101 California Street, Suite 800, San Francisco CA 94111 | PH 650 -571 -2200 | WEB SteelWaveLLC.com July 17, 2026
City of Pleasanton
Mayor Jack Balch and Honorable Members of the City Council P.O. Box 520
Pleasanton, CA 94566
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
RE: Arroyo Lago Residential Project (P25-0115, P25-0116, P25-0118, PUD-154, and Tract 8423), Proposed Revisions to the PADA
Dear Mayor Balch and Honorable Members of the City Council:
In advance of the City Council hearing on July 21, 2026, I am writing this letter as the land owner representative for USL Pleasanton Lakes, L.P. (USL) for the Arroyo Lago Residential Project (Project) to respectfully request certain revisions to the Pre-Annexation and Development Agreement (PADA).
We are very appreciative of the City’s collaborative and cooperative approach to help make this critical housing development happen in Pleasanton and look forward to next week’s hearing to bring the Project before the City Council for its consideration and approval.
However, for USL to be in the position to proceed with the Project, one change to the current draft of the PADA is essential. The current plans require that Zone 7 grant a utility easement to allow for the Project to be built. The development team has been working closely with Zone 7 to secure this easement, and we are confident that Zone 7 will grant this easement to the City. Unfortunately, in the unlikely event this does not occur, then the PADA must include a “Plan B”.
The current draft of the PADA effectively prohibits a Plan B. When this concern was raised to City staff and the City Attorney, we were informed that City staff did not want to allow for a Plan B, and that City staff and the City Attorney instead viewed the use of eminent domain against Zone 7 to secure the easement as Plan B.
While we appreciate the effort of City staff and the City Attorney to address our concerns, unfortunately, their proposed solution is entirely unworkable with uncertain timelines and thus unacceptable. First, contrary to assertions in the Planning Commission staff report, proceeding with eminent domain is not “common”, and we believe it would become adversarial and are not interested in funding or pursuing eminent domain against Zone 7.
As I’m sure the City Council can understand, we simply cannot proceed with this level of exposure, and we are not interested in a Plan B that would involve the use of eminent domain. Therefore, to
resolve this issue, and also be responsive to City staff comments, we propose the following:
• The City would agree to the development team’s proposed language that allows for a Plan B that does not involve eminent domain . (See Attachment 1 for the proposed revisions.)
o If Plan B were pursued, the Project would be required to go through the City’s typical process pursuant to its local Subdivision Ordinance and the Subdivision Map Act . This means that City staff would have ample time and opportunity to review and comment on the revised site plan pursuant to its standard procedures. Also, to the extent a revised tentative map were required, then it would need to go through the standard hearing process at the Planning Commission (with any appeal going before the City Council).
o The development team would also agree that if Plan B were pursued, the revised site plan must reflect grading with pad elevations along the western edge of the Project site being within one foot of the current site plan. This additional give is intended to assure City staff that any Plan B pursued would retain a grading plan that is substantially similar to the current site plan.
In closing, we have been pursuing this development for decades and we strongly desire for the Project to be built in Pleasanton. With the City’s agreement to the requested changes to the PADA, we can work together to deliver this Project for the benefit of the Pleasanton community. To that end, we respectfully request the City Council’s approval of the Project, including the PADA, subject to the revisions set forth in Attachment 1 being incorporated.
We look forward to working with the City of Pleasanton to bring this signature project to fruition. We welcome the opportunity to address any questions or feedback in advance of the Tuesday evening hearing to help ensure alignment and a productive discussion.
Sincerely,
Steve Dunn
Senior Managing Director
USL Pleasanton Lakes l.P.
c/o Steelwave, LLC
Cc: Steve Reilly, 330 Land Company LLC
Bridget Metz, USL Pleasanton Lakes L.P.
