Agenda packet — Folsom City Council, December 9, 2025 (part 3 of 6)

12/09/2025 Item No.14.
25 Drainage System Improvements: Authorized facilities include any and all drainage and storm drain improvements designed to meet the needs of development within the CFD. These facilities include, but may not be limited to: excavation and grading, pipelines and appurtenances, outfalls, and water quality measures; detention/retention basins, drainage pretreatment facilities, drainage ways/channels, pump stations, landscaping and irrigation; access roads, gates and fencing; and striping and signage and other improvements related thereto.

Wastewater System Improvements: Authorized facilities include all wastewater facilities designed to meet the needs of development within the CFD. These facilities include, but may not be limited to, pipelines and all appurtenances thereto; manholes; tie-in to existing main lines; force mains; lift stations; odor-control facilities; and permitting related thereto; and related sewer system improvements.

Park, Parkway, Open Space and Preserve Improvements: Authorized facilities include any and all improvements to parks, parkways, and open space required for development within the CFD. These facilities include, but may not be limited to grading; turf, shrubs and trees; landscaping irrigation; site lighting; drainage; sanitary sewer and water service, pedestrian and bicycle trails, protective fencing (including soundwalls), pedestrian/bicycle bridges; public art; active and passive park and open space improvements (including respites and overlooks); related monumentation and signage; storm drain crossings; environmental mitigation for wetlands, hawk, and other species for infrastructure under the Specific Plan Infrastructure Fee Program and authorized facilities herein; access gates and fencing; and related park, open space and preserve improvements.

Payment of Specific Plan Infrastructure Fee Program (“SPIF”) Obligation: Authorized facilities include payment of the following SPIF obligations for all development that would be subject to SPIF obligations within the entire CFD:
 SPIF Infrastructure Fee (including the SPIF Set-Aside component);  SPIF Public Facilities Land Equalization Fee Component;  SPIF Parkland Equalization Fee Component; and
 SPIF Administrative Fee.

Other Incidental Expenses and Bond Issuance Costs: In addition to the above facilities, other incidental expenses as authorized by the Act, including, but not limited to, the cost of planning and designing the facilities (including the cost of environmental evaluation, remediation and mitigation); engineering and surveying; construction staking; utility relocation and demolition costs incidental to the construction of the public facilities; costs of project/construction management; costs (including the costs of legal services) associated with the formation of the CFD; issuance of bonds (if any); determination of the amount of taxes; collection of taxes; payment of taxes; costs of calculating and providing reimbursements from one-time special tax payments; or costs otherwise incurred in order to carry out the authorized purposes of the CFD; and any other expenses incidental to the formation and implementation of the CFD and to the construction, completion, inspection and acquisition of the authorized facilities.

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12/09/2025 Item No.14.
26 Fiscal Year 2024/25 Collections & Expenditures
Fund
Initial
Deposit
Prior Years
Additions /
Interest
Prior Years
Expenses
6/30/2024
Balance
Current Year
Additions /
Interest
Current Year
Expenses
6/30/2025
Balance
Acquisition and
Construction
$21,106,647 $21,210,474 $21,210,474 $0 $0 $0 $0
Underwriter’s
Discount
230,285 230,285 230,285 0 0 0 0
Costs of
Issuance
650,000 650,000 650,000 0 0 0 0
Reserve
Account
1,550,000 1,554,219 7,776 1,546,443 0 7,406 1,539,037
Capitalized
Interest
505,560 505,660 505,660 0 0 0 0

Page 363 ends

12/09/2025 Item No.14.
27 City of Folsom
Community Facilities District No. 22 (Folsom Heights)
Established November 27, 2018
Purpose of Special Tax
Facilities
The public facilities for Community Facilities District No. 22 (Folsom Heights) (“CFD”) include the following:

Transportation Improvements: Eligible roadway improvements include, but are not limited to:
acquisition of land and easements; roadway design; project management; bridge crossings and culverts; clearing, grubbing, and demolition; grading, soil import/export, paving (including slurry seal), and decorative/enhanced pavement concrete and/or pavers; joint trenches, underground utilities and undergrounding of existing utilities; dry utilities and appurtenances; curbs, gutters, sidewalks, bike trails (including onsite and off-site), enhanced fencing, and access ramps; street lights, signalization, and traffic signal control systems; bus turnouts; signs and striping; erosion control; median and parkway landscaping and irrigation; entry monumentation; bus shelters, Bus Rapid Transit improvements including transfer stations and regional public transit improvements; masonry walls; traffic control and agency fees; and other improvements related thereto. Eligible improvements for the roads listed herein also include any and all necessary underground potable and recycled water, sanitary sewer, and storm drainage system improvements. Authorized facilities include the following transportation improvements:
 Summit Street
 Prima Drive
 Empire Ranch Road
 Alder Creek Parkway
 Folsom Heights Drive
 Other public roadway improvements designed to meet the needs of development of property within the CFD, including internal subdivision streets and related underground utilities.

Water System Improvements: Authorized facilities include any and all water facilities, including those expected to be owned or managed by the City and/or the El Dorado Irrigation District, designed to meet the needs of development of property within the CFD. These facilities include, but may not be limited to:
water storage, treatment and distribution facilities including waterlines and appurtenances, gate valves, pressure reducing stations, flow meters, fire hydrants, and other improvements related thereto such as site clearing, grading and paving; curbs and gutters; booster pump stations and power; stand-by generators; site lighting, drainage, sanitary sewer, and water service; landscaping and irrigation; access gates, and fencing; and striping and signage.

Recycled Water System Improvements: Authorized facilities include any and all recycled water system facilities, including those expected to be owned or managed by the City and/or the El Dorado Irrigation District, designed to meet the needs of development of property within the CFD. These facilities include, but may not be limited to: treatment and distribution facilities including pipelines and appurtenances, gate valves, flow meters, booster pump pressurization system, and other improvements related thereto - such as site clearing, grading and paving; curbs and gutters; booster pump stations; stand-by generators; site lighting, drainage, sanitary sewer, and water service; landscaping and irrigation; access gates, and fencing; and striping and signage.

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12/09/2025 Item No.14.
28 Drainage System Improvements: Authorized facilities include any and all drainage and storm drain improvements designed to meet the needs of development of property within the CFD. These facilities include, but may not be limited to: excavation and grading, pipelines and appurtenances, outfalls and water quality measures, detention/retention basins, drainage pretreatment facilities, drainage ways/channels, pump stations, landscaping and irrigation; access roads, gates, and fencing; and striping and signage and other improvements related thereto.

Wastewater System Improvements: Authorized facilities include any and all wastewater facilities, including those expected to be owned or managed by the City and/or the El Dorado Irrigation District, designed to meet the needs of development of property within the CFD. These facilities include, but may not be limited to, pipelines and all appurtenances thereto; manholes; tie-in to existing main lines; force mains; lift stations; upgrades to existing lift stations; odor-control facilities; and permitting related thereto; and related sewer system improvements.

Park, Parkway and Open Space Improvements: Authorized facilities include any and all improvements to parks, parkways and open space required for development of property within the CFD. These facilities include, but may not be limited to: grading, turf, shrubs and trees, landscaping irrigation, site lighting, drainage, sanitary sewer and water service, pedestrian and bicycle trails, protective fencing (including soundwalls), pedestrian/bicycle bridges, storm drain crossings, wetland mitigation, hawk mitigation for authorized facilities herein, access gates and fencing and related open space improvements. Authorized facilities include acquisition of any and all parkland as well as open space/bike trail/public access easements required for development of property within the CFD.

Specific Plan Infrastructure Fee Infrastructure: Authorized facilities include any and all improvements that are included in the Specific Plan Infrastructure Fee Program adopted by the City Council on September 8, 2015, including any future amendments thereto.

Services
The services to be financed by the CFD include the following:
 Landscape corridor and enhanced open space maintenance; and  Street light maintenance.

Annual maintenance functions and costs generally will include the installation, maintenance and servicing of ground cover, shrubs and trees, irrigation systems, street lighting, fencing, sound walls, sidewalks, monuments, enhanced open space maintenance including but not limited to maintaining the enhanced open space areas located adjacent to avoided or created habitat mitigation areas and other buffer areas between the enhanced open space and vertical development, bike trails, walkways, entry signage, street pavers, and labor, materials, supplies, utilities (including water and electricity) and

Page 365 ends

12/09/2025 Item No.14.
29 equipment, as applicable, for property owned or maintained by the City. Annual maintenance costs include an allowance for long-term repair and replacement of improvements.

The CFD may fund any of the following related to the maintenance of the services described above:
obtaining, repairing, reconstructing, furnishing, operating and maintaining equipment, apparatus or facilities related to providing the services and/or equipment, apparatus, facilities or fixtures in areas to be maintained, paying the salaries and benefits of the personnel necessary or convenient to provide the services, and other related expenses and the provision of reserves for repairs and replacements for the future provision of services. It is expected that the services will be provided by the City, either with its own employees or by contract with third parties, or any combination thereof. The CFD may also fund administrative fees of the City related to the CFD.

Fiscal Year 2024/25 Collections & Expenditures
Facilities
6/30/2024
Balance
Amount
Collected
Expended
Amount
6/30/2025
Balance
Project
Status
$0 $0 $0 $0 On-going
Services
6/30/2024
Balance
Amount
Collected
Expended
Amount
6/30/2025
Balance
Project
Status
$0 $0 $0 $0 On-going

Page 366 ends

12/09/2025 Item No.14.
30 City of Folsom
Community Facilities District No. 23 (Folsom Ranch)
Improvement Area 1
Established May 26, 2020
Special Tax Bonds, Series 2020 Issued October 30, 2020
Special Tax Bonds, Series 2021 Issued April 27, 2022
Purpose of Special Tax
Facilities
The public facilities for Community Facilities District No. 23 (Folsom Ranch) (“CFD”) include the following:

Transportation Improvements: Eligible roadway improvements include, but are not limited to:
acquisition of land and easements; roadway design; project management; bridge crossings and culverts; clearing, grubbing, and demolition; grading, soil import/export, paving (including slurry seal), and decorative/enhanced pavement concrete and/or pavers; joint trenches, underground utilities and undergrounding of existing utilities; dry utilities and appurtenances; curbs, gutters, sidewalks, bike trails (including onsite and off-site), enhanced fencing, and access ramps; street lights, signalization, and traffic signal control systems; bus turnouts; signs and striping; erosion control; median and parkway landscaping and irrigation; entry monumentation; bus shelters, Bus Rapid Transit improvements including transfer stations and regional public transit improvements; masonry walls; traffic control and agency fees; and other improvements related thereto. Eligible improvements for the roads listed herein also include any and all necessary underground potable and recycled water, sanitary sewer, and storm drainage system improvements. Authorized facilities include the following transportation improvements:
 All public roadway improvements designed to meet the needs of development within the CFD, including internal subdivision streets and related underground utilities.

Water System Improvements: Authorized facilities include any and all water facilities designed to meet the needs of development of property within the CFD. These facilities include, but may not be limited to:
water storage, treatment and distribution facilities including waterlines and appurtenances, gate valves, pressure reducing stations, flow meters, fire hydrants, and other improvements related thereto such as site clearing, grading and paving; curbs and gutters; booster pump stations and power; stand-by generators; site lighting, drainage, sanitary sewer, and water service; landscaping and irrigation; access gates, and fencing; and striping and signage.

Recycled Water System Improvements: Authorized facilities include any and all recycled water system facilities designed to meet the needs of development of property within the CFD. These facilities include, but may not be limited to: treatment and distribution facilities including pipelines and appurtenances, gate valves, flow meters, booster pump pressurization system, and other improvements related thereto - such as site clearing, grading and paving; curbs and gutters; booster pump stations; stand-by generators; site lighting, drainage, sanitary sewer, and water service; landscaping and irrigation; access gates, and fencing; and striping and signage.

Page 367 ends

12/09/2025 Item No.14.
31 water quality measures, detention/retention basins, drainage pretreatment facilities, drainage ways/channels, pump stations, landscaping and irrigation; access roads, gates, and fencing; and striping and signage and other improvements related thereto.

Wastewater System Improvements: Authorized facilities include any and all wastewater facilities designed to meet the needs of development of property within the CFD. These facilities include, but may not be limited to, pipelines and all appurtenances thereto; manholes; tie-in to existing main lines; force mains; lift stations; upgrades to existing lift stations; odor-control facilities; and permitting related thereto; and related sewer system improvements.

Specific Plan Infrastructure Fee Obligation: Subject to the provisions of the Act, authorized facilities include payment of the following SPIF obligations for all development that would be subject to SPIF obligations within the entire CFD:
• SPIF Infrastructure Fee (including the SPIF Set-Aside component) • SPIF Public Facilities Land Equalization Fee Component • SPIF Parkland Equalization Fee Component
• SPIF Administrative Fee.

Other Incidental Expenses and Bond Issuance Costs: In addition to the above facilities, other incidental expenses as authorized by the Mello-Roos Community Facilities Act of 1982, including, but not limited to, the cost of planning and designing the facilities (including the cost of environmental evaluation, remediation and mitigation); engineering and surveying; construction staking; utility relocation and demolition costs incidental to the construction of the public facilities; costs of project/construction management; costs (including the costs of legal services) associated with the formation of the Mello-Roos CFD; issuance of bonds (if any); determination of the amount of taxes; collection of taxes; payment of taxes; costs of calculating and providing reimbursements from one-time special tax payments; or costs otherwise incurred in order to carry out the authorized purposes of the CFD; and any other expenses incidental to the formation and implementation of the CFD and to the construction, completion, inspection and acquisition of the authorized facilities.

Page 368 ends

12/09/2025 Item No.14.
32 maintenance, Erosion control/bank stabilization, Native planting/replanting, Pre and post emergent, maintenance activities as required by a 404 permit and Operations and Management Plan-Conservation and Passive Recreation Open Space, dated June 9, 2017, and repair and replacement of facilities within open space areas in the Project Area.  The maintenance of on-site landscape corridors and paseos designed to serve land uses within the CFD, including general maintenance, masonry walls, accent lighting, water and utility costs.  The maintenance of streetlights, including any utility costs related thereto.  The maintenance of medians, entries, and entry monumentation.  Neighborhood park maintenance, and repair and replacement.  Community amenities, such as a community clubhouse.
 Storm water management, water quality structural controls, including drainage swales constructed between storm drain facilities and receiving waters.  Miscellaneous costs related to any of the items described above including planning, engineering, GIS, legal, and city and county administration costs.
 The levy of special taxes to accumulate sinking funds for anticipated future repairs or replacement costs of landscape corridors, irrigation facilities, medians, entries and entry monumentation, lighting, neighborhood parks, storm water management and other facilities maintained by the CFD as determined by the Administrator.

Page 369 ends

12/09/2025 Item No.14.
33 Fiscal Year 2024/25 Collections & Expenditures
Facilities
Fund
Initial
Deposit
Prior Years
Additions /
Interest
Prior Years
Expenses
6/30/2024
Balance
Current Year
Additions /
Interest
Current Year
Expenses
6/30/2025
Balance
Acquisition and
Construction
$22,554,233 $22,906,885 $20,871,339 $2,035,544 $96,184 $2,070,777 $60,951 Underwriter’s
Discount
279,649 279,649 279,649 0 0 0 0
Costs of
Issuance
510,000 510,000 510,000 0 0 0 0
Reserve
Account
1,774,000 1,777,989 8,006 1,769,983 0 8,474 1,761,509
Capitalized
Interest
606,308 606,379 606,379 0 0 0 0
Services
6/30/2024
Balance
Amount
Collected
Expended
Amount
6/30/2025
Balance
Project
Status
$347,846 $160,376 $53,770 $454,452 On-going
CFD #23, IA1 Fund Detail
June 30, 2024 Acquisition and Construction Fund Cash Balance: 2,035,544$ Revenues:

Proceeds from Series 2022 Bonds -$
Interest Earned 96,184
Total Revenues: 96,184$
Expenses:

Progress Payment #7 East Carpenter Imp. Co., LLC 2,070,777 Total Expenses: 2,070,777$
Change in Receivables/Liabilities -
June 30, 2025 Acquisition and Construction Fund Cash Balance: 60,951$

Page 370 ends

12/09/2025 Item No.14.
34 CFD #23, IA1 Detail
June 30, 2024 Maintenance District Fund Cash Balance: 347,846$ Revenues:

Mangini Ranch Maintenance Direct Levy 144,979$
Reimbursements -
Interest Earned 15,397
Total Revenues: 160,376$
Expenses:

Water & Utilities 23,849$
Monthly Landscape Maintenance 9,354
Repairs & Replacement 7,717
Departmental Charges -
Project Construction -
CFD Admin -
Other Expenses -
Transfers Out 10,662
Total Expenses: 51,582$
Change in Receivables/Liabilities (2,188)
June 30, 2025 Maintenance District Fund Cash Balance: 454,452$

Page 371 ends

12/09/2025 Item No.14.
35 City of Folsom
Community Facilities District No. 23 (Folsom Ranch)
Improvement Area 2
Established May 26, 2020
Special Tax Bonds, Series 2024 Issued April 25, 2024
Purpose of Special Tax
Facilities
The public facilities for Community Facilities District No. 23 (Folsom Ranch) (“CFD”) include the following:

Transportation Improvements: Eligible roadway improvements include, but are not limited to:
acquisition of land and easements; roadway design; project management; bridge crossings and culverts; clearing, grubbing, and demolition; grading, soil import/export, paving (including slurry seal), and decorative/enhanced pavement concrete and/or pavers; joint trenches, underground utilities and undergrounding of existing utilities; dry utilities and appurtenances; curbs, gutters, sidewalks, bike trails (including onsite and off-site), enhanced fencing, and access ramps; street lights, signalization, and traffic signal control systems; bus turnouts; signs and striping; erosion control; median and parkway landscaping and irrigation; entry monumentation; bus shelters, Bus Rapid Transit improvements including transfer stations and regional public transit improvements; masonry walls; traffic control and agency fees; and other improvements related thereto. Eligible improvements for the roads listed herein also include any and all necessary underground potable and recycled water, sanitary sewer, and storm drainage system improvements. Authorized facilities include the following transportation improvements:
 All public roadway improvements designed to meet the needs of development within the CFD, including internal subdivision streets and related underground utilities.

Drainage System Improvements: Authorized facilities include any and all drainage and storm drain improvements designed to meet the needs of development of property within the CFD. These facilities include, but may not be limited to: excavation and grading, pipelines and appurtenances, outfalls and water quality measures, detention/retention basins, drainage pretreatment facilities, drainage

Page 372 ends

12/09/2025 Item No.14.
36 ways/channels, pump stations, landscaping and irrigation; access roads, gates, and fencing; and striping and signage and other improvements related thereto.

Services
The services to be financed by the CFD include the following:
 Open Space improvements, operations and management, monitoring, maintenance (including general maintenance, signage, City owned fence maintenance, trash and debris collection, and bike trails and their appurtenances [drainage culverts or pipes from adjacent subdivisions] within open space), creation and maintenance of fire breaks, Permits, Vandalism/Graffiti, Flood Conveyance (Vegetation/tree removals), Beaver dam removals, Outfall/drainage swale maintenance, Erosion control/bank stabilization, Native planting/replanting, Pre and post

Page 373 ends

12/09/2025 Item No.14.
37 emergent, maintenance activities as required by a 404 permit and Operations and Management Plan-Conservation and Passive Recreation Open Space, dated June 9, 2017, and repair and replacement of facilities within open space areas in the Project Area.  The maintenance of on-site landscape corridors and paseos designed to serve land uses within the CFD, including general maintenance, masonry walls, accent lighting, water and utility costs.  The maintenance of streetlights, including any utility costs related thereto.  The maintenance of medians, entries, and entry monumentation.  Neighborhood park maintenance, and repair and replacement.  Community amenities, such as a community clubhouse.
 Storm water management, water quality structural controls, including drainage swales constructed between storm drain facilities and receiving waters.  Miscellaneous costs related to any of the items described above including planning, engineering, GIS, legal, and city and county administration costs.
 The levy of special taxes to accumulate sinking funds for anticipated future repairs or replacement costs of landscape corridors, irrigation facilities, medians, entries and entry monumentation, lighting, neighborhood parks, storm water management and other facilities maintained by the CFD as determined by the Administrator.

