HomeMy WebLinkAboutss1economicdevelopstrategicplan
FROM: Michael Codron, Assistant City Manager
Prepared By: Lee Johnson, Economic Development Manager
SUBJECT: ECONOMIC DEVELOPMENT STRATEGIC PLAN IMPLEMENTATION:
INFRASTRUCTURE FINANCING ANALYSIS, STUDY SESSION #2
RECOMMENDATION
Receive and file a report and participate in the second study session on infrastructure financing.
DISCUSSION
Background
The Economic Development Strategic Plan (EDSP) sets forth several strategies for addressing
barriers to job creation, including key strategies that begin to address the challenges associated with
infrastructure costs, fees, standards and financing strategies. Financing infrastructure in California
has become more complex and several tools have been developed to help local governments finance
infrastructure associated with new development. Many of these financing tools are routinely used
in jurisdictions throughout the state, but have rarely been used in the City of San Luis Obispo.
Implementation of these strategies must be considered in the context of State law governing how
development impact fees and other tools may be imposed. Another consideration is the
requirements for studies (“nexus studies”) and reports to support the calculation and imposition of
such fees on new development to defray infrastructure costs. The governing statutes are commonly
referred to as "AB 1600" or the “Mitigation Fee Act”.
In April 2013 the Council authorized staff to hire a consultant to undertake an infrastructure
financing analysis that includes a series of study sessions with the Council. The purpose of these
study sessions is to educate the Council and the community. The structure of these sessions will be
as follows:
• Study Session #1: Introduction and Background: This session was held on January 21,
2014 and covered the current trends in municipal infrastructure financing, gave an overview
of development impact fees and reviewed the development of the City’s existing fee
programs.
• Study Session #2: Economic and Policy Implications of Development Impact Fees: This
session (February 18, 2014) will highlight the tools available to the City and the policy
implications and trade-offs associated with the various options.
• Study Session #3: Direction for updating the City’s Development Impact Fees: The
final session (March 18, 2014) will be a business item and will focus on the path forward. It
Meeting Date
Item Number 2-18-2014
SS1 - 1
is intended to be the session in which Council provides direction to staff based on the first
two sessions.
DISCUSSION
The purpose of study session number two is to provide Council with:
1) An overview of the alternative funding options
2) The relationship of development impact fees and alternative funding options and sources to
City General Plan and Specific Plans
3) Policy considerations and tradeoffs
4) Community benefits of economic development and related justification for public
participation and incentives
5) Summary of key policy questions
In order to provide some context for the discussion it is important to highlight some of the key
findings from the Consultants as presented on page two of the memorandum titled, “Review of
City’s Current Development Impact Fee Programs” (Attachment 2).
Key Findings
1. Incremental evolution in the City’s existing development impact fee programs have
resulted in a complex system of base fees, sub area fees, and geographic fee variation
that warrants re-consideration in the next fee update process. During the past 20-plus
years, the City’s impact fee programs have evolved to respond to growth and development
patterns, changing development standards and infrastructure requirements. The City’s fee
programs represent one of the City’s primary methods for financing infrastructure
improvements, particularly in the growth areas of the City. The overall outcome of these
incremental changes has resulted in a complex system that warrants detailed consideration
from the perspectives of clarity and efficiency as well as fee level balance (by geography
and land use) and consistency with City goals (e.g., economic development).
2. There are geographic “overlaps” in the City’s fees that cause a significant difference in
fee levels in various parts of the City. The geographic sub areas, particularly in the
transportation fee program, result in wide fee level differences area-to-area, although, in
some cases, there may be technical justification to support these differentials.
3. At the Citywide level, aggregate fee levels are consistent with fees levied by other cities,
though some specific fees appear to be high by industry standards. The tiered structure
of the City’s development impact fees (layering Citywide and area fees) leads to fees of
significantly differing amounts in various parts of the City. The aggregate fee amounts for
residential uses fall in a range typical for mid-sized California cities and fall within industry
standard “burden” limits. Nonresidential fee levels, however, appear more concerning. For
example, fees levied on retail commercial development in the Margarita Area Specific Plan
Area appear to fall in a range beyond the industry standard for such uses.
SS1 - 2
4. There is an inconsistency between land use categories used to compute fees between fee
programs. In some cases there are inconsistencies between several of the development
impact fees with respect to the land use categories and their precise definition. For example,
the Airport Area Sub Area transportation impact fee includes “business park” as a land use
category; however, there is no “business park” equivalent under the Citywide fee and it
requires a special calculation to estimate the Citywide base fee that is due. It is helpful for
administrative and auditing purposes for the land use categories to be consistent across all of
the individual fees, or more specific land use categories should be “nestled” within a
common land use category.
5. Fees do not contain a cost component for administration and updating. The provisions
of the Mitigation Fee Act allow jurisdictions to include the costs of administering the impact
fee program in the fee amount. Administration requirements include collecting and
allocating impact fee revenue, record keeping and reporting of fund activity, and periodic
updates to the fee program, which are critical to fee program effectiveness. These costs
typically are 1 to 3 percent of the capital portion of the fee. There is some funding in the
City’s Transportation Impact Fee (TIF) program for periodic updates of the traffic model
and volume counts.
6. The Engineering News Record’s Construction Cost Index (CCI) may be a more
appropriate index for automatic, annual “indexing” of existing fees. As specified in the
supporting resolutions, fees are inflated each year by the Consumer Price Index (CPI). In
many jurisdictions, annual fee adjustments are linked to the CCI published by the
Engineering News Record, rather than the CPI to better relate to increases in construction
costs. ENR’s CCI has been published consistently every month since 1913 for 20 U.S. cities
and a national average of the 20 cities. As such it is one of the most reliable and consistent
indices that track trends in construction costs. However, one City of San Luis Obispo
resolution (Resolution No. 9582, Series 2004 – amendment of water and wastewater fees)
states, “Since the facilities and improvements for which connection fees are charged will be
financed through bonds or other form of debt, the annual adjustments are indexed to
consumer prices rather than construction costs.” This may be the justification for the CPI,
rather than CCI adjustment.
7. The City does not charge fees for all municipal infrastructure categories, though this
may be appropriate in the context of other concerns about the overall fee program. The
City of San Luis Obispo does not charge a General Government Fee to fund civic
improvements and the preparation of plans and studies, nor does it charge a Public Safety
Fee to fund police and fire capital improvements or a Citywide park improvement fee (in
addition to the Quimby-authorized Park In-Lieu Fee). In many cities, these fee components,
along with Transportation, are part of a comprehensive Public Facilities Impact Fee
Program. However, any new fees should be considered in the context of broader
development feasibility and citywide financing objectives.
In addition to the key findings from the consultants, the following issues were highlighted in session
one:
1) The expectation that extraordinary investment by the City is linked to the desired outcome
or public benefit.
SS1 - 3
2) An assessment of the risks incurred to the City when using any financing tool or mechanism
needs to be incorporated into the analysis by the City.
3) The integration of the various fee programs into the City’s overall Capital Improvement Plan
(CIP).
4) In addition to the Infrastructure Financing Analysis, an analysis and streamlining of the
process related to entitlements is of benefit as well. This process is underway and there has
been significant success with several projects including the new MindBody headquarters.
5) A comprehensive update of development impact fee programs should immediately occur
after the adoption of the LUCE. This effort will be programed in the 2015-2017 financial
plan.
6) The impact of policy decisions on the cost of infrastructure.
CONCURRENCES
Community Development, City Attorney, Public Works, Utilities and Finance all concur these
sessions will provide the basis for decisions critical to the LUCE Update and fee-related policy
choices.
FISCAL IMPACT
None in the current fiscal year, the funding in the amount of $60,000 was allocated in the 2011-
2013 financial plan for this study.
ALTERNATIVES
The City Council could choose to direct staff to eliminate the business item (third study session)
currently scheduled for the March 18, 2014 Council meeting. Council should only choose this
alternative if it believes no action should be taken on infrastructure financing alternatives and the
data (memoranda) presented in the study sessions do not support the Economic Development
Strategic Plan strategy to reduce barriers to job creation.
ATTACHMENTS
1. Infrastructure Financing Background, Components and Strategy (From session #1)
2. Review of City's Current Development Impact Fee Programs (From session #1)
3. Economic Development Considerations; EPS #131044
4. Presentation from Session #1
SS1 - 4
F INAL M EMORANDUM
To: Michael Codron and Lee Johnson
From: Walter Kieser, Teifion Rice-Evans & Ashleigh Kanat
Subject: Infrastructure Financing Background, Components, and
Strategy; EPS #131044
Date: January 6, 2014
The high costs of expanding municipal infrastructure combined with real
economic and market feasibility constraints faced by new development
requires a renewed approach to infrastructure financing. This approach
can help the City of San Luis Obispo realize General Plan and specific
plan policies and related community and economic development as
envisioned in the Economic Development Strategic Plan. Additional
funding sources and financing mechanisms can augment existing fee
programs by tapping into strategies that can offset costs otherwise
funded with development-based sources and/or provide “bridge”
financing that may be necessary to incentivize sought-after economic
development uses and revitalization of existing neighborhoods.
This memorandum describes funding sources and financing methods
available to the City of San Luis Obispo for funding municipal
infrastructure; specifically, funding and financing methods that can be
integrated with existing and updated development-based funding
sources (e.g., development impact fees) as part of an overall
infrastructure financing strategy promoting economic development in the
City’s newly developing (Specific Plan) areas and revitalization areas.
This proposed infrastructure financing strategy requires a number of
area plan evaluations and analyses to select the appropriate funding
sources and financing mechanisms.
SS1 - 5
Final Memorandum January 6, 2014
Infrastructure Financing Strategy Background Page 2
P:\131000s\131044SLO Infrastructure Financing\Corres\131044smem_01-06-14.docx
Overview of Economic and Fiscal Trends
As a preface to this discussion, it is valuable to note the “macro” trends influencing municipal
infrastructure financing. Economic, fiscal and political trends over the past several decades,
beginning with Proposition 13 in 1978, sowed the seeds for the growth in service costs and
revenue constraints now facing California local jurisdictions. These trends, described below,
compound the lingering effects of the recent Great Recession and underscore the need for cost
control, diversification of funding sources, and a thoughtful infrastructure financing strategy.
Shift of financing responsibilities to local governments. During the past three decades there
has been an increasing shift of infrastructure financing responsibilities from State and federal
government to the local level. Many grant programs that once funded major highway
improvements and water and sewer infrastructure improvements were abandoned long ago.
Advent of Constitutional and statutory restrictions on municipal revenues. Beginning with the
“tax revolt” that resulted in Proposition 13 in 1978, voters (through voter-approved ballot
initiatives) and the legislature have continued to restrict the ability of local governments to
raise revenues for general or special purposes. This trend continues to the present with the
State’s elimination of redevelopment agencies in 2012.
Increasing public expectations regarding municipal levels of service and infrastructure
standards. During this same time frame, citizens have come to expect high standards for the
quality and function of infrastructure (e.g., traffic congestion thresholds) and have often
embedded these standards in planning documents, such as General Plans and other policy
documents. These higher standards are sometimes necessary to assure sustainability of
infrastructure.
Increasing federal and State regulatory standards and mandates. The lack of funding from
federal and State government has not slowed the growth in mandates related to water
quality, habitat conservation, pollution controls and other rules that have increased cost
burdens on local governments. Compliance with these mandates results in expenditures that
compete for resources needed for other local services and infrastructure.
Increasing shift of infrastructure costs to new development. The aforementioned trends,
along with continuing population growth in California over the decades (population has
continued to increase by an average of 500,000 people per year, despite economic ups and
downs), has led to new development bearing an increasing share of costs for building new
infrastructure. Development impact fees are the key expression of this trend and it is now
the norm throughout California that “development should pay its own way”. San Luis Obispo
has followed this trend by establishing a range of impact fees and other developer-based
infrastructure financing requirements.
Linking infrastructure to growth management policies. While there never has been a
statewide expression of “growth management” policy in California as seen in other states
(e.g., Washington, Florida), local jurisdictions have imposed a range of policy constraints
including urban limit lines, growth rate caps and infrastructure concurrency policies. These
policies often are explicitly linked to concerns regarding the costs of infrastructure and the
impact on other aspects of local quality of life. However, growth controls can also inhibit
economic development and create unintended negative fiscal consequences, including
reduced impact fee revenue and other anticipated development-related revenues.
SS1 - 6
Final Memorandum January 6, 2014
Infrastructure Financing Strategy Background Page 3
P:\131000s\131044SLO Infrastructure Financing\Corres\131044smem_01-06-14.docx
Market and financial effects of the Great Recession. The Great Recession, while officially
over, left persistent effects upon real estate markets and both private and public financing.
These effects have changed development economics in a number of ways including re-setting
market pricing and requiring tighter credit standards that have affected both buyers (new
homeowners) and producers (more restrictive credit standards for builders and developers).
The reduced values for new homes not only lower property tax receipts, but also reduce the
funding that can be collected through development impact fees and other fees and taxes
because proportionately high development fees may reduce development feasibility thus
deterring or precluding housing development.
Funding Sources and Financing Mechanisms
The options available to the City fall into four general categories. The City presently makes use
of many of these sources and financing mechanisms, though not necessarily organized into a
cohesive overall financing program.
Developer-Based Funding
Land-Secured Funding and Financing
City Funding and Financing
State and Federal Grant Programs
The following sections describe each of the funding sources and mechanisms that fall under
these general categories, and each is described along with their role in the proposed financing
program. Development-based funding, including Citywide and area development impact fees,
project-specific exactions, private financing, and land-secured taxes and debt, will remain the
primary framework for funding new development-required infrastructure. City-based sources can
augment development-based sources, providing both a source of “bridge” financing and also
providing funding for specific infrastructure projects.
Developer-Based Funding
Development Impact Fees
A development impact fee is an ordinance-based, one-time charge on new development
designed to cover a “proportional-share” of the total capital cost of necessary public
infrastructure and facilities. The creation and collection of impact fees are allowed under
California Assembly Bill (AB) 1600 as codified in California Government Code Section 66000,
known as the Mitigation Fee Act. This law allows a levy of one-time fees to be charged on new
development to cover the cost of constructing the infrastructure needed to serve the demands
created by new growth. To the extent that required improvements are needed to address both
“existing deficiencies” as well as the projected impacts from growth, only the portion of costs
attributable to new development can be included in the fee. Consequently, impact fees are
frequently just one of many sources used to finance a city’s needed infrastructure improvements.
Fees can be charged on a jurisdiction-wide basis or for a particular sub-area of the jurisdiction
(such as a specific plan area).
Establishment. Development impact fees can be imposed through adoption of a City-
enabling ordinance supported by a technical analysis showing “nexus” between the fee and
infrastructure demands of new development. A development impact fee may be levied over
an entire jurisdiction or a geographic sub-area. Fees may also be charged for a particular
improvement (e.g., transportation improvements) or include two or more infrastructure
improvement categories in a comprehensive program. Impact fee programs must be
SS1 - 7
Final Memorandum January 6, 2014
Infrastructure Financing Strategy Background Page 4
P:\131000s\131044SLO Infrastructure Financing\Corres\131044smem_01-06-14.docx
reviewed annually and periodically updated to assure adequate funding and proper allocation
of fee revenues to the infrastructure for which the fees are collected.
Who Pays?The burden incidence of development impact fees is upon the developers and
builders who pay the fees; fees are a cost of development and are “internalized” into project
costs in the same manner as all other development- and construction-related costs. There is
no direct effect of fees on development pricing, because markets set prices, independent of
costs. However, when costs are too high for the “market to bear,” development may be
deterred until such time as prices justify costs. All costs will influence land value, so it is
often the case that landowners bear a portion of the cost of fees through lower land values
(prices paid by developers or builders). While individual circumstances will vary, industry
experience has shown that aggregate cost for off-site infrastructure should generally not
exceed approximately 15 percent of total development sale value. Impact fees, as a cost to
new development, affect financial feasibility of development. If development revenues are
insufficient to fully fund costs, development will be diminished until market conditions
improve. So long as total development costs fall within a reasonable level, such effects are
manageable. This concern has taken on increased importance in the wake of the Great
Recession and the related retrenchment of real estate prices and tightened credit markets.
Economic Considerations. There are a number of specific economic considerations of
development impact fees including:
Understanding the positive economic effects, including economic development, of building
necessary infrastructure and sustaining desired levels of municipal service and related
quality of life.
Understanding the contribution of new development, particularly the types of
development that generate economic activity, employment, and retail sales, and that
create amenities that attract economic activity (e.g., tourist expenditures at local
businesses). Effectively planned new development can help to achieve the City of San
Luis Obispo’s economic development goals and improve fiscal conditions, as well as
provide the economic base to enhance the ability to fund services and infrastructure.
The effects of fees on the financial feasibility of new development and potential to deter
otherwise desirable development.
The competitive effects of higher development costs (compared to neighboring
jurisdictions) leading to dislocation of desired development.
Benefits. Impact fees provide a comprehensive and programmatic framework for identifying
and allocating infrastructure costs to new development based on rational nexus allocations.
There is no discretion on the part of those subject to the fees nor is voter approval required.
Limitations. The key limitation of development impact fees (in addition to the burden limit)
is the timing of funding set against the need for funding—infrastructure is often needed “up-
front” while fees are paid over time as development occurs. This means that other funding
or financing methods are needed to close the “timing gap” between the need for
infrastructure investment and the flow of development impact fees. Fees are also irregular,
as they depend on development activity that varies with economic trends and conditions.
During the Great Recession, when development around the State ground to a near halt, fee
programs were directly affected. Fees also require ongoing management including need for
SS1 - 8
Final Memorandum January 6, 2014
Infrastructure Financing Strategy Background Page 5
P:\131000s\131044SLO Infrastructure Financing\Corres\131044smem_01-06-14.docx
annual review, fund accounting and monitoring, and updating to assure the efficacy and
transparency of the fee program.
Role in Financing Program. While it is important to consider options and augmentation for
the City of San Luis Obispo’s existing infrastructure financing methods, the first step is to
recognize that a comprehensive, updated and sound development impact fee program
provides a comprehensive, robust, and administratively efficient basis for assuring
appropriate development-based infrastructure funding. Development impact fees provide a
rational accounting of costs, rational “nexus” (who benefits) based allocation of all
development-related infrastructure costs, and establishing a comprehensive obligation to pay
for these costs, and a mandated reporting system that promotes transparency and efficiency.
Methods for Moderating or Deferring fees.While considering alternatives and options for
augmenting and offsetting development impact fees related to the economic concerns
discussed above, it is important to assure that the individual development impact fee
ordinances are consistently applied and coordinated and that they contain features that can
reduce potential negative economic effects and thus not unnecessarily inhibit otherwise
desirable development. Also, there can be features of development impact fees that address
economic concerns generally or on a case-by-case basis.
Fee Deferrals. While the statute allows a levy of fees at issuance of building permit,
many development impact fee ordinances allow a deferral until the “certificate of
occupancy” (CO) is issued.
Fee Waivers or Categorical Exemptions. Fee waivers provide the local government the
ability to waive the fee for a particular project when it is determined that without such
reduced costs a project that has substantial public benefit may not otherwise occur.
Lacking such community benefits, waivers may be regarded as a “gift of public funds”.
Examples of such partial or total waivers include projects with the potential to generate
substantial municipal revenue or amenities, affordable housing projects, and
employment-generating uses. Fee waivers or categorical exemptions reduce funding in a
fee program proportional to the aggregate amount of waivers or exemptions granted.
Such revenue reductions must be “made up” by the city from other funding sources, or
the City of San Luis Obispo risks not being able to build the infrastructure for which the
fee was levied.
Credits and Reimbursements. Credits and reimbursements are mechanisms that allow
developers subject to an impact fee to build infrastructure in-lieu of paying the fee and
receiving a proportional credit for the value of that construction against the fee
obligation. Reimbursement would occur in the case where construction value actually
exceeded the particular developer’s fee obligation.
