Judge orders Pismo Beach to refund developer for excessive fees 

A SLO County Superior Court judge recently ruled in favor of a developer who sued the city Pismo Beach over excessive development impact fees the city charged for a storage facility project.

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• File Photo By Kasey Bubnash
• REFUND In a Sept. 16 ruling, Judge Tana Coates determined that Pismo Beach violated state law when it charged developer William Kendall hundreds of thousands of dollars in development impact fees for a self-storage facility project, Pismo Beach Self-Storage, and ordered the city to refund Kendall a 2018 payment of $889,254 plus at least $160,021 in interest.

In a Sept. 16 ruling, Judge Tana Coates determined that Pismo Beach violated state law when it charged developer William Kendall hundreds of thousands of dollars in development impact fees for a self-storage facility project, Pismo Beach Self-Storage, and ordered the city to refund Kendall a 2018 payment of $889,254 plus at least $160,021 in interest. The ruling also invalidated a city ordinance establishing Pismo's self-storage development impact fees that Coates said violates state law.

Kendall and his team of attorneys announced the win, the end of a nearly two-year court battle, in a press release on Oct. 26.

"Our press release came out so that the citizens of Pismo know that their council is 1) Wasting money, and 2) Lost something that could have been easily negotiated," Kendall told New Times.

In 2004, according to the Sept. 16 ruling, Pismo Beach adopted a development impact fee schedule based on a study conducted by Maximus Inc. Development impact fees are charged to developers for the purpose of defraying the costs of public services related to their projects. The city imposed fees for residential dwelling units, mobile homes, hotels and motels, recreational vehicle parking spaces, and commercial uses, but not specifically for self-storage units.

That year, Kendall purchased land on Five Cities Drive that was being used for self-storage and RV storage with hopes of expanding and updating the facility. Kendall presented his initial plans to the city in 2005, and the Pismo Beach Planning Commission approved the project in 2008. Kendall put the project on hold for a few years after the economic downturn of 2008, but returned to working on the project in 2013.

Although there wasn't a development impact fee schedule specifically for self-storage units in Pismo at the time, in 2016 city staff estimated that fees for the project would total about $539,000, which Kendall said was already about double what he normally pays for such projects. Still, he agreed to pay. But in 2017, court documents show that after discussing where the project should fall on the city's fee schedule, city staff landed on reclassifying the project as retail, because the multi-use project includes an office and manager's residence along with four buildings of self-storage space. Staff advised Kendall that fees for his project would thus increase to roughly $2.45 million.

"There was no rhyme or reason to what they were telling us," Kendall said.

By 2017 the project was reclassified again as "office" space, and the estimate for the project's impact fees had landed at $1.87 million. City staff, according to court documents, said that past water use at the prior self-storage and RV storage site indicated immense water usage. But Kendall said he never proposed using much water at the site, other than for some drought-tolerant landscaping. While the former site may have been used to wash RVs, Kendall said he never intended to allow RV washing at Pismo Beach Self-Storage.

Then in May 2018, Pismo Beach City Council voted to establish a light industrial and self-storage fee schedule, which, in part, assumed that any facility allowing RV storage would also have wash racks and be equipped for RV washing, unlike Kendall's project proposal. So, according to court documents, if Kendall wanted to allow RV storage, he'd have to pay development impact fees associated with washing them too.

Based on the guidelines in this resolution, the city's final estimate by 2018 for Pismo Beach Self-Storage came out at about $1.54 million.

"It was basically charging us fees for water use in a project that doesn't use water," he said.

Kendall paid in protest and sued the city, but said he repeatedly tried to work out a better option with the city.

Staff and members of City Council wouldn't budge, he said.

"For reasons unclear to the court," the Sept. 16 ruling reads, "the city ultimately chose to drastically increase the [development impact fees] for self-storage facilities under the 'light industrial' category. While the city claims it did so according to the Maximus Study, the Maximus Study is from 2004. It is unclear to the court why the city would prepare one set of estimated [development impact fees] in 2016, and then increase those estimated [development impact fees] in 2018, only to claim that the increase was based on a 2004 study that was obviously available to the city when it made its original [development impact fees] estimation. In short, there appears to be no basis for the arbitrary increase."

Pismo Beach city staff declined to comment on the case, citing pending litigation. It's unclear whether the city plans to appeal the decision. Δ