WHEREAS, on August 15, 2022, the City and VPO (collectively, the “Parties”) entered into a Tolling Agreement that tolled the statute of limitations for certain challenges to Impact Fees and parkland dedication fees imposed on the Project, which, as amended, remains in effect and tolls the statute of limitations on those claims through July 31, 2024; and
WHEREAS, on July 10, 2024, the Parties entered into a Settlement Agreement and Release (“Settlement Agreement”) to resolve their dispute regarding Impact Fees and parkland dedication fees imposed on the Project; and WHEREAS, as a condition of the Settlement Agreement, the City agreed to present for City Council consideration a request to waive Below Market Rate Housing Mitigation Fees (“BMR Fees”) and Zoning/Planning Municipal Code Fees (“Planning Fees”) that may otherwise apply to the Project; and WHEREAS, on December 18, 2023, VPO renewed its prior request for a waiver of the BMR Fees under Section 2.3.3(D) of the City’s BMR Housing Mitigation Program Procedural Manual, Resolution No. 20-055 (Exhibit A); and WHEREAS, the City Attorney has reviewed the request to waive BMR Fees, and has determined based on Exhibit A and other evidence considered, including but not limited to the City’s 2015 Non-Residential Jobs-Housing Nexus Analysis, that the Project fully mitigates the impact of market-rate residential and nonresidential components of the Project on the demand for affordable housing; and
WHEREAS, under Sheetz v. County of El Dorado (2024) 601 U.S. 267, 275 (“Sheetz”), a generally applicable, legislatively imposed fee charged as a condition of granting a land use permit must have an “essential nexus” to the government’s land-use interest and “rough proportionality” to the development’s impact on that interest to avoid a finding that the fee is a taking of property in violation of the 5th and 14th Amendments of the U.S. Constitution. In the absence of an impact of the Project on the demand for affordable housing in Cupertino, the imposition of the BMR Fees on the Project would in the opinion of the City Attorney result in an unconstitutional taking of Property, and therefore a waiver of the BMR Fee is appropriate; and
WHEREAS, the City Attorney has reviewed the Planning Fees that would be imposed on the Project under the FY 2024-25 Fee Schedule and has determined 835
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that the imposition of the full amount of the Planning Fees would be disproportionate to the impact of the Project on long-range planning efforts by the City (See Sheetz, supra, 601 U.S. at p. 275; see also Gov. Code, § 65104 [“. . . [A]ny fees to support the work of the planning agency . . . shall not exceed the reasonable cost of providing the service for which the fee is charged.”]); and WHEREAS, in lieu of the paying Planning Fees, VPO, through the Settlement Agreement, has agreed to provide up to $500,000 to fund future long range planning studies in the vicinity of the Project, which may include studies covering the Vallco and/or Heart of the City Specific Plan areas; and WHEREAS, based on the findings and Recitals set forth above, the City Attorney recommends that the City Council waive the imposition of BMR and Planning Fees on the Project.
NOW, THEREFORE, BE IT RESOLVED, based on the Recitals set forth above, that:
1. The City Council hereby waives imposition of the BMR Fees and Planning Fees imposed on the Project.
2. Notwithstanding Resolution No. 20-055 or any other prior Resolution of the City Council, the fee waivers granted by this Resolution shall remain in effect during the Term of the Settlement Agreement; provided, however, the fee waiver shall expire upon the termination of the Settlement Agreement or, alternatively, upon a finding by the City Attorney that a BMR Fee is due and payable under Section 6(c) and Exhibit D of the Settlement Agreement, in which case applicable BMR Fees shall be determined according to the provisions of Section 6(c) and Exhibit D.
3. To the extent that Resolution No. 20-055 or any other prior Resolution of the City Council is inconsistent with this Resolution, this Resolution shall control, and nothing in any prior Resolution shall create a legal obligation or give rise to a duty of the City to act in a manner inconsistent with this Resolution.
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Resolution No. 24-___
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Cupertino this 16th day of July, 2024, by the following vote:
Members of the City Council
AYES:
NOES:
ABSENT:
ABSTAIN:
SIGNED:
________________________
Sheila Mohan, Mayor
City of Cupertino
________________________
Date
ATTEST:
________________________
Kirsten Squarcia, City Clerk
________________________
Date
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017571.0001 4895-8905-1014.2
Miles Imwalle
D (415) 772-5786
[email protected]
December 18, 2023
VIA ELECTRONIC MAIL
Chris Jensen
City Attorney
City of Cupertino
10300 Torre Avenue
Cupertino, CA 95014-3202
[email protected]
Re: The Rise – Request for Waiver of BMR Fee [Updated, December 2023] Dear Chris:
This updated letter is submitted on behalf of Vallco Property Owner, LLC (the “Project Applicant”) regarding its project, The Rise (the “Project”), to request a waiver of the Affordable Housing Fee the City is proposing to charge on the office portion of the Project. This request is made in connection with the modification application recently submitted to the City for the Project. This waiver request is submitted pursuant to Section 2.3.3(D) of the BMR Housing Mitigation Program Procedural Manual. Specifically, the Project Applicant requests that the City decline to impose an Affordable Housing Mitigation Fee because the Project does not have an affordable housing impact. The Project, which includes 890 affordable units, more than offsets any affordable housing demand its other land use components generate. Imposing impact fees when the Project does not create an impact is unconstitutional.
