Atherton City Council
March 18, 2026

% of
Par Value Market Value Book Value Portfolio
Cash In Bank (Schedule A) 6,816,083 6,816,083 6,816,083 16.4% LAIF Statement 17,467,981 17,506,087 17,467,981 42.0%
Investments (Schedule B) 17,790,000 17,744,712 17,276,374 41.6% Total Cash and Investments 42,074,064 42,066,882 41,560,438 100% 12/31/2025
Robert Barron, Finance Director Date
Town of Atherton
Quarterly Treasurer's Report
Portfolio Summary
December 31, 2025
The above investments are consistent with the Town's Statement of Investment Policy and are allowable under current legislation of the State of California. Investments are selected using safety, liquidity, and yield as the criteria. The Town has sufficient cash flow to cover anticipated expenditures through the next six months.

Schedule A
Reconciled
Name of Depository Investment Type Bank Balance
Wells Fargo General Account 6,777,536
Wells Fargo Wells Fargo Trust MMF-Cash 38,547
Total 6,816,083
Town of Atherton
Quarterly Treasurer's Report
Portfolio Details - Cash In Bank
December 31, 2025

Schedule B
Town of Atherton
Treasurer's Report Schedule B
Portfolio Details - Investments
December 31, 2025
See next pages Insight Report

Town of Atherton
Quarterly Treasurer's Report
Cash & Investments Balance By Fund
December 31, 2025
Fund No. Fund Name
June
Balance
101 General Fund 19,489,916
105 Tennis Fund 208,745
610 Equipment Replacement Fund 673,104
614 Worker's Compensation 1,846,947
615 General Liability 370,193
616 Employee Benefits 1,508,893
Total Non-Restricted 24,097,799
201 Special Tax Fund 473,469
202 County Measure A Fund 2,212,074
203 Gas Tax Fund 488,040
204 Measure M 34,942
205 Measure W 1,129,593
209 SLES/COPS Grant 40,602
213 Library Fund 495,986
221 Refuse Rate and Stabilization 531,914
401 GF Projects 9,685,144
402 Storm Drainage 34,429
403 Atherton Channel Drainage District 1,385,180
406 Facilities Construction 917,196
730 H-P Park Improvement 6,983
740 Tree Committee 27,088
Total Restricted 17,462,639
Total Cash & Investments 41,560,438

Date Begin $$$ Contribution Earnings Expenses Distribution Ending $$$ Date 12/1/2025 17,467,981 - 17,467,981 12/31/2025
Town of Atherton
Quarterly Treasurer's Report
Local Agency Investment Fund Summary (LAIF)
December 31, 2025

Date Begin $$$ Contribution Earnings Expenses Distribution Ending $$$ Date 12/1/2025 9,255,407 16,390 (4,248) (41,847) 9,225,702 12/31/2025 (*) Town of Atherton
Quarterly Treasurer's Report
PARS Trust Account Summary
December 31, 2025
* Recent available PARS report

FOR PROFESSIONAL CLIENTS ONLY
NOT TO BE REPRODUCED WITHOUT PRIOR WRITTEN APPROVALPLEASE REFER TO ALL RISK DISCLOSURES AT THE BACK OF THIS DOCUMENTTOWN OF ATHERTONDecember 2025 Treasurer's Report Schedule B

Contents
Fixed income market review 3Activity and performance summary 4Performance 6Recap of securities held 7Maturity distribution of securities held 8Securities held 9GASB 40 - Deposit and investment risk disclosure 13Securities purchased 16Securities sold and matured 17Detail of return and interest received 18Transaction report 21Additional information 22

FIXED INCOME MARKET REVIEW
As of December 31, 2025

TOWN OF ATHERTON
Chart 1: The Fed made no major changes to its “dot plot” projectionsSource: Federal Reserve, December 10, 2025.Chart 2: Jobless claims improved in DecemberSource: Bloomberg, December 31, 2025.

Economic Indicators and Monetary Policy
The FOMC cut the Fed funds rate by 25bp on December 10, taking it to a range of 3.50% to3.75%. Three members dissented (the highest since 1989), with two voting for no change andanother voting for a 50bp cut. The committee
s updated dot plotwas unchanged from the previous quarter, reflecting only one further rate cut in 2026 (Chart 1). The committees quarterly Summary of Economic Projections (SEP) for 2026 showed a significant increase in theGDP forecast from 1.8% to 2.3%, which Chair Powell partly attributed to business investmentrelating to datacenters and AI, as well as a reversal of the drag from the government shutdown.Labor market conditions continued to be the Feds key motivation to cut rates.

In the US, the unemployment rate rose to 4.6%, the highest since October 2021. However, inbetter news for the labor market, jobless claims decreased over the month. Initial claims fellfrom 237,000 to 199,000 during December (Chart 2) and continuing claims fell to 1.866m.Residual seasonality may have had a measure of impact.Elsewhere, headline CPI fell from 3% to 2.7% (the slowest pace since June 2025) and core CPIfrom 3% to 2.6% (the slowest since March 2021). However, the release was plagued by dataquality concerns. Due to the recent government shutdown, most month-on-month data pointswere missing for October and November. The disruption appeared to particularly impact thecalculation of the sheltercomponent (the largest component of the index), which reached 3% year-over-year in November, the lowest since August 2021. The Feds preferred measure of inflation, the Personal Consumption Expenditures Price Index, was released on December 5. The PCE for September (a release delayed by the recentgovernment shutdown) rose from 2.7% to 2.8% on a headline basis, with core PCE falling from2.9% to 2.8%. Markets moved to price in a 95% probability of a rate cut at next weeks FOMC meeting.GDP surprised to the upside in Q4 at 4.3% SAAR, stronger than market expectations at 3.3%.Consumption was the bright spot with final private domestic demand rising 3.0%.Interest Rate SummaryTreasury yields generally rose during the month in what was a strong end to the year for riskassets. At the end of December, the 3-month US Treasury bill yielded 3.63%, the 6-month USTreasury bill yielded 3.6%, the 2-year US Treasury note yielded 3.47%, the 5-year US Treasurynote yielded 3.73% and the 10-year US Treasury note yielded 4.17%. 3

ACTIVITY AND PERFORMANCE SUMMARY
For the period December 1, 2025 - December 31, 2025

TOWN OF ATHERTON
Amortized Cost Basis Activity Summary
Opening balance 17,587,303.84
Income received 57,504.16
Total receipts 57,504.16Total disbursements 0.00
Interportfolio transfers 0.00
Total Interportfolio transfers 0.00
Realized gain (loss) 0.00Change in accruals from security movement 0.00 Total amortization expense (3,190.89)Total OID/MKT accretion income 20,932.48 Return of capital 0.00
Closing balance 17,662,549.59Ending fair value 17,783,259.19 Unrealized gain (loss) 120,709.60
Comparative Rates of Return (%)
* Twelve
month trailing
* Six
month trailing
* One month
Fed Funds 4.21 2.04 0.31Overnight Repo 4.28 2.09 0.32Merrill Lynch 3m US Treas Bill 4.06 1.95 0.30Merrill Lynch 6m US Treas Bill 4.05 1.89 0.29ML 1 Year US Treasury Note 3.91 1.87 0.30ML 2 Year US Treasury Note 3.81 1.81 0.29ML 5 Year US Treasury Note 3.92 1.87 0.31 * rates reflected are cumulative
Summary of Amortized Cost Basis Return for the Period
Total portfolio
Interest earned 45,092.03Accretion (amortization) 17,741.59Realized gain (loss) on sales 0.00Total income on portfolio 62,833.62Average daily amortized cost 17,633,054.00Period return (%)Weighted average final maturity in days 776YTD return (%) Detail of Amortized Cost Basis Return
Interest
earned
Realized
gain (loss)
Accretion
(amortization)
Total
income
Cash and Cash Equivalents 162.10 0.00 162.10 0.00Corporate Bonds 14,859.59 5,474.98 20,334.57 0.00Government Agencies 15,225.08 4,764.03 19,989.11 0.00Government Bonds 14,845.26 7,502.58 22,347.84 0.00Total 45,092.03 17,741.59 0.00 62,833.62

0.354.40
4

ACTIVITY AND PERFORMANCE SUMMARY
For the period December 1, 2025 - December 31, 2025

TOWN OF ATHERTON
Fair Value Basis Activity Summary
Opening balance 17,716,219.15
Income received 57,504.16
Total receipts 57,504.16Total disbursements 0.00
Interportfolio transfers 0.00
Total Interportfolio transfers 0.00
Unrealized gain (loss) on security movements 0.00Change in accruals from security movement 0.00Return of capital 0.00Change in fair value for the period 9,535.88 Ending fair value 17,783,259.19
Comparative Rates of Return (%)
* Twelve
month trailing
* Six
month trailing
* One month
Fed Funds 4.21 2.04 0.31Overnight Repo 4.28 2.09 0.32ICE Bofa 3 Months US T-BILL 4.18 2.06 0.35ICE Bofa 6m US Treas Bill 4.28 2.20 0.38ICE Bofa 1 Yr US Treasury Note 4.15 2.14 0.37ICE BofA US Treasury 1-3 5.09 2.25 0.32ICE BofA US Treasury 1-5 5.74 2.27 0.19 * rates reflected are cumulative
Detail of Fair Value Basis Return
Interest
earned
Change in
fair value
Total
income
Cash and Cash Equivalents 162.10 0.00 162.10Corporate Bonds 14,859.59 4,698.27 19,557.86Government Agencies 15,225.08 (66.75) 15,158.33Government Bonds 14,845.26 4,904.36 19,749.62Total 45,092.03 9,535.88 54,627.91 Summary of Fair Value Basis Return for the Period
Total portfolio
Interest earned 45,092.03Total income on portfolio 54,627.91Average daily total value * 17,870,463.91Period return (%) 0.31Weighted average final maturity in days 776Change in fair value 9,535.88YTD return (%) 5.08* Total value equals market value and accrued interest 5

PERFORMANCE
For the period December 1, 2025 - December 31, 2025

TOWN OF ATHERTON
Total return performance (%)
1 month 3 months YTD 1 year 3 years* 5 years* Since inception* 10 years* TOWN OF ATHERTON 0.31 1.11 5.08 4.80 2.51 5.08 1.99 1.91 Benchmark 0.32 1.12 5.09 4.48 1.79 5.09 1.85 1.77
0246
(% )
1 month 3 months YTD 1 year 3 years* 5 years* 10 years* Since inception*

TOWN OF ATHERTON BENCHMARK
Total return performance
*Returns for periods greater than one year are annualizedReturns are gross of feesPortfolio inception is 08/31/2015Benchmark historyICE BofA US Treasury 1-3: 08/31/2015 - present 6

RECAP OF SECURITIES HELD
As of December 31, 2025

TOWN OF ATHERTON
Weighted
average
final
maturity (days)
Weighted
average
effective
duration (years)
Percent
of
portfolio
Amortized
cost
Historical
cost
Fair value Unrealized
gain (loss)
Cash and Cash Equivalents 38,547.13 38,547.13 38,547.13 0.00 0.22 0.00 1Corporate Bonds 4,843,907.50 5,015,933.72 5,068,683.83 52,750.11 460 27.98 1.06Government Agencies 6,024,866.00 6,092,752.90 6,118,887.99 26,135.09 929 34.80 1.99Government Bonds 6,407,600.75 6,515,315.84 6,557,140.24 41,824.40 877 37.01 2.24Total 17,314,921.38 17,662,549.59 17,783,259.19 120,709.60 776 100.00 1.82 Cash and Cash EquivalentsCorporate BondsGovernment AgenciesGovernment Bonds Portfolio diversification (%)
Cash and Cash Equivalents 0.22Corporate Bonds 27.98Government Agencies 34.80Government Bonds 37.01 Portfolio diversification (%)
7

MATURITY DISTRIBUTION OF SECURITIES HELD
As of December 31, 2025

TOWN OF ATHERTON
Maturity Historic cost PercentUnder 90 days 1,829,599.88 10.5790 to 179 days 1,576,816.50 9.11180 days to 1 year 2,570,893.75 14.851 to 2 years 4,624,774.57 26.712 to 3 years 2,636,953.45 15.233 to 4 years 2,616,076.38 15.114 to 5 years 1,459,806.85 8.43Over 5 years 0.00 0.00 17,314,921.38 100.00
Maturity distribution

0.001.002.003.004.005.00
Historical cost (mm)
Under 90 days
90 to 179 days
180 days to 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
Over 5 years
8

SECURITIES HELD
As of December 31, 2025

TOWN OF ATHERTON
Amortized cost Fair value Unrealized
gain
(loss)
Coupon Maturity/
Call date
Cusip Historical cost Total
accrued
interest
%
Portcost
Par value or
shares
Description
Cash and Cash Equivalents
Cash and Cash Equivalents 0.000 38,547.13 38,547.13 38,547.13 0.00 0.00 0.22 38,547.13 Total Cash and Cash Equivalents 38,547.13 38,547.13 38,547.13 38,547.13 0.00 0.22 0.00Corporate Bonds24422EVK2 JOHN DEERE CAPITAL CORP 0.7% 15JAN2026 0.700 01/15/2026 439,170.00 499,212.73 175.74 1,613.89 2. 500,000.00 499,388.47 54 037833EB2 0.700 02/08/2026 593,749.00 647,866.73 79.02 1,807.36 01/08/2026
APPLE INC 0.7% 08FEB2026 (CALLABLE 09JAN26) 650,000.00 647,945.75 3.43 06051GFX2 BANK OF AMERICA CORP 3.5% 19APR2026 3.500 04/19/2026 623,493.00 647,069.71 2,098.89 4,550.00 650,000.00 649,168.60 3.6094988J6D4 5.450 08/07/2026 397,028.00 399,374.47 3,962.57 8,720.00 07/07/2026
WELLS FARGO BANK NA 5.45% 07AUG2026 (CALLABLE 400,000.00 403,337.04 2.2907JUL26) 437076BN1 2.125 09/15/2026 366,260.00 391,951.64 3,397.45 2,502.78 06/15/2026
HOME DEPOT INC 2.125% 15SEP2026 (CALLABLE 400,000.00 395,349.09 2.1215JUN26) 02665WFK2 AMERICAN HONDA FINANCE 4.9% 09JUL2027 4.900 07/09/2027 599,556.00 599,774.30 8,403.60 14,046.6 600,000.00 608,177.90 7 3.4689236TKL8 TOYOTA MOTOR CREDIT CORP 5.45% 10NOV2027 5.450 11/10/2027 671,703.50 660,514.35 8,955.98 5,018.54 650,000.00 669,470.33 3.8846647PDA1 4.323 04/26/2028 588,900.00 593,938.86 8,596.54 4,683.25 04/26/2027
JPMORGAN CHASE & CO 4.323% 26APR2028 (CALLABLE 600,000.00 602,535.40 3.4026APR27) 717081ET6 3.450 03/15/2029 564,048.00 576,230.93 17,080.32 6,095.00 12/15/2028
PFIZER INC 3.45% 15MAR2029 (CALLABLE 15DEC28) 600,000.00 593,311.25 3.26 Total Corporate Bonds 5,050,000.00 4,843,907.50 5,015,933.72 5,068,683.83 52,750.11 27.98 49,037.49 9

SECURITIES HELD
As of December 31, 2025

TOWN OF ATHERTON
Amortized cost Fair value Unrealized
gain
(loss)
Coupon Maturity/
Call date
Cusip Historical cost Total
accrued
interest
%
Portcost
Par value or
shares
Description
Government Agencies3130AV6J6 FEDERAL HOME LOAN BANK 4.5% 13MAR2026 4.500 03/13/2026 758,133.75 750,552.85 770.71 10,125.00 4 750,000.00 751,323.56 .38 3134GXCJ1 FREDDIE MAC 0.65% 28MAY2026 CALLABLE 0.650 05/28/2026 451,345.00 493,399.69 665.32 297.92 2.61 500,000.00 494,065.013135G0Q22 FANNIE MAE 1.875% 24SEP2026 1.875 09/24/2026 606,047.00 638,579.14 3,452.85 3,283.85 650,000.00 642,031.99 3.503133EPK79 FEDERAL FARM CREDIT BANK 4.375% 07DEC2026 4.375 12/07/2026 747,652.50 749,270.20 6,044.68 2,187.50 750,000.00 755,314.88 4.323130B3W25 FEDERAL HOME LOAN BANK 4.3% 27NOV2028 4.300 11/27/2028 653,978.00 652,900.39 10,561.12 2,639.7 650,000.00 663,461.51 2 3.783134A3ZU3 FREDDIE MAC 0% 14DEC2029 0.000 12/14/2029 646,005.00 648,512.94 (2,821.01) 0.00 3. 750,000.00 645,691.93 733134HAW33 4.750 12/18/2029 501,978.50 501,978.50 (7.92) 857.64 06/18/2026
FREDDIE MAC 4.75% 18DEC2029 (CALLABLE 18JUN26) 500,000.00 501,970.58 2.90 3130AV5P3 FEDERAL HOME LOAN BANK 4.375% 08MAR2030 4.375 03/08/2030 660,341.50 658,771.96 8,971.99 8,847.22 650,000.00 667,743.95 3.813130AWGS3 FEDERAL HOME LOAN BANK 4.125% 14JUN2030 4.125 06/14/2030 398,784.75 398,245.02 (1,417.02) 759.69 390,000.00 396,828.00 2.303130B83T7 3.875 10/08/2030 600,600.00 600,542.21 (85.63) 5,231.25 10/08/2027
FEDERAL HOME LOAN BANK 3.875% 08OCT2030 600,000.00 600,456.58 3.47(CALLABLE 08OCT27) Total Government Agencies 6,190,000.00 6,024,866.00 6,092,752.90 6,118,887.99 26,135.09 34.80 34,229.79Government Bonds91282CDK4 USA TREASURY 1.25% 30NOV2026 1.250 11/30/2026 453,906.25 487,896.77 1,872.76 532.28 2. 500,000.00 489,769.53 62 10

SECURITIES HELD
As of December 31, 2025

TOWN OF ATHERTON
Amortized cost Fair value Unrealized
gain
(loss)
Coupon Maturity/
Call date
Cusip Historical cost Total
accrued
interest
%
Portcost
Par value or
shares
Description
Government Bonds91282CEC1 USA TREASURY 1.875% 28FEB2027 1.875 02/28/2027 540,646.09 565,034.93 4,271.32 3,665.06 580,000.00 569,306.25 3.12 91282CEN7 USA TREASURY 2.75% 30APR2027 2.750 04/30/2027 653,053.13 682,225.42 11,020.67 3,243.7 700,000.00 693,246.09 9 3.7791282CEW7 USA TREASURY 3.25% 30JUN2027 3.250 06/30/2027 488,243.86 495,039.53 3,280.78 0.00 2.82 500,000.00 498,320.3191282CFH9 USA TREASURY 3.125% 31AUG2027 3.125 08/31/2027 482,071.99 491,634.51 5,533.46 5,265.88 500,000.00 497,167.97 2.7891282CGH8 USA TREASURY 3.5% 31JAN2028 3.500 01/31/2028 490,978.24 495,348.54 4,827.24 7,275.82 500,000.00 500,175.78 2.8491282CHK0 USA TREASURY 4% 30JUN2028 4.000 06/30/2028 495,236.05 497,232.66 8,743.90 0.00 2.86 500,000.00 505,976.5691282CNY3 USA TREASURY 3.375% 15SEP2028 3.375 09/15/2028 496,798.55 496,865.11 1,240.36 4,987.91 500,000.00 498,105.47 2.8791282CPP0 USA TREASURY 3.5% 15DEC2028 3.500 12/15/2028 499,962.61 499,962.64 (353.26) 769.23 2. 500,000.00 499,609.38 8991282CKT7 USA TREASURY 4.5% 31MAY2029 4.500 05/31/2029 492,676.61 491,054.36 2,989.39 1,839.56 480,000.00 494,043.75 2.8591282CLR0 USA TREASURY 4.125% 31OCT2029 4.125 10/31/2029 509,532.93 509,526.13 (658.94) 3,475.48 500,000.00 508,867.19 2.9491282CFY2 USA TREASURY 3.875% 30NOV2029 3.875 11/30/2029 403,813.84 403,523.12 86.26 1,320.06 2.3 400,000.00 403,609.38 3 11

SECURITIES HELD
As of December 31, 2025

TOWN OF ATHERTON
Amortized cost Fair value Unrealized
gain
(loss)
Coupon Maturity/
Call date
Cusip Historical cost Total
accrued
interest
%
Portcost
Par value or
shares
Description
Government Bonds91282CMG3 USA TREASURY 4.25% 31JAN2030 4.250 01/31/2030 400,680.60 399,972.12 (1,029.54) 6,891. 390,000.00 398,942.58 24 2.31Total Government Bonds 6,550,000.00 6,407,600.75 6,515,315.84 6,557,140.24 41,824.40 37.01 39,266.31Grand total 17,828,547.13 17,314,921.38 17,662,549.59 120,709.60 17,783,259.19 122,533.59 100.00 12

GASB 40 - DEPOSIT AND INVESTMENT RISK DISCLOSURE
As of December 31, 2025

TOWN OF ATHERTON
Cusip S&P
rating
Moody
rating
Historical
cost
% Portfolio
hist cost
Market
value
% Portfolio
mkt value
Effective
dur (yrs)
Description Coupon Maturity
date
Call date Par value or
shares
United States Treasury Note/Bond91282CDK4 USA TREASURY 1.25% 1.250 11/30/2026 AA+ Aa1 500,000.00 453,906.25 2.62 489,769.53 2.75 0.9091282CEC1 USA TREASURY 1.875% 1.875 02/28/2027 AA+ Aa1 580,000.00 540,646.09 3.12 569,306.25 3.20 1.1391282CEN7 USA TREASURY 2.75% 2.750 04/30/2027 AA+ Aa1 700,000.00 653,053.13 3.77 693,246.09 3.90 1.2991282CEW7 USA TREASURY 3.25% 3.250 06/30/2027 AA+ Aa1 500,000.00 488,243.86 2.82 498,320.31 2.80 1.4591282CFH9 USA TREASURY 3.125% 3.125 08/31/2027 AA+ Aa1 500,000.00 482,071.99 2.78 497,167.97 2.80 1.5991282CGH8 USA TREASURY 3.5% 3.500 01/31/2028 AA+ Aa1 500,000.00 490,978.24 2.84 500,175.78 2.81 1.9691282CHK0 USA TREASURY 4% 4.000 06/30/2028 AA+ Aa1 500,000.00 495,236.05 2.86 505,976.56 2.85 2.3691282CNY3 USA TREASURY 3.375% 3.375 09/15/2028 AA+ Aa1 500,000.00 496,798.55 2.87 498,105.47 2.80 2.5491282CPP0 USA TREASURY 3.5% 3.500 12/15/2028 AA+ Aa1 500,000.00 499,962.61 2.89 499,609.38 2.81 2.7891282CKT7 USA TREASURY 4.5% 4.500 05/31/2029 AA+ Aa1 480,000.00 492,676.61 2.85 494,043.75 2.78 3.1491282CLR0 USA TREASURY 4.125% 4.125 10/31/2029 AA+ Aa1 500,000.00 509,532.93 2.94 508,867.19 2.86 3.5091282CFY2 USA TREASURY 3.875% 3.875 11/30/2029 AA+ Aa1 400,000.00 403,813.84 2.33 403,609.38 2.27 3.6091282CMG3 USA TREASURY 4.25% 4.250 01/31/2030 AA+ Aa1 390,000.00 400,680.60 2.31 398,942.58 2.24 3.67Issuer total 6,550,000.00 6,407,600.75 37.01 6,557,140.24 36.87 2.24Federal Home Loan Banks3130AV6J6 FEDERAL HOME LOAN 4.500 03/13/2026 AA+ Aa1 750,000.00 758,133.75 4.38 751,323.56 4.22 0.203130B3W25 FEDERAL HOME LOAN 4.300 11/27/2028 AA+ Aa1 650,000.00 653,978.00 3.78 663,461.51 3.73 2.713130AV5P3 FEDERAL HOME LOAN 4.375 03/08/2030 AA+ Aa1 650,000.00 660,341.50 3.81 667,743.95 3.75 3.763130AWGS3 FEDERAL HOME LOAN 4.125 06/14/2030 AA+ Aa1 390,000.00 398,784.75 2.30 396,828.00 2.23 4.043130B83T7 FEDERAL HOME LOAN 3.875 10/08/2030 10/08/2027 AA+ Aa1 600,000.00 600,600.00 3.47 600,456.58 3.38 2.83Issuer total 3,040,000.00 3,071,838.00 17.74 3,079,813.60 17.32 2.51Federal Home Loan Mortgage Corp3134GXCJ1 FREDDIE MAC 0.65% 0.650 05/28/2026 AA+ Aa1 500,000.00 451,345.00 2.61 494,065.01 2.78 0.403134A3ZU3 FREDDIE MAC 0% 0.000 12/14/2029 AA+ Aa1 750,000.00 646,005.00 3.73 645,691.93 3.63 3.88 13

GASB 40 - DEPOSIT AND INVESTMENT RISK DISCLOSURE
As of December 31, 2025

TOWN OF ATHERTON
Cusip S&P
rating
Moody
rating
Historical
cost
% Portfolio
hist cost
Market
value
% Portfolio
mkt value
Effective
dur (yrs)
Description Coupon Maturity
date
Call date Par value or
shares
Federal Home Loan Mortgage Corp3134HAW33 FREDDIE MAC 4.75% 4.750 12/18/2029 06/18/2026 AA+ Aa1 500,000.00 501,978.50 2.90 501,970.58 2.82 0.92Issuer total 1,750,000.00 1,599,328.50 9.24 1,641,727.52 9.23 1.97Federal Farm Credit Banks Funding Corp3133EPK79 FEDERAL FARM CREDIT 4.375 12/07/2026 AA+ Aa1 750,000.00 747,652.50 4.32 755,314.88 4.25 0.91 Issuer total 750,000.00 747,652.50 4.32 755,314.88 4.25 0.91 Toyota Motor Credit Corp89236TKL8 TOYOTA MOTOR CREDIT 5.450 11/10/2027 A+ A1 650,000.00 671,703.50 3.88 669,470.33 3.76 1.75 Issuer total 650,000.00 671,703.50 3.88 669,470.33 3.76 1.75 Bank of America Corp06051GFX2 BANK OF AMERICA CORP 3.500 04/19/2026 A- A1 650,000.00 623,493.00 3.60 649,168.60 3.65 0.30 Issuer total 650,000.00 623,493.00 3.60 649,168.60 3.65 0.30 Apple Inc037833EB2 APPLE INC 0.7% 0.700 02/08/2026 01/08/2026 AA+ Aaa 650,000.00 593,749.00 3.43 647,945.75 3.64 0.11 Issuer total 650,000.00 593,749.00 3.43 647,945.75 3.64 0.11 Federal National Mortgage Association3135G0Q22 FANNIE MAE 1.875% 1.875 09/24/2026 AA+ Aa1 650,000.00 606,047.00 3.50 642,031.99 3.61 0.71 Issuer total 650,000.00 606,047.00 3.50 642,031.99 3.61 0.71 American Honda Finance Corp02665WFK2 AMERICAN HONDA 4.900 07/09/2027 A- A3 600,000.00 599,556.00 3.46 608,177.90 3.42 1.42 Issuer total 600,000.00 599,556.00 3.46 608,177.90 3.42 1.42 14

GASB 40 - DEPOSIT AND INVESTMENT RISK DISCLOSURE
As of December 31, 2025

TOWN OF ATHERTON
Cusip S&P
rating
Moody
rating
Historical
cost
% Portfolio
hist cost
Market
value
% Portfolio
mkt value
Effective
dur (yrs)
Description Coupon Maturity
date
Call date Par value or
shares
JPMorgan Chase & Co46647PDA1 JPMORGAN CHASE & CO 4.323 04/26/2028 04/26/2027 A A1 600,000.00 588,900.00 3.40 602,535.40 3.39 1.26 Issuer total 600,000.00 588,900.00 3.40 602,535.40 3.39 1.26 Pfizer Inc717081ET6 PFIZER INC 3.45% 3.450 03/15/2029 12/15/2028 A A2 600,000.00 564,048.00 3.26 593,311.25 3.34 2.90 Issuer total 600,000.00 564,048.00 3.26 593,311.25 3.34 2.90 John Deere Capital Corp24422EVK2 JOHN DEERE CAPITAL 0.700 01/15/2026 A A1 500,000.00 439,170.00 2.54 499,388.47 2.81 0.04 Issuer total 500,000.00 439,170.00 2.54 499,388.47 2.81 0.04 Wells Fargo Bank NA94988J6D4 WELLS FARGO BANK NA 5.450 08/07/2026 07/07/2026 A+ Aa2 400,000.00 397,028.00 2.29 403,337.04 2.27 0.50 Issuer total 400,000.00 397,028.00 2.29 403,337.04 2.27 0.50 Home Depot Inc/The437076BN1 HOME DEPOT INC 2.125% 2.125 09/15/2026 06/15/2026 A A2 400,000.00 366,260.00 2.12 395,349.09 2.22 0.69 Issuer total 400,000.00 366,260.00 2.12 395,349.09 2.22 0.69 Cash and Cash Equivalents
CASH 0.000 38,547.13 38,547.13 0.00 38,547.13 0.22 0.00 Issuer total 38,547.13 38,547.13 0.00 38,547.13 0.22 0.00 Grand total 17,828,547.13 17,314,921.38 100.00 17,783,259.19 100.00 1.82 15

SECURITIES PURCHASED
For the period December 1, 2025 - December 31, 2025

TOWN OF ATHERTON
Par value or
shares
Unit cost Accrued
interest
Trade date
Settle date
Coupon Maturity/
Call date
Principal
cost
Cusip Description / Broker
Government Agencies3134HAW33 12/30/2025 12/18/2029 500,000.00 100.40 (501,978.50) (85 4.750 7.64) 12/31/2025 06/18/2026
FREDDIE MAC 4.75% 18DEC2029WELLS FARGO SECURITIES, LLC
Total Government Agencies 500,000.00 (501,978.50) (857.64) Government Bonds91282CNY3 12/10/2025 09/15/2028 500,000.00 99.36 (496,798.55) (4,0 3.375 55.59) 12/11/2025
USA TREASURY 3.375% 15SEP2028THE BANK OF NEW YORK MELLON 91282CPP0 12/30/2025 12/15/2028 500,000.00 99.99 (499,962.61) (769 3.500 .23) 12/31/2025
USA TREASURY 3.5% 15DEC2028WELLS FARGO SECURITIES, LLC
91282CLR0 12/30/2025 10/31/2029 500,000.00 101.91 (509,532.93) (3, 4.125 475.48) 12/31/2025
USA TREASURY 4.125% 31OCT2029BANK OF MONTREAL
Total Government Bonds 1,500,000.00 (1,506,294.09) (8,300.30) Grand total Grand total 2,000,000.00 (2,008,272.59) (9,157.94) 16

