Source: https://lozanosmith.wordpress.com/category/client-news-briefs/construction-advice-litigation/
Timestamp: 2020-08-03 21:11:19
Document Index: 491904339

Matched Legal Cases: ['§ 17406', '§ 20111', '§ 17406', '§17406', '§ 5956', '§ 5975']

Construction Advice & Litigation | Lozano Smith News
A California appellate court has ruled that lay public opinions on nontechnical issues concerning a project’s size and general appearance can provide substantial evidence of environmental impact, triggering the need to prepare an environmental impact report (EIR) under the California Environmental Quality Act (CEQA).
CEQA generally requires public agencies to identify potentially significant impacts of projects they carry out or approve, and mitigate those impacts where feasible. Unless a project is exempt from CEQA, the public agency must prepare one of three types of documents. A negative declaration (ND) can be prepared where there is no substantial evidence that the project may have a significant effect on the environment, and a mitigated negative declaration (MND) can be prepared where the project has potentially significant environmental effects, but these effects will be reduced to insignificance by mitigation measures. An EIR, however, is required whenever substantial evidence in the record supports a “fair argument” that the project may produce significant impacts or effects. An EIR generally involves more time and often more cost than an ND or MND.
The Third District Court of Appeal filed its decision inGeorgetown Preservation Society v. County of El Dorado (2018) 30 Cal.App5th 358, on December 17, 2018, affirming the trial court’s writ setting aside El Dorado County’s (County) approval of a project based on an MND. The County had prepared an initial study to analyze the environmental impacts of a proposed Dollar General chain discount store (Project) and found that there was no basis to require an EIR. Local residents acting through plaintiff Georgetown Preservation Society (Society) objected, claiming that the Project would impair the aesthetic character of their town. The Project was located in a historic center and several lay opinions were submitted by the local community, which commented that the Project was
too big and too boxy and would damage the look and feel of the town, and would therefore have significant and negative effects related to aesthetics. The County slightly modified the project and ultimately adopted the MND. In part, it found that the project complied with local zoning because the area was zoned for commercial retail, that the Project’s design, architectural treatments, and associated improvements substantially conform to the County’s Historic Design Guide and, that the Project would not substantially detract from the town’s historic commercial district.
The Society filed a lawsuit seeking to require the County to prepare an EIR. The trial court applied prior case law and found that the Society’s evidence supported a fair argument that the Project may have a significant aesthetic effect on the environment. Accordingly, the trial court issued a writ of mandate compelling the County to prepare an EIR.
On appeal, the County relied on the fact that it had applied its Historical Design Guide principles when it found the project met aesthetic standards. In the County’s view, the ensuing finding of compliance with its Historical Design Guide principles could not be disputed by lay opinion evidence. A key issue addressed by the Court of Appeal was whether non-expert factual evidence or lay opinion evidence proffered by area residents can support a “fair argument” that the Project may have a significant aesthetic impact on the environment. In reaching its decision, the Court of Appeal followed the rationale in Pocket Protectors v. City of Sacramento (2004) 124 Cal.App.4th 903, and held that (1) consistency with local design guidelines could not be used to insulate a project from CEQA review; (2) lay opinions can provide substantial evidence to support a “fair argument” that a project may have a significant aesthetic impact on the environment, triggering the need to prepare an EIR; and (3) since the County made no credibility determinations, it could not categorically disregard the
public’s comments.
Georgetown Preservation Society serves as a reminder of the impact public opinion may have on projects approved or carried out by public agencies, and that lead agencies should not disregard public opinion in non-technical areas like aesthetics. Previous court decisions have also considered lay opinions in other impact areas such as noise, traffic safety, and parking. Therefore, lead agencies should not solely rely on its industry experts when evaluating the environmental impacts of a project. If the community members’ opinions on these issues are not properly taken into consideration, project delays and increases costs can result.
