What do Level III Fees Mean for the Construction Industry?

On May 25^th 2016, The California State Allocation Board (“SAB”) made findings that would allow school districts to levy Level III Alternative School Fees (“Level III Fees”), no longer approving apportionment for new construction.

So what does this mean exactly?

Let’s step back a bit.

With the adoption of Senate Bill 50 and Proposition 1A in 1998, California school districts that meet certain requirements are given an option of adopting alternative school impact fees known as Level II and Level III.

Level II:

• Applies when the SAB is apportioning state school facility funding to school districts
• Represents fifty percent (50%) of a school district’s school facility construction costs per new home served

In essence, when a developer is paying their school impact fees, that payment represents 50% of the true total while the other 50% is accounted for with funding from the SAB.

Level III:

• Applies when the SAB officially declares that it is no longer making apportionments of state school facility funding school districts
• Represents one-hundred percent (100%) of a school district’s school facility construction costs per new home served

In other words, the impact fee that a developer is responsible for, would represent 100% of the fee obligation without SAB apportionments/contribution.

So what now?

CBIA (California Building Industry Association) was successful in obtaining a Court Order preventing SAB from implementing level 3 fees and from sending a notice to the Legislature that State funds for new school construction are not available.

A preliminary injunction hearing on July 1 has been scheduled, to determine whether to extend the court order until a full hearing.

The Murow Development Consultants Team will continue to monitor the progress of this issue and similar reports to keep you up to date with the development industry.

Contributed by, Christian Gagne
Director of Reimbursements and Agreements