Developer Fees

CP V Walnut v. Fremont Unified School District Case No. A157722 – California Court of Appeal, First District New

Member(s) Involved: Fremont Unified School District

Current status and/or outcome:

On July 31, 2020, the ELA filed an amicus brief with the appellate court in support of Fremont Unified School District’s argument that it properly imposed Level 2 and Level 3 development impact fees on CP V Walnut, LLC (CPVW), noting that California’s Constitution grants to local school districts and their governing boards the flexibility and local control appropriate to address their communities’ unique needs. The parties await the court’s decision.

Importance of statewide issue:

Developer fees are a common source of funding to pay for local school district facility needs. Level 2 fees and Level 3 fees may be assessed when a school district meets certain statutory requirements. Placing restrictions on school districts’ authority to assess developer fees beyond those contemplated in legislation would hamper their ability to meet the specific school facilities needs.

Summary of the case:

Fremont USD imposed Level 2 and Level 3 development impact fees on CPVW, a real estate company developing multi-family housing in Fremont. CPVW challenged the district’s fee calculations, arguing that the Level 2 fee exceeded the amount the district was allowed to charge, and that the Level 3 fee was not authorized by law.

Developer fees, paid by developers as a condition of obtaining a building permit or prior to the issuance of a certificate of occupancy, partially mitigate the impact created by a new development on a school district’s facilities. Level 2 fees are available for school districts that adopt a School Facilities Needs Analysis. Level 3 fees are available for school districts that meet the eligibility for Level 2 fees and when the state bond funds for school facilities are not available.

In arguing against the amount of Level 2 fees levied, the developer challenged the determinations of the district’s School Facilities Needs Analysis regarding the needs and capacity of the district. It also argued that the district did not have the authority to demand payment for Level 3 fees, because resumption of state funding terminated the authority of local school districts to impose Level 3 fees. The district argued that it met all the necessary statutory requirements to assess Level 2 and Level 3 fees, noting that the determination of a school district’s capacity is fixed by statute, that district capacity determinations are subject to considerable discretion, and that the developer could not rely on post-decision materials to challenge the district’s approval of the School Facilities Needs Analysis.

The superior court found for the district by holding that while Fremont USD’s calculations of Level 2 fees were flawed in some ways, the district properly accounted for available local funds, did not improperly consider the cost of acquiring and developing new land for schools, and its analysis of available property for development at school sites was supported by substantial evidence. However, the court also found that Fremont USD abused its discretion by imposing Level 3 impact fees because state funds for new school facility construction had become available at the time the district imposed the fees.