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Home My WebLink AboutStaff Report 4697 City of Palo Alto (ID # 4697) Finance Committee Staff Report Report Type: Action Items Meeting Date: 5/6/2014 City of Palo Alto Page 1 Summary Title: Proposed Changes in Development Impact Fees Title: Proposed Changes in Development Impact Fees: Implementation of New Public Safety Facility and General Government Facilities Fees From: City Manager Lead Department: Administrative Services RECOMMENDATION Staff requests that the Finance Committee review and discuss the attached “Development Impact Fee Justification Study” prepared by David Taussig & Associates (DTA) (see Attachment A). The report presents proposed maximum fee levels for a n ew Public Safety Facility Impact Fee and for a new General Government Facilities Impact Fee. Through this process, the Committee and the City Council may determine the following: (a) whether to levy each of the proposed new fees, (b) at what level to s et the fee(s), up to and including the maximum allowable fee, and (c) what if any exemptions should be included. MOTION The Finance Committee has reviewed the Development Impact Fee (DIF) Justification Study prepared by David Taussig & Associates and recommends that the Council review the report and approve the recommended new Public Safety Facility and General Government Facility impact fees at 75 percent of the maximum allowable level. BACKGROUND Staff presented to the Finance Committee on November 5, 2013 a list of anticipated Project Needs throughout the City between now and 2035. Staff then presented the list along with additional information requested by the Finance Committee to the City Council on March 3, 2014. Council approved the Project Needs List that evening, so the consultant was able to proceed with calculating the recommended maximum fee levels for certain areas. Process for Developing the Project Needs List: City of Palo Alto Page 2 For several months before the November 5, 2013 Finance Committee meeting, staff assembled an extensive list of projected capital needs for the following categories: Transportation, Public Safety, General Government Facilities, Parks and Recreation, and Libraries. The Administrative Services Department and DTA consulted with City staff of all relevant departments, the IBRC report and the follow-up discussions with the Council Infrastructure Committee, and the Proposed and Adopted CIP Budgets for Fiscal Year 2014. Staff also conducted a series of inter- department meetings to discuss the draft list of projects and any new developments—such as changes in funding or changed cost estimates-- that may have arisen in the intervening weeks. It is important to note that the evaluation of the City’s housing impact fees is not included in DTA’s current contract scope, but is included as a program under the Updated Housing Element, recently adopted by City Council. The list was limited by the following criteria: each project must be “non-speculative” – that is, seriously considered, not just a nice-to-have; have a useful life of over 5 years, and have all offsetting revenues deducted. In addition, given the built-out nature of the City, only a small percentage of the cost of the projects could be allocated to new development. For example, staff’s list of unfunded projected needs for Parks added up to $39 million. Given the Association of Bay Area Governments’ and Planning and Community Environment staff’s projected population growth rates, in the next 20 years about 15% of the City’s par ks users will be brought in by new development. The remaining 85% will be “existing users.” Therefore only 15% or about $6 million of those costs could be allocated to the development impact fee. That $6 million is already largely covered by the Parks fe e at its current level. The remaining $33 million would have to be funded by the General Fund or by “existing users.” That raises the bar quite high for the amount of funding needed to justify a new or increased fee. In advance of the November meeting with the Finance Committee, DTA determined that the total project needs for Parks and Recreation (at $39 million) and Libraries (at $0.3 million) would not merit an increase in current fees. In fact, the current fee levels should be adequate to fund the new list of needs along with the needs anticipated at the last Impact Fee update. As a result, staff presented Council with a proposed list of projects in the remaining categories: Transportation, Public Safety facilities and General Government facilities. After the Council Meeting on March 3, DTA determined that the Transportation-related project needs, totaling $91.2 million, also would be adequately met by the fees already in place. That left General Government facilities and Public Safety Facilities as the two fee opportunities DTA analyzed in its Fee Justification Study. The following table shows all the categories of fees currently in place in Palo Alto, which ones were included in the Benchmarking study, and which ones were included in the fee updates, and if they were not, when they are expected to be updated. City of Palo Alto Page 3 DTA completed this draft fee recommendation report on April 15. Staff has had the opportunity to review the recommendations and consider them in relation to total impact fees currently in place and the impact to prospective developers. Note that DTA had completed earlier a benchmarking study of Development Impact Fees (DIFs) in neighboring communities. (See Attachment F.) The following chart summarizes the benchmark information with and without the proposed new fees for Palo Alto. City of Palo Alto Page 4 The chart above shows that Palo Alto’s total DIFs are quite a bit higher than the average of the other benchmarked cities. However, taken as a percentage of home prices within the cities, the comparison is more reasonable. The following chart shows the total fees – including the potential new fees - by category as a percentage of average single-family home sale price. The City of Palo’s current DIFs are outlined in Attachment B. Developments may be exempt from all or some impact fees, depending upon the intended use. For instance, 100% affordable housing projects (not a mix of market rate and below market rate) are exempt from current impact fees, as are home remodels or expansions. (Planning and Community Environment is considering whether that exemption needs to be tightened.) Attachment C shows the exempted groups for each of the current fees. Staff recommends that Council maintain the same general exemptions for the new fees. Note that an earlier version of the Current Impact Fees provided to Council on March 3, 2014 contained an inaccuracy: for Parkland Dedication Fees, it indicated that the fees applied only to “Residential Subdivisions of over 50 parcels.” In fact, the statute indicates that the required parkland per unit applies to all residential development, but the in-lieu fees are available only to subdivisions of less than 50 parcels. The version in Attachment B includes the corrected text. The Needs List (see Attachment E), approved by Council on March 3 2014, identifies the City’s projected capital needs through 2035 within the selected categories. As discussed above, this list is a pared-down version of a more extensive review conducted by staff of all the DIF City of Palo Alto Page 5 categories: Transportation, Public Safety, General Government Facilities, Parks and Recreation, and Libraries. Council members may note that Public Safety Building (PSB) needs are listed at $57 million. Staff acknowledges that there are discussions underway regarding earmarkin g a proposed 2 percent Transient Occupancy Tax increase as a revenue stream for the PSB, and that the needs list above excludes such funds. Staff proposes that for now Council consider that need unfunded, and when the City Council approves the funding for the PSB – if it is finalized before the new fees are implemented-- the resulting fee can be recalculated and reduced to reflect the offsetting revenue source. RESOURCE IMPACT Development Impact Fees provide funding for capital improvements to mitigate the impacts of new development in the community. The revenues received each year vary based on the amount of development (both residential and non-residential) occurring in Palo Alto during that timeframe. Recommended changes to the fees will be presented to Council for approval in future meetings. DTA’s analysis projected revenue impacts over the next 20 years, assuming maximum fee levels, of $22.6 million for Public Safety facilities and $13.1 million for General Government facilities, for a total of $35.6 million. If Council sets the fees at 75 percent of maximum, combined revenues would be in the $27 million range. Actual revenues will vary depending on the specific fee levels approved by Council as well as with year-by-year development activity. The following table summarizes the fund balances for the City’s existing impact fees as of June 30, 2013: Fee Bal. June 30, 2013 (Thous. of $$) Commitments & Encumbrances (Thous. of $$) Net Funds Available (Thous. of $$) Parks 1,626 10 1,616 Community Centers 5,396 15 5,381 Libraries 680 3 678 Residential Housing in-Lieu 14,935 10,306 4,630 Commercial Housing In-Lieu 10,017 6,448 3,569 Parkland Dedication 2,057 6 2,051 Citywide Transportation 3,149 8 3,141 Water & Wastewater 2,225 0 2,225 Charleston/Arastradero 572 3 569 Stanford Research Park/El Camino 3,847 0 3,847 San Antonio/West Bayshore 829 0 829 University Ave. Parking Assessment District 660,852 2,891 657,961 City of Palo Alto Page 6 Staff recommends that some of the net funds listed above be dedicated to releva nt infrastructure needs. Specific fund allocations will be included in the Proposed FY 2015 Budget. POLICY IMPLICATIONS Council has the authority to charge new development for its relative share of the cost of specific public facilities, as calculated based on a Nexus Study. Council also has the authority, for policy reasons, to restructure fees based on articulated City policies. The information provided in this report allows Council to take the next step towards re -evaluating and adjusting the City’s Development Impact Fees. Attachments:  Attachment A: Draft Development Impact Fee Justification Study by David Taussig & Assoc. (PDF)  Attachment B: Current Development Impact Fees (PDF)  Attachment C: Current Exemptions from Palo Alto Development Impact Fee s (DOCX)  Attachment D: Excerpt Minutes from City Council meeting of March 3, 2014 (PDF)  Attachment E: Public Facilities Needs List (PDF)  Attachment F: Charts from Benchmarking Study (DOCX) B. C. DRAFT DEVELOPMENT IMPACT FEE JUSTIFICATION STUDY CITY OF PALO ALTO APRIL 29,2014 Prepared by: DAVID TAUSSIG &ASSOCIATES,INC. 2250 HYDE STREET,5TH FLOOR SAN FRANCISCO,CALIFORNIA 94109 (800)969-4382 ASSOCIATES,INC. Public Finance Public Private Partnerships Urban Economics TAUSSIG Newport Beach San Francisco Riverside Fresno Chicago, Illinois Dallas, Texas DAVID & City of Palo Alto TOC Development Impact Fee Justification Study April 29, 2014 TABLE OF CONTENTS SECTION PAGE EXECUTIVE SUMMARY...............................................................................................................1 SECTION I.INTRODUCTION ..................................................................................................3 SECTION II.LEGAL REQUIREMENTS TO JUSTIFY DEVELOPMENT IMPACT FEES ..................4 SECTION III.DEMOGRAPHICS ................................................................................................8 SECTION IV.THE NEEDS LIST...............................................................................................12 SECTION V.METHODOLOGY USED TO CALCULATE FEES ...................................................15 A.PUBLIC SAFETY FACILITIES ......................................................................................................17 B.GENERAL GOVERNMENT FACILITIES .........................................................................................22 SECTION VI.SUMMARY OF FEES..........................................................................................25 APPENDICES APPENDIX A:FEE DERIVATION WORKSHEETS EXECUTIVE SUMMARY City of Palo Alto Page 1 Development Impact Fee Justification Study April 29, 2014 In order to adequately plan for new development and identify the public facilities and costs associated with mitigating the direct and cumulative impacts of new development, David Taussig & Associates, Inc. (“DTA”) was retained by the City of Palo Alto (the “City”) to prepare an AB 1600 Fee Justification Study (the “Fee Study”) for specific categories of public improvements not currently covered by the City ’s Fee Program. The Fee Study is intended to comply with Section 66000 et. seq.of the Government Code, which was enacted by the State of California in 1987, by identifying additional public facilities required by new development (“Future Facilities”) and determining the level of fees that may be imposed to pay the costs of the Future Facilities.Fee amounts have been determined that will finance Public Safety and General Government facilities at levels