If you have any questions about the appellate court’s decision in Georgetown Preservation Society and its impact on CEQA compliance, or about the CEQA in general, please contact the authors of this Client News Brief or an attorney at one of our eight offices located statewide. You can also visit our website, follow us on Facebook or Twitter or download our Client News Brief App.
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Scrutiny regarding school districts’ use of lease-leaseback (LLB) construction contracts has prompted the Legislature to impose additional contracting requirements that will make the use of LLB more complicated, and will limit a school district’s discretion in selecting the LLB contractor. Assembly Bill (AB) 2316, which the Governor signed on September 23, 2016, will require school districts to use a comprehensive “best value” selection process for LLB contractors. AB 2316 also grants specific financial protection to contractors who were awarded LLB contracts prior to July 1, 2015. The bill goes into effect on January 1, 2017.
The law related to LLB contracts has changed significantly over the last two years. Effective January 1, 2015, AB 1581 required prequalification for contractors on LLB projects that were over $1 million, funded by the state and for districts with an average daily attendance (ADA) of 2,500 or more. (Ed. Code, § 17406; Pub. Contract Code, § 20111.6; see 2014 Client News Brief No. 71.) Though not a model of clarity, effective January 1, 2016, AB 566 appears to have extended prequalification to all LLB projects for districts with ADA of 2,500 or more, regardless of funding source and regardless of price. AB 566 also required use of a “skilled and trained workforce.” (See Ed. Code, §§ 17406, 17407.5; and 2015 Client News Brief No. 51.)
On April 12, 2016, an appellate court agreed with the Davis court about the potential for a conflict of interest in an LLB contractor’s performance of preconstruction services under an earlier contract, but disagreed with the Davis court regarding terms required for LLB contracts, ruling that an LLB contract need not include provisions about contractor financing and post-construction tenancy. (McGee v. Balfour Beatty Construction (2016) 247 Cal.App.4th 235; see 2016 Client News Brief No. 25.) A conflict therefore exists in California courts as to what must be contained in an LLB contract.
Beginning on January 1, 2017, AB 2316 requires selection of the LLB contractor through a “best value” procedure specifically laid out in statute. Proposals submitted in response to a request for proposals (RFP) will be ranked by their best value scores and the Board must award to the contractor that submitted the sealed proposal determined by the Board to be the best value. In other words, aside from developing a scoring system for ranking the proposals, a school district will now have limited discretion in selecting its LLB contractor.
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California Energy Commission Makes Project-Friendly Changes to Proposition 39 Program Guidelines
On June 27, 2016, the California Energy Commission (CEC) issued a new set of proposed Proposition 39 Program Implementation Guidelines (guidelines). The proposed guidelines include a number of project-friendly changes, including a reduction in the Savings-to-Investment Ratio (SIR). These proposed guidelines are expected to be approved at the CEC’s general business meeting on July 13, 2016.
The California Clean Energy Jobs Act, commonly referred to as the Proposition 39 program, provides funds to all local educational agencies in the State of California for a variety of energy projects. The guidelines are intended to define how the state will implement the Proposition 39 program, and to provide direction to potential applicants on the types of awards and required proposals, describe the standards to be used to evaluate project proposals and outline the award process. The revisions to the guidelines should create additional flexibility for local educational agencies and increase the availability of Proposition 39 energy projects and funding.
Any local educational agency seeking Proposition 39 funding must show that its proposed energy project is “cost effective.” To be cost effective, the current guidelines require local educational agencies to achieve a minimum SIR of 1.05. The proposed guidelines reduce the SIR to 1.01, meaning that for every dollar invested on the project, the local agency must only accrue $1.01 in savings. This new minimum SIR applies to projects that include only one school site, and also applies cumulatively to projects involving multiple school sites.
As an alternative option to satisfying the minimum SIR, the current guidelines allow local educational agencies to submit a narrative describing how a proposed energy project would be cost effective if the local agency can show that each school site benefiting from a Proposition 39 grant has zero-dollar utility bills, referred to as “Zero Net Energy.” Because very few local educational agencies are completely zero net energy, local educational agencies generally cannot take advantage of this option. The proposed guidelines allow the zero net energy option for any school site, i.e., on a per school site basis. This change opens the door for more local educational agencies to utilize the zero net energy option in lieu of satisfying the minimum SIR, even if the entire educational agency is not zero net energy.
