Pismo Beach loses appeal, ordered to pay developer more than $1 million

September 13, 2022

By KAREN VELIE

The city of Pismo Beach was ordered Monday to repay the developer of a storage facility more than $1 million for overcharging development impact fees, along with court costs, according to a Second Appellate District ruling.

Developer William Kendall sued Pismo Beach, claiming the city charged him development impact fees that did not apply to his project, Pismo Beach Self-Storage. State law limits fees municipalities can charge to the cost of increased services made necessary by the development, which in this case were substantially lower than the city charged.

Judge Tana Coates agreed, and in 2020, she ordered the city to refund Kendall a payment of $889,254 plus at least $160,021 in interest. Judge Coates’ ruling also invalidated a city ordinance establishing self-storage development impact fees, which she argued violated state law.

The city appealed, arguing a storage facility previously on the property used a large amount of water, and determined the fees based on that usage. However, that facility included wash racks and a place to wash down RVs, which was not the case with Kendall’s project.

In 2008, the Pismo Beach Planning Commission approved Kendall’s project. But shortly afterwards, Kendall put the project on hold for a few years because of the economic downturn.

Upon resumption of the project, in 2016, city staff estimated the fees for the development would total about $539,000, even though there was not a specific development impact fee for self-storage units in Pismo Beach at the time.

In 2017, city staff reclassified the project as retail and increased the fee total to about $2.45 million. Later that year, staffers reclassified the project again as office space with an estimated fee total of $1.87 million.

Finally, in May 2018, the Pismo Beach City Council voted to create a light industrial and self-storage fee schedule based on the previous facility’s water usage. The city then charged Kendall approximately $1.54 million in fees for his project.

Kendall paid the amount, but sued the city for violating state law. Pismo Beach was basically charging him for water use in a project that does not use water, Kendall argued.

The appellate court agreed with Kendall’s argument and Judge Coates’ ruling.

“We conclude the evidence does not show a reasonable relationship between the fee imposed and the burden on the City’s infrastructure arising from a self-storage type of facility,” according to the appellate court ruling. “The city’s determination was arbitrary, capricious, and without evidentiary support.”