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County Counsel recommending the Board:
1) Consider the various options for refunding development impact fees that were ordered by the court to be refunded in the Thomas Austin and Helen Austin v. County of El Dorado et al. litigation (Case Number PC20150633);
2) Direct staff to issue partial refunds by direct payment to the current record owners of eligible parcels as of the last equalized assessment roll, with payment amounts prorated based on the proportional relationship between the amount of fees actually paid on an eligible parcel and the amount of funds subject to refund pursuant to the Settlement Agreements; and
3) Direct staff to develop a claims process to facilitate the refunds, proceed with the refunds once the claims process is implemented, and to return to the Board in approximately six months with a status update on the refunds.
FUNDING: TIM/TIF funds, El Dorado Hills Community Services District Park & Recreation Impact Fee Fund, El Dorado Hills County Water District Fire Impact Fee Fund.
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DISCUSSION / BACKGROUND
On December 2, 2015, petitioners Thomas and Helen Austin filed a petition for writ of mandate alleging that the County failed to make required findings under California’s Mitigation Fee Act (MFA). Most of the issues in this case were issues of first impression and included an intermediate decision by the Court of Appeal to determine the proper statute of limitation applicable to this type of petition. In recognition of the complexity of this case, the trial court and the parties agreed to hear the case in three phases: preliminary procedural issues (Phase 1), substantive issues (Phase 2), and refund/remedies issues (Phase 3), with separate briefing for each phase.
Phase 1 of the trial began on January 10, 2023. The Court held that petitioners have “public interest standing” to pursue their claims even though they did not pay many of the county fees at issue. The Court also ruled that the County’s biological in-lieu fees (oak resources and rare plants) are not subject to the MFA because they are regulatory fees rather than development impact fees.
Phase 2 of the trial commenced on October 17, 2023. The court ruled in favor of Petitioner on all counts based on a hyper-technical approach to compliance with the MFA 5-year finding requirement. The court ruled that the 5-year finding requirement is mandatory; therefore, strict compliance is required. The Court focused on the County’s failure to use the exact words "finding" or "reasonable relationship" despite the numerous documents/public meetings/public hearings that, taken as a whole, demonstrate the reasonable relationship between the fee and the purpose for which it was charged (mitigation for development impacts to transportation infrastructure).
Phase 3 of the trial commenced on January 9, 2025. The court again ruled for petitioners regarding the refund request and ordered the County to refund fees that were collected during a specified period of time, including interest at the County’s pooled rate. The court denied petitioners request for prejudgment interest. Since calculation of the fees involved “simple math” the court directed the parties to meet and confer to determine the exact amount of the refund. The parties did not dispute the dollar figures that were ultimately calculated; however, during these discussions, a settlement offer was made, and settlement negotiations ensued which resulted in the County and petitioners reaching a settlement with an effective date of October 3, 2025.
Pursuant to the settlement agreement, the Board is required to determine the method of the refund within 60 days of the effective date of the settlement agreement which is why this item is on the agenda today. Under the MFA, the Board determines the method of refund, and such determination is considered a legislative act. If a refund under the MFA is required, the local agency: “shall refund to the then current record owner or owners of the lots or units, as identified on the last equalized assessment roll, of the development project or projects on a prorated basis, the unexpended portion of the fee, and any interest accrued thereon. By means consistent with the intent of this section, a local agency may refund the unexpended revenues by direct payment, by providing a temporary suspension of fees, or by any other reasonable means. The determination by the governing body of the local agency of the means by which those revenues are to be refunded is a legislative act.” (Government Code 66001(e), italics added)
As the foregoing statutory language indicates, the person(s) or entities that paid the fees are not necessarily the person(s) or entities that are eligible for a refund. Under the MFA, regardless of who actually paid the fee, the refund is paid to the current owners of record identified on the last equalized assessment roll. The last equalized assessment roll was deemed equalized on August 20, 2025 (Revenue and Taxation Code 2052).
Settlement Agreement between Petitioners and County (TIF/TIM)
County agreed to issue refunds from the following four TIM Fee funds or successor funds:
1. 2004 General Plan, Zone 8
2. 2004 General Plan, Zones 1-7
3. West Slope pre-2004
4. Interim Highway 50 Fund
Parcels eligible for a TIM/TIF partial refund are parcels whose owner(s) “paid impact fees for the foregoing four funds during the time period of December 2, 2014, through November 15, 2016.” “The Board of Supervisors shall, within sixty (60) days of the Effective Date, determine the method of Refund as authorized by Government Code section 66001, subd. (e).” Pursuant to the Settlement Agreement, the County “shall use reasonable efforts to complete the Refund within seven months from its determination of the method of Refund.” (Settlement Agreement Section 1.(a), as relevant)
County Fees (TIF/TIM)
Total Amount to be Refunded: $ 9,500,000 (TIF/TIM)
Attorney Fees & Costs: $ 5,219,601 (TIF/TIM)
Subtotal: $14,719,601 (TIF/TIM) (including pooled interest)
Stipend to Austins: $50,000 (Risk Liability)
Total Settlement Amount: $14,769,601
Settlement Agreements between Petitioners and EDHCSD and EDH Fire (special districts)
The Petitioners also entered into separate settlement agreements with El Dorado Hills Community Services District (EDHCSD) and the El Dorado Hills County Water District (EDH Fire) that established the amount of the refund, attorney fees and costs, and a stipend for the Petitioners to be paid out of each special district fund. Since the EDHCSD and EDH Fire fees are County fees imposed on behalf of the special districts, the Board’s determination of the method of refund will also apply to the special district fees and the County will be responsible for refunding the special district fees out of the special district fee accounts. Per the settlement agreements, the County, EDHCSD, and EDH Fire will all pay attorney fees and costs and the stipends directly to the Petitioners’ attorneys. EDHCSD and EDH Fire have already paid agreed-upon attorney’s fees and received reimbursement from their respective development impact fee funds. Refunds from the special district funds will be made within the same time frame as the TIM/TIF refunds. The EDHCSD and EDH Fire settlement agreements are attached as Exhibits to the County settlement agreement.