The proposed guidelines also increase the maintenance savings assumption from 2 percent to 3 percent of project costs, remove certain size limitations to solar systems under power purchase arrangements and provide further clarification to other areas in the existing guidelines.
If you have any questions regarding the Proposition 39 guidelines or have any planned or anticipate planning energy projects and would like to discuss Proposition 39 eligibility and funding, please contact the authors of this Client News Brief or an attorney at one of our nine offices located statewide. You can also visit our website, follow us on Facebook or Twitter, or download our Client News Brief App.
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Another California Appellate Court Opines On Lease-Leaseback Construction
An appellate court has ruled that a lease-leaseback (LLB) contract without competitive bidding was legally enforceable. In McGee v. Balfour Beatty Construction, LLC, et al. (Apr. 12, 2016) 2016 Cal.App.Unpub. Lexis 2626, a California appellate court rejected the holding of Davis v. Fresno Unified School District (2015) 237 Cal.App.4th 261, that competitive bidding was required for an LLB contract unless additional non-statutory contract terms were included. However, the McGee decision agreed with Davis that a third party had standing to sue regarding the LLB contractor’s potential conflict of interest. Unfortunately, the McGee court elected not to publish its decision, meaning that it cannot be cited by other courts as legal precedent. Lozano Smith filed an amicus curiae brief with the McGee appellate court on behalf of the California Association of School Business Officials (CASBO).
As in Davis, the plaintiffs in McGee alleged that the LLB contract documents were not genuine leases, but instead were a “subterfuge” to avoid competitive bidding. However, unlike Davis, the appellate court in McGee held that the plain language of the LLB statute (Education Code §17406) only required that the school district own the land, that the lease be for purposes of construction, and that the title vest in the school district at the end of the school term. The court held that the plaintiffs’ “efforts to engraft additional requirements – such as the timing of the lease payments, the duration of the lease, and the financing – are not based on the plain language of the statute.” This in effect repudiates the Davis case.
In short, the McGee court declined to “rewrite the [LLB] statute.” It relied heavily on Los Alamitos Unified School District v. Howard Contracting, Inc. (2014) 229 Cal.App.4th 1222, which held that Education Code section 17406’s exception from competitive bidding was valid.
McGee also focused on whether the taxpayer plaintiff had standing as a third party to allege a cause of action for conflict of interest under Government Code section 1090 (as held in Davis), or did not have such standing (as held in another recent case, San Bernardino County v. Superior Court (2015) 239 Cal.App.4th 679). The appellate court held that the plaintiffs had standing since the present case was a validation action like Davis, and since a prior Supreme Court case (on which Davis relied) implicitly gave standing to third parties. In addition, the appellate court held that the plaintiffs’ allegations that the LLB contractor acted as an officer or employee of the District when performing pre-construction services were sufficient to let the cause of action proceed to trial.
What does the McGee decision mean for school districts? Since it is not binding precedent, it merely provides additional perspective on certain LLB issues, but this perspective highlights the ongoing uncertainty surrounding LLB. The appellate courts have not agreed on LLB and what contract terms are required, or on the standing of third parties to sue regarding an LLB contractor’s conflict of interest and the application of conflict of interest laws to private contractors. The California Supreme Court dodged this issue by denying review of the Davis case. There is yet another LLB case pending in another appellate court (California Taxpayers Action Network v. Taber Construction Inc., et al.), in which Lozano Smith also filed an amicus brief on behalf of CASBO. The hope remains that clarity will yet come out of these divergent cases.
One or more parties may request reconsideration, publication, or Supreme Court review of the McGee decision. If not reconsidered by the appellate court or reviewed by the Supreme Court, the McGee action would move forward in the trial court solely on the conflict of interest cause of action. However, the final judgment cannot be predicted, and may yet be appealed.
