Net Sales Revenue (for-sale) n.a. n.a. $49,245,872 $30,958,857 $14,820,000 Residual Land Value ($3,294,546) ($15,519,195) ($5,608,693) $11,609,220 $7,379,980 Residual Land Value per Acre ($1,647,273) ($7,759,597) ($5,608,693) $11,609,220 $14,759,960 Required Land Purchase Price
per Acre $3.0 - $6.0 Million $4.0 - $8.0 Million $4.0 - $8.0 Million $2.5 - $8.0 Million $6.0 - $10.0 Million Feasibility Gap/Surplus
per Acre ($4.6) - ($7.6) Million ($11.8) - ($15.8) Million ($9.6) - ($13.6) Million $3.6 - $9.1 Million $4.8 - $8.8 Million Feasible under current
conditions?
No No No Yes Yes
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4. INCLUSIONARY HOUSING IN-LIEU FEE
ANALYSIS
This chapter analyzes potential changes to the City’s inclusionary housing in-lieu fees. In-lieu fees are a common option that cities offer as an alternative to providing inclusionary units within a project, though cities 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, cities 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, because the cost of the fee exceeds the cost to provide the inclusionary units. Conversely, a low in-lieu fee tends to create an incentive for developers to pay the fee rather than provide inclusionary units.
As discussed in the introduction to this report, Campbell currently allows developments with a density of six dwelling units per acre or less to pay an in-lieu fee rather than provide affordable units within the development. For projects providing rental units, the in-lieu fee is equal to $21.50 per project square foot. For projects providing owner-occupied units, the in-lieu fee is equal to $34.50 per project SF. Based on the current ordinance, only projects with ten or more units are subject to the inclusionary housing ordinance. Due to the density limits for projects that are eligible for the in-lieu fee option and the size threshold for the inclusionary ordinance, the City has only seen a limited number of projects that are subject to the inclusionary housing ordinance and fall within the density range for projects that are eligible to pay the in-lieu fee.
This chapter includes technical analysis for calculating the in-lieu fee as well as a benchmark analysis that evaluates in-lieu fees and total residential impact fees in comparison jurisdictions. Recommendations for implementation supported by the analysis provided in this chapter are addressed in the Policy Options section of this report, along with recommendations supported by the analysis of commercial linkage fees.
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Inclusionary Unit Construction Cost Approach
Many cities 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. To inform the City’s consideration of an inclusionary in-lieu fee, this subsection provides an analysis of the cost to construct inclusionary units in each of the five residential prototypes analyzed in this report.
For inclusionary rental units, this analysis estimates the cost to construct an inclusionary unit based on the per-unit construction costs shown in the pro-formas for the rental developments.
The analysis then subtracts 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 ownership units, this analysis estimates the cost to construct an inclusionary unit based on the per-unit construction costs shown in the pro-formas for the ownership developments. The analysis then subtracts the restricted sale price from the total construction cost to estimate the construction cost net of sales proceeds. Like 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 all of the development prototypes, this analysis included the required developer profit and the land acquisition. Land costs were estimated at the midpoint of the ranges for each prototype as shown in Table 13.
As shown in Table 14 Table 1below, based on the construction cost approach calculations, the in-lieu fee amount based on the construction cost approach ranges from $107 to $115 per net residential square foot for the rental prototypes. The lower-density rental prototype yields the lower in-lieu fee amount, due to a lower per-unit development cost for that prototype.
Using the construction cost approach, the in-lieu fee for the for-sale units is equal to $96 per net square foot for the condominium prototypes, $70 per net square foot for the townhouse prototype, and $83 per net square foot for the single-family prototype.
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Table 14: Construction Cost In-Lieu Fee Amount by Prototype
Source: BAE, 2024.
Prototype 1 Prototype 2 Prototype 3 Prototype 4 Prototype 5 Low- High- For-Sale
Density Density For-Sale For-Sale Single-Family
MFR Rental MFR Rental Condo Townhome Subdivision
Development Program
Site Size (acres) 2.0 2.0 1.0 1.0 0.5
Total Units 59 132 53 22 6
Affordable Units 9 20 8 4 0
Total Net Project SF 49,500 110,900 63,600 39,600 15,600 Estimated Land Cost (per unit) $152,542 $90,909 $113,208 $238,636 $666,667 Construction Cost Approach
Total Development Cost Per Unit, Incl. Land $646,336 $703,737 $1,148,199 $1,118,165 $1,906,670 Rental Prototypes
Average Monthly Rent per Affordable Unit (a) $1,738 $1,793 n.a. n.a. n.a.
Monthly Net Operating Income per Affordable Unit $401 $454 n.a. n.a. n.a.
Supportable Debt per Affordable Unit $58,174 $65,787 n.a. n.a. n.a.
For-Sale Prototypes
Avg. Net Sales Revenue per Affordable Unit (b) n.a. n.a. $384,484 $429,464 $476,313 Development Cost minus Sale Price per Aff. Unit n.a. n.a. $763,715 $688,701 $1,430,357 In-Lieu Fee Per Affordable Unit $588,162 $637,951 $763,715 $688,701 $1,430,357 Constructoin Cost In-Lieu Fee Amount
Total In-Lieu Fee Amount $5,293,459 $12,759,012 $6,109,723 $2,754,805 $1,287,321 Fee per Net Residential Sq. Ft. (c) $107 $115 $96 $70 $83
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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 following section summarizes the methodology for setting this fee amount, as well as the potential fee amount for each of the prototypes.
Methodology
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, 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.
This analysis evaluated the point of indifference by determining the in-lieu fee rate for each prototype that would result in the same feasibility results as providing inclusionary units. The analysis involved creating an alternate version of the pro-forma for each prototype. The pro- formas that were used for this portion of the analysis differed from the pro-formas that were used to test the feasibility of the inclusionary requirements in that the alternate versions do not have any affordable inclusionary units and instead include an in-lieu fee as part of the total development cost. To identify the point of indifference in-lieu fee for each prototype, the analysis determined the fee that would result in the same residual land value as in the inclusionary scenario. For example, as shown in Table 13 above, with the inclusionary units Prototype 4 results in a residual land value of $11.6 million. To identify the point of indifference fee rate for Prototype 4, an alternate version of the Prototype 4 pro-forma was created with no inclusionary units. An in-lieu fee was then added to the development costs for in this alternate version of the pro-forma, with that fee rate set such that the residual land value associated with the project would be $11.6 million, or equal to the residual land value in the inclusionary scenario for the same prototype.
The methodology for estimating the point of indifference fee rate for the single-family prototype involved creating two alternate versions of the single-family prototype pro forma.
One alternate version evaluated a prototype that is similar to the single-family prototype discussed elsewhere in this report, but with seven units rather than six and a commensurate increase in the site size, with one of the seven units as an inclusionary unit (i.e., approximately 15 percent of a seven-unit project). The second alternate version evaluated the same seven-
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unit single-family prototype with an in-lieu fee rather than an inclusionary unit, following the same methodology that was used for the other prototypes as described above.
The resulting in-lieu fee rates for each prototype approximate the “point of indifference,” or the inclusionary in-lieu fee payment that would have approximately the same cost impacts as providing affordable units within the project. In other words, if all else were equal, a residential rental project that pays the “point of indifference” fee rates shown in Table 15 would generally support the same residual land value as a project that provides the affordable units on site.
Findings
As shown below in, the rental prototypes yield a “point of indifference” in-lieu fee amount between $55.50 and $63.50 per net residential square foot. The for-sale prototypes yield a “point of indifference” in-lieu fee amount of $61.50 per net residential square foot for condominium prototypes, $92.00 per net residential square foot for townhomes, and $90.50 per net residential square foot for single-family homes.
Table 15: Point of Indifference In-Lieu Fee Amount by Prototype
Note:
(a) Based on proformas shown in Appendix C.
Source: BAE, 2024.
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 the difference between market-rate and affordable rents and sale prices. 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.
Residential Fee Benchmark Analysis
The following subsections provide information on 1) Inclusionary housing in-lieu fees charged in nearby jurisdictions; and 2) Total impact fees charged on residential uses in nearby Prototype 1 Prototype 2 Prototype 3 Prototype 4 Prototype 5 Low- High- For-Sale
Density Density For-Sale For-Sale Single-Family
MFR Rental MFR Rental Condo Townhome Subdivision
Point of Indifference
In-Lieu Fee Amount (a) $2,747,250 $7,042,150 $3,911,400 $3,643,200 $1,647,100 Existing Fee per SF $21.50 $21.50 $34.50 $34.50 $34.50
Additional Fee per SF $34.00 $42.00 $27.00 $57.50 $56.00 Total Fee per SF $55.50 $63.50 $61.50 $92.00 $90.50
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jurisdictions. The fee information provided in this section may inform Campbell’s process for identifying an in-lieu fee. To the extent that cities with comparable market conditions assess fees and continue to attract new residential development, this could serve as an indication that Campbell could potentially assess similar fees without making residential development infeasible. Conversely, if Campbell were to adopt fees that are significantly higher than the fees charged in nearby jurisdictions, this could affect developers’ willingness to pursue projects in Campbell if developers are able to find attractive development opportunities in nearby cities with lower fees.
However, inclusionary housing in-lieu fees have little or no effect on the financial feasibility of residential development projects in jurisdictions where use of the in-lieu fee is generally restricted to specific types of projects, and therefore the information provided below should be considered within a broader policy context. As discussed in more detail below, many jurisdictions place restrictions on developers’ ability to satisfy inclusionary requirements through payment of an in-lieu fee. These restrictions may include requiring City Council approval to pay an in-lieu fee, allowing in-lieu fees only for the purpose of meeting a requirement for a fractional unit, and allowing in-lieu fees only for small projects. In cases where the use of an in-lieu fee is restricted, most projects may be required to provide inclusionary units rather than pay the fee, making the specific in-lieu fee rate irrelevant to the financial feasibility of most projects. Similarly, the cost of an in-lieu fee is often not included in the total fees that apply to a residential development project because projects often provide inclusionary units rather than pay an inclusionary in-lieu fee.
Inclusionary In-Lieu Fees in Nearby Jurisdictions
Table 16 below shows the inclusionary housing in-lieu fees that apply in several nearby jurisdictions. The table also shows the median home sale prices in each jurisdiction as well as the average rental rates for multifamily rental units in each jurisdiction. This market information is shown to provide high-level contextual information regarding variations in the market between the jurisdictions in the table, and how the market in each jurisdiction shown compares to the market in Campbell. It should be noted that the median sale prices and average rental rates shown are for all properties of each type in each jurisdiction, according to data from Costar and Redfin, and are therefore lower than the rental rates and sale prices that would be typical of most new development in each jurisdiction.
As shown, almost all of the jurisdictions shown in Table 16 have restrictions on developers’ ability to satisfy inclusionary requirements through payment of an in-lieu fee. These restrictions include requiring City Council approval to pay an in-lieu fee, allowing in-lieu fees only for the purpose of meeting a requirement for a fractional unit, and allowing in-lieu fees only for small projects. The exception is San Jose, which allows developers to choose whether to pay an in-lieu fee, provide inclusionary units, or pursue an alternative method of compliance.
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Among the jurisdictions shown in Table 16 that have established in-lieu fee rates, in-lieu fees for for-sale developments generally range from $21 per square foot (Cupertino, for some development types) to $144 per square foot (Mountain View, for rowhouses or townhomes).6 Campbell’s current in-lieu fee rate for for-sale developments is higher than the current in-lieu fee rates in Cupertino and San Jose and lower than the in-lieu fee rates in Mountain View.
Campbell is unique among the jurisdictions shown in that Campbell has a single in-lieu fee rate for all for-sale development rather than a fee that varies by for-sale development type.
Among the jurisdictions shown in Table 16 that have established in-lieu fee rates, in-lieu fees for rental developments generally range from approximately $22 per square foot (San Jose, in moderate market areas) to $111 per square foot (Mountain View).7 Campbell’s current fee rate is toward the low end of this range, at $21.50 per square foot.
Rather than set fee rates, some jurisdictions set fees as a percent of building permit valuation (Los Gatos) or sale price (Sunnyvale, for for-sale developments). Some jurisdictions use a formula based on the difference between the affordable sale price and the market-rate sale price (Santa Clara, for for-sale projects).
While fee rates in nearby jurisdictions often provide insight on the fee rates that are financially feasible, in the case of an in-lieu fee the fee rates shown in Table 16 do not necessarily reflect financially feasible fee rates. As noted above, most of the jurisdictions shown place restrictions on developers’ ability to pay an in-lieu fee and prefer that developers provide affordable inclusionary units. As a result, these jurisdictions may charge relatively high fee rates that would not be feasible for most projects in order to incentivize developers to provide inclusionary units rather than pay the fee. These cities may continue to experience residential development activity, with new development providing affordable units rather than paying an in-lieu fee, provided that the inclusionary requirements themselves are financially feasible.
Methodology for calculating fees: Jurisdictions in California generally determine the in-lieu by multiplying the fee by total net new habitable square feet in a project. Alternatively, some jurisdictions may elect to calculate the fee by only the net new habitable square feet of the affordable units that would have been included on site (the City of Campbell historically has followed this approach). The former method is recommended as it results in higher fees to support affordable housing production.
6 San Jose has a lower fee rate of $14.54 per square foot for for-sale developments with 10-19 units that are built at 90 percent or more of the allowable density.
7 San Jose and Sunnyvale have lower in-lieu fees for some specific project types.
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Table 16: Inclusionary Housing In-Lieu Fees in Nearby Jurisdictions
Notes:
(a) Median home sale prices shown are the median home sale price in October 2023, according to data from Redfin.
