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Impact Fee Ruling to Have Little Effect in Santa Monica


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By Jorge Casuso

April 17, 2024 -- A U.S. Supreme Court ruling Friday that paves the way for developers and builders in California to challenge "impact fees" will have little effect in Santa Monica, according to local land use experts.

In the 9-0 decision, the court found that the fees imposed by cities to pay for public improvements could be unconstitutional if they make up an "unfair" share of the public projects.

While the ruling could have major repercussions in cities across the state that charge sometimes exorbitant fees, Santa Monica is not among them, local land use attorneys said.

"Cities in the South Bay have some fees that are obscenely high, rendering them more susceptible," said Dave Rand, a land use attorney who represents Santa Monica's biggest housing developers.

"Santa Monica's fees are not that out of whack," Rand said. "I don't think this will result in any impact in Santa Monica, at least in the immediate term."

A longtime local land use attorney, who spoke not for attribution, concurred.

"This may not have a practical effect on Santa Monica," the attorney said. "Most developers don't challenge impact fees."

Some state officials worry high fees can hamper a developer's ability to build much-needed housing, especially in the current market when interest rates are high, construction costs soaring and profit margins tight.

The amount of the fees can range widely, according to the office of State Senator Scott Wiener, who is sponsoring SB 937, a measure that would delay payment of impact fees until an occupancy permit is issued.

Los Angeles reports a multifamily development fee of $12,000 per unit, while Fremont reports $75,000, Wiener's office said.

"The state contains more than its share of cities charging high development fees, with the six jurisdictions charging the highest recorded fees in the nation all located in California," the Senator's staff said in a press release this week.

Since Prop 13 limited property taxes in 1978, California cities have increasingly relied on development fees to bankroll public improvements that include everything from building roads to upgrading sewers.

Santa Monica charges impact fees for child care, transportation, parks and recreation, affordable housing and water demand.

The ending fund balance for the City's five impact fees totaled $22,269,038 for the fiscal year ending in June 2023.

While developers don't often challenge impact fees, it was a homeowner whose case was heard by the nation's highest court.

The El Dorado County plaintiff, George Sheetz, faced a $23,420 "traffic mitigation fee" for putting an 1,800-square-foot manufactured home on his property.

"When they told me the cost when I went down to get the permit, I was in shock and I said, 'I did not budget for this,'" Sheetz told CBS Sacramento.

"What they're saying is me putting this house here is impacting the roads and therefore, they need to charge this money," Sheetz said.

While Friday's court ruling paves he way to challenge unfair fees, the justices did not spell out when a fee is unconstitutional or unfair.

The Court's ruling, Justice Brett Kavanaugh noted in a one-paragraph opinion, “does not address or prohibit the common government practice of imposing permit conditions, such as impact fees, on new developments through reasonable formulas or schedules that assess the impact of classes of development rather than the impact of specific parcels of property.”

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