DO FEE WAIVERS, EXEMPTIONS
AND OTHER CLASSIFICATIONS
SATISFY EQUAL PROTECTION OF THE LAW?
Michael W. L. McCrory
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DO FEE WAIVERS, EXEMPTIONS AND OTHER CLASSIFICATIONS
SATISFY EQUAL PROTECTION OF THE LAW?
Impact fees are generally viewed by the courts as an exercise of the local
jurisdiction’s police power. When challenged on equal protection grounds, fee statutes
are subject to the traditionally broad deference that allows jurisdictions wide latitude for
legislative acts that are reviewed only to determine if there is some plausible, rational
governmental purpose supporting the statute. City of Cleburne, Tex. v. Cleburne Living
Center. 1 Development impact fees are presumed to be a valid exercise of the
legislative authority to regulate land use.2
That judicial deference, however, decreases as challenges focus on more
precise classifications within impact fee regulations that may have discriminatory effects
and such deference may evaporate with classifications for waivers or exemptions that
are unrelated to the fundamental purpose of the impact fee. Different classifications
within an impact fee establish subclasses within the overall class. These are more likely
to be viewed in equal protection terms of whether the subclasses are treated equally
with respect to other subclasses rather than whether the classification serves a
legitimate governmental purpose.
Waivers, exemptions and other classifications which are applied to individual
cases create such subclasses and raise two additional equal protection challenges.
Such actions may lead to claims that individuals have been treated in an arbitrary and
irrational manner and therefore have an equal protection claim under Village of
Willowbrook v. Olech.3 Such actions may also become the type of individualized
determination that is subject to the stricter scrutiny of the Nollan and Dolan cases.4
At the broadest level of review, differences in how impact fees are applied are
reviewed to determine whether there is a rational basis for the classification. Thus the
application of fees to some, but not all, areas within a jurisdiction has been upheld 5 as
have imprecise formulas for determining fees.6 In Home Builders Association of Central
Arizona v. City of Scottsdale, the court examined the nature of the governmental
purpose for the fees but deferred to the local jurisdiction on how to meet that purpose
and did not second guess the feasibility of the local jurisdictions plans.
1
473 U.S. 432 (1985).
Home Builders Association of Central Arizona v. City of Scottsdale, 187 Ariz. 479, 930 P.2d 993 (1997);
San Remo Hotel L.P. v. City and County of San Francisco, 41 P.3d 87 (Cal. 2002); Home Builders
Association v. Des Moines, 644 N.W.2d 339 (Iowa, 2002); Home Builders and Contractors Association v.
Palm Beach County, 446 So.2d 140 (Fla. App., 1984).
3 526 U.S. 562 (2000)
4 Nollan v. California Coastal Commission, 483 U.S. 825 (1987); Dolan v. City of Tigard, 512 U.S. 374
(1994).
5 Palm Beach County, supra.
6 Black v. Kileen, 78 S.W.3d 686 (Tex. App. 2002); Southport Development Group, Inc. v. Township of
Wall, 709 A.2d 226 (N.J. App. 1998); Agencia La Esperanza Corporation v. Orange County, 2002 WL
681798 (Ca. App. 2002) [Unpublished]
2
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In Black, the court upheld water and sewer connection fees that were in excess
of the actual connection costs. The court held that the City could include indirect costs
in its fee resulting in a fee that is higher than actual costs. Since the plaintiff had failed
to account for these indirect costs, and since the plaintiff bore the burden of proof, the
court could not determine that the fee was unreasonable.
The treatment of different uses also raises potential equal protection concerns.
In Home Builders Association v. City of West Des Moines, supra., upheld separate
classification of single family residence and multi-family residences and upheld the
exclusion commercial uses from the City’s park fee.7 In Bogue Shores Homeowners
Association, Inc. v. Town of Atlantic Beach, 8 the court found that assessing water rates
for single family residences based upon the size of the water line and for multi-family
complexes based on the number of units was necessary to avoid discriminating against
single family residences. While the size of the line was an accurate measurement for
one family, the multi-family complexes would require far more usage which was not
accounted for in the size of the line.9
Even the deferential standard for equal protection analysis has its limits. As
noted in Tyson Smith’s presentation, fees that cannot provide any benefit will violate
equal protection. Thus in St. John’s County,10 the application of the fee to cities that
would never receive any benefit was discriminatory and in Volusia,11 an adult mobile
home park that could not have children living on the premises could not be subjected to
a school impact fee without violating equal protection.
