Judge orders Pismo Beach to pay developer more than $1 million for overcharging fees

A San Luis Obispo judge ordered the city of Pismo Beach to repay the developer of a storage facility more than $1 million for overcharging development impact fees. [New Times]

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. In a Sept. 16 ruling, Judge Tana Coates 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 violates state law.

In 2004, Pismo Beach adopted a development impact fee schedule based on a study conducted by government consulting firm Maximus Inc. The city set fees for residential dwelling units, mobile homes, hotels and motels, recreational vehicle parking spaces and commercial uses. Pismo Beach’s development impact fee schedule did not specifically include self-storage units. 

The same year, Kendall purchased land on Five Cities Drive that was being used for self-storage and RV storage. Kendall panned to expand and update the facility. 

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. 

The following year, city staff reclassified the project as retail and increased the fee total to about $2.45 million. Later in 2017, staffers reclassified the project again as office space with 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. The fee schedule contained an incorrect assumption that any facility allowing RV storage would have wash racks and be equipped for RV washing, which was not the case with Kendall’s project.

Based on the resolution adopted by the council, the city charged Kendall approximately $1.54 million in fees for his project. 

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

The developer said he repeatedly tried to work out a better option with the city, but staff and Pismo Beach City Council members would not budge.

City officials claim the categorization of self-storage facilities along with light industrial developments in the fee scheduled was based on the 2004 Maximus study. However, Judge Coates’ ruling found it unclear why the city would prepare one set of estimated fees in 2016 and then increase the amount in 2018, claiming the new total was based on a 2004 study.

“In short, there appears to be no basis for the arbitrary increase,” Coates stated in the ruling.