Capitola City Council
October 10, 2024

REVISED 10/09/2024 1:30 PM
City of Capitola
City Council Meeting Agenda
Thursday, October 10, 2024 – 6:00 PM
City Council Chambers
420 Capitola Avenue, Capitola, CA 95010
Mayor: Kristen Brown
Vice Mayor: Yvette Brooks
Council Members: Joe Clarke, Margaux Morgan, Alexander Pedersen Regular Meeting of the Capitola City Council – 6 PM
All correspondence received prior to 5:00 p.m. on the Wednesday preceding a Council Meeting will be distributed to Councilmembers to review prior to the meeting. Information submitted after 5 p.m. on that Wednesday may not have time to reach Councilmembers, nor be read by them prior to consideration of an item.

1. Roll Call and Pledge of Allegiance
Council Members Joe Clarke, Margaux Morgan, Alexander Pedersen, Yvette Brooks, and Mayor Kristen Brown.

2. Additions and Deletions to the Agenda

3. Presentations
Presentations are limited to eight minutes.

A. Presentation from Oneill's Sea Odyssey
B. Presentation from Vista Center for the Blind and Visually Impaired

4. Additional Materials
Additional information submitted to the City after distribution of the agenda packet.

A. Item 8B - Correspondence Received
B. Item 8C - Correspondence Received
C. Item 8D - Correspondence Received

5. Oral Communications by Members of the Public
Oral Communications allows time for members of the Public to address the City Council on any “Consent Item” on tonight’s agenda, or on any topic within the jurisdiction of the City that is not on the “General Government/Public Hearings” section of the Agenda. Members of the public may speak for up to three minutes, unless otherwise specified by the Mayor. Individuals may not speak more than once during Oral Communications. All speakers must address the entire legislative body and will not be permitted to engage in dialogue. A maximum of 30 minutes is set aside for Oral Communications.

6. Staff / City Council Comments
Comments are limited to three minutes.
1 City Council Meeting Agenda – October 10, 2024
City of Capitola Page 2

7. Consent Items
All items listed as “Consent Items” will be enacted by one motion in the form listed below. There will be no separate discussion on these items prior to the time the Council votes on the action unless members of the City Council request specific items to be discussed for separate review. Items pulled for separate discussion will be considered following General Government. Note that all Ordinances which appear on the public agenda shall be determined to have been read by title and further reading waived.

A. City Council Meeting Minutes
Recommended Action: Approve minutes from the regular meeting on September 26, 2024.

B. Donations Report FY 2023-24
Recommended Action: Receive the Annual Donations and Contributions Report for Fiscal Year 2023-24.

8. General Government / Public Hearings
All items listed in “General Government / Public Hearings” are intended to provide an opportunity for public discussion of each item listed. The following procedure pertains to each General Government item: 1) Staff explanation; 2) Council questions; 3) Public comment; 4) Council deliberation; 5) Decision.

A. Netherlands Transportation Study Visit
Recommended Action: Receive a presentation on the June 2024 Santa Cruz County Delegation Transportation Study Visit to the Netherlands with the Dutch Cycling Embassy.

B. RFQ for 41st Avenue Corridor Plan
Recommended Action: Authorize staff to issue a Request for Qualifications (RFQ) for a 41st Avenue Corridor Plan.

C. Capitola Mall Redevelopment Land Use Study
Recommended Action: Receive a presentation by Kosmont Companies on the findings of the Capitola Mall Redevelopment Land Use Study.

D. Council Parental Leave
Recommended Action: Adopt a resolution adopting an Administrative Policy permitting the City Council absences from official service occasioned by parental leave for up to 12 weeks.

9. Adjournment - The next regularly scheduled City Council meeting is on October 24, 2024, at 6:00 PM.
_____________________________________________________
How to View the Meeting
Meetings are open to the public for in-person attendance at the Capitola City Council Chambers located at 420 Capitola Avenue, Capitola, California, 95010.

Other ways to Watch:

Spectrum Cable Television channel 8
City of Capitola, California YouTube Channel
To Join Zoom Application or Call in to Zoom:

Meeting
link: https://us02web.zoom.us/j/83328173113?pwd=aVRwcWN3RU03Zzc2dkNpQzRWVXAydz09 2 City Council Meeting Agenda – October 10, 2024
City of Capitola Page 3
Or dial one of these phone numbers: 1 (669) 900 6833, 1 (408) 638 0968, 1 (346) 248 7799 Meeting ID: 833 2817 3113
Meeting Passcode: 678550
How to Provide Comments to the City Council
Members of the public may provide public comments to the City Council in-person during the meeting.

If you are unable to attend in-person, please email your comments to [email protected] and they will be included as a part of the record for the meeting. Please be aware that the City Council will not accept comments via Zoom.

Notice regarding City Council: The City Council meets on the 2nd and 4th Thursday of each month at 6:00 p.m. in the City Hall Council Chambers located at 420 Capitola Avenue, Capitola.

Agenda and Agenda Packet Materials: The City Council Agenda and the complete Agenda Packet are available for review on the City’s website and at Capitola City Hall prior to the meeting. Need more information? Contact the City Clerk’s office at 831-475-7300.

Agenda Materials Distributed after Distribution of the Agenda Packet: Pursuant to Government Code §54957.5, materials related to an agenda item submitted after distribution of the agenda packet are available for public inspection at the Reception Office at City Hall, 420 Capitola Avenue, Capitola, California, during normal business hours.

Americans with Disabilities Act: Disability-related aids or services are available to enable persons with a disability to participate in this meeting consistent with the Federal Americans with Disabilities Act of 1990. Assisted listening devices are available for individuals with hearing impairments at the meeting in the City Council Chambers. Should you require special accommodations to participate in the meeting due to a disability, please contact the City Clerk’s office at least 24 hours in advance of the meeting at 831-475-7300. In an effort to accommodate individuals with environmental sensitivities, attendees are requested to refrain from wearing perfumes and other scented products.

Si desea asistir a esta reunión pública y necesita ayuda - como un intérprete de lenguaje de señas americano, español u otro equipo especial - favor de llamar al Departamento de la Secretaría de la Ciudad al 831-475-7300 al menos tres días antes para que podamos coordinar dicha asistencia especial o envié un correo electrónico a [email protected].

Televised Meetings: City Council meetings are cablecast “Live” on Charter Communications Cable TV Channel 8 and are recorded to be rebroadcasted at 8:00 a.m. on the Wednesday following the meetings and at 1:00 p.m. on Saturday following the first rebroadcast on Community Television of Santa Cruz County (Charter Channel 71 and Comcast Channel 25). Meetings are streamed “Live” on the City’s website by clicking on the Home Page link “Meeting Agendas/Videos.” Archived meetings can be viewed from the website at any time. 3 10/9/24, 8:55 AM Comments to Item 8B - Gautho, Julia - Outlook about:blank 1/1
4 Item 4 A.

Dear Capitola City Council,
I have some concerns regarding the proposed concept plan for 41st Avenue. The City has already funded two visioning documents for the 41st Avenue corridor in 2009 and 2011 and those only led to minimal changes in the zoning code and no significant development. Rather than spending $100,000 on another pretty visioning document, which would require subsequent plans to actually implement, I think the City would be better served by building a larger budget over the next several years and applying for grant funding to develop a specific plan for the 41st Avenue corridor (including a portion of Capitola Road and Clares Street).

Specific plans, which can be adopted by ordinance and used as regulatory documents, have the potential to truly transform a specific area of a city. The City of Santa Cruz updated their Downtown Plan in 2017 and again in 2020 and those modifications have led to significant investment in their downtown area.

Watsonville followed suit last year, adopting the Downtown Watsonville Specific Plan in October 2023, and that document has the potential to catalyze the same type of development in their downtown area.

Specific plans do this by removing uncertainty for developers and businesses through catering development standards to the specific area, conducting a CEQA analysis for the whole area so that subsequent projects in the area do not require CEQA review, and addressing issues such as infrastructure, transportation, and financing needs more comprehensively.

Now, before anyone labels me an extremist (again), I am not saying that 41st Avenue needs to look like downtown Santa Cruz or downtown Watsonville. Drafting a specific plan for the 41st Avenue corridor would involve a large amount of community input so that the resulting plan would reflect what our residents, property owners, businesses, and visitors want to see in the area. The plan will need to allow for the densities and development standards identified in the recently adopted 6th Cycle Housing Element, but this effort would take that one step further by showing where and how those densities can be achieved in a form that is acceptable to the community while also building a path towards making that vision a reality.

If we are serious about revitalizing the 41st Avenue corridor, that is the level of investment we need to be willing to make. If not, we will end up $100,000 poorer with another conceptual plan with lots of pretty pictures collecting dust on a bookshelf at City Hall along next to the ones from 2009 and 2011.

Respectfully,
Melinda Orbach
5 Item 4 A.

Perkins Coie LLP
505 Howard Street
Suite 1000
San Francisco, CA 94105-3204
T. +1.415.344.7000
F. +1.415.344.7050
perkinscoie.com
Matthew S. Gray
[email protected]
D. +1.415.344.7082
F. +1.415.344.7282
October 8, 2024
Katie Herlihy
Community Development Director
City of Capitola
420 Capitola Avenue
Capitola, California 95010
[email protected]
Re: Capitola Mall Redevelopment Study (“Study”) / October 10, 2024 City Council Meeting Agenda Item 8.c
Dear Ms. Herlihy:

We write on behalf of Merlone Geier Partners (“MGP”), the owner of a portion of the Capitola Mall property (the “Property”) in the City of Capitola (“City”). As you are aware from our prior correspondence, MGP has closely monitored the City’s efforts to achieve compliance with state law concerning the 2023-2031 Housing Element and related implementation procedures. As the owner of properties that are essential to the implementation of the Housing Element, and given our prior interactions with staff, MGP was surprised not to have been afforded an opportunity to review and comment on a draft of the Study that purports to identify strategies for incentivizing redevelopment of that same property. After review of the Study, our position continues to be that if the City wants the site to be redeveloped for housing within the current Regional Housing Needs Allocation cycle, then it should timely adopt the zoning amendments required by the Housing Element and forego duplicative analyses of alternatives that fail to adequately address impediments to the development of a residential component at Capitola Mall.

