CASH-School Fees PAPER by WHW on 3-28

BOWIE, ARNESON, WILES & GIANNONE
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
ATTORNEYS AT LAW
ALEXANDER BOWIE*
JOAN C. ARNESON
WENDY H. WILES*
PATRICIA B. GIANNONE
ROBERT E. ANSLOW
BRIAN W. SMITH
JEFFREY A. HOSKINSON
JEFFREY W. FREY
LYNH N. NGUYEN
AMANDA A. POPE
4920 Campus Drive
NEWPORT BEACH, CALIFORNIA 92660
(949) 851-1300
(800) 649-0997
FAX (949) 851-2014
*A PROFESSIONAL CORPORATION
JUSTIFYING SCHOOL FEES
AND
MOST COMMONLY ASKED QUESTIONS
California’s Coalition for Adequate School Housing
March 28, 2014 – Ontario, CA
By
Wendy H. Wiles
BOWIE, ARNESON, WILES & GIANNONE
BOWIE, ARNESON, WILES & GIANNONE
I.
INTRODUCTION
School districts have been authorized to levy school fees on new development
projects located within the boundaries of the school district since January, 1987. The fees
are authorized to be levied in order to mitigate the impacts that new development creates
on the school facilities of a school district. During the last 27 years, the process for
levying school fees has evolved and in 1998, school districts were authorized to levy
alternative school fees in addition to the statutory school fees initially authorized in 1987.
Although school fees are statutorily authorized, developers and school districts
have many times been at odds over the amounts proposed to be levied on new
development projects. In some situations, developers have either protested or challenged
school districts on the findings and determinations made in their “School Fee Justification
Study” and/or their “School Facility Needs Analysis”. This paper will address the most
commonly asked questions related to the levying of school fees and discuss the current
issues affecting the levying of school fees.
II.
BRIEF HISTORY OF SCHOOL FEES
In 1986, the California Legislature enacted Assembly Bill 2926 (“AB 2926”),
Chapter 887 of the Statutes of 1986 (Government Code Sections 53080, et seq., and
65995, et seq.). In part, AB 2926, for the first time, granted school districts the authority
to impose statutory school fees upon new development projects to help fund the
construction of public school facilities. Pursuant to AB 2926, Government Code Section
530801 authorized school districts to levy statutory school fees on new development
projects, subject to the limits imposed by Government Code Section 65995(b).
As established in 1986, a cap of $1.50 per square foot on new residential
construction and $0.25 per square foot for commercial/industrial construction was
authorized. These fees are adjusted biannually for inflation by the State of California,
State Allocation Board (“SAB”) and, in 2014, were increased to $3.36 and $0.54,
1
Government Code Section 53080 was renumbered as Education Code Section 17620
pursuant to Senate Bill 1562 (Chapter 277, Section 3).
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respectively. (Government Code Section 65995(b)(3).) These fees are commonly
referred to as “Level I Fees”. In order to justify levying the Level I Fees, a school district
will prepare a study/report, commonly referred to as a “School Fee Justification Study”.
On November 3, 1998, the California voters approved Proposition 1A, the Class
Size Reduction Kindergarten-University Public Education Facilities Bond Act of 1998.
The approval of Proposition 1A resulted in the provisions contained in Senate Bill 50
(“SB-50”) of the Leroy F. Greene School Facilities Act of 1998 becoming effective.
Included within the provisions of SB-50, was the authorization for school districts to levy
“alternative school fees” or what have become known as Level II Fees and Level III Fees.
(Government Code Section 65995.5, 65995.6 and 65995.7.) The requirements for the
levying of alternative school fees are set forth under Government Code Section 65995.6,
which provides for the necessity of the preparation of a School Facilities Needs Analysis
and the requirements set forth for such analysis.
III.
COMMONLY ASKED QUESTIONS
1.
What is the Process a School District Must Follow in Order to Levy Level I
Fees?
In order to levy Level I Fees (on residential and commercial/industrial
construction), a school district must prepare and adopt a School Fee Justification Study
(“SFJS”). Even for those school districts which will levy Level II Fees (discussed
hereafter), school districts commonly prepare an SFJS to adopt or increase Level I Fees.
This will protect a school district should the school district fail to meet the eligibility
requirements discussed below for Level II Fees or in the event the Level II Fees are
successfully challenged.
Government Code Section 66001 requires school districts to establish a nexus in
the SFJS between the type of the proposed new development to be constructed in the
school district and the amount of fees to be levied upon such development.
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The following procedures should be followed:

Complete a School Fee Justification Study which analyzes the
anticipated impact to the school district from the proposed new
development and establishes a need for the levying of the school fees.

