HomeMy WebLinkAbout2004-04-12 City Council (11)City of Palo Alto
City Manager’s Report
TO:
FROM:
HONORABLE CITY COUNCIL
CITY MANAGER DEPARTMENT: PUBLIC WORKS 8
DATE:APRIL 12, 2004 CMR:212:04
SUBJECT:APPROVAL OF CHANGES TO FLOOD HAZARD REGULATIONS
(PALO ALTO MUNCIPAL CODE CHAPTER 16.52) PERTAINING
TO THE REVIEW OF IMPROVEMENTS TO EXISTING
STRUCTURES IN THE SPECIAL FLOOD HAZARD AREA
REPORT IN BRIEF
In Spring 2000, the State Department of Water Resources (DWR), acting as the Federal
Emergency Management Agency’s (FEMA) contract agent, conducted an audit of the
City of Palo Alto’s floodplain management practices. The audit identified a deficiency in
the City’s process for reviewing building permit applications for structures in the FEMA-
designated floodplain. Specifically, the auditor challenged the method used by City staff
to determine whether an individual building project constitutes a "substantial
improvement" subject to the City’s Flood Hazard Regulations. The audit report included
a requirement that the City modify its permit review methodology to bring it into
compliance with National Flood Insurance Program (NFIP) standards.
In response to the audit findings, staff is proposing to clarify the process used to identify
"substantial improvements" by adding a definition for the term "market value" to the
Mtmicipal Code and by revising the methodology for determining the market value of
existing structures and screening building permit applications for projects in the
floodplain. In addition, staff recommends clarifying some additional floodplain
management issues, such as health and safety exclusions from the Flood Hazard
Regulations, crawl space construction standards, and the prohibition of new or expanded
basements. These issues have been problematic for staff and building permit applicants
due to ambiguous or missing language. Lastly, staff recommends that the exemption
from the Flood Hazard Regulations for historic structures be extended to locally-
designated historic structures.
This report describes the public outreach meetings conducted by staff to inform and
solicit input from those individuals and businesses potentially impacted by the proposed
CMR:212:04 Page 1 of 13
regulation changes. Staff summarizes the comments and concerns made by participants
during the meetings and provides responses for the key issues raised. The report also
describes the potential consequences of non-compliance with the audit requirements.
RECOMMENDATION
Staff recommends that the. Council approve and adopt the attached ordinance
(Attachment A) revising the City’s Flood Hazard Regulations (Palo Alto Municipal Code
Chapter 16.52). The ordinance adds a definition for the term "market value", an
exemption from the Regulations for locally-designated historic structures, and language
to clarify problematic issues regarding health and safety exclusions, crawl space
construction standards, and basement prohibition in the existing Regulations. Staff also
recommends that Council approve a revised cost valuation methodology for determining
whether building projects modifying existing structures constitute a "substantial
improvement" that must comply with special floodplain construction standards.
BACKGROUND
Historically, the nation’s private insurance companies have been unwilling to offer flood
insurance, due to the potentially catastrophic level of claims from even a single major
flood. To remedy this situation, Congress established the National Flood Insurance
Program (NFIP) in 1968 to provide flood insurance underwriting. NFIP-sponsored flood
insurance is made available to residents and businesses in communities that elect to
participate in the program. In return, in order to reduce its level of risk, the federal
government imposes requirements on the participating community, including the
codification of federal floodplain management regulations into local ordinances. Council
first incorporated the federal requirements into the Palo Alto Municipal Code (PAMC) in
1979, by adopting PAMC Chapter 16.52, "Flood Hazard Regulations."
City staff is responsible for enforcing the special building requirements contained in the
Flood Hazard Regulations. These requirements apply to new construction and
"substantial improvement" o.f existing structures within a Special Flood Hazard Area
(SFHA), the area subject to flooding in the one percent (100-year) flood (see map -
Attachment B). 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 requirements
mandate that the lowest floor of a regulated structure nmst be constructed at or above the
Base Flood Elevation determined by the Federal Emergency Management Agency
(FEMA). Other requirements include installation of adequate openings beneath the floor
to allow for passage of floodwaters, placement of building utilities (e.g. water heater,
furnace, etc.) above the flood level, use of flood-resistant building materials, and the
certification of lowest floor elevations by a registered engineer or surveyor.
It is important to understand the intent and context of the federal floodplain management
regulations, particularly with respect to their applicability to existing structures. The
CMR:212:04 Page 2 of 13
concept of retrofitting existing buildings to protect them from flooding when they are
~substantially improved" is consistent with FEMA’s mission as administrator of the
NFIP. Through the NFIP, FEMA makes 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. Successful reduction of damage claims, in turn,
allows the NFIP to lower the premiums paid by flood insurance policy holders. A recent
article in the Palo Alto Daily Neu~s describes how the number of damage claims directly
influences the cost of flood insurance (Attachment C). According to FEMA, the fifty
percent threshold used to define ~substantial improvement" was chosen "as a
compromise between the extremes of 1) prohibiting all investment in 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." Likewise, the "substantial improvement" regulation is consistent with the
City!s goal to protect public health and safety. As evidenced by the widespread property
damage caused by the overtopping of San Francisquito Creek in 1998, flood damage is a
very real possibility for Palo Alto residents and businesses. Enforcement of the Flood
Hazard Regulations, including the requirement to raise the floors of "substantially
improved" buildings, will help to mitigate future flood damage.
The ultimate goal of removing the burden of special building requirements and
mandatory flood insurance currently faced by owners of property in the SFHA can only
be achieved through elimination of the floodplain. This, however, is a long-term
solution that will require expensive flood control modifications to San Francisquito Creek
and the bayfront levees. Steady progress is being made towards this goal. The San
Francisquito Creek Joint Powers Authority is working with Palo Alto, its other member
agencies, and the US Army Corps of Engineers to identify a flood control solution for
San Francisquito Creek. There is $100K in the FY 03-04 Corps budget to start a
reconnaisance study of flood control options. In addition, the Santa Clara Valley Water
District has successfully lobbied Congress to authorize $100K in the FY 03-04 Corps
budget to reassess the bayfront levees and the need for improvements..Improving San
Francisquito Creek and the bayfront levees would eliminate the remaining flood hazards
in Palo Alto. Staff is working cooperatively with other local agencies to make these
improvements happen, but realistically these projects have a 10 to 20 year horizon.
FEMA and the State Department of Water Resources (DWR) periodically conduct
°~Community Assistance Visits" (CAVs) to audit the floodplain management practices of
communities participating in the NFIP. In Spring 2000, DWR staff conducted a CAV
with the City of Palo Alto. The DWR auditor concluded that the City is in general
compliance with the NFIP requirements. However, the audit identified a deficiency in
the City’s process for reviewing building permit applications for structures in the FEMA-
designated floodplain, formally known as the Special Flood Hazard Area (SFHA).
CMR:212:04 Page 3 of 13
PAMC Chapter 16.52 (Flood Hazard Regulations) contains special building requirements
that apply to new construction and to "substantial improvement" of existing structures
within an SFHA. The DWR auditor identified inadequacies in the City’s methodology
for reviewing building permit applications for modifications to existing structures.
Specifically, the auditor challenged the method used by City staff to determine whether
an individual building project constitutes a "substantial improvement" subject to the
special building requirements. The audit report included a requirement that the City
modify its permit review methodology to bring it into compliance with NFIP standards.
PAMC Chapter 16.52 currently defines a "substantial improvement" 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." In order to ascertain whether
proposed improvements to an existing structure constitute a substantial improvement
subject to the Flood Hazard Regulations, Public Works staff reviews, each project by
comparing the cost of the impro’~ements with the market value of the existing structure.
The cost of the improvements is derived from information provided by the applicant on
the building permit application form. Determination of the market value of existing
structures has been more problematic and is the subject of the audit findings.
PAMC Chapter 16.52 does not contain a definition for the term "market value." Since
the term has multiple meanings in general usage, building permit applicants are often
confused over how to interpret it. With guidance from local FEMA officials, Public
Works staff developed a procedure for determining the market value of structures using.
the depreciated replacement cost approach. Using this approach, market value is
calculated by multiplying the replacement cost per square foot by the existing building
square footage and then multiplying the product by a depreciation factor that is dependent
upon the age and condition of the building. Public Works staff worked with the City
Attorney’s Office to draft a definition for the term "market value" based on this concept.