MGP agrees with the Study’s fundamental conclusion that mandates for commercial use on site, whether that use is retail or hospitality, will render a redevelopment proposal uneconomic. The use of fee waivers, bonus floor areas, local tax sharing, or other forms of public subsidy described in the Study, while potentially offsetting some of that economic risk, are, in MGP’s expert opinion, insufficient to trigger redevelopment of the site. We would specifically object to any notion that the City would “establish a minimum objective Development Standard for commercial development with a residential development proposal . . .” (Study, p. 8). Such a standard would be inconsistent with the Housing Element, and we believe cannot now be imposed through a zoning amendment or otherwise, as it would present a new land use constraint to the development of housing that was not evaluated in the Housing Element presented to the Department of Housing and Community Development for certification. (See Cal. Govt. Code, § 65583(a)(5) (requiring “an analysis of potential and actual government constraints upon the . . . development of housing for all income levels, . . . including land use controls . . . .”) MGP appreciates that the City is interested in redevelopment of the site, and we remain willing to engage collaboratively to achieve that end; however, we believe the first necessary step is 6 Item 4 B.

October 8, 2024

timely adoption of the zoning amendments already studied and required by the Housing Element, namely, the modifications to Section 17.88 regarding height increases to 75 feet and maximum floor area ratio of 2.0.

Sincerely,
Matthew S. Gray
MSG:msg
7 Item 4 B.
1 Gautho, Julia
From: John <[email protected]>
Sent: Friday, October 4, 2024 3:49 PM
To: City Council; Gautho, Julia
Subject: Upcoming Council Meeting Item 8D
Follow Up Flag: Follow up
Flag Status: Flagged
Hello folks
I strongly support Item 8D. Watching messaging and narraƟve I have spent years nurturing come out in council, local reporƟng and forums the last couple of months has been a wonder. Come November 5th my Ɵme in local poliƟcs will be at an end in my modeling, and I want y’all to know that when I run into people like me in my work I too am bummed about it.

FWIW I’m preƩy average irl. This persona was a chore for me too. Behaviorism is brutal. Be nice to Alex. It’s not his fault I put him there.

The radical soluƟons to our issues can be found in budgets and changing our policy from market fixing to market shaping.

If I was y’all I would focus on those two areas.

Leon expounded ‘The end may jusƟfy the means as long as there is something that jusƟfies the end’.

I was faced with a singular problem, a system directed outward instead of inward. Short of folks resorƟng to tacƟcs even I won’t touch, the narraƟves controlling that system now value the inward over the outward (local over state) and it is unlikely anyone with the resources and lived experience to derail the current future coming will arrive in Ɵme to redirect the narraƟves ascendant.

Local voters not state interests will be the dominant force choosing electeds in mid county for the foreseeable future.

This is a blessing. Don’t waste it imo.

Godspeed JM
8 Item 4 C.

City of Capitola
City Council Meeting Minutes
Thursday, September 26, 2024 – 6:00 PM
City Council Chambers
420 Capitola Avenue, Capitola, CA 95010
Mayor: Kristen Brown
Vice Mayor: Yvette Brooks
Council Members: Joe Clarke, Margaux Morgan, Alexander Pedersen Regular Meeting of the Capitola City Council – 6 PM

1. Roll Call and Pledge of Allegiance – The meeting was called to order at 6:00 PM. In attendance: Council Members Joe Clarke, Margaux Morgan, Alexander Pedersen, Yvette Brooks, and Mayor Kristen Brown.

2. Additions and Deletions to the Agenda – None

3. Presentations
A. Mayor Brown presented certificates of recognition to the 2024 Junior Guard Participants.

4. Additional Materials
A. Item 7D – One email received after publication of the agenda packet.

B. Item 8A - Two emails received after publication of the agenda packet.

C. Item 8B - One email received after publication of the agenda packet.

5. Oral Communications by Members of the Public
 Goran Klepic
 Marilyn Garrett
 Gary Allstart

6. Staff / City Council Comments
 City Manager Goldstein expressed his gratitude for the public and staff’s participation in the Capitola Wharf Grand Reopening Event. He also reminded the public and the City Council of the Public Community Forum on October 1st at 6:00 PM to discuss the City’s Strategic Plan and obtain public input.
 Council Member Clarke thanked the public for their attendance at the Wharf Grand Opening Event and requested that the City consider maintaining a portable restroom facility on the Wharf and challenged the Police Chief to a paddle board race.  Council Member Morgan thanked the public for their attendance at the Wharf Grand Opening Event.
 Council Member Pedersen echoed sentiments about the Wharf Grand Opening Event.  Vice Mayor Brooks thanked staff, CWEP, and our allied agencies for their efforts to reopen the Wharf. She also provided an update on the appointment of two Capitola Youth Liaisons.

Vice Mayor Brooks shared concerns about the closure of the Bay/Porter off-ramp from Highway 1 and requested that traffic safety data be paused during this closure. She also echoed Council Member Clarke’s request about the Wharf portable bathroom facilities. She 9 Item 7 A.

City Council Meeting Minutes – September 26, 2024
City of Capitola Page 2
requested that the Long Term Wharf Plan Survey and the Strategic Plan be agendized at upcoming City advisory group meetings.
 Mayor Brown echoed sentiments about the Wharf Grand Opening Event. She reminded the public that they may find information about the Bay/Hill Traffic Improvements Project on the City’s website.
 Council Member Clarke requested that the City work with the CVWBIA to continue to host Wharf Events monthly year-round.

7. Consent Items
A. City Council Meeting Minutes
Recommended Action: Approve minutes from the regular meeting on September 12, 2024.

B. City Check Registers
Recommended Action: Approve check registers dated August 30, 2024, September 6, 2024, and September 13, 2024.

C. State Grant Administration Agreement Amendment
Recommended Action: Authorize the City Manager to execute Amendment 3 to the Professional Services Agreement with Adams Ashby Group for grant administration services for 2023 Community Development Block Grant Administration in the amount of $100,000, for a total contract value of $240,052.

D. Annexation Feasibility Plan Development Contract Award Recommended Action: Authorize the City Manager to execute an agreement with RSG Inc. to study the feasibility of annexation in an amount not to exceed $45,000, subject to City Attorney review and approval.

E. 2024 Holiday Parking
Recommended Action: Authorize the suspension of parking meter and pay station operation to allow free three-hour parking in the Village Parking Meter Zone A (1) from November 28, 2024, through December 25, 2024.

F. 2024 CDBG Grant Application
Recommended Action: Adopt a resolution authorizing staff to prepare and submit an application under the 2024 Community Development Block Grant Program for the Jade Street Community Center Project Phase II and Public Service Food Distribution Programs. (Resolution No. 4397) Motion to approve the Consent Calendar: Council Member Morgan Seconded: Council Member Clarke
Voting Yea: Council Members Clarke, Morgan, Pedersen, Vice Mayor Brooks, Mayor Brown

8. General Government / Public Hearings
A. Dog Park at Noble Gulch Park
Recommended Action: 1) Provide feedback on the proposed dog park design; 2) approve the Coastal Development Permit; 3) defer the funding decision to future budget discussions; and/or 4) direct staff to assess interest in donations and/or community fundraising for the project.

Public Works Director Kahn presented the staff report.

Public Comment:
 Dave Montgomery
 Marilyn Garrett
10 Item 7 A.

City Council Meeting Minutes – September 26, 2024
City of Capitola Page 3
The City Council voiced support for this project and discussed maximizing usable space in Noble Gulch Park, drainage issues within the proposed park location, and the possibility of community fundraising to support the project funding.

Motion to approve the Coastal Development Permit based on the findings outlined in the staff report: Vice Mayor Brooks
Seconded: Council Member Morgan
Voting Yea: Council Members Clarke, Morgan, Pedersen, Vice Mayor Brooks, Mayor Brown
B. Daylighting Law AB 413 – Village Parking
Recommended Action: 1) Review the AB 413 compliance approach in the Village and Citywide; and 2) approve the Coastal Development Permit.

Public Works Director Kahn presented the staff report.

Public Comment:
 Marilyn Garrett
The City Council discussed the timing of enforcement of AB 413, the need for additional bicycle parking, and requested that staff gather additional public buy-in for the Citywide approach of implementation of AB 413 compliance. The City Council voiced concern about members of the public receiving citations for parking in unmarked areas.

Motion to approve the Coastal Development Permit for implementation of AB 413 based on the findings outlined in the staff report: Council Member Morgan Seconded: Council Member Pedersen
Voting Yea: Council Members Clarke, Morgan, Pedersen, Vice Mayor Brooks, Mayor Brown
C. Public Art Project
Recommended Action: Adopt a resolution: 1) approving the Begonia Commemorative Public Art Project, 2) authorizing the City Manager to execute a Professional Services Agreement with artist Geoffrey Nelson in the amount of $40,000 for the Project, and 3) amending the adopted FY 2024-25 budget to accept a $20,000 donation from the Capitola Beach Festival and allocate funding for preparation of the project site for installation.

Recreation and Community Services Director Bryant and artist Geoffrey Nelson presented the staff report.

Public Comment:
 Marilyn Garrett
 Laurie Hill
 Mary Beth Cahalen
 Roy Johnson
The City Council thanked the Art and Cultural Commission for their careful review of Mr.

Nelson’s proposal.

Motion to adopt Resolution No. 4398: Vice Mayor Brooks
Seconded: Mayor Brown
Voting Yea: Council Members Clarke, Morgan, Pedersen, Vice Mayor Brooks, Mayor Brown
11 Item 7 A.

City Council Meeting Minutes – September 26, 2024
City of Capitola Page 4

9. Adjournment - The meeting adjourned at 8:01 PM. The next regularly scheduled City Council meeting is on October 10, 2024, at 6:00 PM.
____________________________
ATTEST: Kristen Brown, Mayor
____________________________
Julia Gautho, City Clerk
12 Item 7 A.

Capitola City Council
Agenda Report
Meeting: October 10, 2024
From: Finance Department
Subject: Donations Report FY 2023-24
Recommended Action: Receive the Annual Donations and Contributions Report for Fiscal Year 2023-24.

Background: In July 2013, the City implemented Administrative Policy III-15, which authorizes the City Manager to accept and appropriate donations or grants of $5,000 or less to support existing City projects and programs. Attachment 1 shows donations and contributions for the period of July 2023 through June 2024.

Discussion: Between July 2023 and June 2024, the City received a total of $314,902 in donations and contributions. Of the total amount, $44,428 had values of $5,000 or less. These contributions included support for the Capitola Historical Museum, Junior Guards scholarships, food truck event sponsorship, the Capitola Plein Air Festival, and the summer twilight concert series. In addition, the City received $270,474 in donations and contributions with values greater than $5,000. These contributions supported the Capitola Wharf Resiliency Project and afterschool program scholarships.

