Shapell Industries, Inc. v. Governing Board

CourtCalifornia Court of Appeals
Citation1 Cal.Rptr.2d 818,1 Cal.App.4th 218
Decision Date22 November 1991
Docket NumberNo. H006752,H006752
Parties, 70 Ed. Law Rep. 1148 SHAPELL INDUSTRIES, INC., Plaintiff and Respondent, v. GOVERNING BOARD OF THE MILPITAS UNIFIED SCHOOL DISTRICT, Defendant and Appellant.

Page 818

1 Cal.Rptr.2d 818
1 Cal.App.4th 218, 70 Ed. Law Rep. 1148
SHAPELL INDUSTRIES, INC., Plaintiff and Respondent,
No. H006752.
Court of Appeal, Sixth District, California.
Nov. 22, 1991.
Review Denied March 19, 1992.

Page 820

[1 Cal.App.4th 224] Joseph P. DiCiuccio, Harvey Levine, John T. Schreiber and Hallgrimson, McNichols, McCann & Inderbitzen, for defendant and appellant.

Schools Legal Defense Ass'n, Karen M. Steentofte, for amici curiae on behalf of appellant.

[1 Cal.App.4th 225] Steven M. Bernard, Elise M. Balgley and Bernard & Wood, for plaintiff and respondent.

BAMATTRE-MANOUKIAN, Associate Justice.

In 1987, the governing board of the Milpitas Unified School District passed two resolutions which authorized the levy of a "school facilities fee" of $1.50 per square foot on new residential development and $0.25 per square foot on new commercial and industrial development throughout the District. Developers were required to pay fees in those amounts to the District as a condition of obtaining a building permit. Shapell Industries, Inc., a developer, tendered payment under protest and brought suit against the District seeking invalidation of both resolutions and a refund of its money. The trial court issued a writ of mandate granting the requested relief and the District appeals from the judgment.

We will affirm in part and reverse in part. We affirm that portion of the judgment ordering a refund of all commercial and industrial fees collected pursuant to Resolution 87.12, finding that the District acted without any reasonable basis for imposing those fees. We reverse the judgment, however, insofar as it ordered a refund of all residential fees collected pursuant to Resolution 87.12. As to those fees we direct that the court instead order a partial refund to Shapell Industries, Inc., in compliance with Government Code section 66020, subdivision (e) (hereafter section 66020(e)), and in accordance with the views we express herein. Finally, we reverse the trial court's judgment invalidating Resolution 88.7, which imposed fees on commercial and industrial property only. We find that resolution to be valid and we therefore direct that the trial court enter judgment in favor of the District as to Resolution 88.7.


In the early 1970s, in the wake of increased resistance throughout California to rising property taxes, local governments found themselves faced with the task of devising new methods to finance construction of school facilities. A wave of residential development, causing serious overcrowding in local schools, contributed to the problem. (See, generally, Builders Assn. of Santa Clara-Santa Cruz Counties v. Superior Court (1974) 13 Cal.3d 225, 227-230, 118 Cal.Rptr. 158, 529 P.2d 582 (Builders Assn.); Candid Enterprises, Inc. v. Grossmont Union High School Dist. (1985) 39 Cal.3d 878, 881-885, 218 Cal.Rptr. 303, 705 P.2d 876 (Candid Enterprises ).)

[1 Cal.App.4th 226] In an effort to keep pace with the continuing influx of new students, local governments began the practice of imposing

Page 821

fees on developers to cover the costs of new school facilities made necessary by the new housing. Such "school-impact fees" were generally considered to be a valid exercise of the police power under the California Constitution (Cal. Const. art. XI, § 7), so long as the local entity could demonstrate a reasonable relationship between the fee imposed and the need for increased facilities created by the development. (Builders Assn., supra, 13 Cal.3d at p. 232, fn. 6, 118 Cal.Rptr. 158, 529 P.2d 582; Candid Enterprises, supra, 39 Cal.3d at p. 885, 218 Cal.Rptr. 303, 705 P.2d 876.)

In 1977, with the passage of Senate Bill 201 (The School Facilities Act, effective January 1, 1978), the Legislature specifically authorized cities and counties to enact ordinances requiring residential developers to pay fees to finance temporary school facilities necessitated by new development. In the preamble to the Act, the Legislature set forth its findings that "residential developments may require the expansion of existing public schools or the construction of new school facilities" and that "funds for the construction of new classroom facilities are not available when new development occurs, resulting in the overcrowding of existing schools." Therefore, "new and improved methods of financing for interim school facilities necessitated by new development are needed in California." (Gov.Code, § 65970.)

