May It Please The Court

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May It Please The Court
by Leonard Rivkin
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Quote of the Day - I make a fortune from criticizing the policy of the government, and then hand it over to the government in taxes to keep it going. - George Bernard Shaw
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Government Loses Big Battle Over Excessive Developer Fees

Right before Christmas and Hanukkah last year, the California Supreme Court quietly issued a decision that will have long-reaching effects across the state, perhaps to the point that cities and counties may raise taxes for fees they can't now collect from builders (and consequently new home buyers).  Builders have long groused about both the time it takes to get land development approval and the costs.  One builder, however, recently chose to challenge one City's fees as excessive.

The builder won.  In a big way.

Barratt American, a Carlsbad builder somewhat new to California, claimed that it had paid more than $143,000 in building permit and plan review fees for at least 83 building permits for the construction of single-family homes, or $1,722.89 per home.  The City's ordinances allowed it to charge $550.50 per home.  Barratt claimed that the City of Rancho Cucamonga had collected more than $1,000,000.00 in excess building fees in one year from all builders, and sought a refund of the money it had paid in.

While the City succeeded in its argument that four of five causes of action Barratt filed should be dismissed.  It didn't succeed, however, in the most important of the five:  the one cause of action that asked for a refund of excess fees.  Ultimately, the decision will lead to lower new home prices to consumers, and lower revenues to cities.  Barratt has a similar case against the City of Encinitas pending before the Supreme Court, which now will most likely be handled the same way.

Cities and counties across California now need to readjust their fee, accounting and audit structure to meet the requirements explained by the California Supreme Court.  Essentially, cities must now price their fees commensurate with the cost of providing the services of planning review to obtain development permits to meet the Court's edict.

In government-speak, that result means less money coming in to local government, even though the fees are supposed to cover costs.  Does that mean that with less revenue, local governments will now try to raise taxes elsewhere to cover the lost revenue?  Let me put it this way:  how many times have we seen taxes go down?

Posted by J. Craig Williams on Saturday, January 07, 2006 at 13:23 Comments (2)


Comments by Smitty from United States on Tuesday, January 10, 2006 at 22:24 - IP Logged
Building permits shouldn't be an income redistribution tool and neither should the state.

Comments by Brian from United States on Monday, January 09, 2006 at 18:43 - IP Logged
While I can see your point, what does the government really have to lose?

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