4.1.b
Packet Pg. 251 Attachment: Final Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo (SMLAFCo) Municipal MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
Appendix A Regional Growth 214
While the long-term impact of the COVID-19 economic crisis on income inequality in the region remains unknown, data points on job loss by industry provide insight to how the pandemic may impact top and bottom earning households in the region. Many households that fall into the bottom 10% rely on employment in industries that have experienced sizable job losses over the past year in the Bay Area. 510 Examining job losses by industry provides more nuanced insight into the COVID-19 recession employment recovery in the region. In early 2020, employment across the travel and tourism and hospitality and services sectors were immediately impacted as local and statewide shelter in place mandates and travel guidelines were put in place in the Bay Area. As time went on, these effects transferred to other industries leading to layoffs, furloughs, and hiring freezes across various industries.511
Industries that typically employ white-collar workers such as professional and business services and financial services were less impacted by employment loss throughout 2020. Other sectors had unique trajectories of employment loss and recovery during 2020. The construction industry had one of the most pronounced recoveries. The government sector saw a delayed low point for employment loss, reaching the deepest level of job loss in July but remaining relatively stable into the new year.512 Despite the region’s continued success in both venture capital and technology in light of COVID-19, the reshaping of “location” as a factor for where companies choose to locate and where venture capitalists choose to invest their money can have an impact on whether or not the Bay Area will continue to have a concentration of venture capital investment and technology companies in the future. If location is no longer a primary driver for investment, venture capitalists might choose to start investing in companies in other parts of the country, and likewise, companies might choose to station themselves or their employees in less expensive regions. At the same time, many view the Bay Area’s entrepreneurial spirit and conglomeration of venture capital to be a unique underlying factor that will not disappear in the near future. 513
510 Association of Bay Area Governments and Metropolitan Transportation Commission, Plan Bay Area 2050, October 21, 2021, pp. 51-52.
511 Bay Area Council Economic Institute, Tracking Impacts of the COVID-19 Recession on the Bay Area Economy, 2020, p. 7.
512 Bay Area Council Economic Institute, Tracking Impacts of the COVID-19 Recession on the Bay Area Economy, 2020, p. 7.
513 Bay Area Council Economic Institute, Tracking Impacts of the COVID-19 Recession on the Bay Area Economy, 2020, p. 16-17.
4.1.b
Packet Pg. 252 Attachment: Final Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo (SMLAFCo) Municipal MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
Appendix A Regional Growth 215
Distribution of Jobs and Housing
The distribution of jobs and housing have a significant impact on population growth and development trends. This distribution in the Bay Area has historically depended on multiple factors. In some places, zoning restricts development exclusively to commercial buildings or single-family homes, and other policies also can limit the amount of housing or commercial space that can be built. Another factor is the tendency of similar types of businesses to cluster near one another — most notably in Silicon Valley, where many information and technology firms have co-located since the 1970s. Proximity to transit or to highways also plays a role, as businesses and workers choose locations that will enable quicker travel.514
Compounded over many decades, these forces have resulted in a significant spatial imbalance of jobs and housing throughout the Bay Area. Generally, there is more housing than jobs in Alameda, Contra Costa, Solano and Sonoma counties, while there are more jobs than housing in Marin, Napa, San Francisco, San Mateo and Santa Clara counties. This creates a number of associated problems, such as traffic congestion and transit overcrowding in major commute corridors. The imbalance also reinforces other challenges, such as the displacement of longtime residents from neighborhoods where home values and rents have spiked.515
The Bay Area is generally known as one of the least affordable areas to live in the country. The high cost of living is largely driven by the high costs of housing, which has spurred an affordability crisis, pushing lower income households to locations farther from the urban job centers.516 Housing growth in cities with growing high-wage workforces — notably those in Silicon Valley — has not kept pace with job growth, resulting in spillover demand for homes and higher housing costs throughout the region. Every day, Bay Area workers of all income levels struggle to find housing close to their workplaces, though this trend is particularly challenging for workers with low incomes.517 Many planning strategies developed by the Association of Bay Area Council of Governments (ABAG) and the Metropolitan Transportation Commission (MTC) in the Plan Bay Area 2050 (discussed in more detail 514 Association of Bay Area Governments and Metropolitan Transportation Commission, Plan Bay Area 2050, October 21, 2021, p. 48.
515 Association of Bay Area Governments and Metropolitan Transportation Commission, Plan Bay Area 2050, October 21, 2021, p. 48.
516 Bay Area Council Economic Institute, Tracking Impacts of the COVID-19 Recession on the Bay Area Economy, 2020, p. 19.
517 Association of Bay Area Governments and Metropolitan Transportation Commission, Plan Bay Area 2050, October 21, 2021, p. 13.
4.1.b
Packet Pg. 253 Attachment: Final Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo (SMLAFCo) Municipal MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
Appendix A Regional Growth 216
below), promote a more balanced distribution of jobs and housing across the region.518 First, local jurisdictions can support a more balanced distribution of job growth by allowing greater commercial densities. A complementary strategy to provide incentives to employers to shift jobs to housing-rich areas that are well served by transit could further improve the balance of jobs and housing. Finally, a strategy to retain key industrial lands by establishing Priority Production Areas would both support a more even jobs-to-housing balance regionwide and protect industrial land from the risk of conversion to residential uses.519
In a post-pandemic Bay Area, both housing and transportation will inevitably be reshaped. 520 A reversal
in housing costs has already materialized in some locations, with rents dropping in historically high cost urban job centers, like San Francisco, and rising in parts of the East Bay. In contrast to the drop in rental prices in some areas, home sale prices have increased across the Bay Area during the pandemic. As this redefinition in the geography of housing prices in the region plays out, thousands of people face unemployment in an unaffordable region, making future housing stability an uncertainty for many.
Housing protections temporarily in place at the state and county level will expire on varying timelines, further contributing to uncertainty surrounding housing security for regional residents in poverty and those currently unemployed.521
Work from Home
One of the most identifiable effects of the COVID-19 pandemic was the acceleration of the work-fromhome trend. This trend is especially relevant in the Bay Area as remote work possibility increases with the rise in average income. The eligibility to work remotely further deepened the income disparity across the region, however.522
Up to 45 percent of the jobs in the Bay Area are eligible for remote work, equating to a total of 1.79 million remote eligible jobs in the region. The nine Bay Area counties together have about the same number of remote eligible jobs as Los Angeles County (1.70 million), but the region has a larger share of 518 Association of Bay Area Governments and Metropolitan Transportation Commission, Plan Bay Area 2050, October 21, 2021, p. 48.
519 Association of Bay Area Governments and Metropolitan Transportation Commission, Plan Bay Area 2050, October 21, 2021, p. 51.
520 Bay Area Council Economic Institute, Tracking Impacts of the COVID-19 Recession on the Bay Area Economy, 2020, p. 19.
521 Bay Area Council Economic Institute, Tracking Impacts of the COVID-19 Recession on the Bay Area Economy, 2020, p. 19.
522 Bay Area Council Economic Institute, Remote Work in the Bay Area: An Initial Evaluation of the Data and Implications for Public Policy, December 2020, http://www.bayareaeconomy.org/report/remote-work-in-thebay-area/.
4.1.b
Packet Pg. 254 Attachment: Final Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo (SMLAFCo) Municipal MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
Appendix A Regional Growth 217
the total workforce remote eligible compared to other geographies. San Francisco County and Santa Clara County have the highest shares of remote work eligible jobs in the region, accounting for more than half of all jobs in each county.
523 A majority of the remote eligible jobs in the Bay Area are within the professional services sector.524
If each of the region’s 1.79 million people employed in a remote eligible job worked outside of the office for just one day per week, over 1 million single-occupancy vehicle trips could be avoided each week—a reduction of 8 percent based on pre-COVID-19 travel. Reduced demand for commute trips will ease congestion for those that do travel, creating further emissions benefits. However, if households relocate to more dispersed locations in the region because they only need to be in the office a few days per week, more drivers could take to the roads for longer commutes between locations that are not currently connected by transit. In addition, if many households relocate to less transit and pedestrianfriendly locations, there could be a localized impact on the environment as people become more reliant on cars as a primary mode. Shifting travel behavior could also call for a re-prioritization of transportation investments away from commute trips to urban centers and toward local transit, bicycle, and pedestrian infrastructure. The potential for remote work to drive down daytime populations in downtown areas can impact the service economy, housing markets, and public transit usage.525 There are also racial and ethnic inequities in the demographics of the pre-pandemic population employed in occupations eligible to work from home. Based on the pre-COVID-19 occupational makeup across the nine counties, 51 percent of the white workforce and 52 percent of the Asian workforce held a job in an occupation eligible for remote work, while 33 percent of the Black workforce and 30 percent of Latinx workforce in the region held a job in an occupation eligible for remote work.526 It is impossible to disaggregate remote work effects from COVID-19 effects, and this is especially true when it comes to housing markets. Median rents have fallen by at least 20 percent year-over-year as of October 2020 in locations with a high percentage of jobs that could be done remotely. These drops in rental prices in these locations indicate their susceptibility to population decline driven by increased 523 These numbers are high bounds for expectations for the future level of remote work and are calculated at the pre-pandemic job mix.
524 Bay Area Council Economic Institute, Remote Work in the Bay Area: An Initial Evaluation of the Data and Implications for Public Policy, December 2020, http://www.bayareaeconomy.org/report/remote-work-in-thebay-area/. 525 Bay Area Council Economic Institute, Remote Work in the Bay Area: An Initial Evaluation of the Data and Implications for Public Policy, December 2020, http://www.bayareaeconomy.org/report/remote-work-in-thebay-area/. 526 Bay Area Council Economic Institute, Remote Work in the Bay Area: An Initial Evaluation of the Data and Implications for Public Policy, December 2020, http://www.bayareaeconomy.org/report/remote-work-in-thebay-area/.
4.1.b
Packet Pg. 255 Attachment: Final Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo (SMLAFCo) Municipal MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
Appendix A Regional Growth 218
remote work. If remote workers begin to prefer housing in suburban locations, remote work could also alleviate some of the pressure on urban housing markets while simultaneously shifting affordability concerns to other parts of the region.527
Housing Needs
California, and the Bay Area in particular, face an affordable housing crisis that has built up over decades. The Bay Area faces a shortfall of over 220,000 homes affordable to its poorest residents.
Roughly 45 percent of Bay Area renter households spend more than 30 percent of their income on housing (meeting the definition of “cost-burdened”),while roughly 23 percent spend over 50 percent of their income (meeting the definition of “severely cost burdened).Nearly 85 percent of extremely lowincome residents and 61 percent of low-income residents are cost burdened, while 69 percent of extremely low-income and 15 percent of low-income residents face severe cost burdens.528 These dynamics have led to an increasingly segregated region, with low-income residents and people of color often pushed to the peripheries of the Bay Area if they are able to remain in the region at all. As briefly mentioned before, the Bay Area’s inability to adequately house all its residents, especially close to job centers, has led to a host of other challenges such as crippling traffic, attendant greenhouse gas emissions, and labor shortages that affect all Bay Area residents. 529 Recent events have exacerbated the housing crisis. Every Bay Area resident has been affected in some way by the COVID-19 pandemic and the accompanying economic downturn, as well as by the historic wildfires that have threatened homes, caused large-scale evacuations, and resulted in prolonged periods of unhealthy air quality.530
Rents in the region where so high prior to the pandemic, that despite the drastic percentage drops in rent in Bay Area cities over the last year, housing costs are still unaffordable for many households. While the decline in rent has the potential to decrease the rent burden felt by low-income households, overall affordability of the region for low-income households is a factor of both rental costs and income. 531
Recognizing the severity of the problem, the Bay Area’s regional governing bodies, the Association of Bay Area Governments (ABAG) and Metropolitan Transportation Commission (MTC), have developed 527 Bay Area Council Economic Institute, Remote Work in the Bay Area: An Initial Evaluation of the Data and Implications for Public Policy, December 2020, http://www.bayareaeconomy.org/report/remote-work-in-thebay-area/. 528 Bay Area Housing Finance Authority, Momentum for Lasting Solutions, 2021. 529 Bay Area Housing Finance Authority, Momentum for Lasting Solutions, 2021. 530 Bay Area Housing Finance Authority, Momentum for Lasting Solutions, 2021. 531 Association of Bay Area Governments and Metropolitan Transportation Commission, Plan Bay Area 2050, October 21, 2021, pp. 51-52.
