The long-running feud over school impact fees was supposedly settled with passage of last year's SB 50 and subsequent approval by voters of Proposition 1A, a $9.2 billion school construction and rehabilitation bond. Some city and school officials, however, continue to argue that schools need more money from developers than allowed by SB 50, and a few cities appear openly defiant of the law. In Livermore, for example, homebuilders still pay more than double the SB 50 cap of $1.93 per square foot as part of an uneasy truce with the city. "If they didn't want to pay for the impacts of their development, then we weren't going to develop any more," Livermore Mayor Cathie Brown said recently. State lawmakers, builders and school supporters last year cut a deal in which builders agreed to back the bond measure in exchange for an impact fee limit of $1.93 per square foot on new homes. The legislation also attempted to clamp down on jurisdictions that ignored a previous impact fee limit. The law went so far as to state that payment of the $1.93-per-square-foot fee was "hereby deemed to be full and complete mitigation of the impacts … on the provision of adequate school facilities." Senate Bill 50 suspended for eight years the Mira, Hart, Murrieta court precedents that let cities reject developments on the basis of inadequate schools. The measure also prohibited the often-used tactic of forcing developers to join a Mello-Roos district to raise additional funds for school construction. Despite last year's deal, the issue is not settled. An analysis by the California Chapter of the American Planning Association states, "The bill was crafted mainly behind the scenes by the legislative leadership and contains vague language, technical problems and inconsistencies as a result. … [M]any issues will have to be addressed in follow-up legislation or court cases, since the new law does not provide clear direction in some cases, or any direction at all in others." However, Richard Lyon, senior legislative advocate for the California Building Industry Association, said people should let the new program run its course before tinkering with it. "One of the problems we have with cleanup legislation is that the program hasn't even been operating. What we've been arguing is that we need to let it operate, give it some breathing room for a couple of years before we know if cleanup is needed," Lyon said. While the new law makes clear that cities and counties cannot deny a project or require fees greater than $1.93 per square foot, questions remain over how to apply the California Environmental Quality Act. In many instances, school officials say $1.93 per square foot does not provide enough money to meet Proposition 1A's local match requirement. Under one interpretation, CEQA requires an environmental impact report for every project with unmitigable school impacts. Under another interpretation, SB 50 removes schools from CEQA review because the legislature deemed payment of $1.93 per square foot as full mitigation. Scott C. Smith, general counsel to CCAPA, recommended local agencies document the shortfall in the environmental review and note that the state prevents further mitigation. Whether that environmental review must include an EIR is a live question. There is no case law on the subject; follow-up legislation this year is unclear. Senate Bill 50 still allows school districts to issue bonds to achieve the local match, and it allows schools and cities to request — but not require — that developers pay more than $1.93 per square foot. Bay Area Cities Chart Own Course Among the most aggressive cities in exacting school fees is Livermore. Leaders of the Alameda County town vowed not to abide by the $1.93-per-square-foot maximum and instead crafted an agreement with local developers that calls for builders to pay about $5 per square foot, Mayor Brown said. The Livermore Valley Joint Unified School District will repay developers up to half of the fee if, and when, the school district receives adequate state funding to build new facilities. City officials, school district representatives and some developers hashed out the agreement to end Livermore's moratorium on new subdivisions, Brown explained. "The school district and the developers convinced the other developers we could not build new schools with the fees they wanted to pay," Brown said. Plus, the city was not going to budge. "The developers who are here now are working with us," she added. Lyon, of the CBIA, said Livermore homebuilders accepted the deal because it got Livermore schools into the state construction program for the first time. Previously, the school district insisted builders shoulder all costs of school expansion, he said. Livermore's status as a hot real estate market where developers are eager to build undoubtedly gave city leaders confidence, as did success in defending an earlier lawsuit filed by the Homebuilders Association of Northern California. In an unpublished opinion filed in February, the First District Court of Appeals upheld the city's previous method of exacting up to $6 per square foot in school impact fees. The court has since granted a rehearing. Backlash to development is pushing growth-control initiatives onto upcoming ballots in the Tri-Valley area. That citizen outcry may embolden other Tri-Valley cities to insist — somehow — on higher school fees. In Pleasanton, a citizen group called Reduce Overcrowded Campuses is insisting the school district add one high school and one elementary school to a master plan. But city and school officials did not include those additional schools in previous financing equations, which puts them face to face with the impact fee limit, said Pleasanton Planning Director Brian Swift. Pleasanton since 1992 has charged two to three times the amount allowed by state impact fee limits. (As in all jurisdictions, contracts between Pleasanton and developers for higher fees signed prior to SB 50 remain in effect.) Like the new arrangement in Livermore, developers in Pleasanton get some fees refunded if the schools receive adequate state money. The Pleasanton agreements allow for annual review. The question is whether the city could increase those agreements' school impact fees in light of SB 50, said Swift, who is doubtful. Money in the Pipeline Elsewhere in California, however, the availability of Proposition 1A funds has silenced the debate over school impact fees. James Murdoch, lobbyist for the Coalition for Adequate School Housing, said impact fees are not a subject of discussion among the group's 500 member school districts. "As a result of Senate Bill 50 and all the local bond issues that have passed, there is a ton of money out on the street, which districts are accessing to build schools," Murdoch said. Kent Hunt, spokesman for the state's General Services Department, said spending the $6.7 billion Proposition 1A earmarked for new schools is going according to the four-year allocation plan. Many CASH members are urban school districts, which are not often affected a great deal by growth, Murdoch conceded. For that reason, the coalition backed the SB 50/Proposition 1A package because it contained costs for builders and provided state funds for schools, he said. The concern for CASH has become Proposition 1A's limited funding for modernization, which totals $2.1 billion. "I think that the (Proposition 1A) money for growth is adequate. It appears that the money for modernization is not. It is being used up rapidly," Murdoch said. Murdoch is not the only person who sees the school impact fee cap having different effects on different districts. According to the California School Boards Association, small school districts may not have enough growth to generate the 50% match required to get Proposition 1A funds, and they can no longer fall back on the Mira, Hart, Murrieta cases to exact additional fees. Districts can issue bonds for the local match, but they need a two-thirds majority vote, which can be more difficult to achieve in small districts. Livermore Mayor Brown, however, contended SB 50 hit hardest in suburban cities where growth is causing the need for more schools, not in slow-growing areas with small districts. Smith, the CCAPA attorney, said nothing in SB 50 prevents city officials from asking that developers talk with school officials about higher impact fees. At the same time they make that request, city officials might want to note the marketability of a subdivision with overburdened schools, he said. Contacts: Cathie Brown, Livermore mayor, (925) 373-5149. Brian Swift, Pleasanton Planning and Community Development director, (925) 484-8023. James Murdoch, Coalition for Adequate School Housing lobbyist, (916) 441-3300. Richard Lyon, California Building Industry Association senior legislative advocate, (916) 443-7933.