identified by the various City departments as being necessary to meet the needs of new development through buildout in 2035.The Future Facilities and associated construction costs are identified in the Needs List, which is included in Section IV of the Fee Study.A description of the methodology used to calculate the fees is included in Section V.All new development may be required to pay its “fair share”of the cost of the new infrastructure through the development fee program. ORGANIZATION OF THE REPORT Section I of this report provides an introduction to the Fee Study including a brief description of City surroundings, and background information on development fee financing.Section II provides an overview of the legal requirements for implementing and imposing the fee amounts identified in the Fee Study.Section III includes a discussion of projected new development and demand variables such as future population and employment, assuming current growth trends in housing, commercial, and industrial development extrapolated through buildout in 2035.Projections of future development are based on data provided by the City and the City’s 2007 Comprehensive Plan.1 Section IV includes a description of the Needs List, which identifies the facilities needed to serve new development through buildout in 2035 that are eligible for funding by the impact fees.The Needs List provides the total estimated facilities costs, offsetting revenues, net costs to the City ,and costs allocated to new development for all facilities listed in the Needs List.This list is a compilation of projects and costs identified by various City departments.Section V discusses the findings required under the Mitigation Fee Act and requirements necessary to be satisfied when establishing, increasing,or imposing a fee as a condition of new development, and satisfies the nexus requirements for each facility included as part of this study.Section V also contains the description of the methodology used to determine the fees for all facility types.Finally,Section VI includes a summary of the proposed fees justified by this Fee Study.Appendix A includes the calculations used to determine the various fee levels. IMPACT FEE SUMMARY The total fee amounts required to finance new development ’s share of the costs of facilities identified in the Needs List are summarized in Table ES -1 below.Fees within this Fee Study reflect the maximum fee levels that may be imposed on new development. 1 City of Palo Alto, Comprehensive Plan (1998) and Comprehensive Plan Amendment (in progress). EXECUTIVE SUMMARY City of Palo Alto Page 2 Development Impact Fee Justification Study April 29, 2014 TABLE ES-1 DEVELOPMENT IMPACT FEE SUMMARY EXEMPTIONS California Government Code permits fee exemptions for affordable housing and senior housing at the discretion of local jurisdictions.Such fee exemptions are a policy matter that should be based on the consideration of the greater public good provided by the use exempted from the fee. SECTION I: INTRODUCTION City of Palo Alto Page 3 Development Impact Fee Justification Study April 29, 2014 Part of the San Francisco Metropolitan Area,the City of Palo Alto (“City”or “Palo Alto”)is located approximately 35 miles south of San Francisco within the County of Santa Clara. Named after the coastal redwood tree that grows along San Francisquito Creek, the City is more than 100 years old,encompassing an area roughly the size of 26 square miles and boasting approximately 30,000 housing units, more than 65,000 residents, and over 90,000 jobs.Yet despite the City’s mature and largely developed nature, the presence of excellent schools, the world’s finest employment centers and job creators, and high quality of life marks across the board, make the City incredibly attractive to new residential and non -residential development and re-development. For instance, the average homes sales price rec orded in the City in February 2014 was nearly $2.0 million. Thus, in order to adequately plan for new development and identify the public facilities and costs associated with mitigating the direct and cumulative impacts of new development, David Taussig & Associates, Inc.(“DTA”) was retained by the City to prepare an AB 1600 Fee Justification Study (the “Fee Study”)for specific categories of public improvements not currently covered by the City’s Fee Program. Impact fees are calculated here using updated information on development and City facilities. Moreover, the methods used to calculate impact fees in this study are intended to satisfy all legal requirements governing such fees, including provisions of the U. S. Constitution, the California Constitution, and the California Mitigation Fee Act (Government Code Sections 66000 et.seq.).Impact fees calculated in this report are intended to complement the City’s existing impact fees. More specifically, the Fee Study is intended to comply with Sectio n 66000 et.seq.of the Government Code, which was enacted by the State of California in 1987, by identifying additional public facilities required by new development (“Future Facilities”) and determining the level of fees that may be imposed to pay the co sts of the Future Facilities.Fee amounts have been determined that will finance facilities at levels identified by the various City departments as deemed necessary to meet the needs of new development.The Future Facilities and associated construction costs are identified in the Needs List, which is included in Section IV of the Fee Study.All new development may be required to pay its “fair share”of the cost of the new infrastructure through the development fee program . The fees are calculated to fund the cost of facilities needed to me et the needs of new development.The steps followed in the Fee Study include: 1.Demographic Assumptions:Identify future growth that represents the increased demand for facilities. 2.Facility Needs and Costs:Identify the amount of public facilities required to support the new development and the costs of such facilities .Facilities costs and the Needs List are discussed in Section IV. 3.Cost Allocation:Allocate costs per equivalent dwelling unit. 4.Fee Schedule:Calculate the fee per residential unit or per non -residential square foot. SECTION II: LEGAL REQUIREMENTS TO JUSTIFY DEVELOPMENT IMPACT FEES City of Palo Alto Page 4 Development Impact Fee Justification Study April 29, 2014 The levy of impact fees is one authorized method of financing the public facilities necessary to mitigate the impacts of new development.A fee is “a monetary exaction, other than a tax or special assessment, which is charged by a local agency to the applicant in connection with approval of a development project for the purpose of defraying all or a portion of the cost of public facilities related to the development project...”(California Government Code, Section 66000).A fee may be levied for each type of capital improvement required for new development, with the payment of the fee typically occurring pr ior to the beginning of construction of a dwelling unit or non-residential building.Fees are often levied at final map recordation, issuance of a certificate of occupancy, or more commonly, at building permit issuance.However, Assembly Bill (“AB”) 2604 (Torrico) which was signed into law in August 2008, encourages public agencies to defer the collection of fees until close of escrow to an end user in an attempt to assist California ’s troubled building industry. AB 1600, which created Section 66000 et.seq.of the Government Code was enacted by the State of California in 1987. In 2006, Government Code Section 66001 was amended to clarify that a fee cannot include costs attributable to existing deficiencies, but can fund costs used to maintain the exis ting level of service (“LOS”)or meet an adopted level of service that is consistent with the general plan. Section 66000 et seq.of the Government Code thus requires that all public agencies satisfy the following requirements when establishing, increasin g,or imposing a fee as a condition of new development: 1.Identify the purpose of the fee.(Government Code Section 66001(a)(1)) 2.Identify the use to which the fee will be put.(Government Code Section 66001(a)(2)) 3.Determine that there is a reasonable re lationship between the fee’s use and the type of development on which the fee is to be imposed.(Government Code Section 66001(a)(3)) 4.Determine how there is a reasonable relationship between the need for the public facility and the type of development project on which the fee is to be imposed. (Government Code Section 66001(a)(4)) 5.Discuss how there is a reasonable relationship between the amount of the fee and the cost of the public facility or portion of the public facility attributable to the development on which the fee is imposed. This section presents each of these items as they relate to the imposition of the proposed fees in the City of Palo Alto. SECTION II: LEGAL REQUIREMENTS TO JUSTIFY DEVELOPMENT IMPACT FEES City of Palo Alto Page 5 Development Impact Fee Justification Study April 29, 2014 A.PURPOSE OF THE FEE (GOVERNMENT CODE SECTION 66001(A)(1)) New residential and non-residential development within the City will generate additional residents and employees who will require additional public facilities .Land for these facilities will have to be acquired and public facilities and equipment will have to be expanded, constructed,or purchased to meet this increased demand. The Fee Study has been prepared in response to the projected direct and cumulative effect of future development.Each new development will contribute to the need for new public facilities.Without future development many of the new public facilities on the Needs List would not be necessary as the existing facilities are generally adequate for the City’s present population.In instances where facilities would be built regardless of new development, the costs of such facilities have been allocated to new and existing development based on their respective level of benefit. The proposed impact fee will be charged to all future developmen t, irrespective of location, within the City.Even future “in-fill”development projects contribute to impacts on public facilities because they are an interactive component of a much greater universe of development located throughout the City of Palo Alto.First, the property owners and/or the tenants associated with any new development i n the City can be expected to place additional demands on Palo Alto’s facilities funded by the fee.Second, these property owners and tenants are dependent on and, in fact, may not have chosen to utilize their development, except for residential, retail,employment, and recreational opportunities located nearby on other existing and future development.Third, the availability of residents, employees, and customers throughout the City has a growth-inducing impact without which some of the “in-fill” development would not occur.As a result, all development projects within Palo Alto contribute to the cumulative impacts of development. The impact fees will be used for the acquisition, installation, and construction of public facilities identified on the Needs Lists to mitigate the direct and cumulative impacts of new development within the City. B.THE USE TO WHICH THE FEE IS TO BE PUT (GOVERNMENT CODE SECTION 66001(A)(2)) The fee will be used for the acquisition, installation, and construction of the public facilities identified on the Needs Lists, included in Section IV of the Fee Study and other appropriate costs to mitigate the direct and cumulative impacts of new development in the City.The fee will provide a source of revenue to Palo Alto to allow for the acquisition, installation, and construction of public facilities, which in turn will both preserve the quality of life in the City and protect the health, safety, and welfare of the existing and future residents and employees. SECTION II: LEGAL REQUIREMENTS TO JUSTIFY DEVELOPMENT IMPACT FEES City of Palo Alto Page 6 Development Impact Fee Justification Study April 29, 2014 C.DETERMINE THAT THERE IS A REASONABLE RELATIONSHIP BETWEEN THE FEE’S USE AND THE TYPE OF DEVELOPMENT PROJECT UPON WHICH THE FEE IS IMPOSED (BENEFIT RELATIONSHIP)(GOVERNMENT CODE SECTION 66001(A)(3)) As discussed in Section A above, it is the projected direct and cumulative effe ct of future development that has prompted the preparation of the Fee Study .Each development will contribute to the need for new public facilities .Without future development,the City would have no need to construct many of the public facilities on the Needs List.For all other facilities, the costs have been allocated to both existing and new development based on their level of benefit.Even future “in-fill”development projects, which may be adjacent to existing facilities, further burden existing p ublic facilities.Consequently, all new development within Palo Alto,irrespective of location, contributes to the direct and cumulative impacts of development on public facilities and creates the need for new facilities to accommodate growth. The fees will be expended for the acquisition, installation, and construction of the public