MS Impact Fee Case and TX Takings Case Are Industry's Latest Legal Successes
Home Builders Association of Mississippi et al. v. City of Ocean Springs
Earlier this month, the Jackson County circuit court ruled that the Home Builders Association of Mississippi was successful in its challenge against a Gulf Coast municipality, ruling that the City of Ocean Springs' impact fee ordinance was unconstitutional and in violation of state statutory law. 

The City of Ocean Springs had imposed multiple impact fees for fire and police facilities, park and recreational facilities and water and roadway infrastructure, totaling almost $5,000 per single-family home.

In knocking down the fee program, the court ruled that the state's Home Rule Statute did not enable Ocean Springs to implement the fees in the absence of express enabling authority. It found that the municipality was not authorized to impose fees through its general planning and zoning powers, and determined that the purported “regulatory” fees were operating instead as illegal taxes. According to the court, the city's “venture into the realm” of taxation, without express taxing authority, was illegal. 

The court ordered Ocean Springs to develop a detailed accounting of funds already collected and to submit a written plan for refunding the fees.  Ocean Springs is certain to appeal the circuit court's decision and the case could ultimately end up in the Mississippi Supreme Court.

Town of Flower Mound v. Stafford Estates Limited
Agreeing with NAHB and the development community, the Texas Supreme Court ruled recently that a town must compensate landowners for requiring them to improve a road before it would allow housing to be built on their property.

“This ruling is a major victory for home builders and home buyers,” said NAHB President Bobby Rayburn. “Local governments can't just decide they are going to force home builders to create gold-plated infrastructure. That just drives up the cost of housing and prices many families out of the market.”

In the case, the Town of Flower Mound provided approval for Stafford Estates — a 247-lot, phased subdivision — on the condition that the developer would rebuild an existing road with concrete rather than asphalt. The developer rebuilt the road at a cost of more than $484,000, but only after objecting to the condition at every administrative level provided by the town. He then filed a takings claim against the town to recover his road-building costs.

The projected impact of the subdivision project did not warrant the degree of improvements mandated by the town, and in a friend-of-the-court brief NAHB argued that the road improvements exacted from the developer, Stafford Estates Limited Partnership, amounted to an unconstitutional infringement upon its constitutional rights. The court agreed.

Stafford cited a decision by the U.S. Supreme Court in the 1987 Nollan case requiring localities to demonstrate a “nexus” between a legitimate government interest and the exaction it demands from the developer, such as a road improvement, and the 1994 Dolan case ruling that exactions must be proportionate to the impact of the development.

Flower Mound argued that those cases did not apply to its exaction because its permit approval was conditioned on a monetary expenditure and not forfeiting actual property.

But the Texas court ruled otherwise, finding that the standards established in the Nollan and Dolan cases are essential to prevent government from “unfairly leveraging its police power over land-use regulation to extract from landowners concessions and benefits to which it is not entitled.”

In cases such as this, the government has the burden of justifying the condition or exaction demanded of the developer. Flower Mound failed to show that the required improvements were roughly proportional to the impact of the subdivision on the road or the town's roadway system, and the court found that this was simply a way for the town to “extract from Stafford a benefit to which the Town was not entitled.”

To read the court's decision in the case of Town of Flower Mound v. Stafford Estates Limited Partnership, No 02-0369, click here.

NAHB's Involvement
NAHB's Legal Action Fund provided financial assistance to builder interests in both cases, and is currently accepting applications to be considered to receive funding during the Fall Board of Directors Meeting in Columbus, OH.

For more information on either case, contact Jon Luther, NAHB legal counsel, at 800-368-5242 x8329. [ return to top ]