HomeMy WebLinkAbout1998-09-23 City Council (3)TO:
ATTN:
FROM:
DATE:
City of Palo Alto
City Manager’s Report
HONORABLE CITY COUNCIL
POLICY AND SERVICES COMMITTEE
CITY MANAGER DEPARTMENT: PUBLIC WORKS
SEPTEMBER 23, 1998 CMR:371:98
SUBJECT:REVISIONS TO CITY’S FLOOD HAZARD REGULATIONS (PALO
ALTO MUNICIPAL CODE CHAPTER 16.52)
RECOMMENDATION.
Staff recommends that the Policy and Services Committee recommend that. the City Council
approve the attached ordinance revising the City’s Flood Hazard Regulations (Palo Alto
Municipal Code Chapter 16.52) with respect to development review procedures.
BACKGROUND
On August 10, 1998, staff submitted a report to Council outlining the process for adoption
of a new Flood Insurance Rate Map (FIRM) and related revisions to the City’s Flood Hazard
Regulations, Palo Alto Municipal Code (PAMC) Chapter 16.52 (CMR:321:98). The report
also discussed other recommended changes to.PAMC Chapter 16.52 which would clarify the
procedure for review of building permit applications in the Special Flood Hazard Area
(SFHA). Council referred the latter regulation changes to the Policy and Services Committee
due to the complexity of the issue and the level of concern in .the local development
community surrounding the proposed changes.
Since the August 10, 1998 Council meeting, two additional issues have arisen regarding the
process for adoption of a revised FIRM. These issues will be discussed briefly below for
Council’s information.
DISCUSSION
Proposed Changes t° PAMC Chapter 16.52
The proposed changes to PAMC Chapter 16.52 relate to the procedure for staff review of
building permit applications in the SFHA (Attachment A).
In order to clarify and formalize the process for screening commercial building permit
applications for compliance with.the City’s Flood Hazard Regulations, staff recommends that
a definition for the term "market value" based on depreciated replacement cost be added to
the regulations and that PAMC Section 16.52.040(36) be modified to clarify the allowable
CMR:371:98 Page 1 of 3
exclusions for health, sanitary, or safety code requirements in the substantial improvement
calculation.
It should be noted that this review procedure has been challenged by a permit applicant. The
challenge relates to staff’s interpretation of PAMC Chapter 16.52 with respect to remodeling
projects, specifically the methodology used by staff to establish the value of existing
commercial buildings. The issue was briefly described in the August 10, 1998, staff report
(CMR:321:98). In order to clarify the applicant’s specific concern, staff has prepared a
summary document outlining the regulations and their origin, as well as staffs dialogue with
representatives from the development community and FEMA (Attachment B).
Staff believes that the attached ordinance, which has been reviewed by local FEMA and
California Department of Water Resources officials, is consistent with FEMA’s written
guidance.
¯ Additional Issues Related to Adoption of Revised FIRM
Since the August 10, 1998 Council meeting, two additional issues have arisen regarding the
process for adoption of a revised FIRM for the San Francisquito Creek floodplain. These
issues are briefly described for the Committee’s consideration and will be more fully
discussed in subsequent reports to Council.
The first issue is a suggestion that Council consider exempting those properties listed in the
City’s Historic Inventory from the requirements of PAMC Chapter 16.52. This policy
change would allow applicants to modify City-designated historic structures without the
requirement to elevate them above base floodlevels, even if the improvements were
determined to be "substantial" per the Flood Hazard Regulations. The current regulations
allow exemptions from flood zone requirements for properties listed on the Nationai Register
of Historic Places or the State of California inventory of historic places. Staff will discuss
the possibility of exempting locally-designated historic properties with FEMA
representatives and will report back to Council with its findings. At that point, Council will
need to consider the public policy ramifications of allowing additional building.
~ improvements to be made in flood-prone areas.
The second issue is an update regarding staffs process of working with FEMA to pursue a
change in the boundary of the tidal flood zone. On May 11, 1998, staff reported that it had
submitted to FEMA a revised tidal flood zone boundary based upon current elevation data
from the City’s Geographic Information System (CMR:220:98). If approved without further
modification, the boundary change would result in a net decrease of 38 properties in the tidal
flood zone (199 properties added to and 237 properties removed from the map). Staff has
postponed the processing of this boundary revision request because of concerns that the
affected property owners are not sufficiently aware of the request. Staff will return to
Council with a proposal to resubmit this boundary change request after conducting a public
outreach campaign targeting affected property owners.
CMR:371:98 Page 2 of 3
POLICY IMPLICATIONS
The proposed changes to ,PAMC Chapter 16.52 would formalize current staff practices
regarding review of building permit applications for properties located within a FEMA-
designated Special Flood Hazard Area.
ENVIRONMENTAL REVIEW
Council’s consideration of revisions to PAMC Chapter 16.52 is not a project for purposes
of the California Environmental Quality Act (CEQA).
ATTACHMENTS
A --Proposed revisions to PAMC Chapter 16.52
B--Summary of substantial improvement regulations
development community and FEMA representatives
and dialogue with
PREPARED BY: Joe Teresi, Senior Engineer
DEPARTMENT HEAD: //~. ~’~
GLENN S. ROBERTS
Director
CITY MANAGER APPROVAL:
Ken Nauman,
Kristen Kingsley, California Department of Water Resources
Susan Frank, Palo Alto Chamber of Commerce
Demetrios Triantafyllou, Space Systems Loral
Loren Brown, Vance Brown, Inc.
Dan McGanney, California Pacific Commercial Corp.
Dave Ross, Jack and Cohen Builders
Rick Stultz, Innovest
CMR:371:98 Page 3 of 3
ATTACHIVI~NT A
ORD INA!~CE NO.
ORDINAIqCE OF THE COUNCIL OF THE CITY OFPALO ALTO
AMENDING SECTION 16.52. 040 OF CHAPTER 16.52 OF
TITLE 16 OF THE PALO ALTO MI]NICIPAL CODE TO CHANGE
CERTAIN DEFINITIONS IN THE FLOOD HAZA!~D
REGULAT IONS
NOW, THEREFORE, the Council of the City of Palo Alto does
ORDAIN as follows:
SECTIQN I. Section 16.52.040 of Chapter 16.52 of Title 16
Of the Palo Alto Municipal Code is hereby amended to read as
follows:
16.52.040 Definitions.
(a) Throughout this title, the following words and phrases
shall have the meanings ascribed in this section.
(i) ~Appeal" means a request for a review of the
floodplain administrator’s interpretation of any provision of this
chapter or a request for a variance.
(2) ~Area of shallow flooding" means a designated
AOR. A!4 zone on the Flood Insurance Rate Map (FIRM). The base
flood depths range from one to three feet; a clearly defined
channel does not exist; the path of flooding.is unpredictable and
indeterminate; and velocity flow may be evident.
(3)
hazard area."
Axea of Special Flood Hazard. See ~Special flood
(4) "Base flood" means the flood having a one percent
chance of being equaled or exceeded in any given year (also called
the none hundred-year flood").
(5) ~Basement" means any area of the building have
its floor subgrade (below ground level) on all sides.
