The Ninth Circuit held that a Berkeley ordinance prohibiting natural gas infrastructure in new buildings was preempted by the Energy Policy and Conservation Act (“EPCA”), 42 U.S.C. § 6297(c), which regulates the energy use of natural gas appliances used in household and restaurant kitchens. California Restaurant Association v. City of Berkeley, 65 F. 4th 1045 (9th Cir., 2023).

In 2019, the Berkeley City Council adopted an ordinance banning all natural gas infrastructure, including piping, in newly constructed buildings. The stated purpose of the ordinance was to “eliminate obsolete natural gas infrastructure and associated greenhouse gas emissions in new buildings where all-electric infrastructure can be most practicably integrated, thereby reducing the environmental and health hazards produced by the consumption and transportation of natural gas.”

The Ninth Circuit held that the ordinance was preempted by the express terms of the EPCA, which regulates energy use, including “the quantity of [natural gas] directly consumed  by” consumer appliances at their place of use. The court rejected Berkeley’s argument that the ordinance did not regulate “energy use” because it banned natural gas rather than prescribing an affirmative “quantity of energy” to be used by appliances.

The court observed that the EPCA was concerned with the end-user’s ability to use installed covered products at their intended final destinations, and therefore preempted local regulations that would directly prohibit all use of covered natural gas appliances in new buildings. Berkeley could not do the same thing indirectly “by merely moving up one step in the energy chain and banning natural gas piping within those buildings.” The ability to use covered products would be “meaningless if consumers can’t access the natural gas available to them within the City of Berkeley.”

The Court of Appeal ruled that the protected speech or petitioning activity on which an anti-SLAPP motion is based must be a target of the suit and not merely an event that triggered claims unrelated to such speech or activity.  Durkin v. City and County of San Francisco, 90 Cal.App.5th 643 (2023).

After the City Planning Commission approved a mitigated negative declaration for the renovation of a residence, a neighbor, Kaufman, appealed to the Board of Supervisors, which reversed the Planning Commission’s decision. The property owner filed suit against the City, naming Kaufman as a real party in interest. Kaufman filed an anti-SLAPP motion alleging that the suit arose out of his speech or petitioning activity and lacked merit.

The Court of Appeal acknowledged that Kaufman’s appeal constituted petitioning activity protected under the anti-SLAPP law but held that the suit did not arise from such petitioning activity. The suit challenged the Board’s failure to make factual findings in support of its decision; the lack of substantial evidence supporting the Board’s decision; and the Board’s convening of more than five hearings on the project. All of these were acts or omissions of the Board, not Kaufman, and the petition sought no coercive relief against Kaufman. Accordingly, the petition did not arise from Kaufman’s petitioning activity.

It made no difference that Kaufman’s appeal directly preceded or even triggered the events leading to the petition’s causes of action. A claim may be struck under the anti-SLAPP statute only if the speech or petitioning activity itself is the wrong complained of, and not just evidence of liability or a step leading to a different act for which liability is asserted. Thus, at most, the allegation of Kaufman’s protected activity merely provided context, without supporting a claim for recovery, and such contextual allegations are not subject to being stricken under the anti-SLAPP statute.  

A court addressed the City of Clovis’ repeated failures to accommodate lower-income housing needs. Disagreeing with the Department of Housing and Community Development’s (HCD’s) determination that the City’s Housing Element complied with Housing Element Laws, it held the City failed to meet minimum density requirements for certain housing sites and remanded for further proceedings under the federal Fair Housing Act, the California Fair Employment and Housing Act, and Government Code section 65008, which prohibits discrimination against residential development based on income levels. It also held that the statute imposing an affirmative duty to further fair housing requires more than an absence of discrimination, and ruled that judgment should be entered in petitioner’s favor on the portion of her fair housing claim that was based on the City’s violations of the Housing Element Law.  Martinez v. City of Clovis 90 Cal. App. 5th 193 (2023).

