On June 27, 2025, Governor Gavin Newsom signed Assembly Bill 121 (“AB 121”) into law. AB 121 exempts school districts that adopt a five-year facilities plan under Education Code section 17070.54 from Senate Bill 937 (“SB 937”). AB 121 went into effect immediately.
This is a welcome development for school districts. Since Governor Newsom approved SB 937 in September 2024, SB 937 has caused districts concern and confusion. SB 937 amended Government Code section 66007 to change when local agency developer fees on some housing projects are collected—from when a building permit is issued to when the building gets its final inspection or certificate of occupancy.
Developer fees, also called school impact fees, help pay for school facilities. If the timing of fee collection changes, it can disrupt school construction plans. Having to collect fees on different projects at different times would also create extra administrative work. On top of that, there is increased risk of fees not getting collected at all if projects are not tracked carefully. When fees don’t get collected on projects, school districts do not have any good way to recover the money.
To make things harder, SB 937 is not clearly written. In fact, SB 937 arguably should not apply to school impact fees at all. The SB 937 amendments to Government Code section 66007 conflict with Education Code section 17620, which explicitly provides that school impact fees have to be collected before building permits are issued. The Court of Appeal resolved an earlier conflict between Section 66007 and Section 17620 in favor of Section 17620.[1] (RRLH, Inc. v. Saddleback Valley Unified Sch. Dist. (1990) 222 Cal. App. 3d 1602, 1611.)
However, in case a court decides that SB 937 does apply to school districts, it is a good idea to qualify for exemptions from the law. One exemption is for districts using school impact fees collected on SB 937 projects to reimburse previous facilities expenditures. Another exemption is for districts with a five-year facilities master plan.
The original SB 937 amendments to Government Code section 66007 tied the five-year plan exemption to compliance with Education Code section 17017.5. Unfortunately, the legislature had not done its homework. Section 17017.5 has been a defunct statute for more than 25 years. It was a requirement of the old state Lease Purchase Program, the program that preceded the current School Facilities Program (“SFP”). The SFP provides state funding for school facilities projects.
AB 121 updated the five-year facilities plan exemption so that Government Code section 66007 refers to five-year facilities plans adopted pursuant to Education Code section 17070.54. This is the new five-year facilities plan requirement for SFP funding that was included with the 2024 statewide school facilities bond. The Office of Public School Construction (“OPSC”) is currently preparing regulations for these new five-year plans. OPSC aims to have the regulations finalized by October 31, 2025.
Once the new five-year plan regulations are in place, it will be easier for districts to qualify for the five-year plan exemption. However, districts not participating in the SFP can adopt a simplified five-year plan now and qualify for the exemption.
Tao Rossini attorneys have helped numerous school districts navigate the complexities of SB 937 and avoid disruptions to fee collection. Contact us for strategic advice and practical support.
[1] At the time, the provisions of current Education Code section 17620 were part of former Government Code section 53080. The provisions of current Government Code section 66007 were part of former Government Code section 53077.5.
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