The Project contains three primary components—residential, retail, and office—and replaces an existing retail mall. The Project’s 890 units of affordable housing yield more than any other Project in the history of the City. The retail and office components of the project induce demand for affordable housing; however, the removal of the existing retail mall and the Project’s provision of 890 affordable units offset that induced demand. Because the Project more than offsets any demand induced by its retail and office components, using the analysis from the City's own nexus studies,1 there is no affordable housing impact—indeed there is a benefit—and therefore the City cannot constitutionally impose an impact fee. We also note that in the SB 35 context applicable to the Project, the office portion is inextricably tied to the 1 Residential Below Market Rate Housing Nexus Analysis, dated April 2015. Accessed from:
https://www.cupertino.org/home/showdocument?id=16828.
Non-Residential Jobs-Housing Nexus Analysis, dated April 2015. Accessed from:
https://www.cupertino.org/home/showdocument?id=16830.
EXHIBIT A
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affordable units being provided since, by law, the office component cannot be built unless the residential component, including the BMR units, is also built. For that reason, the City must look at the impact based on the entire Project, not each subcomponent individually. a. Calculation of Affordable Housing Impact
To understand why the Project does not create an affordable housing impact, we propose the following analytical framework:
Step 1: Calculate the total induced demand for BMRs caused by the nonresidential portions. Step 2: Calculate the existing induced demand for BMRs caused by the retail mall being removed.
Step 3: Calculate the net new demand of non-residential (i.e., subtract existing demand from the new demand)
Step 4: Calculate the number of BMR units in excess of what is required to mitigate the induced demand from market rate units.
Step 5: Compare the "excess" BMR units to the non-residential net new induced demand to calculate the total net new demand of the entire Project Credit for the existing mall should be based on the comparative demand for affordable housing, i.e., the impact. For that reason, we look to the increased demand for the various uses contained in the City's nexus studies, rather than the fees for each. Fee amounts do not measure impacts, because the City considers other unrelated feasibility and policy factors when setting fees.
Non-Residential Jobs-Housing Nexus Analysis Table II-4: Housing Demand Nexus Factors per Sq. Ft. of Building Area (copied below) identifies the number of affordable housing units induced per square foot of building area per type of use, which identifies the impact of the Project components. As this Table demonstrates, retail has the highest induced demand for affordable housing per square foot and this demand is focused most on the very low-income level. Office has a lower induced demand, which is most focused on the low- and moderate839 CC 07-16-2024
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income categories. While we note the disparity in income categories, to keep this analysis simpler, we focus only on the total amount of increased BMR units.2 Table II-4: Housing Demand Nexus Factors per Sq. Ft. of Building Area We calculate Steps 1 to 3 as follows:
Step 1: Calculate total demand from non-residential
Office: 1,954,613 sf x 0.00071733 du/sf 1,402.10 BMR units Retail: 226,386 sf x 0.00098361 du/sf 222.67 BMR units
Total: 1,624.77 BMR units
Step 2: Calculate existing demand from the Mall
Existing Mall: 1,207,774 sf x 0.00098361 du/sf 1,187.98 BMR units 2 Not only is this simpler, it is also a conservative approach because it underestimates the benefit of the Project. A full accounting would acknowledge the affordable housing benefit of shifting the use from retail to office since office has less than one-quarter of the induced demand for very low income units compared to retail. Instead, office’s induced demand is concentrated on the low and moderate income end of the spectrum. This shift to higher income levels is itself a benefit.
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Step 3: Calculate net demand
1,624.77 BMR units
-1,187.98 BMR units
Total new demand 437 BMR units
Step 4: Calculate the number of BMR units in excess of what is required to mitigate the market rate induced demand
The City requires that market rate projects set aside 15% of the on-site units as affordable to offset the induced demand of the market rate units. Here, there are 1,779 market rate units, meaning that 267 of the BMR units (rounded up) are offsetting the induced demand of the 1,779 market rate units. Therefore, the additional 623 BMR units are "excess" and should be credited when calculating the net new demand of the entire Project.
Step 5: Calculate the total net new demand of the entire project Comparing the total BMR unit demand from non-residential (437 BMR units) to the number of BMR units that are in excess to the market rate demand (623 BMR units) demonstrates that there is a net Project benefit of 186 BMR units. That is, all induced demand for affordable housing from all components of the Project is being met on-site and there are 186 BMR units being provided beyond that induced demand, which is a significant benefit to the City. b. Fees Cannot Be Imposed When The Project Has No Impact.
