MILLER BROWN DANNIS ATTORNEYS. Do's and Don'ts. b v. Presented. MarilynJ. Cleveland. Attorney Brown & Dannis. Miller. Hartsell. Steve General Counsel

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1 FRANCISCO SAN Stevenson Street, 19 Floor 71 Francisco, CA 9410S San 41 S-$ Tel: MILLER BROWN b v Presented Cleveland MarilynJ. Hartsell Steve General Counsel Associate BEACH LONG East Ocean Blvd., Suite 17S0 301 Beach, CA Long S00 Tel: DIEGO SAN B Street, Suite Diego, CA San Tel: DANNIS ATTORNEYS ADVOCACY EXPERIENCE LEADERSHIP Developer Fees Do's and Don'ts Attorney Brown & Dannis Miller School and College Legal Services March 11, 2007 Fax: 41 S-$ Fax: Fax: Miller Brown & I nni$

2 i," "Level 2" or "Level 3" fees. Since the enactment of Assembly Bill 16 in 2002, voter "Level of a $13.05 billion state general obligation bond in November 2002 and $12.3 authorization state general obligation bond in March 2004 Level 3 fees have been suspended. billion school districts should focus on adopting both Level 1 and Level 2 fees, if possible. Accordingly, Code et seq. authorized the collection of developer fees; Government Code Education et seq. establishes the types of fees and rates; Government Code sets the section districts have been authorized by law since January 1, 1987, to impose developer fees to School. te the impact created by new development within rniti school district's boundaries on the a school facilities. Because developer fees district's imposed on new development within a are district, the fees collected may only be expended to accommodate students generated school California Education Code section 17620, subdivision (1) allows developer fees to "the construction or reconstruction of school facilities" subject to limitations set forth in fund sections of the Government Code. In general, Education and Government Code sections relevant that the District be able to show require reasonable relationship between the impact of the a and the use of the fees. (See, e.g., Ed. Code and Gov. Code 66001, development.) The District may not, therefore, subdiv. developer fees to fund construction that the use would or should perform in the absence of the District development. new questions concerning whether developer fees can be used for Most specific project can be a by considering the following: answered the same work have to be done absent the student growth due to Would new development? terms "construction and reconstruction" The not specifically defined. The term "school are however, is def'med facility," "any school-related consideration relating to a school district's as ability to accommodate enrollment." (Gov. Code 65995, subdiv. (e).). addition, Education Code section , subdivision (5) specifically allows school districts In use developer fees to pay: (i) for Developer Fee Justification Studies and/or Needs Analyses; to and (ii) up to 3% of Level 1 fees collected per fiscal year for reimbursement of administrative FEES---DO' S AND DON'TS DEVELOPER 11,2007 MARCH I. Justifying Developer Fees 1. What are the types of developer fees? With the inception of Senate Bill 50 in 1998, three types of developer fees were made available, 2. What are the statutes that authorize the collection of developer fees? process for appeal, these statutes are set forth in the Attachment What are the permissible uses of developer fees? from new development be used to a. Does the work include construction or reconstruction of a school facility? bo PAGE 1 Miller Brown & Dannis

3 incurred for collecting the Level 1 fees. Level 1 fees may also be spent on enrollment costs projections. districts may not expend developer fees merely to modernize or improve existing School Education Code section 17620, subdivision (2), prohibits the expenditure of facilities. Education Code section 17620, subdivision (3) specifically prohibits districts Additionally, using developer fees for any of the following purposes: from regular maintenance or routine repair of school buildings and The facilities. inspection, sampling, analysis, encapsulation, or removal of asbestos- The materials, except where incidental to school facilities containing construction or reconstruction for which the expenditure of fees or purposes of deferred maintenance described in Section As The deferred maintenance, for which developer fees may not be used, defined, "major repair or replacement of plumbing, heating, air means electrical, roofing, and floor systems, the exterior and conditioning, painting of school buildings, the inspection, sampling, and interior of building materials to determine the presence of asbestos- analysis fees may be expended to modernize existing facilities ONLY in limited Developer as the presence of new development may not only necessitate constructing new circumstances, implements the standard of reasonableness and the purpose of the school fee legislation, District has the discretion to determine that new development may be required to pay a proportionate it of the cost of refurbishing old facilities to maintain a level of service commensurate with share presently existing. ([bid) that May I spend developer fees for interim housing of students during 5. modernization? depends. Developer fees may only be spent for interim housing if it is part of a project that will It school capacity to house children generated by new development. increase FEES---Do's AND DON'TS DEVELOPER 1, 2007 MARCH PAGE 2 4. May I expend developer fees to modernize existing facilities? fees on: (i) regular and routine maintenance of schools; (ii) asbestos mitigation costs; developer (iii) deferred maintenance costs as described in Education Code section and other consideration collected pursuant to this section is not prohibited. materials, the encapsulation, or removal of asbestos-containing containing (Ed. Code 17582, subdiv..) materials." but also in some cases refurbishing old ones. (Shapell Industries, lnc. v. Governing facilities, of the Milpitas Unified School District, (1.991) 1 Cal. App. 4 th 218, 239.) As long as the Board Miller Brown & Dannis