Joe Calabrigo, City of Pleasanton
Ellen Clark, City of Pleasanton
Katherine Wisinski, City of Pleasanton
Nadia Costa, GVR Partners
ATTACHMENT 1: PROPOSED REVISIONS TO THE PADA
[Note to City: Proposed revisions are shown in bold/underline text.] ********************************************************* Section 3.2 Developer Obligations. Developer shall comply with all of the requirements set forth below:
a. Subject to subsection (b) below, design and complete grading for the Project in a manner that minimizes the grade differential between the Project’s westerly lots and the abutting easterly lots within the Village at Ironwood subdivision; to satisfy this obligation, Developer shall perform the foregoing work in substantial conformance with the approved plans dated February 2026 (collectively, the “Approved Plans”) and as otherwise set forth in the Project Approvals and Subsequent Approvals.
b. Provided, however, in the event that Zone 7 does not grant the utility easement envisioned by and incorporated in the Project Approvals by January 31, 2027, Developer and City acknowledge that Project design changes to accommodate utility and/or grading modifications (in order to proceed without the Zone 7 utility easement) will be necessary. If a substantial compliance finding under Government Code section 66474.1 cannot be made with respect to the Vesting Tentative Map as it relates to any such design changes, the Parties acknowledge that the Vesting Tentative Map will need to be amended. Under such circumstances, the Parties shall work collaboratively in good faith to expeditiously process and consider any such map amendment to effectuate the Project, as modified by such Subsequent Approval.
Notwithstanding the foregoing, Developer agrees that any such design changes to the Vesting Tentative Map shall show the grade differential between the Project’s westerly lots and the abutting easterly lots within the Village at Ironwood subdivision to be no more than one (1) foot difference as compared to the February 2026 Approved Plans.
1 5 6 D I A BL O R O A D, S UI T E 3 4 0 | D A N V I LL E , C A 9 45 26
July 17, 2026
City of Pleasanton
Mayor Jack Balch and Honorable Members of the City Council P.O. Box 520
Pleasanton, CA 94566
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
RE: Arroyo Lago Residential Project (P25-0115, P25-0116, P25-0118, PUD-154, and Tract 8423), Voluntary Contribution Towards Future El Charro Extension Dear Mayor Balch and Honorable Members of the City Council:
I am writing to you today as the applicant of the Arroyo Lago project in advance of the City Council meeting on July 21, 2026, to respectfully request that the City Council honor the $3,000,000 commitment from the Project intended to help fund the long -planned Future El Charro Road Extension, and ensure the Pre-Annexation and Development Agreement (PADA) reflects this agreed- upon amount.
Prior to the October 2025 City Council hearing when the major terms of the PADA were unanimously approved, we had spent months negotiating with City staff. During the Planning Commission hearing last month, the El Charro Road contribution became a singular issue discussed in a vacuum. The Planning Commission members did not have the benefit of understanding the history of the project and all the significant concessions that have already been made by the development team as part of the PADA.
I just want to take a minute to remind everyone of the concessions the project’s development team has made in order to work collaboratively with our neighbors and other stakeholders. ➢ Reduced the overall lot count from 194 to 189 units ~ loss of $10MM of revenue ➢ Created all smaller single -story homes along the western boundary which meant a loss of 18,000 SF ~ $9MM of revenue
➢ Agreed to create a maintenance CFD to absorb all normal City costs of maintaining public infrastructure (City cost savings of approximately $4.5MM of 30 years) ➢ Agreed to build improvements along the City’s corporation yard 1 5 6 D I A BL O R O A D, S UI T E 3 4 0 | D A N V I LL E , C A 9 45 26
➢ Agreed to construct the utility and trail easement extension from Arroyo Lago to Mohr ($1MM)
Moreover, t hese significant concessions must be viewed in light of the fact that there is no legal nexus between the project and the Future El Charro Road Extension in the first instance. As detailed in the attached legal analysis (Attachment 1) that was presented to the City in October 2025 prior to the City Council meeting (Attachment 1), given the lack of legal basis for the City’s funding demand, the applicant’s willingness to pay the City $3,000,000 towards these regional improvements is entirely voluntary and should be treated as such.
When the above items are taken into consideration the $3 million voluntary contribution to El Charro Road is generous, which is why the City Council voted unanimously to approve the major terms of the PADA back in October 2025. Since then there has been no new information or any change in circumstances, which is why we are requesting the City Council honor the terms that were agreed to in October.
We look forward to working with the City of Pleasanton to bring this signature project to fruition.
