Memorandum
Date: January 13, 2026
To: The Honorable Brad Rasmussen, Chair, Lake County Board of Supervisors
From: Mireya G. Turner, Community Development Director
Lloyd Guintivano, County Counsel
Susan Parker, County Administrative Officer
Shannon Walker-Smith, Deputy Community Development Administrator
Casey Moreno, Deputy County Administrative Officer
Subject: Presentation of Update on Community Development Department (CDD) Loan Repayment Plan
Executive Summary: Your Board will recall, Community Development Department (CDD) staff provided findings regarding factors that led to declining Building Department revenues, and discussed General Fund loan repayment, on December 9, 2025. Members of your Board requested further follow-up, seeking to gain additional understanding about inter-department operations, options for loan repayment timelines and effects on departmental resources and service provision.
Additionally, your Board requested County Counsel present background on legal considerations surrounding use of incoming permit fees to repay a loan that covered past expenses.
Since that presentation, CDD and Administration Staff have been in ongoing dialogue, and are prepared to give the Board a joint update on the following:
• Review of data presented December 9, 2025 with additional context;
• Summary of non-revenue generating activities for each CDD Division;
• Analysis of budgeted and actual revenues for all CDD Divisions;
• Overview of Building Division loan repayment options;
• Initial analysis of repayment timeline scenarios, and their anticipated effects on departmental operations;
• Anticipated Mid-Year Budget changes; and
• High-level Fee analysis.
In-depth review of budgeted and actual revenues over the past decade show Reserves were “spent down,” beginning in Fiscal Year 2022/2023, resulting in significant transfers among CDD Divisions.
Initially, this was a prudent action, and protected the General Fund. At the end of Fiscal Year 2021/2022, the Building Reserve reached $941,607; this high level of Reserves demonstrated not all Departmental expenses associated with actions taken in service of permits had been appropriately recognized. Therefore, County Administrative Office Budgeting staff advised the Building Division to adjust their practices, to ensure all actual Departmental costs were recovered; when this does not occur, it can inappropriately appear the Department “made a profit.” In the immediate, those prudent actions included transfers among CDD Divisions, in consideration of historical costs that had not been recovered.
In subsequent Fiscal Years, rather than slowing, transfers from CDD’s Building Division to Code Enforcement and Planning accelerated; as discussed late last year, than trend was unsustainable.
Although the Building Division’s budget was balanced, as presented in September 2025, the Division’s cash flow could not sustain budgeted expenses. County Administration has customarily monitored cash accounts only for those under its direct purview, whereas the Auditor-Controller’s office is responsible to monitors all cash accounts, as well as all Accounts Payable. The Auditor-Controller’s office notifies departments if they overdraw accounts and requires resolution. When November payroll hit, the Building Division’s cash account was overdrawn, despite their having remaining budgeted allocations in their payroll accounts. This was multifactorial: for example, as previously discussed, permit revenue had not been coming in as expected; the ending cash balance for Fiscal Year 2024/2025 was also $222,335.90 short of Departmental projections.
During discussion of December 9, 2026, reference was made to review of legal considerations surrounding Building Division Fees, and whether those revenues could be appropriately utilized to cover cross-Divisional expenses. County Counsel, Lloyd Guintivano’s, findings are presented here:
County Counsel’s Information in relation to the proposed loan:
Adoption of Fees
California State Code requires the County to provide funds to meet the CDD’s costs. Specifically, CGC §65104 states that a “legislative body shall provide the funds, equipment, and accommodations necessary or appropriate for the work of the planning agency…”. In this County, the “planning agency” is the Community Development Department, including its three divisions. The County may, however, adopt fees to “support the work of the planning agency” and to reimburse the local agency for expenditures previously made. (CGC §§65104 and 66007).
When the County adopts fees as part of its fee schedule, the California Government Code requires specific regulatory actions to adopt fee schedules which comply with the due process requirements for implementation which include:
1. Holding at least one open and public meeting, at which oral or written presentations can be made, as part of a regularly scheduled meeting.
2. Notice of the time and place of the meeting, including a general explanation of the matter to be considered, and a statement that the data required by this section is available.
3. At least 10 days prior to the meeting, the local agency shall make available to the public data indicating the amount of cost, or estimated cost, required to provide the service for which the fee or service charge is levied and the revenue sources anticipated to provide the service, including General Fund revenues.
a. CGC §66016 provides that a “…local agency shall make available to the public data indicating the amount of cost, or estimated cost, required to provide [a]
service for which the fee or service charge is levied and the revenue sources anticipated to provide the service, including General Fund revenues.” (emphasis added).
