Trial Court Delivers Post-Sheetz Wake-Up Call to Local Jurisdictions on Impact Fees

California jurisdictions have historically relied on development impact fees adopted under the Mitigation Fee Act (MFA) or Quimby Act to fund new infrastructure, utilities and park facilities. Although it cannot be cited as binding legal precedent, the recent trial court decision in California Building Industry Association v. City of Patterson (January 27, 2026, Stanislaus County Superior Court Case No. CV-24-010405) – which relies heavily upon the prior U.S. Supreme Court decision in Sheetz v. County of El Dorado, 601 U.S. 267 (2024) in facially invalidating certain new and increased impact fees adopted by city – provides an important road map for both local agencies and project proponents seeking to navigate both the constitutional and statutory parameters on such fees.

Background: Sheetz Decision

For decades, California courts generally treated legislatively adopted impact fees as quasi‑legislative acts subject to deferential review, often rejecting facial challenges and limiting heightened scrutiny under Nollan v. California Coastal Commission, 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1994) to adjudicative, project‑specific exactions. In Sheetz, however, the Supreme Court rejected that distinction outright, holding that the Takings Clause of the U.S. Constitution¹ "does not distinguish between legislative and administrative permit conditions"² and that all development fees, however enacted, must satisfy the constitutional "essential nexus" and "rough proportionality" standards established in the Nollan/Dolan line of cases.³

Impact Fees at Issue in Patterson

The relevant exactions in Patterson consisted of substantially increased development impact fees, updated parkland in-lieu fees, a new citywide transportation impact fee and updated Quimby Act parkland dedication requirements. Petitioners challenged these new exactions on their face before the fees or dedication requirements were imposed on any particular project. The city argued that such a challenge was premature and barred absent an as‑applied fee imposition. Relying heavily on Sheetz, the court rejected that argument, holding that facial challenges to development impact fees are not only permissible, but subject to heightened constitutional scrutiny.

The Brown Act and Patterson's Notice Violations

First, the court concluded that the City of Patterson failed to comply with the Brown Act's core notice and agenda-posting requirements in connection with its adoption of the new fee regimes. The Brown Act requires agencies to post an agenda at least 72 hours before a regular meeting, include a brief but meaningful description of each item and make supporting materials – especially those relied upon for decision‑making – available to the public in an accessible, searchable and downloadable format. The court emphasized that "substantial compliance" with these mandates requires fair notice of the essential nature of the governmental actions at issue.

Here, however, the city posted a revised nexus study, containing significant new material – including an entirely new Capital Improvement Plan (CIP) – less than 90 minutes before the public hearing to consider and adopt the new fees.⁴ The court determined that the new material was consequential and, therefore, the city violated the Brown Act because the new CIP was a required component of the updated fee regime pursuant to the MFA. Because these changes were substantive and not merely clerical, and because the court found that the public had no genuine opportunity to review or comment, the late release could not satisfy the Act's notice requirements.

Based on these procedural defects, the court held that the city's actions were prejudicially taken in violation of the Brown Act. The petitioners had submitted timely "cure and correct" demands under the Act, but the city failed to remedy the violations. As a result, the court declared the city's approval of the nexus studies and adoption of the related resolutions and ordinance null and void. The court also issued a peremptory writ directing the city to vacate those approvals and enjoining it from enforcing the associated fees or exactions. Although the city retains the ability to re‑adopt the fee program, it may do so only by fully complying with all Brown Act requirements and providing proper notice and opportunity for public participation going forward.

Facial Invalidity Under the Nollan/Dolan Framework

Upon moving to Building Industry Association's (BIA) substantive constitutionality claims and applying the Nollan/Dolan framework, the court concluded that the city failed to carry its burden to demonstrate both an "essential nexus" and "rough proportionality" between the adopted fees and impacts of new development.⁵

Central to the court's analysis was the city's reliance on an "existing inventory" methodology in its nexus studies. Rather than identifying specific new public facilities needed to serve future growth, the studies assumed, without substantial evidentiary support, that existing city facilities were already at capacity and required new development to "buy in" to those facilities at estimated replacement costs. The Patterson court found that this approach impermissibly treated impact fees as a general revenue‑raising mechanism rather than a tool to mitigate development‑caused impacts.

The court emphasized that Sheetz forecloses the notion that a city may impose development fees simply to maintain an existing level of service absent evidence of an increased need for facilities caused by new development. Without concrete analysis demonstrating how new development would create the need for additional or expanded facilities (and how the amount of each fee was proportionate to that need) the city's fee regime could not survive constitutional scrutiny.

MFA and the City's Failure to Adopt a Compliant CIP

In a similar, but distinct, analysis to the court's analysis of BIA's Brown Act claims, the court determined that the City of Patterson violated several core provisions of the MFA⁶ by adopting new development impact fees without providing the statutorily required support and procedural safeguards.⁷ Central to the court's finding was that the city lacked a compliant, properly adopted CIP, which is a mandatory component under Government Code Section 66016.5 when imposing certain development impact fees. The court emphasized that the CIP must be made available for public review at least 30 days before adoption, yet the city failed to release a complete CIP during that statutory window. Instead, as discussed above, it circulated late revisions to its nexus studies containing material elements that effectively functioned as a CIP only hours before the October 15, 2024, hearing. Because the city relied heavily on these late-infused materials to justify its fee program, the court held that the public did not receive the notice, transparency or meaningful participation opportunities required by the MFA.