facilities identified on the Needs List and other authorized uses, as that is the purpose for which the fee is collected.As previously stated, all new development creates either a direct impact on public facilities or contributes to the cumulative impact on public facilities.Moreover, this impact is generally equalized among all types of development because it is the increased demands for public facilities created by the future residents and employees that create the impact upon existing facilities. For the aforementioned reasons, new development benefits from the acquisition, construction, and installation of the facilities on the Needs Lists. D.DETERMINE HOW THERE IS A REASONABLE RELATIONSHIP BETWEEN THE NEED FOR THE PUBLIC FACILITY AND THE TYPE OF DEVELOPMENT PROJECT UPON WHICH THE FEE IS IMPOSED (IMPACT RELATIONSHIP) (GOVERNMENT CODE SECTION 66001(A)(4)) As previously stated, all new development within the City, irrespective of location, contributes to the direct and cumulative impacts of development on public facilities and creates the need for new facilities to accommodate growth .Without future development, many of the facilities on the Needs Lists would not be neces sary.For certain other facilities, the costs have been allocated to both existing and new development based on their level of benefit. For the reasons presented herein, there is a reasonable relationship between the need for the public facilities included on the Needs List and all new development within Palo Alto. SECTION II: LEGAL REQUIREMENTS TO JUSTIFY DEVELOPMENT IMPACT FEES City of Palo Alto Page 7 Development Impact Fee Justification Study April 29, 2014 E.THE RELATIONSHIP BETWEEN THE AMOUNT OF THE FEE AND THE COST OF THE PUBLIC FACILITIES ATTRIBUTABLE TO THE DEVELOPMENT UPON WHICH THE FEE IS IMPOSED (“ROUGH PROPORTIONALITY” RELATIONSHIP)(GOVERNMENT CODE 66001(A) As set forth above, all new development within the City impacts public facilities. Moreover, each individual development project and its related increase in population and/or employment, along with the cumulative impacts of all devel opment in Palo Alto, will adversely impact existing facilities .Thus, imposition of the fee to finance the facilities on the Needs Lists is an efficient, practical, and equitable method of permitting development to proceed in a responsible manner. New development impacts facilities directly and cumulatively .In fact, without any future development, the acquisition, construction, and/or installation of many of the facilities on the Needs Lists would not be necessary as existing City facilities are generally adequate.Even new development located adjacent to existing facilities will utilize and benefit from facilities on the Needs List. The proposed fee amounts are roughly proportional to the impacts resulting from new development based on the analyses contained in Section V.Thus there is a reasonable relationship between the amount of the fee and the cost of the facilities. SECTION III: DEMOGRAPHICS City of Palo Alto Page 8 Development Impact Fee Justification Study April 29, 2014 In order to determine the public facilities needed to serve new development as well as establish fee amounts to fund such facilities, the City provided DTA with projections of future population and development within Palo Alto.DTA categorized developable residential land uses as Single Family and Multi-Family.Developable non-residential land uses within the City’s commercial, office,and industrial zones are categorized as Commercial, Office/Institutional,and Industrial respectively. Additional details are included in the table below.Based on these designations, DTA established fees for t he following five (5)land use categories to acknowledge the difference in impacts resulting from various land uses and to make the resulting fee program implementable . LAND USE CLASSIFICATION FOR FEE STUDY DEFINITION Single Family Includes single family detached homes Multi-Family Includes buildings with attached residential units including apartments, town homes, condominiums, and all other residential units not classified as Single Family Detached Commercial Includes, but is not limited to, buildings used as the following: Retail Service-oriented business activities Department stores, discount stores, furniture/appliance outlets, home improvement centers Entertainment centers Sub-regional and regional shopping centers Office/Institutional Includes, but is not limited to, buildings used as the following: Business/professional office Professional medical offices and hospitals Schools Industrial Includes, but is not limited to, buildings used as the following: Light manufacturing, warehouse/distribution, wholesaling; Large-scale warehouse retail Service commercial activities Public uses, arterial roadways and freeways providing automobile and public transit access Automobile dealerships Support commercial services The City of Palo Alto’s Comprehensive Plan1 (the “Comprehensive Plan”)demographics were used as estimates of the number of housing units and nonresidential building square feet to be built in the City.In addition, the Comprehensive Plan was used to project the additional population generated from new development.However, Comprehensive Plan Update data was also reviewed in light of projections prepared by the Association of Bay Area Governments (“ABAG”). 1 City of Palo Alto, Comprehensive Plan (1998).See also Comprehensive Plan Amendment (in progress). SECTION III: DEMOGRAPHICS City of Palo Alto Page 9 Development Impact Fee Justification Study April 29, 2014 Notably, DTA attempted to utilize metrics (e.g. average household size) t hat standardized existing demographics with the projections found in the Comprehensive Plan. Future residents and employees will create additional demand for facilities that existing public facilities cannot accommodate.In order to accommodate new development in an orderly manner, while maintaining the current quality of life in the City, the facilities on the Needs List (Section IV), as reviewed and approved by the City Council on March 3, 2014,will need to be constructed.For those facilities that are needed to mitigate demand from new development, facility costs have been allocated to new development only .In those instances when it has been determined that the new facilities will serve both existing and new development, facility costs have been allocated based on proportionate benefit (see Equivalent Dwelling Unit discussion in Section V). The following sections summarize the existing and future development figures that were used in calculating the impact fees. 1.EXISTING POPULATION FOR LAND USE CATEGORIES According to information provided by the City of Palo Alto, and generally confirmed by the California Employment Development Department –Demographic Research Unit, there are 17,614 existing Single Family units and 10,843 existing Multi-Family units within the City. DTA has used the following demographic information provided by the City of Palo Alto and the Comprehensive Plan which assume resident-per-unit factors of 2.68 and 2.12 per Single Family unit and Multi-Family unit, respectively.Therefore, the City population is generally comprised of 70,193 residents living in 28,457 Single Family and Multi-Family homes. Table 1 below summarizes the existing demographics for the residential land uses. TABLE 1 CITY OF PALO ALTO ESTIMATED EXISTING RESIDENTIAL DEVELOPMENT DTA has also utilized the following non-residential demographic information provided by the City of Palo Alto which assumes existing City non-residential land uses utilize employees-per-thousand-square-foot factors of 3.00, 2,50 and 1.00 employees per 1,000 building square feet of Commercial , Office/Institutional, and Industrial, SECTION III: DEMOGRAPHICS City of Palo Alto Page 10 Development Impact Fee Justification Study April 29, 2014 respectively.This results in 11,662 existing Commercial employees,63,534 existing Office/Institutional employees, and 18,099 existing Industrial City employees,as shown in Table 2 below.Each of these figures are generally confirmed by data from the Association of Bay Area Governments (“ABAG”) and the U.S. Census Bureau. Importantly,for many of the facilities considered in this Fee Study,EDUs are calculated based on the number of residents or employees (“Persons Served”)generated by each land use class.“Persons Served”equal Residents plus 50% of Employees,and is a customary industry practice designed to capture the reduced levels of s ervice demanded by employees.For existing Persons Served estimates, please reference Table 2 below. TABLE 2 CITY OF PALO ALTO ESTIMATED EXISTING NON-RESIDENTIAL DEVELOPMENT 1 Persons served equal Residents plus 50% of employees. 2.FUTURE POPULATION FOR NEW LAND USE CATEGORIES (2035) According to information provided by the City of Palo Alto,and confirmed by ABAG, there are projected to be an additional 6,839 Single Family units and 3,331 Multi- Family units within the City-wide area at 2035, the time horizon utilized for this Fee Study. DTA has used the following demographic information provided by the City of Palo Alto which assumes future resident-per-unit factors of 2.68 and 2.12 per Single Family unit and Multi-Family unit, respectively. This results in an additional 10,170 residents living in 4,123 Single Family and Multi-Family homes within the City. Table 3 on the following page summarizes the future demographics for the residential land uses. TABLE 3 CITY OF PALO ALTO FUTURE RESIDENTIAL DEVELOPMENT SECTION III: DEMOGRAPHICS City of Palo Alto Page 11 Development Impact Fee Justification Study April 29, 2014 In terms of non-residential property, Palo Alto expects to generate 21,428 future jobs, which can be broken down into 2,679 jobs relating to Commercial development, 14,592 jobs for Office/Institutional development, and 4,157 jobs for Industrial development within the City. The City of Palo Alto provided the projected employment discussed above, which results in estimated employees-per-thousand-square-foot factors of 3.00,2,50,and 1.00 employees per 1,000 building square feet of Commercial, Office/Institutional, and Industrial, respectively,as shown in Table 4 below. Again,for many of the facilities considered in this Fee Study, EDUs are calculated based on the number of residents or employees (“Persons Served”)generated by each land use class.“Persons Served”equal Residents plus 50% of Employees,and is a customary industry practice designed to capture the reduced levels of service demanded by employees.For future Persons Served estimates, please reference Table 4 below. TABLE 4 CITY OF PALO ALTO FUTURE NON-RESIDENTIAL DEVELOPMENT 1 Persons served equal Residents plus 50% of employees. Importantly, the land use categories that have been discussed above are consistent with (i) growth projections prepared by the City for the Comprehensive Plan, and (ii) land uses generally included in other development impact fee programs of the City. 3.EQUIVALENT DWELLING UNIT (EDU)PROJECTIONS Equivalent Dwelling Units (“EDU”) are a means of quantifying different land uses in terms of their equivalence to a residential dwelling unit, where equivalence is measured in terms of potential infrastructure use or benefit for each type of public facility.Since nearly all of the facilities proposed to be financed by the levy of impact fees will serve both residential and non-residential property, DTA projected the number of future EDUs based on the number of residents or employees generated by each land use class.For other facilities, different measures, such as number of trips, more accurately represent the benefit provided to each land use type .The EDU projections for each facility are shown in the fee derivation worksheets in Appendix A . SECTION IV: THE NEEDS LIST City of Palo Alto Page 12 Development Impact Fee Justification Study April 29, 2014 Identification of the facilities to be financed is a crit ical component of any development impact fee program.In the broadest sense,the purpose of impact fees is to protect the public health, safety, and general welfare by providing for adequate public facilities .