SECURITIES SOLD AND MATURED
For the period December 1, 2025 - December 31, 2025

TOWN OF ATHERTON
Historical cost Amortized cost
at sale or
maturity
Fair value at
sale or
maturity
Realized
gain
(loss)
Trade date Coupon Price
Settle date
Maturity/
Call date
Par value or
shares
Cusip Accrued
interest
sold
Description / Broker
Government Agencies3134A2HG6 12/11/2025 (750,000.00) 675,172.50 750,000.00 0.00 750,0 0.000 00.00 0.00 0.00 12/11/2025
FED HOME LN MTG 0% DUE12-11-2025
Total (Government Agencies) (750,000.00) 675,172.50 750,000.00 750,000.00 0.00 0.00 Government Bonds91282CBC4 12/31/2025 (1,200,000.00) 1,063,082.15 1,200,000.00 0.0 0.375 0 1,200,000.00 0.00 0.00 12/31/2025
USA TREASURY 0.375% 31DEC2025
Total (Government Bonds) (1,200,000.00) 1,063,082.15 1,200,000.00 1,200,000.00 0.00 0.00 Grand total (1,950,000.00) 1,738,254.65 1,950,000.00 1,950,000.00 0.00 0.00 17

DETAIL OF RETURN AND INTEREST RECEIVED
For the period December 1, 2025 - December 31, 2025

TOWN OF ATHERTON
Description Accretion Interest earned
(amortization)
Realized gain
(loss)
Change in fair
value
Cusip Interest received
Cash
Cash and Cash Equivalents 0.00 0.00 0.00 162.10 162.10
Total Cash 0.00 0.00 0.00 162.10 162.10Corporate Bonds
02665WFK2 AMERICAN HONDA FINANCE 4.9% 09JUL2027 12.33 0.00 (85.73) 2,531.67 0.00 037833EB2 APPLE INC 0.7% 08FEB2026 (CALLABLE 09JAN26) 1,684.16 0.00 1,857.83 391.80 0.00 06051GFX2 BANK OF AMERICA CORP 3.5% 19APR2026 806.50 0.00 584.98 1,959.03 0.00 437076BN1 HOME DEPOT INC 2.125% 15SEP2026 (CALLABLE 15JUN26) 946.87 0.00 535.96 731.95 0.00 24422EVK2 JOHN DEERE CAPITAL CORP 0.7% 15JAN2026 1,574.55 0.00 1,493.76 301.39 0.00 46647PDA1 JPMORGAN CHASE & CO 4.323% 26APR2028 (CALLABLE 26APR27) 217.50 0.00 189.18 2,233.55 0.00 717081ET6 PFIZER INC 3.45% 15MAR2029 (CALLABLE 15DEC28) 617.38 0.00 (81.53) 1,782.50 0.00 89236TKL8 TOYOTA MOTOR CREDIT CORP 5.45% 10NOV2027 (470.79) 0.00 350.12 3,050.48 0.00 94988J6D4 WELLS FARGO BANK NA 5.45% 07AUG2026 (CALLABLE 07JUL26) 86.48 0.00 (146.30) 1,877.22 0.00 Total Corporate Bonds 5,474.98 0.00 4,698.27 14,859.59 0.00Government Agencies 3135G0Q22 FANNIE MAE 1.875% 24SEP2026 1,297.82 0.00 1,455.18 1,049.47 0.00 3134A2HG6 FED HOME LN MTG 0% DUE 12-11-2025 832.78 0.00 855.10 0.00 0.00 3133EPK79 FEDERAL FARM CREDIT BANK 4.375% 07DEC2026 64.97 0.00 264.06 2,825.52 16,406.25 3130B83T7 FEDERAL HOME LOAN BANK 3.875% 08OCT2030 (CALLABLE 08OCT27) (25.50) 0.00 (331.09) 2,002.08 0.00 3130AWGS3 FEDERAL HOME LOAN BANK 4.125% 14JUN2030 (154.21) 0.00 (1,454.47) 1,385.31 8,043.75 3130B3W25 FEDERAL HOME LOAN BANK 4.3% 27NOV2028 (83.11) 0.00 663.83 2,406.80 0.00 3130AV5P3 FEDERAL HOME LOAN BANK 4.375% 08MAR2030 (168.58) 0.00 (2,197.43) 2,369.79 0.00 18

DETAIL OF RETURN AND INTEREST RECEIVED
For the period December 1, 2025 - December 31, 2025

TOWN OF ATHERTON
Description Accretion Interest earned
(amortization)
Realized gain
(loss)
Change in fair
value
Cusip Interest received
Government Agencies
3130AV6J6 FEDERAL HOME LOAN BANK 4.5% 13MAR2026 (227.20) 0.00 2.13 2,906.25 0.00 3134A3ZU3 FREDDIE MAC 0% 14DEC2029 1,889.16 0.00 (926.87) 0.00 0.00 3134GXCJ1 FREDDIE MAC 0.65% 28MAY2026 CALLABLE 1,337.90 0.00 1,610.73 279.86 0.00 3134HAW33 FREDDIE MAC 4.75% 18DEC2029 (CALLABLE 18JUN26) 0.00 0.00 (7.92) 0.00 0.00 Total Government Agencies 4,764.03 0.00 (66.75) 24,450.00 15,225.08Government Bonds 91282CBC4 USA TREASURY 0.375% 31DEC2025 3,655.86 0.00 3,366.41 379.08 2,250.00 91282CDK4 USA TREASURY 1.25% 30NOV2026 1,123.36 0.00 1,394.53 532.28 3,125.00 91282CEC1 USA TREASURY 1.875% 28FEB2027 1,094.15 0.00 1,314.06 931.29 0.00 91282CEN7 USA TREASURY 2.75% 30APR2027 1,136.10 0.00 1,066.41 1,648.49 0.00 91282CFH9 USA TREASURY 3.125% 31AUG2027 426.53 0.00 585.94 1,338.05 0.00 91282CEW7 USA TREASURY 3.25% 30JUN2027 281.64 0.00 527.34 1,368.89 8,125.00 91282CNY3 USA TREASURY 3.375% 15SEP2028 66.56 0.00 1,306.92 932.32 0.00 91282CPP0 USA TREASURY 3.5% 15DEC2028 0.03 0.00 (353.23) 0.00 0.00 91282CGH8 USA TREASURY 3.5% 31JAN2028 189.48 0.00 175.78 1,474.19 0.00 91282CFY2 USA TREASURY 3.875% 30NOV2029 (76.38) 0.00 (1,031.24) 1,320.06 7,750.00 91282CHK0 USA TREASURY 4% 30JUN2028 94.06 0.00 (371.10) 1,684.78 10,000.00 91282CLR0 USA TREASURY 4.125% 31OCT2029 (6.80) 0.00 (665.74) 0.00 0.00 91282CMG3 USA TREASURY 4.25% 31JAN2030 (207.20) 0.00 (1,249.22) 1,396.27 0.00 19

DETAIL OF RETURN AND INTEREST RECEIVED
For the period December 1, 2025 - December 31, 2025

TOWN OF ATHERTON
Description Accretion Interest earned
(amortization)
Realized gain
(loss)
Change in fair
value
Cusip Interest received
Government Bonds
91282CKT7 USA TREASURY 4.5% 31MAY2029 (274.81) 0.00 (1,162.50) 1,839.56 10,800.00 Total Government Bonds 7,502.58 0.00 4,904.36 42,050.00 14,845.26Grand total 17,741.59 0.00 9,535.88 66,662.10 45,092.03 20

TRANSACTION REPORT
For the period December 1, 2025 - December 31, 2025

TOWN OF ATHERTON
Maturity Par value or
shares
Trade date Cusip Sec type Description Transaction Principal Interest Transaction totalSettle date Realized
gain(loss)
11/30/2025 3,125.0011/30/2025
91282CDK4 Government Bonds USA TREASURY 1.25% 11/30/20 Income 26 500,000.00 0.00 3,125.00 0.00 11/30/2025 7,750.0011/30/2025
91282CFY2 Government Bonds USA TREASURY 3.875% 11/30/2 Income 029 400,000.00 0.00 7,750.00 0.00 11/30/2025 10,800.0011/30/2025
91282CKT7 Government Bonds USA TREASURY 4.5% 05/31/202 Income 9 480,000.00 0.00 10,800.00 0.00 12/07/2025 16,406.2512/07/2025
3133EPK79 Government Agencies FEDERAL FARM CREDIT BAN Income K 12/07/2026 750,000.00 0.00 16,406.25 0.00 12/10/2025 (4,055.59)12/11/2025
91282CNY3 Government Bonds USA TREASURY 3.375% 09/15/2 Bought 028 500,000.00 (496,798.55) (500,854.14) 0.00 12/11/2025 0.0012/11/2025
3134A2HG6 Government Agencies FED HOME LN MTG 0% DUE 1 Capital Change 2/11/2025 (750,000.00) 750,000.00 750,000.00 0.00 12/14/2025 8,043.7512/14/2025
3130AWGS3 Government Agencies FEDERAL HOME LOAN BANK 0 Income 6/14/2030 390,000.00 0.00 8,043.75 0.00 12/30/2025 (857.64)12/31/2025
3134HAW33 Government Agencies FREDDIE MAC 4.75% 12/18/ Bought 2029 500,000.00 (501,978.50) (502,836.14) 0.00 12/30/2025 (3,475.48)12/31/2025
91282CLR0 Government Bonds USA TREASURY 4.125% 10/31/2 Bought 029 500,000.00 (509,532.93) (513,008.41) 0.00 12/30/2025 (769.23)12/31/2025
91282CPP0 Government Bonds USA TREASURY 3.5% 12/15/202 Bought 8 500,000.00 (499,962.61) (500,731.84) 0.00 12/31/2025 2,250.0012/31/2025
91282CBC4 Government Bonds USA TREASURY 0.375% 12/31/2 Income 025 1,200,000.00 0.00 2,250.00 0.00 12/31/2025 0.0012/31/2025
91282CBC4 Government Bonds USA TREASURY 0.375% 12/31/2 Capital Change 025 (1,200,000.00) 1,200,000.00 1,200,000.00 0.00 12/31/2025 8,125.0012/31/2025
91282CEW7 Government Bonds USA TREASURY 3.25% 06/30/20 Income 27 500,000.00 0.00 8,125.00 0.00 12/31/2025 10,000.0012/31/2025
91282CHK0 Government Bonds USA TREASURY 4% 30JUN2028 0 Income 6/30/2028 500,000.00 0.00 10,000.00 0.00 12/31/2025 Income Cash and Cash Equivalents Cash 0.00 0.00 0.00 162.10 162.10 21

ADDITIONAL INFORMATION
As of December 31, 2025

TOWN OF ATHERTON
The performance results shown, whether net or gross of investment management fees, reflect the reinvestment of dividends and/or income and other earnings. Any gross of fees performance does not include fees and charges and these can have a material detrimental effect on the performance of an investment. The performance shown is for the stated time period(s) only. Any target performance aims are not a guarantee, may not be achieved and a capital loss may occur. Funds which have a higher performance aim generally take more risk to achieve this and so have a greater potential for the returns to be significantly different than expected. Investments are subject to risks, including loss of principal. There can be no guarantee that any investment strategy will meet the liability funding needs of a particular client.

Performance information for certain accounts may reflect performance achieved while the account was managed at a prior firm. In addition, the performance and customized benchmark information for these periods are based on Information from 3rd parties that Insight believes to be accurate, but Insight has not independently verified such information and no representation is made regarding its accuracy or completeness.The quoted benchmarks do not reflect deductions for fees, expenses or taxes. These benchmarks are unmanaged and cannot be purchased directly by investors. Benchmark performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. There may be material factors relevant to any such comparison such as differences in volatility, and regulatory and legal restrictions between the indices shown and the strategy.Any currency conversions performed for this presentation, use FX rates as per WM Reuters 4pm spot rates, unless noted otherwise.Funds and portfolios with an ESG objective follow a sustainable or ESG related investment approach, which may cause them to perform differently than funds that are not required to integrate sustainable investment criteriawhen selecting securities. Funds and portfolios with no ESG objective are not required to integrate sustainable investment criteria when selecting securities so any ESG approach shown is only indicative and there is noguarantee that the specific approach will be applied across the whole portfolio.

This document must not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or otherwise not permitted. This document is intended only for the parties to whom it was delivered or its authorised agentsand should not be copied or passed to any other person. Please contact the Client Services Team if there has been any change in your financial circumstances or risk tolerance since the previous valuation that could affect theinvestment objective of your portfolio. Insight obtains market data and prices from an independent pricing source for all of our currency positions on a daily basis. For trading activity the Clearing broker will be reflected. Incertain cases the Clearing broker will differ from the Executing broker.Some information contained in this client report comes from external sources which Insight believes to be reliable. A list of sources is available on request. All statistics represent month end figures unless otherwise noted. Itshould not be assumed that any of the security transactions or holdings referenced herein have been or will prove to be profitable or that future investment decisions will be profitable or will equal or exceed the past investment performance of the securities listed. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Insight does not provide tax or legal advice to its clients and all investors are strongly urged to seek professional advice regarding any potential strategy or investment. Material in this publication is for general information only and is not advice, investment advice, or the recommendation of any purchase or sale of any security.Insight Investment is the corporate brand for certain companies operated by Insight Investment Management Limited (IIML). Insight includes, among others, Insight Investment Management (Global) Limited (IIMG), Insight Investment International Limited (IIIL) and Insight North America LLC (INA), each of which provides asset management services. This group of companies may be referred to as 'Insight' or 'Insight Investment'.

Please compare the information provided in this statement to the information provided in the statement received from your Custodian. This report is not intended to replace your custodial statement which is your official record for all pertinent account information. Please notify us promptly if you do not receive from your custodian on at least a quarterly basis account statements that contain the amount of funds and each security in theaccount at the end of the period and all transactions in the account during that period.

Investment advisory services in North America are provided through two different investment advisers registered with the Securities and Exchange Commission (SEC), using the brand Insight Investment: Insight North America LLC (INA) and Insight Investment International Limited (IIIL). The North American investment advisers are associated with other global investment managers that also (individually and collectively) use the corporate brand Insight Investment and may be referred to as 'Insight' or 'Insight Investment'. INA is registered with the CFTC as a Commodity Trading Advisor and a Commodity Pool Operator and are members of the NFA.Information about the indices shown here is provided to allow for comparison of the performance of the strategy to that of certain well-known and widely recognized indices. There is no representation that such index is anappropriate benchmark for such comparison. You cannot invest directly in an index and the indices represented do not take into account trading commissions and/or other brokerage or custodial costs. The volatility of theindices may be materially different from that of the strategy. In addition, the strategy’s holdings may differ substantially from the securities that comprise the indices shown.

The ICE BofA 3 Month US T-Bill index is an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income. The ICE BofA 6 Month US T-Bill index measures the performance of Treasury bills with time to maturity of less than 6 months. 22

ADDITIONAL INFORMATION
As of December 31, 2025

TOWN OF ATHERTON
The ICE BofA 1-Year US Treasury Index is a one-security index comprised of the most recently issued 1-year US Treasury note. The index is rebalanced monthly. In order to qualify for inclusion, a 1-year note must be auctioned on or before the third business day before the last business day of the month.The ICE BofA 3-Year US Treasury Index is a one-security index comprised of the most recently issued 3-year US Treasury note. The index is rebalanced monthly. In order to qualify for inclusion, a 3-year note must be auctionedon or before the third business day before the last business day of the month.The ICE BofA 5-Year US Treasury Index is a one-security index comprised of the most recently issued 5-year US Treasury note. The index is rebalanced monthly. In order to qualify for inclusion, a 5-year note must be auctionedon or before the third business day before the last business day of the month.The ICE BofA 1-3 US Year Treasury Index is an unmanaged index that tracks the performance of the direct sovereign debt of the U.S. Government having a maturity of at least one year and less than three years.

The ICE BofA 1-5 US Year Treasury Index is an unmanaged index that tracks the performance of the direct sovereign debt of the U.S. Government having a maturity of at least one year and less than five years. © 2025 Insight Investment. All rights reserved.
23

Item No. 7
Town of Atherton
CITY COUNCIL STAFF REPORT – PUBLIC HEARING
TO: HONORABLE MAYOR AND CITY COUNCIL

GEORGE RODERICKS, CITY MANAGER
FROM: BRITTANY BENDIX, CONSULTING TOWN PLANNER
DATE: MARCH 18, 2026
SUBJECT: RESOLUTION TO ADOPT AN INCLUSIONARY HOUSING FEE RECOMMENDATION:

Staff recommends that the City Council adopt the attached resolution to establish an inclusionary housing fee consistent with the Town’s Inclusionary Housing program and the certified Atherton 2023-2031 Housing Element.

BACKGROUND
Since January 2025 the Town has held numerous public study sessions and hearings to discuss and consider recommendations for the Town’s inclusionary housing program and to provide feedback to staff. An Inclusionary Housing Ordinance (IHO) is a policy tool that the Town included in the 2023-2031 Housing Element update to ensure that new multifamily development will contribute to meeting state-mandated affordable housing requirements.

At a City Council meeting on January 21, 2026, the Council discussed various components of a local inclusionary housing program, including the structure and application of an Inclusionary Housing In-Lieu fee. The application of an in-lieu fee is supported by an analysis prepared by BAE, Inc. and is provided at Attachment 1. The analysis was also introduced and discussed at the January 8, 2025 joint study session. The Council considered the analysis and evaluated three approaches to setting fees. On February 18, 2026, the Council adopted the Inclusionary Housing Ordinance, which identified the “point of indifference” calculation method as the upper limit used to set fees. The corresponding resolution that adopts the fee is the focus of this report.

ANALYSIS
Using the “point of indifference” methodology as the upper limit facilitated the Council’s preference, as stated at their January 21, 2026 meeting, to adopt the in-lieu fee structure of $150 per square foot of net residential development for rental developments and $200 per square foot

March 18, 2026, City Council Staff Report
Inclusionary Housing Ordinance - Introduction

of net residential development for ownership developments. The alternative methodologies provided by the BAE analysis generated fees that are below Council’s direction.

For reference, the summary of the BAE analysis shared with the Council at their January 21, 2026 meeting, is provided in Table 1. Prototype 1 reflects rental multifamily housing within the RM20/40 districts. Prototypes 2 and 3 reflect rental or ownership housing options within the RM-10 district. Prototype 4 is not applicable as the adopted Inclusionary Housing Program does not include single-family development. Each fee represents an amount that would be assessed based on the product type (rental vs. ownership) and applied per net residential square foot. - Nexus Basis: The nexus analysis estimates the amount that the Town would need to charge in in-lieu fees to make the amount of the fee payment commensurate with the revenue needed to address the estimated affordable housing need associated with the construction of new market-rate development. This approach includes a financial feasibility analysis to determine how the fees would impact development feasibility. - Cost of Construction: This approach analyzes setting in-lieu fees to cover the full cost of constructing an affordable unit. This scenario supports off-site construction of affordable units.
- Point of Indifference: This approach approximates the cost of affordable units within a market-rate project. In this scenario the fee is set to incentivize development of on-site construction.

Table 1: BAE Summary of In-Lieu Fee Analysis
At the January 21, 2026 meeting, the Council sought to simplify the fee and the characterization of the housing types. Prototypes 1 and 2 were discussed as a “rental” category and Prototype 3 as an “owner” category. Additionally, the Council preferred reducing the fee amounts in the Point of Indifference analysis to simpler values, which resulted in the $150 and $200 per square foot assessments for rental and ownership projects, respectively. The draft resolution provided at Attachment 2 reflects these amounts.

As a reminder, the Inclusionary Housing Ordinance does provide a structure by which the fee will be managed and updated. Most frequently, the fee will be applied to fractional units that result from requirements on multifamily development. However, applicants can request Council Prototype 1 Prototype 2 Prototype 3 Prototype 4
Tenure Rental Rental For-Sale For-Sale
In-Lieu Fee Findings
Development
Typology
Multifamily
Apartments
Townhouses Townhouses Single Family +
ADU
Nexus Basis $29 $26 $31 $50
Cost of
Construction
$91 $159 $125 $29
Point of
Indifference
$154 $156 $212 $69

March 18, 2026, City Council Staff Report
Inclusionary Housing Ordinance - Introduction

approval to meet their entire affordability requirement through an in-lieu fee payment. Payments of the fee will be deposited into the Town’s affordable housing fund and expended exclusively to provide affordable housing consistent with the Town’s Housing Element and for the administration and compliance monitoring of the Town’s inclusionary housing program. Every four years the Town will review its in-lieu fees to determine how much it has collected and identify projects for uses for which the fees will be made. The Town will also review and update the in-lieu fee feasibility analysis every 8 years, with a specific effort to align this cycle with the housing element cycle.

FINDINGS:

The proposed Resolution is consistent with the Town’s General Plan goals, policies, and implementation programs, as identified below:

Housing Element Goal 3.730 Facilitate the development of faculty and student housing on school campuses to meet a portion of the moderate and very low-income housing need identified for Atherton.

Housing Element Goal 3.760 Encourage special consideration to the maintenance and expansion of housing opportunities for handicapped and
low- and moderate-income homeless persons.

Housing Element Objective 3.761 B. Support the conservation and development of affordable housing for citizens of modest means.

Housing Element Policy 3.795 B. The Town shall continue to encourage the production and availability of more affordable housing through the development of new accessory dwelling units, and
private and public-school faculty and student housing.

Housing Element Goal 3.770 Meet the needs of seniors, in light of the pending growth of this population in San Mateo County.

Housing Element Policy 3.772 B. Support the conservation and development of affordable housing for seniors with lower incomes.

Program 3.814 Adoption of an
Inclusionary Zoning Ordinance
Adopt a new inclusionary ordinance for multifamily
development and a housing fee for all new single-family housing construction and additions. Generate funds to
support an affordable ADU rental program (Program

3.812(B)) and other affordable housing opportunities.

CONCLUSION:

Staff recommends that the City Council adopt a resolution to establish an inclusionary housing fee consistent with the Town’s Inclusionary Housing program and the certified Atherton 2023-2031 Housing Element.

FISCAL IMPACT:

March 18, 2026, City Council Staff Report
Inclusionary Housing Ordinance - Introduction

The cost associated with the preparation of the draft Resolution is included within the annual Planning Department budget. The cost to implement the Resolution will be paid for by the applicants of related development projects.

ENVIRONMENTAL IMPACT:

The project is Categorically Exemption per Section 15061(b)(3) of the California Environmental Quality Act (“CEQA”) Guidelines because CEQA applies only to projects that have the potential for causing a significant effect on the environment, and it can be seen with certainty that there is no possibility that this resolution and the inclusionary housing in-lieu fee it establishes creates changes in the physical environment, or results in any changes to the General Plan or Implementing Zoning Ordinance land use policies, and any development that occurs in the future that is subject to such policies will undergo an independent analysis pursuant to the requirements of CEQA.

PUBLIC NOTICE:

Public notification was achieved by posting the agenda, with this agenda item being listed, at least 72 hours prior to the meeting in print and electronically. Legal advertisement of this hearing was published in The Almanac newspaper. Notice of this hearing was also mailed to all property owners within the Town. Information about the project is also disseminated via the Town’s electronic News Flash and Atherton Online. There are approximately 1,200 subscribers to the Town’s electronic News Flash publications. Subscribers include residents as well as stakeholders – to include, but be not limited to, media outlets, school districts, Menlo Park Fire District, service providers (water, power, and sewer), and regional elected officials.

FORMAL MOTION:

I move that the City Council adopt the Inclusionary Housing Fee Resolution based on reasons outlined in the Staff Report.
/s/Brittany Bendix
Brittany Bendix, Town Planner
Attachments:

1. Inclusionary Housing and In-Lieu Fee Analysis

2. https://atherton.primegov.com/portal/item?id=2370Draft Inclusionary Housing Fee Resolution

ATTACHMENT 1
bae urban economics
Inclusionary Housing and In-Lieu Fee Study
Prepared for the Town of Atherton
December 31, 2024

Table of Contents
INTRODUCTION ...........................................................................................................1 Town of Atherton 2023-2031 Housing Element Update ...........................................................1 Components of the Analysis....................................................................................................2 Affordability of Market-Rate Housing......................................................................................3 Atherton Residential Development Standards and Relevant State Laws .................................5 AB 602 Requirements..............................................................................................................6 AB 1505 Requirements ............................................................................................................7 INCLUSIONARY HOUSING FINANICAL FEASIBILITY ANALYSIS ......................................9 Prototypes ..............................................................................................................................9 Methodology for Financial Feasibility Analysis.......................................................................11 Inclusionary Housing Financial Feasibility Findings ................................................................13 Summary of Findings.............................................................................................................15 IN-LIEU FEE ANALYSIS................................................................................................17 Nexus Analysis.......................................................................................................................17 In-Lieu Fee Financial Feasibility Analysis................................................................................35 Inclusionary Unit Construction Cost.......................................................................................39 Point of Indifference Approach..............................................................................................40 Summary of Findings from Inclusionary In-Lieu Fee Analysis .................................................43 POLICY OPTIONS AND RECOMMENDATIONS..............................................................46 APPENDIX A: AB 602 ANALYSIS ..................................................................................50 APPENDIX B: CALIFORNIA STATE DENSITY BONUS DENSITY ALLOWANCES ...............54 APPENDIX C: RESIDENTIAL PRO FORMAS ...................................................................57 APPENDIX D: OVERVIEW OF IMPLAN..........................................................................68

List of Tables
Table 1: Affordability of Market-Rate Multifamily Rental Units, San Mateo County, 2023.............5 Table 2: Summary of Residential Prototype Development Programs, Inclusionary Housing Scenarios....................................................................................................................................10 Table 3: Vacant Land Sales in Atherton, 2018-2023.....................................................................13 Table 4: Summary of Residential Development Feasibility, Inclusionary Housing Scenarios.......16 Table 5: Household Income Required to Rent New Multifamily Rental Units in Atherton ............20 Table 6: Household Income Required to Purchase New Market-Rate Units in Atherton ..............20 Table 7: Worker Household Income Level by Industry of Employment, San Mateo County .........23 Table 8: Jobs and Worker Household Generation by Income Level from New Multifamily Rental Apartment Units.........................................................................................................................25 Table 9: Jobs and Worker Household Generation by Income Level from New Rental Townhouse Units ..........................................................................................................................................26 Table 10: Jobs and Worker Household Generation by Income Level from New For-Sale Townhouse Units........................................................................................................................27 Table 11: Jobs and Worker Household Generation by Income Level from New Single-Family Residential Units ........................................................................................................................28 Table 12: Summary of Induced Housing Need per 100 Units by Residential Development Type by Income Category........................................................................................................................29 Table 13: Affordable Housing Financing Gaps, San Mateo County, 2024.....................................32 Table 14: Nexus-Based Fee Rates for Market-Rate Residential Units ..........................................34 Table 15: Summary of Residential Prototype Development Programs, Inclusionary and In-Lieu Fee Scenarios .............................................................................................................................36 Table 16: Financial Feasibility Summary, No Inclusionary/No In-Lieu Fee Scenario .....................38 Table 17: Construction Cost In-Lieu Fee Amount by Prototype ...................................................40 Table 18: Point of Indifference In-Lieu Fee Amount by Prototype ..............................................43 Table 19: Summary of In-Lieu Fee Analysis Findings...................................................................44 Table 20: Potential Inclusionary Housing In-Lieu Fee rates .........................................................48

Atherton Inclusionary Housing & In-Lieu Fee Study | Introduction 1

INTRODUCTION
This study provides analysis to assist the Town of Atherton in considering the adoption of an inclusionary housing ordinance and associated inclusionary housing in-lieu fees. The Town of Atherton is situated in one of the highest-cost regions in the country and has been identified as the most expensive zip code in the nation to buy a home.1 According to data from Redfin, the median home sale price in Atherton was $9.3 million as of December 2023. As a result, housing costs in Atherton are out of reach for lower-income and moderate-income households as well as for most households with above-moderate incomes.

The Town of Atherton is considering the adoption of an inclusionary housing program and associated inclusionary housing in-lieu fees, which would require that some new housing units in Atherton be made affordable to a wider range of households. Inclusionary housing ordinances generally require that a portion of units in new residential developments be made affordable to lower-income or moderate-income households, while revenue from in-lieu fees generally supports affordable housing initiatives. This study provides economic analysis to inform the Town in its consideration of an inclusionary housing program and related in-lieu fees.

Town of Atherton 2023-2031 Housing Element Update
The Town of Atherton’s adopted Housing Element Update includes a program stating that the Town will adopt an inclusionary housing ordinance for multifamily development, with a nexus study evaluating whether a 20 percent inclusionary requirement is feasible. The program language reads as follows:

Adopt a new inclusionary ordinance for multifamily development and a housing fee for all new single-family housing construction and addition. Generate funds to support an affordable ADU rental program (Program 3.812 (B)) and other affordable housing opportunities.

The Town is currently completing a nexus study that will inform the development of the zoning ordinance. The nexus study will ensure that a 20% affordable requirement is not a constraint, and propose a revised percentage if 20% is determined to be a constraint or if a higher percentage of inclusionary units is feasible.

The analysis presented in this report supports the Town’s implementation of this Housing Element program by analyzing the feasibility of a 20-percent inclusionary requirement for multifamily developments. Although not explicitly mentioned in the Housing Element program identified above, the analysis presented in this report also identifies potential in-lieu fees for 1 See https://www.sfgate.com/local/article/bay-area-expensive-zip-codes-18475302.php

Atherton Inclusionary Housing & In-Lieu Fee Study | Introduction 2 multifamily developments because inclusionary ordinances often offer in-lieu fees as an alternative to providing affordable units, either in-lieu of meeting an entire inclusionary requirement or in-lieu of meeting a requirement for fractional units. This report also provides an analysis of housing fees for new single-family units as referenced in the Housing Element program cited above. According to information provided by Town staff, the Town is considering a requirement for single-family units that would call for either a deed-restricted ADU or the payment of a housing fee. Therefore, this analysis also includes an evaluation of the feasibility of constructing single-family homes with deed-restricted ADUs.

