Chapter 4
Fees and Exactions
Fees and
exactions are really two facets of the same thing: direct charges
or dedications collected on a one-time basis as a condition of an
approval being granted by the local government. The purpose of the
fee or exaction must directly relate to the need created by the
development. In addition, its amount must be proportional to the
cost of improvement.
Fees can be
categorized in four major classes: (1) development impact fees
(often called "developer fees") which are levied on new
development to cover the cost of infrastructure or facilities
necessitated by that development; (2) permit and application fees
which cover the cost of processing permits and development plans;
(3) regulatory fees; and (4) "property related fees and
charges," as defined by Proposition 218. This chapter will
focus primarily on developer fees and property related fees and
charges.
Proposition 218
does not apply to "existing laws relating to the imposition
of fees or charges as a condition of project development"
(Section (b)(1), Article XIIID, California Constitution).
Accordingly, development impact fees continue to be governed by
the Mitigation Fee Act (Government Code section 66000, et seq.)
and do not require voter approval. Similarly, Proposition 218 does
not apply to permit and application fees. As will be discussed
later, Proposition 218 requires property related fees and charges
to be put to a vote of affected property owners, and classifies
"standby fees" the future installation of utilities as
assessments not fees, subject to its limitations and voting
requirements.
Proposition 218
provides that any fee "imposed by an agency upon a parcel or
a person as an incident of property ownership, including a user
fee or charge for a property related service" requires prior
approval of a simple majority of affected property owners or a
two-thirds majority of the voters in the affected area. The
initiative also lays out the specific method for establishing such
fees. These requirements are detailed in the following section
entitled "Property Related User Fees and Standby
Charges."
Traffic
mitigation fees, infrastructure improvement fees, and fees for
improving sewer and water systems to accommodate new development
are common examples of development impact fees.
"Exaction" is a broader term for impact fees,
dedications of land, and in-lieu fees that are imposed to fund
public improvements necessitated by the proposed development.
School facility fees, park land dedication requirements, and road
dedication and improvement are all examples of exactions.
IMPACT FEES
AND EXACTIONS
After the
passage of Proposition 13, local government found itself with less
money to pay for infrastructure improvements. In the past, cities
and counties have, to a certain extent, subsidized new development
by installing infrastructure or by charging impact fees that did
not pay for the entire cost of the infrastructure necessitated by
the project. Today, as new development occurs, cities and counties
find themselves unable to afford the improvements that the
development will need. They are turning to the developer to carry
the burden of these costs. As a general rule, if the local
government has the power to deny a project, then it also has the
power to approve it subject to conditions that mitigate the reason
for denial.
A development
impact fee is an exaction that is imposed as a precondition for
the privilege of developing land. Such fees are commonly imposed
on developers by local governments in order to lessen the impacts
of increased population or demand on services generated by that
development. Local governments derive their authority to impose
exactions from two sources: the "police power" granted
to them by the State Constitution; and/or specific state enabling
statutes such as the Subdivision Map Act.
Exactions and
impact fees give new meaning to the old saying "you get what
you pay for." Developers, and the new home buyers to whom the
costs are passed, now find that they are paying more for what they
get than ever before. A 1987 survey by the Bay Area Council found
that the average impact fee for single family homes in the San
Francisco Bay Area had increased by 644% in the previous ten
years. At that time, the median fee for building a small detached
residence was $9110. Fees have continued to rise in the 10 year
since.
The increasing
costs of impact fees is exacerbated by the cumulative effect of
paying fees for more than one purpose and to more than one public
entity. For example, the City of Roseville collects a parks fee, a
sewer connection fee, a public facilities fee, and other fees. Its
school district also imposes a fee.The total fees associated with
new home construction in Roseville may exceed $13,000. Similar fee
levels can be found in the cities of San Jose, San Ramon, and
Anaheim.
As the dollar
amount of impact fees has increased, so has the range of uses to
which exactions are being put. The City of San Francisco collects
impact fees from downtown commercial development for public
transit improvements, low and moderate-income housing, and child
care. The City of Irvine collects impact fees for traffic
improvements. Concord funds child care through impact fees paid by
non-residential development. Fresno uses impact fees to pay for
fire stations, overpasses, railroad crossings, and traffic signals
required by new growth. Orange County and its cities collect
impact fees from new subdivisions to fund the construction of four
major highway corridors.
