1. PURPOSE
1.1. This Policy establishes the guidelines, criteria, and processes for naming City streets, parks, and other facilities.
1.2. This Policy is consistent with Milpitas Municipal Code, Title XI-1000 and Government Code Section 34093.
2. POLICY
2.1. The City shall have the sole authority and the City Council shall have the final authority to approve names of City Streets, Parks, and other Facilities.
2.2. The Planning Commission shall evaluate names of City streets, and shall make recommendations to the City Council.
2.3. The Parks, Recreation, and Cultural Resources Commission shall evaluate names of City parks and facilities, and shall make recommendations to the City Council.
2.4. Although the City will have full control and final decision-making authority on any names selected, public input will be received, and other names may be raised and requested to be considered by the City Council.
2.5. From time to time, the City Council shall approve names to be added to a list(s) of names suitable for streets, parks, and facilities.
2.6. No duplication of names within an asset type (i.e., park, facility, plaza) will be approved.
2.7. A deliberative process by City staff will be conducted to ensure that renaming of a street, park, and facility will not diminish the original justification for the name of the prior contributors. Parks and facilities named after individuals shall not be changed unless it is found that because of the individual’s character the continued use of their name would not be in the best interest of the community. Parks that have been named by deed restriction shall not be considered for renaming.
2.8. The following criteria and factors shall be considered with naming or renaming a street, park, or facility:
2.8.1. Neighborhood or geographical identification, such as street, school, or other descriptive names;
2.8.2. Natural or geological features of the area;
Policy No:
Click or tap here to enter
text.
CITY STREETS, PARKS AND
FACILITIES NAMING POLICY
Effective Date:
2/15/2022
Revision No:
1 Policy Administrator:
Recreation and Community Services
Next Review Due:
As needed
Related Policies and
Procedures:
Incorporates and
replaces SOP 1.3
Approved by:
Click or tap here to enter text.
Council meeting date, agenda item #, and
vote
Date Approved:
2/15/2022
524
Item # 20.
CITY OF MILPITAS
Revision Date
Original 04/21/2006
CITY STREETS, PARKS, AND FACILITIES NAMING POLICY / POLICY #
2.8.3. Historical or cultural significance: the name of a historical figure can be considered, if the figure had a significant and extraordinary historical influence on the area, state, national, or international level;
2.8.4. The name of any person or family that has made a significant impact in the community and/or in development of the street, park, or facility;
2.8.5. An individual or organization that contributed significantly to the acquisition or development of the park or facility to be named. This can include either a deed or substantial monetary contribution, or contribution toward the acquisition, and/or development of the park of facility. (Naming rights are not guaranteed if the donation is a dedication as required by the subdivision.)
2.8.6. The articulated preference of residents of the neighborhood surrounding the street, park, facility;
2.8.7. A name should represent community values and consider future generations and ethnic diversity;
2.8.8. If the name of an individual or family is to be considered, the use of such name shall have the approval of the individual (or his/her surviving family) or family when reasonably possible;
2.8.9. Avoid confusing or similar sounding names (Public Safety Dispatch test);
2.8.10. Avoid changing street names along any continuous alignment (Continuity test).
2.9. Naming of parks and facilities near schools shall be coordinated with the Milpitas Unified School District as much as possible.
2.10. All naming and/or renaming of a park or facility will be set forth by a Council Resolution.
2.11. Should policy conflict with any City Ordinance, Code or other laws and regulations, the respective City Ordinance, Code or other laws and regulations shall prevail.
3. PROCEDURE
3.1. Maintaining a List of Names for Naming Streets, Parks, and Facilities.
3.1.1. The Recreation and Community Services Department shall maintain a List of Names for Naming Streets, Parks, and Facilities.
3.1.2. As needed, the Director of Recreation and Community Services shall bring additions to the List of Names for Naming Streets, Parks, and Facilities to Council for approval at any regular or special meeting.
3.2. Naming of Streets, Parks, and Facilities
3.2.1. City street naming recommendations shall be brought to the Planning Commission for recommendation to the City Council and may be considered at any regular or special meeting.
3.2.2. City park and facility naming recommendations shall be brought to the Parks, Recreation, and Cultural Resources Commission for recommendation to the City Council and may be considered at any regular or special meeting.
3.2.3. Naming recommendations shall be from the City Council approved List of Names available from the Director of Recreation and Community Services. 525
Item # 20.
CITY OF MILPITAS
Revision Date
Original 04/21/2006
CITY STREETS, PARKS, AND FACILITIES NAMING POLICY / POLICY #
3.3. Proposed names for new City streets, parks, and facilities should be considered during the entitlement process prior to the final map approval.
3.4. Names being considered for streets shall be reviewed by the City and County emergency services dispatch and Post Office to discourage names that are too similar or confusing that may hinder emergency response; or are otherwise inappropriate for public safety purposes.
3.5. The following City Departments will contribute to the establishment and maintenance of databases for named streets, parks, and facilities:
3.5.1. Information and Technology Department – Maintain database of all City assets (streets, parks, and facilities)
3.5.2. Recreation and Community Services Department – Maintain Naming Lists, information about historical references, person’s full names, ancestry, dates of birth and death, and other information of interest about the person or group, and the significance of their name to Milpitas’ history and/or to that particular named asset.
3.5.3. Planning Department – Coordinate Street Naming related to new development, prepare, and maintain GIS databases for mapping of new facilities.
3.6. Renaming of a street, park, or facility
3.6.1. The renaming of a street, park, or facility may be initiated by City Council, City Commission, City staff, a group, or individuals.
3.6.2. The initiation of renaming by non-City organizations or individuals shall be made by participating during Public Forum at the appropriate advisory City Commission or City Council meeting.
3.6.3. The City Commission may place the request on the agenda for review of the proposed name(s), taking of public comment, and discussion of the renaming proposal consistent with this Policy.
3.6.4. When a City Commission considers the renaming proposal of a street, park, or facility, staff shall notify the surrounding neighborhood in a ¼ mile radius.
3.6.5. If the City Commission supports the renaming proposal, it will make a recommendation to the City Council for Council consideration.
3.7. The name of a park or facility that is sold, transferred to non-city ownership, or otherwise deemed to no longer be a City of Milpitas property, should be transferred to another location eligible for naming. Should there not be an appropriate location, the name shall be added to the appropriate Naming List for future use.
526
Item # 20.
City of Milpitas
Facilities, Streets & Park Naming Subcommittee
Naming List – US Presidents
Approved for: Streets & Parks
PRESIDENT EXISTING STREET LOCATION
1. George Washington Washington Dr./N. Milpitas Blvd.
2. John Adams Adams Ave./N. Temple
3. Thomas Jefferson
4. James Madison
5. James Monroe
6. John Quincy Adams Adams Ave./N. Temple
7. Martin Van Buren
8. William Henry Harrison
9. John Tyler
10. James K. Polk
11. Zachary Taylor Taylor Dr./Conway St.
12. Millard Fillmore
13. Franklin Pierce
14. James Buchanan
15. Abraham Lincoln
16. Andrew Johnson
17. Ulysses S. Grant
18. Rutherford B. Hayes
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Item # 20.
PRESIDENT EXISTING STREET LOCATION
19. James A. Garfield
20. Chester Arthur
21. Grover Cleveland
22. Benjamin Harrison
23. Grover Cleveland
24. William McKinley
25. Theodore Roosevelt
26. William Howard Taft
27. Woodrow Wilson Wilson Way/N. Milpitas Blvd.
28. Warren G. Harding
29. Calvin Coolidge
30. Herbert Hoover
31. Franklin D. Roosevelt
32. Harry S Truman
33. Dwight D. Eisenhower
34. John F. Kennedy Kennedy Dr./Fanyon St.
35. Lyndon B. Johnson
36. Gerald Ford
37. Jimmy Carter
38. Ronald Reagan
39. George Bush
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Item # 20.
PRESIDENT EXISTING STREET LOCATION
40. Bill Clinton
41. George W. Bush
42. Barack Obama
529
Item # 20.
City of Milpitas
Facilities, Streets & Park Naming Subcommittee
Naming List – Milpitas Historical Names
Approved for: Streets, Parks, Facilities
NAME SUGGESTED BY DEDICATION LOCATION
19th CENTURY
1. Charles Beverson Commission: PRCRC
Milpitas Cattle Rancher/Dairy Farmer
2. Alfred Doten Commission: PRCRC
Milpitas literary figure/author
3. Alfred French Commission: PRCRC
Ran first hotel that brought tourism to Milpitas
4. JW Johnson Commission: PRCRC
First Town Constable
5. Augustus Rathbone Commission: PRCRC Augustus Rathbone Park First Storekeeper
20th CENTURY
6. Chew Family Naming Subcommittee
Part of Milpitas’ early agricultural history, the
Chew’s had 15 acres where they ran their Flower
Farm business
7. Albert Currlin Commission: PRCRC Dedication Plaque: Valley Health Center One of the first Doctors in Milpitas
530
Item # 20.
NAME SUGGESTED BY DEDICATION LOCATION
8. Sal Cracolice Naming Subcommittee Sal Cracolice Building (through June 2016) Ran Milpitas’ first Pharmacy, started first Youth Center
9. Ernestina Garcia Commission: PRCRC
Civil Rights Activist
10. Joe House Commission: PRCRC
Mayor (1974 – 1976)
11. Bob McGuire Commission: PRCRC Dedication Plaque: Comm. Center Amphitheater First Parks and Recreation Director Bob McGuire Park
12. Ray Madruga Commission: PRCRC
Early Ironworker, invented “Milpitas Plow”
13. Mabel Mattos NA Street: Mattos Dr./Edsel
Bench/Farm Equipment: Alviso Adobe
14. Ford Naming Subcommittee
15. Dick Delong Commission: PRCRC Street: Delong Dr./Tradezone Blvd.
16. Joe Smith Commission: PRCRC Street: Smith Ln./Pimentel Cir.
17. Rogers Family (Ben, Jim) NA Ben Rogers Park
18. Weller Family (Joseph, Abraham) NA Street: Weller Ln./N. Main St./Weller Elementary
19. Denny Weisgerber NA Denny Weisgerber Community Room: Senior Center 21st CENTURY
20. Larry Voellger Naming Subcommittee Public Art Project Dedication: Higuera Adobe Park Started Milpitas’ first Public art Program (Art in Your Park)/ Long Serving Arts Commissioner 531
Item # 20.
21. Jimmy Chamoures Naming Subcommittee
Instrumental in the rebuilding of the Milpitas Post Newspaper in the mid 90’s/Started Milpitas Yellow Pages 532
Item # 20.
City of Milpitas
Facilities, Streets & Park Naming Subcommittee
Naming List – California Native Plants, Flowers, Trees
Approved for: Streets
1. Maple Maple Ave./N. Abbott Ave.
2. Paprika
3. Pomegranate
4. Terracotta Terracotta Ct./Dogwood Ct.
5. Beacon Beacon Dr./Canton Dr.
6. Chamise
7. Fern Family
a. Fernleaf Dr. Fernleaf Dr./ Sandisk Dr.
8. Snapdragon
9. Manzanita Manzanita Court/Blue Spruce Way
10. Poppy Family
a. Poppy Lane Poppy Ln./E. Calaveras Blvd.
b. Poppy Court Poppy Ct./Poppy Ln.
11. Sagebrush Sage Brush St./Milkweed
12. Finnis
13. Milkweed
14. Butterfly Weed
15. California Aster
16. Pacific Aster
17. Desert Holly
18. Coyote Brush
19. Chuparosa
20. Barberry
21. Goldenstar
22. Lily Family
23. Camas
24. Harebell
25. Berkeley Sedge
26. Anemone
27. Purple Owls Clover
28. Lilac
29. Redbud
30. Willow Willow Ave./N. Abbott Ave.
31. Rabbit Brush
32. Thistle Thistle Pl./Clover Cir.
33. Clarkia
34. Chinese Houses
35. Dogwood Dogwood Ct./Terracotta Ct.
NAME EXISTING STREET LOCATION
533
Item # 20.
36. Sacred Thorn
37. Dichondra
38. Shooting Star
39. Bleeding Heart
40. Candleholder
41. Lance Leaf
42. Cactus
43. Canyon Prince
44. Desert Tea
45. Stream Orchid
46. Rabbit Brush
47. Yerba Santa
48. Buckwheat
49. St. Catherine's Lace
50. Golden Yarrow
51. Lizard Tail
52. Fremontea
53. Bush Family
54. Bedstraw
55. Snapdragon
56. Sunrose Sunrose Ct./Joshu Tree Ct.
57. Toyon
58. Coral Bells
59. Alumroot
60. Cardinal
61. Bridget Bloom
62. Wooly Rose
63. Desert Lavender – “Lavender” Lavender Loop/Currant Rd.
64. Iris
65. Scarlet Gilia
66. Walnut Walnut Dr./N. Abbott Ave.
67. Chuparosa
68. Goldfields
69. Mallow Family
70. Tidy Tips
71. El Tigre
72. Sage Sage Ct/Tarob Ct.
73. Tiger Lily Tiger Lily St./Sunflower Ln.
74. Western Flax
75. Bitterroot
76. Cardinal Flower
77. Honeysuckle
78. Water Primrose
79. Lupine
NAME EXISTING STREET LOCATION
534
Item # 20.
80. Chamisso Bush
81. Catalina Ironwood
82. Laurel
83. Blazing Star
84. Wishbone Bush
85. Mustang Mint – “Mint” Mint Way/Cherry Cir.
86. Myrtle Myrtle Ln./Clover Cir.
87. Needlegrass
88. Beavertail
89. Pricklypear
90. Cactus
91. Clover Clover Cir/Myrtle Ln.
92. Redwood Sorrel
93. Palo Verde
94. Peony
95. Scarlet Bugler
96. Desert Bluebell
97. Fiesta Flower
98. Pine
a. Pinewood Way Pinewood Way/Fallen Leaf Dr.
b. Pinewood Court Pinewood Way/Pinewood Ct.
c. Pinehurst Court Pinehurst Ct./Tularcitos Dr.
99. Sycamore Sycamore Dr./Barber Ln.
100. Cottonwood Cottonwood Dr./Barber Ln.
101. Desert Peach
102. Desert Almond
103. Cherry Cherry Cir./Mint Way
104. Coffee Berry Coffee Berry Ln./Wild Rose Ln.
105. Red Berry Red Berry Ln./Sunflower Ln.
106. Lemonade Berry
107. Sugar Bush
108. Currant Family
a. Currant Currant Rd./Lavender Loop
109. Matilija Poppy
110. Wild Rose
111. Baja Rose
112. Chia
113. Sage Family
a. Sagemeadow Court Sagemeadow Ct./ Beresford Ct.
114. Mexican Elderberry
115. Checker
116. Catchfly
117. Grass Family
NAME EXISTING STREET LOCATION
535
Item # 20.
118. Goldenrod
119. La Luna
120. Aster Family
121. Clover Clover Cir & Clover Ct.
122. Southern Cattail
123. Sunflower Sunflower Ln./S. Main St.
124. Wild Grape
125. Joshua Tree Joshua Tree Cir./Lundy Rd.
126. Nightshade Nightshade Rd./Garden St.
127. Oak
a. Oakhurst Way Oakhurst Way/Sandhurst Way
b. Oak Ridge Road Oak Ridge Rd./Calaveras Blvd.
NAME EXISTING STREET LOCATION
536
Item # 20.
CITY OF MILPITAS
AGENDA REPORT
(AR)
Item Title: Approve Employment Agreement with, and Appoint Michael Mutalipassi to Serve as City Attorney (Staff Contact: Jeannine Seher, Human Resources Director, 408-586- 3086)
Category: Leadership and Support Services
Meeting
Date:
4/19/2022
Recommendation: Approve Employment Agreement with Michael Mutalipassi and appoint him to serve as City Attorney for the City of Milpitas.
Background:
On June 22, 2021, City Council reported out of closed session, its decision to transition to an in-house City Attorney model, and on August 5, 2021 formed a Subcommittee, comprised of Mayor Tran and Vice Mayor Montano to provide further direction on the recruitment process. On September 7, 2021, Council adopted the City Attorney class specification and salary schedule, and consistent with the Subcommittee’s direction, authorized the recommended recruitment process.
As a result of the successful completion of the recruitment process, Michael Mutalipassi has been selected to serve as the City Attorney for Milpitas. An employment agreement has been negotiated between the City Council and Mr. Mutalipassi and is now ready for City Council approval.
Analysis:
The employment agreement between the City and Mr. Mutalipassi provides for the following:
Term: 3 years
Salary: $215,000 annually
Benefits: The agreement provides that Mr. Mutalipassi will receive regular benefits and allowances provided to all other unrepresented executive employees. This includes a City provided cellular phone. In addition, the agreement specifies the City will authorize attendance at, and reimburse Mr. Mutalipassi for his attendance at the League of California Cities Spring Conference and expenses.
Retirement: The agreement provides for Mr. Mutalipassi be enrolled in CalPERS with the City and receive benefits similar to other employees.
Miscellaneous: The agreement provides for an “At-will” employment relationship with Mr. Mutalipassi but also provides for the payment of three months of severance in the event the City terminates Mr. Mutalipassi’s employment without cause.
Policy Alternative:
Alternative: Do not approve the employment agreement or seek modifications to the agreement.
Pros: None, as City Council has directed the preparation of this agreement and it represents the good faith negotiations between the City Council and Mr. Mutalipassi. If further modifications are desired, the City Council can discuss and provide that direction in closed session. 537
Item # 21.
Cons: Not moving forward with the recommended actions will result in not being able to hire the City Attorney and will be counter to prior direction given by the Council.
Reason for not Recommending: If the City Council does not approve the employment agreement, then the City Council will need to provide additional direction to staff. This is not recommended is because Council has directed the contract preparation and negotiation and it represents the completion of the negotiations.
Fiscal Impact:
The annual salary compensation is currently budgeted in fiscal year 2022-23. The compensation that will be paid in fiscal year 2021-22 will be absorbed from vacancy savings.
California Environmental Quality Act:
Approval of the recommendation is not a project under the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15061(b)(3) (Common Sense Exemption) as it can be seen with certainty that a discussion about establishing a salary range will not have a significant effect on the environment. Further, the item is not a project pursuant to CEQA Guidelines Section 15378(b)(5) as it involves organizational or administrative activities of a local government entity that will not result in direct or indirect physical changes in the environment.
Recommendation:
Approve Employment Agreement with Michael Mutalipassi and appoint him to serve as City Attorney for the City of Milpitas.
Attachments:
1. Employment Agreement
2. Exhibits to Employment Agreement
538
Item # 21.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is between the City of Milpitas, a municipal corporation (the “City” or “Employer”) and City Attorney (“Employee”). It is effective on the latest date next to the signatures on the last page (“the Effective Date”).
This agreement is entered into on the basis of the following facts, among others:
A. The City desires to employ the qualified professional services of Employee as City Attorney of the City, as provided by the Milpitas Municipal Code.
B. The City Council and Employee desire to establish a reasonable, professional and trustworthy employment relationship, subject to the terms and conditions set forth in this Agreement pertaining to compensation and benefits, performance evaluations, and related matters.
BASED UPON THE FOREGOING, THE CITY AND EMPLOYEE AGREE AS FOLLOWS:
1. Employee Appointed. The City appoints Employee as City Attorney, and Employee continues to accept the appointment and employment as of Effective Date.
2. Duties of Employee. Employee shall perform the duties established for the City Attorney by State law, the Milpitas Municipal Code, the City Attorney job description, the directions of the City Council, or as otherwise provided by law, ordinance, or regulation. The provisions of the Municipal Code pertaining to the City Attorney and City Attorney job description, as may be amended from time to time, are attached hereto as Exhibit A and are hereby made a part of this Agreement.
(a) Full Energy and Skill. Employee shall faithfully, diligently, and to the best of Employee’s abilities, perform all duties that may be required under this Agreement. Employee agrees that Employee has a duty of loyalty and a general fiduciary duty to the City. Employee shall devote the whole of Employee’s working time, skill, experience, knowledge, ability, labor, energy, attention, and best effort exclusively to the City’s business and affairs.
Prior to undertaking any secondary activities for which Employee receives compensation, Employee shall disclose those activities to the Council. (b) No Conflict. Employee shall not engage in any employment, activity, consulting service, or other enterprise, for compensation or otherwise, which is actually or potentially in conflict with, inimical to, or which interferes with the performance of Employee’s duties.
Further, Employee shall not, during the term of this Agreement, individually, as a partner, joint venture, officer, or shareholder, invest or participate in any business venture conducting business in the corporate limits of the City of Milpitas. 539
Item # 21.
(c) Outside Activities. Consistent with subdivision 2(a) above, the Employee’s primary employment is with the City. Any outside activities for which the Employee receives compensation from a third party shall be disclosed, in advance, to the City Council.
Employee is expected to take personal leave (i.e., vacation time) for any outside activities of this nature.
3. Hours of Work. The City Attorney is an exempt employee but is expected to engage in those hours of work that are necessary to fulfill the obligations of the City Attorney’s position. The City Attorney does not have set hours of work. The City Attorney is expected to be reasonably available to the City Council at all times. It is recognized that the City Attorney must devote a great deal of time to the business of the City outside the City’s customary office hours, and to that end, the City Attorney’s schedule of work each day and week shall vary in accordance with the work required to be performed and in accordance with any specific direction provided by the City Council.
4. Term. The term of this Agreement shall be from the Effective date through April 25, 2025, unless terminated earlier by either party in accordance with the provisions set forth in Section 12, or unless extended as authorized by this Section. The City Council shall meet annually on or around each anniversary of the Effective Date to consider an annual extension to the Agreement.
5. City Council Commitments. The City Council shall abide by all provisions of the City Municipal Code regarding the administration of personnel issues, with a copy of the relevant provisions of the City’s Municipal Code, as may be amended from time to time, attached hereto as Exhibit A.
6. Annual Evaluation. In the first year of the term of this Agreement, the City Council shall conduct an evaluation of Employee’s performance within 60 days to establish working relationships, norms, opportunities to be successful, and goals for the coming year, then followed on a sixmonth basis for the first year of agreement. The second six-month evaluation shall be conducted within 60 days of the Employee’s anniversary date as the City Attorney. The City Council shall conduct an evaluation of Employee’s performance and provide guidance and direction in accordance with specific criteria developed by the City Council. At the time of Employee’s annual performance evaluation, Employee may be eligible to receive an increase in Base Salary, as determined by the City Council in its sole discretion. Employee may be eligible for the first increase on Employee’s first anniversary date, and then annually dependent on a performance evaluation to precede any consideration of a salary adjustment. Employee is not automatically entitled to any increase, which is subject to the sole discretion of the Council. In addition to an established evaluation, the Council has the discretion to provide Employee with an evaluation of performance at other times chosen by the Council.
540
Item # 21.
7. Compensation.
(a) Base Salary. Employee shall receive the annual Base Salary of Two-Hundred Fifteen Dollars ($215,000), payable on a pro-rata basis in the same manner as all full-time City employees, and subject to all applicable payroll taxes and withholdings. (b) COLA Adjustments/Compaction. Whenever a cost of living adjustment or other nonmerit based salary increase is provided to other miscellaneous unrepresented executive staff, the City Council shall consider whether it is reasonable and appropriate to grant the highest cost of living increase received by any miscellaneous unrepresented employee groups to the Employee’s Base Salary to avoid compaction and maintain a buffer of 10% minimum between the Employee’s Base Salary and the next highest salary for miscellaneous unrepresented executive staff in the City Attorney’s Office. No salary adjustment is guaranteed but is subject to the discretion of the City Council. (c) Reduction in Salary or Benefits. If the City reduces the Employee’s Base Salary, or any benefit described in Sections 8 to 11 of this Agreement, in a percentage that is greater than the average reduction of all miscellaneous unrepresented executive staff, such action shall constitute a termination of this Agreement without Cause under Section 12 of this Agreement.
8. Regular Benefits and Allowances. Employer agrees to provide and pay the City allowance for vision, dental, and comprehensive medical health insurance for Employee and his/her dependents, if any, equal to that which is provided to all other full-time miscellaneous unrepresented executive staff of Employer. The City contribution toward health insurance shall be equal to that which is provided to all other miscellaneous unrepresented executive staff of Employer as specified in the applicable Unrepresented Employee Benefit Handbook (“Benefit Handbook”), dated July 1, 2019, or any amendment thereto or replacement thereof. Similarly, Employee shall receive short-term and long-term disability insurance coverage while this Agreement is in force, subject to any contributions required of unrepresented miscellaneous unrepresented executive staff.
9. Additional Deferred Compensation. As part of Employee’s annual base compensation, City agrees to provide a Section 457 deferred compensation program which will be administered by Mission Square Retirement (formerly the International City Management Association – Retirement Corporation (ICMA-RC)), and to pay into such program for Employee’s benefit monthly, an amount equal to that for miscellaneous unrepresented staff commencing with the Effective Date of this Agreement
10. Retirement Benefits.
541
Item # 21.
(a) Employer agrees to enroll Employee into the California Public Employees Retirement System (“CalPERS”) consistent with other City employees.
11. Additional Benefits and Allowances. In addition to the benefits already specified in this Agreement, Employee shall receive the same benefits afforded to miscellaneous unrepresented executive staff, including and not limited to:
(a) Vacation; Sick Leave
(i) Vacation. Employee shall accrue and be eligible to use vacation days in accordance with the City’s established vacation policy. (ii) Sick Leave. Employee shall be entitled to use and accrue sick leave in accordance with established City policy.
(b) Automobile. Employee shall receive a monthly vehicle allowance of five hundred fifty dollars ($550.00) per month, for automobile trips which shall be equal to that which is provided to all other miscellaneous unrepresented executive staff of Employer as specified in the applicable Unrepresented Employee Benefit Handbook (“Benefit Handbook”). Dated July 1, 2019, or any amendment thereto or replacement thereof. (c) Cellular Phone. Employee shall receive a City cell phone for use City work purposes. (d) Professional Development. Employer expects the Employee to continue to develop the professional technical and leadership skills and knowledge necessary to serve as City Attorney. To that end, Employee is expected to continue membership with the California State Bar Association. Employee is expected to attend state or regular conferences, trainings, and other educational opportunities to continue to hone the skills consistent with the City Attorney job description and to maintain licensure as an attorney for the State of California. The City will allow Employee reasonable time away to participate in these professional development opportunities and Employer shall pay for these training opportunities subject to City Council’s budget approval and in accordance with established City policies.
1. City agrees to reimburse employee for registration costs for League of California Cities Spring Conference in Carlsbad, held May 4-6, 2022 and for reasonable travel and per diem expenses in accordance with City policies.
12. Termination of Employment.
(a) No property Interest/Cause Defined. Employee understands and agrees that Employee has no constitutionally-protected property or other interest in Employee’s employment as City Attorney. Employee understands and agrees that Employee works at the will and pleasure of the City Council and that Employee may be terminated, or asked to resign, at 542
Item # 21.
any time, with or without Cause, by a majority vote of its members. Notice of termination shall be provided to the City Attorney in writing. As used in this Agreement, Cause shall only mean any of the following:
(i) Conviction of, or plea of guilty or nolo contender to, any crime or offense (other than minor traffic violations or similar offenses) which is likely to have a material adverse impact on the City or on the Employee’s reputation; (ii) Proven failure of the Employee to observe or perform any of his duties and obligations, if that failure continues for a period of thirty (30) business days from the date of his receipt of notice from the City Council specifying the acts or omissions deemed to amount to that failure;
(iii) Conviction of any crime involving an “abuse of office or position,” as that term is defined in Government Code Section 53243.4;
(iv) Repeated failure to carry out a directive or directives of the City Council made by the City Council as a body at a Brown Act compliant meeting; and (v) Any grossly negligent action or inaction by Employee that materially and adversely: (a) impedes or disrupts the operations of City or its organizational units; (b) is detrimental to employees or public safety, or (c) violates the City’s properly-established rules or procedures.
(b) Termination Immediately Before or Following City Council Election. No action by the City Council to terminate Employee, other than for Cause, will be made within ninety (90) days before a City Council election or within six (6) months immediately following a City Council election. Nothing in this subsection alters the “at will” status of Employee’s employment with the City.
(c) Notice Required of Employee. Employee may voluntarily terminate employment at any time by giving not less than sixty (60) days’ notice.
(d) Severance Pay. If Employee is asked to resign or is terminated without Cause, then Employee shall be eligible to receive a cash payment equivalent to the sum of Employee’s then-current monthly salary multiplied by three (3) and the cash value, as determined by the City, of Employee’s monthly non-salary COBRA-eligible benefits multiplied by three (3). Any severance and benefits paid shall be subject to state law requirements codified by Government Code Section 53260. This cash payment will be made on a pro-rated, monthly basis over the number of months involved, subject to termination of the severance requirement set forth below. Employee shall also be paid for any accrued, but unused, vacation. In the event of termination or resignation from employment or the 543
Item # 21.
non-renewal of this Agreement, sick leave upon termination shall be treated in accordance with the Benefit Handbook. Eligibility for such severance payment is expressly conditioned upon Employee’s execution of (i) a waiver and release of any and all of Employee’s claims against City, and (ii) a covenant not to sue. All normal payroll taxes and withholdings as required by law shall be made with respect to any amounts paid under this section. Employee expressly agrees to provide notice to the City within two (2) business days of accepting employment elsewhere, and the City’s obligation to pay any severance benefit to Employee shall terminate upon Employee’s acceptance of such alternative employment.
(e) Ineligibility for Severance under Certain Conditions. If the termination of Employee is for Cause (as defined above) or if Employee voluntarily resigns, Employee is not eligible for and will not receive any severance. If Employee is terminated without Cause, then Section 7(d) above shall control
(f) Communications Upon Termination. In the event that Employer terminates the Employee for any reason or no reason, the Employer and Employee agree to undertake reasonable efforts to issue a joint press release or statement, the content of which is mutually agreeable to the Employer and Employee. The joint press release or statement shall not contain any text or information that is reasonably considered to be disparaging to either party. For purposes of this subdivision only, “party” includes City Council members in the office at the time of termination and miscellaneous unrepresented executive employees. If the parties are able to agree on a joint statement, either party member verbally repeat the substance of the joint press release or statement in response to any inquiry.
13. Statutory Requirements. This agreement shall be deemed to incorporate by reference the provisions of Sections 53243 et seq. of the Government Code, as it may be amended or renumbered.
14. Payment of Expenses of Employment. The City shall pay the following usual and customary employment expenses.
(a) The cost of any fidelity or other bonds required by law for the City Attorney. (b) Subject to Section 12 of this Agreement, the cost to defend and indemnify Employee as required by the California Government Claims Act (Government Code §810 et seq.) or otherwise. City will determine, in its sole discretion, whether to compromise and settle any such claims or suit again Employee and the amount of any settlement or judgment rendered thereon.
544
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(c) Subject to budget approval, the cost of attending conferences or other events (i.e. outof-town meetings, professional memberships, and seminars, etc.) necessary for the proper discharge of Employee’s duties. The City will not reimburse Employee of any expenses related to membership in service clubs, and will not encourage or require service club membership.
15. Miscellaneous.
(a) Notices. Notices given under this Agreement shall be in writing and shall be:
(i) Served personally; or
(ii) Sent by facsimile (provided a hard copy is mailed within one (1) business day); or (iii) Delivered by first-class United States mail, certified, with postage prepaid and a return receipt requested; or
(iv) Sent by Federal Express, or some equivalent private overnight delivery service.
Notices shall be deemed received at the earlier of actual receipt or three (3) days following deposit in the United States mail, postage prepaid. Notices shall be directed to the addresses shown below, provided that a party may change such party’s address for notice by giving written notice to the other party in accordance with this subsection.
CITY:
City of Milpitas
Attn: Mayor
455 E. Calaveras Blvd.
Milpitas, CA 95035
Employee:
Michael Mutalipassi
Attn: City Attorney
455 E. Calaveras Blvd.
Milpitas, CA 95035
(b) Compliance with Government Code §§53243, 53243.1, & 53243.2. If Employee is convicted of a crime involving an abuse of the Employee’s office or position, all of the following shall apply:
(i) If Employee is provided with administrative leave pay pending an investigation, Employee shall be required to fully reimburse the City for such amounts paid; 545
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(ii) If the City pays for the criminal legal defense of Employee (which would be in its sole discretion, as it is not generally required to pay for criminal defense), Employee shall be required to fully reimburse City such amounts paid; and (iii) If this Agreement is terminated, any cash settlement related to the termination that Employee may receive from the City shall be fully reimbursed to the City or void if not yet paid to Employee.
(iv) For this subsection, “abuse of office or position” means either (1) an abuse of public authority, including waste, fraud, and violations of the law under color of authority, or (2) a crime against public justice, including but not limited to a crime described in Title 7 (commencing with Section 92) or Part 1 of the Penal Code. (c) Entire Agreement/Amendment. This Agreement constitutes the entire understanding and agreement between the parties as to those matters contained in it and supersedes any and all prior or contemporaneous agreements, representations, and understandings of the parties. This Agreement may be amended at any time by mutual agreement of the parties and attached hereto.
(d) Attorney’s Fees. If any legal action or proceeding is brought to enforce or interpret this Agreement, the prevailing party shall be entitled to recover his or its attorney’s fees and costs. Nothing in this subsection shall be read to prevent the parties from agreeing to some alternative method of dispute resolution.
(e) Severability. In the event any portion of this Agreement is declared void, such be severed from this Agreement and the remaining provisions shall remain in effect unless the result of that severability would be to substantially alter this Agreement or the obligations of the parties, in which case this Agreement shall be immediately terminated. (f) Waiver. Any failure of a party to insist upon strict compliance with any term, undertaking, or condition of this Agreement shall not be deemed to be a waiver of such term, undertaking, or condition. To be effective, a waiver must be in writing, signed, and dated by the parties.
(g) Representation by Counsel. The parties acknowledge and agree that they were, or had the opportunity to be, represented individually by legal counsel with respect to the matters that are the subject of this Agreement and that they are fully advised with respect to their respective rights and obligations resulting from signing this Agreement. (h) Governing Law and Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of California. Employee and City agree that the venue for any dispute shall be in Santa Clara County, California. 546
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(i) Section Headings. The headings on each of the sections and subsections of this Agreement are for the convenience of the parties only and do not limit or expand the contents of any such section or subsection.
(j) No Assignment. Employee may not assign this Agreement in whole or in part. _____________________________________________ ________________________________ City of Milpitas / Mayor Dated
_____________________________________________ ________________________________ Employee / City Attorney Dated
547
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Title VI - PERSONNEL
Chapters:
VI-1 City Manager 419
VI-3 Departments, Assignments and Appointments 423
VI-10 Public Safety Dispatcher Training and Selection 424.1 VI-101 Personnel System 425
VI-102 Provisions for Reducing City Work Force 430
Chapter 1 - CITY MANAGER
Sections:
Section 1 - Establishment
The office of City Manager and the City Manager form of government is hereby established in the City of Milpitas pursuant to the provisions of Section 34851a et seq., of the Government Code of the State of California.
(Ord. 63 (part), 8/20/57)
Section 2 - Duties and Responsibilities
VI-1-2.01 - Manager Responsible to the Council
The City Manager shall be the chief executive officer of the City Council of the City of Milpitas and shall act as the agent for and on behalf of the Council in the discharge of its administrative functions. He shall be responsible to the City Council for the administration of all affairs of the City except as otherwise provided herein.
(Ord. 63 (part), 8/20/57)
548
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VI-1-2.02 - Manager Shall Attend All City Council Meetings and Make Reports The City Manager shall attend all regular and special meetings of the City Council. He shall report to the Council as requested by the City Council and as he deems necessary. He shall keep the Council advised of the financial condition and future needs of the city and shall make such recommendations as he may deem desirable.
(Ord. 63 (part), 8/20/57)
VI-1-2.03 - Appointment and Removal of Employees by Manager The City Manager shall be the "appointing officer" of the City, and shall have the power to appoint and dismiss all subordinate appointive officers and employees, subject to the provisions of the City's Municipal Code. Provided, however, that the provisions of this Section shall not apply to the City Attorney. (Ord. 52.5 (part), 11/18/97: Ord. 63 (part), 8/20/57)
VI-1-2.04 - Council Dealing with Administrative Staff through City Manager Except for purposes of inquiry, the City Council and its members shall deal with the administrative staff solely through the City Manager.
(Ord. 63 (part), 8/20/57)
VI-1-2.05 - Preparation and Administration of the Budget The City Manager shall prepare the budget annually and submit it to the City Council, and he shall be responsible for its administration after adoption. He shall supervise the expenditures of and act as the purchasing agent for all the departments, divisions and services of the city government. The City Manager shall prepare and submit to the City Council a complete report as of the end of each fiscal year on the finances and administrative activities of the City during the preceding year. (Ord. 63 (part), 8/20/57)
VI-1-2.06 - Performance of Other Duties
The City Manager shall perform such other duties as are consistent with this chapter and as may be prescribed by ordinance, resolution, or order of the City Council. (Ord. 63 (part), 8/20/57)
VI-1-2.07 - Designation of Administrative Officer when Manager is Absent or Disabled 549
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The City Manager may designate in writing a qualified administrative officer of the City to perform his duties during his temporary absence or disability. In the event of the failure of the City Manager to make such designation, the Council may by resolution appoint an officer of the City to perform the duties of the City Manager until he shall return or his disability shall cease. (Ord. 63 (part), 8/20/57)
VI-1-2.08 - Creation of Departments and Subdivisions
The work of the city government may be distributed among such departments, divisions, and services thereof as may be established by ordinance of the City Council upon recommendation of the City Manager.
Pending the passage of an ordinance distributing such work, the Manager may establish temporary departments, divisions, and services.
(Ord. 63 (part), 8/20/57)
VI-1-2.09 - Furnishing Bond
The City Manager shall furnish a bond to the City of Milpitas conditioned upon the faithful performance of his duties in a penal sum and with such corporate surety as the Council may require. The premium for said bond shall be paid by the City of Milpitas.
(Ord. 63 (part), 8/20/57)
VI-1-2.10 - Appointment and Removal
The City Manager shall be appointed by a majority of the City Council and shall serve until he or she is removed by a majority of the members or until his or her resignation. (Ord. 52.4, 2/2/93; Ord. 63 (part), 8/20/57)
VI-1-2.11 - Notice of Resignation
The City Manager may resign from his position upon at least thirty (30) days' notice in writing to the City Council.
(Ord. 63 (part), 8/20/57)
VI-1-2.12 - Compensation
The compensation, annual leave, sick leave and other recompense of the City Manager and perquisites of his office shall be as determined by order or resolution of the City Council. 550
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(a)
(b)
(c)
(Ord. 63 (part), 8/20/57)
VI-1-2.13 - Assigning Additional Duties
Wherever any order, resolution or ordinance of the City Council of the City of Milpitas has heretofore or hereafter assigned any power or duty or granted any right or privilege to the City Administrator of the City of Milpitas, the City Manager of the City of Milpitas shall be empowered and shall be assigned said power or duty and shall be granted said right or privilege.
(Ord. 63 (part), 8/20/57)
VI-1-2.14 - Signatures.
The City Manager and his or her designee, upon approval of the City Council, shall have the authority to sign and execute the following instruments:
All warrants drawn on the City Treasury.
All written contracts and conveyances made or entered into by the City.
All instruments requiring the City seal.
(Ord. 63.2, 6/15/99)
Section 3 - Transfer of Duties to City Manager
VI-1-3.01 - City Clerk
Pursuant to the provisions of Section 34004 of the Government Code of the State of California, the City Council of the City of Milpitas does hereby transfer from the City Clerk of the City of Milpitas to the City Manager of the City of Milpitas, any duty imposed upon said Clerk by any law of the State of California or any rule or regulation adopted under the authority of any such law except as hereinafter provided, and any duty imposed upon the City Clerk by any ordinance or resolution of the City of Milpitas, or any rule or regulation adopted under the authority of any ordinance or resolution of the City of Milpitas except as hereinafter provided:
(Ord. 52.2, 1/16/63)
3.01-1 Exception: The City Clerk may sign and execute any evidence of indebtedness, bond, indenture, or document specified by law or contract to be signed or executed by the City Clerk in connection with the issuance, sale or redemption of bonds, and evidences of indebtedness, and the qualification for or acceptance of grants, the proceedings for the authorization or incurring of which have been conducted by, or pursuant to the authority of the City Council.
551
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(Ord. 52.2, 1/16/63)
3.01-2 Exception: The City Clerk shall have concurrent authority (with the City Manager) to administer oaths or affirmations and take and certify affidavits and depositions pertaining to city affairs and business pursuant to the authority granted by 40814 of the Government Code of the State of California. (Ord. 52.2, 1/16/63)
VI-1-3.02 - Treasurer
Pursuant to the provisions of 34004 of the Government Code of the State of California, the City Council of the City of Milpitas does hereby transfer from the City Treasurer of the City of Milpitas to the City Manager of the City of Milpitas, any duty imposed upon said Treasurer by any law of the State of California or any rule or regulation adopted under the authority of any such law except as hereinafter provided, and any duty imposed upon the City Treasurer by any ordinance or resolution of the City of Milpitas, or any rule or regulation adopted under the authority of any ordinance or resolution of the City of Milpitas except as hereinafter provided:
(Ord. 52.2, 1/16/63)
3.02-1 Exception: The City Treasurer may continue to sign voucher checks of the City of Milpitas to the extent granted by resolution of the City Council enacted under authority of 37203 of the Government Code.
3.02-2 Exception: The City Treasurer may sign and execute any evidence of indebtedness, bond, indenture, or document specified by law or contract to be signed or executed by the City Treasurer in connection with the issuance, sale or redemption of bonds, and evidences of indebtedness, and the qualification for or acceptance of grants, the proceedings for the authorization or incurring of which have been conducted by, or pursuant to the authority of, the City Council. (Ord. 52.2, 1/16/63)
VI-1-3.03 - Performance of Duties Transferred
It shall be the duty of the City Manager to perform such duties as have been transferred to him, pursuant to the provisions of this section.
(Ord. 52.2, 1/16/63)
VI-1-3.04 - City Manager Empowered to Appoint Clerk and Treasurer Pursuant to the provisions of Section 36510 of the Government Code of the State of California, the City Manager of the City of Milpitas is hereby empowered to appoint the City Clerk and the City Treasurer. 552
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A.
B.
C.
D.
E.
F.
G.
H.
I.
(Ord. 52.3, 9/18/73)
Section 4 - Employment Contracts
VI-1-4.00
Nothing herein contained shall be construed to prevent the City Council from entering into a written contract of employment with the City Manager. Said contract may, in addition to such other provisions as shall not be in conflict with the provisions of this Chapter, provide for severance pay to the City Manager in the event his employment is terminated by City. No contract of employment, however, shall exceed a term of four years. No contract of employment shall contain any provision inconsistent with the provisions of this Chapter.
(Ord. 63.1, 9/5/78)
VI-1-4.01 - Declaratory of Existing Law
The Council finds and determines that the provisions of this Section VI-1-4.00 are declaratory of existing law and do not constitute a change in said law.
(Ord. 63.1, 9/5/78)
Chapter 3 - DEPARTMENTS, ASSIGNMENTS AND APPOINTMENTS
VI-3-1.00 - Establishment of Departments of City
Pursuant to the provision of Section VI-1-2.08 of the Milpitas Municipal Code, the work of the City government shall be distributed among the following departments of the City:
City Manager;
City Attorney;
Finance;
Human Resources;
Information Technology;
Planning;
Public Works;
Engineering;
Police; 553
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J.
K.
L.
1. 2.
Fire;
Building Safety and Housing; and
Recreation and Community Services.
(Ord. No. 301 , § 19, 8/20/19; Ord. No. 197.14, § 1, 6/6/17; Ord. No. 197.13, § 2, 6/2/15; Ord. No. 197.12, § 2, 6/5/12; Ord. No. 197.11, § 2, 6-16-09; Ord. 197.10 (1), 6/19/07: Ord. 197.9, 6/6/06: Ord. 197.7, 7/3/01: Ord. 197.6, 9/5/95: Ord. 197.5, 3/21/95: Ord. 197.4, 5/4/94: Ord. 197.3 (A), 8/5/86: Ord. 197.2, 3/16/79; Ord. 197.1 (part), 9/5/78)
VI-3-2.00 - Divisions and Distribution of Work
Subject to other provisions of law, the work of the City government shall be assigned to such departments and such divisions within such departments as the City Manager shall establish and determine.
(Ord. 197.1 (part), 9/5/78)
VI-3-3.00 - Appointment and Removal of Department Heads The City Manager shall appoint, and at his or her pleasure may dismiss, all City Department Heads. The City Manager's power to appoint and dismiss as described in this Ordinance may not be amended or limited, except as expressly imposed by formal action of the City Council. (Ord. 52.5 (part), 11/18/97: Ord. 197.1 (part), 9/5/78) VI-3-4.00 - Severance Payments for Specified "At-Will" Positions Application. The ordinance codified in this Section shall permit the payment of severance to City employees serving in any of the following positions on an "at-will" (i.e., exempt) basis:
Department Heads; Chief Building Official; and City Engineer (hereafter "qualifying positions").
Severance Schedule. In exchange for a general release in a form subject to approval by the City Attorney, the City Manager may grant severance pay pursuant to this Section on the following schedule. Severance pay shall be based on an employee's base salary at the time of separation and is subject to all applicable withholding as determined by the City or appropriate taxing authorities:
For employees with up to one year of City service in a qualifying position: Four weeks' salary.
For employees with greater than one year, but no more than five years, of City service in a qualifying position: Four weeks' salary, plus two weeks' salary for each additional year of City service in a qualifying position (maximum twelve weeks' salary). 554
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3. (a)
(b)
(c)
(d)
For employees with greater than five years of City service in a qualifying position: Twelve weeks' salary, plus one week's salary for each additional year of City service in a qualifying position not to exceed a total of four additional weeks' salary.
Criteria and Administration.
The maximum amount of severance payable under this Section sixteen weeks' salary. The minimum City service required in a qualifying position in order to receive this amount is nine years.
A year of City service means at least 2080 hours during a twelve-month period in a paid status.
Severance payments under this Section shall not be paid until after the City Attorney approves the release and after any statutory waiting periods have expired (e.g., the seven-day waiting period under the ADEA).
Severance payments may be made under this Section only after an employee is dismissed without cause or is laid off. Employees who voluntarily resign, retire, or who are dismissed "for cause" are ineligible for severance payments made under this section. Dismissal "for cause" includes any dismissal made for reasons of fraud, dishonesty, insubordination, theft, misappropriation or misuse of City property, excessive absenteeism, actions prohibited by the City's anti-discrimination policies, or conduct that would constitute a crime. The City Manager shall have the discretion to determine whether dismissals are "for cause" under this section.
(Ord. 197.8, 6/4/02)
Chapter 10 - PUBLIC SAFETY DISPATCHER TRAINING AND SELECTION Sections:
VI-10-1.00 - Purpose
The City of Milpitas declares that it desires to qualify to receive aid from the State of California under the provisions of Section 13522, Chapter 1, of Title 4, Part 4, of the California Penal Code. (Ord. 235 (part), 4/3/90)
VI-10-2.00 - State Standards
Pursuant to Section 13510(c), Chapter 1, the City of Milpitas will adhere to standards for recruitment and training established by the California Commission on Peace Officer Standards and Training (POST). 555
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(Ord. 235 (part), 4/3/90)
VI-10-3.00 - Adherence to Standards
Pursuant to section 13512, Chapter 1, the Commission and its representatives may make such inquiries as deemed appropriate by the Commission to ascertain that the City of Milpitas public safety dispatcher personnel adhere to standards for selection and training established by the Commission on Peace Officer Standards and Training.
(Ord. 235 (part), 4/3/90)
Chapter 101 - PERSONNEL SYSTEM
Sections:
[Section 1. - Adoption of Personnel System]
VI-101-1.00 - Adoption of Personnel System
In order to establish an equitable and uniform procedure for dealing with personnel matters; to attract to municipal service the best and most competent persons available; to assure that appointments and promotions of employees will be based on merit and fitness as determined by competitive test; and to provide a reasonable degree of security for qualified employees, the following personnel system is hereby adopted.
(Ord. 111.8 (C)(part), 4/17/90; Ord. 111 (part), 8/6/63) [Section 2. - Personnel Officer]
VI-101-2.00 - Personnel Officer
VI-101-2.01 - Duties and Responsibilities
The City Manager shall be ex-officio personnel officer. The City Manager may delegate any of the powers and duties as personnel officer under this Chapter to any other officer or employee of the City or may recommend that such powers and duties be performed under contract as provided in Section VI-101-15 of this Chapter. The Personnel Officer shall:
556
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2.01-1 Administer all the provisions of this Chapter and of the personnel rules not specifically reserved to the Council.
2.01-2 Prepare and recommend to the Council revisions and amendments to the personnel rules. The City Attorney shall approve the legality of such revisions and amendments prior to their submission to the Council.
2.01-3 Prepare a position classification plan, including class specifications, and revisions of the plan.
The plan, and any revisions thereof, shall become effective upon approval by the Council.
2.01-4 Prepare a plan of compensation, and revisions thereof, covering all classifications in the competitive service. The plan, and any revisions thereof, shall become effective upon approval by the Council.
(Ord. 111.8 (C)(part), (D), 4/17/90: Ord. 111 (part), 8/6/63) [Section 3. - Competitive Service]
VI-101-3.00 - Competitive Service
The provisions of this Chapter shall apply to all offices, positions, and employments in the service of the City, except the following "exempt" positions.
(Ord. 111.8 (C)(part), 4/17/90; Ord. 111 (part), 8/6/63) VI-101-3.01 - Positions Exempt from Competitive Service
3.01-1 All elected officials.
3.01-2 Members of appointive boards, commissions and committees.
3.01-3 Persons engaged under contract to supply expert, professional or technical services for a definite period of time.
3.01-4 Volunteer personnel, such as volunteer firemen, who receive no regular compensation from the City.
3.01-5 The City Attorney, the City Clerk, and City Treasurer.
3.01-6 The City Manager and Assistant City Manager.
3.01-7 Department Heads, Directors, Division Heads and other employees with significant responsibility for formulating and administering City policies and programs. (Ord. 111.8 (C)(part), (E), 4/17/90: Ord 111.2, 6/22/70; Ord. 111 (part), 8/6/63) 557
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[Section 4. - Adoption of Rules]
VI-101-4.00 - Adoption of Rules
Personnel rules, prepared by the City Manager subject to this Chapter and to revision by the Council, shall be adopted, and may be amended from time to time, by resolution of the Council. The rules shall establish specific procedures and regulations governing the following phases of the personnel system:
(Ord. 111.8 (C)(part), 4/17/90; Ord. 111 (part), 8/6/63) VI-101-4.01 - Coverage of Such Rules
4.01-1 Preparation, installation, revision, and maintenance of a position classification plan covering all positions in the competitive service, including employment standards and qualifications for each class.
4.01-2 Preparation, revision, and administration of a plan of compensation directly correlated with the position classification plan, providing a rate or range of pay for each class.
4.01-3 Public announcement of all tests and the acceptance of applications for employment.