We welcome the opportunity to address any questions or feedback in advance of the Tuesday evening hearing to help ensure alignment and a productive discussion.
Sincerely,
Cc: Steve Dunn, USL Pleasanton Lakes L.P.
Bridget Metz, USL Pleasanton Lakes L.P.
Joe Calabrigo, City of Pleasanton
Ellen Clark, City of Pleasanton
Katherine Wisinski, City of Pleasanton
Nadia Costa, GVR Partners
Stephen Reilly
330 Land Company LLC
1 Bridget Metz
From: Steve Reilly <[email protected]>
Sent: Wednesday, October 15, 2025 9:41 PM
To: Gerry Beaudin; Ellen Clark; Mike Tassano
Cc: Steve Dunn; Bridget Metz; Nadia Costa
Subject: Arroyo Lago PADA/El Charro
Attachments: TTL-1 Final 10.14.25 Legal Memo re Nexus (GVR, 10.14.25).pdf [EXTERNAL EMAIL]
Gerry, Ellen & Mike,
First, thanks for all the hard work in preparation of the City Council meeting on the 21 st, we are greatly appreciative of the eƯorts from staƯ since we restarted the process.
While we do not believe there is a nexus between Arroyo Lago and the El Charro Road extension, in the spirit of good faith we are agreeing to a $3,000,000 community benefit payment to the city as part of the PADA. To be clear, this is in addition to the reimbursement to the Villages at the Quarry project assuming the Busch Road improvements are completed and in addition to the 2024 TIF fees we estimate will be approximately $2,200,000. In total we estimate that Arroyo Lago will contribute approximately $6,000,000 for traƯic improvements.
As Mike Tassano pointed out recently, we never provided Mike with a response to his proposed methodology and allocation for the El Charro extension, so I thought we would take a minute and lay out our position. Our team has spent a lot of time reviewing the El Charro Road Extension Assessment prepared by Fehr & Peers dated February 12, 2025. As well as the cost allocation spreadsheet that Mike Tassano provided. With regards to the City Arroyo Lago project 330 Land has the following issues with the report and the proposed cost allocations.
1. We do not believe there is a legal NEXUS for additional El Charro exactions for Arroyo Lago on top of TIF fees- See GVR Memo
2. We believe there are serios issues in the allocation methodology & conclusions of City/Fehr & Peers Memo referenced above:
a. The allocation assumes a through put of only 2,400 vehicles total. The capacity of an arterial roadway with periodic traƯic signals through a suburban environment is generally accepted to be between 1,100 to 1,500 vehicles per hour per lane. The El Charro Road extension between Stoneridge Drive and Stanley Boulevard is programmed to include two travel lanes in each direction which equates to a capacity of between 2,200 to 3,000 vehicles per hour per direction, meaning that this implies that the future four-lane wide El Charro Road extension has unused capacity of at least 900 vehicles in each direction during the p.m. peak hour to serve a greater number of vehicles, since a typical capacity for a similar four-lane roadway is approximately 2,200 to 3,000 vehicles per hour in each direction. This excess capacity should be included, because it means that the pro rata share for all the projects in East Pleasanton would be reduced since their traƯic would be a smaller percentage of the overall use.
ATTACHMENT 1
2 b. As traƯic from Villages at the Quarry is included in the report, the TIA should also cover City-required improvements at the Santa Rita and Valley intersection to be completed by Villages at the Quarry.
c. Project traƯic should be based upon VMT.
I’ve limited our comments from the perspective of Arroyo Lago, but having worked on many large development projects that included major backbone roadway improvements I would also add that I’ve never seen a methodology that allocates a portion of the roadway to landowners because they have frontage on the road, because the location of the road is being dictated and if the road was design just for whatever project the landowner intended to develop, then the road would probably be in a diƯerent location and would definitely have a diƯerent design.
We look forward to the meeting on October 21st and the continued team eƯort to get Arroyo Lago approved and annexed.
