City of Gonzales
SPECIAL PROJECTS DEPARTMENT
STAFF REPORT
TO: Honorable Mayor Rios and City Council
DATE: June 6, 2022
FROM: Mark Hartunian, Deputy City Manager/Special Projects Director THROUGH: René L. Mendez, City Manager
SUBJECT: Development Impact Fees Study
RECOMMENDATION
It is recommended that the City Council:
• Receive the staff report, and the oral report from Willdan Financial Services; • Receive public comment(s);
• Hold a public hearing and adopt Resolution No. 2022-32 Adopting the Development Impact Fee Nexus Study Update Dated May 6, 2022; and
• Introduce and read by title only Ordinance No. 2022-133, An Ordinance of the City Council of the City of Gonzales Amending Chapter 1.48- “Impact Mitigation Fees” of the Gonzales City Code and hold public hearing.
BACKGROUND
Development impact fees are a major source of funding to pay for new and expanded facilities and infrastructure required to serve new development. The City has utilized a system of development impact mitigation fees for some years, and the City’s current impact fee schedule addresses most kinds of fees typically required by local government.
Fees need to be updated periodically to remain current and accurate. Additionally, the proposed annexation of significant areas within the City’s sphere of influence for future residential and nonresidential development required the City’s impact fee program be updated to provide a funding source for the significant facility needs required by the proposed development. The City determined the future development’s facility needs through master planning efforts and retained Willdan Financial Services to work with staff to update the City’s current impact fee program to incorporate the identified facility needs. Willdan’s resulting “Development Impact Fee Nexus Study Update Report” (“Nexus AGENDA
ITEM
18 Study”) is attached to City of Gonzales Resolution No. 2022-32 as Exhibit A. Among other matters, the Nexus Study includes an analysis that demonstrates the connection between the needs of new development and proposed new impact fees.
Staff has reviewed the fee proposals in the Nexus Study in detail and supports Willdan’s recommendations. A resolution has been prepared for the Council’s use to formally adopt the Nexus Study. Staff has also prepared attached Ordinance No. 2022-133 which will codify the updated fee schedule.
Public noticing requirements pursuant to adoption of development impact fees have been followed by the City. In addition, staff has written to all principal developers and property owners that will be most affected by the proposed amendments to make sure that they are aware of the proposals.
Adoption or amendments to impact fees require a public hearing be conducted. Pursuant to the requirements of AB 602 the City must also formally adopt the Nexus Study in a separate public hearing.
SUMMARY
This report recommends that the Council convene two Public Hearings. The first Public Hearing is to consider the adoption of the Development Impact Fee Nexus Study Update (“Nexus Study”). The second Public Hearing is to consider staff recommendations to adopt an ordinance Amending Chapter 1.48 “Impact Mitigation Fees” of the Gonzales City Code which updates the City’s impact fees charged to new development based upon the Nexus Study findings. Fee revenues will fund new development’s share of the capital facilities included in the Nexus Study.
METHODOLOGY
The Nexus Study uses one of three approaches to calculate facilities standards and allocate the costs of planned facilities to accommodate growth in compliance with the Mitigation Fee Act requirements for each fee category included in the study.
The existing inventory approach is based on a facility standard derived from the City’s existing level of facilities and existing demand for services. This approach results in no facility deficiencies attributable to existing development. This approach was used to calculate the fire protection facilities (existing City), and parks and recreation facilities fees.
The planned facilities approach allocates costs based on the ratio of planned facilities that serve new development to the increase in demand associated with new development. This approach is appropriate when specific planned facilities that only benefit new development can be identified, or when the specific share of facilities benefiting new development can be identified. This approach was used to calculate the circulation facilities, wastewater facilities water facilities, police facilities and fire protection facilities (future growth area) fees.
The system plan approach is based on a master facility plan in situations where specific needed facilities serve both existing and new development. This approach allocates existing and planned facilities across existing and new development to determine new development’s fair share of facility needs. This approach is used when it is not possible to differentiate the benefits of new facilities between new and existing development. This approach was used to calculate the general city facilities fees.
REVIEW AND ANALYSIS
The Nexus Study identifies the maximum justified impact fees for the following facility categories:
circulation system facilities, sanitary sewer facilities, water facilities, police capital facilities, fire capital facilities, parkland and park facilities and general city facilities. Fee revenue generated within a category can only be spent on the identified facilities and infrastructure within that category.
Most of the fees presented in the Nexus Study are updates to fees in the City’s existing fee program.