(6) ~Breakaway walls" means any type of walls,
whether solid or lattice, and whether constructed of concrete,
masonry, wood, metal, plastic or any other suitable building
material which is not part of the structural support of the
building and which is designed to break away under abnormally high
tides or wave action without causing any damage to the structural
integrity of the building on which they are used or any buildings
to which they might be carried by floodwater. A breakaway wall
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shall have a safe design loading resistance of not less than ten
and no more than twenty pounds per square foot. Use of breakaway
walls must be certified by a registered engineer or architect and
shall meet the following conditions:
(A) Breakaway wall collapse shall result from
a water load less than that which would occur during the base
flood; and
(B) The elevated portion of the building shall
-not~ incur any structural damage due to the effects of wind and
water loads acting simultaneously in the event of the base flood.
(7) "Coastal high hazard area" is the area subject to
high velocitywaters, including coastal and tidal and
inundation or tsunamis. The area is designated on a Flood
Insurance Rate Map (FIRM) as Zone VI-V30, VE or V.
(8) "Development" means any manmade change to
improved or unimproved real estate, including but not limited to
buildings or other structures, mining, dredging, filling, grading,
paving, excavation or drilling operations or storage of equipment
or materials.
(9) "Flood" or "flooding" means a general and
temporary condition of partial or complete inundation of normally
dry land areas from (A) the overflow of floodwater, (B) the
unusual and rapid accumulation or runoff of surface waters from any
source, and/or (C) the ~co!lapse or subsidence of land along the
shore of a lake or other body of water as a result oferosion or
undermining caused by waves or currents of water exceeding
anticipated cyclical levels or suddenly caused by-an unusually high
water level in a natural body of water, accompanied by a severe
storm, or by an unanticipated force of nature, such as flash
flood or an abnormal tidal surge, or by some similarly unusual and
unforeseeable event which results in flooding as defined in this
definition.
(i0) "Flood boundary and floodway map" means the
official map on which the Federal Emergency Management Agency or
Federal Insurance Administration has delineated both the areas of
flood hazard and~the floodway°
(II) "Flood insurance rate map (FIRM)" ~means the
official map on which the Federal Emergency Management Agency or
Federal Insurance-Administration has delineated both the areas of
special flood hazard and the risk premium zones applicable to the
community.
980804 ~n 0071491 2
(12 "Flood Insurance Study" means the official
report provided by the Federal Insurance Administration that
includes flood profiles, the FIRM, the Flood Boundary and Floodway
Map, and the water surface elevation of the base flood.
(13) "Floodplain or flood-prone area" means any land
area susceptible to being inundated by water from any source as
defined in subdivision (9) of subsection (A) of Section 16.52.040.
(14) "Floodplain management" means the operation of
an oVerall program of corrective and preventive measures for
reducing flood damage, including but not limited to emergency
preparedness plans, flood control works and floodplain management
regulations.
(i5) "Floodplain management regulations" means
zoning ordinances, subdivision regulations, building codes, health
regulations, special purpose ordinances (such as floodplain
ordinance, grading ordinance and erosion control ordinance) and
other applications of police power. The~ term describes such state
or local regulations in any combination thereof, which provide
standards for the purpose of flood damage prevention and reduction.
(16) "Floodproofing" means any combination of
structural and nonstructural additions, changes~or adjustments to
non-residential structures which reduce or eliminate flood damage
to real estate or improved real property, water and sanitary
facilities, structures and their contents.
(17) "Floodway or regulatory floodway" means the
channel of a river or other watercourse and the adjacent land areas
that must be reserved in order to discharge the base flood without
cumulatively increasing the water surface elevationmore than one
foot.
(18). "Functionally~dependent use" means a use which
has an intended purpose that cannot be performed unless it is
located or carried out in close proximity to water. The term
includes only docking facilities, port facilities that are
necessary for the loading and unloading of cargo or passengers, and
shipbuilding and ship repair facilities, but does not include
long-term storage or related manufacturing facilities°
(19) "Highest adjacent grade" means the highest
natural elevation of the ground surface prior to construction next
to the proposed walls of a structure.
980804 ~yn 0071491
(20) "Historic structure" means any structure that is:
(A) listed individually in the National Register
of Historic Places (a listing maintained by the United States
Department of Interior) or preliminarily determined by the
Secretary of the Department of Interior as meeting the requirements
for individual listing on the National Register of Historic Places;
(B) certified or preliminarily determined by the
Secretary of the Department of Interior as contributing to the
historical significance of a registered historic district or a
district preliminarily determined by the Secretary to qualify as a
registered historic d±strict; or
(C) individually listed on the State of
California inventory of historic places to the extent the State of
California has a historic preservation program which has been
approved by the Secretary of the Department of Interior.
(21) "Lowest floor" means the lowest floor of the
lowest enclosed area, including basement as defined in subdivision
(5) of subsection (a) of Section 16.52.040.
(A) An unfinished or flood resistant enclosure
below the lowest floor that is usable solely for parking of
vehicles, building access or storage in an area other than a
basement area, is not considered a building’s lowest floor provided
it conforms to the applicable non-elevation design requirements,
including, but not limited to:
(I) the standard set forth in subdivision
(4) of subsection (c) ofSection 16.52.130;
(2) the anchoring standards set forth in
subdivision (i) of subsection (a) of Section 16.52.130;
(3) the construction materials and methods
standards set forth in subsection (b) of Section 16.52.130; and
in Section 16.52.140.
(4) the standards for utilities set forth
(B) For residential structures, all subgrade
enclosed areas are prohibited as they are considered to be
basements, as defined in subdivision (5) of subsection (a) of
Section 16.52.040. This prohibition includes below-grade garages
and storage areas.
(22) "Manufactured home" means a structure,
transportable in one or more sections, which is built on a
980804 ~n 0071491
4
permanent chassis and is designed for use with or without a
permanent foundation when attached to the required utilities. The
term ~manufactured home" does not include a recreational vehicle.
(23) "Manufactured home park or subdivision" means
a.parcel (or contiguous parcels) of land divided into two or more
manufactured home lots for sale or rent.
~i~i~i."Mean sea level" means, for purposes of the
National Flood Insurance Program, the National Geodetic Vertical
Datum (NGVD) of 1929 or other datum, to which base flood elevations
shown on a community’s Flood Insurance Rate Map are referenced.
~i~i "New construction", for floodplain
management purposes, means structures for which the "start of
construction" commenced~ on or after the effective date of
floodplain management regulations adopted by this community, and
includes any subsequent improvements to such structures.
~o~!i~ii "One hundred year flood" or "100-year flood"
means a flood which ’has a one percent annual probability of being
equaled or exceeded. It is identical to the "base flood, " which
will be the term used throughout this chapter.
(~i!~i~ Person" means an individual or his agent,
firm, partnership, association or corporation, or agent of the
aforementioned groups, or this state or its agencies or political
subdivisions°
is."
~i~i~i~ii ’~Recreational vehicle" means a vehicle which
980804 syn 0071491
(A) built on a single chassis;
(B) 400 square feet or less when measured at the
largest horizontal projection;
(C) designed to be self-propelled or permanently
towable by a light-duty truck; and
(D) designed primarily not for use as a
permanent dwelling but as temporary living quarters for
recreational, camping, travel, or seasonal use.
~ii!~ "Remedy a violation" means to bring the
structure or other development into compliance with state or local
floodplain management regulations, or, if this is not possible, to
reduce the impacts of its noncompliance. Ways that impacts may be
reduced include protecting the structure or other affected
development from flood damages, implementing the enforcement
provisions of this chapter or otherwise deterring future similar
violations, or reducing federal or state financial exposure with
regard to the structure or other development.
