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HomeMy WebLinkAbout2004-04-20 City Council (2)City of Palo Alto City Manager’s Report TO: ATTN: HONORABLE CITY COUNCIL FINANCE COMMITTEE FROM:CITY MANAGER DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT DATE:APRIL 20, 2004 CMR:223:04 SUBJECT:PROPOSED CITYWIDE TRANSPORTATION IMPACT FEE RECOMMENDATION The Planning and Transportation Commission (PTC) recommends.that the Finance Committee recommend Council approval of the proposed citywide transportation impact fee (TIF) and adoption of the ordinance amending the Palo Alt0 Municipal Code to establish the TIF with the following additions: 1) 3) 4) Staff should prepare criteria for giving credit to large developers for measures that implement the citywide TIF expenditure plan in-lieu of part or all of the required TIF. Explore the feasibility of exempting from or providing credits toward desired citywide TIF land uses that generate sales tax and/or Transient Occupancy Tax (TOT) to the City; provided that net TIF revenue is not diminished as a result. The Citywide TIF Ordinance language should clarify that City Council has authority to approve the exact nature of the projects in the Citywide TIF Expenditure Plan as well as to substitute other improvements that provide substantially similar transportation benefits and mitigations. - - The Citywide TIF Ordinance should clarify that the TIF assessment requirement is triggered either when the first discretionary approval is given or application is made for a building permit. Staff recommends one modification to the PTC recommendation: that no exemption from the TIF be provided to development or redevelopment projects solely on their magnitude of transient occupancy tax or sales tax revenues. Staff has determined it is not feasible to do so. BACKGROUND Creation of a citywide transportation impact fee is a task assigned by City Council to Transportation Division staff under two of the Top 5 Council Priorities: City Finances and Alternative Transportation/Traffic Calming. The proposed citywide TIF would fund an CMR:223:04 Page 1 of 6 expenditure plan consisting of a variety of transportation improvements, including computerized traffic management, key Palo Alto Bicycle Transportation Plan projects, enhanced shuttle service, travel demand management (trip reduction) program activities, and administration of the TIF (the latter projected to be 2.6 percent of TIF revenues). The TIF would fund 7.6 percent of the expenditure plan to the year 2025, with other funding provided by federal, state, and local grants, and the Street Improvement Fund. The TIF would be assessed on new PM peak-hour trips (typically those weekday vehicle trips taking place between 5 p.m. and6 p.m.) generated by land development and re-development. The 7.6 percent share represents the proportion of all PM peak-hour vehicle trips originating and!or terminating in Palo Alto forecast in the Palo Alto Computer Travel Demand Forecast Model as assignable to new development and re-development. A Transportation Impact Fee Nexus Study Final Report has been prepared to document findings and recommendations with respect to the TIF (Attachment B). DISCUSSION The TIF expenditure plan comprises life-cycle costs (capital, operations, and maintenance) for the life of a project or program through the year 2025. The expenditure plan comprises a suite of eight projects and program areas as listed below. These projects are included in either the proposed Transportation Strategic Plan or the Council-adopted Bicycle Transportation Plan. °Transportation Demand Management Program (the City’s Way2Go program)°Computer traffic management (including traffic-adaptive automated signal operation)°Expanded shuttle service°Bicycle boulevards°Bicycle/pedestrian undercrossings°Bicycle lanes on major streets°Bicycle routes/lanes on major arterials°Spot bicycle/pedestrian improvements Figure 16 (page 27) of Attachment B displays the TIF expenditure plan life-cycle costs in detail. The table below presents a summary by category: Transportation Demand Management $1,225,936 $93,171 Computerized traffic management $38,490,703 $2,925,293 Expanded shuttle service $27,480,779 $2,088,539 Bicycle boulevards $1,308,006 $99,408 Bicycle/pedestrian undercrossings $38,171,358 $2,901,023 Bicycle lanes on maj or streets $1,792,781 $136,251 Bicycle routes/lanes on maj or arterials $ 5,994,176 $455,557 Spot bicycle/pedestrian improvements $4,436,035 $337,139 CMR:223:04 Page 2 of 6 The life-cycle cost approach calculates total future costs in current dollars (using a real interest, or present value, discount rate of 3 percent) to build, operate, and maintain transportation infrastructure, as well as to operate transportation programs such as the travel demand management (trip reduction) program. It is important to note that there is provision to account for future inflation in these costs through annual adjustment of the TIF based on ¯ changes in the Dodge Construction Cost Index, the industry standard for infrastructure cost trends. The TIF proposal is the first time that the City of Palo Alto has projected life-cycle costs of any infrastructure programs based on best practices in economic analysis. Hence, the TIF expenditure plan is the first City proposal to include the cost not only of building, but operatingand maint.aining a project through its useful life. This approach differs from that taken in preparation of the City’s Capital hnprovement Program, which focuses exclusively only on capital costs,, rather than full life-cycle costs. Since the TIF expenditure plan life-cycle costs include operations and maintenance items that are traditionally reflected in the operating budget, at the most, only one or two years into the future, TIF transportation capital investment and program planning offers a more comprehensive and longer-range perspective. Nevertheless, in the case of each TIF expenditure plan project/program, the City Council has final authority with respect to project approval and budget. The TIF funds 7.6 percent of the total life-cycle projected cost of the TIF expenditure plan projects/programs, and includes funding TIF administrative costs at a level of 15 percent of a staff year for one transportation engineer. Staff costs include verifying PM peak hour trip generation projections and calculating the resultant TIF assessment, administering the TIF expenditure plan, and verifying the conformity of any proposed in-lieu contributions by developers with the expenditure plan. The proposed TIF is $2,293 per PM peak hour trip, which represents an increase of from 12 percent (commercial/industrial development in the existing Stanford Research Park intersection-based Traffic Impact Fee area) to 39 percent (for non-commercial development outside the existing Stanford Research Park and San Antonio Bayshore intersection-based Traffic Impact Fee area) in total impact fees (including existing fees for parks, community centers and libraries; housing in-lieu; and the existing Stanford Research Park and San Antonio/East Bayshore Traffic Impact Fee, both of which would stay in place). The TIF assessment for a single-family house would be $2,316 (compared to a parks impact fee of from $8,071 to $12,050, depending on home size, and community centers impact fee of from $2,093 to $3,132, again depending on home size). Figures 18 and 19 (pp. 29-30) of Attachment A provide additional detail on these and other illustrations. Staff believes this level of TIF is unlikely to affect development or redevelopment location, scope, or pace. BOARD/COMMISSION REVIEW AND RECOMMENDATIONS The Planning and Transportation Commission (PTC) reviewed the staff findings and recommendations regarding the TIF on March 17 (see Attachment C for the March 17 staff CMR:223:04 Page 3 of 6 report to PTC and Attachment D for PTC meeting milmtes). The Commission concluded that the Nexus Study is clearly written and meets all the requirements of the California Code relating to development impact fees, and the citywide nature of the TIF Expenditure Plan is well designed to meet citywide impacts of new development and redevelopment. Commissioners .comments, concerns, ~nd suggestions included the following: Need for expedient delivery of TIF Expenditure Plan projects. "Strike the right balance between project readiness, project delivery, and citywide geography equity in implementation of the TIF Expenditure Plan. The PTC voted 5-0-0-1 (Commissioner Bialson absent) to recommend the staff recommendation of the proposed Citywide Transportation Impact Fee and associated ordinance with the following additions: 1)That staff prepare criteria for use when the City negotiates with large developers for possible use of the TIF funds expected of that development, including terms and conditions under which credit is given for measures that implement the citywide TIF Expenditure Plan in-lieu of payment of all or part. of the required citywide TIF. Staff exploration of the feasibility of exempting from or providing .credits toward the Citywide TIF land uses that are desired as a result of their generation of sales tax and!or Transient Occupancy Tax (TOT) to the City, provided that the net revenue to the TIF (Expenditure) Program is in no way diminished as a result. That the TIF ordinance clarify that the TIF Expenditure Plan projects, as approved by. Council, may not exactly replicate their description in the TIF Expenditure Plan (for example as respect to new shuttle routes), since Council has final approval prerogative on project scope. Thus the projects defined in the TIF Expenditure Plan should be understood as being s~mewhat Conceptual, although they will be implemented largely, although not always exactly, as defined in the Expenditure Plan. That the TIF ordinance make clear that the citywide TIF obligation regarding change of use--if associated with new PM vehicle trip generation--is triggered by the requirement for issuance of a discretionary pelqnit such as a building permit. Staff has included provision in the draft Citywide TIF Ordinance, under prescribed conditions, for acceptance of developer-funded improvements in-lieu of payment of the TIF. Staff has determined, however, that it is not feasible to provide an exemption ~from the Citywide TIF to land developments or redevelopments solely on their magnitude of transient occupancy tax or sales tax revenues, due to legal concerns regarding equal treatment of all types of land uses and to practical concerns regarding the feasibility of earrnarldng by the CMR:223:04 Page 4 of 6 current and future Councils of sales taxes or transient occupancy taxes specifically to "back fill" the Citywide TIF Expenditure Plan. RESOURCE IMPACT The TIF Expenditure Plan will add resources to City of Palo Alto transportation project and program priorities. TIF funds will supplement grant resources obtained and City resources programmed in annual/biennial operations budgets and Capital Improvement Program budgets. City Council has sole authority over annual and biennial budgets for both capital and operating expenses, as well of approval of individual projects and programs prior to their implementation. POLICY IMPLICATIONS The proposed Citywide TIF carries out two of the Council’s Top 5 priorities: City Finances and Alternative Transportation!Traffic Calming, and helps implement the Bicycle Transportation Plan and draft Transportation Strategic Plan. The TIF Expenditure Plan implements the following 1998-2010 Palo Alto Comprehensive Plan Goals: T-l: T-2: T-3: T-4: T-5: T-6: Less Reliance on Single-Occupant Vehicles A Convenient, Efficient, Public Transit System that Provides a Viable Alternative to Driving Facilities, Services, and Programs that Encourage and Promote Walking and Bicycling An Efficient Roadway Network for All Users A Transportation System with Minimal Impacts on Residential Neighborhoods A High Level of Safety for Motorists, Pedestrians, and Bicyclists on Palo Alto Streets ENVIRONMENTAL REVIEW The TIF expenditure plan comprises a set of projects from the Palo Alto Comprehensive Plan and Bicycle Transportation Plan. The proposed Transportation Strategic Plan is in turn comprised of projects from both the Comprehensive Plan and Bicycle Transportation Plan. The Bicycle Transportation Plan was the subject of an addendum to the Comprehensive Plan EIR. Each project in the TIF expenditure .plan would be subject to a project-level environmental analysis prior to implementation. The TIF itself is a funding mechanism, not a project subject to environmental review. CMR:223:04 Page 5 of 6 ATTACHMENTS A. Draft C.itywide Transportation Impact Fee Ordinance B. Transportation Impact Fee Nexus Study Revised Draft Final Report C. March 17, 2004 Planning and Transportation Commission Staff Report D. March 17, 2004 Planning and Transportation Commission Meeting Minutes PREPARED BY: SEPH KOTT ~ortation Official DEPARTMENT HEAD: STEVE EMSLIE Director of Planning and Community Environment CITY MANAGER APPROVAL: HARRISON Assistant City Manager Palo Alto Chamber of Commerce Palo Alto Bicycle Advisory Committee Lee Weider Jim Baer Bill Phillips, Stanford Management Company CMR:223:04 Page 6 of 6 NOT YET APPROVED ATTACHMENT A follows: ORDINANCE NO. ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO ESTABLISHING A CITYWIDE TRANSPORTATION IMPACT FEE AND AMENDING THE PALO ALTO MUNICIPAL CODE The Council of the City of Palo Alto does ORDAIN as SECTION i. Findings.The City Council finds and declares that: (a) Development projects in the City, including new construction, additions, and rebuilds, place new demands on the City’s transportation infrastructure. (b) Especially during commute hours, the City’s transportation infrastructure operates at or near capacity. Consequently, the introduction of additional vehicles onto the City’s streets ~as the effect of increasing traffic congestion. Increased congestion has negative effects on commute times, transit system efficiency, air quality, traffic safety, pedestrian and cyclist comfort, and other quality-of-life issues affecting the community. (c) The City currently imposes site-specific ~exactions upon new development that place heavy demands on specific intersections and streets,and the City currently imposes neighborhood-based traffic impact fees to fund neighborhood street improvements necessitated by development in certain area of the City. However, when traveling to and from new developments, commuters, residents and customers use (and cause congestion on) streets and transportation infrastructure throughout the City. These citywide transportation impacts are not mitigated by existing exactions or fees. (d) It is not feasible to widen streets on a citywide basis in order to relieve congestion. Consequently, the best way to accommodate trips generated by new development is through improvements and services that increase the capacity of the transportation system without requiring additional full-width lanes. (e) The City has engaged Nelson\Nygaard Consulting Associates to prepare a study, entitled "Transportation Impact Fee Nexus Study" (the "Study") , setting forth a program of public improvements and public services designed to increase capacity of the transportation system and mitigate congestion caused by new development (the "Program"). The Study, which is 040414 sm 0100214 1 NOT YET APPROVED on file in the Office of the City Clerk, is incorporated herein by reference. (f)The Program’s advanced transportation management and information system will mitigate congestion throughout the city by improving drivers’ rodte and trip selections,by decreasing the amount of time vehicles spend idled at intersections and by increasing the efficiency and speed of transit services. (g) The Program’s expanded shuttle transit service will provide additional transportation options to commuters, residents and customers. By shifting trips along existing streets from single passenger automobiles to multi-passenger buses, expanded shuttle service will increase the number of people who can simultaneously use existing streets. (h) The Program’s bicycle and pedestrian improvements will make it safer and easier for individuals to travel within the City without using a motorized vehicle. By shifting trips along existing streets from. existing traffic lanes to sidewalks, bike lanes, and bike boulevards, bicycle and pedestrian improvements increase the number of people who travel without using infrastructure for motorized vehicles. (i) Section 66000 et seq. of the California Government Code authorizes the City to levy a fee upon development projects to defray all or a portion of the costs of public improvements and public services related to the development project. (j) The City desires to ±mpose.a fee, to be known as the "Citywide Transportation Impact .Fee", upon development projects, for the purpose of funding a portion of the costs of the Program (the "Fee"). The Fee, its methodology, and the calculations supporting its methodology, are set forth in this Ordinance and more completely analyzed in the Study. (k) The Study estimates the costs of each element of the Program and substantiates a methodology for the Fee that will charge each new development projects only for the portion of the costs of the Program necessary to mitigate the traffic congestion expected to be caused by that development project. (1) The Study identifies congestion not attributable to new development, and the Fee will not fund mitigation of such congestion. 040414 sm 0100214 2 NOT YET APPROVED (m) There is a reasonable relationship between the need for the Program and the development projects on which the Fee will be imposed because such development projects cause traffic congestion~ on a citywide basis that the Program will mitigate. (n) There is a reasonable relationship between- the Fee’s use and development projects on which the Fee will be imposed because the Fee will only fund the portion of Project costs allocable to congestion caused by those development projects. (o)~ The Fee does not exceed the estimated reasonable cost of providing the services a~d facilities for which the Fee is imposed. The Fee is not levied, collected or imposed for general government p~rposes. (p) Certain new development projects, though likely to generate at least some traffic congestion, are exempted by this Ordinance from the Fee ~due to the following considerations: (i) public schools, affordable housing projects, and day care centers are exempted because the provision of the critical social services provided by these types of developments are of higher priority to the City than the mitigation of citywide traffic congestion; (ii) municipal buildings are exempted because the City already funds a wide range of transportation improvements throughout the city; and (iii) small retail establishments are exempted because such establishments primarily serve workers and residents already in a neighborhood, thereby permitting these customers to substitute walking trips or short vehicular trips for longer tips and thus serve by the very nature.to mitigate citywide traffic impacts. (q) The Report identifies the portion of anticipated citywide congestion allocable to exempt uses and does not charge non-exempt development projects for the portion of Project Costs necessary to mitigate such congestion. SECTION 2. Title 16 of the Palo Alto Municipal Code is hereby amended by adding Chapter 16.59 to read as follows: "Chapter 16.59 - Citywide Transportation Impact Fee Section 16.59.010 - Short Title This Chapter may be referred to as the Citywide Transportation Impact Fee Ordinance. 040414 sm 0100214 NOT YET APPROVED Section 16.59.020 - Definitions For the purposes ~of this Chapter, the following definitions shall apply: (a) ~Affordable Housing" shall mean housing with a purchase price or rent that is affordable to a "moderate," "low" or "very low" income household, as those terms are defined by the California Department of Housing and Community Development, as applicable to Santa Clara County. (b) "Citywide Transportation Capacity Enhancements" shall mean public facilities and services that relieve citywide traffic congestion caused by new development projects.Citywide Transportation Capacity Enhancements include, but are not limited to, advanced transportation management and information systems, expanded shuttle transit services, and bicycle and pedestrian improvements. Citywide Transportation Capacity Enhancements do not include (i) intersection improvements designed primarily to accommodate increased traffic.generated by a specific development or (ii) the addition of through-traffic lanes designed for primary use by private motorized vehicles. (c) "Construction Cost Index" shall mean the Construction Cost Index for the San .Francisco Bay Area set forth in the Engineering News Record published by McGraw Hill and Associates. In the event the Eng£neering News Remord ceases to calculate and publish this index, then the City Manager may designate a comparable, alternative index to serve as the Construction Cost Index. (d) "Eligible Citywide Transportation Capacity. Enhancements" shall mean (i) the Citywide Transportation Capacity Enhancements identified in the Transportation Impact Fee Nexus Study approved by the City Council, and (ii) other Citywide Transportation Capacity Enhancements that are approved by the City Council that may be substituted for an identified improvement because they will mitigate similar congestion. (e) "Fee" shall mean the Citywide Transportation Impact Fee imposed pursuant to this Chapter. (f) Any reference in this chapter to the "Government Code" or to a section of the "Government Code" shall refer to the California Government Code as it exists at the time this ordinance is applied and shall include amendments to that Code 040414 sm 0100214 4 NOT YET APPROVED made subsequently to the adoption of this Chapter, it being the intent of the City to maintain the Fee in compliance with applicable law. (g) "New Development" shall mean the construction of new structures or additions to existing structures in the City and, with respect to residential development, any development project that creates additional residential units. ~New Development" shall not mean replacement or expansion of an existing residential unit. With respect to nonresidential development, ~New Development" shall mean any development project that creates additional square footage of useful area or changes the use of an existing structure. (h) "Transportation Impact Analysis Guidelines" shall mean the most recent edition of the’~Transportation Impact Analysis Guidelines"promulgated by the Valley Transportation Authority or such other trip projection methodology adopted by the City for the purpose of traffic impact analysis reports. Section 16.59.030 - Fee Imposed The Fee is hereby imposed as a condition of the issuance of any permit for any New Development, unless expressly exempted by this chapter. Section 16.59.040 - Exemptions The provisions of this chapter shall not apply to: (a)City buildings or structures; (b)Public school_buildings,or structures; (c) Affordable housing, either for sale or rental, which, by recordable means, is permanently obligated to be 100% affordable; (d)Retail service,eating and drinking service, personal service, or automotive service when the total square footage including New Development) is 1,500 square feet or less. e) Day care centers used for childcare, nursery school or preschool education. 040414 sm 0100214 5 NOT YET APPROVED (f) Affordable housing units subject to and offered and constructed consistently with the requirements of the BMR program. (g) New Development which is exempt from the Fee by virtue of the Constitutions of the United States and California or by virtue of other applicable state or federal law. Section 16.59.050 - Timing of Payment (a) Except as otherwise required by Government Code Section 66007, the Fee shall due when the first discretionary approval is given for a New Development, or if no discretionary approval is required, when an application is submitted for a building permit for that New Development. A Fee shall be calculated at the rate in effect when the Fee is due. (b) Payment of the Fee ma~ be deferred, for residential development only, to the date of final building inspection approval of the development, provided the owner of the real property for which the fees are required enters into a recordable agreement with the City prior to issuance of the building permit for the developmemt, which from the date of recordation, shall constitute a lien on the property and shall be enforceabie against successors in interest to the property owner. The agreement shall provide that final occupancy approval shall not be given until the fees are paid. The agreement shall also provide that, in any action to collect the fees or any portion thereof, the City shall be entitled .to all of its costs of enforcement and collection, including reasonable attorney’s fees. Any deferral granted pursuant to thLs paragraph (b) shall be consistent with the requirements of Government Code Section 66007. c) A credit against the Fee may be given for dedications of Eligible Citywide Transportation Capacity Enhancements constructed at private expense and for the value of land dedicated to the City that is necessary or useful to an Eligible Citywide Transportation Capacity Enhancement. Such credit will be granted only if the City Council determines that: (i) the City will experience a substantial cost savings or service quality improvement as a result of private construction of the Capacity Enhancement or the dedication of land, (ii)the Capacity Enhancement can be expected to immediately and significantly relieve citywide traffic congestion, and (iii)the grant of the credit, in lieu of the fee, will not cause the City to delay the implementation of elements of the City’s 040414 sm 0100214 6 NOT YET APPROVED transportation plan that are of higher priority, in the judgment of the City Council, than the land or Capacity Enhancement that will be dedicated. The credit shall be applied at the time the City accepts the land or Capacity Enhancement. Where the City Council has made the determinations required by this subdivision, payment of a portion of the Fee equal to the amount of an expected credit against the Fee may be deferred to the date of final building inspectiQn approval of the development, provided the owner of the real property for which the fees are required enters into a recordable agreement with the City prior to issuance of the building permit for the development, which from the date of recordation, shall constitute a lien on the property and shall be enforceable against successors in interest to the property owner. The agreement shall provide that final Occupancy approval shall not be given until the fees ~ar9. paid or the credit issued. The~agreement shall ais0 provide that, in any- action to collect the Fees or any portion thereof, the City shall be entitled to all of its costs of enforcement and collection, including reasonable attorney’s fees. Any deferral granted pursuant to this paragraph (b) shall be consistent with the requirements of Government Code Section 66007. Where a credit is given for the provision of a service that is an Eligible Capacity Enhancement, the deferral of the Fee, and the application of the credit, may be according to a schedule set forth in the recorded agreement, which schedule shall be designed to ensure that no credit is applied in advance of the provision of services for which the credit is made. Section 16.59.060 - Calculation of Fee (a) The Fee imposed upon a New Development shall be calculated by multiplying (i) the number of PM peak hour vehicle trips projected to be generated by a New Development by (ii) the current Fee rate. (b) The number of PM peak hour vehicle trips projected to be generated by a New Development shall be calculated pursuant to the Transportation Impact Analysis Guidelines. (c) Where a New Development consists of an addition to an existing structure or a change of the use of an existing structure, the number of PM peak hour vehicle trips projected to be generated by that New Development shall be calculated by subtracting the projected PM peak hour vehicle trips generated by the existing structure from the projected PM peak hour vehicle trips generated by the structure as modified. In no 040414 sm 0100214 NOT YET APPROVED event shall a structure be projected to generate less than zero PM peak hour vehicle trips as a result of this calculation. (d) Notwithstanding the provisions of Section 16.59.060(c , where an addition to an existing structure described in Section 16.59.040 of this Code or a change in use of such a structure causes that structure to no longer qualify for an exemption from the Fee, the projection of PM peak hour vehicle, trips for purposes of this Section 16.59.060 shall be made as if the structure were entirely new construction. (e)~ For the purposes of Section 16.59.060(c), with respect to an existing structure designed and constructed for nonresidential purposes, a use of which has been discontinued or abandoned for a period of one year or more, the projection of PM peak hour vehicle trips generated by the existing structure shall not be based on such discontinued or abandoned use. (f) The rate of the Fee shall be established from time to time by resolution or ordinance of the City Council in the manner required by Government Code Sections 66004 and 66018. (g) Beginning July I, 2005, and on each July 1 thereafter, the rate of the fee shall be automatically adjusted according to the following formula: Council-Approved Rate * Most Recent ENR ENR at Council-Approval Where the "Council-Approved Rate" is the rate most recently set by resolution or ordinance of the City Council, "Most Recent ENR" is.the most recently published Construction Cost Index when the calculation is made and "ENR at Council-Approval" is the Construction Cost Index published for the month in which the Council approved the "Council-Approved Rate" (h) The Department shall be responsible for the calculation of the Fee at the time of plan review or when the Fee is due, whichever is earlier. Section 16.59.070 - Appeal of Fee Determination (a) The developer of any New Development subject to the Fee may appeal the determination of the Department that the New Development is subject to the Fee or the calculation of the Fee due from that New Development as provided 040414 sm 0100214 8 NOT YET APPROVED by this Section.Such an appeal shall be supported by substantial evidence that (i) the Department has incorrectly calculated the amount of the Fee,(ii) the Fee lacks either nexus or proportionality to the service demand to be generated by the New Development, or (iii) the law otherwise requires the City to grant the relief sought. The appeal shall be made in writing and filed with the City Clerk ten days before the sooner of: (i) the initial public hearing on a permit application for the New Development, or (2) the date the Department informs the developer of the amount of the fee applicable to the New Development. (b) Except where inconsistent with the express provisions of this Chapter, the requirements and procedures of Chapter 18.93 of this Code shall apply to appeals taken pursuant to this Section. If a reduction, adjustment or waiver is granted, any change in use of all or part of the New Development Shall invalidate the waiver, adjustment or reduction of the Fee and the Fee shall bedue within thirty days of-written notice to the owner or operator of the New Development from the City of the duty to pay the Fee. Section 16.59.080 - Special Fund (a) There is hereby established a special fund, entitled the ~Citywide Transportation Impact Mitigation Fund", into which all Fee proceeds and any interest thereon shall be deposited. The fund shall be maintained as required by Government Code Section 66006. (b)Moneys in the fund shall be expended only on the installation,acquisition, construction, maintenance and operation of Eligible Citywide Transportation Capacity Enhancements. Section 16.59.090 - Accountability Measures (a) At least annually and as required by Government Code Section 66006, the City Manager, or his or her designee, shall review the estimated cost of the public improvements to be funded by the Fee, the con£inued needfor those improvements and the reasonable relationship between such need and the impacts of pending or anticipated New Developments. The City Manager, or his or her designee shall report his or her findings to the City Council at a noticed public hearing and recommend any adjustment to the Fee or other action as may be needed. 