In 2016, Clovis adopted its fifth cycle housing element for the planning period from 2015 to 2023.  The housing element purported to accommodate the City’s Regional Housing Needs Allocation (RHNA) by including some carryover sites that had been identified in the fourth cycle housing element but had not been built out and sites that would be rezoned to accommodate housing.  It included Program 4, which stated the City would “[p]rovide adequate zoning on at least 221 acres of land by December 31, 2016, to cover the unaccommodated need.”  HCD found the City’s housing element was in substantial compliance with Housing Element Law, conditioned upon compliance with certain items including implementation of Program 4.

By 2018, the City had not implemented Program 4. HCD found that the housing element was then out of compliance.  The City responded by proposing two zoning actions:  (1) allow multi-family housing in the Public Facilities (P-F) zoning district, and (2) create a City-wide overlay zoning district to allow multi-family housing on properties that met certain standards.  HCD was not satisfied that the proposal to enact zoning implemented Program 4, and revoked its finding of substantial compliance. 

The City subsequently adopted the proposed zoning actions.  At the request of HCD, it also amended its housing element to incorporate a revised site inventory for the parcels subject to the two zoning actions.  In 2019, HCD found the amended housing element substantially complied with Housing Element Law. 

Denise Martinez, a Clovis resident, sued, alleging numerous claims under the Housing Element Law, anti-discrimination laws, and the statutory duty to further fair housing.

Housing Element Law.  Government Code section 65583.2(h) requires that certain parcels “shall be zoned with minimum density and development standards that permit at least” 20 units per acre in suburban jurisdictions such as Clovis.  The court held that the City violated this law by using a zoning overlay that required at least 20 units per acre, but keeping in place the base zoning districts that allowed lower densities.  It noted that HCD’s finding of substantial compliance was not dispositive as it created only a rebuttable presumption of validity, and rejected the City’s argument that the statutory language should be construed to require only that the zoning allow the required density. 

The petitioner also challenged nonvacant sites subject to the revised P-F zoning, claiming the City failed to establish that existing public facilities would be redeveloped into housing.  The court noted that section 65583.2(g) requires the City to “specify the additional development potential for each [nonvacant] site . . . and provide an explanation of the methodology used to determine the development potential.”  It held that this information need not be included in the housing element itself, and upheld the City’s inclusion of these parcels in the site inventory based upon information in letters the City sent to HCD.  It also rejected petitioner’s argument that the City was required to address expressly each factor that must be considered in assessing development potential.  HCD could reasonably infer that certain factors were absent based on the lack of any mention of those factors in the City’s letters. 

Federal Fair Housing Act (FHA).  The FHA prohibits housing discrimination based on race, color, religion, sex, familiar status, or national origin.  Petitioner argued that the City’s failure to provide affordable housing adversely affected people of color. 

The court relied on federal regulations establishing that liability under the FHA may be based on discriminatory effect, which is established when the action actually or predictably results in a disparate impact or perpetuates segregated housing patterns.  The court held that allegations of the City’s continuing failure to implement Program 4 and its failure to comply with the Housing Element Law sufficiently identified the specific practices being challenged.  It found allegations of statistical facts about income and housing burdens within the area sufficient to allege a disparate impact, and that the historical perspective the petition provided was “sufficient to adequately allege [that] the City’s practice of noncompliance with the Housing Element Law during the fourth and fifth planning periods perpetuated segregated housing patterns.” 

California Fair Employment and Housing Act (FEHA).  The FEHA makes it illegal to discriminate through public land use regulations, including those that make housing opportunities unavailable, based on protected characteristics that include race and source of income.  The court ruled that violations of the Housing Element Law are sufficient to establish a violation of the FEHA, provided the challenger establishes that the failure to comply makes housing unavailable.  Petitioners’ allegations of a discriminatory effect were sufficient establish that housing was made unavailable. 

The court also rejected the City’s immunity argument, noting that the immunity granted by the Government Claims Act applies only to claims for damages, and not to petitioner’s claims for a writ, declaratory relief and injunctive relief. 