Short-Term Fee Financing (Interest Bearing Installment Payments). Ordinances can
provide for a developer to pay fee obligations over a period of time subject to an interest
bearing and secured note payable.
Private Financing, Agreements, and Partnerships
Developers commonly fund infrastructure requirements privately, for example virtually all “in-
tract” improvements (infrastructure improvements within a given subdivision) are privately
financed. In some cases area-serving infrastructure (not fully the responsibility of a particular
developer) can be privately financed, subject to a refund of all or a portion of this investment
SS1 - 9
Final Memorandum January 6, 2014
Infrastructure Financing Strategy Background Page 6
P:\131000s\131044SLO Infrastructure Financing\Corres\131044smem_01-06-14.docx
using subsequently collected development impact fees, special tax bond proceeds, or other City
funding sources. These cooperative arrangements are typically structured in development
agreements or reimbursement agreements.
Developer (Project-Specific) Conditions and Exactions. Before the advent of ordinance-based
development impact fees, it was common for infrastructure to be funded by project-specific
“exactions” – payments or construction of infrastructure required as a condition of
subdivision or project approval. While development impact fees have reduced the use of
exactions, exactions remain an important part of development-based infrastructure financing
as there are often infrastructure requirements of a new project that are not included in the
applicable fee programs. Determination of the need for such additional infrastructure is often
derived from CEQA-based mitigation measures.
Development Agreements. A development agreement (DA) is a legally binding agreement
between a local government and developer authorized by State statute (Government Code
Section 65864 et seq.). A DA is a means for a developer to secure existing regulations or a
development entitlement for a particular development project for an agreed upon period in
exchange for special considerations for the city (or county), generally including infrastructure
improvements or amenities that cannot be obtained through the normal conditions applicable
to the project. DAs are entirely discretionary on the part of local government and must be
individually adopted by local ordinance. Cities often establish their own policies and
procedures for considering development agreements. Developer Funding Secured with Fee
Credits and Reimbursements. Pursuant to terms of a development impact fee, a specific
development exaction, or a development agreement, a developer may build and/or or
directly fund infrastructure improvements and thus receive a credit against any formal fees
or charges otherwise due. A developer may also receive reimbursement when the amount
expended exceeds any fees or charges otherwise due. Such agreements effectively make
use of private credit available to the developer to fund municipal infrastructure, subject to
repayment from one or another municipal source of funding. Typically, repayment of
reimbursable investments made by a developer is derived from future development impact
fee revenue derived from other benefitting landowners or developers.
Land-Secured Funding and Financing
There is a long history in California and elsewhere in the United States of using land-secured
financing methods to fund local infrastructure or provide services that benefits a particular area
(ranging from an entire jurisdiction to sub-areas of the jurisdiction of all sizes. Traditionally,
special assessment bonds as authorized in the 1913 Municipal Improvement Act and other
related legislation were issued and funded by annual property tax assessments from benefitting
properties. Since its advent in 1982, the Mello-Roos Community Facilities District has largely
supplanted the use of the range of assessment districts available in the California statutes. The
City of San Luis Obispo has historically not used land-secured financing districts, although they
are referenced in the financing plans of Specific Plans. Because their characteristics are similar,
assessments and special tax secured financing are both addressed below.
Establishment. California’s land secured funding districts require (resident) voter or
landowner approval. In the case of assessment districts, majority landowner approval is
typically required. In the case of a Community Facilities District, a two-thirds voter approval
is needed in all areas that have more than 12 residents (landowners can approve special
taxes in areas with 12 or fewer residents).
SS1 - 10
Final Memorandum January 6, 2014
Infrastructure Financing Strategy Background Page 7
P:\131000s\131044SLO Infrastructure Financing\Corres\131044smem_01-06-14.docx
Who Pays? The owners or users of real property pay assessments and special taxes.
Insofar as developer-based costs are shifted to land secured financing, a shift in the
incidence of burden from the developer or builder to the future tax or assessment payer
occurs. By adding to the cost of ownership this shift may affect the price a buyer is willing to
pay for a home or commercial property; however experience suggests that there is a
discount (i.e., less than 100 percent of additional infrastructure financing burden cost is
recognized by the buyer-owner).
Benefits. Land secured financing provides a well-established method for financing the cost
of infrastructure thus reducing “up-front” costs and shifting the burden from the developer to
the future users of the developed property.
Limitations. Land secured financing adds financing costs to the mix (cost of issuance,
insurance, and administration) and also faces temporal limits similar to impact fees because
the financing capacity of a district is a function of its potential tax revenue at a given point in
time and, of course, at the beginning of development or in the early phases, tax revenue
(and related funding capacity) will be proportionately limited. This is why it may be
necessary to rely on other sources of infrastructure funding (e.g., advances from other
sources) during initial years until special tax or assessment-based funding capacity is
adequate to support a bond issue or otherwise pay for needed infrastructure.
Role in Financing Program. Land secured financing districts can be used as an optional
alternative for funding costs otherwise included in development impact fees. This could be
done by including certain cost items or categories of items (e.g., a highway or bridge
improvement, or all park and recreation improvements) in a financing district that
encompasses the benefitting properties that would otherwise be included in the development
impact fee program. Or, alternatively, developers could be given the option to fund all or
part of their City fee obligations with a land secured district. The Statewide Community
Infrastructure Program (SCIP) requires creation of a CFD as security for accessing State
financing of development impact fee obligations.
Special Benefit Assessment Districts
Special benefit assessment districts are a way of creating a property-based assessment upon
properties benefiting from a specific public improvement. Formation of assessment districts
requires majority approval of the affected property owners. Such benefit assessments can fund a
wide range of infrastructure improvements so long as a direct and measurable benefit can be
identified for the benefitting properties. There are numerous forms of special benefit
assessments in the California statutes, including the Municipal Improvement Act of 1913,
Lighting and Landscape Maintenance Districts, and many others. Recent court rulings (Silicon
Valley Taxpayers’ Assn., Inc. v. Santa Clara County Open Space Authority, 44 Cal. 4th 431 (Cal.
2008)) have tightened the requirements for demonstration of “special benefit” thus further
reducing the flexibility and utility of assessment districts. And even before these rulings, the
administrative requirements of assessment districts limited their flexibility and shifted most land
secured financings toward Mello-Roos Community Facilities Districts.
Community Facilities District Act
The Mello-Roos Community Facilities Act of 1982 (authorized by Section 53311 et. seq. of the
Government Code) enables the formation of a Community Facilities District (CFD) by local
agencies, with two-thirds voter approval (or landowner approval in when there are fewer than 12
registered voters in the proposed district), for the purpose of imposing special taxes on property
SS1 - 11
Final Memorandum January 6, 2014
Infrastructure Financing Strategy Background Page 8
P:\131000s\131044SLO Infrastructure Financing\Corres\131044smem_01-06-14.docx
owners. The resulting special tax revenue can be used to fund capital costs or operations and
maintenance expenses directly, or they may be used to secure a bond issuance, the proceeds of
which are used for funding capital costs. Because the levy is a tax rather than an assessment,
the standard of benefit received is lower, thus creating more flexibility. CFDs have become the
most common form of land secured financing in California and have been paired, in other
jurisdictions, with development impact fee programs as part of area-specific infrastructure
financing.
As special taxes and tax overrides approach 50 percent or more compared to the basic 1 percent
property tax rate, there is a risk of impacts on land and home prices which would offset any
financing benefit associated with the additional special taxes. Cities using CFDs often adopt
policies that regulate how they are used and the various limits and considerations to be applied
in creating CFDs.
Statewide Community Infrastructure Program
The Statewide Community Infrastructure Program (SCIP) is a program of the California
Statewide Communities Development Authority that makes use of a local government’s ability to
create land secured financing districts. Because the obligations are “pooled” they typically can
gain a comparatively lower interest rate, and issuance costs, particularly if the issue is small, will
be reduced.
The Authority is a joint powers authority sponsored by the League of California Cities and the
California State Association of Counties. Membership in the Authority is open to every California
city and county, and most are already members. SCIP financing is available for development
projects situated within cities or counties (local agencies) which have elected to become SCIP
participants. Eligibility to become a local agency requires only (a) membership in the League of
Cities or CSAC, as the case may be, (b) membership in the Authority, and (c) adoption of a
resolution making the election (the “SCIP Resolution”).
Participation in SCIP entails the submission of an application by the property owner of the project
for which development entitlements either have been obtained or are being obtained from a
Local Agency. For Projects determined to be qualified, SCIP provides non-recourse financing of
either (a) eligible development impact fees payable to the Local Agency (the “Fees”) or (b)
eligible public capital improvements (the “Improvements”) or both. Under certain circumstances,
to be determined on a case by case basis, development impact fees payable to local agencies
other than the Local Agency can also be used as repayment for upfront SCIP funding.
Applicants benefit from SCIP because it allows them to obtain low-cost, long-term financing of
fees and improvements, which can otherwise entail substantial cash outlays. The Local Agencies
benefit from SCIP because it encourages developers to pay fees sooner and in larger blocks than
they otherwise would. The availability of low-cost, long-term financing also softens the burden
of rising Fee amounts and Improvement costs, benefiting both the Applicants and the Local
Agencies. Upon receipt of a completed Application, the SCIP team reviews it to determine (a)
eligibility of the fees and improvements for which the Applicant seeks financing and (b)
creditworthiness of the Applicant and the Project. Once approved by the SCIP team, the
Application is countersigned by the Local Agency. Approved Applications are aggregated for
inclusion in the next round of financing authorization. Periodically, as warranted by the
accumulation of approved Applications, the Authority issues tax-exempt revenue bonds (the
“Bonds”). The proceeds from the Bonds are used to finance fees and/or improvements for
qualifying Projects located throughout the state. For projects involving a sufficient amount of
SS1 - 12
Final Memorandum January 6, 2014
Infrastructure Financing Strategy Background Page 9
P:\131000s\131044SLO Infrastructure Financing\Corres\131044smem_01-06-14.docx
financing (generally $5 million or more), a special series of bonds may be issued to fund the
project separately if the timing of issuance of a pooled financing does not suit the project,
subject to approval of the Authority.
Revenues to pay debt service on the Bonds are derived by the Authority in one of two ways:
1) through the levy of special assessments on the parcels which comprise the participating
Projects by establishing one or more assessment districts pursuant to the Municipal
Improvement Act of 1913; or 2) through the levy of special taxes on the Project parcels by
establishing a CFD pursuant to the Mello-Roos Community Facilities Act of 1982. Absent
circumstances which warrant a CFD, the Assessment District format has been and is expected to
continue to be the customary basis for SCIP financing.
City Funding and Financing
The City has a number of ways in which it can raise money for capital projects including seeking
voter approval of general obligation bonds or special tax bonds, use of enterprise revenues for
enterprise (e.g., water and sewer utilities) investments, and issuing certificates of participation
funded with existing (or new or increased) general fund revenue sources. The City also has
discretion over the use of various State and federal grant programs that continue to be available.
General Obligation Bonds
A general obligation bond is a type of municipal bond in the United States that is secured by a
state or local government's pledge to use legally available resources, most typically including
property tax revenues, to repay bond holders. General obligation bonds are restricted to defined
capital improvements. Because property owners are usually reluctant to risk losses due to
unpaid property tax bills, credit rating agencies often consider a general obligation pledge to
have very strong credit quality and frequently assign them investment grade ratings. If local
property owners do not pay their property taxes on time in any given year, a government entity
is required to increase its property tax rate by as much as is legally allowable in a following year
to make up for any delinquencies. In the interim between the taxpayer delinquency and the
higher property tax rate in the following year, the general obligation pledge requires the local
government to pay debt service coming due with its available resources. In California, cities
must secure a two-thirds voter approval to issue general obligation bonds.
Establishment. Creation of general obligation bonds requires two-thirds voter approval if
the issuance is for non-educational purposes.
Who Pays? The incidence of burden of general obligation bonds is upon all property owners
in the issuing jurisdiction proportional to the value of their property. It is this very broad
base of funding that provides excellent security for general obligation bonds, thus typically
garnering the lowest interest rate of any municipal debt instrument.
Benefits. General obligation bonds typically garner comparatively low interest rates due to
their inherent security (the property tax base of the entire jurisdiction) and the typically long
financing period (30 years).
Limitations. General obligation bonds are limited to capital improvement expenditures and
are also limited in their use to the precise purposes outlined in the authorizing ballot
measure; general obligation bonds are commonly restricted to particular capital uses (e.g.,
street improvements, drainage improvements, parks and recreation, etc.) in the issuing
jurisdiction.
SS1 - 13
Final Memorandum January 6, 2014
Infrastructure Financing Strategy Background Page 10
P:\131000s\131044SLO Infrastructure Financing\Corres\131044smem_01-06-14.docx
Role in Financing Program. General obligation bonds can fund community-serving
infrastructure that is capable of winning super-majority support by the voters. Funding
community-serving infrastructure (that benefits all residents and businesses, existing and
new) such as community parks and open space can reduce the need for adding such facilities
in the citywide development impact fees (as new development will pay their share of these
costs through future property taxes).
Revenue Bonds
Cities and other local governments typically issue revenue bonds when they have access to a
stable source of revenue such as municipal utility rates. San Luis Obispo has traditionally made
use of revenue bonds to fund improvements to its water and sewer facilities, including
improvements that serve newly developing areas. Revenue bond funding is commonly paired
with “connection charges” (a form of development impact fee) charged to new customers as they
connect to the sewer or water utility service. Utility rates that fund revenue bonds can vary
within a given jurisdiction if there are substantial differences in the costs of providing services to
sub-areas of the City. There can also be rate surcharges to a given area if unique improvements
are needed to serve the area.
Establishment. Revenue bonds are issued by the municipal enterprise and require no voter
approval. Revenue bonds may provide improvements for an entire jurisdiction or a sub-area.
Who Pays? The incidence of burden of revenue bonds is upon rate payers.
Benefits. Revenue bonds have a good risk profile and therefore garner comparatively low
interest rates. Because they are exclusively secured by enterprise revenue they are not
general obligations of the city and thus do not require ballot approval. The ability to adjust
rates to cover debt service costs and the ability to charge such rates differentially (given
differing costs and benefits of service in sub-areas) create flexibility and appropriate cost
allocation.
Limitations. Revenue bonds are limited to the specific enterprise-related capital
improvement expenditures and are also limited in their use to the precise purposes outlined
in the authorizing bond instrument. Revenue bonds are also limited by the rate base – utility
rates must conform to State statute (Proposition 218) and are primarily used for funding
operations and maintenance of the utility system, often limiting the amount of funding
available for debt service.
Role in Financing Program. Major “backbone” water and sewer infrastructure serving a
new development area can be funded with revenue bonds (and related utility area-specific
rates or surcharges applicable only to the benefitting area). This technique can shift costs
otherwise funded by development impact fees or exactions, as a part of a strategy to keep
development impact fee burdens within reasonable limits.
Citywide Parcel or Special Tax Bonds
Parcel taxes or a Citywide Mello-Roos CFD special tax can be imposed with voter approval to
fund municipal services and infrastructure. They can provide a broad-based source of funding
for citywide-serving services and infrastructure. Due to the voter approval requirements and
similar to general obligation bonds, jurisdiction-wide parcel taxes or special taxes are typically
only successful if they fund highly desired services and improvements such as improved public
safety services.
SS1 - 14
Final Memorandum January 6, 2014
Infrastructure Financing Strategy Background Page 11
P:\131000s\131044SLO Infrastructure Financing\Corres\131044smem_01-06-14.docx
Establishment. Parcel taxes, if used for general purposes, can be imposed with majority
voter approval. If used for special purposes, parcel taxes will require two-thirds voter
approval. They may be used for funding ongoing services or pledged to debt service.
Who Pays? The incidence of burden of parcel or special taxes falls upon property owners.
Typically such taxes are “flat rate”-per parcel, sometimes with use-related variation and
exemptions.
Benefits. Parcel taxes and citywide special taxes create an opportunity for voters to decide
to pay for municipal services or facilities that they deem important. With a broad funding
base and strict allocation rules, the taxpayers can assure that funding will be used as
intended.
Limitations. Parcel and special taxes are limited to the purposes for which they were
approved. They also are commonly subject to a “sunset” date, and thus must be re-
authorized periodically to maintain funding.
Role in Financing Program. Similar to a general obligation bonds, parcel and special taxes
can fund improvements with broad public benefit including both existing and new residents
and businesses. As such they can reduce the need for adding such facilities in the citywide
development impact fees (as new development will pay their share of these costs through
future property taxes). Parcel and special taxes differ from general obligation bonds in that
parcel and special taxes can be used for maintenance and operations, all or in part, and they
are not levied “ad valorem” (they typically have a flat or escalating rate structure applied to
particular classes of properties). Infrastructure Financing Districts
Local agencies can establish an Infrastructure Financing District (IFD) for a givenproject or
geographic area of the jurisdiction. The IFD “captures” incremental increases of property tax
revenues from future development otherwise accruing to the City’s General Fund that can be
used for funding project-related infrastructure. Current law is highly restrictive making IFDs
difficult to enact. However, pending legislation (SB 33) seeks to modify current restrictive
provisions of IFD law. IFDs could become a more viable funding and financing mechanism in the
future, particularly if inter-agency partnerships can improve the amount of increment financing
available.
Establishment. The establishment of an IFD can be rather complicated and requires
approval by every local taxing entity that will contribute its property tax increment AND also
requires two-thirds voter approval (within the specific geographic area) to form the IFD and
issue bonds.
Who Pays? The incidence of burden of an infrastructure financing district is identical to
property taxes in general – those paying the property taxes. However, there is an additional
consideration – the property tax “increment” diverted to the infrastructure financing district
is not available for funding general fund supported services. Thus it could be said that the
City at large also “pays” by losing access to this funding during the duration of the district.
Benefits. IFDs, similar to redevelopment agency tax increment financing, redirect property
taxes otherwise accruing to the city to project-related purposes – the value created by the
project is “captured” and invested in a manner that helps realize the project.
SS1 - 15
Final Memorandum January 6, 2014
Infrastructure Financing Strategy Background Page 12
P:\131000s\131044SLO Infrastructure Financing\Corres\131044smem_01-06-14.docx
Limitations. Only public capital facilities of communitywide significance may be financed;
an IFD cannot be used to finance operations and maintenance expenses. Unlike former
redevelopment tax increment funding, IFDs can only utilize the City of San Luis Obispo’s
share of property tax increment (and any other agencies who agree to forego their share of
tax increment).
Role in Financing Program. An IFD would provide a way for the City to assist funding a
desired project or plan area by infusing property tax funding into the financing of local
infrastructure, thus lowering the need for development impact fees, exactions, or special tax
funding. IFD funding could be used as a source of reimbursement for funding advances from
developer or other city-based sources.
Municipal Credit and Financing Programs
The City can use a variety existing or new broadly based funding sources to fund infrastructure
directly or provide a source of interim financing for developer-based obligations (e.g., through
issuance of a lease revenue bond as described below). By enhancing General Fund revenues,
the City gains the ability to divert some General Funds to infrastructure projects. Such a
commitment can be made in the ordinances that create the taxes in question or can be made as
a matter of policy. Local sales tax increases, transient occupancy taxes, utility users taxes,
development taxes, and a local option real estate transfer tax all can be created or increased for
this purpose. The City of San Luis Obispo has levied a new general tax in recent years, a sales
tax override (Measure Y) that is allocated to diverse community investments and programs.
Establishment. Creation of new general or special revenues and any related issuance of
bonds supported by such revenues are limited by State Constitutional requirements and
statutes that require voter approval of greater than 50 percent for general taxes and two-
thirds approval for special taxes (those earmarked for particular uses).
Who Pays? The incidence of burden of taxes or rates is upon those paying; for example,
sales taxes are paid by residents, businesses, employees, and visitors to the City of San Luis
Obispo; transient occupancy taxes are paid by visitors; rates are paid by those receiving
utility services, etc. The rationale for the investment and general funding is that these
households, visitors, and businesses will benefit from the investments made in infrastructure
and the related economic development that is expected to ensue.
