Fees and Exactions
Government Code Section 65583(a) requires “An analysis of potential and actual governmental constraints upon the maintenance, improvement, or development of housing for all income levels…including…fees and other exactions required of developers, and local processing and permit procedures…”.
Housing development is typically subject to two types of fees or exactions:
- Permit processing fees for planning and zoning.
- Impact fees or exactions, imposed to defray all or a portion of the public costs related to the development project.
These fees and exactions can impact the cost and feasibility of developing the housing as well as its affordability. They can also involve issues of private property rights. High planning and site development fees can impact property owners’ ability to make improvements or repairs, especially for lower-income households. Development projects are subject to fees and exactions from a growing number of public entities, ranging from special districts to regional agencies. In order to create a viable development proposal, it is important to estimate the cumulative amount of fees to which the housing development will be subject. (Information about the city or county’s fees and exactions is among the most critical.) For both processing fees and impact fees, state law specifies procedural and nexus requirements:
- Government Code Section 66020 requires that planning and permit processing fees do not exceed the reasonable cost of providing the service or impact, unless approved by the voters; agencies collecting fees must provide project applicants with a statement of amounts and purposes of all fees at the time of fee imposition or project approval.
- Government Code Section 66000 et. seq. (Mitigation Fee Act) sets forth procedural requirements for adopting and collecting capital facilities fees and exactions, and requires they be supported by a report establishing the relationship between the amount of any capital facilities fee and the use for which it is collected.
Requisite Analysis
- Identify and analyze permit processing and planning fees, and development and impact fees and exactions and how they have been established relative to the above statutory requirements, including any in-lieu fees.
- Identify exactions such as land dedication requirements (e.g. streets, public utility and other right-of-ways, easements, parks, open space, etc.) and other exactions imposed on development.
- Describe other sources of public finance used to balance development fees assessed for individual projects. Estimate and analyze total development fees imposed by the city/county by unit type, such as typical single family and multifamily development and total cost of fees.
- Include information on how fees are collected (e.g. at the beginning of the approval process, at the time of building permit issuance, or deferred until the project receives certificate of occupancy).
- Identify any policies or efforts to moderate high-fee impacts for housing for lower-income households, such as fee waivers, fee deferrals, streamlined fee processing, and consolidated fee schedules.
Topics to Consider in Analyzing Fees and Exactions
As the market conditions and circumstances affecting a jurisdiction’s fee structure vary, the analysis should consider a variety of factors to determine the extent to which fees pose a constraint to housing. In the analysis of fees, the jurisdiction could consider the following factors:
- Funding mechanisms for capital improvement plans. If the financing of major capital facilities is reliant predominantly on the collection of developer fees, other mechanisms to finance part of these improvements such as development of special districts, or leveraging federal, State and local programs could be considered.
- Analyzing of fee trends. The analysis could examine the amount and rate of cumulative development fee increases over the past five to ten years.
- Identifying the most recent nexus study on which the fees are based. Factors in the analysis could include the date/relevancy of the most recent study, and what fees were examined.
- Analyzing whether the fee structure incentivizes effective use of services and compact development. For example, are there differentials for different locations or sizes of housing units within the jurisdiction?
- Examining affordable housing development trends. Determine whether local affordable housing builders are developing within the jurisdiction and whether the amount of fees and exactions are constraining their development decisions or income targeting of affordable housing development.
- Estimating fees as a portion of overall housing development cost. Should the analysis show that fees are a significant portion of overall development cost, this could indicate that fees are posing a constraint to the development of housing. Typically, 10-15 percent of development costs are considered typical. However, this percentage might shift up and down depending on land and construction costs and other factors related to the actual development of housing.
- Comparing surrounding jurisdictions. Are housing development fees in the community competitive with the fees being assessed by neighboring jurisdictions?
Inclusionary Ordinance
Like other ordinances related to the development of housing, the housing element must include a description and analysis of the inclusionary framework. For example, the housing element should describe the types of incentives the jurisdiction has or will adopt to encourage and facilitate compliance with inclusionary requirements, what options are available for developers to meet affordability requirements, how the ordinance interacts with density bonus law, the amount of any in-lieu fee, and what finding a developer must make in order to choose to pay the in-lieu fee. If the jurisdiction has established a housing fund to collect any in-lieu fees, the housing element should describe the total amount available for housing production and any planned uses for the funds.