Median Home Project Size Threshold
For-Sale Units Fee Rate Sale Price (a) for Inclusionary Req's Fee Based on Affordable Unit Square Footage
Campbell (b) $34.50 per SF $1,750,000 10 or more units
Cupertino (c) $3,015,000 N/A; requirements apply to
Detached Single-Family $21.36 per SF all project sizes
Small Lot Single-Family or Townhome $23.49 per SF
Multifamily Attached Townhome, Apartment, Condo $28.48 per SF Fee Based on Total Project Square Footage
Mountain View (e) $1,830,500 N/A; requirements apply to Single-Family Detached and Condominiums $63 per SF all project sizes Rowhomes and Townhomes $144 per SF
San Jose (e) $1,350,000 10 or more units
Developments with 20+ units $29.07 per SF
Developments with 10-19 units at <90% allowable density $29.07 per SF Developments with 10-19 units at >90% allowable density $14.54 per SF Fee Based on Construction Cost or Sale Price
Santa Clara (g) Difference b/t the market value and $1,505,000 N/A; requirements apply to the affordable sale price, multiplied all project sizes by the fractional amount due
Los Gatos (d) 6% of building permit valuation $2,382,875 5 or more units Sunnyvale (h) 7% of contract sales price $1,703,000 7 or more units of all units in project
Avg. Rent Project Size Threshold
Rental Units Fee Rate Rent per SF (i) for Inclusionary Req's Fee Based on Affordable Unit Square Footage
Campbell (b) $21.50 per SF $3.18 10 or more units
Cupertino (c) $3.74 N/A; requirements apply to
Up to 35 du/acre $28.48 per SF all project sizes
Over 35 du/acre $35.60 per SF
Fee Based on Total Project Square Footage
Mountain View (e) $111 per SF $3.92 N/A; req's apply at all sizes San Jose (f) $3.01 10 or more units
Strong Market Areas
Developments with 20+ units $49.99 per SF
Developments with 10-19 units at <90% allowable density $49.99 per SF Developments with 10-19 units at >90% allowable density $25.00 per SF Moderate Market Areas
Developments with 20+ units $21.74 per SF
Developments with 10-19 units at <90% allowable density $21.74 per SF Developments with 10-19 units at >90% allowable density $10.87 per SF Qualifiying High Rises in Downtown Planned Growth Area $0 Santa Clara (g) $28.79 per SF $3.40 N/A; req's apply at all sizes Sunnyvale (h) $3.47 3 or more units
Projects with 3-6 units $15.00 per SF
Projects with 7+ units $30.00 per SF
Fee Based on Construction Cost
Los Gatos (d) 6% of building permit valuation $3.17 5 or more units
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(b) In-lieu fees can be paid for projects with a density of six dwelling units per acre or less. (c) In-lieu fees can only be used to satisfy the inclusionary requirement for projects with fewer than 7 units or for fractional units in projects with more than 7 units if the fractional unit is less than 0.5. If the fractional unit is equal to 0.5 - 0.99 of a unit, the BMR unit requirement is rounded up and the project must provide one additional BMR unit. Projects with less than 7 units may provide one unit or pay the fee. All other alternatives to providing on-site inclusionary units are subject to City Council approval.
(d) Inclusionary program applies to projects that include five or more residential units; Fee option is available only in limited cases and at the Town's discretion.
(e) Fees are charged per net new habitable SF. In-lieu fees can be paid for fractional units in projects with less than 7 units.
In projects with 7+ units, in-lieu fees can be paid for a fractional unit that is equal to less than 0.5 of a unit. An in-lieu fee payment to satisfy the entire inclusionary requirement requires City County approval. Applicant must demonstrate that in- lieu fee payment will further the City's housing goals to a greater extent than providing units on site. Fees must be greater than the value of providing the units on site and higher than the in-lieu fees for fractional units that are cited above. (f) All projects may choose to pay the in-lieu fee rather than construct units. Additionally, projects can choose a mixed compliance option to provide a portion of units on-site and pay an adjusted in-lieu fee. The adjusted in-lieu fee rate varies depending on the number and affordability of the units provided. In-lieu fees provided above are for a development providing no inclusionary units on-site. Fee exemption for qualifying high-rises is set to expire. (g) Fees apply only to projects with fewer than 10 units or to satisfy the requirement for a fractional unit in projects with 10 units or more. All residential developments with 10 or more units are required to construct affordable units onsite. Projects with fewer than ten units may either provide one affordable unit or pay an in-lieu fee. Construction of one single-family home or duplex on a lot of record is exempt.
(h) Inclusionary requirements apply to for-sale projects with 7 or more units or rental projects with 3 or more units. City Council approval required for in-lieu fee option for projects with 7+ units. (i) Average multifamily rent shown reflects the average monthly asking rent per square foot among multifamily properties in each jurisdiction as of the third quarter of 2023, according to data from Costar.
Sources: City of Campbell; City of Cupertino; City of Los Gatos; City of Mountain View; City of San Jose; City of Santa Clara; City of Sunnyvale; BAE; 2023.
Total Impact Fees on Residential Uses in Nearby Jurisdictions Figure 2 provides estimates of the total impact fees that would apply to each of the five residential prototypes that are evaluated in this report in Cambell as well as in neighboring jurisdictions. This analysis provides insight on how Campbell compares to neighboring jurisdictions in terms of the total impact fees that apply to new residential development.
As shown, Campbell’s impact fees are toward the middle of the range for each prototype. Los Gatos, Monte Sereno, and San Jose would generally assess lower impact fees than Campbell for each of the prototypes, while impact fees in Saratoga would be comparable to Campbell’s impact fees. The other cities shown, including Cupertino, Mountain View, Santa Clara, and Sunnyvale, would all charge higher impact fees than Campbell for each of the residential prototypes. It should be noted that the fee estimates shown in Figure 2 do not include inclusionary housing in-lieu fees because most of the jurisdictions shown require that most projects provide inclusionary units rather than pay in-lieu fees. The information provided in Figure 2 indicates that Campbell is generally in line with neighboring jurisdictions in terms of the impact fees that apply to new residential development projects, with significantly lower residential impact fees than many nearby jurisdictions.
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Figure 2: Residential Impact Fees in Campbell and Comparison Jurisdictions
Notes:
Fee calculations include park fees for Campbell, Cupertino, Mountain View, San Jose, Santa Clara, Saratoga, and Sunnyvale. These fees would be reduced to the extent that projects provide park space in accordance with each jurisdiction's requirements. Fee calculations do not include inclusionary housing in-lieu fees because most of the jurisdictions shown require that most projects provide inclusionary units rather than pay in-lieu fees. (a) Fees do not include Traffic Impact Mitigation Fee, which are calculated based on new average daily trips generated (b) Fee estimates do not include any Specific Plan Area fees. Some Specific Plan Areas have fees that would result in higher total fees than shown.
Source: BAE, 2023.
$1,750,000
$3,015,000
$2,382,875
$7,775,000
$1,830,500
$1,350,000
$1,505,000
$3,775,000
$1,703,000
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
Campbell Cupertino Los Gatos (a) Monte Sereno Mountain View San Jose Santa Clara Saratoga Sunnyvale (b) Median Home Sale Price, October 2023
Estimated Fees per Unit
High-Density MFR Low-Density MFR Condominium Townhouse Single-Family Median Home Sale Price
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Summary of Findings from Inclusionary In-Lieu Fee Analysis The analysis presented above evaluates potential inclusionary housing in-lieu fees in Campbell based on: 1) the cost to construct an inclusionary unit; and 2) the “point of indifference” in-lieu fee rate. Table 17 summarizes the findings from the construction cost approach and the point of indifference approach.
Table 17: Summary of Findings from In-Lieu Fee Analysis
Source: BAE, 2024.
If City decision-makers generally prefer that developers provide inclusionary units rather than pay an in-lieu fee, the City should either place limits on the circumstances under which developers may satisfy inclusionary requirements through the payment of an in-lieu fee or adopt fee rates that are higher than the fee rates established through the point of indifference approach. Restrictions on the circumstances under which developers can pay the in-lieu fees could include allowing a fee payment for small projects or for requirements resulting in fractional units, but not allowing a fee payment to meet the entire inclusionary requirement for larger projects. Campbell could also require discretionary approvals for the use of an in-lieu fee in most circumstances.
Prototype 1 Prototype 2 Prototype 3 Prototype 4 Prototype 5 Low- High- For-Sale
Density Density For-Sale For-Sale Single-Family
MFR Rental MFR Rental Condo Townhome Subdivision
Construction Cost Approach (per SF) $106.94 $115.05 $96.06 $69.57 $82.52 Point of Indifference Approach (per SF) $55.50 $63.50 $61.50 $92.00 $90.50
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5. POLICY OPTIONS
This chapter presents policy options based on the analysis presented in the preceding chapters of this report. These policy options and recommendations include the potential adoption of a commercial linkage fee and adjustments to the inclusionary housing in-lieu fee.
Commercial Linkage Fee Policy Options
The analysis presented in this report supports the following options related to the potential adoption of commercial linkage fees in Campbell in furtherance of Housing Element Program H-1b:
Program H-1b: Commercial Linkage Fee: Establish an affordable housing impact fee that will apply to nonresidential development to provide an additional local source of revenue to support production of affordable housing.
Commercial Linkage Fee Policy Option 1: Do not adopt commercial linkage fees.
City decision-makers may wish to refrain from adopting any commercial linkage fees at this time. This option is based on the non-residential financial feasibility analysis that was presented in this report, which found that office, retail, hotel, and industrial development faces financial feasibility challenges in the current market.
Commercial Linkage Fee Policy Option 2: Charge a fixed amount for all non-residential uses.
To simplify fee collection and make the City’s fee schedule easy to understand, Campbell could adopt a single commercial linkage fee rate that would apply to all non-residential uses.
If the City pursues this approach, BAE recommends a fee that would be consistent with a fee rate that represents a low percentage of total development costs for all uses to which the commercial linkage fee would apply. For example, if the City adopts commercial linkage fees for office, retail, hotel, and light industrial uses, the recommended fee rate would be $9 per square foot or less, which is equal to two percent of estimated total development costs (not including land or developer profit) for retail and light industrial uses.
Commercial Linkage Fee Policy Option 3: Adopt a Tiered Commercial Linkage Fees Based on Building Type.
Policy option 3 involves adopting commercial linkage fees with lower fees for specific uses based on various policy goals. If the City pursues this option, fees for some uses could be set at up to two percent of total development costs according to Policy Option 2, while fees for other uses would be set at lower rates, per the following maximum fee rates:
• Office: up to $15 per square foot
• Retail/Restaurant: up to $9 per square foot
• Hotel: up to $12 per square foot
• Light Industrial: up to $9 per square foot
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Implementation Consideration: Timing of Fee Payment
• Allow fees to be paid after building permit issuance. Some of the developers that participated in the stakeholder focus groups highlighted the financial burden associated with paying commercial linkage fees at building permit issuance due to the high cost of financing for up-front development costs. While many jurisdictions require payment of all impact fees at building permit issuance, some allow fees to be paid at later stages in the development process, such prior to issuance of a certificate of occupancy.
Implementation Consideration: Exemptions and Discounts
• Discount or exempt certain land uses and project sizes. Some jurisdictions with commercial linkage fees choose not to charge fees or to charge low fees on specific non-residential uses and project sizes. For example, some jurisdictions take this approach with hotel and/or retail uses, often because these uses generate other revenues for the City (i.e., transient occupancy tax or sales and use tax), and as a result jurisdictions choose to incentivize these uses. It should be noted that transient occupancy tax and sales and use tax revenues accrue to a jurisdiction’s General Fund and therefore are not reserved for affordable housing.
• Provide an exemption for the non-residential component of vertical mixed-use projects.
Some jurisdictions provide commercial linkage fee exemptions for the commercial component of mixed-use projects, such as ground floor retail space in a residential building. For example, the City of Santa Clara provides an exemption for “Commercial square footage within a mixed-use development where the commercial space is integrated into a single building that also includes residential development at a density of thirty (30) dwelling units per acre or greater and where the commercial square footage does not exceed twenty thousand (20,000) square feet.” Jurisdictions may adopt these types of exemptions to incentivize the provision of ground-floor retail space in residential projects. In some cases, these exemptions are adopted because local codes require ground-floor commercial space in some areas, and an exemption may reflect that the jurisdiction is electing not to charge a fee on space that developers are required to build, and which is often not profitable.
Implementation Consideration: Phasing
For projects that do not meet the exemption criteria, options for phasing in a fee include:
• No phase-in process. This option would consist of applying the full adopted fee rate to all non-exempt projects following adoption.
• Phase in based on time. For example, Campbell could charge no fee for one-year after adoption.
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Note: Housing development projects submitting preliminary applications under SB 330 (Housing Crisis Act of 2019) will generally not be subject to any in-lieu fee, even for the commercial component of a mixed-use project, provided that they submit their application prior to the effective date of the new fees.
Implementation Consideration: Fee Calculation Methodology Jurisdictions will typically adopt fee calculation methodologies that factor in existing commercial space in cases where a new development is replacing an existing use. For example, in the hypothetical case of a 300,000 square foot commercial development replacing an existing 100,000 square foot development, the fee would be based on the net square footage of 200,000 square feet. The following potential implementing language and formula reflects accepted practices in comparable California jurisdictions:
The housing impact fee for nonresidential development projects shall be charged on a per- square-foot basis for all net new gross floor area, including all additions where floor area is increased, with a specific per-square-foot amount set for each nonresidential land use category and amount of floor area. The amount of the fee shall be computed as follows: Fee = (sq. ft. of new land use * relevant commercial linkage fee fee) - (sq. ft. of existing land use * relevant commercial linkage fee).