Benefits. Use of various general fund sources to support infrastructure investments
including repair and replacement of existing infrastructure as well as that serving new
development requires little additional administrative effort and is typically secure given the
broad range of revenues ultimately pledged to the financing.
Limitations. Use of existing general fund revenues is limited by existing demands to
support municipal operations. Capitalizing general or special taxes (i.e., issuing bonds)
typically involves voter approval for any “multi-year” funding obligation. Certificates of
participation (described below) offer a means for raising capital without creating such a
multi-year obligation or voter requirement.
Role in Financing Strategy . Citywide based funding (and related bond issues) can be used
to fund infrastructure pay-as-you-go, as a source of reimbursement, or to support a
municipal bond issue to fund infrastructure or to close the initial funding gap associated with
development impact fee programs or land secured financing programs. Allocation of existing
General Fund revenues or the creation of new general or special taxes can be integrated (as
SS1 - 16
Final Memorandum January 6, 2014
Infrastructure Financing Strategy Background Page 13
P:\131000s\131044SLO Infrastructure Financing\Corres\131044smem_01-06-14.docx
they have been in the City of San Luis Obispo) with fee and other developer-based financing
efforts as a source of paying directly for a particular infrastructure item or class of items.
These revenues and taxes can also provide “bridge” financing to fee programs or land
secured financing districts where there is a temporal funding gap anticipated. In such cases
the City of San Luis Obispo’s investment would be repaid with subsequent development
impact fee or other project-based revenue sources.
Financing Mechanisms Linked to City Funding Sources
Certificates of Participation. Government agencies acquire needed capital assets in one
of two ways: 1) by purchasing the asset either in cash or through a bond financing
arrangement; or 2) entering into a rental agreement to obtain use, but not ownership of the
asset, or to obtain use and ownership. Leasing, the most malleable of financing tools, can
accommodate both options, without the requirement of voter approval. A common form of
leasing, Certificates of Participation (COPs) offer a way to pay capital improvements and
assets with a long-term lease-purchase agreement with a third-party leasing entity. Cities
regularly enter into operating leases, or true leases, to rent property such as equipment and
office space. Agencies execute lease-purchase agreements, or tax-exempt leases, to finance
not only minor equipment procurements, but also the construction or acquisition costs of
major capital projects, such as schools and courthouses. Tax-exempt leasing, often involving
the sale of COPs, serves as an alternative to issuing municipal bonds. As new financing
needs emerge and market conditions change, government agencies often find that their
leasing powers provide more expedient access to the capital markets than their more limited
powers to incur debt. As noted above, the City of San Luis Obispo has made use of COPs in
its Capital Improvement Program (CIP) and has used COPs to “front” funding for projects
needed to facilitate economic development, specifically for providing “bridge” financing for
the Los Osos Valley Road interchange project.
Private Placement. “Private placement” is the sale of securities (revenue bonds or COPs)
to a relatively small number of select investors as a way of raising capital. Given current
financial markets, municipal financial advisors have found that structuring private placement
municipal debt is competitive with more traditional municipal bond offerings. Investors
involved in private placements are usually large banks, mutual funds, insurance companies
and pension funds. Private placement is the opposite of a public issue, in which securities
are made available for sale on the open market. Since a private placement is offered to a
few, select individuals, the placement does not have to be registered with the Securities and
Exchange Commission. In many cases, detailed financial information is not disclosed and the
need for a prospectus is waived. Finally, since the placements are private rather than public,
the average investor is only made aware of the placement after it has occurred.
State Infrastructure Bank. The California Infrastructure and Economic Development Bank
(I-Bank) was created in 1994 to finance public infrastructure and private development that
promote a healthy climate for jobs, contribute to a strong economy and improve the quality
of life in California communities. The I-Bank operates pursuant to the Bergeson-Peace
Infrastructure and Economic Development Bank Act (Government Code Sections 63000 et
seq.) The I-Bank is located within the Governor's Office of Business and Economic
Development and is governed by a five-member Board of Directors and has broad authority
to issue tax-exempt and taxable revenue bonds, provide financing to public agencies, provide
credit enhancements, acquire or lease facilities, and leverage State and Federal funds. The I-
Bank's current programs include the Infrastructure State Revolving Fund (ISRF) Program,
501(c)(3) Revenue Bond Program, Industrial Development Revenue Bond Program, Exempt
SS1 - 17
Final Memorandum January 6, 2014
Infrastructure Financing Strategy Background Page 14
P:\131000s\131044SLO Infrastructure Financing\Corres\131044smem_01-06-14.docx
Facility Revenue Bond Program and Governmental Bond Program. The I-Bank operates the
Infrastructure State Revolving Fund (ISRF) Program.
This ISRF Program is a statewide program that provides low-cost loans up to $10 million per
project to municipal governments for a wide variety of municipal infrastructure, including
infrastructure needed to serve new development. An application is required for these loans,
and loans require a stable and reliable source of repayment. If approved, loan repayment
can be funded through a commitment of general fund revenues or a pledge of a particular
revenue source, including City wide taxes or land secured assessments or special taxes.
State and Federal Grant Programs
The City participates in a range of State and federal grant programs, competes for special
grants, and cooperates with Caltrans on improvements to the State highways that transect the
City. These grant programs and cooperative efforts, while mainly focused on maintenance of
existing infrastructure, can be managed in a way that supports revitalization and economic
development efforts.
Capital Improvement Programming
Capital improvement programming and related efforts to manage infrastructure costs at the
policy, design, and construction phases are an integral part of the conceptual financing program.
Successful cost management can reduce the funding necessary from development impact fees
and other funding sources and financing mechanisms that would otherwise be necessary. Cost
management activities include review of policies that influence costs (in the context of
comprehensive and area planning), capital improvement programming, and project-level cost
management efforts. In the past the City has not integrated its CIP and its development impact
fee programs or other development related infrastructure projects. Key aspects of cost
management include the following techniques. Given the “overlap” of many capital projects (i.e.,
benefitting both new and existing development) and the need to prioritize use of a broad range
of funding and financing options, it may be beneficial to integrate the City’s capital programming
efforts.
Review of Level-of-Service Policies and Infrastructure and Facility Commitments
Cities’ infrastructure cost obligations derive from the need to provide new infrastructure and
public facilities to serve new development and maintain service levels, improve facilities pursuant
to State and federal mandates, improve existing levels of service throughout the City of San Luis
Obispo, and last but not least, maintain (repair and replace) existing capital assets. The
provision and cost of infrastructure to new developing areas is influenced by City policy in a
variety of ways including the setting of “level of service” standards in the General Plan,
development of facility master plans that contain actual or de facto standards, and the creation
of specific plans that contain specific infrastructure and public facility commitments. It is
important that such service level policies and programs consider long-range capital and
maintenance cost implications and funding constraints.
Accounting for Capital Assets’ “Life-Cycle” Costs in CIP
The City of San Luis Obispo’s capital assets, buildings, roads, parks, water and sewer utility
infrastructure, drainage facilities, and other capital equipment are in continual need of repair and
replacement. The cost of such repairs and replacement are commonly referred to as
“depreciation”—the value or utility of an asset wears out with time and use. One of the key
SS1 - 18
Final Memorandum January 6, 2014
Infrastructure Financing Strategy Background Page 15
P:\131000s\131044SLO Infrastructure Financing\Corres\131044smem_01-06-14.docx
coping mechanisms commonly deployed by organizations, including cities, under financial stress
is to defer maintenance and replacement of capital assets, thus creating a long-term liability and
perhaps even higher costs than would otherwise be the case. On the other hand, life-cycle
costing reflects the full range of costs of an asset over its life span based on the optimal cost-
effective maintenance and replacement schedule. An asset management approach can assure
that these costs are measured, monitored, and factored into all related infrastructure funding
and financing mechanisms.
Clarifying How CIP Investments Can Contribute to Revitalization and Economic
Development
A major City goal as articulated in the Economic Development Strategic Plan focuses upon
incentivizing economic development. The City has also focused upon revitalization of its older
commercial corridors. These policies suggest that some City investment in infrastructure for
desired economic development uses should be considered. Such investment may involve the
collection and use of development impact fees, but the precise nature of this interaction should
be defined. This effort could also include prioritization of available grant funding (e.g., State and
federal transportation grant programs) to support revitalization efforts and a recognition of the
linkage of broad community, fiscal, and economic benefits derived from targeted infrastructure
investments.
Appropriate Spatial Allocation of Costs
A “spatial” component of the CIP can consider how individual infrastructure items differentially
benefit sub-areas of the City of San Luis Obispo as a matter of policy as well as technical
analysis. Such policy and technical analysis, combined with other policies (e.g., those contained
in the General Plan or Specific Plans) can provide a key input to development impact fees and
sub-area financing programs, and also “spread” costs in an efficient manner.
Enhanced project cost management
Beyond the identification of needed or desired capital improvements and identification of funding
sources typically reflected in the CIP, the actual cost of individual capital improvement items can
be influenced by a variety of factors including:
“right-sizing” the project
phasing the project
prioritizing and linking with funding availability
Value-engineering (efforts to reduce costs through design and engineering efforts
A sound capital improvement programming effort will engage all of these techniques to assure
that infrastructure will be constructed in a timely and cost-effective manner.
Financing Program Elements
The preceding discussion of funding sources and financing mechanisms occurs in a context of
City policy, planning, capital improvement programming and financing, and economic
development that together need to be aligned to assure that policy objectives are achieved while
at the same time not impeding desired revitalization and economic development in the City. It is
important to note that such a program must not be limited to consideration of new funding
SS1 - 19
Final Memorandum January 6, 2014
Infrastructure Financing Strategy Background Page 16
P:\131000s\131044SLO Infrastructure Financing\Corres\131044smem_01-06-14.docx
sources and financing mechanisms but rather integrating funding and financing in the broader
context of community planning, General Plan and specific plan policy fulfillment, economic
development objectives, and related economic analysis. The funding sources and financing
mechanism must also be linked to the efforts involved in their creation and ongoing
administration. Accordingly, seven steps shape the overall financing program:
1.Economic evaluation of the area plan
2.Area plan cost and feasibility analysis
3.Value added and cost management adjustments
4.Funding and financing policies and options
5.Preparation of area financing strategy
6.Implementing actions
7.Monitoring, reporting, and updating
Each of these steps is described in detail below. Figure 1 illustrates how the Program
Components interact.
1.Economic evaluation of the area plan
An economic evaluation of the planning area should be conducted, ideally as a part of plan-
making. The economic evaluation should document market trends and likely values of the
plan as it is realized, document the general set of infrastructure improvements and any
extraordinary development costs (e.g., land assembly) that can influence development
economics. The evaluation should also analyze future fiscal effects (municipal service costs
and revenues) and also the range of broader economic benefits (jobs, sales, household
income, multiplier effects, etc.). This information is fundamental to subsequent feasibility
analysis and determining the appropriate financing strategy.
2.Area plan cost and feasibility analysis
Once the plan land use capacity and mix of uses are quantified, market information is
available, and basic infrastructure items (and other site-related development costs) are
generally identified, a more detailed cost analysis can be conducted. The cost analysis
combined with the quantification of potential real estate value (combining land use capacity
and market prospects) allows a development feasibility analysis. Such feasibility analyses
can determine the ability of a project or a plan area can fund necessary infrastructure and, if
not, the magnitude of funding “gaps” that may exist. This information, combined with the
economic evaluation previously prepared, provides the basis for making adjustments to the
project or plan (i.e., increasing value or decreasing costs) and formulating an informed
financing strategy.
3.Development incentives opportunities and cost management
Feasibility analysis provides a basis for reconsidering the project or plan in question and its
policies, especially those policies affecting “value creation” or conferring development costs.
If feasibility challenges are identified it may be necessary to make changes that: 1) increase
a plan’s real estate value (e.g., higher densities) through the provision of development
incentives that improve the project or plan’s ability to fund necessary infrastructure, 2)
reduce costs by altering the basic infrastructure improvement program or other policy-based
development costs; or 3) apply the funding and financing techniques discussed above in a
manner that offsets development costs.
SS1 - 20
Final Memorandum January 6, 2014
Infrastructure Financing Strategy Background Page 17
P:\131000s\131044SLO Infrastructure Financing\Corres\131044smem_01-06-14.docx
4.Funding and financing mechanisms
Given the need for infrastructure in newly developing and revitalization areas and related
economic development objectives and economic limitations, it is first necessary to assure
that the most efficient and cost-effective mechanisms are applied in tapping development-
based sources of funding. In cases where feasibility challenges are met despite best
practices it may be necessary to augment development-based funding sources and financing
with additional sources of funding along with other incentives if sought-after revitalization
and commercial and industrial development is to occur. The funding sources and financing
mechanisms presented in this Memorandum are all available and are being used in
jurisdictions around the State as a part of overall capital financing strategies. Going
forward there will be the need to formalize policy and to take the necessary steps to
institutionalize favored revenue sources and financing mechanisms.
5.Preparation of area financing strategy
A financing strategy for a given project or area or specific plan would synthesize the above
technical analyses into the necessary policy guidance, financing framework, and
implementation program. Such financing strategies are normally an integral part of specific
plans as required by State Planning Law. Setting precise guidelines for the form and content
of such strategies can assure that they adequately address economic, financial, and fiscal
issues related to specific plan development.
6.Implementing actions
The financing strategy would provide policies, and a financing framework, and identify the
specific actions necessary to implement the various components needed to assure funding of
local and related citywide infrastructure in a manner consistent with broader City policy and
economic development objectives. There are implications associated with a higher level of
City involvement in development-related infrastructure financing. For example, the activities
outlined in the program (e.g., enhanced levels of economic, fiscal, and financial analysis as a
part of plan making) and ongoing administration of the financing program components and
plan-related implementation efforts will require substantial staff time and other expenses
that must be anticipated and funded as a part of the overall program.
7.Monitoring, reporting, and updating
Development of an area typically plays out over an extended period of years. Thus, following
completion of the implementing actions it is necessary to monitor the financing strategy
components to assure they are performing as expected. Changing circumstances (e.g.,
market conditions, developer proposals, etc.) are often inconsistent with forecasts or what
may have been expected thus requiring adjustments to the program. Reporting is also
necessary, as may be required by statute (e.g., Gov’t Code Section 66000 et seq.) or by local
policy. Finally, if adjustments are in order, amendments to the area plan or altering or
remixing funding and financing mechanisms may be required.
SS1 - 21
Final Memorandum January 6, 2014
Infrastructure Financing Strategy Background Page 18
P:\131000s\131044SLO Infrastructure Financing\Corres\131044smem_01-06-14.docx
Figure 1 Area Plan Financing Program Elements
SS1 - 22
F INAL M EMORANDUM
To: Michael Codron and Lee Johnson
From: Walter Kieser, Teifion Rice-Evans and Ashleigh Kanat
Subject: Review of City’s Current Development Impact Fee Programs;
EPS #131044
Date: January 6, 2014
This memorandum provides an overview of the City of San Luis Obispo’s
current development impact fees. It has been prepared by Economic &
Planning Systems, Inc. (EPS) as part of the Infrastructure Financing
Analysis Study (“Study”) that is currently underway. This memorandum
is a companion to another EPS memorandum entitled “Infrastructure
Financing Background, Components, and Strategy.” Through this Study,
the City seeks a technical assessment of the existing fees, a better
understanding of their economic development implications, and
alternative funding sources and mechanisms that may be available to
fund infrastructure in the City. Together these memoranda are intended
to inform the upcoming series of City Council study sessions that will
involve the community, staff, Planning Commissioners and other
interested stakeholders.
As a basis of this review of the City’s development impact fees, EPS has
met with City staff; reviewed the Specific Plans, including the Financing
Plan chapters of the Margarita Area Specific Plan, the Airport Area
Specific Plan and the Orcutt Area Specific Plan (OASP); and reviewed
applicable ordinances, fee-setting resolutions, supporting nexus study
documentation, and City budget and financial reports. This body of
information leads to an understanding of the history, technical bases,
improvements funded, and related financing mechanisms that have been
used by the City in its efforts to fund the infrastructure needed to
support new development in the City.
This memorandum is organized by type of fee, including Citywide fees
and area fees. It is expected that a comprehensive update of the
development impact fees will be prepared in 2015 based on the
infrastructure improvements identified as part of the Land Use and
Circulation Element (LUCE) update.
SS1 - 23
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 2
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
Key Findings
1.Incremental evolution in the City’s existing development impact fee programs have
resulted in a complex system of base fees, sub area fees, and geographic fee
variation that warrants re-consideration in the next fee update process.
During the past 20-plus years, the City’s impact fee programs have evolved to respond to
growth and development patterns, changing development standards and infrastructure
requirements. The City’s fee programs represent one of the City’s primary methods for
financing infrastructure improvements, particularly in the growth areas of the City. The
overall outcome of these incremental changes has resulted in a complex system that
warrants detailed consideration from the perspectives of clarity and efficiency as well as fee
level balance (by geography and land use) and consistency with City goals (e.g., economic
development).
2.There are geographic “overlaps” in the City’s fees that cause a significant
difference in fee levels in various parts of the City.
The geographic sub areas, particularly in the transportation fee program, result in wide fee
level differences area-to-area, although, in some cases, there may be technical justification
to support these differentials.
3.At the Citywide level, aggregate fee levels are consistent with fees levied by other
cities, though some specific fees appear to be high by industry standards.
The tiered structure of the City’s development impact fees (layering Citywide and area fees)
leads to fees of significantly differing amounts in various parts of the City. The aggregate fee
amounts for residential uses fall in a range typical for mid-sized California cities and fall
within industry standard “burden” limits. Nonresidential fee levels, however, appear more
concerning. For example, fees levied on retail commercial development in the Margarita Area
Specific Plan Area appear to fall in a range beyond the industry standard for such uses.1
4.There is an inconsistency between land use categories used to compute fees
between fee programs.
In some cases there are inconsistencies between several of the development impact fees
with respect to the land use categories and their precise definition. For example, the Airport
Area Sub Area transportation impact fee includes “business park” as a land use category;
however, there is no “business park” equivalent under the Citywide fee and it requires a
special calculation to estimate the Citywide base fee that is due. It is helpful for
administrative and auditing purposes for the land use categories to be consistent across all of
the individual fees, or more specific land use categories should be “nestled” within a common
land use category.
1 Fees for other land uses also may exceed the industry standard “burden” limits, however, the
feasibility analysis was limited to single-family, retail and industrial uses.
SS1 - 24
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 3
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
5.Fees do not contain a cost component for administration and updating.
The provisions of the Mitigation Fee Act allow jurisdictions to include the costs of
administering the impact fee program in the fee amount. Administration requirements
include collecting and allocating impact fee revenue, record keeping and reporting of fund
activity, and periodic updates to the fee program, which are critical to fee program
effectiveness. These costs typically are 1 to 3 percent of the capital portion of the fee.
There is some funding in the City’s Transportation Impact Fee (TIF) program for periodic
updates of the traffic model and volume counts.
6.The Engineering News Record’s Construction Cost Index (CCI) may be a more
appropriate index for automatic, annual “indexing” of existing fees.
As specified in the supporting resolutions, fees are inflated each year by the Consumer Price
Index (CPI). In many jurisdictions, annual fee adjustments are linked to the CCI published
by the Engineering News Record, rather than the CPI to better relate to increases in
construction costs. ENR’s CCI has been published consistently every month since 1913 for
20 U.S. cities and a national average of the 20 cities. As such it is one of the most reliable
and consistent indices that track trends in construction costs. However, one City of San Luis
Obispo resolution (Resolution No. 9582, Series 2004 – amendment of water and wastewater
fees) states, “Since the facilities and improvements for which connection fees are charged
will be financed through bonds or other form of debt, the annual adjustments are indexed to
consumer prices rather than construction costs.” This may be the justification for the CPI,
rather than CCI adjustment.
7.The City does not charge fees for all municipal infrastructure categories, though
this may be appropriate in the context of other concerns about the overall fee
program.