~iii~ii "Riverine" means relating to, formed by, or
resembling a river (including tributaries), stream, brook, etc.
~l~i~ii "Sand dunes" means naturally occurring
accumulations of sand in ridges or mounds landward of the beach.
~ii~:,~ii~ii "Special flood hazard area (SFHA)" means an
area having special flood or flood-related erosion hazar.ds, and
shown on an FHBM or FIRM as Zone A, AO, AI-30, AE,AH, Vl-30, VE or
V.
wc-3-3~-iii~iiii "Start of construction" includes substantial
improvement and other proposed new development and means the date
the building permit was issued, provided the actual start of
construction, repair, reconstruction, rehabilitation, addition,
placement, or other improvement was within 180 days from the date
of the permit . The actual start means either the first placement
.of permanent construction of a structure on a site, such as the
.pouring of slab or footings, the installation of piles, the
construction of columns, or any work beyond the stage of
excavation; or the placement of a manufactured home on a
foundation. Permanent construction does not include land
preparation, such as clearing, grading and filling; nor does it
include the installation of streets and/or walkways; nor does it
include excavation for a basement, footings, piers, or foundations
or the erection of temporary forms;nor does it include the
installation on the property of accessory buildings, such as
garages or sheds not occupied as dwelling units or not part of the
980804 ~yn 0071491
6
main structure. For a substantial improvement, the actual start of
construction means the first alteration of any wall, ceiling,
floor, or other structural part of a building, whether or not that
alteration affects the external dimensions of the building°
~i!}~i~il "Structure" means a walled and roofedbuilding, including a gas or liquid storage tank, that is
principally above ground, as well as a manufactured home.
~-9z~rliii~i~]i "Substantial damage" means damage of any
origin sustained by a structure whereby the cost of restoring the
structure to its before damaged condition would equal or exceed 50
percent of the market value of the structure before the damage
occurred.
~-3~ii!i~ii "Substantial improvement" means any
reconstruction, rehabilitation, addition, or other proposed new
¯ development of a structure, the cost of which equals or exceeds 50
percent of the market value of the structure before the "start of
construction" of the improvement. This term includes structures
which have incurred ~substantial damage", regardless of the actual
repair work performed. The term does not, however, include
either:
~9.r. improvement of a structure ~ ~~!iii{~~
existing violations of state or local health, sanitary, or safety
code specifications which ....
(B) Any alteration of a "historic structure",
provided that the. alteration will not preclude the structure’s
continued designation as a "historic structure"; ~kii}!ii
~II{ii~:~i~ii "Variance" means a grant of relief from
the requirements of this chapter which permits construction in a
manner that would otherwise be prohibited by this chapter.
~D@~iiii~ii "Violation" means the failure of a
structure or other development to be fully compliant with the
community’s floodplain management regulations. A structure or
other development without the elevation certificate,~ other
certifications, or other evidence of compliance required in this
980804 ~yn 0071491
7
chapter is presumed to be in violation until such time as that
documentation is provided.
~.The City Council finds that there is no
possibility that this ordinance will have a significant effect on
the environment and upon that basis determines that no
environmental assessment is required.
SECTION 3. This ordinance shall be effective on the
commencement of the thirty-first day after the date of its
adoption.
INTRODUCED:
PASSED:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST:APPROVED:
City Clerk
APPROVED AS TO FORM:
Senior Asst. City Attorney
Mayor
City Manager
Director of Public Works
8980804 ~yn 0071491
ATTACHMENT B
SUMMARY OF SUBSTANTIAL IMPROVEMENT REGULATIONS AND STAFF
DIALOGUE WITH DEVELOPMENT COMMUNITY AND FEMA
REPRESENTATIVES
PAMC Chapter 16.52 contains special building requirements that apply to new construction
and "substantial improvement" of existing structures within an SFHA. A "substantial
improvement" is defined as any repair, reconstruction, or improvement of a structure, the
cost of which equals or exceeds fifty percent of the market value of the existing structure.
The primary special building requirement involves the elevation of the lowest floor of a~
structure. For new construction or substantial improvement to an existing structure within
an SFHA, the lowest floor must be constructed at or above the base flood elevation as
established on FEMA’s Flood Insurance Rate Map. For substantial improvements, the floor
elevation requirement extends to the entire structure, which means that existing floors also
have to be raised if they are below the minimum elevation. In the most severe case, this
would require a property owner to build or raise the lowest floor five to six feet above the
existing ground level. Other special building requirements include installation of adequate
openings beneath the floor to allow for passage of floodwaters, placement of building utilities
(e.g. water heater, electrical panels, etc.) above the flood level, use of water-resistant building
materials, and certification of lowest floor elevations by a registered engineer or surveyor.
The concept of retrofitting existing buildings when they are "substantially improved" is
consistent with the mission of the National Flood Insurance Program (NFIP). FEMA has two
primary roles as the administrator of the NFIP. First of all, FEMA has a responsibility to
ensure that local communities comply with sound floodplain management practices in order
to promote public safety. In addition, FEMA acts as an insurance company, making flood
insurance available to residents and businesses nationwide. As an insurance provider, FEMA
is motivated to minimize the number of at-risk properties in order to reduce the potential
damage claims by policy holders in the event of a major flood. According to FEMA, the
50% threshold, used to define "substantial improvement" was chosen "as a compromise
between the extremes of 1) prohibiting all investment to structures in flood hazard areas
which do not meet minimum FEMA floodplain management requirements, and 2) allowing
structures to be improved in any fashion without regard to the hazard present."
Page 1
In order to ascertain whether proposed improvements to an existing structure are subject to
the floodplain management requirements of PAMC Chapter 16.52, it is necessary to
determine whether the improvements constitute a substantial improvement. Building
Inspection Division staff forward all building permit applications for projects within a
Special Flood Hazard Area to the Public Works Department for screening prior to acceptance
of the permit application. Public Works staff reviews each project to determine whether it
is a substantial improvement by comparing the cost of the improvements with the market
value of the existing structure. The project cost is taken from information provided by the
applicant on the building permit application form. Staff uses standard per square foot costs
to establish the market value of existing residential structures. The price per square foot is
based upon the depreciated replacement cost of typical residential construction. Since there
is much more variability between individual commercial properties, determining their market
value requires a more complex analysis.
Neither PAMC Chapter 16.52, the State of Califomia Department of Water Resources
(DWR) model ordinance on which it is based, nor the underlying FEMAregulations contain
a definition of "market value." Since FEMA does not define market value in its model
ordinance, the City has some flexibility in developing its own definition. In researching the
federal regulations establishing the National Flood Insurance Program (NFIP), however, the
City Attorney has identified two underlying principles related to the determination of market
value. First, for purposes of the.NFIP, market value must relate exclusively to the existing
structure in question and must exclude the associated land value. Secondly, the market value
of a structure must not be influenced by the geographic location of the structure. With
guidance from local FEMA officials, Public Works staff has developed a procedure for
determining the market value of commercial structures using the depreciated replacement
cost approach. Applicants are directed to use this approach to prepare valuations of existing
structures for staff review. Staff uses industry standard cost estimating guides to review per
square foot replacement costs and depreciation factors submitted by applicants for different
types of commercial development. Market value is calculated by multiplying per square foot
replacement cost by the existing building square footage and then multiplying the product
by a depreciation factor dependent upon the age of the building..This valuation approach has
been consistently applied to all commercial building permit applications reviewed by Public
Works staff. Although FEMA does not have a defined method for determining market value,
local FEMA officials have.reviewed staff’s methodology during their floodplain management
audits and have found it to be consistent with the intent of the National Flood Insurance
Program. In addition, this appears to be the methodology used by other Bay Area cities
based on telephone inquiries.
