CITY COUNCIL MEETING DATE: 09/15/2026
AGENDA REPORT AGENDA HEADING: Regular Business
AGENDA TITLE:
Consider the potential establishment of Developer Impact Fees (DIFs) and whether to proceed with a Nexus Study.
RECOMMENDED COUNCIL ACTION:
(1) Receive and file Willdan Financial Services’ (Willdan) Initial Impact Fee Evaluation regarding the potential establishment of DIFs;
(2) Provide Staff direction regarding preparation of a Nexus Study for the potential establishment of DIFs, including:
a. Consider the Finance Advisory Committee’s (FAC) recommendation to defer preparation of the Nexus Study based on the City being largely built out, budget considerations, uncertain revenue potential, and ongoing administrative and funding requirements; or,
b. Consider whether to proceed with the Nexus Study to position the City for potential future development, and if so, authorize the City Manager to execute a professional services agreement (PSA) with Willdan, in a form approved by the City Attorney, in an amount not to exceed $50,000;
(3) If authorized to proceed, direct Staff to work with Willdan and City Departments to identify potentially eligible capital improvements, refine development assumptions and fee categories, and return to the City Council with the completed Nexus Study and proposed DIFs for consideration.
FISCAL IMPACT: If directed to proceed with the preparation of the Nexus Study, that recommended Council action would authorize an expenditure of up to $50,000. The amount is included in the Fiscal Year (FY) 2026-27 Adopted Budget of $60,000 under Non-Departmental, Professional and Services. No additional appropriation is required.
Authorization of the Nexus Study would not establish a DIF program or authorize the collection of fees. If authorized, the Nexus Study is expected to take approximately six to twelve months to complete Once completed, the Nexus Study will be presented to the City Council for further direction. Any proposed fees would undergo a separate public review process, including opportunities for public input and the required public notice and hearing, before returning to the City Council for adoption consideration. VR
1 Amount Budgeted: $60,000
Additional Appropriation: N/A
Account Number(s): 101-400-2999-5101
(GF - Non-Departmental Professional/Services)
ORIGINATED BY: James O'Neill, Senior Administrative Analyst JO Robert Moya, Deputy Director of Finance RM
REVIEWED BY: Vina Ramos, Director of Finance VR
Catherine Jun, Deputy City Manager CJ
APPROVED BY: Ara Mihranian, AICP, City Manager
ATTACHED SUPPORTING DOCUMENTS:
A. Willdan Initial Impact Fee Evaluation (page A-1)
B. Willdan Impact Fee Comparison Survey (page B-1)
EXECUTIVE SUMMARY:
• On May 30, 2024, the Finance Advisory Committee (FAC) discussed the potential of DIFs as part of Fiscal Sustainability discussions.
• Under the California Mitigation Fee Act (Government Code §§ 66000 et seq.), DIFs are one-time, legally restricted fees on new development. The following limitations and requirements also apply:
o DIFs may be used to fund the development’s proportionate share of eligible capital improvements.
o DIFs may not fund routine maintenance, rehabilitation, existing deficiencies, or general operating expenses.
o A Nexus Study is required to establish the legally required connection among the new development, the fees imposed, and the eligible improvements to be funded.
• On September 3, 2024, the City Council approved the FAC’s recommendation to initiate a Nexus Study for potential DIFs (estimated at approximately $60,000). • In November 2025, through a qualifications-based process, the City selected Willdan Financial Services to evaluate potential DIFs. Given the City’s largely builtout condition, Willdan first completed an Initial Impact Fee Evaluation, at a cost of approximately $9,700, to determine whether proceeding with a full Nexus Study estimated at $50,000 was warranted.
• On June 30, 2026, Willdan provided its Initial Impact Fee Evaluation (Attachment A), which estimated that DIFs could potentially generate approximately $8.8 million total in legally restricted revenue through 2050. The estimate was based on preliminary growth assumptions from the California Department of Finance and the City’s Housing Element, as well as illustrative fee levels. • The evaluation’s intent is to provide the City with an initial sense of the potential revenue and does not represent a proposed fee schedule or guaranteed 2 collections. Actual fees and collections would depend on future development activity, eligible capital needs, project costs, and the methodology supported by a Nexus Study.
• Willdan’s evaluation also states that the City has the discretion to consider fee exemptions, reductions, or waivers for certain types of development. These policy options could be evaluated as part of the Nexus Study.
• On August 13, 2026, following extensive discussion and deliberation, the FAC voted 3-2 to recommend deferring the Nexus Study at this time based on the City being largely built out with limited development potential, uncertain revenue collections, restricted uses of fee revenue, and ongoing administrative requirements set by the State.
• On August 28, 2026, Staff met with the City Council Fiscal Sustainability Subcommittee, consisting of Councilmembers Bradley and Lewis. The discussion reflected many of the considerations raised by the FAC, while also recognizing the benefit of balancing current financial considerations with positioning the City to be prepared for potential future development associated with State housing mandates and the City’s adopted Housing Element. If such development occurs, the Subcommittee discussed the value of having a DIF framework in place so that future development could contribute its appropriate share toward eligible infrastructure needs, thereby reducing the potential impact on existing City resources.
BACKGROUND:
Developer Impact Fees Overview
DIFs are one-time charges imposed on new residential and nonresidential development to help fund new or expanded capital facilities needed to serve that development. Unlike taxes or general-purpose revenues, DIFs are legally restricted. Fees may be used for new facilities, capacity-expanding improvements, and certain improvements to existing facilities to the extent the costs are reasonably attributable to increased demand created by new development and supported by the required Nexus Study. Based on California Government Code § 66000, DIFs may not be used for routine maintenance, rehabilitation, existing deficiencies, or general operating expenses. This ensures that new development pay its proportionate share of the capital facilities needed to serve that development rather than placing the full cost on existing City resources.
Development Impact Fees Calculation
Under the California Mitigation Fee Act, the City must demonstrate a reasonable relationship, or “nexus,” between the development being charged a fee, the additional demand for public facilities created by that development, and the amount and use of the fee. This relationship is typically established through preparation of a formal Nexus Study.
The Nexus Study will determine the maximum supportable fee and generally consider:
3 • Projected future development;
• Eligible capital improvements and associated costs;
• The portion of those costs attributable to new development; and • The appropriate allocation of fees among residential and nonresidential development categories.