Page 374 ends

12/09/2025 Item No.14.
38 Fiscal Year 2024/25 Collections & Expenditures
Facilities
Fund
Initial
Deposit
Prior Years
Additions /
Interest
Prior Years
Expenses
6/30/2024
Balance
Current Year
Additions /
Interest
Current Year
Expenses
6/30/2025
Balance
Acquisition and
Construction
$9,578,406 $9,611,122 $5,166,161 $4,444,961 $218,422 $680,852 $3,982,531 Underwriter’s
Discount
116,190 116,190 116,190 0 0 0 0
Costs of
Issuance
305,000 305,000 305,000 0 0 0 0
Reserve
Account
833,250 837,626 0 837,626 0 3,626 834,000
Capitalized
Interest
51,936 51,936 0 51,936 0 51,936 0
Services
6/30/2024
Balance
Amount
Collected
Expended
Amount
6/30/2025
Balance
Project
Status
$37,309 $35,524 $23,441 $49,392 On-going
CFD #23, IA2 Fund Detail
June 30, 2024 Acquisition and Construction Fund Cash Balance: 4,444,961$ Revenues:

Proceeds from Series 2024 Bonds -$
Interest Earned 218,422
Total Revenues: 218,422$
Expenses:

Progress Payment #2 to Arcadian Improvement Co., LLC 680,852$ Total Expenses: 680,852$
Change in Receivables/Liabilities -
June 30, 2025 Acquisition and Construction Fund Cash Balance: 3,982,531$

Page 375 ends

12/09/2025 Item No.14.
39 CFD #23, IA2 Detail
June 30, 2024 Maintenance District Fund Cash Balance: 37,309$ Revenues:

Mangini Ranch Maintenance Direct Levy 34,149$
Reimbursements -
Interest Earned 1,375
Total Revenues: 35,524$
Expenses:

Water & Utilities 6,053$
Monthly Landscape Maintenance -
Repairs & Replacement 16,966
Departmental Charges -
Project Construction -
CFD Admin -
Other Expenses -
Transfers Out -
Total Expenses: 23,019$
Change in Receivables/Liabilities (422)
June 30, 2025 Maintenance District Fund Cash Balance: 49,392$

Page 376 ends

12/09/2025 Item No.14.
40 City of Folsom
Community Facilities District No. 23 (Folsom Ranch)
Improvement Area 3
Established May 26, 2020
Special Tax Bonds, Series 2022 Issued August 10, 2022
Purpose of Special Tax
Facilities
The public facilities for Community Facilities District No. 23 (Folsom Ranch) (“CFD”) include the following:

Transportation Improvements: Eligible roadway improvements include, but are not limited to:
acquisition of land and easements; roadway design; project management; bridge crossings and culverts; clearing, grubbing, and demolition; grading, soil import/export, paving (including slurry seal), and decorative/enhanced pavement concrete and/or pavers; joint trenches, underground utilities and undergrounding of existing utilities; dry utilities and appurtenances; curbs, gutters, sidewalks, bike trails (including onsite and off-site), enhanced fencing, and access ramps; street lights, signalization, and traffic signal control systems; bus turnouts; signs and striping; erosion control; median and parkway landscaping and irrigation; entry monumentation; bus shelters, Bus Rapid Transit improvements including transfer stations and regional public transit improvements; masonry walls; traffic control and agency fees; and other improvements related thereto. Eligible improvements for the roads listed herein also include any and all necessary underground potable and recycled water, sanitary sewer, and storm drainage system improvements. Authorized facilities include the following transportation improvements:
 All public roadway improvements designed to meet the needs of development within the CFD, including internal subdivision streets and related underground utilities.

Page 377 ends

12/09/2025 Item No.14.
41 ways/channels, pump stations, landscaping and irrigation; access roads, gates, and fencing; and striping and signage and other improvements related thereto.

Page 378 ends

12/09/2025 Item No.14.
42 emergent, maintenance activities as required by a 404 permit and Operations and Management Plan-Conservation and Passive Recreation Open Space, dated June 9, 2017, and repair and replacement of facilities within open space areas in the Project Area.  The maintenance of on-site landscape corridors and paseos designed to serve land uses within the CFD, including general maintenance, masonry walls, accent lighting, water and utility costs.  The maintenance of streetlights, including any utility costs related thereto.  The maintenance of medians, entries, and entry monumentation.  Neighborhood park maintenance, and repair and replacement.  Community amenities, such as a community clubhouse.
 Storm water management, water quality structural controls, including drainage swales constructed between storm drain facilities and receiving waters.  Miscellaneous costs related to any of the items described above including planning, engineering, GIS, legal, and city and county administration costs.
 The levy of special taxes to accumulate sinking funds for anticipated future repairs or replacement costs of landscape corridors, irrigation facilities, medians, entries and entry monumentation, lighting, neighborhood parks, storm water management and other facilities maintained by the CFD as determined by the Administrator.

Page 379 ends

12/09/2025 Item No.14.
43 Fiscal Year 2024/25 Collections & Expenditures
Facilities
Fund
Initial
Deposit
Prior Years
Additions /
Interest
Prior Years
Expenses
6/30/2024
Balance
Current Year
Additions /
Interest
Current Year
Expenses
6/30/2025
Balance
Acquisition and
Construction
$7,846,603 $8,414,730 $5,930,584 $2,484,145 $117,382 $0 $2,601,527 Underwriter’s
Discount
101,165 101,165 101,165 0 0 0 0
Costs of
Issuance
300,000 300,000 300,000 0 0 0 0
Reserve
Account
717,500 718,981 852 718,129 0 136 717,993
Capitalized
Interest
468,690 468,690 468,690 0 0 0 0
Services
6/30/2024
Balance
Amount
Collected
Expended
Amount
6/30/2025
Balance
Project
Status
$355,487 $169,554 $7,011 $518,030 On-going
CFD #23, IA3 Fund Detail
June 30, 2024 Acquisition and Construction Fund Cash Balance: 2,484,145$ Revenues:

Proceeds from Series 2022 Bonds -$
Interest Earned 117,382
Total Revenues: 117,382$
Expenses:

Progress Payment -$
Total Expenses: -$
Change in Receivables/Liabilities -
June 30, 2025 Acquisition and Construction Fund Cash Balance: 2,601,527$

Page 380 ends

12/09/2025 Item No.14.
44 CFD #23, IA3 Detail
June 30, 2024 Maintenance District Fund Cash Balance: 355,487$ Revenues:

Mangini Ranch Maintenance Direct Levy 151,962$
Reimbursements -
Interest Earned 17,592
Total Revenues: 169,554$
Expenses:

Water & Utilities 1,685$
Monthly Landscape Maintenance -
Repairs & Replacement 1,842
Departmental Charges -
Project Construction -
CFD Admin -
Other Expenses -
Transfers Out 153
Total Expenses: 3,680$
Change in Receivables/Liabilities (3,331)
June 30, 2025 Maintenance District Fund Cash Balance: 518,030$

Page 381 ends

12/09/2025 Item No.14.
45 City of Folsom
Community Facilities District No. 23 (Folsom Ranch)
Improvement Area 4
Established May 26, 2020
Special Tax Bonds, Series 2024 Issued December 5, 2024
Purpose of Special Tax
Facilities
The public facilities for Community Facilities District No. 23 (Folsom Ranch) (“CFD”) include the following:

Transportation Improvements: Eligible roadway improvements include, but are not limited to:
acquisition of land and easements; roadway design; project management; bridge crossings and culverts; clearing, grubbing, and demolition; grading, soil import/export, paving (including slurry seal), and decorative/enhanced pavement concrete and/or pavers; joint trenches, underground utilities and undergrounding of existing utilities; dry utilities and appurtenances; curbs, gutters, sidewalks, bike trails (including onsite and off-site), enhanced fencing, and access ramps; street lights, signalization, and traffic signal control systems; bus turnouts; signs and striping; erosion control; median and parkway landscaping and irrigation; entry monumentation; bus shelters, Bus Rapid Transit improvements including transfer stations and regional public transit improvements; masonry walls; traffic control and agency fees; and other improvements related thereto. Eligible improvements for the roads listed herein also include any and all necessary underground potable and recycled water, sanitary sewer, and storm drainage system improvements. Authorized facilities include the following transportation improvements:
 All public roadway improvements designed to meet the needs of development within the CFD, including internal subdivision streets and related underground utilities.

Page 382 ends

12/09/2025 Item No.14.
46 ways/channels, pump stations, landscaping and irrigation; access roads, gates, and fencing; and striping and signage and other improvements related thereto.

Page 383 ends

12/09/2025 Item No.14.
47 emergent, maintenance activities as required by a 404 permit and Operations and Management Plan-Conservation and Passive Recreation Open Space, dated June 9, 2017, and repair and replacement of facilities within open space areas in the Project Area.  The maintenance of on-site landscape corridors and paseos designed to serve land uses within the CFD, including general maintenance, masonry walls, accent lighting, water and utility costs.  The maintenance of streetlights, including any utility costs related thereto.  The maintenance of medians, entries, and entry monumentation.  Neighborhood park maintenance, and repair and replacement.  Community amenities, such as a community clubhouse.
 Storm water management, water quality structural controls, including drainage swales constructed between storm drain facilities and receiving waters.  Miscellaneous costs related to any of the items described above including planning, engineering, GIS, legal, and city and county administration costs.
 The levy of special taxes to accumulate sinking funds for anticipated future repairs or replacement costs of landscape corridors, irrigation facilities, medians, entries and entry monumentation, lighting, neighborhood parks, storm water management and other facilities maintained by the CFD as determined by the Administrator.

Fiscal Year 2024/25 Collections & Expenditures
Facilities
Fund
Initial
Deposit
Prior Years
Additions /
Interest
Prior Years
Expenses
6/30/2024
Balance
Current Year
Additions /
Interest
Current
Year
Expenses
6/30/2025
Balance
Acquisition and
Construction
$9,985,149 $0 $0 $0 $10,002,373 $10,002,373 $0
Reserve Account 828,500 0 0 0 840,071 0 840,071
Underwriter’s
Discount
118,384 0 0 0 118,384 118,384 0
Costs of Issuance 290,000 0 0 0 290,000 290,000 0

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12/09/2025 Item No.14.
48 Services
6/30/2024
Balance
Amount
Collected
Expended
Amount
6/30/2025
Balance
Project
Status
$124,457 $141,546 $22,832 $243,171 On-going
CFD #23, IA4 Fund Detail
June 30, 2024 Acquisition and Construction Fund Cash Balance: -$ Revenues:

Proceeds from Series 2024 Bonds 9,985,149$
Interest Earned 17,224
Total Revenues: 10,002,373$
Expenses:

Progress Payment #1 to TCS Improvement Co. 935,094$
Progress Payment #2 to TCS Improvement Co. 9,067,279
Total Expenses: 10,002,373$
Change in Receivables/Liabilities -
June 30, 2025 Acquisition and Construction Fund Cash Balance: -$

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12/09/2025 Item No.14.
49 City of Folsom
Community Facilities District No. 23 (Folsom Ranch)
Improvement Area 5
Established May 26, 2020
Purpose of Special Tax
Facilities
The public facilities for Community Facilities District No. 23 (Folsom Ranch) (“CFD”) include the following:

Transportation Improvements: Eligible roadway improvements include, but are not limited to:
acquisition of land and easements; roadway design; project management; bridge crossings and culverts; clearing, grubbing, and demolition; grading, soil import/export, paving (including slurry seal), and decorative/enhanced pavement concrete and/or pavers; joint trenches, underground utilities and undergrounding of existing utilities; dry utilities and appurtenances; curbs, gutters, sidewalks, bike trails (including onsite and off-site), enhanced fencing, and access ramps; street lights, signalization, and traffic signal control systems; bus turnouts; signs and striping; erosion control; median and parkway landscaping and irrigation; entry monumentation; bus shelters, Bus Rapid Transit improvements including transfer stations and regional public transit improvements; masonry walls; traffic control and agency fees; and other improvements related thereto. Eligible improvements for the roads listed herein also include any and all necessary underground potable and recycled water, sanitary sewer, and storm drainage system improvements. Authorized facilities include the following transportation improvements:
 All public roadway improvements designed to meet the needs of development within the CFD, including internal subdivision streets and related underground utilities.

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12/09/2025 Item No.14.
50 Wastewater System Improvements: Authorized facilities include any and all wastewater facilities designed to meet the needs of development of property within the CFD. These facilities include, but may not be limited to, pipelines and all appurtenances thereto; manholes; tie-in to existing main lines; force mains; lift stations; upgrades to existing lift stations; odor-control facilities; and permitting related thereto; and related sewer system improvements.

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12/09/2025 Item No.14.
51  The maintenance of on-site landscape corridors and paseos designed to serve land uses within the CFD, including general maintenance, masonry walls, accent lighting, water and utility costs.  The maintenance of streetlights, including any utility costs related thereto.  The maintenance of medians, entries, and entry monumentation.  Neighborhood park maintenance, and repair and replacement.  Community amenities, such as a community clubhouse.
 Storm water management, water quality structural controls, including drainage swales constructed between storm drain facilities and receiving waters.  Miscellaneous costs related to any of the items described above including planning, engineering, GIS, legal, and city and county administration costs.
 The levy of special taxes to accumulate sinking funds for anticipated future repairs or replacement costs of landscape corridors, irrigation facilities, medians, entries and entry monumentation, lighting, neighborhood parks, storm water management and other facilities maintained by the CFD as determined by the Administrator.

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52 City of Folsom
Community Facilities District No. 23 (Folsom Ranch)
Improvement Area 6
Established May 26, 2020
Purpose of Special Tax
Facilities
The public facilities for Community Facilities District No. 23 (Folsom Ranch) (“CFD”) include the following:

Transportation Improvements: Eligible roadway improvements include, but are not limited to:
acquisition of land and easements; roadway design; project management; bridge crossings and culverts; clearing, grubbing, and demolition; grading, soil import/export, paving (including slurry seal), and decorative/enhanced pavement concrete and/or pavers; joint trenches, underground utilities and undergrounding of existing utilities; dry utilities and appurtenances; curbs, gutters, sidewalks, bike trails (including onsite and off-site), enhanced fencing, and access ramps; street lights, signalization, and traffic signal control systems; bus turnouts; signs and striping; erosion control; median and parkway landscaping and irrigation; entry monumentation; bus shelters, Bus Rapid Transit improvements including transfer stations and regional public transit improvements; masonry walls; traffic control and agency fees; and other improvements related thereto. Eligible improvements for the roads listed herein also include any and all necessary underground potable and recycled water, sanitary sewer, and storm drainage system improvements. Authorized facilities include the following transportation improvements:
 All public roadway improvements designed to meet the needs of development within the CFD, including internal subdivision streets and related underground utilities.

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12/09/2025 Item No.14.
53 Wastewater System Improvements: Authorized facilities include any and all wastewater facilities designed to meet the needs of development of property within the CFD. These facilities include, but may not be limited to, pipelines and all appurtenances thereto; manholes; tie-in to existing main lines; force mains; lift stations; upgrades to existing lift stations; odor-control facilities; and permitting related thereto; and related sewer system improvements.

In 2023, the Rate and Method of Apportionment associated with the CFD was amended to remove the facilities special tax from the CFD. As of Fiscal Year 2023/24, the facilities special tax is no longer levied.

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12/09/2025 Item No.14.
54 emergent, maintenance activities as required by a 404 permit and Operations and Management Plan-Conservation and Passive Recreation Open Space, dated June 9, 2017, and repair and replacement of facilities within open space areas in the Project Area.  The maintenance of on-site landscape corridors and paseos designed to serve land uses within the CFD, including general maintenance, masonry walls, accent lighting, water and utility costs.  The maintenance of streetlights, including any utility costs related thereto.  The maintenance of medians, entries, and entry monumentation.  Neighborhood park maintenance, and repair and replacement.  Community amenities, such as a community clubhouse.
 Storm water management, water quality structural controls, including drainage swales constructed between storm drain facilities and receiving waters.  Miscellaneous costs related to any of the items described above including planning, engineering, GIS, legal, and city and county administration costs.
 The levy of special taxes to accumulate sinking funds for anticipated future repairs or replacement costs of landscape corridors, irrigation facilities, medians, entries and entry monumentation, lighting, neighborhood parks, storm water management and other facilities maintained by the CFD as determined by the Administrator.

Fiscal Year 2024/25 Collections & Expenditures
Services
6/30/2024
Balance
Amount
Collected
Expended
Amount
6/30/2025
Balance
Project
Status
$1,059 $7,311 $1,963 $6,407 On-going

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12/09/2025 Item No.14.
55 CFD #23, IA6 Detail
June 30, 2024 Maintenance District Fund Cash Balance: 1,059$ Revenues:

Mangini Ranch Maintenance Direct Levy 7,203$
Reimbursements -
Interest Earned 108
Total Revenues: 7,311$
Expenses:

Water & Utilities 443$
Monthly Landscape Maintenance -
Repairs & Replacement 1,464
Departmental Charges -
Project Construction -
CFD Admin -
Other Expenses -
Transfers Out -
Total Expenses: 1,907$
Change in Receivables/Liabilities (56)
June 30, 2025 Maintenance District Fund Cash Balance: 6,407$

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12/09/2025 Item No.14.
56 City of Folsom
Community Facilities District No. 23 (Folsom Ranch)
Improvement Area 7
Established December 14, 2021
Purpose of Special Tax
Facilities
The public facilities for Community Facilities District No. 23 (Folsom Ranch) (“CFD”) include the following:

Transportation Improvements: Eligible roadway improvements include, but are not limited to:
acquisition of land and easements; roadway design; project management; bridge crossings and culverts; clearing, grubbing, and demolition; grading, soil import/export, paving (including slurry seal), and decorative/enhanced pavement concrete and/or pavers; joint trenches, underground utilities and undergrounding of existing utilities; dry utilities and appurtenances; curbs, gutters, sidewalks, bike trails (including onsite and off-site), enhanced fencing, and access ramps; street lights, signalization, and traffic signal control systems; bus turnouts; signs and striping; erosion control; median and parkway landscaping and irrigation; entry monumentation; bus shelters, Bus Rapid Transit improvements including transfer stations and regional public transit improvements; masonry walls; traffic control and agency fees; and other improvements related thereto. Eligible improvements for the roads listed herein also include any and all necessary underground potable and recycled water, sanitary sewer, and storm drainage system improvements. Authorized facilities include the following transportation improvements:
 All public roadway improvements designed to meet the needs of development within the CFD, including internal subdivision streets and related underground utilities.

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12/09/2025 Item No.14.
57 Wastewater System Improvements: Authorized facilities include any and all wastewater facilities designed to meet the needs of development of property within the CFD. These facilities include, but may not be limited to, pipelines and all appurtenances thereto; manholes; tie-in to existing main lines; force mains; lift stations; upgrades to existing lift stations; odor-control facilities; and permitting related thereto; and related sewer system improvements.

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12/09/2025 Item No.14.
58  The maintenance of on-site landscape corridors and paseos designed to serve land uses within the CFD, including general maintenance, masonry walls, accent lighting, water and utility costs.  The maintenance of streetlights, including any utility costs related thereto.  The maintenance of medians, entries, and entry monumentation.  Neighborhood park maintenance, and repair and replacement.  Community amenities, such as a community clubhouse.
 Storm water management, water quality structural controls, including drainage swales constructed between storm drain facilities and receiving waters.  Miscellaneous costs related to any of the items described above including planning, engineering, GIS, legal, and city and county administration costs.
 The levy of special taxes to accumulate sinking funds for anticipated future repairs or replacement costs of landscape corridors, irrigation facilities, medians, entries and entry monumentation, lighting, neighborhood parks, storm water management and other facilities maintained by the CFD as determined by the Administrator.

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59 Page 396
12/09/2025 Item No.14.

Folsom City Council
Staff Report
1 MEETING DATE: 12/9/2025
AGENDA SECTION: Public Hearing
SUBJECT: Ordinance No. 1359 – An Ordinance of the City of Folsom Amending Certain Sections of Chapter 17.104 (Inclusionary Housing) of the Folsom Municipal Code to Update the Methodology for Calculating In-lieu Fees Applicable to Residential Development, and to Incorporate Non-Substantive Cleanup Revisions for Clarity and Consistency, and Determine that the Project is Exempt from CEQA (Introduction and First Reading)
FROM: Community Development Department

RECOMMENDATION / CITY COUNCIL ACTION
Staff recommends that the City Council move to adopt Ordinance No. 1359 – An Ordinance of the City of Folsom Amending Certain Sections of Chapter 17.104 (Inclusionary Housing) of the Folsom Municipal Code to Update the Methodology for Calculating In-lieu Fees Applicable to Residential Development, and to Incorporate Non-Substantive Cleanup Revisions for Clarity and Consistency, and Determine that the Project is Exempt from CEQA.

BACKGROUND / ISSUE
The City of Folsom’s Inclusionary Housing Ordinance, Chapter 17.104 of the Folsom Municipal Code, plays a key role in promoting the development of affordable housing.

Adopted in 2002 and amended in 2013, the ordinance is a significant component of the City’s overall affordable housing strategy.

Under the City’s Inclusionary Housing Ordinance, developers of new for-sale detached singlefamily homes within subdivisions of ten housing units, or more are required to provide at least 10 percent of their homes to lower-income households (3 percent very low and 7 percent low).

However, a developer may opt to pay an in-lieu fee instead of constructing affordable units onsite. Other seldom-used options also exist. Given the complexities and challenges associated with building deed-restricted affordable for-sale homes, almost all developers in Folsom choose to pay the in-lieu fee. This fee is paid instead of or in-lieu of building the affordable,

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2 deed-restricted housing units. It is calculated as 1 percent (1%) of the sales price of the lowestpriced unit in the subdivision, multiplied by the total number of units in the project. To determine the fee amount, developers are required to submit architectural plans and anticipated homes sales pricing prior to the issuance of building permits. Additionally, developers must enter into an inclusionary housing agreement to formalize the fee calculation and related requirements. To date, the Inclusionary Housing Fee program has generated approximately $30.5 million, which has been instrumental in providing gap financing for affordable rental housing projects. However, administration of the in-lieu fee program is unnecessarily complex and burdensome as described in more detail in this report. As a result, staff is recommending changes to the in-lieu fee methodology to improve predictability and the process for staff and applicants.