The City of San Luis Obispo does not charge a General Government Fee to fund civic
improvements and the preparation of plans and studies,2 nor does it charge a Public Safety
Fee to fund police and fire capital improvements or a Citywide park improvement fee (in
addition to the Quimby-authorized Park In-Lieu Fee). In many cities, these fee components,
along with Transportation, are part of a comprehensive Public Facilities Impact Fee Program.
However, any new fees should be considered in the context of broader development
feasibility and citywide financing objectives.
Impact Fee History and Summary
During the past 20+ years the City has adopted multiple development impact fees that apply
throughout the City including a transportation impact fee, a water impact fee, a wastewater
impact fee (as connection charges), an affordable housing inclusionary requirement and in-lieu
fee, a public art impact fee, and a park impact fee (an in-lieu of dedication of parkland).3 The
2 The cost of preparing Specific Plans has been incorporated into several of the sub area
transportation fees.
3 There is also a parking in-lieu fee for the Central Commercial Zone that is not evaluated in this
memorandum. See Chapter 4.30 of the Municipal Code for specifics.
SS1 - 25
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 4
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
City has also adopted “sub area” development impact fees for its specific plan areas including the
following:
Margarita Area Specific Plan
Margarita Area Specific Plan Sub Area Transportation Impact Fee
Margarita Area Specific Plan Parkland Impact Fee
Airport Area Specific Plan4
Airport Area Specific Plan Sub Area Transportation Impact Fee
Orcutt Area Specific Plan
Orcutt Area Specific Plan Sub Area Transportation Impact Fee
Orcutt Area Specific Plan Area Park Improvement Fee
Los Osos Valley Road Sub Area
Los Osos Valley Road Sub Area Transportation Impact Fee
Figure 1 shows a time-line reflecting the adoption of the various development impact fees and
also the major updates that have occurred over the past several decades, alongside planning
events, such as Specific Plan adoptions or adoption of the Economic Development Strategic Plan.
Table 1 provides this same history with more detail about what led to the event (if known) and
the effect of each event.
Table 2 shows the City’s development impact fees by category as they apply in the various sub-
areas of the City to typical development types. Wastewater catchment fees also apply in the
growth areas of the City, though are not reflected on this table.5 Totals are provided for the
single-family residential land use category only, as the nonresidential fees are not additive. At
its most basic, the Citywide development impact fee total is approximately $18,000 per single-
family residential unit. This fee level can be compared with the Orcutt Specific Plan Area, where
a single-family residential unit would be charged approximately $39,400 in development impact
fees, not including the Wastewater catchment fee, which would add an additional $3,630 for a
total of $43,030, assuming development in the Tank Farm catchment area.
General Impact Fee Characteristics
The City’s development impact fees reflect standard features seen in typical municipal
development impact fee programs as described below.
Hybrid of Mitigation Fee Act Compliant Fees and In Lieu Fees
Cities adopt impact fees using two legal frameworks: 1) impact fees adopted pursuant to the
Mitigation Fee Act (Government Code Section 66000 et seq.) which applies to funding for
infrastructure required to serve new development requiring very specific infrastructure-related
“nexus” findings, and 2) “In lieu” fees that are based a variety of public policy objectives such as
4 There is also an Open Space In Lieu Fee that applies to new development in the Airport Area Specific
Plan area, which is not included here as it is not strictly an impact fee.
5 See Table 6 for a summary of wastewater catchment fees by catchment area.
SS1 - 26
SS1 - 27
SS1 - 28
SS1 - 29
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 8
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
open space preservation, affordable housing, parking, and parkland acquisition. The City’s
development impact fees include both of these types of fees as will be discussed under each fee
category, below.
Discounts for Retail and Hotel Uses
The City “discounts” (reduces) its Citywide Transportation Impact Fee from the amount
calculated technically to a lower amount intended to be more affordable for retail and hotel
development, in consideration of the General Fund benefits of this type of development (sales
tax and transient occupancy tax, respectively). When this is done it automatically creates a
deficit proportional to the cumulative amount of the discounted fees in the applicable fee
account. By law, this deficit cannot be “made-up” by increasing fees on the remaining uses and
must also be “backfilled” with other City funding sources or grants to assure the financial
integrity of the fee program. The various specific plan transportation fee programs do not have
this provision in their fee methodologies.
Timing of Payment
Fees are payable before issuance of a building permit. For any development project or portion
thereof, impact fees shall be assessed at the time of application and remain valid for as long as
the application is proceeding through valid processing as per the Uniform Administrative Code.
Annual Adjustments
The amount of the fees are currently automatically adjusted on July 1 of each year by the annual
percentage change in the U.S. Bureau of Labor Statistics consumer price index for all urban
consumers (CPI-U), all-cities average for the prior calendar year.
Fee Updates
Fee updates have been prepared periodically as is necessary to keep the individual impact fees
reflective of current infrastructure costs, new land use plans, and real estate market trends.
Fee Credits and Reimbursements
If the applicant for approval of any development project is required by the City, as a condition of
approval, to construct facilities whose cost has been used in the calculation of impact fees which
apply to that project, the applicant shall receive a credit for that portion of the total fees
otherwise payable that are attributable to those facilities. If the credit exceeds the amount of
the impact fees due on the development, a reimbursement agreement with the applicant shall be
offered. The reimbursement amount shall not include the portion of the improvement needed to
provide services or mitigate the need for the facility or the burdens created by the development.
The City has entered into several such reimbursement agreements in its efforts to assure timely
construction of required infrastructure.
In general, the City would prefer to see improvements constructed at the time of development as
opposed to waiting for there to be adequate revenue from fee collections. Due to recent
economic conditions, requests for reimbursement agreements are becoming more common in
order to fund up front infrastructure. The City has begun charging an “administrative” fee for
long-term oversight of the reimbursement agreements and these costs are not currently included
in the fee programs. As such, crediting for these costs is not currently allowed by the City.
SS1 - 30
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 9
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
Review of Development Impact Fees by Category
The following review of the City’s development impact fees is organized by fee category including
transportation, water and sewer utilities, and parks and open space. While not adopted pursuant
to the Mitigation Fee Act, the City also has an inclusionary housing ordinance that provides an in-
lieu fee option and a public art fee applicable to larger commercial projects. The fees in each
category include those that are charged Citywide and also those that apply to specific sub-areas
of the City. Within each category the initial section highlights some key components of the
Citywide fee program generally and identifies topics for consideration as part of the proposed
Comprehensive Update. The subsequent sections provide detailed information on the
components of the fees including the subarea fees to illustrate how the fees evolved over time.
Detailed tables illustrating how the fees function together are provided in Appendix A for select
land use categories.
Transportation Impact Fees
Transportation impact fees include a Citywide Transportation Impact Fee (referred to as the
“TIF”) in addition to fees applicable to sub-areas of the City generally corresponding to the
Specific Plan areas. The TIF program was originally established in 1995 and last updated in
2006. A comprehensive fee update will be prepared after the completion of the LUCE. The
overall transportation fee program has evolved into a relatively complex fee program with the
TIF, the three subarea fees associated with the different growth areas, an additional subarea-fee
associated with an individual transportation improvement (the LOVR interchange), and numerous
reimbursement agreements to monitor.
A map of the transportation sub areas is provided as Figure 2. Some of the definitions of the
land uses (e.g., business park, service commercial) are uncertain and fees on some types of
development in certain subareas require calculation (i.e., are not fully transparent). The
variation in fees, the specifics of the allocations of improvement costs for some improvements,
and lack of clarity in terms of which fees apply have resulted in questions concerning whether
the fee program could be improved from an administrative efficiency, economic development,
and other perspectives.
Table 3 provides a summary of the transportation fees in the City (Citywide and by sub area),
and Table 4 below shows the total transportation fees by select land use categories (Single-
Family, Retail and Industrial are selected as representative) and subarea.
SS1 - 31
SS1 - 32
SS1 - 33
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 12
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
As shown, fees for Single-Family residential development vary from $3,500 per unit in a non-
growth area of the City to $12,500 per unit in the Margarita sub area, with uncertainties for
other categories. Industrial fees show a greater variation with the base fee at $2.0 per square
foot Citywide and $20.0 per square foot in the Margarita sub area.
Citywide Fee Program Description
Municipal Code Chapter 4.56, Sections 4.56.010
Resolution No. 9793 (2006 Series) Updates Transportation Impact Fees
Fee Purpose
The purpose of the transportation impact fee program is to help fund the transportation
improvements required to accommodate new development in the City, including vehicular traffic
as well as bicycle and pedestrian traffic and transit. It is the City’s policy to ensure that new
development pays for its fair share of the cost of transportation improvements, and the
transportation impact fee program is one of the City’s key strategies for doing so.
Fee Program Background
The City’s transportation impact fee program was originally established in 1995. The
MuniFinancial study, which was prepared in 2006, represented the first comprehensive update in
over 10 years. It has not been updated since 2006. It is planned that when the LUCE update is
complete, the transportation impact fee program will be updated.
Table 4
Transportation Impact Fees by Select Land Use Categories and Sub Area
Area/Sub Area
Citywide $3,516per unit$7.406per sq.ft.$2.036per sq.ft.
MASP Sub Area [1]$12,504per unit$49.406per sq.ft.$20.051per sq.ft.
OASP Sub Area [1]$12,171per unit
AASP Sub Area [1]$2.851per sq.ft.
LOVR Sub Area $8,888per unit$20.556per sq.ft.$6.028per sq.ft.
"Triple Fee" Zone $6.843per sq.ft.
[1] Includes the "planning" fee for preparation of the Specific Plan.
Source: City of San Luis Obispo.
Industrial Total
Calc Required [2]
[2] The Airport Area Specific Plan (and, therefore, the "Triple Fee Zone) does not anticipate residential growth. If
required, a single family fee would need to be calculated by the Department of Public Works based on Average
Daily Trips (ADT).
Retail Total
Calc Required [3]
Calc Required [3]
Calc Required [3]
Single Family Total
[3] The Orcutt Area Specific Plan and the Airport Area Specific Plan (and, therefore, the "Triple Fee Zone) do not
anticipate significant retail growth. If required, a retail fee would need to be calculated by the Department of
Public Works based on Average Daily Trips (ADT).
[4] The Orcutt Area Specific Plan does not anticipate industrial growth. If required, an industrial fee would need to
be calculated by the Department of Public Works based on Average Daily Trips (ADT).
Calc Required [4]
Calc Required [2]
SS1 - 34
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 13
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
Improvements and Costs
The Citywide fee program is designed to fund costs related to street and highway projects,
transit projects, and bikeway projects. Total project costs, excluding financing costs, increased
by $86.1 million, from $48.7 million in 1995 to $134 million in 2006. The portion of costs
allocated to the fee program correspondingly increased by $32.2 million, from $19.3 million to
$51.5 million. Including financing costs of $24.6 million for funding the Prado Road and Los
Osos Valley Road interchanges and the Prado Road bridge widening increased the fee program
costs from $51.5 million to $76.1 million.6 The improvements are categorized into three
components: 1) all identified projects except the Prado Road and Los Osos Valley Road
interchanges, 2) the Prado Road interchange, and 3) the Los Osos Valley Road interchange.
Technical Methodology
Depending on the improvement item, costs are allocated between existing and new development
based on the ratio of base-year trips versus trips at buildout using the City’s traffic model. The
resulting ratio of costs attributable to new development is 35 percent, though the precise
allocation varies by improvement.
Trip rates by land use type were used to estimate total trips, and then total trips were multiplied
by a pass-by factor. A cost per trip is calculated based on the project costs and the land use and
total trips. Total capital costs are allocated to each land use category by multiplying the cost per
trip by the total trips for each land use. The fee per unit of development for each category of
project costs is calculated by dividing the share of total costs for each land use by the amount of
projected development (in terms of trips) for that land use. Projected development assumptions
were provided by the City and included estimates of total Citywide development and within the
Prado Road and Los Osos Valley Road sub areas separately.7
Adjustments
For the Citywide fee, there is a 50 percent discount for retail and hotel uses in recognition of the
General Fund fiscal benefits of these types of uses (e.g., sales tax and transient occupancy tax).
Adjustments to the Citywide TIF base fee are also made for the Los Osos Valley Road Sub Area
and the Margarita Area Specific Plan Sub Area to avoid double-counting for the same project
costs. New development in these sub areas are already charged for their benefit through the
add-on sub area fees. Accordingly the Citywide fees in these sub areas are reduced
proportionately by the amount that is attributable to these interchange projects in the base fee.
6 See Table 2 of the MuniFinancial Transportation Impact Fee Update, 2006.
7 The Prado Road sub area was to be created to develop an “add on” fee for development in close
proximity to the Prado Road Interchange (similar to the LOVR Interchange sub area). The Prado Road
Sub Area never materialized since the “Dalidio” property approvals were overturned via referendum
and other development in the area that would require the sub area to be formulated have not yet
occurred.
SS1 - 35
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 14
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
Los Osos Valley Road Sub-Area
Resolution No. (2003 Series) established sub area fee
Resolution No. 9732 (2005 Series) updated sub area fee
The LOVR Sub Area fee was based on analyses approved by the Council in October 2003 and
updated in September 2005. The LOVR Sub Area fee funds improvements to the Los Osos Valley
Road/US 101 interchange. In the 2003 analysis, the total costs of the improvements were
estimated to be $16 million. For budgeting and planning purposes, City staff estimated that
grants amounting to approximately $8 million would be obtained.
Using the City’s traffic model and various environmental documents that included trip generation
estimates, City staff calculated the percentage of vehicle trips that would be generated by the
new development surrounding the interchange and then derived a “per trip” cost for new
development’s share of the interchange improvements. A sub area around the interchange was
established that reflected the likely development and redevelopment that would affect the need
for increased capacity at the interchange location.
Partial funding for the LOVR/US 101 interchange is included in the Citywide transportation impact
fee program. However, the estimated cost was based upon 1994 information (when the TIF
program was established). At the time, the cost estimate for the interchange was $3 million.
Further investigation before the 2003 establishment of the sub area fee indicated the cost was
$16 million. In the Citywide TIF program, all new development equally shares the cost of the $3
million estimate. The 2003 Council agenda report explains that because the sub area will receive
the greatest benefit and generate the greatest demand, the sub area fee is designed to ensure
that the sub area pays its fair share. The rest of the City still benefits and will continue to
contribute to the interchange project but at a much lower level.
By 2005, the project costs had increased to $27 million, including $3.1 million for the Calle
Joaquin relocation project and $23.9 million for the LOVR interchange project, and the sub area
fee was updated. The 2005 staff report notes that while necessary to fund needed LOVR
interchange improvements, the LOVR Sub Area fee presents an economic challenge for new
development in the area. A financing program was proposed that would be extended to auto
dealerships, in light of the fiscal benefits of this type of development and the City’s General Plan
policy of encouraging auto dealers to locate in this area.
Margarita Area Specific Plan Sub Area
Resolution No. 9643 (2005 Series)
Resolution No. (2007 Series) (updates cost estimate of Prado Road extension)
The Margarita Area Specific Plan was adopted in October 2004 and amended in July 2012. The
420-acre Margarita Area is in the southern part of San Luis Obispo, located within the City’s
urban reserve boundary. It includes much of the land bounded by South Higuera Street, Broad
Street, Tank Farm Road, and the ridge of the South Street Hills.
The Margarita Area is identified as a Residential Expansion Area, meaning it is one of the areas
designated to accommodate San Luis Obispo’s planned residential growth for the near future.
According to the General Plan, this area should include permanent open space protection and a
mix of housing with supporting services, and a business park. The development program
associated with the Margarita Area is summarized on Table 5, along with specific plan
development programs.
SS1 - 36
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 15
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
Because development in the Airport Area Specific Plan is expected to occur concurrently with that
in the Margarita Area, the Public Facilities Financing Plan (PFFP) (Chapter 9 of the Margarita Area
Specific Plan) also incorporates the land uses and infrastructure facilities needs for the Airport
area as well. The total cost of transportation infrastructure (road and bikeway improvements)
and planning costs associated with the specific plans for which the Airport and Margarita areas
are responsible is estimated to be $28.5 million.8
Some roadway infrastructure costs are allocated to the areas which benefit most significantly
from these improvements or have a significantly higher impact on them than the overall City
traffic generated by new development. Prado Road improvements, a portion of the cost of Prado
Road Interchange, and intersection improvements at Prado and South Higuera are allocated to
future development in the Margarita Area since this area will benefit from these improvements.
As stated in the PFFP, future development in the Margarita Area will benefit from the
improvements to Prado Road and the intersection at South Higuera Street, and, therefore, a
significantly higher pro rata share of project costs associated with these improvements was
allocated to future development in the Margarita Area.
Additionally, based on an earlier study, the City estimated that future development in the
Margarita Area is responsible for 13 percent, or $2.9 million, of the $22 million Prado Road
Interchange. Similarly, when the Dalidio-MacBride area near the Prado Interchange develops,
City staff anticipates that properties in the immediate vicinity of the interchange will carry a
higher cost responsibility of improving the interchange.
8 Provided by Tim Bochum via an updated version of Table 8.6 of the Airport Area Specific Plan.
Table 5
Development Program by Specific Plan Planning Area [1]
Land Use Category
Single Family Residential685 units540 units
Multifamily Residential183 units439 units
Retail 10,000 sq.ft.8,000 sq.ft.
Office 8,500 sq.ft.
Business Park 959,017 sq.ft.3,044,844 sq.ft.
Industrial 4,277,592 sq.ft.
Government 66,350 sq.ft.
[2] See Table 8.1 of the Airport Area Specific Plan.
[3] See Table 4.1 of the Airport Area Specific Plan.
[4] See Table 3.2 of the Orcutt Area Specific Plan.
Sources: Margarita Area Specific Plan; Airport Area Specific Plan; Orcutt Area Specific Plan; City of San Luis Obispo.
OASP [4]MASP [2]AASP [3]
Specific Plan Planning Areas
[1] Development program represents total plan area development capacity and does not necessarily represent the
development totals that are used for fee calculation purposes. For example, the square footages noted above for
the AASP are inclusive of existing development that would not factor into a fee calculation.
SS1 - 37
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 16
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
The total cost of these three improvements, approximately $13 million, is allocated among all
future development in the Margarita Area based on trip generation factors.
In addition, funds were advanced by the City to pay consultants’ costs associated with preparing
the specific plans, environmental review, and other analyses to support development of the
Airport and Margarita areas. These costs total $717,000 and have been allocated to all future
development in the Airport and Margarita areas on a per-acre basis. The Specific Plan cost to the
Margarita sub area is $252,000.9
When the fee was updated in 2007, the cost estimate of the Prado Road extension was revised.
The current sub area fee reflects the following improvements:
Prado Road Extension, $18,967,700
Prado Road Interchange, $3,131,100
Prado & Higuera Intersection, $313,400
In the case of the Prado Road extension, it was envisioned that this improvement would be built
by new development, and as such, the impact fees serve to determine that basis for
reimbursement agreements and crediting, rather than fees to be collected. As noted by City
staff, the recent economic downturn influenced this philosophy and the City has received
requests from proponents of existing approved vesting maps to modify construction
requirements to be more aligned with a fee based program with deferral of Prado Road
improvements.
Airport Area Specific Plan Sub Area
Resolution No. 9727 (2005 Series)
The roughly 1,500-acre Airport Area is located approximately 2.5 miles south of downtown San
Luis Obispo, in the City’s designated Urban Reserve area. The land use program for the Airport
Area allows for the development of up to 1,073 acres (71 percent of the planning area) with a
mixture of services, manufacturing, business park, and airport-related facilities. The balance of
the area is to be preserved as open space and agriculture (424.9 acres), and an existing mobile
home park (7 acres) will be retained.
In addition to providing for new development, a key goal of the Plan is to preserve, enhance, and
manage the planning area’s open space lands and natural resources for the long-term benefit of
planning area businesses, the San Luis Obispo community, visitors to the area, and the
environment itself.
