What you Need to Know About Development Impact Fees – Part Nine Level 2 and 3 Fees

In part one of this multi-part series of articles, we discussed what to know and why to know about development impact fees. If you missed part one, you could find that article here. In our second part, we briefly discuss some of the history of developer fees for school facilities in California. In part three, we briefly discussed the three levels of fees. In part four, we discussed special circumstances and use of fee. Part five discussed adopting and increasing the fees. Part six discussed collecting fees and accounting for the collected fees. Part seven discussed permissible and impermissible use of collected fees. Part eight discussed statutory exemptions, agreements with non-unified districts, and refunds for unused permits. 

In this article, we discuss level 2 and 3 fees. These fees require a Needs Analysis. There are specific criteria and requirements a district has to satisfy before implementing these fees. Let’s dig into this.​

Here are specific requirements for the Needs Assessment:

  • Multi-track Year Round Education (MTYRE) with substantial enrollment (can be met by meeting by either);
    1. 30% (or more) K-6 on MTYRE in high school attendance area;
    2. 40% (or more) high school attendance area boundaries K-12;
  • Local bond measure in last four years with more than 50% of vote;
  • After November 4, 1998, show long term debt for capital outlay of 30% of bonding capacity;
  • Have 20% of teaching station inventory be relocatable classrooms.


Although it is permissible to incorporate level 1, 2, and 3 studies/needs analysis in a single study, it is important that the document meet all of the requirements for both studies (level 2 and 3 are incorporated in needs analysis study). It is highly recommended districts prepare a Fee Justification Study to ensure ability to collect commercial/industrial fees (level 1 fees cannot be collected at the same time as level 2/3 fees), but also to protect the district if SB50 were ever repealed.

Level 2 and 3 fees are effective on adoption but valid only one year (must be reviewed/renewed annually). The Needs Analysis requires update annually and renewal/adoption of the fees. More information about level 2/3 fees is found in government code section 65995.6. We encourage and recommend review of this code before engaging a Needs Assessment, and to ensure compliance with the specific procedures of implementing/collecting these fees.

Our next article will focus on the development of the School Facility Needs Analysis and those requirements. Stay tuned!