On April 30, 2026, the Colorado Court of Appeals issued its opinion in Carroll Partners LLC v. Board of Commissioners of Pitkin County, 2026 COA 34, affirming summary judgment in favor of Pitkin County on a challenge to an employee housing impact fee of nearly one million dollars assessed for the demolition and replacement of a single-family residence. The decision addresses the scope of a local government’s authority to impose impact fees on new development under the Local Government Land Use Control Enabling Act of 1974 (the “Act”). In a case of first impression, the court concluded that the Act authorizes a local government to impose impact fees as a condition of issuing a development permit, and that such authority is not limited to the development of raw land or projects that substantially change the use of previously developed property.
Background
Under the Act, local governments are authorized to regulate the use of land within their jurisdictions based on “the impact of the use on the community or surrounding areas.” §§ 29-20-101, -104(1)(g)(I), C.R.S. (2025). One mechanism for exercising this authority is the impact fee statute, section 29-20-104.5(1), which permits a local government to “impose an impact fee or other similar development charge to fund expenditures by such local government on capital facilities needed to serve new development” as a condition of issuing a development permit. Governments that choose to assess such fees must do so pursuant to a legislatively adopted schedule that is generally applicable to a broad class of property and intended to defray the projected impacts of proposed development on capital facilities. § 29-20-104.5(1)(a)–(c).
Pitkin County imposes an employee housing impact fee (“EHIF”) on certain construction projects under its land use code. The EHIF is designed to generate funds to offset demand for employee housing caused by employment generated from new development, and the county uses the fees it collects to create additional dwelling units to be added to its employee housing inventory.
Carroll Partners LLC (“Carroll”) purchased a 6.5-acre lot in the Starwood Seven subdivision on which a 14,807-square-foot house, built in 1983, was located. Carroll applied for a development permit to demolish the existing structure and replace it with a new single-family residence generally within the same footprint. Pitkin County conditionally approved the application as a “replacement” project and informed Carroll that it would be required to pay an EHIF of $948,544.18 before a building permit could be issued. Carroll’s request for an exemption was denied, and Carroll appealed to the district court, which granted summary judgment in favor of Pitkin County.
The Court’s Analysis
On appeal, Carroll raised two primary arguments: (1) that Pitkin County exceeded its statutory authority under the impact fee statute, and (2) that the imposition of the EHIF violated Carroll’s substantive due process rights.
Carroll argued that the impact fee statute only authorizes local governments to assess impact fees on “new development,” which Carroll argued should be construed narrowly as the development “of a raw parcel of land for a specific and/or different use.” Under Carroll’s reading, because its project involved the demolition and reconstruction of an existing house without a material change in use or expected occupancy, the EHIF could not be imposed because the project did not involve “growth” and would not appreciably increase the county’s infrastructure needs.
The court rejected this interpretation, agreeing with Pitkin County that a local government’s authority to impose impact fees is linked to the issuance of a “development permit,” such that if a project is extensive enough to require such a permit, the local government may charge an impact fee as a condition of its issuance. See § 29-20-103(1) (defining “development permit”). The court found that the county’s interpretation properly accounted for all the words and phrases in the impact fee statute, whereas Carroll’s interpretation would render the statute’s reference to development permits superfluous. The court further concluded that the phrase “new development” encompasses more than the development of raw land, holding that nothing in the Act suggests that a reconstruction project extensive enough to require a development permit falls outside the scope of a local government’s authority to impose an impact fee.
Regarding Carroll’s substantive due process challenge, the court applied rational basis review and found that Pitkin County’s assessment of the EHIF easily satisfied the test. The court observed that “employee generation” occurs whether construction takes place on raw land or on land with an existing residence, and that Pitkin County’s formula, which assesses a fee based on projected construction impacts and use and maintenance impacts, is reasonably tailored to quantify those impacts.
Significance
This decision significantly broadens the scope of local government impact fee authority in Colorado. Property owners and developers should be aware that impact fees may lawfully be imposed not only on greenfield development but also on demolition-and-replacement projects, and potentially any construction project substantial enough to require a development permit. The decision also reinforces that employee housing impact fees, which address the workforce housing demands generated by construction activity itself, bear a rational relationship to legitimate governmental interests and will survive constitutional challenge under rational basis review. In high-cost markets like Pitkin County, where such fees can approach $1 million for a single-family residence, the financial implications for developers and property owners undertaking replacement construction are substantial.
The decision was authored by Judge Grove with Judges Yun and Taubman concurring.
For questions about this legal alert, please contact a member of the Davis Graham Appellate Group.