INFRASTRUCTURE: City may add $61 million in new developer fees

by Mark McDermott

The Manhattan Beach City Council has been grappling with an onslaught of new multifamily housing projects that are being fast-tracked via state laws intended to address California’s housing crisis. Locally, an estimated 2,326 new housing units are projected to be built in the next 14 years, mostly in the form of large, multi-family developments along Rosecrans Avenue and Sepulveda Boulevard as part of the state-mandated Residential Overlay District, or ROD.

There is little the city can do to block or modify these developments. But on Tuesday night, the council took its first step towards ensuring at least one aspect of this growth spurt is within the city’s control. The council considered an array of new developer fees that in total would generate $61 million in revenue to help pay for infrastructure, transportation, and public safety impacts of new developments.

Financial services manager Emy-Rose Hanna told the council that the infrastructure costs associated with the developments are coming with or without the new fees.

“If the proposed fees are not adopted, the alternative would be that the taxpayer-supported general funds and other utility funds would end up having to pay for the increased infrastructure costs borne by the new development,” she said.

The proposed development impact fees represent Manhattan Beach’s first comprehensive effort to link growth to increased infrastructure costs. Under the current fee structure, the city collects only $700 per new residential unit plus $1,817 for subdivisions. The new fees would be far more substantial and would be calculated based on building square footage, water meter size, and impervious surface area.

For the proposed 273-unit development at the former Fry’s Electronics site on Sepulveda Boulevard, the fees under the current system would total approximately $191,100. Under the proposed structure, that same project would pay an estimated $5.9 million in impact fees.

A 200-unit, multifamily residential project — the example used repeatedly in the staff presentation — would pay $4.36 million under the proposed fees, compared to $140,000 under the current structure. Even modest single-family home expansions would see increased costs. A homeowner doubling their home from 2,000 square feet to 4,000 square feet by adding a second story would pay $12,240 in new impact fees.

The fees would be collected across eight categories: general government facilities, police protection, fire protection, transportation, sewer, storm drainage, water, and a 5% administrative fee. The proposed fees are designed to generate $61.6 million at full buildout through 2040 if adopted at 100% of the recommended amounts. The council could also choose to adopt them at 75% ($46.2 million in revenue) or 50% ($30.8 million).

However, that $61.6 million represents only a portion of the total infrastructure costs the city will face. According to the staff report, Manhattan Beach anticipates $265.9 million in capital improvement needs through 2040, meaning existing residents would still bear $204.3 million in costs through the General Fund, enterprise funds, and grants — even with the impact fees in place.

Finance Director Libby Bretthauer emphasized the city’s current infrastructure shortfalls during her opening remarks.

“The city already has unmet infrastructure funding needs, and these new developments could worsen this financial position over time,” Bretthauer said.

Adam Marston, project manager with Harris & Associates, the consulting firm that conducted the development impact fee study, walked the council through the methodology behind the proposed fees. The study evaluated existing city facilities, equipment valuations, the funded five-year capital improvement plan, unfunded infrastructure needs, and multiple master plans for water, sewer, and storm drainage.

“Development impact fees are one-time fees collected from new development and significant redevelopments to mitigate the impacts that they create on public facilities,” Marston said. “These fees only include the costs attributable to new development and significant redevelopment, including expansion projects. The fees can only be used for capital expansions and capital costs. They cannot fund existing deficiencies, ongoing maintenance or salaries.”

For residential projects, the fees break down to $6.12 per square foot for single-family homes and $15.53 per square foot for multifamily developments — a disparity that reflects the higher infrastructure demands of denser housing. Commercial projects would pay between $4,173 and $11,469 per 1,000 square feet, depending on the use type. 

The growth projections driving these fees are substantial: 127 new single-family units, 2,200 multifamily units, 134,000 square feet of new commercial space, and 106,000 square feet of new office space by 2040. This translates to an additional 4,500 residents and approximately 90 new workers, bringing the city’s total service population from just over 41,300 to nearly 46,000.

Marston noted that the fees are “locked in and vested at the time of a building application” under recent state legislation (SB 937), but cannot be collected until a certificate of occupancy is issued — potentially two to three years later. Water, wastewater, and storm drainage fees are the exception and can be collected at the time of application.

