1

Filed 3/16/22 CP V Walnut v. Fremont Unified School Dist. CA1/2

Opinion following rehearing

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or 

ordered published for purposes of rule 8.1115. 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

CP V WALNUT, LLC,

Plaintiff and Appellant,

v.

FREMONT UNIFIED SCHOOL 

DISTRICT et al.,

Defendants and Appellants.

 A157722

 (Alameda County Super.

 Super. Ct. No. RG18901866)

California has adopted a number of ways to finance the construction 

and maintenance of public schools. Two of those ways, authorized by the 

Government Code,1 are what is known as Level 2 and Level 3 fees. These can 

be imposed by a school district, requiring developers of a new housing project 

to pay some of the cost of school facilities to handle the number of new 

students anticipated from the project. 

The developer here is CP V Walnut LLC (Walnut), which describes 

itself as “the owner and developer of the Walnut Residences Project in the 

City of Fremont,” which is planned to have “632 rental apartments.” During 

the course of administrative proceedings before the Fremont Unified School 

1 Statutory references are to this code unless otherwise indicated.
2

District (District), Walnut was assessed both Level 2 and Level 3 fees. It paid 

under protest, and then sued to recover the amounts it alleged were 

“unlawful and excessive.” Some of the Level 2 fees were refunded prior to the 

trial court determining that the Level 2 assessment was “flawed” in part by 

the manner in which it was calculated, and the Level 3 assessment was 

statutorily invalid. Walnut and the District then advised the court that they 

had resolved the “flawed” aspect of the Level 2 assessment, withdrawing it 

from the litigation. Pursuant to that stipulation, and the accompanying form 

of judgment and proposed writ of mandate submitted by the parties, the 

District was directed by the writ to repay Walnut more than $7.3 million for 

the Level 3 fees improperly assessed and collected, together with 

approximately $80,000 interest for the refunded Level 2 amounts. 

Both sides have appealed. Walnut contends it should have a greater 

amount of the Level 2 fees refunded. The District contends that, with the 

exception of the amount of the Level 2 refunds, all fees, Level 2 and Level 3,

were properly assessed, and that Walnut is not entitled to recover either 

additional fees or interest.

We conclude that all of Walnut’s arguments against the Level 2 fees are 

without merit. As for the District’s appeal, we reject its efforts to overturn 

the interest award for the two refunds. However, we agree with its 

contention that the trial court erred in ruling that the Level 3 fees were void 

by reason of Proposition 51. That measure, adopted by the voters after 

Walnut paid the Level 3 fees, provided expanded funding for school 

construction, but considerable time would pass before the new funds would 

actually be in the hands of local authorities. Until that occurred, there is 

nothing in Proposition 51 giving the slightest support to Walnut’s argument 

that passage of that measure effected an across-the-board invalidation of 
3

Level 3 fees which had already been assessed and paid. We will thus reverse 

and order entry of a new judgment.

BACKGROUND

The briefs filed by the parties demonstrate that they are thoroughly 

familiar with the genesis of this controversy (even if not all of that knowledge 

made it into the briefs). In the interests of brevity, we mention only the 

salient highlights. However, coherence requires an initial examination of the 

purpose of the fees, and how they are calculated.

The Problem’s History

In 1993, our Supreme Court summarized the complicated evolution of 

public school finance:

“ ‘In California the financing of public school facilities has traditionally 

been the responsibility of local government. “Before the Serrano v. Priest

[5 Cal.3d 584] decision in 1971, school districts supported their activities 

mainly by levying ad valorem taxes on real property within their districts.” 

[Citation.] Specifically, . . . school districts . . . financed the construction and 

maintenance of school facilities mainly through the issuance of local bonds 

repaid from real property taxes.’ [Citation.]

“ ‘In the early 1970’s, in the wake of increased resistance throughout 

California to rising property taxes, local governments found themselves faced 

with the task of devising new methods to finance construction of school 

facilities. A wave of residential development, causing serious overcrowding 

in local schools, contributed to the problem. [Citations.]

“ ‘In an effort to keep pace with the continuing influx of new students, 

local governments began the practice of imposing fees on developers to cover 

the costs of new school facilities made necessary by the new housing. Such 

“school-impact fees” were generally considered to be a valid exercise of the 
4

police power under the California Constitution (Cal. Const., art. XI, § 7), so 

long as the local entity could demonstrate a reasonable relationship between 

the fee imposed and the need for increased facilities created by the 

development. [Citations.]’ [Citation.]

“In 1977 the Legislature took its first major step towards a statewide 

solution to the problem, by granting local governments specific legislative

authorization—i.e., in addition to their constitutional police power—to 

impose school-impact fees: ‘In 1977, with the passage of Senate Bill No. 201 

(The School Facilities Act, effective Jan. 1, 1978), the Legislature specifically 

authorized cities and counties to enact ordinances requiring residential 

developers to pay fees to finance temporary school facilities necessitated by 

new development. In the preamble to the act, the Legislature set forth its 

findings that “residential developments may require the expansion of existing 

public schools or the construction of new school facilities” and that “funds for 

the construction of new classroom facilities are not available when new 

development occurs, resulting in the overcrowding of existing schools.” 

Therefore, “new and improved methods of financing for interim school 

facilities necessitated by new development are needed in California.” (Gov. 

Code, § 65970.)’ [Citation.]

“The School Facilities Act, however, was not a complete solution. . . . 

It did not authorize school districts to impose school-impact fees themselves.

The statute merely authorized each school district, when appropriate, to 

make ‘findings’ that its schools were overcrowded and there was no feasible 

method of reducing that condition, and to transmit those findings to the local 

city council or county board of supervisors; if the latter concurred in the 

findings, that concurrence furnished a legal basis for the local government to 

impose the school-impact fees by ordinance. (§§ 65971–65972.) The fees 
5

could be used only to provide ‘interim,’ i.e., temporary, classroom facilities. 

(Now § 65974, subd. (a)(3).) The amount of the fees, as before, was required 

to be ‘reasonably related and limited to the need for schools caused by the 

development.’ (Id. subd. (a)(4).) And, . . . in enacting the School Facilities Act 

the Legislature did not occupy the field of school construction financing and 

did not preempt local ordinances imposing school-impact fees under the police 

power. [Citation.]

“Nine years later the Legislature reentered the field of school financing, 

and this time fully and expressly occupied it. (Stats. 1986, chs. 886, 887, 888, 

889.) ‘The School Facilities Act, as originally enacted, proved to be a stopgap 

measure. [Citation.] In 1986 it was substantially revised and expanded with 

the passage of a comprehensive multibill package, addressing an identified 

$3.8 billion need for new permanent school facilities to meet the demands of 

an expanding population. The heart of this legislation, Assembly Bill 

No. 2926, consolidated the legal authority for assessment of developer fees 

for school facilities into a single body of law. It authorized the governing 

boards of the school districts themselves, rather than city councils or county 

boards of supervisors, to impose school-impact fees districtwide, subject to 

certain monetary limitations.’ [Citation.]

“Dispelling any doubt as to its intent, the Legislature declared in the 

subject bill that in many parts of California real property development was 

causing serious overcrowding in schools that traditional public financing was 

inadequate to relieve, and ‘For these reasons, a comprehensive school 

facilities finance program based upon a partnership of state and local 

governments and the private sector is required to ensure the availability of 

school facilities to serve the population growth generated by new 

development.’ [Citation.] Finally, ‘The Legislature therefore finds that the 
6

levying of appropriate fees by school district governing boards at the rates 

authorized by this act is a reasonable method of financing the expansion and 

construction of school facilities resulting from new economic development 

within the district.’ [Citation.]” (Grupe Development Co. v. Superior Court

(1993) 4 Cal.4th 911, 915–918, fn. omitted.)

The Statutory Framework

Education Code section 17620 is the starting point. It authorizes the 

governing board of any school district “to levy a fee . . . against any 

construction within the boundaries of the district for the purpose of funding 

the construction or reconstruction of school facilities,” but only as to “new 

commercial and industrial construction” or “new residential construction.”

(Ed. Code, § 17620, subds. (a)(1)(A)-(a)(1)(B).) 

The fee cannot include “regular maintenance or routine repair of school 

buildings and facilities.” (Ed. Code, § 17620, subd. (a)(2)(A).) No building 

permit or certificate of occupancy can be issued unless the appropriate school 

district certifies that any assessed construction fee has been paid. (Id. subds. 

(b), (c).)

Pursuant to section 66001, subdivision (a), “[i]n any action . . . imposing 

a fee,” the district must do four things: First, it must identify the purpose of 

the fee. Second, it must identify the use to which the fee will be put. If the 

use is financing public facilities, the facilities must be identified; however, the 

district may identify the facilities by reference to a capital improvement plan, 

to facilities identified in applicable general or specific plans, or to other public 

documents “that identify the public facilities for which the fee is charged.” 

Third, the district must determine how there is a reasonable relationship 

between the fee’s use and the type of development project on which the fee is 

imposed. Fourth, the district must determine how there is a reasonable 
7

relationship between the need for the public facility and the type of project on 

which the fee is imposed.

Sections 65995, 65995.5, 65995.6, and 65995.7 set out the procedure for 

calculating the fee amounts a developer may be charged for residential, 

commercial, and industrial construction. Subdivision (b) of section 65995 

fixes the maximum amounts (annually adjusted for inflation by the State 

Allocation Board (SAB)) assessable for the per square footage of “assessable 

space” for residential construction, and “chargeable covered and enclosed 

space” for commercial or industrial construction. These are known as Level 1

fees.

Section 65995.5 establishes an alternative procedure applicable only to 

new residential construction. Unlike Level 1 fees, actual need must be 

demonstrated. This is done with a “school facility needs analysis,” whose 

purpose is to determine the extent of the need over the next five years for 

school facilities that are attributable to new development. (See § 65995.5, 

subds. (b)(2), (f).) 

Specifically, the needs analysis “shall project the number of unhoused 

elementary, middle, and high school pupils generated by new residential 

units. . . . This projection of unhoused pupils shall be based on the historical 

student generation rates of new residential units constructed during the 

previous five years that are of a similar type to those anticipated to be 

constructed . . . and relevant planning agency information.” (§ 65995.6, 

subd. (a).)

“The maximum square foot fee . . . authorized by this section that may 

be collected . . . shall be calculated by a governing board of a school district as 

follows: [¶] . . . The number of unhoused pupils identified in the school 

facilities needs analysis shall be multiplied by the appropriate amount as 
8

provided in . . . Section 17072.10. This sum shall be added to the site 

acquisition and development cost . . . .” (§ 65995.5, subds. (c), (c)(1).)

