Cotati City Council
Agenda Staff Report
Item type: REGULAR AGENDA (ACTION)
To: City Council
Subject: FEE DEFFERRAL AGREEMENT WITH NOEL AND LISA
KIRBY OF DARHAL DEVELOPMENTS LLC REQUESTING
DEFERRAL OF CERTAIN PERMIT AND IMPACT FEES
ASSOCIATED WITH DEVELOPMENT OF 902 E. COTATI
AVENUE
Date: November 12, 2024
Written by: Noah Housh, Director of Community Development Recommendation
It is recommended by the Community Development Department that the City Council adopt a resolution approving a Fee Deferral Agreement to allow portions of the permit and impact fees for an approved development at 902 E. Cotati Avenue to be deferred from building permit issuance to building permit final (occupancy).
Background
In 2016 the City of Cotati adopted Ordinance 863 which amended the Cotati Municipal Code (CMC) to create a process to allow deferral of certain development related fees, subject to approval by the City Council.
In February of 2023, the City Council approved the first Cotati Cottage Housing project for a six (6) unit development proposed at 902 E. Cotati Avenue.
In June of 2023, the City of Cotati approved the 6th Cycle Housing Element which included a Program 2-7 committing the City to providing automatic deferral of fees until occupancy for all residential projects.
In October of 2024, the property owners Noel and Lisa Kirby indicated they intend to move forward with construction of the project and requested approval of a fee deferral agreement to allow postponement of the impact fees associated with the development.
Analysis/Discussion
All fees associated with the review and construction of a new development are typically collected at the time the permit allowing the construction is issued. These fees cover the costs of the permit, as well as the “impact fees” the City collects to address the impacts of these future residents will have on public infrastructure such as streets and parks. Historically, cities would collect these fees when the permit is issued to ensure the fees (and therefore the funding to offset their impacts) would be available when the future residents occupy the homes being permitted for construction.
CMC Chapter 4.14 Development Impact Fee Deferrals identifies that a majority of the City of Cotati impact fees may be deferred subject to a documented written agreement approved by the City Council. This agreement cannot defer the fees for more than two years, and shall be due upon sale or transfer of the property; upon placement of long term financing for the project; or at another time expressed in the agreement. Fees for services rendered (such as the review of the building permit plans) and for agencies other than the City (such as the school district) are not included in the fee deferral agreement. The complete text of CMC 4.14 is available at: https://www.codepublishing.com/CA/Cotati/html/Cotati04/Cotati0414.html Housing Elemnt Program 2-7 Support Development of Proposed Projects commits the City to several actions intended to proactively support the processing, approval and development of approved projects. The intent of this program is to reduce the upfront costs and review timelines for residential development by deferring the collection of impact fees to the time the project is completed, which is when permanent financing typically replaces temporary (more expensive) construction financing.
Senate Bill 937 Influence
SB 937 (Weiner) was signed by the Governor on September 19, 2024, and prohibits a local agency that imposes fees or charges on a residential development for the construction of public improvements or facilities (aka Impact Fees) from requiring the payment of those fees or charges until the date of the final inspection or the date the certificate of occupancy is issued, whichever occurs first, except for utility service fees, which the local agency is authorized to collect at the time an application for utility service is received. The full text of the bill is available here:
https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240SB937 Given this recent change in state law, staff intends to move forward with an ordinance to update CMC Section 4.14 to remove the City Council as the authority for granting such a fee deferral.
This will both ensure the City’s process is in keeping with state law and be an additional step in implementing Housing Element Program 2-7 reducing the time frame for a fee deferral agreement to be granted to qualifying residential developments. The draft contract attached to this report will continue to serve as the template contract and all other (allowed) elements of the process will be maintained.
Financial Considerations
There are some limited financial impacts to the development impact fee accounts associated with the proposed deferral. Namely, the amounts being deferred for each account will be collected later in the development process, impacting their availability to fund current improvements and/or to collect interest prior to their expenditure. However, both adopted Housing Element policy and now SB 937 (state law), effective January 1, 2025, make this no longer relevant. From an infrastructure perspective, the impact is minimal as the future residents do not actually occupy the units and begin creating impacts until construction is complete. Therefore, this change in timing can more closely tie the start of the impacts with the collection of the fees.
Environmental Issues
The proposed Fee Deferral Agreement is not a project under CEQA as the Agreement itself does not allow any action that has the potential to impact the environment. Under CEQA, where it can be determined with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA review. This general rule can be applied to activities which could be subject to the CEQA process, but which logic dictates should not be subject to CEQA review. Therefore, based on the information provided above, the proposed resolution is exempt from CEQA pursuant to Section 14.03.021 of the CEQA Guidelines in that there is no possibility that the activity may have a significant impact on the environment.