Components of the Analysis
The analysis provided in this report consists of two key components: a financial feasibility analysis to evaluate inclusionary housing requirements and an analysis of potential inclusionary housing in-lieu fees.

Inclusionary Housing Financial Feasibility Analysis
This component of the report evaluates the financial feasibility of residential development in Atherton with the inclusionary housing requirements that the Town is currently considering. This includes an analysis of residential developments that conform to existing development standards in Atherton as well as developments that would be consistent with new standards for residential development in Atherton that are currently under consideration. The purpose of this analysis is to evaluate whether future residential developments in Atherton can absorb the inclusionary requirements that are currently under consideration while remaining financially feasible.

Inclusionary Housing In-Lieu Fee Analysis
An inclusionary housing in-lieu fee is a fee that local jurisdictions may allow developers to pay instead of providing inclusionary units in a new development, with revenue from the fee used to support affordable housing initiatives elsewhere in the jurisdiction. This report includes analysis to inform the Town of Atherton’s consideration of inclusionary housing in-lieu fees as part of an inclusionary housing program.

Inclusionary housing in-lieu fees are typically not a requirement for new development but are instead offered as an alternative to providing affordable inclusionary units. Therefore, inclusionary housing in-lieu fees are typically not considered to be impact fees. Nonetheless, this study provides a nexus analysis that is consistent with the analysis that would be needed to support an impact fee to evaluate an inclusionary housing in-lieu fee for new residential development in Atherton. This analysis quantifies the estimated relationship between new market-rate residential development in Atherton, the need for workforce housing, and the public cost to construct housing that is affordable to lower-income workers. The concept of the residential nexus analysis is that residents in new market-rate units make expenditures in the local economy, thereby creating a demand for additional workers. A portion of these workers will have wages and household incomes that are not high enough to enable them to afford market-rate housing, and as a result new market-rate residential development is associated with

Atherton Inclusionary Housing & In-Lieu Fee Study | Introduction 3 a need for additional affordable housing. The nexus analysis estimates the fees that the Town of Atherton would need to charge to generate the funds necessary to support the construction of affordable units for these workers.

While many jurisdictions adopt inclusionary housing in-lieu fees without conducting a nexus analysis, a nexus analysis can inform policy decisions by identifying the in-lieu fee rates that would be necessary to mitigate the affordable housing needs associated with the construction of new market-rate residential units. In addition, a nexus study may be required if the Town were to require that some developments pay the in-lieu fee, with no option to provide affordable units instead of paying the fee, rather than providing the in-lieu fee as an alternative to providing inclusionary units for those developments.

In addition to the inclusionary housing in-lieu fee nexus analysis, this study includes a financial feasibility analysis to evaluate the feasibility of paying an in-lieu fee, as well as other analysis to inform recommendations related to setting the Town’s inclusionary housing in-lieu fee rates.

Affordability of Market-Rate Housing
Table 1 below shows the average market-rate rent in San Mateo County as of the January 2024 as well as the maximum affordable monthly rent for households of various sizes and income levels.

The U.S. Department of Housing and Urban Development (HUD) and the California Department of Housing and Community Development (HCD) characterize households as “extremely lowincome,” “very low-income,” “low-income,” “moderate-income,” or “above-moderate income” based on percentages of the Area Median Income (AMI). These income categories are defined below.
• Extremely Low-Income: Up to 30 percent of AMI
• Very Low- Income: 31 percent to 50 percent of AMI
• Low-Income: 51 percent to 80 percent of AMI
• Moderate-Income: 81 percent to 120 percent of AMI
• Above-Moderate Income: More than 120 percent of AMI
In accordance with guidelines established by HUD, housing costs are generally considered to be affordable if a household’s housing costs are equal to no more than 30 percent of their household income. For lower-income households, having housing costs above this threshold often signifies that a household is at risk of losing their housing and may struggle to afford housing costs while also paying for food, transportation, health care, and other basic needs.

The analysis shown in Table 1 indicates that market-rate rents in San Mateo County exceed the affordability threshold for extremely low- and very low-income households, as well as for most low-income households. It should be noted that the incomes shown in the table are at the top of the income range for each group. Therefore, while Table 1 indicates that some one-person households with incomes equal to 80 percent of AMI can afford market-rate rents, most lowerPage 204 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | Introduction 4 income households have incomes that fall somewhere below 80 percent of AMI. As a result, market-rate rents exceed the affordability threshold for all but a small portion of lower-income households.

It is likely that market-rate rents for multifamily units in Atherton would be higher than the averages shown for San Mateo County due in part to Atherton’s location near the center of Silicon Valley. Data from Costar indicate that the effective monthly rent in Menlo Park, which is adjacent to Atherton, averages $2,736 for a studio, $3,312 for a one-bedroom unit, $4,447 for a two-bedroom unit, and $5,418 for a three-bedroom unit. These rents are approximately $450 to $950 per month higher than the countywide averages shown in Table 1. Data from Costar indicate that average effective rents in Redwood City, which borders Atherton on the opposite side, are lower than in Menlo Park but nonetheless higher than the countywide averages shown in Table 1. Multifamily rents in Atherton can be expected to be higher than the countywide averages shown in Table 1 due to the Town’s reputation as a desirable community in which to live and the lack of multifamily rental units in the Town, which creates a shortage in supply. Due to the lack of multifamily rental units in Atherton, data are not available on the rental rates within Atherton itself.

This analysis indicates that many new workers in San Mateo County that have moderate or above moderate household incomes will generally be able to afford market-rate rental units within the County, while workers with lower household incomes will generally not be able to afford market-rate housing in San Mateo County. While some market-rate units in San Mateo County have rents that fall below the averages shown in Table 1, data from Costar indicate that the multifamily rental vacancy rate in San Mateo County is approximately five percent, which is the vacancy rate that housing analysts typically consider indicative of a relatively stabilized housing market. This suggests that new housing will need to be built to accommodate an increase in worker housing demand regardless of the level of affordability needed. The marketrate rents shown in Table 1 are based on all market-rate units in San Mateo County, regardless of property age, and therefore are lower than the rents that would be charged at a newer development. As a result, new market-rate units are unlikely to provide housing that is affordable for worker households with extremely low, very low, and low incomes, and these households will need rent-restricted affordable housing in order to be able to afford to live locally.

Based on the calculations shown in Table 1, the nexus analysis provided in this study evaluates the extent to which new development generates a need for housing for extremely low-income, very low-income, and low-income households. The nexus analysis does not focus on the housing need for moderate or above-moderate income households because households at these income levels are more likely to be able to afford market-rate housing.

Atherton Inclusionary Housing & In-Lieu Fee Study | Introduction 5 Table 1: Affordability of Market-Rate Multifamily Rental Units, San Mateo County, 2023
Notes:
(a) The average effective multifamily rent by number of bedrooms in San Mateo County as of January 2024, as reported by CoStar.
(b) Housing Authority of San Mateo County 2023 allowances for tenant-furnished utilities and other services for a multifamily unit that uses electricity for cooking, heating, and water heating, as well as electricity for lights and appliances. Figure assumes the tenant is charged for water and sewer services. The allowance is based on the number of bedrooms in the unit and a household is assumed to have one bedroom fewer than the number of people in the household. (c) California Department of Housing and Community Development 2023 income limits for San Mateo County. (d) Assumes 30 percent of income spent on rent and utilities.

Sources: CoStar, 2024; California Department of Housing and Community Development, 2023; BAE, 2024.

Atherton Residential Development Standards and Relevant State Laws Before October of 2024, Atherton’s zoning ordinance consisted of a total of four zoning designations: two Residential designations (R-1A and R-1B), Park and Open Space, and Public Facilities and Schools. The vast majority of the Town is designated R-1A, with some parcels near El Camino Real designated R-1B and a limited number of parcels with Park and Open Space or Public Facilities and Schools designations. Both the R-1A and R-1B zoning designations allow for single-family homes with a minimum lot size of one acre. In both the R-1A and R-1B Districts, the development of Accessory Dwelling Units (ADUs) and lot splits pursuant to Senate Bill (SB) 9 are allowed in accordance with State law. Residential uses are not generally allowed in the Park and Open Space of Public Facilities and Schools Districts, with the exception of emergency shelters, which are allowed in the Public Facilities and Schools District, and possible exceptions for Household (Unit) Size
1 Person 2 Person 3 Person 4 Person
(Studio) (1 Bedroom) (2 Bedrooms) (3 Bedrooms)
Average Market-Rate Rent (a) $2,287 $2,833 $3,500 $4,809 Utility Costs (b) $157 $175 $233 $293
Maximum Affordable Monthly Rent
Extremely Low Income (up to 30% AMI)
Household Income (c) $39,150 $44,750 $50,350 $55,900
Max. Affordable Monthly Rent (d) $822 $944 $1,026 $1,105 Amount Above (Below) Market Rate Rent ($1,465) ($1,889) ($2,474) ($3,705) Very Low Income (31-50% AMI)
Household Income (c) $65,250 $74,600 $83,900 $93,200
Max. Affordable Monthly Rent (d) $1,474 $1,690 $1,865 $2,037 Amount Above (Below) Market Rate Rent ($813) ($1,143) ($1,636) ($2,772) Low Income (51-80% AMI)
Household Income (c) $104,400 $119,300 $134,200 $149,100 Max. Affordable Monthly Rent (d) $2,453 $2,808 $3,122 $3,435 Amount Above (Below) Market Rate Rent $166 ($26) ($378) ($1,375) Median Income (81-100% AMI)
Household Income (c) $122,500 $140,000 $157,500 $175,000 Max. Affordable Monthly Rent (d) $2,906 $3,325 $3,705 $4,082 Amount Above (Below) Market Rate Rent $619 $492 $205 ($727) Moderate Income (101-120% AMI)
Household Income (c) $147,000 $168,000 $189,000 $210,000 Max. Affordable Monthly Rent (d) $3,518 $4,025 $4,492 $4,957 Amount Above (Below) Market Rate Rent $1,231 $1,192 $992 $148

Atherton Inclusionary Housing & In-Lieu Fee Study | Introduction 6 caretaker housing or other residential uses associated with another use on the same site. No zoning districts in Atherton allowed for the development of multifamily housing.

In October 2024, as part of the Town’s 2023-2031 Housing Element Update process, Atherton adopted changes to the Town’s Zoning Ordinance to allow for the development of multifamily housing on some sites. The Town adopted three new zoning overlays to allow for multifamily development, allowing for densities of up to ten dwelling units per acre, 20 dwelling units per acre, or 40 dwelling units per acre, depending on the overlay, with multifamily housing allowed by right.

Senate Bill 9
California SB 9, which went into effect on January 1, 2022, allows property owners to split their lots and build up to four homes on a single-family parcel, regardless of local zoning regulations.

This means that SB 9 lot splits do not have to meet the lot size requirements of the underlying zone. SB 9 also allows for the development of two homes on each lot resulting from an SB 9 lot split. Many lots in Atherton are particularly well-suited for SB 9 lot splits because the Town’s large minimum lot sizes provide opportunities for split lots with sufficient land to develop homes on each lot. The Town has received multiple applications for SB 9 lot splits and has identified numerous additional lots with SB 9 lot split opportunities. According to the Town’s Adopted Housing Element Update, there are 24 parcels in Atherton that could support SB 9 subdivisions.

Several of these parcels are vacant and the remainder have existing homes but could accommodate additional homes pursuant to SB 9.

State Density Bonus
As in all local jurisdictions in California, developments in Atherton that provide qualifying affordable housing units are eligible for density bonuses and other concessions and incentives under the State Density Bonus law. The Density Bonus law provides density bonuses on a sliding scale to projects that provide affordable units, with larger bonuses for projects that provide more affordable units, up to a maximum density bonus of 100 percent. The proportion of affordable units that are required to be eligible for each tier of density bonus varies based on whether a project is a rental or ownership project and on the affordability level of the affordable units.

Appendix B shows the density bonuses that are allowable for projects with various affordability levels and proportions. The State Density Bonus law also provides for parking reductions and various development incentives and concessions for projects that meet designated affordability thresholds. Under State law, affordable units that are provided to satisfy an inclusionary requirement also make a project eligible for the benefits of the State Density Bonus – such as density bonuses, concessions, incentives, and waivers – provided that the affordable units align with the affordability levels and proportions identified in the State Density Bonus Law.

AB 602 Requirements
The provisions of Assembly Bill 602 (AB 602) came into effect in January 2022, enacting new requirements for impact fees and impact fee nexus studies. Inclusionary housing in-lieu fees are

Atherton Inclusionary Housing & In-Lieu Fee Study | Introduction 7 not impact fees, and therefore are not subject to the AB 602 requirements. However, the Town of Atherton may wish to consider the provisions of AB 602 on a voluntary basis to inform policy decisions. Key provisions of AB 602 include that impact fee nexus studies include analysis related to level of service for public facilities. When a nexus study supports an increase to an existing fee, AB 602 requires an analysis of the prior nexus study and fees collected based on the prior nexus study. AB 602 also requires that jurisdictions adopt a capital improvement plan as part of a nexus study, charge fees on residential uses in a manner that is proportional to the square footage of a unit, adopt any new fees in a public meeting with at least 30 days for public notice, and update nexus studies at least every eight years. Although the inclusionary housing in-lieu fees that are analyzed in this report are not impact fees, for informational purposes Appendix A provides an analysis of the provisions of AB 602 in relation to the inclusionary housing in-lieu fees that are evaluated in this report.

AB 1505 Requirements
California State Assembly Bill 1505 (AB 1505), which was signed into law as part of the State’s 2017 housing legislation package, provides cities with the authority to adopt inclusionary ordinances for rental developments. Inclusionary ordinances for for-sale developments were already permissible under State law prior to the adoption of AB 1505. One of the key provisions of AB 1505 requires that local jurisdictions with inclusionary ordinances for rental developments provide developers with at least one alternative for complying with the ordinance, such as an inlieu fee payment, land dedication, or off-site construction of affordable units.

AB 1505 provides the State Department of Housing and Community Development (HCD) with the authority to review inclusionary ordinances in some circumstances by requesting that a local jurisdiction submit an economic feasibility study. A review by HCD would be limited to inclusionary requirements on rental developments and would not apply to inclusionary requirements on for-sale developments. A feasibility study would potentially be required only in cases where all of the following apply:
• The ordinance requires more than 15 percent of units to be affordable to households with incomes equal to 80 percent of the AMI or less.
• Either: 1) the jurisdiction did not meet at least 75 percent of its above-moderate income Regional Housing Needs Allocation (RHNA) over at least a five-year period, or 2) the jurisdiction failed to submit its annual Housing Element report for at least two consecutive years.
• Less than ten years have passed since the adoption or amendment of the ordinance.

However, meeting the criteria above does not necessarily trigger a review by HCD. Reviews are conducted only if HCD receives a complaint, and HCD has the authority to determine whether to conduct a review after receiving a complaint. To date, HCD has not required that any jurisdiction submit an economic feasibility study for an inclusionary ordinance based on AB 1505.

Atherton Inclusionary Housing & In-Lieu Fee Study | Introduction 8 Regardless of the specific provisions of AB 1505, HCD could consider the financial feasibility of the Town’s inclusionary ordinance as part of its review of the Town’s Housing Element Update, in order to assess whether the requirements constitute an undue constraint on housing production.

Atherton Inclusionary Housing & In-Lieu Fee Study | Introduction 8 Page 210 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | Inclusionary Housing Financial Feasibility Analysis 9

INCLUSIONARY HOUSING FINANICAL

FEASIBILITY ANALYSIS
This chapter provides an analysis to evaluate the financial feasibility of the inclusionary housing requirements that the Town of Atherton is currently considering. This analysis evaluates the financial feasibility of four residential development prototypes. The findings from the financial feasibility analysis are intended to inform the Town of Atherton in considering the adoption of an inclusionary housing ordinance and in-lieu fee. The in-lieu fee is evaluated in the following chapter of this report.

Prototypes
The financial feasibility analysis evaluates four residential prototypes, consisting of two rental prototypes and two for-sale housing prototypes at varying densities. The analysis provided in this chapter evaluates prototypes that would provide inclusionary units in accordance with the proposed inclusionary policy for the Town of Atherton. For the purpose of this analysis, the inclusionary policy is assumed to require the following:
• For multifamily rental developments, 20 percent of units affordable to very low-income households (i.e., up to 50 percent of AMI)
• For multifamily for-sale developments, 20 percent of units affordable to lower-income households (i.e., up to 80 percent of AMI)
• For single-family homes, provide an ADU with a deed restriction that requires the ADU to be affordable to low-income households (i.e., up to 80 percent of AMI) or pay an in-lieu fee.

To the extent that meeting these inclusionary requirements would make a prototype eligible for a density bonus under the State Density Bonus law, the prototypes evaluated in this chapter incorporate these bonuses. The prototypes that were evaluated in this analysis are described in more detail below and summarized in Table 2.

Atherton Inclusionary Housing & In-Lieu Fee Study | Inclusionary Housing Financial Feasibility Analysis 10 Table 2: Summary of Residential Prototype Development Programs, Inclusionary Housing Scenarios
Note:
(a) Base density shown reflects assumed density for site before applying any density bonuses.

Source: BAE, 2024.

Prototype 1: Multifamily Rental Apartments, 20 du/acre Base Zoning. Prototype 1 is a multifamily rental apartment development on a 1.5-acre site with a base zoning allowing for 20 dwelling units per acre. The prototype evaluated in this analysis includes six units affordable to very low-income households (i.e., 50 percent of AMI), which is equal to 20 percent of the 30 units that would be allowed under the base zoning. This makes the project consistent with the inclusionary requirements identified above and eligible for a 70-percent density bonus under State law. The resulting project with the density bonus consists of a total of 51 rental units. This project would be eligible for an additional density bonus under State Law if the project were to provide additional very low-income units or moderate-income units. Parking for Prototype 1 would be provided in a surface parking lot at a ratio of 1.25 spaces per unit.

Prototype 2: Rental Townhouses, 10 du/acre Base Zoning. Prototype 2 is a rental townhouse apartment development on a 1.0-acre site with a base zoning allowing for 10 dwelling units per acre. The prototype evaluated in this analysis includes two units affordable to very low-income households (i.e., 50 percent of AMI), which is equal to 20 percent of the 10 units that would be allowed under the base zoning, making the project eligible for a 70-percent density bonus under State law. The resulting project with the density bonus consists of a total of 17 rental units. Like Prototype 1, this project could be eligible for an additional density bonus under State Law if the project were to provide additional very low-income units or additional moderate-income units.

Parking for Prototype 2 would be provided in private garages within each unit at a ratio of two spaces per unit.

Prototype 3: For-Sale Townhouses, 10 du/acre Base Zoning. Prototype 3 is a for-sale townhouse apartment development on a 1.0-acre site with a base zoning allowing for 10 dwelling units per acre. The prototype evaluated in this analysis includes two units affordable to lowincome households (i.e., 70 percent of AMI), which is equal to 20 percent of the 10 units that Prototype 1 Prototype 2 Prototype 3 Prototype 4
Tenure Rental Rental For-Sale For-Sale
Base Density (a) 20 du/acre 10 du/acre 10 du/acre Single-Family Site Size (acres) 1.5 1.0 1.0 1.0
Development Program, Inclusionary Scenario
Development Typology Multifamily Apts. Tow nhouses Tow nhouses Single-Family Total Units 51 17 14 2
Affordable Units 6 2 2 1
Average Unit Size (net sq. ft.) 999 1,476 1,900 7,000 SF single-family home & 1,000 SF ADU
Parking Spaces 64 34 28 3+

Atherton Inclusionary Housing & In-Lieu Fee Study | Inclusionary Housing Financial Feasibility Analysis 11 would be allowed under the base zoning.3 This makes the project consistent with the inclusionary requirements identified above and eligible for a 35-percent density bonus under State law. The resulting project with the density bonus consists of a total of 14 units (rounded up to the nearest whole unit). Like the prototypes described above, this project would be eligible for an additional density bonus under State Law if the project were to provide additional qualifying affordable units. Parking for Prototype 3 would be provided in private garages within each unit at a ratio of two spaces per unit.

Prototype 4: Single-Family Home with an ADU. Prototype 4 is a for-sale single-family home with an ADU that is deed-restricted to be affordable to households with incomes equal to 80 percent of AMI. The primary home measures 7,000 square feet while the ADU would be detached from the primary home and measure 1,000 square feet. Parking would be provided in a two-car garage attached to the primary home, plus one space in a covered carport. Additional parking would likely be available in the driveway or on other paved areas.

Methodology for Financial Feasibility Analysis
The methodology used for this study involved preparation of static pro-forma financial feasibility models for each of the four prototypes described above. The static pro-forma models represent a form of financial feasibility analysis that developers often use at a conceptual level of planning for a development project, as an initial test of financial feasibility for a development concept to screen for viability. The detailed pro-formas that BAE prepared for this analysis are provided in Appendix C.

The pro-forma models are structured to calculate the residual land value associated with each prototype. The residual land value for a residential rental project is equal to the value of the completed project, net of total development costs and developer profit. The capitalized value of the project at stabilization is defined as the annual net operating income (NOI) from the project (i.e., annual income from the project net of operating expenses), divided by the capitalization rate (cap rate). The cap rate is a common metric used to estimate the value of a property based on its NOI, and varies based on property type, location, and other property-specific characteristics. The residual land value for a residential rental project can be summarized as follows:

Capitalized Value at Stabilization (i.e., NOI / cap rate) – Total Development Costs =
Residual Land Value
3 Under State Law, affordable ownership units must be affordable to households with incomes equal to 70 percent of AMI or less in order to be eligible for the density bonuses that are available for projects with low-income units. Rents for low-income ownership units in Prototype 3 are assumed to be affordable to households at 70 percent of AMI to make the project eligible for a density bonus based on the provision of low-income units.

Atherton Inclusionary Housing & In-Lieu Fee Study | Inclusionary Housing Financial Feasibility Analysis 12 The residual land value for a for-sale project is equal to the net sale proceeds from the project (i.e., total revenue from sales after subtracting marketing costs) net of total development costs and developer profit:

Net Sale Proceeds (total revenues less marketing costs) – Total Development Costs =
Residual Land Value
The residual land value approximates the maximum amount that a developer should be willing to pay for a given site, based on the value of the project that the developer would build on that site.

In general, a development pro-forma that shows a residual land value that is approximately equivalent to the typical sale price for land indicates a financially feasible project. If a developer is able to acquire land for a price that is lower than the residual land value associated with his or her project, the difference between the residual land value and the actual sale price essentially represents additional project profit. A project that generates a residual land value that is lower than typical site acquisition costs is generally not considered financially feasible and would be unlikely to be built.

Residual Land Value Threshold
This analysis uses a residual land value threshold of $5.0 million to $6.5 million per acre to establish feasibility. In instances where the pro-formas show that a prototype generates a residual land value of $6.5 million per acre or more, this analysis identifies these prototypes as financially feasible. Where the pro-formas show that a prototype generates a residual land value of less than $5.0 million per acre, this analysis determines that the prototype would experience financial feasibility challenges. Prototypes that generate a residual land value ranging between $5.0 million and $6.5 million per acre would be considered marginally feasible.

This residual land value threshold is based on an analysis of recent sales of vacant land in Atherton, as reported by Redfin. These data show sales of eight vacant parcels in Atherton between 2019 and 2023, as summarized in Table 3. The sale prices for these parcels ranged from $5.2 million to $9.8 million per acre, with an average of $7.1 million per acre and a median of $6.7 million per acre. Land sales that occurred in 2022 and 2023 show the same pricing characteristics, indicating that land prices have been relatively consistent across the 2018 to 2023 time period.

Atherton Inclusionary Housing & In-Lieu Fee Study | Inclusionary Housing Financial Feasibility Analysis 13 Table 3: Vacant Land Sales in Atherton, 2018-2023
Sources: Redfin, 2024; BAE, 2024.

The residual land value thresholds identified above could also apply to the purchase of nonvacant parcels in Atherton that are purchased for the purpose of pursuing new residential development. New residential development in Atherton could occur on parcels with existing homes rather than on vacant parcels, with the existing homes demolished to accommodate new development or with one or more new homes constructed alongside an existing home. Data from Redfin show sales of 14 homes in Atherton in 2023 with a sale price of less than $6.5 million per acre, all with older homes (i.e., built in 1974 or earlier) on the property. These data indicate that, in addition to potential opportunities to purchase vacant land, there are potential opportunities to purchase lots with existing homes in Atherton at a price that is consistent with the residual land value thresholds used in this analysis. These data also show sales of five properties with existing homes for less than $5.0 million per acre, indicating that some developers may be able to acquire land for a price that is lower than the minimum residual land value that this analysis uses to determine feasibility. Nonetheless, this analysis uses a residual land value of $5.0 million to $6.5 million per acre to avoid potentially overstating the feasibility of new residential development.

Inclusionary Housing Financial Feasibility Findings
The following section summarizes the findings from the financial feasibility analysis for the four housing prototypes described above. A summary of the financial feasibility findings is included below in Table 4.

Prototype 1: Multifamily Rental Apartments, 20 du/acre Base Zoning The financial feasibility analysis indicates that the 51-unit multifamily rental apartment prototype with a base zoning of 20 dwelling units per acre is financially feasible. The project has a total Sale Date Sale Price Size Size (Acres) Price/Acre
9/13/2019 $6,400,000 1.00 $6,398,678
3/18/2020 $8,000,000 1.05 $7,648,143
7/31/2020 $2,500,000 0.28 $9,075,000
1/21/2021 $7,000,000 1.26 $5,556,527
1/11/2022 $5,450,000 1.05 $5,170,805
2/9/2022 $9,300,000 1.43 $6,503,476
5/4/2023 $25,000,000 2.56 $9,765,678
10/30/2023 $4,500,000 0.66 $6,832,346
Minimum, 2018-2023 $5,170,805
Maximum, 2018-2023 $9,765,678
Average, 2018-2023 $7,118,832
Median, 2018-2023 $6,667,911
Average, 2022-2023 $7,068,076
Median, 2022-2023 $6,667,911

Atherton Inclusionary Housing & In-Lieu Fee Study | Inclusionary Housing Financial Feasibility Analysis 14 development cost of $29.0 million, not including land, and a capitalized value totaling $44.3 million. After accounting for developer profit, the residual land value associated with this prototype is $11.8 million, or $7.9 million per acre. This is higher than the $5.0 million to $6.5 million residual land value threshold that this analysis uses to determine whether a project is financially feasible, indicating that the project would be financially feasible under current market conditions.

It should be noted that this project would be eligible for an additional density bonus under the State Density Bonus law if the project were to provide either moderate-income units or additional very low-income units (see Appendix B). If the project were to pursue an additional density bonus, it could support a higher residual land value and generate additional profit for the developer, improving the financial feasibility of the project.

Prototype 2: Rental Townhouses, 10 du/acre Base Zoning
The financial feasibility analysis indicates that the 17-unit rental townhouse prototype with a base zoning of 10 dwelling units per acre faces financial feasibility challenges in the current market. The project has a total development cost of $15.9 million, not including land, and a capitalized value totaling $21.3 million. After accounting for developer profit, the residual land value associated with this prototype is $3.5 million per acre. This is lower than the $5.0 million to $6.5 million residual land value threshold that this analysis uses to determine whether a project is financially feasible, indicating that the project would face financial feasibility challenges under current market conditions. It should be noted that this prototype would not be feasible even with no inclusionary units, indicating that the potential inclusionary requirements are not the barrier to financial feasibility for this project.

Like Prototype 1, Prototype 2 would be eligible for an additional density bonus under the State Density Bonus law if the project were to provide additional qualifying affordable units. If the project were to pursue an additional density bonus, it could support a higher residual land value and generate additional profit to the developer, improving the financial feasibility of the project.

Prototype 3: For-Sale Townhouses, 10 du/acre Base Zoning The financial feasibility analysis indicates that the 14-unit for-sale townhouse prototype with a base zoning of 10 dwelling units per acre is financially feasible. The project has a total development cost of $17.0 million, not including land, and net sale proceeds totaling $29.6 million. After accounting for developer profit, the residual land value associated with this prototype is $10.9 million per acre. This is higher than the $5.0 million to $6.5 million residual land value threshold that this analysis uses to determine whether a project is financially feasible, indicating that the project would be financially feasible under current market conditions.

Like Prototypes 1 and 2, Prototype 3 would be eligible for an additional density bonus under the State Density Bonus law if the project were to provide additional qualifying affordable units. If the project were to pursue an additional density bonus, it could support a higher residual land

Atherton Inclusionary Housing & In-Lieu Fee Study | Inclusionary Housing Financial Feasibility Analysis 15 value and generate additional profit to the developer, improving the financial feasibility of the project.

Prototype 4: Single-Family Home with an ADU
The financial feasibility analysis indicates that a single-family prototype with a deed-restricted ADU is marginally feasible. The project has a total development cost of $6.7 million, not including land, and net sale proceeds totaling $13.9 million. After accounting for developer profit, the residual land value associated with this prototype is $6.5 million per acre. This is equal to the $6.5 million residual land value threshold that this analysis uses to determine whether a project is financially feasible.

While this study does not include an analysis of a development that involves an urban lot split or additional unit as permitted under SB 9, the analysis indicates that a development that involves an SB 9 lot split would likely be financially feasible. In an urban lot split scenario, a developer could construct multiple single-family homes on an area that was previously one lot, significantly reducing land costs on a per-unit basis. The significant decrease in per-unit land costs for split lot projects can be expected to improve the feasibility of developments involving SB 9 lot splits compared to single-family projects that do not involve an SB 9 lot split.

Summary of Findings
The analysis presented above demonstrates that the multifamily rental apartment prototype, the for-sale townhome prototype, and the single-family home prototype are feasible under current market conditions. These findings indicate that the inclusionary requirements that the Town of Atherton is currently considering are feasible for the development typologies that are likely to occur in Atherton in the coming years.

The analysis also demonstrates that the rental townhome prototype is unlikely to be financially feasible in the current market. This prototype is not financially feasible even with no inclusionary requirement, meaning that there are barriers to financial feasibility for the rental townhome prototype that are unrelated to inclusionary requirements, and that changes to the Town’s proposed inclusionary requirements would not make this project feasible. This finding is consistent with development trends in the Atherton area, which has experienced limited, if any, build-to-rent townhome development in recent years or other types of rental development at a density that is consistent with this prototype (i.e., 17 dwelling units per acre, or ten dwelling units per acre with no density bonus). This finding does not indicate that a new inclusionary policy would be a significant constraint on development, but rather that this type of project is not generally feasible in the local market.