Discrimination Under Government Code § 65008.  Section 65008 prohibits discrimination based on the fact that residences are intended for very low-, low- or moderate-income residents.  The court held that section 65008 encompasses actions that have a discriminatory effect.  A violation may be established by proving a disparate impact on developments intended for occupancy by lower income families, even where there is no denial of a particular development.  However, a violation of the Housing Element Law would not automatically constitute a violation of section 65008, as the petitioner must also prove a discriminatory effect, intentional discrimination, or a combination of the two.  Affirmative Duty to Further Fair Housing Under Government Code § 8899.50.   Section 8899.50 requires cities to administer programs relating to housing in a manner that affirmatively furthers fair housing.  The court interpreted this statute to do more than prohibit discrimination; it requires meaningful action.  The court concluded as a matter of law that the violations established regarding petitioner’s first three causes of action – regarding rezoning requirements, zoning at the required density and with adequate capacity to accommodate the RHNA carryover, and failing to implement Program 4 – established that the City failed to comply.  It further held that section 8899.50 may be enforced in an action for writ of mandate.

Remodeled residential units converted from space long dedicated to residential use are not considered new construction and are not exempt from local rent control under the Costa-Hawkins Rental Housing Act. NCR Properties, LLC v. City of Berkeley, No. A163003 (1st Dist., March 9, 2023).

Appellant landlords purchased two derelict single-family homes and rehabilitated them, converting them into triplexes, obtaining certificates of occupancy after completion of construction. After the units were rented out, a dispute arose as to whether the properties were subject to the City’s Rent Stabilization and Eviction for Good Cause Ordinance.

Appellants contended that the new units were exempt from local rent control under Costa-Hawkins, which provides an exemption for residential units that have a certificate of occupancy issued after February 1, 1995. The City disagreed as to four of the six units, noting that before appellants purchased the homes, the properties had been managed as rooming houses and two of the three units in each building were carved from space that had been rented for residential use before the current certificates of occupancy were issued.

The First Appellate District relied on prior caselaw holding that issuance of a new certificate of occupancy for conversion of an apartment to a condominium did not exempt the unit from rent control under Costa-Hawkins. It reasoned that Costa-Hawkins applied only to certificates of occupancy issued prior to residential use of the unit; hence buildings certified for residential occupancy prior to February 1, 1995, were not excluded.

Appellants argued that even if Costa-Hawkins applied only to certificates of occupancy that preceded residential use of a unit, the properties at issue qualified for an exemption because the renovations expanded and improved the living spaces, enabled the properties to house more people and created triplex units that had not previously existed. They pointed out that these renovations were no mere paperwork conversions and that the buildings were derelict and unoccupied before renovations began. The court acknowledged that the renovations were extensive and increased the ability to house more people, but ultimately rejected the appellants’ argument, observing that the City had found one unit in each building exempt from rent control as new construction, and the square footage of residential space that was subject to rent control appeared to be less than the square footage of the two units the City had exempted.

Plaintiff did not exhaust administrative remedies when challenging the City’s approval of a homeowner’s development project on the ground that a Class 1 categorical exemption was inapplicable. Arcadians for Environmental Preservation v. City of Arcadia, 88 Cal. App. 5th 418 (2023).

A homeowner applied for approval to expand the first story of her single-family home and add a second story. The City Council approved the project, finding it to be exempt from CEQA under the Class 1 categorical exemption for minor alterations to existing private structures.

The Second Appellate District held that plaintiff failed to exhaust its administrative remedies because it did not properly raise any claims specifically related to the project’s Class 1 exemption at the hearings on the project. Instead, plaintiff made only general statements in opposition to the project, which did not apprise the City of its contention that the project fell outside the scope of the Class 1 exemption.

