Commercial Builders of Northern California, and Its Affected Members v. City of Sacramento, Council of the City of Sacramento

BEEZER, Circuit Judge,

dissenting:

I respectfully dissent.

As Justice Scalia warned in Nollan, a state can leverage its police power to the point where a regulation of land use becomes an “out-and-out plan of extortion.” Nollan v. California Coastal Comm’n, 483 U.S. 825, 837, 107 S.Ct. 3141, 3149, 97 L.Ed.2d 677 (1987). Sacramento’s ordinance is a transparent attempt to force commercial developers to underwrite social policy. Apparently, legislators find it politically more palatable to exact payments from developers than to tax their constituents. The Takings Clause prohibits singling out developers to bear this burden.

Historically, courts have upheld exac-tions when states were able to justify them as serving a public purpose related to the burdens caused by development.1 For example, courts have sustained requirements *877that developers construct various on-site improvements, such as sewers, water-mains, sidewalks, curbs and gutters, storm drains, and landscaping. Requiring off-site improvements that serve a public purpose, such as roads, schools, parks and sewage treatment plants, may also be justified where the requirement alleviates a public burden or ameliorates harmful effects caused by the development. When the developer is asked to bear a fair share of the burden, such a requirement directly furthers the legitimate interests of the government. See, e.g., Leroy Land Development v. TRPA, 939 F.2d 696, 699 (9th Cir.1991). When the governmental exaction solves a problem actually created by the development (for example, requiring the developer to provide needed infrastructure), it is no coincidence that the exaction results in a benefit to the development as well as the community.2

State and local governments face mounting budget deficits, attributable to decreased federal funding, recessionary pressures on tax collection and the growing popularity of “taxpayer revolts” — the most well-known example of which is California’s Proposition 13.3 In response, state and local governments have begun to stretch the use of exactions to the breaking point.4 Sacramento would have developers pay not just for public improvements necessitated by development, but for private subsidies with little or no causal connection to development. Not surprisingly, under a scheme requiring no connection, no benefit accrues to the development in return.

It is no longer the case that exaction requirements are imposed only when the direct benefit to the land and extra costs to government created by development are demonstrable. Instead, exaction fees have approached ... “grand theft,” as the benefit to private landowners has become marginal, or in some cases, nonexistent, and the public need attributable to new development more tenuous and theoretical.

Smith, supra note 1, at 29 (footnotes omitted).

Sacramento has commissioned a study that demonstrates at best a tenuous and theoretical connection between commercial development and housing needs. But the Takings Clause requires a cause-and-effect relationship between the two. Pennell v. San Jose, 485 U.S. 1, 20, 108 S.Ct. 849, 862, 99 L.Ed.2d 1 (1988) (Scalia, J., dissenting). In my view, Sacramento has not shown such a relationship. Even the study relied on by the city to support the ordinance states that its “nexus analysis does not make the case that building construction is responsible for growth.”

The ordinance is nothing more than a convenient way to fund a system of transfer payments. Although Sacramento attempts to justify the ordinance as an exercise of its police power, the city actually is exercising its taxing power — free of the encumbrances generally thought to limit the exercise of that power.

The traditional manner in which American government has met the problem of those who cannot pay reasonable prices for privately sold necessities — a problem caused by the society at large — has been the distribution to such persons of funds raised from the public at large through taxes, either in cash (welfare payments) or in goods (public housing, publicly subsidized housing, and food stamps). Un*878less we are to abandon the guiding principle of the Takings Clause that “public burdens ... should be borne by the public as a whole,” this is the only manner that our Constitution permits.

Pennell, 485 U.S. at 21-22, 108 S.Ct. at 863 (Scalia, J., dissenting) (citation omitted).

The new workers attracted by the new jobs associated with the new development surely will increase the demand for all manner of goods and services. If Sacramento has shown a sufficient causal connection in this case, we can be expected next to uphold exactions imposed on developers to subsidize small business retailers, child-care programs, food services and health-care delivery systems.

. See generally Smith, From Subdivision Improvement Requirements to Community Benefit Assessments and Linkage Payments: A Brief 1'Us-tory of Land Development Exactions, 50 Law & Contemp.Probs. 5 (Winter 1987).

.See, e.g., Hollywood Inc. v. Broward County, 431 So.2d 606 (Fla.Dist.Ct.App.), cert. denied, 440 So.2d 352 (1983). Upholding a county ordinance requiring the dedication of land or payment of a fee to assist the county in acquiring and developing parks, the court noted that (1) the funds had to be expended within a reasonable time, (2) the funds had to be used to meet the need created by the development, and (3) the park system thereby provided would "substantially benefit the residents of the platted area.” Id. at 612.

. Bauman & Ethier, Development Exactions and Impact Fees: A Survey of American Practices, 50 Law & Contemp.Probs. 51, 51-52 (Winter 1987); Blaesser & Kentopp, Impact Fees: The "Second Generation," 38 Wash.U J.Urb. & Contemp.L. 55, 59 (1990).

. Honolulu is considering an ordinance that would impose a similar low-income housing fee on golf-course developers. Cabrera, Taxman, Spare That Golf Course, Wall St.J., July 11, 1991, at A10, col. 3.