“Public Facilities”per Government Code Section 66000 includes “public improvements and community amenities.” Government Code Section 66000 requires the identification of those facilities for which impact fees are going to be used as the key financing mechanism.Identification of the facilities may be made in an applicable general or specific plan, other public documents, or by reference to a Capital Improvement Program (“CIP”). DTA has worked closely with City staff to develop the list of facilities to be included in the Fee Study (“the Needs List”).Additionally, the Needs List was reviewed and approved by the City Council on March 3, 2014 at a public hearing.For purposes of the City’s fee program, the Needs List is intended to be the official public document identifying the facilities eligi ble to be financed, in whole or in part, through the levy of a development impact fee on new development within Palo Alto.The Needs List is organized by facility element (or type) and includes a cost section consisting of six (6)columns, which are defined in Table 5 below: TABLE 5 CITY OF PALO ALTO NEEDS LIST EXPLANATION OF COST SECTION Column Title Contents Source Total Cost for Facility The total estimated facility cost including engineering, design, construction, land acquisition, and equipment (as applicable) City Offsetting Revenues to New & Existing Development Share of Total Offsetting Revenues allocated to new and existing development City Net Cost to City The difference between the Total Cost and the Offsetting Revenues (column 1 plus column 2) Calculated by DTA Percent of Cost Allocated to New Development Net Cost Allocated to New Development based on New Development’s Share of Facilities Calculated by DTA Net Cost Allocated to New Development The Net Cost to City Multiplied by the Percentage Cost Allocated to New Development Calculated by DTA Policy Background or Objective Identifies policy source or rationale for facility need City Council or Comprehensive Plan SECTION IV: THE NEEDS LIST City of Palo Alto Page 13 Development Impact Fee Justification Study April 29, 2014 DTA surveyed City staff on required facilities needed to serve new develop ment as a starting point for its fee calculations.As part of the survey, DTA conducted extensive research with City departments such as Planning, Public Works, Parks & Recreation, Library, Transportation, etc.,and then narrowed the focus to those facility needs that were deemed most timely and prudent to include in the Fee Study.More specifically, the survey included the project description, justification, public benefit, estimated costs, and project financing for each proposed facility.Through regular discussions between DTA and City staff, the Needs List has gone through multiple series of revisions to fine-tune the needs, costs, and methodologies used in allocating the costs for each facility.For purposes of the fee program, it was determined that a planning horizon through 2035 would be appropriate.Importantly, escalations in project construction costs could be included in future fee increases that would need to be approved by the Palo Alto City Council. The final Needs List is shown on the following page. SECTION IV: THE NEEDS LIST City of Palo Alto Page 14 Development Impact Fee Justification Study April 29, 2014 SECTION V: METHODOLOGY USED TO CALCULATE FEES City of Palo Alto Page 15 Development Impact Fee Justification Study April 29, 2014 Pursuant to the nexus requirements of Government Code 66000, a local agency is required to “determine how there is a reasonable relationship between the amount of the fee and the cost of the public facility or portion of the public fac ility attributable to the development on which the fee is imposed.”It is impossible to precisely determine the impact that a specific new residential unit, commercial project, or industrial development will have on existing facilities.Additionally, predicting future residents’or employees’specific behavioral patterns, park and transportation, and health and welfare requirements is extremely difficult, and would involve numerous assumptions that are subject to substantial variation.Recognizing these limitations, the Legislature drafted AB 1600 to specifically require that a “reasonable” relationship be determined, not a direct cause and effect relationship. There are many methods or ways of calc ulating fees, but they are all based on determining the cost of needed improvements and assigning those costs equitably to various types of development.Each of the fee calculations employs the concept of an Equivalent Dwelling Unit (“EDU”) or Equivalent Benefit Unit (“EBU”)to allocate benefit among the five (5)land use classes.EDUs are a means of quantifying different land uses in terms of their equivalence to a residential dwelling unit, where equivalence is measured in terms of potential infrastruct ure use or benefit for each type of public facility .For many of the facilities considered in this Fee Study, EDUs are calculated based on the number of residents or employees (“Persons Served”)generated by each land use class.For other facilities, different measures, such as number of trips, more accurately represent the benefit provided to each land use class .Table 6 below shows total existing and projected EDUs or EBUs by facility type. Notably,“Persons Served”equal Residents plus 50% of Employees,and is a customary industry practice designed to capture the reduced levels of service demanded by employees. TABLE 6 CITY OF PALO ALTO CITY EQUIVALENT DWELLING UNITS The following sections present the reasonable relationship for benefit, impact,and rough proportionality tests for each fee element (i.e.,public safety and general government) and the analysis undertaken to apportion costs for each type of facility on the Needs List.More detailed fee calculation worksheets for each type of facilit y are included in Appendix A. Importantly, since the level of service (“LOS”)being requested for new development by City department heads is above the existing service level for certain types of facility, the cost of the new facilities has been carefully apportioned between existing and new development in the following manner: SECTION V: METHODOLOGY USED TO CALCULATE FEES City of Palo Alto Page 16 Development Impact Fee Justification Study April 29, 2014 1.New development was assigned 100% of the cost for a LOS that is equivalent to the existing LOS within the City. 2.The cost of the incremental difference between the new, higher LOS being requested by the City and the existing LOS was then allocated between existing development and new development, based on the relative number of equivalent dwelling units (“EDUs”) assigned to existing development and new development. SECTION V: METHODOLOGY USED TO CALCULATE FEES City of Palo Alto Page 17 Development Impact Fee Justification Study April 29, 2014 A.PUBLIC SAFETY FACILITIES The Public Safety element includes those facilities used by the City to protect life and property. In order to serve new development through buildout in 2035, the City identified the need for two (2)new fire stations. One (1)of the two (2)fire stations, and the equipment required to service this fire station, is needed to serve new development almost exclusively and will be funded 100% by new development, while the other fire station will serve both new and existing development.Thus, the cost of the incremental difference between the new, higher LOS being requested by the City and the existing LOS has been allocated between existing development and new development, based on the relative number of EDUs assigned to existing development and new development. Additionally, there is a need for other facilities,public safety specialty vehicles,and training stations to serve both existing and projected development.Therefore, the costs of these facilities have been allocated between existing development and new development based on their percentage of build out EDUs. TABLE 7 PUBLIC SAFETY FACILITIES ELEMENT Identify Purpose of Fee Public Safety Facilities Identify Use of Fee Construction,acquisition and/or upgrade of Police and Fire Facilities and equipment Demonstrate how there is a reasonable relationship between the need for the public facility, the use of the fee, and the type of development project on which the fee is imposed New residential and non-residential development will generate additional residents and employees who will require additional service calls increasing the need for trained Police and Fire personnel. Buildings and vehicles used to provide these services will have to be expanded, constructed,or purchased to meet this increased demand.Thus a reasonable relationship exists between the need for Public Safety facilities and the impact of residential and non-residential development.The Public Safety fees collected from new development will be used exclusively for public safety purposes. SECTION V: METHODOLOGY USED TO CALCULATE FEES City of Palo Alto Page 18 Development Impact Fee Justification Study April 29, 2014 Table 8 below identifies the facilities proposed to be funded in whole or in part with the collection of Public Safety fees.Costs are based on estimates provided by the City. TABLE 8 PUBLIC SAFETY FACILITIES FACILITY COSTS Calculation Methodology Fee amounts for this element were calculated for both residential and non -residential land uses as detailed in Appendix A.Each land use classification was assigned an EDU factor which was derived from the number of Persons Served, which again is defined as the persons per household (for residential units)and 50% of the number of employees per 1,000 building square feet of each category of non-residential development. Public Safety Building Improvements According to the City,it has been determined that this facility is needed to serve new development.Currently,this proposed facility is operating at an appropriate and acceptable level of service; therefore,the costs of facilities have been allocated to new development and existing development based on their percentage of their expected facility usage at build out .Consequently, 84.81%of the costs will be allocated to existing development and 15.19% of the costs will be allocated to new development. SECTION V: METHODOLOGY USED TO CALCULATE FEES City of Palo Alto Page 19 Development Impact Fee Justification Study April 29, 2014 TABLE 9 PUBLIC SAFETY BUILDING IMPROVEMENT COST ALLOCATION SUMMARY Fire Station Improvements According to the City,it has been determined that these facilities are needed to serve new development.Currently, these facilities are generally operating at an appropriate and acceptable level of service, though less so than many of the other public safety facilities and improvements ; therefore,the costs of facilities have been allocated to new development and existing development bas ed on their percentage of their expected facility usage at build out .Consequently, 46.85% of the costs will be allocated t o existing development and 53.15% of the costs will be allocated to new development. TABLE 10 FIRE STATION IMPROVEMENTS COST ALLOCATION SUMMARY Public Safety Vehicles According to the City,it has been determined that these facilities are needed to serve new development.Currently, these facilities are generally operating at an appropriate and acceptable level of service; therefore,the costs of facilities have been allocated to new development and existing development based on their percentage of their expected facility usage at build out .Consequently, 69.63% of the costs will be allocated to existing development and 30.37% of the costs will be allocated to new development. SECTION V: METHODOLOGY USED TO CALCULATE FEES City of Palo Alto Page 20 Development Impact Fee Justification Study April 29, 2014 TABLE 11 PUBLIC SAFETY VEHICLES COST ALLOCATION SUMMARY Public Safety Training Tower Modernization According to the City,it has been determined that this facility modernization is needed to serve new development.Currently,this facility is operating at an appropriate and acceptable level of service; therefore,the costs of facilities have been allocated to new development and existing development based on their percentage of their expected facility usage at build out.Consequently, 84.81% of the costs will be allocated to existing development and 15.19% of the costs will be allocated to new development. TABLE 12 PUBLIC SAFETY TRAINING TOWER MODERNIZATION COST ALLOCATION SUMMARY Fee Amounts Table 13 presents a summary of the derivation of EDUs, fee amounts ,and the costs financed by fees for the Public Safety Facilities on the Needs List.The details of the fee calculation are presented in Appendix A. SECTION V: METHODOLOGY USED TO CALCULATE FEES City of Palo Alto Page 21 Development Impact Fee Justification Study April 29, 2014 TABLE 13 PUBLIC SAFETY FACILITIES FEE DERIVATION SUMMARY Based on the development projections in Appendix A, the fee amounts presented in Table 13 will finance 23.47% of the net costs of the Public Safety Facilities identified on the Needs List.The remaining 76.53% of the net costs of facilities will be funded through other sources. SECTION V: METHODOLOGY USED TO CALCULATE FEES City of Palo Alto Page 22 Development Impact Fee Justification Study April 29, 2014 B.GENERAL GOVERNMENT FACILITIES The General Government Facilities Element includes those facilities used by the City to provide basic governmental services and public facilities maintenance services, exclusive of public safety. TABLE 14 GENERAL GOVERNMENT FACILITIES Identify Purpose of Fee General Government Service Facilities Identify Use of Fee Modernization of City Office and Building Improvements and Replacement of Municipal Services Center. Demonstrate how there is a reasonable relationship between the need for the public facility, the use of the fee, and the type of development project on which the fee is imposed New residential and non-residential development in the City will generate additional residents and employees who will increase the demand for services,including municipal services and general government functions.Population and growth has a direct impact on the need for government services and facilities, thus