Housing Element Program H-9
The City’s 2021–2029 Housing Element included Program H-9, which required the City to conduct an inclusionary housing fee study. The purpose of the program was to evaluate fee levels and funding gaps, as well as to improve the existing methodology for calculating the inlieu fee. To implement Program H-9, the City retained Economic & Planning Systems, Inc. (EPS) to conduct a comprehensive review of the existing fee program, with a particular focus on exploring alternative fee calculation methods that better align with regional practices.

In addition to policy considerations, City staff identified administrative challenges within the current fee structure. The system has resulted in more than 75 subdivision-specific fees, each requiring manual input into the City’s permit processing system. This lack of integration with the City’s automated review and permitting systems increases the risk of clerical errors and creates inefficiencies in fee administration.

Inclusionary Housing Program Feasibility Analysis
The Inclusionary Housing Program Study, conducted by EPS, explored potential updates to the City’s Inclusionary Housing Ordinance (IHO), with a focus on the in-lieu fee applied to residential developments that did not meet their affordable housing obligations through on-site construction. Although such in-lieu fees are not legally required to meet nexus standards under California’s Mitigation Fee Act and related legislation, EPS applied a nexus-based methodology to reassess the affordability gap and calculate the maximum justifiable fee.

Given recent challenges in California to in-lieu fees, the use of nexus studies is recommended, which is why EPS performed such as study. The study also examined the impact of Assembly Bill 1505, enacted in 2017, which gave cities the authority to apply inclusionary housing requirements—including in-lieu fees—to rental developments. Based on this legislation, the study evaluated the potential expansion of the ordinance to cover rental projects as previously recommended by the Planning Commission.

EPS reviewed the City’s current in-lieu fee using updated socioeconomic and real estate market data. Since the last analysis, several major shifts occurred—most notably the economic impacts of the COVID-19 pandemic, rising construction costs, and higher interest rates. These factors have affected both home values and rental prices and have increased the cost of housing

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3 production. As a result, the financial investment required to produce affordable units has grown, as has the funding gaps faced by developers of affordable housing projects. The updated analysis aims to determine a revised fee that reflects these conditions while maintaining feasibility for new market-rate development.

In addition, the study incorporates input from stakeholders, including market-rate and affordable housing developers, as well as City staff, compares our current in-lieu fee methodology amount and proposed fee amount to other jurisdictions, and considers State legislative changes adopted since the previous analysis. EPS also reviewed affordable housing policies and funding strategies in selected peer jurisdictions to provide context for potential updates to the in-lieu fee.

Summary of Key Study Findings and Recommendations
Fee Structure and Developer Impact
 The Study recommends adopting a per-square-foot fee structure to streamline administration and offer developers greater clarity regarding project costs.

Specifically, it proposes:
o An In-lieu fee of $3.00 per square foot for single-family for sale units, consistent with average current fee levels ($2.97 per square foot). o A lower $2.50 per square foot fee for multifamily for-sale units (1,500 square feet or less), structured to support the financial viability of higher density missing middle housing alternatives.
 In the Folsom Plan Area—where most new housing development is concentrated—the Study found that developers currently face significant fee burdens:
o Single-family for-sale units incur average impact fees of nearly $95,000 per unit, including inclusionary in-lieu fees typically ranging from $5,000 to $11,000 per unit.
o Rental multifamily units, although exempt from inclusionary fees, still face impact fees of approximately $60,000 per unit, posing feasibility challenges under current market conditions.

Developer Feedback and Historical Fee Data
 Developers expressed strong support for retaining the existing fee structure and fee levels given that it is based on the sales-price for the lowest priced home.  Historical building permit data from 2023 to present indicates that developers have paid an average inclusionary housing in-lieu fee of approximately $3.00 per square foot under the current framework.

Feasibility Analysis and Recommendations
 Estimated development costs, including the current in-lieu fee, are feasible for singlefamily residential projects.

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12/09/2025 Item No.15.
4  Multifamily for-sale housing types (e.g., condominiums, townhomes) and multifamily rental apartments are generally infeasible under current market conditions.  To address these feasibility concerns and support the City’s Housing Element goals for higher-density housing, the Study recommends:
o Implementing a $2.50 per square foot in-lieu fee for multifamily for-sale units (e.g., condominiums, townhomes).
o Establishing a clear definition of multifamily for-sale units to ensure consistent application of the reduced fee.
o Continuing to exempt multifamily rental units (apartments) from the in-lieu fee to enhance development viability.
o Applying an automatic construction cost inflation adjustment to the new fee(s).

Proposed FMC Title 17 Amendments
Based on the findings and recommendations of the EPS study, staff’s experience administering the Inclusionary Housing Ordinance (IHO), recent amendments to California State law regarding density bonuses, and the presence of outdated language in the current ordinance, staff recommends a series of revisions to Folsom Municipal Code Chapter 17.104. The central proposal involves amending Section 17.104.060(g) to revise the methodology for calculating the in-lieu fee. Specifically, the proposed change would replace the current formula—1% of the lowest priced home in the subdivision—with a simplified, standardized squarefootage-based fee, as recommended in the section above. This approach is consistent with practices in many other jurisdictions and, while not legally mandated, aligns with the nexus requirements of AB 602 (2021), which standardizes development impact fees on a per-squarefoot basis.

In addition to the proposed changes to the fee methodology, staff recommends several other amendments to the inclusionary housing ordinance. These include eliminating outdated references, such as those pertaining to the former Redevelopment Agency, and updating language to match current administrative practices and terminology. Furthermore, a number of revisions are intended to bring the ordinance into alignment with recent changes in California housing law. The State has enacted multiple measures to streamline housing production and reduce regulatory barriers for developers, necessitating updates to existing provisions related to density bonuses, fee deferrals, and tenant preference policies to ensure compliance with current legal requirements.

Note: As part of the proposed updates, the existing resident and local worker preference requirements for affordable housing are being removed to ensure consistency with current State law and federal fair housing regulations. However, staff plans to revisit this issue by developing a new local preference policy, which will be brought back to the Planning Commission and City Council for consideration. This future proposal will be shaped by the City Council’s prior direction and supported by additional research to ensure legal compliance and alignment with the City’s housing goals.

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5 Planning Commission Workshop
On September 17, 2025, the Planning Commission held a public workshop to review and discuss the Inclusionary Housing Ordinance. During the session, City staff presented preliminary findings from the Inclusionary Housing Program Study to both the Commission and the public. The workshop included an overview of the ordinance’s history, current requirements, and regulatory framework, and highlighted key operational challenges tied to the existing in-lieu fee calculation method. Staff also introduced potential goals for updating the fee structure to improve efficiency and better align with the City’s affordable housing objectives. Materials from the workshop are available at the following link:
https://www.folsom.ca.us/government/community-development/planning-services/planningcommission Other Outreach
In addition to the workshop, staff conducted a series of outreach efforts to engage the community and stakeholders. These efforts included distributing more than 600 emails to residents, businesses, and developers throughout Folsom; holding three consultation meetings with the North State Building Industry Association; convening two stakeholder meetings with the Sacramento Housing Alliance (SHA) and Legal Services of Northern California; and creating a dedicated Inclusionary Housing Ordinance Update webpage to provide ongoing access to materials and updates.

Builders and the BIA expressed strong support for maintaining Folsom’s current sales pricebased inclusionary housing in-lieu fee model, emphasizing its flexibility and ability to adapt to changing market conditions—particularly during an economic downturn. They noted that on-site construction requirements pose significant operational challenges, making the feebased approach more manageable. Furthermore, the building representatives raised concerns that revising the fee methodology could result in higher inclusionary fees, especially given that Folsom’s fees in the Plan Area are already considered high relative to other jurisdictions. They also questioned the feasibility of applying inclusionary requirements to rental projects under current economic conditions.

During consultation meetings held after release of the Public Review Draft, several building representatives reaffirmed their support for the existing fee structure, emphasizing that it reflects market realities and avoids disproportionate impacts on larger homes. While acknowledging administrative burdens, developers expressed a willingness to collaborate on streamlining the process, offering suggestions such as a one-time processing fee, submission of sales data at the time of model home permitting, and collection of fees at certificate of occupancy when funds are more readily available.

If the City were to pursue a square-foot-based fee, developers recommended incorporating a sliding scale to mitigate impacts on larger homes. Some also raised questions about whether projects with existing inclusionary housing agreements would be able transition to the new methodology if adopted. In response to developer feedback and concerns, staff prepared three alternative options for consideration, which are summarized in Attachment 5 to this report.

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12/09/2025 Item No.15.
6 In parallel meetings with SHA and Legal Services of Northern California, affordable housing representatives raised concerns about any reduction in the proposed fee from existing levels and expressed the need for a higher fee given the recent reductions in affordable housing funding available from the State. They were also supportive of the alternative option (Option 2) that required the payment of all in-lieu fees at the first certificate of occupancy since this would result in funding for affordable housing projects earlier than under the current process.

Planning Commission Hearing
On November 9, 2025, the Planning Commission held a duly noticed public hearing to review and discuss proposed amendments to the Inclusionary Housing Ordinance. During the hearing, the consultant and city staff presented the key findings and recommendations of the Inclusionary Housing Program Study, which focused on evaluating potential updates to Folsom’s Inclusionary Housing Ordinance with a particular emphasis on the in-lieu fee applied to residential developments that do not provide affordable units on-site.

EPS provided a high-level overview of the affordability gaps used to calculate the maximum justifiable fee. This analysis incorporated updated socioeconomic and market data reflecting the impacts of COVID-19, rising construction costs, and higher interest rates—all of which have increased housing production costs and widened funding gaps for affordable projects.

EPS also reviewed the implications of Assembly Bill 1505, which authorizes cities to apply inclusionary housing requirements to rental developments.

In addition, staff and the consultant provided an overview of stakeholder input, comparisons with peer jurisdictions, and recent legislative changes. As part of this discussion, staff presented three alternative approaches to the recommended fee structure for consideration based on developer feedback. These alternatives, included in Attachment 5 to the staff report, were:
 Option 1: Retain the existing formula but shift administration to a third-party consultant.
 Option 2: Maintain the current formula but collect fees at the certificate of occupancy.  Option 3: Transition to a square-foot-based in-lieu fee structure; however, implement a sliding scale to reduce the cost burden on larger homes.

Staff noted that the merits of each option were carefully considered. However, based on experience administering the current program and the findings of the EPS Study, staff expressed support for the proposed residential per-square-foot fee methodology and proposed fee amount recommended in the Study.

At the meeting, two stakeholders provided comments on behalf of the Building Industry Association (BIA) and Toll Brothers. The BIA representative reaffirmed support for maintaining the current fee structure and expressed concern that a solution related to reducing the administrative burden on staff had been determined prior to consultation with the BIA. The representative from Toll Brothers indicated that their organization was comfortable either

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12/09/2025 Item No.15.
7 retaining the existing methodology or transitioning to a square-foot-based approach. Neither representative recommended that the commission consider any of the alternatives presented by staff; however, Toll Brothers stated they did not support Option 2, noting that requiring payment of all in-lieu fees at the first certificate of occupancy would impose a financial burden on developers.

Following public comment, the public hearing was closed. The Commission then deliberated and asked staff and the consultant questions regarding the recommendation and the alternatives presented. At the conclusion of its discussion, the Planning Commission adopted a motion (5-0-0-2, with two members absent) recommending that the City Council adopt Ordinance No. 1359 and determine that the project is exempt from CEQA.

POLICY / RULE
Folsom Municipal Code (FMC) Chapter 17.68 (Amendments) governs the process for the City to amend FMC Title 17 – Zoning. The Planning Commission must hold a public hearing on any proposed amendment and make a recommendation to the City Council. The City Council then may consider the amendment at a public hearing. The City Council must find that the public necessity and convenience and the general welfare require such an amendment.

ANALYSIS
The City’s 2021–2029 Housing Element includes Program H-9, which directs staff to conduct a study of the inclusionary housing in-lieu fee. The goal of this program is to evaluate fee levels and funding gaps, and to improve the methodology for calculating the in-lieu fee. The existing calculation method—based on 1% of the lowest-priced home in a subdivision—has proven to be administratively inefficient and incompatible with the City’s current fee processing system.

Despite these challenges, the inclusionary fee program has been highly successful, generating approximately $30.5 million in funding that has supported gap financing for several affordable housing developments. This funding has resulted in the creation of over 320 new affordable apartments in Folsom, demonstrating the effectiveness of the fee amount.

Overview of Current Process and Challenges
 Sales Price Estimation: Since the IHO in-lieu fee is set as 1% of the lowest priced home in the subdivision, sales price information is required. However, developers typically do not have final home prices available at the time of initial building permit issuance, especially for model homes. Consequently, City staff must rely on developerprovided market analyses to estimate sales prices. This step requires staff review and validation.
 Initial Fee Determination: Each subdivision must prepare an in-lieu fee determination to formally establish its initial fee. This step creates a fixed reference point for consistent tracking and administration.
 Manual Fee Entry: Once the fee is set, it must be manually entered into the City’s development permit and processing system for every single production home permit in the subdivision. Because the fee is subdivision-specific and not standardized, it remains

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12/09/2025 Item No.15.
8 one of the few non-automated building permit fees. This manual process increases the risk of clerical errors and inefficiencies. In the Folsom Plan Area alone, over 75 separate inclusionary housing fees have been established for individual subdivisions as shown in Attachment 4.
 Deed Restriction Requirements: Current practice requires an inclusionary housing deed restriction to be placed on applicable projects. This restriction serves multiple purposes: it ensures the project is subject to the required fee, outlines all provisions related to fee calculation, monitoring, and future updates, and helps maintain consistency and transparency in how the requirements are applied across developments. However, the process of recording the deed restriction against the property and then removing it once the requirements of the IHO have been satisfied is time consuming for City staff.
 Annual Fee Review: The ordinance requires an annual review of the lowest-priced unit in each subdivision to determine if the sales price has changed by more than 10%.

If so, the inclusionary housing fee must be recalculated and applied to remaining lots.

To support this review, inclusionary housing agreements require developers to submit home sales reports. However, compliance is inconsistent, often requiring staff to follow up directly with developers or independently review builder websites for current pricing data.

Revision to Fee Structure
While the current ordinance offers flexibility for developers and has effectively generated funding for affordable housing, as indicated above, its administration demands ongoing staff time, coordination, and effort to maintain fairness and consistency. To address these operational inefficiencies and reduce the amount of staff time dedicated to implementing the current fee structure, staff supports the Study’s recommendation to revise the Inclusionary Housing Ordinance (IHO) and transition to a square footage-based fee structure. This approach, increasingly adopted by other jurisdictions, is expected to streamline administration, reduce processing burdens, and provide developers with clearer and more predictable cost expectations.

Section 4 of the Study (pages 40–48) presents a comparative survey of jurisdictions evaluating the City’s inclusionary program against others in the region and other selected jurisdictions in the State with inclusionary programs. The survey highlights that no other jurisdiction uses sales price as a basis for calculating in-lieu fees. Instead, most apply either a flat fee or a per-squarefoot fee. Because square footage is a standard metric used in building permits, it simplifies fee calculation and verification. Moreover, flat fees may disproportionately impact smaller projects or undercharge larger ones, whereas a square footage-based fee ensures a more equitable distribution of costs across varying project sizes.

Fee Amount Recommendation and Analysis
The Study recommends establishing an in-lieu fee of $3.00 per square foot for single-family for-sale units, aligning with current fee levels, and $2.50 per square foot for for-sale

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9 multifamily units to help ensure the financial viability of this housing type. The following section offers a high-level summary of the EPS Study and the rationale behind the proposed fees.

To inform these recommendations, the Study analyzed four representative residential prototypes—two single-family and two multifamily—reflecting recent development patterns in Folsom. Although the prototypes differ in design and pricing, the analysis applied a standardized pro forma with consistent assumptions regarding unit size, base density, and housing type. A summary of these prototypes is presented below and detailed in Table 3.1, with further context provided in Section 3 of the Study.

Prototype Housing Type Tenure Unit Size
(sq ft)
BedroomsBase Density
(DU/acre)
Prototype 1 Single Family Low Density For-sale 2,600 4 5 Prototype 2 Single Family Medium Density For-sale 2,000 3 10 Prototype 3 Multifamily Low Density For-sale 1,500 3 18 Prototype 4 Multifamily High Density Rental 1,000 2 30
Using a nexus-based methodology, the Study estimates the maximum supportable in-lieu fees for each residential prototype by evaluating two key factors: the affordability gap and the additional demand for affordable housing generated by new market-rate development. This demand arises from the increased need for lower-wage workers who support higher-income households—workers who are often unable to afford market-rate housing. This approach is based on the premise that higher-income households spend more on goods and services, which creates jobs—many of which pay lower wages. These workers often cannot afford market-rate housing. Charging fees on new market-rate development helps address the increased demand for affordable housing created by this dynamic.

The maximum supported nexus based inclusionary housing in-lieu fee per square foot for each prototype analyzed in this study is summarized on Page 8 of the Study in Table 3.9. While the maximum supported inclusionary housing fee is very high, it does not consider the overall fee burden of all fees on residential development. As a result, no jurisdiction uses the maximum supported fee, but it does establish the outer end of a range of legally defensible fees.

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10 In addition to identifying the maximum nexus-based fee, the EPS Study presents two alternative in-lieu fee scenarios for City Council consideration: a low-fee option consistent with current rates, and a high-fee option set at 20% of the maximum supportable amount. These alternative fees are summarized in the Table above.

While the City has the authority to adopt fees up to the maximum level, it is standard practice to set fees well below that threshold to maintain project feasibility and avoid discouraging housing production. Because the primary goal of the Inclusionary Housing Ordinance (IHO) update is to transition to a square-foot-based fee calculation method – not to increase fee levels—staff recommends adopting a fee of $3.00 per square foot for single-family for-sale units and $2.50 per square foot for for-sale multifamily units. These rates are financially viable and align with the City’s current affordable housing strategy. As noted earlier in this report, historical building permit data from 2023 to the present indicates that developers have paid an average in-lieu fee of approximately $2.97 per square foot under the existing fee methodology.

The recommended fee levels would continue to provide the City with meaningful financial resources to support affordable housing development. With an estimated local subsidy of approximately $55,000 per unit, the City can invest in housing opportunities for lower-income residents while maintaining overall project feasibility. Rental multifamily projects would remain exempt, reflecting ongoing economic challenges in the rental housing market where narrow margins mean that additional fees could jeopardize project viability and reduce the supply of much-needed rental units in the Folsom Plan Area.

This balanced approach ensures that the Inclusionary Housing Ordinance remains effective in generating resources for affordable housing while avoiding undue burdens on new residential development.

Prototype Housing Type Tenure
Unit
Size
(sq
ft)
Per Square Foot Fee Level
Max
Allowed
Fee
High
Scenario
(20 % of
maximum)
Low
Scenario
(matches
existing fee)
Prototype 1 Single Family Low
Density
For-sale 2,600 $59.56 $11.91 $3.00
Prototype 2 Single Family
Medium Density
For-sale 2,000 $44.35 $8.87 $3.00
Prototype 3 Multifamily Low
Density
For-sale 1,500 $35.82 $7.16 $2.50
Prototype 4 Multifamily High
Density
Rental 1,000 $34.01 $6.80 $0.00

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11 Regional In-Lieu Fee Comparison
Finally, to assess the City’s current and proposed in-lieu fee levels, the Study examined perunit fees for the single-family low-density housing prototype across jurisdictions in the Sacramento Region. As summarized in Table 4.3 of the Study, Folsom’s existing and recommended fees are generally in line with regional benchmarks. Specifically, Folsom’s fee is approximately 10% lower than those in the City of Sacramento and Sacramento County, yet it is 35% and 75% higher than the fees in Rancho Cordova and the City of Elk Grove, respectively, though the fee level in Rancho Cordova is just based on one Affordable Housing Plan for a specific development.

FINANCIAL IMPACT
There is no financial impact on the General Fund. The inclusionary housing in-lieu fee will continue to support the Folsom Housing Fund (Fund 238). Based on historical data, the recommended fee of $3.00 per square foot for single-family for-sale housing units is consistent with the amounts previously collected under the current framework. The proposed $2.50 per square foot reduced fee for multifamily for-sale housing units 1,500 square feet or less may result in minor reductions in overall collections; however, this outcome is consistent with the City’s efforts to encourage more moderate “missing middle” housing options. As such, it aligns with Council direction as well as the goals and policies outlined in the Housing Element.

Consistent with existing in-lieu fee requirements, a minimum of 50% of revenue generated from the fund will be allocated for the development of lower-income housing units. Overall, revenues are expected to remain stable compared to current collections. To ensure the fee remains responsive to market conditions, it will be indexed to the Construction Cost Index (CCI), providing for regular adjustments over time.

ENVIRONMENTAL REVIEW
The proposed City Council action to adopt Ordinance No. 1359 is exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15378 (b)(4) “Project” and Section 15061(b)(3) “Review for Exemption”. Under Section 15378, the action does not constitute a “project” under CEQA, as it pertains solely to administrative or procedural matters that do not result in direct physical environmental changes. Furthermore, Section 15061(b)(3) - the “common sense exemption” -applies because it can be determined with certainty that the adoption of this updated document will not lead to significant effects on the environment.