4 Developer fees may be utilized towards the salary of a the extent that a District staff member's duties are related to growth resulting from To new the District should be able to use developer fees for that portion of the staff development, Can a district use developer fees to pay a staff member's salary for the time the 7. is gathering information with respect to vacant properties within the employee A district may use developer fees towards a Staff member relate to conducting studies or gathering information which is necessary to that the justification studies for developer fees. However, it is questionable whether the complete of developer fees is permissible if theduties relate only to the collection of expenditure which will be used for State eligibility applications under the State bond program. information Can a district use developer fees to pay a staff member's salary for the time the 8. is acting as the district's labor compliance officer with respect to AB employee to a construction manager, if a labor compliance officer is working Similar a construction on that is related to development in the area, his or her salary may be paid by developer fees. project involved in several projects, some of which are not attributable to growth, it is possible that only a portion of the labor compliance officer's salary may be paid new developer fees with the remaining portion of the salary coming from other sources. with a distn'ct use developer fees to pay a staff member's salary for the time the Can is coordinating various tasks relating to moves which are required by employee district may expend developer fees towards the salary of a district staff member if the various A with which the staff member is involved are related to "the.construction tasks reconstruction or school facilities" which is brought about as a result of new growth. However, since it is not of to utilize developer fees towards the purchase of text books, furniture, and supplies, permissible is also not permissible to expend developer fees towards the salary of it staff member for the a relating to the purchase of such supplies. With respect to the staff member's time relating time coordinating any moves as a result of construction projects, the District may expend developer to towards that portion of the staff member's salary that relates to moves related to fees FEES----DO' S AND DON'TS DEVELOPER 11, 2007 MARCH 6. May! expend developer fees for staff salaries? staff member only if the staff member's time is related to the impact of growth from new development. member's salary which relates to new grow. district's boundaries which will be utilized in the district's nexus reports?" staff member's salary to the extent that the duties of If a labor compliance officer is the district's various school construction projects. construction projects which are a result of new growth. PAGE 3 Miller Brown & Dannis

5 text books, furniture, and supplies are "school-related considerations relating to a school While ability to accommodate enrollment," they do not fall within the concepts of district's or "reconstruction." Therefore, the purchase of supplies is not generally a proper "construction" of developer fees. It is also not permissible to expend developer fees towards the salary of a use a district can show that the technology being installed is a function of growth resulting from If it will likely be able to use the fees to install the technology. Installing technology development, however, be distinguished from merely purchasing additional computers. It is the should, (e.g. cabling) that can be brought within the definition of "construction" or installation If the district is installing technology throughout its existing campuses, the "reconstruction." of'the costs that is associated with the installation that would be applicable to new portion development with developer fees, with the remainder of those costs relating to existing students. this situation, the district may use developer fees for the portion of the installation which is In with new development and the remainder of the cost must be paid from other sources. assocmted district should retain records which would justify the proper proportionate spending in the The that a developer or interested party later requests documentation. event portable classrooms certainly meets the requirement of construction or reconstruction Installing a school facility. The question to ask, therefore, is whether the work would have to be of absent the development. If, for instance, a portable is being installed to take performed of the class-size reduction program and the District has not incurred an increase in advantage population, the District could not use developer fee funds to fitmnce the installation. If, student the District can show that it has experienced an increase in student population and in however, Would i4. change in a building permit from an addition of less than 500 square a to an addition more than 500 square feet trigger developer fees? feet conclude that it would. The statutory scheme for developer fees allows a district to levy a We on any new construction on "other residential construction, only if the increase in assessable fee 500 square feet." (Ed, Code 17620(1)(B) and (C).) The exemption for space...exceeds construction, other than new construction, that is less than 500 square feet applies to a residential FEES---Do's AND DON'TS DEVELOPER l, 2007 MARCH 10. Can developer fees be used to purchase text books, furniture, and supplies? staff member for the time relating to the purchase of such supplies. 11. Can developer fees be used to install technology? 12. Can developer fees be used to pay the salary of a construction manager? the construction manager is working on a construction project that is related to development in If area, his or her salary may be paid by developer fees. the 13. Can developer fees be used to install portable classrooms? to accommodate that increase and take advantage of class-size reduction programs it must order the portable, the District probably could justify using developer fee funds to install the install classroom. PAGE 4 Miller Brown & Dannis

