Suspension of Level 3 Developer Fees Expires
On June 27, 2012, the Governor signed Senate Bill (SB) 1016, which in part amended Government Code section 65995.7 to make the authorization for “Level 3” developer fees inoperative through December 31, 2014, regardless of the status of state funding, except under two circumstances. With the Legislature failing by August 31, 2014, to place a statewide school facilities bond on the November 4, 2014 statewide general election ballot, the second such circumstance occurred, resulting in the expiration of the existing suspension of Level 3 fees as of September 1, 2014.
Under the Leroy-Greene School Facilities Act of 1998, commonly known as SB-50, school districts have been able to levy a fee per square foot of development (commonly called a “Level 1″ fee), so long as sufficient justification exists to support that fee. The current Level 1 fees are $3.36 for residential development and $0.54 for commercial. For school districts that meet certain criteria, a “Level 2″ residential fee may be imposed that can be higher than the Level 1 fee, based on a specific statutory formula. The Level 2 fee is unique to each school district and must be supported by a school facility needs analysis (SFNA) and re-authorized annually. In concept, Level 2 fees are the equivalent of what the state assumes will total 50% of the cost of providing facilities for students from new development. The other 50% was to be funded by the state through SB-50.
SB 50 also resulted in the passage of Government Code section 65995.7, pursuant to which school districts eligible for Level 2 fees may also be eligible for Level 3 fees if the State Allocation Board (SAB) certifies that state funds for new school facility construction are no longer available. Level 3 fees are intended to be the equivalent of 100% of the cost of school facilities for new development. If and when state bond funds again become available for facilities, the difference between the Level 2 and Level 3 amounts is to be refunded either to the state or to developers. Thus, Level 3 fees represent a gap filler for when the state is unable to match its share of the cost of facilities for new development.
Prior to school districts’ imposing Level 3 fees, Government Code section 65995.7(a)(1) requires that the SAB must make the determination that state funds are no longer available, and then notify the Secretary of the Senate and the Chief Clerk of the Assembly, in writing, of that determination and the date when state funds are no longer available for publication in the respective journal of each house.
We will be closely monitoring any actions which the SAB may be taking going forward, and will advise you if and when any such action is likely to be taken finding that state funds are no longer available. If you have questions or need further information on changes in public works project labor compliance, please contact this office.