionality of land use planning from the situation before the Court in
that case because those prior decisions “involved essentially legislative determinations
classifying entire areas of the city, whereas here the city made an adjudicative decision to
condition petitioner’s application for a building permit on an individual parcel,” 512 U.S. at
385. See, e.g., St. Clair Cnty. Home Builders Ass’n, 61 So.3d at 1007. However, those prior
cases involved zoning power and general land-use regulations rather than impact fees. See
Agins v. City of Tiburon, 447 U.S. 255 (1980), abrogated by Lingle, 544 U.S. at 528; Village of
Euclid, 272 U.S. at 365; Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922).
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at 387). In light of that logic, the General Assembly’s recent decision to enact the
Public Water and Sewer System Development Act, S.L. 2017-138, 2017 N.C. Sess.
Laws 996, which provides uniform guidelines for the implementation of water and
sewer system development fees on a prospective basis, suggests that, in the future,
such fees are likely to satisfy the “essential nexus” and “rough proportionality”
requirement enunciated in Nollan and Dolan. Even so, as a constitutional matter,
we believe that a decision to limit the applicability of the test set out in Nollan and
Dolan to administratively determined land-use exactions would undermine the
purpose and function of the “unconstitutional conditions” doctrine. See James
Burling & Graham Owen, The Implications of Lingle on Inclusionary Zoning and
other Legislative and Monetary Exactions, 28 Stan. Envtl. L. J., 397, 438 (2009)
(observing that “[g]iving greater leeway to conditions imposed by the legislative
branch is inconsistent with the theoretical justifications for the doctrine because
those justifications are concerned with questions of the exercise [of] government
power and not the specific source of that power”); David L. Callies, Regulatory
Takings and the Supreme Court: How Perspectives on Property Rights Have Changed
from Penn Central to Dolan, and What State and Federal Courts Are Doing About It,
28 Stetson L. Rev. 523, 567–68 (1999) (finding “little doctrinal basis beyond blind
deference to legislative decisions to limit [the application of the test enunciated in
Nollan and Dolan] only to administrative or quasi-judicial acts of government
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regulators”); see also Town of Flower Mound v. Stafford Ests. Ltd. P’ship, 135 S.W.3d
620, 641 (Tex. 2004) (expressing skepticism that “a workable distinction can always
be drawn between actions denominated adjudicative and legislative” and noting that
the conditions under consideration in both Nollan and Dolan were imposed pursuant
to authority granted by state law). At the end of the day, we conclude that the
applicability of the test enunciated in Nollan and Dolan hinges upon the fact that the
government has demanded property from a land-use permit applicant, either through
a dedication of land or the payment of money, as a pre-condition for permit approval
rather than the identity of the governmental actor that imposed the challenged
condition. See Koontz, 570 U.S. at 619.
¶ 52 We are equally unpersuaded by the County’s contention that plaintiffs “never
identified a constitutional right that they were coerced into giving up” or “allege[d]
coercion of any kind. According to their complaint, plaintiffs’ claim rests upon a
contention that, in accordance with Koontz, “[m]onetary exactions by a local
government as a condition to development approval, plat approval, permit approval,
and/or approval of construction, which are designed to offset the impact of a proposed
development phase, must bear an essential nexus or rough proportionality to the
impact that the development will have on existing infrastructure.” In this case,
payment of the challenged “capacity use” fees is not just a requirement to ensure that
adequate water and sewer capacity is available to for plaintiffs’ developments, but
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Opinion of the Court
also a precondition for the County’s support for the issuance of a water and sewer
permit from the Department of Environmental Quality. For that reason, we have
little difficulty in concluding that plaintiffs have contended that the County violated
the “unconstitutional conditions” doctrine set out in Koontz, Dolan, and Nollan, which
rests upon the Fifth Amendment right to be free from governmental takings of one’s
property without just compensation. See Koontz, 570 U.S. at 605.
¶ 53 Similarly, the County’s decision to condition its support for the issuance of the
required water and sewer permits upon the payment of the challenged “capacity use”
fees is inherently coercive in the constitutional sense. See id. at 614 (recognizing that
the “central concern” underlying Nollan and Dolan was “the risk that the government
may use its substantial power and discretion in land-use permitting to pursue
governmental ends that lack an essential nexus and rough proportionality to the
effects of the proposed new use of the specific property at issue”). The County’s
contention that it had not engaged in any coercive conduct in this instance because
“[plaintiffs] wanted to connect to the County’s water and sewer system” and “could
have used their properties for other purposes” or “sought to develop properties that
used well water and septic tanks” is not persuasive for several reasons.
¶ 54 As an initial matter, we note that the payment of the challenged “capacity use”
fees was not just necessary to permit the landowner to connect to the County’s water
and sewer system; instead, as we have already explained, the making of those
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payments implicated plaintiff’s ability to develop their property at all given that
plaintiffs were required to pay the challenged “capacity use” fees before the County
would support plaintiffs’ applications for the issuance of a water and sewer permit,
with the issuance of such a permit constituting a necessary precondition for the
recording of a residential subdivision plot. In other words, as a practical matter,
plaintiffs would have been unable to proceed with their development plans had they
refused to make the necessary “capacity use” fee payments to the County, a situation
that places them squarely within the ambit of Nollan, Dolan, and Koontz. In the
same vein, the fact that plaintiffs “could have used their properties for some other
purposes” would have been equally true of the plaintiffs in each of the other relevant
Supreme Court land-use exactions cases, with none of those cases having held that
the availability of alternative uses for the plaintiff’s property sufficed to justify an
otherwise unconstitutional land-use exaction.15
15 This argument might be relevant to a contention that the County’s ordinance
amounts to a “regulatory taking,” in which government action violates the Takings Clause
because it “denies [a landowner] all economically beneficial or productive use of [his or her]
land.” Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1015 (1992). Plaintiffs have not
advanced any sort of “regulatory taking” claim in this case and we do not believe the facts
would support such a claim. The imposition of the challenged “capacity use” fee at issue in
this case is simply not a regulation of the type discussed by the Supreme Court in Penn
Central Transportation Co. v. City of New York, 438 U.S. 104 (1978), which held that a New
York City law placing restrictions upon development activities involving individual historic
landmarks was not an unconstitutional regulatory taking but was, instead, a valid exercise
of the City’s police power. See Lingle, 544 U.S. at 528 (noting that cases involving “the special
context of land-use exactions” are governed by Nollan and Dolan, rather than Penn Central);
see also Lanvale Properties, 366 N.C. at 160 (holding that an ordinance requiring residential
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¶ 55 Similarly, we are not persuaded by the County’s argument that plaintiffs’
concerns should be directed to the legislative, rather than the judicial, branch. To be
sure, the Supreme Court of California has opined that,
[w]hile legislatively mandated fees do present some danger
of improper leveraging, such generally applicable
legislation is subject to the ordinary restraints of the
democratic political process. A city council that charged
extortionate fees for all property development,
unjustifiable by mitigation needs, would likely face
widespread and well-financed opposition at the next
election. Ad hoc individual monetary exactions deserve
special judicial scrutiny mainly because, affecting fewer
citizens and evading systematic assessment, they are more
likely to escape such political controls.