The projected total square footage of new residential units “shall be 

based on information available from the city or county within which the 

residential units are anticipated to be constructed or a market report 

prepared by an independent third party.” (§ 65995.5, subd. (c)(3).).)

The school district must also apply to the SAB for state school bond 

funds. (§ 65995.5, subd. (b)(1).) If funds from that source are available, the 

fee assessed is calculated according to the formula set out in section 65995.5, 

subdivision (c). These are known as Level 2 fees.

Finally, “[i]f state funds for new school facility construction are not 

available, the governing board of a school district that complies with Section 

65995.5 may increase the . . . fee . . . calculated pursuant to subdivision (c) of 

Section 65995.5 by an amount that may not exceed the amount calculated 

pursuant to subdivision (c) of Section 65995.5.” (§ 65995.7, subd. (a).) These 

are known as Level 3 fees.

These appeals concern the propriety of the Level 2 and Level 3 fees that 

were assessed against Walnut.

The Project And The District’s Assessment Of Fees

In November 2015, the City of Fremont approved Walnut’s application 

to build “Walnut Residences,” which Walnut described as “relatively unique” 

in that the 632 planned one and two-bedroom apartments were “not designed 

to attract many families with children.” Walnut anticipated that the project 

would only “generate approximately 55 K-12 students.” 

At that time the District was operating with a state-mandated Long 

Range Facilities Plan adopted by the District in 2014, when the District had 

approximately 33,000 students in 39 schools. Overcrowding was already a 
9

problem, and increases at all levels K-12 were anticipated. To that end, in 

2015, the District acquired a site for a new middle school. 

About this time, funding from the SAB dried up. This meant that the 

District was now statutorily authorized to assess Level 3 fees on top of Level 

2 fees.

However, as shown above, Level 2 fees can only be assessed if the 

District prepared a school facility needs analysis. The District did so in 2017,

which projected that the District currently had 852 “unhoused” students, and 

forecast 2,417 “total projected students from future units.” This would 

necessitate construction of four new schools, with a projected cost of more 

than $77 million. The Level 2 fee was fixed at $13.05 per square foot. The 

Level 3 fee was initially (May 10, 2017) set at double that—$26.11 per square 

foot—although, as will be shown, it was subsequently reduced to $23.12.

Walnut believed that the assessed fees—totaling $20,365,068.92—were 

excessive and unjustified. Walnut paid them under protest, whereupon it 

commenced this action.

A needs analysis is operative for only one year (§ 65995.6, subd. (f)), 

which means that Level 3 fees are likewise of limited duration. In May 2018, 

the District adopted another needs analysis, and re-set the Level 2 fee at 

$8.83, and the Level 3 fee at $18.17. 

Walnut’s Complaint

In April 2018, Walnut filed a complaint in which it alleged three causes 

of action, two for a writ of mandate—one directed at each level of fees—the 

other for declaratory relief. Walnut reiterated its belief that “the Project will 

generate approximately 55 K-12 students, all of whom can be accommodated 

in two classrooms, at a cost of less than $900,000. Yet the . . . District 
10

imposed [impact] fees in excess of $16,000,000 . . . some $300,000 for each 

student likely to be generated by the Project.” 

Concerning the first mandate cause of action, Walnut alleged that a 

statutory requisite to imposing fees was absent, namely, the lack of funding 

from state bond funds. Walnut alleged that passage of Proposition 51 by the 

voters in November 2016 opened a new income stream:

“In August 2017, the State sold the first phase of the bonds authorized 

by Proposition 51, thereby making over $400 million in proceeds available for 

new school facility constriction. Based on the sale of these bonds, on 

September 6, 2017, the SAB resumed apportionment of funds for new 

construction, approving apportionments of over $400,000,000 to school 

districts for new school facility constriction.

“At all times herein mentioned, the District has been determined by the 

SAB to be eligible for and has been actively applying for and receiving 

apportionments of state funding under the School Facilities Program. Since 

the passage of Proposition 51, the District has submitted applications for over 

$60 million in new construction funds from the bonds issued pursuant to that 

authority, and the SAB has approved apportionment of Proposition 51 bond 

funds to the District.

“Because one of the express statutory prerequisites to imposition of 

Level 3 fees—that the SAB ‘is no longer approving apportionments for new 

construction’ due to a lack of funds available for new construction—does not 

exist, the District was not legally authorized to impose Level 3 fees on the . . . 

Project and is not currently legally authorized to impose such fees.” 

With respect to the second mandate cause of action, Walnut alleged 

that “[t]he District’s levy and demands for payment of the Level 2 school fees 
11

were and are unlawful, arbitrary, capricious and without legal or evidentiary 

support” for a number of reasons. 

First, the fees “are not calculated or justified in the manner specified 

and required under . . . [the] controlling law.” Next, the District “did not 

comply with the methodologies prescribed by the School Facilities Act, was 

not supported by substantial evidence, and failed to properly account for or 

credit other assets and resources available to the District for mitigation of 

school facility impacts.” Walnut identified seven supposed errors in the 

needs analysis, including “invalidly includ[ing] costs for new school facilities 

and new school sites . . . that will not be needed to accommodate students 

from new developments” and “overestimate[ing] the number of students that 

would be generated by new multi-family development, including the Walnut 

Residences Project.” Thus, Walnut alleged the District had imposed Level 2 

fees “at unjustified and excessive rates, without reasonable justification or 

just compensation,” and “unlawfully imposed unconstitutional conditions on 

the Project.” 

The parties’ disagreement on the validity of the fees formed the basis 

for the cause of action for declaratory relief. 

The Trial Court’s Judgment

Following its examination of the papers, and oral argument, the trial 

court issued an order explaining its decision. With minor editorial 

modifications made by us, its pertinent language was as follows:

“Petitioner CP V Walnut, LLC [Walnut] is a real estate company 

developing a multi-family building in Fremont. As a condition of its ability to 

develop that building in its territory, Respondent Fremont Unified School 

District [District] imposed developmental impact fees on [Walnut], 

purportedly to offset a share of the District’s projected costs for constructing 
12

or reconstructing new schools to house the increased student population 

caused by new real estate development. Walnut paid the fees under protest. 

Walnut now challenges the District’s calculations of the permissible rate and 

petitions this Court for a writ of mandate directing the District to set aside 

its decision imposing development impact fees and reimburse a portion of the 

fees it paid. For the reasons stated below, the petition is GRANTED.

“Setting impact fees is a quasi-legislative action subject to reversal if 

shown to be ‘arbitrary, capricious, or entirely lacking in evidentiary support.’ 

[Citation.]

“The District abused its discretion when it purported to impose ‘Level 3’

impact fees under Government Code section 65995.7 when, in fact, state 

funds for new school facility construction were available. The statute is clear 

that such fees may only be imposed ‘[i]f state funds for new school facility 

construction are not available.’ (Gov. Code, § 65995.7[, subd.] (a).) The 

parties do not dispute that the State Allocation Board received new bond 

funding and was considering applications for funding at the time the District 

imposed Level 3 fees on Walnut’s project, negating the ‘not available’ 

component of the statute.

“The provisions allowing a school district to refund fees (Gov. Code,

§ 65995.7[, subds.] (b)–(d)) do not compel a different reading, as those 

provisions have the effect of allowing a refund if the Level 3 fees were 

properly imposed, which is not the situation here.

“The court will issue a writ of mandate directing the District to set 

aside its determination that it could impose Level 3 fees as a condition on 

Walnut’s permits and to refund the excess fees Walnut paid.

“The District’s calculations of ‘Level 2’ fees are flawed. The ‘generation 

rate’ reported in the 2017 School Facilities Needs Analysis (‘SFNA’) should be 
13

based on a five-year moving average (Gov. Code, § 65995.6[, subd.](a)) but is, 

without explanation, roughly 50 percent higher than the years before and 

after it, even after a downward revision. Furthermore, no data underlying 

that calculation appears in the Administrative Record, and the court 

concludes, for that reason, that the District’s approval of a generation rate for 

multi-family housing units in the 2017 SFNA is entirely lacking in 

evidentiary support. The court will issue a writ of mandate directing the 

District to set aside its determination that the generation rate for multifamily housing units is 0.2100. Other than the finding by the court that the 

District’s determination of the generation rate lacked evidentiary support in 

the record, the court does not designate any instruction to the District 

regarding its exercise of discretion in recalculating the generation rate.

“The District’s ‘Level 2’ fees calculation properly accounted for available 

local funds. The District did not abuse its discretion in determining that 

general obligation bonds were designated for upgrading existing facilities, in 

disregarding state funds for which it had applied, and in disregarding 

‘Level 3’ fees paid by other developers.

“The District’s ‘Level 2’ fees did not improperly consider the cost of 

acquiring and developing new land for elementary and high schools. The 

District’s 2014 Long Term Plan contemplated reconfiguring its elementary 

schools to a K-5 grade band from K-6 and expanding existing high school 

facilities. The District’s determination of its current school facilities needs is 

not bound by its 2014 Long Term Plan. The District’s projected need for two 

elementary schools, one junior high school, and one high school are not

‘hypothetical schools’ as that term is used in SummerHill Winchester LLC v. 

Campbell Union School Dist. (2018) 30 Cal.App.5th 545. The District’s 

determination that existing school facilities were already ‘over capacity’ and 
14

therefore inadequate to house the students generated in existing residential 

units was not arbitrary, capricious, or entirely lacking in evidentiary support. 

The District’s determinations that all students generated by new 

development would require new facilities, regardless of how its schools are 

configured, was not an abuse of discretion.

“[T]he District’s analysis of available property for development as 

school sites was supported by substantial evidence and is not an abuse of 

discretion. The District explained why each site was either unavailable or 

not suitable for use as a school site. These determinations were not 

arbitrary, capricious, or entirely lacking in evidentiary support.

“Walnut’s petition is GRANTED. Walnut must draft and submit a 

proposed writ consistent with the above order . . . .”

The writ issued in due course, commanding the District to “refund the 

Level 3 fees . . . in the sum of $7,381,072, . . . together with slightly more than 

$90,000 interest.” Both Walnut and the District appeal from the judgment. 

WALNUT’S APPEAL

A Preliminary Comment

In its formal letter of protest to the District, Walnut objected to the 

District “impos[ing] fees in excess of $16,000,000.” This was also the amount 

used by Walnut in its complaint. Although Walnut twice states in its opening 

brief that it “paid the District fees (totaling over $16,000,000) for the Project. 

