Builders win stay in challenge over developer fees

Builders win stay in challenge over developer fees

(Calif.) The state’s 3rd District Court of Appeal has temporarily halted plans from at least two school districts to begin imposing higher fees on housing developers to help finance new school construction.

The vaguely-worded order came earlier this month and was quickly challenged by opposition papers filed by the California State Board of Allocation, according to a news brief from the education law firm of Lozano Smith.

A Sacramento County superior court judge originally rejected arguments from the California Building Industry Association in July, that state officials had improperly given schools the authority to raise developer fees.

The ruling from Judge Michael Kenny appeared to clear the path for at least two Bay Area school districts to impose significantly higher fees on new construction in order to cover the cost of building new classrooms.

But the BIA appealed the ruling and now the status of the higher fees are uncertain.

The so-called Level 3 developer fees were triggered in May after the SAB made a determination that the state could no longer contribute its share of school building costs. Under state law, when that finding has been officially acknowledged, school districts have the option to hike the fees, which in some cases might double the burden on builders.

The outcome of the suit is especially important to at least two school districts likely to be the first to use the new authority: Dublin Unified and Fremont Unified. Both have said their classes are well beyond capacity and expect growth over the next five to seven years that necessitates the construction of new high schools, middle and elementary schools.

In challenging the decision by the State Allocation Board, the BIA argued that state officials had access to $150 million in untapped bond money that could be transferred into accounts that serve classroom construction and remodeling projects. State officials have said those dollars are restricted to seismic-related school improvements and defend their action to allow districts to raise the facility money they need from new housing developers.

Judge Kenny sided with the state, saying that a plain reading of the state laws governing the use of the seismic funds does not give the Allocation Board authority to transfer the dollars to other uses.

“The Court finds, based on a plain reading of section 17075.10, Article 8 funds are intended for use in connection with seismic repairs, which repairs may at times be so extensive as to require constructing a new facility,” Kenny said in the July 27 ruling. “This does not, however, mean that such funds are also available for new construction for Article 5 purposes.”

While BIA’s legal argument centered on the dollars the state had to help schools, the bigger worry is that spiking developer fees will damage the housing recovery that has been modest at best in most parts of the state.

With that threat in mind, the BIA was already instrumental in getting a $9 billion statewide school bond qualified for the November ballot.

If voters approve the measure, expectations are that the State Allocation Board would rescind the Level 3 authorization. If the bond is rejected, then new fees would likely have significant economic implications over the long term, especially in those communities were the population is growing and more is expected.