Plaintiff argued that statements in the written administrative appeal were sufficient to fairly apprise the City of the objection to the exemption. These included references to environmental impacts and a request that the City prepare an EIR, which implicitly challenged reliance on the exemption. The court rejected this argument.  The cited statements were only general complaints in opposition to the project and were only general references to potential environmental impacts that even when considered together, did not come close to meeting the exhaustion requirement mandated by CEQA. The court noted that the exhaustion requirement is met when the exact issue is presented to the agency or is raised in the administrative proceeding and is sufficiently specific to fairly apprise the agency of the substance of the objection so that it has an opportunity to evaluate and respond to the challenge. Because plaintiff did not make specific challenges to the project’s Class 1 exemption and did not raise any other CEQA challenges during the administrative hearings, it failed to meet the exhaustion requirement.

The City of Irvine violated CEQA by approving a development project based on an addendum to a program EIR containing insufficient information regarding the project’s greenhouse gas emissions and by relying on CEQA’s Class 32 infill exemption, which was inapplicable due to unusual circumstances. IBC Business Owners for Sensible Development v. City of Irvine, 88 Cal. App. 5th 100 (2023).

In 2010, the City adopted a plan to guide development of the Irvine Business Complex (IBC) and prepared and approved a Program EIR, studying the effects of the development plan under CEQA. Nine years later, a developer proposed a project to redevelop a 4.95-acre parcel in the IBC. The proposed project would demolish an existing building and parking lots to construct a 275,000-square-foot office complex, consisting of a five-story office building, a six-story office building, and a seven-story parking structure.

City staff prepared an addendum to the EIR and the City Council approved the project, finding that all environmental effects of the proposed project had been adequately studied in the 2010 EIR. 

The Fourth Appellate District held there was insufficient evidence that the project’s greenhouse gas emissions were within the scope of the 2010 EIR and that no categorical exemption applied because the project could cause significant environmental effects due to unusual circumstances.

Addendum to EIR

The City argued that the addendum was proper because the project’s greenhouse gas emissions would be less than significant for two reasons. First, the project’s emissions would be consistent with the 2010 EIR and second, its emissions would comply with the thresholds drafted by the South Coast Air Quality Management District.

The court found there was insufficient evidence to support the City’s first conclusion. The City relied on the flawed understanding that the project was consistent with the EIR by assuming that the project incorporated all the mitigation efforts to achieve the EIR’s target of net zero emissions. The court explained that the incorporation of the mitigation measures alone did not constitute substantial evidence that the project was consistent with the target of net zero emissions. Moreover, even with all applicable measures in place, the large-scale nature of the project could cause it to emit a disproportionate level of greenhouse gases and that the addendum did not examine those emissions. The court explained that to demonstrate the project’s compliance with the EIR’s emissions plan, the City needed to analyze the project’s emissions within the context of present and future development in the IBC and demonstrate that its emissions would not prevent the IBC from achieving its goal of net zero emissions at full buildout.

The court also found the City’s conclusion that project’s emissions would comply with Air District thresholds to be legally incorrect. While the addendum did not discuss total emissions, draft documents indicated that the project would emit 5,563 metric tons of greenhouse gases per year. This was four times the applicable Tier 3 screening level of allowed emissions for commercial land uses established by the Air District. The addendum instead relied on the Air District’s Tier 1 threshold for projects exempt from CEQA based on the erroneous assumption that the project qualified for a categorical exemption.

CEQA’s Class 32 infill exemption

The City argued that any deficiencies in the addendum were inconsequential because the proposed project was categorically exempt from CEQA and thus the City was not obligated to perform any environmental review. The City relied on the Class 32 infill exemption applicable to projects characterized as in-fill development. However, the court concluded that the project did not qualify for the exemption because there was a reasonable possibility that it would have a significant effect on the environment due to unusual circumstances. The proposed project was not a standalone project but part of a plan to guide development in the IBC. The project would demolish an existing building and replace it with substantially larger buildings with more than double the office space originally allocated to the site that could have more substantial greenhouse gas emissions. The transfer of development rights required for this project would also be the largest ever approved in the history of the IBC development plan.

