Developers sue city of Gilroy for allegedly illegal development fees

Glen Loma Ranch will add more than 1,600 new single-family residential homes by 2020.

Three developers, including the Glen-Loma Corporation, owned by Filice family members who are longtime residents and developers in Gilroy, have sued the City of Gilroy for thousands of dollars in relief for “unjustified and excessive development fees” as well as unspecified attorney fees, according to court documents.

The other two plaintiffs are Arcadia Development Corporation of San Jose and Ronan Avenue Investors of Gilroy. 

The lawsuit stems from a dispute between the developers and the city which began in 2009. The developers asked for relief from what they believed to be artificially high public facilities impact fees (money that goes toward purchasing land like neighborhood parks), and, while the city acknowledged in 2009 that the fees were inaccurate and based on outdated research from 2004, it took two years for them to adjust the fees – and when they did, they refused to offer reimbursement to developers.

In January 2012, the city reduced the public facilities fees by about $5,000 per home to reflect the current construction market after the housing crash associated with the Great Recession – from $21,586 per home to $16,200 per home.

“The city report acknowledged that assumptions of the 2004 fee study no longer legally justified the fees that were still being imposed on the basis of that study,” the court document reads.

So after the city finally reduced the fees that had been inflated for years, there still was one catch: they refused to apply the reduction retroactively for any developers. 

Between the years of 2009 and 2012, developers continued to build homes (court documents do not reveal how many), and continued to pay the higher fees, for which they now seek restitution.

Glen-Loma Corporation, Arcadia Development Corporation and Ronan Avenue Investors claim that the city acted against state law by imposing a fee without significant review or adjustments since 2004, and by holding developers to those illegal fees even after acknowledging in 2009 that they needed to be reduced. 

Plaintiffs have taken their case to San Francisco-based lawyer David Lanferman, who specializes in real-estate law and land development cases. 

Arcadia Development and Glen-Loma are together responsible for the Rancho Hills Drive development in the northwest quad. Ronan Avenue Investors invests in KB Homes, which built homes in Gilroy during the years 2008 to 2012.

Glen Loma Corporation also has plans that are currently on hold, but approved to build 1,700 new homes on the west end of Gilroy, known as Glen Loma Ranch, flanking the east side of Santa Teresa Boulevard from the area around Ascenscion Solorsano Middle School to Las Animas Elementary School.