EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: April 5, 2022
TO: Honorable Mayor and Members of the City Council
VIA: Jaime M. Fontes, City Manager
BY: Amy Chen, Community & Economic Development Director SUBJECT: Developer Payment Obligations Connected to the RBD Specific Plan Update Recommendation
It is recommended that the City Council:
1) Affirm previous direction that the three developers seeking an amendment to the RBD Specific Plan pay an equal share (or one third) of the associated costs related to the environmental review process in addition to a pro rata share of the City’s investment if the of the RBD Specific Plan is updated and projects are approved; and 2) Direct staff to only process and/or consider projects where the developer’s payment obligations are up to date and in good standing.
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
Priority No. 2: Enhance Economic Vitality
Priority No. 6: Create a Healthy and Safe Community
Background
At the beginning of 2019, the City started to receive strong interest to develop projects in the Ravenswood Business District/Four Corners Transit Oriented Development Specific Plan Area (also known as the “Ravenswood Business District” or “RBD”). With those proposals, the RBD’s original projected development capacity in the Specific Plan would be exceeded, rendering the initial Plan in need of an update.
On February 25, 2020, the City Council provide direction on the Ravenswood Business District Specific Plan and directed City staff to return with a proposed workplan for amending the Specific Plan and EIR, including time and cost estimates. On June 2, 2020, City staff returned with a proposal for the Plan Amendment Project Manager and a firm to serve as the RBD Project Manager responsible for processing development projects in the RBD.
On September 15, 2020, the City Council authorized the City to enter into a contract with Raimi + Associates (R+A), in an amount not to exceed $1,326,829 to provide the analysis, community engagement, and environmental review necessary for the City Council to consider an amendment to the Ravenswood Business District (RBD) Specific Plan and potentially increase the amount of development approved in the EIR. The staff report linked online1 details the phases of the analysis and the scope of work.
The City Council’s actions on September 15, 2020 also committed the City to fund some of the analysis necessary for the specific plan update and established the repayment obligations of all entities engaged for both the up front costs as well as how the City will recapture its investment if/when the specific plan is updated and projects move forward. The table below provides more details on those actions:
Up Front Costs
Activity Responsible Entity Cost Estimate* % of Obligation Data Refresh,
Analysis,
Community
Engagement
City of East Palo
Alto
$490,164 100%
Environmental
Review
Emerson
Collective, Harvest
Properties, Sand
Hill
$737,665 Developer to pay
33% of each cost
*All cost estimates will include an additional payment towards the City’s 10% administrative fee2
Reimbursement of the City’s Initial Investment
At the September 15, 2020 meeting, Council accepted staff’s recommendation to set up a process to recapture a proportionate amount of the City’s initial investment to be structured as follows:
A) The new project’s square footage would be represented as a percentage of the total additional capacity allowed by the RBD Specific Plan amendment, once approved.
B) The developer contribution would then be calculated as an equal percentage of the total costs to the City of completing the RBD Specific Plan amendment, plus an administrative fee.
Example:
A) Additional Capacity in the RBD Specific Plan 1,500,000* sq ft Size of Project X 400,000 sq ft
1 September 15, 2020 City Council meeting, agenda item 11.1:
http://eastpaloalto.iqm2.com/Citizens/Detail_LegiFile.aspx?Frame=&MeetingID=1283&MediaPosition=15 893.831&ID=1306&CssClass=
2 These figures do not include the additional City investment approved by the City Council on January 18, 2022.
Project Size as Percentage of Additional Capacity 27%
B) City’s Contribution to the RBD Specific Plan Amendment $400,000* Project Contribution ($400,000 X 27%) $108,000
Administrative fee (15% of project contribution) $16,200 Total obligation for Project X $124,200
*Amount provided for illustrative purposes only; Actuals will not be known until RBD Specific Plan amendment is completed.
On October 6, 2020, the City Council authorized the City to enter into reimbursement agreements with certain developers within the RBD to fund a share of the associated costs for the environmental review portion of the R+A contract3. Three developers have contributed installments towards the reimbursement of the environmental review portion of the R+A contract (further referred to as the RBD CEQA portion or Exhibit B). Those three developers include the Emerson Collective, Harvest Properties, and Sand Hill Property Company. The 2020 Bay Road project is not included towards the reimbursement of the environmental review portion of the R+A contract because the project was submitted before the RBD Specific Plan process initiated and the project application can continue to be reviewed and processed, and is not dependent on the outcome of the RBD Specific Plan process.
