Court Opinion

ID: 6323892
Source: CourtListenerOpinion
Date Created: 2022-03-16 19:03:24.167984+00
Date Added: 2024-06-11T09:21:45.271625
License: Public Domain

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                  NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or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,
                                                                        A157722
    v.
    FREMONT UNIFIED SCHOOL                                              (Alameda County Super.
    DISTRICT et al.,                                                    Super. Ct. No. RG18901866)
           Defendants and Appellants.

         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.

                                                               1
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

                                        2
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

                                          3
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

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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

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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

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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

                                         7
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

                                         8
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

                                        9
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

                                        10
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

                                        11
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

                                       12
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 multi-
family 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

                                        13
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

                                        14
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,

                                        15
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.

                                       16
      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.

                                         17
                             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

                                        18
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.”

                                        19
      “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.

                                       20
                            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 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 [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

                                       21
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.

                                       22
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.

                                         23
        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.”

                                        24
      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

                                       25
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.”

                                       26
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

                                       27
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

                                         28
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

                                        29
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.

                                        30
      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

                                       31
                               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).)

                                       32
      “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 per-
unhoused-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).)

                                         33
      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.

                                        34
      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 non-
mitigated 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

                                        35
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.”

                                        36
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

                                        37
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

                                          38
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

                                         39
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.

                                       40
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.

                                          41
      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.

                                        42
      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

                                        43
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,

                                         44
[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,

                                        45
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

                                        46
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.

                                         47
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.)

                                       48
      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

                                       49
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.

                                        50
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.

                                         51
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.

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                                    _________________________
                                    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.

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