AR 0834-0843,” the cited pages in the administrative record document that 

Walnut tendered two checks totaling $8,304,651.04. This sum was 

apparently accepted by the District as payment in full, as evidenced by the 

“CERTIFICATE OF COMPLIANCE For Payment of Developer Fees” dated 

March 28, 2018. However, the cited pages show that Walnut tendered 

another pair of checks totaling $12,060,417.88, for which it received a 
15

different “CERTIFICATE OF COMPLIANCE For Payment of Developer

Fees,” also dated March 28, 2018. 

As previously mentioned, Walnut had to pay the entirety of the 

assessed fees in order to get a building permit. (Ed. Code, § 17620, subds. (b), 

(c).) We were puzzled as to how the cited pages substantiated Walnut’s claim 

that it paid the District $16 million, not $8 million, or $12 million, or 

$20 million. We asked the parties for supplemental briefing as to “the exact 

amounts” of the assessments and amounts paid. Citing the same pages in 

the administrative record, Walnut responded that it had paid $8,304,651.04 

and $12,060,417.88, for a total of $20,365,068.92. Still not $16 million, nor a 

ready explanation as to how or why Walnut consistently used this figure

before the trial court.

The precise figure of how much Walnut is actually out of pocket has 

proved very much a moving target. Even as Walnut went to court, events 

were still unfolding at the administrative level.

In a footnote of its opening brief, Walnut advises that the District 

subsequently “acknowledged an error in the calculation of the fee, resulting 

in a refund of a portion of the fee,” but it did not provide a dollar figure for

the refund. To judge from the language of the writ, the refund occurred on 

October 16, 2018, and the amount refunded was $1,909,117.99, hardly an 

insignificant sum.

In fact, this was the second refund. In its brief, the District states: 

“[P]rior to receiving Walnut’s April 18, 2018 Protest letter, the District issued 

Walnut a voluntary refund in the amount of $3,693,807.81 on April 12, 2018, 
16

more than a week before Walnut filed suit against the District on April 23,

2018.”2 This figure was never mentioned in Walnut’s opening brief. 

So, here is $5,602,925.80 that was returned by the District. But from 

what figure should it be deducted—the $16 million Walnut repeatedly used, 

or the $20+ million for which Walnut actually wrote checks?

Then there is the matter of the “student generation rate” (which the 

trial court reduced to “generation rate”). As will be discussed in greater 

detail in the next section of this opinion, after the matter was briefed and 

submitted for decision, almost two months after the court issued the ruling 

quoted above, the parties came to the court with a written stipulation to the 

effect that after “the Court issued an order granting petition for writ of 

mandate finding, in part, that no data underlying the calculation of the 

District’s multi-family student generation rate (‘SGR’) appeared in the 

Administrative Record and therefore the SGR calculation was entirely 

lacking in evidentiary support,” “the District has provided [Walnut] with data 

concerning the basis for calculation of the SGR and the parties have agreed 

that, in the interests of narrowing the range of disputed issues and 

eliminating any unnecessary further legal proceedings relating to the SGR,

no further action by the District is needed with respect to the SGR issue.” 

The parties further stipulated “That the Court issue a final judgment and 

writ of mandate consistent with this Stipulation by omitting any further 

direction to the District with respect to the SGR issue.” 

Thus, the only relief Walnut achieved on the Level 2 fees was 

$90,109.64 for interest on the two refunds voluntarily made by the District. 

2 The language of the writ puts the date of the refund a day later, on April 

13th. 
17

Finally, the writ of mandate, which was drafted by counsel for Walnut,

directed the District to “refund . . . the Level 3 fees . . . in the sum of 

$7,381,072.” We have no idea how this amount was calculated, but we can 

gather from the writ that it does not include the $5,512,916.81 for the 

refunds. Both of these sums do not add up to the $16 million Walnut says it 

paid, much less the $20+ million evidenced by its cancelled checks. The 

refunds would not account for the difference. Nor does the $90,109.64 

interest.

Most of these questions were answered by the supplemental briefing we 

requested from the parties.

First of all, the District assessed, and Walnut paid, not $16 million, but 

more than $20 million, specifically the $8,304,651.04 and the $12,060,417.88, 

for a total of $20,365,068.92.

Nine days later, the District made the first refund, for $3,693,807.81. 

Walnut’s out-of-pocket was thus reduced to $16,671,261.11.

The second refund, the one made after the case had ostensibly been 

submitted to the court for decision, was for $1,909,117.99. The District tells 

us, the “total Amount of Fees Assessed/Paid” was $14,762,143.12. This is 

another figure that did not appear in Walnut’s opening brief, or in its 

supplemental brief when we asked Walnut for “the exact amounts paid . . . 

and the dates such payments were made.” (It was provided by the District in 

its supplemental brief.) We assume this was the sum, excluding interest, 

that Walnut was seeking in the trial court.

For a party prosecuting an appeal about money, Walnut appears

strangely reluctant to provide a complete narrative with concrete dollars and 

cents figures.
18

Standard of Review

“ ‘[The a]ction imposing school facilities fee is quasi-legislative and 

reviewed under the narrower standards of ordinary mandate. (Code Civ. 

Proc., § 1085). We determine only whether the action taken was arbitrary, 

capricious, or entirely lacking in evidentiary support, or whether it failed to 

conform to procedures required by law. Such limited review is grounded on 

the doctrine of separation of powers which (1) sanctions the legislative 

delegation of authority to the agency and (2) acknowledges the presumed 

expertise of the agency. [Citation.] The inquiry into arbitrariness or 

capriciousness is like substantial evidence review in that both require a 

reasonable basis for the decision.’ ” (Western California, Ltd. v. Dry Creek 

Joint Elementary School Dist. (1996) 50 Cal.App.4th 1461, 1492 (Western 

California).)

“ ‘In a mandamus proceeding, the ultimate question, whether the 

agency’s action was arbitrary or capricious, is a question of law. [Citations.] 

Trial and appellate courts therefore perform the same function and the trial 

court’s statement of decision has no conclusive effect upon us.’ ” (Western 

California, supra, 50 Cal.App.4th 1461, 1492.)

Even so, considerable deference must be factored in. “[T]he District’s 

choices will be presumed to be correct and the courts may not question its 

wisdom or substitute different choices where the issues are ‘fairly debatable.’ 

[Citations.] If reasonable minds might differ, the District’s determinations 

must be upheld.” (Shapell Industries, Inc. v. Governing Board (1991) 

1 Cal.App.4th 218, 239 (Shapell).) This court has held that a school district’s 

decision need only be “ ‘reasonably based’ ” in order to withstand appeal. 

(Garrick Development Co. v. Hayward Unified School Dist. (1992) 

3 Cal.App.4th 320, 332.) Similarly, “[s]ince the process required of the 
19

District will necessarily involve predictions regarding population trends and 

future building costs, it is not to be expected that the figures will be exact. 

Nor will courts concern themselves with the District’s methods of marshalling 

and evaluating scientific data.” (Shapell, supra, at p. 235.)

Walnut’s Attack on the Level 2 Fees

Walnut frames its contention with what seems to be admirable clarity:

“The trial court erred in determining that the District validly included 

the cost of land for new schools in the Level 2 fee. Over 60 percent of the 

Level 2 fee reflected the cost of acquiring and developing land (at an 

acquisition cost of $3.5 million per acre) for new elementary and high 

schools.[3] But three years before it enacted the Level 2 fee, the District 

adopted a Long Range Facilities Plan, as required under state law, that 

called for reconfiguring its elementary and junior high schools from a K-6/7-8 

to a K-5/6-8 model, moving the sixth grade to middle school. The undisputed 

facts (as reflected in the Plan and other District planning documents and 

state funding applications) show that the reconfiguration, coupled with the 

planned addition of classrooms to existing elementary and high school sites, 

will make ample capacity available to accommodate all anticipated student 

growth. The District did not need and does not intend to buy any land for 

elementary schools or high schools to accommodate students from new 

development. The District thus cannot lawfully collect school facilities fees to 

fund the cost of such land.

3 Walnut provided a bit more detail in its trial brief: “The 2017 [needs 

analysis] determined that the District would incur site acquisition and 

development costs of $22.3 million for 0.848 of a new elementary school and 

$11.3 million [for] 0.132 of a new high school, for a total of $33.6 million. 

This figure alone . . . accounted for $8.12 (or over 60 percent) of the District’s 

Level 2 fee.” 
20

“Additionally, two years before imposing the Level 2 fee, the District 

acquired a school site it plans to use for a new middle school that will have 

ample space to accommodate projected growth from new development. 

Nevertheless, the District’s fee improperly included the cost of acquisition of 

a new school site for the middle school at more than twice the cost of the site 

the District had already acquired for that purpose. The District’s Level 2 fee 

should have been based on the actual cost of the land—$1.66 million per 

acre—and not the hypothetical cost of $3.5 million to acquire new land.

“The District’s Level 2 fee also failed to take into account over 

$150 million in local funds the District had already allocated for the school 

facilities to be funded by the fees. State law provides that local funds 

determined to be available for new school construction ‘shall be subtracted 

from the amount [of the Level 2 fee.]’ Gov[ernment] Code [section]

65995.5[, subdivision] (c)(2) emphasis added.) The District’s failure to comply 

with this requirement further compromised the legality of its Level 2 fee.” 

Walnut breaks this contention into two arguments. First, it asserts 

that “The District’s Level 2 Fee Improperly Included the Cost of Land the 

District Did Not Need and Did Not Intend to Acquire.” Second, “The District 

Failed Properly to Account for Available Local Funds in Calculating the Level 

2 fee.” 

Walnut’s first argument has six subparts which occupy 20 pages of its 

opening brief. However, most of the arguments are premised on an implicit 

assumption—the number of new students likely to come into the District’s 

classrooms if and when Walnut Residences is built. This is what the trial 

court called the “generation rate,” the one thing the court explicitly 

condemned as “flawed.” Because it is foundational, it will be addressed first.
21

The Generation Rate

Walnut does not overtly re-argue the point it repeatedly made before 

the District and the trial court—that only 55 new students would be 

attributable to Walnut Residences—but it clearly animates many of the 

subpart arguments Walnut advances. When it asserts that “the District had 

no Need for . . . New Elementary or High Schools,” and thus the “Level 2 Fee 

Should Be Adjusted to Delete the Cost of Acquisition of New Land for 

Elementary and High Schools,” Walnut is clearly assuming that new facilities 

will not be needed because there will not be new students to fill them.

True, Walnut commissioned a “Peer Review” of the District’s 2017 

needs analysis which uses the “55 K-12 students” but even this figure was 

only an approximation. In contrast, the District estimated the figure would 

be 84, which was the figure generated after the District acknowledged its 

original information was erroneous, leading to the first refund to Walnut. 

