News & Updates

The Threat of Level 3 School Fees Could Become Reality as Early as Next Week!

The Court recently denied the California Building Industry Association's request for a preliminary injunction on the imposition of Level 3 school fees. The State Allocation Board's attorney, at the earliest, has 5 days from August 22, 2016 to approve and file the order. During this 5 day period, the California Building Industry Association plans to file an appeal (a writ of supersedes) which, if granted, could stay the SAB's decision to trigger level 3 fees.

If the order is filed and the writ is denied, the State Allocation Board would have to send the notice to the Legislature and the letter (notice) triggering Level 3 fees must be printed in the journal before school districts can begin charging Level 3 fees. Accordingly, if the order is filed and the writ is denied, school districts in California could be able to charge the Level 3 school fees as early as next week. Therefore, it is strongly advised that you pre-pay your Level 2 school fees over the next couple of days, if possible.

The current school fee law was established with the concept that a new school would be funded from one-half of the school fees coming from State-wide General Obligation Bonds, and the other one-half coming from the developer/builder. This is referred to a Level 2 school fee and generally ranges from $12,000 to $15,000 per residential unit. The Level 3 school fee kicks in when funding from State-wide General Obligation Bonds is fully depleted, and the developer/builder must pay for both the State-wide General Obligation Bonds, as well as their local share. This results in school fees effectively doubling to $24,000 to $30,000.

Ironically, the November 2016 ballot will include Proposition 51. This $9 billion State-wide General Obligation Bond will replenish the state's school facility fund ensuring the continuation of the current school facilities financing program where all partners - the state, the district, and developers - contribute to modernize aging schools or build new facilities where necessary. If Proposition 51 passes, the State Allocation Board will only be able to charge Level 2 school fees.

To the extent a developer/builder becomes obligated to pay the Level 3 school fee, in this potentially short time frame, that could commence as early as next week and run until the bonds of Proposition 51 are actually issued (i.e., assuming it passes), they should consider negotiating with the local school district escrow the difference between the Level 3 school fee and the Level 2 school fee. If Proposition 51 passes, the escrow is released back to the developer/builder. If Proposition 51 fails, the escrow is released to the school district.

For more information on this matter, please contact Chris Austin in our Sacramento office at (916) 480-0305 x1247 or email chris.austin@dpfg.com, or call Chris Cole in our Southern California office at (949) 388-9269 x1120 or email at chris.cole@dpfg.com, or call Chris Lightburne at (949) 388-9269 x1110 or email him at chris.lightburne@dpfg.com, or call Peter Piller at (949) 388-9269 x1109 or email peter.piller@dpfg.com.