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HomeMy WebLinkAbout1996-01-29 City Council (4)C ty City of Palo Alto V anager’s Report TO:HONORABLE CITY COUNCIL FROM: AGENDA DATE: CITY MANAGER January 29, 1996 DEPARTMENT: Planning and Community Environment CMR:132:96 SUBJECT:Palo Alto Medical Foundation -- Request for Modification of Housing Fee Ordinance REQUEST This staff report provides information related to the January 22, 1996 request (see attached letter) of the Palo Alto Medical Foundation (PAMY) for modification of the City Housing Mitigation Fee Ordinance (attached Chapter 16.47 of the Municipal Code). This request would appropriately be considered as part of the Council’s January 29 continued review of the PAMF Urban Lane Campus development applications. RECOMMENDATIONS It is recommended that the Council refer the PAMF request to staff and the Palo Alto Housing Corporation for review. The initial staff reaction to the request is favorable, but there has not been time since receipt of the request on January 22 for careful review, including identification of potential unintended consequences. BACKGROUND The City has been reviewing the Palo Alto Medical Foundation’s applications for a new medical clinic and research campus to be located in the Urban Lane area between E1 Camino Real and the railroad tracks. As part of the January 22, 1996 City Council public hearing on these applications, PAMY requested the modification of the City’s Housing Mitigation fee regulations reviewed in this report. POLICY IMPLICATIONS Existing City policy applies a housing mitigation fee to new commercial and industrial floor area above that previously existing on a site. No provision is made for reducing the floor area which is subject to the fee by subtracting offsite floor area that will be demolished and CMR: 132:96 Page 1 of 5 not rebuilt for nonresidential purposes. The request from PAMF would incorporate offsite demolished space into the fee formula. Staff does not interpret the requested change as a substantial modification to City policy. Moreover, the City Attorney has advised that some fee adjustment mechanism is advisable in order to accommodate constitutional limitations in unusual cases. DISCUSSION The City has imposed housing mitigation fees on new commercial and industrial projects since the mid-1970s. Current authority for the fee is found in Chapter 16.47 of the Municipal Code, Approval of Projects with Impacts on Housing (attached). The purpose of the fee is to "lessen the shortage of low-income and moderate-income housing in Palo Alto...". A nexus study was conducted in 1983-84 prior to adoption of the current ordinance. In summary, the study found that new commercial and industrial floor area created new employment, which created additional demand for housing. Some of the new employees are from low- and moderate-income households and would be unable to rent or purchase housing in Palo Alto. Mitigation of a percentage of this new housing demand was a legitimate part of the City’s land use authority. The ordinance contains a formula for the calculation of the housing impact to be mitigated (16.47.040). The developer is provided the option of either providing the required number of low- and moderate-income housing units or paying an in-lieu fee. The current fee is $3.48 for each square foot of floor area subject to the ordinance. The fee is adjusted annually, based on the change in the Bay Area Consumer Price Index. The applicable fee is that fee in effect at the time that the building permit is issued. For the Palo Alto Medical Foundation, the fee for the total requested development on the Urban Lane site is approximately $914,077. This number is derived in the following manner: Proposed New Floor Area Minus Previously Existing Floor Area on the Urban Lane Site Total Floor Area Subject to the Housing Mitigation Fee Fee at Current Rate of $3.48 Per Square Foot 355,500 sq. ft. 92,834 sq. ft. 262,666 sq. ft. $914,077 CMR: 132:96 Page 2 of 5 In administrating the fee, staff is not aware of a situation where a large new use subject to the fee ordinance resulted in the demolition of another building, with the site of the demolished building to be redeveloped without housing. (The Packard Children’s Hospital would have been a similar situation, but hospitals are not subject to the fee ordinance.) The Medical Foundation argument is relatively simple: Since the fee ordinance is not applicable to replacement square footage on the site of the new development, the ordinance should also recognize demolished floor area at another site, as long as the other site is redeveloped with housing. A complicating factor is that nothing in the present applications commits PAMF to develop housing on the downtown site. Reuse issues have been deferred to the proposed coordinated area plan. If the ordinance is amended consistent with the Foundation request, the housing fee calculation for the Urban Lane site could be: Proposed New Floor Area Minus Previously Existing Floor Area on the Urban Lane Site Minus Floor Area to be Demolished on the Downtown Site* Total Floor Area Subject to the Housing Mitigation Fee Fee at Current Rate of $3.48 Per Square Foot 355,500 sq. ft. 92,834 sq. ft. 203,242 sq. ft. 59,424 sq. ft $206,795 *203,242 square feet is the amount of medical or clinic research floor area owned by PAMF in the downtown area and subject to the Specific Plan. The actual square footage to be demolished would be calculated based on future planning decisions. Staff’s reaction to PAMF’s proposal is that on the one hand, they are already receiving a substantial benefit by not having to pay the fee on 92,834 square feet of previously existing floor area, that would never have supported the employment density of the new floor area. On the other hand, if the City gives a credit for the 92,834 square feet, there may not be a fundamental difference in logic in giving a credit for other vacated floor area, as long as it is removed from nonresidential use (or, as long as it is replaced with residential uses). If the Council agrees with the PAMF-requested change to the Housing Mitigation Ordinance, numerous details will need to be resolved and incorporated into an ordinance amendment. CMR:132:96 Page 3 of 5 ALTERNATIVES Alternatives available to the Council are either to retain the existing ordinance or to direct staff to develop an amendment to the Housing Mitigation Ordinance as conceptually requested by PA_MF. FISCAL IMPACT Implementation of the PAMF-requested ordinance change would substantially reduce the amount of housing mitigation generated by the proposed development. Future fiscal impacts are not possible to estimate, Nven uncertainty as to how often similarsituations would arise. ENVIRONMENTAL ASSESSMENT If staff is directed to develop an ordinance amendment, appropriate environmental review will accompany the ordinance. For the Urban Lane project, mitigation of housing impacts is achieved through compliance with the City’s Housing Mitigation Fee Ordinance in effect at the time building permits are issued. STEPS FOLLOWING APPROVAL If an ordinance amendment is requested by the Council, staff will return with the amendment on a schedule that would have it be effective prior to PAMF’s receiving building permits. ATTACHMENTS 1/22/96 Letter from David Jury Chapter 16.47 CC:Palo Alto Medical Foundation (David Ju130 Palo Alto Housing Corporation PREPARED BY: Ken Schreiber DEPARTMENT HEAD REVIEW: KENNETH R. SCHREIBER Director of Planning and Community Environment CMR: 132:96 Page 4 of 5 CITY MANAGER APPROVAL: City . CMR:132:96 Page 5 of 5