The School Facilities Act, as originally enacted, proved to be a stop-gap measure. (Candid Enterprises, supra, 39 Cal.3d at p. 882, 218 Cal.Rptr. 303, 705 P.2d 876.) In 1986 it was substantially revised and expanded with the passage of a comprehensive multi-bill package, addressing an identified $3.8 billion need for new permanent school facilities to meet the demands of an expanding population. The heart of this legislation, Assembly Bill 2926, consolidated the legal authority for assessment of developer fees for school facilities into a single body of law. It authorized the governing boards of the school districts themselves, rather than city councils or county boards of supervisors, to impose school-impact fees districtwide, subject to certain monetary limitations. (Gov.Code, § 53080, subd. (a), added by Stats. 1986, ch. 887, amended by ch. 888.) 1 No building permit would be issued for any development project within the District until the fees had been paid. (Gov.Code, § 53080, subd. (b).)

The limitations are set forth in Government Code section 65995, which specifies a maximum fee assessment level of $1.50 per square foot for [1 Cal.App.4th 227] residential construction and $0.25 per square foot for commercial or industrial construction, and provides for annual adjustments for inflation. (Gov.Code, § 65995, subds. (a) and (b)(3).)

Assembly Bill 2926 was intended to provide the exclusive method of raising local financing for permanent school facilities. 2 Funds raised pursuant to sections 53080 and 65995 would provide a "local match" for state funding from various sources. (Ed.Code, § 17705.5, added by Stats. 1986, ch. 887, p. 3076.)

The concerns expressed by the Legislature in 1977 were reiterated in its published findings in 1986. It found that "substantial development" in many areas of the state had resulted in "serious overcrowding in school facilities," that "the lack of availability of the public revenues needed to construct school facilities is a serious problem, undermining both the education of the state's children and the continued economic prosperity of California," and that a "school facilities finance program" was

Page 822

necessary "to ensure the availability of school facilities to serve the population growth generated by new development." Finally, the Legislature found that "the levying of appropriate fees by school district governing boards at the rates authorized by this act is a reasonable method of financing the expansion and construction of school facilities resulting from new economic development within the district." (Stats.1986, ch. 887, § 7(e), p. 3080.)

In anticipation of the passage of Assembly Bill 2926, which was to become effective January 1, 1987, school districts statewide, including the Milpitas Unified School District ("the District,") began accumulating data to evaluate local needs. On January 13, 1987, the governing board of the District (the Board) adopted Resolution No. 87.12. The resolution provided that no building permit could be issued within the District unless the builder first obtained a certificate of compliance from the District, evidencing payment of development fees in the amount of $1.50 per square foot in the case of residential development and $0.25 per square foot in the case of commercial or industrial development. 3

Resolution 87.12 contained certain findings which the Board stated were based upon evidence and testimony presented at a public hearing. It [1 Cal.App.4th 228] found that conditions of overcrowding existed in district schools due to new development, and that proposed development was anticipated to increase enrollment beyond the capacity of the District's facilities. And it found that fees in the maximum amounts allowable by state law were "reasonably related to the need for schools caused by the development."

At the time of this enactment, the Board had before it a staff report prepared by Robert Nicolai, its Director of Business and Administrative Services, entitled "Supporting Rationale for Developer Fee Implementation." That report in turn relied upon data obtained from three identified sources: 1) enrollment projection figures compiled by a consultant hired by the District, Morgan Woollett and Associates, 2) a report from the Milpitas City Planning Department regarding housing increases and general plan amendments, and 3) information from individual developers relating to their housing development schedules.

Nicolai's "Supporting Rationale" projected that by the year 2000, enrollment in the District would reach a total of 12,211 students, an increase of 4,410 students from the 1986 total of 7,801. He estimated total costs to accommodate the increased enrollment at $17,482,200. Based on the number of housing units expected to be built within the District to reach a building saturation point, Nicolai figured that approximately 7,135,500 square feet of new housing would be available to be assessed. That amount of square footage would have to be assessed $2.45 per square foot in order to finance the needed facilities. Since that exceeded the statutory maximum of $1.50 per square foot, Nicolai concluded that the maximum amount could be imposed. Furthermore, since there would be a substantial shortfall between the amount which could be collected on residential property and the total amount needed, he concluded the District was also justified...

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