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One of the lingering questions about the law of regulatory takings concerns the proper scope and application of the Supreme Court’s exactions jurisprudence, known as the Nollan/Dolan test. A recurring issue in the case law, and of particular importance to this article, is the extent to which the Nollan/Dolan framework applies to takings challenges brought against development impact fees.

By and large, the decisions on the issue split over two primary questions. First, there is a debate about whether Nollan/Dolan is limited to physical exactions or whether the test might also apply to monetary exactions as well. Second, there is a difference of opinion over whether Nollan/Dolan applies only to exactions imposed in an ad hoc, adjudicative manner or also to those that are more broadly-applicable and established legislatively. These questions are important, but the primary emphasis on them has diminished other issues that also require attention. Particularly, there is a need to situate impact fees within the law of local government financing – i.e., determining whether they operate as fees or taxes – which will have some bearing on the proper level of Takings Clause scrutiny to which they should be subjected. Only after wrestling with all of these issues, can one move to the ultimate query of what analytical test is most appropriate.

This article attempts to answer these questions, fit impact fees into the Court’s current takings jurisprudence, propose a new rule of decision for impact fee cases, and demonstrate how that rule might apply to basic factual situations. In short, I demonstrate that impact fees are hybrid animals that occupy a space at the theoretical and doctrinal crossroads of takings jurisprudence, property law, and the rules applicable to municipal finance. Second, in light of this hybrid quality, I propose that takings challenges to impact fees be analyzed under a hybrid framework that combines elements of Nollan/Dolan with the more flexible factor-balancing reserved for the majority of takings cases. Finally, I suggest several larger questions implicated by the impact fee problem that continue to require judicial and scholarly attention.