Atherton Inclusionary Housing & In-Lieu Fee Study | Inclusionary Housing Financial Feasibility Analysis 15 Page 218 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | Inclusionary Housing Financial Feasibility Analysis 16 Table 4: Summary of Residential Development Feasibility, Inclusionary Housing Scenarios Note:
(a) Base density shown reflects assumed density for site before applying any density bonuses.

Source: BAE, 2024.

Prototype 1 Prototype 2 Prototype 3 Prototype 4
Tenure Rental Rental For-Sale For-Sale
Base Density (a) 20 du/acre 10 du/acre 10 du/acre Single-Family Site Size (acres) 1.5 1.0 1.0 1.0
Development Program, Inclusionary Scenario
Total Units 51 17 14 2
Affordable Units 6 2 2 1
Average Unit Size (net sq. ft.) 999 1,476 1,900 7,000 SF single-family home & 1,000 SF ADU
Parking Spaces 64 34 28 3+
Total Development Costs, Excluding Land and Developer Profit, Inclusionary Scenario Total Development Cost (TDC) $28,988,178 $15,944,590 $17,033,792 $6,675,047 TDC per Unit $568,396 $937,917 $1,216,699 $6,675,047
TDC per Gross Building SF $467 $635 $640 $834
Residual Land Value Analysis, Inclusionary Scenario
Capitalized Project Value (Rental) $44,310,340 $21,345,253 N/A N/A Net Sales Revenue (for-sale) N/A N/A $29,640,045 $13,871,000 Residual Land Value (RLV) $11,843,581 $3,487,312 $10,902,874 $6,528,448 Residual Land Value per Acre $7,895,721 $3,487,312 $10,902,874 $6,528,448 RLV Feasibility Threshold (per Acre) $5.0 - $6.5 million $5.0 - $6.5 million $5.0 - $6.5 million $5.0 - $6.5 million Feasible under current conditions? Yes No Yes Yes

Atherton Inclusionary Housing & In-Lieu Fee Study | Inclusionary Housing Financial Feasibility Analysis 16 Page 220 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 17

IN-LIEU FEE ANALYSIS
This chapter provides analysis to inform the Town’s consideration of inclusionary housing in-lieu fees. Many jurisdictions that have inclusionary housing ordinances provide developers with the option to pay in-lieu fees as an alternative to providing inclusionary units, though jurisdictions differ in terms of the extent to which the in-lieu fee option is available for all projects or only in specific circumstances. In addition, jurisdictions differ in terms of the extent to which in-lieu fees are set at levels that are likely to incentivize developers to pay the fee or to provide inclusionary units on site. In general, a relatively high in-lieu fee tends to create an incentive for developers to provide inclusionary units on site, particularly if the cost of the fee exceeds the cost to provide the inclusionary units. Conversely, a low in-lieu fee may create an incentive for developers to pay the fee rather than provide inclusionary units.

This chapter is divided into five sections:

1. A residential nexus analysis, which identifies the relationship between the construction of new market-rate residential units, the need for affordable housing, and the need for Town funds to construct affordable housing. The nexus analysis estimates the amount that the Town would need to charge in in-lieu fees to make the amount of the fee payment commensurate with the revenue needed to address the estimated affordable housing need associated with the construction of new market-rate development.

2. A financial feasibility analysis that evaluates how in-lieu fees would impact the feasibility of new development.

3. An analysis of the cost to construct an affordable inclusionary unit. Some jurisdictions set inclusionary housing in-lieu fees to be equal to the cost of constructing an affordable unit to ensure that the revenue from an in-lieu fee is sufficient to support the construction of an affordable unit off site.

4. A point of indifference analysis that estimates the fee rates that are approximately equivalent in cost to providing inclusionary units within a market-rate project. Fees set higher than the point of indifference will generally encourage developers to provide inclusionary units rather than pay an in-lieu fee, while fees set lower than the point of indifference will generally encourage developers to pay the fee rather than providing inclusionary units.

5. A summary of the findings from each of the prior sections of the chapter.

Nexus Analysis
This section presents a nexus analysis for market-rate residential units in Atherton. The residential nexus calculation is based on the premise that new households in Atherton will spend some of their money within the local economy, thereby supporting employment for new

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 18 workers, a portion of which will need affordable housing. The nexus-based fee for market-rate residential units represents the fee that the Town of Atherton would need to collect to support the construction of the affordable housing needed to house these lower-income worker households.

The process for estimating the relationship between new market-rate residential development and the fee revenue necessary to address the resulting affordable housing need consists of the following steps:

Step 1: Identify housing types and prices. This step consists of identifying the types of residential development that will be evaluated in the nexus analysis as well as the typical rental rate or sale price for units of each type.

Step 2: Estimate incomes of households in new market-rate housing. Based on the rental rates or sale price for each residential development type, this step estimates the typical household income for households that would reside in each type of unit.

Step 3: Analyze spending patterns for households in new market-rate units and estimate the number of jobs associated with this spending. Based on the household incomes estimated in Step 2, Step 3 relies on the IMPLAN software model to estimate the number of new jobs that would be associated with household spending among households in new market-rate units. IMPLAN also provides an estimated distribution of these jobs by industry.

Step 4: Estimate new worker households by income level. For each residential development type, the estimated number of worker households at each income level is based on the number of new workers by industry as estimated in Step 3, the typical household income distribution for workers in each industry, and the typical number of workers per household.

This step yields an estimate of the number of lower-income worker households associated with the development of each market-rate unit, by residential development type. This number constitutes the estimated affordable housing need associated with each residential unit type.

Step 5: Calculate the affordable housing financing gap. The financing gap is the amount of public subsidy needed to finance an affordable housing unit.

Step 6: Calculate the maximum nexus-based fee. The maximum nexus-based fee is equal to the number of lower-income worker households from Step 4 multiplied by the affordable housing financing gap from Step 5.

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 19 Each of these steps is discussed in more detail in the following sections.

Step 1: Define Housing Types and Identify Housing Prices This analysis evaluates four market-rate residential unit types, which are consistent with the four prototypes described in the previous chapter: multifamily rental apartment units, rental townhouses, for-sale townhouses, and a single-family home. For the purpose of the nexus analysis, the single-family home does not include a deed-restricted ADU because the nexus analysis evaluates a potential in-lieu fee, which would only be charged in a scenario in which a deed-restricted ADU would not be provided. These unit types encompass the range of development typologies that are anticipated to occur in Atherton over the next several years.

Part of Step 1 is to identify the estimated average rent or sale price for each unit type. To estimate rental rates and sale prices for new multifamily apartment and townhouse developments in Atherton, BAE reviewed data on rental rates among properties in Menlo Park, Palo Alto, and Redwood City. Multifamily rental rates for properties in Atherton could not be used for this analysis due to the lack of existing multifamily properties in the Town. For multifamily rental apartment units, BAE reviewed data from Costar on rental rates among newlyconstructed multifamily rental properties in Menlo Park, Palo Alto, and Redwood City. For rental townhomes, BAE reviewed data from Zillow on asking rents among newly-constructed townhomes in Menlo Park, Palo Alto, and Redwood City. For for-sale townhomes, BAE reviewed data from Redfin on sale prices among recently-constructed townhouses in Menlo Park, Palo Alto, and Redwood City. For single-family homes, BAE reviewed data from Redfin on sale prices among newly-constructed single-family homes in Atherton. The resulting average rent and sale price estimates are shown in Table 5 and Table 6, respectively.

Step 2: Estimate the Incomes of Households in New Market Rate Housing The analysis uses the estimated rent and sale prices for new units in Atherton to estimate the household incomes of households that occupy new rental and for sale units in Atherton. Table 5 presents the annual household income required to rent new market-rate multifamily rental apartment units in Atherton, assuming households spend 30 percent of their gross income on rent and utilities, in accordance with HUD guidelines. Based on an estimated average monthly rent of $5,097 for new rental units in multifamily rental apartment developments and $6,808 for new rental townhomes, the estimated annual household income required to afford these market rents is approximately $210,900 and $279,300, respectively.

Table 6 shows the estimated annual household income required to afford a new for-sale home in Atherton. Based on the sale prices for new for sale units, the estimated annual household income needed to afford new for-sale units in Atherton is approximately $452,900 for townhouses and $2.37 million for single-family units.

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 20 Table 5: Household Income Required to Rent New Multifamily Rental Units in Atherton
Notes:
(a) Estimated average monthly rents for new units based on data from Costar. (b) Housing Authority of San Mateo County 2023 allowances for tenant-furnished utilities and other services for a multifamily unit that uses electricity for cooking, heating, and water heating, as well as electricity for lights and appliances. Figure assumes the tenant is charged for water service. The allowance used in this table is based on a one-bedroom unit. (c) 30 percent of gross income spent on housing costs.

Sources: Costar, 2024; Housing Authority of San Mateo County, 2023; BAE, 2024.

Table 6: Household Income Required to Purchase New Market-Rate Units in Atherton
Notes:
(a) Estimated sale prices based on data from Redfin on recent sales of townhouses in Menlo Park, Palo Alto, and Redwood City.
(b) Monthly housing costs are based on the estimated sale price for each unit type and the assumptions shown in the table. (c) Equal to the average of the average weekly rate for a 30-year fixed rate mortgage between January 2019 and December 2023 per Freddie Mac.
(d) The median of the property tax rates in the tax rate areas in the Town of Atherton per the County of San Mateo 2023- 2024 Tax Rate Book.
(e) Based on insurance rate information provided on the California Department of Insurance website for homes in San Mateo County.
(f) Estimate based on HOA fees for recently-constructed condominiums and townhouses in Menlo Park and Palo Alto that were sold in the past year, according to data from Redfin.

Sources: Redfin, 2024; Freddie Mac, 2019-2023; California Department of Insurance, 2024; San Mateo County AuditorController, 2023/2024; BAE, 2024.

Apartment Townhome
Average Monthly Rent (a) $5,097 $6,808
Plus Utilities (b) $175 $175
Total Monthly Housing Costs $5,272 $6,983
Annual Housing Costs $63,264 $83,796
Household Income Required (c) $210,880 $279,320
Townhouse Single-Family
Estimated Sale Price for New Residential Unit (a) $2,582,000 $13,650,000 Monthly Housing Costs for a New Residential Unit (b) $13,210 $69,265 Annual Housing Costs $158,526 $831,180
Household Income Required $452,931 $2,374,801
Assumptions
Annual Interest Rate (c) 4.43%
Term of Mortgage (years) 30
Percent of sales price as down payment 20%
Property tax as a % fo Sale Price (annual) (d) 1.1071%
Annual homeowner's insurance rate as a percent of sale price (single-family) (e) 0.16% Annual homeowner's insurance cost (townhouse/condo) (e) $513 Monthly homeowners' association fee (townhomes) (f) $410 Percent of household income available for housing costs 35%

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 21 Step 3: Analyze Projected Spending Patterns for Households in New Market-Rate Units and Estimate the Number of Jobs Associated with this Spending New household spending within an economy supports jobs. As households spend money on retail goods, food, and health, personal, professional, and educational services, they support job growth in these and other sectors.

To estimate the effect of new household spending on employment generation, this analysis uses IMPLAN (“Impact analysis for Planning”), a widely-accepted and utilized software model. At the heart of the model is an input-output dollar flow table. For a specified region, the input-output table accounts for all dollar flows between different sectors of the economy. Using this information, IMPLAN models the way income injected into one sector is spent and re-spent in other sectors of the economy, generating waves of economic activity, or so-called “economic multiplier” effects. Appendix D contains a more detailed overview of IMPLAN.

The IMPLAN model is also able to estimate the number of direct, indirect, and induced jobs generated by a given economic “event.” Once the economic events have been entered into the model, IMPLAN reports the following types of impacts:
• Direct Impacts. Direct impacts refer to the set of producer or consumer expenditures applied to the predictive model for impact analysis. It is the amount of spending available to flow through the local economy. IMPLAN then displays how the local economy will then respond to these initial changes. The direct impacts may equal the amount of spending input into the model, depending on a variety of factors. • Indirect Impacts. The indirect impacts refer to the impact of local industries buying goods and services from other local industries. The cycle of spending works its way backward through the supply chain until all money leaks from the local economy, either through imports or by payments to income and taxes. For capital projects this would include payments for construction inputs such as wood, steel, office supplies, and any other non-labor payments that a construction firm would purchase in the building process. Since IMPLAN is only used in the housing analysis for this report to assess the impacts of new resident household expenditures, there are no indirect impacts to assess as there are no industry expenditures as inputs to the model. • Induced Impacts. The induced impacts refer to an economy’s response to an initial change (direct impact) that occurs through re-spending of income according to household spending patterns. When households earn income, they spend part of that income on goods and services, such as food and healthcare. IMPLAN models households’ disposable income spending patterns and distributes them through the local economy.

For the purpose of this analysis, the economic “event” is the household spending by occupants of new residential units in Atherton. By IMPLAN definition these household expenditures are direct

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 22 impacts, and the resulting spending generates induced impacts. For instance, the household expenditures generate jobs for cashiers and baggers at grocery stores patronized by the new households. The process initiated by household expenditures continues as these workers and the businesses they work for spend money in subsequent transactions, supporting employment at places other than the initial point of sale, such as wholesalers supplying retail stores, or truck drivers delivering goods to those stores. In turn, these businesses and workers spend money to generate additional activity in the local economy. These are all part of the induced impacts linked to the household expenditures.

For each of the residential unit types evaluated in this analysis, the IMPLAN analysis provides an estimate of the total number of jobs generated by the household expenditures made by residents in new market-rate housing. Because household spending tends to increase as household incomes increase, the IMPLAN analysis indicates that – of the four residential unit types analyzed – single-family units will generate the highest number of jobs per unit, followed by for-sale townhouses, rental townhouses, and multifamily rental apartment units, in that order. In addition to an estimate of the total number of jobs, the IMPLAN analysis also provides an estimate of the number of jobs in each industry sector that each unit type will generate. These estimates are shown in Step 4 (Table 8 through Table 11) below.

Step 4: Estimate New Worker Households by Household Income Level Worker households5 often have more than one employed person, and therefore the incomes of individual workers do not provide sufficient information to estimate the distribution of household incomes among new workers. This analysis estimates workers’ household incomes using the Public Microdata Sample (PUMS) data set, which consists of detailed data from the US Census American Community Survey that allow for cross-tabulations that are not available through published ACS data. For each of the industry sectors identified in the IMPLAN analysis described above, the PUMS data were used to estimate worker household incomes for workers associated with job growth attributable to new market-rate residential units.

Table 7 shows the distribution of workers in each major industry sector by household income level, based on PUMS data for workers employed in each industry sector that live in San Mateo County.
5 A worker household is defined as a household with one or more employed persons. They may be wage and salary workers, or self-employed/sole proprietors.

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 22

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 23 Table 7: Worker Household Income Level by Industry of Employment, San Mateo County Note:
(a) Based on a cross tabulation of Public Use Microdata Samples (PUMS) from the 2018-2022 American Community Survey. These incomes were compared to 2022 San Mateo County household income limits published by HCD to determine the percentage of households falling into each income category. The analysis controlled for household size, to address the varying income limits for each household size.

Sources: American Community Survey, 2018-2022 Public Use Microdata Sample; CA Dept. of Housing and Community Development (HCD), 2022; BAE, 2024.

Estimated Household Income as a Percent of AMI (a)
Acutely Extremely Very Above
NAICS Low Low Low Low Moderate Moderate
Industry Code (15% AMI) (30% AMI) (50% AMI) (80% AMI) (120% AMI) (>120% AMI) Total Private Sector
Agriculture and Natural Resources 11, 21 9.0% 5.1% 10.6% 15.1% 40.8% 19.4% 100.0% Construction 23 2.4% 7.9% 15.0% 20.2% 18.1% 36.3% 100.0% Manufacturing 31-33 1.2% 3.6% 4.6% 13.5% 13.5% 63.6% 100.0% Wholesale Trade 42 0.2% 5.8% 8.5% 15.1% 20.3% 50.1% 100.0% Retail Trade 44-45 1.5% 5.5% 14.8% 22.3% 17.6% 38.2% 100.0% Transportation, Warehousing, and Utilities 48-49, 22 1.1% 7.5% 14.3% 26.9% 15.3% 35.0% 100.0% Information 51 0.4% 1.5% 3.1% 7.5% 7.2% 80.3% 100.0%
Finance, Insurance, and Real Estate 52-53 0.6% 2.3% 4.3% 12.1% 12.7% 68.1% 100.0% Professional, Scientific, & Technical Services, & Mgmt of Companies 54-55 0.5% 1.4% 2.7% 8.4% 11.5% 75.5% 100.0% Administrative and Support and Waste Management Services 56 4.6% 12.0% 22.0% 22.2% 13.8% 25.5% 100.0% Educational Services 61 2.5% 3.5% 9.6% 15.3% 16.9% 52.2% 100.0% Health Care and Social Assistance 62 0.8% 3.4% 8.5% 18.3% 16.2% 52.6% 100.0% Leisure and Hospitality 71-72 3.6% 10.7% 14.3% 26.1% 16.7% 28.6% 100.0% Other Services Except Public Administration 81 1.0% 8.3% 16.5% 24.7% 18.0% 31.5% 100.0% Government 1.1% 3.4% 7.6% 15.1% 19.4% 53.4% 100.0%
Total 1.4% 4.7% 9.2% 16.6% 15.3% 52.7% 100.0%

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 23

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 24 Table 8, Table 9, Table 10, and Table 11 apply the household income distribution by industry, as shown in Table 7, to the number of jobs generated in each industry as a result of spending by households, as estimated in Step 3. Since the income of an individual household generates only a small amount of employment within each specific industry and household income level category, the tables show the number of jobs generated for every 100 units. The results are then divided by 100 in Step 6 below to show the estimated impact of a single household.

Housing need is based on the number of households rather than the number of jobs. As such, the analysis translates the number of jobs into households by dividing the number of jobs by the average number of workers per worker household for each income category, using PUMS data to identify the average number of workers per worker household by household income level.

The number of jobs that each residential product type generates corresponds to the household income required to afford each unit type. As shown in Table 8, multifamily rental apartment units in Atherton generate a need for approximately 18 housing units for local workers per 100 units, including approximately eight units affordable to extremely low-, very low--, and lowincome households. As shown in Table 9, rental townhouse units in Atherton generate a need for approximately 24 housing units for local workers per 100 units, including approximately ten units affordable to extremely low-, very low-, and low-income households. As shown in Table 10, forsale townhouse units in Atherton generate a need for approximately 39 housing units for local workers per 100 units, including approximately 17 units affordable to extremely low-, very low-, and low-income households. As shown in Table 11, single-family homes in Atherton generate a need for approximately 220 housing units for local workers per 100 units, including approximately 96 units affordable to extremely low-, very low-, and low-income households.

These findings are summarized in Table 12.

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 25 Table 8: Jobs and Worker Household Generation by Income Level from New Multifamily Rental Apartment Units Notes:
(a) Total Jobs is output of IMPLAN model, and shows employment generated by household spending. Columns to right may not sum to Total Jobs due to independent rounding. (b) Estimated Jobs per 100 Units at each worker household income level is equal to Total Jobs per 100 Units in each industry, as shown in this table, multiplied by the share of workers in each industry at each income level, as shown in Table 7. (c) Average number of workers per worker household by income category calculated based on American Community Survey PUMS Analysis, 2018-2022.

Sources: American Community Survey, 2018-2022, including the Public User Microdata Sample; CA Department of Housing and Community Development, 2022; IMPLAN; BAE, 2024.

Estimated Jobs per 100 Units
Total Jobs by Worker Household Income Level (b)
NAICS per 100 Up to 15% to 30% to 50% to 80% to Over
Industry Code Units (a) 15% AMI 30% AMI 50% AMI 80% AMI 120% AMI 120% AMI Private Sector
Agriculture and Natural Resources 11, 21 0.022 0.002 0.001 0.002 0.003 0.009 0.004 Construction 23 0.196 0.005 0.015 0.029 0.040 0.036 0.071 Manufacturing 31-33 0.047 0.001 0.002 0.002 0.006 0.006 0.030 Wholesale Trade 42 0.612 0.001 0.035 0.052 0.092 0.124 0.307 Retail Trade 44-45 4.429 0.069 0.245 0.654 0.988 0.780 1.694 Transportation, Warehousing, and Utilities 48-49, 22 1.134 0.012 0.085 0.162 0.305 0.174 0.397 Information 51 0.474 0.002 0.007 0.015 0.036 0.034 0.381 Finance, Insurance, and Real Estate 52-53 3.318 0.018 0.076 0.142 0.400 0.422 2.260 Professional, Scientific, & Technical Services, & Mgmt of Companies 54-55 0.924 0.005 0.013 0.025 0.077 0.106 0.697 Administrative and Support and Waste Management Services 56 0.999 0.046 0.120 0.219 0.222 0.137 0.255 Educational Services 61 2.158 0.054 0.075 0.208 0.329 0.366 1.126 Health Care and Social Assistance 62 6.875 0.058 0.237 0.587 1.261 1.113 3.618 Leisure and Hospitality 71-72 5.366 0.191 0.576 0.765 1.403 0.898 1.533 Other Services Except Public Administration 81 3.666 0.036 0.306 0.604 0.905 0.660 1.155 Government 0.093 0.001 0.003 0.007 0.014 0.018 0.050
Total Jobs 30.31 0.50 1.80 3.47 6.08 4.88 13.58
Workers per Households (c) 1.69 1.19 1.33 1.46 1.67 1.77 1.84 Number of Households 17.96 0.42 1.36 2.38 3.65 2.76 7.38

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 25

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 26 Table 9: Jobs and Worker Household Generation by Income Level from New Rental Townhouse Units Notes:
(a) Total Jobs is output of IMPLAN model, and shows employment generated by household spending. Columns to right may not sum to Total Jobs due to independent rounding. (b) Estimated Jobs per 100 Units at each worker household income level is equal to Total Jobs per 100 Units in each industry, as shown in this table, multiplied by the share of workers in each industry at each income level, as shown in Table 7. (c) Average number of workers per worker household by income category calculated based on American Community Survey PUMS Analysis, 2018-2022.

Sources: American Community Survey, 2018-2022, including the Public User Microdata Sample; CA Department of Housing and Community Development, 2022; IMPLAN; BAE, 2024.

Estimated Jobs per 100 Units
Total Jobs by Worker Household Income Level (b)
NAICS per 100 Up to 15% to 30% to 50% to 80% to Over
Industry Code Units (a) 15% AMI 30% AMI 50% AMI 80% AMI 120% AMI 120% AMI Private Sector
Agriculture and Natural Resources 11, 21 0.029 0.003 0.001 0.003 0.004 0.012 0.006 Construction 23 0.260 0.006 0.021 0.039 0.053 0.047 0.095 Manufacturing 31-33 0.062 0.001 0.002 0.003 0.008 0.008 0.040 Wholesale Trade 42 0.810 0.002 0.047 0.069 0.122 0.165 0.406 Retail Trade 44-45 5.866 0.091 0.325 0.866 1.308 1.033 2.243 Transportation, Warehousing, and Utilities 48-49, 22 1.503 0.016 0.112 0.214 0.404 0.230 0.526 Information 51 0.628 0.003 0.009 0.019 0.047 0.045 0.504 Finance, Insurance, and Real Estate 52-53 4.395 0.024 0.100 0.188 0.530 0.559 2.994 Professional, Scientific, & Technical Services, & Mgmt of Companies 54-55 1.223 0.006 0.018 0.033 0.102 0.141 0.924 Administrative and Support and Waste Management Services 56 1.323 0.060 0.159 0.291 0.294 0.182 0.337 Educational Services 61 2.859 0.072 0.099 0.275 0.436 0.484 1.491 Health Care and Social Assistance 62 9.106 0.077 0.314 0.778 1.670 1.474 4.792 Leisure and Hospitality 71-72 7.108 0.253 0.762 1.014 1.858 1.190 2.030 Other Services Except Public Administration 81 4.855 0.047 0.405 0.800 1.198 0.875 1.530 Government 0.124 0.001 0.004 0.009 0.019 0.024 0.066
Total Jobs 40.15 0.66 2.38 4.60 8.05 6.47 17.98
Workers per Households (c) 1.69 1.19 1.33 1.46 1.67 1.77 1.84 Number of Households 23.78 0.56 1.80 3.16 4.84 3.66 9.78

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 26

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 27 Table 10: Jobs and Worker Household Generation by Income Level from New For-Sale Townhouse Units Notes:
(a) Total Jobs is output of IMPLAN model, and shows employment generated by household spending. Columns to right may not sum to Total Jobs due to independent rounding. (b) Estimated Jobs per 100 Units at each worker household income level is equal to Total Jobs per 100 Units in each industry, as shown in this table, multiplied by the share of workers in each industry at each income level, as shown in Table 7. (c) Average number of workers per worker household by income category calculated based on American Community Survey PUMS Analysis, 2018-2022.

Sources: American Community Survey, 2018-2022, including the Public User Microdata Sample; CA Department of Housing and Community Development, 2022; IMPLAN; BAE, 2024.

Estimated Jobs per 100 Units
Total Jobs by Worker Household Income Level (b)
NAICS per 100 Up to 15% to 30% to 50% to 80% to Over
Industry Code Units (a) 15% AMI 30% AMI 50% AMI 80% AMI 120% AMI 120% AMI Private Sector
Agriculture and Natural Resources 11, 21 0.048 0.004 0.002 0.005 0.007 0.020 0.009 Construction 23 0.431 0.011 0.034 0.065 0.087 0.078 0.157 Manufacturing 31-33 0.103 0.001 0.004 0.005 0.014 0.014 0.066 Wholesale Trade 42 1.343 0.003 0.078 0.114 0.203 0.273 0.673 Retail Trade 44-45 9.725 0.151 0.539 1.435 2.169 1.712 3.719 Transportation, Warehousing, and Utilities 48-49, 22 2.491 0.027 0.186 0.355 0.669 0.382 0.872 Information 51 1.041 0.004 0.016 0.032 0.078 0.075 0.836 Finance, Insurance, and Real Estate 52-53 7.286 0.041 0.166 0.311 0.879 0.927 4.963 Professional, Scientific, & Technical Services, & Mgmt of Companies 54-55 2.028 0.010 0.029 0.055 0.170 0.233 1.531 Administrative and Support and Waste Management Services 56 2.193 0.100 0.263 0.482 0.487 0.302 0.559 Educational Services 61 4.739 0.119 0.165 0.456 0.723 0.803 2.473 Health Care and Social Assistance 62 15.096 0.128 0.520 1.290 2.769 2.444 7.945 Leisure and Hospitality 71-72 11.784 0.419 1.264 1.681 3.081 1.973 3.366 Other Services Except Public Administration 81 8.049 0.078 0.672 1.326 1.986 1.450 2.537 Government 0.205 0.002 0.007 0.016 0.031 0.040 0.109
Total Jobs 66.56 1.10 3.95 7.63 13.35 10.73 29.82
Workers per Households (c) 1.69 1.19 1.33 1.46 1.67 1.77 1.84 Number of Households 39.43 0.92 2.98 5.23 8.02 6.07 16.21

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 27

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 28 Table 11: Jobs and Worker Household Generation by Income Level from New Single-Family Residential Units Notes:
(a) Total Jobs is output of IMPLAN model, and shows employment generated by household spending. Columns to right may not sum to Total Jobs due to independent rounding. (b) Estimated Jobs per 100 Units at each worker household income level is equal to Total Jobs per 100 Units in each industry, as shown in this table, multiplied by the share of workers in each industry at each income level, as shown in Table 7. (c) Average number of workers per worker household by income category calculated based on American Community Survey PUMS Analysis, 2018-2022.

Sources: American Community Survey, 2018-2022, including the Public User Microdata Sample; CA Department of Housing and Community Development, 2022; IMPLAN; BAE, 2024.

Estimated Jobs per 100 Units
Total Jobs by Worker Household Income Level (b)
NAICS per 100 Up to 15% to 30% to 50% to 80% to Over
Industry Code Units (a) 15% AMI 30% AMI 50% AMI 80% AMI 120% AMI 120% AMI Private Sector
Agriculture and Natural Resources 11, 21 0.270 0.024 0.014 0.029 0.041 0.110 0.052 Construction 23 2.406 0.059 0.190 0.360 0.487 0.437 0.874 Manufacturing 31-33 0.577 0.007 0.021 0.027 0.078 0.078 0.367 Wholesale Trade 42 7.494 0.016 0.433 0.634 1.131 1.524 3.755 Retail Trade 44-45 54.244 0.840 3.005 8.006 12.098 9.549 20.746 Transportation, Warehousing, and Utilities 48-49, 22 13.895 0.150 1.038 1.981 3.732 2.130 4.864 Information 51 5.808 0.025 0.088 0.180 0.436 0.417 4.663 Finance, Insurance, and Real Estate 52-53 40.641 0.226 0.929 1.734 4.900 5.169 27.683 Professional, Scientific, & Technical Services, & Mgmt of Companies 54-55 11.313 0.058 0.162 0.306 0.947 1.300 8.540 Administrative and Support and Waste Management Services 56 12.233 0.559 1.469 2.687 2.716 1.684 3.118 Educational Services 61 26.435 0.666 0.919 2.545 4.033 4.480 13.791 Health Care and Social Assistance 62 84.206 0.715 2.902 7.194 15.447 13.631 44.316 Leisure and Hospitality 71-72 65.728 2.338 7.050 9.375 17.186 11.004 18.776 Other Services Except Public Administration 81 44.897 0.436 3.748 7.394 11.080 8.088 14.151 Government 1.144 0.012 0.039 0.087 0.173 0.222 0.610
Total Jobs 371.29 6.13 22.01 42.54 74.48 59.82 166.31
Workers per Households (c) 1.69 1.19 1.33 1.46 1.67 1.77 1.84 Number of Households 219.94 5.15 16.61 29.19 44.73 33.86 90.39

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 28

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 29 Table 12: Summary of Induced Housing Need per 100 Units by Residential Development Type by Income Category Notes:
(a) Total Jobs is output of IMPLAN model, and shows employment generated by household spending. Columns to right may not sum to Total Jobs due to independent rounding. (b) Estimated Jobs per 100 Units at each worker household income level is equal to Total Jobs per 100 Units in each industry, as shown in this table, multiplied by the share of workers in each industry at each income level, as shown in Table 7. (c) Average number of workers per worker household by income category calculated based on American Community Survey PUMS Analysis, 2018-2022.

