Summary: The City of Patterson’s schedule of multiple “development impact fees” and “transportation impact mitigation fees” has been declared to be unlawfully enacted in an important new decision by the Stanislaus County Superior Court. The Court held that the City of Patterson violated both procedural and substantive laws governing the establishment or amendment of such development fees when the City Council approved flawed “nexus studies” and adopted the disputed fees in October and November 2024, and ordered the City to rescind its fees.
The Court’s Decision also declared that “the City violated the Brown Act [California’s “open meetings” law], the Mitigation Fee Act, and CEQA” and enjoined the City and its officials from “implementing, enforcing, or applying any of the fees and exactions” challenged in the lawsuit. The case is “Building Industry Ass’n of the Greater Valley & Keystone Ranch LLC v. City of Patterson” (Stanislaus County Superior Court No. CV-24-010405.) Rutan represented the prevailing petitioners in the litigation.
Background: The City of Patterson began to consider updating its various development impact fees (“DIF”) in 2022 and hired consulting firms to conduct studies to try to justify increased fees. The Building Industry Association of the Greater Valley (“BIA”) pointed out many flaws in that “nexus study” produced by the City’s consultants, and a second version was issued. The BIA, joined by Keystone Ranch LLP (owner of property previously master-planned and approved by the City for development of 719 new homes) objected that the nexus study failed to show that the proposed new fees would comply with constitutional or statutory limits on fees, were not based on an adopted “capital improvement plan” and were not shown to be “proportional” to the increased needs for new facilities. They also objected to the City’s violations of the public notice requirements of the Brown Act, CEQA, and the Mitigation Fee Act.
Despite those objections, the City set a Council hearing for October 15, 2024 to approve the fees. The City prepared a new third version of its nexus study, dated October 15, which was not provided to the public until the evening of the City Council meeting on the proposed fees.
In November, the City further compounded its errors when the Council approved yet another fourth “revised” version of the nexus study, and adopted new parkland fees on November 19, 2024, under the Mitigation Fee Act and purportedly under the Quimby Act.
Litigation: BIA and Keystone filed their Petition for Writ of Mandate and Complaint in December 2024. The Superior Court granted Petitioners’ motion for a preliminary injunction in May 2025, enjoining the City from implementing or attempting to enforce any of the challenged fees, pending trial. The Court conducted a bench trial in July 2025, and issued its proposed statement of decision in October 2025 against the City, which was largely affirmed in January 2026.
The Court’s Decision: The Court’s 36-page Statement of Decision concluded that the City had acted unlawfully in adopting the new development impact fees and the new transportation impact fees, on both procedural and substantive grounds. After detailing the litany of defective and untimely public notices leading up to the Council’s actions on the repeatedly revised nexus studies the Court concluded that the City had violated California laws requiring notice and transparency in the conduct of public affairs, and declared that Council’s actions in October and November 2024 were “null and void.” As the Court stated:
“The haphazard way in which the nexus studies were prepared, amended, amended again and amended a third time combined with the lack of proper notice of the meetings at which the City Council adopted the relevant nexus studies was not designed to ensure transparency and public participation in government. In fact, it appears likely it ensured exactly the opposite.”
The Court addressed the substantive deficiencies:
“The City also failed to carry its burden to demonstrate the substantive reasonableness and validity of the newly enacted development impact fees … [and] the fee enactments filed to comply with constitutional Nollan/Dolan requirements or with many of the requirements of the Mitigation Fee Act.”
The Decision includes significant holdings:
- The Court recognized that the Supreme Court decisions in Nollan and Dolan— establishing “heightened judicial scrutiny” of development fees and requiring that the government show that its fees bear a reasonable “nexus” and are proportional to impacts of new development—were applicable. The Court astutely observed that “[t]he notion that the Nollan/Dolan line of cases does not apply to these DIFs and TIFs is now ‘dead and buried’ by the unanimous Supreme Court decision in Sheetz [v. County of El Dorado (2024) 601 U.S. 267]…”
- The Court held that BIA and Keystone had standing to challenge the fee resolutions “on their face” even though the new fees had not yet been imposed or paid. The Court cited recent case law and stated: “Following Sheetz, it is now clear on a nationwide basis that Nollan/Dolan applies to all development fees, including facial challenges to fee enactments.”
- The Court applied that heightened level of review to the nexus studies, and found that they “contained numerous errors and deficiencies preventing the City from demonstrating the required ‘nexus’ and ‘rough proportionality’ including population growth assumptions, unsupported ‘at capacity’ assumptions for existing facilities, and the absence of a compliant [Capital Improvement Plan].”
- The Court held that the City had failed to comply with the Mitigation Fee Act, and held that the nexus studies were “based on mere speculation” because of the City’s failure to base its nexus studies on a properly-adopted capital improvement plan as required by the Act.
- The Court held that the nexus studies erred by purporting to justify the new fees by use of a so-called “existing inventory approach”—which “fails to comply with either the nexus and proportionality requirements of Nollan, Dolan and Ehrlich or the statutory requirements of the Mitigation Fee Act (a reasonable relationship between the need for the public facility and the type of development project on which the fee is imposed).”
FOR ADDITIONAL INFORMATION on this case or on any other issues relating to development fees and exactions, please contact:
Dave P. Lanferman
Tel: (510) 303-1178
Email: DLanferman@Rutan.com
or
Matt Francois
Tel: (650) 798-5669
Email: MFrancois@Rutan.com