Inclusionary Housing In-Lieu Fee Policy Options
The analysis presented in this report supports various policy options related to inclusionary housing in-lieu fees in Campbell in furtherance of Housing Element Program H-1a:
Program H-1a: Inclusionary Housing Ordinance Implementation: Amend the Inclusionary Housing Ordinance to offer developers a menu of options for achieving affordability, adjusting the percentage of units required to be affordable depending on the degree of affordability achieved (i.e., moderate-, low-, very low-, and extremely low- income).
This section also provides implementation considerations for the phasing and method of calculation fees that should be considered after selecting a preferred initial option.
Inclusionary Housing Policy Option 1: Retain Existing Fees This policy option would entail no change in the base fees charged in-lieu of providing on-site units (i.e., 10-units; For-Sale: $34.50; For-Rent: $21.50). This approach would also maintain the City’s existing method of calculating fees, and result in significantly less revenue than all other jurisdictions included in the benchmarking analysis.
Inclusionary Housing In-Lieu Fee Policy Option 2: Increase in-lieu fees up to the point of indifference fee rate of $60 with a threshold of five (5) units.
Table 15 shows the in-lieu fee rates that represent the “point of indifference” for each prototype, or the point at which the cost of the fee would be approximately equivalent to the
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cost of providing inclusionary units in a project. These fees are approximately $60 per net square foot for rental developments and range from approximately $60 per net square foot to $90 per net square foot for for-sale developments, depending on the development type. In this policy option, the City would adopt a single in-lieu fee of $60 for all unit types to be applied as follows:
• Threshold: would apply inclusionary ordinance requirements (i.e., 15% affordability) to all projects of five (5) or more units
• Provide option to pay fees for any fractional requirement not resulting in a whole unit o Exception: Projects between 5-6 units may pay in-lieu fee instead of providing units
Note: This option deviates from the possible amendments contemplated by Policy H-1a, as it would require projects of seven (7) or more units to provide an affordable housing unit, when the fractional requirement exceeds 0.5 of a unit. As a result, this policy option would result in the production of more affordable housing units, fewer fees, than initially contemplated by Policy H-1a of the Housing Element.
Inclusionary Housing In-Lieu Fee Policy Option 3: Same as Policy Option 2 but with a threshold of seven (7) units
Table 15 shows the in-lieu fee rates that represent the “point of indifference” for each prototype, or the point at which the cost of the fee would be approximately equivalent to the cost of providing inclusionary units in a project. These fees are approximately $60 per net square foot for rental developments and range from approximately $60 per net square foot to $90 per net square foot for for-sale developments, depending on the development type. In this policy option, the City would adopt a single in-lieu fee of $60 for all unit types to be applied as follows:
• Threshold: Would apply to all project of seven (7) or more units • Provide option to pay fees for any fractional requirement not resulting in a whole unit
Note: This option also deviates from the possible amendments contemplated by Policy H-1a, as it would exempt projects under 7 units from paying fees or providing units. As a result, this policy option would result in the generation of less fees than initially contemplated by Policy H- 1a of the Housing Element.
Implementation Considerations: Phasing
The options for phasing in the in-lieu fee rate are similar to those described under the commercial linkage fees. As deemed appropriate, the in-lieu fees could be phased in over time as follows:
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• No phase-in process. This option would consist of applying the full adopted fee rate to all non-exempt projects following adoption.
• Phase in based on time (staff preferred). For example, Campbell could charge no fee for one year after adoption.
Implementation Considerations: Fractional Units
Under options 2 and 3, the City would provide the option for developers to pay a fee to address requirements for fractional units. Campbell’s current inclusionary housing ordinance requires that developers round up to the nearest whole unit when there is a requirement for a fractional inclusionary unit of 0.5 or greater and allow the developer to round down to the nearest whole unit when there is a requirement for a fractional inclusionary unit less than 0.5. The City could allow payment of an in-lieu fee to satisfy the requirement for any fractional unit (i.e., up to .99 of a unit requirement) or just for fractional unit requirements when less than 0.5. The application of the in-lieu fee to fractional unit requirements could be implemented regardless of whether the City reduces the project size threshold for inclusionary requirements as described under Inclusionary Housing In-Lieu Fee Policy Options 2 or 3.
This study support two options for addressing “fractional” units, as follows:
• Option 1: Retain the existing 15 percent inclusionary requirement as adopted, in which fractions less than .5 round down, fractions .5 and over round up to a full unit. • Option 2: Modify the 15 percent inclusionary requirement such the following options apply when there is a fractional obligation:
o Provide a unit to satisfy any fractional obligation (i.e., 0.1); or o Pay a fee to satisfy any fractional obligation when one of the following conditions apply:
▪ Any fractional obligation for projects with 5 or 6 units ▪ The fractional obligation is less than .5 for projects 7 units and over The benefits of applying the in-lieu fee to fractional units include generating some fee revenue from fractional units, though the magnitude of the revenue is likely to be small. In addition, charging an in-lieu fee for fractional units would reduce the magnitude of the difference in requirements for less than 0.5 units and requirements for 0.5 units or more. Reducing this gap in requirements may reduce the extent to which developers seek to keep projects smaller to avoid a requirement for an entire new inclusionary unit.
The specific formula for determining the in-lieu fee for fractional units would be as follows:
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Total Fee = ($60 per square foot) * (Fractional unit/Total inclusionary units required) * (Habitable Square Feet8)
Implementation Considerations: Affordability Term
The City currently has a 55-year affordability term for rental units and a 45-year term for for- sale units. To have a more standardized approach, the City should consider establishing a 55- year affordability term for both rental and for-sale units (and also for the renewal of units), in- line with best practices from other jurisdictions.
8 Habitable Square Feet would only count the floor area of primary dwelling units, and not include accessory dwelling units, or junior accessory dwelling units.
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APPENDIX A: AB 602 ANALYSIS
Assembly Bill 602 (AB 602, 2021) enacted new requirements for impact fees and impact fee nexus studies. This appendix provides an analysis of commercial linkage fees in relation to AB 602 requirements. Relevant 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, Campbell is classified as a large jurisdiction.9
Commercial Linkage Fee AB 602 Analysis
This section provides discussion and analysis related to the commercial linkage fee analysis to comply with the provisions of AB 602 as described above. The subsections below are numbered to correspond to the four provisions described above.
1. Level of Service
A commercial linkage would generate the funding necessary to finance the construction of new publicly-assisted affordable housing units to serve new workers in Campbell as the City’s employment base grows. Therefore, in the context of the commercial linkage fee, the level of service can be defined in terms of the number of publicly-assisted affordable housing units in Campbell per worker employed in Campbell.
Existing Level of Service. According to the City of Campbell’s 2023-2031 Housing Element, there are 617 publicly-assisted affordable housing units in Campbell. This total consists of units that received public funding in exchange for providing affordable housing with a deed restriction of maintain units as affordable for a set time period. In addition to these units, the Housing Element identifies three deed-restricted affordable housing units that were created
9 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.
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through the City’s inclusionary housing program. These units did not receive public funding and therefore are not factored into this analysis. According to US Census American Community Survey (ACS) data collected between 2018 and 2022, there are an estimated 24,377 people that work in Campbell. Based on these figures, there are currently approximately 0.025 publicly-assisted affordable housing units per worker in Campbell, as shown in Table A-1 below.
Proposed New Level of Service. Table A-1 shows an analysis of the level of service that would be supported by commercial linkage fees, assuming fee rates equal to two percent of total development costs as shown in Table 10 (fees shown in Table A-1 are rounded to the nearest dollar). As shown, commercial linkage fee rates at that level would support the construction of an estimated 0.020 units of publicly-assisted affordable housing per new worker in office space, 0.019 units of publicly-assisted affordable housing per new worker in retail space,
0.060 units of publicly-assisted affordable housing per new worker in hotel space, and 0.042 units of publicly-assisted affordable housing per new worker in industrial space.
Table A-1: Level of Service Analysis, Commercial Linkage Fee
Notes:
(a) Based on ACS data collected between 2018 and 2022.
(b) See Table 4.
(c) See Table 6.
(d) Equal to the affordable housing need per 1,000 SF multiplied by the percentage of the full need mitigated by the fee rate shown.
(e) Equal to the affordable housing need per 1,000 SF mitigated by the fee rate shown divided by the estimated number of workers per 1,000 SF.
Sources: US Census American Community Survey, 2018-2022; City of Campbell Housing Element Update, 2023; BAE, 2023.
Appropriateness of New Level of Service. Table A-1 above indicates that commercial linkage fees for some uses could support a higher level of service than currently exists in Campbell, depending on whether the Campbell City Council adopts commercial linkage fees and, if so, what the adopted fee rates are. While the current level of service is 0.025 publicly-assisted affordable housing unit per worker, the hotel and industrial fees shown in Table A-1 would Existing Level of Service
Workers in Campbell (a) 24,377
Publicly-Supported Affordable Housing Units 617
Publicly-Supported Affordable Housing Units per Worker 0.025 Retail/
Proposed New Level of Service Office Restaurant Hotel Industrial Fee Necessary to Address Full Housing Need $46.85 $128.46 $49.13 $33.72 Possible Fee Rate $15.00 $9.00 $9.00 $12.00
% of Full Need Mitigated by Possible Fee Rate 32% 7% 18% 36% Estimated Number of Workers per 1,000 SF (b) 3.33 2.00 0.67 1.33 Affordable Housing Need per 1,000 SF (c) 0.21 0.54 0.22 0.16 Affordable Housing Need per 1,000 SF Mitigated by Possible Fee Rate (d) 0.07 0.04 0.04 0.06 Affordable Housing Units Funded per Worker (e) 0.020 0.019 0.060 0.042
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support larger numbers of publicly-assisted affordable housing units per worker. A higher level of service would be appropriate in part because the current level of service is insufficient to provide enough affordable housing for Campbell’s workforce. 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.
The existing shortage of affordable units is also apparent in the number of households that are overpaying for housing in Campbell.10 As discussed in Campbells 2023-2031 Housing Element, approximately 85 percent of extremely low-income households, 71 percent of very low-income households, and 59 percent of low-income households are overpaying for housing.
These data indicate a significant gap in the number of lower-income households living in Campbell and the availability of affordable housing.
Commercial linkage fees will not address these existing deficiencies in the affordable housing inventory. However, supporting a higher level of service through commercial linkage fees could help to prevent new non-residential development in Campbell from continuing to replicate the same gaps in affordable housing delivery that exist under the current level of service. Even at a higher level of service, the City is unlikely to charge commercial linkage fees that would fully mitigate the need for affordable housing that new non-residential development is anticipated to create. As a result, some gaps in affordable housing delivery would remain unless mitigated through other means.
Furthermore, the higher level of service is appropriate based on the City of Campbell’s Regional Housing Needs Allocation (RHNA). The RHNA is the number of housing units that the City 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 eight-year 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 City of Campbell has a RHNA obligation totaling 2,191 units, including 1,186 units for lower-income households. This a significant increase from the 5th Housing Element Update Cycle (2015-2023), when the City’s RHNA obligation totaled 933 units, including 391 units for lower-income households.
10 A household is typically considered to be overpaying for housing if it spends more than 30 percent of its gross income on housing-related expenses, such as rent, utilities, or mortgage payments.
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Campbell’s 2023-2031 Housing Element reports that the City permitted 15 housing units that are affordable to lower-income households during the 5th Housing Element cycle. This suggests that Campbell will need to issue building permits for significantly more affordable housing units during the 6th Housing Element Cycle to address the City’s RHNA. While a commercial linkage fee would not be intended to fully address the City’s RHNA and would not be sufficient to do so, these figures demonstrate a need for the City of Campbell to enhance the level of service provided by the City’s affordable housing inventory relative to existing conditions.
2. Prior Nexus Study Assumptions and Fees Collected
The City of Campbell does not have an existing commercial linkage fee, and therefore this nexus study does not relate to the increase of an existing fee. As a result, the provisions of AB 602 that relate to reviewing the assumptions of a prior nexus study and evaluating the amount of fees collected under the original fee do not apply to the commercial linkage fee analysis.
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, Campbell 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.”
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 City of Campbell’s 2023-2031 Housing Element Update provides a plan to accommodate the City’s RHNA. This plan includes an identification of sites where all 1,186 lower-income units in the City’s RHNA could be built over the eight-year Housing Element period. These units would be located within Campbell City limits, and will likely generally correspond to the approved, under construction, and pipeline projects identified in the Housing Element, as well as projects that could be constructed on the opportunity sites that
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the Housing Element identifies. 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 10 units to over 100 units.
Information provided in recent applications for tax credit financing for new affordable housing developments in Santa Clara County indicates that the cost to build a publicly-assisted affordable housing unit currently averages an estimated $720,000 per unit. Funds from commercial linkage fees would 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 City’s RHNA. The total cost that will be financed through the fees will depend on the amount of revenue generated by commercial linkage fees during the Housing Element cycle.
In addition to commercial linkage 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 City housing programs, including the City’s inclusionary ordinance.
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APPENDIX B: NON-RESIDENTIAL PRO FORMAS
This appendix provides the detailed pro formas for non-residential uses that were used for the commercial linkage fee analysis provided in this report. This appendix also includes a description of the key assumptions used in the non-residential pro formas.
Key Assumptions
Hard Costs: Hard costs are the costs associated with the physical construction of a building, including all construction materials and labor. The hard cost assumptions are primarily based on information provided by developers that were interviewed for this study. The study also relies on published sources and BAE’s experience with recent projects in the Bay Area to cross- check the information provided by developers and to fill gaps in the information that developers were able to provide.