Sources: American Community Survey, 2018-2022, including the Public User Microdata Sample; CA Department of Housing and Community Development, 2022; IMPLAN; BAE, 2024.

Estimated Jobs per 100 Units
Total Jobs by Worker Household Income Level (b)
per 100 Up to 15% to 30% to 50% to 80% to Over Total Up to Jobs Units (a) 15% AMI 30% AMI 50% AMI 80% AMI 120% AMI 120% AMI 80% AMI Rental Apartments 30.31 0.50 1.80 3.47 6.08 4.88 13.58 11.85 Rental Townhomes 40.15 0.66 2.38 4.60 8.05 6.47 17.98 15.70 For-Sale Townhomes 66.56 1.10 3.95 7.63 13.35 10.73 29.82 26.02 For-Sale Single-Family 371.29 6.13 22.01 42.54 74.48 59.82 166.31 145.16 Estimated Worker Households per 100 Units
Total HH by Worker Household Income Level (c)
per 100 Up to 15% to 30% to 50% to 80% to Over Total Up to Households Units (c) 15% AMI 30% AMI 50% AMI 80% AMI 120% AMI 120% AMI 80% AMI Rental Apartments 17.96 0.42 1.36 2.38 3.65 2.76 7.38 7.81 Rental Townhomes 23.78 0.56 1.80 3.16 4.84 3.66 9.78 10.35 For-Sale Townhomes 39.43 0.92 2.98 5.23 8.02 6.07 16.21 17.15 For-Sale Single-Family 219.94 5.15 16.61 29.19 44.73 33.86 90.39 95.68

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 29

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 30 Step 5: Calculate Financing Gap per Affordable Unit
The next step in the nexus analysis is to calculate the cost to house the extremely low-, very low-, and low-income households calculated in Step 3 by determining the per unit “financing gap” for an affordable unit. The nexus analysis defines the financing gap for an affordable unit as the difference between the cost to develop an affordable unit and the amount of permanent financing available to support the development of the unit.

Affordable Unit Development Cost. To estimate the average construction cost for an affordable unit, BAE reviewed cost estimates provided in applications for tax credit funding that were submitted in 2022 and 2023 for proposed affordable housing developments in San Mateo County. Cost information from applications submitted in 2022 was inflated to 2023 estimates based on the RS Means Historical Cost Index. Based on the information from these applications, BAE estimated that the average cost to construct an affordable housing unit in Atherton would be approximately $915,000, as shown in Table 13 below.

Permanent Financing. To calculate the financing gap for an affordable unit, the nexus analysis assumes that an affordable housing developer is able to secure four percent LIHTC equity financing as well as a permanent loan based on the net operating income (NOI) from each unit.

This analysis assumes four percent LIHTC equity financing because this funding source is more readily available than nine percent LIHTC financing, for which there is considerable competition.

However, it should be noted that four percent LIHTC financing is nonetheless limited and has become more competitive in recent years. As a result, four percent LIHTC financing is unlikely to be available at the levels that would be necessary to construct all affordable units needed to address housing needs attributable to new development in the Atherton area. In addition, inclusion of four percent tax credits as a funding source shifts some of the cost of providing affordable housing onto the public sector because the tax credits reduce the tax credit investors’ tax liability. Including four percent LIHTC financing as a source of funding in the nexus model reduces the net affordability gap show in Table 13, and therefore serves as a conservative assumption in estimating the cost associated with mitigating the housing needs generated by new non-residential development. As shown in Table 13, four percent LIHTC equity would provide an estimated $367,510 per affordable unit, based on an average cost of approximately $915,000 per unit and standard current four percent tax credit pricing assumptions.

The financing gap calculation does not include financing from other public funding sources because other sources are limited, typically require a highly competitive application process, and require a public subsidy to fill the financing gap. These sources are not sufficient to fully address affordable housing needs that arise due to the impacts of future market-rate residential development projects in Atherton.

Table 13 also shows the estimated permanent loan amount per unit, based on the NOI from each unit (i.e., gross income net of vacancy and expenses) and typical financing terms. The rental

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 31 rates used in this analysis are the 2023 rent limits for a two-bedroom unit for households at each income level, as set by the Tax Credit Allocation Committee (TCAC) for LIHTC projects, net of an estimated utility allowance. The use of the two-bedroom rent limit provides a conservative assumption because units in affordable housing developments tend to have a large share of studio and one-bedroom units, which have lower rental rates. Using the higher two-bedroom rental rate results in more assumed rental income from the affordable units, which results in a lower financing gap and a lower maximum fee amount. The vacancy, miscellaneous income, and operating expense assumptions shown in Table 13 are also based on information provided in 2022 and 2023 applications for LIHTC funding for projects in San Mateo County. Based on the NOI for units at each affordability level and standard financing assumptions, the supportable loan amount ranges from $10,466 per unit for units serving extremely low-income households to $295,646 per unit for units serving low-income households.

Net Financing Gap. The financing gap per affordable unit is equal to the total development cost less the tax credit equity and supportable loan amount. As shown, the financing gap per affordable unit ranges from $251,798 for low-income units to $536,978 for extremely low-income units. The financing gap has an inverse relationship to the income levels that each unit serves because units with higher income targeting generate more NOI and can therefore support higher debt service payments on a loan. The financing gap figures shown in Table 13 represent the amount of permanent financing subsidy that Atherton would need to provide to support the development of units at each income level, assuming that the Town’s funds are leveraged with four percent tax credits and a permanent loan.

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 32 Table 13: Affordable Housing Financing Gaps, San Mateo County, 2024 Notes:
(a) Based on a 3-person household, CA Department of Housing & Community Development, 2023. (b) Maximum affordable rents for 2-bedroom units per TCAC rent limits, net of 2-bedroom utility costs as shown in Table 1. (c) Data from funding applications for recent affordable housing projects in San Mateo County. (d) Net Operating Income divided by Debt Coverage Ratio. (e) Average of development costs shown in low-income housing tax credit applications submitted in 2022 and 2023 for projects in San Mateo County.
(f) The financing gap calculations that are shown in this table incorporate credit financing to offset a portion of the cost of constructing an affordable unit, which reduces the estimated financing gaps. However, it should be noted that projects must compete for tax credit financing, with a limited amount of funding available from tax credit financing in each round. It is unlikely that enough tax credits would be available to fully address affordable housing needs in Atherton or in the broader region, and therefore full mitigation of housing needs would likely require affordable housing developments to be constructed without tax credit financing. Therefore, the financing gaps shown in this table likely represent an underestimate of the funding that would be needed to address the full need. (g) Based on financing terms assumptions.
(h) Total Development Costs less Loan Amount and tax credit financing. (i) Atherton is designated as a small difficult to develop area (DDA), meaning that tax credit projects in that portion of the Town would receive a tax credit boost.

Sources: California Tax Credit Allocation Committee, 2022 and 2023; California Department of Housing and Community Development, 2023; Novogradac, 2023; BAE, 2024.

Income Group
Extremely Low Very Low Low
Household Income Limit (a) $50,350 $83,900 $134,200
Maximum Affordable Monthly Contract Rent per Unit (b) $1,021 $1,858 $3,113 Annual Gross Rent per Unit $12,252 $22,296 $37,356
Less 5% Vacancy ($613) ($1,115) ($1,868)
Miscellaneous Income per Unit (Annual) (c) $144 $144 $144 Less 5% Vacancy ($7) ($7) ($7)
Total Annual Revenue per Unit $11,776 $21,318 $35,625
Less Annual Operating Expenses per Unit (c) $10,901 $10,901 $10,901 Annual Net Operating Income per Unit $875 $10,417 $24,724 Annual Supportable Debt Service per Unit (d) $761 $9,058 $21,499 Total Development Costs per Affordable Unit (e) $914,954 $914,954 $914,954 Less: Permanent Loan Amount (f) ($10,466) ($124,565) ($295,646) Less: Tax Credit Financing (4% LIHTC) (g) ($367,510) ($367,510) ($367,510) Financing Gap per Affordable Unit (h) $536,978 $422,879 $251,798 Assumptions
Financing Terms
Debt Coverage Ratio 1.15
Interest Rate 6.10%
Amortization of Loan 30
Tax Credit Assumptions
Tax Credit Price $0.89
Eligible Basis % 86.8%
DDA Boost (i) 130%
Tax Credit Term (years) 10
4% Tax Credit Percentage 4.00%
Equity Partner Share 99.99%

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 33 Step 6: Calculate the Nexus-Based Fee
The final step in calculating the nexus-based fee is to apply the financing gap per unit for each income level (from Step 5) to the total housing need by income level from new market-rate units (from Step 4). As shown in Table 14, the nexus-based fees for each of the four residential product types are as follows:
• Multifamily Rental Apartment Units: $28,812 per unit
• Rental Townhouse Units: $38,163 per unit
• For-Sale Townhouse Units: $63,269 per unit
• Single-Family Units: $352,906 per unit
Table 14 also provides the nexus-based fee per square foot for each residential product type, calculated by dividing the per-unit fee amount by typical unit sizes among new units of each type. The resulting nexus-based fees per square foot are as follows:
• Multifamily Rental Apartment Units: $28.99 per net leasable square foot • Rental Townhouse Units: $25.79 per net leasable square foot • For-Sale Townhouse Units: $31.32 per net saleable square foot • Single-Family Units: $50.42 per net saleable square foot

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 33 Page 245 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 34 Table 14: Nexus-Based Fee Rates for Market-Rate Residential Units Notes:
(a) See Table 8, Table 9, Table 10, and Table 11.
(b) See Table 13.
(c) Equal to the affordable housing need per 100 units at each income level multiplied by the financing gap at the corresponding income level. (d) Equal to the nexus-based fee per 100 units divided by 100. (e) Reflects the fee rate per net leasable/saleable square foot. Based on the following average unit sizes: Multifamily Rental Apartment Units (SF): 994 SF; Townhome Rental Units (SF): 1,480 SF; For-Sale Townhome Units (SF): 2,020 SF; Single-Family Residential Units: 7,000 SF.

Source: BAE, 2024.

Affordable Housing Financing Nexus-Based Fee Nexus-Based Nexus-Based Fee Affordability Level Need Per 100 Units (a) Gap (b) Per 100 Units (c) Fee Per Unit (d) Per Net SF (e) Multifamily Rental Apartment Units
Extremely Low Income (up to 30% AMI) 1.776 $536,978 $953,667 $9,537 $9.60 Very Low Income (31-50% AMI) 2.383 $422,879 $1,007,912 $10,079 $10.14 Low Income (51-80% AMI) 3.652 $251,798 $919,616 $9,196 $9.25 Total 7.812 $2,881,194 $28,812 $28.99
Townhome Rental Units
Extremely Low Income (up to 30% AMI) 2.352 $536,978 $1,263,174 $12,632 $8.53 Very Low Income (31-50% AMI) 3.157 $422,879 $1,335,024 $13,350 $9.02 Low Income (51-80% AMI) 4.837 $251,798 $1,218,072 $12,181 $8.23 Total 10.347 $3,816,270 $38,163 $25.79
For-Sale Townhome Units
Extremely Low Income (up to 30% AMI) 3.900 $536,978 $2,094,176 $20,942 $10.37 Very Low Income (31-50% AMI) 5.234 $422,879 $2,213,294 $22,133 $10.96 Low Income (51-80% AMI) 8.020 $251,798 $2,019,403 $20,194 $10.00 Total 17.154 $6,326,874 $63,269 $31.32
Single-Family Residential Units
Extremely Low Income (up to 30% AMI) 21.753 $536,978 $11,681,077 $116,811 $16.69 Very Low Income (31-50% AMI) 29.194 $422,879 $12,345,504 $123,455 $17.64 Low Income (51-80% AMI) 44.734 $251,798 $11,264,000 $112,640 $16.09 Total 95.681 $35,290,581 $352,906 $50.42

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 34

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 35 In-Lieu Fee Financial Feasibility Analysis
This section analyzes the financial feasibility of an inclusionary housing in-lieu fee.

In-Lieu Fee Prototypes
The financial feasibility analysis involved creating an alternate version of the pro-forma for each of the residential prototypes summarized in Table 2 above, with the alternate versions having no inclusionary units. Because the alternate versions do not include affordable units, the projects would not be eligible for a density bonus under the State Density Bonus Law. Therefore, the prototypes were adjusted to remove any units attributable to a density bonus. Table 15 provides a summary of the development programs for the prototypes that were used to analyze the financial feasibility of an in-lieu fee. The table also shows the development program for each prototype in the inclusionary scenario to facilitate comparisons.

As shown, in the in-lieu fee scenario Prototype 1 would have a total of 30 units, consistent with the 20-dwelling unit/acre zoning for the site, rather than the 51 units that the site would support in the inclusionary scenario, which includes a density bonus. While Prototype 1 is a multifamily rental apartment prototype in the inclusionary scenario, this analysis assumes that the units on this site would consist of townhomes in the in-lieu fee scenario, which is consistent with the density of 20 dwelling units per acre that would be allowable in the in-lieu fee scenario with no density bonus. Consistent with the inclusionary scenario, this analysis evaluates Prototype 1 as a rental project in the in-lieu fee scenario.

Prototypes 2 and 3 are townhome developments in both the inclusionary scenario and the in-lieu fee scenario. However, both prototypes have fewer units in the in-lieu fee scenario due to the lack of a density bonus. Consistent with the inclusionary scenario, the in-lieu fee scenario for Prototype 2 would be a rental development while Prototype 3 would be a for-sale development.

Prototype 4 is a single-family home in both the inclusionary scenario and the in-lieu fee scenario.

In the in-lieu fee scenario this prototype does not include a deed-restricted ADU.

Methodology
The analysis involved first testing each prototype under a scenario with no in-lieu fee to assess the feasibility of a development with inclusionary units relative to a development without inclusionary units, before accounting for the effect of any in-lieu fees. This provides a baseline analysis to compare the tradeoffs associated with providing inclusionary units versus paying an in-lieu fee. To the extent that a prototype is more feasible in the inclusionary scenario than in a non-inclusionary scenario even with no in-lieu fees, developers will generally prefer to provide inclusionary units rather than pay an in-lieu fee regardless of the fee rate, making financial feasibility testing of potential specific in-lieu fee rates unnecessary. As discussed in more detail below, the analysis found that the prototypes were generally more feasible in the inclusionary scenario than in the non-inclusionary scenario, even before applying any in-lieu fees in the nonPage 248 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 36 inclusionary scenario. As a result, no further testing of the financial feasibility of in-lieu fees is shown in this report.

Table 15: Summary of Residential Prototype Development Programs, Inclusionary and In-Lieu Fee Scenarios
Note:
(a) Base density shown reflects assumed density for site before applying any density bonuses.

Source: BAE, 2024.

Financial Feasibility Findings for No Inclusionary, No In-Lieu Fee Scenario As shown in Table 16, the findings from the analysis of a scenario with no inclusionary units and no in-lieu fees are similar to the findings from the financial feasibility analysis of the inclusionary scenarios described above (see Table 4) with respect to which prototypes are currently feasible.

Prototype 1 (rental units with base zoning of 20 du/acre) is feasible with no inclusionary units and no in-lieu fee. Prototype 2 (rental units with a base zoning of 10 du/acre) is not likely to be financially feasible in either the inclusionary scenario or a scenario with no inclusionary units and no in-lieu fee. Prototype 3 (for-sale townhomes with base zoning of 10 du/acre) is financially feasible in both the inclusionary scenario and a scenario with no inclusionary units and no in-lieu fee. Prototype 4 (single-family) is feasible in both the inclusionary scenario and in a scenario with no inclusionary units and no in-lieu fee.

Table 16 also provides a comparison between the on-site inclusionary scenario and the scenario with no inclusionary units and no in-lieu fee to determine which would be preferrable from a developer perspective. As shown, for all three multifamily prototypes (Prototypes 1 through 3), the inclusionary scenario supports a higher residual land value than the no inclusionary/no in-lieu fee scenario. This finding is attributable to the use of the density bonus in the inclusionary scenario for these prototypes, which offsets the cost of providing the affordable units and makes Prototype 1 Prototype 2 Prototype 3 Prototype 4
Tenure Rental Rental For-Sale For-Sale
Base Density (a) 20 du/acre 10 du/acre 10 du/acre Single-Family Site Size (acres) 1.5 1.0 1.0 1.0
Development Program, Inclusionary Scenario
Development Typology Multifamily Apts. Townhouses Townhouses Single-Family Total Units 51 17 14 2
Affordable Units 6 2 2 1
Average Unit Size (net sq. ft.) 999 1,476 1,900 7,000 SF single-family home & 1,000 SF ADU
Parking Spaces 64 34 28 3+
Development Program, In-Lieu Fee Scenario
Development Typology Townhouses Townhouses Townhouses Single-Family Total Units 30 10 10 1
Affordable Units 0 0 0 0
Average Unit Size (net sq. ft.) 1,480 1,480 2,020 7,000 Parking Spaces 60 20 20 2+

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 37 the project that is possible in the inclusionary scenario more attractive to a developer than the project with no inclusionary units and no density bonus, even with no in-lieu fee. This indicates that, if the Town of Atherton were to adopt in-lieu fees, in most cases developers of multifamily projects would be likely to choose to provide affordable inclusionary units within their projects rather than pay in-lieu fees.

For single-family homes, Table 16 shows that development is slightly more feasible with no deed-restricted ADU and no in-lieu fee compared to a scenario with a deed-restricted ADU. This indicates that, depending on the level of in-lieu fees adopted by the Town of Atherton, developers of single-family homes may prefer the in-lieu fee option. The point of indifference section of this report provides additional analysis of the potential economic tradeoffs associated with providing a deed-restricted ADU compared to paying an in-lieu fee.

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 37 Page 251 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 38 Table 16: Financial Feasibility Summary, No Inclusionary/No In-Lieu Fee Scenario Note:
(a) Base density shown reflects assumed density for site before applying any density bonuses. (b) See Table 4. Inclusionary Scenario assumes the use of a density bonus in accordance with the State Density Bonus Law.

Source: BAE, 2024.

Prototype 1 Prototype 2 Prototype 3 Prototype 4
Tenure Rental Rental For-Sale For-Sale
Base Density (a) 20 du/acre 10 du/acre 10 du/acre Single-Family Site Size (acres) 1.5 1.0 1.0 1.0
Development Program
Total Units 30 10 10 1
Affordable Units 0 0 0 0
Average Unit Size (net sq. ft.) 1,480 1,480 2,020 7,000 Parking Spaces 60 20 20 2+
In-Lieu Fee (per net sq. ft.) $0.00 $0.00 $0.00 $0.00
Total Development Costs, Excluding Land and Developer Profit Total Development Cost (TDC) $27,947,950 $9,793,485 $13,156,374 $5,953,725 TDC per Unit $931,598 $979,348 $1,315,637 $5,953,725
TDC per Gross Building SF $629 $662 $651 $851
Residual Land Value Analysis
Capitalized Project Value (Rental) $41,740,800 $13,913,600 N/A N/A Net Sales Revenue (for-sale) N/A N/A $25,045,400 $13,240,500 Residual Land Value (RLV) $10,439,096 $2,944,897 $10,573,389 $6,691,402 Residual Land Value per Acre $6,959,398 $2,944,897 $10,573,389 $6,691,402 RLV Feasibility Threshold (per Acre) $5.0 - $6.5 million $5.0 - $6.5 million $5.0 - $6.5 million $5.0 - $6.5 million Feasible under current conditions? Yes No Yes Yes
Comparison to Inclusionary Scenario with Density Bonus
Residual Land Value per Acre
Inclusionary Scenario (b) $7,895,721 $3,487,312 $10,902,874 $6,528,448 No Inclusionary Scenario $6,959,398 $2,944,897 $10,573,389 $6,691,402 Preferred Scenario for Developer Inclusionary w/
Density Bonus
Inclusionary w/
Density Bonus
Inclusionary w/
Density Bonus No Inclusionary

Atherton Inclusionary Housing & In-Lieu Fee Study | In-Lieu Fee Analysis 38 Page 253 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | Inclusionary Housing In-Lieu Fee Analysis 39 Inclusionary Unit Construction Cost
Many jurisdictions base their inclusionary in-lieu fees on the cost to construct an affordable unit, often through a formula that applies on a project-by-project basis that is tied to the cost of construction. Conceptually, charging inclusionary housing in-lieu fees that are equal to the cost of constructing an affordable unit ensures that the revenue from an in-lieu fee is sufficient to support the construction of an affordable unit off site in cases where the affordable unit is not constructed on site as an inclusionary unit. To inform the Town’s consideration of an inclusionary housing in-lieu fee, this subsection provides an analysis of the cost to construct inclusionary units in each of the four residential prototypes analyzed in this report.

The analysis of potential in-lieu fee rates based on construction costs in Atherton is shown in Table 17. For inclusionary rental units, the calculations shown in the table estimate the cost to construct an inclusionary unit based on the per-unit construction costs shown in the pro-formas for the rental developments. The calculations then subtract the amount of debt service that an affordable unit can support from the total construction cost to estimate the construction cost net of supportable debt. This approach recognizes that an affordable unit generates rental income to offset the cost of constructing the unit, albeit at a lower rate than needed to cover construction costs.

For inclusionary townhouse ownership units (Prototype 3), the calculations shown estimate the cost to construct an inclusionary unit based on the per-unit construction costs shown in the proforma for the prototype. The calculations then subtract the average restricted sale price for the inclusionary units from the total per-unit construction cost to estimate the construction cost net of sale proceeds. Similar to the approach used for the rental units, this approach recognizes that an inclusionary unit generates revenue from the sale of the unit to offset the cost of constructing the unit, though this revenue is not sufficient to cover construction costs. For the single-family prototype, the calculations in the table show the estimated net sales revenue attributable to the deed-restricted ADU, based on the difference between the net sales revenue for the singlefamily prototype with a deed-restricted ADU (the inclusionary scenario) and the net sales revenue for the single-family prototype with no ADU (the in-lieu fee scenario). The calculations then subtract the development cost associated with the ADU.

For all of the multifamily development prototypes, this analysis included the cost of land acquisition, estimated at $6.5 million per acre.

As shown in Table 17 below, based on the construction cost approach calculations, the in-lieu fee amount based on the construction cost approach ranges from $91 to $159 per net residential square foot for the rental prototypes. Using the construction cost approach, the in-lieu fee for the for-sale units is equal to $125 per net square foot for the townhouse prototype and $29 per net square foot for the single-family prototype.

Atherton Inclusionary Housing & In-Lieu Fee Study | Inclusionary Housing In-Lieu Fee Analysis 40 Table 17: Construction Cost In-Lieu Fee Amount by Prototype Notes:
(a) Base density shown reflects assumed density for site before applying any density bonuses. (b) Affordable Unit Obligation refers to the number of inclusionary units that would be required based on the Town's proposed inclusionary requirements. In the in-lieu fee scenario, this obligation would be met through the payment of an inlieu fee rather than providing units on site. (c) Average monthly rent per affordable unit based on rents shown in the pro-formas provided in Appendix C. (d) Average net sales revenue per affordable unit is based on net sales revenues shown in the pro-formas provided in Appendix C.

Source: BAE, 2024.

Point of Indifference Approach
One factor to consider when setting an in-lieu fee is the “point of indifference”, or the fee amount that is generally equivalent to the cost of providing inclusionary units in a project. Fees that are set higher than this amount will generally incentivize developers to provide affordable units instead of paying the in-lieu fee because providing the units will be more cost-effective.

Conversely, fees that are set lower than this amount will generally incentivize developers to pay the in-lieu fee instead of providing the affordable units.

The cost of an in-lieu fee and the cost to provide inclusionary units on site are not directly comparable, because an in-lieu fee affects total development costs, whereas providing inclusionary units on site affects either the project’s operating income and the resulting project value (for rental developments) or sale proceeds (for ownership developments). In other words, Prototype 1 Prototype 2 Prototype 3 Prototype 4
Tenure Rental Rental For-Sale For-Sale
Base Density (a) 20 du/acre 10 du/acre 10 du/acre Single-Family Site Size (acres) 1.5 1.0 1.0 1.0
Development Program, In-Lieu Fee Scenario
Total Units 30 10 10 1
Affordable Unit Obligation (b) 6 2 2 1
Average Unit Size (net sq. ft.) 1,480 1,480 2,020 7,000 Net Residential Square Footage 44,400 14,800 20,200 7,000 Construction Cost Approach
Total Development Cost Per Inclusionary Unit, Incl. Land $772,319 $1,303,455 $1,584,930 $834,381 Rental Prototypes
Average Monthly Rent per Affordable Unit (c) $2,029 $2,253 N/A N/A Monthly Net Operating Income per Affordable Unit $677 $890 N/A N/A Supportable Debt per Affordable Unit $98,223 $129,133 N/A N/A For-Sale Prototypes
Avg. Net Sales Revenue per Affordable Unit (d) N/A N/A $323,373 $630,500 Development Cost minus Sale Price per Aff. Unit N/A N/A $1,261,557 $203,881 In-Lieu Fee Per Affordable Unit $674,095 $1,174,322 $1,261,557 $203,881 Construction Cost In-Lieu Fee Amount
Total In-Lieu Fee Amount $4,044,572 $2,348,644 $2,523,114 $203,881 Fee per Net Residential Sq. Ft. $91 $159 $125 $29

Atherton Inclusionary Housing & In-Lieu Fee Study | Inclusionary Housing In-Lieu Fee Analysis 41 payment of an in-lieu fee affects the cost side of the residual land value calculation, while providing inclusionary units on site affects the project value or sale proceeds side of the residual land value calculation.

Multifamily Prototype Methodology
For the rental developments (Prototypes 1 and 2), this analysis evaluated the point of indifference by calculating the cost of making a unit affordable to a lower-income household, with this “cost” defined as the reduction in capitalized project value that would result from charging an affordable rent rather than a market-rate rent on the unit. The calculations shown in Table 18 show the annual operating revenue that a project would forego by making a unit affordable, compared to renting the unit at market rate, and the resulting difference in the capitalized value of the project. The analysis uses the average net operating income per marketrate unit and per affordable unit in each prototype to calculate this difference.

For the for-sale townhome development (Prototype 3), this analysis evaluated the point of indifference by calculating the cost of making a unit affordable to a lower-income household, with this “cost” defined as the difference in the sale price between a market-rate unit and an affordable unit. The calculations shown in Table 18 show the average sale price for an affordable unit and the average sale price for a market-rate unit, and the resulting difference in sale proceeds.

This analysis does not account for the effect that density bonuses available through the State Density Bonus Law would have on overall project feasibility for projects that provide affordable units on site rather than paying an in-lieu fee. In the case of the multifamily prototypes evaluated in this report, the scenarios with inclusionary units were more feasible than the scenarios with no inclusionary units, even with no in-lieu fee, due to the additional density available for these prototypes under State Density Bonus Law (see Table 16 above). Because the inclusionary scenario with a density bonus is already more feasible than the non-inclusionary, non-densitybonus scenario, any in-lieu fee charged on multifamily projects would serve to make the inclusionary scenario with a density bonus even more attractive relative to the in-lieu fee scenario, with higher fees being associated with a stronger incentive to provide units on site.

After accounting for the impact of a density bonus, the point of indifference fee rate would be negative, meaning that a payment would need to be made to the developer to make the noninclusionary scenario more attractive than the inclusionary scenario. As a result, the point of indifference analysis presented here does not account for the effect of a density bonus.

The resulting cost of providing affordable units approximates the “point of indifference,” or the inclusionary in-lieu fee payment that would have the same cost impacts as providing affordable units within each project in a scenario in which the developer chooses not to pursue a density bonus. In other words, if all else were equal, a residential project that pays the “point of indifference” fee rates shown in Table 18 would generally support the same residual land value as a project that provides the affordable units on site with no density bonus.

Atherton Inclusionary Housing & In-Lieu Fee Study | Inclusionary Housing In-Lieu Fee Analysis 42 Single-Family Prototype Methodology
For the single-family prototype (Prototype 4), this analysis estimated the point of indifference based on the difference in the capitalized value of a market-rate ADU and the capitalized value of a deed-restricted ADU. If the proposed inclusionary housing requirements are adopted, a developer of a single-family home in Atherton would have the option to either pay an in-lieu fee or provide an ADU with a deed restriction requiring the ADU to be affordable to a low-income household. Developers that choose to pay an in-lieu fee rather than provide a deed-restricted affordable ADU would nonetheless have the option to provide an ADU that would not be subject to affordability restrictions. Therefore, the inclusionary and non-inclusionary scenarios for single-family home developments could differ only in terms of the affordability requirements for the ADU, with no difference in the physical structures on the property. As a result, this analysis estimates the point of indifference for the single-family prototype based on the difference in the value of an ADU, assuming that a single-family home would have a deed-restricted affordable ADU in the inclusionary scenario and an ADU rented at the market rate in the in-lieu fee scenario.

It should be noted that an ADU could have a range of impacts on single-family home sale prices, whether the ADU is deed restricted to remain affordable or not. The approach used in this analysis effectively assumes that a home buyer will offer a price for a home that incorporates the value of an ADU based on the rental income that the ADU will provide. However, in the case of a deed-restricted affordable ADU, it is likely that some homebuyers will ascribe a value to the ADU that is lower than the capitalized value of the unit because the deed restriction will require them to rent the unit, precluding its use for hosting guests, housing extended family, or other purposes. Furthermore, the deed restrictions for the unit will require verifying tenant eligibility, which could prove burdensome for many households, and will require homeowners to function as landlords, which many homebuyers may not see as desirable. In the case of an ADU with no deed restriction, a homebuyer would have the flexibility to choose whether or not they want to rent the unit, and therefore may not ascribe a value to the ADU as a rental unit. A home buyer that does not plan to rent their ADU could ascribe a value to the ADU that is either higher or lower than the capitalized value of the ADU as a rental unit, depending on how much they value the ADU for other purposes. Therefore, while the point of indifference calculations for the singlefamily prototype represent an approximation of one potential scenario, the actual point of indifference for any individual property could vary significantly. As a result, it is possible that many developers would choose to pay the in-lieu fee even if rates are set higher than the amount shown in Table 18.

Findings
As shown in Table 18, the rental prototypes (Prototypes 1 and 2) yield a point of indifference inlieu fee amount equal to approximately $154 to $156 per net residential square foot. The point of indifference fee amount for the for-sale townhome prototype (Prototype 3) is equal to approximately $212 per net residential square foot. The point of indifference fee amount for the single-family prototype (Prototype 4) is equal to approximately $69 per square foot.

