Apartment and Condo Developers in California Take Note: Court Clarifies Calculation of School Impact Fees

by Wendel, Rosen, Black & Dean LLP
Contact

Under California’s Education Code (section 17620), a school district can levy a fee on new residential construction for the purpose of funding new or improved school facilities to help meet the demand created by the new development.

Government Code section 65995(b)(1) calculates the applicable fee as $1.93 per square foot of assessable space.  “Assessable space,” in turn, is defined as: “all of the square footage within the perimeter of a residential structure, not including any carport, covered or uncovered walkway, garage, overhang, patio, enclosed patio, detached accessory structure, or similar area.”

How does this statute apply to a new apartment building with interior space outside of the individual apartment units, such as interior hallways, storage rooms, and fitness centers?  A recent opinion from California’s Fourth Appellate District — 1901 First Street Owner, LLC v. Tustin Unified School District — provides guidance.

Facts and trial court judgment

The developer — 1901 First Street Owner, LLC  (“First Street”) — built a five-story apartment building in the City of Santa Ana. Before obtaining building permits, First Street was required to pay a school impact fee to the Tustin Unified School District.

First Street submitted a worksheet to the City’s building department.  (Section 65995 provides that the square footage calculations required by the statute shall be performed by the building department of the city or county that issued the building permit for the development.)  The worksheet calculated the square footage using a “net rentable” method, which was the City’s standard practice at that time.  That method calculated the square footage of the individual apartment units, but excluded everything else in the building.  The City accepted First Street’s calculations (totaling 272,943 square feet of residential space) and informed the School District.

The School District objected to the calculations because they did not include “all of the square footage within the perimeter of the residential structure” as required by Government Code section 65995(b)(1).  After some administrative proceedings, the City decided to abandon its “net rentable” method and revised the square footage calculation for the project to include everything within the perimeter of the building, resulting in an increase of 70,000 square feet, which increased the impact fee by $238,549.86.

First Street paid the increased fee under protest and, after exhausting its administrative remedies, sued the School District.

The trial court ruled in favor of the School District, and First Street appealed.

Court of Appeal’s opinion

The Court of Appeal affirmed the trial court’s judgment.

Looking to the statutory language of section 65995(b)(1), the court noted that the “definition of ‘assessable space’ begins with the perimeter of a residential structure.”  (Emphasis original.)  The court continued:

If we were to stop there and consider only the plain language of the statute, interior common area clearly constitutes assessable space.  The only way this interpretation could be avoided would be to conclude that residential ‘structure’ refers to an individual apartment unit.  But that would be an extremely strained interpretation of the word ‘structure.’

The court also noted that the statute applies on its face to both new construction and the reconstruction of an “existing building” for residential use, and that the use of the word “building” cut against the notion that the “structure” containing the “assessable space” could be simply an individual apartment unit.

The court then rejected a string of First Street’s arguments:

  • First Street pointed to a different statute, section 65995.5, which provides an alternative method for calculating school impact fees for anticipated future development based on the projected square footage “of residential units.”  But the court noted that the alternative method permitted by section 65995.5 was not used here, and was not required to be used.
  • First Street argued that the interior areas of its apartment building fit within the spirit of the exceptions to section 65995 (walkways, garages, etc.)  But the court observed that the exceptions did not mention interior common areas frequently found in large apartment buildings, such as mechanical rooms, storage rooms, fitness centers, common lounge areas, recreation rooms, indoor pools, and elevator shafts.
  • As to the exception to assessable space for “walkways,” the court acknowledge the term could be used in different ways, but held that section 65995 “uses it in the sense of an external walking path” and not an interior hallway.  The court noted that the other items in the list of exceptions are all typically located at or near the periphery of a residential structure, and could arguably be included within the perimeter, so it made sense for the Legislature to clarify that it did not mean to include those items within the definition of assessable space. Interpreting “walkways” as external walking paths was more consistent with the overall list of exceptions.
  • Last, First Street argued that the court should have enforced the City’s “standard practice” of using the “net rentable” method of calculating assessable space, and that the City’s decision to change that method violated First Street’s vested rights arising from the approval of its tentative map and execution of its development agreement.  But the court held that the City’s “standard practice” violated section 65995, and the City was therefore justified in adopting a new rule consistent with the statute.  As to vested rights, the court held that under section 66498.6(b), the approval of a tentative vesting map “does not grant local agencies the option to disregard any state or federal laws, regulations, or policies.”  First Street’s development agreement likewise expressly reserved to the City the power to enact rules after the agreement’s effective date to comply with the law.

Lesson

Residential developers constructing apartment buildings, condominiums, or townhomes now have greater clarity regarding the school impact fees they are likely to pay.  Under the First Street opinion, if the fees are calculated under Government Code section 65995, then “assessable space” will include the interior common areas.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Wendel, Rosen, Black & Dean LLP | Attorney Advertising

Written by:

Wendel, Rosen, Black & Dean LLP
Contact
more
less

Wendel, Rosen, Black & Dean LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.