Soft Costs: This analysis assumes that soft costs are equal to 20 percent of hard costs. This soft cost estimate includes engineering, architecture, and CEQA costs, as well as City cost- recovery fees for planning, permitting, and entitlements, but does not include financing costs or impact fees. Financing costs and impact fees were calculated separately and included in total development costs as separate line items.
Financing Costs: This analysis assumes a 6.5 percent interest rate on construction loans and loan fees equal to 1.0 percent of the loan amount. These assumptions are consistent with information provided by developers interviewed for this study as well as BAE’s experience with recent projects in the region.
Impact Fees: BAE calculated impact fees for each prototype based on the City’s impact fee schedule, which includes storm drain impact fees and roadway maintenance impact fees.
Commercial Rental Rates: For the office, retail, and industrial prototypes, this analysis uses rental rates that are based on information provided by developers during the developer interviews and cross-checked against data from Costar.
Hotel Operating Revenues and Expenses. This analysis uses data from Costar to estimate hotel room rates and occupancy rates. The hotel market continues to be impacted by the COVID-19 pandemic, with lower room rates and occupancy rates than in 2019, but has demonstrated a significant recovery from the most severe impacts of the pandemic. This analysis uses the 2019 average occupancy and room rates for hotel properties in Campbell on the basis that developers would likely need to anticipate a return to pre-pandemic conditions in order to pursue future hotel development.
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Capitalization Rate and Yield on Cost: The capitalization rate (or cap rate) is defined as the net operating income that a property generates divided by the estimated sale price of a stabilized building. To support new development, investors require a spread between the capitalization rate and the project’s Yield on Cost, calculated as the project’s net operating income divided by the total development costs. To inform the current cap rates and required yield on cost metrics to support new development, This analysis uses information from developer interviews, Costar, and the CBRE United States Cap Rate Survey for the first half of 2023 to estimate cap rates for each of the prototypes.
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Table B-1: Financial Pro Forma – Office Prototype
Sources: BAE, 2023.
Development Program Assumptions Development Cost Analysis Site Hard Costs
Site area (acres) 3.0 Site w ork $2,613,600
Site area (sq. ft.) 130,680 Hard construction costs $34,500,000 TI allow ance costs $10,925,000
Structure Parking - surface $1,163,500
Building Size - Gross SF 115,000 Parking - structured $16,600,000 Common Area SF 5,750 Parking - underground $0
Net Rentable SF 109,250 Total Hard Costs $65,802,100
Common Area as a % of Gross 5% Hard Costs per Built Sq. Ft. $572 Parking (spaces) 511 Soft Costs
Surface 179 Soft costs $13,160,420
Structured 332 Impact fees $260,630
Underground 0 Commercial Linkage Fee $0
Developer Fee $2,632,084
Development Cost & Income Assumptions Total Soft Costs $16,053,134 Hard Costs Construction Financing Costs
Site Work, per site SF $20 Construction Period Interest $3,112,545 Construction hard costs, per SF $300 Loan Fees $491,131 Tenant improvements, per rentable SF $100 Total Financing Costs $3,603,677 Parking - surface, per space $6,500
Parking - structured, per space $50,000 Total Development Costs Parking - underground, per space $90,000 excl. Land Value $85,458,911 Cost per built sq. ft. $743
Soft Costs
Soft Costs as a % of Hard Costs 20% Feasibility Analysis Developer Fee as % of Hard Costs 4%
Projected Income
Impact Fees & Extractions Gross Annual Revenue $6,227,250 Impact Fees (per SF) $2.27 Less Vacancy ($622,725)
Net Operating Income (NOI) $5,604,525
Operating Revenues & Expenses
Rental Rate (per SF per month, NNN) $4.75 Project Value to Investor $70,056,563 Vacancy rate 10% Less Development Costs ($85,458,911)
Residual Land Value ($15,402,348)
Construction Financing Residual Land Value/Acre ($5,134,116) Loan to cost ratio 60%
Interest rate 6.5%
Loan fees (points) 1%
Loan period (months) 18
Draw dow n factor 65%
Capitalization Rate 7.00%
Developer Profit Spread 1.00%
Required Yield on Cost 8.00%
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Table B-2: Financial Pro Forma – Retail Prototype
Sources: BAE, 2023.
Development Program Assumptions Development Cost Analysis Site Hard Costs
Site area (acres) 0.5 Site w ork $435,600
Site area (sq. ft.) 21,780 Hard construction costs $2,300,000 TI allow ance costs $650,000
Structure Parking - surface $266,500
Building Size - Gross SF 10,000 Parking - structured $0 Parking - underground $0
Parking (spaces) 41 Total Hard Costs $3,652,100
Surface 41 Hard Costs per Built Sq. Ft. $365
Structured 0
Underground 0 Soft Costs
Soft costs $730,420
Development Cost & Income Assumptions Impact fees $15,349 Commercial Linkage Fee $0
Hard Costs Developer Fee $146,084
Site Work, per site SF $20 Total Soft Costs $891,853
Construction hard costs, per SF $230
Tenant improvements, per rentable SF $65 Construction Financing Costs Parking - surface, per space $6,500 Construction Period Interest $172,784 Parking - structured, per space $50,000 Loan Fees $27,264 Parking - underground, per space $90,000 Total Financing Costs $200,048 Soft Costs Total Development Costs
Soft Costs as a % of Hard Costs 20% excl. Land Value $4,744,001 Developer Fee as % of Hard Costs 4% Cost per built sq. ft. $474 Developer Profit as % of Total Project Costs 0%
Feasibility Analysis
Impact Fees & Extractions
Misc. Impact Fees, not including CLF (per SF) $1.53 Projected Income Gross Annual Revenue $450,000
Operating Revenues & Expenses Less Vacancy ($45,000)
Rental Rate (per SF per month, NNN) $3.75 Net Operating Income (NOI) $405,000 Vacancy rate 10%
Project Value to Investor $5,062,500
Construction Financing Less Development Costs ($4,744,001) Loan to cost ratio 60% Residual Land Value $318,499
Interest rate 7% Residual Land Value/Acre $636,999
Loan fees (points) 1%
Loan period (months) 18
Draw dow n factor 65%
Capitalization Rate 6.50%
Developer Profit Spread 1.50%
Required Yield on Cost 8.00%
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Table B-4: Financial Pro Forma – Industrial Prototype
Sources: BAE, 2023.
Development Program Assumptions Development Cost Analysis Site Hard Costs
Site area (acres) 1.0 Site w ork $871,200
Site area (sq. ft.) 43,560 Hard construction costs $4,200,000 Parking - surface $279,500
Structure Parking - structured $0
Building Size - Gross SF 15,000 Parking - underground $0 Total Hard Costs $5,350,700
Parking (spaces) 43 Hard Costs per Built Sq. Ft. $357
Surface 43
Structured 0 Soft Costs
Underground 0 Soft costs $1,070,140
Impact fees $23,197
Development Cost & Income Assumptions Commercial Linkage Fee $0 Developer Fee $214,028
Hard Costs Total Soft Costs $1,307,365
Site Work, per site SF $20
Construction hard costs, per SF $280 Construction Financing Costs Tenant improvements, per rentable SF $0 Construction Period Interest $253,173 Parking - surface, per space $6,500 Loan Fees $39,948
Parking - structured, per space $50,000 Total Financing Costs $293,121 Parking - underground, per space $90,000
Total Development Costs
Soft Costs excl. Land Value $6,951,186
Soft Costs as a % of Hard Costs 20% Cost per built sq. ft. $463 Developer Fee as % of Hard Costs 4%
Feasibility Analysis
Impact Fees & Extractions
Misc. Impact Fees, not including CLF (per SF) $1.55 Projected Income Gross Annual Revenue $495,000
Operating Revenues & Expenses Less Vacancy ($24,750)
Rental Rate (per SF per month, NNN) $2.75 Net Operating Income (NOI) $470,250 Vacancy rate 5%
Project Value to Investor $7,234,615
Construction Financing Less Development Costs ($6,951,186) Loan to cost ratio 60% Residual Land Value $283,429
Interest rate 7% Residual Land Value/Acre $283,429
Loan fees (points) 1%
Loan period (months) 18
Draw dow n factor 65%
Capitalization Rate 5.00%
Developer Profit Spread 1.50%
Required Yield on Cost 6.50%
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Table B-5: Financial Pro Forma – Hotel Prototype
Sources: BAE, 2023.
Development Program Assumptions Development Cost Analysis Site Hard Costs
Site area (acres) 2.5 Site w ork $2,178,000
Site area (sq. ft.) 108,900 Hard construction costs $26,000,000 FF&E $3,250,000
Structure Parking - surface $1,300,000
Building Size - Gross SF 71,500 Parking - structured $0 Number of Hotel Rooms 130 Parking - underground $0
Total Hard Costs $32,728,000
Parking (spaces) 200 Hard Costs per Room $251,754
Surface 200
Structured 0 Soft Costs
Underground 0 Soft costs $6,545,600
Impact fees $132,301
Development Cost & Income Assumptions Commercial Linkage Fee $0 Developer Fee $1,309,120
Hard Costs Total Soft Costs $7,987,021
Site Work, per site SF $20
Construction hard costs, per room $200,000 Construction Financing Costs FF&E, per room $25,000 Construction Period Interest $1,548,189 Parking - surface, per space $6,500 Loan Fees $244,290
Parking - structured, per space $50,000 Total Financing Costs $1,792,479 Parking - underground, per space $90,000
Total Development Costs
Soft Costs excl. Land Value $42,507,499
Soft Costs as a % of Hard Costs 20% Cost per room $326,981 Developer Fee as % of Hard Costs 4% Cost per built sq. ft. $595 Developer Profit as % of Total Project Costs 0%
Feasibility Analysis
Impact Fees & Extractions
Misc. Impact Fees, not including CLF (per SF) $1.85 Projected Income Gross Revenue $9,376,120
Operating Revenues & Expenses Less Expenses ($6,094,478) Room Revenue (per occupied room night) $215 Net Operating Income (NOI) $3,281,642 Other Revenue (per occupied room night) $32
Expenses (as a % of operating revenue) 65% Project Value to Investor $36,462,689 Occupancy Rate 80% Less Development Costs ($42,507,499) Residual Land Value ($6,044,810)
Construction Financing Residual Land Value/Acre ($2,417,924) Loan to cost ratio 60%
Interest rate 7%
Loan fees (points) 1%
Loan period (months) 18
Draw dow n factor 65%
Capitalization Rate 8.00%
Developer Profit Spread 1.00%
Required Yield on Cost 9.00%
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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 $375 per leasable square foot of residential space for the lower-density multifamily rental prototype, $425 per leasable square foot of residential space for the high-density multifamily rental prototype, $475 per leasable square foot of residential space for the condominium prototype, $275 per square foot of residential space for the townhome prototype, and $250 per square foot of residential space for the single-family prototype.
Parking Costs: BAE included parking as a separate cost item in order to estimate the specific cost of building parking in these projects. Based on stakeholder interviews, BAE estimates the cost of a podium parking space at $55,000 per space. For prototypes including surface parking, BAE assumes a cost of $5,000 per surface parking space.
Soft Costs: This analysis assumes that soft costs are equal to between 12.5 and 17 percent of hard costs. This soft cost estimate includes engineering, architecture, financing, and CEQA costs, as well as City cost-recovery 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 the City’s impact fee schedule, including park in-lieu fees, storm drain area fees, and roadway maintenance fees.
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Market-Rate Residential Rents: This analysis assumes that rental rates for market-rate units for the lower-density apartments will average approximately $4.30 per net residential square foot, with some variation in rent per square foot based on unit size. Assuming slightly higher rents for the high-density prototype, BAE estimates rents are equal to $4.55 per square foot, with some variation between units. These assumption is based on information provided by developers that were interviewed as part of this study as well as data from Costar on current multifamily rental rates in the Campbell area.
Affordable Residential Rents: The affordable rental rates used in this analysis are based on income limits for households at each income level, as published by HCD, assuming an affordable rent equal to 30 of the total household income. The HCD rent limits were adjusted based on an estimated utility allowance to ensure that the combined cost of rent and utilities was no higher than the rent limit.
Market-Rate Residential Sale Prices: This analysis assumes that sale prices for market- rate units will average approximately $900 per net residential square foot for condominiums, $950 per residential square foot for townhomes, and $1,000 per square foot for single-family homes. This assumption is based on information provided by developers that were interviewed as part of this study as well as data from Redfin on sale prices among recently-sold condominiums and townhouses in Campbell.
Affordable Residential Sale Prices: The affordable sale prices used in this analysis are based on the published City of Campbell below-market rate sale prices.
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 include a one-time developer fee, which is estimated as a percentage of both hard and soft costs. Based on interviews, the fee typically amounts to roughly four percent of hard and soft costs.
Yield on Cost (rental prototypes): In order to meet developer and investor return thresholds, BAE assumes the project must reach a 5.5 percent Yield on Cost (YOC). This is roughly 75 basis points above the current capitalization rate. While this is a relatively small spread between the capitalization rate and the YOC, developers noted a willingness to proceed with projects yielding a 5.5 percent YOC due to the perceived strength of the Santa Clara County rental market.
Developer Profit Margin (for sale prototypes): This metric divides total developer profit by total development cost, to judge overall project feasibility. It can be considered as a
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simple profit margin, irrespective of how a project is financed between debt and equity.
Real estate development has higher risk inherent to many other types of investment activity, such as corporate bonds, so developers tend to seek higher profit threshold on real estate projects than these other investment options as a requirement for deciding whether to pursue a project. This study assumes an 18 percent profit threshold for the for- sale prototypes.