During this fiscal year, the City also received $5,679,800 in state and federal grants (Attachment 2). Included was $9,847 for California Alcoholic Beverage Control (ABC) activity reimbursement, $108,023 for reimbursement of various storm related damages, $1,065 for the accessory dwelling unit (ADU) program, $4,545,213 for the Wharf Resiliency Project, $500,000 for the Stockton Bridge, $160,560 for Coronavirus relief and public assistance, $105,092 for Permanent Housing Allocations, and $250,000 for the electric street sweeper.

Fiscal Impact: The City of Capitola benefits greatly from the generosity of individual citizens, local businesses, non-profit agencies, and others. Between July 2023 and June 2024, the City received $5,994,702 in donations, contributions, and grant funding.

Attachments:

1. Donations

2. Grants
Report Prepared By: Luis Ruiz, Accountant I
Reviewed By: Jim Malberg, Finance Director; Julia Gautho, City Clerk Approved By: Jamie Goldstein, City Manager
13 Item 7 B.

Date From Description Amount
Various Various Museum donations 10,675.21 $
Various Various Wharf Donations 220.00 $
12/14/2023 Public Safety Foundation Jr Guards Scholarships 1,432.5 $       8 6/6/2024 Public Safety Foundation Jr Guards Scholarships 2,500.00 $ 6/6/2024 Public Safety Foundation Camp Capitola Scholarships 2,000 $       .00 $      5,932.58
12/21/2023 Gayle's Bakery Plein Air 1,000.00 $
12/21/2023 Capitola By‐The‐Sea Inn & Suites Plein Air 800.00 $ 12/21/2023 Aspromonte Hotels, LLC Plein Air 800.00 $
$      2,600.00
7/13/2023 Lanai Financial Solutions, LLC Twilight Concerts 1,800.0 $       0 8/24/2023 Green Valley Corporation Twilight Concerts 1,800.00 $ 8/31/2023 GreenWaste Recovery LLC Twilight Concerts 1,000.00 $ 4/11/2024 Devcon Construction Twilight Concerts 2,000.00 $ 4/11/2024 Laverne Collins Twilight Concerts 2,000.00 $
5/29/2024 GreenWaste Recovery LLC Twilight Concerts 2,000.00 $ 6/6/2024 Capitola Inn and Suites Twilight Concerts 1,200.00 $ 6/6/2024 Aspromonte Hotels Twilight Concerts 1,200.00 $ 6/6/2024 Britannia Arms of Capitola Twilight Concerts 2,000.00 $ 6/6/2024 Fries Properties Inc Twilight Concerts 2,000.00 $ 6/6/2024 Santa Cruz Lending Group Twilight Concerts 1,000.00 $ 6/13/2024 Jessica Wallace Properties Inc Twilight Concerts 1,000.0 $       0 6/13/2024 New Leaf Twilight Concerts 2,000.00 $
6/20/2024 Lanai Financial Solutions, LLC Twilight Concerts 2,000.0 $       0 6/20/2024 Capitola Mall Twilight Concerts 2,000.00 $
$    25,000.00
TOTAL $5,000 AND UNDER 44,427.79 $
3/12/2024 Soquel Unified Elementary School District  Afterschool Program Scholarships 30,000.00 $ 5/7/2024 LAFCO  LAFCO Annexation Study 15,000.00 $
4/18/2024 CWEP Capitola Wharf Contribution 185,474.50 $ 5/10/2024 National Marine Sancturary Foundation Wharf Interpretive Signage  40,000.00 $ TOTAL OVER $5,000 270,474.50 $
GRAND TOTAL 314,902.29 $
City of Capitola
Donations & Contributions
July 2023 - June 2024
DONATIONS & CONTRIBUTIONS $5,000 AND UNDER
DONATIONS & CONTRIBUTIONS OVER $5,000
14 Item 7 B.

Date From Description Amount
Various State of CA ABC grant ‐ OT, travel, & meal
reimbursement $         9,846.84
Various State of CA Cal OES Storm Damage Reimbursements 108,023.43 $ 12/21/2023 State of CA SB2 grant ‐ ADU program 1,065.00 $ Various US Department of Housing and Urban
Development Capitola Wharf Rehabilitation Grant 3,293,689.00 $ Various State of CA Coastal Conservancy Wharf Grant $   1,251,523.94 5/23/2024 State of CA
Department of Water Resources Stockton
Bridge Grant $      500,000.00
Various CA Housing & Community Development CDBG grant ‐ Coronavirus relief & public assistance $      160,559.92
4/25/2024 State of CA
Permanent Local Housing Allocation
Reimbursement $      105,092.00
2/8/2024 Central Coast Community Energy  Electrive Street Sweeper Incentive  $      250,000.00 $  5,679,800.13
City of Capitola Grants
July 2023 - June 2024
15 Item 7 B.

Capitola City Council
Agenda Report
Meeting: October 10, 2024
From: Public Works Department
Subject: Netherlands Transportation Study Visit
Recommended Action: Receive a presentation on the June 2024 Santa Cruz County Delegation Transportation Study Visit to the Netherlands with the Dutch Cycling Embassy.

Background: Representatives from various Santa Cruz County agencies participated in a study visit to the Netherlands from June 3-6, 2024, organized by Ecology Action of Santa Cruz. This visit aimed to explore strategies for enhancing local transportation infrastructure and policies, building on insights gained during the 2022 Think Bike Workshop held in Santa Cruz. The delegation visited The Hague, Rotterdam, and Delft to study the renowned Dutch cycling system and how it contributes to creating safe, livable places, and boosts economic development and overall community wellbeing. Delegates included 30 staff members and elected officials from every jurisdiction in the County and all the regional organizations in Santa Cruz County.

Discussion: During the meeting, staff and representatives from Ecology Action will present their findings and insights from the study visit.

Fiscal Impact: The trip was funded by Ecology Action.

Report Prepared By: Kailash Mozumder, Public Works Project Manager Reviewed By: Julia Gautho, City Clerk; Samantha Zutler, City Attorney Approved By: Jamie Goldstein, City Manager
16 Item 8 A.

Netherlands Study
Visit Recap
June 3-7 2024

CAPITOLA CITY COUNCIL
17 Item 8 A.

Yvette Brooks
Vice-Mayor, City of Capitola
Kailash Mozumder
Public Work Project Manager, City of Capitola
City of Capitola Delegates
0 18
Item 8 A.

Climate Justice
Collaborative
Water
Energy
Transportation
EV Charging/
Infrastructure
Our mission is to advance equitable
community climate solutions in highgreenhouse gas emitting sectors. To achieve this we empower people,
businesses and communities make
simple, yet profound changes that
have measurable social, economic,
and environmental impact through
innovative energy, water, and
transportation solutions.
19 Item 8 A.

Sharing Dutch Cycling Knowledge
20 Item 8 A.

Who went on this trip? County-wide representatives from the following agencies:
• UC Santa Cruz
• City of Santa Cruz
• City of Scotts Valley
• City of Capitola
• City of Watsonville
• County of Santa Cruz
• Santa Cruz Regional Transportation Commission
• Transportation Agency of Monterey County
• Association of Monterey Bay Area Governments
• Ecology Action
30 Delegates including Planners, Engineers,
Elected Officials, City Admin, Advocates.
21 Item 8 A.

What did we learn?

1. Network Planning

2. Infrastructure Design

3. Cycle Highways

4. Car Management

5. Intersection Design

6. Pop Up to Permanent Infrastructure +
Tactical Urbanism

7. School Zones
Integrating principles applied in the Netherlands
can transform a community’s quality of life
22 Item 8 A.

The Headlines: • 30 delegates from 10 orgs/agencies expanded their knowledge about safety, livability, and
mobility with this trip. • 28% of all trips in the Netherlands are made by bike and they have comprehensive active
transportation infrastructure to support that. • To increase walking, biking, and transit (and reduce GHG in the process) we need
transformative infrastructure changes, and we
just saw how it can be done.
23 Item 8 A.

Critical Takeaways:

Thinking at a Network Level
24 Item 8 A.

Critical Takeaways:

Connectivity and Prioritization of Roads
25 Item 8 A.

Critical Takeaways:

Don’t Ignore the Weakest Link
• A Network is only as good as its
weakest link: the intersection is
where the majority of collisions
occur and where we see cycling
infrastructure “disappear”
• Signalized and unsignalized
junctions are physically protected
and designed to reduce speeds and
raise awareness, increasing safety
for all road users
• Raised and continuous cycle path
at side streets keeps vulnerable
users in a raised, seamless and
prioritized space
0 1
26 Item 8 A.

Critical Takeaways:

School Zones: Design for the
Behavior you Want
New Brighton Middle School (above)
Traffic calmed street to Dutch school (above)
0 27
Item 8 A.

The Kid-Friendly City
• Two-thirds of all Dutch children walk or
cycle to school; for high school students,
that number is closer to 75%
• The 12-17 age group cycles more than any
other age group (60% of ALL trips) • Dutch children are among the happiest in the world (regularly ranked as such by
UNICEF) specifically citing their unrivaled
levels of physical activity, freedom,
autonomy
• Mental and Physical wellbeing also
boasts the lowest levels of obesity and
depressions in the EU
28 Item 8 A.

Critical Takeaways:

The Safest Streets in the World
“If the U.S. had achieved the same improvements in traffic safety as the Netherlands (since 1970) 22,000 fewer Americans would have died on our roads in 2015” - Vox 29 Item 8 A.

What We Can Achieve
• Safety for all our Residents
• Economic Development for our
Businesses
• Livable, Connected and Thriving
Community
• County-wide Collaboration
Biggest Takeaways
0 30
Item 8 A.

Where to from here?
• Meet with Capitola City Council members for a
deeper dive into applicable lessons learned
from the study visit • Ecology Action will be reconvening the countywide coalition of delegates in December to support on design review, cross jurisdiction
collaboration, and mapping out next steps for
improved mobility and livability for us all • More to come! 31 Item 8 A.

Capitola City Council
Agenda Report
Meeting: October 10, 2024
From: Community Development Department
Subject: RFQ for 41st Avenue Corridor Plan
Recommended Action: Authorize staff to issue a Request for Qualifications (RFQ) for a 41st Avenue Corridor Plan.

Background: The 41st Avenue corridor is a vital commercial area within Capitola. Over the years, the City has conducted multiple studies to explore its potential for revitalization. The 2009 "41st Avenue Corridor Economic Development/Mixed Use Revitalization Study" and the 2011 "41st Avenue/Capitola Mall ReVisioning Plan" provided valuable insights into economic growth and redevelopment challenges.

