Hours after the State Allocation Board (SAB) authorized school districts to impose Level 3 developer fees, the California Building Industry Association (CBIA) filed a legal challenge in Sacramento Superior Court.  On May 26, 2016, Judge Michael P. Kenny issued a temporary restraining order (TRO) blocking the imposition of Level 3 developer fees until the court decides whether a preliminary injunction should be issued.  A hearing to decide whether a preliminary injunction is warranted is scheduled for July 1, 2016.  The Attorney General must submit any opposition to the preliminary injunction by June 13, 2016.  The SAB is represented by the Attorney General’s office, however, school districts had no notice of, or representation at, the initial ex parte hearing.  CBIA, a longstanding and vocal opponent to Level 3 developer fees, is likely to appeal if the Court denies its request for a preliminary injunction, and may seek to preserve the TRO pending a determination from the Third District Court of Appeal.

As we reported yesterday, the SAB approved Level 3 developer fees pursuant to Government Code section 65995.7 after determining that state bond funds for the School Facility Program have been exhausted.  CBIA argued that a small fund set aside for seismic repair precludes the SAB’s finding that state funds have been exhausted, despite the lack of available funding for new construction or other purposes that has caused a growing backlog of unfunded projects.  With a bond initiative on the November ballot, CBIA is expected to fight to keep a TRO/injunction in place until the election.  Upon bond passage, CBIA could then argue that Level 3 developer fees are no longer warranted.

CBIA’s lawsuit raises questions and concerns for Districts in need of Level 3 developer fees, such as whether Districts may take measures now to position themselves to impose Level 3 fees immediately upon the defeat of a preliminary or permanent injunction.  Another question is whether Districts should seek to intervene in this action so the court can hear the perspective of school districts, especially with regard to the question of whether continuing the injunction will cause irreparable harm.  Districts with questions concerning the implementation of Level 2 or Level 3 fees, or who may wish to become involved in opposing CBIA’s lawsuit, should contact their legal counsel without delay.