6 permit for the life of the building permit and applies to the total resulting increase in building space, taking into account any decrease in assessable space in the same structure for assessable performed pursuant to the same building permit. (Ed, Code 17620(1)(C).) Therefore, work a building permit is amended to increase the size of the structure to exceed 500 square feet, when State Allocation Board ("SAB") increases the allowable amounts every two years. In The 2006, the SAB increased the Level 1 fee amounts to $2.63 per square foot of residential January and $0.42 per square foot of commercial/industrial construction construction a grade K-12 on Unified school districts may collect the full Level 1 fee amount, while non-unified school basis. commercial and industrial construction (not including square footage new existing site construction when building permit was first issued); for other residential construction when there is an increase of 500 square feet Co assessable space; and in establish that a nexus exists between the type of development in a school district, the amount to the Level 1 fees imposed on each type of development and the need for the fees for school of how there is a reasonable relationship between the fee's Determine and the use of development project on which the fee is imposed; and type FEES DO'S AND DON'TS DEVELOPER 11, 2007 MARCH the developer fee requirement is triggered as to the entire building area of the structure. II. Adoption of Level 1 Fees 1. What school districts can adopt level l fees? All school districts may adopt Level 1 fees pursuant to Education Code section et seq. and Government Code section How much are the level l fees? di trlets share the total fees collected, usually pursuant to a fee-splitting agreement. 3. What types of development are subject to a level l fee? The fee can be applied to: b. new residential construction; installation, or occupancy of manufactured homes and mobile location, homes. 4. What is the process to adopt level l fees? To adopt current Level 1 fees, a school district must prepare a Developer Fee Justification Study facilities purposes. Government Code section sets forth the nexus findings as follows: the purpose of the fees; Identify the use to which the fee is to be put; Identify PAOE 5 Miller Brown & Dannis

7 facility and the type of development on which the fee is fee justification study should be updated or a new study prepared each time the school The increases its Level 1 fee. If the required nexus can be established, Level 1 fees should be district when the maximum fee is increased by the SAB every two years, even if a school updated has adopted Level 2 fees, in case a school district's eligibility to impose the Level 2 fees district the public hearing must be advertised and mailed as required by statute. The Level 1 fees of become effective sixty (60) days after adoption by resolution of the governing board, generally FJS if the district does not intend to levy school fees above the amount that was prepared justified in the latest FJS adopted. The previously adopted FJS may already support.previously can I prevent my district from losing sev.eral months of Level 1 fee How because of time needed to pass a board resolution? increases districts can begin planning for the preparation of a Fee Justification Study ("FJS") in years, or October of the prior year by gathering all the relevant data, contracting with a September A draft of the FJS or meeting the 10-day public review period and two publications of the notice need to be met. district could adopt an urgency resolution which allows the fees to go into effect The upon the adoption by the governing board and thus avoid the mandatory 60-day immediately period before the increased fees are effective. An urgency resolution requires a 4/5 vote waiting is only. in effect for 30 days, so it must be adopted twice. Each adoption requires two and publications of a notice of public heating. An urgency resolution may only be adopted if a FEES---DO'S AND DON'TS DEVELOPER 11, 2007 MARCH a reasonable relationship between the need for the public Determine how there is imposed. lost, the Level 2 fees expire, the Level 2 fees are successfully challenged and/or because Level is fees cannot be imposed on commercial/industrial construction. 2 the fee justification study is prepared, it must be made available for public review for at Once (10) days prior to leastten public hearing by the governing board at a regular meeting. Notice a unless adopted on an urgency basis within limited circumstances. 5. Can you provide a calendar for the Level l fee adoption process? calendar of events for the adoption or increase of Level 1 school fees is set forth in Attachment A How often do you have to redo your developer fee justification study? Every time the law changes and you can charge more, you need to redo or update your study, unless you can stretch it out for a while. A district is not required to prepare a new Fee Justification Study ("FJS") or update a previously the district imposing the most recent increase. Since Level 1 fees are adjusted at the January State Allocation Board meeting in even-numbered consultant or determining the appropriate staff to update the district's data. can be completed and the final amount of the fee be inserted when known. This item update be included on the district's February board meeting agenda, and prior to the board should PAGE -6- Miller Brown & Darmis

