MANTECA -- Developers are seeking refunds for an elevenfold hike in a fee the city charges to build homes.
The $4,000 fee, set to rise again to $4,702 in about a year, took effect in January to provide for government building expansions to accommodate new residents. The fee goes toward nine projects, including additions to or expansion of City Hall, the library and a performing arts center, all of which are on hold until resolution of lawsuits.
Pulte Homes, Morrison Homes and Woodside Ponte Verde Inc., which have hundreds of homes under way, filed lawsuits in San Joaquin County Superior Court demanding the city honor its former fee of $350 per house and reimburse them for the difference. They maintain the price is locked into agreements signed with the city before the new fees.
The suits follow one filed in March by the Building Industry Association of the Delta.
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"The development agreement says we'll pay certain fees and it refers by ordinance to the fees," said attorney Dave Lanferman, who represents both the developers and the association. "Our contention was that at the time we made the agreement, it was a flat fee ($350) and that's what our expectation was at the time. Reasonable minds can disagree, and that's why we're having a third party look at it. And we're working with the city."
He said his clients hope to reach an agreement outside court.
The City Council discussed the suits during a closed-door session Dec. 3 but took no action.
City attorneys stand by the fee and a belief that the agreement required builders to pay the fee in place when they pulled building permits.
"The development agreements themselves contemplate that there might be an increase in the fee, and that is what in fact took place," said Peter Pierce, one of the lawyers representing the city. "So the city has not violated any agreement at all."
Likewise, he said, the city disputes claims by the building association that suggest the city is charging new development for existing deficiencies.
Before making the change, the city compiled at least 50 pages of documentation on the fee, what it would pay for and how the burden would be split by existing city funds and new development.
"We feel the evidence supports the fee and we have a strong defense in court," Pierce said.
Raise factored existing homes
He said the fee would have been higher had existing residents not factored into the price. "The city is not improving areas of current deficiency on the backs of developers," Pierce said.
John Beckman, chief executive officer of the building industry association, disagreed.
"We agreed that they were going to have to go up from before. And we said it should be in the neighborhood of $3,000, give or take a couple of hundred dollars," he said. "But not $4,700."
Beckman said the association is concerned that other cities also are considering or passing fees that overcharge developers and that the association is "engaged with other cities and talking about the fees and saying 'This is what the law says, and let's see if we can come up with something that is legal.' "
The association has a second lawsuit challenging the city of Stockton's agricultural mitigation fee, which Beckman said is a similar case.
Figures weren't available on how many cities face legal challenges on their fees. The practice goes back decades.
Bill Higgins, legislative representative for the League of California Cities, said cities have a right to set fees at a rate that covers the cost of new residents. The industry standard is to base the rate on a professional study like the one Manteca has.
"Most people want to live in a community where they have facilities, and if they can't get it through developer fees, there is really no other way to get it," he said. "I think we are constantly struggling for better ways to fund infrastructure in a way that is less of a burden, but the fact of the matter is that it takes a lot of money to provide good community facilities."
Bee staff writer Inga Miller can be reached email@example.com or 578-2324.