The 2009 Study focused on strategies for economic development and mixed-use projects to improve the corridor’s appeal and functionality. Building on this, the 2011 Plan proposed a comprehensive vision to integrate 41st Avenue with the Capitola Mall, and touched on economic development, land use, urban design, parking, and traffic and circulation issues. Many of the recommendations from these studies have been incorporated into the City's General Plan and Zoning Code to guide property owners and local businesses.

Since the studies were completed, the City has made several key updates to its Municipal Code that affect economic development on the 41st Avenue corridor, including:

1. Allowing vertical and horizontal mixed-use in all commercial and mixed-use districts.

2. Reducing parking requirements.

3. Enabling low-impact commercial uses without the need for a planning permit.

4. Offering incentives for increased building height and floor area in exchange for community benefits.

5. Updating the sign code to allow administrative approval of signs that comply with standards.

6. Raising the threshold for when a conditional use permit is required.

7. Updating development review criteria to be objective and quantifiable.

While some of the studies' recommendations have been implemented, due to feasibility, cost, and staffing resources some action items have not been implemented, including:

1. Establish a unified design theme and brand identity.

2. Improve infrastructure to attract desired retailers.

3. Develop “complete streets” connecting the corridor with nearby neighborhoods.

4. Enhance pedestrian and bicycle access.

5. Relocate the Metro Transit Center.

6. Develop urban amenities to attract residential and mixed-use developments.

7. Assess the feasibility of a public facility and parking structure.

8. Implement short-term improvements such as enhanced wayfinding, landscaping, and public spaces.

9. Adopt placemaking strategies to integrate retail, dining, and entertainment, making the corridor more appealing for locals and visitors.

On August 22, 2024, the City Council adopted Resolution No. 4392, adopting the Capitola Housing Element which identifies the 41st Avenue, including the Capitola Mall, as a significant site for future housing development. This designation underscores the need to transform the corridor to accommodate higher-density residential development while improving its overall appeal and functionality. 32 Item 8 B.

Discussion: To help establish a vision for a more vibrant, multimodal corridor within a thriving regional commercial district, a cohesive planning effort should take place to lay the framework for future investment. Staff recommends the City issue a Request for Qualifications (RFQ) from consultants rather than requesting specific project proposals. Staff is suggesting an RFQ process due to the City’s overall goals and limited budget for this project. The RFQ allows the City to:

1. Gather Expert Input: Firms can provide valuable feedback and innovative ideas, helping to craft a cost-effective scope of work tailored to Capitola’s needs.

2. Encourage Broader Participation: An RFQ minimizes the upfront investment for firms, making it more likely that experienced teams will submit proposals, even with a smaller budget.

3. Focus on Qualifications: The RFQ prioritizes selecting firms with the most relevant experience, ensuring the City works with experts capable of delivering the best outcomes.

4. Maintain Flexibility: The City can refine the project scope based on input from qualified firms, ensuring an adaptable and collaborative planning process.

This approach helps ensure the corridor plan scope of work is both innovative and aligned with the City’s budget.

A corridor plan is a coordinated planning tool that lays the groundwork for future investment. It identifies key issues, addresses current conditions, provides a long-term vision for the future, and recommends improvements. Staff recommends issuing an RFQ to solicit input from qualified firms with expertise in corridor planning, focusing on mobility and placemaking improvements. The RFQ will outline the need for a multifaceted approach, including:

1. Multimodal streets designed for pedestrians, bicycles, cars, and public transit.

2. Greenspaces and public gathering areas to enhance livability.

3. Placemaking and branding through public art, lighting, landscaping, and street furniture.

4. Safety enhancements such as better crossings, lighting, and wayfinding.

5. Planning for future housing/increased population as identified in the Housing Element.

The 41st Avenue Corridor Plan marks the first step in establishing a foundation for future investment and planning along Capitola’s busiest thoroughfare. This initial planning effort will develop a high-level concept for subsequent, more detailed projects aimed at transforming the corridor into a more attractive space for both businesses and residents. The resulting concept will serve as a blueprint for incremental changes over the next decade. Additionally, the City will use the final plan to pursue grant opportunities related to detailed design and implementation.

Timeline: Staff plans to publish the RFQ in October with a deadline for submittals in February 2025.

Fiscal Impact: Funding for this RFQ process is included in the City’s budget for up to $75,000 and REAP

2.0 Grant of $35,000, for a total of $105,000.

Attachments:

1. 41st Avenue Corridor Plan Request For Qualifications Report Prepared By: Katie Herlihy, Community Development Director Reviewed By: Julia Gautho, City Clerk, and Samantha Zutler, City Attorney Approved By: Jamie Goldstein, City Manager
33 Item 8 B.

Request for Qualifications (RFQ) for 41st Avenue Corridor Plan City of Capitola
Date: October 15, 2024
Deadline for Submissions: February 1, 2025
Overview: The City of Capitola is seeking qualified firms to submit their qualifications for the development of a comprehensive Corridor Plan for the 41st Avenue Corridor. This corridor is a vital commercial and economic hub for the city, and there is a need for a coordinated planning effort to revitalize the area, integrating mobility improvements, placemaking, and housing development as part of the City's long-term vision.

The selected firm will work closely with the City to develop a high-level concept plan that will serve as a foundation for future investments and grant opportunities. The resulting plan will serve as a blueprint for transforming the corridor over the next decade into a more attractive space for businesses, residents, and visitors.

II. Background: The 41st Avenue corridor has been the focus of multiple studies aimed at revitalizing this critical commercial district. The 2009 "41st Avenue Corridor Economic Development/Mixed-Use Revitalization Study" and the 2011 "41st Avenue/Capitola Mall ReVisioning Plan" provided a comprehensive review of economic, land use, and urban design opportunities. While many recommendations have been integrated into the City's General Plan and Zoning Code, additional key improvements remain unaddressed, including:
 Establishing a unified design theme and brand identity.  Improving infrastructure to attract retailers.
 Enhancing pedestrian, bicycle, and transit connections.  Implementing short-term improvements (e.g., landscaping, wayfinding).  Developing urban amenities to support mixed-use developments.

The City Council’s recent adoption of the 2024 Housing Element further underscores the need for a cohesive plan to accommodate future high-density residential development while maintaining the corridor’s commercial viability.

RFQ Objectives: This RFQ seeks to gather qualifications from firms with demonstrated expertise in corridor planning, particularly in the areas of mobility, placemaking, and infrastructure improvements. Firms are invited to showcase their experience, capabilities, and vision for how they can contribute to the following project goals:

1. Multimodal Street Design: Create streets that prioritize pedestrians, bicycles, vehicles, and public transit.

2. Placemaking and Branding: Develop a cohesive design that incorporates public art, lighting, landscaping, and street furniture to create a unique identity for the corridor.

3. Safety Enhancements: Improve crossings, lighting, and wayfinding for all users. 34 Item 8 B.

4. Greenspaces and Public Gathering Areas: Incorporate public areas to enhance livability and foster community engagement.

5. Housing and Population Growth: Plan for future housing and higher-density developments identified in the Housing Element.

Scope of Work: The City anticipates that the scope of work will include, but not be limited to:
 Reviewing past studies and incorporating relevant findings into the new plan.  Analyzing current conditions and identifying key challenges and opportunities.  Developing a long-term vision for the corridor, focusing on mobility, placemaking, and future redevelopment.
 Creating a phased approach to improvements, allowing for incremental development over the next decade.
 Producing a final concept plan that will serve as a blueprint for future detailed design efforts and funding opportunities.

Deliverables
 A comprehensive Corridor Plan.
 Visualizations and conceptual designs of key improvements.  Engagement with community stakeholders to ensure that the plan aligns with public needs and expectations.

Submission Requirements
Firms interested in responding to this RFQ should submit the following materials in a document not to exceed 20 pages:

1. Cover Letter: Brief introduction and expression of interest.

2. Firm Profile: Overview of the firm, including size, location, and areas of expertise.

3. Relevant Experience: Description of similar projects, including outcomes and any partnerships.

4. Staffing Plan: Identification of key personnel who will be involved in the project, including their qualifications and roles.

5. Proposed Scope of Work, Timeline, and Cost: Outline of the methodology for conducting the work, including stakeholder engagement strategies, as well as a detailed timeline and estimated costs.

6. References: Contact information for at least three references from similar projects.

Timeline
35 Item 8 B.
 RFQ Release Date: October 15, 2024
 Deadline for Submissions: February 1, 2025
 Interviews with Selected Firms: February 2025
 Selection of Firm: February 2025
 Project Kick-off: March 1, 2025
Fiscal Impact
Funding for this RFQ process is included in the City’s budget for up to $105,000.

Submission Instructions
Submit qualifications electronically to [email protected] by the deadline stated above.

Late submissions will not be considered.

Contact Information
For questions regarding this RFQ, please contact:

Katie Herlihy
Community Development Director
City of Capitola
831-475-7300
[email protected]
36 Item 8 B.

RFQ
41st Avenue
Corridor Plan
City Council
October 10, 2024
37 Item 8 B.
41st Avenue Corridor Plan:

Request for Qualifications
Recommended Action:

Authorize issuance of a
Request for Qualifications
(RFQ) for a 41st Avenue
Corridor Plan.
38 Item 8 B.
41st Avenue Corridor Plan:

Request for Qualifications
Background
• Vital commercial area within
Capitola
• Multiple studies conducted:
• 2009 "Economic
Development/Mixed Use
Revitalization Study“
• 2011 "41st Avenue/Capitola
Mall Re-Visioning Plan“
• Focus: Economic growth,
redevelopment, land use, urban
design, traffic, and circulation.
• Incorporated into City's General
Plan and Zoning Code 39
Item 8 B.
41st Avenue Corridor Plan:

Request for Qualifications
Implemented Recommendation –
Primarily focused on zoning/regulations
• Vertical and horizontal mixed-use
allowed
• Reduced parking requirements
• No permit required for low-impact
commercial
• Incentives for height/floor area
• Updated sign code for admin approval
• Raised thresholds for conditional use
permits
• Objective and quantifiable criteria
•.
40 Item 8 B.
41st Avenue Corridor Plan:

Request for Qualifications
Pending Implementation – Primarily focused on changes to public spaces
• Unified design theme and brand identity.
• Infrastructure to attract retailers.
• Create “complete streets” connecting nearby neighborhoods. • Enhance pedestrian and bicycle access.
• Relocate Metro Transit Center.
• Urban amenities to attract residential/mixed-use projects. • Assess public facility and parking structure feasibility. • Implement short-term improvements: wayfinding, landscaping, public spaces
• Adopt placemaking strategies for retail, dining, and
entertainment.
•.
41 Item 8 B.
41st Avenue Corridor Plan:

Request for Qualifications
Recent Developments
August 22, 2024:
• City Council adopts
Housing Element
• 41st Avenue/Mall
identified for future
housing development
• Need for higher-density
residential + corridor
transformation
42 Item 8 B.
41st Avenue Corridor Plan:

Request for Qualifications
Next Steps: Corridor Plan
Planning Effort:
• Establish a vision for a vibrant, multimodal corridor • Request for Qualifications (RFQ) to guide future investments RFQ Approach:
• Gather expert input for cost-effective planning
• Encourage broader participation (minimize upfront
investment)
• Focus on qualifications and relevant experience
• Maintain flexibility to adapt project scope
43 Item 8 B.
41st Avenue Corridor Plan:

Request for Qualifications
Potential components of the Corridor Plan
• Multimodal Streets: Pedestrians, bicycles, cars, public transit
• Greenspaces: Public gathering areas to enhance livability • Placemaking & Branding: Public art, lighting,
landscaping, street furniture
• Safety Enhancements: Better crossings, lighting,
wayfinding
• Future Housing Planning: Addressing population growth per Housing Element
44 Item 8 B.
41st Avenue Corridor Plan:

Request for Qualifications
Examples: Re-Envision West Arden Arcade
45 Item 8 B.
41st Avenue Corridor Plan:

Request for Qualifications
Examples: Re-Envision West Arden Arcade
46 Item 8 B.
41st Avenue Corridor Plan:

Request for Qualifications
Examples: Re-Envision West Arden Arcade
47 Item 8 B.
41st Avenue Corridor Plan:

Request for Qualifications
Examples: Re-Envision West Arden Arcade
48 Item 8 B.
41st Avenue Corridor Plan:

Request for Qualifications
Timeline
RFQ Process:
• Publication: October 2024
• Submission Deadline: February 2025
49 Item 8 B.
41st Avenue Corridor Plan:

Request for Qualifications
Fiscal Impact
Funding:
• Budget allocation, Gen Plan Update Fund: $75,000
• REAP 2.0 Grant: $35,000
• Total Funding: $110,000
50 Item 8 B.
41st Avenue Corridor Plan:

Request for Qualifications
Recommended Action:

Authorize staff to issue a
Request for Qualifications
(RFQ) for a 41st Avenue
Corridor Plan.
51 Item 8 B.

Capitola City Council
Agenda Report
Meeting: October 10, 2024
From: Community Development Department
Subject: Capitola Mall Redevelopment Land Use Study
Recommended Action: Receive a presentation by Kosmont Companies on the findings of the Capitola Mall Redevelopment Land Use Study.

Background: The Capitola Mall has been a key commercial and economic hub for the City since its opening in 1977. It is located along the 41st Avenue corridor in the Regional Commercial Zoning District.

In recent years, changes in the retail industry, including the decline of large-format retail stores, have led to the need for a re-envisioning of the mall site. In response to this challenge, the City’s 2013 General Plan identified the redevelopment of the mall and the surrounding 41st Avenue corridor as a priority, with the goal of transforming the area into a mixed-use, pedestrian-friendly district.

In 2019, Merlone Geier Partners (MGP), the majority owner of the mall, submitted an initial redevelopment plan for conceptual review, which included a mix of residential and commercial uses. The City Council and Planning Commission provided initial feedback, expressing general support for the concept while recommending the inclusion of a hotel to offset the public service costs associated with new residential units. In 2020, the project was withdrawn due to the Covid-19 Pandemic and the shifting economy.

In 2023, in an effort to support redevelopment, the City initiated the Capitola Mall Redevelopment Land Use Study (Study). On September 14, 2023, the City Council approved an agreement with Kosmont Companies to complete the Study. The Study was originally set for completion in early 2023 but was delayed due to requirements from the California Department of Housing and Community Development (HCD). Specifically, HCD required that the City update the Housing Element to commit to increasing the height limit and floor area ratio (FAR) for the mall site to ensure the economic feasibility of residential development. Kosmont Companies provided economic analysis, supporting a height increase of up to 75 feet and more flexibility in FAR to remove parking garages from the calculation. The commitments are included in the City’s certified Housing Element
Discussion: The Study focuses on identifying tools and strategies that can assist the City in supporting the future redevelopment of the Capitola Mall. It emphasizes that the City’s land use and zoning regulations will play a crucial role in shaping future redevelopment.

Several land use incentives are identified in the study to assist with attracting and retaining commercial development in a mixed-use environment. These include:
 Fee Waivers
 Bonus Residential Floor Area/Height Limits
 Local Tax Sharing Agreement
 EIFD/CFD Special District Fundings
 Infrastructure Cost Support (Bonds/Grants)
 Public Parking Structures
Kosmont Companies provided examples from other communities that have successfully redeveloped large mall sites using a combination of residential and commercial uses. These examples illustrate how flexible zoning, public-private collaboration, and the strategic use of incentives can lead to successful redevelopment outcomes.

Also attached is the 2019 report prepared by Kosmont Companies evaluating the economic impact of Merlone Geier’s initial redevelopment proposal. While that project is no longer under consideration, the report provides background information about the fiscal impacts of redevelopment on the City. 52 Item 8 C.

Fiscal Impact: There is no fiscal impact associated with receiving this report.

Attachments:

1. Capitola Mall Redevelopment Land Use Study

2. Kosmont Companies 2019 Capitola Town Square – Analysis of Fiscal Impact Report Prepared By: Katie Herlihy, Community Development Director Reviewed By: Julia Gautho, City Clerk and Samantha Zutler, City Attorney Approved By: Jamie Goldstein, City Manager
53 Item 8 C.

El Segundo, CA 90266
TEL: 424-297-1070 | URL: www.kosmont.com

CAPITOLA MALL COMMERCIAL

DEVELOPMENT INCENTIVES
September 2024
54 Item 8 C.

KOSMONT COMPANIES | 2

INTRODUCTION
Kosmont Companies ("Kosmont"), a real estate & economics advisory firm serving hundreds of cities and local governments for over 38 years, has been retained by the City of Capitola ("City") to evaluate City’s zoning and Development Standards and present land use/economic policies to the City to help facilitate more commercial redevelopment of the Capitola Mall into a blended use project. ▪ Kosmont's expertise covers a full range of economics & real estate advisory services including:
➢ Market and Feasibility Analyses
➢ Fiscal Impact & Economic Benefit Studies
➢ Economic Development Strategies & Implementation
➢ Business/Retailer & Developer Recruitment
➢ Identification of Funding Sources & Financing Strategies ➢ Public-Private Transaction Structuring & Negotiation
▪ Winning track record of initiating and implementing projects for municipalities ➢ In-house team includes economists, registered municipal advisors, financial analysts, lawyers, real estate professionals, former city managers ➢ Extensive network of brokers, investors and market data for real-time information, and industry leadership Disclaimer: The analyses, projections, assumptions, and any examples presented herein are for illustrative purposes and are not a guarantee of actual and/or future results. Actual results are difficult to predict as a function of market conditions, natural disasters, pandemics, legislation and administrative actions.

Note: If needed, Financial Advisory and Real Estate Brokerage services can be provided by Kosmont Financial Services, Inc. (SEC / MSRB Registered Municipal Advisor) and Kosmont Real Estate Services, Inc. (Licensed Real Estate Brokerage Firm), respectively. 55 Item 8 C.

KOSMONT COMPANIES | 3

EXECUTIVE SUMMARY
In general, regional malls across the State need to be reimagined. Large box retail and department stores are facing obsolescence and mall sites are ideal candidates for a blend / balance of land uses to include residential. In other words, we are over-retailed and under-housed.

The City recently worked with HCD to achieve a certified Housing Element including increases of the Capitola Mall area height limit to 75 ft. and maximum building FAR to 2.0. The City desires redevelopment of the Mall to not only include high density residential, but also a healthy blend of commercial / retail. Kosmont identified key market conditions below followed by potential incentives for City consideration to help attract/retain commercial development within a future blended use project at the Mall.
 Land use approvals are the most powerful tool the City has to require commercial development. Through use of a CUP or Development Agreement for large scale projects, the City can negotiate terms with the developer to include hotel, restaurant, entertainment uses. However, the profit to the master developer from new commercial uses is significantly less than could be achieved from residential uses, so the City will need to consider concessions / incentives to reduce the risk.
56 Item 8 C.

KOSMONT COMPANIES | 4

EXECUTIVE SUMMARY
 The City code allows horizontal mixed/blended use that permits commercial and residential uses to be stand alone (adjacent to each other), if both uses are on the same parcel. Kosmont believes this is the most viable option, as it appropriately separates operational issues (e.g., access, parking/traffic, noise, odors) associated with commercial uses from residential development and is more financeable in this high construction cost and interest rate environment.  Vertical mixed/blended use generally requires commercial uses to be built underneath multi-level residential.

Kosmont believes there are limited such opportunities in Capitola. There are significant cost implications and viability is typically only found in high density communities (i.e., downtown SF or LA or oceanfront promenades), as market rents need to be much higher, and foot traffic needs to be significant for at least 10-12 hours per day.  For many years, dozens of suburban communities have required ground floor commercial under 4-5 story multifamily units and developers have found that such commercial space has high vacancy or community rooms or services use tenants that do not generate any significant sales tax. 57 Item 8 C.

KOSMONT COMPANIES | 5

EXECUTIVE SUMMARY
 Hotels are ideal commercial uses to incorporate into blended use projects and fiscally accretive, but the profit to the master developer may be low or negative based on residual land value, thus incentives may need to be considered.

Here are potential incentive programs, which are further analyzed along with a summary cost / benefit incentive matrix:

Fee Waivers – can speed up development and increases tax base earlier Bonus Residential Floor Area/Height Limits – increased residual land value for residential can help developer achieve stronger financial feasibility to increase commercial (i.e., hotel and retail) Local Tax Sharing Agreement – provides financial incentives and increases tax revenue EIFD / CFD Special District Fundings – capture value through special tax increment and land secured based financing district
Infrastructure Cost Support (Bonds / Grants) - solve for development infrastructure costs and reduce development risk
Public Parking Structures – potential funding by city at lower cost of capital than private sector 58 Item 8 C.