Thus, the size of the project, the scale of the transfer of development rights required to make it possible, the resulting density and the project’s estimated greenhouse gas emissions exceeding the Tier 3 threshold, constituted unusual circumstances that could result in a significant effect on the environment, making the City’s reliance on the Class 32 infill exemption improper.

The First District Court of Appeal largely upheld the City of Oakland’s EIR and CEQA findings for the Oakland A’s proposed new baseball stadium and surrounding mixed-use development, with the exception of one mitigation measure that was improperly deferred. East Oakland Stadium Alliance v. City of Oakland, 89 Cal.App.5th 1226 (2023).

The proposed project at the Port of Oakland’s Howard Terminal would include, in addition to the stadium, development of the surrounding area with residential, retail, commercial, and hotel uses; a performance venue; parking for 8,900 vehicles; and publicly accessible open space.

Railroad Safety Impacts

The project site is bounded on the north by active railroad tracks that run down the middle of a major street. The EIR found that the passenger and freight trains using these tracks would pose a safety hazard to ballpark visitors. Mitigation measures for this impact included installing fences on both sides of the tracks along the entire project frontage to prevent pedestrians and vehicles from crossing the tracks between intersections, eliminating one intersection, building a bicycle and pedestrian overcrossing, and building a vehicle overcrossing. The city found that although these measures would improve safety conditions, but the project’s impact would remain significant and unavoidable. The petitioners asserted three reasons why there was inadequate mitigation for safety impacts of railroad traffic on ballpark visitors:

  • Multi-Use Path: Part of the fencing mitigation included a multi-use path on property owned by Union Pacific Railroad. During the CEQA process, Union Pacific informed the city that it would not allow any part of its property to be used for the project. The Final EIR acknowledged that Union Pacific’s position would preclude the multi-use path. The court rejected the petitioners’ argument that the EIR was flawed because the multi-use path was not feasible given Union Pacific’s refusal to allow it. The court explained that “[t]he path does not itself contribute to the fence’s mitigation of safety hazards. Rather, the path appears to be simply an amenity. . . . With or without a multi-use path, the fence will have the desired effect of precluding access to the tracks between intersections, and there is no evidence to suggest that loss of the path will reduce the effectiveness of the fencing.”
  • Pedestrian and Bicycle Overcrossing: The EIR identified a tentative location for the overcrossing, while recognizing that the actual location could not be determined yet because it would be subject to the jurisdiction of the California Public Utilities Commission. This tentative location scored highest among four potential locations that were evaluated in a technical study. At this location, the overcrossing was estimated to be used by 60 percent of gameday visitors. The EIR concluded that the overcrossing would improve safety and therefore reduce the severity of hazards posed by the railroad tracks, but also recognized that some visitors would continue to use at-grade crossings. The court rejected the petitioners’ argument that the pedestrian and bicycle overcrossing would be ineffective. The court held that the EIR’s analysis of this topic was supported by substantial evidence: “The EIR unquestionably contains substantial evidence to support a finding that the overpass will significantly mitigate the hazards by diverting thousands of visitors from at-grade intersections.”
  • Temporary Closure of Intersections: The petitioners argued that the EIR should have considered the temporary closure of intersections at the railroad tracks during ballpark events as a mitigation measure. The court held that this argument was not raised with sufficient specificity during the CEQA process and therefore had not been properly exhausted. One comment letter had stated that “the most effective and safest way to preclude the possible use of at-grade crossings is by closing them, whether temporarily or permanently.” The court held, however, that this suggestion to temporarily close intersections, considered in the context of the broader comment letter, did not fairly apprise the city of the issue because it gave no indication that it was intended to refer to a suggested mitigation measure. The court explained that this single reference to temporarily closing intersections was an isolated and unelaborated comment, appearing toward the end of a long letter that included lengthy discussions other potential mitigation measures (including lengthy discussion advocating permanent closure of intersections).
Continue Reading Court of Appeal Upholds Most of EIR for New A’s Stadium

A local organization appealed the denial of its challenge to the approval of an affordable housing project and disputed the trial court’s order requiring it to post a bond. The Court of Appeal rejected plaintiff’s contentions on the merits and held that the plaintiff was properly required to post a bond because it was delaying an affordable housing project. Save Livermore Downtown v. City of Livermore, No. A164987 (1st Dist., Dec. 28, 2022).