San Remo Hotel, 27 Cal. 4th, 643 at 671. On the other hand, the Texas Supreme
Court has rejected this view, stating that
[w]hile we recognize that an ad hoc decision is more likely
to constitute a taking than general legislation, we think it
entirely possible that the government could “gang up” on
particular groups to force exactions that a majority of
constituents would not only tolerate but applaud, so long
as burdens they would otherwise bear were shifted to
others.
Town of Flower Mound, 135 S.W.3d at 641. The view expressed by the Texas
Supreme Court echoes in our observation in Lanvale Properties that Cabarrus County
property developers to pay a fee to subsidize new school construction was a mechanism for
generating revenue, rather than a land-use regulation); Durham Land Owners Ass’n v.
County of Durham, 177 N.C. App. 629, 638 (concluding that Durham County lacked the
authority under its “zoning and general police powers” to impose a school impact fee), disc.
rev. denied, 360 N.C. 532 (2006)).
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had an incentive to increase the impact fees that it charged because it “could generate
significant amounts of revenue from a possibly unpopular group—residential
developers[.]” 366 N.C. at 162. See also Ronald H. Rosenberg, The Changing Culture
of American Land Use Regulation: Paying for Growth with Impact Fees, 59 SMU L.
Rev. 177, 262 (2006) (observing that, “[w]ithout having to face the opposition of future
residents who do not currently live or vote in the locality, [local government] officials
find impact fees an irresistible policy option” with “continuing political support”).
¶ 56 As we have already noted, the Takings Clause “was designed to bar
Government from forcing some people alone to bear public burdens which, in all
fairness and justice, should be borne by the public as a whole.” Armstrong v. United
States, 364 U.S. 40, 49 (1960). Consistent with this logic, to the extent that the
challenged “capacity use” fees at issue in this case are intended to cover the cost of
expanding the County’s water and sewer systems to accommodate the developments
in which plaintiffs were involved, then plaintiffs, rather than the public at large (who
already support the existing system through the payment of user fees and, perhaps,
taxes), can appropriately be made to bear those costs to the extent that they are
“roughly proportional” to the impact of the proposed developments upon the County’s
water and sewer system.16 As the Supreme Court recognized in Koontz, its own
16 In other words, the issue before us is not whether the County may charge developers
for the cost that the County may incur to expand its water and sewer capacity in order to
serve the new customers that will result from successful development activities. The County
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precedents “enable permitting authorities to insist that applicants bear the full cost
of their proposals,” with “[i]nsisting that landowners internalize the negative
externalities of their conduct [being] a hallmark of responsible land-use
management[.]” 570 U.S. at 605–06. Acceptance of this logic does not mean, however,
that the courts have no role to play in analyzing the lawfulness of such exactions,
since a state or local government’s ability to require property owners to internalize
the cost of development does not allow such governmental entities to “engag[e] in ‘out-
and-out . . . extortion’ that would thwart the Fifth Amendment right to just
compensation.” Id. at 606 (quoting Dolan, 512 U.S. at 387). See also Lucas, 505 U.S.
at 1014 (warning that, if “the uses of private property were subject to unbridled,
uncompensated qualification under the police power, ‘the natural tendency of human
nature [would be] to extend the qualification more and more until at last private
property disappear[ed]’ ”) (alterations in original) (quoting Mahon, 260 U.S. at 415).
¶ 57 A number of the arguments that the County has advanced in this case rest
upon an erroneous belief that the challenged “capacity use” fees are “user fees” rather
than “impact fees.” Nothing in the logic of the decision that we believe to be
may clearly do so if it has the necessary statutory authority, an issue which the Court of
Appeals resolved in the affirmative and which is not before us for further review in this
appeal, and if the fees in question satisfy the test enunciated in Nollan, Dolan, and Koontz.
To be clear, if the impact fees like those at issue in this case have an “essential nexus” and
are “roughly proportional” to the costs that the developers’ activities will impose upon the
County’s water and sewer system, then no taking will have occurred. However, for the
reasons set forth in elsewhere in this opinion, we cannot assume that this test will be satisfied
based on the present record and must leave that issue for resolution by the trial court.
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appropriate in this case will “subject every fee payment to a governmental entity to
the Nollan/Dolan/Koontz analysis” or “cripple the ability of governments to tax,
mandate fees, and levy other types of monetary payments that finance and make
possible the services that governments provide.”17 On the contrary, the logic
underlying our decision in this case is limited to “impact fees” or “monetary exactions”
and does not extend to true user fees such as charges for garbage collection, charges
for the provision of actual water or sewer service or the right to tap on to existing
water or sewer infrastructure, or fees assessed to cover the cost of enforcing particular
regulatory regimes, so that our holding in this case should not be construed as
inconsistent with anything that we said in Homebuilders Association of Charlotte.