It is important to note that DIF calculations and fee levels vary by jurisdiction based on differences in development patterns, infrastructure needs, capital improvement priorities, and project costs. As a result, fees adopted by other cities are not directly comparable to those that may be appropriate for Rancho Palos Verdes, reinforcing the need for a Cityspecific Nexus Study.
Initial Consideration of Development Impact Fees
On May 30, 2024, the FAC discussed the potential review of DIFs as part of Fiscal Sustainability review. Staff reported that the City’s Master Schedule of Fees primarily includes service and cost-recovery charges, and although DIFs are referenced in Chapter 16 (Subdivisions) of the Rancho Palos Verdes Municipal Code (RPVMC), the City has not established a DIF program. Based on Staff’s research, the absence of DIFs may be attributed, in part, to the City’s historically limited development potential. Following the discussion, the FAC requested additional information regarding DIFs and the process required to establish them.
On August 8, 2024, Staff returned to the FAC with additional information regarding DIFs and the process of establishing a DIF program. Following its review, the FAC recommended that the City initiate a Nexus Study and directed Staff to forward that recommendation to the City Council for consideration.
September 3, 2024, Staff presented that recommendation to the City Council, and the City Council approved the FAC’s recommendation to initiate a Nexus Study.
On September 26, 2025, Staff advertised a Request for Qualifications for DIF Consulting Services and selected Willdan Financial Group (Willdan) as the most qualified firm. Based on Willdan’s recommendation, Staff’s budget consideration, and the City’s unique circumstances as a largely built-out community with limited development potential, an Draft Initial Impact Fee Evaluation was approved rather than immediately undertaking a full Nexus Study. This phased approach allowed the City to evaluate potential fee categories, order-of-magnitude revenue, implementation requirements, and policy considerations before incurring the greater cost of a formal Nexus Study.
FAC Review and Considerations (August 2026)
On August 13, 2026, Willdan’s Draft Initial Impact Fee Evaluation (Attachment A) was presented to the FAC at its regular meeting. Following FAC’s deliberation, the FAC voted 3-2 to recommend that the City Council consider deferring the Nexus Study at this time.
The closely divided vote reflected a range of considerations, including the City being largely built out with limited development potential, uncertainty of future revenue 4 collections, restrictions on the use of DIF revenues, and ongoing administrative requirements set by the State.
City Council Fiscal Sustainability Subcommittee (August 2026) On August 28, 2026, Staff met with the City Council Fiscal Sustainability Subcommittee, consisting of Councilmembers Bradley and Lewis. The Subcommittee acknowledged the FAC’s concerns on why the Nexus Study should be deferred, while also recognizing the importance of preparing the City for potential future development associated with State housing mandates and the City’s adopted Housing Element.
The discussion also considered the value of evaluating DIFs to establish a mechanism for collecting fees from future development. The Subcommittee identified areas for further analysis, including development-related infrastructure impacts, proportionate fee levels, and eligible improvements. If authorized by the City Council, a Nexus Study would determine whether, and to what extent, future development could be required to contribute toward those improvements consistent with applicable legal requirements.
DISCUSSION:
The following discussion addresses the recommended Council actions in the order presented above.
1. Willdan Initial Development Impact Fee Evaluation
Willdan prepared the “City of Rancho Palos Verdes Initial Impact Fee Evaluation” to help the City assess whether DIFs could fund a portion of future capital infrastructure needs and to identify the legal, administrative, and procedural requirements associated with implementing a fee program (Attachment A).
The Initial Impact Fee Evaluation is not a Nexus Study and does not establish or recommend an actual City fee schedule. It is a preliminary planning document that illustrates the potential magnitude of fees and revenue and identifies the work that would be required before the City Council could consider adopting a City-specific DIF program.
As previously mentioned, it is important to note that the peer-city fee information used for the initial evaluation is for illustrative and benchmarking purposes to provide context regarding potential fee categories and ranges. Because DIFs are based on each jurisdiction’s unique development patterns, infrastructure needs, capital improvements, and project costs, the fees charged by other cities do not determine what may be appropriate for Rancho Palos Verdes. Therefore, the comparable fee levels should not be interpreted as proposed City fees or as an indication of the fees that would ultimately result from a City-specific Nexus Study.
5 Initial Evaluation Methodology
After meeting with City Staff, Willdan developed preliminary estimates of potential DIFs using fee levels assessed by other jurisdictions as an illustrative starting point.
For the initial evaluation, Willdan:
• Reviewed DIFs assessed by the cities of Hawthorne, Lawndale, Long Beach, Manhattan Beach, and Seal Beach;
• Used those jurisdictions to provide an illustrative range of potential fee levels, rather than as a strict peer-city comparison; and
• Applied preliminary growth assumptions based on data from the California Department of Finance and the City’s Housing Element.
If the City proceeds with the Nexus Study, any potential DIFs would be based on the Cityspecific development assumptions, identified capital facility needs, project costs, and applicable policy considerations.
After the initial report was issued, Staff worked with Willdan to collect information on DIF programs for neighboring and other similarly sized cities, including Rolling Hills Estates, Malibu, and Seal Beach. A comparison of those programs is provided in Willdan’s Impact Fee Comparison Survey (Attachment B).
Development Assumptions
Willdan’s growth projections are based on data from the State of California’s Department of Finance and the City’s Housing Element. The evaluation projects the City’s population increasing from 40,599 in 2026 to 42,162 in 2050, an increase of 1,563 residents.
For purposes of estimating potential fee revenue, Willdan assumes new development between 2026 and 2050, totaling:
• 540 single-family residential units
o Generally includes single family units located on individual residential lots. Accessory Dwelling Units (ADUs) may be permitted on the same lot but are regulated separately under Chapter 17.10 of the RPVMC.
• 107 new multi-family residential units
o Generally includes developments containing two or more dwelling units on a lot, such as apartments and condominiums.
• 69,000 square feet of additional commercial development o Generally includes retail and service-oriented uses, such as stores, restaurants, and personal-service businesses.
