Conclusion

This report has reviewed the state of the practice regarding the "essential nexus" and "rough proportionality" tests associated with exactions such as easements, land dedications, and impact fees. These issues have been heavily litigated. However, the case law, overall, relies on the balancing test enunciated in the Penn Central case. In some instances, this balancing is informed by the "essential nexus" and "rough proportionality" tests. But given the propensity of property owners to oppose government limitations on development activities, these tests do not lend themselves to a simple check list that will ensure the avoidance of litigation. However, while the essential nexus and rough proportionality tests have favored property owners in certain circumstances, courts are generally deferential to a government's exercise of its police powers if the government establishes the following:

• A relationship between the technique and the powers delegated to it by its State.
• The exercise of this power advances a legitimate jurisdictional interest (health, safety, welfare).
• Due process was provided in the enactment of the law or regulation and in its implementation.
• Compatibility with uniformity. (In these cases, this means demonstrating that fairness is achieved by subjecting some people and property to fees or conditions while not subjecting others.)
• An "essential nexus" between a legitimate interest of the government, the impact of a landowner's actions on the attainment of that interest, and the fee or condition imposed on the landowner to protect or achieve that legitimate interest.
• The burden imposed by the fee or condition on property owners is proportionate to the benefits received by them or to the costs that they impose on the community. Under no circumstances can the burden of the fee or condition exceed the cost to the public sector of providing a special benefit or mitigating an adverse impact.

Regarding the but-for test for TIF districts, there has been considerable academic interest in investigating the validity of the but-for finding that accompanies most TIF ordinances. Despite this controversy, there has been relatively little litigation. When litigation occurs, courts deem TIFs to be legislative actions requiring judicial deference. This means that courts will not second-guess a legislative body regarding the wisdom or correctness of its decision. However, where TIF-enabling legislation requires findings of blight or a finding that economic development would not occur but for the TIF project, jurisdictions that fail to make these findings or that rely on spurious evidence to reach a pre-determined conclusion risk the invalidation of their TIF ordinances. For this reason, it is difficult to establish metrics or analytical tools that will ensure that a particular TIF district will survive a but-for legal challenge. But judicial decisions in the relevant State (or in States with a similar TIF-enabling statute) will illuminate the legal standards and thresholds for validity.

Many States and local governments have already developed the analytical tools (asset management lifecycle costing and fiscal impact methodology) to implement exactions and impact fees within an acceptable legal framework. Also, many jurisdictions use computer assisted mass appraisal (CAMA) systems to assess property value accurately. CAMA and real estate professionals have the capability to implement land value return techniques that can reduce land speculation, make infrastructure financially self-sustaining, and reduce sprawl.