The City of Livermore approved a 130-unit affordable housing project, finding the project exempt from CEQA on multiple grounds, including that it was consistent with a specific plan for which an EIR had been certified.  A nonprofit group sued, claiming inconsistency with the specific plan and CEQA violations.  The trial court required the nonprofit to post a $500,000 bond under Code of Civil Procedure section 529.2, which allows courts to order those who challenge affordable housing projects to post bonds to cover damages that may be incurred from delay in carrying out the project.

First, the appellate court found there was substantial evidence that the project complied with the City’s Downtown Specific Plan. Inconsistencies between details of the project and standards in the specific plan such as main entrance orientation and window design were not sufficient for a finding that the project would not promote the overarching polices of the plan. 

Second, the court agreed with the trial court’s finding that plaintiff’s CEQA arguments were “almost utterly without merit.” The discovery of groundwater and soil contaminants at the site after the certification of the EIR did not constitute “new information” that would trigger reanalysis under CEQA because the EIR had addressed the potential presence of contaminants at the site due to past uses of the property.

Lastly, the court found that both conditions for issuance of a bond under section 529.2. were satisfied: “(1) the action was brought in bad faith, vexatiously, for the purpose of delay, or to thwart the low- or moderate-income nature of the housing development project, and (2) the plaintiff will not suffer undue economic hardship by filing the undertaking.” Plaintiff filed its petition at the end of the 30-day statute of limitations period and then delayed preparation of the administrative record, causing the hearing on the merits to be delayed. The court found no undue economic hardship because the record showed that the plaintiff nonprofit group was supported by more than 50 members, had spent “$37,000 commissioning plans for an alternative and unrealistic location,” and had hired a prominent and expensive law firm.

A trial court had jurisdiction to find that a denial of a permit application violated the Housing Accountability Act (HAA) on remand, even though the Court of Appeal did not expressly instruct the trial court to address the HAA issue. Ruegg & Ellsworth v. City of Berkeley, No. 2487258 (1st Dist., March 14, 2023).

Plaintiff applied for ministerial approval of a mixed-use development pursuant to the streamlined approval process for affordable housing projects outlined in Government Code section 65913.4. Plaintiff challenged the City’s denial of the permit, alleging that the City violated both the streamlining statute and the HAA, which prohibits local agencies from disapproving affordable housing development projects without making specified written findings.

The trial court originally found that the City did not err in denying the ministerial permit and did not reach the HAA issue. The Court of Appeal reversed and remanded to the trial court with directions to grant the writ petition, stating that it was “unnecessary” for the appellate court to address whether the City’s denial also violated the HAA. On remand, plaintiff argued that the trial court should decide the outstanding HAA issue in addition to granting its writ petition, and the trial court did so.

The Court of Appeal agreed that trial court had jurisdiction to decide the HAA issue because doing so was necessary to fully resolve whether the plaintiff was entitled to the relief sought by the petition. The Court of Appeal’s statement that it was unnecessary to address the HAA issue did not mean that the HAA issue was outside the trial court’s jurisdiction on remand—it left that issue open for determination by the trial court. In addition, plaintiff was not required to seek rehearing of the appellate court’s decision and seek modification of the remand instructions to include further proceedings on the HAA claims — the appellate disposition, read together with the opinion as a whole, gave no indication that the HAA issues were not to be resolved. The trial court’s issuance of the writ requiring the City to grant the ministerial permit also did not moot the HAA claim because determining the HAA claim allowed the trial court to provide further relief, including retaining jurisdiction to ensure enforcement of its orders and imposing fines for noncompliance.