040414 sm 0100214 9 NOT YET APPROVED (b) The City Council -shall review such report in the manner required by Government Code Section 66006(b) (2). (c) To the extent required by Government Code Section 66001(d), the City Council shall make the findings required by that Section. Section 16.59.100 - Penalties (a) All remedies provided for in this chapter shall be cumulative and not exclusive. ¯ (b) Violation of any provision of this Chapter, including, but not limited to, ~converting an exempt use to a use to which this Chapter applies without paying the Fee, is a misdemeanor punishable as provided in this Code. (.c) Each person is guilty of a separate offense for each and every day during any portion of which any violation of any provision of this Chapter is committed, continued or permitted by such person. (d) Any person violating any provision of this Chapter, including/ but not limited to, converting an exempt use to a use to which this Chapter applies, without paying the Fee, shall be liable civilly to the City in a sum not to exceed five hundred dollars for each day in which such violation occurs. (e) Persons employed in the following .designated employee positions are authorized to exercise the authority provided in the California Penal Code Section 836.5 and are authorized to issue citation for .violations of this chapter: chief building official, assistant chief building official, and ordinance compliance inspector." SECTION 3. The initial rate of the fee imposed pursuant to Section 16.59.030 of the Municipal Code shall be $2,675 per PM peak hour vehicle trip. This rate may be revised by resolution or ordinance of the City Council and shall be subject to automatic annual adjustment as provided in Section 16.59.060 of the Municipal Code. SECTION 4.The City Council of the City of Palo Alto hereby determines that this Ordinance is an aspect of the project analyzed pursuant to the California Environmental Quality Act by [name the EIR or Neg. Dec.] and that (i) no new information of substantial importance to the 040414 sm 0100214 1 0 NOT YET APPROVED project which was not known and could not have been know when the [name the EIR or Neg. Dec.] was {certified / adopted] has~ been presented, (ii) no substantial change has occurred in the circumstances under which the project is to be undertaken, and (iii) no substantial changes in the project have been made which would major revisions in the project. Accordingly, the City Council determines -that [name the EIR or Neg. Dec.] is adequate compliance with CEQA for purposes of the adoption of this Ordinance. SECTION 5. If any provision or clause of this chapter or the application thereof to any person or circumstance is held to be invalid ~by any court of competent jurisdiction, such invalidity shall not affect any other provision or clause of this Chapter, and to that end, the provisions and clauses of this Chapter are severable. SECTION 6~.’ This ordinance shall be effective on the sixty-first day after the date of its adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Mayor APPROVED: Sr. Assistant City Attorney City Manager Director of Planning & Community Environment 040414 sm 0100214 "l i NOT YET APPROVED Director of Administrative Services 040414 sm 0100214 12 ATTACHMENT B CITY OF PALO ALTO ~m~ac~ Fee Nexus Nelson\Nygaard Consulting Associates 833 Market Street, Suite 900 San Francisco, CA 94103 April 2004 No statement in this memorandum is meant to express a.legal opinion of any kind. Any explicit or implicit interpretation of law or court precedenee in this memorandum is based solely on our experience as non-legal professional practitioners using development impact fees in California. We advise consulting with an expert attorney in this field prior to making any final recommendations based on the content of this memorandum. Transportation Impact Fee Nexus Study ¯ Revised Draft Final Report IX =~’~= , ~I :: ;. " Table of Contents PAGE Executive Summary ..........................................................................................................1 Fee Structure .................................................................................................................3 Chapter 1. Introduction ....................................................................................................5 Chapter 2. Planning Context ....................................~ ..................................~ .....................6 Existing Impact Fees ~6 Impact Fees in California ...............................................................................................7 Chapter 3. Transportation Impacts of New Development ................................................9 Impacts of New Development .......................................................................................9 Mitigation of Identified Impacts ...................................................................................11 Mitigation Measures ................. ....................................................................................11 Nexus for Proposed Traffic Impact Fee .........................................................................12 Impacts Not Mitigated ................................................................................................. 13 Chapter 4. Recommended Fee Structure ........................................................................14 Veh icle Trip-Based Fee ................................................................................................14 Expenditure of Fee Revenue .........................................................................................16 Exemptions .................................................................................................................21 Index Linking ..............................................................................................................22 Accounting for Changing Uses .....................................................................................23 Chapter 5. Recommended Fee Level ...............................................................................24 Development and Travel Projections ........................ .................................................~.24 Expenditure Plan .........................................................................................................26 Recommended Fee Level ............................................................................................28 Total Impact Fee Level ......................................................’ ..........................................29 Illustrative Examples ....................................................................................................31 March 2004 Page i ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Revised Draft Final Report Table of Figures PAGE Figure 1 Figure 2 Figure 3 Figure 4 Figure 5 Figure 6 Figure 7 Figure 8 Figure 9 Figure 10 Figure 11 Figure 12 Figure 13 Figure 14 Figure 15 Figure 16 Figure 17 Figure 18 Figure 19 Figure 20 Transportation Impact Fees in Select Bay Area Cities ......................................2 Proposed Total Impact.Fee Level ...................................................................2 Projects Funded by Proposed Impact Fee .......................................................3 Summary of Recommendations .....................................................................4 Summary of Existing Palo Alto Impact Fee Levels ...........................................6 Summary of Existing Palo Alto Impact Fees ....................................................7 Projected Increase in VehiCle Trips ................................................................9 Expected Impact of TIF Expenditure Plan .....................................................12 VTA Trip Reduction Credits .............................................~ ............................15 Bicycle_and Pedestrian Improvements Proposed for Impact Fee Funding. .....18 Transit Improvements Proposed for Impact Fee Funding .............: ...... ...........19 City of Palo Alto Traffic Signals ....................................................................20 Policy Rationale for TIF Exemptions ...................................... ........................22 Palo Alto Travel Demand Model ..................................................................25 Palo ~klto Population and Employment Projections .....................~ ..................25 TIF Project List with Present Value Costs ......................................................27 Proposed Fee Level ......i ..............................................................................28 Transportation Impact Fee by Land Use (Illustrative) ....................................29 Proposed Total Impact Fee (Illustrative Only) ...............................................30 Illustrative Examples ....................................................................................32 March 2004 Page ii ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯ Revised Draft Final Report Executive Summary This report presents a recommended Citywide Transportation Impact Fee (TIF) for Palo Alto. in contrast to the City’s current traffic fees, which are limited to funding, intersection improvements in the Stanford Research Park and Bayshore, the proposed TIF would raise money for a broad variety of transportation projects, and programs, and be levied on developments in all parts of the City. It would charge new developments for the cost of implementing programs to mitigate the impact of the new vehicle trips that they generate. This report recommends a fee level of $2,293 per PM peak hour vehicle trip, which would raise $9 million for transportation over 21 years. This would cover 7.6% of the cost of the proposed expenditure plan, including citywide Transportation Demand Management, expanded shuttle service, bicycle facilities, and computerized traffic management. The 7.6% share of costs is the same as the proportion of vehicle trips in 2025 that is expected to be generated by new development subject to the fee. Many other cities in the Bay Area and elsewhere in California levy fees to mitigate traffic and transportation impacts of new development. In general, these cover traditional roadway and intersection improvements, but some cities (such as Redwood City) use the revenue to support alternative modes. As shown in Figure 1, the recommended fee for Palo Alto would fall into the mid range of fees levied in other Bay Area cities. Appendix A provides more details of these peer comparisons. The City already levies development impact fees for parks, community centers, libraries and housing. In the Stanford Research Park/El Camino Real and the San Antonio/Bayshore zones, it also levies traffic impact fees to cover the cost of intersection improvements. As shown in Figure 2, a new TIF at $2,293 per PM peak hour vehicle trip would raise the total fee amount by between 12% and 39%, depending on land use and location. Note that the existing traffic impact fees in the Stanford Research Park/El Camino Real and the San Antonio/Bayshore zones would continue to be levied, since these are mitigating a separate set of impacts,, name.l.~ vehicular level of service at intersections. April 2004 Page 1 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯ Revised Draft Final Report Figure 1 Transportation impact Fees in Select Bay Area Cities $10,000 $8,000 $6,000 $4,000 $2,000 $o [] Low End [] High End Notes: For consistency with the proposed Palo Alto fee, the figure expresses impact fees per PM peak hour vehicle trip. Transportation Impact Fees in other cities vary by land use, hence the "low end" and "high end" figures. This is because they are typically levied per square foot or residential unit, not per vehicle trip. Figure 2 Proposed Total impact Fee Level $35,000 e $30,000=J ...., $25,000 E $20,000 : $15,000 Eo $1o,ooo "~ $5,000 $o [] Recommended Transportation Impa~:t Fee [] Existing Traffic Fees <3,000 sf >3,000 sf >900 sf <900 sf Single Family (unit) Multi Family (unit) No Traffic SA~SRP / ECR Hotel/Motel Fees Bayshore (1000 sf) Commercial/Industrial (1000 sf) Hotel April 2004 Page 2 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Revised Draft Final Report Fee Structure Key recommendations regarding the structure of the Transportation Impact Fee are as follows. The full set of recommendations, given in full in Chapter 4, is shown in Figure 4. Levy fees on a per vehicle trip basis, rather than per square foot of development or per residential unit. This ensures that there is the closest possible link between actual transportation impacts and the amount of fee levied. In addition, this approach rewards transit-oriented, mixed-use developments that commit to Transportation Demand Management programs, since these factors will be used to reduce the projected number of trips generated. (Recommendation 1) Focus on alternative modes projects. The TIF would exclusively be used to fund bicycle, pedestrian, transit, computerized traffic management and .Transportation Demand Management projects, reflecting Palo Alto Comprehensive Plan transportation priorities and the most effective mitigation strategies. The expenditure program is shown in Figure 3. The fee would not replace-existing obligations for intersection improvements if a project would degrade level of service below the City’s transportation .significance thresholds. These mitigation requirements would continue to be required on a project-specific basis based on the results of a traffic impact analysis, with the exception of zones such as the Stanford Research Park wherethese improvements are covered by existing fees. (Recommendation 4) Levy fees on a citywide basis. Fee revenue would be able to be used for projects anywhere in the City, in line with citywide priorities and project readiness. However, overall geographic equity would be guaranteed through the composition of the expenditure program. As shown in Figures 10, 11 and 12, projects are spread throughout the City. In addition, 33% of the expenditure program is dedicated to citywide projects, encompassing Transportation Demand Management and computerized traffic management. (Recommendation 5) Figure 3 Projects Funded by Proposed Impact Fee Project . " . ’ Transportation Demand Management Computerized Traffic Management Expanded Shuttle Service Bike Boulevards* Bike/Pedestrian Undercr0ssings* Bike Lanes on Major Streets* Bike RouteslLanes on Major Arterials* Spot Bike/Pedestrian Improvements* Total *Hi#h Priority items from Bicycle Transportation Plan. Total Cost~ ,il ....~Amount $1,225,936 $38,490,703 $27,480,779 $1,308,006 $38,171,358 $1,792,781 $5~994,176 $4,436,035 $118,889,773 FundedbyTIFi~ $93,171 $2,925,293 $2,088,539 $99,408 $2,901,023 $136,251 $455,557 $337,139 $9,036,383 Total Cost includes capital, replacement and operating costs, expressed in present value terms. See Chapter5 for full details. The full project list is in Appendix C. April2004 Page 3 * Neison\Nygaard Consulting Associates Transportation Impact Fee Nexus Study = Revised Draft Final Report Figure 4 Summary of Recommendations No.Recommendation 1 Levy fees on a per vehicle trip basis based on PM peak hour trips, Tor any development that has a completed Traffic Impact Analysis. 2 Require the estimate of trip generation to be consistent with the most recant VTA Transportation impact Ana/ysis Guide/ines, or any other methodology specified by the City for the completion of Traffic Impact Analysis reports. 3 Fees for smaller developments that do not require a full Traffic Impact Analysis should be assessed by City staff, using the same methodology as the full TIA. 4 Dedicate fee revenue exclusively to those projects shown in Figure 3. Do not use TIF revenue to fund traditional roadway and intersection improvements. 5 Ensure geographic equity through a geographically balanced expenditure plan. Do not institute a zonal system that would require fee revenue to be spent in the same geographic zones where it was collected. 6 Retain the City’s existing transportation impact fees for the Stanford Research Park/El Camino Real and San Antonio/Bayshore zones. 7 Exempt certain development types from the T]F, consistent with the City’s existing impact fees for parks, community centers and libraries. 8 Adjust fee levels annually in line with the Construction Cost Index. 9 Levy supplemental TIFs for changing uses, based on net new trips added. April 2004 Page 4. Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Revised Draft Final Report Chapter t, introduction As is true throughout the State, Palo Alto increasingly relies on impact fees to ensure that new development contributes fairly to the City’s fiscal needs. For example, the city’s Commercial Housing In-Lieu fee, in place since 1984, has provided an irreplaceable funding source for over 400 new affordable housing units. Along with the housing fee, development impact fees are in place citywide to fund parks, community centers, and libraries. In the Stanford Research Park and El Camino Real CS Zone, a traffic impact fee on commercial development of $8.51 per square foot funds intersection improvements in the area. ¯ Palo Alto is interested in introducing a Citywide Transportation Impact Fee (TIF) to mitigate the impacts of traffic generated by new development. This report outlines a recommended option for the scope and structure of such a TIF in Palo Alto. It first discusses the scope of the City’s existing impact fees~ and the~legislati~e and case law requirements for levying such fees in California. In Chapter 3, it then outlines the nexus, or relationship between new development and the projects on which TIF revenue will be spent. Chapter 4 outlines the recommended structure of a citywide TIF in Palo Alto, considering such issues as exemptions, which projects should be funded, and the methodology for assessing a fee. Chapter 5 presents the recommended fee schedule and expenditure program. Background information on transportation impact fees levied elsewhere in California is provided in Appendix A, "Literature and Peer Review." April 2004 Page 5 ¯ Neison\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯ Revised Draft Final Report Chapter 2, Planning Cot=text Existing Impact Fees Palo Alto’s existing impact fees are summarized in Figures 5 and 6. The City has had long established fees for housing and, in parts of the City, to fund intersection improvements. In 2002, citywide fees were enacted to fund community centers, libraries and parks. Figure 5 Summary of Existing Pale Alto impact Fee Levels Fee Geography Unit of assessment: Parks Citywide Community Centers Citywide Libraries Citywide Housing Impact Citywide Subtotal for Citywide Fees SRP / El Camino CSTrafficZone Traffic San.Antonio/WBayshore Total (SRP/E! Camino) Total (San AntoniolW 9ayshoro) Total (Other Areas) Single Family per home $8,071 $2,093 $730 Exempt $10,694 Exempt Exempt $10,894 $10,894 $10,894 Single , Family > 3,000 sf per home $12,050 $3,132 $1,085 Exempt $16,262 Exempt Exempt $16,267 $16,267 $16,267 Multi- Family perunit $5,283 $1,377 $477 Exempt $Z132 Exempt Exempt $7,137 $7,137 n $7,137 l~iL,ilI, -- Multi- Family < 900 sf per unit $2,671 $694 $239 Exempt $3,604 Exempt Exempt $3,604 $3,804 $3,804 Commer-Hotel/cial/ "MotelIndustrial, per s.f.per s.f. $3.43 $1.55 $0.19 $0.09 $0.18 $0.08 $15.24 $15.24 $19.04 $16.96 $8.51 $1.75 $27.55 $16.96 $20.79 $16.96 $!9.04 $16.96 April 2004 Page 6 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study = Revised Draft Final Report Figure 6 Fee Commercial Housing In-Lieu Fee Parks, Community Centers and Libraries Transportation Impact Fee (Stanford Research Park / El Camino Real CS Zone only) Summary,of Existing Polo Alto Impact Fees Enacted/ Updated Enacted in 1984; Updated in 1993 and 2002 Enacted 2002 Enacted in 1986 and 1989 - Updated in 2002 Methodology / Basis Nexus study demonstrates impact of $57.81 per square foot. Actual fee of $15.24 reflects desire to maintain viability of commercial development and availability of other sources Residential rates set at 2/3 of impact supported by nexus study -- partial charge reflects desire to maintain viability of housing development. Commercial rates set at full impact supported by nexus study-- Based on cost estimates of intersection improvement projects Exemptions All residential development, employee use areas (child- care, cafeterias, rec rooms), HazMat storage, churches, collegesluniversities, commercial recreation, private clubs, private education, public facilities, chiidcare facilities, 1,500 s.f. per site for retail/restaurant/ automotive/personal service Public facilities and schools, projects that.are 100% permanently affordable housing for very low-, low-, and moderate income households All residential development, employee usi~ areas (child- care, cafeterias, rec rooms), HazMat storage, churches, thermal storage, projects under 250 s.f., childcare facilities, 1,500 s.f. per site for retail/restaurant/ automotive/personal service impact Fees in California Development impact fees are a widely used, well-accepted practice for charging growth for the needs it creates. They offer an efficient way to pay for new infrastructure, can help sustain job growth in local economies, and contribute to economic prosperity.1 Cities levy impact fees on new development to fund a variety of public facilities and services.including parks) schools, public art, and libraries. Transportation Impact Fees are a type of impact fee. A 1997 study found that 116 of the 206 surveyed California cities (56%) imposed TIFs.2 Such development impact fees are governed by the Mitigation Fee Act.3 This requires the City Council to make certain findings in order to establish a fee. These findings must: Identify the purpose of the fee Identify the use to which the fee is to be put and the facilities (if any) to be financed Determine how there is a reasonable relationship between the fee’s use and the type of development project on which the fee is imposed 1 Nelson, Arthur and Moody, Mitch (2003), Paying for Prosperity: Impact Fees and Job Growth, Brookings Institution Center on Urban and Metropolitan Policy. www.brookings.ed u/dybdocroot/es/urban/publications/ nelsonimpactfees.pdf2 Traffic Impact Fee Survey, Santa Barbara County Association of Governments, May 1997 3 Government Code Section 66000 et seq. April 2004 Page 7 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ,, Revised Draft Final Report Determine how there is a reasonable relationship Between the need for the public facility and the type of development project on which the fee is imposed (Gov’t Code §66001 (a)). Because the fee would be charged at schedule~t rates, based on anticipated trip generation, the imposition of the Fee would not be subject to the highly rigorous tests (commonly known as the Nolan/Dolan tests) applicable to ad hoc monetary exactions. (San Remo Hotel v. City and County of San Francisco (2002) 27 Cal.4th 643, 670). However, the California courts have interpreted the AB1600 finding requirements to also require that a development fee be shown to "bear a reasonable relationship, in both use and amount, to the deleterious impact of the development.". (Id., at 671). This report is intended to describe the proposed fee, and to provide an evidentiary basis and a rationale to support these required findings. April 2004 Page 8 = Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Revised Draft Final Report Chapter 3, Transportation impacts of New Development This chapter identifies the impacts of new development on the city’s transportation system, which a TIF could be used to mitigate. impacts of New Development New development in Palo Alto between 2002 and 2025 is expected to generate 4,411 PM peak hour vehicle trips with origins and/or destinations within the City.4 This represents an 8% increase on 2002 levels (Figure 7). This figure does not include any "background" growth in trips, since the modeling methodology (described in detail in Chapter 5) assumes fixed trip generation rates from a land use of a particular size. It should also be noted that the values in Figure 7 account only for trips with an origin and/or destination within the City of Palo Alto, and thus exclude "pass through" trips of a regional nature. As discussed in the following two chapters, however, certain uses such as public schools are proposed to be exempt from the Citywide Transportation Impact Fee. These are estimated to account for 8.3% of the new 4,411 trips (see Appendix B for the calculation methodology). New development in Palo Alto that will be subject to the proposed TIF is therefore expected to generate 4,045 PM peak hour vehicle trips (Figure 7). Figure 7 Projected ~ncrease in Vehicle Trips 2002 Trips 2025 Trips Change 2002-2025 New Trips Generated by Exempt Uses (8.3%) New Trips Generated by Development Subject to TIF (91.7%) Number of PM Peak Hour. Vehicle Trips 49,142 53,553 4,411 366 4,045 Source: City of Palo Alto Travel Demand Model and estimates of exempt uses. %of 2025 Trips 92% 100% 8.2% 0.7% 7.8% This increase in vehicle trips will have impacts on the City’s transportation system as follows: 1. impacts on Transit. Increased congestion from new vehicle trips will slow transit travel times. As a result, more resources will be required to provide the same capacity, since fewer seats will be available per revenue hour of service. Increased transit expenditure will therefore be needed simply to maintain existing frequencies and capacity. At the same 4 PM peak hour trips is a generally accepted measure of traffic impacts used in transportation planning practice, and is the typical output from the traffic studies conducted for proposed developments in Palo Alto. April 2004 Page 9 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯ Revised Draft Final Report time, the quality of service available to transit riders - one of the key strategic indicators in the City’s draft Transportation Implementation Plans - will be degraded by slower travel times. The scale of all these impacts is expected to be roughly proportional to the increase in vehicle trips. 2. Impacts on Pedestrians and Cyclists. New vehicle trips have a detrimental impact on conditions for pedestrians and cyclists in several ways: Comfort and Safety. Research for the Federal Highway Administration, Florida Department of Transportation and other institutions has found that motor vehicle volumes are one of the most important determinants of the level of service for bicyclists and pedestrians, which are key strategic indicators in the City’s draft Transportation Implementation Plan.6 Increases in motor vehicle volumes are inversely proportional to bicycle and pedestrian level of service. Attractiveness. The degraded conditions for pedestrians and cyclists will diminish the attractiveness and use of these modes, in turn leading to further increases in motor vehicle trips and compounding their impacts. 3. Congestion Impacts. Traffic impact analyses tend to focus on congestion impacts, such as degraded Vehicle Level of Service, at intersections adjacent to the development. However, new trips generated by a development will also have citywide congestion impacts, leading to increases in vehicle travel time. Increases in motor vehicle volumes are inversely proportional to Vehic]e Level of Service, which is a key strategic indicator in the City’s draft Transportation Implementation Plan. 4. Other Impacts. Increases in vehicle traffic have a range .of other negative impacts on the City of Palo Alto’s environment and transportation system. Some of those listed in the City’s Comprehensive Plan include: ¯Air pollution ¯Water pollution ¯Noise ¯Visual degradation o Energy use ¯The costs of enforcing traffic safety laws These impacts are expected to be approximately proportional to the number of new vehicle trips. It-should be noted that some California communities, such as Stockton and 5 These indicators were reviewed by the Planning and Transportation Commission on June 11, 2003, and recommended to City Council. They were considered by City Council Finance Committee on October 8, 2003, for recommendation to the full City Council.6 The Bicycle Compatibility Index: A Level of Service Concept. Implementation Manual. FHWA-RD-98-095. Available at: www.hsrc.unc.edu/research/pedbike/98095/index.html. Landis, Bruce et. aL (2001), "Modeling the Roadside Walking Environment: Pedestrian Level of Service," Transportation Research Record No. 1773. April 2004 Page I 0 ¯ Nelson\Nygaard Consulting Associates Turlock, have dedicated fees specifically dedicated to mitigating these impacts, such as air quality. Stockton’s fee, for example, has been in place since 1991, and used for projects such as traffic signal timing, clean-fuel vehicles for City fleets, and city TDM programs. Mitigation of identified impacts Traditionally~ measures to mitigate the impacts of vehicle trips have focused on roadway widenings and intersection enhancements. The City of Palo Alto, however, wishes to mitigate the impacts through an alternative strategy: reducing the number of vehicle trips through provision of effective alternatives. There are several reasons behind this policy decision: Mitigating all impacts. Most other potential mitigation measures address only specific, selected impacts caused by vehicle traffic increases. For example, a clean fuel vehicle program would mitigate air quality impacts, but not those on bicycle and pedestrian safety and comfort. Mitigating impacts across the City. Some mitigation measures may be able to address a specific impact at a particular location. For example, a transit priority signal may be able to reduce the impacts of new vehicle trips on transit travel time at a particular intersection. However, the impacts of vehicle trips tend. to be extremely diffuse and felt across the entire City transportation network. This means that they are best mitigated by addressing the cause - increased vehicle trips - at root. This report therefore identifies and costs the measures necessary to mitigate the impacts of vehicle trips generated by new development, through provision of improvements in citywide traffic flow and travel alternatives. This reduction is primarily expected to be achieved through investing in alternative transportation modes, to encourage mode shift away from the private automobile. This approach is in line with the policy framework articulated in the Gity’s Comprehensive Plan, Reduced reliance on single-occupant vehicles is an explicit goal (Goal T-l), and the "Vision Statement" of the Transportation Element calls for a 10% reduction in vehicle trips by 2010. These policies are supported through other City policy documents, including the draft Transportation Implementation Plan. Mitigation Measures The expenditure plan (identified and costed in full in Chapter 5 and Appendix C) includes the following elements: Citywide Transportation Demand Management Expanded shuttle service Bicycle facilities April 2004 Page 1"~ . Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯ Revised Draft Final Report Computerized traffic management (or "Advanced Transportation Management and Information System") The first three elements of the expenditure plan are explicitly intended to reduce vehicle trips, .through making alternative modes more attractive, and providing the information, education and incentives to encourage people to use them. As shown in Figure 8, these programs will reduce PM peak hour vehicle trips by 1,782 vehicles, or mitigate 44% of the vehicle trips generated by new development subject to the TIF. The full methodology to support this calculation is shown in Appendix D. Figure 8 Expected impact of TIF Expenditure Plan Expenditure Plan Item PM Peak Hour Trips Reduced Citywide Transportation Demand Management 58 Expanded Shuttle Service 88 Bicycle Facilities*1,636 Total Vehicle Trips Reducedby TIF Expenditure 1, 782 Expected New Vehicle Trips from New Development Subject to TIF 4,045 % of New Vehicle Trips Mitigated by TIF 44% * Includes Bike Boulevards, Undercrossings, Bike RouteslLanes and Spot Improvements Computerized traffic management will contribute towards mitigating the remaining 56% of impacts. For example, this system will be able to: Alleviate congestion through allowing more efficient operation of traffic signals, thus reducing the impact of new vehicle trips on transit travel times. Improve comfort and Safety for pedestrians and cyclists, by allowing signal phasings to be adjusted in their favor Reduce air pollution, through promoting smoother and more efficient traffic flow Avoid impacts on pedestrians and cyclists, water pollution and visual amenity by allowing roadway capacity increases to be achieved without roadway widening Nexus for Proposed Traffic Impact Fee The recommended transportation impact fee is based on charging new development for 7.6% of the cost of the expenditure plan. This represents the proportion of 2025 vehicle trips that is expected to be generated by development subject to the TIF. This nexus is based on the fact that the trips generated by new development create new demands on the transportation infrastructure. It is reasonable to assume .that these impacts are proportional to the share of total vehicle trips in the City generated by new development subject to the TIF (7,6%). Similarly, it is reasonable to assume that new development uses Palo Alto’s transportation facilities in proportion to its share of vehicle trips (7.6%). April 2004 Page 12 ¯ Ne|son\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯ Revised Draft Final Report Moreover, because the transportation facilities being proposed represent only a marginal addition to the City’s existing stock of transportation, infrastructure, it is conservative to require new development to pay for only 7.6% of this marginal addition, rather than ¯ paying to add 7.6% to the City’s entire stock of transportation infrastructure. Note that the expenditure plan accounts for only a small subset of programsto reduce vehicle trips and provide transportation alternatives. Others, which include Caltrain improvements such as the Baby Bullet express service, the University Avenue Intermodal Transportation Center, and neighborhood traffic calming, are set out in the Comprehensive Plan, the draft Transportation Implementation Plan, and other city, county and regional planning documents. Impacts Not Mitigated The mitigation program proposed by this report is designed to mitigate the citywide impacts of increased trips on the major traffic routes within the City of. Palo Alto. In addition to these citywide impacts, development projects often generate an extensive increase in traffic at intersections immediately surrounding the projects, and on the local streets feeding into the projects. These intense, localized impacts are in addition to the impacts mitigated by the proposed program, and will continue to be mitigated through site specific exactions tied to project-based traffic studies and neighborhood-based traffic impacts fees such as the Stanford Research Park/El Camino Real and San Antonio/Bayshore fees. April 2004 Page t3 o Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯ Revised Draft Final Report Chapter 4. Recommended Fee Structure The legal requirements for an impact fee provide a great deal of flexibility for a city in crafting an impact fee tailored to its needs. This means that fundamental decisions need to be made on the methodology, exemptions and expenditure of fee revenue. This chapter sets out a recommended structure for the City of Palo AIto’s Transportation Impact Fee. Vehicle Trip-Based Fee Recommendation 1: Levy fees on a per-trip basis based on PM peak hour trips, rather than a per unit or per square foot basis, for any development that has a Completed Traffic Impact Analysis. Impact fees are typically quoted on a per unit of development basis such as per housing unit or per square foot. The actual transportation impacts of a development, however, tend to be proportional to the number of peak hour vehicle trips generated. This is related to, but not necessarily proportional to, the size of a development, particularly if only broad land use categories are used. Indeed, even if fees are eventually levied per square foot or (as in South Placer County) per "Dwelling Unit Equivalent," the first stage is usually to calculate them on a per trip basis. They are then converted into square footage fees based on trip generation rates for different land uses. Vehicle trips are therefore the recommended assessment basis for the Transportation Impact Fee. The measure of PM peak hour trips is recommended for purposes o.f administrability, since this is standard practice !n the City’s traffic study methodology. Levying fees on a per-trip basis also has the critical advantage of providing incentives for developments that minimize their trip generation, for example through a location close to transit, a mix of uses, or Transportation Demand Management programs. Methodology Recommendation 2: Require the estimate of trip generation to be consistent with the most recent VTA Transportation Impact Analysis Guidelines, or any other methodology specified by the .City for the completion of Traffic Impact Analysis reports. For consistency with the environmental review process, it is recommended that trip generation figures from a development’s Traffic Impact Analysis be used as the basis for fee assessment. The City of Palo Alto uses the methodology developed by the Valley Transportation Authority (VTA), in its Transportation Impact Analysis Guidelines (1998). April 2004 Page 14 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯ Revised Draft Final Report Key features of the VTA methodology include: Basic trip generation rates for each land use are taken from the most recent version of the Institute of Transportation Engineers’ (ITE) Trip Generation Manual7. Other sources such as the City of San Jose’s Trip Generation Rates may be used in special circumstances, such as unique land uses. These baseline estimates may be reduced based on certain development characteristics such as proximity to transit, as long as clear documentation is provided. Figure 9 summarizes the maximum potential trip reductions generally allowed for by VTA. Note that reductions are maximum amounts as opposed to standard reductions, and VTA emphasizes that they "should be applied carefully using professional judgment" and "may be. smaller" in a given project. It is also possible to .use trip reduction values greater than the maximum rates shown in Figure 9, given concurrence by the Congestion Management Program and justification in a TIA report. Figure 9 VTA Trip Reduction Credits With housing and retail components With hotel and retail components With housing and employment With employment and employee-serving retail Housing near LRT or Caltrain Station Housing near a Major Bus Stop2 Employment Near LRT or Caltrain Station Employment near a Major Bus Stop. Financial Incentives Shuttle Program3 Project-funded dedicated shuttle Partially-funded multi-site shuttle 13% 10% 3% 3% 2% 5~ 3% 2% ~For mixed-use projects, the percentage is off of the smaller trip-generator with the same number of trips reduced for the smaller generator applied to the larger generator. 2Major bus stop defined as a stop at which six or more buses per h~ur from the same or different routes stop during the peak period. 3If the.shuttle trip reduction is being combined with the "Employment near LRT or Caltrain Station’ reduction, the maximum shuttle trip reduction that can he taken is Note that a new edition of Trip Generation is expected to be published in Spring 2004. April 2004 Page 15 = Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯ Revised Draft Final Report Smaller Developments. Recommendation 3: City staff should assess fees for smaller developments that do not require a full Traffic Impact Analysis. This assessment should use the same methodology as the full TIA. VTA requires a Traffic Impact Analysis to be completed for any project in the county expected to generate 100 or more new weekday peak hour trips, including both inbound and outbound trips. In addition, the City of Palo Alto requires a TIA for some projects that fall under this threshold, for example for projects with PC zoning or other zoning that was not includec~ in the Comprehensive l~lan Update, or if an Environmental Impact Report is required for other reasons. In some cases, developers have chosen to prepare a TIA even if not required. The trip generation portion, however, is a very small part of the overall work in producing a TIA. This means that trip generation can be ,easily calculated by City staff, and used to assess a Transportation Impact Fee. Unless a developer specifically requests and provides documentation to support the trip reduction credits shown in Figure 9, such as proximity to transit, ~he baseline trip generation rates in the ITE Trip Generation Manual should be used. A sample worksheet to calculate the fee is shown in Appendix E. .Expenditure of Fee Revenue Recommendation 4: Dedicate TIF revenue exclusively to those projects shown in Figure 16 and Appendix C. Do not use T1F revenue to fund traditional roadway and intersection improvements. In Palo Alto, the most effective way to mitigate the impacts of increases in vehicle trips, as identified in Chapter 3, is through investment in alternative .modes projects and computerized traffic management. This approach is also in line with the City’s Comprehensive Plan policies. We therefore recommend that TIF revenue should be dedicated exclusively to those projects shown in Figure 16 and AppendixC, namely: ¯CitywideTransportation Demand Management ¯Computerized Traffic Management ¯Expanded Shuttle.Service ¯Bicycle facilities, including Bike Boulevards, Undercrossings, Bike Lanes on Major Streets, Bike Routes/Lanes on Major Arterials, and Spot Improvements Roadway and intersection improvements, in contrast, tend to mitigate more localized impacts than those addressed through the TIF, namely vehicle capacity and level ofservice at specific intersections and on specific roadway segments. We recommend that the City should continue to seek intersection improvements from individual developments to mitigate level of service impacts, based on the impacts identified in a Traffic Impact April 2004 Page 16, Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯ Revised Draft Final Report Analysis study. Note that these improvements could consist of either traditional roadway improvements or changes to signal phasing, or investment in alternative modes to reduce the number of vehicles passing through an intersection and thus maintaining a designated Automobile Level of Service standard. Even if the citywide impact of vehicle trips were to be fully mitigated, through the expenditure plan for this TIF, there would likely be localized roadway capacity impacts resulting from traffic increases at particular intersections that would still need to be mitigated. Zo.nal Basis Recommendation 5: Ensure .geographic equity through a geographically balanced expenditure plan. Do not institute a zonal system that wou[d require fee revenue to be spent in the same geographic zones where it was collected. Development is expected to take place throughout the City, rather than being concentrated in a particular area. In addition, the impacts of any development are likely to be experienced citywide. A new employment development in downtown, for example, will generate many trips from existing residences in South Pale Alto, and vice versa. For these reasons, we recommend that the City retain discretion to expend TIF revenue in any part of Pale Alto, regardless of the location of the development that paid the fee. An alternative approach has been implemented in a number of California municipalities such as the cities of San Diego, Los Angeles, and Sacramento, which have unique expenditure programs for impact fee revenue in different areas of their cities. The benefits of this approach are primarily geographic equity - fee revenue is spent in the neighborhoods where development occurs, and that are subject to increased traffic. Because the proposed mitigation program is designed to mitigate the non-localized, citywide impacts of development on traffic congestion, it is appropriate to spread the costs of the program on a citywide.basis. Impacts of a more local nature will continue to be mitigated through site-specific project exactions tied to project-based traffic studies, and neighborhood-based traffic impacts fees such as the Stanford Research Park/El Camino Real and San Antonio/Bayshore fees. To maintain the maximum flexibility and administrative simplicity, we recommend that geographic equity be addressed through the composition of the expenditure plan. As shown in Figures 10 and 11, transit, bicycle and pedestrian projects are geographically balanced and spread throughout the city. In addition, some fee revenue would be devoted to citywide programs that benefit all parts of the City - computerized traffic management, and Transportation Demand Management. Figure 12 shows the locations of the City’s traffic signals, providing another indication that the benefits from computerized traffic management would accrue to all parts of the City. April 2004 Page 17 ¯ Nelson\Nygaard Consulting Associates \ Spot Improvements Undercrossmgs Bike Lanes Bike Boulevards Palo Alto City Boundary Caltraifi Stations Caitrain Line Palo Alto City Boundary Z 0 0.5 ~1 Miles ~4M& TON 4 ~ Extended Crosstown Shuttle to PAMF New/Extended Shuttle Route Improved Frequency/Service Hours Caltrain Stations Caltrain Line Palo Alto City Boundary PALO ALTO CITY OF PALO ALTO Legend City of Pelo Alfo Traffic Signals Cily of Menlo Perk Traffic Signals Santa Clara County Traffic Signals San Moteo County Traffic ,Signals Caltrans Traffic Slgnals Not to Scale City of Palo Alto Transportation Division Traffic Signal Locations TransPortation Impact Fee Ne×us Study ¯ Revised Draft Final Report Retain i~xisting Transportation Impact Fees Recommendation 6: Retain the City’s existing transportation impact fees for the Stanford Research Park/El Camino Real and San Antonio/Bayshore zones. The City’s existing transportation impact fees are exclusively dedicated to intersection and traditional roadway improvements in specific geographic areas. As such, they fund different types of projects than would the proposed citywide TIF, and they should be retained. However, developments in areas subject to these additional impact fees would not be subject to additional site. specific exactions to fund intersection improvements, as would be the case elsewhere in the City. Exemptions Recommendation 7: Exempt ~:ertain developmenttypes from the TIF, consistent with the City’s existing impact fees for parks, community centers and libraries For reasons of administrative simplicity and consistency with other impact fees, it is recommended that exemptions from the TIF be the same as those for the Parks, Community Centers and Libraries impact fees, enacted in 2002. The exemptions, as listed in Chapter 16.58 in the Palo Alto Municipal Code are currently: ® City buildings or structures; Public school buildings or structures; Residential housing, either for sale or rental, which, by recordable means, is permanently obligated to be 100% affordable; Retail service, eating and drinking service, personal service, or automotive service when the total additional square footage is 1,500 square feet or less. This exemption shall apply only when the additional square footage of new development does not exceed 1,500 square feet. New development that is larger than 1,500 square feet shall pay a fee for all square footage, including the first 1,500 square feet. Day care centers used for child care, nursery school or preschool education. Below market rate housing units above and beyond the minimum number required for projects subject to the City’s Below Market Rate (BMR) Housing program. The additional units must be offered and constructed in a manner consistent with all requirements of the BMR program. For each exemption, a rational policy basis must be articulated. A brief summary of the basis for the exemptions is provided in Figure 13. City staff is currently considering additional exemptions from all impact fees for nonprofit social services agencies. If the precise definition of these agencies is finalized .prior to April 2004 Page 21 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Revised Draft Final Report adoption of the TIF ordinance, this exemption should be added. Otherwise, a later ordinance can provide exemptions for these uses from all impact fees, including the TIF. The fee methodology (discussed in Chapter 5) has been designed so that development subject to the fee will not pay fees to cover the impacts of these exempt uses. Figure 13 Policy Rati( nale for.TiF Exemptions Exemption "Policy Rationale ~- City Buildings While city facilities can generate vehicle trips, the city is already funding transportation improvements through its operating and capital budgets. Public Schools The need for modern and expanded school facilities is a higher policy priority than transportation improvements. Schools are fiscally constrained. And public entities funding schqols (counties, states) are funding transportation improvements in Palo Alto. 100% Affordable Affordable housing is a high priority to the Palo Alto community. Program H-12 of the housing, and BMR units Comprehensive plan establishes the basis for the fee exemption: Where appropriate and feasible, above minimum allow waivers of development fees ax a means of promoting the development of affordable housing to very low- and /ow-income households Retail service below Small retail establishments can capture short trips in low-impact modes, such as walking and 1,500 s.f.cycling. Additionally, it is policy as per Policy B-7 of the Comprehensive Plan: Encourage and support the operation of small, independent businesses. Day care centers The pressing social need for daycare centers and the general lack of public financing available to meet daycare need warrants an exemption from public fees Partially adapted from City of Palo Alto, February 20, 2002, CMR: 146:02 Index Linking Recommendation 8: Adjust fee levels annually in line with the Construction Cost Index Automatic inflation adjustments avoid the need to adopt a new fee ordinance to reflect inflation. The Construction Cost Index, published by Engineering News Record, provides a better guide than the Consumer Price Index for increases in the cost of transportation projects. It is currently used to adjust the San Antonio and Stanford Research Park traffic impact fees, and is widely used by other jurisdictions such as .Redwood City. Automatic adjustment should not preclude City Council from revisiting the fee level if the Construction Cost Index does not accurately reflect future cost changes in projects in the TIF expenditure plan. This is particularly important since several projects, such as shuttle operations, are not construction projects. April 2004 Page 22. Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Revised Draft Final Report . Accounting for Changing Uses Recommendation 9: Levy the impact fee on new trips generated by a change in use If different levels of fee are charged for different uses, the question arises of how the City should account for changing uses. This is a major issue since different uses vary considerably in the number of trips they generate for the same floor area. The recommended option is to levy impact fees on any new PM peak hour trips generated by the change in use or an increase in square footage. The trigger should be the issuance of a permit for construction or reconstruction, or the approval of a zoning change or conditional use permit. For consistency with other impact fees, a threshold of 1,5OO square feet for non-residential development, or the addition of a new dwelling unit for residential uses, is recommended. A change of use that reduces vehicle trips should not entitle the developer or tenant to a partial refund. There is no legal requirement or precedence for California municipalities to return any fees properly collected. In addition, such refunds would assume that the transportation improvements implemented could be removed and the investment recouped, which would obviously be impracticable. April 2004 Page 23 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Revised Draft Final Report Chapter 5. Recomraended Fee Level This chapter presents and describes the methodology for determining the recommended fee level. It also presents examples of fee levels for different land uses, using standard trip 8eneration rates. The basic impact fee formula can be described as the cost of impact mitigation divided by the amount of impact, yielding a cost per unit of impact. The general impact fee formula is shown below: Impact Fee Rate =Cost of Mitigations/Projects to Accommodate Development Aggregate Unit Impacts Generated by Development " For the Palo Alto Fee, the uhit of impact is PM peak hour vehicle trips. The cost of impact mitigation is the share of the total cost of the TIF project list. The denominator and numerator of the impact fee equation are discussed successively below. Development and Travel Projections Forecasts of PM peak hour vehicle trips are derived from the new Palo Alto travel demand mode[, which uses a combination of locally and regionally derived land use forecasts to develop trave! forecasts. Using population and employment forecasts developed by the Association of Bay Area Governments and the countywide model developed by the Santa Clara County Congestion Management Agency (CMA) as the starting point, the model was modified to take better account of local knowledge of existing land use and development potential and of existing traffic conditions. In addition, the Palo Alto city model includes bicycle and shuttle data that are not available for the county mode[. Analysis of the traffic assignments results leads to our understanding of level of service, vehicle miles traveled and other transportation system performance measures. Figure 14 shows the mode[ process.. April 2004 Page 24 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Revised Draft Final Report Figure 14 Palo Alto Travel Demand Model ABAG Population and emp oyment forecasts ........indicates process --"indicates results City Street and Highway Network Bicycle Survey The population and employment baseline and forecasts for Palo Alto are shown in Figure 15. The population growth, which.is expected to be more stable - and therefore easier to predict, is shown in five-year increments. While the ABAG employment projection to 2025 is expected to be met, employment growth is expected to be more dynamic than can predicted with much certainty for the intervening years. Employment is predicted for 2005, 2010 and 2025; the 2025 value includes growth from 2011 through.2025. Based on this projected growth in population and employment, the Travel Demand Model shows an increase in PM peak hour trips with origins or destinations in Palo Alto from 49,142 in 2002, to 53,553 in 2025. This represents an increase of 4,411. As discussed in Chapter 3, 91.7% of these new trips are expected to be generated by development that is subject to the proposed TIF, with 8.3% generated by exempt uses such as public schools (Figure 7). Figure 15 Palo Alto Population and Employment Projections Total Population Total Employment Retail Employment Service Sector Employment Wh01esale/Manufacturing Employment Note: Excludes Stanford/ands 63,728 95,454 11,979 48,717 24,615 64,237 96,788 12,430 48,841 25,140 67,576 99,152 12,854 49,685 25,750 67,743 68,023 ii:~12025~ 69,748 104,964 14,200 51,064 28,392 April 2004 Page 25 o Neison\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Revised Draft Final Report Expenditure Plan The proposed expenditure plan is shown in Figure 16. The detailed project list and description is provided in Appendix C. It should be emphasized that the projects in the expenditure plan would not constitute the sole alternative modes projects in the City of Palo Alto. Rather, new development would benefit from (and its vehicle trips would be mitigated by) the extremely large investment that the. City has already made in streets, bicycle and pedestrian facilities, traffic control devices, traffic calming, and transit. The costs shown in Figure 16 are ’present-value’ costs. The present-value cost represents a conversion of any annual funding needs to a single dollar term. Annual funding streams are discounted to present value assuming a building life of 45 years, and a real interest rate to the city of 3%. The figure shows three distinct groups of costs, which are summed to arrive at the total cost of the projects and programs: One-time costs and capita[ costs - these represent the cost to get infrastructure or a program up and running. This amount is not discounted, and is not affected by the use of a different value for building life. Replacement costs - these are a function of the expected useful life of the infrastructure. For example, a shuttle bus with a useful life of seven years would need to be replaced six times over the 45-year period. Since these replacement costs are not incurred until later, they are discounted using the real interest rate. Annual costs - the total of these costs over the 45-year planning horizon is discounted Using the real interest rate, to obtain a present value figure. In general, these annual costs are for operations and maintenance. The total present value cost of the TIF project list is $t 18.9 million. If 7.6% of the cost is assigned to new development subject to the TIF, the total amount that would be funded through the TIF is $9.0 million. April 2004 Page 26 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Revised Draft Final Report Recommended Fee Level The total of $9million represents the maximum citywide sum that can be raised from the proposed Transportation Impact Fee, in order to mitigate the impacts of new development subject to the TIF. In addition, administrative costs are estimated at 15% of the time of a traffic engineer, or $15,000 per year. This amounts to $239,054 in present value terms over the period to 2025, assuming the same real interest rate to the City of 3%. This equates to just 2.6% of the total revenue raised through the TIF. This equates to a fee level of $2,293 per PM peak hour vehicle trip. The fee calculation is shown in Figure 17. This fee would allow development to mitigate its impacts by contributing to transportation programs in proportion to its share of total traffic. Figure 17 Proposed Fee Level PM peak hour trips generated by new development subject to TIF (A)4,045 Total TIF Expenditure Plan Costs (mi#ions) (B)$118,9 % of Expenditure Plan Funded Through TIF ©7.6% Total Revenue Raised Through TIF (mi#ions) (B * C)$9.0 Administration $0.2 Fee per PM Peak Hour Trip (B*C / A)$2,293 As the TIF uses a trip generation rate as the unit of. assessment, it is somewhat difficult to compare to the other Palo Alto development impact fees, which are levied per unit or square foot. To facilitate comparison, Figure 18 uses ITE trip generation rates8 to convert the PM peak-hour fee to a unit of development equivalent. Note that these trip generation rates are based on the 6th Edition of the Trip Generation Manual. A new edition is scheduled to be released in Spring 2004, which will supercede the rates used in the calculations in this report. a ITE trip generation rates are generally used for Traffic Impact Analysis studies that determine fee level~ April 2004 Page 28 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯ Revised Draft Final Report Figure 18 Transportation impact Fee by Land Use (Illustrative) Example Land Use Single-Family, Detached Apartment General Office Hotel Room Second Housing Unit Residential Condominium/Townhouse Retirement Community General Light Industrial Warehousing Medical Office Office Park Specialty Retail Center Supermarket Discount Club Quality Restaurant PM Peak Hour Trips Generated 1.01 0.62 0.00149 0.61 0.72 0.54 0.27 0.00098 0.00051 0.00618 0.00150 0.00259 0.01202 0.00350 0.00902 Recommended Transportation Impact Fee $2,316 $1,422 $3.42 $1,399 $1,651 $1,238 $619 $2.25 $1.17 $1.1.88 $3.44 $5.94 $27.56 $8.03 $20.88 Note: Derived by multiplying the applicable PM peak hour trip rate X Fee Rate per trip. Illustrative as results of final Traffic Impact Analysis will determine fees for developments. Source: ITE Trip Generation Manual, 6th Edition. Unit of development dwelling dwelling sq. ft. room dwelling dwelling dwelling sq. ft. sq. ft. sq. ft. sq. ft. sq. ft. sq. ft. sq. ft. sq. ft. Total impact Fee Level Figure 19 shows the total fee that would be levied on different development types, following the adoption of a Transportation Impact Fee. Note that these are illustrative, since there are broad variations in trip generation rates between land use types, particularly between different commercial and industrial land uses. While the City’s existing impact fees distinguish between only six land use categories, four. of which are residential, the proposed TIF would vary with the literally hundreds of land uses categories detailed in the ITE Trip Generation Manual. For example, per ITE, Supermarkets (code #850) generate 20 times more peak hour trips than Warehousing (code #150) - both of which would be considered commercial/industrial under other impact fees. If the recommended Transportation Impact Fee were to be adopted, the total impact fees levied on developers would amount to just over $13,200 for a small single family home, just over $5,000 for a small apartment, and $22.46 per square foot of commercial or industrial development in most of the City. This represents an increase of between 12% and 39% (Figure 19). As is to be expected, fees for residential uses are increased by the largest percentage because they are exempt from the existing affordable housing in-lieu and traffic impact fees. April2004 Page 29 ¯ Neison\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Rev, ised Draft Final Report It should be stressed that fees will be lower for developments that can take advantage of credits for proximity to transit, mixed-use or TDM programs. A mixed-use residential/retail development close to Caltrain that implements a robust TDM program, for example, could benefit from a reduction of nearly 30% in its impact fee. Figure 19 Proposed Total Impact Fee (illustrative Only) Impact Fee Existing/mpact Fees Parks Community Centers Lihrarie~ Housing In-Lieu Existing Traffic Fee New Fbe Recommended TIF Total Fee Level % Increase per home $8,071 $2,093 $730 $1,422 $5,026 39% $3.43 $0.19 $0.18 $15.24 $1.75 $3.42 $24.21 18% 18% Illustrative as results of final Traffic Impact Analysis will determine fees for developments. For this table, the impact fee calculated for General Office (code#710) is shown. For Hotel/Motel (code #310), assumes 350 square feet of development per hotel room. This needs to be done to match units of assessment between other Palo Alto Impact Fees and the Transportation Impact Fee. Single Family, ITE code #210, Multi April 2004 Page 30 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯ Revised Draft Final Report Illustrative Examples The final section of this report provides some examples of how the proposed TIF would apply to an actual development in Pa]o Alto. Figure 20 provides three examples: Sunrise Development Inc., Assisted Living Development, 2701 El Camino Real. This development in Palo Alto was considered by the Planning and Transportation Commission at its meeting on 10 September, 2003. As proposed then, it comprised an 81-unit assisted living facility,9 and would be within 2,000 feet of a Caltrain station. The calculation assumes a TDM program would be implemented.~° Jewish Community Center Mixed Use Project, San Antonio Avenue and Charleston Road.~ This would include a new community center, an as.sisted-living facility, rental apartments for low-income seniors and entry-level condominiums. It would be close to a major bus stop. The calculation assumes a TDM program would be implemented. Hyatt Rickey Redevelopment, Charleston, Arastradero, and El Camino. This project is on hold pending completion of the Charlestan-Arastradero Corridor Study. For these purposes, the calculation assumes that the existing 344-room hotel is replaced with a 300-room hotel and 302 apartments. Only the net new trips generated by the change in use would be subject to the TIF. The project would be close to a major bus stop. No TDM program is assumed. These projects have been used as examples so that readers of this report could see estimates of the fee that would apply to project concepts with which the city is familiar. The estimates are not based on final project data,.and therefore should not be relied on by any person as a statement of the fee, if any, that would be owed with respect to any actual developments. 