Residual Land Value Threshold: This analysis uses a land cost of approximately $3 million to $10 million per acre to assess the financial feasibility of each of the prototypes. The land costs vary by prototype in the City, with the single-family prototypes paying the highest in land costs due to the high sale prices of new single-family units. The land costs for the other prototypes tend to fall within the lower end of the range identified. This is generally consistent with input from the development community, however developers did note that site conditions and location greatly influence the site costs.
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Table C-1: Low-Density Multifamily Rental Prototype Pro Forma, Inclusionary Scenario
Sources: BAE, 2023.
Development Program Assumptions Cost Assumptions Development Cost Analysis Site Size - acres / square feet Construction Mixed-Income Development Total Units 59 Site Prep Costs (per site. sq.ft) Affordable Market Rate Total Project Affordable (% - count) 15% Hard Cost per net residential sf Market Rate (% - count) 85% Parking cost per space, Surface Site Preparation $244,640 $1,497,760 $1,742,400 Leasable sq.ft. Soft Costs (% of hard costs)
Total Project sq.ft Impact Fees (per unit) (a) Vertical Construction Total Parking Spaces 89 Inclusionary Housing In-Lieu Fee (per SF) $21.50 Hard Cost $2,606,250 $15,956,250 $18,562,500 Parking spaces per du 1.5 Developer Fee (% of hard and soft) 4% Parking Cost $70,000 $375,000 $445,000 Soft Costs $401,438 $2,449,688 $2,851,125
Base Density Units Impact Fees $205,388 $1,141,045 $1,346,433 Units by AMI Level All Rental Revenue Inclusionary Housing In-Lieu Fee $0 $0 $0 Unit Mix Sq. Ft. 50% 60% 80% MR Units Monthly Rent by AMI Level Subtotal $3,283,076 $19,921,983 $23,205,058 Studio 600 1 1 0 4 6 Unit Type 50% 60% 80% MR
1-BR 750 2 3 0 27 32 Studio $1,419 $1,714 $2,304 $2,940 Construction Financing 2-BR 1,000 1 1 0 16 18 1-BR $1,514 $1,830 $2,462 $3,300 Const. Loan Fees $22,930 $139,228 $162,158 3-BR 1,300 0 0 0 3 3 2-BR $1,806 $2,185 $2,944 $4,000 Const. Loan Interest $223,569 $1,357,476 $1,581,045 All Units 4 5 0 50 59 3-BR $2,079 $2,517 $3,394 $4,940
Developer Fee $141,109 $856,790 $997,898
Summary Market-Rate Total Operating Costs
Number of Units (# - %) 9 15% 50 85% 59 Annual op. cost - per Affordable du $15,000 Total Dev. Cost (excl. Land) $3,915,323 $23,773,237 $27,688,560 Avg. Affordability (% AMI) 56% n.a. Annual op. cost - per Market Rate du $15,000 Per Unit $435,036 $475,465 $469,298 Leasable Sq. Ft. 49,500 Vacancy Rate, Residential 5.0% Per Net SF $563 $559 $559 Total Sq. Ft. 59,400 Market Rate Cap Rate 4.75% Per Gross SF $469 $466 $466 Parking Spaces 14 75 89 Required Yield-on-Cost 5.50%
Feasibility Analysis
Financing
Construction-Period Mixed-Income Development
MR Loan-to-Cost 65% Affordable Market Rate Total Project Loan Fees 1% Project Income
Drawdown Factor 65% Gross Scheduled Rents $187,704 $2,156,160 $2,343,864 Interest rate 7.50% Less Vacancy ($9,385) ($107,808) ($117,193) Loan Term (months) 24 Less Operating Expenses ($135,000) ($750,000) ($885,000) Net Operating Income $43,319 $1,298,352 $1,341,671
Feasibility
Total Development Costs (ex. Land) $3,915,323 $23,773,237 $27,688,560 Per Unit (ex. Land) $435,036 $475,465 $469,298
Required Yield on Cost 5.50% 5.50% 5.50%
Project Value Net of Dev. Profit $787,615 $23,606,400 $24,394,015 Residual Land Value ($3,127,709) ($166,837) ($3,294,546) RLV per unit ($347,523) ($3,337) ($55,840)
RLV per Acre ($1,563,854) ($83,418) ($1,647,273)
15%
$5,000
$375
$20
8,340
$22,821
2.00 49,500
6,950
59,400
Affordable
42,550
51,060
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Table C-2: High-Density Mixed-Use Rental Prototype Pro Forma, Inclusionary Scenario
Sources: BAE, 2023.
Development Program Assumptions Cost Assumptions Development Cost Analysis Site Size - acres / square feet Construction Mixed-Income Development Total Units 132 Site Prep Costs (per site. sq.ft) Affordable Market Rate Total Project Affordable (% - count) 15% Hard Cost per net sf
Market Rate (% - count) 85% Parking cost per space, Podium Site Preparation $245,309 $1,497,091 $1,742,400 Leasable sq.ft. Soft Costs (% of hard costs)
Total Project sq.ft Impact Fees (per unit) (a) Vertical Construction Total Parking Spaces 132 Inclusionary Housing In-Lieu Fee (per SF) $21.50 Hard Cost $6,885,000 $42,372,500 $49,257,500 Parking spaces per du 1.0 Developer Fee (% of hard and soft) 4% Parking Cost $1,100,000 $6,160,000 $7,260,000 Soft Costs $1,197,750 $7,279,875 $8,477,625
Base Density Units Impact Fees $462,280 $2,588,770 $3,051,050 Units by AMI Level All Rental Revenue Inclusionary Housing In-Lieu Fee $0 $0 $0 Unit Mix Sq. Ft. 50% 60% 80% MR Units Monthly Rent by AMI Level Subtotal $9,645,030 $58,401,145 $68,046,175 Studio 600 1 1 0 11 13 Unit Type 50% 60% 80% MR
1-BR 750 5 7 0 60 72 Studio $1,419 $1,714 $2,304 $3,090 Construction Financing 2-BR 1,000 2 4 0 34 40 1-BR $1,514 $1,830 $2,462 $3,488 Const. Loan Fees $64,287 $389,339 $453,626 3-BR 1,300 0 0 0 7 7 2-BR $1,806 $2,185 $2,944 $4,250 Const. Loan Interest $626,800 $3,796,051 $4,422,851 All Units 8 12 0 112 132 3-BR $2,079 $2,517 $3,394 $5,200 Developer Fee $395,614 $2,395,929 $2,791,543
Summary Market-Rate Total Commercial Rent (NNN) $2.50
Number of Units (# - %) 20 15% 112 85% 132 Total Dev. Cost (excl. Land) $10,977,040 $66,479,555 $77,456,595 Avg. Affordability (% AMI) 56% n.a. Operating Costs Per Unit $548,852 $593,567 $586,792 Leasable Sq. Ft. 110,900 Annual op. cost - per Affordable du $15,000 Per Net SF $678 $702 $698 Total Sq. Ft. 133,080 Annual op. cost - per Market Rate du $15,000 Per Gross SF $565 $585 $561 Parking Spaces 20 112 132 Vacancy Rate, Residential 5.0% Market Rate Cap Rate 4.75% Feasibility Analysis
Ground Floor Commercial Space 5,000 Required Yield-on-Cost 5.50% Mixed-Income Development
Financing Affordable Market Rate Total Project
Construction-Period Project Income
MR Loan-to-Cost 65% Gross Scheduled Rents $430,380 $5,239,680 $5,670,060 Loan Fees 1% Less Vacancy ($21,519) ($261,984) ($283,503) Drawdown Factor 65% Less Operating Expenses ($300,000) ($1,680,000) ($1,980,000) Interest rate 7.50% Net Operating Income $108,861 $3,297,696 $3,406,557 Loan Term (months) 24
Feasibility
Total Development Costs (ex. Land) $10,977,040 $66,479,555 $77,456,595 Per Unit (ex. Land) $548,852 $593,567 $586,792
Required Yield on Cost 5.50% 5.50% 5.50%
Project Value Net of Dev. Profit $1,979,291 $59,958,109 $61,937,400 Residual Land Value ($8,997,749) ($6,521,445) ($15,519,195) RLV per unit ($449,887) ($58,227) ($117,570)
RLV per Acre ($4,498,875) ($3,260,723) ($7,759,597)
$23,114
Affordable
16,200 94,700
2.00 $20
$425
$55,000
110,900 15%
113,64019,440
138,080
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Table C-3: For-Sale Condominium Prototype Pro Forma, Inclusionary Scenario
Sources: BAE, 2023.
Development Program Assumptions Cost Assumptions Development Cost Analysis Site Size - acres / square feet Construction Mixed-Income Development Total Units 53 Site Prep Costs (per site. sq.ft) $20 Affordable Market Rate Total Project Affordable (% - count) 15% Hard Cost per net residential sf $475 Market Rate (% - count) 85% Parking cost per space, Podium $55,000 Site Preparation $131,502 $739,698 $871,200 Leasable sq.ft. Soft Costs (% of hard costs) 17.5%
Total Project sq.ft Impact Fees (per unit) (a) $23,908 Vertical Construction Total Parking Spaces 53 Inclusionary Housing In-Lieu Fee (per SF) $34.50 Hard Cost $4,560,000 $25,650,000 $30,210,000 Parking spaces per du 1.00 Developer Fee (% of hard and soft) 4% Parking Cost $440,000 $2,475,000 $2,915,000 Soft Costs $875,000 $4,921,875 $5,796,875
Base Density Units Sale Revenue Impact Fees $191,261 $1,075,842 $1,267,103 AMI-Level All Sale Price by AMI Level Inclusionary In-Lieu Fee $0 $0 $0 Unit Mix Sq. Ft. 50% 70% 110% MR Units Unit Type 50% 70% 110% MR Subtotal $6,066,261 $34,122,717 $40,188,978 2-BR 1,200 0 4 4 45 53 2-BR $188,601 $297,056 $512,384 $1,080,000 Construction Financing
Marketing Costs 5.00% Const. Loan Fees $40,285 $226,606 $266,891 Summary Market-Rate Total Const. Loan Interest $392,783 $2,209,406 $2,602,189 Number of Units (# - %) 8 15% 45 85% 53 Financing
Avg. Affordability (% AMI) 90% n.a. Construction-Period Developer Fee $247,911 $1,394,497 $1,642,407 Leasable Sq. Ft. 54,000 63,600 MR Loan-to-Cost 65%
Total Sq. Ft. 64,800 76,320 Loan Fees 1% Total Development Cost $6,878,742 $38,692,923 $45,571,665 Parking Spaces 8 45 53 Drawdown Factor 65% Per Unit $859,843 $859,843 $859,843 Interest rate 7.50% Per Net SF $717 $717 $717
Loan Term (months) 24 Per Gross SF $597 $597 $597
Feasibility Analysis
Mixed-Income Development
Affordable Market Rate Total Project
Project Income
Gross Sale Revenue $3,237,760 $48,600,000 $51,837,760
Less Marketing Costs ($161,888) ($2,430,000) ($2,591,888) Net Sales Revenue $3,075,872 $46,170,000 $49,245,872
Total Development Costs (ex. Land) $6,878,742 $38,692,923 $45,571,665 Per Unit (ex. Land) $859,843 $859,843 $859,843
Developer Profit Margin (% of Total Cost) 18% 18% 18%
Developer Profit Threshold $1,401,192 $7,881,707 $9,282,900 Residual Land Value ($5,204,062) ($404,630) ($5,608,693) RLV per unit ($650,508) ($8,992) ($105,824)
RLV per Acre ($5,204,062) ($404,630) ($5,608,693)
1.00 63,600
76,320
Affordable
9,600
11,520
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Table C-4: For-Sale Townhome Prototype Pro Forma, Inclusionary Scenario
Sources: BAE, 2023.
Development Program Assumptions Cost Assumptions Development Cost Analysis Site Size (acres) 1.00 Construction Mixed-Income Development Total Units 22 Site Prep Costs (per site. sq.ft) Affordable Market Rate Total Project Affordable (% - count) 18% Hard Cost per gross residential sf Market Rate (% - count) 82% Soft Costs (% of hard costs) 13% Site Preparation $198,000 $891,000 $1,089,000 Leasable sq.ft. Impact Fees (per unit) (a) $32,401
Total Project sq.ft Inclusionary Housing In-Lieu Fee (per SF) $34.50 Vertical Construction Total Parking Spaces 44 Developer Fee (% of hard and soft) 4% Hard Cost $1,980,000 $8,910,000 $10,890,000 Parking spaces per du 2.00 Soft Costs $247,500 $1,113,750 $1,361,250 Impact Fees $129,603 $583,215 $712,819
Base Density Units Sale Revenue Inclusionary Housing In-Lieu Fee $0 $0 $0 AMI-Level All Sale Price by AMI Level Subtotal $2,357,103 $10,606,965 $12,964,069 Unit Mix Sq. Ft. 50% 70% 110% MR Units Unit Type 50% 70% 110% MR 3-BR 1,800 0 2 2 18 22 3-BR $212,778 $330,841 $573,294 $1,710,000 Construction Financing
Marketing Costs 5.00% Const. Loan Fees $16,608 $74,737 $91,345 Summary Market-Rate Total Const. Loan Interest $161,930 $728,684 $890,613 Number of Units (# - %) 4 18% 18 82% 22 Financing
Avg. Affordability (% AMI) 90% n.a. Construction-Period Developer Fee $102,204 $459,919 $562,123 Leasable Sq. Ft. 32,400 39,600 MR Loan-to-Cost 65%
Total Sq. Ft. 32,400 39,600 Loan Fees 1% Total Development Cost $2,835,845 $12,761,304 $15,597,150 Parking Spaces 8 36 44 Drawdown Factor 65% Per Unit $708,961 $708,961 $708,961 Interest rate 7.50% Per Net SF $394 $394 $394
Loan Term (months) 24 Per Gross SF $394 $394 $394
Feasibility Analysis
Mixed-Income Development
Affordable Market Rate Total Project
Project Income
Gross Sale Revenue $1,808,270 $30,780,000 $32,588,270
Less Marketing Costs ($90,414) ($1,539,000) ($1,629,414) Net Sales Revenue $1,717,857 $29,241,000 $30,958,857
Total Development Costs (ex. Land) $2,835,845 $12,761,304 $15,597,150 Per Unit (ex. Land) $708,961 $708,961 $708,961
Developer Profit Margin (% of Total Cost) 18% 18% 18%
Developer Profit Threshold $682,270 $3,070,217 $3,752,487 Residual Land Value ($1,800,259) $13,409,479 $11,609,220 RLV per unit ($450,065) $744,971 $527,692
RLV per Acre ($1,800,259) $13,409,479 $11,609,220
$25
$275
39,600
7,200
39,600
Affordable
7,200
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Table C-5: For-Sale Single-Family Subdivision Prototype Pro Forma, Inclusionary Scenario
Sources: BAE, 2023.
