A federal lawsuit filed by two people claiming Teton County “extorted” a fee in exchange for building a home on property they already owned can go forward after a judge ruled against the county’s motion to dismiss the case.
Vernon “Trey” and Shelby Scharp filed a civil lawsuit in May in the U.S. District Court for Wyoming against the Teton County Commission.
They paid a $24,325 fee to the Teton County government in 2022 to build a home on property they own in the Hoback Junction area.
Teton County’s building impact fees are calculated around the need for workers each new house will supposedly generate.
The county has no problem attracting wealthy homeowners, but struggles to house — affordably and in reasonable living conditions — the working class that serves those homeowners.
In Teton County's seat of Jackson, the average home price hit $8.6 million last year.
The Scharps, however, call the county’s fee structure unconstitutional under the Fifth Amendment to the U.S. Constitution. The amendment says private property shall not be taken for public use without “just compensation.”
The U.S. Supreme Court last year reaffirmed the heightened justifications governments must prove when charging building fees like the one the Scharps paid.
Not Relevant
In urging U.S. District Court Judge Kelly Rankin, of Wyoming, to dismiss the Scharps’ case, Teton County argued that the couple could have used the “independent calculation” portion of county regulations rather than paying the standard calculation fee.
That’s irrelevant under the case law, Rankin concluded Thursday in an order denying the county’s motion to dismiss the case.
Generally, people can’t wage disputes in court if they haven’t exhausted “administrative remedies,” or tried to work with the entity that supposedly harmed them.
But people can wage constitutional claims against state governmental entities without first seeking a remedy with the state, Rankin related from a 2019 U.S. Supreme Court case, Knick v. Township of Scott.
The high court later clarified that people don’t have to exhaust administrative remedies before suing if there’s proof the government “has reached a conclusive position” on the matter.
At this early stage in the lawsuit, Rankin has to accept the Scharps’ pleadings as true, so he has to accept the evidence they’ve brought that Teton County reached a conclusive position on charging them the fee, the judge noted.
“(When they paid) the affordable housing fee as a condition precent to obtaining a building permit, Plaintiffs suffered actual injury by Defendant’s action,” wrote Rankin, “and they are not prematurely litigating a hypothetical harm.”
The case is ongoing.
The Saga
In 2021, the Scharps were living on their own land near Hoback Junction in Teton County in a small cabin when they applied to build a larger home to accommodate their family, says the complaint.
Before that, they’d lived in rental housing in the county for “many years.”
The couple started making plans to build a bigger home on their property to accommodate themselves and their adolescent daughter. They planned to rent their existing cabin to some of the valley’s many workers, the complaint says.
The property is 5 acres in size, so the family could have built multiple additional dwelling units and parking space to help fund the construction of its new home, but the county regulations wouldn’t allow it because the area was zoned only for one single-family residence, the complaint says.
The family was able to apply for a special “accessory residential unit” permit to rent out the cabin and work toward building their own larger home, however.
But when they applied for the accessory residential unit permit in 2022, a Teton County official told them that the cabin was too big to be an accessory residential unit.
In other words, the Scharps were penalized for trying to provide “too much rental housing” in a county that hinges many of its housing regulations on its dire need for workforce housing, the lawsuit says.
The official suggested the Scharps fill their basement with gravel to make it smaller to conform to the permit.
The family found a workaround: The Teton County Historic Preservation Board determined the building was historically significant and therefore qualified for the floor area maximum that had kept them from permitting it (or could have required them to fill its basement with gravel) earlier.
Twenty-Four Grand
Finally, the Scharps settled on plans for a 3,776-square-foot home and applied for a building permit in 2022.
“Teton County demanded the Scharps pay a $24,325.05 affordable workforce housing fee pursuant to its Land Development Regulations,” the complaint says.
To limit their already heightened costs, the Scharps have acted as their own general contractors on the project and have digested “thousands of pages of regulations relevant to building a home in Teton County,” among numerous other chores, says the complaint.
Their home is still under construction, and the couple hopes to move into their new home by Thanksgiving, the document says.
Yeah, But
Wyoming law gives Teton County the authority to set its land use regulations.
But those are limited by case law surrounding the Fifth Amendment’s promise that no property shall be “taken” from people without just compensation.
Specifically, past cases demand that homebuilding fees are related both in nature and breadth to the impact the homebuilder is going to have on his community; and that the fee is essentially connected to and roughly proportionate to those impacts.
The Scharps were already living and working in Teton County.
They’d looked for ways to provide more rental space to people to offset their own costs. And the addition of their newly constructed home could put downward pressure on the Teton County housing market, the complaint argues.
Yet they had to pay $24,325 toward what the county’s general rules system calls their worsening of the workforce housing shortage.
The disconnect between the Scharps’ reality and the county’s theories makes this fee unconstitutional, the complaint alleges.
Teton County Civil Deputy Attorney Keith Gingery countered these claims in a May email to Cowboy State Daily.
“Teton County strongly stands by our most recent affordable housing nexus study completed in 2023,” he wrote at the time. “The county’s adoption of affordable housing mitigation fees is fully compliant with all constitutional provisions requiring an essential nexus and proportionality.”
The Ask
The complaint asks the court to issue a judgment that the county’s land use regulations in this area are unconstitutional under the takings clause “both facially and as applied to the Scharp residence.”
That means this lawsuit attempts to defend everyone, not just the Scharps, from what it calls unconstitutional homebuilding fees in Teton County. It asserts the theory that those regulations are unconstitutional in any situation.
The lawsuit also asks for a judgment that the Scharps suffered a violation of civil rights.
It requests money damages, for the court to prohibit Teton County from enforcing those rules against other builders, compensation for attorneys' fees and expert fees, lawsuit costs, and “any other relief the court deems just and proper under the circumstances.”
Clair McFarland can be reached at clair@cowboystatedaily.com.