The definition was reviewed and approved by FEMA and DWR staff and has been
incorporated into the State of California model floodplain ordinance and adopted by local
agencies such as San Mateo, Lafayette, Mill Valley, Brentwood, and Contra Costa
County. However, this definition of."market value" has not yet been incorporated into
the City’s Flood Hazard Regulations. Due to the complexity and variability of multi-
family residential, commercial, and industrial buildings, staff has
relied primarily on professional appraisals based on the depreciated replacement cost
approach to determine the market value of these structures. Staffhas used a standard rate
of $120 per square foot for living area and $60 per square foot for garages as the
depreciated replacement cost figures to determine the value of single-family residential
structures. This one-size-fits-all approach for valuing single-family residential structures
was the target of the DWR audit.
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The DWR audit report states:
"Our review found one serious problem with the City’s Floodplain
Management Program. The serious problem identified is that the City
inaccurately evaluates structures for substantial improvement and
substantial damage. The City currently evaluates all structures as "luxury"
quality at $120 per square foot as defined in the Means Square Foot
Estimating Guide. However, many of the structures identified in the
enclosed °~Floodplain Inspection List" are not ~°luxury" quality. Therefore,
the cost per square foot for the actual structure evaluated is too high. To
correct this serious problem, the City needs to modify its Substantial
Improvement and Substantial Damage square foot building valuation so
that it reflects the actual quality of the structure evaluated. It is also
strongly recommended that the City adopt a definition for "Market Value."
This definition is necessary because of the many older structures that are
being improved within the City’s Special Flood Hazard Areas."
Other Issues
The revision of the Flood Hazard Regulations to add a "market value" definition provides
a timely opportunity to clarify some additional floodplain management issues that have
been problematic for staff and 15uilding permit applicants due to ambiguous or missing
language. A detailed discussion of these additional regulation changes is included below.
The existing Flood Hazard Regulations allow an exemption from the floodplain-related
special building requirements for historic structures listed on the National Register of
Historic Places or the California Register of Historical Resources. Staff would like to
extend the exemption provision to locally-designated historic structures, as discussed
below.
DISCUSSION
Recommended Follow-Up to DWR Audit
As a follow-up to the DWR audit, staff reviewed options for conducting substantial
improvement evaluations. The most accurate and rigorous method would be to base the
cost of the proposed building improvements on a detailed construction cost estimate and
to bage the market value of the existing structure on an appraisal by a professional real
estate appraiser. Since the majority of remodeling projects clearly do not constitute a
substantial improvement, however, staff sought to develop a simpler and less costly
means to conduct an initial screening of projects to determine whether or not they trigger
the substantial improvement threshold without requiring all applicants to incur the cost of
a professional appraisal. Therefore, staff developed a methodology for conducting
preliminary substantial improvement evaluations without an appraisal. Under this
approach, the cost of the building improvements would be based upon the cost figure
accepted by the Building Inspection Division on the building permit application. The
market value of existing single-family residential structures would be determined by. staff
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using a customized valuation methodology. The proposed methodology takes into
account the unique characteristics (age, size, construction quality, amenities, etc.) of each
individual structure while maintaining a streamlined review procedure that will allow for
timely and accurate "substantial improvement" evaluations. The proposed evaluation
.procedure is based on cost estimating data contained in Means Square Foot Costs, a
nationally-recognized cost estimating reference guide that is updated annually and
adjusted for local construction costs. Staff has input cost data from the estimating guide
into a customized software application that will allow custom valuations of residential
structures based upon the following factors:
¯Age of the structure
[]Square footage of the structure
[]Quality of construction (average vs. custom)
[]Exterior finish
[]Type of roofing materials
¯Number of bathrooms
[]Building upgrades (fireplaces, air conditioning,premium kitchen, etc.)
The software also applies an adjustment factor for depreciation of the structure based on
its age.
A summary of the range of costs generated by this valuation methodology is provided in
the attached tables (Attachment D). The unit cost figures are generally lower than the
standard $120 per square foot figure currently used by staff to establish the value of
existing structures. An example "substantial improvement" evaluation using the
proposed technique is depicted in the attached narrative (Attachment E). Staff proposes
to use this cost estimating software as a screening tool for.reviewing building permit
applications for modifications to existing structures in the SFHA. In most cases, this tool
will allow staff to accurately and efficiently determine which building projects constitute
substantial improvements subject to the Flood Hazard Regulations. Applicants will be
given the option to provide a detailed construction cost estimate and a property appraisal
prepared by a certified professional if they wish to challenge the screening-level
substantial improvement evaluation conducted by staff. Professional appraisals will be
accepted provided that they are prepared based upon the depreciated replacement cost
approach.
The proposed cost valuation methodology was reviewed and approved by FEMA staff.
The lower building costs generated by the new valuation methodology will tend to
identify more projects as potential "substantial improvements," subject to the special
floodplain construction standards, but this trend may be offset by more use of
professional appraisals by permit applicants to establish higher building values.
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During the summer of 2003, staff convened a peer review panel consisting of members of
the local development community (developers, design professionals and appraisers) to
review the proposed cost valuation methodology. A list of members of the peer review
panel is attached (Attachment F). The peer review panel was supportive of staff’s
approach. The panel noted that the construction costs listed in the Means Square Foot
Costs are lower than actual local costs, but acknowledged that they are consistent with
costs typically submitted by applicants on building permit applications for new
construction. Panel members observed that the initial substantial improvement screening
will produce an accurate assessment as long as the unit costs for new construction and
existing improvements are relatively consistent. The panel also felt that it was important
to include the option enabling an applicant to obtain a professional cost appraisal if they
do not agree with staff’s cost estimate.
In order to comply with the DWR audit of the City’s floodplain management practices,
staff recommends that Council approve the attached ordinance incorporatin~ the "market
value" definition into the Flood Hazard Regulations and approve staff’.s proposed cost
valuation methodology for determining whether building projects modifying existing
structures constitute a "substantial improvement." Although codification of the "market
value" definition is not strictly mandatory, the proposed definition is consistent with
written guidance from FEMA and staff’s interpretation of the term. Staff strongly
recommends that the definition be added to the Municipal Code in order to clarify the
issue and to avoid disputes with applicants over the meaning of the term. This will
promote consistency and efficiency in processing applications.
Additional Floodplain Management Issues
In addition to adding the ~market value" definition, staff recommends amending the Code
in order to clarify some additional floodplain management issues that have been
problematic for staff and building permit applicants due to ambiguous language or areas
where the ordinance is silent. The issues, including health and safety exclusions from the
Flood Hazard Regulations, crawl space construction standards, and the prohibition of
new or expanded basements in the SFHA, are discussed below.
Section 16.52.040(35) of the Flood Hazard Regulations allows the exclusion of certain
items of work when determining the cost of a building improvement project. By
reducing the calculated cost of a project, these exclusions effectively allow more
construction to occur before the "substantial improvement" criteria is triggered. One
such exclusion is allowed for "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." The vague nature of the language in this code
section has created confusion for both staff and building permit applicants. 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
CMR:212:04 Page 7 of 13
in writing that it may only exclude 1) those costs for work to correct pre-existing code
violations that make the structure uninhabitable, and 2) work necessary to comply with
the Americans with Disabilities Act (ADA) (see attached correspondence - Attachment
G). Based on the guidance from FEMA, Public Works staff and the City Attorney’s
Office have drafted alternative ordinance language that more clearly describes the intent
behind the exclusion (see Attachment A).
Section 16.52.040(5) of the Flood Hazard Regulations defines a basement as an area of a
building having its .floor subgrade (below ground level) on all four sides. Basements are
prohibited for new construction and "substantial improvements" to existing structures
that are within the SFHA. Written FEMA guidance has indicated that subfloor crawl
spaces that are below grade on all four sides are considered basements and are therefore
prohibited. A prohibition of subgrade crawl space areas, however, is not explicitly made
in the existing Flood Hazard Regulations. The lack of specific language prohibiting
subgrade crawl spaces ~reates confusion for building permit applicants and makes it
difficult for staff to enforce the prohibition. Staff proposes to modify Section
16.52.040(21). to explicitly prohibit subfloor crawl spaces that are subgrade (below
ground level) on all four sides for new construction.