If you have any questions about the legality of LLB and which appellate court decisions may apply to your project, or about other project delivery methods, please contact one of our nine offices located statewide. You can also visit our website, follow us on Facebook or Twitter, or download our Client News Brief App.
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Local public agencies have several options when it comes to choosing a delivery method for a construction project. The public-private partnership method, or P3, is one option that is receiving increased attention. P3 involves a long term partnership between a public agency and private entity, where typically the private entity finances, designs, builds, operates, and/or maintains a fee-producing public project. In exchange, the private entity will be repaid over an extended period of time through the fees generated by the public project or as otherwise permitted by statute. This can involve the private entity’s lease or ownership of the project for an extended period of time during the repayment period.
In order to utilize the P3 method for a public agency’s project, there must be authorizing legislation. The primary P3 law is the California Infrastructure Finance Act (Gov. Code §§ 5956 et seq.), which allows P3 for specific types of fee-producing local government projects through a “competitive negotiation” process. This Act applies to cities, counties, school districts, community college districts, county boards of education, public districts, joint powers authorities, transportation commissions or authorities, and any other public or municipal corporations. The Act covers specified types of projects: irrigation; drainage; energy or power production; water supply, treatment, and distribution; flood control; inland waterways; harbors; municipal improvements; commuter and light rail; highways or bridges; tunnels; airports and runways; purification of water; sewage treatment, disposal, and water recycling; refuse disposal; and structures or buildings, except structures or buildings to be primarily used for sporting or entertainment events.
Other California statutes allow P3 but apply less generally to local public entities. For instance, Government Code section 70371.5 permits public-private partnerships whereby the private entity shares some of the risk of financing, design, construction, or operation of court facilities. Section 143 of the Streets and Highways Code permits CalTrans and regional transportation agencies to partner with private entities for transportation projects.
One notable P3 project that has garnered attention recently is the new city hall, library, park, and port headquarters being built in the City of Long Beach. The City benefited from specific legislation that established its right to utilize the P3 method for these projects. (Gov. Code §§ 5975 et seq.) Since these projects were not fee-producing, existing legislation did not permit use of P3.
A major benefit of the P3 method is the ability to obtain private financing. Additionally, risks and responsibilities of the project design and construction are shifted to the private entity. Of course, the public agency also gives up some control of the project design. Each project is unique and each public agency’s needs are different, so the use of P3 should be evaluated on a case-by-case basis. For additional information about other project delivery methods, read the following: Client News Brief No. 8, February 2015 and Client News Brief No. 71, November 2015.
If you have any questions regarding P3 or other delivery methods for your project, please contact one of our nine offices located statewide. You can also visit our website, follow us on Facebook or Twitter, or download our Client News Brief App.
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The Department of Industrial Relations (DIR) recently announced that it has temporarily suspended enforcement of its requirement that contractors submit their certified payroll records (CPR) electronically. This electronic system (“eCPR” system) was intended to take the place of contractors submitting paper copies of their records, but the eCPR system is not working as expected. Even though the DIR has suspended the eCPR system for the time being, contractors are still required by Labor Code section 1771.4 to submit their CPR to DIR at least monthly. As a result, questions have been raised as to where and how contractors are to file their CPR.
The CPR submittal requirement is part of Senate Bill 854 (SB 854) which introduced this requirement so that the DIR could monitor whether prevailing wages are being paid on public works projects. SB 854 also added the contractor registration requirements and related provisions as described in an earlier Lozano Smith news brief (see Client News Brief No. 43, July 2014). The Labor Commissioner announced last year that contractors would have to submit their CPR to the DIR through the eCPR system.
Although DIR has suspended the eCPR system, it has not provided guidance as to how contractors should submit their CPR to the DIR in the meantime. Nothing in the language of SB 854 or recent DIR notices requires public agencies to accept the CPR from contractors as a substitute for the eCPR system. Instead, contractors remain obligated to maintain CPR and to provide them upon request, as provided in Labor Code section 1776. The DIR reports that the eCPR upgrades should be completed by June 2016. Hopefully, the eCPR system will be back in operation in time for the peak of the summer construction season.
