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HomeMy WebLinkAbout11-13-2018 Item 8 Amendment of Resolution of Intent to apply the capital facilities fee program and water and wastewater capacity and connection program development impact fees to new development Meeting Date: 11/13/2018 FROM: Michael Codron, Community Development Director Prepared By: Xzandrea Fowler, Deputy Director – Long Range Planning SUBJECT: AMENDMENT OF RESOLUTION OF INTENT TO APPLY THE CAPITAL FACILITIES FEE PROGRAM AND WATER AND WASTEWATER CAPACITY AND CONNECTION PROGRAM DEVELOPMENT IMPACT FEES TO NEW DEVELOPMENT RECOMMENDATION Adopt a Resolution (Attachment A) to Amend Previously Adopted Resolution No. 10849 (Attachment B) to modify the eligibility criteria for establishing which development review projects are exempt from participating in the newly adopted Capital Facilities Fee Program and the Water and Wastewater Capacity and Connection Fee Program based on the date of building permit application. DISCUSSION Background On November 21, 2017, the City Council adopted Resolution No.10849 (2017 Series) to require applicable development projects to participate in the pending Capital Facilities Fee Program and the Water and Wastewater Capacity and Connection Fee Program. Council adopted that resolution to minimize uncertainty amongst the development community regarding unanticipated impacts to the fiscal feasibility of pending development projects, and to reduce a “rush the planning counter” response from developers to secure project approval or vested rights status before the new development impact fees took effect. The referenced development fee programs were adopted via Resolution [Resolutions No. 10879 (2018 Series) and No.10880 (2018 Series) by City Council on April 3, 2018, and the applicable development impact fees went into effect on July 1, 2018. The adopted Resolution of Intent and the extensive outreach campaign were successful at preventing a “rush the planning counter” response by developers to secure project approval or vested rights prematurely, because developers received advanced notice of when and how the new development impact fees would be applied. The resolution of intent clearly stated that the new development impact fees would be applicable to any project that received building permits on or after the fees went into effect, unless the development project met one of the specified exemptions: In accordance with Resolution No. 10849 (2017 Series), the Developer shall pay any and all development impact fees, including water and wastewater capacity and connection fees, in the amount in effect at the time of issuance of building permit. The following is a list of development review projects that would be exempt from the resolution: a) Development projects that are currently entitled under a vesting tract map that specified which development impact fees would be applied to the project; Packet Pg. 97 Item 8 b) Ministerial development review projects that receive building permit issuance prior to the adoption of the updated development impact fee programs; and c) Discretionary development review projects that are currently in process and will have building permits issued for that development prior to the establishment of the updated development impact fee programs. Limitations with Current Resolution of Intent Enforcement Approach At the time of adoption of the Resolution of Intent, staff believed that the EnerGov permit tracking software system that the City uses to process all development permits (planning and building) had the functionality to accurately track and apply the applicable development impact fees based on both building permit application date and building permit issuance date. However, after the adoption of the new development impact fee programs the software developer informed staff that the software was unable to apply development impact fees by either building permit application date or building permit issuance date, and that the software couldn’t discern between the two without manual manipulation of the building permit on a case by case basis which is both time consuming and prone to error. When building permit applications are entered into the EnerGov system development impact fees are automatically generated in the system and a cost estimate of the impact fee is provided to the applicant, but payment of fees isn’t due until the building permit is issued. Typically, when the building permit is issued the impact fees due are the same amount as the fee estimate that was provide at building permit application. There are a few exceptions when the fees do change, such as the project description changes (e.g., building becomes larger or changes use), fee credits are applied (e.g., credit for existing structure square footage or uses), and annual CPI adjustments (which are applied to fees every July 1st). The new development impact fees are calculated in a completely different manner, which was necessary to accommodate the tiered development impact fee system that Council adopted to incentivize the development of more affordable residential products. Since the adoption of the new development impact fees, staff has been manually re-calculating the development impact fees for projects that applied for building permits before the new impact fees were adopted