Best regards,
Steve Reilly
330 Land Company, LLC
156 Diablo Road, Suite 340
Danville, CA 94526
Cell: 925.368.3128 Web: www.330land.com
Attachments: GVR Nexus Evaluation
1 MEMORANDUM ATTORNEY CLIENT COMMUNICATION PRIVILEGED AND CONFIDENTIAL TO: Steve Reilly - 330 Land Company, LLC FROM: Nadia Costa Bryn Jedlic CC: RE:
Steve Dunn - USL Pleasanton Lakes, LP Bridget Metz - USL Pleasanton Lakes, LP Voluntary Contribution – Future El Charro Extension DATE: October 14, 2025 I. EXECUTIVE SUMMARY 330 Land Company, LLC (“Developer”) and USL Pleasanton Lakes, LP (“Landowner”) have asked us to review whether the City of Pleasanton (the “City”) would have a reasonable legal basis under applicable law to allocate a portion of the responsibility for funding the installation of the Future El Charro Extension (as defined below) to the proposed Arroyo Lago project (the “Project”) should the Project be annexed to the City. For the reasons discussed below, we have concluded that the necessary legal nexus that would be required under applicable law for any such allocation does not exist given the circumstances at hand, and that accordingly, any contribution of funds towards the costs of the Future El Charro Extension agreed by Developer in connection with the Project would be voluntary in nature and solely at the discretion of the Developer in connection with the PADA negotiations. The Future El Charro Extension is a long-planned regional transportation improvement contemplated to serve the City and the broader region; the most recent cost estimate for this improvement is quite expensive, approximately $115 million. Currently, there is no funding allocated to the Future El Charro Extension under the City’s recently adopted five-year $220.1 million Capital Improvement Program.
2 The Project, which proposes to develop 189 single-family homes on approximately 29 acres of land north of Busch Road, is within the area that the City has historically referred to as the “East Pleasanton Specific Plan” area, although this specific plan has never been adopted by the City. In connection with its proposed development of the Project, Developer and City staff have engaged in extensive negotiations for a Pre-Annexation and Development Agreement (“PADA”). Based on negotiations with staff to date, Developer’s proposed responsibilities for funding new transportation infrastructure in connection with the Project, including the Future El Charro Extension, would be expected to total approximately $5.2 million,1 including Developer’s voluntary payment to the City of $2,250,000 (the “Payment”) towards the future costs of the Future El Charro Extension (equal to an additional $11,905 per residential unit based on 189 units). Historically, the City took the position that, based on the Planning Documents (as defined below), the costs for the Future El Charro Extension should be allocated 50-50 between developers in the East Pleasanton Specific Plan area (collectively) and the City. For this position to have merit under the applicable law, the City would need to establish that the required essential nexus existed; and further that, for the proposed 50-50 allocation, this was reasonably proportionate. As demonstrated by substantial evidence in the record and as further discussed below, the necessary legal findings cannot be made to support the foregoing position with respect to the Project. Given the long-planned nature of the Future El Charro Extension as backbone infrastructure to serve the existing and planned future growth of the City and the broader region (contemplated since at least the 1990s), combined with the paucity of information or data to support any legal nexus between the Future El Charro Extension and the Project or the proposed 50-50 allocation, there is no basis under applicable law for the City to require Developer to contribute any amounts towards the costs of the Future El Charro Extension due to the failure to satisfy the requisite legal tests. As such, the proposed Payment by Developer towards the future costs of the Future El Charro Extension is best characterized as a voluntary contribution since it otherwise could not be lawfully imposed by the City due to the lack of the required nexus. II. RELEVANT FACTUAL BACKGROUND To provide relevant factual context for our legal analysis, this section briefly discusses: (1) the history and scope of improvements contemplated for the Future El Charro Extension and related relevant nexus studies/technical analyses; and (2) the lack of any basis for the City to require Developer to contribute toward these improvements (apart from Developer’s TDF contributions). The Future El Charro Extension consists of a four-lane divided road from Stoneridge Drive to Stanley Boulevard with related bike facilities (described as a Class I bike facility along the south side or Class IV bike facilities). These improvements have been contemplated as a necessary regional improvement by Pleasanton as well as the broader Tri-Valley Transportation Council (“TVTC”) for decades. Since at least 1996, long before any residential 1 This amount is comprised of (1) the Payment, (2) $750,000 in frontage improvements, and (3) approximately $2.2m in Transportation Demand Fees payable to the City, but does not include an additional nearly $1.4m in Tri-Valley Transportation Development Fees payable to the TVTC.
