Agenda packet — Foster City City Council, March 7, 2022 (part 1 of 2)

CITY OF FOSTER CITY/

ESTERO MUNICIPAL IMPROVEMENT DISTRICT

THIS MEETING WILL BE CONDUCTED PURSUANT TO THE PROVISIONS OF GOVERNMENT CODE SECTION 54953 (AS AMENDED BY AB 361) WHICH AUTHORIZES TELECONFERENCED MEETINGS UNDER THE BROWN ACT DURING CERTAIN PROCLAIMED STATES OF EMERGENCY. THE GOVERNOR OF CALIFORNIA PROCLAIMED A STATE OF EMERGENCY RELATED TO COVID-19 ON MARCH 4, 2020. THIS TELECONFERENCED MEETING IS NECESSARY SO THAT THE CITY CAN CONDUCT ESSENTIAL BUSINESS AND IS PERMITTED UNDER GOVER NMENT CODE 54953 IN ORDER TO PROTECT PUBLIC HEALTH AND SAFETY OF ATTENDEES. MEMBERS OF THE PUBLIC

THAT WISH TO ATTEND AND/OR PARTICIPATE IN A MEETING MAY DO SO IN PERSON OR BY

JOINING THE ZOOM MEETING
HTTPS://FOSTERCITY-ORG.ZOOM.US/J/89512136117 PUBLIC
COMMENTS WILL BE ACCEPTED BOTH IN PERSON AND VIA ZOOM MEETING. ANY EMAILS SENT TO [email protected] WILL BE PROVIDED TO THE CITY COUNCIL PRIOR TO THE MEETING.

Consistent with Government Code Section 54953, this City/District Meeting will be held via teleconference in addition to in person. City Councilmembers/District Board and staff will attend in person or via teleconference.

To maximize public safety while still maintaining transparency and public access, members of the public can observe the meeting from home or attend the meeting in person. Below is information on how the public may observe and participate in the meeting.

To Attend the Meeting in Person:
• Location: 620 Foster City Blvd, Foster City, California, 94404

To Provide Public Comment in Person:
• Members of the public wishing to speak will be asked to fill out a Request to Speak Form. Forms will be accepted until t he staff presentation on an agenda item ends, or until the public comment period on non- agenda items is closed. For special meetings, public comment is limited to item(s) on the agenda only.

To Observe the Meeting via Teleconference/Video Conference:
• To access the meeting by computer / smartphone, go to: https://fostercity-org.zoom.us/j/89512136117

• To dial-in via phone:
1-669-900-6833 or
1-408-638-0968
And enter Webinar ID: 895 1213 6117

To Participate in the Meeting by Providing Public Comment via Teleconference/Video Conference:
• During the Meeting: Live verbal public comments may be made by members of the public joining the meeting via Zoom. Zoom access information is provided above. Use the “raise hand” feature (for those joining by phone, press *9 to “raise hand”) during the public comment period for the agenda item you wish to address. The Zoom Host will call on people to speak by name provided or last 4 digits of phone number for dial-in attendees. Please clearly state your full name for the record at the start of your public comment.

Before the Meeting: Written public comments for the record may be submitted in advance by 4:00 p.m. the day of the meeting by email to: [email protected] and will be made part of the written
record but will not be read verbally at the meeting. Written public comments submitted by email should adhere to the following:
• Clearly indicate the Agenda Item No. or specify “Public” in the Subject Line for items not on the agenda
• Include the submitter’s full name (Recommended but not required)

1 Written public comments received by 4:00 p.m. the day of the meeting will be provided in their entirety to the City Council prior to the meeting and will be made part of the written record but will not be read verbally at the meeting. Written public comments will be posted to the City’s website for review prior to the meeting.

AGENDA

Monday, March 7, 2022 6:30 PM

REGULAR MEETING AS CITY COUNCIL/EMID BOARD OF DIRECTORS

1. CALL TO ORDER

2. PLEDGE OF ALLEGIANCE

3. ROLL CALL

Councilmembers/ex officio EMID Directors Jon Froomin, Sanjay Gehani, Sam Hindi, Patrick Sullivan, and Mayor/President Richa Awasthi

4. SPECIAL PRESENTATIONS

4.1. A Proclamation Recognizing March 2022 as Women's History Month

5. PUBLIC

Government Code Section 54954.2 E (3) precludes the City Council from discussing or acting upon any topic initially presented during the “Public” portion of the agenda. Information may be received, placed on a future agenda, or referred to the appropriate City staff. FCMC 2.08.240 Addressing the Council. "...Each person desiring to address the Council shall step up to the public rostrum after being recognized to speak by the presiding officer, shall state his/her name and address for the record, state the subject he/she wishes to discuss, state who he/she is representing if he/she represents an organization or other persons and, unless further time is granted by majority vote of the Council, shall limit his/her remarks to three minutes. The City Council may vary the time limit for any speaker, if it deems this necessary." Speakers may join the Zoom meeting via the meeting link and using the “raise hand” feature and the Zoom host will call on people.

6. CITY/EMID CONSENT CALENDAR

All matters listed under Consent Calendar are considered to be routine by the City Council/EMID Board of Directors and will be enacted by one motion unless removed by a member of the Council/Board, staff, or public. There will be no separate discussion on thes
e items unless a citizen or a Council/Board member
so requests. If discussion is required, that item will be removed from the 2 Consent Calendar and will be considered separately after approval of the remaining items on the Consent Calendar. Vote may be by roll call.

6.1. City/EMID Minutes

6.1.1. City/EMID Special Meeting of February 17, 2022

6.1.2. City/EMID Regular Meeting of February 22, 2022

6.2. City/EMID Resolutions for Adoption (First City Resolution Number to be used tonight is 2022-20 and EMID Resolution Number to be used tonight is 3636)

6.2.1. A Resolution of the City Council of the City of Foster City Approving the Plans and Specifications and Authorizing the Call for Bids for the New Traffic Signals at Various Locations Project (CIP 301-681)
a) Staff Report
b) Adopt Resolution

7. PUBLIC HEARINGS

7.1. Consideration of Below Market Rate Inclusionary Housing Program (RZ2021-0004), Affordable Housing Overlay Combining District (RZ2019-0001), Zoning of Seven Apartment Properties Within Affordable Housing Overlay Combining District (RZ2020-0001), and Establishing Rates for a Below Market Rate Housing In-Lieu Fee
a) Staff report
b) Action - An Ordinance of the City of Foster City Adding a New Chapter 17.90, Below Market Rate Inclusionary Housing Program, to Title 17, Zoning, of the Foster City Municipal Code Relating to Inclusionary Housing
c) Action -
An Ordinance of the City of Foster City Adding a New Chapter

17.92, Affordable Housing Overlay Combining District, to Title 17, Zoning, of the Foster City Municipal Code
d) Action - An Ordinance of the City of Foster City Amending the Foster City Zoning Map to Zone Certain Properties Within the Affordable Housing Overlay Combining District
e) Action - A Resolution of the City Council of the City of Foster City Amending the City’s Master Fee Schedule to Adopt a Fee for Below Market Rate Housing In-Lieu Fees

8. REPORTS

8.1. Youth Advisory Committee's 2021 Year End Report, Review of Mission Statement, and Goals for 2022
a) Staff Report
b) Action - By Minute Order, Receive and Accept the Report

3 8.2. Recreation Center Project Update - Next Steps
a) Staff Report
b) Action - By Minute Order, Provide Policy Direction

8.3. Report on General Fund Revenue Enhancement Ballot Measures a) Staff Report
b) Action - By Minute Order, Receive and Accept Report

9. RESOLUTIONS FOR ADOPTION

9.1. A Resolution of the City Council of the City of Foster City Providing Direction and Approving Revenues and Expenditures Budget for the Remainder of FY 2021-2022 for the Workforce Housing Fund (Fund 139) a) Staff Report
b) Action - Adopt Resolution

10. COMMUNICATIONS

10.1. City/District Warrants of Demands were Processed and Issued on February 5, 2022 and February 15, 2022; ACH were Processed on January 27, 2022, February 5, 2022 and February 15, 2022 a) Information Item Only
b) No Action Required

11. CITY/DISTRICT MANAGER REPORTS, COUNCIL/BOARD STATEMENTS

AND REQUESTS, AND COUNCIL LIAISON REPORTS

City/District Manager and Council/EMID Board Members report on their various assignments and liaison roles and Council/EMID Board requests for scheduling future items.

12. CLOSED SESSION

12.1. Conference with Legal Counsel – Existing Litigation (Government Code § 54956.9(d)(1)):

High Level Training Center LLC (aka Gold Medal Martial Arts), U.S.

Bankruptcy Court California Northern Bankruptcy Court – Case number:
21-30452

12.2. Public Employee Appointment (Government Code §54957) Title: City Manager

12.3. Report Out from Closed Session

4 13. ADJOURNMENT

The public is invited to attend.

Any attendee wishing special accommodations at the meeting should contact the City Clerk’s Department at (650) 286-3250 at least 48 hours in advance of the meeting.

Any writings or documents provided to a majority of the City Council or EMID Board regarding any item on this agenda after the agenda packet was distributed will be made available for public inspection in the City Clerk Department at City Hall located at 610 Foster City Boulevard during normal business hours and at the meeting.

City Council meetings on FCTV on Comcast Channel 27 and AT&T Channel 99:

LIVE every 1st and 3rd Monday of the month
REPLAY next day at 1:00 pm (that week only)
REPLAY Saturday at 5:00 pm (only on Saturday the week the actual meeting occurs)

City Council meetings on https://www.fostercity.org/community/page/fctv-live-stream:

STREAMED LIVE every 1st and 3rd Monday of the month

City Council meetings on-demand:
https://www.fostercity.org/agendasandminutes

5 Proclamation of the
City of Foster City, California

Recognizing March 2022 as Women’s History Month

WHERAS, Women’s History Month is a celebration of women’s contributions to history, culture, and society and has been observed annually in the month of March in the United States since 1987; and

WHEREAS, the National Women’s History Alliance designates a yearly theme for Women’s Hi story Month and the theme for 2022 is “Providing Healing, Promoting Hope”; and

WHEREAS, this t heme is “both a tribute to the ceaseless workers during this ongoing pandemic and also a recognition of the thousands of ways that women of all cultures have provided both healing and hope throughout history ”; and

WHEREAS, American women of every race, class, and ethnic background have made historic contributions to the growth and strength of our Nation in countless recorded and unrecorded ways; and

WHEREAS, American women have played and continue to play critical economic, cultural, and social roles in every sphere of the life of the Nation by constituting a significant portion of the labor force working inside and outside of the home; and

WHEREAS, American women have played a unique role throughout the history of the Nation by providing the majority of the volunteer labor force of the Nation; and

WHEREAS, American women were particularly important in the establishment of early charitable, philanthropic, and cultural institutions in our Nation; and

WHEREAS, American women of every race, class, and ethnic background served as early leaders in the forefront of every major progressive social change movement; and

WHEREAS, American women have been leaders, not only in securing their own rights of suffr age and equal opportunity, but al so in the abolitionist movement, the emancipation m ovement, the industrial labor movement, the civil rights movement, and other movements, especially the peace movement, which create a more fair and just society for all; and

WHEREAS, We must join our voices with the chorus of history and push forward w ith unyielding determination to forge a more equal society for all our daughters and granddaughters -- one where a woman's potential is limited only by the size of her dreams and the power of her imagination.

NOW THEREFORE, I, RICHA AWASTHI, MAYOR OF THE CITY OF FOSTER CITY, do hereby recognize March 2022 as Women’ s History Mont h and invite our Foster City community residents to recognize and celebrate women’s contributions and enduring imprints on our history.

IN WITNESS WHEREOF, I have hereunto set my hand and
have caused the official seal of the City of Foster C ity to be affixed this 7th day of March, two thousand twenty-two, A.D.

MAYOR RICHA AWASTHI
6 CITY OF FOSTER CITY/

ESTERO MUNICIPAL IMPROVEMENT DISTRICT
SPECIAL MEETING OF FEBRUARY 17, 2022

MINUTES

CALL TO ORDER OF CITY COUNCIL/EMID BOARD OF DIRECTORS
The duly called and noticed special meeting of the City Council of the City of Foster City (City), sitting as said Council and as ex officio the Board of Directors of the Estero Municipal Improvement District (EMID) of February 17, 2022 was called to order at 8:31 a.m. by Mayor/President Awasthi.

Pursuant to Governor Newsom’s Executive Order N-29-20, as amended through Order N- 08-21, the meeting was held as a teleconference meeting.

ROLL CALL
The Communications Director/City Clerk/District Secretary called the roll:

PRESENT: Councilmembers/ex officio EMID Directors Jon Froomin, Sanjay Gehani, Sam Hindi, Patrick Sullivan, and Mayor/President Richa Awasthi.

ABSENT: None.

STAFF PRESENT: Maria Saguisag-Sid, Human Resources Director; Rob Lasky, IT Manager; and Priscilla Schaus, Communications Director/City Clerk/District Secretary.

Councilmember/Director Sullivan arrived at 8:34 a.m.

CLOSED SESSION
Hearing no objection from the City Council/EMID Board, Mayor/President Awasthi recessed the meeting into Closed Session for the following:

1. Public Employee Appointment (Government Code § 54957) Title: City Manager; and

2. Report Out from Closed Session.

Meeting recessed into Closed Session at 8:34 a.m. and reconvened at 4:03 p.m.

Vice Mayor/Vice President Froomin reported that no action was taken in Closed Session.

ADJOURNMENT
7 Hearing no objection from the City Council/EMID Board, Mayor/President Awasthi adjourned the meeting. Meeting adjourned at 4:03 p.m.
8 CITY OF FOSTER CITY/

ESTERO MUNICIPAL IMPROVEMENT DISTRICT
REGULAR MEETING OF FEBRUARY 22, 2022

MINUTES

CALL TO ORDER OF CITY COUNCIL/EMID BOARD OF DIRECTORS
The Regular Meeting of February 22, 2022 of the City Council of the City of Foster City, sitting as said Council and as ex officio the Board of Directors of the Estero Municipal Improvement District (EMID), was called to order at 6:30 p.m. by Mayor/President Richa Awasthi.

Pursuant to Governor Newsom’s Executive Order N-29-20, as amended through Order N-08-21, the meeting was held as a teleconference meeting.

ROLL CALL
The Communications Director/City Clerk/District Secretary called the roll:

PRESENT: Councilmembers/ex officio Directors Jon Froomin, Sanjay Gehani, Sam Hindi, Patrick Sullivan, and Mayor/President Richa Awasthi.

ABSENT: None.

STAFF PRESENT: Kevin Miller, Interim City/District Manager, Benjamin Stock, City Attorney/District Legal Counsel; Jennifer Phan, Interim Deputy City Manager; Edmund Suen, Finance Director; Marlene Subhashini, Community Development Director; Maria Saguisag-Sid, Human Resources Director; Tracy Avelar, Police Chief; Louis Sun, Public Works Director; Robert Marshall, Fire Marshal; Rob Lasky, IT Manager; Marty Cooper, Chief Building Inspector; Laura Galli, Engineer Manager; Tiffany Oren, Recreation Manager; Francine Magno, Senior Engineer; Yelena Cappello, Deputy City Clerk; Julie Paping, Interim Principal Management Analyst; Kevin Ortiz, Management Coordinator; Shuli Chen, Video Technician and Priscilla Schaus, Communications Director/City Clerk/District Secretary.

PUBLIC
Connie Vial addressed the City Council via email regarding the redevelopment of Lantern Cove apartments.

CONSENT CALENDAR
9 Motion by Councilmember/Director Gehani, seconded by Councilmember/Director Hindi, and carried unanimously by roll call vote, 5-0-0, approving the following items on the City/District Consent Calendar:

City/EMID Consent Calendar

1. Minutes of Special Meeting of January 31, 2022;

2. Minutes of Regular Meeting of February 7, 2022;

3. City Resolution No. 2022-12, “Approving a Drop-off and Pick-Up Zone Along the South End of Balclutha Drive Restricting Parking Between the Hours of 7:30AM- 9:30AM and 2:00PM-4:00PM Monday through Friday;”

4. City Resolution No. 2022-13, “Awarding a Professional Services Agreement to Waterworks Industries, Inc. in an Amount Not to Exceed $24,905 for Comprehensively Updating the Lagoon Management Plan; Authorizing the City Manager to Execute the Agreement; and Appropriating $40,000 from the General Fund Reserve to Account No. 001-0920-431-4251;”

5. City Resolution No. 2022-14, “Authorizing the Addition of Summer Days as an On- Going Community Event; Authorizing the Return to Pre-COVID 19 Pandemic in the Fiscal Year 2022-2023 Special Recreation and City Council Budgets; and Appropriating $30,000 From the General Fund Reserve to Account No. 003-0537- 451-4251 for Summer Days Event Expenses and $25,000 From the General Fund Reserve to Account No. 001-1030-413-4251 for Fourth of July Event Expenses;”

6. City Resolution No. 2022-15, “Extending the Proclamation of the Existence of a Local Emergency Caused by the Threat of the Novel Covid-19 Virus, and Proclaiming the Continuing Need for the City Council, Planning Commission and Committees to Meet by Teleconference and Allowing for Increased Meeting Accessibility via in Person and Teleconference Meeting Participation;” and

7. EMID Resolution No. 3634, “Proclaiming the Continuing Need for the Estero Municipal Improvement District Board of Directors, Planning Commission, and Committees to Meet by Teleconference and Allowing for Increased Meeting Accessibility via in Person and Teleconference Meeting Participation.”

ITEMS REMOVED FROM CONSENT CALENDAR

FIRST AMENDMENT TO THE AGREEMENT WITH RENNE PUBLIC LAW GROUP (DBA, RENNE PUBLIC POLICY GROUP (RPPG)), IN THE AMOUNT OF $156,000 FOR

AN EXTENDED TWO-YEAR TERM, FOR BOTH STATE LEGISLATIVE ADVOCACY

SERVICES IN ADDITION TO STATE AND FEDERAL GRANT WRITING AND CONSULTING SERVICES. CITY RESOLUTION NO. 2022-16.

Without objection from the City Council, Mayor Awasthi removed this item from the Consent Calendar at the request of Councilmember Sullivan.

Interim Deputy City Manager Phan presented the staff report.

Discussion ensued.
10 Motion by Councilmember Gehani, seconded by Vice Mayor Froomin, and carried unanimously by roll call vote, 5-0-0, adopting City Resolution No. 2022-16, “A Resolution of the City Council of the City of Foster City Authorizing the Mayor to Execute the First Amendment to the Agreement with Renne Public Law Group (dba, Renne Public Policy Group (RPPG)), in the Amount of $156,000 for an Extended Two-Year Term, for Both State Legislative Advocacy Services in Addition to State and Federal Grant Writing and Consulting Services.”

NEW BUSINESS
INTERIM GUIDANCE RULES AND REGULATIONS TO IMPLEMENT SENATE BILL 9 (SB 9) AND DIRECTING THE PREPARATION OF AN SB 9 IMPLEMENTING ORDINANCE AND RECEIVING A REPORT ON SENATE BILL 10 (SB 10). MINUTE ORDER NO. 1835. CITY RESOLUTION NO. 2022.17.

Community Development Director Subhashini presented the staff report.

Discussion ensued.

Motion by Councilmember Sullivan, seconded by Councilmember Gehani, and carried unanimously by roll call vote, 5-0-0, adopting Minute Order No. 1835, to receive and accept the informational report on Senate Bill 10 (SB10).

Motion by Councilmember Hindi, seconded by Councilmember Gehani, and carried unanimously by roll call vote, 5-0-0, adopting City Resolution No. 2022-17, “A Resolution of the City Council of the City of Foster City Adopting Interim Guidance Rules and Regulations to Implement SB 9 – the California Home Act; and Directing the Preparation of an SB 9 Implementing Ordinance.”

ITEM REMOVED FROM THE AGENDA
"OUR NEIGHBORHOOD VOICES" INITIATIVE AND A REQUEST FOR A RESOLUTION OF SUPPORT.

The Communications Director/City Clerk announced that "Our Neighborhood Voices" Initiative and a request for a resolution of support was removed from the agenda at the request of staff.

REPORTS

WASTEWATER TREATMENT PLANT MASTER PLAN IMPROVEMENTS PROJECT (CIP 455-652) - CLEAN WATER PROGRAM - UPDATE FOR OCTOBER 2021 THROUGH DECEMBER 2021. MINUTE ORDER NO. 1836.

Public Works Director Sun presented the staff report.
11 Discussion ensued.

Motion by Vice Mayor Froomin, seconded by Councilmember Gehani, and carried unanimously by roll call vote, 5-0-0, adopting Minute Order No. 1836, receiving and accept the report on Wastewater Treatment Plant Master Plan Improvements Project (CIP 455-652) - Clean Water Program - Update for October 2021 through December 2021.

LEVEE IMPROVEMENTS PROJECT (CIP 327-657) - MONTHLY GENERAL UPDATE.

MINUTE ORDER. NO. 1837.

Public Works Director Sun presented the staff report.

Discussion ensued.

Motion by Councilmember Gehani, seconded by Vice Mayor Froomin, and carried unanimously by roll call vote, 5-0-0, adopting Minute Order No. 1837, receiving and accepting the Levee Improvements Project (CIP 327-657) - Monthly General Update.

RESOLUTIONS FOR ADOPTION
CONTRACT CHANGE ORDER NO. TWENTY (20) TO THE AGREEMENT WITH SHIMMICK CONSTRUCTION CO., IN THE AMOUNT OF $347,422.78 TO PROVIDE

AND CONSTRUCT DRAINAGE REVISIONS FOR CONCRETE BLOCK WALLS NORTH

OF SAN MATEO BRIDGE FOR THE LEVEE PROTECTION PLANNING AND IMPROVEMENTS PROJECT (CIP 327-657). CITY RESOLUTION NO. 2022-18.

Public Works Director Sun presented the staff report.

Discussion ensued.

Motion by Vice Mayor Froomin, seconded by Councilmember Sullivan, and carried unanimously by roll call vote, 5-0-0, adopting City Resolution No. 2022-18, “A Resolution of the City Council of the City of Foster City Authorizing the Mayor to Execute Contract Change Order No. Twenty (20) to the Agreement with Shimmick Construction Co., in the Amount of $347,422.78 to Provide and Construct Drainage Revisions for Concrete Block Walls North of San Mateo Bridge for the Levee Protection Planning and Improvements Project (CIP 327-657).”

COMMUNICATIONS
CITY/DISTRICT WARRANT OF DEMANDS. NO ACTION TAKEN.

City/District Warrants of Demands were Processed and Issued on January 31, 2022, and ACH were Processed on January 25, and January 31, 2022. 12 COUNCIL/BOARD STATEMENTS AND REQUESTS, COUNCIL LIAISON REPORTS,

AND CITY/DISTRICT MANAGER REPORTS
Interim City/District Manager Miller stated that in-person meetings will resume beginning March 7. He reminded everyone that the first Budget Study Session is on February 28 at 6:30 pm. He invited everyone to visit the new engagement website at www.engagefostercity.org where they can provide feedback via a Housing Priorities and Preferences Survey and Interactive Map. He thanked the Council for a great meeting tonight.

Councilmember/Director Sullivan stated he attended the Pension Liability Ad Hoc Subcommittee meeting on February 9, San Mateo-Foster City School District (SMFCSD) virtual meeting on February 7, Peninsula Traffic Congestion Relief Alliance Board of Directors Meeting on February 17, Leadership Council – Strategic Partnerships and Innovation training on February 11, and Community Beautification Subcommittee meeting on February 22.

Councilmember/Director Gehani stated he attended commute.org’s new board member orientation on February 11. He also stated he was not able to attend his first commute.org meeting on February 17 due to a scheduling conflict with the City Council’s special meeting.

Councilmember/Director Hindi stated he attended the Pension Liability Ad Hoc Subcommittee meeting on February 9. He stated he attended the SFO Roundtable‘s (SFORT) special meeting on February 10, where they discussed the NIITE/HUSSH Departure procedure.

Vice Mayor/Vice President Froomin stated he attended Parks and Recreation’s Valentine’s Day craft project event on February 11, City of Belmont’s first Lunar New Year celebration on February 16, Planning Commission meeting on February 17, and Community Beautification Subcommittee on February 22. He mentioned a tree fell on a multi-resident house and thanked staff for their response.

Mayor/President Awasthi attended the City/Council Association of Governments (C/CAG) Board meeting on February 10 where they nominated the Chair and Vice Chair and continued to discuss express lanes. She thanked Interim City Manager Miller and the City Council for their continued cooperation, discipline, and dedication.

ADJOURNMENT
Hearing no objection from the City Council/EMID Board, Mayor/President Awasthi adjourned the meeting. Meeting adjourned at 8:31 p.m.
13 DATE: March 7, 2022

TO: Mayor and Members of the City Council

VIA: Kevin Miller, Interim City Manager

FROM: Louis Sun, Public Works Director

SUBJECT: APPROVING THE PLANS AND SPECIFICATIONS AND

AUTHORIZING THE CALL FOR BIDS FOR THE NEW TRAFFIC
SIGNALS AT VARIOUS LOCATIONS PROJECT (CIP 301-681)

RECOMMENDATION

It is recommended that the City Council adopt the attached resolution approving the plans and specifications and authorizing the call for bids for the New Traffic Signals at Various Locations Project (CIP 301-681).

EXECUTIVE SUMMARY

CIP 301-681 continues the City’s program of improving its roadway safety and accessibility for its residents, business owners and their employees, and visitors who walk, bike, and drive in the City. CIP 301-681 consists of the construction of four (4) new traffic signals and related work at the following intersections:
Shell Boulevard and Beach Park Boulevard
Beach Park Boulevard and Gull Avenue (North)
Foster City Boulevard and Polynesia Drive
Edgewater Boulevard and Port Royal Avenue (North)
The engineer’s construction estimate for the project is $4,500,000. Total funding in the amount of $3,882,500 provided by a combination of SB 1, Gas 14 Tax, and General Funds has been budgeted for this project. A portion of the project construction will be funded by the School District for the signalized intersection at Beach Park Boulevard and Shell Boulevard. Due to the rising costs in construction, additional funding will be required to fully fund construction. A request for additional funds will be brought to the City Council following the bid opening. The recommended action by the City Council is approving the plans and specifications and the authorization to call for bids for the project. Construction is anticipated to take approximately 6 months.

BACKGROUND

CIP 301-681 includes improvements identified in the Bicycle, Pedestrian, and Intersection Evaluation Study (CIP 301-664 – “Study”), as well as input received from the City Council at its February 5, 2018 Meeting when the Study was adopted.

At its June 17, 2019 City Council Meeting, the City Council voted to issue a Request for Proposal for Engineering Services for the project.

At its November 18, 2019 City Council Meeting, the City Council approved the award of a design contract to Traffic Patterns for the signal installation at four intersections:
Shell Boulevard and Beach Park Boulevard
Beach Park Boulevard and Gull Avenue (North)
Foster City Boulevard and Polynesia Drive
Edgewater Boulevard and Port Royal Avenue (North)
The scope of the project includes the installation of new crosswalks, ADA ramps, and signage.

The School District is responsible for its share of the design and construction costs associated with the signalized intersection at Shell Boulevard and Beach Park Boulevard. The School District has previously contributed $32,500 for its share of the design and construction support costs.

At the City Council meeting on February 7, 2022, the City Council adopted Resolution No. 2022-8 approving and authorizing the purchase of signal poles, mast-arms, and luminaire arms in the amount of $244,320.78 from AZCO Supply, Inc. as City furnished items. The procurement of long lead equipment prior to the award of the construction contract is intended to 15 minimize delays and allow construction to begin this summer. The poles are anticipated to arrive in July.

ANALYSIS

CIP 301-681 is part of the City’s ongoing effort to improve roadway safety and accessibility throughout the City of Foster City. These four intersections have been identified as the best candidates for improvement based on past studies and City Council input. The project will help make these intersections ADA compliant and, in some cases, add additional crossings for better pedestrian movements. Along with pedestrian movements, vehicles will also have safer movements at locations where the intersections were previously uncontrolled.

As part of the design process, the pole locations were identified and potholed to avoid any conflicts during the construction phase. The City has been working with PG&E to power the new signals and will continue to work with adjacent properties during the construction phase.

Plans and specifications for CIP 301-681 are complete and ready for bidding.

A copy of the plans and specifications is available online for review via the link below. The work is being coordinated with PG&E for the required connections. Day to day inspection and construction administration will be performed by City staff and its consultant.

Message boards will be placed at the limits of the project to advise drivers about the upcoming construction. Material testing and special inspection services are required and will be awarded as a separate contract. Construction is anticipated to begin in Summer 2022 and will take approximately six (6) months to complete. The project schedule is as follows:

Approval of Plans and Specifications and
Authorization to Call for Bids
March 7, 2022
Bid Opening April 5, 2022
Award of Construction Contract May 2, 2022
Construction Summer/Fall 2022
Project Notice of Completion December 2022
16 FISCAL IMPACT

All costs associated with construction will be funded through CIP 301-681.

Funding for the CIP project has been budgeted over the past years from SB1, Gas Tax, and the General Fund. Additionally, the School District will be funding a portion of the intersection improvements adjacent to Beach Park Elementary School. Staff will reach out to the School District for its portion of the construction costs following receipt of bids. It is anticipated that the cost of the project will be greater than the current budget of $3,882,500 and will require additional funding due to the rising costs of material and labor since the COVID-19 pandemic. The engineer’s construction estimate, which includes a 15% contingency, is $4,500,000. Additional funding will be brought to the City Council for approval along with the request to award the construction contract.

CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREAS

This item is in alignment with the “Facilities and Infrastructure” Value/Priority Area in that this project addresses recommendations identified in the Bicycle, Pedestrian, and Intersection Evaluation Study completed in 2018 which studied intersections and identified improvements to improve traffic operations and safety and accessibility for bicyclists and pedestrians.

Attachments:
Attachment 1 - Resolution
Link to Plans and Specifications - https://www.fostercity.org/CIP301- 681-Plans-Specs
17 RESOLUTION NO. ___________

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF FOSTER CITY

APPROVING THE PLANS AND SPECIFICATIONS AND AUTHORIZING THE CALL

FOR BIDS FOR THE NEW TRAFFIC SIGNALS AT VARIOUS LOCATIONS PROJECT (CIP 301-681).

CITY OF FOSTER CITY
WHEREAS, Plans and Specifications for the New Traffic Signals at Various Locations Project (CIP 301-681) have been completed by Traffic Patterns and are ready for bid; and
WHEREAS, funding in the amount of $3,882,500 was approved for the project budget for CIP 301-681; and
WHEREAS, the School District is responsible for its portion of the construction costs associated with the intersection improvements adjacent to Beach Park Elementary School; and
WHEREAS, staff will reach out to the School District to collect its portion of the construction costs following receipt of bids; and
WHEREAS, based on the current Engineer’s Estimate, additional funding will be requested for CIP 301-681 to fully fund the construction of the project and will be brought to the City Council for approval at the time of award of the construction contract.

NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Foster City does hereby approve the plans and specifications and authorize the call for bids for the new traffic signals at various locations project (CIP 301-681). 18 PASSED AND ADOPTED as a resolution of the City Council of the City of Foster City at the regular meeting held on the 7th day of March 2022, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RICHA AWASTHI, MAYOR
ATTEST:

PRISCILLA SCHAUS, CITY CLERK
19 DATE: March 7, 2022

TO: Mayor and Members of the City Council

VIA: Kevin Miller, Interim City Manager

FROM: Marlene Subhashini, Community Development Director Leslie Carmichael, Consulting Planner

SUBJECT: BELOW MARKET RATE INCLUSIONARY HOUSING
PROGRAM (RZ2021-0004), AFFORDABLE HOUSING
OVERLAY COMBINING DISTRICT (RZ2019-0001), ZONING OF

SEVEN APARTMENT PROPERTIES WITHIN AFFORDABLE
HOUSING OVERLAY COMBINING DISTRICT (RZ2020-0001),

AND ESTABLISHING RATES FOR A BELOW MARKET RATE

HOUSING IN-LIEU FEE

RECOMMENDATION

It is recommended that the City Council introduce the following ordinances and, after passing a motion to read by title only, read said ordinances by title only, and thereafter approve the ordinances, which ordinances shall be presented to the City Council at a subsequent meeting to be passed and adopted:

1. An Ordinance of the City of Foster City adding a new Chapter 17.90, Below Market Rate Inclusionary Housing Program, to Title 17, Zoning, of the Foster City Municipal Code; and

2. An Ordinance of the City of Foster City adding a new Chapter 17.92, Affordable Housing Overlay Combining District, to Title 17, Zoning, of the Foster City Municipal Code; and
20 3. An Ordinance of the City of Foster City amending the Foster City Zoning Map to zone Certain Properties within the Affordable Housing Overlay Combining District:

1. Beach Cove Apartments, 605-1021 Catamaran Street,
APNs 094-320-040 & 094-330-010

2. Franciscan Apartments, 888 Foster City Boulevard, APN 094-091-020

3. Sand Cove Apartments, 707-939 Shell Boulevard, APN 094- 470-160

4. Shadow Cove Apartments, 1019-1087 Foster City
Boulevard, APN 094-312-780

5. The Lagoons Apartments, 611-899 Bounty Drive, APN 094- 472-010

6. Lantern Cove Apartments, 244 Rock Harbor Lane, APNs
097-160-110 & 120

7. Schooner Bay Apartments, Timberhead Lane, Halyard Lane, Stanchion Lane, Masthead Lane, Quadrant Lane, Cutwater
Lane, Jibstay Lane, Bobstay Lane, Windlass Lane, Pinrail Lane, APNs 097-140-070 & 080; 097-150-020, 030, 050,
110, & 120 ; and
It is further recommended that the City Council also adopt a resolution amending the City’s Master Fee Schedule to adopt a fee for a Below Market Rate Housing In-Lieu Fees.

EXECUTIVE SUMMARY

The City’s current Housing Element adopted on February 2, 2015 for the 2015-2023 planning period contains a number of housing goals, policies and programs including an Inclusionary Housing Policy H-E-2, an Affordable Housing Overlay (AHO) Program H-D-2-b and Rezone of Sites with AHO Program H-D-2-c. The proposed actions are necessary to implement these policies and programs contained in the existing Housing Element and maintain a compliant Housing Element. The Ordinance establishing a new Chapter 17.90, Below Market Rate Inclusionary Housing Program, will establish objective standards for the City’s long-standing Inclusionary Housing Policy which requires 20% of residential units to be affordable/below market rate. The Ordinance establishing a new Chapter 17.92, Affordable Housing Overlay (AHO) Combining District will implement the AHO program contained in the Housing Element but in a different form than originally proposed. The AHO program in the Housing Element was originally intended 21 to allow for an increase in density (up to 52%) in exchange for the provision of affordable housing. However, the proposed AHO Ordinance does not change the density already allowed by Zoning, General Plan, and State Density Bonus Law. Instead, it provides for an alternate set of lower overall inclusionary housing percentage (15% instead of the standard 20%) in exchange for providing more units at lower income levels. The AHO is proposed to be applied to seven (7) existing apartment developments.

The City Council is also requested to establish the fees for a Below Market Rate Housing In-Lieu Fee. The in-lieu fee option would be provided to developments of five (5) to nine (9) units or to satisfy fractional unit requirements. In-lieu fees would also be available to other development projects subject to several findings.

BACKGROUND

The proposed ordinances and resolution are necessary to implement policies and programs contained in the existing Housing Element. Foster City’s current Housing Element 2015-2023 was adopted on February 2, 2015. The Housing Element plays a critical role in identifying and addressing housing needs, which maintain the "balance" that exists in the types, tenure, and affordability of housing in the City. The Housing Element also establishes programs to maintain and protect existing housing and community character.

The current Housing Element includes policies and programs to address affordable housing needs, including the establishment of the Affordable Housing Overlay (AHO) Combining District, the application of the AHO Combining District to specific sites, and the formal implementation of the City’s Inclusionary Housing Policy. State law requires the City to implement its Housing Element and to adopt programs to meet its obligations within certain timeframes.

Previous meetings have considered the background information provided on these programs, including:
September 21, 2020: A Joint Planning Commission and City Council Study Session was held to provide an overview of the local and regional housing framework including an overview of Housing Program Implementation Efforts. (See pages 9-11 of Staff Report dated September 21, 2020 and Joint Planning Commission/City Council Minutes dated September 21, 2020).
22 May 3, 2021: The City Council adopted Resolutions of Intention for the Housing Element Implementation Programs contained in the Housing Element for 2015-2023. (See Staff Report to the City Council dated May 3, 2021).
July 15, 2021: A Planning Commission Study Session was held to consider background information on the Inclusionary Ordinance and AHO and provide initial feedback to staff regarding options to be researched/considered, factors to be analyzed, etc. (See Staff Report to the Planning Commission dated July 15, 2021 and Minutes of the July 15, 2021 Planning Commission Regular Meeting). October 21, 2021: A second Planning Commission Study Session was held to consider and receive feedback on the draft Ordinances creating Chapters 17.90, Requirements for Below Market Rate Dwelling Units, and Chapter 17.92, Affordable Housing Overlay Combining District. (See Staff Report to the Planning Commission dated October 21, 2021 and Minutes of the October 21, 2021 Planning Commission Regular Meeting).
February 3, 2022: A Planning Commission Public Hearing was held to consider and provide recommendation on the draft Ordinances Chapters 17.90, Requirements for Below Market Rate Dwelling Units, and Chapter 17.92, Affordable Housing Overlay Combining District. (See Attachment 9, Staff Report to the Planning Commission dated February 3, 2022; Attachment 12, Proposed revisions to the draft ordinance provided to the Planning Commission on February 3, 2022 and public comments received as of February 3,
2022; Attachment 8, Planning Commission Minutes dated February 3, 2022; and Attachment 10, Planning Commission Resolutions P- 01-22, P-02-22, and P-03-22.

At the Planning Commission Public Hearing on February 3, 2022, the Planning Commission discussed the various aspects of the proposed ordinances, heard public testimony, and considered the details of the proposed ordinances. The Planning Commission adopted three Resolutions (Attachment 10):
P-01-22: A Resolution recommending City Council adoption of an Ordinance adding Chapter 17.90, Below Market Rate Inclusionary Housing Program, including the edits recommended by staff on February 3, 2022, passed by a vote of 4-1-0-0 (Noes: Chairman Wykoff); and
23 P-02-22: A Resolution recommending City Council adoption of an Ordinance Adding Chapter 17.92, Affordable Housing Overlay Combining District, passed by a vote of 4-1-0-0 (Noes: Chairman Wykoff); and
P-03-22: A Resolution recommending City Council adoption of an Ordinance amending the Foster City Zoning Map to zone certain properties with the Affordable Housing Overlay Combining District, passed by a vote of 4-1-0-0 (Noes: Chairman Wykoff).

In accordance with all legal noticing requirements, the public was advised of this Public Hearing in the following ways:
Ad in the Foster City Islander – February 16, 2022 and February 23, 2022
Electronic mailing to the project applicants, owners and persons who expressed interest in receiving project updates (ListServs for Planning, Housing, AHOZ, Lantern Cove)– February 10, 2022 Mailing to property owners who own property within a 300-foot radius – February 16, 2022
Foster City Website: www.fostercity.org – February 10, 2022 Foster City webpage on Inclusionary and AHO – updated February, 10, 2022
Public Posting Places – February 11, 2022
Social Media and Press Release– February 24, 2022

ANALYSIS

BELOW MARKET RATE INCLUSIONARY HOUSING PROGRAM –
RZ2021-0004

Inclusionary housing policies and programs require a certain percentage of Below Market Rate (BMR) units to be included in new or rehabilitated housing developments. Foster City has an inclusionary housing policy as set forth in the Housing Element of the General Plan since 2001; however, the City has not adopted an ordinance to formally implement the policy. State law allows cities to impose inclusionary requirements by ordinance. The proposed ordinance adding the Below Market Rate Inclusionary Housing Program to the Foster City Municipal Code will implement the inclusionary policy with clear, objective requirements that apply city-wide, instead of the current practice of separately negotiating the specific parameters for each development which can lead to inconsistent results.
24 Summary of Key Provisions

A summary of the key recommendations by the Planning Commission are listed below in Table 1 and explained in further detail below and in the Planning Commission Staff Report dated February 3, 2022 (Attachment 9):

25 Additional detail related to these provisions is provided in the Planning Commission Staff Report dated February 3, 2022. Staff has provided a summary of the discussion regarding the income level percentages below.

Income Level Percentage Requirements

The income level percentage requirements specify the percentage of housing units required at various income levels. The current inclusionary policy in Housing Element Policy H-E-2 sets forth the City’s goal of achieving a total of 20% BMR housing in residential projects. As explained in the October 21, 2021 Planning Commission Staff Report, the goal of the income level requirements is to establish clear and objective standards for the development community regarding the income levels to be provided in 26 residential projects, address housing needs, and at the same time not unduly constrain the economic feasibility of, and hence the production of housing.

Additional information to consider is the inclusionary requirements in nearby jurisdictions so that the City’s requirements are not significantly more or less stringent than neighboring jurisdictions.

The City hired Economic & Planning Systems, Inc. (EPS) to assist the City with analyzing the financial feasibility of inclusionary housing requirements (they are also analyzing potential development impact fees). EPS has used market data and cost information from interviews with regionally active developers and analyzed the economics of rental and for-sale housing in the area in order to assist with analyzing various scenarios of inclusionary requirements and the economic feasibility of each of these scenarios. The economic model includes various assumptions based on research and focus group discussions, which are documented in their report, “Housing Fee Implementation Considerations” (see Attachment 5).

Rental Percentages

For rental units, the metric used to assess feasibility is “yield on cost” of about

4.2% or above to represent a feasible rental project. Yield on cost is the net operating income (or sometimes cash flow from operations) at stabilization divided by total project cost, whereas the capitalization rate is the stabilized net operating income divided by the market value of the property (yield on cost defined here). This is based on capitalization rates (rate of return by dividing net operating income by property asset value, expressed as a percentage) for existing recently built properties of around 3.3-3.4% and the expectation that a “premium” of at least 0.75% for developers/investors to take on the risk of a new construction project. Any scenario that results in at least a 4.2% yield on cost may be considered within reach of feasibility, particularly if developers are able to achieve lower costs or higher market rate pricing than assumed through such measures as building additional market- rate units through application of the State’s density bonus law, or factoring in the concessions and waivers that density bonus law provides as a result of providing the affordable inclusionary units.

Table 2 below indicates the yield on cost for six (6) scenarios. The ranges in the yield on cost for some scenarios indicate the difference between a development at a density of 35 units per acre and a development at a higher density of 60 units per acre. A scenario with no BMR requirement was 27 included for comparison, showing a yield on cost of 4.5%. Three of the scenarios met or exceeded the 4.2% yield on cost. One of those scenarios included 10% very low- and 10% low-income but not moderate-income units.

The other two included a mix of very low-, low-, and moderate-income units, with one at 10% very low-, 5% low- and 5% moderate-income and the other scenario at 7% very low-, 7% low-, and 6% moderate-income.

In evaluating the scenarios, one factor to consider is whether to include moderate-income units in the rental requirement. Depending on various economic factors, the calculated maximum moderate-income rents can sometimes be higher than market rents. The maximum allowable rent amounts are calculated from the income limits for the County and also incorporate a utility allowance for each development depending on which utilities are the tenant’s responsibility. Table 3 below shows typical maximum allowable rents for each income category as well as the range of market rate rents in November 2021.

Although the moderate-income rents for 2021 are higher than market in some 28 cases, this is not always the case. The BMR rents are primarily dependent on the median income and related income limits, while the market rents are primarily dependent on supply and demand. When the calculated moderate- income rents are higher than market rents, the landlord will lower the moderate-income rents in order to attract tenants. Having moderate-income units can provide an intermediate step between low-income and market rents for tenants whose incomes grow above the low-income level. Having moderate-income units also helps the City address the moderate-income category of the RHNA. EPS has provided a comparison to several other nearby cities’ rental and for-sale inclusionary requirements, as shown in Figure 1 below. Millbrae, San Carlos, and San Mateo all require 15% inclusionary at very low- or low-income levels for rental developments, with Redwood City requiring 20% and including moderate-income units.

Staff Comments/Recommendation

Rental Percentages. Based on the financial feasibility analysis and the desire to include all three RHNA categories, staff and the Planning Commission recommends an inclusionary requirement for rental developments of 10% very low-income, 5% low-income, and 5%-moderate- income. The proposed range has a yield on cost ratio of 4.2% which indicates financial feasibility and addresses all of required RHNA income categories. 29 For-Sale Percentages

For ownership units, the metric used to assess financial feasibility is a profit margin of about 14% for townhouses and 16% for condominiums. All of the 20% inclusionary scenarios modeled fall short of these thresholds, but a developer may be able to incur these inclusionary requirements and still have a feasible project if they can find savings elsewhere or achieve higher prices than assumed. Table 4 below indicates the estimated profit margin for several scenarios.

The analysis provided by EPS shows that the 20% moderate scenario yields a 12%-14% profit, which is marginally feasible, unless the developer can find savings elsewhere or achieve higher prices than assumed. The scenario with 15% moderate-income units yields an improved profit margin of 14%-15%. In either scenario, the profit margin could be improved by application of State density bonus law which provides the ability to construct additional market- rate units and obtain various concessions and waivers to reduce development costs as a result of providing the affordable inclusionary units.

EPS notes that they have calculated the affordable price assuming the households earns 110 percent of median income, though the nominal “moderate-income” category could reach as high as 120 percent of median income. This is similar to State law requirements for calculating moderate rents using 110 percent of median income. This assumption parallels State law regarding the use of density bonuses for moderate-income households and reflects the idea that the units should not be affordable only to those households earning literally the maximum figure allowed in the income category. In other words, the qualifying maximum income to purchase a unit 30 would remain at 120% of median income but the maximum sales price would be set based on an income of 110% of median income.

The review of inclusionary for-sale requirements in nearby cities as shown in Figure 1 above indicates that the typical requirement is 15% with Millbrae, Redwood City, and San Mateo requiring 15% moderate-income only and San Carlos requiring a mix of 5% low- and 10% moderate-income.

Comments/Recommendation

Based on the financial feasibility analysis, Staff and the Planning Commission recommend an inclusionary requirement of 20% moderate-income for ownership units. This is consistent with the City’s inclusionary policy and close to the thresholds for economic feasibility which likely can be enhanced through application of State density bonus law provisions designed to reduce development costs and enhance development values in exchange for development of affordable housing units.

New vs Net New

Due to the lack of vacant land, a significant portion of Foster City’s new housing units is anticipated from redevelopment of existing apartment developments. The issue with “new” vs “net new” is whether to apply the inclusionary requirement to all newly constructed units, including replacement units, or only to the net new units, i.e., additional units beyond the number of existing units. One of the concerns is that existing older units are likely to be replaced with new, more expensive units. This concern is already addressed by Government Code Section 66300(d) of the Housing Crisis Act of 2019, and Section 65915(c)(3) of State Density Bonus Law. Combined, these provisions require any “protected” unit to be “replaced” at the same income level. “Protected” units, defined at Government Code Section 66300(d)(2)(E)(ii), includes units that are or were rented by lower or very low- income households in the last five years. “Replaced”, defined at Government Code Section 66300(d)(2)(E)(iii) and 65915(c)(3)(B), means units of equivalent size to be made available at affordable rent or affordable housing cost to households in the same or lower income category as those households in occupancy. If the income levels of the occupants are not known, then the units must be replaced with the Citywide proportion of lower income renter households.

As an example, consider an existing development that has 100 units. If 50 31 units are removed and replaced with 110 units for a property total of 160 units, then 50 of the newly constructed units will be considered “replacement units” and the 60 “net new” units will be subject to an inclusionary requirement to provide 12 (20% x 60) BMR units.

Replacement units at the very low- or low-income levels are required to be deed restricted for at least 55 years (see additional discussion regarding term of affordability below).

Comments/Recommendation
Staff and the Planning Commission recommend that the inclusionary requirement be applied to net new units, excluding density bonus units, and that any BMR units provided as replacement units pursuant to Government Code Section 66300(d) or 65915(c)(3) may not be included in the count of provided inclusionary units.

Exemptions

Size thresholds can be used to exempt projects smaller than a certain number of units from any inclusionary requirement. Most jurisdictions exempt developments smaller than a certain size in order to assist the financial feasibility of smaller projects.

Exempting residential projects smaller than a certain number of units from any inclusionary requirement, either on-site units or an in-lieu fee, will improve the financial feasibility of these small projects. ADUs are already typically more affordable due to their limited size and there is no statutory authority that would allow a city to impose an inclusionary requirement on ADUs. For the Annual Progress Reports (APR) to HCD, the City categorizes the ADUs into market and below market rate categories based on surveys of actual ADU rental rates.

Other exemptions as required by law are also included, such as properties damaged by fire or other calamity, projects developed in accordance with a development agreement, or have a tentative map or vesting tentative map approval, or have already submitted complete applications for discretionary development entitlements.

32 Comments/Recommendation

Staff and the Planning Commission recommend explicitly exempting Accessory Dwelling Units (ADUs) in conformance with State law and also exempting residential projects of four units or less.

Projects of Five (5) to Nine (9) Units

Providing an option for smaller developments to pay an in-lieu fee can off-set the fact that they are more likely to have difficulty achieving financial feasibility. Having this option available only to small developments can minimize the drawbacks of receiving in-lieu fees but not have land or projects to use the funds.

Comments/Recommendation

Staff and the Planning Commission recommend that developments of five (5) to nine (9) units be allowed to provide on-site units or pay an in-lieu fee.

Providing this option may help the financial feasibility of smaller developments, although availability of land in Foster City for this size development is extremely limited.

Projects of Ten (10) or More units

On the issue of requiring projects larger than a certain size to provide on-site units, given the lack of available land in Foster City, staff believes it is important to require on-site provision of units as the standard means of compliance. The risk of allowing in-lieu fees as a standard option could result in the City struggling to find sites for projects and not be as helpful in providing new units to address the RHNA. The City is required to include provisions for alternatives but can specify the requirements under which they would be allowed.

Comments/Recommendation

Staff and the Planning Commission recommend that all residential development projects of ten (10) units or more be required to provide on-site inclusionary units and provide options for alternative means of compliance as required by State law (discussed below).

Rounding
33 The ordinance needs to establish the outcome when calculations result in a fraction. Requirements can: 1) round up any fraction 0.5 or more to require an additional unit and drop any requirement for fractions less than 0.5, or 2) round up 0.5 or more and require a prorated fractional fee for fractions less than 0.5.