8 is made that to protect the public health, welfare and safety of the district, fees must be finding immediately. collected qualify, a school district must have applied for state funding pursuant to the School Facility To pursuant to the Leroy F. Greene School Facilities Act of 1998 ("SFP"), received Program an eligibility determination from the SAB, and met two of the four following criteria: Have a certain percentage of "substantial enrollment" in multi-track-year-round education; Meet specified bonding/debt capacity requirements; Have held a local general obligation bond election in the past four years that received 2 fees are calculated for each school dislrict, unified or non-unified, using Level statutory a "Accordingly, the Level 2 fee amount will vary for each school district, but should methodology. be adopted unless the fee amount will exceed the state-established Level 1 fee mount. The not 2 fees are deemed to represent 50% of a school district's school facility costs for purposes Level qualifying school district must prepare a School Facilities Needs Analysis ("Needs Analysis") A calculate and justify the amount of the Level 2 fee. While similar to a Developer Fee to Studyin that the proper nexus requirements must be accounted for, the Needs Justification must follow the methodology prescribed by Government Code sections and Analysis to calculate the Level 2 fee. This analysis must include evaluation of historical an generation rates of new residential dwelling units constructed student the immediately over In addition, excess seating capacity, surplus school sites and local sources funding for school facilities must be considered in calculating the Level 2 fee. While the of 2 fee is intended to represent 50% of a school district's school facility costs based Level a on statutory cost per student, the analysis should also include a school facilities costs for purposes of comparison and to support the required actual nexus findings. FEES---DO'S AND DON'TS DEVELOPER I, 2007 MARCH III. Adoption of Level 2 Fees 1. What school districts can adopt level 2fees? least 50% plus one of all votes cast; and at Have a certain number of relocatable classrooms throughout the school district. 2. How are level 2fees calculated? of obtaining state construction funding from the SFP. 3. What types of development are subject to level 2fees? Level 2 fees apply solely to residential construction. 4. What is the process to determine and adopt level 2fees? preceding five years to project the number of residential dwelling units to be constructed in the upcoming five years. calculation of the school district's Before adopting a Level 2 fee calculated by a Needs Analysis, local planning agencies must be PAGE 7 Miller Brown & Dannis

9 potential expansion of school sites and/or need to acquire additional school sites. The discuss Analysis must be made available for public review for at least thirty (30) days before a Needs hearing is conducted and notice of the public review period published and mailed as public by statute. The governing board must respond to written comments it has received on required Needs Analysis and can use the assistance of the consultant who prepared the Needs Analysis the legal counsel to do so. Upon governing board adoption by resolution, Level 2 fees become and immediately, but are only valid for one year. Accordingly, this process must be effective annually with sufficient lead time to keep a Level 2 fee continually in place. It is repeated the imposition of the maximum developer fee authorized by law. As a result, lapses requires result in a reduction in financial hardship funding. may can the District charge Level 2 developer fees and when is it limited to When 1 developer fees for residential development, whether it is new Level District may charge Level 2 developer fees for new residential construction as long as the A complies with the requirements for charging Level 2 developer fees, including that the District School Facility Needs Analysis (SFNA) establishes the requisite nexus between the District's generation by new development and the need for the school facilities to be paid for by student developer fees. A District may charge no more than Level 1 fees for the expansion of an the unit. existing assessable space is in excess of 500 square feet. If the net increase in assessable space is in of of 500 square feet, the District may charge Level 1 developer fees for the entire net excess increase in assessable space. Dislrict may not charge developer fees for the replacement of a residential unit that was A by a natural disaster, but it may charge Level 2 fees for the voluntary demolition and destroyed allows school districts to charge the higher Level 2 fee based upon the cost of Section facilities to house students to be generated by new development. The Level 2 fee is half school cost of school facilities to be provided by the District as determined by the Dislrict's SFNA. the fees may be charged when the SFNA establishes a nexus between the projected enrollment These FEES DO' S AND DON'TS DEVELOPER 11, 2007 MARCH notified at least forty-five (45) days in advance and be provided with the opportunity to meet to important for a school district seeking financial hardship funding through the SFP particularly to revert to a Level 1 fee when it would otherwise qualify for a Level 2 fee because the SFP not 5. Can you provide a calendar for the Level 2fee adoption process? A calendar of events for Level 2 fee adoption is set forth in Attachment 3. IV. Other Issues regarding Fee Adoption/Increase of Fees construction, expansion of an existing unit, or demolition and replacement of an existing residential unit. A District may only charge Level 1 fees for the expansion of an existing unit if the net increase replacement of a residential unit as long as the appropriate nexus is established. All developer fees must be supported by the District's developer fee study. Government Code PAGE 8 Miller Brown & Dannis

