Challenges

Economic Development Concerns

No matter how compelling the case for a linkage program may be, someone - often commercial developers, public officials, or business leaders - will raise the concern that such a fee will discourage or halt needed economic development. A good counter argument is that the fee is relatively modest compared to the developers' budgets and that linkage fees have not halted commercial development elsewhere. It is critical to have specific numbers regarding the benefits of the fee and the limited impact on the developers' bottom line. It is also worthwhile to point out that builders benefit from the public investment in infrastructure (transportation, sewage, etc.), so it is not unreasonable to expect them to mitigate negative public impacts of their activity.

Private Property

The Fifth Amendment to the Constitution states that private property may not be taken for public use without just compensation.  What constitutes a "taking," however, is the subject of much debate. Some developers argue that linkage programs are "takings" that require government compensation.

The answer is not simple. Linkage programs are a kind of "exaction," a requirement to transfer land or money to a municipality as a condition of approval for development. Some exactions are considered takings, and some are not, and the Supreme Court has -articulated a two-step test to make the distinction. If a government wants to make an exaction without compensating a private landowner, it must pass both steps.
 
First, the government must show that a connection ("nexus") exists between what the landowner wants to do and a legitimate state interest. For example, in Nollan v. California Coastal Commission , the California Coastal Commission wanted to require a property owner to give public access to the property's beachfront in order to get permission to rebuild a house on the property. But the Court ruled that the building of the house was not directly connected to the public interest of beachfront access, and held that the Coastal Commission could not make that requirement without compensation.

Second, what the state requires of the private landowner must itself be related "in nature and extent" to the impact of the proposed development. So a linkage program must be designed to handle the housing needs created by the new development, not a pre-existing housing crisis as well, according to the decision in the case of - Dolan v. City of Tigard.

In developing a linkage program, advocates should be aware of the Nollan/Dolan cases and be prepared to demonstrate that the linkage fee is connected to the impacts of proposed development and that it is proportional to the nature and extent of the impacts. 

Taxing Authority

Another potential legal issue is whether local government has the power to levy taxes. Linkage fee programs are established by local municipal governments. Depending on state law regarding local governments' power to tax, state-enabling legislation may be necessary before an approved linkage program can go into effect.