As a result of local construction practices, subgrade crawl spaces are a common feature
for residential structures in Palo Alto. Prohibiting subgrade crawl spaces on a new house
is relatively straightforward since the building is constructed with new materials from the
foundation up. Eliminating subgrade crawl spaces from existing houses that are being
substantially improved, however, is much more problematic. The problem arises due to
an inadvertent conflict with a Uniform Building Code rule that requires a minimum
distance of 18 inches between the ground and the lowest structural member in the crawl
space area (e.g. the floor joists) in order to provide adequate subfloor access. There are
two typical scenarios for "substantial improvement" projects. In the first scenari.o, the
lowest floor of the structure is below the base flood elevation for the parcel. In this case,
the lowest floor of the entire house must be raised in order to comply with the Flood
Hazard Regulations. Since the floor is required to be raised anyway, the applicant is
required to fill in any subgrade crawl space area and then elevate the floor to a level that
a) is at or above the base flood elevation, or b) provides the minimum 18 inches clearance
above the ground, whichever is higher. The second scenario is the problematic one. In
this scenario, the lowest floor is already above the base flood elevation so it does not
need to be raised, but typically the house is built above a subgrade crawl space and most
often the ground clearance is already at or near the minimum 18 inches. In this situation,
filling in the subgrade crawl space violates the building code clearance requirement, but
leaving the subgrade crawl space violates the Flood Hazard Regulations. In such cases,
staff has elected to allow the subgrade crawl space to remain because it is considered
onerous to require a permittee to incur the sizable cost to elevate the entire house simply
in order to eliminate the minimal risk of damage that may occur if water accumulates in
the crawl space during a flood event. Instead, staff has directed permittees to fill the
CMR:212:04 Page 8 of 13
subgrade crawl space area to the extent feasible without violating the minimum clearance
requirement. FEMA has recently issued written guidance that allows limited subgrade
crawl spaces to remain if the following conditions are imposed on the project:
"The crawl space grade must not be more than two feet below the lowest adjacent
grade outside the foundation.
[]The height of the crawl space, measured from the interior grade of the crawl space
to the top of the foundation wall, must not exceed four feet.
[]There must be an adequate drainage system that removes floodwaters from the
interior area of the crawl space. The enclosed area must be able to be drained
within a reasonable time after the flood event.
[] The velocity of the floodwaters at the site should not exceed five feet per second.
[]Communities that choose to allow subgrade crawl spaces must amend their flood
hazard regulations to reflect the other conditions listed above.
Staff proposes modifying Section 16.52.130 of the Flood Hazard Regulations to allow
subgrade crawl spaces to remain beneath substantially improved buildings, subject to the
conditions dictated by FEMA.
According to the existing Flood Hazard Regulations, the requirement that the lowest floor
of a structure be constructed at or above the base flood elevation only applies to new
construction or "substantial improvement" of an existing structure located in the SFHA.
This effectively prohibits the construction of most basements in the SFHA. There is a
loophole, however, that allows the construction of a new basement or the expansion of an
existing basement in an existing structure, if the construction does not constitute a
"substantial improvement." Staff believes that the health and safety risks caused by
basements constructed beneath residential buildings located .in a floodplain should be
sufficient cause for a policy of complete prohibition. The impacts to basements during a
flood were made evident during the February 1998 San Francisquito Creek flood, when
the Fire Department assisted with pumping out several hundred flooded basements and
subgrade crawl spaces throughout the City. Therefore, staff has proposed modifications
to Section 16.52.130 of the Flood Hazard Regulations that close the existing loophole and
prohibit ~ new or expanded basements in the SFHA in order to protect public health
and safety.
Expanded Exemption for Historic Structures
The existing Flood Hazard Regulations allow an exemption from the floodplain-related
special building requirements for historic structures listed on the National Register of
Historic Places or the California Register of Historical Resources. Specifically, the
definition of a "substantial improvement" excludes alterations to a designated historic
structure as long as the proposed alterations will not result in the termination of the
structure’s continued designation as an historic structure. FEMA regulations also allow
for the exclusion of locally-designated historic properties in communities with certified
CMR:212:04 Page 9 of 13
historic preservation programs. Palo Alto’s historic preservation program is certified by
the State of California in the City’s Certified Local Government Agreement, and the
exemption of locally-designated historic properties from the Flood Hazard Regulations
was included in the Historic Preservation Ordinance adopted by Council in 1999. The
exemption was eliminated, however, when the Historic Preservation Ordinance was
invalidated by voter referendum in 2000. Staff would like to reinstate the exemption
provision for locally-designated historic structures in order to provide an incentive for
voluntary historic preservation. In particular, the regulations would be modified to
exempt "any structure that is listed individually in the current edition of the Palo Alto
Master List of Structures on the Historic Inventory in Category 1 "Exceptional Building"
or Category 2 "Major Building" or any structure that has been certified by the Keeper of
the National Register as contributing to the historical significance of a registered historic
district". It is expected that the potential exclusion from the Flood Hazard Regulations
may induce some owners of properties listed as Category 3 or 4 on the Palo Alto Historic
Inventory to seek the Category 1 or 2 designation if they qualify. The revised historic
designation would allow property owners to implement extensive remodeling plans
without having to elevate their structures, as long as the-historic nature of the structure is
not compromised. In turn, the voluntary addition of properties to the Category 1 or 2
inventory would increase the City’s ability to ensure the continued preservation of these
historic properties and thus benefit the City’s overall efforts ~to promote historic
preservation:
Public Outreach
In addition to convening, the peer review panel for purposes, of commentary on the
"substantial improvement" cost methodology discussed above, staff has conducted
outreach to those impacted by the recommended ordinance changes. Staff arranged a
series of public lneetings with residential property owners, commercial property owners,
the Chamber of Commerce, and local realtors to provide information and receive
feedback. The meeting for residential property owners was publicized through direct
mailing to neighborhood association representatives and paid advertising in local
newspapers. Individual meeting invitations were mailed to all owners of commercial
property in the floodplain. The attached table lists the target audiences and meeting dates
of staff’s outreach efforts (Attachment H).
The residential property owner representatives, local realtors, and the Chamber of
Commerce Government Action Committee were generally supportive of staff’s proposed
ordinance changes. There were a couple of notable concerns expressed by members of
the public during the meetings. Many meeting attendees commented that the
construction costs used to determine market value at the building permit screening phase
are too low. The participants generally understood staff’s rationale supporting the
methodology for initial screening of building permit applications (i.e. streamlined review
procedure; customized approach based on the building’s size, age, construction quality,
and amenities; the use of similar cost ranges for the cost of building improvements and
CMR:212:04 Page 10 of 13
for building replacement costs, etc.), but found the process somewhat confusing. If
Council approves the proposed cost valuation .methodology, staff will prepare written
guidance materials to clarify the process for permit applicants. Some residential property
owners questioned why basements are allowed for commercial properties in the
floodplain (as long as they are flood-proofed), but are prohibited for residential
structures. One resident noted that FEMA regulations allow municipalities to permit
residential basements under certain conditions and advocated that Palo Alto take
advantage of this opportunity to allow residential basements. Staff has researched the
FEMA regulations and has concluded that it would be difficult to comply with all of the
conditions required to allow the City to permit residential basements (see summary of the
requirements in Attachment I). In any case, staff continues to believe that the health and
safety risks caused by basements constructed beneath residential buildings located in a
floodplain are sufficient cause for a policy of prohibition.
The commercial property owners represented at the February 4 meeting expressed strong
opposition to the proposed "market value" definition. They argued that staff is exceeding
the minimum requirements of the National Flood Insurance Program by proposing a
"market value" definition based on depreciated replacement cost. Furthermore, they
contended that staff’s proposed definition will negatively impact commercial
development in Palo Alto. They noted that the existing Flood Hazard Regulations provide
that undefined terms "shall be interpreted so as to give them the meaning they have in
commonusage and to give this chapter its most reasonable application." Under this
approach, they believe that term "market value" should be interpreted as "the sales price
mutually acceptable to a buyer and a seller" or "the value of a property based upon its
income-producing potential", common meanings of this term in the commercial real
estate business. Staff is basing its recommendation on the specific verbal and written
guidance on this issue provided by FEMA and California DWR staff. Several years ago,
at the urging of some commercial property owners, staff wrote to FEMA seeking
approval to use income-based appraisals to establish the market value of existing
commercial buildings. FEMA responded by rejecting this approach and reinforcing the
validity of the depreciated replacement cost methodology (see attached correspondence -
Attachment J).
RESOURCE IMPACT
Council adoption of the attached modifications to Palo Alto Municipal Code Chapter
16.52 (Flood Hazard Regulations) will ease the workload on existing staff by clarifying
ambiguities or omissions in the existing regulations.
In an effort to determine the impact of the Flood Hazard Regulations on commercial
development, staff reviewed building permit applications for commercial buildings in the
floodplain during the period from 1998 through the present. Of the 177 permit
applications received during this period, only six were found to be substantial
improvements. Two of the projects were never built, one was floodproofed by elevating
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low-lying doors and windows and strengthening the walls, and three were either elevated
or already met the minimum floor height requirements.
Failure to comply with the audit could result in the loss of the 15% flood insurance
premium discount enjoyed by Palo Alto residents and businesses due to Palo Alto’s
participation in the NFIP’s Commu.nity Rating System and its good standing in the NFIP.
In a worst case scenario, Palo Alto could be suspended from the NFIP, which would
make federally-backed lnortgages unavailable to borrowers on properties located in the
floodplain.
