Loading...
HomeMy WebLinkAbout4/3/2018 Item 11, Codron City of San Luis Obispo, Council Memorandum Date: April 3, 2018 TO: Mayor and City Council FROM: Michael Codron, Community Development Director VIA: Derek Johnson, City Manager DJ SUBJECT: Item #11: Capital Facilities Fee Program and Water and Wastewater Development Impact Fee Program Response to City Council Questions On April 2, 2018 city staff received the following questions regarding the Capital Facilities Fee Program (CFF Program) and the Water and Wastewater Development Impact Fee Program. Provided below are summarized versions of the questions followed by staff responses: 1. Jobs/Housing Balance. On packet page 264, the table shows population and jobs both increasing by 21.3%. Does the LUCE show a more gradual improvement of the jobs/housing ratio, which would imply that the number of jobs would increase more slowly than the population. If so, is the table on packet page 264 accurate? Response: The Population, Jobs and Service Population table shown on packet page 264 is accurate. As shown in Table 3 of the Land Use Element, provided below, a one percent City population growth projection was used to estimate the population by 2035. The same projection was used for the CFF Nexus Study to ensure consistency with the General Plan. The General Plan also has policies that aim to keep the non-residential growth rate around one percent, which is reflected in the projected jobs and service populations figures that are shown in the CFF Nexus Study. The amount of commercial vs. residential development at any one time will fluctuate based on market factors, such as available land. Even though the LUCE does not include a phasing plan, the end result at build-out is an improved jobs/housing balance. Item #11: CFF Program and Water and Wastewater Development Fee Program Page 2 2. Policy Reductions for Office/Service and Industrial. Why is a policy-based reduction in the fees for office/service (packet page 330) being considered for feasibility? Since commercial development appears to be strong, could the feasibility threshold for office/service uses support fees without policy reductions? Response: When the feasibility prototypes were presented to City Council during the study sessions in October 2017 and January 2018, staff and the consultant team heard consensus from the Council to not charge the maximum fees shown in the Nexus Study, and to return with fees that were under the industry recognized feasibility thresholds (as indicated by the green , yellow, and red lines for each development prototype) for all development types, and to incentivize the development of residential units, particularly missing middle and affordable units. The feasibility analysis that was presented to Council at the January study session showed the maximum fees for the office/service and industrial uses was approaching the red line, which is an indication that the fees may be too high for development of those land uses. The price per square foot assumptions used for that analysis is based on current market conditions. Therefore, staff is returning with a recommendation for a policy reduction strategy that discounts office/service and industrial fees by 15 percent, to take into consideration market fluctuations/downturns, so that development of office/service and industrial uses will be within the range of feasibility even if the price per square foot are reduced. 3. Policy Reductions for Retail/Hotel. Why is staff recommending policy discounts for retail/hotel and other high trip generation uses, as indicated in the Change in Transportation Fees Table on packet page 226, when the Benchmark Cities Analysis Table on packet page 233 Transportation Fees are typically at the lower end when compared? Is the intent of the reduction to incentivize that type of development? Response: The table on packet page 226 shows the maximum transportation fees which are substantially more than the policy reduction fees that are shown in the table on packet page 233. For example, the maximum retail fee is $34.45 per square foot which exceeds the comparable retail fee for the benchmark cities. When the feasibility analysis was conducted, the maximum fees (transportation, water, wastewater, and public safety) for retail/hotel were substantially higher than the current fee burden and were the highest amongst the benchmark cities (exceeded the red line). retail and hotel development. When the existing 50 percent policy reduction was applied the retail/hotel fee it was still significantly higher than the existing fee and was still among the highest for the benchmark cities. When the feasibility analysis was prepared it showed that even with the 50 percent discount retail and hotel uses the CFF Nexus Study maximum fees would be approaching the red feasibility line. Therefore, staff is recommending that the policy reduction be increased to 60 percent, to take into consideration market fluctuations/downturns, and so that development of future retail/hotel uses will be within the range of feasibility even if the price per square foot are reduced. Item #11: CFF Program and Water and Wastewater Development Fee Program Page 3 The historical basis for the existing and proposed reduction is that commercial development more than pays for the ongoing costs of services and in fact is a critical factor in financially supporting new residential development. 4. Policy Reduction for Residential. How are impact fee feasibility concerns being addressed to incentivize mid-to-lower-cost housing units? Response: A tiered fee system is being recommended for residential development, which was designed to provide incentivizes for smaller residential units. Single-family units that are less than 1,400 square feet, and multi-family units that are less than 800 square feet would benefit from this tiered fee structure on a per square-foot basis. The recommended fee structure can provide up to a 50% reduction for the smallest units. Larger single-family homes would still pay the maximum fee. 5. Policy Reduction for Targeted Residential Development. Packet page 234 says that "Council is choosing to help pay the costs to obtain community-wide benefit", which would be the production of more residential units that are in the mid-to-lower-cost range. Is there flexibility to alter the fees assessed based on housing size? Response: Any single family residential unit that is larger than 1,400 square feet is being charged the maximum fees. expensive single-family residential uses have more transportation impacts than a single- family unit with a smaller foot print or price point. Therefore, the City cannot charge a fee that exceeds the maximum fee shown in the CFF Nexus Study - penalty fees or charging a fee that exceeds the impact identified in the Study is not legal. The reduction from the maximum fees is a policy decision and Council can set the discount threshold at a different square footage (e.g., less or more than 1,400 square feet). 6. Decision to not Charge Parkland/Park Development (non-residential only) or General Government Impact Fees. What is the reasoning or background behind not charging fees for parkland and general government impact fees for non-residential development, as discussed on packet page 228? Response: The consensus of the Council during the January study session was to not charge the general government impact fee at this time, to provide some total fee burden relief, and to not charge the non-residential parkland or park development fee until the Park and Recreation Element and Master Plan were completed, which would identify specific projects that the non-residential fee revenue could go towards. The CFF Nexus Study and the proposed ordinance provide the foundation for the Council to charge those fees now or in the future. 7. Impacts of the Policy Reductions in the MASP. Is the Margarita Area Specific Plan, as referenced on packet page 228, almost approaching build-out, or are there additional residential units planned to which the proposed fee reductions would apply? Response: Only about one-third of the residential units for the MASP have entitlements or have been built, there are still approximately 500 units that could still be built and/or are Item #11: CFF Program and Water and Wastewater Development Fee Program Page 4 anticipated under the MASP, mostly in the Damon-Garcia Ranch. Therefore, those residential units, if smaller than 1,400 square feet in size, would benefit from the tiered fee structure that is recommended. 8. Difference between Water and Wastewater Development Impact Fee Program Options. Please clarify what the two three-bullet lists of items "eliminated from the water and the wastewater fee program" mean, as shown on packet page 230? What is difference between debt financed projects and non-financed projects? Would this impact the type of water and wastewater infrastructure projects that are proposed or built? Response: In the past only debt-financed capital projects containing capacity-related components were included in the development impact fee. The capacity-related projects (mostly pipelines) for which cash was paid were generally not included in the fee. The original October 17, 2017 recommendation by the Utilities Department incorporated -related projects into a Capacity and Connection Fee (generally a 16% share). The new recommendation before the City Council on April of debt-financed capital projects. A ten-year prioritized list of projects from approved master planning documents are included as Exhibits W-8 (water packet pages 390-392) and S-7 (wastewater packet pages 407-410). In general, projects less than $5 million are not debt-financed. The bulleted lists on packet page 230 summarize the projects that were eliminated from the fee program. The table on the top of packet page 231 summarizes the dollar change in the fee program.