Comments/Recommendation

Staff and the Planning Commission recommend rounding up any fractions 0.5 or greater to provide an additional unit and paying a prorated fractional fee for any fractions less than 0.5.

Terms of Affordability

Terms of affordability have increased since the first developments subject to affordability restrictions in Foster City. The first for-sale development including restricted units, Marina Green, was subject to 20-year restrictions that began in 1985 or when each unit was first sold. The first rental development with restricted units, Fosters Landing, was subject to a 34-year restriction that began in 1986 (and was later extended). The only other restricted for-sale development, Emerald Bay, was subject to 34-year restrictions that began in 1992. Later rental developments have typically had 55-year affordability terms (Metro Senior Apartments, Plaza, 100 Grand, Alma Point, Triton), with Marlin Cove and Miramar in perpetuity, and Pilgrim Triton Workforce Apartments for 99 years.

The minimum terms required to count toward RHNA requirements are 55 years for rental units and 45 years for ownership units. Staff noted in the October 21, 2021 Staff Report that San Jose and San Francisco have enacted a 99-year requirement for rental units but with a provision allowing exceptions when financing requires a shorter term (such as tax credits). Staff has done additional research and concluded that the approach used in San Jose with the 99- year term with exceptions for financing requirements is a reasonable option for rental units.

17.90.060.C.2 to require that replacement units also have a term of affordability restriction of 99 years.
34 The term of affordability restriction for ownership units is typically 45 years.

The restriction can be structured so that the restriction resets to begin a new time period each time a unit is resold or the restrictions can expire at the end of a fixed time period. Restarting the restriction can achieve nearly the same result as a restriction in perpetuity but be less likely to hamper the purchaser’s ability to obtain financing.

Comments/Recommendation

Staff and the Planning Commission recommend that for both inclusionary and replacement rental units, the restriction shall have a term of ninety-nine (99) years, unless a shorter term not less than fifty-five (55) years is necessary to secure financing, such as tax credits. Staff recommends a term of 45 years for ownership units, to be restarted with each sale.

Alternative Means of Compliance

Government Code Section 65850(g) requires that an inclusionary ordinance for rental units provide alternative means of compliance that may include, but are not limited to, in-lieu fees, land dedication, off-site construction, or acquisition and rehabilitation of existing units. Each of these alternatives has pros and cons as summarized in Table 5. Providing an alternative means of compliance is not required for ownership units.
35 36

As discussed above, in a small, built-out City like Foster City, it is preferable to require provision of the inclusionary units rather than payment of fees or dedication of land that then requires additional implementation programs/actions by the City.

Comments/Recommendation

For the reasons noted above, staff and the Planning Commission recommend the following as potential alternative means of compliance, subject to findings, summarized below:

1. Payment of Below Market Rate Housing In-lieu Fee.
a. Fee is adequate to cover cost of units at another location based on an affordability gap analysis;
37 b. Project location doesn’t have sufficient land area for on-site units; c. There are adequate locations in the City that are available and there are funds in sufficient amount and timing to finance acquisition; d. Purposes of the Chapter would be better served; and
e. Fee would be paid upon first building permit.

2. Construction of Off-Site Below Market Rate Units.
a. Off-site location is within City and suitable;
b. Off-site location has necessary infrastructure;
c. Off-site BMR units are in addition to any BMR units otherwise required;
d. Construction of off-site units has not commenced before approval of the on-site project and won’t contribute to residential segregation by income level;
e. Off-site units would provide at least same quantity and affordability levels; any off-site rentals to satisfy for-sale requirements would be at rental affordability levels; and
f. Would comply with all other parts of the Chapter.
g. The purposes of the Chapter would be better served

3. Conversion of Off-Site Dwelling Units or Non-Residential Buildings to Off-Site Below Market Rate Dwelling Units.
a. Same findings as for off-site construction; and
b. Off-site BMR units are in addition to any replacement units otherwise required.

4. On-Site Clustering of Below Market Rate Dwelling Units. a. Clustering is necessary to access and secure financing; b. Construction will occur concurrently with market rate units; c. Clustering will not contribute to residential segregation by income level; and
d. The purposes of the Chapter would be better served.

5. Donation of Land.
a. Land is within the City, owned or under contract by Developer, suitable for development;
b. Land has necessary infrastructure;
38 c. Fair market value of the land equals or exceeds the value of the on- site BMR unit otherwise required;
d. Land is not contaminated; and
e. The purposes of the Chapter would be better served.

In-Lieu Fee and Fractional Fee Amounts
Based on the recommendations above, a Below Market Rate Housing In-Lieu Fee would need to be established for developments of five (5) to nine (9) units and for the fractional fee requirements. EPS has provided an analysis of rental and ownership housing development costs in order to establish amounts for in-lieu fees under different scenarios on both a per unit basis and a per square foot basis. The in-lieu fee estimates the gap between the cost of producing a dwelling unit and the value per unit with restricted rent or sales price. The assumptions that are included in these estimates are documented in the reports from EPS (see Attachments 6 and 7). The in-lieu fees were estimated for the recommended scenarios incorporating the costs of development with the assumed inclusionary percentages, as indicated in Table 6 and Table 7.

Jurisdictions can charge in-lieu fees on a per unit or a per square foot basis.

The per unit fee will result in relatively higher cost for developments with smaller units. Assessing the fee on a per unit basis would penalize projects of smaller, higher density units.

For rental projects, the in-lieu fee would be multiplied by the net rentable square feet. All net rentable square footage includes measurements from the 39 outside surface of the exterior walls and includes all finished living space. It does not include parking areas, common hallways and stairways, common rooms, building lobbies, balconies, elevator shafts, and utility rooms.

For for-sale developments, the in-lieu fee would be multiplied by the habitable area measured from the outside surface of the exterior walls, including all finished living space and common areas inside the dwelling unit. It does not include unheated areas such as parking and balconies.

Comments/Recommendation
Staff and the Planning Commission recommend that the in-lieu fee be assessed on a per square foot basis. The in-lieu fee amounts would be established by adoption of the attached City Council Resolution (Attachment 4).

AFFORDABLE HOUSING OVERLAY COMBINING DISTRICT – RZ2019- 0001

The original concept included in the Housing Element provided additional density up to 52% beyond the current zoning. Since then, the concept has evolved due to the ever changing State laws and City needs. Staff’s proposal is to simplify the proposed AHO (since the developer will also be able to access all the incentives contained in State Density Bonus Law) to require more BMR units at the very low- (including extremely low-) and low-income levels accompanied by a reduction in the inclusionary percentage from the City’s standard inclusionary requirement of 20% to 15%. The AHO would not allow an increase in density beyond what is allowed by Zoning, General Plan and Density Bonus Law but would provide the City with more BMR rental units at the lower income levels in exchange for a reduced overall inclusionary requirement. This will enable the City to obtain more of the extremely low-, very low- and low-income units than would be achieved with only density bonus and/or inclusionary provisions. Affordable units at lower 40 income levels are the most challenging to provide. It would also allow the City to obtain more extremely low-, very low- and low-income units with fewer overall total units.

EPS has calculated the yield on cost for scenarios including extremely low- income units with a 15% total for the purposes of assessing the financial feasibility. As indicated in Table 8, below, the proposed 4% extremely low- income, 4% very low-income, and 7% low-income yields a 4.2% yield on cost and can therefore be considered within the reach of feasibility.

Including some units at the extremely low-income level will be one of the few ways to reach this level, which is very hard to do without financial subsidies.

The analysis prepared for the Housing Element indicates that approximately half of the very low-income households in Foster City fall into the extremely low-income category. The extremely low-income units count toward the very low-income RHNA.

Comments/Recommendation
Staff and Planning Commission recommendations for the income category requirements for both the inclusionary ordinance and AHO are shown in Table 9.

41 ZONING MAP AMENDMENT RELATED TO SITES WITHIN AFFORDABLE HOUSING OVERLAY COMBINING DISTRICT – RZ2020-0001

The specific sites included for consideration of the AHO zone in the Resolution of Intention adopted by the City Council (Resolution No. 2021-52) are:

1. Beach Cove Apartments, 605-1021 Catamaran Street, APNs 094-320- 040 & 094- 330-010

2. Franciscan Apartments, 888 Foster City Boulevard, APN 094-091-020

3. Sand Cove Apartments, 707-939 Shell Boulevard, APN 094-470-160

4. Shadow Cove Apartments, 1019-1087 Foster City Boulevard, APN 094- 312-780

5. The Lagoons Apartments, 611-899 Bounty Drive, APN 094-472-010

6. Lantern Cove Apartments, 244 Rock Harbor Lane, APNs 097-160-110 & 120

7. Schooner Bay Apartments, Timberhead Lane, Halyard Lane, Stanchion Lane, Masthead Lane, Quadrant Lane, Cutwater Lane, Jibstay Lane, Bobstay Lane, Windlass Lane, Pinrail Lane, APNs 097-140-070 & 080; 097-150-020, 030, 050, 110, & 120
The first five (5) sites listed above were identified in the City’s adopted Housing Element for the application of the AHO. The Lantern Cove and Schooner Bay sites were added per the request of the property owner and approved for consideration by the City Council through the Resolution of Intention. Inclusion of Lantern Cove and Schooner Bay sites to the list of AHO sites does not mean approval of redevelopment of these sites nor does it mean approval of increased density or additional units at these sites.

Although the AHO as currently proposed does not alter the allowed density of development but only adjusts the percentage and income levels of the inclusionary units, by providing additional options it is intended as a potential incentive for the redevelopment of these sites. A developer of any of the existing apartment sites who wishes to redevelop their sites may do so whether or not their site is an AHO site. The only difference is that when an apartment development is in an AHO zone, the developer has the option to provide affordable units at the City’s standard 20% inclusionary requirement or the 15% inclusionary requirement with deeper affordability levels under the AHO.

The Housing Element for 2015-2023 considered the sites identified in the Housing Element for the AHO to have the best opportunities for additional 42 housing units other than the already approved developments at Foster Square and Pilgrim Triton. The parameters used to select these sites are summarized in the Planning Commission Staff Report dated February 3, 2022 and listed below.
 Existing Density. Sites with lower existing densities may be more likely to consider redevelopment if they can increase their density.

Many of the older apartment developments are developed with a density less than 20 units/acre even though they are zoned R-3, which allows up to 19.89 units/acre, or R-4, which allows up to 34.98 units/acre. They can also utilize state law density bonus provisions to achieve higher densities.
Land Area. Larger sites would have more opportunity to mitigate potential impacts with increased setbacks and/or lower heights near the adjacent development.
Age. The older apartment developments are believed to be more likely to be considering making significant investments either upgrading or redeveloping their property to remain competitive in the marketplace and/or to correct existing problems.
Adjacent Uses. Sites that are adjacent to less dense residential uses, such as single-family development, will need to have larger setbacks and adjust the building massing compared to sites that border streets and/or the Lagoon.

The Lantern Cove and Schooner Bay properties were not included during the preparation of the Housing Element for 2015-2023 because they are newer than the others. Based on their relative age, staff considered it unlikely the property owner would be considering redeveloping them. The owner, Equity Residential, subsequently indicated they are considering redeveloping their properties and requested that the properties be included in the AHO.

Additional information about each site is provided in Attachment 11.

Comments/Recommendation:

The application of the AHO to these sites does not alter the potential density of development but provides an additional option to the developer for the provision of inclusionary housing that addresses deeper affordability levels in exchange for a lower total inclusionary requirement. Staff and the Planning Commission recommend approval of the zoning map amendment to apply the AHO combining district to these properties.
43 SUMMARY
These zoning actions will follow through on the City's obligations for implementation of the 2015-2023 Housing Element and avoid penalties for noncompliance. The potential penalties for noncompliance have been significantly increased by the State legislature in the past few years and include loss of decision-making authority over development applications, financial penalties, and loss of funds. The penalty for failure to complete zoning actions to provide adequate sites can result in a carryover of units to be added to the RHNA for the next Housing Element. The new Chapter

17.90, Below Market Rate Inclusionary Housing Program, will provide the specific parameters to implement the City's long-standing inclusionary housing policy. The new Chapter 17.92, Affordable-Housing Overlay Combining District, and application of the AHO to seven properties will provide an additional option for redevelopment of apartment properties to provide inclusionary units at deeper affordability levels at an overall inclusionary percentage of 15%.

FISCAL IMPACT
The estimated costs to cover staff and consultant time and materials for the adoption of the AHO, Rezoning of AHO sites, Multi-family Objective Design Standards is $50,000. $36,000 of these costs will be covered by the SB2 Planning Grant (128-0844-419-4110) that was approved as part of the FY 2021/2022 budget and will be carried over to the FY 2022/2023 Budget. The remaining costs of $14,000 was approved as part of the FY 2021/2022 Budget from the General Plan Maintenance Fund (Account No. 128-0838- 419-4251) and will also be carried over to FY 2022/2023 Budget.

CITY COUNCIL VISION, MISSION AND VALUE/PRIORITY AREA
This action supports the City Council’s Value/Priority under "Smart Planning, Development, and the Local Economy" which is to create a long-term vision that protects, maintains, and enhances our community character through thoughtful planning and economic development policies. The key outcome is implementation of current Housing Element 2015-23 Goals, Policies, and Programs related to affordable housing initiatives and maintaining the City’s authority to review development proposals.

Attachments:
44 Attachment 1: Ordinance Adding Chapter 17.90, Below Market Rate Inclusionary Housing Program
Attachment 2: Ordinance Adding Chapter 17.92, Affordable Housing Overlay Combining District
Attachment 3: Ordinance Amending Zoning Map with Exhibit A Attachment 4: Resolution Establishing a Below Market Rate Housing In-Lieu Fee
Attachment 5: Draft Memo from EPS, Housing Fee Implementation Considerations, dated January 24, 2022
Attachment 6: Draft Report from EPS, Rental Inclusionary Housing In- Lieu Fee, dated January 20, 2022
Attachment 7: Draft Report from EPS, Ownership Inclusionary Housing In-Lieu Fee, dated January 11, 2022
Attachment 8: Planning Commission Minutes of 2/3/22 Attachment 9: Planning Commission Staff Report dated 2/3/22 Attachment 10: Planning Commission Resolutions P-01-22, P-02-22, and P-03-22
Attachment 11: Data table for AHO sites
Attachment 12: Revisions proposed to draft ordinance provided to the Planning Commission on 2/3/22 and Public Comments received as of 2/3/22 (provided by link only)
Attachment 13: Public Comments received 2/4/22 through 2/27/22 (provided by link only)
Linked documents:
 Housing Element 2015-2023
 Staff Report dated September 21, 2020
 Staff Report to the City Council dated May 3, 2021
 Staff Report to the Planning Commission dated July 15, 2021  Staff Report to the Planning Commission dated October 21, 2021  Joint Planning Commission/City Council Minutes dated September 21, 2020
 Planning Commission Minutes dated October 21, 2021
 Planning Commission Minutes dated July 15, 2021
45 ORDINANCE NO. ___
AN ORDINANCE OF THE CITY OF FOSTER CITY ADDING A NEW CHAPTER 17.90, BELOW MARKET RATE INCLUSIONARY HOUSING PROGRAM, TO TITLE 17,

ZONING, OF THE FOSTER CITY MUNICIPAL CODE RELATING TO INCLUSIONARY

HOUSING

CITY OF FOSTER CITY
WHEREAS, there is a shortage of affordable housing in the City of Foster City (“City”) as documented in the 2015-2023 General Plan Housing Element; and

WHEREAS, California Government Code Section 65580(d) states that all cities have a responsibility to use the powers vested in them to facilitate the improvement and development of housing and to make adequate provision for the housing needs of all economic segments of the community; and

WHEREAS, consistent with State law, Housing Element Goal H-E is to “Address Affordable Housing Needs: Meet the City's "fair share" of very low, low, and moderate income housing need and the needs of special groups, including the elderly, handicapped, small and large families, extremely low income households and persons, single parents and local workers”; and

WHEREAS, in order to implement Housing Element Goal H-E, Housing Element Policy H-E-2a provides that 20% of all units, excluding bonus units, in residential projects be affordable; and

WHEREAS, the City wishes to implement Housing Element Policy H-E-2a with clear and objective standards to be set forth in an ordinance adding a new Chapter 17.90, Below Market Rate Inclusionary Housing Program, to Title 17 of the Foster City Municipal Code; and

WHEREAS, adopting clear and objective standards for the provision of inclusionary housing within residential development projects will encourage the development and availability of housing opportunities to a broad range of households with varying income levels within the City, as mandated by State Law, and is essential for the public welfare; and

WHEREAS, requiring inclusionary housing will increase the supply of below market rate housing to meet the City’s regional share of very low-, low- and moderate- 46 income housing needs and the needs of special groups, including the elderly, disabled, small and large families, and local workers; and

WHEREAS, provision of housing at a variety of income levels will reduce Vehicle Miles Traveled (VMT) and Greenhouse Gas (GHG) emissions by providing people at all income levels more opportunities to live near where they work; and

WHEREAS, provision of housing at a variety of income levels will support the local economy by making it easier for employers to attract and retain workers by providing people at all income levels more opportunities to live near where they work; and

WHEREAS, provision of housing at a variety of income levels will affirmatively further the policies and purposes of the Fair Housing Act, also known as “Affirmatively Further Fair Housing” by reducing segregation and concentration of poverty; and

WHEREAS, the City has received and considered the analysis prepared by Economic and Planning Systems, Inc. (EPS), including memorandum titled “Housing Fee Implementation Considerations” (January 24, 2022), “Rental Inclusionary Housing In-Lieu Fee” (January 20, 2022), and “Ownership Inclusionary Housing In-Lieu Fee” (January 11, 2022) (collectively, the “EPS Studies”); and
WHEREAS, the new Chapter 17.90, Below Market Rate Inclusionary Housing Program, authorizes the City Council to adopt a Below Market Rate Housing In-lieu Fee, which a project developer may, in certain prescribed instances, pay as an alternative to the development and construction of below market rate dwelling units; and WHEREAS, the payment of any Below Market Rate Housing In-lieu Fees will be deposited in the City’s Affordable Housing Fund, to be used to finance the development of new affordable housing or the rehabilitation of existing affordable housing, to provide affordable housing programs in the City, to leverage flexible local funds for larger State and Federal grants, and to administer the City’s Affordable Housing Program; and WHEREAS, the Planning Commission considered the proposed ordinance adding a new Chapter 17.90, Below Market Rate Inclusionary Housing Program, to Title 17 of the Foster City Municipal Code at a noticed public hearing on February 3, 2022 and adopted Resolution P-01-22 recommending City Council approval; and WHEREAS, the City provided notice of the public hearing (“Notice”) and held a public hearing on March 7, 2022, regarding the proposed ordinance adding a new 47 Chapter 17.90, Below Market Rate Inclusionary Housing Program, to Title 17 of the Foster City Municipal Code, pursuant to Government Code Section 65856; and WHEREAS, as required by Government Code Sections 65856 and 65090, the Notice contained the information required by Government Code Section 65094, and was published in compliance with Government Code Section 6061 on February 16, 2022 and February 23, 2022 in the Foster City Islander, a newspaper of general circulation with the City of Foster City; and
WHEREAS, the City Council of the City of Foster City carefully reviewed and considered the staff report and all attachments thereto presented as part of the agenda for the public hearing regarding the proposed ordinance adding a new Chapter 17.90, Below Market Rate Inclusionary Housing Program, to Title 17 of the Foster City Municipal Code, including the EPS Studies and this Ordinance, any and all timely submitted correspondence, all information submitted at or prior to the public hearing, and all public comment and testimony presented at the public hearing (collectively, the “Record”); now, therefore, be it resolved that
THE CITY COUNCIL OF THE CITY OF FOSTER CITY DOES ORDAIN AS FOLLOWS:

Section 1. The foregoing Recitals are true and correct and are incorporated herein by this reference.

Section 2. The City Council does hereby find and determine based upon the aforementioned Record as follows:
(a) The Public Hearing was properly noticed and conducted in accordance with State law and the Foster City Municipal Code; and
(b) The adoption of the proposed ordinance adding a new Chapter 17.90, Below Market Rate Inclusionary Housing Program, to Title 17 of the Foster City Municipal Code, is exempt from review under the California Environmental Quality Act (CEQA) as it is not considered a ‘project’ under Public Resources Code Section 21065 and CEQA Guidelines Section 15378 because the ordinance will not result in a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment. In addition, even if the adoption of the ordinance was considered a “project” under CEQA, pursuant to CEQA Guidelines Section 15061(b)(3), the proposed ordinance is covered by the common sense exemption providing that CEQA only applies to projects which have the potential for causing a significant effect on the environment and where, as is the case with the adoption of this proposed ordinance, it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA; and
(c) The provision of safe and stable housing for households at all income levels is essential for the public welfare of the City. Housing in Foster City, both rental and 48 for-sale housing, has become steadily more expensive and housing costs have gone up faster than incomes. Federal and state government programs do not provide enough affordable housing to satisfy the needs of very low, low, or moderate income households. As a result, there is a severe shortage of adequate, affordable housing for very low, lower, and moderate income households, as evidenced by the findings in the City’s 2015 – 2023 Housing Element: and (d) As provided in the Housing Element of the General Plan, Housing Element Goal H-D, Housing Element Program H-D-2-b “Affordable Housing Overlay Combining District”, the City wishes to encourage the production of additional housing units, including affordable units, through redevelopment of areas already developed with housing by private interests; and
(e) Based on the findings above, the City desires to further the public health, safety and welfare by providing an incentive for areas already developed with housing to redevelop those areas with additional housing units, including affordable units, through the creation of an overlay combing district for certain areas of the City; and (f) The proposed ordinance adding a new Chapter 17.90, Below Market Rate Inclusionary Housing Program, to Title 17 of the Foster City Municipal Code, is consistent with the General Plan.

Section 3. Chapter 17.90, Below Market Rate Inclusionary Housing Program, is hereby added to Title 17, Zoning, of the Foster City Municipal Code to read as follows:

Chapter 17.90

BELOW MARKET RATE INCLUSIONARY HOUSING PROGRAM
Sections:

17.90.010 Purpose.

17.90.020 Definitions.

17.90.030 Applicability.

17.90.040 Requirements for Inclusion of Below Market Rate Dwelling Units.

17.90.050 Payment of a Below Market Rate Housing In-Lieu Fee.

17.90.060 Standards for Below Market Rate Dwelling Units.

17.90.070 Below Market Rate Housing Plan and Below Market Rate Housing Agreement.

17.90.080 Alternatives.

17.90.090 Waiver of Requirements.

17.90.100 Affordable Housing Fund.
49 17.90.110 Enforcement.

17.90.010 Purpose.

The purpose of this Chapter, to be known as the Below Market Rate Inclusionary Housing Program, is to:

A. Enhance the public welfare by establishing policies and encouraging the development and availability of housing opportunities to a broad range of households with varying income levels within the City as mandated by State Law, California Government Code Section 65580 and following; and B. Promote the City’s goals as stated in the Housing Element of the General Plan to increase the supply of below market rate housing to meet the City’s regional share of very low-, low- and moderate-income housing needs and the needs of special groups, including the elderly, disabled, small and large families, and local workers by imposing an inclusionary requirement for residential development projects; and
C. Reduce Vehicle Miles Traveled (VMT) and Greenhouse Gas (GHG) emissions by providing people at all income levels more opportunities to live near where they work; and
D. Support the local economy by making it easier for employers to attract and retain workers by providing people at all income levels more opportunities to live near where they work; and
E. Affirmatively further the policies and purposes of the Fair Housing Act, also known as “Affirmatively Further Fair Housing” by reducing segregation and concentration of poverty; and
F. Implement the City’s adopted inclusionary policy contained in the Housing Element of the General Plan by creating standards and a mechanism to provide below market rate dwelling units as part of new residential development projects; and
G. Provide for the establishment and imposition of a Below Market Rate Housing In- Lieu Fee on residential development projects as an alternative means of mitigating the impact of residential development projects on the need for below market rate dwelling units in the City, as opposed to the development and construction of below market rate dwelling units as part of residential development projects, in certain circumstances.

17.90.020 Definitions.

A. "Below Market Rate Housing Fund" means a separate or segregated fund or account designated by the City to maintain and account for all monies received pursuant to this Chapter.

B. "Below market rate ownership cost" means the sale price for a below market rate dwelling unit, available as a for-sale unit, resulting in a projected average monthly 50 housing expense during the first calendar year of an eligible household's occupancy, including mortgage principal and interest, mortgage insurance, property taxes, homeowners insurance, homeowners' association dues, if any, and a reasonable allowance for utilities, not exceeding the sales prices specified by Section 50052.5 of the California Health and Safety Code and California Code of Regulations Title 25, Sections 6910-6924.

C. "Below market rate rent" means the total monthly housing expenses for a below market rate dwelling unit, available as a rental unit, not exceeding the rents specified by Section 50053 of the California Health and Safety Code and California Code of Regulations Title 25, Sections 6910-6924, except that the City may permit alternative criteria, when necessary, to be consistent with pertinent state and federal statutes and regulations governing publicly assisted rental housing. As used in this Chapter, "below market rate rent" shall include the total of monthly payments by the tenant for all of the following:

1. Use and occupancy of the below market rate dwelling unit and land and all facilities associated with the below market rate dwelling unit, including but not limited to parking (whether unbundled or not), bicycle storage, storage lockers, and use of all common areas;

2. Any additional separately charged fees or service charges assessed by the owner, other than security deposits;

3. An allowance for utilities paid by the tenant as established by the San Mateo County Housing Authority which may be updated from time to time, including garbage collection, sewer, water, electricity, gas, and other heating, cooking, and refrigeration fuel, but not telephone service, cable TV or WiFi/internet; and

4. Any other interest, taxes, fees or charges for use of the land or below market rate dwelling unit or associated facilities and assessed by a public or private entity other than the owner, and paid by the tenant.

D. "Below market rate dwelling unit" means a dwelling unit in a residential development project that is restricted for sale or rental to and occupancy by an eligible household at a below market rate ownership cost or below market rate rent, as applicable, and as required by this Chapter.

E. “Below Market Rate Housing Administrative Guidelines” means guidelines adopted by the Community Development Director from time to time for determining household income, below market rate ownership cost, below market rate rent, eligible households, monitoring, reporting, scope of Below Market Rate Housing Plan, terms of Below Market Rate Housing Agreement, and any other relevant rules, regulations or provisions necessary for the administration of this Chapter.

F. “Below Market Rate Housing Agreement” means an agreement that shall specify the number, type, location, size, and phasing of all below market rate dwelling units required in a residential development project, provisions for income certification and screening of potential purchasers or renters of below market rate dwelling units, and resale control mechanisms, including the financing of ongoing 51 administrative and monitoring costs, consistent with the approved Below Market Rate Housing Plan, as determined by the Community Development Director.

G. “Below Market Rate Housing In-Lieu Fee” means the fee imposed on each dwelling unit of a residential development project, established by resolution of the City Council and updated from time to time, not to exceed the cost of mitigating the impact of residential development projects on the need for below market rate dwelling units in the City.

H. “Below Market Rate Housing Plan” means a plan prepared by the developer of a residential development project that describes how the proposed dwelling units conform to the requirements of this Chapter, and City and State Density Bonus law requirements, as applicable, and shall include, at a minimum, procedures and requirements for determining eligible households for rental of rental units or purchasers of for-sale units, occupancy requirements, initial and ongoing marketing policies, application process, waitlist management, income verification requirements, annual recertification, if applicable, rejection of ineligible applicants and eligibility termination, and such other provisions as the Community Development Director may prescribe from time to time pursuant to Below Market Rate Housing Administrative Guidelines.

I. "Building permit" includes full structural building permits as well as partial permits such as foundation-only permits and demolition permits.

J. “Density bonus” means entitlement to build additional residential units above the maximum number of units permitted pursuant to the existing General Plan, applicable specific plan and/or zoning designation, and as further specified in Chapter 17.86 of this Title and California Government Code Section 65915 (“State Density Bonus Law”).

K. "Developer" means the person(s) or legal entity(ies), including the property owner, seeking a planning permit or building permit for a residential development project.

L. “Dwelling unit” means a dwelling designed for occupancy by one (1) household; the foregoing notwithstanding, Dwelling Unit shall not include an Accessory Dwelling Unit as defined in Section 17.78.040, Chapter 17.78 of this Title.

M. “Eligible household” means those households whose maximum income does not exceed levels published annually for extremely low income households, very low income households, low income households, and moderate income households, adjusted for household size and appropriate for the below market rate dwelling unit.

N. "Extremely low income households" means households with incomes no greater than the maximum income for extremely low income households, as published annually by the California Department of Housing and Community Development (HCD) as the Official State Income Limits pursuant to Health and Safety Code Section 50093 for San Mateo County, adjusted for household size, except that the City may permit alternative criteria, when necessary, to be consistent with pertinent state and federal statutes and regulations governing publicly assisted housing. 52 O. "For-sale unit" means a dwelling unit that may be sold individually in conformance with the Subdivision Map Act. For-sale units also include dwelling units that are converted from rental units to for-sale units.

P. "Low income households" means households with incomes no greater than the maximum income for low income households, as published annually by the California Department of Housing and Community Development (HCD) as the Official State Income Limits pursuant to Health and Safety Code Section 50093 for San Mateo County, adjusted for household size, except that the City may permit alternative criteria, when necessary, to be consistent with pertinent state and federal statutes and regulations governing publicly assisted housing.

Q. "Market rate unit" means a dwelling unit in a residential development project that is not a below market rate dwelling unit.

R. "Moderate income households" means households with incomes no greater than the maximum income for moderate income households, as published annually by the California Department of Housing and Community Development (HCD) as the Official State Income Limits pursuant to Health and Safety Code Section 50093 for San Mateo County, adjusted for household size, except that the City may permit alternative criteria, when necessary, to be consistent with pertinent state and federal statutes and regulations governing publicly assisted housing.

S. "One (1) location" includes all adjacent parcels of land under common ownership or control, 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, or separated only by the lands owned or controlled by the developer.

T. "Planning permit" means any discretionary approval of a residential development project, including, without limitation, a general or specific plan adoption or amendment, rezoning, tentative map, parcel map, conditional use permit, variances, or architectural review.

U. "Rental unit" means a dwelling unit that is intended to be offered for rent or lease and that cannot be sold individually in conformance with the Subdivision Map Act.

V. "Residential development project" means an application for a planning permit or building permit at one (1) location to create one (1) or more dwelling units, redevelop an existing residential development project to remove and replace dwelling units and/or create one (1) or more additional dwelling units, convert nonresidential uses to dwelling units, subdivide a parcel to create one (1) or more separately transferable parcels intended for development of dwelling units, or implement a condominium conversion, including development of dwelling units constructed at one (1) location and in phases.

W. "Review authority" means the City staff person or body authorized to approve or deny an application for a planning permit or building permit for a residential development project.

X. "Very low income households" means households with incomes no greater than the maximum income for very low income households, as published annually by 53 the California Department of Housing and Community Development (HCD) as the Official State Income Limits pursuant to Health and Safety Code Section 50093 for San Mateo County, adjusted for household size, except that the City may permit alternative criteria, when necessary, to be consistent with pertinent state and federal statutes and regulations governing publicly assisted housing.

17.90.030 Applicability.

The requirements of this Chapter shall apply to any residential development project as set forth below.

A. Residential Development Projects: Five (5) to Nine (9) Dwelling Units.

Residential development projects containing five (5) to nine (9) dwelling units are hereby required, as a condition of issuance of a planning permit or building permit, to either (i) pay a Below Market Rate Housing In-Lieu Fee for each dwelling unit upon issuance of a building permit, or (ii) construct below market rate units on the location of the residential development project per Section 17.90.040 (Requirements for Inclusion of Below Market Rate Dwelling Units), make said below market rate dwelling units available for sale or rental to and occupancy by eligible households at the applicable household income level and at below market rate ownership cost or below market rate rent, as applicable, and secure said obligation pursuant to a Below Market Rate Housing Agreement as set forth in Section 17.90.070.E (Below Market Rate Housing Agreement).

B. Residential Development Projects: Ten (10) Dwelling Units or More.

Residential development projects of ten (10) dwelling units or more are hereby required, as a condition of issuance of a planning permit or building permit, to construct below market rate units on the location of the residential development project per Section 17.90.040 (Requirements for Inclusion of Below Market Rate Dwelling Units), make said below market rate dwelling units available for sale or rental to and occupancy by eligible households at the applicable household income level and at below market rate ownership cost or below market rate rent, as applicable, and secure said obligation pursuant to a Below Market Rate Housing Agreement as set forth in Section 17.90.070.E (Below Market Rate Housing Agreement).

C. Exemptions. The provisions of this Chapter shall not apply to developers of residential development projects which fall within one (1) or more of the following categories:

1. Residential development projects containing four (4) or fewer dwelling units;

2. Residential development projects located on property owned by the State of California, the United States of America, or any of its agencies and used exclusively for governmental or educational purposes;

3. Residential development projects involving the repair or replacement of a building that was damaged or destroyed by fire or other calamity, so long as (i) the square footage and use of the building remains the same, (ii) construction of the replacement building is conducted in accordance with California Government Code Section 65852.25, which section requires a building permit to be secured 54 within two (2) years of the occurrence of any such event, and (iii) in accordance with California Health and Safety Code Section 18938.6, construction begins within one (1) year from the issuance of a building permit, subject to the issuance of one or more extensions, not to exceed 180 days, upon a showing of justifiable cause by the applicant to the satisfaction of the building official;

4. Accessory dwelling units (ADUs) or Junior accessory dwelling units (JADUs) as defined in Chapter 17.78 of the Foster City Municipal Code;

5. Residential development projects which are developed in accordance with the terms of a development agreement adopted by ordinance pursuant to the authority and provisions of California Government Code Section 65864 et seq., and that is executed prior to the effective date of the ordinance codified in this Chapter, provided that such residential development projects shall comply with any below market rate inclusionary housing requirements included in the development agreement or any predecessor ordinance in effect on the date the development agreement was executed;

6. Residential development projects exempted by California Government Code Section 66474.2 or 66498.1 or successor provision, provided that such residential development projects shall comply with any predecessor ordinance, resolution, or policy governing below market rate inclusionary housing in effect on the date the application for the development was deemed complete;

7. Residential development projects exempted by California Government Code Section 65589.5 (o) or successor provision, provided that such residential development projects shall comply with any predecessor ordinance, resolution, or policy governing below market rate inclusionary housing in effect on the date that a preliminary application for the development containing all of the information required by California Government Code Section 65941.1 was submitted to the City; or

8. Residential development projects for which all applications for City of Foster City discretionary development entitlements required to develop the project have been deemed complete prior to the effective date of the ordinance codified in this Chapter, provided that such residential development projects shall comply with any predecessor ordinance, resolution, or policy governing below market rate inclusionary housing in effect on the date the application for the development was deemed complete.

17.90.040 Requirements for Inclusion of Below Market Rate Dwelling Units.

A. Number of Below Market Rate Dwelling Units and Level of Affordability.

Residential development projects of ten (10) dwelling units or more shall construct, or cause to be constructed, the number of below market rate dwelling units as specified below. For the purposes of this section, "total dwelling units" does not include (i) dwelling units awarded above the otherwise-allowable maximum density as part of a density bonus in Chapter 17.86 (Density Bonuses), as provided by California Government Code Section 65915 (b)(3), or (ii) in a residential development 55 project that will require the demolition of dwelling units, the number of dwelling units demolished, provided the residential development project will create at least as many dwelling units as will be demolished and otherwise complies with the requirements of California Government Code Section 66300 (d), as appliable.

1. Rental Projects. Five percent (5%) of the proposed total dwelling units in a rental residential development project shall be below market rate dwelling units occupied by or available for occupancy by moderate income households at or below market rate rents; five percent (5%) of the proposed total dwelling units shall be below market rate dwelling units occupied by or available for occupancy by low income households at or below market rate rents; and ten percent (10%) of the proposed total dwelling units shall be below market rate dwelling units occupied by or available for occupancy by very low income households at or below market rate rents. Alternative percentages and levels of affordability may be considered as part of the Below Market Rate Housing Plan and Below Market Rate Housing Agreement (Section 17.90.070) and the reviewing authority may approve or conditionally approve such an alternative if it determines, based on substantial evidence, that such alternative percentages and levels of affordability will provide as many or more below market rate units at the same or lower income levels or will otherwise provide greater public benefit than the standard requirement.

2. Ownership Projects. Twenty percent (20%) of the proposed total dwelling units in a for-sale residential development project shall be below market rate dwelling units sold to and occupied by or available for sale to and occupancy by moderate income households at or below market rate ownership cost.

3. Fractional Units. In calculating the number of below market rate dwelling units required pursuant to Sections 17.90.040.A.1 and 17.90.040.A.2 above, any fraction of less than 0.50 shall be satisfied by payment of an amount equal to the Below Market Rate Housing In-Lieu Fee, as adopted by the City Council applicable to rental or ownership residential developments, times the applicable fraction, and any fraction of 0.50 or more shall be satisfied by developing one (1) below market rate dwelling unit available for sale or rental to and occupancy by eligible households at the applicable household income level and at below market rate ownership cost or below market rate rent, as applicable.

B. Density Bonus. Below market rate dwelling units that satisfy the requirements of this Chapter may be counted toward the number of below market rate dwelling units required for a density bonus under California Government Code Sections 65915- 65918. To be eligible, the below market rate dwelling units shall meet all of the applicable requirements in California Government Code Section 65915. These requirements, including application submittal requirements and replacement housing obligations, are set forth in Chapter 17.86 (Density Bonuses).

17.90.050 Payment of Below Market Rate Housing In-Lieu Fee.

A. Amount. The amount of the Below Market Rate Housing In-Lieu Fee applicable to rental residential development projects and ownership residential development 56 projects shall be established from time to time by resolution of the City Council. The Below Market Rate Housing In-Lieu Fee established for rental residential development projects and ownership residential development projects shall not exceed the cost of mitigating the impact of rental or ownership residential development projects on the need for below market rate dwelling units in the City.

B. Timing of Payment. Payment of the Below Market Rate Housing In-Lieu Fee shall be due prior to the issuance of the first building permit for the residential development project. The Below Market Rate Housing In-Lieu Fee shall be calculated based on the type of residential development project (i.e. either rental or ownership), and the applicable fee schedule in effect at the time the building permit is issued for a rental residential development project or ownership residential development project.

17.90.060 Standards for Below Market Rate Dwelling Units.

A. Quality of Construction and Number of Bedrooms. All below market rate dwelling units required by this Chapter shall be equal to the overall quality of construction to market-rate units in the same residential development project as follows:

1. The exterior appearance of the below market rate dwelling units shall be the same as that of market-rate units.

2. Interior finishes and amenities of the below market rate dwelling units shall not differ from those provided in the base model market rate units.

3. The number of bedrooms in the below market rate dwelling units shall be equal to the average number of bedrooms in the market-rate units, including square footage by unit size, and the below market rate dwelling units shall be dispersed within the residential development project, with the location of below market rate dwelling units comparable to those of the market-rate units, subject to review and approval by the Community Development Director.

For example, residents of the below market rate dwelling units shall not be excluded from common open space, parking, storage, and other community facilities or amenities in the residential development project, nor shall households residing in below market rate dwelling units be charged more than an below market rate rent or an below market rate ownership cost as defined in Section

17.90.020 (Definitions) for the use of such facilities and amenities.

B. Availability for Occupancy. Below market rate dwelling units required by this Chapter shall be made available for occupancy concurrently with the market-rate units. For the purposes of this subsection, "concurrently" means that the City may not issue building permits for more than fifty (50) percent of the market-rate units until it has issued building permits for all of the below market rate dwelling units, and the City may not approve any final inspections or certificates of occupancy for more than fifty (50) percent of the market-rate units until it has issued final inspections or certificates of occupancy for all of the below market rate dwelling units. 57 C. Duration of Affordability.

1. Ownership. Below market rate dwelling units available as a for-sale unit produced as required by this Chapter shall, pursuant to the terms of a Below Market Rate Housing Agreement, be legally restricted for sale to and occupancy by eligible households within the income levels for which the below market rate dwelling units were designated and at a below market rate ownership cost for a period of at least forty-five (45) years from the date of recordation of each grant deed. Resale of the below market rate dwelling unit during the forty-five (45) year term shall be restricted to eligible households at a below market rate ownership cost as defined herein and set forth in the Below Market Rate Housing Agreement recorded against the below market rate dwelling unit and the forty- five (45) year term shall start over with each resale. If a below market rate dwelling unit has not been sold or resold prior to the expiration of the forty-five (45) year term, then upon the expiration of the forty-five (45) year term, the restrictions set forth in the Below Market Rate Housing Agreement shall terminate, expire and be of no further force or effect and the dwelling unit may then be sold at market rate. The Below Market Rate Housing Agreement shall be recorded against the property of the applicable residential development project and below market rate dwelling unit(s) in accordance with the provisions of and consistent with the form specified in Section 17.90.070.E.

2. Rental. Below market rate dwelling units available as a rental unit produced as required by this Chapter or pursuant to the provisions of California Government Code Section 66300 (d) shall, pursuant to the terms of a Below Market Rate Housing Agreement, be legally restricted to occupancy by eligible households within the income levels for which the below market rate dwelling units were designated and at an below market rate rent for a period of at least ninety-nine (99) years from the date a certificate of occupancy is issued by City for the entire residential development project. The foregoing notwithstanding, the Community Development Director, or his or her designee, may, in the exercise of her or his discretion, accept a shorter period of affordability of no less than fifty-five (55) years, if the applicable residential development project provides substantial evidence that a shorter-term restriction is necessary and required in order to obtain financing for the applicable residential development project. The Below Market Rate Housing Agreement shall be recorded against the property of the applicable residential development project in accordance with the provisions of and consistent with the form specified in Section 17.90.070.E.

D. Eligibility. No eligible household may occupy a below market rate dwelling unit available as a rental unit or acquire a below market rate dwelling unit available as a for-sale unit until the Community Development Director, or his or her designee, has approved a Below Market Rate Housing Plan prepared by the developer, which plan shall include eligibility requirements specific to the residential development project, and an Below Market Rate Housing Agreement has been recorded against the residential development project in accordance with Section 17.90.070.E.

E. Principal Residence. Any eligible household that occupies a below market rate dwelling unit must occupy that dwelling unit as its principal residence, unless 58 otherwise approved in writing for rental to a third party for a limited period of time due to household hardship, as determined and approved by the City in advance and in accordance with Below Market Rate Housing Administrative Guidelines.

F. Below Market Rate Housing Administrative Guidelines. The Community Development Director, or his or her designee, may, from time to time, adopt and revise rules, regulations and guidelines for determining household income, below market rate housing cost, below market rate rent, determining eligible households of for-sale units and rental units, establishing monitoring and reporting requirements for residential development projects, and such other provisions and requirements as are relevant to the administration of this Chapter.

G. Housing Preferences. Subject to applicable state and federal fair housing laws, the City Council may, from time to time, adopt preferences for the sale or rental to and occupancy of below market rate dwelling units at the applicable below market rate ownership cost or below market rate rent, as applicable, to eligible households that live and/or work in the City or any other characteristics the City Council deems appropriate to further the purposes of this Chapter. The City Council may also, from time to time, adopt preferences applicable to specific residential development projects.

17.90.070 Below Market Rate Housing Plan and Below Market Rate Housing Agreement.

A. Required. A Below Market Rate Housing Plan is required for any residential development project that provides below market rate dwelling units, either on-site or off-site. The Below Market Rate Housing Plan shall describe how the proposed dwelling units conform to the requirements of this Chapter and City and State Density Bonus law requirements, as applicable. Further, the Below Market Rate Housing Plan shall include, at a minimum, procedures and requirements for determining eligible households for rental of rental units or purchasers of for-sale units, occupancy requirements, initial and ongoing marketing policies, application process, waitlist management, income verification requirements, annual recertification, if applicable, rejection of ineligible applicants and eligibility termination, funding by developer of ongoing administration and monitoring costs to be incurred by City following occupancy of below market rate dwelling units, and such other provisions as the Community Development Director, or his or her designee, may prescribe from time to time pursuant to Below Market Rate Housing Administrative Guidelines. Below Market Rate Housing Plans are not required for residential development projects that are not required to provide for the construction, sale and/or rental of on-site or off-site below market rate dwelling units, in compliance with the provisions of this Chapter.

B. Submittal and Review. The Below Market Rate Housing Plan must be submitted prior to the first planning permit application being deemed complete. The Below Market Rate Housing Plan shall be processed concurrently with all other planning permits required for the residential development project.

C. Approval of On-site Below Market Rate Dwelling Units. The review authority may approve or conditionally approve a Below Market Rate Housing Plan that proposes 59 on-site below market rate dwelling units if it makes findings, based on substantial evidence, that:

1. The on-site below market rate dwelling units comply with the applicable standards in this Chapter, including, without limitation, the requirement that the below market rate dwelling units be made available for occupancy concurrently with the market-rate units.

2. The on-site below market rate dwelling units will mitigate the impact of the market rate units in the residential development project on the need for below market rate dwelling units in the City.

D. Amendments. The approved Below Market Rate Housing Plan may be amended prior to issuance of any building permit for the residential development project. A request for a minor modification of an approved Below Market Rate Housing Plan may be granted by the Community Development Director if the modification is substantially in compliance with the original Below Market Rate Housing Plan and conditions of approval. Other significant or substantial modifications to the Below Market Rate Housing Plan, as determined by the Community Development Director, shall be processed in the same manner as the original Below Market Rate Housing Plan.

E. Below Market Rate Housing Agreements. As a condition of approval of a residential development project, a Below Market Rate Housing Agreement acceptable to the Community Development Director, approved by the City Attorney and executed by the City Manager, shall be recorded against the residential development project prior to approval of any final or parcel map, or issuance of any building permit, whichever occurs first. The Below Market Rate Housing Agreement shall specify the number, type, location, size, and phasing of all below market rate dwelling units, provisions for income certification and screening of potential purchasers or renters of below market rate dwelling units, and resale control mechanisms, including funding by developer of ongoing administrative and monitoring costs incurred by City, consistent with the approved Below Market Rate Housing Plan. The Below Market Rate Housing Agreement shall provide for the indemnification and defense of the City, as approved by the City Attorney, against any and all claims brought by any and all persons, including eligible households, in connection with the administration and implementation by City of the Below Market Rate Housing Plan and Below Market Rate Housing Agreement. A Below Market Rate Housing Agreement applicable to below market rate dwelling units, available as for-sale units, shall require as a condition of the sale of a below market rate dwelling unit from developer to an eligible household, that the restrictions set forth in the Below Market Rate Housing Agreement and this Chapter be recorded against the below market rate dwelling unit in the form of a resale restriction agreement, performance deed of trust, and/or regulatory agreement, as approved by the City Attorney and executed by the City Manager, to ensure the continued affordability of the below market rate dwelling units.

17.90.080 Alternatives.
60 To the extent permitted by law, the City’s objective is to obtain the actual development and construction of below market rate dwelling units within each residential development project, as opposed to the receipt of payment of Below Market Rate Housing In-Lieu Fees, construction of off-site below market rate dwelling units, or other such alternatives as set forth herein. Nevertheless, a developer may propose an alternative means of compliance with this Chapter subject to the following provisions:

A. Payment of Below Market Rate Housing In-Lieu Fee.

If a developer of a residential development project of ten (10) or more dwelling units proposes the payment of a Below Market Rate Housing In-Lieu Fee in place of construction of on-site below market rate dwelling units in the Below Market Rate Housing Plan required under Section 17.90.070, the City Council may, in its discretion, approve such a proposal if it finds the proposal meets all of the following conditions:
a. The Below Market Rate Housing In-Lieu Fee then in effect is adequate to cover the cost of providing at least an equivalent number of below market rate dwelling units at another location as would otherwise be required under this Chapter for the proposed residential development project based upon an affordability gap analysis prepared by the City, at the expense of the developer, and approved by the City Council; and b. The location of the proposed residential development project does not have sufficient land area to provide the below market rate dwelling units without severely impacting the financial feasibility of the project; and c. There exists adequate alternative locations within the City of Foster City for the construction of residential development projects that are available for sale on the open market, said alternative locations are not located in a flood hazard zone and do not contain environmentally sensitive habitat, said alternative locations are not contaminated with or otherwise impaired by the presence of hazardous materials or hazardous substances in the soil, soil vapor or groundwater in, on, or under the land or emanating from lands in proximity thereto, as reflected in a Phase I Environmental Site Assessment, and if necessary, a Phase II Environmental Site Assessment, development and construction of a residential development project on the alternative locations is consistent with the City’s adopted General Plan, Housing Element, and Zoning, and there are funds in the Affordable Housing Fund which have not been allocated or appropriated for other allowable uses which, when combined with the Below Market Rate Housing In-Lieu Fee to be paid by the applicable residential development project, is sufficient in amount and timing of availability of funds to permit the City to finance the acquisition of an alternative location(s); and
d. The alternative locations are suitable for and development of a residential development project thereon is economically and financially feasible as determined by the City, in its sole discretion, pursuant to a feasibility analysis of a proposed residential development project on the alternative 61 locations prepared by the City, at the expense of the developer, and approved by the City Council; and
e. The City finds that the purposes of this Chapter would be better served by payment of the Below Market Rate Housing In-Lieu Fee and that the proposed Below Market Rate Housing In-Lieu Fee meets the greatest community needs at that time; and
f. The Below Market Rate Housing In-Lieu Fee applicable to the entire residential development project shall be paid by the developer and collected by the City upon the issuance of the first building permit for a dwelling unit in the residential development project. Any Below Market Rate Housing In-Lieu Fee collected by the City pursuant to this Section

17.90.080.A shall be deposited in the Affordable Housing Fund and used in accordance with Sections 17.88.060.B and 17.90.100.C of the Foster City Municipal Code.