The trial court concluded that the generation rate used in the needs 

analysis was vulnerable, with this reasoning: it “should be based on a fiveyear moving average (Gov. Code, § 65995.6[, subd.] (a)) but is, without 

explanation, roughly 50 percent higher than the years before and after it, 

even after a downward revision. Furthermore, no data underlying that 

calculation appears in the Administrative Record, and the court concludes, 

for that reason, that the District’s approval of a generation rate for multifamily housing units in the [needs analysis] is entirely lacking in evidentiary 

support.”

At first glance, this reasoning seems unassailable. The statute cited 

does indeed provide: “The school facilities needs analysis shall project the 

number of unhoused elementary, middle, and high school pupils generated by 

new residential units, in each category of pupils enrolled in the district. This
22

projection of unhoused pupils shall be based on the historical student 

generation rates of new residential units constructed during the previous five 

years that are of a similar type of unit to those anticipated to be constructed 

either in the school district or the city and county in which the school district 

is located, and relevant planning agency information, such as multi-phased 

development projects, that may modify the historical figures.” (§ 65995.6, 

subd. (a).)

However, we are then told by the District that the refund it issued to 

Walnut (see fn. 2, ante) had to do with a downward recalculation of the 

generation rate, and the following consequences: “Although Walnut had 

challenged the [original] generation rate calculation on other grounds, the 

error identified and voluntarily corrected by the District was not directly or 

indirectly addressed in Walnut’s claims at any point in this litigation.”4 

(Emphasis added.) 

The District continues: 

“However, the District’s calculation of the amended student generation 

rate was inadvertently omitted from the administrative record and the trial 

court found the amended student generation rate was unsupported by the 

evidence.

“After the trial court’s ruling, the District provided Walnut with 

additional data supporting its calculation of the amended student generation 

rate for multi-family units and Walnut voluntarily elected to drop its legal 

challenge to the District’s amended student generation rate. Accordingly, the 

4 If this is true, one wonders why the parties did not advise the trial court 

that the revised generation rate was not a point of dispute, and why the 

parties thereafter resolved the issue between themselves after they had 

submitted it to the court for decision.
23

District’s amended calculation of the student generation rate for multi-family 

units . . . is uncontested.”

The cited pages of the clerk’s transcript are to a Stipulation Regarding 

Compliance With Order[5] Concerning Student Generation Rate Data. One of 

the “recitals” is that “the Parties have agreed that, in the interest of 

narrowing the range of disputed issues and eliminating any unnecessary 

further legal proceedings relating to the SGR [Student Generation Rate], no 

further action by the District is needed with respect to the SGR issue.”6

Thus, the generation rate, and the number of students produced by 

application of that rate, are no longer “disputed issues.”

The District’s Need For New Schools

To reiterate: “The school facilities needs analysis . . . shall be 

conducted by the governing board of a school district to determine the need 

for new school facilities for unhoused pupils that are attributable to projected 

enrollment growth from the development of new residential units over the 

next five years. The school facilities needs analysis shall project the number 

of unhoused elementary, middle, and high school pupils generated by new 

residential units, in each category of pupils enrolled in the district. This 

projection of unhoused pupils shall be based on the historical student 

generation rates of new residential units constructed during the previous five 

years . . . .” (§ 65995.6, subd. (a).)

The revised needs analysis projected that the District currently had 

852 “unhoused students,” and forecast 2,417 “total projected students from 

future units.” This would necessitate construction of four new schools, with a 

projected cost of more than $77 million. 

5 This is the Order Granting Petition For Writ of Mandate already quoted.

6 This stipulation is not mentioned in Walnut’s opening brief. 
24

The first and second subparts of Walnut’s initial argument—“The 

Undisputed Facts Show That the District Had No Need for and No Intent to 

Purchase Land for New Elementary or High Schools,” and “The District’s 

Level 2 Fee Improperly Included the Cost of Land the District Did Not Need 

and Did Not Intend to Acquire”—are that “the undisputed facts” demonstrate 

that the District “had no need for and no interest to purchase” land for a new 

elementary and a high school, and that it already owned the land for a new 

middle school, so no acquisition costs should have been included in the level 2 

fees.

The first subpart makes much of the District’s on-going conversion of 

elementary from kindergarten through sixth grade to kindergarten through 

fifth grade, meaning that the sixth graders who were classified as elementary 

school pupils would now be assigned to middle schools (aka junior high 

schools). As Walnut puts it, the District’s own Long Range Facilities Plan 

“calls for the addition of new classrooms, labs and other teaching stations at 

the District’s five existing junior high schools to accommodate the addition of 

the sixth grade. [¶] . . . The classroom additions (including a minimum of 50 

classrooms and 16 science labs) were projected by District staff to add 

capacity ‘for more than 1,700 students by 2018/19.’ ” The rub was that the 

needs analysis “nowhere accounted for the increase in capacity that would 

result from the construction of these new classrooms.” 

Walnut continues: “As a result of the planned and approved change in 

grade configuration, . . . the District will have excess capacity of 3,169 seats 

at the elementary (K-5) level. This is more than sufficient to accommodate 

the 721 elementary students the [needs analysis] projected to be generated 

from new development over the next five years.” 
25

Walnut advances similar reasoning against the purported need for a 

new high school. 

Subparts (1)–(2) & (4)

Where Walnut invokes “the undisputed facts,” the District points to an 

even lengthier number of items and matters it identifies as “undisputed,” 

“uncontested,” or “not challenged on appeal.” For the District, it claims that 

its needs analysis faithfully followed the statutory formula, “correctly 

calculated the District’s existing capacity according to this formula and 

determined that the District was currently overcapacity by 852 students.” 

Thus, because the District was already overcapacity, the needs analysis 

“reasonably” and “rationally” concluded that all future enrollment growth

would be attributable to future residential development over the next five 

years should be deemed “unhoused.” 

With so much ground ostensibly without controversy, it requires

careful—and repeated—examination of the briefs to discern the crux of the 

dispute. Ultimately, it comes down to this: the District says students 

already outnumber places for them, and that situation is only going to get 

worse. Nonsense, Walnut insists: if the District followed through on its Long

Range Facilities Plan, the needed places are either already in place or in the 

pipeline.

But setting the needs analysis beside the Long Range Facilities Plan is 

comparing a papaya to a pineapple. The Long Range Facilities Plan 

expressly states it “addresses the educational program and facility needs at 

the existing schools” (italics added), and makes it clear that “No land 

acquisition costs have been included.” In short, the Long Range Facilities 

Plan looked backwards, while the needs analysis looked forwards. The 

District puts it nicely in its brief: the Long Range Facilities Plan “work[s] in 
26

tandem with its school facilities needs analysis, with the former focusing on 

improvements and modernization of the District’s existing facilities, and the 

latter addressing the additional school facilities needed to accommodate 

enrollment growth from new development.” The District made an even more 

telling point in its trial brief: “[The] 2014 Master Plan was prepared to 

evaluate needs for modernization of existing facilities with anticipated local 

bond funds, not to evaluate capacity[7] to house student growth generated by 

new residential development.” 

Even treating the Long Range Facilities Plan as having a predictive 

element, its prediction was very quickly disproven. It anticipated enrollment 

in 2018–2019 at approximately 34,500, but the needs analysis prepared three 

years later showed existing enrollment as more that 1200 above that figure. 

7 The District made another pertinent observation in its trial brief: “School 

capacity is a malleable concept, and representations of a school’s capacity can 

vary considerably depending on the purpose and manner of any given 

capacity analysis. For example, just looking at classroom loading ratios (i.e., 

students per classroom), the District’s 2014 Long Range Facilities Plan 

adopted certain classroom loading ratios which are at odds with the District’s 

collective bargaining agreement. Classroom loading ratios are just one of 

many considerations that impact capacity. A school’s capacity is subject to 

physical, operational, and programmatic variables, some of which are fixed 

while others are fluid.” 

 Amicus California School Boards Association’s Education Legal Alliance 

makes a similar point: “Projections made in any given year are all the more 

challenging for school districts because students don’t arrive neatly in 

packages that equal the size of particular classrooms, grade levels or schools. 

For a developer, 100 students means 100 students. For a school district, that 

could mean a bubble of 80 students at elementary grade levels within the 

attendance area of a particular elementary school that push[es] enrollment at 

that school over its capacity. Moreover, not only do overall enrollment 

numbers change from year-to-year, but enrollment at particular grade levels 

change as well, making it difficult to estimate and anticipate the number of 

students in a given grade [for a given school] for a given school year.” 
27

As the District puts it: “Even assuming . . . that the 2014 LRP can be read as 

supporting the proposition that the District’s existing facilities were sufficient 

to accommodate all projected enrollment growth, those assumptions were 

clearly laid to rest by 2017 when actual enrollment growth had significantly 

outpaced the enrollment projections set forth in the 2014 LRP. . . . Thus, 

when the District adopted the 2017 [needs analysis], the District needed to 

house far more students than contemplated by the District’s 2014 LRP.” To 

straight-jacket the District with what it thought three years earlier would be 

either to command that the District be clairvoyant, or to deny the possibility 

that things may change and turn out differently than anticipated. Walnut 

would deny the District the right to be wrong.

The determination in the needs analysis that the District already had 

more students than places, together with the accompanying projection of 

anticipated additional students, “provided a reasonable basis for the school 

district to decide that multiple new schools would be needed to accommodate 

the . . . new students that were expected to be generated by new 

development.” (SummerHill Winchester LLC v. Campbell Union School Dist., 

supra, 30 Cal.App.5th 545, 554.) Thus, we agree with the trial court’s 

conclusion that “The District’s determination that existing school facilities 

were already ‘over capacity’ and therefore inadequate to house the students 

generated in existing residential units was not arbitrary, capricious, or 

entirely lacking in evidentiary support.” (See Western California, supra, 

50 Cal.App.4th 1461, 1492.) Walnut’s attempt to use the Long Range 

Facilities Plan to impeach the needs analysis fails.

Walnut’s next subpart is that “the undisputed facts show that the 

[needs analysis] included the cost of land for a new junior high school site 

although the District had already acquired the land it intended to use for a 
28

new middle school.” The relevant property is referred to as “the Fremont 

Boulevard Site” throughout the record.

The thrust of this argument is contrary to statutory language: “When 

determining the funds necessary to meet its facility needs, the governing 

board shall . . . [¶] . . . Identify and consider any surplus property owned by 

the district that can be used as a school site or that is available for sale to 

finance school facilities.” (§ 65995.6, subd. (b)(1).)

To jump to subpart (4), Walnut asserts that the District “was Legally 

Required to Take Into Account Its Adopted Facilities Plans in Determining 

the Appropriate Fee.” 