4.01-4 Preparation and conduct of tests and the establishment and use of resulting employment lists containing names of persons eligible for appointment.
4.01-5 Certification and appointment of persons for employment lists, and the making of temporary and emergency appointments.
4.01-6 Transfer, promotion, demotion, and reinstatement of employees in the competitive service.
4.01-7 Separation of employees from the City service through lay-off, suspension, and dismissal.
4.01-8 Standardization of hours of work, attendance and leave regulations, working conditions and the development of employee morale, welfare, and training.
4.01-9 Suitable provision for orderly and equitable presentations to the City Manager and to the City Council by employees relating to general conditions of employment.
4.01-10 Content, maintenance, and use of personnel records and forms.
4.01-11 Not codified.
4.01-12 Any other procedures and regulations necessary to carry out the provisions of this Chapter. (Ord. 111.8 (C)(part), 4/17/90; Ord. 111 (part), 8/6/63) [Section 5. - Appointments]
558
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VI-101-5.00 - Appointments
VI-101-5.01 - Competitive
Examinations
Appointments to vacant positions in the competitive service shall be made in accordance with the personnel rules. Appointments and promotions shall be based on merit and fitness to be ascertained so far as practicable by competitive examinations. Examinations shall not be required for the reinstatement of employees to the same or comparable class, for which they are qualified and from which they were separated as a result of resignation in good standing or reduction in force.
Provided however, the City Council shall be entitled to establish preference in the competitive examination procedure for veterans of the United States armed forces as defined by and under rules and regulations adopted by the City Council by resolution.
(Ord. 111.8 (C)(part), 4/17/90; Ord. 111.7, 2/18/86; Ord. 111 (part), 8/6/63) VI-101-5.02 - Power to Make Appointments
Appointments shall be made by the City Council, City Manager, Department Heads, Personnel Officer or the officer in whom the power to make appointments is vested by law. (Ord. 111.8 (C)(part), (F), 4/17/90: Ord. 111 (part), 8/6/63) VI-101-5.03 - Temporary appointment
In the absence of appropriate employment lists, a temporary appointment may be made in accordance with the Personnel Rules.
(Ord. 111.8 (C)(part), 4/17/90; Ord. 111 (part), 8/6/63) VI-101-5.04 - Emergency appointments
Emergency appointments shall be made in accordance with state law and the personnel rules. (Ord. 111.8 (C)(part), 4/17/90; Ord. 111 (part), 8/6/63) Section 6 - Probationary Period
All regular appointments, including promotional appointments, shall be for a probationary period of not less than six months.
559
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(Ord. 111.8 (C)(part), 4/17/90; Ord. 111 (part), 8/6/63) Section 7 - Status of Present Employees
VI-101-7.01 - Exemption From Qualifying
Any person holding a position included in the competitive service who, on the effective date of this Chapter, shall have served continuously in such position for a period equal to the probationary period prescribed in the rules for his class, shall assume regular status in the competitive service in the position held on such effective date without qualifying test, and shall thereafter be subject in all respects to the provisions of this Chapter and the personnel rules.
(Ord. 111.8 (C)(part), 4/17/90; Ord. 111 (part), 8/6/63) VI-101-7.02 - Present Employee in Probationary Period
Any other persons holding positions in the competitive service shall be regarded as probationers who are serving out the balance of their probationary periods as prescribed in the rules before obtaining regular status. The probationary period shall be computed from the date of appointment or employment. (Ord. 111.8 (C)(part), 4/17/90; Ord. 111 (part), 8/6/63) Section 8 - Applicability of Rules to Certain Exempt Positions The provisions of the personnel rules relating to attendance and leaves shall apply to the incumbents of full-time exempt positions.
(Ord. 111.8 (C)(part), 4/17/90; Ord. 111 (part), 8/6/63) Section 9 - Appointments Subject to Ordinance
The City Council, City Manager, and any other officer in whom is vested the power to appoint, make transfers, promotions, demotions, reinstatements, lay-offs, and to suspend or dismiss employees, shall retain such power, subject to the provisions of this chapter and the personnel rules. (Ord. 111.8 (C)(part), 4/17/90; Ord. 111 (part), 8/6/63) Section 10 - Suspension
560
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(a)
(b)
(c)
(a)
(b)
(c)
(d)
(e)
Any person holding a position or employment in the competitive service shall be subject to disciplinary suspension without pay by the appointing power, provided that such suspensions are in accordance with the provisions of this chapter and the personnel rules relating to appeals procedure. (Ord. 111.8 (C)(part), 4/17/90; Ord. 111 (part), 8/6/63) Section 11 - Right of Appeal
Except as otherwise provided in a Memorandum of Understanding approved by the City Council, any employee shall have the right to appeal any disciplinary action, suspension, demotion, reduction or alleged violation of the personnel ordinance or rules. The administration of appeals shall be governed by the personnel rules.
(Ord. 111.8 (C)(part), (G), 4/17/90: Ord. 111.7 (part), 1/6/87: Ord. 111 (part), 8/6/63) Section 12 - Improper Political Activity
Any person holding an office or employment in the competitive service shall not:
Deleted by Ord. 111.3.
During hours of work, or when dressed in the uniform required in any department of the City government or when wearing any City insignia required or permitted in any department of the City government or while identifying himself as an officer or employee of the City of Milpitas, participate in any City, District, County, State, Federal or other political activity or participate in any nomination, campaign or election (except as expressly authorized by the City Manager of City.)
Use his office or employment or title or City uniform or City insignia in connection with any City, District, County, State, Federal or other political activity or in connection with any nomination, campaign or election (except as expressly authorized by the City Manager). (Ord. 111.8 (C)(part), 4/17/90; Ord. 111.3, 6/18/74; Ord. 111.1, 5/28/68; Ord. 111 (part), 8/6/63) Section 13 - Activities Not Affected
This chapter does not prevent any officer or employee from:
Becoming or continuing to be a member of a political club or organization.
Attendance at a political meeting.
Enjoying entire freedom from all interference in casting his vote.
Seeking or accepting election or appointment to public office while on leave of absence.
Seeking signatures to any initiative or referendum petition directly affecting his rates of pay, 561
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hours of work, retirement, civil service, or other working conditions provided such activity is not carried on during hours of work.
Distributing badges, pamphlets, dodgers, or handbills or other participation in any campaign in connection with such petition if the activity is not carried on during hours of work, or when he is dressed in the uniform required in any department of the city government.
The violation of any provision of Sections 12 or 13 is ground for discharge of any officer of employee. (Ord. 111.8 (C)(part), 4/17/90; Ord. 111 (part), 8/6/63) Section 14 - Discrimination
All recruitment, hiring, placements, transfers and promotions shall be on the basis of qualifications of the individual for the positions being filled regardless of race, color, religion, ancestry, national origin, age (over forty years), sex, marital status, medical condition (cured or rehabilitated cancer), physical handicap, political affiliation or union activity. All other personnel actions, such as compensation, benefits, layoffs, returns from layoffs, disciplinary actions, training and social and recreational programs shall also be administered regardless of race, color, religion, ancestry, national origin, age (over forty years), sex, marital status, medical condition, physical handicap, political affiliation or union activity. (Ord. 111.8 (C)(part), (H), 4/17/90: Ord. 111 (part), 8/6/63) Section 15 - Right to Contract for Special Service
The City Manager shall consider and make recommendations to the City Council regarding the extent to which the City should contract for the performance of technical services in connection with the establishment or operation of the personnel system. The Council may contract with any qualified person or agency for the performance of all or any of the following responsibilities and duties imposed by this Chapter:
The preparation of personnel rules and subsequent revisions and amendments thereof.
The preparation of a position-classification plan, and subsequent revisions and amendments thereof.
The preparation of a plan of compensation, and subsequent revisions and amendments thereof.
The preparation, conduct and grading of competitive tests.
Special and technical services of advisory or informational character on matters relating to personnel administration.
(Ord. 111.8 (C)(part), 4/17/90; Ord. 111 (part), 8/6/63) 562
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Section 16 - Appropriation of Funds
The Council shall appropriate such funds as are necessary to carry out the provisions of this Chapter. (Ord. 111.8 (C)(part), 4/17/90; Ord. 111 (part), 8/6/63) Section 17 - Penalty Provision
See I-1-4.09-1
(Ord. 111.8 (C)(part), 4/17/90; Ord. 111 (part), 8/6/63) Section 18 - Regulations Regarding Nepotism
VI-101-18.01
As used herein, the term "relative" means the following relationships by blood, marriage or adoption:
Spouse, father, mother, sister, brother, son, daughter, niece, nephew, aunt, uncle, stepfather, stepmother, stepsister, stepbrother, stepson, stepdaughter.
(Ord. 111.8 (C)(part), 4/17/90; Ord. 111 (part), 8/6/63) VI-101-18.02
The provisions of this Section shall not apply to any officer, employee or appointee holding any office, employment or appointment prior to thirty days following the adoption of this Section. (Ord. 111.8 (C)(part), 4/17/90; Ord. 111 (part), 8/6/63) VI-101-18.03
No person shall be disqualified for appointment as an employee of the City or disqualified from assignment or transfer for the sole reason that said person is a relative of another City officer or employee except as follows:
a) No person shall serve in a position where said person is subject to supervision, evaluation, discipline or having his/her compensation determined by a relative. b) No person who is a relative of a department head shall serve in the department of said department head.
c) No person who is a relative of a division head shall serve in the same division as said division head. 563
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d) No relative of the City Manager, Mayor, or of any City Council member shall serve in any city position provided nothing herein contained:
shall be a limitation upon the power of the electorate to elect a Mayor or Council member, notwithstanding the fact that at the time of said election, said Mayor or Council member shall have a relative employed by the City
shall be a limitation upon the power of the Mayor or Council to appoint any Council member or other City officer, notwithstanding the fact that at the time of the appointment, the appointee has a relative employed by the City.
(Ord. 111.8 (C)(part), 4/17/90; Ord. 111.6, 2/18/86; Ord. 111 (part), 8/6/63) Chapter 102 - PROVISIONS FOR REDUCING CITY WORK FORCE
Sections:
Section 1 - Abolition or Reduction of Authorized Positions VI-102-1.00
Whenever in the judgment of the City Council it becomes necessary in the interest of economy or because the necessity for any authorized position in the City service no longer exists, the City Council may eliminate or reduce the number of any or all authorized positions within the City service without the right of appeal of the decision to eliminate or reduce the positions. (Ord. 111.5 (part), 6/20/78)
Section 2 - Demotion Within the Competitive Service Classifications Above the Entry Level VI-102-2.00
In reducing the number of personnel within classification(s) the least senior employee(s) within the affected class(es) shall be displaced either through demotion or lay-off. Seniority for the purpose of this section, is defined as the employee's total time served within the specified classification, or higher classification(s) within the job series. In the event two or more employees have served the same amount of time in a classification, seniority shall be determined by their respective position on the employment list for the specified classification. All temporary employees in the affected class or classes shall be laid off prior to the displacement of any probationary or permanent employee. 564
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Any permanent employee who is displaced as provided for in Section 1, may elect to accept a demotion in lieu of lay-off to a lower level related classification, or an unrelated classification previously held on a permanent basis, provided, however, that two conditions are met:
that the employee accepting demotion meets the qualifications for the classification he/she has elected for the demotion OR has previously held the classification; and that the employee accepting demotion must have a length of service either in the higher classification(s), the classification he/she is considering for demotion, or a combination of both which is greater than the least senior employee in the classification to which he/she intends to accept the demotion.
(Ord. 111.5 (part), 6/20/78)
Section 3 - Exempt Employees May Return to the Competitive Service VI-102-3.00
Any exempt employee who was promoted from the Competitive Service may elect a demotion to the Competitive Service in lieu of layoff. Once elected, said employee shall be eligible for demotion to a lower level classification in accordance with the provisions of Section 2. (Ord. 111.8 (I)(part), 4/17/90: Ord. 111.5 (part), 6/20/78) Section 4 - Lay-Off
VI-102-4.00
Seniority, for the purpose of this section, shall be defined as the total cumulative time of City service and shall be observed in effecting lay-offs. The order of lay-off shall be in the reverse order of total cumulative time served in permanent positions in the City service upon the effective date of lay-off. Lay-off shall be made within classes of positions, and all temporary employees in the affected class or classes shall be laid off prior to the lay-off of any probationary or permanent employee.
Each employee laid off shall receive a final performance evaluation to be based on job performance since the employee's last performance appraisal. Thereafter, the Department head shall certify as to the affected employee's competency if overall service in the classification has been satisfactory. If not certified as having given satisfactory service, the employee laid off may interpret the action as a discharge and request a hearing as provided by the Personnel Ordinance. An employee who is laid off must be certified as competent, in order to be placed on the re-employment list. 565
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(Ord. 111.5 (part), 6/20/78)
Section 5 - Time Served on Military Leave
VI-102-5.00
For the purpose of determining displacement within classifications in accordance with this Chapter, time served on military leave shall be included as time served within the classification held at the time the military leave was taken, and in accordance with the Military and Veterans Code of the State of California. (Ord. 111.5 (part), 6/20/78)
Section 6 - Notice of Lay-Off
VI-102-6.00
Pursuant to Section 1 of this Chapter, the City shall provide employees who may be affected by lay-off, a thirty (30) calendar day written preliminary notice of intent to lay-off. The preliminary notice shall also advise the employee whether, in accordance with this Chapter, they may elect demotion in lieu of lay-off.
Employees who are notified that they may elect demotion in lieu of lay-off, must advise the City Manager's Office within fifteen (15) calendar days, of their decision to exercise the demotion option or forfeit their rights to the demotion in lieu of lay-off. Thereafter, the City shall provide a written confirmed notice of layoff at least ten (10) working days prior to the effective date of lay-off. Reasonable effort shall be made to ensure notification. The recognized employee group representatives for the affected classes shall be notified concurrently on the preliminary and confirmed lay-off notices. (Ord. 111.5 (part), 6/20/78)
Section 7 - Re-Employment Lists
VI-102-7.00
The names of probationary and permanent employees laid off or demoted in accordance with this Chapter shall be placed on a re-employment list in the reverse order of their displacement, whether it be by lay-off or demotion. The lists shall be prepared by classes which, in the opinion of the City Manager, require basically the same qualifications and duties and responsibilities for those of the class or classes of positions 566
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from which lay-off or demotion occurred. Re-employment lists shall remain in effect for seven years following their promulgation, except that the names of employees who are laid off shall be removed after three years.
Employees who are laid off in accordance with this Chapter are required to keep the City Manager's Office informed of any change of address or telephone number. Employees shall be returned in the reverse order of their displacement.
An employee's name shall be removed from the re-employment list, if:
the individual has been certified for appointment three times and has refused the appointments; and/or
has resigned from City service during the period the list is in effect.
In the event an employee's name is removed from the re-employment list for refusing an appointment three times, he/she may petition the City Manager in writing for reinstatement to the list. If good cause can be demonstrated as to why the individual did not accept any of the appointments, the City Manager may reinstate the individual to the list.
(Ord. 111.5 (part), 6/20/78)
Section 8 - Conditions of Re-Employment
VI-102-8.00
Upon re-employment, any employee who was laid off in accordance with Section 4 of this Chapter shall have his/her status restored and/or modified pursuant to the existing Memorandum of Understanding in effect at the time of lay-off or subsequent Memorandum of Understanding. The intent of this section is to restore at least the following:
the same vacation accrual rate;
his/her sick leave balance in effect at the time of lay-off; his/her seniority (time served in permanent positions within the City service), at the time of lay-off;
if re-employed in the same classification, or substantially the same classification, the employee shall be returned to the same step of the current salary range for that classification;
if re-employed in a lower classification, the employee's salary shall be established as though he/she had been demoted to the position; and
upon re-employment the applicant shall provide a written statement that he/she has not 567
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incurred any disability during the period of lay-off which would prevent the applicant from performing the duties of that position.
(Ord. 111.5 (part), 6/20/78)
Section 9 - Waiver
VI-102-9.00
Unless modified herein, all other existing provisions remain as established. (Ord. 111.5 (part), 6/20/78)
Section 10 - Severability
See I-1-4.12
(Ord. 111.5 (part), 6/20/78)
Section 11 - Criteria for Demotion Within Exempt Classifications VI-102-11.00
In reducing the number of exempt personnel, displacement within classification(s) shall be made by the City Manager after reviewing the Department Head's recommendation and may take into consideration the following four factors:
consideration of the seniority of the employee(s) affected; the nature of the services performed by the employee(s) affected or which the employee(s) affected are capable of rendering;
the importance of the service rendered to the City and to the community; and the availability of funds.
(Ord. 111.8 (I)(part), 4/17/90: Ord. 111.5 (part), 6/20/78) Section 12 - Outsourcing of Sworn Safety Personnel
VI-102-12.00
568
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Police and Fire services are currently provided by employees of the City within Departments of the City utilizing City owned facilities and equipment. Any proposal to outsource the public safety functions of these departments as currently organized may not be implemented without first being approved by the voters of the City of Milpitas. Outsourcing within the meaning of this Ordinance means laying off or terminating the employment of the employees currently providing these services and replacing those persons with personnel not employees of the City. This provision shall not affect the authority of the City to otherwise reduce its workforce, as provided in this Chapter, or to take disciplinary action regarding any employee for cause, or otherwise exercise management authority to organize these departments and personnel as allowed under this Code, the Personnel Rules and applicable MOU provisions. (Ord. No. 283, § 2, 11/6/12)
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April 11, 2022
Sent by email to: [email protected]
Mr Steve McHarris, City Manager
City of Milpitas
455 E. Calaveras Bl.
Milpitas, CA 95035
Dear Mr. McHarris,
We are looking forward to attending the City Council meeting on April 19th where you will be asking the City Council if they would like to prioritize the review of the Eleanor to become a member of the recently adopted CSCDA Workforce Housing Program (“WHP”). We have outlined in this letter a few key points to help you frame our request to the City Council that evening.
Background
We have been in working with the property owner (SummerHill Apartment Communities) since June 2021 to present this property to the City of Milpitas. We realize that your staff had to take a deep dive into the CSCDA WHP to understand the program and the benefits, cost, and any liability to the City by becoming a member of the WHP, and whether to consider adopting the Turing as a part of the WHP. As we all know, this process was very long. We stood patiently on the sidelines while the City went through this process, ultimately decided to join the WHP and adopted the Turing to be part of WHP in March 2020.
Benefits to the City
As you know we submitted our project data and required documents for you to review for consideration of now adopting the Eleanor to the WHP (See the attached Dropbox link below) on March 16, 2022. As we discussed over the Zoom meeting we had on March 29th, we are excited to be able to present this opportunity to make the Eleanor a middleͲincome housing community to the city for many years to come. Adopting this community to be a part of the WHP will have a meaningful impact to the residents of the EleanorͲIn fact, we recently learned that 78% of current residents would qualify for the Program. This is a considerable number of existing Milpitas residents who will immediately see an average savings of their rent to be ~$460 per month or $5,520 per year! Next Steps
The good news is that our application is not centered around the heavy analysis that went into the decision of if the City should join the CSCDA WHP JPA, but rather now it’s only a decision to add this Property to the City’s newly adopted membership of the CSCDA WHP JPA. Thus, the scope of work will be significantly less for the 3rdͲParty Consultant(s) where the focus should be on the merits of the Eleanor to be included as a part of the City’s approved properties under the newly adopted CSCDA WHP JPA. This process should move forward without a lot of staff time and your consultants should be able to review and report on the Eleanor’s bond underwriting very quickly. 570
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Letter to Mr. Steve McHarris
City of Milpitas
April 11, 2022
2 Schedule:
We have reviewed the timeframe that we would expect this process to take, and have outlined the following schedule to be very achievable:
Date/Week of: Milestone
3/16/22 OHG submitted the Application for Eleanor to the City 4/19/22 City to initiate priority review of Eleanor
May 9th: 3rd Party Report finalized (2+ weeks to contract & prepare)* May 12/13th: City Finalize Staff Report (use all the information in Dropbox link below) 5/17/22 City Council to Hear Item for consideration to adopt Eleanor as a part of the CSCDA WHP Note: *We would suggest that the City immediately contract with their consultants to expedite the review of the information we provided to you on March 16th. OHG is willing to pay overtime to have the 3rd Party Consultants review the bond underwriting for the Eleanor within the timeframe noted. We would also recommend that if KMA is backed up, that the City consider RSG to complete this propertyͲlevel report (https://webrsg.comͲattention Mark Sawicki 714.316.2194 (Direct)). RSG has completed project reviews of the WHP for numerous cities across the state.
Summary of Request for City Council to consider at the City Council Meeting on April 19, 2022:
1. Prioritize and immediately commence the review process pursuant to the schedule noted above.
2. Initiate a Reimbursement Agreement where OHG will reimburse the City and Consultant time to expedite this review.
3. Establish a clear understanding between the City Council, Staff and OHG that any review and approval for Eleanor will need to be under the same terms and conditions as the Turing and will include the same waivers and set of agreements reached between Waterford with the City Council [Note: OHG works with the same CSCDA bond council and there is no latitude to make any changes to what was approved by the City Council earlier this month].
4. Establish a clear understanding between the City Council, Staff and OHG that certain goals and performance measures that you recommended in your staff report of the Turing’s application were waived by the City Council and those waivers would match up to what Eleanor would be able to accept as a part of its approval.
As we stated in our prior emails, to accelerate the city review and to expedite the process, please find the Dropbox link below which contains the following documents:
x Eleanor Project Memo
x Eleanor Proforma
x Draft Public Benefit Agreement for Eleanor
x Redline Eleanor Public Benefit Agreement vs. Turing x Draft Approval Resolution
https://www.dropbox.com/sh/mcqjvog7kdtbek7/AAAJC4RUXT17PbdHho0Z53Zga?dl=0 571
Item # 22.
Letter to Mr. Steve McHarris
City of Milpitas
April 11, 2022
3 Thank you for your consideration of our request on April 19, 2022, and we look forward to answering any questions that you might have in the meantime.
Sincerely,
Brad Griggs
Managing Partner
Blake|Griggs Properties, LLC
Opportunity Housing Group, LLC
550 Hartz Avenue, Suite 200
Danville, CA94526
M. 415Ͳ235Ͳ7732
www.blakegriggs.com | www.opportunityhousinggroup.com
CC (by email):
Members of the City Council c/o Milpitas City ClerkͲ[email protected] CSCDA – Jon Penkower, Managing Director [email protected] OHG – Lauren Seaver [email protected]
Deputy Milpitas City Manager – Ashwini Kantak [email protected]
l
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455 E. Calaveras Blvd., Milpitas, CA 95035
MEMORANDUM
City Manager’s Office
www.ci.milpitas.ca.gov
Superior Customer Service Open Communication Integrity and Accountability Trust and Respect Recognition and Celebration DATE: April 15, 2022
TO: Mayor and Councilmembers
THROUGH: Steve McHarris, City Manager
FROM: Ashwini Kantak, Assistant City Manager
Sharon Goei, Building Safety and Housing Director
SUBJECT: Eleanor Apartments Project Proposal
BACKGROUND
At the March 15 City Council meeting, staff was directed to agendize a discussion about the potential conversion of Eleanor Apartments located at 312 Gates Drive to a moderate-income housing project through the California Statewide Communities Development Authority.
At the February 15 City Council meeting, Council adopted Goals and Performance Measures for this type of moderate-income housing program and presented recommendations for a Public Benefit Agreement (PBA) for a similar program for the Turing apartments located at 1355 McCandless Drive.
Although the Turing project team had made several changes to their original project proposal and draft PBA since the original proposal was submitted in May 2021, the adopted PBA still did not align with the Council’s adopted goals and measures for this type of program. Council deliberation included an acknowledgment that since this was a new concept for Milpitas, the Turing proposal could be considered for approval, while the process along with the adopted Goals and Performance Measures, provided ample information for future applicants to understand the City’s expectations for any other such project proposals.
The Eleanor Apartments project representative has stated that their proposed project will not be viable if they are required to comply with the recent Council adopted goals and performance measures. Their project team is seeking the same terms included in the Turing PBA.
We also remind the Council that, as noted in the February 15 staff report, Item 16, the approved PBA for the Turing project does not meet the adopted Goals and Performance Measures in several areas related to Affordability, Financial Considerations, Capital Investments, and Transparency and Oversight. The approved PBA also does not adequately mitigate potential future risks identified by the City’s financial consultants, City Attorney’s Office, and staff.
Another consideration for the proposed project is the availability of staffing resources. Although the Turing project team paid for consultant costs, a significant amount of staff time was spent on the project, which was not reimbursed, and diverted staff attention away from other City Council work priorities. Given the vacancy rate in Housing and the many federal and state-mandated projects currently underway, Housing staff will not be able to initiate this project without securing additional staffing resources to manage the project. Additionally, the Turing project required a considerable amount of time from staff in Finance and the City Manager’s Office, and from the City Attorney. With the Proposed FY 2022-2023 Budget currently underway, staff will only be able to initiate the proposed project analysis upon securing staff dedicated to working on this project. And at that time, the proposal analysis will require setting up a funding mechanism with the project applicant to pay for staffing and consultant costs. Additionally, procurement of consulting resources will require staff resources across multiple departments.
Attachments:
Attachment 1: Adopted Goals and Performance Measures
Attachment 2: Alignment of Proposal with Adopted Goals and Measures 573
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1 City of Milpitas
Framework for Evaluating
City Participation in Middle-Income Workforce Housing Proposals
GOALS AND PERFORMANCE MEASURES
GOAL A: AFFORDABILITY LEVEL
Project will primarily serve Moderate Income Households during the entire bond period.
Performance Measures:
A1. Housing units will be below market-rate and affordable to Moderate-Income Households earning 81-120% average median income (AMI), as defined by the California Department of Housing and Community Development (HCD) maximum household income and rent limits for Santa Clara County. Units for Low-Income Households (80% AMI or below) as defined by HCD are also encouraged.
A2. Maximum rents shall be based on Moderate Income Households paying a maximum of the 30% of their gross household income for housing costs consisting of rent and utility expenses paid by tenants.
GOAL B: RENT INCREASES
Rent increases will be limited to maintain the affordability of the project for primarily Moderate Income Households during the entire bond period.
Performance Measures:
B1. Annual rent increases will not exceed 4% or the annual allowable percentage rent increase established by federal Department of Housing and Urban Development (HUD), whichever is lower.
B2. Owner or Property Administrator agrees to submit proposed rent increases for City review and approval that verifies affordability requirements/covenants will continue to be maintained. City will be allowed 30 days to review and approve the rent increase proposal.
AFFORDABILITY CONSIDERATIONS
ATTACHMENT 1
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2 B3. Owner or Property Administrator agrees to submit an annual report to City that certifies and confirms that affordability covenants, including rent increases, comply with HCD standards for affordability to Moderate Income Households.
GOAL C: EXISTING TENANTS
Existing project tenants will not be displaced by the public benefit, regulatory, or other agreements.
Performance Measures:
C1. Non-Qualified Tenants (exceeding 120% AMI per California Tax Credit Allocation Committee (CTCAC) standards) will be allowed to remain in unit paying market rents until they choose to move out.
C2. Qualified Tenants (120% AMI or below per CTCAC standards) will be allowed to benefit from a minimum 10% reduction in current project market rents.
GOAL D: LOCAL PREFERENCE POLICY
A preference program will be established for qualifying residents and employees with a primary work location in the City of Milpitas.
Performance Measures:
D1. Subject to City review and approval, Owner or Property Administrator agrees to establish and administer a tenant preference program with administrative guidelines, marketing plan, and screening procedures that define benefiting households and employees. Confirm compliance with state and federal fair housing regulations.
D2. Priority will be provided to qualifying teachers and administrative, maintenance, and support staff that are employed by the Milpitas Unified School District or other public education institution with a Milpitas job location.
GOAL E: REGIONAL HOUSING NEEDS ALLOCATION (RHNA) CREDIT Projects will qualify for full or partial RHNA credit, if feasible.
Performance Measures:
E1. Project complies with AB 787 criteria for full or partial RHNA credit:
a. No existing units affordable to very low, low, or moderate-income households; b. Affordable to moderate income households for 55 years; c. At least 10% reduction in average monthly rents from previous 12 months; d. Rents based on 100% AMI established by CTCAC;
e. Units in decent, safe, and sanitary condition;
f. Project not acquired by eminent domain;
g. Government monitoring program established to ensure affordability and occupancy by qualifying households; and
h. A public entity shall hold an assignable right to purchase development. 575
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3 GOAL F: QUALIFICATIONS OF PROJECT TEAM
Project will be owned and managed by a highly experienced and reputable Property Administrator and Property Manager.
Performance Measures:
F1: Property Administrator demonstrates a minimum of ten years of extensive expertise and financial capability in financing, developing, and managing at least 5,000 units of comparable market-rate and affordable (income and rent restricted) residential projects in California.
F2. Property Manager demonstrates a minimum of ten years of extensive financial and operations experience managing a portfolio of at least 5,000 units of comparable market-rate and affordable (income and rent restricted) residential projects in California, including administering local preference programs.
GOAL G: CITY EVALUATION OF PROPOSALS
Proposals will be evaluated for compliance with Goals and Performance Measures with professional and technical assistance as necessary.
Performance Measure:
G1. Project proponent deposits funds as determined by the City to retain independent financial, economic. and/or property management consultants to analyze the proposal and provide findings and recommendations on affordability terms, cashflow analysis, pro forma, property condition assessment, capital improvement needs, bond/financing structure, administrative fees, and draft agreements.
GOAL H CITY REVENUES
City participation will not result in a loss of City property taxes, special taxes, or property tax in lieu of vehicle license fees (PTILVLF).
Performance Measures:
H1. Project will fully backfill the City's any lost property tax and PTILVLF revenues through an upfront and/or annual payment of a Host Fee to the City with an annual increase of 2%. Host Fee shall be based on the post-sale assessed valuation of the property.
H2. Host and other applicable City fees will be paid before operating expenses, administrator fees, debt service (bond principal and interest), and any bond reserve fund deposits, and will be paid from other sources if operating revenue is insufficient to meet this obligation.
H3. For mixed used projects, property taxes pertaining to the non-residential portion of the property will continue to be paid.
FINANCIAL CONSIDERATIONS
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4 H4. Where applicable, an annual Infrastructure Fee will be paid equivalent to City special taxes pertaining to inclusion in a community facilities district or assessment district with annual increase as specified.
GOAL I. PROJECT FINANCIAL VIABILITY
Project demonstrates positive cashflow and ability to fully cover its debt service and operating expenses during the bond or agreement period to reduce financial risks and assure long-term viability.
Performance Measures:
I1. Through consultation with an independent real estate or economic consultant, income and expense assumptions conservatively reflect historical trends for residential projects in Milpitas or Santa Clara County.
J2. Project Condition Report demonstrates a minimum 1.0 Debt Coverage Ratio (DCR) during the entire bond period with rental income based on conservative assumptions and the affordability goals and performance measures in Goals A and B.
I3. Cash flow analysis and pro forma demonstrate ability to cover amortized principal and interest payments during the bond term based on conservative assumptions.
GOAL J: CITY FINANCIAL RISK/BOND STRUCTURE
The financing plan and bond structure for the project is sound and consistent with industry standards for multi-family revenue bonds and reduces City risks and liability.
Performance Measures:
J1. A minimum of 25% of the aggregate principal will be paid within 10 years of bond issuance; bond term will not exceed 35 years.
J2 Bonds will be optionally redeemable within 10 years of issuance with call premium consistent with investment grade municipal bonds.
J3 Bond principal redemption will be mandatory and paid under the same lien position as bond interest payments.
J4 Administrator fees will be paid after payment of bond interest and principal, any bond reserve fund deposits, and payable with annual excess cashflow only.
J5 Bond issuance fees and expenses will be in line with other similar middle income housing programs in California.
J6. Bond issuer will notify the City of any material changes to the project during the bond term, including updates to cashflow analyses or pro formas as needed.
J7. Public Benefit Agreement or Regulatory Agreement includes indemnification clause that limits the City’s liability and exposure as the Project Host and program participant.
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5 J8. City will be entitled to 100% of the property’s reversion value at the end of the bond term, without any obligation to share any proceeds to other taxing entities.
GOAL K: REFINANCING/ADDITIONAL DEBT
City will have the authority to approve any refinancing, restructuring, or issuance of additional debt.
Performance Measure:
K1. Public Benefit Agreement, Regulatory Agreement, and/or Indenture include provisions that stipulate the City's approval authority for any debt refinancing, restructuring, or issuance of additional debt or encumbrances during the bond term.
GOAL L: CAPITAL IMPROVEMENTS
Capital improvement needs for the project are fully identified and funded for the entire bond or agreement period.
Performance Measures:
L1. Capital improvement and replacement needs with estimated costs are determined that cover the entire bond period.
L2. Project Condition Report (pro forma or cash flow analysis) demonstrates that capital improvement and replacement costs will be covered by project reserves and operating income during the entire bond period.
L3. An updated capital improvement assessment will be prepared at least every five years, or sooner if requested by the City, that assesses the capital needs and expenses for the project during the remaining bond term and the sufficiency of reserve funds and operating income.
L4. Owner or Property Administrator agrees to fund an independent consultant approved by the City to prepare the capital improvement assessment and agrees to adjust reserve funds to cover revised capital costs for the project, if necessary.
GOAL M: CITY ENFORCEMENT AUTHORITY
City will have enforcement authority over management of the project to ensure compliance with goals and performance measures during the bond or agreement period.
Performance Measures:
M1. Public Benefit Agreement or Regulatory Agreement cites the City’s authority and remedies to enforce compliance with the housing affordability requirements.
LEVEL OF CAPITAL INVESTMENT
TRANSPARENCY AND OVERSIGHT
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6 M2. Public Benefit Agreement or Regulatory Agreement defines the City’s enforcement abilities, remedies, consequences, and resolution process if, upon review of annual certification and reports, project operations or responsible parties are found to be out of compliance with agreements.
GOAL N: MONITORING AND REPORTING
City will be provided with regular reports regarding the financial and operational performance of the project during the bond or agreement period for project monitoring.
Performance Measures:
N1. Certification: Owner or Property Administrator agrees to submit to the City an annual Certificate of Continuing Program Compliance for the project.
N2. Property Financial, Management, and Maintenance Reports: Owner or Property Administrator agrees to submit an annual report to the City that describes the project operations and finances, including but not limited to:
a. Rent roll and rent increases;
b. Vacancy rate;
c. Operating income and expenses;
d. Cashflow projection, operating funds, and reserves;
e. Bond interest and redemption payments and all bond specific payments; f. Completed and planned capital improvements and replacements; and g. Documentation on the general condition of the Project.
N3. Independent Review: City reserves the right to require the property owner to fund an independent property and/or financial management consultant to review the reports required under N2 and provide an assessment of the project based on industry standards and best practices for management of residential property.
N4. Monitoring Fee: Owner or Project Administrator agrees to submit to City an annual monitoring fee to cover City staff costs for project oversight and monitoring, with provision for an annual fee increase.
GOAL O: PROJECT ADMINISTRATION AND MANAGEMENT
Project proponent demonstrates to the City that the project will comply with best real estate practices for management of residential property.
Performance Measures:
O1. Owner or Property Administrator agrees to submit the following plans for City review and approval prior to execution of PBA: Tenant Selection Plan, with screening and qualification procedures; Local Preference Policy (per Goal D); Maintenance Plan; Property Management Plan, including staffing; and Marketing Plan.
O2. City will have the authority to review and approve the selection of any replacement Property Administrator or Property Manager that may be proposed during the bond period, including new or revised agreements pertaining to the replacement company. 579
Item # 22.
15-Apr-22
Goal Performance Measure Comply? Comments
A. AFFORDABILITY LEVEL A1. Housing units below market-rate and affordable to Moderate-Income Households per HCD standards for Santa
Clara County. Units for Low Income Households encouraged.
No Based on CSCDA maximum rents and assuming same rent levels as Turing Project, 40% of units would not be affordable to ModerateIncome Households and no units would be affordable to LowIncome Households per HCD standards.
A2. Rents based on Moderate Income Households paying
maximum 30% of gross household income for housing costs (rent and utilities).
No Rents based on 30% of gross household income, but utility expenses are not included in calculating maximum rents per HUD standards.
B. RENT INCREASES B1. Annual rent increases will not exceed 4% or the annual allowable percentage rent increase established by HUD,
whichever is lower.
Yes Regulatory Agreement includes this provision.
B2. Owner agrees to submit proposed rent increases for City review and approval.
Yes City approval required for any amendments to affordability covenant in Regulatory Agreement per PBA.
B3. Owner agrees to submit an annual report to City certifying compliance with affordability covenants.
Yes Annual compliance certification is required per PBA.
C. EXISTING TENANTS C1. Non-Qualified Tenants (exceeding 120% AMI) allowed to remain in unit paying market rents.
Yes Non-Qualified Tenants (exceeding 120% AMI) allowed to stay in their units per Regulatory Agreement.
C2. Qualified Tenants (120% AMI or below) will benefit from a minimum 10% rent reduction.
No No guaranteed rent reduction for qualified existing tenants.
ATTACHMENT 2
Eleanor Apartments CSCDA Proposal
COMPLIANCE WITH COUNCIL-ADOPTED GOALS AND PERFORMANCE MEASURES
AFFORDABILITY CONSIDERATIONS
GOALS (15): YES - 2, NO - 2 , Partial or Pending - 11
COMPLIANCE SUMMARY:
PERFORMANCE MEASURES (41): YES - 10, NO - 25 , Partial or Pending - 6 COMPLIANCE ITEMIZED LIST:
Color Coding: YES (Green), NO (Red), Partial or Pending (White) Project Proponent: Opportunity Housing Group
580
Item # 22.
Goal Performance Measure Comply? Comments
D. LOCAL PREFERENCE POLICY D1. Owner will administer a tenant preference program. No Not currently verified or included on PBA D2. Preference to teachers and staff employed in public education institutions in Milpitas.
No Not currently verified or included in PBA
E. RHNA CREDIT E1. Project qualifies for full or partial RHNA credit, if feasible. No Project does not qualify for partial RHNA credit.
F. QUALIFICATIONS OF PROJECT
TEAM
F1: Project Administrator demonstrates extensive development, management and financial experience.
Pending Project Administrator not identified yet.
F2. Property Manager demonstrates extensive residential management experience, including affordable housing and preference programs.
Pending Property Manager not identified yet.
G. CITY EVALUATION OF
PROPOSALS
G1. Project proponent deposits funds for consultants to analyze proposal.
Pending Submittal of deposit pending.
H. CITY REVENUES H1. Project backfills City property tax and PTILVLF through annual Host Fee based on post-sale assessed valuation.
No Project will backfill Milpitas's share of property taxes and PTILVLF, but based on pre-sale assessed valuation.
H2. Host Fee is guaranteed and in a senior lien position. Yes Host Fee will be paid before administrator fees and principal and interest per PBA.
H3. Property taxes for non-residential portion of the property will continue to be paid.
Pending Confirm that retail portion will not be included in CSCDA property transfer.
H4. Annual Infrastructure Fee will be paid equivalent to City CFD 2008-1 special tax.
Yes Special tax will be paid, and will continue to be paid if property found to be exempt from tax per PBA.
I. PROJECT FINANCIAL VIABILITY I1. Income/expense assumptions conservatively reflect historical trends for residential projects in Milpitas or Santa Clara County.
No Project has not yet submitted cash flow analysis with income/expense assumptions to verify performance measure.
I2. Project demonstrates a minimum 1.0 Debt Coverage Ratio (DCR) with rental income based on Affordability Goals A and B.
No Project has not yet demonstrated minimum 1:1 DCR and ability to cover debt and expenses with operating income.
FINANCIAL CONSIDERATIONS
581
Item # 22.
Goal Performance Measure Comply? Comments
I3. Ability to make amortized principal and interest bond payments.
No Project has not yet demonstrated ability to make amortized principal and interest bond payments.
J. CITY FINANCIAL RISK/BOND
STRUCTURE
J1. Minimum 25% of principal paid within 10 years and bond term cannot exceed 35 years,
No CSCDA bonds are "turbo" bonds with no guarantee of principal payment; limited payment of principal in first 15 years based on projected cashflow.
J2. Bonds optionally redeemable within 10 years of issuance with call premium consistent with investment grade bonds.
No Provision not included in PBA.
J3. Bond principal redemption mandatory and in same lien position as bond interest payments.
No Provision not included in PBA.
J4. Administrator fee paid after bond principal and interest, bond reserve deposits, and only from excess cashflow.
No Provision not included in PBA.
J5. Bond issuance fess and expenses in line with similar middle income housing programs in California.
No If similar to Turing project, fees to project sponsors significantly exceed underwriting standards for similar municipal bonds.
J6. Bond issuer will notify City of any material changes to project financials during bond term.
No Provision not included in PBA.
J7. PBA includes indemnification clause to limit City’s liability and exposure.
No Limitation on liability section included in PBA, but indemnification provision not included.
J8. City will be entitled to 100% of the property’s reversion value at the end of the bond term.
Yes City not obligated to share proceeds with other taxing entities per PBA.
K. DEBT REFINANCING K1. PBA includes City approval authority for debt refinancing or restructuring.
Yes City approval of any refinancing with stipulated exceptions (e.g. to fund improvements) per PBA.
L. CAPITAL IMPROVEMENTS L1. Capital improvement needs and costs are determined for entire bond period.
No Project has not verified this yet.
L2. Capital improvement needs and costs covered by project reserves and operating income during entire bond period.
No Uncertain that reserve funds for capital improvements will be adequately funded during full bond term.
LEVEL OF CAPITAL INVESTMENT
582
Item # 22.
Goal Performance Measure Comply? Comments
L3. Capital improvement assessment prepared at least every five years.
Yes Provision included in PBA.
L4. Independent consultant to prepare Capital Needs
Assessment and reserve funds to be adjusted, if necessary.
No Provision not included in PBA.
M. CITY ENFORCEMENT
AUTHORITY
M1. City authority with remedies to enforce compliance with the affordability requirements.
No PBA does not include City enforcement authority and remedies for non-compliance with affordability covenants.
M2. City enforcement abilities, remedies, and consequences if project out of compliance.
No PBA does not include City enforcement authority and remedies for non-compliance with PBA and Regulatory Agreement.
N. MONITORING AND
REPORTING
N1. Owner submits annual Certificate of Continuing Program Compliance.
Yes Provision included in PBA.
N2. Owner submits annual Property Financial, Management, and Maintenance Reports.
Partial Partially addressed in PBA
N3. City reserves the right to require independent consultant to review annual monitoring reports.
No Provision not included in PBA.
N4. Owner agrees to submit annual monitoring fee to cover City oversight and monitoring costs.
No PBA does not require payment of annual City Monitoring Fee.
O. PROJECT ADMINISTRATION
AND MANAGEMENT
O1. Owner agrees to submit management and maintenance
plans.
No Provision not included in PBA.
O2. City authority to approve any replacement Project
Administrator or Property Manager.
Partial City allowed to comment on change of Property Manager per PBA, but no approval authority for change of Property Manager or Project Administrator.
TRANSPARENCY AND OVERSIGHT
583
Item # 22.
April 19, 2022
City Council Meeting
Presentations
Item #15: Adopt an Ordinance regarding the Police Department Controlled Equipment Use Policy
Item #16: TEFRA Public Hearing for 308 Sango Court
Item #17: Fiscal Year 2022-23 Master Fee Schedule
Item #18: Homelessness Task Force Options
Item #19: Report on Recommended Changes to the Municipal Code to Remove and Prohibit Property in Public
Item #22: Discussion of CSCDA Program for Eleanor Apartments to Provide MiddleIncome Workforce Housing Milpitas City Council Meeting
Item #15: Adopt an Ordinance regarding
the Police Department Controlled
Equipment Use Policy
April 19, 2022
City of Milpitas
455 E. Calaveras Blvd., Milpitas, CA 95035
www.ci.milpitas.ca.gov 408-586-3000
2 Presentation Overview
Assembly Bill 481 (AB481)
Controlled equipment currently used by the Milpitas Police Department Why controlled equipment is needed
Seek approval of the proposed ordinance
3 Assembly Bill 481 Summary
September 30, 2021 - Assembly Bill 481: Law Enforcement and State Agencies: Military equipment: Funding, Acquisition, and Use • Defines certain equipment as “military equipment.” It does not necessarily mean equipment that is/has been used by, or received from, the military.
Meant to improve transparency and create a checks and balance system for procurement and use of qualifying equipment.
Highlights of AB 481
• Policy approval process needs to start prior to May 1, 2022 • Outline process for community feedback
• Approval for continued use of items purchased prior to January 1, 2022 • Requires an annual report to include:
• Equipment usage and updates
• Maintenance and costs
• Internal audits
• Summarize community feedback
4 Controlled Equipment Currently In Use
Item(s) Funding Source Prior Council Approval Years In Use by MPD Unmanned Aircraft CIP, Operating Budget Yes 3 years
Robot Grant, Operating Budget Yes 10 years
Armored Recue Vehicle CIP Yes 5 years
Command Vehicle CIP, Grant, Asset
Forfeiture
Yes 30+ years
Specialized Firearms
(Rifles)
Grant, Operating Budget Yes 30+ years
Tear Gas, Distraction
Devices
Grant, Operating Budget Yes 30+ years
Breaching Equipment Grant, Operating Budget Yes 30+ years 40mm Less Lethal, Bean
Bag Rounds
Grant, Operating Budget Yes 20+ years
Note: Additional Controlled Equipment not utilized by the Milpitas Police Department includes mine resistant vehicles, tracked ballistic vehicles, weaponized aircraft or vehicles, ≥ .50 caliber firearms or ammunition, explosive launchers, microwave weapons, long-range acoustic weaponry, or water cannons 5 Controlled Equipment Justification
The Milpitas Police Department utilizes best practices and the most current tools and equipment to safeguard residents, businesses, and visitors of Milpitas by promoting de-escalation, distance, safety and most importantly, the preservation of human life.
These items provide peace officers with the ability to safely resolve volatile situations which could otherwise result in a lethal force encounter.
Provides the Department with vital tools that facilitate compliance with existing policy.
In most categories, there are no reasonable alternatives to achieve the same degree of civilian and officer safety.
In those categories where alternatives exist, the equipment is cost effective compared to the available alternatives (Ex: Unmanned Aircraft Systems).
6 Next Steps
Second reading of the ordinance scheduled for May 3, 2022 City Council meeting
Implementation of a tracking system for equipment use in preparation for the AB 481 Annual Report
Issuance of the first Annual Report scheduled for the first quarter of 2023
7 Recommendation
Introduce an ordinance adopting a Controlled
Equipment Use Policy per California Assembly Bill.
City of Milpitas
455 E. Calaveras Blvd., Milpitas, CA 95035
www.ci.milpitas.ca.gov 408-586-3000
9 Remaining Slides are Back-Up Slides
10 Equipment Categories per AB481
Equipment Description Category
Unmanned, remotely piloted, powered aerial or ground vehicles 1 Mine-resistant ambush-protected vehicles or armored personnel carriers 2 High mobility multipurpose wheeled vehicles (HMMWV), two-and-one-half-ton trucks, five-ton trucks, or wheeled vehicles that have a breaching or entry apparatus attached 3 Tracked armored vehicles that provide ballistic protection to their occupants 4 Command and control vehicles that are either built or modified to facilitate the operational control and direction of public safety units
5 Weaponized aircraft, vessels, or vehicles of any kind 6 Battering rams, slugs, and breaching apparatuses that are explosive in nature 7 Firearms of .50 caliber or greater, Ammunition of .50 caliber or greater 8 and 9 Specialized firearms and ammunition of less than .50 caliber 10 Any firearm or firearm accessory that is designed to launch explosive projectiles 11 Noise-flash diversionary devices and explosive breaching tools, munitions containing tear gas or OC, excluding standard, service-issued handheld pepper spray 12 TASER® Shockwave, microwave weapons, water cannons, and long-range acoustic devices 13 Kinetic energy weapons and munitions 14
Any other equipment as determined by a governing body or a state agency to require additional oversight
15 11
Controlled Equipment Currently In Use
Unmanned Remotely Piloted Ariel Vehicle (UAS)
Without the use of a UAS, officers would have to deploy to high-risk locations which would increase the risk to the officers and members of the public. The UAS system is designed to enter small spaces, such as enclosed structures, as well as to provide overhead observations of wooded areas and other structures located in often crowded or difficult to reach spaces.
Unmanned Remotely Controlled Ground Vehicle (Robot)
For reconnaissance during critical incidents to assist in providing visibility in areas where it would be unsafe to send an officer. This system can also be used to defuse or move potentially hazardous items.
Armored Rescue Vehicle
Enhances the ability of first responders to rescue persons in need and helps protect first responders at the scene of an emergency situation. The vehicle is also designed to meet tactical needs of law enforcement agencies tasked with responding to acts of violence and/ or terrorism.
12 Controlled Equipment Currently In Use Cont.
Command and Control Vehicles
This vehicle allows for mobile incident command and use of the Incident Command Systems facilitating the best possible on scene decision-making by key leaders. It is equipped with specific communication and audio-visual devices to assist in command and control of a critical incident.
Specialized Firearms and Ammunition
Patrol rifles, Special Weapons and Tactics (SWAT) rifles, and sniper rifles enable officers when in compliance with the Departments Use of Force Policy, to address medium to long distance threats, or those threats who are heavily armed, armored or both. Further, in both short and long-distance deployments, they allow officers precision shot placement minimizing the risk to officers and innocent citizens.
13 Controlled Equipment Currently In Use Cont.
Tear Gas
Tear gas is a less lethal method used to address violent or riotous crowds when they are engaged in acts of violence with a clear and present danger of injury to people. They are also used to safely extract a suspect from a fixed location or safely detain a suspect who poses a risk of violence to officers. Tear gas allows officers to deploy a less lethal chemical agent into a structure where other weapons would not be capable of doing so.
40 MM Projectile Launcher and Bean Bag Shot Gun
The 40mm launcher affords the ability to use less lethal chemical agents and impact munitions. This allows officers to address a threat from a greater distance and provides an alternative option for deadly force when reasonable.
The bean bag shotgun also allows officers to confront a potentially armed or dangerous suspect at a longer distance. This can potentially prevent a deadly force encounter.
14 Controlled Equipment Currently In Use Cont.
Flashbangs
Flashbangs are used as a distraction device in order to disorient or divert the suspect’(s) attention away from officers. This can allow officers to gain safer access to a high-risk situation, giving extra time to assess and analyze existing threats. This can prevent injury to officers and citizens. These devices can often lead to a safer resolution and allow officers to take a subject into custody without force.
Explosive Breaching Tools
Explosive breaching tools are used by the SWAT Team in order to enter fortified or hardened structures to allow for rescue or other high-risk police entries. They are used when there are no other reasonable alternatives to rapidly breach a location. They are only used when time is of the essence in order to preserve life.