4.1.b
Packet Pg. 256 Attachment: Final Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo (SMLAFCo) Municipal MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
Appendix A Regional Growth 219
and adopted the Plan Bay Area 2050532 that treats housing like public infrastructure to address the area’s housing crisis.533
The Bay Area has over 2.5 million homes in its nine counties. To accommodate a growing population expected to reach 10 million by 2050, more housing will need to be built throughout the region. Where that housing is built, and in what form, can impact the greatest challenges facing the Bay Area today, including housing affordability, access to job opportunities and reducing greenhouse gas emissions. Plan Bay Area 2050 contains a strategy for housing the 10 million people expected to live in the Bay Area in 2050, to be implemented by the region’s 101 cities and towns using their knowledge of local needs and resources. 534
The Bay Area housing market consists of market-rate, rent-regulated and deed-restricted affordable housing. Over 90 percent of Bay Area homes are market-rate, meaning they are bought, sold or rented on the private real estate market. The price of new and existing market rate housing is influenced by supply and demand, resulting in unaffordability to most residents with low and moderate incomes.
Factors such as high land and construction costs, minimum parking requirements, maximum unit densities and other local policies contribute to higher supply costs. Swiftly increasing demand for housing compounds these supply-side challenges, leading to higher rents and home prices. Cities or counties may voluntarily adopt rent regulations to stabilize rents or protect renters from discrimination.
A small share of homes in the Bay Area today are deed-restricted affordable housing. In accordance with state and federal standards, the price of these homes is tied to affordability levels for households with low and moderate incomes, for a period of time defined in the deed of ownership for a property. Homes with deed restrictions lasting 55 years or more are often considered “permanently affordable,” though few mechanisms exist to ensure true permanency. 535
Since 1969, the State of California has required each local government to plan for its share of the state’s housing needs for people of all income levels.536 The California Department of Housing and Community Development (HCD) identifies the total number of homes for which each region in California must plan in order to meet the housing needs of people at all income levels. The total number of housing units from HCD is separated into four income categories that cover everything from housing for very low532 The Plan was adopted on October 21, 2021. 533 Bay Area Housing Finance Authority, Momentum for Lasting Solutions, 2021. 534 Association of Bay Area Governments and Metropolitan Transportation Commission, Plan Bay Area 2050, October 21, 2021, pp. 29-30.
535 Association of Bay Area Governments and Metropolitan Transportation Commission, Plan Bay Area 2050, October 21, 2021, pp. 29-30.
536 Association of Bay Area Governments, Final Regional Housing Needs Allocation (RHNA) Plan: San Francisco Bay Area 2023-2031, 2021, pp. 4-6.
4.1.b
Packet Pg. 257 Attachment: Final Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo (SMLAFCo) Municipal MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
Appendix A Regional Growth 220
income households all the way to market rate housing.
537 ABAG is responsible for developing a
methodology to allocate a portion of this housing need to every local government in the Bay Area.538 Every eight years, ABAG develops a Regional Housing Needs Allocation (RHNA) that allocates statemandated expected growth at the jurisdictional level and across the income spectrum.539 On December 16, 2021, ABAG adopted the RHNA Plan for the period of 2023-2031.540 Once it receives its allocation, each local government must update the Housing Element of its General Plan and its zoning to show how it plans to accommodate its RHNA units and meet the housing needs in its community. The housing element addresses specific housing needs within a jurisdiction such as homelessness, meeting the needs of specific populations, affirmatively furthering fair housing, or minimizing displacement.541 In consultation with ABAG, HCD determined that the Bay Area must plan for 441,176 new housing units from 2023 to 2031.542 This determination is based on population projections produced by the California Department of Finance. The new laws governing the methodology for how HCD calculates the RHNA resulted in a significantly higher number of housing units (more than double from the last cycle; 187,000 units between 2015 and 2023)
543 for which the Bay Area must plan compared to previous RHNA cycles.544 Figure 3-1 depicts the housing needs breakdown. 537 Very Low Income: 0-50% of Area Median Income; Low Income: 50-80% of Area Median Income; Moderate Income: 80-120% of Area Median Income; Above Moderate Income: 120% or more of Area Median Income. 538 Association of Bay Area Governments and Metropolitan Transportation Commission, Plan Bay Area 2050, October 21, 2021, p. 47.
539 Bay Area Housing Finance Authority, Momentum for Lasting Solutions, 2021. 540 https://abag.ca.gov/our-work/housing/rhna-regional-housing-needs-allocation 541 Association of Bay Area Governments, Final Regional Housing Needs Allocation (RHNA) Plan: San Francisco Bay Area 2023-2031, 2021, pp. 4-6.
542 There are three components to the methodology that includes: 1) Baseline allocation, which is used to assign each jurisdiction a beginning share of the RHND and is based on each jurisdiction’s share of the region’s total households in the year 2050 from the Plan Bay Area 2050 Final Blueprint; 2) Factors and weights for allocating units by income category that are taken into consideration in allocating very low- and low-income units and moderate- and above-moderate units; and 3) Equity adjustment that identifies 49 jurisdictions that exhibit racial and socioeconomic demographics that differ from the regional average to ensure that each of these jurisdictions receives an allocation of lower-income units that is at least proportional to its share of the region’s total households in 2020.
543 Association of Bay Area Governments, Final Regional Housing Needs Allocation (RHNA) Plan: San Francisco Bay Area 2023-2031, 2021, p. 34.
544 Association of Bay Area Governments, Final Regional Housing Needs Allocation (RHNA) Plan: San Francisco Bay Area 2023-2031, 2021, p. 11.
4.1.b
Packet Pg. 258 Attachment: Final Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo (SMLAFCo) Municipal MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
Appendix A Regional Growth 221
Figure A.3-1: Regional Housing Needs Determination from HCD (San Francisco Bay Area) Source: Regional Housing Needs Determination (RHND) from HCD Factsheet.
The City of East Palo Alto has been assigned a total of 829 RHNA units that include 165 very low income, 95 low income, 159 moderate income, and 410 above moderate income.545 The unincorporated San Mateo county got assigned 2,833 units including 811 very low income, 468 low income, 433 moderate income, and 1,121 above moderate income.546 It will result in the growth rate of 11 percent in East Palo Alto and 13 percent in unincorporated San Mateo County from 2020 households.547 During the current RHNA cycle, it is especially not easy for each Bay Area jurisdiction to update its Housing Element given the higher number of new homes needed. In addition to the overall number of homes assigned to each jurisdiction, the RHNA process dictates that housing must be planned for every affordability level. Historically, permitting for homes affordable to people with lower and moderate incomes has not kept pace with the Bay Area's RHNA targets. Housing Elements for this RHNA period must also demonstrate how they affirmatively further fair housing (new requirement). 548
RHNA and Plan Bay Area 2050 discuss planning for housing on two separate time horizons: RHNA focuses on the shorter-term with its eight-year cycle, while Plan Bay Area 2050 presents a longer-term vision for the next 30 years. The two efforts, however, are coordinated, with RHNA’s near-term focus setting the stage for early implementation of Plan Bay Area 2050’s envisioned growth pattern. To assist cities and counties with planning for new housing this cycle, HCD provided new state funding of $250 million in the 2019-20 State Budget; $25 million of these funds went directly to Bay Area jurisdictions, with an additional $24 million allocated to ABAG. ABAG is deploying its funds through subgrants to all 109 jurisdictions and the recently launched Regional Housing Technical Assistance (RHTA) program.
RHTA includes several forms of technical assistance, such as providing jurisdiction-specific data packets 545 Association of Bay Area Governments, Final Regional Housing Needs Allocation (RHNA) Plan: San Francisco Bay Area 2023-2031, 2021, p. 27.
546 Association of Bay Area Governments, Final Regional Housing Needs Allocation (RHNA) Plan: San Francisco Bay Area 2023-2031, 2021, p. 27.
547 Association of Bay Area Governments, Final Regional Housing Needs Allocation (RHNA) Plan: San Francisco Bay Area 2023-2031, 2021, p. 30.
548 Association of Bay Area Governments, Final Regional Housing Needs Allocation (RHNA) Plan: San Francisco Bay Area 2023-2031, 2021, p. 30.
4.1.b
Packet Pg. 259 Attachment: Final Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo (SMLAFCo) Municipal MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
Appendix A Regional Growth 222
that include charts and graphs that local staff can add directly into their Housing Elements and the Housing Element Site Selection tool, an interactive map that identifies opportunity sites for rezoning.
Innovative ideas for engaging the community on housing planning, a regional consulting bench, and resources to support fair housing and resilience to hazards are also supported by these state funds.549 Bay Area Housing Finance Authority (BAHFA) also can help jurisdictions meet their RHNA targets by providing resources and technical assistance so local plans result in more homes, especially for lowerincome residents. 550 Established in 2019 by Assembly Bill 1487 (Chiu), BAHFA is the first legislativelyapproved regional housing finance authority in California that has the potential to raise hundreds of millions of dollars annually through ballot measures and other revenue mechanisms for the entirety of the nine-county Bay Area. The defining feature of BAHFA is the authority to raise revenue through a ballot measure that would require two-thirds approval from voters in the nine Bay Area counties.
Potential mechanisms include a general obligation bond, a parcel tax and two employer-based taxes – a per-employee “head tax” and a gross receipts tax. 551
Strategies to Meet Housing Needs
The Bay Area’s severe housing shortage will require innovative solutions as well as time-tested methods.
One novel idea is to transform aging shopping malls and office parks into vibrant, mixed-use neighborhoods incorporating open space, shops, services and housing. With department stores and other retail storefronts facing a steady decline since the takeoff of online shopping (accelerated by the COVID-19 pandemic), this strategy turns an economic development challenge into an opportunity.
Reimagining large, underutilized commercial spaces as housing can form an important nexus with economic development to transform the quintessential single-use sites of the 20th century into 21st century spaces that meet the needs of the future.552
Also, in addition to building stand-alone affordable housing, Plan Bay Area 2050 calls for integrating affordable housing into all major housing projects to meet the needs of all residents by 2050. California law (GC 65589.7) requires that special districts grant priority status to affordable housing developments and adopt written policies and procedures with specific objective standards for provision of services in conformance with this requirement.
549 Association of Bay Area Governments, Final Regional Housing Needs Allocation (RHNA) Plan: San Francisco Bay Area 2023-2031, 2021, p. 30.
550 Bay Area Housing Finance Authority, Momentum for Lasting Solutions, 2021. 551 Bay Area Housing Finance Authority, Momentum for Lasting Solutions, 2021. 552 Association of Bay Area Governments and Metropolitan Transportation Commission, Plan Bay Area 2050, October 21, 2021, p. 33.
4.1.b
Packet Pg. 260 Attachment: Final Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo (SMLAFCo) Municipal MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
Appendix A Regional Growth 223
Numerous Bay Area cities have had inclusionary housing policies in effect for years, requiring developers to reserve a set number of homes in new buildings as affordable units. These policies promote the development of mixed income apartment buildings without requiring a direct government subsidy. Instead, the cost of providing affordable housing is built into the developer’s financial projections. Plan Bay Area 2050 envisions a regional approach to inclusionary zoning that is contextspecific, with requirements for affordable housing ranging from 10 percent to 20 percent of the total number of apartments built. The percentage would be based on factors like the strength of the housing market and proximity to amenities like transit or well-resourced schools. An exemption for buildings with five units or less would allow homeowners to affordably add backyard cottages and other accessory dwelling units (ADUs).
553
ADUs have been one of the major strategies in addressing the housing crisis. State legislators are pursuing zoning reform to allow more small-scale housing types, particularly in low density neighborhoods. ADUs, commonly knowns as secondary units, backyard cottages, and in-law units, are one such housing type. Over the past few years, state legislators reduced parking requirements, lot size minimums and setback requirements, and development fees to incentivize construction of ADUs.554 Since the Bay Area Council partnered with Senator Bob Wieckowski to pass the first significant Accessory Dwelling Unit (ADU) reform legislation in 2016 (SB 1069), ADU permits have soared across the state.
With other housing permits remaining stagnant or falling, ADUs represent a bright spot in California’s housing crisis. The Council continues to advocate for reforms to expand access to ADUs, including most recently sponsoring legislation by Assembly member Phil Ting (AB 561) making it easier for homeowners to finance ADU construction.555
An analysis by the Bay Area Council Economic Institute using data from the California Department of Housing and Community Development (HCD) shows Accessory Dwelling Units (ADUs) accounted for 13.4 percent of all housing permit types in the Bay Area in 2020, a significant jump from 3.2 percent in 2016.
