Impact fees, as the name suggests, are intended to help pay municipal costs that arise as an impact of development. The precise relationship between impact fees and those costs, however, has long been debated. In California, the appellate court recently addressed this issue in the case Homebuilders Association of Tulare/Kings Counties, Inc. v. City of Lemoore, 2010 Cal. App. LEXIS 859 (Cal. Ct. App. 2010).
In the City of Lemoore case, the local building association challenged several impact fees imposed by the City for various purposes, including parks and recreation, police, public safety, municipal facilities, solid waste and fire protection. The court upheld all of the fees except certain of the fire protection fees. Unlike the other fees, the fire protection fees assessed on property located in the City's east side were being levied on property that already had been substantially developed, and to reimburse the City for facilities that already had been constructed. The court held that such fees had been imposed for general revenue purposes, and were therefore invalid.
Notwithstanding the invalid fire protection fees, this case otherwise reinforces the validity of impact fees as a method by which California municipalities can compel developers to help finance certain infrastructure associated with a development. For larger projects, developers can sometimes negotiate a more favorable financing structure, utilizing public financing tools such as development agreements, tax sharing agreements and special assessment districts or Mello-Roos community facilities districts. Nevertheless, impact fees continue to increase in popularity in California and across the nation and represent a critical consideration when assembling a development financing package.
Goodwin Procter LLP is one of the nation's leading law firms, with a team of 700 attorneys and offices in Boston, Los Angeles, New York, San Diego, San Francisco and Washington, D.C. The firm combines in-depth legal knowledge with practical business experience to deliver innovative solutions to complex legal problems. We provide litigation, corporate law and real estate services to clients ranging from start-up companies to Fortune 500 multinationals, with a focus on matters involving private equity, technology companies, real estate capital markets, financial services, intellectual property and products liability.
This article, which may be considered advertising under the ethical rules of certain jurisdictions, is provided with the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin Procter LLP or its attorneys. © 2010 Goodwin Procter LLP. All rights reserved.
We operate a free-to-view policy, asking only that you register in order to read all of our content. Please login or register to view the rest of this article.