Cal. Ct. App. Reverses Lower Court and Upholds Impact Fees

This post was authored by Sebastian Perez, Esq.

The City of Oakland’s (the “City”) police power was challenged over The Monte Vista Villas, a large residential development project in the City (the “Project”), when The Skyview Executive Homes (“Skyview”), a condominium development within the Project, and Sky Chi 8, LLC (“Sky Chi”), the seller and owner of Skyview, and Discovery Builders, Inc. (“DBI”), the developer and general contractor (Sky Chi and DBI collectively are “Respondents”) petitioned for a writ of mandate that challenged the imposition of new impact fees on development projects meant to address the effects of development on affordable housing, transportation, and capital improvements which included the Project. The trial court granted the writ and vacated the imposition of the fees. This appeal followed.

In contention between the City and Respondents was a 40-page document entitled “Conditions of Approval (“COA”) and the adoption of all the mitigation measures identified in an environmental review as outlined in the Mitigation Monitoring and Reporting Program (“MMRP”). Specifically, a subsequent agreement (the “Agreement”) was entered into by the City and the developers that detailed the terms to compensate the City for fees related to the Project’s large scale and complexity. The Agreement included provisions where the parties tentatively agreed on all the Developers fees due related to the Project to be expressly stated as well as a severability clause that kept all other provisions enforceable should another be deemed unenforceable. As development of the Project continued and 11 years later, the City adopted 3 new impact fees—an affordable housing impact fee, a transportation impact fee, and a capital improvements impact fee—which went into effect shortly thereafter under Oakland Municipal Code Secs. 15.72, 15.74 (“Oakland Mun. Code”). After the new 3 impact fees went into effect, Respondents filed building permit applications for 5 of Skyview’s 10 buildings, and the permits were issued without any of the new impact fees assessed or paid. Respondents then filed building permits 3 years later for the remaining Skyview buildings, for which the City assessed all 3 impact fees. Respondents partially paid the impact fees to obtain the building permits and protested the general imposition of the fees as they pertained to them, but the City refused to rescind the fees.

A year later, Sky Chi and DBI filed for a writ of mandate challenging the imposition of the impact fees and the trial court granted the writ petition. The trial court reasoned that the Agreement was considered a binding contract which limited the City’s ability to impose further fees related to the development of the Project not provided for in the contract and further decided that such limitation was not an infringement of the City’s police power because the parties had relied on the terms of the Agreement for the last 16 years. The trial court issued the writ of mandate which ordered the City to vacate the imposition of impact fees on Sky Chi and DBI and to refund impact fees already paid. The City appealed and alleged that the trial court erred because (1) the Agreement had not prohibited the assessment of impact fees enacted after the Agreement was signed; (2) the trial court’s construction of the Agreement infringed on the City’s exercise of its police power; and (3) the doctrine of equitable estoppel had not prohibited the City from exercising its police power.

On the first issue, the City argued that the Agreement did not bar future impact fees and was only intended to cover the costs of City employee services and specialized consultant fees, and the impact fees fell outside of those categories. Respondents argued that the plain language of the Agreement precluded the imposition of future impact fees. However, the Court found that even if Respondents’ interpretation of the Agreement were correct, such provisions to prevent the City from imposing impact fees on the Project were untenable and could not be enforced because it would be an invalid infringement on the City’s police power. On the second issue, the Court relied on substantial case law to rule for the City and reiterated its inherent police power to make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws which could not be negotiated away. On the third issue, the Court deemed Respondents’ equitable estoppel argument waived since it was raised for the first time on appeal but also the merits because on balance, there would not have been a grave injustice to Respondent that outweighed the adverse impact on public policy or the public interest.

Therefore, the Court reversed the lower court’s judgment and held that the trial court was to enter a judgment denying the petition for writ of mandate. 

Discovery Builders, Inc. v City of Oakland, 2023 WL 4115074 (CA App. 6/22/2023).