Page 2
During the course of staff’s review of building permit applications, questions have arisen
regarding the methodology for determining the market value of existing commercial
structures. Specific inquiries have been made pertaining to the use of an income-based
appraisal to establish market value, as an alternative to depreciated replacement cost.
Income-based appraisals, which are typically significantly higher than depreciated
replacement cost figures, are based upon the rental income generated by the building. In
contemplating this alternative valuation methodology, Council should be aware that it would
result in more expensive improvements to existing structures without the incorporation of
measures to protect the property from future flooding. This would subject more persons and
property to potential flood hazards and increase the NFIP’s exposure to damage claims.
In addition to the questions about "market value,’" there have been recent inquiries from
permit applicants regarding staff’s method for calculating the cost Of proposed building
improvements. The cost of improvements is the numerator in the calculation used to
determine whether or not a particular project is considered a substantial improvement.
Specifically, the questions pertain to language in the existing Flood Hazard Regulations that
allows staffto exclude from the substantial improvement calculation the cost of"any project
for improvement of a structure to comply with existing state or local health, sanitary, or
safety code specifications which are solely necessary to assure safe living conditions."
Citing this code section, applicants have asked staff to exclude such items of work as fire
sprinklers and seismic upgrades from the cost of their projects in an attempt to keep the total
project cost below the substantial improvement threshold. FEMA officials have advised staff
that we may only exclude those costs for work to correct pre-existing code violations that
make the structure uninhabitable. Based on this guidance, staff has not excluded the cost of
routine code compliance from total project costs when determining whether or.not a project
constitutes a substantial improvement.
Staff has met with Chamber of Commerce staff and affected commercial property owners
and developers to describe the proposed revisions to PAMC Chapter 16.52 and to solicit their
comments and concerns~ During initial meetings on April 8 and May30, 1996, the attendees
asked staff to clarify several issues by sending letters to FEMA soliciting a formal written
response. A copy of the letters as well as FEMA’s responses are attached to this document
(Attachments 1 through 6). Staff’s proposed code revisions are consistent with the written
guidance provided by FEMA. The. key issues and FEMA’s responses can be summarized as
follows:
D._I.dT.~.~LO_.N~: Will FEMA allow the use of the "capitalization or income method" of
appraisal, which establishes property value based upon the income that the property
generates, to establish the "market value" of an existing structure?
Page 3
FEMA RESPONSE: No.
QUESTION: Will FEMA allow the City to exempt individual building permit
applicants from the NFIP building requirements in exchange for a written waiver of
the right to federal flood insurance benefits or disaster relief funds?
FEMA RESPONSE: No.
QUESTION: What types of health, sanitary, or safety code improvements will
FEMA allow the City to exclude from the cost of a project when calculating whether
or not the project constitutes a substantial improvement?
FEMA RESPONSE:: Two types of improvements are excludable: 1) Improvements
to comply with the Americans with Disabilities Act (ADA), and 2) improvements to
correct existing violations of state or local .health, sanitary, or safety code
specifications which make the structure unfit for occupancy.
A follow-up meeting with the developers and property owners was held on April 16, 1997
to report on FEMA’s responses to the City’s inquiries, but staff was unable to obtain
consensus from the attendees on the proposed regulation changes. The development
community representatives requested that staff postpone presenting the changes to Council
until they had the opportunity for their legal counsel to review the regulations and the
underlying federal legislation. Staff has requested a written response summarizing their
findings or offering alternative regulation language, but no response has been submitted.
In order to clarify, and formalize the process for screening commercial building permit
applications for compliance with the City’s Flood Hazard Regulations, staff recommends that
a definition for the term "market value" be added to the regulations and that PAMC Section
16.52.040(36) be modified to clarify the allowable exclusions for health, sanitary, or safety
code requirements in the substantial improvement calculation.
Attachments
1 -- 9/9/96 letter from City to FEMA re: determination of market value of existing structures
2 -- 10/2/96 response from FEMA to City re: determination of market value of existing structures
3 -- 9/9/96 letter from City to FEMA re: voluntary exclusion from National Flood Insurance
Program
4 -- 10/2/96 response from FEMA to City re: voluntary exclusion from National Flood Insurance
Program
5 -- 11/20/96 letter from City to FEMA re: determination of cost of improvements for building
remodeling projects
6 -- 2/17/97 response from FEMA to City re: determination of cost of improvements for building
remodeling projects
Page 4
City_c y Palo Alto
P~blic Works Department
September 9, 1996 ’ ,
Mr. John Eldridge
Federal Emergency Management Agency, Region IX
Building 105
Presidio of San Francisco, CA 94129
DMsions
Administration
415.329.2373
415, 3~. 229’:) Fax
Engin~ring
415. 3~). 2151
415.32@. 2299 FKx
F.nvironmental
Compliance
415.3~D.2~98
415.494.3531
Eqtfipmtnat
Management
415. 4%, 69~
415:496.6958Fax
Fadlifies
lVlanagement
415,496.6tX~
415.496.69.~SFax
Opcral~ons
415.496.6974
415. 496. 6924 Fax
Rcl~orual Water
Quality Control
415.329.2598
415.494.3531 Fax
Subject:Determination of market value of existing structures
Dear Mr. Eldridge:
Over the past several months, City staff have been attempting to clarify and
document our process for screening building permit applications for non-
residential remodeling projects located ina Special Flood Hazard Area. Our goal
is to develop a clearly defined set of procedures that are easily understood by
applicants, City review staff and FEMA representatives. ’The most challenging
aspect of the task to-date has been documenting a methodology for establishing
the "market value" of existing structures as part of determining w.hether or not a
project constitutes a substantial improvement.
As you know, "market value" is not defined in the City’s floodplain management
ordinance nor in the model ordinance developed by the State Department of Water
Resources (DWR). In the absence of a definition, some permit applicants have
questioned the City’s interpretation of market value, as well as the intent behind
FEMA’s use of the term in its regulations. The City Will be updating its
floodplain management ordinance in the next few months as requested by DWR
staff during a recent Community Assistance Visit. We plan to take-this
opportunity t° clarify the meaning of"market value" by defining the term in the
revised ordinance.
Prior to. ’finalizing a "market value" definition for consideration by the City
Couficil, staff reviewed the policy guidance provided in FEMA Publication 213
and discussed the issue with Ken Nauman of your staff. We also held meetings
with local developers and property owners to solicit their input and comments.
Ken attended one of the meetings to provide FEMA’s perspective on the topic.
During the meetings, several questions were raised regarding use of professional
appraisals to establish market v~,lue. Before proceeding to City Council with a
recommendation, we need clarification from FEMA on this issue.
P.O. Box
PaIo Alto, CA 94303
Letter to Federal Emergency Management Agency
September. 9, 1996
Page 2
Pe’r FEMA Publicati6n 213, an acceptable estimate: of market value can be
obtained from an "independent appraisal by a professional appraiser". One of the
Standard appraisal methods used by professional appraisers is the "capitalization
¯ or income method," ~vhich establishes property value based upon the income that
¯ the property generates. Using this ’method, the.value of a structure on that
property is obtained by subtractin.g the land value from the total property value.