Development Program Assumptions Cost Assumptions Development Cost Analysis Site Size (acres) 0.50 Construction Project Total
Total Units 6 Site Prep Costs (per site. sq.ft)
Affordable (% - count) 0% Hard Cost per gross residential sf Site Preparation $544,500 Market Rate (% - count) 100% Soft Costs (% of hard costs) 13% Leasable sq.ft. Impact Fees (per unit) (a) $33,191 Vertical Construction Total Project sq.ft Inclusionary Housing In-Lieu Fee (per SF) $0.00 Hard Cost $3,900,000 Total Parking Spaces 12 Developer Fee (% of hard and soft) 4% Soft Costs $487,500 Parking spaces per du 2.00 Impact Fees $199,147
Inclusionary Housing In-Lieu Fee $0
Base Density Units Sale Revenue Subtotal $4,586,647
AMI-Level All Sale Price by AMI Level
Unit Mix Sq. Ft. 50% 70% 110% MR Units Unit Type 50% 70% 110% MR Const. Loan Fees $33,352 3-BR 2,600 0 0 0 6 6 3-BR $212,778 $330,841 $573,294 $2,600,000 Developer Fee $205,246 Total Development Cost $5,694,932
Marketing Costs 5.00% Per Unit $949,155
Summary Market-Rate Total Per Net SF $365
Number of Units (# - %) 0 0% 6 100% 6 Financing Per Gross SF $365 Avg. Affordability (% AMI) n.a. n.a. Construction-Period Leasable Sq. Ft. 15,600 15,600 MR Loan-to-Cost 65% Feasibility Analysis Total Sq. Ft. 15,600 15,600 Loan Fees 1%
Parking Spaces 0 12 12 Drawdown Factor 65% Project Total Interest rate 7.50% Project Income
Loan Term (months) 24 Gross Sale Revenue $15,600,000
Less Marketing Costs ($780,000)
Net Sales Revenue $14,820,000
Total Development Costs (ex. Land) $5,694,932
Per Unit (ex. Land) $949,155
Developer Profit Margin (% of Total Cost) 18%
Developer Profit Threshold $1,745,088
Residual Land Value $7,379,980
RLV per unit $1,229,997
RLV per Acre $14,759,960
0 $25
$250
15,600
15,600
Affordable
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Table C-6: For-Sale Single-Family Subdivision Prototype Pro Forma, Seven-Unit Inclusionary Scenario
Source: BAE, 2024.
Development Program Assumptions Cost Assumptions Development Cost Analysis Site Size (acres) 0.58 Construction Affordable Market Rate Project Total Total Units 7 Site Prep Costs (per site. sq.ft)
Affordable (% - count) 14% Hard Cost per gross residential sf Site Preparation $90,750 $544,500 $635,250 Market Rate (% - count) 86% Soft Costs (% of hard costs) 13% Leasable sq.ft. Impact Fees (per unit) (a) $33,191 Vertical Construction Total Project sq.ft Inclusionary Housing In-Lieu Fee (per SF) $0.00 Hard Cost $650,000 $3,900,000 $4,550,000 Total Parking Spaces 14 Developer Fee (% of hard and soft) 4% Soft Costs $81,250 $487,500 $568,750 Parking spaces per du 2.00 Impact Fees $33,191 $199,147 $232,339 Inclusionary Housing In-Lieu Fee $0 $0 $0
Base Density Units Sale Revenue Subtotal $764,441 $4,586,647 $5,351,089 AMI-Level All Sale Price by AMI Level
Unit Mix Sq. Ft. 50% 70% 110% MR Units Unit Type 50% 70% 110% MR Const. Loan Fees $5,559 $33,352 $38,911 3-BR 2,600 0 1.0 0.0 6 7 3-BR $212,778 $330,841 $573,294 $2,600,000 Developer Fee $34,208 $205,246 $239,454 Total Development Cost $949,155 $5,694,932 $6,644,088
Marketing Costs 5.00% Per Unit $949,155 $949,155 $949,155 Summary Market-Rate Total Per Net SF $365 $365 $365
Number of Units (# - %) 1 14% 6 86% 7 Financing Per Gross SF $365 $365 $365 Avg. Affordability (% AMI) 70% n.a. Construction-Period Leasable Sq. Ft. 15,600 18,200 MR Loan-to-Cost 65% Feasibility Analysis Total Sq. Ft. 15,600 18,200 Loan Fees 1%
Parking Spaces 2 12 14 Drawdown Factor 65% Affordable Market Rate Project Total Interest rate 7.50% Project Income
Loan Term (months) 24 Gross Sale Revenue $330,841 $15,600,000 $15,930,841 Less Marketing Costs ($16,542) ($780,000) ($796,542)
Net Sales Revenue $314,299 $14,820,000 $15,134,299
Total Development Costs (ex. Land) $949,155 $5,694,932 $6,644,088 Per Unit (ex. Land) $949,155 $949,155 $949,155
Developer Profit Margin (% of Total Cost) 18% 18% 18%
Developer Profit Threshold $290,848 $1,745,088 $2,035,936 Residual Land Value ($925,704) $7,379,980 $6,454,276
RLV per unit ($925,704) $1,229,997 $922,039
RLV per Acre ($11,108,453) $14,759,960 $11,064,472
2,600
$25
$250
18,200
18,200
Affordable
2,600
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Table C-7: Low-Density Multifamily Rental Prototype Pro Forma, Point of Indifference In-Lieu Fee Scenario
Source: BAE, 2024.
Development Program Assumptions Cost Assumptions Development Cost Analysis Site Size - acres / square feet 2.0 Construction
Total Units 59 Site Prep Costs (per site. sq.ft) Total Project Affordable (% - count) 0% Hard Cost per net residential sf Market Rate (% - count) 100% Parking cost per space, Surface Site Preparation $1,742,400 Leasable sq.ft. Soft Costs (% of hard costs)
Total Project sq.ft Impact Fees (per unit) (a) Vertical Construction Total Parking Spaces 89 Inclusionary Housing In-Lieu Fee (per SF) $55.50 Hard Cost $18,562,500 Parking spaces per du 1.5 Developer Fee (% of hard and soft) 4% Parking Cost $445,000 Soft Costs $2,851,125
Base Density Units Impact Fees $1,346,433
Units by AMI Level All Rental Revenue Inclusionary Housing In-Lieu Fee $2,747,250 Unit Mix Sq. Ft. 50% 60% 80% 100% MR Units Monthly Rent by AMI Level Subtotal $25,952,308 Studio 600 6 6 Unit Type 50% 60% 80% MR
1-BR 750 32 32 Studio $1,419 $1,714 $2,304 $2,940 Construction Financing 2-BR 1,000 18 18 1-BR $1,514 $1,830 $2,462 $3,300 Const. Loan Fees $180,016 3-BR 1,300 3 3 2-BR $1,806 $2,185 $2,944 $4,000 Const. Loan Interest $1,755,152 All Units 0 0 0 59 59 3-BR $2,079 $2,517 $3,394 $4,940
Developer Fee $1,107,788
Summary Market-Rate Total Operating Costs
Number of Units (# - %) 0 0% 59 100% 59 Annual op. cost - per Affordable du $15,000 Total Dev. Cost (excl. Land) $30,737,664 Avg. Affordability (% AMI) n.a. n.a. Annual op. cost - per Market Rate du $15,000 Per Unit $520,977 Leasable Sq. Ft. 49,500 Vacancy Rate, Residential 5.0% Per Net SF $621 Total Sq. Ft. 59,400 Market Rate Cap Rate 4.75% Per Gross SF $517 Parking Spaces 0 89 89 Required Yield-on-Cost 5.50%
Feasibility Analysis
Financing
Construction-Period
MR Loan-to-Cost 65% Total Project
Loan Fees 1% Project Income
Drawdown Factor 65% Gross Scheduled Rents $2,520,720
Interest rate 7.50% Less Vacancy ($126,036)
Loan Term (months) 24 Less Operating Expenses ($885,000) Net Operating Income $1,509,684
Feasibility
Total Development Costs (ex. Land) $30,737,664
Per Unit (ex. Land) $520,977
Required Yield on Cost 5.50%
Project Value Net of Dev. Profit $27,448,800
Residual Land Value ($3,288,864)
RLV per unit ($55,743)
RLV per Acre ($1,644,432)
2.00 $20
$375
$5,000
49,500 15%
59,400 $22,821
Affordable
0 49,500
0 59,400
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DRAFT Campbell Affordable Housing Nexus Study | Appendix C: Residential Pro Formas 82
Table C-8: High-Density Mixed-Use Rental Prototype Pro Forma, Point of Indifference In-Lieu Fee Scenario
Source: BAE, 2024.
Development Program Assumptions Cost Assumptions Development Cost Analysis Site Size - acres / square feet 2.0 Construction
Total Units 132 Site Prep Costs (per site. sq.ft) Total Project Affordable (% - count) 0% Hard Cost per net sf
Market Rate (% - count) 100% Parking cost per space, Podium Site Preparation $1,742,400 Leasable sq.ft. Soft Costs (% of hard costs)
Total Project sq.ft Impact Fees (per unit) (a) Vertical Construction Total Parking Spaces 132 Inclusionary Housing In-Lieu Fee (per SF) $63.50 Hard Cost $49,257,500 Parking spaces per du 1.0 Developer Fee (% of hard and soft) 4% Parking Cost $7,260,000 Soft Costs $8,477,625
Base Density Units Impact Fees $3,051,050
Units by AMI Level All Rental Revenue Inclusionary Housing In-Lieu Fee $7,042,150 Unit Mix Sq. Ft. 50% 60% 80% 100% MR Units Monthly Rent by AMI Level Subtotal $75,088,325 Studio 600 13 13 Unit Type 50% 60% 80% MR
1-BR 750 72 72 Studio $1,419 $1,714 $2,304 $3,090 Construction Financing 2-BR 1,000 40 40 1-BR $1,514 $1,830 $2,462 $3,488 Const. Loan Fees $499,400 3-BR 1,300 7 7 2-BR $1,806 $2,185 $2,944 $4,250 Const. Loan Interest $4,869,147 All Units 0 0 0 132 132 3-BR $2,079 $2,517 $3,394 $5,200 Developer Fee $3,073,229
Summary Market-Rate Total Commercial Rent (NNN) $2.50
Number of Units (# - %) 0 0% 132 100% 132 Total Dev. Cost (excl. Land) $85,272,501 Avg. Affordability (% AMI) n.a. n.a. Operating Costs Per Unit $646,004 Leasable Sq. Ft. 110,900 Annual op. cost - per Affordable du $15,000 Per Net SF $769 Total Sq. Ft. 133,080 Annual op. cost - per Market Rate du $15,000 Per Gross SF $641 Parking Spaces 0 132 132 Vacancy Rate, Residential 5.0% Market Rate Cap Rate 4.75% Feasibility Analysis
Ground Floor Commercial Space 5,000 Required Yield-on-Cost 5.50% Financing Total Project
Construction-Period Project Income
MR Loan-to-Cost 65% Gross Scheduled Rents $6,122,040
Loan Fees 1% Less Vacancy ($306,102)
Drawdown Factor 65% Less Operating Expenses ($1,980,000) 1008.182 Interest rate 7.50% Net Operating Income $3,835,938 Loan Term (months) 24
Feasibility
Total Development Costs (ex. Land) $85,272,501
Per Unit (ex. Land) $646,004
Required Yield on Cost 5.50%
Project Value Net of Dev. Profit $69,744,327
Residual Land Value ($15,528,174)
RLV per unit ($117,638)
RLV per Acre ($7,764,087)
2.00 $20
$425
$55,000
110,900 15%
133,080 $23,114
Affordable
0 110,900
0 133,080
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DRAFT Campbell Affordable Housing Nexus Study | Appendix C: Residential Pro Formas 83
Table C-9: For-Sale Condominium Prototype Pro Forma, Point of Indifference In-Lieu Fee Scenario
Source: BAE, 2024.
