The Fifth Amendment to the United States Constitution creates several constitutional rights limiting government powers. Predicated on their varied experiences with predatory and overreaching government models, our Founding Fathers had the foresight to include specific protections focusing on criminal and property rights proceedings which, along with nine other articles, was ratified in 1791 in what we know as the Bill of Rights.
You may be most familiar with the 5th Amendment because we customarily hear it being invoked in trial proceedings when a defendant or witness in a court case ‘takes the 5th’. That’s their right to decline to answer a question on the grounds that their answer may incriminate themselves. Avoidance of self-incrimination also forms the basis for today’s use of the Miranda warning, whereby a criminal suspect must be advised of their rights prior to interrogation.
There are actually five clauses in the 5th Amendment, with two providing substantial protections from federal government overreach in private property issues, specifically through the Due Process Clause and the Takings Clause. (Similar protections against state government overreach are in the 14th Amendment). The Takings Clauses states, “nor shall private property be taken for public use without just compensation”. It is typically exercised when a municipality decides to invoke eminent domain, or the taking of private property for public good. In such cases the landowner must be paid ‘just compensation’. It probably won’t surprise you that these protections are routinely abused by government entities.
The U.S. Supreme Court is currently hearing a landmark property rights case out of California that may have major economic implications for local, state and federal governments in Sheetz v. El Dorado County. In a nutshell, the case is being brought by a California property owner, George Sheetz, who in 2016 applied for a building permit to build a small home near Lake Tahoe in El Dorado County. The county said he could have the permit IF he paid $23,420 as a ‘traffic mitigation fee’. Sheetz thought that seemed a tad high for what he was trying to do and sued the county under precedent cited in Nollan (1987) and Dolan (1994) whereby a permit conditioning must have ‘essential nexus’ and be ‘roughly proportional’ to the development’s adverse impact. According to Sheetz, because California property taxes are constrained by Prop. 13, the county had devised an alternative revenue scheme based on inflated permit fees and this fee was nothing more than an extortionate money grab.
Now impact fees are routinely combined in a project’s total permit fee and vary widely from state to state and municipality to municipality. According to the National Home Builders, they can range from a low of $3,000, to a nationwide average of about $14,000. In California that rises to around $38,000, and as much as $150,000 or more in some areas. In El Dorado County these fees currently range from about $30,000, to over $60,000 depending on the zone. So was George’s fee too high? I’ll leave that up to the court to decide.
But the decision will have much broader implications than just on George’s home. Such government overreach also extends to ‘extortion’ of property developers by conditioning permits on providing daycare centers, ride-share parking, set asides for ‘affordable housing’, and, in one Oakland case, a public art installation. The California appellate court dismissed Sheetz case and the state Supreme Court declined review as they determined that the fees do not constitute ‘taking’ but rather a public benefit allowing ‘many residents to enjoy the benefits of public improvement without paying for them’. By this logic a government could not demand that a developer, or individual home builder, fork over land worth $100,000 without compensation to build a bike path, but they could jack up the cost of a permit by $100,000 to accomplish the same end.
As cities strive to balance infrastructure requirements with revenue streams, we’ve seen such specious activities applied in some local municipalities as well. On occasion a Mayor or Councilmember exceeded their role by demanding conditions prior to permit approval. Typically these are couched as benefits ‘for the public good’ rather than personal gain, but it happens.
So in the end, the Supreme Court will determine what the framers of the constitution intended when Alexander Hamilton declared in Federalist #10 that “the great object of the Constitution was to secure private property against the danger of such factions whilst preserving the spirit and form of government.” Property rights and the taxpayer’s pocketbook are increasingly fair game these days as government seeks to control ever increasing swaths of our lives. Stay tuned.