Atherton Inclusionary Housing & In-Lieu Fee Study | Inclusionary Housing In-Lieu Fee Analysis 43 It should be noted that the “point of indifference” fee rates identified in this analysis are sensitive to the relationship between the market-rate rent and the affordable rent for rental projects and the market-rate sale price and the affordable sale price for ownership projects, as well as other assumptions used in the financial modeling. Consequently, the fee rate that represents the point of indifference will vary between projects and over time based on variations in home prices and other factors. Nonetheless, the analysis presented in this subsection provides general insight on the in-lieu fees levels that are comparable in cost to providing inclusionary units in a project.

Table 18: Point of Indifference In-Lieu Fee Amount by Prototype Notes:
(a) Base density shown reflects assumed density for site before applying and density bonuses. (b) Affordable Unit Obligation refers to the number of inclusionary units that would be required based on the Town's proposed inclusionary requirements. In the in-lieu fee scenario, this obligation would be met through the payment of an inlieu fee rather than providing units on site.

Source: BAE, 2024.

Summary of Findings from Inclusionary In-Lieu Fee Analysis Table 19 provides a summary of the findings from the inclusionary housing in-lieu fee analysis that are presented in the preceding sections of this chapter. As shown, all three of the multifamily prototypes (Prototypes 1, 2, and 3) are more financially feasible in a scenario with inclusionary units and a density bonus than in a non-inclusionary scenario, even with no inclusionary housing in-lieu fee. The single-family prototype (Prototype 4) is slightly more feasible in a scenario with no inclusionary housing requirement and no in-lieu fee.

Prototype 1 Prototype 2 Prototype 3 Prototype 4
Tenure Rental Rental For-Sale For-Sale
Base Density (a) 20 du/acre 10 du/acre 10 du/acre Single-Family Site Size (acres) 1.5 1.0 1.0 1.0
Development Program, In-Lieu Fee Scenario
Total Units 30 10 10 1
Affordable Unit Obligation (b) 6 2 2 1
Average Unit Size (net sq. ft.) 1,480 1,480 2,020 7,000 Net Residential Square Footage 44,400 14,800 20,200 7,000 Point of Indifference In-Lieu Fee Amount
Rental Prototypes
Net Annual Operating Income per Affordable Unit $11,300 $10,684 N/A $29,144 Net Annual Operating Income per Market Rate Unit $62,611 $62,611 N/A $50,850 Difference in Net Operating Income $51,311 $51,927 N/A $21,706 Capitalized Value of Difference in NOI per Unit $1,140,253 $1,153,933 N/A $482,347 For Sale Prototypes
Average Net Sale Price per Affordable Unit N/A N/A $359,461 N/A Average Net Sale Price per Market Rate Unit N/A N/A $2,504,540 N/A Difference in Sale Price N/A N/A $2,145,079 N/A
Total In-Lieu Fee Amount $6,841,520 $2,307,867 $4,290,157 $482,347 Per Net Project Sq. Ft. $154 $156 $212 $69

Atherton Inclusionary Housing & In-Lieu Fee Study | Inclusionary Housing In-Lieu Fee Analysis 44 This chapter presents three potential approaches for calculating an in-lieu fee: 1) the nexus-based approach, 2) the construction cost approach, and 3) the point of indifference approach. For the three multifamily prototypes (Prototypes 1, 2, and 3), the nexus-based approach results in the lowest fee rates, ranging from $26 to $31 per net residential square foot. For Prototypes 1 and 3, the point of indifference approach results in the highest fee rates, at $154 and $212 per net residential square foot, respectively. For Prototype 2, the construction cost approach and the point of indifference approach result in similar fee rates ($159 and $156 per net residential square foot, respectively). This means that, if the Town of Atherton chooses to adopt inclusionary housing in-lieu fees that are consistent with the nexus approach, the fee rates for multifamily projects would be lower than both the cost to construct an affordable unit and the point of indifference. Even so, fees that are consistent with the nexus analysis would generally incentivize developers to provide inclusionary units rather than pay an in-lieu fee because developers providing inclusionary units are likely to pursue a density bonus that will make the inclusionary scenario is more feasible than the in-lieu fee scenario regardless of the in-lieu fee rate.

For the single-family prototype (Prototype 4), the construction cost approach results in the lowest in-lieu fee rate ($29 per square foot), followed by the nexus-based approach ($50 per square foot) and the point of indifference approach ($69 per square foot). It should be noted that in the case of the single-family prototype the point of indifference approach may understate the actual point of indifference for the reasons described in the previous subsection of this chapter.

As a result, if the Town of Atherton chooses to adopt inclusionary housing in-lieu fees that are consistent with either the nexus-based approach or the construction cost approach, developers may generally choose to pay an in-lieu fee rather than providing a deed-restricted affordable ADU as an inclusionary unit.

Table 19: Summary of In-Lieu Fee Analysis Findings
Notes:
(a) Base density shown reflects assumed density for site before applying and density bonuses. (b) Shows whether each prototype is more financially feasible with inclusionary units and a density bonus or with no inclusionary units, no density bonus, and no in-lieu fee.

Source: BAE, 2024.

Prototype 1 Prototype 2 Prototype 3 Prototype 4
Tenure Rental Rental For-Sale For-Sale
Base Density (a) 20 du/acre 10 du/acre 10 du/acre Single-Family Site Size (acres) 1.5 1.0 1.0 1.0
In-Lieu Fee Findings
Most Financially-Feasible Scenario (b) Inclusionary w/
Density Bonus
Inclusionary w/
Density Bonus
Inclusionary w/
Density Bonus
No
Inclusionary
Nexus-Based In-Lieu Fee $29 $26 $31 $50
Construction Cost In-Lieu Fee Rate (per net sq. ft.) $91 $159 $125 $29 Pt. of Indifference In-Lieu Fee Rate (per net sq. ft.) $154 $156 $212 $69

Atherton Inclusionary Housing & In-Lieu Fee Study | Inclusionary Housing In-Lieu Fee Analysis 45 Page 260 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | Inclusionary Housing In-Lieu Fee Analysis 45 Page 261 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | Summary of Findings and Recommendations 46

POLICY OPTIONS AND

RECOMMENDATIONS
The findings from the analysis, as described in the preceding chapters of this report, support the following recommendations.

Recommendation 1. Consider adoption of inclusionary housing requirements that are consistent with the requirements that the Town of Atherton has proposed The Town of Atherton is currently considering an inclusionary housing program that would require the following:
• For multifamily rental developments, 20 percent of units affordable to very low-income households (i.e., up to 50 percent of AMI)
• For multifamily for-sale developments, 20 percent of units affordable to lower-income households (i.e., up to 80 percent of AMI)
• For single-family homes, provide an ADU with a deed restriction that requires the ADU to be affordable to low-income households (i.e., up to 80 percent of AMI) or pay an in-lieu fee.

The financial feasibility analysis provided in this report found that these inclusionary requirements are feasible for multifamily rental apartments, for-sale townhomes, and singlefamily homes (see Table 4). These findings indicate that the adoption of the inclusionary requirements that the Town is currently considering would not impede residential development in Atherton.

While the analysis found that the for-rent townhome prototype was not financially feasible, this prototype is not feasible even with no inclusionary requirements or in-lieu fee. In fact, this study demonstrates that the financial feasibility of the for-rent townhome prototype improves in an inclusionary housing scenario compared to a scenario in which the prototype would not include any affordable units and therefore would not be eligible for a density bonus under State law.

Therefore, the adoption of inclusionary requirements would be unlikely to hinder the construction of for-rent townhomes in Atherton if market conditions were favorable to this product type within the regional market.

Recommendation 2: Adopt new inclusionary requirements concurrently with the adoption of upcoming zoning changes that will implement Housing Element programs As noted in the Introduction chapter of this report, the Town of Atherton is planning to adopt changes to the Town’s Zoning Ordinance to allow for the development of multifamily housing on some sites. If the Town plans to adopt inclusionary requirements, the adoption of these requirements should occur concurrently with the adoption of changes to the Zoning Ordinance.

Atherton Inclusionary Housing & In-Lieu Fee Study | Summary of Findings and Recommendations 47 This will ensure that potential developers of multifamily projects in Atherton will be aware of all requirements that will apply to potential multifamily development sites before moving forward and will allow developers to include the impact of inclusionary requirements in their initial financial modeling and in their offer to landowners to purchase development sites.

Recommendation 3: Consider the adoption of inclusionary housing in-lieu fees for projects that do not provide inclusionary units on site
Under AB 1505, local jurisdictions with inclusionary housing requirements for rental developments must offer at least one alternative to providing inclusionary units on site within rental developments, such as an in-lieu fee, rehabilitation of existing affordable units, a land donation, or building affordable units offsite. While an alternative is not required in the case of inclusionary requirements for ownership developments, many jurisdictions offer in-lieu fees or other alternatives to on-site inclusionary units for ownership developments.

With the exception of in-lieu fees, alternatives to providing inclusionary units on site may be particularly limited in Atherton. Even with the planned zoning changes, there will be only a limited number of sites in Atherton that will be zoned for multifamily use and potentially suitable for a land donation or the construction of affordable units offsite. Moreover, there are no existing affordable units in Atherton that are in need of rehabilitation. As a result, an in-lieu fee option may be the most straightforward and practical alternative to providing inclusionary units on site.

If the Town of Atherton adopts inclusionary housing in-lieu fees, some of the key factors to consider include the following:

Whether to allow developers to pay a fee by right or require discretionary approvals for an inlieu fee payment. Allowing the in-lieu fee option by right makes the process more predictable for project applicants but could result in fewer on-site inclusionary units than the Town desires if fees are set too low to incentivize on-site production.

Whether to establish set fee rates or a process for determining the appropriate fee on a project-by-project basis. A set fee rate is easier to administer and makes the process more predictable for project applicants, while a fee that is determined on a project-by project basis provides the Town with more discretion to determine the appropriate fee on a case-by-case basis.

If the Town adopts set in-lieu fee rates, the specific fee rates for adoption. Table 20 presents potential fee rates for consideration by the Atherton City Council. The table shows fee rates based on the nexus approach, the construction-cost approach, and the point of indifference approach. The table also includes a high-level summary of the conceptual basis for each approach to inform decision making. For all multifamily development types (multifamily rental apartments, rental townhomes, and for-sale townhomes), all fee rates shown are likely to

Atherton Inclusionary Housing & In-Lieu Fee Study | Summary of Findings and Recommendations 48 incentivize developers to provide affordable inclusionary units on site within projects rather than pay an in-lieu fee. However, only fees set higher than the point of indifference fee rate would incentivize developers to provide inclusionary units in a scenario in which the developer would not pursue a density bonus.

For single-family homes, most project applicants are likely to choose to pay an in-lieu fee rather than provide a deed-restricted ADU if the City adopts the nexus-based fee rate or the construction cost fee rate. Project applicants may still elect to pay the in-lieu fee for singlefamily projects if the City adopts fees set at the point of indifference fee rate, though fees set at the point of indifference fee rate might encourage some project applicants to provide a deedrestricted ADU rather than pay an in-lieu fee.

Table 20: Potential Inclusionary Housing In-Lieu Fee rates Fee Rate per Net Square Foot
Approach Multifamily
Rental
Apartments
Rental
Townhomes
For-Sale
Townhomes
SingleFamily
Homes
Nexus-Based Fee
Based on the relationship between
new development and the need for
affordable housing funds.
$29 $26 $31 $50
Construction Cost Fee
Based on the cost to construct an
affordable unit offsite.
$91 $159 $125 $29
Point of Indifference
Approximates the developer's cost to
provide inclusionary units in a
scenario where the developer would
not pursue a density bonus for
inclusionary units
$154 $156 $212 $69
Note: Fee rates shown in bold are likely to incentivize on-site production of affordable units rather than payment of an in-lieu fee, at least in some cases.

Recommendation 4: To the extent that Atherton decision makers prefer that new single-family homes provide deed-restricted ADUs rather than pay an in-lieu fee, consider policies to make the deed-restricted ADU option more attractive to project applicants Developers may be hesitant to provide deed-restricted affordable ADUs as part of single-family development projects because these units could reduce the pool of potential buyers and introduce additional uncertainty related to pricing. While some homebuyers may be attracted to a home with an ADU that can provide additional income, deed restrictions on ADUs would require homebuyers to commit to being landlords and to ensuring that tenants in ADUs are income-qualified to rent the units, which many homebuyers may find unappealing. As a result,

Atherton Inclusionary Housing & In-Lieu Fee Study | Summary of Findings and Recommendations 49 developers may require additional incentives to provide a deed-restricted ADU as part of a singlefamily project.

One possible incentive could allow developers to build one non-deed-restricted ADU in exchange for building a deed-restricted ADU, irrespective of other zoning restrictions on the site. This would mean that developers would not have to forego the opportunity to build a non-deedrestricted ADU in order to provide a deed-restricted ADU. Combined with an in-lieu fee in cases where no deed-restricted ADU is built, this approach could shift the economic tradeoffs to favor construction of deed-restricted ADUs, at least in some cases.

Atherton Inclusionary Housing & In-Lieu Fee Study | Summary of Findings and Recommendations 49 Page 266 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix A: AB 602 Analysis 50 APPENDIX A: AB 602 ANALYSIS
The provisions of Assembly Bill 602 (AB 602) came into effect in January 2022, enacting new requirements for impact fees and impact fee nexus studies. This report provides an analysis of inclusionary housing in-lieu fees, which are not impact fees and therefore are not subject to the AB 602 requirements. However, the Town of Atherton may wish to consider the provisions of AB 602 on a voluntary basis to inform policy decisions. Key provisions of AB 602 include:

1. Level of Service. AB 602 requires that impact fee nexus studies “identify the existing level of service for each public facility, identify the proposed new level of service, and include an explanation of why the new level of service is appropriate.” (See Government Code Section 66016.5(a)(2).)

2. Prior Nexus Study Assumptions and Fees Collected. Pursuant to AB 602, Government Code Section 66016.5(a)(4) provides that “if a nexus study supports the increase of an existing fee, the local agency shall review the assumptions of the nexus study supporting the original fee and evaluate the amount of fees collected under the original fee.”

3. Capital Improvement Plan. Under AB 602, Government Code Section 66016.5(6) states that “large jurisdictions shall adopt a capital improvement plan as a part of the nexus study.” For the purposes of this provision, Atherton is classified as a large jurisdiction.7

4. Residential Fees Proportional to Square Footage. AB 602 stipulates that “if [a nexus] study is adopted after July 1, 2022, [it must] either calculate a fee levied or imposed on a housing development project proportionately to the square footage of the proposed units or make specified findings explaining why square footage is not an appropriate metric to calculate the fees.”

5. 30-Day Noticing. Under AB 602, “All studies shall be adopted at a public hearing with at least 30 days’ notice, and the local agency shall notify any member of the public that requests notice of intent to begin an impact fee nexus study of the date of the hearing.”

6. Updates Every Eight Years. AB 602 stipulates that nexus studies “shall be updated at least every eight years, from the period beginning on January 1, 2022.” This appendix provides discussion and analysis related to the inclusionary housing in-lieu fee analysis based on the provisions of AB 602 described above. The subsections below are numbered to correspond to the six provisions described above. Because inclusionary housing inlieu fees are generally not considered to be impact fees that would require an analysis under AB 602, this analysis is provided for informational purposes only. 7 AB 602 uses the definition of a “large jurisdiction” that is contained in Section 53559.1 of the California Health and Safety Code. This section defines a large jurisdiction as a county with a population of 250,000 or more as of January 1, 2019 or any city within that county.

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix A: AB 602 Analysis 51

1. Level of Service
An inclusionary housing in-lieu fee would generate funding for the construction of new publiclyassisted affordable housing units to serve new workers attributable to the growth in household spending associated with the construction of new homes in Atherton. Therefore, in the context of an inclusionary housing in-lieu fee, the level of service can be defined in terms of the number of publicly-assisted affordable housing units in Atherton as a share of the overall housing stock.

Existing Level of Service. The Town of Atherton does not currently have any publicly-assisted affordable housing units. This means that the current level of service, measured in terms of publicly-assisted affordable housing units as a share of the overall housing stock, is zero percent.

Proposed New Level of Service. The level of service that inclusionary housing in-lieu fees would support in Atherton will depend on the fee rates adopted by the Town of Atherton as well as the share of new developments that pay an in-lieu fee rather than provide inclusionary units.

Because there are currently no publicly-assisted affordable housing units in Atherton, any increase would constitute an increase in the level of service.

Appropriateness of New Level of Service. A higher level of service would be appropriate in part because the current level of service is insufficient to provide affordable housing for the workers attributable to household spending by Atherton residents. There is a persistent shortage of available affordable housing units throughout the region and affordable housing developments consistently have long waiting lists for any available units. Supporting a higher level of service using inclusionary housing in-lieu fees could help to prevent new market-rate residential development in Atherton from continuing to replicate the same gaps in affordable housing delivery that exist under the current level of service.

Furthermore, the higher level of service is appropriate based on the Town of Atherton’s Regional Housing Needs Allocation (RHNA). The RHNA is the number of housing units that the Town is required to plan to accommodate during each eight-year Housing Element cycle. Prior to the start of each Housing Element cycle, the State determines the total RHNA for each region in California. Each region then goes through a process to distribute the RHNA among each of the cities and counties in the region. Under California law, each city and county in California is required to prepare a Housing Element every eight years and must demonstrate through the Housing Element that the jurisdiction has the ability to accommodate its RHNA during the eightyear Housing Element period. The RHNA for each city and county includes an allocation of units that will be affordable to low-income and moderate-income households, and the Housing Element must demonstrate that the jurisdiction has the ability to accommodate units at each affordability level.

For the 6th Housing Element Update Cycle (2023-2031), the Town of Atherton has a RHNA obligation totaling 348 units, including 148 units for lower-income households. Atherton’s

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix A: AB 602 Analysis 52 January 2023 Housing Element for the 2023-2031 Housing Element period reports that the Town permitted 115 ADUs during the 5th Housing Element cycle, with 94 of these estimated to be affordable to very low- or low-income households and the remainder estimated to be affordable to moderate-income households. There were no other affordable units built in Atherton during this period. This suggests that Atherton will need to issue building permits for more affordable housing units during the 6th Housing Element Cycle to address the Town’s RHNA. These figures demonstrate a need for the Town of Atherton to enhance the level of service provided by the Town’s affordable housing inventory relative to existing conditions.

2. Prior Nexus Study Assumptions and Fees Collected
The Town of Atherton does not have an existing inclusionary housing in-lieu fee. As a result, the provision of AB 602 that relates to reviewing the assumptions of a prior nexus study if a study supports an increase to an existing fee does not apply. The provision of AB 602 that relates to evaluating the amount of fees collected under an existing fee also does not apply.

3. Capital Improvement Plan
Under AB 602, Government Code Section 66016.5(6) states that “large jurisdictions shall adopt a capital improvement plan as a part of the nexus study.” For the purposes of this provision, Atherton is classified as a large jurisdiction. Government Code Section 66002 further states that “any local agency which levies a fee subject to [the California Mitigation Fee Act] may adopt a capital improvement plan, which shall indicate the approximate location, size, time of availability, and estimates of cost for all facilities or improvements to be financed with the fees.” Although inclusionary housing in-lieu fees are not impact fees subject to the California Mitigation Fee Act, this subsection provides analysis of an inclusionary housing in-lieu fee in relation to these sections of the Government Code for informational purposes.

A jurisdiction’s capital improvement plan identifies infrastructure improvements and public facilities projects that the jurisdiction intends to implement, though some portions of the capital improvement plan may be unfunded and would be implemented only if funding becomes available in the future. Affordable housing developments are not typically included in a jurisdiction’s capital improvement plan, in part because local jurisdictions do not typically have a direct role in constructing affordable housing. Instead, local jurisdictions with access to affordable housing funds typically provide these funds to affordable housing developers or operators. These affordable housing developers or operators then use the funds to construct new affordable housing units, acquire existing housing units for the purpose of creating or maintaining affordable housing, or rehabilitate existing affordable units.

Although affordable housing developments are not included in a formal capital improvement plan, the Town of Atherton’s 2023-2031 Housing Element Update provides a plan to accommodate the City’s RHNA, including all lower-income units in the City’s RHNA, over the eight-year Housing Element period. These units would be located within Atherton Town limits

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix A: AB 602 Analysis 53 and will likely be geographically distributed a manner that generally corresponds to the sites that the Housing Element identifies as potential sites for accommodating housing affordable to lower-income households. Projects with affordable units will vary in size based on the specific opportunities for affordable housing development that could occur during the planning period and may range from single ADU units to developments with up to 25 units, with potential for larger developments on select housing opportunity sites.

Information provided in recent applications for tax credit financing for new affordable housing developments in San Mateo County indicates that the cost to build a publicly-assisted affordable housing unit currently averages an estimated $915,000 per unit. Funds from inclusionary housing in-lieu fees could help to finance a portion of the cost to construct these units but are not anticipated to be sufficient to fund the construction of all of the lower-income units in the Town’s RHNA. The total cost that will be financed through the fees will depend on the amount of revenue generated by inclusionary housing in-lieu fees during the Housing Element cycle. In addition to inclusionary housing in-lieu fees, construction of these units will be financed by other public and private funding sources, including but not limited to low-income housing tax credits.

A portion of the RHNA will also be met through other local housing programs, including the Town’s inclusionary ordinance.

4. Residential Fees Proportional to Square Footage
The analysis provided in this report includes calculations of potential inclusionary housing in-lieu fees on a per-square-foot basis, thereby enabling the Town to assess any inclusionary housing inlieu fees in a manner that is proportional to the square footage of proposed units.

5. 30-day Noticing
If the Town of Atherton chooses to comply with the 30-day noticing requirement of AB 602, the Town should adopt any inclusionary housing in-lieu fees at a public hearing with at least 30 days’ notice and notify any member of the public that requests notice of the date of the hearing.

6. Updates Every Eight Years
If the Town of Atherton chooses to comply with the eight-year update requirement of AB 602, the Town should update its inclusionary housing in-lieu fees within eight years or less from adoption.

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix A: AB 602 Analysis 53 Page 271 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix B: State Density Bonus Charts 54 APPENDIX B: CALIFORNIA STATE DENSITY

BONUS DENSITY ALLOWANCES
The Density Bonus law provides density bonuses on a sliding scale to projects that provide affordable units. The State Density Bonus law also provides for parking reductions and various development incentives and concessions for projects that meet designated affordability thresholds.

The passage of AB 1287, which went into effect on January 1, 2024, added an option for projects to receive a larger density bonus than was previously available in exchange for additional affordable units. AB 1287 essentially created a second level of density bonuses with associated affordability requirements. In order to be eligible for the second level of bonuses, a project must first provide enough affordable units to be eligible for a 50-percent density bonus based on first level of density bonuses, or the standards that were in effect prior to the passage of AB 1287.

This means that a project must provide 15 percent very low-income units, 24-percent low-income units, or 44-percent moderate-income units (with moderate-income units required to be for-sale units) to be eligible for the second level of density bonuses that were made available by AB 1287.

For the first level of density bonuses, Table B-1 shows the proportion of affordable units that are required for each tier of density bonus based on whether a project is a rental or ownership project and the affordability level of the affordable units.

If a project has provided enough affordable units to be eligible for a 50-percent density bonus under level one, the project can provide additional affordable units to be eligible for an additional density bonus based on density bonuses that are available in level two. These additional affordable units can be either very low-income units or moderate-income units. Unlike moderate income units that are used to satisfy affordability requirements under level one, moderateincome units that are used to satisfy affordability requirements under level two can be either rental units or for-sale units. Table B-2 shows the proportion of affordable units that are required for each tier of density bonus under level two (i.e., the additional bonuses put in place by AB 1287).

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix B: State Density Bonus Charts 55 Table B-1: California State Density Bonus Level 1
Notes:
(a) Density bonuses percentages are based on the percent of units at the base density (i.e., not including density bonus units).
(b) Density bonuses based on moderate-income affordability are available to for-sale projects only. (c) 100 percent affordable developments can meet the affordability requirement with units affordable at a mix of income levels, with a maximum of 20 percent moderate-income units.

Affordable Unit Very Low Low Moderate
Percentage (a) Income Households Income Households Income Households (b) 5% 20% N/A N/A
6% 22.50% N/A N/A
7% 25% N/A N/A
8% 27.50% N/A N/A
9% 30% N/A N/A
10% 32.50% 20% 5%
11% 35% 21.50% 6%
12% 38.75% 23% 7%
13% 42.50% 24.50% 8%
14% 46.25% 26% 9%
15% 50% 27.50% 10%
16% 50% 29% 11%
17% 50% 30.50% 12%
18% 50% 32% 13%
19% 50% 33.50% 14%
20% 50% 35% 15%
21% 50% 38.75% 16%
22% 50% 42.50% 17%
23% 50% 46.25% 18%
24% 50% 50% 19%
25% 50% 50% 20%
26% 50% 50% 21%
27% 50% 50% 22%
28% 50% 50% 23%
29% 50% 50% 24%
30% 50% 50% 25%
31% 50% 50% 26%
32% 50% 50% 27%
33% 50% 50% 28%
34% 50% 50% 29%
35% 50% 50% 30%
36% 50% 50% 31%
37% 50% 50% 32%
38% 50% 50% 33%
39% 50% 50% 34%
40% 50% 50% 35%
41% 50% 50% 38.75%
42% 50% 50% 42.50%
43% 50% 50% 46.25%
44% 50% 50% 50%
100% (c) 80% 80% 80%
Density Bonus if Units are Affordable to…

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix B: State Density Bonus Charts 56 Table B-2: California State Density Bonus Level 2 (per AB 1287) Notes:

Density bonuses shown in this table can only be used if the project is also providing enough affordable units to be eligible for a 50 percent density bonus based on the bonuses shown in Table B-1. (a) Density bonuses percentages are based on the percent of units at the base density (i.e., not including density bonus units).
(b) Density bonuses based on moderate-income affordability are available to either rental or for-sale projects.

Affordable Unit Very Low Moderate
Percentage (a) Income Households Income Households (b)
5% 20.00% 20.00%
6% 23.75% 22.50%
7% 27.50% 25.00%
8% 31.25% 27.50%
9% 35.00% 30.00%
10% 38.75% 32.50%
11% 38.75% 35.00%
12% 38.75% 38.75%
13% 38.75% 42.50%
14% 38.75% 46.25%
15% 38.75% 50.00%
Density Bonus if Units are Affordable to…

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix B: State Density Bonus Charts 56 Page 275 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 57 APPENDIX C: RESIDENTIAL PRO FORMAS
This appendix provides the detailed pro-formas for residential developments that were used for the inclusionary feasibility and inclusionary in-lieu analysis provided in this report. This appendix also includes a description of the key assumptions used in the residential pro-formas.

Key Assumptions
BAE developed the various modeling inputs and assumptions needed for the financial feasibility analysis based on interviews with residential developers who are active in the local area, data from industry publications and databases, experience with recent development projects in the local area, and other research. Developers vary somewhat in the categorization of various project costs, and therefore may show different cost figures for individual cost items even for projects with similar overall development costs. Any variation in the specific cost items described below would not affect the findings of this analysis provided that the total development costs for the prototype projects are consistent with total development costs for similar projects.

Hard Costs: Hard costs are the costs associated with the physical construction of a building, including all construction materials and labor. This analysis uses a hard cost assumption of $400 per leasable square foot of residential space for multifamily rental apartment units, $450 per square foot for rental townhome units, $475 per square foot for for-sale townhome units, and $600 per square foot for single-family homes.

Parking Costs: This analysis uses an estimated cost of $5,000 per surface parking space. The cost for parking in garages attached to townhouse units and single-family homes is included in the construction costs for these unit types. The cost of any additional parking on single-family lots is included in the site prep costs for single-family lots.

Soft Costs: This analysis assumes that soft costs are equal to 20 percent of hard costs for multifamily (i.e., apartment and townhome) unit types and 15 percent of hard costs for singlefamily homes. The slightly higher soft costs for multifamily developments as compared to single-family homes reflects the added complexity associated with the design and engineering for multifamily projects as well as the potential for added entitlement costs. This soft cost estimate includes engineering, architecture, financing, and CEQA costs, as well as Town costrecovery fees for planning, permitting, and entitlements, but does not include impact fees.

Impact fees are included as a separate line item, discussed below.

Impact Fees: BAE calculated impact fees for each prototype based on current school district impact fees. The Town of Atherton does not assess any impact fees.

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 58 Market-Rate Residential Rents: This analysis assumes that rental rates for market-rate units in the multifamily rental apartment prototype will range from $4,125 per month for a one-bedroom unit to $7,228 per month for a three-bedroom unit. These rental rates are based on data from Costar on current multifamily rental rates for new developments in Menlo Park, Palo Alto, and Redwood City. The analysis assumes that rental rates for townhomes will average $5,980 per month for a two-bedroom unit and $7,360 per month for a three-bedroom unit. Due to a lack of build-to-rent townhomes in the Atherton area, these rent assumptions are based on asking rents among townhomes in Menlo Park, Palo Alto, and Redwood City that are rented out by individual property owners, as advertised on Zillow.

Affordable Residential Rents: The affordable rental rates used in this analysis are based on allowable rents for each unit size and income level as determined by the US Department of Housing and Urban Development for projects receiving low-income housing tax credits in San Mateo County.

Market-Rate Residential Sale Prices: This analysis assumes that average sale prices for marketrate townhouse units will range from $2.16 million for two-bedroom units to $2.75 million for four-bedroom units. These assumptions are based on an analysis of data from Redfin on sale prices among recently-sold, recently constructed townhouses in the Atherton area. Based on analysis of data from Redfin on sale prices among recently sold, recently constructed singlefamily homes in Atherton, the analysis assumes that the typical sale price for a single-family home without a deed-restricted ADU is equal to $13.65 million. For the sale price for the singlefamily home with a deed-restricted ADU, the analysis uses a sale price of $14.30 million. The difference in sale price for the two single-family prototypes is based on the capitalized value of the rental income from the ADU, using a rental rate equal to 80 percent of the area median income.

Affordable Residential Sale Prices: The affordable sale prices used in this analysis are based on the sale prices that would be affordable to households at the designated income levels, accounting for the costs of mortgage principal and interest, home insurance, property tax, and homeowners’ association fees.

