Impact Fees As CEQA Mitigation

Properly administered impact fee programs can operate to streamline California Environmental Quality Act (CEQA) review of later development projects. At the same time, impact fee programs that are not implemented in accordance with the original expectations, or that are founded upon unrealistic assumptions, may offer the lead agency and affected applicant little or no real legal relief, and may be a trap for the unwary.

Impact fees are controlled by Government Code section 66000-66022. Fees may be imposed based upon a comprehensive impact fee program (Blue Jeans Equities West v. City and County of San Francisco (1992) 3 Cal. App. 4th 164) or as calculated on an ad hoc basis (Erlich v. City of Culver City (1996) 12 Cal.4th 854). The methodology ' broad-based vs. ad hoc ' determines which findings must be adopted by the imposing agency. Loyola Marymount University v. Los Angeles Unified School District (1996) 45 Cal.App.4th 1256. Generally, impact fees of broad application receive less judicial scrutiny (Erlich v. City of Culver City, supra at p. 875).

Mitigation Considerations

CEQA requires lead agencies to mitigate the impacts associated with project approvals. For a developer, it is far simpler to pay an impact fee than it is to design, engineer, and construct an offsite improvement. From this perspective, impact fees are a cost-effective means by which project impacts can be properly mitigated. Moreover, impacts are considered mitigated, even when the fee-funded facility is constructed after the project that contributes to the need for the facility. Save Our Peninsula Committee v. Monterey County Board of Supervisors (2001) 87 Cal.App.4th 99. In this context, paying impact fees could well be the lesser of two evils. However, recent cases illustrate that simply paying the local impact fee does not constitute full absolution of CEQA responsibilities in every instance.

In Napa Citizens for Honest Govern-ment v. Board of Supervisors (2001) 91 Cal.App.4th 342, the court of appeal found that a pre-existing fee program failed to provide the 'mitigation cover' to avoid a determination that a project impact may be cumulatively significant. The County previously adopted a Napa Airport traffic fee, and collected over $2 million pursuant to this fee. However, the improvements necessary to maintain an adequate circulation totaled over $70 million and, although the current project was obligated to pay its fair share of fees, the evidence showed that the necessary improvements would never be funded. As a result, there could be no assumption that cumulative impacts would be mitigated simply by paying the adopted fee.

A different result was reached in Save Our Peninsula Committee v. Monterey County Board of Supervisors, supra. In this case, the petitioners challenged a development project approval located in scenic Carmel Valley. One of the legal challenges was to the payment of traffic impact fees as a form of mitigation. The project approval followed the 1995 enactment of a Carmel Valley road impact fee, which called for funding of improvements consistent with the Carmel Valley Master Plan. The fee was set at $16,000 per unit, with annual increases tied to the construction cost index. The mitigation program called for regular monitoring of traffic conditions to determine if specified thresholds were met, which in turn would call for construction of specified improvements. The appellate court characterized the fee program as a 'pay-as-you-go' program. The project also contributed to Highway 1 congestion improvements, based upon a mitigation measure that called for a developer pro-rata contribution. The appellate court found sufficient evidence upon which it could conclude that a reasonable commitment to mitigation was demonstrated. In these circumstances, the use of previously adopted fees, as well as ad-hoc fees imposed as part of the project approval, constituted effective
mitigation.

Two more recent cases have delineated the outer limits of the ability to use fee programs as mitigation for traffic impacts. In Anderson First Coalition v. City of Anderson (2005) 130 Cal.App.4th 1173, the appellate court held that paying a 'fair-share fee' is permissible as effective mitigation if the fees are 'part of a reasonable plan of actual mitigation that the relevant agency commits itself to implementing.' Project opponents challenged the use of an impact fee to mitigate cumulative traffic effects in the Environmental Impact Report for a proposed Wal-Mart Supercenter. The court held that a fee program would be permissible as long the mitigation measure specified the amount of the fee and the percentage of future improvements for which this developer would be responsible. The court also emphasized that the fees must be a reasonable, enforceable part of an improvement plan that will actually mitigate the cumulative effects. But Endangered Habitats League Inc. v. County of Orange (2005) 131 Cal.App.4th 777 again demonstrates how an incomplete mitigation measure will not allow the fee program to operate as CEQA mitigation. Op-ponents there challenged a fee program to fund road improvements needed due to a proposed residential development. The appellate court held that there was no evidence of a firm and certain plan for improvements because the record showed only the existence of a fee program as well as a planned study to identify needed improvements. The court said, 'Since there is no evidence here of what improvements will be funded by the fee programs ' we cannot find the mitigated project is consistent with the general plan,' and held that the fee program was not adequate mitigation under CEQA.