KOSMONT COMPANIES | 6

BACKGROUND
The Capitola Mall is a 46.3 acre site with 640,000 SF of retail building area and 3,000 parking spaces controlled by half a dozen property owners/retailers. The City needs the Mall site to be a major commercial tax generator for long term fiscal stability.
 Merlone Geier Partners (“MGP”) controls about 2/3rds or 31.5 acres that contain 181,000 SF of Mall retail stores, the 74,000 SF Kohl’s and 110,000 SF former Sears store
 Macy’s owns 5.3 acres and a 102,000 SF store and Target owns 2.6 acres and a 93,000 SF store  Site plan building layout and parcel ownership is shown on the following slide Challenges
 Retail industry continues to be impacted by growth in online sales  Transitioning large malls to more urban environments typically requires structured parking, which can be costly  Investment capital requires higher return for retail based on higher expected risk than return expectations for residential, which has lower expected risk
59 Item 8 C.

KOSMONT COMPANIES |
7 CAPITOLA MALL
TOTAL SITE IS 46.3 ACRES
MGP OWNS MAJORITY 31.5

ACRES SHOWN IN BLUE-
OF WHICH 10.1 ACRES ARE

UNDER LESSEE CONTROL
NOT A PART (N.A.P)

BUILDINGS AND PROPERTY

ARE SHOWN IN RED
Ross

5.09 AC
Citibank
Olive 0.479 AC
Garden

0.66 AC
Macy’s

5.298 AC
Kohl’s
Existing Mall

31.467 AC
Sears
Target

2.586 AC
BofA

0.684 AC
A
B
C
D
41st Avenue
Capitola Road
Clares Street
Legend
N.A.P. Buildings MGP Owned
Buildings
N.A.P. Property MGP Owned
Property
Tenant Lease
Control Area
60 Item 8 C.

KOSMONT COMPANIES | 8

APPROACH AND CONTEXT
The intention of Kosmont’s analysis is to present a menu of options for the City to assist in Mall redevelopment with pros/cons of each, including cost to City and incentivization to spur redevelopment.

Challenges to getting the Mall redevelopment to occur are mainly driven by market, economic and financial forces along with planning / entitlement limitations. Of course, the solution to market and economic issues can be aided by variances to building codes / permit processes that facilitate entitlement, increase density and/or reduce costs.

In addition to incentives, City could also establish a minimum objective Development Standard for commercial development with residential development proposal on the Mall site (e.g. 25% of gross area on the site must be retail, restaurant or hotel uses). For example, with 1,000 new units, ~300,000 SF of commercial would be required to be retained/added. Kosmont also recommends using a Development Agreement process with MGP to provide flexibility in achieving City’s long term fiscal sustainability.

It is important to understand that enhancements / incentives cannot assure timely redevelopment of the Mall at this point in the national economic cycle. To advise the City regarding certain financial challenges, Kosmont also prepared financial feasibility illustrative pro forma analyses (appendix) to demonstrate the magnitude of the challenges facing redevelopment. 61 Item 8 C.

KOSMONT COMPANIES | 9

CAPITOLA DEVELOPMENT STANDARDS (UPDATED)
Chapter 17.24 Commercial and Industrial Zoning :
• The Mall is located within Regional Commercial (C-R) zoning. • New office, including medical, prohibited on first floor. • Multifamily Residential allowed as part of mixed us projected integrated with commercial on the same development site. • Setbacks: For the C-R Zone there is a 15-foot setback required on street facing buildings. • Maximum height of 40 feet is permitted. Housing Element to update Chapter 17.88 to allow up to 75 feet for mall redevelopment • Floor Area Ratio (“FAR”): Maximum FAR is 1.5 in C-R. Chapter 17.88 allows up to 2.0 for mall redevelopment. • Multi-level parking structures are counted in the FAR. Housing Element commits to update in Chapter 17.88 to remove multi-level parking structures from FAR.

Chapter 17.76 Parking Requirement
• The code requires 2.5 spaces per residential unit.
• There is a 10% reduction allowed for regional transit adjacent facilities (for which the Mall qualifies). • Independent shared parking studies for mixed-use development may be able to demonstrate further reductions are warranted. 62 Item 8 C.

KOSMONT COMPANIES | 10

CAPITOLA DEVELOPMENT STANDARDS (UPDATED)
Chapter 17.88 Special Incentives:

This chapter was added in 2018 to help facilitate the redevelopment of underutilized commercial properties, including those along 41st Avenue. Subsection A lists a wide range of community benefits that developers can provide to get incentives.

Subsection B identifies the Capitola Mall properties as being eligible if the property is subdivided into smaller blocks with interior intersecting streets and may include extension of 40th Avenue into the the site.

Incentives:

1. Increase in the FAR from 1.5 to 2.0

2. Increase in the Height Limit from 40 ft to 50 ft.

Per 2024 Housing Element – City will increase FAR on Mall site to 2.0 and excludes structured parking from the floor area, the maximum height limit will increase to 75 feet, and the standards will be amended to be objective.

Chapter 18.02 Affordable Housing:
• Development of for sale residential units will reserve 15% of the total units for very-low, low and moderate income households for a period of 55 years
• Development of multi-family rental units pay an affordable housing in lieu fee currently set at $6.00 per SF 63 Item 8 C.

KOSMONT COMPANIES | 11

COMMERCIAL INCENTIVE PROGRAMS
Kosmont research has found numerous examples of city policies and programs that incentivize commercial development:
 Fee Waivers
 Bonus Residential Floor Area/Height Limits
 Local Tax Sharing Agreement
 EIFD / CFD Special District Fundings
 Infrastructure Cost Support (Bonds / Grants)
 Public Parking Structures
The following section describes the programs/policies, gives examples, suitability for Capitola and summarizes the financial impact.
64 Item 8 C.

KOSMONT COMPANIES | 12

FEE WAIVERS
Description – Cities can wave Development Impact Fees (“DIF”) for development projects to ease the financial funding needs for a developer ( e.g. 12-24 month window). Another fee policy change could allow developers to receive credit for existing development and only pay DIF on the incremental increase in commercial SF. A third option would be to reduce DIF or eliminate fees, if new commercial development is greater than 100,000 SF as an example threshold.

Examples – Various California cities have enacted fee waiver programs for development projects during periods of economic hardship. For example, Sacramento County established DIF credit policy to encourage redevelopment of older centers.

Financial Impact – City will lose revenue associated with the Fee Program, but will encourage developers to proceed more expeditiously and thus increasing the tax base years earlier. 65 Item 8 C.

KOSMONT COMPANIES | 13

BONUS RESIDENTIAL FLOOR AREA/HEIGHT
Description – Given residential development in Santa Cruz County provides the greatest return to a developer, the City can adopt a policy for commercial zones that provides even greater residential height limits and FAR in exchange for minimum hotel (e.g., 80-100-room hotel) and/or retail development (e.g., 10,000 SF of commercial per gross acre).

Examples – Cities across the state use a density bonus program that allow bonus residential units above existing zoning for projects that include affordable housing.

Financial Impact – Potential increase in commercial land value in the estimated range of $25,000 to $50,000 per new residential unit permitted can be used to subsidize hotel/retail financial gap. Capitola could benefit from new hotel TOT that could likely exceed $500,000 per year, and could also benefit from the increase in property tax base and indirect retail spending from new households.
66 Item 8 C.

KOSMONT COMPANIES | 14

LOCAL TAX SHARING AGREEMENT
Description – To incentivize desired development, many cities adopt policies to share the increase in future hotel/sales/property tax revenue generated by a new project with the developer. Projects are generally contingent on a financial feasibility assessment that “but-for” the subsidy, the project would not be built with the desired use. The value of a subsidy cannot be larger than the determined financing gap. Typical policy parameters:
 No more than 50% of tax revenue generated will be shared  Some cities require a baseline amount to go to city before taxes are shared  Establish number of years of tax revenue will be shared Examples – City of Los Angeles Tax Sharing Program for both stand alone hotels and retail, the City has structured tax sharing agreements for dozens of projects. The most relevant to Capitola would be the city $25 million incentive provided to Westfield for redevelopment of the Westfield Topanga Mall project into a mixed-use residential, hotel and retail village. City also received various community benefits. https://www.latimes.com/local/la-xpm-2013-jun-24-la-me-mall-subsidy-20130625-story.html Financial Impact – A 50% share of a Capitola hotel TOT could yield a financial subsidy worth several million dollars to developer. The City will benefit from its share of the TOT and the retail spending by guests. 67 Item 8 C.

KOSMONT COMPANIES | 15

FORM EIFD / CFD
Description – In the post Redevelopment era, cities can form Enhanced Infrastructure Financing Districts (EIFDs) to help fund infrastructure, but will require six to nine months timeframe to establish. Similar to redevelopment districts, the EIFDs facilitate the local capture of future increases in property tax, referred to as tax increment. While such districts would benefit from the participation of other taxing agencies (i.e., the County), the EIFD can be formed by the City as a stand-alone District and the County could join later. They work well in conjunction with Mello-Roos Community Facility Districts (“CFD”) that can generate upfront bonds equal to 1/3rd of the as is land value.

Examples
 City of Napa EIFD – includes Napa Premium Outlets and others positioned for reimagination  City of Citrus Heights – Sunrise Mall revitalization EIFD (in process)  City of Buena Park – Buena Park Mall revitalization EIFD (in process) Financial Impact – Assuming a +$500 million redevelopment associated with the mall and/or surrounding sites within a district, if the City for example designated 50% of their ~$400,000 per year of property and VLF tax increment to be used as developer reimbursement, or to pay special taxes on a CFD, or leveraged in the longer term through the issuance of a ~$3 million EIFD bond is possible. 68 Item 8 C.

KOSMONT COMPANIES | 16

INFRASTRUCTURE COST SUPPORT
Description – Private developments often necessitate the enhancement of costly off-site public infrastructure, which can have a significant impact on project viability. Cities have the ability to cover the cost of these improvements by issuing bonds. Doing so can incentivize a desired project with positive public benefit and fiscal impact of the City.

Examples – South Gate, azalea retail shopping center
 City of South Gate provided bond funding to support a retail project by funding 100% of off-site costs  Though it was not directly tied to a tax sharing program, the tax revenue to be generated by the project was estimated to exceed the bond funding provided over a 10-year period Financial Impact – Public off-site improvements associated with large projects can often run into the millions of dollars. City covered bond payments through increased sales taxes. City also received $5 million in profit participation based on the project outperforming projections. 69 Item 8 C.

KOSMONT COMPANIES | 17

PUBLIC PARKING STRUCTURES
Description – Retail developments require high parking counts, typically 4 or more spaces per 1,000 square feet of rentable building area. In urban settings where parking often needs to be delivered in a multi-level structure, the cost for each parking space can run in excess of $40,000 per space, creating a significant cost burden for a project.

By establishing in lieu parking fees for new development in certain districts, the City can use public bonds to fund the cost of constructing a public parking structure on City property that replaces on site parking requirements.

