UNDERSTANDING HOW TO MAXIMIZE YOUR FEES SCHOOL FACILITY FEES UNDERSTANDING HOW TO MAXIMIZE YOUR FEES

UNDERSTANDING THE BASICS Allowed by SB50 and Ed. Code 17620. Allows school districts to collect fees for new development, renovations, and reconstruction to mitigate impact. Different levels require different items to be prepared.

UNDERSTANDING FEE LEVELS Level 1 - Minimum amount allowed to be collected set by statute and adjusted by SAB. Level 2 - Increased fees allowed to be collected based on meeting certain criteria. Level 3 - Only allowed if SAB finds that funds are no longer available [Has never happened].

UNDERSTANDING LEVEL 1 FEE Conduct Fee Justification Study Ed. Code §17621 Collect Level 1 Fee prior to issuance of building permit: Residential - $3.48 per sq. ft. Commercial/Industrial - $0.56 per sq. ft. (updated in January 2016) Ed. Code §17620 & Govt. Code §65995

SPENDING LEVEL 1 FEE Cost of fee justification study or needs analysis. Reimburse administrative costs related to collection of developer fees up to 3% of Level 1 Fees collected in given fiscal year. Finance construction and reconstruction of school facilities. (Ed. Code § 17620(a)(3).) GC 66001(g) Not for “deficiencies”

Can I “Refurbish”? GC 66001 paragraph (g) say, in part, “A fee… may include the costs attributable to the increased demand for public facilities reasonably related to the development project in order to (1) refurbish existing facilities to maintain the existing level of service or (2) achieve an adopted level of service that is consistent with the general plan.”

UNDERSTANDING FEE JUSTIFICATION STUDIES Identify the purpose of the fee; Identify the use to which the fee is to be put; 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; Determine how there is a reasonable relationship between the need for the public facility and the type of development on which the fee is imposed. Commercial/Industrial Fees require additional procedures (Ed. Code § 17621(e).)

UNDERSTANDING LEVEL 2 FEE District makes “timely application” to SAB for new construction funding and is determined by SAB to be eligible for new construction funding Govt. Code §65995.5(b)(1) Does District qualify to collect Level 2 Fee? Govt. Code §65995.5 Adopt school facilities needs analysis Govt. Code §65995.5(b)(2) Satisfy two of the four Level 2 Fee requirements Govt. Code §65995.5(b)(3) Steps to Qualify

LEVEL 2 FEE REQUIREMENTS Bond election with 50% + 1 vote. Bonded indebtedness equal to 15% of local bonding capacity. 20% of teaching stations are relocatables. School Facility Needs Analysis.

SPENDING LEVEL 2 FEE Only to finance school facilities identified in the needs analysis. Level 1 Fee may be deducted from the Level 2 Fee to determine amount of funds for administrative costs.

UNDERSTANDING SCHOOL FACILITIES NEEDS ANAYLSES (SFNA) Districts have the option of adopting Alternative School Facility Fees. Each district adopts its own Level 2 Fee. Preparation requirements differ significantly from Fee Justification Study. (See Gov’t. Code §§ 65995.5 & 65995.6.) Alternative School Fees are calculated individually for each school district and apply solely to residential construction in the district. Level 2 Fees amount to fifty percent of a school district’s school facility costs.

ITEMS TO INCLUDE IN THE SFNA Costs of school facilities (by level, elementary, middle, high). Cost per student. Cost per dwelling unit using historical generation factor and cost per square foot. Factual discussion to serve as basis for satisfying two of the four statutory requirements. Analysis of historical student generation factor of new residential dwelling units constructed in the previous five years.

Determination of probable dwelling units by type in the next five years. Identify and consider existing or unused seating capacity by looking at current enrollment. Identify and consider any surplus sites as well as any local sources other than fees, charges and dedications imposed on residential construction which are available for school purposes. The amount of local funds dedicated to needs from new development must be subtracted from the calculated grant amounts. Include a section which sets forth the actual school facility costs.

MAXIMIZING LEVEL 2 FEE Get a good consultant Carefully review SFNA Discuss potential grant enhancements Include Legal Counsel Use Best / Most up–to–date information available Particularly site acquisition information

UNDERSTANDING LEVEL 3 FEE State funding not available Govt. Code §65995.7(a) SAB declares state funds insufficient Govt. Code §65995.7(a) School district has adopted Level 2 Fees Govt. Code §65995.5

UNDERSTANDING HOW TO ACCOUNT FOR FEES Maintain separate account for developer fees. Segregate amount attributable to each fee. Level 1 Fee or Level 2 Fee. Commercial fees. Mitigation payments per agreements or cfd.

REPORTS Annual – year end report Govt. Code Section 66006. Applies to each account established to finance public improvements. Findings must be made within 180 days after last day of fiscal year (December 27, 2010).

5 YEAR REPORT GOVT CODE SECTION 66001(d). Fees levied and unexpended in 5th fiscal year following the first deposit into the developer fee fund and every 5 years thereafter. (which means each year a ‘new dollar’ turns 5, thereby the need for a 5-Year Report annually as well). 1988/89 (first deposit). 1993/94 (5th fiscal year). 1998/99 (5 years thereafter). 2003/04 (5 years thereafter). 2008/09 (5 years thereafter).

Board must review annual and five–year report at a regularly scheduled meeting not less than 15 days after the report is made available to the public. Notice requirements. Mail notice 15 days before meeting to anyone who filed written request.

Must be made available to public within 180 days after end of fiscal year. December 27, 2010. Plan on beginning preparation process no later than October to ensure compliance.

Information to report: Description of type of fees collected; Amounts that may be collected; Beginning and ending balances; Total amounts collected and interest earned. Detailed information relating to each project on which Fees were expended. Percentage actually funded by Responsible Fees for project; Descriptions of any inter–fund transfers or loans; Amount of any refunds made. Information should be obtained from the internal business records. Keep separate file of this information; File should include all relevant information to assist in making required findings.

UNDERSTANDING HOW TO INCREASE FEES Increase in Fees due January 2010 (actually remained the same) Update Fee Justification Study. Conduct Public Review Period. Make available to public 10 days before Public Hearing. Applicable mailing, posting, and publishing notice requirements must be met. Recommend scheduling Public Hearing in mid–February. After the Public Hearing and Governing Board adopts a Resolution and Fee Justification Study, statutory fees do not take effect for 60 days unless urgency resolutions are adopted. Up to two urgency resolutions may be adopted which provide interim authorization for the adopted Fees for 30 days per urgency resolution.

UNDERSTANDING THE PROPER EXPENDITURE OF FEES Section 17620(a)(3) states fees cannot be used for: Regular maintenance Routine repair of facilities Inspection, sampling, analysis, encapsulation, or removal of asbestos–containing materials Except where incidental to construction or reconstruction in which the expenditure of fees is not prohibited Deferred maintenance Described in Section 17582

FLEXIBILITY. Education Code Section 17620(a)(5) allows paying cost to perform needs analysis Described in Govt. Code 65995.6. Allows 3% fees for reimbursement of administrative costs. 3% can only be calculated against Level 1 Fees collected. Not allowed for Level 2 or 3 Fees collected. If you are considering spending developer fees on something other than the actual allowances noted in Code, we recommend discussing the idea with legal counsel.

UNDERSTANDING YOUR ALTERNATIVES Negotiate a mitigation agreement Acquiring school sites Use of CFD to increase mitigation payment