At least 14 days prior to the public hearing, the school district must
mail the Notice of Public Hearing to any interested person who has
requested in writing notification prior to the public hearing to
consider the adoption of the Level I Fees.

The Notice of Public Hearing must be published in a newspaper of
general circulation – the first publication at least ten days prior to the
public hearing and the second publication at least five days after the
first publication – Government Code Section 6062a.

The SFJS must be made available to the public at least ten days prior
to the public hearing.

The school district must hold a public hearing at a regularly scheduled
meeting of the governing board, at which time input from the public is
requested and any written correspondence on the SFJS is reviewed.

Pursuant to Education Code Section 17621(c), upon adoption of the
SFJS, the school district must notify local planning agencies
(applicable cities and counties and Office of Statewide Health
Planning and Development in which the school district is located
(Education Code Section 17620(d)) of the new statutory school fees
and must notify the planning agencies that the new SFJS will be
effective 60 days after adoption unless urgency resolutions are
adopted.

Pursuant to Education Code Section 17621(b), if the school district
desires to adopt an urgency resolution, in order to make the statutory
school fees immediately effective, two such resolutions must be
adopted. Each resolution is only effective for thirty days and requires
a 4/5 vote of the governing board (not just the board members present
at the board meeting). The board must also make a finding that the
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urgency resolutions are necessary to respond to a current and
immediate threat to public health, welfare or safety.
2.
How Often Does a School District Have to Adopt a School Fee Justification
Study to Levy Level I Fees?
The Level I Fees are adjusted every two years in even numbered years by the SAB.
In order to levy an increase in the Level I Fees, the school district would need to prepare
a new SFJS or update a previously prepared SFJS. However, should the school district
desire to continue levying the older Level I Fee amounts, then a new SFJS is not required.
The school district should however be aware that the school district is always required to
establish a nexus in order to levy any school fees. Accordingly, if there are any changes
in circumstances which might affect the conclusions in the prior SFJS, a school district
should consider adopting or updating its existing SFJS. We recommend that in order to be
able to withstand a potential challenge to the SFJS, a school district update its SFJS every
two years consistent with the action taken by the SAB.
3.
What is the Process a School District Must Follow in Order to Levy
Alternative School Fees (Level II and Level III Fees)?
Government Code Section 65995.5 contains a number of preliminary steps which
must be complied with prior to the preparation of a School Facilities Needs Analysis
(“SFNA”). Compliance with these procedures allows a school district to prepare an
SFNA and, if adopted, impose Level II Fees. Level II Fees are effective immediately.

A school district must first apply for state funding with the SAB
(Forms SAB 50-01, 50-02, 50-03).

The SAB will issue an eligibility determination to the school district
regarding its application. Note: If the SAB fails to respond within
120 days, the school district is deemed to have received the
determination.
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
To prepare or revise an SFNA and adopt Level II/Level III Fees, the
school district must meet at least two of the following four
requirements set forth in Government Code Section 65995.5(b)(3):
1.
A specified percentage of “substantial enrollment” of the
school district’s pupils are on multi-track year-round schedule;
2.
The school district held a local general obligation bond election
within the past four years which received at least 50% + 1 of all
votes cast;
3.
The school district has issued debt or incurred obligations for
capital outlay in a specified percentage of the district’s local
bonding capacity; and
4.
At least twenty percent of the teaching stations within the
school district are relocatable classrooms.
Government Code Sections 65352.2 and 65995.6(c) and (d) require that the
following steps be taken to properly adopt an SFNA:

The school district must complete a SFNA which analyzes the
anticipated impact to the school district from the proposed new
development and establishes a need for the levying of the school fees.

At least 45 days prior to the adoption of the SFNA, the school district
shall offer to meet and confer with the local planning agencies of the
cities and counties.

The Notice of Public Hearing shall be published in a newspaper of
general circulation within the school district at least 30 days prior to
the public hearing.

