03 - Fees and Exactions

Revised on 07-12-2023

Fees, or the more inclusive term exactions, may be imposed as a condition of approval on a development project. The four major types of exactions include:

  1. Dedication of land and fees in lieu of dedication, 
  2. Subdivision reservations,
  3. Project design and improvements, and
  4. Fees

Dedication of Land and Fees in Lieu of Dedication

Dedication can be defined as the voluntary act of an owner or developer setting aside a portion of land for public use. In California, two types of dedication exist 1) those made under common law, and 2) those made pursuant to the Subdivision Map Act (Section 66411 of the California Government Code, et seq.).  A common law dedication occurs when an owner records a map of his or her property with areas labeled as for public use. Over time, the statutory provisions of the Map Act and non-statutory requirements of zoning law have become more important. Section 66475 of the California Government Code allows local agencies to require dedication or irrevocable offers of dedication of real property within the subdivision for streets, alleys, drainage, public utility easements and other public easements.

Exactions must be related to and proportional to the impact of the development. Local agencies have a long history of exacting requirements in exchange for permission to develop, but this practice became more prevalent after the passage of California Proposition 13 in 1978. Proposition 13 greatly reduced local governments’ ability to raise property taxes leaving less money to finance infrastructure improvements. Local agencies in turn have increasingly looked to developers to fund the improvements that will be needed to serve the development.

Subdivision Reservations

Sections 66479 through 66482 of the California Government Code, allows local agencies to reserve areas of real property within the subdivision for parks, recreational facilities, fire stations, libraries, or other public uses. The major difference between a reservation and a dedication is that the Map Act provides for reimbursement of the fair market value of the reserved area plus the taxes against the reserved area from the date of the reservation and any other costs incurred by the developer in the maintenance of the reserved area.

Design and Improvement

Section 66411 of the California Government Code vests regulation and control of the design and improvement of subdivisions in the legislative bodies of local agencies. LAMC 17.05 includes design standards for streets, alleys, easements, grading, drainage, utilities and park and recreation sites. In addition, LAMC 17.05 equires that the subdivision be designed in conformance to the General Plan.

Fees

The three major categories of fees include:

  1. Development fees which are levied on new development to cover the  cost of infrastructure or facilities necessitated by that development
  2. Fees for benefits and services
  3. Regulatory fees.

Development Fees:  A development fee is an exaction that is imposed as a precondition for the privilege of developing land. Such fees are commonly imposed on developers by local governments in order to lessen the impacts of increased population or demand on services generated by that development. Traffic mitigation fees, infrastructure improvement fees, and fees for improving sewer and water systems to accommodate new development are common examples of development impact fees.  

Fees for Benefits and Services:  Local agencies can charge fees for various benefits and services. These fees include service fees, user fees, and connection fees and can be imposed for services such as refuse collection, sewer service, and water supply. In order to be considered a fee and not a tax subject to the limitations of Proposition 13, these fees must not exceed the value of the services rendered.

Regulatory Fees:  Regulatory fees are imposed to cover the cost of regulating some activity such as a business license fee. Similar to fees for benefits and services, regulatory fees which do not exceed the reasonable cost of providing the regulatory activity and which are not levied for general revenue purposes are not considered taxes. 

Standard Fees, at a minimum, are reviewed on an annual basis.   The most current version of the City’s Standard Fee List is located at the BOE website under Permits (https://engineering.lacity.gov/permits).  

Limitations of Exactions - Takings


Regulatory Taking

The Fifth Amendment of the U.S. Constitution includes a provision “nor shall private property be taken for public use without just compensation.” As land use regulations were implemented the legal concept of a regulatory taking emerged which limited the government’s ability on exactions. The theory of a regulatory taking is that land use regulation can under certain circumstances have the same affect as the government taking the property outright. Thus an exaction cannot be imposed that results in a regulatory taking.