There are many examples that have enabled large scale commercial districts to thrive, but such a program could require several years to modify development standards and issue bonds.

Examples – Old Pasadena, 3rd Street Promenade Santa Monica, Downtown Ventura, San Luis Obispo Financial Impact – Given the high cost of parking structures, the use of tax-exempt city debt can yield a significant financial benefit for a major retail development and facilitate future redevelopment throughout the district. However, the City does not own large lots of land adjacent to the Capitola Mall. 70 Item 8 C.

KOSMONT COMPANIES | 18

INCENTIVE MATRIX
71 Item 8 C.

KOSMONT COMPANIES | 19

FINANCIAL FEASIBILITY ILLUSTRATION APPENDIX

THE ANALYSES, PROJECTIONS, ASSUMPTIONS AND ANY EXAMPLES PRESENTED HEREIN ARE FOR ILLUSTRATIVE PURPOSES AND ARE NOT A PREDICTION OF FUTURE RESULTS. ACTUAL RESULTS MAY DIFFER FROM THOSE EXPRESSED IN THIS ANALYSIS, AS

RESULTS ARE DIFFICULT TO PREDICT AS A FUNCTION OF MARKET CONDITIONS, NATURAL DISASTERS, PANDEMICS, SIGNIFICANT ECONOMIC IMPACTS, LEGISLATION AND ADMINISTRATIVE ACTIONS. 72 Item 8 C.

KOSMONT COMPANIES | 20

FINANCIAL FEASIBILITY ANALYSIS
Capitola Mall redevelopment must yield significant investment value to MGP sufficient to justify replacing older commercial buildings, which can still have significant value (e.g. approximately $3 million) The following steps indicate the basic approach Kosmont followed in conducting the analysis:
 Gathered market data to estimate the achievable rents and buildout value of residential  Estimated development costs
 Prepared illustrative financial pro formas to show investment value and resulting residual land value Key MF apartment project cost components include site development, parking, new building construction, architectural and engineering fees, permits and fees, soft costs, and financing costs. The net operating income (NOI) calculation accounts for rents, vacancy factor, operating expense ratio and stabilized sales value at a threshold cap rate of 5.75%, which allows an industry standard developer profit margin on MF development equal to ~15% of stabilized value.
73 Item 8 C.

KOSMONT COMPANIES | 21

EXISTING RETAIL VALUE PRO FORMA
Exhibit 1 on following page illustrates estimated “As Is” value for 11-acre parcel with 150,000 SF of retail.  The pro formas show:
➢ Assuming conservative market rents of $1.75 psf / month and 15% vacancy, the existing 150,000 SF of underperforming retail has a value of $30-$36 million, or approximately $3 million per acre of land 74 Item 8 C.

KOSMONT COMPANIES | 22
EXHIBIT 1

AS IS RETAIL VALUE
Exhibit 1 shows a range of net
operating income and estimated
sales value for existing commercial
space on the underperforming
portion of mall on 11 acres of land.

The analysis indicates an ‘”As Is”
value of approximately $3 million
per acre
75 Item 8 C.

KOSMONT COMPANIES | 23

HIGH DENSITY MULTI-FAMILY RESIDUAL LAND VALUE
Exhibit 2 on following page illustrates a stabilized pro forma for an 880-unit MF Apt project that is applicable on 11- acre parcel under a revised 2.0 FAR, but with a 75 ft height limit to illustrate the increased residual land value that improves feasibility.
 The pro formas show:
➢ With market rents of $3,800 per month, the high-density project has a residual land value of $2 million per acre
➢ However, if rent are 5-10% higher, the residual land value increases to $4 to $6 million per acre which should justify redevelopment
76 Item 8 C.

KOSMONT COMPANIES | 24
EXHIBIT 2

RESIDUAL LAND VALUE
MULTI-FAMILY (75’ HEIGHT)
Exhibit 2 shows development
parameters and estimated total
development cost for 80-unit per
acre MF with 75 ft height on an 11-
acre site.

This results in a residual land value
of $2 - $6 million per acre depending
on market rents
77 Item 8 C.

KOSMONT COMPANIES | 25

CITY OF CAPITOLA

DEVELOPMENT INCENTIVES

THE ANALYSES, PROJECTIONS, ASSUMPTIONS AND ANY EXAMPLES PRESENTED HEREIN ARE FOR ILLUSTRATIVE PURPOSES AND ARE NOT A GUARANTEE OF ACTUAL AND/OR FUTURE RESULTS. ACTUAL RESULTS MAY DIFFER FROM THOSE EXPRESSED IN THIS

ANALYSIS, AS RESULTS ARE DIFFICULT TO PREDICT AS A FUNCTION OF MARKET CONDITIONS, NATURAL DISASTERS, PANDEMICS, SIGNIFICANT ECONOMIC IMPACTS, LEGISLATION AND ADMINISTRATIVE ACTIONS. 2301 Rosecrans Ave., Suite 4140
El Segundo, CA 90245
TEL: 424-297-1070 | URL: www.kosmont.com
78 Item 8 C.

MEMORANDUM
To: Jamie Goldstein, City Manager City of Capitola
From: Ken K. Hira, President Kosmont Companies
Tom Jirovsky, Senior Advisor Kosmont Companies
Date: November 7, 2019
Re: Capitola Town Square – Analysis of Fiscal Impact
___________________________________________________________________________ Kosmont & Associates, Inc. doing business as Kosmont Companies (“Consultant” or “Kosmont”) is pleased to present our findings from a Fiscal Impact Analysis (“Analysis”) in connection with proposed 637 residential units and 600,000 square feet of commercial in the proposed mixed/blended use Capitola Town Square (“Project”).

BACKGROUND
Merlone Geier Partners (“MGP”), owner of the Capitola Mall (“Mall”) are seeking approval of a major redevelopment plan. As part of ongoing discussions / negotiations between MGP and the City for a new Project Concept Application and Development Agreement, it is important to understand the marginal impact the residential and commercial components will have on General Fund revenues and expenditures.

For purposes of this analysis only, Kosmont assumes that the average household size, based on the proposed average unit sizes ranging from 600 to 800 square feet, will range from 1.75 to 2.0 persons per unit. Prospective renters are expected to range from UC Santa Cruz students sharing units, to young professional, to empty nester households.

The City has compiled historic retail sales data for the Mall and surrounding block to help establish a base year amount. The data shows a significant annual decline in retail sales throughout the entire mall area since 2016. The 2018-19 annual sales for the entire mall area were approximately $130 million, or a little more than $200 per square foot. • The 3rd party anchor stores (Macy’s, Target, Ross Center, Olive Garden) totaling 270,000 square feet generated approximately $65 million in sales. • The 370,000 square feet within MGP control generated $65 million in sales The MGP Project calls for a reduction of 34,000 square feet of retail space versus the 640,000 square feet currently contained within in the Mall block. In order to finance construction of new retail, MGP has estimated gross annual sales will average $300 per square foot for MGP’s 79 Item 8 C.

Capitola Town Square
Fiscal Impact Analysis
November 7, 2019

336,000 square feet (including Kohl’s) of retail space following redevelopment. Assuming a 10% bump in sales at the major stores, the total annual mall block sales could reach $180 million, a $50 million increase. However, with no new tenants under contract, this should be considered a somewhat optimistic forecast.

SUMMARY
The proposed reconfiguration of the mall into a mix of residential and retail uses will improve the economic health of the overall shopping center, but depending on the growth in taxable retail sales, it may result in annual fiscal deficit to the City, as compared to the 2018 Mall fiscal impact.

FISCAL REVENUE ANALYSIS
Property Tax & In-Lieu of VLF
Secured property tax revenues are estimated based on the anticipated assessed value of the Project upon full build-out and the applicable property tax rates for the City. Acquisition costs were not included as part of the analysis, as the subject property is already on the tax rolls and title is vested under MGP’s name. The City general fund receives an approximate 7.5% share of the annual 1.0% secured property tax general levy placed by the County.

Prior to 2004, a percentage of State motor vehicle license fees (VLF) were distributed to cities and counties. In 2005, the State of California instituted a revenue swap, guaranteeing that municipalities and counties within California receive a distribution equal to the VLF collected the prior year, plus a percentage equal to the annual increase in assessed value. Property tax in-lieu of VLF resulting from the Project is estimated based on the incremental amount of assessed value will add to the City; thereby increasing the City’s apportionment. Based on review of the City CAFR, Kosmont estimates VLF will add an amount equal to 4.3% of assessed value.

Kosmont’s survey of higher-end apartments in the area indicates monthly rents of +$4.00 psf, which would support assessed value of $400,0000 to $500,000 per unit. At an average of $450,000, the total assessed value from new residential would be $290 million. With a combined tax of 0.113%, the City General Fund would receive an additional $325,000 annually from property taxes.

Sales Tax (Off-Site / Indirect)
Off-site / indirect sales tax revenue is based on the taxable sales generated by the Citywide spending of Project residents, based on average household incomes and BLS Consumer Expenditure Survey data.

Kosmont’s preliminary analysis indicates that the 637 residential units are expected to spend an average of $10,000 to $15,000 per unit on local serving goods and services, excluding the general merchandise expenditures at Macy’s, Kohl’s and Target that would be captured irrespective of 80 Item 8 C.

Capitola Town Square
Fiscal Impact Analysis
November 7, 2019

the resident location. At an average of $12,500, this would result in approximately $8 million in incremental taxable sales, which would result in an estimated $80,000 in annual sales tax revenues for the City.

Measure O District Tax of 0.25% will result in an additional $20,000 in annual offsite sales taxes to City, while Measure F’s 0.25% tax will yield additional $20,000 per year thru Dec. 2027.

On-site Sales Taxes
For this analysis, Kosmont is illustrating the impact from growth in retail sales above the 2018-19 base year. As mentioned earlier, the optimistic forecast for retail sales is a gain of $50 million, which could result in an additional $500,000 in annual sales taxes to the City.

Measure O District Tax of 0.25% could result in an additional $125,000 in annual offsite sales taxes to City, while Measure F’s 0.25% tax could yield additional $125,000 per year thru 2027, for a potential total of $750,000.

Since the actual tenant mix is not determined and to allow for potential non-taxable uses such large tenants as movie theater and fitness center, Kosmont suggests using a more conservative $30 million increase in mall retail sales, which would yield $450,000 annually (including Measure O and Measure F).

Franchise Taxes
For 2019-20 budget, the City is estimated to collects $560,000 in Franchise taxes. For purposes of preliminary estimates, incremental franchise taxes are estimated on a per capita basis assuming 50% of revenue comes from non-residential uses. Based on estimated population of 10,100, the Franchise tax revenue factor is $28 per resident. Therefore, at full Project buildout of 637 units, Franchise taxes are estimated to bring $30,000 to the City General Fund annually.

