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A Discussion of Development Impact Fees

On September 8th of this year, I had the opportunity to attend the League of California Cities annual conference as a speaker. I’m kind of a one-trick pony, so needless to say, the topic was about development impact fees. The panel was put together by Marco Martinez with Best, Best and Krieger, LLP, and was rounded out with Anita Gutierrez, the Community Development Director for the City of Pomona. Our topic was “AB 602, An Essential Breakdown for Development Impact Fee Programs”.

Our approach was:

Scott: The process/information required to calculate impact fees.

Marco: Legal requirements for/after adoption of impact fee calculations.

Anita: What City staff has to do when the DIF consultant is done.

I started out by outlining what makes a good DIF calculation report, which is primarily a solid land-use database indicating the amount of development expected by the General Plan to indicate future added demands and a plan for accommodating these added demands. I honestly felt a little shaky starting out because I never want to underestimate the audience's understanding of impact fees. I followed up with the factors that must be considered in doing an update of an initial calculation (completed projects, fund balance, outstanding DIF credits, and a new land use database).

Marco then dove headlong into the new requirements established by AB 602. Most of these are largely City website noticing requirements after adoption, such as posting your calculation report (and yes now you ARE required have to have such a report to adopt such fees), your DIF fee schedule, and lastly that the DIF fees must be updated every eight years. The last requirement would practically require you begin an update at about seven years to get that report done in time.

There was discussion about the AB 602 statement that residential impact fees based upon square feet will be assumed to be valid. However, AB 602 offers an opportunity to make findings supporting residential fees calculated per unit. This was covered in my June 2022 article, so I won’t revisit that discussion.

Anita then covered the process from the City staff’s perspective, after a new Report indicated it should be about 17 times higher than Pomona’s extremely old existing impact fee of $1,125 per detached dwelling. Or the “what to do when the consultant” is done portion of the effort and the full increase could have some negative impacts on the City.

Anita additionally discussed the need for educating other City staff to make sure they fully understand the relevance of the impact fee process: imposition/collection, accounting, and ultimate use. Needless to say, the finance staff needs to know when to allow impact fees to be used. I often get calls from finance staff in cities where I have completed DIF work that want to make sure that the request to use impact fee receipts on a desired item or project was included in the calculation. They aren’t always.

Then, for me, the real fun started, QUESTION and ANSWER time. A question indicates what that person needs to know that we did not cover or not well enough. We fielded about a dozen very cogent questions. In the end I think the roughly 200+ attendees, including both staff members and elected officials, appreciated our efforts and a number came up to the stage afterwards with additional questions. It was good to see some past clients stop by also.

I enjoyed the experience very much and I feel that it was beneficial to many. My thanks to Marco for putting the panel together and to Anita for her perspective from a staff viewpoint. Even I learned from the other panel members.

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