¯POLICY IMPLICATIONS
Council adoption of the attached modifications to Palo Alto Municipal Code Chapter
16.52 (Flood Hazard Regulations) will bring Palo Alto’s floodplain management program
into full compliance with National Flood Insurance Program (NFIP) standards. Adoption
of a "market value" definition and approval of the modified methodology for valuation of
existing single-family residential structures will represent a change from the current
valuation methodology and will comply with the requirements of the Spring 2000 audit
by the California Department of Water Resources.
ENVIRONMENTAL REVIEW
Adoption of the attached ordinance is exempt from the provisions of the California
Environmental Quality Act (CEQA) as a minor alteration in land use limitations in an
area with an average slope of less than 20% which does not result in any changes in land
use or density (CEQA Guidelines Section 15305).
ATTACHMENTS
Attachment A:
Attachment B:
Attachment C:
Attachment D:
Attachment E:
Attachment F:
methodology
Attachment G:
Attachment H:
Attachment I:
Attachment J:
Ordinance
Map of Special Flood Hazard Area
Palo Alto Daily News article on flood insurance
Range of building costs using modified cost valuation methodology
Example "substantial improvement" evaluation
List of Peer Review Panel members for modified cost valuation
Correspondence to/from FEMA on health and safety exclusions
Summary of public outreach meetings
FEMA requirements for residential basements in the floodplain
Correspondence to/from FEMA regarding income-based appraisals
PREPARED BY:
Senior Engineer
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DEPARTMENT HEAD:
CITY MANAGER APPROVAL:
GLENN S. ROBERTS
Director of Public Works
EMI@L H’ARRISON
Assistant City Manager
Palo Alto Chalnber of Commerce Government Action Committee
Silicon Valley Board of Realtors Local Government Relations Committee
Loren Brown, Vance Brown Builders
Elaine Breeze, Summerhill Homes
John Northway, Stoecker and Northway
Wayne Prescott, Schmidt-Prescott Group
John Tarlton, Tarlton Properties
Stan Tish, Berliner, Kidder, & Tish
Jon Schink
Douglas B. Moran, Barron Park Association
Dorothy Bender, Barron Park Residents Organization
Jean Wilcox, Charleston Gardens Association
Cole H. Richmond, Chestnut-Wilton Homeowners Assn.
Rick Ferguson, Community Center Neighbors Assn.
Janet Levy, Creek Action Committee
Glenna Violette, Crescent Park Neighborhood Assn.
Dan Lorimer, Downtown North Neighborhood Assn.
Karen White, Duveneck/St. Francis Neighborhood Assn.
Angelica Volterra, Edgewood Neighbors
Mike McMahon, Meadow Park Homeowners Assn.
Annette Glanckopf Ashton, Midtown Residents Assn.
Abera Metaferia, Oregon Green Condolninium Owners Assn.
Bonnie Packer, Palo Verde Neighborhood Assn.
Kristen Johnson, Ventura Neighborhood Assn.
Dieter Folta, Walter Hays Neighborhood
Flood Hazard Regulations Public Meetil~g Attendees
CMR:212:04 Page 13 of 13
NOT YET APPROVED
ATTACHMENT A
ORDINANCE NO.
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO
ALTO AMENDING PALO ALTO MUNICIPAL CODE SECTIONS
16.52.040 AND 16.52.130 OF CHAPTER 16.52
PERTAINING TO FLOOD HAZARD REGULATIONS
The Council of the City of Palo Alto does ORDAIN as
follows:
SECTION i. Section 16.52.040 (Definitions) of Chapter
16.45 (Flood Hazard Regulations), Title 16 [Building
Regulations] of the Palo Alto Municipal Code is hereby amended
to read as follows:
16.52.040 Definitions.
(a) The ’ definitions contained hereafter shall govern
the interpretation of the terms defined for the purposes of this
chapter, except where the context clearly requires otherwise.
Words used in this chapter and not defined in this ~section shall
be interpreted so as to give them the meaning they have in
common usage and to give this chapter its most reasonable
application.
( 1 ) "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 AO
or AH zone on the Flood Insurance Rate Map. The base flood
depths range from one to three feet; a clearly defined channel
does not exi st ; the path of f.looding is unpredictable and
indeterminate; and velocity flow may be evident.
(3) "Area of Special Flood Hazard." See "Special flood
hazard area."
(4) "Base flood" or "one hundred year flood" means the
flood having a one percent chance of being equaled or exceeded
in any given year.
(5) "Basement" means any area of the building having
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 floodwaters. A
breakaway wall shall have a safe design loading resistance of
not less than ten and no more than twenty pounds per .square
040401 sm 0100152
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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 velocity waters, including coastal and tidal and inundation
or tsunamis. The area is designated on the Flood Insurance Rate
Map as Zone V1 - V30, VE or V.
(8) "Development" means any man-made 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 bulk
storage of equipment or materials.
(9) "Flood" or "Flooding"means a general and
tmmporary condition of partial or complete inundation of
normally dry land areas from (A) the overflow of floodwaters,
(B) the unusual and rapid accumulation or runoff of surface
Waters from any source, and/or (C) the collapse or subsidence of
land along the shore of a lake or other body~ of water as a
result of erosion 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.
(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" 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.
(12) "Flood Insurance Study" means the official report
provided by the Federal Insurance Administration that includes
flood profiles, the Flood Insurance Rate Map, 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 flood.
(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.
040401 sm 0100152 2
NOT YET APPROVED
(15)"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 of California or local regulations in any combination
thereof, which provide standa[ds 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
cha~nel 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 elevation more
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 facil~ities 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.
(20) "Historic structure" means any structure that is
listed individually in the National Register of Historic Places
or in the State of California Register of Historical Resources
or any strmcture that is listed individually in the current
edition of the Palo Alto Master List of Structures on the
Historic Inventory in Category 1 "Exceptional Building" or
Category 2 "Major Building"~ or any structure that has been
certified by the Keeper of the National Register as contributing
to the historical significance of a registered historic
district.
(21) "Lowest floor" means the lowest floor of the
lowest enclosed area, including basement.
(A) An unfinished or flood r~sistant enclosure below the
lowest floor that is usable solely for the parking of vehicles,
building access or storage in an area other than a basement area
is not considered a building’s lowest floor, provided that it
conforms to the applicable non-elevation design requirements,
including but not limited to:
(I) The standard set forth in subdivision 3 of
subsection (c) of Section 16.52.130;
(2) The anchoring standards set forth in subdivision
(i) of subsection (a) of Section 16.52.130;
040401 smOlO0152 3
NOT YET APPROVED
(3) The construction materials and methods standards
set forth in subsection (b) of Section 16.52.130; and
(4) The standards for utilities set forth in Section
16.52.140.
(B) For residential structures, all subgrade enclosed
areas are prohibited as they are considered to be basements.
This prohibition includes below-grade garagesm-~o~ storage areas
and subfloor crawl spaces, except existing below-grade subfloor
crawl spaces meeting the standards set forth in subsection (d)
of Section 16.52.130.
(22) "Manufactured home" means a structure,
transportable in one or more sections, which is built on a
permanent chassis and is designed for use with or without a
permanent foundation when it is attached to the required
utilities. The term 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.
(24) "Market Value of the structure" means that value
of a structure determined by estimating the cost to replace the
structure in a new condition and adjusting that cost figure by
the amount of depreciation which has accrued since the structure
was constructed. The cost of replacement of the structure shall
be based on a square foot cost factor determined by reference to
a building cost estimating guide recognized by the building
construction industry, as approved by the floodplain
administrator. The amount of depreciation shall be determined
by taking into account the age and physical deterioration of the
structure and functional obsolescence, as approved by the
floodplain administrator, but shall not include economic or
other forms of external obsolescence. The use of replacement
Costs or accrued depreciation factors different from those
contained in recognized building cost estimating guides may be
approved at the discretion of the floodplain administrator only
if such factors are included in a report prepared by an
independent professional appraiser and supported by a written
explanation of the differences.
(2%5) "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.
(2~6) "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.
(2~7) "Person" means an individual or his agent, firm,
partnership, association or corporation, or agent of the
040401 sm 0100152 4
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aforementioned groups, or the State of California or its
agencies or political subdivisions.
(238) "Recreational vehicle" means a vehicle which:
(A) Is built on a single chassis;
(B) Measures 400 square feet or less at its argest or
widest horizontal projection;
(C) Is designed to be self-propelled or permanentl~
towable by a small truck;
(D) Is designed primarily not for use as a permanent
dwelling but as temporary living quarters for recreational,
seasonal use camping or travel; and
(E) Incorporates a vehicle that is defined by the
State of California as a camp trailer, camper, fifth-wheel
travel trailer, or house car.