The City cannot impose an affordable housing fee here because the Project produces a net benefit rather than an impact on the demand for affordable housing. The City’s impact fees must have a “reasonable relationship” to the “deleterious public impact” of the development.
San Remo Hotel L.P. v. City and Cty. of San Francisco (2002) 27 Cal.4th 643, 667 (citing Gov.
Code § 66001). There is no such relationship here, where the predicate of imposition of fees— an impact—does not exist. Any fees imposed in the absence of such a relationship are unlawful, a violation of the Project Applicant’s due process rights, and would be invalidated.
See Home Builders Ass’n of Tulare/Kings Counties, Inc. v. City of Lemoore (2010) 185 Cal.App.4th 554; Boatworks, LLC v. City of Alameda (2019) 35 Cal.App.5th 290, 300.
Indeed, a fair reading of the BMR Housing Mitigation Program Procedural Manual would not result in imposition of fees here. Only by making certain assumptions against the Project (that its components should be treated independently, and that the existing retail impact should be measured based on the time when the mall has been under redevelopment) can the City 841
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arrive at the conclusion that an affordable housing fee can be imposed. By making such assumptions, the City would engage in precisely the sort of individualized determinations that require a “rough proportionality” before a fee could be imposed. Nollan v. Calif. Coastal Comm’n, 483 U.S. 825 (1987); Dolan v. City of Tigard, 512 U.S. 374 (1994); Koontz v. St. Johns River Water Management Dist., 570 U.S. 595 (2013). Again, because there is no impact, the City would be engaging in an unconstitutional taking were it to impose fees. Instead, as the City’s Municipal Code recognizes, “[t]o the extent permitted by law, the City’s objective is to obtain actual affordable housing units within each development rather than off-site units or mitigation fee payments.” Cupertino Mun. Code 19.172.020(B). Units, rather than in-lieu fees, are exactly what the City needs, and are exactly what this Project provides (in excess of the induced demand).
Further, Section 2.3.3.D of the City’s BMR Housing Mitigation Program Procedural Manual recognizes that there may be instances in which application of the BMR requirements could have an unconstitutional result, in which case, waiver or modification of the BMR requirements is necessary. Although the City cannot charge a fee in excess of constitutional limits, so the specific procedure for requesting waivers is not controlling, we nonetheless submit this request for a waiver pursuant to that section.
Based on the foregoing, the Project Applicant requests that the City decline to impose an unconstitutional affordable housing fee.
Very truly yours,
Miles Imwalle
cc: Pamela Wu, City Manager
Reed Moulds, Managing Director, Sand Hill Property Company 842
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CITY OF CUPERTINO
Agenda Item
23-12679 Agenda Date: 7/16/2024
Agenda #: 11.
Subject: Councilmember Reports
CITY OF CUPERTINO Page 1 of 1 Printed on 7/10/2024
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1 CITY COUNCIL ACTIVITY REPORT
Meeting: July 16, 2024
Reporting Councilmember: Vice Mayor J.R. Fruen
Report Activity Dates: 6/25/24 to 7/8/24
Event Date, Title, and Description:
Event 1. June 27, 2024 – Silicon Valley at Home Elected Officials Roundtable – SV@Home relaunched its regular gathering of local elected officials focused on housing affordability. This was the first such in‐person meeting the organization has held since the onset of the pandemic.
It provoked a thoughtful exchange of views and experiences between electeds in different parts of Santa Clara County.
Event 2. June 28, 2024 – Meeting with the City Manager – I attended my regular weekly meeting with the City Manager to go over upcoming council agendas and to discuss ongoing issues, including constituent matters
Event 3. June 28, 2024 – Briefing and Public Works on Upcoming Agenda Items – I received a helpful briefing on four items: the Lawrence‐Mitty Park and Trail Project Final Conceptual Design (heard July 2), the Vision Zero Action Plan (heard July 9), the Lawson Middle School Bikeway (heard July 9), and the municipal water system lease (to be heard on July 16).
Event 4. June 28, 2024 – Cupertino Historical Society and Museum “Sip of History” Event – I attended this annual event recognizing the work of the CHS+M for the past year and honoring the transition of the board to new leadership for the coming year.
Event 5. July 4, 2024 – Independence Day Celebrations in Memorial Park – Together with the entire city council, I participated in Cupertino’s annual flag‐raising ceremony and children’s parade in celebration of Independence Day in Memorial Park. The event was well attended. 844
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2 Event 6. July 8, 2024 – Meeting with the City Manager – I attended my regular weekly meeting with the City Manager to go over upcoming council agendas and to discuss ongoing issues, including constituent matters
Event 7. July 8, 2024 – Groundbreaking for Jollyman Park All‐Inclusive Playground – This groundbreaking marked the beginning of the construction process for the long‐awaited Jollyman Park All‐Inclusive Playground. The additions and revisions to the park are designed to make the park accessible to children of all abilities—an essential part of making Cupertino a place where all children have access to key life experiences, like the everyday opportunity to play.