Given the language of FEMA Publication 213 and the widespread use of the
income method by the appraisal community, it seems appropriate to us that this
method can be used as one way to determine market value. Unless we are advised
by FEMA that this market value methodology is not acceptable to FEMA, the
City intends to permit ’an appraisal prepared in accordance with the "capitalization
or in~:ome method" to be used to establish the market value of an existing
structure. An exampld us.ing this income-based methodology is included to assist
in your review of this issue.
Please.provide a defir~itive \vritten response to’ this request so ihat we may proceed
with developing a definition of "mai-k~t value" for inclusion in our floodplain
management ordinance. If you have any questions or need further information,
please call Joe Teresi of my staff at (415).329-2129.
Sincerely,
Glenn S. Roberts
Director’ of Public Works
JT:GSR/sm
Attachment: Exarfiple of inc0me-based appraisal
¯Bernie Strojny
Carol Jansen
George Bagdon
Joe Teresi
~-_!~_~ Palo Alto, California
Dear
This is a letter of opinlon regarding the above-referenced property. You have asked me
to estimate the ".market value of the of the structure" at this location. Information you
provided to me indicates that the propesiT has been leased on the basis of $480,000 per
year after it is improved at cost to the lessor. We have estimated the "as is" market value ¯
of, the leased fee interest in the subiect property assuming t.his information is correct.
The market value of the structure is based on first estimating the value of the property
ha its "a~ is" condition and then deductingthe value of the land and the improvements
that are not part of the structure. Such improvements include the parking tot and
lanckscapingl
Based on the guidelines of th~ Uniform Standards of Professional Appraisal Practice
.(USPAP) adopted by the. Appraisal ~oundation, this letter represents a ~limited"
appraisal in "restricted" report, format. (See attached Standards Rule 2-2 Comparison
Chart.)
The purpose of the .report is to estimate the Uas is" residual leased fee value of the
¯ property after deductS," g lmad value.and non-structural improvements. I understand that
you will use this letter to meet City of Palo Alto requirements .relating to propexties ......
which are located in flood hazard zones. The definition of market value is shown at the
end of this report. We have reviewed plans for the subject property and have
Page 2
investigated market information for similar properties to the subject in de.tdrrnirdng that
a) S2.00per square foot rent, b) $20.00 per square fogt land value, and c) a nine
percent capitalization rate are reasonable in the current market. These arc used in value
calculations on the following page. . ~,,...
The scope of the assigrunent is very limited in that we rely on information provided by
you, and while we have inspected the property, we have not fitUyinvestigated market
and other factors as sve would normally do in a full appraisal. I have conducted an
Income Capitalization Approach assuming an annual rent of $480,000 per year from an
average or above-average credit’tenant for three or more years and svith periodic inflation
increases to the rent. I have not used the Cost and the Sales Comparison ApproacheL
The limitations discussed above, are departures from the Uniform Standards.
The market value .of the leased fee interest in the whole property in its "as is" condition
as of January 16, 1996, the date of ingpection and the effective date of this appraisal, .is
estimated at $4,335,000. Deducting the land value and the site improwmen.ts
(landscaping, "parldng improvements, etc~) of $1,127,492 yields a "market value of the
structure" in its "as is" condition of $3,207,508, rounded to .$3,200,000.
This report may be relied upon ordy by you and by the City of Palo Alto insofar as the
scope of the assigrunent outlined above meets their criteria. The calculations on the
following page lead to the conclusion ms to the "as is" market value of the leased fee
interest in the structure, subject to the limiting conditions discussed as departures from
Uniform Standards above and subject to the general limiting conditionsdescrlb’ed at the
end of this report.
Sincerely,
"As Is" Market Value of the Structure
.at ~in Palo .Alto, Callfornia
Market Value of Leased Fee Interest in ProDerty as if Renovated
Co--~ntractual Rental ~Income (first year)
20,000 sq.ft, x $2.00/sq.ft. (a) x 12 months =$ 480,000
Vacancy (2%).~ 9,600
Effec’tive Rental Income°~$ ~70,400
Operating Expenses ~
Management (2%)$9,408
Reserves (1%)$~$ 14 112
.Net Income for Capital~zati0n
Capitalized at 9%
Rounded Leased Fee Value As If Renovated
$ 456,288
$5,069,867
$5,070,000
"As Is" Market Value of Leased Fee Interest in ProDerty
Leased Fee Value As If Renovated
Less Development Costs
New building
Hard costs 6,288 sf x $75 = ($471,600)
Soft costs 6,288 sf x $15 = ($ 94,320)
Renovate old building
Hard costs 14,000 sf x $i0 = ($140,000)
Soft costs 14,000 sf x $2 = (28~_~_~)
"As Is" Leased Fee Value - Whole Property
Rounded
$5,070,000
($565,920)
$i68,000,)
$4,336,080
$4,335,000
"As Is" Market Value of Leased Fee Interest in the Structure
"As Is" Leased Fee Value - Whole Property $4,335,000
Less Value of Land’
51,836 sq.ft. X $20/sq.ft. ~
Less.Value of Landscaping/Paving/etc.
Land Area 51,836 sq.ft.
Less Building Footprints 20,288 sq.ft..
¯ 31,548 sq.ft.
31,548 sq.fto x $3o50/sq.ft. =
($1,036,720)
"As Is" Market Value of Leased Fee
Interest in the. Structure
Rounded
$3,187,862
(a)Annual~ rental inflation escalations over tsn years to an
average, credit tenant; $2.00 per square foot rents are if
anything conservatively .low,
DEFINITIONS
Market Value. A current economic definitio~ agreed upon by Federal
financial institutions in ~the United States of America, as set
forth in the Uniform Standards of ProfessionalAppraisal Practice,
1990, page I-7, is as follows:
The most probable price which a property shoul~ bring~ in a
competitive and open market under all conditions requisite to
a fair sale, the buyer and seller each acting prudently and
knowledgeably, and assuming the price is not affected by undue
stimulus. Implicit in this definition is the consummation of.
a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
i.Buyer and seller are typically motivated;
Both parties are well informed or well advised, and
acting in what they consider-their best interests;
A reasonable time is allowed for exposure in the open
market;
Payment is made in terms of cash in United States dollars
or in terms of financial arrangements comparable thereto;
and
The price represents the normal consideration for the
property sold unaffected by special or creative financing
or sales concessions granted by anyone associated with
the sale.
Increments or diminutions in market value attributable to speCial
financing terms are measured against the all-cash standard, and
dollar amounts of variance from the cash standard are estimated and
reported in analyzing comparable data.
Leased Fee Estate. An ownership interest held by a landlord with
the rights of use and occupancy conveyed by lease~to others. The
rights of the lessor (the leased fee owner) and the leased fee are
specified by contract terms contained within a lease. (The
Dictionary of :~Real Estate Appraisal, Appraisal Institute, third
edition, 1993,~’page 204.)
Standa 3 Rule 2-2 Report Compa Chart
This chart Is designed so that you ~n pun ~t from "The
NarratNe Report" and keep it In en ee.sity ec~:essible plac~
so you can refer Io it when nece~ary, ¯
1.Self Cont~Ined Appraisal Report~A wri~len report
prepared under StandaJ’~ Rule 2-2 (a) of a complete
or limited appraisal performed under Sland~d 1.