If you have any questions about these CPR issues or other items related to upcoming construction projects, please contact one of our nine offices located statewide. You can also visit our website, follow us on Facebook or Twitter, or download our Client News Brief App.
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Court of Appeal Highlights the Importance of a Public Agency Complying With its Own Bid Requirements
The Third District Court of Appeal’s recent decision in DeSilva Gates Construction, L.P. v. Department of Transportation (2015) 242 Cal.App.4th 1409 (DeSilva), confirms the importance of ensuring that bidders on public construction projects comply with the express requirements of an invitation for bids. In DeSilva, the Court of Appeal held that a public entity incorrectly determined a contractor’s bid to be nonresponsive where the contractor had complied with all requirements in the invitation to bid and under applicable statute, despite the contractor adding a new subcontractor after submitting its original bid. The DeSilva court also reaffirmed the longstanding rule that a public entity cannot waive a material error in a bid.
In DeSilva, the California Department of Transportation (Caltrans) issued an invitation for bids on a public construction project. The invitation required each bidder to list, in its bid proposal, all subcontractors performing work in an amount in excess of one-half of one percent of the total bid or $10,000, whichever was greater. Each bidder was also required to provide, in its bid or within twenty-four hours thereafter, the bid items for each subcontractor and the corresponding percentages of those items being subcontracted. These requirements mirrored those in Public Contract Code section 4100, et seq. Caltrans then issued an addendum to the invitation which, in part, instructed bidders that the items declared in the addendum were an “essential part of the contract” and that bids should be submitted “with the understanding and full consideration of [the] addendum.” Caltrans received and opened nine bids for the project. The lowest bid was deemed nonresponsive and was not at issue in the appeal. The second lowest bid was submitted by DeSilva Gates Construction LP (DeSilva), and the third lowest bid submitted by Papich Construction Company, Inc. (Papich).
DeSilva’s bid included the names and appropriate descriptions of work to be performed by all subcontractors slated to perform work exceeding one-half of one percent of the bid amount. After submitting its bid, and within twenty-four hours of bid opening, DeSilva sent Caltrans a second subcontractor list, which provided additional information regarding its subcontractors and also listed an entirely new subcontractor. On the second subcontractor list, the new subcontractor was listed to perform less than one-half of one percent of the work. The next lowest bidder, Papich, challenged the award of the contract to DeSilva. Caltrans then rejected DeSilva’s bid on the grounds that listing the entirely new subcontractor on its second subcontractor list was improper and rendered DeSilva’s bid nonresponsive.
The Court of Appeal disagreed with Caltrans’ determination and held that DeSilva’s bid was not nonresponsive and that Caltrans’ rejection of the bid was improper. Even though DeSilva’s second subcontractor list was not identical to the initial subcontractor list, and listed an entirely new subcontractor, DeSilva’s bid did not run afoul of the invitation for bids or any applicable statute. The only requirement was that DeSilva, in its initial bid, list all subcontractors performing in excess of one-half of one percent of the work. Because the new subcontractor was not slated to perform more than one-half of one percent of the work, DeSilva had no legal requirement to list the new subcontractor in its original bid. As stated by the Court, the listing of the new subcontractor in the second subcontractor list was “accurate, albeit unnecessary.” The Court also noted that DeSilva’s listing of the new subcontractor did not appear deceptive or indicate any attempt to gain an unfair advantage, and showed no attempt by DeSilva to flout the requirements in the bid invitation. Because DeSilva’s bid met the express requirements of the invitation, did not conflict with any applicable statute, and was not otherwise improper, the bid was responsive and should not have been rejected. The Court also rejected arguments that its ruling would allow for improper bid shopping after the initial bid is submitted.
