Developer Fees

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

MEMBER(S) INVOLVED: Fremont Unified School District

IMPORTANCE OF STATEWIDE ISSUE:

Developer fees paid by property owners and developers to mitigate the impacts of new construction are a common source of funding to pay for local school district facility needs. There are three levels of developer fees, and 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 restrictions contemplated in legislation would hamper districts’ ability to meet the specific school facility needs.

SUMMARY OF THE CASE:

After approving the School Facility Needs Analysis, Fremont USD imposed Level 2 and Level 3 development impact fees on CPVW, a real estate company developing multi-family housing in Fremont. In 2018, 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 state bond funds for school facilities are not available. The State Allocation Board provided notification that state funds were no longer available for new construction, authorizing qualifying school districts to charge Level 3 fees, in November 2016.

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 through Proposition 51, a statewide school facilities bond approved by the voters, 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.

In July 2019, CPVW appealed the court’s ruling that the district properly assessed Level 2 fees. Fremont USD filed a cross-appeal, challenging the court’s finding that the district abused its discretion by imposing Level 3 fees.

CURRENT STATUS AND/OR OUTCOME:

On July 31, 2020, the ELA filed an amicus brief with the appellate court in support of Fremont USD’s argument that it properly imposed Level 2 and Level 3 development impact fees on 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 court heard oral arguments on October 20, 2021. On October 27, 2021, the appellate court reversed the trial court’s holding with respect to the Level 3 impact fees and found that Fremont USD had properly assessed Level 3 fees on CPVW because, contrary to the trial court’s findings, state funds had not been available to Fremont USD at the time CPVW paid the Level 3 fees. The appellate court also found that CPVW’s arguments against the Level 2 fees were without merit. The appellate court cited to the ELA’s amicus brief in making its favorable ruling for Fremont USD.