Cotati City Council
Agenda Staff Report
Item type: REGULAR AGENDA (ACTION)
To: City Council
Subject: Consideration of a resolution to approve a deferral of impact fees and granting of funds for affordable housing and public improvements, an associated inter-fund grant, and affordable housing agreement for the Cotati Station Apartments Project Date: September 27, 2022 Written
by: Damien O'Bid, City Manager
Recommendation
It is recommended that the City Council adopt:
1. A resolution to defer impact fees and grant funds for affordable housing and public improvements through an Impact Fee Deferral and Grant Agreement, including an associated inter-fund grant; and
2. A resolution to approve the Affordable Housing Agreement for the Cotati Station Apartments Project.
Background
On June 14, 2022, Colvin Group LLC., a California limited liability company (“Developer”) was granted Design Review and Density Bonus approval by the Cotati City Council for the Cotati Station Apartments (“Project”), a 98-unit mixed use project consisting of 98-apartment homes (1, 2, and 3 bedroom units) and approximately 5,600 square feet of commercial space on three parcels totaling approximately 2.42 acres. The primary change from the previously approved project was a reduction in the number of 3-bedroom units and increase in the number of 1- bedroom units.
At the June 14, 2022 public hearing, the City Council approved Resolution 2022-26, which included various conditions of approval, including authorizing an impact fee deferral (subject to City Council approval of the agreement), and authorizing a grant from the Affordable Housing Fund for the impact fees related to the low and very low affordable units, to be included in the Affordable Housing Agreement.
Subsequently, the lead on the revised application (Doug Elliot) was not able to secure financing for construction, so the Project fell back to Colvin Group, LLC. This led to further discussions with City staff on ways to reduce costs to bring this long-stalled project to construction. Given the public benefits of the Project, including a variety of additional public amenities, including the widening of Santero Way to improve fire access, a new public park, and additional public parking beyond the development requirements adjacent to the SMART station, city staff explored ways to assist and bring these housing units and public infrastructure on-line.
Analysis/Discussion
Following the June 14 City Council meeting and the subsequent unwinding of construction financing, staff engaged with the Developer to negotiate the affordable housing agreement, including the affordable unit mix, as well as other cost reduction options.
For the final mix of affordable unit types, staff worked with the Developer to align it with the overall mix of units in the project. The table below shows the overall mix of unit types in the project:
PROJECT UNIT MIX
UNIT SUMMARY UNIT TYPE NET S.F. # OF UNITS % OF TOTAL SQUARE FT 1 Bdrm 625 58 59% 36,250
2 Bdrm 1042 33 34% 34,386
3 Bdrm 1220 7 7% 8,540
TOTAL 98 100% 79,176
As indicated in the table below, the final mix of affordable units is within 1-3% of the overall project mix of 1, 2 and 3-bedroom units. Following up on the June 14 discussion with the City Council, staff negotiated a move of 1 low income and 1 moderate income unit from 1 bedroom to 2-bedroom. While this ensures more unit types are available for lower income tenants, it also incrementally increases the cost of the project.
AFFORDABLE HOUSING LEVELS 1 BDRM 2 BDRM 3 BDRM TOTAL
Very Low Income 5 3 0 8
Low Income 2 1 0 3
Moderate income 4 3 1 8
TOTAL 11 7 1 19
% of Affordable Units as a % of Total Affordable Units 58% 37% 5% 100% OVERALL UNIT MIX FOR TOTAL PROJECT 59% 34% 7% 100%
As part of the Affordable Housing Agreement, in accordance with Resolution 2022-26, staff included grant funding from the Affordable Housing Fund to offset City impact fees for the low and very low-income units. Given the cost to construct and the restricted sale price or lease rates, these units have historically been the most difficult to produce, thus were incentivized. In the current 5th cycle of RHNA, while the City will produce more overall units than allocated, the City will fall short on the very low income unit category. It is estimated that the impact fees for the eleven (11) low and very low affordable units total $275,000. The City would apply the grant from the Housing In-Lieu Fund at the time the impact fees are due.
In parallel with the Affordable Housing Agreement, staff began negotiations on an Impact Fee Deferral Agreement. This standard agreement allows the Developer to defer payment of City impact fees from the normal time of collection (at issuance of building permits) to the end of construction (certificate of occupancy) to minimize the carrying time for these costs under the more costly construction loan. During the deferment period, the City charges the developer interest equal to the LAIF rate, so that the impact fee funds are cost neutral and do not create a gift of public funds.
As part of the fee deferral conversations, including the broader conversation about potential ways to lower costs and increase the chances that the project will go into construction, staff began to explore ways to reduce impact fees. The proposed unique situation was considered by staff because this transit-oriented development project brings significant additional public benefits, above and beyond the typical public improvements associated with most projects. In addition to the additional parking, publicly accessible park, and widening of Santero Way for improved fire access, the developer has also agreed to build this project as a 100% electric project to eliminate greenhouse gas emissions associated with natural gas usage.
Therefore, staff recommends City Council approve an additional city impact fee reduction for the Developer to be paid by the City through an interfund grant between the Traffic Impact Fee Fund and the General Fund. The grant terms are included in the attached Impact Fee Deferral and Grant Agreement. The City would apply the grant funds to the project at the time the impact fees are paid, which is expected to occur at the end of the project construction (i.e. occupancy). If the project is not built, the City will have no obligation to provide grant funds.
Financial Considerations
If the City Council approves the attached resolutions, the deferred impact fees will be cost neutral but will change the timing of receipt of the funds. At this time, it’s not expected to impact any impact fee funded city projects. However, if timing did become an issue in the future, the General Fund and Affordable Housing Funds could advance the funds as available. For the grant of funds, the cost to the General Fund will be $325,000 (plus interest at the LAIF rate) spread out over an initial term of 5 years and the cost to the Affordable Housing Fund will be a lump sum payment of $275,000 in either FY 22-23 or 23-24, depending on timing of developer payment of the other impact fees.
Environmental Issues
The action of approving an Affordable Housing Agreement, Impact Fee Deferral and Grant Agreement, as well as the associated documents and an inter-fund grant, does not constitute a project as defined by California Environmental Quality Act Guidelines Section 15378; therefore, no further environmental review is required.