(2~) "Remedy a violation" means to bring the
structure or other development into compliance with the State of
California 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 of California financial exposure with
regard to the structure or other development.
(9-930) "Riverine" means relating to, formed by,or
resembling a river (including tributaries), stream, or brook.
(3@i) "Sand dunes" means naturally occurring
accumulations of sand in ridges or mounds landward of the beach.
(3~2) "Special flood hazard area (SFHA)" means an area
having special flood or flood-related erosion hazards, and shown
on the Flood Insurance Rate Map as Zone A, AO, A1 - A30, AE, AH,
V1 - V30, VE or V.
(3~3) "Start of construction" includes :substantial
improvement and other proposed new development, and means the
date on which the building permit was issued, provided the
actual start of construction, repair, reconstruction,
rehabilitation,addition, placement, or other imprQvement
commenced within 180 days from the date of issuance 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
040401 sm 0100152 5
NOT YET APPROVED
part of the main structure. For a substantial improvement, the
actual start of construction means the first alteration of any
wall, ceiling, floor, or other part of a structure, whether or
not that alteration affects the external dimensions of the
structure.
(3%4) "Structure" means a walled and roofed building,
including but not limited to a gas or liquid storage tank, that
is principally above ground, as well as a manufactured home.
(345) ~"Substantial damage" means damage of any origin
sustained by a structure, whereby the cost of restoring the
structure to its original damage-free condition .would equal or
exceed fifty percent of the market value of the structure before
the damage occurred.
(3~6) "Substantial improvement"means any
reconstruction, rehabilitation, addition, or other proposed new
development of a structure, the cost of which equals or exceeds
fifty percent of .the market value of the structure before the
s.tart of construction of the improvement. This term includes a
structure which has incurred substantial damage, regardless of
the actual repair work to be performed.
The term shall not include:
(A) Any project, or any portion of ’a project, for
improvement of a structure to~~ ~~~-~ violations of the
spocifications ~.’~ ~~ ~ ~ ~ ~by ~~ ~7 ~ode
living comditions undertaken in response to a finding by the
local code enforcement official that there are existing
violations of State of California or local health, sanitary, or
safety code specifications which render the structure unfit for
human occupancy; or
(B) Any alteration of an historic structure, provided
that the alteration will not result in the termination of a
structure’s continued designation as an historic structure::or
(C)Any project, or any portion of a project, for
improvement of a structure that is required to comply with the
Americans with Disabilities Act of 1990 (42 U.S.C. Section 12101
et.seq.).
(3~7) "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.
(3~8) "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
chapter is presumed to be in violation until such time as that
documentation is provided.
040401 sm 0100152 6
NOT YET APPROVED
SECTION 2. Section 16.52.130 (Standards of Construction)
of Chapter 16.52 (Flood Hazard Regulations), Title 16 [Building
Regulations] of the Palo Alto Municipal Code is hereby amended
to read as follows:
16.52.130 Standards of construction.
In all areas of special flood hazards the following
standards are requ±red:
(a)Anchoring.
( 1 )All new construction and subs tant ial l_~y~..........~improved structures shall be anchored to prevent
flotation,collapse or lateral movement of the structure
resulting from hydrodynamic and hydrostatic loads, including the
effects of buoyancy.
(2) All manufactured homes shall meet the anchoring
standards of Section 16.52.160.
(b) Construction Materials and Methods.
(i) AII new construction and substantially
improve_~mcnt s structures shall be constructed with- flood-
resistant materials as specified in applicable Federal Emergency
Management Agency technical bulletins, including~but not limited
to TB 2-93, and utility equipment resistant to flood damage.
( 2 ) All new construction and substantially
~ ~ improved structures shall be constructed using
methods and practices that minimize flood damage.
(3) All new construction and substantially improved
~ structures shall be constructed with electrical, heating,
ventilation, plumbing and air conditioning .equipment and other
service facilities that are designed and/or located so as to
prevent water from entering or accumulating within the
components during conditions of flooding.
(4) Require within Zones AH or AO, adequate drainage
paths around structures on slopes to guide floodwaters around
and away from proposed structures.
(c)Elevation and Floodproofing.
(i)In residential new construction and substantial
improvement of any residential structure, the lowest floor,
including basement :
(A) In an AO zone, shall be elevated above the highest
adjacent grade to a height equal to or exceeding the depth
number specified in feet on the Flood Insurance Rate Map, or
elevated at least two feet above the highest adjacent grade if
no depth number is specified;
(B) In an A zone, shall be elevated at least one foot
above the highest adjacent grade; or
(C) In all other zones, shall be elevated to or above
the base flood elevation.
Upon the completion of the structure, the elevation of
the iowest floor, including basement, shall be certified by a
040401 sm 0100152 7
NOT YET APPROVED
registered professional engineer or surveyor, and verified by a
community official to be properly elevated. Such certification
and verification shall be provided to the floodplain
administrator.
(2) Nonresidential new construction and any
substantially improvcmcnt improved of any nonresidential
structure shall either be elevated to conform with subdivision
(i) of this subsection or, together with attendant utility and
sanitary facilities:
(A) Shall be floodproofed below the minimum elevation
required in subdivision (i) above so that the structure is
watertight with walls substantially impermeable to the passage
of water;
(B) Shall possess structural components capable of
resisting hydrostatic and hydrodynamic loans and effects of
buoyancy; and
(C) Shall be certified by a registered professional
e~gineer that the standards of this subdivision are satisfied.
The certification shall be provided to the floodplain
administrator.
(3) All new construction and substantially
improve~ structures, with fully enclosed areas below the
lowest .floor (excluding basements) that are usable soiely for
the parking of vehicles, building access or storage, and which
are subject to flooding shall be designed to automatically
equalize hydrostatic flood forces on exterior walls by allowing
for the entry and exit of floodwaters. Designs for meeting this
requirement shall comply with the guidelines set forth in the
applicable Federal Emergency Management Agency technical
bulletins, including but not limited to TB 1-93 and TB 7-93, and
shall meet or exceed the following minimum criteria:
(A) Possess a minimum of two openings with a total net
area of not less than one square inch for every square foot of
enclosed area subject to flooding. The bottom of all openings
shall be no higher than one foot above grade. Openings may be
equipped with screens, louvers, valves or other coverings or
devices provided that they permit the automatic entry and exit
of floodwaters; or
(B) Be certified by a registered professional engineer
or architect.
(4) Manufactured homes shall also meet the standard in
Section 16.52.160.
(d) Existing Residential Below Grade. Subfloor Crawl
Spaces. Notwithstanding the provisions of subsection (c) (i) for
existinq residential structures, existing below-grade subfloor
crawl spaces shall be allowed to remain beneath substantially
improved structures provided all other standards of construction
set forth in section 16.52.130 and the following conditions are
met:
040401 sm 0100152 8
.NOT YET APPROVED
(i)The lowest floor of the living space of the
existing structure is at or above the elevation required under
subsection (c) above;
(2)The below-grade crawl space shall be backfilled
to the maximum extent possible without violating Uniform
Building Code requirements for minimum crawl space height;
(3) The crawl space grade is not more than two-feet
below the lowest adjacent grade outside the foundation;
(4)The height of the crawl space, measured from the
interior grade of the crawl space to the top of the foundation
wall, does not exceed four feet;
(5)There is an adequate drainage system capable Of
removing floodwaters from the interior area of the crawl space
within seventy=t~o (72) hours after the flood event; and
(6) The expected velocity of the floodwaters at the
site does not exceed five feet per second.
(e)Prohibition of Residential Basement Construction.
(i)For residential structures located within a
Special Flood Hazard Area:
(A)No new basements shall be constructed; and
(B)NO existing basements shall be expanded.
SECTION 3. The Council finds that this project is
exempt under the California Environmental Quality Act as a minor
alteration in land use limitations in an area with an average
slope of less than 20% which does not result in any changes in
land use or density. (CEQA Guideline Section 15305) and,
therefore no environment impact assessment is necessary.
//
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040401 sm 0100152 9
NOT YET APPROVED
SECTION 4. This ordinance shall be effective
thirty-first day after the date of its adoption:
INTRODUCED:
PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
on
City Clerk
APPROVED AS TO FORM:
Mayor
APPROVED:
City Attorney City Manager
Director of Public Works
Director of Administrative
Services
the
040401 sm 0100152 1 0
The City of
Palo Alto
ATTACHMENT B
SPECIAL FLOOD
HAZARD AREA
IN PALO ALTO
This map is a product of the
City of Palo Alto GIS
01 4000’
mrasChk, 2OO4434435 16:56:50 ~This document is a grapNc representztion only of b~st availableFleod Zones General (~\cc~na ps\gis$\gis~dmin\Petso~gm~ sch k,mdb )The city of Palo Alto assumes ne responsibil~y for any errors.