Conclusion

What's the key? In order to count on a previously adopted fee program, or project imposed 'fair share' fees, the lead agency must have reasonable evidence in the record to find that the program is sufficiently certain and can be implemented in its entirety over time. Said the Court of Appeal, Sixth District, 'We do not believe ' that CEQA requires that the EIR set forth a time-specific schedule for the County to complete specified road improvements. All that is required by CEQA is that there be a reasonable plan for mitigation.' Save Our Peninsula Committee v. Monterey County Board of Supervisors, supra at p. 139. Where improvements call for significant state or federal funding, and that funding is in doubt, then assumed mitigation of cumulative impacts is doubtful and reversal is likely.

In 2006, the discussion of impact fees and CEQA mitigation was revisited by the California Supreme Court in City of Marina v. Board of Trustees of California State University (2006) 39 Cal.4th 341. There, the court addressed the refusal of a state university campus to pay funds toward the construction of offsite improvements. The campus claimed that it lacked the legal authority to pay those fees. The California Supreme Court disagreed, and introduced into the fee lexicon the phrase 'voluntary mitigation,' inviting significant speculation as to where the duty to mitigate (and in appropriate circumstances, pay impact fees) ends.

William W. Abbott, a member of this newsletter's Board of Editors, is a partner with Abbott & Kindermann, LLP, in Sacramento. Janell M. Bogue is an associate with the firm.

Properly administered impact fee programs can operate to streamline California Environmental Quality Act (CEQA) review of later development projects. At the same time, impact fee programs that are not implemented in accordance with the original expectations, or that are founded upon unrealistic assumptions, may offer the lead agency and affected applicant little or no real legal relief, and may be a trap for the unwary.

Impact fees are controlled by Government Code section 66000-66022. Fees may be imposed based upon a comprehensive impact fee program (Blue Jeans Equities West v. City and County of San Francisco (1992) 3 Cal. App. 4th 164) or as calculated on an ad hoc basis (Erlich v. City of Culver City (1996) 12 Cal.4th 854). The methodology ' broad-based vs. ad hoc ' determines which findings must be adopted by the imposing agency. Loyola Marymount University v. Los Angeles Unified School District (1996) 45 Cal.App.4th 1256. Generally, impact fees of broad application receive less judicial scrutiny (Erlich v. City of Culver City, supra at p. 875).

Mitigation Considerations

CEQA requires lead agencies to mitigate the impacts associated with project approvals. For a developer, it is far simpler to pay an impact fee than it is to design, engineer, and construct an offsite improvement. From this perspective, impact fees are a cost-effective means by which project impacts can be properly mitigated. Moreover, impacts are considered mitigated, even when the fee-funded facility is constructed after the project that contributes to the need for the facility. Save Our Peninsula Committee v. Monterey County Board of Supervisors (2001) 87 Cal.App.4th 99. In this context, paying impact fees could well be the lesser of two evils. However, recent cases illustrate that simply paying the local impact fee does not constitute full absolution of CEQA responsibilities in every instance.

In Napa Citizens for Honest Govern-ment v. Board of Supervisors (2001) 91 Cal.App.4th 342, the court of appeal found that a pre-existing fee program failed to provide the 'mitigation cover' to avoid a determination that a project impact may be cumulatively significant. The County previously adopted a Napa Airport traffic fee, and collected over $2 million pursuant to this fee. However, the improvements necessary to maintain an adequate circulation totaled over $70 million and, although the current project was obligated to pay its fair share of fees, the evidence showed that the necessary improvements would never be funded. As a result, there could be no assumption that cumulative impacts would be mitigated simply by paying the adopted fee.