The school district must mail a copy of the SFNA not less than 30
days prior to the public hearing to anyone who has made a written
request at least 45 days prior to the public hearing. (We recommend
that the school district post the Notice of Public Hearing in the
district’s normal posting locations.)
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4.

The school district shall make the SFNA available in its final form for
a period of not less than 30 days prior to the public hearing including
sending the final SFNA to the local planning agencies.

During the 30 day public review period, the public shall have the
opportunity to review and comment on the SFNA. The governing
board shall respond to any written comments that have been received
regarding the SFNA.

The governing board must adopt the SFNA by resolution after
holding a public hearing.

Under Education Code Section 17621(c), after adoption of the final
SFNA, a school district shall mail the final SFNA to all planning
agencies and the Office of Statewide Health Planning and
Development in which the school district is located (Education Code
Section 17620(d)).
How Often Does a School District Have to Adopt an SFNA to Levy Level
II/Level III Fees?
At least annually. Pursuant to Government Code Section 65995.6(f), an SFNA is
not effective for more than one year. We recommend that school districts not wait until
the week before the SFNA expires to calendar the adoption of the new SFNA. Instead, we
suggest that school districts calendar the adoption of the new SFNA for two to four weeks
prior to the expiration of the SFNA in order that the Level II/III Fee will not lapse.
5.
What is “Nexus” and How is it Established?
Perhaps the most common issue raised by developers when challenging a school
fee report is the claim that the school district has failed to establish a “nexus” for the
levying of the school fees. Nexus is a reasonable relationship between the proposed
development and the mitigation fee to be imposed on the project. The leading case which
sets forth the test to be used to determine if the “nexus” has been established, is Shapell
Industries, Inc. v. Governing Board (1991) 1 Cal.App.4th 218 (“Shapell”). This case
continues to be regularly cited whenever an argument is made that the nexus has not been
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properly established to levy school fees.
In Shapell, the court concluded that “facilities fees are justified only to the extent
that they are limited to the cost of increased services made necessary by virtue of the
development.” (Shapell, supra, at p. 235.) In order to be valid, the school board must
show that there is a valid method used “for arriving at the fee in question, ‘one which
established a reasonable relationship between the fee charged and the burden posed by the
development’.” (Id.)
In Shapell, a developer brought an action challenging the resolutions adopted by a
school district’s governing board authorizing the levying of school facility fees on new
residential, commercial and industrial development throughout the district. The Shapell
court established a test to determine if a reasonable relationship existed between the fee
charged and the burden imposed by the development. This test requires 3 elements:
1.
Since the fee is to be assessed on the per square foot of development, there
must be a projection of the total amount of new housing expected to be built
within the school district.
2.
In order to measure the extent of the burden imposed on schools by new
development, the school district must determine approximately how many
students will be generated by the new housing.
3.
The school district must estimate what it will cost to provide the necessary
school facilities for that approximate number of new students.
(Id. at p. 235.)
It is through the preparation of an analysis contained in the SFJS and the SFNA
that the school district identifies the anticipated burden that new development will cause
on the school district’s school facilities. The SFJS and the SFNA must be able to justify
the need for the levying of the proposed school fees in order to mitigate the impacts from
the proposed new development.
6.
Can School Districts Collect Level III Fees?
School districts are not currently authorized to collect Level III Fees. Pursuant to
Government Code Section 65995.7, the SAB needs to make a determination that state
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funds are no longer available to approve apportionments for new construction. Upon
making this determination, the SAB shall notify the Secretary of the Senate and the Chief
Clerk of the Assembly, in writing, of that determination and the date when state funds are
no longer available. Only then will school districts be able to levy Level III Fees.
However, Government Code Section 65995.7(a)(2) was amended in 2012 to suspend the
ability of a school district to levy a Level III Fee through 2014 even if the SAB does not
approve apportionments.
While the SAB needs to make the above determination, this assumes that the
school district has adopted an SFNA justifying the levying of Level III Fees.
7.
What are the Key Factors Affecting School Fee Reports?
A.
Capacity of School Facilities
Developers routinely review the school facility capacity calculations. This is
particularly important when a school district is experiencing declining enrollment.
School districts need to carefully review their capacity analysis to ensure the current
capacity calculation can be justified if challenged by a developer.
B.
Land Valuation
Developers are keenly aware of the current values of land. This is an area in which
developers focus when reviewing an SFJS or SFNA. Accordingly, school districts need
to carefully review their projections on the anticipated cost of future school sites to be
sure such projections are in line with current values. Many times, school districts carry
forward a prior appraisal for a proposed future school site. In situations in which
appraisals are outdated or adjustments to land values are not properly supported, school
districts may likely experience a challenge to their school fee calculations. With regard to
a SFJS, we recommend that a school district have an appraisal performed on property
proposed for future school sites. This will provide independent support for the land
valuation component.
With regard to the preparation of an SFNA, pursuant to the provisions of
Government Code Section 65995.5(h) and Education Code Section 17072.12, the land
cost component must be based on a recent appraisal or a recent site acquisition by the
school district. We believe the appraisal should be on the basis of “super pad condition,”