Because development in the Margarita Area Specific Plan is expected to occur concurrently with
that in the Airport Area, the PFFP that is included as Chapter 8 in the Airport Area Specific Plan
also incorporates the land uses and infrastructure facilities needs for the Margarita Area. The
total of transportation infrastructure (road and bikeway improvements) and planning costs for
which the Airport and Margarita areas are responsible is estimated to be approximately $28.5
million.10
9 Indicated as $284,000 in the MASP, Table 10.
10 Provided by Tim Bochum via an updated version of Table 8.6 of the Airport Area Specific Plan.
SS1 - 38
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 17
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
As stated in the PFFP, roadway infrastructure costs are allocated to the areas which benefit from
these improvements. Future development in the Airport Area will primarily benefit from the
improvements to Tank Farm Road, the Unocal Collector, Santa Fe Road Extension and Buckley
Road Extension and therefore, existing development in the Airport Area is not allocated these
costs. Costs include roadway improvements and median landscaping and irrigation for Tank Farm
Road. The original PFFP did not include the full cost of the Buckley Road Extension because the
County of San Luis Obispo was acting as lead on the project at the time of the plan adoption and
costs were included as part of the County’s SLO Area Fringe Transportation Impact Fee Program.
The original PFFP assigned most of the Unocal Collector and Santa Fe Road Extension
improvement costs to the fronting property owners, although the part of the Unocal Collector
that crosses the Chevron/Unocal property is included in the Plan.
The total cost of these roadway improvements is approximately $12.78 million and is allocated
solely to future development in the Airport Area.11 Additionally, $2.0 million in bikeway costs is
allocated to the Airport Area.
Funds have been advanced by the City to pay consultants’ costs associated with preparing the
specific plans and other analyses to support development of the Airport and Margarita areas.
These costs total $717,000 and have been allocated to all future development in the Airport and
Margarita areas on a per-acre basis. The existing development in the Airport and Margarita areas
is not included in the cost allocation. The Specific Plan cost to the Airport sub area is $465,000.
Orcutt Area Specific Plan Sub Area
Resolution No. 10222 (2010 Series)
The 230.85-acre Orcutt Plan Area, located southeast of the City, is designated as an expansion
area within the urban reserve line in the City’s General Plan. The Specific Plan calls for a
balanced mix of housing types including single-family and multifamily residential areas and two
sites for public or low-income housing development. Required infrastructure to serve the OASP
area includes roads and bridges, a network of biking and walking paths linking the residential
areas, a centrally located park, a neighborhood park, a pocket park, a linear park system and
Trail Junction Park.
The costs for roads, bridges, pedestrian and bicycle paths, and parks and recreation facilities
were estimated to be approximately $15.9 million when the Specific Plan was completed in 2010.
The fair share of these costs allocated to the Orcutt Plan Area was $14.1 million.
Transportation, $4.2 million
Pedestrian and Bicycle Paths, $1.8 million
Parks and Recreation, $4.4 million
Parkland, $3.7 million
11 Text on page 8-8 of the Airport Area Specific Plan indicates $5.5 million. Estimate of $12.78 million
is extracted from Table 8.6 on page 8-11 of the Airport Area Specific Plan.
SS1 - 39
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 18
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
The public facilities identified in the OASP were designed and sized to serve the residential
development in the OASP. The proposed commercial uses are a minor part of the total Plan,
representing less than one-half of 1 percent of the net developable acreage. Therefore, the cost
of the public facilities attributable to the commercial land uses is not allocated to them because
they will be developed only as a result of the demand created by the residential development, as
such, are shared equally by all residential development in the OASP area.
Development in the OASP is expected to participate in the Citywide development impact fee
programs for transportation, water, and sewer facilities. The Citywide fees are in addition to the
OASP fees and will fund the Plan Area’s fair share of Citywide public facility costs. It should be
noted that there are no duplicated transportation infrastructure costs between the OASP-specific
transportation fees and the Citywide fees.
New development in the OASP area is also subject to a fee that will be used to reimburse the
City and certain land owners for EIR preparation costs, and the City will be reimbursed for its
costs associated with preparation of the Specific Plan. The total cost of the EIR and the Specific
Plan is spread equally to the residential land uses on a per-acre basis.
Fee Update Topics
1.Geography of Fee Program . The City’s TIF program includes a Citywide fee, distinct add-
on fees for three growth areas (Orcutt, Margarita, and Airport) and an additional add-on fee
for one of the City’s major projects (the LOVR Interchange). While additional fees for growth
expansion areas exist in a number of California cities, the complexity and overlap of the
City’s current transportation fee programs should be carefully studied as part of the future
fee update process, with the objectives of reducing both complexity and geographic
disparities (including, overlap).
2.Transportation Improvement Cost Allocations. A key component of the geography of
the current transportation fee program, and the associated differences in fee levels in
different areas, relates to the process of allocating transportation costs. The future fee
update process should consider the allocation of transportation improvement costs, including
the best allocation of major facilities (e.g., LOVR Interchange, Prado Road) between the
Citywide fee program and the expansion areas as well as among the expansion areas
themselves. The proportion of costs allocated to existing development (i.e., non-fee funding
sources) should also be reviewed, as should prior fee program assumptions concerning
expected revenues from other non-fee funding sources.
3.Transportation Impact Fee Discounts and Other Policy Decisions . There are a number
of policy decisions involved in fee program creation. One common example is the
discounting of fees for certain uses. The City currently discounts transportation fees on retail
and hotel uses due to the General Fund fiscal benefits of such developments (sales tax from
retail development and transient occupancy tax from hotel development). In situations where
discounts are provided, the City should identify the other funding sources that will ensure a
comprehensive transportation financing policy and ensure a fully-funded fee program. Other
policy decisions can include 1) the range of transportation improvements the City determines
are necessary, and 2) the specific allocation of new transportation improvement costs
between existing and new development.
SS1 - 40
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 19
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
4.Fee Updating. The Citywide transportation impact fee program was first adopted in 1995
and last updated in 2006. The City is prudently awaiting the update of its LUCE before
conducting a comprehensive fee update. At the same time, once a new fee program is in
place, the City may wish to adopt a policy of more frequent fee program updating. Generally
speaking, impact fee programs should be updated within a five-year timeframe.
Water and Sewer Utilities
Chapter 4.20.140
This section provides an overview of the City’s water and wastewater fee programs. The initial
section highlights key components of the fee program, and the subsequent sections provide
more detailed information on the different components of the fee program, including catchment
areas, fee program history, and other important factors. The end of the section identifies fee
update topics for discussion.
The water and wastewater fees were recently updated (August 2013) after the necessary
technical work and policy level discussions occurred. The water fee schedule was refined to a
single overall Citywide fee with the removal of sub area differentiation. The wastewater fee has
a Citywide base fee as well as catchment area add-ons. The Citywide wastewater fee along with
the catchment area fees are shown in Table 6. As a result of the catchment area add-ons,
wastewater fees for single-family residential development range from $3,739 per unit (no
catchment area) to $7,359 per unit (Tank Farm catchment area).
Fee Program Descriptions
The City’s water and wastewater development impact fees are based on future growth under the
City’s General Plan used in conjunction with capital improvement planning to ensure adequate
water supply, water treatment, wastewater collection infrastructure, and wastewater treatment
capacity. These fees are based on a methodology that applies facility cost and location, and
types and size of anticipated development. The fees collected are used to finance improvements
to the benefit of future development.
The City Council first assessed water and wastewater impact fees in 1991 and updated them in
2004. The City prepared the 2013 Study in order to identify and/or update the public facilities
and costs associated with providing capacity for future development. Costs came down
significantly in the 2013 update.
The 2013 Study reflects significant changes to the Water Development Impact Fee and the
Wastewater Development Impact Fee since the adoption of the fees in 2004. Important changes
to note include the following:
1.The Fees include a new fee class for secondary dwelling units (studio units less than 450
square feet) that is 30 percent of one equivalent dwelling unit based on water demand and
wastewater generation for similar units. This unit type was previously charged the fee for a
multifamily residential unit.
2.The Fees also include an updated multifamily unit development impact fee that is 70 percent
of one equivalent dwelling unit based on water demand and wastewater generation for
similar units. The fee for a multifamily unit was previously 80 percent one equivalent dwelling
unit based on water demand and wastewater generation for similar units.
SS1 - 41
SS1 - 42
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 21
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
3.Updated actual capital costs for additional water supplies.
4.Elimination of the Water Area-Specific add-on fee for the Airport and Margarita Areas.
5.Updated actual and forecasted wastewater capital facility costs with actual and forecasted
capital costs for facilities from the 2013-15 Financial Plan, along with costs from the 2010
Water Reclamation Facility (WRF) Master Plan, and City project financing resources as
documented throughout the report.
6.Change from “Area Specific Add-On” fees to “Catchment Area” fees for certain wastewater lift
station facilities.
7.Elimination of the 3.5 percent adjustment in the Citywide nonresidential fee related to higher
discharge strengths.
Water Impact Fee
The City’s Utilities Department provides water service to City residents and businesses within the
City limits and to the County Airport and California Polytechnic State University, San Luis Obispo
(Cal Poly). Cal Poly does, however, provide its own source of supply, on-site storage, and
distribution facilities to meet its on-campus water demands. If an area outside the City limits
wants to receive water service, that area must be annexed to the City, with the exception being
customers who have made prior agreements with the City.
There are two components of the Water Development Impact Fee: Water Supply and Water
System Facilities.
Water Supply
Two of the City’s water supply sources, recycled water and the Nacimiento Pipeline Project, are
included in the cost calculation for the water supply development impact fee since the added
water supply of these projects enables the City to meet the General Plan build-out goals.
Water Reuse Project, $11,532,100 (includes Financing Costs)
Nacimiento Pipeline Project, $149,879,829 (includes Financing Costs)
The unit cost per EDU is determined by the total cost of water supply attributable to future
development ($63.2 million12) divided by the total future EDUs within the City (6,927 EDU). The
equivalency factor is applied to this unit cost to determine the residential fees per dwelling unit.
Nonresidential development impact fees are based on meter size per the American Water Works
Association ratio.
Water Facility
The 2000 Water System Master Plan identifies water treatment facilities required to
accommodate future development in the City:
2006 Water Treatment Plant Improvements, $24,842,500
Sedimentation Process, $7,776,700
2007 Bishop Tank, $1,502,100
1994 Water Treatment Plant Upgrade, $22,566,900
12 See Table 14, page 20 of 2013 Water and Wastewater Development Impact Fee Study.
SS1 - 43
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 22
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
Of these total facility improvement costs, approximately $11.4 million is allocated to future
development.
The cost of water facilities attributable to future development, ($11,431,833) is divided by the
total EDUs anticipated as a result of future development in the City (6,927 EDUs) to determine
the cost per EDU. The equivalency factors for other residential categories are then applied to this
unit cost to determine the residential fees per dwelling unit. Nonresidential development impact
fees are based on meter size. Table 7 provides a summary of the City’s water impact fees.
Wastewater Impact Fee
The City provides wastewater collection and treatment service for residents and businesses
located within the City, as well as the County Airport and Cal Poly.
Citywide
An upgrade of the City’s Water Reclamation Facility (WRF) is planned in response to stricter
discharge limits required by the Central Coast Water Board (CCWB), to increase capacity to serve
the City’s population at General Plan buildout, and to replace existing aged facilities at the end of
their service life. The Water Reclamation Facility Master Plan was prepared to identify these
upgrades and associated costs. Study and design phases of these improvements are scheduled
to begin in 2013-14, with construction anticipated in 2016-17.
Table 7
Water Impact Fees
Land Use Category
Facilities FeeSupply FeeTotal
Residential
Single Family DetachedDwelling Unit $1,650$9,124$10,775
Multifamily Dwelling Unit $1,155$6,387$7,542
Mobile Home Dwelling Unit $990$5,474$6,465
Studio Unit ( < 450 sq.ft.)Dwelling Unit $495$2,737$3,232
Non-Residential
3/4"Meter Size $1.650$9.124$10.774
1"Meter Size $2.806$15.511$18.317
1.5"Meter Size $5.611$31.022$36.633
2"Meter Size $8.912$49.270$58.182
3"Meter Size $17.659$97.628$115.287
4"Meter Size $27.561$152.373$179.934
6"Meter Size $55.123$304.746$359.869
Water and wastewater impact fees are based on meter size for non-residential uses in
determining "equivalent dwelling units." For example, a 3/4-inch meter is the equivalent of one
single-family residence (EDU); a one-inch meter is 1.7 EDUs; a two-inch meter is 5.4 EDUs;
and a three-inch meter is 10.7 EDUs.
Citywide Water Fees
SS1 - 44
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 23
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
The total cost of the Water Reclamation Facility Master Plan Improvements is $126,254,900, of
which $25,847,460 is allocated to future development.
Catchment Areas
In addition to the Citywide improvements, the City has constructed and anticipates additional
necessary catchment-area specific improvements to accommodate future development within the
City. These catchment areas are regions with wastewater mains, lift stations, and force mains
that collect wastewater from identified areas of the City. Each catchment area varies in the
amount of flow contributions to the Water Reclamation Facility, due to its applicable topography
and land uses. The wastewater catchment areas and associated improvement costs are as
follows:
1.Margarita, $1,000,000
2.Tank Farm, $19,118,800
3.Silver City, $1,000,000
4.Calle Joaquin, $1,500,000
5.Laguna, $3,121,300
The City’s planning area boundaries, such as the Margarita, Airport, and Orcutt Specific Plan
areas, do not coincide with wastewater catchment area boundaries, as shown below in Table 8.
A map of the wastewater catchment areas is provided as Figure 3.
Table 8
Planning Areas and Catchment Areas
Planning
Area
Tank
FarmMargarita
Silver
CityLaguna
Calle
Joaquin
Airport X
Margarita XXX
Dalidio X
Madonna X
McBride X
Irish Hills X
Orcutt X
Source: 2013 Water and Wastewater Development Impact Fee Study.
Lift Station Catchment Areas
SS1 - 45
SS1 - 46
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 25
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
Fee Update Topics
Due to the recent water and wastewater fee update, the discussion topics around this fee
program are likely to include some of the broader areas for discussion as well as considerations
of whether there were any broader innovations from this process that should be considered as
part of the future comprehensive fee study process. Potential discussion issues include:
1.Overall Feasibility Issues. Broader development feasibility analysis as part of the
comprehensive fee update process will need to consider the collective fee burden, including
water and wastewater fees.
2.Geography of Sub Areas. A combination of catchment areas for wastewater fees as well as
sub areas for transportation fees are also present in other California cities, though an overall
examination of fee variation throughout the City should be considered as part of the fee
update process.
3.Applicable Approaches. The update of the water and wastewater fee programs might have
highlighted specific principles or approaches of interest to policymakers. The transferability
of these lessons could be discussed.
4.Cost Allocations. To the extent there are ongoing questions concerning the allocation of
particular wastewater improvements, the allocation methodology could be further explored.
For example, with improvement costs of approximately $19 million, the Tank Farm
catchment area faces the highest sub area fee.
Parks and Open Space Fees
The City’s fee programs include a Citywide park in-lieu fee, an area-specific Margarita Area
Specific Plan parkland improvement fee, and an OASP park improvement fees. These fees are all
only charged to residential development, including separate fees for single-family and
multifamily development. Table 9 shows the current fee schedules.
Table 9
Summary of Park Fees
Area/Sub Area
Citywide (Quimby)
Park In-Lieu Fee$5,668per unit [1]$4,494per unit [2]
Margarita Specific Plan Area
Parkland Impact Fee$8,247per unit$6,945per unit
Orcutt Specific Plan Area
Park Improvement Fee$12,719per unit$9,359per unit
Source: City of San Luis Obispo.
[1] Applies to each potential additional single family dwelling unit in C/OS and R-1
zones within the subdivided area.
[2] Applies to each potential additional multifamily dwelling unit in zones other than
C/OS and R-1 within the subdivided area.
Single FamilyMultifamily
SS1 - 47
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 26
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
Park and Open Space Fee Program Descriptions
Park In-Lieu Fees (applies to residential subdivisions)
Resolution No. 8956 (1999 Series)
The City of San Luis Obispo requires dedication of park land or payment of park in-lieu fees as a
condition of approval for a final tract or parcel map, consistent with California Subdivision Map
Act, Government Code Section 66477 (Quimby). Fees apply to single-family homes in the C/OS
and R-1 zones within the subdivided area and multifamily homes in zones other than C/OS and
R-1 within the subdivided area. Fees are based on residential land costs.
Parkland Impact Fee (applies to Margarita Specific Plan Sub Area)
Resolution No. 9643 (2005 Series)
Resolution No. 10387 (2012 Series)
The City’s parkland standards are established in the General Plan at 10 acres per 1,000
residents. This standard is only applicable to residential development, so it was not included
with the joint Airport/Margarita area infrastructure analyses. The most recent update occurred in
2012 to reflect increases in Citywide use of the Damon-Garcia sports field.
The Margarita Specific Plan Area will include 868 housing units and a population of 1,835
residents.13 At 10 acres per 1,000 residents, new development in the area is responsible for
providing approximately 18.35 acres of developed parkland.
The Specific Plan calls for 25 acres of parkland in this area (9.9 acres of neighborhood park and
15.1 acres in sports fields), but only 18.35 acres are required to meet the standard of 10 acres
per 1,000 residents. Since original adoption of the Plan in 2004, the Damon-Garcia sports fields
have been developed and utilized as a Citywide facility. Therefore some of the costs originally
anticipated as being the sole responsibility of the Margarita Area development needed to shift to
13 On page 76 of the MASP, the number of future housing units is indicated as 836. Elsewhere in the
MASP document, the number of future housing units is indicated as 868 units.
Table 10
Citywide Park In-Lieu Fees (Quimby)
Land Use
Single Family [1]$5,668per unit
Multifamily [2]$4,494per unit
Source: City of San Luis Obispo.
Fee
[1] Applies to each potential additional single family dwelling
unit in C/OS and R-1 zones within the subdivided area.
[2] Applies to each potential additional multifamily dwelling
unit in zones other than C/OS and R-1 within the subdivided
area.
SS1 - 48
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 27
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
City responsibility. Of the total parkland planned for the area, new development is responsible
for 12.9 acres.
In meeting the standard for this area, this results in 9.9 acres in neighborhood parks and 8.45
acres in sports fields required to serve the increase in the MASP population. Land costs are
estimated at $300,000 per acre for the future neighborhood park and $200,000 in actual costs
for the Damon Garcia sports field. Park development costs are $235,000 per acre for both the
Damon Garcia sports field and the proposed neighborhood park.
Those who dedicate parkland within the Margarita area will receive a fee credit based on the land
and improvement value of the dedicated parkland.
Park Improvement Fee (applies to Orcutt Area Specific Plan Sub Area)
Resolution No. 10222 (2010 Series)
The OASP provides for approximately 16.3 acres of improved parkland. In addition, the San Luis
Coastal Unified School District is expected to develop an elementary school within the Orcutt
Area, or nearby, to serve future residents. It is normal for the City to enter into Joint-Use
Agreements with the School District, which would provide additional parkland benefits to City
residents. The amount of parkland listed below, plus future recreation facilities that would be
developed with a new elementary school, fully satisfy parkland requirements for the Orcutt Area.
As indicated in the March 2010 OASP, a proposed 12-acre neighborhood park located at the
center of the Project will serve as a community gathering place for casual recreation and sporting
events by providing a variety of active recreation facilities. In addition, a linear park is proposed
that will serve a dual purpose as both an area-wide detention basin and a recreation area, and a
smaller pocket park is planned within the low and medium density residential neighborhoods. A
2.5 acre “trail junction” park will provide passive parkland adjacent to trailheads at the base of
Righetti Hill. The following list summarizes the parks and recreation projects planned to serve the
Project:14
Central Neighborhood Park – 11.13 Acres
Garay Portion of Neighborhood Park (if Garay property is developed) - 0.87 Acres
Pocket Park – 0.26 Acre
14 See page 8-4 of the Orcutt Area Specific Plan. The Parks and Rec Commission will need to approve
each of these improvements.
