MD Court of Appeals Holds Area-Wide Impact Fees are Not Subject to the Rational Nexus/Rough Proportionality Test for a Government Taking

This post was authored by Matthew Loeser, Esq.

Anne Arundel County, Maryland imposed road and school impact fees according to County districts beginning in 1987. These fees were paid usually by land developers and builders. Those who paid impact fees, like the Dabbs Class in this case, could become eligible, under certain circumstances, for refunds of those fees. These refunds were contingent upon the County’s failure to utilize or encumber within a specified time the collected fees for present or future eligible capital improvements, such as projects for the “expansion of the capacity of public schools, roads, and public safety facilities and not for replacement, maintenance, or operations.” The Dabbs Class’ claims were a demand for refunds of an unspecified amount of impact fees collected by the County between fiscal years (FY) 1997–2003.

The Dabbs Class first contended that the intermediate appellate court erred in concluding that the rough proportionality test/rational nexus test had no application to the present case. This test set forth that the County must “demonstrate that its expenditure of impact fees was attributable reasonably to new development and each such expenditure reasonably benefitted ‘new development’ and/or individual ‘against whom the fee was charged.’” The Dabbs Class noted that under Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595, 599 (2013), taxes and user fees were not takings subject to the rough proportionality test/rational nexus test of Nollan and Dolan. The court found that unlike Koontz, the Ordinance here did not direct a property owner to make a conditional monetary payment to obtain approval of an application for a permit of any particular kind, and did not impose the condition on a particularized or discretionary basis. Here, the County’s Development Impact Fee Ordinance was imposed broadly on all properties, within defined geographical districts, that may be proposed for development.

The Dabbs Class next contended that the County counted improperly impact fees encumbered during the 1997–2003 FYs, and could remedy that error now through an unlawful retrospective application of Bill No. 27–07, in violation of their vested rights to obtain impact fee refunds. The court found that Bill No. 27–07 codified the County’s pre-existing – although unwritten – administrative procedures for counting impact fee encumbrances and did not constitute a change County policy. Accordingly, the court held that Bill No. 27–07 did not interfere with any vested rights of the Dabbs Class.

Lastly, the court found that the effective date of the repeal of the refund provision of § 17–11–210 occurred well before any impact fees collected through 2003 became ripe for a refund claim. Here, before paying any potential impact fee refunds, the County had to determine if refunds were due from the FY of relevant collection. Until such time, the court held that no eligible owner had vested rights in the refunds. Thus, the Dabbs Class’ claims for refunds of impact fees collected through FY 2003 was not ripe until 29 August 2009—after the effective date of the repeal of the refund provision in § 17–11–210. Accordingly, the judgment of the Court of Special Appeals was affirmed.

Dabbs v Anne Arundel County, 183 A.3d 798 (MD 4/10/2018)