It should be noted that parcels eligible for a special district refund are parcels whose owners paid the special district fees during the eligible time period specified in their respective settlement agreements. For EDHCSD the eligible time period is December 2, 2014 through June 28, 2016 and for EDH Fire the eligible time period is December 2, 2014 through December 13, 2016.
Refund Options:
As previously noted, the MFA contemplates that “refunds” may be issued in a variety of different ways including (1) Direct payment (cash/check), (2) Temporary suspension of fee collection (100% or some other percentage), (3) Credits, (4) Combination of the above, and (5) Other reasonable means (consistent with the intent of the MFA). These options are expanded on in detail below.
Option 1: Direct Payment (cash/check)
Pros: Direct Payment is the easiest to manage since it is a relatively short-term, albeit intensive, commitment of staff resources. Once checks are issued, the County’s responsibilities are concluded. County staff considered various methods for determining each eligible property owners’ portion of the total refund amount and concluded that the most equitable method and the easiest to manage is a proration based on the amount of fees actually paid on an eligible parcel. County can recover the cost of processing refunds for the special districts.
Cons: Direct payment will probably have the biggest impact on the funds in terms of actual dollars. This method will require significant staff time and resources over the course of approximately seven months, possibly longer.
Option 2: Temporary suspension of fee collection (100% or some other percentage)
Pros: A temporary suspension of fees will probably have the lowest impact on staff time and resources.
Cons: A suspension of fees does not seem to accomplish the goals of the MFA, and it would likely not benefit most of the eligible property owners. The refund is supposed to go to the “current record owner or owners of the lots or units, as identified on the last equalized assessment roll, of the development project or projects on a prorated basis.” If the owner or owners of the lots or units are given a suspension of fees, they may never have an opportunity to use it unless they build a new residential or non-residential project in the County. This method appears to only benefit large developers who are eligible for a refund and not individual eligible property owners. A suspension of the fees would also require prolonged staff monitoring and tracking.
Option 3: Credits
Pros: Initially, less impact on staff time and resources. Staff time and resources will presumably be spread out as credits are used; however, a tracking system will have to be set up. Impact to the funds will be spread out over time.
Cons: The issuance of credits raises many questions regarding the use of the credits and the tracking of the credits. For example, are the credits a commodity that can be sold or traded? Would credits create an underground marketplace for the purchase of credits at a discount? How would the credits be tracked if they are considered a commodity? How would the County verify who owns the credits at any given time? Credits would also involve an unknown amount of staff time to monitor and track the credits for a prolonged period, potentially decades.
Option 4: Combination of the above
Pros: Depending on the combination, it would probably have a smaller initial dollar impact on the funds. The impact to staff time and resources depends on the combination
Cons: Same as noted above.
Option 5: Other reasonable means (consistent with the intent of the MFA)
Other refund methods can be considered as long as they are consistent with the intent of the MFA.
Staff Recommendation:
County staff (CAO, DOT, Auditor/Controller and County Counsel) met several times to discuss the potential refund options, and the consensus of the working group was that a refund by the direct payment (cash/check) method would be the easiest to implement, most equitable, and would eliminate the need for prolonged future monitoring and tracking. Because the refund amount is a negotiated amount that includes attorney fees and costs, the eligible property owners will only get a partial refund of the fees actually paid. As a result, a method to prorate the refund amount among the eligible property owners is necessary. After considering several different methods of proration, the working group determined that the most equitable method of prorating the settlement refund amount is to prorate each partial refund based on the amount of fees actually paid on an eligible parcel. The working group is also recommending that the partial refunds be made through a claims process so that the County can verify property ownership and obtain W-9 forms and County payee information.
County staff has already started working on compiling a list of eligible parcels and eligible property owners identified on the last equalized assessment roll. Preliminary research indicates that between 1,800 and 1,900 parcels may be eligible for a partial refund of TIF/TIM Fees. Once the Board determines the method of refund, staff will work on the procedures and processes to claim a refund. Information on the claims process will be posted on the County’s website once the process is developed and implemented. Attached to this Legistar item are draft Frequently Asked Questions which will be updated following the Board’s action today and will be posted on the County website shortly thereafter.
ALTERNATIVES
There are no feasible alternatives. Under the MFA, the Board is required to determine the method of refund which is considered a legislative act.
PRIOR BOARD ACTION
N/A
OTHER DEPARTMENT / AGENCY INVOLVEMENT
Chief Administrative Office
Department of Transportation
Auditor-Controller
CAO RECOMMENDATION / COMMENTS
Approve as recommended.
FINANCIAL IMPACT
The partial refunds will come out of the various development impact fee accounts.
CLERK OF THE BOARD FOLLOW UP ACTIONS
N/A
STRATEGIC PLAN COMPONENT
N/A
CONTACT
Kay Ann Markham, Senior Deputy County Counsel
David Livingston, County Counsel