10 generated by new residential development and the need for additional school facilities for growth students. (Gov. Code, ) unhoused the Level 1 fee which is an amount set by statute and justified by the District's developer fee to (Ed. Code, ) study. someone requests that the District issue a certificate of compliance with the developer fee When for a remodel or an expansion of an existing structure, Education Code section requirement subtracting any decrease in assessable space in the same structure. If the residential space, qualifies for developer fees, the Level 1 fee is charged on the entire increase in construction space. (Ed. Code, 17620(1)(C)(1).) If the net increase in assessable space is less assessable 500 square feet, the remodel is exempt from developer fees. than a person requests a certificate of compliance for a remodel that includes demolition and If of an existing structure, the first issue is whether this is the result of a natural reconstruction or is a voluntary tear down. A reconstruction is exempt from developer fees if the disaster structure is damaged or destroyed due to a catastrophic loss or act of nature, such as fire, original shall be subject to a Level 1 fee. The same criteria are applicable to the replacement of a and or industrial structure. In that circumstance, the square footage comp arison shall be commercial made, for a the demolition and reconstruction is voluntary, it is subject to developer fees If new as at the Level 2 rate for residential property if an appropriate nexus has been construction in the District's SFNA. If the property is commercial or industrial, the developer demonstrated should be charged at the applicable commercial or industrial rate. If the appropriate fee nexus application for a permit from the city or county with jurisdiction should indicate the number The square feet for which the permit will be granted, and the District should be able to rely upon of FEES----DO'S AND DON'TS DEVELOPER 11, 2007 MARCH a. Additions For other residential construction for which building permits are required, the District is limited provides that the District may only charge a Level 1 fee if "the resulting 17620(1)(C)(1) in assessable space exceeds 500 square feet." This must be a net increase in assessable increase b. Demolitions Natural Disaster or Voluntary earthquake, landslide, mudslide tidal wave, or other unforeseen event that produces flood, damage or loss, so long as the reconstruction does not increase the prior assessable material space for residential property by more than 500 square feet. (Ed. Code, ) the case of residential property, if the reconstruction increases the assessable space by more In 500 square feet, the entire increased assessable space will be considered new construction, than commercial or industrial structure, on the basis of chargeable covered and enclosed space. can not be shown, residential redevelopment may be exempt from the Level 2 fee, and subject to only the Level 1 fee. that application in making the foregoing determinations. 2. Can you justify raising your fees if you have declining enrollment? How? PAOE 9 Miller Brown & Dannis

11 to levy the justified amount even when enrollment is declining, provided that there is allowed no capacity for the period of time analyzed in the FJS. excess the Level 2 Fees: if a School Facilities Need Analysis ("SFNA") shows that the Regarding costs exceed the Level 1 fee amount and the projected enrollment exceeds any excess district's for the five-year period of the SFNA, the diswict may levy Level 2 Fees after the capacity of the SFNA. adoption Ira district has a declining enrollment and has not changed its developer fee 3. (Level 1) is it legal to continue to charge the earlier developer fee rate rates depends. A district is not required to prepare a new FJS o r update a previously prepared FJS if It district does not intend to levy school fees above the amount that was justified in the most- the recently adopted FJS. district is currently charging the Level 1 fee rate from 2004 and its If study indicates it should charge less than the current fees, can it justification ignore the study and just continue to charge the prior Level I rates? the estimated reasonable cost of providing the service or facility, for which the fee is exceed (Gov. Code ) A district should probably not be charging a fee that is not imposed. justified by a FJS or an update prepared by district staff. a district adopt an "evergreen" Board Resolution that automatically adopts Can maximum level l fees approved by the SAB? the The sections of the Education Code and'the Government Code that authorize aschool No. levy Developer Fees require that the district prepare either a FJS, a SNFA or both that district that the disla-ict's facilities costs meet or exceed the school fee amounts. Without this prove the district cannot simply include in a resolution that its costs meet or exceed the information, a district prevent the prepayment of developer fees at a lower rate than Can effect at the time of pulling building permits? in are advised to review their Certificates of Compliance and include a date after which, if Districts is not commenced, the Certificate of Compliance Expires. construction FEES DO' S AND DON'TS. DEVELOPER l, 2007 MARCH Regarding Level 1 or Statutory School Fees: if the Fee Justification Study ("FJS") Depends. that the district's costs meet or exceed the maximum Level 1 fee amount, the district is shows without doing any additional fee studies? No. Government Codes et seq., require that the fees imposed by a local agency shall not costs as established by the SAB. Government Code Section prohibits a local agency fxom to collect a fee that exceeds the estimated reasonable cost of providing the services or attempting for which the fee is imposed. (Gov. Code ) facility 7. What fees can be c.harged for other residential construction? Level 1 fees can be charged for other residential construction. PAOE-10- Miller Brown & Dannis

12 Can a district charge developer fees for new residential construction that 8. prior residential construction without allowing replaces offset for prior an construction if the district's fee study does not address the residential of this redevelopment? impacts court in Warmington Old Town Associates The Tustin Unified School District (2002) 101. v. t 840, made this situation problematic. In the at ease, the developer, Cal.App.4 part of a as project, demolished 56 apartments and replaced them with 38 single-family redevelopment The school district imposed school impact fees homes. the total square footage of the 38 on However, the court found that developer's refund was justified because the fee study: (1) did not specifically address the (2) did not address the extent of the impact of newly constructed homes that redevelopment; fact generated additional students over is not the most well-reasoned decision in that it puts school districts in W'armzngton quandary: a the court's interpretation of Education Code section theoretically supports the while of fees on voluntary tear downs, it also finds fault with doing that when imposition fee study a not include an analysis of the impact of the redevelopment construction that replaces the does District is vulnerable to a legal challenge for the imposition of school fees the redevelopment on not analyzed by the district's fee study. projects law requires school districts to be accountable for the developer fees collected and expended The both an annual and a five-year basis pursuant to Government Code sections and on annual report focuses on the amount of developer fees collected and expended throughout The fiscal year. The report must include the following information (i) type of fees collected, (ii) the interest earned; (v) information regarding each project and which fees were expended; (vi) on transfers or loans; and (vii) amount of any refunds. interfund five-year report requires The more detailed analysis of a school district's overall use of a fees. The purpose is to illustrate the extent to which flae collected developer fees developer are to serve a school district's school facilities needs. The findings must identify: (i) the necessary between the development for which fees are collected and the use of the.fees; (ii) all nexus and amounts of funds anticipated to complete financing of incomplete projects; (iii) sources date of receipt of those funds; and (iv) approximate date when construction will anticipated FEES--DO'S AND DON'TS DEVELOPER 11, 2007 MARCH homes as "new residential construction" pursuant to Education Code section single-family refused to give credit. The court held that the developers who completely demolished and residential apartments and replaced them with newly constructed houses were not entitled to an offset of school impact fees under Education Code section and (3) did not consider replaced older residential housing previously existing on the same site; whether those newly constructed replacement homes in and above those generated in the previous homes at the site. Therefore, unless the district's fee study includes this type of analysis, demolished construction. V. Reporting Requirements 1. How do we meet the reporting requirements for developer fees? amounts collected; (iii) beginning and ending balances of accounts; (iv) total amounts collected commence on pending projects for which sufficient funds have been collected. If this date is not PAGE 11 Miller Brown & Datmis