Establishing
reasonable and defensible impact fees is a special science. Cities
and counties must be careful to limit fees to reasonable levels,
to apply such fees equitably and proportionally, and to comply
with the Mitigation Fee Act. For an excellent general discussion
of this topic, refer to: The Calculation of Proportionate-Share
Impact Fees, PAS Report No. 408, by James Nicholas and available
from the American Planning Association. Although this book does
not address California law's special requirements, its detailed
suggestions for relating fees to projected impacts are helpful
when drafting an impact fee ordinance. A more detailed reference
is the highly informative Public Needs and Private Dollars and its
1995 supplement by William Abbott, Marian E. Moe, and Marilee
Hansen (available from Solano Press Books, Point Arena, CA). It
discusses the legal basis for impact fees and offers practical,
California-specific advice about calculating and imposing such
fees.
Subdivision
Exactions
The Subdivision
Map Act (Government Code section 66410 et seq.) gives cities and
counties statutory authority to impose fees or dedications of land
for specific uses as conditions of subdivision map approval.
The Map Act
provides that certain types of exactions may only be imposed if a
local subdivision ordinance contains specific enabling language to
do so. The following sections of the Map Act provide enabling
authority for such local ordinances.
section 66475
- dedication of streets and alleys within the subdivision.
section
66475.1 - dedication of bike paths in conjunction with streets
and alley dedications.
section
66475.2 - when the subdivision has the potential for 200 or
more dwelling units, covers 100 or more acres or when transit
services are or will be available to it, the jurisdiction may
require dedication of land for local transit facilities.
section
66475.3 - sunlight easements to facilitate solar energy use.
section 66477
(Quimby Act) - dedication of land or payment of an in-lieu fee
to provide park and recreation facilities to serve the
subdivision. The amount of the exaction is limited by statute
and must be based upon the policies and standards contained in
an adopted general or specific plan.
section 66478
- dedication of school sites to serve the subdivision. Such a
dedication must be requested by the affected school district.
section 66479
- areas within the subdivision may be reserved for parks,
recreational facilities, fire stations, libraries, and other
public uses based upon the policies and standards of an
adopted general or specific plan. The local jurisdiction must
enter into an agreement with the subdivider that specifies
when the jurisdiction will purchase the reserved land.
section 66483
- fees to pay for the construction of planned drainage or
sewer facilities to serve the subdivision.
section 66484
- fees to pay for the installation of planned bridges and
major thoroughfares to serve the subdivision.
section
66484.3 - authorizes Orange County and its cities to collect
countywide fees for planned major road construction.
section
66484.5 - fees to pay for planned groundwater storage and
recharge facilities within designated areas of benefit.
There are also
exactions which may be imposed under the Subdivision Map Act
without the adoption of a local enabling ordinance.
sections
66478.4 & 66478.5 - local jurisdictions must assure that
subdivisions provide public access to public waterways.
Subdividers can be required to dedicate this access.
section
66478.11 - a provision similar to the above, relating to
coastal and bayshore access.
section
66478.12 - public access must be provided to lakes and
reservoirs.
Fees vs. Taxes
and Assessments
Fees which do
not exceed the reasonable cost of providing the regulatory
activity or service for which they are charged and which are not
levied for general revenue purposes are not "special
taxes" (Government Code section 50076). If a fee is subjected
to legal challenge, the jurisdiction that is charging the fee
carries the burden of proving that it is not a special tax
(Government Code section 50076.5). Fees may be further
distinguished from taxes because they are voluntary (in that
development is a voluntary act) rather than compulsory and are
imposed only upon those developing land rather than upon all
landowners or taxpayers uniformly.
The relationship
between users fees and special assessments is not as clear. In San
Marcos Water District v. San Marcos Unified School District (1986)
42 Cal.3d 154, the California Supreme Court concluded that "a
fee aimed at assisting a utility district to defray costs of
capital improvements will be deemed a special assessment from
which other public entities are exempt." Although the primary
holding in this case (that one district need not pay another
district's capital facilities fee) has been revised by the State
Legislature as discussed later in this chapter, its view of the
relationship between fees and special assessments remains. Any fee
which qualifies as an "assessment" under Proposition 218
is subject to the approval requirements applicable to assessments.
Several court
cases decided before and after the passage of Proposition 13 have
upheld fees and exactions against challenges that they are taxes
or special assessments. Here is a brief look at some of the more
important decisions.