The cases applying the deferential standard focus on the broad and relatively
equal general application of impact fees. Waivers and exemptions provide exceptions
to those general, uniform applications and as such raise additional equal protection
issues. Often, waivers and exemptions are intended to achieve a governmental
objective that is distinct from the purpose of the fee such as excluding low
income/affordable housing from the cost of a road impact fee or excluding schools from
having to pay traffic or park impact fees.
The central problem with such waivers and exemptions is where the basis for this
sub-classification is not related to the purpose of the impact fee. Are such subclassifications judged on their governmental purpose or the purpose of the fee? The
answer to that may well determine the validity of the waiver or exemption.
7West
Des Moines applies a tax analysis rather than a regulatory fee analysis. Since tax statutes do not
have to provide the same benefit to the person paying the tax as a regulatory fee, such statutes may be
given more deference for equal protection purposes.
8 428 S.E.2d 258 (N.C. App. 1993).
9 See also: Ellis v. Clovis Unified School District, 2002 WL 1011515 (Cal App. 2002), an unpublished
case holding that a school impact fee did not have to distinguish between the impact of single family
residences and multi-family projects.
10 St Johns County v. Northeast Florida Builders Ass’n, Inc., 583 So.2d 635 (Fla. 1991).
11 Volusia Co. v. Aberdeen at Ormand Beach, 760 So.2d 126 (Fla. 2000).
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It is well accepted that providing low income housing is a legitimate governmental
function and impact fees may be designed to accomplish that goal.12 Thus, if a waiver
to a road or park fee for affordable housing units is viewed in terms of whether it furthers
a legitimate governmental purpose, there should be no doubt about it’s validity.
As an exception to an otherwise valid fee, however, the issue may become one
of whether it is related to the purpose of the fee. Affordable housing, whether privately
or publicly constructed, will essentially have the same effect on traffic and park use as
any other house of comparable size. Analyzed from this perspective, the fee is
“arbitrary and irrational”.
The importance of the question of what to analyze is best exemplified by the
Brook Park case from Tyson Smith’s presentation.13 Brook Park I involves the
assessment of a parking tax at rate to the local exhibition center and at a lower rate to
the local airport. The trial court found “a legitimate difference in the number of vehicles
and people attending the exhibition center and the associated cost of necessary
municipal services . . . .”14 The Court of Appeals rejected this analysis holding that none
of these factors effected the parking use. Since parking was the reason for the excise
tax, none of the factors cited by the trial court justified the different rates. The different
rates therefore were not supported by any rational basis and were invalid.
The Ohio Supreme Court rejected that analysis.15 In Brook Park II, that court
returned to the deferential standard of review and an analysis of whether the different
classifications further legitimate state objectives. This allowed the court to examine the
objective of maintaining the economic viability of the airport through a preferential rate,
the guaranteed payout from the airport and the desire to aid development of the part of
the city that housed the airport. Since these are legitimate governmental interests, the
different tax rates were upheld.16 This case was, however, reviewed as a tax case
rather than a regulatory fee case and it is not at all clear that such reasons would be
accepted for different regulatory fees.
Waivers and exemptions that are provided to individual applicants raise
additional issues concerning how each individual is treated in the process. In Olech, the
United States Supreme Court made it clear that equal protection claims were not solely
the province of suspect classes and fundamental rights. Olech establishes that an
equal protection claim may lie where the plaintiff can establish that it “has been
intentionally treated differently from others similarly situated and that there is no rational
basis for the difference in treatment.”17 Under this precedent, “an individual who does
not claim membership in any group narrower than the human race can still obtain a
12
San Remo Hotel, supra.
Park Corp. v. Brook Park, 2002 WL 973082 (Brook Park I).
14 Brook Park I, paragraph 31.
15 Park Corporationv. City of Brook Park, 807 N.E.2d 913 (Ohio, 2004) (Brook Park II).
16 Cf: Massachusetts Municipal Wholesale Electric Company v. City of Springfield, 726 N.E.2d 973 (Mass.
App. 2000) (differential utility rates to promote industrial users within city was discriminatory).
17 Olech, supra., 528 U.S. at 564.
13
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remedy under the equal protection clause for ‘irrational and wholly arbitrary’
treatment.”18
The application of Olech to land use decision making and regulations is
described in the attached presentation of Michael S. Giaimo to the Georgetown
University Law Center Regulatory Takings Claims Seminar, October, 2003. As set forth
in that paper, there are no clear guidelines on the extent to which the “class of one”
claims require evidence of ill will, spite, and intentional acts of discrimination. As Mr.