See 336 N.C. at 42 (discussing the relationship between regulatory authority and
fees). In addition, we are confident that the definitions of “impact fee” and “exaction”
set out earlier in this opinion will provide the trial courts with the ability to
17 Amici North Carolina Water Quality Association and National Association of Clean
Water Agencies separately argue that application of the “unconstitutional conditions”
doctrine to impact fees like those at issue in this case would be “an unnecessary and costly
exercise” because the Public Water and Sewer System Development Fee Act “now expressly
requires that impact fees be tied to the actual capital cost impacts to water and sewer systems
imposed by new development, thereby ensuring that fees will exhibit a rational relationship
to the costs imposed.” See S.L. 2017-138, 2017 N.C. Sess. Laws 996. In the event that the
analysis outlined by amici is now statutorily required, we fail to see how a requirement that
an impact fee satisfy the “essential nexus” and “rough proportionality” test enunciated in
Nollan and Dolan would impose any additional burden upon any unit of local government
and that this requirement would serve, instead, to ensure that any properly established
impact fee satisfies the relevant constitutional standard.
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distinguish between different types of payments required by local governments in
future proceedings.
¶ 58 The County further contends that, even if Koontz is applicable in this case,
plaintiffs have failed to allege sufficient facts to support the legal conclusion set out
in their complaint that the challenged “capacity use” fees lacked an “essential nexus”
and “rough proportionality” to the County’s goal of mitigating the impact on existing
water and sewer infrastructure. Aside from the fact that the County, not plaintiffs,
has the burden of showing that the challenged “capacity use” fees satisfy the
“essential nexus” and “rough proportionality” test, see F.P. Dev., LLC v. Charter Twp.
of Canton, Mich., 16 F.4th 198, 206 (6th Cir. 2021) (noting that the township had
“fail[ed] to carry its burden to show that it made the required individualized
determination” that “the required dedication is related both in nature and extent to
the impact of the proposed development”) (citing Dolan, 512 U.S. at 391), we note
that, while the entry of judgment on the pleadings is appropriate in situations in
which the plaintiff alleges facts that defeat his, her, or its legal theory, DiCesare, 376
N.C. at 98–99, no such situation exists in this case.
¶ 59 Admittedly, plaintiffs’ allegation that “the water and sewer impact fees are
collected by the County to pay for the costs of future improvements to the County’s
water and sewer system” suffices to defeat any argument that the challenged
“capacity use” fees lack an “essential nexus” to the County’s objective of properly
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funding the expansion of its water and sewer system capacity. However, plaintiffs’
complaint does not, as the County claims, “confirm[ ] that the fees are roughly
proportional to the costs of the expansion.” Instead, plaintiffs’ complaint simply
identifies the rates at which “capacity use” fees for water and sewer service are
currently set and alleges that “[t]he water and sewer impact fees for commercial
development is an amount determined by the County based upon the estimated water
and sewer usage of the property.” As a result, while plaintiffs’ complaint admits that
the challenged “capacity use” fees are based upon what the County estimates to be
the cost of expanding existing water and sewer capacity to serve the properties
contained in plaintiffs’ development, it does not concede that these estimates
accurately reflect the impact of plaintiffs’ proposed developments upon the County’s
water and sewer systems. Although “[n]o mathematical calculation is required,” the
County must still show that its estimates are “roughly proportional” to the actual cost
of expanding the County’s water and sewer system to accommodate plaintiffs’
proposed developments, see Dolan, 512 U.S. at 391, with the County having provided
no support for its assertions that “rough proportionality” inquiry is simply “one of
common sense” or that the challenged “capacity use” fees “meet that common-sense
test and do not require a further factual inquiry.” As a result, whether the challenged
“capacity use” fees are or are not “roughly proportional” to the costs that plaintiffs’
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developments impose upon the County’s water and sewer infrastructure is an issue
that must be determined on remand.
¶ 60 Finally, despite our acceptance of the plaintiffs’ underlying legal theory, we
agree with the County that it would be improper for plaintiffs to recover the “capacity
use” fees that they have already paid in the event that plaintiffs have passed those
costs along to others, such as ultimate purchasers, in order to ensure that no party
receives a “windfall.” For that reason, we hold that, on remand, the County shall be
permitted to present evidence concerning the extent to which, if at all, plaintiffs
factored the cost of the challenged “capacity use” fees into the prices at which they
have sold lots to ultimate purchasers. In the event that the trial court finds that
plaintiffs have done so, it shall be permitted to hear evidence regarding the
appropriate manner by which any such amount should be distributed to the parties
in order to ensure that no party receives a windfall as a result of these proceedings.
E. Mootness
¶ 61 In the alternative, the County requests that this Court dismiss plaintiffs’
petition for discretionary review as improvidently allowed on the grounds that the
issues that are before the Court have become moot. According to the County,
“[plaintiffs’] Koontz theory appears in the complaint’s complaint for declaratory
relief,” but “[plaintiffs] no longer have a justiciable claim for a declaration because a
declaration about the validity of the old ordinance would not prospectively redress
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any injury that [plaintiffs] claim[ed] to have suffered.” In addition, the County argues
that plaintiffs have not sought “money damages—retrospective relief—on their
Koontz theory” and have “only sought money damages [for] claims that are not before
this Court.” As a result, in the County’s view, plaintiffs’ request for declaratory relief
has been rendered moot given that the relevant statutory provisions have been
amended during the pendency of this case, citing Cape Fear River Watch v. N.C. Env’t
Mgmt. Comm’n, 368 N.C. 92, 98 (2015) (holding that the enactment of new legislation
by the General Assembly rendered the trial court’s declaratory ruling moot because
it superseded the administrative agency rule challenged in the case).
¶ 62 In support of this contention, the County argues that, after plaintiffs had filed
their complaints, the General Assembly passed the Public Water and Sewer
Development Fee Act, which outlines the process by which local governments are
entitled to calculate and assess “system development fees.” See S.L. 2017-138, 2017
N.C. Sess. Laws 996. The County claims that it has assessed water and sewer system
development fees in accordance with these newly enacted statutory provisions since
2017 and that current law “allows the County to impose much higher fees than what
[plaintiffs] paid and contest[ed] here.” As a result, the County contends that, “even
if this Court were to side with [plaintiffs] on their constitutional contentions, that
would not affect [plaintiffs’] legal rights going forward.”