9 ITE Land Use Type #252 (Congregate Care Facility), with an average PM Peak Hour Trip Rate of 0.21 per dwelling unit.10 Source: Staff Report, Planning and Transportation Commission, September 10, 2003. www~city~pa~~-a~t~~ca~us/cityagenda/pub~ish/p~anning-transp~rtati~n-meetings/237~~pdf11 Source: San Jose Mercury News, Jewish Center has Ambitious Plans for New Palo Alto Site, Dan Stober, 8/10/03. April 2004 Page 31 ° Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Revised Draft Final Report Figure 20 Illustrative Examples Development Sunrise Assisted Jewish Community Hyatt Rickey Living Facility Center Mixed Use Location 2701 El Camino San Antonio Avenue and Charleston, Arastradero, Development Size 81 units Trip Reductions Applied Exempt Portions PM Peak Hour Trips Subject to TIF Recommended TIF Other Impact Fees (Estimated) Parks Community Centers Libraries Housing In-Lieu Subtotal Existing Fees Total Fee (TIF + Existing) Near Caltrain, TDM program, shuttle None 14 $32,103 $216,351 $56,214 $19,359 Charleston Road 65,000 sf community center, 175 assisted living units, 80 low- income senior apartments, 150 condominiums Near major bus stop, mixed use (1), TDM program, shuttle Low-income senior apartments 233 $534,283 $1,091,025 $237,900 $89,375 and El Camino 302 apartments. Net reduction of 44 hotel rooms. Near major bus stop None 156 $357,718 $782,772 $208,2O2 $70,948 $291,924 $1,418,300 $1,061,920 $324,027 $1;952,583 $1,419,838 April 2004 Page 32 ¯ Nelson\Nygaard Consulting Associates APPEND|X A LITERATURE AND PEER REVIEW Transportation Impact Fee Nexus Study ¯Appendix A introduction and Methodology The purpose of this appendix is to provide background for the choices facing Palo Alto in establishing a Transportation Impact Fee (TIF), by reviewing the policies of other jurisdictions that levy TIFs. The focus is on California jurisdictions that have implemented transportation impact fees that fund alternative modes projects/mitigations as well as traditional roadway improvements. Relying on previous research as well as a number of phone interviews, we summarize statewide trends in TIF policy, exploring how fees are assessed, what fees fund, fee levels and how nexus is established between fees and mitigations. Following the summary information, this appendix presents brief profiles of innovative TIFs. A few examples of innovative development impact policies and transportation funding sources levied outside of California are presented as well. A summary of findings categorizes policy options and innovations for ease of reference and consideration regarding the applicability to a TIF in Palo Alto. A Note on Terminology Throughout this appendix, these definitions are used for the following terms: Development Impact Fee. Any fee levied on new development in recognition of its impacts on municipal services. These fees include transportation, school, housing, arts and open space impact fees. Transportation Impact Fee (TIF). A subset of development impact fees, referring to fees that cover impacts on all transportation modeS. Traffic Impact Fee. In general, traffic impact fees are the same as transportation impact fees, but more narrowly defined to cover only roadway improvements needed to mitigate the impacts of vehicle trip generation. They are also referred to as TIFs; many jurisdictions use the term interchangeably with Transportation Impact Fees. Development ] npact Fees In the process of establishing its transportation impact fee, the Santa Barbara County Association of Governments conducted a statewide survey of what it referred to as Traffic Impact Fees. While conducted in 1997, some of its findings still provide a useful baseline of information as Palo Alto explores its alternatives for a Transportation Impact Fee.1 The study compiles information on 264 jurisdictions, including all 58 counties and 206 (or 44%) of the 469 cities in the state. At the time of the survey 34 of the 58 counties (59%) and 116 of the 206 surveyed cities (56%) imposed TIFs. 1 This section summarizes the findings of Traffic Impact Fee Survey, Santa Barbara County Association of Governments, May 1997 Page/1-1 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Appendix A The study also reviews state statutes and case law, which clearly allow the use of impact fees for alternative transportation modes. Out of four approaches to documenting nexus between new development and alternative mode improvements, the study recommends using a policy-based approach where a capital improvement program (CIP) with traditional street and road projects and alternative mode projects is adopted as part of the ordinance establishing the fee. How Are Fees Assessed? Assessment I Calculation Method ~ The TIF survey collected assessment/calculation methods on 95 jurisdictions and found the following distribution of assessment/calculation methodologies: % of Jurisdictions 42% 34% 23% 1% Assessment/Calculati0n Method Average daily vehicle trips Size (square footage, number of units, etc.) Peak hour trips Building valuation Setting Fees: Facility Fee Basis Ninety-one percent of jurisdictions use a facility basis methodology for calculating fee levels. The facility basis divides the total dollar amount needed to construct necessary transportation improvements/facilities and meet established level of service standards at General Plan buildout by the level of anticipated development (either in the form of number of trips generated, number of square feet, number of housing units, etc.) The result is a unit cost to be assessed against new development. At times, only a percentage of the cost of a Capital Improvement Plan is assigned to new development on the rationale that the existing community should fund a share of transportation needs as well. The Facility Fee Basis Equation illustrates the methodology. Facility Fee Basis Equation Impact Fee Rate =Cost ot"Mitigations/Proiects to Accommodate Development Aggregate Unit Impacts Generated by Development Fee Amounts While the fee level must be established as part of the particular fee planning process in proportion to local impacts, it is useful to observe the fee levels used in other jurisdictions. Figure A-1 shows a range of fees on a PM Peak Hour Trip basis, which is the unit of assessment intended for the Palo Alto TIF. Most cities state their fees on a unit of development basis, even if the original determination was made with peak hour trip generation rates. The figure ’reconverts’ example fees to a PM Peak Hour basis. It shows a wide range of per trip fees, from under $500 per trip to over $5,000 per trip. Figure A-2 Page A-2 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Appendix A shows the impact fees for single-family residences and office-commercial development, and the percentage of the total impact fee that is accounted for by transportation fees. As can be seen, this percentage varies markedly for both residential and commercial development, from 9% to 100%, depending on the other impact fees levied by the jurisdiction. Figures A-1 and A-2 illustrate the wide range of transportation impact fees in the region. Figures A-3 and A-4 show the impact fee rates of two specific Bay Area cities, illustrating the diversity of land use categories used in impact fees. Many neighboring cities in San Mateo and Santa Clara counties do not levy a Transportation Impact Fee at all. These include Atherton, Colma, Foster City, San Carlos, Campbell, Cupertino, Mountain View, San Jose, Saratoga and Sunnyvale. Many of these cities, however, levy site-specific exactions on developers. In Campbell, for example, the developer of a recent project including a 210-room hotel, 170,000 sf office building and two parking structures paid $150,000 for a new traffic signal, $50,000 for other traffic signal improvements, and $300,000 towards the costs of extending a public street. However, the extent of these site-specific exactions is difficult to quantify on an average basis, since by their nature they vary considerably from project to project. Figure A-1 Specific E~ay Area Fees on a Per Peak-Hour Trip Basis Jurisdiction I Area Marin County1 Redwood City Gilroy Livermore Walnut Creek San Mateo Vacavitle Vallejo Danville2 Morgan Hill San Ramon3 Dublin4 Menlo Park Fee Low $2,530 $1,502 $2,521 $2,903 $914 $1,407 $994 $993 $1,980 $2,418 $4,120 $7,279 $701 Per Peak Hour PMTrip High $5,318 $1,502 $6,731 $7,717 $3,054 $3,200 $6,808 $3,112 $6,251 $2,418 $9,609 $9,575 $1,074 Unless otherwise noted, the fee level represents converszon of per unit of development fees to PM Peak Hour equivalent using ITE trip generation rates1 Actual per trip fee, range is for different planning areas = Low amount is city general fee, high amount is fee if in Tassajara planning area3 Both amounts represent all fees for development in city, including sub-regional fees. High amount includes fee in Tassajara planning area 4 Both amounts represent all fees for development in city, including sub-regional fees. For commercial uses, per trip fee amount has been converted to PM peak amount using ITE trip generation rates. Page A-3 ¯ Nelson\Nygaard Consulting Associates Transportation impact Fee Nexus Study ¯Appendix A Figure A-3 Redwood City Transportation impact Fees by Land Use Residential Land Use Single Family Residential [1] Multi-Family Residential [2] Senior Housing/Congregate Care Affordable Housing Transit-Oriented Housing Non-Residential Land Uses (per square foot or other variable). Retail Per Fast Food Restaurant Per High Turnover Restaurant Per Quality Restaurant Theater Service Station Service Station with Mini-Mart Convenience Store Hotel/Motet Private School (K-12) Church Office Industrial Self Storage Facility Commercial Warehouse Per Dwelling Unit Per Dwelling Unit Per Dwelling Unit Per Dwelling Unit Per Dwelling Unit Square Foot Square Foot Square Foot Per Square Foot Per Seat Per Fueling Position Per Fueling Position Per Square Foot Per Room Per Student Per Square Foot Per Square Foot Per Square Foot Per Storage Unit Per Square Foot $1,501.59 $1,021.08 $172.31 $795.84 $855.90 $4.97 $27.65 $8.97 $11.25 $210.22 $12,024.71 $11,050.18 $44.37 $915.97 $300.32 $0.99 $3.45 $0.90 $45.05 $0.77 [1] Single family residential is defined as a residential density of 1-1.5 units per acre regardless of whether units are attached or detached. [2] Multi-family residential is defined as a residential density of !6+ units per acre regardless of whether units are attached or detached. Source: Redwood City, email July 2003 Figure A,4 City of Gilroy Traffic Development Impact Fee by Land Use Land gse Category ,tlnit Fee Residential - Low Density Per dwelling unit $5,560 Residential - High Density Per dwelling unit $4,510 Commercial- Low Traffic Per 1,000 sq. ft.$6,150 Commercial- High Traffic Per 1,000 sq. ft.$12,430 Industrial- General Per 1,000 sq. ft.$2,400 Industrial-- Warehouse Per 1,000 sq. ft.$1,770 Source: City of Gilroy, fax July 2003 Page A-5 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Appendix A What Do Fees Fund? Most of the surveyed jurisdictions that impose TIFs use the revenues solely for traditional street and road improvements. However, more than 10% allocate a portion for alternative transportation mode improvements. Examples of alternative modes projects funded by TIF revenues included: New.or upgraded bicycle and pedestrian facilities Signage programs Transit capital improvements (new buses, shelters, terminals) Bus pull-outs Rideshare/carpool and parking management programs Park-and-ride lot.s Light rail station improvements Figure A-5 summarizes TIFs in California that include funding for alternative transportation. Page A-6. Neison\Nygaard Consulting Associates Transportation Impact Fee Nexus Study , Appendix A Figure A-5 California TIFs Using Revenues for Alternative Transportation improvements Tahoe Regional Planning Agency San Francisco Santa Cruz County Sacramento County City of Long Beach Redwood City City of San Luis 0bispo Coachella Valley Association of Governments South Placer Regional Transportation Authority City of Dublin City of Fillmore (Ventura County) San Joaquin County City of 9akersfield City of Petaluma City of Vacaville City of Woodland (Yolo County) Monterey County City of San Diego City of lrvine Walnut Creek Santa Barbara County Association of Governments % for Jurisdiction ~Alternative Modes 100%* lO0% 5o% 25-30% 27% 25o~ 2o% 10% 8% 6% 5% 5% 4% 3% 2% 2% 1% N/A N/A N/A N/A *Used for transit or air quality projects Other than development mitigation Transit impact fee used for both capital improvements and operating costs Allocated among ped amenities (78%), existing bike facilities (10%), new Class II hike facilities (6%), bicycle signage (4%), and bus pullouts (2%) Used for buses, P& R lots and LRT station. 7 Districts with fee schedules Allocated to transit (23%) and a Parking Management Program (4%) Used for bicycle paths, shuttle services, TDM coordinator, and other mi’scellaneous alternative mode improvements Allocated to bicycle facilities (75%) and transit capital improvements (25%) Used for bus replacement and additional transit service, commuter buses, carpools/vanpools, and discount Senior/disabled fares. Used for rail and bus transit Allocated among Class I bikeways (19%), transit (57.5%), P&R (23.5%) Used for Class I bikeways Projects needed accommodate growth at Comprehensive Plan huildout Used for transit capital improvements 9 alternative modes projects include Class II bike lanes, Class I trails, pedestrian projects, a P&R lot and a transit center Used for Class I bike trails along 3 creeks Used for new bicycle facilities Used to maintain Class II bikelanes along arterials Fees and use vary based on 49 Community Plans. Used for bike and pedestrian facilities and park and ride lots ¯ ¯ Uses $3 million of fee revenue for alternatioe transportation A variable percentage is apportioned to alternative modes Detail unavailable at time of writing Source: Traffic Impact Fee Survey, Santa Barbara County Association of Governments, May 1997, and follow-up interviews How is Nexus Established for Alternative Modes? Traffic modeling techniques make it relatively simple fc~r local jurisdictions to document the need for roadway system improvements based on the additional trips generated by new development. While state statutes and case law clearly allow the use of impact fees for alternative transportation mode improvements, the issue of documenting the relationship / nexus between new development and alternative mode improvements is more problematic. SBCAG’s report outlined the four methods that have been used in Page A-7 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Ne×us Study , Appendix A California to establish this nexus, which are summarized in Figure A-6 below. Local traffic models typically help support the nexus for alternative mode projects by predicting the future level of service given all planned improvements. Figure A-6 Methods for Establishing Nexus Bet~ween Fee and Alternative Mode Improvements ~ Method Description .....Example Direct Relationship Demonstrate mode will be impacted and that San Francisco improvements will be needed to handle increase in the mode’s use by the new development Indirect Relationship Alternative mode improvement will increase street City of San Luis 0bispo capacity through mode shift and reduce traffic impact Negotiation with A specific alternative, mode improvement is necessary Many examples Developer to serve a particular development Policy-based Formation and adoption of a Capital Improvement City of Petaluma Determination Program with both traditional road and alternative mode projects as part of the ordinance establishing the fee Source: Traffic Impact Fee Survey, Santa Barbara County Association of Governments, May 1997, and follow-up interviews impact Fee Profiles San Francisco Transit Impact Development Fee Unique Features Impact fee nexus is based on the transit demand created by new development Fee revenue is used for both transit capital needs and transit operations Fee will mitigate impacts of development on existing transit service, as well as provide new capacity (proposed) San Francisco adopted a Transit Impact Development Fee (TIDF).in 1981. The fee of $5.00 per square foot of development is assessed for all office development within the greater downtown area. No specific fees are assessed to pay for traffic or intersection improvements, as the opportunity to expand roadway capacity beyond minor intersection improvements or street widening through parking removal are very limited in San Francisco. The TIDF is intended to recover the costs of carrying additional employees into downtown on public transit. The fee is focused On capturing the "costs incurred by the Municipal Railway in meeting peak-period public transit service demands created by office use in each new development subject to the fee, including the expansion of service capacity through the purchase of new rolling stock, the installation of new lines, the addition of Page A-8 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study o Appendix A existing lines and the long term operation, maintenance, repair and replacement of those expanded facilities." The very specific definition used in the ordinance, however, has posed several problems for Muni, which were highlighted in a recent study.2 Incremental service is currently assessed against a base year of 1981, which had abnormally high ridership. Subsequently ridership and funding for Muni have declined, making it difficult to show a net increase above in service provision above the base year in the peak hour. ¯The fee only relates to the cost of providing new capacity. Therefore, it cannot cover costs due to the increased congestion caused by new development. Congestion Slows transit vehicles that are operating in mixed-flow traffic, meaning that fewer passengers are carried per revenue hour of service. The $5.00 per square foot fee falls short of the cost of providing additional transit service by as much as 60 percent. Therefore, even with the past collection of $144 million since fiscal year 1988/89, service reliability and crowding problems persist on Muni. An update to the TIDF is pending introduction to the San Francisco Board of Supervisors. As well as addressing these issues, the revised TIDF is expected to cover the entire city rather than just the greater downtown area, and charge fees to all non-residential uses rather than only on offices. Sacramento County Roadway and Transit Development Fee Program3 Unique Features: A forecast of transit ridership attributable to development over 10 years was used in developing the transit fee The fee varies among 7 land use zones, which are based on projected development and roadway and transit needs in each zone The alternative mode fee directly funds the transit operator, Sacramento Regional Transit Sacramento County’s T1F was adopted in 1988 and updated in 1993. As in a number of localities, the fee was required in order to enact the local transportation sales tax initiative to ensure that new development would pay a "fair" share of transportation costs. The fee is currently scheduled for a further update. 2 San Francisco Planning Department (2001), Transit Impact Development Fee Analysis. Final Report. 3 Interview with Rich Blackmare, Sacramento County and Traffic Impact Fee Survey, Santa Barbara County Association of Governments, May 1997 Page A-9 = Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Appendix A The fee program covers the growing unincorporated areas of the county. Sacramento County has historically had a larger than average share of unincorporated urbanized and urbanizing areas. However, recent incorporations have diluted the impact of the fee. To better link the fee with the impact of new development, different fees were established among seven land use zones. Fees were based on the amount of anticipated development and required capital improvements. SACOG’s "SACMET" traffic forecasting mode[ was used to assess traffic impacts and identify roadway capacity deficiencies on county arterials. A separate forecast of transit ridership attributable to development over the next ten years was used in developing the transit fee. Averaged over the 7 land use zones, the transit fee portion accounts for approximately 20-25 % of the total Roadway and Transit Development Fee revenues. Capital improvements financed by the transit portion of the impact fee included the purchase of new buses, signal pre-emption projects at intersections for buses, park and ride lots, and light rail system stations. The revenues are not used for transit operations. Redweod City Transportation Impact Fee4 Unique Features TIF revenues are used to fund a TDM coordinator position and taxi/shuttle operations The city enacted a limited term fee exemption for desired types of development located in its.downtown In 2000, Redwood City adopted a Transportation Impact Fee with a project list containing $3.25 million in alternative mode projects out of total projects worth $12.87 million. This represents a quarter of the fee proceeds and is used for bicycle paths, Shuttle services, a full-time TDM coordinator, and other miscellaneous transit, pedestrian, and bicycle improvements. One of the challenges for the city is the need for a steady on-going revenue stream to support activities like shuttle operations compared to a development impact fee, which provides a more irregular flow of funds and also has a foreseeable end date. The nexus between traffic impacts and alternative modes was established by arguing that supporting alternative modes will reduce traffic demands, particularly at locations where traditional mitigations (e.g. road and intersection widenings) are not feasible. A recent ordinance exempts development in downtown Redwood City from the TIF through 2005 for all land uses except for office, medical and professional office. This was done to try and facilitate the development of housing and retail in downtown. 4 Interview with Richard Haygood, Traffic Engineer, City of Redwood City Page A-10 ¯ Neison\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Appendix A San Luis Obispo City Traffic Mitigation Fee Program5 Unique Feature: One fifth of proceeds are used for capital transportation projects that include public transit, bikeways, and pedestrian facilities Fees adjust annually with the Los Angeles/Long Beach CPI Fees are charged for only 50% of the calculated impact of retail and hotel/motel uses in recognition of the other fiscal benefits these uses provide the city San Luis Obispo’s Impact Fees were first implemented in the early 1990s, following a comprehensive study of the City’s transportation needs and capital improvement costs related to new development. Based on that study, the City Council established Transportation Impact Fees that apply to all new development. The fees are assessed as follows: Land Use Category Single Family Residential Multifamily Residential Retail* Office Fee per Unit of Development $1,456 1 unit $1,292 / unit $2,298 1 1000 sq. ft. $2,298 / 1000 sq. ft. Service Commercial $1,5841 1000 sq. ft Industrial $843 1 1000 sq. ft. Hospital $2,615 / 1000 sq. ft. Mote!/Hotel*$676 / room Service Station $1,351 / pump Other $136 / trip *Fees for retail end hotel-motel are set at 50% of the adjusted study costs in recognition of the fiscal benefits these developments bring to the City. The City allocates 20% of the revenues derived from its traffic mitigation fee to alternative transportation improvements. The allocation was determined by policy to ensure a 12% mode shift as supported for the modeling documentation. The proceeds are used for capital transportation projects, including streets, public transit, bikeways, and pedestrian facilities. Fees are adjusted annually on July 1 based on changes in the Los Angeles/Long Beach CPI. No empirical work has been done on changes in transportation behavior or development decisions related to impact fees. The Transportation Impact Fee is currently being evaluated and may be revised. 5 Email correspondence on 4/18/03 with Jeff Hook, City of San Luis Obispo; and Traffic Impact Fee Survey, Santa Barbara County Association of Governments, May 1997 Page A-11 ¯ Nelson\Nygaard Consulting Associates Transportation impact Fee Nexus Study ¯Appendix A West Hollywood6 Unique Features: Developments that specifically serve lower income residents are given a "credit" during the transportation impact process for higher transit use Developments located close to public transit can use mode split to apply for a reduction in fees levied .Fees have been used to improve transit, in particular bus stop amenities Development mitigation has included easements for widened sidewalks near bus stops West Hollywood does not impose fee exactions on all developments. Instead all proposed developments are subject to a transportation impacts review, and assessment fees are applied only if such impacts are deemed "significant.’ ~The exaction charged by the City is a flat fee times the number of square feet or residential units. The City uses the SANDAG Traffic Generators Manual7 as well as traffic studies to forecast trip generation. " A unique aspect of the transportation impact analysis process in West Hollywood is that developments that specifically serve lower income residents or persons living with HIV/AIDS are given a "credit" (i.e. a lower fee) for their higher transit use, with the assumption that these residents will use transit in higher proportions than would typically be found in the region. In the same way, developments located close to public transit can apply for a reduction in their impact fees. Developer assessments can be used for transit and other non-auto modal improvements. Assessment fee funds have been used for enhanced bus stops and shelters in order to mitigate for an increase in transit ridership. In addition, easements have been required in order to widen sidewalks near transit stops, increasing their accessibility. Separately, the city also requires all developments with over 10,000 square feet to implement a Transportation Demand Management program. City of Los Angeles Transportation Impact Assessment Fees8 Unique Features: Trip generation studies assume a non-SOV mode split of 20% for developments in the downtown core. Trip credits (thus lower fees) are given to developers implementing approved and monitored TDM programs. 6 Southern California Association of Governments, Transit Impact Review Program, Final Report, 2002 7 Although in an adjacent region, the SANDAG manual is commonly used for trip generation rates in Southern California. It has data on 70 land uses and includes average rates, ranges and specific data on each case study8 Southern California Association of Governments, Transit Impact Review Program, Final Report, 2002 Page A-12 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Appendix A Trip generation estimates may be reduced after considering pass-by trips, internal capture from mixed land uses, demolition of previous uses, and proximity to regional transit. Transportation Impact Assessment (TIA) fees in a few cases fund measures to reduce travel demand, such as the operation of shuttles and a Transportation Management Association The City of Los Angeles has a sophisticated process of reviewing the impacts of new developments on the transportation system. Trip generation for a proposed project is calculated as part of required traffic studies. Transportation Impact Assessment fees are paid by property owners of proposed projects only in either designated "Transportation Study Districts" (TSD) or an area with a "Transportation Specific Plan" (TSP). In other cases, development impact mitigation is managed primarily through the city’s Transportation Demand Management ordinance and occ~asionally required TDM Plans. The TIA fees are assessed on the basis of PM peak hour trips that are forecast to be generated by a proposed project. TIA fee rates are derived from the cost to implement projects that will improve (TSD/TSP) area .wide traffic conditions divided by the trips expected to be generated in the TSD/TSP by new development projects. For example, the TIA Fee in the Coastal Corridor TSP is $5,285 per PM peak hour vehicle trip while the T1A in the West Los Angeles TSD is $2,059 per PM peak hour vehicle trip. The fee is then converted to a per square foot fee that varies by type of land use. Projects that utilize TDM or transit enhancements to reduce vehicle trips benefit from lower TIA fees since the estimate of fees is based on trips expected to be generated at the site. Local site area mitigations are not included in the TSD/TSP projects to be financed by the TIA fee and thus are required in addition to the fee. TIA fees primarily support traditional roadway improvements, however in some cases, fees have funded measures to reduce travel demand, such as the operation of shuttles and a Transportation Management Association. The T1A fee may also be used as the basis for the penalty that is assessed to property owners who fail to adhere to a trip cap imposed as a condition of project approval. Page A-t3 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Appendix A City of San Diego Transportation Mitigation Feeg Unique Features Community Plans are used to determine both the fee level and the projects to which the fee level support. A policy decision allocated 15% of the cost of desired projects to new development The City of San Diego’s Transportation Mitigation Fee leverages off of the existing General Plan and plans for its 49 communities. Impact fees fund projects, including those for bicycles and pedestrians, based on the needs and priorities established in by each community in Community Plans. Not all of the projects are in the city’s Capital Improvement P!an.. Because many projects are desired and are not wholly necessary due to new development, impact fee rates were calculated onthe basis of covering 15% of the cost of the desired projects. Fees vary by community depending on the infrastructure/projects and the amount of new development. In other words, each community has its impact fee established via a unique Facility Fee Basis Equation. The city will be updating its impact fee program and is considering modulating impact fees for affordable housing or the presence of transit. Other impact Fee Examples This section briefly summarizes additional fees and other development impact policies, both within and outside California, in order to give an idea of the range and type of policies that have been introduced. City of Long Beach Transportation Improvement Fee1° ¯A significant percentage (27%) of fee revenues are used for alternative modes ¯Exemption for affordable housing for lower income households Boulder, CO Citywide (residents and employees) travel Surveys are conducted every two years to determine trip generation and define mode split. This informs a multi-modal impact analysis of new development A developer can suggest that it will maintain a higher transit mode split and introduce additional TDM programs as a means to reducing a development’s fees. 9 Interview with Charlene Gabriel Facilities Financing Manager, City of San Diego Planning Department and Traffic Impact Fee Survey, Santa Barbara County Association of Governments, May 1997lo City of Long Beach website http://vvww.ci.long-beach.ca.us and Traffic Impact Fee Survey, Santa Barbara County Association of Governments, May 1997 Page A-14 = Nelson\Nygaard (;onsuiting Associates Transportation Impact Fee Nexus Study ¯Appendix A Montgomery County, MD11 The county has negotiated developer agreements in which public transportation service is provided by the developer for up to 12 years in lieu of other traffic mitigation Portland, OR A 70% "discount" for trip generation is given to all developments in the downtown area which are located within 500 feet of a transit stop Projects citywide can get between a 30% to 50% trip generation discount if they meet a specific density requirement In-Lieu Parking Fees for Parking Requirernents - Palo Alto Parking requirements mandate that developers provide resources (land, construction funding) related to access to new development. In this sense, parking requirements should be recognized, if not in name, as essentially a development impact fee. In-lieu parking fees, which allow developers t° pay into a fund for the construction of a common parking facility rather than directly provide parking, more closely parallel the development impact fee because of the monetary payment. Palo Alto’s downtown, in-lieu fee of nearly $51,000 per parking space represents the equivalent of a $200 per square foot impact fee. Insome cities, such as Boulder, CO, in-lieu parking fees are used for wider transportation improvements as well as parking, in recognition of their contribution to reducing parking demand. Summary of Findings Since Palo Alto is interested in a T1F that will fund a variety of transportation projects, this peer review focuses on TIFs. that fund alternative modes as well as traditional roadway improvements. Alternative mode mitigations are more common in TIFs than was generally considered: over 10% of TIFs surveyed use a portion of revenues for alternative modes. Most of these TIFs view alternative mode projects as a method.for facilitating mode shift in trips from new development. Only San Francisco and Sacramento incorporate the cost of demand for alternative modes generated by new development. In addition to funding alternative modes, many TIFs have responded with innovations to the complexities in developing a T1F in an urban, developed, and multi-modal contextL These innovative policies and implementing jurisdictions are summarized in Figure A-7. As Palo Alto embarks on implementing a TIF that is sensitive to multi-modal considerations, it should consider which of these policies are most applicable to the city’s context. Asking Growth to Pay for Public Transportation, Tom Noguchi and Don Samdahl, April 2000 Page ALl5 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Appendix A Figure A-7 Existing Innovative and Unique TIF Policies Innovative/Unique Methodology/Policy TIF considers impacts of development on transit A significant percentage of TIF revenues support alternative mode projects TIF revenue supports transit/shuttle operations TIF revenue directly funds a non-levying agency such as a transit operator TIF vary on a Zonal/Community basis incorporating specific development, impacts, and mitigations TIF revenue sugports TDM coordinator/staff Ridership forecasts attributed to new development used in establishing TIF Trip Generation/Fees are sensitive to downtowns and presence of transit Trip Generation/Fees consider pass by tFips and internal capture for mixed uses Trip Generation/Fees recognize lesser impact of lower income households/ affordable housing development Trip Generation/Fee discounts provided for higher density development TIF rates consider other fiscal benefits of certain land uses (e.g. retail/hotel) or are modified to encourage certain types of development (e.g. residential in downtown) A development’s TDM program is incorporated into trip generation estimates/fee calculation Payments in kind such as sidewalk easements near bus stops or a long term agreement to support transit operations are allowed as mitigation measure/fee payment A developer can suggest that it will maintain a higher transit mode split and introduce additional TDM programs as a means to reducing a development’s fees Regular resident and employee travel surveys inform multi-modal trip. generation estimation Examples SF, Sacramento Numerous SF, Sacramento, Redwood City, Los Angeles SF, Sacramento Sacramento, San Diego, Los Angeles Redwood City, Los Angeles Sacramento Redwood City, West Hollywood, Los Angeles, Portland Los Angeles West Hollywood, Long Beach Portland San Luis Obispo, Redwood City Los Angeles West Hollywood, Montgomery County Boulder Boulder Scope of TIF mitigation projects is widened to all desired projects with a San Diego percentage responsibility/cost attributed to new development TIF rates adjust with an inflation index San Luis Obispo Page A-16 ¯ Neison\Nygaard Consulting Associates APPENDIX ESTIMATION OF DEVELOPMENT PROPORTION OF EXEMPT Transportation Impact Fee Nexus Study ¯Appendix This appendix provides details of the methodology used by City of Palo Alto Planning Division staff to estimate the proportion of development that will be exempt from the proposed Transportation Impact Fee. Non Residential Details were compiled of all development in Palo Alto between 1983 and 2003 with the uses proposed to be exempt from the Transportation Impact Fee. The amount of development with these uses totaled 216,977 square feet. The Association of Bay Area Governments is projecting 10,924 additional employees in Palo Alto through the year 2025. Assuming 4 employees per 1000 square feet of work space, this equates to 2,731,000 square feet of non-residential floor area. Assuming the same rate of exempt development will continue over the next 21 years, the proportion of exempt non-residential development will be 7.9% (= 216,977 / 2,731,000) over the period 2004-2025. Residential Details were compiled of all 100% affordable multifamily housing development (i.e., that proposed to be exempt from the Transportation Impact Fee) in Palo Alto between 1983 and 2003. This totaled 376 units. The Association of Bay Area Governments is projecting 4,360 additional housing units in Palo Alto through the year 2025. Assuming the same rate of exempt development will continue over the next 21 years, the proportion of exempt residential development will be 8.6% (= 376 / 4360). 