In Marin and Napa, the Bay Area counties permitting the lowest amount of housing, ADUs are the 553 Association of Bay Area Governments and Metropolitan Transportation Commission, Plan Bay Area 2050, October 21, 2021, p. 33.
554 Center for Community Innovation, ADUs in CA: A Revolution in Progress, October 2020, p. 5. 555 Bay Area Council Economic Institute, New Analysis of Housing Permits Shows Prominence of ADUs in the Bay Area, http://www.bayareaeconomy.org/new-analysis-of-housing-permits-shows-prominence-of-adus-in-thebay-area/.
4.1.b
Packet Pg. 261 Attachment: Final Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo (SMLAFCo) Municipal MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
Appendix A Regional Growth 224
majority of permits, making up 49.4 percent of all housing permits in Marin County and 40.3 percent in Napa County.556
Figure A.3-2: Accessory Dwelling Units, 2013-2020
Source: Bay Area Council Economic Institute
Figure A.3-3: Housing Permits by Type in the Bay Area, 2020 Source: Bay Area Council Economic Institute
556 Bay Area Council Economic Institute, New Analysis of Housing Permits Shows Prominence of ADUs in the Bay Area, http://www.bayareaeconomy.org/new-analysis-of-housing-permits-shows-prominence-of-adus-in-thebay-area/.
4.1.b
Packet Pg. 262 Attachment: Final Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo (SMLAFCo) Municipal MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
Appendix A Regional Growth 225
A majority of ADU production takes place in areas with high home values and incomes, such as the San Francisco Bay Area, as depicted in Figure 3-2.
557 ADU production is generally occurring in diverse, transitaccessible neighborhoods where a greater share of homeowners have recently purchased their homes and still have a mortgage. Overall, 92 percent of ADUs are built on parcels zoned for single-family residential, but about two percent are being built on lots with duplexes, triplexes, or fourplexes, suggesting that the move to build the missing middle has already begun. Almost 70 percent of ADUs are built on parcels where the main house has three bedrooms or more, suggesting that lack of space is not the primary motivator. Over 3,300 ADUs have been built on parcels of less than 5,000 square feet, suggesting that eliminating minimum lot sizes may have a meaningful impact on state housing production. 558 Recently, researchers found that there is potential for 1.5 million new ADU units across the state, which could account for approximately 40 percent of the state’s housing need. 559 Despite widespread support among the general public and local elected officials for the new legislation, ADU construction is not occurring evenly across the state due to pervasive barriers that often limit development. Finances (27 percent), lack of awareness (16 percent), and lack of desire (16 percent) remain significant barriers to ADU development. Jurisdictions also report that the State’s top-down ADU legislation presents challenges for local ADU construction. 560
LOCAL LAND USE PLANNING AND COORDINATION
Generally, federal law delegates land use control to states. In the late 19th century, California further delegated authority over land use to local governments as part of the “home rule” movement. While Plan Bay Area 2050 proposes strategies to help the region accommodate a growing population more equitably, it does not mandate any changes to local zoning rules, general plans or processes for reviewing projects; nor does the plan create an enforceable direct or indirect cap on development locations or targets in the region. The Bay Area’s cities, towns and counties maintain control of all decisions to adopt plans and to permit or deny development projects. Plan Bay Area 2050 helps guide, but does not directly establish, new state-mandated Regional Housing Needs Allocation (RHNA) numbers for any jurisdiction.561
557 Center for Community Innovation, ADUs in CA: A Revolution in Progress, October 2020, p. 5. 558 Center for Community Innovation, ADUs in CA: A Revolution in Progress, October 2020, p. 5. 559 Center for Community Innovation, ADUs in CA: A Revolution in Progress, October 2020, p. 7. 560 Center for Community Innovation, ADUs in CA: A Revolution in Progress, October 2020, p. 5. 561 Association of Bay Area Governments and Metropolitan Transportation Commission, Plan Bay Area 2050, October 21, 2021, p. 32.
4.1.b
Packet Pg. 263 Attachment: Final Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo (SMLAFCo) Municipal MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
Appendix A Regional Growth 226
Zoning has been seen as a contributor to the housing crisis and to inequity. Plan Bay Area 2050 views zoning reforms as one tool to shift the region’s housing landscape toward inclusivity by allowing for more housing of different types to be built. Zoning must be approached from a context-specific lens that identifies opportunity sites for future growth, as well as areas where additional growth is inappropriate.
Currently, two similarly located parcels can be zoned for dramatically different uses depending upon the communities in which they are located, with one permitting a wide spectrum of housing types, and another allowing only single-family homes on larger lots.562 These factors highlight the importance of cities’ land use planning and need for special districts to coordinate with and support cities’ planning efforts. Despite slower than expected growth rates, mainly due to the pandemic, growth in the region is inevitable. Given the RHNA as well as other developmental pressures identified in this chapter, local jurisdictions in the Bay area must engage in sufficient planning to accommodate the demand for housing as well as municipal services. Infrastructure like sewer capacity must be planned to keep pace with anticipated development to avoid the situation where housing cannot be supported despite the state requirement that it be planned for and the market demand for it to be built.563
562
Association of Bay Area Governments and Metropolitan Transportation Commission, Plan Bay Area 2050, October 21, 2021, p. 32.
563
The paragraph contains excerpts from memo attached to Light Tree Developer Survey, written by Cox Castle Nicholson, June 26, 2020.
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Packet Pg. 264 Attachment: Final Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo (SMLAFCo) Municipal MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
Appendix B Key Financial Indicators 227
APPENDIX B: SUMMARY OF KEY FINANCIAL METRICS
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Packet Pg. 265 Attachment: Final Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo (SMLAFCo) Municipal MSR Updates
–Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
Appendix B Key Financial Indicators 228 0 1 2 3 FY18 - FY22 Actual Actual Actual Approved Approved Avg. Annual Comments/ Metric (Measure) FY2017-18 FY2018-19 FY2019-20 FY2020-21 FY2021-22 % Change Indicator Balanced Budget Revenues (1) $21,785,000 $28,460,000 $30,525,000 $26,839,500 $28,920,000 0.5% Low Growth Expenditures (exc. capital/debt, & transfers) $20,029,000 $26,852,450 $28,620,170 $27,333,410 $29,398,195 3.1% Moderate Growth Net $1,756,000 $1,607,550 $1,904,830 ($493,910) ($478,195) Reserves GF Reserves (ending General Fund balance) $9,651,785 $19,086,455 $23,090,015 $28,083,855 $19,125,000 na Assets reclassified FY22 % of Operating Expenditures 48.2% 71.1% 80.7% 102.7% 65.1% na High Level of Reserves Pensions and OPEB Pensions Bartel Associates % Pension Funded 74.9% Moderately Funded Unfunded Pension Liability $11,507,754 CAFR OPEB No OPEB liability OPEB not a provided benefit Long-term Obligations No Long-term Debt (only leases) Infrastructure and Facility Assets CAFR, Note 5 Total Value (depreciable assets) $74,955,022 $77,458,518 $93,404,805 $95,373,308 not yet reported Depreciated Value $33,346,345 $34,114,552 $48,426,052 $48,195,459 not yet reported Depreciated Value/Total Value 44% 44% 52% 51% Sources: Adopted Budgets and Comprehensive Annual Financial Reports Table B-1 City of East Palo Alto Summary of Key Financial Metrics not yet reported not yet reported
4.1.b
Packet Pg. 266 Attachment: Final Municipal Services Review (2369 : Study Session on the Next Steps following San MSR Updates
–Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
Appendix B Key Financial Indicators 229 0 1 2 3 4 FY18 - FY22 Avg. Annual Comment/ Metric (Measure) FY2016-17 FY2017-18 FY2018-19 FY2019-20 FY2020-21 FY2021-22 % Change Indicator Balanced Budget Revenues $4,932,752 $5,106,713 $5,782,374 $5,973,913 $5,832,241 4.3% Moderate Growth Expenditures (exc. capital, debt, and transfers) $3,407,295 $3,746,323 $3,903,851 $4,155,400 $4,192,900 5.3% High Growth Net $1,525,457 $1,360,390 $1,878,523 $1,818,513 $1,639,341 Avg. $1,600,000 Reserves Ending General Fund Balance $7,514,641 $7,297,796 $11,296,519 $9,949,132 $11,273,473 High Reserves % of General Fund Expenditures 220.5% 194.8% 289.4% 239.4% 268.9% Pensions and OPEB Pensions % Pension Funded 70.9% 69.2% 68.8% 67.5% Unfunded Pension Liability $1,585,923 $1,791,690 $1,857,784 $1,975,202 OPEB Net OPEB Liability $185,696 $300,144 $184,408 ($31,214) % of General Fund Revenue 3.8% 5.9% 3.2% -0.5% Long-term Obligations Total Principal Due 1,394,423 $1,288,833 $1,611,978 $1,065,535 % of General Fund Revenue 28.3% 25.2% 27.9% 17.8% Annual Debt Service $153,022 $153,123 $144,752 $152,854 % of General Fund Revenue 3.1% 3.0% 2.5% 2.6% Infrastructure and Facility Assets Total Value (depreciable assets) 14,125,666 14,214,188 14,394,190 14,394,190 Financial Reports Note 3 Depreciated Value 7,224,460 6,939,262 6,735,051 6,376,250 Depreciated Value/Total Value 51% 49% 47% 44% Capital Additions -- Sewer/Pipe $445,252 $1,451,257 $59,508 $180,002 $0 avg (exc. WIP): $427,204 avg. FY17-FY21 Sources: Adopted Budgets and Annual Financial Reports. not yet reported Table B-2 East Palo Alto Sanitary District (EPASD) Summary of Key Financial Metrics not yet reported not yet reported not yet reported
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Packet Pg. 267 Attachment: Final Municipal Services Review (2369 : Study Session on the Next Steps following San MSR Updates
–Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
Appendix B Key Financial Indicators 230 0 1 2 3 4 FY18 - FY22 Actual Actual Actual Projected Approved Avg. Annual FY2017-18 FY2018-19 FY2019-20 FY2020-21 FY2021-22 % Change Indicator Balanced Budget Revenues (1) $26,298,032 $28,293,053 $31,414,052 $32,706,011 $31,223,897 4.4% Moderate Growth Expenditures (exc. depreciation) $19,450,423 $29,012,442 $29,146,904 $29,036,459 $21,504,201 2.5% Low Growth Net $6,847,609 ($719,389) $2,267,148 $3,669,552 $9,719,696 (less) depreciation ($1,800,000) ($1,900,000) ($2,500,000) ($2,866,400) ($3,200,000) Net after depreciation $5,047,609 ($2,619,389) ($232,852) $803,152 $6,519,696 Reserves Operating Reserves $8,131,426 $9,365,601 9,530,903 $9,531,000 $10,752,100 High Reserves % of Expenditures (exc. depreciation) 46.1% 34.5% 35.8% 36.4% 58.7% Pensions and OPEB Pensions CalPers, Misc. Plan % Pension Funded 72.5% 71.2% 71.3% 70.4% unfunded paid High Pension Funding Unfunded Pension Liability $4,898,053 $5,627,100 $5,911,505 $6,413,843 in full OPEB Net OPEB Obligations $111,239 % of General Fund Revenue 0.3% Leases and Long-term Debt Audit reports, Note 6. State Revolving Loan Fund $17,335,200 $16,600,000 Infrastructure and Facility Assets Audit reports, Note 5. Total Value $76,125,515 $76,028,349 $77,418,631 $107,556,875 Depreciated Value $48,195,102 $46,283,600 $42,101,559 $68,500,682 Depreciated Value/Total Value 63% 61% 54% 64% Sources: Adopted Budgets and Annual Financial Reports. (1) Revenues include non-operating revenues (interest). not yet reported West Bay Sanitary District Summary of Key Financial Metrics Table B-3 not yet reported
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Packet Pg. 268 Attachment: Final Municipal Services Review (2369 : Study Session on the Next Steps following San MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
4. City of East Palo Alto 96
Drinking water quality is determined by a combination of historical violations reported by the EPA since 2015 and the percent of time that the City was in compliance with Primary Drinking Water Regulations in 2020. The City has not had any violations recorded since 2015. The City was in compliance with drinking water regulations 100 percent of the time in 2020.