Milpitas City Council Meeting
Item #16:
TEFRA Public Hearing for
308 Sango Court
April 19, 2022
City of Milpitas
455 E. Calaveras Blvd., Milpitas, CA 95035
www.ci.milpitas.ca.gov 408-586-3000
2 Background
308 Sango Court project
• Approved by City Council on August 5, 2021
• 85-unit, 100% affordable housing project
• Submitted building permit package in
February 2022
3 308 Sango Court Proposed Financing
Developer’s proposed financing
• Pacific West Communities (Developer)
• Milpitas Pacific Associates (Borrower)
• Requested California Municipal Finance Authority
(CMFA) issue tax-exempt Multifamily Housing
Revenue Bonds up to $47M to finance the 308 Sango
Court project
4 Bond Financing
Federal and state law established bond financing program • Gives developers access to below-market interest rates for affordable housing projects
• 308 Sango Court project qualifies for tax-exempt bond financing Federal Tax Equity and Fiscal Responsibility Act (TEFRA) • Requires a public hearing be held by the governing body of the jurisdiction in which a project to be financed with tax-exempt financing is located
• Provide opportunity for public comment
• Governing body/Milpitas City Council approves the proposed financing – issuance of bonds by CMFA
5 California Municipal Finance Authority
(CMFA)
Organization
• Created in 2004, a joint powers authority
• Issues bonds to finance public benefit projects throughout California
• Over 300 municipalities, including Milpitas, have become members of CMFA
Bond financing
• Bonds issued by CMFA – sole responsibility of the Borrower • City will have no financial obligation, legal obligation, liability, or responsibility for the project or repayment of the bonds • All bond financing documents will carry clear disclaimers that the bonds are not an obligation of the City
6 TEFRA Public Hearing
Developer/Borrower requested CMFA issue tax-exempt bonds not to exceed $47M to finance the 308 Sango Court project To satisfy federal and state tax code, CMFA requested City conduct TEFRA hearing and adopt resolution
TEFRA public hearing
• Conduct a public hearing to provide
opportunity for public comment
• Adopt a resolution approving the
issuance of bonds by CMFA for the
benefit of Milpitas Pacific Associates to
provide for financing
7 Fiscal Impact
No fiscal impact except staff time
A portion of the issuance fee is expected to be granted by CMFA to the City, approximately $15,000
8 Recommendation
Open the public hearing under the requirements of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the Internal Revenue Code of 1986, as amended (the “Code”).
Move to close the public hearing following any comments.
Adopt a resolution approving the issuance of the Multifamily Housing Revenue Bonds in an aggregate principal amount
not to exceed $47,000,000.00 by the California Municipal Finance Authority (CMFA) for the benefit of Milpitas Pacific Associates to provide for the financing of the 308 Sango Court project. Such adoption is solely for the purposes of satisfying the requirements of TEFRA, the Code, and the California Government Code Section 6500 regarding Joint Exercise of Powers.
City of Milpitas
455 E. Calaveras Blvd., Milpitas, CA 95035
www.ci.milpitas.ca.gov 408-586-3000
City Council Meeting
Item #17: Fiscal Year 2022-23
Master Fee Schedule
April 19, 2022
2 Background & Approach
Master Fee Schedule Overview
Water and Sewer Rate Increases
Recommendation
Agenda
3 What is a User Fee?
An amount charged for a government activity performed at the request of, and/or specifically for, a particular individual, business, or group …as opposed to a service performed for the community as a whole 4 Approach & Response to Council
• COST RECOVERY:
• Adjust user fees consistent with personnel cost increases (Council direction, May 2019)
• Comprehensive Update every 3 to 5 years (cost of study, May 2019) • Interim Updates -- Maintain cost-recovery
• RESPONSE TO COUNCIL
• Cost recovery
• Events Fee
• Facility Deposit
5 FY 2022-23 Annual Update
• 97% of fees to remain unchanged or increase by 5% or less to maintain cost recovery levels
Description Count %
Fees - Remain Unchanged 200 51%
Fees - Increase by 5% or Less 525 48%
Fees - Increase by More than 5% 19 3%
Fees – Decreased by More than 5% 1 0%
New Fees Proposed 0 0%
Total Fees Examined 745 100%
6 Fees Proposed More than 5% (Cont.)
Description Current Proposed
Ambulance Fees
ALS-1 (Advanced Life Support) $1,710.12 $1,960.82
ALS-2 (Advanced Life Support) $1,710.12 $1,960.82
Mileage $55.42 $63.55
Hourly Ambulance Standby $216.41 $248.14
Hourly Paramedic – Individual $108.21 $124.07
Hourly EMT – Individual $72.14 $82.71
Fees adjusted to mirror with Santa Clara County EMS
7 Fees Proposed More than 5%
Description Current Proposed Difference
Development Permit Review Fees
Special Event Permits:
Application Fee
Major Events (1000+ attendees) $5,787 $6,157 $370
Pre-Application Review:
Single-family Home $2,712 $2,948 $236
All Others $8,775 $9,392 $617
Minor Site Development Permits:
Staff-level Review – Various Depts $3,062 $3,313 $251
Staff-level Review - Hillside $4,301 $4,606 $305
Requiring Planning Commission or Zoning
Administrator Hearing $9,158 $9,674 $516
Proposed fee now includes:
1) Annual Cost of Living Adjustment (COLA)
2) Previously Omitted Cost recovery for Building Safety Review 8 Fees Proposed More than 5% (Cont.)
Description Current Proposed Difference
Development Permit Review Fees
Site Development Permits:
Requiring Zoning Administrator
Hearing $13,280 $14,328 $1,048
Requiring PC and/or CC Hearing $16,174 $18,529 $2,355
SB35 MF Housing Project (No
Hearing) $8,775 $10,809 $2,034
Minor Conditional Use Permits:
Staff Review – Various City
Departments $1,230 $1,401 $171
Requiring Zoning Administrator
Hearing $2,920 $3,164 $244
Conditional Use Permits:
Single Family Districts $539 $681 $142
Requiring PC and/or CC Hearing $14,632 $15,739 $1,107
Proposed fee now includes:
1) Annual Cost of Living Adjustment (COLA)
2) Previously Omitted Cost Recovery for Review by Building Safety and Housing Staff 9 Special Events Fee Change
Description Current Proposed Difference
Special Events Fees:
Application Fee
A) Minor Events $945 $253 -$692
B) Regular Events $945 $986 $41
C) Major Events $5,787 $6,157 $370
• Minor Events – events that are one day or less and involve minimal staff review • Regular Events – four or fewer days
• Major Events – exceeds four consecutive days (up to seven days) or events that expect more than 1,000 attendees 10 Community Garden Plot Fees
Description Current Proposed
Residents Only
Community Gardens $60/year
$15/year, Senior
Potable Water
Community Garden
$0.75 - $1.15
per square foot
(and Senior & MAPS
discounts if applicable)
Recycled Water
Community Garden
$0.15 - $0.55
per square foot
(and Senior & MAPS
discounts if applicable)
- Adding a second garden with significantly smaller plot size, hence revised to fee per square footage basis. - Very Low-Income Senior new rates would be equal to or less than $15/year, with incremental increases for supporting costs and utility 11 Facility Deposit &
Recreation Cost-Recovery Policy
• Senior Center Community Room (auditorium) &
Higuera Adobe Room
• Current: $750 deposit
• Proposed: $500 deposit
• 33% reduction
• FY20-21 Recreation Cost-Recovery Policy
• Pandemic
• Need a full year of data
• Plans to phase in implementation with FY23-24 Master Fee 12 Finance
• Modify the fee schedule to clarify that credit card transaction fees apply when a credit card is used for payment of fees for development/fire-related fees, permits, plan review, etc. This is an existing fee and allows the City to offset its vendor related costs associated with credit card transaction processing. The fee only applies when a credit card is used for payment of fees.
13 Water and Sewer Rates
• Rate Ordinances adopted on Feb. 19, 2019 for FY 2019-19 through FY 2022-23 - Assumed certain costs for staff, equipment and supplies costs, wholesale water purchases, wastewater treatment, and capital improvements funding
- Positioned the funds for debt issuances (October 2019) Fund Rate Increase FY 2021-22
Bi-Monthly
Charge*
Bi-Monthly
Increase*
FY 2022-23
Bi-Monthly
Charge*
Water 6% $135.77 $7.25 $143.02
Sewer 5% $118.34 $5.80 $124.14
Total $254.11 $13.05 $267.16
* Cost for an Average Single Family Residential Household 14 Recommendation
1. Adopt a Resolution Approving the Fiscal Year 2022-23 Master Fee Schedule
City of Milpitas
455 E. Calaveras Blvd., Milpitas, CA 95035
www.ci.Milpitas.ca.gov (408) 586-3000
16 Examples of User Fees
Development Fees
- building, planning and fire permitting and inspection fees Engineering Fees
- map review and encroachment permitting fees
Utility Fees
-sewer lateral inspections and restoration of discontinued water service Police Fees
- vehicle impound and false alarm response fees
Recreation Fees
- program participation fees and facility rental fees
17 Building Safety and Housing
Clarifying fee descriptions to make
them clearer and easier to understand
and implement; and correcting
typographical errors in prior fee
schedule
18 Building Safety and Housing
[e] Not a new fee.
Amount shown in
prior schedule
reflected a
typographical
error. Fee now
aligns to other
permit issuance
fees listed in this
schedule.
[f] Not a new fee.
Clarifying fee
description.
19 Building Safety and Housing
[e] Not a new fee.
Amount shown in
prior schedule
reflected a
typographical error.
Fee now aligns to
other permit
issuance fees listed
in this schedule.
20 Building Safety and Housing
[e] Not a new fee.
Amount shown in prior
schedule reflected a
typographical error. Fee
now aligns to other
permit issuance fees
listed in this schedule.
[f] Not a new fee.
Clarifying fee
description.
21 Building Safety and Housing
[f] Not a new fee.
Clarifying fee
description.
22 Building Safety and Housing
[c] Removing. Fee
category not required.
Amount collected via
other fee in this
schedule.
[f] Not a new fee.
Clarifying fee
description.
23 Planning
• Modifying special event application review fees to account for varying levels of special event magnitude - The current fee schedule distinguishes between reviews for minor and major events - The proposed fee schedule distinguishes between:
Minor Event Review
Regular Event Review
Major Event Review
- Minor events are for permits issued over-the-counter for small private events. Regular events permits are typically issued for events less than four consecutive days, including block parties, or that require review by multiple departments. Major event permits are typically issued for events that exceed four consecutive days and/or anticipate crowds exceeding 1,000 people.
• Modifying several planning fees to account for building review activities included in the application review process. Modified fees include:
- Special Event Application Review for Major Events
- Pre-Application Review Fees
- Site Development Reviews
- Conditional Use Permit Reviews
24 Planning
25 Fire
• Modify the fee schedule to clarify that credit card transaction fees apply when a credit card is used for payment of fees for development/fire-related fees, permits, plan review, etc. This is an existing fee and allows the City to offset its vendor related costs associated with credit card transaction processing. The fee only applies when a credit card is used for payment of fees.
26 Fire
27 Fire
28 Fire-Ambulance
29 Recreation
• Modifying the community garden fee from a fixed fee of $15 per plot to a fee aligned to plot size As the City’s new community garden becomes available there will be a difference in plot sizes and water usage.
The modified fee structure will provide a more consistent application using charge per square foot of plot rented.
• In response to a request from City Council, the deposit for rental of the Senior Center Auditorium has been reduced to $500.
• In order to maintain consistency within the fee schedule, all indoor auditorium deposits have been reduced to $500.
• Recreation fees are proposed for an inflationary adjustment for the first time in several years. This will allow the department to better respond to increases in seasonal labor costs and other recurring costs. While the City Council adopted the recreation cost recovery policy in Fiscal Year 2020-2021, due to the Pandemic and the need to collect more data, staff plans to phase in this policy and implement beginning with the FY 2023-2024 master fee schedule update.
30 Recreation
31 Recreation
32 Recreation
33 Recreation
34 CPI Calculation
Milpitas City Council Meeting
Item #18:
Homelessness Task Force Options
April 19, 2022
City of Milpitas
455 E. Calaveras Blvd., Milpitas, CA 95035
www.ci.milpitas.ca.gov 408-586-3000
2 Presentation Outline
Background
Possible Homelessness Program and Project Options
Considerations for Homelessness Options
Fiscal Impact
Recommendation
3 BACKGROUND
4 Homelessness Task Force
Approved by City Council January 2021
Task Force monthly meetings March 2021 to January 2022
Task Force report presented to City Council on February 1, 2021 (PowerPoint presentation)
Task Force recommendations to assist unhoused population grouped into five “Program Ideas” or objectives:
• Milpitas Homelessness Help Center
• Temporary Housing
• Homelessness Prevention
• Work and Self-Sufficiency
• Accountability
5 City Council Comments
At Council meeting on March 1, individual Councilmembers expressed interest in the following approaches to assist unhoused population:
Recreational vehicle (RV) safe parking program
Homelessness Prevention Programs, particularly for McKinneyVento individuals Feasibility Study for Navigation Center
Day Worker/Homelessness Help Center
Expanded Mobile Shower and Laundry Services
Trash Collection Service for Unhoused Population
Additionally, instead of Local Oversight Committee, input was received that this is a City Council function.
6 Homelessness Program
and Project Options
7 Homelessness Program & Project Options
Based on Councilmember comments on Task Force Program
Ideas, staff identified program and project options to assist unhoused populations and researched models from other cities.
Table below list six program/project options and program objective addressed by each option (most options can meet several program objectives):
Homelessness Programs and Projects
Program Objective
Project/Program
Options
Public Health
& Sanitation
Homeless
Help Center
Temporary
Housing
Homelessness
Prevention
Work & SelfSufficiency
Expanded Shower and
Laundry Services √
Trash Collection
Service √
Day Worker/Help Center √ √
Navigation Center √ √
RV Safe Parking √ √
Tiny Home Village √ √
8 Expanded Shower and Laundry Services
Program Area: Public Health and Sanitation
Description: Expand existing mobile services from currently once to twice a week; once per week service began in March 2021 and funded through September 2022.
Population Served: Average 23 clients served per session during past year; most recently 19 clients per session, with 30% affiliated with Milpitas.
Estimated Costs: Approximately $105,000 per year (double current costs assuming continuing to contract with WeHOPE.) Funding from grants or General Fund.
Potential Next Steps: Pursue grants and/or identify alternate funding to increase service; amend contract with WeHOPE to expand service; reassess location for mobile service.
9 Trash Collection Service
Program Area: Public Health and Sanitation
Description: Dumpsters or trash bins placed at homeless encampments for weekly collection to minimize illegal dumping, remove debris, and address public health hazards.
Population Served: Unhoused population are currently located at scattered sites and not concentrated at one or several locations, so determining suitable locations is pending. Locations selected may prompt establishment of homeless encampments, and dumpsters could attract illegal dumping by community at large.
Estimated Cost: For weekly collection at two locations: $133,000 per year by Milpitas Sanitation (assumes service along existing route), or $317,000 per year by separate vendor; includes extra allowance for disposal of biohazardous waste and illegal dumping. Funding from grants or General Fund.
Potential Next Steps: Identify funding and select vendor and suitable site(s). 10 Day Worker/Help Center
Program Areas: Homeless Help Center/Work and Self-Sufficiency Description: Clearinghouse to connect day workers to short-term jobs from residents and businesses, and resource center for employment assistance and skills training.
Population Served: Lower-income residents in Milpitas; Help Center can be expanded to support unhoused population with added services or referrals to other service providers.
Estimated Cost: Facility and start-up costs depends on site selected for Center.
Annual staffing and operating costs can vary widely depending on services offered and number of clients served; assume $250,000 per year initially.
Funding from grants, donations, and/or General Fund.
Potential Next Steps: Identify funding in the amount of $50,000 to $75,000 for a feasibility study to define program scope, estimate facility and operating costs, identify possible sites, and explore potential service providers. 11 Navigation Center Feasibility Study
Program Areas: Temporary Housing/Homelessness Prevention Description:
• Rapid rehousing facility for the unhoused population with case management and wrap-around services to transition clients from homelessness to stable housing. Shelters vary from congregate living to individual modular units. • Feasibility study would explore program scope, facility options, alternative sites, possible service providers, estimated cost, and potential funding sources. Public outreach to unhoused population and community included.
Population Served: Unhoused individuals who are seeking temporary shelter and case management services. Maximum stay is typically six months with continuing support after occupancy. Primarily serves a male clientele if congregate living; other models with individual units are suitable for couples, households with children, or respite care.
Estimated Cost: Estimate cost for feasibility study - $110,000 (up to $100,000 for consultant services and $10,000 for staff costs)
Potential Next Steps: Identify funding for study and secure consultant. Given staffing status, study could start in summer 2022 and take 6 to 9 months to complete.
12 Program Areas: Temporary Housing/Homelessness Prevention Description: Site for temporary parking of RVs (overnight only or 24-hour) to provide a secure location and alternative to on-street parking. Case management and support services provided to transition clients to stable housing.
Population Served: Parking for unhoused population living in RVs. Maximum occupancy is typically 6 months. Safe parking programs have also allowed parking for passenger vehicles. Estimate 26 individuals living in vehicles in city, but number of RVs currently unknown.
Estimated Cost: Site preparation costs will depend on available sites and utilities. Operating cost for an RV Safe Parking Program could be about $300,000/year for a 1/2-acre site that can hold up to 15 RVs. Additional cost for case management services.
Potential Next Steps: Allocate $50,000 to $75,000 for a feasibility study to explore program models, site preparation and operating costs, possible sites, and potential service providers.
Recreational Vehicle (RV) Safe Parking
13 Tiny Home Village
Program Areas: Temporary Housing/Homelessness Prevention Description: Rapid rehousing model for the unhoused population with case management and wrap-around services to transition clients from homelessness to stable housing. Facility characterized by individual or duplex modular shelters. Can be operated like a navigation center.
Population Served: Unhoused individuals who are seeking temporary shelter and case management services. Maximum stay is typically six months with continuing support after occupancy. Because living units are private, environment is more conducive for couples, households with children, or clients needing more intensive care.
Estimated Cost: Facility and site preparation costs vary widely depending on site conditions, proposed facilities, and client capacity. Capital costs are typically higher than a navigation center with congregate living. Operating costs with case management services can be similar to a navigation center, approximately $1 to $1.2 million per year to serve about 25 clients at one time.
Potential Next Steps: If Council moves forward on a feasibility study for a navigation center, a tiny home village option could be included in an expanded study. Allow $150,000 for a combined study.
14 Considerations for
Homelessness
Program Options
15 Unhoused Population Service Needs
Scale homelessness program or project to level of need in City. For comparison, unhoused population from last point-in-time homeless count in 2019:
Milpitas -125; Fremont, Mountain View, and Hayward - 487 to 608.
Respond to largest need, such as single adults which represent 94% of unhoused population (recent Santa Clara County data); or target specific populations, such as McKinney-Vento households.
Balance short-term vs. longer-term programs/projects. Public health and sanitation services provide an immediate response, but do not transition individuals out of homelessness.
Navigation Centers and Tiny Home Villages require clients to agree to accept case management services. Will require additional outreach for participation.
Day Worker/Help Centers serve lower-income clients, but do not necessarily target services for the unhoused population.
A central RV Safe Parking site may not be cost-effective if low number of individuals living in RVs in city; further pursue locations on private property such as religious assembly sites.
16 Funding Availability & Opportunities
Multiple funding sources typically combined to fund a program or project:
• Milpitas: Housing Authority Funds (up to $250,000 per fiscal year) for navigation center feasibility study and tiny home village feasibility study, Affordable Housing Unrestricted Fund, General Fund
• County, state, and federal grants and appropriations (rental assistance grant, HOME funds, Assemblymember Lee funding request)
• Faith-based and charitable organizations
• Non-profit foundations
• Private and corporate donors
Feasibility study for program/project option would explore potential grants and other sources to fund one-time capital improvement costs and ongoing operating costs.
17 Planning and Implementation
Time Schedule:
With budget allocation, expanded shower/laundry services and trash collection services can be implemented in several months.
Feasibility study for navigation center, day worker/help center, tiny home village, or RV safe parking can start in summer 2022 with completion in 2023 (allow 6 to 9 months for each study). If multiple studies are to be conducted concurrently, depending on the number of studies, an extended timeline will be required.
City Staffing/Service Providers:
Service provider with homelessness expertise is necessary for all program/project options along with additional partner agencies to provide case management and support services.
Additional staff capacity required for coordination of programs/projects:
planning, design, and implementation; grant and contract administration; financial management and reporting; and performance accountability.
18 Fiscal Impact
There is no fiscal impact associated with receiving
the report.
Based on Council direction, each of the program
options would require additional funding, which
Council may wish to consider as a part of the fiscal
year 2022- 23 budget development.
19 Recommendation
Receive staff report related to the
Homelessness Task Force
recommendations and provide
direction to staff on next steps.
City of Milpitas
455 E. Calaveras Blvd., Milpitas, CA 95035
www.ci.milpitas.ca.gov 408-586-3000
21 Summary and Comparison of Program/Project Options
22 Summary and Comparison of Program/Project Options
Milpitas City Council Meeting
Item #19:
Report on Recommended Changes to the
Municipal Code to Remove and
Prohibit Property in Public
April 19, 2022
City of Milpitas
455 E. Calaveras Blvd., Milpitas, CA 95035
www.ci.milpitas.ca.gov 408-586-3000
2 Background
At the March 15, 2022 City Council meeting, the City Council directed staff to return with recommendations regarding proposed amendments to the Milpitas Municipal Code to
address homeless encampment cleanups in the City.
Staff has reviewed other cities’ efforts to further define criteria surrounding lawful and unlawful camping, including
restrictions on time, place, and manner, to better protect those that are experiencing homelessness as well as the community at large.
3 Legal Considerations
Martin v. City of Boise (9th Circuit):
• Controlling case on enforcement of laws against homeless individuals. • Held that local governments are prohibited from criminalizing homelessness, and that cities must allow individuals to sleep on public property when there is no shelter available to them.
• Prosecution of homeless individuals under such circumstances amounted to cruel and unusual punishment in violation of the Eighth Amendment to the U.S. Constitution.
• However:
• Does not apply to individuals who can pay for temporary shelter and choose not to, or to individuals who have realistic access to free shelter and choose not to use it.
• A jurisdiction may, in certain circumstances, criminalize the act of sleeping outside, for example, at particular times or in particular locations. 4 Legal Considerations (Cont’d)
Lavan v. City of Los Angeles:
• Finding that there is a constitutionally protected property right to leave possessions unattended on public sidewalks.
• City of LA had a practice of immediately destroying possessions of homeless persons left in public.
• Court held that LA’s practice violates due process rights.
Garcia v. City of Los Angeles (9th Circuit):
• In addressing Lavan, the City of LA amended its code but allowed for bulky items to be immediately destroyed.
• Court found that the practice violated homeless residents rights to due process, holding that municipalities may not summarily seize and destroy even bulky items of personal property left on city property. 5 Example: City of Los Angeles
LAMC § 41.18: Prohibits sitting, sleeping, lying, storing personal property or otherwise obstructing the public right-of-way in certain areas of the city, in a manner that interferes with any activity for which the city has issued a permit or restricts accessible passage as required by the ADA; or anywhere within a street, including bike paths.
• Protects the PROW within 500 ft. of a "sensitive" facility including schools, day care facilities, parks and libraries.
• City must pass resolution to designate a specific area for enforcement, post signage, and give notice of date that ordinance will be enforced for the area. • City may prohibit encampments for a period of no longer than 1 year in areas designated by resolution to be an ongoing threat to (i) public health or safety; (ii) repeated serious or violent crimes or threats of serious or violent crimes, including human trafficking; or (iii) the occurrence of fires that resulted in a fire department response to the location.
LAMC § 56.11: 72-hour pre-removal notice, storage for 90 days, and no-notice removal and destruction of contraband or anything that constitutes an immediate threat to the health or safety. 6 Example: City of Oakland
Encampment Management Policy: Prioritizes encampments for intervention based on health, safety, and location impacts, and targets limited resources to the highest priority encampments. • High Sensitivity Areas: Designated by city council. Includes:
• All vehicular traffic lanes, bike lanes, and sidewalks; must comply w/ ADA. • Locations designated as high fire severity zones.
• Within 150 ft. of elementary, middle, pre-school or child care center. • Within 50 feet of a protected waterway.
• Within 50 feet of a residence.
• Within 50 feet of a retail business, and 50 feet from the main entrance and any emergency exits from all other businesses, including places of worship. • Within 50 feet of a city park or other public land that has a children’s playground, play structure, tot lot, or recreation center.
7 Example: City of Oakland (Cont’d)
Encampment Management Policy:
• Low Sensitivity Areas: The following standards apply to all encampments in these locations:
• Shall not impede vehicle, bike, or pedestrian traffic. • Shall not impede ADA access points.
• Shall not impede emergency ingress/egress routes.
• Compliance with applicable state codes and local ordinances. • Encampment footprint shall not exceed 12 x 12 sq. ft per person. • Area directly adjacent to a vehicle dwelling must remain clear at all times. • Structures, tents, and vehicle dwellings shall maintain not less than six (6) feet distance between one another.
• Storage of Individuals’ Property: Respect and protect individuals’ rights to their property. Reasonable methods of safe, secure, property storage. 8 Recommendation
9 MMC Chapter 10, Title X
• Prohibits storage of personal property in public.
• But, needs update to address Boise, Lavan, Garcia, and due process requirements, as exemplified by the cities of LA and Oakland.
Time, Place and Manner Restrictions
• Staff recommends that Chapter 10, Title X be amended to define criteria surrounding lawful and unlawful camping.
• Update Municipal Code by adopting time, place, and manner restrictions, in addition to general storage prohibition, to identify allowable places, times, and manners for involuntary camping.
Procedures for Removal and Storage of Personal Property • Staff recommends amendments to Municipal Code to codify practices concerning the removal and storage of personal property that are consistent with Lavan and Garcia.
Changes to Municipal Code
City of Milpitas
455 E. Calaveras Blvd., Milpitas, CA 95035
www.ci.milpitas.ca.gov 408-586-3000
Milpitas City Council Meeting
Item #22:
Discussion of CSCDA Program for
Eleanor Apartments to
Provide Middle-Income Workforce Housing
April 19, 2022
City of Milpitas
455 E. Calaveras Blvd., Milpitas, CA 95035
www.ci.milpitas.ca.gov 408-586-3000
2 BACKGROUND
INFORMATION
3 Background
At the March 15 Council meeting, staff was directed to agendize a discussion about the potential conversion of Eleanor Apartments located at 312 Gates Drive to a moderate-income housing project through the California Statewide Communities Development Authority (CSCDA).
At the February 15 Council meeting, Council adopted Goals and Performance Measures for this type of moderate-income housing program and approved a Public Benefit Agreement (PBA) for a similar program for the Turing apartments located at 1355 McCandless Drive.
The adopted Turing PBA did not align with the Council’s adopted Goals and Performance Measures but was considered for approval since it was a new concept.
Future applicants were to comply with the Adopted Goals and Performance Measures.
The Eleanor Apartment project team proposes to have the City Council adopt a PBA similar to the one approved for the Turing project.
Proposed project does not comply with a majority of the Adopted Goals and Performance Measures.
4 Framework for
Evaluating City Participation in
Middle Income Workforce Housing Proposals
GOALS AND PERFORMANCE MEASURES
5 Affordability Considerations
GOAL A: AFFORDABILITY LEVEL
Project will primarily serve Moderate Income Households during the entire bond period.
Performance Measures:
A1. Housing units will be below market-rate and affordable to Moderate-Income Households earning 81-120% average median income (AMI), as defined by the California Department of Housing and Community Development (HCD) maximum household income and rent limits for Santa Clara County. Units for Low-Income Households (80% AMI or below) as defined by HCD are also encouraged.
A2. Maximum rents shall be based on Moderate Income Households paying a maximum of the 30% of their gross household income for housing costs consisting of rent and utility expenses paid by tenants.
GOAL B: RENT INCREASES
Rent increases will be limited to maintain the affordability of the project for primarily Moderate Income Households during the entire bond period.
Performance Measures:
B1. Annual rent increases will not exceed 4% or the annual allowable percentage rent increase established by federal Department of Housing and Urban Development (HUD), whichever is lower.
B2. Owner or Property Administrator agrees to submit proposed rent increases for City review and approval that verifies affordability requirements/covenants will continue to be maintained. City will be allowed 30 days to review and approve the rent increase proposal.
B3. Owner or Property Administrator agrees to submit an annual report to City that certifies and confirms that affordability covenants, including rent increases, comply with HCD standards for affordability to Moderate Income Households.
GOAL C: EXISTING TENANTS
Existing project tenants will not be displaced by the public benefit, regulatory, or other agreements.
Performance Measures:
C1. Non-Qualified Tenants (exceeding 120% AMI per California Tax Credit Allocation Committee (CTCAC) standards) will be allowed to remain in unit paying market rents until they choose to move out.
C2. Qualified Tenants (120% AMI or below per CTCAC standards) will be allowed to benefit from a minimum 10% reduction in current project market rents.
6 Affordability Considerations
GOAL D: LOCAL PREFERENCE POLICY
A preference program will be established for qualifying residents and employees with a primary work location in the City of Milpitas.
Performance Measures:
D1. Subject to City review and approval, Owner or Property Administrator agrees to establish and administer a tenant preference program with administrative guidelines, marketing plan, and screening procedures that define benefiting households and employees. Confirm compliance with state and federal fair housing regulations.
D2. Priority will be provided to qualifying teachers and administrative, maintenance, and support staff that are employed by the Milpitas Unified School District or other public education institution with a Milpitas job location.
GOAL E: REGIONAL HOUSING NEEDS ALLOCATION (RHNA) CREDIT Projects will qualify for full or partial RHNA credit, if feasible.
Performance Measures:
E1. Project complies with AB 787 criteria for full or partial RHNA credit:
a. No existing units affordable to very low, low, or moderate-income households; b. Affordable to moderate income households for 55 years; c. At least 10% reduction in average monthly rents from previous 12 months; d. Rents based on 100% AMI established by CTCAC;
e. Units in decent, safe, and sanitary condition;
f. Project not acquired by eminent domain;
g. Government monitoring program established to ensure affordability and occupancy by qualifying households; and h. A public entity shall hold an assignable right to purchase development. 7 Financial Considerations
GOAL F: QUALIFICATIONS OF PROJECT TEAM
Project will be owned and managed by a highly experienced and reputable Property Administrator and Property Manager.
Performance Measures:
F1: Property Administrator demonstrates a minimum of ten years of extensive expertise and financial capability in financing, developing, and managing at least 5,000 units of comparable market-rate and affordable (income and rent restricted) residential projects in California.
F2. Property Manager demonstrates a minimum of ten years of extensive financial and operations experience managing a portfolio of at least 5,000 units of comparable market-rate and affordable (income and rent restricted) residential projects in California, including administering local preference programs.
GOAL G: CITY EVALUATION OF PROPOSALS
Proposals will be evaluated for compliance with Goals and Performance Measures with professional and technical assistance as necessary.
Performance Measure:
G1. Project proponent deposits funds as determined by the City to retain independent financial, economic. and/or property management consultants to analyze the proposal and provide findings and recommendations on affordability terms, cashflow analysis, pro forma, property condition assessment, capital improvement needs, bond/financing structure, administrative fees, and draft agreements.
8 Financial Considerations
GOAL H CITY REVENUES
City participation will not result in a loss of City property taxes, special taxes, or property tax in lieu of vehicle license fees (PTILVLF).
Performance Measures:
H1. Project will fully backfill the City's any lost property tax and PTILVLF revenues through an upfront and/or annual payment of a Host Fee to the City with an annual increase of 2%. Host Fee shall be based on the post-sale assessed valuation of the property.
H2. Host and other applicable City fees will be paid before operating expenses, administrator fees, debt service (bond principal and interest), and any bond reserve fund deposits, and will be paid from other sources if operating revenue is insufficient to meet this obligation.
H3. For mixed used projects, property taxes pertaining to the non-residential portion of the property will continue to be paid.
H4. Where applicable, an annual Infrastructure Fee will be paid equivalent to City special taxes pertaining to inclusion in a community facilities district or assessment district with annual increase as specified.
GOAL I. PROJECT FINANCIAL VIABILITY
Project demonstrates positive cashflow and ability to fully cover its debt service and operating expenses during the bond or agreement period to reduce financial risks and assure long-term viability.
Performance Measures:
HI1. Through consultation with an independent real estate or economic consultant, income and expense assumptions conservatively reflect historical trends for residential projects in Milpitas or Santa Clara County.
J2. J2JProject Condition Report demonstrates a minimum 1.0 Debt Coverage Ratio (DCR) during the entire bond period with rental income based on conservative assumptions and the affordability goals and performance measures in Goals A and B.
II2I3. Cash flow analysis and pro forma demonstrate ability to cover amortized principal and interest payments during the bond term based on conservative assumptions.
9 Financial Considerations
GOAL J: CITY FINANCIAL RISK/BOND STRUCTURE
The financing plan and bond structure for the project is sound and consistent with industry standards for multi-family revenue bonds and reduces City risks and liability.
Performance Measures:
J1. A minimum of 25% of the aggregate principal will be paid within 10 years of bond issuanceiI; bond term will not exceed 35 years.
J2 Bonds will be optionally redeemable within 10 years of issuance with call premium consistent with investment grade municipal bonds.
J3 Bond principal redemption will be mandatory and paid under the same lien position as bond interest payments.
J4 Administrator fees will be paid after payment of bond interest and principal, any bond reserve fund deposits, and payable with annual excess cashflow only.
J5 Bond issuance fees and expenses will be in line with other similar middle income housing programs in California.
J6. Bond issuer will notify the City of any material changes to the project during the bond term, including updates to cashflow analyses or pro formas as needed.
J7. Public Benefit Agreement or Regulatory Agreement includes indemnification clause that limits the City’s liability and exposure as the Project Host and program participant.
J8. City will be entitled to 100% of the property’s reversion value at the end of the bond term, without any obligation to share any proceeds to other taxing entities.
GOAL K: REFINANCING/ADDITIONAL DEBT
City will have the authority to approve any refinancing, restructuring, or issuance of additional debt.
Performance Measure:
K1. Public Benefit Agreement, Regulatory Agreement, and/or Indenture include provisions that stipulate the City's approval authority for any debt refinancing, restructuring, or issuance of additional debt or encumbrances during the bond term. 10 Level of Capital Investment
GOAL L: CAPITAL IMPROVEMENTS
Capital improvement needs for the project are fully identified and funded for the entire bond or agreement period.
Performance Measures:
L1. Capital improvement and replacement needs with estimated costs are determined that cover the entire bond period.
L2. Project Condition Report (pro forma or cash flow analysis) demonstrates that capital improvement and replacement costs will be covered by project reserves and operating income during the entire bond period.
L3. An updated capital improvement assessment will be prepared at least every five years, or sooner if requested by the City, that assesses the capital needs and expenses for the project during the remaining bond term and the sufficiency of reserve funds and operating income.
L4. Owner or Property Administrator agrees to fund an independent consultant approved by the City to prepare the capital improvement assessment and agrees to adjust reserve funds to cover revised capital costs for the project, if necessary. 11 Transparency and Oversight
GOAL M: CITY ENFORCEMENT AUTHORITY
City will have enforcement authority over management of the project to ensure compliance with goals and performance measures during the bond or agreement period.
Performance Measures:
M1. Public Benefit Agreement or Regulatory Agreement cites the City’s authority and remedies to enforce compliance with the housing affordability requirements.
M2. Public Benefit Agreement or Regulatory Agreement defines the City’s enforcement abilities, remedies, consequences, and resolution process if, upon review of annual certification and reports, project operations or responsible parties are found to be out of compliance with agreements.
GOAL N: MONITORING AND REPORTING
City will be provided with regular reports regarding the financial and operational performance of the project during the bond or agreement period for project monitoring.
Performance Measures:
N1. Certification: Owner or Property Administrator agrees to submit to the City an annual Certificate of Continuing Program Compliance for the project.
N2. Property Financial, Management, and Maintenance Reports: Owner or Property Administrator agrees to submit an annual report to the City that describes the project operations and finances, including but not limited to:
a. Rent roll and rent increases;
b. Vacancy rate;
c. Operating income and expenses;
d. Cashflow projection, operating funds, and reserves;
e. Bond interest and redemption payments and all bond specific payments; f. Completed and planned capital improvements and replacements; and g. Documentation on the general condition of the Project. 12 Transparency and Oversight
GOAL N: MONITORING AND REPORTING (cont’d.)
N3. Independent Review: City reserves the right to require the property owner to fund an independent property and/or financial management consultant to review the reports required under N2 and provide an assessment of the project based on industry standards and best practices for management of residential property.
N4. Monitoring Fee: Owner or Project Administrator agrees to submit to City an annual monitoring fee to cover City staff costs for project oversight and monitoring, with provision for an annual fee increase.
GOAL O: PROJECT ADMINISTRATION AND MANAGEMENT
Project proponent demonstrates to the City that the project will comply with best real estate practices for management of residential property.
Performance Measures:
O1. Owner or Property Administrator agrees to submit the following plans for City review and approval prior to execution of PBA: Tenant Selection Plan, with screening and qualification procedures; Local Preference Policy (per Goal D); Maintenance Plan; Property Management Plan, including staffing; and Marketing Plan.
O2. City will have the authority to review and approve the selection of any replacement Property Administrator or Property Manager that may be proposed during the bond period, including new or revised agreements pertaining to the replacement company.
13 Eleanor Apartments CSCDA Proposal
COMPLIANCE WITH COUNCIL-ADOPTED
GOALS AND PERFORMANCE MEASURES
18 Considerations
The Eleanor Apartment project team proposes to have the City Council adopt a Public Benefit Agreement (PBA) similar to that approved for the Turing CSCDA project.
The PBA for Eleanor Apartments would not comply with most of the Goals and Performance Measures adopted by the City Council on March 1, 2022, in terms of Affordability, Financial Considerations, Level of Capital Investment, and Transparency and Oversight.
Considerable staff time was required to process the Turing CSCDA proposal. Housing staff is currently constrained; additional staff and consultant resources would be necessary to process this proposal.
Investment of time from City Manager’s Office, City Attorney’s Office, and Finance Department is also necessary. With current proposed FY 2022-23 budget currently underway, staff will not be able to initiate analysis of this proposal until next fiscal year.
City of Milpitas
455 E. Calaveras Blvd., Milpitas, CA 95035
www.ci.milpitas.ca.gov 408-586-3000
www.cscda.org www.cscda.org www.opportunityhousinggroup.com www.opportunityhousinggroup.com Workforce Housing Program
Presentation to the City of Costa Mesa
June 14, 2021
CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY
WORKFORCE HOUSING PROGRAM
Opportunity to Immediately Convert 333 Market Rate Multifamily Units at the Eleanor to Low-, Middle- and Moderate-Income Housing Presentation to City of Milpitas City Council
April 19, 2022
www.cscda.org www.opportunityhousinggroup.com
Workforce Housing Sponsorship Team
Issued more than $65 billion in bonds for over 1,700 public benefit financings, including the creation or preservation of nearly 100,000 affordable housing units throughout California. 533 cities, counties and special districts are members of CSCDA. CSCDA Workforce Housing Program (“CSCDA WHP”) has issued $4.5 billion in bonds for 28 projects / 7,400 units in CA in 2020 and 2021. See:
https://cscda.org/workforce‐housing‐program/
City of Milpitas joined the CSCDA WHP in March 2022
California Statewide Communities Development Authority (Bond Issuer) Opportunity Housing Group (Sponsor/Project Administrator) Citigroup (Bond Underwriter)
Greystar (Property Manager)
Locally-based in Danville, CA
Extensive experience in multifamily acquisitions and asset management Team members have acquired over 7,700 apartments, managed over 100 properties/35,000+ units, and developed over 7,750 units.
In 2021 closed over $918M in bonds / 1,582 workforce housing units under the CSCDA WHP. #1 municipal bond underwriter nationally and in California over the past four decades. Citi has financed more housing transactions (middle income, affordable, permanent supportive and student segments) than any other firm
First class operator with most residential units under management in CA. Excellent procedures for maintenance, capital improvements and repairs. 2 www.cscda.org www.opportunityhousinggroup.com
ISSUE
• Dramatic, sustained rent
increases (+21% in 2021)
across CA cities mean that only
the wealthy can continue to
afford to live in the cities where
they work.
• Income Inequality in CA is
among the worst in the U.S. and
is growing faster than other
states.
• Teachers, Construction Workers,
Government Employees,
Nurses, First Responders and
others struggle to afford rent or
are forced to move away. 37%
of Californians pay more than
40% of their income as rent.
• 30% of California’s workforce
falls into this “Missing Middle.”
IMPACT
• Hurts Families: Families have
little disposable income after
payment of rent to spend in their
communities or to save for their
futures.
• Hurts Communities: Families
face instability- not knowing if
rent increases will force them to
leave the community.
• Hurts Employers: California
public and private employers
struggle to find workers, hurting
economies and challenging
small businesses.
• Hurts Environment: Moving
farther from employment causes
increased commutes, traffic and
reduced quality-of-life.
SOLUTION
New Construction: Supply is
limited, and market rents are
generally too high for middleincome residents to afford.
Tax Credits or Subsidy
Programs: Limited to Very Low
Income (<60% of AMI) residents,
so Middle-Income Californians
are not eligible.
CSCDA’s Workforce Housing
Program is the SOLUTION:
- Restricts rents to affordable
levels for middle-income
residents with rent control <4%.
- Keeps existing residents in
place.
- No public subsidies, equity,
grants or liability.
- Delivers long-term value to
Cities.
Problem: Housing Crisis for the “Missing Middle”
THE CRISIS
Across California, critical members of the workforce are being priced out of their communities. 3 Data: Rent.com for Jan 2022, US Census 2020, American Community Survey (US Census 2020), World Population Review. www.cscda.org www.opportunityhousinggroup.com
Who is the Missing Middle? Teachers, Government Workers, Nurses, First Responders, Construction/Trade workers, Police, Fire, Medical workers and others.
Housing Challenges for Middle Income Families
In Milpitas, 24% of renters (1,900 families) are extremely rent-burdened with rent >40% of income. • 9% of renters pay 40-50% of income as rent.
• 15% of renters pay >50% of income as rent.
And it’s getting worse…
• Last year, rent growth in Milpitas was the second highest in the Bay Area at 14.2% [CBRE] • Rent growth in Milpitas projected to continue at 9.5% in 2022 and 6.6% in 2023 [CoStar]. 4 Data from Bureau of Labor Statistics & Costar. Analysis by Opportunity Housing Group.
37% of the workforce in
Silicon Valley would
income-qualify for the
CSCDA program.
www.cscda.org www.opportunityhousinggroup.com
• Residents receive initial rent savings of $1,830,059 per year (average of ~$5,500 per unit/year) and future rent increases capped at no more than 4%. 78% of current residents would qualify for the Program.
• The Project will pay the City of Milpitas a Host City Charge of $345,000/year, escalating at 2% annually, making the program entirely revenue neutral. No liability for City & No ongoing admin requirements.
• Under the Public Benefit Agreement, the City receives 100% of the equity of the asset in 15-35 years (Eleanor is estimated at $78 million in Year 15 and $550 million in Year 35, assuming the property remains permanently affordable after sale). • Will offer Renter Preference for Milpitas Unified School District Teachers Solution/Benefits: Add Eleanor to CSCDA WHP
The Opportunity:
Immediately convert 333 market-rate units at
the Eleanor to 40% Low-, 20% Middle- and
40% Moderate-Income Housing to benefit
the Missing Middle in Milpitas.
5 www.cscda.org www.opportunityhousinggroup.com
Next Steps: City Council to Adopt Eleanor
6 Very Simple and Fast:
GOVERNMENTAL APPROVAL
1. City is now a member of the CSCDA Workforce Housing Program* – No Further Review or Action is Required
2. City to:
a) Adopt a resolution to adopt Eleanor as a part of the CSCDA Workforce Housing Program
b) Execute the Public Benefit Agreement (as approved by CSCDA and the City for the Turing)
SCHEDULE
*Note: Includes all the previously negotiated terms for Turing Date/Week of: Milestone
4/19/22 (today) City to Prioritize review of Eleanor
5/17/22 City Council to consider adopting the Eleanor as a part of the CSCDA Workforce Housing Program
www.cscda.org www.opportunityhousinggroup.com
Summary of City Council Request
7 1. Instruct City Staff to prioritize the review of the Eleanor and bring it back to the City Council on May 17th for consideration.
2. Initiate a Reimbursement Agreement where OHG will reimburse City and Consultant time to expedite the Eleanor review.
3. Clarify for the benefit of Staff and OHG/CSCDA, the following:
A. Any review and approval for Eleanor will be under the same terms and conditions as approved for the Turing.
B. The same Goals and Performance Measures in the Turing’s Staff Report that were waived by the City Council, will also be waived for the Eleanor as a part of its approval.
www.cscda.org www.opportunityhousinggroup.com
Opportunity Housing Group
Brad Griggs
[email protected]
www.opportunityhousinggroup.com
CSCDA
Jon Penkower
[email protected]
www.cscda.org/workforce-housing-program/
Thank You
8 www.cscda.org www.opportunityhousinggroup.com
Appendix – No Liability to the City
9 City CSCDA
Bond
Trustee
Bond
Investors
Public Benefit Agreement
Regulatory Agreement
Benefits and Fees Paid
To the City
Property Owner Lender
Eleanor
The City has No Liability associated with the bond issuance • City is not a party to the bond transaction
• City’s Credit Rating is not impacted
• City does not own the asset
• City is not providing equity or grants
• City is not the borrower
• City is an additional insured on property liability insurance • NO LIABILITY is stated exhaustively throughout the JPA Agreement, the Public Benefit Agreement and the Bond
Documents.
SPECIAL MEETING OF THE
MILPITAS CITY COUNCIL
April 19, 2022 Milpitas City Council Agenda Page 1
AGENDA
TUESDAY, APRIL 19, 2022
CITY COUNCIL CHAMBERS, 455 E CALAVERAS BLVD, MILPITAS, CA 5:00 PM
For assistance in the following languages, you may call:
Đối với Việt Nam, gọi 408-586-2400
Para sa Tagalog, tumawag sa 408-586-3051
Para español, llame 408-586-3072
CITY OF MILPITAS - NOTICE OF SPECIAL MEETING
NOTICE IS HEREBY GIVEN that a Special Meeting of the Milpitas City Council will be held at 5:00 p.m. on April 19, 2022, in the City Council Chamber at City Hall, 455 E. Calaveras Blvd., Milpitas and via teleconference/Zoom webinar.
Meeting shall be livestreamed - Go to:
Facebook: https://www.facebook.com/CityofMilpitas/
YouTube: https://www.ci.milpitas.ca.gov/youtube
Web Streaming: https://www.ci.milpitas.ca.gov/webstreaming
PUBLIC COMMENT INSTRUCTIONS
Oral public comments may be provided live during the City Council meeting in person or by registering for the zoom meeting in advance. To register you will need to provide an email address (not disclosed) and a name. To minimize technical difficulties, please make sure that you have the latest version of the Zoom Application. Below is the link to register for this meeting only:
https://ci-milpitas-ca-gov.zoom.us/webinar/register/WN_KvXKMOX1T3Sfp0jIqc97pw After you register a link will be sent to you to join the City Council meeting in order to give your comments.
All registered meeting attendees who wish to speak must click on the “raise hand” icon when the Mayor calls for public comments. If participating by calling in on your phone, dial *9 to use the “raise hand” feature, and when you are called upon, hit *6 to unmute your phone. Your phone number will be displayed in the live meeting. The Mayor will call the speakers to begin.
All comments provided shall be limited to three minutes or less as determined by the Mayor. All members of the public will be limited to one comment per agenda item, and one comment for non-agenda items.
MILPITAS CITY COUNCIL CODE OF CONDUCT
• Be respectful and courteous (words, tone, and body language). • Model civility.
• Avoid surprises.
• Praise publicly and criticize privately.
• Focus on the issue, not the person.
• Refrain from using electronic devices while on the Council dais. • Disclose conflicts of interest and affiliations related to agenda items. • Separate governing from campaigning.
• The Council speaks with one voice after making policy on issues. • Respect the line between policy and administration.
• Council will hold one another accountable to comply with this Code of Conduct.
April 19, 2022 Milpitas City Council Agenda Page 2
CALL MEETING TO ORDER by Mayor and ROLL CALL by City Clerk
PLEDGE OF ALLEGIANCE
PRESENTATIONS
PUBLIC FORUM
Those in the audience and via Zoom are invited to address City Council on any subject not on tonight’s agenda. In-person speakers wishing to address the Council are requested, but not required to complete a Speaker Card and submit it to the Mayor. In-person speakers will then be asked to come up to the podium and state their name for the record. Those interested in speaking via Zoom may do so by following the instructions on page one (1) of the agenda. Comments may be limited to three (3) minutes or less at the Mayor’s discretion. As an item not listed on the agenda, no response is required from City staff or the Council and no action can be taken. The City Council may instruct the City Manager to place the item on a future meeting agenda.
NOTE: If a member of the public wishes to share any presentation materials for Council consideration, they must be submitted to the Clerk’s Office by email to [email protected] by 12:00 p.m. on the day of the meeting. No presentations will be accepted in person in the Council Chambers.
ANNOUNCEMENTS
ANNOUNCEMENT OF CONFLICT OF INTEREST AND CAMPAIGN CONTRIBUTIONS
READING OF THE CITY COUNCIL CODE OF CONDUCT
APPROVAL OF AGENDA
AGENDA ITEMS
1. Receive a Presentation on the Draft Milpitas Metro Specific Plan (Update of 2008 Transit Area Specific Plan) and Draft Subsequent Environmental Impact Report (SEIR), Receive Public Comment, and Provide Direction to Staff Regarding the Draft Documents and Timeline for Adoption (Staff Contact: Ned Thomas, Planning Director, 408-586-3273; and Kevin Riley, TASP (Metro) Manager, 408-586-3292)
Recommendation: (1) Receive a presentation from staff and consultants; (2) Receive public comments; and (3) Provide feedback and direction on the Draft Milpitas Metro Specific Plan.
2. Adopt the Innovation District Action Plan (Staff Contact: Alex Andrade, Director of Economic Development, 408-586-3046 and Daniel Degu, Sr., Economic Development Coordinator, 408-586- 3054)
Recommendation: Adopt the Innovation District Action Plan.
3. Receive a Report on Community Odor Monitoring Pilot Program Results (Staff Contact: Tony Ndah, Public Works Director, 408-586-2602)
Recommendation: Receive a report on the Community Odor Monitoring Pilot Program Results and provide direction to Staff.
ADJOURNMENT
April 19, 2022 Milpitas City Council Agenda Page 3
KNOW YOUR RIGHTS UNDER THE OPEN GOVERNMENT ORDINANCE
Government’s duty is to serve the public, reaching its decisions in full view of the public. Commissions and other City agencies exist to conduct the people’s business. This ordinance assures that deliberations are conducted before the people and City operations are open to the people’s review. For more information on your rights under the Open Government Ordinance or to report a violation, contact the City Attorney’s office at Milpitas City Hall, 455 E. Calaveras Blvd., Milpitas, CA 95035 e-mail:[email protected] / Phone: 408-586-3040
The Open Government Ordinance is codified in the Milpitas Municipal Code as Title I Chapter 310 and is available online at the City’s website www.ci.milpitas.ca.gov by selecting the Milpitas Municipal Code link.