Residential Rental Operating Expenses: This analysis uses an estimate of $15,000 per unit per year for all residential rental units.

Developer Fee: To cover staff overhead and other internal project costs, developers of rental projects include a one-time developer fee, which is estimated as a percentage of both hard and soft costs. Based on interviews with local developers, the fee typically amounts to roughly four percent of hard and soft costs.

Capitalization Rate: The capitalization rate (cap rate) is defined as the net operating income that a property generates divided by the estimated value of the property. Cap rates are a common

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 59 metric used to estimate the value of a rental property based on its net operating income, and vary by property type, location, and other property-specific characteristics. This analysis uses a

4.5 percent cap rate to value the rental properties. This capitalization rate is based on information obtained through interviews with developers that are familiar with the local market.

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 60 Table C-1: Multifamily Rental Apartment Pro-Forma, 20 du/acre Base Density, Inclusionary Scenario Source: BAE, 2024.

Development Program Assumptions Cost Assumptions Development Cost Analysis Site Size - acres / square feet 1.5 65,340 Construction Affordable Market Rate Total Project Total Units 51 Site Prep Costs (per site. sq.ft) $20 Site Preparation $157,098 $1,149,702 $1,306,800 Affordable (% - count) 12% 6 Hard Cost per net residential sf $400 Market Rate (% - count) 88% 45 Parking cost per space, Surface $5,000 Vertical Construction Leasable sq.ft. 50,950 Soft Costs (% of hard costs) 20% Hard Cost $2,450,000 $17,930,000 $20,380,000 Circulation % 18% School Impact Fees (per sq. ft.) $4.79 Parking Cost $40,000 $280,000 $320,000 Gross SF 62,134 Inclusionary Housing In-Lieu Fee (per SF) $0.00 Soft Costs $498,000 $3,642,000 $4,140,000 Total Parking Spaces 64 School Impact Fees $35,779 $261,844 $297,623 Parking spaces per du 1.25 Rental Revenue Inclusionary Housing In-Lieu Fee $0 $0 $0 Monthly Rent by AMI Level Subtotal $3,023,779 $22,113,844 $25,137,623 Base Density Units Unit Type 50% 60% MR
Units by AMI Level All 1-BR $1,742 $2,091 $4,125 Construction Financing Unit Mix Sq. Ft. 50% 60% MR Units 2-BR $2,091 $2,509 $5,250 Const. Loan Fees $20,676 $151,213 $171,889 1-BR 750 2 0 10 12 3-BR $2,415 $2,898 $7,228 Const. Loan Interest $151,191 $1,105,745 $1,256,936 2-BR 1,050 3 0 11 14
3-BR 1,475 1 0 3 4 Operating Costs Developer Fee $134,110 $980,820 $1,114,930 All Units 6 0 24 30 Annual op. cost per du $15,000
Vacancy Rate 5.0% Total Dev. Cost (excl. Land) $3,486,854 $25,501,324 $28,988,178 Summary Affordable Market-Rate Total Market Rate Cap Rate 4.50% Per Unit $581,142 $566,696 $568,396 Number of Units (# / %) 6 20% 24 80% 30 Per Net SF $569 $569 $569 Leasable Sq. Ft. 6,125 23,475 29,600 Construction Financing Per Gross SF $467 $467 $467 Gross Sq. Ft. 7,470 28,628 36,098 Loan-to-Cost Ratio 65% Parking Spaces 8 30 38 Loan Fees 1.0% Feasibility Analysis Drawdown Factor 65%
Density Bonus Units Interest rate 7.5% Affordable Market Rate Total Project Loan Term (months) 18 Project Income
Unit Mix Market-Rate Gross Scheduled Rents $146,064 $2,758,110 $2,904,174 1-BR 8 Developer Fee (as % of total project costs) 4% Less Vacancy ($7,303) ($137,906) ($145,209) 2-BR 9 Less Operating Expenses ($90,000) ($675,000) ($765,000) 3-BR 4 Developer Profit (as % of total project costs) 12% Net Operating Income $48,761 $1,945,205 $1,993,965 All Units 21
Density Bonus % 70.0% Capitalized Project Value $1,083,573 $43,226,767 $44,310,340 Sq. Ft. (leasable/gross) 21,350 26,037 Less Total Development Costs ($3,486,854) ($25,501,324) ($28,988,178) Parking Spaces 26 Less Developer Profit ($418,422) ($3,060,159) ($3,478,581) Residual Land Value (RLV) ($2,821,703) $14,665,284 $11,843,581 RLV per Unit ($470,284) $325,895 $232,227
RLV per Site sf ($367) $254 $181

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 60 Page 280 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 61 Table C-2: Rental Townhome Pro-Forma, 10 du/acre Base Density, Inclusionary Scenario Source: BAE, 2024.

Development Program Assumptions Cost Assumptions Development Cost Analysis Site Size - acres / square feet 1.0 43,560 Construction Affordable Market Rate Total Project Total Units 17 Site Prep Costs (per site. sq.ft) $20 Site Preparation $100,657 $770,543 $871,200 Affordable (% - count) 12% 2 Hard Cost per net residential sf $450 Market Rate (% - count) 88% 15 Soft Costs (% of hard costs) 20% Vertical Construction Leasable sq.ft. 25,100 School Impact Fees (per sq. ft.) $4.79 Hard Cost $1,305,000 $9,990,000 $11,295,000 Circulation % 0% Inclusionary Housing In-Lieu Fee (per SF) $0.00 Soft Costs $261,000 $1,998,000 $2,259,000 Gross SF 25,100 School Impact Fees $13,891 $106,338 $120,229 Total Parking Spaces 34 Rental Revenue Inclusionary Housing In-Lieu Fee $0 $0 $0 Parking spaces per du 2.00 Monthly Rent by AMI Level Subtotal $1,579,891 $12,094,338 $13,674,229 Unit Type 50% 60% MR
Base Density Units 2-BR $2,091 $2,509 $5,980 Construction Financing Units by AMI Level All 3-BR $2,415 $2,898 $7,360 Const. Loan Fees $10,924 $83,622 $94,545 Unit Mix Sq. Ft. 50% 60% MR Units Const. Loan Interest $79,879 $611,484 $691,362 2-BR 1,300 1 0 3 4 Operating Costs
3-BR 1,600 1 0 5 6 Annual op. cost per du $15,000 Developer Fee $70,854 $542,399 $613,253 All Units 2 0 8 10 Vacancy Rate 5.0%
Market Rate Cap Rate 4.50% Total Dev. Cost (excl. Land) $1,842,204 $14,102,387 $15,944,590 Summary Affordable Market-Rate Total Per Unit $921,102 $940,159 $937,917 Number of Units (# / %) 2 20% 8 80% 10 Construction Financing Per Net SF $635 $635 $635 Leasable Sq. Ft. 2,900 11,900 14,800 Loan-to-Cost Ratio 65% Per Gross SF $635 $635 $635 Gross Sq. Ft. 2,900 11,900 14,800 Loan Fees 1.0%
Parking Spaces 4 16 20 Drawdown Factor 65% Feasibility Analysis Interest rate 7.5%
Density Bonus Units Loan Term (months) 18 Affordable Market Rate Total Project Project Income
Unit Mix Market-Rate Developer Fee (as % of total project costs) 4% Gross Scheduled Rents $54,072 $1,225,440 $1,279,512 2-BR 3 Less Vacancy ($2,704) ($61,272) ($63,976)
3-BR 4 Developer Profit (as % of total project costs) 12% Less Operating Expenses ($30,000) ($225,000) ($255,000) All Units 7 Net Operating Income $21,368 $939,168 $960,536 Density Bonus % 70.0%
Capitalized Project Value $474,853 $20,870,400 $21,345,253 Sq. Ft. (leasable/gross) 10,300 10,300
Parking Spaces 14 Less Total Development Costs ($1,842,204) ($14,102,387) ($15,944,590) Less Developer Profit ($221,064) ($1,692,286) ($1,913,351) Residual Land Value (RLV) ($1,588,415) $5,075,727 $3,487,312 RLV per Unit ($794,207) $338,382 $205,136
RLV per Site sf ($310) $132 $80

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 61 Page 282 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 62 Table C-3: For-Sale Townhome Pro-Forma, 10 du/acre Base Density, Inclusionary Scenario Source: BAE, 2024.

Development Program Assumptions Cost Assumptions Development Cost Analysis Site Size - acres / square feet 1 43,560 Construction Affordable Market Rate Total Project Total Units 14 Site Prep Costs (per site. sq.ft) $20 Site Preparation $114,632 $756,568 $871,200 Affordable (% - count) 14% 2 Hard Cost per net residential sf $475 Market Rate (% - count) 86% 12 Soft Costs (% of hard costs) 20% Vertical Construction Total SF 26,600 School Impact Fees (per sq. ft.) $4.79 Hard Cost $1,662,500 $10,972,500 $12,635,000 Total Parking Spaces 28 Inclusionary Housing In-Lieu Fee (per SF) $0.00 Soft Costs $332,500 $2,194,500 $2,527,000 Parking spaces per du 2.00 School Impact Fees $16,765 $110,649 $127,414 Inclusionary Housing In-Lieu Fee $0 $0 $0
Base Density Units Sale Prices Subtotal $2,011,765 $13,277,649 $15,289,414 Units by AMI Level All Affordable Sale Price by AMI Level Unit Mix Sq. Ft. 70% 110% MR Units Unit Type 70% 110% MR Construction Financing 2-BR 1,600 1 0 1 2 2-BR $312,683 $525,208 $2,160,000 Const. Loan Fees $13,822 $91,222 $105,044 3-BR 1,900 1 0 6 7 3-BR $354,065 $590,088 $2,470,000 Const. Loan Interest $101,070 $667,064 $768,134 4-BR 2,200 0 0 1 1 4-BR $387,093 $642,044 $2,750,000
All Units 2 0 8 10 Total Dev. Cost (excl. Land) $2,241,288 $14,792,504 $17,033,792 Construction Financing Per Unit $1,120,644 $1,232,709 $1,216,699 Summary Affordable Market-Rate Total Loan-to-Cost Ratio 65% Per Gross SF $640 $640 $640 Number of Units (# / %) 2 20% 8 80% 10 Loan Fees 1.0%
Gross Sq. Ft. 3,500 15,200 18,700 Drawdown Factor 65% Feasibility Analysis Parking Spaces 4 16 20 Interest rate 7.5%
Loan Term (months) 18 Affordable Market Rate Total Project Density Bonus Units Project Revenue
Marketing Costs (as % of sale price) 3.0% Sales Revenue $666,748 $29,890,000 $30,556,748 Unit Mix Market-Rate Developer Profit (as % of total project costs) 10.0% Less Marketing Costs ($20,002) ($896,700) ($916,702) 2-BR 0 Net Sales Revenue $646,745 $28,993,300 $29,640,045 3-BR 3
4-BR 1 Less Total Development Costs ($2,241,288) ($14,792,504) ($17,033,792) All Units 4 Less Developer Profit ($224,129) ($1,479,250) ($1,703,379) Density Bonus % 35.0% Residual Land Value (RLV) ($1,818,672) $12,721,546 $10,902,874 RLV per Unit ($909,336) $1,060,129 $778,777
Gross SF 7,900 RLV per Site sf ($292) $341 $250
Parking Spaces 8

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 62 Page 284 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 63 Table C-4: For-Sale Single-Family Home Prototype Pro-Forma, Inclusionary Scenario (with Deed-Restricted ADU) Source: BAE, 2024.

Development Program Assumptions Development Cost Analysis Site Size - acres / square feet 1 43,560 Site Preparation $871,200 Total Units 2
Primary Home - sq. ft. / # 7,000 1 Vertical Construction Deed-Restricted ADU - sq. ft. / # 1,000 1 Hard Cost $4,800,000 Total SF 8,000 Soft Costs $720,000
School Impact Fees $38,320
Cost Assumptions Inclusionary Housing In-Lieu Fee $0
Subtotal $5,558,320
Construction
Site Prep Costs (per site. sq.ft) $20 Construction Financing Hard Cost per net residential sf $600 Const. Loan Fees $41,792 Soft Costs (% of hard costs) 15% Const. Loan Interest $203,735 School Impact Fees (per sq. ft.) $4.79
Inclusionary Housing In-Lieu Fee (per SF) $0.00 Total Dev. Cost (excl. Land) $6,675,047 Per Gross SF $834
Sale Price $14,300,000
Feasibility Analysis
Construction Financing
Loan-to-Cost Ratio 65% Total Project
Loan Fees 1.0% Project Revenue
Drawdown Factor 65% Sales Revenue $14,300,000
Interest rate 7.5% Less Marketing Costs ($429,000)
Loan Term (months) 12 Net Sales Revenue $13,871,000
Marketing Costs (as % of sale price) 3.0% Less Total Development Costs ($6,675,047) Developer Profit (as % of total project costs) 10.0% Less Developer Profit ($667,505) Residual Land Value (RLV) $6,528,448
RLV per Site sf $150

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 63 Page 286 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 64 Table C-5: Multifamily Rental Apartment Pro-Forma, 20 du/acre Base Density, No Inclusionary/No In-Lieu Fee Scenario Source: BAE, 2024.

Development Program Assumptions Cost Assumptions Development Cost Analysis Site Size - acres / square feet 1.5 65,340 Construction Affordable Market Rate Total Project Total Units 30 Site Prep Costs (per site. sq.ft) $20 Site Preparation $0 $1,306,800 $1,306,800 Affordable (% - count) 0% 0 Hard Cost per net residential sf $450 Market Rate (% - count) 100% 30 Soft Costs (% of hard costs) 20% Vertical Construction Leasable sq.ft. 44,400 School Impact Fees (per sq. ft.) $4.79 Hard Cost $0 $19,980,000 $19,980,000 Circulation % 0% Inclusionary Housing In-Lieu Fee (per SF) $0.00 Soft Costs $0 $3,996,000 $3,996,000 Gross SF 44,400 School Impact Fees $0 $212,676 $212,676 Total Parking Spaces 60 Rental Revenue Inclusionary Housing In-Lieu Fee $0 $0 $0 Parking spaces per du 2.00 Monthly Rent by AMI Level Subtotal $0 $24,188,676 $24,188,676 Unit Type 50% 80% MR
Base Density Units 2-BR $2,091 $3,346 $5,980 Construction Financing Units by AMI Level All 3-BR $2,415 $3,865 $7,360 Const. Loan Fees $0 $165,721 $165,721 Unit Mix Sq. Ft. 50% 80% MR Units Const. Loan Interest $0 $1,211,832 $1,211,832 2-BR 1,300 0 0 12 12 Operating Costs
3-BR 1,600 0 0 18 18 Annual op. cost per du $15,000 Developer Fee $0 $1,074,921 $1,074,921 All Units 0 0 30 30 Vacancy Rate 5.0%
Market Rate Cap Rate 4.50% Total Dev. Cost (excl. Land) $0 $27,947,950 $27,947,950 Summary Affordable Market-Rate Total Per Unit N/A $931,598 $931,598 Number of Units (# / %) 0 0% 30 100% 30 Construction Financing Per Net SF N/A $629 $629 Leasable Sq. Ft. 0 44,400 44,400 Loan-to-Cost Ratio 65% Per Gross SF N/A $629 $629 Gross Sq. Ft. 0 44,400 44,400 Loan Fees 1.0%
Parking Spaces 0 60 60 Drawdown Factor 65% Feasibility Analysis Interest rate 7.5%
Density Bonus Units Loan Term (months) 18 Affordable Market Rate Total Project Project Income
Unit Mix Market-Rate Developer Fee (as % of total project costs) 4% Gross Scheduled Rents $0 $2,450,880 $2,450,880 2-BR 0 Less Vacancy $0 ($122,544) ($122,544)
3-BR 0 Developer Profit (as % of total project costs) 12% Less Operating Expenses $0 ($450,000) ($450,000) All Units 0 Net Operating Income $0 $1,878,336 $1,878,336 Density Bonus % 0.0%
Capitalized Project Value $0 $41,740,800 $41,740,800
Sq. Ft. (leasable/gross) 0 0
Parking Spaces 0 Less Total Development Costs $0 ($27,947,950) ($27,947,950) Less Developer Profit $0 ($3,353,754) ($3,353,754)
Residual Land Value (RLV) $0 $10,439,096 $10,439,096
RLV per Unit N/A $347,970 $347,970
RLV per Site sf N/A $160 $160

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 64 Page 288 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 65 Table C-6: Rental Townhome Pro-Forma, 10 du/acre Base Density, No Inclusionary/No In-Lieu Fee Scenario Source: BAE, 2024.

Development Program Assumptions Cost Assumptions Development Cost Analysis Site Size - acres / square feet 1 43,560 Construction Affordable Market Rate Total Project Total Units 10 Site Prep Costs (per site. sq.ft) $20 Site Preparation $0 $871,200 $871,200 Affordable (% - count) 0% 0 Hard Cost per net residential sf $450 Market Rate (% - count) 100% 10 Soft Costs (% of hard costs) 20% Vertical Construction Leasable sq.ft. 14,800 School Impact Fees (per sq. ft.) $4.79 Hard Cost $0 $6,660,000 $6,660,000 Circulation % 0% Inclusionary Housing In-Lieu Fee (per SF) $0.00 Soft Costs $0 $1,332,000 $1,332,000 Gross SF 14,800 School Impact Fees $0 $70,892 $70,892
Total Parking Spaces 20 Rental Revenue Inclusionary Housing In-Lieu Fee $0 $0 $0 Parking spaces per du 2.00 Monthly Rent by AMI Level Subtotal $0 $8,062,892 $8,062,892 Unit Type 50% 80% MR
Base Density Units 2-BR $2,091 $3,346 $5,980 Construction Financing Units by AMI Level All 3-BR $2,415 $3,865 $7,360 Const. Loan Fees $0 $58,072 $58,072 Unit Mix Sq. Ft. 50% 80% MR Units Const. Loan Interest $0 $424,649 $424,649 2-BR 1,300 0 0 4 4 Operating Costs
3-BR 1,600 0 0 6 6 Annual op. cost per du $15,000 Developer Fee $0 $376,672 $376,672 All Units 0 0 10 10 Vacancy Rate 5.0%
Market Rate Cap Rate 4.50% Total Dev. Cost (excl. Land) $0 $9,793,485 $9,793,485 Summary Affordable Market-Rate Total Per Unit N/A $979,348 $979,348 Number of Units (# / %) 0 0% 10 100% 10 Construction Financing Per Net SF N/A $662 $662 Leasable Sq. Ft. 0 14,800 14,800 Loan-to-Cost Ratio 65% Per Gross SF N/A $662 $662 Gross Sq. Ft. 0 14,800 14,800 Loan Fees 1.0%
Parking Spaces 0 20 20 Drawdown Factor 65% Feasibility Analysis Interest rate 7.5%
Density Bonus Units Loan Term (months) 18 Affordable Market Rate Total Project Project Income
Unit Mix Market-Rate Developer Fee (as % of total project costs) 4% Gross Scheduled Rents $0 $816,960 $816,960 2-BR 0 Less Vacancy $0 ($40,848) ($40,848)
3-BR 0 Developer Profit (as % of total project costs) 12% Less Operating Expenses $0 ($150,000) ($150,000) All Units 0 Net Operating Income $0 $626,112 $626,112
Density Bonus % 0.0%
Capitalized Project Value $0 $13,913,600 $13,913,600
Sq. Ft. (leasable/gross) 0 0
Parking Spaces 0 Less Total Development Costs $0 ($9,793,485) ($9,793,485) Less Developer Profit $0 ($1,175,218) ($1,175,218)
Residual Land Value (RLV) $0 $2,944,897 $2,944,897
RLV per Unit N/A $294,490 $294,490
RLV per Site sf N/A $68 $68

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 65 Page 290 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 66 Table C-7: For-Sale Townhome Pro-Forma, 10 du/acre Base Density, No Inclusionary/No In-Lieu Fee Scenario Source: BAE, 2024.

Development Program Assumptions Cost Assumptions Development Cost Analysis Site Size - acres / square feet 1 43,560 Construction Affordable Market Rate Total Project Total Units 10 Site Prep Costs (per site. sq.ft) $20 Site Preparation $0 $871,200 $871,200 Affordable (% - count) 0% 0 Hard Cost per net residential sf $475 Market Rate (% - count) 100% 10 Soft Costs (% of hard costs) 20% Vertical Construction Total SF 20,200 School Impact Fees (per sq. ft.) $4.79 Hard Cost $0 $9,595,000 $9,595,000 Total Parking Spaces 20 Inclusionary Housing In-Lieu Fee (per SF) $0.00 Soft Costs $0 $1,919,000 $1,919,000 Parking spaces per du 2.00 School Impact Fees $0 $96,758 $96,758 Inclusionary Housing In-Lieu Fee $0 $0 $0
Base Density Units Sale Prices Subtotal $0 $11,610,758 $11,610,758 Units by AMI Level All Monthly Rent by AMI Level
Unit Mix Sq. Ft. 70% 110% MR Units Unit Type 70% 110% MR Construction Financing 2-BR 1,600 0 0 0 0 2-BR $312,683 $525,208 $2,160,000 Const. Loan Fees $0 $81,133 $81,133 3-BR 1,900 0 0 6 6 3-BR $354,065 $590,088 $2,470,000 Const. Loan Interest $0 $593,283 $593,283 4-BR 2,200 0 0 4 4 4-BR $387,093 $642,044 $2,750,000
All Units 0 0 10 10 Total Dev. Cost (excl. Land) $0 $13,156,374 $13,156,374 Construction Financing Per Unit N/A $1,315,637 $1,315,637 Summary Affordable Market-Rate Total Loan-to-Cost Ratio 65% Per Gross SF N/A $651 $651 Number of Units (# / %) 0 0% 10 100% 10 Loan Fees 1.0%
Gross Sq. Ft. 0 20,200 20,200 Drawdown Factor 65% Feasibility Analysis Parking Spaces 0 20 20 Interest rate 7.5%
Loan Term (months) 18 Affordable Market Rate Total Project Density Bonus Units Project Revenue
Marketing Costs (as % of sale price) 3.0% Sales Revenue $0 $25,820,000 $25,820,000 Unit Mix Market-Rate Developer Profit (as % of total project costs) 10.0% Less Marketing Costs $0 ($774,600) ($774,600) 2-BR 0 Net Sales Revenue $0 $25,045,400 $25,045,400
3-BR 0
4-BR 0 Less Total Development Costs $0 ($13,156,374) ($13,156,374) All Units 0 Less Developer Profit $0 ($1,315,637) ($1,315,637) Density Bonus % 0.0% Residual Land Value (RLV) $0 $10,573,389 $10,573,389 RLV per Unit N/A $1,057,339 $1,057,339
Gross SF 0 RLV per Site sf N/A $243 $243
Parking Spaces 0

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 66 Page 292 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 67 Table C-8: For-Sale Single-Family Home Prototype Pro-Forma, No Inclusionary/No In-Lieu Fee Scenario Source: BAE, 2024.

Development Program Assumptions Development Cost Analysis Site Size - acres / square feet 1 43,560 Site Preparation $871,200 Total Units 1
Total SF 7,000 Vertical Construction
Hard Cost $4,200,000
Cost Assumptions Soft Costs $630,000
School Impact Fees $33,530
Construction Inclusionary Housing In-Lieu Fee $0
Site Prep Costs (per site. sq.ft) $20 Subtotal $4,863,530 Hard Cost per net residential sf $600
Soft Costs (% of hard costs) 15% Construction Financing School Impact Fees (per sq. ft.) $4.79 Const. Loan Fees $37,276 Inclusionary Housing In-Lieu Fee (per SF) $0.00 Const. Loan Interest $181,719 Sale Price $13,650,000 Total Dev. Cost (excl. Land) $5,953,725 Per Gross SF $851
Construction Financing
Loan-to-Cost Ratio 65% Feasibility Analysis
Loan Fees 1.0%
Drawdown Factor 65% Total Project
Interest rate 7.5% Project Revenue
Loan Term (months) 12 Sales Revenue $13,650,000
Less Marketing Costs ($409,500)
Marketing Costs (as % of sale price) 3.0% Net Sales Revenue $13,240,500 Developer Profit (as % of total project costs) 10.0%
Less Total Development Costs ($5,953,725)
Less Developer Profit ($595,373)
Residual Land Value (RLV) $6,691,402
RLV per Site sf $154

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix C: Residential Pro Formas 67 Page 294 of 320 Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix D: Overview of IMPLAN 68 APPENDIX D: OVERVIEW OF IMPLAN
This appendix provides additional clarification of the workings of the IMPLAN input-output model. It provides a step-by-step account of how IMPLAN estimates economic impacts. This section begins with an overview of the data that IMPLAN uses internally and moves forward through the process of how the model estimates the impacts of new commercial and housing projects.

What is IMPLAN?
IMPLAN is an input-output model that estimates the total economic implications of new economic activity within a specified geography. The model uses national industry data and county-level economic data to generate a series of multipliers, which in turn estimate the total economic implications of economic activity.

At the heart of the model is a national input-output dollar flow table called the Social Accounting Matrix (SAM). Unlike other static input-output models, which just measure the purchasing relationships between industry and household sectors, SAM also measures the economic relationships between government, industry, and household sectors, allowing IMPLAN to model transfer payments such as unemployment insurance. Thus, for the specified region, the input-output table accounts for all the dollar flows between the different sectors within the economy.

National Industry Data. The model uses national production functions for 546 sectors to determine how an industry spends its operating receipts to produce its commodities. The model also uses a national matrix to determine the byproducts9 that each industry generates. To analyze the impacts of household spending, the model treats households as an “industry” to determining their expenditure patterns. IMPLAN couples the national production functions with a variety of county-level economic data to determine the impacts for our example.

County-Level Economic Data. In order to estimate the county-level impacts, IMPLAN combines national industry production functions with county-level economic data. IMPLAN collects data from a variety of economic data sources to generate average output, employment, and productivity for each of the industries in a given county. It also collects data on average prices for all of the goods sold in the local economy. In this analysis, IMPLAN uses economic data for San Mateo County. IMPLAN gathers data on the types and amount of output that each industry generates within the County. In addition, the IMPLAN model uses county-level data on the prices of goods and household expenditures to determine the consumption functions of regional households and local government, taking into account the availability of each commodity within the specified geography. 9 The byproducts refer to any secondary commodities that the industry creates.

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix D: Overview of IMPLAN 69 Multipliers. IMPLAN combines these data to generate a series of SAM-type multipliers for the local economy. The multiplier measures the amount of total economic activity that results from an industry (or household) spending an additional dollar in the local economy. Based on these multipliers, IMPLAN generates a series of tables to show the economic event’s direct, indirect, and induced impacts to gross receipts, or output, within each of the model’s 546 sectors. These outputs have been described above, and also are described here:
▪ Direct Impacts. Direct impacts refer to the dollar value of economic activity available to circulate through the economy and the jobs associated with that economic activity. In the case of new residential development, the direct impacts are equal to the new households’ discretionary spending. The direct impacts do not include household savings and payments to federal, state, and local taxes, as these payments do not circulate through the economy.

It should be noted that impacts from retail expenditures differ significantly between the total economic value of retail and the amount available to circulate through the local economy. The nature of retail expenditures accounts for this difference. The model assumes that only the retail markup impacts the local economy, particularly for industries heavily populated with national firms such as gas stations and grocery stores. Since local stores buy goods from wholesalers and manufacturers outside of the area, and corporate profits also leave the local economy, only the retail markup will be available for distribution within the local economy. To the extent that retailers’ headquarters are located within the county or region, the model allocates their portions of the impacts to the local economy. ▪ Indirect Impacts. The indirect impacts refer to the impact of local industries buying goods and services from other local industries, and to the jobs supported by those purchases. The cycle of spending works its way backward through the supply chain until all money leaks from the local economy, either through imports or by payments to income and taxes. For capital projects this would include payments for construction inputs such as wood, steel, office supplies, and any other non-labor payments that a construction firm would purchase in the building process. ▪ Induced Impacts. The induced impacts refer to the dollar and employment impacts of household spending by the employees generated by the direct and indirect impacts. In other words, induced impacts result from the household spending of employees of business establishments that the new households patronize (direct) and their suppliers (indirect). The model accounts for local commute patterns in the geography. For example, if 20 percent of construction workers who work in the region live outside of the region, the model will allocate 80 percent of labor’s disposable income into the model to generate induced impact estimates.

The model excludes payments to federal and state taxes and savings based on the geography’s average local tax and savings rates. Thus, only the disposable incomes from local workers are included in the model.

Atherton Inclusionary Housing & In-Lieu Fee Study | Appendix D: Overview of IMPLAN 70 Specifying the “Event” and Running the Model
Once the model is built for the specified geographies, it is time to specify the “event” that the model will analyze and run the model.

Specifying the “Event.” The “event” refers to the total economic value of industry output that the analyst is considering. For example, in the case of the ongoing economic impacts of a new institutional development such as a school, the “event” would be the operations of a school, including the resulting new jobs and the worker compensation.

Running the Model. Once the event is specified, IMPLAN runs the event through the model to generate the results. By default, IMPLAN applies the local data on average output per worker and compensation per worker to determine the direct impacts. The model then applies the value of the event to the national production functions and runs a number of iterations of this value through the production functions for the local economy to determine the indirect and induced impacts. For each iteration, the model removes expenditures to government, savings, and for goods bought outside of the local economy so that the results only include those dollars that impact the local economy.

Summarizing the Impacts
Once the model is run, IMPLAN generates a series of output tables to show the direct, indirect, and induced impacts within each of the model’s 546 sectors. IMPLAN generates these tables for three types of impacts: employment, output, and value added. The IMPLAN analysis of this study is focused on the employment impacts.
• Employment shows the number of employees needed to support the economic activity in the local economy. It should be noted that for annual impacts of ongoing operations, the employment figure shown represents the amount of employment needed to support that activity for a year. Furthermore, IMPLAN reports the number of jobs based on average output per employee for a given industry within the geography. This is not necessarily the same as the number of full-time positions.
• Output refers to the total economic value of the project in the local economy. • Value Added shows the total income that the event generates in the local economy. This income includes:
o Employee Compensation – total payroll costs, including benefits o Proprietary Income – payments received by self-employed individuals as income o Other Property Type Income – payments for rents, royalties, and dividends o Indirect Business Taxes – excise taxes, property taxes, fees, and sales taxes paid by businesses. These taxes occur during the normal operation of businesses, but do not include taxes on profits or income.

