Fremont City Council Meeting: 03/01/22 07:00 PM
3300 Capitol Avenue Div/Dept: Public Works
Fremont, CA 94538 Category: Fees & Rates
SCHEDULED
Sponsors:
STAFF REPORT (ID # 4544) DOC ID: 4544
Updated: 2/23/2022 4:21 PM by Susan Gauthier Page 1
PROPOSED DEVELOPMENT IMPACT FEE ANNUAL INFLATIONARY INCREASE - Public Hearing (Published Notice) to Consider Adoption of a Resolution to Apply an Annual Inflationary Adjustment to the City’s Development Impact Fees, Including the Parkland Fee, Park Facilities Fee, Traffic Impact Fee, Capital Facilities Fee, and Fire Facilities Fee, Increasing the Fees in an Amount of 6.62%, Based on the Bay Area Construction Cost Index, Effective July 1, 2022.
Contact Persons:
Name: Michelle Silva-Salinas Hans Larsen
Title: Business Manager Public Works Director
Div/Dept: Public Works Public Works
Phone: 510-979-5705 510-494-4722
E-Mail: [email protected] [email protected]
Executive Summary: The purpose of this report is to implement a fee adjustment to Development Impact Fees, based on annual construction cost escalation, to ensure that proposed mitigation to offset the community impacts associated with new development can be delivered.
BACKGROUND: The City of Fremont imposes fees on new development to mitigate its impacts and to fund public facility improvements that meet the needs of a growing community. These fees are commonly known as development impact fees. The City has five fee programs: two related to Parks (parkland acquisition, park facilities), one for Transportation (also known as the Traffic Impact Fee), and two for Civic Facilities (fire facilities/equipment, other city buildings/infrastructure/equipment). The City uses its impact fees to fund public facilities and improvements needed to serve new development. Impact fees are typically paid by developers at the time of building permit issuance. Impact fees cannot, however, be used to correct existing deficiencies or for the ongoing operation and maintenance costs of these facilities. Fee revenues are allocated to specific projects as part of the City’s 5-Year Capital Improvement Program (CIP).
DISCUSSION/ANALYSIS:
Adjustment of Development Impact Fees
Based on prior Council direction, the City annually adjusts Development Impact Fees to keep pace with the inflationary cost of infrastructure construction. The index most widely used in the construction industry is the Construction Cost Index (CCI) prepared by the Engineering News Record for the San Francisco Bay Area. This index takes into account the cost of construction materials and labor and is distinctly different from the Consumer Price Index. The currently published CCI reflects a 6.62% increase in construction costs over the past year. Consistent with past practice, staff recommends increasing all development fees by 6.62% effective July 1, 2022. It is noted that the annual construction cost escalation increase approved by the City Council, effective for the current fiscal year was 4.48%.
Staff Report (ID # 4544) Meeting of March 1, 2022
Updated: 2/23/2022 4:21 PM by Susan Gauthier Page 2
State law requires a minimum 60-day period after council approves a fee increase before the increase can go into effect. Staff is recommending an annual adjustment in an amount of 6.62% to the development impact fees to be effective on July 1, 2022, which is more than the 60 days required by law. Proposed development impact fees are provided in Exhibit A.
Fee Reduction to Support Affordable Housing
On May 4, 2021, the City Council approved a comprehensive update to the City’s Development Impact Fee program which established a 50% reduced rate for development fees related to affordable housing. The recommended inflationary fee increase would apply “across the board” to all City development fees, including affordable housing. From a relative perspective, development fees related to affordable housing would continue to be discounted at a 50% rate.
PUBLIC NOTICE: A public hearing notice was published in the Tri-City Voice on February 15, 2022. Additionally, email notification to the public was sent to approximately 1,736 persons listed on the City’s eNews Notify Me subscribers of the Builder’s Interest list on February 10, 2022.
FISCAL IMPACT: The proposed adjustment of 6.62% to the development impact fees would ensure that new development is adequately funding its share of the costs of new public facilities as the costs to construct these projects increase over time. The annual adjustment to the impact fees provides for fees that better reflect construction cost increases to ensure the City does not subsidize new development’s share of these facilities and that adequate funding is available when the City is ready to construct the projects.
ENVIRONMENTAL REVIEW: The recommended action is exempt from the requirements of the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15061(b)(3) in that it is not a project which has the potential for causing a significant effect on the environment.
ATTACHMENTS:
• Draft Resolution - Development Impact Fees
• Exhibit A - Proposed Development Impact Fees - effective July 1, 2022
RECOMMENDATIONS:
1. Hold a public hearing to hear any public comments regarding the proposed impact fee adjustment.
2. Adopt a resolution approving a 6.62% increase to development impact fees for the Parkland Fee, Park Facilities Fee, Traffic Impact Fee, Capital Facilities Fee, and Fire Facilities Fee programs to reflect construction cost changes in 2021, effective July 1, 2022 and amending the Master Fee Schedule to include the increased fees.