Fremont City Council Meeting: 12/06/22 07:00 PM
3300 Capitol Avenue Div/Dept: Public Works
Fremont, CA 94538 Category: Fees & Rates
SCHEDULED
Sponsors:
STAFF REPORT (ID # 4734) DOC ID: 4734
Updated: 11/30/2022 2:14 PM by Alberto Quintanilla Page 1
DEVELOPMENT IMPACT FEE ANNUAL REPORT AND PROPOSED INCREASE IN FEES - Public Hearing (Published Notice) to Consider the Development Impact Fee Annual Report for Fiscal Year 2021/22 and an Increase in Development Impact Fees in an Amount of 13.65% to Align with the Bay Area Construction Cost Index
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 comply with legal reporting requirements associated with the collection and use of development impact fees and to implement a fee adjustment based on construction cost escalation.
BACKGROUND: The City of Fremont imposes impact fees on new development to mitigate the impacts caused by new development. A development impact fee is a monetary exaction other than a tax or special assessment that is charged by a local agency to new development to defray costs of public facilities needed because of impacts created by the new development. Impact fees are typically paid by developers at the time of building permit issuance and cannot be used to correct existing deficiencies or for the ongoing operation and maintenance costs of these facilities.
The City collects development impact fees in five fee programs referred to as: Capital Facilities Fees; Fire Facilities Fees; Parkland Fees; Park Facilities Fees; and Traffic Program Fees.
Annual Report
The Mitigation Fee Act (Gov. Code, Section 66000 et seq.) requires that an annual report be made available to the public within 180 days after the last day of each fiscal year. For each separate account or fund established the City must provide certain information.
Note that every five years Government Code Section 66001(d) requires the Council to make certain findings with respect to unexpended impact fees following the first deposit into the fee account. The Council made these findings on March 2, 2021, with the approval of the FY 2019/20 Development Impact Fee Annual and Five Year Report. The next Five Year Report will be presented to Council in FY 2024/25.
Annual Adjustment of Development Impact Fees
On April 18, 2017, the City Council adopted Resolution No. 2017-20 to establish a process for the annual adjustment of development impact fees commensurate with the increase in the Engineering News Record-Construction Cost Index (ENR-CCI) for the San Francisco Bay Staff Report (ID # 4734) Meeting of December 6, 2022
Updated: 11/30/2022 2:14 PM by Alberto Quintanilla Page 2 Area, which measures the annual increases in general construction costs so that impact fees will continue to generate sufficient funds to construct the facilities needed to serve new development
Based on this 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 considers the cost of construction materials and labor and is distinctly different from the Consumer Price Index.
The currently published CCI reflects a 13.65% increase in construction costs over the past year. Consistent with past practice, staff recommends increasing all development fees by
13.65% effective July 1, 2023, as part of the annual review of development impact fees.
It is noted that based on prior Council direction, qualifying development projects with deed- restricted affordable housing units receive a 50% reduction in traffic, parkland, and park facilities fees.
DISCUSSION/ANALYSIS:
Annual Report
Staff has prepared the attached consolidated report that provides the disclosure information required to comply with Government Code Sec. 66006(b) for Fiscal Year 2021/22, which includes the following information:
(A) A brief description of the type of fee in the account or fund. (B) The amount of the fee.
(C) The beginning and ending balance of the account or fund. (D) The amount of fees collected and interest earned.
(E) An identification of each public improvement on which fees were expended and the amount of expenditures on each improvement including the total percentage of the cost of the public improvement that was funded with fees. (F) An identification of an approximate date by which the construction of the public improvement will commence if the local agency determines that sufficient funds have been collected to complete financing on an incomplete public improvement and the public improvement remains incomplete.
(G) A description of each interfund transfer or loan made from the account or fund, including the public improvement on which the transferred or loaned fees will be expended, and, in the case of an interfund loan, the date on which the loan will be repaid, and the rate of interest that the account or fund will receive on the loan. (H) The amount of refunds made (as pursuant to GC 66001e) due to sufficient funds being collected to complete financing on incomplete public improvements, and the amount of reallocation of funds made (as pursuant to GC 66001f) due to administrative costs of refunding unexpended revenues exceeding the amount to be refunded.
Adjusted Impact Fees – Effective July 1, 2023
State law requires a minimum 60-day period after Council approval for fee increases to go into effect. The proposed 13.65% annual fee adjustment would go into effect July 1, 2023, Staff Report (ID # 4734) Meeting of December 6, 2022
Updated: 11/30/2022 2:14 PM by Alberto Quintanilla Page 3 which is more than the 60 days required by state law. The new development impact fees effective July 1, 2023, are shown in Exhibit A to the Resolution included with this item.
Public Notice
Fee increases require a noticed public hearing, and the City published the public hearing notice in the Tri-City Voice on November 22, 2022. Additionally, email and text notification to the public was sent to approximately 2,121 email subscribers and 446 text subscribers listed on the City’s eNews Notify Me subscribers of the Builder’s Interest list on November 22, 2022.
FISCAL IMPACT: The proposed adjustment of 13.65% 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:
• Development Impact Fee Annual Report for Period Ending June 30. 2022 • Exhibit A Proposed Development Impact Fees Effective July 1, 2023 • Draft Resolution Development Impact Fee Annual Report and Increase (Final)
RECOMMENDATIONS:
1. Approve the Development Impact Fee Annual Report FY 2021/22.
2. Hold a public hearing to hear any public comments regarding the proposed impact fee adjustment.
3. Adopt a resolution approving a 13.65% increase to development impact fees for the capital facilities, fire facilities, park facilities, parkland, and traffic programs to reflect construction cost changes in 2022, effective July 1, 2023.