B. Construction of Off-Site Below Market Rate Dwelling Units.

If a developer of a residential development project of ten (10) or more dwelling units proposes the construction of off-site below market rate dwelling units in the Below Market Rate Housing Plan required under Section 17.90.070, the City Council may, in its discretion, approve such a proposal if it finds the proposal meets all of the following conditions:
a. The proposed off-site location is within the City of Foster City, is currently owned by the developer or is under contract for purchase by the developer, is not located in a flood hazard zone and does not contain environmentally sensitive habitat, is not contaminated with or otherwise impaired by the presence of hazardous materials or hazardous substances in the soil, soil vapor or groundwater in, on, or under the off- site location or emanating from lands in proximity thereto, as reflected in a Phase I Environmental Site Assessment, and if necessary, a Phase II Environmental Site Assessment, and development and construction of a residential development project on the proposed off-site location is consistent with the City’s adopted General Plan, Housing Element, and Zoning; and
b. The proposed off-site location is suitable for and development of a residential development project thereon is economically and financially feasible as determined by the City, in its sole discretion, pursuant to a feasibility analysis of a proposed residential development project on the proposed off-site location prepared by the City, at the expense of the developer, and approved by the City Council; and
c. The proposed off-site location is adequately served by all required utilities and transportation infrastructure, all of which are appropriately sized to accommodate the proposed off-site below market rate units, the off-site residential development project, and all reasonable foreseeable probable 62 future development within the area served by said utilities and transportation infrastructure; and
d. The proposed off-site below market rate units are in addition to any below market rate dwelling units otherwise required for the off-site residential development project; and
e. The construction of the proposed off-site below market rate dwelling units within the off-site residential development project has not commenced before the approval of the on-site residential development project, the off- site below market rate dwelling units will be available for occupancy prior to or concurrently with the market rate units within the on-site residential development project, and the inclusion of the below market rate dwelling units within the off-site residential development project will not, when combined with the below market rate inclusionary requirement of the off- site residential development project, significantly contribute to residential segregation by income level within the City; and
f. The proposed off-site below market rate dwelling units would be provided in at least the same quantity and affordability levels as would be required for on-site units. The foregoing notwithstanding, any proposal to provide rental off-site below market rate dwelling units to satisfy an inclusionary requirement for an ownership project, shall comply with Sections

17.90.040.A.1 and 17.90.060.C.2 of this Chapter; and
g. The proposed off-site below market rate dwelling units comply with all other requirements of this Chapter; and
h. All necessary agreements required to secure the construction of the off- site below market rate dwelling units will be made a part of the affordable housing agreement required for the on-site residential development project; and
i. Financing or a viable financing plan, which may include public funding sources, is in place for the acquisition of land, development and construction of the proposed off-site below market rate dwelling units; and
j. The purposes of this Chapter would be better served by implementation of the proposed alternative and that the proposed alternative meets the greatest community needs at that time.

C. Conversion of Off-Site Dwelling Units or Non-Residential Buildings to Off- Site Below Market Rate Dwelling Units.

If a developer of a residential development project of ten (10) or more dwelling units proposes the conversion of off-site dwelling units or non-residential buildings to off-site below market rate dwelling units in the Below Market Rate Housing Plan required under Section 17.90.070, the City Council may, in its discretion, approve such a proposal if it finds the proposal meets all of the following conditions:
63 a. All of the conditions as set forth in Section 17.90.080.B above; and b. The construction of the proposed off-site below market rate dwelling units shall be in addition to any replacement units otherwise required by State law, including but not limited to Government Code Sections 66300 (d) and 65915 (c)(3).

D. On-Site Clustering of Below Market Rate Dwelling Units.

If a developer of a residential development project of ten (10) or more dwelling units proposes the clustering of on-site below market rate dwelling units in the Below Market Rate Housing Plan required under Section 17.90.070 as an alternative to the provisions of Section 17.90.060.A.3 requiring the reasonable dispersal of such units within the residential development project, the City Council may, in its discretion, approve such a proposal if it finds the proposal meets all of the following conditions:
a. The clustering of on-site below market rate dwelling units is necessary to access and secure sources of financing needed for the residential development project; and
b. Construction of the clustered below market rate dwelling units will occur prior to or concurrently with the construction of the market units in the residential development project; and
c. The clustering of on-site below market rate dwelling units will not, when considered singularly or in connection with other residential development projects in the vicinity of the project, significantly contribute to residential segregation by income level within the City; and
d. The purposes of this Chapter would be better served by implementation of the proposed alternative and that the proposed alternative meets the greatest community needs at that time.

E. Alternative to On-Site Construction of Below Market Rate Dwelling Units – Donation of Land.

If a developer of a residential development project of ten (10) or more dwelling units proposes the donation of land to the City for the construction of below market rate dwelling units in the Below Market Rate Housing Plan required under Section 17.90.070, the City Council may, in its discretion, approve such a proposal if it finds the proposal meets all of the following conditions:
a. The land proposed to be donated to the City is located within the City of Foster City, is currently owned by the developer or is under contract for purchase by the developer, is not located in a flood hazard zone and does not contain environmentally sensitive habitat, and development and construction of a residential development project on the site is consistent with the City’s adopted General Plan, Housing Element, and Zoning; and b. The land proposed to be donated is suitable for and development of a residential development project thereon is economically and financially 64 feasible as determined by the City, in its sole discretion, pursuant to a feasibility analysis of a proposed residential development project on the land proposed to be donated prepared by the City, at the expense of the developer, and approved by the City Council; and
c. The land proposed to be donated to the City is adequately served by all required utilities and transportation infrastructure, all of which are appropriately sized to accommodate a residential development project on the site and all reasonable foreseeable probable future development within the area served by said utilities and transportation infrastructure; and d. The fair market value of the land proposed to be donated equals or exceeds the value of the on-site below market rate dwelling units otherwise required to be provided as part of the residential development project, as shown in an appraisal of the land to be donated and a financial analysis of the proposed residential development project prepared by the City, at the expense of the developer, and approved by the City Council; and e. The land proposed to be donated to the City shall not be contaminated with or otherwise impaired by the presence of hazardous materials or hazardous substances in the soil, soil vapor or groundwater in, on, or under the land to be donated or emanating from lands in proximity thereto, as determined by and to satisfaction of the City, in its sole discretion, pursuant to a Phase I Environmental Site Assessment, and if necessary, a Phase II Environmental Site Assessment, conducted under the direction of the City and at the expense of developer; and
f. The purposes of this Chapter would be better served by implementation of the proposed alternative and that the proposed alternative meets the greatest community needs at that time.

17.90.090 Waiver of Requirements.

A. Timing of Request. A developer of a residential development project may apply for a reduction, adjustment, or waiver of the requirements of this Chapter as part of an application for the approval of a planning permit or building permit, whichever permit is required first.

B. Application Requirements. The developer must show that applying the requirements of this Chapter, without the requested reduction, adjustment or waiver, would result in an unconstitutional taking of property or would result in any other unconstitutional result. The developer shall set forth in detail the factual and legal basis for the claim, including all supporting technical documentation, and shall bear the burden of presenting the requisite evidence to demonstrate the alleged unconstitutional result.

C. City Assumptions. The City may assume each of the following when applicable:

1. The developer will benefit from the incentives set forth in State Density Bonus law and the zoning ordinance; and
65 2. The developer is able to provide the most economical below market rate dwelling units feasible in terms of financing, construction, design, location and tenure.

D. Decision. The review authority, based upon legal advice provided by or at the behest of the City Attorney, may approve a reduction, adjustment, or waiver of the requirements of this Chapter if the review authority determines that applying the requirements of this Chapter would effectuate an unconstitutional taking of property or otherwise have an unconstitutional application to the property. The reduction, adjustment, or waiver may be approved only to the extent necessary to avoid an unconstitutional result after adoption of written findings, based on legal analysis and the evidence.

E. Changes to the Project. If a reduction, adjustment, or waiver is granted, any subsequent change in the residential development project shall invalidate the reduction, adjustment, or waiver, and a new application shall be required for a reduction, adjustment, or waiver per this section.

17.90.100 Affordable Housing Fund.

Separate accounts within the Affordable Housing Fund may be created from time to time to avoid commingling of monies, if required by law or as deemed appropriate for the administration of the Affordable Housing Fund.

B.Deposits.All Below Market Rate Housing In-Lieu Fees or other funds collected under this Chapter, shall be deposited into the Affordable Housing Fund.

C. Use of Funds. In addition to the purposes set forth in Section 17.88.060 of the Foster City Municipal Code, the monies in the Affordable Housing Fund, including all interest and earnings from investment of the monies therein, shall be expended exclusively to provide, or assure the continued provision of, below market rate dwelling units to extremely low income, very low income, lower income, and moderate income households in the City, through property acquisition, construction, development assistance, rehabilitation, conversion, financing, rental assistance or other subsidies or methods, consistent with the goals and policies contained in the City's Housing Element and the purposes for which the fees were collected, and for administration and compliance monitoring of the below market rate dwelling units established pursuant to this Chapter.

D. Guidelines. The City Council may, from time to time, adopt guidelines for expenditure of monies in the Affordable Housing Fund.

17.90.110 Enforcement.

A.Nuisance.Any violation of the provisions of this Chapter, or the terms or conditions of a planning permit or building permit issued for a residential development 66 project, or the terms of a Below Market Rate Housing Plan or Below Market Rate Housing Agreement approved in accordance with this Chapter, shall constitute a public nuisance.

B. Provision of Below Market Rate Dwelling Units; Payment Obligation. Provision of below market rate dwelling units and/or payment of the Below Market Rate Housing In-Lieu Fee in accordance with the requirements of this Chapter is the obligation of the developer of a residential development project. The City may institute any appropriate legal actions or proceedings necessary to ensure compliance herewith, including, but not limited to, actions to revoke, deny, modify or suspend any planning permit or building permit approved by the City.

C. City Attorney Enforcement. The City Attorney shall be authorized to enforce the provisions of this Chapter and all Below Market Rate Housing Agreements, resale restrictions, performance deeds of trust, regulatory agreements, and all other covenants or restrictions placed on residential development projects or below market rate dwelling units, by civil action and any other proceeding or method permitted by law. The City shall be entitled to recover its costs, expenses and fees, including reasonable attorneys’ fees, incurred in connection with the enforcement of the provisions of this Chapter and all Below Market Rate Housing Agreements, resale restrictions, performance deeds of trust, regulatory agreements, and all other covenants or restrictions placed on residential development projects or below market rate dwelling units.

D.Developer Responsibility. Failure of any official or agency to enforce the requirements of this Chapter shall not excuse any developer or owner from the requirements of this Chapter. No planning permit, building permit, license, map, or other approval or entitlement for a residential development project or dwelling unit shall be issued, including without limitation a final inspection or certificate of occupancy, until all applicable requirements of this Chapter have been satisfied.

E. Remedies. The remedies provided for in this Section shall be cumulative and not exclusive and shall not preclude the City from any other remedy or relief to which it otherwise would be entitled under law or equity.

Section 4. Effective Date. This ordinance shall take effect thirty (30) days following its final passage.

Section 5. Posting. Within fifteen (15) days after the adoption of this Ordinance, the City Clerk shall have it posted in three (3) public places designated by the City Council.

Section 6. Severability. If any section, subsection, sentence, clause, or phrase of this chapter is held to be invalid or unconstitutional including by any court with jurisdiction, such decision shall not affect the validity of the remaining portions of this article. The City Council declares that it would have passed this article, and each section, subsection, 67 clause, or phrase thereof, irrespective of the fact that any one or more other sections, subsections, clauses, or phrases may be declared invalid or unconstitutional.

This ordinance was introduced and read on the 7 th day of March, 2022, and passed and adopted on the __ day of March 2022, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RICHA AWASTHI, MAYOR
ATTEST:

PRISCILLA SCHAUS, CITY CLERK
68 ORDINANCE NO. ___
AN ORDINANCE OF THE CITY OF FOSTER CITY ADDING A NEW CHAPTER 17.92, AFFORDABLE HOUSING OVERLAY COMBINING DISTRICT, TO TITLE 17, ZONING,

OF THE FOSTER CITY MUNICIPAL CODE

CITY OF FOSTER CITY
WHEREAS, there is a shortage of affordable housing in the City of Foster City (“City”) as documented in the 2015-2023 General Plan Housing Element; and

WHEREAS, consistent with State law, Housing Element Goal H-D is to “Consider Potential Public and Private Redevelopment Opportunities to Increase the Supply of Housing”; and

WHEREAS, in order to implement Housing Element Goal H-D, Housing Element Program H-D-2-b “Affordable Housing Overlay Combining District” calls for the City to adopt and implement an Affordable Housing Overlay (AHO) to encourage the production of additional housing units, including affordable units, in areas already developed with housing; and

WHEREAS, the City wishes to implement Housing Element Program H-D-2-b with clear and objective standards to be set forth in an ordinance adding a new Chapter 17.92, Affordable Housing Overlay Combining District, to Title 17 of the Foster City Municipal Code; and

WHEREAS, adopting clear and objective standards for the creation and application of the AHO will provide additional options for compliance with inclusionary housing requirements for redevelopment of existing apartment developments that will encourage the development and availability of housing opportunities to a broad range of households with varying income levels within the City as mandated by State Law, and is essential for the public welfare; and

WHEREAS, adopting clear and objective standards for the creation and application of the AHO will increase the supply of below market rate housing to meet the City’s regional share of very low-, low- and moderate-income housing needs and the needs of special groups, including the elderly, disabled, small and large families, and local workers; and

69 WHEREAS, provision of housing at a variety of income levels will reduce Vehicle Miles Traveled (VMT) and Greenhouse Gas (GHG) emissions by providing people at all income levels more opportunities to live near where they work; and

WHEREAS, the City Council has requested that the Planning Commission consider the adoption of ordinances adding provisions to the Municipal Code to address the need for housing affordable to households at all income levels, including adoption of an ordinance to create the AHO with the goal of encouraging the production of additional housing units, including affordable units, in areas already developed with housing; and

WHEREAS, the Planning Commission considered the proposed ordinance adding a new Chapter 17.92, Affordable Housing Overlay Combining District, to Title 17 of the Foster City Municipal Code at a noticed public hearing on February 3, 2022 and adopted Resolution P-02-22 recommending City Council approval; and WHEREAS, the City provided notice of the public hearing (“Notice”) and held a public hearing on March 7, 2022, regarding the proposed ordinance adding a new Chapter 17.92, Affordable Housing Overlay Combining District, to Title 17 of the Foster City Municipal Code, pursuant to Government Code Section 65856; and WHEREAS, as required by Government Code Sections 65856 and 65090, the Notice contained the information required by Government Code Section 65094, and was published in compliance with Government Code Section 6061 on February 16, 2022 and February 23, 2022 in the Foster City Islander, a newspaper of general circulation with the City of Foster City; and
WHEREAS, the Notice was duly posted and mailed to the owners of the properties being considered for inclusion within the Affordable Housing Overlay Combining District, if created and adopted, as well as to owners of property located within 500 feet of the boundaries of these prospective properties above; and
70 WHEREAS, the City Council of the City of Foster City carefully reviewed and considered the staff report and all attachment thereto presented as part of the agenda for the public hearing regarding the proposed ordinance to amend the Foster City Zoning Municipal Code to add provisions regarding an Affordable Housing Overlay Combining District, including the EPS Studies and this Ordinance, any and all timely submitted correspondence, all information submitted at or prior to the public hearing, and all public comment and testimony presented at the public hearing (collectively, the “Record”); now, therefore, be it resolved that
THE CITY COUNCIL OF THE CITY OF FOSTER CITY DOES ORDAIN AS FOLLOWS:

Section 1. The foregoing Recitals are true and correct and are incorporated herein by this reference.

Section 2. The City Council does hereby find and determine based upon the aforementioned Record as follows:
(a) The Public Hearing was properly noticed and conducted in accordance with State law and the Foster City Municipal Code; and
(b) The adoption of the proposed ordinance adding a new Chapter 17.92, Affordable Housing Overlay Combining District, of Title 17 of the Foster City Municipal Code, is exempt from review under the California Environmental Quality Act (CEQA) as it is not considered a ‘project’ under Public Resources Code Section 21065 and CEQA Guidelines Section 15378 because the ordinance will not result in a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment. In addition, even if the adoption of the ordinance was considered a “project” under CEQA, pursuant to CEQA Guidelines Section 15061(b)(3), the proposed ordinance is covered by the common sense exemption providing that CEQA only applies to projects which have the potential for causing a significant effect on the environment and where, as is the case with the adoption of this proposed ordinance, it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA; and
(c) The provision of safe and stable housing for households at all income levels is essential for the public welfare of the City. Housing in Foster City, both rental and for-sale housing, has become steadily more expensive and housing costs have gone up faster than incomes. Federal and state government programs do not provide enough affordable housing to satisfy the needs of very low, low, or moderate income households. As a result, there is a severe shortage of adequate, affordable housing for very low, lower, and moderate income households, as evidenced by the findings in the City’s 2015 – 2023 Housing Element: and (d) As provided in the Housing Element of the General Plan, Housing Element Goal H-D, Housing Element Program H-D-2-b “Affordable Housing Overlay Combining District”, the City wishes to encourage the production of additional housing units, including affordable units, through redevelopment of areas already developed with housing by private interests; and
71 (e) Based on the findings above, the City desires to further the public health, safety and welfare by providing an incentive for areas already developed with housing to redevelop those areas with additional housing units, including affordable units, through the creation of an overlay combing district for certain areas of the City; and (f) The proposed ordinance adding a new Chapter 17.92, Affordable Housing Overlay Combining District, to Title 17 of the Foster City Municipal Code, is consistent with the General Plan.

Section 3. Chapter 17.92, Affordable Housing Overlay Combining District, is hereby added to Title 17, Zoning, of the Foster City Municipal Code to read as follows:

Chapter 17.92

AFFORDABLE HOUSING OVERLAY COMBINING DISTRICT
Sections:

17.92.010 Purpose.

17.92.020 Establishment.

17.92.030 Definitions.

17.92.040 Requirements for Inclusion of Below Market Rate Dwelling Units.

17.92.010 Purpose.

The purpose of the affordable housing overlay (“AHO”) combining district established by this Chapter is to:

A. Encourage the development of below market rate rental dwelling units for extremely low-, very low- and low-income households on sites that are designated Apartment Residential in the General Plan; and
B. Provide an alternative to the percentage of below market rate dwelling units required by Chapter 17.90 that targets the extremely low-, very low- and low- income units and at the same time reduces the overall percentage of below market rate dwelling units required; and
C. Enhance the public welfare by establishing policies and encouraging the development and availability of housing opportunities to a broad range of households with varying income levels within the City as mandated by State Law, California Government Code Section 65580 and following; and D. Promote the City’s goals as stated in the Housing Element of the General Plan to increase the supply of below market rate housing to meet the City’s regional share of extremely low-, very low-, and low-income housing needs and the needs of 72 special groups, including the elderly, disabled, small and large families, and local workers by imposing an inclusionary requirement for residential development projects; and
E. Reduce Vehicle Miles Traveled (VMT) and Greenhouse Gas (GHG) emissions by providing people at all income levels more opportunities to live near where they work.

F. Support the local economy by making it easier for employers to attract and retain workers by providing people at all income levels more opportunities to live near where they work; and
G. Affirmatively further the policies and purposes of the Fair Housing Act, also known as “Affirmatively Further Fair Housing”, by reducing segregation and concentration of poverty; and
H. Implement the City’s policies contained in the Housing Element of the General Plan to create an Affordable Housing Overlay District to encourage the production of additional housing units, including affordable housing units at existing, older apartments, in a manner appropriate to their neighborhood and surrounding development.

17.92.020 Establishment.

The AHO combining district may be established or removed from the zoning map upon the application of a property owner or owners, or upon the initiative of the city council or planning commission, in accordance with the procedures set forth in Chapter 17.74. Only properties designated Apartment Residential on the Land Use Plan Map of the General Plan shall be eligible for the AHO combining district.

17.92.030 Definitions.

For purposes of this Chapter, the definitions set forth in Section 17.90.020 of Chapter

17.90 of the Foster City Municipal Code shall be, and hereby are, incorporated herein by this reference as if set forth in full.

17.92.040 Requirements for Inclusion of Below Market Rate Dwelling Units.

A. Substitution for Number of Dwelling Units Required by Chapter 17.90. In lieu of the percentage of below market rate dwelling units required by Chapter 17.90, developers of rental residential development projects of ten (10) or more dwelling units may instead choose to provide the percentage of below market rate dwelling units specified below. All other provisions of Chapter 17.90 shall apply, except those provisions pertaining only to for-sale residential development projects and below market rate dwelling units available as for-sale units.

B. Number of Below Market Rate Dwelling Units and Level of Affordability. For the purposes of this section, "total dwelling units" does not include dwelling units awarded above the otherwise-allowable maximum density as part of a density bonus in Chapter 17.86 (Density Bonuses).
73 1. Rental Projects. Seven percent (7%) of the proposed total dwelling units shall be below market rate dwelling units occupied by or available for occupancy by low income households at or below market rate rents; four percent (4%) of the proposed total dwelling units shall be below market rate dwelling units occupied by or available for occupancy by very low income households at or below market rate rents; and four percent (4%) of the proposed total dwelling units shall be below market rate dwelling units occupied by or available for occupancy by extremely low income households at or below market rate rents. Alternative percentages and levels of affordability may be considered as part of the Below Market Rate Housing Plan and Below Market Rate Housing Agreement (Section

17.90.070) and the reviewing authority may approve or conditionally approve such an alternative if it determines, based on substantial evidence, that such alternative percentages and levels of affordability will provide as many or more below market rate dwelling units at the same or lower income levels or will otherwise provide greater public benefit than the requirement set forth herein.

2. Fractional Units. In calculating the number of below market rate dwelling units required pursuant to Sections 17.92.040.B.1 above, any fraction of less than 0.50 shall be satisfied by payment of an amount equal to the Below Market Rate Housing In-Lieu Fee established pursuant to Section 17.90.050 times the applicable fraction, and any fraction of 0.50 or more shall be satisfied by developing one (1) below market rate dwelling unit available for rental to and occupancy by eligible households at the applicable household income level and at below market rate rent.

Section 4. Effective Date. This ordinance shall take effect thirty (30) days following its final passage.

Section 5. Posting. Within fifteen (15) days after the adoption of this Ordinance, the City Clerk shall have it posted in three (3) public places designated by the City Council.

Section 6. Severability. If any section, subsection, sentence, clause, or phrase of this chapter is held to be invalid or unconstitutional including by any court with jurisdiction, such decision shall not affect the validity of the remaining portions of this article. The City Council declares that it would have passed this article, and each section, subsection, clause, or phrase thereof, irrespective of the fact that any one or more other sections, subsections, clauses, or phrases may be declared invalid or unconstitutional. 74 This ordinance was introduced and read on the 7 th day of March, 2022, and passed and adopted on the __ day of March 2022, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RICHA AWASTHI, MAYOR
ATTEST:

PRISCILLA SCHAUS, CITY CLERK
75 ORDINANCE NO. ___

AN ORDINANCE OF THE CITY OF FOSTER CITY AMENDING THE FOSTER CITY

ZONING MAP TO ZONE CERTAIN PROPERTIES WITHIN THE AFFORDABLE

HOUSING OVERLAY COMBINING DISTRICT

CITY OF FOSTER CITY
WHEREAS, there is a shortage of affordable housing in the City of Foster City (“City”) as documented in the 2015-2023 General Plan Housing Element; and WHEREAS, California Government Code Section 65580(d) states that all cities have a responsibility to use the powers vested in them to facilitate the improvement and development of housing and to make adequate provision for the housing needs of all economic segments of the community; and
WHEREAS, consistent with State law, Housing Element Goal H-D is to “Consider Potential Public and Private Redevelopment Opportunities to Increase the Supply of Housing”; and
WHEREAS, in order to implement Housing Element Goal H-D, Housing Element Program H-D-2-b “Affordable Housing Overlay Combining District” calls for the City to adopt and implement an Affordable Housing Overlay (AHO) to encourage the production of additional housing units, including affordable units , in areas already developed with housing; and
WHEREAS, the City wishes to implement Housing Element Program H-D-2-b with clear and objective standards to be set forth in an ordinance adding a new Chapter 17.92, Affordable Housing Overlay Combining District, to Title 17 of the Foster City Municipal Code; and
WHEREAS, adopting clear and objective standards for the creation and application of the AHO will provide additional options for compliance with inclusionary housing requirements for redevelopment of existing apartment developments that will encourage the development and availability of housing opportunities to a broad range of households with varying income levels within the City as mandated by State Law, and is essential for the public welfare; and
WHEREAS, adopting clear and objective standards for the creation and application of the AHO will increase the supply of below market rate housing to meet the City’s regional share of very low-, low- and moderate-income housing needs and the needs of special groups, including the elderly, disabled, small and large families, and local workers; and
76 WHEREAS, provision of housing at a variety of income levels will reduce Vehicle Miles Traveled (VMT) and Greenhouse Gas (GHG) emissions by providing people at all income levels more opportunities to live near where they work; and

WHEREAS, provision of housing at a variety of income levels will a ffirmatively further the policies and purposes of the Fair Housing Act, also known as “Affirmatively Further Fair Housing” by reducing segregation and concentration of poverty; and

WHEREAS, the City Council , by adoption of Resolution No. 2021-52 on May 3, 2021, has requested that the Planning Commission consider the adoption of an ordinance to amend the Foster City Zoning Map to zone the below referenced properties within the Affordable Housing Overlay Combining District, to be set forth in a new Chapter 17.92, Affordable Housing Ove rlay Combining District, of Title 17 of the Foster City Municipal Code:

1. Beach Cove Apartments, 605 -1021 Catamaran Street, APNs 094 -320-040 & 094-330-010

2. Franciscan Apartments, 888 Foster City Boulevard, APN 094-091-020

3. Sand Cove Apartments, 707-939 Shell Boulevard, APN 094-470-160

4. Shadow Cove Apartments, 1019 -1087 Foster City Boulevard, APN 094 -312- 780

5. The Lagoons Apartments, 611-899 Bounty Drive, APN 094-472-010

6. Lantern Cove Apartments, 244 Rock Harbor Lane, APNs 097-160-110 & 120

WHEREAS, the Planning Commission considered the proposed amendment to the zoning map at a noticed public hearing on February 3, 2022 and adopted Resolution P - 03-22 recommending City Council approval; and

WHEREAS, the City provided notice of the public hearing (“ Notice”) and held a public hearing on March 7, 2022, regarding the proposed ordinance to amend the Foster City Zoning Map to zone the above referenced properties within the Affordable Housing Overlay Combining District, pursuant to Government Code Section 65856; and 77 WHEREAS, as required by Government Code Sections 65856 and 65090, the Notice contained the information required by Government Code Section 65094, and was published in compliance with Government Code Section 6061 on February 16, 2022 and February 23, 2022 in the Foster City Islander, a newspaper of general circulation with the City of Foster City; and

WHEREAS, the Notice was duly posted and mailed to the owners of the properties referenced above and to be included within the Affordable Housing Overlay Combining District, as well as to owners of property located within 500 feet of the boundaries of the properties above; and

WHEREAS, the City Council of the City of Foster City carefully reviewed and considered the staff report and all attachment thereto presented as part of the agenda for the public hearing regarding the proposed ordinance to amend the Foster City Zoning Map to zone the above referenced properties within the Affordable Housing Overlay Combining District , including the EPS Studies and this Ordinance, any and all timely submitted correspondence, all information submitted at or prior to the public hearing, and all public comment and testi mony presented at the public hearing (collectively, the “Record”); now, therefore, be it resolved that

THE CITY COUNCIL OF THE CITY OF FOSTER CITY DOES ORDAIN AS FOLLOWS:

Section 1. The foregoing Recitals are true and correct and are incorporated herein by this reference.

Section 2 . The City Council does hereby find and determine based upon the aforementioned Record as follows:

(a) The Public Hearing was properly noticed and conducted in accordance with State law and the Foster City Municipal Code; and
(b) The adoption of the proposed ordinance amending the Foster City Zoning Map to zone the above reference properties within the Affordable Housing Overlay Combining District, to be set forth in Chapter 17.92, Affordable Housing Overlay Combining District, of Title 17 of the Foster City Municipal Code, is exempt from review under the California Environmental Quality Act (CEQA) as it is not considered a ‘project’ under Public Resources Code Section 21065 and CEQA Guidelines Section 15378 because the ordinance will not result in a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment. In addition, even if the adoption of the ordinance was considered a “project” under CEQA, pursuant to CEQA Guidelines Sec tion 15061(b)(3), the proposed ordinance is covered by the common sense exemption providing that CEQA only applies to projects which have the potential for causing a significant effect on the environment and where, as is the case with the adoption of this proposed ordinance, it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA; and
78 (c) The provision of safe and stable housing for households at all income levels i s essential for the public welfare of the City. Housing in Foster City, both rental and for-sale housing, has become steadily more expensive and housing costs have gone up faster than incomes. Federal and state government programs do not provide enough affordable housing to satisfy the needs of very low, low, or moderate income households. As a result, there is a severe shortage of adequate, affordable housing for very low, lower, and moderate income households, as evidenced by the findings in the City’s 2015 – 2023 Housing Element: and (d) As provided in the Housing Element of the General Plan, Housing Element G oal H-D, Housing Element Program H-D-2-b “Affordable Housing Overlay Combining District”, the City wishes to encourage the production of additional housing units, including affordable units, through redevelopment of areas already developed with housing by private interests; and
(e) Based on the findings above, the City desires to further the public health, safety and welfare by providing an incentive for areas already developed with housing to redevelop those areas with additional housing units, including affo rdable units, through the creation of an overlay combing district for certain areas of the City; and (f) The proposed ordinance adding Chapter 17.92, Affordable Housing Overlay Combining District, to Title 17 of the Foster City Municipal Code, is consistent with the General Plan; and
(g) The proposed ordinance to amend the Foster City Zoning Map to apply the provisions to be set forth in Chapter 17.92, Affordable Housing Overlay Combining District, of Title 17 of the Fost er City Municipal Code, to the specific properties listed in Section 3 below and as shown on Exhibit A attached hereto and incorporated herein, is consistent with the General Plan.

Section 3. That the City of Foster City Zoning Map is hereby amended to classify the properties, as listed below and as shown on Exhibit A attached hereto and incorporated herein, to be located within the Affordable Housing Overlay Combining District, as set forth in Chapter 17.92, Affordable Housing Overlay Combining District, of Title 17 of the Foster City Municipal Code:

1. Beach Cove Apartments, 605 -1021 Catamaran Street, APNs 094 -320-040 & 094-330-010

2. Franciscan Apartments, 888 Foster City Boulevard, APN 094-091-020

3. Sand Cove Apartments, 707-939 Shell Boulevard, APN 094-470-160

4. Shadow Cove Apartments, 1019 -1091 Foster City Boulevard, APN 094 -312- 780

5. The Lagoons Apartments, 611-899 Bounty Drive, APN 094-472-010

6. Lantern Cove Apartments, 244 Rock Harbor Lane, APNs 097-160-110 & 120

7. Schooner Bay Apartments, Timberhead Lane, Halyard Lane, Stanchion Lane, Masthead Lane, Quadrant Lane, Cutwater Lane, Jibstay Lane, Bobstay Lane, Windlass Lane, Pinrail Lane, APNs 097 -140-070 & 080; 097 -150-020, 030, 050, 110, & 120
79 Section 4. Effective Date. This ordinance shall take effect thirty (30) days following its final passage.

Section 5. Posting. Within fifteen (15) days after the adoption of this Ordinance, the City Clerk shall have it posted in three (3) public places designated by the City Council.

Section 6. Severability. If any section, subsection, sentence, clause, or phrase of this chapter is held to be invalid or unconstitutional including by any court with jurisdiction, such decision shall not affect the validity of the remaining portions of this article. The City Council declares that it would have passed this article, and eac h section, subsection, clause, or phrase thereof, irrespective of the fact that any one or more other sections, subsections, clauses, or phrases may be declared invalid or unconstitutional.

This ordinance was introduced and read on the 7 th day of March, 2022, and passed and adopted on the __ day of March 2022, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RICHA AWASTHI, MAYOR
ATTEST:

PRISCILLA SCHAUS, CITY CLERK
80 Exhibit A: Page 1 of 7
Beach Cove Apartments
The City of Foster City Zoning Map is hereby amended to reclassify the 18.7-acre lands at 605-1021 Catamaran Street (APN: 094-320-040 and 094-330-010) to change the Zoning Map Designation from R- 4/PD (High Density Multiple-Family Residence/Planned Development) to R-4/PD/AHO (High Density Multiple-Family Residence/Planned Development/Affordable Housing Overlay) Combining District as indicated in Figure 1.

Figure 1: Beach Cove Apartments
Beach Cove Apartments
81 Exhibit A: Page 2 of 7
Franciscan Apartments

The City of Foster City Zoning Map is hereby amended to reclassify the 6.4-acre lands at 888 Foster City Boulevard (APN: 094-091-020) to change the Zoning Map Designation from R-3 (Medium Density Multiple-Family Residence) to R-3/AHO (Medium Density Multiple-Family Residence/Affordable Housing Overlay) Combining District as indicated in Figure 2.

Figure 2: Franciscan Apartments

Franciscan Apartments
82 Exhibit A: Page 3 of 7
Sand Cove Apartments

The City of Foster City Zoning Map is hereby amended to reclassify the 8.77-acre lands at 707-939 Shell Boulevard (APN: 094-470-160) to change the Zoning Map Designation from R-3/PD (Medium Density Multiple-Family Residence/Planned Development) to R-3/PD/AHO (Medium Density Multiple-Family Residence/Planned Development/Affordable Housing Overlay) Combining District as indicated in Figure 3.

Figure 3: Sand Cove Apartments

`
Sand Cove Apartments
83 Exhibit A: Page 4 of 7
The Lagoons Apartments

The City of Foster City Zoning Map is hereby amended to reclassify the 9.64-acre lands at 611-899 Bounty Drive (APN: 094-472-010) to change the Zoning Map Designation from R-3/PD (Medium Density Multiple- Family Residence/Planned Development) to R-3/PD/AHO (Medium Density Multiple-Family Residence/Planned Development/Affordable Housing Overlay) Combining District as indicated in Figure 4.

Figure 4: The Lagoons Apartments

The Lagoons Apartments
84 Exhibit A: Page 5 of 7
Shadow Cove Apartments

The City of Foster City Zoning Map is hereby amended to reclassify the 7.9-acre lands at 1019-1087 Foster City Boulevard (APN: 094-312-780) to change the Zoning Map Designation from R-4/PD (High Density Multiple-Family Residence/Planned Development) to R-4/PD/AHO (High Density Multiple-Family Residence/Planned Development/Affordable Housing Overlay) Combining District as indicated in Figure 5.

Figure 5: Shadow Cove Apartments

Shadow Cove Apartments
85 Exhibit A: Page 6 of 7
Lantern Cove Apartments
The City of Foster City Zoning Map is hereby amended to reclassify the 16.8-acre lands at 244 Rock Harbor Lane (APN: 097-160-110 and 097-160-120) to change the Zoning Map Designation from R-3/PD (Medium Density Multiple-Family Residence/Planned Development) to R-3/PD/AHO (Medium Density Multiple- Family Residence/Planned Development/Affordable Housing Overlay) Combining District as indicated in Figure 6.

Figure 6: Lantern Cove Apartments
Lantern Cove Apartments
86 Exhibit A: Page 7 of 7
Schooner Bay Apartments
The City of Foster City Zoning Map is hereby amended to reclassify the 24.8-acre lands at Timberhead Lane, Halyard Lane, Stanchion Lane, Masthead Lane, Quadrant Lane, Cutwater Lane, Jobstay Lane, Bobstay Lane, Windlass Lane, and Pinrail Lane (APN: 097-140-070 and 080; 097-150-020, 030, 050, 110, and 120) to change the Zoning Map Designation from R-3/PD (Medium Density Multiple-Family Residence/Planned Development) to R-3/PD/AHO (Medium Density Multiple-Family Residence/Planned Development/Affordable Housing Overlay) Combining District as indicated in Figure 7.

Figure 7: Schooner Bay Apartments
Schooner Bay Apartments
Schooner Bay Apartments
87 RESOLUTION NO. ______

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF FOSTER CITY AMENDING THE CITY’S MASTER FEE SCHEDULE TO ADOPT A FEE FOR BELOW MARKET

RATE HOUSING IN-LIEU FEES

CITY OF FOSTER CITY
WHEREAS, there is a shortage of affordable housing in the City of Foster City (“City”) as documented in the 2015-2023 General Plan Housing Element; and

WHEREAS, in order to implement Housing Element Goal H-E, Housing Element Policy H-E-2a currently requires that 20% of all units, excluding bonus units, in residential projects be affordable; and

WHEREAS, requiring inclusionary housing will increase the supply of below market rate housing to meet the City’s regional share of very low-, low- and moderate- 88 income housing needs and the needs of special groups, including the elderly, disabled, small and large families, and local workers; and

WHEREAS, the City has received and considered the analysis prepared by Economic and Planning Systems, Inc. (EPS), including a memorandum titled “Housing Fee Implementation Considerations” (January 24, 2022), “Rental Inclusionary Housing In-Lieu Fee” (January 20, 2022), and “Ownership Inclusionary Housing In-Lieu Fee” (January 11, 2022) (collectively, the “EPS Studies”); and WHEREAS, the new Chapter 17.90, Below Market Rate Inclusionary Housing Program, authorizes the City Council to adopt a Below Market Rate Housing In-lieu Fee, which a project developer may pay as an alternative compliance option pursuant to Chapter 17.90; and
WHEREAS, the Below Market Rate Housing In-lieu Fee, deposited in the City’s Affordable Housing Fund, will be used to finance the development of new affordable housing or the rehabilitation of existing affordable housing, to provide affordable housing programs in the City, to leverage flexible local funds for larger State and Federal grants, and to administer the City’s Affordable Housing Program; and WHEREAS, the City provided notice and held a public hearing on March 7, 2022 pursuant to Government Code sections 66016, 66016.5, 66018, and 6062a; and WHEREAS, pursuant to Government Code section 6062a, a notice of a public hearing on the proposed fee schedule was published on February 16, 2022 and February 23, 2022 in the Foster City Islander, a newspaper of general circulation; and WHEREAS, pursuant to Government Code sections 66016 and 66016.5, notice 89 of the time and place of the meeting, including a general explanation of the matters to be considered and a statement that required data is available was mailed at least 30 days prior to the meeting to those members of the public who filed a written request with the City; and
WHEREAS, at least ten (10) days prior to the public hearing referenced above, the City made available for public inspection information required under government Code section 66000, et. seq.; and
WHEREAS, on March 7, 2022, the City Council held a noticed public hearing to consider the City’s proposed affordable housing in-lieu fees at which time all interested persons were given an opportunity to comment.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Foster City that:
1) The foregoing recitals are true and correct.
2) The City’s Master Fee Schedule is hereby amended to add the following fee under “Community Development” as follows:

Current
REF. NO.

REVENUE TITLE Adopted Fees
CDP-27 Below Market Rate Housing In-Lieu Fee
a. Rental – to be multiplied by the net rentable
square feet. All net rentable square footage
includes measurements from the outside
surface of the exterior walls and includes all
finished living space. It does not include parking
areas, common hallways and stairways,
common rooms, building lobbies, balconies,
elevator shafts, and utility rooms. On July 1st of
each year beginning in 2023 the fee amount
shall be automatically adjusted in accordance
with the change in the Engineering Construction
Cost Index for San Francisco, California, most
recently published by Engineering News-
Record, for the elapsed time period from May of
the previous year to May of the current year.
$75.32
b. For Sale – to be multiplied by the habitable area
measured from the outside surface of the
exterior walls, including all finished living space
$48.21
90 Current
REF. NO.

REVENUE TITLE Adopted Fees
and common areas inside the dwelling unit. It
does not include unheated areas such as
parking and balconies. On July 1st of each year
beginning in 2023 the fee amount shall be
automatically adjusted in accordance with the
change in the Engineering Construction Cost
Index for San Francisco, California, most
recently published by Engineering News-
Record, for the elapsed time period from May of
the previous year to May of the current year.
3) Fees shall be deposited into the City Affordable Housing Fund, to be used to finance the development of new affordable housing or the rehabilitation of existing affordable housing, to provide affordable housing programs in the City, to leverage flexible local funds for larger State and Federal grants, and to administer the City’s Affordable Housing Program.
4) The above listed fees shall become effective sixty (60) days after adoption of this resolution.
5) The City Council finds that this Resolution is not subject to the California Environmental Quality Act (“CEQA”). This action is not a project within the meaning of the CEQA Guidelines Section 15378 and 15061(b)(3) as it has no potential for physical effects on the environment because it involves an adoption of certain fees and/or charges imposed by the City, does not commit the City to any specific project, and said fees and/or charges are applicable to future development projects and/or activities, each of which future projects and/or activities will be fully evaluated in full compliance with CEQA when sufficient physical details regarding said projects and/or activities are available to permit meaningful CEQA review (see CEQA Guidelines, Section 15004(b)(1)). Pursuant to CEQA Guidelines section 15378(b)(4), the creation of government funding mechanisms which do not involve any commitment to any specific project which may cause significant effect on the environment, is not defined as a “project” under CEQA. Therefore, approval of the fees and/or charges is not a “project” for purposes of CEQA, pursuant to CEQA Guidelines, Section 15378(b)(4); and, even if considered a “project” under CEQA, is exempt from CEQA review pursuant to CEQA Guidelines Section 15061(b)(3) because it can be seen with certainty that there is no possibility that approval of the fees and/or charges may have a significant effect on the environment.
91 PASSED AND ADOPTED as a resolution of the City Council of the City of Foster City at the regular meeting held on the 7th day of March, 2022, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RICHA AWASTHI, MAYOR
ATTEST:

PRISCILLA SCHAUS, CITY CLERK
92 D RAFT M EMORANDUM
To: Marlene Subhashini and Leslie Carmichael, City of Foster City From: Darin Smith and Chinmay Damle
Subject: Housing Fee Implementation Considerations; EPS #211040 Date: January 24, 2022
Economic & Planning Systems, Inc. (EPS) was retained by the City of Foster City (City) to calculate inclusionary housing in-lieu fees for ownership and rental residential projects. Those analyses are provided under separate cover. In this memorandum, EPS evaluates the competitive and feasibility implications of implementing the inclusionary programs by comparing inclusionary requirements in other jurisdictions and evaluates the effect that different requirements and fee levels could have on new development activity in Foster City.

Key Findings

1. Foster City has seen significant housing price inflation in recent years. Rent rate
s have increased by roughly 33 percent in
the p
ast decade, while for-sale home values have more than
dou
bled. To purchase a typical home in Foster City today, a househ
old would need to earn roughly $300,000, nearly double the City
’s median income.

2. Foster City’s proposed inclusionary standards are somewhat more aggr
essive than those in comparable jurisdictions
within San Mateo County. Of the
neighboring cities to Foster City,
most req
uire 15 percent affordable units compared to Foster City’s 20 percent. However, like Foster City, it is common for cities to re
quire low and very low income units in rental projects, and mode
rate income units in for-sale projects.

3. The City staff suggest
ion for rental inclusionary housing
scenarios i
s deemed feasible by the model; however the
ownership
scenarios appear to represent a feasibility
challenge. For ren
tal projects, it appears feasible to require up to
20 percent inclusionary units, including a mix of very low, low, and mode
rate income units. However, a requirement for for-sale projects to p
rovide 20 percent of units affordable to moderate income units doe
s not appear to be feasible without some adjustment to market ci
rcumstances or assumptions. A standard more consistent with those
in nearby communities – 15 percent moderate income units – would enha
nce project feasibility for for-sale developments.

Attachment 5
93 Draft Memorandum January 24, 2022
Foster City Housing Fee Implementation Considerations; EPS #211040 Page 2

Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_Feasibility_012422.docx

Context
Foster City is a high-income community in a high-income County and region, and housing costs are of increasing concern for many working households and policymakers. As of 2019, Foster City’s median household income of $158,529 was about 14 percent above the San Mateo County median and about 140 percent above the national median. As shown in Table 1, income distribution in Foster City is similar to the County.

Table 1 Household Income Distribution

Since 2012, rental rates in Foster City were consistently higher than in the County. Rental rates dipped starting 2020, the same time as the COVID-19 pandemic, however have begun to rebound. As of the fourth quarter of 2021, the average effective rent for apartments in the City was roughly $3,200 per month, as shown in Figure 1. The rental rate in the City has been consistently higher than the County average, with the average effective monthly rent for apartments in the County at close to $2,700. In both the City and County, rents have increased roughly 33 percent over the past decade.

Household Income Range Foster City San Mateo County United States Less than $10,000 2.80% 2.30% 5.80%
$10,000 to $14,999 1.10% 1.90% 4.00%
$15,000 to $24,999 2.60% 4.10% 8.30%
$25,000 to $34,999 2.90% 3.50% 8.40%
$35,000 to $49,999 5.70% 6.40% 11.90%
$50,000 to $74,999 5.70% 10.20% 17.40%
$75,000 to $99,999 7.70% 8.70% 12.80%
$100,000 to $149,999 18.50% 16.90% 15.70%
$150,000 to $199,999 15.80% 12.70% 7.20%
$200,000 or more 37.20% 33.30% 8.50%
Median Household Income $158,529 $138,500 $65,712
Source: ACS 2015-2019 Estimate
94 Draft Memorandum January 24, 2022
Foster City Housing Fee Implementation Considerations; EPS #211040 Page 3

Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_Feasibility_012422.docx

Figure 1 Average Rent per Multifamily Unit, 2012-2021

Source: CoStar, Economic & Planning Systems
For-sale housing values have increased even more dramatically in Foster City. In 2012, Zillow data indicates that typical home values were roughly $850,000, and this figure had increased to $1.9 million by 2021 – more than double the value from a decade earlier. To purchase a typical home today, a household would need to earn roughly $300,000 annually, about twice as much as the City’s median household income shown on Table 1.1 Figure 2 Foster City For-Sale Home Values, 2012-2021

Source: Zillow, Economic & Planning Systems

1 Even with a 20 percent down payment on a $1.9 million home, annual mortgage principal and interest plus insurance and taxes would exceed $100,000 per year. Assuming a household pays 35 percent of gross income toward housing costs, the household would need to earn roughly $300,000. $3,175
$2,692
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Foster City San Mateo County
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
$2,000,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
95 Draft Memorandum January 24, 2022
Foster City Housing Fee Implementation Considerations; EPS #211040 Page 4

Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_Feasibility_012422.docx

Increasing housing costs reflect the combination of rising demand and relative lack of supply, compounded by high costs of construction. Accordingly, lack of housing at all affordability levels is a concern not only locally, but also regionally, and has been an increasing focus of State policy and legislation.

Survey of Comparable Jurisdictions
EPS conducted a survey of inclusionary requirements in comparable jurisdictions in San Mateo County. Inclusionary requirements adopted by these jurisdictions vary based on local policy preferences, including factors such as the number of units in the development or the type of housing (i.e., rental, condominium, townhome, or single family). The household income level required for new inclusionary units also differs. In looking at the inclusionary requirements across all of the surveyed jurisdictions (Figure 2), the lowest total inclusionary requirement is 15 percent, and the highest requirement is 20 percent. The median inclusionary requirement for both rental and for-sale projects is 15 percent, and often jurisdictions require a mix of income levels within that 15 percent requirement.

Figure 2 Inclusionary Requirement Comparison

Feasibility Testing
Under separate cover, EPS has produced in-lieu fee calculations for rental and ownership projects, using an affordability gap analysis approach as it relates to specific inclusionary requirements recommended by City staff:
 Rental (Citywide) – 20 percent inclusionary including 5 percent Moderate (110 percent of Area Median Income [AMI]), 5 percent Low (80 percent AMI), and 10 percent Very Low (50 percent AMI)

0%
5%
10%
15%
20%
25%
Rental Ownership Rental Ownership Rental Ownership Rental Ownership Millbrae Redwood City S an Carlos San Mateo
Very Low Low Moderate
96 Draft Memorandum January 24, 2022
Foster City Housing Fee Implementation Considerations; EPS #211040 Page 5

Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_Feasibility_012422.docx

 Rental (Overlay) – 15 percent inclusionary including 7 percent Low (80 percent AMI), 4 percent Very Low (50 percent AMI), and 4 percent Extremely Low (30 percent AMI)

 For-Sale (Citywide) – 20 percent all at Moderate Income (110 percent AMI) Having estimated the costs to construct new housing of various types, and the prices at which they could be sold or rented at both market rate and below-market rate pricing, this analysis assesses the economic implications of the City’s potential inclusionary program. The analysis, shown on Tables A-1 and A-2 in the Appendix, details how the rental inclusionary requirements and the ownership/for-sale inclusionary requirements can affect development feasibility. Each table evaluates scenarios with differing inclusionary requirements. These scenarios show how different proportions of inclusionary units at different income levels can affect the average revenue or value per unit in the project. Implicit in these comparisons is the idea that construction costs per unit for each building prototype are essentially equivalent regardless of the inclusionary requirement and allowable rents or sale prices, and thus the impact of each inclusionary alternative on the economics of the project can be understood through the changes in average unit revenues.

Appendix Table A-1 shows the feasibility scenarios for rental inclusionary requirements. For this analysis, EPS considers a project to be financially feasible if the “yield on cost” (annual net operating income as a proportion of the overall development costs) is equal to or greater than

4.2 percent. This figure is selected because developers constructing a new rental project generally require the “yield on cost” to exceed market-based “capitalization rates” by at least

0.75 to 1.00 percentage points – with “capitalization rates” representing the metric used by an investor to purchase an existing rental property that has achieved stabilized occupancy. For transactions of apartment buildings built near Foster City in recent years, real estate data company CoStar indicates that capitalization rates have been roughly 3.3 percent, so EPS adds

0.90 percentage points to that figure to represent a feasible yield on cost.

In each scenario, a low-density (35 dwelling units/acre) and high-density (60 dwelling units/acre) prototype is used. The first scenario represents a scenario in which the City does not have any inclusionary requirement as if the developers do not build any affordable units within their projects, and the yield on cost is shown to be 4.5 percent, thus representing a feasible project. Both the Citywide and Overlay zone scenarios achieve yield-on-cost metrics at 4.2 percent at each assumed density, and thus represent returns that just meet the feasibility standards EPS believes are appropriate for new apartment construction in Foster City. The hypothetical scenarios in which a development might pay the in-lieu fees rather than providing any affordable units yield a similarly feasible return. In addition, EPS has modeled several other potential inclusionary scenarios with different mixes and income levels, some of which also appear to reach the feasibility target.

EPS concludes that the Citywide and Overlay inclusionary standards can be considered feasible, although some projects with higher costs or lower market-value characteristics than EPS has assumed may face feasibility challenges. That said, some feasibility improvements might be achieved, for instance, by building additional market-rate units available to them through the State’s density bonus law, or by activating the concessions and waivers that law entitles them to get.
97 Draft Memorandum January 24, 2022
Foster City Housing Fee Implementation Considerations; EPS #211040 Page 6

Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_Feasibility_012422.docx

Appendix Table A-2 shows the feasibility implications for ownership inclusionary requirements.