which is defined by SAB Regulation Section 1859.74.1(a)(2) as a site graded to
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construction readiness without foundation or paving with utilities stubbed to the site. In
the past, some school districts have used different sources to substantiate land costs such
as conversations with architects or by escalating estimates used in previous school facility
master plans. However, if land costs are not taken from a recent appraisal or recent site
acquisition as required by the statute, the school district may face a challenge to the
SFNA.
C.
Projected Development
The projection of the number of new residential units to be constructed within the
boundaries of the school district is also an area in which developers have expertise.
Unlike SFNAs, SFJS do not have specific procedures for calculating projected future
residential units. We recommend that housing projections be broken down into the
appropriate residential land use designations, such as single-family detached, singlefamily attached, multi-family attached and potentially apartments.
Consultants preparing SFNAs are required to project future residential
development over the next five years. Consultants have often found cities and counties to
be nonresponsive to their questions regarding the nature and quantity of future residential
development. Government Code Section 65995.6(a) requires the projected development
data to be obtained from the planning agencies of the cities and counties in which the
school district is located and relevant planning agency information such as multi-phased
development projects that may modify historical figures. The practical approach has been
to seek this information from the applicable cities or counties, and if no response is
forthcoming, the consultant will formulate an opinion based on available credible
sources.
8.
How Can School Fees be Levied on Redeveloped Projects?
Perhaps one of the most difficult issues involving school fees is the analysis to be
undertaken when a parcel of land is redeveloped. The issue regarding what amount of
school fees, if any, may be levied on a “renovated” or “redeveloped” project, is complex.
Developers often challenge the assessment of fees against projects that involve
demolition of existing structures, which are then replaced by new structures. The
question often arises, whether fees should be charged against such redevelopment.
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In order to levy any school fees on a redeveloped project, school districts need to
analyze the “nexus” requirements of Government Code Section 66000 et seq. As
discussed, Government Code Section 66001(a) requires an identification of the purpose
and use of the fees. Government Code Section 66001(a) additionally requires a showing
that there is a reasonable relationship between fees’ use, the type of development project
on which the fee is imposed, and the need for the school facility.
When dealing with redeveloped commercial property, pursuant to Education Code
Section 17620, a school district may charge the commercial/industrial fee on new
commercial and industrial construction. However, the chargeable covered and enclosed
space of commercial or industrial construction shall not be deemed to include the square
footage of any structure existing on the site of that construction as of the date the first
building permit is issued for any portion of that construction. Government Code Section
65995(d) defines construction as new construction and reconstruction of existing
buildings for residential, commercial, or industrial.
If the developer is demolishing currently standing commercial/industrial structures
and replacing them with new commercial/industrial structures, the school district should
most likely give a credit for the currently standing commercial/industrial structures and
charge the current commercial/industrial fee only for any excess square footage between
the old and new buildings. However, before charging, a closer analysis would need to be
done to establish the appropriate nexus between the fee charged and the type of
commercial/industrial building being replaced (i.e., will this type of commercial/industrial
structure produce less employees and thus less children than the one it replaced.)
If the developer is constructing new commercial/industrial buildings where
commercial/industrial buildings used to stand (i.e., they were demolished several years
ago), then the school district will need to decide whether a credit for the
commercial/industrial structures that used to exist on the property should be given. Our
firm believes that the phrases “that construction” and “first building permit” are not clear
in Education Code Section 17620 and the school district should discuss each
commercial/industrial redevelopment project with their legal counsel to decide the best
approach based on the facts with regard to the proposed development.
Education Code Section 17626 contains an exemption for school fees for the
reconstruction of any residential, commercial, or industrial structure that is damaged or
destroyed as a result of a disaster. Disaster is defined as: “a fire, earthquake, landslide,
mudslide, flood, tidal wave, or other unforeseen event that produces material damage or
loss.” The exemption does not apply for the square footage of the reconstructed structure
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that exceeds the square footage of the structure that was damaged or destroyed.
We believe that if a new owner wants to rebuild a home on property where the
original home was destroyed in a disaster, the new owner would still qualify for the credit
intended by Education Code Section 17626. For example, if a 2,000 square foot home
owned by Person A is destroyed in a disaster and Person B (new owner) wants to rebuild
a 2,800 square foot home, we believe that a school district is permitted to charge the
current Level II Fees (if applicable; if not, then Level I Fees) on 800 square feet. The
Level II Fee may be charged because the 800 square feet is viewed as new construction
and not an addition.
9.
What Exemptions Exist for School Fees?
A.
Senior Citizens Housing
Government Code Sections 65995.1 and 65995.2 provides that school districts may
only charge the commercial/industrial fee for qualified senior citizen housing. If the
development is later converted to another type of use, Government Code Section
65995.1(c) states that the Level II (if currently being levied by the school district or the
Level I), may be charged at the time of conversion minus any school fees previously paid.
Four types of senior citizen housing qualify for this special treatment:

Senior citizen housing development projects described in Civil Code
Section 51.3 (One resident is at least age 55 plus other restrictions);

A “residential care facility for the elderly” as described in Health and
Safety Code Section 1569.2(k) (residents age 60 and over plus other
restrictions);

A “multilevel facility for the elderly” as described in Government
Code Section 15432(d)(9) (residents age 62 and older plus other
restrictions); and

A mobile home development limited to older persons as described in
the Federal Fair Housing Amendments Act of 1988 (age varies by
program; generally age 55 or 62).
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Residences that do not meet these standards should be charged the regular
residential fee rates. School districts should also require proof from the developer that the
project qualifies as senior citizen housing in the form of CC&Rs.
B.
Churches and Religious Organizations
Pursuant to Government Code Section 65995(d), school districts may not levy
school fees on any facility used exclusively for religious purposes and exempt from
property taxation under California law.
C.
Private Full-Time Day School
Pursuant to Government Code Section 65995(d), school districts may not levy
school fees on any “facility used exclusively as a private full-time day school as described
in Section 48222 of the Education Code.” A private full-time day school offers instruction
in the several branches of study required to be taught in the public schools and attendance
is required to be taken. We recommend that school districts obtain a copy of the affidavit
that private schools are required to file pursuant to Education Code Section 33190 from
any private full-time day school requesting this exemption.
D.
Government Agencies
Pursuant to Government Code Section 65995(d), school districts may not levy
school fees on “any facility that is owned and occupied by one or more agencies of
federal, state, or local government.”
E.
Construction for Handicapped Accessibility
Education Code Section 17620 (a)(1)(C)(ii) states that school districts are not
authorized to levy school fees against residential construction if the construction qualifies
for the exclusion set forth in Revenue and Taxation Code Section 74.3(a), which excludes
from school fees the following: construction, installation, or modification of an existing
single-family or multi-family dwelling unit to make the structure more accessible to a
disabled person. The proof required for the exclusion is a statement signed by a licensed
physician or surgeon of appropriate specialty which certifies that the person is severely
and permanently disabled and identifies the specific disability-related requirements
necessitating accessibility improvements or features. The statement must also identify the
construction, installation, or modification that was necessary to make the structure more
accessible to the disabled person.
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The definition of a severely and permanently disabled person is any person who has
a physical disability or impairment, whether from birth or by reason of accident or disease,
that results in a functional limitation as to employment or substantially limits one or more
major life activities of that person, and that has been diagnosed as permanently affecting
the person’s ability to function, including, but not limited to, any disability or impairment
that affects sight, speech, hearing, or the use of any limbs.
F.
Residential Additions Less than 500 Square Feet
Education Code Section 17620(a)(1)(C)(i) permits school districts to charge Level I
Fees on residential additions only if the resulting increase in assessable space exceeds 500
square feet. Therefore, there is an exemption for school fees for any additions less than
500 square feet.
While we are aware that some school districts do charge Level II Fees for additions
over 500 square feet, we do not believe that the statutory definition authorizes charging
Level II Fees on additions.
G.
Reconstruction of a Structure Destroyed in a Disaster
As discussed above, Education Code Section 17626 contains an exemption for
school fees for the reconstruction of any residential, commercial, or industrial structure
that is damaged or destroyed as a result of a disaster. However, the exemption does not
apply if the square footage of the reconstructed structure exceeds the square footage of the
structure that was damaged or destroyed.
H.
Greenhouse Space
Education Code Section17622 contains an exemption for greenhouse or other space
that is covered or enclosed for agricultural purposes unless the governing board makes
specified findings.
10.
Can Level I or Level II Fees be Used for the Following?
A.
New Construction
Yes. Level I Fees may be spent on new construction projects on facilities for new
capacity to accommodate new students that result from new construction. Level II Fees