but didn’t have building permits that were ready for issuance until after the new impact fees went into effect on July 1, 2018. To adjust the development impact fees for those projects, staff must manipulate the fee estimates that were automatically generated in the system at the time of building permit application. When fees are manually manipulated in this manner, EnerGov cannot track how the manipulated fees were derived. This process greatly reduces accounting transparency and makes it extremely difficult to identify potential accounting errors and increases the likely hood that accounting errors will occur. The unintended consequences associated with this method are that developers could be over or undercharged development impact fees, which could negatively impact the City’s development impact fee revenue to pay for associated capital improvements and services associated with new development, and potentially expose the City to legal challenge for charging Packet Pg. 98 Item 8 fees that exceed those identified in the associated nexus studies. Proposed Resolution of Intent Enforcement Approach Staff has explored alternative methods to address this issue and has identified that the best approach would be to work within the limitations of the EnerGov system by applying the same development impact fee structure that was in place at building permit application for the project to continue to be applied at building permit issuance. This would eliminate the need for manual calculation of development impact fees at building permit issuance and would maintain the impact fee calculation transparency and tracking that exist within the EnerGov system. To apply this approach the exemption criteria described in the Resolution of Intent would require modification. Provided below are the proposed text changes: The following is a list of development review projects that would be exempt from the resolution: a) Development projects that are currently entitled under a vesting tract map that specified which development impact fees would be applied to the project; b) Ministerial development review projects that receive submitted building permit issuance applications prior to the adoption of the updated development impact fee programs; and c) Discretionary development review projects that are currently in process and will have submitted building permits issued applications for that development prior to the establishment of the updated development impact fee programs. CONCURRENCES The proposed resolution and condition of approval language has been reviewed by the City Attorney. ENVIRONMENTAL REVIEW Modification of rates and charges by public agencies is statutorily exempt from the California Environmental Quality Act (CEQA) under Section 15273 of the Public Resources Code because changes in fees is not intended to fund expansion of capital projects not otherwise evaluated under CEQA. FISCAL IMPACT The proposed text amendment of previously adopted Resolution 10849 (2017 Series) to modify the criteria of development review projects that would be eligible for exemption from the application of the newly adopted development impact fee programs will help the City to accurately forecast the amount of development that will contribute to the potential impact fee revenue generation and will provide assurance that applicable development project will contribute their fair share of the cost to provide infrastructure/facility/service benefits that are necessary to serve that new development. Packet Pg. 99 Item 8 Accurate forecasting of potential impact fee revenue generation also helps the City identify the amount of funding that will need to come from other funding sources in order to fully fund the identified facilities, improvements, and services that are covered under the development impact fee programs. When those potential impact fee revenues fall short additional pressure is put on the General Fund to cover the funding gap. The anticipated fiscal impact of this modification is expected to be minumal because the revenue forecast considered when the Capital Facilities Fee Program was adopted did not include development review projects that already had or were expected to have building permit applications submitted prior to the effective date of the newly adopted development impact fee programs. Those revenue forecast included future development associated with the buildout of existing Specific Plan Areas (Orcutt Area, Margarita Area, and Airport Area), all development associated with San Luis Ranch, Avila Ranch, Froom Ranch (if approved as proposed), buildout of Special Focus Areas identified in the Land Use Element of the General Plan and infill development throughout the City. ALTERNATIVES 1. Not adopt the resolution or amend the existing exemption language that currently applies to development review projects. This is not recommended because the City doesn’t have a method in place to ensure that the development impact fees that would be charged to those projects has been accurately calculated. Attachments: a - Amendment to Resolution of Intent b - R-10849 Intent to Apply Pending CFFP and Water and Wastewater CCFP Packet Pg. 100 Item 8 R ______ RESOLUTION NO. _____ (2018 SERIES) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, AMENDING PREVIOUSLY ADOPTED RESOLUTION NO. 10849 (2017 SERIES) AND MODIFYING THE ELIGIBILITY CRITERIA FOR ESTABLISHING WHICH DEVELOPMENT REVIEW PROJECTS ARE EXEMPT FROM PARTICIPATING IN THE NEWLY ADOPTED CAPITAL FACILITIES FEE AND THE WATER AND WASTEWATER CAPACITY AND CONNECTION FEE PROGRAMS BASED ON THE DATE OF BUILDING PERMIT APPLICATION WHEREAS, on November 21, 2017, the City Council adopted Resolution No.10849 (2017 Series) requiring all applicable development review projects participate in then pending, but now adopted, Capital Facilities Fee and the Water and Wastewater Capacity and Connection Programs. The Resolution provided notice to all property owners that it was the City’s intent to adopt updated development impact fee programs by March 2018, and that it is the City’s expectation that all applicable development projects that are issued building permits once those impact fees have been published pay those updated fees, since they will benefit from the improvements, facilities, and services that will be covered by those fee programs. In addition, the Resolution contained condition of approval language to be added to applicable development projects to provide additional clarification as to which fees that development project will be subject to: In accordance with Resolution No.10849 (2017 Series), the Developer shall pay any and all development impact fees, including water and wastewater capacity and connection fees, in the amount in effect at the time of issuance of building permit. However, Resolution No.10849 (2017 Series) also exempted the following development review projects from paying the updated fees: a) Development projects that are entitled under a vesting tract map that specified which development impact fees would be applied to the project; b) Ministerial development review projects that receive building permit issuance prior to the adoption of the updated development impact fee programs; and c) Discretionary development review projects that are currently in process and will have building permits issued for that development prior to the publication of the updated development fee programs. WHEREAS, on April 3, 2018, the City Council adopted Resolution Nos.10879 and 10880 (2018 Series) which created the current Capital Facilities Fee and Water and Wastewater Development Impact Fee programs; WHEREAS, the City’s development review tracking software is unable to provide the level of functionality needed in order to fully implement Resolution No. 10849 (2017 Series). Packet Pg. 101 Item 8 Resolution No. _____ (2018 Series) Page 2 Specifically, the City’s software generates all fees due at building permit issuance at the time the permit was submitted, not at the time of issuance; and WHEREAS, by this Resolution, the City intends on modifying Resolution No. 10849 (2017 Series) so that projects which are subject to the updated Capital Facilities Fee and Water and Wastewater Development Impact Fees are consistent with the functionality of the City’s development review tracking software. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. Action. Resolution No. 10849 (2017 Series) is hereby amended insofar as the following list of development review projects are exempt from the requirements of Resolution No. 10849 (2017 Series): a) Development projects that are entitled under a vesting tract map that specified which development impact fees would be applied to the project; b) Ministerial development review projects that submitted building permit applications prior to the adoption of the updated development impact fee programs; and c) Discretionary development review projects that submitted building permits applications for that development prior to the establishment of the updated development fee programs. The modified condition of approval language as set forth below, is hereby approved which shall be applied to all discretionary development review projects that were in process between the date of adoption of Resolution No. 10849 (2017 Series) and the adoption of Resolution No.10879 (2018 Series) and Resolution No.10880 (2018 Series) which established the updated development impact fee programs. In accordance with Resolution No.10489 (2017 Series) and as amended with Resolution No. _____(2018 Series), the Developer shall pay any and all development impact fees, including water and wastewater capacity and connection fees, in the amount in effect at the time of issuance of building permit. SECTION 2. Upon the effective date of this Resolution, the Community Development Director is hereby authorized and directed to apply the condition of approval language to all applicable discretionary development review projects that are currently in process or will be in process between now and the establishment of the updated development impact fee programs, unless exempt from this Resolution as described above. Packet Pg. 102 Item 8 Resolution No. _____ (2018 Series) Page 3 SECTION 3. CEQA determination. The City Council herby finds that the modification of rates and charges by public agencies is statutorily exempt from the California Environmental Quality Act (CEQA) under section 15273 of the Public Resources Code because changes in fees is not intended to fund expansion of capital projects not otherwise evaluated under CEQA. Upon motion of _______________________, seconded by _______________________, and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this _____ day of _____________________ 2018. ____________________________________ Mayor Heidi Harmon ATTEST: ____________________________________ Teresa Purrington City Clerk APPROVED AS TO FORM: _____________________________________ J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, this ______ day of ______________, _________. ____________________________________ Teresa Purrington City Clerk Packet Pg. 103 Item 8 RESOLUTION NO. 10849 (2017 SERIES) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, SETTING FORTH INTENT TO APPLY THE PENDING CAPITAL FACILITIES FEE PROGRAM AND WATER AND WASTEWATER CAPACITY AND CONNECTION FEE PROGRAM TO NEW DEVELOPMENT WHEREAS, in October 2012, the City Council adopted an Economic Development Strategic Plan (EDSP). The EDSP was updated in 2015. The primary goal of the plan is to help create head of household jobs, and the Plan recognizes how important infrastructure financing is to accomplish this goal; and WHEREAS, in April 2013, the City Council authorized staff to hire a consultant to undertake an infrastructure financing analysis that would include a series of study session with the Council, as an implementation measure of the EDSP. The purpose of these study sessions was to provide the Council and the community with information, context and tools to support informed decision making and direction as many as needed; and WHEREAS, on January 21, 2014, the City Council held Study Session #1: Introduction and Background. This session covered the current trends in municipal infrastructure financing, gave an overview of development impacts fee and reviewed the development of the City's existing fee programs; and WHEREAS, on February 18, 2014, the City Council held Study Session #2: Economic and Policy Implications of Development Impact Fees. This session highlighted the tools available to the City and the policy implications and trade-offs associated with the various options; and WHEREAS, on March 18, 2014, the City Council held Study Session #3: Direction for updating the City's Development Impact Fees. This session focused on the path forward, and City Council provided direction to staff, based on the first two sessions and accompanying documents, to proceed with the update of the City's development impact fees, to integrate fees into and prioritize projects in the City's Capital Improvement Program, and to explore new infrastructure funding strategies to support the objectives of the Economic Development Strategic Plan with particular focus on creating head of household jobs in San Luis Obispo; and WHEREAS, on August 16, 2016, the City Council held a fourth Study Session: Public Infrastructure Financing Framework and Draft Policies. This session provided a framework for a comprehensive approach to funding the City's public facilities and infrastructure improvements and recommended draft policies for City Council consideration. The Framework provides a systematic way of considering funding and financing options so that the City is able to construct needed public facilities and infrastructure in a manner that funds facilities and infrastructure needed to maintain and enhance the City's quality of life for current and future residents, employees and visitors, makes efficient use of available funding sources and financing mechanisms, implements General Plan policy, is fair and equitable with respect to incidence of burden (who pays), and is consistent with economic development objectives; and Packet Pg. 104 Item 8 Resolution No. 10849 (2017 Series) Page 2 WHEREAS, on August 16, 2016, the City Council held a public hearing and authorized staff to issue a Request for Proposal (RFP) for the preparation of a Public/Capital Facilities Impact Fee Program Nexus Study. The preparation of a Nexus Study was identified in the 2015-17 Financial Plan as an Objective that supports Major City Goals in Housing, Multi -Modal Transportation, as well as supports the other important objective of Downtown. It also continues implementation of the EDSP strategy to reduce barriers to job creation, which was part of the Major City Goal in Economic Development in the 2011-13 Financial Plan; and WHEREAS, on November 23, 2016, the City requested proposals for consultant services to prepare the City's Capital Facilities Fee Program Nexus Study per Specification No. 91356. The scope of work for the Study included a Citywide Capital Facilities Fee Program with supplemental area -specific fees as needed and only if supported by nexus logic. The Capital Facilities Fee Programs scope of work also included categorical subcomponents for Transportation, Parkland and Park Improvements, General Government, and Public Safety; and WHEREAS, on April 21, 2017, pursuant to said request Economic & Planning Systems. Inc. submitted a proposal that was accepted by the city for said project; and WHEREAS, on June 29, 2017, the City conducted outreach with stakeholders in the development community at a Developer's Roundtable meeting. At this meeting the study objectives and approach were discussed; and WHERAS, on October 5, 2017, the City conducted outreach with stakeholders in the community at the San Luis Chamber of Commerce, Economic Development Committee meeting, and with stakeholders in the development community at a