The latest round to be decided in the ongoing fight over building inspection and plan check fees has gone to the City of Corona, which successfully defended a lawsuit originally brought by developer Barratt American and its chief fee consultant.

A trial court judge refused to let Barratt American and the consultant, The Paladin Group, participate because they had no direct interest in the litigation. The suit went forward with a resident as plaintiff, but the Fourth District Court of Appeal upheld the city’s methodology for setting the fees.

Barratt American and Paladin have been involved in numerous fee lawsuits, forcing some jurisdictions to change their fee methodologies while losing other cases. The company won a minor victory at the state Supreme Court in late 2005 when the court ruled that the company could contest the validity of a fee ordinance that the Rancho Cucamonga City Council re-adopted — unchanged from an earlier ordinance — in 2002 (Barratt American, Inc. v. City of Rancho Cucamonga, 37 Cal.4th 685, see CP&DR Legal Digest, January 2006, November 2005). The Supreme Court overturned an appellate court, which had ruled that because there were no changes in the ordinance, the time to challenge the fees had passed.

Barratt American has a long, adversarial history with the City of Corona. In 1997, Barratt American sued the city for a refund of building permit and plan check fees. A trial court and the Fourth District ruled the lawsuit was filed too late. Two years later, Barratt American, Paladin and Corona resident George Jenkins sued, alleging that the city’s fees exceeded the cost of providing service. The city revised its fees and the lawsuit was dismissed.

The latest round of litigation involved the same players and similar fees. After a consultant completed a study that determined building inspection and plan check costs, and allocated the costs among tasks, the Corona City Council in May 2001 adopted revised fees. The new fees were actually about one-third lower than the previous rates. Still, Barratt American, Paladin and Jenkins sued, arguing that the fees violated the Mitigation Fee Act, Proposition 13, Proposition 62, the Fifth and Fourteenth Amendments and the federal Civil Rights Act.

Riverside County Superior Court Judge Erik Michael Kaiser removed Barratt American and Paladin from the lawsuit, finding that they had no direct interest. The litigation went forward with Jenkins as the plaintiff. On the merits, Judge Kaiser found that the city’s methodology was not precise enough, and he ordered the city to establish new fees. The city appealed to the Fourth District and won a unanimous decision of the three-judge panel.

The Fourth District first addressed the city’s contention that the Mitigation Fee Act (Government Code § 66000 et seq.) bars challenges to fee reductions. Citing the state Supreme Court’s decision in the Rancho Cucamonga case, the Fourth District disagreed. Re-enactment of a fee constitutes a modification or amendment of the fee, whether or not the fee increases, and a new 120-day period to challenge the fees commences, the court ruled.

The court then undertook an extensive discussion of the city’s fee methodology. Essentially, the city’s consultant, Revenue Cost Specialists (RCS), determined the 10-year average for building and plan check fee revenue, and estimated the cost of providing the service for the 2000-01 fiscal year. The consultant found that fee revenue averaged $808,000 a year, while the estimated cost of providing the service during 2000-01 was $565,000. So RCS recommended setting fees at 69.9% of the then-current level.

Judge Kaiser ruled that the 10-year revenue averaging was too imprecise to comply with the Mitigation Fee Act. But the Fourth District found that Kaiser’s review went too far, and that the city did comply with the act.

“[T]he act requires only that fees ‘may not exceed the estimated reasonable cost of providing the service for which the fee is charged,’ absent voter approval,” Justice Thomas Hollenhorst wrote for the appellate court, citing Government Code § 66014. “The trial court’s implicit finding that the act requires a yearly dollar-for-dollar correspondence between the city’s fee revenue and costs is not supported by the act. … The act does not require a precise calculation.”

Hollenhorst cited City of Dublin v. County of Alameda, (1993) 14 Cal.App.4th 264, in which the court ruled, “[T]he record need only demonstrate a reasonable relationship between the fees to be charged and the estimated cost of the service or program to be provided.” The City of Corona met that test, the court ruled.

“Nothing in the act,” Hollenhorst continued, “mandates how a city should perform its duties. Here, the city properly exercised its discretion in deciding how to proceed with the mandates of the act.”

Jenkins had appealed different portions of the trial court’s ruling, but the Fourth District rejected those contentions and even ordered Jenkins to pay the city’s appeal costs.

The Case:
Jenkins v. City of Corona, No. E036270, 06 C.D.O.S. 5013, 2006 DJDAR 7250. Filed May 10, 2006. Ordered published June 14, 2006.
The Lawyers:
For Jenkins: Jason Brent, Brent & Klein, (661) 823-1103.
For the city: Jeffrey Dunn, Best, Best & Krieger, (949) 263-2600.