13 one hundred eighty (180) days of making these findings, Government Code section within that the school district refund any unexpended developer fees to the parties who paid requires annual reporting information must be made available to the public The later than one hundred no (180) days from the last day of the fiscal year. For fiscal year ending June 30, eighty is triggered five years after the first fiscal year that a school district collected developer report For school districts that began collecting developer fees in fiscal year , the first fees. must be presented for approval by the governing board in conjunction with the annual findings It maybe more convenient for staff to prepare a comprehensive report each fiscal year findings. Doing so against the penalty of refunding unexpended developer fees for failure to report guards in a timely manner during the appropriate year. expenditures adoption by governing board resolution at a regular meeting. Although b fore formal public a is not required, mailed notice is required by statute. hearing there a standard "appeal" process that includes mandated time periods for Is by both the developer and school district? response Education Code Section 17621(e) provides detailed procedures for appeal of Yes. fees. Government Code Section 66020(d)(1) states that Commercial/Industrial protest of the a of fees must be filed within 90 days of the imposition of fees and that any action must payment filed within 180 days of the notice of protest. be If a developer wins a protest based on the imposition of developer fees, can a Code section 66020(e) requires interest in the amount of 8% be paid if Government court finds a favor of a plaintiff who has filed a protest against the imposition of the fees. While this in provides a mechanism for charging interest, it is not clear that this would apply in the provision of resolving a protest short of court action. context FEES---DO'S AND DON'TS DEVELOPER 11, 2007 MARCH those funds. the deadline is December 27, Because school districts are generally closed at this 2006, school districts should begin preparing the report no later than October. The five-year time, five-year report would have been required year 1992, and the next one in The five-year that includes both the annual and five-year collection and expenditure information. report must be made available to the public by no later than December 27 of the applicable The The completed report must be made available for public review at least fifteen (15) days y ar. VI. Appeal Process for Developer Fees court award interest on any amounts awarded? PAGE 12- Miller Brown & Dannis

14 Annotated California Codes Currentness West's Code (Refs & Annos) Education 1. General Education Code Provisions Title 1. General Education Code Provisions (Refs & Annos) Division The governing board of any school district is authorized to levy a fee, charge, dedication, or other (1) against any construction within the boundaries of the district, for the purpose of funding the requirement or reconstruction of school facilities, subject to any limitations set forth in Chapter 4.9 (commencing construction Section 65995) of Division of Title 7 of the Government Code. This fee, charge, dedication, or other with requirement may be applied to construction only as follows: (B) To new residential construction. The chargeable covered and enclosed space of commercial or (D) To location, installation, or occupancy of manufactured homes and mobilehomes, as defined in Section For purposes of this section and Section 65995, "construction or reconstruction of school facilities" does not (3) any item of expenditure for any of the following: include (A) The regular maintenance or routine repair of school buildings and facilities. The inspection, sampling, analysis, encapsulation, or removal of asbestos-containing materials, except where (B) to school facilities construction or reconstruction for which the expenditure of fees or other consideration incidental (C) The purposes of deferred maintenance described in Section The appropriate city or county may be authorized, pursuant to contractual agreement with the governing board, (4) collect and otherwise administer, on behalf of the school district, any fee, charge, dedication, or other requirement to West!a Page Effective: January 01, 2001 tn Part School Facilities (Refs & Annos) Chapter 6. Development Fees, Charges, and Dedications (Refs & Annos) Levies against development proiects by school districts (A) To new commercial and industrial construction. construction shall not be deemed to include the square footage of any structure existing on the site of that industrial as of the date the first building permit is issued for any portion of that construction. construction Except as otherwise provided in clause (ii), to other residential construction, only if the resulting increase in (C)(i) space exceeds 500 square feet. The calculation of the "resulting increase in assessable space" for this assessable shall reflect any decrease in assessable space in the same residential structure that also results from that purpose Where authorized under this paragraph, the fee, charge, dedication, or other requirement is applicable construction. to the total resulting increase in assessable space. This subparagraph does not authorize the imposition of a levy, charge, dedication, or other requirement against (ii) construction, regardless of the resulting increase in assessable space, if that construction qualifies for the residential exclusion set forth in subdivision of Section 74.3 of the Revenue and Taxation Code. For purposes of this section, "construction" and "assessable space" have the same meaning as defined in Section (2) of the Government Code collected pursuant to this section is not prohibited. levied under this subdivision. In the event of any agreement authorizing a city or county to collect that fee, charge,