Table 11
Margarita Area Specific Plan Parkland Impact Fees
Land Use
Single Family$8,247per unit
Multifamily$6,945per unit
Source: City of San Luis Obispo.
Fee
SS1 - 49
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 28
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
Linear Park System – 1.54 Acres
Trail Junction Park – 2.50 Acres
The total cost of park and recreation improvements to be funded by the Project is estimated to
be approximately $4.45 million. The parks will be improved with a wide range of features,
including tennis courts, a soccer field, perimeter paths, creek enhancements, public art,
restrooms, and parking as described in the OASP.
The total land cost will be $3,678,000, or $300,000 per acre for the Neighborhood Park and the
Pocket Park (12.26 acres total). Land for the Linear Park System and the Trail Junction Park,
which has no development potential (4.04 acres total), will be dedicated by the property owner
for parkland purposes at no cost.
Open Space In-Lieu Fee (applies to Airport Area Specific Plan Sub Area)
Resolution No. 9728 (2005 Series)
The City’s General Plan includes policies for greenbelt protection including Land Use Element
Policy 7.4, which says that an Airport Area annexation shall not take effect unless the annexed
area helps protect an appropriate part of the greenbelt near the Airport Area either by dedicating
open space or by paying an in-lieu fee, which is to be used to secure greenbelt open space. In
2005 and based on negotiations for open space acquisition in the area south of the Airport, City
staff determined that the in-lieu fee should be set at $2,500 per acre, which is an amount
sufficient to allow the City to acquire greenbelt open space at a ratio of at least 1:1.
Development in the Airport Area that has not met its open space dedication requirement through
provisions of a pre-annexation agreement established before the above-referenced 2005
resolution, or through the dedication of open space land, or conservation easements, in a
manner consistent with Land Use Element Policy 7.4, will pay an in-lieu fee per every 1,000
square feet of new floor area, based on the per-acre fee of $2,500. Properties brought into the
City via interim annexation agreements paid their In-Lieu fee based upon acreage only and not
final buildable square footage.
Table 12
Orcutt Area Specific Plan Park Improvement Fees
Land Use
Single Family$12,719per unit
Multifamily$9,359per unit
Source: City of San Luis Obispo.
Fee
SS1 - 50
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 29
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
Park and Open Space Fee Update Topics
1.Geography of Fee Program. The City’s park and open space fees include a Citywide in-lieu
fee and distinct sub area fees for three growth areas (Orcutt, Margarita, and Airport). While
additional fees for growth expansion areas exist in a number of California cities, the need for
the complexity and overlap under the City’s current park and open space fee programs
should be carefully studied as part of the future fee update process.
2.Variation in Park Fee Programs and Cost Allocations. Some discussion of the variation
of fees between different areas of the City could be important. As part of this, a number of
factors should be considered including:
(a) The application of City General Plan standards by area.
(b) The allocation of park improvement costs between new and existing development,
particularly for large park facilities in new growth areas (for example, one park under the
MASP Parkland Impact Fee was determined to be of Citywide benefit during the 2012
update, resulting in an adjustment in the area fee schedule).
(c) Confirmation that the City of San Luis Obispo, like many California cities, does not want
to allocate any park improvement costs to new nonresidential development should also
be obtained.
3.Update to the Airport Area Open Space Fee. The Airport Area open space fee was
established at $2,500 per acre based on negotiations for open space acquisitions that took
place in or before 2005. As part of the broader update issue, it may be appropriate to set a
formal timing for updating this fee as well as others.
Other City Fees
Two other City fee programs are (1) the in-lieu affordable housing fee (applicable to both
residential and commercial development) that represents one way for a developer to meet the
City’s affordable housing obligations (pursuant to the City’s inclusionary housing ordinance) and
(2) the Public Art in private development in-lieu fee that represents one option for nonresidential
developers to meet the City’s public art requirement. The primary issues for discussion for these
Table 13
Airport Area Specific Plan Open Space In-Lieu Fees
Land Use
Business Park $0.390per sq.ft.
Service Commercial $0.574per sq.ft.
Manufacturing $0.522per sq.ft.
[1] Fee levels are as of 2005 and need updating.
Source: City of San Luis Obispo.
Fee [1]
SS1 - 51
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 30
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
programs include the particulars of City requirements and whether any changes are warranted as
well as consideration of the recent court decisions on affordable housing fees and their
implications, if any, for these fees.
Inclusionary Housing Requirement
Chapter 17.91, Ordinance No. 1348 (1999 Series)
The City’s Inclusionary Housing Requirement is designed to increase the supply of housing
available to very-low, low- and moderate-income households in the City and the City’s Expansion
Areas. The Inclusionary Housing Requirement applies to development projects consisting of five
or more lots or new dwelling units, and to commercial development projects consisting of 2,500
square feet of gross floor area or larger. The Developer can either 1) construct the required
number of affordable dwelling units, 2) pay an in-lieu fee, 3) dedicate real property, or
4) a combination of these, to City approval.
1.A residential project located in the City must build 3 percent low or 5 percent moderate cost
affordable dwelling units but not less than 1 affordable dwelling unit per project or pay an in-
lieu fee equal to 5 percent of the value of the building.
2.A residential project located in the Expansion Area must build 5 percent low and 10 percent
moderate cost affordable dwelling units but not less than 1 affordable dwelling unit per
project or pay an in-lieu fee equal to 15 percent of the value of the building.
3.A commercial project located in the City or the Expansion Area must build 2 affordable
dwelling units per acre but not less than 1 affordable dwelling unit per project or pay an in-
lieu fee equal to 5 percent of the value of the building.
Resolution No. 9131 (2000 Series) waives Citywide Development Impact fees for Affordable
Housing Units in Excess of Inclusionary Requirements
Citywide development impact fees are waived on residential units qualifying as affordable
housing that 1) exceed the number required to meet the City’s inclusionary housing
requirements, or 2) are built, owned and managed by the San Luis Obispo Housing Authority,
other governmental agencies or not-for-profit housing organizations.
Resolution No. 8415 (1995 Series) waives Development Review and Meter Installation Fees for
Affordable Housing Projects
Residential development projects which meet the City’s affordability standards for very-low and
low income households, and for which provisions have been made to ensure that they will
continue to meet affordability standards for the life of the housing to the satisfaction of the
Community Development Director, shall be exempt from all planning, building, engineering and
any other similar development review fees as well as any water meter or sewer installation fees.
Impact fees for funding capital facility improvements necessary to serve the project shall not be
included in this blanket exemption. Whenever a project includes a combination of affordable and
market rate housing units, fees shall be pro-rated appropriately as determined by the
Community Development Director.
SS1 - 52
Final Memorandum January 6, 2014
Review of City’s Current Development Impact Fee Programs Page 31
P:\131000s\131044SLO Infrastructure Financing\Deliverables\131044_fee summary_010614.docx
Public Art in Private Development
Chapter 17.98
Public Art in Private Development is a program designed to provide opportunities for the general
public to experience quality works of art by facilitating their acquisition, display and development
in places where they may be experienced by large numbers of people. The City’s Public Art
program was first established in 1990 and formally expanded to include a fee applicable to art in
private development (if the developer chose to pay a fee instead of developing an art piece) in
2000.
The program applies to all new nonresidential development and all expansion of, remodeling of,
or tenant improvements to existing eligible buildings when any work has a total construction cost
of $100,000 or more.
Options are 1) Propose Public Art to be reviewed and approved by the Architectural Review
Committee and the Art Jury for art to be placed in a public place on or in the vicinity of the
development project site or 2) Pay an Art in-lieu Fee in an amount equal to one-half of one
percent (0.5 percent) of that portion of the total construction costs in excess of $100,000 for
each building permit.
SS1 - 53
APPENDIX A
SS1 - 54
SS1 - 55
SS1 - 56
SS1 - 57
M EMORANDUM
To: Michael Codron and Lee Johnson
From: Walter Kieser
Subject: Economic Development Considerations; EPS #131044
Date: February 6, 2014
During the first Study Session the Mayor raised two questions that are
central to the whole topic of economic development and specifically how
the Economic Development Strategic Plan will be implemented. These
questions include (EPS paraphrasing): “What financial risks may be
involved with economic development investments?”; and “How can we
be assured that City investments of whatever sort actually have the
desired result of increasing ‘head of household’ jobs?”
The answer to the first question rests upon the definition of “economic
development investments.” Depending upon the definition, the types of
economic development investments and activities, and how investments
are actually made, there may be little or no risk, or substantial risk. For
purposes of discussion, economic development investments can be
divided into five broad categories:
1) Providing high quality municipal services and infrastructure;
2) “Streamlining” land use regulations and development review
procedures;
3) Prioritizing infrastructure investments and assuring reasonable
infrastructure financing burdens on the private sector investors (the
topic of the current City Council Study Sessions);
4) Identifying cooperative efforts with private business groups (e.g.,
Chamber of Commerce, etc.) and other governmental agencies in
general business attraction activities, training, marketing, and
related physical improvements; and
5) Providing targeted public subsidies to private companies that
contribute to the City’s economic development goals.
Each of these categories has unique cost, return, and risk
characteristics. Moreover, it is our understanding that the Economic
Development Strategic Plan focuses upon the first four of these
categories, (i.e., the fifth category of direct public subsidies is not
contemplated).
SS1 - 58
Memorandum February 6, 2014
Economic Development Considerations Page 2
P:\131000s\131044SLO Infrastructure Financing\Economic_Development\131044memo_2014_02_06.docx
Regarding the second question about performance, it is also the case that each of the different
categories has unique performance measures contributing to the overall goal of increasing head
of household jobs. Public investments in these activities should consider the likely contribution
to increasing employment.
1. High Quality Municipal Services and Facilities
The normal job of the City to provide services such as police protection, routine maintenance
of facilities, and assure adequate infrastructure system capacities has an important impact
upon economic development as well as overall quality of life in the City. For example,
providing security and well-maintained facilities (e.g., public parking) are important factors in
attracting new businesses and customers to a downtown area. San Luis Obispo is arguably
doing well with this category of economic development; the City is well-regarded as a place
to live and work, municipal services are offered at or above typical municipal level-of-service
standards, and basic infrastructure systems are exist or are being planned to support existing
and future levels of demand.
2. “Streamlining” Land Use Regulations and Development Review Procedures
Land use regulations and the time, costs, and risks involved with obtaining entitlements can
affect the City’s attractiveness to business investment. As noted in the Economic
Development Strategic Plan, permit “streamlining” for priority commercial and industrial
uses, use-by-right zoning standards (minimizing additional discretionary review) and CEQA
streamlining strategies (completing program EIRs, comprehensive mitigation strategies, etc.)
can help minimize regulatory costs, time required to obtain entitlement, and uncertainties,
without weakening regulatory standards or achievement. Moreover, the ongoing General
Plan Land Use and Circulation Element (LUCE) update offers an opportunity to assure
supporting General Plan policies and land use district characteristics compatible with market
demand for commercial and industrial uses and consistent with economic development goals.
Risks to the City in this category are limited to the cost of City staff time or other expenses
that may be involved in streamlining reforms and activities.
3. Prioritizing Infrastructure Investments and Financing
Public investments in roads, parking, utilities, public buildings can all have a large impact
upon economic development both by assuring adequate capacity and level of service to
commercial and industrial areas while also keeping costs borne by the private sector within
industry-standard burden limits. Strategy 1.5 in the Economic Development Strategic Plan
specifically addresses this category of economic development. The City’s Capital
Improvement Program should take full account of the economic development goals and
prioritize investments based upon a "return-on-investment" (i.e. achieving economic
development goals) logic. This category is the subject of our ongoing effort to specific
reforms to the City’s development impact fees and related infrastructure financing efforts.
The risk involved in this category, in addition to the costs of reforms and activities involved,
is that infrastructure investments in pursuit of economic development will be made (e.g.,
improving roadways) that may not result in desired development and job creation (stranded
costs).
SS1 - 59
Memorandum February 6, 2014
Economic Development Considerations Page 3
P:\131000s\131044SLO Infrastructure Financing\Economic_Development\131044memo_2014_02_06.docx
4. Identifying cooperative Public/Private Efforts
The City’s Economic Development Department, guided by the Economic Development
Strategic Plan, and is involved with a range of cooperative efforts with private companies,
industry organizations, and other government entities in pursuit of economic development
goals. Cooperative (City and landowners) identification and marketing of development
opportunity sites is another example of cooperative public/private efforts targeted at the
same outcome. Risks in this category are limited to the cost of City staff time or other
expenses that do not yield the desired result of head of household job creation.
5. Direct Subsidies to Desired Businesses
Providing subsidies in one form or another was historically the realm of redevelopment
agencies in California. The City, as part of its economic development efforts, is not
contemplating such subsidies. These subsidies typically come in the form of writing down
the cost of land to the private sector investor, provision of needed infrastructure funded with
redevelopment agency sources, tax abatements and credits, and direct subsidies of one form
or another. All such programs carried both performance and financial risks—performance
risks meaning the potential that the desired outcome fails to materialize and financial risks
meaning that project failure exposes the City to loss of invested assets or even broader
liabilities. Without redevelopment powers the City’s ability to engage in such direct financial
subsidies is quite limited due to restrictions on the use of public funding.
The ability to measure the effectiveness of these categories of economic development (i.e., in
terms of creating head of household jobs) varies with the “directness” of the investments. It is
relatively easy to determine the effectiveness of a direct subsidy (category 5, above) because
the receiving entity either performs or not. As efforts become more generalized, it becomes
more difficult to draw a direct relationship between the activity and the desired result.
Nonetheless, all of the strategies contained in the Economic Development Strategic Plan in
combination, will very likely improve the City’s competitive position and attraction of jobs. As a
part of ongoing efforts, a monitoring program based upon specific metrics and data sources (EDD
employment data, creation of work space, and business expansion and attraction) can be created
to determine whether the City’s efforts are yielding the desired results.
SS1 - 60
Economic & Planning Systems, Inc.
2501 Ninth Street, Suite 200, Berkeley, CA 94710
510.841.9190 • 510.841.9208 fax
presented to
City of San Luis Obispo
City Council
Infrastructure Financing Analysis
Study Session #1
presented by
Walter F. Kieser
Economic & Planning Systems, Inc.
January 21, 2014
Berkeley
Denver
Los Angeles
Sacramento SS1 - 61
Team Introduction
•About EPS
•EPS Staff
–Walter Kieser, Senior Principal
–Teifion Rice-Evans, Managing Principal
–Ashleigh Kanat, Vice President
•City Staff
–Michael Codron
–Lee Johnson
–Derek Johnson, Carrie Mattingly, Wayne Padilla, Daryl
Grigsby, Tim Bochum
Economic & Planning Systems, Inc. 1
SS1 - 62
How Did We Get Here?
•City’s development impact fees created incrementally
over the past 25 years
•2012 Economic Development Strategic Plan (EDSP)
–Enhance Quality of Life
–Increase Head of Household Jobs
–Development Impact Fees as a Barrier
•EDSP recommended a consultant be retained to
prepare an infrastructure financing analysis
–RFP issued in May
–EPS kicked-off the Study in July
Economic & Planning Systems, Inc. 2
SS1 - 63
Study Objectives
•Evaluate City’s development impact fee programs and
recommend scope of update
•Consider economic development objectives in fee
review (consistent with quality of life objectives and
removal of barriers to head of household job creation)
•Prepare for implementation of the Land Use and
Circulation Element (LUCE)
•Identify supplemental infrastructure funding sources
and financing mechanisms
Economic & Planning Systems, Inc. 3
SS1 - 64
What Have We Completed?
•Met with City Staff, EVC in July
•Following on outreach associated with the EDSP
•Evaluated how infrastructure is currently being funded
•Reviewed City’s current fee programs and provided
summary overview as a memorandum
•Identified alternative funding sources and mechanisms
and provided as a memorandum
Economic & Planning Systems, Inc. 4
SS1 - 65
Overview of Study Sessions
•Study Session #1 – January 21, 2014
–Role of fees in public finance
–Impact fee basics
–Overview of City’s current fee programs
•Study Session #2 – February 18, 2014
–Supplemental funding sources and mechanisms
–Impact fee policy tradeoffs
•Study Session #3 – March 18, 2014
–Summary
–Future considerations for SLO
Economic & Planning Systems, Inc. 5
SS1 - 66
Study Session Goals
•At the end of the three scheduled study sessions, we
hope you will:
–Understand the role a fee program plays in
infrastructure financing
–Understand how fee programs are developed
–Understand key decision points in developing a fee
program
–Understand associated policy implications and tradeoffs
–Understand the City’s current fee programs
–Be prepared to consider adjustments to the City’s
current fee programs through subsequent fee update
efforts
Economic & Planning Systems, Inc. 6
SS1 - 67
Economic & Planning Systems, Inc. 7
Agenda for Study Session #1
•Present Municipal Infrastructure Financing Trends and
Influence
•Development Impact Fee Primer
•Review of San Luis Obispo’s Existing Fee Programs
•Identification of Key Topics for Discussion
SS1 - 68
Infrastructure Financing Trends and Influence
•Major Trends
–Historical shift of financing responsibilities to local
governments
–Increasing public level of service expectations and
standards
–Increasing federal and State regulatory standards
–Advent of Constitutional and statutory restrictions on
municipal revenues
Economic & Planning Systems, Inc. 8
SS1 - 69
Infrastructure Financing Trends and Influence
•Municipal Responses
–Increasing shift of infrastructure cost to new
development
–Linking infrastructure to growth management policies
(concurrency, etc.)
–Increasing deferred maintenance
–Inter-jurisdictional conflicts
Economic & Planning Systems, Inc. 9
SS1 - 70
Infrastructure Financing Trends and Influence
•Financial effects of the Great Recession
–Reset of real estate values followed by slow recovery
–Tightening credit markets
–Disruption of existing financing plans (e.g., Specific Plan
financing plans) due to changing market conditions
–Slower growth
–Persistent demographic/socio-economic changes (i.e.,
household incomes)
–Exposed weakness in municipal funding and financing
programs
Economic & Planning Systems, Inc. 10
SS1 - 71
Development Impact Fees – Definition
•Impact fees are “one-time” charges to new
development charged for funding infrastructure
required to serve new development
•What can they fund?