For townhome ownership housing, EPS asserts that the feasibility threshold measurement is a profit margin in which the average sales price exceeds development costs by 14 percent, which in EPS’s experience is the minimum expected by investors and lenders. For condominium ownership housing, EPS believes the feasibility threshold would be somewhat higher, because condominium developers are less able to ration the pace of construction (the entire building must be built at once, whereas townhomes can be constructed in smaller groups) and condominiums also face certain pre-sale requirements before typical buyers can qualify for federally supported mortgages. As such, EPS asserts that the feasibility threshold measurement for condominiums is a profit margin in which the average sales price exceeds development costs by 16 percent.

In each inclusionary scenario, a low-density townhome (17 dwelling units/acre) and higher- density condominium (35 dwelling units/acre) prototype is used. The first scenario represents a hypothetical in which the City does not have any inclusionary requirement and thus the developers do not build any affordable units within their projects nor have any obligation to pay an in-lieu fee. Under these assumptions, a townhome project is estimated to achieved a profit margin of 20 percent and a condominium project is estimated to achieved a profit margin of 17 percent, both above EPS’s minimum standards required for feasibility. The second scenario reflects City staff’s preferred standards and those used in EPS’s in-lieu fee calculations, in which a hypothetical 100-unit project would be required to provide fees sufficient to subsidize 20 moderate income units at 110 percent of AMI. This scenario achieves a profit margin of only 12 percent for a townhome project and 14 percent for a condominium project, and thus represents a project that faces a feasibility and financing challenge. The third scenario assumes the developer does not build the affordable units required (20 percent moderate), but rather is allowed to pay the in-lieu fee calculated by EPS at roughly $83,548 per townhome market-rate unit and $63,673 per condominium market-rate unit. This in-lieu fee option increases the development costs per unit, but also increases the average home price because all the units would be market rate. Still, the profit margin for a townhome project is estimated at 13 percent, falling just short of the feasibility metric established by EPS, and the project margin for a condominium project is estimated at only 9 percent. The final scenario assumes the City adopts an inclusionary standard at 15 percent moderate-income units – similar to that in Millbrae, Redwood City, and San Mateo – and the resulting profit margin improves upon the 20 percent requirement by meeting the feasibility threshold at 14 percent for a townhome project and falling just short at 15 percent for a condominium project.

In addition to market improvements that may increase unit values and/or decrease development costs, these profit margin metrics could potentially be improved to the extent that developers utilize State density bonus law to achieve additional market-rate units and/or concessions and waivers that can reduce development costs or enhance values. Also, it is important to note that EPS has held fixed the price per acre of developable land for all residential projects. Land markets routinely adjust to reflect changes in regulatory or market circumstances, and the imposition of an impact fee and/or inclusionary standard that negatively affects project feasibility can be expected to place some downward pressure on the prices that landowners can expect to achieve. As such, it is possible and even likely that some landowners would reduce their asking prices in recognition of the impact of the City’s inclusionary standards, in which case the hypothetical projects tested herein may achieve the return targets that EPS expects represent feasibility.
98 Draft Memorandum January 24, 2022
Foster City Inclusionary Feasibility Analysis; EPS #211040 Page 7

Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_Feasibility_012422.docx

Appendix A
99 Table A-1 Rental Inclusionary Scenario Feasibility Test Results

Assumptions
Unit Type Low‐Density High‐Density Low‐Density High‐Density Low‐Density High‐D ensity Low‐Density High‐Density Low‐Density High‐Density Low‐Density High‐Density Low‐Density High‐Density Low‐Density High‐Density Low‐D ensity High‐Density Base Density (units/acre) 35 60 35 60 35 60 35 60 35 60 35 60 35 60 35 60 35 60 Number of Units 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Cost Per Unit (excl. Developer Fee) [1] $743,673 $733,397 $743,673 $733,397 $743,673 $733,397 $743,673 $733,39 7 $743,673 $733,397 $743,673 $733,397 $743,673 $733,397 $743,673 $733,3 97 $743,673 $733,397 In-Lieu Fee [2] $0 $0 $0 $0 $0 $0 $48,210 $48,210 $48,210 $48,210 $0 $0 $0 $0 $0 $0 $0 $0 Cost Per Unit $743,673 $733,397 $743,673 $733,397 $743,673 $733,397 $791,883 $781,60 7 $791,883 $781,607 $743,673 $733,397 $743,673 $733,397 $743,673 $733,3 97 $743,673 $733,397 Revenues (Net Operating Income)
Market Rate Units
NOI Per Unit [3] $33,150 $33,150 $33,150 $33,150 $33,150 $33,150 $33,150 $33,150 $33,150 $33,150 $33,150 $33,150 $33,150 $33,150 $33,150 $33,150 $33,150 $33,150 % of Total Units 100% 100% 80% 80% 85% 85% 100% 100% 100% 100% 80% 80% 80% 80% 80% 80% 80% 80% Number of Total Units 100 100 80 80 85 85 100 100 100 100 80 80 80 80 80 80 80 80 110% AMI (Moderate Income)
NOI Per Unit
% of Total Units
Number of Total Units
80% AMI (Low Income)
NOI Per Unit
% of Total Units
Number of Total Units
50% AMI (Very Low Income)
NOI Per Unit
% of Total Units
Number of Total Units
30% AMI (Extremely Low Income)
NOI Per Unit
% of Total Units
Number of Total Units
Weighted Avg. NOI/Unit
$33,150 $33,150 $30,969 $30,969 $31,043 $31,043 $33,150 $33,150 $33,150 $33,150 $30,947 $30,947 $28,550 $28,550 $31,405 $31,405 $30,490 $30,490 Yield on Cost 4.5% 4.5% 4.2% 4.2% 4.2% 4.2% 4.2% 4.2% 4.2% 4.2% 4.2% 4.2% 3.8% 3.9% 4.2% 4.3 %4 . 1 % 4 . 2 % [3] NOI per unit for market‐rate units assumed rents at $4,250/ month, operating costs at 30% of gross income, and 5% vacancy l osses.

Sources: CoStar; Economic & Planning Systems
0%
0 [2] The in‐lieu fee is based on the aggregate subsidy required to produce the number of affordable units prescribed under each of the scenarios that the City wants to explore (Citywide and Overlay Zone). $14,935
0%
0 $5,361
$14,935
0%
0 $5,361
0%
0 In‐Lieu Fee
Based on Overlay Zone
Scenario Requirements
$29,768
0%
0 $29,339
0%
0 In‐Lieu Fee
Based on Citywide
Scenario Requirements
$29,768
0%
0 Citywide Scenario Overlay Zone
$14,935
10%
$14,935

7.0%
$5,361 $5,361
0%
$29,339

7.0%
$14,935
10%
10%
5 107
No Inclusionary
20% Inclusionary ‐ Very
Low, Low, and Moderate
15% Inclusionary ‐ Extremely
Low, Very Low, and Low
20% Inclusionary ‐ Very
Low and Low
$29,768
0%
$29,768
0%
$29,768
6%
0% 5% 7%
$29,339 $29,339 $29,339
4%
$14,935 $14,935 $14,935
10 500
04 10 10
0% 10.0%
$29,768
0%
$29,768
0%5%
$29,768
0 $29,339
0 0
0 $5,361 $5,361
10%
$5,361
0%0%
$29,339
6 7
$29,339
0%
0 Alternative 1 Alternative 2 Alternative 3 Alternative 4 20% Inclusionary ‐ Extremely Low,
Very Low, Low, and Moderate
20% Inclusionary ‐ Extremely
Low and Very Low
20% Inclusionary ‐ Very
Low, Low, and Moderate
$29,768
5%
5 $29,339

5.0%
5 $5,361
5%
5 [1] Development costs for 35 unit/acre "low density" units are consistent with those used in the EPS in‐lieu fee report. For "high‐density" projects at 60 units/acre, construction costs ar e slightly higher due to structured parking but land costs per unit are lower due to greater density, and the net result is a slightly lower total cost $14,935

5.0%
5 0100400
7 0% 0% 4%
$5,361
100

Table A-2 Ownership Inclusionary Sc enario Feasibility Test Results

Assumptions
Unit Type Townhomes Condominium Townhomes Condominium Townhomes Condominium Tow nhomes Condominium Base Density (units/acre) 17 35 17 35 17 35 17 35
Number of Units 100 100 100 100 100 100 100 100
Standard Cost per Unit [1] $1,162,884 $872,753 $1,162,884 $872,753 $1,162,884 $872,753 $1,162,88 4 $872,753 In-Lieu Fee [2] $0 $0 $0 $0 $83,548 $62,673 $0 $0
Cost Per Unit $1,162,884 $872,753 $1,162,884 $872,753 $1,246,432 $935,427 $1,162,88 4 $872,753 Value Per Unit
Market Rate Units
Value Per Unit [3] $1,397,197 $1,017,900 $1,397,197 $1,017,900 $1,397,197 $1,017,900 $1, 397,197 $1,017,900 % of Total Units 100% 100% 80% 80% 100% 100% 85% 85%
Number of Total Units 100 100 80 80 100 100 100 85
110% AMI (Moderate)
Value Per Unit
% of Total Units
Number of Units
Weighted Value/Unit $1,397,197 $1,017,900 $1,299,346 $995,909 $1,397,197 $1,017,900 $1,32 3,809 $1,001,407 Surplus/(Gap) Per Unit $234,313 $145,147 $136,463 $123,156 $150,765 $82,473 $160,925 $128,654 Profit Margin 20% 17% 12% 14% 13% 9% 14% 15%
Sources: Zillow; Economic & Planning Systems
In‐Lieu Fee based on 20%
Moderate
15% Inclusionary ‐
Moderate
[1] Standard Cost per townhome unit is consistent with those assumed in the EPS in‐lieu fee study, but excludes the developer fee because this table is intended to calculate the profit margin that would mirror the developer fee in the in‐lieu fee study. Condominium construction costs are similar but roughly 11% higher than apartment costs per square foot, due to higher levels of finish and increased indirect costs for financing and construction defect insurance. [3] Market‐rate pricing reflects a 1,733 square foot 3BR townhome sold at $806/SqFt and a 1,300 square foot 3BR condominium sold at $783/SqFt. The pricing metrics for both prototypes are consistent with averages for recent attached product in and around Foster City. 0 0%
1502 0
No Inclusionary
20% Inclusionary ‐
Moderate
[2] The in‐lieu fee is based on $48.21 per square foot, consistent with EPS's in‐lieu fee study. $907,946$907,946$907,946 $907,946
15%20% 0%
101
Draft Report
Rental Inclusionary Housing
In-Lieu Fee
Pr
epared for:

City
of Foster City
Pr
epared by:

Ec
onomic & Planning Systems, Inc.

Jan
uary 20, 2022
EPS #211040
Attachment 6
102

Table of Contents
EXECUTIVE SUMMARY ...................................................................................................... 1 METHODOLOGY ............................................................................................................. 2 Maximum Affordable Housing Rents ........................................................................... 2 Affordability Gap Analysis ......................................................................................... 4 In-Lieu Fee Calculations ........................................................................................... 7

List of Tables
Table 1 Summary of In-Lieu Fees for Rental Housing ....................................................... 1 Table 2 San Mateo County’s 2021 Income Limits for 3-Person Households .......................... 2 Table 3 2021 Maximum Supported Rents by Income Category .......................................... 3 Table 4 Affordability Gap Analysis ................................................................................. 6 Table 5 In-Lieu Fee Calculation – Citywide Scenario ........................................................ 7 Table 6 In-Lieu Fee Calculation – Overlay Zone Scenario .................................................. 8

103

Economic & Planning Systems, Inc. 1 Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_Rental In Lieu_012022.docx

EXECUTIVE SUMMARY
Economic & Planning Systems, Inc. (EPS) was hired by the City of Foster City to create new affordable housing fees, including the inclusionary housing in-lieu fee. The City is currently considering a Citywide inclusionary housing ordinance under which 20 percent of units in a rental project would be required to be offered at below-market-rate prices affordable to “very low,” “low,” and “moderate” income households based on income standards established by the State of California’s Department of Housing and Community Development (HCD). The City is also exploring the potential to offer an alternative inclusionary requirement in a specified “overlay zone,” in which 15 percent of units would be required to be affordable at “extremely low,” “very low,” and “low” income levels.

Table 1, below, shows the in-lieu fee calculation results under these two scenarios. As detailed later in this document, the in-lieu fees are based on the aggregate subsidy required to produce the number of affordable units prescribed under each scenario that the City wants to explore for its inclusionary housing ordinance (a “Citywide” standard for 20 affordable units out of each 100 total units in a project, and 15 affordable units out of each 100 total units in a project representing an overlay zone). As shown, the fee associated with the 20 percent inclusionary requirement (very low, low, and moderate income) is calculated to be $75,316 per market-rate unit or $75.32 per square foot of the market-rate units, while the fee associated with the 15 percent inclusionary requirement of the overlay zone (extremely low, very low, and low income) is calculated to be $68,264 or $68.26 per square foot. Adopting fees at these levels would represent the true costs of the City’s inclusionary housing ordinance, as the calculations are based on the costs versus values of units meeting the inclusionary ordinance. As such, fees at this level would represent a generally “cost-neutral” option to developers relative to producing inclusionary units within their projects.

Table 1 Summary of In-Lieu Fees for Rental Housing

Inclusionary Requirement
Fee per
Market-Rate Unit
Fee per
Square Foot [1]
Citywide Scenario (10% Very Low; 5% at Low; and 5% Moderate) $75,316 $75.32 Overlay Zone Scenario (4% Extremely Low; 4% Very Low; and 7% Low) $68,264 $68.26 Source: Economic & Planning Systems, Inc.
[1] Consistent with the affordability gap analysis, an average net unit size is 1,000 square feet is assumed. This area is the average unit size of two bedroom units developed in Foster City recently. 104

Economic & Planning Systems, Inc. 2 Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_Rental In Lieu_012022.docx

METHODOLOGY
Through an affordability gap analysis, this report estimates the subsidy needed to produce rental housing that is affordable to households at specified income levels in the event that developers do not build the units themselves. EPS calculates the in-lieu fee based on the two scenarios for rental housing developments, one which is citywide and the other that is for an overlay zone:
1) Citywide: Providing 10 percent of the units to very low-income households, 5 percent to low- income households, and 5 percent to moderate-income, for a total of 20 percent inclusionary units.
2) Overlay Zone: Providing 4 percent of the units to extremely low-income, 4 percent to very low-income households, and 7 percent to low income, for a total of 15 percent inclusionary units.

Maximum Affordable Housing Rents
The income levels are set for the County of San Mateo by the California Department of Housing and Community Development (HCD) on an annual basis. Table 2 shows the income limits for 2021, which vary by the number of people in the household. The average household in Foster City has 2.66 people according to 2019 Five-Year Estimates from the American Community Survey (ACS). Thus, Table 2 illustrates the income limits for a three-person household, to represent the City’s average household size (rounded). The Area Median Income (AMI) for a family of three in San Mateo County is $134,650 in 2021 as shown below. Please note that the nominal income categories do not necessarily correspond mathematically to the figures set by HCD; for example, “low” income is nominally meant to represent households earning up to 80 percent of median income, but in San Mateo County the maximum income allowed by HCD in this category is nearly 100 percent of median income.

Table 2 San Mateo County’s 2021 Income Limits for 3-Person Households

Income Group and Definition
2021 Maximum Income
3-Person Household
Extremely Low ≤30% AMI $49,350
Very Low >30% to ≤50% AMI $82,250
Low >50% to ≤80% AMI $131,750
Median (Base) >80% to ≤100% AMI $134,650
Moderate >100% AMI to ≤120% AMI $161,550
Source: San Mateo County 2021 Income Limits, California Department Housing and Community Development (HCD).
105
Rental Inclusionary Housing In-Lieu Fee
Draft Report 1/20/2022

Economic & Planning Systems, Inc. 3 Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_Rental In Lieu_012022.docx Consistent with HCD guidelines and direction from City staff, EPS has assumed a three-person household would reside in a two-bedroom unit, and that the households spend 30 percent of their gross annual income on housing costs, including rent and utilities. Then the annual spending on utilities is subtracted from the annual spending on housing to determine the maximum rent that a household can pay, as summarized on Table 3 below.

A moderate-income household at 110 percent of median income in a three-bedroom unit can pay up to $3,420 on monthly rent, while a low-income household at 80 percent of median income can pay up to $3,011, a very-low-income household can pay $1,773, and an extremely-low- income household can pay only $951. As shown, EPS estimates that a newly constructed market-rate unit of the same size could achieve monthly rent of $4,250, so each of the affordable rent levels represents a significant discount from current market rates.

Table 3 2021 Maximum Supported Rents by Income Category

Income
Category AMI
Annual HH
Income
(3-Person)
Annual
Spending on
Housing [1]
Annual
Spending on
Utilities [2] Annual Rent Monthly Rent
Extremely Low 30% $49,350 $14,805 $3,396 $11,409 $951
Very Low 50% $82,250 $24,675 $3,396 $21,279 $1,773
Low 80% $131,750 $39,525 $3,396 $36,129 $3,011
Moderate 110% $148,100 $44,430 $3,396 $41,034 $3,420
Market $4,250
[1] Assumes a housing costs to income ratio of 30 percent. Includes rent plus utilities.

Max Rent Assumptions
[2] Assumes annual utility expenditures consistent with the San Mateo County limits for a 2-bedroom unit (assumes use of electricity for heating and cooking). Utility costs effective March 2021.

Source: San Mateo County 2021 Income Limits; San Mateo County Utility Allowance Schedule; and Economic & Planning Systems, Inc.
106
Rental Inclusionary Housing In-Lieu Fee
Draft Report 1/20/2022

Economic & Planning Systems, Inc. 4 Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_Rental In Lieu_012022.docx Affordability Gap Analysis
Product Type
The analysis assumes that the collected in-lieu fees would be used to subsidize the production of lower-income units similar to the type of multifamily construction currently observed in the City.

The assumed prototype reflects multifamily construction at 35 dwelling units to the acre with surface parking. Though projects vary, City staff has confirmed that this product type is representative of multifamily housing developments that are being built in the City and the surrounding region.

California State law (California Health and Safety Code Section 50052.5) assumes that a 2-bedroom unit is occupied by a 3-person household, and this assumption is used in this analysis. Consistent with input from the City, EPS assumes that the typical net square footage of a 2-bedroom rental unit in Foster City will be approximately 1,000 square feet. Applying a “load factor” of 15 percent to account for shared lobbies, hallways, etc., results in gross square footage of 1,150 square feet per unit.

Development Cost Assumptions
Affordable housing development costs include land costs, direct costs (e.g., labor and materials), and indirect or “soft” costs (e.g., architecture, entitlement, marketing, etc.). Data from recent land transactions in and around Foster City have been combined with EPS’s information from various market-rate and affordable housing developers on the Peninsula to estimate appropriate development cost assumptions for use in Foster City. A developer fee is also estimated, and represents the compensation to the developer for their efforts, investment, and risk. These assumptions are shown on Table 4 and indicate that the total cost per unit for rental apartments is about $848,000. By necessity, this figure represents a “prototypical” project; the actual costs for a given project will vary by location and project design characteristics.

Revenue Assumptions
To calculate the values of the affordable units, assumptions must be made regarding the applicable income level and the rents paid based on an appropriate percentage of household income spent on housing costs. In addition, translating these assumptions into unit prices and values requires estimates of operating expenses and capitalization rates. The following assumptions were used in these calculations:
• Income Levels—This analysis estimates the subsidy required to produce units for three- person households at HCD-defined income levels as shown in Table 2. In keeping with the City’s expressed interest for the “Citywide” and “overlay” scenarios, EPS has used income levels ranging from 30 percent of median (“extremely low income”) to 110 percent of median (“moderate income”) and points between.
• Percentage of Gross Household Income Available for Housing Costs—HCD standards on overpaying for rent indicate that households should pay no more than 30 percent of their gross income on housing costs. As previously shown on Table 3, EPS calculated the rents that each income category would be able to pay, after subtracting the households’ monthly expenses for utilities.
107
Rental Inclusionary Housing In-Lieu Fee
Draft Report 1/20/2022

Economic & Planning Systems, Inc. 5 Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_Rental In Lieu_012022.docx • Operating Costs for Rental Units—This analysis assumes that affordable apartment operators incur annual operating costs of $9,000 per unit, which include the cost of management, maintenance, and common utilities (those not paid by tenants) for units that are for households earning up to 80 percent of AMI. These operating costs assumes that all affordable apartments constructed would be exempt from property taxes because they are income-restricted and constructed by non-profit developers. Units that are for moderate- income households are assumed to incur an annual operating cost of 30 percent of annual gross rent revenue, and are not exempt from property taxes.

Affordability Gap Results
Table 4 shows the subsidies required for construction of rental apartments for three-person households at defined moderate -, low-, very low-, and extremely low-income levels. As shown, such units are estimated to cost nearly $850,000 to develop, and the operating income from those units at affordable rents would translate to values well below those development costs. As such, a unit affordable to a moderate income household is expected to require a subsidy of roughly $188,500, while a unit for a low income household requires a subsidy of $199,000, a unit for a very low income household requires a subsidy of $559,000 and a unit for an extremely low income household requires a subsidy of $798,500.
108
Rental Inclusionary Housing In-Lieu Fee
Draft Report 1/20/2022

Economic & Planning Systems, Inc. 6 Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_Rental In Lieu_012022.docx Table 4 Affordability Gap Analysis

Mid-Density Multifamily Apartments with Surface/Deck Parking Extremely Low
Income (30% AMI)
Very Low Income
(50% AMI)
Low Income
(80% AMI)
Moderate Income
(110% AMI)
Development Program Assumptions
Density/Acre 35 35 35 35
Gross Unit Size [1] 1,150 1,150 1,150 1,150
Net Unit Size 1,000 1,000 1,000 1,000
Number of Bedrooms 2 2 2 2
Number of Persons per 2-Bedroom Unit [2] 3 3 3 3
Parking Spaces/Unit 2.25 2.25 2.25 2.25
Cost Assumptions
Land/Acre [3] $7,837,315 $7,837,315 $7,837,315 $7,837,315 Land/Unit $223,923 $223,923 $223,923 $223,923
Direct Costs
Direct Construction Costs/Gross SF [4] $325 $325 $325 $325 Direct Construction Costs/Unit $373,750 $373,750 $373,750 $373,750 Parking Construction Costs/Space $5,000 $5,000 $5,000 $5,000 Parking Construction Costs/Unit $11,250 $11,250 $11,250 $11,250 Subtotal, Direct Costs/Unit $385,000 $385,000 $385,000 $385,000 Indirect Costs as a % of Direct Costs [5] 35% 35% 35% 35% Indirect Costs/Unit $134,750 $134,750 $134,750 $134,750 Developer Fee (% of all costs) 14% 14% 14% 14%
Developer Fee $104,114 $104,114 $104,114 $104,114
Cost w/o Developer Fee $743,673 $743,673 $743,673 $743,673 Total Cost/Unit $847,788 $847,788 $847,788 $847,788
Maximum Supported Home Price
Household Income [6] $49,350 $82,250 $131,750 $148,100
Revenue to Property Owner/Year [7] $11,409 $21,279 $36,129 $41,034 (less) Op. Exp. Losses per Unit/Year ($9,000) ($9,000) ($9,000) ($13,329) (less) Vacancy Losses per Unit/Year ($444) ($740) ($1,186) ($1,333) Net Operating Income $1,965 $11,539 $25,943 $26,372
Capitalization Rate 4.0% 4.0% 4.0% 4.0%
Total Supportable Unit Value [8] $49,121 $288,469 $648,581 $659,303 Affordability Gap ($798,666) ($559,319) ($199,206) ($188,485) [7] Assumes housing costs (e.g., rent and utilities) to be 30% of gross household income. [8] The total supportable unit value is determined by dividing the net operating income by the capitalization rate, provided by C St
Source: CoStar; California Department Housing and Community Development; Economic & Planning Systems, Inc. [1] A load factor of 15% is applied to the net unit size to calculate the gross unit size. [3] Based on CoStar reported land sale transactions in Foster City. [4] Includes costs for contingency and site improvement. [6] Based on 2021 income limits for a three-person household in San Mateo County established by HCD. [2] For this analysis, EPS has assumed an average unit for income-qualified worker households would be 2-bedrooms. State law (Health and Safety Code Section 50052.5) indicates that a 2-bedroom unit should be assumed to be occupied by a 3-person household. [5] Includes costs for architecture and engineering; entitlement and fees; project management; appraisal and market study; marketing, commissions, and general administration; financing and charges; and insurance. These cost estimates are consistent with those used by housing developers in the San Francisco Bay Area.
109
Rental Inclusionary Housing In-Lieu Fee
Draft Report 1/20/2022

Economic & Planning Systems, Inc. 7 Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_Rental In Lieu_012022.docx In -Lieu Fee Calculations
Tables 5 and 6 translate these subsidies into in-lieu fees. In Table 5, the Citywide Scenario, a prototypical 100-unit rental project would be required to provide fees sufficient to subsidize ten very-low-income units, five low-income units, and five moderate-income units, which would jointly cost nearly $17 million to build but would be worth less than $10 million. The difference, of about $7.5 million, representing the subsidy that the 100-unit market-rate project would need to provide via in-lieu fees, translating to a fee of $75.32 per market-rate square foot.

Table 5 In-Lieu Fee Calculation – Citywide Scenario

Similarly, in the second scenario , which is for the housing overlay zone, shown on Table 6, a prototypical 100-unit project would be required to provide fees sufficient to subsidize four extremely-low-income units, four very-low-income units, and seven low-income units, which would jointly cost $12.7 million to build but would only be worth $ 5.9 million total. The difference, $6.8 million, represents the subsidy that the 100-unit market-rate project would need to provide via in- lieu fees, translating to a fee of $68.26 per market-rate square-foot.

Item
Very Low
(50% AMI)
Low (80)
(80% AMI)
Moderate (110)
(110% AMI) Total
per
Affordable
Unit
per
Market-
Rate Unit
per
Market-
Rate
Square-
foot [1]
Units 10 5 5 20 20 100
Value/Unit $288,469 $648,581 $659,303
Total Value $2,884,688 $3,242,906 $3,296,513 $9,424,106 Costs/Unit $847,788 $847,788 $847,788
Total Costs $8,477,876 $4,238,938 $4,238,938 $16,955,751 Subsidy per Unit $559,319 $199,206 $188,485
Total Subsidy Required $5,593,188 $996,032 $942,425 $7,531,645 $376,582 $75,316 $75.32 Source: CoStar; San Mateo County; Economic & Planning Systems, Inc.

In-Lieu FeeIncome Level
[1] Consistent with the affordability gap analysis, an average net unit size is 1,000 square feet is assumed. This area is the average unit size of two bedroom units developed in Foster City recently.
110
Rental Inclusionary Housing In-Lieu Fee
Draft Report 1/20/2022

Economic & Planning Systems, Inc. 8 Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_Rental In Lieu_012022.docx Table 6 In-Lieu Fee Calculation – Overlay Zone Scenario

Item
Extremely Low
(30% AMI)
Very Low
(50% AMI)
Low (80)
(80% AMI) Total
per
Affordable
Unit
per
Market-
Rate Unit
per Market-
Rate Square-
foot [1]
Units 4 4 7 15 15 100
Value/Unit $49,121 $288,469 $648,581
Total Value $196,485 $1,153,875 $4,540,069 $5,890,429
Costs/Unit $847,788 $847,788 $847,788
Total Costs $3,391,150 $3,391,150 $5,934,513 $12,716,813 Subsidy per Unit $798,666 $559,319 $199,206
Total Subsidy Required $3,194,665 $2,237,275 $1,394,444 $6,826,385 $455,092 $68,264 $68.26 Source: CoStar; San Mateo County; Economic & Planning Systems, Inc.

In-Lieu FeeIncome Level
[1] Consistent with the affordability gap analysis, an average net unit size is 1,000 square feet is assumed. This area is the average unit size of two bedroom units developed in Foster City recently. 111
Draft Report
Ownership Inclusionary Housing
In-Lieu Fee
P
repared for:

City
of Foster City
P
repared by:

E
conomic & Planning Systems, Inc.

Ja
nuary 11, 2022
EPS #211040
Attachment 7
112

Economic & Planning Systems, Inc. 1 Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_For-Sale In Lieu_011122.docx Table of Contents
EXECUTIVE SUMMARY .................................................................................................... 2 METHODOLOGY ........................................................................................................... 3 Maximum Affordable Housing Income Levels ............................................................... 3 Affordability Gap Analysis ......................................................................................... 4 In-Lieu Fee Calculations ........................................................................................... 6

List of Tables
Table 1 Summary of In-Lieu Fees for Home-Ownership Projects ........................................ 2 Table 2 San Mateo County 2021 Income Limits for 4-Person Households ............................ 3 Table 4 Affordability Gap Analysis ................................................................................. 5 Table 5 In-Lieu Fee Calculation ..................................................................................... 6

113
Ownership Inclusionary Housing In-Lieu Fee
Draft Report 1/11/2022

Economic & Planning Systems, Inc. 2 Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_For-Sale In Lieu_011122.docx

Table 1, below, shows the in-lieu fee calculation results. As detailed later in this document, the in-lieu fees are based on the aggregate subsidy required to produce the number of affordable units prescribed under the inclusionary housing ordinance (20 affordable units out of each 100 total units in a project). As shown, the fee associated with the 20 percent inclusionary requirement (moderate income) is calculated to be $83,548 per market-rate unit, or $48.21 per square foot of the market-rate homes. Adopting fees at these levels would represent the true costs of the City’s inclusionary housing ordinance, as the calculations are based on the costs versus values of units meeting the inclusionary ordinance. As such, fees at this level would represent a generally “cost-neutral” option to developers relative to producing inclusionary units within their projects.

Table 1 Summary of In-Lieu Fees for Home-Ownership Projects Item
Moderate
(110% AMI) Total
per
Affordable
Unit
per
Market-
Rate Unit
per Market-
Rate Square-
foot [1]
Units 20 20 20 100
Value/Unit $907,946
Total Value $18,158,920 $18,158,920
Costs/Unit $1,325,687
Total Costs $26,513,745 $26,513,745
Subsidy per Unit $417,741
Total Subsidy Required $8,354,825 $8,354,825 $417,741 $83,548 $48.21 Source: CoStar; San Mateo County; Economic & Planning Systems, Inc.

Income Level In-Lieu Fee
[1] Consistent with the affordability gap analysis, an average unit size of 1,733 square feet is assumed. This area is the average unit size of townhomes sold in Foster City over the last five years. 114

Economic & Planning Systems, Inc. 3 Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_For-Sale In Lieu_011122.docx

METHODOLOGY
Through an affordability gap analysis, this report estimates the subsidy needed to produce for- sale housing that is affordable to moderate-income households in the event that developers do not build the units themselves. Under separate covers, EPS has produced an in-lieu fee calculation for rental projects, and a memorandum reflecting comparable jurisdictions and feasibility findings.

Maximum Affordable Housing Income Levels
The City is exploring an inclusionary housing ordinance that would require that for-sale development provide 20 percent of all new units at prices affordable at “moderate” income levels. The income levels are set for the County of San Mateo by the California Department of Housing and Community Development (HCD) on an annual basis. Table 2 shows the income limits for 2021, which vary by the number of people in the household. Based on recent ownership developments and input from City staff, EPS assumed the average unit in a typical for-sale development would be three-bedrooms serving a four-person household. Thus, Table 2 illustrates the income limits for a four-person household for San Mateo County. The Area Median Income for a family of four in San Mateo County is $149,600 in 2021 as shown below. Please note that the nominal income categories do not necessarily correspond mathematically to the figures set by HCD; for example, “low” income is nominally meant to represent households earning up to 80 percent of median income, but in San Mateo County the maximum income allowed by HCD in this category is nearly 100 percent of median income.

Table 2 San Mateo County 2021 Income Limits for 4-Person Households

Income Group and Definition
2021 Maximum Income
4-Person Household
Extremely Low ≤30% AMI $54,800
Very Low >30% to ≤50% AMI $91,350
Low >50% to ≤80% AMI $146,350
Median (Base) >80% to ≤100% AMI $149,600
Moderate >100% AMI to ≤120% AMI $179,500
Source: San Mateo County 2021 Income Limits, California Housing and Community Development (HCD).
115
Ownership Inclusionary Housing In-Lieu Fee
Draft Report 1/11/2022

Economic & Planning Systems, Inc. 4 Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_For-Sale In Lieu_011122.docx Affordability Gap Analysis
Product Type
The analysis assumes that moderate-income households would be housed in affordable units similar to the type of ownership construction currently observed in the City. The assumed prototype reflects townhome construction at 17 dwelling units to the acre, which City staff has confirmed as a representative prototype of housing developments they expect to be built.

California State law (California Health and Safety Code Section 50052.5) assumes that a 3-bedroom unit is occupied by a 4-person household, and this assumption is used in this analysis. Consistent with input from the City and data gathered from Zillow and other online sources regarding recently constructed projects, EPS assumes that the typical unit size is 1,733 square feet.

Development Cost Assumptions
Affordable housing development costs include land costs, direct costs (e.g., labor and materials), and indirect or “soft” costs (e.g., architecture and engineering, entitlement, marketing, etc.). In addition, a developer must achieve a profit margin in order to justify their investment and risk.

Data from recent developments and recent land transactions within Foster City have been combined with EPS’s information from various market-rate and affordable housing developers on the Peninsula to estimate appropriate development cost assumptions for use in Foster City.

These assumptions are shown on Table 4 and indicate that the total cost per unit for a for-sale townhome is about $1.3 million. By necessity, this figure represents a “prototypical” project; the actual costs for a given project will vary by location and project design characteristics.

Revenue Assumptions
To calculate the values of the affordable units, assumptions must be made regarding the applicable income level and the percentage of household income spent on housing costs. The following assumptions were used in these calculations:
• Income Levels— This analysis estimates the subsidy required to produce units for four-person households at HCD-defined income levels as shown in Table 2. As is customary among jurisdictions that require moderate-income ownership units, EPS has calculated the affordable price assuming the household earns 110 percent of median income, though the nominal “moderate income” category could reach as high as 120 percent of median income.

This assumption parallels State law regarding the use of density bonuses for moderate income households, and reflects the idea that the units should not be affordable only to those households earning literally the maximum figure allowed in the income category. • Percentage of Gross Household Income Available for Housing Costs—HCD standards on overpaying for housing indicate that moderate income households should pay no more than 35 percent of their gross income on housing costs.
• Housing Costs Included for For-Sale Units—Ownership housin g costs include mortgage principal and interest, plus estimates of annual Homeowners Association (HOA) fees and insurance costs, estimated private mortgage insurance payments, and property taxes. The analysis assumes a 30-year fixed mortgage with a 3.5 percent effective interest rate, plus a 10 percent down payment from the homebuyer.
116
Ownership Inclusionary Housing In-Lieu Fee
Draft Report 1/11/2022

Economic & Planning Systems, Inc. 5 Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_For-Sale In Lieu_011122.docx Affordability Gap Results
Table 4 shows the subsidies required for construction of townhome units for four-person households earning 110 percent of median income. As shown, such households would earn $164,550 annually and could afford to pay up to roughly $908,000 for a home. However, such homes are estimated to cost over $1.3 million to develop, thus requiring a subsidy of $418,000.

Table 3 Affordability Gap Analysis

Item Moderate Income
(110% AMI)
Development Program Assumptions
Density/Acre 17
Net Unit Size 1,733
Number of Bedrooms per Unit 3
Number of Persons per Unit [1] 4
Cost Assumptions
Land/Acre [2] $7,837,315
Land/Unit $461,019
Direct Costs
Direct Construction Costs/Gross SF [3] $300
Direct Construction Costs/Unit $519,900
Parking Construction Costs/Space Included
Parking Construction Costs/Unit Included
Subtotal, Direct Costs/Unit $519,900
Indirect Costs as a % of Direct Costs [4] 35%
Indirect Costs/Unit $181,965
Developer Fee (% of all costs) 14%
Developer Fee $162,804
Cost w/o Developer Fee $1,162,884
Total Cost/Unit (rounded) $1,325,687
Maximum Supported Home Price
Household Income [5] $164,550
Monthly Payments [6] $4,799
Mortgage Terms
Insurance $125
Taxes $755
HOA $250
Down Payment 10%
Interest Rate 0.29%
Loan Term (months) 360
Sales Price [7] $907,946
Affordability Gap ($417,741)
Townhomes
[7] Based on the assumed housing costs and present values given the mortgage terms. [1] For this analysis, EPS has assumed an average unit for income-qualified worker households would be 3-bedrooms. State law (Health and Safety Code Section 50052.5) indicates that a 3-bedroom unit should be assumed to be occupied by a 4-person household. [2] Based on CoStar reported land sale transactions in Foster City. [3] Includes costs for parking, contingency, and site improvement. [4] Includes costs for architecture and engineering; entitlement and fees; project management; appraisal and market study; marketing, commissions, and general administration; financing and charges; and insurance. [5] Based on 2021 income limits for a four-person household in San Mateo County. [6] Assumes housing costs (e.g., mortgage payments and utilities) to be 35% of gross household income for Moderate incomes.

Source: CoStar; California Department Housing and Community Development; Economic & Planning Systems, Inc. 117
Ownership Inclusionary Housing In-Lieu Fee
Draft Report 1/11/2022

Economic & Planning Systems, Inc. 6 Z:\Shared\Projects\Oakland\211000s\211040_FosterCity\deliverable\Affordable Housing\211040_For-Sale In Lieu_011122.docx In -Lieu Fee Calculations
Table 5 then translates these subsidies into in-lieu fees. A prototypical 100-unit ownership project would be required to provide fees sufficient to subsidize 20 moderate (110) income units, which would cost $26.5 million to build but would only be worth $18 million total or about $908,000 per affordable unit. The difference, roughly $8.35 million, represents the subsidy that the 100-unit market-rate project would need to provide via in-lieu fees, translating to a fee of $83,548 per market-rate unit or $48.21 per market-rate square-foot.

Table 4 In-Lieu Fee Calculation

While it is useful to think of the total in-lieu fee as it may apply to each market-rate unit, it is also useful to know the fee per affordable unit, as some projects will be required to provide a certain number of units but may be allowed to meet any fractional obligation through payment of a fee. For example, under the current inclusionary housing ordinance, which requires 20 percent inclusionary units, a 117-unit project would be required to provide 23.4 affordable units. If 23 units are provided on site, the additional 0.4-unit requirement could be met by charging a fee of

0.4 times the $417,741 per affordable unit fee, or a total payment of $167,096.

Item
Moderate
(110% AMI) Total
per
Affordable
Unit
per
Market-
Rate Unit
per Market-
Rate Square-
foot [1]
Units 20 20 20 100
Value/Unit $907,946
Total Value $18,158,920 $18,158,920
Costs/Unit $1,325,687
Total Costs $26,513,745 $26,513,745
Subsidy per Unit $417,741
Total Subsidy Required $8,354,825 $8,354,825 $417,741 $83,548 $48.21 Source: CoStar; San Mateo County; Economic & Planning Systems, Inc.

REGULAR MEETING OF THE FOSTER CITY PLANNING COMMISSION

M I N U T
E S
FEBRUARY 3, 2022

1. CALL TO ORDER
At 7:00 p.m. by Chairman Wykoff
Pursuant to the provisions of Government Code Section 54953 (as amended by AB 361) which authorizes teleconferenced meetings under the Brown Act d uring certain proclaimed states of emergency, this meeting was held as a teleconference/videoconference meeting.

2. ROLL CALL

Present: Commissioners Adams, Bronitsky, Haddad, Jagtiani and Chairman Wykoff
Staff Present: Marlene Subhashini, Community Development Direct or; Leslie Carmichael, Consultant Planner; Darin Smith, Economic & Planning Systems, Inc.; Michael Biddle, Attorney representing City – Burke, Williams & Sorenson, LLP

3. COMMUNICATIONS FROM THE PUBLIC

1. None

4. CONSENT CALENDAR

1. MINUTES OF JANUARY 20, 2022 REGULAR MEETING
ACTION: Motion by Commissioner Bronitsky, seconded by Commissio ner Jagtiani to approve the Minutes of January 20, 2022 Regular Meeting, carried by roll call vote, passed 5-0-0-0

2. MINUTES OF JANUARY 25, 2022 SPECIAL MEETING
ACTION: Motion by Commissioner Jagtiani, seconded by Commissioner Adams to approve the Minutes of January 25, 2022 Special Meeting, carried by roll call vote, passed 4-0-1-0 (Abstain: Bronitsky)

5. CONTINUED PUBLIC HEARING

1. None

6. NEW PUBLIC HEARING
1 . AMENDMENT TO THE FOSTER CITY MUNICIPAL CODE TO ADD A NEW CHA PTER

17.90, BELOW MARKET RATE INCLUSIONARY HOUSING PROGRAM, TO TITLE 17,

ZONING,
TO ESTABLISH STANDARDS TO IMPLEMENT THE CITY’S EXISTING

INCLUSIONARY HOUSING POLICY REQUIRING BELOW MARKET RATE HOUSING IN NEW HOUSING DEVELOPMENTS – CITYWIDE – RZ2021-0004
Attachment 8
119

PLANNING COMMISSION MINUTES FEBRUARY 3, 2022

2. AMENDMENT TO THE FOSTER CITY MUNICIPAL CODE TO ADD A NEW CHA PTER

17.92, AFFORDABLE HOUSING OVERLAY COMBINING DISTRICT, TO TITLE 17,

ZONING, TO CREATE AN AFFORDABLE HOUSING OVERLAY COMBINING

DISTRICT AS DIRECTED BY THE HOUSING ELEMENT OF THE GENERAL PLAN, TO

BE APPLIED TO SPECIFIC APARTMENT DEVELOPMENTS IN ORDER TO FACILITATE THE PROVISION OF AFFORDABLE HOUSING. THE SPECIFIC

APARTMENT DEVELOPMENTS UNDER CONS IDERATION FOR APPLICATION OF

THE NEW AFFORDABLE HOUSING OVERLAY COMBINING DISTRICT ARE LISTE D BELOW – CITYWIDE – RZ2019-0001 & RZ2020-0001

 BEACH COVE APARTMENTS, 605-1021 CA TAMARAN STREET, APNS: 094-32 0- 040 & 094-330-010
 FRANCISCAN APARTMENTS, 888 FOSTER CITY BOULEVARD, APN: 094-091 - 030
 SAND COVE APARTMENTS, 707-939 SHELL BOULEVARD, APN: 094-470-16 0  SHADOW COVE APARTMENTS, 1019-1087 FOSTER CITY BOULEVARD, APN:
094-312-780
 THE LAGOONS APARTMENTS (FORMERLY PART OF SAND COVE), 611-899 BOUNTY DRIVE, APN 094-472-010
 LANTERN COVE APARTMENTS, 244 RO CK HARBOR LANE, APNS: 097-160-1 10 & 120
 SCHOONER BAY APARTMENTS, TIMBERHEAD LANE, HALYARD LANE,

STANCHION LANE, MASTHEAD LANE, QUADRANT LANE, CUTWATER LANE, JIBSTAY LANE, BOBSTAY LANE, WINDLASS LANE, PINRAIL LANE, APNS: 097- 140-070 & 080; 097-150-020, 030, 050, 110, & 120

Planning Commission comments:

 One Commissioner asked if the 20% would be enough to meet the housing demand for Foster City. Staff responded that the 20% inclusionary requirem ent itself does not meet RHNA but that meeting RHNA is based on actual construction of u nits. Staff added that the 20% is on the higher side of what jurisdictions typically r equire which is 15%.

However, any units produced would count toward the RHNA.  One Commissioner asked if the AHO is more distributed with the addition of the two sites in the southern end of the City. Staff responded that the S t a t e r e v i e w o f t h e Housing Element will be looking for distribution of sites in co mpliance with the State requirements to Affirmatively Further Fair Housing (AFFH).  One Commissioner mentioned the El Torito feasibility study tha t estimated a yield on cost for a housing development as 3.94% and asked about the eco nomically feasibility and cutoff. EPS consultant replied that anything below 4.0% is not likely to get financed.

The 4.2% is what EPS considers to be the minimum to be feasible.  One Commissioner stated that it’s not the Planning Commission’ s job to be concerned about developer profits, but asked if the 4.2% takes into consi deration the cost of prevailing wages, impact fees, potential prime rate increases, etc. Would setting a tough standard lead to inferior construction? EPS consultant replied that there is a limit on what a project can absorb. If you added other requirements, lik e impact fees or labor agreements, that could have an impact. One way it could play ou t is that they would pay less for land. He added that there’s a limit to the aggregate effect of all the requirements.  One Commissioner asked about the CoStar data point of 3.3% cap rate for properties sold and if that is for stabilized apartment buildings or somet hing that a developer would build. He asked if the buffer was enough. EPS consultant replie d that the 3.3% cap rate is for stabilized properties. The 4.2% represents a reasonable spread, i.e., a 27% profit margin.
120

PLANNING COMMISSION MINUTES FEBRUARY 3, 2022
 One Commissioner asked if the analysis included both developme nt on vacant land and redeveloping existing properties. EPS consultant responded that the analysis assumed the purchase price for “free and clear” land, i.e., developable land. The issue of redevelopment can go both ways – you may have a property that i s finished with its useful life; on the other hand if the property has existing cas h flow, it may be hard to make that up. Plus, if redeveloping properties with tenants, th ere’s a requirement in State law to maintain the affordability of those units. Every property is different.  One Commissioner asked about prevailing wage rates and project labor agreements.

Staff responded that some forms of public funding require preva iling wage requirements, such as many types of funding for affordable housing. Some deve lopment agreements have included wage agreements. If the City were to build housin g, it would also be subject to prevailing wage.
 One Commissioner stated that there was a policy for some previ ous projects that required prevailing wage and a preference for local hiring.

The Public Hearing was opened. The following public comments were received.

 Kalisha Webster, housing advocate for people with developmenta l disabilities, pointed out that the City cannot meet the RHNA with only inclusionary h ousing. The City should do more to encourage 100% affordable housing. She supports requ iring a range of affordability levels. It’s not clear what would incentivize dev elopers to choose to use the AHO. The City should consider additional incentives. The extrem ely low-income category is important to target because they are at the greates t risk of displacement or homelessness. There’s no data on the number of protected units to support the recommendation to apply the inclusionary requirement to net new units.  ChimChune Ko, Beach Cove Apartments, spoke in favor of the pro posed amendments.

The City should consider additional policies to increase housin g opportunities in Foster City, both affordable and market rate.
 Susmith Mukund, Isle Cove, asked if the Commission is consider ing the impact on egress points, impacts on wildlife, and if studies have been do ne on liquefaction. One of the Commissioners responded that there are liquefaction studies going back to the 80s, the City Council is addressing the geese problem, environmental impact reports are required on any project that takes place. The Commissioner remi nded the speaker that the meeting was regarding the proposed ordinances and asked tha t the resident reach out to City staff who can provide the results of the studies.

The Public Hearing was closed and discussion ensued.

 One Commissioner asked about projects with 5 to 9 units having a c h o i c e o f o n - s i t e units or pay in-lieu fees – he recommended a lower in-lieu fee or a lower percentage of requirement because smaller projects are harder to pencil out. On rounding up of fractions, he noted that it would be harder for smaller project s. The 3.3% cap rate for existing stabilized units may not work for a new construction e ven though there’s a buffer, because of today’s uncertainties, the 4.2% may not be f easible and should be looked at again. On the 45-year term for ownership units, there should be some sort of profit-sharing arrangement. The State should contribute as well by possibly reducing property taxes for affordable units.
 One Commissioner commented that Ms. Webster’s comments are mor e appropriate to the upcoming meeting on the Housing Element on March 2. Also Mr . Ko’s concerns regarding affordable housing would be appropriate then. The AHO proposal to not increase the density but to require lower income units in new d evelopments is a good thing to do.
121

PLANNING COMMISSION MINUTES FEBRUARY 3, 2022
 One Commissioner commented that it’s important to note that th e actions regarding affordability levels aren’t increasing the density. Regarding displacement, there are State laws but also the City Council could consider policies to incre ase protection. On the inclusion of the two southern sites for the AHO, he noted that it helps to distribute affordable housing throughout the City.
 One Commissioner commented that he is concerned about the 4.2% . On the inclusion of Lantern Cove and Schooner Bay, they are far from transit and co mmercial development.

They are a newer design and don’t agree they should be changed.  One Commissioner asked to review the emailed comments from Pro metheus. These were read by staff.
o Rental term – the Commissioner stated he prefers 99 years to 5 5 years o Minimum time to rebuild after a fire or calamity – the Commiss ioner stated that it may be better to tie the minimum time in the Housing Accountabi lity Act (HAA) into the ordinance.
o Guidelines consistent with pertinent State and Federal statues – may want to reference regulations.
 One Commissioner stated he agrees and asked what the minimum t imeframe for rebuilding is under the HAA. The City Attorney replied that the ordinance could reference the minimum in the HAA.
 One Commissioner asked if one year is adequate to begin rebuil ding? Staff responded that it’s difficult to estimate. The availability of materials and labor can be an issue. It’s hard to know all the factors; some disasters cause insurance and infrastructure issues.

ACTION: Motion by Commissioner Bronitsky, seconded by Commissio ner Adams, to Adopt Resolution No. P-01-22, recommending City Council adoption of a n Ordinance adding Chapter

17.90, Below Market Rate Inclusionary Housing Program including the edits recommended by staff on 2/3/22, including the language to tie the timeframe fo r rebuilding destroyed housing to the HAA with the applicant having the right to show good cause for an extension, to Title 17, Zoning, of the Foster City Municipal Code, carried by roll call vote, passed 4-1-0-0 (Noes:

Chairman Wykoff)

ACTION: Motion by Commissioner Bronitsky, seconded by Commissio ner Adams, to Adopt Resolution No. P-02-22, recommending City Council adoption of a n Ordinance adding Chapter

17.92, Affordable Housing Overlay Combining District, to Title 17, Zoning, of the Foster City Municipal Code, carried by roll call vote, passed 4-1-0-0 (Noes: Chairman Wykoff)

ACTION: Motion by Commissioner Bronitsky, seconded by Commissio ner Haddad, to Adopt Resolution No. P-03-22, recommending City Council adoption of a n Ordinance amending the Foster City Zoning Map to Zone Certain Properties with the Affo rdable Housing Overlay Combining District, as listed below, carried by roll call vote, passed 4-1-0-0 (Noes: Chairman Wykoff)

 Beach Cove Apartments, 605-1021 Catamaran Street, APNs 094-320 -040 & 094- 330-010
 Franciscan Apartments, 888 Foster City Boulevard, APN 094-091- 020  Sand Cove Apartments, 707-939 Shell Boulevard, APN 094-470-160  Shadow Cove Apartments, 1019-1087 Foster City Boulevard, APN 0 94-312-780  The Lagoons Apartments, 611-899 Bounty Drive, APN 094-472-010  Lantern Cove Apartments, 244 Rock Harbor Lane, APNs 097-160-11 0 & 120  Schooner Bay Apartments, Timberhead Lane, Halyard Lane, Stanch ion Lane, Masthead Lane, Quadrant Lane, Cutwater Lane, Jibstay Lane, Bobs tay Lane, Windlass Lane, Pinrail Lane, APNs 097-140-070 & 080; 097-150-020, 030, 050, 110, & 120
122

PLANNING COMMISSION MINUTES FEBRUARY 3, 2022

7. OLD BUSINESS

1. None

8. NEW BUSINESS

1. None

9. STUDY SESSION

1. None

10. COMMUNITY DEVELOPMENT DEPARTMENT DIRECTOR REPORT

1. The Director thanked the Commissioners for taking the time t o review the staff reports and understand and digest all the information that was presente d. The Director also mentioned the Joint Planning Commission and City Council meetin g tentatively scheduled on March 2nd. Planning Commission will be participating virtually and the City Council may choose to participate in the Chambers as they have been doing for the Council meetings.

