by: Kasia Gregorczyk / Fox5 San Diego / Jul 15, 2025
— The city of San Diego may be on the hook to refund nearly $200 million in development impact fees due to not following state guidelines on how to spend and track that money properly, according to a recently published San Diego grand jury report.
“It’s a year of our lives that we pour into these reports and we hope they make a difference,” said jury foreperson James Tuck.
The grand jury is calling into question the city’s collection of development impact fees meant to go toward things like new parks, fire stations, libraries, and roads to offset the impact of new development.
Tuck explains why so much money is at stake.
“Because the city has not reported out and met its reporting requirement since 2021, it could be at risk of having to return this $178 million that’s been languishing in DIF accounts for more than five years back to current property owners.”
That money could be required to be returned under the state Mitigation Fee Act, if someone challenged the city. However the title of this report is “Never Been Challenged.”
“It’s a significant chunk of money. We feel like this is a red flag for the city. We just closed the $250 million budget shortfall to turn around and have to pay another $178 million out should be a red flag for the city council and for the mayor,” said Tuck.
The Mitigation Fee Act took effect in 1989 and applies to all local agencies, giving them the ability to charge development impact fees. However, it also lays out rules for what that money can be spent on, the time frame it should be spent in, and timely requires annual reporting.
The grand jury found $178.8 million went unspent for the five-year limit without proper reporting or justification from the city of San Diego.
“The reason it was set that way so that the municipalities would use the money or refund it. If it turns out, you don’t need it and you don’t need it to mitigate the impact of the development whatever it was, then you give it back,” said Madison Spach, partner at Frost Brown Todd.
Spach won a case (Walker v. City of San Clemente) dating back to 2015 in San Clemente where fees were promised for extra parking at the beach that never came to fruition. A court ruled the money be returned to property owners.
“If you do need it, you spend it, but what you shouldn’t do is let years and years go by or in some case of decades go by without using the money for the purpose for which it was collected. It’s not a tax, it’s a fee,” said Spach.
The San Clemente case from 2015 and a more recent 2023 case out of Palo Alto (Hamilton & High v. City of Palo Alto) are both mentioned as precedent-setting for the concerns being raised here in San Diego.
Dave Lanferman, who worked on the Palo Alto case, echoes the implications highlighted in the grand jury report.
“If the fees are imposed and paid, they are supposed to go to a public purpose to provide some infrastructure that the public needs and wants. If the fees are not being used or accounted for then the current owner of record five years down the road is eligible to get a refund,” explained Lanferman, Partner at Rutan & Tucker.
Meantime Tuck says concerns over the development impact fees were first raised as far back as 2011, more recently in a 2022-2023 grand jury report, and again in this most recent report. Paying out the $178 million to the property owners was a recommendation laid out in the 2022-2023 grand jury report. The grand jury also included a list of 14 recommended actions for the city to remedy the issues.
Additionally, the jury points out more than $720,000 that was reportedly incorrectly transferred from legacy DIF accounts into a new city-wide account with the adoption of “Build Better San Diego.” They claim this is also in violation of the state Mitigation Fee Act requirements.
“This is what the grand jury does. It is here for government oversight. We’re here to make government work better for the people the citizens of San Diego,” said Tuck.
The city declined an interview until it has completed its formal response to the grand jury, which will also need city council approval before being issued. The city has until Sept. 30 to respond or request an extension.
If anyone has a recall petition going on, I’m down for it. To run this city, like this, is absurd.
I wonder when San Diego will appear on Google Search as one of the most corrupt cities in the US. Chicago and New Orleans held that trophy for many years, but I won’t be surprised if one day Gloria and his puppets show up.