School District Failed to Document Justification For Applying Full School Fees to Demolition of and Development of a Multi-family Project

By William W. Abbott

As developers pursue infill or re-use opportunities, a predictable question regarding impact fees will arise: To what extent is the developer entitled to a credit for the existing uses onsite which ultimately are displaced by a new project? At least in the case of school facilities, we know from the recent decision in Cresta Bella, LP v. Poway Unified School District (July 31, 2013, D060789) ___ Cal.App.4th ___,that the burden is on the agency to justify the fee, and in the absence of sufficient justification, that the developer may be entitled to a fee refund. 

Cresta Bella proposed a new 368 apartment complex including 371,443 square feet to replace an existing 248 unit complex consisting of 258,169 square feet. Pursuant to state statute, the local school district imposed its Level II fee on all of the new structure, without credit for any of the square footage demolished to make way for the project. Cresta Bella paid the fees under protest and sued for a refund, seeking slightly in excess of $1,000,000.00. In defense of the fee, the school district pointed to its recently approved school facility needs analysis. The trial court agreed with the district that the study provided sufficient nexus, and rejected Cresta Bella’s argument. The developer appealed, and the court of appeal reversed, directing that Cresta Bella was entitled to a refund.

As established by statute and prior appellate decisions, the appellate court concluded that the burden is on the agency to justify the fee. The appellate court’s interpretation of the school facility needs analysis was that while it may have supported the fee as applied to new construction, the study did not provide the necessary justification to support the argument that the school facility needs associated with new construction would exceed those needs created by the existing multi-family project. This required showing was previously set forth in the decision of Warmington Old Town Associates v. Tustin Unified School District (2002) 101 Cal.App.4th 840. Accordingly, the appellate court held that the trial court erred in rejecting Cresta Bella’s argument, and ordered a refund.

William W. Abbott is a partner at Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, or the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.

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