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Lompoc staff warn refunding past developer impact fees could risk public-fund "gift" claim
Summary
Finance staff told the City Council that refunding previously collected developer impact fees would be legally complex and could be perceived as an improper gift of public funds; staff reported only a handful of recent payers and asked for further direction on accounting and appeals.
Finance staff told the Lompoc City Council on Nov. 4 that refunding developer impact fees that were lawfully assessed and paid could be legally fraught and operationally complex.
"The biggest concern here is if we refund legally established fees, it could be argued that the city is providing a gift of public funds," Finance Department staff said during a presentation on the feasibility of refunding impact fees that were collected in the two years before a fee schedule change effective Aug. 5, 2025. The staff review found the city previously charged fees for a range of categories — parks, library, public safety, streets and traffic, bikeways, water and wastewater and refuse containers — but that the ordinance change narrowed the schedule to library, police and fire, and refuse container fees.
Staff said they reviewed revenues and related expenses over the last four fiscal years and found that "in 23-24, there were 3 developers that paid developer impact fees, and in 24-25, there were 2." Staff added that some assessed fees were not collected when a certificate of occupancy had not been issued (an example cited was the Little Caesars site) and that, to date, they had not identified any refunds that must be paid.
Council members pressed for clarity on appeal rights and timing. Mayor James Mosby asked whether people who were not properly informed of their appeal rights years ago could still appeal now. The City Attorney replied that "the appeal timing begins when the city decision is made" and that late appeals are generally time-barred under the code; however, an aggrieved person can still file a government tort claim if they believe the city owes them money.
Councilmembers expressed concern for applicants who paid fees in good faith while awaiting occupancy and said the council should consider transparency and posting appeal information on the city website so the public understands available remedies. No refund program was approved at the meeting; staff left the council with outstanding questions about legal risk, how to allocate and track previously collected funds, and whether a narrow refund program would create a public-purpose justification for repayments.
What happens next: Staff will not implement refunds at this meeting; council requested that staff return with further analysis outlining legal exposure, accounting for spent vs. unspent fee revenue, and options for addressing individual claims or settlements.