Developer's Roundtable meeting. At these meetings the preliminary maximum fees calculated as part of the Capital Facilities Fee Program Nexus Study were discussed; and WHEREAS, on October 11, 2017, the Planning Commission held a study session to review the preliminary results of the Capital Facilities Fee Program Nexus Study and the Water and Wastewater Capacity and Connection Fee Program Study. During the study session the development community expressed concern that the pending changes to the City's development impact fee programs would create uncertainty for the development community which could result in unanticipated impacts to the fiscal feasibility for development projects; and WHEREAS, On October 17, the City Council held a study session to review the preliminary results of the Capital Facilities Fee Program Nexus Study and the Water and Wastewater Capacity and Connection Fee Program Study. During the study session, the development community expressed concern that the pending changes to the City's development impact fee programs would create uncertainty for the development community which could result in unanticipated impacts to the fiscal feasibility for development projects. The City Council provided staff with guidance regarding policy considerations and directed staff to return with more analysis of the fee burden feasibility, impacts to affordable housing objectives, identification of alternative infrastructure funding sources, refinement of project improvement lists, implementation phasing and additional community outreach; and R 10849 Packet Pg. 105 Item 8 Resolution No. 10849 (2017 Series) Page 3 WHEREAS, with any new or proposed increase in development impact fees, agencies typically encounter a "rush the planning counter" by developers to secure project approval or vested rights status before the new fees take effect. To address this concern, staff recommended the adoption of this Resolution that provides notice that it is the City's intent to adopt updated development impact fee programs by March 2018, and that it is the expectation that all applicable development projects that are issued building permits once those impact fees have been established will be expected to pay those fees, since they will benefit from the improvements, facilities, and services that will be covered by those fees. In addition, staff recommends that the following condition of approval language be added to applicable development projects to provide additional clarification as to which fees that development project will be subject to: In accordance with Resolution No. 10849 (2017 Series), the Developer shall pay any and all development impact fees, including water and wastewater capacity and connection fees, in the amount in effect at the time of issuance of building permit. The following is a list of development review projects that would be exempt from the resolution: a) Development projects that are currently entitled under a vesting tract map that specified which development impact fees would be applied to the project; b) Ministerial development review projects that receive building permit issuance prior to the adoption of the updated development impact fee programs; and c) Discretionary development review projects that are currently in process and will have building permits issued for that development prior to the establishment of the updated development impact fee programs. WHEREAS, the City Council finds that the condition of approval language is consistent with the objectives, policies, and strategies specified in the Economic Development Strategic Plan and the General Plan of the City of San Luis Obispo, as described below, and as further detailed in the accompanying City Council staff report prepared for this action: a) Costs of Growth — Land Use Policy 1.13.9: The city shall require the costs of public facilities and services needed for new development to be borne by the new development, unless the community chooses to help pay the costs for certain development to obtain community -wide benefits. The City shall consider a range of options for financing measures so that new development pays its fair share of costs of new service and facilities which are required to serve the project, and which are reasonably related to the new growth attributable to the development. b) Economic Development Strategic Plan Policy IA: Ensure that the fair -share structure includes appropriate percentages for each party bearing a portion of the infrastructure costs. Utilize a consultant to lead a series of study sessions with the City Council on the City's impact fee stricture guided by existing policies and options for the City to consider related to how impact fees are determined, calculated, and applied. c) Furthermore, the condition of approval language is consistent with the Land Use and Circulation Element overall land use policies by preserving a funding source for city- wide community benefits, including but not limited to, financial support for transportation, parks and recreation, multi -modal infrastructure, public safety, and water and wastewater infrastructure in the City. Packet Pg. 106 Item 8 Resolution No. 10849 (2017 Series) Page 4 NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. Recitals. The above recitals are true and correct and are incorporated herein