The District responds as follows (with minor editorial changes): 

“Walnut concedes that the District’s 2017 [needs analysis] ‘nowhere’ states 

the Fremont Boulevard property will be used, specifically, as the site for a 

new middle school. Nevertheless, Walnut improperly cites to post-decision 

materials to support its argument that the middle school site acquisition 

costs used in the 2017 [needs analysis] should have been based on the $1.66 

million cost-per-acre of the Fremont Boulevard property acquired years 

before rather than the $3.5 million-per-acre acquisition cost that came from 

recent real estate comparisons provided by the District’s real estate 

consultant. Specifically, Walnut relies on the December 2017 Facilities 

Presentation, and the 2018 Gibbs Report prepared by Walnut’s hired 

consultant, to second guess the wisdom of the District’s decision making with 

respect to middle school site acquisition costs utilized in the 2017 [needs 

analysis.] [¶] . . . [¶]

“Walnut repeatedly misrepresents that the District has decided a new 

middle school will be constructed on the Fremont Boulevard property, and 

cites to the December 2017 Facilities Presentation in support, when in fact 
29

the Presentation merely references a July 2016 conceptual site study 

prepared by a consultant that contemplated various possible uses and 

configurations of the property, including and recommending the ‘2-story 

middle school’ option. Similarly, the 2018 Gibbs report relied on by Walnut is 

replete with factual inaccuracies, such as ‘per Board action on September 27, 

2017,’ the District has decided to use 22 acres of the Fremont Boulevard site 

‘for [a] Middle School with [a] capacity of up to 2,400.’ However, the only 

action taken by the Board that night was a motion to dedicate the front 22-

acres of the [Fremont Boulevard] site for the benefit of the AHS Attendance 

Area. While this shows the District’s intent to use the site for a future school 

facility as stated in the 2017 [needs analysis], it does not equal a decision to 

use the Fremont Boulevard site for the needed middle school.

“Even if the extra-record evidence cited by Walnut was accurate or 

convincing, ‘consideration of reports prepared long after the agency has acted 

would therefore be improper.’ (Shapell, supra, 1 Cal.App.4th at p. 233.) 

Walnut’s challenge is limited to what was before the District’s Board when its 

decision was made to adopt the 2017 [needs analysis] and the site acquisition 

estimate set forth therein, thus Walnut cannot rely on extra-record evidence 

to raise a question regarding the wisdom of that decision. ” 

This reasoning is near-conclusive. Just as important is to recall that 

the needs formula employed a formula spelled out and mandated by statute. 

(See § 65995.6, subd. (a) [“existing school building capacity shall be 

calculated pursuant to . . . Section 17071.10 . . . of the Education Code,” 

italics added].) As the District repeats, Walnut does not argue that the needs 

analysis deviated from that formula, or otherwise failed to comply with it. 

Walnut obviously did not like the amount produced by application of that 

formula, but its real complaint is that the contents of the formula are 
30

dictated by statute and that the District followed that command. At bottom, 

Walnut is arguing that the District should have ignored the formula and 

followed its outdated Long Range Facilities Plan.

Moreover, Exhibit K to the needs analysis, titled “Surplus Site 

Determination,” had this: “35086 Fremont Boulevard . . . is a 32.86-acre site 

intended for use as a future school site. The site was purchased through the 

issuance of COPs [Certificates of Participation] and cannot be used to reduce 

the impact of students generated from non-mitigated Future Units, as 

Alternative Fees from Future Units are anticipated as the revenue stream to 

finance the repayment of these outstanding COPs. (It should be noted that 

the School District has insufficient funds to construct a school facility on this 

site at this time.) Therefore, this site is not available to offset the impact of 

students generated from non-mitigated Future Units.”8

8 The District further explained in its trial brief: “[This] property was 

purchased through the issuance of Certificates of Participation (‘COPs’) 

because the District’s bond measure is restricted to use on existing school 

sites, and the State new construction program lacked funds to provide 

matching shares to school districts. This property cannot be used to reduce 

the impact of students generated from non-mitigated residential development 

projects because available funds cannot be used to build a school on this site 

and developer fees are the designated source of funding to repay the 

outstanding COPs debt and interest As the 2017 [needs analysis] states, the 

District had, and still has, insufficient funds to construct a school facility on 

this site. [¶] [Thus], the District’s 2017 [needs analysis] properly identified 

and considered any and all available surplus property that could ‘be used as a 

school site or that is available for sale to finance school facilities’ as required 

by . . . section 65995.6(b)(1).” 

 At another part of the needs analysis, it was explained that COP’s “are a 

means of financing facilities through a pledge of lease payments. . . . All 

lease payments associated with lease financings must be paid by the issuing 

school district through its existing sources of revenue.” According to the 

needs analysis, the 2015 acquisition of the Fremont Boulevard site required 

the District to issued $54,570,000 in COPs. 
31

A final point. As already noted, it must be kept in mind that the 

District’s action is deemed “quasi-legislative” and reversible only if 

“ ‘arbitrary, capricious or entirely lacking in evidentiary support.’ ” (Western 

California, supra, 50 Cal.App.4th 1461, 1492.) If that action is “ ‘fairly 

debatable,’ ” or “reasonably based,” it will be upheld by the courts. (Shapell, 

supra, 1 Cal.App.4th 218, 239; Garrick Development Co. v. Hayward Unified 

School Dist. supra, 3 Cal.App.4th 320, 332.) Although Walnut’s argument 

does possess a degree of common-sense plausibility, it will not stand the 

particular scrutiny employed in this context. The District clearly chose to 

treat the Fremont Boulevard site as “unavailable” because it was already tied 

to an existing financial program. In this particular instance, how a school 

district chooses to classify property as “available” or “unavailable” might not 

square with strict principles of accounting, but it comes within the scope of 

what is “fairly debatable.” Given the notorious recent volatility of the Bay 

Area real estate market, an extra measure of deference should be extended to 

a school district’s estimate of what it would cost to acquire a site and build a 

school on it.9

9 Amicus makes the cogent reminder that “even if a school board announces 

its intent to acquire property, there remains uncertainty regarding whether 

the school district will actually be able to do so. Future school sites must be 

reviewed by the California Department of Education and the Division of 

Toxic Substances Control. . . . Acquisition and construction of the school 

generally must go through the extensive study and public input process of the 

California Environmental Quality Act. A host of other statutory and 

regulatory requirements apply that can impact a school district’s ability to 

acquire property. Community opposition to a particular site can arise. Thus, 

even after a school board identifies a preferred new school site, a range of 

contingencies could change that initial choice.” 

 An additional wrinkle is statutory: “Site acquisition costs shall not exceed 

half of the amount determined by multiplying the land acreage determined to 

be necessary under the guidelines of the State Department of Education, as 
32

Subparts (3) & (6)

Walnut’s subpart argument (3) is that “recent caselaw confirms that a 

mitigation fee may not lawfully include costs the agency will not incur” only 

states a truism. Yet it does set up Walnut’s claim that “the District here 

already owns the land on which it intends to build or expand the facilities 

needed to accommodate new development. And . . . it is undisputed that the 

District does not intend to acquire new land or build new schools to 

accommodate new development subject to the Level 2 fee. . . . [T]he District’s 

Level 2 fee thus does not have the legally mandated reasonable relationship 

to the costs of new public facilities attributable to the development.” This in 

turn merges into Walnut’s subpart (6): “[The] Level 2 Fee Should Be 

Adjusted to Delete the Cost of Acquisition of New Land for Elementary and 

High Schools and to Reflect the Actual Cost of the Land Already Acquired for 

the Middle School.” 

These arguments merely reframe the arguments already discussed, and 

the same reasoning requires their rejection.

Subpart (5)

The last subpart from Walnut is “The District Had and Failed to Carry 

the Burden of Producing Evidence to Support Every Element of the Fee.” 

The preceding discussion shows otherwise.

Availability of Local Funds

In computing Level 2 fees, a school district must follow the following 

statutory formula:

published in the ‘School Site Analysis and Development Handbook,’ as that 

handbook read as of January 1, 1998, by the estimated cost determined 

pursuant to Section 17072.12 of the Education Code. Site development costs 

shall not exceed the estimated amount that would be funded by the State 

Allocation Board to its regulations governing grants for site development 

costs.” (§ 65995.5, subd. (h).)
33

“The maximum square foot fee . . . shall be calculated by a governing 

board of a school district as follows:

“(1) The number of unhoused pupils identified in the school facilities 

needs analysis shall be multiplied by the appropriate amounts provided in 

subdivision (a) of [Education Code] Section 17072.10.[10] This sum shall be 

added to the site acquisition and development costs . . . .

“(2) The full amount of local funds the governing board has dedicated to 

facilities necessitated by new construction shall be subtracted from the 

amount determined pursuant to paragraph (1). Local funds includes fees, 

charges, dedications, or other requirements imposed on commercial or 

industrial construction.

“(3) The resulting amount determined pursuant to paragraph (2) shall 

be divided by the projected total square footage of assessable space of 

residential units anticipated to be constructed during the next five-year 

period in the school district or the city and county in which the school district 

is located. The estimate of the projected total square footage shall be based 

on information available from the city or county within which the residential 

units are anticipated to be constructed or a market report prepared by an 

independent third party.” (§ 65995.5, subd. (c).)

10 “The board shall determine the maximum total new construction grant 

eligibility of an applicant by multiplying the number of unhoused pupils 

calculated pursuant to Article 3 (commencing with Section 17071.75) in each 

school district with an approved application for new construction, by the perunhoused-pupil grant as follows: [¶] (1) Five thousand two hundred dollars 

($5,200) for elementary school pupils. [¶] (2) Five thousand five hundred 

dollars ($5,500) for middle school pupils. [¶] (3) Seven thousand two 

hundred dollars ($7,200) for high school pupils.” (Ed. Code, § 17072.10, 

subd. (a).)
34

Exhibit L to the District’s needs analysis is titled “Local Funding 

Sources per Government Code Sections 65995.5(c)(2) and 65995.6(b)(3).” In 

the course of four pages, it examined the following as “potential local 

sources”: (1) Lease Financings; (2) General Obligation Bonds; 

(3) Redevelopment Pass Throughs; (4) Community Facilities Districts; 

(5) School Fees; and (6) Existing Surplus Funds. 

Under the heading “Identification of Existing Surplus Local Funds,”

the needs analysis read:

“[T]he School District currently has 852 unhoused students from 

existing residential units. Based on per-student costs calculated in 

Exhibit E, these existing unhoused students have a cost impact to the School 

District of $100,561,590.

“Over the next five (5) years, the School District will also need to 

construct school facilities to house students to be generated from Future 

Units. Using per-student costs calculated in Exhibit E, providing adequate 

school facilities to the 1,160 Projected Unhoused Students identified in 

Section III.C will have a cost of $133,917,740. Table L-1 shows a summary of 

the school facilities needs of the School District.”