DRAFT RESOLUTION NO. 26-XX

A RESOLUTION OF THE CITY COUNCIL OF THE TOWN OF ATHERTON TO

ADOPT AN INCLUSIONARY HOUSING FEE
WHEREAS, on or around May 5, 2025, the California Department of Housing and Community Development certified the Town of Atherton's 2023-2031 Housing Element as compliant with state law; and
WHEREAS, Program 3.814 of the 2023-2031 Housing Element identifies the adoption of an Inclusionary Housing Ordinance that would serve as a tool to facilitate the development of affordable housing; and
WHEREAS, the Town's Inclusionary Housing Ordinance will create housing opportunities for essential workers such as teachers, healthcare workers, public sector and public safety employees to live in the community in which they work; and WHEREAS, the Town retained Bay Area Economics (BAE), Inc. to prepare a study that analyzed the fees necessary to support the construction of affordable housing, the feasibility of imposing such fees on new development, and how new market-rate units are filled with residents who spend in the local economy, thereby creating a demand for lower waged earners that need affordable housing; and
WHEREAS, there is a shortage of adequate, affordable housing for extremely low, very low, lower and moderate income households in Atherton, as evidenced by the 2023-2031 Housing Element; and
WHEREAS, the Association of Bay Area Governments (ABAG) and Metropolitan Transportation Commission (MTC) have assigned the Town a total housing need of 348 dwelling units, of which 94 are very low-income, 54 are low-income, 56 are moderate-income and 144 are above moderate-income; and
WHEREAS, the Town adopted an Inclusionary Housing Ordinance at a City Council meeting on February 18, 2026, that will substantially advance the Town's legitimate interest in providing additional housing affordable to all income levels and dispersed throughout the Town because inclusionary units required by the ordinance codified in this Chapter, including both rental and ownership units, must be affordable to either Very Low, Low, and Moderate Income Households; and
WHEREAS, the Inclusionary Housing Ordinance identifies the establishment of an inlieu fee and identified the “point of indifference” calculation method from the BAE study as the upper limit used to set fees; and
WHEREAS, on March 18, 2026 the City Council held a duly noticed public hearing to consider this Resolution and adopt the in-lieu fee methodology as provided in the BAE analysis and set the in-lieu fees; and
WHEREAS, this resolution and the inclusionary housing in-lieu fee it establishes is exempt from environmental review under the general rule section 15061(b)(3) of the California Page 298 of 320 Environmental Quality Act (“CEQA”) Guidelines because CEQA applies only to projects that have the potential for causing a significant effect on the environment, and it can be seen with certainty that there is no possibility that this resolution and the inclusionary housing in-lieu fee it establishes creates changes in the physical environment, or results in any changes to the General Plan or Implementing Zoning Ordinance land use policies, and any development that occurs in the future subject to such standards will undergo an independent analysis pursuant to the requirements of CEQA; and
WHEREAS, this resolution and the inclusionary housing in-lieu fee it establishes is statutorily exempt pursuant to Section 15283 of the CEQA Guidelines because this resolution and the inclusionary housing in-lieu fee reflect determinations by the City regarding the need to adequately provide for the City’s share of regional housing needs pursuant to Government Code section 65584; and
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the Town of Atherton, as follows:

1. Finds that the facts set forth in the recitals to this Resolution are true and correct, and establish the factual basis for the City Council’s adoption of this Resolution; and

2. Adopts the inclusionary in-lieu fees for rental and ownership units as shown in Exhibit A, attached and incorporated by reference; and

3. That the proposed fees will be added to the Town’s Master Fee Schedule; and

4. That the inclusionary housing in-lieu fee will be administered and reviewed in accordance with Section 17.57.050 of the Atherton Municipal Code.

I hereby certify that the foregoing Resolution was duly and regularly passed and adopted by the City Council of the Town of Atherton at a regular meeting thereof held on this 18th day of March 2026, by the following vote:

AYES: Council Members:

NOES: Council Members:

ABSENT: Council Members:

ABSTAIN: Council Members:
____________________________
Stacy Holland, MAYOR
Town of Atherton

ATTEST:
________________________
Anthony Suber, City Clerk
APPROVED AS TO FORM:
_________________________
Mona Ebrahimi, City Attorney

EXHIBIT A
Town of Atherton
Inclusionary Housing Fees
Inclusionary Housing In-Lieu Fees
Rental Units $150 per square foot of net residential development Ownership Units $200 per square foot of net residential development

Item No. 8
Town of Atherton
CITY COUNCIL STAFF REPORT – PUBLIC HEARINGS
TO: HONORABLE MAYOR AND CITY COUNCIL

GEORGE RODERICKS, CITY MANAGER
FROM: FRED LUSTENBERGER, BUILDING OFFCIAL
DATE: MARCH 18, 2026
SUBJECT: WAIVE THE FIRST READING AND INTRODUCE BY TITLE ONLY, AN ORDINANCE TO AMEND TITLE 15 OF THE

ATHERTON MUNICIPAL CODE TO UPDATE HOLIDAYS

DURING WHICH CERTAIN CONSTRUCTION AND

CONSTRUCTION-RELATED ACTIVITY IS PROHIBITED

RECOMMENDATION
Waive the first reading and introduce by title only, an ordinance to amend Title 15 of the Atherton Municipal Code to update holidays during which certain construction and construction-related activity is prohibited.

BACKGROUND / ANALYSIS
The Town has adopted regulations limiting construction and construction-related activities within the Town at certain times. These time limits are detailed in Section 15.40.120 of the Atherton Municipal code and include, but are not limited to Saturdays, Sundays, and holidays. Holidays are defined in Subsection C of Section 15.40.110 as follows:
“Holidays” means those days declared legal holidays by the Governor of the state of California, those days set forth in Government Code Section 6700(a)(1)-(5), (7)-(9), (13)-(14), and fourth Thursday and Friday in November (Thanksgiving and day after Thanksgiving).

In addition to these limitations imposed on construction and construction-related activities through the Atherton Municipal Code, for ease of reference for contractors and property owners, the Town annually publishes a schedule of days when construction and construction-related activities are prohibited. The most recent such schedule is a one-page document called “Construction and Delivery Hours and Holidays for 2026” which is currently published on the Town’s website. This document is authorized by Subsection B of Section 15.40.120 as follows:

Construction, pickup and delivery shall be prohibited on any property within the Town on Saturdays, Sundays, and any holiday. Page 303 of 320
Staff Report – Amendment of Title 15 Modifying Construction Time Limits March 2, 2026

As currently enacted, there are three issues:
1) The definition of holidays in Title 15 is aligned with Government Code 6700, which is inconsistent with the holidays currently observed by the Town; 2) Government Code 6700 has been amended over time, and the references are no longer consistent with the Town’s original intent for observed holidays; and 3) The section does not specify that these holidays must also be observed by the Town and does not identify by name each of the observed holidays.

Section 6700 currently (as of 1/1/2025) identifies eighteen (18) holidays plus Thanksgiving, when it is duly appointed by the Governor or the President, which totals seven more holidays than what the Town currently observes. Unless the Town decides to designate some, or all, of these holidays as exempt from the requirements of Section 15.40.120 of the Atherton Municipal Code, the loss of additional construction workdays would negatively impact the ability of builders and property owners to successfully complete their projects within the Construction Time Limits imposed by Section

15.40.180.

The proposed Ordinance amendment aligns Section 15.40.110 with the State Holidays as promulgated by the California Secretary of State, which, with one exception, closely matches those currently observed by the Town. The amendment also specifies that the holiday must also be formally observed by the Town. Lastly, although not typically a construction holiday, the amendment adds Columbus Day as an observed holiday since it is also observed by the Town. This proposed amendment will codify what holidays the Town currently observes.

Further, as currently enacted, 15.40.120 prohibits construction work on all observed Town holidays.

However, this is inconsistent with the past and ongoing practice of allowing construction work on Columbus Day and the day after Thanksgiving. The proposed amendment to this section will simply codify an existing, long-standing practice.

In summary, this ordinance would amend the Atherton Municipal Code to resolve any existing discrepancies, conflicts, or ambiguities between the holidays currently observed by the Town and those specified in Title 15 of the Code. It would also clearly identify on which observed holidays construction work is to be permitted.

FISCAL IMPACT
None.

PUBLIC NOTICE
Public notification was achieved by posting the agenda, with this agenda item being listed, at least 72 hours prior to the meeting in print and electronically. Information about the project is also disseminated via the Town’s electronic News Flash and Atherton Online. There are approximately 1,200 subscribers to the Town’s electronic News Flash publications. Subscribers include residents as well as stakeholders – to include, but be not limited to, media outlets, school districts, Menlo Park Fire District, service providers (water, power, and sewer), and regional elected officials.

Staff Report – Amendment of Title 15 Modifying Construction Time Limits March 2, 2026

COMMISSION/COMMITTEE FEEDBACK/REFERRAL
This item ____ has or X has not been before a Town Committee or Commission. ____ Audit/Finance Committee (meets every other month)
____ Bicycle/Pedestrian Committee (meets as needed) ____ Civic Center Advisory Committee (meets as needed)
____ Environmental Programs Committee (meets every other month) ____ Park and Recreation Committee (meets each month)
____ Planning Commission (meets each month)
____ Rail Committee (meets every other month)
____ Transportation Committee (meets every other month)

ATTACHMENTS

1. Ordinance Amending Title 15 of the Atherton Municipal Code 2.

Construction and Delivery Hours and Holidays for 2026
.

Staff Report – Amendment of Title 15 Modifying Construction Time Limits March 2, 2026

1919852.2 14537-009 O20XX-__ Page 1 of 2 Type adopted date of ordinance here

ORDINANCE XXX

ORDINANCE OF THE CITY COUNCIL OF THE TOWN OF

ATHERTON, STATE OF CALIFORNIA, AMENDING
CHAPTER 15.40 OF THE ATHERTON MUNICIPAL CODE
WHEREAS, the City Council has adopted various ordinances regulating construction within the Town as codified at Chapter 15.40 of the Atherton Municipal Code; and
WHEREAS, for ease of reference for contractors and property owners seeking to undertake construction within the Town, the Town annually publishes a schedule of days when certain construction and construction-related activities are prohibited in the Construction and Delivery Hours and Holidays (“Annual Schedule”); and WHEREAS, the City Council wishes to harmonize the provisions of the Atherton Municipal Code with the Annual Schedule posted on the Town’s website for 2026; and WHEREAS, the City Council has considered all information related to this matter, as presented at the public meeting of the City Council identified herein, including any supporting reports by City Staff, and any information provided during public meetings.

THE CITY COUNCIL OF THE TOWN OF ATHERTON DOES ORDAIN AS FOLLOWS:

SECTION 1: Amendment. Atherton Municipal Code section 15.40.110 Definitions, subsection C is hereby amended to read as follows:

C. “Holiday” means any day declared a State Holiday by the California Secretary of State and observed by the Town of Atherton, and Columbus Day. These holidays are New Year’s Day, Martin Luther King Jr. Day, President’s Day, Memorial Day, Independence Day, Labor Day, Columbus Day, Veteran’s Day, Thanksgiving Day, the day after Thanksgiving Day, and Christmas Day.

SECTION 2: Amendment. Atherton Municipal Code section 15.40.120 Time Limits, subsection B is hereby amended to read as follows:

B. Construction, pickup and delivery shall be prohibited on any property within the Town on Saturdays, Sundays, and any holiday except for Columbus Day and the day after Thanksgiving.

SECTION 3: Severability. If any section, subsection, subdivision, paragraph, clause or phrase in this Ordinance, or any part thereof, is for any reason held to be invalid or unconstitutional, such decision shall not affect the validity of the remaining sections or portions of this Ordinance or any part thereof. The City Council hereby declares that it would have passed each section, subsection, subdivision, paragraph, sentence, clause,

1919852.2 14537-009 O20XX-__ Page 2 of 2 Type adop
or phrase of this Ordinance, irrespective of the fact that any one or more sections, subsections, subdivisions, paragraphs, sentences, clauses, or phrases may be declared invalid or unconstitutional.

SECTION 4: Effective Date. This Ordinance shall become effective thirty (30) days following adoption.

Town of Atherton, a municipal corporation
MAYOR: __________________________________
ATTEST: __________________________________

ANTHONY SUBER, CITY CLERK
APPROVED AS TO FORM: __________________________________ MONA G. EBRAHIMI, CITY ATTORNEY

STATE OF CALIFORNIA
COUNTY OF SAN MATEO SS:

TOWN OF ATHERTON
I, Anthony Suber, City Clerk of the Town of Atherton, do hereby certify that the foregoing Ordinance had its first reading and was introduced during the public meeting of the City Council on the ___ day of ______________, 2026, and had its second reading and was adopted and passed during the public meeting of the City Council on the ___ day of _____________, 2026, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

ATTEST: __________________________

ANTHONY SUBER
City Clerk

Rev 1/1/2026 JM

CONSTRUCTION &

DELIVERY HOURS
and HOLIDAYS for
2026
Town of Atherton
Building Department
80 Fair Oaks Lane
Atherton, California 94027
Phone: (650) 752-0560
Inspection requests:
(650) 752-0542
Construction, deliveries, and or servicing of any item on site shall be prohibited as follows:

BEFORE 8:00 AM and AFTER 5:00 PM WEEKDAYS
SATURDAYS, SUNDAYS, and the FOLLOWING HOLIDAYS:

1. NEW YEARS' DAY - JANUARY 1, 2026

2. MARTIN LUTHER KING JR. DAY - JANUARY 19, 2026

3. PRESIDENT'S DAY- FEBRUARY 16, 2026

4. MEMORIAL DAY- MAY 25, 2026

5. INDEPENDENCE DAY - JULY 3, 2026

6. LABOR DAY- SEPTEMBER 7, 2026

7. COLUMBUS DAY — OCTOBER 12, 2026 (Construction Allowed)

8. VETERAN'S DAY- NOVEMBER 11, 2026

9. THANKSGIVING - NOVEMBER 26 & 27, 2026 (Construction Allowed on the 27th)

10. CHRISTMAS DAY - DECEMBER 25th, 2026
Town offices will be closed with no inspections on the above-mentioned holidays. Construction activity is allowed on Columbus Day, October 12, 2026, the day after Thanksgiving November 27, 2026 and the entire week between Christmas and New Year's Day: December 26 — December 31, 2026.

Item No. 9
Town of Atherton
CITY COUNCIL STAFF REPORT – REGULAR AGENDA
TO: HONORABLE MAYOR, CITY COUNCIL, AND GEORGE

RODERICKS, CITY MANAGER
FROM: CHRISTABEL SORIA MENDOZA, MANAGEMENT ANALYST II
DATE: MARCH 18, 2026
SUBJECT: REVIEW OF ELECTRIC & GAS EQUIPMENT USE AT

HOLBROOK-PALMER PARK

RECOMMENDATION
Staff recommends that the City Council review and concur with staff’s proposal to transition select Town owned landscaping equipment from gas powered to electric alternatives, where feasible.

BACKGROUND
In a previous Council discussion, the Environmental Programs Committee (EPC) proposed a resolution requesting the establishment of a pilot program at Holbrook-Palmer Park to evaluate the use of battery-operated gardening and landscaping equipment. The proposed pilot program was intended to compare the environmental, health, operational, and economic impacts of batteryoperated equipment as substitutes for existing gas-powered equipment.

As part of that discussion, staff began coordinating with the Town’s landscape maintenance contractor, BrightView Landscape Services, to better understand the equipment currently used to maintain park facilities and the availability of battery powered alternatives, if needed. Staff requested information regarding the types of equipment used at Town facilities, the feasibility of electric alternatives, and operational considerations such as run time, charging needs, performance, and potential cost implications.

ANALYSIS
BrightView provided an overview of the equipment currently used in their maintenance operations and indicated that their team already owns and operates electric landscaping equipment at the Park for most routine maintenance activities. BrightView outlined the equipment they currently own and utilize when performing landscape maintenance services at Town facilities (Attachment 1).

In addition to contractor owned equipment, BrightView noted that their team and Town maintenance personnel occasionally use certain Town owned tools, including chainsaws and trimming equipment, on an as-needed basis when performing work at the Park. These Town owned tools are currently gas powered (Attachment 1).

Based on this information, staff evaluated opportunities to transition select Town owned tools to electric alternatives. A few pieces of equipment were identified as feasible items for electrification, including a stick edger, chainsaw, and potentially a riding mower. Commercial electric versions of these tools are widely available and commonly used in landscaping operations. However, while many handheld tools have well established electric alternatives, some larger equipment may still present operational limitations depending on the intensity and duration of use.

Transitioning these tools to electric alternatives would support the Town’s sustainability goals by reducing emissions associated with gas powered small equipment while also lowering noise levels in park environments. Electric equipment also reduces the need for fuel storage and handling during routine maintenance operations.

As part of the next phase of evaluation, staff will coordinate directly with vendors to review available electric equipment platforms and identify appropriate models that meet the Town’s operational needs.

CONCLUSION
Building on the earlier EPC discussion regarding a potential pilot program, staff’s coordination with BrightView determined that a formal pilot program is not necessary for contractor operations.

BrightView has indicated that their team already owns and operates electric landscaping equipment and utilizes these tools at Town facilities where feasible. BrightView performs the predominant amount of landscape work at the Park.

As a result, staff’s focus has shifted toward evaluating opportunities to transition select Town owned equipment that is currently used during park maintenance activities on an as needed basis.

Staff recommends transitioning feasible handheld tools to electric alternatives as equipment is replaced or funding becomes available. Utility vehicles, such as the Gator, will be evaluated for transition to electric as grant funds become available (estimated costs $15,000-$20,000). There are different cargo and towing capacities that apply to gas and electric powered Gator’s that need to be considered based on service needs.

This approach allows the Town to support its Climate Action Plan goals while maintaining operational flexibility and minimizing disruption to routine park maintenance activities.

FISCAL IMPACT
There is no direct fiscal impact associated with coordinating with vendors to review available electric equipment platforms. Vendor consultations, equipment specifications, and product

demonstrations are typically provided at no cost as part of the procurement evaluation process.

Staff time associated with coordinating these discussions and reviewing equipment options would be absorbed within existing departmental resources.

Future fiscal impacts may occur if the Town elects to purchase electric equipment to replace existing gas-powered tools. The cost will depend on the specific equipment models selected, battery and charging systems required, and the number of units procured. Staff will continue to evaluate potential funding opportunities, including programs offered through Peninsula Clean Energy, that may help offset equipment costs.

GOAL ALIGNMENT
This report and its contents are in alignment with the following Council Policy Goals:
• Goal 4 – Be Forward-Thinking
• Goal 5 – Maintain & Improve Public Infrastructure

POLICY FOCUS
Council consideration of transitioning select Town owned landscaping equipment from gas powered to electric alternatives relates to Priority 5: Climate Action and Sustainability, which includes implementation of the Town Climate Action Plan and efforts to reduce emissions and noise associated with Town operations.

PUBLIC NOTICE
Public notification was achieved by posting the agenda, with this agenda item being listed, at least 72 hours prior to the meeting in print and electronically.

ATTACHMENTS

1. Landscaping Equipment List

Landscaping Equipment List
1 Unit Description Owner Make Model Number Quantity Model Description Type Freuquency of Use Ave Duration Hours Per Week Equipment Notes Use Notes 2 Backpack Blower BV STIHL BGA 300.1 2 Battery Powered Battery weekly 2 hrs 4 hrs Requires 1 battery per unit Batterie last approximately 60 minutes 3 Hedge Trimmer BV Green Works PH 302 F 1 Battery Powered Battery Monthly 4 hrs 1 hr Requires 1 battery per unit Batteries last approximately 60 minutes 4 Hedge Trimmer w/extension BV Green Works 82PH20T 1 Battery Powered Battery Twice a Year 4 hrs 2 hrs Requires 1 battery per unit Batteries last approximately 60 minutes 5 Line Trimmer BV STIHL FSA 135 R 1 Battery Powered Battery weekly 2 hrs 4 hrs Requires 1 battery per unit Battery last approximately 30 minutes 6 Ride on Mower BV Mean Green RIVAL 60" 1 Electric Powered Electric weekly 3 hrs 3 hrs Requires to be pluged in for 12 hrs full charge
1 hr Baseball Field, 2 hrs Lawn Field, 1.5 hrs Entry Lawn & JP Lawn, 1 hr N Meadow.
7 Ride on Mower BV Mean Green RIVAL 60" 1 Electric Powered Electric weekly 2hrs 2 hrs Requires to be pluged in for 12 hrs full charge
2 hrs Lawn Field only. (Large area nex to baseball field) 8 Battery Charger BV STIHL AL301-4 2 Electric Powered Electric Daily 4 hrs full charge Plug in Charger 9 Battery Charger BV STIHL AL500 1 Electric Powered Electric Daily 1 hr full charge Plug in Charger 10 Walk behind Mower BV Green Works ATM22A 22" 1 Battery Powered Battery weekly 3 hrs 3 hrs Requires 2 batteries per unit 2 hrs Main House, 1 hr Gilmore house. 11 Gator BV John Deere G25GAS 1 Gas Powered Gas Daily 3 hrs 3 hrs Requires 5 Gal of Gas Weekly Varies on Daily task **12 Hedge Timmer Town Shindawa SHT230 1 Gas Powered Gas Not in use Not in use **13 Stick Edger Town Shindawa C282 1 Gas Powered Gas Once a month 15 Min 15 min Requires 1 Gal og Gas every 2 months From August to February is used once a month for Little League 14 Chainsaw Town Husqvarna E00058 18" 1 Gas Powered Gas Twice a Month 2 hrs 1 hr Only used as needed for Tree Demo or Removal
15 Chainsaw Town Husqvarna E000557 24" 1 Gas Powered Gas Not in use Not in use 16 Chainsaw Town Timberman UT10910 12" 1 Gas Powered Gas Not in use Not in use **17 Pole Chainsaw Town Shindawa 65004 16" 1 Gas Powered Gas Once a month 1 hr 1 hr Only used for larger Tree branches 18 Ride on Mower Town Exmark LZ26KC724 72" 1 Gas Powered Gas Used by MCE only Only used as backup for the park 19 Gator Town Toro 07214 1 Gas Powered Gas Daily 5 hrs 5 hrs 5 Gal of Gas every other week 20 Tractor Town John Deere 5410 1 Diesel Diesel Weekly 2 hrs 2 hrs 5 Gal of diesel per month Used for Green Waste Dump and to Spread Wood Chips 21 Battery Charger Tester Town Dayton 141-229-905 1 Electric Powered Electric As needed Varies Twice a year for 2 hrs aprox.

Item No. 10
Town of Atherton
CITY COUNCIL STAFF REPORT – REGULAR AGENDA
TO: HONORABLE MAYOR AND CITY COUNCIL

GEORGE RODERICKS, CITY MANAGER
FROM: STEVEN D. MCCULLEY, CHIEF OF POLICE
DATE: MARCH 18, 2026
SUBJECT: REVIEW PROPOSED ALARM PERMIT COMPLIANCE AND

FALSE ALARM PENALTY COLLECTION POLICIES

RECOMMENDATION
Staff recommend that the City Council review the information contained in this report and provide feedback regarding staff’s recommended administrative policies regarding alarm permit compliance and false alarm penalty collection policies.

BACKGROUND
The Police Department (PD) administers alarm permits for all residences throughout the Town and provides alarm monitoring for enrolled households, as outlined in the Atherton Municipal Code Chapter 8.04, Alarm Systems. Alarm permits are required for all residential alarm systems, regardless of whether they are monitored by the Town, a private alarm company, or not monitored at all. Pursuant to Chapter 8.04, residents are required to obtain an annual permit from the Police Department. Every year, a percentage of permit holders fail to remit payment or maintain current permit status, creating administrative and operational burdens.

In addition, the Town continues to experience false alarms, including repeated occurrences at certain residences. Each alarm response results in Dispatch directing officers to the scene. If the alarm is determined to be false before arrival, officers will be canceled. Per the ordinance, multiple false alarms in 12 months to which officers respond result in penalty fines. False alarm response impacts response capacity, officer workload, and overall service equity among residents. Often, these fines go unpaid, and at this time, no effort is currently being made to collect them beyond initial notices.

This report outlines current practices, identifies gaps, presents data related to false alarms, and provides recommendations for Council consideration.

ANALYSIS

Alarm Permit Compliance, Monitoring Practices, and False Alarm Policy 03-18-2026

Alarm Permits and Monitoring
The PD Dispatch Center currently monitors 1,534 residential alarm systems. At the start of each year, the Finance Department (using an outside consultant Turbodata) sends a letter to all residents reminding them that an annual alarm permit is required for any alarm system. Using a list of known permit holders provided by the PD, Finance tracks permit renewals and identifies new permit holders. Finance also forwards information on new permits to the PD so dispatch and electronic records can be updated. As part of the current practice, the Finance Department will issue the first notice to all residents and will send a follow-up letter to known renewals. However, no additional follow-up is conducted for those that have a permit renewal due but who fail to pay for that renewal.

Staff is recommending several modifications to current practice. In addition to establishing a database of all permit holders and a tracking system for paid and unpaid permits, staff recommend adopting a structured three-step notice and enforcement process:

Step 1 - Initial Notice
An initial notice will be sent to all residents in January. The notice will alert property owners to the requirement to obtain a permit for their system and will advise those with existing systems that they are required to renew their permit annually. There will be a clear due date and payment instructions. Turbodata has developed an online payment portal for residents to use. For those that want to pay in person, they can do so at the PD or the Town’s front desk (cash or credit card). The associated information update form will need to be sent directly to the PD.

Step 2 - Second Notice (30 days past due)
Thirty (30) days after the initial January notice, a reminder letter will be issued to all known permit holders for renewal. This letter will note the delinquency and for the permit holders with alarm systems that are monitored by the Town, indicate that there may be possible service impacts if payment is not received.

Step 3 - Final Notice / Termination Warning (60 days past due) At the sixty (60) day mark, a final notice will be sent advising that for those systems monitored by the Town, monitoring services will be terminated if payment is not received within a defined period. Staff recommends a 15-day payment window. This is the final opportunity to maintain an active permit.

Service Termination
Failure to remit the payment results in the discontinuance of the PD monitoring service once the final deadline passes. Residents may reactivate PD monitoring upon payment of an administrative reinstatement fee (the full cost of a new permit).

Alarm Permit Compliance, Monitoring Practices, and False Alarm Policy 03-18-2026

False Alarms
In 2025, PD dispatch received 1,246 alarm calls, using the resident information provided by the permit application process. For 583 alarm calls, dispatch was able to contact the responsible party, determine that the alarm was false, and stop our police responses. Of the remaining 663 alarm calls, all were false except 1. To help mitigate false alarms, a penalty fee was established for repeat false alarm responses. Penalty fees are as follows:
• a $400 fee for a 4th false alarm in 12 months;
• a $500 fee for a 5th alarm in 12 months; and
• a $600 fee for the 6th and each subsequent false alarm in 12 months.

For 2025, there is a total of $9,800 in issued fees for false-alarm responses. These penalty fees are a result of 14 residents who had 4 false alarms in a 12-month period, 6 residents with 5 false alarms in the same period, and 6 residents with 6 false alarms in the same period. To date, $4,600 of these fees has gone unpaid. The unpaid fees are for twelve 4th false alarm responses, four 5th false alarm responses, and six 6th false alarm responses. Currently, there is no process in place for Finance to send them to a collection agency.

Staff is recommending several modifications to existing policy. For repeat false alarm penalty fees per the ordinance, staff recommend adopting a structured three-step notice and enforcement process:

Step 1 - Initial Notice of Penalty Due
An initial notice will be sent after the 4th false alarm in 12 months and for each additional false alarm within 12 months. The notice will include a clear due date and payment instructions.

Step 2 - Second Notice (30 days past due)
After thirty (30) days, a reminder letter noting the delinquency will be sent. This letter will note the delinquency and for the permit holders with alarm systems that are monitored by the Town, indicate that there may be possible service impacts if payment is not received.

Step 3 - Final Notice / Termination Warning (60 days past due) At the sixty (60) day mark, a final notice will be sent advising that for those systems monitored by the Town, monitoring services will be terminated if payment is not received within a defined period. Staff recommend a 15-day payment window. This is the final opportunity to maintain an remit false alarm fees before collections or service termination.

Service Termination
Failure to remit the payment results in the discontinuation of the PD monitoring service once the final deadline passes. Residents may reactivate PD monitoring upon payment of all false alarm

Alarm Permit Compliance, Monitoring Practices, and False Alarm Policy 03-18-2026

penalty fees and payment of a new alarm fee. For alarm services that fail to remit their penalty fees, staff recommend that these be sent to collections.

Public Education Outreach
The PD will produce annual communications reminding residents of how to prevent false alarms and provide guidance on contractor related activations, system maintenance, and user training.

Adopting a structured permit compliance process and a clear false-alarm policy will improve service fairness, reduce unnecessary alarms, and enable the Police Department to maintain efficient and equitable monitoring services.

FISCAL IMPACT
Improved fee remittance rates may offset Department administrative costs and reduce unnecessary officer responses. Reducing false alarms will improve operational efficiency without impacting core services.

GOAL ALIGNMENT
Goal E - Strengthen Community Engagement and Transparency Goal F - Be a Forward-Thinking, Well-Managed, Well-Planned Town

PUBLIC NOTICE
Public notification was achieved by posting the agenda, including this agenda item, at least 72 hours before the meeting in print and electronically. Information about the project is also disseminated via the Town’s electronic News Flash and Atherton Online. There are approximately 1,200 subscribers to the Town’s electronic News Flash publications. Subscribers include residents and stakeholders, including, but not limited to, media outlets, school districts, the Menlo Park Fire District, service providers (water, power, and sewer), and regional elected officials.

COMMISSION/COMMITTEE FEEDBACK/REFERRAL
This item ____ has or __X___ has not been before a Town Committee or Commission. ____ Audit/Finance Committee (meets every other month)
____ Bicycle/Pedestrian Committee (meets as needed)
____ Civic Center Advisory Committee (meets as needed)
____ Environmental Programs Committee (meets every other month) ____ Park and Recreation Committee (meets each month)
____ Planning Commission (meets each month)
____ Rail Committee (meets every other month)
____ Transportation Committee (meets every other month) ____ Tree Committee (meets each month)

Alarm Permit Compliance, Monitoring Practices, and False Alarm Policy 03-18-2026

ATTACHMENTS
A. Atherton Municipal Code 8.04 Alarm Systems

Attachment 1