HomeMy WebLinkAbout2002-03-25 City Council (3)TO:
City of Palo Alto
City Manager’s Report
HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENTS:ADMINISTRATIVE
SERVICES/PLANNING
DATE:MARCH 25, 2002 CMR: 188:02
SUBJECT:ORDINANCE TO ESTABLISH DEVELOPMENT IMPACT FEES
FOR PARKS, COMMUNITY CENTERS AND LIBRARIES
RECOMMENDATION
The Finance Committee recommends that Council:
1)Approve the recommended levels for new development impact fees for parks,
community centers and libraries as shown in Tables 1 and 2 on pages 2 and 3;
2) Approve the recommended policies related to exemptions and implementation; and
3) Adopt the attached ordinance to establish the proposed development impact fees.
BACKGROUND
On February 20, 2002 staff presented the Finance Committee with a report concerning
potential development impact fees for parks, community centers and libraries
(CMR:146:02, attached). Under California law (AB 1600), cities have the ability to
charge new development for the cost of public facilities and services attributable to the
development. The February report contained the results of a community forum regarding
impact fees, and made recommendations for new community services fees. A report
concerning an increase in the existing housing-in-lieu fee and transportation fee
(CMR: 150:02) was presented at the same meeting.
Discussions at the February 20, 2002 Finance Committee meeting included community
reaction, evaluation of fee levels, and policy issues related to exemptions and
implementation. This report forwards to the City Council recommendations made by the
Finance Committee at that meeting.
CMR:188:02 Page ! of 5
COMMITTEE REVIEW AND RECOMMENDATIONS
Fee Levels
The Finance Committee voted 4-0 to accept staff’s recommended residential fee levels
totaling $10,580 for a new single-family home and $6,930 for a new multi-family unit.
The residential rates are at 2/3 of those supported by the nexus study. The Committee
voted 4-0 for nonresidential fees above the levels proposed by staff, suggesting
community services impact fees totaling $3.75 per square foot for commercial/industrial
development and $1.70 per square foot for hotel/motel development. These levels
represent the full cost recovery fee levels for nonresidential development justified by the
nexus analysis, ensuring that nonresidential development projects fully mitigate the
impacts they have on Palo Alto’s parks, community centers and libraries.
Tables 1 and 2 display current impact fees and full cost-recovery fee levels for parks,
community centers and libraries based on the nexus study. Finance Committee’s
recommended fee levels are also displayed. To see the effect of these new fees on the
total amount of impact fees that would be paid by new commercial and hotel
development, Table 2 also shows proposed revised fees for housing and traffic. These
revised fees are presented to Council in a companion report (CMR: 189:02) in conjunction
with this report.
Table 1
Recommended Impact Fee Levels
Residential
Current Fee Recovery Fee
Level.Level
Single Family (per home)
Parks
Community Centers
Libraries
Total fee per new home
0
0
0
0
11,884
2,844
1,070
15,798
Multi-Family (per unit)
Parks
Community Centers
Libraries
Total fee per new unit
$
$
0
0
0
o
Proposed Fee
Level
$7,960
1,900
720
$ 10,580
7,770 $5,210
1,860 1,250
699 470
10,329 $ 6,930
CMR: 188:02 Page 2 of 5
Table 2
Recommended Impact Fee Levels
Nonresidential
Current Fee Level
Full Cost Recovery
Fee Level Proposed Fee Level
Commercial/Industrial (per sq. ft)
Parks $$ "3.38 $3.38Community Centers 0.19 0.19Libraries0.18 0.18Housing4.21 57.81 15.00
sub-total, w/o Traffic 4.21 61.56 t8.75Research Park Area Traffic 3.03 8.20 8.20Total per new square foot $7.24 $69.76 $26.95
Hotel/Motel (per sq. ft)
Parks $$1.53 $1.53Community Centers 0.09 0.09Libraries0.08 0.08Housing¯ 4.21 57.81 15.00Total per new square foot $4.21 $59.51 $16.70
Although the Committee unanimously recommends adoption of the above-proposed
nonresidential rates, there is a desire to preserve local services and encourage the
retention of retail outlets in town. The Committee directed staff to perform further
analysis and return to Council at a later date with the feasibility of lower fee levels for
retail development.
The Committee also approved the above residential rates. However, several members of
the community, as well as Committee members, expressed a concern about substantial
residential rebuilds and a desire to encourage small multi-family dwellings. The
Committee asked staff to further study the correlation between residential square footage
and the population residing therein, in order to examine the advisability of charging fees
when a large home replaces a smaller home, and to charge lower fees for smaller multi-
family units. Such an analysis will require further nexus study, the results of which will
be brought to the Council.
Exemptions
The Finance Committee agreed with staff recommendations concerning exemptions for
community services impact fees for: existing residential units and existing nonresidential
square footage; public facilities and schools; and projects that are 100% permanently-
affordable housing for very low-, low-, and moderate-income households.
The Committee als0 discussed and rejected the idea of an exemption for small
nonresidential expansions as a way of promoting the development of local retail business.
CMR:188:02 Page 3 of 5
The Committee preferred instead to direct staff (as specified above) to evaluate possible
lower retail fee levels.
Implementation
The Finance Committee recommended that the new community services fees apply to
development projects based on the date of final approval of the projects. Resolution No.
8124, adopted by Council on January 28, 2002, permits the City to impose conditions of
approval on development projects to bear their fair share of the cost of these facilities via
development fees, an assessment district or othermechanisms until impact fees have been
approved by the City Council and become effective. Thus, any projects for which the
final approval was received after January 28 would be subject to the new fees or
equivalent mechanism.