• 43,000 square feet of additional office development
o General includes administrative and professional office uses, such as financial, legal and similar professional-service offices 6 If this development occurred evenly over the approximately 25-year period, it would represent an annual average of approximately (rounded):
• 22 single-family homes;
• 4 multi-family units;
• 2,760 square feet of commercial development; and
• 1,720 square feet of office development
These assumptions provide the basis for Willdan’s preliminary revenue estimate. Actual development activity may occur at a different pace or in a different mix, and resulting DIF revenue could therefore be higher or lower than the preliminary estimate.
Estimated Potential Revenue
Based on these development assumptions and illustrative comparable-jurisdictional DIFs used for this evaluation, Willdan estimates that the City could generate approximately $8.8 million in restricted revenue between 2026 and 2050, as summarized in Table 1 below:
Table 1: Estimated Potential Developer Impact Fee Revenue Development
Type Examples
Estimated
Growth
(2026-2050)
Illustrative
Fees Total
Single Family
residential
Single Family and
ADUs 540 units $12,309/unit $6.7 million
Multi-Family
Units
residential
2 or more dwelling
units, apartments,
condominiums
107 units $11,349/unit $1.2 million
Commercial Retail stores,
restaurants,
69,000 sq. ft. $9,245/1,000
sq. ft $0.6 million
Office Administrative and
professional offices 43,000 sq. ft. $7,965/1,000 sq. ft $0.3 million Total $8.8 million
Willdan’s preliminary estimate assumes potential fees could apply towards associated General Government, Public Safety, Recreation and Parks, and Transportation facilities.
If authorized to proceed with the Nexus Study, these categories could be expanded based on Staff’s feedback. Estimated revenue by fee category is summarized below in Table 2.
Table 2: Estimated Potential Developer Impact Fee Revenue by fee category Potential Fee
Category Types of CIP Projects
(examples)
2026-2050
Total
Illustrative
Annual
Average
General Government City Facility Improvements
or upgrades to Information $1.7 million $67,718
7 Potential Fee
Category Types of CIP Projects
(examples)
2026-2050
Total
Illustrative
Annual
Average
System Servers, Human
Resource Systems
Public Safety Additional Public Safety
vehicle $1.1 million $43,637
Recreation and Parks
Additional playground
equipment, purchase of land
for additional park space
$4.2 million
$167,835
Transportation Roadway Improvements to
increase capacity $1.9 million $74,471
Total $8.8 million $353,662
If authorized to proceed with the Nexus Study, these categories could be expanded (i.e. add Sewer Infrastructure)
The annual amount is provided only to illustrate the magnitude of the cumulative revenue estimate and should not be interpreted as a forecast of recurring annual revenue. DIFs are one-time fees triggered by development activity, and collections could vary significantly from year-to-year based on the timing, type, and size of future development.
Willdan’s analysis is also stated in current dollars and does not reflect potential inflationary adjustments.
Illustrative Revenue Scenarios
Willdan’s preliminary revenue estimate is based on the development assumptions previously described and has not yet been refined using a comprehensive review of the City’s historical development activity. Because the City is largely built out and the economy and future development activity are uncertain, Staff also considered how potential revenue would change if actual fee-eligible development were lower than assumed in the Initial Impact Fee Evaluation.
The following scenarios in Table 3 are provided for illustrative purposes only and are not forecasts of future development or revenue. They do not modify Willdan’s preliminary evaluation. Rather, they demonstrate the sensitivity of potential revenue to different levels of future fee-eligible development.
Table 3. Illustrative Revenue Scenarios
Illustrative Scenario 2026-2050 Total Illustrative Annual Average
100% of Estimated Development
(Willdan)
$8.8 million $353,662
75% of Estimated Development $6.7 million $265,250
50% of Estimated Development $4.4 million $176,800
30% of Estimated Development $2.7 million $106,100
8 These scenarios illustrate that the financial benefit of a DIF program would be materially affected by the amount and type of development that actually occurs. If the City Council authorizes the Nexus Study, Staff and Willdan would refine the preliminary development assumptions using City-specific historical development data and other available information before calculating potential fee revenue.
Rancho Palos Verdes Development Activity and Existing Permit Costs Since the City is largely built out, the type and pace of future development are central to the value of a DIF program. To supplement Willdan’s regional assumptions, Staff reviewed recent permit information provided by the Community Development Department’s Building and Safety records. Table 4 illustrates the City’s recent local residential development for context purposes.
Table 4. Recent Rancho Palos Verdes Development Activities City Information Examples (FY 2024-2026)
ADU permits issued
*ADUs up to 750 sq. ft. are
generally EXEMPT from DIFs
• 2024: 11 (2 are over 750 sq. ft.)
• 2025: 15 (3 are over 750 sq. ft.)
• 2026: 7 (1 is over 750 sq. ft.)
ADU sizes Approximately 270 to 1,000 sq. ft.
Paid ADU fees • Approximately $4,000 to $7,300 combined Planning and Building and Safety fees
Paid home addition fees • Approximately $5,200 to $10,300 in combined City fees
Paid second-story projects Approximately $24,000 to $31,000 in combined City fees
New Single Family/Rebuild Permits
*Rebuild or tear-down permits may
not generate a new development
impact
• 2024: 2 (1 New, 1 Tear-down/Rebuild)
• 2025: 11 (5 New, 6 Tear-down/Rebuild)
• 2026: 6 (4 New, 2 Tear-down/Rebuild)
Paid new single-family homes Approximately $35,000 to $60,000 in combined City fees
As shown in Table 4, recent permit records show that the City issued 11 ADU permits in 2024 and 15 ADU permits in 2025 and 7 in 2026. Recent examples demonstrate that ADUs vary significantly in size and type, including garage conversions, attached and detached ADUs, and junior ADUs. Examples reviewed by staff ranged from approximately 270 square feet to 1,000 square feet, including several ADUs exceeding 750 square feet.
The City's permit records therefore demonstrate that, although many recent ADUs fall below the 750-square-foot impact-fee threshold, per State law, larger ADUs are also being constructed and should be evaluated as part of the Nexus Study. Under the City’s current ADU standards, ADU size limits vary depending on the type of unit and number of bedrooms. Generally, the maximum size is 850 square feet for an ADU with one bedroom and 1,000 square feet for an ADU with more than one bedroom. Certain State9 exempt ADUs may be up to 800 square feet and are not required to comply with the City’s architectural requirements. Because ADUs may be developed under several different configurations and statutory provisions, applicable size limitations vary by project.
