Staff Report
City Council
Item No. 4.A
Meeting Date: April 22, 2026
From: Kevin Biersack, Financial Services Director
Title: AB 1600 Development Impact Fee Annual Inflationary Update RECOMMENDATION:
Staff recommend City Council conduct a Public Hearing and Adopt by Resolution an authorized inflationary adjustment to the City’s Assembly Bill (AB) 1600 Development Impact Fees.
BACKGROUND:
Development Impact Fees (DIF Fees) are established by the City Council. They are one- time fees charged to new development. DIF fees are intended to pay for backbone infrastructure and capital facilities required to serve new development activities.
Municipalities are prohibited from using DIF fees to fund ongoing operations, maintenance, or to make up for existing service deficiencies. DIF fees must be accounted for, set aside, and saved until the municipality has the required funding to build the needed facilities.
This Fee Schedule for Development Impact Fees includes:
Parks
Transportation
General Government Facilities
Fire Facilities
Police Facilities
On September 27, 2023, the City Council Adopted an updated DIF Schedule to reflect the adopted recommendations based on the results of a comprehensive cost of service study.
Built into the schedule is an automatic Fee Adjustment using the Construction Cost index (CCI) for the 20-City Average as reported by Engineering News Record (ENR) for a twelve- month period/year or a similar published index if the CCI is no longer available.
Construction costs have continued to increase since 2023. With those increased costs, there could be a shortfall between current development impact fees and what it will cost to build the municipal facilities required to serve future residents. This automatic fee adjustment helps to mitigate that shortfall; however, per Government Code 66016, the inflationary adjustments do not exceed the costs to provide the City infrastructure.
During interim years, i.e., between comprehensive studies, the City Council has authorized inflationary adjustments to fees. July 1, 2025 represented the first annual inflationary update after the comprehensive fee study was implemented in January 2024.
On April 8, 2026, staff presented to City Council the findings and recommendations from the recently completed annual update. With these impact fees established by City Council, staff received direction and feedback to proceed with conducting a public hearing held in conformance with Government Code Section 66016.
DISCUSSION:
With a full cost-of-service study completed every eight (8) years, incremental annual inflationary updates occur in the years in between comprehensive studies. This report presents an inflationary adjustment for the AB 1600 Development Impact Fees in Fiscal Year (FY) 2026/2027. This update will apply 3.6% CCI inflationary adjustment for the 20-City Average as reported by ENR for the twelve-month period of December 2025 over December 2024.
In anticipation of this Public Hearing, the City Clerk sent/published the following notices to:
Agua Caliente, BIA of So Cal, Desert Valley Builders Association (DVBA), Riverside County BIA, So Cal Gas, So Cal Edison on April 3, 2026
Desert Sun 1 st publication on April 2, 2026
Desert Sun 2 nd publication on April 8, 2026
On April 8, 2026, this update to include the 3.6% annual inflationary adjustment to the AB 1600 Development Impact Fees was presented to City Council for review and feedback.
Feedback from City Council was incorporated in the attached table.
In holding this Public Hearing and subsequent City Council approval, staff will then implement the adjusted fees on July 1, 2026.
FISCAL IMPACT:
With the 3.6% ENR compounded CCI increase along with equivalent development activity from FY 2024/2025, DIF revenues could provide additional DIF funds’ revenue up to $75,000 for FY 2026/2027.
FIVE-YEAR STRATEGIC PLAN:
The implementation of updated Development Impact Fees supports the following strategic plan goals:
GOAL B: COMMUNITY INVESTMENT Objective: Cathedral City roads, gateways, public spaces, and other city infrastructure are well planned, designed, constructed, and maintained.
GOAL C: FISCAL STABILITY AND SUSTAINABILITY Objective: Cathedral City has economically prospered by facilitating the investment of private dollars in high-quality development which benefits the community. We remain financially solvent by implementing prudent fiscal policies and transparent financial practices.
ATTACHMENTS:
1. Proposed FY 2026_2027 Development Impact Fees w/ CCI ENR Annual Increase