Enhancing Transparency: AB 516’s Annual Developer Fee Reporting and Auditing Changes

11.06.2023

On October 11, 2023, Governor Newsom signed Assembly Bill 516 (Ramos) (“AB 516”) into law, amending certain portions of the Mitigation Fee Act (commencing with Government Code section 66000) (“Act”) relating to a school district’s reporting requirements relative to developer fees, collected pursuant to Education Code section 17620 and Government Code section 65995.  Specifically, AB 516 requires: (1) additional information to be added to a school district’s Annual and Five-Year Report (“Report”); (2) additional information to be provided to an applicant paying developer fees; and (3) new grounds upon which an applicant may request an audit regarding the expenditure of developer fees. 

Annual Report Requirements

Currently, school districts are required to prepare, and make available to the public, the Report on or before December 27th of each fiscal year.  The Report must include the following information:

1. A brief description of the developer fee.
2. The amount of the developer fee.
3. The beginning and ending balance of the developer fee account.
4. The amount of the developer fees collected and the interest earned.
5. An identification of each project on which developer fees were expended and the amount of the expenditures on each project, including the total percentage of the cost of the project that was funded with developer fees.
6. An identification of an approximate date by which the construction of the project will commence.
7. A description of each interfund transfer or loan made from the developer fee account.
8. The amount of developer fee refunds subject to certain provisions in the Act.

The Report is required to be made available to the public no less than 15 days before the governing board of the school district may consider adoption of the Report.

In addition to the above requirements, AB 516 now requires school districts to also include in the Report the following information:

• For the project information previously provided in (f) above, an identification of whether construction began on the approximate date noted in the previous Report;
• For the project information previously provided in (f) above for which construction did not commence by the approximate date identified in a previous Report, the reason for the delay and a revised approximate date that construction will commence; and
• For the refunds identified in (h) above, the number of persons or entities that receive refunds.

AB 516 also requires school districts to inform an applicant of: (1) their right to request an audit pursuant to Government Code section 66023; (2) their right to file a written request to receive notice of the governing board’s meeting to review the information in the Report; and (3) a website link of where the Report can be accessed.  It is recommended that a school district include the applicant’s rights in its certificate of compliance (or any other similar form) relating to the collection of developer fees.  While we understand that not every school district has a webpage housing copies of its Report, we recommend that such link be created and updated on an annual basis with copies of the Report and any related developer fee information.   

Audit Requirements

Current law authorizes an applicant to request an audit to determine whether a developer fee levied by a school district exceeds the amount reasonably necessary to cover the cost of a facility provided.  If an applicant makes a request for an audit, current law allows the legislative body to retain an independent contractor to conduct the audit, provided an audit has not been performed on the same developer fee within the previous 12 months.  The requestor is required to deposit the estimated cost for the audit with the school district (with any unused amounts later reimbursed to the requestor). 

AB 516 now permits an applicant to also request an audit to determine when the revenue generated by the developer fee is scheduled to be expended and when the project is scheduled to be completed.

Compliance with AB 516 is mandated beginning January 1, 2024.  We note that school districts who have scheduled consideration and adoption of its Report during its January 2024 governing board meeting are required to comply with the above requirements directed by AB 516. 

We encourage school districts who have questions concerning AB 516 to reach out to legal counsel identified in this Alert.

Special thanks to Farrah Ghaffarirafi, our FCPPG law clerk, for her extensive work on this alert.

This AALRR publication is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR publication does not create an attorney-client relationship. AALRR is not responsible for inadvertent errors that may occur in the publishing process. 

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