Recap and Fee Overview. Developer Fees, Part Two: A Deeper Dive Into the Law and Recent Developments. Overview. November 1, 2017

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1 Developer Fees, Part Two: A Deeper Dive Into the Law and Recent Developments November 1, 2017 Presented by: Harold M. Freiman Kelly M. Rem Overview Recap and Fee Overview Exceptions Replacement Development / Credits Pending Litigation Recap and Fee Overview

Types of Developer Fees Level 1 Ed. Code, 17620 Gov. Code, 65995,

2 Types of Developer Fees Level 1 Ed. Code, Gov. Code, 65995, et seq. Level 2 Gov. Code, , Level 3 Gov. Code, Level 1 Fees Statutorily-designated level of fees Subject to an inflationary increase by the State Allocation Board (SAB) in every even year, currently: $3.48 per square foot of residential development $0.56 per square foot of commercial development Level 1 Fees (cont.) Requires justification study establishing the following: Purpose of the fee; Use to which the fee is to be put; Reasonable relationship between the fee s use and the type of development project; and Reasonable relationship between the need for the public facility and the type of development project. (Gov. Code, 66001)

3 Level 1 Fees (cont.) State Allocation Board ( SAB ) action to increase Level 1 fee amount The next increase will take place in early In order to impose increased fees, school districts must: Confirm that their Level 1 fee studies are current. Provide the requisite notice, per statute. Agendize a public hearing and adoption of a resolution adopting the increase. Increases are generally not effective for 60 days. Level 2 Fees No set amount unique to each district. For eligibility, must have established eligibility for State funding. Level 2 Fees (cont.) Additional eligibility requirements must satisfy at least two of four requirements: Substantial enrollment in multi-track year-round (MTYRE) schedule. Local bond in the last four years with a vote of more than 50%. Debt issuance or obligations for capital outlay equivalent to 30% of the local bonding capacity. At least 20% of the teaching stations in relocatable classrooms. (Gov. Code, , subd. (b)(3))

4 Level 2 Fees (cont.) Amount established by statutory formula, intended to be equal to 50% of construction costs and 50% of site development costs. Amount determined by School Facilities Needs Analysis ( SFNA ) pursuant to the following formula: Multiply the number of projected unhoused pupils by the standard school facilities program grant, which is based upon grade level; Add all site acquisition and development costs. Subtract local funds dedicated by the governing board to facilities necessitated by new construction. Divide the subtotal by the projected total square footage of assessable space of residential units anticipated to be constructed within the next five years. (Gov. Code, ) Level 2 Fees (cont.) SFNA must be updated annually. Level 3 Fees Effectively doubles Level 2 fees Requires authorization / trigger by the SAB when the State is no longer making apportionments for New Construction Requires current School Facility Needs Analysis (SFNA) pursuant to Government Code sections

Level 3 Fees (cont.) How are Level 3 fees calculated?

be double the District s Level 2 fee Can be more than double

local funds Status of Level 3 Fees Up in the air!

5 Level 3 Fees (cont.) How are Level 3 fees calculated? In many cases, the total fee charged under Level 3 will simply be double the District s Level 2 fee Can be more than double Level 2 fees because no adjustment is required for available local funds Status of Level 3 Fees Up in the air! Accounting Issues Details regarding Fee Reporting One-year requirements Five-year requirements

6 Developer Fee Exceptions Exceptions What space is covered? Residential: Assessable space, means all of the square footage within the perimeter of a residential structure, not including any carport, covered or uncovered walkway, garage, overhang, patio, enclosed patio, detached accessory structure, or similar area. (Gov. Code, 65995(b)(1).) Commercial: Chargeable covered and enclosed space, for this purpose, means the covered and enclosed space determined to be within the perimeter of a commercial or industrial structure, not including any storage areas incidental to the principal use of the construction, garage, parking structure, unenclosed walkway, or utility or disposal area. (Gov. Code, 65995(b)(2).) Calculated by the building department of the city or county issuing the building permit, in accordance with the standard practice of that city or county. (Gov. Code, 65995(b).) Exceptions (cont.) Hotels (Gov. Code, 65995(d).) Mobile Homes (Ed. Code, ) Senior Citizen Housing (Gov. Code, , ) Greenhouses / Enclosed Agricultural Space (Ed. Code, )

7 Exceptions (cont.) Residential additions of 500 square feet or less. (Ed. Code, 17620(a)(1)(C)(i).) Modification or expansion of existing residences to increase access for severely and permanently disabled person. (Ed. Code, 17620(a)(1)(C)(ii).) Reconstruction after certain natural disasters. (Ed. Code, ) Facilities used exclusively for religious purposes. (Gov. Code, 65995(d).) Exceptions (cont.) Facilities used exclusively as a private full-time day school (including only grades between K-12). (Gov. Code, 65995(d).) Facilities owned and occupied by any federal, state, or local governmental agency. (Gov. Code, 65995(d).) State-owned housing for migrant farm workers that meets specific requirements. (Gov. Code (b).) Replacement Property / Credits

8 Replacement Property Replacement Property and Type of Development Districts may impose fees upon replacement projects. District s justification study must demonstrate a reasonable relationship between the fee and the use to which it will be put. Replacement Property (cont.) Warmington Old Town Associates, L.P. v. Tustin Unified School District (2002) 101 Cal.App.4 th 840 Cresta Bella, L.P. v. Poway Unified School District (2013) 218 Cal.App.4 th 438 Credits Two relevant inquires: Is there a statutory basis for a credit? Example: reconstruction of structures damaged or destroyed as a result of a disaster, except to the extent the square footage of the reconstructed structure exceeds the square footage of the structure that was damaged or destroyed. Is there a constitutional / nexus basis for a credit? Example: voluntary replacement of previously-existing square footage.

