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HomeMy WebLinkAbout02/19/2008, PH 1 - PARKING IN-LIEU FEES council Mm fi, Feb February 19,2008 j AgenoA Report 1WmNum6c.�� i CITY O F SAN LU I S O B I S P O FROM: Jay D. Walter,Director of Public Works Prepared By: Tim Bochum, Deputy Director of Public Works Robert Horch, Parking Services Manager SUBJECT: PARKING IN-LIEU FEES CAO RECOMMENDATION Adopt a Resolution establishing parking in-lieu fees at $16,400 per required space effective immediately. REPORT-IN-BRIEF During the 2007 Parking Fund Review, Council directed staff to return with a discussion and recommendation of parking in-lieu fees based on the final parking costs of the structure built at 919 Palm Street. During that fund review, the financial impacts of the Chinatown and Garden Street Terraces projects were discussed including the long-term implications of funding (and lack thereof) for the next, and final parking structure. This staff report discusses the history of various parking in-lieu issues (since two council members may be new to all issues) as well as makes recommendations to maintain existing policies for recovery rates for the program but adjust the fees for the most recent construction costs of providing public parking. Recognizing the impact of parking in-lieu fees on multiple City policies and budgets combined with the affect on vital downtown development, finding "the right" balance is a difficult undertaking. In order to strike a reasonable and appropriate balance, staff recommends maintaining the policy of 40% recovery of the cost of a structured space but updating the base amount to reflect the costs of the parking structure at 919 Palm Street. This would increase the parking in-lieu fee from the current amount of$12,767 per required space to $16,400. DISCUSSION Brief History of the Parking In-Lieu Fee Downtown parking requirements were established in 1981 and the concept of paying a fee to the City "in-lieu" of providing parking on site was included. These parking requirements generally reduced the number of parking spaces required in the Central Commercial (C-C) zone to 50% from what is required of other similar projects'in the City. In 1986, the City utilized an independent parking consultant to look at potential structure locations and funding. The consultant recommended that Council approve an in-lieu fee of$4,000 per space required. The basis of the recommendation was an objective of recovering 40% of the cost of providing a structured parking space downtown. This percentage was chosen with the belief that as the J Parking In-Lieu Fees Page 2 recovery amount approaches and then exceeds 50%, the actual in-lieu fee becomes a disincentive to participate because the actual cost begins to approach the cost of providing space on site. In 1987, Council approved an in-lieu rate at $4,000 per space for new construction or additions and $1,000 per space for changes in use or occupancy. The rationale and underlining policy established was the 40% cost recovery of providing a_structured parking space in the downtown. In 1990, Council considered increases to the parking in-lieu fees and other parking fees to bridge a $400,000 operating deficiency in the Parking Fund. Staff recommended raising the fees to $6,000 per space. Council did not raise the in-lieu fees at this time, but did increase user fees to cover operating costs. In 2002, the Council again reviewed the issue of the in-lieu fees due to increased construction costs and potential future demands for structure development. Council approved an increase to $11,000 per space and also included an annual consumer price increase (CPI) to keep pace with construction costs. Council's decision reaffirmed the 40% cost recovery of providing a structured parking space downtown primarily using the expansion costs of Marsh Street parking structure. The last significant policy decision for in-lieu fee amounts came in 2004 when the Council adopted a new in-lieu fee category for designated Community Partners at 50% of the base fee. The current parking-in-lieu fee is $12,767, which was effective July 1, 2007. Parking In-Lieu Fee Boundary—Who is Eligible? On September 3, 2002 the City Council passed an ordinance approving amendments to Section 4.30 of the City of San Luis Obispo's Municipal Code creating the new Parking In-Lieu Fee Area in the Downtown district of San Luis Obispo. Essentially, these amendments converted the existing parking in-lieu program to a boundary based program and separated the program from the C-C zoning. The amendment also expanded the boundary area. Impetus for decoupling the in-lieu program from C-C zoning and basing it on the boundary of the downtown stemmed, in part, from concerns that "other" zoned land in the downtown core were being inhibited from expansion by their inability to fund adequate on-site