Item Number: 2
City Council / Board of Directors
Public Hearing(s)
Meeting of: December 16, 2025
Submitted By:
Jenele Davidson, Deputy City Manager
Carmen Cun, Finance Director / City Treasurer
Subject:
Development Impact Fees (“DIF”) and Capacity Charges Annual Review – Master Fee Schedule and Capital Improvement Plan
Recommendation:
That the Honorable City Council and Victorville Water District Board of Directors (District Board):
(1) Open and conduct the Public Hearing;
(2) Close the Public Hearing; and
(3) Adopt Resolution Nos. 25-086 and VWD-25-002, adopting an updated Master Fee Schedule for DIF and Capacity Charges, the associated updated Capital Improvement Plan, and City Council Policy No. CP-25-01 establishing updated guidelines for implementation of said DIF and Capacity Charges, and superseding City Council Policy No. CP-24-05.
Fiscal Impact:
There is no fiscal impact directly associated with the recommended action. If adopted as proposed, updated DIF and Capacity Charges will go into effect on March 1, 2026, as it relates to non-residential fees and charges. The California Construction Cost Index (“CCCI”) for July 2025-over-July 2024 was 5.70%, and this amount has been applied to non-residential DIF and Capacity Charges in Exhibit A of Resolution Nos. 25-086 and VWD-25-002.
Residential DIF and Capacity Charges will be entering Year 4 of the phased implementation plan on January 1, 2026, as previously adopted in Resolution Nos. 22- 050 and VWD-22-007.
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Strategic Plan Goal:
Annual review and updating of the DIF and Capacity Charges Master Fee Schedule ensures the City is accomplishing Goal A: Financial Sustainability from the City’s current Strategic Plan. These incremental adjustments help ensure the City is collecting sufficient funds to fully mitigate the impact of new development in an amount sufficient to fund the needed investments in infrastructure, as outlined in the Capital Improvement Plan and in accordance with Goal E of the City’s current Strategic Plan.
Background:
Development Impact Fees (“DIF”) are one-time fees assessed on new development to fund the cost of providing municipal facilities to address the impact created by new development. The authorization for a local jurisdiction to collect DIF and Capacity Charges are in Government Code sections 66001 through 66025 (also known as the “Mitigation Fee Act”) and related laws. Additionally, under Victorville Municipal Code Section 16-5.01.080, DIF are applicable to all development in the City of Victorville.
The Mitigation Fee Act is premised on the concept that new development should pay its own way; or, put another way, new development must mitigate its own impacts on the City’s infrastructure. For the City to levy DIF, a comprehensive study must be completed to verify there is a reasonable relationship between the purpose of each fee, the fee’s use, and the type of development project on which the fee is imposed. Capacity Charges must also be studied to ensure that they do not exceed the estimated reasonable cost of the services and public improvements/facilities for which the charges are imposed and are of proportional benefit to the person/property being charged.
The State Legislature passed Assembly Bill 602 (“AB 602”) in 2021, which modified the Mitigation Fee Act and related laws and created new requirements relative to impact fees.
Changes went into effect on January 1, 2022, including the requirement under Government Code Section 66016.5 that a local agency adopt an impact fee nexus study before imposing an associated development fee. To meet these requirements, the City Council/District Board previously adopted the Nexus Studies for DIF and Capacity Charges and the associated Capital Improvement Plan under Resolution Nos. 22-045 and VWD-22-005 on June 7, 2022. Under AB 602, nexus studies must be updated at least every eight years.
On June 7, 2022, the City Council/District Board also approved Resolution Nos. 22-050 and VWD-22-007, adopting a Master Fee Schedule (“MFS”) for DIF and Capacity Charges, a Capital Improvement Plan, and City Council Policy No. CP-22-01 which collectively outlined the City’s DIF and Capacity Charge program, fees and charges, and established a four-year phased implementation for residential DIF with certain grandfathering clauses for existing projects and provisions requiring an annual review process.
On December 19, 2023, the City Council/District Board adopted Resolution Nos. 23-100 and VWD-23-015, which approved the updated MFS for DIF and Capacity Charges, implemented City Council Policy CP-23-02 (“CP-23-02”) to provide updated guidelines 4 4
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for implementation and superseded any previous resolutions or policies, and adopted the associated Capital Improvement Plan. Non-residential fees were increased by 4.57%, and CP-23-02 established March 1 as the annual effective date for these fees. The policy also set procedures for annual review of the Master Fee Schedule using the California Construction Cost Index (“CCCI”) published by the State, and annual review of the Capital Improvement Plan to ensure all DIF and Capacity Charge funded capital projects are accounted for.
