Planning commission backs ordinance to let developers defer impact fees until occupancy

The El Segundo Planning Commission on March 27 voted 3-0 to recommend that the City Council adopt an ordinance amending the municipal code to allow deferral of certain development impact fees and some building-permit fees until final inspection or certificate of occupancy.

The commission’s recommendation follows a staff presentation explaining that development impact fees are one-time charges intended to pay for future demand on city infrastructure and services. Michael (staff presenter) told commissioners that the city currently charges a mix of building-permit fees that cover inspection and administrative services and surcharges used to fund long-term projects, and that development impact fees were increased and phased in after a 2022 update that expanded fees from four to 11 categories and phased collection (50% in year one, 100% thereafter). Staff said these fees are indexed to CPI.

Staff said the proposed ordinance would make it explicit that impact fees for any development type may be collected at any time during the building permit process and that the default would remain front‑end payment when permits are issued. Under the proposed option, however, applicants could enter an agreement to pay deferred fees prior to final inspection or upon issuance of a certificate of occupancy. Michael said the city would not defer fees that fund front‑end services (inspections or immediate staff time) and that the primary targets for deferral are fees that pay for future infrastructure needs.

Staff gave two numerical examples to illustrate potential savings: a hypothetical $100,000 of fees could entail about $30,000 in one‑year carry costs, and a large, entitled commercial project staff used as an example carried roughly $1.5 million in combined permit and impact fees of which about $1 million might be deferrable, producing significant financing relief.

Commissioners asked how the city would enforce deferred payments. Staff described several collection mechanisms already discussed in draft language: recording a covenant or lien against the property, withholding certificate-of-occupancy until fees are paid, and recording a covenant as part of the permit record. Staff said council had removed a proposed automatic covenant-recording requirement after earlier feedback, but the city could still use liens, covenants, or withhold occupancy as enforcement options if needed. Staff also noted that, for very large projects, a development agreement could be used and that residential projects may be less likely to use the deferral option.

Commission discussion noted uncertainty about collection efforts and potential staff workload to pursue unpaid fees, but several commissioners said withholding occupancy would be a strong enforcement tool because it prevents revenue-generating use of a building. The Planning Commission voted to recommend approval of the ordinance change; Commissioner Taylor, Commissioner McCafferty and Vice Chair Inga voted yes.

The item now goes to the City Council for consideration; staff said the ordinance would require two council readings before adoption.