3 development was contemplated for the area, the City has planned for the extension of El Charro Road from Stoneridge Drive to Stanley Boulevard (as depicted in Exhibit A hereto). These planning efforts included assessments in (1) the City’s 2005 General Plan (and related EIR) (adopted in 2009); (2) the 2015 East Pleasanton Specific Plan (and related EIR) (never adopted); and (3) recent cost assessments and impact fee studies, including City’s 2018 development impact fee nexus study (“2018 Nexus Study”), its 2024 update thereto (“2024 Nexus Study”) and a Project-specific El Charro Road Extension Assessment prepared by Fehr & Peers in January 2025 (“2025 F&P Report”). These various documents are referred to collectively as “Planning Documents” in this memorandum. In terms of the allocation of costs for the Future El Charro Extension between City and applicable developers, the Planning Documents do not include any stated basis or other support for the allocation of such costs historically proposed by the City. Instead, it appears that the City directed — without explanation — that 50 percent of the total costs would be covered through the City’s Transportation Development Fee (“TDF”) program (and/or other City revenue) with the remaining 50 percent to be covered by the “East Pleasanton” developers, collectively. For example, the 2018 Nexus Study notes that while cost estimates for the road works for the Future El Charro Extension were prepared by BKF and Fehr & Peers, the allocation of these costs between the East Pleasanton developers and the TDF was set “per direction from the City” without any rationale being provided for this 50-50 allocation. While this 50-50 allocation was not referenced in the 2024 Nexus Study for some unexplained reason, the City has continued to rely on it until recently.2 Finally, the 2025 F&P Report is also not helpful as it does not establish a reasonable basis for allocating any of the expected benefits of the Future El Charro Extension to the Project. III. APPLICABLE LAW The following is a summary of relevant constitutional and statutory provisions governing the imposition of development exactions, including federal and state constitutional principles, relevant state statutes (i.e., the Mitigation Fee Act), and finally, relevant local Pleasanton Municipal Code provisions. A. Common Law/Constitutional Provisions Relating to the Police Power The legal basis for all land use regulation is the police power of a local agency to protect the public health, safety and welfare of its residents. (See Berman v. Parker, 348 U.S. 26, 32-33 (1954).) The police power is set forth in the California Constitution, which confers on local agencies the power to “make and enforce within [their] limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws.” (Cal. Const. art. XI, § 7 .) Thus, land use regulations are a manifestation of the local police powers conferred by the California Constitution, rather than reflecting an exercise of specific statutory authority. (See Scrutton v. County of Sacramento, 275 Cal. App. 2d 412, 417 (1969).) 2 It is important to note that, without explanation, Attachment 1 of the 2024 Nexus Study deleted the reference to the 50-50 allocation. The reason for this deletion is unclear, particularly given the City’s recent recitation of this 50-50 allocation.