State law also limits the imposition of development impact fees on ADUs. ADUs with 750 square feet or less of interior livable space are generally exempt from applicable impact fees, while impact fees on larger ADUs are generally required to be proportionate to the size of the ADU relative to the primary dwelling unit. Accordingly, some ADUs permitted in the City may potentially be subject to a future DIF while others would remain exempt.
These distinctions would need to be incorporated into the Nexus Study and any future fee schedule.
Staff also reviewed recent City permit fees to understand the existing cost of residential development. For example, the 1,000-square-foot detached ADU identified above incurred $841 in Planning Division fees and $5,747 in Building and Safety Division fees.
Other recent ADU examples incurred combining Planning and Building and Safety fees ranging from approximately $4,000 to more than $7,000.
Existing fees for larger residential projects can be substantially higher. Recent examples include additions to existing homes with combined City fees of approximately $5,200 to $10,300, second-story addition/remodel projects with combined fees ranging from approximately $24,000 to $31,000, and new single-family residences with combined Planning and Building and Safety fees ranging from approximately $35,000 to $60,000.
These examples are provided for context only and are not directly comparable to a future DIF because the existing Planning and Building and Safety fees generally recover the City’s costs associated with processing, reviewing, and inspecting individual development applications. A DIF would serve a different purpose by requiring qualifying new construction (not tear-down/rebuilds) to contribute its proportionate share toward eligible capital facilities needed to serve future growth. However, the cumulative cost of existing development fees is an important policy consideration when determining which development types should be subject to a future DIF and whether exemptions, reductions, or other policy adjustments should be evaluated as part of the Nexus Study.
Willdan and City staff also acknowledged that the City has limited opportunities for largescale development and that the timing and extent of future development cannot be predicted with certainty. As a result, actual development and resulting DIF collections could differ materially from the assumptions used in the Initial Impact Fee Evaluation.
The Initial Impact Fee Evaluation also does not quantify the potential effect of DIFs on housing affordability or the financial feasibility of future development. Willdan notes that the City could consider exemptions, reductions, or waivers for certain types of development, including affordable housing or uses considered fiscally desirable, such as retail that would generate sales tax or hotels that would generate transient occupancy tax. These policy considerations could be evaluated if the City proceeds with further study.
10 Supplemental Review of Selected Comparable Peninsula and Coastal Cities In response to questions raised during preparation of this report, Staff also reviewed selected comparable Peninsula and coastal cities that may provide additional context.
The review confirms that nearby and similar jurisdictions use materially different fee categories and calculation methods. The comparison below is therefore informational only and is not an apples-to-apples comparison of total development costs. Table 5 illustrates supplemental comparison of selected development-related Fees.
Table 5. Supplemental Comparison of Selected Development-Related Fees Development
Type
Sample fees
from
Willdan
initial
analysis
City of
Rolling Hills
Estates
City of
Laguna
Beach
City of
Malibu
City of
La Cañada
Flintridge
Single-family
residential $12,309/unit $28,729/unit + $0.73/sq. ft. $200/unit $5,636/unit No citywide DIF identified Multi-family
residential $11,349/unit $21,158/unit + $0.73/sq. ft. $200/unit $3,583-$4,810/unit No citywide
DIF identified
Commercial $9,245/1,000
sq. ft.
$9,643/1,000
sq. ft. N/A N/A No citywide DIF identified
Office $7,965/1,000
sq. ft.
$11,195/1,000
sq. ft. N/A N/A No citywide DIF identified
The City of Rolling Hills Estates has historically imposed multiple public facilities-related fees, including library, parks and recreation, transportation, and general plan components. Moreover, the City of Laguna Beach imposes a limited $200 library impact fee on new residential units. The City of Malibu imposes a parkland development fee on new dwelling units rather than a broad multi-category program. Staff did not identify a citywide DIF program in La Cañada Flintridge's current master fee materials.
As presented above, Staff seeks City Council approval to receive and file Willdan’s Initial Impact Fee Evaluation regarding the potential establishment of DIFs.
2. FAC and City Council Fiscal Sustainability Subcommittee Review FAC Review and Considerations (August 2026)
On August 13, 2026, Willdan’s Draft Initial Impact Fee Evaluation (Attachment A) was subsequently presented to the FAC at its regular meeting. The FAC engaged in extensive discussion with Staff and Willdan regarding the preliminary revenue estimates, restricted uses of DIFs, the City’s limited development potential, administrative and reporting requirements, the cost of periodic updates, and the potential value of having a fee framework in place before future development occurs.
Following FAC’s deliberation, the FAC voted 3-2 to recommend that the City Council consider deferring the Nexus Study at this time. The closely divided vote reflected range 11 of considerations, including the City being largely built out with limited development potential, uncertainty of future revenue collections, restrictions on the use of DIF revenues, and ongoing administrative requirements set by the State.
Financial and Policy Considerations
The FAC weighted the potential benefits of having a framework in place against the upfront and ongoing costs, restricted uses of revenue, and uncertain of future collections.
The preliminary estimate of approximately $8.8 million is cumulative over a 25-year period, with the illustrative annual average of approximately $353,000 (approximately 1% of the City’s total CIP Program) should not be treated as recurring annual revenue.
Table 6a and 6b summarizes the potential benefits and program requirements presented to the FAC.
Table 6a: Potential Benefits
Potential Benefits
Provides a dedicated funding source for eligible capital improvements Establishes fees before major development occurs
Allows recovery of a portion of growth-related infrastructure costs May reduce reliance on other City funding sources for eligible improvements Allows new development to contribute its proportionate share toward facilities needed to serve that development
Allows the City to have a fee program in place if significant development opportunities arise
Table 6b: Potential Financial and Administrative Considerations Financial and Administrative Considerations
The $50,000 study cost would be incurred before revenue is known or guaranteed.
Revenue is uncertain and dependent on future development activity Revenue is legally restricted to eligible uses
Creates ongoing administrative, accounting, reporting, and compliance requirements Requires periodic Nexus Study updates
Limited development potential may reduce overall financial benefit Ongoing Administrative and Reporting Requirements
Staff also reported to FAC that establishment of a DIF program would create ongoing administrative responsibilities in addition to the initial cost of preparing a Nexus Study.
These responsibilities would help ensure that fees are properly collected, accounted for, and used for their intended purposes.