2.Summery Appraisal ReporI--A written report
pared under ShlndaJ’d,s Rule 2-2 (b) of a complete or
Iimiled apprai.sai report performed under Standard
3.Restricted Appraisal Report--A written report
pared under Sl~ndaKL~ Rule 2°2 (c) of a complete or
IImlted appraisal performed under SLandard 1.
The e~,entt, aJ difference among the three reports Is In the use
~’~d application o! the term:= des~lbe, summlrlze, and
~tate, and each Indicates the level of devil provided. De-
s~’lbe requires a comprehensive level of detail In the pmsen.
ta~on of Information. Summarize mea~s a more cond.se
presentation of information. State a.sk.s for the minim,~ pro*
santatlon of Information. The Explana,’ory Comment= from
Standard~ Rule 2-2 are not Included In (his table.
|a)Self-Contained I b) Summary c) RestrictedAppraisal Report
I. Identify and describe
estate being opposed des~p~on of ~e r~ e~te ~lng p~
~prais~
IL s~te the re~ pmpe~ Interest ~. s~te ~e re~ pm~ Imerest 11. a~ ~e ra~ pmpe~ Inler~
~ing app~s~ ~ing app~ ~ing ~p~
lil. ==to the pu~ose and Imend~IK ~ta the pu~se ~d Imend~IK =~ta ~e pu~ose and Inlend~use of the app~s~use of ~e app~~e of ~e app~
~, ~efine the v~ue to be e~U~ted ~~. define ~e v~ue to ~ e~mat~~~. s~te ~d reference a defln~on ofI¯e v~ue to be ~flma~
v.==t, the e~e ~te of ~e
I
v. state the e~ ~te of ~o
~
v. ~1, the e,~e date o, ~eappr~ ~d the ~te of ~e re~d apprai~ ~d the~te of ~e re~ appmi~ ~d ~e date of the repo~
~. =late the e~ent
~ll~ng. ~nfl~l~ ~ ~ng pr~ of ~II~. ~Ing of ~ll~ng, ~nfl~Ing ~d r~-~" ~d ~e~ng
~1. s~te all ~sump~o~ ~d liming ~1. s~te all ~u~o~ and Ilmit~g ~~1. =~t~ ~1 ~sumpUons ~d limiting~ndlfions ~at aff~ ~e ~es.~ndillons that ~ ~e ~ses.
~
~ndltions ~at ~ ~e ~ses,opinions and ~usions opinions ~d ~1o~~inlo~ ~d ~nclusio~
~ii.describe the informal~on consld-.
erad. the appraisal procedures
followed, and the r~asonlng that
supports the anai~/ses, opinions
and conclusions
Ix.describe the spp~s opinion of
the highest and best use of the
estate, when such an opinion Is
necessa,"7 and appmprtste
x.explain and supped the exclusion
of any of the usual vaJuat~on
preaches "
xl.de=cribs a~ additional informa-
tion that may be appropriate to
show compliance w~. or dem’~
Identify e~nd expl~ permitted
departures from the specific guide-
lines of Standard 1
xil.Include a signed codification In
accorda~nce w~h Starters
Rule 2-3
viii.summarize the infatuation consid-
ered, the appraisal procedures
followed, and the reasoning that
supports the an~/’ses, opinions
ix.eummartz~ the apgreLser’s opinion
of the highest ~ b~ use of the
real estaJe, when such an opinion
I~ necessary and appropriate,
x. explain and support ltte exdu’Hon
¯ of any of the usuaJ valuation
preaches
xii.include a signed cenffication in
accordance w~th Standan:Ls
Rule 2-3
state the appr"~sal procedures
followed, state the vaJue con~Ju-
don =u’,,d reference ~e exLstence of
specific file information In support
of the conclusion
b~.at.ate the appr-aJser’e opinion of ~e
highest and best use of the re~J
e~tate, when such an opinion Is
necessary and appropriate
x.stat~ the exclusion of an~ of the.
usuaJ valuation approaches
~.contain a prominent L~se restrfc~on
that IIm~ raiku~ca on ~e ~ to
~t be undated
~o~ add~o~ I~o~on
¯ e wo~le of ~e opposer.
dea~ Iden~ ~d expl~n ~-
t~ depa~res from ~e
~idellnas el S~ 1
xil.In~ude a slgn~ ~lfi~gon
a~ce ~h S~nda~
Rule 2-3
Warranties and Representations bv APPraiser
Appraiser warrants and represents"to Client that Appraiser has no present or
con=emplated futLtre interest in the real estate that is the subject of this
assignment and that Appraiser has no personal interest or bias with respect to
the subject matter of this assignment or the par~ies involved. No one other than
Appraiser (or the individual" who signs the appraisal report on behalf of the
Appraiser) shall form the analyses, conclusions, or opinions to be se= forth in
the appraisal report, unless such participation by another par~y is indicated by
the co-signing of the appraisal.report by such other par~y.
Amoraiser’s Resoonsibilities
All statements of fact in the appraisal repoz- which are used as the basis of
Appraiser,s analyses, opinions and conclusions will be true and correct to the
best of Appraiser,s knowledge and belief. Appraiser shall have no responsibility
for legal matters, questions of survey, opinions of title, soil or sttb-soil
conditions, engineering or other techr~ical matters. Any’sketches prepared by
Appraiser and contained i~ the appraisal repor~ will be included solely to aid
the user of the report in visualizing the proper~y and its location.
Each finding, prediction, assumption or conclusion contained in the appraisal
report will be Appraiser’s personal opinion and will mot be an assurance that an
event will or will not occur. Appraiser may assume that there ar~ no conditions
relating to the real estate, sub-soil or structures~located on the real estate
which would affect Acpraiser’s analyses, opinions or conclusions with respect to
the real estate tha~ are mot apparent.
Confidential ~nfcrmation and ownership of Documents
The data gathered in the appraisal process (except data furmished by client) and
the~ppraisal repcr~repared pursuantto the Agreement will remain the proper~y
of Appraiser. With respect to the data provided Client, Appraiser shall mot
violate the confidential nature of the Appr~iser-Cliemt relationship by
improperly disclosing amy confidential information fttrrlished to Appraiser.
Appraiser is, however, authorized by client to dlsclose all or any portion of the
appraisal report amd the rela~ed appraisal data to appropriate representatives
of the Appraisal Institute if such disclosure is required to enable Appraiser to
comply with the~Bylaws and Regulations of such Znstitution now or hereafter in
effect.
Limitations Uoon Use of Appraisal Reoort bv client
client agrees that the appraisal repoL~cto be prepared pursuant to this Agreement
shall not be quoted or referred to in any report or financial statement of Client
or in any documents filed with any governmental agency without the prior written
consent of Appraiser. The contents of this appraisal repor~ (especially the
conclusions as to value, the identity of Appraiser, references to the Appraisal
Institute or references to the MAI designation), ifdisseminated to the public
through advertising media, public relations media, mews media, sales media or
other public mean~ or communications, must be provided i~ its entirety°
contamination Issues
Unless otherwise state in this report, the existence ofhazardous material, which
may or may not be present on the proper~y, was not observed by the appraiser.
The appraiser has no knowledge of the existence of such materials on or in the
property. The appraiser, however, is not qualified to detect such s~bsta~ces.