Associated
Homebuilders of the East Bay v. City of Walnut Creek (1971) 4
Cal.3d 633 ratified the use of "Quimby Act"-type fees
for exacting park and recreation land from new subdivision
development. The court held that "a general public need for
recreational facilities caused by present and future
subdivisions" could justify the levying of exaction.
Mills v. Trinity
County (1980) 108 Cal.App.3d 656 upheld the imposition of local
fees for processing subdivisions, zoning, and other land use
applications as long as they do not exceed the reasonable cost of
providing services necessary to the activity for which the fee is
charged.
Trent Meredith
v. City of Oxnard (1981) 114 Cal.App.3d 317 upheld the validity of
fees imposed under the School Facilities Act (authorizing
exactions for interim school facilities) in the face of
allegations that they constituted a special tax. The court pointed
out that, unlike taxes, the fees were related to benefits received
by or burdens created by the development.
Terminal Plaza
Corporation v. City and County of San Francisco (1986) 177
Cal.App.3d 892 held that an ordinance requiring developers to
provide replacement units whenever residential structures were
demolished or converted to another use could be imposed under the
city's police power. The exaction was held to be reasonably
related to the cost of services necessitated by the project and
was not levied for general revenue purposes.
Russ Building
Partnership v. City and County of San Francisco (1987) 188
Cal.App.3d 977 upheld the city's exaction of a transit impact fee
from new office development. The city had carefully established a
factual basis for the fee before enacting it. The court concluded
that the fee did not amount to double taxation because it was not
imposed on the same property, at the same time, by the same
authority, for the same purpose as any city tax. In fact, it was
not a tax at all. "The fee in question was not aimed at
replacing lost revenue. It is triggered by the voluntary action of
the developer to construct something and directly tied to an
increase in ridership generated by new development."
Here's an
example of a fee which did not pass judicial muster. Bixel v. City
of Los Angeles (1989) 216 Cal.App.3d 1208 illustrates the pitfalls
of attempting to assign equitable fees to new development. Los
Angeles charged Bixel Associates a fire hydrant and water main fee
as a condition of issuing the building permit for a high rise
office. Los Angeles had devised a formula for calculating such
fees that was based on the ratio between the total amount that the
city had spent for hydrants and water mains over a two year period
and the value of work performed under building permits issued
during that period.
The California
Court of Appeal invalidated the city's fee ordinance, finding that
the city's method of setting this fee failed to distinguish those
costs which were solely attributable to new construction from
those relating to routine repairs and maintenance. In addition,
the fee ordinance did not expressly limit the use of fee revenues
to improvements required by new development. As a result, the city
could not demonstrate its compliance with the crucial principles
that: (1) fees bear a reasonable relationship to the cost of the
improvements necessitated by new development and (2) fees not be
used for general revenue purposes.
Limits on
Impact Fees and Exactions
The Nollan and
Dolan Decisions
The U.S. Supreme
Court holding in Nollan v. California Coastal Commission (1987)
107 S.Ct. 3141 has established that the power to impose exactions
on development is not without limits. The U.S. Constitution
guarantees that private land will not be taken without just
compensation. This prohibition includes regulatory takings or
inverse condemnation. An exaction will not be allowed to result in
a taking. A legally defensible exaction must: (1) "advance a
legitimate state interest" (such as protection of the public
health, safety, and welfare); and, (2) mitigate the adverse
impacts to that interest that would otherwise result from the
project. An exaction may be imposed even if the development
project itself will not benefit from it, when it is necessitated
by the project's impacts on identifiable public resources. At
least one view of the Nollan decision holds that exactions may
only be required where the local government would otherwise be
empowered to deny approval of the project.
The Nollan
decision does not prohibit local governments from imposing impact
fees or dedications as conditions of project approval. It does,
however, require that government establish the existence of a
"nexus" or link between the exaction and the state
interest being advanced by that exaction. Once the adverse impacts
of a project have been quantified, the local government must then
document the relationship between the project and the need for the
conditions which mitigate those impacts. This link may be forged
by general plan policies or by special ordinances that are based
upon studies or other objective evidence. Adoption of detailed
findings, supported by evidence in the hearing record, is crucial
to the enactment of a legally defensible fee ordinance.
AB 1600 of 1987
(Chapter 927) provides valuable guidance in this area by creating
a statutory nexus requirement (Gov. Code sections 66000 et seq).