Indicators of distribution system integrity are number of breaks and leaks in 2020 and rate of unaccounted for water loss. In 2020, the City experienced 13 main and service line breaks and leaks.
Distribution system water losses are the physical water losses from the water distribution system and the supplier storage facilities, up to the point of customer consumption. The total differential between water supply and metered water use is categorized as unaccounted-for-water; however, this category includes unbilled water uses such as system flushing, leak repair flushing, hydrant leaks, and street sweeping. In order to isolate the water loss attributed to the distribution system, the City has estimated water losses using the Department of Water Resources (DWR) Water Audit Method. Of the total demand of 550 MG in 2017, 477 MG were attributable to metered consumption and 73 MG were estimated to be the non-revenue water demand, which includes unmetered consumption and distribution system water loss. Of the 73 MG of non-revenue water in 2017, 50 MG was estimated to be attributed to water losses, which equates to water loss of 9.1 percent for the City’s system.229 Water loss of under 10 percent is generally considered within industry standard for water systems.
SUMMARY OF CITY OF EAST PALO ALTO MSR DETERMINATIONS
Growth and Population Projections
4-1: The City of East Palo Alto’s population has remained fairly static over the last two decades, fluctuating minimally from year to year. Most recently, there has been a slight decline in population from 2018 to 2020. The Census 2020 estimates that the population of the City was 30,034 as of April 2020.
4-2: Over the period from 2020 to 2040, ABAG projects 17.7 percent population growth, which equates to 0.8 percent compound annual growth. Based on the City’s Census 2020 population and ABAG’s projected growth rate, the City is projected to have a population of 35,363 in 2040. 4-3: As of December 2021, the City had 20 unconstructed development projects in some phase of the application and construction process consisting of 1,469 dwelling units and 4,635,139 square feet of nonresidential building space. A majority of the larger developments are located in the 229 EPA, UWMP, 2021, p. 34.
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Packet Pg. 269 Attachment: Final Determinations of the Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
4. City of East Palo Alto 97
Ravenswood/4 Corners TOD Specific Plan area. There are several mixed-use proposals, the largest of which are Four Corners, the Landing, and East Palo Alto Waterfront. 4-4: Regional Housing Needs Allocation mandates have an impact on the City’s new development and intensification of density contributing to population growth. ABAGs most recent Regional Housing Needs Allocation (RHNA) for the City of East Palo Alto for the period from 2023-2031 is 829 units, almost double the previous allocation.
4-5: In addition to the substantial number of sizeable developments, the City is experiencing intensification of uses on properties with existing dwelling units where a number of accessory dwelling units are being added. SB 9, which streamlines the permitting process for accessory dwelling units, will likely prompt a greater number of ADU additions. 4-6: Lack of EPASD sewer collection system capacity is an impediment to development in the City.
Developers have indicated concerns that the costs to connect are prohibitively expensive and that EPASD has been unwilling to discuss financing options to make connection more feasible.
Efforts to-date to resolve this issue have been largely unsuccessful. Constrained development and growth deprive the City and its residents of increased tax revenues to maintain and improve public services, reduces future affordable housing and ability to meet RHNA housing allocations, and limits growth in job opportunities.
The Location and Characteristics of Disadvantaged Unincorporated Communities Within or Contiguous to the Agency’s SOI
4-7: According to the Department of Water Resource’s Disadvantaged Communities mapping instrument, there are no communities within or contiguous to the City’s SOI that meet the definition of a disadvantaged unincorporated community. However, there is a single Block Group (060816121002) within the City’s incorporated territory to the west of Highway 101 that meets the definition of disadvantaged. The area has an estimated population of 2,232 with a median household income of $45,731.
Present and Planned Capacity of Public Facilities and Adequacy of Public Services, Including Infrastructure Needs and Deficiencies
4-8: Based on ISO ratings, response times, and stations per 1,000 population served, Menlo Park Fire Protection District’s serviced provided within East Palo Alto appear to be adequate.
Additionally, the City of East Palo Alto indicates it is satisfied with Menlo Park Fire Protection District’s response times and that the District meets its outlined service goals. 4-9: Law enforcement services are marginally adequate given the low clearance rate of property crimes within the City, which is likely attributable to staffing constraints within the Police
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Packet Pg. 270 Attachment: Final Determinations of the Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
4. City of East Palo Alto 98
Department. Additionally, the two police facilities are considered to some extent sufficient as identified by Police Department staff; however, no specific infrastructure needs were identified. 4-10: The City has indicated that the current availability of parks and open space is not sufficient to meet demand. No parks exist in the Weeks, Kavanaugh, and Westside neighborhoods within EPA, despite having a higher population density that primarily consists of younger families residing in multi-family structures without backyards. With current and projected population estimates, service adequacy will not be sufficient unless an estimated 79 acres of parkland are added to the cityscape.
4-11: The City provides adequate solid waste management services as indicated by per capita and per employee disposal rates that are well within its target disposal rates as dictated by the State.
However, waste management services face challenges throughout the County, including 1) a decline in the recyclables market from contaminated sources, 2) new organics diversion requirements that will require major new programs, and 3) dwindling capacity at the Ox Mountain landfill.
4-12: There are deficiencies in the City of East Palo Alto’s stormwater collection system There are two significant challenges to implementing planned improvements—lack of funding for $37.5 million in infrastructure needs and location constraints limiting system expansion and rerouting alternatives. Improvements are necessary in order to reduce the risk of flooding. 4-13: The City’s PMS report has described pavement conditions as very good, with an average PCI of 71 out of 100. However, congestion and conditions that impact other modes of transportation continue to be a concern. In particular, there are areas without walkable sidewalks and many areas lacking sufficient capacity for bike lanes leading to high incidents of accidents. 4-14: Wastewater services provided by EPASD and WBSD within City of East Palo Alto appear to be adequate based on the analysis in this report; however, as described in the Growth and Development section of this chapter, availability of wastewater capacity for new development is a critical issue for the City. Necessary capacity enhancements are making connection to EPASD’s collection system exceptionally costly, which is deterring potential developers and preventing some approved developments from being completed. Several options exist for financing of necessary capacity enhancements that may be agreeable to all parties. 4-15: Indicators of water distribution service adequacy, including the State Water Resources Control Board system evaluation, drinking water quality, and distribution system integrity demonstrate that the City provides adequate service levels. While the City has been able to address water supply capacity constraints that were preventing development, there continue to be needs for
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Packet Pg. 271 Attachment: Final Determinations of the Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
4. City of East Palo Alto 99
water storage for emergency backup supply and pipeline expansions to meet industry standards.
Financial Ability of Agencies to Provide Services
4-16: The City of East Palo Alto is in good financial position; however, the City is experiencing structural budget deficits that will deplete reserves over time. 4-17: Development projects delayed by lack of sewer infrastructure capacity obstructs the ability to pursue economic development as one means to improve financial conditions and help achieve the City’s fiscal resiliency goals.
Accountability for Community Service Needs, Including Governmental Structure and Operational Efficiencies
4-18: The City generally meets legal requirements intended to ensure transparency and accountability; however, there appears to be room for improvement in City Council compliance with ethics training requirements and timely filing of Form 700s. 4-19: East Palo Alto should consider taking on EPASD as a subsidiary district to enable funding of capital projects to address deficiencies and capacity constraints that encourages development.
In order to limit demands on city staff, the City may wish to contract with West Bay Sanitary District for operations and maintenance of the system.
Recommendations
• Ethics Training - It is recommended that the City make City Council ethics training information readily available on its website.
• Form 700 - It is recommended that the City ensure its Council Members comply with Form 700 filing requirements.
• Intergovernmental Relations – Restart and continue regular public meetings between representatives of the City of East Palo Alto and the East Palo Alto Sanitary District. While staff level cooperation related to development planning is ongoing, involvement by board and council members assure efficient and effective coordination between the City and District related to infrastructure financing and other matters. These meetings should be live streamed, recorded and promptly posted to facilitate public outreach and transparency. These meetings could be focused on specific topics such as development projects and infrastructure finance. The meetings should be conducted with equal support and staff time from both the City and EPASD.
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Packet Pg. 272 Attachment: Final Determinations of the Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
4. City of East Palo Alto 100
• Development Environmental Review - Include analysis regarding impacts on the wastewater collection system, in addition to the wastewater treatment system, in CEQA review documents associated with new developments.
• Budget Forecasting – Prepare and periodically update a long-term budget forecast to assist with financial planning, including projected pension obligations. • Infrastructure improvements – It is recommended that the City continue to work towards addressing identified needed infrastructure improvements for both stormwater and drinking water, including identifying potential funding mechanisms. • Park Planning – The City should continue its effort to develop a Parks Master Plan for recreation, parks and open space in the City and work to address the lack of these facilities in many areas of the City.
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Packet Pg. 273 Attachment: Final Determinations of the Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
5 East Palo Alto Sanitary District 150
SUMMARY OF EAST PALO ALTO SANITARY DISTRICT MSR DETERMINATIONS Growth and Population Projections
5-1: As of 2020, based on the number of residential connections served and the average household size in the cities served, it is estimated that EPASD’s population is approximately 26,622. 5-2: It is assumed that EPASD’s growth will closely mirror that of the City of East Palo Alto. Based on the current population estimate within the District and ABAG’s growth projections through 2040, it is projected that there will be 31,335 residents within the EPASD in 2040, an increase of approximately 4,700 residents.
5-3: As of December 2021, there were 20 unconstructed development projects within EPASD in some phase of the application and construction process consisting of 1,469 dwelling units and 4,635,139 square feet of nonresidential building space. A majority of the larger developments are located in the Ravenswood/4 Corners TOD Specific Plan area. 5-4: In addition to the substantial number of sizeable developments, the City is experiencing intensification of uses on properties with existing dwelling units where a number of accessory dwelling units are being added. Recent changes in state law allowing a streamlined permitting process for accessory dwelling units (ADUs) will likely prompt a greater number of ADU additions. However, 12 ADUs have been stalled as they have been unable to get approval for connection to EPASD’s system.
5-5: Lack of EPASD sewer collection system capacity is an impediment to development in the City.
Developers have indicated concerns that the costs to connect are prohibitively expensive and that EPASD has been unwilling to discuss financing options to make connection more feasible.
Efforts to-date to resolve this issue have been largely unsuccessful. Constrained development deprives the City and its residents of increased taxes and other revenues to maintain and improve public services, reduces future affordable housing and ability to meet RHNA housing allocations, and limits growth in job opportunities.
The Location and Characteristics of Disadvantaged Unincorporated Communities Within or Contiguous to the Agency’s SOI
5-6: According to the Department of Water Resource’s Disadvantaged Communities mapping instrument, there are no communities within or contiguous to the District that meet the definition of a disadvantaged unincorporated community, as the District only serves incorporated portions of the City of East Palo Alto and the City of Menlo Park. However, there is a single Block Group (060816121002) within District’s territory to the west of Highway 101 that
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Packet Pg. 274 Attachment: Final Determinations of the Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
5 East Palo Alto Sanitary District 151
meets the definition of disadvantaged. The area has an estimated population of 2,232 with a median household income of $45,731.
Present and Planned Capacity of Public Facilities and Adequacy of Public Services, Including Infrastructure Needs and Deficiencies
5-7: While sufficient treatment capacity exists to meet the needs of current and a portion of future demand, EPASD reports an inadequate collection system capacity to serve increased flows expected from pending development applications. EPASD faces significant financial challenges to fund capacity enhancements to eliminate the potential for sewer overflows that are compounded by proposed new connections. Large-scale capacity enhancements are costly and difficult to complete in a piecemeal fashion as development occurs. 5-8: Based on overflow rates, infiltration and inflow, regulatory compliance, preventative maintenance practices, speed of response times to customer reports of issues, and the number and type of complaints related to wastewater services, EPASD provides an adequate level of wastewater collection services to existing ratepayers.
5-9: Infrastructure capacity needs are appropriately identified in EPASD’s 2021 Addendum to the 2015 Master Plan Update. EPASD focuses on assessing the current condition of the piping and replacing or relining pipe as needed, and EPASD asserts that current collection system capacities are adequate to serve existing ratepayers; this position appears contrary to the results of the 2021 Addendum that predict surcharging and sewer overflows under peak wet weather flows.
EPASD states that the 2021 Addendum is a theoretical model and EPASD has not experienced a sewer overflow in the past ten years.