ATTAC H ME NT C
-.flood one properties
INblAN NEWS
A federal program that insures homeown-
ers .against the risks of flood has paid multi-
pie claims on tens of thousands of particu-
larly flood-prone homes. The insurance pro-
gram is sound, but improvements should be
implemented to stop these so-called "repeti-
tive loss" properties from continuing to
drain the program’s resources.
The National Flood Insurance Program
insures 4.4 million homes around the coun-
try. Some 48,000 of those insured proper-
ties, a mere one percen~ of the totar, have
been flooded at least twice in the last 10
years.
Those claims .cost the program $200 mil-
lion each year and account for 25-30 per-
cent of the claims paid, according to a itate-
ment from the National Association Of
Home Builders. The Federal Emergency
Management Agency, a division of the U.S.
Department of Homeland Security, operates
- the program.
The builders group last week called On
Congress to "address repetitive loss proper-
ties in order to ensure .the long-term viabili-
ty" of the National Flood Insurance Pro-
gram. The group also wants Congress to
"narrowly define severe ’repetitive loss’
properties to include only those that pose
the most severe flood risks."
This approach would.direct FEMA "to.
address the most problematic properties
.first, which would quickly lead to signifi-
cant savings to the NFIP and ensm’e its
long-term viability," Steve Feldmann, direc-
tor of community affairs for the Fischer
Group, a home builder in Kentucky, last
week told a U.S. Senate subcommittee.
There’s no question that Congress should
take action. However, a too-narrow defini-
tion.of repetitive loss properties would
leave in place the cmTent injustice of 4.4
million policyholders each paying an exti’a
$45.45 each year for those 48,000 sadly and
unfortunately flood-prone homes.
The high cost of repetitive loss properties
to the national flood program is not a new
problem. In fact, it’s a’problem that’s exist-
ed for years.
.Legislation first proposed nearly five
years ago would have set aside $400 mil-
lion-two years’ worth of repetitive-loss
payouts to buy 6ut homeowners who suf-
fered repetitive flood losses.
Those who didn’t want to sell.or elevate
their properties could have kept their federal
flood insurance, but wouId have had to pay
market-rate premiums, instead Of the iow
subsidized rates. The "Two Floods and
You’re Out" legislation wasn’t enacted, and
maybe it wasn’t exactly the fight solution.
Nonetheless, it’s high time Con.gress took
action to fix the problerd of repetitive-loss
properties, and that action should be aggres-
sive and results-oriented, not merely sym-
bolic.
Congress also should take the real estate
ifidustry’s advice and make the "flood insur-
ance program permanent or at least reautho-
rize it for several years at a time. The pro-
gram is routinely reauthorized year after
year, except when Congress is too busy to
attend to it.
In those years, the program lapses just
.long enough to .create unnecessary stress
and confusion for home buyers. Permanency
would add stability and save people who
buy a flood-plain house during a lapse peri-
od some trouble and worry gbout their new-
bought home.
PALO ALTO DAILY NEWS
APRIL 2, 2004
Attachment D
1-STORY AVERAGE CONSTRUCTION
Assumptions:
¯ Average single-story construction
¯ Materials and workmanship are average
¯ Drywall interior finishes
¯ Asphalt shingle roof
¯ Basic built-in appliances
(ovenlrangeldishwasher/garbage disposal)
¯Hot air heating
¯Wood frame construction with wood siding
¯One full bathroom
¯No basement
REPLACEMENT COSTS:
Basic structure
Cedar Shake Roof
=Premium kitchen cabinets and countertops
¯ ~Air Conditioning (in heating ducts)
~-Additional Full Bathroom
Fireplace and Chimney
Size of Living Area (square feet)
1200 1400 1600 1800 2000
82.52 77.51 74.25 72.53 70.38
2.32 2.32 2.32 2.32 2.32
2.61 2.24 1.96 1.74 1.57
2.80 2.80 2.80 2.80 2.80
3.38 2.90 2.54 2.26 2.03
3.26 2.79 2.44 2.17 1.96
Fully upgraded "per square foot" cost 96.90 90.56 86.31 83.82 81.06
LOCATION ADJUSTMENT FACTOR:
Palo Alto location adjustment factor: 1.17
Location-adjusted basic "per square foot" cost
Location-adjusted upgraded "per square foot" cost
Multiply above costs by this factor to
adjust for local prices.
96.55 90.69 86.88 84.86 82.35
113.37 105.96 100.99 98.07 94.83
DEPRECIATION FACTORS:
Factors taken from FEMA Publication 311’Guidance on Estimating Substantial Damage
Buildin,q Aqe Depreciation Factor
Up to 10 years old 3%
10 to 20 years old 6%
20 to 30 years old 9%
30 to 40 years old 12%
40 to 50 years old 15%
Over 50 years old 18%
>>>MARKET VALUE = REPLACEMENT COST x 1.17 x (1 - DEPRECIATION FACTOR)
4/1/2004
Attachment D
1-STORY CUSTOM CONSTRUCTION
Assumptions:
¯ Custom single-story construction
¯ Materials and workmanship are above average
¯ Drywall interior finishes
¯ Asphalt shingle roof
¯ Basic built-in appliances
(ovenlrangeldishwasher/garbage disposal)
¯Forced air heating and air conditioning
¯Wood frame construction with wood siding
¯One and a half bathrooms
¯No basement
REPLACEMENT COSTS:
Basic structure
Cedar Shake Roof
Premium kitchen cabinets & countertops
Additional Full Bathroom
Fireplace and Chimney
Size of Living Area (square feet)
1200 1400 1600 1800 2000
105.73 98.23 93.09 90.44 87.12
1.99 1.99 1.99 1.99 1.99
1.61 1.38 1.21 .1,08 0.97
4.01 3.44 3.01 2.67 2.41
3.39 2,91 2.54 2.26 2.04
Fully upgraded "per square foot" cost 116.74 107.94 101.84 98.44 94.52
LOCATION ADJUSTMENT FACTOR:
Palo Alto location adjustment factor: 1.17
Location-adjusted basic "per square foot" cost
Location-adjusted upgraded "per square foot" cost
Multiply above costs by this factor to
adjust for local prices.
123,71 114.93 108.91 105.81 101.93
136.58 126.29 119.15 115.17 110.59
DEPRECIATION FACTORS:
Factors taken from FEMA Publication 311: Guidance on Estimating Substantial Damage
Buildin,q A,qe Depreciation Factor
Up to 10 years old 3%
10 to 20 years old 6%
20 to 30 years old 9%
30 to 40 years old 12%
40 to 50 years old 15%
Over 50 years old 18%
>>>MARKET VALUE = REPLACEMENT COST x 1.17 x (1 - DEPRECIATION FACTOR)
4/1/2004
Attachment E
City of Palo Alto
Example Substantial Improvement evaluation using modified technique
April 1, 2004
Back~ound: Resident has applied for a building permit to remodel a bathroom
and kitchen in an existing residential structure. Cost of proposed improvements is
$80,000. The existing structure can be described as follows:
¯1800 square feet
¯One story
¯Built 1950
¯Custom-quality construction
¯2-1/2 bathrooms
¯Cedar shake roof
o Fireplace
Attached 2-car garage
Market value determination: The market value of the existing structure will be
determined using the information from the square foot cost table.
Base cost:
Add for cedar shake roof:
Add for 2nd bathroom:
Add for fireplace:
Subtotal:
$ 90.44/sf
$ 1.99
$ 2.67
$ 2.26
$ 97.36/sf
Palo Alto location adjustment factor = 1.17
Replacement cost:$ 97.36 x 1.17 = $113.91/sf
Living area: $113.91 x 1800 sf=
2-car garage:
Total:
Depreciation for 54-year old structure = 18%
$205,038
$ 21,652
$226,690
Market value (depreciated replacement cost) = $226,690 x 82% = $185,885
Substantial Improvement evaluation:
Cost of improvements/market value of existing structure =
$ 80,000/$ 185,885 =
Therefore, proposed improvements are not substantial.