Based on Willdan’s report, ongoing responsibilities would generally include:
• Maintaining DIF revenue in separate accounts by fee category; 12 • Accounting for fee collections and expenditures;
• Tracking capital projects funded with DIF revenue;
• Completing required public reports;
• Reviewing fee justification, project costs, and development assumptions; • Administering credits, exemptions, waivers, or appeals, if applicable; and • Periodically updating the Nexus Study and fee calculations.
Additionally, State law requires periodic updates of impact fee programs, including an update of the Nexus Study at least every eight years. Such an update generally involves refreshing development assumptions, capital plans, policies, project costs, and fee calculations. Willdan also recommends that fees be periodically adjusted for inflation and generally recommends use of the California Construction Cost Index for that purpose.
These requirements would involve ongoing staff time and coordination among Finance, Community Development, the City Attorney’s Office, and other Departments involved in fee collection, capital project planning, accounting, reporting, and compliance.
Willdan notes that DIF programs commonly include an administrative charge intended to recover the cost of administering the program. According to Willdan, such charges are typically approximately 1% to 2% of the fee calculation, which would equate to approximately $3,500 - $7,000 annually based on the $353,662 illustrative annual average. Willdan also recommends consideration of a formal appeals process to address disputes with fee payers and notes that the City could consider exemptions, reductions, or waivers for selected types of development. A fee calculator could also be considered to assist prospective applicants, although such a calculator is not required.
City Council Fiscal Sustainability Subcommittee (August 2026) On August 28, 2026, Staff met with the City Council Fiscal Sustainability Subcommittee, consisting of Councilmember Bradley and Councilmember Lewis. The Subcommittee acknowledged the FAC’s concerns on why the Nexus Study should be deferred, while also recognizing the importance of preparing the City for potential future development associated with State housing mandates and the City’s adopted Housing Element.
The discussion with the Subcommittee also considered the value of evaluating DIFs to establish a mechanism for collecting fees from future development. A Nexus Study may help the City determine whether, and to what extent, such development could be required to contribute toward eligible infrastructure costs consistent with applicable legal requirements.
The Subcommittee identified several considerations for the Nexus Study, including:
• Evaluate the infrastructure impacts associated with different types and intensities of development.
• Assess whether infrastructure impacts support different fee levels for multiplefamily and single-family residential development, based on each category’s proportionate share.
13 • Ensure that potential fees are proportionate to the impacts attributable to each development category.
• Identify eligible infrastructure improvements and determine the appropriate share attributable to future development.
The Subcommittee also expressed interest in whether residential fees could vary based on project size or the number of units. The current evaluation assumes that a standard per-unit fee already causes the total charge to increase as units are added. A structure in which the fee per unit also increases with project size would be a different, graduated approach and would need to be evaluated by Willdan and the City Attorney for nexus, proportionality, and housing-policy considerations. If the City Council agrees to proceed with the Nexus Study, Staff will ask Willdan to consider this information.
Based on the information presented above, Staff seeks City Council direction on whether to (a) accept the FAC’s recommendation to defer preparation of the Nexus Study; or (b) proceed with the Nexus Study to position the City for potential future development.
3. Willdan Agreement
If the City Council authorizes to proceed with the Nexus Study, the next substantive step is preparation for a formal Nexus Study. Willdan’s Initial Impact Fee Evaluation is a preliminary planning document and does not contain the findings required to establish a DIF program.
Before completing the Nexus Study, the City would need to:
• Identify eligible capital improvements or facility expansions that may be necessary to accommodate future development.
• Establish reasonable development assumptions.
• Estimate the associated project costs.
• Determine the proportionate share of eligible project costs attributable to new development.
Under the California Mitigation Fee Act, the Nexus Study would document the reasonable relationship between:
• The types of development on which a fee would be imposed. • The additional demand for public facilities created by that development. • The facilities or improvements funded by the fee.
• The amount of the fee charged to the development.
The cost of preparing a formal Nexus Study would depend on the number of fee categories and projects evaluated. Based on Willdan’s preliminary assumptions, the cost is estimated not-to-exceed $50,000. If approved, this amount is already included in the FY 2026-27 Adopted Budget of $60,000 (see Fiscal Impact Analysis on cover page). 14 Willdan estimates that preparation of a Nexus Study and completion of the associated adoption process would typically require approximately six months, although the schedule could vary depending on the number and complexity of fee categories, capital projects, stakeholder issues, and policy considerations involved.
The Nexus Study is a planning and legal prerequisite; it is not an adoption of fees.
Completion of the study would not obligate the City Council to establish a DIF program or adopt fees at the maximum supportable levels. Any proposed fee schedule would return to the City Council for separate consideration. In this respect, the Nexus Study serves as a prudent fiscal safeguard by placing the City in a position to act before a significant development application is pending while preserving full policy discretion after the study is completed.
Nexus Study Work Plan
If authorized to proceed with the preparation of a Nexus Study, Staff and Willdan would complete the following work before any proposed DIF program is returned to the City Council:
A. Convene Stakeholder Departments and Identify Eligible Capital Needs Finance would coordinate with Willdan and City Departments, including Recreation and Parks, Community Development, Public Works, Public Safety Division, Information Technology Division, and the City Attorney's Office, as appropriate, to identify facility expansions and capital improvements that may be necessary to serve anticipated future development (project scope, estimated costs, timing, existing versus growth-related shares, and the relationship between each project and anticipated development).
Preliminary Capital Improvement Examples
Staff identified the following examples of projects that can be studied for eligibility for DIF funding:
• IT improvements at Hesse Park, to the extent the improvements increase capacity or services needed to accommodate new development;
• Additional Public Safety and Ranger office space, limited to the portion of the project attributable to increased demand from new development; • Restroom upgrades and permanent office space at Eastview Park, identified in the Capital Improvement Program as Project No. 85Pot1, to the extent the improvements expand capacity or address demand created by new development; and
• Traffic Improvements along Palos Verdes Drive South, to the extent the improvements are necessary to address additional traffic generated by new development.
• Sewer and Storm Drain Improvements to increase capacity to accommodate new development.
15 • Civic Center expansion, limited to the portion of the project that expands capacity or services to accommodate increased demand from new development.
