On August 22, 2016, the court issued its ruling in the case of California Building Industry Association (CBIA) v. State Allocation Board (SAB), denying the CBIA’s request for a preliminary injunction to stop the SAB from taking further action to allow school districts to charge Level 3 school impact fees. The SAB can now complete its statutory process of notifying the California Legislature of its determination authorizing school districts to levy Level 3 fees.

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At its May 25, 2016 meeting, the SAB authorized school districts to impose Level 3 fees. However, within hours after the SAB made this finding, the CBIA filed a legal challenge against the SAB in Sacramento Superior Court, seeking a preliminary injunction, and the court issued a temporary restraining order (TRO) blocking the imposition of Level 3 fees until the court could decide whether the preliminary injunction was warranted. The court must evaluate two criteria when determining whether to grant a preliminary injunction: (1)　petitioner’s likelihood of success on the merits; and (2)　the relative harms to the parties if the injunction is issued.

The court heard the parties’ arguments at a hearing on July 22, 2016. The court issued a tentative ruling the day before the hearing and held that the CBIA could not prevail on the merits. Therefore, the arguments at the hearing focused on the SAB’s ability to meet the statutory requirement that state bond funds for the School Facility Program have been exhausted and that SAB could no longer apportion funds. The parties briefly discussed the relative interim harm to the parties. Two school districts, Dublin Unified and Fremont Unified, both represented by Dannis Woliver Kelley, and the City of Dublin participated in the hearing as amici curiae, literally “friends of the court,” in support of the SAB’s position. These are high—-growth school districts. The amici argued that the lack of sufficient facility funding from either developer fees or state bond funds are significantly impacting both school districtsthere are just not enough classrooms to accommodate the incoming students from the new developments in these communities.

After the hearing, the court took the matter under submission and the TRO remained in place.
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In its ruling on August 22, 2016, the court denied CBIA’s request for a preliminary injunction because it failed to prove any likelihood of success on the merits, and lifted the TRO. The court found that, by a plain reading of the relevant statutes, the SAB could not approve apportionments for new construction. Therefore it was appropriate for the SAB to make the finding that state funds for new construction are no longer available under Government Code section 65995.7. With the SAB’s determination, school districts currently charging, or eligible to charge, Level 2 fees may now charge Level 3 fees—-typically two times the amount of Level 2 fees. As a longstanding opponent of Level 3 fees, the CBIA is likely to appeal this decision, in addition to seeking to reinstate the TRO pending a determination from the Third District Court of Appeal. Districts preparing to levy Level 3 fees based upon this recent court ruling may want to consult with their legal counsel. We will keep you updated on the latest developments related to this case and the imposition of Level 3 fees.