parking. In essence an office zoned property sitting next to a commercial zone property was restricted from participating in the in-lieu fee program even though property costs may be very similar and the objective of quality mixed use developed was the same for each property. Since the City objective is to consolidate parking and minimize the individual parcel area devoted exclusively to parking (on each property) the conversion to an area based program made sense and has been successful in removing this redevelopment issue. Why Consider New Parking In-Lieu Fees at this time? During the 2007 Parking Fund Review, Council directed staff to return with a discussion and recommendation of parking in-lieu fees based on the final parking costs of the structure built at 919 Palm Street. During that fund review, the financial impacts of the Chinatown and Garden Street Terraces projects were discussed including the long-term implications of funding (and lack thereof) for the next, and final parking structure. Both projects will eliminate highly utilized surface parking lots which will result in the loss of two of the largest revenue producers of the Parking Fund. The other aspect of these projects. is that removal of surface parking lots will further necessitate the City moving forward with replacement parking in the form of the proposed 'Palm-Nipomo parking structure. Decreased revenues coupled with higher debt financing and additional operating expenses makes it now prudent to consider the adequacy of our current parking in-lieu fees and the need for fee modifications. I- � Parking In-Lieu Fees Page 3 Historical In-Lieu Fee Revenue Impact on the Parking Fund The majority of the revenue in the Parking Fund is provided by structure, parking meter, and fine revenue. In-lieu fees are not a significant revenue source from year to year but do contribute to the Parking Fund's ability to meet its' financial obligations. As the chart below shows, even in years with significant development, the in-lieu fees are a small percentage of revenue for the Parking Fund. 2002-03 2003.04 2004-05 2005-06 2006-07 Total Revenues 3,232,100 3,251,500 4,504,700 3,921,800 4,275,600 Parking In-Lieu Revenue 64,900 105,700 620,400 219,400 41,300 %To Overall Revenues 2% 3% 14% 6% 1% In-Lieu Rate 11,000 11,275 11,661 12,046 12,456 "Court St. 132 spaces x$4000=528,000 Cost Comparison for City Parking Projects The following chart shows the "cost per space" of most recent City parking projects (including surface parking lots and parking structures) and the calculated in-lieu fee amount that would result if the current 40% policy was used. #of Cost Per Project Year Spaces Space 40% Lot 14(Palm & Nipomo) 2000 35 (parking lot) Construction $4,000 Construction & Land $17,200 $6,900 Railroad Transfer Center 2001 134 (parking lot) Construction $11,200 Construction & Land $16,400 $6,600 Marsh Structure Expansion 2002 354 (parking structure) Construction $24,600 Construction & Land $27,600 $11,000 X919 Palm Structure 2006 242 (parking structure) Construction $37,200 Construction & Land $40,900 $16,400 * 919 Costs do not include General Fund Costs for the Tenant Space. The Downtown Plan and Circulation Element proposes that future parking is provided in parking structures at the perimeter of the downtown in order to reduce traffic in the downtown core, reduce driveways that interfere with pedestrian flow, and promote high density or compact urban design. Since the City does not have a redevelopment agency, its parking lots are generally being promoted for redevelopment. Based on rising construction and land acquisition costs, the cost to build new structured parking will likely continue to increase and may continue to outpace construction indexes. As shown above, the most recent parking structure constructed in the City cost $40,900 per space. Parking In-Lieu Fees Page 4 The City recently acquired two properties to expand the footprint for a parking structure envisioned at the southeast corner of Palm and Nipomo Streets. According to the financial evaluation provided by the City's consultant, the anticipated cost for construction of a parking structure in 2012-13 at this location may be as high as $24,548,200. Considering the City's goal of 450 parking spaces for the structure, this translates to a cost of $54,500 per parking space based on construction cost alone. If the City were to charge a 40% cost recovery for construction of this proposed structure, the cost would be $21,800 per space. Comparison to Other Cities Staff periodically surveys other California cities to use as a comparison for fee recommendations and to gauge the City's current fee structure. The amount of the parking in-lieu fee can vary widely based on policy objectives and economic factors. Several cities use different funding methods to supplement the parking costs including redevelopment