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shall be solely expended on the school facilities identified in the SFNA as being
attributable to projected enrollment growth from the construction of new residential units.
B.
Modernization
No. However, Level I and II Fees may be spent on modernization projects to the
extent the projects add new capacity to accommodate new students that result from new
construction.
C.
Regular Maintenance/Routine Repair
No. Pursuant to Education Code Section 17620(a)(3)(A), Level I and II Fees may
not be spent on the regular maintenance or routine repair of school buildings and facilities.
D.
Asbestos Projects
No. Pursuant to Education Code Section 17620(a)(3)(B), Level I and II Fees may
not be spent on the inspection, sampling, analysis, encapsulation, or removal of asbestoscontaining materials, except where incidental to school facilities construction or
reconstruction.
E.
Deferred Maintenance
No. Pursuant to Education Code Section 17620(a)(3)(C), Level I Fees and Level II
Fees may not be spent on deferred maintenance. Deferred maintenance projects include:
major repair or replacement of plumbing, heating, air conditioning, electrical, roofing, and
floor systems, the exterior and interior painting of school buildings, the inspection,
sampling, and analysis of building materials to determine the presence of asbestoscontaining materials, the encapsulation or removal of asbestos-containing materials, the
inspection, identification, sampling, and analysis of building materials to determine the
presence of lead-containing materials, the control, management, and removal of leadcontaining materials, and any other items of maintenance approved by the SAB.
F.
Non-Facility Costs
Yes. Pursuant to Education Code Section 17620(a)(5), Level I Fees may also be
spent on the following non-facility costs: the costs of conducting an SFNA and SFJS,
preparing the Annual and Five-Year Report, and not more than three percent (3%) of the
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amount collected per fiscal year may be spent on the administrative time necessary for the
collection of the Level I Fees.
Level II Fees have to relate to school facilities identified in the SFNA as being
attributable to projected enrollment growth from the construction of new residential units.
11.
If a School District is Experiencing Declining Enrollment, Can the School
District Still Levy School Fees?
It depends. Regarding statutory school fees: if a SFJS shows that the school
district’s costs meet or exceed the current Level I Fee and commercial/industrial fee
amounts, the school district is allowed to levy the justified amounts even when enrollment
is declining.
Regarding alternative school fees: if an SFNA shows that the school district’s costs
exceed the Level II Fee and the projected enrollment exceeds any excess capacity for the
five-year period of the SFNA, the school district may levy alternative school fees after
adopting the SFNA.
12.
Is There a Time Limit on When School Districts Must Refund School Fees?
No. Pursuant to Education Code Section 17624, school districts are required to
repay the school fee (without interest) to the person from whom the fee was originally
paid, less an administrative charge for collecting and repaying the fee. The section applies
to any development project for which the building permit, including any extensions,
expires on or after January 1, 1990, without the commencement of construction.
When someone requests a refund, we recommend that school districts request proof
of original payment from the individual, proof that the project has been cancelled and
construction has not commenced from the appropriate city or county agency and verify
that a refund has not yet been paid.
If the developer’s original building permit has expired and they are seeking to now
bring their school fees current, the school district has two options with respect to
refunding the school fees: (1) refund the school fees originally paid and charge the current
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school fees due (including any increase in square footage); or (2) charge the difference in
square footage between the two projects (if any) at the current school fee rate or simply
charge the difference between the school fees due at the old and new rate. While both
options are reasonable, a developer may argue that the school district was permitted to
retain the school fees under the first option without providing any school facilities.
13.
Can or Should School Districts Agree to Defer, Suspend or Waive School
Fees?
In regard to the deferral of school fees, the Building Industry Association has been
requesting for several years that school districts allow developers to defer payment of
school fees until occupancy of newly constructed residential units. Potentially, a school
district could become an unsecured creditor if the developer becomes bankrupt, and a