On December 17, 2024, the City Council/District Board adopted Resolution Nos. 24-005 and VWD-24-011, which updated the MFS for DIF and Capacity Charges, implemented the new City Council Policy CP-24-05 (“CP-24-05”), and adopted the associated Capital Improvement Plan. As part of the MFS update, non-residential fees were increased by
1.26%. CP-24-05 made minor revisions to Sections III and IV of CP-23-02 to clarify the reference to the Cost Index used for annual adjustments, correct typographical errors, and reflect changes to Mitigation Fee Act Section 66007 under SB 937 regarding the timing of DIF and Capacity Charge collection.
Residential DIF and Capacity Charges will be entering year four of the phased-in implementation plan and the CCCI will be applied beginning in 2027, after the phased implementation plan is complete.
Discussion:
It is important that the City/District annually review DIF and Capacity Charges to ensure they are sufficient to mitigate the impacts of new development on the associated capital facilities and other improvements needed to maintain the existing level of service. The corresponding City Council policy and Capital Improvement Plan should also be reviewed each year.
For the MFS, the annual review process consists of applying the CCCI to the fees and charges in the MFS to ensure sufficient amounts are collected to complete projects when accounting for annual costs. For July 2025-over-July 2024, the CCCI was 5.70%. This percentage increase has been applied to all non-residential DIF and Capacity Charges in the MFS, as seen in Exhibit A to Resolution Nos. 25-086 and VWD-25-002 (Attachments A and B). By applying this inflation factor, the City is keeping pace with construction costs and will be less likely to subject developers to substantial increases in fees, as was the case when the Nexus Studies were completed in June 2022.
In addition to these updates, staff identified a correction needed for the annual escalator applied to the Public Buildings fee within the Public Facilities category. During the December 2023 update, the CCCI escalator was inadvertently not applied to the fee effective March 1, 2024, resulting in a reduced fee. Although the escalator was applied the following year, the fee remained lower than intended due to this clerical error. As part of the 2025 fee update, this fee has now been corrected by retroactively applying the appropriate year-over-year CCCI adjustments.
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A review of the existing Council Policy for DIF and Capacity Charges was also conducted to ensure the policy is performing as intended and that the City’s program continues to comply with the Mitigation Fee Act and related laws. Although the revised Policy No. CP- 24-05 was adopted last year, staff have reviewed the policy and additional updates are being proposed. The revised City Council Policy No. CP-25-01 (Exhibit B to Resolution Nos. 25-086 and VWD-25-002) is now being presented for adoption with clarifying language and key revisions in the following areas:
The policy’s purpose statement has been updated to clearly identify which fees are governed by the policy and a definitions section has been added. The previous grandfathered project provisions expired on January 1, 2025; therefore, related references have been removed.
The policy now clearly states where the Master Fee Schedule for DIF and Capacity Charges can be accessed.
Credits for fuel pump removals may be granted only for complete fuel system removal and may be applied on-site or transferred, subject to City approval. The section on fee credits has been revised for improved clarity, including outlining the requirements and calculation methodology for fee credits, and allowing unused credits to roll over to future projects or be transferred to other properties within Victorville, subject to City approval.
Finally, an annual review of the Capital Improvement Plan allows the City to remove projects that have been completed, update estimated project completion time frames and budget estimates and add new eligible projects. The Capital Improvement Plan is a requirement for AB 602 and is made available on the City’s website.
This year, the Capital Improvement Plan (Exhibit C to Resolution Nos. 25-086 and VWD- 25-002) has been updated for 2026 to include the following projects:
Old Town Walking Loop
Park Lighting Enhancements
Roadway Project on Mojave Dr.
Traffic Signals on Mojave Dr. and on Ridgecrest Rd.
1 Million Gallon Water Tank
Permanent Water Rights
City Hall Capacity Improvements
Fire Station Capacity Improvements
Fire Department Standard of Cover
Additionally, the total estimated costs for the following projects have been increased to reflect updated project estimates: the Civic Plaza Park & Police Station, various traffic signal installations, and the pipeline in Area 28 – Turnout #5. Finally, as projects are completed, they are removed from the Capital Improvement Project list. This year completed projects were removed from the following sections: Parks & Recreation, SCLA Roadway Projects, and Citywide Traffic Signals.
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Staff recommends that the City Council and the Victorville Water District Board of Directors adopt Resolution Nos. 25-086 and VWD-25-002, adopting an updated Master Fee Schedule for DIF and Capacity Charges, the associated updated Capital Improvement Plan, and City Council Policy No. CP-25-01 establishing updated guidelines for implementation of said DIF and Capacity Charges, and superseding City Council Policy No. CP-24-05.
Staff are available for any questions the Council or Board may have.
Prepared By:
Alex M. Garcia, Management Specialist
Attachments: A. Resolution No. 25-086
B. Resolution No. VWD-25-002