–Funds only capital facilities
–Funds only portion of costs associated
with new development (“nexus”)
–Can fund financing charges so long as these are clearly
identified in technical report
–Non-fee funded portion must be funded through other
municipal sources
•Part of a city’s overall infrastructure financing program
Economic & Planning Systems, Inc. 11
SS1 - 72
Development Impact Fees – Legal Basis
•Police power of local government is the fundamental
legal basis of impact fees
•Constitutional case law: Nollan 1987, Dolan 1994 and
Erlich 1996) established restraints on use of fees
•AB 1600 (1988) Mitigation Fee Act (as amended)
provides the State’s statutory framework for
infrastructure-related fees
•Non-infrastructure fees are based upon State
Constitutional police powers and statutes (Quimby)
•School impact fees not purview of Cities
(Serrano, 1971 and SB-50 1998)
Economic & Planning Systems, Inc. 12
SS1 - 73
Infrastructure Need and Responsibility
Impact fee programs should be
part of City’s broader capital
improvement programming and
funding:
•Demand for infrastructure
comes from both existing and
new development
•Numerous factors influence
need and cost of
infrastructure
•Cost allocation follows “nexus”
logic
•Funding responsibility based
on benefit incidence
Economic & Planning Systems, Inc. 13
SS1 - 74
Infrastructure Need and Responsibility – 1
Need for infrastructure
derives from four sources:
•Repair and replacement of
existing infrastructure
•New infrastructure required
to meet new service
standards
•Expanded or improved
infrastructure to meet
deficiencies in meeting
existing service standards
•Meet demands created by
new development
Economic & Planning Systems, Inc. 14
SS1 - 75
Infrastructure Need and Responsibility – 2
Infrastructure need also
influenced by institutional
factors:
•State and federal regulations
•Professional engineering
design and standards
•Community level of service
standards (e.g., GP policies)
•CEQA mitigation requirements
•Other City regulations and
policies
Economic & Planning Systems, Inc. 15
SS1 - 76
Infrastructure Need and Responsibility – 3
Infrastructure projects require
cost estimates and
programming:
•Draw upon policy documents
•Preliminary design and cost
•Determining project
priorities
•Funding availability
influences design and
programming
•Typically completed in
conjunction with CIP process
Economic & Planning Systems, Inc. 16
SS1 - 77
Infrastructure Need and Responsibility – 4
Infrastructure cost allocation
determined by who benefits:
•Existing development pays
for relieving service
deficiencies
•All development pays for
meeting adopted standards
and repair and replacement
•New development pays for
infrastructure not needed
but for new development
Economic & Planning Systems, Inc. 17
SS1 - 78
Infrastructure Need and Responsibility – 5
Existing development
infrastructure cost allocation
funded by existing City
sources:
•General fund appropriations
•Available special funds
(enterprise revenues)
•Grant funding
•Special communitywide
taxes and financing
Economic & Planning Systems, Inc. 18
SS1 - 79
Infrastructure Need and Responsibility – 6a
New development cost
allocation further allocated to:
•Geographic sub-areas:
–Whole City
–Planning sub-area
–Project
•Need/use based upon land
use types and characteristics
•Phase of development or
time
Economic & Planning Systems, Inc. 19
SS1 - 80
Infrastructure Need and Responsibility – 6b
New development allocation
funded by:
•Development impact fees
•Subdivision map conditions
•Other special exactions
•Private capital (build-
transfer)
Economic & Planning Systems, Inc. 20
SS1 - 81
Development Impact Fees –
Financial Characteristics
•Can assure that all new development pays its
“proportional share” of costs
•Cost and development estimates must be accurate to
assure adequate funding
•Incidence of funding may be mismatched with the
timing of need for infrastructure
•Variable cash flow (i.e., market conditions)
•Can provide “match” funding and other complements
to other financing sources, such as grants
•Can be integrated with other development-related
funding mechanisms such as land secured financing
districts, reimbursement agreements, etc.
Economic & Planning Systems, Inc. 21
SS1 - 82
Example: Hwy 101/LOVR Funding
Economic & Planning Systems, Inc. 22
SS1 - 83
Development Impact Fees –
Economic Considerations
•DIFs add to the cost of new construction
•Fees, like other costs, do not directly influence prices
(markets set prices)
•Insofar as fees fund necessary infrastructure and
improve quality of life they along with other
infrastructure investments “create value”
•Like other development costs fees can influence
development feasibility as ability to purchase land or
profit margins slim
•Aggregate fees should be moderated to “industry
standard” levels given existing and expected pricing to
avoid displacement of otherwise feasible development
Economic & Planning Systems, Inc. 23
SS1 - 84
Development Impact Fees –
Supplemental Funding and Financing
•City participation in funding new development
infrastructure cost considered when:
–Excessive cost burdens on new development
–Community and fiscal benefits
•Existing or new city funding sources and grant sources
can be used to offset cost of fees to new development
when community-wide benefits can be achieved
•Land secured financing methods offer alternative to
“one-time” fees
•Fee credit and reimbursement agreements can assure
timely construction of infrastructure
Economic & Planning Systems, Inc. 24
SS1 - 85
City’s Existing Fee Programs
Economic & Planning Systems, Inc. 25
•Transportation
–Citywide fee
–Area fees (4 areas: Los Osos Valley Road, Margarita Area,
Airport Area, Orcutt Area)
•Water and Wastewater
–Water Impact Fee (Citywide)
–Wastewater Impact Fee (Citywide)
–Wastewater Catchment Area Fees (5 areas)
•Parks and Open Space
–Parkland dedication in lieu fee – Quimby (Citywide)
–Area open space fees (3 areas: Margarita, Orcutt, Airport)
SS1 - 86
City’s Existing Fee Programs (continued)
Economic & Planning Systems, Inc. 26
•Affordable Housing (Zoning Ordinance)
–Inclusionary housing in lieu fee (Citywide)
•Art in Public Places (Zoning Ordinance)
–Commercial development in lieu fee (Citywide)
SS1 - 87
Transportation Impact Fee Program
Economic & Planning Systems, Inc. 27
SS1 - 88
Transportation Impact Fee Program
Economic & Planning Systems, Inc. 28
SS1 - 89
Water and Wastewater Impact Fee Program
Economic & Planning Systems, Inc. 29
SS1 - 90
Single Family Fees: Area to Area Comparison
Economic & Planning Systems, Inc. 30
SS1 - 91
Retail Fees: Area to Area Comparison
Economic & Planning Systems, Inc. 31
SS1 - 92
Industrial Fees: Area to Area Comparison
Economic & Planning Systems, Inc. 32
SS1 - 93
Feasibility Analysis
•Fees are a development costs
•Industry standard burdens
–15% of residential market value
–10% of commercial/industrial market value
•Local circumstances affect burden measure
•Analysis indicates that
–Residential development, at current median price, meets
standard
–Retail and industrial development in the MASP exceeds
standard
–Other subareas require further research to determine
economic effects
33 Economic & Planning Systems, Inc.
SS1 - 94
Feasibility Analysis (Single Family)
34 Economic & Planning Systems, Inc.
SS1 - 95
Feasibility Analysis (Retail)
35 Economic & Planning Systems, Inc.
SS1 - 96
Feasibility Analysis (Industrial)
36 Economic & Planning Systems, Inc.
SS1 - 97
Fee Update Considerations – 1
•Are foundational policies (e.g., LOS standards in
General Plan, park standards) in place?
•Should fee program be integrated with CIP?
•Are infrastructure lists complete?
•Are cost estimates accurate and current?
•Can “nexus” be established?
•How should financing be calculated?
37 Economic & Planning Systems, Inc.
SS1 - 98
Fee Update Considerations – 2
•Is existing fee geography appropriate?
•Should sub-area fee disparities be reduced?
•Are general feasibility standards met?
•Are any public investments justified (provision of
community wide benefit)?
•Are features in place that reduce upfront impact of
fees (e.g., reimbursement agreements, land-secured
financing)?
•How should financing be calculated?
38 Economic & Planning Systems, Inc.
SS1 - 99
Next Study Session
•Review Study Session #1
•Respond to Questions
•Supplemental Funding Sources and Mechanisms
Economic & Planning Systems, Inc. 39
SS1 - 100
Economic & Planning Systems, Inc. 40
Questions and Discussion
SS1 - 101
Page intentionally left
blank.
SS1 - 102
RECHVED
- ". FEB 13 2014
f City Administration h
990 Palm Street, San Luis Obispo, CA 93401 -3249
° 805.781.7114
>lt,bty'(arq
AGENDA
CORRESPONDENCE
February 13, 2014 Date2 Z' l item# �!�
From: Lee Johnson, Economic Development Manager
Via: Michael Codron, Assistant City Manager
Subject: Presentation materials for Study Session No. 2
Attached please find the presentation materials that will be used during the Infrastructure
Financing Study Session that will being at 4 p.m. on Tuesday, February 18, 2014.
WE
c
E
L
U C: V1
QJ SvS � C5 .0
V
C
O
N
L
kO
�,
V/
E
'IT
O1
�
U
O
c c
i�
N r�
�
C
0o
•�
E co
•u
L
(� +t O
n
�
a
O
C ?
(`�V
M N III
LL
V
'C
a
O
�Ol
``J
C
o}i a
L T-1
N
.O
t
cn
a..J
.1�.�
O
i
Y CO
Q
U
U
a
w
Wo°
WE
c
E
L
U C: V1
QJ SvS � C5 .0
N (o "p O
0 E 2 w w,
Q� L �
> al '- > -0
O O Ln V .p
D Q N O
> •r-+ -0
V �
.� V O O
( °O •,
V -0 •— �
(n
O f O � o
W O" 4-J O �
O �-+ E _ O
Ln C 4-+ Q, fo -p
0- =3 >
f > O V (n
W a 'E c: .�
... o p L
4 � .� fu
ol fo 4-;-o OV CM
o� r� ��>
Q� E cn O O
a L o o�> E
� w U
• • •
O
E
O
E
fu
O
N
L
L
LL
a
Ln
.0
fu
D
_0
O
O
C �
O W
�
U
=) 4-J
O 4-J
E C:
w w
'aE
E
'L W
0 0
L- ro
CL u
U
Ll
Ul)
Q)
L
O
L.
V)
(n
E
._ cn
'E
fu
4-j m
C=
E
cn
Ul C:
�
W
fu
E
u
c
V
E
V)
c
a
aS
V
O
c
O
u
w
W
L
V
a-J
()
fo
L.
r
a O
'V V
'C: C:
:3 O
E 42 -3
O '�
O fo
L Ln
O _0
O C
O CD
'V
Ln
a) fo
L C
a-
0
L
w
E
'L
a
V
a
.E
N
E
a
_O
O
O
N
O
0
-W
^�
W
E
a
_O
O
(n
'X
N
Ln
O
a
Ln
O
.U)
J
c
fp
� O
O �
V
O fo
•> a
._
E
W
L
fu
O
.Ln
V
O
V
.Q
O
N
.O
- fo
0
(1) L
'O O
0
N
Ln
fu
a
06
u
0
c
0
U
W
p1
� •V
-O O
cv
li LL
r ru
m 0)
CL c
I
L
_O Li
C) V
/VlJ
W
V
L
O
(n
LL
N
a�
O
Q
c
O
fu
LL
fu
(n
0
M
u
c
V
E
V)
rn
ru
c
'c
c
a
df
u
E
0
c
0
U
w
O
�L
cn
O
V
O
L
a-J
U
o
Cn
Q
cn
O
u
V
L
�
O
L
=3
U)
LL
O
0)
Un
c
O
0)
c
4-J
r
.—
:3
LL
L
�
�
LL
L
Q
4-J
>
V
iu
4-J
fu
O
L
4-J
z
Q
p1
� •V
-O O
cv
li LL
r ru
m 0)
CL c
I
L
_O Li
C) V
/VlJ
W
V
L
O
(n
LL
N
a�
O
Q
c
O
fu
LL
fu
(n
0
M
u
c
V
E
V)
rn
ru
c
'c
c
a
df
u
E
0
c
0
U
w
a-
rr
V
O v
• c
cn
L `� c
L O O 'a
O .. L O
L >1 4-- of a-.i =3
O .V ) -0 0)
L.
_0 _0 V O O X 4-j O
(j) U fo
fo -0 O 4= ^ f� V) Ul O Q
V O •—
N
%. W fo L O
L O O O
fo L Q � L. V) f .0 O� '�
Q O O v W� a w
.E ,_ (n O w f6 V Q) c > L
>
N O V
fo
L > CO
� WWW .� J
> >-
D U O I I I I I I
0 •
No
U
_
E
w
V)
LO
a
C6
0
_
0
w
LO
E
fo fu
cn L-
cn
O
V O.
� O
+
� V a �
fo Q O
al E
.E Q
.E a-; O
— � O
'E >
L E _0
a-J Q
0 0 •V
-0-5 E
� _0 O
cn O
(! -W cn
Ln U .L
L
4�
O 0-0
(n O �
O 4-' O
C)- �
-0
0)
V
� O
�--+ c: C: O
O V
E O
Q
_O
� L
> O
Q) -W
_0 =3
L '
0
cn O
V
O w
Q m
O L
O .E
E
CD
� O
'> O
C M Q)
a- V -0
0 0 0
a)
0
fu
.� O
V
O �
4-J L
fO 4-J
0) in
O C:
4-J 0
O E
cn z
fu
C: :3 V (n
V) fo
V
O .
_�
� 0) O
O .0 >
�_
0) C
E _O
>` �V)
Coro
U CL�
0
Ln
V)
V)
a
0
0
U
w
Q�
•
.—
>
c:
O
fu
V)
.x
V
O
"O
V
C:
«0
O
cn
cn
C:
L
C:
a..�
C:
c�
C:
�L
L
-0
OV
L
0-0
O
�
O
�
ry
,
-0
�
>-0
C
N
fu
O
cn
c:
E
C:
fu
5,
U
_O
a
>
a
-Lj
�
a
U
�
-�
0 0 0
a)
0
fu
.� O
V
O �
4-J L
fO 4-J
0) in
O C:
4-J 0
O E
cn z
fu
C: :3 V (n
V) fo
V
O .
_�
� 0) O
O .0 >
�_
0) C
E _O
>` �V)
Coro
U CL�
0
Ln
V)
V)
a
0
0
U
w
E
L
O
L
Es
V)
Ln
CL
C6
0
0
w
L
V_
_0
' L
L
a--�
�
0
�
LL
ru
.+..�
V'U
f0
Q
c
O
E
a-1
•L
fu
E
-0
O
�
LX
ED
U
O
E
O_
a
V
a)
-0
'
Lo
_O
O
_O
N
-O
O
>
>
fo
0
0
J
Cn
0
•
•
•
Es
V)
Ln
CL
C6
0
0
w
U
i
•1-J
fu
C
� N
C 4-J
fu
U
_=3
U U
Q
un 4-J
V)
i fo
fu •C
L
0 C
N �
-° E
O
U 0
C U
U M-
C
U o
C Z
fu C
0
7
0 L
0) 0)
C
4-J
f� N
C �
N N
4-J 4--
U c
fo ro
O
0 ru
-0 f0
fp U_
= �C
0) XZ-
C U
O ,a;
L
fu
70-0
a�
•- a
� O-
Q (n
V)
L
aj
_0
C
�
C v
0 E
CD
C
m
N
C
'O
C •-
N
a
O
O
N
fa
fvL.
OC
N�
�
C
C
O O
4-J
v
a,O
(�
U�
._
0
L
C
'p
J
�
'�
O
N
-O �
_0
"O
C 4J
U uj
E -O
ateJ
(n
0) C
fn C
��
Q U
C V)
_.
�v
0
v
E v
C
c
-W
0
Nom•-+
�E
f6 4-J
U
O
ra
-C p
N
fl-
O-
N
fn
'>
.61
C
N O
0 >
0 m
- fu
'E
N
u
V
E
V)
C
c
a
df
U
E
0
c
0
u
W
L
E
fu
—
4-J
(6
O
L-
>1
IT
O C:
•�"
•--,
.O
U 4-J
=3
4-1 a-J
�
L O
=; a
L
E
a o1
(O
c
U
c
a C
�c
ru
,
cam
V)
N
ON
-L-
a)
c
=
a
V_
t4--
01
a)
•C:
>
O
E
E cn
a..+ L
•�
fo
V)
O "O
> �
(m
c
O .—
•V)
Q
Q
�-
U
O
_�
U
•Q)
�.�
U
O+-
c
L
U�
a) •�
N
•C :3
4-
oL°
o
a N
0-0
_
L.
v;
U
O �
u
(a M
0
U O
N
O'O
,C
'a C:
N
�' v
c
=3 >
M
V) -0
-v
U ro
4-
4-
a) Ul
o>,
0)
a»
era
tea'
cC
CL
� °
o aJ
L.-
u�
LL L
c
LL (p
U-
1--4
0 o
LL
O a)
0 -v
1-4 4-J
0 cn
O
(n 4-
1--1
0 m
Col
L;
c
V
E
v
4�
LO
rn
_C
C
C
(0
a
aS
U
E
O
c
O
u
w
N
L
U
O
C
N uj
4- 4-J
O C
Q)
c E
Ov
V
X ra
N r_
v
C
C L
O D
C
O L
U
L
(u C: aM
Ow
>�
_0 U
L
Q�
U 4--i
C
(a
a--i
N
C .
Oo
4-J O
E
� L
-00
ON
4-J U
C C
•— f0
C
"a
4-J O
a) : Lj
(U U
4-J -0
CC
C
L •1 J
Q N
.
C
fu
V)
-W
Ln
O
U
4-
O
O
'L
Lw�l
•
•
N
N E
E L
�4-J
� •U
c
fo (o
J .0
O
a-+
f�
Ln
N
O
U
U
v
•o
cuL
a
cn
fu
v
U
C
OU a_'
0 .(n
U fu
U 4--
> •o
•L L
a °-
4-J
U
C 4-
Om
fa
aE
.
V
a
C
v cn
v4-J
00
a �
O
E a"J
a-J .0
f •C
:3 (O
N O
cv -�
C
c f°
w a-J
E
N
O
L (n
a>
•C
C
N
4 i
00
ro
-a >
C 1�:;
fu L-
4-1 a..j
C cn
C .0
N E
w _0
c
ru CM
Q) O
a 0)
O C
N O
N
ro -O
� C
U f°
O X
C
ce O
J
c
E
V)
c
c
a
dS
v
E
0
c
0
U
w
6
V)
O
U
U
L
V)
fu
L
4--.
.c
.a)
Q
i
N
.O
L
C-
4—
f0
.Q
V)
O
U
X
w
.
Q�
L
L U
0
� 4-
C
�U
C a-J
M
C Uj
O O
>
•L
CL L.
N �
O C
L
Q L.
Q
_U%
�Q
(n U
C L
O
U U) fu
W .�
.
Q)
N
.Q
.N
V)
O
ro
N
O
U
O
N
C
U
.
L
E
L
N
O U
� L
(n
CU
U 0
C 0)
fp
� .0
-0-0
cn
c �Q
U
4---
c:
-o E
: L
U
.C: 4-J
_0 O
C
D fu
O L
� O
C �
O C
O
U E
cu O
W
.
cm
a-.
cu
cu
C
O
fQ
O
O
U
v.
O
U �
ate.+ p1
C
N a-.+
E 4-j
V) Cu
53 C
-0 a
O
•� O
L w
-0-0
C
(0 .c-
N C
:-' O
N O
L
U�
.
0
c
V
E
a,
V)
V)
rn
_C
C
C
(0
a
dS
U
E
O
C
O
U
W
V)
Q)
U
ro
C
=3 0)
E O
E C -0
O�
U O
_0 a_
((o U
V) Ul)
U
.L O
C cu
Q) C:
E Ln
�
V_
Q) �L
V)
ro
L
O U
O O
Ln
_0 _0 V
M.7
u 4''
�-0
C
fo
V)
Q)
V)
Ln
0
fu
d
t
Q
O
Q
�+
L
L
O uj
Q)
L X
CU m
a.J
O
ro
.N
�u
C
O
V C
�f
O
070
. 4-)
ro v
U O-
-0 E
CO
m U
�
U
(n
00
Q Q
O
N
L (�
>c �
O fu
(1) 0)
C � S
O U
_r_ C:
O fu
4-J .0
ro E
O
X �
o
•
Q) �
4-J Q
Eo
O O-
C U
vL-
0-
-00
O
.� O
V) V)
� L
C Q)
V)
v
O ateJ
V �
c
�
Q O 0
: L
i Q)
Q�
U 0
v
�
-0
0
cn
C
� Q
fu
(U U
a--+ QU
E4-j
p1 �
c �
V)
0 (o
C
i
X O
�E Q
Q) -o
ai
F_; m
ro
O
L
Ln -a
N C
0 fo
CD X
�U (o
C �
Q
0
Q a
0
C
E
N
4-
N
LO
p1
C
C
(0
a
aS
U
E
0
c
0
v
w
U -O (p 4 —
N ^ 4-J
4- L
4-j I 'V E N
0 �, V; 4— 1-
N d1 r Q a� 41 i� 4�-+ � v i N .61
C
0 >` N LI.- O
L O O V)
0 (d 4-J 4- N CD a
w cu
a cu O ° M'� ra` >_0
> ._�, roa
E i O N O V) 0
"O 4-J C 'Q V
— ?,- -0 v 0 a�
0 � O 0
_ _0 -a
. �4- �
L V V O U U U�
V U
C
(n O m N 0
Q)
(a U U
0O Cv mV) O O 0) cp1�
cn — 'L) V) '� cn a a C •L
� ._
(0 (0
cn r L.