Development Program Assumptions Cost Assumptions Development Cost Analysis Site Size - acres / square feet Construction
Total Units 53 Site Prep Costs (per site. sq.ft) $20 Total Project Affordable (% - count) 0% Hard Cost per net residential sf $475 Market Rate (% - count) 100% Parking cost per space, Podium $55,000 Site Preparation $871,200 Leasable sq.ft. Soft Costs (% of hard costs) 17.5%
Total Project sq.ft Impact Fees (per unit) (a) $23,908 Vertical Construction Total Parking Spaces 53 Inclusionary Housing In-Lieu Fee (per SF) $61.50 Hard Cost $30,210,000 Parking spaces per du 1.00 Developer Fee (% of hard and soft) 4% Parking Cost $2,915,000 Soft Costs $5,796,875
Base Density Units Sale Revenue Impact Fees $1,267,103
AMI-Level All Sale Price by AMI Level Inclusionary In-Lieu Fee $3,911,400 Unit Mix Sq. Ft. 50% 70% 110% MR Units Unit Type 50% 70% 110% MR Subtotal $44,100,378 2-BR 1,200 53 53 2-BR $188,601 $297,056 $512,384 $1,080,000 Construction Financing
Marketing Costs 5.00% Const. Loan Fees $292,315
Summary Market-Rate Total Const. Loan Interest $2,850,074 Number of Units (# - %) 0 0% 53 100% 53 Financing
Avg. Affordability (% AMI) n.a. n.a. Construction-Period Developer Fee $1,798,863 Leasable Sq. Ft. 63,600 63,600 MR Loan-to-Cost 65%
Total Sq. Ft. 76,320 76,320 Loan Fees 1% Total Development Cost $49,912,830 Parking Spaces 0 53 53 Drawdown Factor 65% Per Unit $941,752 Interest rate 7.50% Per Net SF $785
Loan Term (months) 24 Per Gross SF $654
Feasibility Analysis
Total Project
Project Income
Gross Sale Revenue $57,240,000
Less Marketing Costs ($2,862,000)
Net Sales Revenue $54,378,000
Total Development Costs (ex. Land) $49,912,830
Per Unit (ex. Land) $941,752
Developer Profit Margin (% of Total Cost) 18%
Developer Profit Threshold $10,064,309
Residual Land Value ($5,599,139)
RLV per unit ($105,644)
RLV per Acre ($5,599,139)
1.00 63,600
76,320
Affordable
0 0
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DRAFT Campbell Affordable Housing Nexus Study | Appendix C: Residential Pro Formas 84
Table C-10: For-Sale Townhome Prototype Pro Forma, Point of Indifference In-Lieu Fee Scenario
Source: BAE, 2024.
Development Program Assumptions Cost Assumptions Development Cost Analysis Site Size (acres) 1.00 Construction
Total Units 22 Site Prep Costs (per site. sq.ft) Total Project Affordable (% - count) 0% Hard Cost per gross residential sf Market Rate (% - count) 100% Soft Costs (% of hard costs) 13% Site Preparation $1,089,000 Leasable sq.ft. Impact Fees (per unit) (a) $32,401
Total Project sq.ft Inclusionary Housing In-Lieu Fee (per SF) $92.00 Vertical Construction Total Parking Spaces 44 Developer Fee (% of hard and soft) 4% Hard Cost $10,890,000 Parking spaces per du 2.00 Soft Costs $1,361,250
Impact Fees $712,819
Base Density Units Sale Revenue Inclusionary Housing In-Lieu Fee $3,643,200 AMI-Level All Sale Price by AMI Level Subtotal $16,607,269 Unit Mix Sq. Ft. 50% 70% 110% MR Units Unit Type 50% 70% 110% MR 3-BR 1,800 22 22 3-BR $212,778 $330,841 $573,294 $1,710,000 Construction Financing
Marketing Costs 5.00% Const. Loan Fees $115,026
Summary Market-Rate Total Const. Loan Interest $1,121,501 Number of Units (# - %) 0 0% 22 100% 22 Financing
Avg. Affordability (% AMI) n.a. n.a. Construction-Period Developer Fee $707,851 Leasable Sq. Ft. 39,600 39,600 MR Loan-to-Cost 65%
Total Sq. Ft. 39,600 39,600 Loan Fees 1% Total Development Cost $19,640,646 Parking Spaces 0 44 44 Drawdown Factor 65% Per Unit $892,757 Interest rate 7.50% Per Net SF $496
Loan Term (months) 24 Per Gross SF $496
Feasibility Analysis
Total Project
Project Income
Gross Sale Revenue $37,620,000
Less Marketing Costs ($1,881,000)
Net Sales Revenue $35,739,000
Total Development Costs (ex. Land) $19,640,646
Per Unit (ex. Land) $892,757
Developer Profit Margin (% of Total Cost) 18%
Developer Profit Threshold $4,480,316
Residual Land Value $11,618,037
RLV per unit $528,093
RLV per Acre $11,618,037
0 $25
$275
39,600
39,600
Affordable
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Attachment: Draft Affordable Housing Nexus Study Report (Receive Draft Affordable Housing Nexus DRAFT
DRAFT Campbell Affordable Housing Nexus Study | Appendix C: Residential Pro Formas 85
Table C-11: For-Sale Single-Family Subdivision Prototype Pro Forma, Seven-Unit Point of Indifference In-Lieu Fee Scenario
Source: BAE, 2024.
Development Program Assumptions Cost Assumptions Development Cost Analysis Site Size (acres) 0.50 Construction
Total Units 6 Site Prep Costs (per site. sq.ft) Total Project Affordable (% - count) 0% Hard Cost per gross residential sf Market Rate (% - count) 100% Soft Costs (% of hard costs) 13% Site Preparation $544,500 Leasable sq.ft. Impact Fees (per unit) (a) $33,191
Total Project sq.ft Inclusionary Housing In-Lieu Fee (per SF) $98.50 Vertical Construction Total Parking Spaces 12 Developer Fee (% of hard and soft) 4% Hard Cost $3,900,000 Parking spaces per du 2.00 Soft Costs $487,500
Impact Fees $199,147
Base Density Units Sale Revenue Inclusionary Housing In-Lieu Fee $1,536,600 AMI-Level All Sale Price by AMI Level Subtotal $6,123,247 Unit Mix Sq. Ft. 50% 70% 110% MR Units Unit Type 50% 70% 110% MR 3-BR 2,600 0 0 0 6 6 3-BR $212,778 $330,841 $573,294 $2,600,000 Construction Financing
Marketing Costs 5.00% Const. Loan Fees $43,340
Summary Market-Rate Total Const. Loan Interest $422,568 Number of Units (# - %) 0 0% 6 100% 6 Financing
Avg. Affordability (% AMI) n.a. n.a. Construction-Period Developer Fee $266,710 Leasable Sq. Ft. 15,600 15,600 MR Loan-to-Cost 65%
Total Sq. Ft. 15,600 15,600 Loan Fees 1% Total Development Cost $7,400,366 Parking Spaces 0 12 12 Drawdown Factor 65% Per Unit $1,233,394 Interest rate 7.50% Per Net SF $474
Loan Term (months) 24 Per Gross SF $474
Feasibility Analysis
Total Project
Project Income
Gross Sale Revenue $15,600,000
Less Marketing Costs ($780,000)
Net Sales Revenue $14,820,000
Total Development Costs (ex. Land) $7,400,366
Per Unit (ex. Land) $1,233,394
Developer Profit Margin (% of Total Cost) 18%
Developer Profit Threshold $2,052,066
Residual Land Value $5,367,568
RLV per unit $894,595
RLV per Acre $10,735,136
0 $25
$250
15,600
15,600
Affordable
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DRAFT Campbell Affordable Housing Nexus Study | Appendix E: Demonstration of Lack of Overlap Between Fees 86
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 byproducts11 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 Santa Clara 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.
11 The byproducts refer to any secondary commodities that the industry creates.
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DRAFT Campbell Affordable Housing Nexus Study | Appendix E: Demonstration of Lack of Overlap Between Fees 87
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.
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DRAFT Campbell Affordable Housing Nexus Study | Appendix E: Demonstration of Lack of Overlap Between Fees 88
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.
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Attachment: Draft Affordable Housing Nexus Study Report (Receive Draft Affordable Housing Nexus Study) 1 Project Examples
Based on Staff Recommendations
Commercial Fee Examples
To illustrate how the fee could be applied to various projects, staff have developed the examples below.
Commercial Example 1 : New 6,000 sq. ft. restaurant, replacing existing 5,000 sq. ft. restaurant.
First provide credit for existing and/or recently demolished buildings:
6,000 sq. ft. (new)
– 5,000 sq. ft. (old)
1,000 sq. ft. net new area
Then multiply the remaining area by appropriate fee rate based on building size:
$1,000 sq. ft. net new
x $4.50 rate
$4,500 – total fee due
Commercial Example 2: New 155,000 sq. ft. office building (no prior building) $900,000 (100,000 sq. ft. at $9 sq. ft. under flat fee) +$247,500 (55,000 sq. ft. at reduced fee of $4.5 sq. ft. for “large projects”) Housing Fee Examples
Housing Example 1: 89-unit project built with 1,000 sq. ft. average unit sizes Two eligible options to satisfy the inclusionary unit obligation as follows:
Option 1: Provide inclusionary units to satisfy any whole and/or fractional unit obligations as follows:
• 14 units (89 units x 15% = 13.35)
Obligation: Provide 14 inclusionary units.
Option 2: Provide inclusionary units to satisfy any whole unit obligations and pay a fee fractional unit obligation.
• Note: Eligible for fee payment as of 0.35 is under 0.5 (for a 7+ unit project) • Fee Formula: $60 (rate) x 0.35 (fractional obligation) / 13.35 (total obligation) x
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Attachment: Project Examples (Receive Draft Affordable Housing Nexus Study) 2 89,000 sq. ft. (89 units at 1,000 sq. ft. average habitable square feet) = $140,000
Obligation: Provide 13 inclusionary units and pay $140,000.
Housing Example 2: 90-unit project built with 1,000 sq. ft. average unit size
Only one eligible option to satisfy the inclusionary unit obligation as follows:
Option 1: Provide inclusionary units to satisfy any whole and/or fractional unit obligations as follows:
• 14 units (90 units x 15% = 13.5)
Obligation: Provide 14 inclusionary units.
Note: This example is not “eligible” for “Option 2” allowing fee payment for fractional units as the fractional obligation not less than 0.5.
Housing Example 3: 6-unit project built with 2,000 sq. ft. average unit size
Option 1: Provide inclusionary units to satisfy any whole and/or fractional unit obligations as follows:
• 0.9 units (6 units x 15% = .9)
Obligation: Provide 1 inclusionary unit.
Option 2: Provide inclusionary units to satisfy any whole unit obligations (not applicable) and pay a fee for the fractional unit obligation (i.e., 0.9)
• Formula: $60 (rate) x 0.9 (fractional obligation) / 0.9 (total obligation) x 12,000 sq. ft. (6 units at 2,000 sq. ft. average habitable square feet) = $720,000
Obligation: $720,000
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Attachment: Project Examples (Receive Draft Affordable Housing Nexus Study) City
Council
Report
TITLE: Council Committee Reports
RECOMMENDED ACTION
That the City Council report on activities from their committee assignments.
DISCUSSION
This is the section of the City Council Agenda that allows the City Councilmembers to report on items of interest and the work of City Council Subcommittees.
MAYOR LANDRY
Advisory Commissioner Appointment Interview Subcommittee City Attorney Performance/Compensation Subcommittee
City Clerk Performance/Compensation Subcommittee
City Manager Performance/Compensation Subcommittee
Education Subcommittee
Economic Development Subcommittee
West Valley Mayors and Managers
DCBA Liaison
Santa Clara County Housing and Community Development Advisory Committee Santa Clara Valley Water District County Water Commission Santa Clara County Library District JPA Board of Directors Cities Association of Santa Clara County - City Selection Committee Friends of the Heritage Theater Liaison (Alt.)
West Valley Clean Water JPA (Alt.)
West Valley Solid Waste Authority JPA (Alt.)
VICE MAYOR LOPEZ
City Attorney Performance/Compensation Subcommittee
City Clerk Performance/Compensation Subcommittee
City Manager Performance/Compensation Subcommittee
Economic Development Subcommittee
Finance Subcommittee
Legislative Subcommittee
Silicon Valley Clean Energy Audit Committee
Item: 19
Category: COUNCIL COMMITTEE
REPORTS
Meeting Date: April 16, 2024
19 Packet Pg. 623
Council Committee Reports Page 2 of 3
Bay Area Quality Management District Board of Directors** League of Cities Peninsula Division Executive Committee** Valley Transportation Authority Board of Directors**
West Valley Mayors and Managers (Alt.)
Cities Association of Santa Clara County:
Board Representative (Alt.)
Legislative Action Committee and City Selection Committee (Alt.) Silicon Valley Clean Energy JPA Board of Directors (Alt.) West Valley Sanitation District (Alt.)
COUNCILMEMBER BYBEE:
Finance Subcommittee
Legislative Subcommittee
Cities Association of Santa Clara County:
Board Representative
Legislative Action Committee
Silicon Valley Animal Control Authority Board (SVACA)
Silicon Valley Clean Energy JPA Board of Directors
Campbell Historical Museum & Ainsley House Foundation Liaison (Alt.) West Valley Sanitation District (Alt.)
COUNCILMEMBER FURTADO
Advisory Commissioner Appointment Interview Committee
West Valley Clean Water JPA
West Valley Sanitation District
West Valley Solid Waste Authority JPA
Association of Bay Area Governments (ABAG)
Silicon Valley Regional Interoperability Authority (SVRIA) Santa Clara County Emergency Operational Council (EOAC)**
Silicon Valley Animal Control Authority Board (SVACA) (Alt.) Valley Transportation Authority Policy Advisory Committee (Alt.)