RESOURCE IMPACT .
The Finance Committee recommends slightly higher fee levels than those proposed in the
earlier report. The following revenue scenario, based on average development in Palo
Alto over the last four years~ is revised to reflect those fee levels. Precise revenue
projections are difficult, as the amount of development in any given year varies greatly.
The following table shows an annual revenue scenario assuming seven new homes, one
15-unit apartment complex, and 100,000 square feet of commercial development.
Table 3 -Revenue Scenario
Potential Revenue
Parks $471,870
Community Centers $51,050
Libraries $30,090
Total $553,010
POLICY IMPLICATIONS
The fee levels proposed by this report are justified based on the impacts that new
development has on City services and facilities, and are consistent with prior Council
direction to implement development fees. The Finance Committee considered Council
policies, and priorities in determining its recommendations regarding fee levels and
. exemptions.
ALTERNATIVES TO RECOMMENDATION
Council has alternatives to adoption of the proposed community services development
impact fees as specified in the attached report to the Finance Committee (CMR: 146:02).
CMR: 188:02 Page4 of 5
TIMELINE
The new fees will become effective 30 days following Council adoption of the ordinance
(rather than the previously assumed 60 days), and will apply retroactively to those project
applications receiving final approval after January 28, 2002.
Staff will return to Council following further study related to community services fees.
As directed by the Finance Committee, staff will examine the advisability of lower retail
fee levels, fees for substantial residential rebuilds, and lower fees for smaller multi-family
units.
ATTACHMENTS
Attachment 1: Ordinance of the Council of the City of Palo Alto Amending the Palo
Alto Municipal Code by Adding Chapter 16.58 Establishing Impact Fees,
to be Imposed on New Development, for Parks, Community Centers and
Libraries
Attachment 2:CMR: 146:02 Ordinance to Establish Development Impact Fees for Parks,
Community Centers and Libraries (as presented to Finance Committee
February 20, 2002)
Attachment 3: Presentation made to Finance Committee February 20, 2002
PREPARED BY:
Sr. Financial Analyst, Administrative Services
Administrator, Planning and Community Environment
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
CARL YEATS
Director, Administrative Services
EI~ILY HARRISON
Assistant City Manager
CMR:188:02 Page 5 of 5
ATTACHMENT 1
ORDINANCE NO.
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO
ALTO ORDINANCE OF THE COUNCIL OF THE CITY OF
PALO AbTO AMENDING THE PALO ALTO MUNICIPAL CODE
BY ADDING CHAPTER 16.58 ESTABLISHING IMPACT
FEES, TO BE IMPOSED ON NEW DEVELOPMENT,FOR
PARKS, COMMUNITY CENTERS AND LIBRARIES
The Council of the City of Palo Alto does ORDAIN as
follows:
SECTION I, Findings.
(a) Following discussion of the Long Range Financial
Plan on July 17, 2000, the Council directed that a study be
undertaken to assess the impact of new development upon the
existing City parks, community centers and libraries.
(b) Based upon that direction, the City commissioned
the preparation of a nexus study, City of Palo Alto Parks and
Community Facilities Impact Fee Study, dated September 18, 2001,
and prepared by DMG-MAXIMUS (hereinafter, "Study").
(c)The Study provides a detailed legal framework for
the imposition of development impact fees for parks, community
centers and libraries, defines the facilities that could be
.funded by such fees and specifies the levels of fees that could
be justifiably charged to new development to fund the identified
facilities.
(d) The Study is. hereby adopted and shall serve as
the basis for imposition of the fees established by this
ordinance. In particular, the Study:
I.Identifies the purpose of each fee;
2.Identifies the use to which the fee will be put;
3.Shows a reasonable relationship between the fee’s
use and the type of development project on which the fee is
imposed.
4.Shows a reasonable relationship between the need
for the public facility and the type of development project on
which the fee is imposed; and
020320 sm0032527 1
5. Shows a reasonable relationship between the
amount of the fee and the cost of the public facility or portion
of the public facility attributable to the development on which
the fee is imposed.
(e) After considering the specific pro]ect
descriptions and cost estimates identified in theStudy, the
Council approves of such project descriptions and cost
estimates, and finds them reasonable as the basis for
calculating and imposing the development impact feesestablished
by this ordinance.
.(f)The projects and fee methodology identified in
the Study are consistent with the Comprehensive Plan, and the
mitigation of.impacts.by new development upon the City’s parks,
oommunity centers and libraries is in accord with numerous
Comprehensfve Plan goals, policies and programs, as enumerated
by the Council in Resolution No. 8124, adopted January 28,. 2002.
(g) Adoption of the fees
¯ ordinance is in the public interest.
established by this
SECTION 2. ~Chapter 16.58 is hereby added to Title 16
[Building Regulations] of the Palo Alto Municipal Code to read:
Chapter 16.58
Development Impact Fees for Parks, Community
Centers and Libraries
Sections:
16.58.010
16.58 020
16.58 030
16.58 040
16.58 050
16.58 060
16.58
Definitions
Applicability
Exemptions
Timing of Payment
Creation of Special Funds
Fee Review
070 ’ Severability
16.58.010 Definitions. For the purposes
chapter, the following definitions shall apply:
of this
(a)"Affordable residential housing" shall mean a purchase
price or rental price that is affordable to a
’moderate,’ ~low’ or ’very low’ income household as
those terms are defined by the California Department
020320 sm 0032527 2
of Housing and Community.Development, as applicable to
Santa Clara County.
