Have you just been asked to update your city, county, or district's impact fee nexus study and are wondering where to start?

Nexus studies play a vital role in ensuring that new development contributes its fair share to the community’s infrastructure. They help local governments navigate the complex regulatory landscape and provide a transparent, accountable way to fund necessary public facilities.

In this article, we’ll break down what a nexus study is, why it’s essential, how long it takes, and how often it needs to be updated. We'll also walk you through the key components of a good nexus study and provide insights into the process and timeline for impact fee adoption.  

Let’s get started!  

So, What’s a Nexus Study?

Planning for public infrastructure and facilities in California requires navigating a complex regulatory maze. The nexus study is one of the crucial steps in this process.

A nexus study is a report that is required any time an impact fee is adopted or updated. It establishes a connection, or nexus, between new development and the need for additional public facilities.  

The California Mitigation Fee Act (“Act”) requires nexus studies to impose or increase development impact fees, also known as mitigation fees or impact fees. These fees are levied on new development to fund the construction or expansion of public facilities needed for the new growth.

What is the Purpose of a Nexus Study?

A nexus study ensures that impact fees for new projects are proportionate to their actual impact on local infrastructure and services.  

The Act requires that a nexus study must:

• Identify the purpose of the fee and how it will be used.

• Demonstrate three key nexus findings:  

• the need for the fee,  

• the benefit to the new development, and  

• the proportionality of the fee to the impact of the development.  

What Makes for a Good Nexus Study?

A well-prepared nexus study

• Provides an overview of the government agency operations and its fee programs, the regulatory framework for the fees, and the fee calculation methodology.

• Defines the service area subject to the fee, analyzes existing development, and prepares a long-term development projection.

• Contains a detailed inventory of existing public facilities (including land, structures, infrastructure improvements, fleet, and all major capital equipment) and a capital facilities plan for future expansion, including a financing plan.

• Analyzes key service demand variables (recent Act updates require housing fees to be calculated per square foot).

• Allocates facility costs to new development.

• Calculates the fee amount for each development type and includes an administrative surcharge and automatic annual inflation adjustment provisions.

• Compares the existing and proposed fee amounts.

• Documents the nexus findings required by the Act.

• Provides guidance on the implementation of the fee program.

A good nexus study covers all these elements to make sure the fee program is compliant with applicable laws and to properly document the fee program for the agency.  

It must also be in compliance with all recent changes to the law to ensure that the fee program is fair and legally defensible.

A well-prepared nexus study provides transparency and accountability and helps public agencies clearly communicate to the community how the fees are determined and used.

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How Often Do We Need to Prepare or Update Nexus Studies?

Nexus studies must be updated at least every eight years to remain compliant with the Act. However, best practices suggest updating them every five years or more often if there are significant changes in the scope of facilities or development patterns.

Failing to timely update nexus studies can have serious implications. Outdated studies may not reflect current facility needs or accurately allocate costs, leading to potential legal challenges and financial shortfalls. Building tomorrow’s facilities with yesterday’s dollars rarely works.

Agencies risk losing credibility if their fee programs are perceived as unfair or misaligned with actual development impacts.

How Long Does It Take to Prepare a Nexus Study and Adopt a Fee?

It takes two to four months to prepare a nexus study, with the timing heavily dependent on availability of information.  

Key information needed to expedite the nexus study process includes:

• Existing development data for the service area.

• An inventory of existing facilities, including good replacement cost estimates.

• A good understanding of future facilities, including reasonable cost estimates.

Once the nexus study is completed, it needs to be adopted by the agency’s governing body following strict public notice requirements. Special districts must work with their city and county to adopt or update the fee program, as they lack the necessary authority. The fee adoption process can take another two to four months.

Once the fee is adopted, it goes into effect 60 days later.  

As such, a fee program adoption or update can take from six to twelve months, depending on data availability and public hearing process.

I Need a Nexus Study Done. How Do I Get Started?

Ridgeline has extensive experience preparing nexus studies, ensuring fees are justified, equitable, and compliant with the Mitigation Fee Act.

If your agency needs a nexus study, we are here to help.

We provide comprehensive support to ensure that your development impact fees are properly calculated and effectively implemented.  

Schedule a free consultation today to learn more about how we can assist you in planning for your community’s future.

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Ridgeline Municipal Strategies, LLC is a registered municipal advisory and financial consulting firm helping California’s public agencies with financial planning and financing for infrastructure and facilities.

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