O.C. loses appeal, must again cut fees

In a stinging rebuke, a state appeals court has ordered Orange County to forfeit $4.5 million it collected by overcharging for building permits, and to pay nearly $1.4 million to the lawyer who brought the case to court.

The unanimous decision by California’s 4th Appellate District upholds a trial court ruling that found the county overcharged developers and people seeking home-improvement permits during most of the 1990s.

“It’s a big victory, I think, for fee-payers,” said Walter P. McNeill, the lawyer who brought the case on behalf of Barratt American.

While developers passed the cost along to home-buyers in the purchase price, individual homeowners had to pay inflated prices on fees seeking approval for remodels, additions and installations.

The county has 40 days to appeal to the state Supreme Court. A lawyer for the county, Marc S. Ehrlich of the firm Best Best & Krieger, said the decision to appeal was under review.

The case stems from long-running accusations that Orange County -- among other Southern California cities and counties -- charged more for planning department services than was legal, and used the overages to fund other government services. State law limits charges for services to what is “reasonable and necessary” to cover the cost of providing the services.

People and companies who paid the excess fees are not eligible for refunds as a result of the decision. Rather, it requires the county’s planning department to reduce fees for future building permits, inspections and construction plan checks until it exhausts a $4.5-million surplus that accumulated from 1992 to 1999.

A special master in the case found that the accumulated surplus from the overcharges was $18.5 million, but the county spent a portion of that on a computer system and other equipment that the court ultimately found was justified.

The county has since reduced its fees several times.

In a further reprimand of the county, the appeals court upheld the trial judge’s award of $1.22 million in fees and more than $160,000 in court costs to McNeill -- an amount that was 2 1/2 times his actual costs -- after agreeing that private litigation was needed to resolve the issue.

The county had objected, saying McNeill didn’t deserve the payments because the case “did not vindicate an important public right [and] did not achieve a significant public benefit.”

The appeals court disagreed, saying: “Ensuring that the county fulfill its statutory duty to use the fee revenue surplus vindicates an important public right.”

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christian.berthelsen@latimes.com