Total Annual Fiscal Revenue
The total annual incremental fiscal revenues from the mall redevelopment are estimated to range from $900,000 (to $1.2 million per year under MGP optimistic forecast).

Annual Taxes
Property Taxes $325,000
Offsite Sales 120,000
Onsite Sales 450,000 /1
Franchise Taxes 30,000
Subtotal $925,000
/1 Assumes 30% growth in onsite sales
81 Item 8 C.

Capitola Town Square
Fiscal Impact Analysis
November 7, 2019

Long Term Growth
Given the national trends in retail sales being captured by e-commerce and big box discounters, it is likely that the future retail sales may not keep pace with cost inflation, resulting in greater risk to the City General Fund. In addition to the risks of economic recession, this potential long term deterioration is evidenced by historic Santa Cruz County per capita taxable sales, adjusted for inflation, have declined by 20 percent in the past 20 years.

Exhibit 1
For these reasons, it may be prudent for Capitola to conservatively estimate sales tax growth when considering the impact of a large-scale long-term project, such as mall redevelopment.

FISCAL EXPENDITURE ANALYSIS
The proposed Capitola Town Square project will substantially increase the population of the City. As noted earlier, the 637 units are estimated to increase the resident population by 1,115 to 1,275 people, a 12% increase above current population of 10,080, which has remained relatively flat for years.

Over 80% of the City’s total expenditures represent salaries, benefits and contract services, indicating a high degree of sensitivity to increased service demands from the new population. Expenditures such as police/protective services, public safety, and other fiscal expenditures are usually measured on a per capita basis based on the City’s Budget, and the relevant resident and employee populations within the City. However, complicating the analysis is the impact of tourists.

For this analysis, Kosmont interviewed City department heads. It was determined that the appropriate method to determine incremental per capita costs is to examine current budget by major category, $7,000
$7,500
$8,000
$8,500
$9,000
$9,500
$10,000
$10,500
$11,000
$11,500
$12,000
1997199819992000200120022003200420052006200720082009201020112012201320142015201620172018 Inflation Adjusted Per Capita Santa Cruz
County Total Taxable Sales
82 Item 8 C.

Capitola Town Square
Fiscal Impact Analysis
October 23, 2019

and factor in current population of 10,080 plus an estimated 5,700 employees who work in the City, plus summer tourism. For each category, excluding police and public works, it was assumed that per capita incremental cost is derived by dividing the annual budget by 10,080 residents plus 5,700 employees x 50% (reflect reduced demand as compared to a resident).

The Police Chief estimated that 50% of annual cost is derived from resident population, while the Public Works Director estimated that 40% of costs during summer are related to residents and 70% of costs the rest of the year, for an average of 60%.

General Fund expenditures and allocated per resident cost estimates are summarized below:

General Fund Expenditures
Annual New Resident
Administrative $2,582,000 $200
Police 6,152,000 305
Public Works 2,879,000 171
Community Development 363,000 28
CIP Funding 650,000 50
Recreation, Arts and Cultural 398,000 31
Subtotal (Before Transfers) $13,024000 $785
With 1,115 to 1,275 net new residents in Capitola Town Square, there could be an increase in General Fund cost of $875,000 to $1 million per year, assuming a similar level of service.

NET FISCAL IMPACT
To give the City a better understanding of the potential impact, Kosmont provided a table that summarizes the net fiscal impact to the City using a range of net new residents. As shown in Exhibit 2, the Project could generate a $50,000 per year positive fiscal impact to a negative fiscal impact of $75,000 per year. The deficit can be attributed to the extremely low property tax share the City receives and nominal off-site sales taxes.

Exhibit 2
Capitola Town Square
Based on Net New Residents
1,115 Residents 1,275 Residents
GF Revenues $925,000 $925,000
GF Expenditures ($875,000) ( $1,000,000)
Net Fiscal Surplus (Deficit) $50,000 ($75,000)
83 Item 8 C.

Capitola Town Square
Fiscal Impact Analysis
October 23, 2019

OTHER TOOLS TO GENERATE REVENUES
There are several potential financial tools available to improve the City’s revenue picture:

1. Build New Hotel

2. Establish a (Community Facilities District (CFD) Maintenance Fee

3. Enact an Entertainment Tax

4. Negotiate Sales Tax Assessment Revenues Upfront Payment Hotel
While no hotel is included in the initial plan, it is our understanding that MGP has preliminarily explored a 105-room select service hotel concept. Kosmont and the City have done preliminary market research indicating a 105 room upscale hotel could be supported within the next few years.

Assuming a range of $160 to $190 Average Daily Rate (ADR) and 75% to 80% occupancy, Kosmont projects hotel tax revenues of over $550,000 to as much as $700,000 per year at 12% Transient Occupancy Tax (TOT) rate.

CFD Maintenance Fee
When large projects result in an increase in municipal service costs, some cities require a CFD maintenance district. A nominal $25 per month fee for each residential unit would generate almost $190,000 per year.

Entertainment Tax
Many new commercial uses, such as theaters, bowling alleys, arcades etc. do not generate taxable retail sales. By establishing a 5% tax on admission to such entertainment uses the City might generate $50,000 to $100,000 per year.

Sales Tax Assessment Revenue (STAR*)
®
The City stands to lose $500,000 or more each year during the estimated three year demolition and reconstruction of the retail shops. Under a Development Agreement process, the City can negotiate an upfront payment from MGP to offset that loss, and protect themselves in the event that the redevelopment is delayed.
84 Item 8 C.
4868-0533-6555 v1
Capitola City Council
Agenda Report
Meeting: October 10, 2024
From: City Attorney
Subject: Council Parental Leave
Recommended Action: Adopt a resolution adopting an Administrative Policy permitting the City Council absences from official service occasioned by parental leave for up to 12 weeks.

Background: During the June 27, 2024, City Council meeting, Mayor Brown asked that staff bring forward, for Council consideration, a policy regarding parental leave for Councilmembers.

Discussion: Government Code section 36513 subsection (a) provides that “[i]f a city councilmember is absent without permission from all regular city council meetings for 60 days consecutively from the last regular meeting he or she attended, his or her office becomes vacant and shall be filled as any other vacancy.”
This policy provides that the City Council grants, in advance, all requests for leave and excuses all absences due to the pending or recent birth or adoption of a child or children for up to 12 weeks. The grant of approval satisfies the requirement of Government Code section 36513.

The Councilmember planning to take parental leave must inform the Mayor and the City Manager as early as reasonably possible prior to the absence. If the Mayor plans to take leave, the Mayor must inform the Vice Mayor and City Manager. A Councilmember requesting additional leave must make the request to the full City Council.

The policy is drafted to provide unpaid leave. Government Code section 36516(d) provides that any amounts paid by the City to Councilmembers for health and welfare benefits are not included in Councilmembers' salaries, so long as those same benefits are available and paid by the City for its employees.

The City Manager’s Department is evaluating the City’s family leave policies for staff (Administrative Policy II-9: Family Care & Medical Leave) and plans to bring potential revisions to that policy to the City Council for consideration this Winter.

Fiscal Impact: None.

Attachments:

1. Resolution Adopting Administrative Policy: City Council Parental Leave Report Prepared By: Samantha W. Zutler, City Attorney
Reviewed By: Julia Gautho, City Clerk; Chloe Woodmansee, Assistant to the City Manager Approved By: Samantha W. Zutler
85 Item 8 D.

SF #4814-3098-1230 v1
07183-0005
4885-7502-4363 v1
RESOLUTION NO.

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CAPITOLA ADOPTING AN

ADMINISTRATIVE POLICY REGARDING CITY COUNCIL PARENTAL LEAVE WHEREAS, Government Code section 36513 provides that a City Councilmember who is absent without permission from the regular city council meeting for 60 days consecutively from the last regular meeting they attended, vacates their office; WHEREAS, access to parental leave facilitates broad participation in local leadership by providing an avenue for new parents to balance their work and family responsibilities; and WHEREAS, streamlining the process by which Councilmembers may invoke this right to take necessary parental leave further encourages participation from all age, gender, and income demographics; and
WHEREAS, it is the policy of the City of Capitola to encourage broad public participation in local government leadership.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Capitola as follows:

A. The above recitals are true and correct and material to this Resolution.

B. The City Council hereby adopts the Administrative Policy attached hereto as Exhibit A and incorporated herein by reference.

I HEREBY CERTIFY that the foregoing Resolution was passed and adopted by the City Council of the City of Capitola on the 10th day of October, 2024, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:
____________________
Kristen Brown, Mayor
ATTEST:
_______________________
Julia Gautho, City Clerk
86 Item 8 D.

SF #4814-3098-1230 v1
07183-0005
4885-7502-4363 v1

ADMINISTRATIVE POLICY
Number:

Issued: xx

Jurisdiction: City Council

PERMISSION FOR ABSENCES FROM OFFICIAL SERVICE OCCASIONED BY

PARENTAL LEAVE

I PURPOSE & POLICY STATEMENT
Access to parental leave facilitates broad participation in local leadership by providing an avenue for new parents to balance their work and family responsibilities. Streamlining the process by which Councilmembers may invoke this ability to take necessary parental leave further encourages participation from all age, gender, and income demographics. It is the policy of the City of Capitola to encourage broad public participation in local government leadership.

Government Code section 36513 subsection (a) provides that “[i]f a city councilmember is absent without permission from all regular city council meetings for 60 days consecutively from the last regular meeting he or she attended, his or her office becomes vacant and shall be filled as any other vacancy.”
This Policy operates in conjunction with and does not supersede or conflict with Government Code section 36513.

II APPROVAL OF ABSENCE FROM PUBLIC SERVICE DUE TO PARENTAL LEAVE The City Council hereby grants all requests for parental leave and finds that absences occasioned by the pending or recent birth or adoption of a child or children are excused for up to 12 weeks.

This grant of approval shall satisfy the requirement of Government Code section 36513.

The Councilmember planning to take parental leave shall inform the Mayor and the City Manager of the anticipated absence as early as reasonably possible prior to the absence(s). If the Mayor plans to take parental leave, the Mayor shall inform the Vice Mayor and the City Manager.

A Councilmember requesting leave time beyond 12 weeks shall make a request to the full City Council.

All leave time taken pursuant to this policy shall be unpaid. ___________________
Jamie Goldstein, City Manager
87 Item 8 D.

SF #4814-3098-1230 v1
07183-0005
4885-7502-4363 v1 88
Item 8 D.