Developer-Schools Ruling Leaves Both Camps Half a Loaf

With both sides claiming some victory, a judge Tuesday ordered the Newport-Mesa Unified School District to refund about $600,000 in developer fees that it unlawfully collected from local builders and homeowners.

Superior Court Judge Leonard Goldstein, following up a November ruling, spelled out for the first time Tuesday the mechanism for correcting the system that he found illegal.

Goldstein ruled that the district failed to show that its financial needs justified the maximum fees possible under state law.

Rejected 2 Broader Measures

But even as he penalized the district, Goldstein disappointed Building and Industry Assn. officials by refusing to impose two broader measures that the industry lobby had sought to counter the fees.

The builders sought assurances that the district would refund the entire $3 million that it collected from developers and homeowners in 1987 and 1988 to pay for such projects as the reroofing of Estancia High School.

Instead, Goldstein ordered only that the district pay back a total of $593,000 to two developers and two homeowners who were specifically named as plaintiffs in the BIA suit.

Others assessed fees may still sue separately for refunds, lawyers for the builders said.

“This is an extremely limited decision,” said Spencer E. Covert Jr., an attorney for the Newport-Mesa district. “It could have been a lot worse--$2.5 million worse.”

Also, Goldstein declined to impose a ban sought by the BIA that could have prevented the district from collecting the maximum developer fees through 1992 without first showing the court a justified need for the fees.

And so, while the decision invalidates the district’s 1987 fees, it leaves intact revised schedules that the district has used since November to collect about $1.2 million.

That may well lead to another court battle, because BIA officials maintain that these latest fees are virtually identical to the ones found deficient by the judge.

Never Justified to Public

Goldstein said in his ruling that the fees were faulty because the district never adequately justified to the public how its capital needs in the years ahead justified the imposition of the maximum developer fees allowed by law.

The Newport--Mesa case was watched closely by education and building industry officials around the state. It was one of the first legal challenges to a 1987 California law that allowed local school districts to raise money for capital improvements by taxing local developments, ranging from large-scale commercial projects to residential home additions.

“We established an important principle here,” said John Erskine, executive director of the BIA’s county region. “This is one of the first times that a judge has said that these schools can’t just single out a group for a special tax, whether there’s a need or not.”

Although he is “very happy overall” with the final ruling, Erskine acknowledged that the judge’s refusal to order refunds for all those people and companies assessed fees is a blow to the BIA.

“We believe everyone should get a refund, whether they were a party to this action or not,” said Erskine, who suggested that the BIA may appeal that aspect of the ruling.

Also considering an appeal will be the Newport-Mesa school board, which will meet in closed session next week to review the ruling with its attorneys, Supt. John W. Nicoll said.

“I’m glad the judge has made a decision so we can get on with the business at hand, but I most respectfully disagree with his decision that our fees were invalid to begin with,” Nicoll said.

The decision “will not cause an immediate financial hardship,” he said, “but it does take away $600,000 that we could have used.”

The district projects capital expenses totaling about $40 million in the next 5 to 8 years, chief among those being the reopening of Lincoln Elementary School, the superintendent said.

Those awarded refunds Tuesday were: Arnel Development Co., $538,481; Centra Development Co., $37,782; Beven and Betsey Grams, $3,497, and Nita Connelly, $13,834.

Unless the district decides to appeal, those refunds will probably come out of a pool of about $2.1 million in unspent developer fees that was frozen in part by the pending litigation, Nicoll said.