11. STATEMENTS AND REQUESTS FROM THE COMMISSIONERS

1. Commissioners Adams thanked the staff for the wonderful prep and spending all that time with them. He also mentioned the upcoming Traffic Review C ommittee meeting going to City Council with some red curb on Leo Court and that the new school is finally getting some green bike lanes.

2. Chairman Wykoff thanked all of the staff and consultants for a great comprehensive report and appreciated all the efforts in explaining various issues.

12. ADJOURNMENT

Adjourned at 8:43 pm to February 17, 2022 Regular Meeting.

123

PLANNING COMMISSION MINUTES FEBRUARY 3, 2022
PASSED AND ADOPTED by the Planni ng Commission of the City of F oster City at a Regular Meeting thereof held on February 17, 2022 by the following vote:

AYES, COMMISSIONERS:

NOES, COMMISSIONERS:

ABSTAIN, COMMISSIONERS:

ABSENT, COMMISSIONERS:

__________________________
RICK D. WYKOFF, CHAIRMAN

ATTEST:

________________________________

MARLENE SUBHASHINI, SECRETARY

124
DATE: FEB. 3, 2022 STAFF REPORT AGENDA ITEM NO 6.1 & 6.2 TO: FOSTER CITY PLANNING COMMISSION
PREPARED BY: LESLIE CARMICHAEL, CONSULTING PLANNER
CASE NO.: RZ2021-0004 (BELOW MARKET RATE INCLUSIONARY

HOUSING PROGRAM)
RZ2019-0001 (AFFORDABLE HOUSING OVERLAY COMBINING

DISTRICT)
RZ2020-0001 (ZONING OF HOUSING SITES WITH

AFFORDABLE HOUSING OVERLAY COMBINING DISTRICT)
PROJECT LOCATION: CITYWIDE

REQUESTED ACTION/PURPOSE
The purpose of this Public Hearing is for the Planning Commission to review and consider the approval of three resolutions recommending the City Council adopt ordinances related to below market rate housing as follows:
1) An ordinance adding Chapter 17.90, Below Market Rate Inclusionary Housing Program; 2) An ordinance adding Chapter 17.92, Affordable Housing Overlay Combining District; and 3) An ordinance amending the zoning map to zone the following housing sites with in the Affordable Housing Overlay Combining District:
a. Beach Cove Apartments, 605-1021 Catamaran Street, APNs 094-320-040 & 094- 330-010
b. Franciscan Apartments, 888 Foster City Boulevard, APN 094-091-020 c. Sand Cove Apartments, 707-939 Shell Boulevard, APN 094-470-160 d. Shadow Cove Apartments, 1019-1087 Foster City Boulevard, APN 094-312-780 e. The Lagoons Apartments, 611-899 Bounty Drive, APN 094-472-010 f. Lantern Cove Apartments, 244 Rock Harbor Lane, APNs 097-160-110 & 120 g. Schooner Bay Apartments, Timberhead Lane, Halyard Lane, Stanchion Lane, Masthead Lane, Quadrant Lane, Cutwater Lane, Jibstay Lane, Bobstay Lane, Windlass Lane, Pinrail Lane, APNs 097 -140-070 & 080; 097 -150-020, 030, 050, 110, & 120

ENVIRONMENTAL REVIEW
The adoption of the proposed ordinances is exempt from the California Environmental Quality Act (CEQA) as they are not considered a ‘project’ under Public Resources Code Section 21065 and CEQA Guidelines Section 15378 as the ordinances will not result in a direct physical change in the environment or a reasonably foreseeable indir ect physical change in the environment. In addition, even if the adoption of the ordinances were considered a “project” under CEQA, pursuant to CEQA Guidelines Section 15061(b)(3), the proposed ordinances are covered by the common sense exemption providing that CEQA only applies to projects which have the potential for causing a significant effect on the environment and where, as is the case with the adoption of Attachment 9
125

these proposed ordinances, it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA.

BACKGROUND

The proposed ordinances are necessary to implement policies and programs contained in the existing Housing Element. Foster City’s current Housing Element 2015-23 was adopted on February 2, 2015. The Housing Element plays a critical role in identifying and addressing housing needs, which maintain the "balance" that exists in the types, tenure and affordability of housing in the City. The Housing Element also establishes programs to maintain and protect existing housing and community character.

The current Housing Element includes policies and programs to address affordable housing needs, including the establishment of the Affordable Housing Overlay (AHO) Combining District, the application of the AHO Combining District to specific sites, and the formal implementation of the City’s Inclusionary Housing Poli cy. State law requires the City to implement its Housing Element and to adopt programs to meet its obligations within certain timeframes.

Previous meetings have considered the background information provided on these programs, including:
• September 21, 2020, a Joint Planning Commission and City Council Study Session was held to provide an overview of the local and regional h ousing framework including an overview of Housing Program Implementation Efforts. (See pages 9-11 Staff Report dated September 21, 2020.)
• May 3, 2021, the City Council adopted Resolutions of Intention for the Housing Element Implementation Programs contained in the Housing Element for 2015 -2023. (See Staff Report to the City Council dated May 3, 2021.)
• July 15, 2021, a Planning Commission Study Session was held to consider background information on the Inclusionary Ordinance and AHO and provide initial feedback to staff regarding options to be researched/considered, factors to be analyzed, and community engagement. (See Staff Report to the Planning Commission dated July 15, 2021 and Attachment 8, Minutes of the July 15, 2021 Planning Commission Regular Meeting.) • October 21, 2021, a second Planning Commission Study Session was held to consider and receive feedback on the draft Ordinances Chapters 17.90, Requirements for Below Market Rate Dwelling Units, and Chapter 17.92, Affordable Housing Overlay. (See Staff Report to the Planning Commission dated October 21, 2021 and Attachment 7, Planning Commission Minutes dated October 21, 2021.)

A summary of the feedback received at the October 21, 2021 Study Session and responses is as follows:
• Redevelopment of existing units could impact the quality of life for existing tenants , including displacement.
o The quality of the living environment can be addressed through objective design standards (in progress) such as open space requirements, amenities, and minimum unit sizes.
o Displacement impacts are addressed by State law regarding replacement units , relocation benefits, and other tenant protections.
o Providing more housing near work locations could positively impact quality of life by reducing commute times.
126

• There is a need for a holistic discussion on how to address housing issues with representatives of all affected groups to work together on potential solutions. o Discussion of the broader range of housing issues with affected groups is part of the Housing Element Update , including community meetings and on -line engagement.
• Inclusionary requirements should be applied to “new” and not “net new” units. o Staff has provided additional analysis later in this staff report regarding State law requirements for replacement units that protect the units that are occupied by very low- and low-income households, even if the units are not currently subject to deed restrictions. As a result, staff recommends that the inclusionary requirements apply to “net new” units but that replacement units may not also count as part of the required inclusionary units.
• There should be an analysis of constructions cost s and fees to understand how the fee would impact smaller projects.
o The analysis by EPS includes construction costs (Attachments 4, 5, and 6) . The analysis includes modeling financial feasibility for several prototype developments, focusing on the types of developments that are more likely in Foster City. In order to address financial feasibility of smaller projects, s taff recommends exempting projects of four (4) or fewer units and providing projects of five (5) to nine (9) units with the option to pay in-lieu fees.
• We don’t want an overreliance on fees.
o Staff has recommended the in-lieu fee option for projects of five (5) to nine (9) units and for larger projects only if required findings are made. • One of the Commissioners asked why vacant properties were not included. o Certain sites were already identified in the Housing Element and the Resolution of Intention identified by the City Council. Additional sites can be included as part of the next Housing Element Update.
• Kalisha Webster o f Housing Choices spoke on behalf of people with development al disabilities: 1) the City lacks affordable housing; 2) other cities are requesting a portion of affordable units be set aside/prioritized for disabled people; 3) developmentally disabled people often need on -site supportive servi ces; 4) the City should incentivize supportive housing by allowing higher densities than density bonus as an incentive ; and 5) support the 99-year term on rental affordability.
o The City will be addressing special housing needs as part of the Housing Element Update.

Following the October 21, 2021 Planning Commission meeting, the City hired Economic & Planning Systems (EPS) to assist the City with analyzing the financial feasibility of inclusionary housing requirements (they are also analyzing potential development impact fees). EPS has used market data and cost information from interviews with regionally active developers and analyzed the economics of rental and for-sale housing in the area in order to assist with analyzing various scenarios of inclusionary requirements and the economic feasibility of each of these scenarios.

This information is presented and discussed in the Analysis section of this report.

NOTICING/PUBLIC OUTREACH

The public was advised of this Public Hearing in the following ways:
▪ Ad in the Foster City Islander – January 19, 2022
▪ Electronic mailing to the project applicants, owners and persons who expressed interest in receiving project updates – January 13, 2022
▪ Mailing to property owners who own property within a 500-foot radius – January 20, 2022 127

▪ Foster City Website: www.fostercity.org – January 13, 2022 ▪ Foster City webpage on Inclusionary and AHO – updated January 25, 2022 ▪ Foster City TV Channel 27 – January 13, 2022
▪ Electronic Marquee Sign in Leo Ryan Park – January 20, 2022- February 3, 2022 ▪ Public Posting Places – January 13, 2022
▪ Staking on the properties – January 20, 2022

ANALYSIS

BELOW MARKET RATE INCLUSIONARY HOUSING PROGRAM

Inclusionary housing policies and programs require a certain percentage of Below Market Rate (BMR) units to be included in new or rehabilitated housing developments. Foster City has had an inclusionary housing policy in the Housing Element since 2001 ; however, the City has not adopted an ordinance to formally implement the policy . State law allows cities to impose inclusionary requirements by ordinance. The proposed ordinance adding the Below Market Rate Inclusionary Housing Program to the Foster City Municipal Code will implement the inclusionary policy with clear, objective requirements that apply city -wide, instead of the current practice of separately negotiating the specific parameters for each development which c an lead to inconsistent results.

Summary of Key Provisions

A summary of the key recommendations including changes since the October 21, 202 1 Study Session are listed below in Table 1 and explained in further detail in the following sections:

Table 1: Summary of Key Recommendations
Item Recommendation
Inclusionary Rental
Housing Percentages
10% very low -income, 5% low -income, 5% moderate -income (10/21/21: 7% very low -income, 7% low -income, 6% moderate - income)
Inclusionary For-Sale
Housing Percentages
20% moderate -income (10/21/21: 7% very low -income, 7% low - income, 6% moderate-income)
New vs Net new Inclusionary requirement to be applied to “net new” units (instead of all new units including replacement units); any BMR units provided as replacement units may not be “double counted” as inclusionary units (no recommendation in 10/21/21 staff report)
Exemptions Accessory Dwelling Units (ADUs) and developments of four (4) or fewer units to be exempt from the inclusionary requirements. Other exemptions as required by law are added. (10/21/21: recommended ADUs be exempt)
Projects of 5 to 9 Units Residential developments of five (5) to nine (9) net new units would be allowed to provide on-site units or pay an in-lieu fee.

Projects of 10 or More
Units
All residential development projects of ten (10) units or more net new units be required to provide on -site inclusionary units, although per State law, the City is required to provide options for alternative means of compliance.

Rounding Fractions 0.5 or greater shall be rounded up to provide an additional unit; fractions less than 0.5 shall pay a prorated fractional fee Term of Affordability For-Sale: 45 years with a new 45-year term upon each resale; Rental:
99 years unless shorter is necessary to obtain financing ; Rental 128

Item Recommendation
replacement units would also be subject to a 99 year term (99 years recommended for additional study in 10/21/21 staff report) Alternative: Payment of
In-Lieu Fee
Only allowed if all findings can be made:
• Fee is adequate to cover cost of units at another location based on an affordability gap analysis
• Project location doesn’t have sufficient land area for on -site units
• There are adequate locations in the City that are available and there are funds in sufficient am ount and timing to finance acquisition
• Purposes of the Chapter would be better served
• Fee would be paid upon first building permit
Alternative: Off-site
Construction
Only allowed if all findings can be made:
• Off-site location is within City and suitable
• Off-site location has necessary infrastructure
• Off-site BMR units are in addition to any BMR units otherwise required
• Construction of off -site units has not commenced before approval of the on -site project and won’t contribute to residential segregation by income level
• Off-site units would provide at least same quantity and affordability levels; any off -site rentals to satisfy for -sale requirements would be at rental affordability levels
• Would comply with all other parts of the Chapter
• The purposes of the Chapter would be better served
Alternative: Conversion
of Off-Site Units or Non-
Residential Buildings to
Off-Site BMR Units
Only allowed if all findings can be made:
• Same findings as for off-site construction
• Off-site BMR units are in addition to any replacement units otherwise required
Alternative: On-Site
Clustering
Only allowed if all findings can be made:
• Clustering is necessary to access and secure financing • Construction will occur concurrently with market rate units • Clustering will not contribute to residential segregation by income level
• The purposes of the Chapter would be better served
Alternative: Donation of
Land
Only allowed if all findings can be made:
• Land is within the City, owned or under contract by Developer, suitable for development
• Land has necessary infrastructure
• Fair market value of the land equals or exceeds the value of the on-site BMR unit otherwise required
• Land is not contaminated
• The purposes of the Chapter would be better served

129

Housing Affordability

The need for more housing that is affordable to all economic segments of the communit y is well documented. The Staff Report to the Planning Commission on October 21, 2021 included information from that report on the number of cost -burdened households, as shown in Table 2, below (updated with a newer data release). The total number of Foster City households earning less than median income that are paying more than 30% of their income on housing (cost - burdened) and more than 50% of their income on housing (extremely cost -burdened) is approximately 2,950. For the numbers of cost burdened and extremely cost burdened households making less than the median income, as shown in Table 2 below, to not be cost burdened, there would need to be 785 units for extremely low-income households; 635 units for very low -income households, 815 units for low -income households, and 715 units for moderate-income households. Without an inclusionary requirement, few if any of the needed BMR units would be provided.

Table 2: Cost Burden by Income Level for Occupied Housing Units: Foster City (2014- 2018)
Income Group Column A:

Not Cost
Burdened
0%-30% of
Income Used
for Housing
Column B:

Cost
Burdened
30%-50% of
Income
Used for
Housing
Column C:

Extremely
Cost
Burdened
50%+ of
Income Used
for Housing
Column B+C:

Units Needed to
Address Cost
Burdened and
Extremely Cost
Burdened for
Households
Making Less
Than Median
Income
0%-30% of AMI
(Extremely low-income)
160

80 705 785
31%-50% of AMI
(Very low-income)
295 220 415 635
51%-80% of AMI
(Low-income)
415 435 380 815
81%-100% of AMI
(Moderate-income)
280

570 145 715
Greater than 100% of
AMI
(Moderate and Above
moderate-income;
Moderate is typically 80-
120% of AMI
7,380 1,060 65 0
Totals 8,530 2,365 2,010 2,950
Notes:
-Cost burden is the ratio of housing costs to household income. For renters, housing cost is gross rent (contract rent plus utilities). For owners, housing cost is "select monthly owner costs", which includes mortgage payment, utilities, association fees, insurance, and real estate taxes. HUD defines cost-burdened households as those whose monthly housing costs exceed 30% of monthly income, while severely cost -burdened households are those whose monthly housing costs exceed 50% of monthly income.
-Income groups are based on HUD calculations f or Area Median Income (AMI). HUD calculates the AMI for different metropolitan areas, and the nine county Bay Area includes the following metropolitan areas: Napa Metro Area (Napa County), Oakland-Fremont Metro Area (Alameda and Contra Costa Counties), San Francisco Metro Area (Marin, San Francisco, and San Mateo Counties), San Jose-Sunnyvale-Santa Clara Metro Area (Santa Clara County), Santa Rosa 130

Metro Area (Sonoma County), and Vallejo-Fairfield Metro Area (Solano County). The AMI levels in this chart are based on the HUD metro area where this jurisdiction is located.

Source: U.S. Department of Housing and Urban Development (HUD), Comprehensive Housing Affordability Strategy (CHAS) ACS tabulation, 2014-2018 release

For reference, Table 3 below includes the Area Median Income (AMI) and income limits for the different income levels for San Mateo County as published by the California Department of Housing and Community Development (HCD).

Table 3: San Mateo County Income Limits (2021)
Number of Persons In Household

1 2 3 4 5 6
Extremely Low 38,400 43,850 49,350 54,800 59,200 63,600 Very Low 63,950 73,100 82,250 91,350 98,700 106,000
Low 102,450 117,100 131,750 146,350 158,100 169,800
Median 104,700 119,700 134650 149,600 161,550 173,550
Moderate 125,650 143,600 161,550 179,500 193,850 208,200 Source: California Department of Housing and Community Development, 2021

As noted in the memo by Economic & Planning Systems on Housing Fee Implementation Considerations (Attachment 4), rents increased 33% in past decade and for-sale home prices have more than doubled. To purchase a typical home in Foster City, a 4-person household would need to earn $300,000, nearly double the County’s median income.

Please refer to the July 15, 2021 Staff Report for additional background on:
• Affordable income levels
• Legal and legislative requirements
• History of Foster City’s Inclusionary policy

Please refer to the October 21, 2021 Staff Report for additional background on:
• Purposes of inclusionary housing
• Need for affordable housing, including cost burden
• Discussion of specific provisions to be included

Discussion of Specific Provisions

The Study Session Staff Report for the October 21, 2021 meeting identified several items for additional analysis/discussion. These topics are addressed below.

Income Level Percentage Requirements

The income level percentage requirements specify the percentage of housing units required at various income levels. The current inclusionary policy in Housing Element Policy H-E-2 sets forth the City’s goal of achieving a total of 20% BMR housing in residential projects. As explained in the October 21, 2021 Planning Commission Staff Report, t he goal of the income level requirements is to establish clear and objective standards for the development community regarding the income levels to be provided in residential projects, address housing needs, and at 131

the same time not unduly constrain the economic feasibility of, and hence the production of housing.

EPS has provided information to assist the City with analyzing the financial f easibility of inclusionary housing requirements (they are also analyzing potential development impact fees).

EPS has used market data and cost information from interviews with regionally active developers and analyzed the economics of rental and for -sale housing in the area in order to assist with analyzing various scenarios of inclusionary requirements and the economic feasibility of each of these scenarios. The economic model includes various assumptions based on research and focus group discussions, which are documented in their report (see Attachment 4).

Rental Percentages. For rental units, the metric used to assess feasibility is “yield on cost” 1 of about 4.2% or above to represent a feasible rental project. This is based on capitalization rates2 for existing recently built properties of around 3.3 -3.4% and the expectation that a “premium” of at least 0.75 % for developers/investors to take on the risk of a new construction project. Any scenario that results in at least a 4.2% yield on cost may be considered within reach of feasibility, particularly if developers are able to achieve lower costs or higher mark et rate pricing than assumed th rough such measures as building additional market -rate units through the State’s density bonus law, or even just activating the concessions and waivers that density bonus law provides.

Table 4 below indicates the yield on cost for six (6) scenarios. The ranges in the yield on cost for some scenarios indicate the difference between a development at a density of 35 units per acre and a development at a higher density of 60 units per acre. A scenario with no BMR requirement was included for comparison , showing a yield on cost of 4.5%. Three of the scenarios met or exceeded the 4.2% yield on cost. One of those scenarios included 10% very low- and 10% low- income but not moderate -income units. The other two included a mix of very low -, low -, and moderate-income units, with one at 10% very low-, 5% low- and 5% moderate-income and the other scenario as discussed in the October 21, 2021 Staff Report at 7% very low-, 7% low-, and 6% moderate-income.

1 Yield on cost is the net operating income (or sometimes cash flow from operations) at stabilization divided by total project cost, whereas the capitalization rate is the stabilized net operating income divided by the market value of the property. https://www.adventuresincre.com/glossary/yield-on-cost/ 2 Capitalization rate indicates the rate of return by dividing net operating income by property asset value, expressed as a percentage.
132

Table 4: Yield on Cost for Rental Inclusionary Scenarios Scenarios
(EL-VL-L-M)
Extremely
Low
Income
30% AMI
Very Low
Income
50% AMI
Low
Income
80% AMI
Moderate
Income
110% AMI
Total
Inclusionary
Yield on
Cost
1: 0-0-0-0 4.5%
2: 0-10-10-0 10% 10% 20% 4.2%
3: 10-10-0-0 10% 10% 20% 3.8%-3.9%
4: 0-10-5-5 10% 5% 5% 20% 4.2%
5: 0-7-7-6 7% 7% 6% 20% 4.2%-4.3%
6: 5-5-5-5 5% 5% 5% 5% 20% 4.1%-4.2%
AMI = Area Median Income
Green = Staff Recommendation

In evaluating the scenarios, one factor to consider is whether to include moderate -income units in the rental requirement. Depending on various economic factors, the calculated maximum moderate-income rents can sometimes be higher than market rents. The maximum allowable rent amounts are calculated from the income limits for the County and also incorporate a utility allowance for each development depending on which utilities are the tenant’s responsibility. Table 5 below shows typical maximum allowable rents for each income category as well as the range of market rate rents in November 2021.

Table 5: Typical Maximum BMR Rents Compared to Market Rate: 2021 Very Low Income
50% AMI
Low Income
80% AMI
Moderate Income
110% AMI
Market
(November 2021)
One Bedroom 1,622 2,722 3,086 2,614 - 2,965
Two Bedroom 1,793 3,031 3,440 3,304 - 3,715
Three Bedroom 1,955 3,330 3,785 4,441 - 4,890
Note: Typical rent amounts will vary based on specific utility allowances for each property Source: Community Development Department and Apartments.com

Although the moderate-income rents for 2021 are higher than market in some cases, this is not always the case. The BMR rents are primarily dependent on the median income and related income limits while the market rents are primarily dependent on supply and demand. When the calculated moderate -income rents are higher than market rents, the landlord will lower the moderate-income rents in order to attract tenants. Having moderate-income units can provide an intermediate step between low-income and market rents for tenants whose incomes grow above the low-income level. Having moderate-income units also helps the City address the moderate - income category of the RHNA.

EPS has provided a comparison to several other nearby cities’ rental and for -sale inclusionary requirements, as shown in Figure 1 below. Millbrae, San Carlos, and San Mateo all require 15% inclusionary at very low - or low -income levels for rental developments with Redwood City requiring 20% and including moderate-income units.

133

Figure 1: Inclusionary Requirement Comparison
Staff Comments/Recommendation

Based on the financial feasibility analysis and the desire to include all three RHNA categories, Staff recommends an inclusionary requirement for rental developments of 10% very low-income, 5% low-income, and 5%-moderate-income. The proposed range has a yield on cost ratio that indicates financial feasibility and addresses all of required RHNA income categories.

For-Sale Percentages. For ownership units, the metric used to assess financial feasibility is a profit margin of about 14% for townhouses and 16% for condominiums. All of the 20% inclusionary scenarios modeled fall short of th ese thresholds, but a developer may be able to incur these inclusionary requirements and still have a feasible project if they can find savin gs elsewhere or achieve higher prices than assumed. Table 6 below indicates the estimated profit margin for several scenarios.

Table 6: Percentage of Profit Margin – For-Sale/Ownership Inclusionary Scenarios Scenarios
(EL-VL-L-M)
Extremely
Low
Income
30% AMI
Very Low
Income
50% AMI
Low
Income
80% AMI
Moderate
Income
110% AMI
Total
Inclusionary
Profit
Margin
1: 0-0-0-0 0% 17%-20%
2: 0-0-0-20 20% 20% 12%-14%
3: 0-0-0-15 15% 15% 14%-15%
AMI = Area Median Income
Green = Staff Recommendation

The analysis provided by EPS shows that the 20% moderate scenario yield s only a 12% -14% profit, which is marginally feasible, unless the developer can find savings elsewhere or achieve 134

higher prices than assumed. The scenario with 15% moderate-income units yields an improved profit margin of 14%-15%. The profit margin could be improved by use of State density bonus law to achieve additional market -rate units and/or concessions and waivers that can reduce development costs or enhance values.

EPS notes that they have calculated the affordable price assuming the households earns 110 percent of median income, though the nominal “moderate-income” category could reach as high as 120 percent of median income. This is similar to State law requ irements for calculating moderate rents using 110 percent of median income. This assumption parallels State law regarding the use of density bonuses for moderate-income households and reflects the idea that the units should not be affordable only to those households earning literally the maximum figure allowed in the income category. In other words, t he qualifying maximum income to purchase a unit would remain at 120% of median income but the maximum sales price would be set based on an income of 110% of median income.

Staff Comments/Recommendation

Based on the financial feasibility analysis, staff recommends an inclusionary requirement of 20% moderate-income for ownership units. This is consistent with the City’s inclusionary polic y and close to the thresholds for economic feasibility that could probably be addressed with use of density bonus or other means to reduce development costs or enhance values.

New vs Net New

Due to the lack of vacant land, a significant portion of Foster City’s new housing units is anticipated from redevelopment of existing apartment developments. The issue with “new” vs “net new” is whether to apply the inclusionary requirement to all new ly c onstructed units, including replacement units, or only to the net new units, i.e., additional units beyond the number of existing units. One of the concerns is that existing older units are likely to be replaced with new , more expensive units. This concern is already addressed by Government Code Section 66300(d) of the Housing Crisis Act of 2019, and Section 65915(c)(3) of State Density Bonus Law. Combined, these provisions require any “protected” unit to be “replaced” at the same income level . “Protected” units, defined at Government Code Section 66300(d)(2)(E)(ii), includes units that are or were rented by lower or very low-income households in the last five years. “Replaced”, defined at Government Code Section 66300( d)(2)(E)(iii) and 65915(c)(3)(B), means units of equivalent size to be made available at affordable rent or affordable housing cost to households in the same or lower income category as those households in occupancy. If the income levels of the occupants are not known, then the units must be replaced with the Citywide proportion of lower income renter households.

As an example, consider an existing development that has 100 units. If 50 units are removed and replaced with 110 units for a property total of 160 units, then 50 of the newly constructed units will be considered “replacement units” and the 60 “net new” units will be subject to an inclusionary requirement to provide 12 (20% x 60) BMR units.

135

Replacement units at the very low- or low-income levels are required to be deed restricted for at least 55 years (see additional discussion regarding term of affordability below).

Staff Comments/Recommendation

Staff recommends that the inclusionary requirement be applied to net new units, excluding density bonus units, and that any BMR units provided as replacement units pursuant to Government Code Section 66300(d) or 65915(c)(3) may not be included in the count of provided inclusionary units.

Exemptions

Exempting residential projects s maller than a certain number of units from any inclusionary requirement, either on -site units or an in -lieu fee, will improve the financial feasibility of these small projects. ADUs are already typically more affordable due to their limited size and there is no statutory authority that would allow a city to impose an inclusionary requirement on ADUs. For the Annual Progress Reports (APR) to HCD, the City categorizes the ADUs into market and below market rate categories based on surveys of actual ADU rental rates.

Staff Comments/Recommendation

Staff recommends explicitly exempting Accessory Dwelling Units (ADUs) in conformance with State law and also exempting residential projects of four units or less.

Projects of Five (5) to Nine (9) Units

Providing an option for smaller developments to pay an in -lieu fee can off-set the fact that they are more likely to have difficulty achieving financial feasibility. Having this option available only to small developments can minimize the drawbacks of receiving in -lieu fees but not have land or projects to use the funds.

Staff Comments/Recommendation

Staff recommends that developments of five (5) to nine (9) units be allowed to provide on -site units or pay an in -lieu fee. Providing this option may help the financial feasibility of smaller developments, although availability of land in Foster City for this si ze development is extremely limited.

Projects of Ten (10) or More units

result in the City struggling to find sites for projects and not be as helpful in providing new units to address the RHNA. The City is required to include provisions for alternatives but can specify the requirements under which they would be allowed.

Staff Comments/Recommendation

Staff recommends that all residential development projects of ten (10) units or more be required to provide on-site inclusionary units and provide options for alternative means of compliance as required by State law (discussed below).

Rounding

The ordinance needs to establish the outcome when calculations result in a fraction.

Requirements can: 1) round up any fraction 0.5 or more to require an additional unit and drop any requirement for fractions less than 0.5, or 2) round up 0.5 or more and require a prorated fractional fee for fractions less than 0.5.

Staff Comments/Recommendation

Staff recommends rounding up any fractions 0.5 or greater to provide an additional unit and paying a prorated fractional fee for any fractions less than 0.5.

Term of Affordability

Terms of affordability have increased since the first developments subje ct to affordability restrictions in Foster City. The first for-sale development including restricted units, Marina Green, was subject to 20-year restrictions that began in 1985 or when each unit was first sold. The first rental development with restricted units, Fosters Landing, was subject to a 34-year restriction that began in 1986 (and was later extended). The only other restricted for-sale development, Emerald Bay, was subject to 34 -year restrictions that began in 1992. Later rental developments have typically had 55-year affordability terms (Metro Senior Apartments, Plaza, 100 Grand, Alma Point, Triton), with Marlin Cove and Miramar in perpetuity, and Pilgrim Triton Workforce Apartments for 99 years.

Staff also noted that the requirement for replacement units is that the very low - and low-income units be subject to affordability restrictions of “at least” 55 years. For consistency, a provision is included in the proposed Section 17.90.060.C.2 to require that replacement units also have a term of affordability restriction of 99 years.

The term of affordability restriction for ownership units is typically 45 years. The restriction can be structured so that the restriction resets to begin a new time period each time a unit is resold or the restrictions can expire at the end of a fixed time period. Restarting the restriction can achieve nearly the same result as a restriction in perpetuity but be less likely to hamper the purchaser’s ability to obtain financing.
137

Staff Comments/Recommendation

Staff recommends that for both inclusionary and replacem ent rental units, the restriction shall have a term of ninety -nine (99) years, unless a shorter term not less than fifty -five (55) years is necessary to secure financing, such as tax credits. Staff recommends a term of 45 years for ownership units, to be restarted with each sale.

Alternative Means of Compliance

Government Code Section 65850(g) requires that an inclusionary ordinance for rental units provide alternative means of compliance that may include, but are not limited to, in-lieu fees, land dedication, off-site construction, or acquisition and rehabilitation of existing units. Each of these alternatives has pros and cons as summarized in Table 7. Providing an alternative means of compliance is not required for ownership units.

Table 7: Pros and Cons of Alternative Means of Compliance Alternative Pros Cons
On-Site (Default
required option
unless an
alternative means is
approved)
• Ensures BMR units are
provided at same time
• Integration of BMR units
with market rate units
provides equitable access
to amenities

• May not be economically
feasible for all residential
development product types or
smaller residential projects
On-Site But Not
Dispersed • Easier management of
units
• May provide access to
additional funding sources
(e.g., tax credits, County or
State programs)
• May provide opportunity to
address special needs

• Makes affordable units more
identifiable
Rental units to
satisfy for-sale
inclusionary
requirement
• Same number of units will
serve more households
given increased rental
turnover
• Assists lower income
households in greater
need than moderate
income households

• Reduces opportunity for
moderate-income households
to enter housing ownership
and accumulate wealth
In-Lieu Fee
• Funds could be used to
subsidize other affordable
housing developments or
for other affordable
housing programs, such as
first-time homebuyer loans

• Because Foster City is built
out, there is a lack of available
sites to use the funds to
construct affordable units
• Funds could end up being
held for a long time waiting for
sufficient funds to pursue an
138

Alternative Pros Cons
opportunity to build or convert
units
• More City administrative
resources required to utilize
funds
• Does not help with meeting
immediate RHNA obligations
Off-Site
Construction • Can be more cost efficient
• Can provide opportunity to
leverage other housing
funds
• More opportunities to
address special needs

• May concentrate affordable
units
• May result in lower quality
buildings
Conversion of
existing units to
affordable units
• Can be more cost efficient
• Shorter construction
timeline when compared to
newly constructed units
• Can provide opportunity to
leverage use of other
housing funds
• Provides more
opportunities to address
special needs
• Per recent changes to
State law, conversion units
apply to RHNA credits

• Doesn’t increase the overall
housing supply
• May concentrate affordable
units
• May result in lower quality
buildings
• May require a willing property
owner and/or unsuccessful
negotiations
Donation of land
within City limits • Gives City control of what
type of housing is built
• Provides more
opportunities to address
special needs

• Difficult to ensure that land
value is equivalent to value of
required inclusionary units
• More City administrative
resources required to sell or
partner with another developer
to construct housing

As discussed above, in a small, built-out City like Foster City, it is preferable to require provision of the inclusionary units rather than payme nt of fees or dedication of land that then requires additional implementation programs/actions by the City.

Staff Comments/Recommendation

For the reasons noted above, staff recommends the following as potential alternative means of compliance, subject to findings, summarized below:

1. Payment of Below Market Rate Housing In-lieu Fee.
139

a. Fee is adequate to cover cost of units at another location based on an affordability gap analysis;
b. Project location doesn’t have sufficient land area for on-site units; c. There are adequate locations in the City that are available and there are funds in sufficient amount and timing to finance acquisition;
d. Purposes of the Chapter would be better served; and
e. Fee would be paid upon first building permit.

2. Construction of Off-Site Below Market Rate Units.
a. Off-site location is within City and suitable;
b. Off-site location has necessary infrastructure;
c. Off-site BMR units are in addition to any BMR units otherwise required; d. Construction of off -site units has not commenc ed before approval of the on -site project and won’t contribute to residential segregation by income level; e. Off-site units would provide at least same quantity and affordability levels; any off- site rentals to satisfy for -sale requirements would be at renta l affordability levels; and
f. Would comply with all other parts of the Chapter.
g. The purposes of the Chapter would be better served

3. Conversion of Off -Site Dwelling Units or Non -Residential Buildings to Off -Site Below Market Rate Dwelling Units.
a. Same findings as for off-site construction; and
b. Off-site BMR units are in addition to any replacement units otherwise required.

4. On-Site Clustering of Below Market Rate Dwelling Units. a. Clustering is necessary to access and secure financing; b. Construction will occur concurrently with market rate units; c. Clustering will not contribute to residential segregation by income level; and d. The purposes of the Chapter would be better served.

5. Donation of Land.
a. Land is within the City, owned or under contract by Developer, suitable for development;
b. Land has necessary infrastructure;
c. Fair market value of the land equals or exceeds the value of the on-site BMR unit otherwise required;
d. Land is not contaminated; and
e. The purposes of the Chapter would be better served.

In-Lieu Fee and Fractional Fee Amounts

Based on staff’s recommendations above, in -lieu fees would need to be established for developments of five (5) to nine (9) units and for the fractional fee requirements. EPS has provided an analysis of rental and ownership housing development costs in order to establish amounts for in-lieu fees under different scenarios on both a per unit basis and a per square foot basis. The in- lieu fee estimates the gap between the cost of producing a dwelling unit and the value per unit with restricted rent or sales price. The assumptions that are included in these estimates are documented in the reports from EPS (see Attachments 5 and 6). The in-lieu fees were estimated for the recommended scenarios incorporating the costs of development with the assumed inclusionary percentages, as indicated in Table 8 and Table 9.

140

Table 8: Rental In-Lieu Fee Estimates
Scenario In-Lieu Fee per
Affordable Unit
In-Lieu Fee per
Market Rate Unit
In-Lieu Fee per
Market-Rate
Square Foot
10% Very Low; 5 %
Low; 5% Moderate
$376,582 $75,316 $75.32

Table 9: For-Sale In-Lieu Fee Estimates
Scenario In-Lieu Fee per
Affordable Unit
In-Lieu Fee per
Market Rate Unit
In-Lieu Fee per
Market-Rate
Square Foot
20% Moderate (110%
AMI)
$417,741 $83,548 $48.21

Jurisdictions can charge in-lieu fees on a per unit or a per square foot basis. The per unit fee will result in relatively higher cost for developments with smaller units. Assessing the fee on a per unit basis would penalize projects of smaller, higher density units.

For rental projects, the in -lieu fee would be multiplied by the net rentable square feet. All net rentable square footage includes measurements from the outside surface of the exterior walls and includes all finish ed living space. It does not include parking areas, common hallways and stairways, common rooms, building lobbies, balconies, elevator shafts, and utility rooms.

For for-sale developments, the in -lieu fee would be multiplied by the habitable area measured from the outside surface of the exterior walls, including all finished living space and common areas inside the dwelling unit. It does not include unheated areas such as parking and balconies.

These provisions defining the area subject to the f ee calculation will be included in the fee resolution recommended for City Council adoption.

Staff Comments/Recommendation

Staff recommends that the in -lieu fee be assessed on a per square foot basis. The in-lieu fee would be established and set by a City Council Resolution and does not require Planning Commission recommendation.

AFFORDABLE HOUSING OVERLAY COMBINING DISTRICT

An additional Housing Element Implementation measure included in the 2015 -2023 Housing Element is the creation of an Affordable Housing Overlay Zone (AHO) to provide incentives for the creation of BMR housing units on properties already developed with apartment units. As explained in the Staff Report to the City Council dated May 3, 2021 , given the changes to State Density Bonus Law, staff is proposing some adjustments in the City’s initial concepts for the AHO presented in the Housing Element . Staff’s proposal is to simplify the proposed AHO (since the developer will also be able to access all the incentives contained in Density Bonus Law) to require more BMR units at the very low- (including extremely low-) and low-income levels accompanied by a reduction in the inclusionary percentage from the City’s standard requirement of 20% to 15%.

The AHO would not allow an increase in density beyond what is allowed by Density Bonus Law but would provide the City with more BMR rental units at the lower income levels in exchange for a reduced overall inclusionary requirement. This will enable the City to obtain more of the extremely low-, very low- and low-income units than would be achieved with only density bonus 141

and/or inclusionary provisions. The lower income levels are the most difficult to provide. It would also allow the City to obtain more extre mely low-, very low - and low-income units with fewer overall total units.

EPS has calculated the yield on cost for scenarios including extremely low -income units with a 15% total for the purposes of assessing the financial feasibility. As indicated in T able 10, below, the proposed 4% extremely low-income, 4% very low-income, and 7% low-income yields a 4.2% yield on cost and can therefore be considered within the reach of feasibility.

Including some units at the extremely low-income level will be one of the few ways to reach this level, which is very hard to do without financial subsidies. The analysis prepared for the Housing Element indicates that approximately half of the very low -income households in Foster City fall into the extremely low -income category. The extremely low-income units count toward the very low-income RHNA.

Table 10: Yield on Cost for Rental Inclusionary Scenarios for AHO Scenarios
(EL-VL-L-M)
Extremely
Low
Income
30% AMI
Very Low
Income
50% AMI
Low
Income
80% AMI
Moderate
Income
110% AMI
Total
Inclusionary
Yield on
Cost
1: 4-4-7-0 4% 4% 7% 15% 4.2%

2. 5-5-5-0 5% 5% 5% 15% 4.1%-4.2%
AMI = Area Median Income
Green = staff recommendation

Staff Comments/Recommendation

Staff’s recommendation s for the income category requirements for both the inclusionary ordinance and AHO are shown in Table 11.

Table 11: Staff Recommended Income Category Requirements for Inclusionary and AHOZ
Inclusionary Requirement
(Rental)
AHOZ Requirement
(Rental)
Extremely Low 4%
Very Low 10% 4%
Low 5% 7%
Moderate 5% 0
Total 20% 15%

The attached draft AHO ordinance references the requirements in Chapter 17.90 and focuses on two key differences:
• Section 17.92.020 Establishment – specifies that the AHO overlay can only be applied to properties designated Apartment Residential on the La nd Use Plan Map of the General Plan; and
• Section 17.92.030 Requirements:
o Specifies that the developer may choose to provide the percentage of BMR units per the AHO instead of the percentage required by Chapter 17.90 and that all other provisions of Chapter 17.90 shall apply, except those pertaining to ownership units; and
142

o Includes the inclusionary percentages for the AHO: 4% extremely low-income; 4% very low-income; and 7% low-income; a total of 15%.

ZONING MAP AMENDMENT RELATED TO SITES WITHIN AFFORDABLE HOUSING

OVERLAY COMBINING DISTRICT

The specific sites included for consideration of the AHO zone in the Resolution of Intention adopted by the City Council (Resolution No. 2021-52) are:

1. Beach Cove Apartments, 605-1021 Catamaran Street, APNs 094-320-040 & 094- 330-010

2. Franciscan Apartments, 888 Foster City Boulevard, APN 094-091-020

3. Sand Cove Apartments, 707-939 Shell Boulevard, APN 094-470-160

4. Shadow Cove Apartments, 1019-1087 Foster City Boulevard, APN 094-312-780

5. The Lagoons Apartments, 611-899 Bounty Drive, APN 094-472-010

6. Lantern Cove Apartments, 244 Rock Harbor Lane, APNs 097-160-110 & 120

The first five (5) sites listed above were identified in the City’s adopted Housing Element for the application of the AHO. The Lantern Cove and Schooner Bay sites were added by staff at the request of the property owner and approved for consideration by the City Council through the Resolution of Intention . Although the AHO as currently proposed does not alter the allowed density of development but only adjusts the percentage and income levels of the inclusionary units, by providing additional options it is intended as a potential incentive for the redevelopment of these sites. The Housing Element considered the identified sites to have the best opportunities for additional housing units other than the already approved developments at Foster Square and Pilgrim Triton. This was based on a review of the following parameters:
• Existing Density. Sites with lower existing densities may be more likely to consider redevelopment if they can increase their density. Many of the older apartment developments are developed with a density less than 20 units/acre even though they are zoned R -3, which allows up to 19.89 units/acre, or R -4, which allows up to 34.98 units/acre. They can also utilize state law density bonus provisions to achiev e higher densities.
• Land Area. Larger sites would have more opportunity to mitigate potential impacts with increased setbacks and/or lower heights near the adjacent development. • Age. The older apartment developments are believed to be more likely to be considering making significant investments either upgrading or redeveloping their property to remain competitive in the marketplace and/or to correct existing problems. • Adjacent Uses. Sites that are adjacent to less dense residential uses, such as single- family development, will need to have larger setbacks and adjust the building massing compared to sites that border streets and/or the Lagoon.

The Lantern Cove and Schooner Bay properties were not included during the preparation of the Housing Element because they are newer than the others . Based on their relative age, staff considered it unlikely the property owner would be considering redeveloping them. The owner, Equity Residential, subsequently indicated they are considering redeveloping their properties and requested that the properties be included in the AHO.

Additional information about each site is provided in Table 12, below. 143

Table 12: Housing Sites Proposed for Consideration of Rezoning with AHO

Site Address Neighbor-
hood
Year
Built
Exist-
ing
Units
Acres Existing
Density
Units/acre
General
Plan
Maximum
Density
Units/acre
Exist-
ing
Zoning
Adjacent Uses
Beach
Cove
605-1021
Catamaran St.
4 1973 416 18.7 22.25 35 R-4/PD Marlin Cove, Clipper
Ln., Catamaran St.

Franciscan 888 Foster City
Blvd.
1 1964 122 6.4 19.06 35 R-3 Apartments, Single
family homes, Comet
Dr., Foster City Blvd.

Sand Cove 707-939 Shell
Blvd.
1 1970 168 8.77 19.16 35 R-3/PD Recreation Center
tennis courts, Foster
City Lagoon, Shell
Blvd.

The
Lagoons
611-899 Bounty
Dr.
1 1970 176 9.64 18.26 35 R-3/PD Foster City Lagoon,
Boat Park, Bounty Dr.

Shadow
Cove
1019-1087 Foster
City Blvd.

3 1970 164 7.9 20.84 35 R-4/PD Single family homes,
Marlin Ave., Foster
City Blvd.

Lantern
Cove
244 Rock Harbor
Ln
8 1985 244 16.8 13.81 35 R-3/PD Townhouses,
wetlands, Port Royal
Ave.

Schooner
Bay
Timberhead Ln,
Halyard Ln,
Stanchion Ln,
Masthead Ln,
Quadrant Ln,
Cutwater Ln,
Jibstay L, Bobstay
Ln, Windlass Ln,
Pinrail Ln,
7 1985 312 24.8 12.58 35 R-3/PD Belmont Slough,
Baffin St.

144

Staff Comments/Recommendation

SUMMARY

These zoning actions will follow through on the City’s obligations for implementation of the 2015- 2023 Housing Element and avoid penalties for noncompliance. The new Chapter 17.90, Below Market Rate Inclusionary Housing Program, will provide the specific parameters to implement the City’s long-standing inclusionary housing policy. The new Chapter 17.92, Affordable Housing Overlay Combining District , and application of the AHO to seven properties will provide an additional option for redevelopment of apartment properties to provide inclusionary units at deeper affordability levels at an overall inclusionary percentage of 15%.

NEXT STEPS

The City Council will consider the Planning Commission’s recommendations at a noticed Public Hearing, tentatively scheduled for March 7, 2022. The City Council will also consider a Resolution to establish in-lieu and fractional fees.

INDIVIDUALS, ORGANIZATIONS AND DOCUMENTS CONSULTED
Foster City General Plan
Foster City Municipal Code
City Attorney
Economic and Planning Systems (EPS)
ABAG Housing Policy and Data Explorer website
California Housing and Community Development Department Housing Planning Hub Site California Inclusionary Housing Reader, Institute for Local Government, 2003 Housing Element Compliance: Incentives/Housing Element Noncompliance: Consequences Meeting California’s Housing Needs: Best Practices for Inclusionary Housing, Local Government Commission, November 2018.

Inclusionary Housing in California: The Legal landscape, Western Center on Law & Poverty/California Rural Legal Assistance Foundation.

HCD Memo: Rental Inclusionary Housing (AB 1505), October 21, 2019 Municipal Codes for San Mateo County Jurisdictions

ATTACHMENTS:

Attachment 1: Resolution Recommending new Chapter 17.90, Below Market Rate Inclusionary Housing Program with Draft Ordinance
Attachment 2: Resolution Recommending new Chapter 17.92, Affordable Housing Overlay Combining District with Draft Ordinance
Attachment 3: Resolution Recommending Zoning Map Amendment with Exhibit A Attachment 4: Draft Memo from EPS, Housing Fee Implementation Considerations , dated January 24, 2022
145

Attachment 5: Draft Report from EPS, Rental Inclusionary Housing In-Lieu Fee, dated January 20, 2022
Attachment 6: Draft Report from EPS, Ownership Inclusionary Housing In -Lieu Fee, dated January 11, 2022
Attachment 7: Planning Commission Minutes of 10/21/21
Attachment 8: Planning Commission Minutes dated 7/15/21

146
RESOLUTION NO. P-01-22
A RESO

LUTION OF THE PLANNING COMMISSION OF THE CITY OF FOSTER CITY

RECOMMENDING CITY COUNCIL ADOPTION OF AN ORDINANCE ADDING CHAPTER

17.90, “BELOW MARKET RATE INCLUSIONARY HOUSING PROGRAM”, TO TITLE 17 OF THE FOSTER CITY MUNICIPAL CODE – RZ2021-0004
CIT

Y OF FOSTER CITY PLANNING COMMISSION
WHE
REAS, there is a shortage of affordable housing in the City of Foster City (“City”) as documented in the 2015-2023 General Plan Housing Element; and WHE
REAS, California Government Code Section 65580(d) states that all cities have a responsibility to use the powers vested in them to facilitate the improvement and development of housing and to make adequate provision for the housing needs of all economic segments of the community; and
WHER
EAS, consistent with State law, Housing Element Goal H -E is to “ Address Affordable Housing Needs : Meet the City's "fair share" of very low, low and moderate income housing need and the needs of special groups, including the elderly, handicapped, small and large families, extremely low income households and persons, single parents and local workers”; and
WHE
REAS, in order to implement Housing Element Goal H-E, Housing Element Policy H- E-2a provides that 20% of all units, excluding bonus units, in residential projects be affordable; and
WHERE
AS, the City wishes to implement Housing Element Policy H-E-2a with clear and objective standards to be set for th in an ordinance adding a new Chapter 17.90, Below Market Rate Inclusionary Housing Program, to Title 17 of the Foster City Municipal Code; and WHER
EAS, adopting clear and objective standards for the provision of inclusionary housing within residential development projects will encourage the development and availability of housing opportunities to a broad range of households with varying income levels within the City, as mandated by State Law, and is essential for the public welfare; and WHER
EAS, requiring inclusionary housing will increase the supply of below market rate housing to meet the City’s regional share of very low-, low- and moderate-income housing needs and the needs of special groups, including the elderly, disabled, small and large families, and local workers; and
WHER
EAS, provision of housing at a variety of income levels will r educe Vehicle Miles Traveled (VMT) and Greenhouse Gas (GHG) emissions by providing people at all income levels more opportunities to live near where they work; and
WHE
REAS, provision of housing at a variety of income levels will s upport the local economy by making it easier for employers to attract and retain workers by providing people at all income levels more opportunities to live near where they work; and DocuSign Envelope ID: EEBB37CC-8BA1-423F-942A-6BC0451BF0DA Attachment 10
147
Resolution No. P-01-22
RZ2021-0004
WH
EREAS, provision of housing at a variety of income levels will affirmatively further the policies and purposes of the Fair Housing Act, also known as “Affirmatively Further Fair Housing” by reducing segregation and concentration of poverty; and WHE
REAS, the City has received and considered the analysis prepared by Economic and Planning Systems, Inc. (EPS), including m emorandum titled “Housing Fee Impl ementation Considerations” (January 24, 2022) , “Rental Inclusionary Housing In -Lieu Fee” (January 20, 2022), and “Ownership Inclusionary Housing In- Lieu Fee” (January 11, 2022) (collectively, the “EPS Studies”); and
WHERE
AS, the City Council has requested that the Planning Commission consider the adoption of ordinances adding provisions to the Municipal Code to address objective inclusionary housing standards; and
WHERE
AS, a Notice of Public Hearing w as duly posted, published and mailed for the consideration by the Planning Commission of three resolutions recommending the City Council adopt ordinances related to below market rate housing, including an ordinance adding Chapter

17.90, Below Market Rate Inclusionary Housing Program, to Title 17 of the Foster City Municipal Code, at the Planning Commission meeting of February 3, 2022, and on said date the Public Hearing was opened, held and closed.