Giaimo notes from the Seventh Circuit cases, there are potentially two subsets of the
“class of one” cases, one based on intentional treatment that is different from others
similarly situated and without any rational basis and one based on different treatment of
persons in identical circumstances based upon illegitimate animus. These two subsets
may represent distinct claims or the latter may be a variation of the former. 19
The central nature of the subjective intent behind government actions in an Olech
claim makes it significantly more difficult for government entities to dispose of such
claims on the pleadings or in summary judgments. Allegations of ill will from
government employees and determinations of what constitutes a “similarly situated”
party will be fact intensive and unique to each case. In Squaw Valley Development
Company v. Goldberg,20 a claim was allowed to proceed against an agency supervisor
who more strictly enforced rules in an effort to obtain compliance from a long term
violator of agency rules where there was an issue of material fact as to whether the
official acted from personal animosity. By contrast, in Bell v. Duperrault,21 allegations of
rude treatment were not sufficient to show a “deep seated animosity” that would sustain
an Olech claim.
Waivers and exemptions to impact fees which will inherently involve the review of
a individual facts may be particularly susceptible to such claims of “irrational and wholly
arbitrary” application. Some may involve claims that another applicant had more
favorable treatment or that a formula or data source was allowed in one instance but not
another. Others may argue that they are not producing any impact and therefore must
be exempted. Given that under Olech any individual may claim a denial of equal
protection for what is perceived to be “irrational and wholly arbitrary”, these individual
decisions will involve greater scrutiny.
In addition to the equal treatment issues raised by potential Olech claims,
waivers and exemptions for individual cases may trigger greater scrutiny under the
Nollan and Dolan cases. Nollan clearly requires that the government exaction be
directly related to the purpose of the regulation as opposed to promoting an unrelated
governmental purpose. Dolan requires that the exaction be “roughly proportional” to the
actual impact of the development.
18
Indiana Land Company v. City of Greenwood, 378 F.3d 705, (2004)
The more recent decision in Indiana Land Company, supra., confirms the “tension” between these
interpretations with a dissent asserting that no such tension exists.
20 375 F.3d 936 (9th Cir. 2004).
21 367 F.3d 703 (7th Cir. 2004).
19
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There are conflicting decisions on whether the stricter scrutiny of Nollan and
Dolan apply to impact fee regulations at the general level since the fees are legislatively
determined and uniformly applied.22 Where there is determination on an individual
application for a waiver or exemption, however, there is no longer the same premise of
uniformity or standardization. These individual applications appear to fall squarely
within the type of individualized determination that was the core of the Dolan case.
Thus it is more likely that analysis will require that the fee imposed be related in nature
and extent to the impact of the development and the affirmative showing of how the fee
advances a legitimate governmental interest.23
In summary, where impact fees provide for uniform classifications and application
and are based upon reasonable evidentiary grounds, the courts will generally defer to
the policy judgments of the legislative bodies. Where the fee regulations depart from
nature and purpose of the fee itself and introduce unrelated public policies and where
fee regulations provide for individual waivers, exemptions and determinations, local
governments will face significantly greater scrutiny for compliance with equal protection
principles. The challenge for individual cases will be to determine which analysis
applies.
22
Rogers Machinery Inc. v. Washington County, 45 P.3d 966 (Or. App), rev. den. 52 P.3d 1057 (Or.
2002); Garneau v. City of Seattle, 147 F. 3d 802 (9th Cir. 1998); Home Builders Association of Central
Arizona v. City of Scottsdale, supra., McCarthy v. City of Leawood, 894 P.2d 836 (Kan. 1995); cf: Ehrlick
v. City of Culver City, 911 P.2d 429 (Cal.) cert. den. 519 U.S. 929 (1996); Home Builders Ass'n of Greater
Des Moines v. City of West Des Moines, 644 N.W.2d 339 (Iowa May 08, 2002) (NO. 00-0351, 99-2025),
as amended (May 31, 2002)
23
Town of Flower Moundv. Stafford Estates Limited Partnership, 2004 WL 1048331 (Tex) (Not released
for publication), 71 S.W.3d 18 (Tex. App. 2002); Agencia La Esperanza Corporation, supra.
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