7.9% (= 216,977 / 2,731,000) over the period 2004-2025. Total A simple average of figures for residential and non-residential development was taken to estimate the overall percentage of development that is expected to be exempt from the proposed Transportation Impact Fee. This equates to 8.3 %. Page I~-t ¯ Neison\Nygaard Consulting Associates A~N~x C DETAILED EXPENDITURE PLAN Transportation Impact Fee Nexus Study ¯Appendix This appendix provides the detailed project list, supplementing the summary expenditure plan outlined in Chapter 5. Transportation Demand Management Plan Reference: Comprehensive Plan Programs T-5, T-6, %7, %8, T-9, T-10, T-11, %12; Policy T-3 This line item would cover operations and marketing costs for a citywide TDM program, equivalent to staff time for 0.5 FTEs. This is estimated at $50,000 per year. Advanced Transportation Management and Information System Plan Reference: Comprehensive Plan Program T-38; Policy %28 The City of Palo Alto’s Advanced Transportation Management and Information System (ATMIS) will create real-time transportation management system that will manage both the traffic system and the transit system. The system will collect real-time traffic information to better manage the system and will provide .information to the users with various technology means. In addition, the system will be integrated with other transportation service providers and regional systems, including regional traveler information system, Travlnfo®, Caltrans, Silicon Valley ITS Program, Stanford University, and transit agencies, such as VTA and Samtrans. The following are the major components of the system: Closed Circuit TV (CCT~ - Install CCTVs at major intersection for monitoring of traffic conditions - Approximately 30 locations. Communication System Upgrade - Upgrade communication system for the CCTV system, by deploying SONET or Gig Ethernet system over existing fiber optic infrastructure. Dynamic Message Signs (DMS) - Install arterial size DMS signs to provide real-time traffic information, traffic updates and roadway information, especially during event traffic at the Stanford University. -Approximately 10 locations. Video Detection System (VID) - Install VID system at major intersection to collect real-time information - Approximately 50 intersections. Detection System - Install loop detectors or other types of traffic count system in the downtown area to collect traffic volumes - Approximately 25 intersections. Transit Priority System - Install transit priority system along major collector arterials for major transit routes for VTA, Samtrans and Palo Alto Transit. Approximately 60 intersections. Page C-1 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Appendix Traffic Adaptive System (TAS) - Implement a traffic adaptive system for major arterial corridors - Approximately 35 intersections. Update signal timing for other major intersections - Approximately 65 intersections. Parking Guidance Systems (PGS) - Implement a parking guidance system to provide real-time information coming to Palo Alto, including event traffic management and integration with the DMS system. Integration with Regional Transportation Systems - Integrate City of Palo Alto’s advanced traffic management system with Travlnfo®, the regional traveler information system, SV-ITS program, which is the south bay traffic management system, Caltrans and Stanford University. 10.Traveler Information System and Web Site - Develop a traveler information system web site for dissemination of traffic and transit information, as well as real-time trip planning. Install kiosk at major transportation attraction points. The proposed system will provide a full spectrum of transportation, transit and traveler information system efficiencies for the residents of Palo Alto. The program can be integrated with the currently funded Advanced Transportation Management system upgrade and transform the City into one of the most advanced systems in the country. Figure C-I shows a planning level estimate of probable costs for the proposed program. Figure C-1 Estimate of Costs (Planning Level Estimate) item Quantity Unit Price ’ Total Closed Circuit TV 30 $30,000 $900,000 Communication System Upgrade 10 $50,000 $500,000 Dynamic Message Signs.10 $45,000 $450,000 Video Detection System 50 $25,000 $1,250,000 Loop Detection for Downtown 25 $10,000 $250,000 Transit Priority System.50 $15,000 $750,000 Traffic Adaptive System 35 $4,000 $140,000 Signal Timing 65 $2,500 $162,500 Parking Guidance System 1 $500,000 $500,000 Travlnfo® and SV-ITS Integration 1 $200,000 $200,000 Traveler Information System 1 $250,000 $250,000 Kiosks 15 $10,000 $150,000 Sub-Total $5,502,500 Contingency at 15%$825,375 Sub-Total $6,327,875 Planning, Engineering, Construction Management & Administration at $2,214,756 35% Total Capital Cost $8,542,631 Annual Operating Cost @ 10%$854,2113 Page C-2 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Appendix C Expanded Shuttle Service Plan Reference: Palo Alto Local Shuttle Plan; Comprehensive Plan Policy T-4; Program T-13 Figure C-2 shows the description of shuttle service expansions, and associated costs (current as of February 2004). Note that costs for all-day service are lower than for peak- period or midday only service. Figure C-2 Shuttle Service ]Expansion Costs Shuttle Route Extend Crosstown shuttle to PAMF Stanford Research Park Shuttle (new) San Antonio Shuttle (new) Run Embarcadero shuttle midday from 9-3 Marguerite noontime express (expanded) Annual Contract Operating Cost Planning & Administration @ 10% l’otai Annual Operating Costs Capital Cost (7 ]]uses @ $250,000, plus 10% administration) Frequency 30 min 15 min 30 rain 30 rain 15 Service No. of Hours Buses 10 1 11 2 11 1 4 1 6 2 Cost per Hour $47.02 $47.02 $47.02 $47.02 $54.28 Service Days 254 254 254 254 254 Annual Operating Cost $119,431 $282,748 $131,374 $47,772 $185,445 $726,770 $72,677 $799,447 $1,825,000 Bic~ycle and Pedestrian Projects Plan Reference: Bicycle Transportation Plan; Comprehensive Plan Programs T-19, T-21, T- 22; T-23, T-24; Policies T-16, T-20, T-28 Figure C-3 shows the high priority bicycle and pedestrian improvements identified in the Bicycle Transportation Plan. Unit costs (including identified needs for traffic signals) are taken from the Bicycle and Pedestrian Plan. Since this expresses costs in Year 2001 dollars, they are inflated by 9.4%. (This represents the percentage increase in the Construction Cost Index from February2002 to February 2004.) Figure C-3 includes one additional item: pedestrian and bicycle safety and efficiency improvements at major intersections on the Charleston-Arastradero Road Corridor. These improvements form part of the Corridor Plan approved by City Council on January 20, 2004 (CMR:122:04). Page C-3 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Appendix C Engineering manuals stress the importance of incorporating annual maintenance and operating costs into the overall budget for bicycle facilities,1 particularly since higher maintenance standards are required for bicycle routes than automobile routes (see, for example, City of Portland Bicycle Master Plan, Appendix A). However, these manuals provide little standard guidance on estimating these costs, and in practice they are often subsumed into overall operations and maintenance budgets. For purposes of this analysis, these costs are estimated at 2% of capital costs annually, including resurfacing/restriping, lighting energy costs and maintenance, graffiti removal and other measures to counter vandalism, signal operations and maintenance, landscaping, sweeping and street cleaning, and drainage and flood control. This is consistent with the 2-5% range estimated by Department of Public Works staff.2 1 For example, American Association of State Highway and Transportation Officials (1999), Guide for the development of bicycle facilities.2 Mike Sartor, Deputy Director, Palo Alto Public Works Department. Page C-4 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Appendix C Figure C-3 Bicycle and Pedestrian Improvements Bike Plan Ref. Bicycle 2 28 31 12 14 16 4 Description 8oulevards Castilleja/Park/Wilkie Way Matadero/Margarita El Camino Way/Maybell/Donald Everett Ave/Palo Alto Ave (including signal) Homer Avenue (including signal) Chaucer/BoycelMelville Extension of Bryant bike blvd. Construction Cost $72.209 $21 881 $15 317 $194,744 $193,850 $31 728 $32,822 Bicycle/Pedestrian Undercrossings 66 South Palo Alto Caltrain 61 Everett Avenue Caltrain 60 California Avenue Caltrain Bike Lanes on Major Streets ...... 30 Los Robles Avenue bike lanes 24 Charleston/Arastradero bike lanes (including signal) 6 Middlefield Road bike lanes 18 Embarcadero Road bike lanes Bike Lanes/Routes on Major Arterials 19 Cal Ave.- business District 3 Alma St. 27 Hanover and Porter bike lanes 1 El Camino Real bike route 33 West Arastradero Rd. Spot Bicycle/Pedestrian Improvements ¯ Arastradero/E] Camino 5 Oregon Expwy signals Stanford/El Camino Churchill/El Camino San Antonio/Charleston San Antonio/Middlefield Newell/Embarcadero El Camino/Embarcadero Improvements in Charleston/Arastradero Rd Corridor Plan Total Construction Cost Soft Costs (E.g. design, Administration) @ 30% Total Capital Cost Annual Operating/Maintenance Cost (2% of construction cost) $5,470,344 $5,470,344 $5,470,344 $89,167 $245,071 $228,113 $208,420 $268,584 $915,736 $735.214 $560.163 $97372 $75491 $547 034 $164,110 $109 407 $218 814 $218 814 $54 703 $218,814 $300,000 $22,228,423 $6,668,527 $28,896,949 $1,402,291 Page C-5 ¯ Neison\Nygaard Consulting Associates APPeNDiX METHODOLOGY FOR CALCULATING VEHICLE TRIP REDUCTION Transportation Impact Fee Nexus Study o Appendix This appendix provides the methodology and calculations to support the conclusions in Chapter 3, regarding the contribution of Citywide Transportation Demand Management, Expanded Shuttle Service and Bicycle Facilities towards mitigating the impact of vehicle trips generated by new development. Figure D-1 Expected Impact of TIF Expenditure Plan 1, Citywide Transportation Demand Management Cost Per Vehicle Trip Reduced B Total Annual Project Cost C Subtotal Weekday Vehicle Trips Reduced 2,. Expanded Shuttle Service D Proposed Daily Revenue Hours E Estimated Ridership per Revenue Hour % of Riders Shifting from Drive Alone Subtotal Weekday Vehicle Trips Reduced Bicycle Facilities Potential Future Bike Mode Split L M N 0 Existing Bike Mode Split Potential Increase ii~ Bike Mode Split % of Bicycle Transportation Plan included in TIF Expenditure Plan Estimated % impact of high priority projects 2025 Projected PM Peak Hour Vehicle Trips Potential New PM Peak Hour Bike Trips Subtotal PM Peak Hour Vehicle Trips Reduced $88.72 $50,000 577 42 21.0 100% 882 10.7% 5.8% 4.9% 45% 82% 53,553 1,836 1,836 The Contra Costa Commute Alternative Network’s Program reduced 1,107 daily vehicle trips over the FY 02/03 year, with a budget of $96,000. Source: Transportation Fund for Clean Air report. TIF Expenditure Plan =B/A TIF Expenditure Plan. Figures from existing shuttle service, from: City of Pale Alto, Pale Alto Shuttle Ridership Assessment 2002. Average of Embarcadero (22.65) and Crosstown (19.3) services. Likely maximum assumption, given that many riders will be making new trips, or shifting from paratransit or 5ther modes. =D*E*F Pale Alto Bicycle Transportation Plan, p. B-3. The assumption 0f10.7% for work trips is used, rather than the 8.8% for all trips, which provides the likely maximum mode share: Pale Alto Bicycle Transportation Plan, p. B-3, based on 1990 census. 2000 Census figure is 6.0%; using the 5.8% therefore provides the likely maximum value. = H - I. Assumed to be achievable with full implementation of Bicycle Transportation Plan. However, TIF Expenditure Plan only implements part of this plan (hence rows K and L). Equivalent to % of projects in Bicycle Transportation Plan that are "High" Priority (24 out of 53). Assumes that high priority projects have twice the impact of ethers in the plan. = K * 21 ( 100% + K ) City of Pale Alto Travel Demand Model. =J*L*M Assumes 1:1 reduction. This is the likely maximum assumption, given that many cyclists will be making new trips, or shifting from walking or other modes. Page D-1 ¯ Nelson\Nygaard Consulting Associates Transportation Impact Fee Nexus Study ¯Appendix D The expected impacts in Figure D-1 for Citywide TDM and Shuttle Services refer to "weekday vehicle trips," rather than PM peak hour trips, since the data sources utilize this measure. The final step, in Figure D-2, involves conversion from weekday vehicle trips to PM peak hour trips. The diurnal factor in VTA’s Regional Model is.0.058, meaning that 5.8% of weekday trips occur in the PM peak hour. For this calculation, the likely maximum figure of 0.100 is used, given that many of the trip reduction strategies will target peak hour trips. Figure D-2 Conversion from Weekday to PM Peak Hour Vehicle Trips Weekday Vehicle PM Peak Hour Vehicle : Project ’Trips Reduced Trips Reduced Citywide Transportation Demand Management 577 58 Expanded Shuttle Service 881 88 Bicycle Facilities 16,360 1,636 T.0tal 17,818.1,782 Note: This table converts trips reduced by Citywide TDM and Shuttle Service from weekday into PM Peak Hours. Trips reduced by Bicycle Facilities are converted from PM Peak Hour into weekday trips. Page D-2 . Nelson\Nygaard Consulting Associates APP~:ND|X E SAMPLE FEE CALCULATION WORKSHEET ATTACHMENT C TRANSP OR TA TION DIVISION STAFF REPORT TO:PLANNING & TRANSPORTATION COMMISSION FROM:Joseph Kott DEPARTMENT: Planning AGENDA DATE: March 17, 2004 SUBJECT:Proposed Citywide Transportation Impact Fee RECOMMENDATION Staffrecommends that the Commission recommend to City Council adoption of the proposed Citywide Transportation Impact Fee and associated Ordinance to implement the fee. BACKGROUND Creation ofa Citywide Transportation Impact Fee (TIF) is a task assigned by City Council to Transportation Division staff under two of the "Top 5" Council Priorities: "City Finances" and "Alternative Transportation/Traffic Calming". On June 11, 2003 and August 27, 2003 the Commission discussed draft "conceptual alternatives" for establishment of a citywide, multimodal transportation impact fee. The citywide transportation impact fee would fund only programs that reduce transportation congestion on a citywide basis, and would be in addition to existing fees for local improvements in the Stanford Research Park and San Antonio/West Bayshore. The fee would also be in addition to traditional intersection and street improvement requirements associated with projects that create intense demands on nearby intersections and streets. The Citywide TIF Expenditure Plan, which is largely based on the 1998-2010 Palo Alto Comprehensive Plan goals, policies, and projects, sets forth the projects planned in connection with the fee. Because congestion is not solely caused by development, the fee on new development would fund only a portion of the cost of installing, operating, and maintaining these projects. The City would need to use other available funds, including external grants, to cover the remaining costs. This staff report and the Transportation Impact Fee Nexus Study Draft Final Report (Attachment A) comprises revisions and refinements of an earlier version reviewed by the Citywide TIF 3-22-04 Page 1 Commission. The revised Transportation Impact Fee Report reflects responses to this Commission’s discussion on August 27, 2004, to discussions with the Palo Alto Chamber of Commerce Government Affairs Committee (GAC) and a special subcommittee appointed by the GAC, and to legal review by the City Attorney’s Office, as well as subsequent work by Transportation Division staff and consultants. The Chamber has issued a letter containing its views on the proposed TIF, which is included as Attachment B. DISCUSSION Proposed Ci _tywide Transportation Impact Fee (TIF) Objectives, Purposes, and Methods Three key objectives of a TIF are as follows: To require new development and redevelopment projects to pay their fair share of the costs for transportation improvements needed to mitigate the impacts of trips that these projects add to the citywide street network. To provide a funding source for citywide implementation of key projects called for in the Palo Alto Comprehensive Plan, Bicycle Transportation Plan, and Transportation Strategic Plan, including computerized traffic management at signalized intersections, bicycle lanes, bicycle and pedestrian undercr0ssings of Caltrain, Palo Alto Shuttle service and equipment, and vehicle trip reduction ("transportation demand management") efforts. To provide an additional source of local match funds (typically from 10 to 25 percent of the cost of a project) for federal, state, and regional transportation grants to implement these projects. The proposed Citywide Transportation Impact Fee is predicated on the following 14 principles: 1)Citywide scope and application. 2)Uniform rates throughout the city. 3)Rates calculated on anticipated PM peak-hour vehicle trip generation. 4)Rates applied to projects of all sizes. 5)Use of Santa Clara Valley Transportation Authority’s Transportation Impact Analysis Guidelines for rate determinations. 6)Fee charged as one-time development fee, rather than periodic charge. 7)Changes in land use trigger fees on increased trip generation resulting from new use. 8)Annual fee level adjustments based on the Construction Cost Index. Citywide TIF 3-22-04 Page 2 9)Expenditure on projects that will increase capacity of existing street nebvork, including alternative transportation projects (cycling, walking, shuttle transit) and computerized citywide traffic signal system improvements. Non-disturbance of existing fees and infrastructure improvement requirements designed to relieve the intense impacts new development has on immediately surrounding intersections and streets. 11)Geographic equity is to be ensured through a geographically balanced expenditure plan (an alternative approach would be to allocate a portion citywide and a portion to the geographic area or "zone" of the development project. 12) Credits against fee for transportation demand management (trip reduction) efforts. 13)Exemptions similar to those for other Cityimpact fees (e.g. for 100 percent affordable housing projects, day care centers, public schools, etc.). The proposed Citywide TIF will fund transportation projects city,vide given priority by Palo Alto decision-makers and carry out transportation policies adopted by the City Council. A focus on alternative modes will help mitigate the negative impact on the convenience and utility citywide of driving, cycling, walking, and public transit (including increased travel time) due to projected new vehicle trips to and from new development and redevelopment projects. Proceeds from the proposed TIF will also contribute resources to expand the overall person-trip (not necessarily vehicle-trip) capacity of the city’s transportation system, inclusive of cycling, walking, and public transit facilities and services, as well as increasing (through computerized traffic signal system operation) the efficiency of Palo Alto’s street system. The proposed Citywide TIF fee level is calculated as follows: 1)According to the City’s new citywide computer traffic forecast model, the projected (to the year 2025) share of average weekday PM peak hour vehicle trips caused by new development and redevelopment within Palo Alto is 7.6 percent (4,045 of 53,553 projected non-PM peak hour trips). 2)The net present value of life-cycle (capital, operations/maintenance, and replacement) costs to fund a citywide future transportation improvement plan (the proposed TIF Expenditure Plan) to meet key future needs regarding alternative modes, traffic calming, and traffic signal system automation (which will increase the efficiency of Palo Alto’s street system for all users) is $118.9M to the year 2025. 3)The proportionate share (corresponding to percentage of projected PM peak hour traffic in the year 2025) to be borne by new development and redevelopment is 7.6 percent of $118.9M, or $9.04M. Citywide TIF 3-22-04 Page 3 4)The resulting share per PM peak-hour vehicle trip is $9.04M divided by 4,045 (the number of projected PM peak hour trips assignable to new development and redevelopment), or $2,234. Thus the proposed Citywide TIF is $2,234. The TIF Expenditure Plan is shown in summary detail on Figure 16, page 27 and in geographic summary on maps following page 17 of Attachment A. It should be noted that the third nlap in this series, which depicts the citywide traffic signal system, shows those City of Palo Alto traffic signals potentially subject to enhanced computer operation. Efficiency considerations require such enhancements to take place along an entire street corridor or wide area (e.g., an entire commercial district). The improvement categories in the Expenditure Plan are as follows: Citywide Transportation Demand Management (trip reduction program) Computerized Traffic Management Expanded Palo Alto Shuttle Bike Boulevards Bike/Pedestrian Undercrossings Bike Lanes on Major Streets (i.e. residential collectors andarterials) Bike Routes/Lanes on Major Arterials (i.e. commercial arterials) Spot Bike/Ped (pedestrian) Improvements Summary_ of Provisions and Issues 1)Fee based on PM peak hour trip generation. 2) Traffic and transportation impact analysis is predicated on the time interval of greatest demand on the transportation system, which typically occurs during the peak evening weekday commute hour. Fee based on PMpeak hour trip generation for all new development and new PMpeak hour trips generated by redevelopment projects. Even Small projectS (e.g. those generating fewer than 10 projected PM peak hour trips) would be subject to the TIF. This approach addresses the issue of"cumulative" impacts of traffic growth. While an individual project may have only an incremental impact on the transportation system, the collective impact of a large number of such projects may have a substantial impact. Redevelopment projects would only be responsible for any net increase in PM peak hour trips measured as the difference between the PM peak hour trip generation of the redevelopment project compared to the land use it w.ould replace: 3)Fee directly based on vehicle trip generation, rather than physical size (per square foot of commercial property or per housing unit of residential property) of a project. Citywide TIF 3-22-04 Page 4 This basis allow direct measurement of impact on the transportation system in the form of PM peak hour trips generated. 4)Certain projects exempt. Public policy considerations warrant facilitation of certain types of development and redevelopment, including affordable housing, public facilities, and day care centers, small (less than 1,500 square feet) retail and commercial service businesses. These exemptions are consistent with those provided in impact fees for parks, community. centers, and libraries. 5) 6) Dedicate TIF revenues to a citywide expenditure plan focused on alternative (to the single occupant motor vehicle) transportation modes and traffic signal system automation (to improve travel efficiency and safety for all modes of travel). The proposed TIF Expenditure Plan comprises the key projects in the .Palo Alto Comprehensive Plan, Bicycle Master Plan, and draft Transportation Strategic Plan. No new road construction or intersection widening projects are included. New intersection and street capacity will be obtained, in effect, through computerized traffic signal system operation. Vehicle trip demand will be reduced through the Transportation Demand Management, bicycle, pedestrian, and Palo Alto Shuttle programs and projects in the proposed TIF Expenditure Plan. Continue to require developer mitigation of significant impacts on nearby intersections due to new development or redevelopment projects. Palo Alto requires that a minimum intersection level of service standard (a function of length of average vehicle delay) of"D" be maintained at most signalized intersections. A minimum level of service standard of "E" is maintained for a subset of the more major intersections for the so-called "CMP" (congestion management program of the Santa Clara Valley Transportation Authority) intersections. Projects whose projected trip generation would cause a breach of these standards are required to provide mitigations, typically through contributions to the cost of new turning lanes and!or traffic signal modifications (signal re-timings, installation of a left-turn indicator, etc.). These mitigations are site-specific and only occur in the event that the projected traffic impact of development would cause an unacceptable degradation of intersection level of service. Thus they do not address either the cumulative impacts of a series of projects that do not breach the minimum level of service threshold or address the cumulative and dispersed impacts on the citywide transportation system of any given new development or redevelopment. Citywide TIF 3-22-04 Page 5 7)Retain the existing Stanford Research Park/El Camino Real ($8.51/sq. foot) and San Antonio/Bayshore ($1.75per square foo0 traffic impact fees Developers in both of these areas would contim~e to pay the stipulated traffic impact fees, which are dedicated to intersection improvement specified by ordinance within each impact fee zone. As stated above, these fees do not address the cumulative and dispersed impacts on the citywide transportation system of any given new development or redevelopment. 8)Provide geographic equity through a geographically balanced expenditure plan, rather than through citywide transportation impact fee "zones". A citywide expenditure plan provides flexibility and rewards "project readiness", thus contributing to more timely delivery of projects and programs. Some expenditure plan projects are by na~tre citywide, including transportation demand management and traffic signal system automation (which requires a corridor, wide-area focus). Others are difficult to divide on a zonal basis, including new shuttle routes, bicycle lanes, and bicycle boulevards, which typically traverse along north-south or east-west travel routes in the city, rather than one specific area. POLICY IMPLICATIONS The proposed Citywide Transportation Impact Fee addresses the firs.t five goals of the Palo Alto Comprehensive Plan: ¯T-l: "Less Reliance on Single Occupant Vehicles". ¯T-2: "A Convenient, Efficient Public Transportation System that Provides A Viable Alternative to Driving". ~ T-3: "Facilities, Services, and Programs that Encourage and Promote Walking and Bicycling". ¯T-4: "An Efficient Roadway Network for All Users". ¯T-5: "A Transportation System that Minimizes Impacts on Residential Neighborhoods". In addition, the proposed Citywide Transportation Impact Fee addresses two of the City Council’ s.Top Five Priorities: "City Finances" "Alternative Transportation/Traffic Calming,’ ENVIRONMENTAL REVIEW The TIF Expenditure Plan comprises a set of projects from the Palo Alto Comprehensive Plan and Bicycle Transportation Plan. The proposed Transportation Strategic Plan is in turn comprised of proj ects from both the Comprehensive Plan and Bicycle Transportation Plan. Citywide TIF 3-22-04 Page 6 The Comprehensive Plan was subject to an addendum to the Comprehensive Plan EIR. Each project in the TIF Expenditure Plan would be subject to a project-level environmental analysis prior to implementation. The TIF itself is a funding mechanism, not a project subject to environmental review. NEXT STEPS Staff will present recommendations regarding a proposed Citywide Transportation Impact Fee to the City Council Finance Committee on April 6, 2004. ATTACHMENTS/EXHIBITS A.Transportation Impact Fee Nexus Study: Draft Final Report B.Draft Citywide Transportation Impact Fee Ordinance ¯ C.Chamber of Commerce letter dated January 20, 2004 COURTESY COPIES Palo Alto Bicycle Advisory Committee Palo Alto Chamber of Commerce City Council Prepared by: Joseph Kott, Chief Transportation Official Division Head Approval: Joseph I(dtt, Chief Transportation Official Citywide TIF 3-22-04 Page 7 ATTACHMENT A The March 2004 Transportation Impact Fee Nexus Study Draft Final Report is superceded by the revised April 2004 Draft Final Report, which is appended to CMR:223:04 as Attachment B. ATTACHMENT B The Draft Citywide Transportation Impact Fee Ordinance from March 2004 is superceded by the revised April 2004 Impact Fee Ordinance, which is appended to CMR:223:04 as Attachment A. CtlAMBER ATTACHMENT C OF COMMERCE BOARD OF DIRECTORS Chair TONY CARRASCO Carrasco & Associates Vice Chairs SUNNY DYKWEL Alain Pinel Realtors RICK STERN Stem Mortgage Company HEATHER TROSSMAN Heather Trossman Ardaitecture & Planning TERRY WHITE Comerica Bank Past Chair MARK SAhn~ The Patnaude Group JIVI BAL~om Otis Elevator Company John BARTON Joba~ H. Barton B, A~d~ttect ~Y COE Stanford U~versi~ ~o~ Harr~ton Design T~o~ JACOB Thole, Love, Hershberger & McLean LINnA S~BmS J~SEN ~e Wint~ Lodge jons W. ~G ~house-~ng ReM~, Inc. TO~ ~ Latham & Wa~s S~P~N ~ Center for ~e Con~uing S~dy of California Economi~ JOE ~G~ Vent~a Prope~ Se~ices J~ MCCO~ Ritd~ey, F~her, Whi~an & ~ein ~ MIC~LSON Hewle~-Packard Company BUD MISSION Roche PMo Alto LLC J~Y Mid-Penins~ia Bank RO~ ~e Roxy Rapp & Co. J~ ~BOS~O Sheraton P~lo Alto Hotel The Wes~ PMo ~to ROBOT ROSKOPH Roskoph Assodates P.C. Is~ Z~ Diamonds of Paio ~to President & CEO SANDRA LONNQLrLST January 20, 2004 Honorable Members of the City Council City of Palo Alto 250 Hamilton Ave. Palo Alto, CA. 94301 Re: Transportation Impact Fee (Item #7) Dear Honorable City Council Members: The Palo Alto Chamber of Commerce recognizes that one of the "key" elements to a~ great city is one that encourages alternative transportation modes to the automobile, which overall will contribute to better managing traffic throughout our City. It is to this end that the revenue from the proposed traffic fee will exclusively be used to fund bicycle, pedestrian, transit, computerized traffic management and Transportation Demand Management projects citywide through the year 2025. We applaud this direction while we understand that the City will retain the City’s existing transportation impact fees for the Stanford Research Park/El Camino Real and San Antonio/Bayshore zones. These existing fees are exclusively dedicated to intersection and traditional roadway improvements in specific geographic areas. We conclude that the proposed fee structure appears to be reasonable and fair because of some of the following features: 1. Fees are levied on a trip basis at PM Peak hours. 2. The determination of measuring trips .is consistent with the methodology developed by VTA. 3. Ensures equity .geographically by directing the revenue toward projects in the north, east, south and west parts of our town. 4. The exemptions to the fees are consistent with those exemptions for our Parks, Community Centers and Libraries, such as exempting Below Market housing beyond required units or a project that is 100% affordable or a.project that is 1,500 sq. ft. or less for retail/personal service/automotive service. 5. There is a legal nexus between the amount of traffic impact fee attributed to new development and its proportional share of the projected costs of the recommended traffic improvements. We appreciate that staff examined closely this required nexus and then revised the responsibility of new development down from 20% to 5.5% 122 Hamilton Avenue Palo.Alto, CA 94301 (650) 324-3121 Fax: (650) 324-1215 info@paloaltochamber.com www.paloaltochamber.com toward the Transportation Impact Fee projects that total in today’s dollars $13 5 million. Having aclcnowledged all this there remains the following concerns which we would like to see addr.essed: 1.Should there be a reduction in the TIF for a developer who offers public benefits related to traffic, pedestrian and/or bicycle lane improvements that are quite substantial economically, especially when the zoning for the property being developed is other than a PC zoning? 