Materials related to an item on this agenda submitted to the City Council after initial distribution of the agenda packet are available for public inspection at the City Clerk’s office at Milpitas City Hall, 3rd floor 455 E. Calaveras Blvd., Milpitas and on City website. City Council agendas and related materials can be viewed online: www.ci.milpitas.ca.gov/government/council/agenda_minutes.asp (select meeting date)
APPLY TO SERVE ON A CITY COMMISSION
Commission application forms are available online at www.ci.milpitas.ca.gov or at Milpitas City Hall.
Contact the City Clerk’s Office at 408-586-3001 for more information.
If you need assistance, per the Americans with Disabilities Act, for any City of Milpitas public meeting, please call the City Clerk at 408-586-3001 or send an e-mail to [email protected] prior to the meeting. You may request a larger font agenda.
SPECIAL MEETING OF THE
MILPITAS CITY COUNCIL
April 19, 2022 Milpitas City Council Agenda Page 1
AG END A
TUESDAY, APRIL 19, 2022
CITY COUNCIL CHAMBERS, 455 E CALAVERAS BLVD, MILPITAS, CA 5:00 PM
For assistance in the following languages, you may call:
Đối với Việt Nam, gọi 408-586-2400
Para sa Tagalog, tumawag sa 408-586-3051
Para español, llame 408-586-3072
CITY OF MILPITAS - NOTICE OF SPECIAL MEETING
NOTICE IS HEREBY GIVEN that a Special Meeting of the Milpitas City Council will be held at 5:00 p.m. on April 19, 2022, in the City Council Chamber at City Hall, 455 E. Calaveras Blvd., Milpitas and via teleconference/Zoom webinar.
Meeting shall be livestreamed - Go to:
Facebook: https://www.facebook.com/CityofMilpitas/
YouTube: https://www.ci.milpitas.ca.gov/youtube
Web Streaming: https://www.ci.milpitas.ca.gov/webstreaming
PUBLIC COMMENT INSTRUCTIONS
Oral public comments may be provided live during the City Council meeting in person or by registering for the zoom meeting in advance. To register you will need to provide an email address (not disclosed) and a name. To minimize technical difficulties, please make sure that you have the latest version of the Zoom Application. Below is the link to register for this meeting only:
https://ci-milpitas-ca-gov.zoom.us/webinar/register/WN_KvXKMOX1T3Sfp0jIqc97pw After you register a link will be sent to you to join the City Council meeting in order to give your comments.
All registered meeting attendees who wish to speak must click on the “raise hand” icon when the Mayor calls for public comments. If participating by calling in on your phone, dial *9 to use the “raise hand” feature, and when you are called upon, hit *6 to unmute your phone. Your phone number will be displayed in the live meeting. The Mayor will call the speakers to begin.
All comments provided shall be limited to three minutes or less as determined by the Mayor. All members of the public will be limited to one comment per agenda item, and one comment for non-agenda items.
MILPITAS CITY COUNCIL CODE OF CONDUCT
Be respectful and courteous (words, tone, and body language). Model civility.
Avoid surprises.
Praise publicly and criticize privately.
Focus on the issue, not the person.
Refrain from using electronic devices while on the Council dais. Disclose conflicts of interest and affiliations related to agenda items. Separate governing from campaigning.
The Council speaks with one voice after making policy on issues. Respect the line between policy and administration.
Council will hold one another accountable to comply with this Code of Conduct. 1 April 19, 2022 Milpitas City Council Agenda Page 2
CALL MEETING TO ORDER by Mayor and ROLL CALL by City Clerk
PLEDGE OF ALLEGIANCE
PRESENTATIONS
PUBLIC FORUM
Those in the audience and via Zoom are invited to address City Council on any subject not on tonight’s agenda. In-person speakers wishing to address the Council are requested, but not required to complete a Speaker Card and submit it to the Mayor. In-person speakers will then be asked to come up to the podium and state their name for the record. Those interested in speaking via Zoom may do so by following the instructions on page one (1) of the agenda. Comments may be limited to three (3) minutes or less at the Mayor’s discretion. As an item not listed on the agenda, no response is required from City staff or the Council and no action can be taken. The City Council may instruct the City Manager to place the item on a future meeting agenda.
NOTE: If a member of the public wishes to share any presentation materials for Council consideration, they must be submitted to the Clerk’s Office by email to [email protected] by 12:00 p.m. on the day of the meeting. No presentations will be accepted in person in the Council Chambers.
ANNOUNCEMENTS
ANNOUNCEMENT OF CONFLICT OF INTEREST AND CAMPAIGN CONTRIBUTIONS
READING OF THE CITY COUNCIL CODE OF CONDUCT
APPROVAL OF AGENDA
AGENDA ITEMS
1. Receive a Presentation on the Draft Milpitas Metro Specific Plan (Update of 2008 Transit Area Specific Plan) and Draft Subsequent Environmental Impact Report (SEIR), Receive Public Comment, and Provide Direction to Staff Regarding the Draft Documents and Timeline for Adoption (Staff Contact: Ned Thomas, Planning Director, 408-586-3273; and Kevin Riley, TASP (Metro) Manager, 408-586-3292)
Recommendation: (1) Receive a presentation from staff and consultants; (2) Receive public comments; and (3) Provide feedback and direction on the Draft Milpitas Metro Specific Plan.
2. Adopt the Innovation District Action Plan (Staff Contact: Alex Andrade, Director of Economic Development, 408-586-3046 and Daniel Degu, Sr., Economic Development Coordinator, 408-586- 3054)
Recommendation: Adopt the Innovation District Action Plan.
3. Receive a Report on Community Odor Monitoring Pilot Program Results (Staff Contact: Tony Ndah, Public Works Director, 408-586-2602)
Recommendation: Receive a report on the Community Odor Monitoring Pilot Program Results and provide direction to Staff.
ADJOURNMENT
2 April 19, 2022 Milpitas City Council Agenda Page 3
KNOW YOUR RIGHTS UNDER THE OPEN GOVERNMENT ORDINANCE
Government’s duty is to serve the public, reaching its decisions in full view of the public. Commissions and other City agencies exist to conduct the people’s business. This ordinance assures that deliberations are conducted before the people and City operations are open to the people’s review. For more information on your rights under the Open Government Ordinance or to report a violation, contact the City Attorney’s office at Milpitas City Hall, 455 E. Calaveras Blvd., Milpitas, CA 95035 e-mail:[email protected] / Phone: 408-586-3040
The Open Government Ordinance is codified in the Milpitas Municipal Code as Title I Chapter 310 and is available online at the City’s website www.ci.milpitas.ca.gov by selecting the Milpitas Municipal Code link.
Materials related to an item on this agenda submitted to the City Council after initial distribution of the agenda packet are available for public inspection at the City Clerk’s office at Milpitas City Hall, 3rd floor 455 E. Calaveras Blvd., Milpitas and on City website. City Council agendas and related materials can be viewed online: www.ci.milpitas.ca.gov/government/council/agenda_minutes.asp (select meeting date)
APPLY TO SERVE ON A CITY COMMISSION
Commission application forms are available online at www.ci.milpitas.ca.gov or at Milpitas City Hall.
Contact the City Clerk’s Office at 408-586-3001 for more information.
If you need assistance, per the Americans with Disabilities Act, for any City of Milpitas public meeting, please call the City Clerk at 408-586-3001 or send an e-mail to [email protected] prior to the meeting. You may request a larger font agenda.
3 CITY OF MILPITAS
AGENDA REPORT
(AR)
Item Title: Receive a Presentation on the Draft Milpitas Metro Specific Plan (Update of 2008 Transit Area Specific Plan) and Draft Subsequent Environmental Impact Report (SEIR), Receive Public Comment, and Provide Direction to Staff Regarding the Draft Documents and Timeline for Adoption (Staff Contact: Ned Thomas, Planning Director, 408-586-3273; and Kevin Riley, TASP (Metro) Manager 408-586-3292) Category: Community Development
Meeting Date: 04-19-2022
Recommendation: (1) Receive a presentation from staff and consultants; (2) Receive public comments; and (3) Provide feedback and direction on the Draft Milpitas Metro Specific Plan.
Background:
The City’s consultant team, headed by Urban Field Studio (UFS), and City staff are preparing final edits on the Milpitas Metro Specific Plan (Metro Plan), which is an update of the Transit Area Specific Plan (TASP) adopted in 2008. The City Council received a presentation on an earlier draft of the six (6) chapters that comprise the Metro Plan on October 12, 2021. Since that time, the consultant team and City staff from various departments have been focused on refining the document in response to Council direction at the October meeting as well as comments received from the public and outside agencies. The basic scope, content, and direction of the current draft Metro Plan are consistent with the October draft and form the basis for environmental analysis in the Subsequent Environmental Impact Report (SEIR). The Draft SEIR will be circulated for public review and comment during May, and the Final SEIR is due to be completed in August. The Council discussion on April 19, 2022 will be an opportunity to provide any significant comments and final direction to staff prior to completing the document and presenting it in a public hearing to the Planning Commission for their recommendation to the City Council for final adoption.
Staff from various City Departments reviewed the Administrative Draft Subsequent Environmental Impact Report (SEIR) in February and March. The Draft EIR was released on April 15 for a 45-day public review period as required by the California Environmental Quality Act (CEQA). Once the public review period closes, the consultants and staff will prepare formal responses to each of the written comments received. Combined, the Draft SEIR and the comments and responses to it comprise the Final SEIR, which must be certified by the Council prior to adopting the Metro Plan. The Draft Metro Plan will also be released for public circulation concurrent with the EIR, but it is not constrained by a circulation timeline. At this time, staff anticipates that the SEIR and Plan will come back to Council for certification and adoption, respectively, in late summer 2022.
In six study sessions held during 2020 and 2021, the Council received presentations and held discussions regarding existing conditions, draft policy guidance and notable economic opportunities for new development, particularly in and around the Great Mall District and the Innovation District. These two focus areas are key features of the Metro Plan and both take advantage of their proximity to the Milpitas Transit Center that opened in June 2020 but has been constrained in its ridership due to COVID pandemic conditions. The Metro Plan both creates and takes advantage of opportunities inherent in the proximities of each of the land uses to transit and to each other. The Plan continues to promote and facilitate development of a new and unique Milpitas neighborhood with housing, jobs, and public amenities all generally within a half- mile walk of the Milpitas Transit Center. This development is distinct from the City’s more traditional single-family neighborhoods and suburban, auto-oriented development.
4 Item # 1.
Analysis:
The Metro Plan will guide the further development of the area at greater densities and intensities over the next 20 years. Besides the City’s own civic priorities and along with internal and external governmental constraints, other factors such as economic conditions, business activity, and housing development, etc. will factor into successful implementation. While the Metro Plan enlarges the planning area by approximately 70 acres from the original 437-acre TASP area, the new guiding document for the Metro Plan area will be more concise and generally more focused than the TASP, insofar as much of the land area of the original transit plan has been developed and is not expected to see significant change during the lifespan of the 20-year Metro Plan.
The presentation and discussion will provide an opportunity for Council and the public to see a refined draft version of the complete document prepared by the consultant team and City staff. The combination of the various chapters presents the City’s vision for the approximately 510 acres of the Metro Plan and provides a practicable and implementable policy document that developers and builders can use to test the viability of proposed projects and to build them. In addition to laying out a buildable development scenario, the Metro Plan identifies the public infrastructure needed to make the area a vibrant and livable neighborhood of homes, jobs and services.
Key issues for Council consideration and comment in this review include:
The nature and intensity of development east of Berryessa Creek and at the four corners of South Milpitas Boulevard and Montague Expressway, as a part of the Innovation District, which encompasses mixed use lands westward to the Transit Center and south; The nature and intensity of the Great Mall District, particularly the 99-acre Great Mall site itself and how the City can facilitate progressive redevelopment of the site in partnership with Simon Properties and in keeping with the City’s vision for the site and its surroundings. Some sites within the Great Mall Subdistrict will also benefit from the Innovation District program and strategies. Consideration of development implementation tools, such as the Development Agreement process for certain larger planning areas (e.g., the Innovation District, the Great Mall) Public infrastructure needs beyond the TASP Basic Infrastructure Plan (BIP) to promote a well connected and well served area both internally and as to how these relate to and support the whole of the City and how this neighborhood is supported by Citywide services at the same time.
The environmental analysis in the Subsequent EIR evaluates potential environmental effects of new development promoted by the Metro Plan and is not obligated to assess the development already approved by the 2008 TASP. In accordance with the California Environmental Quality Act (CEQA), environmental analysis included preparation of an Initial Study to identify key issues with the potential to create new impacts and would therefore need to be addressed in the SEIR.
Policy Alternatives:
This is an informational item for Council consideration, feedback, and direction on the final draft of the Plan.
Fiscal Impact:
This is an informational item. As such, there is no fiscal impact.
California Environmental Quality Act:
This report represents ongoing work on the Milpitas Metro Specific Plan; a Subsequent Environmental Impact Report (SEIR) is being prepared for consideration and certification prior to the Metro Plan adoption.
Recommendation:
1. Receive a presentation from staff;
2. Receive public comments;
3. Provide feedback and direction on the Draft Milpitas Metro Specific Plan and SEIR 5 Item # 1.
Attachments:
1. Cover Memo from Urban Field Studio
2. Milpitas Metro Specific Plan Draft Subsequent Environmental Impact Report (weblink)
3. Draft Milpitas Metro Specific Plan (weblink)
6 Item # 1.
Milpitas Metro Specific Plan (MMSP) and Subsequent
Environmental Impact Report (SEIR)
Agenda Report Attachment prepared for the City Council Meeting on April 19, 2022 Prepared by Urban Field Studio and M-Group
Links to the Plans
Consultants will present the Draft Milpitas Metro Specific Plan and the accompanying Draft Subsequent Environmental Impact Report at the April 19, 2022 meeting. Both documents are available on the City’s website. at: https://www.ci.milpitas.ca.gov/metro Links to both documents are also being sent to relevant outside agencies in nearby Cities, VTA, Valley Water, CalTrans, and School Districts. Printed copies are also available for public viewing at the City of Milpitas Planning Department and at the Milpitas Library.
The MMSP and SEIR Public Review Process
The 45-day public review period for both plans will be from April 15, 2022, to May 30, 2022. The project team will consider comments in finalizing the MMSP and Draft SEIR.
The Draft SEIR goes to the State CEQA Clearinghouse for statewide notification. Public comments on the MMSP and Draft SEIR must be received no later than 5:00 p.m. on the last day of the public review period. Comments can be submitted by mail or email to Kevin Riley, Metro Plan Project Manager (email: [email protected]).
Next Steps to Adoption
After City staff and the consultant team receive and review all public comments, the MMSP and Draft SEIR will be revised and finalized, as needed, and prepared for adoption.
The Planning Commission will hold a Public Hearing in June or August to review and discuss the Draft MMSP and Draft SEIR and provide a recommendation to the City Council. The City Council will then hold a Public Hearing for adoption of the MMSP and Final SEIR in August or September. The timing of these hearings depends on the nature and extent of public comments received and the time required to prepare responses. .
7 Item # 1.
Milpitas Metro Specific Plan Draft Subsequent Environmental Impact Report
https://www.ci.milpitas.ca.gov/wp-content/uploads/2022/04/Metro-PlanDraft-SEIR_2022-April-with-Appendix-A-F.pdf 8 Item # 1.
Draft Milpitas Metro Specific Plan
https://www.ci.milpitas.ca.gov/wp-content/uploads/2022/04/2022-04- 12-MMSP-Book-Layout-print.pdf
9 Item # 1.
CITY OF MILPITAS
AGENDA REPORT
(AR)
Item Title: Adopt the Innovation District Action Plan (Staff Contact: Alex Andrade, Director of Economic Development, 408-586-3046 and Daniel Degu, Sr., Economic Development Coordinator, 408-586-3054)
Category: Community Development
Meeting Date: 4/19/2022
Recommendation: Adopt the Innovation District Action Plan.
BACKGROUND:
The City of Milpitas has experienced a COVID-19 impact loss of $30 million to the General Fund in the past two years. Economic recovery is vital to the success of the City of Milpitas, which may improve through economic development, cost management, innovation and prioritization of new services, programs, and projects, such as the Innovation District.
Employment lands are significant contributors to the City’s General Fund through substantial net positive revenues that support essential and critical public services. As such, it’s imperative that the City of Milpitas prioritize preserving and protecting employment lands to ensure long-term fiscal sustainability through diversifying the local economy and creating high-quality job opportunities for residents as we progress out of the pandemic and into an endemic stage.
On March 9, 2021, the City Council adopted the Milpitas 2040 General Plan. General Plan Action ED-3i recommends exploring the creation of an Innovation District in the Milpitas Metro Specific Plan area to facilitate increases in employment densities while leveraging the area’s proximity to mass transit. And, on May 5, 2020, the City Council adopted the Economic Development Strategy to serve as Milpitas’ road map to grow and diversify the City’s economy, support businesses and workers, and improve quality of life in the community.
Strategies 24, 27, and 29 all envision an Innovation District that will be designed as an employment destination with modern office, research and development buildings and flexible space for people to interact through “creative collisions” and placemaking. The aim is to plan for a well-connected Innovation District with proximity to the Milpitas Transit Center and infrastructure that supports bike paths, pedestrian scale sidewalks, social gathering places, and modern infrastructure. With the growing innovation economy, technology businesses prefer locations in and around transit areas for ease of employee access and mobility to and from employment centers.
On June 4, 2021, the Office of Economic Development retained Economic & Planning Systems, Inc. (EPS) to prepare a Fiscal Benefits of Employment Lands Study. This Study guides City policy towards a fiscally resilient future based on preserving and protecting employment lands, attracting innovative businesses focused on emerging technologies, and developing the Innovation District as part of the Milpitas Metro Specific Plan.
ANALYSIS:
The Fiscal Benefits of Employment Lands Study is divided into two phases. Phase I, presented to City Council on October 12, 2021, provided broad insights into the importance of employment lands in Milpitas as well as the opportunities and challenges associated with the creation of an Innovation District as part of the Milpitas Metro Specific Plan. Phase II (Attachment 1) takes a closer look at the Innovation District, combining existing conditions, case studies, and Phase I Findings (Attachment 2), to develop an Innovation District Action Plan that outlines a set of potential City actions to help support the advancement of a technology business cluster. 10 Item # 2.
Phase I Key Findings
Phase I of the Fiscal Benefits of Employment Lands included various analyses with the project goals of City fiscal sustainability, preserving and protecting employment lands, balanced growth, creative placemaking and business attraction. Analyses consisted of a Fiscal Impact Analysis, Occupation and Wage Analysis, Innovation District Development Scenarios, Residual Land Value Analysis, and the Innovation District Framework Plan. Key findings from Phase I are described below:
Employment lands are significant contributors to the General Fund making it imperative that the City preserve and protect these lands.
Employment lands provide substantial net positive revenues to the General Fund, which supports essential and critical City services such as Police, Fire, Parks, Public Facilities, etc. Full buildout of the Innovation District may result in future General Fund revenues in the range of $6.5M to $9.9M annually and create approximately 2,000 to 14,000 new high-quality jobs. New Office and Research and Development (R&D) (mid-rise) real estate space is not currently economically feasible making it challenging to attract new investment and technology businesses. Since current economic and real estate market conditions alone are not sufficient to drive the City’s vision for the Innovation District, supportive City policies can help spur Office/R&D development and business attraction within the Innovation District.
For City policy adjustments, the two key areas of focus were reductions in Transit Area Development Impact Fees (TADIF) on commercial development and the easing of parking requirements to make real estate projects more feasible.
While the City of Milpitas does not typically act as a real estate developer, the City Council, as a legislative body, has the authority to enact legislation, establish policies, and provide direction for actions which affect development and land use. In order to develop a successful Innovation District, the following types of policies and actions were considered by the City Council at the October 12, 2021 meeting:
Protect and preserve employment lands through land use designations. Offer flexibility in density and height to support development economics. Consider reduced parking requirements for employment uses in a transit-oriented area. Consider reduced development impact fees on future Office and R&D projects. Expedite the entitlement and permit processes through Development Agreements, Public/Private Partnerships, and facilitating pre-development meetings with various City departments and developers.
The City Council responded favorably to preserving and protecting our valuable employment lands and maximizing opportunities to attract new revenue sources through business attraction and job creation. Also, the City Council reached consensus on pursuing strategies for parking reductions since development would transpire in a transit-oriented area and to assist the development community with expediting the entitlement and permit processes. Although some Councilmembers supported exploring development impact fee reductions, others said it would depend based on who the applicant is, their needs, and community benefits.
Phase II Key Findings
The Fiscal Benefits of Employment Lands Study Phase II is focused on development of an Innovation District Action Plan. Phase II combines case studies of other Innovation Districts, contextual and on-the-ground information, and data concerning Development Opportunity Sites partially contained in and proximate to the Innovation District.
The Innovation District, located within the Milpitas Metro Specific Plan (MMSP), provides a vital economic development opportunity to support the City from a long-term fiscal sustainability perspective. While Phase II consists of various research and analyses, key findings are illustrated below. For the full draft Phase II report, see Attachment 1.
11 Item # 2.
Case Studies
To develop the Innovation District Action Plan, EPS prepared four case studies of other jurisdictions that have or are supporting the development of an Innovation District. The purpose of these case studies is to identify common themes or specific insights to inform the City of Milpitas as it considers different ways to support development of its Innovation District. The four-case study areas consist of Mission Bay, San Francisco; Seaport District, Boston; South Fremont, Fremont; and Peery Park, Sunnyvale.
Innovation Districts from the case studies – Mission Bay (San Francisco) and Seaport (Boston) – have transformed from former underutilized industrial areas into economic engines that are now home to tens of thousands of jobs along with housing, revenues, retail, and other amenities. Others, like Peery Park (Sunnyvale) and Warm Springs (Fremont), are at different stages in their development. That said, the case studies did provide some common themes in terms of approaches and issues to be addressed in developing Innovation Districts. Key takeaways from the case studies include:
City leadership and branding along with formation of strong partnerships will be critical to bringing major investors, technology businesses, and partners to the Innovation District. City should consider raising funds through grants, seek to attract investors, academic institutions, and incubators/accelerators, and establish a fund for property acquisition in the Innovation District. City could explore Enhanced Infrastructure Financing District’s (EIFD’s) and Community Facilities Districts (CFD’s) as sources of additional funding as well as Community Benefit programs. Investment of development impact fees will also support Innovation District development. The attraction of anchor tenants will be a high priority as they help define Innovation Districts and will act as an important and positive signal to other investors, businesses, and partners. The City of Milpitas will benefit from its location in an innovation region. The Milpitas Transit Center (BART/VTA Light Rail) that connects Milpitas to the rest of Silicon Valley along with its access to major highways and central location, and more modest land costs are important advantages. The Milpitas Metro Specific Plan and its focus on creating a walkable, mixed-use environment is consistent with other Innovation Districts that envision mixed-use, urban neighborhoods with “live-workplay” amenities, and easy access to the Milpitas Transit Center are also strategic advantages. As experienced in other Innovation Districts, activity can be slow initially, fluctuates with economic cycles, and is often dependent on the decisions and preferences of private property owners.
Innovation District Action Plan
The Innovation District is intentionally defined as one of five Districts1 within the larger Milpitas Metro Specific Plan area. The vision for the Innovation District is a new center for innovation and applied technology in Silicon Valley that allows for the evolution of traditional manufacturing, warehousing and mini-storage uses to a place designed for emerging technologies in artificial intelligence, machine learning, automotive technology, virtual and augmented reality, robotics, 3-D printing, etc.
Partially contained in and proximate to the Innovation District is the Programmatic Milpitas Innovation District, which represents 74 acres of Development Opportunity Sites identified by City staff as part of the Phase I Study. It includes roughly 17 acres of land that is located between the Great Mall and the Milpitas Transit Center and an additional 57 acres of contiguous land. The 57-acre contiguous area includes about 10 acres at the intersection of S. Milpitas Boulevard and Montague Expressway as well as an additional 47 acres of additional land east of Berryessa Creek.
Economic research completed as part of the Milpitas Metro Specific Plan, the Phase I Report, and consideration of the current characteristics of Development Opportunity Sites indicate that current economic and real estate market conditions alone are not sufficient to drive the City’s vision for the Innovation District.
1 The Milpitas Metro Specific Plan is organized into five Districts which have unique characteristics and support different land uses.
These districts are reoriented and reorganized from the original Transit Area Specific Plan subdistricts to better define them as cohesive neighborhoods, typically bounded by major streets and centered around a common open space area or business district.
The five Districts are: Innovation District, Great Mall District, McCandless District, Tango District, and Piper District. 12 Item # 2.
Rather, a concerted effort on the part of the City will be required in the short to medium term to help the City realize the goals through the recommended Innovation District Action Plan.
The Innovation District Action Plan builds upon the vision and policies in the Economic Development Strategy, Milpitas Metro Specific Plan, and the City’s General Plan 2040. The actions were developed based on considerations of current development economics in Milpitas (see Attachment 2, Chapter 2), the current characteristics of the newly established Innovation District (see Attachment 1, Chapter 3), case studies of other established or developing Innovation Districts (see Attachment 1, Chapter 4), and the substantial efforts of City staff to assess a broad range of options that might be suitable for the City of Milpitas in the next five years.
Summary of Recommended Actions
Important policy actions may allow future real estate developers and new technology businesses to take vital steps toward investing in development of the Innovation District. The Innovation District Action Plan and recommended actions below reflect the desire to create a successful business cluster near transit and residents, but with the lens of knowing that the Milpitas real estate market needs an injection of creative solutions to spur economic vitality. The table below outlines fourteen recommended action items that are divided into three categories: (1) Incentivizing New Development; (2) Funding and Investing; and (3) City Leadership, Outreach, and Partnerships.
Theme No. Recommended Action
Incentivizing
New
Development
1 Develop an Internal Working Group to Support the Implementation of the Innovation District Action Plan
2 Develop Flexible Permitting Processes for Innovation District Developments 3 Temporarily Reduce or Defer Building Permit, Plan Check, and Other Processing Fees
4 Temporarily Defer Impact Fees for Innovation District Developments 5 Removal of Parking Minimums for Innovation District Development 6 Develop Development Agreement and Community Benefit Agreement Templates for Innovation District Developments
7 Performing Technical Due Diligence for Innovation District Developments Funding &
Investing
8 Exploration of Tax Financing Tools (i.e., EIFDs and CFDs) for the Innovation District 9 Funding for a Strategic Property Acquisition Revenue (SPAR) Fund 10 Pursue Planning Grants and Technical Assistance for Innovation District Evolution City
Leadership,
Outreach, &
Partnerships
11 Develop a Branding Initiative for the Innovation District 12 Promotion of Innovation District by City Leadership
13 Directed Outreach to Businesses, Developers, and Landowners 14 Cultivation of Partnerships with Educational and Other Innovation-oriented Institutions
Each action item is described in more detail below, along with expectation in terms of timing, cost, and funding. (1) Incentivizing New Development
Action #1. Develop an Internal Working Group to Support the Implementation of the Innovation District Action Plan
The City of Milpitas will establish an Internal Working Group that will focus on the implementation of the Action Plan. The Working Group will be comprised of representatives from the following Community Development City Service Areas: City Manager’s Office; Economic Development; Planning; Building Safety and Housing; Engineering Land Development; and Fire Prevention. The Working Group will 13 Item # 2.
ensure inter-departmental coordination and collaboration as the City looks to catalyze its new Innovation District and assist the development community with consistency and certainty. The timing of action adoption will take place in the short term (Year 1). There is no cost to implement this action as the working group will utilize existing resources and personnel.
Action #2. Develop Flexible Permitting Processes for the Innovation District The City of Milpitas has already taken numerous steps to streamline its permitting processes but may explore more solutions based on the initial proposed development projects. The Office of Economic Development facilitates preliminary plan review meetings with applicants interested in interdepartmental City staff review of preliminary or conceptual designs. These meetings result in identifying projectrelated concerns immediately, which helps in planning for official application submittal. In addition, the Building Safety and Housing Department currently implements several expedited plan review services for eligible tenant improvements, renovation or rehabilitation, and new construction. Once additional staffing is added to the Building Safety and Housing Department, the City may explore developing a prioritization system for development applications. Furthermore, the Planning Department, through its Zoning Administrator, conducts public hearings on minor land use and development permits as a way of reducing the processing time of minor entitlement applications. The Planning Department is utilizing American Rescue Plan Act (ARPA) funding to partner with Symbium to implement Build Business and Plan Check, a suite of web applications aimed at streamlining commercial development. Build Business will allow businesses and developers to easily identify potential locations based on the City’s existing zoning regulations. Symbium Plan Check will allow applicants to submit planning permit applications online and automatically screen applications for compliance with the City’s zoning regulations and development standards, which will streamline the planning review process. The timing of action adoption is in the short term (Year 1). Implement of this action may require additional staffing and dollars to fund staff overtime to perform expedited services. This may take place if staff can work afterhours, and if paid for by the development community. Funding from other City revenue sources may be required for additional staffing and/or overtime pay.
Action #3. Temporarily Reduce or Defer Building Permit, Plan Check, and Other Processing Fees
Like other cities, the City of Milpitas charges for building permits, plan check, as well as other processing and cost recovery fees for new developments. The City could, for example, consider temporarily reducing these permit fees by 10 percent or deferring such fees for the first 300,000 square feet of new commercial development to occur in the Innovation District. This will provide an incentive to the early developers, businesses, incubator/accelerator, and/or academic institutions to invest in the Innovation District. The timing of action adoption is in the short term (Year 1). The City may not receive typical cost recovery fees from early Innovation District developments participating in the temporary fee reduction/deferral program. As the City operates under a Cost-Recovery system, there would be a potential loss in permit revenues. This may be offset by new revenue sources to the General Fund and job creation for new commercial development occurring in the Innovation District.
Therefore, funding from other City revenue sources may be required to “backfill” any loss or delay in fee revenue.
Action #4. Temporarily Defer Impact Fees for Innovation District Developments The Transit Area Development Impact Fee (TADIF) and the Non-Residential Affordable Housing Fee (Commercial Linkage Fee) are critical sources of revenue for infrastructure investment in the Metro Area, but also add to the cost of new commercial development. An impact fee deferral program could be offered to encourage economic development where the first 300,000 square feet of new commercial development in the Innovation District are allowed to pay in phases, such as, a small portion of the TADIF Fee and Commercial Linkage Fee at the time of building permit issuance and defer paying the remainder of the fees until Certificate of Occupancy. Shifting these fees until later in the permit process may improve developer cashflows and financing. This policy could be enacted in concert with the next update to the TADIF, which is anticipated to commence sometime in late 2022/early 2023. Action adoption may happen in the short term (Year 1). The adoption of this policy may delay fee revenues accrued from new commercial development (first 300,000 square feet) until later in the permit process.
This may be partially offset by new revenue sources to the General Fund and job creation for new 14 Item # 2.
commercial development occurring in the Innovation District. Funding from other City revenue sources may be required to “backfill” any delay in fee revenue.
Action #5. Removal of Parking Minimums for Innovation District Developments The City of Milpitas already provides greater flexibility around parking requirements in the Metro Area due to its transit-oriented nature. The City could go one step further for new commercial developments in the Innovation District and either further reduce parking minimums or remove all minimums in the Innovation District. Developers would then be able to select the amount and type of parking they provide on expected demand from their tenants, thereby reducing parking costs where it makes sense.
Action adoption would happen in the short term (Year 1). There is no cost to implement this action as existing resources and personnel will be utilized.
Action #6. Develop Development Agreement and Community Benefit Agreement Templates for Innovation District Developments
For larger commercial development opportunities, the City of Milpitas encourages collaborating with the proposing developers through Development Agreements. The Development Agreement would provide the developer with more certainty over its development opportunity and approvals, while allowing the City to ensure the project provides substantial benefits to the City, potentially through a related Community Benefit Agreement. A Development Agreement and Community Benefit Agreement may also grant additional development rights to new commercial developments in the Innovation District, for example, as seen in a Development Opportunity Reserve2(D.O.R.) program. Developing template agreements for the development community is critical to the Innovation District as it helps maintain a level of certainty and consistency in the City’s development process. Action adoption would happen in the medium term (Year 3). There is no cost to implement this action as the City will utilize existing resources and personnel.
Action #7. Performing Technical Due Diligence for Innovation District Developments The City of Milpitas could offer to co-sponsor due diligence technical studies to support developer exploration of development opportunities. In cases where developers are interested in specific development opportunities but wish to study a key issue that could determine whether they move forward or not, the City could consider co-sponsoring and funding the necessary study. The nature of the study will likely vary by opportunity (for example, environmental assessments, transportation analyses, development pro formas, etc.) and the specific City support would be determined on a caseby-case basis. Action adoption is likely to take place in the medium term (Year 3). Consulting costs will vary depending on specific services provided and funding would likely originate from the Office of Economic Development’s Operating Budget.
(2) Funding & Investing
Action #8. Exploration of Financing Tools (i.e., EIFDs and CFDs) for the Innovation District Cities throughout the U.S. have used tax increment financing tools available in their specific State to reinvest new property taxes generated back into their Innovation Districts. In many cases, tax increment funding has provided the primary public tool for investments in the Innovation District after the dissolution of Redevelopment Agencies in California. While less effective than the earlier tax increment funding tools, the Enhanced Infrastructure Financing District (EIFD) has become the primary route through which tax increment can be captured and invested. It is being used along the San Francisco waterfront to help fund infrastructure and support mixed-use developments. Community Facilities Districts (CFD) are also being combined with EIFD and other tax increment tools to enable earlier issuance of bonds to fund infrastructure. City staff anticipates researching these tax increment tools in the short term (Year 1). EIFD studies typically focus on estimating the level of tax increment revenues that could be generated under different approaches. Consultants would then need to support a process of adoption by City Council. Approximate consulting cost is estimated at $75,000. The City will need to identify funding for EIFD and CFD evaluation. Funding is likely to come from other City revenue sources.
2 Development Opportunity Reserve (D.O.R.) is a service provided by Kosmont Companies that allows cities to allocate density to commercial development projects that deliver community benefits and public amenities. 15 Item # 2.
Action #9. Funding for a Strategic Property Acquisition Reserve (SPAR) Fund Ownership of land within an Innovation District by a City provides an opportunity to directly shape new development investment. Land ownership may allow the City to offer competitive leases to new partners/developments or site assembly efforts that could help catalyze the Innovation District. It could also allow for joint development opportunities, for example, for a new building that could house an incubator as well as other uses. The SPAR will require significant funding. Due to costs depending on the nature and the size of land acquisitions, it is likely to be in the $3-4M dollar range, and action adoption is anticipated to take place in the short term (Year 2). Potential funding sources could include a temporary redirection of a small percentage of revenues from the City’s Transient Occupancy Tax fund or sales taxes from the Great Mall to the SPAR fund as a way of providing seed funding for economic vitality, new General Fund revenues in the future, and job creation.
Action #10. Pursue Planning Grants and Technical Assistance for Innovation District Evolution The City of Milpitas could pursue planning grants to further plan for and implement the Innovation District. Planning grants may include regional (i.e., ABAG, MTC, etc.), state (i.e., GO-Biz, etc.), and federal (i.e., EDA). The City might also engage an Urban Land Institute (ULI) Technical Assistance Panel (TAP) to further explore the strategies to catalyze the Innovation District. Action adoption may take place in the short term (Year 2). There is no cost to pursue planning grants as the City will utilize existing resources and personnel. Approximate cost for ULI TAP is about $30,000 and would likely originate from the Office of Economic Development’s Operating Budget. (3) City Leadership, Outreach, & Partnerships
Action #11. Develop a Branding Initiative for the Innovation District The City of Milpitas could lead the development of a branding initiative for the Innovation District. The strategic place branding will allow the Innovation District to turn from a place into a brand. A consultant will help develop some of the following: Innovation District logo, tagline, and slide decks for City staff to use when pitching to investors/developers/businesses, graphics, and marketing. The branding initiative will envision Smart City design and district-scale infrastructure systems. City staff is budgeting approximately $30,000 for a consultant to be paid through the Office of Economic Development’s Operating Budget. Action adoption is in the short term (Year 2).
Action #12. Promotion of Innovation District by City Leadership Strong and effective City leadership has consistently been identified as a critical component of successful Innovation Districts across the U.S. City leaders are in a unique position to promote and highlight the City’s Innovation District to marshal internal and external resources towards it, and to help prioritize the economic development efforts. Connections between City leaders and State and federal leadership can also ensure the appropriate focus and receipt of supporting resources. This action may take place in the short term (Year 2). There is no cost to implement this action as the City will utilize existing resources and personnel.
Action #13. Directed Outreach to Businesses, Developers, and Landowners The Office of Economic Development will proceed with aggressive and targeted outreach to landowners, developers, other potential partners, as well as current Milpitas businesses that might expand into the Innovation District, and businesses outside of Milpitas. Implementation will take place in the short term (Year 2). City staff will prioritize its time and resources within existing levels to support outreach.
Action #14. Cultivation of Partnerships with Educational and Other Innovation-oriented Institutions
In addition to developers and businesses, there are a range of additional partnerships with non-profit, public, and private parties that often act as core cultivators of Innovation Districts. If the City can raise funds for strategic land acquisition or infrastructure funding, these funds could be used to support development opportunities with these partners. For example, like other successful Innovation Districts, the City of Milpitas could look to offer lower cost land and/or discounted rents to key Innovation District cultivators such as for an incubator, accelerator and/or an academic institution. This action will take 16 Item # 2.
place in the medium term (Year 4). City staff will prioritize its time and resources to support outreach to potential partners.
In summary, the Innovation District Action Plan and fourteen recommended action items listed above provides a roadmap for the first five years of the City’s journey in helping the Milpitas Innovation District reach its full potential as a technology business cluster. While action adoption by City staff is slated to occur at various times over the next five years, the actual execution of the action items may extend over several years. City staff will concentrate on implementing action items within existing resources. Additional funding sources for the implementation of some action items will be covered by the Office of Economic Development’s Operating Budget, while funding for other action items will be determined as part of the annual budget development process and brought forward for Council consideration through the City Manager’s Proposed Budget. Funding requested as part of the City Manager’s Proposed Budget will be limited to action items focused on permit streamlining, fee reduction/deferral programs, exploration of tax financing tools, and seed funding for a SPAR fund. Furthermore, any fee reduction/deferral programs focused on permits and impact fees will only be available on a temporary basis and not in perpetuity as these incentives are targeted for early investors in the Innovation District.
POLICY ALTERNATIVE:
Alternative 1: Do not adopt the Innovation District Action Plan, at this time, and return at a future date for adoption.
Pro: City staff would receive Council comments, direction, and return to Council at a later date for adoption of the Innovation District Action Plan.
Con: Not adopting the Innovation District Action Plan now may result in loss of significant potential revenues for the City’s long-term fiscal health, new jobs will not be created, and it is likely that the Innovation District boundary would continue to stay as a stagnant and tired industrial area and/or convert to residential in an area that is experiencing significant residential development growth.
Reason for Not Recommending: It is critical for the Innovation District to obtain City Council adoption of the proposed Innovation District Action Plan to ensure that Milpitas maintains its competitiveness in: (1) attracting emerging technologies; (2) retaining and expanding existing businesses and industries; (3) preparing the local workforce for future jobs; (4) encouraging development activity; and (5) sustaining the City’s fiscal health. For these reasons, Alternative 1 is not recommended.
FISCAL IMPACT:
Adopting the Innovation District Action Plan does not have a fiscal impact. City staff will concentrate on implementing action items within existing resources. Any additional funding needs will be brought forward for Council consideration as part of future policy and budget actions.
California Environmental Quality Act (CEQA):
By the definition provided in the California Environmental Quality Act (CEQA) Guidelines Section 15378, this action does not qualify as a “project” for the purpose of CEQA as this action has no potential to result in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. This is because the Plan merely articulates potential action items for which the City has not yet committed to taking any action. If and when the City Council decides to implement any of the action items, CEQA review will be conducted prior to any implementation and the City Council will have full authority to implement or not implement the actions after receiving information on any environmental impacts under CEQA.
The City Council’s action in adopting the strategy document is also exempt from CEQA under Guideline 15306 as basic data collection and research which does not cause or result in a serious or major disturbance to an environmental resource. The data collection and research captured in this document details potential actions the City can explore, but which it is not yet approving, adopting, or funding. Any future consideration of potential actions will include an analysis of any environmental impacts associated with implementation of those actions. At this time, to explore any potential environmental impacts of each potential action contemplated in the study would be speculative and is not required by CEQA. 17 Item # 2.
RECOMMENDATION:
Adopt the Innovation District Action Plan.
Attachment:
1. Fiscal Benefits of Employment Lands Study Phase II: Innovation District Action Plan
2. Fiscal Benefits of Employment Lands Study Phase I: Narrative Summary of Conclusions Report
3. Council Agenda Report for Fiscal Benefits of Employment Lands Study – October 12, 2021 18 Item # 2.
Draft Report
Fiscal Benefits of Employment Lands
Study Phase II: Innovation District
Action Plan
Prepared for:
City of Milpitas
Prepared by:
Economic & Planning Systems, Inc.
April 19, 2022
EPS #211034
19 Item # 2.
Table of Contents
1. EXECUTIVE SUMMARY ..............................................................................................1 Context for Action Plan ............................................................................................ 1 Summary of Recommended Actions........................................................................... 3 Document Organization ........................................................................................... 4
2. CONTEXT FOR INNOVATION DISTRICT ACTION PLAN ...........................................................5 Milpitas Metro Specific Plan ...................................................................................... 5 Market Context....................................................................................................... 6 Innovation District Concept ...................................................................................... 8 Other Factors ......................................................................................................... 9
3. CURRENT INNOVATION DISTRICT CHARACTERISTICS ........................................................ 11 Broader Characteristics.......................................................................................... 11 Innovation District Parcel Characteristics .................................................................. 12 Programmatic Milpitas Innovation District Overview ................................................... 13 Innovation District Subarea Information ................................................................... 16 Accessibility/Public Realm ...................................................................................... 22 Adjacent Uses ...................................................................................................... 23
4. INNOVATION DISTRICT CASE STUDIES ........................................................................ 24 Mission Bay, San Francisco..................................................................................... 24 Seaport, Boston.................................................................................................... 32 South Fremont/Warm Springs, Fremont ................................................................... 37 Peery Park, Sunnyvale........................................................................................... 45 Lessons Learned from Case Studies ......................................................................... 50
5. INNOVATION DISTRICT ACTION PLAN .......................................................................... 55 Incentivizing New Development .............................................................................. 57 Funding and Investing ........................................................................................... 60 City Leadership, Outreach, and Partnerships ............................................................. 61 Appendix A: Phase 1 Study
20 Item # 2.
List of Tables
Table 1 Summary of Recommended Actions ................................................................... 4 Table 2 Summary of Subarea Development.................................................................. 15 Table 3 Summary of Subarea 1 Development ............................................................... 17 Table 4 Summary of Subarea 2 Development ............................................................... 18 Table 5 Summary of Subarea 3 Development ............................................................... 19 Table 6 Summary of Subarea 4 Development ............................................................... 21 Table 7 Summary of Largest 25 Companies by Square Footage Leased or Occupied ........... 26 Table 8 City of Sunnyvale Community Benefits Program Overview ................................... 48 Table 9 Themes from Case Studies ............................................................................. 52 Table 10 Case Study Summary Matrix........................................................................... 54 Table 11 Gantt Chart of Action Plan Timeline.................................................................. 56 21 Item # 2.
List of Figures
Figure 1 Milpitas Metro Specific Plan Land Uses................................................................ 7 Figure 2 Programmatic Milpitas Innovation District Map................................................... 13 Figure 3 Innovation District and Great Mall District Parcel Focus ....................................... 14 Figure 4 Innovation District Subareas ........................................................................... 15 Figure 5 Map of Subarea 1.......................................................................................... 16 Figure 6 Current Buildings in Subarea 1 ........................................................................ 17 Figure 7 Map of Subarea 2.......................................................................................... 18 Figure 8 Current Buildings in Subarea 2 ........................................................................ 19 Figure 9 Map of Subarea 3.......................................................................................... 20 Figure 10 Current Buildings in Subarea 3 .................................................................... 20 Figure 11 Map of Subarea 4 ...................................................................................... 21 Figure 12 Current Buildings in Subarea 4 .................................................................... 22 Figure 13 Innovation District Surrounding Land Uses .................................................... 23 Figure 14 Land Uses in Mission Bay ............................................................................ 27 Figure 15 Mission Bay and UCSF Building Square Footage.............................................. 28 Figure 16 Mission Bay Building Square Footage Timeline................................................ 29 Figure 17 Map of Boston Seaport District..................................................................... 33 Figure 18 Seaport Boston Building Square Footage ....................................................... 34 Figure 19 Seaport Boston Building Square Footage Timeline........................................... 34 Figure 20 South Fremont/Warm Springs Innovation District Map .................................... 39 Figure 21 Warm Springs BART Station Pedestrian Bridge and Plaza ................................. 39 Figure 22 Warm Springs Development Area Building Square Footage .............................. 40 Figure 23 Warm Springs Development Area Development Timeline ................................. 40 Figure 24 Peery Park Specific Plan Development Plan .................................................... 47 22 Item # 2.
Economic & Planning Systems, Inc. 1
1. EXECUTIVE SUMMARY
The City of Milpitas (City) engaged Economic & Planning Systems, Inc. (EPS) to prepare a Fiscal Benefits of Employment Lands Study (Study). The Study’s purpose is to guide City policy towards a fiscally resilient future based on protection and preservation of employment lands, the expansion and attraction of innovative and competitive businesses, and the implementation of the City’s new Innovation District. The Innovation District, located within the Milpitas Metro Specific Plan (MMSP), provides a vital economic development opportunity to support the City fiscally and economically.
Phase I of the Fiscal Benefits of Employment Lands Study (Phase I Study), provided here as Appendix A, established the potential benefits of the successful implementation of the Innovation District, including the attraction of a large number of well-paying jobs and substantial positive fiscal impacts on the City’s General Fund. It also indicated some of the current challenges associated with the economics of development that will need to be overcome in establishing the Innovation District.
This Report represents Phase II of the Study. Phase II combines contextual and on-the-ground information and data concerning Development Opportunity Sites1 within and around the Innovation District (Chapters 2 and 3), case studies of other Innovation Districts (Chapter 4), the Phase I Study (Appendix A), and the substantial efforts of City staff to assess a broad range of options that might be suitable for the City of Milpitas to develop an Innovation District Action Plan (Chapter 5) - an outline of potential City actions to help support the evolution and development of the Innovation District.
C o n t e x t f o r A c t i o n P l a n
The City’s vision for the Innovation District is as follows:
“The Innovation District will be an employment destination with modern office, research and development buildings and flexible space for people to interact through “creative collisions” and an innovative ecosystem. This ecosystem supports a risk-taking environment, facilitates idea generation with experimentation being central to the success of the Innovation District. The City of Milpitas aims to plan for a well-connected Innovation District with proximity to public transit and public infrastructure that supports bike paths, pedestrian scale sidewalks, social gathering places, and high-speed fiber. The growing innovation economy in Milpitas will 1 Development Opportunity Sites are found in the programmatic Milpitas Innovation District. These sites were identified by the City of Milpitas Office of Economic Development and were evaluated by City staff. Their land use designations under the MMSP will allow for a range of commercial uses (in some cases in combination with residential uses) and were the parcels evaluated in Phase I of this Study.
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require local leaders to plan long-term, but with short-term flexibility to shape future growth strategies within the Innovation District. The vision includes shaping our urban development practices to build a culture of creativity, innovation, inclusivity and equity, and agility to help advance opportunities for innovation.”
The Innovation District provides the following benefits:
• Ensures the City’s fiscal sustainability with a diverse set of fiscal revenues. • Preserves and protects employment lands to retain and create higher paying technology jobs.
• Stimulates the creation of an Innovation District that will encourage higher paying employment uses near the Milpitas Transit Center. • Encourages creative placemaking and strengthens connections to and from the Milpitas Transit Center.
• Leverages the City’s existing business ecosystem to attract new anchors to support the creation of the Milpitas Innovation District.
The Innovation District is guided by the following principles:
• Protect and preserve employment lands for greater long-term opportunities. • Promote densification and intensification.
• Explore mixed-use opportunities with commercial development as primary and residential as secondary.
• Provide incentives to encourage development and creative alternatives to parking challenges.
• Encourage parcel assembly for highest and best use.
• Promote pedestrian-oriented streets and activate public spaces through connecting elements.
• Explore information technology infrastructure such as broadband and utilities.
The Innovation District is intentionally defined as one of five Districts2 within the larger Milpitas Metro Specific Plan area. Partially contained in and proximate to the Innovation District is the Programmatic Milpitas Innovation District, which represents 74.3 acres of Development Opportunity Sites identified by City staff as part of the Phase I Study.
Economic research completed as part of the Milpitas Metro Specific Plan, the Phase I Study, and consideration of the current characteristics of Development Opportunity Sites indicate that current economic and real estate market conditions alone are not sufficient to drive the City’s vision for the Innovation District. Rather, a concerted effort on the part of the City of Milpitas will 2 The Milpitas Metro Specific Plan is organized into five Districts which have unique characteristics and support different land uses. These districts are reoriented and reorganized from the original Transit Area Specific Plan subdistricts to better define them as cohesive neighborhoods, typically bounded by major streets and centered around a common open space area or business district. The five Districts are: Innovation District, Great Mall District, McCandless District, Tango District, and Piper District. 24 Item # 2.
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be required in the short-/ medium-term to help the City realize its goals through the recommended Innovation District Action Plan.
The Innovation District Action Plan builds upon the vision and policies in the Milpitas Metro Specific Plan as well as the City’s General Plan and Economic Development Strategy.
For example, the City’s General Plan includes:
• Action LU-2c: Establish and adopt Innovation District Overlay standards and guidelines for the Innovation District Overlay identified on the City’s Land Use Map. • Action ED-3i: Explore the creation of an Innovation District in the Milpitas Metro Specific Plan area to facilitate increases in employment densities while leveraging the area’s proximity to mass transit.
And the City’s Economic Development Strategy includes:
• Strategy 24. Action 24.1: Identify high-potential opportunity areas for converting warehouse and distribution properties to higher value production and tech office/ research and development (R&D) uses. Review and adjust zoning for these areas, including within a potential “Innovation District” near the Milpitas Transit Center. • Strategy 27. Action 27.2: Identify potential office and R&D development opportunity sites in and near the current Transit Area Specific Plan (TASP) boundaries (especially around the Milpitas Transit Center). As part of the TASP update, expand the area’s boundaries to incorporate potential Innovation District sites. Enact land use policy and zoning that prioritize appropriate sites in the TASP for office and R&D development that have a high potential for these uses, while allowing for continued residential development. Sites could be purchased using a Strategic Property Acquisition Revenue (SPAR) fund. • Strategy 29. Action 29.1: Review permitting requirements for 5G facilities installation to identify and remove any obstacles to deployment, especially in under-served areas.