Papich’s bid, on the other hand, failed to acknowledge or accept the addendum to the invitation to bids. Although Caltrans initially determined Papich’s bid nonresponsive for this reason, Caltrans allowed Papich to provide documentary evidence showing that Papich considered and agreed to be bound to the addendum. After receiving this evidence from Papich, Caltrans waived the mistake and determined Papich’s bid to be responsive.
The Court of Appeal again disagreed, holding that Caltrans could not waive the error in Papich’s bid. Under existing case law, a bid error may only be waived if the error or variance in the bid is immaterial in that it does not affect the amount of the bid or give the bidder an advantage or benefit not allowed other bidders, i.e., the error is not material. A material error, on the other hand, cannot be waived. Caltrans’ invitation for bids specifically stated that “a bidder’s failure to acknowledge a material amendment to the contract renders its bid nonresponsive.” The Court therefore concluded that Papich’s failure to acknowledge the addendum in its bid was a material error that Caltrans could not waive, and Papich’s bid should have been rejected as nonresponsive.
The holding in this case boils down to whether or not the contractors’ bids complied with the specific requirements for the invitation for bids. To that end, DeSilva serves as a reminder that public entities, despite their broad discretion in determining responsiveness of bids, must properly and equally enforce the express requirements of a bid request and the numerous California statutes applying thereto. This also emphasizes the need to review bid instructions closely prior to bidding, as the public agency will be afforded limited opportunities to deviate from those instructions once bids are received.
If you have any questions regarding public bidding, or have any planned or anticipated construction projects and would like to discuss the bidding process, please contact one of our nine offices located statewide. You can also visit our website, follow us on Facebook or Twitter, or download our Client News Brief App.
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An appellate court has held that a public agency may recover administrative record preparation costs in a lawsuit filed against it under the California Environmental Quality Act (CEQA), even where the petitioner elects to prepare the record. This decision calls into question CEQA petitioners’ tendency to elect to prepare the record themselves in order to avoid paying agency costs.
In CEQA lawsuits, Public Resources Code Section 21167.6 governs the record of proceedings or administrative record. That section states that at the time the action is filed, the petitioner must request that the public agency prepare the record. In the alternative, the petitioners suing the public agency under CEQA may elect to prepare the record themselves, subject to certification of its accuracy by the public agency. The statute also provides that the “parties” shall pay any reasonable costs or fees related to the preparation of the record of proceedings.
Although the cost recovery language refers to the “parties,” thus including both the petitioner and the public agency, petitioners in CEQA lawsuits have long taken the position that the public agency is precluded from recovering record preparation costs after the petitioner elects to prepare the record. CEQA petitioners will typically sue the public agency, elect to prepare the record, and then simply obtain the record documents from the public agency through a Public Records Act request. In such circumstances, the public agency generally incurs the same cost as the agency would have had it prepared the record itself. However, under the Public Records Act, the agency can charge only actual and reasonable copying costs. If the petitioners elect to make the copies themselves, nothing can generally be charged under the Public Records Act.
In Coalition for Adequate Review v. City and County of San Francisco (September 15, 2014) __ Cal.App.4th __ 2014 WL 4537020, the Court of Appeal expressly held that the fact that a petitioner elects to prepare the record does not bar the recovery of record preparation costs by a public agency. The court recognized that the public agency may be required to incur record preparation costs notwithstanding the petitioner’s election. In Coalition for Adequate Review, the record prepared by the petitioner was incomplete because it omitted documents that were statutorily required to be in the record, and had been provided to the petitioners by the City. As a result, the City was required to supplement the record with approximately 12 additional volumes of documents totaling 4,559 pages. The City prevailed in the CEQA lawsuit, and sought costs associated with preparing the supplemental record. The costs were denied by the trial court in their entirety, but the decision was reversed on appeal.
This case represents a victory for public agencies, as it challenges the idea that petitioners can elect to prepare the record as a way to avoid paying agency costs. The costs claimed by the public agency must still be reasonable, which is a question of fact for the trial court. In Coalition for Adequate Review, the City’s claim for over $64,000 in costs, including staff and paralegal time, was sent back to the trial court for a consideration of reasonableness. While the case addressed the need for a supplemental record, it is noteworthy that the court indicated a public agency may seek costs even when there is no need to supplement the record and even if the public agency does not prevail in the underlying CEQA case.
