Item No. 17.
TO:HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM:OFFICE OF THE CITY MANAGER
BY:IRMA HUITRON, DIRECTOR OF COMMUNITY DEVELOPMENT
DATE:APRIL 28, 2026
SUBJECT:DISCUSSION REGARDING THE FEASIBILITY OF A TIERED CONDITIONAL USE PERMIT
FEE STRUCTURE FOR SMALL BUSINESSES
EXECUTIVE SUMMARY
At its October 14, 2025, meeting, the City Council directed staff to evaluate the feasibility of a tiered Conditional Use Permit fee structure to support small businesses. This report assesses how the City’s existing CUP and MCUP processes function in practice, including associated costs, and identifies opportunities to align permit requirements and fees with the scale and potential impacts of proposed uses. The report also summarizes current municipal code provisions, outlines existing fees, and presents potential next steps for City Council consideration.
RECOMMENDATION
That the City Council:
Discuss the current tiered conditional use permit processes and provide direction to staff on whether to expand the Minor Conditional Use Permit categories and initiate a Zoning Text Amendment (ZTA).
BACKGROUND
The City currently utilizes a tiered Conditional Use Permit structure, a Minor Conditional Use Permit (MCUP) and a Conditional Use Permit (CUP).
A MCUP is considered an Administrative Permit process for “minor land use actions” as described by Downey Municipal Code (DMC) Section 9814, which does not require a public hearing. The municipal code describes MCUP uses as those that:
a. Have little potential for affecting surrounding properties; b. Have no significant environmental effect under the California Environmental Quality Act (Exempt from CEQA); and
c. Are not subject to discretionary or other review requirements.
Example of uses include establishing or modifying an “Outdoor Dining” area and “Minor Commercial Recreational” land uses.
A CUP is a discretionary review process, subject to a public hearing before the Planning Commission, for uses that generally have a unique and distinct impact on the area in which they are located or are capable of creating special problems for adjacent properties unless given special review and special conditions, as described by DMC Section 9824. Examples of uses that need a CUP include restaurants serving alcohol, restaurants with live entertainment, and valet parking, which require a public hearing.
At its October 14, 2025, meeting, the City Council requested that staff study the feasibility of a tiered CUP structure to benefit small businesses.
ANALYSIS
Existing CUP vs. MCUP Framework
As outlined in the Background section, the City’s existing tiered structure distinguishes between administrative and discretionary review based on project impacts. While this framework provides a foundation for aligning review with project complexity, staff’s evaluation indicates that it may not fully capture the range of lower-impact uses that could be processed at the administrative level.
This presents an opportunity to evaluate whether expanding MCUP eligibility could better align permit requirements, costs, and processing timelines with the scale of proposed uses, while maintaining appropriate oversight.
Review Authority, Fees, and Noticing
Based on the City’s last fee study, the cost of a CUP is significantly higher than that of an MCUP, primarily due to the level of review required. The fee study evaluated costs in relation to the relative complexity of each application and the corresponding level of staff review involved. While MCUPs are intended to streamline lower-impact uses, staff have observed that incomplete submittals, evolving project scopes, and varying familiarity with requirements are a typical part of the process and can result in additional coordination and, in some cases, longer processing times than originally anticipated in the fee study.
A CUP involves a more comprehensive evaluation process, including interdepartmental review, review of technical studies, preparation of a detailed staff report, more extensive CEQA review, public noticing, and a public hearing before the Planning Commission. In contrast, an MCUP is reviewed at the administrative level, is subject to Director-level review, typically involves a more limited, focused interdepartmental review, is generally exempt from CEQA, and does not require a public hearing, resulting in a more streamlined process that is reflected in a lower application fee and shorter processing timeline.
Public noticing requirements also differ, with a 500-foot radius for a CUP and a 100-foot radius for an MCUP. Table 1 summarizes the key distinctions.
These differences illustrate that the City’s existing tiered structure already provides a foundation for scaling review requirements based on project complexity; however, the range of uses eligible for administrative review remains limited. In addition, the City substantially subsidizes permit processing costs, with MCUPs subsidized by approximately 76 percent ($3,961) and CUPs by approximately 40 percent ($5,048). For context, in 2024, the Department processed five (5) MCUPs and eight (8) CUPS, and in 2025, two (2) MCUPs and nine (9) CUPs.
Discussion Topics (MCUP Expansion)
Expanding the MCUP land use categories would allow certain uses to be reviewed at the administrative level, benefit from a reduced application fee, and experience shorter processing times due to the absence of a public hearing, while still maintaining appropriate oversight of potential land use impacts on nearby properties.
Based on staff’s review, several uses currently requiring a CUP share operational characteristics more consistent with lower-impact uses and may not require Planning Commission-level review in all cases. Providing flexibility to evaluate these uses at the administrative MCUP level could streamline staff’s review and reduce costs to the applicant.
This approach would be consistent with the Council’s direction to explore the feasibility of creating a fee structure that helps small businesses, as it builds upon the City’s existing tiered framework rather than introducing a new entitlement and associated structure.
Examples of uses in Table 2 are often associated with small businesses and could be considered for reclassification from a CUP to an MCUP.
Examples of land uses that would remain as Conditionally Permitted Uses are listed in Table 3:
If directed by the City Council, this approach would allow staff to further evaluate whether targeted refinements to the MCUP category could enhance the City’s existing permitting framework while maintaining appropriate safeguards for surrounding properties.
If, after discussion, the City Council directs staff to proceed with preparing a ZTA, staff will conduct the necessary research and prepare its findings for review by the Planning Commission. The Commission’s recommendation will then be forwarded to the City Council for final consideration.
Estimated Timeline & Costs
The following outlines the anticipated timeline and preparation costs for the ZTA. Based on the Community Development Department’s 2026–2027 work plan, which includes completing the final steps associated with the City’s Comprehensive General Plan Update and the associated Environmental Impact Report, staff anticipates initiating the preparation of the ZTA would commence in July 2026.This timing reflects staff availability, allowing resources currently dedicated to the General Plan and EIR to transition to this effort in the Summer 2027. Once initiated, the project is expected to be completed within four (4) months, as outlined in Table 4.
The estimated cost to prepare the ordinance and conduct related research is approximately $18,000. The costs of preparing the ZTA would be included in the FY 2026/2027 budget.
ENVIRONMENTAL ANALYSIS
Based on staff’s review, it has been determined that this report is not subject to the California Environmental Quality Act pursuant to Section 15061(b)(3) of the CEQA Guidelines because it will not have a significant effect on the environment.
CITY COUNCIL PRIORITIES
Quality of Life, Safety & Infrastructure
Public Engagement
FISCAL IMPACT
If the City Council directs staff to prepare the ZTA, this action will result in an appropriation of $18,000 from the General Fund to the Community Development Department Account No. 10-4-5110-0446 operating budget for FY 26/27.