The actions were developed based on considerations of current development economics in the city (see Phase I Report), current parcel characteristics of the potential innovation parcels identified in Phase I (see Chapter 3), case studies of other established or developing Innovation Districts (see Chapter 4), and the substantial efforts of City staff to assess a broad range of options that might be suitable for the City of Milpitas.
S umm a r y o f R e c omm e n d e d A c t i o n s
Table 1 below outlines fourteen (14) recommended action items that are divided into three primary categories: (1) Incentivizing New Development; (2) Funding and Investing; and (3) City Leadership, Outreach, and Partnerships. These action items are described in detail in Chapter 5. 25 Item # 2.
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Table 1 Summary of Recommended Actions
Theme No. Recommended Action
Incentivizing
New
Development
1 Develop an Internal Working Group to Support the Implementation of the Innovation District Action Plan
2 Develop Flexible Permitting Processes for Innovation District Developments
3 Temporarily Reduce or Defer Building Permit, Plan Check, and Other Processing Fees
4 Temporarily Defer Impact Fees for Innovation District Developments 5 Removal of Parking Minimums for Innovation District Development 6 Develop Development Agreement and Community Benefit Agreement Templates for Innovation District Developments
7 Performing Technical Due Diligence for Innovation District Developments
Funding and
Investing
8 Exploration of Financing Tools (i.e. EIFDs and CFDs) for the Innovation District
9 Funding for a Strategic Property Acquisition Revenue (SPAR) Fund 10 Pursue Planning Grants and Technical Assistance for Innovation District Evolution
City
Leadership,
Outreach, and
Partnerships
11 Develop a Branding Initiative for the Innovation District 12 Promotion of Innovation District by City Leadership
13 Directed Outreach to Businesses, Developers, and Landowners 14 Cultivation of Partnership with Educational and Other Innovationoriented Institutions D o c um e n t O r g a n i z a t i o n
This report is organized into five (5) chapters, including this Executive Summary serving as Chapter 1. Chapter 2 provides contextual information for the Innovation District Action Plan.
Chapter 3 provides an overview of current Development Opportunity Site characteristics relevant to development prospects. Chapter 4 describes four (4) case studies of other Innovation Districts and summarizes the lessons learned. Finally, Chapter 5 describes the Innovation District Action Plan (recommended City action items). 26 Item # 2.
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2. CONTEXT FOR INNOVATION DISTRICT ACTION PLAN
The 2008 Transit Area Specific Plan (TASP) was adopted in 2008 and amended in 2011. It called for the redevelopment of approximately 437 acres of formerly employment generating lands into a new vibrant community featuring up to 7,109 dwelling units, 993,843 square feet of office space, 287,075 square feet of retail space, and a new upscale hotel featuring up to 350 hotel rooms. While most of the planned housing units in the TASP have been entitled or developed over the past 10 years following the Great Recession, very little of the office development and only a portion of the retail uses envisioned by the Specific Plan have been realized. A new 162-room extended-stay hotel was approved at the intersection of McCandless Drive and Great Mall Parkway.
The City Council approved proceeding with the Innovation District within the Milpitas Metro Specific Plan area, through both its Economic Development Strategy and its General Plan. The Innovation District then became an important part of the discussion and development of the Milpitas Metro Specific Plan – the update to the TASP.
Recognizing that the market conditions in the TASP had previously favored residential uses, a new employment district is envisioned that will: (1) preserve and protect employment plans in part of the MMSP; (2) seek to capture the fiscal and economic benefits that the City would garner with new employment and workspace development; and (3) encourage, over time, the transformation of this area into an Innovation District. Importantly, the Innovation District would not stand alone but would be part of the larger mix of uses and improvements envisioned by the Milpitas Metro Specific Plan as a complete neighborhood. The vision for the Innovation District resulted in the annexation of the older industrial area east of Berryessa Creek into the Milpitas Metro Specific Plan, with convenient proximity to the Milpitas Transit Center as well as jobs, services, amenities, and housing.
This Chapter provides some important context for the development of the Innovation District Action Plan, specifically around the key role of the Milpitas Metro Specific Plan, the broader economic and real estate context, and the Innovation District concept.
M i l p i t a s M e t r o S p e c i f i c P l a n
The Milpitas Metro Specific Plan (MMSP) will guide the next wave of investment, growth, and development in the Metro area through 2040. The MMSP lays out the City’s overarching vision for the southern portion of Milpitas and includes a range of policies, objectives, and actions that will be key to achieving a complete Metro district. The MMSP includes a number of policies and goals that are important to the success of the Innovation District. In addition to recognizing the importance of the Innovation District as an opportunity to attract and retain businesses in Milpitas, it recognizes: (1) the Innovation District’s importance in allowing the Metro area to become a vibrant mixed-use community, and; (2) the importance of investments, incentives and other actions to help support the establishment and success of the Innovation District. 27 Item # 2.
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Of particular importance to the evolution of the new Innovation District are:
• Land Use Policies. The MMSP will establish an updated set of land use policies (see Figure 1) to ensure that certain areas of the MMSP are protected and preserved as employment lands. In protecting these lands primarily for employment uses, while providing flexibility over development density, heights, and specific use types, the MMSP increases the likelihood of Innovation District success.
• Place-Making and Connectivity. The MMSP also identifies a specific set of improvements, programs, and design guidelines to ensure a high quality of new development in the Metro area. Implementation of the MMSP will result in the creation of attractive streets and outdoor gathering places for placemaking and a high quality of life, and it will also provide greater efficiency and availability in all forms of transportation to improve the mobility for all. These efforts will further improve the appeal of the Metro area and Innovation District to new businesses, employees, residents, and visitors.
M a r k e t C o n t e x t
The City of Milpitas conducted research into regional economic trends and local real estate market conditions as part of the Milpitas Metro Specific Plan effort and the Phase I Study. Some key observations from these research efforts important to the Innovation District Action Plan include:
• Broadening Innovation Geography. The location of technology, life sciences, and other creative/ innovative firms in Silicon Valley has been gradually broadening beyond the cities that first captured the initial wave of Office/R&D space that houses these firms. Some of this expansion is related to the high level of demands for new space, while some has been due to constrained development opportunities in some cities. As a city near the center of Silicon Valley and the larger innovation ecosystem, the city of Milpitas is well-positioned to be part of future waves of expansion. Often these firms prefer geographic clusters and so attracting the first firms and developments of these types to a new area can be an important but challenging initial step. Attracting anchor tenant(s) to the Innovation District help catalyze the success of this new district.
• Milpitas Transit Center. The Milpitas Transit Center opened in June 2020 for operations. It provides a rich multi-modal transit center in Milpitas with BART and VTA Light Rail/Bus operations providing critical connections to the greater San Francisco Bay Area. As the economy re-opens after the pandemic, the Transit Center will offer a significant boost in efforts to attract new businesses (as well as residential development) to the Milpitas Metro Specific Plan area by connecting employers to the regional workforce. The availability and promise of transit already drove the development of a substantial amount of new, denser residential development near the Transit Center, and it is hoped that it can also attract new Office/R&D and other workspace development to help create the envisioned mixed-use area. 28 Item # 2.
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Figure 1 Milpitas Metro Specific Plan Land Uses
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• Milpitas Economy. The Milpitas economy experienced a significant increase in unemployment rate during the pandemic. In April 2020, the Milpitas unemployment rate increased to 12.9 percent, which is the highest local unemployment rate in decades. As of early 2022, the Milpitas unemployment rate has been reduced to pre-pandemic levels at
3.3%.3 With the recent changes by the Santa Clara County Health Department, workers in Milpitas have started to return to the workplace. The City of Milpitas experienced a $30 million reduction in funding during the pandemic, making the Innovation District vital to future economic growth in Milpitas
• Quality of Place. Innovation firms require and therefore compete for top talent. As a result, these firms think carefully about locating in places, environments, and buildings that will be attractive to their workforce. This was true before the COVID-19 pandemic and may be even more true as it wanes. The pandemic required work-from-home for many innovation workers. With it has come a greater expectation of flexibility among many workers, increasing the need for attractive, collaborative, and amenity-laden work locations as firms look to shift more towards face-to-face collaboration.
• Office/R&D Development Post-Pandemic. There are many questions remaining as to whether the need for and use of Office/R&D space will return to the pre-pandemic “old normal” or become a hybrid of approaches. Major technology companies such as Google, Apple, Meta (Facebook), Amazon, and LinkedIn are starting to require their employees to report to work at least in a hybrid environment. While a number of innovation firms changed and scaled back plans for new development due to the pandemic, the number of developers seeking entitlements for Office, R&D, and Lab Space suggests expectations for substantial demand for these types of spaces.
• Milpitas Real Estate Market Conditions. The Phase I Study assessed the development feasibility of new Class A Office development given estimates of currently achievable lease rates in Milpitas. Because of the high costs of construction and the modest lease rates, it currently appears unlikely that a speculative office developer would build a new Office/R&D building (or set of buildings) without having commitments from anchor tenants. Sensitivity analysis indicated that the feasibility gap would close as market conditions improve. Overall, the analysis pointed to the need for the City of Milpitas to actively market itself to innovation businesses/institutions and, where possible and prudent, take additional actions to attract a first wave of new workspace development through policy actions described in Chapter 5.
I n n o v a t i o n D i s t r i c t C o n c e p t
Many important studies have explored the origins of successful and enduring regional innovation economies like Silicon Valley.4 A different set of studies have focused on smaller geographies or clusters. These clusters were often termed research or science parks with anchor institutions and 3 Unemployment Data (January 2022) from California Economic Development Department (EDD). 4 See, for example, AnnaLee Saxenian, “Regional Advantage: Culture and Competition in Silicon Valley and Route 128”, Harvard University Press, 1994.
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a broad array of other employment uses. They were also sometimes referred to as Innovation Districts, though the term Innovation District now often refers to areas that contain both innovative firms and institutions in an area with a mix of uses with attractive public spaces. The Brookings Institution (Brookings), in particular, has published a number of important studies of Innovation Districts over the last decade. As noted in their 2014 report:
5 “A new complementary urban model is now emerging, giving rise to what we and others are calling “innovation districts.” These districts, by our definition, are geographic areas where leading-edge anchor institutions and companies cluster and connect with start-ups, business incubators, and accelerators. They are also physically compact, transit-accessible, and technically-wired and offer mixed-use housing, office, and retail.” As further noted in this report:
”… innovation districts help their city and metropolis move up the value chain of global competitiveness by growing the firms, networks, and traded sectors that drive broad-based prosperity. Instead of building isolated science parks, innovation districts focus extensively on creating a dynamic physical realm that strengthens proximity and knowledge spillovers. Rather than focus on discrete industries, innovation districts represent an intentional effort to create new products, technologies and market solutions through the convergence of disparate sectors and specializations.”
The City’s concept of an Innovation District is described in the Milpitas Metro Specific Plan, Economic Development Strategy, and City’s General Plan and is, in many ways consistent, with the broader vision for Innovation Districts in general.
Finally, it is important that most Innovation Districts have one or more key drivers, as noted by Brookings, typically drawn from the following list:
• Mayors and local governments
• Advanced research institutions and medical campuses
• Major real estate developers and landowners
• Anchor companies
• Incubators, accelerators, and other economic cultivators O t h e r F a c t o r s
There are a broad range of factors that will influence the timing of new commercial development in the Innovation District and the pace at which this area will transform into an Innovation District. The Action Plan, outlined in Chapter 5, focuses on areas where City actions can support 5 Bruce Katz and Julie Wagner, “The Rise of Innovation Districts: A New Geography of Innovation in America”, Brookings, May 2014.
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and accelerate new commercial development in the Innovation District. For context, it is also helpful to recognize that the pace and timing of new innovation districts throughout the U.S. are also affected by a number of factors that are outside of the host City’s control, including:
• Economic Conditions. The strength of the global and national economies is affected by a broad range of factors. These factors cause business cycles that have a substantial impact on levels of investment and the pace of development. The unique nature of different economic cycles can have unique effects on different regional economies, depending on their core industries and the nature of the impact of the business cycle on their viability. • Federal and State Policies. Federal and State policies can have significant effects on the severity of business cycles, the pace of new development, as well as the demand for different types of real estate. Federal responses (through monetary and fiscal policy) to economic downturns have substantial impacts on the economy, while decisions concerning interest rates or government spending programs also have direct effects. • Real Estate Market Conditions. A combination of the state of the economy, regional real estate demand for workspace, and the level of competition from other jurisdictions tend to determine the ability of landowners to attract developers/tenants and the level of real estate revenues a developer could expect to receive. Developers will consider the estimated costs of development when considering a new development. Many of these costs – e.g., the cost of building materials and labor – are primarily outside of the City’s control. • Business Owner and Landowner Decisions. Business interest in site location in different cities is affected by a broad number of factors, including specific preferences for regions or cities. Similarly, private landowners will make individual decisions concerning the use of their land. To the extent, there are existing uses on parcels that are providing a good return to landowners, their interest in and/or incentives to consider redevelopment opportunities may be limited.
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3. CURRENT INNOVATION DISTRICT CHARACTERISTICS
The City of Milpitas provides an attractive location for an Innovation District for numerous reasons. This Chapter highlights some of those broader characteristics. It then takes a more detailed look at the on-the-ground characteristics of a specific set of Development Opportunity Sites. This subarea and parcel-specific information provide important background information on the parcel characteristics that can affect the pace of redevelopment.
B r o a d e r C h a r a c t e r i s t i c s
The City of Milpitas and the Milpitas Metro Specific Plan have numerous characteristics that will appeal to prospective Innovation District businesses and developers (the City’s Economic Development Strategy provides more detail on many of these topics):
• Skilled Workforce. With 40,800 jobs and 39,600 employed residents, Milpitas is a jobs rich community.6 On average, residents of Milpitas have high educational attainment. About 53% of Milpitas residents age 25 years and older possess a bachelor’s degree or higher.6 The largest percentage of the Milpitas workforce, approximately 26%, are employed in professional, scientific, and management, and administrative and waste management; 23% manufacturing; and approximately 16% educational services, and health care and social assistance.7
• Advanced Research and Manufacturing Businesses. As noted above, Milpitas offers a large base of advanced manufacturing and research businesses that provide a core base to the city’s business infrastructure and a strong platform for attracting new businesses as well as for retention and expansion of existing businesses. Major employers in Milpitas include:
Cisco Systems, KLA, Flex, Headway Technologies, View, Inc., and FireEye. Several of these top employers have made Milpitas their corporate headquarters location. • Central and Accessibility Regional Location. Milpitas is centrally located within Silicon Valley and is highly accessible by both transit and automobile. The new Transit Center, and its multiple transit connections (BART and VTA Light Rail/Bus operations), along with the highway systems (Highway 237, Highway 680, and Highway 880), and adjacency to other Silicon Valley cities (San Jose and Fremont) is a major asset for the City of Milpitas. • Milpitas Metro Specific Plan (MMSP). Over the last fourteen years, the City’s Transit Area Specific Plan, now MMSP, has been transformed with a new Transit Center, new neighborhoods, new amenities, and substantial new investments in area-serving infrastructure and capital improvements. This emerging transit-oriented district provides an 6 Data (February 2022) from California Economic Development Department (EDD) 7 2020 American Community Survey 5-year Estimates Data Profiles 33 Item # 2.
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attractive platform for further private investment and development, including the emergence of a new Innovation District.
• Modestly Priced Real Estate. As documented further below, the Innovation District currently includes a broad number of Development Opportunity Sites, many of which are relatively underutilized parcels that offer the prospect of acquisition and redevelopment at relatively low costs. With diminishing areas available for new development in Silicon Valley, these Development Opportunity Sites can offer a new option for innovative businesses and uses.
• Room for Broader Transformation. The MMSP offers opportunities for real estate developers to purchase land proximate to a major transit station in Silicon Valley where there is likely to be substantial appreciation in value in the decades ahead. This represents a unique opportunity.
• Designation as a Priority Area.
8 Portions of the Innovation District are designated as a Priority Development Area (PDA) and Priority Production Area (PPA). PDAs are places near public transit planned for new homes, jobs and community amenities; while PPAs leverage existing infrastructure to support the development of industrial and related business clusters.
I n n o v a t i o n D i s t r i c t P a r c e l C h a r a c t e r i s t i c s The pace of development in the City’s Innovation District will depend, in part, on the “on-theground”, current characteristics of the Programmatic Milpitas Innovation District. This section looks at the characteristics of a selected set of Development Opportunity Sites that were identified by City staff as part of the Phase I Study. Important characteristics that are discussed in this chapter include: the number, size, and ownership of parcels; existing uses and revenue streams from these uses; and the nature of the existing uses and any potential for use conflict, among other factors. These parcel characteristics should be considered and understood in the context of the broader Innovation District characteristics summarized in the section above.
Key observations from the Development Opportunity Site information provided include:
• Many potential Innovation District parcels are currently developed with buildings/uses that generate an income flow to existing landowners.
• Uses on these parcels are quite varied and include office, medical office, light industrial, warehouse, storage facilities, hotel, and flex space.
• For larger new commercial developments, parcel assembly may be required, in some cases, requiring negotiation with multiple landowners.
8 The purpose of designating Priority Development Areas (PDAs) and Priority Production Areas (PPAs) is to help guide growth and development while preserving diverse jobs. The designation of PDAs and PPAs are nominated by local governments and adopted by the Association of Bay Area Governments (ABAG).
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• There are no City-owned parcels in the Metro area envisioned for commercial development. • Key areas of the Innovation District include the area to the south of the Great Mall and the areas around Montague Expressway and either side of Berryessa Creek. • The economics of proposed new commercial developments will need to be sufficiently strong to overcome the challenges of parcel assembly, while also providing greater value to the landowner than the continuation of existing uses.
Collectively, these observations underline the importance of the Innovation District Action Plan and the importance of City action to help catalyze new commercial development in the Innovation District.
P r o g r amm a t i c M i l p i t a s I n n o v a t i o n D i s t r i c t O v e r v i e w Innovation uses and development may occur throughout the Metro Milpitas Specific Plan (MMSP) area. The Programmatic Milpitas Innovation District, as shown in Figure 2, includes a 74.3-acre area that features land adjacent to the Great Mall and select parcels on both sides of Montague Expressway.
Figure 2 Programmatic Milpitas Innovation District Map
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For analytical purposes, the City identified approximately 57 acres of land as part of the Innovation District and 17 acres of land as part of the Great Mall District for analysis given their proposed land use designations and potential for innovation uses. This land area (the Development Opportunity Sites) was evaluated in the Phase I Study. The 57-acre contiguous area includes about 10 acres on the eastern edge of the current TASP area boundary as well as an additional 47 acres of additional land further to the east on both sides of Montague Expressway, that is being incorporated into the new MMSP area. Figure 3 shows the parcels and acreages that make up these areas. While this section focusses on the characteristics of these selected Development Opportunity Sites, it is not intended to suggest that substantial opportunities are not available on many of the other parcels within the Innovation District.
Figure 3 Innovation District and Great Mall District Parcel Focus 36 Item # 2.
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The Development Opportunity Sites were divided into four subareas for analytical purposes, as shown in Figure 4.
Figure 4 Innovation District Subareas
Table 2 shows the distribution of various building types in each subarea.
Table 2 Summary of Subarea Development
Subarea /Property Type
Rentable
Building Area
(RBA)
Percentage of
RBA
Land Acreage
[1] Estimated FAR Avg. Lease Rate (Sf/Mo) [2]
Subarea 1
Hospitality 173,965 12% - - -
Office 53,670 4% - - $2.01
Education 55,430 4%
Retail 4,372 4% - - $3.08
Subarea Total 287,437 20% 17.3 0.38
Subarea 2
Flex 24,656 2% - - -
Industrial 177,149 13% - - $1.13
Subarea Total 201,805 14% 10.3 0.45
Subarea 3
Flex 129,136 9% - - $1.12
Self-Storage 171,924 12% - - $1.94
Office 92,792 7% - - $2.28
Subarea Total 393,852 28% 16.9 0.31
Subarea 4
Flex 18,180 1% - - $1.34
Industrial 214,465 15% - - $1.20
Self-Storage 299,434 21% - - -
Subarea Total 532,079 38% 29.8 0.41
ID Total/Average 1,415,173 100% 74.3 0.39 $1.36
Source: CoStar; Santa Clara County Department of Planning & Development; EPS. [1] Subdistrict 4 acreage includes vacant parcel located on the edge of the Innovation District boundary. [2] While some reported data are available, lease rates primarily reflect CoStar estimates. [3] Available data suggest that vacancy rates in all four subdistricts are quite low. A handful of recent real estate transactions suggest per square foot values of between $200 - $300.
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In aggregate, these potential Development Opportunity Sites comprise 74.3 acres. Collectively, there is about 1.41 million square foot of existing development spread amongst the four subareas, indicating an average existing FAR of 0.44 acres. The analysis is based on CoStar data.
I n n o v a t i o n D i s t r i c t S u ba r e a I n f o rm a t i o n This section summarizes information on the Development Opportunity Sites in each of the four (4) subareas, including parcel sizes, existing structures, use types and tenants, and real estate characteristics (lease rates, vacancy, year built, etc.). It is important to recognize that the dynamic nature of real estate means that data on tenants, lease rates, and other variable will change over time.
Subarea 1
Subarea 1, which sits in the Great Mall District and lies between the Great Mall and the Milpitas Transit Center and BART9 Station, is about 17.3 acres and includes about 290,000 square feet of existing development. Subarea 1 does not contain any industrial uses and one of its major land uses is hospitality, represented by the Marriott Courtyard hotel. Office uses, education uses (Stratford School), and some retail (McDonald’s/Chevron gas station) uses are present. Lease rates range from $18.75 to $40.64 per square foot per year.
Figure 5 Map of Subarea 1
9 The San Francisco Bay Area Rapid Transit District (BART) is a heavy-rail public transit system that connects the San Francisco Peninsula with communities in the East Bay and South Bay. BART operates in five counties (San Francisco, San Mateo, Alameda, Contra Costa, and Santa Clara) with 131 miles of track and 50 stations, carrying approximately 405,000 trips on an average weekday (prior to the COVID-19 pandemic).
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Table 3 Summary of Subarea 1 Development
Figure 6 Current Buildings in Subarea 1
Parcel
Land
Acres
Gross
Building Area
(sq. ft.) Uses Year Built
Lease Rate
(per sq. ft. per
yr.) Tenants
1.1 7.9 109,100 • Manufacturing
• School 1987-2000 $18.75-30.30 • United Optronics, Inc.• Stratford School
1.2 6.7 173,965 • Hotel 1999 n/a • Courtyard and
Towneplace Suites Marriott
1.3 2.7 4,372 • Gas Station
• Retail 1999 $33.25-40.64 • Chevron• McDonald's
Source: CoStar; Economic & Planning Systems
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Subarea 2
Subarea 2 lies east of the Milpitas Transit Center and BART Station, totaling 10.3 acres. It is bounded by Gladding Ct. and Curran Rd. to the west and S. Milpitas Blvd. to the east and south and includes about 200,000 square feet of rentable building area. The Montague Expressway cuts through the center. Primary uses are flex and industrial uses with lease rates ranging from $7.71 to $18.17 per square foot per year.
Figure 7 Map of Subarea 2
Table 4 Summary of Subarea 2 Development
Parcel
Land
Acres
Gross
Building Area
(sq. ft.) Uses Year Built
Lease Rate
(per sq. ft. per
yr.) Tenants
2.1 3.3 49,156
• Engineering
Services
• Manufacturing
1984-1985 $14.44-17.65 • Siemic
• Six Sigma
2.2 4.8 87,649
• Commercial
• Light Industrial
• Retail
Showroom
• Warehouse
1978-1982 $7.71-18.17
• American Skynet
• Bay Area Vinyl Shutters
• Builder's Drapes and
Blinds
• Ceramic Tech
• Cooperhaus K-9
• JC Manufacturing
• KellyTech
• Nano Etch Systems
2.3 2.2 65,000
• Commercial
• Warehouse/
Distribution
1973 $11.78-14.40
• Custom Drywall Inc.
• Hapa Musubi
• Tita's Cantina
Source: CoStar; Economic & Planning Systems
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Figure 8 Current Buildings in Subarea 2
Subarea 3
Subarea 3 is located north of the Montague Expressway and east of S. Milpitas Boulevard. It includes a mix of warehouse (self-storage), institutional/places of assembly (New Vision Church), and medical offices. Lease rates range from $12.08 to $30.04 per square foot per year.
Table 5 Summary of Subarea 3 Development
Parcel
Land
Acres
Gross
Building Area
(sq. ft.) Uses Year Built
Lease Rate
(per sq. ft. per
yr.) Tenants
3.1 4.5 171,924 Self-storage 2019 $20.91-25.56 Bay Rock Storage
3.2 5.4 92,792 Flex 2000 $23.40-30.04 Assorted dental offices
3.3 7 129,136 Flex 2000 $12.08-14.76 New Vision Church
Source: CoStar; Economic & Planning Systems
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Figure 9 Map of Subarea 3
Figure 10 Current Buildings in Subarea 3
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Subarea 4
Subarea 4 is bounded by Montague Expressway to the north, Highway 680 to the east, and South Milpitas Boulevard to the west. With 29.3 acres it is the largest subarea and includes over 500,000 square feet of rentable building area. It primarily consists of flex and warehouse uses in single-story facilities, including self-storage, electronic waste recycling, and various hardware manufacturing. Lease rates range from $7.92 to $21.05 per square foot per year.
Figure 11 Map of Subarea 4
Table 6 Summary of Subarea 4 Development
Parcel
Land
Acres
Gross
Building Area
(sq. ft.) Uses Year Built
Lease Rate
(per sq. ft. per
yr.) Tenants
4.1 1 18,180 Light Industrial 1974-1981 $13-21.05
• CNC Solutions Inc.
• Phamtec
• V&T Machining
• Yuhas Tooling &
Machining
4.2 4.2 95,559 Warehouse/
Distribution 1984 $7.92-9.68 Unknown
4.3 21 418,340
• Flex
• Light
Manufacturing
• Self-storage
• Warehouse/
Distribution
1979-1982 $11.91-19.75
• Acrylic Blank
• Cardova Printed Circuits
• Flex Interconnected
Technologies
• Green E-waste Recycling
• Pacific Medical Center
• Public Storage
• Redline Enterprises
• West Valley Carpet
Services
Source: CoStar; Economic & Planning Systems
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Figure 12 Current Buildings in Subarea 4
A c c e s s i b i l i t y / P u b l i c R e a lm
The Highway680 interchange at Montague Expressway provides relatively immediate access to the Metro area for both commuters and commercial users. At the same time, the proximity to the new Milpitas Transit Center and BART Station provides important transit-access opportunities. That said, the entry points into the Metro area by car and the connectivity between the transit center and the Innovation District areas are imperfect. The Milpitas Metro Specific Plan (MMSP) identifies a new pedestrian and bicycle bridge across Berryessa Creek, park, creek trails, and pedestrian-scale streetscaping whose implementation will be key to overcoming the existing lack of walkability surrounding the Innovation District. The introduction of bike lanes around the Innovation District, as well as forms of street-level activation and the promotion of R&D, advanced manufacturing, and other uses which generate higher employment densities, may further support walkability and spur investment in other amenities such as retail to the area.
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as envisioned in the MMSP, will be important to the creation of a sense of place and attracting technology and other Office/R&D-based companies to the area.
A d j a c e n t U s e s
As parcels redevelop to help form the envisioned Innovation District, it may be necessary to minimize conflicts between older industrial uses and newer workspaces, some new developments’ adjacency to the Great Mall to the north, and other new developments adjacency to residential land uses to the south. For example, as shown in Figure 13, the Innovation District parcels (yellow) are surrounded by residential neighborhoods that include townhomes (orange) and single-family units (gray). Any potential conflicts will be managed carefully by the City of Milpitas as the MMSP continues to evolve and the Innovation District grows. That said, the proximity of residential uses provides not only housing options for the Innovation District’s workforce but also creates demand for amenities like retail and parks. This helps to create a complete neighborhood where people can live, work, and play.
Figure 13 Innovation District Surrounding Land Uses
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4. INNOVATION DISTRICT CASE STUDIES
Chapter 4 provides four case studies of other jurisdictions that have or are supporting the development of Innovation Districts. The purpose of these case studies is to identify common themes or specific insights to inform the City of Milpitas as it considers different ways to support development of its Innovation District. These are the four case study jurisdictions:
• Mission Bay, San Francisco
• Seaport District, Boston
• South Fremont, Fremont
• Peery Park, Sunnyvale
A summary of overall conclusions from these case studies is provided at the end of this chapter.
M i s s i o n B a y , S a n F r a n c i s c o
SOURCE: STEELBLUE AND MANICA ARCHITECTS
Summary
While it was never formally branded as an innovation district, Mission Bay has redeveloped into a “biotech hub” focused on life sciences, health tech, and healthcare and anchored by the University of California, San Francisco (UCSF) within a larger 300-acre mixed-use area. The 46 Item # 2.
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opening of UCSF’s first campus building in 2003 catalyzed further clustering of bioscience startups and companies, who were drawn to the university’s reputation for cutting-edge research. While other innovation districts have required multiple anchors, the size and reputation of UCSF was sufficient to successfully anchor Mission Bay. Keys to this outcome was the publicprivate-partnership between the City and County of San Francisco, UCSF, and the primary developer, Catellus Development Corporation (and subsequent iterations). The City and County of San Francisco and developer agreed on an infrastructure financing package that included substantial Tax Increment Financing (TIF) and Community Facilities District (CFD) special taxes.
As the district continued to gain traction, new tech firms and amenities like retail and green space soon followed, including the Chase Center arena.
History and Land Uses
San Francisco and nearby Silicon Valley are major innovation ecosystems, with large clusters of tech and financial services companies. Previously, Mission Bay was mostly dormant former industrial land, containing railyards once used for shipbuilding and repair. After many years of planning, in 1998, the City adopted the Mission Bay Plan, which detailed a vision to expand multifamily and commercial office space, add public amenities, and build new campus space for UCSF. There was a gradual start to new development until UCSF’s first building opened in 2003.
In the past two decades since, the presence of UCSF and other biotechnology and healthcare firms has helped Mission Bay carve out a niche in clustering bioscience R&D firms and startups.
More recently, drawn by the new activity in the district and centrally located development sites, larger tech firms (Dropbox, Uber) and entertainment venues (Chase Center) have entered, which resulted in economic vitality for the once blighted area.
The main anchor in Mission Bay is UCSF, a large public research university which generates $6.5 billion each year in economic output in San Francisco. A substantial portion of Mission Bay is UCSF-owned or leased; approximately 3 million sq. ft. (~26 percent of total Rentable Building Area). This includes not only classrooms, student housing, and hospital centers, but also research facilities associated with the university. Other early contributors to the area’s life sciences/health focus included Rock Health, a digital health (“health tech”) accelerator, and Bayer, a multinational biosciences and pharmaceutical company. Over time, the life sciences mix has evolved and changed. Current prominent life sciences entities include Pfizer, the Gladstone Institutes, and the California Institute for Quantitative Biosciences (QB3).
Another significant presence is the Golden State Warriors, which opened the Chase Center arena in 2019. In addition to the arena, the surrounding development includes Thrive City, a public plaza with retail and dining, and office space, of which Uber is a major tenant. Its waterfront location is an additional attraction that draws in visitors and workers alike. 47 Item # 2.
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Table 7 shows the core industry sectors associated with the 25 largest companies at Mission Bay including the number of businesses and square footage by sector. More than half of the largest companies are in the biotechnology or healthcare space, although several large tech firms and two major sports teams also contribute to a prominent share of Mission Bay’s building footprint.
Table 7 Summary of Largest 25 Companies by Square Footage Leased or Occupied Figure 14 shows the general land boundaries and land uses in Mission Bay. Besides UCSF (blue) and the Chase Center, other major land uses in Mission Bay include residential (orange and yellow), commercial and industrial (purple), and open space (green). According to CoStar, and as shown in Figure 15, multifamily makes up 33 percent of the area’s building square footage, followed by office (26 percent), and healthcare (12 percent). On UCSF-owned/leased properties, the main uses are healthcare and biosciences (47 percent), with student housing (10 percent) and retail (9 percent) also significant.
Sector
Number of
Businesses Combined Square Feet Example Companies [1]
Biotechnology 9 1,036,245 Bayer, Chan-Zuckerberg Biohub, FibroGen, Gladstone Institutes
Financial Services 1 300,000 Visa
Health Care 4 4,396,091 UCSF, Kaiser Medical Offices, CommonSpirit Health, San Francisco Veteran Affairs
Non-Profit 1 26,726 Kaiser Family Foundations
Public 1 220,000 San Francisco Police Department
Retail 1 307,399 Gap, Inc.
Sports & Entertainment 2 1,122,000 Golden State Warriors, San Francisco Giants Technology 6 2,329,134 Cisco, Dropbox, Lyft, Uber
[1] Not a comprehensive list.
Source: San Francisco Business Times, March 2021
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Figure 14 Land Uses in Mission Bay
SOURCE: CITY AND COUNTY OF SAN FRANCISCO
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Figure 15 Mission Bay and UCSF Building Square Footage
SOURCE: COSTAR; ECONOMIC & PLANNING SYSTEMS
The Mission Bay Master Plan, adopted in 1998, detailed an extensive vision for Mission Bay, including:
• 6,000 housing units (including 30 percent affordable). • 4.4 million square feet of office space.
• 500,000 square feet of retail.
• 41 acres of open space.
• 500-room hotel.
• Public library.
• Public school.
• Four life science incubators.
As shown in Figure 16 below, development in Mission Bay was slow until 2003, when the first UCSF Mission Bay campus building opened. From there, the total building space in Mission Bay began to rise, primarily driven by increases in the office and multi-family residential sectors.
Since 2013, healthcare uses have also risen significantly.
As of April 2019, 5,789 housing units, including 1,191 affordable units, have been constructed in Mission Bay (out of 6,514 planned). An additional 271 units are under construction, and 19 acres of new parks and open space have also been completed, with another 3 acres under construction. 350,000 sq. ft. of retail have also been added, out of 419,000 planned. In total, Mission Bay has more than 13.3 million square feet of built space, including 5.5 million square feet of office, bioscience, and healthcare space.
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Figure 16 Mission Bay Building Square Footage Timeline
SOURCE: COSTAR; ECONOMIC & PLANNING SYSTEMS
Innovation District Outcomes
• Expanded Economy/Employment. At full build-out, Mission Bay is expected to create more than 30,000 new permanent jobs, in addition to hundreds of ongoing construction jobs.
Across all its San Francisco campuses, UCSF employs 24,100, a significant portion of which is in Mission Bay.
• Increased Tax Revenue. UCSF contributes $11.5 million annually to improving the Mission Bay area through CFD fees, in addition to $84 million one-time contributions. Across all San Francisco locations, UCSF generates $6.5 billion annually in economic output. The annual CFD contributions totaled $13.6 million in FY2020-21.
• Revitalization of Blighted Space. Mission Bay’s development has brought in 11,000 new residents and 20 new acres of parks/open space, transforming what was once an underutilized railyard into a vibrant mixed-use space.
• Affordable Housing Initiatives. Nearly 1,500 affordable units have been built to date, accounting for more than 21 percent of total new units. • Economic Growth and Development. The initial investments have spurred additional development plans that were not included in the 1998 master plan to further enhance the livability and attractiveness of the district. Furthermore, the development has recently seen some spillover into adjacent neighborhoods like China Basin and Dogpatch. Mission Rock is a planned 28-acre mixed-use community by Oracle Park, currently in construction with full occupancy expected by 2025. The Chase Center project regularly draws visitors to the neighborhood and includes 11 acres of additional office space, parks, and retail. • Growing Innovation Ecosystem. Like other innovation districts, Mission Bay has focused heavily on growing high-paying jobs in research and technology. Its emphasis on startups and R&D in the life sciences and healthcare sectors distinguishes it from the traditional tech firms that dominate downtown San Francisco and Silicon Valley. 51 Item # 2.
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Despite the Mission Bay master plan being adopted in 1998, it was not until the 2003 opening of the UCSF Mission Bay campus that development in Mission Bay started to take off. Infrastructure financing strategies like TIFs and CFDs that were later implemented also helped the district overcome its slow start. The plan originally estimated $200 million in infrastructure costs for Mission Bay; however, the final costs have totaled closer to $700 million, a threefold increase from the original estimate.
Like other innovation districts, several startups that were once key to creating Mission Bay’s biotech hub identity have left – the biotech accelerator Rock Health decided to relocate to downtown San Francisco, while Bayer decided to consolidate its Bay Area presence by moving from San Francisco to Berkeley. However, by the time this occurred, Mission Bay was already successful/popular enough to maintain its innovation identity, especially because it is mainly anchored by UCSF. The recent arrival of the Golden State Warriors and large tech firms like Dropbox and Uber have further evolved the range of activities and identity of the district. A recent survey of Mission Bay residents, completed in 2021, found that residents enjoy the master-planned open space and walkability that Mission Bay offers, though residents also observed that the district currently lacks neighborhood-serving institutions or civic/community events.
Enabling Innovation District Growth
Governance
A public-private partnership between the City and County of San Francisco, developers, and UCSF spurred the neighborhood’s initial development. The San Francisco Redevelopment Agency10 and Catellus were successful in getting UCSF to expand its campus to Mission Bay.
Several key plans and agreements were developed, including several Redevelopment Plans and Designs for Development; Owner Participation Agreements between the Redevelopment Agency and original master developer, and Interagency Cooperation Agreements, which commit all City and County of San Francisco departments and developers to the Mission Bay Infrastructure Plans. Tax increment financing was also a prominent tool through the Redevelopment Agency.
The City and County of San Francisco also ensured that park space and affordable housing were developed.
Financing
Land donated by the City and County of San Francisco and Catellus to UCSF encouraged their arrival. The City and Catellus donated 42 acres of land, valued at $170 million at the time of contribution, creating a valuable incentive. With UCSF as a flagship presence and completed residential developments, Mission Bay was established as an emerging neighborhood for workers and residents alike, prompting new tenants and major office and retail to seek space in Mission Bay. In addition to tax increment financing, Mello-Roos Community Facilities Districts (“CFDs”) 10 The San Francisco Redevelopment Agency was established in 1948 with the legal authority granted by the California Community Redevelopment Act of 1945 to address real and perceived conditions of blight through economic redevelopment, rehabilitation, and reconstruction. 52 Item # 2.
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provided a major source of funding for the public infrastructure upgrades needed. Mission Bay has two CFDs, formed in 1999 and 2000, to finance infrastructure like parks, sewer, and roadways. In 2021, the combined tax levy from both CFDs was more than $13.9 million.
Privately funded development emerged once Mission Bay had demonstrated solid success; the Chase Center, which opened in 2019, was a privately financed project worth $1.4 billion.
Policy
A master plan, affordable housing requirements, and flexible zoning policies shaped public amenities and mixed-use, urban-dense placemaking. The Mission Bay Plan of 1998 was a fundamental catalyst, establishing the City and County of San Francisco and Catellus’ commitment towards investing in the redevelopment of Mission Bay. Other policies included broad, flexible zoning for non-residential uses to encourage development beyond traditional office space, especially to support the flexible needs of the biosciences (lab, R&D uses). Because affordability is a major concern in San Francisco, Mission Bay’s 30 percent affordable housing goal is substantive, supported by tax increment funding for affordable housing subsidies.
To date, UCSF has also developed 160 units of affordable housing.
Key Conclusions
Key elements in the success of Mission Bay Innovation District are as follows:
• Strong public-private partnership between City and primary developer was critical in developing overall plans, financing infrastructure, and attracting anchor tenant. • Large and reputable innovation anchor of UCSF, a major scientific and educational institution, was pivotal to subsequent growth.
• Vibrant mixed-use district, included residential, office, and laboratory uses, plus public open space and waterfront, makes it an attractive place to live and work. • Combination of public financing tools were critical to supporting infrastructure investments.
• Central location, developable land and market factors were generally supportive of new development.
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S e a p o r t , B o s t o n
SOURCE: SASAKI
Summary
Beginning in 2010, the Mayor’s Office championed a vision for innovation-focused redevelopment in Seaport and brokered several incentives to draw large firms, technology incubators, and startups. Other amenities, including parks, museums, and educational institutions were later added to transform Seaport into a bustling hub of business and recreational activity. The addition of Cambridge’s MassChallenge incubator-accelerator and District Hall, an entrepreneurshipfocused public event space, anchored the district and helped cultivate a startup-friendly reputation. More recently, the success and expanding interest in the district have introduced new challenges in terms of retaining startups and housing affordability.
History and Land Uses
The Boston region has long had a significant cluster of life sciences and financial services, bolstered by numerous universities and research institutions (MIT, Harvard) that attract educated talent in Science, Technology, Engineering, and Mathematics (STEM) and business.
Located in south Boston, Seaport originally included under-utilized industrial land on the waterfront peninsula, with empty parking lots, marine industrial terminals, and warehouses. In the post-industrial era, the Fort Point neighborhood of Seaport was known as artists’ enclave, with converted artists’ lofts and cheap live-work studios. Several large public works projects— including the cleanup of the South Boston Harbor and the extension of the Silver Line bus service into Seaport—prepared local infrastructure for development before the innovation district was conceived.
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In 2010, Mayor Thomas Menino formally announced a vision to develop Seaport as an innovation district, complementing similar economic clusters like Cambridge’s Kendall Square and Route 128. The district would attract startups and entrepreneurs from local universities, adding tech incubators and co-working spaces. The Mayor’s Office envisioned the district as a “24/7 livework-play” space to appeal to young entrepreneurs in need of frequent inspiration and stimuli.
From 2010 to 2014, several major companies moved to Seaport, including Vertex Pharmaceuticals and General Electric, as well as incubators like MassChallenge. All were given financial incentives from the City or State worth millions of dollars to relocate. District Hall, a public innovation center with co-working space and event programming, opened in 2013 as a flagship development. There was $1.8 billion in new construction between 2010 and 2013. More recently, there have also been more traditional business tenants moving into Seaport, many in law and finance coming from downtown Boston, plus newly built hotels, upscale condominiums, and high-end retail.
Figure 17 Map of Boston Seaport District
SOURCE: INFOMEN
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Today, across its 1,000 acres, Seaport has 1,500 firms and 42,000 employees. Major tenants include incubator MassChallenge, District Hall, Vertex Pharmaceuticals, Amazon, and the Institute of Contemporary Art. In 2011, Babson College was the first higher education presence in Seaport, leasing space for its MBA program.
As shown in Figure 18, Office is the predominant building type in Seaport, comprising 39 percent of the total. This is followed by Multifamily (22 percent), Industrial (12 percent), and Specialty (10 percent). Figure 19 shows that Seaport nearly doubled its built space, from 18.5 million to 30 million square feet, following the announcement of the innovation district. Much of this development was due to the increase in Multifamily, which saw a nearly eight-fold increase in built space from 2010 to 2020.
Figure 18 Seaport Boston Building Square Footage
SOURCE: COSTAR, ECONOMIC & PLANNING SYSTEMS
Figure 19 Seaport Boston Building Square Footage Timeline SOURCE: COSTAR, ECONOMIC & PLANNING SYSTEMS
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Innovation District Outcomes
• Expanded Economy & Employment. More than 200 startups entered into Seaport between 2010 and 2015. As of 2019, an estimated 42,000 employees and 1,500 businesses are located in Seaport. Most recently, Seaport has attracted a broad range of Fortune 500 and other larger companies that have pushed up office rents and created challenges for the area in continuing to cultivate and retain smaller innovation startups and established companies. • Increased Property Tax Revenue. Property tax revenue in Seaport was $127 million annually in 2017, up from $30 million in 2008.
• Model for Waterfront Redevelopment. Seaport has demonstrated success of how industrial waterfronts may be revived with new office space, cultural attractions, and retail. • Economic Growth and Development. The success of Seaport has inspired the Mayor’s Office to create smaller innovation-focused neighborhoods across Boston to capture and cultivate spillover benefits.
Enabling Innovation District Growth
Governance
The Mayor’s Office played a large role in accelerating Seaport’s growth. The City’s branding and marketing of Seaport as an Innovation District drew in tenants and helped establish the district’s appeal. On the development side, they prioritized permitting for developers seeking to build in Seaport and hired an Innovation District Director to oversee the growth of the district. Mayor Menino was directly involved in brokering several deals to secure incentives (financial subsidies and office space) for potential tenants.
Financing
Development in Seaport was largely privately funded but combined with tax incentives to attract major tenants, especially to catalyze the innovation district in its first few years. Examples of this include:
• Vertex Pharmaceuticals: received $22 million, from a combined $10 million in state tax credits and $12 million from the creation of a 15-year tax increment financing agreement. • General Electric: received $145 million to relocate to Seaport, comprised of $120 million in state incentives and $25 million from the City of Boston in property tax relief. • LogMeIn: received $2.5 million through a 13-year TIF agreement with the City of Boston. • MassChallenge: Mayor Menino negotiated with developers to offer MassChallenge a one-year rent-free lease in Seaport.
• District Hall: While the building was privately funded and built by Boston Global Investors, it does not pay property taxes as a 501c3 non-profit.
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Infrastructure financing partly relied on a state program, I-Cubed, which uses new income and sales tax revenues from increased employment and business activity at a new development to pay debt service on infrastructure investments. In the case of Seaport, $37.8 million was provided for the 15-acre Fan Pier project, which Vertex Pharmaceuticals occupies as the major tenant. Fan Pier is considered one of "Seaport's signature mixed-use development," a destination featuring an art museum, public parks, and waterfront marina.
Policy
While there was no master plan for the entire innovation district, multiple master plans have been created for various portions of Seaport, including:
• Fan Pier Master Plan (2007).
• Seaport Square Master Plan (2010).
• Raymond L. Flynn Marine Park Master Plan Update (2017).
The City of Boston also advanced policies to encourage affordable housing development alongside the innovation district’s expansion. This included attempts at innovative and affordable housing design – the 450 sq. ft. “micro-apartment” unit.
Key Conclusions
Key elements in the success of Seaport Innovation District are as follows:
• City leadership was important in championing the district and attracting anchor tenants. • City and state funding and incentives helped to bring in several anchor tenants and fund infrastructure.
• Incubator-accelerator presence from MassChallenge and District Hall provided important spaces for entrepreneurship and innovation and helped Seaport grow its innovation identity. • Multiple innovation anchors including small entrepreneurial startups and well-known larger firms, instead of a single on-site university or corporate presence. • Skilled Workforce and strong base of existing industries were important underlying factors in supporting the successful development of the Innovation District. 58 Item # 2.
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S o u t h F r em o n t /W a rm S p r i n g s , F r em o n t SOURCE: CITY OF FREMONT
Summary
The vision for the South Fremont/Warm Springs area is to transform a formerly industrial section of the city and give it new life as a mixed-use Innovation District with advanced manufacturing, Office/R&D buildings, and residential development. The Innovation District area includes the Warm Springs BART Station, which connects the district to the rest of East Bay, San Francisco, and Silicon Valley. A major employment anchor is Tesla, which currently occupies a large industrial facility and employs more than 10,000 workers. The Warm Springs Community Plan, adopted in 2014, guides efforts to build infrastructure that encourages job growth, supports current residents, and maintains quality of life. With the Warm Springs BART Station, the plan anticipates transit-oriented development surrounded by uses like retail, hotel, and entertainment to encourage leisure and livability in addition to work. To date, portions of the district have developed with housing, while other areas have attracted advanced manufacturing uses. Sites have been identified for Office/R&D uses, though no such development has yet occurred. All areas within the broader area must develop master plans to ensure consistency with the Community Plan vision and goals.
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History and Land Uses
Fremont lies within Silicon Valley’s economic region and had traditionally been viewed as a residential suburb of the East Bay. South Fremont has an extensive history as a manufacturing base; it was the site of the General Motors/Toyota New United Motor Manufacturing, Inc (NUMMI) plant and central to the Bay Area’s automotive manufacturing industry. In South Fremont, large vacant parcels are interspersed with well-known advanced manufacturing and R&D firms. However, the closure of the NUMMI plant in 2010 resulted in the loss of a major employer and nearly 5,000 jobs, forcing the City of Fremont to rethink the area’s future.
South Fremont planning began in 2010 with the City of Fremont receiving a federal Economic Development Administration (EDA) grant to develop a recovery strategy for the area following closure of the NUMMI plant. The Warm Springs Community Plan was adopted in 2014, creating several subareas, including the Innovation District, as well as identifying advanced manufacturing as Fremont’s “innovation driver.” The plan identified 10 planning areas that were rezoned to allow more flexible commercial/industrial uses. Figure 20 shows the boundaries of both the Warm Springs Community Plan area and the large South Fremont Innovation District (left). The Warm Springs Community Plan area is targeted for planning, rezoning, and development, but the entire Fremont Innovation District is considered in the City’s place marketing strategy to attract and retain high-tech and advanced manufacturing firms.
The targets in the Warm Springs Community Plan are defined as follows:
• 4,000 new housing units
• 20,000 jobs
• Elementary school
• 1-2 major hotels
• Retail
• Public open space/urban park
Ten (10) Planning Areas and four (4) land use mixes are defined in the Community Plan and form the basis for the Innovation District’s development, as shown on the right in Figure 20.
Each Planning Area is assigned a land use mix. The four mixes are described below and vary in their development intensities and allowable building types:
• Mix A: Low-intensity job uses, mainly Industrial and R&D building types. • Mix B: Combined low and high intensity job uses, with Industrial, R&D, Office, Hotel, and Retail & Entertainment.
• Mix C: Combined high-intensity job uses, with community-oriented uses in a mixed-use and transit-oriented setting. Mix C could include R&D, Hotel, Retail & Entertainment, Office, and Residential.
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In line with the plan’s transit-oriented development goals, the high-intensity mixes (C and D) are centered in the Innovation District and surround the Warm Springs BART Station, while low intensity uses (A and B) make up the edges of the plan area. The BART Station (blue dot in Figure 20) is at the center of the plan area, which is bisected by the Union Pacific Railroad tracks. The West Access Pedestrian Bridge (Figure 21) opened in February 2022 to connect the BART Station with the west side of the plan area, crossing over the railroad tracks to give pedestrians safe access.
Figure 20 South Fremont/Warm Springs Innovation District Map SOURCE: CITY OF FREMONT
Figure 21 Warm Springs BART Station Pedestrian Bridge and Plaza SOURCE: BAY AREA NEWS GROUP
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As shown in Figure 22, the primary type of land use in Warm Springs is Industrial (53 percent), followed by Multi-family (26 percent) and Flex (16 percent). The timeline in Figure 23 shows that Multi-family developments were recent additions to the plan area, occurring mainly in the last four years. Beyond that, activity in other building types has been modest.
Figure 22 Warm Springs Development Area Building Square Footage SOURCE: COSTAR; ECONOMIC & PLANNING SYSTEMS
Figure 23 Warm Springs Development Area Development Timeline SOURCE: COSTAR; ECONOMIC & PLANNING SYSTEMS
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Innovation District Outcomes
• Expanded Economy/Employment. The Fremont Innovation District aims to attract 40,000 new jobs at buildout; approximately 20,000 jobs exist to date. The Tesla factory currently employs 10,000.
