Legislature Proposes Amendment to SB 937 to Clarify School District Exemptions from School Fee Deferral

02.12.2025

Local agencies, including water districts and school districts, often collect fees or charges from new residential developments to fund public improvements or facilities necessary to accommodate the residential developments and their future residents. Government Code section 66007 (“Section 66007”), subdivision (a), requires these local agencies to defer the collection of such fees or charges until the final inspection or issuance of a certificate of occupancy.

School districts are considered “local agencies” for the purpose of Section 66007; therefore, the collection of school fees (also known as developer fees) (“Fees”) must be deferred until the final inspection or issuance of a certificate of occupancy. Before January 1, 2025, school districts were permitted to collect Fees at an earlier stage, typically at the time of building permit issuance, by notifying their local planning agencies that school districts were not subject to Section 66007(a), pursuant to Education Code section 17621 (“Section 17621”).

On September 19, 2024, Governor Gavin Newsom signed Senate Bill 937 (“SB 937”), amending Section 66007. Specifically, SB 937 added subdivision (c) to Section 66007, requiring local agencies to defer Fees until the date of final inspection or certificate of occupancy for projects classified as “designated residential development projects.” Section 66007(c) contained additional requirements for “designated residential development projects.” As a result, when SB 937 took effect on January 1, 2025, school districts could not rely on Section 17621 to exempt themselves from deferral of Fees for projects classified as “designated residential development projects.”

As currently drafted, Section 66007(c) includes an exemption allowing school districts to collect Fees earlier than the date of final inspection or certificate of occupancy if they satisfy the following conditions:

The Fees collected are for the purposes of constructing and rehabilitating school facilities.
The school district must have a five-year plan pursuant to Education Code section 17017.5(c).
An account has been established and funds appropriated for the public improvements or facilities. “Appropriated,” as used in this subclause, means authorization by the governing body of the local agency for which the fee is collected to make expenditures and incur obligations for specific purposes.

This provision calls for a five-year report pursuant to Education Code section 17017.5, which is part of a now-defunct funding program. As a result, much confusion arose regarding the purported exemption and how school districts might comply. There is limited guidance on what would constitute a “five-year plan pursuant to Education Code section 17017.5(c),” making it challenging for school districts to claim this exemption under Section 66007(c).

On February 1, 2025, the Department of Finance released the proposed K-12 Omnibus Trailer Bill Language (“Omnibus Bill”), which, among other changes, proposes to amend Section 66007 by replacing the reference to “a five-year plan pursuant to Education Code section 17017.5(c)” with “a five-year school facilities master plan pursuant to subdivision (a) of Section 17070.54 of the Education Code.” Therefore, if the proposed language from the Omnibus Bill is adopted, school districts can satisfy the “five-year plan” requirement by adopting a five-year school facilities master plan (“Facilities Master Plan”) through the governing board’s action.

Under the proposed amendment in the Omnibus Bill, school districts are not required to participate in the School Facilities Program (“School Facilities Program”) pursuant to Education Code section 17070.10 et seq. to adopt a Facilities Master Plan for the purpose of claiming an exemption under Section 66007(c). School districts that do not intend to participate in the School Facilities Program but wish to claim this exemption may adopt a Facilities Master Plan through governing board action without submitting it to the Department of General Services or including information specific to the School Facilities Program.

If adopted, the proposed language in the Omnibus Bill would clarify whether a school district can claim an exemption under Section 66007(c). Atkinson, Andelson, Loya, Ruud & Romo continues to monitor the developments regarding SB 937. Please contact our firm if your agency requires assistance in navigating SB 937 and/or wishes to stay informed on future updates to Section 66007(c).