A recent case involving developer Charles Keenan and the City of Palo Alto highlights the importance of strict compliance with Mitigation Fee Act’s requirement that findings be made every five years concerning unexpended fees. The court held that the City’s failure to make such findings within the statutory deadline mandated refund of all unexpended fees, not merely fees held for more than five years. Hamilton and High, LLC, et al., v. City of Palo Alto, et al., No. H049425 (6th Dist., March 20, 2023).

In 2013, Charles Keenan paid an “in-lieu parking fee” of $972,000 imposed as a condition of approval of a commercial development project on Hamilton Avenue in Palo Alto. The fee was imposed on all new commercial development to fund parking facilities in the downtown area. As of the end of 2019, the City had a balance of over $6 million in unexpended parking fees.

The Mitigation Fee Act requires public agencies to make findings every five years concerning unexpended development impact fees. The City made findings for the parking fees for the 2007-08 and 2012-13 fiscal years but did not make such findings by the statutory deadline for the 2017-18 fiscal year (i.e., within 180 days of June 30th.) Keenan demanded a refund of the fee, claiming the City failed to comply with the Mitigation Fee Act. The appellate court agreed and ordered the City to refund all unexpended parking fees. In reaching that conclusion, the court made several important clarifications to the law governing such refund claims.

In-lieu fees are exactions subject to the Act’s findings requirements.

The City argued that findings were not required for the parking fees because developers had the election either to provide parking or pay an in-lieu fee. The court disagreed, finding that the fee was a “monetary exaction” imposed as a condition of approval of a project to fund facilities related to the project and therefore met all requirements of the Act. Based on an extensive review of the caselaw regarding in-lieu fees and the Mitigation Fee Act, the court found no support for the claim that the “in-lieu” or elective aspect of the imposition changed the nature of the fee for purposes of the Act.

The statute of limitations runs from the date a request for refund is denied.

Keenan requested a refund in January 2020, which the City rejected in February 2020, and Keenan filed suit three months later. The trial court held that Keenan’s action was time-barred because it was not filed within one year of the December 2018 deadline for adoption of the five-year findings. The appellate court concluded that the thrust of Keenan’s lawsuit was enforcement of a refund of the unexpended fees rather than a challenge to the City’s failure to make findings. As such, the limitations period did not begin to run until the City denied Keenan’s refund request.

Belated findings do not satisfy the Act.

After denying Keenan’s refund request, the City adopted five-year findings in May 2020 and contended these findings satisfied the Act’s requirements. The court found that this argument “ignore[d] the language specifying ‘If the findings are not made as required by this subdivision, the local agency shall refund the moneys in the account or fund as provided in subdivision (e).’” Because the May 2020 findings were not made within the statutory deadline, they were not made “as required” by the Act, and a refund was therefore mandated.

Failure to make five-year findings that comply with the Act requires refund of all unexpended fees.

The City maintained that the five-year findings requirement applied only to fees held for more than five years and, because the City had transferred $1.3 million from the parking fund to a capital fund, this had exhausted the balance of fees held in the fund for over five years and excused the findings requirement. The court rejected this argument, ruling that the plain language of the statute required the five-year findings to address all unexpended fees, not merely those held for more than five years. The court noted that its reading was consistent with the five-year reports issued by the City, which did not break out fees by date of deposit. The consequence of failure to make timely findings for the 2107-18 fiscal year was refund of all unexpended fees, regardless of the date of collection.

*  *  *

This decision underscores the importance of meticulous compliance with the requirements and deadlines of the Mitigation Fee Act. Five-year findings must be made for all development fees that fall within the Act’s definition, whether or not paid electively in-lieu of some other condition of approval. The findings must be made within 180 days of the end of the applicable fiscal year and must cover all unexpended fees in the fund, not merely fees held for more than five years. Agencies that fail to adopt findings within the statutory period or adopt findings that do not meet the strictures of the Act are at risk of having to refund the entire balance to then-current owners of the properties subject to such fees.

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