• Economic Growth and Development. There has been substantial commercial pre-leasing activity in Fremont; most of the projects that have been completed since the Great Recession have been on a speculative basis. According to CoStar, vacancy rates in January 2022 were around 2.6 percent.
• Multimodal Transportation. The district is accessible via the Warm Springs BART Station, which also has intermodal connections to Santa Clara Valley Transportation Authority11 (VTA). Parking maximums encourage alternative transportation, supported by Transportation Demand Management (TDM) strategies like subsidized transit passes, carsharing, or shuttle buses. Bike and pedestrian paths are also planned.
• Urban Public & Placemaking. The Community Plan emphasizes design elements such as public art, energy-efficient building standards, and density focused near transit and amenities (4-8 story adjacent to Warm Springs BART Station, 3-6 story campus offices moving further away, then low-rise).
• Innovation Ecosystem. The city, and South Fremont in particular, have for a while been home to cleantech, life sciences, and advanced manufacturing uses. The Innovation District has yet attracted Office/R&D-based innovation uses, though the Sobrato Organization is searching for developers for a Warm Springs Technology Center, a potential 692,000 sq. ft.
Class A Office development which could add new types of innovation businesses to the Innovation District.
While Fremont has been successful so far in establishing residential and advanced manufacturing businesses in the Innovation District area, it is seeing greater challenges in getting Class A Office/R&D tenants. Despite the availability of substantial land areas available for Office/R&D development, landowners have not yet attracted investment from developers. 11 The Santa Clara Valley Transportation Authority (VTA) employs more than 2,000 people dedicated to providing solutions that move Silicon Valley. Unique among transportation organizations in the San Francisco Bay Area, VTA is Santa Clara County’s authority for transit development and operations (light rail and bus), congestion management, transportation-related funding, highway design and construction, real estate and transit-oriented development, and bicycle and pedestrian planning. With partners on the local, state, and federal levels, VTA works to innovate the way Silicon Valley moves and provide mobility solutions for all.
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Enabling Innovation District Growth
Governance
To guide new development, the City of Fremont adopted the Warm Springs Community Plan as an extension of its EDA-funded Recovery Strategy.12 With this plan came the decision to promote South Fremont/Warm Springs as an Innovation District to potential employers, and City leadership began advertising the low industrial rents and streamlined permitting to developers.
The City also established a partnership with Sobrato Real Estate to build the Warm Springs Technology Center as an innovation anchor in the district. Projects larger than five acres are required to submit master plans to ensure private development is in line with the community plan’s vision and land use target (see Policy section below).
Financing
Private developers in the Innovation District are required to contribute infrastructure/capital improvement needs through development impact fees and direct development of infrastructure.
No additional public financing tools have been developed. The City has also pursued grant funding and tapped into County funding sources. For example, a pedestrian bridge connecting the Warm Springs BART Station with a public plaza at the heart of the Innovation District received $30 million from the Alameda County Transportation Commission13 (Measure BB sales tax), with the City of Fremont providing $11 million. There was also a Development Agreement with the Fremont Unified School District to donate land for a new elementary school and for developers to pay for upgrades at existing nearby schools.
Policy
The Warm Springs Community Plan establishes a vision for development towards a mixed-use urban-dense form. The Warm Springs Innovation District Ordinance formally identified the ten (10) planning areas and four (4) land use typologies within the district, the permitted building types in each, and their targets for development.
Projects larger than five acres are required to submit master plans to ensure private development is in line with the community plan’s vision and land use target. Each plan defines the mix of uses and development density. To date, five master plans have been submitted for 12 The Warm Springs Community Plan was developed to analyze South Fremont's potential as a Priority Development Area (PDA) and followed the guidelines for PDA community plans. It is different from a Specific Plan.
13 The Alameda County Transportation Commission (Alameda CTC) serves as the congestion management agency and transportation authority for the County of Alameda and is responsible for the planning, programming and allocation of federal, state, regional and local funding for transportation improvements throughout Alameda County. Its mission is to plan, fund and deliver transportation programs and projects that expand access and improve mobility to foster a vibrant and livable Alameda County.
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projects in the South Fremont area covering residential, advanced manufacturing, mixed-use, and Office/R&D development opportunities:
• Warm Springs Area 4 Master Plan (2015): This development by Lennar plans for a new elementary school and neighborhood park, urban parks and plazas. Across 111 acres will be 2,214 housing units (286 of which will be affordable) and approximately 1.4 million sq. ft. of commercial and industrial uses.
• Old Warm Springs Boulevard South Area 3 Master Plan (2016): The [Valley Oak Partners] Master Plan encompasses approximately 30 acres and proposes 785 residential units and 325,000 sq. ft. of commercial floor area, which includes a hotel with 125 to 150 rooms as well as Office and R&D buildings.
• Tesla Master Plan (2016): The master plan for the Tesla facility and the surrounding Planning Area 6 encompasses more than 250 acres. It primarily sets guidance for the Tesla production plant, but additionally proposes new traffic infrastructure and pedestrian/bike paths.
• Warm Springs Technology Center Master Plan (2017): This Master Plan, submitted by the Sobrato Organization, seeks to develop 692,000 sq. ft. of R&D and industrial floor area on a 22-acre project site on the east side of Warm Springs Boulevard, between Reliance Way and Corporate Way, within Planning Area 10 of the Warm Springs/South Fremont Community Plan.
• Warm Springs TOD Village Master Plan (2015): The [Toll Brothers] Master Plan encompasses approximately 35 acres and envisions 1,001 housing units, including 132 very affordable units, comprised of apartments, condominiums, and stacked flats. The Master Plan also includes a small retail center, private plazas, and recreation amenities.
Other policy components in the Community Plan include:
• Innovation Way corridor between the Warm Springs BART Station and Innovation District featuring pedestrian bridge and public open space.
• Minimum open space requirements for new developments. • Parking maximums and TDM strategies.
Staff Input and Economic Context
In some ways, the South Fremont/Warm Springs Innovation District is still in its relative infancy.
EPS interviewed City of Fremont staff and reviewed additional materials to develop additional insights on the Innovation District’s evolution to date, including:
• Residential Uses. Residential developers were immediately attracted to the Innovation District due to the strong interest in Fremont as a residential location, the area’s larger sites and opportunities to build a critical mass of housing, along with a location close to the new Warm Springs BART Station and other regional transportation infrastructure. 65 Item # 2.
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• Advanced Manufacturing. The early decision by Tesla to purchase the closed NUMMI factory provided an important boost to the area, complementing the City’s already strong business cluster of advanced manufacturing including many businesses in the emerging life sciences and cleantech industries. The City and the Innovation District have continued to attract and retain advanced manufacturing firms.
• Office/R&D Uses. The Innovation District includes some large development sites zoned for Office/R&D uses. The Old Springs Valley Boulevard Master Plan includes opportunities for Office/R&D development as part of a mixed-use development area, while the Warms Springs Technology Center Master Plan provides the opportunity for over half a million square feet of new Office/R&D space. Reflecting the regional competition for such uses and, more recently, the uncertainty caused by the COVID-19 pandemic, these Master Plan areas and larger development sites have not yet attracted Office/R&D developers or major anchors.
Key Conclusions
• Clear plans and policies provide clarity for potential developers that allows them to evaluate development opportunities more clearly and with certainty. • Outside of established Office/R&D development areas, the addition of Office/ R&D uses into a City’s innovation mix can be a gradual process, affected both by market cycles, but also opportunities at other locations in Silicon Valley along with decisions by individual businesses interested in build-to-suit buildings/campuses. • Development of advanced manufacturing as well as residential development in different parts of the Innovation District helped provide investment, new infrastructure, and economic energy to the Innovation District, even while Office/R&D uses are slower to emerge.
• In the post-redevelopment area cities will often need to rely on a combination of development impact fees and grants from regional and statewide agencies to fund critical infrastructure.
• Existing City assets (existing business clusters) and new transit developments (new Warm Springs BART Station) can both play a role in defining the first wave of developments in an Innovation District.
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P e e r y P a r k , S u n n y v a l e
Summary
The 450-acre Peery Park has long been an important business park in Sunnyvale. Prior to its latest evolution, Peery Park consisted of a broad range of older 1 and 2-story industrial buildings with a broad range of research, manufacturing, and other industrial tenants. During the 2010s, the City of Sunnyvale noted increased demand for new, more modern workspaces in Silicon Valley was attracting interest in Sunnyvale and Peery Park. To respond to and prepare for this market interest, including specific interest from developers, the City of Sunnyvale developed and adopted the Peery Park Specific Plan in 2016. This Specific Plan established the vision, development code, design guidelines, and implementation strategy for the area. The City created an incentive zoning program (community benefit program) that offers both defined and flexible benefits and allowances for developers. The strong interest in Peery Park resulted in immediate interest from large developers and companies, including Apple and LinkedIn, in securing the expanded office entitlements under the new Peery Park Specific Plan. Currently, Apple has a 710,000 square foot lease in the large Pathline Park office development with other Office/R&D development under way.
Land Uses and Composition
The City of Sunnyvale is situated in the heart of Silicon Valley, where major tech firms have built large corporate campuses. Adjacent to the railroad, Peery Park was one of Sunnyvale’s older industrial neighborhoods. Prior to the new wave of activity, development in Peery Park was characterized as 77 percent industrial. As part of the more recent (last decade) wave of Silicon Valley expansion, companies began taking an interest in Peery Park, which is located near a 67 Item # 2.
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Caltrain14 stop and bounded by several freeways. At the time, companies like LinkedIn and Apple were seeking to expand their office presence in Sunnyvale and leased several offices in the area. The rising demand for office space prompted the City of Sunnyvale to develop a plan to encourage and manage economic growth and sustainable community development.
The Peery Park Specific Plan articulated a vision for an Innovation District centered on mixed commercial zones, walkability, transit-oriented development, and abundant public space.
Figure 24 shows the development concept proposed for Peery Park in the Specific Plan. The Specific Plan envisions a district that creates opportunities for leisure near the workplace and enables people to travel easily throughout the district by minimizing vehicle traffic. Activity Centers place restaurants and retail storefronts at highly visible intersections. Innovation Edges are intended to bring more Class A Office throughout much of Peery Park. Mixed Industry Cores designate space for more flexible uses, particularly for businesses requiring industrial or R&D infrastructure. Mixed Commercial Edges are conceived as combining commercial, office, and hotel uses. Neighborhood Transition Areas will redevelop underutilized office buildings to add new multi-family housing where the plan boundary abuts existing housing. Public Facilities will include a neighborhood park and a fire station. The Specific Plan area was rezoned to a new “Peery Park Specific Plan” designation from its previous and primary “Industrial and Service” zoning.
Innovation District Outcomes
Initial expectations were that the planned 2.2 million sq. ft. of new commercial and office space would take 10 to 20 years to entitle, develop, and occupy—instead, all of this new development capacity was entitled and pre-leased in two years. Pathline Park is a new major development created pursuant to the Specific Plan—a 50-acre office complex with amenities like public greenspace, food courts, and a yoga studio. High demand for office space at Peery Park has continued even in the context of the COVID-19 pandemic.
Apple’s new office in Pathline Park indicates that it could become a significant anchor for the Innovation District. The tech firm already has its Central and Wolfe campus in Sunnyvale, plus several leases on office space in the Peery Park plan area, which it would consolidate into its Pathline office. The 710,000 square foot lease, signed in May 2021, was at the time, the largest post-COVID lease in Silicon Valley. Other large firms that have signed leases in Peery Park include Synopsys (350,000 sq. ft.), Proofpoint (242,000 sq. ft.), LinkedIn (194,600 sq. ft.), and 23andMe (145,000 sq. ft.).
14 Owned and operated by the Peninsula Corridor Joint Powers Board, Caltrain provides commuter rail service from San Francisco to San Jose, with commute service to Gilroy. 68 Item # 2.
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Figure 24 Peery Park Specific Plan Development Plan
SOURCE: CITY OF SUNNYVALE
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Enabling Innovation District Growth
Governance
The City of Sunnyvale developed the Peery Park Specific Plan in response to growing market demand for commercial and office development in the area. Because of the existing high interest in Peery Park, the City does not need to provide public incentives or subsidies to jumpstart development. Rather, they focus on maintaining the momentum of development by simplifying regulations (i.e., rezoning, streamlining entitlement, creating flexible benefits program).
Financing
As described in the Specific Plan, a combination of area specific development impact fees and investments or payments through the Community Benefits Program captured funding for community infrastructure and amenities. The Community Benefits Program allows developers to increase their development capacity or intensity in exchange for providing community benefits or paying fees. The community benefits have both a defined list (e.g., providing a required amount of square footage of ground-floor retail or open space), but also allow for flexibility (e.g., developer defines the streetscape improvements). In this way, the City of Sunnyvale ensures that new development in Peery Park includes infrastructure and community facilities that are beneficial to the public and align with the development guidelines stipulated in the Specific Plan.
Table 8 City of Sunnyvale Community Benefits Program Overview Goals
• Innovation Anchor Facilities
• Transportation/Streetscape
Improvements
• TDM Programs or Facilities
• Sustainability Project Elements
• Community Facilities or Services
• Community Programs
• Community Benefits Fund
• Other Community Benefits
Defined Benefits Flexible Benefits
• Innovation-friendly Development
• Open Space/Landscaping
• Publicly Accessible Open Space
• Public Access Easement
• Retail
• Childcare
• Publicly Accessible Recreation
• Parking
• Green Benefits
• Innovation Anchor Facilities
• Transportation/Streetscape
Improvements
• TDM Programs or Facilities
• Sustainability Project Elements
• Community Facilities or Services
• Community Programs
• Community Benefits Fund
• Other Community Benefits
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• Example Defined Benefit: Under Retail, up to 10 percent increase in Floor-Area Ratio (FAR) allowable by providing 2,500-5,000 sq. ft. of publicly accessible retail in a Small Activity Cluster configuration.
• Example Flexible Benefit: Under Community Facilities or Services, provide community meeting space, district wi-fi, green infrastructure improvements or other community facility/service.
Policy
The Peery Park Specific Plan identifies a vision and objectives for development towards a mixeduse urban village form. The innovation vision and strategy for the district is articulated as follows:
1. Align both public and private interests with workplace and market trends.
2. Make Peery Park a center of knowledge and innovation.
3. Allow innovative businesses and workers to thrive.
4. Foster a dynamic mix of uses.
5. Provide settings that bring people together.
6. Protect adjacent neighborhoods.
7. Enable feasible development and provide clear direction for investors.
8. Contribute to community sustainability.
Some key policies and programs that have emerged include:
• Creation of a privately funded transportation management association to coordinate TDM programs, including a shuttle bus, to reduce traffic and parking. A $1.2 million grant was obtained from the Metropolitan Transportation Commission15 (MTC) in 2015 to implement “Peery Park Rides.” However, plans to begin piloting the shuttle routes were delayed with the pandemic in 2020. Furthermore, each development application must include a TDM plan to reduce trips in alignment with Specific Plan goals.
• Encourage buildings to have a “campus-like feel” by adding public plazas, streetscape improvements, open corridors. Avoid isolated developments by creating “signature streets” and public spaces to connect buildings.
• Clear entitlement process, transparent fees and requirements, and streamlined application review for developers.
• Integrating innovation anchors such as incubator-accelerators, co-working spaces, college or university branches, or business development services.
• Prioritize development at high-visibility Innovation Edges and underutilized spaces. 15 The Metropolitan Transportation Commission (MTC) is the regional transportation planning, financing coordinating agency for the nine-county San Francisco Bay Area. 71 Item # 2.
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The Peery Park Specific Plan provided the potential for additional new office and other development entitlements to developers in conjunction with different types of community benefits. As noted above and confirmed by discussions with City of Sunnyvale staff, the clarity of City policies and requirements, combined with the strong and engaged interest from developers during the Specific Plan process and after its adoption, led to immediate entitlement activities and development. The strength of interest from developers and the characteristics of Peery Park meant that new public financing mechanisms were not required.
Some of the ways in which the City of Sunnyvale enabled development was streamlining permitting by hiring a contract planner dedicated to large projects, cultivating relationships with large developers, and establishing business visitation programs for potential investors or developers. The City also emphasized the importance of retaining existing firms to both ensure they are not displaced and to cultivate a dynamic mix of businesses in the area.
Key Conclusions
• Strategic Location and Timing. Peery Park’s location in Sunnyvale and Silicon Valley made it a strong site for attracting employers and workers. Even more interest has focused on opportunities in the City of Sunnyvale as other nearby cities like Palo Alto and Mountain View become limited in office space. The new Specific Plan was also well-timed to benefit from the recent surge in tech sector success, activity, and real estate development. • Major Developer. With strong interest from tech firms, the Irvine Company was able to envision, plan, and develop a major new office development – the Pathline – and become an important new anchor development and contributor to Peery Park. • Community Benefits Program provided flexibility in garnering contributions from developers to support a broad range of planning goals of sustainability and community development. The strong development economics meant developers could feasibly integrate these features/benefits into their development plans.
• Infrastructure financing needs were more modest than in some redevelopment areas and the City has been able to finance necessary infrastructure through development impact fees and direct private development. No new financing mechanisms were required or adopted. • The Specific Plan and Incentive Zoning/Community Benefit Program system provided substantial clarity for interested developers who were then able to pursue and obtain office entitlement allocations expeditiously.
L e s s o n s L e a r n e d f r om C a s e S t u d i e s Innovation Districts throughout the U.S. have become the location of thousands of jobs, a broad array of public, private, and non-profit entities, economic development, fiscal, and other benefits to the host cities and regions. As documented above, the two, mature Innovation Districts from the case studies – Mission Bay in San Francisco and Seaport in Boston – have transformed from former under-utilized industrial areas into economic engines that are now home to tens of thousands of jobs along with housing, revenues, retail, and other amenities. The Phase I Study 72 Item # 2.
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estimated that the Milpitas Innovation District, if developed with a strong concentration of innovation uses, could accommodate about 3.85 million square feet of new development and about 14,000 jobs, and generate millions of dollars in net revenues to the City’s General Fund.
The Innovation District case studies considered four (4) different and distinct case studies, each demonstrating different indicators of success. Some, like Mission Bay (San Francisco) or Seaport (Boston), have become fully established neighborhoods among a bustling metropolitan space.
Others, like Peery Park (Sunnyvale) and Warm Springs (Fremont), are at different stages in their development. No single case study is a perfect match for the unique and current conditions in Milpitas; each city took a different approach to implement an Innovation District and ensure long-term success based on their particular situation. That said, the case studies did provide some common themes in terms of approaches and issues to be addressed in developing Innovation Districts.
Key topics included:
• City Governance.
• Funding and Incentives Strategies.
• Innovation and Employment Anchors.
• Location and Market Advantages.
• Planning and Design.
• Overcoming Challenges.
Primary lessons of key action types important to Innovation District establishment are listed below with a broader summary provided in the tables further below:
• Zoning for flexible commercial/industrial uses, mixed-use, “innovative” land use mixes. • Streamlined permitting to accelerate projects.
• Master planning to articulate district vision and objectives. • Impact fees and incentive zoning to supply public infrastructure. • Use of tax increment and other funding tools to support area transformation. • City and regional leadership in promoting Innovation District, raising funds, and investing funds.
• Investments in mobility and place-making to create a great and accessible place. • Attraction of innovation anchor tenant (e.g., large firm; research institution etc.) and/or innovation cultivators (e.g., incubators/accelerators) to signal transformation to Innovation District and catalyze arrival of other innovation entities. 73 Item # 2.
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Table 9 summarizes these key themes, approaches, and lessons for the City of Milpitas.
Table 10 provides a summary of information of all the Innovation District case studies. While each case study has a unique background and components, they also each include some form of public-private partnerships, public investments and incentives, anchor institution(s) acting as catalysts, and redevelopment of underutilized land.
Table 9 Themes from Case Studies
Theme Conclusions Lessons Learned for Milpitas
City Governance • Strong and public leadership by City (all case studies)
• Public-private partnerships with major
developers or employers (Mission Bay,
Seaport, Peery Park)
• Innovation district branding and place
marketing (Seaport)
• Clear plans and policies (Mission Bay,
Warm Springs, Peery Park)
City leadership and branding along
with formation of strong
partnerships will be critical to
bringing major investors,
businesses and partners to the
Innovation District.
Funding and Incentive
Strategies
• Incentives (Mission Bay, Seaport)
• Community Benefits Program/Incentive
Zoning (Peery Park)
• CFDs /Tax increment financing (Mission
Bay, Seaport)
• Impact fees (Warm Springs, Peery Park)
• Regional grant sources (Warm Springs,
Peery Park)
• Streamlined permitting to accelerate
projects (Seaport, Warm Springs, Peery
Park)
City should consider raising funds
through grants, seek to attract
investors, academic institutions,
and incubators/accelerators, and
establish a fund for property
acquisition in the Innovation
District.
City could also explore EIFD’s and
CFD’s as sources of additional
funding as well as Community
Benefit programs. Investment of
development impact fees will also
support Innovation District
development.
Innovation & Employment
Anchors
• Innovation-focused incubator-accelerator
facilities (Mission Bay, Seaport, Warm
Springs)
• District defined mostly by a single
employer or industry (Mission Bay, Warm
Springs)
• District has multiple anchors or industries
(Mission Bay, Seaport, Peery Park)
• Local educational institutions supported
district growth (Mission Bay, Seaport)
The attraction of anchor(s) for the
Innovation District will be a high
priority. These anchors help define
Innovation Districts and will act as
an important signal to other
investors, businesses, and
partners.
Location & Market
Advantages
• Innovation districts occur in both
metropolitan cities (Mission Bay, Seaport)
or more suburban settings (Peery Park,
Warm Springs).
• Innovation Districts are located in regions
where innovation culture already exists or
is nearby, where high educational
attainment is accessible (Mission Bay,
Seaport, Peery Park, Warm Springs)
• Development of Innovation District timed
well with demand for office space (Peery
Park)
The City of Milpitas will benefit
from its location in an innovation
region. The Transit Center
(BART/VTA Light Rail) that
connects Milpitas to the rest of
Silicon Valley along with its access
to major highways and central
location, and more modest land
costs should act as important
advantages.
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Planning & Design • Creation of a Specific Plan (Peery Park), Master Plan (Mission Bay), or Community
Plan (Warm Springs) to articulate district
vision and objectives
• Mixed-use, transit-oriented, walkable
district (Seaport, Mission Bay, Warm
Springs)
• Zoning for flexible commercial/industrial
uses, mixed-use, “innovative” land use
mixes (Mission Bay, Peery Park, Warm
Springs)
• New transit development assisted growth
of district (Seaport, Warm Springs)
The City’s new MMSP and its focus
on creating a walkable, mixed-use
environment is consistent with
other Innovation Districts that
envision mixed-use, urban-dense
neighborhoods with “live-workplay” amenities. Access to BART/VTA Light Rail is also an
important advantage.
Overcoming Challenges • Innovation district emerged as response to economic difficulties (Warm Springs)
• Slow growth to start, taking several years
to overcome (Mission Bay)
• Difficulty establishing a new
neighborhood identity; balancing
community services (libraries, parks,
etc.) with amenities like retail or
restaurants (Seaport, Mission Bay)
• Rising success of Innovation District
resulted in higher rents displacing older
tenants (Seaport)
• Macroeconomic factors affecting the longterm viability of the district (Seaport) The City should not expect a simple
and straight-line path to Innovation
District growth. As seen at other
Innovation Districts, activity can be
slow at the start, will fluctuate with
economic cycles, and is often
dependent on the decisions and
preferences of private landowners.
Once established, new challenges
can emerge.
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Table 10 Case Study Summary Matrix
Innovation
District Typology [1] Status
Sector Focus
& Innovation
Anchors
Land Use
Shifts
City Leadership
& Governance
Financing
Mechanisms &
Funding Sources
Zoning,
Planning, and
Policy
Innovation
Placemaking
Ingredients for
Success
Challenges
Faced
Mission Bay
San Francisco Anchor plus Established
Biotech &
startups: UCSF,
Bayer, Rock Health,
Uber
Industrial →
Residential,
Healthcare,
Office
A public-private
partnership between
the City/County,
developers, and
anchor institution led
development.
Community Facilities
Districts and land
donated to spur
development, with
private development
entering once Mission
Bay had demonstrated
success.
A master plan,
affordable housing
requirements, and
flexible zoning shaped
public amenities and
mixed-use, urbandense placemaking.
UCSF-affiliated
biotech incubators
and research centers
Partnership with
developer owning
significant portion of
land and agreement
with UCSF as an anchor
institution spurred
further development.
Faced initial slow start
lasting several years,
until arrival of UCSF
and implementation of
infrastructure
financing tools.
Seaport Boston Re-imagined urban
areas
Established
Biotech &
startups: Vertex
Pharmaceuticals,
MassChallenge
Industrial →
Multifamily,
Office
Mayor’s Office played
large role in
accelerating Seaport’s
growth, brokering
deals for incentives
($$, office space) for
potential tenants
Development was largely
privately funded but
combined with tax
incentives to attract
major tenants
Public agencies
advanced policies to
encourage affordable
housing, innovation
district expansion
District Hall and
MassChallenge
City efforts to attract
anchor tenants and
cultural institutions
transformed the area
to a live-work-play
destination
Challenges arose
closer to full build-out
as the City realized a
need to balance a
variety of business
types and sizes as
more traditional and
established companies
arrived.
Peery Park
Sunnyvale
Urbanized science
park
Emerging/In
progress
Tech: LinkedIn,
Apple
Industrial →
Flex, Office,
Industrial
City developed a plan
to respond to market
demand for
commercial/office
development in Peery
Park.
A combination of city
funds and fees,
supported by a
Community Benefits
Program to capture
private funding for
community
infrastructure and
amenities.
The Peery Park Specific
Plan identifies main
objectives and vision
for development
towards a mixed-use
village.
Pathline Park
The district benefits
from a central location
in Silicon Valley; City
responded to rising
market demand for
office space.
Major investments in
infrastructure and land
needed to attract
businesses.
Warm Springs
Fremont
Urbanized science
park
Emerging/In
progress
Advanced
Manufacturing:
Tesla
Industrial →
Industrial,
Office/Flex,
Residential
The City invited
advanced
manufacturing sector,
building upon existing
R&D building types.
Private developers to
provide projects and
contribute to public
infrastructure via impact
fees. Improvements to
urban space taps into
regional funding
sources.
The Warm Springs
Community Plan
establishes a vision for
development towards a
mixed-use urbandense form.
Warm Springs
Innovation Center
Building on existing
advanced
manufacturing sector
and bolstered by new
BART station, the City
is in a good position to
enhance the area with
new land uses and
dense development
Difficulties attracting
office/R&D to
complement existing
residential and
advanced
manufacturing uses.
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5. INNOVATION DISTRICT ACTION PLAN
This Action Plan is intended to guide the City’s actions as it works to catalyze its new Innovation District. The Action Plan represents a set of actions the City of Milpitas should take to support the development of an Innovation District within the larger Milpitas Metro Specific Plan area. As also documented in the Phase I Study, the economics of commercial development in the Innovation District is challenging, which makes the City’s actions to incentivize and support Innovation District development that much more important.
The Innovation District Action Plan builds upon the visioning and policies of the City’s General Plan, Economic Development Strategy, and Milpitas Metro Specific Plan and recommends a series of actions the City of Milpitas could take to support the growth of the City’s Innovation District.
The recommended actions were developed based on consideration of current development economics in Milpitas (see Phase I Report/ Chapter 2), the current “on-the-ground” characteristics of a key set of commercial, industrial, and mixed-use parcels identified by the City (see Chapter 3), case studies of other established or developing Innovation Districts (see Chapter 4), and the substantial efforts of City staff to assess a broad range of options that might be suitable for the City of Milpitas.
The recommended Action Plan includes fourteen (14) actions that are divided into the following 3 categories, which are designed to help catalyze the Innovation District:
16 • Incentivizing New Development.
• Funding and Investing.
• City Leadership, Outreach, and Partnerships.
Each action item is described, along with expectation in terms of timing, cost, and funding. The suggested timeline for adopting actions is summarized in Table 11 below. While action adoption by City staff is slated to occur at various times over the next five years, the actual execution of the action items may extend over several years.
16 Other potential tools were considered but not selected as part of the key fourteen (14) actions.
Examples include funding tools, such as Business Improvement Districts (BID’s). While this tool could become appropriate for the Innovation District at a later stage of development, it is not considered appropriate at the current time. BID’s are more appropriate in established areas with successful and up-and-coming businesses where there is broad interest in a specific set of services/expenditures. 77 Item # 2.
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Table 11 Gantt Chart of Action Plan Timeline
SOURCE: ECONOMIC & PLANNING SYSTEMS
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I n c e n t i v i z i n g N e w D e v e l o pm e n t
Action #1. Develop an Internal Working Group to Support the Implementation of the Innovation District Action Plan
The City of Milpitas will establish an Internal Working Group that will focus on the implementation of the Action Plan. The Working Group will be comprised of representatives from the following Community Development City Service Areas: City Manager’s Office; Economic Development; Planning; Building Safety and Housing; Engineering Land Development; and Fire Prevention. The Working Group will ensure inter-departmental coordination and collaboration as the City looks to catalyze its new Innovation District and assist the development community with consistency and certainty.
Timing of Action Adoption: Short Term (Year 1)
Costs to Implement: There is no cost to implement this action as the working group will utilize existing resources and personnel.
Funding Source: N/A.
Action #2. Develop Flexible Permitting Processes for the Innovation District The City of Milpitas has already taken numerous steps to streamline its permitting processes but may explore more solutions based on the initial proposed development projects. The Office of Economic Development facilitates preliminary plan review meetings with applicants interested in interdepartmental City staff review of preliminary or conceptual designs. These meetings result in identifying project-related concerns immediately, which helps in planning for official application submittal. In addition, the Building Safety and Housing Department currently implements several expedited plan review services for eligible tenant improvements, renovation or rehabilitation, and new construction. Once additional staffing is added to the Building Safety and Housing Department, the City may explore developing a prioritization system for development applications. Furthermore, the Planning Department, through its Zoning Administrator, conducts public hearings on minor land use and development permits as a way of reducing the processing time of minor entitlement applications. The Planning Department is utilizing American Rescue Plan Act (ARPA) funding to partner with Symbium to implement Build Business and Plan Check, a suite of web applications aimed at streamlining commercial development. Build Business will allow businesses and developers to easily identify potential locations based on the City’s existing zoning regulations. Symbium Plan Check will allow applicants to submit planning permit applications online and automatically screen applications for compliance with the City’s zoning regulations and development standards, which will streamline the planning review process.
Timing of Action Adoption: Short Term (Year 1)
Costs to Implement: Implement of this action may require additional staffing and dollars to fund staff overtime to perform expedited services. This may take place if staff can work afterhours, and if paid for by the development community.
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Funding Source: Funding from other City revenue sources may be required for additional staffing and/or overtime pay.
Action #3. Temporarily Reduce or Defer Building Permit, Plan Check, and Other Processing Fees
Like other cities, the City of Milpitas charges for building permits, plan check, as well as other processing and cost recovery fees for new developments. The City could, for example, consider temporarily reducing these permit fees by 10 percent or deferring such fees for the first 300,000 square feet of new commercial development to occur in the Innovation District. This will provide an incentive to the early developers, businesses, incubator/accelerator, and/or academic institutions to invest in the Innovation District.
Timing of Action Adoption: Short Term (Year 1)
Costs to Implement: The City may not receive typical cost recovery fees from early Innovation District developments participating in the temporary fee reduction/deferral program. As the City operates under a Cost-Recovery system, there would be a potential loss in permit revenues.
This may be offset by new revenue sources to the General Fund and job creation for new commercial development occurring in the Innovation District.
Funding Source: Funding from other City revenue sources may be required to “backfill” any loss or delay in fee revenue.
Action #4. Temporarily Defer Impact Fees for Innovation District Developments The Transit Area Development Impact Fee (TADIF) and the Non-Residential Affordable Housing Fee (Commercial Linkage Fee) are critical sources of revenue for infrastructure investment in the Metro Area, but also add to the cost of new commercial development. An impact fee deferral program could be offered to encourage economic development where the first 300,000 square feet of new commercial development in the Innovation District are allowed to pay in phases, such as, a small portion of the TADIF Fee and Commercial Linkage Fee at the time of building permit issuance and defer paying the remainder of the fees until Certificate of Occupancy.
Shifting these fees until later in the permit process may improve developer cashflows and financing. This policy could be enacted in concert with the next update to the TADIF, which is anticipated to commence sometime in late 2022/early 2023.
Timing of Action Adoption: Short Term (Year 1)
Costs to Implement: The adoption of this policy may delay fee revenues accrued from new commercial development (first 300,000 square feet) until later in the permit process. This may be partially offset by new revenue sources to the General Fund and job creation for new commercial development occurring in the Innovation District.
Funding Source: Funding from other City revenue sources may be required to “backfill” any delay in fee revenue.
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Action #5. Removal of Parking Minimums for Innovation District Developments The City of Milpitas already provides greater flexibility around parking requirements in the Metro Area due to its transit-oriented nature. The City could go one step further for new commercial developments in the Innovation District and either further reduce parking minimums or remove all minimums in the Innovation District. Developers would then be able to select the amount and type of parking they provide on expected demand from their tenants, thereby reducing parking costs where it makes sense.
Timing of Action Adoption: Short Term (Years 1)
Costs to Implement: There is no cost to implement this action as existing resources and personnel will be utilized.
Funding Source: N/A.
Action #6. Develop Development Agreement and Community Benefit Agreement Templates for Innovation District Developments
For larger commercial development opportunities, the City of Milpitas encourages collaborating with the proposing developers through Development Agreements. The Development Agreement would provide the developer with more certainty over its development opportunity and approvals, while allowing the City to ensure the project provides substantial benefits to the City, potentially through a related Community Benefit Agreement. A Development Agreement and Community Benefit Agreement may also grant additional development rights to new commercial developments in the Innovation District, for example, as seen in a Development Opportunity Reserve17 (D.O.R.) program. Developing template agreements for the development community is critical to the Innovation District as it helps maintain a level of certainty and consistency in the City’s development process.
Timing of Action Adoption: Medium Term (Year 3)
Costs to Implement: There is no cost to implement this action as the City will utilize existing resources and personnel.
Funding Source: N/A.
Action #7. Performing Technical Due Diligence for Innovation District Developments
The City of Milpitas could offer to co-sponsor due diligence technical studies to support developer exploration of development opportunities. In cases where developers are interested in specific development opportunities but wish to study a key issue that could determine whether they 17 Development Opportunity Reserve (D.O.R.) is a service provided by Kosmont Companies that allows cities to allocate density to commercial development projects that deliver community benefits and public amenities.
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move forward or not, the City could consider co-sponsoring and funding the necessary study.
The nature of the study will likely vary by opportunity (for example, environmental assessments, transportation analyses, development pro formas, etc.) and the specific City support would be determined on a case-by-case basis.
Timing of Action Adoption: Medium Term (Year 3)
Costs to Implement: Consulting costs will vary depending on specific services provided.
Funding Source: Funding would likely originate from the Office of Economic Development’s Operating Budget.
F u n d i n g a n d I n v e s t i n g
Action #8. Exploration of Financing Tools (i.e., EIFDs and CFDs) for the Innovation District
Cities throughout the U.S. have used tax increment financing tools available in their specific State to re-invest new property taxes generated back into their Innovation Districts. In many cases, tax increment funding has provided the primary public tool for investments in the Innovation District after the dissolution of Redevelopment Agencies in California. While less effective than the earlier tax increment funding tools, the Enhanced Infrastructure Financing District (EIFD) has become the primary route through which tax increment can be captured and invested. It is being used along the San Francisco waterfront to help fund infrastructure and support mixed-use developments. Community Facilities Districts (CFD) are also being combined with EIFD and other tax increment tools to enable earlier issuance of bonds to fund infrastructure.
Timing of Action Adoption: Short Term (Year 1)
Costs to Implement: EIFD studies typically focus on estimating the level of tax increment revenues that could be generated under different approaches. Consultants would then need to support a process of adoption by City Council. Approximate consulting cost is estimated at $75,000.
Funding Source: The City will need to identify funding for EIFD and CFD evaluation. Funding is likely to come from other City revenue sources.
Action #9. Funding for a Strategic Property Acquisition Reserve (SPAR) Fund Ownership of land within an Innovation District by a City provides an opportunity to directly shape new development investment. Land ownership may allow the City to offer competitive leases to new partners/developments or site assembly efforts that could help catalyze the Innovation District. It could also allow for joint development opportunities, for example, for a new building that could house an incubator as well as other uses. The SPAR will require significant funding. Due to costs depending on the nature and the size of land acquisitions, it is likely to be in the $3-4M dollar range, and action adoption is anticipated to take place in the short term (Year 2). Potential funding sources could include a temporary redirection of a small 82 Item # 2.
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percentage of revenues from the City’s Transient Occupancy Tax fund or sales taxes from the Great Mall to the SPAR fund as a way of providing seed funding for economic vitality, new General Fund revenues in the future, and job creation.
Timing of Action Adoption: Short Term (Year 2)
Costs to Implement: The potential acquisition of land in the Innovation District will require substantial investment. Costs will depend on the nature and the size of land acquisitions though is likely to be in the millions of dollars. Some outside consulting (e.g., appraisers), will also be required to identify, oversee, and negotiate land transactions.
Funding Source: Potential funding sources could include a temporary redirection of a small percentage of revenues from the City’s Transient Occupancy Tax fund or sales taxes from the Great Mall to the SPAR fund as a way of providing seed funding for economic vitality, new General Fund revenues in the future, and job creation.
Action #10. Pursue Planning Grants and Technical Assistance for Innovation District Evolution
The City of Milpitas could pursue planning grants to further plan for and implement the Innovation District. Planning grants may include regional (i.e., ABAG, MTC, etc.), state (i.e., GOBiz, etc.), and federal (i.e., EDA). The City might also engage an Urban Land Institute (ULI) Technical Assistance Panel (TAP) to further explore the strategies to catalyze the Innovation District.
Timing of Action Adoption: Short Term (Year 2)
Costs to Implement: There is no cost to pursue planning grants as the City will utilize existing resources and personnel. Approximate cost for ULI TAP is about $30,000.
Funding Source: Funding likely to originate from the Office of Economic Development Operating Budget.
C i t y L e a d e r s h i p , O u t r e a c h , a n d P a r t n e r s h i p s Action #11. Develop a Branding Initiative for the Innovation District The City of Milpitas could lead the development of a branding initiative for the Innovation District. The strategic place branding will allow the Innovation District to turn from a place into a brand. A consultant will help develop some of the following: Innovation District logo, tagline, and slide decks for City staff to use when pitching to investors/developers/businesses, graphics, and marketing. The branding initiative will envision Smart City design and district-scale infrastructure systems.
Timing of Action Adoption: Short Term (Year 2)
Costs to Implement: City staff is budgeting approximately $30,000 for a consultant to assist with a strategic place branding initiative.
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Funding Source: Funding likely to come from the Office of Economic Development Operating Budget.
Action #12. Promotion of Innovation District by City Leadership Strong and effective City leadership has consistently been identified as a critical component of successful Innovation Districts across the U.S. City leaders are in a unique position to promote and highlight the City’s Innovation District to marshal internal and external resources towards it, and to help prioritize the economic development efforts. Connections between City leaders and State and federal leadership can also ensure the appropriate focus and receipt of supporting resources.
Timing of Action Adoption: Short Term (Year 2)
Costs to Implement: There is no cost to implement this action as the City will utilize existing resources and personnel.
Funding Source: N/A.
Action #13. Directed Outreach to Businesses, Developers, and Landowners The Office of Economic Development shall proceed with aggressive and targeted outreach to landowners, developers, other potential partners, as well as current Milpitas businesses that might expand into the Innovation District, and businesses outside of Milpitas.
Timing of Action Adoption: Short Term (Year 2)
Costs to Implement: City staff will prioritize its time and resources within existing levels to support outreach.
Funding Source: N/A.
Action #14. Cultivation of Partnership with Educational and Other Innovationoriented Institutions In addition to developers and businesses, there are a range of additional partnerships with nonprofit, public, and private parties that often act as core cultivators of Innovation Districts. If the City can raise funds for strategic land acquisition or infrastructure funding, these funds could be used to support development opportunities with these partners. For example, like other successful Innovation Districts, the City of Milpitas could look to offer lower cost land and/or discounted rents to key Innovation District cultivators such as for an incubator, accelerator and/or an academic institution.
Timing of Action Adoption: Medium Term (Year 4)
Costs to Implement: City staff will prioritize its time and resources to support outreach to potential partners.
Funding Source: N/A.
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APPENDIX A:
Phase 1 Study
85 Item # 2.
T ECHNICAL M EMORANDUM
To: Daniel Degu, City of Milpitas
From: Economic & Planning Systems, Inc.
Subject: Fiscal Benefits of Employment Lands Study Phase 1:
Narrative Summary of Conclusions
Date: October 25, 2021
The City of Milpitas (City) engaged Economic & Planning Systems, Inc. (EPS) to prepare a Fiscal Benefits of Employment Lands Study (Study).
The Study will guide City policy towards a fiscally resilient future based on protection and preservation of employment lands, the expansion and attraction of innovative and competitive businesses, and the evolution of the City’s new Innovation District. The Innovation District, located within the Milpitas Metro Specific Plan (MMSP), provides a vital economic development opportunity to support the City fiscally and economically.
The overall study is divided into two phases, with Phase 1 including the Fiscal Impact Analysis, the Occupation and Wage Analysis, the Residual Land Value Analysis, and the Innovation District Development Scenarios Analysis. Phase 2 will include the development of the Innovation District Framework Plan, a set of potential City policies and actions to help support the evolution and development of the Innovation District.
This memorandum provides a narrative summary of conclusions from these analyses with detailed table sets included in the Appendices. The Phase 1 memorandum, that informs the Phase 2 work, is organized as follows:
Summary of Findings. Summarizes the key findings from the different technical components of the Phase 1 Study.
Fiscal Impact Analysis. Provides a summary of findings concerning the impacts of existing land uses and future development on the City’s General Fund.
Employment Density, Occupational, and Wage Analysis. Estimates the expected number of jobs and wages generated associated with the development and occupancy of different nonresidential developments. 86 Item # 2.
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Innovation District Development Scenarios Analysis. Estimates the different levels of development, jobs, salaries, and net fiscal impacts based on the buildout of different Innovation District land use scenarios.
Summary of Findings
Phase 1 of the Fiscal Benefits of Employment Lands Study provides broad insights into the role and importance of employment lands in Milpitas as well as the opportunities and challenges associated with the creation of a new Innovation District as part of MMSP.1 The overall findings of the Phase 1 work are as follows:
1. Employment lands play a critical economic and fiscal role in supporting essential and critical City services.
2. Cultivation of an Innovation District as a key component of MMSP and City economic development efforts would provide new, expansive benefits to the City.
3. There are challenges to spurring the development of the Innovation District and the City will need to play a proactive role in generating incentives to catalyze the Innovation District.
A more detailed summary of key findings from Phase 1 are provided below:
The successful development of an Innovation District would bring a broad range of substantial benefits (see Innovation District Scenarios Analysis section). The City’s new Innovation District has the potential to accommodate millions of square feet of new Office and Research & Development (R&D) development as well as supportive Hotel and other nonresidential uses. The impacts of the successful development of the Innovation District are estimated in this memorandum and include:
‐ Substantial net revenues to the City’s General Fund.
‐ Accommodation of a range of new professional, scientific, and technology businesses bringing thousands of high-quality jobs.
‐ The broader transformation of the Transit Area Specific Plan (TASP)/MMSP area into a vital mixed-use transit-oriented area.
The City’s current employment lands make substantial and positive net fiscal contributions to the City’s budget. Analysis of the broad set of existing land uses in the 1 This memorandum refers to a range of different geographic areas, including (1) the Transit Area Specific Plan (TASP) area—the planning area of the 2008 Specific Plan; (2) the Milpitas Metro Specific Plan (MMSP) area—the updated/adjusted Specific Plan area that incorporates additional lands to the east of the TASP that form part of the envisioned Innovation District. The proposed Innovation District also is defined geographically in two ways, including a broader Innovation District area as well as a core set of parcels that form the basis of much of the technical analysis in this memorandum. Maps showing these different areas are included in Appendix A. 87 Item # 2.
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Although wages in Milpitas tend not to be as strong as Mountain View, Sunnyvale, and Santa Clara today, full buildout of the Innovation District would accommodate high-quality new jobs and wages for residents in the long term. The strongest annual wages by land use/development types in Milpitas are associated with Class A Office/R&D and Class A Office uses. The lowest annual wages by land use/development types in Milpitas are associated with Hotel, Retail, and Warehouse/Distribution uses. On average, all types of new development in the City are expected to provide positive fiscal contributions to the City, though to varying degrees. The higher property values of new development will generally allow them to make fiscally positive contributions to the City. New hotel development will continue to be the fiscally strongest use, though new Class A Office, Class A Office/R&D, and Retail generate significant fiscal positives. New multi-family residential, Class B office, industrial, and warehouse/distribution uses all generate positive but smaller fiscal impacts. New residential development in the TASP also makes additional contributions towards public services through the payment of the Communities Facilities District (CFD) special tax (see Fiscal Impact Analysis section (new uses)).
The MMSP is intended to support the incremental redevelopment of the identified area into a vital Innovation District. The Innovation District area currently includes a broad range of uses, ranging from public storage to light industrial to hotel uses. With the recent opening of the multi-modal Milpitas Transit Station Center (VTA/BART) and new policies, investments, and improvements, an incremental evolution of these uses is sought towards a more dense, transit-oriented set of employment and supporting uses located near residential development.
There are a broad range of development challenges to achieving the Innovation District vision including the economics of Class A Office/R&D development (see Residual Land Value Analysis section). For jurisdictions throughout the U.S., there are a broad range of development challenges that arise when supporting area transformation. As a result, progress often occurs incrementally and over time. For the Milpitas Innovation District, key challenges include the lack of large and vacant sites, competition for Class A Office/R&D uses among Silicon Valley communities, the high costs of building and parking development associated with Class A Office/R&D uses, high market demand for residential development, the economics of existing uses and competition with other lower-intensity uses (e.g. storage; warehouse/ distribution), and the current lack of connectivity and sense of place/amenities.
City actions can help spur the evolution and development of the Innovation District.
It will be important for the City to consider the full range of actions to support the goals of the Innovation District, particularly preserving and protecting its employment lands and incentivizing the development of a premier Innovation District. These include a broad range of policies, investments, funding mechanisms, outreach, and partnership pursuit. This is the 88 Item # 2.
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Phase 2 of the Study will take a closer look at the Innovation District, combining existing conditions, case studies, and Phase 1 findings, to develop a set of potential policies and actions to support Innovation District implementation.
Fiscal Impact Analysis
A fiscal impact analysis estimates the impact of different land uses on both the City’s General Fund revenues and expenditures. By comparing the revenue and expenditure impacts, it is possible to determine whether particular land uses are expected to have positive or negative impacts on the City’s General Fund. This analysis examines the fiscal impacts of both existing land uses and potential future developments. Appendix B and Appendix C provide the full fiscal impact analysis table set for existing land uses and future land uses, respectively.
Methodology
The City’s General Fund is a key City fund where a broad range of revenues are deposited and from which expenditures on key public services are made. A number of taxes and other public revenues accrue to the City’s General Fund, including property taxes, sales taxes, and transient occupancy taxes, among others. The General Fund also provides all or a significant proportion of funding for a range of important public services, including police, fire, and public works, among others.
In this analysis, two planning-level fiscal impact analyses are conducted, including (1) estimated fiscal impacts of existing land uses; and (2) estimated fiscal impacts of potential new developments/land uses. The results for existing uses provide insights into the relative fiscal contributions of existing land uses. The results for future uses provide insights into how different land use policies and development types could affect the City’s fiscal situation.
Existing Land Uses
The City of Milpitas 2020-2021 Adopted Budget and Financial Plan provides information on the City’s General Fund revenues and expenditures by category. A range of information was used to distribute these revenues and expenditures between different land uses. Building inventory by land use was a key piece of information. On the revenue side, additional information sources included existing assessed values by land use that supported the estimates of property taxes by land use and taxable sales information by land use that supported the estimates of sales and use tax by land use.
On the expenditure side, an average per service population approach was used. Under this approach, all General Fund expenditures are distributed between residents and workers. Because they are, on average, present in the City for less time, a single worker is given half the weighting of a single resident.2 It is then possible to combine the City’s budget information on existing 2 Service population is a measure that combines both residents and workers, reflecting the fact that they both demand/use City services. Workers are given a partial weighting as they are in the city for a smaller proportion of their time. Because different land uses bring different levels of new service population to the city, different land uses have different public service expenditure impacts. 89 Item # 2.
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New Land Uses
The fiscal impacts of new land uses are estimated using a similar approach with some important differences. For new land uses it is helpful to specify the nature of the new land uses assessed; the land uses/development prototypes considered in this analysis are further described below. In addition, new development will typically have substantially higher assessed values based on their new development value. This requires specific assumptions concerning the development value of different land uses. On the expenditure side, the same service population approach is used. In other words, each new resident or worker is assumed to require the same level of General Fund expenditures as existing residents and workers. As a result, based on information on persons per household and workers per square foot, it is possible to derive General Fund expenditures by land use type.
Impacts of Existing Uses
Land Uses and Approach
Milpitas has a broad range of existing land use types located in different employment areas in the city. The analysis provides planning-level land use-specific conclusions on the net General Fund fiscal impact of existing land uses. The existing land uses in the city of Milpitas are categorized as follows:
1. Single-Family Residential. Including detached and attached units up to and including triplexes.
2. Multifamily Residential. Including apartment houses with 5 or more units, condominiums, and generic multifamily dwellings.
3. Office. Including professional buildings and commercial offices.
4. Industrial: Broad industrial category including manufacturing, warehousing and distribution, R&D facilities, and similarly intensive uses.
5. Retail. Including all shopping establishments and service stations.
6. Hotel. Including all hotel uses.
7. Other Uses. Including everything not captured in above categories. Exemplary uses include hospitals, vacant land, civic uses, parking lots, and other. 90 Item # 2.
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Estimated fiscal impacts by land use are shown in Table 1 and show estimated General Fund revenues, expenditures, and the net fiscal impact associated with each existing land use category.
These results reflect Fiscal Year 2020/21 collective, average impacts of the different existing land use categories.3 Each actual existing development has a differential impact based on the timing of its development and project specifics. The impacts of new development are discussed in the next section.
Key conclusions from Table 1 are as follows:
Residential. Existing residential uses, both single-family and multifamily, indicate the largest fiscal deficits with General Fund revenues covering about 50 percent of General Fund expenditures. This is true even with the attribution of sales and use tax revenues from resident spending to residential uses. This is a common finding for existing residential land uses in California cities.
