BACKGROUND
In January 2020, City Council identified reevaluating all City fees as a 2020 and 2021 strategic Council goal. This agenda item is a vital step towards achieving this goal.
In 1987, following the California State Supreme Court Nollan vs. California Coastal Commission decision, the California Mitigation Fee Act was passed. These actions set the stage for Assembly Bill 1600, and Government Code sections 66000-66011. Later, Ehlrich vs. City of Culver City (1993), Doland vs. City of Tigard (1994), and Proposition 218 (1997) (among others) occurred, enabling public agencies to impose a user fee for government services when (1) the individual’s decision to use the governmental service is voluntary, and (2) the fee charged is reasonably related to both the level and cost of the service to be provided.
In addition to public agencies charging for the cost of processing development and related applications, Government Code Sections 66000 and 66001 allow for additional fees or, “monetary exactions other than a tax or special assessment” be charged “in connection with approval of a development project for the purpose of defraying all or a portion of the cost of public facilities related to the development project”. Local agencies must determine “how there is a reasonable relationship between the need for the public facility and the type of development project on which the fee is imposed” and “how there is a reasonable relationship between the amount of the fee and the cost of the public facility or portion of the public facility attributable to the development on which the fee is imposed”. (660014 & 4(b)) These additional fees are commonly referred to as Development Impact Fees.
DISCUSSION:
A Development Impact Fee (DIF) study is, in part, based on the estimates in a Cost Allocation Plan (CAP) and User Fee Study (UFS). Accordingly, DIF fees must be analyzed and updated separately from and subsequent to CAPs and UFSs. In Q3 2021, the City successfully updated and implemented a CAP and UFS. As the CAP and UFS was being wrapped up, the City issued a request for proposal, received four qualified responses, and selected the Clearsource Financial/Harris and Associates team. The CF/HA team was engaged and began work in early Q2 2022.
Since DIF studies are necessarily detailed and time-consuming, Harris and Associates will provide the Council an overview of their process, progress to date, and an estimate on the time remaining until a completed DIF study has been finalized, vetted by the development community, and ready for final review and adoption by City Council.
Even in a non-COVID environment, a DIF Study can generally take one year to complete. After completing the DIF analysis, City Staff and the consultant will present their findings to the Council. Upon Council’s final approval of the updated DIF schedule, staff will implement the new DIF schedule following the mandatory sixty-day waiting period.
FISCAL IMPACT:
The Clearsource Financial DIF engagement has already been approved and is being paid for out of both the FY21-22 and FY22-23 budgets. City Council approved a budget amount not-to-exceed $65,090.