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¶ 63 A careful analysis of plaintiffs’ complaints clearly shows that plaintiffs are
seeking both a declaration that the challenged “capacity use” fees are unlawful and
a return of “all water and sewer impact fees paid to the County as damages,” along
with prejudgment interest, pursuant to former N.C.G.S. § 153A-324, with plaintiffs’
request for monetary damages appearing in its claim pursuant to N.C. Const. art. I,
§ 19, and their contention that the challenged “capacity use” fees lack the required
“essential nexus” and “rough proportionality” appearing in its request for declaratory
relief. In our view, the fact that these allegations appear in separate portions of
plaintiffs’ complaint does not suffice to support the County’s mootness argument
given that plaintiffs’ claim for monetary relief expressly “reincorporate[s] by
reference as if fully set forth herein” all of the earlier allegations set out in the
complaint, including those referencing Koontz, and given that N.C. Const. art. I, § 19
contains an implicit prohibition against the taking of property without just
compensation, Finch v. City of Durham, 325 N.C. 352, 362–63 (1989) (citing Long v.
City of Charlotte, 306 N.C. 187, 196 (1982)), which is the same constitutional right
that underlies Nollan, Dolan, and Koontz. As a result, since plaintiffs’ claim for
monetary relief is inextricably intertwined with their request for declaratory relief
based upon Koontz, we are unable to agree with the County that the claims that are
before us in this case have been rendered moot.
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¶ 64 As further support for our determination with respect to the mootness issue,
we conclude that the passage of the Public Water and Sewer Development Fee Act,
while relevant to the validity of any challenge to the County’s statutory authority to
enact “capacity use” fees like those at issue here, has no bearing on the
constitutionality of those fees. “A constitutional prohibition against taking or
damaging private property for public use without just compensation is self-executing
and neither requires any law for its enforcement, nor is susceptible of impairment by
legislation.” Sale v. State Highway & Pub. Works Comm’n, 242 N.C. 612, 617 (1955)
(citations omitted). As a result, even if plaintiffs had sought nothing more than a
declaration that the “capacity use” fees at issue in this case are unconstitutional
under Koontz, the enactment of the 2017 legislation does not have the effect of
rendering any constitutional claim that plaintiffs may have asserted moot.
F. Demonstration of an Issue of Material Fact
¶ 65 Finally, plaintiffs argue that the trial erred by entering judgment on the
pleadings in the County’s favor because the pleadings demonstrate the existence of a
genuine issue of material fact concerning the extent to which the challenged “capacity
use” fees, as applied to plaintiffs, had an “essential nexus” and “rough
proportionality” to the anticipated impact that plaintiffs’ proposed developments
would have on the County’s water and sewer infrastructure. Although plaintiffs have
not advanced any specific argument with respect to this issue in their brief, a careful
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examination of the pleadings does tend to show, as we have already noted, that, while
there is no genuine issue of material fact concerning the extent to which the
challenged “capacity use” fees had an “essential nexus” to the impact of plaintiffs’
development upon the County’s water and sewer systems, the parties clearly dispute
the extent to which relevant fees were “roughly proportional” to the actual impact on
the County’s water and sewer systems. As a result, on remand, the parties shall be
permitted to conduct discovery and present evidence concerning the issue of whether
the challenged “capacity use” fees satisfy the “rough proportionality” component of
the Nollan/Dolan test. In the event that the amount of the “capacity use” fees that
the County has assessed is no more than is “roughly proportional” to the additional
costs that the County will incur in providing the facilities needed to ensure the
availability of adequate water and sewer services for plaintiffs’ developments, then
no taking should be found to have occurred. In addition, as we have already
discussed, if the trial court determines that the challenged “capacity use” fees are not
“roughly proportional” to the impact of plaintiffs’ proposed developments upon the
County’s water and sewer systems, the parties shall be permitted to present evidence
regarding the extent to which, if at all, plaintiffs have passed the “capacity use” fees
they have already paid to ultimate purchasers and the manner in which any such
amount should be distributed in order to ensure that no person receives a “windfall.”
III. Conclusion
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¶ 66 Thus, for the reasons set forth above, we hold that the “capacity use” fees at
issue in this case are “monetary exactions” subject to constitutional scrutiny under
Koontz and must, therefore, satisfy the “essential nexus” and “rough proportionality”
test in order to avoid being treated as takings of plaintiffs’ property. As a result, the
decision of the Court of Appeals is reversed and this case is remanded to the Court of
Appeals for further remand to Superior Court, Harnett County, for further
proceedings not inconsistent with this opinion.
REVERSED AND REMANDED.
Justice BERGER concurring in part and dissenting in part
¶ 67 I join in the majority opinion generally. However, if an unconstitutional taking
occurred, there is no scenario in which the county can retain the fees collected. The
county should not profit from its taking, and I respectfully dissent from that portion
of the opinion.
¶ 68 I write separately because “[a] frequent recurrence to fundamental principles
is absolutely necessary to preserve the blessings of liberty.” N.C. Const. art. I, § 35.
The admonition of the Constitution requiring frequent
recurrence to fundamental principles is politically sound. .
. . We violate no precedent in referring to the important
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function these guaranties of personal liberty perform in
determining the form and character of our Government. . .
. If those whose duty it is to uphold tradition falter in the
task, these guaranties may be defeated temporarily, or
permanently lost through obsolescence.
State v. Harris, 216 N.C. 746, 762–63, 6 S.E.2d 854, 865–66 (1940).
¶ 69 State constitutional provisions often provide greater protections for our rights,
liberties, and freedoms than those secured by the Constitution of the United States.
State v. Jackson, 348 N.C. 644, 648, 503 S.E.2d 74, 91 (1998). This Court has
recognized that
[o]ur Constitution is more detailed and specific than the
federal Constitution in the protection of the rights of its
citizens. We give our Constitution a liberal interpretation
in favor of its citizens with respect to those provisions
which were designed to safeguard the liberty and security
of the citizens in regard to both person and property.
Corum v. University of North Carolina, 330 N.C. 761, 783, 413 S.E.2d 276, 290 (1992)
(cleaned up).
