Balch Enterprises, Inc. v. New Haven Unified School District

Citations: 219 Cal. App. 3d 783; 268 Cal. Rptr. 543; 1990 Cal. App. LEXIS 413Docket: A042305

Court: California Court of Appeal; March 19, 1990; California; State Appellate Court

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The Court of Appeals of California, in case number 219 Cal.App.3d 783 (1990), addressed an appeal by the New Haven Unified School District against a judgment favoring Balch Enterprises, Inc. The judgment involved a writ of mandate requiring the school district to vacate a resolution that imposed a "school facilities fee" on new commercial and industrial construction and to refund fees collected from Balch. The school district had gained the authority to impose such fees following legislation enacted in 1986, which allowed them to charge fees on both residential and commercial developments.

On January 20, 1987, the school district adopted a fee structure of $1.50 per square foot for residential construction and $0.25 per square foot for commercial and industrial construction. Balch paid a fee of $9,322 under protest while working on a warehouse project in Hayward, California, and subsequently initiated legal action.

The court addressed the statute of limitations applicable to Balch's case. The trial court found that Government Code section 65913.5 (now section 66008), which sets a 180-day limitation period for actions taken under protest, was applicable. However, the school district contended that Government Code section 54995, which mandates a 120-day limitation for challenging an ordinance or resolution, should govern. The court ultimately rejected both interpretations and determined that the appropriate statute of limitations was Code of Civil Procedure section 343, which allows for a four-year period for relief not otherwise specified, thereby permitting Balch's legal challenge to proceed. The contested fee was imposed under Government Code sections 53080 and 65995, which provide school districts the authority to require local governments to impose such fees as a condition for issuing building permits.

The ruling failed to recognize that prior to the 1989 enactment of Government Code section 53080.1, subdivision (d), section 66008 (formerly 65913.5) was applicable only to fees imposed on residential housing developments, thus excluding the current case involving a commercial development. The school district contends that Government Code section 54995 imposes a 120-day limit for initiating actions contesting newly levied fees or service charges by local agencies. This section mandates that any judicial proceeding to challenge such ordinances or resolutions must commence within 120 days of their effective date. Balch argues that section 54995, found within chapter 13.5, is relevant solely to actions contesting fees under chapter 13, which restricts local agencies from increasing revenues through specific fees. The procedural language in section 54992 and section 54995 both reference "a new fee or service charge," suggesting a linkage between the two chapters. Appellant points out that section 54995 was enacted in a statute focused on amendments to chapter 13, indicating legislative intent to connect the two chapters. However, Balch’s interpretation raises questions regarding why section 54995 was not placed within chapter 13 if it pertains only to that chapter and why it lacks a specific reference to chapter 13 fees. The legislative digest supports Balch’s reading, indicating that "such ordinance or resolution" was intended to refer to those enacted under chapter 13, aligning the two chapters as a cohesive unit. Additionally, Government Code section 66008's subdivision (d) allows parties to sue for refunds on fees imposed for residential housing developments within 180 days of such imposition, further demonstrating the legislative understanding of these statutes.

Refund suits will involve assessing the validity of authorizing ordinances, with the statute allowing a wide range of judicial powers to adjudicate fee legality. Enacted in 1984, the statute does not reference Government Code section 54995, leading to questions about the legislative intent and whether section 54995 was meant to apply to local agency development fee challenges. The absence of harmonization between sections 66008 and 54995 suggests a narrow interpretation of the latter, which would not logically extend to all local fees imposed under California law. If a suit is governed by section 54995, it follows the procedural framework of Code of Civil Procedure section 860 et seq., originally intended for bond validation, which may not apply universally to all local fee challenges.

The absence of specific applicable statutes implies no statute of limitations for the current suit, thus it is governed by Code of Civil Procedure section 343. This conclusion invalidates the appellant's claims regarding non-compliance with sections 66008 and 860 et seq., which would otherwise dictate the procedural requirements. Additionally, the school board's decision on development fees is characterized as legislative, not adjudicatory, since it applies broadly to future developments rather than specific cases. Legislative actions create rules for future application, while adjudicatory acts apply existing rules to specific facts. Consequently, the procedural standards of administrative mandamus under section 1094.5, which require hearings and evidence, are not applicable as the school board's actions did not meet those criteria.

The statutory obligation to make a "finding" in this context does not confer an adjudicative nature to the process, distinguishing it from traditional adjudicatory proceedings. Instead, it is characterized as an ordinary mandamus action under Code of Civil Procedure section 1085, which follows a more constrained review standard compared to administrative mandamus. This limited review focuses on whether the agency's action was arbitrary, capricious, or lacked evidentiary support, and it respects the separation of powers by acknowledging the presumed expertise of administrative agencies.