More recently,
in Dolan v. City of Tigard (1994) 114S.Ct. 2309, the U.S. Supreme
Court has held that in addition to the Nollan standard of an
essential nexus, there must be a "rough proportionality"
between proposed exactions and the project impacts that the
exactions are intended to allay. The Dolan case focused on an
administrative permit for expansion of a small plumbing and
electrical supply business which was conditioned upon dedication
of a bike lane and a storm drainage easement along an existing
drainage channel. The Court overturned both exactions, holding
that the city's conclusory findings were not specific enough to
support the dedications.
Where Nollan
established that there must be a nexus between the exaction and
the state interest being advanced, Dolan added a second step to
the analysis of exactions - there must be a "rough
proportionality" between the exaction and the impacts of the
project.The Dolan court offered this advice:
"We think a
term such as 'rough proportionality' best encapsulates what we
hold to be the requirements of the Fifth Amendment. No precise
mathematical calculation is required, but the city must make some
sort of individualized determination that the required dedication
is related both in nature and extent to the impact of the proposed
development."
As in the Nollan
case, the lesson to be learned is that public exactions must be
carefully documented and supported. Many common exactions, such as
street dedication, curb and gutter improvements, parks, and open
space, will probably be able to meet the requirements of Nollan
since they can be directly related to project impacts that would
otherwise necessitate denial of the project. Whether all of these
may withstand the stricter test created by Dolan is the question
of the hour. Other, more exotic exactions, such as affordable
housing, public art, and child care may be more difficult to
impose if the local government cannot tie them directly to the
impacts from the project. Some commentators believe that under the
Nollan standard, exactions requiring the conveyance of land
(dedications) may be subject to greater judicial scrutiny than fee
exactions. In any case, dedications will be examined closely to
determine whether they constitute impermissible
"takings" without just compensation.
The Ehrlich
Decision
The California
Supreme Court clarified the Nollan and Dolan principles when it
decided Ehrlich v. City of Culver City 12 C4th 854 in 1996. For
over 20 years, Ehrlich owned a private tennis facility allowed
under a specific plan and zoning approved by the city. When
Ehrlich sought city approval to demolish the facility and replace
it with luxury condominiums, an action which required rezoning the
property and rescinding the specific plan, the city balked. After
a period of dispute, the city eventually approved Ehrlich's
proposal, subject to conditions including a recreational
mitigation fee of $280,000 imposed ad hoc to enable the city to
replace the loss of the tennis courts and a $33,200 in-lieu fee
imposed under the city's "Art in Public Places"
ordinance. Ehrlich challenged the constitutionality of these fees,
alleging that there was no "essential nexus" (as
required by Nollan) for imposing either aesthetic requirements or
recreation mitigation fees on the project and that the fees being
imposed were not "roughly proportional" to the impact of
his project (the higher level of scrutiny required by Dolan).
The California
Supreme Court's decision allowed both Ehrlich and Culver City to
claim some element of victory. The court made two key points:
(1) Developers
who wish to challenge a development fee on either statutory or
constitutional grounds must do so under provisions of the
Mitigation Fee Act (Government Code section 66000, et seq.).
(2) The two part
Nollan/Dolan test applies only to ad hoc fees and dedications of
land (as opposed to legislatively-enacted fees). The "rough
proportionality" component does not apply to
legislatively-enacted fees such as Culver City's Art in Public
Places (here the court also held that this ordinance enacted to
enhance aesthetics was a reasonable use of the city's police power
under Nollan).
The California
Supreme Court has distinguished between the imposition of
legislatively-enacted and ad hoc fees. The ad hoc recreational
mitigation fees, developed for this specific project and applied
as a condition of approval, were subjected to a higher level of
scrutiny (i.e., application of both Nollan/Dolan principles) than
the legislatively-enacted art in public places fees, which were
developed for general application. As Justice Mosk noted in his
concurring opinion, greater scrutiny is needed so that the court
may ensure that "the developer is not being subject to
arbitrary treatment for extortionate motives. These singular fees
present a greater possibility that the government is unfairly
imposing disproportionate public burdens on a lone, and therefore
particularly vulnerable, property owner."
Since the
Ehrlich decision, the Legislature has amended the Mitigation Fee
Act (Government Code section 66000, et seq.) to specify that its
requirements apply to both legislatively-enacted and ad hoc fees
(Government Code sections 66000 and 66020). Compliance with the
Act should inoculate cities and counties from successful challenge
under the Nollan/Dolan test.