agencies (RDA), assessment or improvement districts, or parking in-lieu fees. The following chart shows comparable cities that staff has traditionally used as a comparison as well as other cities in our county. RDA or In-Lieu Considering Assessment Fee Per An Increase city District Space Basis For Fee (beyond CPI Comparable Cities 25% construction of a structure space or Davis Yes $4,000 full cost of suburban surface lots ace No Monterey No $8,424 Unknown No Napa Yes $7,500 25% of construction cost Yes Palm Springs No none Not Applicable No Santa Barbara Yes none Not Applicable No Santa Cruz Yes none Not Applicable No Santa Maria Yes none Not Applicable No Ventura No $22,335 100% of land and construction cost No SLO County Cities Arroyo Grande Yes $24,000 100% of land and construction cost No Atascadero Yes none Not Applicable No Grover Beach ' Morro Bay No $15,000 Partial offset of land &construction cost No 33% of land &construction cost with 8 Paso Robles No $3,000 year phase-in to$15,000 Yes 100% of land &construction cost of a Pismo Beach Yes $36,000 surface lots ace No San Luis Obispo No $12,767 40% of land &construction cost" Yes * The City of Grover Beach does not operate public parking lots or structures. Given the wide range of adopted fees and local policies, it is difficult to draw accurate conclusions regarding rates and costs. What is consistent is that some share of cost is being home by the developers (either through fee payment or assessment) when opting to pass on parking requirements to the City. Parking In-Lieu Fees Page 5 Adjustment to the Parking In-lieu Fee Overall, parking in-lieu fees are not a significant contributor to the Parking Fund from year to year; however with higher construction and land costs (that are not recovered through the annual CPI adjustments) there should be some "fair-share" contribution by development projects that increase parking demand. While this can be done on a project by project basis, such an approval could be problematic from a timing and consistency standpoint. Continuing to use the parking in-lieu fee program as the primary mitigation program for parking in downtown is believed to be the best avenue to achieve consistency and fairness in application. These fees should not be too high so that it deters redevelopment but should reasonably reflect costs that the City will incur to implement future projects. Staff recommends that the original and on-going policy of 40% recovery of the cost of a structured space should be maintained. While this recovery percentage can be increased, staff continues to be concerned with establishing a recovery rate that begins to discourage projects from participating in the program. For these reasons staff recommends raising the base per-space fee to $16,400 which represents 40% of the actual cost to construct a space at the 919 Palm parking structure. Since the costs of the proposed Palm-Nipomo parking structure are speculative at this time staff does not recommend a higher increase based upon estimates. The new fees using the base of $16,400 would be as follows: Community Fees Partners All Others New Construction. Per vehicle space required by zoning regulations for the new construction and not otherwise provided. $8,200 $16,400 Additions to Existing Buildings. Per vehicle space required by zoning regulations for the addition and not otherwise provided. $8,200 $16,400 Change in Occupancy Requiring Additional Parking. Per vehicle space required by zoning regulations and not otherwise provided. The number of space required by the change shall be the difference between the number of spaces required by the new use and the number required by the previous use. $2,0501 $4,100 CONCURRENCES Staff met with the Downtown Association's Parking & Access Committee and informed them that our recommendation would be to continue the 40% policy using the adjustment of 919 Palm costs as the base. There were no responses from the Committee that indicated opposition to the CAO recommendation at least thus far. As a courtesy, approximately 50 notices concerning this public hearing were mailed to a variety of organizations and individuals which have previously expressed an interest in Downtown / S i C Parking In-Lieu Fees Page 6 parking and related fees. These notices were mailed two weeks prior to the February 19th meeting. Two legal notices were also published in the Tribune prior to the meeting. FISCAL IMPACT As the need for more parking continues to increase, revenue adjustments will be necessary. The Palm-Nipomo parking structure will most likely require additional funding to operate once it is built. ALTERNATIVES With respect to alternative levels of cost recovery, establishing "the right" fee level eventually becomes a question that Council must answer more as a matter of judgment regarding what constitutes a reasonable and appropriate