4 Subject to the applicability of heightened scrutiny in specified circumstances (discussed further below), a land use regulation lies within the local agency’s police power if it is reasonably related to the public welfare. (See Associated Home Builders of the Greater East Bay, Inc. v. City of Livermore, 18 Cal.3d 582, 600-01 (1976).) The concept of the “public welfare” is broad and inclusive. (Berman, 348 U.S. at 33.) Accordingly, given this deferential standard, courts generally uphold a local agency’s action so long as it (1) is not arbitrary or capricious, (2) substantially advances a legitimate governmental interest, and (3) does not deny an owner all economically beneficial use of its land. However, if the power is not exercised within constitutional or statutory mandates, the decision or regulation at issue must be set aside. (See Cal. Const. Art. XI, § 7; see also California Building Ass’n v. Governing Bd of the Newhall Sch. Dist. 206 Cal. App. 3d 212, 234 (1988).) B. Federal Constitutional Requirements3: Nollan/Dolan Essential Nexus 1. In General As noted above, the ability to regulate land use derives from the local agency’s police power, which is limited under the “Takings Clause” of the Fifth Amendment (i.e., the government cannot take private property for public use without just compensation). (See also Cal. Const. Art I, § 19.) This includes not just direct seizure of property but also indirect seizure through the regulatory process. There are four types of regulatory takings: (1) permanent physical invasions; (2) denial of all economically beneficial use; (3) regulatory takings in which the regulation goes “too far”; and (4) development exactions. All four types “share a common touchstone”: Each aims to identify regulatory actions that are functionally equivalent to the classic taking in which government directly appropriates private property or ousts the owner from his domain. Accordingly, each of these tests focuses directly upon the severity of the burden that government imposes upon private property rights. (Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 548 (2005).) Of particular relevance here is the fourth type, wherein exactions are imposed as a condition on land use approvals to offset project impacts on the public. These exactions can take the form of land dedication requirements, obligations to fund and/or construct public improvements, and payment of development impact fees. In general, the standard applied to determine whether an exaction is valid depends on whether it is possessory (dedication of land) or non-possessory (monetary); and whether the local agency applies it pursuant to a generally applicable legislative enactment or in an ad hoc manner on to a specific project. 2. Relevant Decisions Several key U.S. Supreme Court and California Supreme Court cases delineate the primary legal contours of this takings analysis that are relevant to the case at hand (see, e.g., 3 In addition to constitutional principles governing regulatory takings, there are other federal constitutional mandates that must be followed including, without limitation, those involving due process, wherein decisions and regulations must be reasonable and non-discriminatory, and not arbitrary and capricious. (See, e.g., G&D Holland Construction Co. v. City of Marysville, 12 Cal. App. 3d 989, 994 (1970).)
5 Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987), Dolan v. City of Tigard, 512 U.S. 374 (1994), Koontz v. St. Johns River Water Management District, 570 U.S. 595 (2013), Sheetz v. County of El Dorado, California, 601 U.S. 267 (2024), and Ehrlich v City of Culvert City, 12 Cal. 4th 854 (1996)). In Nollan, the U.S. Supreme Court ruled that requiring a public easement over private property as a condition of building permit issuance was unconstitutional unless there was an “essential nexus” between the condition imposed and the legitimate public purpose. This essential nexus test requires the following conditions to be satisfied for an exaction to be constitutional: • There is a direct connection between the impact of the project and the condition being imposed; and • The condition helps to mitigate the specific public burden caused by the project. Thus, there must be a fundamental connection, or essential nexus, between the condition to be imposed and the specific impact of the development proposal at issue. In Dolan, the U.S. Supreme Court upheld the premise that some exactions are constitutional but further clarified the nature of the nexus requirement: there must be "rough proportionality" between the exaction and a project's impact. Thus, read together, the Nollan/Dolan (and related line of cases) resulted in the following two-pronged test that reflects a heightened degree of scrutiny (as compared to the more deferential standard wherein a “reasonable relationship” alone is sufficient): • Is there an essential nexus? • Is the exaction roughly proportional to the impact of the project, in both nature and extent? The Court emphasized that a generic or formulaic fee may not satisfy this test unless justified by quantitative analysis linking a project’s specific burden to the cost of mitigation. For the Court, rough proportionality means “no precise mathematical calculation is required but the city must make some sort of individualized determination that the required dedication is related both in nature and extent to the impact of the proposed development.” (Dolan v. City of Tigard, 512 U.S. 374, 391 (1994).) Following the Dolan decision, in 1996, the California Supreme Court adopted a test to address the lawfulness of exactions in Ehrlich v. City of Culver City, 12 Cal. 4th 854 (1996).4 In that case, the Court clarified that the legal analysis is the same whether an exaction is in the form of a land dedication, a monetary fee, or the required construction of a public facility. However, the Court also held that different standards of review apply, depending on the nature of the exaction at issue. An exaction imposed pursuant to an ordinance or rule of general applicability — as compared to an ad hoc condition imposed on an individual project — is constitutionally permissible unless the landowner establishes that the exaction either 4 The holding and rationale in Erlich was reaffirmed in San Remo Hotel, L.P. v. City and County of San Francisco, 27 Cal. 4th 643 (2002).