Inclusion of these examples does not establish that a project, or the full cost of a project, would qualify for DIF funding. Eligibility would depend on demonstrating the required nexus between future development, the additional demand created by that development, and the proportionate cost of the improvement attributable to that demand.
The interdepartmental review may identify additional projects, remove projects that do not satisfy the legal requirements, or limit eligible costs to only the growth-related portion of a larger project.
B. Refine Development Assumptions and Fee Categories
Willdan would refine the preliminary development assumptions using available City data and determine the appropriate development categories and fee categories appropriate for City-specific analysis. Potential fee categories identified in the preliminary evaluation include General Government, Public Safety, Recreation and Parks, and Transportation.
The final categories would depend on the projects and needs identified through the interdepartmental review.
C. Evaluate Fee Methodologies and Policy Options
Willdan would evaluate legally supportable methodologies for allocating costs among development types. State law generally directs housing impact fees to be calculated in proportion to unit square footage unless the City makes specified findings supporting an alternative methodology. Different fees may be established for different development types when supported by the analysis.
The Fiscal Sustainability Subcommittee have also expressed interest in whether residential fees could vary based on project size or the number of units. Based on the initial evaluation, a standard per-unit fee already causes the total charge to increase as units are added. A structure in which the fee per unit also increases with project size would be a different, graduated approach and would need to be evaluated by Willdan and the City Attorney for nexus, proportionality, and housing-policy considerations.
D. Prepare the Nexus Study and Conduct Outreach
Willdan would evaluate the relationship between anticipated development, resulting demand for City facilities, eligible capital improvements, and the proportionate cost attributable to new development. The resulting Nexus Study would establish the maximum supportable fees based on the underlying analysis. The City Council would retain discretion to consider fees below the maximum amounts supported by the study.
Staff could also conduct stakeholder outreach during development of the Nexus Study to obtain input regarding development assumptions, potential fee categories, 16 implementation issues, or other policy considerations. Additional City Council review or a workshop could also be conducted if warranted.
E. Return to the City Council for Separate Consideration of DIF Adoption During the process, the Finance Department would continue working with the FAC and the Council Subcommittee to obtain feedback on the Nexus Study and any potential fee structure.
The completed Nexus Study, along with FAC and Council Subcommittee feedback and any proposed fees, would then return to the City Council to determine whether to proceed with establishing a DIF program. If approved to proceed, the Staff would go through the applicable public notice and hearing process. At that time, the City Council could adopt the proposed fees, modify them within the limits supported by the Nexus Study..
As presented above, if authorized to proceed with the Nexus Study, Staff seeks City Council approval to work with Willdan and City Departments to identify potentially eligible capital improvements and refine development assumptions and fee categories.
ADDITIONAL INFORMATION:
Existing Quimby Act Fees
The City currently collects Quimby Act fees, when applicable, for qualifying residential development pursuant to Chapter 16 (Subdivisions) of the RPVMC. Quimby Act requirements are separate from DIFs and generally involve the dedication of parkland, payment of in-lieu fee, or a combination of both in connection with qualifying residential subdivisions.
Willdan’s Initial Impact Fee Evaluation separately identifies an illustrative Quimby Act fee for residential development. Revenue from the City’s existing Quimby Act fees is not included in the preliminary $8.8 million DIF revenue estimate. If the City proceeds with a Nexus Study, the analysis would need to consider the existing Quimby fee program and any appropriate credits or offsets to avoid duplicative recovery of park-related costs.
CONCLUSION:
A formal Nexus Study is necessary to refine the City’s development assumptions, identify eligible capital improvements, and determine City-specific fee levels that are legally supportable. The City Council is being asked to consider proceeding with the preparation of a Nexus Study under contract with Willdan for a cost not-to-exceed $50,000 which is already funded in the FY 2026-27 Adopted Budget. Completing the Nexus Study, as recommended by the City Council Subcommittee, would provide a complete City-specific analysis needed to make an informed policy decision on whether to establish DIFs for future development project’s potential impacts on the City. 17 ALTERNATIVES:
In addition to the staff recommendations, the following alternatives are available for the City Council’s consideration:
1. Take no action and receive and file this report.
2. Do not authorize the Nexus Study and receive and file the Initial Impact Fee Evaluation and direct staff to take no further action on a DIF program at this time.
3. Modify Willdan’s proposed scope and direct staff to obtain additional information, revise the proposed study scope, or return at a later date before authorizing the agreement with Willdan.
18 Department of Finance
Memo dated July 20, 2026
Memorandum
Date: July 20, 2026
To: Vina Ramos, Director of Finance
CC: Robert Moya, Deputy Director of Finance
From: James O'Neill, Senior Administrative Analyst
Subject: Developer Impact Fees Draft Memo from Willdan
I received an initial draft memo from Willdan on June 30, 2026 outlining its “Initial Impact Fee Evaluation.” In summary, it estimates that the City might see more than $8.8 million in restricted revenue between 2026 and 2050. This is based on the following assumptions:
Development Type Estimated Growth
(2026-2050) Fees Totals
Single Family Homes
(per unit)
540 $12,309 per unit $6,646,860
Multi-Family Units
(per unit)
107 $11,349 per unit $1,214,343
Commercial
(per 1,000 sq. ft.)
69,000 $9,245 per 1,000 sq. ft $637,905
Office
(per 1,000 sq. ft.)
43,000 $7,965 per 1,000 sq. ft $342,495
$8,841,603
The breakdown of the revenue by fee category would be as follows:
General Government $1,692,958
Public Safety $1,090,932
Parks & Recreation $4,195,869
Transportation $1,861,780
$8,841,539
Consistent, even development across those 25 years (21.6 new single-family homes, 4.28 new multi-family units, 2,760 sq. ft of new commercial and 1,720 sq. ft. of new office development) would equate to the following annually:
General Government $ 67,718
Public Safety $ 43,637
Parks & Recreation $ 167,835
Transportation $ 74,471
A-1
Department of Finance
Memo dated July 20, 2026
$ 353,662
It is important to note that local agencies may not impose Developer Impact Fees (DIFs) on accessory dwelling units (ADUs) less than 750 square feet.
Use of Collected Fees
Developer Impact Fees are legally restricted revenue that may only be used to construct new public facilities or expand existing facilities needed to serve the new development. They may not be used for maintenance, rehabilitation or general operating expenses.
Before fees can be established, the City must identify eligible capital improvements that are necessary to accommodate the growth attributed to the new development.