15 Page 2 or other requirement in any area within the school district, the certification requirement set forth in dedication, or (c), as appropriate, is deemed to be complied with as to any residential construction within that subdivision collected in that fiscal year pursuant to this section may be retained by the school district, city, or county, as fees for reimbursement of the administrative costs incurred by that entity in collecting the fees. When any appropriate, or county is entitled, under an agreement as described in paragraph (4), to compensation in excess of that city the payment of that excess compensation shall be made from other revenue sources available to the school amount, For purposes of this paragraph, "fees collected in that fiscal year pursuant to this section" does not include district. amount in addition to the amounts specified in paragraphs (1) and (2) of subdivision of Section of the any A city or county, whether general law or chartered, may not issue a building permit for any construction absent by the appropriate school district that any fee, charge, dedication, or other requirement levied by the certification board of that school district has been complied with, or of the district's determination that the fee, charge, governing If, pursuant to subdivision (c) of Section 17621, the governing board specifies that the fee, charge, dedication, or (c) requirement levied under subdivision is subject to the restriction set forth in subdivision of Section other of the Government Code, the restriction set forth in subdivision of this section does not apply. In that however, a city or county, whether general law or chartered, may not conduct a fmal inspection or issue a event, of occupancy, whichever is later, for any residential construction absent certification by the appropriate certificate district of compliance by that residential construction with any fee, charge, dedication, or other requirement school Neither subdivision nor (c) shall apply to a city or county as to any fee, charge, dedication, or other (d) as described in subdivision, or as to any increase in that fee, charge, dedication, or other requirement except upon the receipt by that city or county of notification of the adoption of, or increase in, the fee requirement, other requirement in accordance with subdivision (c) of Section or with Section 66000) of Division of Title 7 of the Government Code. The adoption, increase, or (commencing of any fee, charge, dedication, or other requirement pursuant to Section shall not be subject to the imposition Environmental Quality Act, Division 13 (commencing with Section 21000) of the Public Resources California The adoption of, or increase in, the fee, charge, dedication, or other requirement shall be effective no sooner Code. Without following the procedure otherwise required for adopting or increasing a fee, charge, dedication, or other the governing board of a school district may adopt an urgency measure as an interim authorization for a requirement, charge, dedication, or other requirement, or increase in a fee, charge, dedication, or other requirement, where fee, to respond to a current and immediate threat to the public health, welfare, or safety. The interim necessary shall require a four-fifths vote of the governing board for adoption, and shall contain findings authorization the current and immediate threat to the public health, welfare, or safety. The interim authorization shall describing area upon receipt by that city or county of payment of the fee, charge, dedication, or other requirement imposed on that residential construction. Fees or other consideration collected pursuant to this section may be expended by a school district for the costs (5) performing any study or otherwise making the findings and determinations required under subdivisions,, of (d) of Section of the Government Code, or in preparing the school facilities needs analysis described in and of the Government Code. In addition, an amount not to exceed, in any fiscal year, 3 percent of the Section Government Code. dedication, or other requirement does not apply to the construction. The school district shall issue the certification immediately upon compliance with the fee, charge, dedication, or other requirement. levied by the governing board of that school district pursuant to subdivision Procedures for adoption or increase of levy; protest Any resolution adopting or increasing a fee, charge, dedication, or other requirement pursuant to Section 17620, application to residential, commercial, or industrial development, shall be enacted in accordance with Chapter 5 for than 60 days following the final action on that adoption or increase, except as specified in subdivision. have no force or effect on and after a date 30 days after its adoption. After notice and hearing in accordance with