2. How do the total impact fees, not just transportation, for residential and office/commercial development compare with the other jurisdictions listed in Appendix A, Figure A-2, (Page A-4 of Nelson/Nygaard’s report)? What percentage is attributed to the transportation impact fee out of the total impact fees for each of these jurisdictions? 3. In the report it is pointed out that "many neighboring cities in San Mateo and Santa Clara Counties do not levy a TIF at all. These include Atherton, Colma, Foster City, San Carlos, Campbell,. Cupertino, Mountain View, San Jose, Saratoga and Sunnyvale. Many of these cities, however, levy site-specific exactions on developers." (Appendix A, page A-3) In those cities that levy site-specific exactions, what are some examples of these traffic exactions, their valued costs and other total impact fees that the developer still had to pay in that particular jurisdiction? These concerns are about how consideration of a traffic impact fee, even one that seems fair and equitable as this one, may be the unintended additional fee that discourages a significant amount of new real estate development and the revenue and jobs it brings to Palo Alto. We raise these questions because we feel it is our responsibility and yours to address them as we move ahead in considering this traffic impact fee. Thank you ~and we look forward with you to see that these questions are addressed. Very truly yours, Tony Carrasco cc:~eve Emslie Joe Kott 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Wednesday, March 17, 2004 at 7:00 PM City Council Conference Room Civic Center, 1st Floor 250 Hamilton Avenue Palo Alto, California 94301 DRAFT ROLL CALL: 7:00 Commissioners: Michael Griffin - Chair Phyllis Cassel- Vice-Chair Karen Holman Patrick Burr Bonnie Packer Annette Bialson - absent Staff: Steve Emslie, Planning Director Lisa Grote, Chief Planning Official Dan Sodergren, Special Counsel to City Attorneys Amy French, Current Planning Manager Jon Abendschein, Adrnin. Analyst Joseph Kott, Chief Transportation Official Ohtbayo Elimisha, Staff Secretary AGENDIZED ITEM: 1. Citywide Transportation Impact Fee Chair Griffin: Good evening ladies and gentlemen. Welcome to the Special meeting of the Palo Alto Planning and Transportation Commission for Wednesday, March 17, 2004. Would the Secretary please call the roll? Thank you. 26 27 28 29 30 31 32 33 This takes us to the Oral Communications part of our agenda. ORAL COMMUNICATIONS. Members of the public may speak to any item not on the agenda with a limitation of three (3) minutes per speaker. Those who desire to speak must complete a speaker request card available from the secretary of the Commission. The Planning and Transportation Commission reserves the right to limit the oral communications period to 15 minutes. 34 35 36 Chair Griffin: I have no cards for Oral Communication so we will move to the New Business portion of the agenda. City of Palo Alto Page 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 3O 31 32 DRAFT CONSENT CALENDAR. Items will be voted on in one motion unless removed from the calendar by a Commission Member. AGENDA CHANGES, ADDITIONS AND DELETIONS. The agenda may have additional items added to it up until 72 hours prior to meeting time. UNFINISHED BUSINESS. Public Hearings: None. Chair Griffin: I will open the public hearing on agenda item one which is the Citywide Transportation Impact Fee. This is a review and recommendations regarding a proposed Citywide Transportation Impact Fee, to be assessed based on traffic generated by new land development and net traffic growth due to land re-development. Would Staffplease make a presentation? NEW B USINESS. Public Hearings: Ci .tywide Transportation Impact Fee: Review and recommendations regarding a proposed Citywide Transportation Impact Fee, to be assessed based on traffic generated by new land development and net traffic growth due to land re-development. The Citywide Transportation Impact Fee is intended to contribute to the funding requirements of future citywide transportation improvements, thus assist in the mitigation of future growth in traffic and travel demand. Mr. Joseph Kott, ChiefTransportati0n Official: Thank you very mUch.Chair Griffin and Commissioners. This Commission has addressed this item a couple of times now in study sessions. We are now ready as this Commission is aware to offer recommendations to this body. The purpose of recommending a Transportation Impact Fee is to take proper account of the future impacts on our transportation assignable to new development and redevelopment that causes such impacts. And further to link those impacts to mitigations, which address City of Palo Alto Page 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 DRAFT appropriately or proportionately those impacts and further to a fee which is used to pay for the appropriate share of the mitigation costs of impacts of future changes on our citywide transportation system and consequent travel opportunities. The components of future travel demand in Palo Alto, as in everywhere else, are these: new growth within the community both, new development and redevelopment that adds net new trips; t.) regional development, that which occurs outside of Palo Alto but impacts Palo Alto in terms of causing more vehicle travel on our streets either in terms of through trips or trips with one trip end outside of our community; 2.) then there is travel related to the land uses we already have here and I would expect our land use patterns would by and large remain fairly constant as we grow at a rather slow mode; existing land use patterns with no growth at all will still generate vehicle trips particularly in the peak hour; 3.) new vehicle trips related to development and re- development. The Citywide effects of the transportation impacts of this future growth are as follows: reduced comfort and convenience for cyclists and pedestrians; increased travel time tbr personal motor vehicles as well as transit passenger and vehicles; and reduced attractiveness of cycling, walking and bus transit as alternative travel modes. This presents some problems for Palo Alto in particular because our community emphasis is on growing alternative transportation modes with the purpose of reducing our reliance on the single occupant automobiles. The Citywide Traffic Impact Fee before you tonight needs to be differentiated from the mitigation requirements under our traffic standards for the California Environmental Quality Act (CEQA), which do require, for example, that our signalized intersections maintain stated levels of service standards for intersections for two groups of intersections. There is a list of those that City of Palo Alto Page 3 DRAFT 1 are CMP or Congestion Management Program, or regionally significant, intersections. There are 2 all other signalized intersections in the City of Palo Alto. The level of service threshold of 3 significance pertaining to the former is D and for the latter E. So new developments or 4 redevelopments that cause the level of service at nearby intersections to degrade below these two 5 thresholds, one or the other, would trigger and do trigger the need to mitigate those effects back 6 up to the minimum accepted level of service standard.. We are not proposing to change this requirement at all. Rather, we are focusing on Citywide impacts, cumulative impacts, on our entire transportation system, in m~lti-modal terms. 7 8 9 10 The bagis and purpose of the Traffic Impact Fee, or TIF to us the acronym, is the projected PM 11 peak hour trips generated by a development. We are actually going to the source rather than 12 using broad land use categories and talking about, for example, square footage of office and 13 commercial use. We are going to the source and talking about projected PM peak hour trips by 14 all the different kinds of land uses that are codified in the Institute of Transportation Engineers’ 15 Trip Generation Handbook. We are focused on the PM peak because that is the hour in which, in 16 most cases, the highest demand or stress occurs on the transportation system. We are very 17 focused in terms of purpose to appropriately assign these impacts and the to mitigate these 18 impacts accordingly. Now it turns out based on our analysis that most of the future travel in Palo 19 Alto will be either due to trips generated by existing land uses that just remain in place or trips 20 that are induced by regional growth. So the future trips assignable to new development and 21 redevelopment are actually a small proportion, under ten percent as indicated in your Staff 22 Report. 23 City of Palo Alto ~ Page 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 The advantages of a Citywide Transportation Impact Fee include the opportunity to contribute an appropriate share of new development and redevelopment funding for future Citywide transportation mitigations to mitigate future .transportation system needs and deficiencies. There will be a multitude of sources for future transportation improvements required by growth in travel demand. These include regional and state and federal grants, as well as have some General Fund monies and Street Improvement Fund monies and so forth. Through the Citywide TIF we are proposing to add that proportionate share of fundi-ng assignable and payable by new development and redevelopment based on the proportion of future traffic due to these developments. Lastly, two big things really. This fee is quite predictable. You could literally look up your fee responsibility as a developer based on the projected trip generation and the fee itself, which is $2,000-plus per PM peak hour trip. It is very predictable in that way and it is all up front.. Lastly, there are provisions in our proposal to incentivize trip reduction or travel demand management efforts. Our proposed Citywide Transportation Impact Fee Expenditure Program is comprised of the projects and programs towards which the Citywide Fees will contribute. Again, they won’t pay for all the costs of projects toward which they will contribute. The TIF Expenditure Program is based very firmly on the Comprehensive Plan, the goals and policies set forth in the Comprehensive Plan. The Expenditure Program is Citywide so there is the flexibility to implement these mitigations in a timely way per opportunities for outside funding, per project readiness and so forth. Lastly another big advantage is that the fee is a one-time fee and in one City of Palo Alto ~Page 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 DRAFT fell swoop it covers a proportionate share of the full lifecycle cost (capital, replacement, operations and maintenance) of future transportation system improvements that are induced by future traffic growth. We are going to make a change in our audio/visual at this point while we are swapping out CDs. While Adam is doing this if the Commission wishes to ask any questions of me based on my few slides I will be glad to answer them or the Commission may wish to wait until the whole show is finished. Chair Griffin: How much longer will it be? Mr. Kott: I believe Adam’s presentation will be under ten minutes. Commissioner Holman: I think the question then is how long until he is up and running? Mr. Kott: I think he will be up and running fairly soon. Although I may have spoken too soon. Chair Griffin: Will Adam be able to use this? Mr. Kott: We will play musical chairs. City of Palo Alto ~Page 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Commissioner Holman: I will ask a question in the meantime. Changes in land use trigger fees on increased trip generation resulting from new use. How do we know when there is a new use because we don’t have business license fees? Mr. Kott: If there were a request for permission to redevelop that would trigger an action, a permitting action. I believe that would be the signal. I would have to defer to Steve Emslie to really answer this kind of land use related question. Steve? Ms. Nellie Ancel, City Attorney’s Office: Looking through the ordinance I think that one has a discretionary permit but I would have to check. Commissioner Holman: But what if there is not a discretionary permit? Mr. Steve Emslie, Planning Director: We will verify it. If there were not a discretionary permit if it is a ministerial permit or a building permit then the fee would not apply. Commissioner Holman: But it could be a change of use. Mr. Emslie: Correct. Commissioner Holman: So it could be a more intense use or a less intense use. Mr. Emslie: It could. Let’s verify the ordinance. City of Palo Alto ~Page 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Ms. Ancel: By definitions new development is additional square footage, which normally would be subject to a discretionary permit process. So if it is not something that is expanding the square footage I don’t think that they would be subject to the fee. Commissioner Holman: That is how I read it too and that is why I posed the question. Chair Griffin: Pat. Commissioner Burt: Just following on the same subject. On page two of the Staff Report where it says proposed impact fee is predicated on the following 14 principles, principle number seven is changes in land use trigger fees on increased trip generation resulting from new use. So is there anything in the ordinance that captures a new use that is in a case where that new use may not require a building permit? Another way to put it is how do we capture those things that are in principle number seven? Ms. Ancel: I think that we set it up so that it is or!!y triggered when there is a discretionary .permit that needs to be issued. I need to go back through but that is the way I read it. Mr. Emslie: We will verify while Adam gives his presentation. Ms. Ancel: I think that there needs to be a discretionary permit otherwise will double check on that. SoI City of Palo Alto Page 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Chair Griffin: Anybody else have a question while we are waiting for presenters to warm up their software? Commissioner Holman: In this dull moment I will put a plug in for Joe’s brown bag meetings. I have been able to make a couple of them and they are really, really good, usually pretty well attended. It is at lunchtime on Friday so it is a limited audience but they are featuring transportation, obviously and trains in particular in this series and I highly, highly recommend them. Mr. Kott: The next program is this Friday, a two-part series on the transcontinental railroad. Chair Griffin: Are you going to drive the golden spike? Mr. Kott: The golden spike is the very last frame. Commissioner Burt: Will the University be represented? Mr. Kott: verbally. I would suggest Chair Griffin if it is acceptable that Adam just give his presentation Chair Griffin: Bonnie. City of Palo Alto Page 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Commissioner Packer: I have a question about the projected increase in trips is based on traffic within Palo Alto. Is that correct? Mr. Kott: Yes. Commissioner Packer: The trips the trip generator figures for an office or a supermarket are any trips not necessarily trips that are within Palo Alto. Is that also correct? Mr. Kott: The trips have to have an end, a so-called trip end, in Palo Alto. So there may be a shopper that comes in from Mountain View shops in Palo Alto and leaves. That shopping commercial center "generated" that trip in the way we view a "trip". Commissioner Packer: Right. But just to clarify, the trips generated could be employees coming in from outside or people leaving. Mr. Kott: Yes. Commissioner Packer: But the increase in trips from 49,000 to 53,000 trips is just within. Maybe that is okay that we are talking about different trips. Mr. Kott: That is a very good point Commissioner Packer. The 53,000 represents literally what we project to be the number of vehicles on the road at PM peak conditions in the year 2025, City of Palo Alto ,Page 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20. 21 22 53,000. Now some of those trips may be through trips, people are driving on Palo Alto streets that haven’t really begun or will not end in Palo Alto. Commissioner Packer: Okay. Mr. Kott: Some will have one trip end in Palo Alto and others will have both they will live and shop in Palo Alto: Commissioner Packer: I just had an ah-ha, it excludes pass-through. As long as it originates .... Mr. Kott: No, it includes pass-through. I believe it does. Adam? Forgive me I got tripped up by our own methodology. The 53,000 has at least one trip end in Palo Alto. So it would literally exclude through trips. Commissioner Packer: I got it. Now it fits together better. Mr. Kott: We have been working on some way to include througt trips but it didn’t work out. Chair Griffin: Are we now ready for Adam? Mr. Kott: I think so. Yes, please. City of Palo Alto ~Page 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Mr. Adam Mallard-Ball, Consultant: Thank you Chair Griffin and thank you Commissioners. Apologies for the delay in setup. I want to run through this relatively quickly and try not to repeat what Joe said. You will have heard a lot of this before at previous study sessions but I will take the opportunity to repeat some of that and expand on that because it has been several months. I just wanted to start expanding on what Joe said about why we are having this fee and what impacts we are mitigating. The impacts for new vehicle trips include impacts on transit, for example slower travel time and if you have slower travel time then you actually need more money to run the same amount of service. Impacts on pedestrian and cyclists, on traffic. congestion and there is a broad range of other more broad environmental impacts that result from new traffic. The key point here is that we are trying to mitigate all of these impacts. A lot of mitigations programs are focused on very specific impacts of new trips. For example it might be widening of a particular intersection or introducing a bike lane because there are impacts on bicycles. Here we wanted to take a more holistic approach and really try and use the money for programs that will reduce the number of vehicle trips overall. As I said the advantages that mitigate all these types of impacts and it mitigates impacts across the whole City. A lot of traditional impact programs focus on maybe a few blocks within the new development and that traffic kind of effectively disappears once it gets to the more far-flung coruers of the city but with this approach we want to mitigate the entire citywide impacts. It is firmly rooted in the Comprehensive Plan and other transportation policies. It is important to note that the expenditure plan does not include traditional roadway and intersection widenings and City of Palo Alto ~ Page 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 there will continue to be these mitigations through the site specific exactions on developers and the traffic fees in the Stanford Research Park, which we are proposing, should continue but they are not included in this fee. This just gives another view of what the money would actually go to, TDM, traffic management, shuttle service and bicycle facilities. As Joe mentioned before this is lifecycle costing including capital and operating and replacement costs over the 40th at a five year building lifespan. I want to talk about a couple of recommendations in detail. We are proposing a fee based on the number of vehicle trips that the development would generate rather than a fee based on the number of square feet. That has a number of advantages. Firstly, it provides the closest link with the actual impacts of the development. It also provides financial incentives for developments that include TDM programs or are located near Cal Train or a major bus stop. It actually takes ~teps to reduce the number of trips they generate. Then we are proposing to do that through that through an established methodology that is already used by VTA to do traffic studies in the County. These are just examples of some of the percentage reductions which a developer could obtain in their fee assessment by including mixed use development or including development close to transit or through TDM programs. We are proposing a Citywide fee. We talked before about having different fees in different zones of the City but the Citywide fee gives the greatest flexibility in allocating fee to the highest priority projects even if they are in another part of the City at that time. We are City of Palo Alto Page 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 geographic equity because the expenditure plan is balanced it includes projects in all parts of Palo Alto. We are proposing that the more local impacts first are going to continue to be the traffic fees in the Stanford Research Park and the San Antonio/Bayshore zone, which will mitigate these primarily local intersection level of service and congestion impacts. Exemptions we are proposing for consistency. These are exactly the same as the existing City fees for parks, community centers and libraries. Other recommendations as I mentioned before retaining these traffic fees and automatic index linking so that it doesn’t have to come back every year or every few years to Council for an update. We are proposing that if a development changes to a more intense use for example an industrial use changes to office or retail then that would still be subject to the fee but conversely you don’t get a refund if you go down because the idea being that once the City has built this infrastructure you are not going go and take it out simply because this development is generating fewer trips. The recommended fee level is $2,234 per PM peak hour vehicle trip: In a moment I will show some illustrations of what that means for specific developments. This is actually 7.6% of the cost of the entire expenditure plan, which is inline with the share of trips in 2025, which would be generated by new development. So we are assessing new development in exact proportion to their share of the problem in 2025. These figures are from the City Travel Demand Model, which brings in a very strong technical analysis underlying that. Overall it would raise $9.0 million over the next 22 years for transportation in Palo Alto. Again I am going to show you City of Palo Alto ~Page 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 some figures in a moment but this is very much in line with the level of fees in other Bay Area cities. These are some example land uses. As you can see for a single family home it would be just over $2,250 and these other fees for different other uses. It is important to note these are the full amount of fees that is before they get any discounts if they are close to transit or they have various TDM programs or a mixed use component. This is just an illustration of how it fits in with other city’s transportation fees inthe Bay Area. M~st of the cities have a big variation. The light blue is for low and the dark blue is for high. This is really because they assess it on a square footage basis in most cases rather than on a trip basis. So there is a much bigger range that one development might pay just say $500 per trip while another development in the city might pay $2,000 for the same trip. So Palo Alto is very much in the middle to lower end of that range. This is the total fee level on various uses combined with other fees in the City. The green on the top is the new transPortation fee. The light blue is for parks and community centers, libraries, housing fees and the dark blue is for traffic fees in Stanford and the San Antonio/Bayshore. zones. As you can it is a relatively small increment, 12% in some cases and the largest percentage increment is for some multi-family houses it goes up to 38% there. Again this is just one illustration of the total fee level and how it effects development. This might be somewhat dated, the plans might have been changed since then and I don’t know if any of these have actually been approved or denied in the last couple of months but this is just an illustration of what it might look like. For something like the Hyatt Rickey it would be a $350,000 City of Palo Alto ~Page 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 2O 21 22 23 transportation fee that would be assessed on that. For something smaller like Sunrise it would be just over $30,000, This is between 10% and 25 % of the total fee level that is assessed by the City. That is actually my final slide. Did you have anything to add, Joe? Chair Griffin: Commissioners if we might then address further questions of Staff. Then I think what I would like to dois to start i~t Bonnie;s end of thedesk and Bonnie ifyou have a couple of questions and then relinquish the floor and let Phyllis have her crack at it. We will just keep rotating through until everybody has a chance to ask their questions. I think the concept here ~s that we would, try to ask basically all of our questions at this time before we open the public hearing. So Bonnie do you have any further questions? Commissioner Packer: I do, thank you. I have questions about the expenditures in the fund. In the packet before us there is a list of projects and my first question is if we recommend approval of this TIF are we explicitly recommending approval of the projects as they are drawn? The map and the shuttle and all that stuff or are we recommending approval of projects kind of like this? Mr. Kott: Well, perforce it would have to be kind of like this because I think that by the time Council ends up approving a project it tends to change its contours. Of course the purpose and need of projects tends to change too. Maybe what may be a most important point about the expenditure plan is it represents the proportions of investments in the different alternative modes and the computerized traffic signal system operation that the community would be committing City of Palo Alto ~Page 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 to. As to whether or not those specific routes would be the ones there would likely be some scope for making some changes on them but there would be a commitment to doing shuttle expansion more or less like as displayed in the map. The route may not be exactly the way it is put but it would be largely that way. Commissioner Packer: Thank you. My second question related to that is once a fund starts getting created and ttiere are monies in it like a little bank account what criteria would there be for.accessing or- withdrawing money from the fund for a particular project? This wasn’t clear t me how that would happen over the next 22 years. Mr. Kott: We do have an expenditure plan so that the draw-downs of the TIF account you might say would have to be toward projects in the expenditure plan. It would have to be projects that have enough funds from other sources in order to be implemented. Commissioner Packer: I see, so you would be having a project inplace or already getting funding and you need just another nine percent and maybe you could get it from the fund at that time. Mr. Kott: By and large because as you recall only 7.6% of the expenditure plan is attainable from the Traffic Impact Fee so that in nearly all cases I can think of there would need to be other monies to match to it in order to do a project. Commissioner Packer: Thank you. City of Palo Alto ~Page 17 1 2 3 4 5 6 7 8 9 10 ll 12 13 14 15 16 17 18 19 20 21 22 23 Chair Griffin: Phyllis. Vice-Chair Cassel: I just answered my own two questions so you can go on. Chair Griffin: Good,. Then let me jump in line here to as welt if I may and I am going to re-ask the question that Tony Carrasco posed in his letter to you the other day having to do with, ifI understand this question correctly, the possibility of a developer obtaining a credit on TIF if the developer would like to provide some of these facilities himself in the course of the construction of his project. You answered that Joe in such a way that it made it appear that he in fact would not get credit for those activities. I am thinking in the case of a Planned Community project where a developer might want to have some transportation oriented benefits and would like to package that with his presentation. How would we deal with that? How would we accommodate that desire? Mr. Emslie: Well for one all be~s are off on a PC because this only speaks to quantified impacts directly related. Now as you know, PC has a public benefits requirement that is supposed to go above and beyond the project’s mitigation of its required impacts. So this ordinance would not preclude someone coming forward with a PC public benefits package that exceeded the requirements for the fee in this case. Let’s talk about a project that did not involve a PC for a minute. We would want to make sure that the ordinance provided the opportunity that it did not preclude the ability to at the City’s sole City of Palo Alto ~ Page 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 2O 21 22 23 discretion with some acceptable criteria that we could develop allow a development to actually construct improvements. We think that many times for projects of a certain si~e there is an economy and efficiency of scale that enables us to actually get more improvements through the combination of the private development with the public improvements you get an efficiency that you can’t get otherwise if you have to bundle that with other money and have the City do that on its own. You can often be cheaper. So we would like to be able to preserve that opportunity. Again, it would be subject to very specific criteria and be at the City’s discretion as to what improvements it would allow essentially at its sole discretion. It would not involve the developer’s assessment of the cost. Chair Griffin: Presumably the proposed benefit would have to fit in with the concept of the TIF which is a Citywide transportation mitigation as opposed to a project specific one? Mr. Kott: The contribution would need to implement or help implement the expenditure plan and a project or projects within the expenditure plan. In other words, not just a tiny little piece of a bike lane but a significant section of bike lane to make that a usable contribution. Chair Griffin: Karen. Commissioner Holman: The money that goes into the fund there is a difficulty I am not sure the of the best way to address this or how it actually can be addressed so I am just going to throw it out there. One of the concerns I have had for some time is when there is development in affordable housing or BMR units are a requirement of a project sometimes there is an in lieu fee City of Palo Alto Page 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 paid. What happens then though is if those units aren’t built in a relatively short period of time the number of units that can be built with the money at the time the development triggered that is not the same number of units that can be developed over time because of cost of construction and such. So there is the same issue here. Once the money goes into a fund for a development what it is supposed to fund in 2004 is not likely the same amount of development or improvement that can be funded in 2010 for instance. Is there a mechanism to address that? Mr. Kott: A couple of things occur to me off-hand. One is that of course the fund would earn just like any fund would as an account. The second thing that occurs to me is that the way this is supposedly structured as a Citywide proposal we are favoring project readiness. So I think we are positioning this TIF expenditure plan to provide that extra amount of money to make a project go. We may have accumulated money for say from grant sources for a given project and this is just enough to make it go. So we don’t expect a lot of aging in terms of that fund. We would be using it. We have been very aggressive with grants I think, as the Commission knows. We average about a million dollars a year in Palo Alto through our efforts in outside grants for transportation project and we expect, to continue that. Commissioner Holman: Thank you. Chair Griffin: Pat. Commissioner Burt: We saw a graph that compared our proposed Transportation Impact Fee to other cities in the region. I would like to ask two related questions. As this graph shows our City of Palo Alto ~ Page 20 1 2 3 4 proposed measure is fairly modest compared to some of the other and below average. Do you have any knowledge as to how the impact fees in other cities have affected developer’s willingness to put in housing and things like that? Then the second related question is we have other impact fees besides th~ transportation, how do our cumulative fees compare and do we have any sense of how in other cities or throughout the region the various cumulative fees have ¯ affected willingness to put in housing? 