In a decision filed December 4, 2018 and published December 20, 2018, the Sixth District Court of Appeal, in SummerHill Winchester LLC v. Campbell Union School District, __ Cal.App.5th __ (2018) (Case No. H043253), affirmed a trial court decision invalidating the Campbell Union School District’s fee on new residential development because the underlying fee study failed the leading test for ensuring school facilities fees are limited to the cost of increased services made necessary by the development.

Shapell Industries, Inc. v. Governing Board, 1 Cal.App.4th 218 (1991) requires a school board imposing a fee to show that a valid method was used for arriving at the fee in question, one that establishes a reasonable relationship between the fee charged and the burden posed by the development.  In particular, under Shapell, a school board must (1) project the total amount of new housing expected to be built within the district, (2) determine approximately how many students will be generated by the new housing, and (3) estimate what it will cost to provide the necessary school facilities for that approximate number of new students.

CUSD’s consultant prepared a “Level 1 Developer Fee Study” that was more than 50 pages long.  The study was mostly boilerplate, however, and it devoted just a single paragraph to addressing how much new residential construction was expected within the District’s boundaries in the next five years.  At the time of the fee study, the District’s enrollment already exceeded the study’s capacity by a relatively small amount.  In addition, the fee study projected future enrollment growth but did not consider any new residential construction.  Moreover, the District conceded that there was no need to build any new full capacity schools for the expected enrollment increase, at least in the immediate future.  Nevertheless, the CUSD board relied on the fee study and adopted a resolution imposing a fee of $2.24 per square foot on new residential construction.

SummerHill, which was developing a 110-unit residential development in the City of Santa Clara, paid nearly $500,000 in fees under protest and filed a writ of mandate and complaint for declaratory relief seeking a refund of the fees it paid the District and a declaration the fees were invalid.  SummerHill argued that the fee study failed to calculate actual expected growth because it included data only from the City of Campbell rather than all of the cities and the County of Santa Clara that are also within CUSD’s boundaries.  In addition, the fee study did not identify any necessary facilities required because of new development but instead used “hypothetical schools” that could eventually be needed as the basis for its cost figures.

The trial court agreed with SummerHill and granted its petition on the grounds that the fee study did not (1) project the total amount of housing to be constructed in the District; (2) adequately estimate the number of new students in the district resulting from the new development; and (3) establish the necessary relationship between the number of new students and the proposed capital facilities.  The court was especially troubled by the fact that the fee study cost calculation was heavily dependent on two hypothetical new schools that may never be constructed.  The court explained that the required approach would have been to consider the cost of the real construction plans that already existed.  The fee study should have indicated what the District intended to do to accommodate the growth and project a cost on that basis.  The court determined that CUSD does not have the discretion to estimate a cost per student based on the construction of new schools when the increased number of students may not cause the construction of any new facilities.

The Court of Appeal agreed and held that the fee study failed to quantify the expected amount of new development or the number of new students it would generate, did not identify the type of facilities that would be necessary to accommodate those new students, and failed to assess the costs associated with those facilities.  The Court reasoned that the CUSD board’s decision to enact a development fee in this case is invalid because the board did not decide that its enrollment increases would necessitate the construction of new schools but nevertheless based the amount of the development fee on the cost of building new schools.  This discontinuity precluded the board from being able to demonstrate a reasonable relationship between the impact of new development and the development fee.  “While courts defer to the reasonable legislative choices made by school district boards, those boards still must comply with the enabling statutes governing the fees that they impose.  The Board did not do so here.”