ATTACHMENTS

1. Ordinance No. 1359 - An Ordinance of the City of Folsom Amending Certain Sections of Chapter 17.104 (Inclusionary Housing) of the Folsom Municipal Code to Update the Methodology for Calculating In-lieu Fees Applicable to Residential Development, and to Incorporate Non-Substantive Cleanup Revisions for Clarity and Consistency, and Determine that the Project is Exempt from CEQA

2. Folsom Municipal Code Chapter 17.104 (Inclusionary Housing) – Applicable Section Strikethrough

3. City of Folsom Inclusionary Housing Program Study – Public Review Draft

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12 4. List of Inclusionary Housing Fees

5. Alternative Fee Structure Considerations
Submitted,
______________________________________
Pam Johns, Community Development Director

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Attachment 1
Ordinance No. 1359 – An Ordinance of the City of Folsom Amending Certain Sections of Chapter 17.104 (Inclusionary Housing) of the Folsom Municipal Code to Update the
Methodology for Calculating In-lieu Fees Applicable to
Residential Development, and to Incorporate NonSubstantive Cleanup Revisions for Clarity and Consistency, and Determine that the Project is Exempt from CEQA

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ORDINANCE NO. 1359

AN ORDINANCE OF THE CITY OF FOLSOM AMENDING CERTAIN SECTIONS OF CHAPTER 17.104 (INCLUSIONARY HOUSING) OF THE FOLSOM MUNICIPAL

CODE TO UPDATE THE METHODOLOGY FOR CALCULATING IN-LIEU FEES APPLICABLE TO RESIDENTIAL DEVELOPMENT, AND TO INCORPORATE NONSUBSTANTIVE CLEANUP REVISIONS FOR CLARITY AND CONSISTENCY The City Council of the City of Folsom does hereby ordain as follows:

SECTION 1 PURPOSE
The purpose of this ordinance is to amend certain sections of Chapter 17.104 in the Folsom Municipal Code to amend specific sections of Chapter 17.104 of the Folsom Municipal Code, which includes a revision to the calculation method for the in-lieu fee. The current formula of 1% of the lowest-priced home in the subdivision will be replaced with a simplified, standardized structure based on square footage, aligning with practices in other jurisdictions. Additional revisions include cleanup amendments to remove outdated references, ensure consistency with current state law, and enhance clarity and administrative efficiency. The City Council finds that such change is necessary to promote the public health, safety, and welfare.

SECTION 2
Sections 17.104.020 to 17.104.070 of the Folsom Municipal Code is hereby amended to read as follows:

17.104.020 Definitions
“Adjusted basis” means the adjustment to the basis of a home for purposes of determining capital gains. Adjusted basis shall be defined and determined consistently with the Internal Revenue Service publication 523 “Selling Your Home.”
“Affordable” means rented at an affordable rent or sold at an affordable housing price. “Affordable housing price” means a sales price at which low income or very low income households as provided in this chapter can qualify for the purchase of for-sale inclusionary units.

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and (2) for a unit whose occupancy is restricted to a very low income household, that the monthly rent consists of no more than one-twelfth of thirty-five percent of fifty percent of the median income applicable to Sacramento County less a reasonable allowance for utilities. In each case, the median income applicable to Sacramento County is as determined annually by the United States Department of Housing and Urban Development, adjusted for household size. “Affordable rental agreement” means legal restrictions by which the rents for rental inclusionary units will be set at such rates to ensure that rents remain affordable for a period of thirty years or longer.
“City” means the city of Folsom.
“Community development director” means the director of the community development department of the city, or his or her designee.
“Condominium” means and includes:

1. “Condominium” as defined by Section 783 of the Civil Code;

2. “Community apartment project” as defined by Section 11004 of the Business and Professions Code;

3. “Stock cooperative” as defined by Section 11003.2 of the Business and Professions Code; and

4. “Planned development” as defined by Section 11003 of the Business and Professions Code.

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density, and any requested concession or incentives, waivers or reductions of development standards as provided in the Folsom Municipal Code or state law. “Developer” means any applicant, person, developer, firm, partnership, association, joint venture, corporation, or any entity or combination of entities which seeks the city’s approvals for all or part of a development project. “Applicant” includes “owner.” “Development agreement” means an agreement entered into between the city and developer pursuant to Section 65864 et seq. of the Government Code. “Development project” means any residential real estate project or mixed residential and commercial real estate project consisting of residential units, including homes, multifamily residences or other residential structures. Projects at one location undertaken in phases, stages or otherwise developed in distinct sections shall be considered a single development project for purposes of this section. Development projects are those projects for which the developer is applying for new legislative entitlements which are not otherwise exempt under the provisions of this chapter.
“Dwelling unit” means a residential unit within a development project. “External subsidy” means any source of funds that is not local public funding, including federal or state grants, loans, bond funds, tax credits or other tax-based subsidy. “Final decision-making body” means the entity with final approval authority on the development project.
“First-time home buyer” means that neither the purchaser nor spouse has owned a home during the past three years, or that the purchaser meets at least one of the following criteria:

1. The purchaser is a displaced homemaker, defined as a person who has not worked full-time for at least three years, worked primarily without remuneration to care for the home and family, is unemployed or underemployed, is experiencing difficulty in obtaining or upgrading employment, and, while a homemaker, owned a home with a previous spouse;

2. The purchaser is single (unmarried or legally separated), has one or more minor children of whom purchaser has custody, and, while previously married, owned a home with a previous spouse; or

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“Inclusionary housing agreement” or “agreement” means the agreement described in Section 17.104.100 between a developer and the city setting forth the manner in which the inclusionary housing requirement will be met in the development project. “Inclusionary housing plan” means the plan described in Section 17.104.040 setting forth the manner in which the developer proposes to implement the inclusionary housing requirement or alternatives permitted in this chapter within the development project. “Inclusionary housing requirement” means the provision of the inclusionary housing units in a development project as specified in Section 17.104.030 of this chapter. “Inclusionary housing unit or inclusionary unit” means an ownership or rental dwelling unit developed as a part of the inclusionary housing requirement of a development project as provided in this chapter.
“Inclusionary incentives” means the fee waivers or reductions, planning and building standards waivers or reductions, regulatory incentives or concessions, and density bonuses provided by the city to a development project to assist in the provision of the inclusionary housing requirement. “Initial owner” means the first person or persons to purchase a new for-sale inclusionary unit for his, her or their primary residence.
“Land dedication fee” means a fee paid to the Folsom housing fund for purposes of affordable housing in the city as a method of meeting the inclusionary housing requirement for a development project as provided in Section 17.104.030.
“Legislative entitlements” means and includes general and community plan amendments, zoning and rezoning, planned development permits and conditions and amendments thereto, tentative and final maps and development agreements.
“Low income household” means a household whose income does not exceed eighty percent of median income applicable to Sacramento County, adjusted for family size as published and annually updated by the United States Department of Housing and Urban Development. “Market rate” means not restricted to an affordable housing price or affordable rent. “Moderate income household” means a household whose income does not exceed one hundred twenty percent of median income applicable to Sacramento County, adjusted for family size as published and annually updated by the United States Department of Housing and Urban Development.
“Multifamily residential” means residential units such as apartments, duplexes, halfplexes, townhomes, condominiums, or developments of greater intensity, that are planned, approved, or constructed on land planned or zoned for other than single-family residential.

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“Off-site” means outside of the boundaries of a development project, but within the city limits of the city of Folsom.
“One location” means all adjacent land owned or controlled by the same owner or a related owner, the property lines of which are contiguous at any point, or the property lines of which are separated only by a public or private street, road, or other public or private right-of-way. “Owner” means and includes the person, persons, partnership, joint venture, association, corporation, or public or private entity having sufficient proprietary interest in real property to commence, maintain, and operate a development project.
“Project level approval” means and includes a tentative subdivision map, a parcel map, a planned development permit, or other administrative or adjudicatory approval or determination in connection with a development project.
“Related owner” means a person or entity, including but not limited to partnerships, limited liability corporations, limited partnerships and corporations, which has any of the following relationships with an owner: (1) they share the majority of members of their governing boards; (2) they share two or more officers; (3) they are owned or controlled by the same majority shareholder(s) or general partner(s); (4) they are in a parent-subsidiary relationship; or (5) the person is a sibling, offspring or parent of an individual owner. For purposes of this definition, a controlling interest means fifty percent or more of the voting power of a corporation, and a parent-subsidiary relationship exists when one corporation owns, directly or indirectly, fifty percent or more of the voting power of another corporation. For purposes of this definition, a person and any general partnership in which the person is a general partner, or a person and any corporation in which the person owns a controlling interest, shall be treated as one and the same. “Residential project” means the entirety of market rate residential development in a development project subject to the requirement to provide an inclusionary housing requirement as specified in this chapter.
“Residential space” means the total conditioned square footage of a residential dwelling unit, measured to the exterior walls, and including all areas served by heating or cooling systems.

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“Very low income household” means a household whose income does not exceed fifty percent of the median income, adjusted for household size, applicable to Sacramento County, as published and periodically updated by the United States Department of Housing and Urban Development. “Zoning code” means Title 17 of the Folsom Municipal Code as it may be amended from time to time. (Ord. 1033 § 2 (part), 2005: Ord. 958 § 2 (part), 2002)

17.104.030 Inclusionary housing requirement.

A. Number and Affordability of Inclusionary Units. All for-sale development projects consisting of ten or more units, including condominium conversion projects, as well as residential rental projects of ten or more units receiving funding assistance from the city or that are otherwise subject to a voluntary affordable housing agreement with the city, shall include inclusionary housing units equal to ten percent of the total number of units in the project, excluding density bonus units. The ten percent shall consist of three percent very low income units and seven percent low income units.

When four or fewer inclusionary units are required, the inclusionary units shall be provided in the following manner: one inclusionary unit: one low income unit; two inclusionary units: one low income unit and one very low income unit; three inclusionary units: two low income units and one very low income unit; four inclusionary units: three low income units and one very low income unit.

1. Calculation of Units Required. Where the number of units required to be constructed in the development project or condominium conversion project results in a percentage other than a whole number, the developer shall round to the nearest whole number the resulting percentage from the total inclusionary housing requirement calculated as provided in this chapter and provide only the whole units resulting from the inclusionary housing requirement calculation. If, after rounding to the nearest whole number, the total number of inclusionary units provided is less than ten percent of the total project units, any difference in units shall be provided as low income units.

2. Various Methods for Compliance. The inclusionary housing requirement may be satisfied by: including the units within the development project; providing an alternative as set forth in Section 17.104.060; providing the units off site; dedicating land for other affordable development projects; acquisition, rehabilitation, and conversion of existing market rate units; conversion of existing market rate units; paying an in-lieu fee as described in this chapter; other methods as approved by the city council that meet the intent of this chapter; or a combination of these methods or other alternatives set forth in this chapter.

B. Implementation. The developer shall propose an inclusionary housing plan as provided in this chapter and incorporate the agreed upon plan into conditions on the project and , if applicable, an inclusionary housing agreement as provided in this chapter.

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C. Unit Size. The inclusionary housing requirement shall accommodate diverse family sizes by including a mix of studio, one-, two- and/or three-bedroom units and the mix of inclusionary unit sizes shall generally accommodate the household sizes identified in the city’s general plan, unless otherwise negotiated in the inclusionary housing agreement. A developer may propose an alternative mix of the size of units as part of its inclusionary housing plan.

1. Projects of forty residential units or less are exempt from the unit size requirement.

D. Exterior Appearance. Inclusionary units shall be visually compatible with and shall have similar external building materials and finishes as the market rate units in the immediate neighborhood.

E. Access to Common Amenities. Tenants and residents of inclusionary units shall be provided the same rights and access to common amenities in the development project as tenants and residents occupying market rate units.

F. Smaller Parts of Larger Projects. The city shall not approve projects which reasonably appear to be smaller parts of a greater project and have the effect of circumventing the requirements of this chapter. (Ord. 1273 § 2, 2017; Ord. 1177 § 2, 2013: Ord. 1033 § 2 (part), 2005: Ord. 958 § 2 (part), 2002)

17.104.040 Inclusionary housing plan.

A. Submittal Requirements. The inclusionary housing plan must include:

1. The method by which the developer intends to comply with the requirements of this chapter. The developer shall describe the location of the inclusionary units within the development project, unit sizes, and any incentives requested.

2. Where the developer proposes to satisfy the inclusionary housing requirement through any method other than (i) constructing inclusionary units on-site or (ii) paying the in-lieu fee, the developer shall provide the following information:
a. Detailed information on the proposed parcel(s), site, or existing market rate units including the location, assessor’s parcel number(s), size, color photographs, an appraisal of the property dated within the prior six months, known information on physical, environmental or other constraints affecting the use of the property, and known information regarding the positive aspects of the use of the property for affordable housing including proximity to schools, transit routes, shopping and other services.
b. Site Suitability. The site proposed to fulfill the inclusionary housing requirement must be suitable from the perspective of size, configuration, physical characteristics, physical and environmental constraints, access, location, adjacent use, proximity to other affordable housing units and other relevant planning criteria.

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c. Current market rate rents, condition of units, and vacancy rate information for alternatives proposing to fulfill the inclusionary housing requirement through conversion of market rate units or acquisition, rehabilitation, and conversion of market rate units.
d. A written representation that the proposed parcel(s), site, or existing market rate units is/are available and capable of being dedicated to the city by the developer and that the site and/or units shall be deed restricted as affordable housing.

3. Timing of Development. The inclusionary housing plan and inclusionary housing agreement shall include a phasing plan that provides a schedule for the timely development of the inclusionary units as the residential project is built out. In instances where the developer demonstrates that phasing, other than concurrent with market rate units, is necessary in order to account for the different financing and funding environments, economies of scale, or infrastructure needs applicable to the development project, a phasing plan shall be provided that includes definitive dates for construction and does not inhibit the intent of this chapter to create affordable housing units. The community development director shall review the phasing plan and reasons for phasing and make recommendations to the final decision-making body on the timing of the development. The city may condition projects seeking alternative phasing to require posting of bonds, cash deposits, or other securities satisfactory to the city (i.e., deed restriction, development agreement, or withholding of building permit) in an amount sufficient to assure timely construction of the required inclusionary units and to require construction of the units within a specified period of time.

4. Where the developer proposes to satisfy the inclusionary housing requirement exclusively through the payment of an in-lieu fee, the inclusionary housing plan requirements may be satisfied through the provision of a signed letter from the developer as described in Section 17.104.060.

B. Community Development Director’s Scope of Authority. The community development director shall be responsible for review of the inclusionary housing plan submitted by the developer, preparation of the inclusionary housing agreement and providing recommendations on these items and other matters as provided in this chapter to the planning commission for action by the planning commission. In any case where the final authority on a project rests with the planning commission or the city council, the community development director shall make recommendations to the planning commission or the city council.

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multifamily affordable housing, the availability of and access to infrastructure, schools, shopping and transit, current zoning of the property, and proximity to and concentration of other affordable housing locations. If a method other than on-site development or payment of the in-lieu fee is proposed to meet the inclusionary housing requirement, the proposed method must further the goal of the ordinance codified in this chapter and provide no less units or opportunity for creation of units than if the units had been included within the development project. The recommendation of the community development director shall be included in the staff report to the final decisionmaking body who shall approve, reject or modify the inclusionary housing plan. (Ord. 1033 § 2 (part), 2005: Ord. 958 § 2 (part), 2002)

17.104.050 Specific plan requirement
A. Number and Affordability of Inclusionary Units. All specific plans approved pursuant to Chapter 17.37 on or after the effective date of the ordinance codified in this chapter and which are not otherwise exempt shall include three percent of the dwelling units restricted to and affordable to very low income households and seven percent of the dwelling units restricted to and affordable to low income households (inclusionary housing requirement).

1. The inclusionary housing requirement required by this section shall be determined at the specific plan stage, rather than on a project by project basis. Where the inclusionary component is not included in the specific plan, it shall be included with individual projects as provided in this section.

2. The specific plan shall include an inclusionary housing plan that establishes, as a minimum but not limited to, the following:
a. The number of market rate units in the specific plan. b. The inclusionary housing requirement for very low and low income units over the entire specific plan.
c. The location of multifamily parcels (if applicable), subdivisions and/or mixed-use development sites designated to receive the inclusionary units. d. The requirements for an inclusionary housing plan specified in Section 17.104.040.

3. If the specific plan is initiated by developer(s) or property owners, the implementation of this section shall be through the inclusionary housing agreement signed and approved at the time of adoption of the specific plan.

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individual lots, units, or projects which are designated as inclusionary units. The inclusionary housing agreement shall be consistent with Section 17.104.100.

17.104.060 Alternative methods to meet the inclusionary housing requirement.

Alternatives to the on-site construction of the inclusionary housing requirement shall be encouraged and allowed in order to meet the housing needs for low and very low income households, consistent with the criteria in subsections A through I of this section. Alternatives may include:

A. Land Dedication. The developer may dedicate sufficient land within the city of Folsom on which to construct at least the same number of units and infrastructure to support that number of units as the developer would be required to construct on site subject to the inclusionary housing requirement; provided, that the site will support the same number of units the developer is required to construct, has zoning of a minimum density necessary to accommodate the inclusionary housing requirement, that the site is acceptable to the city, and that the site is restricted for affordable housing. The developer shall dedicate the land to the city, an affordable housing developer, or special needs developer acceptable to the city at no cost to the city.

B. Off-Site Construction (“Off-Site”). The developer may develop housing to satisfy the inclusionary housing requirement at an off-site location within the city of Folsom.

C. Acquisition, Rehabilitation, and Conversion of Market Rate Units. The developer may propose to acquire and rehabilitate existing market rate units in the city of Folsom which are at or above existing affordable rents, which require repair, rehabilitation, modernization or other work, and convert those units to affordable housing units.

D. Conversion of Market Rate Units. A developer may propose to convert existing market rate units in the city of Folsom which do not require rehabilitation and are at or above existing affordable rents to affordable housing units by way of deed restrictions, recorded covenants or other legal mechanisms to assure that the units remain affordable housing units.

E. Inclusionary Housing Credits. A developer may use inclusionary housing credits, as defined in this chapter, to meet the inclusionary housing requirement.

F. In-Lieu Fee. A developer may satisfy the inclusionary housing requirement through payment of a fee to the city in-lieu of constructing the inclusionary units with the residential development project, in accordance with the following requirements:

1. The in-lieu fee shall be calculated based on square footage of residential space for each dwelling unit within the development project.

2. Procedures for the assessment, collection and adjustment of in-lieu fees shall be established by resolution of the city council.

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3. If a development project is approved for payment of an in-lieu fee, the fee shall be collected prior to the issuance of a building permit for each dwelling unit included in the development project.

4. In-lieu fees collected by the city shall be deposited into a fund known as the “Folsom housing fund”. This fund shall be used to assist in the provision of housing for extremelylow-, very-low- and low-income households, as well as any special needs populations. All expenditures shall be consistent with the goals and policies outlined in the city’s housing element. Eligible uses may include, without limitation: land acquisition, predevelopment costs, rehabilitation of existing units to extend their useful life and impose affordability restrictions, construction of new residential units, administration, and compliance monitoring of the affordable housing program.

5. Notwithstanding the provisions of Sections 17.104.030, 17.104.040, and 17.104.100, a developer electing to fulfill the project’s inclusionary housing requirements solely through the payment of in-lieu fees is not required to submit a full inclusionary housing plan.

Instead, a signed letter from the developer confirming this intent shall suffice to meet the requirements for both the inclusionary housing plan and inclusionary housing agreement.

No separate approval from the community development director is necessary, provided the project includes a condition of approval requiring payment of the applicable in-lieu fee per unit in effect at the time building permits are issued.

G. Combination. Combination of the above alternatives.

H. Other Alternatives. Other alternatives proposed by the developer which are accepted by the city and meet the requirements and intent of this chapter. (Ord. 1243 § 2, 2015; Ord. 1177 § 4, 2013: Ord. 958 § 2 (part), 2002)

17.104.070 Incentives and assistance.

A. Request for Incentives and Assistance. The developer of a development project which is subject to the inclusionary housing provisions of this chapter may request, and the city, in its sole discretion, may grant or deny the provision of inclusionary incentives as set forth in this section and other provisions of the Folsom Municipal Code.

B. Fee Waivers or Deferrals. The city may grant to a developer a program of waivers reductions or deferrals of development fees, administrative and financing fees for inclusionary units as provided in Chapter 16.60 of the Folsom Municipal Code or state law.

C. Density Bonuses. A developer fulfilling its inclusionary housing requirement through either on site or off-site development may request and receive from the city a density bonus as provided in state density bonus law.

D. Inclusionary Housing Credits. A developer may submit as part of the inclusionary housing plan a proposal to provide more affordable housing units or donate additional land in connection with a development project than the 10 percent required under this chapter, and may credit the

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additional amount of land or additional number of affordable housing units against future projects subject to the provisions of this chapter which are proposed in the city. Credits may be transferred or sold to any other person or entity subject to compliance with following conditions:

1. The transfer or sale of the credits shall not interfere with one of the goals of the ordinance codified in this chapter which is to provide affordable housing dispersed throughout the city of Folsom.