¶ 70 Our Declaration of Rights begins with the foundational statement that “[w]e
hold it to be self-evident that all persons are created equal; that they are endowed by
their Creator with certain inalienable rights; that among these are life, liberty, the
enjoyment of the fruits of their own labor, and the pursuit of happiness.” N.C. Const.
art. I, § 1. The “fundamental guaranties” of Article I, section 1 are “very broad in
scope.” State v. Ballance, 229 N.C. 764, 769, 51 S.E.2d 731, 734 (1949). “This Court’s
duty to protect fundamental rights includes preventing arbitrary government actions
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that interfere with” these fundamental rights. King v. Town of Chapel Hill, 367 N.C.
400, 408, 758 S.E.2d 364, 371 (2014) (citing N.C. Const. art. I, § 1).
¶ 71 The unconstitutional conditions doctrine and the Takings Clause of the Fifth
Amendment provide protections from government exactions that require just
compensation. Nollan v. California Coastal Comm’n, 483 U.S. 825, 829, 107 S. Ct.
3141, 3144, 97 L. Ed. 2d 677 (1987); and Dolan v. City of Tigard, 512 U.S. 374, 378,
114 S. Ct. 2309, 2313, 129 L. Ed. 2d 304 (1994). Nollan and Dolan provide the
constitutional floor. Although not argued by the parties, given our State’s history of
jealously guarding property rights, heightened scrutiny requiring such exactions be
directly proportional to the projected impact may be available under the North
Carolina Constitution.
Chief Justice NEWBY joins in this concurring in part and dissenting in part
opinion.
Justice EARLS dissenting.
¶ 72 At its core, the unconstitutional conditions doctrine is about coercion: the
doctrine “vindicates the Constitution’s enumerated rights by preventing the
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government from coercing people into giving them up.” Koontz v. St. Johns River
Water Mgmt. Dist., 570 U.S. 595, 604 (2013). The basic insight is that allowing
governmental entities to impose conditions on the exercise of a constitutional right
makes individuals vulnerable to potentially “extortionate demands.” Id. at 619. In
the land-use context, the doctrine has been applied to conditions that require a
property owner to cede an interest in their property to the government—or to pay a
“monetary exaction” in lieu of conveying a property interest—as a condition of
obtaining the permits necessary to develop their property. When a government seeks
to impose such a condition, there must be “an essential nexus and rough
proportionality” between the condition and “the effects of the proposed new use of the
specific property at issue.” Id. at 614.
¶ 73 In this case, the majority concludes that Harnett County’s imposition of a
generally applicable impact fee that all property owners must pay if they wish to have
the County’s water and sewer infrastructure expanded to their property is a
potentially “extortionate demand[ ]” that threatens the plaintiffs’ rights under the
Takings Clause. This conclusion rests on a mischaracterization of the County’s
actions and the choices presented to property owners in Harnett County. Specifically,
the impact fee is not a monetary exaction subject to the unconstitutional conditions
doctrine, requiring property owners who want the County to expand its water and
sewer infrastructure to their property to offset a portion of the cost is not a taking,
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and imposition of a generally applicable non-discretionary legislative fee is not
coercive. The result is an unwarranted and unwise expansion of the scope of the
Takings Clause that will engender frequent litigation and may ultimately diminish
the capacity of municipalities to recoup fees to offset the costs of maintaining vital
public infrastructure for the public’s benefit. Even if this decision has few immediate
practical consequences, it also signals an increased hostility towards government that
hearkens back to a bygone era. Accordingly, I respectfully dissent.
I. The County’s infrastructure fee is not equivalent to the “monetary
exaction” at issue in Koontz
¶ 74 In Nollan v. California Coastal Commission, 483 U.S. 825 (1987), and Dolan v.
City of Tigard, 512 U.S. 374 (1994), the United States Supreme Court applied the
unconstitutional conditions doctrine to ad hoc demands requiring property owners to
cede an interest in their property as a prerequisite to obtaining a building permit. In
Koontz, the Court applied the unconstitutional conditions doctrine for the first time
to a government’s demand for payment of a fee instead of a demand for an interest in
property, or what the Court termed a “monetary exaction.” 570 U.S. 595, 612 (2013)
(“[S]o-called ‘monetary exactions’ must satisfy the nexus and rough proportionality
requirements of Nollan and Dolan.”). Specifically, the Court made subject to the
doctrine a Florida municipality’s requirement that, in order to obtain a building
permit, a property owner needed either to (1) dedicate a “conservation easement,” or
(2) pay for the municipality to hire contractors to make improvements to property
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owned by the municipality. Id. at 601–02. The majority holds that the infrastructure
fee at issue in the present case is analogous to the monetary exaction at issue in
Koontz.
¶ 75 There are obvious differences between the monetary exactions at issue in
Koontz and the County’s infrastructure fee. The most notable is the absence of a
governmental demand for an interest in the developers’ real property in this case. In
Koontz, the Court recognized that a choice between dedicating an easement and being
unable to develop property is not meaningfully different from the choice between
dedicating an easement or paying money equivalent to the value of the easement and
being unable to develop property. See Koontz, 570 U.S. at 612 (explaining that “a
permitting authority wishing to exact an easement could simply give the owner a
choice of either surrendering an easement or making a payment equal to the
easement’s value”). Koontz was primarily concerned with closing a perceived loophole
arising under Nollan and Dolan whereby governments, cognizant that the
unconstitutional conditions doctrine limited their authority to require conveyance of
an actual interest in land as a condition of issuing a building permit, required
payment of an equally valuable “monetary exaction” as a supposed alternative. Id. at
619. The municipality in Koontz was trying to do through the permitting process what
would have been “a per se taking” if done “directly”: seize land without providing just
compensation. Id. at 612. Koontz affirmed that governments could not “evade the
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limitations of Nollan and Dolan by recharacterizing the demand for an easement as
a requirement for “payment equal to the easement’s value.” Id. By contrast, in this
case, there is no demand for an interest in land lurking behind the County’s
requirement that the developers help defray the cost of the public service they wish
to obtain.