These fees are circulation system facilities, sanitary sewer facilities, water facilities, police capital facilities, fire capital facilities, parkland, and park facilities. The updates incorporate the latest facility costs, planning and growth projections to ensure that the fee program adequately recovers new development’s share of facility costs.
One fee, the general city facilities fee, combines two of the City’s current fee categories (public facilities impact mitigation fees, public use facilities mitigation fees). Two fees from the City’s current fee program, animal control facilities and storm drain facilities, are being discontinued. Existing fund balances for the fee categories being combined or discontinued must be spent on the purpose they were collected for and will be kept in separate accounts.
CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA)
Adopting a nexus study and fee schedules do not constitute a “project” under CEQA pursuant to State CEQA Guidelines Section 15378(b)(4) because these actions involve the creation of a government funding mechanism which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
Those portions of the study and fees pertaining to the “existing City Zone,” as described below, are also statutorily exempt pursuant to CEQA Guidelines section 15273(4) -Rates, Tolls, Fares and Charges for obtaining funds for capital projects necessary to maintain service within an existing service area.
IMPACT FEE ZONES
One departure from the City’s existing impact fee program is that several of the updated fees vary depending on where development is occurring. Development in the “future growth area” has unique costs that would unfairly burden development in other areas of the City. Depending on the facility category, fees are calculated for varying geographies depending on where the planned facilities will provide service. The zones and corresponding facility categories are outlined below:
• Citywide (including the future growth area): parks and recreation facilities and general city facilities
• Two zones (Existing City zone and the future growth area): water facilities, police facilities, fire protection facilities
• Three zones (Existing City zone, Gonzales Agricultural Business Industrial Park, and the future growth area): circulation facilities
Figure 1 displays a map of the fee zones.
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Figure 1: Impact Fee Zones
Explain Recommendation and How it Supports the Vision
Gonzales will continue to be a safe, clean, family-friendly community, diverse in its heritage, and committed to working collaboratively to preserve and retain its small town charm.
Explain: The adoption of City of Gonzales Resolution No. 2022-32 will provide for amendment to Title 1, Chapter 1.48 Impact Mitigation Fees of the City of Gonzales Municipal Code, which will provide for City cost recovery associated with capital improvement projects, future housing development projects, industrial development projects, traffic infrastructure improvement projects, development and/or improvement of public facilities, and assist in enhancing K-12 education functions within the City of Gonzales.
Explain how the Recommendation Directly Implements the Mission The City Council and Staff of the City of Gonzales will realize our Vision by providing the leadership, commitment, and resources necessary to provide excellent services that enhance the quality of life of our diverse community.
Explain: Please see explanation above for the Vision.
City services will be delivered in a cost-effective, respectful, and friendly manner to insure the safety and well being of the residents and the promotion of business, recreational, housing and employment opportunities in an environmentally sustainable manner.
Explain: Please see explanation above for the Vision.
Strong fiscal policies allow us to provide appropriate infrastructure for:
• Public Safety X Yes No N/A
• Housing X Yes No N/A
• Recreation X Yes No N/A
• Environment X Yes No N/A
• Education X Yes No N/A
Explain:
ALTERNATIVES
Your Council has the option not to approve Resolution 2022-32, which is not recommended because it is needed to develop, fund, and construct essential infrastructure assets in the City of Gonzales.
BUDGET IMPACT
All of the impact fees identified in the Nexus Study and accompanying Ordinance are dedicated fees that can be utilized only for the specific purposes for which they are collected. They will be held in individual accounts until utilized for the planned improvements. The proposed fees represent a source of funding for infrastructure and facilities required by new development. Successful collection of the fees will reduce impacts to the City’s general fund and other funding reserves and will help enable the City to maintain current service levels. Fees for infrastructure in the future growth area will provide service to a previously unserved area and are necessary for development to occur.
Conversely, not to require new development to mitigate its impacts on public facilities and infrastructure will create significant burdens on already thin City financial resources.
CONCLUSION
It is recommended that the City Council:
• Receive the staff report, and the oral report from Willdan Financial Services; • Receive public comment(s);
• Hold a public hearing and adopt Resolution No. 2022-32 Adopting the Development Impact Fee Nexus Study Update Dated May 6, 2022; and
• Introduce and read by title only Ordinance No. 2022-133, An Ordinance of the City Council of the City of Gonzales Amending Chapter 1.48- “Impact Mitigation Fees” of the Gonzales City Code and hold public hearing.
Attachments:
1. Resolution No. 2022-32
2. Exhibit A to Resolution No. 2022-32
3. Ordinance No. 2022-133
4. Public Notice