The courts
continue to clarify the Nollan and Dolan holdings. In Loyola
Marymount University v. Los Angeles Unified School District (1996)
45 Cal.App.4th 1256, a California court of appeal held that the
two-part Nollan/Dolan test did not apply to a school impact fee
that was imposed on the basis of the state school impact fee law
(Government Code Sections 53080 and 65995).
Statutory
Limits
In 1987, at
almost the same time that the U.S. Supreme Court was handing down
its decision in the Nollan case, the California Legislature
approved AB 1600 (Chap. 927, Stats. of 1987), a bill requiring
local agencies to establish a "nexus" or link between
the fees being exacted and the needs created by the project paying
the fees as well as to account for the ultimate use of any fees.
These requirements and subsequent amendments are codified at
sections 66000 et seq. of the Government Code.
By its own
terms, the Mitigation Fee Act applies to development impact fees
imposed by local agencies to finance all or part of the cost of
public facilities (such as streets, traffic signals, bridges and
major thoroughfares, drainage and flood control facilities, water
and sewer, and government buildings). These requirements do not
apply to taxes or special assessments (which are not fees), Quimby
Act fees, processing fees, fees collected under a development
agreement, or certain fees collected by redevelopment agencies.
"Local agency" is defined to include counties, cities,
special districts and school districts (Government Code section
66000 (c)).
Whenever
establishing, imposing, or increasing a fee "as a condition
of approval of a development project," the local agency
imposing the fee must identify the purpose of the fee and the use
to which it will be put. The local agency must also specify the
nexus between the development project (or class of project) and
the improvement being financed (Government Code section 66001). It
must further establish that the amount of funds being collected
will not exceed that needed to pay for the improvement (Government
Code section 66005).
Revenues
resulting from such fees must be kept and administered in a
separate account or fund dedicated to the public improvements
being financed and must not be commingled with other revenues and
funds of the local agency (Government Code section 66006). In
addition, five years after the first deposit into the account or
fund, the local agency must make specific findings regarding any
unexpended funds, whether those funds are committed to expenditure
or not (Government Code section 66001). The same findings must
continue to be made once every five years thereafter. If these
findings are not made, statute requires the agency to refund the
fees to the current owner of the affected property. Refunds may be
made by direct payment, temporary suspension of fees, or
"other reasonable means," at the discretion of the local
agency.
In its findings
under section 66001, the agency must:
(1) identify the
purpose to which the fee is put;
(2) demonstrate
a reasonable relationship between the fee and purpose for which it
is charged;
(3) identify all
sources and amounts of funding anticipated to be used to finance
the incomplete improvements; and
(4) designate
the approximate dates on which the above funding is expected to be
deposited into the appropriate account or fund.
The following
discusses some of the other aspects of these statutes.
Government
Code section 66001 requires that when sufficient funds have
been amassed to complete the financing of public improvements
for which impact fees have been collected (as determined in
the annual fiscal report required under section 66006), but
the improvements have not been completed, the agency must
either identify "an approximate date by which the
construction of the public improvement will be commenced"
or refund the unexpended portion of the funds to the current
record owners of the affected properties on a prorated basis.
Government
Code section 66006 requires that fees collected for an
improvement related to a development project must be deposited
in a separate fund or account and are to be expended
"solely for the purpose for which the fee was
collected." It further requires that the agency make a
yearly public financial disclosure for each of its fee
accounts. The provisions of this section apply to all
development projects, including residential, commercial, and
industrial.
Within 180 days
of the end of each fiscal year, the agency must make the following
information available:
(1) a brief
description of the type of fee in the account;
(2) the amount
of the fee;
(3) the
beginning and ending balance of the account;
(4) the fees
collected that year and the interest earned;
(5) an
identification of each public improvement for which the fees were
expended and the amount of the expenditures for each improvement;
(6) an
identification of an approximate date by which construction of the
improvement will commence if the local agency determines that
sufficient funds have been collected to complete financing of an
incomplete public improvement;
(7)a description
of each inter-fund transfer or loan made from the account or fund,
including the public improvement on which the transferred or
loaned fees will be expended, the date on which any loan will be
repaid, and the rate of interest to be returned to the account;
and
(8) the amount
of money refunded under section 66001.
The public
agency must review the fiscal report at its next scheduled public
hearing after public release of the report. Section 66006
specifies the requirements 15-day advance public notice.
Government
Code section 66006.5 provides that a city or county which is
imposing a fee or charge for transportation purposes may, by
ordinance, create a procedure for accepting property
dedications in lieu of full or partial payment of that fee or
charge.