4. Fees shall be adopted by ordinance or resolution (GC §66016(b))
The State requires that any adopted fee schedule be based on readily determinable, objective, expressly stated, criteria. [Barratt American, Inc. v. City of Encinitas (Cal. App. 4th Dist.), 115 Cal. App. 4th 837, 9 Cal. Rptr. 3d 457, 2004 Cal. App. LEXIS 168]. Fees must also meet the Nollan/Dolan test (Test) requiring:
1. An "essential nexus": Permit conditions must have an “essential nexus” to the government’s land-use interest, ensuring that the government is acting to further its stated purpose, not leveraging its permitting monopoly to exact private property without paying for it.; and
2. A "rough proportionality": Permit conditions (including fees) must have a “rough proportionality” to the development’s impact on the land-use interest and may not require a landowner to give up (or pay) more than is necessary to mitigate costs or harms resulting from new development. (Sheetz v. Cnty. of El Dorado, 601 U.S. 267 citing Nollan v. California Coastal Comm’n, 483 U. S. 825, 107 S. Ct. 3141, 97 L. Ed. 2d 677, and Dolan v. City of Tigard, 512 U. S. 374, 114 S. Ct. 2309, 129 L. Ed. 2d 304).
In adopting its fee schedule, the Board will have already determined that the CDD building division fees meet the required test, but, as outlined below, the County has discretion through policy or the budget appropriation process under the Government Code to manage the expenditure of the revenues from said fees.
Expenditure of Collected Fees
For fees that have already been adopted by the Board, statutes and case law provide some degree of flexibility on the expenditure of the revenue stemming from collected that result in a surplus fees. While a local agency may not levy a fee or service charge “…to an amount which exceeds the estimated amount required to provide the service for which the fee or service charge is levied”, there may be instances in which “…fees or service charges create revenues in excess of actual cost…” [CGC §66016(a), (emphasis added)]. In County of Orange v. Barratt American, Inc., for example, a county had collected more in fees for building inspections and construction plan checks than the cost of performing the services. Relying on CGC §66016(a), the Court determined the County could use its surplus fee revenue to cover the reasonable and necessary costs of the services, rather than lowering the fees until the entire surplus was dissipated. [County of Orange v. Barratt American, Inc. (2007, Cal App 4th Dist) 150 Cal App 4th 420, 58 Cal Rptr 3d 542, 2007 Cal App LEXIS 671, reh’g denied, (2007, Cal App 4th Dist) 2007 Cal App LEXIS 958, review denied, Orange, County of v. Barratt American, Inc. (Cal 2007), 2007 Cal. LEXIS 8521]. The County of Orange did, in fact, lower its fees in that instance but the Court determined that it was not required to refund any surplus or excess. However, if the fees meet the Nollan/Dolan test discussed above, a reduction may not be necessary.
In some cases, fees can fund broader planning activities if directly related to building regulation. In 2007, San Francisco's practice of using building permit fees to fund long-range planning was upheld by the First District Court of Appeal. The court rejected arguments that the fee plan violated Proposition 13 and the city charter. Instead, the court ruled that long-range planning is sufficiently related to the regulation of building construction to justify the spending. [Collier v. City and County of San Francisco, 151 Cal. App. 4th 1326 citing Sinclair Paint Co. v. State Bd. of Equalization, (1997) 15 Cal.4th 866 and California Assn. of Prof. Scientists v. Department of Fish & Game, (2000) 79 Cal.App.4th 935 (see CP&DR Legal Digest, May 2000).]
Next Steps
The County Administrative Office and Community Development Department share your Board’s, and the public’s, desire that any and all attendant issues that sparked this unfortunate situation are well understood, and lessons learned are appropriately institutionalized and acculturated within the County of Lake organization. As members of your Board will appreciate, fully resolving the network of concerns that informed this situation will take some time. Ensuring those concerns are well articulated, promoting transparency and public understanding, demands that ongoing analysis continue.
CDD therefore requests an opportunity to return February 10, 2026 and provide the following further updates:
• Analysis of Building Division Fees over the past 10 Fiscal Years;
• Analysis of historical Code Enforcement Division cost recovery (i.e., gaining further insight into informants of insufficient cost recovery);
• Analysis of historical Planning Division cost recovery;
• Analysis of CDD funding structures in similar Counties;
• Fee analysis for the Planning Division (i.e., recognizing any patterns where staff time is not fully covered by current fees);
• Calculations surrounding 500,000 Code Violations;
• Assessment of repeat code violators and fines applied; and
• Assessment of the financial effects of self-abatements spurred by Code Enforcement activity.
Staff values your Board’s leadership and engagement in navigating this complex matter.
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Recommended Action: Direction to staff to return at the Tuesday, February 10, Board meeting to provide further updates, as described and amended by Board Consensus.