¶ 76 Moreover, the exaction sought in Koontz was also not levied to offset the costs
of any particular service the municipality was providing to the landowner; instead,
the exaction was sought to mitigate the diffuse impacts of development on the
municipality’s water resources. Id. at 600–01. The landowner in Koontz did not obtain
any specific service in exchange for the exaction; the exaction was merely the price of
obtaining permission to build. Id. at 602. By contrast, in this case, the County has
demanded that all of the developers pay a sum of money in order to offset the costs of
providing a particular public service to the developers. As the majority recognizes,
the fees are imposed to achieve the County’s “objective of properly funding the
expansion of its water and sewer system capacity.” Ante, at ¶ 59. The County is asking
all property owners who wish to obtain access to a service to bear part of the cost of
expanding that service. That is not equivalent to the monetary exaction at issue in
Koontz. Even if, as the majority asserts, the logic of the Court’s decision in Koontz
“encompassed a broader range of governmental demands for the payment of money
as a precondition for the approval of a land-use permit” than the precise kind of
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demand imposed by the municipality in that case, ante, at ¶ 42, Koontz does not
justify the majority’s characterization of the County’s impact fee.
II. Requiring developers to pay the infrastructure fee prior to expanding
water and sewer infrastructure does not coerce them into ceding their
constitutional rights
¶ 77 Even assuming that the fee at issue in this case is akin to the monetary
exaction at issue in Koontz, application of the unconstitutional conditions doctrine is
still improper for two additional reasons: First, the requirement that developers pay
a fee to offset the costs of extending the County’s existing water and sewer
infrastructure to their property before the County extends its existing water and
sewer infrastructure to their property does not threaten any enumerated rights
provided under the Takings Clause of the United States Constitution. Second, fees
that are imposed via legislation on a generally applicable, non-discretionary, and
uniform basis do not give rise to a meaningful risk of coercion in the constitutional
sense. Accordingly, the justifications for subjecting a monetary fee to the
unconstitutional conditions doctrine are not present under the circumstances of this
case.
A. Requiring payment of the infrastructure fee does not coerce the
developers into giving up a constitutional right
¶ 78 The unconstitutional conditions doctrine recognizes that when “someone
refuses to cede a constitutional right in the face of coercive pressure, the
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impermissible denial of a governmental benefit is a constitutionally cognizable
injury.” Koontz, 570 U.S. at 607 (emphasis added). As articulated in Nollan, Dolan,
and Koontz, the doctrine applies when the government tries to do something by
imposition of a permitting condition that would be a per se taking if done directly.
See id. at 612 (“A predicate for any unconstitutional conditions claim is that the
government could not have constitutionally ordered the person asserting the claim to
do what it attempted to pressure that person into doing. . . . [I]f the government had
directly seized the easements it sought to obtain through the permitting process, it
would have committed a per se taking.”). The gravamen of an unconstitutional
conditions claim is thus the existence of an underlying enumerated constitutional
right that is threatened by the government’s actions.
¶ 79 Here, the majority holds that the unconstitutional conditions doctrine applies
to the circumstances of this case because the County’s imposition of the infrastructure
fee threatens the developers’ enumerated constitutional rights under the Takings
Clause. See ante, at ¶ 52. Under the Takings Clause, property owners have the “right
to receive just compensation when [their] property is taken for a public use.” Dolan,
512 U.S. at 385. “[T]he appropriation of an easement constitutes a physical taking.”
Cedar Point Nursery v. Hassid, 141 S. Ct. 2063, 2073 (2021). Thus, in both Nollan
and Dolan, it was obvious what constitutional right the municipalities’ conditions
implicated: the government had conditioned approval of a building permit on the
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property owner’s conveyance of an easement on a portion of their property.
See Nollan, 483 U.S. at 827 (addressing the question of whether “the California
Coastal Commission could condition its grant of permission to [landowners to] rebuild
their house on their transfer to the public of an easement across their beachfront
property”); Dolan, 512 U.S. at 395 (considering whether a city could require
dedication of a “floodplain easement” and a “pedestrian/bicycle pathway easement”
as a condition of granting a building permit). The County’s imposition of an
infrastructure fee in this case obviously does not threaten a taking in the Nollan /
Dolan sense.
¶ 80 Nonetheless, relying on Koontz, the majority concludes that imposition of the
infrastructure fee implicates the developers’ “Fifth Amendment right to be free from
governmental takings of one’s property without just compensation.” Ante, at ¶ 52.
However, Koontz does not support the conclusion that imposition of an impact fee
connected to a specific service a government provides to a specific property owner is
akin to a taking. The developers are not being coerced to give up any constitutional
rights. If the developers refused to pay the infrastructure fee, the County would not
provide the benefit of extending the County’s water and sewer infrastructure to their
property. The developers do not have a constitutional right to access the County’s
water and sewer infrastructure without contributing to the cost of its provision.
See, e.g., Massachusetts v. United States, 435 U.S. 444, 462 (1978) (“A governmental
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body has an obvious interest in making those who specifically benefit from its services
pay the cost . . . .”). If the developers did not obtain access to the County’s water and
sewer infrastructure, the County would not sign off on its application for a permit
that the developers need to build residential subdivisions. The developers also do not
have a constitutional right to build residential subdivisions without complying with
applicable regulations. See, e.g., Batch v. Town of Chapel Hill, 326 N.C. 1, 13 (1990)
(concluding that a developer’s “failure to comply with [a municipal] ordinance is a
sufficient basis to support the council’s refusal to approve plaintiff’s subdivision
plan”).
¶ 81 When Harnett County refuses to extend its water and sewer infrastructure to
property owned by individuals who refuse to pay the infrastructure fee, the County
is not “deny[ing] a benefit to a person because he [is] exercis[ing] a constitutional
right.” Regan v. Taxation With Representation of Wash., 461 U.S. 540, 545 (1983). The
developers have “not alleged a physical taking of any of [their] property” because
“[r]equiring money to be spent is not a taking of property,” Atlas Corp. v. United
States, 895 F.2d 745, 756 (Fed. Cir. 1990), at least when the money was “charged as
a fee for service or a tax,” Homebuilders Ass’n of Metro. Portland v. Tualatin Hills
Park & Recreation Dist., 185 Or. App. 729, 740 (2003). The only thing the County is
denying the developers is the benefit of a service they would prefer not to pay for. If
that is a taking, then it is difficult to see why all user fees are not also monetary
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exactions subject to the doctrine, notwithstanding the majority’s assertion to the
contrary: conceptually, “charges for garbage collection, charges for the provision of
actual water or sewer service . . . or fees assessed to cover the cost of enforcing
particular regulatory regimes,” ante, at ¶ 57, are also fees imposed to mitigate the
(fiscal) impacts of endeavoring to provide a specific public service to residents.
