Building-Fees Case Going to State’s Top Court

The California Supreme Court will review a Rancho Cucamonga case brought by a national homebuilder that could reshape how local governments across the state charge building fees.

The high court’s acceptance of the case, posted late Wednesday, also jump-starts similar cases in Orange County and Corona that were put on hold after an adverse appellate court ruling in July.

The lawsuits, filed by Barratt American Inc. and former developer Richard McCarthy, contend that California cities and counties routinely violate state law requiring planning and building inspection fees to reflect only the cost of providing the service. Anything more is considered a hidden tax, and illegal.

Appellate justices in San Bernardino County ruled in a published decision that local governments have complete discretion to set fees. Those fees could be challenged, they said, but only within 120 days of adoption. If the fees were later deemed excessive, they weren’t refundable, the justices said.

The Supreme Court’s interest “means that the court is not satisfied with the way the appellate court decided [the case],” said Walt McNeill, Barratt’s attorney on all three cases. The court agrees to review only a small number of cases brought to it.

“It doesn’t necessarily mean they’re going to rule in our favor,” McNeill said, “but if the Supreme Court looked at the appellate decision and believed everything was correctly decided, there would have been no usefulness in granting review.”

The court likely was influenced to take the case because Barratt and McCarthy’s group, the Paladin Fair Housing Coalition, have filed so many similar lawsuits, said James Markman, city attorney for Rancho Cucamonga.

Markman said he was surprised the court agreed to consider the case.

“Our position was [Barratt] was too late” filing its lawsuit, he said. “Can a developer come in three, 15, 30 years later and challenge a fee for service? When cities do budgets, they have the same right to rely on that as someone who does business.”

Letters urging the court to take the case were filed by attorneys for the Howard Jarvis Taxpayers Assn. and former state Sen. David Kelley (R-Hemet).

While in the Legislature, Kelley obtained an opinion from the state attorney general critical of local governments for setting fees based on the square footage of new buildings. State lawyers said such fee schedules were “invalid to the extent they exceed the reasonable cost of providing the services rendered.”

McCarthy said he’s been waiting for the issue to reach the Supreme Court throughout the 14 years he’s been fighting local governments over building fees. Two cases were dismissed at the trial court level.

A judge in Riverside County tentatively ruled in March that Corona had discretion to set fees, but said officials there failed to show that the method for setting fees had any “reasonable relationship to the cost.” A final ruling was postponed until the Supreme Court acted.

“The lower courts are more politically motivated and are loath to rule against local government because they’re a part of it,” McCarthy said.

A status conference in the Orange County case is set for Oct. 24, but the case has been put on hold, awaiting a decision on the Rancho Cucamonga appeal. Had that ruling stood, the builder’s lawsuit against Orange County would have been substantially gutted.

McNeill said he’ll ask Orange County Superior Court Judge C. Robert Jameson to accelerate the case and finish the work of a special master, who is reviewing expenditures from the county’s planning department. The county’s building fund logged an $18.5 million surplus at its peak in 1997; the surplus was depleted over the next five years.

By June 2002, the fund had been drained. The department still kept spending, however, and needed an $8-million emergency loan to keep it afloat through this summer.

In the meantime, Orange County has begun charging fees based on the actual amount of time and materials spent on reviewing specific projects.