2. Any credits must be applied to another development project within 5 years of issuance of a certificate of occupancy for the inclusionary unit(s) or implementation of an alternative method of meeting the inclusionary housing requirement (i.e., land dedication) which gives rise to the credit. For purposes of this section, “applied” shall mean that the credits are committed for use at a development project and included in a developer’s proposed inclusionary housing plan. A developer who has not used, transferred or sold credits within the time specified in this section may apply to the city for a 1 year extension on the life of the credits. A request for extension of credits shall be reviewed by the city council who shall grant or deny the request for extension. The city council shall consider progress and efforts the developer has made to utilize the credits during the previous 5 years, the impact on affordable housing if the extension is granted, any proposals for use of the credits should the extension be granted and other relevant factors.

3. Inclusionary units receiving monetary subsidies through the city shall not receive credits unless the city has been reimbursed for its financial assistance.

E. Mixed Use. In order to provide additional opportunity for development of inclusionary units, residential development that would fully or partially fulfill the inclusionary housing requirement of a development project may be implemented in conjunction with commercial or office uses located within an area covered by a General Plan mixed-use or residential overlay designation. This applies within the central business (C-2), general commercial (C-3), and business and professional office (BP) zoning districts, as well as within areas governed by adopted specific plans, consistent with applicable provisions of the Folsom Municipal Code and the General Plan or the applicable specific plan.

F. Local Public Funding. The developer may apply to the city for local public funding to assist in the financing and development of the inclusionary housing requirement.

SECTION 3
Sections 17.104.090 to 17.104.110 of the Folsom Municipal Code are hereby amended to read as follows:

17.104.090 Restrictions on inclusionary units.

Each inclusionary unit created as a result of the ordinance codified in this chapter shall have limitations governing its occupancy and its sale and/or resale. The purpose of these limitations is

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to preserve the long-term affordability and to ensure its continued availability for income-eligible households.

A. Duration of Affordability for Rental Inclusionary Units. Rental inclusionary units under subsections (C)(1) and (2) of this section shall remain affordable for a period of no less than thirty years from the recordation of the affordable rental agreement unless state law requires a longer period. The affordable rental agreement shall be recorded no later than the issuance of the first building permit for the rental inclusionary project under subsection (C)(1) of this section, and prior to the first day of rental of the inclusionary unit under subsection (C)(2) of this section.

Rental units under subsection (C)(2) of this section shall be rented to an income-eligible person at the same income level of the original for-sale affordable housing price.

B. Affordability and Resale of For-Sale Units.

1. Sale and Resale to an Income-Eligible Person—Exception. After the initial sale of inclusionary for-sale units at a price affordable to the target income level group, inclusionary for-sale units shall remain affordable to subsequent income-eligible buyers pursuant to a resale restriction with a term of twenty years, or longer if required by state law or other provisions of this code. The initial owner shall be a first-time home buyer as defined in this chapter. Subsequent owners are not required to be a first-time home buyer.

The resale restriction shall require that the unit will be sold, by the initial owner and any subsequent owner, at the same affordable housing price income level as originally sold and will remain at that income level for the duration of the resale restriction term. For example, a home that was sold to the initial owner at a very low income level shall be sold to a subsequent owner who qualifies at the very low income level. a. If the owner is unable to sell the inclusionary unit within sixty days of offering and advertising the unit for sale, the owner may offer to sell the unit to the city at the affordable housing price at the time of offer. If the city or its assignee does not complete the purchase of the unit within ninety days of the owner’s offer of sale to the city, the resale obligations of this section shall terminate; however, the provisions of this section relating to recapture upon sale shall continue to apply and remain in full force and effect.

2. Recapture upon Sale. If the inclusionary unit does not sell within sixty days of offering and advertising the unit for sale and if the city does not acquire the inclusionary unit as specified in this section, the inclusionary unit may be sold at the current market price, and the seller shall pay to the city housing fund all proceeds from the sale of the unit less a percentage of profit, if any, as provided in this section. For purposes of this section, “profit” is defined as the net proceeds from the sale after deducting loan(s), ordinary expenses attributed to the seller, including real estate commissions not to exceed six percent, and after deducting the current affordable housing price. If the owner has made improvements to the home, profit shall be determined by deducting the adjusted basis of the home, or the current affordable housing price, whichever is higher.

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a. The percentage of profit retained by the owner shall vary according to the number of years an owner owns the residential unit. The percentage of profit to be allocated to the owner is provided as follows:

Years Current
Owner Owned
Residence
Percentage of
Profit to
Current
Owner
Percent Profit
Paid to the
City’s
Housing Trust
Fund
Less than 1 10 90
Less than 2 20 80
Less than 3 30 70
Less than 4 40 60
5 or more 50 50

3. Evaluation of Owner’s Repayment Ability. On a biannual basis, owners of for-sale inclusionary units who have acquired a second mortgage or other secondary financing or loan provided by the city will be evaluated by the city housing manageras to their ability to initiate repayment procedures. Where the city determines the owner’s household income exceeds the affordable income level applicable to the inclusionary unit, the city may require repayment according to the terms provided in the deed of trust or other financing document(s).

4. Guidelines. The city may adopt guidelines for the administration of this program by resolution of the city council.

5. Home Ownership Incentive. The city may establish guidelines by resolution to create incentives for home ownership, including partial loan forgiveness provisions relating to loans or second trust deeds provided by the city depending on the length of time a qualified owner has occupied the residence.

C. Occupancy Requirement.

1. Rental Units. Any person(s) who occupies a rental inclusionary unit produced or acquired with funding assistance from the city or is otherwise subject to a voluntary affordable housing agreement between the city and the unit’s developer shall occupy that unit as his or her principal residence and shall annually certify that he/she qualifies for the applicable affordable rent level. The city’s housing manager shall annually initiate this certification process. If and when any person(s) who rents an inclusionary unit no longer qualifies at the applicable affordable rent and income levels, that person(s) shall be required to quit the unit or pay the market rate for the unit provided another rental unit is made available at the income level of the inclusionary unit.

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2. For-Sale Units. Except as provided in this section, an initial owner who purchases a for-sale inclusionary unit shall occupy that unit as his or her principal residence. The inclusionary housing agreement shall provide that a for-sale inclusionary unit may be rented or leased only after the owner, initial or subsequent, has resided in the inclusionary unit for a period of not less than two years. If the owner rents or leases the inclusionary unit, the renter or lessee shall be an income-eligible person at the same income level of the original for-sale affordable housing price. For example, if the initial owner bought the unit at the very low income housing price, the unit shall be rented to tenants of a very low income household.
a. Any person offering a for-sale inclusionary unit for rent or lease shall notify the city housing manager in writing, prior to the renting of the unit, that the unit is offered for rent or lease. Any person offering a for-sale inclusionary unit for rent or lease shall notify prospective tenants of the income eligibility requirements. b. If the city has provided loans, incentives or other deeds of trust on a for-sale inclusionary unit, the city may include provisions, based on the ability of the owner to repay the loan or other financing instrument, in the deeds of trust to require repayment of the note secured by that deed of trust if the property is not owner occupied. c. If the city has provided loans, financial assistance or other incentives to purchaser of a for-sale inclusionary unit, the city shall require, in a recorded affordability covenant, that the unit, if rented or leased by the owner, initial or subsequent, pursuant to subsection (C)(2) of this section, shall be rented at an affordable rent level no greater than the affordable rent level currently in effect. Any person(s) who occupies a rental inclusionary unit shall occupy that unit as his or her principal residence and shall annually certify that he/she qualifies for the applicable affordable rent level. The city’s housing manager shall annually initiate this certification process. If and when any person(s) who rents an inclusionary unit no longer qualifies at the applicable affordable rent and income levels, that person(s) shall be required to quit the unit or pay the market rate for the unit provided another rental unit is made available at the income level of the inclusionary unit.

3. Converted Units. Units which are converted from market rate units shall follow the requirements of subsections A, B, and C of this section based on the type of converted residential unit applicable.

17.104.100 Administration of the inclusionary housing requirement.

A. Proposed Inclusionary Housing Plan. At the time of and as part of the application for the first entitlement, the developer of a development project shall submit a draft inclusionary housing plan consistent with the requirements of Section 17.104.040.

B. Action on Inclusionary Housing Plan. The inclusionary housing plan shall be subject to the same review and approval as the entitlements. No entitlement shall be granted without an approved inclusionary housing plan, except as described in Section 17.104.060(F)(4). The

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elements of the inclusionary housing plan shall be incorporated into the terms and conditions of the applicable entitlements and project-level approvals.

1. Amendment of Inclusionary Housing Plan. The community development director shall have the authority to approve amendments of the inclusionary housing plan to reflect changes in the underlying development project. Where the proposed amendment(s) will result in a change in the phasing or timing of development of the inclusionary units, the amendment must be reviewed under the criteria in Section 17.104.040(A)(3).

2. Amendment Process. Amendments which will result in the modification of conditions shall be subject to notice, review, approval and appeal in the same manner as the original approval.

C. Inclusionary Housing Agreement.

1. Requirement. Except as provided in this chapter, no project-level approval may be issued by the city without an inclusionary housing agreement executed by the owner and recorded against the property, the developer (if not owner) and the community development director, and approved by the city attorney; provided, that a tentative subdivision map or tentative parcel map may be approved prior to execution or recordation of an inclusionary housing agreement if (a) an inclusionary housing plan including a phasing plan has been approved; (b) any tentative map or parcel map contains conditions that enforce the applicable phasing and other requirements of the housing plan; and (c) the entitlements contain provisions that condition approval of planned development permits, plan review, or building permits on execution and recordation of, and compliance with, an inclusionary housing agreement.

2. Contents. The agreement shall be consistent with the inclusionary housing plan, and shall indicate ownership information, the number and size of very low and low income units, the developer of the inclusionary units, the phasing and construction scheduling of the inclusionary units, commitments for inclusionary incentives and any other information required by the city relative to the inclusionary housing requirement. In the case of alternatives to the inclusionary housing requirement, the agreement shall also contain the information required in this chapter pertaining to the alternative.

3. Information Required from Developer. The developer of the development project shall present to the city: (a) plans, schematics, and details of phasing of the residential project as a whole, including the inclusionary housing requirement; (b) the name and address of the entity which will develop the inclusionary housing requirement if not the developer; (c) in the case of land dedication, an executed irrevocable offer of dedication at no cost to the city; (d) in the case of off-site location, the evidence of control or ownership of the site required in this chapter; and (e) any other information reasonably required by the city in connection with the agreement.

4. Incentives. The community development director shall recommend to the final decision-making body which inclusionary incentives, if any have been requested by the

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developer, the city will make available in connection with the development project as provided in this chapter. The inclusionary housing agreement shall specify the nature of the incentives provided.

5. Incorporation into Project-Level Approvals and Recordation. The developer obligations and the inclusionary incentives in the agreement shall be incorporated into the applicable project-level approvals. The executed agreement shall be recorded as a covenant running with the land against the real property of the residential project and, in the case of off-site inclusionary units, against the real property on which such inclusionary units are to be located.

D. Affordable Rental and Affordable Housing Agreements. Upon approval of the entitlements for a for-sale development project which shall include inclusionary units, or a residential rental development project to be produced with funding assistance from the city or otherwise subject to a voluntary affordable housing agreement with the city, the developer shall record with the county recorder’s office an affordable rent agreement or affordable housing agreement against the parcels identified in the inclusionary housing plan for the inclusionary units. Where the inclusionary unit is a for-sale unit within a development project, the developer shall record the affordable housing agreement relating to the lot(s) within the development project which are to be inclusionary units prior to the issuance of a building permit on any lot(s) within the development project.

E. Administration of Affordability for Rental Inclusionary Housing. The owner of rental inclusionary units or for-sale inclusionary units offered for rent pursuant to Section 17.104.090(C)(2) shall be responsible for certifying the income of tenant to the city at the time of initial rental and annually thereafter. The owner of a for-sale inclusionary unit shall certify to the city the income of the initial purchaser and shall certify to the city that the initial purchaser is a first-time home buyer. The owner of rental inclusionary units shall apply the same rental terms and conditions (except rent levels, deposits and income requirements) to tenants of inclusionary units as are applied to all other tenants, except as otherwise required to comply with government subsidy programs. Discrimination based on subsidies received by the prospective tenant is prohibited. The city shall keep confidential the personal identifying information of the household members occupying an inclusionary unit.

F. Guidelines. The community development director may develop and adopt additional guidelines as necessary for the implementation of this chapter consistent with the terms contained herein and consistent with any guidelines adopted by the city council as provided in this chapter.

G. Appeal. Where the provisions of this chapter vest the community development director with final decision-making authority, any applicant aggrieved by the decision of the community development director may appeal that decision to the planning commission. Any appeal of a decision of the community development director must be filed with the community development department within ten calendar days of the date the decision is rendered by the community development director. The community development department shall set the appeal before the planning commission at the next regularly scheduled planning commission meeting, but in no

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case less than ten calendar days after the community development director’s decision. (Ord. 1273 § 3, 2017; Ord. 1177 § 7, 2013: Ord. 1033 § 2 (part), 2005: Ord. 958 § 2 (part), 2002)

17.104.110 Monitoring of inclusionary housing.

A. Developers. Developers that have an inclusionary housing agreement requiring the provision of inclusionary housing units will be monitored by the city annually to assure compliance with the inclusionary housing agreement.

B. Inclusionary Units. Units will be monitored by the city to verify that the units are and will remain affordable.

1. Rental Inclusionary Unit. Owners of the rental inclusionary units produced with funding assistance from the city or that are otherwise subject to a voluntary affordable housing agreement with the city will be monitored by the city annually to certify that tenant(s) occupying the unit(s) are income qualified to remain in the unit and that the rent is at or below the affordable rent as stipulated in Section 17.104.090. Owners of the forsale inclusionary units offered for rent will be monitored by the city annually to certify that tenant(s) occupying the unit(s) are income qualified to remain in the unit. The city shall further monitor approximately ten percent of tenants annually by: (a) requiring the owner submit a copy of the signed rental or lease agreement to verify the rental rate, and (b) independently verifying that the tenant is income-eligible to reside in the inclusionary unit.

2. For-Sale Inclusionary Unit. Owners of for-sale inclusionary units will be monitored by the city to certify that the unit: (a) if sold during the monitoring period, was sold at an affordable for-sale price and to an income qualifying person, (b) is being occupied by the original income-qualifying buyer, and (c) if the unit is being rented or leased it is to an income-eligible household for a rental rate that is at or below the affordable rent as stipulated in Section 17.104.090.

C. Reporting. A reporting mechanism shall be created by the city to identify the number of inclusionary units, by very low or low income, that have been required by inclusionary housing agreements during the reporting period, the number of inclusionary units, by very low or low income, planned for creation in inclusionary housing agreements during the reporting period, the number of inclusionary units, by very low or low income, created during the reporting period, and the number of inclusionary housing credits, by very low and low income, both made available and used during the reporting period. The report shall also include the results of the monitoring of developers and inclusionary units in subsections A and B of this section and any corrective actions taken if the units were not being rented, sold, or occupied as stipulated in Section 17.104.090. The report shall identify the shortfall between the number of inclusionary units planned for creation and the number of units actually created. This information may be used for future change and amendments to the ordinance codified in this chapter. (Ord. 1177 § 8, 2013; Ord. 958 § 2 (part), 2002)

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SECTION 4
Section 17.104.140 of the Folsom Municipal Code is hereby amended to read as follows:

17.104.140 Enforcement and penalties
It shall be unlawful to sell any inclusionary unit without compliance with each and every provision of this chapter. It shall be unlawful to offer for lease or rent, or to enter into a lease or rental agreement, or to collect lease or rental payments without compliance with each and every provision of this chapter. Any person who violates any provision of this chapter shall be guilty of a misdemeanor and/or an administrative violation punishable as follows:

A. A violation of this chapter shall be an administrative violation as defined in Section 1.08.020. In addition to enforcement as set forth in Chapters 1.08 through 1.10, inclusive, any violation of this chapter shall be punishable as a misdemeanor, which shall be punishable by a fine not to exceed one thousand dollars or by imprisonment in the county jail for not more than six months, or by both such fine and imprisonment.

B. Notwithstanding the procedure for administrative violations provided in Chapters 1.08 through 1.10, no notice to correct as provided in Section 1.09.023 shall be required prior to issuance of a notice of administrative violation.

C. Each of the sanctions for administrative violations identified in Section 1.09.013 shall be available for enforcement of this chapter.

D. Based on the criteria for the imposition of administrative violations set forth in Section 1.09.014, a violation of this chapter shall be deemed a Level C violation, as that term is described in Section 1.09.012. The range of monetary sanctions available for a violation of this chapter shall be as set forth in Section 1.09.012(A).

E. Any person who violates any provision of this chapter shall be guilty of a separate offense for each and every day which any such person commits, continues, permits, or causes a violation thereof and, shall be punished accordingly. (Ord. 958 § 2 (part), 2002) SECTION 5 SCOPE
Except as set forth in this ordinance, all other provisions of the Folsom Municipal Code shall remain in full force and effect.

SECTION 6 SEVERABILITY
If any section, subsection, sentence, clause, or phrase in this Ordinance or any part thereof is for any reason held to be unconstitutional, invalid, or ineffective by any court of competent jurisdiction, such decision shall not affect the validity or effectiveness of the remaining portions of this Ordinance or any part thereof. The City Council declares that it would have passed each section irrespective of the fact that any one or more section, subsection, sentence, clause, or phrase be declared unconstitutional, invalid, or ineffective.

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SECTION 7 NO MANDATORY DUTY
This Ordinance is not intended to and shall not be construed or given effect in a manner that imposes upon the City or any officer or employee thereof a mandatory duty of care towards persons and property within or without the City, so as to provide a basis of civil liability for damages, except as otherwise imposed by law.

SECTION 8 EFFECTIVE DATE
This ordinance shall become effective thirty (30) days from and after its passage and adoption, provided it is published in full or in summary within twenty (20) days after its adoption in a newspaper of general circulation in the City.

This ordinance was introduced and the title thereof read at the regular meeting of the City Council on December 9, 2025, and the second reading occurred at the regular meeting of the City Council on January 13, 2026.

On a motion by Councilmember seconded by Councilmember , the foregoing ordinance was passed and adopted by the City Council of the City of Folsom, State of California, this 13th day of January, 2026, by the following roll-call vote:

AYES: Councilmember(s):

NOES: Councilmember(s):

ABSENT: Councilmember(s):

ABSTAIN: Councilmember(s):
__________________________________
MAYOR
ATTEST:
______________________________
Christa Freemantle, CITY CLERK

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Attachment 2
Folsom Municipal Code Chapter 17.104 (Inclusionary
Housing) – Applicable Section Strikethrough

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Modifications to FMC Chapter 17.104 (Strikethrough/Underline Version) Section 17.104.020 of the Folsom Municipal Code is amended to read as follows:

A sales price shall be considered affordable only if each owner-occupied housing monthly payment is equal to or less than one-twelfth of thirty-five percent of gross income for the specified income level of the household (i.e., very low or low). For purposes of such calculation, housing expenses shall include mortgage principal and interest, taxes, insurance, and assessments. For purposes of this section, the interest rate shall be calculated based on an average of three major California lending institutions for thirty-year fixed rate FHA PAR financing.
“Affordable rent” means (1) for a unit whose occupancy is restricted to a low income household, that the monthly rent consists of no more than one-twelfth of thirty-five percent of eighty percent of the median income applicable to Sacramento County less a reasonable allowance for utilities; and (2) for a unit whose occupancy is restricted to a very low income household, that the monthly rent consists of no more than one-twelfth of thirty-five percent of fifty percent of the median income applicable to Sacramento County less a reasonable allowance for utilities. In each case, the median income applicable to Sacramento County is as determined annually by the United States Department of Housing and Urban Development, adjusted for household size. “Affordable rental agreement” means legal restrictions by which the rents for rental inclusionary units will be set at such rates to ensure that rents remain affordable for a period of thirty years or longer.
“City” means the city of Folsom.
“Community development director” means the director of the community development department of the city, or his or her designee.
“Condominium” means and includes:

1. “Condominium” as defined by Section 783 of the Civil Code;

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2. “Community apartment project” as defined by Section 11004 of the Business and Professions Code;

3. “Stock cooperative” as defined by Section 11003.2 of the Business and Professions Code; and

4. “Planned development” as defined by Section 11003 of the Business and Professions Code.