11

“As stated above, the School District has identified the following local 

funds: (i) $144,511,394 in available GO [General Obligation] Bond Proceeds, 

(ii) potential commercial/industrial school fees in the amount of $3,432,632, 

and (iii) potential surplus site revenues in the amount of $6,597,904. 

Additionally, based on Table 15 of the Analysis, the School District can expect 

to receive $53,987,395 from Alternative No. 2 Fees on new residential 

development.”

11 Table L-1 shows “Current Unhoused Student Impact” as $100,561,590, 

and “Future Unhoused Student Impact” as $133,917,740, for a total of 

$234,479,330.
35

The bottom line was that the District had $234,479,330 of “School 

Facilities Needs,” but only $208,529,325 of “Local Funding Sources,” meaning 

“there is currently a $25,950,005 funding shortfall.” 

Under “General Obligation Bonds,” the needs analysis stated: “On 

June 3, 2014, the voters of the School District approved Measure E, which 

authorized the issuance of $650,000,000 in GO bonds. Of the $650,000,000 to 

be issued, $144,511,394 has been identified for the construction of new 

classrooms at existing school facilities. Therefore, it has determined that 

$144,511,394 is available to offset the impact of students generated from nonmitigated Future Units over the next five (5) years.” 

In its second, and final contention—“The District Failed Properly to 

Account for Available Local Funds in Calculating the Level 2 Fee”—Walnut 

identifies what its claims are four “glaring analytical and legal flaws” in the 

needs analysis reasoning:

(1) “The alleged $100 million in the cost of housing existing students 

was based on the same unfounded assumptions about the District’s need for 

land for new elementary and high schools.” This is a reframing of part of 

Walnut’s primary argument, which has already been rejected. (See pp. 27-37, 

ante.) As will be seen, it also fails for the reasons stated hereafter.

(2) “Even assuming the $100 Million ‘Existing Student Housing Cost’ 

was calculated correctly, this still left $54 million in available local funds that 

should have been credited against the proposed fees.” The $54 million figure 

appears to be all of the Level 2 fees that the District anticipated assessing for 

other developments. 

The entirety of Walnut’s argument is as follows: “Even if the SFNA 

[the needs analysis] had correctly determined the cost of accommodating 

existing students at $100 million, there would still have been $54 million 
36

available that should have been credited against the proposed Level 2 fee. As 

indicated in Table 1 above, this represented 100 percent of the cost of both 

land and facilities on which the Level 2 fee was based. Had this been 

properly credited, even with no other adjustments, the Level 2 fee would have 

been zero.” 

Walnut’s reasoning, insofar as we can discern it, is specious. Walnut is 

saying that if there is $54 million in Level 2 fees assessed against other 

developers, that money counts as “available” funds. But it is not available 

because it is intended for those unhoused students generated by a prior 

development. Walnut wants one payment of Level 2 fees to cover two distinct 

groups of students.12 And if Walnut pays no Level 2 fees, it also means it 

would pay no Level 3 fees. In other words, it is now agreed that Walnut’s 

project will generate new students, but Walnut wants to pay not a dime to 

educate them.

(3) “The [needs analysis’s] inclusion of projected Level 2 fees and 

projected costs of accommodating students violated the School Facilities Act.” 

Walnut provides four sentences in support: “Government Code § 65995.6 

specifies in detail how a school district shall consider and identify local 

sources available to finance school facilities needed to accommodate students 

from new development. Section 65995.6[, subdivision] (b)(3) states that the 

district shall ‘[i]dentify and consider local sources other than fees, charges, 

dedications and other requirements imposed on residential construction 

available to finance the construction or reconstruction of school facilities to 

12 The District responds that “these funds are not available in the sense that 

they did not exist in 2017 and were merely an estimate of potential future 

funds.” However, the practice followed here, mandated by statute, shows 

otherwise. Level 2 and Level 3 fees must be paid prior to getting a permit to 

begin construction. (§ 17620, subds. (b), (c).) Cash in hand is not “potential 

future funds.” 
37

accommodate any growth in enrollment attributable to the construction of 

new residential units.’ The referenced ‘fees, charges, dedications and other 

requirements’ include Level 2 fees. The [needs analysis’s] inclusion of the 

projected Level 2 fees as a local funding source that should be credited 

against the projected fee violated the statute as well as common sense.”

Walnut misreads the plain language of the statute. It does not include

Level 2 fees, it clearly excludes them: “When determining the funds 

necessary to meet its facility needs, the governing board shall . . .

[¶] Identify and consider local sources other than fees, charges, dedications, 

or other requirements imposed on residential construction available to 

finance the construction or reconstruction of school facilities needed to 

accommodate any growth in enrollment attributable to the construction of 

new residential units.” (§ 65995.6, subd. (b)(3), italics added].)

The District also points out that if future school impact fees are 

considered as dedicated local funds that must be subtracted from the total 

cost to house students from future development, logically both Level 2 and 

Level 3 fees should be included. In its words: “But, by definition, estimated 

future Level 2 and 3 fees are equal to the total cost to house students from 

future development. The result is a mathematical certainty that neither 

Level 2 nor Level 3 fees could ever be collected under any circumstance. The 

Legislature certainly did not intend such a patently absurd construction” of 

section 65995.6. 

(4) “If inclusion of the projected fee in the calculus had been permitted, 

it should have included 100 percent of the projected fee, not 50 percent.” The 

supporting reasoning for this, Walnut’s final subpart argument, is as follows:

“Even assuming it was appropriate to include projected fee revenues in 

determining available local funds, the SFNA should have based this on the 
38

projected fees recommended in the SFNA, not 50 percent of those fees. The 

SFNA purported to justify Level 3 fees as well as Level 2 fees, based on total 

projected school facilities costs of $108 million to accommodate students from 

new development over the next five years. Thus, in projecting fee revenues, 

the SFNA should have used that figure (i.e., the figure from Table 19, based 

on Level 3 fees), not the $54 million figure from Table 15, based on level 2 

fees.

“The result would have been to show $262,516,720 in ‘Local Funds’ 

available to fund facilities (not the $208,529,325 used in the SFNA). 

Comparing this to the $234,479,330 in alleged total school facilities needs 

would have left $28,037,390 that should have been credited against the 

proposed fee. This alone would have reduced the fee by over 50 percent.”

We reject this argument.

Initially, it is not clear that it was made in the trial court. In the 

relevant portion of Walnut’s trial brief, under the heading “The District 

Failed to Consider and Subtract Available Local Funds,” there is no mention 

of Table 15 or Table 19, and none of the figures quoted above can be found. 

Thus, the argument now made was not preserved for review. (Doers v. 

Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 184–185, fn. 1; 9 Witkin, 

Cal. Procedure (5th ed. 2020) Appeal, § 400, p. 458.)

In addition, the issue “Identification and Consideration of Local 

Funding Sources per Government Code Sections 65995.5(c)(2) and 

65995.6(b)(3)” constituted Exhibit L to the needs analysis. Exhibit L 

comprises four pages and three tables (L-1, L-2, and L-3), none of which, as 

shown above, is mentioned or addressed in Walnut’s argument. By ignoring 

this, the most pertinent portion of the needs analysis, we can only conclude 

Walnut declines to challenge it directly. In consequence, and in application of 
39

a fundamental principle of appellate review, we must assume that Exhibit L 

supports the judgment, and Walnut has failed to demonstrate otherwise. 

(Jameson v. Desta (2018) 5 Cal.5th 594, 608–609; Foreman & Clark Corp. v. 

Fallon (1971) 3 Cal.3d 875, 881.) Put otherwise, Walnut has not established 

that the challenged action by the District was “ ‘arbitrary, capricious or 

entirely lacking in evidentiary support.’ ” (Western California, supra, 

50 Cal.App.4th 1461, 1492.) 

THE DISTRICT’S APPEAL

Striking The Interest Awards

As previously mentioned, in its judgment the trial court ordered the 

District to pay a specified amount of interest on the two sums it refunded to 

Walnut. The District asks us to strike both of the interest components 

because interest: (1) was not mentioned in the trial court’s previous order, 

and (2) is not statutorily authorized. 

In the prayer of its petition, Walnut gave the District notice that it 

(Walnut) was seeking “interest at the rate of 8 percent pursuant to 

Government Code [section] 66020[, subdivision] (e).” The cited statute 

provides in pertinent part: “If the court finds in favor of the plaintiff in any 

action or proceeding. . . , the court shall direct the local agency to refund the 

unlawful portion of the payment, with interest at the rate of 8 percent per 

annum . . . .” Walnut repeated the request for interest in its trial brief. In its 

trial brief, the District did not mention section 66020, and did not address 

whether Walnut had any legitimate claim to interest. 

Also as previously mentioned, after the trial court filed its written 

decision granting in part Walnut’s petition for a writ of mandate, the parties 

submitted a written stipulation that the court could “issue a final judgment 
40

and writ of mandate consistent with this stipulation.” Neither the decision 

nor the stipulation mentioned interest.

In its decision, the court directed Walnut to “draft and submit a 

proposed writ consistent with the [decision].” Apparently contemporaneously 

with the stipulation, Walnut submitted a proposed judgment and proposed 

writ of mandate.13 The proposed judgment did not mention interest, but 

simply directed that a writ of mandate “shall issue.” It was in the proposed 

writ of mandate that the issue of interest first appeared. 

The judgment was filed on July 2, 2019, and notice of entry was mailed 

eight days later. Attached to the judgment as Exhibit A was the writ 

prepared by Walnut’s counsel. Both the judgment and the writ were 

“approved as to form” by the District’s counsel. 

This chronology establishes that at no point did the District advise the 

trial court that it disputed Walnut’s claim or entitlement to interest should 

it—Walnut—prevail. The District never hinted to the trial court that, as it 

now asserts, the form of either the judgment or the writ—both of which the 

District had approved—was unauthorized by the court’s written decision. In 

light of the totality of these circumstances, we must conclude the District 

failed to take any step that would have brought the issue to the trial court’s 

attention for correction. In light of this omission, the matter was not 

preserved for review. (Doers v. Golden Gate Bridge etc. Dist., supra,

13 The attorney signatures on the stipulation are dated July 1, 2019. The 

stipulation was filed the following day. Immediately following in the clerk’s 

transcript is Walnut’s “[Proposed] Judgment Granting Peremptory Writ of 

Mandate,” which has no file stamp, but has the handwritten notation 

“Received 7/2/19,” and the signature of the District’s counsel recording that 

he “approved as to form.” The judgment was immediately filed that same 

day. 
41

23 Cal.3d 180, 184–185, fn. 1; 9 Witkin, Cal. Procedure, supra, Appeal, § 400, 

p. 458]; cf. Buck v. Canty (1912) 162 Cal. 226, 238 [“[A] judgment will not be 

reversed on appeal because of the failure of the lower court to give relief . . . 

which it was not asked to give, that is, in effect, for an error which the trial 

court did not make”].)