(b)"New development" shall mean, with respect to
residential development, any development that creates
additional residential units. "New development" shall
not mean replacement of an existing residential unit.
"New development" shall mean, with respect to
nonresidential development,any development that
creates additional square footage. Where a
development project includes replacement of existing
square footage, the "new development" shall mean only
the portion that constitutes additional square
footage.
16.58.020 Applicability.The following fees are
hereby established and shall be imposed .as a condition of the
approval of, or permit for, any new development, whether
residential or nonresidential, except as otherwise exempted by
this chapter:
(a)A fee, known as a Park Development Fee, to fund
acquisition of land and improvements for neighborhood
and district parks, in an amount as set forth in the
Municipal Fee Schedule.
(b A fee., known as a Community Center Development Fee, to
fund development and improvements to community
centers, in an amount as set forth in the Municipal
Fee Schedule.
(c)_ A fee, known.as a Library Development Fee, to fund
development and improvements to libraries, in an
amount as set forth in the Municipal Fee Schedule.
16.58.030 Exemptions. The provisions of this chapter
shall not apply to the following:
(a)
(b)
(c)
by recordable means,
affordable;
City buildings or structures;
Public school buildings or structures;
Residential housing, either for sale or rental, which,
is permanently obligated to be 100%
020320 sm 0032527 3
16.58.040 Timing of Payment.
(a) The obligation to pay the fees established by this
chapter shall accrue as of the date the first discretionary
approval is given for the development, or if no discretionary
approval is required, as of the date a complete application is
submitted-for a building permit for the development. Fees shall
be due and payable as of the date a complete application is
submitted for a building permit for the development. Fees shall
be due and payable to the City of Palo Alto prior to issuance of
a building permit for the development, and shall be calculated
at the rate of the fees in effect as of the date the obligation
to pay the fees accrued.
(b) Payment of the fees may 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 development, which from the date of
recordation, shal! 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 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
attorneys fees. The director of planning and community
environment shall be authorized on behalf of the City to execute
the agreement described in this section, in a form acceptable to
the City attorney. "
16.58.050 Creation of Special Funds. .The city manager
is hereby directed to establish and maintain the following
special funds, into which all fees of each type described in
Section. 16.58.020, and any interest thereon, shall be deposited.
Each fund shall be maintained as a separate capital facilities
account in a manner to avoid any commingling of the fees with
other revenues, funds or accounts of the City. Upon receipt and
entry into the accounting records for each fund such monies
shall be considered committed to the uses described in
16.58.020.
The special funds established by this section are:
(a) Park Development Fee Fund
020320 sm 0032527 4
(b)Community Center Development Fee Fund
(c)Library Development Fee Fund
16.58.060 Fee Review. On an annual basis following
the enactment of this chapter, the city manager shall review the
estimated cost of the described public improvements to be funded
by the fees, the continued need for those improvements and the
reasonable relationship between such¯ need and the impacts of
pending or anticipated new development within the City. The
city manager shall report his or her findings to the city
council at a noticed public hearing and recommend any adjustment
to the fees or other action as may be needed.
16.58.070 Severability.If any provision of this
chapter or the applicability thereof to any person or entity is
held to be invalid by a court of competent jurisdiction,¯ such
invalidity shall not affect any other provision of this .chapter
which can be given effect without the invalid provisions or
application; and to this end the provisions of this chapter are
declared to be severable.
SECTION 3. The Municipal Fee Schedule is hereby amended
to add development fees for parks, community centersand
libraries, as shown on Exhibit "~’, attached heretoand
incorporated herein by reference.
SECTION 4. This is not a project for purposes ofthe
California Environmental Quality Act (CEQA). However,
individual improvement projects to be funded by the fees hereby
established and individual development projects upon which the
fees Will be imposed shall be subject to appropriate
environmental review under CEQA.
//
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020320 sm 0032527 5
SECTION 5. This ordinance shall take effect 30 dayS
after the date of its adoption; .provided, however, that when
effective, the fees hereby established shall be imposed on all
applicable development receiving discretionary approval from and
after January 29, 2002 or for applicable development projects
not requiring discretionary approval, projects for which a
building permit is issued from and after January 29, 2002.
INTRODUCED:
PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST
City Clerk
APPROVED AS TO FORM:
Mayor
APPROVED:
Senior Asst. City Attorney City Manager
Director of Planning and
Community Environment
Director of Administrative
Services
020320 sm 0032527 6
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EXHIBIT "A"
ATTACHMENT 2
City of Palo Alto
City Manager’s.Report
TO:HONORABLE CITY COUNCIL
ATTN:FINANCE COMMITTEE
FROM:CITY MANAGER DEPARTMENTS:ADMINISTRATIVE
SERVICES/PLANNING
DATE:FEBRUARY 20, 2002 CMR: 146:02
SUBJECT:ORDINANCE TO ESTABLISH DEVELOPMENT IMPACT FEES
FOR PARKS, COMMUNITY CENTERS AND LIBRARIES
REPORT IN BRIEF
Under California law (AB 1600), cities have the ability to charge new development for
the cost of public facilities and services attributable to the development. The City of Palo
Alto already charges such development impact fees for housing and traffic. During
discussions of the City’s financial condition as part of the Long Range Financial Plan,
Council raised the idea of considering additional development impact fees to provide
funding for mitigating the impact of new development and its corresponding burden on
City services.
