For nearly seven years, the controversy over school impact fees has appeared to be an issue of the past. However, skirmishes have broken out in Merced County that could presage an end to the statewide peace regarding school fees.

Since last year, city and school officials in Los Banos have forced developers to sign agreements calling for fees of about $14,000 per house - more than triple the “level one” fees permitted by a state law. Now, other districts in Merced County are demanding higher fees. At least two districts that did not get more money from developers have filed California Environmental Quality Act (CEQA) lawsuits that contend impacts to schools have not been mitigated. They are similar to lawsuits that were common during the 1980s and 1990s, but which a 1998 compromise sought to end.

Still, development industry officials say the conflicts in Merced County, and especially in Los Banos, are exceptions. California Building Industry Association lobbyist Richard Lyon said that the SB50/Proposition 1A compromise from 1998 remains in full effect. Under the compromise, school backers accepted a statutory cap on local impact fees and a suspension of case law precedents favoring school districts in exchange for builders' support of statewide school bonds (see CP&DR, September 1998).

Lyon said Proposition 1A and two subsequent school bonds, combined with SB 50 school impact fees, have provided tens of billions of dollars for school construction. But some school districts complain that the fees allowed under SB 50 are inadequate to pay for new schools. The cap currently is $2.24 per square foot for new houses, unless school districts meet criteria to charge “level two” fees, which vary from district to district but average approximately $4 per square foot.

“The school districts in Merced County do not embrace the statutory scheme in effect regarding schools fees,” said Steve Madison, executive vice president of the Building Industry Association of Central California.

The Los Banos Unified School District has been at the forefront of the fight. With relatively inexpensive real estate and many greenfield development sites, Los Banos has become a relief valve for Bay Area growth pressure - even though the commute to Silicon Valley can take two hours. The population of Los Banos has more than doubled in 15 years to about 32,000, and numerous giant subdivisions are planned.

Shortly after first winning office in 1994, Los Banos Mayor Michael Amabile helped put together an ordinance that required builders to get school district approval for new housing projects. Those sorts of “negotiations” were supposed to have ended with SB 50, but Amabile calls SB 50 an “inferior law.”

“It's really been a heated issue for about three years now. In the last 18 months, there has been a lot of progress made toward implementing a fee that will mitigate the impacts to schools,” Amabile said.

Amabile marks as progress the mitigation agreements that seven developers have signed with Los Banos Unified calling for extraordinary fees. Ranchwood Corp., for example, agreed to pay $14,000 per home for a 2,700-unit project. Anderson Homes agreed to pay $5.25 per square foot and to place its 1,800 planned houses in a community facilities district that will levy a $300-per-year tax for schools.

“SB 50 doesn't really work for building schools,” said Los Banos Unified Superintendent Paul Alderete. The district's student population doubled during the 12 years from 1992 to 2004, and is projected to double again by 2020. Alderete contended that even level two fees are inadequate to meet the district's needs. The district's five elementary schools are already on a year-round calendar, the district has 165 portable classrooms, and the junior high is scheduled to go to year-round sessions in 2006-07.

“What is boils down to is, who should pay?” Alderete said. “In this community, there's a feeling that growth should pay its own way.”

However, ballot measures aimed at taxing growth have failed twice recently. In May, Measure A1 received about 66% of the vote - just short of the two-thirds required. The measure would have set up a Mello-Roos district for the entire 620-square-mile school district. Homebuilders would have had to pay about $13,600 per unit, and new homeowners would pay an additional $339 annually. Owners of existing homes would have paid a $50 annual tax. A similar measure lost in 2003.

Alderete, who said building industry representatives were partly to blame for Measure A1's loss, said district officials are regrouping. “We're not going to build any faster unless we have more money. Until we can build schools to match the growth of the community, it will be harder to market new homes,” he said.

Both Lyon and Madison argued that Los Banos Unified could build schools cheaper than it does. Madison said that developers have signed mitigation agreements with Los Banos Unified only because the city was willing to hold up project approvals.

Amabile said the city never threatened to stop a project, but he noted that talk of a growth control initiative or moratorium has been in the background.

“In the real world, those developers need us,” Amabile said. “It may not be just for the tentative map that's before us. They need us on their side.”

Not every developer has been willing to pay extra, however. Industry giant KB Homes has not signed an agreement, and a much smaller developer who took over a 34-unit townhouse project in June called the district's demand for $15,000 per unit “extortion.”

Demands for higher fees have spread elsewhere in Merced County. In June, Merced Union High School District and Merced City School District signed an agreement with Lakemont Homes regarding a 520-house project near the new University of California campus. Lakemont agreed to pay about $16,000 per unit to the districts.

In Atwater, Merced Union High and Atwater Elementary school districts have sued the city over approval of a 1,600-unit project proposed by Florsheim Homes. The CEQA lawsuit contends that the approximately $3.25 per square foot that Florsheim would pay in level two fees would not mitigate the impact on schools. The district said fees of about $8 per square feet are needed, and rejected Florsheim's offer of $4.50 per square foot.

However, $4.50 per square foot was the amount that Livingston Union Elementary School District accepted in negotiations with Del Valle Homes for a 500-unit divisions. Del Valle also agreed to give teachers priority for the affordable homes in the project.

Contacts:
Michael Amabile, mayor, Los Banos, (209) 827-7000, extension 30.
Paul Alderete, Los Banos Unified School District, (209) 826-3801.
Steve Madison, Building Industry Association of Central California, (209) 529-4531.
Richard Lyon, California Building Industry Association, (916) 443-7933.