Restoring The Level 3 Fees

As previously described, the predicate for Level 3 fees is that “state 

funds for new school facility construction are not available.” (§ 65995.7, 

subd. (a).) The concept of “available” is statutorily addressed: “For purposes 

of this section, state funds are not available if the State Allocation Board is 

no longer approving apportionments for new construction pursuant to . . . the 

Education Code due to a lack of funds available for new construction.” (Ibid.)

From the beginning of this dispute, Walnut maintained that the 

passage and implementation of Proposition 51 essentially nullified the 

District’s authority to impose Level 3 fees. The SAB may have run out of 

apportionable funds in 2015, but Proposition 51 put new funds in the 

pipeline, and by September 2017 the SAB was again making apportionments. 

Thus, the statutory requirement that “state funds for new school facility 

construction are not available” was not satisfied when the District imposed—

and Walnut paid—the Level 3 fees in 2018. This was the basis of Walnut’s 

administrative protest, and, as already shown, the basis of Walnut’s attack in 

its complaint against the Level 3 fees.

The District responded with some of the arguments it advances here: 

(1) the Level 3 fees were imposed in strict conformity with sections 65995.5 

and 65995.7, and (2) the fact that the SAB was infused with new bond 

funding by reason of the passage of Proposition 51 did not subsequently affect

an automatic termination of the Level 3 fees. 
42

The trial court agreed with Walnut, viewing the matter as 

straightforward: “The statute is clear that such fees may only be imposed ‘[i]f 

state funds for new school facility construction are not available.’ (Gov. Code,

§ 65995.7(a).) The parties do not dispute that the State Allocation Board 

received new bond funding and was considering applications for funding at 

the time [the District] imposed Level 3 fees on [Walnut’s] project, negating 

the ‘not available’ component of the statute.”

On this appeal, the District reiterates the same arguments rejected by 

the trial court, augmented with two others: (1) Walnut’s claim that 

Proposition 51’s restoration of the state bond funding for new school 

construction effected a de facto repeal or invalidation of existing Level 3 fees 

was contrary to legislative intent expressed in another provision of the School 

Facilities Act, and (2) Walnut’s claim “lacks practical workability.” 

We conclude the matter is not as simple and straightforward as the 

District believes, because the impact of Proposition 51, officially known as the 

Kindergarten Through Community College Public Education Bond Act of 

2016 (Ballot Pamp., Gen. Elec. (Nov. 8, 2016) text of Prop. 51 adding 

Ed. Code, § 101122, p. 118), cannot be ignored. The Legislature has 

demonstrated in the past when it intends to suspend or temporarily 

terminate a school district’s power to impose Level 3 fees, and there is no 

evidence of such an intent in Proposition 51. Quite the contrary, there is a 

provision in Proposition 51 that, by itself, is virtually dispositive in 

demonstrating that the Legislature intended to have no impact on the power 

to impose Level 3 fees. Moreover, we believe that accepting Walnut’s 

“automatic termination” position is not only contrary to existing language in 

the School Facilities Act, it would inject an element of uncertainty that could 

lead to chaos in the process of funding and constructing new school facilities.
43

Because it looms over the landscape like Gibraltar, Proposition 51 

deserves examination.

Proposition 51

The Official Title and Summary of Proposition 51 advised voters that 

the measure:

“Authorizes $9 billion in general obligation bonds: $3 billion for new 

construction and $3 billion for modernization of K-12 public school facilities; 

$1 billion for charter schools and vocational education facilities; and 

$2 billion for California Community Colleges facilities.

“Bars amendment to existing authority to levy developer fees to fund 

school facilities, until new construction bond proceeds are spent or December 

31, 2020, whichever is earlier.” (Ballot Pamp., supra, title and summary 

prepared by State Attorney General, p. 18.) 

The Analysis of the measure prepared by the Legislative Analyst told 

the voters of the need and the ways and means of addressing it:

“The state typically issues general obligation bonds to pay for facility 

projects. A majority of voters must approve these bonds. From 1998 through 

2006, voters approved four facility bonds that provided a total of $36 billion 

for K-12 facilities and $4 billion community college facilities. Voters have not 

approved new state facility bonds since 2006. Today, the state has virtually 

no remaining funding from previously issued school and community college 

facility bonds. (For more information on the state’s use of bonds, see the 

‘Overview of State Bond Debt’ later in this voter guide.)” (Ballot Pamp., Gen. 

Elec., supra, analysis of Prop. 51, p. 19.)

Without question, the purpose of Proposition 51 was to inject a 

substantial amount of new public money into school construction. As 

relevant here, the amount was $3 billion for “New Construction” of “K-12 
44

Public School Facilities.” (Ballot Pamp., Gen. Elec., supra, analysis of Prop. 

51, p. 20; id., text of Prop. 51, adding Ed. Code, § 101122, subd. (a)(1) [“The 

proceeds from the sale of bonds, issued and sold . . . shall be allocated in 

accordance with the following schedule: [¶] . . . The amount of three billion 

dollars . . . for new construction of school facilities of applicant school 

districts”].)

As explained in the Overview of State Bond Debt, even with adoption 

by the voters, a passage of time would occur before the newly authorized 

funds would actually be distributed to local school districts, a point made 

clear to the voters, who were clearly informed that there would be an 

inevitable time-lag between authorization of bonds, their sale, and the 

proceeds becoming available for distribution to school district. (See Ballot 

Pamp., Gen. Elec., supra, analysis of Prop. 51, pp. 114 [“The state sells bonds 

to investors to receive ‘up-front’ funding for these projects and then repays 

the investors, with interest, over a period of time”], 115 [“The school bond 

proposal on this ballot (Proposition 51) would allow the state to borrow an 

additional $9 billion by selling general obligation bonds to investors. The 

amount needed to pay the principal and interest on these bonds, . . . would 

depend on the specific details of the bond sales [and] . . . the bonds would be 

issued over a five-year period”]; id., text of Prop. 51, adding Ed. Code, 

§ 101120 [“The proceeds of bonds issued and sold . . .shall be deposited in the 

2016 State School Facilities Fund established in the State Treasury under 

Section 17070.41 and shall be allocated by the State Allocation Board”], 

119, text of Prop. 51, adding Ed. Code, § 101130 [“the Treasurer shall sell the 

bonds . . . at any different times necessary to service expenditures required 

by the apportionments”], id., text of Prop. 51, adding Ed. Code, § 101132

[“The bonds authorized by this chapter shall be prepared, executed, issued, 
45

[and] sold . . . as provided in the State General Obligation Bond Law”].)

Moreover, it was not guaranteed that the entire $3 billion would be 

released at the same time. (See Ballot Pamp., Gen. Elec., supra, text of 

Prop. 51, adding Ed. Code, § 101133 [“Upon request of the State Allocation 

Board, the State School Building Finance Committee shall determine 

whether or not it is necessary or desirable to issue bonds . . . in order to fund 

the related apportionments, and, if so, the amount of bonds to be issued and 

sold. Successive issues of bonds may be authorized and sold to fund those 

apportionments progressively, and it is not necessary that all of the bonds 

authorized to be issued be sold at any one time”].)

So, until the funds reached the districts, there would be a period when 

the districts would be dependent on the existing financial arrangements, 

specifically, the power to assess and collect Level 2 and Level 3 fees.

Legislative & Voter Intent 

Both in the trial court and on this appeal, the District has come close to 

presenting the matter simply and solely as a matter of statutory 

construction. Reduced to its essence, the District contends that it complied 

with sections 65995.5 and 65995.7 and that should pretty much be the end to 

the matter, subsequent events being irrelevant.

We have described the approach to statutory interpretation many 

times. The fundamental goal is to determine the intent of the legislation. To 

do this, we first examine the statutory language. If its meaning is plain, we 

apply the words as written. If the language will support conflicting 

interpretations, we may consult extrinsic aids. Finally, we consider reason, 

practicality, and common sense. (MacIsaac v. Waste Management 

Collection & Recycling, Inc. (2005) 134 Cal.App.4th 1076, 1082–1084.) The 

same principles govern voter initiatives which, in the case of Proposition 51, 
46

involve statutes adopted by the electorate instead of the Legislature. 

(People v. Buycks (2018) 5 Cal.5th 857, 879–880.)

These rules, however, are not a precise fit to the situation here. The 

District naturally looks to, and relies upon, only sections 65995.5 and 

65995.7, but our gaze must be broader, taking in the entire statutory scheme 

governing school finance, which, as will be seen, includes the statutes enacted 

by Proposition 51 because they deal with the same subject. (Mendoza v. 

Nordstrom, Inc. (2017) 2 Cal.5th 1074, 1084 [“ ‘We do not construe statutory 

language in isolation, but rather as a thread in the fabric of the entire 

statutory scheme of which it is a part’ ”]; Smith v. Superior Court (2006) 

39 Cal.4th 77, 83 [“ ‘ “we do not construe statutes in isolation, but rather read 

every statute ‘with reference to the entire scheme of law of which it is part so 

that the whole may be harmonized and retain effectiveness’ . . . ” ’ ”].) 

Additionally, passage of that initiative undergirded the argument advanced 

by Walnut and accepted by the trial court. Accordingly we examine both the 

School Facilities Act and Proposition 51.

The District initially assaults “the trial court’s interpretative error” 

with the following argument: “Once Level 3 fees are triggered, Government 

Code section 65995.7 does not contemplate any sort of ‘automatic reversal’ of 

a school district’s authority to impose Level 3 fees, which cannot be disputed 

given the subsequent ‘sunset’ provision since added by AB 48.” The assault is 

quickly defeated because its foundation no longer exists. 

The District’s supportive reasoning runs as follows: “Subsequent to the 

trial court’s decision in this case, . . . the Legislature enacted AB 48, placing 

the 2020 Bond Act on the March 2020 statewide ballot. The Legislature also 

added a sunset provision to a school district’s ability to impose Level 3 fees, 

which, if the 2020 Bond Act passes in March [2020], will suspend until 
47

January 1, 2028, a school district’s ability to impose Level 3 fees . . . . [¶] . . . 

AB 48 is suggestive of the Legislature’s understanding of current law.” 