Based on a nexus study, Finance COlmnittee discussion, and input fro1Tl a public forum,
staff has proposed potential development impact fees for parks, COlmnunity centers and
libraries, and recormnendations on policy issues related to implementation of such fees.
This report gives background on the project, describes, input received during a public
forum, proposes fee levels, and specifies policy issues related ~o exemptions and fee
implementation. Finance Committee direction is requested to determine any adjustments
to the proposed fee levels and proposed policies, and for recommendation to Council for
adoption of the attached ordinance to establish the fees.
CMR:146:02 Page 1 of 10
RECOMMENDATION
Staff recommends that the Finance Committee:
1)Determine any changes or adjustments to the proposed fee levels as shown in Tables
2 and 3 on pages 4 and 5 for recommendation to the City Council;
2)Determine any changes to proposed policies related to exemptions and
implementation; and
3) Recommend Council adoption of the attached ordinance to establish the proposed
development impact fees.
BACKGROUND
Based upon.Council’s direction, staff evaluated impact fees for parks, community centers
and libraries, and presented the study results and staff recommendations to the Finance
Committee on October 16, 2001. That report (CMR:381:01) included a complete
background on development impact fees in. Palo Alto, a discussion of the legal
requirements for fees, an analysis of the nexus study results, a review of fees in other
California cities, and staff recommendations for possible new fee levels for Palo Alto. A
report concerning an increase in the existing housing-in-lieu fee (CMR:383:01) was
presented at the same meeting.
The Finance Committee meeting on October 16, 2001 was attended by the public,
including members of the business and development community. Issues raised by the
public and Committee members included:
¯concerns about the potential of fees to hinder development, including small retail;
¯a desire to ensure that fees would not adversely affect affordable housing, and would
remain consistent with City housing policies;
¯concerns about implementation relative to projects already under consideration by the
City; and
¯a desire to assess the opinions of the community related to development fees.
The Finance Committee directed staff to hold an outreach session with the community,
and return to the Committee with recommendations once commu.nity sentiment was
evaluated.
DISCUSSION
¯ Public Outreach Meeting
A public forum to discuss development impact fees was advertised for December. 19,
2001. Notices were sent to local businesses through the Chamber of Commerce, local
developers, residents who had expressed an interest in related issues in the past, and
members of boards and commissions related to parks, libraries and community centers
(Public Art Commission, Library Advisory Commission, Parks and Recreation
CMR:146:02 Page 2 of 10
Commission, Art Center Foundation, and Friends of the Library), Twenty members of
the community, including three members of the City Council, attended the forum.
At the meeting, staff presented a distillation of the information contained in the original
report to the Finance Committee. (A copy of the presentation is shown as Attachment 2.)
The presentation included the legal basis for impact fees; the effects of development on
City services; a review of current fees and proposed fee levels; and a discussion of
proposed exemptions. Staff also provided a comparison of similar fees in other cities.
Concerns expressed by the community members attending the meeting included
protecting affordable housing, deterring over-sized homes, and the viability of fees for
other purposes such as art in public places and transportation. Some participants wanted
to use impact fees as a way to shape development; staff advised that impact fees are
intended to maintain existing service levels, and that development controls are better
handled using zoning and comprehensive plan regulations.
Survey
Ai-ih-i2-end of the public outreach meeting, staff distributed a survey to collect additional
input from the meeting participants. (See Attachment 3 for a sample survey and survey
results.) The attendees strongly supported the idea of development impact fees for parks,
community centers and libraries at levels of 77%, 69% and 92% respectively, as shown in
Table 1, below. The respondents were also asked to specify the fee levels that they
deemed appropriate: lower than those proposed by staff; at the proposed level; or higher
than the proposed level.
Table 1 - Public Input on New Fees
(14 respondents)
Parks
!Community Centers
Libraries
Should the City
Adopt New Fees?
77% yes
69% yes
92% yes
Lower than
Proposed
10%
13%
10%
Fee Level
At Proposed
Level
60%
38%
60%
Greater than
Proposed
30%
49%
3O%
Exemptions were also discussed at the public forum, and were included on the survey. In
general, survey comments were supportive of the proposed exemptions: three
respondents commented on the need to exempt or minimize fees for affordable housing;
four commented that the proposed exemptions were acceptable or reasonable; two.
indicated no exemptions should be allowed for nonresidential or office space; three
wanted to limit or remove the exemption for replacement homes; and one requested that
private schools not be exempt from the new fees.
Several survey respondents included extensive general comments in addition to those
described above. (Survey comments are also included with Attachment 3.)
CMR:146:02 Page 3 of 10
Fee Levels
The development impact fees presented in the nexus study represent the full cost
recovery fee levels justified by the analysis. Fee levels were reviewed by the City staff
Land Use Committee, which considered them in light of other potential impact fees
proposed by the City. The Committee recommended fee levels for parks, community
centers and libraries at 2/3 of those supported by the nexus study, rather than at the
maximum levels allowed by the nexus study. Although the nexus study utilizes the most
recent information in terms of land acquisition and development costs, these costs may be
reduced in the current economic downturn. Participants at the community forum
concurred with the implementation of fees and fee levels proposed by staff, though some
community members recommended higher fee levels.
Tables 2 and 3 display the maximum fee levels for parks, community centers and
libraries justified by the nexus study. Staff’s recommended proposed fee levels are also
listed. To see the effect of these new fees on the total amount of impact fees that would
be paid by new commercial and hotel development, Table 3 also shows potential revised
fees for housing and traffic. These revised fees are presented to the Finance Committee
in a companion report (CMR:150:02) in conjunction with this report. It should be noted
that the proposed revised traffic fee for the Stanford Research Park area is higher than
that estimated during the December 19 public forum ($8.20 rather than $6.10 per square
foot of commercial development).