6 does not substantially advance a legitimate governmental purpose or deprives the landowner of any economically viable use of the land. In contrast, an ad hoc exaction is subject to the heightened Nollan/Dolan “essential nexus” and “rough proportionality” standards. In 2013, Koontz v. St. Johns Rover Water Management District, 570 U.S. 595 (2013), the U.S. Supreme Court held that the Nollan/Dolan test applies to both ad hoc monetary exactions and to denials of permit applications where an applicant refuses to adhere to the requested demands. In 2024, in Sheetz, the U.S. Supreme Court importantly held that there was no constitutional basis to distinguish between exactions imposed on an ad hoc basis or as an ordinance or rule of general applicability. In Sheetz, as a condition of receiving a residential building permit for a modest prefabricated home in El Dorado County, George Sheetz was required to pay a traffic impact fee adopted by El Dorado County as part of its General Plan process. The amount of the fee ($23,420) was not determined based on the extent of traffic impacts specifically attributable to Sheetz’s new house, but rather was assessed according to a rate schedule that was based on the general type of development and its location within El Dorado County. Sheetz paid the fee under protest and eventually sued El Dorado County, asserting state law claims under the Mitigation Fee Act and federal claims under the Takings Clause. While Sheetz’s state law claims were denied by the California courts, the U.S. Supreme Court invalidated California’s rule of applying Nollan/Dolan heightened scrutiny only to ad hoc, discretionary fees, concluding that “a legislative exception to the ordinary takings rules finds no support in constitutional text, history or precedent.” (Sheetz v. County of El Dorado, California, 601 U.S. 267, 279 (2024).) C. State Statutory Requirements5 In general, the land use entitlement process provides several ways in which a local agency, through the exercise of police power, can require the payment of fees and/or dedication of land as conditions of project approval. Under state law, the Mitigation Fee Act is of particular relevance. In response to Nollan, in 1987, the California Legislature adopted its “Nexus Litigation,” the Mitigation Fee Act (Gov. Code §§ 66001 to 66020) to provide a statutory framework for the lawful imposition of development fees in California. Local agencies must comply with the Mitigation Fee Act’s procedural and substantive requirements to ensure that all development fees (both legislatively imposed and ad hoc) satisfy legal nexus requirements. At bottom, the Mitigation Fee Act reflects an underlying fundamental premise elucidated in Takings Clause jurisprudence and elsewhere: while a developer “should pay its own way” (i.e., offsetting project impacts on the costs to the public), any such payment must reflect only the developer’s proportionate fair share of such costs. Anything more would be tantamount to the type of “out-and-out plan of extortion" that the U.S. Supreme Court ruled against in the Nollan/Dolan line of cases. 5 It is beyond the scope of this analysis to identify the myriad ways in which a local agency may seek to impose dedication and/or monetary exaction obligations, including, without limitation, via CEQA, general/special plan provisions, other local ordinances, school fees, special taxes and Proposition 218 assessments/CFD special taxes.