9 Waiving Fees Considerations Effect on hardship funding Discrimination / equal protection issues Setting precedent Pending Litigation Pending Litigation Pulte Home Corporation v. Dublin Unified School District Alameda County Superior Court, Case No. RG (pending) Developers sought to prepay fees ahead of potential increases and sued when District refused to execute incomplete certificates. District incorporated expiration date into certificates. Court ruled that state law pre-empts the District s attempt to have certificates expire. Trial court proceedings on the developers other claims are pending.

10 Pending Litigation (cont.) SummerHill Winchester LLC v. Campbell Union School District (H043253, app. pending.) Santa Clara Superior Court Developer filed suit challenging validity of Level 1 fee justification study. Court ruled in developer s favor, saying that the District s fee study was inadequate because: The fee study identified in excess of 133 homes, rather than a specific number. The fee study did not identify specific school construction plans. An appeal is pending. Pending Litigation (cont.) Burbank Housing Development Corporation v. Bellevue Union School District (A148801, app. pending.) Sonoma County Superior Court Property owners seeking annexation agreed to pay fees higher than those authorized by state law. Successor developer claimed agreements constituted illegal mitigation fees pre-empted by SB 50. Court ruled for developer, saying fees didn t qualify for exemption in School Facilities Act because the agreement was not tied to a legislative act. An appeal is pending. Pending Litigation (cont.) Tanimura & Antle Fresh Foods, Inc. v. Salinas Union High School District Monterey County Superior Court, Case No. 16CV Developer sought refund of fees paid on housing development it claimed was for adults only. Court issued preliminary decision holding that District failed to establish a reasonable relationship between the fees and the project s impact on school enrollment. District objected to the preliminary decision. Additional proceedings are pending.

11 Pending Litigation (cont.) AMCAL Sacramento LLC v. Sacramento City Unified School District, Case No Sacramento County Superior Court Developer sued for repayment of fees, claiming residential complex for college students will not impact District facilities. The case, filed on May 25, 2017, is pending. Developer Fee Handbook for School Facilities Copies can be ordered by visiting the following link: Questions can be directed to Presenter Information Harold M. Freiman Partner Lozano Smith 2001 North Main St., Suite 500 Walnut Creek, CA Phone: (925) Harold M. Freiman is a Partner in Lozano Smith's Walnut Creek office. He represents school districts, county offices of education, and community college districts in such areas as school facilities, property, general education law, governing boards, student issues, business, and general litigation. He is a recognized leader on such topics as developer fees, school district reorganization, surplus property, the Brown Act and the Public Records Act. Additionally, he provides advice and litigation services related to the California Environmental Quality Act (CEQA) to cities, special districts and educational agencies. He has been with the firm and representing public entities for over 20 years. Mr. Freiman has appeared before the California Supreme Court on behalf of the California School Boards Association's Education Legal Alliance, and has been named a Northern California "Super Lawyer." He also received the 2014 CASBO Associate Member of the Year Award for his exemplary service to schools and to CASBO for many years. 33

Presenter Information Kelly M. Rem Partner Lozano Smith 2001 North Main St., Suite 500 Walnut Creek, CA 94596 Phone: (925) 953-1620 krem@lozanosmith.com Ms.

12 Presenter Information Kelly M. Rem Partner Lozano Smith 2001 North Main St., Suite 500 Walnut Creek, CA Phone: (925) Ms. Rem has extensive experience advising clients regarding CEQA issues, including procedural requirements, deadlines and statutes of limitation, exemptions, and adequacy of environmental impact reports and other documents. She represented the California School Boards Association as amicus curiae in the matter of Berkeley Hillside Preservation v. City of Berkeley, a recent CEQA case before the California Supreme Court. She also has extensive eminent domain experience, and assists school districts with a variety of real property issues including sale and lease transactions, land use and zoning issues, and surplus property requirements. Ms. Rem is experienced in reviewing and providing advice to clients relating to various types of business contracts. She also regularly advises clients regarding school facilities fees and construction matters. 34 Disclaimer: These materials and all discussions of these materials are for instructional purposes only and do not constitute legal advice. If you need legal advice, you should contact your local counsel or an attorney at Lozano Smith. If you are interested in having other in-service programs presented, please contact clientservices@lozanosmith.com or call (559) Copyright 2017 Lozano Smith All rights reserved. No portion of this work may be copied, or sold or used for any commercial advantage or private gain, nor any derivative work prepared there from, without the express prior written permission of Lozano Smith through its Managing Partner. The Managing Partner of Lozano Smith hereby grants permission to any client of Lozano Smith to whom Lozano Smith provides a copy to use such copy intact and solely for the internal purposes of such client. 35

Community Facilities District Report. Jurupa Unified School District Community Facilities District No. 13. September 14, 2015

Community Facilities District Report Jurupa Unified School District Community Facilities District No. 13 September 14, 2015 Prepared For: Jurupa Unified School District 4850 Pedley Road Jurupa Valley,