Table 2
Recommended Impact Fee Levels
Residential
Full Cost Recovery
Fee Level Proposed Fee Level
Single Family (pet" home)’
Parks $11,884 $7,960
Community Centers 2,844 1,900
Libraries 1,070 720
Total fee per new home $15,798 $10,580
Multi-Family (per unit)
Parks $7,770 $5,210
Community Centers 1,860 1,250
Libraries 699 470
Total fee per new unit $10,329 $6,930
Note: Residential developers of for-sale housing projects with three or more units or.rental projects of five or more
units must comply with Palo Alto’s BMR requirements. Although these are not impact fees, they do represent a cost
to the developers of either dedicating BMR units or paying an in-lieu fee. Those costs are not included in this chart.
CMR:146:02 Page 4 of 10
Table 3
Recommended Impact Fee Levels
Nonresidential
Full Cost Recovery
Fee Level Proposed Fee Level
Commercial/Industrial (per sq. ft)
Parks $3.38 $2.26
Community Centers 0.19 0.13
Libraries 0.18 0.12
Housing 57.81 12.00
sub-total, w/o Traffic 61.56 14.51
Research Park Area Traffic 8.20 8.20
Total per new square foot $69.76 $22.71
Hotel/Motel (per sq. ft)
Parks $1.53 $1.03
Community Centers 0.09 0.06
Libraries 0.08 0.05
Housing 12.00 12.00
Total per new square foot $13.70 $13.14
A comparison of the recommended impact fees to those of other, municipalities is also
useful in determining where to establish Palo Alto’s fees. However, every city has its
own array of types of fees, and many are applied on a "case-by-case" basis rather than as
a set fee. Staff researched impact fees covering parks, facilities, libraries, and traffic for
cities throughout California, but could find none with the exact fee categories as those
proposed. Therefore, staff found communities with similar fees, and, for purposes of
comparison, looked at the aggregate of fees paid by developers, rather than comparing
fees on a one-to-one basis. Exhibit 1 depicts this comparison.
CMR:146:02 Page 5 of 10
Exhibit 1
Total Impact Fee Comparison
Single Family
$ 28,872
Residential
Multi-Family
$ 24,228
$o
Palo Alto
Current
$ 10,580
PaloAIto Gilroy
Proposed
$ 10,990
$ 5,236
6,930
$0
Campbell Morgan PaloAIto PaloAIto
Hill Current Proposed
Com rn ercial/Ind ustrial/O ffice
$ 5,639
$ 4,179
Gilroy Campbell Morgan
Hill .
$ 7.24
$ 14.51
$ 22.71 $ 22.00
$ 1;7.69
$ 6.51
Per Square Foot- Commercial
Palo Alto Palo Alto Palo Alto San Francisco Gilroy Morgan Hill
Current Proposed Proposed w/Traffic
Note." Proposed fees with Traffic include the proposed updated traffic impact fee ($8.20), which would
apply to Research Park area development only. The current traffic impact fee for that area is $3.03 per
square foot. An update to the traffic impact fee is still under consideration.
Exemptions
council could .elect to exempt specific types of development from proposed fees, but
must articulate a rational policy basis for each exemption. Staff recommends the
following exemptions and rationale:
Existing residential units and existing nonresidential square footage are not subject to
development impact fees because fees are based on an increased burden on existing
services.
¯Public facilities and schools _ City facilities would be. partially funded by impact fees,
and City funds are already used to pay for any public facilities not fully-funded by
CMR:146:02 Page 6 of 10
impact fees. Staff therefore recommends exempting public facilities. Staff also
recommends exempting public schools, which are taxpayer supported, due to
community concern regarding escalating costs for public school renovation and
maintenance.
Small nonresidential expansions (under 2,500 square feet) - Staff recommends an
exemption for small-scale commercial expansions, most likely to occur in small
¯businesses. This is consistent with Council policy to encourage local retail business
in Palo Alto. Staff recommends this as a project threshold. Projects in excess of
2,500 square feet would be subject to impact fees on 100% of new square footage.
This exemption is consistent with Policy B-7 of the Comprehensive Plan: Encourage
and Support the operation of small, independent businesses.
-Affordable Housing - Based on community input and concerns expressed by Finance
Committee about affordable housing, staff has changed its earlier recommendation.
Staff recommends that projects that are 100% permanently-affordable housing for low
and very low income households be exempt from impact fees. This exemption is
consistent with Program H-12 of the Comprehensive Plan: Where appropriate and
feasible, allow waivers of development fees as a means of promoting the development
of affordable housing to very low- and low-income households.
Implementation
The tirst step toward implementation occurred January 28, 2002 when Council adopted
Resolution No. 8124 creating the policy to mitigate development impacts and initiate
proceedings to establish development impact fees for parks, community centers and
libraries. The resolution permits the City to impose conditions of approval on
development projects to bear their fair share of the Cost of these facilities via
development fees, an assessment district or other mechanisms until impact fees have been
approved by the City Council and become effective.
Implementation relative to projects currently under consideration by the City is also
addressed in the ordinance. There are several milestones in the application process which
can be used to determine which projects will be affected by the new fees: 1)date the
building permit is issued; 2) date of final action (approval/disapproval) by the appropriate
board, commission, City Council, or Director of Planning and Community Environment;
3) date an application is deemed complete by staff; and 4) date an application is received
by planning staff.