¶ 82 The majority suggests that the potential taking arises from depriving the
developers of the opportunity to “proceed with their development plans,” ante, at ¶ 54,
specifically “the recording of a residential subdivision plot,” id., even if they have
failed to offset the costs of a service the government provides them and, as a result,
cannot comply with applicable building regulations. To begin with, this is really a
complaint directed at the North Carolina Department of Environmental Quality
based on its refusal to issue a building permit, not at Harnett County. Regardless,
this type of claim—that a regulation precludes a property owner from developing
their land in one particular way—does not threaten a per se taking as in Nollan,
Dolan, and Koontz. Rather, it is a type of claim that fits neatly within the “regulatory
takings” doctrine established in Penn Central Transportation Co. v. City of New York,
438 U.S. 104 (1978). A regulation which limits a property owner’s ability to develop
their property but which does not “completely deprive an owner of ‘all economically
beneficial use’ of her property,” Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 538 (2005)
(cleaned up), may constitute a regulatory taking depending on (1) “[t]he economic
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impact of the regulation on the claimant,” (2) “the extent to which the regulation has
interfered with distinct investment-backed expectations,” and (3) “the character of
the governmental action.” Penn Central, 438 U.S. at 124. Accordingly, “the
appropriate test here is a Penn Central regulatory takings analysis.” Better Hous. for
Long Beach v. Newsom, 452 F. Supp. 3d 921, 933 (C.D. Cal. 2020); see also Mead v.
City of Cotati, 389 F. App’x 637, 638–39 (9th Cir. 2010) (“A generally applicable
development fee is not an adjudicative land-use exaction subject to the [Nollan and
Dolan]. Instead, the proper framework for analyzing whether such a fee constitutes
a taking is the fact-specific inquiry developed by the Supreme Court in [Penn
Central].”).
¶ 83 The choice presented to the developers in this case is not the same as the choice
that was presented to the landowner in Koontz: it is not the choice between conveying
an interest in their property or paying an equivalent fee and being denied permission
to develop their property. Rather, the choice is between paying a portion of the costs
of extending a public service that will enable the developers to develop their property
in one particularly desired way and not paying for the service. Under Koontz, that is
not the kind of choice that is subject to the unconstitutional conditions doctrine.
B. Application of a non-discretionary, generally applicable, uniform
legislative fee does not give rise to a meaningful risk of coercion
¶ 84 The majority’s decision to subject the County’s infrastructure fee to the
unconstitutional conditions doctrine overlooks another important distinction between
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the requirements at issue in the Supreme Court’s unconstitutional conditions cases
and the requirement at issue here. In Nollan, Dolan, and Koontz, the challenged
permit conditions were discretionary conditions imposed on an ad hoc basis by a
governmental entity after a permit application had been submitted. By contrast, the
County’s infrastructure fee is imposed on a non-discretionary, generally applicable,
and uniform basis. Notwithstanding the majority’s tautological assertion that the
County’s infrastructure fee is “inherently coercive in the constitutional sense,” ante,
at ¶ 54, these features substantially diminish the risk of coercion arising from
imposition of the infrastructure fee. The salient distinctions involve both the manner
in which the fees are applied and the manner in which they are enacted.
¶ 85 In Koontz, the property owner challenged a condition devised by a water
management district under a Florida statute that authorized the district to require
developers to “offset . . . resulting environmental damage by creating, enhancing, or
preserving wetlands elsewhere.” 570 U.S. at 601. This kind of permitting process
gives rise to a risk of coercion “because the government often has broad discretion to
deny a permit that is worth far more than property it would like to take.” Id. at 605
(emphasis added). For example, if developing the undeveloped land imposes costs to
the municipality of $1,000, and issuing a building permit will enable the property
owner to develop the land in a way that increases its value by $10,000,000, then the
municipality has the power to demand a fee that far exceeds the costs of development
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it will be forced to bear. This is the kind of coercive power the unconstitutional
conditions doctrine attempts to mitigate. Id. (“So long as the building permit is more
valuable than any just compensation the owner could hope to receive for the right-of-
way, the owner is likely to accede to the government’s demand, no matter how
unreasonable.”). Under this scenario, there is a significant risk that a municipality
will “leverage its legitimate interest in mitigation to pursue governmental ends that
lack an essential nexus and rough proportionality to those impacts.” Id. at 606.
¶ 86 As numerous other courts have recognized, the same risk of coercion is not
present when the amount of a fee is fixed beforehand at a set amount for all property
owners without regard for the potential value of their property. See, e.g., Knight v.
Metro. Gov’t of Nashville & Davidson Cnty., 572 F. Supp. 3d 428, 443 (M.D. Tenn.
2021) (“The Nollan/Dolan standard of review does not apply to generally applicable
land use regulations, as opposed to adjudicative land-use exactions.”); Am. Furniture
Warehouse Co. v. Town of Gilbert, 245 Ariz. 156, 163 (Ct. App. 2018) (“Koontz
addressed the constitutionality of a government’s ‘adjudicative decision’ unique to a
parcel. . . . Koontz did not hold that Dolan applied to generally applicable legislative
development fees.”); Better Hous. for Long Beach v. Newsom, 452 F. Supp. 3d at 932
(“Koontz itself involved an adjudicative, individual determination, and the majority
never addressed Nollan/Dolan’s application to general legislation. Instead, it
repeatedly emphasized the special vulnerability of land use permit applicants to
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extortionate demands for money.” (cleaned up)); Douglass Properties II, LLC v. City
of Olympia, 16 Wash. App. 2d 158, 164, rev. denied, 197 Wash. 2d 1018 (2021), and
cert. denied, 142 S. Ct. 900 (2022) (“[T]he Nollan/Dolan test does not apply to the
traffic impact fees, because such fees are legislatively prescribed generally applicable
fees outside the scope of Koontz.”); Willie Pearl Burrell Tr. v. City of Kankakee, 2016
IL App (3d) 150655, ¶ 44 (“Defendant’s demand for money stems from . . . a generally
applicable ordinance . . . [and] is thus not the sort of ad hoc demand contemplated in
Koontz, but simple compliance with a straightforward ordinance.”); Dabbs v. Anne
Arundel Cnty., 458 Md. 331, 353–54 (2018) (“This case falls squarely within Dolan’s
recognition that impact fees imposed on a generally applicable basis are not subject
to a rough proportionality or nexus analysis.”). The fees in this case “are
predetermined, set out in [an] Ordinance, and non-negotiable; the Fees are not
assessed on an ad hoc basis or dependent upon the landowner’s particular project.”
