Audit of Development Impact Fees

The City of Los Angeles is passing up chances to collect as much as $91 million dollars per year from commercial, industrial and residential developers by not imposing fees for a wide range of public services their projects will require to mitigate their impacts. Other California cities have developed broad programs to charge such fees, called development impact fees (DIF) under State law, to pay for the additional demands that will be placed on public services such as fire protection as a result of new construction.

Much smaller San Francisco took in $96 million in such fees in 2014; San Diego collected $22.5 million, while the City of Los Angeles collected a relatively meager $4.9 million in DIF. What’s more, Los Angeles has not been spending much of the development impact fees it has collected. About $54 million remains in funds in which expenditures have not kept pace with revenues. For some of these funds, spending plans have not been developed to utilize the unspent monies.

Instead of a comprehensive program to impose and monitor DIF, the City has favored an ad-hoc approach to mitigating the impacts of new developments, imposing mandatory conditions of approval and/or negotiating case-specific deals that typically require developers to contribute towards or build some public improvements at their own expense. By only charging DIF in certain limited situations and by not establishing monitoring responsibilities of existing fees under one department, the City is missing an opportunity to utilize an additional or alternative tool to fund public facility improvements that offset the impacts of new development.

Read the full audit here.