The presence of substances such as asbestos, urea-for~naldehyde foam insulations,
or other potentially hazardous materi~ls may affect the value of the proper~y.
The value estimate is predicated on the assttmption that there is no s~ch material
on or in the property that would cause a loss in value. No responsibility is
assumed for any such conditions, or for any expertise or engineering knowledge
required to discover them. The client is ~urged to retain an exper~ in-this.
field, if desired.
CERTIFICATION
The undersigned do hereby certify, except as otherwise noted in
this appraisal report, that:
~The statements of fact contained in this report are true
and correct.
The reported analyses, opinions, and conclusions are
limited only by the reported assumptions and limiting
conditions, and are our personal, unbiased professional
analyses, opinions, and conclusions.
I have no present or prospective interest in the property
that is the subject of this report, and I have no personal
interest or bias with respect to the parties involved.
My compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the
Cause of the client, the amount of the value estimate, the
attainment of a stipulated result, or~the occurrence of a
subsequent event.
My analyses, opinions, and conclusions were developed, and
this report has been prepared, in conformity with the
Uniform Standards of Professional Appraisal Practice
(USPAP) of the Appraisal Foundation and the .Code of
Professional Ethics and Stamdards of Professional Appraisal
Practice of the’Appraisal Institute.
I am currently certified under the voluntary continuing
education program of the Appraisa! Institute.
The use of this report is subject to the requirements.of
the Appraisal Institute relating to review by its duly
authorized representatives.
I have made a personal inspection of the property that is
the subject of this report.
* No one provided significant professional assistance to the
pefsons.~igning this report.
i"
ATTACHMENT 2
Federal Emergency Management Agency
P,e~ion IX
Building 105
Presidio of San Francisco
San Francisco, California 94129
October 2, 1996
Mr. Glenn W. Roberts
Director of Public Works
City of Palo Alto
P.O. Box 10250
Palo Alto, CA 94303
Dear Mr; Roberts:
Thank you for your letter dated September 9, 1996, regarding an
the determintation of "market value" using the "capitalization or
income method" for substantially improved or damaged properties.
The "independent appraisal by a professional appraiser" cited in
the FEMA Publication 213 does not incorporate appraisals based
upon capitalization or inc~ m~th~ .~perty bas~d.insurgnce
programs center on the~nstruction valu~of the building, zn
other words, the labor and materials to construct, rebuild, or
repair the structure. The intent is ~o es~aDilsITa Dasis tna-t-~.
-will be obgect~e.±n’it’s, use for determining a likelihood of
risk versus cost, as it pertains to flood insurance claims.
Your selection of definitions for inclusion in your ordinance
should include your staffs’ analysis of the FEMA 213 options
cited in Question 21, paqe i0. As can be o~erved, a~l options
center on the value of the st~cture, as oppQsed to the income it
might be able to garner. Further, question 22 identifies the
potential of erroneous "assessed values" that must.be tempered.by
judgement and the ultimate objective of providing a reduction in
the risk potential of the structure.
We appreciate your inquiry and the efforts the City has taken in
support of the program. If you have any further quest.ions,
please contact me or the planner for your area, .Mr. Ken Nauman,
at (415) 923-7196.
Sincerely,
G/John W. Eldridge~r..
Chief, Community Mitigation
Programs Branch
P, ~blic Wot’k.~ D~] ~ ~rh~o ~ t
ATTACHMENT 3
September 9, 1996
Mr. John Eldridge
Federal Emergency Management Agency, Region IX
Building 105
Presidio of San Francisco, CA 94129
3ivisions
-~dministratlon
t15.329.2.373
t 15.329.2..999 Fax
Engineering
115.329.2151
~ t5.329.2..’x)9
i ~vironmenkal
Sompliance
115.329.9,.598
t15.494.3531 Fax
!!quipmcnt
lan,agemcnt
H5.496.69~
15.496.6958 F,’tx
~ l,uaagement
~ 15. 496. 6900
I t 5.496.6958 F,xx
_~rations
115.496.6974
115.496, 6924.F,xx
;~egion~ Water
~E~ityControl
t 15.329.2598
| 15.494.3531F,tx
Subject: . Voluntary Exclusion from National Flood Insurance Program
Dear Mr. Eldridge:
Over the past several months, City staff have-been attempting to clarify and
document our process .for screening building permit applications for non-
residential projects located in a Special Flood Hazard Area. Our goal is to
develop a clearly defined set of procedures that are easily understood by
applicants, City review staff, and FEMA representatives. As part of the
process, we have held meetings with local developers and property owners to
solicit their input and comments. Ken Nauman of your staff attended one of the
meetings to pro~,ide FEMA’s perspective on the topic.
During the meetings, business community representatives raised several
questions about the overall benefits of the National Flood Insurance Program
(NFIP) relative to the cost of its requirements. Their primary objection to the
NFIP is focused on the regulations applicable to "substantial improvement"
projects. Specifically, some property owners do not believe that the availability
of flood insurance provides enough of a benefit to them to offset the cost .of the
building elevation/floodproofmg requirements contained in the City’S floodplain
management ordinance. They-discount the value of flood insurance because
they do not believe that flooding is a significant risk in Palo Alto, and,
furthermor.e, they do not believe that the amount of insurance currently available
under th, e NFIP is large en6figh relative to the overall value of their property to
be of any tangible benefit. Additionally, some of the projects may not utilize
financing which is Federally guaranteed, thereby relieving the government of
the underlying risk of a potential mortgage default due to a catastrophic event.
Based on these issues, the business community representatives questioned
whether the City could exempt them from the NFIP building requirements in
P.O. Box 10250
PaloAltooCA94303
Letter to Federal Emergency Management Agency
September 9, 1996
Page 2
exchange for a written waiver of the right to federal flood insurance benefits or
disaster relief funds. We agreed to forward this question to FEMA staff for an
official response.
Please provide a def’mitive written response to this question so that we.may pass
the information on to the business community. If you have any questions or
need further information, please call Joe Teresi of my staff at (415) 329-2129.
Sincerely,
Glenn S. Roberts
Director of Public Works
JT:GSR/sm
Bernie Strojny
Carol Jansen-
George Bagdon
Joe Teresi
Fde
Federal Emergency Management Agency
Region IX
Building 105
Presidio of San Francisco
San Francisco, California 94129
Mr. Glenn Wo Roberts
Director of Public Works
City of Palo Alto
P.O. Box 10250
Palo Alto, CA 94303
Dear Mr. Roberts:~
October 2, 1996
Thank’you for your letter datedSeptember9, 1996~ regarding an
exemption from the flood insurance requirements for structures
located within a Special Flood Hazard Area (SFHA). You addressed
the concern of local business persons regarding substantial
improvement requirements and insurance coverage.
While the local’busin~ss community representatives may not
believe that flooding is a potential risk, we are still required
by regulation to follow the current flood risk maps that are
effective for your community. Exemption from insurance ~nd
building compliance requirements is not allowed under the terms
of the program.
As to your constituent’s challenge of the flooding potential, one
particular option availableis’their option to submit engineering
evidence in support of their contention that the risk has.not
been adequately or accurately address. The Letter of Map Change
(LOMC) process is designed for this purpose.