7 In general, the Mitigation Fee Act requires local agencies that establish, increase, or impose a fee as a condition of approval of a development project to do the following: • Identify the purpose of the fee; • Identify the use to which the fee is to be put; if the use is financing public facilities, the facilities shall be identified; • Determine how there is a reasonable relationship (i.e., proportionality) between the need for the public facility and the type of project being developed on which the fee is imposed; and • Determine how there is a reasonable relationship between the amount of the fee and the cost of the public facility attributable to the development upon which the fee is imposed.6 In establishing a city-wide development impact fee program, a city is required to prepare and rely upon a robust fee nexus study to identify the improvements at issue and validate the amount of fees being implemented in connection therewith.7 The Mitigation Fee Act also provides that a fee shall not include costs attributable to existing deficiencies in public facilities, but may include costs attributable to increased demand for such facilities reasonably related to the development project in order to (i) refurbish existing facilities to maintain the existing level of service or (ii) achieve an adopted level of service that is consistent with the general plan (see Gov. Code § 66001(g)). D. Local Statutory Requirements: Pleasanton Municipal Code In Pleasanton, the City’s Municipal Code addresses a developer’s obligations with respect to the construction of public improvements and the payment of impact fees. Importantly here, the Municipal Code provisions do not supersede the above-referenced federal and state constitutional and statutory provisions. The most relevant of these provisions is Chapter 3.26 of the Municipal Code which establishes the framework for City’s TDF, discussed above. As Developer’s obligation to pay applicable TDF fees is not in dispute, this memorandum need not consider the provisions of the Municipal Code further. IV. THERE IS NO LEGAL NEXUS TO JUSTIFY IMPOSITION OF FUTURE EL CHARRO EXTENSION COSTS ON TO THE PROJECT. As noted above, the City has previously taken the position that, based on the Planning Documents, the costs for the Future El Charro Extension should be allocated 50-50 between developers in the East Pleasanton Specific Plan area (collectively) and the City. For this position to have merit under the applicable law, the City would (1) need to establish that the 6 The first three of the foregoing requirements apply to generally applicable, legislatively adopted fees, with the fourth requirement being judicially construed to apply only to ad hoc fees. 7 In addition, among other requirements, the Mitigation Fee Act requires annual reporting on fees collected and spent, the adoption of capital improvement plans, the segregation of fees from other revenues, the return of unused fees and third-party audit and other administrative provisions.
8 required essential nexus existed; and (2) also need to demonstrate the basis for the proposed 50-50 allocation was reasonably proportionate. Both of the foregoing elements must be established, which becomes even more challenging given the few remaining development proposals that may move forward in the East Pleasanton Specific Plan area (thereby resulting in a tremendous cost burden being imposed on relatively few private parties), and the City’s inability to contribute its “portion” due to substantial budgetary constraints. For the reasons set forth herein and further supported by a thoughtful review of the record, the necessary legal findings cannot be made to support the foregoing position with respect to the Project. In particular: • Failure to establish essential nexus: While the Future El Charro Extension would undoubtedly benefit the City’s overall traffic network and has been contemplated as important regional traffic infrastructure since the 1990s, the record does not demonstrate (1) that the Project triggers this improvement, (2) to what extent the extension would also distinctly and specifically benefit the eventual residents and other users of the Project, or (3) why a more modest set of improvements (e.g., two lanes instead of four; extension of Busch Road to Stanley Boulevard only) would not be sufficient. • Failure to establish any evidence of proportionality: Even if one assumes arguendo there is a connection between the impacts of the Project and the Future El Charro Extension, the lack of proportionality is patent. o Because of the nature of these regional improvements and the enormous costs associated therewith, on their face, the City’s past demands clearly exceeded any reasonable notion of proportionality. This is particularly apparent given that the City has not committed to any contribution, and there is a paucity of other developments upon which the City has the legal right to impose fair share obligations thereon. o The asserted 50-50 allocation appears arbitrary, coming to fruition entirely “per direction from the City”; recent attempts via the 2025 F&P Report to justify this allocation seem pretextual at best. o The 2025 F&P Report clearly suggests that the Future El Charro Extension could function adequately as a two-lane road. The implication that necessarily follows from this conclusion is that even if there were some nexus to the Project for a two-lane road (which there is not), the proposed four-lane road would be oversized for the benefit of all City residents. Given the long-planned nature of the Future El Charro Extension as backbone infrastructure to serve the existing and planned future growth of the City and the broader region (contemplated since at least the 1990s), combined with the paucity of information or data to support any legal nexus between the Future El Charro Extension and the Project or the proposed 50-50 allocation, there is no basis under applicable law for the City to require Developer to contribute any amounts towards the costs of the Future El Charro Extension due to the failure to satisfy the requisite legal tests.
9 As such, the proposed Payment by Developer towards the future costs of the Future El Charro Extension is best characterized as a voluntary contribution since it otherwise could not be lawfully imposed by the City due to the lack of the required nexus.
10 EXHIBIT A MAP SHOWING EAST PLEASANTON PROJECTS AND FUTURE EL CHARRO EXTENSION
Kiewit Arroyo Lago East Lakes Amazon Parcel H Middle Property East Property
FUTURE EL CHARRO EXTENSION (RED AREAS ARE FRONTAGE AREAS)