O
cn � L � � 3 -a
Q ° ii > ii 0O0 m 4— J
N
ri
c
:_
V)
ol
C_
C
C
f0
a
aS
U
E
0
C
0
U
w
c
O
m
O
ro
0)
O
fu
O
LJ
•
c
O
co
Q)
D
O
r,
•
fp
�V
O
Q
U)
L
O
N
L
ro
CL
a-J
A
•
a-J
V
L.
0
ul
EZ
�V
c
fu
C
LL
4-J
4-J
H
J
E
fu
CD
O
L
CD
c
�V
c
fo
E
(u
U
Q
�V
C�
G
•
(n
E
L
cn
O
L
-W
C
fu
L
76
O
U-
fo
fo
,-W
V /
L
m
c
E
V)
rn
c
c
c
m
CL
dS
u
0
c
0
u
w
1
ro
CL
U
C
`-J
Q
ro
>
L
ai cn
00
C: -0
0 �
�O
v ra
L
0)
�O
•
L
Q)
O
V)
_0 (1)
L V)
!E O
1 L
O �
3
CL
4-J _
(/) ro
O
=3 a"J
Cf ro
U
C C
O O
C
C: L-
.2 �O
iQ N
al•�
:E U
O C
r6
L. U)
N •—
C N
Q)
cn -C
4-J
4-- 4-
O
C ro
O >
a-+ O
ru L
0 Q
U ro
•
WW
too
ro
a
V)
ro
L
Q)
CL
O
L
a
4-
O
LA
L
O
O
ro
a
Ln X
C u
E
t
as
.� o
C a
CD O
Q)
X
fu
a
0
a
>
io
D
U
O
C
fo
G
0
Q)
L
fu
O
•L
U
Ln
O
fu
a-J
L
4-J
.c
0 �
I- •ro
a>
m
cn
ro C:
•Q �
E
cn
i6
4-
ro
a-j
O
O
4.5 4--J
a� c
E
U N
>
0
CL
f E
O•
Cl.
C 4-
V
L �
a) a
a-
O
> L
Ln O
ro
O •;
ro
u
C
r-i
V
E
O
4-
T
Lo
Q1
C_
C
C
f0
a
o-6
U
E
O
C
O
U
W
N
L
O
fu
>
a
vi
C�
C
>
O
E
Ql
4-+
4-
N
N
>-.O
Uu
L O
4
a-J 4-1
N
O
•
N
w
V
L
O
W
0
E
Q
C
O
O
V
C
0
O
fu
•
L
fo
V;
4-J V)
�O
.V V_
ro L
C
(n
O �
-O
fu m
C �
00
V
C: N
o
C
fu fd
Ln
01
_ cn
0
� L
O O
O >
ru
•
ui
ro
V
E
V)
ro
L
Q�
Ln
O
Ln
N
v
O
L
Q
c
m
•
i�
O
L
V)
U
fu
fu
O1
4-
-
O
4-J U*)
O V
L
>� (O
Q V
4- �
O a
U L.
0o
L
N O
Q)
-� 4-J
fo
O 'F-
U a
•
L
O
O
V
Ul
E
a-1
fn
>
'N N
5 E
U 0
O
L (1)
4-J >
V N
f
N Q)
30
U +-1
f0
� V
C O
fu
L. �
C O
� V
•
Ln
u
vi
E
a�
Ln
rn
C
C
C
(0
a
06
U
E
O
C
O
U
W
v
ate•+
fp
V)
� L
_� 0
°- o
C
O
Q.�
: 3
v).2
-U
.
Ul i6
fu
r
•r1
(Li w
Ul
C fu
0 C
C: c
Q%
N
•
fn
ateJ
O
� Q
� L
O ate.+
U N
a L
f0 %`
fu
U_
� .Q
(a 4-J
�O
c
aj
fu O
Q -a
(0 N
V
�U C
fu
M =1 C V)
•
(6
cu
U
f0
O
U
L
Q
4-J
fu
oC
•
V)
N
f0
L �
p1 V
: O fo
N
C E
00
O L
Q 0
O
a.-
is
(n 4-J
L
C a_+
O-0
O n
O
C
L �
�O
W
O a-J
V
f0
L �
ro
E
•
�L
U
fu
ru
fo
L
J
ui
N
N
O
CL
C
Q�
U
cu
Q
V)
L
O
w
N
N
U
•
to
v
c
V
E
V)
C
f0
a
df
U
E
0
c
0
U
W
L
r
ru
O
p1
L-
>
c_
� L,
L
L
fp :
=
L
U
U
0
N
f6
C
L' ro
�,
p1 O
U
L
.=3 N
N
C
U -C
U U
V)
Q)
O
fo C
4- (n
U
c °
o
v�
-�
Q) O
-O
N
� -O
U
O
f
LO
L a--�
oO
(n
In ru
Q
-0
vU
O
OO
O
O
U
a-j
a)
Q)
:
U
=$
N V
C
C: C:
C
C
N
a) fa
Q)
(o
>
>
>
AM,
��
0
V)
Q)
U
p1
C
4-
4-
O
a..i (n
� U
L
>�V)
r�
a
N V
1--c
O�
Q
V�
00
V) L-
0
-O a"i
�>
U
•
>L
O
O
(n
4-J
cN
C
a-J
(!1
C
� N
5E
U O'
ro �
L- -0
c �
N �
�O
a--J
>.-O
4-J )
. V0
01 O
•Ul) ro
N V)
U U-)
c O
•
N
J
c
ui
E
0)
+r
V)
v�
c
c
c
a
C6
U
E
O
c
O
U
W
.N
fu
ul
L �
V) C:
Q Ln
L �
ci fa
O
_r_ 4-+
4.J U
o
u
.E �
fo
L ..�
v >
X OL
� Q 'l
— ra
Q�
fu�
Z r-
U
L
a 3
.J
•
NO
C
N
a)
V)
T
V)
p1
C_
C
C
(0
a
C6
U
C
O
C
O
v
W
� Vj
_0
N
�-'
0
C •-
v
4-J
i
a--+
O
U
x
ru
d--i
a-J
LL
ui
a-+
C
E
a
0
a
CD
C
U�
1-0
O Z,
N U
Q) O
m ro
Q)
U
L
O
V)
Q
n
C
Q)
E
Q
C
O
..0
O
U
V)
C
m
fu
fu
�U
a
L
O
U
L
a
L
O
Q1.jn
C (n
'U O
� U
(� QJ
C V
C
N 4-J
"a C
t 'fo
0E
0--o
=3 c
(n fo
C: V)
U O
V) 4-J
Q) fu
x v
ro Q
4' o
co v,
'u c
Q �O
U) CD
-00
c L
m O
Q) -0
L W
ui
p1
U
fo
C
Ul
fo
v
a�
Ln
O
V
x
fa
ro
�U
Q
f6
V
L
a
i-
O
L
w
U
fo
fo
0)
O
4-J�
C u
L
>, N
CL U
v
0�
a
V
00
(n L-
ai O
-O 4-+
fu
=3>
U CL
L
Q)
O
O
U
V)
4-J
C
E
5E
U a
_O
L Q)
4-� >
(n w
O
4-J
i,-o
a--+ w
U +�
pl U
�O
.fu fo
U �
O
rn
U
c
E
V)
c
C
(0
a
dS
U
E
0
C
0
v
w
L
O
Ca
C
O
_fu
V)
N
p1
Q
N
d
C
fo
4-J Vj
C
a�
U v
•
a-J
•X U
U �
O
fo >M
L
O j
Q o
(u
V
L .L
':
N O
L
4--0 4-J
C Ln
N N
C .L
= D
�_ cr
� 0
ra -0
wro
•
O
V)
X
ateJ
a
0
Q
v
L
U
C
N
O
cu
L-
0
4-J Q
U U-
(U v
•
cn
ra
v
a-.+
C
O it
v
(n
0-
.E
X
O
0�
� L
0 au
ra �
O 0
Z Q
•
0
N
U
c
V
E
a)
V)
V)
rn
c
c
CL
dS
U
E
O
c
O
U
W
f—
L4 a"J
V) • n
a--;
00
C
ui
O
_0 4-J
U
W >.
.� m
N
Q
O
t >,
N 4-J
�i J
a�
?V
Q U O
0 V,
N
0)
U
X .r,
!E 0
fu 0
� O-
0 4—
0- N
t N
V) U
Q4-'
C: -0
O
Q-0
fu
u N
- X
a-J
L. f
�
0 U
V)
0—
Q
LL >
L.
U a
0
N
U
c
V
E
a)
V)
V)
rn
c
c
CL
dS
U
E
O
c
O
U
W
ui
c
N
E
O
cL
C
V
V
Q
i
v
r�
L
O
a-J
V
v_
.O
LnL
Q
Ui
•
p1
�V
C
4-
c
c
O
E
0
U
C
U
L
W
Q
0
Q
O
U
•
70
c
O
m
c
O
U
O
fp
X
fu
f0
L.
0
V
•L
N
.o
Q)
0
CL
(� n
U �
•
L
In
G-
0
V)
0
01
V
a-J
-Q)v
O
L
� L)
-v
75 U
O �
CO L.
fu
c
O
L
N
W
U
fa
p1
c
O
4-J (/)
O U
L
>. O
f0 to
fl- U
v
o
a
N L
V O
L �
OO
Ul) L
� O
N
a-J
O �
U
•
O
r-
V)
Q)
x
ru
a-J
L
Q
O 4-;
L O
CL a)
a) E
c a
0
CU
L i
4-
O
C �
O p
E id
O .Q
4-1 L
00-
E4--
X_- O
CD -J
m
I U_
a-J
N �
U
'U.)
(n '0
O c
Q
O
a- J c:
rp N
�ro >
> (U
CLn
(10 fu
V)
a)
X
L
v 4-J
afu
0.0
Lr) (U
C: Q
ry V)
L
� 0
L _
4-J >
ry >
cu L.
L Q
a� o.
ry
>
-v
Q �
Q 4-J
(a O
L
O-0
>
X
N ateJ
L
(n r0
X N L.
ra C
a-.J O
0)
cu L-
0
5.
�U
� v
4-J
O- O
ra L.
V) O_
0) . FA
ro
v c
fu r
u
V) V)
N O
I OC'
O C
U N
L
Ln
V) N
Ln
0) N
C:_
C :3
>1�
C
V) N
.v -o
.
O
_V)
fu
L
4—
fu
fu
V)
M,
>
Q�
Q
E w X
O
U �
L
4-J N
ry 3
O
U
�v
ry >
O
4-
a�
�
o)
'c Q
Q�
rp C
w
>
c �
o4-
O
_0 0)
ra c
N fu
(U C:
>
O �CD
v �
CD
C U V
L- N CU
-O Mn
ra -0
oC
CO ra
.
p1
Ul
.(U
N
E
U
0.0
c �
>O
L �
_ Q
U- �C
rL0 E
t
Ind Q
V Q
V) O
N -0
� C
O ru
V)Q)
D -a
.
N
N
C
E
41
V)
V)
c
a
06
U
E
O
C
O
U
W
E
0
L
Q
E
+j
V
.�
O
L
0 U-
4= 6
�U N
a) C:
a)
Q
' v
O
0
.v O
U—_
V) M
-0 a--J
C V)
Ui U
•
p1
C
�U
(p
n
0
U
N
0
c
E
O
U
•
a)
U
4-
E
U
(o
0
� C
� C
v �
v0
�u
0 c
.O
Q
= Q
C IU
'at
F� ro
•
L
0
S
L
Q)
(1
U
0
V)
4--
au
U L
a--+
U
L
a0 Ln
0
Q U
U
O v
U a
fu
0Q)
U ra
•
0
V)
a)
U
C
p1
0
4—
O�
C U
L
>� 0
C- V
4
0 Q
u v
=3 4-J
00
w O
(1)
U
•
V
i
a�
U
L
O
_0 4-+
C
U-
� C-
L
C ,
Ian �
C �
a) C:
E 0
a-J
•c: U
UUl
C O.-
V U
r L
U
C:0
•
M
N
J
E
v
Ln
c
c
a
dS
U
E
0
c
0
u
w
L
O�
�O
L 0)
Qo 4-J
fu
� V
v 4-'
�V)
�0)
E L
0 ru
d-J
fo —
= fu O
f0 u fu
w t
fu Q
V)
E
I- F
cm
O
L-
C:)_ 4-+
4-j C
v
L C
0 L
L
:3 >
O
O �
E 4-j
:3 �
z cn
L
0
w
a
r�
Ul
E
fu
(U
a--J
c�
C
O�
U O
fo
m U
U -
'Q a
-W
Q)
(0.—
Cn
C �>
fL0 C
o
(D
.
ui
ro
L
CL
fa
fo
4.1
U)
L
O
fu
N
Q)
U-
0
-0
0 L
O�
4--, V)
4-J
75 _>,
U �
U
00
L
(n d
.� O
v a�
ate-J
0-0
U O
'O 4-
L 4-J
0 E
p1 �
"O cr
4- 0)
a-J
(0 -0
01 �
ED) 4--
C V)
U U
a-j
v C
Y EE
3
O0
fu .-
fo —
� v)
C
O "a
C
= 4-
•id L
> a�
fu
�O
fo
E >
p1 -o
� U
4�- O
a
0
C �
f-J U
V) O
�O
L
cn (a.
.
O
.a
C
V
C
U
O
a
a
01-
a
LA te
, J
fo
0)
4— 4-J
cu
4-J
C a
I- O
(7 U
.
N
u
c
E
C
C
(0
a
aS
U
E
0
c
0
u
w
O
fo
t
O
Q
V)
fu
L
a--J
a--i
v
E
O
E
.� O
>- cn
.-Q)
U +-j
� U
� a„r
C C:
D fu
4- L
V N
'Q p1
•
0)
C
4-
ate.
O
L
Q
4-J
(0
ILn
V
•
M
L
N
O
E
O
L
4-
m
0
4--
O
O
4-J L-
0
V
D
CU
L �
ateJ V
roC C
L- C
V
•
O
a...J
O
�L
a-J
C
O
U
4-Jc
fu
C
fu
u
O
L
O
4�-
O
.� n
Ul)O
C U
fo LJ
M
CD
O U
L
a--+
fo
C
f�
ru L-
L_ 4-
V .�
•
it
r1
O
L
U
c
01
C
C
�L
y--
O
� U
L
(O/')
Cl V
L �
o�
L v
00
M L-
0
-O 4-J
ru
�>
U CL
•
L
O
V
Q)
U
O
C.
L
d-J
O
U
i
3�
OC:
— cN
pl C
C Q
_O
.a-J
ru
/L-
V
•
Ln
N
u
C
V
E
U1
LO
rn
c
�c
c
CL
aS
U
E
O
c
O
U
w
I%
'II
V)
L
fu
(n
Ln
O
V
O
.07
L
fo
a�
fu
L
4-J
fu
c
Li
c
ro
V
c
O
a-J
ro
-W
(n
.C:
E
fu
V
c
ru
()
O O
(j) .V
�
O
O -C u
V
L
o
rO
L V
fo fo
Q%-
E co
U�
fu
'V
c
f0 �
C 4-J
._
L.
V
� O
O -O
= C
a-J ca
0�
(u L
fu 4-J
V
E L
C
fo N
V -O 4-J
Q �
U , E
O ,U') V
cn fu
fu
E fu W
0 0 0
E
N
U
C
w
V)
c
C
a
U
O
C
O
U
W
(n
a-J
(n
a.-i
L
�
M
14-
:3
O
fo
V
4-J
X
L
O
fu
Q
-O_
'V
O
4-,
-O
fu
'cnw
-0
E
O
ul
C
O
V
�
O
�
�
L
4-J
O
V
-O
M
:3
L
fa
�
�
.fo
•�
O
L.
>
^V^,,
•EZ
L
E
N
U
C
w
V)
c
C
a
U
O
C
O
U
W
u
L.
D
rO
V )
LL
0^�
W
MM�
W
I
L.
CL
0
Q�
r)
^Llr)
W
V
O
Cn
u
Z)
H
4J
V)
cu
m
U
Ln
V)
ro
_0
fu
O
.Ln
W
V/
Ln
'M
O
V)
cn
W
-0
L
>u
L
O
-&-j
c
O
0
U
O
r.
•
rn
N
C
E
V)
Ln
rn
C
C
f0
a
06
0
C
0
w
n�
W
—
^^E
�..f.
_0
4—
\W
�J
fu
W
U
�
-r-
0
w
w
0)
V)
fo
L
0
�
c
C
O
O
z
a...i
U
V
CD
cn
cn
C
V
c
i..L
W
VW /
�
/
I
V/
I
V)
rn
N
C
E
V)
Ln
rn
C
C
f0
a
06
0
C
0
w
0
M
u
C
r-�
E
w
4-
V)
Q1
C_
C
C
m
CL
dS
U
E
O
c
O
u
w
J
k
m
L6
■
§
4.1 /
0 ®
ba
u
c
)
§
§
In
�
§
V
\
§
2
k
§
)
\
�
k
§ �
�
� 2
f
2 Ln
§
§ o tw tw
2 m )
x o UO
(
\
\
i
I..
-
\I �
§
)§�
_
�)§)
[/)
0>
{/\
\
M
'ES a
$;»
E
/f
|
u
_
\{ {j
(�{
.,� .
1
)k>
o
®tee
$
°
/)
( ..
w .
w
;$±
4�
,£
\
/\ w
)[
;/
k�M
-
-
6
,
22%
§% -{
}§
\
\ \\
\2
\\
\� \0
\ \��\
�\ \�\ \ \ \\
\} \\
§ ®7\ IL QE
}|f
_
\ / \. \ \\
\ \/\
_
} 7
�k§
#k
( 2 / 0
/ \
(3u�
1k
(
\
\
d4
C
N
O LL
O
c0
G,
m
m
C
m
C
LL
c
O
C_
C �
u°
bA
C
c
m
.r-
LA-
0
0
O
H
e
v
c
3
W
C
E
Y
V)
c
C
ro
0.
oa
•E
0
C
W
Ln
a
�
c
`m vai
_
a
a
m y
a
y>
c
_ >
v c
.°.�
a
� E
N
to
O
a
� a a
v
u v w
E a c
E v
a x a
o u Y
G
J O ry
g
z
0
o
z
0
o
z
a>
� .� 0 �o
0
o
z
v
o-
o-
o•
Q
a v
a v
a v
a v
a v
3
3
a=
o v
a 0
o v
a N
o v
a N
o a
a
o v
V t
U t
U t
U L
U t
0°
Y O
0
9r� d
a
O
a
a
y a
O y
O a
a
a
O a
u>
u
N
N
a
az
U
° o
o
u a
nz
o a
o a
o
t°.
o
o a
a
a
— —
C Ib
c
N
F L
O. wb
F
J
E 0 c
E v
c v Q, E cm
v O c
Q U
- c
C G iS g C
v 0
c
c
C
a
mma
a
O
0>
N
0 0
a
o Y
o m
v
m>
m` o
c E 0
c v 2
I� p J
�+
a` e7 cp
a` m m
A m m•
ii '..'
m �`
m
O W
o
N
N O
O
m i ry
YJ q u
O O
O! C
> ba
C
W O
C c
C m y
'jj
m A o .�.
c m o E
O
n m 0
a E a E
a c
w mo m 0
,a, c o$
c a u
.c a
w u v o
E c c
w
E o a
0 0 o
c o bU
a o u c v
u`, Z E v
3 �' >' 3 c
c ,xm, m J a
a °u b>i
o
w v
u yu, v a
0 a
w
v� o' o
a�'o
N m C
Ul m ° O
S C 'O Q C
N O N c
W C •C C
u
4
v a Z w o a
d
is w 0 m
LL
a 9 'o
o E o E
E c
w
ai
" a a n 01 >
m> c
a c ° o
0 0 3 a>
ap o
m v a 3 v
°1 a °
m .E u°-
a` E o>
o E v FU
C
c
C
y
c
a
m
m x
G
O
m
a m
~
t+ bo
'L
m y
m
v
a m
C c
N
2S
'E C G
y O
c7 m
d
w
F a
u of
c
c LL
7 GJ 0.
C
E
Y
V)
c
C
ro
0.
oa
•E
0
C
W
Ln