This case involves a developer’s challenge to the City of Alameda’s (City) development impact fee ordinance, based on the argument that the proposed fees for park facilities lacked a reasonable relationship to the burden of future development and therefore violated the Mitigation Fee Act. [Boatworks, LLC v. City of Alameda, ___Cal.App.5th___, Case No. A151063 (1st Dist. May 15, 2019).]

Factual Background

In 2014, the City commissioned a development impact fee nexus study as the basis for fees the City later authorized as part of its updated development impact fee ordinance. The only part of the ordinance at issue in this case relates to parks and recreation. The ordinance included a finding that there was a reasonable relationship between the need for new and improved park and recreation facilities and the type of development on which the fee would be imposed, since new residents would use parks and recreational facilities throughout the City. The park impact fees were approximately $11,000 for single-family homes and $9,000 for multifamily units. Boatworks challenged the fee, alleging that the nexus study inflated the amount of parkland fees necessary to maintain current levels of service. The trial court agreed that the City’s ordinance violated the Mitigation Fee Act.

The California Court of Appeal’s Decision

The Mitigation Fee Act was passed in response to developers’ concerns that local agencies were imposing development fees for purposes unrelated to development projects. The Act requires the agency to:

“. . .identify the purpose of the fee,. . .dentify the use to which the fee is to be put,. . .determine how there is a reasonable relationshipbetween the fee’s use and the type of development project on which the fee is imposed,. . .[and]. . .determine how there is a reasonable relationshipbetween the need for the public facility and the type of development project on which the fee is imposed.” (Gov. Code, § 66001(a), italics added.)

In other words, facilities fees are justified only to the extent that they are limited to the cost of increased services made necessary by virtue of the development.

Here, the City already possessed most of the land needed for new park and recreation facilities, because some of these facilities would be on land the City acquired from the Navy at no cost. The City did not need to, nor did it plan to, use the fees to purchase new parkland; rather, it planned to use the fees to improve existing assets. Yet almost three quarters of the impact fee for parks and recreation was justified by the supposed cost of acquiring new land for parks (the nexus study estimated $28.5 million of the $39 million total). The court concluded that a fee based in significant part on costs the City would not incur, because it already had acquired ample land at no cost, does not have a “reasonable relationship to the cost of the public facility attributable to the development.”

However, the court did not read the Mitigation Fee Act so broadly as to prohibit the City from imposing fees to maintain its current level of service. The new residents would not only use new parks and fields, but would also use existing park facilities, which they did not pay to build. At the same time, they would also increase the demand on the City’s parklands; to the extent that new athletic fields and other facilities are necessary to maintain the existing level of service, the cost of building them is attributable to the increased demand from new residents, not to existing deficiencies in public facilities, as Boatworks argued.

Conclusion and Implications

It’s always critical that a local jurisdiction is able to prove an adequate basis for its fees. Otherwise, a challenge under the Mitigation Fee Act is likely to happen. Here, the City already owned most of the land it intended to develop into new park and recreation facilities. The court determined that this important fact meant the impact fee imposed by the updated ordinance was not reasonably related to the burden posed by anticipated new development because the City was charging fees above what it actually needed.

The opinion may be accessed online at:

https://www.courts.ca.gov/opinions/documents/A151063.PDF

(Nedda Mahrou)