Anderson Creek, 275 N.C. App. at 443. There is no opportunity for the government to
assess the value of the permit to an individual property owner and adjust the demand
for money accordingly. Instead, “[t]he legislatively-imposed development impact fee
is predetermined . . . and applies to any person wishing to develop property in the
[County].” Dabbs, 458 Md. at 353. There is a meaningful difference between the
scenario at issue in this case and the circumstances of Koontz: It is the difference
between a driver pulling up to a gas station where prices are listed prominently on
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the pumps and a driver pulling up to a gas station where the attendant chooses a
price after the driver asks for a certain amount of gas. In both cases, drivers might
not be thrilled at the hit to their wallet, but only in the latter circumstance does the
gas station attendant have the chance to levy an “extortionate demand[ ]” based on
what kind of car the driver is driving and how important it is to the driver to arrive
at his or her destination.
¶ 87 The majority concludes that this distinction in how fees are calculated is
irrelevant, suggesting that even a legislature can choose to “exercise . . . government
power” in a coercive manner. Ante, at ¶ 51. While it may be theoretically possible for
a municipality to set predetermined impact fees at an amount totally
incommensurate with the cost of providing a service, it is legally prohibited and
practically unlikely. As noted above, the regulatory takings doctrine already restrains
the capacity of governments to limit how property owners utilize their property; in
addition, state law already precludes municipalities from assessing fees to defray the
costs of public services that are “unreasonable.” Homebuilders Ass’n of Charlotte, Inc.
v. City of Charlotte, 336 N.C. 37, 46 (1994). Moreover, the developers have a
meaningful opportunity to influence the enactment of legislative impact fees through
participation in the political process. See San Remo Hotel L.P. v. City And Cnty. of
San Francisco, 27 Cal. 4th 643, 671 (2002) (“[G]enerally applicable legislation is
subject to the ordinary restraints of the democratic political process.”). Quoting the
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Texas Supreme Court, the majority opines that it is “entirely possible that the
government could ‘gang up’ on particular groups to force exactions that a majority of
constituents would not only tolerate but applaud.” Ante, at ¶ 55. But “[l]egislation
designed to promote the general welfare commonly burdens some more than others.”
Penn Central, 438 U.S. at 133. The developers have a right to participate in the
process of enacting legislation, not to dictate the results of that process. Their concern
that the result may not reflect their preferences is not the same as a complaint that
they have been excluded from the political process in any constitutionally salient way.
III. Conclusion
¶ 88 Ultimately, the majority is correct in suggesting that its decision will have
little practical effect, either on the parties to this case or on land-use law in North
Carolina more generally. The majority opinion attempts to preclude the developers
from collecting a “windfall” by recouping fees they passed on to ultimate purchasers,
ante, at ¶ 61, and the majority notes that passage of the Public Water and Sewer
System Development Act should mean that “in the future, such fees are likely to
satisfy the ‘essential nexus’ and ‘rough proportionality’ requirement enunciated in
Nollan and Dolan,” id., at ¶ 51. But the majority’s decision to convert generally
applicable legislative impact fees into monetary exactions subject to the
unconstitutional conditions doctrine is not without consequence. Although the
majority purports to limit application of the rule it has announced to “impact fees” as
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distinct from the “true user fees” and taxes governments rely upon to fund their
continued operations, id. at ¶ 57, the lines that separate these categories are blurry
and, often, more semantic than essential. At a minimum, governments will need to
expend more resources justifying the imposition of reasonable fees used to defray the
costs of providing public services.1
¶ 89 More broadly, the majority’s willingness to expand both the unconstitutional
conditions doctrine and the Takings Clause to shield property owners from
governmental efforts to recoup the costs of providing public services is a troubling
throwback to an antiquated jurisprudence. The unconstitutional conditions doctrine
is “a product of Lochner-like, pre-New Deal understandings” initially designed “to
protect common law rights in the face of threats to those rights created by the rise of
the regulatory state.” Cass R. Sunstein, Why the Unconstitutional Conditions
Doctrine Is an Anachronism (with Particular Reference to Religion, Speech, and
Abortion), 70 B.U. L. Rev. 593, 597 (1990). By constitutionalizing a property owner’s
objection to a democratically legitimate non-discriminatory policy choice, the majority
risks conveying the message that certain constitutional rights asserted by certain
litigants are most favored. The Court can dispel this notion in future cases by
evenhandedly applying the unconstitutional conditions doctrine with the same
1 Although we disagree with the majority that the unconstitutional conditions doctrine applies, we
agree that, having determined that it does, on remand, it is appropriate for the trial court to consider whether
ordering the developers to be refunded for prior infrastructure fees would provide them with a windfall.
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solicitousness towards claims brought by other categories of litigants whose rights
are allegedly burdened by onerous conditions imposed on their receipt of public
benefits. See Kathleen M. Sullivan, Unconstitutional Conditions, 102 Harv. L. Rev.
1413, 1416 (1989) (describing how the unconstitutional conditions doctrine has also
been applied “to protect personal liberties of speech, association, religion, and privacy
just as it once had protected the economic liberties of foreign corporations and private
truckers” in the Lochner era). Otherwise, we risk perpetuating an “inconsistent
application” of a doctrine which “has never been an overarching principle of
constitutional law that operates with equal force regardless of the nature of the rights
and powers in question.” Dolan, 512 U.S. at 407 n.12 (Stevens, J., dissenting).
Accordingly, I respectfully dissent.
Justice HUDSON and Justice MORGAN join in this dissenting opinion.