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1 CITY COUNCILMEMBER REPORT
Meeting: July 16, 2024
Reporting Councilmember: Mayor Sheila Mohan
Report Dates: 6/25/24 to 7/8/24
Item Date, Title, and Description:
6/25/2024: In my capacity as Board members of Silicon Valley Clean Energy, I attended a closed session of the Board to discuss matters of potential litigation and possible settlements. 6/26/24: Attended the West Valley Mayors and Managers lunch in Saratoga. Vice Mayor of San Jose, Rosemary Kamei was the guest speaker. The group discussed the Bay Area Housing Finance Authority (BAHFA) bill that is expected to be on the November 2024 ballot. City representatives expressed concerns that funding mechanism details were still unresolved. 6/26/24: Along with the other members of the City Council, I interviewed teen commission candidates for 4 openings.
6/27/24: This was Day 2 of the teen commission candidate interviews. Although only 4 candidates were selected because of the limited number of openings, the caliber and passion and intelligence of most of the candidates was impressive. 6/28/24: Together with Vice Mayor Fruen, I attended a prep session conducted by Public Works staff to discuss issues such as the Lawson Bikeway and Vision Zero which appeared on the 7/9 agenda.
7/4/24: The city celebrated July 4 with traditional festivities – flag raising by Scouts of America Troop 688, a parade around Memorial Park, a pancake breakfast and a concert by the group Phil N the Blanks. A heart-warming community event which was well attended by people of all ages.
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2 7/8/24: I, along with Vice Mayor Fruen and councilmembers Wei and Moore, participated in the groundbreaking ceremony of the All-Inclusive Playground at Jollyman Park. I made a few remarks recognizing the work of organizations which funded the project and staff who made the project a reality. Assemblymember Evan Low and Foothill-De Anza Trustee Patrick Aherns also attended. The project is expected to be completed in the spring of 2025. 7/8/24: Hosted the monthly Chai with Mayor at Berraco Coffee on Stevens Creek. A group of about 15 residents attended – and a lively discussion ensued about issues that City is working on and their impact on neighborhoods and residents. Topics included the housing element, the budget and farmers’ market.
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1 CITY COUNCILMEMBER REPORT
Meeting: July 16, 2024
Reporting Councilmember: Councilmember Hung Wei
Report Dates: 6/24/24 to 7/8/24
Item Date, Title, and Description:
Event 1, Monday June 24, 2024 @ 3:00pm, Audit Committee Meeting Attended the Audit Committee Meeting – received the Enterprise Risk Assessment Final Report and FY 2024‐2025 Internal Audit Work Plan with extensive Q& A, received status update report for prior Internal Audit Work Plans in FY 2021‐2022 and FY 2022‐2023, received FY 2022‐2023 Annual Comprehensive Financial Report, and also received the proposed Audit Committee 2024 Schedule and Workplan.
Event 2, Friday June 28, 2024 @ 11:30am, APALI Appreciation Luncheon Attended the APALI Annual Appreciation Luncheon with networking opportunities.
Event 3, Friday June 28, 2024 @ 5:00pm, Cupertino Historical Society Annual Fundraiser @ Cupertino Quinlan Center
Attended Cupertino Historical Society & Museum’s Annual Fundraiser to support the organization’s mission.
Event 4, Sunday June 30, 2024 @ 9:00am at Cupertino High School, Special Olympics Sports Expo
Attended, along with Councilmember Chao, the Special Olympics at Cupertino High School, toured the events with a guided tour, chatted with participants, and was honored to be given a chance to present medals to winners.
Event 5, Thursday July 4, 2024 @ 10:00am, Flag Raising and Children’s Parade at Memorial Park
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2 Attended the 4th of July celebration activities at Memorial Park, starting with the Pancake Breakfast hosted by De Anza Optimist Club of Cupertino, followed by Flag Raising, Children’s Parade, and a lively Concert with a live band.
Event 6, Monday July 8, 2024 @ 3:00pm, Jollyman All‐Inclusive Playground Groundbreaking
Attended the Groundbreaking of the Jollyman All‐Inclusive Playground with Mayor Mohan, Vice Mayor Fruen, Councilmember Moore, City Manager Wu, Deputy City Manager Kapoor, City staff, City Commissioners, Assemblymember Evan Low, representatives from County Board of Supervisor Joe Simitian and Santa Clara County, Foothill‐De Anza Community College District Trustees Patrick Ahrens and Gilbert Wong, as well as residents.
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