Some other alternatives also exist that might be worth their
consideration in addressing the requirements problem. The
community could continue its commendable efforts in reducing the
risk through development of planning and implementation of risk
reduction methodologies within the area in question. To avoid
the mandatory purchase of flood insurance business owners have an
~ption of purchasing financing from institutions that offer non-
Federally backed or traded financing. Regardless of whether or
not Federal financing isused however, your local community
floodplain ordinance still requires compliance regarding
structures within an SFHA that qualify under the Substantial
Improvement criteria.
If they are concerned about the insurance coverage being
sufficient to cover the value of their property, there are two
basic options. First, large non-residential buildings that are
partitioned by one or more load bearing walls may choose to have
each section insured as a separate building at up to $500,000o00
per section. Second, they may wish to seek additional coverage
from specialty insurance companies offering such options. In
extreme cases, they may choose to relocate their high-cost
materials to another non-risk Iocatlon/facility.
The business community also has. the option of floodproofing their
non-residential structures to assure compliance with the City’s
floodplain management ordinance. There are a variety of
methodologies for accomplishing this alternative, and we are
available to assist the community in offering alternative ~
solutions from which they may choose.
Flooding remains a rather unpredictable and costly element of ~
day-to-day living. Our risk mapping effort has been designed to
offer a reasonable level of protection while not creating undue.
hardship upon the citizens of the community. We hope that the
combined efforts .of all parties involved will result in reaching
the lossreduction goals that the Agency strives for through this
program ....
We appreciate’yourinquiry and the efforts the City has taken in
support of the program. If you haveany further questions,
please contact me or the planner for your area, Mr. Ken Nauman,.
at (415) 923-7196.
Sincerely,
Chief, Community Mitigation
Programs Branch
Cityg, Palo Alto
Public Wor,,~ _)qaartnznt
ATTACHMENT 5
November 20, 1996
~Mr. John Eldridge
Federal Emergency Management Agency, Region IX
Building 105
Presidio of San Francisco, CA 94129
Divisions
.~,dminkstration
415.329.2.373
415. 329.~99 Fax
~g~eering
415. 329. 2151
~,15. 329. 2299 Fax
Sompliance
329. 2598
115.494.~531 Fax
Squipment
’, Ianagemcnt
! 5.496.69°..2
15. 496, 6958 Fax
, lanagemtmt
: 15.496.6900
’d5.496.6958 Fax
3perations
~ 15.496. 6974
~15. 496. 6924 Fax
¢egional Water
2ualityControl
; l 5.329. 2598
’: 15.494.3531 Fax
Subject:Determination of cost .of improvements for building
remodeling projects
Dear Mr. Eldridge:
Thank you for your prompt response to our inquiry regarding the use of
appraisals in determining the market value of existing structures. As a follow-
up, we would like FEMA to clarify the procedure for establishing the cost of
improvements for remodeling projects. Specifically, we seek your guidance
regarding the types of "health, sanitary, or safety code requirements" that can
be excluded from the cost of a project when analyzing whether or not the project
constitutes a "substantial improvement."
The City’s floodplain management ordinance (Pa!o Alto Municipal Code
Chapter 16.52) provides that the term "substantial improvement" does not
include "any project for improvement of a structure to comply with existing state
or local health, sanitary, or safety code specifications which are solely
necessary to assure safe living conditions." It is our understanding that the
inclusion of this language in the ordinance is intended to prevent the floodplain
management regulations from inadvertently discouraging building owners from
implementing health and safety improvements to their structures. Furthermore,
it seems appropriate to us that this exclusion can be interpreted to apply to a
closely-related group of similar types of improvements, such as those listed
below:
®
Modifications to facilitate building accessability (Americans with
Disabilities Act (ADA)/Uniform Building Code)
Seismic safety structural improvement.s (Uniform Building Code)
Installation of fire sprinkler systems (Uniform Fire Code)
Water quality protection f~atures (City of Palo Alto Sewer Use Ordinance
[Chapter 16.09])
Asbestos and lead abatement (Federal and Cal/OSHA)
P.O. Box 10250
P~oAI~o, CA94303
Letter to John Eldridge
November 20, ! 996
Page 2
Hazardous materials storage .(City.of Palo Alto Hazardous Materials
Storage Ordinance [Title 17])
We believe that each of these categories of improvements results in tangible and
significant benefits to the health and safety of the members of our community
and should be promoted on an equa! basis with floodplain management
practices. Furthermore, it seems that to utilize the value of these mandated
improvements to trigger the determination of a substantial improvement and its
associated flood-related building requirements could be construed as placing the
applicant in a form of regulatory "double jeopardy,", which we would like to
avoid. "
Therefore, unless we are advised otherwise by FEMA, the City intends to
exclude the cost Of these categories of improvements from the cost of proposed
building remodeling projects when analyzing whether or not the projects
constitute a ".substantial improvement." Furthermore, in order to encourage
.voluntary implementation of these health and safety improvements, we intend
to exclude the costs of the improvements when they are voluntarily included in
a project, as well as when they are required by code or City ordinance.
Please provide a definitive written response to this request, so that we may
proceed with finalizing the revisions to our floodplain management ordinance.
If you have any questions or need further information, please call Joe Teresi of
my staff at (415) 329-2129.
Sincerely,
Glenn S. Roberts
Director of Public Works
JT/GSR:sm
Carol Jansen
Grant Kolling
George Bagdon
Joe Teresi
Federal mergency Managemeni’ Agency
Region IX
Building 105
Presidio oi" San Francisco
,San Francisco, California 94129 .
ATTACHMENT 6
FEBg4 I~97
E~;,m~.N’r ¢-/pusuc woF
February 17, 1997 D ADM:N!$TRATIONIDIVIS;CI~
Mr. Glenn S. Roberts
Director of Public Works
City of Palo Alto
P O Box 10250
Palo Alto, CA 94303
Dear Mr. Roberts:
Thank you for your letter regarding clarification of the
substantial improvement criteria. We apologize for the
delayed reply, but our disaster committments have overcome
the normal duties of the office. We hope you understand.
The criteria to which you address are those of a
"compliance" nature, whereby if they were not completed, the
structure would be "red-tagged" by the community.
Therefore, "optional" improvements are not qualifiers for
exemption from the computation. The active terms are
~’compliance with health, sanitary, or safety code". FEMA
has interpreted these criteria as those that are clearly
"mandatory", in other words, had the community known of the
nature of the issue before the substantial damage occurred,
they would have red-tagged the structure. We have exempted
ADA requirements from inclusion, but they only apply to
public structures, (ie. Where public visitation occurs), as
opposed to residential or other private structures. Those
issues of water quality, seismic, asbestos/lead, hazardous
materials, or sprinkler units fall to the question.of "would
they have been red-tagged". Please also note there are
specific NFIP requirements regarding hazardous materials
storage that must be complied with in addition to city
restrictions.
It is not our intention to inadvertently discourage building
owners from implementing health and safety improvements, but
at the same time, we have an obligation to also encourage
compliance with NFIP regulations as well, in the interest of
avoiding future flood losses. While we agree that your
identified improvements produce tangible and significant
benefit to the community, we are obligated, as are you, to
support the objectives and goals of the NFIP. This is
hardly "double jeapardy" when two clear goals are obtained
in attaining compliance with both NFIP and one or more of
your defined objectives.
I hope that this is sufficient to answer your questions.
We are confident that you will continue your commendable
record of program implementation. If you have any
questions, please contact Mr. Ken Nauman, at (415) 923-7196.
Sincerely,
//4~John W. Eldridge, Jr.Chief, Community Mitigation
Programs Branch ..