Temporary Restraining Order Issued On State Allocation Board Finding That No State Funds Are Available For New Construction Projects For Level III Developer Fees

At the May 25, 2016, State Allocation Board meeting, the State Allocation Board authorized, for the first time ever, the imposition of Level III Developer Fees.  Developer Fees or school impact fees are paid by property owners and developers to mitigate the impacts of new construction on the school district’s facilities.  There are three levels of Developer Fees, commonly referred to as Level I, II, and III.  Until May 25, 2016, school districts have never been authorized to levy Level III fees because the State Allocation Board has never determined that state funds for new construction projects were not available.

Level III fees are intended to represent 100% of the new construction projects and are essentially double the Level II fees.  In order to qualify for Level III fees, a school district must qualify for Level II fees, and there must be a lack of state funds for new construction projects, and the State Allocation Board must determine that state funds are not available for new construction projects.  Under Government Code section 65995.7 “state funds are not available if the State Allocation Board is no longer approving apportionments for new construction pursuant to Article 5 (commencing with Section 17072.20) of Chapter 12.5 of Part 10 of the Education Code due to a lack of funds available for new construction.”  In determining that state funds are not available for new construction projects, the State Allocation Board reasoned that the last time an apportionment for new construction under Article 5 was made was on September 8, 2015, which was for a February 2015 unfunded approval, and that the remaining $2.2 million in state bond authority for new construction projects has been committed to facility hardship projects under different statutory authority.

On May 25, 2016, the California Building Industry Association filed a Petition for Writ of Mandate challenging the State Allocation Board’s finding that state funds are not available for new construction projects.  The California Building Industry Association also sought a temporary restraining order against the State Allocation Board from taking any further actions to implement Level III fees.

On May 26, 2016, a temporary restraining order was issued to enjoin and restrain the SAB from the following:  (1) to refrain from giving notice that state funds are not available for new construction projects to the Chief Clerk of the Assembly or the Secretary of the Senate, (2) to refrain from taking further action on any finding or determination that state funds are not available for new construction projects, and (3) to refrain from further authorizing the imposition of Level III fees.  The court set a hearing date for July 1, 2016.

The temporary restraining order only applies to the State Allocation Board.  Each school district may be affected differently depending on the current status of its developer fees, School Facilities Needs Analysis, and previous board resolutions.  Please contact us to discuss any potential impacts on your school district’s developer fees.

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