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A tentative ruling from a Sacramento County Superior Court suggests that school districts may soon be able to assess Level III fees – the highest impact fees allowed by law – for development projects located within their districts.

The ruling, issued by Judge Michael Kenny, reinforces a May decision from the State Allocation Board (SAB), which determined that the state’s inability to contribute its share of school facility funds triggered a legal clause allowing school districts to charge the higher level fees.

The California Building Industry Association (CBIA) immediately obtained a temporary restraining order to halt the SAB’s action, arguing that even though the state has exhausted the money in the general school facilities fund, it could transfer $150 million earmarked for school seismic repairs into the fund for new construction. That money would serve as a bridge for developers as they await the outcome of the CBIA-backed Proposition 51, which will appear on the November 8 statewide ballot. 

CSBA supports Proposition 51, also known as the “Kindergarten Through Community College Public Education Facilities Bond Act of 2016.” The measure would authorize $9 billion in general obligation bonds: $3 billion for new construction and $3 billion for modernization of K-12 public school facilities, with $1 billion split between charter schools and vocational educational facilities and $2 billion for community college facilities.

Proposition 51 sample resolution language, talking points and other resources for school and county boards can be found on CSBA’s website.

If Proposition 51 is approved, thereby replenishing the general school facilities fund, it is likely that the SAB would rescind the option to assess Level III fees and districts would resume assessing the lower impact fees.

According to Government Code section 65995.7, subdivision (a), Districts may exercise their option to assess Level III fees if 1) the state has determined that “state funds for new school facility construction are not available” and 2) the district has met all requirements to assess Level II fees.

By officially declaring that the state no longer has funds available for new school construction, the SAB created the opportunity for school districts to assess Level III Developer Fees. The recent Superior Court ruling largely affirms the decision made by the SAB and rejects the argument that the state can use funds reserved for seismic repairs to backfill its empty school facilities fund:

“The request for a preliminary injunction is denied as Petitioner has failed to prove any likelihood of success on the merits…A plain reading of the subject statutes, combined with the legislative history, establishes that Respondent is only required to consider Article 5 funds when determining whether sufficient funds remain available for apportionment for new construction. Other Articles’ funds are segregated for separate purposes; consequently, the funds are not interchangeable or synonymous.”

CBIA has the option to appeal the ruling, although it is not immediately known if it will do so.

Although the ruling is tentative and not final, reversals of tentative rulings are rare, so it remains possible that districts will have a small window before the November 8 election to assess Level III fees – and potentially a much longer period if Prop 51 is defeated at the polls. CSBA will keep you updated on any developments with this case and the status of Proposition 51; CSBA advises that school districts consult with legal counsel before proceeding with Level III fees.