Judge Invalidates Newport-Mesa Schools’ Fees for Developers

A judge has decided that Newport-Mesa Unified School District officials have improperly collected about $3 million in developer fees from local homeowners and builders, a decision that clouds the district’s plans to upgrade its facilities.

In a test case watched closely by schools around the state, Superior Court Judge Leonard Goldstein ruled in a decision made public Tuesday that the Newport-Mesa district has failed to adequately justify its collection of the fees as required by state legislation in 1987.

Many schools around the state, Newport-Mesa among them, have used the 2-year-old legislation to raise money for needed school improvements by placing fees on local builders both big and small--from major developers erecting commercial complexes down through homeowners adding rooms to their houses.

The precise effect of the ruling remains to be worked out in coming months. But the head of the local branch of the Building Industry Assn. of Orange County--which sued the district--hailed the decision as a signal to all schools that they cannot haphazardly impose fees on local homeowners and developers.

Newport-Mesa District Supt. John Nicoll said the judge’s ruling dims the district’s already bleak financial picture.

“This is a disappointment, but our capital needs will not go away regardless of this case,” Nicoll said. “This district is always in a financial crunch, and anything like this that takes away money worsens that plight.”

Dianne Jacob, past president of the California School Boards Assn., said the ruling threatens to cripple local schools around the state at a time when many face a massive backlog of unmet improvement needs in their facilities.

“This could have an impact around the state,” said Jacob, who has worked extensively in the area of developer fees. “Unless the local school districts can sustain their ability to raise developer revenues, there’s absolutely no way we’ll be able to build the schools that are needed for the future.”

Judge Goldstein gave his ruling late Monday to attorneys in the case in private conference, following a trial that ended in August.

“The basis for the (developer) fees was invalid for both procedural and substantive reasons,” the judge said in an interview. He said that the district lacked the supporting data needed to justify to the public imposing the maximum developer fees allowed by law over the last 2 years.

He declined to specify precisely what the school district should have done to comply with the law. He asked lawyers for the developers to draft a new order on the fee question, which will be followed by a response from the school district and a final ruling by him.

Law Passed Last Year

State legislation that was passed in January, 1987, enabled local school districts to impose fees of up to $1.53 per square foot on new residential construction and 25 cents per square foot on commercial development to help finance schools’ capital projects.

Newport-Mesa quickly put in place the maximum level of developer fees. Over the last 2 years, Nicoll said, the district has collected about $3 million in both residential and commercial developer fees, spending about $800,000 of that total and putting the balance in a capital improvements fund.

But the developer fee policy quickly angered the Building Industry Assn., which took the district to court in the summer of 1987 on behalf of several local developers.

The building association, among the first in the state to challenge the developer fees, singled out Newport-Mesa as one of the biggest and most blatant abusers of the new revenue source in the state.

It charged that the school district, despite an actual decline in enrollment, was raising large amounts of new money for routine maintenance and repair, rather than for essential capital projects.

Builder Group’s Response

Buoyed by the ruling in the case, John Erskine, executive director of the association, said Tuesday: “We (developers) are committed to paying our fair share of the cost of providing school district facilities, but we don’t feel that was the case in Newport-Mesa. There has to be some consistency in the collection of these fees. And this ruling shows that we’re not going to accept the unreasonable imposition of fees without good justification.”

Officials involved with the case said they are unsure exactly what Goldstein’s ruling will mean in practice.