fee, and less as an empirical or analytic undertaking. Several alternatives to the staff recommendation are outlined below. Prior to further detailing these alternatives, staff would offer this introductory perspective to assist with the judgment about what is reasonable and appropriate: Establishing a parking in-lieu fee in San Luis Obispo was difficult and controversial, and subsequently increasing the fee has also been a highly contentious undertaking. In the 1990s, for example, it took many months of negotiation with the downtown merchants, property owners, and other stakeholders to finally update the fee. Years later, we seem to have finally reached a point where the 40% recovery rate has achieved general acceptance. Given, however, that the parking in-lieu fee is unlikely to ever constitute a major component of Parking Fund revenues, Council should assess the benefit of further increases against the "cost' in terms of community acceptance and policy impact (i.e. that the fee encourages, and not discourages, what the Council and City wants). Reducing Cost Recovery. As a first option, Council may wish to reduce the 40% cost recovery. Staff does not recommend reducing the cost recovery contribution policy level since the 40% recovery level seems to have struck the right balance between having a meaningful fee without discouraging the desired outcome. But if Council wishes to reduce the recovery level, we advise against going below 30% because that would take the in-lieu fee lower than the current rate, as shown in the chart below. This new, lower fee might not be viewed as fair and equitable by those who have already paid a higher fee. Contribution Policy Discount Fee 100% 0% $40,900 75% 25% $30,700 60% 40% $24,500 50% 50% $20,500 40%** 60%** $16,400 35% 65% $14,300 30% 70% $12,300 ** CAO recommended percentage / // Parking In-Lieu Fees Page 7 Increasing Cost Recovery: The simplest way of increasing cost recovery would be to increase the percentage above the current 40% level, and higher options are also shown in the chart. There are, however, other alternatives that have been raised during past Council discussions as outlined below: A. Tiered Fees Based on "New Demand" vs. "Existing Loss. " There could be one fee for new demand at a discounted rate (for example, the current 40%) and another higher fee for the loss of existing public parking (100%). The rationale for this approach would be that the loss of an existing parking space has a greater impact than the "discount" of a "future" space. Currently the City's in-lieu ordinance does not require a developer to pay an in-lieu fee for the loss of public parking in a parking lot or on the street. Instead, this loss of public parking is handled on a case-by-case basis, depending upon the specific project, the policy context of the project, and EIR mitigations. B. Graduated Fees. Another alternative could be to have a graduated rate that scales up with increments of demand. As an example, Council may select a higher percentage of recovery for parking demand which exceeds 10, 20, or 30 spaces (or more). The rationale for this approach is that, if the parking demand being shifted to the City is more significant, there should be a higher amount paid per space. With respect to increase options A and B, in addition to the perspective offered at the beginning of this Alternative section, one aspect of fee acceptance (of any kind) is that the fee is relatively easy to explain or administer. Both of these options would be a little more complicated. Both might also have the unintended consequence of discouraging redevelopment and/or a higher and better use of surface parking spaces by making the spaces "too expensive." Multiple private surface lots, for example, pose increased traffic and pedestrian conflicts and discourage other downtown policy goals. In addition, it is typically the larger, more fiscally beneficial redevelopment projects that create more immediate parking demand, and if the fees scale up with such projects beyond a "tipping point," such projects might inadvertently be discouraged. Therefore, if Council wishes to increase the fee more than the CAO recommendation, staff would recommend modifying the recovery percentage level as the simplest, most equitable approach. ATTACHMENT Resolution \\chstore2\Team\Council Agenda Reports\Public Works CAR\Parking\Parking In Lieu 2-1 9-2008.doc Attachment 1 RESOLUTION NO. (2008 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO AMENDING PARKING IN-LIEU FEES WHEREAS, Section 4.30 of the San Luis Obispo Municipal Code provides for the option of paying a fee to the City in-lieu of providing parking spaces in the Parking In-Lieu Area and provides for setting fees by resolution; and WHEREAS, the Council has considered the staff analysis regarding an increase of this fee and the recommendations of the Downtown Association; and NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo that the parking in-lieu fee for the Parking In-Lieu Area shall be amended as follows: 1. New Construction. The parking in-lieu fee shall be $16,400 per vehicle space ($8,200 for Community Partners) required by the zoning regulations for the addition and not otherwise provided. 