The court further found that the city's nexus studies did not satisfy the substantive requirements of the MFA, including the need to demonstrate a "reasonable relationship" between each fee, the use to which it will be put and type of development on which it is imposed. Substantive updates and methodological changes introduced at the last minute deprived both the public and decision-makers of a fair opportunity to evaluate whether the required nexus truly existed. The court also noted that the city relied on draft materials rather than the "final" studies actually adopted by the City Council, compounding the procedural and substantive defects. As a result, the court concluded that the city's adoption of the impact fees was invalid under the MFA and issued a peremptory writ directing the city to set aside the nexus studies, void the fee resolutions and refrain from enforcing the fees unless and until the city restarts the process in full compliance with MFA requirements.

CEQA Implications

Finally, the court concluded that the city violated the California Environmental Quality Act (CEQA) by failing to conduct even a threshold environmental review of the fee program. Although the city argued that adoption of the fees was categorically exempt as a fiscal activity, the court rejected that argument, noting that the city's own resolutions asserted that the fees would fund identified public facilities. Having identified specific facilities to be financed, the city could not rely on a fiscal‑activity exemption and was required to conduct at least a preliminary CEQA review and, if applicable, file a notice of exemption.

Key Takeaways for Local Governments and Developers

The Patterson decision significantly develops the principle underlying Sheetz: Local governments must meticulously ensure that any adopted fee schedule strictly complies with the Nollan/Dolan framework in addition to the procedural and substantive requirements of the MFA,⁸ Brown Act and CEQA. Impact fee programs built on outdated reports and assumptions, unsupported methodologies or hastily assembled nexus studies may be increasingly vulnerable to facial challenges.

For local jurisdictions, the case underscores the importance of adopting detailed, publicly vetted capital improvement plans that clearly link future development to specific facility needs and costs. For developers and landowners, the decision confirms that facial challenges to impact fees are a viable tool and that courts will no longer defer reflexively to legislative fee enactments that lack rigorous evidentiary support.

As cities continue to update impact fee programs to fund growth, Patterson serves as an early and consequential warning that post-Sheetz, constitutional scrutiny of development fees is no longer theoretical, and courts are prepared to enforce it.

Notes

¹ "Nor shall private property be taken for public use, without just compensation." U.S. Const. amend. V.

² Sheetz v. County of El Dorado, 601 U.S. 267, 270 (2024).

⁴ See Nollan v. California Coastal Com'n, 483 U.S. 825, 837 (1987); Dolan v. City of Tigard, 512 U.S. 374, 391 (1994). See also Koontz v. St. Johns River Water Management District, 570 U.S. 595, 612 (2013) (extending Nollan/Dolan framework to apply to fees, in addition to exactions of real property).

⁴ For clarity, this opinion considers the city's actions with respect to two distinct nexus studies – the Development Impact Fee Study (DIF), prepared by one consultant and offered in several iterations, and the Transportation Impact Fee Study (TIF), prepared by another consultant and dated April 17, 2024. Despite this distinction, the court found both studies legally deficient on similar grounds.

⁵ Using somewhat different terminology, the court also characterizes this failure by the city as its failure "to carry its burden to demonstrate the substantive reasonableness and validity" of the subject impact fees.

⁶ Importantly, before analyzing the substantive validity of the city's impact fees under the MFA and Nollan/Dolan, the court questioned whether it was limited by relevant law to consider only the "four corners" of the final adopted nexus study "or may it consider prior drafts and versions of the nexus study." On this question, the court rejected the suggestion that judicial review must be limited strictly to the four corners of the final, adopted nexus study, because the court observed that no final nexus study existed at the time the city adopted its resolutions approving the updated development impact fees. The court further concluded that even when a final nexus study exists, the applicable standard of review permitted consideration of the broader evidentiary basis for the impact fees, not merely the text within the four corners of the final document. Citing Boatworks v. City of Alameda, the court noted that prior drafts, related planning documents and supporting analyses may all be relevant in assessing whether the city met its legal burdens, including statutory requirements under the MFA and constitutional nexus and proportionality requirements. Thus, the court affirmed that its role is to evaluate the full evidentiary record surrounding the fee program, not confine itself to a single version of the nexus study isolated from its development history.

⁷ See Gov. Code § 66000 et seq.

⁸ To comply with the MFA, local agencies must deposit the fees in a separate fund "in a manner to avoid any commingling of the fees with other revenues and funds" (Gov. Code. § 66006(a)), must satisfy annual reporting requirements (Gov. Code § 66006(b)) and must update the corresponding nexus studies at least every eight years (Gov. Code § 66016.5(a)). Furthermore, any person may request an audit of any fee to determine whether a fee exceeds the amount reasonably necessary to cover the costs of the improvements that the fee is intended to fund. Gov. Code § 66006(d). When a court finds that a local agency has not complied with MFA requirements in establishing fees, the local agency will be liable to refund the unlawful portion imposed, plus 8 percent interest per annum (Gov. Code § 66020(e)).

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