a reasonable relationship exists between new development and government facilities, which will have to be acquired to meet the increased demand.Fees collected from new development will be used exclusively for the City Government Service Facilities on the Needs List. TABLE 15 GENERAL GOVERNMENT FACILITIES COST SECTION V: METHODOLOGY USED TO CALCULATE FEES City of Palo Alto Page 23 Development Impact Fee Justification Study April 29, 2014 Calculation Methodology Fee amounts for this element were calculated for both residentia l and non-residential land uses as detailed in Appendix A.Each land use classification was assigned an EDU factor which was derived from the number of Persons Served, which again is defined as the persons per household (for residential units)and 50% of the number of employees per 1,000 building square feet of each category of non-residential development. CITY OFFICE AND BUILDING IMPROVEMENTS According to the City,it has been determined that these facilities are needed to serve new development.Currently, these facilities are operating at an appropriate and acceptable level of service; therefore,the costs of facilities have been allocated to new development and existing development based on their percentage of their expected facility usage at build out .Consequently, 84.81% of the costs will be allocated to existing dev elopment and 15.19% of the costs will be allocated to new development as presented in Table 16 below. TABLE 16 CITY OFFICE AND BUILDING IMPROVEMENTS COST ALLOCATION SUMMARY Municipal Services Center Replacement According to the City,it has been determined that these facilities are needed to serve new development.Currently, these facilities are operating at an appropriate and acceptable level of service; therefore,the costs of facilities have been allocated to new development and existing dev elopment based on their percentage of their expected facility usage at build out .Consequently, 84.81% of the costs will be allocated to existing development and 15.19% of the costs will be allocated to new development as presented in Table 17 below. SECTION V: METHODOLOGY USED TO CALCULATE FEES City of Palo Alto Page 24 Development Impact Fee Justification Study April 29, 2014 TABLE 17 MUNICIPAL SERVICES CENTER REPLACEMENT COST ALLOCATION SUMMARY Fee Amounts Table 18 presents a summary of the derivation of EDUs, fee amounts and the costs financed by fees for the general government facilities on the Needs List .The details of the fee calculation are presented in Appendix A . TABLE 18 GENERAL GOVERNMENT FACILITIES FEE DERIVATION SUMMARY Based on the development projections in Appendix A, the fee amounts presented in Table 18 will finance 15.19% of the net costs of the General Government Facilities identified on the Needs List.The remaining 84.81% of the net costs of facilities will be funded through other sources. SECTION VI: SUMMARY OF FEES City of Palo Alto Page 25 Development Impact Fee Justification Study April 29, 2014 The total fee amounts to finance new development ’s share of the costs of facilities in the Needs Lists are summarized in Tables 19 & 20 below. TABLE 19 DEVELOPMENT IMPACT FEE SUMMARY TABLE 20 DEVELOPMENT IMPACT FEE SUMMARY http://localhost/resources/home/Clients/Palo Alto/AB 1600 -2012/AB 1600 Update/DIFReport DRAFT v.8.docx Appendix A Fee Derivation Worksheets I. Inventory of Existing Facilities Facility Type Quantity Facility Units Public Safety Building (Replacement)0 Square Feet Fire Stations (Modernized)5 Integrated Facility Vehicles (Van, Trucks, Engines, Ambulances)18 No. of Vehicles Training Tower (Modernized)0 Integrated Facility Public Safety Facilities NA NA II. Existing EDU Calculation [a][d] Number of [b][c]Total Units/Persons Served per Unit/EDUs per Unit/Number of EDUs Land Use Type Non-Res. 1,000 SF 1,000 Non-Res. SF Per 1,000 Non-Res. SF [a]*[c] Single Family Residential 17,614 2.68 1.00 17,614 Multi Family Residential 10,843 2.12 0.79 8,577 Commercial 3,887 1.50 0.56 2,176 Office/Institutional 25,414 1.25 0.47 11,853 Industrial 18,099 0.50 0.19 3,377 Total 43,597 III. Existing Facility Standard Quantity Facility Type Quantity Facility Units per 1,000 EDU's Public Safety Building (Replacement)0 Square Feet 0 Fire Stations (Modernized)5 Integrated Facility 0.11 Vehicles (Van, Trucks, Engines, Ambulances)18 No. of Vehicles 0.41 Training Tower (Modernized)0 Integrated Facility 0 Public Safety Facilities NA NA NA IV. Future EDU Calculation [a][b][d] Number of Residents per Unit/[c]Total Units/Employees per EDUs per Number of EDUs Land Use Type Non-Res. 1,000 SF [1]Non-Res. 1,000 SF [2]Unit/per 1,000 Non-Res. SF [a]*[c] Single Family Residential 2,552 2.68 1.00 2,552 Multi Family Residential 1,571 2.12 0.80 1,257 Commercial 893 1.50 0.56 500 Office/Institutional 5,837 1.25 0.47 2,722 Industrial 4,157 0.50 0.19 776 Total 7,807 V. Proposed Inventory, Cost, and Service Standard Quantity Facility Type Quantity Facility Units Facility Cost per 1,000 EDU's Public Safety Building (Replacement)44,850 Square Feet $57,000,000 5,745.17 Fire Stations (Modernized)2 Integrated Facility $14,200,000 0.26 Vehicles (Van, Trucks, Engines, Ambulances)18 No. of Vehicles $17,000,000 2.31 Training Tower (Modernized)1 Integrated Facility $8,000,000 0.13 Offsetting Revenues $0 Total Cost of Public Safety Facilities $96,200,000 VI. Allocation of Public Safety Facilities to Existing & New Development (based on total EDUs) A.1 Public Safety Building Improvements [a][b][c][d][e][f][g] Existing Total Future SF Allocated 100%Proposed Service SF per EDU SF Beyond Existing Total Proposed SF Per EDU's To New Development [3]Standard Per Beyond Existing Service Standard [4] New SF 1,000 EDU's [a]*[b]1,000 EDU's [d]-[a][b]*[e][c]+[f] 0.00 7,806.55 0.00 5,745.17 5,745.17 44,850.00 44,850.00 City of Palo Alto Public Safety Fee Calculation A - 1 City of Palo Alto Public Safety Fee Calculation A.2 SF Beyond Existing Service Standard Split Between New and Existing, plus Facility Units allocated 100% to New Development Facility Units Split Facility Units Number of Percentage of Total Between New and Existing Allocated 100% To Total Facility Units Facility Type EDU's EDU's Development New Development Allocated Existing 43,597 84.81%38,038.73 NA 38,038.73 New Development 7,807 15.19%6,811.27 0.00 6,811.27 Total 51,404 100.00%44,850.00 44,850.00 A.3 Cost Allocated Between Existing and New Development Total Number of Percentage of Facility Type SF Cost Allocated Facility Cost Existing 38,039 84.81%$48,343,543 New Development 6,811 15.19%$8,656,457 Total 44,850 100.00%$57,000,000 B.1 Fire Station Improvements [a][b][c][d][e][f][g] Existing Total Future Facility Units Allocated 100%Proposed Service Facility Units per EDU Facility Units Beyond Total Proposed Facility Units Per EDU's To New Development [3]Standard Per Beyond Existing Existing Service Standard [4]New Facility Units 1,000 EDU's [a]*[b]1,000 EDU's [d]-[a][b]*[e][c]+[f] 0.11 7,806.55 0.90 0.26 0.14 1.10 2.00 B.2 Facility Units Beyond Existing Service Standard Split Between New and Existing, plus Facility Units allocated 100% to New Development Facility Units Split Facility Units Number of Percentage of Total Between New and Existing Allocated 100% To Total Facility Units Facility Type EDU's EDU's Development New Development Allocated Existing 43,597 84.81%0.94 NA 0.94 New Development 7,807 15.19%0.17 0.90 1.06 Total 51,404 100.00%1.10 2.00 B.3 Cost Allocated Between Existing and New Development Total Number of Percentage of Facility Type New Facility Units Cost Allocated Facility Cost Existing 0.94 46.85%$6,652,177 New Development 1.06 53.15%$7,547,823 Total 2.00 100.00%$14,200,000 C.1 Public Safety Vehicles [a][b][c][d][e][f][g] Existing Total Future Facility Units Allocated 100%Proposed Service Facility Units per EDU Facility Units Beyond Total Proposed Facility Units Per EDU's To New Development [3]Standard Per Beyond Existing Existing Service Standard [4]New Facility Units 1,000 EDU's [a]*[b]1,000 EDU's [d]-[a][b]*[e][c]+[f] 0.41 7,806.55 3.22 2.31 1.89 14.78 18.00 C.2 Facility Units Beyond Existing Service Standard Split Between New and Existing, plus Facility Units allocated 100% to New Development Facility Units Split Facility Units Number of Percentage of Total Between New and Existing Allocated 100% To Total Facility Units Facility Type EDU's EDU's Development New Development Allocated Existing 43,597 84.81%12.53 NA 12.53 New Development 7,807 15.19%2.24 3.22 5.47 Total 51,404 100.00%14.78 18.00 A - 2 City of Palo Alto Public Safety Fee Calculation C.3 Cost Allocated Between Existing and New Development Total Number of Percentage of Facility Type Facility Units Cost Allocated Facility Cost Existing 12.53 69.63%$11,836,499 New Development 5.47 30.37%$5,163,501 Total 18.00 100.00%$17,000,000 D.1 Public Safety Training Tower (Modernized) [a][b][c][d][e][f][g] Existing Total Future Facility Units Allocated 100%Proposed Service Facility Units per EDU Facility Units Beyond Total Proposed Facility Units Per EDU's To New Development [3]Standard Per Beyond Existing Existing Service Standard [4]New Facility Units 1,000 EDU's [a]*[b]1,000 EDU's [d]-[a][b]*[e][c]+[f] 0.00 7,806.55 0.00 0.13 0.13 1.00 1.00 D.2 Facility Units Beyond Existing Service Standard Split Between New and Existing, plus Facility Units allocated 100% to New Development Facility Units Split Facility Units Number of Percentage of Total Between New and Existing Allocated 100% To Total Facility Units Facility Type EDU's EDU's Development New Development Allocated Existing 43,597 84.81%0.85 NA 0.85 New Development 7,807 15.19%0.15 0.00 0.15 Total 51,404 100.00%1.00 1.00 D.3 Cost Allocated Between Existing and New Development Total Number of Percentage of Facility Type Facility Units Cost Allocated Facility Cost Existing 0.85 84.81%$6,785,059 New Development 0.15 15.19%$1,214,941 Total 1.00 100.00%$8,000,000 Section Cost Allocated Total Cost Per VI Facility Type to New Development Future EDU's EDU E.1 Public Safety Facilities $22,582,723 7,807 $2,892.79 Offsetting Revenues $0 7,807 $0.00 Total $22,582,723 $2,892.79 VIII. Development Impact Fee per Unit or per 1,000 Non-Res. SF EDUs Per Fees Per Number of Units/Cost Financed by Land Use Type Unit/1,000 Non-Res. SF Unit/1,000 Non-Res. SF Non-Res. 1,000 SF DIF Single Family Residential 1.00 $2,893 2,552 $7,382,429 Multi Family Residential 0.80 $2,314 1,571 $3,635,639 Commercial 0.56 $1,619 893 $1,445,601 Office/Institutional 0.47 $1,349 5,837 $7,875,517 Industrial 0.19 $540 4,157 $2,243,537 Total Allocated to New Development $22,582,723 Outside Funding Responsibility $73,617,277 Total Cost of Public Safety Facilities $96,200,000 Notes: [1] Expected Housing Units based on data provided by the City of Palo Alto's Planning Department, confirmed by ABAG. [2] Average Household Size Based on information obtained from the California Department of Finance (2013), City, and U.S. Census Bureau. [3] Allocates 100% to new development square feet or equipment necessary to fund existing service standard for new residents. [4] Denotes proposed service standard in excess to that currently provided to existing residents. VII. Summary Cost Data A - 3 I. Inventory of Existing Facilities Facility Type Quantity Facility Units City Office & Building Improvements (Modernized)0 Square Feet Municipal Services Center Replacement 0 Square Feet City Office & Building Improvements NA NA II. Existing EDU Calculation [a][d] Number of [b][c]Total Units/Persons Served per Unit/EDUs per Unit/Number of EDUs Land Use Type Non-Res. 1,000 SF 1,000 Non-Res. SF Per 1,000 Non-Res. SF [a]*[c] Single Family Residential 17,614 2.68 1.00 17,614 Multi Family Residential 10,843 2.12 0.79 8,577 Commercial 3,887 1.50 0.56 2,176 Office/Institutional 25,414 1.25 0.47 11,853 Industrial 18,099 0.50 0.19 3,377 Total 43,597 III. Existing Facility Standard Quantity Facility Type Quantity Facility Units per 1,000 EDU's City Office & Building Improvements (Modernized)0 Square Feet 0 Municipal Services Center Replacement 0 Square Feet 0 City Office & Building Improvements NA NA NA IV. Future EDU Calculation [a][b][d] Number of Residents per Unit/[c]Total Units/Employees per EDUs per Number of EDUs Land Use Type Non-Res. 1,000 SF [1]Non-Res. 1,000 SF [2]Unit/per 1,000 Non-Res. SF [a]*[c] Single Family Residential 2,552 2.68 1.00 2,552 Multi Family Residential 1,571 2.12 0.80 1,257 Commercial 893 1.50 0.56 500 Office/Institutional 5,837 1.25 0.47 2,722 Industrial 4,157 0.50 0.19 776 Total 7,807 V. Proposed Inventory, Cost, and Service Standard Quantity Facility Type Quantity Facility Units Facility Cost per 1,000 EDU's City Office & Building Improvements (Modernized)21,481 Square Feet $25,556,000 2,751.66 Municipal Services Center Replacement 83,000 Square Feet $60,450,000 10,632.09 Offsetting Revenues $0 Total Cost of General Government Facilities $86,006,000 VI. Allocation of General Government Facilities to Existing & New Development (based on total EDUs) A.1 City Office & Building Improvements [a][b][c][d][e][f][g] Existing Total Future SF Allocated 100%Proposed Service SF per EDU SF Beyond Existing Total Proposed SF Per EDU's To New Development [3]Standard Per Beyond Existing