October 31, 2018
In September, Governor Jerry Brown signed into law SB 1202, a bill that increases transparency around how agencies spend impact fees collected from developers. Under the bill, introduced by Senator Jeff Stone, any agency that fails to report its impact fee spending can face an independent audit at the agency’s own expense.
The notion of reporting on development impact fees is certainly nothing new. The Mitigation Fee Act already requires agencies to file reports annually on their usage of fees—how much they collected, how much they spent and on what, and whether they made any loans between funds. Every five years, agencies must justify these amounts in another report. Together, these reports prove that fees are set at an appropriate level to cover costs and that fees are being spent in a timely fashion on the right types of infrastructure projects.
In addition to paying for the audit...agencies may be forced to pay back unused impact fees if they fail to make their five year findings.
However, according to Senator Stone, almost one-third of localities failed to meet these reporting requirements in recent years. Some agencies simply aren’t aware of the requirement; others don’t have designated staff assigned to the task.
What’s at Stake?
Reporting impact fee spending ensures fees manifest into tangible community improvements and that every dollar is used for the purpose in which it is intended. Considering that fees for a single family home can range from a few thousand dollars to more than $100,000 per unit, there’s plenty of incentive for agencies to get on board with regular reporting.
Failure to do so could get costly. In addition to paying for the audit (formerly the developers’ responsibility), agencies may be forced to pay back unused impact fees if they fail to make their five year findings. Meeting reporting requirements prevents such unpleasant surprises. On the plus side, cities that complete five year updates, could discover they are entitled to receive even higher impact fees than they are currently collecting.
Many cities are turning to experts to help ensure they meet the annual and five year requirements. At Harris & Associates, we help manage impact fee programs for agencies on an ongoing basis. If you have any questions about the new SB 1202 or impact fee reporting, get in touch.