NOW, T

HEREFORE, BE IT RESOLVED, THAT THE PLANNING COMMISSION OF THE

CITY OF FOSTER CITY, CALIFORNIA, HAVING CAREFULLY REVIEWED AND CONSIDERED

THE STAFF REPORT AND THIS RESOLUTION AND ALL ATTACHMENTS HERETO,

INCLUDING THE EPS STUDIES, AND ANY AND ALL TIMELY SUBMITTED COMMENTS,

CORRESPONDENCE, INFORMATION AND TESTIMONY SUBMITTED AT OR PRIOR TO THE CLOSING OF THE PUBLIC HEARING (COLLECTIVELY, THE “RECORD”), DOES HEREBY FIND AND DETERMINE BASED ON THE RECORD AS FOLLOWS:
(a) The Public Hearing was properly noticed and conducted in accordance with State law and the Foster City Municipal Code; and
(b) The adoption of the proposed ordinance adding Chapter 17.90, Below Market Rate Inclusionary Housing Program, to Title 17 of the Foster City Municipal Code, is exempt from review under the California Environmental Quality Act (CEQA) as it is not considered a ‘project’ under Public Resources Code Section 21065 and CEQA Guidelines Section 15378 because the ordinance will not result in a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment. In addition, even if the adoption of the ordinance was considered a “project” under CEQA, pursuant to CEQA Guidelines Section 15061(b)(3), the proposed ordinance is covered by the common sense exemption providing that CEQA only applies to projects which have the potential for causing a significant effect on the environment and where, as is the case with the adoption of this proposed ordinance, it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA; and
(c) The provision of safe and stable housing for households at all income levels i s essential for the public welfare of the City. Housing in Foster City, both rental and for-sale housing, has become steadily more expensive and housing costs have gone up faster than incomes. Federal and state government programs do not provide enough affordable housing to satisfy the needs of very low, low, or moderate income households. As a result, there is a severe sho rtage of adequate, affordable housing for very low, lower, and DocuSign Envelope ID: EEBB37CC-8BA1-423F-942A-6BC0451BF0DA 148
Resolution No. P-01-22
RZ2021
-0004
moderat
e income households, as evidenced by the findings in the City’s 2015 – 2023 Housing Element; and
(d) As provided in the Housing Element of the General Plan, the City wishes to encourage the promotion of the private development of affordable housing through an inclusionary program as stated in Housing Element Policy H-E-2; and
(e) Based on the findings above, the City desires to further the public health, safety and welfare by requiring residential development projects in the City to mitigate their impact on the need for affordable housing in the City; and
(f) The proposed ordinance adding Chapter 17.90, Below Market Rate Inclusionary Housing Program, to Title 17 of the Foster City Municipal Code, is consistent with the General Plan.

BE IT FURTHER RESOLVED that the Planning Commission hereby recommends that the City Council adopt the proposed ordinance adding Chapter 17.90, Below Market Rate Inclusionary Housing Program, to Title 17 of the Foster City Municipal Code, as contained in the attached Draft Ordinance.

PASSE
D AND ADOPTED as a Resolution of the Planning Commission of the City of Foster City at a Regular Meeting thereof held on February 3, 2022, by the following vote:

AYES, COMMISSIONERS: Adams, Bronitsky, Haddad and Jagtiani NOES, COMMISSIONERS: Chairman Wykoff

ABSTAIN, C
OMMISSIONERS:

ABSENT, CO
MMISSIONERS:
_______________________

RICK WYKOFF, CHAIRMAN
ATTEST:
________________________________
MARLEN

E SUBHASHINI, SECRETARY
DocuSign Envelope ID: EEBB37CC-8BA1-423F-942A-6BC0451BF0DA 149
Chapter 17.90

BELOW MARKET RATE INCLUSIONARY HOUSING PROGRAM
Sections:

17.90.010 Purpose.

17.90.020 Definitions.

17.90.030 Applicability.

17.90.040 Requirements for Inclusion of Below Market Rate Dwelling Units.

17.90.050 Payment of a Below Market Rate Housing In-Lieu Fee.

17.90.060 Standards for Below Market Rate Dwelling Units.

17.90.070 Below Market Rate Housing Plan and Below Market Rate Housing Agreement.

17.90.080 Alternatives.

17.90.090 Waiver of Requirements.

17.90.100 Affordable Housing Fund.

17.90.110 Enforcement.

17.90.010 Purpose.

The purpose of this Chapter, to be known as the Below Market Rate Inclusionary Housing Program, is to:

F. Implement the City’s adopted inclusionary policy contained in the Housing Element of the General Plan by creating standards and a mechanism to provide below market rate dwelling units as part of new residential development projects; and G. Provide for the establishment and imposition of a Below Market Rate Housing In -Lieu Fee on residential development projects as an alternative means of mitigating the impact of residential development projects on the need for below market rate dwelling units in the City, as opposed to the development and construction of below market rate dwelling units as part of residential development projects, in certain circumstances.

17.90.020 Definitions.

A. "Below Market Rate Housing Fund" means a separate or segregated fund or account designated by the City to maintain and account for all monies received pursuant to this Chapter.

B. "Below market rate ownership cost" means the sale price for a below market rate dwelling unit , available as a for-sale unit, resulting in a projected average monthly housing expense during the first calendar year of an eligible household's occupancy, including mortgage principal and interest, mortgage insurance, property taxes, homeowners insurance, homeowners' association dues, if any, and a reasonable allowance for utilities, not exceeding the sales prices specified by Section 50052.5 of the California Health and Safety Code and California Code of Regulations Title 25, Sections 6910-6924.

C. "Below market rate rent" means t he total monthly housing expenses for a below market rate dwelling unit, available as a rental unit, not exceeding the rents specified by Section 50053 of the California Health and Safety Code and California Code of Regulations Title 25, Sections 6910-6924, except that the City may permit alternative criteria, when necessary, to be consistent with pertinent state and federal statutes and regulations governing publicly assisted rental housing. As used in this Chapter, "below market rate rent" shall include the total of monthly payments by the tenant for all of the following:

2. Any additional separately charged fees or service charges assessed by the owner, other than security deposits;

3. An allowance for utilities paid by the tenant as established by the San Mateo County Housing Authority which may be updated from time to time, including garbage collection, sewer, water, electricity, gas, and other heating, cooking , and refrigeration fuel, but not telephone service, cable TV or WiFi/internet; and

market rate ownership cost, below market rate rent, eligible households, monitoring, reporting, scope of Below Market Rate Housing Plan, terms of Below Market Rate Housing Agreement, and any other relevant rules, regulations or provisions necessary for the administration of this Chapter.

F. “Below Market Rate Housing Agreement” means an agreement that shall specify the number, type, location, size, and phasing of all below market rate dwelling units required in a residential development project, provisions for income certification and screening of potential purchasers or renters of below market rate dwelling units, and resale control mechanisms, including the financing of ongoing administrative and monitoring costs, consistent with the approved Below Market Rate Housing Plan, as determined by the Community Development Director.

G. “Below Market Rate Housing I n-Lieu Fee” means the fee imposed on each dwelling unit of a residential development project, established by resolution of the City Council and updated from time to time, not to exceed the cost of mitigating the impact of residential development projects on the need for below market rate dwelling units in the City.

H. “Below Market Rate Housing Plan” means a plan prepared by th e developer of a residential development project that describes how the proposed dwelling units conform to the requirements of this Chapter, and City and State Density Bonus law requirements, as applicable , and shall include, at a minimum, procedures and requirements for determining eligible households for rental of rental units or purchasers of for -sale units, occupancy requirements, initial and ongoing marketing policies, application process, waitlist management, income verification requirements, annual recertification, if applicable, rejection of ineligible applicants and eligibility termination , and such other provisions as the Community De velopment Director may prescribe from time to time pursuant to Below Market Rate Housing Administrative Guidelines.

I. "Building permit" includes full structural building permits as well as partial permits such as foundation-only permits and demolition permits.

J. “Density bonus” means entitlement to build additional residential units above the maximum number of units permitted pursuant to the existing General Plan, applicable specific plan and /or zoning designation , and as further specified in Chapter 17.86 of this Title and California Government Code Section 65915 (“State Density Bonus Law”).

K. "Developer" means the person(s) or legal entity(ies), including the property owner, seeking a planning permit or building permit for a residential development project.

L. “Dwelling unit” means a dwelling designed for occupancy by one (1) household; the foregoing notwithstanding, Dwelling Unit shall not include an Accessory Dwelling Unit as defined in Section

17.78.040, Chapter 17.78 of this Title.

size, except that the City may permit alternative criteria, when necessary, to be consistent with pertinent state and federal statutes and regulations governing publicly assisted housing.

O. "For-sale unit" means a dwelling unit that may be sold individually in conformance with the Subdivision Map Act. For-sale units also include dwelling units that are converted from rental units to for-sale units.

Q. "Market rate unit" means a dwelling unit in a residential development project that is not a below market rate dwelling unit.

R. "Moderate income households" means households with incomes no greater than the maximum income for moderate income households, as published annually by the Ca lifornia Department of Housing and Community Development (HCD) as the Official State Income Limits pursuant to Health and Safety Code Section 50093 for San Mateo County, adjusted for household size, except that the City may permit alternative criteria, when necessary, to be consistent with pertinent state and federal statutes and regulations governing publicly assisted housing.

S. "One (1) location" includes all adjacent parcels of land under common ownership or control, 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, or separated only by the lands owned or controlled by the developer.

T. "Planning permit" means any discre tionary approval of a residential development project, including, without limitation, a general or specific plan adoption or amendment, rezoning, tentative map, parcel map, conditional use permit, variances, or architectural review.

U. "Rental unit" means a dwelling unit that is intended to be offered for rent or lease and that cannot be sold individually in conformance with the Subdivision Map Act.

V. "Residential development project" means an application for a planning permit or building permit at one (1) loc ation to create one (1) or more dwelling units, redevelop an existing residential development project to remove and replace dwelling units and/or create one (1) or more additional dwelling units, convert nonresidential uses to dwelling units, subdivide a p arcel to create one (1) or more separately transferable parcels intended for development of dwelling units, or implement a condominium conversion, including development of dwelling units constructed at one (1) location and in phases.

W. "Review authority" means the City staff person or body authorized to approve or deny an application for a planning permit or building permit for a residential development project.

X. "Very low income households" means households with incomes no greater than the maximum income for very low income households, as published annually by the California Department of Housing a nd Community Development (HCD) as the Official State Income Limits pursuant to Health and Safety Code Section 50093 for San Mateo County, adjusted for household size, except that the City may permit alternative criteria, when necessary, to be consistent with pertinent state and federal statutes and regulations governing publicly assisted housing.

DocuSign Envelope ID: EEBB37CC-8BA1-423F-942A-6BC0451BF0DA 153

17.90.030 Applicability.

The requirements of this Chapter shall apply to any residential development project as set forth below.

A. Residential Development Projects: Five (5) to Nine (9) Dwelling Units. Residential development projects containing five (5) to nine (9) dwelling units are hereby required, as a condition of issuance of a planning permit or building permit , to either (i) pay a Below Market Rate Housing I n-Lieu Fee for each dwelling unit upon issuance of a building permit , or (ii) construct below market rate units on the location of the residential development project per Section 17.90.040 (Requirements for Inclusion of Below Market Rate Dwelling Units ), make sa id below market rate dwelling units available for sale or rental to and occupancy by eligible households at the applicable household income level and at below market rate ownership cost or below market rate rent, as applicable, and secure said obligation pursuant to a Below Market Rate Housing Agreement as set forth in Section

17.90.070.E (Below Market Rate Housing Agreement).

B. Residential Development Projects: Ten (10) Dwelling Units or More. Residential development projects of ten (10) dwelling units or more are hereby required, as a condition of issuance of a planning permit or building permit , to construct below market rate units on th e location of the residential development project per Section 17.90.040 (Requirements for Inclusion of Below Market Rate Dwelling Units), make said below market rate dwelling units available for sale or rental to and occupancy by eligible households at the applicable household income level and at below market rate ownership cost or below market rate rent, as applicable, and secure said obligation pursuant to a Below Market Rate Housing Agreement as set forth in Section 17.90.070.E (Below Market Rate Housing Agreement).

C. Exemptions. The provisions of this Chapter shall not apply to developers of residential development projects which fall within one (1) or more of the following categories:

1. Residential development projects containing four (4) or fewer dwelling units;

3. Residential development projects involving the repair or replace ment of a building that was damaged or destroyed by fire or other calamity, so long as (i) the square footage and use of the building remains the same, (ii) construction of the replacement building is conducted in accordance with California Government Code Section 65852.25, which requires a building permit to be secured within two (2) years of the occurrence of any such event , and (iii) in accordance with California Health and Safety Code Section 18938.6, construction begins within one (1) year from the issuance o f a building permit, subject to the issuance of one or more extensions, not to exceed 180 days, upon a showing of justifiable cause by the applicant to the satisfaction of the building official;

4. Accessory Dwelling Units (ADUs) or Junior Accessory Dwelling Units (JADUs) as defined in Chapter 17.78 of the Foster City Municipal Code;

5. Residential development projects which are developed in accordance with the terms of a development agreement adopted by ordinance pursuant to the authority and provisions of California Government Code Section 65864 et seq., and that is executed prior to th e effective date of the ordinance codified in this Chapter, provided that such residential development projects shall comply with any below market rate inclusionary housing requirements included DocuSign Envelope ID: EEBB37CC-8BA1-423F-942A-6BC0451BF0DA 154

in the development agreement or any predecessor ordinance in effect on the date the development agreement was executed;

6. Residential development projects exempted by California Government Code Section 66474.2 or 66498.1 or successor provision, provided that such residential development projects shall comply with a ny predecessor ordinance, resolution, or policy governing below market rate inclusionary housing in effect on the date the application for the development was deemed complete;

7. Residential development projects exempted by California Government Code Sect ion 65589.5 (o) or successor provision, provided that such residential development projects shall comply with any predecessor ordinance, resolution, or policy governing below market rate inclusionary housing in effect on the date that a preliminary applica tion for the development containing all of the information required by California Government Code Section 65941.1 was submitted to the City; or

8. Residential development projects for which all applications for City of Foster City discretionary development entitlements required to develop the project have been deemed complete prior to the effective date of the ordinance codified in this Chapter, provided that such residential development projects shall comply with any predecessor ordinance, resolution, or p olicy governing below market rate inclusionary housing in effect on the date the application for the development was deemed complete.

17.90.040 Requirements for Inclusion of Below Market Rate Dwelling Units.

A. Number of Below Market Rate Dwelling Units and Level of Affordability. Residential development projects of ten (10) dwelling units or more shall construct, or cause to be constructed, t he number of below market rate dwelling units as specified below . For the purposes of this section, "total dwelling units" does not include (i) dwelling units awarded above the otherwise-allowable maximum density as part of a density bonus in Chapter 17.86 ( Density Bonuses ), as provided by California Government Code Section 65915 (b)(3), or (ii) in a residential development project that will require the demolition of dwelling units, the number of dwelling units demolished, provided the residential development project will create at least as many dwelling units as will be demolished and otherwise complies with the requirements of California Government Code Section 66300 (d), as applicable.

1. Rental Projects. Five percent (5%) of the proposed total dwelling units in a rental residential development project shall be below market rate dwelling units occupied by or available for occupancy by moderate income households at or below market rate rents; five percent (5%) of the proposed total dwelling units shall be below market rate dwelling units occupied by or available for occupancy by low income households at or below market rate rents ; and ten percent (10%) of the proposed total dwelling units shall be below market rate dwelling units occupied by or available for occupancy by very low income households at or below market rate rents. Alternative percentages and levels of affordability may be considered as part of the Below Market Rate Housing Plan and Below Market Rate Housing Agreement (Section 17.90.070) and the reviewing authority may approve or conditionally approve such an alter native if it determines, based on substantial evidence, that such alternative percentages and levels of affordability will provide as many or more below market rate units at the same or lower income levels or will otherwise provide greater public benefit than the standard requirement.

2. Ownership Projects. Twenty percent (20%) of the proposed total dwelling units in a for -sale residential development project shall be below market rate dwelling units sold to and occupied DocuSign Envelope ID: EEBB37CC-8BA1-423F-942A-6BC0451BF0DA 155

by or available for sale to and occupancy by moderate income households at or below market rate ownership cost.

3. Fractional Units. In calculating the number of below market rate dwelling units required pursuant to Sections 17.90.040.A.1 and 17.90.040.A.2 above, any fraction of less than 0.50 shall be satisfied by payment of an amount equal to the Below Market Rate Housing I n-Lieu Fee, as adopted by the City Council applicable to rental or ownership resi dential developments, times the applicable fraction, and any fraction of 0.50 or more shall be satisfied by developing one (1) below market rate dwelling unit available for sale or rental to and occupancy by eligible households at the applicable household income level and at below market rate ownership cost or below market rate rent, as applicable.

B. Density Bonus. Below market rate dwelling units that satisfy the requirements of this C hapter may be counted toward the number of below market rate dwelling units required for a density bonus under California Government Code Sections 65915 -65918. To be eligible, the below market rate dwelling units shall meet all of the applicable requirements in California Government Code Section 65915. These requirements, including application submittal requirements and replacement housing obligations, are set forth in Chapter 17.86 (Density Bonuses).

17.90.050 Payment of Below Market Rate Housing In-Lieu Fee.

A. Amount. The amount of the Below Market Rate Housing In-Lieu Fee applicable to rental residential development projects and ownership residential development projects shall be established from time to time by resolution of the City Council. The Below Market Rate Housing In-Lieu Fee established for rental residential development projects and ownership residential development projects shall not exceed the cost of mitigating the impact of rental or ownership residential development projects on the need for below market rate dwelling units in the City.

B. Timing of Payment. Payment of the Below Market Rate Housing In-Lieu Fee shall be due prior to the issuance of the first building permit for the residential development project. The Below Market Rate Housing In-Lieu Fee shall be calculated based on the type of residential development project ( i.e., either rental or ownership), and the applicable fee schedule in effect at the time the building permit is issued for a rental residential development project or ownership residential development project.

17.90.060 Standards for Below Market Rate Dwelling Units.

A. Quality of Construction and Number of Bedrooms. All below market rate dwelling units required by this Chapter shall be equal to the overall quality of construction to market -rate units in the same residential development project as follows:

1. The exterior appearance of the below market rate dwelling units shall be the same as that of market-rate units.

2. Interior finishes and amenities of the below market rate dwelling units shall not differ from those provided in the base model market rate units.

3. The number of bedrooms in the below market rate dwelling units shall be equal to the average number of bedrooms in the market -rate units, includ ing square footage by unit size , and the below market rate dwelling units shall be dispersed within the residential development project, with the location of below market rate dwelling units comparable to those of the market -rate units, subject to review and approval by the Community Development Director.

DocuSign Envelope ID: EEBB37CC-8BA1-423F-942A-6BC0451BF0DA 156

4. The below market rate dwelling units shall have access to the same amenities as the market rate units and shall be included within the below market rate ownership cost or below market rate rent for the below market rate dwelling unit. For example, residents of the below market rate dwelling units shall not be excluded from common open space, parking, storage, and other community facilities or amenities in the residential development project, nor shall households residing in below market rate dwelling units be charged more than a below market rate rent or a below market rate ownership cost as defined in Section 17.90.020 (Definitions) for the use of such facilities and amenities.

B. Availability for Occupancy. Below market rate dwelling units required by this Chapter shall be made available for occupancy concurrently with the market-rate units. For the purposes of this subsection, "concurrently" means that the City may not issue building permits for more than fifty (50) percent of the market-rate units until it has is sued building permits for all of the below market rate dwelling units, and the City may not approve any final inspections or certificates of occupancy for more than fifty (50) percent of the market -rate units until it has issued final inspections or certif icates of occupancy for all of the below market rate dwelling units.

C. Duration of Affordability.

1. Ownership. Below market rate dwelling units available as a for-sale unit produced as required by this Chapter shall, pursuant to the terms of a Below Market Rate Housing Agreement, be legally restricted for sale to and occupancy by eligible households within the income levels for which the below market rate dwelling units were designated and at a below market rate ownership cost for a period of at least forty-five (45) years from the date of recordation of each grant deed. Resale of the below market rate dwelling unit during the forty -five (45) year term shall be restricted to eligible households at a below market rate ownership cost as defined herein and set forth in the Below Market Rate Housing Agreement recorded against the below market rate dwelling unit and the forty-five (45) year term shall start over with each resale. If a below market rate dwelling unit has not been sold or resold prior to the expiration of the forty- five (45) year term, then upon the expiration of the forty-five (45) year term, the restrictions set forth in the Below Market Rate Housing Agreement shall terminate, expire and be of no further force or effect and the dwelling unit may then be sold at market rate . The Below Market Rate Housing Agreement shall be recorded against the property of the applicable residential development project and below market rate dwelling unit(s) in accordance with the provisions of and consistent with the form specified in Section 17.90.070.E.

2. Rental. Below market rate dwelling units available as a rental unit produced as required by this Chapter or pursuant to the provisions of California Government Code Section 66300 (d) shall, pursuant to the terms of a Below Market Rate Housing Agreement, be legally restricted to occupancy by eligible households within the income levels for which the below market rate dwelling units were designated and at a below market rate rent for a period of at least ninety- nine (99) years from the date a certificate of occupancy is issued by City for the entire residential development project. The foregoing notwithstanding, the Community Development Director, or his or her designee, may, in the exercise of her or his discretion, accept a shorter period of affordability of no less than fifty -five (55) years, if the applicable residential development project provides substantial evidence that a shorter-term restriction is necessary and required in order to obtain financing for the applicable residential development project. The Below Market Rate Housing Agreement shall be recorded against the property of the applicable residential development project in accordance with the provisions of and consistent with the form specified in Section 17.90.070.E.

DocuSign Envelope ID: EEBB37CC-8BA1-423F-942A-6BC0451BF0DA 157

D. Eligibility. No eligible household may occupy a below market rate dwelling unit available as a rental unit or acquire a below market rate dwelling unit available as a for -sale unit until the Community Development Director , or his or her designee, has approved a Below Market Rate Housing Plan prepared by the developer, which plan shall include eligibility requirements specific to the residential development project, and a Below Market Rate Housing Agreement has been recorded against the residential development project in accordance with Section 17.90.070.E.

E. Principal Residence. Any eligible household that occupies a below market rate dwelling unit must occupy that dwelling unit as its principal residence, unless otherwise approved in writing for rental to a third party for a limited period of time due to household hardship, as determined and approved by the City in advance and in accordance with Below Market Rate Housing Administrative Guidelines.

F. Below Market Rate Housing Administrative Guidelines. The Community Development Director , or his or her designee , may, from time to time , adopt and revise rules, regulations and guidelines for determining household income , below market rate housing cost, below market rate rent, determining eligible households of for -sale units and rental units , establishing monitoring and reporting requirements for residential development projects , and such other provisions and requirements as are relevant to the administration of this Chapter.

G. Housing Preferences. Subject to applicable state and federal fair housing laws, the City Council may, from time to time , adopt preferences for the sale or rental to and occupancy of below market rate dwelling units at the applicable below market rate ownership cost or below market rate rent, as applicable, to eligible households that live and/or work in the City or any other characteristics the City Council deems appropriate to further the purposes of this Chapter . The City Council may also , from time to time, adopt preferences applicable to specific residential development projects.

17.90.070 Below Market Rate Housing Plan and Below Market Rate Housing Agreement.

A. Required. A Below Market Rate Housing Plan is required for any residential development project that provides below market rate dwelling units, either on-site or off-site. The Below Market Rate Housing Plan shall describe how the proposed dwelling units conform to the requirements of this Chapter and City and State Density Bonus law requirements, as applicable. Further, the Below Market Rate Housing Plan shall include, at a minimum, procedures and requirements for determining eligible households for rental of rental units or purchasers of for -sale units, occupancy requirements, initial and ongoing marketing policies, application process, waitlist management, income verification requirements, annual recertification, if applicable, rejection of ineligible applicants and eligibility termination, funding by developer of ongoing administration and monitoring costs to be incurred by City following occupancy of below market rate dwelling units, and such other provisions as the Community Development Director, or his or her designee, may prescribe from time to time pursuant to Below Market Rate Housing Administrative Guidelines. Below Market Rate Housing Plans are not required for residential development projects that are not required to provide for the construction, sale and/or rental of on-site or off -site below market rate dwelling units, in compliance with the provisions of this Chapter.

DocuSign Envelope ID: EEBB37CC-8BA1-423F-942A-6BC0451BF0DA 158

C. Approval of On -site Below Market Rate Dwelling Units. The review authority may approve or conditionally approve a Below Market Rate Housing Plan that proposes on-site below market rate dwelling units if it makes findings, based on substantial evidence, that:

1. The on -site below market rate dwelling units comply with the applicable standards in this Chapter, including, without limitation, the requirement that the below market rate dwelling units be made available for occupancy concurrently with the market-rate units.

2. The on-site below market rate dwelling units will mitigate the impact of the market rate units in the residential development p roject on the need for below market rate dwelling units in the City.

E. Below Market Rate Housing Agreement. As a condition of approval of a residential develo pment project, a Below Market R ate Housing A greement acceptable to the Community Development Director, approved by the City Attorney and executed by the City Manager, shall be recorded against the residential development project prior to approval of any fi nal or parcel map, or issuance of any building permit, whichever occurs first. The Below Market Rate Housing Agreement shall specify the number, type, location, size, and phasing of all below market rate dwelling units, provisions for income certification and screening of potential purchasers or renters of below market rate dwelling units, and resale control mechanisms, including funding by developer of ongoing administrative and monitoring costs incurred by City , consistent with the approved Below Market R ate Housing Plan.

The Below Market Rate Housing Agreement shall provide for the indemnification and defense of the City, as approved by the City Attorney, against any and all claims brought by any and all persons, including eligible households, in connection with the administration and implementation by City of the Below Market Rate Housing Plan and Below Market R ate Housing Agreement. A Below Market Rate Housing Agreement applicable to below market rate dwelling units, available as for -sale units, shall require as a condition of the sale of a below market rate dwelling unit from developer to an eligible household, that the restrictions set forth in the Below Market Rate Housing Agreement and this Chapter be recorded against the below market rate dwelling unit in the form of a resale restriction agreement, performance deed of trust, and/or regulatory agreement, as approved by the City Attorney and executed by the City Manager , to ensure the continued affordability of the below market rate dwelling units.

17.90.080 Alternatives.

To the extent permitted by law, the City’s objective is to obtain the actual development and construction of below market rate dwelling units within each residential development project, as opposed to the receipt of payment of Below Market Rate Housing In-Lieu Fees, construction of off-site below market rate dwelling units, or other such alternative s as set forth herein . Nevertheless, a developer may propose an alternative means of compliance with this Chapter subject to the following provisions:

DocuSign Envelope ID: EEBB37CC-8BA1-423F-942A-6BC0451BF0DA 159

A. Payment of Below Market Rate Housing In-Lieu Fee.

17.90.070, the City Council may, in its discretion, approve such a proposal if it finds the proposal meets all of the following conditions:
a. The Below Market Rate Housing In-Lieu Fee then in effect is adequate to cover the cost of providing at least an equivalent number of below market rate dwelling units at another location as would otherwise be required under this Chapter for the proposed residential development project based upon an affordability gap analysis prepared by the City, at the expense of the developer, and approved by the City Council; and b. The location of the proposed residential development project does not have sufficient land area to provide the below market rate dwelling units without severely impacting the financial feasibility of the project; and
c. There exists adequate alternative lo cations within the City of Foster City for the construction of residential development projects that are available for sale on the open market, said alternative locations are not located in a flood hazard zone and do not contain environmentally sensitive h abitat, said alternative locations are not contaminated with or otherwise impaired by the presence of hazardous materials or hazardous substances in the soil, soil vapor or groundwater in, on, or under the land or emanating from lands in proximity thereto, as reflected in a Phase I Environmental Site Assessment, and if necessary, a Phase II Environmental Site Assessment, development and construction of a residential development project on the alternative locations is consistent with the City’s adopted General Plan, Housing Element, and Zoning, and there are funds in the Affordable Housing Fund which have not been allocated or appropriated for other allowable uses which, when combined with the Below Market Rate Housing In-Lieu Fee to be paid by the applicable residential development project, is sufficient in amount and timing of availability of funds to permit the City to finance the acquisition of an alternative location(s); and d. The alternative locations are suitable for, and development of a residential development project thereon is economically and financially feasible as determined by the City, in its sole discretion, pursuant to a feasibility analysis of a proposed residential development project on the alternati ve locations prepared by the City, at the expense of the developer, and approved by the City Council; and e. The City finds that the purposes of this Chapter would be better served by payment of the Below Market Rate Housing In-Lieu Fee and that the proposed Below Market Rate Housing In-Lieu Fee meets the greatest community needs at that time; and f. The Below Market Rate Housing In -Lieu Fee applicable to the entire residential development project shall be paid by the developer and collected by the City upon the issuance of the first building permit for a dwelling unit in the residential development project. Any Below Market Rate Housing In-Lieu Fee collected by the City pursuant to this Section 17.90.080.A shall be deposited in the Affordable Housing Fund and used in accordance with Sections 17.88.060.B and 17.90.100.C of the Foster City Municipal Code.

DocuSign Envelope ID: EEBB37CC-8BA1-423F-942A-6BC0451BF0DA 160

B. Construction of Off-Site Below Market Rate Dwelling Units.

If a developer of a residential development project of ten (10) or more dwelling units proposes the construction of off-site below market rate dwelling units in the Below Market Rate Housing Plan required under Section 17.90.070, the City Council may, in its discretion, approve such a proposal if it finds the proposal meets all of the following conditions:
a. The proposed off-site location is within the City of Foster City, is currently owned by the developer or is under contract for purchase by the developer, is not located in a flood hazard zone and does not contain environmentally sensitive habitat, is not contaminated with or otherwise impaired by the presence of hazardous materials or hazardous substances in the soil, soil vapor or groundwater in , on, or under the off - site location or emanating from lands in proximity thereto, as reflected in a Phase I Environmental Site Assessment, and if necessary, a Phase II Environmental Site Assessment, and development and construction of a residential develo pment project on the proposed off-site location is consistent with the City’s adopted General Plan, Housing Element, and Zoning; and
b. The proposed off -site location is suitable for, and development of a residential development project thereon is economically and financially feasible as determined by the City, in its sole discretion, pursuant to a feasibility analysis of a proposed residential development project on the proposed off -site location prepared by the City, at the expense of the developer, and approved by the City Council; and c. The proposed off-site location is adequately served by all required utilities and transportation infrastructure, all of which are appropriately sized to accommodate the proposed off -site below market rate units , the off-site residential development project, and all reasonable foreseeable probable future development within the area served by said utilities and transportation infrastructure; and d. The proposed off-site below market rate units are in addition to any below market rate dwelling units otherwise required for the off-site residential development project; and e. The construction of the proposed off-site below market rate dwelling units within the off-site residential development project has not commenced before the approval of the on-site residential development project , the off-site below market rate dwelling units will be available for occupancy prior to or concurrently with the market rate units within the on -site residential development project, and the inclusion of the below market rate dwelling units within the off-site residential development project will not, when combined with the below market rate inclusionary requirement of the off -site residential development project, significantly contribute to residential segregation by income level within the City; and
f. The proposed off-site below market rate dwelling units would be provided in at least the same quantity and affordability levels as would be required for on -site units. The foregoing notwithstanding, any proposal to provide rental off -site below market rate dwelling units to satisfy a n inclusionary requirement for an ownership project, shall comply with Sections 17.90.040.A.1 and 17.90.060.C.2 of this Chapter; and g. The proposed off -site below market rate dwelling units comply with all other requirements of this Chapter; and
DocuSign Envelope ID: EEBB37CC-8BA1-423F-942A-6BC0451BF0DA 161

h. All necessary agreements required to secure the construction of the off-site below market rate dwelling units will be made a part of the affordable housing agreement required for the on-site residential development project; and i. Financing or a viable financing plan, w hich may include public funding sources, is in place for the acquisition of land, development and construction of the proposed off- site below market rate dwelling units; and
j. The purposes of this Chapter would be better served by implementation of the proposed alternative and that the proposed alternative meets the greatest community needs at that time.

C. Conversion of Off -Site Dwelling Units or Non -Residential Buildings to Off -Site Below Market Rate Dwelling Units.

If a developer of a residential development project of ten (10) or more dwelling units proposes the conversion of o ff-site dwelling units or non-residential buildings to off -site below market rate dwelling units in the Below Market Rate Housing Plan required under Section 17.90.070, the City Council may, in its discretion, approve such a proposal if it finds the proposal meets all of the following conditions:
a. All of the conditions as set forth in Section 17.90.080.B above; and b. The construction of the proposed off-site below market rate dwelling units shall be in addition to any replacement units otherwise required by State law, incl uding but not limited to Government Code Sections 66300 (d) and 65915 (c)(3).

D. On-Site Clustering of Below Market Rate Dwelling Units.

17.90.060.A.3 requiring the reasonable dispersal of such units within the residential development project, the City Council may, in its discretion, approve such a proposal if it finds the proposal meets all of the following conditions:
a. The clustering of on-site below market rate dwelling units is necessary to access and secure sources of financing needed for the residential development project; and b. Construction of the clustered below market rate d welling units will occur prior to or concurrently with the construction of the market units in the residential development project; and
c. The clustering of on -site below market rate dwelling units will not, when considered singularly or in connection with other residential development projects in the vicinity of the project, significantly contribute to residential segregation by income level within the city; and
d. The purposes of this Chapter would be better served by implementation of the proposed alternative and that the proposed alternative meets the greatest community needs at that time.

DocuSign Envelope ID: EEBB37CC-8BA1-423F-942A-6BC0451BF0DA 162

E. Alternative to On-Site Construction of Below Market Rate Dwelling Units – Donation of Land.

If a developer of a residential development project of ten (10) or more dwelling units proposes the donation of land to the City for the construction of below mar ket rate dwelling units in the Below Market Rate Housing Plan required under Section 17.90.070, the City Council may, in its discretion, approve such a proposal if it finds the proposal meets all of the following conditions:
a. The land proposed to be donated to the City is located within the City of Foster City, is currently owned by the developer or is under contract for purchase by the developer, is not located in a flood hazard zone and does not contain environmentally sensitive habitat, and development and construction of a residential development project on the site is consistent with the City’s adopted General Plan, Housing Element, and Zoning; and
b. The land proposed to be donated is suitable for and development of a residential development project thereon is economically and financially feasible as determined by the City, in its sole discretion, pursuant to a feasibility analysis of a proposed residential development project on the land proposed to be donated prepared by the City, at the expense of the developer, and approved by the City Council; and c. The land proposed to be donated to the City is adequately served by all required utilities and transportation infrastructure, all of which are appropriately sized to accommodate a residential development project on the site and all reasonable foreseeable probable future development within the area served by said utilities and transportation infrastructure; and
d. The fair market value of the land proposed to be donated equals or exceeds the value of the on-site below market rate dwelling units otherwise required to be provided as part of the residential development project, as shown in an appraisal of the land to be donated and a financial analysis of the proposed residential development project prepared by the City, at the expense of the developer, and approved by the City Council; and
e. The land proposed to be donated to the City shall not be contaminated with or otherwise impaired by the presence of hazardous materials or hazardous substances in the soil, soil vapor or groundwater in, on, or under the land to be donated or emanating from lands in proximity thereto, as determined by and to satisfaction of the City, in its sole discretion, pursuant to a Phase I Environmental Site Assessment, and if necessary, a Phase II Environmental Site Assessment, conducted under the direction of the City and at the expense of developer; and
f. The purposes of this Chapter would be better served by implementation of the proposed alternative and that the proposed alternative meets the greatest community needs at that time.

DocuSign Envelope ID: EEBB37CC-8BA1-423F-942A-6BC0451BF0DA 163

17.90.090 Waiver of Requirements.

B. Application Requirements. The developer must show that applying the requirements of this Chapter, without the requested reduction, adjustment or waiver, would result in an unconstitutional taking of property or would result in any other unconstitutiona l result. The developer shall set forth in detail the factual and legal basis for the claim, including all supporting technical documentation, and shall bear the burden of presenting the requisite evidence to demonstrate the alleged unconstitutional result.

C. City Assumptions. The City may assume each of the following when applicable:

1. The developer will benefit from the incentives set forth in State Density Bonus law and the zoning ordinance; and

2. The developer is able to provide the most economical below market rate dwelling units feasible in terms of financing, construction, design, location and tenure.

17.90.100 Affordable Housing Fund.

A. Establishment of the Affordable Housing Fund. The City of Foster City has established an Affordable Housing Fund as set forth in Section 17.88.060 of the Foster City Municipal Code. The City reaffirms that the Affordable Housing Fund is created for the purpose of receiving and dispersing certain monies to address the housing needs of extremely low, very low, low and moderate income households. Separate accounts within the Affordable Housing Fund may be created from time to time to avoid commingling of monies, if required by law or as deemed appropriate for the administration of the Affordable Housing Fund.

B. Deposits. All Below Market Rate Housing In-Lieu Fees or other funds collected under this Chapter, shall be deposited into the Affordable Housing Fund.

C. Use of Funds. In addition to the purposes set forth in Section 17.88.060 of the Foster City Municipal Code, the monies in the Affordable Housing Fund, including all interest and earnings from investment of the monies therein, shall be expended exclusively to provide , or assure the continued provision of, below market rate dwelling units to extremely low income, very low income, lower income, and moderate income households in the City, through property acquisition, construction, development assistance, rehabilitation, conversion, financing, rental assistance or other subsidies or methods, consistent with the goals and policies contained in the City's Housing Element and the purposes for DocuSign Envelope ID: EEBB37CC-8BA1-423F-942A-6BC0451BF0DA 164

which the fees were collected, and for administration and compliance monitoring of the below market rate dwelling units established pursuant to this Chapter.

D. Guidelines. The City Council may, from time to time, adopt guidelines for expenditure of monies in the Affordable Housing Fund.

17.90.110 Enforcement.

A. Nuisance. Any violation of the provisions of this Chapter, or the terms or conditions of a planning permit or building permit issued for a residential development project, or the terms of a Below Market Rate Housing Plan or Below Market Rate Housing Agreement approved in accordance with this Chapter, shall constitute a public nuisance.

The City may institute any appropriate legal actions or proceedings necessary to ensure compliance herewith, including, but not limited to, actions to revoke, deny, modify or suspend any planning permit or building permit approved by the City.

C. City Attorney Enforcement. The City Attorney shall be authorized to enforce the provisions of this Chapter and all Below Market Rate Housing Agreements, resale restrictions, performance deeds of trust, r egulatory agreements, and all other covenants or restrictions placed on residential development projects or below market rate dwelling units, by civil action and any other proceeding or method permitted by law. The City shall be entitled to recover its cos ts, expenses and fees, including reasonable attorneys’ fees, incurred in connection with the enforcement of the provisions of this Chapter and all Below Market Rate Housing Agreements, resale restrictions, performance deeds of trust, regulatory agreements, and all other covenants or restrictions placed on residential development projects or below market rate dwelling units.

D. Developer Responsibility. Failure of any official or agency to enforce the requirements of this Chapter shall not excuse any developer or owner from the requirements of this Chapter. No planning permit, building permit, license, map, or other approval or entitlement for a residential development project or dwelling unit shall be issued, including without limitation a final inspection or certificate of occupancy, until all applicable requirements of this Chapter have been satisfied.

DocuSign Envelope ID: EEBB37CC-8BA1-423F-942A-6BC0451BF0DA 165
RESOLUTION NO. P-02-22
A

RESOLUTION OF THE PLANNING COMMISSION OF THE CITY OF FOSTER CITY

RECOMMENDING CITY COUNCIL ADOPTION OF AN ORDINANCE ADDING CHAPTER

17.92, “AFFORDABLE HOUSING OVERLAY COMBINING DISTRICT”, TO TITLE 17 OF THE FOSTER CITY MUNICIPAL CODE – RZ2019-0001
C

ITY OF FOSTER CITY PLANNING COMMISSION
W
HEREAS, there is a shortage of affordable housing in the City of Foster City (“City”) as documented in the 2015-2023 General Plan Housing Element; and W
HEREAS, California Government Code Section 65580(d) states that all cities have a responsibility to use the powers vested in them to facilitate the improvement and development of housing and to make adequate provision for the housing needs of all economic segments of the community; and
W
HEREAS, consistent with State law, Housing Element Goal H-D is to “Consider Potential Public and Private Redevelopment Opportunities to Increase the Supply of Housing”; and W
HEREAS, in order to implement Housing Element Goal H-D, Housing Element Program H-D-2-b “Affordable Housing Overlay Combining District” calls for the City to adopt and implement an Affordable Housing Overlay (AHO) to encourage the production of additional housing units, including affordable units, in areas already developed with housing; and W
HEREAS, the City wishes to implement Housing Element Program H -D-2-b with clear and objective standards to be set forth in an ordinance adding a new Chapter 17.92, Affordable Housing Overlay Combining District, to Title 17 of the Foster City Municipal Code; and W
HEREAS, adopting clear and objective standards for the creation and application of the AHO will provide additional options for compliance with inclusionary housing requirements for redevelopment of existing apartment developments that will encourage the development and availability of housing opportunities to a broad range of households with varying income levels within the City as mandated by State Law, and is essential for the public welfare; and W
HEREAS, adopting clear and objective standards for the creation and application of the AHO will increase the supply of below market rate housing to meet the City’s regional share of very low-, low- and moderate-income housing needs and the needs of special groups, including the elderly, disabled, small and large families, and local workers; and W
HEREAS, provision of housing at a variety of income levels will r educe Vehicle Miles Traveled (VMT) and Greenhouse Gas (GHG) emissions by providing people at all income levels more opportunities to live near where they work; and
W
HEREAS, provision of housing at a variety of income levels will s upport the local economy by making it easier for employers to attract and retain workers by providing people at all income levels more opportunities to live near where they work; and DocuSign Envelope ID: 98D0734F-DA1B-4F01-AD71-A48D78E30428 166
Resolution No. P-02-22
RZ2019-0001
W
HEREAS, provision of housing at a variety of income levels will affirmatively further the policies and purposes of the Fair Housing Act, also known as “Affirmatively Further Fair Housing” by reducing segregation and concentration of poverty; and W
HEREAS, the City has received and considered the analysis prepared by Economic and Planning Systems, Inc. (EPS), including m emorandum titled “Housing Fee Implementation Considerations” (January 24, 2022) , “Rental Inclusionary Housing In -Lieu Fee” (January 20, 2022), and “Ownership Inclusionary Housing In- Lieu Fee” (January 11, 2022) (collectively, the “EPS Studies”); and
W
HEREAS, the City Council has requested that the Planning Commission consider the adoption of ordinances adding provisions to the Municipal Code to address the need for housing affordable to households at all income levels, including adoption of an ordinance to create the AHO with the goal of encouraging the production of additional housing units, including affordable units, in areas already developed with housing; and
W
HEREAS, a Notice of Public Hearing w as duly posted, published and mailed for the consideration by the Planning Commission of three resolutions recommending the City Council adopt ordinances related to below market rate housing, including an ordinance adding Chapter

17.92, Affordable Housing Overlay Combining District, to Title 17 of the Foster City Municipal Code, at the Planning Commission meeting of February 3, 2022, and on said date the Public Hearing was opened, held and closed.

W, THEREFORE, BE IT RESOLVED, THAT THE PLANNING COMMISSION OF THE

CITY OF FOSTER CITY, CALIFORNIA, HAVING CAREFULLY REVIEWED AND CONSIDERED

THE STAFF REPORT AND THIS RESOLUTION AND ALL ATTACHMENTS HERETO,

INCLUDING THE EPS STUDIES, AND ANY AND ALL TIMELY SUBMITTED COMMENTS,

CORRESPONDENCE, INFORMATION AND TESTIMONY SUBMITTED AT OR PRIOR TO THE CLOSING OF THE PUBLIC HEARING (COLLECTIVELY, THE “RECORD”), DOES HEREBY FIND AND DETERMINE BASED ON THE RECORD AS FOLLOWS:
(a) The Public Hearing was properly noticed and conducted in accordance with State law and the Foster City Municipal Code; and
(b) The adoption of the proposed ordinance adding Chapter 17.92, Affordable Housing Overlay Combining District, to Title 17 of the Foster City Municipal Code, is exempt from review under the California Environmental Quality Act (CEQA) as it is not considered a ‘project’ under Public Resources Code Section 21065 and CEQA Guidelines Section 15378 because the ordinance will not result in a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment. In addition, even if the adoption of the ordinance was considered a “project” under CEQA, pursuant to CEQA Guidelines Section 15061(b)(3), the proposed ordinance is covered by the common sense exemption providing that CEQA only applies to projects which have the pot ential for causing a significant effect on the environment and where, as is the case with the adoption of this proposed ordinance, it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA; and
(c) The provision of safe and stable housing for households at all income levels i s essential for the public welfare of the City. Housing in Foster City, both rental and for-sale housing, has become steadily more expensive and housing costs have gone up faster than incomes. Federal and state government programs do not provide enough affordable DocuSign Envelope ID: 98D0734F-DA1B-4F01-AD71-A48D78E30428 167
Resolution No. P-02-22
RZ2019-0001
housing to s
atisfy the needs of very low, low, or moderate income households. As a result, there is a severe shortage of adequate, affordable housing for very low, lower, and moderate income households, as evidenced by the findings in the City’s 2015 – 2023 Housing Element: and
(d) As provided in the Housing Element of the General Plan, Housing Element Goal H -D, Housing Element Program H-D-2-b “Affordable Housing Overlay Combining District”, the City wishes to encourage the production of additional housing units, including affordable units, through redevelopment of areas already developed with housing by private interests; and
(e) Based on the findings above, the City desires to further the public health, safety and welfare by providing an incentive for areas already developed with housing to redevelop those areas with additional housing units, including affordable units, through the creation of an overlay combing district for certain areas of the City; and (f) The proposed ordinance adding Chapter 17.92, Affordable Housing Overlay Combining District, to Title 17 of the Foster City Municipal Code, is consistent with the General Plan.

BE IT FURTHER RESOLVED that the Planning Commission hereby recommends that the City Council adopt the proposed ordinance adding Chapter 17.92, Affordable Housing Overlay Combining District, to Title 17 of the Foster City Municipal Code, as contained in the attached Draft Ordinance.

PASS
ED AND ADOPTED as a Resolution of the Planning Commission of the City of Foster City at a Regular Meeting thereof held on February 3, 2022, by the following vote:

AYES, COMMISSIONERS: Adams, Bronitsky, Haddad and Jagtiani NOES, COMMISSIONERS: Chairman Wykoff

ABSTAIN,
COMMISSIONERS:

ABSENT, C
OMMISSIONERS:
_______________________

RICK WYKOFF, CHAIRMAN
ATTEST:
________________________________
MARL

ENE SUBHASHINI, SECRETARY
DocuSign Envelope ID: 98D0734F-DA1B-4F01-AD71-A48D78E30428 168
Chapter 17.92

AFFORDABLE HOUSING OVERLAY COMBINING DISTRICT
Sections:

17.92.010 Purpose.

17.92.020 Establishment.

17.92.030 Definitions.

17.92.040 Requirements for Inclusion of Below Market Rate Dwelling Units.

17.92.010 Purpose.

The purpose of the affordable housing overlay (“AHO”) combining district established by this Chapter is to:

17.90 that targets the extremely low -, very low - and low -income units and at the same time reduces the overall percentage of below market rate dwelling units required; and C. Enhance the public welfare by establishing policies and encouraging the development and availability of housing opportunities to a broad range of households with varying income leve ls within the City as mandated by State Law, California Government Code Section 65580 and following; and
D. Promote the City’s goals as stated in the Housing Element of the General Plan to increase the supply of below market rate housing to meet the City’s regional share of extremely low-, very low- , and low-income housing needs and the needs of special groups, including the elderly, disabled, small and large families, and local workers by imposing an inclusionary requirement for residential development projects; and
E. Reduce Vehicle Miles Traveled (VMT) and Greenhouse Gas (GHG) emissions by providing people at all income levels more opportunities to live near where they work.

F. Support the local economy by making it easier for employers to attract and retain wor kers by providing people at all income levels more opportunities to live near where they work; and G. Affirmatively further the policies and purposes of the Fair Housing Act, also known as “Affirmatively Further Fair Housing”, by reducing segregation and concentration of poverty; and H. Implement the City’s policies contained in the Housing Element of the General Plan to create an Affordable Housing Overlay Dist rict to encoura ge the production of additional housing units, including affordable housing units at existing, older apartments, in a manner appropriate to their neighborhood and surrounding development.

DocuSign Envelope ID: 98D0734F-DA1B-4F01-AD71-A48D78E30428 169

17.92.020 Establishment.

The AHO combining district may be established or removed from the zoning map upon the application of a property owner or owners , or upon the initiative of the city council or planning commission, in accordance with the procedures set forth in Chapter 17.74. Only properties designated Apartment Residential on the Land Use Plan Map of the General Plan shall be eligible for the AHO combining district.

17.92.030 Definitions.

For purposes of this Chapter, the definitions set forth in Section 17.90.020 of Chapter 17.90 of the Foster City Municipal Code shall be, and hereby are, incorporated herein by this reference as if set forth in full.

17.92.040 Requirements for Inclusion of Below Market Rate Dwelling Units.

1. Rental Projects. Seven percent (7%) of the proposed total dwelling units shall be below market rate dwelling units occupied by or available for occupancy by low income households at or below market rate rents; four percent (4%) of the proposed total dwelling units shall be below market rate dwelling units occupied by or available for occupancy by very low income households at or below market rate rent s; and four percent (4%) of the proposed total dwelling units shall be below market rate dwelling units occupied by or available for occupancy by extremely low income households at or below market rate rents . Alternative percentages and levels of affordability may be considered as part of the Below Market Rate Housing Plan and Below Market Rate Housing Agreement (Section 17.90.070) and the reviewing authority may approve or conditionally approve such an alternative if it determines, based on substantial evidence, that such alternative percentages and levels of affordability will provide as many or more below market rate dwelling units at the same or lower income levels or will otherwise provide greater public benefit than the requirement set forth herein.