A different result was reached in Save Our Peninsula Committee v. Monterey County Board of Supervisors, supra. In this case, the petitioners challenged a development project approval located in scenic Carmel Valley. One of the legal challenges was to the payment of traffic impact fees as a form of mitigation. The project approval followed the 1995 enactment of a Carmel Valley road impact fee, which called for funding of improvements consistent with the Carmel Valley Master Plan. The fee was set at $16,000 per unit, with annual increases tied to the construction cost index. The mitigation program called for regular monitoring of traffic conditions to determine if specified thresholds were met, which in turn would call for construction of specified improvements. The appellate court characterized the fee program as a 'pay-as-you-go' program. The project also contributed to Highway 1 congestion improvements, based upon a mitigation measure that called for a developer pro-rata contribution. The appellate court found sufficient evidence upon which it could conclude that a reasonable commitment to mitigation was demonstrated. In these circumstances, the use of previously adopted fees, as well as ad-hoc fees imposed as part of the project approval, constituted effective
mitigation.

Two more recent cases have delineated the outer limits of the ability to use fee programs as mitigation for traffic impacts. In Anderson First Coalition v. City of Anderson (2005) 130 Cal.App.4th 1173, the appellate court held that paying a 'fair-share fee' is permissible as effective mitigation if the fees are 'part of a reasonable plan of actual mitigation that the relevant agency commits itself to implementing.' Project opponents challenged the use of an impact fee to mitigate cumulative traffic effects in the Environmental Impact Report for a proposed Wal-Mart Supercenter. The court held that a fee program would be permissible as long the mitigation measure specified the amount of the fee and the percentage of future improvements for which this developer would be responsible. The court also emphasized that the fees must be a reasonable, enforceable part of an improvement plan that will actually mitigate the cumulative effects. But Endangered Habitats League Inc. v. County of Orange (2005) 131 Cal.App.4th 777 again demonstrates how an incomplete mitigation measure will not allow the fee program to operate as CEQA mitigation. Op-ponents there challenged a fee program to fund road improvements needed due to a proposed residential development. The appellate court held that there was no evidence of a firm and certain plan for improvements because the record showed only the existence of a fee program as well as a planned study to identify needed improvements. The court said, 'Since there is no evidence here of what improvements will be funded by the fee programs ' we cannot find the mitigated project is consistent with the general plan,' and held that the fee program was not adequate mitigation under CEQA.

Conclusion

What's the key? In order to count on a previously adopted fee program, or project imposed 'fair share' fees, the lead agency must have reasonable evidence in the record to find that the program is sufficiently certain and can be implemented in its entirety over time. Said the Court of Appeal, Sixth District, 'We do not believe ' that CEQA requires that the EIR set forth a time-specific schedule for the County to complete specified road improvements. All that is required by CEQA is that there be a reasonable plan for mitigation.' Save Our Peninsula Committee v. Monterey County Board of Supervisors, supra at p. 139. Where improvements call for significant state or federal funding, and that funding is in doubt, then assumed mitigation of cumulative impacts is doubtful and reversal is likely.

In 2006, the discussion of impact fees and CEQA mitigation was revisited by the California Supreme Court in City of Marina v. Board of Trustees of California State University (2006) 39 Cal.4th 341. There, the court addressed the refusal of a state university campus to pay funds toward the construction of offsite improvements. The campus claimed that it lacked the legal authority to pay those fees. The California Supreme Court disagreed, and introduced into the fee lexicon the phrase 'voluntary mitigation,' inviting significant speculation as to where the duty to mitigate (and in appropriate circumstances, pay impact fees) ends.

William W. Abbott, a member of this newsletter's Board of Editors, is a partner with Abbott & Kindermann, LLP, in Sacramento. Janell M. Bogue is an associate with the firm.