EPASD budgets $1 million annually towards “Construction Replacement” (not including developer contributions); actual capital expenditures have been less. The 2021 Addendum identifies 110 segments to be upsized to ensure that the system is not operating at a surcharge or at risk of overflows during a storm event.
5-10: Information on the age of the collection infrastructure conflicts, as identified by the RWQCB in its most recent inspection; this data was not provided by EPASD when requested for the preparation of this MSR. It is recommended that the District document the age of its system and conduct comparative analysis to determine what percentage of the effective life of the segment has been used as input to develop long-term CIP priorities and schedule. 5-11: There is a need to comprehensively update EPASD’s primary planning documents, such as the Master Plan, Sewer Rate Study, and Capacity Charge Study to meet the current needs of EPASD, taking into consideration existing circumstances that have surfaced, and enhancing transparency for rate payers, members of the community, developers, and others regarding the full extent of
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Packet Pg. 275 Attachment: Final Determinations of the Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
5 East Palo Alto Sanitary District 152
current and future infrastructure needs and associated financing requirements and funding sources. These updates can document and communicate plans to cost-effectively manage EPASD infrastructure maintenance and replacement, address the potential for sewer overflows from existing uses during storm events, and assure that existing ratepayers do not subsidize costs incurred to serve new development.
Financial Ability of Agencies to Provide Services
5-12: EPASD’s strong financial position and healthy reserves are the outcome of property tax revenues that supplement services charges, and a relatively low-cost structure. This financial position enables EPASD to maintain low annual charges to ratepayers compared to other sanitary districts.
5-13: However, the District’s priority to maintain low rates can adversely affect services and infrastructure by hampering the District’s ability to implement best practices and address existing system capacity deficiencies to reduce risks of sewer overflows from existing uses. Low rates that do not account for the need to address projected surcharging and potential sewer overflows can adversely affect ratepayers financially in the long run. Lack of staff resources contributes to an inability to provide clear, up-to-date, and transparent information to ratepayers, the City of East Palo Alto, property owners and developers, and other stakeholders; and produces insufficient financial planning to establish cost-effective and equitable infrastructure financing to facilitate plans adopted by the City of EPA which represents a majority of EPASD residents.
5-14: The lack of future development capacity indirectly affects ratepayers who are also residents of the City of East Palo Alto, as the inability to serve new development reduces growth in City revenues for services and financial resiliency, provides fewer affordable housing opportunities, and constrains the community’s commercial base and job growth.
Accountability for Community Service Needs, Including Governmental Structure and Operational Efficiencies
5-15: EPASD generally complies with legal requirements to ensure accountability and transparency.
Improvements include ensuring Board Members are up-to-date on ethics training and that all policies and procedures are readily available on its website. Staff reports for District meetings are often not provided, or the narrative for agenda items provides minimal information about the proposed meeting topic or recommended action by the Board. 5-16: The compensation and benefits offered to EPASD’s governing body is exceptional compared to neighboring sanitary districts and even compared to compensation of the City of EPA’s Council
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Packet Pg. 276 Attachment: Final Determinations of the Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
5 East Palo Alto Sanitary District 153
Members. EPASD should consider aligning board compensation with that of similar service providers.
5-17: Transitioning EPASD into a subsidiary district of the City of East Palo Alto is a governance structure option that may benefit the City and its residents by facilitating funding of capital projects to address existing risks of sewer overflows during storm events, and capacity constraints that impede City of EPA planning and achieving City objectives that also benefit most EPASD residents as citizens of the City of EPA.
Recommendations
1. Ethics Training - It is recommended that EPASD ensure that board members receive the required ethics training every two years.
2. Policies and Procedures - These policies are not readily accessible on EPASD’s website, and in order to ensure transparency, it is recommended that the District make available all policies on its website.
3.Update Capacity Charges -- The update should reflect current development trends and recent CIP cost updates to assure that development pays its share of expansion costs without burdening existing ratepayers. The capacity charges can help fund required infrastructure and provide a mechanism for developer reimbursement if oversizing is required that benefits other developers.
4.Develop CIP Financing Plan – Consistent with best practices EPASD should prioritize improvements and identify financing mechanisms to fund existing deficiencies and future capacity needs over time. The Plan should create a standard, transparent approach for new development applications that does not require time-consuming, costly individual negotiations and custom agreements for each development.
5.Pursue Grants and Low-Interest Loans – A revised CIP will be essential to pursuing grants and low-interest loans. Infrastructure Act funds may provide opportunities to implement the CIP at a lower cost to ratepayers. EPASD should collaborate with other districts, the City of EPA, and/or affordable housing developers to improve prospects for obtaining funds.
6.Evaluate and Consider Using Revenue Debt for Major Long-Term Capital Improvements – Major improvements can be funded more cost-effectively, and costs spread to future ratepayers rather than entirely existing ratepayers. Debt payments and potential impacts on rates should be
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Packet Pg. 277 Attachment: Final Determinations of the Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
5 East Palo Alto Sanitary District 154
carefully considered as part of an overall funding plan to pay for improvements that serve existing ratepayers. The use of debt, and/or other funding sources, must respect the principle that existing ratepayers do not subsidize new development.
7. Facilitate New Development without Burdening Existing Ratepayers – The 2021 Addendum provided an allocation between existing system capacity constraints during a storm event, and expansion required for new development that can dictate an equitable allocation and financing plan consistent with legal requirements.
8.Improve Transparency of Budget and Financial Documents – A clear, well-documented budget with explanations of changes, risks, and activities would improve financial transparency. The budget should better correlate with annual audited financial reports, for example, by including depreciation. Financial reports should correlate with funds reported in budgets. Annual debt obligations should be clearly documented in the budgets and should correlate with information in audited financial reports.
9.Budget Forecasting – Periodically update the long-term budget forecast most recently prepared in the 2019 Rate Study to reflect changing financial conditions and projections of costs and revenues.
10. Intergovernmental Relations – Restart and continue regular public meetings between representatives of the City of EPA and EPASD. While staff level cooperation related to development planning is ongoing, involvement by board and council members is essential for efficient and effective coordination between the City of EPA and EPASD related to infrastructure financing and other matters, including the Ravenswood Specific Plan. These meetings should be live streamed, recorded and promptly posted to facilitate public outreach and transparency. These meetings could be focused on specific topics such as development projects and infrastructure finance. The meetings should be conducted with equal support and staff time from both the City and EPASD.
11. Update Sewer Rates – The update should reflect the costs “needed to fund projected operating expenses, help fund high priority improvements to the District’s aging sewer collection system, pay for the District’s share of operating and capital improvement costs for the regional wastewater treatment plant, and support safe and reliable service” as outlined in the 2019 Rate Study. The update should balance the need to maintain affordable sewer rates against the importance of maintaining and improving services and infrastructure for the health and well-being of EPASD ratepayers.
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Packet Pg. 278 Attachment: Final Determinations of the Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
5 East Palo Alto Sanitary District 155
12. Independent Review of EPASD Hydraulic Analysis and Proposed Improvements – EPASD states that the hydraulic analysis of the 2021 Addendum only indicated that the system is adequate for existing customers, however it cannot serve future developers. This statement appears to contradict the 2021 Addendum that predicts sanitary sewer overflows (SSOs) could occur at 38 manholes due to surcharge conditions in many of its pipes during a peak storm event under existing land use conditions and existing customers. 382 An independent engineering analysis
should be conducted to review the hydraulic analysis and assumptions to reconcile the apparent inconsistencies between predicted sewer overflows under existing conditions and EPASD’s position that the system currently is adequate. The analysis would include an update of hydraulic assumptions including flows from ADUs and residential units. 382 Addendum to the March 2015 East Palo Alto Sanitary District Master Plan Update, Freyer & Laureta Inc., Final – April 28, 2021, Tables 3-5.
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Packet Pg. 279 Attachment: Final Determinations of the Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
6. West Bay Sanitary District 176
SUMMARY OF WEST BAY SANITARY DISTRICT MSR DETERMINATIONS Growth and Population Projections
6-1: Based on the number of residential connections served and the average household size in the cities served, it is estimated that WBSD has a population of approximately 55,701. 6-2: Based on the current population estimate within the District and ABAG’s growth projections extended through 2040, it is projected that there will be 65,029 residents within the District in 2040.
6-3: Growth within WBSD is primarily located in the Bayfront Area of Menlo Park. Recently approved and developments under review are all located within the City of Menlo Park. Existing development projects propose a total of 3,522 dwelling units and 3,927,394 in nonresidential building square feet, indicating potential for substantial growth.
The Location and Characteristics of Disadvantaged Unincorporated Communities Within or Contiguous to the Agency’s SOI
6-4: According to the Department of Water Resource’s Disadvantaged Communities mapping instrument, there are two communities within or contiguous to the District’s SOI that, while not unincorporated, meet the definition of a disadvantaged community. Block Group (060816117003) within the City of Menlo Park east of Highway 101 meets the definition of disadvantaged. The area has an estimated population of 1,237 with a median household income of $45,481. Block Group (060816117001) is also within the City of Menlo Park east of Highway 101. It has an estimated population of 2,272 and has a median household income of $51,150.
Present and Planned Capacity of Public Facilities and Adequacy of Public Services, Including Infrastructure Needs and Deficiencies
6-5: WBSD reported that there is generally sufficient collection capacity to serve existing demand; however, some basins are at capacity. Because the District’s Master Plan is almost 10 years old and many improvements have been made since the hydraulic assessment was conducted, it is unclear the degree to which flows are at or nearing capacity and which segments are most impacted. The District is compiling a new Master Plan in 2022 to identify existing conditions after capital improvements, any areas of concern, and capital projects to address these areas. 6-6: Similarly, because WBSD’s flow projections are outdated it is unclear what infrastructure needs are necessary to meet projected demand. The Master Plan Update in 2023 is anticipated to provide up-to-date flow projections and recommended capital improvements to meet future demand and serve as a planning tool for the next 10 years to 2033. The new master plan will
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Packet Pg. 280 Attachment: Final Determinations of the Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo MSR Updates –Draft Final Report
City of East Palo Alto, EPASD, WBSD
June 6, 2022
6. West Bay Sanitary District 177
consider the prior pipeline replacement and rehabilitation work and will include a new hydraulic model study.432
6-7: Based on overflow rates, infiltration and inflow, regulatory compliance, preventative maintenance practices, speed of response times to customer reports of issues, and the number and type of complaints related to wastewater services, WBSD provides an adequate level of wastewater collection services.
6-8: WBSD appropriately plans for infrastructure needs in its Capital Improvement Program.
Resources for capital improvement of the system are determined by field evaluations performed on an on-going basis. The objective of the CIP is to systematically replace and or rehabilitate approximately 1.5 percent of system pipelines every year, in addition to completing already planned pump station and pipeline improvements. The District has planned funding for Capital Improvement Program projects of approximately $3.5 million each fiscal year.
Financial Ability of Agencies to Provide Services
6-9: WBSD’s financial condition is sound with a significant positive net position, adequate reserves, and financial planning based on long-term financial planning and capital improvement programs that are annually reviewed, prioritized and updated.
Accountability for Community Service Needs, Including Governmental Structure and Operational Efficiencies
6-10: WBSD complies with all legal requirements aimed at ensuring accountability and transparency of public agencies. Additionally, WBSD has gone beyond the legal requirements and is a recipient of the District Transparency Certificate of Excellence from the Special District Leadership Foundation (SDLF) for the period January 2020 to March 2023.
Recommendations
1. Funding of Reserves – Continue to fund reserves consistent with adopted policies, including allocations to the recently created Treatment Plant Reserve which has not been fully funded.
2. Master Plan and CIP – Update the WBSD Master Plan and CIP beginning in 2022 in accord with current anticipated scheduling.