Service Standard [4] New SF 1,000 EDU's [a]*[b]1,000 EDU's [d]-[a][b]*[e][c]+[f] 0.00 7,806.55 0.00 2,751.66 2,751.66 21,481.00 21,481.00 A.2 SF Beyond Existing Service Standard Split Between New and Existing, plus SF allocated 100% to New Development Facility Units Split Facility Units Number of Percentage of Total Between New and Existing Allocated 100% To Total Facility Units Facility Type EDU's EDU's Development New Development Allocated Existing 43,597 84.81%18,218.73 NA 18,218.73 New Development 7,807 15.19%3,262.27 0.00 3,262.27 Total 51,404 100.00%21,481.00 21,481.00 City of Palo Alto General Government Fee Calculation A - 4 City of Palo Alto General Government Fee Calculation A.3 Cost Allocated Between Existing and New Development Total Number of Percentage of Facility Type SF Cost Allocated Facility Cost Existing 18,218.73 84.81%$21,674,870 New Development 3,262.27 15.19%$3,881,130 Total 21,481.00 100.00%$25,556,000 B.1 Municipal Services Center Replacement [a][b][c][d][e][f][g] Existing Total Future SF Allocated 100%Proposed Service SF per EDU SF Beyond Existing Total Proposed SF Per EDU's To New Development [3]Standard Per Beyond Existing Service Standard [4] New SF 1,000 EDU's [a]*[b]1,000 EDU's [d]-[a][b]*[e][c]+[f] 0.00 7,806.55 0.00 10,632.09 10,632.09 83,000.00 83,000.00 B.2 Facility Units Beyond Existing Service Standard Split Between New and Existing, plus SF allocated 100% to New Development Facility Units Split Facility Units Number of Percentage of Total Between New and Existing Allocated 100% To Total Facility Units Facility Type EDU's EDU's Development New Development Allocated Existing 43,597 84.81%70,394.98 NA 70,394.98 New Development 7,807 15.19%12,605.02 0.00 12,605.02 Total 51,404 100.00%83,000.00 83,000.00 B.3 Cost Allocated Between Existing and New Development Total Number of Percentage of Facility Type New Facility Units Cost Allocated Facility Cost Existing 70,394.98 84.81%$51,269,599 New Development 12,605.02 15.19%$9,180,401 Total 83,000.00 100.00%$60,450,000 Section Cost Allocated Total Cost Per VI Facility Type to New Development Future EDU's EDU C.1 City Office & Building Improvements $13,061,531 7,807 $1,673.15 Offsetting Revenues $0 7,807 $0.00 Total $13,061,531 $1,673.15 VIII. Development Impact Fee per Unit or per 1,000 Non-Res. SF EDUs Per Fees Per Number of Units/Cost Financed by Land Use Type Unit/1,000 Non-Res. SF Unit/1,000 Non-Res. SF Non-Res. 1,000 SF DIF Single Family Residential 1.00 $1,673 2,552 $4,269,893 Multi Family Residential 0.80 $1,339 1,571 $2,102,803 Commercial 0.56 $936 893 $836,116 Office/Institutional 0.47 $780 5,837 $4,555,089 Industrial 0.19 $312 4,157 $1,297,630 Total Allocated to New Development $13,061,531 Outside Funding Responsibility $72,944,469 Total Cost of General Government Facilities $86,006,000 Notes: [1] Expected Housing Units based on data provided by the City of Palo Alto's Planning Department, confirmed by ABAG. [2] Average Household Size Based on information obtained from the California Department of Finance (2013), City, and U.S. Census Bureau. [3] Allocates 100% to new development square feet or equipment necessary to fund existing service standard for new residents. [4] Denotes proposed service standard in excess to that currently provided to existing residents. VII. Summary Cost Data A - 5 Existing EDU Calculation Service Factor (Residents and Employees) Residents per Unit**/ Number of Persons Served per EDUs per Unit/Total Land Use Type Persons Served *1,000 Non-Res. SF per 1,000 Non-Res. SF Number of EDUs Single Family Residential 47,206 2.68 1.00 17,614 Multi Family Residential 22,987 2.12 0.80 8,674 Commercial 5,831 1.50 0.56 2,176 Office/Institutional 31,767 1.25 0.47 11,853 Industrial 9,050 0.50 0.19 3,377 Total 116,840 43,694 * Source: David Taussig & Associates; City of Palo Alto Comprehensive Plan, U.S. Census Bureau QuickFacts (American Community Survey). ** Persons Served = Residents plus 50% of Employees, customary industry practice designed to capture the reduced levels of service demanded by employees. Future EDU Calculation Service Factor (Future Residents and Employees) Residents per Unit**/ Number of Persons Served per EDUs per Unit/Total Land Use Type Persons Served *1,000 Non-Res. SF per 1,000 Non-Res. SF Number of EDUs Single Family Residential 6,839 2.68 1.00 2,552 Multi Family Residential 3,331 2.12 0.80 1,257 Commercial 1,339 1.50 0.56 500 Office/Institutional 7,296 1.25 0.47 2,722 Industrial 2,079 0.50 0.19 776 Total 20,884 7,807 * Source: David Taussig & Associates; City of Palo Alto Comprehensive Plan, U.S. Census Bureau QuickFacts (American Community Survey). ** Persons Served = Residents plus 50% of Employees, customary industry practice designed to capture the reduced levels of service demanded by employees. City of Palo Alto EBU & EDU Calculation Year to Build-Out (2035) A - 6 Public Finance Public Private Partnerships Urban Economics 2250 Hyde Street 5th Floor San Francisco, CA 94109 Phone (800) 969-4382 City of Palo Alto Development Impact Fees As per FY 2014 Adopted Municipal Fee Schedule page 17-3, with revisions Type of Project Parks Community Centers Libraries Housing Total Fees (NIC Transp.)Transportation Residential - New Homes Only* Single family < 3,000 sq. feet $10,638/residence $2,758/residence $963/residence EXEMPT $14,359/res. $3,197 per net new PM peak hr trip Single family >3,000 sq. feet $15,885/residence $4,129/residence $1,434/residence EXEMPT $21,448/res. $3,197 per net new PM peak hr trip Multi-family </= 900 sq. feet $3,521/unit $916/unit $316/unit EXEMPT $4,753/unit $3,197 per net new PM peak hr trip Multi-family >900 sq. feet $6,963/unit $1,815/unit $565/unit EXEMPT $9,343/unit $3,197 per net new PM peak hr trip Non-residential Commercial/Industrial $4,517 per 1,000 sq ft or fraction thereof $255 per 1,000 sq ft or fraction thereof $243 per 1,000 sq ft or fraction thereof $18.89 per sq ft $23.89 per net new sq ft $3,197 per net new PM peak hr trip Hotel/Motel $2,043 per 1,000 sq ft or fraction thereof $115 per 1,000 sq ft or fraction thereof $102 per 1,000 sq ft or fraction thereof $18.89 per sq ft $21.15 per net new sq ft $3,197 per net new PM peak hr trip Residential Subdivisions Single-family Multi-family Special Zones Traffic Impact Fee Stanford Research Park/El Camino Real CS Zone $11.08 per net new sq ft San Antonio/West Bayshore Area $2.28 per sq ft Charleston/Arastradero Commercial $0.34 per sq ft Charleston/Arastradero Residential $1,168 per unit Parking in-lieu fee for Downtown Assessment District $60,750 per parking space Notes: "Single-family" is defined as a single dwelling unit that does not share a common wall with another dwelling unit **In-Lieu Parkland Dedication Fee is an option only for projects of < 50 parcels. Fee Category Parkland Dedication Fee** *Square footage refers to living area, not lot size. 531 sq ft of parkland/unit or $58,366/unit in-lieu fee 366 sq ft of parkland/unit or $40,187/unit in-lieu fee Attachment C ACTION ITEMS 8. From Finance Committee Review of Development Impact Fees: List of Public Facilities Capital Needs. Lalo Perez, Administrative Services Director and Chief Financial Officer, indicated Staff was asked to review Development Impact Fees (DIF). Information was introduced at the Finance Committee a few months prior. Nathan Perez, Vice President of David Taussig and Associates (DTA), reported DIF were not taxes, special assessments, or user fees. DIF could not be used to cover ongoing operations, maintenance costs, and the like. Per AB 1600, DIF were an attempt to allow municipalities to recover their fair share from new development. DIF had a nexus requirement and could not be arbitrary. DIF required a great deal of demographic research and costing of projected facilities throughout the timeframe of the Nexus Study update. The current study covered the timeframe through 2035. Previously the City asked DTA to provide a comparative survey of DIF for peer communities to Palo Alto. There were not many peer communities to Palo Alto. Sometimes information was difficult to obtain, because staff in other cities were not always helpful. Per the Finance Committee's request, DTA reviewed DIF as a percentage of average home sales price. With the $1.5 million average home price in December 2013, Palo Alto was in line with other cities on the Peninsula. DTA recommended updating the Citywide transportation fee, adding a public safety fee for the Public Safety Building, and adding a general government fee for larger municipal offices and capital improvements. DTA sought the Council's approval of the needs list. Following Council approval of the needs list, DTA would calculate fee levels and then prepare a draft and/or final Nexus Study for review. If the final study reflected updates to fees, they would be incorporated via City Ordinance and could be a source for additional revenue in the future. Mr. Lalo Perez noted the Infrastructure Committee was working on funding for infrastructure projects. Some of the numbers on the needs list would not align to the infrastructure item later in the Agenda. Staff requested the Council focus on the list itself. The cost and funding sources would be updated as decisions were made. The needs list contained more projects than the infrastructure project list, because the Infrastructure Committee was considering projects that were not fundable with existing City funds. Staff compiled the needs list beginning with projects that were currently in the Capital Improvement Program (CIP). The needs list was a snapshot in time for projects likely to be undertaken. Staff initially had an effective date of July 1. It became evident in Finance Committee discussions that Staff needed more time to review the project list. The Finance Committee questioned why the water, sewer and storm drain fee connections seemed to Page 9 of 31 City Council Meeting Minutes: 03/03/14 be higher than surrounding benchmarked cities. In 2008, the Council approved an increase in fees be phased in over three years based upon a fee analysis. The resetting of that fee was based on a complete analysis of the total cost including projected needs for infrastructure. The City provided an exemption for residential remodeling. The Finance Committee also questioned the possibility of changing the residential remodeling exemption. Council Member Burt, Chair of the Finance Committee in 2013, reported the Finance Committee recommended the topic be an action item in order to provide adequate transparency and additional opportunity for public participation and Council comment. Three main areas dominated the Finance Committee's discussion: 1) whether the transportation fee was adequate; 2) why the wastewater fee was higher than surrounding cities; and 3) should the City have a public safety or fire fee. The Finance Committee did not want to limit Council discussion to those three topics. Vice Mayor Kniss requested the Finance Committee's determination as to why the City did not have a public safety or fire fee. Council Member Burt stated the Finance Committee did not make a determination. Vice Mayor Kniss asked why the City did not have a public safety or fire fee. Council Member Burt noted the Finance Committee discussed that. Vice Mayor Kniss wanted to know what would be required for the City to develop a public safety or fire fee. The City was always searching for ways to augment revenue. Mr. Nathan Perez needed the Council's approval of the needs list in order to develop fees. DTA would then utilize demographic information and cost to arrive at estimated fees. To calculate a fee, the costs in any given category were divided by generally the number of dwelling units projected over the horizon of the fee update. Vice Mayor Kniss felt the Council first should determine whether or not the City needed such a fee. She understood Council Member Burt wanted Council feedback. She wanted to know what the Council needed to do to get a policy on the table and then to decide whether or not to implement a fee. Mr. Lalo Perez referenced Attachment A of DTA's report, Item B Public Safety facilities. The first item was the Public Safety Building (PSB). At the time that the listing was compiled, the Council had multiple options for funding a PSB. Once the Council made decisions regarding a funding source, the $57 million amount in the table could change to $0. A fully funded project could Page 10 of 31 City Council Meeting Minutes: 03/03/14 not be contained in the needs list. As the Council made decisions, Staff could calculate an amount for a potential fee. Council Member Scharff asked if DTA would recommend changes to fee amounts based on the Nexus Study. Mr. Nathan Perez explained that consultants typically did not recommend new fees that were less than existing fees. The Council retained the authority to charge less than the existing fee amount. Council Member Scharff noted the City's park fee was substantially less than park fees charged in other cities. He inquired whether the Nexus Study would suggest the maximum park fee the City could charge. Mr. Nathan Perez reported the Nexus Study would utilize the costs noted in Attachment A divided by demographic