Government
Code section 66007 prohibits a local government which has
imposed fees for the construction of public improvements or
facilities as part of a residential development from requiring
payment of the fee prior to the date of final inspection or
the issuance of final occupancy certificate, whichever comes
first. As a condition of granting the building permit, the
local agency may require the developer to execute a contract
promising to pay the required fee upon final inspection or
issuance of a certificate of occupancy.
When a project
involves more than one dwelling, the local agency can determine
whether: (1) the fee is to be paid in a lump sum when the first
residence receives its final inspection or certificate of
occupancy; (2) the fee is to be paid on a pro rata basis when a
certain percentage of the dwellings have received their final
inspection or certificate of occupancy; or (3) the fee is to be
paid on a pro rata basis for each dwelling as it receives its
final inspection or certificate of occupancy.
Fees may be
collected before the final inspection or certificate of occupancy
stage if the local agency determines that:
(1) the fees
will be collected for an improvement or facility for which an
account has already been established and funds appropriated and
the local agency has adopted a proposed construction schedule or
plan for the project (i.e., a capital improvement plan or
five-year school facilities plan; or,
(2) the fees are
to reimburse the agency for expenditures it has already made.
Section 66007
does not apply to fees collected to cover the cost of code
enforcement or inspection services.
Government
Code section 66008 was enacted in 1997 in response to reports
that the accounts established for development fees were being
commingled and, in some cases, had been illegally placed in
general revenue accounts. It reiterates the requirement that
development fees are to be expended only on the public
improvements for which the fee was collected. It also reminds
local agencies that fees are not to be levied, collected, or
imposed for general revenue purposes.
Under
Government Code section 66011, local agencies cannot collect
fees from the reconstruction of any residential, commercial or
industrial development that has been damaged or destroyed as a
result of a natural disaster, as declared by the Governor.
Fees can be assessed on that portion of the development which
is not "substantially equivalent" to the property
being rebuilt.
Government
Code sections 66013 and 66014 provide that fees for water or
sewer connections and for zoning variances, zone changes, use
permits, building inspections, building permits, planning
services, subdivision maps, and LAFCO proceedings may be
adopted without a public vote only when they do "not
exceed the estimated reasonable cost of providing the service
for which the fee is charged."
Government
Code section 66016 imposes a general requirement that
newspaper notice be made and an open and public hearing held
prior to approval of any proposed new fee or increase in
existing fees. Prior to the hearing, the agency must make data
on the estimated cost of services and the estimated revenues
generated by the fees available to the public. This section
prohibits the legislative body of the agency from delegating
authority to enact new or increase existing taxes.
Government
Code section 66017 establishes a 60-day delay between the time
a fee, charge, or an increase in a fee or charge is adopted
and when it becomes effective. This section applies to fees
for development projects as defined under section 66000.
For those
instances where fees are needed immediately, the statute also
establishes an urgency procedure whereby, with four-fifths
vote of the local legislative body, interim fees may be
collected for up to 30-days. Not more than two 30-day
extensions of the urgency fees can be voted by the legislative
body. (Government Code section 66017 (b)).
Pursuant to
Government Code section 66020, any party may protest the
imposition of fees, dedications, reservations or other
exactions imposed on a residential housing development
(including a tentative subdivision map or parcel map). To do
so, the party must pay the exaction in full (or provide
evidence of arrangements to pay) when due or otherwise ensure
performance of the conditions imposed when required and serve
the governing body of the agency with a notice that payment in
under protest. A protest must be filed when the development is
approved, or within 90 days of imposition of the exaction. The
agency must notify the applicant in writing of the project's
approval and beginning of the 90-day period in which to submit
a protest. Any related court challenge must be filed by the
party within 180 days of the agency's written notice.
If a court
upholds the challenge, the local agency must refund the fee
collected, with interest. Amendments to the code require the
court, if it grants a judgement to a plaintiff invalidating
all or a portion of an ordinance or resolution enacting a fee,
dedication, reservation, or other exaction, to direct the
local agency to make the refund to a plaintiff or to any other
person who paid the fee or exaction under protest. A local
agency which has received such a protest cannot withhold
approval or the issuance of permits for the residential
project solely for that reason. However, when the permitting
agency makes certain findings relative to the public health,
safety, and welfare, they may suspend approval of the project
pending either withdrawal of the protest, expiration of the
180-day time-limit without an action being filed or resolution
of the action that is filed.
