An air pollution fee on new development in the San Joaquin Valley has been upheld by a Fresno County Superior Court. Judge Donald Black rejected numerous arguments against the fee in a lawsuit filed by the California Building Industry Association (CBIA), the Modesto Chamber of Commerce, Valley Taxpayers Association and affordable housing developer Coalition of Urban Renewal Excellence.

The San Joaquin Valley Unified Air Pollution Control District adopted the "indirect source" fee (also called Rule 9510) in December 2005. It applies to housing developments of at least 50 units and all but the smallest commercial, industrial and office projects (see CP&DR Environment Watch, April 2006, January 2004). The fee starts at $780 per residential unit. Developers may offset or even eliminate the fee by increasing residential densities, mixing uses, providing bicycle and pedestrian facilities, constructing energy-efficient buildings, or taking other steps that reduce driving and energy use. The district spends the fee revenue on off-site mitigation, such as replacing old farm equipment and buses. During the program's first two years, developers have mostly implemented the offsets and have paid far less in fees than the district anticipated.

The CBIA and other opponents argued that the fee violated the Mitigation Fee Act, was an illegal special tax and an illegal exaction, and was pre-empted by a variety of state laws. Judge Black rejected all of the contentions.

Black found that the fee was not subject to the Mitigation Fee Act because the district does not decide on development projects. "While plaintiffs argue that the fees are ‘in connection with approval of a development project' because defendant (the district) can compel plaintiffs to comply with the fee requirement, there is no evidence that defendants can prevent approval of the projects if the fees are not paid," Black wrote in a 46-page decision. "At most, the district can levy fines against plaintiffs for failing to comply with Rule 9510, which is not the same as preventing approval of the project."

The fee is not a special tax because it is triggered only when a developer chooses to develop property and not implement sufficient mitigation, Black ruled. As for the argument that the fee is an illegal exaction or taking, Black determined the fee was subject only to the "reasonable relationship" test, which the district passed. The judge further ruled that the fee was not in conflict with the California Environmental Quality Act or the Subdivision Map Act.

The case is California Building Industry Association v. San Joaquin Valley Unified Air Pollution Control District, Fresno County Superior Court Case No. 06 CE CG 02100. An appeal is likely.