A few potential projects could be:
IT improvements at Hesse Park (potentially partially paid for by the “General Government” fees)
Partially paying for costs of adding office space for Public Safety out of Public Safety fees
Upgrading the restrooms and adding permanent office space to Eastview Park (a project listed under “Wants/Need” in the Capital Improvement Program as 85Pot1) and potentially partially paid for by the “Parks and Recreation” fees Traffic Improvements along Palos Verdes Drive South (potentially paid for by “Transportation” fees)
I have asked Willdan to provide some examples of types of improvements other cities have made for the City to consider or spark ideas of projects RPV might consider.
Administrative Requirements
Implementation of a Development Impact Fee program would require ongoing administrative oversight. Revenues must be maintained in separate accounts, tracked by fee category, reported in accordance with state law, and expended only on projects supported by the required Nexus Study. These administrative responsibilities would require additional staff time and resources.
Nexus Study
State law requires preparation of a Nexus Study to establish the relationship between anticipated new development, the demand it creates for public facilities, and the fees charged to offset those impacts.
The cost of preparing a Nexus Study would depend on the number of fee categories included but is estimated to be approximately $50,000 or less based on Willdan’s preliminary assumptions.
A-2
Department of Finance
Memo dated July 20, 2026
The City would first need to determine which capital improvements of facility expansions are necessary to serve future development. Those projects and associated costs would form the basis of the Nexus Study and ultimately determine the fee amounts. As such, the actual fees could be higher or lower than the preliminary estimates contained in Willdan’s draft memorandum.
Adoption of Fees
If the City elects to proceed, adoption of Developer Impact Fees would follow a process similar to of adoption of the City’s Master Fee Schedule, requiring a public notice and public hearing.
Considerations
During the meeting with Willdan, Ara and the department directors, there was general consensus that the City is generally “built out” and there is little opportunity for large development.
Although Willdan’s preliminary analysis projects approximately $8.8million in potential revenue over the next 25 years, those estimates assume development averaging:
21.6 new single-family homes annually;
4.3 new multi-family units annually;
2,760 square feet of commercial development annually; and 1,720 square feet of office space development annually These assumptions do not appear to reflect the City’s expected pace of future development.
In addition, future residential development is likely to consist of accessory dwelling units, which would not generate Developer Impact Fees if they are less than 750 square feet.
Conclusion
While the projected revenue appears significant when viewed over a 25-year period, the estimated annual revenue of approximately $353,000 represents only 1.1% of the CIP allocation of $31 million for FY 2026-27,
Given the City’s limited development potential, the estimated cost of preparing a Nexus Study, the ongoing administrative requirements, and the restriction governing the use of collected fees, Robert and I have concerns regarding whether implementation of a Developer Impact Fee program would provide sufficient benefit to justify the associated costs and administrative effort.
A-3
Department of Finance
Memo dated July 20, 2026
Recommendation
Because the City Council requested that staff evaluate Developer Impact Fees, I anticipate preparing a future staff report summarizing our findings.
Before making a recommendation regarding a Nexus Study, I recommend meeting with Ara and Catherine, and then seeking feedback from the Finance Advisory Committee to identify potential capital improvements or facility expansion projects and discuss realistic development expectations. Following those discussions, staff should meet with Willdan to review the City’s conclusions, refine the preliminary analysis as appropriate, and determine whether preparation of a Nexus Study is warranted.
Please let me know if you would like to discuss this recommendation and next steps.
A-4
Development Impact Fee Comparison Survey
August 27, 2026
Development Impact Fee Comparison Survey
Methodology
Willdan collected development impact fee schedules for ten comparison cities. These comparison jurisdictions are:
• Hawthorne
• Laguna Beach
• Lawndale
• Long Beach
• Los Angeles
• Malibu
• Manhattan Beach
• Seal Beach
• Rolling Hills Estates
• Torrance
The following cities do not assess development impact fees:
• Hermosa Beach
• La Cañada Flintridge
• Redondo Beach
Willdan collected data regarding all one-time fees and charges used to fund infrastructure and facilities related to new development. Impact fees are not standardized and are assessed by various units of development by different jurisdictions. To create a meaningful comparison of impact fees, Willdan calculated the fees for four prototype projects. • Single Family Dwelling Unit (2,000 Square Feet, 0.15 Acres) • Multifamily Dwelling Unit (1,000 Square Feet, 0.05 Acres) • Retail (1,000 Square Feet, 0.10 Acres)
• Office Building (1,000 Square Feet, 0.10 Acres)
Results
Tables 1 through 4, and Charts 1 through 4, display the fee comparisons for each prototype.
Some jurisdictions charge impact fees that vary by project location. In these cases, the tables show the range of potential impact fees.
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Development Impact Fee Comparison Survey
August 27, 2026 Page 2
Table 1: Rancho Palos Verdes Development Impact Fee ComparisonSingle Family Dwelling Unit (2,000 Square Feet, 0.15 Acres) Fee Category (Low)1 (High)1 Malibu
Fire - $ -$ -$ -$ 496$ $ - - $ 1,008 $ $ -$ - $ - $ 752 General Government - - - - - - - 2,142 1,460 - - 1,801
Library - - 200 - - - - 3,073 - - - 1,637
Parks and Recreation 3,569 3,569 11,383 4,613 - 5,636 8,928 21,090 - 10,000 - 8,599 Police 874 - 874 703 - - - - - - - 817
Sewer - - 4,722 - - - - 6,363 - - - 5,543
Storm Drain 239 - 239 - - - - 8,058 - - - 2,845
Total DIF - - - - - - - - - - 10,753 10,753
Transportation1 1,370 767 - 4,508 1,125 - - 1,638 4,566 1,681 - 2,236 Water - - 5,151 - - - - 42,206 - - - 23,679
Total $ 6,052 5,449 $ 21,456 $ 4,508 $ 6,937 $ 8,928$ 5,636 $ 61,415 $ 30,189 $ 11,681 $ 10,753 $ 1 Hawthorne transportation fee varies with project location.2 Laguna Beach fee assumes that Public Art and Parking In-Lieu are provided onsite.