2. Fractional Units. In calculating the number of below market rate dwelling units required pursuant to Sections 17.92.0 40.B.1 above, any fraction of less than 0.50 shall be satisfied by payment of an amount equal to the Below Market Rate Housing In-Lieu Fee established pursuant to Section 17.90.050 times the applicable fraction, and any fraction of 0.50 or more s hall be satisfied by developing one (1) below market rate dwelling unit available for rental to and occupancy by eligible households at the applicable household income level and at below market rate rent.

DocuSign Envelope ID: 98D0734F-DA1B-4F01-AD71-A48D78E30428 170
RESOLUTION NO. P-03-22
A

RESOLUTION OF THE PLANNING COMMISSION OF THE CITY OF FOSTER CITY

RECOMMENDING CITY COUNCIL ADOPTION OF AN ORDINANCE AMENDING THE FOSTER

CITY ZONING MAP TO ZONE CERTAIN PROPERTIES WITHIN THE AFFORDABLE HOUSING OVERLAY COMBINING DISTRICT – RZ2020-0001
C

ITY OF FOSTER CITY PLANNING COMMISSION
W
HEREAS, there is a shortage of affordable housing in the City of Foster City (“City”) as documented in the 2015-2023 General Plan Housing Element; and W
HEREAS, California Government Code Section 65580(d) states that all cities have a responsibility to use the powers vested in them to facilitate the improvement and development of housing and to make adequate provision for the housing needs of all economic segments of the community; and
W
HEREAS, consistent with State law, Housing Element Goal H-D is to “Consider Potential Public and Private Redevelopment Opportunities to Increase the Supply of Housing”; and W
HEREAS, in order to implement Housing Element Goal H-D, Housing Element Program H-D-2-b “Affordable Housing Overlay Combining District” calls for the City to adopt and implement an Affordable Housing Overlay (AHO) to encourage the production of additional housing units, including affordable units, in areas already developed with housing; and W
HEREAS, the City wishes to implement Housing Element Program H -D-2-b with clear and objective standards to be set forth in an ordinance adding a new Chapter 17.92, Affordable Housing Overlay Combining District, to Title 17 of the Foster City Municipal Code; and W
HEREAS, adopting clear and objective standards for the creation and application of the AHO will provide additional options for compliance with inclusionary housing requirements for redevelopment of existing apartment developments that will encourage the development and availability of housing opportunities to a broad range of households with varying income levels within the City as mandated by State Law, and is essential for the public welfare; and W
HEREAS, adopting clear and objective standards for the creation and application of the AHO will increase the supply of below market rate housing to meet the City’s regional share of very low-, low- and moderate-income housing needs and the needs of special groups, including the elderly, disabled, small and large families, and local workers; and W
HEREAS, provision of housing at a variety of income levels will r educe Vehicle Miles Traveled (VMT) and Greenhouse Gas (GHG) emissions by providing people at all income levels more opportunities to live near where they work; and
W
HEREAS, provision of housing at a variety of income levels will s upport the local economy by making it easier for employers to attract and retain workers by providing people at all income levels more opportunities to live near where they work; and DocuSign Envelope ID: 49F17FE3-FE74-4857-934F-56A3D064B7B7 171
Resolution No. P-03-22
RZ2020-0001
WH
EREAS, provision of housing at a variety of income levels will affirmatively further the policies and purposes of the Fair Housing Act, also known as “Affirmatively Further Fair Housing” by reducing segregation and concentration of poverty; and WH
EREAS, the City has received and considered the analysis prepared by Economic and Planning Systems, Inc. (EPS), including m emorandum titled “Housing Fee Impl ementation Considerations” (January 24, 2022) , “Rental Inclusionary Housing In -Lieu Fee” (January 20, 2022), and “Ownership Inclusionary Housing In- Lieu Fee” (January 11, 2022) (collectively, the “EPS Studies”); and
WHE
REAS, the City Council, by adoption of Resolution No. 2021-52 on May 3, 2021, has requested that the Planning Commission consider the adoption of an ordinance to amend the Foster City Zoning Map to zone the below referenced properties within the Affordable Housing Overlay Combining District, to be set forth in a new Chapter 17.92, Affordable Housing Overlay Combining District, of Title 17 of the Foster City Municipal Code:

1. Beac
h Cove Apartments, 605-1021 Catamaran Street, APNs 094-320-040 & 094-330- 010

2. Franciscan Apartments, 888 Foster City Boulevard, APN 094-091-020

3. Sand Cove Apartments, 707-939 Shell Boulevard, APN 094-470-160

4. Shadow Cove Apartments, 1019-1087 Foster City Boulevard, APN 094-312-780

5. The Lagoons Apartments, 611-899 Bounty Drive, APN 094-472-010

6. Lantern Cove Apartments, 244 Rock Harbor Lane, APNs 097-160-110 & 120

7. Schooner Bay Apartments, Timberhead Lane, Halyard Lane, Stanchion Lane, Masthead Lane, Quadrant Lane, Cutwater Lane, Jibstay Lane, Bobstay Lane, Windlass Lane, Pinrail Lane, APNs 097-140-070 & 080; 097-150-020, 030, 050, 110, & 120; and
WHE
REAS, a Notice of Public Hearing w as duly posted, published and mailed for the consideration by the Planning Commission of three resolutions recommending the City Council adopt ordinances related to below market rate housing, including an ordinance amending the Foster City Zoning Map to zone the above reference properties within the Affordable Housing Overlay C ombining D istrict, to be set forth in Chapter 17.92, Affordable Housing Overlay Combining District, of Title 17 of the Foster City Municipal Code, at the Planning Commission meeting of February 3, 2022, and on said date the Public Hearing was opened, held and closed.

NOW,

THEREFORE, BE IT RESOLVED, THAT THE PLANNING COMMISSION OF THE

CITY OF FOSTER CITY, CALIFORNIA, HAVING CAREFULLY REVIEWED AND CONSIDERED

THE STAFF REPORT AND THIS RESOLUTION AND ALL ATTACHMENTS HERETO,

INCLUDING THE EPS STUDIES, AND ANY AND ALL TIMELY SUBMITTED COMMENTS,

CORRESPONDENCE, INFORMATION AND TESTIMONY SUBMITTED AT OR PRIOR TO THE CLOSING OF THE PUBLIC HEARING (COLLECTIVE LY, THE “RECORD”), DOES HEREBY FIND AND DETERMINE BASED ON THE RECORD AS FOLLOWS:
(a) The Public Hearing was properly noticed and conducted in accordance with State law and the Foster City Municipal Code; and
(b) The adoption of the proposed ordinance amending the Foster City Zoning Map to zone the above reference properties within the Affordable Housing Overlay Combining District, to be set forth in Chapter 17.92, Affordable Housing Overlay Combining District, of Title 17 of the Foster City Municipal Code, is exe mpt from review under the California DocuSign Envelope ID: 49F17FE3-FE74-4857-934F-56A3D064B7B7 172
Resolution No. P-03-22
RZ2020-0001
Env
ironmental Quality Act (CEQA) as it is not considered a ‘project’ under Public Resources Code Section 21065 and CEQA Guidelines Section 15378 because the ordinance will not result in a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment. In addition, even if the adoption of the ordinance was considered a “project” under CEQA, pursuant to CEQA Guidelines Section 15061(b)(3), the proposed ordinance is covered by the common sense exemption providing that CEQA only applies to projects which have the potential for causing a significant effect on the environment and where, as is the case with the adoption of this proposed ordinance, it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA; and
(c) The provision of safe and stable housing for households at all income levels i s essential for the public welfare of the City. Housing in Foster City, both rental and for-sale housing, has become steadily more expensive and housing costs have gone up faster than incomes. Federal and state government programs do not provide enough affordable housing to satisfy the needs of very low, low, or moderate income households. As a result, there is a severe shortage of adequate, affordable housing for very low, lower, and moderate income households, as evidenced by the findings in the City’s 2015 – 2023 Housing Element: and
(d) As provided in the Housing Element of the General Plan, Housing Element Goal H -D, Housing Element Program H-D-2-b “Affordable Housing Overlay Combining District”, the City wishes to encourage the production of additional housing units, including affordable units, through redevelopment of areas already developed with housing by private interests; and
(e) Based on the findings above, the City desires to further the public health, safety and welfare by providing an incentive for areas already developed with housing to redevelop those areas with additional housing units, including affordable units, through the creation of an overlay combing district for certain areas of the City; and (f) The proposed ordinance adding Chapter 17.92, Affordable Housing Overlay Combining District, to Title 17 of the Foster City Municipal Code, is consistent with the General Plan; and
(g) The proposed ordinance to amend the Foster City Zoning Map to apply the provisions to be set forth in Chapter 17.92, Affordable Housing Overlay Combining District, of Title 17 of the Foster City Municipal Code, to the following specific properties , is consistent with the General Plan.

BE IT FURTHER RESOLVED that the Planning Commission hereby recommends that the City Council adopt an ordinance to zone the properties, as listed below and as shown on Exhibit A to this Resolution attached hereto and incorporated herein, within the Affordable Housing Overlay C ombining D istrict, to be set forth in Chapter 17.92, Affordable Housing Overlay Combining District, of Title 17 of the Foster City Municipal Code:

1. Beac
h Cove Apartments, 605-1021 Catamaran Street, APNs 094-320-040 & 094-330- 010

2. Franciscan Apartments, 888 Foster City Boulevard, APN 094-091-020

3. Sand Cove Apartments, 707-939 Shell Boulevard, APN 094-470-160

4. Shadow Cove Apartments, 1019-1091 Foster City Boulevard, APN 094-312-780

5. The Lagoons Apartments, 611-899 Bounty Drive, APN 094-472-010 DocuSign Envelope ID: 49F17FE3-FE74-4857-934F-56A3D064B7B7 173
Resolution No. P-03-22
RZ2020
-0001

6. Lantern C
ove Apartments, 244 Rock Harbor Lane, APNs 097-160-110 & 120

7. Schooner Bay Apartments, Timberhead Lane, Halyard Lane, Stanchion Lane, Masthead Lane, Quadrant Lane, Cutwater Lane, Jibstay Lane, Bobstay Lane, Windlass Lane, Pinrail Lane, APNs 097-140-070 & 080; 097-150-020, 030, 050, 110, & 120
PASS
ED AND ADOPTED as a Resolution of the Planning Commission of the City of Foster City at a Regular Meeting thereof held on February 3, 2022, by the following vote:

AYES, COMMISSIONERS: Adams, Bronitsky, Haddad and Jagtiani NOES, COMMISSIONERS:

Chairman Wykoff

ABSTAIN,
COMMISSIONERS:

ABSENT, C
OMMISSIONERS:
_______________________

RICK WYKOFF, CHAIRMAN
ATTEST:
________________________________
MARL

ENE SUBHASHINI, SECRETARY
DocuSign Envelope ID: 49F17FE3-FE74-4857-934F-56A3D064B7B7 174
Exhibit A: Page 1 of 7
Beach Cove Apartments
The City of Foster City Zoning Map is hereby amended to reclassify the 18.7-acre lands at 605-1021 Catamaran Street (APN: 094-320-040 and 094-330-010) to change the Zoning Map Designation from R- 4/PD (High Density Multiple-Family Residence/Planned Development) to R-4/PD/AHO (High Density Multiple-Family Residence/Planned Development/Affordable Housing Overlay) Combining District as indicated in Figure 1.

Figure 1: Beach Cove Apartments
Beach Cove Apartments
DocuSign Envelope ID: 49F17FE3-FE74-4857-934F-56A3D064B7B7 175
Exhibit A: Page 2 of 7
Franciscan Apartments
The City of Foster City Zoning Map is hereby amended to reclassify the 6.4-acre lands at 888 Foster City Boulevard (APN: 094-091-020) to change the Zoning Map Designation from R-3 (Medium Density Multiple-Family Residence) to R-3/AHO (Medium Density Multiple-Family Residence/Affordable Housing Overlay) Combining District as indicated in Figure 2.

Figure 2: Franciscan Apartments
Franciscan Apartments
DocuSign Envelope ID: 49F17FE3-FE74-4857-934F-56A3D064B7B7 176
Exhibit A: Page 3 of 7
Sand Cove Apartments
The City of Foster City Zoning Map is hereby amended to reclassify the 8.77-acre lands at 707-939 Shell Boulevard (APN: 094-470-160) to change the Zoning Map Designation from R-3/PD (Medium Density Multiple-Family Residence/Planned Development) to R-3/PD/AHO (Medium Density Multiple-Family Residence/Planned Development/Affordable Housing Overlay) Combining District as indicated in Figure 3.

Figure 3: Sand Cove Apartments
`
Sand Cove Apartments
DocuSign Envelope ID: 49F17FE3-FE74-4857-934F-56A3D064B7B7 177
Exhibit A: Page 4 of 7
The Lagoons Apartments

Figure 4: The Lagoons Apartments

The Lagoons Apartments
DocuSign Envelope ID: 49F17FE3-FE74-4857-934F-56A3D064B7B7 178
Exhibit A: Page 5 of 7
Shadow Cove Apartments
The City of Foster City Zoning Map is hereby amended to reclassify the 7.9-acre lands at 1019-1087 Foster City Boulevard (APN: 094-312-780) to change the Zoning Map Designation from R-4/PD (High Density Multiple-Family Residence/Planned Development) to R-4/PD/AHO (High Density Multiple-Family Residence/Planned Development/Affordable Housing Overlay) Combining District as indicated in Figure 5.

Figure 5: Shadow Cove Apartments
Shadow Cove Apartments
DocuSign Envelope ID: 49F17FE3-FE74-4857-934F-56A3D064B7B7 179
Exhibit A: Page 6 of 7
Lantern Cove Apartments
The City of Foster City Zoning Map is hereby amended to reclassify the 16.8-acre lands at 244 Rock Harbor Lane (APN: 097-160-110 and 097-160-120) to change the Zoning Map Designation from R-3/PD (Medium Density Multiple-Family Residence/Planned Development) to R-3/PD/AHO (Medium Density Multiple- Family Residence/Planned Development/Affordable Housing Overlay) Combining District as indicated in Figure 6.

Figure 6: Lantern Cove Apartments
Lantern Cove Apartments
DocuSign Envelope ID: 49F17FE3-FE74-4857-934F-56A3D064B7B7 180
Exhibit A: Page 7 of 7
Schooner Bay Apartments

The City of Foster City Zoning Map is hereby amended to reclassify the 24.8-acre lands at Timberhead Lane, Halyard Lane, Stanchion Lane, Masthead Lane, Quadrant Lane, Cutwater Lane, Jobstay Lane, Bobstay Lane, Windlass Lane, and Pinrail Lane (APN: 097-140-070 and 080; 097-150-020, 030, 050, 110, and 120) to change the Zoning Map Designation from R-3/PD (Medium Density Multiple-Family Residence/Planned Development) to R-3/PD/AHO (Medium Density Multiple-Family Residence/Planned Development/Affordable Housing Overlay) Combining District as indicated in Figure 7.

Figure 7: Schooner Bay Apartments
Schooner Bay Apartments
Schooner Bay Apartments
DocuSign Envelope ID: 49F17FE3-FE74-4857-934F-56A3D064B7B7 181
Data Table for AHO Sites
Site Address Neighbor-
hood
Year
Built
Existing
Units
Acres Existing
Density
Units/acre
General
Plan
Maximum
Density
Units/acre
Exist-ing
Zoning
Adjacent Uses
Beach Cove 605-1021
Catamaran St.
4 1973 416 18.7 22.25 35 R-4/PD Marlin Cove, Clipper
Ln., Catamaran St.

Franciscan 888 Foster City
Blvd.
1 1964 122 6.4 19.06 35 R-3 Apartments, Single
family homes, Comet
Dr., Foster City Blvd.

Sand Cove 707-939 Shell
Blvd.
1 1970 168 8.77 19.16 35 R-3/PD Recreation Center
tennis courts, Foster
City Lagoon, Shell
Blvd.

The
Lagoons
611-899 Bounty
Dr.
1 1970 176 9.64 18.26 35 R-3/PD Foster City Lagoon,
Boat Park, Bounty
Dr.

Shadow
Cove
1019-1087 Foster
City Blvd.
3 1970 164 7.9 20.84 35 R-4/PD Single family homes,
Marlin Ave., Foster
City Blvd.

Lantern
Cove
244 Rock Harbor
Ln
8 1985 244 16.8 13.81 35 R-3/PD Townhouses,
wetlands, Port Royal
Ave.

Schooner
Bay
Timberhead Ln,
Halyard Ln,
Stanchion Ln,
Masthead Ln,
Quadrant Ln,
Cutwater Ln,
Jibstay L, Bobstay
Ln, Windlass Ln,
Pinrail Ln,
7 1985 312 24.8 12.58 35 R-3/PD Belmont Slough,
Baffin St.

Att Attachment 11
182
DATE: March 7, 2022

TO: Mayor and Members of the City Council

VIA: Kevin Miller, Interim City Manager

FROM: Tiffany Oren, Recreation Manager
Dusty Landwehr, Recreation Coordinator

SUBJECT: YOUTH ADVISORY COMMITTEE'S 2021 YEAR END REPORT, REVIEW OF MISSION STATEMENT, AND GOALS FOR 2022

RECOMMENDATION
It is recommended that the City Council by Minute Order, accept the Youth Advisory Committee’s 2021 Year-End Report; approve amendments to the mission statement; and accept the Goals for 2022.

EXECUTIVE SUMMARY
Pursuant to Minute Order No. 802, each citizen-advisory committee must prepare a written year-end report, review its mission statement, and prepare a written annual goals/work program for the upcoming year for presentation to the City Council at a City Council meeting in the first quarter of 2022.

At its regular meeting on January 5, 2022 the Youth Advisory Committee approved the following:

1. 2021 Year-End Report

2. Reviewed Mission Statement

3. Mission Statement: The Foster City Youth Advisory Committee shall exist as a citizens’ group to advise and respond to the City Council in all 183
matters related to the needs of youth in Foster City and to promote teen involvement in the community.

4. Goals for 2022
It is recommended that by Minute Order, the City Council accept the Youth Advisory Committee’s 2021 Year-End Report; approve the mission statement; and accept the Goals for 2022.

FISCAL IMPACT
There is no fiscal impact for this item.

CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREAS
This item is in alignment with the "City Council Operations and Improved Community Engagement" Value/Priority Area as it promotes resident engagement and full transparency.

Attachments:
Attachment 1 - 2021 Year-End Report
Attachment 2 - Mission Statement and Goals for 2022
184
Foster City Youth Advisory Committee
2021 Year-End Report
Goal: To continue to be leaders for the teens in the community.

Accomplishments:
Attended a teambuilding event to build team comradery, learn effective ways to work as a team, and how to set an example for other teens in the community
Established subcommittees in which each member had the opportunity to play a leadership role.

Goal: To enhance individual member’s personal skills in leadership and in service.

Accomplishments:
Members practiced parliamentary procedure to conduct meetings in a fair and organized manner.
Required each member to serve on the established sub-committees and gave each the opportunity to be the Chair Person for at least one event/activity.

Goal: To continue to serve charitable or community organizations.

Accomplishments:
Made monetary contributions via Halloween Festival, the Walking in a Winter Wonderland event, as well as the Spaghetti Feed Fundraiser to the Foster City Youth and Teen Foundation. Due to the pandemic, the Spaghetti Feed fundraiser was run as a drive through meal pickup rather than a traditional event.

Goal: To improve the connections between the Foster City City Council and the youth and teens in the community.

Accomplishments:
Launched an Instagram account targeted at Foster City Teens. The posts on this Instagram page highlight the community information sent out in the city’s bi-weekly newsletter, as well as City Council meeting updates and Mayor Minute summaries.

Goal: To engage with the members of our community most impacted by the Covid-19 pandemic
Accomplishments:
Co-developed a Pen Pal program with the Foster City Village. This pilot program matched a YAC member with a Senior living in our community 185
and became pen pals. This pilot program is running until August and will be evaluated afterwards in hopes to expand this program to other teens living in the community, and not just YAC members.

Approved by the Foster City Youth Advisory Committee at its regular meeting of January 5, 2022.
186
Foster City Youth Advisory Committee
Mission Statement
And
Goals for 2022
Mission Statement: The Foster City Youth Advisory Committee shall exist as a citizens’ group to advise and respond to the City Council in all matters related to the needs of the youth in Foster City and to promote teen involvement in the community.

Our Goals for 2022 are:
To continue to be leaders for the teens in the community To enhance individual member’s personal skills in leadership and in service
To continue to serve charitable organizations
To encourage the spirit of giving by organizing a city wide initiative to aid the military and military families.
To host an event or program for Foster City Youth in an attempt to make up for lost experiences during Shelter in Place.
187
DATE: March 7, 2022

TO: Mayor and Members of the City Council

VIA: Kevin Miller, Interim City Manager

FROM: Louis Sun, Public Works Director
Edmund Suen, Finance Director
Jennifer Phan, Interim Deputy City Manager

SUBJECT: RECREATION CENTER REPLACEMENT PROJECT (CIP 301- 678) – NEXT STEPS

RECOMMENDATIONS
It is recommended that the City Council by Minute Order:

1. Confirm the City Council’s intent to adopt a resolution appropriating Transfer Outs of $36 million from the Capital Asset Acquisition and Replacement Fund (CAAR Fund 326) and $19 million from General Fund reserves to City CIP Fund 301 for the Recreation Center Replacement Project (CIP 301-678) and increasing the CIP 301-678 expenditure budget by $55 million as part of the Annual Budget; and

2. Provide City staff direction regarding the Recreation Center Replacement Project in relation to the Request for Proposals process for design services, construction management services, construction inspection services, and materials testing; and

3. Provide City staff direction regarding the Recreation Center Replacement Project in relation to a request for additional staffing to support the project.
188

EXECUTIVE SUMMARY
On January 31, 2022, the City Council directed staff to proceed with the “build-to-budget” option for the Recreation Center Replacement Project in an amount not-to-exceed $55 million and to proceed with utilizing $36 million funding from CAAR Fund 326 (4/5th City Council approval required) and $19 million from General Fund reserves. The design-bid-build process would entail preparing requests for the proposals (RFPs) for a designer, project and construction manager, construction inspection services, and materials testing.

Should the City Council provide direction to move forward, staff will begin the process to prepare and issue RFPs in specific areas of technical and professional expertise. Consultants shall be solicited through an open and competitive RFP process. The RFP process is used to identify consulting firms with the necessary background and experience to provide services as well as making certain the cost for services is competitive. Staff has prepared a draft RFP schedule (Attachment 1) for City Council to evaluate. Given the complexity and scale of the Recreation Center Replacement Project, staff is also requesting two additional positions dedicated to work on the City’s three major capital improvements projects, which includes the Recreation Center Replacement Project. If approved, the additional personnel/staffing exception will be included in a detailed line item budget submitted for City Council review at the Budget Study Session Meeting on May 9, 2022. City Council consideration of any additional resources (including personnel/staffing) will ultimately be approved concurrently with adoption of the City budget.

BACKGROUND
The William E. Walker Recreation Center opened to the public in 1974. Due to its location as a central amenity in Foster City’s Leo Ryan Park, the center is a hub of activity in the community.

The current Recreation Center consists of the original building that was built in 1974 and two expansion wings that were constructed in the 1990s. The current structure contains approximately 18,500 square feet of meeting room/user space in the 36,000 square foot building, with the remaining space allocated to lobbies, storage, mechanical rooms and long hallways to access the phased additions. Because the building was originally three separate structures that were all combined into one building with one roof in 1997, multiple roof penetrations were added to install HVAC equipment and aesthetic screens on the flat deck of the roof. Due to the construction history and the piecemeal way in which it was constructed, a number of structural 189
issues are known or anticipated related to water intrusion. The age of the building and its emergency shelter readiness are all factors that should be considered when addressing its infrastructure needs.

As such, in 2016, the City Council began exploring a rebuild of the Recreation Center. Significant outreach was conducted throughout 2016 into early 2017 to assess community needs in regard to the Recreation Center. In 2018, the City entered into an agreement with Burks Toma Architects to develop a conceptual design plan for a new center. In 2019, the City Council agreed on a design concept, but ultimately opted for a build-to-budget option with a cost not to exceed $40 million. However, the project was essentially placed on hold in August of 2019. Then, in 2021 the City Council requested staff to revisit the Recreation Center Replacement Project, and in June 2021 the City Council received an update on the status of the project.

At the August 2, 2021 City Council Regular Meeting, staff provided a report on the engagement process for the Recreation Center Replacement Project, including a draft Recreation Center and Parks System Survey. Following that meeting, staff worked with Zencity to finalize a community survey to validate programming and use options, and how those may have changed as a result of the COVID-19 pandemic. The Recreation Center and Parks System Survey launched on November 23, 2021 and was open through December 17, 2021.

At the January 31, 2022 City Council Special Meeting, staff provided a report to present an update on the Recreation Center Replacement Project including the results of the Recreation Center and Parks System Survey, funding options, and additional information regarding the build process and design options. The City Council accepted the Recreation Center and Parks System Survey results and proposed to move forward with the “build-to-budget” option with a not-to-exceed budget of $55 million with $36 million from Capital Asset Acquisition and Replacement Fund (CAAR Fund 326) and $19 million from General Fund reserves.

ANALYSIS
Funding and Project Costs
Per the City Council’s direction regarding the project design and funding options presented at the January 31, 2022 City Council Special Meeting, the “build-to-budget” option was selected with a cost not-to-exceed $55 million in 190
2022 dollars. Funding for the $55 million consists of $36 million from CAAR Fund 326 (4/5th City Council approval required) and $19 million from General Fund reserves. Based on a not-to-exceed cost of $55 million, staff estimates the cost of the professional design services for the build-to-budget option is $4.6 million. The table below breaks down the project cost including construction and softs costs:

Service % of
Construction
Cost
Cost
Estimated Construction Cost - $42,000,000
Contingency 10% $4,200,000
Design Services 10%-12% $4,620,000
Project/Construction Management Services 8% $3,360,000
Inspection/Testing Services Cost 1% $420,000
Recreation Program Relocation 0.5% $210,000
Total Cost $54,810,000
Not-To-Exceed Cost $55,000,000
Staff is seeking City Council’s intent to adopt a resolution appropriating Transfer Outs of $36 million from the Capital Asset Acquisition and Replacement Fund (CAAR Fund 326) and $19 million from General Fund reserves to City CIP Fund 301 for the Recreation Center Replacement Project (CIP 301-678) and increasing the CIP 301-678 expenditure budget by $55 million as part of the Annual Budget.

Alternatively, City Council may consider a “pay as you go” approach – in which case, staff would then seek City Council approval to appropriate $4.6 million in order to proceed with the professional design services to begin. This may be brought forward either when the authorization for issuance of the RFP is considered or when the agreement is awarded to the selected firm.

It should be noted that while the City Council has identified existing funding sources for the Recreation Center Replacement Project, it may consider various revenue models or measures (in general) to address the City’s 191
anticipated structural deficits over the five-year financial forecast period. This informational item is being presented in a separate report on this meeting’s agenda.

Request for Proposals Process
The City utilizes consultants for professional engineering services and other specialty professional services on CIP projects and private development projects to support the operations of the City as a standard practice. Services provided assist staff in specific areas of technical and professional expertise.

Consultants are solicited through an open and competitive RFP process. The RFP process is used to identify consulting firms with the necessary background and experience to provide services as well as making certain the cost for services is competitive.

The City will request proposals from qualified firms to provide the various professional design services required for the design-bid-build process of the Recreation Center Replacement Project. The selected firms would be required to have completed similar projects and possess experience in the services mentioned above. An evaluation committee consisting of staff members shall review the submitted proposals per a qualification-based selection process and rank the top three firms for interview. Staff suggests the process include City Council evaluation of the top three firms and is seeking direction on this additional step. The top three design firms are to present their proposals at a City Council meeting to give City Council the opportunity to review and provide feedback to staff. Once staff receives the City Council’s feedback, the evaluation committee will further deliberate to select the final firm. A draft selection criteria may be found below and shall be refined as part of the RFP development.

Draft Selection Criteria
Proposed Work Plan and Approach.
Experience with project services for similar project in size and complexity.
Quality and completeness.
Relevance and conciseness.
Qualifications and experience of staff.
Completion of similar projects and references.
Manpower allocation.
192
Upon evaluation of the proposals, staff will negotiate a reasonable fee amount with the selected firm. The anticipated schedule for the RFP process has been attached. Based on a start date of July 1, 2022, staff anticipates having the contracts awarded by the end of 2022.

Additional Staffing Support and Needs
In addition to consultants, staff is requesting two additional positions, Senior Engineering Technician (Project Coordinator) and Associate/Assistant Engineer, to support the Recreation Center Replacement Project under the supervision of the Senior Civil Engineer. The purpose of the additional staffing is to build a core team of three Public Works staff to lead the three major capital improvement projects which include the Levee Improvements Project, the Wastewater Expansion Project, and the Recreation Center Project. Upon completion of the three major projects, the core team will transition back to the Engineering team and support the various Capital Improvement Projects. Public works, parks, and building/maintenance projects are all part of the Engineering Division’s responsibility and additional staffing is necessary to complete the projects in a timely matter.

As an alternate to two new full-time staff positions, staff would instead request a Senior Civil Engineer and a consultant/staff augmentation (Project Coordinator) for the duration of the three major capital improvement projects.

Upon completion of the three major projects, the Senior Engineer will transition back to the Engineering team and the consultant’s contract would come to an end.

FISCAL IMPACT
As previously mentioned in the Analysis section of the report, City Council has provided direction to pursue the “build-to-budget” option selected with a cost not-to-exceed $55 million in 2022 dollars for the replacement of the Recreation Center. Funding for the $55 million consists of $36 million from CAAR Fund 326 (4/5th City Council approval required) and $19 million from General Fund reserves.

Dependent on the direction from City Council, staff will be bringing a resolution at a future City Council meeting appropriating the funds for the Recreation Center Replacement Project (CIP 301-678) in its entirety at $55 million or at the initial amount of $4.6 million in order to proceed with the 193
professional design services.

Two additional staff members are requested to support the Recreation Center Replacement Project. The cost associated with the additional personnel are as follows:

Associate/Assistant Engineer - $213,180/year
Senior Engineering Technician/Consultant - $162,917/year Alternatively, should City Council provide direction to proceed with one additional staff member (Senior Civil Engineer) with consultant/staff augmentation, the costs to cover the consultant/staff augmentation may be included as part of the Recreation Center Replacement Project Budget. The annual cost associated with the Senior Civil Engineer position is $253,307.

Any additional personnel/staffing exceptions will be included in a detailed line item budget submitted for City Council review at the Budget Study Session Meeting on May 9, 2022. City Council consideration of any additional resources (including personnel/staffing) will ultimately be approved concurrently with adoption of the City budget.

CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
This item directly aligns with the City Council’s Facilities and Infrastructure priority area which prioritizes maintaining, “a standard of excellence with regards to infrastructure, including… City facilities to preserve and enhance quality of life for future generations.”
Attachment:
Attachment 1 – Draft Request for Proposal Schedule
194
re
at Recreation Center (CIP 301-678)
En Foster City
Enter the name of the Project Lead in cell B3. Enter the Project Start:
h
e Display Week: 1
C 4 5 6 7 8 11 12 13 14 15 18 19 20 21 22 25 26 27 28 29 1 2 3 4 5 8 9 10 11 12 15 16 17 18 19 22 23 24 25 26 29 30 31 1 2 5 6 7 8 9 12 13 14 15 16 19 20 21 22 23 26 27 28 29 30 3 4 5 6 7 10 11 12 13 14 17 18 19 20 21 24 25 26 27 28 31 1 2 3 4 7 8 9 10 11 14 15 16 17 18 21 22 23 24 25 28 29 30 1 2 5 6 7 8 9 12 13 14 15 16 19 20 21 22 23 hi
s TASK DURATION START END M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F M T W T F el
l Request for Proposal (RFP)
el
l Prepare RFP 4 weeks 7/5/22 7/29/22
o
w Submit RFP to CC 8/1/22 8/1/22
City Council Meeting - Approval of RFP 8/15/22 8/15/22
Advertise RFP 5 weeks 8/16/22 9/20/22
Staff Proposal Review 4 weeks 9/21/22 10/19/22
Submit Top 3 Proposals to CC 10/24/22 10/24/22
City Council Meeting - Top 3 Interviews 11/7/22 11/7/22 Finalist Revew 1 week 11/8/22 11/17/22
Contract Negotiation 1 week 11/28/22 12/2/22
Submit Contract Award to CC 12/5/22 12/5/22
City Council Meeting - Contract Award 12/19/22 12/19/22 hi
s
December DecemberNovember November November Nov-Dec DecemberOctober October October October Oct-NovAug-Sept September September September SeptemberJuly August AugustAugust August Fri, 7/1/2022
July July July
Attachment 1
195
DATE: March 7, 2022

TO: Mayor and Members of the City Council

VIA: Kevin Miller, Interim City Manager

FROM: Edmund Suen, Finance Director

SUBJECT: INFORMATIONAL REPORT ON GENERAL FUND REVENUE

ENHANCEMENT BALLOT MEASURES

RECOMMENDATION

It is recommended that the City Council, by Minute Order, review and accept an informational report on General Fund revenue enhancement ballot measures.

EXECUTIVE SUMMARY

At the February 28, 2022 meeting, City staff communicated to the City Council that we are anticipating multi-year General Fund structural deficits (excluding American Rescue Plan Act relief funds) over the upcoming five-year time horizon due primarily to the continued adverse revenue impacts (e.g.

Transient Occupancy Tax, Recreation programming and rentals, sales tax, business license tax) from the COVID-19 pandemic, increases in labor costs from the new labor agreements that were approved by the City Council in November and December of 2021, potential new annual funding commitments to reduce our CalPERS Unfunded Accrued Liability (UAL) pending the development and adoption of a pension liability reduction policy, and potential budget exceptions and associated budgetary cost impacts for additional personnel costs as they relate to the maintenance of high service levels to the community. There are also headwinds from inflation, supply chain disruptions, and the State’s proposed law changes to property tax in lieu of 196
vehicle license fees. In recognition of the fiscal challenges and the desire to provide uninterrupted essential services to the community, City staff is providing this informational report on revenue enhancement ballot measures (Business License Tax, Sales Tax, and Transient Occupancy Tax) as options to address the anticipated General Fund structural deficits. A simple voter majority is needed for any of these ballot measures to succeed. The County’s deadline for such ballot measures is early August which would suggest a City Council decision in March/April would be desirable.

BACKGROUND

Since the beginning of 2022, the City Council has provided policy direction on key initiatives, including the rebuilding of a not-to-exceed $55 million built to budget Recreation Center (with funding from the Capital Asset Acquisition and Replacement Fund and General Fund Reserves of $36 million and $19 million respectively), the preparation of the City’s FY 2022-2023 annual budget and five-year financial plan, and direction on preliminary budget exceptions related to maintaining high service levels to the community. The Pension Liability ad hoc subcommittee is also on the verge of recommending a pension funding policy that will require annual General Fund resources to methodically reduce the City’s unfunded pension liability. With the adverse revenue impacts of COVID-19 still quite relevant, City staff is anticipating multi-year General Fund structural deficits in its five-year planning horizon. Such deficits would conflict with the City Council’s general policy of annually balanced budgets. As a result, City staff is providing an informational report this evening on three potential revenue enhancement options to address the continued General Fund revenue shortfalls and increase in operating expenditures.

ANALYSIS
City staff has identified three general taxes as candidates for General Fund revenue enhancement. The table below shows the historical General Fund revenues from Business License Tax, Sales and Use Tax, and Transient Occupancy Tax. Compared to the pre-pandemic FY 2018-2019 levels, the aggregate of these revenues have plunged 42.7% from $9.83 million to $5.63 million.
197
Business License Tax
The City has a business license tax (BLT) that includes a gross receipts component consisting of a gross receipts rate of $0.00075 and a cap of $35,980,000, resulting in a maximum BLT amount of $26,985. The gross receipts cap is indexed annually based on the local CPI. There are approximately 20 businesses that are currently above the cap. An increase in the gross receipts cap would generate additional revenues for the City from those 20 businesses. In a review of 13 local cities, 7 do not have caps and 6 have employee counts as a criterion component. The table below provides potential increases in the BLT at various gross receipts cap limits.

Sales/Use Tax
The City’s current sales tax rate is 9.375% of which 1.0% is received by the City. State law permits cities to approve an add-on sales tax (transaction and use tax) that is added to the combined 9.375% state, county, and local sales and use tax rate. A ½ cent add-on sales tax is projected to enhance sales tax revenues by $1.5 million. Eight of the twenty cities in San Mateo County have an add-on sales tax; six of them have add-ons at ½ cents and the remaining two are at ¼ cents.

Transient Occupancy Tax
Foster City has a 12% transient occupancy tax (TOT) assessed to hotel guests. Our hotels serve as the collection agent for the City and remits the TOT to City monthly. Prior to January 1, 2019, the City’s TOT rate was

9.5%. The TOT rate was increased on January 1, 2019 to 11% and thereafter 198
to 12% on July 1, 2019. City staff estimates that a 2% increase in TOT rate to 14% would enhance TOT revenues by approximately $626,000. The TOT rates in San Mateo County are indicated in the table below.

FISCAL IMPACT
There is no fiscal impact as this is an informational report only.

CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
This item is in alignment with City Council's Vision Statement for a "Sustainable Foster City" under the economic sustainability framework. This is a carry-over project from last year and is not directly aligned with our Value/Priority Areas. It indirectly aligns to delivering a balanced budget and promotes transparency.
199
DATE: March 7, 2022

TO: Mayor and Members of the City Council

VIA: Kevin Miller, Interim City Manager

FROM: Marlene Subhashini, Community Development Director Leslie Carmichael, Consulting Planner

SUBJECT: WORKFORCE HOUSING APARTMENTS (501 PILGRIM
DRIVE)

RECOMMENDATION

It is recommended that the City Council adopt the attached resolution to:

1. Redesignate five (5) one-bedroom moderate-income Below Market Rate (BMR) units to two (2) very low-income BMR units and three (3) low-income BMR units;

2. Of the total eight (8) Workforce housing units, redesignate seven (7) Workforce Units to four (4) very-low income units and three (3) low- income units;

3. Of the total eight (8) Workforce housing units, reserve one (1) two- bedroom Workforce unit for potential City use as temporary sleeping quarters for Police Department staff;

4. Hold a separate waitlist application and lottery process for the seven (7) redesignated Workforce units and invite those who applied for the BMR unit waitlist to apply;

5. Based on items 1-4 above, use “Draft Budget #2 - Recommended Alternative” attached to the March 7, 2022 Staff Report as Exhibit A to this resolution;
200

6. Use funds from the Capital Asset Acquisition and Replacement Fund (CAARF) to complete the purchase of the Workforce Housing Apartments approved by Resolution No. 2019-72; and

7. At the end of each fiscal year, any positive net income from the Workforce Apartments shall be divided equally between the CAARF and the City Affordable Housing Fund, until the CAARF is repaid the $7,000,000 purchase price, at which time all of the net income will be placed in the City Affordable Housing Fund.

8. Approving the revenues and expenditures budget for Workforce Housing Fund 139 for FY 2021-2022.

EXECUTIVE SUMMARY

The Workforce Housing project includes 22 apartment units being developed as part of the Pilgrim Triton Phase C (Laguna Vista) project that will be owned by the City. The City Council approved the purchase of the Workforce Housing Project with the adoption of Resolution No. 2019-72 on July 1, 2019.

The purpose of this staff report is to seek City Council direction and action on:

1. Adjustment in income levels/use of some of the units, including reserving one (1) Workforce unit for potential Police Department use;

2. Acceptance of the proposed budget for the Workforce Housing Fund;

3. Confirmation of use of CAARF for the purchase of the property; and

4. Allocation of net income to repayment of CAARF and/or to City Affordable Housing Fund

BACKGROUND
The Workforce Housing Apartments are currently under construction by SummerHill Properties as part of the Pilgrim Triton Phase C (Laguna Vista) project. A summary of key actions is contained in Table 1 below. 201
Workforce Housing Apartments Unit Mix
The Pilgrim Triton Phase C Development Agreement included two (2) categories of units in the building: 1) traditional BMR units in very low-, low-, and moderate-income categories; and 2) Workforce units with maximum rents calculated at amounts affordable to households at 130% of Area Median Income (AMI). At the time these actions were taken, the City had not exercised the option to purchase.

Table 2 includes the approved unit mix.

Preference Categories

Slightly different preference categories were established by the City Council for the BMR units and the Workforce units by Minute Order 1543 and are contained in the Affordable Housing Covenant.
202

The preference categories established for the fourteen (14) BMR units are as follows:

1. Income qualified employees of the City of Foster City (Disaster Service Workers)

2. Income qualified classroom teachers employed by SMFC School District, SMUHSD or the San Mateo Community College District

3. Income qualified persons who live and work in Foster City

4. Income qualified persons who live in Foster City

5. Income qualified persons who work in Foster City

6. All others who are income qualified
The preference categories established for the eight (8) Workforce Units are as follows:

1. Persons who work for the Foster City Police Department, City of Foster City Fire Department (now SMC Fire) or are otherwise considered by the City of Foster City to be a first responder to emergencies

2. Employees of the City of Foster City (Disaster Service Workers)

3. Classroom teachers employed by SMFC School District, SMUHSD or the San Mateo Community College District

4. Persons who live and work in Foster City

5. Persons who live in Foster City

6. Persons who work in Foster City

7. All others who are income qualified
Applications for BMR Units

After issuing an RFP, the City contracted with HHAV for property management services for the 22 units. HHAV managed the waitlist and lottery process for the fourteen (14) BMR units in December 2021 and January 2022. HHAV opened the waitlist in early December through January 31, 2022 and promoted the waitlist through the Foster City Chamber of Commerce, County Office of Education, elementary and high school districts, major employers, Housing Leadership Council of San Mateo County, HIP Housing’s website, and Facebook. The City of Foster City also promoted the opportunity through the City’s Human Resources department and a digital billboard, affordable housing ListServ, Foster City Current e-newsletter, the City’s social media channels, etc.

203
HHAV received 180 applications for the fourteen (14) BMR units. Applications were sorted by type of unit requested (one or two-bedroom) and by the six (6) preference priorities. HHAV received 144 waitlist applications from very low- income households, 30 waitlist applications from low-income households, and six (6) waitlist applications from moderate-income households. Income designations were based on data provided by applicants. Verification of income will be performed by HHAV as part of the approval process.

The majority of applications (80%) were from very low-income households, 16% were from low-income households, and only 3% were from moderate- income households. In addition, HHAV received no applications for one- bedroom units from moderate-income households. The breakdown of applications by income category is shown in Table 3.

HHAV has also provided the breakdown including unit size as shown in Table

4. 204
Purchase Agreement

The purchase agreement sets the total purchase price at the lesser of $7 million dollars or $6,700,000 multiplied by the percentage change in the Area Median Income (AMI) since the Effective Date of the Pilgrim Triton Phase C Development Agreement in 2018. The AMI for San Mateo County has increased 26.35% between 2018 and 2021. The 26.35% change multiplied by $6,700,000 results in $8,465,450, leaving $7 million as the lesser amount, i.e., sales price. The City Council has previously paid a $50,000 deposit which will be credited against the purchase price.

ANALYSIS

Workforce Housing Apartments Unit Mix

Several issues related to the unit mix require City Council direction:
Lack of applicants for moderate-income units;
Potential for City to redesignate units to address needs for very low- and low-income households; and
Potential use of one 2-bedroom Workforce Unit for Police Department Staff.

BMR Applications. As indicated above, the majority of applications (80%) for the BMR units were from very low-income households, 16% were from low- income households, and only 3% were from moderate-income households. In addition, HHAV received no applications for one-bedroom units from moderate-income households.

HHAV and other BMR landlords in Foster City have experienced difficulties attracting tenants for the moderate-income units. The difference in rents of a moderate BMR unit when compared to market rate unit is often not significant or not a sufficient incentive for a tenant to agree to the annual recertification requirements. In addition, many moderate-income households are looking for larger two or more bedroom units or single-family homes. The cost of vacancies resulting from a vacant moderate unit when a tenant cannot be found will reduce the net income generation. The cost of a vacant one- bedroom moderate-income unit is approximately $33,600 per year; a vacant two-bedroom moderate-income unit would cost approximately $39,600 per year.

205
Police Department Proposed Use. All City departments were asked to submit any interest/proposal for use of the eight (8) Workforce Units to the City Manager. A single proposal/interest from the Police Department was received to use one 2-bedroom unit for off-duty Police Department personnel to sleep or rest following extended working hours, a court appearance or other work- related activities, making it difficult for personnel to return to their home to sleep. City staff is in the process of ascertaining the potential tax implications to Police Department employees to provide a unit for this purpose. Staff recommends that one (1) unit be set aside at this time until these issues can be fully researched.

HHAV On-Site Employee Unit. State law requires an on-site property management employee for apartment developments of sixteen (16) or more units. One HHAV employee will live on-site in one of the one-bedroom with den units. This employee qualifies as a very low-income household, as noted in Table 5. A further discount on the rent amount would be part of this employee’s compensation, as shown in Table 6.

Recommended Adjustments in Unit Mix. Based on the factors discussed above, including the numbers of applications received in the various income categories, difficulty of filling the moderate-income units, particularly the one- bedroom moderate units, potential cost of moderate-income unit vacancies, and the substantially greater demand for very low- and low-income units, HHAV and City staff recommend the following changes to the unit mix:

1. Fourteen (14) BMR Units. Due to the lack of any applications for one- bedroom, moderate income apartments, HHAV recommends that the City change the affordability designations of the five (5) moderate- income one-bedroom BMR units to low and very low income. If the units are not re-designated, they are at risk of remaining vacant for months or even a year or more while the demand is high for low-income units and very high for very low-income units. The existing waitlist and lottery will be used to fill these units.

2. Eight (8) Workforce Apartments. The City received only one request from City departments expressing interest for potential use of a two- bedroom workforce apartment. Therefore, staff is recommending changing the designations of the remaining seven (7) workforce units to low- and very low-income. HHAV and City staff recommend holding a separate waitlist application and lottery process for these units using the different preference categories established by the City Council and 206
inviting those who applied for the BMR unit waitlist to apply for these seven units as well.

The units will be “counted” toward the Regional Housing Needs Allocation (RHNA) for the current 2015-2022 Housing Element because they will be completed before June 30, 2022. Staff will need to verify with HCD regarding whether the City can count the units in lower income categories than are stated in the Affordable Housing Regulatory Agreement based on City Council direction or if an amendment to the Agreement would be required.

Staff has prepared a budget and projected cash flow, discussed in more detail below, for both the existing unit mix and the recommended unit mix.

Table 5 shows the recommended unit mix with the adjustments to the BMR units and the Workforce units.

Financial Impact Resulting from Redesignation of Units. The annual financial impact as a result of the recommended re-designation of BMR units (not including a reduced price for the Police Department unit) amounts to an annual reduction of rent revenue of approximately $87,840 per year and when factoring in all other income and expenses, a reduction of $84,982 in net income (see Table 10). While this amount may appear significant, the potential loss of revenue for five (5) empty moderate-income BMR units and seven (7) workforce units for one year could be up to $423,600 ($168,000 for the five (5) moderate units, and $255,600 for the seven (7) workforce units).

Given the high demand for very low- and low-income units and the high risk of long-term vacancies of the moderate and workforce units, the recommendation to redesignate the units to meet demand is prudent and in the best interest of the Foster City community. The rental revenue unit, the 207
original and recommended unit designations are shown in Table 6.

Rent Amounts Maximum allowable rents, known as “affordable rent,” for each unit type and income category are determined by formulas in the California Health and Safety Code, as stipulated in the Affordable Housing Regulatory Agreement and Declaration of Restrictive Covenants (Affordable Covenant) recorded for the project on January 15, 2021. The landlord can always choose to charge less than the maximum allowable rents. The maximum allowable rents for 2021 (2022 income limits have not yet been released), after deduction of a utility allowance for the utilities charged to the tenant, are shown in Table 7.
208
Moderate income rents are typically close to market rents and often result in the landlord reducing them in order to attract tenants. The Workforce Units would likely have the same issue with the calculated maximum rents being close to market rents. For comparison, currently advertised market rents in the other apartments in Pilgrim Triton are shown in Table 8. It should be noted that the 22-unit building will not have the same level of amenities as the other developments.

HHAV recommends adjusted rent amounts after deduction of the required utility allowance, as shown in Table 9. These amounts include a reduction of the moderate income and Workforce rents below the maximum allowed rent so that they are less than market rents. The rent for the one bedroom+den is also set between the one- and two- bedroom rents.

Budget/Projected Cash Flow

HHAV and staff have prepared a proposed budget and projected cash flow 209
(Attachment 2). This budget varies from the proforma prepared in November 2021 in order to reflect improved accuracy with regards to rental rates and other revenue and utility and operating expenses.

In addition, HHAV included Replacement Reserve contributions in the budget of $20,000 in year one and $22,000 beginning in year two and increasing by 3% each year (per the City’s Proforma dated 11/1/2021). These funds will help offset replacement costs of interior and exterior finishes and fixtures, systems, appliances, and ADA-compliant items. HHAV calculated the useful life of each item and replacement cost using data provided by the contractor and industry standards. Replacement cost expense is estimated to begin in Year 5. HHAV recommends review of the reserve analysis annually to ensure sufficient reserves.

The net income after deducting expenses for the first full operating year, including contributions to the replacement reserve fund, with and without the proposed shift in unit assignments is provided in Table 10.

If the Police Department requests a 2-bedroom unit for Police Department use, staff will return to City Council to request direction on how the costs of the unit should be allocated. The City could choose to forego rent (reducing net income) or charge it to some other source, such as the Police Department budget. The utility charges cannot be spread onto the other units and would need to be charged either to the net income or to another source. Options include, but are not limited to:
Forego rent, charge utilities to the net income
Forego rent, charge utilities to the Police Department Charge rent and utilities to the Police Department
Explore the potential use of Development Impact Fees to offset costs Table 10 shows the net income from the proposed unit mix with and without rent charged for a Police Department unit.
210
Use of Net Income: CAARF and/or City Affordable Housing Fund

The projected budget with the adjusted unit mix includes an annual net income of $373,775 to $412,105 once the building is fully occupied. This may vary from year to year depending on vacancies (the budget includes a typical vacancy rate of 5% in the first year and 3% in subsequent years), unforeseen costs, reserve expenses, etc. Staff is requesting direction on how the City Council would like to allocate the net income generated from the project.