school district could be required to consent to occupancy without payment.
We are not aware of any precedent for school districts to suspend the collection of
school fees. Moreover, school districts would be required to, at the very least, adopt a
resolution authorizing the suspension of the school fees since they previously adopted a
resolution authorizing the collection of school fees. Then, the school district would be
required to adopt another resolution when the school district decided to reinstitute the
collection of school fees in the future. At that time, there would have to be some
explanation of why it was appropriate to then to be charging school fees when the school
district did not have a need for the school fees during the period of suspension.
Waiver is when someone asks a school district not to levy school fees in their
particular situation even though a statutory exemption does not apply. We generally do not
recommend that school districts waive school fees because school districts are required by
law to treat everyone equally and it could potentially be considered a gift of public funds.
14.
How Should School Fees be Calculated on the Common Areas and the
Interior Space of Apartment Buildings?
When school districts receive the development calculations from developers for
common areas in apartment complexes, we review these on a case-by-case basis to
determine what is the appropriate amount to charge (i.e., residential or commercial/BAWG/WHW/lk/174936
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industrial) and to ensure that the nexus is satisfied as to the use of the space. These
common areas may include the office area where apartments are rented, an exercise room,
storage rooms for the apartment staff (such as janitorial), and the multi-purpose room that
the tenants may rent for social events.
If the common area includes two or more uses, such as office space, an exercise
room, and the multi-purpose room, we may divide the space based on the use. Generally,
if the use is something that would ordinarily be in an apartment, but is included in the
common area due to limited space within the apartments and is residential in nature, then
we may recommend charging the residential fee amount (so exercise rooms and multipurpose rooms might fall into this category).
However, for non-residential uses, such as office space, we would recommend
charging commercial/industrial fees, since it is clear that this would generate employees
whose children could attend the school district’s schools. For spaces such as storage units,
we do not recommend charging any fees, since “storage areas” and “utility or disposal
areas” are not included within the definition of chargeable covered and enclosed space for
commercial or industrial construction.
Another common area of dispute relates to whether the interior hallways of an
apartment complex should be included in the calculation of school fees. It is the
responsibility of the city or county to calculate the square footage within the perimeter of
the residential structure. This may result in discrepancies between cities on how the
square footage should be calculated. School districts should review the process being
utilized by the cities or counties within the school district’s boundaries to determine how
such calculation is performed.
15.
Is a School District Authorized to Levy School Fees on Residential
Replacement Housing Located on Church Property?
One of the exceptions to the levying of school fees is for facilities used exclusively
for religious purposes and exempt from property taxation. (Government Code Section
65995(d).) If the prior residences were used for religious purposes, they were exempt. If
the new residence will be used exclusively for religious purposes, it will also be exempt.
Assuming the prior residences were not used for religious purposes, the issue relates to
whether a nexus can be established on the replacement of one larger home for the prior
residences. In any redevelopment situation, the school district will need to establish a
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nexus on the new proposed construction. In most situations, a credit will need to be
given for the square footage previously existing. Accordingly, if the new residential
structure is smaller than the prior residential structures, school fees will most likely not be
able to be levied.
Should you have any questions or comments regarding , please do not hesitate to
contact Wendy H. Wiles ([email protected]) at (949) 851-1300 or (800) 649-0997.
The applicability of the legal matters discussed may differ substantially in individual situations. The foregoing information
has been prepared by Bowie, Arneson, Wiles & Giannone as an overview of the subjects discussed and should not be
construed as individual legal advice.
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