2. Additions to Existing Buildings. The parking in-lieu fee shall be $16,400 per vehicle space ($8,200 for Community Partners) required by the zoning regulations for the addition and not otherwise provided. 3. Change in Occupancy Requiring Additional Parking Spaces. The parking in- lieu fee shall be $4.100 per vehicle space ($2,050 for Community Partners) required by the zoning regulations and not otherwise provided. The number of spaces required by the change in occupancy shall be the difference between the number required by the new use and the number required by the previous occupancy. 4. Annual Adjustment. The parking in-lieu fee will be adjusted annually on July 1 of each year by the annual percentage change in the U.S. Bureau of Labor Statistics (or successor agency) consumer price index for all urban consumers (CPI-U) all-cities average for the prior calendar year. Upon motion of seconded by and on the following vote: AYES: NOES: ABSENT: the foregoing resolution was adopted this day of 2008. R p �'a Resolution No. (200x Series) Page 2 Mayor David F. Romero ATTEST: Audrey Hooper City Clerk APPROVED AS TO FORM: Jo athan P. owell Cityo'mey /- 9 OUNCIL $CDD DIR RECEIVED CAO OFIN DIR FEB 15 20U9 ETACAO �jFIRE CHIEF ® fd' - PW DIR CLERK/ I5 CLERK/ORIRIG {POLICE CHFSLO CITY CLERK ❑ D PT EADS .ef REC DIR San Luis Obispo 15 February 2008 C1HR I DIR IR Downtown - -- - Association 7 aft To: Mayor Romero and City Councilmembers i P.O. Box 1402 San Luis Obispo From: Deborah Cash; Administrator, SLO Downtown Association California 93406 Re: Parking In Lieu Fees Phone.805-541-0286 FAX-805-781-2647 The SLO Downtown Association Board of Directors voted unanimously at its 12 www.downtownsio.com February, 2008 meeting that the City Council not increase parking in lieu fees at this time. Because the philosophy and premise of the in lieu program is to preserve compact urban form and encourage total commercial build out in the Downtown core (without requiring space that would otherwise generate income to be used for parking), it seems necessary to weigh this advantage over cost recovery. As noted in the most recent City sales tax report, the Downtown remains the second highest grossing commercial district in the City and is the only commercial district showing an increase in sales. We would like to continue that trend by using every possible square foot of real estate for business and put parking on the periphery. However, in the past year; a turn of events toward an economic downturn in real estate development has occurred spurring some developers to reevaluate projects that may have seemed lucrative but are now questionable in terms of value. An increase in the in lieu fees may be the tipping point that decides a project is not viable. And, in the overall picture, as few in lieu spaces are purchased annually, an increase would not result in much additional income for the parking fund. The Board understands that a built-in annual CPI increase currently applies to the in lieu fees and recommends that the current fee with this increase remain in place but that the fees not be increased at,this time. A review in another three years would be appropriate.. cc: Board of Directors Shelly Stanwyck Audrey Hooper Robert Horch Attachment: Board of Directors 12 February 2008 meeting minutes (draft) Fid RLE ME N�G i�q/IpAGENDA CIA' ITEM # �, SLO Downtown Association Board of Directors 12 February 2008 919 Palm Street Minutes DRAFT Present Pam Seeley Tom Swem Natalie Tartaglia Doug Shaw Ellen Henry Bob Seeley Bob Schinkel Patty Carpenter Ron Meier Carl Dudley, ex officio Roy Mueller, ex officio Brandon Downing, ex offico Deborah Cash, staff Brent Vanderhoof, staff Katie Hollingsworth, staff Diana Cotta, staff Christy Tiaga, staff Shelly Stanwyck Call to order by P. Seeley 7:35 AM. No public comment at this time. Motion to approve minutes by Bob Seeley, 2"d by Bob Schinkel, PAIF. Restructuring Update Board recommendations: ■ Provide additional surveys ■ Put a PDF on website ■ Shaw: compared the increase to TNP increase, need to bring into 215` century Attachment with questions and answers Prefumo Creek Commons project Phil Dunsmore, Planning Dept. Dunsmore said project is going to Planning Commission to look at EIR Application to change zoning, annex into City Cash inquired if an economic impact study would be included Stanwyck: not required by CEQA, not included in the scope May need to go to Council with this request Other comments: Jobs/housing relationship in that area What should