Options include, but are not limited to:
Put all of net income into CAARF: estimated seventeen to nineteen (17-19) years to repay CAARF based on the purchase price of $7 million; then put net income in the City Affordable Housing Fund that will be solely used to fund affordable housing projects/initiatives Put half of net income into CAARF and half into City Affordable Housing Fund: estimated 34-38 years to repay CAARF; then put net income into the City Affordable Housing Fund that will be solely used to fund affordable housing projects/initiatives
Staff recommends the second option: putting half of the net income into CAARF until the CAARF is repaid and the remaining half into the City Affordable Housing Fund. The Housing Element Update will explore potential programs to address housing needs that will need a source of revenue, including but not limited to:
Incentives for ADUs committed to very low- or low-income Support the creation of a countywide nonprofit to increase ADU production
211
Provide incentives for homeowners to rent to Section 8 and low- income households
Low-interest rehabilitation loans for very low- and low-income homeowners
Fee waivers for affordable housing
Funding for supportive housing
Programs to assist residents with disabilities make home accessibility improvements
Staffing resources to implement affordable housing
programs/policies

FISCAL IMPACT

The operation of the Workforce Apartments will provide a positive cash flow that can enable repayment to the CAARF and also generate some revenue that could be directed to the City Affordable Housing Fund

CITY COUNCIL VISION, MISSION AND VALUE/PRIORITY AREA

The creation of the Workforce Apartments is in alignment with the City Council’s Vision and Mission to create a more sustainable and equitable Foster City by expanding the availability of affordable housing. The Workforce Apartments also relate to several of the City Council’s Priority Areas. One of the purposes of the Workforce Apartments, as reflected in the preference categories for tenants, is to enable first responders and disaster service workers to live in Foster City so that they are more likely to be available in an emergency. The provision of affordable housing is aligned with the Value/Priority Area for “Smart Planning, Development, and the Local Economy” as a way to increase housing opportunities for all economic segments of the community.

Attachments:
Attachment 1 - Resolution Approving Budget for Remainder of FY 2021-2022
Attachment 2 - Draft 5-Year Operating Budget #1 with Original Unit Designations
Attachment 3 - Draft 5-Year Operating Budget #2 with Recommended Revisions
212
Attachment 4 - Draft 5-Year Operating Budget #3 with Recommended Revisions/No Rent for WF unit
213
RESOLUTION NO.____________

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF FOSTER CITY PROVIDING

DIRECTION AND APPROVING REVENUES AND EXPENDITURES BUDGET FOR THE REMAINDER OF FY 2021-2022 FOR THE WORKFORCE HOUSING FUND (FUND 139)

CITY OF FOSTER CITY
WHEREAS, the Development Agreement between the City of Foster City and Pilgrim Triton Phase III FC, LP, dated October 31, 2018, includes provisions for the development of a Workforce Project by Pilgrim Triton Phase III FC, LP consisting of twenty-two (22) rental housing units with affordability restrictions at various affordable rents and also provides the City the option to purchase the Workforce Project; and WHEREAS, the City Council adopted Resolution No. 2019-72 at its July 1, 2019 regular meeting, exercising its option to purchase the 22-unit Pilgrim Triton Phase C Workforce Project; and
WHEREAS, the Affordable Housing Regulatory Agreement for the Pilgrim Triton Phase C Project recorded on January 15, 2021 requires the 22-unit project to provide the 22 units with rents restricted at very low-, low-, moderate-, and 130% of Area Median Income levels; and
WHEREAS, on November 1, 2021 the City Council adopted Resolution No. 2021- 159 to:

1. Authorize the Mayor to execute an agreement with HIP Housing Affordable Ventures for professional services for provision of property management services pursuant to the proposal received, subject to any minor changes deemed necessary by the City Attorney

2. Establish a new Fund #139 for the Workforce Housing and transfer $45,000 from the fund balance of the Capital Asset Acquisition and Replacement Fund 326 to the new Workforce Housing Fund (Fund 139); and

3. Appropriate funding to the following expenditures accounts for FY2021/2022:
a. $20,000 to Account No. 139-0846-419-4246 Maintenance & Repair b. $25,000 to Account No. 139-0846-419-4251 Contractual Service NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Foster City does hereby approve the revenue and expenditure budget for the remainder of FY 2021-2022 and authorize the Finance Director to make the corresponding budget appropriations in the Workforce Housing Fund 139, as attached in Exhibit A.

BE IT FURTHER RESOLVED that the City Council of the City of Foster City does hereby direct the following with respect to the Workforce Housing Apartments:
214

1. Redesignate five (5) one-bedroom moderate-income Below Market Rate (BMR) units to two (2) very low-income BMR units and three (3) low-income BMR units;

2. Of the total eight (8) Workforce housing units, redesignate seven (7) Workforce Units to four (4) very-low income units and three (3) low-income units;

3. Of the total eight (8) Workforce housing units, reserve one (1) two-bedroom Workforce unit for potential City use as temporary sleeping quarters for Police Department Staff;

4. Hold a separate waitlist application and lottery process for the seven (7) redesignated Workforce units and invite those who applied for the BMR unit waitlist to apply;

5. Use funds from the Capital Asset Acquisition and Replacement Fund (CAARF) to complete the purchase of the Workforce Housing Apartments approved by Resolution No. 2019-72; and

6. At the end of each fiscal year, any positive net income from the Workforce Apartments shall be divided equally between the CAARF and the City Affordable Housing Fund, until the CAARF is repaid the $7,000,000 purchase price, at which time all of the net income will be placed in the City Affordable Housing Fund.

PASSED AND ADOPTED as a resolution of the City Council of the City of Foster City at the regular meeting held on the 7th day of March, 2022, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RICHA AWASTHI, MAYOR
ATTEST:

PRISCILLA SCHAUS, CITY CLERK
215
Draft 5-Year Operating Budget 2021-2026
501 Pilgrim Drive, Foster City
Line
Item
Account Description 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 2026-2027 2021-2027 Total
Comments/Assumptions
REVENUE - with original affordability designations
1 Rent Revenue - Gross Potential 188,328$ 753,312$ 775,911$ 799,189$ 823,164$ 847,859$ 4,187,764$ See Rent Schedule sheet; 3% increase per year. 2021-2022 assumes 25% of year for revenues (April, May, June). Source: City staff. 2 Tenant Assistance Payments -$ -$ -$ -$ -$ -$ -$ No rental assistance 3 Management unit 4,962$ 19,848$ 20,443$ 21,057$ 21,688$ 22,339$ 110,338$ Does not include rent reduction - see administrative expenses for rent discount. Assumes manager unit will be occupied in April. 4 Total 193,290$ 773,160$ 796,355$ 820,245$ 844,853$ 870,198$ 4,298,101$ Vacancy
5 Vacancy (9,416)$ (22,599)$ (23,277)$ (23,976)$ (24,695)$ (25,436)$ (129,399)$ Assumes 5% vacancy rate in year one; 3% in subsequent years; excludes management unit. Estimated by HHAV.
6 Total (9,416)$ (22,599)$ (23,277)$ (23,976)$ (24,695)$ (25,436)$ (129,399)$ Other Revenue
7 Tenant Charges - Late Fees 720$ 720$ 720$ 720$ 720$ 720$ 4,320$ Late fees; assumes $30 late fee for 10%, or 2 units, per month; no increase in fee over 5 years. Esiimated by HHAV.
8 Tenant Charges - Additional or
Replacement Key Fobs; Cardkeys
1,200$ 200$ 200$ 200$ 200$ 200$ 2,200$ 2 cardkeys/fobs included for each unit; additionals cost $100; replacement of lost keycard or fob is $100. Assumes 44 included; 10 additional; 2 replacement per year. Estimated by HHAV.
9 Tenant Charges -
Cleaning/Damage/Repair to Units
250$ 500$ 515$ 530$ 546$ 563$ 2,905$ Tenant damages; nominal amount per year; 3% increase; $250 in first fiscal year. Estimated by HHAV.
10 Credit Reporting Fees 1,680$ 70$ 70$ 70$ 70$ 70$ 2,030$ Assumes total adult occupancy of property of 48 adults @ $35 per application for lease up; assumes 2 applications each year thereafter.Estimated by HHAV. 11 Tenant Utility Charges through Ratio
Utility Billing System (RUBS)
18,881$ 60,816$ 62,640$ 64,520$ 66,455$ 68,449$ 341,762$ For water, gas, trash; see Expenses below for each line item. Estimated by HHAV.
12 Interest earned 7$ 42$ 65$ 88$ 112$ 159$ 473$ Reserve accounts interest @ .1%. See Reserve Analysis. Estimated by HHAV.
13 Interest earned on deposits 175$ 702$ 723$ 745$ 767$ 790$ 3,903$ Per City's proforma. Data not estimated by HHAV. 14 Total 22,913$ 63,050$ 64,933$ 66,873$ 68,871$ 70,951$ 357,592$ 15 Gross Margin 206,786$ 813,611$ 838,011$ 863,143$ 889,029$ 915,714$ 4,526,294$

EXPENSE
HHAV Management Fees (paid by City of Foster City to HHAV) 16 HHAV Lease-up fees 10,500$ 1,000$ 1,000$ 1,000$ 1,000$ 1,000$ 15,500$ Leasing fee for move-ins @$500 per move in; 21 units; assumes 2 move ins/turnovers in subsequent years. Per contract between HHAV and City. 2021-2022 assumes 33% for expenses (4 months - March, April, May, June) except as noted. Many of the expenses will start before tenants move in so an extra month in the first fiscal year is included.

1. Original Designations - Draft prepared 2/22/2022
Blue = Revenue; Orange = Expense; Purple = Other Expense. Pink = data provided by City staff or City's proforma Rental Revenue - original affordability recommendations 1 of 4
Attachment 2
216
Draft 5-Year Operating Budget 2021-2026
501 Pilgrim Drive, Foster City
Line
Item
Account Description 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 2026-2027 2021-2027 Total
Comments/Assumptions

1. Original Designations - Draft prepared 2/22/2022
Blue = Revenue; Orange = Expense; Purple = Other Expense. Pink = data provided by City staff or City's proforma 17 HHAV Unit Set up fee (one time) 2,200$ -$ -$ -$ -$ 2,200$ $100 per unit; one time fee. Per contract between HHAV and City. 18 HHAV Management Fees 11,880$ 23,760$ 24,473$ 25,207$ 25,963$ 26,742$ 138,025$ $90 per door per month; January through June in FY 21-22. Per contract between HHAV and City.
19 Total 24,580$ 24,760$ 25,473$ 26,207$ 26,963$ 27,742$ 155,725$ City Administrative Expenses
20 Miscellaneous Admin. Epenses 165$ 500$ 515$ 530$ 546$ 563$ 2,820$ Placeholder estimate only. Amount to be determined by City of Foster City if applicable.Estimated by HHAV.
21 City Staff Salaries and Benefits 5,594$ 12,782$ 13,165$ 13,560$ 13,967$ 14,386$ 73,456$ See Foster City Employee Costs Sheet. Estimated by City. 22 Manager's Unit Rent Discount 3,275$ 9,924$ 10,222$ 10,528$ 10,844$ 11,170$ 55,963$ Rent discount; 3% increase per year 23 Total 9,034$ 23,206$ 23,902$ 24,619$ 25,358$ 26,119$ 132,238$ Property Utility Expenses - paid by City to Utility Provider 24 Common Area Electricity 5,940$ 18,000$ 18,900$ 19,845$ 20,837$ 21,879$ 105,401$ Common areas only; 5% increase per year; tenants have their own meters; not billed to tenants through RUBS. Assumption is $1500 per month for FY 2022-2023. Review in July 2022 after 3 months of actuals. Estimated by HHAV.
25 Gas - water heating only 887$ 2,688$ 2,769$ 2,852$ 2,937$ 3,025$ 15,158$ 9 one-beds; 4 1-bed plus den (treated as 2-bed); 9 2-beds: $9 for 1-bed; $11 for 2-beds; 3% increase per year; recaptured through RUBS. Amounts are based on 2021 Utility Allowance Schedule. Review in July 2022 after 3 months of actuals. Estimated by HHAV.
26 Water - landscaping common area plus
tenant usage
15,642$ 51,000$ 52,530$ 54,106$ 55,729$ 57,401$ 286,408$ Estimated at $125 per unit per month recaptured through RUBS (includes washer use); 3% increase in subsequent years; recaptured through RUBS; common area: $1500 per month; 3% increase per year. Review in July 2022 after 3 months of actuals. Landscaping is not billed to tenants through RUBS.

Estimated by HHAV.
27 Trash Removal 2,352$ 7,128$ 7,342$ 7,562$ 7,789$ 8,023$ 40,196$ $27 per unit per month recaptured through RUBS; 3% increase in subsequent years; recaptured through RUBS; common area: $1000 per month; 3% increase per year. Amount is from 2021 UA Schedule. Review in July 2022 after 3 months of actuals. Estimated by HHAV.
28 Sewer 8,139$ 28,177$ 30,994$ 31,614$ 32,208$ 32,208$ 163,339$ Assumes $93.42 per unit in FY 2021-22, $106.73 in 22-23, $117.40 in 23-24, $119.75 in 24-25 and $122 (estimated) for 25-26 per City of Foster City Wastewater Rate sheet. Budgeted for 22 units. Review in July 2022 after 3 months of actuals.
29 Total 32,960$ 106,993$ 112,534$ 115,979$ 119,501$ 122,536$ 610,502$ HHAV Property Operating & Maintenance Expenses - Paid by City to HHAV 30 Maintenance Technician and Property
Manager Salaries and Benefits
15,583$ 33,376$ 34,377$ 35,409$ 36,471$ 37,565$ 192,780$ See HHAV Employee Costs Sheet. Estimated by HHAV. 31 Legal Expenses -$ 1,300$ 1,300$ 1,300$ 1,300$ 1,300$ 6,500$ Estimates one eviction or other legal advice each year except first fiscal year; HHAV to invoice city. Estimated by HHAV.
32 Credit/Background Checks 1,440$ 60$ 60$ 60$ 60$ 60$ 1,740$ Actual cost of credit/background checks - estimate 2 per year; HHAV to invoice city. Assumes 48 for 2021-22. Esimated by HHAV. 33 Miscellaneous Operating and
Maintenance
330$ 1,000$ 1,030$ 1,061$ 1,093$ 1,126$ 5,639$ Review in July 2022 after 3 months of actuals. Esimated by HHAV. 2 of 4
217
Draft 5-Year Operating Budget 2021-2026
501 Pilgrim Drive, Foster City
Line
Item
Account Description 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 2026-2027 2021-2027 Total
Comments/Assumptions

1. Original Designations - Draft prepared 2/22/2022
Blue = Revenue; Orange = Expense; Purple = Other Expense. Pink = data provided by City staff or City's proforma 34 Technology - property management
software
508$ 1,540$ 1,586$ 1,634$ 1,683$ 1,733$ 8,684$ Yardi property management software fees and support services. Estimate is $70 per unit per year; review after 3 months of actuals. Esimated by HHAV. 35 Repairs and Maintenance - HHAV time
billed to project
4,792$ 14,520$ 14,956$ 15,404$ 15,866$ 16,342$ 81,880$ See Repairs & Maintenance Rate Sheet; if HHAV needs to call a 3rd party vendor; bills will be paid directly to third party. See line item 54. Review in July 2022 after 3 months of actuals. Esimated by HHAV.
36 Materials and Supplies - HHAV 1,808$ 5,480$ 5,644$ 5,814$ 5,988$ 6,168$ 30,902$ See Repairs & Maintenance Rate Sheet. Billed at no markup.Review in July 2022 after 3 months of actuals. Esimated by HHAV.
37 Total 22,652$ 57,276$ 53,309$ 54,867$ 56,473$ 58,126$ 302,704$ Other Property Operating & Maintenance Expenses - Paid by City of Foster City to Contractors 38 RUBS 3rd party management fees 429$ 1,056$ 1,088$ 1,120$ 1,154$ 1,189$ 6,035$ $4 per month per door monthly fee plus $7.50 per door set up fee (one time).

Provider is National Utility Billing Systems; have quote. Assumes 3 months only in FY 2021-22.
39 Pest Control 825$ 2,500$ 2,575$ 2,652$ 2,732$ 2,814$ 14,098$ $2500 per year; 3% increase in subsequent years; estimate based on similar sized properties. Review in July 2022 after 3 months of actuals. Esimated by HHAV.
40 Security-Fire Alarm Monitoring 3,168$ 9,600$ 9,888$ 10,185$ 10,490$ 10,805$ 54,136$ $800 per month; 3% increase in subsequent years; estimate based on similar sized properties. Review in July 2022 after 3 months of actuals.Esimated by HHAV.
41 Landscape Contract 8,580$ 26,000$ 26,780$ 27,583$ 28,411$ 29,263$ 146,618$ $500 per week; FY 21-22 is for 3/1-6/30 only; 3% increase in subsequent years; check with City regarding common areas shared with condos; review in July 2022 after 3 months of actuals. Esimated by HHAV.
42 Property Telephone Line Expense for
Fire Alarm
100$ 103$ 106$ 109$ 113$ 116$ 647$ One phone line for fire alarm panel/monitoring; review in July 2022 after 3 months of actuals.Esimated by HHAV.
43 Repairs - Outside Contractors 2,178$ 6,600$ 6,798$ 7,002$ 7,212$ 7,428$ 37,218$ $300 per unit per year; 3% increase in subsequent years; Review in July 2022 after 3 months of actuals. Esimated by HHAV.
44 Miscellaneous Operating and
Maintenance
330$ 1,000$ 1,030$ 1,061$ 1,093$ 1,126$ 5,639$ Review in July 2022 after 3 months of actuals. Esimated by HHAV. 45 Total 15,610$ 46,859$ 48,265$ 49,713$ 51,204$ 52,740$ 264,391$ Property Taxes & Insurance Expense - paid by the City of Foster City 46 Real Estate Taxes 2,202$ 2,246$ 2,290$ 2,336$ 2,383$ 2,431$ 13,888$ Possessory Interest Tax: 1.169% of annual rent then 2%/yr per 2/1/22 email 47 Franchise Tax -$ -$ -$ -$ -$ -$ -$ N/A 48 Misc. Tax, License & Permits -$ -$ -$ -$ -$ -$ -$ N/a 59 Property and Liability Insurance 8,055$ 33,185$ 34,180$ 35,205$ 36,262$ 37,349$ 184,236$ Alliant estimates premium for the new location is $32,218; estimate was provided to the City.
50 Total 10,256$ 35,430$ 36,471$ 37,542$ 38,645$ 39,780$ 198,123$ 51 TOTAL OPERATING EXPENSES 115,093$ 294,524$ 299,953$ 308,927$ 318,143$ 327,043$ 1,663,683$ 52 NET ORDINARY INCOME 91,694$ 519,087$ 538,057$ 554,216$ 570,886$ 588,671$ 2,862,611$

OTHER EXPENSES - FINANCIAL & REPLACEMENT RESERVE
Financial Expense
3 of 4
218
Draft 5-Year Operating Budget 2021-2026
501 Pilgrim Drive, Foster City
Line
Item
Account Description 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 2026-2027 2021-2027 Total
Comments/Assumptions

1. Original Designations - Draft prepared 2/22/2022
Blue = Revenue; Orange = Expense; Purple = Other Expense. Pink = data provided by City staff or City's proforma 53 City's financial expense -$ -$ -$ -$ -$ -$ -$ To be determined by City of Foster City if applicable. 54 Total -$ -$ -$ -$ -$ -$ Reserve Expense
55 Replacement Reserve Expense -$ -$ -$ -$ -$ 22,557$ 22,557$ See separate Reserve Analysis; expenses start in Year 5. Data provided from contractor and HHAV using industry standards.
56 Replacement Reserve Fund - Initial
ContributionEquipment Replacement
Fund
20,000$ 20,000$ Per city meeting on November 1, 2021. 57 Replacement Reserve Fund - annual
contribution
-$ 22,000$ 22,660$ 23,340$ 24,040$ 24,761$ 116,801$ $22,000 annual contribution, increases 3% per year - from City's proforma.

Review annually to ensure sufficient reserves.
58 Total 20,000$ 22,000$ 22,660$ 23,340$ 24,040$ 47,318$ 159,358$ 59 TOTAL OTHER EXPENSE 20,000$ 22,000$ 22,660$ 23,340$ 24,040$ 47,318$ 159,358$ 60 CASH FLOW 71,694$ 497,087$ 515,397$ 530,876$ 546,846$ 541,353$ 2,703,253$ 4 of 4
219
Draft 5-Year Operating Budget 2021-2026
501 Pilgrim Drive, Foster City
Line
Item
Account Description 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 2026-2027 2021-2027 Total
Comments/Assumptions/Source of Data
1 Rent Revenue - Gross Potential 166,050$ 664,200$ 684,126$ 704,650$ 725,789$ 747,563$ 3,692,378$ See Rent Schedule sheet; 3% increase per year. 2021-2022 assumes 25% of year for revenues (April, May, June). Uses recommended redesignations for 7 Workforce units and 5 moderate one-bedrooms to low and very low income (6 very low and 6 low).

Rent schedule is from City.
2 Tenant Assistance Payments -$ -$ -$ -$ -$ -$ -$ No rental assistance. 3 Management unit 6,970$ 21,120$ 21,754$ 22,406$ 23,078$ 23,771$ 119,099$ Does not include rent reduction for onsite unit - see administrative expenses for discount. Assumes manager unit will be occupied in March.
4 Total 173,020$ 685,320$ 705,880$ 727,056$ 748,868$ 771,334$ 3,811,477$ Vacancy
5 Vacancy (8,303)$ (19,926)$ (20,524)$ (21,139)$ (21,774)$ (22,427)$ (114,092)$ Assumes 5% vacancy rate in year one; 3% in subsequent years; excludes management unit.
6 Total (8,303)$ (19,926)$ (20,524)$ (21,139)$ (21,774)$ (22,427)$ (114,092)$ Other Revenue
7 Tenant Charges - Late Fees 720$ 720$ 720$ 720$ 720$ 720$ 4,320$ Late fees; assumes $30 late fee for 10%, or 2 units, per month; no increase in fee over 5 years. Estimated by HHAV.
8 Tenant Charges - Additional or
Replacement Key Fobs; Cardkeys
1,200$ 200$ 200$ 200$ 200$ 200$ 2,200$ 2 cardkeys/fobs included for each unit; additionals cost $100; replacement of lost keycard or fob is $100. Assumes 44 included; 10 additional; 2 replacement per year.Estimated by HHAV. 9 Tenant Charges -
Cleaning/Damage/Repair to Units
250$ 500$ 515$ 530$ 546$ 563$ 2,905$ Tenant damages; nominal amount per year; 3% increase; $250 in first fiscal year. Estimated by HHAV.
10 Credit Reporting Fees 1,680$ 70$ 70$ 70$ 70$ 70$ 2,030$ Assumes total adult occupancy of property of 48 adults @ $35 per application for lease up; assumes 2 applications each year thereafter.Estimated by HHAV.
11 Tenant Utility Charges through Ratio
Utility Billing System (RUBS)
18,881$ 60,816$ 62,640$ 64,520$ 66,455$ 68,449$ 341,762$ For water, gas, trash; see Expenses below for each line item. 12 Interest earned 7$ 42$ 65$ 88$ 112$ 159$ 473$ Reserve accounts interest @ .1%. See Reserve Analysis.

Estimated by HHAV.
13 Interest earned on deposits 156$ 621$ 640$ 659$ 679$ 699$ 3,455$ Per City's proforma. These values were not estimated by HHAV. 14 Total 22,894$ 62,969$ 64,850$ 66,787$ 68,783$ 70,860$ 357,144$ 15 Gross Margin 187,611$ 728,363$ 750,206$ 772,704$ 795,877$ 819,767$ 4,054,528$

2. Recommended Alternative - Draft prepared 2/22/2022
Color Code: Blue = Revenue; Orange = Expense; Pink = from City Proforma or data provided by City Rental Revenue - with Recommended Revisions to Affordability Designations for 7 workforce and 5 moderate units

REVENUE - WITH RECOMMENDED REVISIONS
1 of 4
Attachment 3
220
Draft 5-Year Operating Budget 2021-2026
501 Pilgrim Drive, Foster City
Line
Item
Account Description 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 2026-2027 2021-2027 Total
Comments/Assumptions/Source of Data

2. Recommended Alternative - Draft prepared 2/22/2022
Color Code: Blue = Revenue; Orange = Expense; Pink = from City Proforma or data provided by City

REVENUE - WITH RECOMMENDED REVISIONS EXPENSE
HHAV Management Fees (paid by City of Foster City to HHAV per contract 16 HHAV Lease-up fees 10,500$ 1,000$ 1,000$ 1,000$ 1,000$ 1,000$ 15,500$ Leasing fee for move-ins @$500 per move in; 21 units; assumes 2 move ins/turnovers in subsequent years; per contract between City and HHAV.
17 HHAV Unit Set up fee (one time) 2,200$ -$ -$ -$ -$ 2,200$ $100 per unit; one time fee; per contract between City and HHAV. 18 HHAV Management Fees 11,880$ 23,760$ 24,473$ 25,207$ 25,963$ 26,742$ 138,025$ $90 per door per month; January through June in FY 21-22. Per contract between City and HHAV.
19 Total 24,580$ 24,760$ 25,473$ 26,207$ 26,963$ 27,742$ 155,725$ City Administrative Expenses
20 Miscellaneous Admin. Epenses 165$ 500$ 515$ 530$ 546$ 563$ 2,820$ Placeholder estimate only. Amount to be determined by City of Foster City if applicable. Estimated by HHAV.
21 City Staff Salaries and Benefits 5,594$ 12,782$ 13,165$ 13,560$ 13,967$ 14,386$ 73,456$ See Foster City Employee Costs Sheet. Not estimated by HHAV. 22 Manager's Unit Rent Discount 3,275$ 9,924$ 10,222$ 10,528$ 10,844$ 11,170$ 55,963$ Rent discount; 3% increase per year 23 Total 9,034$ 23,206$ 23,902$ 24,619$ 25,358$ 26,119$ 132,238$ Property Utility Expenses - paid by City to Utility Provider 24 Common Area Electricity 5,940$ 18,000$ 18,900$ 19,845$ 20,837$ 21,879$ 105,401$ Common areas only; 5% increase per year; tenants have their own meters; not billed to tenants through RUBS. Assumption is $1500 per month for FY 2022-2023. Review in July 2022 after 3 months of actuals. Estimated by HHAV.
25 Gas - water heating only 887$ 2,688$ 2,769$ 2,852$ 2,937$ 3,025$ 15,158$ 9 one-beds; 4 1-bed plus den (treated as 2-bed); 9 2-beds: $9 for 1- bed; $11 for 2-beds; 3% increase per year; recaptured through RUBS. Amounts are based on 2021 Utility Allowance Schedule.

Review in July 2022 after 3 months of actuals.
26 Water - landscaping common area plus
tenant usage
15,642$ 51,000$ 52,530$ 54,106$ 55,729$ 57,401$ 286,408$ Estimated at $125 per unit per month recaptured through RUBS (includes washer use); 3% increase in subsequent years; recaptured through RUBS; common area: $1500 per month; 3% increase per year. Review in July 2022 after 3 months of actuals.

Landscaping is not billed to tenants through RUBS.
27 Trash Removal 2,352$ 7,128$ 7,342$ 7,562$ 7,789$ 8,023$ 40,196$ $27 per unit per month recaptured through RUBS; 3% increase in subsequent years; recaptured through RUBS; common area: $1000 per month; 3% increase per year. Amount is from 2021 UA Schedule. Review in July 2022 after 3 months of actuals. 28 Sewer 8,139$ 28,177$ 30,994$ 31,614$ 32,208$ 32,208$ 163,339$ Assumes $93.42 per unit in FY 2021-22, $106.73 in 22-23, $117.40 in 23-24, $119.75 in 24-25 and $122 (estimated) for 25-26 per City of Foster City Wastewater Rate sheet. Budgeted for 22 units.

Review in July 2022 after 3 months of actuals.

General notes on expenses: 2021-2022 assumes 33% for expenses (4 months - March, April, May, June) in year one except as noted. Many of the expenses will start before tenants move in so an extra month in the first fiscal year is included.
2 of 4
221
Draft 5-Year Operating Budget 2021-2026
501 Pilgrim Drive, Foster City
Line
Item
Account Description 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 2026-2027 2021-2027 Total
Comments/Assumptions/Source of Data

2. Recommended Alternative - Draft prepared 2/22/2022
Color Code: Blue = Revenue; Orange = Expense; Pink = from City Proforma or data provided by City REVENUE - WITH RECOMMENDED REVISIONS 29 Total 32,960$ 106,993$ 112,534$ 115,979$ 119,501$ 122,536$ 610,502$ HHAV Property Operating & Maintenance Expenses - Paid by City to HHAV 30 Maintenance Technician and Property
Manager Salaries and Benefits
15,583$ 33,376$ 34,377$ 35,409$ 36,471$ 37,565$ 192,780$ See HHAV Employee Costs Sheet 31 Legal Expenses -$ 1,300$ 1,300$ 1,300$ 1,300$ 1,300$ 6,500$ Est. one eviction or other legal advice each year except first fiscal year; HHAV to invoice city.
32 Credit/Background Checks 1,440$ 60$ 60$ 60$ 60$ 60$ 1,740$ Actual cost of credit/background checks - estimate 2 per year; HHAV to invoice city. Assumes 48 for 2021-22.
33 Miscellaneous Operating and
Maintenance
330$ 1,000$ 1,030$ 1,061$ 1,093$ 1,126$ 5,639$ Review in July 2022 after 3 months of actuals. 34 Technology - property management
software
508$ 1,540$ 1,586$ 1,634$ 1,683$ 1,733$ 8,684$ Yardi property management software fees and support services. 35 Repairs and Maintenance - HHAV time
billed to project
4,792$ 14,520$ 14,956$ 15,404$ 15,866$ 16,342$ 81,880$ See Repairs & Maintenance Rate Sheet; if HHAV needs to call a 3rd party vendor; bills will be paid directly to third party. See line item 54. Review in July 2022 after 3 months of actuals. 36 Materials and Supplies - HHAV 1,808$ 5,480$ 5,644$ 5,814$ 5,988$ 6,168$ 30,902$ See Repairs & Maintenance Rate Sheet. Billed at no markup.Review in July 2022 after 3 months of actuals.
37 Total 22,652$ 57,276$ 53,309$ 54,867$ 56,473$ 58,126$ 302,704$ Other Property Operating & Maintenance Expenses - Paid by City of Foster City to Contractors 38 RUBS 3rd party management fees 429$ 1,056$ 1,088$ 1,120$ 1,154$ 1,189$ 6,035$ $4 per month per door monthly fee plus $7.50 per door set up fee (one time). Provider is National Utility Billing Systems; have quote.

Assumes 3 months only in FY 2021-22.
39 Pest Control 825$ 2,500$ 2,575$ 2,652$ 2,732$ 2,814$ 14,098$ $2500 per year; 3% increase in subsequent years; estimate based on similar sized properties. Review in July 2022 after 3 months of actuals. Estimated by HHAV.
40 Security-Fire Alarm Monitoring 3,168$ 9,600$ 9,888$ 10,185$ 10,490$ 10,805$ 54,136$ $800 per month; 3% increase in subsequent years; estimate based on similar sized properties. Review in July 2022 after 3 months of actuals. Estimated by HHAV.
41 Landscape Contract 8,580$ 26,000$ 26,780$ 27,583$ 28,411$ 29,263$ 146,618$ $500 per week; FY 21-22 is for 3/1-6/30 only; 3% increase in subsequent years; check with City regarding common areas shared with condos; review in July 2022 after 3 months of actuals.

Estimated by HHAV.
42 Property Telephone Line Expense for
Fire Alarm
100$ 103$ 106$ 109$ 113$ 116$ 647$ one phone line for fire alarm panel/monitoring; review in July 2022 after 3 months of actuals.
43 Repairs - Outside Contractors 2,178$ 6,600$ 6,798$ 7,002$ 7,212$ 7,428$ 37,218$ $300 per unit per year; 3% increase in subsequent years; Review in July 2022 after 3 months of actuals. Estimated by HHAV. 44 Miscellaneous Operating and
Maintenance
330$ 1,000$ 1,030$ 1,061$ 1,093$ 1,126$ 5,639$ Contingency; review after one year of actuals.Estimated by HHAV. 45 Total 15,610$ 46,859$ 48,265$ 49,713$ 51,204$ 52,740$ 264,391$ 3 of 4
222
Draft 5-Year Operating Budget 2021-2026
501 Pilgrim Drive, Foster City
Line
Item
Account Description 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 2026-2027 2021-2027 Total
Comments/Assumptions/Source of Data

2. Recommended Alternative - Draft prepared 2/22/2022
Color Code: Blue = Revenue; Orange = Expense; Pink = from City Proforma or data provided by City REVENUE - WITH RECOMMENDED REVISIONS Property Taxes & Insurance Expense - paid by the City of Foster City 46 Real Estate Taxes 1,941$ 1,980$ 2,020$ 2,060$ 2,101$ 2,143$ 12,245$ Possessory Interest Tax: 1.169% of annual rent then 2%/yr per 2/1/22 email 47 Franchise Tax -$ -$ -$ -$ -$ -$ -$ N/A 48 Misc. Tax, License & Permits -$ -$ -$ -$ -$ -$ -$ N/a 49 Property and Liability Insurance 8,055$ 33,185$ 34,180$ 35,205$ 36,262$ 37,349$ 184,236$ Alliant estimates premium for the new location is $32,218. Quote provided to City.
50 Total 9,996$ 35,164$ 36,200$ 37,265$ 38,363$ 39,493$ 196,481$ 41 TOTAL OPERATING EXPENSES 114,832$ 294,258$ 299,682$ 308,651$ 317,861$ 326,756$ 1,662,040$ 52 NET ORDINARY INCOME 72,779$ 434,105$ 450,523$ 464,053$ 478,016$ 493,012$ 2,392,488$ Financial Expense
53 City's financial expense -$ -$ To be determined by City of Foster City if applicable 54 Total -$ -$ -$ -$ -$ -$ Replacement Reserve
55 Replacement Reserve Expense -$ -$ -$ -$ -$ 22,557$ 22,557$ See separate Reserve Analysis; expenses start in Year 5; some data provided by Contractor; remainder estimated by HHAV. 56 Replacement Reserve Fund - initial
contribution
20,000$ 20,000$ Per City Staff Meeting November 1, 2021 57 Replacement Reserve Fund - annual
Contribution
-$ 22,000$ 22,660$ 23,340$ 24,040$ 24,761$ 116,801$ $22,000 per year contribution, 3% increase per year - See separate Reserve Analysis. $22,000 annual contribution is from City's proforma. Review annually to ensure sufficient reserves. 58 Total 20,000$ 22,000$ 22,660$ 23,340$ 24,040$ 47,318$ 159,358$ 59 TOTAL OTHER EXPENSE 20,000$ 22,000$ 22,660$ 23,340$ 24,040$ 47,318$ 159,358$ 60 CASH FLOW 52,779$ 412,105$ 427,863$ 440,713$ 453,976$ 445,693$ 2,233,130$

OTHER EXPENSES - FINANCIAL & REPLACEMENT RESERVE
4 of 4
223
Draft 5-Year Operating Budget 2021-2026
501 Pilgrim Drive, Foster City
Line
Item
Account Description 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 2026-2027 2021-2027 Total
Comments/Assumptions/Source of Data
1 Rent Revenue - Gross Potential 156,150$ 624,600$ 643,338$ 662,638$ 682,517$ 702,993$ 3,472,236$ See Rent Schedule sheet; 3% increase per year. 2021-2022 assumes 25% of year for revenues (April, May, June). Uses recommended redesignations for 7 Workforce units and 5 moderate one-bedrooms to low and very low income (6 very low and 6 low). Values provided by City.
2 Tenant Assistance Payments -$ -$ -$ -$ -$ -$ -$ No rental assistance 3 Management unit 6,970$ 21,120$ 21,754$ 22,406$ 23,078$ 23,771$ 119,099$ Does not include rent reduction - see administrative expenses for discount.

Assumes manager unit will be occupied in March.
4 Total 163,120$ 645,720$ 665,092$ 685,044$ 705,596$ 726,764$ 3,591,335$ Vacany
5 Vacancy (7,808)$ (18,738)$ (19,300)$ (19,879)$ (20,476)$ (21,090)$ (107,290)$ Assumes 5% vacancy rate in year one; 3% in subsequent years; excludes management unit. Estimated by HHAV.
6 Total (7,808)$ (18,738)$ (19,300)$ (19,879)$ (20,476)$ (21,090)$ (107,290)$ Other Revenue
7 Tenant Charges - Late Fees 720$ 720$ 720$ 720$ 720$ 720$ 4,320$ Late fees; assumes $30 late fee for 10%, or 2 units, per month; no increase in fee over 5 years. Estimated by HHAV.
8 Tenant Charges - Additional or
Replacement Key Fobs; Cardkeys
1,200$ 200$ 200$ 200$ 200$ 200$ 2,200$ 2 cardkeys/fobs included for each unit; additionals cost $100; replacement of lost keycard or fob is $100. Assumes 44 included; 10 additional; 2 replacement per year. Estimated by HHAV.
9 Tenant Charges -
Cleaning/Damage/Repair to Units
250$ 500$ 515$ 530$ 546$ 563$ 2,905$ Tenant damages; nominal amount per year; 3% increase; $250 in first fiscal year. Estimated by HHAV.
10 Credit Reporting Fees 1,680$ 70$ 70$ 70$ 70$ 70$ 2,030$ Assumes total adult occupancy of property of 48 adults @ $35 per application for lease up; assumes 2 applications each year thereafter. Estimated by HHAV.
11 Tenant Utility Charges through Ratio
Utility Billing System (RUBS)
18,881$ 60,816$ 62,640$ 64,520$ 66,455$ 68,449$ 341,762$ For water, gas, trash; see Expenses below for each line item. Estimated by HHAV.
12 Interest earned 7$ 42$ 65$ 88$ 112$ 159$ 473$ Reserve accounts interest @ .1%. See Reserve Analysis. Estimated by HHAV.
13 Interest earned on deposits 147$ 585$ 602$ 621$ 639$ 658$ 3,253$ Per City's proforma. These values were not estimated by HHAV. 13 Total 22,885$ 62,933$ 64,813$ 66,749$ 68,743$ 70,819$ 356,941$ 14 Gross Margin 178,197$ 689,915$ 710,604$ 731,914$ 753,863$ 776,493$ 3,840,986$

EXPENSE
HHAV Management Fees (paid by City of Foster City to HHAV) 15 HHAV Lease-up fees 10,500$ 1,000$ 1,000$ 1,000$ 1,000$ 1,000$ 15,500$ Leasing fee for move-ins @$500 per move in; 21 units; assumes 2 move ins/turnovers in subsequent years. Per contract between City and HHAV. 16 HHAV Unit Set up fee (one time) 2,200$ -$ -$ -$ -$ 2,200$ $100 per unit; one time fee. Per contract between City and HHAV.

REVENUE - WITH RECOMMENDED REVISIONS
2021-2022 assumes 33% for expenses (4 months - March, April, May, June) except as noted. Many of the expenses will start before tenants move in so an extra month in the first fiscal year is included. 1 of 4
Attachment 4
224
Draft 5-Year Operating Budget 2021-2026
501 Pilgrim Drive, Foster City
Line
Item
Account Description 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 2026-2027 2021-2027 Total
Comments/Assumptions/Source of Data

3. Recommended Alternative with No Rent for WF Unit - Draft prepared 2/22/2022 Blue = Revenue; Orange = Expense; Purple = Other Expense. Pink = data provided by City staff or City's proforma REVENUE - WITH RECOMMENDED REVISIONS 17 HHAV Management Fees 11,880$ 23,760$ 24,473$ 25,207$ 25,963$ 26,742$ 138,025$ $90 per door per month; January through June in FY 21-22. Per Contract between City and HHAV.
18 Total 24,580$ 24,760$ 25,473$ 26,207$ 26,963$ 27,742$ 155,725$ City Administrative Expenses
19 Miscellaneous Admin. Expenses 165$ 500$ 515$ 530$ 546$ 563$ 2,820$ Placeholder estimate only. Amount to be determined by City of Foster City if applicable.
20 City Staff Salaries and Benefits 5,594$ 12,782$ 13,165$ 13,560$ 13,967$ 14,386$ 73,456$ See Foster City Employee Costs Sheet. Data provided by City. 21 Manager's Unit Rent Discount 3,275$ 9,924$ 10,222$ 10,528$ 10,844$ 11,170$ 55,963$ Rent discount; 3% increase per year 22 Total 9,034$ 23,206$ 23,902$ 24,619$ 25,358$ 26,119$ 132,238$ Property Utility Expenses - paid by City to Utility Provider 23 Common Area Electricity 5,940$ 18,000$ 18,900$ 19,845$ 20,837$ 21,879$ 105,401$ Common areas only; 5% increase per year; tenants have their own meters; not billed to tenants through RUBS. Assumption is $1500 per month for FY 2022- 2023. Review in July 2022 af ter 3 months of actuals. Estimated by HHAV. 24 Gas - water heating only 887$ 2,688$ 2,769$ 2,852$ 2,937$ 3,025$ 15,158$ 9 one-beds; 4 1-bed plus den (treated as 2-bed); 9 2-beds: $9 for 1-bed; $11 for 2-beds; 3% increase per year; recaptured through RUBS. Amounts are based on 2021 Utility Allowance Schedule. Review in July 2022 after 3 months of actuals. Estimated by HHAV.
25 Water - landscaping common area plus
tenant usage
15,642$ 51,000$ 52,530$ 54,106$ 55,729$ 57,401$ 286,408$ Estimated at $125 per unit per month recaptured through RUBS (includes washer use); 3% increase in subsequent years; recaptured through RUBS; common area: $1500 per month; 3% increase per year. Review in July 2022 after 3 months of actuals. Landscaping is not billed to tenants through RUBS.

Estimated by HHAV.
26 Trash Removal 2,352$ 7,128$ 7,342$ 7,562$ 7,789$ 8,023$ 40,196$ $27 per unit per month recaptured through RUBS; 3% increase in subsequent years; recaptured through RUBS; common area: $1000 per month; 3% increase per year. Amount is from 2021 UA Schedule. Review in July 2022 after 3 months of actuals. Estimated by HHAV.
27 Sewer 8,139$ 28,177$ 30,994$ 31,614$ 32,208$ 32,208$ 163,339$ Assumes $93.42 per unit in FY 2021-22, $106.73 in 22-23, $117.40 in 23-24, $119.75 in 24-25 and $122 (estimated) for 25-26 per City of Foster City Wastewater Rate sheet. Budgeted for 22 units. Review in July 2022 after 3 months of actuals.
28 Total 32,960$ 106,993$ 112,534$ 115,979$ 119,501$ 122,536$ 610,502$ HHAV Property Operating & Maintenance Expenses - Paid by City to HHAV 29 Maintenance Technician and Property
Manager Salaries and Benefits
15,583$ 33,376$ 34,377$ 35,409$ 36,471$ 37,565$ 192,780$ See HHAV Employee Costs Sheet. Data provided by City. 30 Legal Expenses -$ 1,300$ 1,300$ 1,300$ 1,300$ 1,300$ 6,500$ Est. one eviction or other legal advice each year except first fiscal year; HHAV to invoice city. Estimated by HHAV.
31 Credit/Background Checks 1,440$ 60$ 60$ 60$ 60$ 60$ 1,740$ Actual cost of credit/background checks - estimate 2 per year; HHAV to invoice city. Assumes 48 for 2021-22. Estimated by HHAV. 32 Miscellaneous Operating and
Maintenance
330$ 1,000$ 1,030$ 1,061$ 1,093$ 1,126$ 5,639$ Review in July 2022 after 3 months of actuals. Estimated by HHAV. 2 of 4
225
Draft 5-Year Operating Budget 2021-2026
501 Pilgrim Drive, Foster City
Line
Item
Account Description 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 2026-2027 2021-2027 Total
Comments/Assumptions/Source of Data

3. Recommended Alternative with No Rent for WF Unit - Draft prepared 2/22/2022 Blue = Revenue; Orange = Expense; Purple = Other Expense. Pink = data provided by City staff or City's proforma REVENUE - WITH RECOMMENDED REVISIONS 33 Technology - property management software
508$ 1,540$ 1,586$ 1,634$ 1,683$ 1,733$ 8,684$ Yardi property management software fees and support services. Estimated by HHAV.
34 Repairs and Maintenance - HHAV time
billed to project
4,792$ 14,520$ 14,956$ 15,404$ 15,866$ 16,342$ 81,880$ See Repairs & Maintenance Rate Sheet; if HHAV needs to call a 3rd party vendor; bills will be paid directly to third party. See line item 54. Review in July 2022 after 3 months of actuals. Estimated by HHAV.
35 Materials and Supplies - HHAV 1,808$ 5,480$ 5,644$ 5,814$ 5,988$ 6,168$ 30,902$ See Repairs & Maintenance Rate Sheet. Billed at no markup.Review in July 2022 after 3 months of actuals. Estimated by HHAV.
36 Total 22,652$ 57,276$ 53,309$ 54,867$ 56,473$ 58,126$ 302,704$ Other Property Operating & Maintenance Expenses - Paid by City of Foster City to Contractors 37 RUBS 3rd party management fees 429$ 1,056$ 1,088$ 1,120$ 1,154$ 1,189$ 6,035$ $4 per month per door monthly fee plus $7.50 per door set up fee (one time).

Provider is National Utility Billing Systems; have quote. Assumes 3 months only in FY 2021-22.
38 Pest Control 825$ 2,500$ 2,575$ 2,652$ 2,732$ 2,814$ 14,098$ $2500 per year; 3% increase in subsequent years; estimate based on similar sized properties. Review in July 2022 after 3 months of actuals. Estimated by HHAV.
39 Security-Fire Alarm Monitoring 3,168$ 9,600$ 9,888$ 10,185$ 10,490$ 10,805$ 54,136$ $800 per month; 3% increase in subsequent years; estimate based on similar sized properties. Review in July 2022 after 3 months of actuals. Estimated by HHAV.
40 Landscape Contract 8,580$ 26,000$ 26,780$ 27,583$ 28,411$ 29,263$ 146,618$ $500 per week; FY 21-22 is for 3/1-6/30 only; 3% increase in subsequent years; check with City regarding common areas shared with condos; review in July 2022 after 3 months of actuals. Estimated by HHAV. 41 Property Telephone Line Expense for
Fire Alarm
100$ 103$ 106$ 109$ 113$ 116$ 647$ one phone line for fire alarm panel/monitoring; review in July 2022 after 3 months of actuals. Estimated by HHAV.
42 Repairs - Outside Contractors 2,178$ 6,600$ 6,798$ 7,002$ 7,212$ 7,428$ 37,218$ $300 per unit per year; 3% increase in subsequent years; Review in July 2022 after 3 months of actuals. Estimated by HHAV.
44 Miscellaneous Operating and
Maintenance
330$ 1,000$ 1,030$ 1,061$ 1,093$ 1,126$ 5,639$ Contingency; 3% increase in subsequent years; Review in 1 year. 3 months of actuals. Estimated by HHAV.
45 Total 15,610$ 46,859$ 48,265$ 49,713$ 51,204$ 52,740$ 264,391$ Property Taxes & Insurance Expense - paid by the City of Foster City 46 Real Estate Taxes 1,825$ 1,862$ 1,899$ 1,937$ 1,976$ 2,015$ 11,515$ Possessory Interest Tax: 1.169% of annual rent then 2%/yr per 2/1/22 email 47 Franchise Tax -$ -$ -$ -$ -$ -$ -$ N/A 48 Misc. Tax, License & Permits -$ -$ -$ -$ -$ -$ -$ N/A 49 Property and Liability Insurance 8,055$ 33,185$ 34,180$ 35,205$ 36,262$ 37,349$ 184,236$ Alliant estimates premium for the new location is $32,218. Provided by City. 50 Total 9,880$ 35,046$ 36,079$ 37,143$ 38,238$ 39,365$ 195,751$ 51 TOTAL OPERATING EXPENSES 114,716$ 294,140$ 299,562$ 308,528$ 317,736$ 326,628$ 1,661,310$ 52 NET ORDINARY INCOME 63,481$ 395,775$ 411,042$ 423,386$ 436,127$ 449,865$ 2,179,676$

OTHER EXPENSES - FINANCIAL & REPLACEMENT RESERVE
Financial Expense
3 of 4
226
Draft 5-Year Operating Budget 2021-2026
501 Pilgrim Drive, Foster City
Line
Item
Account Description 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 2026-2027 2021-2027 Total
Comments/Assumptions/Source of Data

3. Recommended Alternative with No Rent for WF Unit - Draft prepared 2/22/2022 Blue = Revenue; Orange = Expense; Purple = Other Expense. Pink = data provided by City staff or City's proforma REVENUE - WITH RECOMMENDED REVISIONS 53 City's financial expense -$ -$ -$ -$ -$ -$ -$ To be determined by City of Foster City if applicable. 54 Total -$ -$ -$ -$ -$ -$ Reserve Expense
55 Replacement Reserve Expense -$ -$ -$ -$ -$ 22,557$ 22,557$ See separate Reserve Analysis; expenses start in Year 5. Estimated by HHAV.

Replacement Reserve Fund - Initial
Contribution
20,000$ 20,000$ Per City Staff meeting November 1, 2021 56 Equipment Replacement Fund -$ 22,000$ 22,660$ 23,340$ 24,040$ 24,761$ 116,801$ Annual contribution of $22,000 with 3% increase per year. Per City's proforma; review annually.
58 Total 20,000$ 22,000$ 22,660$ 23,340$ 24,040$ 47,318$ 159,358$ 59 TOTAL OTHER EXPENSE 20,000$ 22,000$ 22,660$ 23,340$ 24,040$ 47,318$ 159,358$ 60 CASH FLOW 43,481$ 373,775$ 388,382$ 400,046$ 412,087$ 402,547$ 2,020,318$ 4 of 4
227
Prepared Date 2/5/2022 City of Foster City, CA
Accounts Payable Check Register

Page 1 ends

Foster City City CouncilMarch 7, 2022

Foster City City Council
March 7, 2022