On January 18, 2022, the City Council authorized the City Manager to amend the Raimi + Associates contract with an addition of $508,308 in order to add more analysis, community engagement, and environmental review necessary for the City Council to consider an amendment to the RBD Specific Plan4. The contract amendment is nearly complete, and a table in the Analysis section below summarizes the original and first amendment.
Although certain developers are funding a portion of the R+A contract, the City Council maintains full land use authority regarding decisions about the RBD. Entering into developer reimbursement agreements does not commit the City to amend the RBD or to any project approvals.
Developers Installment Progress
The R+A contract was fully executed and work initiated in early 2021 starting with the data refresh, analysis, and community engagement phase of the RBD Specific Plan process. The RBD CEQA phase of the R+A contract commenced in July 2021 with preparation for Fall Council study sessions and conducting initial analysis to support the environmental review process. In August 2021, City staff requested each of the three developers to submit the first installment towards the RBD Specific Plan update on the environmental review phase. All three developers submitted their installment payment to the City on-time and each also signed the City initiated letter acknowledging they were aware and willing to make the installment payment towards the RBD Specific Plan update during that time. One developer submitted their payment but added onto the acknowledgement letter they were only willing to 3 October 6, 2020 City Council meeting, agenda item 6.11:
http://eastpaloalto.iqm2.com/Citizens/Detail_LegiFile.aspx?Frame=&MeetingID=1284&MediaPosition=31
41.636&ID=1416&CssClass=
4 January 18, 2022 City Council meeting, agenda item 3.4:
http://eastpaloalto.iqm2.com/Citizens/Detail_LegiFile.aspx?Frame=None&MeetingID=1471&MediaPositio n=&ID=2074&CssClass=
conditionally fund the estimated costs of the RBD Specific Plan Update as long as the Specific Plan update continues to study its project as proposed. That one developer stated that it will not make further contributions to the RBD Specific Plan Update and the City will reimburse them for any amounts contributed in excess of their then-current share of the studied growth capacity.
At this time, this one developer is the only developer with an outstanding installment that would go towards the RBD CEQA portion and an outstanding payment under their DRA that would go towards their project processing. They have expressed their dissatisfaction with the formula and would prefer it be based on sq/footage of entitlement vs. the 1/3 split. The developer made an argument that the public record and their DRA is not clear on how the payment obligations were established for the first phase of the RBD process (for which the City is currently fronting the costs), and that they would prefer a prorated formula be used for the entire repayment scheme.
The purpose of this staff report is to confirm with the City Council that it would like to proceed with the reimbursement equation as set forth in the original DRA’s.
Analysis
The City has invested significant time and resources into the potential RBD Specific Plan Update. To date, the City has held four City Council Study Sessions and three community meetings, hosted office hours, and set up several key stakeholder roundtable discussions on the topic. Staff is gratified by the level of community engagement and progress with this aspect the project to date.
As the repayment obligations have previously been approved by City Council, staff recognizes the additional conversations disputing these obligations are requiring a disproportionate level of limited staff resources. Therefore, staff recommends: 1) A discussion and re-affirmation of the previous City Council direction that the three developers seeking an amendment to the RBD Specific Plan pay an equal share (or one third) of the associated costs related to the environmental review process, and 2) The City only process and/or consider projects where the developer’s payment obligations are up to date and in good standing.
Staff’s Recommendation/Rational
Staff recommends the City Council affirm previous direction that the three developers seeking an amendment to the RBD Specific Plan pay an equal share (or one third) of the associated costs related to the environmental review process in addition to a pro rata share of the City’s investment if the of the RBD Specific Plan is updated and projects are approved. It is staff’s position that it would be presumptions to use the square footage of the developers proposed project to establish the payment formula for the RBD CEQA costs. The City Council, community, and other stakeholders have already expressed concerns with the amount of square footage being proposed in the RBD, therefore, the more appropriate approach is to spread the obligation across the three projects, equally.
Fiscal Impact
There are no fiscal impacts associated with this staff report.
Public Notice
The public was provided notice of this agenda item by posting the City Council agenda on the City’s official bulletin board outside City Hall and making the agenda and report available at the City’s website and at the San Mateo County Library located at 2415 University Avenue, East Palo Alto.
Environmental
The action being considered does not constitute a “Project” within the meaning of the California Environmental Quality Act (CEQA), pursuant to CEQA Guideline section 15378 (b)(5), in that it is a government administrative activity that will not result in direct or indirect changes in the environment.