numbers to calculate a projected fee moving forward. Park fees were omitted from the list because he understood that park fees would not be increased based upon total costs. Mr. Lalo Perez explained that most of the projects identified for parks was funded through the CIP. The net cost for identified park projects was very low. Community Services and Public Works Departments were approximately one year away from completing a Master Plan for parks; therefore Staff did not have a full picture of parks needs. Council Member Scharff did not believe Staff was ready to move forward with the study. He asked why a purchase of land for parks was not included in the needs list. Mr. Nathan Perez surveyed every City department for a list of projects. The threshold for needs for parks would not result in a higher fee. Council Member Scharff felt there were many needs for parks over the next 30 years. He was not comfortable moving forward on that basis. Mr. Nathan Perez reported the parks list of projects was inclusive, but the ultimate cost of the facilities on that list would not be great enough to increase the fee. Council Member Scharff asked if the list contained all the facilities, including additional parks, that could possibly be needed. Staff presented information before completing the Master Plan for parks. Mr. Lalo Perez noted the Council in the future could consider any fees that were not adjusted at the current time and have the Master Plan as a source. Page 11 of 31 City Council Meeting Minutes: 03/03/14 If the Council delayed its decision, it could lose the opportunity of adjusting other fees at the current time. Council Member Scharff asked if the Council could carve out the parks fee and return to it in the future. Mr. Nathan Perez answered yes. Parks could be omitted at the current time and the fee would remain the same. DTA could either add new categories or increase other categories as applicable. Council Member Scharff reiterated that the parks fee would remain in place and the Council could review it at a later time. Mr. Keene indicated the Council typically reviewed DIF every two to four years. Staff could perform the review more often if the Council directed them to do so. Council Member Scharff asked why Cubberley was not included in the needs list. Mr. Lalo Perez reported the needs for Cubberley were not fully known. Council Member Scharff stated the amount for a PSB was not known, and asked how that discussion was different from Cubberley. Mr. Lalo Perez explained that the review of DIF had been delayed because of the number of pending decisions. At the current time, the Council was more likely to make a decision regarding the PSB than Cubberley. Cubberley needed a great deal of negotiation and discussion. To include Cubberley in the needs list, Staff needed a degree of certainty that a project would occur. Council Member Scharff inquired whether the needs list was a vision for the community through 2035 or simply a list of projects that needed a funding source. He did not see a consistent methodology. Mr. Keene commented that the goal was to set a fee that was applied in a given year to a new construction project. The Council could adjust fees each year. Nothing precluded the Council from marginally adjusting one area without reviewing all areas. Mr. Nathan Perez noted the recommendations considered the total cost per category. Given the lack of dollars in some categories, DTA determined that updates could be better discussed at a later time. Mr. Keene reported the needs list did not contain all definite unfunded capital needs or community facilities. The Council could set a policy Page 12 of 31 City Council Meeting Minutes: 03/03/14 direction to add those needs. At the same time, DIF were practically applied when a building permit was obtained. If the Council delayed adjustments on recommended categories to obtain information for all categories, then the City would lose revenue from increased fees for recommended categories. Moving forward on some categories was in the City's best interests even if the Council acknowledged it needed additional information for other categories. Council Member Scharff understood the City Manager suggested reviewing DIF more frequently. He asked if more projects should be contained in the needs list even though they could be removed from the list by November 2014. Mr. Lalo Perez acknowledged that Staff should have given the Council the full list of areas considered so the Council could appreciate the extensive review. The full list for parks and recreation facilities contained 33 items totaling a net cost of $57 million and included $6 million for athletic fields at the Golf Course, $11 million for a City gymnasium, Cubberley field restrooms, Cubberley roof replacement, Cubberley mechanical and electrical upgrades, and Cubberley tennis courts. Even after including those dollar figures, the analysis determined that an increased fee was not warranted. Council Member Scharff stated rates did not necessarily decrease. Mr. Nathan Perez responded correct. The Council retained authority to charge less. Council Member Scharff asked if the City was forced to lower the rate because cost amounts were insufficient to maintain the current fee amount. Mr. Nathan Perez replied no. Council Member Scharff inquired whether legally the Council was required to reduce an existing fee. Mr. Nathan Perez indicated the law did not specifically state that. City departments did an excellent job of reviewing projects. He did not encourage benchmarking or finding a certain number that would result in increased DIF. Staff developed a list of needs that did not meet the threshold to increase rates. It could happen in a few years, at which time the rates could be updated. Council Member Scharff inquired whether a decision was made on the three issued mentioned at the Finance Committee meeting. Page 13 of 31 City Council Meeting Minutes: 03/03/14 Mr. Nathan Perez remarked that if the Council chose to eliminate big-ticket items from the list, then they would be removed from the list prior to calculating fees. Council Member Scharff added that some big-ticket items needed to be added to the list prior to calculating fees. Council Member Burt mentioned a transportation fee, a wastewater fee, and a public safety fee. The question was whether they would be included in the study to determine a fee. Mr. Lalo Perez reported a transportation fee would be studied because the net cost of many of the projects was relatively stable. Several projects, especially the PSB, might be eliminated resulting in a low amount of costs and a smaller fee. The Council should proceed with consideration of a transportation fee until it made the final decisions on those projects. The general government facilities fee could proceed, because MSC funding sources were unclear. Council Member Scharff asked why the MSC with an approximate cost of $300 million was not included in the list. Mr. Lalo Perez Staff explained that the dollar amount was not reliable and was part of the CIP process. Council Member Holman noted that parking impact fees were not included on the list to be increased and had not been updated since 1989. The in-lieu parking fee for Downtown development was updated in 1995 and recommended for update. She asked why those were not included on the list. Mr. Nathan Perez agreed that those fees may need to be updated. Zonal fees were outside the scope of DTA's contract. Mr. Lalo Perez explained that Staff was reviewing fees in manageable groups and would continue the process with all fees. Council Member Holman stated the definition of home demolition needed to be changed, because of the exemption from impact fees and the lack of proper assessment for property taxes. She inquired about the number of projects that were more than 50 parcels in reference to page 87, Residential Subdivisions of Over 50 Parcels. Mr. Lalo Perez did not have an answer but would report back. Council Member Holman felt the number should be lower, certainly not 50 as she could not think of a single project over 50 parcels. She asked if a California Avenue in-lieu fee was outside the scope of the presentation. Page 14 of 31 City Council Meeting Minutes: 03/03/14 Mr. Lalo Perez answered yes. Council Member Holman concurred with Council Member Scharff's comments regarding parks. She inquired whether Staff presented the impact fee to the Parks and Recreation Commission for consideration. Mr. Lalo Perez replied no. That had not been a part of the process. Council Member Holman suggested Staff not be married to process. The chart was all based on residential information. Mr. Keene noted non-residential, commercial and industrial could be found in the middle of the chart. Council Member Holman had nothing to compare non-residential information to as the chart was not provided in the packet. It was important to know how Palo Alto tracked with other communities. Mr. Lalo Perez would include that information in future Staff Reports. Council Member Holman inquired whether Staff could provide that information when the item returned to the Council. Mr. Nathan Perez replied yes. Council Member Holman noted the Staff Report did not contain the chart referenced in the Finance Committee Minutes, which made it difficult to follow the discussion. The chart appeared to be misleading because it included the sewer hookup fee in the water, sewer, and storm drain fee. Mr. Nathan Perez could reflect it either way. It was an outlier in otherwise consistent data. Council Member Holman felt it should at least have a footnote. Mr. Lalo Perez indicated each agency within Santa Clara County set fees in different manners. Mr. Nathan Perez reported the comparison was difficult because Palo Alto suggested a larger water main diameter than other cities. Each city had different requirements that had to be considered in a comparison. Council Member Holman was unsure whether commercial and industrial was lower than residential. Mr. Nathan Perez would provide that data. Palo Alto was relatively lower compared to peer communities on the non-residential side. Page 15 of 31 City Council Meeting Minutes: 03/03/14 Council Member Klein inquired about the amount of money collected and the length of time required to collect sufficient funds to construct a PSB. Mr. Nathan Perez did not believe the City would collect sufficient funding over the timeframe of the study. Fees would assist with funding but would not solely fund a $57 million project. The cost of the project had to be allocated between existing and new development. Using 25 percent for new development, the fee would finance a maximum of $15 million. Council Member Klein inquired about the source of 25 percent. Mr. Nathan Perez explained that 25 percent was an approximation for discussion. It generally considered existing versus future demographics. Council Member Klein assumed that new construction, both commercial and residential, would result in 1-2 percent of existing stock. Mr. Nathan Perez concurred. Palo Alto was largely built out. The Nexus Study could result in a figure closer to 15-20 percent. Council Member Klein clarified that 15-20 percent was over the 20-year period. Utilizing gross numbers, the most a fee devoted to the PSB would generate was 20 percent of the cost over 20 years. Mr. Nathan Perez agreed. Council Member Klein calculated the present value to be a quarter of that or 5 percent. That fee would generate only a few million of the needed $57 million. Mr. Nathan Perez concurred. Council Member Klein inquired about the amount of funds collected from DIF. Mr. Lalo Perez did not have a cumulative total, but the transportation fee collected $600,000 and the wastewater fee collected $1.3 million. Council Member Klein asked about the time period over which those collections spanned. Mr. Lalo Perez reported funds had to be utilized within a five-year period. Council Member Klein noted the report was delivered to Staff in May 2012, and asked why Staff delayed presenting it to the Council for 22 months. Page 16 of 31 City Council Meeting Minutes: 03/03/14 Mr. Lalo Perez indicated the lack of a Budget Director prevented the project from being a high priority for Staff. Council Member Klein believed the City had cost itself money because the project was not presented sooner. Mr. Lalo Perez agreed there could have been a loss of revenue on the transportation side. He did not know whether Staff would have had a good inventory of projects if the project was presented sooner. Council Member Klein inquired whether Staff could have hired a temporary person with sufficient skills to shepherd the project. Mr. Lalo Perez explained that such a person would need a certain amount of internal knowledge to navigate the multitude of departments and personnel to obtain data. Council Member Price recalled Mr. Nathan Perez's comments regarding cities not being forthcoming with information. She inquired whether the various city categories in the chart of comparative survey results was a true picture of all fees. Mr. Nathan Perez reported it was a true picture except for the City of Santa Clara. Council Member Price felt the information