1901 First Street Owner, LLC v. Tustin Unified School Dist. (2018) 21 Cal.App.5th 1186

The methodology for imposing local impact fees is largely left to the discretion of the local agency adopting the impact fees. (AB 1600; Gov. Code §66000, et seq.; the “Mitigation Fee Act”.) As long as there is a reasonable basis for the methodology, a reviewing court should uphold the enacting agency’s approach (e.g., gross building area v. net building area, bedrooms, or EDUs). The notable exception to this involves school impact fees wherein the Legislature set forth the methodology which uses the interior square footage with listed exceptions. Petitioner 1901 First Street Owner, LLC (“First Street”), the developer of a multi-family project, challenged how the methodology was applied to its project. First Street argued that non-inhabited areas such as an interior gym, hallways, and meeting rooms (“interior common areas”) should not be included in the calculation. Initially, the City had agreed with First Street’s opinion and calculated the fee excluding interior common areas. When challenged by the school district, however, the City reversed itself, recalculating the fee to include the interior common areas. As a result, an additional 70,000 square feet were included in the recalculation, which translated to a $238,549.86 increase in the school impact fees. First Street sued and lost at the trial court.

As the interpretation of the statute is purely a legal question, the appellate court applied its independent judgment in interpreting the statute, ultimately agreeing with the City, the school district and the trial court. It found that though detached homes do not include interior common area, this fact was not a basis for reaching a contrary conclusion to that of the City. First Street also argued that it had a vested right based upon a vesting map it processed in conjunction with its entitlements, and as such, the City could only apply its former fee calculation methodology. Citing Government Code section 66498.6, the appellate court noted that the vesting map law does not vest rights as to misinterpretation of state law.

Commentary:  In circumstances involving non-school impact fees, First Street may well have had a winning argument with respect to the effect of the vesting map. As school impact fees are based upon a state-crafted formula, the local agency did not have the discretion to misapply state law.

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

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, Inc., 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.