ZONING; TAXES: Development fees are generally analyzed as land use regulation and not taxes if the fees are imposed only when land is developed. As regulatory fees, they are subject to the Dolan takings analysis, but do not constitute takings if the allocation of fees is made pursuant to a "legislative" act, rather than an ad hoc determiination, as in Dolan. Home Builders Association of Central Arizona v. City of Scottsdale, 902 P.2d 1347 (Ariz. Ct. App. 1995). The Arizona Supreme Court remanded this case to the Court of Appeals to review its previous decision regarding developers' claims that the city's water resource development fee was an unconstitutional taking in light of the new Supreme Court opinion, Dolan v. City of Tigard, 512 U.S. _____, 114 S.Ct. 2309, 129 L.Ed.2d 304 (1994).

If readers find the description of the case in the caption somewhat confusing, the editor welcomes them to read the case (and the dissent) and do better.

The court first evaluated whether takings analysis should apply at all. It stated that many cases have held that a fee can be a taking, and that a recent U.S. Supreme Court remand convinced it that the Court holds that view. The decision in question is Ehrlich v. City of Culver City, 114 S.Ct. 1731 (1993), which remanded a challenge to a California regulatory fee for further consideration in light of Dolan. The Arizona court suggested that no remand have been necessary if regulatory fees were not subject to takings analysis.

The Arizona court then went on to suggest that not all development fees fall under the takings analysis. Assessment charges, it holds, are not land use regulation, but should be analyzed as taxes. It differentiates between assessment charges and other development fees. Assessment charges - to be analyzed as taxes - are charges that are imposed upon landowners through a determination of a need for a benefit (by a process in which landowners participate and frequently initiate) and which are imposed in accordance with the determination of need for a public improvement, rather than at the moment of development of a particular parcel. The assessment charges that the court seems to have in mind are charges imposed through an improvement district, on some kind of uniform basis, the proceeds of which might be used to benefit land other than that of the taxpayer, rather than the type of assessment charge that is proportioned to the benefit to the assessed land itself. Assessment charges, as taxes, are of course subject to Equal Protection clause analysis and the process by which they are created to Due Process Clause analysis, but they are not land use regulation and cannot constitute takings.

In the case at hand, the development fees were water development charges were designed to compensate the government for water development needs created by the development on the parcel in question and were imposed as a condition of development, not generally on all properties within a district at the time the public improvement is built. These charges were not taxes, then, and were subject to a takings analysis.

Having reached this conclusion, the court attempts to establish a framework in which to evaluate these charges as potential takings. It states that the charges were imposed through a different system than was used in Dolan. In Dolan, the administrative agency enforcing the development fee ordinance was instructed to make an ad hoc determination as to what was a "sufficient" amount of land to be exacted from each applicant for a land use benefit. Under these circumstances, it was appropriate for a court to require that the administrative determination, which was essentially "adjudicative" meet the "rough proportionality" test established by the Supreme Court.

Here, however, the court pointed out that the water development charges were made through a legislative process, by a general schedule of charges set for different kinds of proposed uses, and the evil addressed in Dolan, consequently was not likely to occur. Therefore, the "rough proportionality" analysis need not be used.

"The Dolan court was concerned with arbitrary, non-legislative conditions being placed upon landowners. Dolan is implicated when an administrator or commission exacts conditions from individual property-owners with little or no legislative guidance. This concern, however, is simply not present when the legislature, after undertaking sufficient analysis, has determined a policy and then mandated uniform and specific means of accomplishing that policy, as Scottsdale had done here." 902 P.2d at 1352.

The court then seems to say that because the determination of the fee to be imposed upon the landowner seeking to develop property was established by a legislative process, rather than an adjudicatory one, ipso facto, there can be no taking. It seems to conclude that the landowner's interest is adequately protected by the fact that the legislative process is a political one which provides greater protection against individual fairness.

There is a strong dissent, arguing that it makes no sense to insulate legislative determinations from any meaningful takings analysis. Comment: Although it is true that a broad based legislative determination as to the appropriateness of allocating fees to particular users, and a broad schedule of the amount of fee for classes of uses, reduces the possibility of gross unfairness in particular cases, this is does not mean that no taking is ever possible in such cases.

It is quite likely that the legislative body would elect to shift the cost of public needs generally faced by all the populace to parties seeking land use benefits, and their customers. This could be an inappropriate imposition on particular parties of costs that ought to be borne generally. The Arizona court suggests no test to evaluate whether the Scottsdale determination to allocate water development costs as it has fairly apportions to affected land developers only their appropriate share of the cost of the public needs. If Dolan is not appropriate, then some other test must be used.

The dissent would be perfectly happy to use Dolan. Stay tuned to see how the Arizona Supreme Court feels about these matters.

rule is that if the development fees are a land use regulation then eminent domain is implicated but if the development fees are a tax they are not subject to the Takings Clause.

The court, quoting Dolan, stated that usually a land use regulation will not violate the Takings Clause if it "substantially advances legitimate state interests and does not deny an owner economically viable use of his land." The court concluded that since the development fees imposed in this case are more legislative rather than adjudicative, the decision in Dolan does not control the within case.

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