Chapter 22 Impact Fees, Exactions, Takings

• Library: The Zoning and Land Use Handbook (ABA) (2016 Ed.)

Chapter 22 Impact Fees, Exactions, Takings

The terms "dedications," "contributions," and "fees" are used interchangeably to denote a form of exaction. The concept is that a developer, in order to obtain approval of a plan of development, is required to include, as part of that plan (or plat), provisions for public streets, alleys, ways for public service facilities, parks, playgrounds, school grounds, and other public grounds which are reasonably required as part of the municipality's plan for orderly growth.¹ The developer may be required to make a cash donation in lieu of land.²

The concept of cash in lieu of land makes sense because many developments are simply not large enough to require a dedication of a full-sized site for a school or park, whereas the developer may be required to contribute a fair proportion of what would otherwise have been a land dedication. The exaction is in the form of cash rather than some fraction of land.

Those persons or entities challenging impact fees generally argue that the local government lacks authority to impose the regulation. Courts look to state enabling legislation and to the U.S. and state constitutions to determine the extent of a municipality's authority to impose impact fees on a new development. In addition to state-enabling acts, courts also examine local ordinances as additional sources of authority to impose impact fees. Absent express state or local authority, courts will find implied authority from state statutes or from the state's constitutional home rule provision.

A. Express Statutory Authority

In Illinois, for example, the Road Improvement Impact Fee Law³ explicitly grants local governments the authority to impose transportation impact fees on a new development. The Road Improvement Impact Fee Law expressly permits counties with populations greater than 400,000 persons and home rule municipalities to impose transportation impact fees. In addition, the Act prohibits home rule units from imposing transportation impact fees in a manner inconsistent with the Act.⁴

The Road Improvement Impact Fee Law provides explicit direction for the imposition of transportation impact fees. The Law's provisions include a comprehensive definition section, including definitions for the terms "proportionate share" and "specifically and uniquely attributable."⁵ The Law provides guidelines as to when impact fees may be imposed⁶ and the procedural, legislative, and administrative framework that local government must follow.⁷ The Law additionally provides guidelines for the payment of impact fees⁸ and appeals.⁹

The Road Improvement Impact Fee Law, as the name implies, focuses on roads, streets, or highways and has actually been construed as placing limitations on the authority of home-rule municipalities to impose impact fees. The Illinois Supreme Court noted in Northern Illinois Home Builders Ass'n v. County of DuPage,¹⁰

[I]nstead of creating special powers for home rule units which they did not already possess, the second enabling act curtailed that power by setting forth "minimum standards and procedures" for the imposition of impact fees; "so that the burden of paying for road improvements can be allocated in a fair and equitable manner."¹¹

B. Statutorily Implied Authority: The Police Power

Because municipalities are legislatively created, they are subject to statutory control. Non-home-rule municipalities must derive authority to regulate a specific area from powers that are expressly granted.¹² A local government, however, can derive its authority to pass an ordinance from several distinct sources of power.

Local governments possess certain "implied" or "incidental" powers, including: (a) those necessarily arising from powers expressly granted and those reasonably inferred from the powers expressly granted; and (b) those essential to give effect to powers expressly granted.¹³ These implied powers enable municipalities to employ mechanisms to carry out powers expressly conferred to them—despite the fact that the mechanism itself is not expressly authorized.¹⁴

Courts often interpret general enabling statutes broadly to confer the greatest amount of authority to local governments. For example, most general enabling statutes that provide authority for land use regulation are deemed sufficient for a local government's exaction of school and park fees or offsite road improvements.¹⁵ Likewise, State statutes authorizing municipalities to operate and regulate sewer and water facilities have been broadly interpreted to permit the imposition of connection fees.¹⁶

For example, in Illinois, §11-150-1 of the Illinois Municipal Code enumerates the general powers of a municipality regarding sewer and water facilities:

The corporate authorities of any municipality operating a waterworks, sewerage or a combined waterworks and sewerage system have the power by ordinance to collect a fair and reasonable charge for connection to any such system in addition to those charges covered by normal taxes, for the construction, expansion and extension of the works of the system, the charge to be assessed against new or additional users of this system and to be known as a connection charge, except that no connection or water usage charge shall exceed the actual cost required for the installation or usage of an automatic sprinkler system. The funds thus collected shall be used by the municipality for its general corporate purposes, with primary application thereof being made by the necessary expansion of the works of the system to meet the requirements of the new users thereof.¹⁷

The Illinois Supreme Court has upheld ordinances enacted to establish connection fees pursuant to § 11-150-1. The court determined that local governments were authorized to enact connection fee ordinances because the General Assembly had delegated that power to local governments.¹⁸

The authority to impose impact fees falls within the State and local police power, and courts have likened the imposition of impact fees to other zoning or subdivision regulations. Section 11-12-5(1) of the Municipal Code expressly authorizes a municipality to regulate subdivisions, including implementing a comprehensive plan by ordinances:

(a) establishing reasonable standards of design for subdivisions and for resubdivisions of unimproved land and of areas subject to redevelopment in respect to public improvements as herein defined; (b) establishing reasonable requirements governing the location, width, course, and surfacing of public streets and highways, alleys, ways for public service facilities, curbs, gutters, sidewalks, street lights, parks, playgrounds, school grounds, size of lots to be used for residential purposes, storm water drainage, water supply and distribution, sanitary sewers, and sewage collection and treatment.¹⁹

Illinois Municipal Code § 11-12-6 dictates the manner in which a municipality in Illinois must enact ordinances governing subdivision regulation. Municipalities "shall specifically state standard requirements of the municipality relating to size of streets, alleys, public ways, parks, playgrounds, school sites, other public grounds, and ways for public service facilities."²⁰ Section 11-12-12 indicates that a map or plat not providing for the services enumerated in § 11-12-6 will not be entitled to be recorded or shall be invalid.²¹

The Illinois Supreme Court has determined that, when municipalities condition the approval of plats of subdivisions upon satisfaction of certain conditions such as the payment of impact fees, the municipalities are exercising their police power.²² In several cases, the Illinois Supreme Court has held that dictating requirements for the design of subdivisions and for the provision of public streets, alleys, parks, playgrounds, and other public facilities involves a reasonable exercise of a local government's police power.²³

In Petterson v. City of Naperville,²⁴ the Illinois Supreme Court held that a municipality's ordinance requiring curbs and gutters and proper drainage for a new development was within the municipality's police powers. The court determined that the express authority to provide reasonable requirements for public streets, alleys, ways for public service facilities, parks, playgrounds, school grounds, and other public grounds also implicitly authorized local governments to provide for more than a mere designation of the location and width of streets. The court disagreed with the trial court that the ordinance was arbitrary or discriminatory as applied to the plaintiffs. The Illinois Supreme Court held that the mere fact that an "ordinance may operate to impose burdens or restrictions on the property which would not have existed without the enactment of the ordinance is never determinative of the question of validity."²⁵

In Pioneer Trust & Savings Bank v. Village of Mt. Prospect,²⁶ the Illinois Supreme Court invalidated an ordinance conditioning approval of a subdivision plat upon the developer's dedicating a certain percentage of the land to the municipality. The court held that the dedication requirement was not related to specific costs generated by the development. Because the dedication requirement was not specifically and uniquely attributable to the activity of the developer under the strict test of the reasonableness of an impact fee ordinance applied in Illinois, the court held that it was not a reasonable exercise of the local government's police power. Although the court invalidated the particular ordinance at issue in this case, it confirmed that local governments generally have the ability to impose dedication requirements or fees in lieu thereof in connection with subdivision developments.

In Board of Education of School District No. 68, DuPage County v. Surety²⁷ the Illinois Supreme Court upheld an ordinance requiring developers to contribute land and cash for school facilities necessitated by the new development. The court reinforced the authority of local...