The following are sample tables help organize critical fee and exaction information. The information provided in the tables should be tailored to the jurisdiction and followed by appropriate analysis. (Note: These sample tables are not intended to be a substitute for addressing the analytical requirements described in the statute.)
| FEE CATEGORY | FEE AMOUNT | |
|---|---|---|
| Planning and Application Fees | Single-Family | Multifamily |
| SUBDIVISION | ||
| ENVIRONMENTAL | ||
| IMPACT | ||
| Annexation | ||
| Variance | ||
| Conditional Use Permit | ||
| General Plan Amendment | ||
| Zone Change | ||
| Site Plan Review | ||
| Architectural Review | ||
| Planned Unit Development | ||
| Specific Plan | ||
| Development Agreement | ||
| Other | ||
| Certificate of Compliance | ||
| Lot Line Adjustment | ||
| Tentative Tract Map | ||
| Final Parcel Map | ||
| Vesting Tentative Map | ||
| Other | ||
| Initial Environmental Study | ||
| Environmental Impact Report | ||
| Negative Declaration | ||
| Mitigated Negative Declaration | ||
| Other | ||
| Police | ||
| Fire | ||
| Parks | ||
| Water and Sewer | ||
| Sewer Hook-up | ||
| Solid Waste | ||
| Traffic | ||
| Flood | ||
| School | ||
| Special District | ||
| Habitat | ||
| Other | ||
| TOTAL | ||
| Estimated proportion of total development cost | ||
| PROPORTION OF FEE IN OVERALL DEVELOPMENT COST FOR A TYPICAL RESIDENTIAL DEVELOPMENT | ||
|---|---|---|
| Development Cost for a Typical Unit | Single-Family | Multifamily |
| Total estimated fees per unit | ||
| Typical estimated cost of development per unit | ||
| Estimated proportion of fee cost to overall development cost per unit | ||
Nexus Requirements
State law requires establishment of a nexus between the projected development impacts and the public facilities for which impact fees are imposed. Government Code Section 66001(a) of the Mitigation Fee Act (Section 66000-66025) requires that any city or county that establishes, imposes, or increases a fee as a condition of development approval do all of the following: (1) identify the purpose of the fee, (2) identify the use to which the fee is to be put, (3) determine how there is a reasonable relationship between the fee’s use and the type of development project on which the fee is imposed, and (4) determine how there is a reasonable relationship between the need for the public facility and the type of development project upon which the fee is imposed.
Government Code Section 66001(b) further requires the locality to determine whether there is a reasonable relationship between the specific amount the fee imposed and the costs of building, expanding, or upgrading public facilities. Such determinations, also known as nexus studies, are made in written form and must be updated whenever new fees are imposed or existing fees are increased.
The Mitigation Fee Act also requires jurisdictions to segregate fee revenues from other municipal funds and requires the local agency to make certain enumerated findings with respect to any funds remaining unexpended, whether committed or uncommitted, within five years of the original deposit and every five years thereafter. If the findings are not made as required by the Act, the local agency is mandated to refund the moneys in the fund in accordance with the Act. Any person may request an audit to determine whether any fee or charge levied by the city or county exceeds the amount reasonably necessary to cover the cost of the service provided (Government Code Section 66006(d). Under Government Code Section 66014, fees charged for zoning changes, use permits, building permits, and similar processing fees are subject to the same nexus requirements as development fees. Lastly, under Government Code Section 66020, agencies collecting fees must provide project applicants with a statement of the amounts and purposes of all fees at the time of fee imposition or project approval.
Helpful Hints
Information regarding the impact of local fees and total typical development costs can be found by contacting local for- and nonprofit developers. In addition, affordable housing developers can provide insight related to the timing of fee payments and strategies to reduce the overall effect of fees on the cost and supply of housing. Examples include mitigating school impact fees for senior housing or deferring fees until financing is in place for affordable housing.