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Can School Districts Collect “Level 3” Developer Fees?
In June 2012, the Legislature suspended school districts’ ability to levy “Level 3” developer fees. This suspension would be lifted if, by August 31, 2014, a statewide facilities bond was not placed on the ballot for the November 4th general election. As a statewide facilities bond was not placed on the ballot, the suspension on collecting Level 3 fees was lifted on September 1, 2014. Despite anticipation that a further extension of the suspension of Level 3 fees might be signed into law, no legislation was introduced during the recent legislative session. School districts may be on the precipice of collecting Level 3 fees for the first time ever, but many questions remain unanswered.
Under Senate Bill (SB) 50, legislation that became effective in 1998, school districts have been able to levy one of three levels of developer fees on new development. SB 50 continued a statutory rate (commonly called a “Level 1” fee), so long as sufficient justification exists to support that fee. The current Level 1 fees are $3.36 for residential development and $0.54 for commercial. For school districts that meet certain criteria, a “Level 2” residential fee may be imposed that can be higher than the Level 1 fee, based on a specific statutory formula. The Level 2 fee is unique to each school district and must be authorized annually. In concept, Level 2 fees are the equivalent of what the state assumes will total 50% of the cost of providing facilities for students from new development.
The passage of SB 50 in 1998 also resulted in the enactment of Government Code section 65995.7. Under this statute, school districts eligible for Level 2 fees may also become eligible for “Level 3” fees if the State Allocation Board (SAB) certifies that state funds for new school facility construction are no longer available. Level 3 fees are intended to be the equivalent of approximately 100% of the cost of school facilities for new development. Following such SAB certification regarding funding, if and when state bond funds again become available for facilities, the difference between the Level 2 and Level 3 amounts is to be refunded either to the state or to developers. Thus, Level 3 fees represent a gap filler for when the state is unable to match its share of the cost of facilities for new development.
SB 50 represented a compromise between school districts and the building industry after a prolonged debate and series of court decisions addressing school districts’ ability to receive more than the statutorily designated school mitigation amount. The industry received limitations on their obligations to pay certain fee amounts, in part in exchange for the opportunity of the school districts to collect additional fees when state funding was not available for school facilities projects. While the building industry has enjoyed the limitations on its obligations for almost 16 years, school districts have not yet been able to access Level 3 fees, even when no state funding has been available to them.
Until now, Government Code section 65995.7 had little effect, either because it has been suspended, or because the SAB has declined to issue the necessary certification that state funding is unavailable. Now that all potential revenue from the existing statewide bond is nearing the point of being fully apportioned, the situation will call for SAB to make the necessary certification in the near future. It would seem that the current situation is precisely the scenario that Level 3 fees were intended to address, but it will remain to be seen whether SAB will actually issue the certification. With the housing market picking up, developers will be less able to argue that Level 3 fees will stop economic recovery from the recession, which is the argument the building industry and Legislature used when Level 3 fees were suspended in 2012. The renewed housing boom supports the need for school districts to implement Level 3 fees to accommodate for more growth.
To the extent that a school district is contemplating levying a Level 3 fee, and all conditions are in place to allow the district to do so, it is important to consider whether the most recent school facilities need analysis and/or developer fee justification study and adopting resolution adequately address the issue of Level 3 fees.
To assist school districts in navigating these and other developer fee issues, Lozano Smith’s Facilities and Business Practice Group publishes and regularly updates its Developer Fee Handbook for School Facilities: A User’s Guide to Qualifying for, Imposing, Increasing, Collecting, Using and Accounting for School Impact Fees in California. The Handbook can be ordered on our website by clicking here. If we can be of assistance regarding Level 3 fees or other developer fee matters, please contact one of our eight offices located statewide. You can also visit our website, follow us on Facebook or Twitter, or download our Client News Brief App.
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