Paiwei Wei, representing Abundant Housing LA and South Bay YIMBY (Yes In My Backyard), urged the council to ensure the fee structure supports housing affordability goals. Wei said he was moved to advocate for affordable housing after witnessing a neighbor’s eviction.

“In October, I looked outside my window, there was a couple crying because they just got evicted by their landlord, and all their stuff was just put on a driveway next to the apartment complex,” Wei said. “And this is one of my neighbors, and it really moved me to really look into the affordability of Manhattan Beach residents.”

Wei cited Austin, Texas, where rents dropped 20% due to increased housing supply, as a model for market-based affordability through increased development.

“Our hope is that the impact fees would be based on some metric that would be fair and equitable for people who do decide to add more housing to the Manhattan Beach area,” Wei said.

Council members expressed general support for the new fee structure. 

Councilmember Nina Tarnay framed the issue in personal terms, asking Hanna who bears the costs of developments under current fee structures. 

“So if my next-door neighbor is expanding their house and doubling the square footage… I would eventually have to pay for the increase in her usage, her burden to the system?” she asked. 

“Essentially, yes,” Hanna said.

Councilmember Steve Charelian, the city’s former finance director, said that the impact fees are long overdue. 

“I wish we had done this 10 years ago,” Charelian said.

Mayor Pro Tem Joe Franklin used the fire department’s recent acquisition of a 107-foot ladder truck as an example of infrastructure needed to serve taller buildings.

“At this point we’re going to need — you know, like in Jaws, ‘We need a bigger boat,’ correct?” Franklin asked.

Marston confirmed that the study accounts for such stepped-up infrastructure needs, and was developed by meeting with staff from every City of MB department. 

The lack of robust public comment Tuesday night likely reflected the technical nature of the study session. The real debate is expected to materialize at the February 3 public hearing, when the council will consider actually adopting the fees. If adopted, the fees would take effect 60 days later, on April 18, 2026.

Manhattan Beach’s move reflects a broader statewide trend of cities professionalizing their development impact fee structures to withstand legal challenges and shift infrastructure costs from taxpayers to developers. Santa Monica has become the gold standard for this approach, charging between $25,000 and $38,000 per multifamily unit through a tiered system that targets larger projects for significantly higher fees to fund affordable housing and open space.

Under the proposed fees, Manhattan Beach would move into what development consultants call the “Tier 1” category of high-cost development cities in California. At $15.53 per square foot for multifamily projects — or roughly $15,530 to $21,600 per typical 1,000-square-foot unit — Manhattan Beach’s fees would exceed those in El Segundo ($12,000-$18,000 per unit) and Huntington Beach ($10,000-$15,000 per unit), though remaining below Santa Monica’s rates.

The proposed fees place Manhattan Beach in stark contrast to its immediate South Bay neighbors. Hermosa Beach and Redondo Beach currently have zero development impact fees, meaning taxpayers in those cities have been subsidizing infrastructure costs for new development for decades. Among regional comparison cities, El Segundo has 11 different impact fee categories and last updated its study in 2022, while Santa Monica, Newport Beach, Huntington Beach, and Torrance each have five impact fee categories.

The shift from Manhattan Beach’s current $700 flat fee per unit to a comprehensive fee structure represents one of the most dramatic increases in the South Bay. For context, a 200-unit multifamily project currently pays $140,000 in Manhattan Beach. Under the proposed structure, that same project would pay $4.36 million—a 3,014% increase.

In an interview after Tuesday’s meeting, Tarnay emphasized that the fees address a broader infrastructure challenge beyond new housing developments. She said city staff have been working to align costs of development with the city’s lagging infrastructure needs long before state-housing mandates made it a more pressing issue. 

“As much as it is about housing, it’s really about more than that,” Tarnay said. “We’re seeing pipes bursting, water mains breaking. We have a degraded system, and the more that we develop, the more strain on our infrastructure.”

She framed the issue as one of fundamental fairness across generations of residents.

“Who should bear that cost?” Tarnay asked. “Should it be my 85-year-old neighbor who’s lived in the same bungalow? I don’t think so. If I’m remodeling my house, I should bear that cost.” ER