The following are implementation options for projects "in the pipeline" relative to the
status of each project in the application process. New fees would apply to:
1)All planning applications for which a building permit is issued after January
28, 2002 (everything "in the pipeline");
CMR:146:02 Page 7 of 10
2)Development projects under consideration without final discretionary approval
prior to January 28, 2002 (staff recommends this option);
3) Development project applications deemed complete after January 28, 2002; or
4) Development project applications received after January 28, 2002.
RESOURCE IMPACT
New development impact fees could provide a portion of badly-needed funding for the
City’s infrastructure backlog related to parks, community centers and libraries, in order to
mitigate the impact of new development. In order to estimate the amount of revenue to
be expected from the new fees, staff analyzed last year’s levels of new development to
create a projection for a future year. The following table shows potential revenues
assuming seven new homes, one 15-unit apartment complex, and 100,000 square :feet of
commercial development.
Table 4 -Revenue Scenario
Parks
Gonlnunity Genter~
Ubmd~
Potential Revenue
$359,870
$45,050
$.24,090
Total .$429,010
POLICY IMPLICATIONS
Development impact fees increase the cost of new development. Adding new fees and
increasing existing fees increase developers’ costs if they elect to build in Palo Alto,
which in turn may raise costs for buyers and renters of the new properties. The fee levels
proposed by this report are easily justified based on the impacts that new development
has on City services and facilities, and are consistent with prior Council direction to
implement development fees. Staff is recommending fees that will provide funding to
offset these impacts while ensuring that developing in Palo Alto is not prohibitively
expensive relative to other California communities. These fees should also be considered
in conjunction with other policies of the City of Palo Alto.
Council could elect to exempt specific types of development from these proposed fees, as
discussed in this report, but would need to articulate a rational policy basis for each
exemption.
CMR:i46:02 Page 8 of 10
ALTERNATIVES TO STAFF RECOMMENDATION
The following are possible alternatives to staffs recommended adoption of the proposed
development impact fees:
1)
2)
3)
4)
Decide not to implement new impact fees at this time.
Elect to implement fees at a higher (or lower) level than those suggested in this report.
The attached nexus study justifies potentialimpact fees at a level higher than those
proposed by staff. Council could choose to set individual fee levels for parks,
community centers or libraries at the legally supportable maximums or at any lower
level. In addition, Council could elect to charge relatively less to one category of
development (e.g., single-family, multiple-family, commercial/industrial) by
providing a rational policy reason to effectively subsidize that type of development.
Select types of development that would be exempt from the requirements of any new
impact fees. (As noted above, each .exemption must include a rational policy basis.)
Select an alternative implementation milestone to address the applicability of new
fees to development projects cqrrently in process.
Not
Included
TIMELINE
The new fees will become effective 60 days following Council adoption of the ordinance,
and will applied retroactively to those project applications currently in process as
determined by Council pursuant to Resolution No. 8124.
Additional impact fees requiring extensive evaluation and a nexus study, such. as those
for.transportation improvements and traffic calming measures, would be included in a
subsequent study. At the time of the current study, the consultant also completed a
feasibility study for impact, fees for a new public safety facility, to determine if the City
should consider performing-a nexus study to justify such a fee. Staff is continuing to
evaluate that option.
ENVIRONMENTAL REVIEW
This is not a project under the California Environmental Quality Act (CEQA).
ATTACHMENTS
f Attachment 1: Ordinance to Establish Development Impact Fees for Parks, Community
-Centers and Libraries
Attachment 2: Presentation for the Public Forum on December 19, 2001
Attachment 3: Summary of Survey Results and Comments from December 19, 2001
Public Forum
CMR:146:02 Page 9 of 10
PREPARED BY:
LIBBY D~
Sr. Financial Analyst, Administrative Services
Administrator, Planning and Community Environment
DEPARTMENT HEAD APPROVAL:
CARL Y~TS ’
Director,/Administrative Services
CITY MANAGER APPROVAL
CMR:146:02 Page 10 of 10
ATTACHMENT 3 TO CMR 146:02
-SURVEY
CITY OF PALO ALTO
DEVELOPMENT IMPACT FEES
The City would like to get your opinions about development impact fees for Palo Alto. Please
answer the following questions and provide any additional comments that you have on these
topics on the back of this survey. Thank you for your input.
1)
2)
HOUSING FEE: Do you think the City should increase the Housing-in-Lieu fee from
the current level of $4.21 per square foot?
~ NO 13 (93%) YES, increase the fee to
¯3 (23%) the proposed level of $12100 per square foot of development
0 (0%) a level less than the proposed $12.00 per square foot
10 (77%) a Ievel greater than the proposed $12.00 per square foot
NEW FEES FOR PARKS, COMMUNITY CENTERS AND LIBRARIES:
Do you think the City should adopt new development impact fees for:
PARKS: 2 (15%) NO 10 (77%)YES
YES: 6 (60%) At proposed levels; 1 (lO%)Less than proposed; 3 (30%) Greater than proposed
COMMUNITY
CENTERS: 3 (23%) NO 9 (69%0) YES
YES: ~ .At proposed levels; 1 (13%)Less than proposed; 4(50%) Greater than proposed
LIBRARIES: 0(0%) NO 11 (92%) YES
YES: ~ At proposed levels; ~ Less than proposed; 3 (30%) Greater than proposed
3)ADDITIONAL DEVELOPMENT IMPACT FEES:
Should the City evaluate potential fees for:
PUBLIC SAFETY: 2 (17%) NO _ 10 (83%) YES
CITYWlDE TRAFFIC: 1 (8%) NO 12 (92%) YES
OTHER: Public Art (2), Schools and Recreation fields
4) EXEMPTIONS: The development impact fees as proposed would exempt affordable
housing, small non-residential development (less than 2500 square feet), and public
schools/public facilities. Do you have any comments about exemptions?