The term “condominium” specifically includes, but is not limited to, the conversion of any existing structure for sale pursuant to a method described in subsections (1) through (4) of this definition.
“Condominium conversion” or “conversion” means a change in the ownership of a parcel or parcels of property, together with structures thereon, whereby the parcel or parcels and structures previously used as rental units are changed to condominium ownership. “Condominium project” or “project” includes the real property and any structures thereon, or any structures to be constructed thereon, which are to be divided into condominium ownership. “Condominium unit” or “units” means the individual spaces within a condominium project owned as individual estates.
“Density bonus” means increases in density in a development project above the maximum density otherwise permitted for the applicable land use designation, or if elected by the developer, a lesser percentage of density increase, including but not limited to, no increase in density, and any requested concession or incentives, waivers or reductions of development standards as provided in the Folsom Municipal Code or state law. in an amount specified in this chapter.
“Developer” means any applicant, person, developer, firm, partnership, association, joint venture, corporation, or any entity or combination of entities which seeks the city’s approvals for all or part of a development project. “DeveloperApplicant” includes “owner.” “Development agreement” means an agreement entered into between the city and developer pursuant to Section 65864 et seq. of the Government Code. “Development project” means any residential real estate project or mixed residential and commercial real estate project consisting of residential units, including homes, multifamily residences or other residential structures. Projects at one location undertaken in phases, stages or otherwise developed in distinct sections shall be considered a single development project for purposes of this section. Development projects are those projects for which the developer is applying for new legislative entitlements which are not otherwise exempt under the provisions of this chapter.
“Dwelling unit” means a residential unit within a development project.

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“External subsidy” means any source of funds that is not local public funding, including federal or state grants, loans, bond funds, tax credits or other tax-based subsidy. “Final decision-making body” means the entity with final approval authority on the development project.
“First-time home buyer” means that neither the purchaser nor spouse has owned a home during the past three years, or that the purchaser meets at least one of the following criteria:

2. The purchaser is single (unmarried or legally separated), has one or more minor children of whom purchaser has custody, and, while previously married, owned a home with a previous spouse; or

3. The purchaser owns or owned, during the past three years, a mobile home or trailer which is/was not permanently affixed to a permanent foundation as their principal residence. “Folsom Hhousing trust fund” means the fund created and administered by the city for use on affordable housing projects in the city.
“Inclusionary housing agreement” or “agreement” means the agreement described in Section 17.104.100 between a developer and the city setting forth the manner in which the inclusionary housing requirement will be met in the development project. “Inclusionary housing plan” means the plan described in Section 17.104.040 setting forth the manner in which the developer proposes to implement the inclusionary housing requirement or alternatives permitted in this chapter within the development project. “Inclusionary housing requirement” means the provision of the inclusionary housing units in a development project as specified in Section 17.104.030 of this chapter. “Inclusionary housing unit or inclusionary unit” means an ownership or rental dwelling unit developed as a part of the inclusionary housing requirement of a development project as provided in this chapter.
“Inclusionary incentives” means the fee waivers or reductions, planning and building standards waivers or reductions, regulatory incentives or concessions, and density bonuses provided by the city to a development project to assist in the provision of the inclusionary housing requirement. “Initial owner” means the first person or persons to purchase a new for-sale inclusionary unit for his, her or their primary residence.

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“Land dedication fee” means a fee paid to the Folsom housing trust fund of the city of Folsom for purposes of affordable housing in the city as a method of meeting the inclusionary housing requirement for a development project as provided in Section 17.104.030. “Legislative entitlements” means and includes general and community plan amendments, zoning and rezoning, planned development permits and conditions and amendments thereto, tentative and final maps and development agreements.
“Low income household” means a household whose income does not exceed eighty percent of median income applicable to Sacramento County, adjusted for family size as published and annually updated by the United States Department of Housing and Urban Development. “Market rate” means not restricted to an affordable housing price or affordable rent. “Moderate income household” means a household whose income does not exceed one hundred twenty percent of median income applicable to Sacramento County, adjusted for family size as published and annually updated by the United States Department of Housing and Urban Development.
“Multifamily residential” means residential units at such as apartments, duplexes, halfplexes, townhomes, condominiums, or developments of greater intensity, that are planned, approved, or built constructed on land planned or zoned for other than single-family residential. “Off-site” means outside of the boundaries of a development project, but within the city limits of the city of Folsom.
“One location” means all adjacent land owned or controlled by the same owner or a related owner, the property lines of which are contiguous at any point, or the property lines of which are separated only by a public or private street, road, or other public or private right-of-way. “Owner” means and includes the person, persons, partnership, joint venture, association, corporation, or public or private entity having sufficient proprietary interest in real property to commence, maintain, and operate a development project.
“Project level approval” means and includes a tentative subdivision map, a parcel map, a planned development permit, or other administrative or adjudicatory approval or determination in connection with a development project.
“Related owner” means a person or entity, including but not limited to partnerships, limited liability corporations, limited partnerships and corporations, which has any of the following relationships with an owner: (1) they share the majority of members of their governing boards; (2) they share two or more officers; (3) they are owned or controlled by the same majority shareholder(s) or general partner(s); (4) they are in a parent-subsidiary relationship; or (5) the person is a sibling, offspring or parent of an individual owner. For purposes of this definition, a controlling interest means fifty percent or more of the voting power of a corporation, and a parent-subsidiary relationship exists when one corporation owns, directly or indirectly, fifty

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percent or more of the voting power of another corporation. For purposes of this definition, a person and any general partnership in which the person is a general partner, or a person and any corporation in which the person owns a controlling interest, shall be treated as one and the same. “Residential project” means the entirety of market rate residential development in a development project subject to the requirement to provide an inclusionary housing requirement as specified in this chapter.
“Residential space” means the total conditioned square footage of a residential dwelling unit, measured to the exterior walls, and including all areas served by heating or cooling systems.

Residential space excludes unconditioned areas such as garages, carports, unfinished basements, attics, and exterior patios. For purposes of in-lieu fee calculations, residential space shall not include accessory dwelling units (ADUs) that are exempt from impact fees in accordance with state law, or other areas specifically exempted by the Folsom Municipal Code. “Single-family residential” means planned, approved or built on land planned or zoned solely for a permitted residential density of one unit per parcel. Where such a planning or zoning singlefamily designation also allows as a conditional use duplexes, halfplexes, second units, ADUs, or similar uses, the designation is nonetheless considered single-family residential for purposes of the inclusionary housing requirement and the other provisions of this chapter. “State density bonus law” means Sections 65915 through 65918 of the California Government Code, or successor provisions, as such laws may be amended from time to time. “Very low income household” means a household whose income does not exceed fifty percent of the median income, adjusted for household size, applicable to Sacramento County, as published and periodically updated by the United States Department of Housing and Urban Development. “Zoning code” means Title 17 of the Folsom Municipal Code as it may be amended from time to time. (Ord. 1033 § 2 (part), 2005: Ord. 958 § 2 (part), 2002) Section 17.104.030 of the Folsom Municipal Code is amended to read as follows:

17.104.030 Inclusionary housing requirement.

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and one very low income unit; four inclusionary units: three low income units and one very low income unit.

1. Projects of forty residential units or less are exempt from the unit size requirement.

D. Exterior Appearance. Inclusionary units shall be visually compatible with and shall have similar external building materials and finishes as the market rate units in the immediate neighborhood.

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Section 17.104.040 of the Folsom Municipal Code is amended to read as follows:

17.104.040 Inclusionary housing plan.

A. Submittal Requirements. The inclusionary housing plan must include:

2. Where an alternative to constructing inclusionary units on-site is intended, Where the developer proposes to satisfy the inclusionary housing requirement through any method other than (i) constructing inclusionary units on-site or (ii) paying the in-lieu fee, the developer shall provide the following information:
a. Detailed information on the proposed parcel(s), site, or existing market rate units including the location, assessor’s parcel number(s), size, color photographs, an appraisal of the property dated within the prior six months, known information on physical, environmental or other constraints affecting the use of the property, and known information regarding the positive aspects of the use of the property for affordable housing including proximity to schools, transit routes, shopping and other services.
b. Site Suitability. The site proposed to fulfill the inclusionary housing requirement must be suitable from the perspective of size, configuration, physical characteristics, physical and environmental constraints, access, location, adjacent use, proximity to other affordable housing units and other relevant planning criteria. c. Current market rate rents, condition of units, and vacancy rate information for alternatives proposing to fulfill the inclusionary housing requirement through conversion of market rate units or acquisition, rehabilitation, and conversion of market rate units.
d. A written representation that the proposed parcel(s), site, or existing market rate units is/are available and capable of being dedicated to the city by the developer and that the site and/or units shall be deed restricted as affordable housing.

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development director shall review the phasing plan and reasons for phasing and make recommendations to the final decision-making body on the timing of the development. The city may condition projects seeking alternative phasing to require posting of bonds, cash deposits, or other securities satisfactory to the city (i.e., deed restriction, development agreement, or withholding of building permit) in an amount sufficient to assure timely construction of the required inclusionary units and to require construction of the units within a specified period of time.

C. Standard for Approval. The community development director shall recommend approval of the inclusionary housing plan, provided the inclusionary housing plan meets all the requirements of this chapter and, if applicable, is included in the inclusionary housing agreement, and based upon a determination by the community development director that the inclusionary housing plan would meet the intent of this chapter. Factors to be considered by the community development director in his/her determination to recommend approval, conditional approval or rejection of the proposed inclusionary housing plan include the criteriaon provided in this section and Sections 17.104.030 and 17.104.060, the suitability of the proposed site for single- or multifamily affordable housing, the availability of and access to infrastructure, schools, shopping and transit, current zoning of the property, and proximity to and concentration of other affordable housing locations. If a method other than on-site development or payment of the in-lieu fee is proposed to meet the inclusionary housing requirement, the proposed method must further the goal of the ordinance codified in this chapter and provide no less units or opportunity for creation of units than if the units had been included within the development project. The recommendation of the community development director shall be included in the staff report to the final decisionmaking body who shall approve, reject or modify the inclusionary housing plan. (Ord. 1033 § 2 (part), 2005: Ord. 958 § 2 (part), 2002)
Section 17.104.050 of the Folsom Municipal Code is amended to read as follows:

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affordable to very low income households and seven percent of the dwelling units restricted to and affordable to low income households (inclusionary housing requirement).

4. A general provision requiring that an inclusionary housing agreement shall be made a condition of all future discretionary permits for development within the specific plan. The provision shall establish that all relevant terms and conditions of any inclusionary housing agreement shall be filed and recorded as a restriction on the project as a whole and those individual lots, units, or projects which are designated as inclusionary units. The inclusionary housing agreement shall be consistent with Section 17.104.100.

5. Every existing specific plan proposed for amendment shall incorporate into the amended specific plan an inclusionary housing plan, consistent with this section. (Ord. 1177 § 3, 2013: Ord. 958 § 2 (part), 2002
Section 17.104.060 of the Folsom Municipal Code is amended to read as follows:

17.104.060 Alternative methods to meet the inclusionary housing requirement.

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B. Off-Site Construction (“Off-Site”). The developer may develop housing to satisfy the inclusionary housing requirement at an off-site location within the city of Folsom.

D. Conversion of Market Rate Units. A developer may propose to convert existing market rate units in the city of Folsom which do not require rehabilitation and are at or above existing affordable rents to affordable for-sale housing units by way of deed restrictions, recorded covenants or other legal mechanisms to assure that the units remain affordable housing units.

E. Deleted.

EF. Inclusionary Housing Credits. A developer may use inclusionary housing credits, as defined in this chapter, to meet the inclusionary housing requirement.

FG. In-Lieu Fee. A developer may satisfy the inclusionary housing requirement through payment of a fee to the city in-lieu of constructing the inclusionary units with the residential development project, in accordance with the following requirements: pay an in-lieu fee calculated as follows to satisfy all of the inclusionary housing requirements: multiply one percent of the lowest priced for-sale residential unit in the proposed subdivision by the total number of for-sale residential units in the proposed subdivision. For custom lot subdivisions where only lots will be sold, multiply one-half percent of the estimated cost of the least expensive homes anticipated for the proposed subdivision by the total number of for-sale lots in the proposed subdivision. The in-lieu fee is payable at the time of the building permit on a per-unit basis, and may be deferred upon application by the developer and approval in the city’s sole and complete discretion pursuant to Section 16.80.030. Once the in-lieu fee has been set for an initial twelve months, the amount of the fee shall be evaluated on January 1st of each following year. In the event the lowest priced for-sale residential unit or anticipated home in the subdivision changes by ten percent or more, the amount of the in-lieu fee shall be adjusted to the new amount using the formula set forth above, applicable prospectively to the remaining units or lots in the subdivision.

1. The in-lieu fee shall be calculated based on square footage of residential space for each dwelling unit within the development project.

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2. Procedures for the assessment, collection and adjustment of in-lieu fees shall be established by resolution of the city council.

2. If a development project is approved for payment of an in-lieu fee, the fee shall be collected prior to the issuance of a building permit for each dwelling unit included in the development project

3. In-lieu fees collected by the city shall be deposited into a fund known as the “Folsom housing fund”. This fund shall be used to assist in the provision of housing for extremelylow-, very-low- and low-income households, as well as any special needs populations. All expenditures shall be consistent with the goals and policies outlined in the city’s housing element. Eligible uses may include, without limitation: land acquisition, predevelopment costs, rehabilitation of existing units to extend their useful life and impose affordability restrictions, construction of new residential units, administration, and compliance monitoring of the affordable housing program.

4. Notwithstanding the provisions of Sections 17.104.030, 17.104.040, and 17.104.100, a developer electing to fulfill the project’s inclusionary housing requirements solely through the payment of in-lieu fees is not required to submit a full inclusionary housing plan.

Instead, a signed letter from the developer confirming this intent shall suffice to meet the requirements for both the inclusionary housing plan and inclusionary housing agreement.

GH. Combination. Combination of the above alternatives.

HI. Other Alternatives. Other alternatives proposed by the developer which are accepted by the city and meet the requirements and intent of this chapter. (Ord. 1243 § 2, 2015; Ord. 1177 § 4, 2013: Ord. 958 § 2 (part), 2002)
Section 17.104.070 of the Folsom Municipal Code is amended to read as follows:

17.104.070 Incentives and assistance.

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C. Modification of Planning and Public Works Development Standards. To the extent feasible in light of the uses, design, and infrastructure needs of the development project, modifications for inclusionary units may include: (1) applicable public works development standards contained in the Folsom Municipal Code, such as alternative standards relating to road widths and parking; and (2) applicable planning standards contained elsewhere in this code such as minimum lot size, alternative housing types, lot coverage, locational and other requirements for approval of duplexes and half-plexes. Nothing in this provision is intended to permit deviation from the nature and character of buildings erected in the historic district and design shall be consistent with the design guidelines adopted for that portion of the city.

CD. Density Bonuses. The city may grant to a A developer fulfilling its inclusionary housing requirement through either on site or off-site development may request and receive from the city a density bonus as provided in state density bonus law.Chapter 17.102 of the Folsom Municipal Code. As referenced in Chapter 17.102 of the Folsom Municipal Code, the definition of “housing development” shall be interpreted to include both the market rate and inclusionary unit components of a development project.

DE. Inclusionary Housing Credits. A developer may submit as part of the inclusionary housing plan a proposal to provide more affordable housing units or donate additional land in connection with a development project than the 105 percent required under this chapter, and may credit the additional amount of land or additional number of affordable housing units against future projects subject to the provisions of this chapter which are proposed in the city. Credits may be transferred or sold to any other person or entity subject to compliance with following conditions:

3. Inclusionary units receiving monetary subsidies through the city shall not receive credits unless the city has been reimbursed for its financial assistance.

EF. Mixed Use. In order to provide additional opportunity for development of inclusionary units, residential development that would fully or partially fulfill the inclusionary housing

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requirement of a development project may be implemented in conjunction with commercial or office uses located within an area covered by a General Plan mixed-use or residential overlay designation. This applies within in the central business (C-2), general commercial (C-3), and business and professional office (BP) zoning districts, as well as within areas governed by adopted specific plans, as consistent with applicable provisions of the Folsom Municipal Code and the General Plan or the applicable specific plan.

G. Local Public Funding. The developer may apply to the Folsom Redevelopment Agency (RDA) city for local public funding to assist in the financing and development of the inclusionary housing requirement.

H. Local Public Subsidy. The developer of the development project may apply to the Folsom Redevelopment Agency (RDA) or to the administrator of the housing trust fund for local public subsidy.

1. Inclusionary units provided through the acquisition, rehabilitation, and conversion alternative shall be eligible for funding assistance through the city’s substantial rehabilitation program. (Ord. 1177 § 5, 2013; Ord. 958 § 2 (part), 2002) Section 17.104.090 of the Folsom Municipal Code is amended to read as follows:

17.104.090 Restrictions on inclusionary units.

Each inclusionary unit created as a result of the ordinance codified in this chapter shall have limitations governing its occupancy and its sale and/or resale. The purpose of these limitations is to preserve the long-term affordability and to ensure its continued availability for income-eligible households.

Rental units under subsection (C)(2) of this section shall be rented to an income-eligible person at the same income level of the original for-sale affordable housing price.

B. Affordability and Resale of For-Sale Units.

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2. Recapture upon Sale. If the inclusionary unit does not sell within sixty days of offering and advertising the unit for sale and if the city does not acquire the inclusionary unit as specified in this section, the inclusionary unit may be sold at the current market price, and the seller shall pay to the city housing trust fund all proceeds from the sale of the unit less a percentage of profit, if any, as provided in this section. For purposes of this section, “profit” is defined as the net proceeds from the sale after deducting loan(s), ordinary expenses attributed to the seller, including real estate commissions not to exceed six percent, and after deducting the current affordable housing price. If the owner has made improvements to the home, profit shall be determined by deducting the adjusted basis of the home, or the current affordable housing price, whichever is higher. a. The percentage of profit retained by the owner shall vary according to the number of years an owner owns the residential unit. The percentage of profit to be allocated to the owner is provided as follows:

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their ability to initiate repayment procedures. Where the city determines the owner’s household income exceeds the affordable income level applicable to the inclusionary unit, the city may require repayment according to the terms provided in the deed of trust or other financing document(s).

4. Guidelines. The city may adopt guidelines for the administration of this program by resolution of the city council.

5. Home Ownership Incentive. The city and/or the RDA may establish guidelines by resolution to create incentives for home ownership, including partial loan forgiveness provisions relating to loans or second trust deeds provided by the city depending on the length of time a qualified owner has occupied the residence.

C. Occupancy Requirement.

1. Rental Units. Any person(s) who occupies a rental inclusionary unit produced or acquired with funding assistance from the city or is otherwise subject to a voluntary affordable housing agreement between the city and the unit’s developer shall occupy that unit as his or her principal residence and shall annually certify that he/she qualifies for the applicable affordable rent level. The city’s housing managercoordinator shall annually initiate this certification process. If and when any person(s) who rents an inclusionary unit no longer qualifies at the applicable affordable rent and income levels, that person(s) shall be required to quit the unit or pay the market rate for the unit provided another rental unit is made available at the income level of the inclusionary unit.

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c. If the city has provided loans, financial assistance or other incentives to purchaser of a for-sale inclusionary unit, the city shall require, in a recorded affordability covenant, that the unit, if rented or leased by the owner, initial or subsequent, pursuant to subsection (C)(2) of this section, shall be rented at an affordable rent level no greater a rental rate than the affordable rent level currently in effect. Any person(s) who occupies a rental inclusionary unit shall occupy that unit as his or her principal residence and shall annually certify that he/she qualifies for the applicable affordable rent level. The city’s housing managercoordinator shall annually initiate this certification process. If and when any person(s) who rents an inclusionary unit no longer qualifies at the applicable affordable rent and income levels, that person(s) shall be required to quit the unit or pay the market rate for the unit provided another rental unit is made available at the income level of the inclusionary unit.

4. Resident or Work Eligibility for Affordable Housing Units. To the extent permissible under applicable state and federal law, people who work and/or reside in the city of Folsom shall have priority over other persons to rent or purchase inclusionary units constructed pursuant to the provisions of this chapter. Priority shall be established according to the following provisions:
a. Work. First priority shall first be given to qualified applicants who work in the city of Folsom. To qualify as a person who works in the city of Folsom, the person responsible for renting or purchasing the inclusionary housing unit must demonstrate that both of the following criteria have been met:
i. Type of Work. The applicant must have worked in the city of Folsom for a minimum of one year immediately preceding the date of application. Work is defined for purposes of this section as owning or operating a business, employment for wages or salary for an employer located in the city of Folsom, contract employment where the actual work is conducted at a city of Folsom location, or commission work where the applicant’s principal location from which he/she worked is located in the city of Folsom.
ii. Hours of Work. The applicant must have been employed in the city of Folsom an average of at least twenty hours per week over the course of the qualifying year.
b. Resident. Second priority shall be given to a qualified applicant(s) for rental or for-sale units who is a resident of the city of Folsom. To qualify as a resident of the city of Folsom, the person responsible for renting or purchasing the inclusionary unit must have their principal place of residence in the city of Folsom for a minimum of one year immediately preceding the date of application.

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c. Where no applicants meet the priority criteria set forth above, the inclusionary housing units may be made available to other qualified applicants. d. The owner or manager of inclusionary units, which are offered for rent, sale, or lease, shall require the applicant to provide proof that he/she meets the occupancy and income criteria set forth in this chapter. (Ord. 1177 § 6, 2013: Ord. 958 § 2 (part), 2002)
Section 17.104.100 of the Folsom Municipal Code is amended to read as follows:

17.104.100 Administration of the inclusionary housing requirement.

A. Proposed Inclusionary Housing Plan. At the time of and as part of the application for the first legislative entitlement, the developer of a development project shall submit a draft inclusionary housing plan consistent with the requirements of Section 17.104.040.