Office. Existing office uses also generate a net fiscal deficit for the City’s General Fund. This is primarily a reflection of the age of the office building stock (average age of office buildings in Milpitas is over 30 years) that limits the property tax revenue generation. Industrial. The city has a large base of industrial development that varies in specific use type. Overall, existing industrial uses generate a net fiscal positive impact for the City’s General Fund. An important reason for this outcome is the substantial sales and use tax revenues (business-to-business taxes) generated by many industrial uses. Retail. As is common under the State of California’s tax system, retail uses provide a substantial positive fiscal impact to the City’s General Fund. The Great Mall is a key driver of this contribution with additional contributions from retail establishments throughout the city.
Dependence on retail uses and their associated sales tax generation is a common theme for many California cities.
Hotel. Similar to retail uses, hotel uses and their associated transient occupancy taxes also bring a substantial positive fiscal impacts to the City. These revenues can fluctuate substantially with economic conditions.4
As with most California cities, the pandemic-related recession brought challenges to the City of Milpitas, with the primary generators of fiscal revenues (retail and hotel uses) being especially affected by social-distancing guidelines and stay-at-home orders. 3 The analysis distributes the large majority of General Fund revenues and expenditures. Only exceptions are items that are unrelated to land use/development (e.g., transfers in). 4 More recent information than the City’s 2020-2021 Adopted Budget indicates a substantial reduction in Transient Occupancy Tax revenues associated with the pandemic. 91 Item # 2.
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Annual General Fund Impacts Family1 Family1 Office Industrial Retail Hotel Uses Total2 General Fund Revenues
Property Tax $14,774,099 $6,671,212 $544,022 $6,251,994 $1,931,997 $627,253 $941,356 $31,741,933Property Tax In‐Lieu of VLF $3,696,107 $1,668,969 $136,100 $1,564,091 $483,337 $156,923 $235,503 $7,941,031 Sales Taxes $3,752,701 $1,076,926 $822,258 $6,950,982 $15,514,270 $34,669 $220,146 $28,371,951 Real Estate Transfer Tax $370,582 $167,335 $13,646 $156,820 $48,461 $15,734 $23,612 $796,190 Business License Tax $0 $0 $54,661 $199,016 $32,036 $14,356 $65,582 $365,650 Motor Vehicle In‐Lieu $26,708 $7,665 $0 $0 $0 $0 $647 $35,020 Other Taxes $397,290 $175,000 $68,307 $355,836 $80,496 $30,089 $89,841 $1,196,860 Franchise Fees $3,221,727 $924,550 $192,907 $702,353 $113,058 $50,663 $309,528 $5,514,787Transient Occupancy Tax $0 $0 $0 $0 $0 $13,452,683 $0 $13,452,683 Licenses, Permits, and Fines $5,787,719 $1,660,922 $346,551 $1,261,752 $203,105 $91,015 $556,055 $9,907,120 Total Revenues $27,933,537 $10,508,610 $1,974,045 $15,522,917 $17,842,927 $14,286,373 $2,116,925 $90,185,334 31% 12% 2% 17% 20% 16% 2% 100%
General Fund Expenditures
General Government $2,511,645 $720,775 $150,390 $547,551 $88,140 $39,497 $241,306 $4,299,304Economic Development $534,026 $153,251 $31,976 $116,420 $18,740 $8,398 $51,307 $914,118 Building Safety & Housing $4,032,635 $1,157,260 $241,462 $879,135 $141,515 $63,415 $387,436 $6,902,858 Engineering $1,367,502 $392,437 $81,882 $298,122 $47,989 $21,505 $131,383 $2,340,819Finance $2,545,109 $730,379 $152,393 $554,847 $89,314 $40,023 $244,521 $4,356,586Fire $16,252,557 $4,664,053 $973,154 $3,543,140 $570,341 $255,581 $1,561,465 $27,820,292Human Resources $1,227,784 $352,341 $73,516 $267,663 $43,086 $19,308 $117,959 $2,101,657Information Technology $2,174,120 $623,915 $130,180 $473,969 $76,295 $34,189 $208,879 $3,721,547 Planning $579,456 $166,289 $34,696 $126,324 $20,334 $9,112 $55,671 $991,883Police $21,940,150 $6,296,242 $1,313,710 $4,783,064 $769,932 $345,021 $2,107,901 $37,556,020Public Works $5,348,454 $1,534,865 $320,249 $1,165,990 $187,690 $84,107 $513,853 $9,155,209Recreation & Community Services $1,905,131 $546,722 $114,074 $415,328 $66,856 $29,959 $183,036 $3,261,106 Total Expenditures $60,418,568 $17,338,528 $3,617,682 $13,171,555 $2,120,232 $950,116 $5,804,717 $103,421,399 58% 17% 3% 13% 2% 1% 6% 100%
Annual Net Impact on General Fund ($32,485,031) ($6,829,918) ($1,643,637) $2,351,362 $15,722,695 $13,336,257 ($3,687,792) ($13,236,065) Source: Economic & Planning Systems
[1] Residential developments in the TASP/CFD area pay an additional annual CFD special tax toward the provision of public services throughout the TASP. These revenues do not flow into the City's General Fund and therefore are omitted from this table. [2] Despite the negative total annual General Fund impact displayed, the City's General Fund does balance as required by State law. The negative value shown is due to the omission of certain budget items not affected by existing land uses as considered in this analysis. 92 Item # 2.
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Land Uses and Approach
To estimate the fiscal impacts of potential new developments on the City’s General Fund, City staff and EPS considered nine (9) development prototypes across a range of land uses. These prototypes were selected as they represent development types that might be considered for development within the Innovation District and the broader MMPS. The prototypes examined are as follows:
1. Mid-Rise Multifamily Residential. Apartment building of 7 stories in height with a density of about 90 Dwelling Units per Acre.
2. High-Rise Multifamily Residential. Apartment building of 12 stories in height with a density of about 180 Dwelling Units per Acre.
3. Class A Office. A 5- to 8-story office building with high-quality finishes, amenities, and systems.
4. Class B Office. A 3-story office building with mid-quality finishes, amenities, and systems.
5. Class A Office/R&D. A 4- to 5-story commercial building with more flexible space that can accommodate both office and R&D uses.
6. Light Industrial. A 1- to 3-story building intended for production, processing, and assembly activities that do not generate noise, odors, or fumes to the degree a heavy industrial use would.
7. Warehouse/Distribution.5 A 1-story building intended for warehousing and logistic uses.
8. Retail. A traditional 1-story commercial building with substantial parking and a low Floor Area Ratio intended for on-site retail sales.
9. Hotel. A 210-room hotel with 650 gross square feet (sq. ft.) per room.
Fiscal impacts for the new prototype developments were derived using the same general methodology as for existing uses, with the major difference arising in the assessed value assumptions.6 For new uses, development values/assessed values are based on recent market 5 Warehouse and distribution uses include logistics/fulfillment centers. 6 Assessed value represents the basis on which property owners pay their property taxes. For existing developments, County Assessor records provide information on actual assessed values. For new development, the assessment is set at the sales price or property value of the new development. For for-sale properties, new development will be assessed at its sale price. For new income (rental) properties, the assessed value of the new property will be estimated by the Santa Clara County Assessor’s Office on either a capitalized value or total cost basis (see next footnote). 93 Item # 2.
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Results
As shown in Table 2, on a per-acre basis, the new development prototypes all cover their estimated costs and nonresidential uses generally provide greater annual fiscal surpluses to the City’s General Fund. Hotel uses provide the greatest fiscal impact at $826,580 per acre, though as experienced during the pandemic, these revenues sources are subject to fluctuation with economic conditions. After Hotels uses, Class A Office ($85,406), Retail ($63,925), and Class A Office/R&D ($51,222) uses provided the next highest fiscal impact per acre. The next set of uses in order of positive fiscal impact per acre include, High-Rise Residential ($28,115), Light Industrial ($22,648), Class B Office ($14,299), Warehouse and Distribution ($13,527), and MidRise Residential ($9,153). The higher development values and associated property tax generation by new development are a key driver of the improved fiscal results. Employment uses often generate higher fiscal surpluses as opposed to residential uses, due to their lower service population generation and subsequently lower impact on General Fund expenditures.
It is important to note that these results represent planning-level averages and individual developments will vary from these results based on project specifics and market timing. Over time, when properties do not turnover (are not sold), property tax revenue generation for all building types often declines gradually due to Proposition 13 limits on assessed value increases through time. The CFD special taxes paid by new residential development in the TASP are not included in this table but are discussed below (these revenues do not flow directly into the City’s General Fund but they do support the provision of public services in the TASP).8 Key conclusions from Table 2 are as follows:
Residential. New mid-rise development prototypes—a predominant recent development type in the TASP—are expected to generate sufficient General Fund revenues annually (about $333,000) to cover the new General Fund expenditures (about $315,000) with a positive fiscal surplus of about $18,000 or $9,000 per acre. New high-residential development prototypes (a product type that is yet to be developed in the city high-rise residential) are also expected to generate a positive fiscal surplus of about $56,000 for the prototype, equivalent to $28,000 per acre, with higher General Fund revenue and expenditure impacts than new mid-rise development. The significant property tax revenues generated by new 7 Development values (and hence assessed values of new development) were estimated using a capitalized value approach driven by market rent/lease rate information and capitalized rates. Rents and associated values were developed using 2019 data to avoid the impact of the pandemic-induced market downturn. Capitalized values were developed as part of the Residual Land Value Analysis section. A glossary of terms is provided in Appendix D. 8 The Transit Area Specific Plan (TASP) is the 2008 document that sets forth the vision, design guidelines, and policies for the City to redevelop the area surrounding the now opened Milpitas BART station. The new Milpitas Metro Specific Plan represents an update to this document. 94 Item # 2.
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Property Tax $191,702 $397,211 $352,556 $59,768 $199,254 $78,611 $39,374 $68,201 $126,707 Property Tax In‐Lieu of VLF $47,959 $99,372 $88,201 $14,952 $49,848 $19,666 $9,850 $17,062 $31,699 Sales Taxes $28,005 $57,993 $156,730 $31,010 $91,922 $40,181 $25,964 $254,244 $801 Real Estate Transfer Tax $5,207 $10,788 $4,788 $812 $2,706 $1,068 $535 $926 $1,721 Business License Tax $0 $0 $10,032 $2,006 $5,016 $1,505 $463 $1,191 $614 Motor Vehicle In‐Lieu $218 $437 $0 $0 $0 $0 $0 $0 $0
Other Taxes $5,425 $11,225 $14,820 $2,818 $7,722 $2,572 $998 $2,118 $2,335Franchise Fees $21,341 $42,681 $57,382 $11,476 $28,691 $8,607 $2,648 $6,814 $3,513Transient Occupancy Tax $0 $0 $0 $0 $0 $0 $0 $0 $1,916,250Licenses, Permits, and Fines $38,338 $76,675 $103,086 $20,617 $51,543 $15,463 $4,758 $12,241 $6,311 Total Revenues $332,770 $685,158 $772,774 $140,642 $428,980 $165,101 $83,592 $360,681 $2,087,616 per Acre $166,385 $342,579 $154,555 $28,128 $85,796 $33,020 $16,718 $72,136 $835,046 General Fund Expenditures
General Government $3,217 $6,433 $3,537 $707 $1,768 $530 $163 $420 $217Economic Development $1,368 $2,736 $1,504 $301 $752 $226 $69 $179 $92Building Safety & Housing $10,329 $20,658 $11,357 $2,271 $5,678 $1,703 $524 $1,349 $695 Engineering $3,503 $7,005 $3,851 $770 $1,926 $578 $178 $457 $236Finance $3,260 $6,519 $3,584 $717 $1,792 $538 $165 $426 $219Fire $104,073 $208,146 $114,425 $22,885 $57,212 $17,164 $5,281 $13,588 $7,005Human Resources $1,572 $3,145 $1,729 $346 $864 $259 $80 $205 $106Information Technology $2,784 $5,569 $3,061 $612 $1,531 $459 $141 $364 $187Planning $1,484 $2,968 $1,632 $326 $816 $245 $75 $194 $100Police $140,493 $280,986 $154,468 $30,894 $77,234 $23,170 $7,129 $18,343 $9,456Public Works $34,249 $68,497 $37,655 $7,531 $18,828 $5,648 $1,738 $4,472 $2,305Recreation & Community Services $8,133 $16,266 $8,942 $1,788 $4,471 $1,341 $413 $1,062 $547 Total Expenditures $314,464 $628,929 $345,743 $69,149 $172,872 $51,861 $15,957 $41,057 $21,166 per Acre $157,232 $314,464 $69,149 $13,830 $34,574 $10,372 $3,191 $8,211 $8,466 Annual Net Impact on
General Fund $18,305 $56,229 $427,031 $71,493 $256,109 $113,239 $67,635 $319,624 $2,066,450 per Acre $9,153 $28,115 $85,406 $14,299 $51,222 $22,648 $13,527 $63,925 $826,580 Source: Economic & Planning Systems
[1] The current CFD special tax rate is about $650 per unit annually. As a result, mid‐rise residential developments (see prototypes above) in the TASP/CFD area generate a significant additional annual $117,000 in tax revenue per acre of development and high‐rise developments an additional $234,000 per acre. The City uses these revenue streams to support additional public safety services in the TASP.
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Light Industrial and Warehouse/Distribution Uses. Light Industrial uses and Warehouse/Distribution uses are both estimated to generate positive annual net fiscal impacts. Their expected revenue generation is sufficient to cover their relatively modest costs, though the lower density nature of these developments means modest per acre fiscal positives. On a per acre basis, light industrial uses generate a fiscal surplus of $23,000 per acre and warehouse and distribution uses about $14,000 per acre. Hotel and Retail Uses. As is typical under the State of California’s system of public finance, new hotel uses and retail generate strong fiscal surpluses to the City’s General Fund. Hotel uses, with their strong transient occupancy taxes (TOT) and more modest public service demands, generate the highest fiscal surplus estimated. For Milpitas and the hotel development prototype evaluated (210 hotel rooms on 2.5 gross acres), the fiscal surplus is estimated at about $825,000 per acre. New retail uses also generate a positive fiscal surplus due to their strong sales and use tax generation. For Milpitas and the relatively low density retail development prototype evaluated (0.3 FAR, one-story development on 5 gross acres), the fiscal surplus of about $320,000 is spread across a broader land area resulting in a fiscal surplus of about $63,000 per acre.9
CFD/TASP Residential Development. The above results for existing and new land uses are expressed strictly in terms of the fiscal impacts of the various land uses on the City’s General Fund and exclude the role of the TASP’s CFD. For existing and any future residential development inside the TASP, developments pay an additional annual payment towards the provision of public services through a CFD special tax.10 This CFD was formed by the City to support the provision of additional public services for residential uses in the TASP, including police, fire, and storm protection services. The current CFD special tax rate is about $650 per 9 Because of e-commerce and other factors, retail uses are generally re-positioning and/or contracting in California cities so substantial new retail developments are expected to be relatively infrequent.
Smaller, new retail development are occurring on the ground floor of mixed uses buildings typically with residential and office on the higher floors and with structured parking sharing the ground floor with the retail areas.
10 Milpitas’ Community Facilities District (CFD) 2008-1 was formed in 2008 under the authority of the Mello-Roos Community Facilities Act of 1982.
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Employment Density and O ccupation/Wage Analysis
Different types of new workforce development accommodate different types of industries and different numbers of jobs/workers with different average wages/salaries. The sections below provide estimates of the expected employment densities and salaries/wages for selected land uses/development types.
Methodology
There are a range of data sources available that provide information or estimates of employment density (number of jobs per 1,000 square feet of a particular building type) as well as on wage levels by occupation. For employment density, information is often reported at a regional or statewide level. EPS reviewed multiple data sources to determine estimates of the average number of workers per building square foot and the average square feet required per worker. For the wage analysis, the first step was to obtain U.S. Census Bureau information on wages by industry sector by city. A connection was then made between the land use/development types being evaluated and the typical industry sectors occupying those building. It was then possible to estimate average wages of jobs in different building types in different cities. Because wage information by city is imperfect and due to the regional nature of employment markets, an average of the four cities evaluated was calculated to provide a planning-level estimate of future wages by building type.
Employment Density
The relationship between new development (building square feet) and the expected number of new workers accommodated is typically expressed as a jobs or employment density on a jobs per 1,000 square feet basis. Table 3 shows the average expected jobs densities for different types of workplace development. EPS reviewed available data from CoStar in terms of jobs by building square feet for different uses in a range of Silicon Valley cities, reviewed information in different brokerage reports, project-specific information for recent developments where available, and other industry reports.11 There is not sufficient variation between cities or data available to draw distinctions between the same land uses in different cities in Santa Clara County.
11 CoStar Group, Inc. provides a web-based tool that collects data and analytics on commercial real estate industry sales and market trends.
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Retail and Hotel employment densities often vary depending on the type of retail and hotel, though on average employment densities for retail developments are expected to be about 400 square feet per worker (2.5 workers per 1,000 square feet) and for hotel developments about 1,300 square feet per worker (typically about 0.5 workers per hotel room).
Land use
Sq. Ft./
Employee
Workers / 1,000
Sq. Ft.
Light Industrial 500 2.0 Retail 400 2.5 Warehouse and Distribution 1,300 0.8 Class A Office 225 4.4 Class A Office/R&D 300 3.3 Class B Office 300 3.3 Hotel 1,300 0.5 Source: CoStar, Cushman & Wakefield, U.S. Bureau of
Labor Statistics, Moody’s, EPS prior project work.
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Different land use/development types typically accommodate businesses from specific sets of industry sectors. U.S. Census Bureau information (American Community Surveys and associated applications) provide average wages by industry sector by city. EPS first linked different land use/development types to different industry sectors based on typically observed tenant profiles.
Average wages for each of these industry sectors (or set of industry sectors) were then identified for the city of Milpitas and three other Santa Clara County cities – Sunnyvale, Santa Clara, and Mountain View, shown in Table 4.
Table 4. Industries and Annual Wages by Land Use/Development Type Where development types typically accommodate multiple industry sectors with different wages, an average wage was calculated based on the cities’ current mix of those industry types.
Because there is typically a regional market for jobs and because of the potential for outliers/anomalies in individual cites, a four-city average wage was developed by land use/development type.
Land Use/Development Type Milpitas Santa Clara Sunnyvale Mountain
View Primary Industry Sectors
Office/Industrial
Class A Office $121,500 $112,400 $120,900 $130,500 Information; Professional; Management Class A Office/R&D $122,100 $120,600 $135,700 $145,900 Professional; Scientific; Technical Class B Office $78,200 $88,300 $55,300 $80,500 Finance; Insurance; Real Estate Light Industrial $89,500 $120,600 $135,600 $120,600 Manufacturing Warehouse/Distribution [1] $39,300 $43,600 $75,200 ‐ Transportation and Warehousing Retail/Hotel
Retail $34,000 $31,300 $41,100 $51,000 Retail Trade
Hotel $33,900 $21,700 $23,600 $25,800 Accommodation and Food Services [1] Mountain View has a low number of warehouse/distribution jobs, therefore skewing the salary data. For this reason, an average salary is not used in this category as it does not provide a representative comparison.
Source: 2019 1‐Year ACS Estimates, Table S2413; U.S. Census Bureau, OnTheMap Application and LEHD Origin‐Destination Employment Statistics. 99 Item # 2.
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Table 5. Industries and Annual Wages by Land Use/Development Type As shown in Table 5, jobs in Class A Office, Class A Office/R&D, and Light Industrial Uses (especially manufacturing sector) provide the highest average wages. Class B Office jobs accommodate a broader range of industries with, on average, more modest wages.
Warehouse/distribution, retail, and hotel jobs provide relatively lower wages.12 Residual Land Value Analysis
Residual land value is a method for calculating the value of development land. A Residual Land Value Analysis provides important insights on the feasibility of different land uses/development types under current/recent market conditions and City policies. It also provides a tool to explore the extent to which the prospects for development improve as market conditions improve and/or as City policies are adjusted.
In this analysis, EPS conducted residual land value analysis on a set of potential Innovation District and MMSP area development prototypes in partnership with City staff. An initial residual land value analysis was conducted under recent market conditions and, where development prototypes were infeasible, under a potential, alternative set of conditions where market conditions were improved and/or City policies adjusted. The residual land value analyses provide important insights (as summarized further below) in terms of the level of change that may be required to support certain land uses. Appendix E provides the full residual land value table set. 12 Jobs in Warehouse/Distribution include jobs in e-commerce fulfillment centers, such as Amazon.
Land Use/Development Type Annual Wages Primary Industry Sectors Office/Industrial
Class A Office $135,000 Information; Professional; Management Class A Office/R&D $132,000 Professional; Scientific; Technical Class B Office $77,000 Finance; Insurance; Real Estate
Light Industrial $118,000 Manufacturing
Warehouse/Distribution [1] $51,000 Transportation and Warehousing Retail/Hotel
Retail $47,000 Retail Trade
Hotel $25,000 Accommodation and Food Services
Source: 2019 1‐Year ACS Estimates, Table S2413; U.S. Census Bureau, OnTheMap Application and LEHD Origin‐Destination Employment Statistics.
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Methodology
A residual land value analysis specifically estimates the amount developers could pay for land and still meet a hurdle/basic level of return on their investment. A negative residual land value indicates the project is infeasible and a zero residual land value indicates the project is only feasible if land is available at no cost. Feasible projects on private land will need to cover all costs/return requirements and provide a sufficient land value payment to the existing landowner for them to agree to sell their land. Landowner threshold requirements for their land will depend on a range of factors, including, but not limited to (1) existing land uses, leases, and associated revenues streams; (2) land price expectations, sometimes informed by other recent land sales; and (3) general interest of landowner in selling land.
For each of the development prototypes (see below), the residual land value analyses compared the estimated development value of the development prototype once completed to the estimated development costs and return requirements (excluding any land acquisition costs). As a formula:
Residual Land Value = Project Development Value minus Development Costs (excluding the cost to purchase land)
The following assumptions underlie the residual land value analysis:
Project Development Value. Project development value is driven by:
(1) Estimated lease rates, vacancy rates, operating expenses and resulting Net Operating Income; and
(2) The return on investment a project buyer would be looking for in acquiring the completed project (also known as the capitalization rate).
Market conditions are generally the key factor to project development value and change through time with business and real estate cycles.
Project Development Costs. Project development costs include a broad range of costs. The direct costs of construction primarily depend on material costs and construction labor costs, which are in turn tied to development type and height (that affect materials required and type of labor required). Parking requirements and the type of parking required are also key drivers to direct construction costs. Indirect costs are also substantial and include architecture and engineering costs, tenant improvements costs, legal, insurance, and inspection costs, financing costs, and permit fees, development impact fees, and other regulatory requirements.
101
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Land Uses/Development Prototypes Evaluated
Seven (7) different development prototypes were created to support the feasibility analysis, including 5 different workspace prototypes and 2 residential prototypes. Four of the workspace prototypes represent development types that the City seeks to attract into the Innovation District. These include Class A Office (5 stories), Class A Office (8 stories), Class A Office/R&D (4-5 stories) and Light Industrial (3 stories) development types. In addition, the warehouse and distribution prototype is a workspace category that, with e-commerce growing, is being developed and proposed in the city of Milpitas and elsewhere and is studied as a point of comparison. The mid-rise residential development prototype has been increasingly common in the TASP area and is important as a point of reference as well as in terms of developer-decision making when offered residential and commercial development opportunities. High-rise residential development was also considered as a use of interest to the City in appropriate, transitproximate locations.
The prototypes examined include:
Class A Office (5-story). A 5-story office building with high-quality finishes, amenities, and systems.
Class A Office (8-story). An 8-story office building with high-quality finishes, amenities, and systems.
Class A Office/R&D. A 4- to 5-story commercial building with more flexible space that can accommodate both Class A Office and R&D uses.
Light Industrial. A 3-story building intended for production, processing, and assembly activities that do not generate noise, odors, or fumes to the degree a heavy industrial use would.
Warehouse/Distribution. A 1-story building intended for logistics, distribution, and warehouse uses.
Mid-Rise Multifamily Residential. Apartment building of 7 stories in height with a density of about 90 Dwelling Units per Acre.
High-Rise Multifamily Residential. Apartment building of 12 stories in height with a density of about 180 Dwelling Units per Acre.
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Table 6 shows results of the residual land value analysis under early 2020 (pre-pandemic) market conditions and policies as described below. It is important to note that individual project residual land values will vary around the estimated planning-level average based on project specifics and costs/revenues at time of development/going to market:
Class A Office and Class A Office/R&D Development. The combination of 2020 market conditions, development costs, and City policies/requirements indicate that new Class A Office development, at both 5 stories and 8 stories, as well as Class A Office/R&D development are not currently feasible. A comparison of estimated development costs to development value indicates a negative residual land value. These results are consistent with the current lack of these types of development in the city of Milpitas. Light Industrial and Warehouse and Distribution Uses. For light industrial and warehouse and distribution developments the current economic picture is more positive. For the prototypes evaluated, development values cover development costs and generate positive residual land values. Under these assumptions, these developments could pay between $2.2 million and $2.8 million per acre for land and still cover their development costs and meet a hurdle rate of return. This development economics picture is also reflected on the ground in the city of Milpitas with recent developments. Warehouse and distribution uses, in particular, have been driven by increasing demand associated with e-commerce, a trend that has strengthened during the pandemic, and directly results in stronger residual land values.
Residential Development.13 Mid-rise residential development also shows robust development economics using pre-COVID impact lease rates. Assuming the post-pandemic recovery continues and brings lease rates back to pre-COVID levels, new midrise residential development will continue to be a strong land use, with estimated residual land values of about $4.75 million per acre. Recent increases in construction costs may erode the residual land values, though it is likely that developers will continue to be willing to pay more for land that is suitable for and allows residential uses than for other uses. High-rise residential comes with higher per square foot construction costs and at the current time does not appear feasible in Milpitas.
13 The baseline/current analyses are based on pre-COVID lease rates/development values. Forecasts indicate that, depending on the land uses, these rates should be achievable by 2023 or sooner. The application of pandemic lease rates would make residual land values lower for most land uses. 103
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Sensitivity analysis is a tool used to determine how outcomes and conclusions change as difficult model assumptions are adjusted. In this section, the analysis considers how improvements in market conditions as well as different policy approaches could change the outcomes of the residual land value analysis.
In general, it is expected that, over time, the combination of the new multi-modal Milpitas Transit Center (VTA/BART), the envisioned improvements and connections under the MMSP, broader awareness of opportunities in Milpitas, and the continued pre-eminence of Silicon Valley as a global innovation ecosystem will all result in improved market performance.
The sensitivity analyses looked at the land uses that currently return negative residual land values and potentially improved market conditions over time as potential City policy decisions.
For market conditions, improvements were considered where conditions were similar to those in North San Jose in recent years. North San Jose currently shows substantially stronger conditions for office and office/R&D product types but was chosen due to its proximity to Milpitas and its more recent emergence as a jobs center relative to more established jobs center in Palo Alto and other cities. For policy adjustments, the two key areas of focus were reductions in Transit Area Development Impact Fees (TADIF) on nonresidential development in the Innovation District and the easing of parking requirements in the Innovation District. These policy options were selected as they directly affect the feasibility of these new development types. This analysis is particularly pertinent to the development of the Innovation District Implementation Framework in Phase 2 as it provides some indication of potential City actions.
The results of the sensitivity analyses are shown in Table 7 and described below.
Gross FAR/ Building SF/ Residual Per Acre
Prototype Acres Density Units Costs Value Land Value Land Value Workspace
1 Class A Office (5-Story) 5 1.00 217,800 $157,400,000 $104,700,000 ($52,700,000) ($10,540,000) 2 Class A Office (8-Story) 5 1.50 326,700 $250,000,000 $157,100,000 ($92,900,000) ($18,580,000) 3 Class A Office/R&D 5 1.00 217,800 $128,800,000 $96,300,000 ($32,500,000) ($6,500,000) 4 Light Industrial 5 0.50 108,900 $34,200,000 $48,500,000 $14,300,000 $2,860,000 5 Warehouse & Distribution 5 0.40 87,120 $13,200,000 $24,300,000 $11,100,000 $2,220,000 Residential
6 Mid-Rise Residential 2 90 180 $105,300,000 $114,800,000 $9,500,000 $4,750,000 7 High-Rise Residential 2 180 360 $234,700,000 $229,600,000 ($5,100,000) ($2,550,000) * Costs, value, residual land value, and per acre land values are rounded to the nearest hundred thousands 104
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To test an improved scenario, the analysis: (1) improves development values by about $40 million by increasing the assumed lease rate by about 30 percent to be consistent with top of market rents in North San Jose and by reducing capitalization rates by 50 basis points; (2) decreases development costs by about $19 million through a combination of not charging the TADIF fee (about $8 million) and reducing the parking ratio to 2.4 spaces per 1,000 square feet (about $11 million) as opposed to the current number of spaces required per 1,000 square feet of office of 3.3. The parking cost savings assumes the developer can reduce its parking development without affecting the marketability of the office space.
The 5-story Class A Office development prototype showed a baseline negative residual land value of $52.7 million. The overall effect of these changes results in a residual land value of about $7 million or $1.4 million per acre, a substantial improvement. Some of the potential improvements are policy-driven while others depend on a combination of improvements in the area and evolution of Silicon Valley real estate in a way that supports higher rents in Milpitas.
Under these circumstances, Class A Office development might be feasible though may still struggle to compete to purchase land relative to the land values that residential, light industrial, and warehouse and distribution sources can afford to pay.
Class A Office (8-story)
To test an improved Class A Office (8-story) scenario, the analysis makes the same adjustments as for the 5-Story Class A Office building including (1) improved development values through lease rate increase and capitalization rate reduction; and (2) reduced development costs by not charging the TADIF fee and reducing the parking ratio to 2.4.
The 8-story Class A Office development prototype showed a baseline negative residual land value of $92.9 million. The overall effect of these changes results in a residual land value of about $460,000 or $92,000 per acre, a substantial improvement. Some of the potential improvements Building SF/ Residual Per Acre
Prototype Units Costs Value Land Value Land Value
Class A Office (5-Story)
Baseline 217,800 $157,400,000 $104,700,000 ($52,700,000) ($10,540,000) Improved 217,800 $138,100,000 $145,100,000 $7,000,000 $1,400,000 Class A Office (8-Story)
Baseline 326,700 $250,000,000 $157,100,000 ($92,900,000) ($18,580,000) Improved 326,700 $217,200,000 $217,600,000 $400,000 $80,000 Class A Office/R&D
Baseline 217,800 $128,800,000 $96,300,000 ($32,500,000) ($6,500,000) Improved 217,800 $117,800,000 $123,000,000 $5,200,000 $1,040,000 High-Rise Residential
Baseline 360 $234,700,000 $229,600,000 ($5,100,000) ($2,550,000) Improved 360 $234,700,000 $237,800,000 $3,100,000 $1,550,000 * Costs, value, residual land value, and per acre land values are rounded to the nearest hundred thousands 105
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Under these circumstances, higher density Class A Office development can cover its non-land development cost but does not generate sufficient value to cover land costs as well. As a result, there may be a longer wait (for market rents to go even higher) and/or it might require a joint venture with a public agency that is able to provide land at below market rates.
Class A Office/R&D (5-story)
To test an improved Class A Office/R&D (5-story) scenario, the analysis (1) improves development values by about $27 million by increasing the assumed lease rate by about 30 percent; and (2) decreases development costs by about $9 million by not charging the TADIF fee. No change in parking ratio is modelled as the baseline parking ratio is already relatively low at 2.3 space/1,000 square feet.
The Class A Office/R&D development prototype showed a baseline negative residual land value of $32.5 million. The overall effect of these changes results in a positive residual land value of about $5.2 million or about $1 million per acre. Under these circumstances, Class A Office/R&D development might be feasible though may still struggle to compete to purchase land relative to the land values that residential, light industrial, and warehouse and distribution sources can afford to pay.
High-Rise Residential Development
To test an improved high-rise residential scenario, the analysis improves development values by about $8 million by increasing the assumed lease rate by about 4 percent to be consistent with rents near the top end of the San Jose market.
The high-rise residential development prototype showed a baseline negative residual land value of $5.1 million. The improved development values with the increased lease rates turns the residual land value positive to about $1.6 million per acre. While this positive residual land value is not at the same level as the mid-rise residential development or some industrial uses, it does indicate that if residential lease rates increase faster than development costs in the coming years, high-rise residential development would become feasible in Milpitas.
Innovation District Scenarios Analysis
The vision for the Innovation District is described below:
The Innovation District will be an employment destination with modern office, research and development buildings and flexible space for people to interact through “creative collisions” and an innovative ecosystem. This ecosystem supports a risk-taking environment, facilitates idea generation with experimentation being central to the success of the Innovation District. The City of Milpitas aims to plan for a well-connected Innovation District with proximity to public transit and public infrastructure that supports bike paths, pedestrian scale sidewalks, social gathering places, and high-speed fiber. The growing innovation economy in Milpitas will require local leaders to plan long-term, but with short-term flexibility to shape future growth strategies within the Central Manufacturing Area South’s Innovation District. The vision includes shaping our 106
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The Innovation District Scenarios Analysis considers the potential benefits/impacts of Innovation District development assuming District buildout under four (4) potential Innovation District scenarios.
Methodology
The Innovation District Development Scenarios Analysis applies the Employment Density, Occupation and Wage Analysis, and Fiscal Impact Analysis to the four potential Innovation District scenarios to determine the different economic and fiscal impact analyses associated with each scenario. The City’s Office of Economic Development developed four development scenarios in close collaboration with the Planning Department and the MMSP consultant team. The scenarios incorporate a subset of MMSP parcels that have been identified as part of the Innovation District, and indicates the expected land use of each parcel, as well as the assumed density of development (i.e., Floor-Area-Ratios or residential units/acre).
For each scenario, the potential amount of new development by scenario was estimated. The employment density and wage analysis results were then applied to each development scenario to determine the number of jobs that could be accommodated and the associated estimated wages. In addition, the fiscal impact analysis results were also applied to the development scenarios to estimate the expected net impact on the City’s General Fund under each of the scenarios.
Innovation District Scenarios
The City has identified approximately 74 acres of land as part of the Innovation District. This includes roughly 17 acres of land that are located adjacent to the Great Mall and an additional 57 acres of contiguous land. The 57-acre contiguous area includes about 10 acres on the eastern edge of the current TASP area boundary as well as an additional 47 acres of additional land further to the east on both sides of Montague Expressway, that is being incorporated into the new MMSP area.
City staff indicated different potential land uses for each of the parcels within the Innovation District (see Appendix A and Appendix F). Table 8 shows a summary of the allocation of acres by land use for each of the scenarios. Land uses are divided into two broader categories and specific land use categories, including:
Employment Lands. Class A Office; Class A Office/R&D, Class B Office, Industrial, Hotel, Warehouse/Distribution, and Commercial/Retail.14
Non-Employment Lands. Housing, Open Space, Assembly, and Vacant uses are represented.
14 Warehouse/Distribution uses are included as employments lands as they will generate some jobs, although they are often not viewed as job creators.
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Scenario 1. Represents the existing environment and current land use designations in the Innovation District (ID). Current parcel uses include Warehouse/Distribution (43 percent of ID acres), Assembly (14 percent), Class B Office (13 percent), and Industrial (12 percent). Scenario 2. Scenario where Innovation District (ID) parcels are primarily redeveloped as Retail/Commercial (48 percent of ID acres) with a strong ongoing Warehouse/Distribution component (31 percent).
Scenario 3. Represents a potential Innovation District (ID) with a strong presence of new Class A Office and Class A Office/R&D development (50 percent of ID acres), Light Industrial uses (31 percent), continued Hotel uses, and modest amounts of Housing and Open Space. Scenario 4. Represents a potential Innovation District (ID) with an even stronger presence of new Class A Office and Class A Office/R&D development (87 percent of ID acres) along with continued Hotel uses.
To estimate the potential number of jobs, wages, and housing units associated with each of the scenarios, City staff and EPS developed a set of development prototypes that could be associated with the Innovation District land use designations. Table 9 provides the assumed details of the different development prototypes, including density, number of stories, gross building area, and building square feet based on typical development characteristics seen in the region. City staff provided the Floor-Area-Ratios based on their preferred development typologies. As shown, the level of new building development on an acre of Innovation District land ranges from Land Use
Acres % Acres % Acres % Acres %
Employment Lands
Class A Office 0.0 0% 3.6 5% 17.2 23% 31.2 42%
Class A Office/R&D 0.0 0% 4.3 6% 20.2 27% 33.3 45%
Class B Office 9.7 13% 0.0 0% 0.0 0% 0.0 0%
Industrial 8.9 12% 0.0 0% 23.4 31% 0.0 0%
Warehouse/Distribution 32.1 43% 23.4 31% 0 0% 0.0 0%
Hotel 6.8 9% 4.5 6% 6.8 9% 6.8 9%
Commercial/Retail 1.5 2% 35.5 48% 0.0 0% 0.0 0%
Employment Lands Subtotal 59.0 79% 71.3 96% 67.6 91% 71.3 96% Nonemployment Lands
Housing 0.0 0% 0.0 0% 3.7 5% 0.0 0%
Open Space 0.0 0% 3.1 4% 3.1 4% 3.1 4%
Assembly 10.6 14% 0.0 0% 0 0% 0.0 0%
Vacant 4.8 6% 0.0 0% 0.0 0% 0.0 0%
Nonemployment Lands Subtotal 15.4 21% 3.1 4% 6.8 9% 3.1 4% Total 74.4 100% 74.4 100% 74.4 100% 74.4 100%
Scen. 1 Scen. 2 Scen. 3 Scen. 4
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Table 9. Innovation District Development Prototypes/Intensities Applying the development prototype information to the land use scenarios provides the potential development under each of these scenarios as presented in Table 10. As shown, the amount of development on employment lands ranges from 790,000 square feet under Scenario 1 up to
3.8 million square feet under Scenario 4. There is no residential development in Scenarios 1, 2, and 4, with a potential 330 units under Scenario 3.
Table 10. Residential Units and Employment Lands Building Sq. Ft. by Scenario Area FAR/Density Stories Gross Acres
Gross Building
Area/# of Units
Building Sq. Ft./
Acre
Employment Lands Prototypes
Class A Office 1.5 8 5 326,700 65,340 Class A Office/R&D 1.0 5 5 217,800 43,560 Class B Office 0.4 3 5 87,120 17,424 Light Industrial 0.6 3 5 130,680 26,136 Warehouse/Distribution 0.6 1 5 130,680 26,136 Hotel [1] 1.3 6 2.5 136,125 54,450
Commercial/Retail 0.3 1 5 65,340 13,068 Residential Development
Mid‐Rise (5‐7 story) 90 units/acre 7 2 180 90 units
High‐Rise (8‐12 story) 180 units/acre 12 2 360 180 units [1] 210 hotel rooms at 650 gross square feet per room. Gross square footage for hotel uses include the hotel room and additional eating, cooking, laundry spaces, plus other operational areas.
Area Scen. 1 Scen. 2 Scen. 3 Scen. 4
Employment Lands
Class A Office 0 235,224 1,125,155 2,039,784
Class A Office/R&D 0 187,308 879,825 1,449,677
Class B Office 168,664 0 0 0
Industrial 232,454 0 611,582 0
Warehouse/Distribution 839,122 611,582 0 0
Hotel 370,260 245,025 370,260 370,260
Commercial/Retail 19,406 463,888 0 0
Total Employment Lands (Building Sq. Ft.) 1,629,906 1,743,027 2,986,822 3,859,721 Residential Units 0 0 331 0
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Table 11 through Table 14 summarize the potential land uses, development levels, jobs and total salaries for each scenario.
Scenario 1 (Table 11). Scenario 1 is expected to accommodate about 1.63 million square feet of employment lands development, including roughly 800,000 square feet of Warehouse and Distribution development. Collectively, a total of about 2,000 jobs providing about $140 million in annual wages could be accommodated (over $70,000 per worker).
Table 11. Scenario 1 Summary: Developed Acres, Building Square Footage, Employees, and Salaries Scenario 2 (Table 12). Scenario 2 is expected to accommodate about 1.74 million square feet of employment lands development, including 600,000 square feet of Warehouse and Distribution development. Collectively, a total of about 3,500 jobs providing about $307 million in annual wages could be accommodated (almost $88,000 per worker).
Table 12. Scenario 2 Summary: Developed Acres, Building Square Footage, Employees, and Salaries Total
Land Use Acres Units/ Sq. ft. # of Employees Employees/ Acre Salary/ Job Annual Salaries Employment Lands
Class A Office 0.0 0 0 0 $135,000 $0
Class A Office/R&D 0.0 0 0 0 $132,000 $0
Class B Office 9.7 168,664 562 58 $77,000 $43,291,000
Industrial 8.9 232,454 465 52 $118,000 $54,859,000
Warehouse/Distribution 32.1 839,122 645 20 $51,000 $32,919,000 Hotel 6.8 370,260 285 42 $25,000 $7,120,000
Commercial/Retail 1.5 19,406 49 33 $47,000 $2,280,000
Total 59.0 1,629,906 2,006 34 $70,000 $140,469,000
Residential 0.0 0 na na na na
* Excludes any open space, assembly uses, and vacant land.
Total
Land Use Acres Units/ Sq. ft. # of Employees Employees/ Acre Salary/ Job Annual Salaries Employment Lands
Class A Office 3.6 235,224 1,045 290 $135,000 $141,134,000 Class A Office/R&D 4.3 187,308 624 145 $132,000 $82,416,000 Class B Office 0.0 0 0 0 $77,000 $0
Industrial 0.0 0 0 0 $118,000 $0
Warehouse/Distribution 23.4 611,582 470 20 $51,000 $23,993,000 Hotel 4.5 245,025 188 42 $25,000 $4,712,000
Commercial/Retail 35.5 463,888 1,160 33 $47,000 $54,507,000 Total 71.3 1,743,027 3,488 49 $88,000 $306,762,000
Residential 0 0 na na na na
* Excludes any open space, assembly uses, and vacant land. 110
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Table 13. Scenario 3 Summary: Developed Acres, Building Square Footage, Employees, and Salaries Scenario 4 (Table 14). Scenario 4 is expected to accommodate about 3.86 million square feet of employment lands development, primarily Class A Office and Class A Office/R&D. Collectively, a total of about 14,200 jobs providing almost $2.0 billion in annual wages could be accommodated (around $131,800 per worker).
Table 14. Scenario 4 Summary: Developed Acres, Building Square Footage, Employees, and Salaries Total
Land Use Acres Units/ Sq. ft. # of Employees Employees/ Acre Salary/ Job Annual Salaries Employment Lands
Class A Office 17.2 1,125,155 5,001 290 $135,000 $675,093,000 Class A Office/R&D 20.2 879,825 2,933 145 $132,000 $387,123,000 Class B Office 0.0 0 0 0 $77,000 $0
Industrial 23.4 611,582 1,223 52 $118,000 $144,333,000
Warehouse/Distribution 0.0 0 0 0 0 0
Hotel 6.8 370,260 285 42 $25,000 $7,120,000
Commercial/Retail 0.0 0 0 0 $47,000 $0
Total 67.6 2,986,822 9,441 140 $128,547 $1,213,669,000
Residential 3.7 331 na na na na
* Excludes any open space, assembly uses, and vacant land.
Total
Land Use Acres Units/ Sq. ft. # of Employees Employees/ Acre Salary/ Job Annual Salaries Employment Lands
Class A Office 31.2 2,039,784 9,066 290 $135,000 $1,223,870,000 Class A Office/R&D 33.3 1,449,677 4,832 145 $132,000 $637,858,000 Class B Office 0.0 0 0 0 $77,000 $0
Industrial 0.0 0 0 0 $118,000 $0
Warehouse/Distribution 0.0 0 0 0 0 0
Hotel 6.8 370,260 285 42 $25,000 $7,120,000
Commercial/Retail 0.0 0 0 0 $47,000 $0
Total 71.3 3,859,721 14,183 199 $131,769 $1,868,848,000 Residential 0.0 0 na na na na
* Excludes any open space, assembly uses, and vacant land. 111
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Table 15 estimates the net annual fiscal impacts of each of the Innovation District scenarios on the City’s General Fund at District buildout (in 2021 constant dollars). Estimated net fiscal impacts are derived by applying the average Net General Fund Fiscal Impact per Acre estimates derived in the above Fiscal Impact Analysis to each of the four Innovation District land uses scenarios. In summary:
Scenario 1. At scenario buildout, Scenario 1 is estimated to generate about $6.5 million annually to the City’s General Fund. Over 85 percent of this net positive fiscal impact (approximately $5.6 million) is driven by the 6.8 acres of Hotel uses and their associated TOT revenues. The additional fiscal surplus of $900,000 annually comes from the combination of other uses.
Scenario 2. At scenario buildout, Scenario 2 results in an estimated $6.8 million annually in positive net fiscal impact to the General Fund. While this scenario includes fewer Hotel acreage compared to Scenario 1, the overall impact is slightly greater due to the substantial acreage devoted to Commercial/Retail uses, which drive about $2.3 million in net annual fiscal impact due primarily to their significant sales and use tax revenues. About $850,000 annually of the fiscal surplus is associated with new uses other than Hotel and Commercial/Retail.
Scenario 3. At scenario buildout, Scenario 3 is expected to generate a net fiscal impact of over $8.6 million annually. This scenario includes the same amount of Hotel acreage as Scenario 1 but is composed of a significant amount of Class A Office and Class A Office/R&D acreage. About $3.0 million of the annual fiscal surplus is estimated to be generated by nonHotel uses, fully generated by the new Class A Office, Class A Office/R&D, and Light Industrial development.
Scenario 4. At scenario buildout, Scenario 4 generates the strongest net fiscal impact to the City’s General Fund at an estimated $9.9 million annually. This result is driven by maintaining the original 6.8 acres for Hotel use but shifting the remaining acreage entirely to Class A Office and Class A Office/R&D, which are strong fiscal contributors, while still preserving 3.1 acres for Open Space. About $4.4 million of the annual fiscal surplus is estimated to be generated by non-Hotel uses, with the new Class A Office and Class A Office/R&D generating all of these additional surplus revenues. 112
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Class A Office $85,406 $0 $307,462 $1,470,694 $2,666,210 Class A Office/R&D $51,222 $0 $220,253 $1,034,577 $1,704,659 Class B Office $14,299 $138,414 $0 $0 $0
Industrial $22,648 $201,430 $0 $529,961 $0
Warehouse/Distribution $13,527 $434,295 $316,530 $0 $0
Hotel $826,580 $5,620,744 $3,719,610 $5,620,744 $5,620,744 Commercial/Retail $63,925 $94,929 $2,269,210 $0 $0
Employment Lands Subtotal $6,489,812 $6,833,065 $8,655,975 $9,991,613 Residential $9,153 $0 $0 $33,682 $0
Scenario Total $6,489,812 $6,833,065 $8,689,657 $9,991,613 Source: Economic & Planning Systems
Annual Net Fiscal Impact
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APPENDICES:
Appendix A: Maps
Appendix B: Fiscal Impact Analysis—Existing Uses
Appendix C: Fiscal Impact Analysis—New Uses
Appendix D: Glossary of Terms
Appendix E: Residual Land Value Analysis
Appendix F: Innovation District Scenarios
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APPENDIX A:
Maps
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Milpitas Metro Specific Plan Land Uses
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Innovation District Land Uses
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APPENDIX B:
Fiscal Impact Analysis—Existing Uses
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Table 1
City of Milpitas Annual Citywide Fiscal Impact of Existing Uses City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Single Multi- Other
Annual General Fund Impacts Family Family Office Industrial Retail Hotel Uses Total General Fund Revenues
Property Tax $14,774,099 $6,671,212 $544,022 $6,251,994 $1,931,997 $627,253 $941,356 $31,741,933 Property Tax In-Lieu of VLF $3,696,107 $1,668,969 $136,100 $1,564,091 $483,337 $156,923 $235,503 $7,941,031 Sales Taxes $3,752,701 $1,076,926 $822,258 $6,950,982 $15,514,270 $34,669 $220,146 $28,371,951 Real Estate Transfer Tax $370,582 $167,335 $13,646 $156,820 $48,461 $15,734 $23,612 $796,190 Business License Tax $0 $0 $54,661 $199,016 $32,036 $14,356 $65,582 $365,650 Motor Vehicle In-Lieu $26,708 $7,665 $0 $0 $0 $0 $647 $35,020 Other Taxes $397,290 $175,000 $68,307 $355,836 $80,496 $30,089 $89,841 $1,196,860 Franchise Fees $3,221,727 $924,550 $192,907 $702,353 $113,058 $50,663 $309,528 $5,514,787 Transient Occupancy Tax $0 $0 $0 $0 $0 $13,452,683 $0 $13,452,683 Licenses, Permits, and Fines $5,787,719 $1,660,922 $346,551 $1,261,752 $203,105 $91,015 $556,055 $9,907,120 Total Revenues $27,933,537 $10,508,610 $1,974,045 $15,522,917 $17,842,927 $14,286,373 $2,116,925 $90,185,334 31% 12% 2% 17% 20% 16% 2% 100%
General Fund Expenditures
General Government $2,511,645 $720,775 $150,390 $547,551 $88,140 $39,497 $241,306 $4,299,304 Economic Development $534,026 $153,251 $31,976 $116,420 $18,740 $8,398 $51,307 $914,118 Building Safety & Housing $4,032,635 $1,157,260 $241,462 $879,135 $141,515 $63,415 $387,436 $6,902,858 Engineering $1,367,502 $392,437 $81,882 $298,122 $47,989 $21,505 $131,383 $2,340,819 Finance $2,545,109 $730,379 $152,393 $554,847 $89,314 $40,023 $244,521 $4,356,586 Fire $16,252,557 $4,664,053 $973,154 $3,543,140 $570,341 $255,581 $1,561,465 $27,820,292 Human Resources $1,227,784 $352,341 $73,516 $267,663 $43,086 $19,308 $117,959 $2,101,657 Information Technology $2,174,120 $623,915 $130,180 $473,969 $76,295 $34,189 $208,879 $3,721,547 Planning $579,456 $166,289 $34,696 $126,324 $20,334 $9,112 $55,671 $991,883 Police $21,940,150 $6,296,242 $1,313,710 $4,783,064 $769,932 $345,021 $2,107,901 $37,556,020 Public Works $5,348,454 $1,534,865 $320,249 $1,165,990 $187,690 $84,107 $513,853 $9,155,209 Recreation & Community Services $1,905,131 $546,722 $114,074 $415,328 $66,856 $29,959 $183,036 $3,261,106 Total Expenditures $60,418,568 $17,338,528 $3,617,682 $13,171,555 $2,120,232 $950,116 $5,804,717 $103,421,399 58% 17% 3% 13% 2% 1% 6% 100%
Annual Net Impact on General Fund ($32,485,031) ($6,829,918) ($1,643,637) $2,351,362 $15,722,695 $13,336,257 ($3,687,792) ($13,236,065) Source: Economic & Planning Systems
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Table 2
Milpitas Population and Employment
City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Item Citywide Total Source
Housing Units 22,553 Department of Finance 2020
Occupied Households 21,814 Department of Finance 2020
Population 77,961 Department of Finance 2020
Persons/Household Single Family 3.76 ACS 2019 5-Year Est. & DOF 2020 Persons/Household Multifamily 2.70 ACS 2019 5-Year Est. & DOF 2020 Jobs 47,630 LEHD Employment Statistics 2018
Service Population 101,776 Assumes 1 employee is equivalent to 50% of a resident [1] See Appendix Table A-3 for calculations.
