The California Court of Appeal has held that the Mitigation Fee Act does not require a city to specifically identify proposed facilities prior to adopting an impact fee and that cities may consider operational expenses when assessing fees. The case, Homebuilders Association of Tulare/Kings Counties, Inc. v. City of Lemoore,[1] (“Homebuilders”) will have an important effect on cities wishing to impose fees for public improvements to compensate for growing populations.
At issue in Homebuilders was the City of Lemoore’s (“City”) decision to adopt 13 impact fees. In response to these fees, Homebuilders Association of Tulare/Kings Counties, Inc. (“HBA”) filed suit challenging seven of the new fees. HBA argued that the City had not properly complied with the Mitigation Fee Act[2] in several respects.
First, HBA argued that the Mitigation Fee Act required the City to specifically list the facilities and improvements that the fees would finance. The Court, however, disagreed and held that a city may identify facilities through general descriptions of future facilities.
Second, HBA also argued that the City’s existing surplus of impact fees precluded the City from establishing new fees. The Court again disagreed, holding that because those surpluses may only be spent on existing developments or be refunded, new fees for new developments are appropriate.
Third, the court analyzed whether the Quimby Act[3] preempted fees under the Mitigation Fee Act. The Quimby Act imposes exactions for recreational facilities and HBA asserted that any further fees would be duplicative and preempted. The Court distinguished the Quimby Act from the Mitigation Fee Act in that the Quimby Act is designed to maintain and preserve open space for specific subdivisions, whereas the Mitigation Fee Act permits fees that serve the City at large.
Fourth, HBA contended that because the City’s general plan designated three acres of parks per 1,000 persons, the City abused its discretion in adopting a standard of five acres per 1,000 persons. The Court found that this new standard did not conflict with the City’s general plan, because both reflect a commitment by the City to parks and recreation.
Fifth, the Court found that the City was correct in considering the costs of vehicles and equipment in calculating their fee. The Court held that the Mitigation Fee Act incorporates the costs of operation and maintenance in the financing of public facilities.
Lastly, the Court sided with HBA with regard to a fire protection impact fee. The Court invalidated this fee on the grounds that the City was not in need of additional fire protection. Instead of being used for growing existing fire protection needs, the proposed fee was going to be used for general revenue purposes. The Court, therefore, found that this violated the Mitigation Fee Act.
The Court placed the burden of proof on HBA, the party challenging the impact fees, to show that the fees were not supported by the record. The city or local agency, on the other hand, need only show that there is a reasonable relationship between the fee and the development. The Homebuilders Court emphasized the discretion that cities have in adopting fees as well as the necessity for cities to use generalized plans in their considerations. This case will also provide greater guidance for cities in determining the proper procedures and standards for adopting new impact fees.
Alvarez-Glasman & Colvin serves as legal counsel to municipal agencies throughout California and is at the forefront of a wide variety of legal issues facing cities and local governments. Please contact Associate Anthony Marinaccio at anthony@agclawfirm.com or (562) 699-5500 for more information regarding this case or other municipal law issues.
[1] Case No. F057671M (Cal. Ct. App. July 8, 2010).
[2] Cal. Gov’t Code §§ 66000-66025 (2010).
[3] Gov’t Code § 66477.