Specific to school districts, Government Code section 65995 mandates that certain findings must be made prior to imposing development fees. The trial court's review of these findings examines whether they were arbitrary or capricious, akin to applying the substantial evidence rule used in administrative mandamus cases, which assesses whether there was a reasonable basis for the decision. Some courts have indeed evaluated the existence of substantial evidence supporting such findings in quasi-legislative contexts. However, care should be taken when applying precedents from administrative mandamus to quasi-legislative findings, as procedural or evidentiary standards from judicial processes may not be suitable.

Lastly, Government Code section 65995, subdivision (b)(2) stipulates that a school district may not levy fees on commercial or industrial developments unless it first finds that the fees are reasonably related to community needs for school facilities and the requirements generated by the development.

Government Code section 65974, subdivision (a)(4) permits city and county governments to levy development fees for school facilities, requiring that the fees bear a "reasonable relationship" to community needs and the demand for schools generated by development. This standard aligns with the constitutional guidelines from Associated Home Builders etc. Inc. v. City of Walnut Creek. The statute necessitates two findings regarding development fees: their relation to community needs and the specific need for schools arising from the development. A memorandum and report from December 12, 1986, were incorporated into the board of education's findings, covering development projects, facility needs, costs, and revenue sources. The ordinance affirmed that the fees are reasonably related to community needs for educational facilities.

The staff study highlighted the justification for fees on residential development, noting a 23% population growth in the last decade resulting in overcrowded schools and the necessity for new facilities. It estimated that each residential unit imposes approximately $9,175 in construction and land costs. However, the proposed residential fee would only yield $2,700 per unit, insufficient to meet the identified facility needs. The report did not provide a robust analysis for commercial and industrial fees but suggested that these developments would likely increase population and school enrollment. It acknowledged the challenges of linking commercial development impacts to statutory fee requirements, given the variability in factors affecting school enrollment. The relationship between fee imposition and development effects on school enrollment remains indirect and complex.

The fee's justification must be assessed alongside the residential development fee, as its necessity depends on the revenues generated by the latter. There is a lack of comprehensive studies on the effects of commercial and industrial development, making it unreasonable to demand rigorously supported findings. The existing evidence is insufficient to establish a reasonable connection between the fee amount and community needs. While the district serves a substantial number of nonresident students, the report lacks concrete data on their impact or the volume of anticipated commercial and industrial development needed to meet school funding needs. 

A critical issue arises regarding the requirement under Government Code section 65995 that the fee amount be reasonably related to the school needs generated by the development. The appellant argues for a liberal interpretation of this requirement, suggesting that a mere indirect relationship suffices. However, the statute explicitly demands a connection to the specific development paying the fee, which the current record fails to provide. It only restates statutory language without offering substantive evidence linking Balch's development to the fee assessment.

Although the judgment is affirmed, it raises concerns about the award of attorneys' fees under Code of Civil Procedure section 1021.5, which permits such awards when an important public interest is upheld. The district's imposition of the fee was based on a staff study indicating a pressing need for new revenues for school construction, highlighting that residential development fees alone are inadequate. The authority to impose fees on commercial and industrial developments is intended for these situations. The court ultimately affirms the order invalidating the fee due to the absence of adequate findings in the record, rejecting the staff study's acknowledgment of the complexities surrounding the estimation of commercial and industrial development impacts as sufficient compliance with statutory requirements.

Respondent contends that a legal action can uphold an important public interest right, even if determined on a technical statutory basis, referencing City of Sacramento v. Drew. The petition for writ of mandate alleges violations of significant constitutional and statutory provisions, including the Federal Civil Rights Act of 1871, the equal protection and due process clauses of both the United States and California Constitutions, and a specific section of the California Constitution. The trial court did not address these constitutional issues, which are not included in the district's errors. The record does not support the trial court's conclusion that the district acted arbitrarily in implementing school facilities fees. Without evidence of arbitrary action, other claims lack merit. Consequently, the judgment is affirmed, and the order awarding attorney's fees is reversed, with each party responsible for its own costs. The opinions of Racanelli, P.J., and Stein, J. are noted. A rehearing petition was denied on April 17, 1990, and the Supreme Court declined to review the case on June 21, 1990. The order for attorney's fees under the Federal Civil Rights Act is deemed unfounded due to the absence of a finding of violation in the statement of decision.