432 WBSD letter to LAFCo, May 17, 2022.
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Packet Pg. 281 Attachment: Final Determinations of the Municipal Services Review (2369 : Study Session on the Next Steps following San Mateo LAFCo ATTACHMENT 4
Chronology of City Council Meetings and Actions
Date Meeting Type Specific Item/Topic Link
6/21/22 City Council Meeting 9.1 Update on Next Steps City Council Agenda - June 21, 2022 6/15/22 Regular LAFCo Meeting 5. Adoption of MSR Regular LAFCo Meeting – June 15, 2022 6/7/22 City Council Meeting 12.1 Comment letter on Final MSR City Council Agenda - June 7, 2022 6/6/22 N/A Final Municipal Service Review (MSR) Final MSR Document 5/17/22 City Council Meeting Concerns Regarding the Light Tree Affordable Housing Project
Staff Report 2251 - Issues Concerning the Light
Tree Affordable Housing Project and the East Palo
Alto Sanitary District
5/3/22 City Council Meeting 9.2 Comment letter on Draft MSR City Council Agenda - May 3, 2022 4/22/22 Special LAFCo Meeting Review of Draft MSR Special LAFCo Meeting – April 22, 2022 4/19/22 City Council Meeting 9.1 LAFCo presentation of Draft MSR City Council Agenda - April 19, 2022 4/5/22 N/A Public Review Draft MSR Report
PUBLIC REVIEW DRAFT REPORT, MSR: CITY OF
EAST PALO ALTO, EAST PALO ALTO SANITARY
DISTRICT,WEST BAY SANITARY DISTRICT
4/6/22 LAFCo hosted Community Workshop PowerPoint Presentation SM LAFCo Documents Related to MSR 3/15/22 City Council Meeting Concerns Regarding the Light Tree Affordable Housing Project
Staff Report 2142 - Issues Concerning the Light
Tree Affordable Housing Project and the EPASD
4/6/21 City Council Meeting Informational Report on EPASD Staff Report 1652 - Informational Report on the
East Palo Alto Sanitary District (EPASD)
10/27/20 Joint East Palo Alto & East Palo Alto Sanitary District Intergovernmental Committee See agenda Joint East Palo Alto & East Palo Alto Sanitary District IGC Special Meeting – October 27, 2020 10/20/20 City Council Meeting Informational Report on Joint East Palo Alto & EPASD IG Committee City Council Agenda – October 20, 2020 10/13/20 Joint East Palo Alto & East Palo Alto Sanitary District Intergovernmental Committee
See agenda Joint East Palo Alto & East Palo Alto Sanitary District IGC Special Meeting – October 13, 2020
9/28/20 Joint East Palo Alto & East Palo Alto Sanitary
District Intergovernmental Committee
See agenda Joint East Palo Alto & East Palo Alto Sanitary District IGC Special Meeting – September 28, 2020
9/14/20 Joint East Palo Alto & East Palo Alto Sanitary
District Intergovernmental Committee
See agenda Joint East Palo Alto & East PaloAlto Sanitary District IGC Special Meeting – September 14, 2020
8/24/20 Joint East Palo Alto & East Palo Alto Sanitary
District Intergovernmental Committee
See agenda Joint East Palo Alto & East Palo Alto Sanitary District IGC Special Meeting - August 24, 2020
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Packet Pg. 282 Attachment: Detailed Chronology of City Council meetings and actions (2369 : Study Session on the Next ATTACHMENT 5
Procedures for Affected Local Agency-Initiated Dissolutions and Establishment of Subsidiary Districts under the Cortese-Knox-Hertzberg Local Government Reorganization Act The Local Agency Formation Commissions(“LAFCo”) are authorized to review and approve reorganizations of special districts, include consolidations, mergers, the creation of subsidiary districts, and dissolutions. Proceedings to dissolve a special district and establish a new subsidiary district may be initiated by the LAFCO, the special district, an “affected local agency” or by voter-petition. An “affected local agency” means any “local agency that contains, or would contain, or whose sphere of influence contains or would contain, any territory for which a change of organization is proposed or ordered, either singularly or as part of a reorganization or for which a study is to be reviewed by the [LAFCO].”1 California courts have confirmed that cities qualify as “affected local agencies.” 2 The following chart provides an overview of the procedural steps an affected local agency must take to initiate proceedings to dissolve a special district and establish a new subsidiary district before the LAFCO.
Step Description Timing Requirements San Mateo
LAFCO
Examples
1 Notice of
Resolution of
Application
The legislative body of the affected local agency may – but is not required – give mailed notice of its intention to adopt Resolution of Application to the LAFCO, the subject special district, and other interested agencies. (Gov. Code § 56654(c).)
21 days before
Resolution of
Application
approved.
The notice must generally describe
the proposal and the affected
territory.
2 Resolution of
Application
The legislative bodymust adopt a Resolution of Application to establish a subsidiary district, which must be submitted to LAFCO. (§ 56375).
Prior to taking this step, the legislative body could direct agency staff to prepare staff reports, conduct study sessions and/or take other measuresto explore the feasibility of establishing a subsidiary district. Agency staff couldalso be directed to prepare a draft Resolution of Application (based on the examples to the right-most column) for the legislative body’s consideration and adoption. The Passed prior to
preparing
Application, and
filed with
Application. (#3
below)
A Resolution of Application must
include the following: (Gov’t Code §
56652.)
• State the proposal is made
[pursuant to Part 3 of Division 3
of the Act [(§ 56650 et~-)];
• nature of the proposal and list all
proposed changes of organization;
• Los Trancos
County Water
District Change
of Organization,
Plan of Service,
and Resolution
for Application to
Dissolution (May
7, 2015)
1 Gov. Code § 56014.
2 See, City of Patterson v. Turlock Irrigation Dist. (2014) 227 Cal.App.4th 484 (City was an “affected local agency” authorized to propose an annexation of part of the city into an irrigation district, where city's territory was within the area that was proposed for annexation to the district).
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Step Description Timing Requirements San Mateo
LAFCO
Examples
legislative body could also consider establishing a committee to provide guidance and oversee agency staff’s progression withthese tasks.
NOTE: Establishment of a subsidiary district is exempt from CEQA because it is an organizational change in which the territory in which municipal services is not changing. (15320) • a description of the boundaries of
the affected territory accompanied
by a map showing the boundaries;
• any proposed terms and
conditions;
• the reason or reasons for the
proposal;
• designate three persons as chief
petitioners, setting forth their
names and mailing addresses.
• request that the proceedings be
taken for the proposal; and
• whether the proposal is consistent
with the sphere of influence of
any affected city or affected
district.
• Granada Sanitary
District,
Resolution of
Application for
Reorganization,
Application, and
Plan for
Providing
Services(Nov.
14, 2013)
• Skyline County
Water District,
Resolution for
Application,
Application and
Plan for
Providing
Services(May
13, 2009)
• * East Palo Alto
County
Waterworks
District,
Resolution from
City of East Palo
Alto and City of
Menlo Park,
Application,
Plan for
Providing
Services(Jan.
10, 2001)
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Step Description Timing Requirements San Mateo
LAFCO
Examples
3 Plan for
Providing
Services
The Resolution of Application must include a plan for providing services.(§ 56653(b).)
Submit together with
Application.
The plan for providing service must
include:
• An enumeration and description
of the services to be extended to
the affected territory;
• The level and range of those
services;
• An indication of when those
services can feasibly be
extended to the affected
territory;
• An indication of any
improvement or upgrading of
structures, roads, sewer or
water facility, or other
conditions the local agency
would impose or require within
the affected territory if the
change of organization or
reorganization is completed;
• Information with respect to how
those services would be
financed.
See above.
4 LAFCO
Completeness
Determination
The LAFCO Executive Officer must determine whether the
application is complete and acceptable for filing or whether the application is incomplete.(§ 56658(c).)
30 days of receiving
application.
Property Tax Resolution by the
Board of Supervisors (and the City
council as future governing board)
for transfer of the EPASD share of
1% property tax to the subsidiary
district
5 LAFCO
Certificate of
Filing and Set
Hearing Date
Once the application is deemed complete (Property tax resolution(s) adopted and Executive Officer has received all required materials), the LAFCO Executive Officer must immediately issue a certificate of filing to the applicant. A certificate mustspecify a future hearing date for the proposal.(§ 56658(f).)
Immediately
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Step Description Timing RequirementsSan Mateo
LAFCO
Examples
6 LAFCO
Notice of
Hearing and
Notice of
Proposal to
Establish
Subsidiary
District
The Executive Officer must give notice of any hearing by the commission by publication, posting on its website, and by mailed notice. (§§ 56660; 56661).
N/A
7 Alternative
Proposals for
Subsidiary
District
If the proposal involvesthe establishment of a subsidiary district, the subject special district may either (i) consent to the proposal or (ii) adopt a resolution of intent to file an alternative proposal for reorganizationwithin 35 days of receiving notice. Ifthe special district adopts a resolution of intention to file an alternative proposal, LAFCO cannot take further action on the original proposal for 70- days.If the special district fails to provide an alternative proposal within this 70-day period, it shall be deemed to have consented to original proposal (§§ 56861, 56862).
35 days after
receiving LAFCO
notice of proposal to
establish subsidiary
district.
8 LAFCO
Executive
Officer’s
Report
Not less than five (5) days prior to the hearing, the Executive Officer must prepare a report on the Application, including his or her recommendation, and must provide a copy of the report to every affected district, agency, and city. (§ 56665.)
If the special district files an alternative proposal, LAFCO must analyze and report on both the original and alternative proposal so both may be considered at the hearing. (§ 56862).
5 days prior to
LAFCO hearings.
9 LAFCO
Hearings
At the hearing, the LAFCO will hear and receive written and oral protests and evidence. (§ 56666(b).)
Hearing must occur
no later than 90 days
after issuance of the
certificate of filing.
10 LAFCO
Adoption,
Modification
or Rejection
of Dissolution
After hearing public testimony, the LAFCO may approve, modify, or deny the proposed dissolution. If approved, LAFCOmay adopt terms and conditions.(§ 56886.)
Terms and conditions may include effective date such as beginning of fiscal year or fiscal quarter. If terms and conditions don’t include N/A
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Step Description Timing RequirementsSan Mateo
LAFCO
Examples
an effective date, the effective date is the date the Certificate of Completion is recorded.
12 Conducting
Authority
“Protest
Hearing”
If protests are filed, LAFCO must schedule, give notice and conduct a protest hearing. (§ 57077).Conduct of the protest hearing may be delegated to the Executive Officer. At the conclusion of the protest hearing, the LAFCO must do one of the following: • if majority of voters protest (>50%),terminate proceedings and disapprove the proposal
• if at least 25% of voters submit protests AND the special district objects, approve the proposal subject to a
“confirmation election”
• if the special district does not object and 25% of voters do not submit protests, LAFCo shall order the establishment of a subsidiary district without election
The LAFCO must
set a date for protest
hearings within 35
days of the
resolution, which
must take place no
later than 60 days
after the notice (e.g.,
95 days from the
resolution approving
dissolution) (§
57002(a)).
13 Voter
“Confirmation
Election”
IF the LAFCO determines that a confirmation election is required, it must inform the city council and the elections official of the affected city and direct the elections official to conduct the necessary election.If the majority of the voters approve establishment of a subsidiary district, the LAFCO must execute a certificateof completion confirming the establishment of a subsidiary district. (§ 57176.)If the majority of voters vote against establishment of a subsidiary district, LAFCO must terminateproceedings and disapprove establishment of a subsidiary district.
Election shall be called within 45
days of being
notified by LAFCO,
or next established
election date. (§
57000(e)(1)-(2).)
14 Effect of
Establishing a
Subsidiary
District
If approved, the legislative body of the affected local agency will be designated and empowered to act as the board of directors of the subsidiary district.
Effective upon
recordation of the
Executive Officer’s
certificate of
completion and/or
effective date
established by a
condition of
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Step Description Timing RequirementsSan Mateo
LAFCO
Examples
approval of the
commission
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Packet Pg. 288 Attachment: Detailed Subsidiary District Process (2369 : Study Session on the Next Steps following San
EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: July 26, 2022
TO: Honorable Mayor and Members of the City Council
VIA: Patrick Heisinger, Interim City Manager
BY: Amy Chen, Community & Economic Development Director Elena Lee, Planning Manager
SUBJECT: Ravenswood Business District Specific Plan – Community Benefits and Associated Policies/Programs
Recommendation
Provide direction and feedback on refined policies and mechanisms that comprise a framework to achieve community benefits desired by the community.
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
Priority No. 2: Enhance Economic Vitality
Priority No. 3: Increase Organizational Effectiveness and Efficiency Priority No. 6: Create a Healthy and Safe Community
Background
Since late 2020, City staff have been working closely with the City Council and the Community on an update to the Ravenswood/Four Corners TOD Specific Plan (“Specific Plan”). The purpose of the update is to analyze the impacts of allowing an increased amount of office development and housing in the RBD, developing a framework for obtaining community benefits from new development, and ensuring that the new development creates a “complete neighborhood” in East Palo Alto.