Government
Code section 66021 states that any party on whom a fee, tax,
assessment, dedication, reservation, or other exaction has
been imposed may protest. If the party files the protest under
both section 66008 and 66475.4 (protest of subdivision
exactions), then section 66475.4 shall prevail where conflicts
exist between the two procedures. The protest procedures of
section 66021 do not apply to the protest of any tax or
assessment that is (1) levied under a principal act which
contains its own protest procedures; or (2) pledged to secure
the payment of principal or interest on bonds or other public
indebtedness.
Government
Code section 66022 provides that judicial challenges to fees
adopted or amended under either section 66013 or 66014 must be
mounted within 120 days of adoption or amendment. This also
applies to fees that are amended automatically under the terms
of a local resolution or ordinance. The agency imposing the
fee bears the burden of proof in a legal challenge to its fee
(section 66024).
Government
Code section 66023 establishes a procedure by which anyone may
request an audit of a local agency's fees.
Other pertinent
fee statutes include:
Public Resources
Code section 21004 limits mitigation measures to those which may
be imposed by authority separate from the California Environmental
Quality Act (CEQA). The local subdivision ordinance is an example
of such an independent authorization for imposing exactions. CEQA
itself provides no authority to impose fees or dedications.
Government Code
section 50030 provides that no permit fee imposed by a city or
county for the placement, installation, repair, or upgrading of
telecommunications facilities (lines, poles, or antennas) by a
telephone corporation that has obtained all necessary
authorizations from the California Public Utilities Commission and
the Federal Communications Commission may exceed the cost of
providing the service for which it is charged, nor be levied for
general revenue purposes.
Government Code
section 65913.8 prohibits the use of fees imposed as a condition
of development project approval to pay for maintaining and
operating the infrastructure built with those fees. This statute
offers two exceptions to its own rule for small developments where
formation of a maintenance district is impractical or where
maintenance is only to be funded during a temporary period while a
maintenance entity is being formed.
Statutory
Limits to Map Act Exactions
Section 66411.1
of the Map Act limits the improvements that may be required of a
subdivision of five or fewer lots to the dedication of
rights-of-way, easements, and the construction of offsite and
onsite improvements. Installation of the improvements is not
required until a permit is required for development of the new
parcel or until construction is required under a schedule agreed
upon by the jurisdiction and the subdivider. This limitation does
not apply to Quimby Act exactions.
All or a portion
of any land which has been dedicated in fee for public purposes
(including public improvements and facilities, but not open space,
parks or schools) is subject to reconveyance to the subdivider if,
upon the request of the subdivider, the local agency determines
that the public purpose for which all or a portion of the land was
originally dedicated no longer exists or the property is not
needed for public utilities (Government Code section 66477.5).
Further, upon subdivision map approval, local agencies must attach
a certificate to the approved map which states the name and
address of the subdivider who is dedicating the land, a legal
description of the dedicated land, and notice that reconveyance
will be made under the circumstances described above. The
reconveyance requirement applies only to land which was required
to be dedicated on or after January 1, 1990.
The Map Act also
creates a procedure for protesting dedications alleged to be
excessive. Government Code section 66475.4 provides that a
subdivider may bring suit against the local agency to determine
whether a dedication "is not reasonably necessary to meet
public needs arising as a result of the subdivision." This
section does not apply to in-lieu fees. When a dedication is found
to be excessive, the local agency must either:
(1) require
redesign of the subdivision;
(2) pay
compensation for the excessive portion of the dedication; or,
(3) require
redesign of the subdivision to delete or modify the excessive
dedication.
SERVICE
CHARGES
Many of the
service fees levied by local government are authorized by state
enabling statutes. For example: waste disposal sites and services
within county service areas under Government Code section
25210.77(e); water service connection charges under Water Code
section 22281.1; and city sewer service or immediate availability
charges under Government Code section 38902.
The local
government's legislative body may impose fees for services only
after a noticed public hearing. Pursuant to Government Code
section 66014 et seq., when a local agency charges fees for zoning
changes, zoning variances, use permits, building permits, building
inspections, filing of applications for annexation or related
reorganizations, subdivision maps, or planning services
"those fees shall not exceed the estimated reasonable cost of
providing the service for which the fee is charged." Fees
which exceed the reasonable cost are considered special taxes and
must be submitted to the jurisdiction's voters for a two-thirds
vote approval. Water connection, sewer connection, and capacity
charges are similarly limited under section 66013. The amount of
the fee must be based upon a needs study or other evidence in the
hearing record so that its reasonableness can be ascertained
(Beaumont Investors v. Beaumont-Cherry Valley Water District
(1985) 165 Cal.App.3d 227).
