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There are 100 days left until the December 27, 2024, deadline for school districts to issue reports
on their developer fee accounts pursuant to Government Code sections 66001 and 66006. We
strongly encourage our clients to take developer fee reporting seriously. Not accounting for fees
properly can have serious consequences. In a worst case scenario, it can result in having to
refund all the money in a district’s developer fee account.

By way of background, the Mitigation Fee Act allows public entities to impose developer fees on
construction to fund facilities. In the case of school districts, this is to collect funds to build
facilities for the students generated by construction within their boundaries. Before collecting
fees, Government Code section 66001 requires districts to identify the facilities on which the
fees will be spent. Districts typically do this in fee justification studies.

The reporting requirements in Government Code sections 66006 and 66001 are intended to make
sure public entities spend the fees they collect on the facilities for which they were earmarked.
Section 66006 requires a developer fee account report every year. In addition, Section 66001
requires a special report every five years.

The annual and five-year reports require districts to provide information about fee collections,
the uses of the fees, and the status of projects. Sections 66006, subdivision (b), and 66001,
subdivision (d), list the specific information that must be provided in the annual and five-year
reports. The reports must be published within 180 days of the end of the fiscal year.

The five-year reports are especially important because of the penalty for not reporting properly.
A district that fails to issue the five-year report on time is subject to legal action seeking a refund
of all the money in the account. Districts are similarly legally vulnerable if they issue a report
that does not comply with the statute’s requirements.

This harsh penalty is meant to ensure that public entities are managing developer fees properly.
If public entities can’t demonstrate their plans to spend the money on the facilities that the fees
were collected to build, they forfeit the money.

Districts often have millions of dollars in their developer fee accounts, and losing that money can
be devastating to a facilities program. Therefore districts need to be very careful about
complying with the requirements for five-year reports.

We recommend that school districts implement some developer fee “best practices.” These
include increasing school impact fees every two years in accordance with state law and carefully
complying with the annual reporting requirements of Section 66006. When districts issue
thorough annual reports, it’s much easier to prepare a five-year report that complies with Section
66001.

Districts interested in learning more about annual and five-year reports should contact the author
or their regular Tao Rossini counsel.