Burke Public Law Update: In-Lieu Fees Must Be Refunded If City Has Not Timely Made Five-Year Findings, Court Rules

By Megan A. Burke and Kevin D. Siegel, Partners at Burke, Williams and Sorensen, LLP

Must in-lieu fees paid by a developer as a condition of project approval be repaid by the city if it has not timely adopted the five-year findings required by the Mitigation Fee Act?  Yes, the Sixth District Court of Appeal has ruled in Hamilton and High, LLC v. City of Palo Alto (March 20, 2023 No. H049425) __ Cal.App.5th __, 2023 WL 2570589.

The Sixth District held that the developers were entitled to refunds of in-lieu parking fees, even though they had chosen to pay the in-lieu fees rather than provide parking for their project at the levels required by local regulation, and despite the fact that the city had belatedly adopted the requisite findings.

The Court also rejected the city’s arguments that the developers’ cause of action for refunds did not accrue until the city had denied a demand for refund.  Since the developers had filed suit only three months after the city denied the refund demand, the court did not resolve whether a one-year statute of limitations applies to such refund claims, as the Third District has ruled, or a three- or four-year statute of limitations applies, as the developers asserted.

Cities and other agencies that collect fees to mitigate the impacts of development – including in-lieu fees paid by developers rather than developing per code requirements – should take extra precautions to ensure that they timely comply with the findings requirements of the Mitigation Fee Act, or they risk substantial liability for refunds and loss of moneys to provide necessary public facilities.

Our attorneys at Burke – including Megan A. Burke and Kevin D. Siegel, who authored this summary – are well-versed with these issues and can help with compliance and litigation.

Read more about the Mitigation Fee Act and this important new decision at www.bwslaw.com.