43%
Attachment F
o
~
Cityo Palo Alto
Public Worlcs Department
ATTACHMENT G
November 20, 1996
Mr. John Eldridge
Federal Emergency Management Agency, Region IX
Building 105
Presidio of San Francisco, CA 94129
Divisions
Administ:rafion
415.329.2},73
415.329.2299 Fax
Fagkneer~g
415.329.2151
415.329.2299 Fax
Compliance
415.329.2598
415.494.3531 Fax
Eqt@ment
Management
415.496.6922
415.496.6958 Fax
Facih’ties
Management
415.496.6900
415.496.6958 Fax
Operations
4i5. 496. 6974
415.496.6924Fax
RegionalWater
QualityCon~rol
415.329.2598
415.494.3531 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 (Palo 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 improvements (Uniform Building Code)
Installation of fire sprinkler systems (Uniform Fire Code)
Water quality protection features (City of Palo Alto Sewer Use Ordinance
[Chapter 16.09])
Asbestos and lead abatement (Federal and Cal/OSHA)
P.O. Box 10250
Palo Altm, CA 9.4303
Letter to John Eldridge
November 20, 1996
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 Emergency Management Agency
Region IX
Building 105
Presidio of San Francisco
San Francisco, California 94129
CITY OF PALO ALTO
DEp;..,,Z-rM~NT OF PUBLIC WORKSFebruary 17, 19 9 7 AD.MtN!S’tRA]ION DIVISION
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 werenot 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". FEM_A
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,
John W. Eldridge, Jr.
~¢~Chief, Community Mitigation
Programs Branch
Attachment H
Summary of Public Outreach Meetings on Proposed Revisions to the
Flood Hazard Regulations
January 20 Meeting with Palo Alto Chamber of Commerce Government
Action Committee
January 21 Meeting with Board of Realtors Local Government Relations
Committee
February 4 Public meeting with commercial property owners
February 4 Public meeting with homeowners
February 20 Presentation to Palo Alto realtors
Attachment I
Summary of FEMA Requirements for Residential Basements in the Floodplain
PART 60--CRITERIA FOR LAND MANAGEMENT AND USE
Subpart AmRequirements for Flood Plain Management Regulations
§ 60.6 Variances and exceptions.
(c) A community may propose flood plain management measures which adopt
standards for floodproofed residential basements below the base flood level in zones
A1-30, AH, AO, and AE which are not subject to tidal flooding.
Notwithstanding the requirements of paragraph (b) of this section the Administrator
may approve the proposal provided that:
(1) The .community has demonstrated that areas of special flood hazard in
which basements will be permitted are subject to shallow and low velocity
flooding and that there is adequate flood warning time to ensure that all
residents are notified of impending floods. For the purposes of this paragraph
flood characteristics must include:
(i) Flood depths that are five feet or less for developable lots that are
contiguous to land above the base flood level and three feet or less for
other lots;
(ii) Flood velocities that are five feet per second or less; and
(iii) Flood warning times that are 12 hours or greater. Flood
warning times of two hours or greater may be approved if the
community demonstrates that it has a flood warning system and
emergency plan in operation that is adequate to ensure safe
evacuation of flood plain residents.
(2) The community has adopted flood plain management measures that
require that new construction and substantial improvements of residential
structures with basements in zones A1- 30, AH, AO, and AE shall:
(i) Be designed and built so that any basement area, together with
attendant utilities and sanitary facilities below the floodproofed design
level, is watertight with walls that are impermeable to the passage of
water without human intervention. Basement walls shall be built with
the capacity to resist hydrostatic and hydrodynamic loads and the
effects of buoyancy resulting from flooding to the floodproofed design
level, and shall be designed so that minimal damage will occur from
floods that exceed that level. The floodproofed design level shall be an
elevation one foot above the level of the base flood where the
difference between the base flood and the 500-year flood is three feet
or less and two feet above the level of, the base flood where the
difference is greater than three feet.
(ii) Have the top of the floor of any basement area no lower
than five feet below the elevation of the base flood;
(iii) Have the area surrounding the structure on all sides
filled to or above the elevation of the base flood. Fill must be
compacted with slopes protected by vegetative cover;
Page 1 of 2
Attachment I
(iv) Have a registered professional engineer or architect develop or
review the building’s structural design, specifications, and plans,
including consideration of the depth, velocity, and duration of flooding
and type and permeability of soils at the building site, and certify that
the basement design and methods of construction proposed are in
accordance with accepted standards of practice for. meeting the
provisions of this paragraph;
(v) Be inspected by the building inspector or other authorized
representative of the community to. verify that the structure is built
according to its design and those provisions of this section which are
verifiable.
Note: Bold Itafics font added for em 3hasis.
Page 2 of 2
City of Palo Alto
Public Works Depa~nent
ATTACHMENT J
September 9, 1996
Mr. John Eldridge
Federal Emergency Management Agency, Region iX
Building 105
Presidio of San Francisco, CA 94129
Divisions
Admires’ ~ra~ion
415.329. ~2373 ¯
415.329.2299 Fax
Engineering
415.329.2151
415.329.2299 Fax
Compliance
415.329.2598
415, 494. 3531 Fax
Eq~_dpment
Management
415:496.6922
415.496.6958 Fax
Facilities
Management
415.496.6900
415.496.6958 Fax
Ope, rations
415.496.6974
415.496.6924 Fax
RegionalWater
QualityControl
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 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. 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 to clarify the meaning of "market value" by defining the term in the
revised ordinance.
Prior tQ ’finalizing a "market value" definition for consideration by the City
Council, 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)due. Before proceeding.to City Council with a
recommendation, we need clarification from FEMA on this issue.
P.O. Box 10250
Palo A~to, CA 94203
Letter to Federal Emergency Management Agency
September 9, 1996
Page 2
Per 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," which 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 subtracting 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 income method" to be used to establish the market value of an existing
structure. An example using this income-based methodology is included to assist
in your review of this issue.
Please provide a definitive written response to this request so that we may proceed
with developing a definition of °°market 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:Example of inc0me-based appraisal
cc~Bernie Strojny
Carol Jansen
George Bagdon
Joe Teresi
~Tlnls is a letter of opinion 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 property has been leased on the basis of $480,000 per
year after it is improved at cost to the lessor. Vv~e have estimated the "a~ is" market value
of the leased fee interest in the subject property assuming this information is correct.
The market value of the structure is based on first estimating the value of the property
in its =as is" condition and then deducting the value of the land and the improvements
that are not part of the structure. Such improvements include the parking lot and
landscaping.
Based on the guideEnes of the Unifo~n Standards of Professional Appraisal Practice
(USPAP) adopted by the Appraisal Foundation, this letter represents a "Emited"
appraisal in =restricted" report format. (See attached Standards Rule 2-2 Comparison
Chart)
The purpose of the_report is to estimate the "as is~ residual leased fee value of the
property after deducing land value .and non-structural improvements. I understand that
you will use this let{er to meet City of Palo Alto requirements-relating to properties
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 sLmilar properties to the subject in dete’~-mining that
a) $2.00 per square foot rent, b) $20.00 per square foot land value, and c) a nine
percent capitalization rate are reasonable in the current market. These are used in value
calculations on the following page.
The scope o£ the assignment is very limited in that we rely on information provided by
you, and while we have inspected the property, we have not fully investigated market
and other factors as we would normally do in a full appraisal. I have conducted an
Income Capitalization Approach assuming an annuai rent of $480,000 per year from an
average or above-average credit ~ce_nant for three or more years and ~vith periodic inflation
increases to the rent. I have not used the Cost and the Sales Comparison Approache~.
The limitations discussed above, are departures from the Uniform Standards.
The market value of the leased fe~ interest in the whole property in its =as is’" condition
as of ~anuary 16, I996, the date of inspection and the effective date of this.appraisal, is
estimated at $4,335,000. Deduc*dng the land value and the site improwemen~s
(landscaping, "parking 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 repo~c may be relied upon only by you and by the City of Palo Alto insofar as the
scope of the assignment outJAned above meets, their criteria. The calculations on the
fol!owing page !ead to the conclusionas to the =as is" market value of the leased fee
interest in the su-ucture, subject to the limiting conditions discussed as depart .ures from
Un~orm Standards above and subiect to the general limiting conditions described at the.
end of this report.
Sincerely,
"As Is" Harkeh Value of the Shruchure
ah --in Palo.Alho, California
as of~
Market Value of Leased Fee Interest in Property as if Renovated
Contractual Renta! .Income (first year)
20,000 sq.ft.~ x $2.00/sq.ft. (a) x 12 months =$480,000
Vacancy (2%).~9,600
EffeCtive Rental Income $ 470,400
Operating Expenses
Management (2%)$9,408
Reserves (1%)$4,704 $ 14,112
Net Income for Capitalization
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 Property
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
Nard costs 14,000 sf x $i0 = ($140,000)
Soft costs ~14,000 sf x $2 = ($ 28r000.)
"As Is~ Leased Fee Value - Whole Property
Rounded
$5,070,000
($565,920)
($168rooo)
$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.fto
Less Building Footprints 20,288 sq.ft~.
~,31,548 sq. ft.
31,548 sq.ft, x $3.50/sq.ft. =
($1,036,720)
~$Ii0,418.)