Comments: Larger replacement housing should pay fee (3); affordable housing should be
exempt (3); exemption for less than 2500 square feet should help maintain small retail;
exempt dense small multi-family dwellings because we need housing; do not exempt -
private schools; no exemptions; no exemptions for non-residential development (2);
proposed exemptions sound reasonable (4)
Respondent Information
I am a (check all that apply):
!4 Palo Alto resident
0 .Business Owner
0 Rental Property Owner
0 Commercial Developer
0 Residential Developer
1 Other: renter of affordable housing__
My main area of concern relates to: affordable housing (6); space for parks and playing
fields; public art; revenue lost on City meetings; not increasing commercial development;
high density of population in South Palo Alto;unwise taxation; intelligent growth.
SURVEY COMMENTS
CITY OF PALO ALTO
DEVELOPMENT IMPACT FEES
From meeting of December 19, 2001
New 4 - 5 bedroom homes are replacing 2-3 bedroom homes.
School enrollment is rising: Some of the increases result from families moving into
existing smaller 2-3 bedroom homes. Some of the increases result from families moving
into now larger 4-5 bedroom homes. Is there any correlation between the size of a
family’s house and the number of school age children?
The newer 4-5 bedroom homes that are replacing older, smaller homes invariably have
greater lot coverage. This means that there is more runoff and a greater burden on the
City’s storm drain system. The same can also be said of new houses that are constructed
with basements. Shouldn’t this additional impact on the storm drain system be
recognized in increased development fees for residential new-building?
This was an excellent workshop.
¯ I don’t think Palo Alto is ready to implement new impact fees. I think we are ready to
increase existing impact fees, and make them more widespread, e.g. expand
transportation fee to more areas.
More workshops are in order, consider taking it "on the road" too.
Provide data as to how existing impact fees are used.
I object to using these fees because we cannot set our property tax and use that money as
we see fit. Since we can’t I’ve marked my preferences below on survey.
What I am looking for is not in this survey. I would like to see an increase to the housing
in-lieu fee, and I would also like to see an additional impact fee that applies to Market
rate housing developments. I am interested in learning more about other development
impact fees, especially oncerning traffic/public safety and community centers.
Services: I am troubled by the proposed fee structure for fees for City services. (e.g.,,
libraries). I don’t like the per dwelling unit application of the fee for a library impact fee
on residential development. I feel that it is additional incentive to build fewer new large
units of housing vs. more small units of housing. At this point, I do not support fees that
are placed mainly on residential development and disproportionately impacts smaller
affordable units. It is kind of regressive.
Housing: Commercial (especially office) development contributes to the increasing
housing costs by increasing demand and driving up prices. Commercial development
should pay more in Housing-in-Lieu fees. $12/square foot is way too low when the
actual cost of the impact is $57.81 per square foot.
It’s obvious that Palo Alto has too much office development and commercial
development with no housing to balance thejobs.
The employee numbers in this study do not jive with the traffic studies. The real
numbers are much higher.
New fees could be added for streets and sidewalks which all employees use, rather than
just fees on libraries and parks.
Business license tax should be considered for commercial space.
Develop impact fees that discourage office and encourage housing, retail, and
manufacturing.
Palo Altois described as "built out".
Resid, ential impact fees - Create 2 classes of single family homes, perhaps also multi-
units; homes, up to 4,000 or 5,000 sq. ft. or units up to 2,000 sq. ft. and those larger. The
standard fee seems okay for the smaller homes but I think larger ones should pay more -
perhaps on a square foot basis.
Also - printed material and presentation disagreed on whether housing is included in
residential fees. If it is not it should be. We need affordable housing and it .costs money.
Lastly - non-profit construction should be eligible for exemption if the agency meets
very specific criteria, to be determined. "
Use the 2,000 U.S. census data for Palo Alto population.
Tonight’s meeting was called a "Community Forum", but only 15 citizens attended. The
date of the forum is only one reason for the small attendance Most people have limited
time to attend City meetings, and they understand that the most important community
forum is the City Council meeting that acts on this proposal. If you want Community
participation, the Finance Committee should refer this proposal (with or without a
recommendation) to the City Council.
As an alternative, enact a business license tax (not a fee) based on the number of
employees that are Counted for each month in employer tax forms to the Employment
Development Department. Or tl~e formula proposed for business license tax
(proportional to employees per month) could be used for a citywide traffic fee.
The impact from development increases the number of residents and we already have an
imbalance.
¯ These impact fees should be distributed fairly among the importani community services
within the City of Palo Alto. Public art, like parks and community centers, directly
impacts our quality of life. The public art can enhance the community and neighborhood.
We need to support public art for the sake of the character of our City, to the advantage
of our children and our community. Public Art should be supported by development
impact fees, because it gives back to the community by those who are benefiting from the
act.of developing. Public Art should be included as a category that receives separate
funding, existing alongside parks, libraries, and community centers. Public art impacts
the quality of life direetly and deserves the City’s support. A mural on Alma Street is
viewed by likely 80% of the population, impacting positively 20-40% who care about the
visual character of the City. Many cities, such as San Jose, Seattle, Berkeley, Santa Cruz,
E1 Cerrito, San Francisco and many, many more provide a percent for the arts.
