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Important Updates to Level 1 Development Impact Fees

  • February 24, 2022

February 24, 2022

School districts are authorized to levy a fee against certain residential and commercial construction within the boundaries of the district, for the purpose of funding the construction or reconstruction of school facilities necessitated by that development. (Ed. Code, §17620(a)(1).) Statutory school impact fees, commonly known as “Level 1” fees, are adjusted for inflation every two years by the State Allocation Board (SAB). The SAB has increased Level 1 fee amounts for 2022, and in addition, AB 602 (Grayson) imposes new content and procedural requirements on fee justification studies.

On February 23, 2022, the SAB authorized an increase in the maximum Level 1 fee per square foot of construction as follows:

• Residential Construction: School districts may now charge up to $4.79 per square foot of assessable space of new residential construction.

• Commercial/Industrial Construction: School districts may now charge up to $0.78 per square foot of chargeable covered and enclosed commercial/industrial space.

The new amounts reflect a 17.45% increase over existing rates of $4.08 and $0.66 per square foot.

All school districts may adopt up to the maximum authorized Level 1 fees if justified. Unified school districts may collect the full Level 1 fee amounts, while non-unified school districts share the total maximum amount of justified Level 1 fees pursuant to a fee-sharing agreement.

School districts must take specific action to make the fee increase applicable within their districts. To take advantage of the increase, each school district should act now and follow the statutory process to adopt the increased Level 1 fees.

A school district must prepare or update its fee justification study to establish that a nexus exists between the amount and types of development in a school district and the need for additional school facilities to house students generated by development. A fee justification study must:

• Identify the purpose of the fees;
• Identify the use(s) to which the fees will be put;
• Determine whether a reasonable relationship exists between the fee’s use and the type of development project on which the fee is imposed; and
• Determine whether a reasonable relationship exists between the need for school facilities and student growth resulting from the forms of development on which the fee is imposed.

AB 602 has imposed some new content standards on fee justification studies and notification requirements so districts are advised to work closely with counsel and their fee consultant to ensure that the new standards are properly addressed. Per AB 602, a fee justification study must be updated at least every 8 years, but we recommend more frequent updates to ensure that Level 1 fees remain continuously in place and justified.

Level 1 fees generally become effective sixty (60) days after the governing board’s adoption of the resolution approving the fee increase, unless it is adopted on an urgency basis within limited circumstances.

Note that the SAB fee increase applies only to the Level 1 fees that are authorized by Education Code section 17620, et seq., and Government Code section 65995 et seq. The increase does not affect Level 2/Level 3 fees authorized by Government Code section 65995.5, et seq., which are alternative fees specifically calculated by each school district to yield a per square foot fee in excess of the Level 1 fee amounts. Level 2/Level 3 fees, which are beyond the scope of this bulletin, may be adopted by a school district if certain statutory conditions are met. They must be recalculated annually, and may only be imposed on residential construction.

Later this Spring, we’ll be releasing our updated 2022 edition of the DWK Developer Fee Digest, a comprehensive guide to school district development impact fees. Contact a DWK attorney in our Business, Property and Construction Practice Group if you would like us to provide you with a complimentary copy once published, or if you have questions about adopting school impact fees.

PRACTICE AREAS
  • Business and Property
  • Construction

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