To date, City staff and the consultant team have met with the City Council on six occasions to receive feedback on critical topics for the amendment to the Specific Plan. Major decisions made during this time included approving urban design objectives for the RBD and identifying two potential maximum office/R&D development scenarios:
• Scenario 1 would allow up to 2.82 million square feet of office/R&D space and up to 1,350 housing units.
• Scenario 2 would allow up to 3.35 million square feet of office/R&D space and up to 1,600 housing units.
Both scenarios allow an increase in the total amount of office/R&D development and housing
4.2 Packet Pg. 289
compared to the amount analyzed in the 2013 Specific Plan EIR (which was 1.4 million square feet of office/R&D space and 835 housing units). The amount analyzed in both scenarios is less than the total sum of the current development applications submitted for the RBD Plan area (which is close to 4.2 million square feet of office/R&D space).
In the past, the City Council directed City staff to identify the community’s ideas for potential benefits through a broad-based engagement process. Since the amount of development being analyzed is less than the total amount of development proposed, a methodology for how to allocate the office square footage will need to be developed and communicated to prospective developers.
At the May 17, 2022, City Council meeting1, City staff and the consultant team provided an overview of a proposed community benefits framework. The framework has been updated slightly since that meeting and now includes 8 components:
1. Base requirements. These are the existing requirements based on city regulations and include the Measure HH parcel tax, the Commercial Linkage Fee (CLF), impact fees and other requirements.
2. Financial transparency. Financial analysis would be conducted on each major application, with projects reviewing the stated value of community benefits and the projected financial performance of the project confidentially with a third-party consultant.
The end result of the analysis would be made public.
3. Jobs/Housing linkage. Since the community has clearly identified it as a top priority, projects would be asked to provide additional support for affordable housing, beyond the existing Commercial Linkage Fee and annual Measure HH tax. Specifically, projects would be expected to provide affordable housing (through building or donating land) in exchange for the allocation of office/R&D square footage. The Plan would establish a benchmark ratio for evaluating projects for their additional contributions to affordable housing in the City.
4. Office/R&D allocation methodology. This methodology describes how the office/R&D square footage would be distributed to potential development projects in the RBD to obtain maximum community benefits. The methodology would include a reserve, to hold a small amount of office development for future, unknown development projects.
5. Community benefits scorecard (Evaluation criteria). Staff proposes requiring project applications to include a scorecard that lists the potential community benefits in detail in response to the desires of the community. The scorecard would be comprised of a narrative description, $/sf value of the benefit, phasing, location, and alignment with community priorities.
6. Ongoing revenues. As part of any future Development Agreement, this policy would ask developers (in partnership with the City) to identify and commit to an on-going source(s) of funding for community benefits, to create long-term benefits for the community.
7. Community involvement. Staff is recommending an advisory body be created (composed of EPA residents and organizations) to facilitate active community 1 May 17, 2022 City Council Staff Report:
http://eastpaloalto.iqm2.com/Citizens/Detail_LegiFile.aspx?Frame=None&MeetingID=1810&MediaPosition=7313. 327&ID=2259&CssClass=
4.2 Packet Pg. 290
participation in recommending to the City Council how ongoing community benefit funds should be spent. This body could be either a City commission or independent organization. The purpose of this body would be to recommend the distribution of ongoing revenues for community benefits.
8. Benefits phasing plan. Developers would be asked to demonstrate how they intend to provide benefits across all phases of the project and be bound in the Development Agreement (DA) to this phasing. Some benefits would be expected up front.
The purpose of this staff report, and the July 26, 2022 City Council study session is to provide additional details and confirm the components of a community benefits framework. With this feedback, City staff and the consultant team will move forward and commence drafting the update to the Specific Plan.
As a reminder, the following table summarizes the priorities for benefits as identified by the community through engagement:
Table 1: Priorities for Benefits
Space Money
Top Priority • Subsidized space for local
entrepreneurs
• Affordable housing units
• Public parks and trails
• Local restaurants
• Subsidized space for local
community use
• Workforce/job training
• Home ownership
funds/programs
• Local businesses/startups
• 35% AMI housing
• Funding for schools and/or
childcare
Moderate
Priority
• Expanded ecological areas
• Larger housing units
• Grocery store
• PDR/light industrial space
• Youth Center
• Commercial kitchen
• Outdoor sports fields
• Wetland restoration
• Public recreational amenities
• 50% AMI housing
• Trees and beautification
• Congestion relief projects
• Bicycle/pedestrian projects
• Exceeding local hire targets
Lower
Priority
• New City Hall/civic center
• Senior Center
• Neighborhood traffic calming
• 1-time donations to
community groups
• Regional transportation
projects
Analysis
As discussed previously, this Specific Plan update offers the City of East Palo Alto a chance to leverage development interest for maximum community benefits. At the outset of this process, Council asked staff to create a framework for community benefits. Subsequently, Council established that there would be less development capacity than the total amount proposed by major applicants, which necessitated development of a methodology to allocate this limited square footage. To achieve both objectives, staff proposes that the updated Specific Plan include a framework that directly ties the provision of prioritized community benefits to the
4.2 Packet Pg. 291
future allocation of office/R&D square footage. The proposed framework would be a negotiated process based around projects providing the maximum amount of benefits possible (as established through a confidential residual value analysis) and providing benefits that align with the priorities expressed by residents. The framework would be flexible enough to permit projects to trade-off between different type of benefits as best suits each particular project, but ultimately Council would use its discretion to judge whether a project has provided enough of the most important types of benefits to merit the requested allocation of office/R&D square footage.
The proposed Community Benefits Framework includes the following components, each of which is detailed below.
Base Requirements
All new office/R&D development projects in the RBD will be required to meet all adopted City requirements and ordinances in effect at the time of approval of the project’s Development Agreement (see list below). The existing requirements amount to a significant obligation on developers that seeks to address many of the community’s concerns identified through the engagement process, including a linkage between housing and commercial office space, traffic mitigation, jobs for local residents, affordable housing, and requirements for development to pay their proportional costs of infrastructure improvements for the RBD and city-wide.
Requirements imposed on projects are listed below (note that these fee estimates were calculated in 2022 dollars and these fees are increased annually based on established formulas):
• Inclusionary housing: for rental housing projects, 20% of all new housing units must be affordable (to a mix of 35-50-60% AMI households).
• A one-time Commercial Linkage Impact Fee for affordable housing that would produce $33.5 million under Scenario 1 or $40 million under Scenario 2. • Annual Measure HH Taxes that would produce between $7-9 million annually for jobs and housing (based on the two development scenarios under consideration). • One time impact fees for Public Facilities (between $11 and $12.5 million) • One time impact fees for Parks and Trails (between $6.3 and $7 million) • One time impact fees for Transportation (between $25 and $30 million) • One time impact fees for Water and Storm Drainage improvements including improved water pressure (between $36 and $40 million).
• A 40% reduction in employee/resident trips through Transportation Demand Management (“TDM”) strategies
In addition, the City is currently in the process of studying the total costs of infrastructure improvements needed to serve the increased office/R&D capacity contemplated in the RBD. This may result in upward adjustments to impact fee requirements for transportation and infrastructure.
Further, it is important to note that many of these requirements were put in place after the 2013 Specific Plan was adopted. These include new impact fees, Measure HH, the
4.2 Packet Pg. 292
40% trip reduction “TDM” requirement, and the Commercial Linkage Fee.
In addition to the above, the proposed development scenarios would result in a significant increase in annual fiscal benefits for the City of East Palo Alto of between $14 and $16 million annually in revenues (primarily through increased property taxes). These new General Fund revenues may, at the City Council’s discretion, be used to fund additional community benefits (but are intended to support ongoing City operations).
New Requirements
The following components of the Community Benefits Framework represent new, additional requirements that would be applied to all projects seeking allocation of RBD square footage.
Staff’s proposed implementation approach would be a discretionary approval process guided by community priorities and Plan criteria, resulting in a negotiated Development Agreement between the City and applicant that specifies the agreed-upon terms of the community benefits package. Use of Development Agreements is recommended for several reasons:
• Since the proposed community benefits framework relies on a discretionary (negotiated) process for each project, clear documentation of each project’s commitments through a detailed DA is advisable to provide greater
assurance and specificity to City on the
future delivery of community benefits.
• Since the City's standard planning permits
expire after 2 years, using Development
Agreements would facilitate the planning
and approval processes for major projects
which will all contain multiple phases. This
approach would provide a longer, more
realistic term for applicants to move the
phases of their project forward over a period
of five years, or ten years, or potentially
longer.
• A Development Agreement (DA) would also
allow for greater fiscal and entitlement
certainty on the part of the applicant and provide clarity around their total financial obligations Leveraging DAs in this manner to secure benefits contributions may eliminate the legal requirement to conduct nexus studies. Staff will continue working to determine whether future fee studies will be needed.
Financial Transparency
Staff is recommending that the City add a requirement for office/R&D development projects in the RBD to conduct consistent and transparent financial analyses in order to:
1) confirm the total dollar value of proposed community benefits and 2) to determine whether the value of proposed benefits is adequate relative to the development rights granted. There are two parts to the proposed financial transparency requirement. • Part 1, Benefits Valuation, allows for agreement on the financial value of the Figure 1: Value Capture Analysis
4.2 Packet Pg. 293
benefits provided by a project. Various benefits will be converted into current dollars, using standard methodologies such as foregone revenue from leasable space, construction costs from building community/public spaces, the value of land dedicated for parks and open space, the established gap subsidy for affordable housing units, and so on. This analysis also facilitates easier comparison across projects of the total benefits value offered.
• Part 2, Value Capture, helps to ensure that the community is benefiting sufficiently from any square foot allocation. The developer would complete a financial feasibility analysis to indicate the residual value available for benefits. This analysis would be peer reviewed confidentially by the City’s consultants to provide an assessment of the appropriateness of the value of proposed community benefits on a $/square foot basis. This recommendation on the project’s financials would be part of the information presented to Council during the discretionary allocation process. Council would use these analyses to understand the dollar amount of community benefits that a project can support and still maintain a financially feasible project. The framework would facilitate a negotiation with applicants over financial trade-offs between different benefits that could be provided to the community.
Jobs/Housing Linkage
Throughout the process, community members expressed concerns about the impacts to existing housing prices if the office projects are developed, resulting in accelerated gentrification and indirect displacement. To combat these concerns, staff is recommending that the City create a new and expanded policy that office/R&D projects build or otherwise produce new affordable housing based around a numerical linkage to their office/R&D square footage.
This new linkage policy would build upon the existing CLF requirement and focus on the production of new affordable housing units (the linkage ratio could serve as a baseline expectation for the community benefits negotiations or it could be implemented as an increased base requirement if the City updates the existing nexus fee study).
The proposed jobs/housing linkage program includes the following components:
1. Keeping the existing linkage fee of $12.81 per square foot of office/R&D, which can be satisfied through building affordable units on or off-site, donating land, converting existing housing to affordable units, or paying fees. (Note that this fee is adjusted annually and developers are required to pay the "then current fee").
2. Maintaining the requirement for building at least 20% on-site inclusionary housing associated with mixed-income projects (i.e. those with market-rate housing units). The inclusionary policy and the existing commercial linkage fee obligation are separate – a linkage fee obligation cannot be met through the provision of on-site inclusionary housing units required by the 20% inclusionary obligation (while the city does support satisfying the existing linkage obligation through building on-site affordable units, the same affordable units cannot be counted twice to meet two different obligations).In order to further incentivize on-site affordable units, the proposed linkage policy would allow for a small discount for mixed-income projects (the number of affordable units required to be subsidized for linkage purposes would be subtracted from the total number of units upon which the inclusionary requirement is calculated).
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3. Adding a new job-housing linkage policy that can only be satisfied by building or enabling the production of housing units on-site at a ratio of 1 affordable unit per 30,000 square feet of office/R&D, or 1 unit per 6,000 square feet (with off-site units allowed for highly contaminated sites) .
4. Counting additional production or support for affordable (below 80% of AMI) and moderate-income (80% to 120% of AMI) housing beyond these requirements towards a project’s community benefits.
