Legal Update Memo No. 30-2022 – Annual Development Fee Accounting (K-12)

Download PDF: 30-2022 – Annual Development Fee Accounting (EES) w Attachments

Reminder:  Development Fee Accounting requirements must be met within 180 days after the last day of each fiscal year. This year, 180 days after the last day of the fiscal year falls on Tuesday, December 27, 2022. As a result, we recommend that Development Fee Accounting disclosure requirements be completed prior to any December holiday office closures. The following information and documents are provided to assist school districts maintain statutory compliance.

Government Code Section 66006 requires that an annual accounting of development fees must be made available to the public within 180 days after the last day of each fiscal year, here, no later than December 27, 2022.

In addition, the governing board must review the disclosed information at its next regularly scheduled board meeting held no earlier than 15 days after the information becomes available to the public. Notice of the time and place of this meeting, including the address at which the information may be reviewed, must be mailed at least 15 days prior to the meeting to anyone who has filed a written request with the district for such notice.

Every five years, additional findings must be made for any fund in which development fees remained unexpended at the end of a fiscal year.

I. Annual Accounting: Government Code Section 66006

 School districts collecting development fees (e.g., statutory school facilities fees and other impact mitigation payments) must provide a separate accounting for each separate account or fund into which such fees or payments were deposited.

Section 66006(b)(1) requires the annual accounting for each fund include the following information:

(A) A brief description of the type of fee in the account or fund.

(B) The amount of the fee.

(C) The beginning and ending balance of the account or fund.

(D) The amount of the fees collected and the interest earned.

(E) An identification of each public improvement on which fees were expended and the amount of the expenditures on each improvement; include the total percentage of the cost of the public improvement that was funded with fees.

(F) An identification of an approximate date by which the construction of the public improvement will commence if the local agency determines that sufficient funds have been collected to complete financing on an incomplete public improvement, as identified in paragraph (2) of subdivision (a) of Section 66001, and the public improvement remains incomplete.

(G) A description of each interfund transfer or loan made from the account or fund, including the public improvement on which the transferred or loaned fees will be expended, and, in the case of an interfund loan, the date on which the loan will be repaid, and the rate of interest that the account or fund will receive on the loan.

(H) The amount of refunds made pursuant to subdivision (e) of Section 66001 and any allocations pursuant to subdivision (f) of Section 66001.[1]

II. Every Fifth Fiscal Year: Government Code Section 66001

Government Code section 66001(d)(1) requires that for the fifth fiscal year following the first deposit into each account or fund, and every five years thereafter, the local agency must make certain findings. These findings must also be made available to the public within 180 days after the last day of each fiscal year, here, no later than December 27, 2022. When a local agency fails to make the required five-year findings, the agency is required to refund the unexpended portion of the fee, and any interest accrued thereon. Walker v. City of San Clemente, 239 Cal. App. 4th 1350, 1371 (2015)(emphasis in original).

In Walker, the city was ordered to refund approximately $10.5 million in unexpended fees for failing to make the required five-year findings. Specifically, the city failed to discuss the relationship between the nearly $10 million balance in the Beach Parking Impact Fee account and the purpose for which the fee was established, nor did it demonstrate a reasonable relationship between the unexpended fees and their purpose. The city’s purported findings identifying the sources and funds anticipated to complete financing for incomplete beach parking improvements and designating the approximate dates when it anticipated receiving that funding were also insufficient.

The Walker decision affirms that Section 66001 imposes a duty on the local agency to reexamine the need for the unexpended fees. Specifically, the Walker court explained, “[t]he City may not rely on findings it made 20 years earlier to justify the original establishment of the Beach Parking Impact Fee, or the findings it made 13 years earlier to justify reducing the amount of the fee. Instead, the Act required the City to make new findings demonstrating a continuing need for beach parking improvements caused by the new development in the noncoastal zone.”

To comply with section 66001(d)(1), a district must make all of the following findings with respect to that portion of the account or fund remaining unexpended, whether committed or uncommitted:

(A) Identify the purpose to which the fee is to be put.

(B) Demonstrate a reasonable relationship between the fee and the purpose for which it is charged. The Walker decision interpreted this to include an assessment of the impact of the development on the local agency, the current status of the need for the fund, the status of any improvements identified when the fee was established, what has been done since the fee was imposed, and future plans.

(C) Identify all sources and amounts of funding anticipated to complete financing and incomplete improvements identified in Government Code section 66001(a)(2), which states if the use is financing public facilities, the facilities shall be identified. It is optional, but identification can be made by reference to a capital improvement plan as specified in Government Code sections 65403 or 66002, or in other public documents that identify the public facilities for which the fee is charged.

(D) Designate the approximate dates on which the funding referred to in paragraph (3) is expected to be deposited into the appropriate account or fund.

In sum, the local agency must affirmatively demonstrate that it still needs the unexpended fee to achieve the purpose for which it was originally imposed and that the agency has a plan on how to use the unexpended balance to achieve that purpose.

The findings required by this subdivision need only be made for moneys in possession of the local agency and need not be made with respect to letters of credit, bonds, or other instruments taken to secure payment of the fee at a future date. As noted above, if the findings are not made as required by this subdivision, the local agency must refund the unexpended moneys in the account or fund plus interest as provided in Government Code section 66001(e).

III. Additional Information and Suggestions

Enclosed with this letter are three forms to assist with Government Code sections 66001 and 66006 compliance. The attachments include:

  • A sample resolution related to statutory fees collected under Education Code section 17620. (For districts which still have fees collected under “SB 201” — Government Code section 65970, et seq.—a separate resolution is available upon request.)
    • A sample Exhibit 1, to be completed and attached to the resolution addressing the information required by Government Code section 66006 (Annual Accounting).
    • A sample Exhibit 2, to be completed and attached to the resolution addressing the information required by Government Code section 66001 (Fifth-Year Accounting).
  • Instructions to complete Exhibit 1 and Exhibit 2.
  • Copies of relevant Code provisions.

These three documents assume that there are funds remaining in the account(s) or fund(s) in question for which a report under Government Code section 66001 is necessary. If that is not the case, please contact our office and we can provide a modified form of resolution. Finally, a reminder that even if funds remaining at the end of the fiscal year have been spent prior to the date of the accounting, it remains necessary to comply with Government Code section 66001 and complete the Fifth-Year Accounting. Although, the fact that the funds remaining have been spent will be reflected on both Exhibit 1 (reference (F)) and Exhibit 2 (references (C) and (D).)

Please contact our office with questions regarding this Legal Update or any other legal matter.


The information in this Legal Update is provided as a summary of law and is not intended as legal advice.  Application of the law may vary depending on the particular facts and circumstances at issue.  We, therefore, recommend that you consult legal counsel to advise you on how the law applies to your specific situation.

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[1] Government Code section 66001(e) requires districts to refund developer fees that are not appropriated within a five-year period from date of collection.  Government Code section 66001(f) provides a method for allocating such non-appropriated fees if the administrative costs of refunding exceed the amount to be refunded.