Navigating the Mitigation Fee Act


California Government Code Section 66000, referred to as the Mitigation Fee Act, provides a comprehensive legal framework for ensuring that development impact fees (DIFs) are justified, documented, and used for their intended purpose. The principles and procedures it establishes must be followed by local agencies seeking to impose fees on new developments in order to mitigate their impact on communities.

Development Impact Fees

Development impact fees (DIFs) are a critical tool for local governments to manage growth and ensure that new developments contribute equitably to the cost of expanding public infrastructure and services. They can be assessed to finance a wide range of public improvements, including:

Transportation: To fund road improvements, traffic signal installations, or public transit enhancements necessitated by increased traffic from new development.

Parks and Recreation: To develop new parks, recreational areas, or community facilities to serve the increased population.

Utilities: For the expansion of water, sewer, and electrical systems to accommodate the additional demand from new developments.

Public Safety: To finance the construction or expansion of police and fire stations, and the procurement of necessary equipment and vehicles, ensuring that safety services keep pace with community growth.

Understanding AB1600 and AB602

AB1600, enacted in 1987, outlines five main requirements that amplify the principles laid out in Section 66000. AB1600 requires that any nexus analysis completed includes the following components:


Identifies the specific facilities, infrastructure, equipment, and projects that the impact fee will fund, excluding the fee from being used to cover staffing, maintenance, or other operational expenses.

The fee amount must be proportional to the burden the new development places on public facilities.

A reasonable relationship (nexus) must be established between the fee's use and the type of development project, as well as between the need for the public facility or infrastructure and the specific development project upon which the fee is imposed.

Restricts the use of revenue generated to only fund the expansion or acquisition of new facilities, infrastructure, and equipment.

AB602, which is effective from January 2022, builds upon the foundation of Section 66000 and AB1600 by introducing additional requirements, focusing particularly on housing development projects. It emphasizes the need for detailed nexus studies before the imposition of new fees, ensures public participation in the decision-making process, and reinforces that fees must be proportional to the development's impact. Key aspects include:

Residential Development

Nexus studies must ensure that fees levied on housing development projects are proportional to the square footage of the proposed units (CA Govt Code § 66016(5)(a)). This means that a larger residential project will pay higher fees than a smaller project. However, the legislation also states that fees can be levied using another mechanism as long as there is an appropriate nexus for that alternative mechanism.

Detailed Nexus Study

Before adopting new impact fees, a comprehensive nexus study must be conducted that outlines existing service levels, as well as the proposed new service levels, and justifies the appropriateness of the new levels (CA Govt Code § 66016(a)).

Public Posting

The nexus study and impact fees must not only be publicly accessible to ensure transparency but also require adoption at a public hearing with a minimum notice of 30 days (CA Govt Code § 66016 (7)).

Regular Updates

Nexus studies for impact fees must be updated every eight years, ensuring that the fees remain relevant and appropriately aligned with current infrastructure needs and development impacts (CA Govt Code § 66016 (8)).

Fee Calculation

The State’s Department of Housing and Community Development created templates for a nexus study and residential feasibility analysis to assist local governments in calculating and gauging their compliance (CA Health and Saf. Code § 50466.5).

Conclusions

AB1600 and AB602 work in tandem to provide a robust legal structure for the imposition and management of development impact fees. While AB1600 sets the foundational procedures and requirements for these fees, AB602 further refines the process, particularly for housing developments, and ensures that the fees are fair, transparent, and will effectively contribute to managing the impact of development on local communities.

Development impact fees have emerged as a fundamental strategy for local California governments, to guide and manage urban growth while ensuring that new developments contribute fairly to the enhancement of public infrastructure and services. These fees, when applied judiciously and in alignment with the principles of nexus and proportionality, allow local governments to manage the impacts associated with new development and directly benefit the community.

To learn more about our expertise in conducting development impact fee and nexus studies for jurisdictions across California, contact Khushboo Ingle (kingle@matrixcg.net).