But the 2020 Bond Act—which was more commonly identified as the 

latest attempt to modify Proposition 13’s restrictions on ad valorem real 

property taxes—was rejected by the voters. Thus, there is nothing to be 

learned from its provisions that never became effective, providing nothing 

that can be “suggestive of the Legislature’s understanding of current law.”14

(Italics added.)

However, the District does better, and achieves the same result, by

pointing—albeit elliptically— to measures that were adopted in the past. 

Twice, in 2002 and in 2012, the Legislature amended section 65995.7 to put 

school district’s power to impose Level 3 fees into temporary abeyance. The 

Legislature took pains to specify the precise time period of that abeyance, the 

reasons for it, and the contingencies for ending it.

15 This stands in 

14 “ ‘California courts have frequently noted . . . the very limited guidance 

that can generally be drawn from the fact that the Legislature has not 

enacted a particular proposed amendment to an existing statutory scheme.’ ” 

(Grupe Development Co. v. Superior Court, supra, 4 Cal.4th 911, 922–923.) 

Any guidance is further obscured because the Legislature was merely the 

conduit of a proposed measure that was then submitted to the voters. 

Whatever the Legislature may have intended, connecting that intent to what 

motivated the voters to reject the measure seems even more hazardous. If 

divining the mindset of one group is difficult, it is even harder with two. (Cf. 

People v. Skinner (1985) 39 Cal.3d 765, 785 (conc. opn. of Mosk, J.) [“In an 

initiative measure, . . . no legislative intent is available; the voter has only 

the choice of an enigmatic all or nothing”].)

15 In 2002, the Legislature amended subdivision (a)—the basic authority to 

impose Level 3 fees—with the following: “Paragraph (1) shall become 

inoperative commencing on the effective date of the measure that amended 

this section to add this paragraph, and shall remain inoperative through the 

earlier of either of the following: [¶] (A) November 5, 2002, if the voters 

reject the Kindergarten University Public Education Facilities Bond Act of 

2002, after which date paragraph (1) shall again become operative. 
48

conspicuous contrast to what happened here, where the Legislature took no 

comparable action. The ineluctable conclusion is that, whatever the outcome 

on Proposition 51, there would be no interruption of districts’ power to impose 

Level 3 fees.

This conclusion is reinforced and underscored by another provision of 

Proposition 51. The actual substantive sections of the measure added the 

Kindergarten Through Community College Public Education Facilities Bond 

Act as sections 101110 through 101149.5 of the Education Code. One of the 

most significant additions was section 101122, whose primary purpose was to 

allocate the funds for specified purposes. However, section 101122 also had 

the following: “Chapter 4.9 (commencing with Section 65995) of Division 1 of 

Title 7 of the Government Code, as those provisions read on January 1, 2015, 

shall be in effect until the full amount of bonds authorized for new school 

facility construction . . . have been expended, or [until] December 31, 2020, 

whichever is sooner.” (Ed. Code, § 101122, subd. (d), italics added.) This 

language is near conclusive proof that the Legislature, and the voters, had no 

intention of invalidating Level 3 fees already assessed and paid.

[¶] (B) The date of the 2004 direct primary election after which date 

paragraph (1) shall again become operative.” (Stats. 2002, ch. 33, § 33.)

 In 2012, the Legislature again amended subdivision (a) by adding the 

following: “Paragraph (1) shall become inoperative commencing on the 

effective date of the measure that amended this section to add this 

paragraph, and shall remain inoperative through December 31, 2014, after 

which date paragraph (1) shall again become operative, except that it may 

become operative sooner in either of the following circumstances: [¶] (A) A 

statewide school facilities bond passes before December 31, 2014, in which 

case paragraph (1) shall become operative upon certification of the election in 

which the voters approved the bond [¶] (B) A statewide school facilities bond 

has not been placed on the ballot for the November 4, 2014, statewide general 

election by August 31, 2014, in which case paragraph (1) shall become 

operative on September 1, 2014.” (Stats. 2012, ch. 38, § 75.) 
49

Walnut’s s arguments to the contrary are not persuasive.

According to Walnut, the justification—and the authorization—for 

Level 3 fees vaporized once the SAB was again disbursing funds, and thus 

Proposition 51 made all existing Level 3 assessments invalid, with no need 

for additional action by the Legislature. At its most simple, “Level 3 fees are 

authorized only if . . . the state is no longer [providing] funding.” For Walnut, 

it inexorably follows that “the authority to impose Level 3 fees automatically 

terminates without further legislative action upon the resumption of 

apportionment of state funds for new [school] construction.” In this case, 

following passage of Proposition 51, the SAB resumed approving 

apportionments on September 6, 2017. As Walnut sees it, the District’s Level 

3 fees became null and void a moment later.

The flaws in this reasoning are sizable.

First, as shown at the beginning of our discussion, the statutory 

predicate for imposing Level 3 fees is that “state funds for new school facility 

construction are not available,” meaning “the State Allocation Board is no 

longer approving apportionments for new construction.” (§ 65995.7, 

subd. (a).) It is undisputed that the SAB had not made apportionments since 

September 2015. Proposition 51 was enacted in November 2016, and the 

SAB resumed approving apportionments on September 6, 2017. The 

District’s power to impose Level 3 fees arose by operation of law when it 

approved the needs analysis on April 10, 2017, (§ 65995.6, subd. (f)), that is, 

before the SAB resumed approving apportionments five months later. Thus,

“state funds for new school facility construction [were] not available” 

(§ 65995.7, subd. (a)), meaning that the District had the authority to impose 

Level 3 fees, and the trial court was therefore in error when it concluded that 

the District “abused its discretion when it purported to impose Level 3 
50

fees . . . when, in fact, state funds for new school facility construction were 

available.” (Italics added.) There is simply no question state funds were not

available at the time when the District imposed the Level 3 fees.16

Second, the purpose of Proposition 51 was to increase the amount of 

state funds available for distribution to local school district, not to supersede 

or supplant the existing statutory process for distributing state funds to local 

school districts. This is made clear by the provision of Proposition 51 

specifying that the authority of schools districts under the School Facilities 

Act would remain “in effect until the full amount of bonds authorized for new 

school facility construction . . . have been expended, or [until] December 31, 

2020, whichever is sooner.” (Ed. Code, § 101122, subd. (d).) Further proof 

can be found in the absence of express language suspending the power to 

impose Level 3 fees, language the Legislature had twice used in the recent

past when—or if—school bond issues were to be submitted to the voters.

Third, there is another rule of statutory/initiative construction that is 

particularly relevant: courts may also consider the consequences that might 

flow from a specific interpretation of statutory language, a rule that is 

particularly true if the consequences will be absurd. (Smith v. LoanMe, Inc. 

(2021) 11 Cal.5th 183, 190; Horwich v. Superior Court (1999) 21 Cal.4th 272, 

16 We are also puzzled by the trial court’s conclusion that the SAB “was 

considering applications for funding at the time the District imposed Level 3 

fees on Walnut’s project, negating the ‘not available’ component of [section 

65995.7].” “Considering” fund applications is not the predicate specified by 

that statute. The statutory trigger is whether the SAB “is no longer 

approving apportionments for new construction” (italics added), which, as 

demonstrated in the text, was indeed the case when the Level 3 fees were 

imposed on Walnut.
51

276; People v. Knowles (1950) 35 Cal.2d 175, 182 (Traynor, J.).) And in this 

case, it is the practicalities that are decisive.

The problem here arose because the SAB was subsequently infused 

with $3 billion that could be used for new school facility construction. The 

new funds did not emerge from the ordinary legislative process, but were the 

result of an initiative measure, Proposition 51, passed by the voters in 

November 2016. But it was not until a year later—after the District had 

assessed, and Walnut had paid the Level 3 fees—that school districts began 

receiving state funds after the general obligation bonds authorized by 

Proposition 51 had been sold. Meanwhile, the Walnut Residences Project was 

on the SAB’s list of approved but unfunded developments. Although the 

record is not completely clear, it appears that the District received some 

funds, but not enough to cover all of the Level 3 fees, and not until June 2018. 

Thus, when the District assessed the Level 3 fees on Walnut, it was 

doing so in conformity with the relevant law, specifically sections 65995.5 and 

65995.7. The new funds from Proposition 51 were on their way, but had not 

yet arrived or even been apportioned by the SAB. By the time the new funds 

were ready for apportionment by the SAB, the Level 3 fees assessed by the 

District had already been paid by Walnut. Nevertheless, according to 

Walnut, once the funds had been apportioned to the District, the Level 3 fees 

had to be immediately returned to Walnut.

However, unless the SAB apportioned the full amount of the Level 3 

fees, there would likely be a shortfall between the amount needed and the 

amount available. Building school facilities is a lengthy process, requiring an 

assured income stream. Materials have to be purchased; labor has to be paid. 

The idea that a major portion of the overall expense could suddenly disappear 

would, at a minimum, produce confusion, and might result in utter chaos. 
52

That qualifies as an absurd consequence of Walnut’s idea that the mere 

availability of some state funding automatically terminates the validity of 

Level 3 fees already assessed and collected.

In light of the foregoing, we must reject Walnut’s argument that the 

mere passage of Proposition 51 automatically nullified Level 3 fees already 

assessed and collected. Walnut’s argument is contrary to the plain language 

of Proposition 51, and results in disruption to existing arrangements that 

was not intended by the voters.

Finally, the District appears to invite us to decide that school districts 

can both accept state funds and impose Level 3 fees. However, apart from a 

couple of scattered sentences in the District’s brief, the issue is not framed in 

the correct manner that requires further attention. (See Cal. Rules of Court, 

rule 8.204(a)(1)(B).) Moreover, the District does not advise how much, if any, 

state funds it has received, or whether the parties have employed the 

statutory procedures to prevent a developer from being over-charged in such 

a situation. (See § 65995.7, subd. (b); Ed. Code, § 17072.20, subd. (b).) 

Hazarding an analysis in these uncertain circumstances would partake of an 

advisory opinion, which is not a proper judicial function. (Vandermost v. 

Bowen (2012) 53 Cal.4th 421, 452; Pacific Legal Foundation v. California 

Coastal Com. (1982) 33 Cal.3d 158, 170.)

DISPOSITION

The judgment is reversed and the cause is remanded to the trial court 

with directions to: (1) recall the writ of mandate; (2) set aside the judgment 

granting the petition; and (3) enter a new judgment awarding Walnut 

interest on the refunds, but otherwise denying the petition in conformity with 

this opinion. The District shall recover its costs of appeal.
53

_________________________

Richman, Acting P. J.

We concur:

_________________________

Kline, J.*

_________________________

Stewart, J.

CP V Walnut, LLC v. Fremont Unified School District (A157722)

*Assigned by the Chief Justice pursuant to article VI, section 6 of the 

California Constitution.