by this reference. SECTION 2. Action. Unless exempt as set forth below, all building permits for new development within the City shall be subject to the new or increased development impact fees as described in the Recitals above. The condition of approval language is hereby approved and shall be added to all discretionary development review projects that are currently in process or will be in process between the date of this resolution and the adoption of updated development impact fee programs. Projects exempt from this requirement are as follows: a) Development projects that are currently entitled under a vesting tract map; b) Ministerial development review projects that receive building permit issuance prior to the adoption of the updated development impact fee programs; and c) Discretionary development review projects that are currently in process and will have building permits issued for that development prior to the establishment of the updated development impact fee programs. SECTION 3. Upon the effective date of this Resolution, the Community Development Director is hereby authorized and directed to apply the condition of approval language to all applicable discretionary development review projects that are currently in process or will be in process between now and the adoption of the updated development impact fee programs, unless exempt from this Resolution as described above. In accordance with Government Code § 66474.2(b)(2), the City Clerk is hereby directed to publish notice of this Resolution per Government Code section 65090(a) describing the nature of the proposed changes to. the City's development impact fee program. The notice shall be subject to the approval of the City Attorney. Packet Pg. 107 Item 8 Resolution No. 10849 (2017 Series) Page 5 SECTION 3., CEQA determination. The City Council herby finds that the modification of rates and charges by public agencies is statutorily exempt from the California Environmental Quality Act (CEQA) under section 15273 of the Public Resources Code because changes in fees is not intended to fund expansion of capital projects not otherwise evaluated under CEQA. Upon motion of Vice Mayor Rivoire, seconded by Council Member Christianson, and on the following vote: AYES: Council Members Christianson, Gomez and Pease, Vice Mayor Rivoire and Mayor Harmon NOES: None ABSENT: None The foregoing resolution was adopted this 21' day of November, 2017. Harmon ATTEST: Carrie Gallagher City Clerk APPROVED AS -TO FORM: Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my Baal aiiLl affixed the official seal of the City of San Luis Obispo, California, this day of Df[? CJS , 2017. Carrie Gallagher City Clerk Packet Pg. 108 Item 8 Newspaper of the Central Coast U��,Q:IEfiY�i fl y U SLO CITY CLERK 3825 South Higuera • Post Office Box 112 • San Luis Obispo, California 93406-0112 • (805) 781-7800 In The Superior Court of The State of California In and for the County of San Luis Obispo AD #3918631 CITY OF SAN LUIS OBISPO OFFICE OF CITY CLERK STATE OF CALIFORNIA ss. County of San Luis Obispo I am a citizen of the United States and a resident of the County aforesaid; I am over the age of eighteen and not interested in the above entitled matter; I am now, and at all times embraced in the publication herein mentioned was, the principal clerk of the printers and publishers of THE TRIBUNE, a newspaper of general Circulation, printed and published daily at the City of San Luis Obispo in the above named county and state; that notice at which the annexed clippings is a true copy, was published in the above-named newspaper and not in any supplement thereof — on the following dates to wit; NOVEMBER 3, 2018 that said newspaper was duly and regularly ascertained and established a newspaper of general circulation by Decree entered in the Superior Court of San Luis Obispo County, State of California, on June 9, 1952, Case #19139 under the Government Code of the State of California. I certify (or declare) under the penalty of perjury that the foregoing is true and correct. Mite G (Sig i ture of Principal Clerk) DATE: NOVEMBER 3, 2018 AD COST: $122.96 crff OF &M LIM OBISPO SAN LUIS OBISPO CITY COUNCIL NOTICE OF PUBLIC MEETING The San Luis Obispo City Council invites all interested persons to attend a public meeting on Tuesday, November 13, 2018, at 6:00 p.m. in the City Hall Coun- cil Chamber, 990 Palm Street, San Luis Obispo, California, relative to the follow - Adoption of a Resolution, amending adopt- ed Resolution 10849, to modify the eligibilk ly criteria for establishing which develop- ment review projects are exempt from par- liclpafing in the Capital Facilities Fee Pro- gram and the Water and Wastewater Capacity and Connection Fee Program, [lased on the date of building permit appli- more information please contact ndrga Fowler of the City's Community elopmenI Dopartmonl at (805) 781- 1 or by ernalI atxfow[ar@sloclty orn. Reports for this meeting will be available for review in the City Clerk's Office and on- line at www,slocitV.org by close of busi- ness Tuesday, November 6, 2018. Please call the City Clerk's Office at (805) 781- 7100 for more information. The City Coun- cil meeting will be televised live on Charter Cable Channel 20 and live streaming on Teresa Purrington, City Clerk City of San Luis Obispo November 3, 2018 3918631