Developer Fees to Pay for Municipal Services Upheld

The Supreme Court on Tuesday, clearing away legal doubts about California’s increasing reliance on developers’ fees to pay for municipal services, upheld a San Francisco ordinance that forces the owners of new downtown buildings to subsidize the transit system.

With only Chief Justice William H. Rehnquist dissenting, the court rejected without comment a challenge by San Francisco developers who said that the city law unfairly forced private property owners to pay for public services.

The decision is significant because financially strapped cities and counties in California have turned increasingly to developers fees to pay for everything from new schools and roads to expanded public transit and day care.

A study about a year ago by the Bay Area Council, a major employer group, found that developer fees for a new, 1,400-square-foot home in a 100-unit subdivision in the San Francisco area averaged $9,110. In other parts of the state these fees have risen as high as $12,000 to $15,000, a cost that usually is passed on to the home buyer.

In Los Angeles, the Metro Rail board already has said that it plans to impose fees on downtown property owners near subway stations when the system is completed.

In Orange County, Stanley T. Oftelie, executive director of the County Transportation Commission, said some officials have been quietly discussing the possibility of a developer fee, but have been restrained so far by doubts of its legality.

“I don’t know that the Supreme Court decision speaks directly to that issue,” Oftelie said, “but if it clears up that question, it would cause people around here to give a countywide fee serious consideration.”

Attorneys for the builders in the San Francisco case had hoped that a more conservative Supreme Court might call a halt to the developer fee practice. The Fifth Amendment says that “private property (shall not) be taken for public use without just compensation,” and the Supreme Court in 1986 invoked that clause in two California cases to strike down government regulation of private property.

However, the court, in rejecting the challenge, sided with local governments that contended that it was both fair and legal for developers to subsidize some of the additional burden that their new projects place on public services, or to help support services from which their projects received specific benefits.

The ordinance in question, approved in San Francisco in 1981, assessed a new $5 per square foot “development fee” on builders of downtown office buildings. These funds, estimated at $2.5 million for an average structure, would pay for expanded transit service, the city said.

The transit fee “is a bald effort by a government entity to shift the substantial portion of a public burden to private parties,” attorneys for the developers said in their appeal to the high court in the case (Crocker National Bank vs. City of San Francisco, 88-76). “Many other municipalities will certainly follow San Francisco’s lead unless the path chosen by the city is declared unconstitutional,” they added.

In March, the California Supreme Court had ruled against the developers, and Tuesday the justices dismissed the case as well.

In other actions, the court:

- Agreed to decide whether a newspaper can be forced to pay damages for having printed the name of a rape victim. Florida law forbids news media from identifying victims of sex offenses, but a Jacksonville newspaper mistakenly printed a rape victim’s name as part of a crime roundup. A judge awarded the woman $97,500 in damages from the paper but its lawyers contended that they have a First Amendment right to print accurate information taken from public records (Florida Star vs. BJF, 87-329).

- Agreed to decide whether prosecutors may describe a murder victim in a death penalty case. The South Carolina Supreme Court said no, relying on a 1986 U.S. Supreme court ruling that rejected the use of statements describing the impact of a murder on a family.