5 6 7 8 Mr. Kott: I think a good way to look at it may be because the expenditure program is so tightly 9 bound to the Comprehensive Plan and the values in the Comprehensive Plan which in turn are 10 really Palo Alto values it just about guarantees a big emphasis on quality of life in these 11 transportation improvements. You will notice even though we are very keen on improving the 12 efficiency of our roadways particularly through these investments in computer traffic signal 13 management we are not proposing this expenditure plan be used to widen road, build new roads, 14 make intersections more difficult to cross and so on and so forth. So in our view there is a lot of 15 value added in quality of life and community attractiveness built into this program. Based on our 16 Comprehensive Plan values in any case, and this is all arguable, there is a vicious not a virtuous 17 cycle when you do engage in these road widenings, Often some of the other communities have 18 found themselves in that place where in attempting to build their way out,of congestion what 19 they have done is separated their neighborhoods and they have made their transportation system 20 less usable for a lot of people. That is not the direction that we would be going in. So that is 21 something of a sermon I apologize for that. Steve may be able to answer the housing issue. 22 City of Palo Alto ~Page 21 1 2 3 4 5 6 7 8 Mr. Emslie: Well our experience is that the predictability of the fee up front is a value to the development community. The ability for that to be factored into initial land cost, land value on the front end is generally seen as a positive in my experience with the development community rather than wait until the very end of the process to understand what exactions would be required as you go through the environmental review and so forth. That the up front knowledge of what it is would be easier to accommodate and build into the overall project cost which is a benefit. Commissioner Burt: So I have heard two responses. One that if I might.summarize is that there 9 are many benefits to the quality of life aspects of having a fee like this. I certainly am in 10 agreement with that and in principle as our previous study session have indicated not only myself 11 but also other Commissioners have been supportive of the concept of the fee. I also hear that 12 having the predictability that this fee would have is beneficial for a developer to be able to make 13 clear decisions. So having heard both’of those I still don’t really have any beginning of an 14 answer to my question. If you take and I just want to separate for the moment those other 15 benefits from the question that I am asking. If you were to say exaggerate the fee, say we had 16 ten times as much fee as what we are proposing might that have an impact on the willingness of 17 a developer to put in housing in our community? If the answer is clearly yes in that case then I 18 want to throttle it backwards and ask based upon the sorts of fees we are proposing do we have 19 any notion by studies or comparisons to the impacts in other communities whether this kind of 20 fee would have any significant detrimental impact on a developer’s willingness to put housing in 21 our community? 22 City of Palo Alto ~Page 22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Mr. Kott: Commissioner Burt, I think Adam Mallard-Ball has some comments. I would make two. One is the moderate nature of this fee and Adam h~is put up a very telling I think bar chart, which shows the incremental rise in fees overall. Second just in terms oflocational economics the emphasis on the expenditure plan is increased accessibility in real terms, that is all modes, including personal motor vehicles. That is a clear locational asset and plus in terms of economics of development. Commissioner Burt: Are y~u saying that in your estimation tl~e additional attractiveness of a community that has good transportation in all modes may approximately offset or even outweigh the expense of the fee? Mr. Kott: I think I would be overstating ifI did but I will point out the attitudinal surveys that have been taken of this community through our residents’ panel. The fact is that we do have a comparatively high level of cycling use and we are highly rated as being walkable and bikable. It is very hard and I won’t resis( it is very hard to resist the conclusion that Palo Alto’s walkability and bikability and general community feel that results is an essential part of overall community quality of life. The expenditure plan really builds on that it doesn’t degrade that at all. Mr. Mallard-Ball: I agree with Joe completely and I just wanted to add a couple of things to that answer. The short answer to your question is no I don’t think any evidence of this level have any impact on development feasibility. Without going into the whole complex economics of it the short answer is it is not just the developer that necessarily pays these fees in the long run. It is City of Palo Alto Page 23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 shared between the landowner as it has an impact on the price of land that is shared by the developer and it is shared by the final homeowner or tenant. The proportion that each of those three actors pays depends on the heat of the real estate and land market in a particular community. So the short answer is no. The second reason why that is the case is that in most of these cases the fees don’t necessarily represent an added cost for a developer it simply replaces the sort of case-by-case exceptions, which they would have had to pay for a specific project. So they are not necessarily paying any more under this system at all. CommissionerBurti Great. Thanks: Chair Griffin: Bonnie. Commissioner Packer: I have a question on the model that was used to create the projections. You input trip generations. Were the same assumptions used for the trip generations for developing the projects the same trip generator assumptions that are going to be used to determine the net new trips that the new development would be? So are we comparing apples with apples? Mr.. Kott: I would say generally but not exactly because there is a degree of computer massaging of the trip generation and assignment that is part of calibrating a network travel model. That is, the traffic volumes that result from the trip generation rates for all the different land uses assigned to the street system by the computer in order to calibrate the whole model. So in general it is true but they are not exactly corresponding, no. City of Palo Alto Page 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Commissioner Packer: Then related to that does this model give you the ability to predict how big the fund will be at any given time over the next 22 years? Mr. Kott: Well, in order to do that you would have to make assumptions about what is going to be developed when. Of course in our traffic forecast we have used Council-approved assumptions regarding land use all the way up to 2025. These concern what would be built in Palo Alto in which areas. The pace of that development as you all know depends on the state of the economy, the attractiveness-of different kinds of developments and many other factors that are sometimes very hard to predict on a year-by-year basis. Overall in general over a 20 year span you are probably going to be correct but for next year you may be off. Chair Griffin: Phyllis. Vice-Chair Cassel: Staff is ready to answer the question from Karen. Ms. Ancel: We have an answer now. Basically, in order to impose the fee there needs to be .a development project where we are issuing a permit. A construction permit would probably be sufficient which is ministerial. But if it is a change in use and the property owner doesn’t come in and they don’t need a construction permit or some other permit from the City then we won’t have the opportunity to impose the fee. City of Palo Alto Page 25 7 8 9 10 11 12 13 14 15 16 17 18 20 21 22 23 1 Mr. Emslie: Soit is immaterial whether we have a business license for that because even if we 2 did you wouldn’t be able to have a business permit trigger. So it would have to be the issuance 3 of a building permit, which couldinvolve a change of use, and most often if you were changing a 4 use I would say 90% of tile time there would be a requirement for a building permit. Even if it 5 were raw material there would be a sufficient change and a change in use often triggers building 6 code requirements or structural requirements or site and safety requirements as well. So in most cases the change in use would require a building permit, which would be subject to the fee. Commissioner Holman: So even a tenant improvement would probably then bring that to the attention of Staff. Mr. Emslie: Yes, if it is for a change of use. Vice-Chair Cassel: On page 23 it says the trigger should be the issuance of a permit for construction or reconstruction, which is what you are saying, the approval of a zoning change or a conditional use permit. However, it says for consistency with other impact fees a threshold of 1,500 square feet for non-residential development or the addition of a new dwelling unit for residential is recommended. So if they just had a building and they changed the use but they didn’t add any square footage then it wouldn’t trigger it. Ms. Ancel: Right. It depends. The 1,500 square foot exemption is for certain smaller retail uses I believe. City of Palo Alto ,Page 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Mr. Kott: Yes, retail uses. Mr. Emslie: But if you are not a large building that is going from a low intensity us.e to a high intensity use that would most likely trigger a need for a permit which would be subject to the fee even though all the changes were interior. Vice-Chair Cassel: use permit. If you were for instance to go into a restaurant you would need a conditional Mr. Emslie: Right. In most cases if a tenant were changing out of the Stanford Mall from one retail to another there is no fee no matter what size the tenant was because there was no change in use. Chair Griffin: Anything more? Vice-Chair Cassel: No, that did it for me. Commissioner Holman: Can I just follow up on that? Chair Griffin: Sure. Commissioner Holman: Just to be really, really clear so then it wouldn’t require a 1,500 square foot addition. There is no addition to the building required to trigger. City of Palo Alto ~Page 2 7 1 2 3 4 5 6 7 8 9 10 11 12 "13 14 15 16 17 18 19 20 21 22 23 Mr. Emslie: Correct.It is just the change in use. Chair Griffin: I will ask a question that is a little bit of a tag-on to what asked previously. Just for the sake of argument consider that I am a real fan of computerized traffic signals in order to improve the flow on arterials. I would like to see more money put into that category and I am wondering if it is possible to increase the amount, the $2,200 amount, that we are charging per new net trip. I think I am saying that correctly.. Is it possible to go beyond what you and Adam are proposing tonight, the $2,200 figure? Mr. Emslie: No it is not because these fees have been put at the top level of the impacts as they have been quantified by this .report and justified under the state law. We believe they are set at the maximum level that is consistent with the statutes in this area. Mr. Kott: I should point out too the computerized traffic signal system element of the expenditure plan is very elaborate. It is a very aggressive and advanced system that we are proposing. We hate to say this kind of thing but we really don’t need any more money for that element. I suppose if somebody came and gave us a big check we would probably take it. Chair Griffin: Pat. Commissioner Burt: Just as a follow on to that I think I had a similar question to what Michael was asking. Maybe I can phrase it slightly differently. I am not at all sure that this is feasible City of Palo Alto ~ Page 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 but I want to toss it out and see whether it has any legs. If a developer were given two options, one the standard impact fee or a second option which for the sake of discussion might be 125% of the impact fee but if they paid the additional 25% they could elect which of our projects they would like to-see that fee allocated toward. First is that legally permissible since it would be at the discretion of the developer? You would simply give them additional discretion not additional mandate. Second, is that something that would work from our perspective? Would that be beneficial to raising more funds if a developer chose to prioritize what they are going to do? I will just make one brief example. I think that when we were discussing local traffic.calming measures we went through a discussion several years ago and maybe even a decision and the example I think was off of East Meadow it was the Psychology Institute or whatever it was has a crosswalk there and they volunteered to pay for that. It allowed them to jump in line and have that traffic calming measure done at their location. The principle, and we debated about this and whether it was favoritism or not, but the principle was it freed up other dollars to be spent elsewhere. So that is kind of the genesis of the question and I just wanted to get your thoughts on it. Mr. Kott: I will defer to Nellie on the legal aspects but I will speak just practically from the transportation point of view. Nellie you may have to have a hook and drag me offifI say something "illegal" here. I will give you an example. We had a very fine offer from Roche Biosciences to fund a lighted in pavement crosswalk. We hadn’t done one in Palo Alto and we were eager to do one and learn from the experience. So we took them up on their offer. Now their location qualitied for crosswalk enhancements from our professional point of view. They funded the entire thing. We agreed to accept maintenance of the device and it has worked out City of Palo Alto ~ Page 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 very, very well. advantages to it. From a practical point of view if we can leverage our dollars there are a lot of I will stop well short of any legal concepts. Mr. Emslie: You couldn’t write in this ordinance any provision that collected more than the 100% cost recovery that would be precluded by the statutes. However what we spoke of earlier about having the ordinance not preclude, not making this the only avenue, I think does allow for such a negotiation between the City to receive more benefit. Essentially the state law prevents us from requiring anything more than the direct impact but if by mutual agreement discussion between the developer and the City can increase that and that part of the tradeoff would be where that was done. We want to have that flexibility so that we canhave that because we think that because of the economy of scale we could probably get more improvements out of a developer worth more value to the City in terms of our ability to implement those projects because of the opportunity cost that we would save by having it move forward. So I think it is important that we preserve that but we won’t be able to codify it. We will need to make sure that there is some flexibility that would allow for those kinds of agreements to be reached. Now the bottom line in these actions is that you can charge whatever you want as long as there is agreement. In terms of a mandate’thi~ is the maximum we can mandate but by mutual agreement we cando a lot more. Ms. Ancel: There is an accounting issue. We would have to segregate the funds for each of those improvements that were being specially funded by the developer and account for the interest and issue annual reports. I agree with what Steve said. Mr. Kott: Commissioner Burt, I think Adam has something to add. City of Palo Alto ~ Page 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Commissioner Burr: Great.Well that opens the door to that and I think we understand. Chair Griffin: Karen. Commissioner Holman: As a follow up to that if it can’t be codified how is it tracked, how would it be implemented and how would it be addressed in an opportune situation? Mr. Emslie: Well, for one to sit down and negotiate is really going to be on a larger project. There is not going to be economy of scale on a storefront to do that. So it really will be the larger projects that will either be discretionary through a legislative act like a PC or a rezoning of some nature which gives you all the ability to impose conditions, understand what the impact of those conditions are and all that. So that gives you full discretion over a project. Ms. Ancel: I would just add to that these kinds of things are going to come up where it is done in connection with our implementation of the plan and where it is practical for us to say yes, this project is ready to move forward. Mr. Emslie: There is flexibility. The expenditure plan will be periodically reviewed. Our needs are going to change. We can’t anticipate all of our needs far into the future so it is going to be an organic list depending upon opportunities that present themselves items will move up or down in priority depending on current conditions and projected conditions. City of Palo Alto Page 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 19 20 21 22 23 Chair Griffin: Karen.’ .......~"’ Commissioner Holman: This is a follow up. to a question asked earlier. Could there be clarifications provided on when monies are going to be expended on a project readiness basis and at the same time we talk about geographically balanced expenditure plan? So could you explain how those are wedded? Mr. Kott: This Commission asks very good questions. The expenditure plan is geographically balanced and I think with the maps we provided in our staff report demonstrate that. Not all the projects ready to go will be concentrated in one given area of the City. It has never been our experience that that is the case. We will actually use a balance of project readiness and with some consideration as to the location of a project with respect to a given development project having a Citywide TIF obligation. If some of these activities we have alluded to could take place, some investments could take place to implement a project on the expenditure plan. So it wouldn’t strictly speaking be project readiness, project readiness would be weighted and favored but if a developer is located in a given area and is ready to go with some improvements that work well with our expenditure plan we may very well be in a position to move that project up the list, yes. Commissioner Holman: So in the community it might be contentious if say for instance the Elk’s comes up with a project and they are ready to go and if that funded the Homer Avenue Undercrossing that would be viewed I think in that part of town as not being fair. So that is what I am trying to get at and I know you know that. City of Palo Alto ~Page 32 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Mr. Kott: There will always be that issue. I think the expenditure plan is balanced and there are many opportunities in South Palo Alto in the ~xpenditure plan. In fact some of our most pressing investment we think in the future will need to take place in South Palo Alto. Chair Griffin: I passed up Bonnie. Do you have some more? Commissioner Holman: I have a couple more. Chair Griffin: Hang on. Commissioner Burt: We still haven’t heard from the public either. Chair Griffin: So go ahead Bonnie. Commissioner Packer: I have a question on Figure 18, which listed PM peak hour trips generated on page 29. The PM peak hour trips generated in the fn’st column is that the raw trip generation assuming that a supermarket is being built for the first time on a lot that has been vacant for 50 years as opposed to net new trips? Most of the development in Palo Alto is going to be redevelopment of an existing site that has had a use that generated traffic. So how would we know which are the net and which are the raw? How would be able tO figure that out? City of Palo Alto ~Page 33 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Mr. Kott: Either through provision by a developer, if required, of a traffic impact study or we would do our own mini study you might say with the basis being the developer’s plans and the ITE Trip Generation Manual, Sixth Edition, which just came out. Commissioner Packer is making a very good point. These are net increases in PM peak hour trips. So a grocery store is remodeled say and it ends up generating no new net PM peak hour trips the store is not liable or the developer is not liable to pay a fee on that basis. Mr. Mallard-Ball: IfI can just add to that it is simple subtraction. So say looking at examples in Figure 18 if a general light industrial area is turned into a medical office of the same square footage then the fee would be $11.57 minus $2.19. It is simple subtraction there when there is a change in use. Commissioner Packer: Thank you. Chair Griffin: We will be asking the public to comment as soon as Commissioners have finished with their questions. Karen. Commissioner Holman: A couple more. We have experienced in the community something we have talked about a fairamount at this Commission, which is not about a change of use but about an intensification of use. That is very different and it goes to basically points seven and eight on page two of the Staff Report. The change of use could trigger an additional fee and what I think is a really key point here is that annual fee levels are adjusted based on construction costs. I think that is really smart. The piece that I don’t see addressed is if advancing technologies we City of Palo Alto ~Page 34 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 don’t always have a three per thousand square foot employment base so the trips generated are different. So you could very likely as we have seen in the past have an increase in trip generation without a change of use. So will there be some mechanism by which that could be evaluated periodically as well. Mr. Emslie: If the change of use does not require issuance of a permit this ordinance will not catch them nor.would it be allowed to catch them under the state statute. So if you have a use of a building that is crowding more employees in there and they put up more partitions that don’t require permits then that won’t be triggered by this ordinance. If a building comes in and they need to change it out they are going from a warehouse to an administrative office then that would require a permit then it we would catch that. Then the net new trips would be factored into this. Commissioner Holman: I understand that. So let me make sure I clear. So then what you are saying is because of state statues we cannot address the intensification issues? Mr. Emslie: Yes. There has to be a permit issue. Commissioner Holman: Okay. Ms. Ancel: The statute speaks in terms of development projects that is what you impose the fee on. So there has to be a development project for which a permit is issued. Commissioner Holman: Okay. City of Palo Alto ~Page 35 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16. i7 18 19 20 21 22 23 Mr. Mallard-Ball: IfI could just add to that it is important to realize these fees are fixed in the statute the fees will be based on the trip generation analysis, which is periodically updated by the VTA and by the Institution of Transportation Engineers. So if a development is already there the new fee couldn’t be assessed. If say in ten years time a new office building is constructed then that could be assessed a higher fee per square foot than one today if that trend that you described does occur. So there is scope to adjust these trip generation rates in the light of new data and new experience. Commissioner Holman: Okay. Then also the TDM credits that are mentioned here. I think we are all fans of the TDM program but we don’t have much of a way of monitoring or managing that in the community. So how are going to be able to know that if credits are given that the TDM program is functional? Mr. Kott: The developer would work with our TDM coordinator, Amanda Jones, and we would expect annual reports of activities. Amanda will in turn provide marketing support and other technical support to improve performance if it needs to be improved. Chair Griffin: I am wondering if we can move on down and I will come back to you again. Pat. Commissioner Burt: Back on Figure 18, which is on page 29 of the Nelson/Nygaard report, we have calculations on the various fees based on uses. We have exempted low income house for instance and exempted some smaller types of services and retail. When I look at this table there City of Palo Alto ~ Page 36 1 2 3 4 5 6 7 8 9 10 11 12 13 14. 15 16 17 18 19 20 21 22 are certain uses that provide significant other revenue to the City and that revenue might far exceed the revenue generated by such a fee. Examples are hotels Where we get transient occupancy taxes that go solely to the City or sales taxes where we have significant revenue sources to theCity. My question first is it legally an available option for the City to discount or waive fees on the TIF for certain uses that might provide revenue to the City that can be applied to these very same transportation projects provided that that alternative revenue might significantly exceed the revenue from the TIF? Mr. Kott: I will let Nellie address the legal issues but in practical terms "there’s many a slip twix the cup and lip". We may very well realize a lot of revenue but we humble transportation folks, despite the best intentions of everybody, may not see much of it. This TIF is a fee mechanism that provides assurance that the Citywide impacts of new development are in fact mitigated. That is not always the case with development. We have had very large stores in the Bay Area which have caused tremendous traffic problems which have not been fully mitigated, not in Palo Alto but in other areas, and these projects clearly contributed to municipal revenues but imposed tremendous burdens on the transportation system and users of it. Commissioner Burt: I will just add this question to Nellie. If we were to determine that certain of these uses were highly desirable to the City whether they are low income housing or high revenue taxes to the City should we not only legally make that distinction but could we assure that ’x’ percent of that revenue go to TIF projects or transportation projects on an annual basis? Ci(y of Palo Alto ~Page 3 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Ms. Ancel: I think that is the power of the purse. Obviously that would be money that doesn’t go to the General Fund or however some of these monies are allocated. So lately we can justify exempting uses in terms of the study we .would have to back out the trips that we anticipate those exempt Uses togenerate so you wouldn’t be able to put more on to the remaining land uses that are being asked to pay the fee. Commissioner Burt: My interest would not be to do something that would have a net negative impact but instead to,havea net positive impact on the resources of the City. Chair Griffin: Bonnie? Phyllis? Then we are back to you. Commissioner Holman: Last question I do believe. Schools are exempted here I believe. I know that some of the schools here do participate in partial funding for shuttle programs. So how is that going to be negotiated? Right now it is negotiated. Their participation in the shuttle program is that totally outside of this program? Mr, Emslie: Yes, It is totally outside and that negotiation would not be in any way influenced by this. It would be purely a discussion between the City and the school district. Mr. Kott: Just a clarification. Public schools are exempted. Commissioner Holman: .Yes, thank you for the clarification. City of Palo Alto ~Page 38 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Commissioner Butt: So as a follow up, private schools that increase trip generations would be subject to this kind of table? Mr. Emslie: Yes. Commissioner Burt: Thank you. Chair Griffin: Unless Commissioners have further questions we will now move on to give the public an opportunity to speak. Because they have been so patient we will grant them five minutes per speaker. If any of the rest ofy0u would like to fill out a speaker card now is the time to do that. In the meantime Tony Carrasco will be our first speaker and Tony if you would take the guest chair here we will welcome you to our table. Mr. Tony Carrsco, 4216 Darlington Court, Palo Alto: Good evening Chairman Griffin and members of the Commission. I am speaking to you as Chair of the Chamber of Commerce. Firstly thank you for those excellent questions. I think several of those questions came up in the subcommittee that we sat on. The committee was concerned about issue of fairness and competition that Commissioner Burt brought up. Having said that we applaud the Transportation Department and the Planning Department for coming up with such a program, a fee. Now why would a Chamber be in favor of a fee? We think that this is in an investment in that will make Palo Alto better in the long run. As you know we have been looking at data in terms of traffic trip generation as well as revenue. We believe that somewhere between 70% to 80% of the trips on our streets PM peak hour are residents in the City. We also believe that somewhere City of Palo Alto ~Page 39 1 2 3 4 between 60% and 70% of the revenue that comes to our General Fund is generated by businesses. We think that by these mitigation measures that are proposed in that list that Joe brought before you the City will be more walkable, more bicycle friendly and will take the trips off the streets that are uged by residents. That additional capacity will be able to go to businesses that generate the revenue that create the lifestyle that we have become used to. So that is the reason why we think it is a benefit. 5 6 7 8 We debated your question Commissioner Burt on are we competitive. It is not quite a blind leap 9 of faith but we think that by moving our City into the 21 st century in terms of traffic we are more 10 likely to get funds now being discussed both at the state level with both the Treasurer as well as 11 the Governor in addition we thing that ABAG and MTC are moving in the direction that your 12 Transportation Department has been looking at. We think that it puts Palo Alto in a position to 13 leverage money from programs that MTC might restrict if cries don’t what is being proposed. 14 We sort of remain somewhat concerned about the issue of fairness. The issues of a hotel creating 15 more revenue or Proposition 13 taxing older residents less than newer residents but I think we 16 are most concerned about the issue of being able to develop mitigation measures project by 17 project that offset the costs of this TIF. The belief that if we create a market that is negotiated 18 between transportation and development of a new projects you might come up with measures 19 that are beneficial to both. Create a list of programs that you could choose that offset the TIF. 20 For instance if you have a shuttle like Stanford does it should offset the TIF. We would like for 21 you to look at a formula and a list of criteria that offsets the TIF. Other than that I think we 22 applaud the Transportation Division and thank you. 23 City of Palo Alto ~Page 40 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Chair Griffin:Thank you Tony.Our next speaker is Audrey Jacob. Ms. Audrey Jacob, Chamber of Commerce, Palo Alto: I am Audrey Sullivan Jacob. I am Director ot~ Government Relations for the Chamber of Commerce. I have more specific comments on the ordinance. While the Chamber endorses the Transportation Impact Fee it does not want it to become a threat to business vitality, growth and development. We raised two concerns for Staff and Commission consideration. First the proposed Citywide Transportation Impact Fee is predicated on 14 principles one of which is number 12, credits against a fee for transportation demand management. The Chamber would like to see this expanded to include in lieu fees for developers subject to transportation exaction to have formulas for both the credit and in lieu fees codified in the language of the Transportation Impact Fee Ordinance. Second the Chamber wants to ensure that the City is competitive, and this goes to Commissioner Burt’s comments, with our neighbors such as Mountain View and Sunnyvale in attracting new business and development. To this end a comparison to these communities in the traffic and transportation exactions would be appreciated as an elaboration to the Campbell example in Staff’s March 11 th letter to Tony Carrasco responding to Chamber questions and concerns. Thank you for your consideration. Chair Griffin: Thank you, Audrey. Heather Tressman. Lee Wieder followed by Bill Phillips. Mr. Lee Wieder, Palo Alto: Thank you Chairman Griffin and members of the Planning Commission. I have come here wearing several hats. The most recent one of which is serving as a member of the Chamber’s subcommittee on traffic you heard spoken about and where a lot of City of Palo Alto ~Page 41 1 2 3 4 5 6 7 8 the questions that were raised by you, very excellent questions, are ones that we struggled with. So I don’t want to be redundant. I would like to add to the discussion. I would like to thank Staff for just the excellent iterations, this has been an ongoing process, and one in which they want to make sure that that nexus is very tight and is one that can hold up. I do want to go through some questions for clarification that relate to the Staff Report. Some are of substance most of which are not. Quickly, I think the 14 principles that are mentioned but there are 13 that are identified. That may just be a typo but if there is another principle that we 9 are not aware of I am just calling to your attention in the Staff Report. On page three it was 10 mentioned by the recent speaker about principle number 12 and again I think the key thing that 11 we are looking for is what is the formula that can be put into an ordinance that will make it clear 12 to us and, this wearing a hat as a developer representing the development community, so that not 13 only we as developers but the residents all know what the rules are when a negotiation happens 14 between an applicant and the City. We have clear criteria of what the negotiation can be based 15 upon. If there are certain improvements that an applicant wants to do related to the shuttle in the 16 place of and what percentage of the TIF program should it be? It is not clear to me to this point. 