16 Page 3, the governing board, upon a four-fifths vote of the board, may extend the interim authority for an subdivision 30 days. Not more than two extensions may be granted. additional Upon adopting or increasing a fee, charge, dedication, or other requirement pursuant to subdivision or, the (c) district shall transmit a copy of the resolution to each city and each county in which the district is situated, school by all relevant supporting documentation and a map clearly indicating the boundaries of the area accompanied to the fee, charge, dedication, or other requirement. The school district governing board shall specify, subject to that notification, whether or not the collection of the fee or other charge is subject to the restriction set pursuant in subdivision of Section of the Government Code. forth (d) Any party on whom a fee, charge, dedication, or other requirement has been directly imposed pursuant to Section may protest, the establishment or imposition of that fee, charge, dedication, or other requirement in with Section of the Government Code, except that the procedures set forth in Section of the accordance Code are deemed to apply, for this purpose, to commercial and industrial development, as well as to Government development. residential The school district governing board shall, in the course of making the findings required under subdivisions (1) of Section of the Government Code, do all of the following: and Make the findings on either an individual project basis or on the basis of categories of commercial or industrial (A) Those categories may include, but are not limited to, the following uses: office, retail, transportation, development. Conduct a study to determine the impact of the increased number of employees anticipated to result from the (B) or industrial development upon the cost of providing school facilities within the district. For the commercial of making that determination, the study shall utilize employee generation estimates that are calculated on purpose an individual project or categorical basis, in accordance with subparagraph (A). Those employee generation either shall be based upon commercial and industrial factors within the district or upon, in whole or in part, the estimates employee generation estimates set forth in the January 1990 edition of "San Diego Traffic Generators," a applicable report of the San Diego Association of Governments. The governing board shall take into account the results of that study in making the findings described in this (C) subdivision. or industrial development, as described in paragraph (1), the governing board shall provide a process commercial permits the party against whom the fee, charge, dedication, or other requirement is to be imposed the that for a hearing to appeal that imposition. The grounds for that appeal include, but are not limited to, the opportunity of including the project within the category pursuant to which the fee, charge, dedication, or other inaccuracy is to be imposed, or that the employee generation or pupil generation factors utilized under the requirement category are inaccurate as applied to the project. The party appealing the imposition of the fee, charge, applicable School districts; levies on enclosed agricultural space (e) In the case of any commercial or industrial development, the following procedures shall also apply: communications and utilities, light industrial, heavy industrial, research and development, and warehouse. In addition to any other requirement imposed by law, in the case of any development project against which a fee, (2) dedication, or other requirement is to be imposed pursuant to Section on the basis of a category of charge, or other requirement shall bear the burden of establishing that the fee, charge, dedication, or other dedication, is improper. requirement No fee, charge, dedication, or other requirement may be levied by any school district pursuant to Section any greenhouse or other space that is covered or enclosed for agricultural purposes, unless and until the district upon first complies with subdivisions and (c).

17 Page 4 The school district governing board shall make a finding, supported by substantial evidence, of both of the following: The amount of the proposed fees or other requirements and the location of the land, if any, to be dedicated, bear (1) reasonable relationship and are limited to the needs of the community for elementary or high school facilities a In determining the amount of the fees or other requirements, if any, to be levied on the development of any (c) as described in subdivision, the school district governing board shall consider the relationship between structure proposed increase in the number of employees, if any, the size and specific use of the structure, and the cost of the construction. No fee, charge, dedication, or other form of requirement, as authorized under Section 17620, shall the applied to the development of any structure described in subdivision where the governing board finds either be the number of employees is not increased as a result of that development, or that housing has been provided for that those employees, to the extent of any increase, by their employer, against which housing a other form of requirement has been applied under Section In developing the finding described in this or the governing board shall consult with the county agricultural commissioner or the county director of the section, cooperative extension service. the event the fee authorized pursuant to Section is levied by two nonunified school districts having In territorial jurisdiction, in a total amount that exceeds the maximum fee authorized under Section of common Government Code_, the fee revenue for the area of common jurisdiction shall be distributed in the following the manner: The governing boards of the affected school districts shall enter into an agreement specifying the allocation of revenue and the duration of the agreement. A copy of that agreement shall be transmitted by each district to the fee In the event the affected school districts are unable to reach an agreement pursuant to subdivision, the shall jointly submit the dispute to a three-member arbitration panel composed of one representative chosen districts panel shall be final and binding upon both districts for a period of three years Repayment of levy on development project without commencement of construction the description set forth in subdivision, shall repay or reconvey, as appropriate, that fee, charge, meets or other requirement to the person or persons from whom that fee, charge, dedication, dedication, other or This section applies to any development project for which the building permit, including any extensions, expires or after January 1, 1990, without the commencement of construction, as defined in subdivision (c) of Section on caused by the development. The amount of the proposed fees or other requirements does not exceed the estimated reasonable cost of (2) for the construction or reconstruction of the school facilities necessitated by the development projects providing from which the fees or other requirements are to be collected. fee, charge, or dedication, Distribution of fee levied by two nonunified school districts with common territorial jurisdiction State Allocation Board. by each of the districts and one representative chosen jointly by both of the districts. The decision of the arbitration Any school district that has imposed or, subsequent to the operative date of this section, imposes, any fee, dedication, or other requirement under Section against any development project that subsequently charge, was collected, less the amount of the administrative costs incurred in collecting and repaying the fee, requirement dedication, or other requirement. charge, of the Government Code.