B. Action on Inclusionary Housing Plan. The inclusionary housing plan shall be subject to the same review and approval as the legislative entitlements. No legislative entitlement shall be granted without an approved inclusionary housing plan, except as described in Section

17.104.060(F)(4). The elements of the inclusionary housing plan shall be incorporated into the terms and conditions of the applicable legislative entitlements and project-level approvals.

2. Amendment Process. Amendments which will result in the modification of conditions shall be subject to notice, review, approval and appeal in the same manner as the original approval.

C. Inclusionary Housing Agreement.

1. Requirement. Except as provided in this chapter, Nno project-level approval may be issued by the city without an inclusionary housing agreement executed by the owner and recorded against the property, the developer (if not owner) and the community development director, and approved by the city attorney; provided, that a tentative subdivision map or tentative parcel map may be approved prior to execution or recordation of an inclusionary housing agreement if (a) an inclusionary housing plan including a phasing plan has been approved; (b) any tentative map or parcel map contains conditions that enforce the applicable phasing and other requirements of the housing plan; and (c) the legislative entitlements contain provisions that condition approval of planned development permits, plan review, or building permits on execution and recordation of, and compliance with, an inclusionary housing agreement.

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4. Incentives. The community development director shall recommend to the final decision-making body which inclusionary incentives, if any have been requested by the developer, the city will make available in connection with the development project as provided in this chapter. The inclusionary housing agreement shall specify the nature of the incentives provided.

D. Affordable Rental and Affordable Housing Agreements. Upon approval of the entitlements for a for-sale development project which shall include inclusionary units, or a residential rental development project to be produced with funding assistance from the city or is otherwise subject to a voluntary affordable housing agreement with the city, the developer shall record with the county recorder’s office an affordable rent agreement or affordable housing agreement against the parcels identified in the inclusionary housing plan for the inclusionary units. Where the inclusionary unit is a for-sale unit within a development project, the developer shall record the affordable housing agreement relating to the lot(s) within the development project which are to be inclusionary units prior to the issuance of a building permit on any lot(s) within the development project.

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purchaser is a first-time home buyer. The owner of rental inclusionary units shall apply the same rental terms and conditions (except rent levels, deposits and income requirements) to tenants of inclusionary units as are applied to all other tenants, except as otherwise required to comply with government subsidy programs. Discrimination based on subsidies received by the prospective tenant is prohibited. The city shall keep confidential the personal identifying information of the household members occupying an inclusionary unit.

F. Reserved.

FG. Guidelines. The community development director may develop and adopt additional guidelines as necessary for the implementation of this chapter consistent with the terms contained herein and consistent with any guidelines adopted by the city council as provided in this chapter.

GH. Appeal. Where the provisions of this chapter vest the community development director with final decision-making authority, any applicant aggrieved by the decision of the community development director may appeal that decision to the planning commission. Any appeal of a decision of the community development director must be filed with the community development department within ten calendar days of the date the decision is rendered by the community development director. The community development department shall set the appeal before the planning commission at the next regularly scheduled planning commission meeting, but in no case less than ten calendar days after the community development director’s decision. (Ord. 1273 § 3, 2017; Ord. 1177 § 7, 2013: Ord. 1033 § 2 (part), 2005: Ord. 958 § 2 (part), 2002) Section 17.104.110 of the Folsom Municipal Code is amended to read as follows:

17.104.110 Monitoring of inclusionary housing.

B. Inclusionary Units. Units will be monitored by the city to verify that the units are and will remain affordable.

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C. Reporting. An annual reporting mechanism shall be created by the city to identify the number of inclusionary units, by very low or low income, that have been required by inclusionary housing agreements during the annual reporting period, the number of inclusionary units, by very low or low income, planned for creation in inclusionary housing agreements during the annual reporting period, the number of inclusionary units, by very low or low income, created during the annual reporting period, and the number of inclusionary housing credits, by very low and low income, both made available and used during the annual reporting period. The report shall also include the results of the monitoring of developers and inclusionary units in subsections A and B of this section and any corrective actions taken if the units were not being rented, sold, or occupied as stipulated in Section 17.104.090. The report shall identify thein shortfall between the number of inclusionary units planned for creation and the number of units actually created. This information may be used for future change and amendments to the ordinance codified in this chapter. (Ord. 1177 § 8, 2013; Ord. 958 § 2 (part), 2002) Section 17.104.140 of the Folsom Municipal Code is amended to read as follows:

C. Each of the sanctions for administrative violations identified in Section 1.09.013 shall be available for enforcement of this chapter.

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D. Based on the criteria for the imposition of administrative violations set forth in Section 1.09.014, a violation of this chapter shall be deemed a Level BC violation, as that term is described in Section 1.09.012. The range of monetary sanctions available for a violation of this chapter shall be as set forth in Section 1.09.012(A).

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Attachment 3
City of Folsom Inclusionary Housing Program Study
Public Review Draft

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CITY OF FOLSOM

INCLUSIONARY HOUSING

PROGRAM STUDY

ADMINISTRATIVE
DRAFT REPORT #2
Prepared for: Prepared by:

City of Folsom Economic & Planning Systems, Inc.

October 22, 2025
EPS #252017

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Table of Contents

1. Introduction and Summary of Findings 1
Introduction ............................................................................................................................................................................... 1 Current Policies ........................................................................................................................................................................ 2 Key Findings and Considerations....................................................................................................................................... 5 Organization of Report.......................................................................................................................................................11

2. Inclusionary Housing: Residential In-Lieu Fee Study 12 Methodology Summary ......................................................................................................................................................12 Step #1: Conduct Affordability Gap Analysis .............................................................................................................12 Step #2 Calculate Affordable Housing Demand........................................................................................................15 Step #3 Compute Impact Fee per Market Rate Unit ...............................................................................................17

3. Affordability Gap Analysis Results 18
Product Types ........................................................................................................................................................................18 Revenue Assumptions.........................................................................................................................................................18 Development Cost Assumptions.....................................................................................................................................25 Affordability Gap Results...................................................................................................................................................27 Demand-Based Nexus Fee Calculation ........................................................................................................................27 Affordable Housing Impact Fee Calculation Conclusions .....................................................................................36

4. Comparative Jurisdictions Survey 40
Local Peer Jurisdictions ......................................................................................................................................................42 Selected Jurisdictions with Inclusionary Requirements and In-Lieu Fees.......................................................44 Local Jurisdiction Fee Amounts.......................................................................................................................................47

5. Policy and Implementation Considerations 49
Maximum/Recommended Fee Levels ...........................................................................................................................49 Implementing Ordinances/Resolutions........................................................................................................................49 In-Lieu Fee Update ...............................................................................................................................................................50 Study Timeframe: Updating the Impact Fee Nexus Study.....................................................................................51 Appendix 52

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List of Tables
Table 1-1. Sacramento County Area Median Income (AMI) Categories (2025 in 2025$) ........................................ 4 Table 1-2. Residential Affordable Housing Impact Fee Comparison (2025$)............................................................... 8 Table 3-1. Market-Rate Housing Development Prototype Assumptions ....................................................................19 Table 3-2. Maximum Monthly Rent or Mortgage Payment...............................................................................................21 Table 3-3. Prototype Revenue Assumptions: Rental Product..........................................................................................22 Table 3-4. Prototype Revenue Assumptions: Ownership Product (2025$)................................................................24 Table 3-5. Development Costs by Prototype: Existing Fees (2025$) ............................................................................26 Table 3-6. Development Funding Affordability Gap: Existing Fees................................................................................28 Table 3-7. Required Income by Market Rate Unit Type......................................................................................................30 Table 3-8. Summary of Worker and Household Generation per 100 Market-Rate Units .....................................35 Table 3-9. Maximum Nexus-Based Support Fee per Gross Square Foot......................................................................38 Table 3-10. Development Feasibility Comparison: Existing Fee, Maximum Supportable Fee, and Potential Fee as % of the Maximum (2025$)..............................................................................................................................................39 Table 4-1. Sacramento Region Peer Cities Analysis .............................................................................................................41 Table 4-2. Comparison of Selected Jurisdictions' Inclusionary Programs ...................................................................45

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Economic & Planning Systems, Inc. 1 Introduction and Summary of Findings

1. Introduction and Summary of Findings
Introduction
In 2002, the City of Folsom (City) adopted an inclusionary housing ordinance (IHO) applicable to new development, including the provision of an optional fee in-lieu of developing the affordable housing units. In 2013, the City amended the IHO to establish a formal in-lieu fee component imposed on market rate owner-occupied housing units and to exclude rental developments from inclusionary requirements in accordance with the 2009 Palmer/Sixth Street Properties, L.P. v. City of Los Angeles decision.

The City’s 2021-2029 Housing Element includes Program H-9, which requires an evaluation of current in-lieu fee levels to ensure they effectively advance affordable housing goals under the IHO. To comply with Program H-9, the City retained Economic & Planning Systems, Inc. (EPS) to evaluate the existing IHO in-lieu fee program and determine whether methodology updates are warranted, feasible, and consistent with other regional affordable housing programs. In addition, City staff have indicated that the current fee calculation and collection process is administratively inefficient and does not align with the City’s fee processing system, which calculates other fees automatically for each unit based upon unit characteristics such as zoning and square footage. Because the per-unit fee is subdivision-specific, the IHO in-lieu fee must be entered manually, introducing the risk of clerical error.

This document, the Inclusionary Housing Program In-Lieu Fee Study (“Fee Study” or “Study”), considers an update to the City’s IHO in-lieu fee. This Study establishes updated maximum justifiable using a nexus-based methodology that can be charged to new market rate residential land uses in the City. Although the in-lieu fee is not subject to legal nexus requirements under the Mitigation Fee Act (California Government Code Section 66000 et seq.) and related legislation (e.g., Assembly Bill 602), this analysis applies a nexus-based approach to update the affordability gap analysis that underpins the calculation of the maximum justifiable in-lieu fee under the IHO.

Since the 2013 amendment to the City’s IHO, State Assembly Bill (AB) 1505 (2017) was signed into law, which explicitly allows local governments to impose inclusionary requirements, including in-lieu fees, on rental housing projects. This study examines the potential to expand the City’s existing inclusionary requirements on for-sale housing to also apply to rental housing.

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CITY OF FOLSOM INCLUSIONARY HOUSING PROGRAM STUDY
Economic & Planning Systems, Inc. 2 Introduction and Summary of Findings This Study evaluates an updated fee based on current socioeconomic and real estate market conditions in the City. Since the previous study, market shifts, including the impacts of the COVID-19 Pandemic, significant increases in construction costs, and notably higher interest rates, have impacted residential home values and rental rates, reinforcing the need to reassess the current financing gap or subsidy required to produce affordable units while maintaining feasibility for new market rate development.

In addition, this Study incorporates input from stakeholders - including marketrate and affordable housing developers and City staff - and considers legislative changes adopted since the previous study. EPS also reviewed affordable housing policies and funding approaches in select peer jurisdictions to provide context for potential in-lieu fee updates.

Current Policies
The City’s Municipal Code Ordinance Chapter 17.104 Inclusionary Housing (Ordinance) states that all for-sale and rental projects receiving financial assistance from the City with 10 or more units or that are otherwise subject to a voluntary affordable housing agreement with the City shall include inclusionary housing units equal to 10 percent of the total number of units in the project (excluding density bonus units). The 10 percent requirement comprises: 3 percent “Very Low Income” units and 7 percent “Low Income” units, as defined by the Department of Housing and Community and Development (HCD) Income Limits for Sacramento County.1 For projects where four or fewer inclusionary units are required, the inclusionary units must be composed as follows: one inclusionary unit: one “Low Income” unit; two inclusionary units: one “Low Income” unit and one “Very Low Income” unit; three inclusionary units: two “Low Income” units and one “Very Low Income” unit; four inclusionary units: three “Low Income” units and one “Very Low Income” unit.

The City also provides that there are additional compliance methods the inclusionary requirement can be met beyond including the units in the project:
• Land dedication.
• Off-site construction.
• Acquisition, rehabilitation, and conversion of market-rate units. • Conversion of market-rate units.
• Inclusionary housing credits.
• In-lieu fee.
• A combination of the above alternatives.2
1 City of Folsom Municipal Code, Chapter 17.104, Inclusionary Housing, June 12, 2020. 2 Ibid.

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CITY OF FOLSOM INCLUSIONARY HOUSING PROGRAM STUDY
Economic & Planning Systems, Inc. 3 Introduction and Summary of Findings The in-lieu fee alternative to on-site construction allows a developer to pay a fee to satisfy inclusionary housing requirements. The City has established the in-lieu fee amount as 1 percent of the lowest-priced for-sale residential unit in the proposed subdivision multiplied by the total number of for-sale residential units in the proposed subdivision.3
The Ordinance does not specify the size or ratio of unit types for the inclusionary units but states the provided units, “shall accommodate diverse family sizes by including a mix of studio, one-, two and/or three-bedroom units and the mix of inclusionary sizes shall generally accommodate the household sizes identified in the City’s General Plan.”4 The household sizes encouraged in the General Plan include 3- and 4-bedroom units in multifamily rental housing. Projects with 40 units or fewer are exempt from any unit size requirement.5 The Ordinance does provide that the exterior of the inclusionary units shall be compatible with or built with similar finishes as the market-rate units, as well as access to common amenities. The ordinance excludes any direction of the caliber of the unit’s interior finishes.

The in-lieu fee for each unit must be paid before the City issues a building permit for that unit. Once a per-unit fee has been set for a particular subdivision, it is not subject to review for 12 months. Once 12 months have passed, the fee is reviewed January 1 of each following year. In the event the price of the lowest-priced home in the subdivision changes by 10 percent or more, the fee is recalculated based on the updated price and the method described above.
3 Ibid.
4 Ibid.
5 City of Folsom 2035 General Plan, Policy H-5.9., Final Housing Element, Adopted October 22, 2013.

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CITY OF FOLSOM INCLUSIONARY HOUSING PROGRAM STUDY
Economic & Planning Systems, Inc. 4 Introduction and Summary of Findings Sources
To prepare the in-lieu fee study, EPS relied on numerous current sources of data, including but not limited to the following:
• State of California’s Department of HCD annual income limits for 2025. The study relies on the income limit definitions from HCD to estimate the housing costs by household type. HCD’s income limits define income levels based on county-level Area Median Income (AMI). In 2025, the AMI for the County of Sacramento for a family of 4 was $120,800. The income limits for households are defined by HCD as follows:
- “Extremely Low” is 30 percent or less of AMI
- “Very Low” is between 30 percent and 50 percent of AMI - “Low” is between 50 percent and 80 percent of AMI
- “Moderate” is between 80 percent and 120 percent of AMI - “Above Moderate” is between 120 percent and 160 percent of AMI.

Table 1-1 presents the income categories that are relevant for this fee program evaluation.

Table 1-1. Sacramento County Area Median Income (AMI) Categories (2025 in 2025$) • U.S. Census Bureau American Community Survey (ACS) 1-Year Estimates (2023).6
• California Department of Finance Demographics Table E-5 2024. 6 For most metrics, the choice between 5-year and 1-year ACS data does not significantly change the takeaway. 5-year data is more stable and conservative but may flatten data that ought not to be while 1-year data is more current and allows for year-to-year comparisons but has higher margins of error.

Item 1 2 3 4 5
Income Level
Extremely Low Income 15 - 30% < 30% $27,050 $30,900 $34,750 $38,600 $41,700 Very Low Income 30 - 50% 30-50% $45,050 $51,450 $57,900 $64,300 $69,450 Low Income 50 - 80% 51-80% $72,050 $82,350 $92,650 $102,900 $111,150 Median Income 80 - 100% - $84,550 $96,650 $108,700 $120,800 $130,450 Moderate Income 100 - 120% 81-120% $101,450 $115,950 $130,450 $144,950 $156,550 [1] Base AMI for Sacramento County assumes median income and a household size of 4.

Source: State of California Department of Housing and Community Development, "State Income Limits for 2025"; EPS.

HUD Defined
% of AMI
Study
% of AMI
Sacramento County Income Limits
Based on HH Size [1]

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Economic & Planning Systems, Inc. 5 Introduction and Summary of Findings • JobsEQ Industry and Occupation data as of 1st quarter 2024. The JobsEQ model is based on the BLS projections.
• U.S. Bureau of Labor Statistics 2022 Consumer Expenditure Survey. • 2017 U.S. Census Economic Census.
• Input from market-rate and affordable residential developers, and City staff regarding recently developed market rate and affordable housing projects, market assumptions and trends, and the Study methodology. • Third-party real estate and construction data firms such as CoStar, Zillow, Redfin, and Saylor Construction Costs.

This report presents key findings and recommendations for updating the inclusionary housing program in-lieu fee in the City.

Stakeholder Outreach
In addition to the quantitative data sources consulted above, EPS incorporated stakeholder feedback into the study and recommendations. Stakeholders— including affordable housing developers, single dwelling and market-rate housing developers, and other professionals from the development community— shared their perspectives on the City’s existing affordable housing fee program, providing essential input to inform the findings of this analysis. The following themes were identified from these discussions:
• Home builders surveyed support the current fee calculation method, both because they view the typical fee amount as reasonable and because the fee can change in response to the market prices for new homes.
• All market-rate developers surveyed preferred paying an in-lieu fee to providing on-site affordable housing, citing the administrative difficulties with operating affordable housing.
• Multifamily developers expressed concern at the high fee levels for multifamily units in the City (particularly in the Folsom Plan Area), and shared that further fees would negatively impact multifamily feasibility.

Key Findings and Considerations
The following section reflects the results of the updated Fee Study, which is based on current cost and revenue assumptions. The analyses present updated maximum justifiable affordable housing in-lieu fees that could be exacted on new residential development in the City. This section also summarizes research conducted on affordable and inclusionary housing policies in comparable jurisdictions, current market dynamics, input from local stakeholders, and implementation steps and considerations for the City to provide housing affordable to different income levels.

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Economic & Planning Systems, Inc. 6 Introduction and Summary of Findings Inclusionary Housing Program In-Lieu Fee
This Study applies a nexus-based approach consistent with the requirements of the Mitigation Fee Act, even though in-lieu fees are not subject to these requirements.

This nexus-based approach provides the City and stakeholders with transparency regarding the methods and data used to calculate the fee amount. In addition, charging the fee on a per-square-foot basis, as recommended in this Study, eases the administrative burden on City staff and provides developers with clear expectations for fee levels associated with their projects.

Throughout the outreach process for this study, stakeholders in the development community expressed support for the in-lieu fee levels derived under the current methodology. Accordingly, this Study recommends that the updated in-lieu fee, now expressed on a per-square-foot basis, remains comparable to the existing fee, ensuring that developers in Folsom face similar and predictable costs while maintaining adequate revenues to support the City’s affordable housing goals.

It is important to ensure the fees exacted on development do not negatively affect development’s financial feasibility. The analysis contained in this Study demonstrates the recommended fee level is feasible for all three single-family forsale prototypes analyzed. However, the analysis in this Study shows that, even without being subject to the current inclusionary housing in-lieu fee, multifamily rental developments in Folsom currently face significant feasibility challenges.

Updated In-Lieu Fee
Table 1-2 compares the City’s existing fee with the updated fees developed in this Study, which are calculated using a nexus-based approach for four residential prototypes representative of housing that has been recently constructed, is currently under construction, or is planned in the City. 7 The updated fees include
the updated maximum justifiable in-lieu fee as well as two scenarios representing lower to higher percentages of the maximum justifiable fee. This Study recommends the City consider the fees under the low scenario, which closely approximate the City’s existing fee when converted to a per unit fee equivalent.

Although now permitted under AB 1505, the Study recommends continuing to exempt multifamily rental units from the City’s inclusionary requirements, including the in-lieu fee. This recommendation reflects the feasibility challenges associated with developing this housing type and aligns with the City’s goal of encouraging higher-density housing in key locations.
7 Because the prototypes do not represent all possible home sizes and sales’ price points, the difference between the existing fee and the recommended fee may differ for actual developments. However, as this table shows, the overall change in fee level between the current fee and the recommended fee is minimal.

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Economic & Planning Systems, Inc. 7 Introduction and Summary of Findings Peer Jurisdictions Comparative Survey
EPS examined local affordable housing programs to provide context and comparable information as the City updates its in-lieu fee in Chapter 4. The information includes an evaluation of residential fees and program requirements and is intended to inform decision-making and ensure potential new fees are reasonable and competitive with neighboring areas.

EPS examined affordable housing programs in the following peer jurisdictions:
• City of Sacramento;
• City of Rancho Cordova;
• City of Elk Grove;
• City of Davis;
• City of West Sacramento;
• City of Roseville; and
• Sacramento County.