contained significant gaps, and asked if Mr. Nathan Perez was comfortable with the information. Mr. Nathan Perez replied yes. Council Member Price asked if the information was complete. Mr. Nathan Perez responded yes. Affordable housing was the one category that was charged incredibly differently across all cities. The affordable housing category was sometimes difficult to equalize on a per unit basis. Council Member Price concurred with other comments regarding adding Cubberley to the list. This was a phased approach to DIF, because the Council was attempting to determine a logical and proper methodology. She inquired whether Mr. Nathan Perez's experience included situations where DIF contained automatic Cost of Living Adjustment (COLA). Mr. Nathan Perez reported that was quite common. Mr. Lalo Perez added that COLA was utilized when fees were below 100 percent. The Council policy was not to set some fees at 100 percent. The Page 17 of 31 City Council Meeting Minutes: 03/03/14 Council was concerned about total impacts to projects. That was the reason Staff did not mention use of an inflator. Council Member Price asked if Staff considered cumulative impacts rather than built-in adjustments for each category. Mr. Lalo Perez indicated that was the Finance Committee's focus. Council Member Price suggested Staff include more clarification points in the chart. In facility costs or estimated facility costs, Staff should note the baseline year. She inquired whether Mr. Nathan Perez was aware of the Council's sensitivity to projected rates of growth promulgated by different agencies. Mr. Nathan Perez answered yes. Council Member Price asked if his assumptions were consistent with Council policies. Mr. Nathan Perez replied yes. Mayor Shepherd indicated the impact fees were for a new unit of housing. She viewed the project as an effort to capture brand new fire stations and police stations. There was a parks policy which Staff followed. MOTION: Mayor Shepherd moved, seconded by Vice Mayor Kniss to approve the Development Impact Fee (DIF) Project Needs List prior to having the City’s consultant prepare the quantitative analyses and narratives needed to update some categories of the City’s Development Impact Fees. Mayor Shepherd expected the discussion would evolve and recognized that the Council would need to make decisions regarding infrastructure. Vice Mayor Kniss agreed the discussion would continue. Staff asked the Council to approve a particular recommendation. Council Member Burt noted the Committee reviewed DIF in early November 2013. Since that time, the Council had moved forward with infrastructure projects. The Finance Committee was interested in vetting thoroughly a number of major areas. Because of changes over the last five months, returning the item to the Finance Committee for an update could be appropriate. SUBSTITUTE MOTION: Council Member Burt moved, seconded by Council Member Scharff to return this item to the Finance Committee to be re- evaluated. Page 18 of 31 City Council Meeting Minutes: 03/03/14 Council Member Burt reiterated that a number of projects had changed since the Finance Committee reviewed DIF. Returning the item to the Finance Committee would not require a great deal of Staff time. He wished to move the item forward rapidly and integrate the study with changes made in infrastructure planning. Council Member Scharff felt a more thorough vetting by the Finance Committee would be productive and would save time. Mr. Keene reported returning the item to the Finance Committee would require some direction to Staff. Staff and DTA could continue with the rational nexus component. Staff could work more quickly with clear direction from the Council about specific gaps in the capital facilities needs plan. Council Member Klein was aghast that the Finance Committee would require six months to vet the item. He requested Council Member Burt amend the Substitute Motion to indicate the Finance Committee would provide a recommendation to the Council, hopefully on the Consent Calendar, within 60 days. Council Member Burt felt 90 days would be reasonable. Council Member Klein wished the Finance Committee would complete its review prior to beginning Budget hearings. Perhaps the Finance Committee could provide a recommendation by May 15, 2014. Council Member Burt requested the City Manager comment. Council Member Klein suggested the Finance Committee would have more work than Staff would have in vetting the item. Council Member Burt noted Staff needed to reflect changes made by the Infrastructure Committee, input from the Finance Committee, and input from the Council discussion. Council Member Klein agreed to the item returning to the Council in three months, by the Council's first meeting in June. Council Member Burt concurred. The item might be imperfect at that time, but it would be more contemporary. Council Member Scharff preferred to wait for work to be complete than to have imperfect information. He questioned whether the item should return on the Consent Calendar. Page 19 of 31 City Council Meeting Minutes: 03/03/14 Council Member Klein indicated a return on the Consent Calendar was only a hope. He wanted to see an item returned to the Council by the first meeting in June 2014. Mr. Keene explained that if the Finance Committee identified other capital facility objectives, then that would require a rigorous analysis by Staff. Projects should not be driven by a desire to set a new fee. The same Staff would be working on this item and the Budget. Council Member Scharff would agree to the Finance Committee hearing the item in May 2014. The Finance Committee could decide it was not ready for the Council at that time. He did want the Finance Committee to hear the item prior to beginning the Budget. Council Member Klein expressed concern that the item had already been delayed two years as that cost the City money. Council Member Scharff felt acting too quickly could also cost the City money. Council Member Klein believed if the Finance Committee did not finish the item prior to beginning Budget hearings, then it would have a good excuse not to work on it. INCORPORATED INTO THE SUBSTITUTE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to direct Staff to bring this back to the Council on Consent Calendar, contingent on a unanimous vote by the Finance Committee, and to return to the Council by the first meeting in June 2014 with whatever portion is ready. Council Member Holman requested Staff answer questions such as the meaning of residential subdivision of over 50 parcels. She inquired about the basis for Mr. Nathan Perez stating commercial impact fees appeared to be low compared to other communities. She suggested the Finance Committee complete as much work as soon as possible and then determine whether a second phase of work was needed. Mayor Shepherd indicated the Finance Committee would have to make that determination. Council Member Burt agreed with the Finance Committee having the discretion to bring some or all of the item to the Council at the same time. The item would return on the Consent Calendar only if there was unanimous approval by the Finance Committee. Page 20 of 31 City Council Meeting Minutes: 03/03/14 Council Member Schmid agreed with many of Council Member Scharff's comments. The Council was assessing DIF by utilizing the current CIP. Using the CIP allowed the Council to determine the real expenditure for the range of infrastructure needs at a point in time. The Council should not chase itself by going back to the Finance Committee and removing some items. The goal was to get a picture at one point time and use that as a framework. Council Member Price inquired whether Staff had sufficient information and guidance to make some progress on this item, to make changes. Mr. Keene reported if the work at the Finance Committee was anything like the current discussion, Staff would not return for a long time. The Amendment to the Substitute Motion was important. Staff did not provide a meaningful response about the amount of work needed for this item. Staff work needed to be contained if the Council wanted action at the current time or in three months. The Council would have to settle for something less than all the topics mentioned during the Council discussion. To do the work correctly, Staff would need additional involvement from the Planning Department, which was involved in many other Council projects. Council Member Berman indicated Council Member Schmid's comments were profound in that the Council could be chasing itself in trying to find the perfect list of projects. He inquired whether the Finance Committee would remove projects that were on the infrastructure list and maybe add projects that had not been identified. Mr. Lalo Perez stated that was his understanding. Staff would focus on the three areas in their recommendation, rather than everything else. Council Member Berman asked if the PSB would be removed from the list if the Council decided to fully fund it regardless of the item returning to the Finance Committee. Mr. Lalo Perez answered yes. Council Member Berman asked when the analysis would be completed if the item was not returned to the Finance Committee. Mr. Nathan Perez reported the goal would be to provide estimated fees for the categories discussed to Staff within a month, and then to review those fees with the Finance Committee or the Council. He wished to provide fee levels as soon as possible. Council Member Berman inquired whether projects contingent upon a community vote would remain on the list. Page 21 of 31 City Council Meeting Minutes: 03/03/14 Mr. Nathan Perez responded yes. Council Member Berman would support the Motion, because the information was sufficient. Mr. Nathan Perez added that if the PSB were removed in two months, he would have to redo everything because the PSB was such a large project. Council Member Klein would not support the Substitute Motion because of the language regarding the Finance Committee providing whatever portion was ready. Mayor Shepherd would not support the Substitute Motion. Council Member Schmid articulated the situation well. The changes the Council made with regard to infrastructure would be reflected in the list without returning the item to the Finance Committee for review. SUBSTITUTE MOTION AS AMENDED FAILED: 3-6 Burt, Holman, Scharff yes MOTION PASSED: 8-1 Holman no Council Member Holman inquired when Staff could provide requested information regarding fees. Mayor Shepherd indicated Staff could provide the information outside the Council meeting due to the lack of time. She inquired whether the Council would have sufficient time to address Agenda Item Number 10, naming the Main Library. Mr. Keene announced naming of the Main Library would be continued to a date uncertain. MOTION: Council Member Scharff moved, seconded by Vice Mayor Kniss to discuss Agenda Item No. 11 prior to Agenda Item Number 9. MOTION PASSED: 7-2 Schmid, Shepherd no Mr. Keene requested a time check-in at 10:00 P.M. to determine whether Staff could be excused from the meeting. 11. Infrastructure Project and Funding Plan. Richard Hackmann, Management Analyst, recalled that the Infrastructure Committee met three times since the item was last before the Council on December 9, 2013. The Infrastructure Committee recommended the Council Page 22 of 31 City Council Meeting Minutes: 03/03/14 {1}{2}{3} Facility Name Total Cost for Facility Off-setting Revenues Net Cost to City A. PUBLIC SAFETY FACILITIES 1. Police Facilities 1 Public Safety Building ("PSB") - Replace (44,850 square feet)$57,000,000 $0 $57,000,000 Subtotal $57,000,000 $0 $57,000,000 2. Fire Facilities 2 Fire Station 3 (Rinconada Park - built 1948) - Replace $6,700,000 $0 $6,700,000 3 Fire Station 4 (Meadow/Middlefield - built 1953) - Replace $7,500,000 $0 $7,500,000 5 BC Van (x 2)$200,000 $0 $200,000 6 Fire Trucks (x 2)$2,000,000 $0 $2,000,000 7 Type III Engine (x 2)$800,000 $0 $800,000 8 Training Tower & Related Land Acquisition $8,000,000 $0 $8,000,000 9 Type I Engine (x 8) - 2024 $4,200,000 $0 $4,200,000 10 Ambulances (x 4) - 2022-2025 $1,300,000 $0 $1,300,000 11 Vehicles (Van, Trucks, Engines, Ambulances)$8,500,000 $0 $8,500,000 Subtotal $39,200,000 $0 $39,200,000 12 Pubic Safety Revenues not yet Committed $0 $0 TOTAL PUBLIC SAFETY FACILITIES $96,200,000 $0 $96,200,000 1 Information Technology Upgrades $750,000 ($75,000)$675,000 2 Buildings Systems Improvements $6,300,000 ($100,000)$6,200,000 3 Civic Center Plaza Deck $16,000,000 $0 $16,000,000 4 Municipal Services Center Improvements (through 2020) $ 1,991,000 $0 $1,991,000 5 Municipal Services Center - Replace (after 2020)$93,000,000 ($32,550,000)$60,450,000 6 Ventura Buildings Improvements $690,000 $0 $690,000 7 General Government Revenues not yet Committed $0 $0 TOTAL GENERAL GOVERNMENT FACILITIES 118,731,000$ (32,725,000)$ 86,006,000$ GRAND TOTAL $214,931,000 -$32,725,000 $182,206,000 B. GENERAL GOVERNMENT FACILITIES (COMMUNITY CENTER, INFORMATION TECHONOLOGY, PUBLIC ART, ETC.) ATTACHMENT E CITY OF PALO ALTO DEVELOPMENT IMPACT FEE PROGRAM PUBLIC FACILITIES NEEDS LIST THROUGH 2035 1 Attachment F Attachment F Attachment F