Hawthorne
Los
Angeles
(City of)
Manhattan
Beach
Rolling
Hills
Estates
Average of
Non-Zero
Fees
Laguna
Beach2
Seal
Lawndale Beach Torrance
Long
Beach
B-2
Development Impact Fee Comparison Survey
August 27, 2026 Page 3
$-
$10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 Lawndale Hawthorne
(Low)
Malibu Hawthorne
(High)
Long Beach Los Angeles
(City of)
Torrance Seal Beach Laguna Beach Rolling Hills
Estates
Manhattan
Beach
Chart 1 : Single Family Unit
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Development Impact Fee Comparison Survey
August 27, 2026 Page 4
Table 2: Rancho Palos Verdes Development Impact Fee ComparisonMultifamily Dwelling Unit (1,000 Square Feet, 0.05 Acres) Fee Category (Low)1 (High)1 Malibu
Fire - $ -$ - $ $ 378 - $ $ - - $ $ 1,554 $ - - $ $ - $ 966 General Government - - - - - - - 3,297 - 730 2,014 -Library - - 200 - - - - 2,302 - - 1,251 - Parks and Recreation 2,538 2,538 15,832 3,563 - 4,197 8,928 15,797 - 5,000 7,299 - Police 621 - 621 537 - - - - - - - 593
Sewer - - 3,827 - - - - 7,025 - - 5,426 -
Storm Drain 164 - 164 - - - - 5,500 - - 1,943 -
Total DIF - - - - - - - - - - 9,140 9,140
Transportation1 959 - 536 3,310 1,125 - - 1,964 3,059 1,103 - 1,722 Water - - 5,151 - - - - 28,137 - - - 16,644
Total 3,859 $ 4,282 $ 25,010 $ 3,310 $ 5,603 $ 8,928 $ 4,197 $ 47,476 $ 21,888 $ 6,103$ $ 9,140 1 Hawthorne transportation fee varies with project location.2 Laguna Beach fee assumes that Public Art and Parking In-Lieu are provided onsite.
Average of
Non-Zero
Fees
Seal
Lawndale Beach Torrance
Long
Beach
Hawthorne
Laguna
Beach2
Los
Angeles
(City of)
Manhattan
Beach
Rolling
Hills
Estates
B-4
Development Impact Fee Comparison Survey
August 27, 2026 Page 5
$-
$5,000
$10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 Lawndale Hawthorne
(Low)
Malibu Hawthorne
(High)
Long Beach Seal Beach Los Angeles
(City of)
Torrance Rolling Hills
Estates
Laguna Beach Manhattan
Beach
Chart 2: Multifamily Unit
B-5
Development Impact Fee Comparison Survey
August 27, 2026 Page 6
Table 3: Rancho Palos Verdes Development Impact Fee ComparisonRetail (1,000 Square Feet, 0.10 Acres) Fee Category Hawthorne Low High Malibu
Fire $ - - $ $ 267 - $ 267 $ $ - - $ $ - 528 $ - $ $ - $ 354 General Government - - - - - - - 1,122 730 - - 926
Library - - - - - - - - - - - -
Parks and Recreation - - - - - - - 2,712 - - - 2,712
Police - 173 442 - 442 - - - - - - 352
Sewer 2,495 - - - - - - 1,203 - - - 1,849
Storm Drain - 35 - - - - - 12,150 - - - 6,093
Total DIF - - - - - - - - - - 15,118 15,118
Transportation1 - 4,479 12,115 3,000 4,500 - - 6,201 6,345 14,060 - 7,243 Water 5,151 - - - - - - 28,137 - - - 16,644
Total 4,687 $ 7,646 $ 12,115$ 3,709 $ 5,209 $ $ - - $ 49,487 $ 9,643 $ 14,060 $ $ 15,118 1 Long Beach transportation fee varies with location of project.2 Laguna Beach fee assumes that Public Art and Parking In-Lieu are provided onsite.
Torrance
Average of
Non-Zero
Fees
Laguna
Beach2
Seal
Beach
Los
Angeles
Lawndale (City of)
Manhattan
Beach
Long Beach1
Rolling
Hills
Estates
B-6
Development Impact Fee Comparison Survey
August 27, 2026 Page 7
$-
$10,000 $20,000 $30,000 $40,000 $50,000 $60,000
Los Angeles
(City of)
Malibu Hawthorne Laguna Beach Long Beach
(Low)
Long Beach
(High)
Rolling Hills
Estates
Lawndale Seal Beach Torrance Manhattan
Beach
Chart 3: Shopping Center
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Development Impact Fee Comparison Survey
August 27, 2026 Page 8
Table 4: Rancho Palos Verdes Development Impact Fee ComparisonOffice Building (1,000 Square Feet, 0.10 Acres) Fee Category Hawthorne Low High MalibuFire - $ - $ - $ 325 $ 325$ - $ - $ 1,161 $ - $ - $ -$ $ 604 General Government - - - - - - - 2,467 730 - - 1,598
Library - - - - - - - - - - - -
Parks and Recreation - - - - - - - 3,567 - - - 3,567
Police 234 - 538 - 538 - - - - - - 437
Sewer - 2,482 - - - - - 1,203 - - - 1,843
Storm Drain 29 - - - - - - 11,639 - - - 5,834Total DIF - - - - - - - - - - 5,154 5,154 Transportation1 - 3,255 8,377 2,000 3,000 - - 5,375 6,898 4,740 - 4,806 Water 5,151 - - - - - - 28,137 - - - 16,644
Total $ 3,518 $ 7,633 $ 2,863 8,377 $ 3,863 $ $ - - $ 49,982 $ 11,195 $ $ 4,740 $ 5,154 1 Long Beach transportation fee varies with location of project.2 Laguna Beach fee assumes that Public Art and Parking In-Lieu are provided onsite.
Torrance
Average of
Non-Zero
Fees
Los
Angeles
(City of)
Laguna
Beach2
Seal
Lawndale Beach
Long Beach1
Manhattan
Beach
Rolling
Hills
Estates
B-8
Development Impact Fee Comparison Survey
August 27, 2026 Page 9
$-
$10,000 $20,000 $30,000 $40,000 $50,000 $60,000
Los Angeles
(City of)
Malibu Hawthorne Laguna Beach Long Beach
(Low)
Long Beach
(High)
Seal Beach Torrance Lawndale Rolling Hills
Estates
Manhattan
Beach
Chart 4: Office Building
B-9