The Legislature
approved a measure statutorily overturning the San Marcos Water
District v. San Marcos Unified School District (1986) 42 Cal.3d
154 discussed earlier. Pursuant to Government Code sections
54999-54999.6, any public agency which has been providing public
utility service may charge another agency a capital facilities fee
or capacity charge to pay the capital cost of a public utility
facility. However, new fees may only be imposed on state agencies,
schools, and state colleges and universities under cooperative
agreement with such agencies (section 54999.3). These fees and
charges may be subject to Proposition 218, depending on the
service being provided.
PROPERTY
RELATED USER FEES AND STANDBY CHARGES
Proposition 218
has amended the State Constitution to state that "property
related" fees and all standby charges may be imposed only
upon voter approval. Although its provisions are not always
reflected in statute, bear in mind that any statutory law or
regulation which conflicts with Proposition 218 is null and void.
Under the
express terms of the initiative, no fee or charge can be imposed
or increased unless it meets all of the following requirements:
the revenues
derived from the fee do not exceed the funds necessary to
provide the property related service;
the revenues
are not used for any purpose other than that for which the fee
or charge was imposed; and
the amount
charged to "any parcel or person as an incident of
property ownership" does not exceed the proportional cost
of the service which is attributable to the parcel (Section
6(b), Article XIII D, California Constitution).
Further,
Proposition 218 prohibits levying property related fees to pay for
general governmental services, such as police, fire, ambulance, or
library service which are available to the public at large;
services which are not used by or immediately available to the
property owner; and programs unrelated to the property related
service. The initiative requires the repeal of all nonconforming
fees by July 1, 1997.
Proposition 218
defines a fee or charge as "any levy other than an ad valorem
tax, a special tax, or an assessment, imposed by an agency upon a
parcel or upon a person as an incident of property ownership
[including tenants who are directly responsible for paying the fee
or charge]" (Section 2(c) and (g), Article XIII D, California
Constitution). It requires property owner approval of property
related fees and charges, with the exception of fees and charges
for sewer, water, and refuse collection services. Standby charges
and charges for future services are now classified as special
assessments (Section 6, Article XIII D, California Constitution).
They can only be levied in accordance with the rules for special
assessments described in Chapter III.
In order to
impose (or in the case of existing fees, increase) property
related fees and charges, the jurisdiction must:
Identify the
parcels upon which the fee or charge is to be imposed.
Calculate the
amount to be charged to each parcel.
Notify by
mail the record owner of each parcel of the proposed fee or
charge. The notice must disclose the amount to be charged to
that parcel, the basis for calculating the amount, the reason
for which the fee is charged, and the date, time, and place of
the public hearing to be held on the proposal.
Hold a public
hearing not less than 45 days after the mailing of public
notice at which to consider protests against the proposed fee
or charge. The proposal must be dropped if a majority of the
affected property owners submit written protests at that time.
Conduct a
protest ballot not less than 45 days after the public hearing
on the question of whether to impose the fee or charge (this
assumes that a majority of written protests are not received
at the hearing). The balloting may be conducted either among
the affected property owners (simple majority necessary for
approval) or among the electorate residing in the affected
area (two-thirds majority necessary for approval). This may be
carried out by mailed ballot, similar to the procedure for
special assessments. In any case, no balloting is required for
fees or charges for sewer, water, and refuse collection
services.
The election
process for fees and charges differs in several respects from the
process required for special assessments. First, the public
hearing on the fees or charges is separated from the ballot by at
least 45 days. For special assessments, the ballots are compiled
at the public hearing. Second, a proposed fee or charge may be
killed before going to ballot if a majority of the affected
property owners submit written protests at the public hearing.
Killing a proposed special assessment requires the return of
formal ballots. Third, a jurisdiction proposing or increasing a
fee or charge may place the question before either of two
electorates: affected property owners (simple majority necessary
for approval) or all voters residing within the area subject to
the fee (two-thirds majority necessary for approval). A special
assessment election is limited to affected property owners.
Fourth, fees or charges for sewer, water, and refuse collection
services are subject to public hearing and majority protest
requirements, but not a protest ballot. After July 1, 1997 all
special assessments will be subject to the voting requirements.
As with taxes
and assessments, property related fees and charges are subject
to repeal or reduction by voter initiative.
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