The 1 affordable unit per 30,000 square foot target ratio is derived from two rationales: one related to the overall housing goal for the RBD and the other related to financial feasibility. The target can be interpreted as 1 unit (of any kind) per 6,000 square feet – apply 20% inclusionary and the ratio becomes 30,000 square feet. Building housing units at a ratio of at least 1 per 6,000 square feet would achieve approximately one-third (~35%) of the RBD district goal (1,350 or 1,600 units). This is viewed as an appropriate contribution to building a complete neighborhood. Secondly, adding the proposed additional linkage to the existing CLF results in an overall ask of approximately $21 per square foot, which is aligned with the finding in the City’s 2015 nexus study that the maximum feasible/supportable linkage value is $20/sf.
To satisfy the linkage requirement, it is assumed that affordable housing would be provided at the same AMI percentages as are proscribed in the City’s adopted Inclusionary Ordinance (25% at 35% AMI, 50% at 50% AMI, 25% at 60% AMI). The blended average in-lieu value of one rental unit is currently set at $259,000 for FY 2022. However, if applicants choose instead to provide a different AMI breakdown (i.e., more units at 80% to 120% AMI), the value of these units would be discounted to reflect the true subsidy required to close the gap between projected income and construction costs (the affordability “gap”).
The pathway for compliance is slightly different for an office project that meets its linkage obligations through an 100% affordable housing project versus a mixed-income housing project. To illustrate how the proposed jobs/housing linkage program would work, the following are two hypothetical projects, each following different pathways to compliance:
Hypothetical Project 1: Proposed 500,000 s.f. office project + 100% affordable units • Apply existing linkage fee requirement: 500,000 * $12.81 = $6,405,000 (equivalent to 25 affordable units assuming a subsidy of $259,000 per unit) • Add NEW job-housing requirement of 1 per 30,000 s.f. = 17 affordable units BUILT (value of $4,400,000)
• Total combined requirement: 25 + 17, the total obligation is equivalent to 42 affordable units or $10,878,000. Linkage could be satisfied by a combination of units and fees but not less than 17 affordable units built on-site site (or offsite if primary site is contaminated).
Hypothetical Project 2: Proposed 500,000 s.f. of office + mixed-income housing (150 units) • Apply existing linkage fee requirement: 500,000 * $12.81 = $6,405,000 (equivalent to 25 affordable units)
• Add NEW job-housing linkage requirement of 1 per 30,000 s.f. = 17 affordable units BUILT (value of $4,400,000)
• Total requirement from the jobs-housing linkage is 42 affordable units, leaving 108 units as the mixed income portion of the project (150-42=108). • Apply existing 20% inclusionary requirement to housing component to the mixedincome portion of the project after subtracting the linkage units. This equals 22
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units (20% of 108 units) =22 affordable units BUILT on-site (value of $5,700,000)
• Total combined requirement: 25 + 17 + 22, the total obligation is equivalent to 64 affordable units or $16,575,000. Linkage could be satisfied by a combination of units and fees but not less than 39 affordable (22+17) units built on-site (or off-site if primary site is contaminated).
Figure 2: Jobs-Housing Linkage Program for 100% Affordable Housing Component
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Figure 3: Jobs-Housing Linkage Program for Mixed-Income Housing Component Office/R&D SF Allocation Methodology
Since there will not be enough development capacity to meet the development proposed by the four major projects, the City needs to create a methodology to allocate the office square footage that balances multiple objectives including community benefits, financially feasible development projects, and the creation of a complete neighborhood in the Ravenswood Business District/Four Corners area. At the May 17, 2022, City Council meeting, City staff presented three potential options for the methodology. The first option is based on a formula that allocates the square footage between the four major projects based on either the amount originally proposed or the total development capacity for the project area. The second option is a purely discretionary approach where projects compete for the office square footage. The third option is a hybrid approach that allocates a minimum amount of square footage to each project and the remainder is through a discretionary process.
Staff is recommending a discretionary allocation methodology to ensure that maximum community benefits are achieved in exchange for the allocation of office/R&D square footage. A discretionary approach would play out in three steps:
Step 1: The City sets a date for applications after the amended Plan/EIR are adopted, and all major developers/applicants submit a proposal during this time. The criteria to apply for an allocation would include:
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▪ Meeting base requirements (including prepayment of certain fees) ▪ Completed city’s preliminary application process
▪ Agreeing to participating in the financial transparency analysis ▪ Providing completed community benefits scorecard (see next section of report) ▪ Agreeing to participate in fair share of infrastructure costs, including water, stormwater, the levee, and others.
▪ Participating in Developer Reimbursement Agreement (DRA) cost-sharing for Specific Plan update
▪ Completing all obtainable US Environmental Protection Agency, Department of Toxics Substances Control and/or California Department of Regional Water Quality Control Board Planning-level (environmental) clearances, or other determination that the proposed program is environmentally feasible ▪ Completing the preliminary review of building and site design completed by City.
Step 2: Staff then evaluates all projects and provides a recommendation for Council.
Staff will review each application individually (the project’s ability to support proposed benefits relative to costs), and collectively across projects and across the broader RBD area. Staff will recommend that all the major projects receive “significant” office allocation in order to maximize the overall amount of community benefits and to achieve a complete neighborhood. Staff will recommend that certain community benefits be located in certain projects to ensure that benefits are distributed in a logical way throughout the RBD.
Step 3: Council holds meetings to evaluate the projects, both collectively and individually, and comes to a determination on the allocation for each. ▪ Council can elect to “hold” square footage back from allocation if not all major projects submit; however, it is the city’s desire that all four do so concurrently. ▪ City is committed to moving the 2020 Bay Road project forward first (due to the earlier submittal of its application); however, requesting (and being granted) a DA from the city would put this project on equal footing with other projects relative to approval and allocation timing.
▪ Once receiving an allocation, each project then negotiates and signs their DA with the city. The entitlements obtained through the DA would last longer than standard city permits (potentially five years plus an additional five-year extension contingent on forward progress).
In sum, the Plan establishes a minimum threshold/expectation for any project to qualify for allocation consideration based around the proposed benefits contributions. All projects submit a comprehensive community benefits proposal, which is analyzed and evaluated in light of each project’s constraints and financial realities and compared to community priorities and to other proposals (where appropriate). Benefits are negotiated through Council’s discretion. Then, if approved, these benefits commitments are set forth in a legally binding DA.
In addition, City staff is proposing to reserve some of the development capacity for future, unknown projects. This would maintain sufficient development capacity to allow one or more additional property owners in the RBD to build a small office/R&D project in the future. The proposed office/R&D “reserve” size is 5% of the total development capacity but the Council could consider a higher percentage (i.e., 7.5%). Staff is recommending 5%
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because it allocates more development capacity to current proposals, which would increase their financial performance and produce greater community benefits. Practically, the size of the reserve would depend on the final development scenario selected by Council:
• 5% = 140,000 sf for Scenario 1 or 170,000 sf for Scenario 2 (recommended) • 7.5% = 212,000 sf for Scenario 1 and 250,000 sf for Scenario 2 • 10% = 282,000 sf for Scenario 1 and 333,000 sf for Scenario 2 Community Benefits Scorecard (Evaluation Criteria)
In order to ensure that the highest priority
benefits are provided to the community by the
development projects, the Specific Plan will
include a recommendation to create a
“Community Benefits Scorecard” to provide a
consistent way to compare proposed benefits to
community expectations and among projects.
Staff is recommending that applications include a
qualitative + quantitative “checklist,” that includes
the following detail:
• Narrative description of the benefit
• Description of how each meets community
priorities
• Calculated dollar value ($/sf) of the benefit
• Proposed timing/phasing of benefit
Staff acknowledges that each project is not
expected to provide the same amount/value of
benefits and will review the applications with the
understanding that certain benefits are better
suited to certain locations than others. Each
project’s financial feasibility and residual value
(ability to support benefits) will be accounted for
during staff’s review of a project’s recommended allocation. (Staff considered a point-based system for community benefits but decided a more qualitative approach would better serve the community and allow for a greater diversity of community benefits.) Ongoing Revenue Stream for Community Benefits
Throughout the engagement process, many community members expressed a desire that community benefits be provided by the projects on an on-going basis. As a result, City staff is recommending the creation of a Community Benefits Fund. This could be funded through a variety of mechanisms including, but not limited to:
• Below market rent of subsidized spaces provided by projects. This would occur by projects constructing community space, office, retail, etc. that is then rented at a discount to residents and/or local businesses. The rents from these spaces would go into the Community Benefits Fund. The proceeds would then be used for future community benefits. .
• Upfront “seed” funding from projects as part of application. These funds could be used to start the fund but do not represent an ongoing source of money for community benefits.
Figure 3: Evaluation "Scorecard" Example
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• Portion of fiscal benefit from development projects. Projects will result in a significant fiscal benefit for the city. The City Council could decide to allocate some of the fiscal benefit to the Community Benefits Fund.
• Commitment to annual funding for desired programs. Projects could commit to ongoing funding for high-priority programs identified by the community, such as job training or childcare.
This Benefits Fund would be overseen by the City.
Community Entity to Guide Decision-Making on Benefits
During the engagement process, residents expressed a strong desire to be part of the decision-making process to determine which community benefits are funded as a result of new development in the RBD. Therefore, a key recommendation is to create a “Local Benefits Commission” with advisory oversight of the Community Benefits Fund. This advisory body would ensure community involvement in the process of deciding how benefits dollars or space are best utilized in the RBD. It could be comprised of EPA residents and organizations who apply to be members and would provide oversight of benefits allocation and distribution. This entity could be either an official city board/commission or an outside, independent organization. This organization or commission would be charged with providing recommendations to Council regarding the allocation of ongoing funds received. This body would not tasked with negotiating or reviewing projects’ proposed community benefits up front, as this role would be reserved for staff and the City Council. Furthermore, if the City decides to establish a CBD or similar assessment district to fund maintenance, these ongoing costs would be outside of the purview of this proposed commission/body.
Benefits Phasing
To combat fears about promised community benefits not materializing, the Specific Plan will require that applicants provide a phasing plan to explain how the project intends to deliver benefits over time, tied to specific benchmarks such as development approvals, building permits, or occupancy. These commitments regarding phasing of benefits will then be enshrined in the project’s DA. The Plan will provide guidance for projects on how benefits are expected across all phases:
• During permitting. Some benefits should be provided early, before occupancy. These could include prepayment of certain fees, pop-up programming, or other front-loaded funding.
• At occupancy. Major on-site community spaces and facilities should generally be completed before or at the same time as occupancy of office spaces, with some exceptions for properties no longer controlled by the applicant or delays due to regional infrastructure such as the levee.
• Ongoing. Some benefits should last for a prescribed time or for the life of the project.
Staff will be developing recommendations related to the potential formation of a community assessment or facility district, with a goal of providing funding for maintenance of public improvements or on-going services. Projects receiving any square footage allocation would be required to join the community assessment or facility district entity which would manage these improvements over time and participate as legally stipulated per the terms of the district’s policies and requirements.
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Next Steps
Following feedback from the City Council on the community benefits framework, City staff and the consultant team will begin work preparing the updated Specific Plan. The Draft Specific Plan is expected to be released in late 2022. The consultant team is actively working on the Supplemental Environmental Impact Report (SEIR), which includes traffic modeling of the different growth scenarios. The Draft SEIR is expected to be released in early 2023. Hearings on the Specific Plan and SEIR are expected in Spring 2023. No additional City Council meetings or study sessions are planned between now and the release of the Draft Specific Plan and Draft SEIR.
Discussion Questions and Recommendations for Council
Staff seeks Council direction on the following questions related to the benefits framework:
1. Does the Council support the proposed requirement for confidential peer-review of developer-provided feasibility analysis and benefits valuation?
2. Does the Council support the jobs/housing linkage proposal to supplement the existing jobs/housing linkage fee?
3. Does the Council support a discretionary allocation process, guided by staff’s assessment of projects’ proposed benefits and their respective alignment with community priorities?
4. Does the Council support a 5% reserve of development capacity for future projects in the RBD?
5. Does the Council support the establishment of a permanent source of community benefit revenues and the formation of a community advisory body to recommend distribution of the funds to the City Council? Are there other sources that the Council would like to recommend?
6. Are there any other components that should be included in the Community Benefits Framework?
7. This is expected to be the last presentation to the Council before the draft Specific Plan is released later this year or early next year. Are there other topics that should be discussed with the Council before the plan is drafted?
Fiscal Impact
There are no fiscal impacts associated with the items discussed in this staff report. Any final decision made regarding the financial mechanisms in the Specific Plan area may have fiscal impacts to the City, to be discussed at that time.
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.
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