U:ImpaCt Fees\SurveyComments:doc
ATTACHMENT 3
Development Impact Fees~
Finance Committee
February 20, 2002
Overview
¯New development = new jobs & residents
¯New jobs & residents = more service demand
¯New development can help pay for services for its
new employees and new residents through impact
fees
.°Without impact fees existing service available per
person erodes
What are
Development Impact Fees?
One-time fees imposed on new development to pay for
the cost of public facilities attributable to new
development.
-do not apply to replacement homes
-do not apply to existing non-residential space
-Used to maintain existing service levels while
accommodating new users
Current Impact Fees
in Palo Alto
¯Do not apply to residential development
¯Housing
-$4.21 per square foot
- Affordable.Housing only
¯Transportation
-SpeCific intersections only
-Stanford Research Park ($3.03 per square foot)
-San Antonio/West Bayshore ($1.64 per square foot)
2
What is being proposed?
¯New fees for Parks, Community
Centers, and Libraries
¯Increase Housing Fee
¯Increase Transportation Fee
Process for New Fees
Developing a nexus between service and users
’ Evaluated current service levels
¯Surveyed users of parks, community centers and
libraries to .determine relative use
Computed cost per user for each service
Solicited input from Chamber of Commerce,
Finance Committee, and a subsequent public
forum
Full Cost Recovery vs. Proposed Fees
Residential
Im pact Fee Com parison - Residential
ImPalo Alto - Current ¯ Palo Alto - Proposed [] Gilroy Campbell Morgan Hill¯
$ 20,872
$ 24,228
$10,580
$0
$10,990
$ 5,236 $ 5,635
Single Family
.$0
M ulti-Family
Palo Alto Proposed Fee includes Parks,
Community Centers, and Libraries
$ 4,179
Full Cost Recovery vs. Proposed Fees
Non-Residential
Impact Fee Comparison - Non Residential
$ 22.71 $ 22~00
$17.69
$14.51
$ 7.24 $ 6.51
Per Square Foot - Commercial I Industrial / Office
IP~lo Alto Palo Alto Palo Alto San Francisco Gilroy Morgan Hill
Current Prooosed Proposed w/Traffic
Palo Alto Proposed Fee includes Parks, Community Centers,
Libraries, & increased Housing & Traffic fees
Proposed Exemptions
for Community Service Fees
¯Replacement homes ,& existing nonresidential
square footage
¯Small non-residential expansion
(under 2,500 square feet)
¯ Public. schools and facilities
¯100% Affordable housing projects
Increase Current Housing fee
¯ . Original analysis done in 1985, updated in 1993
¯ Includes numerous exemptions
¯Cost to provide affordable housing has
increased significantly
12
Current vs. Proposed Commercial Housing Impact Fee
$57.81 $57.81
$17.86
$3,34 $4.21
Gap between fee
and cost to build
$12,00
1993 2001 Proposed
13
Commercial Housing Fee Comparison
Fee per square foot of new development
$14.00
$12.00 ~ $12.00~ ~ ~= $10.o0
Palo Alto -Palo Alto -San Francisco Seattle Menlo Park -Mountain View -
Current Proposed Office Office
14
Current Transportation Fee
¯Original ordinance adopted in 1989
¯Affects Stanford Research Park area and
portions of E1 Camino Real
¯Identified capacity improvements for eight
intersections
Increase Transportation Fee
¯Original cost estimate in 1989 = $4.3 million
¯Some projects have been Completed, others cancelled or
changed
¯2001 cost estimate = $14.7 million for revised project
list
¯Staff recommends increasing the fee by the same
percent as cost increase: from $3.03 to $8.20 per
¯ square foot
8
Transportation Impact Fee Comparison
8 Pato ,~to - Current ¯ Palo ~t~ - Proposed ~ Gilroy ¯ M~rgan Hill ¯ San Frandsco ¯ San Mateo
$ t2.73
$ 8.20
$ 5.98
$ 5.00
$ 3.22
Per Square Foot, Commercial
17
Implementation
Parks, Libraries, Community Centers
Pay New Fees No new fees
Application Application Final Building PermitSubmitteddeemed, complete Approval Issued
Applications not approved by the effective date are subject to new fees
Effective date for parks, libraries & community center fees is January 29, 2002
18
Implementation
Housing & Transportation
Pay New Fees Pay Old Fees
Application Application Final Building PermitSubmitteddeemed complete Approval Issued
." Applications not complete by the effective date are subject to new fees
¯ Effective. date for increased fees is 30 days after adoption
Residential Fee Examples
20
10
Non-Residential Fee Examples
2~
Revenue Scenario
Scenario: 7 new homes +15-unit Apartment/Condominium project
+ 50,000 square feet of non-residential development in StanfordResearch Park area
+ 50,000 square.feet of non-residential development in other areas of the city
22
11
Other Potential Fees
¯ Impact Fees
- Citywide Transportation
- Public Safety
- Others as directed by City Council
¯ Other
-Business License Tax
-Increase Transient Occupancy Tax
23
Committee Action
¯Select higher or lower fee levels
- Parks, Libraries, Coml:nunity Centers
-Housing
- Transportation
¯ Refine or confirm proposed exemptions
¯Select implementation milestone for projects
currently in process
24
12
Committee Action
Provide Direction on other fees
-Citywide transportation fee, Public safety fee
- Housing fee ordinance administrative changes
- Others
25
Questions &
Discussion
26
13