COUNCILMEMBER SCOZZOLA
Campbell Historical Museum & Ainsley House Foundation Liaison Friends of the Heritage Theater Liaison
Education Subcommittee
Silicon Valley Clean Energy JPA Board of Directors
Silicon Valley Clean Energy Finance and Legislative Committees Valley Transportation Authority Policy Advisory Board
19 Packet Pg. 624
Council Committee Reports Page 3 of 3
Santa Clara Valley Water District: County Water Commission (Alt.) DCBA Liaison (Alt.)
Santa Clara County Housing and Community Development Advisory Committee (Alt.) Santa Clara County Library District JPA Board of Directors (Alt.) Association of Bay Area Governments (Alt.)
**appointed by other agencies
Prepared by:
Kristen Epolite, Deputy City Clerk
19 Packet Pg. 625
To: Honorable Mayor and City Council
Date: 4/15/2024
From: Kristen Epolite, Deputy City Clerk
Subject: Desk Item – 12 Correspondence
The attached letter written by Mike Krisman, Director at Large for Campbell Village Neighborhood Association, was received in the Clerk’s Office on Monday, April 15, 2024.
City of Campbell
MEMORANDUM
City Clerk’s Office
City of Campbell
70 N. First Street
Campbell, CA 95008
April 14, 2024
RE: Zoning Change for Starbucks located at 1228 Camden Ave.
Vote no to rezone Starbucks located at 1228 Camden Ave.
Traffic currently backs up past the Curtner Ave and S McGlincy intersection on a regular basis.
Adding a drive-through to a limited residential two-lane road will only add to the current traffic issues. Drivers do and will continue to seek ways around the traffic back-up. This drives traffic into our neighborhood. These drivers speed to make up time and risk the lives of people who live here.
·��r,nmn4
OnLk•ll]J T1,1rh,
Mf,11,h�•"-e Int\ by Mcmlott $3,n Jo'J4!
Wi"Hltlfl\o., y
tu11w(/1!ltl
This proposed Zoning change risks the safety of our neighborhood and degrades the quality of life for all those that live in the area.
Vote NO!
To: Honorable Mayor and City Council Date: April 15, 2024 From: Andrea Sanders, City Clerk
Subject: Desk Item 14 – Revised Police Fees
The Master Fee Schedule and Compar ative Fee Schedule has been revised to re move Arcade and Semi Arcade Permits, Hypnotherapy, and Pool or Billard Permit fees fro m Police Fees to align with the same categories being removed from business licensing and Community Development Fees.
Attached is the revised Master Fee Schedule for Police Fees (Item 14 at
tachment B) and the Comparative Master Fee Schedule for Police Fees (Item 14 attachment C.)
Cit
y of Campbell MEM
ORANDUM
City Clerk’s Office
City of Campbell
POLICE FEES
FY 24/25 Fee Charge Basis Note
Report / Recording / Records Fees
1 Police Report Fee [a]
a) Up to ten pages No charge per report [b]
b) Each Add'l page after first 10 pages $0.10 per page 2 CAD Incident Report [a]
a) Up to ten pages No charge
b) Each Add'l page after first 10 pages $0.10 per page 3 Audio Recording Copy Fees [a]
a) Discovery
i) CD/DVD $2 each
ii) USB/Flash Drive $8 each
iii) Hourly Rate for Reproduction $24 per hour [c]
b) Dispatch
i) CD/DVD $2 each
ii) USB/Flash Drive $8 each
iii) Hourly Rate for Reproduction $24 per hour [c]
4 Arrest Log Release No Charge per page [a]
5 Research/Archiving $24 per hour [d]
Vehicle Release / Impound / Repossession Fees
6 Vehicle Release
a) Storage / Impound $187
b) 30 Day Impound $213
7 Vehicle Repossession Fee $15 [e]
Citation Sign‐off Fees
8 Citation Sign‐off
a) Campbell Police Department Issued Citation No charge b) Citation Issued by Other Agency (Non‐Campbell PD) $15 DUI Response Cost Recovery
9 Driving Under the Influence ‐ Cost Recovery (Hourly Rate) a) Community Service Officer (CSO) $67 per hour
b) Police Officer $125 per hour
c) Police Agent $125 per hour
d) Police Sergeant $163 per hour
Activity Description
1 City of Campbell
POLICE FEES
FY 24/25 Fee Charge Basis NoteActivity Description
False Alarm Response
10 False Alarm Fee
a) Up to three false alarms $0 each
b) 4th ‐ 6th Alarm $233 each
c) 7th ‐ 9th Alarm $285 each
d) 10th Alarm and Each Additional Alarm after 10 $337 each Permit / License Application Review
11 Block Party Permit $130
12 Concealed Weapon Permit
a) New $330 plus DOJ fees
b) Renewal $25 plus DOJ fees [f]
c) Psychological Testing $125 plus DOJ fees [f]
d) Modification of Permit $10 plus DOJ fees [f]
13 Firearms and Ammunition Sales Permit (Business)
a) New $850
b) Renewal $268
14 Live Entertainment Permit $1,374
15 Massage
a) Massage Establishment (Owner Not State Certified)
i) New $920
ii) Renewal $330
b) Massage Establishment (Owner State Certified)
i) New $0 [g]
ii) Renewal $0 [g]
c) Massage Therapist / Trainee
i) New (State Certified) $0 [g]
ii) Renewal (State Certified) $0 [g]
16 Medical Marijuana Delivery Registration
a) New $2,197
b) Renewal $1,098
17 Pawnbrokers and Secondhand Dealers
a) New $570
b) Renewal $145
18 Sexually Oriented Business Permit
a) New $1,368
2 City of Campbell
POLICE FEES
FY 24/25 Fee Charge Basis NoteActivity Description
b) Renewal $850
19 Taxicab Owner's License $964
20 Tow Car Operator Permit / Tow Truck Driver Certificate a) Tow Car Operator Permit $2,685
b) Tow Truck Driver Certificate
i) New $50 [h]
ii) Renewal $12 [h]
21 Used Car Dealer ‐ Retail Only $280
Other
22 Naturalization VISA Letter $39
23 Security Services ‐ Outside Work Assignments
a) Reserve Officer $82 per hour; 2‐hr min.
b) Officer $162 per hour; 2‐hr min.
c) Sergeant $207 per hour; 2‐hr min.
24 Firearms Storage
a) Administrative Fee $254 flat fee [i],[j]
b) Daily Storage Fee $1 per firearm/per day [i],[j]
Notes
[a] Per Government Code 6253(b) and City Attorney.
[b] No fee for victims of violent crime or domestic violence. [c] Fee based on rate allowed per Evidence Code Section 1563(b)(1). [d] Maximum amount allowed per Evidence Code Section 1563(b)(1). Fees apply only to research/archiving pursuant to a subpoena. [e] Maximum amount allowed per Government Code Section 41612. [f] Maximum allowed per Penal Code Section 26190.
[g] Fee administered via State certification process.
[h] Maximum amount allowed per Vehicle Code Section 2431. [i] For firearms taken per restraining order or for safekeeping and as a result of a domestic violence or mental health hold. [j] Fee payable upon releasing firearm(s) to owner and may be waived (fully or partially) upon administrative approval. 3 City of Campbell
POLICE FEES
FY 23/24 Fee FY 24/25 Fee Increase / (Decrease) Charge Basis Note CPI Adjust
Report / Recording / Records Fees
1P o l i c e Report Fee [a]
a) Up to ten pages No charge No charge per report [b] N b) Each Add'l page after first 10 pages $0.10 $0.10 $0.00 per page N 2C A D Incident Report [a]
a) Up to ten pages No charge No charge N
b) Each Add'l page after first 10 pages $0.10 $0.10 $0.00 per page N 3 Audio Recording Copy Fees [a]
a) Discovery
i) CD/DVD $2 $2 $0 each N
ii) USB/Flash D r i v e $ 8$ 8$ 0 e a c h N
iii) Hourly Rate for Reproduction $24 $24 $0 per hour [c] N b) Dispatch
i) CD/DVD $2 $2 $0 each N
ii) USB/Flash D r i v e $ 8$ 8$ 0 e a c h N
iii) Hourly Rate for Reproduction $24 $24 $0 per hour [c] N 4 Arrest Log Release No Charge No Charge per page [a] N 5 Research/Archiving $24 $24 $0 per hour [d] N
Vehicle Release / Impound / Repossession Fees
6 Vehicle Release
a) Storage / Impound $180 $187 $7 Y
b) 30 Day Impound $205 $213 $8 Y
7 Vehicle Repossession Fee $15 $15 $0 [e] N
Activity Description
1 City of Campbell
POLICE FEES
FY 23/24 Fee FY 24/25 Fee Increase / (Decrease) Charge Basis Note CPI AdjustActivity Description
Citation Sign‐off Fees
8C i t a t i o n Sign‐off
a) Campbell Police Department Issued Citation No charge No charge N b) Citation Issued by Other Agency (Non‐Campbell PD) $15 $15 $0 N DUI Response Cost Recovery
9D r i v i n g Under the Influence ‐ Cost Recovery (Hourly Rate) a) Community Service Officer (CSO) $64 $67 $2 per hour Y b) Police Officer $121 $125 $4 per hour Y
c) Police Agent $121 $125 $4 per hour Y
d) Police Sergeant $157 $163 $6 per hour Y
False Alarm Response
10 False Alarm Fee
a) Up to three false alarms $0 $0 $0 each Y
b) 4th ‐ 6th Alarm $225 $233 $8 each Y
c) 7th ‐ 9th Alarm $275 $285 $10 each Y
d) 10th Alarm and Each Additional Alarm after 10 $325 $337 $12 each Y Permit / License Application Review
11 Arcade and Semiarcade Permits
a) Arcade $820 $850 $30 Y
b) Semiarcade $685 $710 $25 Y
11 Block Party Permit $125 $130 $5 Y
2 City of Campbell
POLICE FEES
FY 23/24 Fee FY 24/25 Fee Increase / (Decrease) Charge Basis Note CPI AdjustActivity Description
12 Concealed Weapon Permit
a) New $330 $330 $0 plus DOJ fees N
b) Renewal $25 $25 $0 plus DOJ fees [f] N
c) Psychological Testing $125 $125 $0 plus DOJ fees [f] N d) Modification of Permit $10 $10 $0 plus DOJ fees [f] N 13 Firearms and Ammunition Sales Permit (Business)
a) New $820 $850 $30 Y
b) Renewal $259 $268 $9 Y
15 Hypnotherapy $820 $850 $30 Y
14 Live Entertainment Permit $1,325 $1,374 $49 Y
15 Massage
a) Massage Establishment (Owner Not State Certified)
i) New $920 $920 $0 N
ii) Renewal $330 $330 $0 N
b) Massage Establishment (Owner State Certified)
i) N e w $ 0$ 0$ 0 [ g ] N
ii) R e n e w a l $ 0$ 0$ 0 [ g ] N
c) Massage Therapist / Trainee
i) New (State Certified) $0 $0 $0 [g] N
ii) Renewal (State Certified) $0 $0 $0 [g] N
16 Medical Marijuana Delivery Registration
a) New $2,119 $2,197 $78 Y
b) Renewal $1,060 $1,098 $39 Y
3 City of Campbell
POLICE FEES
FY 23/24 Fee FY 24/25 Fee Increase / (Decrease) Charge Basis Note CPI AdjustActivity Description
17 Pawnbrokers and Secondhand Dealers
a) New $550 $570 $20 Y
b) Renewal $140 $145 $5 Y
20 Pool or Billiards Permit
a) Two or More Tables $820 $850 $30 Y
b) One Table Only $65 $67 $2 Y
18 Sexually Oriented Business Permit
a) New $1,320 $1,368 $48 Y
b) Renewal $820 $850 $30 Y
19 Taxicab Owner's License $964 $964 $0 N
20 Tow Car Operator Permit / Tow Truck Driver Certificate a) Tow Car Operator Permit $2,590 $2,685 $95 Y
b) Tow Truck Driver Certificate
i) New $50 $50 $0 [h] N
ii) Renewal $12 $12 $0 [h] N
21 Used Car Dealer ‐ Retail Only $270 $280 $10 Y
Other
22 Naturalization VISA Letter $38 $39 $1 Y
23 Security Services ‐ Outside Work Assignments
a) Reserve Officer $79 $82 $3 per hour; 2‐hr min. Y
b) Officer $156 $162 $6 per hour; 2‐hr min. Y
c) Sergeant $200 $207 $7 per hour; 2‐hr min. Y
4 City of Campbell
POLICE FEES
FY 23/24 Fee FY 24/25 Fee Increase / (Decrease) Charge Basis Note CPI AdjustActivity Description
24 Firearms Storage
a) Administrative Fee $245 $254 $9 flat fee [i],[j] Y b) Daily Storage F e e $ 1$ 1$ 0 p e r firearm/per day [i],[j] Y Notes:
[a] Per Government Code 6253(b) and City Attorney.
[b] No fee for victims of violent crime or domestic violence. [c] Fee based on rate allowed per Evidence Code Section 1563(b)(1). [d] Maximum amount allowed per Evidence Code Section 1563(b)(1). Fees apply only to research/archiving pursuant to a subpoena. [e] Maximum amount allowed per Government Code Section 41612. [f] Maximum allowed per Penal Code Section 26190.
[g] Fee administered via State certification process.
[h] Maximum amount allowed per Vehicle Code Section 2431. [i] For firearms taken per restraining order or for safekeeping and as a result of a domestic violence or mental health hold. [j] Fee payable upon releasing firearm(s) to owner and may be waived (fully or partially) upon administrative approval. 5