be in final scoping Swem: continuation of Madonna's project across the street, didn't request an econ impact report of that project;one difference is that there isn't critical mass by design Some kind of discussion about impact, not necessarily a report How economics fit in to community Economic impact to City as a whole, not just from the Downtown Association Not CEQA induced B. Seeley inquired about the open space portion Dunsmore responded that it's intended to be kept in agriculture Stanwyck: trying to get a sustainable organic farm **Swem motion Projects such as this should have the economic impacts to the City considered with other reviews 2nd by Shaw Contact Carol Florence for more information about the property or to ask about giving a presentation Good neighbor scenario PAIF. Measure J Cash reported on recent development, Measure J nullified by court. Taste of San Luis Cash reported theme is "A Night of Wine and Roses," will bring decorating in-house First round of letters goes out to attendees Tour of California Cotta reported details of race ■ Damon Castillo band touring with Tour • Healthy Lifestyle exhibit part of the market ■ Also Main Stage that evening B. Seeley said a good television review last weekend, each city on the tour highlighted on national TV, prominence of event becoming worldwide, is huge Security/Graffiti Issues Vanderhoof reported issues at Globe, new bicycle cop Downtown working with Nathan to keep an eye on it Mueller said he walks that route regularly, not usually too bad but has heard complaints and the salon nearby has indicated they may move Vanderhoof discussed graffiti removal process through the City Neighborhood Parking District Swem reported on item currently under review, back at table for Old Town however survey respondents most against district Parking In Lieu Fees Swem discussed recommended increase, feels this should not be done, limits construction during this period of downturn Stanwyck: responding to Council's direction,rec is consistent with 40% history of cost recovery A significant number of alternatives including don't increase the fee or have further study Swem: rec at this time is to leave it as is with current escalators Most of econ downturn is perception about what's going on, purse strings are tightening and this adds to that, the differential makes effectively no difference now Construction costs are now down, Motion by Swem that.the status quo remains neutral and there not be an increase of the in lieu fee at this time. 2°d by B. Seeley PAIF Meier suggested that considering business by business needs, City shouldn't discourage increased business that brings in sales tax. Parking impact is greater at different times of the day, this should be considered. Chamber Business Fair Cash suggested all Board members mark their calendars and plan to work a shift. Advisory Body Dinner Swem said he would like to attend. Cash said Board members can RSVP directly or let her know. TNP Carpenter: Regarding Friday markets in 2008 after holidays, Linda Jankay requested that this be discussed again as Farmers won't come on Friday Motion by Shaw to have TNP on Fridays after holidays (Christmas and New Year's 2008) ,2 nd by Meier PAIF. Due to another group scheduled to use the meeting room, the remaining agenda items were not discussed. Meeting adjourned 9:05 AM. Prepared by D.Cash 2-12-08 Page 1 of 1 ®This message was sent with high importance. Council, SloCity From: Montgomery,Victor[VMontgomery@rrmdesign.coml Sent: Tue 2/19/2008 5:52 PM To: Council, SloCity Cc: RECEIVED Subject: Revision to Downtown Parking fees FEB 2. 0 208 Attachments: Dear Members of the Council: $LO CITY CLERK( I am writing to express my support of an exemption from the increased fees for parking. In my opinion"pipeline"projects(those Downtown projects that have filed applications and begun the City development review process) should be exempt from the proposed fee increase. In my opinion these projects are key to the long term continuation of a vibrant and economically successful Downtown (from both the developer and City perspectives).These projects require up front investments of hundreds of thousands of dollars merely to put forth a credible application package and to go through the entitlements process.This new fee can damage the economic viability of the project and lead to abandonment of the project or what's worse in my opinion—reduction in the quality of implementation in order to save the dollars that had to be spent on increased parking fees. I urge you to adopt a pipeline exemption as part of the new fee program-if you adopt it. Victor Montgomery rrmdesigngroup U 3765 S. Higuera St.Ste. 102 San Luis Obispo,CA 93401 C A U P:(805)543-1794 1 F: (805)543-4609 www.mndesign.mm /.Z.He c ff https://mail.s locity.org/exchange/slocitycounci l/Inbox/Revi sion%20to%2ODowntown%20... 2/20/2008