17 that there are clear criteria. Rather it.is just kind of opened up fo~. discussion and negotiation. 18 On page three it talks about the 7.6% and I am referring down to the bottom there, number three. 19 It says that the PM hour extra trips that are produced by a project are divided by the total peak 20 hours and it should be total peak hours unless I am mistaken. It Says total non-peak hours. So 21 please clarify if that does mean non-peak hours in order to arrive at that 7.6%. It is peak hours, 22 so just calling to your attention in terms of the Staff Report itself before it goes to City Council. 23 On page five the mention of exceptions and the point being that that is consistent with other City of Palo Alto ~Page 42 1 types of impact fees or the procedure, the word is consistent. So the 1,500 square feet I guess is 2 just a question of where it applies in other impact fees and I am sure that it does but it is not clear 3 to me. I know that other aspects are followed as impact fees are done. The comparison with 4 other cities, one of the questions that came out from the Chamber’s letter and that was responded 5 to I don’t see it as an attachment to your packet but I am sure it is a letter from Joe Kott back to 6 the Chamber. In it it says basically where there are cities that do not have a traffic impact fee. 7 Give me an example of what costs might be and the example of Campbell was given. I think it 8 comes to about $450,000 using whatever that land use scenario was. It would be helpful from 9 my point of view to have Campbell as an example or Mountain View in the comparison chart to 10 say what Campbell’s total impact fees are even though they don’t have a traffic impact fee so 11 that it would more clearly address the question Pat that you raised of saying how does that 12 compare when an applicant comes in? We are looking what the cost of doing business is. In the 13 end that cost gets passed on to the consumer in one way or another. The issue of affordable 14 housing does become critical. So it is not the TIF by itself it is what the entire impact is. My 15 overall impression of what’s before is it seems to be reasonable. I would like to have more 16 clarity on those cities that do not have a TIF and look at their entire traffic impact fee. If you 17 notice the chart, because I do a lot of work down in Gilroy, Gilroy has the largest impact fees. 18 You say $35,000. At the same time that city has been challenged legally by the homebuilder’s 19 association looking at the nexus issues. I think it is appropriate. I am saying that respectfully to 20 a sister city. Let me conclude by just asking again for clear criteria that can trigger where there 21 can be credit given. I would like to appreciate your deliberation and Staff’s. Thank you. 22 23 Chair Griffin: Bill Phillips will be our last speaker unless someone else wishes to fill out a card. City of Palo Alto ~Page 43 1 2 Mr. Bill Phillips, Stanford University: I just wanted to elaborate on a subject that has been 3 mentioned numerous times tonight and that is the credit for specific work done that is 4 contemplated under the fee proposal. I am probably the only one here now that experiences how 5 this works in practice because we at theResearch Park presently have a $85 t per square foot fee 6 that is applied. When we have a significant project we do a TIA. Often times the TIA identifies 7 a specific piece of the total work that the $851 is based on. Now the way the $851 works is the 8 number of intersections in the Research Park and near the Research Park are iden.tified and the 9 work to improve those intersections for the entire Research Park region is assessed, developed 10 and then you get the $851 much like you have developed in this Transportation Impact Fee a list 11 of projects, what goes into those projects in terms of cost and then what assigned percentage of 12 those projects should be paid through the new development. Well that is the way the traffic fee 13 of $851 now works. However, the City hasn’t usually done all of that work beforehand so you 14 are not just repaying the City for work that is already done. What happens is the work is in plan, 15 it may not occur for several years but your TIA for a specific project may say this one 16 intersection of this group of intersections that needs to be improved needs to be impr6ved now 17 for this project if the project is going togo ahead. The way it has worked in my experience with 18 the City, and I don’t know what was the intention or the understanding or how discretionary that 19 is, but the way it works now is if a right turn lane has to be put in at a certain intersection that is 20 contemplated under the work that established the $851 then we might pay that work. It might be 21 a level of work for that right turn intersection that comes to say $10.00 per square foot. The TIA 22 and the condition of the project is that work has to be done, we pay that amount of money and 23 we get a credit for the $851 because we are applying money to a specific project that the City City of Palo Alto ~Page 44 7 8 9 10 11 12 !3 14 15 16 17 18 19 20 21 22 23 1 now presumably doesn’t have to do later on. I think that is the way it should work in clear 2 instances under the Transportation Impact Fee. So for example ifa segment of the Research 3 Park shuttle that is identified in here as part of the program that develops this square footage fee 4 becomes a project condition for a specific project in the Research Park then there should be a 5 credit up to the amount of work that is done for that element and reimbursed in the meeting of 6 that condition. So I would just bring to your attention the way it works in practice. My only concern sort of came about-when I heard Steve say in our absolute discretion so at that point I have the same issue that others have expressed tonight. That is, can we get language that makes it clear what the intent is with respect to these things? That’s all. Thank you. Chair Griffin: Thanks, Bill. Then I have no other speaker cards so I will in fact close the public hearing and if we could call an intermission here that would be appreciated by a number of my colleagues. We will be back in seven or eight minutes. Colleagues and members of the public we will reconvene our meeting. Before we bring the discussion back to the desk I am wondering if Staff wanted to make any comments in response to what the public might have said. If not that’s fine but I just wanted to provide you with that opportunity. Mr. Emslie: Well, real briefly our initial comments regarding our recommendation that we do retain the flexibility to give credits we believe addresses several of the comments that were made by the speakers. Because it would be difficult to build in a formula that would predict that there is a second tier of evaluation we would propose establishing some criteria that would be used to City of Palo Alto Page 45 1 2 3 4 5 6 7 8 9 .10 11 12 13 14 15 16 17 18 19 20 21 22 guide discussions. We would recommend the Commission direct Staff to prepare that and include that in the draft that goes to Council so that the Finance Committee would have the ability to review those criteria that we would use to establish essentially the credit portion of this. Chair Griffin: You are saying that you look to us to direct you to clarify that portion. Mr. Emslie: Yes we do and move the ordinance on for consideration by the Finance Committee and the City Council. Chair Griffin: And have that be part of our recommendation. Mr. Emslie: Yes. Chair Griffin: Joe. Mr. Kott: Chair Griffin a couple of points. One is that we would urge the retention of a clear differentiation between actions and projects and programs that are meant to address site specific deficiencies those are usually intersection specific deficiencies and actions that are intended to address citywide impacts. So that any so-called in lieu contribution would beone that would be meant to and designed to and in conformity to our expenditure program to address citywide impacts of new trip growth. City of Palo Alto ~ Page 46 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 The second point just a clarification. We are proposing on TDM, the references made to the TDM program, we are proposing a formula for credit given on TDM efforts and that is on page 15 of the Nelson/Nygaard report. Ms. Ancel: In a sense that is not a credit. That reduces the trip generation so the fee is going to be less because you are creating fewer trips. Mr. Kott: It reduces the fee and liability. Yes. Ms. Ancel: We are talking about in terms of development and improvement. Chair Griffin: If there are no other clarifications? Commissioner Burt: On that last one if I understand it it’s not a credit in a literal sense but it reduces the baseline of the trips and the consequent fee. Mr. Kott: Yes. The fee liability is reduced. Chair Griffin: Did you wish to say anything else Adam? Mr. Millard-Ball: Yes. Just to add that these are ~aken directly from the.guidelines here that are produced by VTA that the actual amount of the credit would really depend on the traffic study City of Palo Alto ~Page 47 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 that was conducted for that development. So it is not a formula that would be included in the ordinance. It is taken from the guidelines from VTA on how to conduct the traffic studies. Chair Griffin: Bonnie. Commissioner Packer: I would like to follow up with a question ifI may with this? Chair Griffin: questions. All right and then at some stage here when mn through this we will cease the Commissioner Packer: I have a question on how you determine when something is citywide versus site specific. The reason I ask that is because one of the project although it is a small one is this spot bike/ped improvement which sort of smells like a spot intersection improvement. A developer might argue that a site specific improvement for which they would like credit is really going to benefit a wide area because of x,y,z. So how do we make that distinction more clear? Mr. Kott: There is a vei-y clear test: We certainly.hear creative arguments. We are used to that. The clear test is whether or not the action mitigates a significant impact on level of service. An improvement that brings a level of service standard back up to our minimum is one that is a mitigation for intersection deficiency. A spot improvement for bike and pedestrian might be to make a pedestrian crossing more visible and safer as well as more navigable as part of a longer bike or pedestrian route. It would not per se mitigate a deficiency in vehicular level of service but make the crossing much better for those who use it. City of Palo Alto ~Page 48 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Chair Griffin: Pat. Commissioner Burt: Earlier I was asking about the possibility of fee offsets that might be associated with uses that generate other fee incomes for the City that exceed the TIF fee and a possibility that a portion of those fees could be allocated to TIF programs so that we get a net positive impact. In essence say partially incentivizing people to put in hotels as opposed to other trip generating uses like offices that have very few other benefits for the City either from a revenue standpoint or some of the other jobs/housing imbalances or various other considerations we might have. I would presume that even if there were some interest on behalf of the Commission for this concept tonight it would be difficult to flesh out any details that might be able to be put in a proposal to Council. If that is the case, is this something that Staff might think they could prepare an alternative to the Council that the Commission wouldn’t necessarily have an opportunity to make a recommendation on tonight? Is that something that is feasible that could be placed as one of the alternatives to Council to then consider after Staff has had a greater chance to put something out there? Mr. Kott: Well, Commissioner Burt I think Nellie made a very telling point and that is first of all legislative prerogative of our Council. General Fund monies get allocated through that body. We of course feel that transportation projects and programs are by far the most important need. We wouldn’t be doing our job if we didn’t think that. As the world works there is no guarantee that the Citywide transportation mitigation program would get funded through the General Fund revenues generated by high tax yield uses. I would have to defer to Nellie but it occurs to me City of Palo Alto ~Page 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 that it would be very difficult to make that guarantee given legislative authority to make those budget allocations. Commissioner Burt: Before Nellie answers, if the alternative were presented to Council were that ’x’ percent of any revenue to the City exceeding what might have come from the TIF fund of a given project, say a hotel, if that percent the Council chose to allocate that fund by obligation to TIF is that legally feasible? Ms. Ancel: Well, they set their budget every year. I don’t know the other kinds of income we get besides like the TOTs that I am pretty certain goes to the General Fund. They could obligate it but I think it would be done on a budget by budget basis unless they adopted an ordinance that said this and I am not sure how that would work with I think a lot of our general revenue producing taxes. We would be turning it into a special tax if we said we are allocating it for these types of projects. So it raises some other kinds .of legal issues, Prop 218, does there need to be a vote, that kind of thing. I would need to look at it in more detail but off the top of my head it raises those .kinds .of questions. Mr. Kott: Commissioner I may also point out that I have been on the City Staff level Capital Improvement Program Committee in its current incarnation, which is the Infrastructure Management Plan Committee for five years now. I can tell you there is tremendous demand for investment funds for many, many different worthy projects. Sometimes one feels like the voice in the wilderness arguing for transportation projects. It can be rather difficult even in the context of a Staff level group to get guaranteed funding. City of Palo Alto ~Page 50 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Commissioner Burt: Well that is why .I was interested. Not something where you would be subsequently battling for those funds but that we create an incentive to put more funds in the pool and have a net gain or certainly no net loss to the TIF funds as a result of increasing the overall revenue to the City because we created a set of incentives that results in the sorts of businesses that we desire. That may notbe feasible but those are the kinds of incentives that work for private industry and can work for the public sector simultaneously. If just kind of think narrowly in terms of well we will just get one defined tax and we may end up with folks or businesses that are not what we’d like that don’t provide either the sorts of uses that we prefer or the revenue to the City that we prefer then maybe we don’t come out on top. It may not be feasible to do it but I wanted to explore it if possible. Chair Griffin: I am wondering if any Commissioners have questions otherwise we would get into discussions like Pat has just started here which are discussions of opinions and different approaches that we might take with this issue. No more questions? Then let’s bring it back to the desk and talk about it. Are there any comments that you would like to make in response to Pat’s suggestion? Commissioner Packer: I think theoretically it is a good concept if we were concerned that the imposition of this additional fee on top of the other fees was a potential deterrent to the development of some of these revenue producing entities like the hotels. Bu~ I don’t see that and I don’t hear evidence that it is going to be a deterrent. The Chamber is in favor of it and developments will probably happen and the legal issues involved with trying to allocate monies City of Palo Alto ~Page 51 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 1 hoping that the City Council will allocate that revenue to things might make it really difficult to 2 impose. So I don’t really think it would be necessary to do that. Let’s just go along with the TIF 3 because it assures money for Joe even if it is not the whole thing. It is a little bit more money 4 than he might otherwise get for some of these exciting projects. That is mainly all it is. It is sort 5 of icing on the cake for a lot of projects that would be in the hopper. I think it is fine. In fact I 6 think the whole concept is fine. When we come to it I just have some concerns that I hope get 7 addressed with various clarifications but in general I think the proposal if a good one. It is reasonable. I almost wish it could be a higher amount but it can’t be and probably because it is a small amount, I was concerned at first was this going to put a damper on the production of sales tax revenues. That was my first question when I started to read this but seeing that it was a relatively small additional fee on top of the other fees that developers are already used to then I don’t have that same Concern. Chair Griffin: Phyllis. Vice-Chair Cassel: That was a good question you asked because we certainly want to have thought about that question, i am interested that the Chamber of Commerce was not claiming that we were favoring one over the other but they might not do that anyway, wanting to favor all of their businesses. So I am trying to think here what businesses migrate to the City because of normal business practice that would not come that would be an advantage to us. You seem to be implying that hotels might stay away. I am trying to think of businesses that would stay out of the area other than the small businesses, which is what the 1,500 square feet is for. City of Palo Alto ~Page 52 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Commissioner Burt: Just real simply, as Mayor Beecham spelled out real clearly in his State of the City Address our revenue to the City and especially those revenues that have greatest variability and most direct income to the City are from sales tax and transient occupancy tax. So hotels and gales tax generators, normal retail outlets and automotive dealerships are the sorts that benefit the City from a revenue standpoint. So the question is, is there a way to create incentives. Commissioner Packer spoke about this is not a significant disincentive and that I think actually was in my questions earlier that helped establish that. Businesses don’t make decisions solely based upon existence of disincentives they also make decisions based upon presence of incentives. Often you work both margins if you want to create a desired outcome. This may not be a feasible one to do. I think that it would be beneficial to the Council for Staff to explore it a little bit more and if there is feasibility to it to at least allow the Council to have a discussion that I don’t think we can really have tonight because Staff hasn’t had adequate forewarning to be able to really explore it in depth. I wouldn’t presume to know the answer myself. It may be when they look at it that either it provides very little incentive and it is not worth doing or that there are legal hurdles that make it not worth doing. Alternatively it might be something that is feasible. So that was the reason for bringing it up. Chair Griffin: Karen did you wish to wade in on this particular item or do you have some new topic that you would like to discuss? Commissioner Holman: No, I think I am good. Chair Griffin: Phyllis would you bring a motion for us then? City of Palo Alto ~Page 5"3 1 2 3 4 5 6 7 8 9 10 11 12 13- 14 15 16 17 18 19 20 21 22 23 MOTION Vice-Chair Cassel: Let me move the Staff recommendation that the Commission recommend that the City Council adoption of the proposed Citywide Transportation Impact Fee and associated Ordinance to implement the fee with the addition that the Staff prepare criteria to be used when negotiating with large developments for possible dedicated use of the TIF funds expected of that development. I think that is how you want to word it. Is that clear enough that you understand what I said? Ms. Ancel: As I understand it you want us to look at the criteria for how we give them credit for in lieu improvements in lieu of the fee or not necessarily improvements but shuttle service, things that are elements of the program that a developer is proposing to provide, that we would value somehow and give them a credit against the fee. Vice-Chair Cassel: Is the way I worded it okay for the motion? Mr. Emslie: Yes. Vice-Chair Cassel: Then your idea we can add later. Pat wanted to have the Staff look to see to make sure we are not providing disincentives to businesses, or if possible if any incentives can be offered through this program we want to make sure that we don’t miss that. City of Palo Alto ~Page 54 1 2 3 4 5 6 7 8 9 10 11 12 13 14- 15 16 17 18 19 20 21- 22 23 Commissioner Burt: Along the lines of possible fee credits for highly desired uses. Ms. Ancel: I think it would be more of an exemption. Commissioner Burt: Exemption for uses that are highly desired as a result of their revenue generation to the City and if Commissioner Cassel finds that wording acceptable. vice-Chair Cassel: Have you written it down so that.they can have it? Commissioner Burt: I think Nellie may be able to read it back. Commissioner Packer: Can I add a couple more possibilities to your motion? Chair Griffin: Let’s make sure that Nellie is happy with what we have so far. Ms. Ancel: So we are going to look at the feasibility of.a program that either gives a credit or exempts highly desirable uses that are desirable because of the revenues that they generate through the sales tax or the TOT tax. I think the other side of this was we wanted to be able to commit some of those funds that they generate to the program. Commissioner Burt: Yes and provided that the net revenue to the TIF program would in no way be diminished as a result of those credits. City of Palo Alto ~Page 55 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Chair Griffin: Can we get a second? Vice-Chair Cassel: Yes, can we get a second at this point and then we can discuss. Chair Griffin: Onething at a time. SECOND Commissioner Burt: I will second the motion. Chair Griffin: That is helpful. And you have friendly amendments? Commissioner Packer: A couple friendly amendments. Chair Griffin: Why don’t you try them? Commissioner Packer: Okay. I would like to see if the ordinance could be made clearer. Let me just explain. It refers to the nexus study as though the projects were the projects that were being approved and I think the language in one is a little unclear that way. There could be some language of the ordinance that says something to the effect that projects like these or some good language. Commissioner Holman: What page? City of Paio Alto ~Page 56 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 1 2 Commissioner Packer: It talks about the eligible citywide transportation capacity enhancements 3 that are identified in the impact fee nexus study. This is page four of the report. The way it 4 reads there the ones it identifies Council could think that they were approving for example the 5 extension of the shuttle to San Antonio and I think it should be made clear that you are talking about projects like this and not exactly in the way they are identified. It is just a technical clarification. Ms. Ancel:. But the improvements that are part of the expenditure plan are all described in the nexus study. Commissioner Packer: Yes, I understand that. My question was are these the improvements in their exact form or are they improvements like that and the answer was they are improvements like that they are not the final projects. So the clarification that I would request is that it is clear that by the City Council approving this it is not approving the final projects. Mr. Emslie: Right. We think that that language could be made more clear in here. Commissioner Packer: Is that acceptable? Vice-Chair Cassel: It is acceptable to me. City of Palo Alto ~Page 57 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Commissioner Packer: definitions. Clarify the reference in the ordinance to the proposed projects in the Vice-Chair Cassel: Where is this. Commissioner Packer: Page four, Eligible Citywide Transportation Capacity Enhancements should be clarified. The other clarification because it isn’t that clear in the ordinance is that the changeofuse should probably be defined as being triggered by the building permit or language like that. It would be helpful to actually see that in the ordinance. Chair Griffin: Do we have. agreement with the seconder? Bonnie, those were your items? Commissioner Packer: Those were my clarifications. Chair Griffin: Did you have anything to hang on the Christmas tree? Commissioner Holman: Bonnie took my ornament. Commissioner Burt: I would like to speak to the motion. Do you want to speak to the motion? City of Palo Alto ~ Page 58 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Vice-Chair Cassel: Yes. We have been a long time developing this and I was really delighted to see this ordinance before us and to see the report we have. We need some dedicated funds citywide and I am glad that these are citywide. I wanted to be sure that we understood and that other people Understood that these improvements are based on citywide action and not exactions for immediate development that has to take place in the immediate development of a particular project. That is clearly understood. I could go on but I think I will let Pat speak. Chair Griffin: Would the seconder make some comments, please? Commissioner Burt: The only thing I have to add other than affirming what Commissioner Cassel said and other Commissioners have said that we are enthused about his overall is that I realize another good example of where this incentive might come into play. We have had discussions about the fact that in our sales taxes we often overlook one of the most significant forms of sales tax in the City and that is business to business sales tax. It is not a retail. It is when a company like Hewlett Packard in the case of Menlo Park Sun Microsystems chooses to state that their point of sale for sales tax purposes is a given city. Palo Alto historically has done. almost nothing to incentivize companies to use Palo Alto as that point of sale. We have now recently had discussions and Director Emslie has spoken about this is something that potentially could be done but we haven’t provided any tools to induce companies to choose Palo Alto as their point of sale for their business to business taxes. This might be one of those. On the other hand after the Staff presents the options I might oppose this thing. I want to see the options first and I think Council would like to see the options. So that might be a t0ol because it has been stated to us that often businesses don’t really give much of a hoot where the point of sale is. It is City of Palo Alto , Page 59 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 kind of an arbitrary decision for them and unless the city engages them and either asks them or even can provide an incentive they don’t have much reason to decide where they are going to locate that and yet it can be millions of dollars to a city. Chair Griffin: Karen, you are telling me you did find an ornament. Commissioner Holman: Yes. It is kind of a question and I am not sure if it belong in the ordinance or not but possibly so and it is sort of a question for Staff before I propose something. As a potential amendment would be to establish criteria for credits for the TDM program for example so that there is clarification of that. Ms. Ancel: Ibelieve that that is part of the manual. The VTA has a methodology for determining the number of trips you take away if somebody has a TDM program. Adam may be ¯ able to speak to that. Mr. Millard-Ball: That is correct.. I would be reluctant to see that as something that should be in the ordinance because it is an established manual that is used by VTA for most traffic studies in Santa Clara County. It gives them the flexibility to evolve with traffic engineer practice. Ms. Ancel: The ordinance does say that we are going to be using that VTA methodology. Commissioner Holman: I didn’t think it belonged in there. Then the other thing was just a clarification that Pat’s proposal that is now part of the motion the financial benefit to the City of Citfiof Palo Alto ~Page 60 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 course that would not be the only criteria so I don’t know how that should be worded in the ordinance. Vi~e-Chair Cassel: What Pat’s proposing is that they do an assessment of that and make a recommendation to City Council. They will look at the options. Commissioner Burt: And not necessarily even a recommendation.but simply present that as an alternative. I think that Karen’s concern is to make sure that other considerations are part of what Council will look at as far as the overall impact to the City and the residents. I certainly would concur with that and I think in a way it goes without saying that Council will, if they did consider this, they would not consider it in isolation but would consider it as part of the overall mix of City priorities. Commissioner Holman: Yes, and I would just like to say that when it does go to Council that that language is clear~ I am sure Staff would write it this way. We want it clearly stated that financial considerations and benefits to the City wouldn’t be the only criteria or outweigh what the balance should be. Chair Griffin: All right. Can we vote this up? Any more comments? Commissioner Packer: I would like to just give another congratulations to the Staff and our consultants on a very excellent, very clear study. I think the nexus is so clear that I think you more than met the guidelines. It seems to me the requirements of the California Code and it is so City of Palo Alto " ~ Page 61 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 good for people to start thinking about the impacts and how the change of mode of travel can really change things in our City. So this imposition of the fee and maybe the discussion of that will help raise the awareness part of the City Council and our citizens about thinking in these terms in a very creative way. So I really applaud the change of thought and I am really proud to be a part of the process. Commissioner Burt: On that note I would like to add one more congratulations and that is I thoughtit was Very insightful and progressive on behalf of the Chamb.er of Commerce to recognize that the commerce of the City is benefited by the various quality of life aspects that make our City attractive and easy to move about in. I thought it was a very farsighted approach that they took and I appreciate it. Mr. Kott: Yes. Vice-Chair Cassel: I agree with you. Chair Griffin: To come forward and to say that for the greater glory we are backing you. Excellent. I am not going to add anything to what has already been said. I think we have covered the ground adequately here and if we can now vote this item up. MOTION PASSED (5-0-0-1, Commissioner Bialson was absent) City of Palo Alto ~ Page 62 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 All those in favor of the amended motion say aye. (ayes) unanimously. Thank you Staff. Opposed? That measures passes This takes us to Commission Member Questions and Comments. COMMISSION MEMBER QUESTIONS, COMMENTS, AND/OR ANNOUNCEMENTS. Chair Griffin: I will announce that we do have at long last a new colleague. Lee Lippert will be joining us next week. He unfortunately had a previous engagement in Sacramento tonight. So we will see him at our next meeting. Any other comments? Otherwise I will ask for a motion to approve the minutes of our Special meeting on February 25th. APPROVAL OFMINUTES: Special Meeting of February 25, 2004. Chair Griffin: Bonnie you will move? MOTION Commissioner Packer: So moved. SECOND Vice-Chair Cassel: Second. City of Palo Alto , Page 63 1 2 MOTION PASSED (5-0-0-1, Commissioner Bialson was absent) 3 Chair Griffin: I have a second. All those in favor say aye. (ayes) There is no opposition for 4 that motion. 6 7 Our next meeting is therefore the special meeting on March 24, 2004 and I declare this meeting adjourned. 8 9 NEXT MEETING: Special Meeting of March 24, 2004. 10 11 A.DJOURNED: 9:15 pm City of Palo Alto Page 64