Fed. Dist. Court in MT Determines Impact Fees May Constitute a Fifth Amendment Taking

This post was authored by Tyler Doan, Esq.

Plaintiffs, members of an LLC who applied for building permits, asserted that the Defendant, City of Whitefish’s impact fees for water and wastewater services amount to a Fifth Amendment Taking, among other causes of action. The Defendant sought a judgment on the Takings claim. The District Court denied the motion.

Montana allows for local governments to charge impact fees as well as sets limitations, criteria and how impact fees may be established, calculated, and imposed. “In Montana, the amount of the impact fee must be reasonably related and proportionate to the new development’s share of the cost of the infrastructure improvements.” The Defendant had been charging impact fees since 2007, but passed a resolution which increased the fees for water and wastewater services in 2018, which became effective in 2019.

Plaintiffs alleged that since the Defendant’s cost of water and wastewater impact fees greatly exceeds the actual impact that their new development has on the Defendant’s water and wastewater services and facilities, the overcharge amounts to an illegal taking of their property. Plaintiffs allege that two different third-party consulting reports, one in 2007 and one in 2018, that included maximum fee recommendations were misapplied, thus allowing for the Defendant to charge greater than the maximum allowable fee rates calculated by the consulting companies. Plaintiff further alleged that the 2018 resolution reflected anticipated costs related to future water and wastewater related projects that have since been “redefined” or “scrapped” and, similarly, the Defendant “ . . . cannot lawfully include these project costs in calculating appropriate impact fee rates.”

Defendants relied on a Ninth Circuit case that held the standards in Nollan v. California Costal Commission, 483 U.S. 825 (1987) and Dolon v. City of Tigard, 512 U.S. 374 (1994) “. . . applies only to individualized, adjudicative land-use decisions, not legislative, generally applicable development ordinances like the ones at issue in this case.”

The Court, in denying the motion by the Defendant for judgment on the claim, disagreed with Defendant’s assertion that a monetary exaction analysis under the Nollan and Dolon standard is inapplicable as a matter of law. The Court further reasoned that, in accordance with Ninth Circuit precedent, “any government action, including administrative and legislative, that conditionally grants a benefit, such as a permit, [could] supply the basis for an exaction claim rather than a basic takings claim.” As such, “. . . the Plaintiffs have sufficiently alleged a cognizable violation of the Takings Clause . . .”

Beck v City of Whitefish, 2023 WL 1068239 (D MT 1/27/2023)