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Economic & Planning Systems, Inc. 8 Introduction and Summary of Findings Table 1-2. Residential Affordable Housing Impact Fee Comparison (2025$) Table 1-2
City of Folsom
Inclusionary Housing In-Lieu Fee and Nexus Study
Recommended In-Lieu Fee Comparison (2025$)
Renter-Occupied Prototype
Single Family
Item
Average Unit Sq. Ft. 2,600 2,000 1,500 1,000
EXSITING AFFORDABLE HOUSING IN-LIEU FEE [1]
Per Unit Example [1] $8,610 $6,558 $5,025 $0
Current fee Estimate per Sq. Ft. Example [1] $3.31 $3.28 $3.35 $0.00 UPDATED AFFORDABLE HOUSING IN-LIEU FEE (2025$)
Maximum Supportable Fee per Sq. Ft. [2] $59.56 $44.35 $35.82 $34.01 Per Unit Example [1] $154,856 $88,700 $53,730 $34,010
Difference between Current Fee and Updated Maximum $146,246 $82,142 $48,705 $34,010 % Difference between Current Fee and Updated Maximum 1,698.5% 1,252.6% 969.3% N/A High Fee Scenario (20 % of Maximum) [3] 20.0% of Maximum 20.0% of Maximum 20.0% of Maximum 20.0% of Maximum Potential Updated Fee per Sq. Ft. $11.91 $8.87 $7.16 $6.80 Per Unit Example [1] $30,966 $17,740 $10,740 $6,800
Difference between Current Fee and Potential Updated Fee $22,356 $11,182 $5,715 $6,800 % Difference between Current Fee and Potential Updated Fee 259.6% 170.5% 113.7% N/A Recommended Fee Scenario (% of Maximum) [3] 5.0% of Maximum 6.8% of Maximum 7.0% of Maximum .0% of Maximum Potential Updated Fee per Sq. Ft. $3.00 $3.00 $2.50 $0.00 Per Unit Example [1] $7,800 $6,000 $3,750 $0
Difference between Current Fee and Potential Updated Fee ($810) ($558) ($1,275) $0 % Difference between Current Fee and Potential Updated Fee (9.4%) (8.5%) (25.4%) N/A Source: City of Folsom; EPS.
[2] For more details on the maximum supportable fee per square foot calculation, see Table 3-9. [3] The High Scenario is set at 20% of maximum supportable fee, while the objective of the Low Scenario is to apply percentages of the maximum supportable fee that would result in a similar per unit fee as the current in-lieu fee for the Single Family Detached units. The Low Scenario for the Single Family Attached units is set to be approximately $0.50 lower per square foot than the Single Family Detached units. The Low Scenario for multifamily units is set at zero to reflect the City's position to continue to exempt these units from inclusionary housing requirements.

Detached Medium
Density
Residential Prototype Examples
Owner-Occupied Prototypes
Single Family
Detached Low
Density Single-Family Attached
Multifamily
Apartment Units
[1] Per unit example based on current estimated sales price shown in Table 3-7. Per square foot examples based on per unit fee and prototype square footages. See Table 3-1. The City's current in-lieu fee is not applicable to renter-occupied units.

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Economic & Planning Systems, Inc. 9 Introduction and Summary of Findings Additionally, EPS examined other in-lieu fee amounts from jurisdictions outside of the region, including:
• City of Berkeley;
• City of Santa Rosa;
• City of Sunnyvale; and
• City of Atascadero.

Key Findings from Peer Jurisdictions
Peer jurisdictions offer a range of approaches to funding affordable housing.

Outside of Folsom, no other jurisdiction in the Sacramento region has a formal inclusionary housing in-lieu fee. In addition to Elk Grove, the two largest jurisdictions, the City of Sacramento and Sacramento County, have adopted affordable housing development impact fees applied to market rate residential and nonresidential uses.

The City of Sacramento adopted an incentive program for high-density marketrate development, exempting all single-family and duplex uses with densities greater than 20 units per acre and all multifamily uses with densities greater than 40 units per acre from the fee. The cities of Roseville and Rancho Cordova have no formal inclusionary programs, although both jurisdictions negotiate inclusionary requirements with in-lieu fee options for large development projects through a development agreement. Except for Roseville, all jurisdictions evaluated for this Study have implemented a commercial linkage development impact fee, as shown in Table 4-1.

Broadly speaking, the financial impact of Folsom’s in-lieu fee (both current and the recommended updated fee) are comparable to fees in other jurisdictions in the Sacramento region, slightly lower than the City of Sacramento and Sacramento County, and slightly higher than the City of West Sacramento and City of Elk Grove. The City of Davis is an outlier, charging a significantly higher in-lieu fee than other jurisdictions in the region.

Because no jurisdictions in the Sacramento have an inclusionary housing requirement and associated in-lieu fee similar to Folsom’s, EPS also examined other jurisdictions outside the Region who have formal inclusionary policies with pre-determined in-lieu fee amounts. Compared to these other jurisdiction’s formal in-lieu fee amounts, the City’s fee is significantly lower than any other jurisdiction examined. However, all of the other in-lieu fee programs that EPS examined are in cities with much higher housing prices than the City of Folsom.

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Economic & Planning Systems, Inc. 10 Introduction and Summary of Findings Policy and Implementation Considerations
There are many factors a jurisdiction should consider when establishing affordable housing fee requirements. Like many communities in the State and across the nation, housing demand in the City has continued to outpace supply over the last several decades. This undersupply has increased housing costs for consumers, impacting affordability, and disproportionately affecting the most vulnerable populations. If market-rate units are the only type of housing produced, this ignores the need for housing at below market-rate income levels. However, it should be noted that adding net new net units at any income level has the potential to help reduce the overall housing undersupply and competition for existing units.

While this Study finds that the inclusionary housing in-lieu fee in the City of Folsom is comparable to other jurisdictions’ affordable housing fees in the Sacramento Region, this fee is only a component of the overall fee and infrastructure burden within a community. The City should ensure that both the inclusionary housing inlieu fee and other fees are regularly evaluated to ensure that the fee programs are both achieving their funding goals and that the City’s overall fee burden is not negatively impacting development feasibility.

Because City staff indicated that reducing administrative burden, rather than increasing revenue, was a key goal of this update, this Fee Study recommends that units subject to the fee be charged a single per-square foot fee, regardless of zoning or housing type. However, approaches from other jurisdictions show that the fee can be used as a policy tool to encourage or discourage different types of housing. For example, the City of Santa Rosa charges a lower per-square-foot fee for smaller units, which favors the construction of smaller dwelling units. Similarly, the City of Sacramento charges a lower per-square-foot fee for dwelling units in the City’s “Housing Incentive Zone.” If the City desires to encourage certain types of units or increased development in a certain location, these approaches could be considered.

Since the IHO was last amended, the state passed AB 1505 (2017) which allows local governments to require inclusionary housing (and related in-lieu fee options) on rental housing, subject to feasibility review and other conditions. As part of this study, feasibility findings suggest that rental housing, which is not subject to the City’s current in-lieu fee, already faces feasibility challenges. As such, and despite other peer jurisdictions imposing fees on this type of housing, this study recommends that the updated in-lieu fee continue to exempt rental housing.

Lastly, because this Study proposes charging market-rate units on a per-squarefoot basis, rather than as a percentage of sales price, EPS recommends that an enacting ordinance include an indexing component. By allowing the City to ministerially increase the fee using the Construction Cost Index, the City can ensure that fee revenue keep pace with funding needs.

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Economic & Planning Systems, Inc. 11 Introduction and Summary of Findings Organization of Report
Following this Introduction and Executive Summary, this Study includes the following chapters:
• Chapter 2 summarizes the methodology of the Inclusionary Housing In-Lieu Fee Analysis.
• Chapter 3 summarizes the results of the Inclusionary Housing In-Lieu Fee Analysis.
• Chapter 4 provides a comparison of comparable jurisdictions inclusionary housing policies.
• Chapter 5 provides policy and implementation considerations.

This Study includes two technical appendices. Appendix A provides supporting assumptions and calculations for the Residential Inclusionary Housing In-Lieu Fee Study in Chapter 2. Appendix B includes key assumptions underlying this analysis.

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Economic & Planning Systems, Inc. 12 Inclusionary Housing: Residential In-Lieu Fee Study

2. Inclusionary Housing: Residential In-Lieu
Fee Study
Methodology Summary
As discussed in Chapter 1, the City’s Municipal Code (Chapter 17.104) currently allows a per-unit in-lieu fee option equal to one percent of the sales price of the lowest-priced dwelling unit in the subdivision. The City is interested in exploring other potential methodologies to calculate the in-lieu fee in place of providing onsite affordable units within their development projects. The analysis estimates the financing gap or subsidy required to develop affordable units to quantify a “maximum supportable inclusionary housing in-lieu fee” and compares this fee to the current existing in-lieu fee. The “financing gap” approach is a well-accepted methodology used in development impact fee studies to establish maximum supportable fees that can be imposed on new residential development projects.

The methodology, as discussed below and summarized in Figure 2-1, calculates a fee by combining (1) the subsidy needed to produce a residential unit affordable at HCD-defined income levels and (2) the demand for new affordable housing generated by spending from the households of new market-rate units, which creates additional lower-wage jobs.

This memorandum and the analysis contained herein are intended to support the City’s decision-making process regarding inclusionary policy and to promote the construction of affordable housing development in the City.

Step #1: Conduct Affordability Gap Analysis
EPS developed 4 residential prototypes representative of housing units that have been recently constructed, are currently under construction, or are planned in the City. These prototypes (shown in Table 3-1) were developed based on the weighted average of comparable project types from market research, the Folsom Plan Area Specific Plan, the City’s Municipal Code density and parking requirements, and input from City staff.

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Economic & Planning Systems, Inc. 13 Inclusionary Housing: Residential In-Lieu Fee Study Figure 2-1. Illustration of Inclusionary Housing In-Lieu Fee Methodology Step #1
Affordability Gap Analysis
Step #2
Affordable Housing Demand
Step #3
Compute Impact Fee
(Subsidy Required to
Construct Units)
Define Residential
Prototypes
Subsidy Required
No Subsidy Required
if positive
minus
if negative
Affordable Unit Value
by HCD Income
Level
Required Household
Income Level
Household
Expenditures by
Category
Total Workers to Provide
Goods and Services by
Expenditure Category
Cost to Develop
Units equals Affordability Gap
Affordability
Gap
(Subsidy
Required)
(Generated by Market Rate
Housing)
Total Demand
for Affordable
Units for
Workers
Workers' Income Levels
and Household
Formation
New Population in
Homes
Added Public Sector
Workers per New
Population
Public Sector Worker
Income Levels &
Household Formation
(Per Residential Square Foot)
Market Rate Sales
Prices & Rents
multiplied by
Demand for Affordable Units for
Net New Workers
(per market rate unit)
equals
Maximum Supportable
Nexus-Based Housing Fee
(per market rate unit square foot)

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Economic & Planning Systems, Inc. 14 Inclusionary Housing: Residential In-Lieu Fee Study • Prototype #1: Low-Density Single Dwelling Unit (For-Sale). This prototype is a low-density Single Dwelling Unit with a density of 5 units per acre. The prototype unit size reflects an average of 2,600 square feet, with 4 bedrooms and an attached 2-car garage. See Table A-1 for market research details. • Prototype #2: Medium-Density Single Dwelling Unit (For-Sale). This prototype is a medium-density Single Dwelling Unit with a density of 10 units per acre. The average unit size is 2,000 square feet, with 3 bedrooms and an attached 2-car garage. See Table A-2 for market research details.
• Prototype #3: Townhome (For-Sale). This prototype is a higher density owneroccupied dwelling (townhome or condominium) with a density of 18 units per acre. The Townhome prototype unit size is 1,500 square feet, with 3 bedrooms and an attached 2-car garage. See Table A-3 for market research details. • Prototype #4: Multifamily Apartments (Rental). The Multifamily Apartments prototype is a renter-occupied building with a density of 30 units per acre. The Multifamily prototype unit size is 1,000 square feet, with 2 bedrooms and includes 1.5 parking spaces per unit. See Table A-4 for market research details.

An “affordability gap analysis” evaluates whether the cost to construct affordable units exceeds the income-based value of units that are affordable to lower- and moderate-income households. Not all projected new households will require affordable housing. The maximum housing costis based on income that a household can expend on a mortgage payment or monthly rent (shown in Table 3- 2). This analysis estimates that a household spends 30 percent of the annual household income on all housing costs. Other housing costs include utilities for rental units and mortgage insurance, taxes, homeowners insurance, utilities, and HOA fees for for-sale units. These other costs are subtracted from the total housing costs to determine the estimated maximum mortgage amount or rent. to determine the subsidy required to construct affordable housing units for each affordable housing income level (households with incomes at 50 percent, 80 percent, and 120 percent of AMI). The maximum supportable fee calculations commence with an affordability gap calculation (Table 3-6), an analysis that compares the cost of developing residential units (Table 3-5) to their value under income-based pricing restrictions (Table 3-3 and Table 3-4). Where the development cost exceeds the unit value, there is an affordability gap that must be subsidized to support affordable unit development. The affordability gap is then applied to derive a maximum supportable inclusionary housing impact fee.

Each analytical element used in this calculation is detailed in the following sections.

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Economic & Planning Systems, Inc. 15 Inclusionary Housing: Residential In-Lieu Fee Study Step #2: Calculate Affordable Housing Demand
A justified nexus-based fee is based on the total demand for affordable housing units generated by the construction of market-rate units. The link (or nexus) between market-rate housing and increased demand for affordable housing is that residents of market-rate units demand goods and services that rely on lower wage earners (for example, retail salesclerks), some of whom cannot afford market-rate housing and thus require affordable housing.

Because more expensive housing units require occupants to have higher incomes, and higher income households create more jobs through their spending, the nexus impacts and thus the justified fees for units vary according to the price range of the market-rate units. Typically, larger units (i.e., larger square footage and more bedrooms) command higher sales prices or rents, so their occupants are required to have higher household incomes than occupants of smaller units. Thus, larger units create and/or support more jobs because of their occupants’ spending patterns. Consequently, nexus impacts and the justified fees for market-rate units vary by unit size.

This analysis evaluates the demand for affordable housing generated by an average unit size. The demand-based nexus fee calculation involves the following steps:

1. Market-Rate Household Income Levels. The expected sales price and rental rate of each prototype is based on market data reflecting the weighted average of current sales prices and effective rents of multi-unit dwellings of more recently built units at the different density ranges. The required income levels of households occupying new market-rate housing are derived based on these price points, assuming standard housing expenses as a proportion of overall household income. For example, a typical household renting a market-rate two-bedroom unit for around $2,980 per month plus $280 in monthly utilities would have a household income of $130,100, provided the household spends 30 percent of its income on housing costs (including rent and utilities).8 (Table 3-7).

2. Household Expenditures. Based on the household income computed in Step 1, Consumer Expenditure Survey data is used to evaluate the typical spending patterns of each prototype household. This analysis provides an estimate of how much the household spends on specific categories of expenditures, such as “Food at Home.” As the households’ income increases along with the price and size of the market-rate units, the total spending on goods and services also increases. The Consumer Expenditure Survey also indicates that these relationships are not 8 Per HCD the “Affordable housing cost” for lower-income households is defined in State law as not more than 30 percent of gross household income with variations (Health and Safety Code Section 50052.5). “Housing cost” commonly includes rent or mortgage payments, utilities (gas, electricity, water, sewer, garbage, recycling, green waste), and property taxes and insurance on owneroccupied housing.

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Economic & Planning Systems, Inc. 16 Inclusionary Housing: Residential In-Lieu Fee Study linear (e.g., a household with twice the income does not necessarily spend twice as much on food). See Appendix A Table A-8, Table A-9, Table A-10, and Table A-11.

3. Job Creation and Worker Households. Having estimated the households’ spending on assorted items, that spending is then converted into an estimation of jobs created for each residential prototype. For each expenditure category, data regarding average worker wages and the ratio between gross business receipts and wages are used to translate these household expenditures into the total number of private-sector workers. For selected public-sector jobs that typically grow in proportion to the local population size (e.g., teachers, protective service workers), the demand for new workers is estimated by relating current levels of employment in such categories to the current population and applying this ratio to future development.

Because each new worker does not represent an independent household (Folsom has an average of 1.65 workers per working household), the total number of new households created is somewhat less than the number of new jobs created.9 This analysis assumes that workers form households with others earning similar wages. EPS has further adjusted the household formation rates to reflect the fact that a certain proportion of workers will notform their own households, particularly those of younger ages.10 See Table 3-8, Appendix A Table A-12, Table A-13, Table A-14, Table A-15, and Table A-16.

4. Worker Households by Income Category. Each worker household generated is assigned to an income category—represented as a proportion of AMI ranging from 50 to 120 percent— based on its estimated gross wages. This provides the total number of households generated at each income level by the construction of market-rate units at various sizes and price points. The results indicate that residents of smaller, lower-priced units generate fewer worker households requiring affordable housing than do residents of larger, higher-priced units.

Appendix A Table A-12, Table A-13, Table A-14, Table A-15, and Table A-16.

These steps of the nexus-based fee calculation provide the total number of incomequalified workers required to meet the needs for goods and services generated by market-rate housing. The number of workers servicing market-rate housing is then converted to total income-qualified households and each household is assumed to occupy one housing unit.
9 Average workers per household per ACS. 10 BLS data indicates that 12.5 percent of retail/restaurant workers are age 16-19, but an average of only 1.9 percent of workers overall (this factor is applied to other industries). EPS has assumed that such young workers do not form their own households.

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Economic & Planning Systems, Inc. 17 Inclusionary Housing: Residential In-Lieu Fee Study Step #3: Compute Impact Fee per Market Rate Unit
The nexus fee is calculated by multiplying the number of affordable units required to support the development of a 100-unit market rate project proportionally for each income-level households by the dollar amount affordability gap or subsidy needed to build that affordable unit. The total is divided by 100 to estimate the weighted average per unit and then divided by the gross square footage of the prototype to estimate the maximum supportable in-lieu fee per gross square foot(Table 3-9).

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Economic & Planning Systems, Inc. 18 Affordability Gap Analysis Results

3. Affordability Gap Analysis Results
For any nexus-based inclusionary in-lieu or affordable housing development impact fee calculation, it is necessary to estimate the subsidy required to construct affordable housing units. This chapter details the analysis conducted to determine the subsidy needed to produce both the different prototype density levels of forsale and rental housing that is affordable to very low- through moderate-income households (31 through 120 percent of AMI).

Product Types
While the nexus fees calculated herein are based on demands created by marketrate housing that may be Single-Family Units, Townhomes/Two-Packs, or Multiunit Apartments, the analysis assumes that new lower-income worker households would be housed in affordable units similar to the type of construction currently observed in the City. The assumed prototypes reflect construction at various densities including two (2) Single-Family Detached ownership prototypes, one (1) Townhome prototype, and one (1) Multifamily Apartment prototype as discussed in the methodology section of this chapter and shown in Table 3-1. Project densities, unit sizes, and the number of bedrooms per unit are based on with comparable projects in the area, parking requirements from the City’s Municipal Code, Chapter 17, the Folsom Plan Area Specific Plan, and City staff input.

Revenue Assumptions
To calculate the values of the affordable units, assumptions must be made regarding the applicable income level (Very Low, Low, and Moderate incomes) and the percentage of household income spent on housing costs. In addition, translating these assumptions into unit prices and values requires estimates of purchase price variables, including interest rates, down payment amounts, as well as operating expenses and capitalization rates for the renter-occupied Multifamily Apartment prototype.

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Economic & Planning Systems, Inc. 19 Affordability Gap Analysis Results Table 3-1. Market-Rate Housing Development Prototype Assumptions Prototype Designation [1] Product Type Construction Type Density Bedrooms Unit Sq. Ft. Parking Type [2] 1 R-1-L through R-1-M For-Sale 5 units/acre 4 Bedroom 2,600 sq. ft. 2 spaces per unit

SF/SFHD
2 For-Sale 10 units/acre 3 Bedroom 2,000 sq. ft. 2 spaces per unit 3 For-Sale 18 units/acre 3 Bedroom 1,500 sq. ft. 2 spaces per unit 4 Rental 30 units/acre 2 Bedroom 1,000 sq. ft. 1.5 spaces per unit [7] Source: City of Folsom Municipal Code; Redfin; CoStar; EPS. [1] Residential prototype designations are based on associated density ranges established in the Folsom Plan Area Specific Plan and Folsom Municipal Code. [3] Assumption data for the low-density, single family detached home prototype derived from Redfin (accessed 03/25), see Table A-1. Values have been rounded. [4] Assumption data for the medium-density, single family detached home prototype derived from Redfin (accessed 03/25), see Table A-2.Values have been rounded. [6] Assumption data for the multifamily apartments prototype derived from Costar (accessed 03/25), see Table A-4. Values have been rounded. [7] Per Folsom Municipal Code Section 17.57.040, 1.5 spaces required per multifamily unit.

City of Folsom Prototypes Characteristics
Item
Single-Family
Detached Homes
Type V
1-2 Stories
[5] Assumption data for the single-family attached prototype derived from Redfin (accessed 09/24). Values have been rounded. Given the lack of recently-constructed homes of this type in Folsom, this prototype is based on developments in the greater Sacramento Region. See Table A-3.

Single-Family
Attached [5]
Type V
1-2 Stories
R-2 through R-3

MLD/MMD
R-4
MHD
Multifamily
Apartments [6]
Type V
2-3 Stories
Type V
2-3 Stories
Single-Family
Detached Homes
R-1-M through R-2

SFHD/MLD
[2] Parking requirements per the City of Folsom Municipal Code, Chapter 17.

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Folsom City CouncilDecember 9, 2025

Folsom City Council
December 9, 2025