"As Is" Market Value of Leased Fee
Interest in the Structure
Rounded
$3,187,862
$3 200 ooo
Annual rental inflation escalations over ten years to an
average, credit tenant; $2.00 per square foot rents are if
anything conservztively low,
DEFINITIONS
Market Value. A current economic definition agreed upon by Federal
financial institutions in ~the United States of America, as set
forth in the Uniform Standards of Professiona! Appraisal Practice,
1990, page I-7, is as follows:
The most probable price which a property should 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 Statesdollars
or in terms of financial arrangements comparable thereto;
and
The price represents the normal consideration for the
property sold unaffected by specia! or creative financing
or sales concessions granted by anyone associated with
the sale.
Increments or diminutions in marketvalue attributable to special
financing terms are measured against the all-cash standard, and any
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.~eal Estate Appraisal, Appraisal Institute, third
edition, 1993,/’page 204.)
Standa Rule 2-2 Report Compa Chart
This chart Is designed so ti’~t you can pull tt from "The
Narrative Repor"r" and keep it In an easily accessible place
so you can refer to it when necessary.
1.Self Contained Appr~l’=,,=l Report--A wdtlen report
prepared under Standa~is Rule 2-2 (a) of a complete
or limited appraisal performed under Standard 1.
2.Summary Appraisal Repert~A written report pre-
pared under Slandards Rule 2-2 (b) of a complete or
limited appraisal report performed under Slandard 1.
3.Restricted Appraisal Report--A written report pre-
pared under Standards Rule 2-2 (c) of a complete or
Itmiled appraisal performed under Stm~dard 1.
The essent.~ dlffererw..e among the three repeals Is In the use
and application of the terms describe, summarize, and
state, ~ each Indic.ales the level ot detail provided.
scribe requires a comprehensive level of detail In the presen-
t:agon of Information. Summariz~ means a more concise
presentation of Information. State asks for the minimal pre-
sentation of information. The Explanatory Comments from
Standards Rule 2-2 are not lncJuded In this table.
a) Self-Contained b) Summary c) Restricted
Appraisal Report Appraisal Report Appraisal Report
1. identify and describe the real I. Identify and provide a summary I. Identify the real estate being ap-estate being appraised description of the real estate being praisedappraised
il~state the real property interest ~. state the real property Interest I1. state the real property Interest
being appraised, being appraLsed being appraised
Ill. state the puq3ose end Intended IIL state the purpose and Intended IlL ~.ate the purpose and intendeduse of the appraisal use of the eppr’aJsal use of the appraisal
iv. define the value to be estimated
.iv. define the value to be estimated Iv.theStatevalueandtoreferenCebe estimateda definition el
v.state the effective date of the v. state the effective date of the v. state the effective date of the
appraisal and the date of the report appraisal and the date o! the report appraisaJ and the date of the report
vi. state the extent c’f-. ~.--’-~. ocess of vL summarize the extent of the vi. de s~’!L-,-e-the extent of the precesscollec-,Jng, confirming and reporting proc~sa of collecting, confirming of collecting, confirming and report-data and reporting data Ing data
vil. state ati assumptions and limiting vii. state all a.ssumpgons and llmitthg vii. state all assumptions and limitingconditions that affect the ana~tses,conditions that a.ffec~ the analyses,condition,~ that affect the analyses,opinions and conclusions opinions and conclusions opinions and c~ndusions
viii.viii.describe the information consid-
ered, the apprals&l procedures
followed, and the reasoning that
supports the analyses, opinions
and conclusions
ix.describe the appreJser’s opinion of
the highest and best use of the reaJ
estate, when such &n opinion is
necessazy and apprepgate
summarize the infon’nagon consid-
ered, the apprals&l procedures
followed, and the rea,s.oning that
supports the anal,fees, opiniori.s
ix.summarLz~ the appraJseds opinion
of the highest and be~ use of the
real estate, when such an opink)n
Is nec~s.sary and appropgate
x.explain and support the exclusion
of any of the usual valuation
preaches
xl. describe any addltlonallnforma-
tJon that may be appropriate to
show compliance ’Mth, or dearly
Identify and exq31aJn permitted
departures from the spedflc guide-
lines of Standard 1
xii.Include a signed certhScatlon In
accordance with Standa~rds
Rule 2-3
x. explain and support the exclusion
of any of the usu~ vaJuation ap-
proaches
xt. sumrnarL~ any add~k~n~ trfforma-
tion that may be appropriate to
show compliance with, or cleady
Identify and exp~qJ~ permitted
departures from the specific guide-
lines of Standard 1
xii.include a signed certification in
accordance with Standards
Rule 2-3
v~ii.state the appraisal procedures
followed, state the value conclu-
sion an~ reference the existence of
specffk; file informalJon in supp3d
of the conclusion
st.ate the appre.~er’s opinion of the
highest and best we of the reaJ
estate, when such an opinion is
necessary and appropriate
x.s~te the exclusion of ar~ of the
usual valuation approaches
contain a prominent use restdc~on
that Ifm~ rel!ar~e on the report to
the client and warns the! the report
canner be undersloed propedy
wfthout addPdonal Information in
the workfile of the appraiser, and
clearly Identify and explain permit-
ted departures from the specific
guidelines of Standard 1
xil.include a signed certlficetion in
accerdance wfth Standards
Rule 2-3
STA!T~A/LD LI~LZTING CONDITIONS
Warranties and Remresentations bv’ Ammraiser
Appraiser warrants and re~resents"to Client that Appraiser has no present or
contemplated future :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 pa_r~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 set forth in
the appraisal report, u~less such participation by ~nother party is indicated by
the co-signing of the appraisal report by such other party.
Amnraiser~s Resm0nsibi!ities
All statements of fact in the appraisal report which are used as the basis of
Appraiser,s analyses, opinions and conclusions wil! 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 sub-sol!
conditions, engineering or other technica! matters. Any’sketches prepared by
Appraiser and contained in the appraisa! report 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.wil! be Appraiser’s persona! opinion and will not be an assurance that an
event will or will not occur. Appraiser.may assume that there ame no conditions
relating to the real estate, sub-soil or structures located on the real estate
which would affect Appraiser’s analyses, opinions or conclusions with respect to
the real estate that are not apparent.
confidential Information and OwnershiD of Documents
The data gathered in the appraisal process (except data furnished by client) and
the ~ppraisal report.prepared pursuant to the Agreement wil! remain the proper~y
of Appraiser. With respect to the data provided client, Appraiser shall not
violate the confidential nature of the Appraiser-client relationship by
improperly disclosing any confidential information furnished to Appraiser.
Appraiser is, however, authorized by Client to disclose all or any portion of the
appraisal report and the related appraisal data to appropriate representatives
of the Appraisal Institute if such disclosure is required to enable Appraiser to
comply with the Bylaws a~d Regulations of such Institution now or hereafter in
effect.
Limitations Uoon Use of Appraisal RePort by client
client agrees that the appraisal report to 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 governmenta! agency without the prior written
consent of Appraiser. The contents of this apprmisal report (especially the
conclusions as to value, the identity of Appraiser, references to the Appraisal
Institute or references to the MAI designation), if disseminated to the public
through advertising media, pttblic relations media, news media, sales media or
other public mean~ or communications, must be provided in its entirety.
Contamination Issues
Unless othe~ise state in this report, the existence of hazardous material, which
may or may not be present on the property, was not observed by the appraiser.
The appraiser hss no knowledge of the existence of such materials on or in the
property. The appraiser, however, is not qualified to detect such substances.
The presence of substances such as asbestosr .urea-forlna!dehyde foam insulations,
or other potentially hazardous materials may affect the value of the property-
The value estimate is predicated on the’assumption that there is no such 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 expert in this
fie£d, if desired.~
CERTIFICATION
The undersigned do hereby certify, except as otherwise noted in
this appraisal report, that:
The statements of fact con~ained 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 professiona!
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 persona!
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
Unifor~ Standards of Professional Appraisal Practice
(USPAP) of the Appraisal Foundation and the Code of
Professiona! Ethics and Standards of Professional Appraisal
Practice of theAppraisa! 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 Appraisa! Institute relating to review by its du!y
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
persons ~igning this.report.
Federal Emergency Management Agency
Region 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 incom ’ . d. Property based insurance
programs center on th~_G~nstruction value/of the building, in
other words, the labor and materials to construct, rebuild,.or
rep_a_ir the structure. The intent is ot~staDlish a basis th-~t------
will be objective in’it’s use for determining a likelihood of
risk versus cost, ~s 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, page i0. As can be observed, all options
center on the value of the st~-~cture, as oppgsed 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 questions,
please contact me or the planner for your area, Mr. Ken Nauman,
at (415) 923-7196.
Sl~rely,
(~ohn W. Eldridge
Chief, Community Mitigation
Programs Branch