Source: Economic & Planning Systems
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Table 3
Land Use Assumptions
City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Total Total
Land Use Category Residents Employees
Residential
Single Family 15,817 DUs - 59,457 - 59,457
Multi-Family 6,308 DUs - 17,063 - 17,063
Non-Residential2
Office - 1,780,063 SF - 7,120 3,560
Industrial - 20,865,527 SF - 25,924 12,962
Retail - 5,020,977 SF - 4,173 2,087
Hotel 2,667 Rooms - - 1,870 935
Other Uses3 428 DUs - SF 1,441 8,543 5,712
Citywide Total 22,553 DUs 27,666,567 SF 77,961 47,630 101,776 Source: CoStar Group; Economic & Planning Systems
[3] Other residential uses include mobile homes, other non-residential uses included within this category are listed in Table 12. [2] Per CoStar Group.
[1] Applies a factor of 100% to residents and 50% to employees.
Total Service
Population1
Dwelling Units
Citywide Inventory
Square Feet
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Table 4
Assessed Values by Land Use
City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Milpitas 2021
Land Use Category Assessed Value1
Residential
Single Family 15,817 DUs $9,119,814,483
Multi-Family 6,308 DUs $4,118,031,901
Non-Residential
Office 1,780,063 SF $335,815,823
Industrial 20,865,527 SF $3,859,255,762
Retail 5,020,977 SF $1,192,590,968
Hotel 2,667 Rooms $387,193,287
Other Residential Uses2 $740,252
Other Non-Residential Uses3 $580,343,445
Citywide Residential Total 22,553 DUs
Citywide Non-Residential Total 27,666,567 SF
Citywide Total $19,593,785,921
Source: Parcel Atlas; Economic & Planning Systems
[1] Per data acquired via Parcel Atlas and Santa Clara County Assessor's Office.
Citywide Inventory
[2] Includes Mobile Homes.
[3] Land Uses included in this category are displayed in Table 12. 123
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Table 5
General Fund Revenue Summary
City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 FY 2020/21
General Fund
Item Revenues*
Property Tax 36,872,241 16.20% of 1% of base assessed value Property Tax In-Lieu of VLF1 $7,941,031
Sales Taxes $28,371,951 1.25% of estimated taxable sales Real Estate Transfer Tax $796,190
Business License Tax $365,650 per employee
Motor Vehicle In-Lieu $35,020 per resident
Other Taxes $1,196,860
Franchise Fees $5,514,787 per service population
Transient Occupancy Tax $13,452,683
Licenses, Permits, and Fines $9,907,120 per service population Use of Money and Property $1,364,000 - not impacted
Intergovernmental $708,597 - not impacted
General Government Service Charges $640,000
Engineering Service Charges $1,814,000
Fire Service Charges $460,000
Police Service Charges $730,000
Recreation Service Charges $3,043,000
Building Service Charges $46,000
Planning Service Charges $939,500
Charges for Current Services $7,672,500
Other Revenue $68,000 - not impacted
Operating Transfers In $7,013,990 - not impacted
Total Revenues $112,142,729
Source: City of Milpitas 2020-2021 Adopted Budget & Financial Plan; Economic & Planning Systems [1] Subset of total property tax.
*2020-21 Adopted General Fund Budget values per City of Milpitas 2020-2021 Adopted Budget & Financial Plan [2] These revenues are considered as cost recovery revenues and are taken out of these departments' expenditures as shown in Table 6.
Impact Estimating Factors
Cost Recovery2
Cost Recovery2
Cost Recovery2
Case Study Approach
attributed by assessed value
fully attributed to Hotel use
Cost Recovery2
Cost Recovery2
Cost Recovery2
Cost Recovery2
Cost Recovery2
124
Item # 2.
Table 6
General Fund Expenditure Budget Summary and Fiscal Estimating Factors City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Per Service Pop.
Item Total Offsetting1 Net GF Expense2
General Government3 $4,939,304 $640,000 $4,299,304 101,776 Service Pop. $42.24 Economic Development $914,118 - $914,118 101,776 Service Pop. $8.98 Building Safety & Housing $6,948,858 $46,000 $6,902,858 101,776 Service Pop. $67.82 Engineering $4,154,819 $1,814,000 $2,340,819 101,776 Service Pop. $23.00 Finance $4,356,586 - $4,356,586 101,776 Service Pop. $42.81 Fire $28,280,292 $460,000 $27,820,292 101,776 Service Pop. $273.35 Human Resources $2,101,657 - $2,101,657 101,776 Service Pop. $20.65 Information Technology $3,721,547 - $3,721,547 101,776 Service Pop. $36.57 Planning $1,931,383 $939,500 $991,883 101,776 Service Pop. $9.75 Police $38,286,020 $730,000 $37,556,020 101,776 Service Pop. $369.01 Public Works $9,155,209 - $9,155,209 101,776 Service Pop. $89.95 Recreation & Community Services $6,304,106 $3,043,000 $3,261,106 101,776 Service Pop. $32.04 Other4 $5,623,983 - $5,623,983 $0.00
Total General Fund Expenditures $116,717,882 $109,045,382 $1,016 Source: Economic & Planning Systems
[3] General Government category consists of the City Council, City Manager, City Clerk, and City Attorney Departmental expenditures. [4] Other category consists of Equipment to be Depreciated, Non-Departmental expenditures, and Transfers Out.
FY 2020/21 Adopted GF Expenditures
Estimating Factors
[1] Represents departmental service charges shown in Table 5. [2] Divides net expenditure item by Service Population. not impacted
125
Item # 2.
Table 7
Property Tax Revenue by Land Use Estimate
City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Property Tax and Estimating Factors Formula Single Family Multifamily Office Industrial Retail Hotel Other Property Tax
Total Assessed Value by Land Use1 see Table 4. a $9,119,814,483 $4,118,031,901 $335,815,823 $3,859,255,762 $1,192,590,968 $387,193,287 $581,083,697 Property Tax 1.0% Base Property Tax Rate b = a * 1.0% $91,198,145 $41,180,319 $3,358,158 $38,592,558 $11,925,910 $3,871,933 $5,810,837 General Fund Property Tax Revenue2 16.20% Allocation to General Fund c = b * 16.20% $14,774,099 $6,671,212 $544,022 $6,251,994 $1,931,997 $627,253 $941,356 Property Tax In-Lieu of VLF
Existing Citywide Property Tax In-Lieu of VLF3 $7,941,031 d = $7,941,031 Citywide Taxable Assessed Value1 $19,593,785,921 e = $19,593,785,921 Percentage of Citywide Assessed Value f = a / e 46.5% 21.0% 1.7% 19.7% 6.1% 2.0% 3.0% New General Fund Property Tax In-Lieu of VLF e = d * f $3,696,107 $1,668,969 $136,100 $1,564,091 $483,337 $156,923 $235,503 Source: Economic & Planning Systems
[3] Per Table 5.
Residential Non-Residential
Assumption / Est. Factor
[1] Per Table 4.
[2] Per Page 29 of Milpitas 2020-2021 Adopted Budget & Financial Plan. 126
Item # 2.
Table 8
Milpitas General Fund Annual Sales Tax Revenue Estimate from Residential Development City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Item Single Family Multi-family
Residential Spending
Estimated Annual Household Income $210,896 $151,755
Household Taxable Retail Spending as a Percent of Income 18% 18% Taxable Retail Spending per Household $37,961 $27,316
Citywide Household Counts 15,817 6,308
Total Citywide Retail Spending from Households $600,432,222 $172,308,140 Taxable Retail Sales Captured in Milpitas 50% of Retail Expenditures $300,216,111 $86,154,070 Total Retail Sales Tax Revenue from Household Spending 1.25% of Taxable Sales3 $3,752,701 $1,076,926 Source: Economic & Planning Systems
[2] Based on the Bureau of Labor Statistics 2018 Consumer Expenditure Survey, value shown is average between percentage for households with incomes above $200,000 and households with incomes between $150,000 and $199,999. [3] Includes the City's standard 1% share and the 0.25% additional share via Measure F, passed in 2020.
Assumptions / Estimating Factors
Residential
[1] Existing residential income estimates reflect ACS 2019 1-Year Estimates Per Capita Income for Milpitas' total population of $56,103, multiplied by the average household sizes of 3.76 for single family homes and 2.71 for multi-family homes.
Based on Per Capita Income1
Bureau of Labor Statistics2
127
Item # 2.
Table 9
Milpitas General Fund Annual Sales Tax Revenue Estimate from Commercial Development City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Sales Tax Sources and Estimating Factors Formula Office Industrial Retail Hotel Other Worker-Generated Retail Sales
Citywide Employees a 7,120 25,924 4,173 1,870 8,543
Weekly Taxable Retail Spending per Worker1 b $97.32 $77.73 $31.09 $36.35 $50.53 Annual Citywide Taxable Retail Spending 48 working weeks per year c = a * b * 48 $33,260,328 $96,721,740 $6,227,316 $3,262,940 $20,719,583 Milpitas Spending Capture2 85% of retail expenditures d = c * 85% $28,271,279 $82,213,479 $5,293,219 $2,773,499 $17,611,646 Annual General Fund Worker-Generated Retail Sales Tax Revenue 1.25% of taxable sales e = d * 1.25% $353,391 $1,027,668 $66,165 $34,669 $220,146 Non-Retail Establishment Sales
Business-to-Business Annual Retail Sales Tax Revenue $468,867 $5,923,313 - - - On-Site Retail Sales
Annual General Fund On-Site Retail Sales Tax Revenue - - $15,448,105 - - Total Annual General Fund Sales Tax Revenue $822,258 $6,950,982 $15,514,270 $34,669 $220,146 Source: Economic & Planning Systems
[2] EPS assumption.
Citywide Sales Tax Revenue less Other Sources
Assumptions / Estimating Factors
Non-Residential
per Avenue Insights & Analytics Data
per Table 3.
[1] Per ICSC data adjusted to 2021$ using BLS CPI Index. 128
Item # 2.
Table 10
Other General Fund Revenues
City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Revenue Source Single Family Multifamily Office Industrial Retail Hotel Other Real Estate Transfer Tax $370,582 $167,335 $13,646 $156,820 $48,461 $15,734 $23,612 Business License Tax $7.68 per employee $0 $0 $54,661 $199,016 $32,036 $14,356 $65,582 Motor Vehicle In-Lieu $0.45 per resident $26,708 $7,665 $0 $0 $0 $0 $647 Franchise Fees $54.19 per service pop. $3,221,727 $924,550 $192,907 $702,353 $113,058 $50,663 $309,528 Licenses, Permits, and Fines $97.34 per service pop. $5,787,719 $1,660,922 $346,551 $1,261,752 $203,105 $91,015 $556,055 Total Annual Other Revenues $160 per service pop. $9,406,737 $2,760,472 $607,766 $2,319,941 $396,659 $171,768 $955,424 Source: Economic & Planning Systems
Assumption / Estimating
Factor1
Residential Non-Residential
[1] See Table 6 for cost estimates and Table 3 for total service population by land use. attributed by assessed value
129
Item # 2.
Table 11
General Fund Expenditure Calculations
City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Expenditure Source Single Family Multifamily Office Industrial Retail Hotel Other General Government $42.24 per service pop. $2,511,645 $720,775 $150,390 $547,551 $88,140 $39,497 $241,306 Economic Development $8.98 per service pop. $534,026 $153,251 $31,976 $116,420 $18,740 $8,398 $51,307 Building Safety & Housing $67.82 per service pop. $4,032,635 $1,157,260 $241,462 $879,135 $141,515 $63,415 $387,436 Engineering $23.00 per service pop. $1,367,502 $392,437 $81,882 $298,122 $47,989 $21,505 $131,383 Finance $42.81 per service pop. $2,545,109 $730,379 $152,393 $554,847 $89,314 $40,023 $244,521 Fire $273.35 per service pop. $16,252,557 $4,664,053 $973,154 $3,543,140 $570,341 $255,581 $1,561,465 Human Resources $20.65 per service pop. $1,227,784 $352,341 $73,516 $267,663 $43,086 $19,308 $117,959 Information Technology $36.57 per service pop. $2,174,120 $623,915 $130,180 $473,969 $76,295 $34,189 $208,879 Planning $9.75 per service pop. $579,456 $166,289 $34,696 $126,324 $20,334 $9,112 $55,671 Police $369.01 per service pop. $21,940,150 $6,296,242 $1,313,710 $4,783,064 $769,932 $345,021 $2,107,901 Public Works $89.95 per service pop. $5,348,454 $1,534,865 $320,249 $1,165,990 $187,690 $84,107 $513,853 Recreation & Community Services $32.04 per service pop. $1,905,131 $546,722 $114,074 $415,328 $66,856 $29,959 $183,036 Total Annual Expenditures $1,016 per service pop. $60,418,568 $17,338,528 $3,617,682 $13,171,555 $2,120,232 $950,116 $5,804,717 Source: Economic & Planning Systems
Factors Applied to Estimate Residential Non-Residential Prototype Expenditures1
[1] See Table 6 for cost estimates and Table 3 for total service population by land use. 130
Item # 2.
Table 12
Milpitas Primary Use Code Categorization Index and Assessed Value Summary City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Primary Use Code1 Classification2 Primary Use Code1 Classification2 Single Family Retail
Duplex (2 units, any combination) Single Family Community: Shopping Plaza, Shopping Center, Mini-Mall Retail Residential (General) (Single) Single Family Neighborhood: Shopping Center, Strip Center, Enterprise Zone Retail Single Family Residential Single Family Recreational/Entertainment (General) Retail Townhouse (Residential) Single Family Regional: Shopping Center, Mall (w/Anchor) Retail Triplex (3 units, any combination) Single Family Retail Stores ( Personal Services, Photography, Travel) Retail Service station (full service) Retail
Wholesale Outlet, Discount Store (Franchise) Retail
Multifamily
Apartment house (5+ units) Multifamily
Condominium (Residential) Multifamily
Multi-Family Dwellings (Generic, any combination 2+) Multifamily Office
Professional Bldg (legal; insurance; real estate; business) Office Skyscraper/Highrise (Commercial Offices) Office Other Uses Charitable organization, Fraternal Not Included
City, Municipal, Town, Village Owned (Exempt) Not Included Hotel Community Center (Exempt) Not Included
Hotel Hotel Day care, Pre-school (Commercial) Not Included Homes (retired; handicap, rest; convalescent; nursing) Not Included Hospital-PUBLIC Not Included
Industrial Industrial-Vacant Land Not Included
Chemical Industrial Irrigation, Flood Control Not Included Condominiums (Industrial) Industrial Orchard (fruit; nut) Not Included Foundry, Industrial Plant (metal; rubber; plastic) Industrial Park, Playground, Picnic Area Not Included Horticulture, Growing Houses, Ornamental (Agricultural) Industrial Parking Lot Not Included Industrial (General) Industrial Pasture, Meadow Not Included Light Industrial (10% improved office space; Machine Shop) Industrial Public School (administration; campus; dorms; instruction) Not Included Lumberyard, Building Materials Industrial Public Swimming Pool Not Included Manufacturing (light) Industrial Railroad & related Not Included Mill (feed; grain; paper; lumber; textile; pulp) Industrial Recreation Center Not Included Mining (oil; gas; mineral, precious metals) Industrial Religious, Church, Worship (Synagogue, Temple, Parsonage) Not Included Mixed Use (Commercial/Industrial) Industrial Residential-Vacant Land Not Included Processing Plant (minerals; cement; rock; gravel; glass; clay) Industrial Roads, Streets, Bridges Not Included Public Utility (Electric; Water; Gas; etc.) Industrial Timberland, Forest, Trees (Agricultural) Not Included R&D Facility, Laboratory, Research Facility, Cosmetics, Pharmaceuti Industrial Vacant Land (General) Not Included Storage yard, Open Storage (light equipment, material) Industrial Waste Land, Marsh, Swamp, Submerged-Vacant Land Not Included Transportation & Communications (General) Industrial Winery Not Included Warehouse (Industrial) Industrial Mobile home Not Included Source: Santa Clara County Assessor; Economic & Planning Systems [1] Primary Use Codes per Santa Clara County Assessor Tax Roll data. Assesssed Values were summed by Primary Use Codes, which required classification into the land uses relevant for this effort to derive total Assessed Values by land use.
[2] Demonstrates how Primary Use Codes were grouped to arrive at total assessed value by land use type. 131
Item # 2.
APPENDIX C:
Fiscal Impact Analysis—New Uses
132
Item # 2.
Table 1
City of Milpitas Annual General Fund Fiscal Impacts per Acre City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Mid-Rise High-Rise Class A Office / Light Warehouse/
Annual General Fund Impacts Multifamily Multifamily Office R & D Industrial Distribution Hotel General Fund Revenues
Property Tax $191,702 $397,211 $352,556 $199,254 $78,611 $39,374 $126,707 Property Tax In-Lieu of VLF $47,959 $99,372 $88,201 $49,848 $19,666 $9,850 $31,699 Sales Taxes $28,005 $57,993 $156,730 $91,922 $40,181 $25,964 $801 Real Estate Transfer Tax $5,207 $10,788 $4,788 $2,706 $1,068 $535 $1,721 Business License Tax $0 $0 $10,032 $5,016 $1,505 $463 $614 Motor Vehicle In-Lieu $218 $437 $0 $0 $0 $0 $0
Other Taxes $5,425 $11,225 $14,820 $7,722 $2,572 $998 $2,335 Franchise Fees $21,341 $42,681 $57,382 $28,691 $8,607 $2,648 $3,513 Transient Occupancy Tax $0 $0 $0 $0 $0 $0 $1,916,250
Licenses, Permits, and Fines $38,338 $76,675 $103,086 $51,543 $15,463 $4,758 $6,311 Total Revenues $332,770 $685,158 $772,774 $428,980 $165,101 $83,592 $2,087,616 per Acre $166,385 $342,579 $154,555 $85,796 $33,020 $16,718 $835,046 General Fund Expenditures
General Government $3,217 $6,433 $3,537 $1,768 $530 $163 $217 Economic Development $1,368 $2,736 $1,504 $752 $226 $69 $92 Building Safety & Housing $10,329 $20,658 $11,357 $5,678 $1,703 $524 $695 Engineering $3,503 $7,005 $3,851 $1,926 $578 $178 $236
Finance $3,260 $6,519 $3,584 $1,792 $538 $165 $219
Fire $104,073 $208,146 $114,425 $57,212 $17,164 $5,281 $7,005 Human Resources $1,572 $3,145 $1,729 $864 $259 $80 $106 Information Technology $2,784 $5,569 $3,061 $1,531 $459 $141 $187 Planning $1,484 $2,968 $1,632 $816 $245 $75 $100
Police $140,493 $280,986 $154,468 $77,234 $23,170 $7,129 $9,456 Public Works $34,249 $68,497 $37,655 $18,828 $5,648 $1,738 $2,305 Recreation & Community Services $8,133 $16,266 $8,942 $4,471 $1,341 $413 $547 Total Expenditures $314,464 $628,929 $345,743 $172,872 $51,861 $15,957 $21,166 per Acre $157,232 $314,464 $69,149 $34,574 $10,372 $3,191 $8,466 Annual Net Impact on General Fund $18,305 $56,229 $427,031 $256,109 $113,239 $67,635 $2,066,450 per Acre $9,153 $28,115 $85,406 $51,222 $22,648 $13,527 $826,580 Source: Economic & Planning Systems
133
Item # 2.
Table 2
Milpitas Population and Employment
City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Item Citywide Total Source
Housing Units 22,553 Department of Finance 2020
Occupied Households 21,814 Department of Finance 2020
Population 77,961 Department of Finance 2020
Persons/Household Multifamily 2.70 ACS 2019 5-Year Est. & DOF 2020 Jobs 47,630 LEHD Employment Statistics 2018
Service Population 97,437 See Table 3
Source: Economic & Planning Systems
134
Item # 2.
Service Population Factors based on Resident to Employee Equivalencies Item # %
Employment Status of Milpitas Residents1 Formula: a = b * 77,961 b 1 c = b * c Not in Labor Force 41,429 53.1% 100% 53.1%
Employed in the City3 3,808 4.9% 50% 2.4%
Employed Outside of the City 32,724 42.0% 67% 28.2%
Total Residents 77,961 100.0% 83.8%
Residence Status of Milpitas Employees1 Formula: a = b * 47,630 b 1 c = b * c Live in the City3 3,808 8.0% 50% 4.0%
Live Outside the City 43,825 92.0% 33% 30.3%
Total Jobs 47,630 100.0% 34.2%
Employee to Resident Equivalency Factor 4 (34.2% / 83.8%) = 40.9% Service Population Calculation
Amount Attributable to Residents (@ 100%) 77,961 80.0%
Amount Attributable to Employees (@ 40.9%) 19,476 20.0% Total Service Population 97,437 100.0%
Sources: LEHD OnTheMap 2018, Department of Finance, and Economic & Planning Systems, Inc.
Table 3
City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 [2] Represents EPS estimate of how various types of residents and employees relate to each other in terms of demand for City Services. [3] The number of residents who are employed in the City and the number of employees in the City who are residents are the same, representing the same group of unique individuals. This group is reflected both in the Total Residents and the Total Jobs to demonstrate the composition of the totals, with their weighting split evenly between the resident and employee groups. [4] Equals weighted average of residents divided by weighted average of employees.
Existing Weight2 Weighted
Average
[1] Distribution and total jobs based on data from U.S. Census (OnTheMap 2018). Total residents based on 2020 estimates provided by DOF in Table E-5.
135
Item # 2.
Table 4
Prototype Developments by Land Use Type
City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Mid-Rise High-Rise Class A Office / Light Warehouse /
Item Multifamily Multifamily Office R & D Industrial Distribution Hotel Gross Land Area (AC) 2.0 2.0 5.0 5.0 5.0 5.0 2.5
FAR - - 1.5 1.0 0.5 0.4 -
Gross Building Area 216,000 432,000 326,700 217,800 108,900 87,120 130,000 Net Leasable Area 172,800 345,600 294,030 196,020 98,010 78,408 104,000 Units / Rooms per AC 90 180 - - - - 80
Dwelling Units / Rooms 180 360 - - - - 200
Market Rate DU 153 306 - - - -
Market Rate Monthly Rent PSF $3.75 $3.90 - - - -
Below Market Rate DU 27 54 - - - - -
BMR Monthly Rent PSF $2.76 $2.76 - - - - -
Capitalized Value $118,334,782 $245,192,059 $217,626,944 $122,996,424 $48,525,159 $24,304,775 $78,214,286 per GBA $547.85 $567.57 $666.14 $564.72 $445.59 $278.98 $601.65 per DU / Room $657,415 $681,089 - - - - $391,071
Persons Per Household 2.70 2.70 - - - - -
Total Residents 486 972 - - - - -
Square Feet per Employee - - 225 300 500 1,300 1,300
Total Employees - - 1,307 653 196 60 80
Total Service Population1 486 972 534 267 80 25 33
Average HH Income $138,298 $143,194 - - - - -
Average Salary - - $135,000 $132,000 $118,000 $51,000 $25,000 Source: Economic & Planning Systems
Residential Non-Residential
[1] Applies a factor of 0.41 to employees and 1.0 to residents as derived in Table 3. 136
Item # 2.
Table 5
General Fund Revenue Summary
City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 FY 2020/21
General Fund Table
Item Revenues* Reference
Property Tax 36,872,241 16.20% of 1% of base assessed value Table 7 Property Tax In-Lieu of VLF1 $7,941,031 Table 7
Sales Taxes $28,371,951 1.25% of taxable sales2 Tables 8 & 9 Real Estate Transfer Tax $796,190 $0.55 per $1,000 in assessed value Table 10 Business License Tax $365,650 $7.68 per Employee3 Table 12 Motor Vehicle In-Lieu $35,020 $0.45 per Resident3 Table 12 Other Taxes $1,196,860
Franchise Fees $5,514,787 $43.91 per Employee / Resident4 Table 12 Transient Occupancy Tax $13,452,683 14% of hotel revenues Table 11 Licenses, Permits, and Fines $9,907,120 $78.88 per Employee / Resident4 Table 12 Use of Money and Property $1,364,000 - not impacted
Intergovernmental $708,597 - not impacted
General Government Service Charges $640,000 Table 6
Operating Transfers In $7,013,990 - not impacted
Total Revenues $112,142,729
Source: City of Milpitas 2020-2021 Adopted Budget & Financial Plan; Economic & Planning Systems [1] Subset of total property tax.
*2020-21 Adopted General Fund Budget values per City of Milpitas 2020-2021 Adopted Budget & Financial Plan [5] These revenues are considered as cost recovery revenues and are taken out of these departments' expenditures as shown in Table 6. [2] Includes the City's standard 1% share and the 0.25% additional share via Measure F, passed in 2020. [3] Divides line item by the employee / resident totals from Table 2. [4] Divides line item by the total number of employees and residents citywide without applying a service population factor.
Impact Estimating Factors
Cost Recovery5
Case Study Approach
137
Item # 2.
Table 6
General Fund Expenditure Budget Summary and Fiscal Estimating Factors City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Percent Annual Variable Per Service Pop.
Item Total Offsetting1 Net Variable2 Expense GF Expense General Government3 $4,939,304 $640,000 $4,299,304 15% $644,896 97,437 Service Pop. $6.62 Economic Development $914,118 - $914,118 30% $274,235 97,437 Service Pop. $2.81 Building Safety & Housing $6,948,858 $46,000 $6,902,858 30% $2,070,857 97,437 Service Pop. $21.25 Engineering $4,154,819 $1,814,000 $2,340,819 30% $702,246 97,437 Service Pop. $7.21 Finance $4,356,586 - $4,356,586 15% $653,488 97,437 Service Pop. $6.71 Fire $28,280,292 $460,000 $27,820,292 75% $20,865,219 97,437 Service Pop. $214.14 Human Resources $2,101,657 - $2,101,657 15% $315,249 97,437 Service Pop. $3.24 Information Technology $3,721,547 - $3,721,547 15% $558,232 97,437 Service Pop. $5.73 Planning $1,931,383 $939,500 $991,883 30% $297,565 97,437 Service Pop. $3.05 Police $38,286,020 $730,000 $37,556,020 75% $28,167,015 97,437 Service Pop. $289.08 Public Works $9,155,209 - $9,155,209 75% $6,866,407 97,437 Service Pop. $70.47 Recreation & Community Services $6,304,106 $3,043,000 $3,261,106 50% $1,630,553 97,437 Service Pop. $16.73 Other4 $5,623,983 - $5,623,983 - $0 $0.00
Total General Fund Expenditures $116,717,882 $109,045,382 $63,045,961 $647.05 Source: Economic & Planning Systems
[3] General Government category consists of the City Council, City Manager, City Clerk, and City Attorney Departmental expenditures. [4] Other category consists of Equipment to be Depreciated, Non-Departmental expenditures, and Transfers Out.
FY 2020/21 Adopted GF Expenditures
Estimating Factors
[1] Represents departmental service charges shown in Table 5. [2] EPS assumption.
not impacted
138
Item # 2.
Table 7
Property Tax Revenue by Land Use Estimate
City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Mid-Rise High-Rise Class A Office / Light Warehouse /
Property Tax and Estimating Factors Formula Multifamily Multifamily Office R & D Industrial Distribution Hotel Property Tax
Total Assessed Value1 see Table 4. a $118,334,782 $245,192,059 $217,626,944 $122,996,424 $48,525,159 $24,304,775 $78,214,286 Property Tax 1.0% Base Property Tax Rate b = a * 1.0% $1,183,348 $2,451,921 $2,176,269 $1,229,964 $485,252 $243,048 $782,143 General Fund Property Tax Revenue2 16.20% Allocation to General Fund c = b * 16.20% $191,702 $397,211 $352,556 $199,254 $78,611 $39,374 $126,707 Property Tax In-Lieu of VLF
Existing Citywide Property Tax In-Lieu of VLF3 $7,941,031 d = $7,941,031 Citywide Taxable Assessed Value4 $19,593,785,921 e = $19,593,785,921 Percentage of Citywide Assessed Value f = a / e 0.6% 1.3% 1.1% 0.6% 0.2% 0.1% 0.4% New General Fund Property Tax In-Lieu of VLF e = d * f $47,959 $99,372 $88,201 $49,848 $19,666 $9,850 $31,699 Source: Economic & Planning Systems
[4] Per Santa Clara County Assessor.
[3] Per Table 5.
Assumption / Est. Factor
[1] Per Table 4.
[2] Per Page 29 of Milpitas 2020-2021 Adopted Budget & Financial Plan. 139
Item # 2.
Table 8
Residential Sales Tax Revenue Estimates
City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Mid-Rise High-Rise
Item Multifamily Multifamily
Households 180 360
Estimated Annual Household Income1 $138,298 $143,194
Taxable Retail Spending per Household2 18% of Household Income $24,894 $25,775 Taxable Retail Spending by Prototype $4,480,842 $9,278,945 Taxable Retail Sales Captured in Milpitas 50% Capture Rate $2,240,421 $4,639,473 Annual General Fund Sales Tax Revenue 1.25% of Taxable Sales $28,005 $57,993 Source: Economic & Planning Systems
per Table 4
[2] Based on the Bureau of Labor Statistics 2018 Consumer Expenditure Survey.
Assumption
Rent is 30% of Income
[1] Annual rent estimated based on a 960 net square foot (NSF) apartment renting at $3.75 per NSF for both development types.
140
Item # 2.
Table 9
Non-Residential Sales Tax Revenue Estimates
City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Class A Office / Light Warehouse /
Description Office R & D Industrial Distribution Hotel
Worker-Generated Retail Sales
Total Workers 1,307 653 196 60 80
Weekly Taxable Retail Spending per Worker1 $106 $104 $93 $40 $20 Annual Taxable Retail Spending per Worker 48 weeks per year $5,090 $4,977 $4,449 $1,923 $943 Total Annual Taxable Retail Spending $6,651,995 $3,252,087 $872,151 $115,984 $75,412 Milpitas Spending Capture 85% of retail expenditures $5,654,196 $2,764,274 $741,328 $98,586 $64,100 Annual General Fund Retail Sales Tax Revenue from Workers 1.25% of taxable sales $70,677 $34,553 $9,267 $1,232 $801 Non-Retail Establishment Sales
Business-to-Business Annual Retail Sales Tax Revenue $86,052 $57,368 $30,915 $24,732 $0 Total Annual General Fund Sales Tax Revenue $156,730 $91,922 $40,181 $25,964 $801 Source: Economic & Planning Systems
per Avenue Insights & Analytics Data
Assumption
see Table 4
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Item # 2.
Table 10
Property Transfer Tax Estimates
City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Mid-Rise High-Rise Class A Office / Light Warehouse /
Item Formula Multifamily Multifamily Office R & D Industrial Distribution Hotel Market Value Assumption1 a $118,334,782 $245,192,059 $217,626,944 $122,996,424 $48,525,159 $24,304,775 $78,214,286 Annual Turnover Rate2 b 8% 8% 4% 4% 4% 4% 4%
Annual Assessed Value Turnover c = a * b $9,466,783 $19,615,365 $8,705,078 $4,919,857 $1,941,006 $972,191 $3,128,571 Documentary Transfer to the City3 d = c / 1,000 * $0.55 $5,207 $10,788 $4,788 $2,706 $1,068 $535 $1,721 Source: Economic & Planning Systems
[1] Per Table 4.
[2] Assumes multifamily rental property resold every 15 years, commercial property resold every 30 years. [3] Per IX-10-2.01 of the Milpitas Code of Ordinances.
142
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Table 11
Transient Occupancy Tax
City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Item Value
Total Hotel Rooms 200
Average Daily Rate (ADR)1 $250
Occupancy Rate1 75%
Annual Hotel Room Revenues $13,687,500
General Fund TOT Revenue 14% of revenue $1,916,250
Source: CoStar Group; Economic & Planning Systems
Assumption
see Table 4
[1] per CoStar Group data.
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Item # 2.
Table 12
Other General Fund Revenue Item Estimates
City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Mid-Rise High-Rise Class A Office / Light Warehouse /
Revenue Source Multifamily Multifamily Office R & D Industrial Distribution Hotel Business License Tax $7.68 per Employee $0 $0 $10,032 $5,016 $1,505 $463 $614 Motor Vehicle In-Lieu $0.45 per Resident $218 $437 $0 $0 $0 $0 $0 Franchise Fees $43.91 per Employee / Resident $21,341 $42,681 $57,382 $28,691 $8,607 $2,648 $3,513 Licenses, Permits, and Fines $78.88 per Employee / Resident $38,338 $76,675 $103,086 $51,543 $15,463 $4,758 $6,311 Total Annual Other Revenues $131 per Employee / Resident $59,897 $119,793 $170,500 $85,250 $25,575 $7,869 $10,438 Source: Economic & Planning Systems
Factors Applied to Estimate
Prototype Revenues1
[1] See Table 5 for revenue factors and Table 4 for total service population by land use. 144
Item # 2.
Table 13
General Fund Expenditure Estimates
City of Milpitas Fiscal Benefits of Employment Lands Study; EPS #211034 Mid-Rise High-Rise Class A Office / Light Warehouse /
Expenditure Source Multifamily Multifamily Office R & D Industrial Distribution Hotel General Government $6.62 per Service Pop. $3,217 $6,433 $3,537 $1,768 $530 $163 $217 Economic Development $2.81 per Service Pop. $1,368 $2,736 $1,504 $752 $226 $69 $92 Building Safety & Housing $21.25 per Service Pop. $10,329 $20,658 $11,357 $5,678 $1,703 $524 $695 Engineering $7.21 per Service Pop. $3,503 $7,005 $3,851 $1,926 $578 $178 $236 Finance $6.71 per Service Pop. $3,260 $6,519 $3,584 $1,792 $538 $165 $219 Fire $214.14 per Service Pop. $104,073 $208,146 $114,425 $57,212 $17,164 $5,281 $7,005 Human Resources $3.24 per Service Pop. $1,572 $3,145 $1,729 $864 $259 $80 $106 Information Technology $5.73 per Service Pop. $2,784 $5,569 $3,061 $1,531 $459 $141 $187 Planning $3.05 per Service Pop. $1,484 $2,968 $1,632 $816 $245 $75 $100 Police $289.08 per Service Pop. $140,493 $280,986 $154,468 $77,234 $23,170 $7,129 $9,456 Public Works $70.47 per Service Pop. $34,249 $68,497 $37,655 $18,828 $5,648 $1,738 $2,305 Recreation & Community Services $16.73 per Service Pop. $8,133 $16,266 $8,942 $4,471 $1,341 $413 $547 Total Annual Expenditures $647 per Service Pop. $314,464 $628,929 $345,743 $172,872 $51,861 $15,957 $21,166 Source: Economic & Planning Systems
[1] See Table 6 for cost estimates and Table 4 for total service population by land use.
Factors Applied to Estimate
Prototype Expenditures1
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APPENDIX D:
Glossary of Terms
146
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Glossary of Terms
Gross Land Area. This is the total land area associated with a development measured in acres. It includes not only the building itself, but also parking and landscaping areas, as well as roads and other supporting areas.
Gross Area. This is the total square footage of any buildings for lease. It includes both the occupied areas – such as apartment square footage/ office suite square footage – as well as common areas, such as elevators and corridors, as well as mechanical and storage areas. Efficiency Ratio. The efficiency ratio represents the ratio, often presented as a percentage, between the Net Area (defined below) and the Gross Leasable Area. Net Area. The net area represents the leased area that is specifically for the tenant, such as apartment size or office suite etc. The net area is equal to the gross area multiplied by the efficiency ratio.
Parking Spaces. This represents the number of parking spaces associated with a building.
The number of spaces is often defined by the required parking ratio that provides the number of parking spaces that must be provided for every 1,000 gross square feet of space. Gross Revenue. Gross revenues, sometimes referred to as full service gross (FSG), represents the gross revenues expected to be paid by the tenant. This can be expressed as an annual lease payment per net square foot per year as well as a total annual gross revenue for the full net area leased.
Operating Expenses. The building owner/ landlord receives the gross revenues but also must directly pay a broad range of building operating expenses, including janitorial, building maintenance, insurance, property taxes, and utilities. These are estimated as a percentage of gross revenues.
Commissions. Leasing commissions represent the percentage of rent that is passed on to real estate agents in connection with the building lease. Vacancy Rate. The vacancy rate represents the average percentage of the net leasable area that is vacant at any point in time.
Capitalized Value. The capitalized value represents the estimated value/ sales price of a building/ development. It is typically calculated based on: (1) annual net operating income (annual revenues minus annual operating expenditures); and, (2) the capitalization (cap) rate which represents the observed ratio between building sales prices and net operating incomes in different market areas.
Building Construction Cost. Building construction represents the direct cost of constructing the building often expressed on a cost per gross area basis. Parking Cost/Site Work. Parking costs represent the direct cost of constructing parking spaces (whether surface or structured), while site work consists of preparing the site for construction (e.g. grading).
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Appendix D September 21, 2021
Glossary of Terms Page D-2
Z:\Shared\Projects\Oakland\211000s\211034_Milpitas Employment Lands\Deliverables\Narrative Summaries\appendices\AppD_Glossary.docx Tenant Improvements. Beyond the costs of constructing the building, tenants will often require additional improvements inside their office suite for example. This can include costs of carpeting, interior configurations, kitchens, and other unique features. Landlords typically contribute to these costs.
Commercial Housing Linkage Fee. A fee paid by commercial development to help fund affordable housing.
TADIF Fee. This is the Transit Area Development Impact Fee, an impact fee established under the Mitigation Fee Act that portions a proportionate share of transit area public improvement costs (e.g. sewer, water, transportation, and parks) to new development. Other Permits & Fees. In addition to the TADIF, the City and other agencies charge other fees and permit charges.
General & Administrative. General and Administrative costs are the general day-to-day/ overhead operations costs to the developer.
Financing Costs. These represents the construction financing costs associated with the use of construction loans while developing buildings.
Contingency. A contingency is included in development pro formas to account for cost overruns/ unforeseen cost items.
Profit Margin. The profit margin represents the level of profit a developer will require in order to consider taking the risks associated with the development. 148
Item # 2.
APPENDIX E:
Residual Land Value Analysis
149
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Table 1a - Baseline Scenario
Class A Office Pro Forma (Midrise, 1.0 FAR)
Milpitas Employment Lands, EPS #211034
Item Per Bldg. Sq.Ft. Total
DEVELOPMENT PROGRAM
Gross Land Area (acres) 5.0
Gross Leasable Area 1.00 F.A.R. 217,800
Elevation 5 stories
Efficiency Ratio 90%
Net Area 196,020
Parking Spaces 3.3 parking space per 1,000 sq.ft.
Structured/Podium Parking 75% of parking spaces 545
Surface Parking 25% of parking spaces 182
Total Parking Spaces 726
REVENUE ASSUMPTIONS
Gross Revenue (FSG) (1) $51.00 /net sq. ft./yr. $45.90 $9,997,020 (less) Operating Expenses 25.0% ($11.48) ($2,499,255)
(less) Commissions 2.5% ($1.15) ($249,926)
(less) Vacancy Rate 5.0% ($2.30) ($499,851)
Subtotal, Annual Net Operating Income $30.98 $6,747,989 Capitalized Value (2) 6.25% cap rate $480.85 $104,728,782
DEVELOPMENT COSTS
Direct Costs
Building Construction Cost $325.00 /GLA sq. ft. $325.00 $70,785,000 Parking Cost/Site Work $40,000 /structured space $100.00 $21,780,000 Parking Cost/Site Work $5,000 /surface space $4.17 $907,500 Total Direct Costs $429.17 $93,472,500
Indirect Costs
Tenant Improvements $40.00 /net sq. ft. $36.00 $7,840,800 Legal, Insurance & Inspections 3.0% of direct costs $12.88 $2,804,175 Architecture & Engineering 7.0% of direct costs $30.04 $6,543,075 Commercial Housing Linkage Fee (3) $8.00 /net sq. ft. $7.20 $1,568,160 TADIF Fee $42.52 /net sq. ft. $38.27 $8,334,770
Other Permits & Fees (4) 3.0% of direct costs $12.88 $2,804,175 General & Administrative 2.5% of direct costs $10.73 $2,336,813 Financing Costs 5.0% of direct costs $21.46 $4,673,625
Total Indirect Costs 39.5% of direct costs $169.45 $36,905,593 Subtotal, Direct and Indirect Costs $598.61 $130,378,093 Contingency (% of direct and indirect costs) 5.0% of direct and indirect costs $29.93 $6,518,905 Profit Margin (% of direct and indirect costs) (5) 15.0% of all costs $94.28 $20,534,550 Total Costs $723 $157,431,547
RESIDUAL LAND VALUE ($241.98) ($52,703,000)
Per Acre ($10,540,600)
Assumption
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Table 1b - Improved Scenario
Class A Office Pro Forma (Midrise, 1.0 FAR)
Milpitas Employment Lands, EPS #211034
Item Per Bldg. Sq.Ft. Total
DEVELOPMENT PROGRAM
Gross Land Area (acres) 5.0
Gross Leasable Area 1.00 F.A.R. 217,800
Elevation 5 stories
Efficiency Ratio 90%
Net Area 196,020
Parking Spaces 2.4 parking space per 1,000 sq.ft.
Structured/Podium Parking 75% of parking spaces 392
Surface Parking 25% of parking spaces 131
Total Parking Spaces 523
REVENUE ASSUMPTIONS
Gross Revenue (FSG) (1) $65.00 /net sq. ft./yr. $58.50 $12,741,300 (less) Operating Expenses 25.0% ($14.63) ($3,185,325)
(less) Commissions 2.5% ($1.46) ($318,533)
(less) Vacancy Rate 5.0% ($2.93) ($637,065)
Subtotal, Annual Net Operating Income $39.49 $8,600,378 Capitalized Value (2) 5.75% cap rate $666.14 $145,084,629
DEVELOPMENT COSTS
Direct Costs
Building Construction Cost $325.00 /GLA sq. ft. $325.00 $70,785,000 Parking Cost/Site Work $40,000 /structured space $72.04 $15,690,000 Parking Cost/Site Work $5,000 /surface space $3.00 $653,750 Total Direct Costs $400.04 $87,128,750
Indirect Costs
Tenant Improvements $40.00 /net sq. ft. $36.00 $7,840,800 Legal, Insurance & Inspections 3.0% of direct costs $12.00 $2,613,863 Architecture & Engineering 7.0% of direct costs $28.00 $6,099,013 Commercial Housing Linkage Fee (3) $8.00 /net sq. ft. $7.20 $1,568,160 TADIF Fee $0.00 /net sq. ft. $0.00 $0
Other Permits & Fees (4) 3.0% of direct costs $12.00 $2,613,863 General & Administrative 2.5% of direct costs $10.00 $2,178,219 Financing Costs 5.0% of direct costs $20.00 $4,356,438
Total Indirect Costs 31.3% of direct costs $125.21 $27,270,354 Subtotal, Direct and Indirect Costs $525.25 $114,399,104 Contingency (% of direct and indirect costs) 5.0% of direct and indirect costs $26.26 $5,719,955 Profit Margin (% of direct and indirect costs) (5) 15.0% of all costs $82.73 $18,017,859 Total Costs $634 $138,136,918
RESIDUAL LAND VALUE $31.90 $6,948,000
Per Acre $1,389,600
Assumption
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Table 2a - Baseline Scenario
Class A Office Pro Forma (Midrise, 1.5 FAR)
Milpitas Employment Lands, EPS #211034
Item Per Bldg. Sq.Ft. Total
DEVELOPMENT PROGRAM
Gross Land Area (acres) 5.0
Gross Leasable Area 1.50 F.A.R. 326,700
Elevation 8 stories
Efficiency Ratio 90%
Net Area 294,030
Parking Spaces 3.3 parking space per 1,000 sq.ft.
Structured/Podium Parking 100% of parking spaces 1,089
Surface Parking 0% of parking spaces 0
Total Parking Spaces 1,089
REVENUE ASSUMPTIONS
Gross Revenue (FSG) (1) $51.00 /net sq. ft./yr. $45.90 $14,995,530 (less) Operating Expenses 25.0% ($11.48) ($3,748,883)
(less) Commissions 2.5% ($1.15) ($374,888)
(less) Vacancy Rate 5.0% ($2.30) ($749,777)
Subtotal, Annual Net Operating Income $30.98 $10,121,983 Capitalized Value (2) 6.25% cap rate $480.85 $157,093,172
DEVELOPMENT COSTS
Direct Costs
Building Construction Cost $325.00 /GLA sq. ft. $325.00 $106,177,500 Parking Cost/Site Work $40,000 /structured space $133.33 $43,560,000 Parking Cost/Site Work $5,000 /surface space $0.00 $0
Total Direct Costs $458.33 $149,737,500
Indirect Costs
Tenant Improvements $40.00 /net sq. ft. $36.00 $11,761,200 Legal, Insurance & Inspections 3.0% of direct costs $13.75 $4,492,125 Architecture & Engineering 7.0% of direct costs $32.08 $10,481,625 Commercial Housing Linkage Fee (3) $8.00 /net sq. ft. $7.20 $2,352,240 TADIF Fee $42.52 /net sq. ft. $38.27 $12,502,156
Other Permits & Fees (4) 3.0% of direct costs $13.75 $4,492,125 General & Administrative 2.5% of direct costs $11.46 $3,743,438 Financing Costs 5.0% of direct costs $22.92 $7,486,875
Total Indirect Costs 38.3% of direct costs $175.43 $57,311,783 Subtotal, Direct and Indirect Costs $633.76 $207,049,283 Contingency (% of direct and indirect costs) 5.0% of direct and indirect costs $31.69 $10,352,464 Profit Margin (% of direct and indirect costs) (5) 15.0% of all costs $99.82 $32,610,262 Total Costs $765 $250,012,009
RESIDUAL LAND VALUE ($284.42) ($92,919,000)
Per Acre ($18,583,800)
Assumption
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Table 2b - Improved Scenario
Class A Office Pro Forma (Midrise, 1.5 FAR)
Milpitas Employment Lands, EPS #211034
Item Per Bldg. Sq.Ft. Total
DEVELOPMENT PROGRAM
Gross Land Area (acres) 5.0
Gross Leasable Area 1.50 F.A.R. 326,700
Elevation 8 stories
Efficiency Ratio 90%
Net Area 294,030
Parking Spaces 2.4 parking space per 1,000 sq.ft.
Structured/Podium Parking 100% of parking spaces 784
Surface Parking 0% of parking spaces 0
Total Parking Spaces 784
REVENUE ASSUMPTIONS
Gross Revenue (FSG) (1) $65.00 /net sq. ft./yr. $58.50 $19,111,950 (less) Operating Expenses 25.0% ($14.63) ($4,777,988)
(less) Commissions 2.5% ($1.46) ($477,799)
(less) Vacancy Rate 5.0% ($2.93) ($955,598)
Subtotal, Annual Net Operating Income $39.49 $12,900,566 Capitalized Value (2) 5.75% cap rate $666.14 $217,626,944
DEVELOPMENT COSTS
Direct Costs
Building Construction Cost $325.00 /GLA sq. ft. $325.00 $106,177,500 Parking Cost/Site Work $40,000 /structured space $95.99 $31,360,000 Parking Cost/Site Work $5,000 /surface space $0.00 $0
Total Direct Costs $420.99 $137,537,500
Indirect Costs
Tenant Improvements $40.00 /net sq. ft. $36.00 $11,761,200 Legal, Insurance & Inspections 3.0% of direct costs $12.63 $4,126,125 Architecture & Engineering 7.0% of direct costs $29.47 $9,627,625 Commercial Housing Linkage Fee (3) $8.00 /net sq. ft. $7.20 $2,352,240 TADIF Fee $0.00 /net sq. ft. $0.00 $0
Other Permits & Fees (4) 3.0% of direct costs $12.63 $4,126,125 General & Administrative 2.5% of direct costs $10.52 $3,438,438 Financing Costs 5.0% of direct costs $21.05 $6,876,875
Total Indirect Costs 30.8% of direct costs $129.50 $42,308,628 Subtotal, Direct and Indirect Costs $550.49 $179,846,128 Contingency (% of direct and indirect costs) 5.0% of direct and indirect costs $27.52 $8,992,306 Profit Margin (% of direct and indirect costs) (5) 15.0% of all costs $86.70 $28,325,765 Total Costs $665 $217,164,199
RESIDUAL LAND VALUE $1.42 $463,000
Per Acre $92,600
Assumption
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Table 3a - Baseline Scenario
Class A Office/R&D Pro Forma
Milpitas Employment Lands, EPS #211034
Item Per Bldg. Sq.Ft. Total
DEVELOPMENT PROGRAM
Gross Land Area (acres) 5.0
Gross Leasable Area 1.00 F.A.R. 217,800
Efficiency Ratio 90%
Elevation 5 stories
Net Area 196,020
Parking Spaces 2.3 parking space per 1,000 sq.ft.
Structured/Podium Parking 50% of parking spaces 249
Surface Parking 50% of parking spaces 249
Total Parking Spaces 498
REVENUE ASSUMPTIONS
Gross Revenue (FSG) (1) $45.00 /net sq. ft./yr. $40.50 $8,820,900 (less) Operating Expenses 25.0% ($10.13) ($2,205,225)
(less) Commissions 2.5% ($1.01) ($220,523)
(less) Vacancy Rate 5.0% ($2.03) ($441,045)
Subtotal, Annual Net Operating Income $27.34 $5,954,108 Capitalized Value (2) 6.00% cap rate $441.96 $96,258,071
DEVELOPMENT COSTS
Direct Costs
Building Construction Cost $295.00 /GLA sq. ft. $295.00 $64,251,000 Parking Cost/Site Work $40,000 /structured space $45.73 $9,960,000 Parking Cost/Site Work $5,000 /surface space $5.72 $1,245,000 Total Direct Costs $346.45 $75,456,000
Indirect Costs
Tenant Improvements $30.00 /net sq. ft. $27.00 $5,880,600 Legal, Insurance & Inspections 3.0% of direct costs $10.39 $2,263,680 Architecture & Engineering 7.0% of direct costs $24.25 $5,281,920 Commercial Housing Linkage Fee (3) $8.00 /net sq. ft. $7.20 $1,568,160 TADIF Fee $42.52 /net sq. ft. $38.27 $8,334,770
Other Permits & Fees (4) 3.0% of direct costs $10.39 $2,263,680 General & Administrative 2.5% of direct costs $8.66 $1,886,400 Financing Costs 5.0% of direct costs $17.32 $3,772,800
Total Indirect Costs 41.4% of direct costs $143.49 $31,252,010 Subtotal, Direct and Indirect Costs $489.94 $106,708,010 Contingency (% of direct and indirect costs) 5.0% of direct and indirect costs $24.50 $5,335,401 Profit Margin (% of direct and indirect costs) (5) 15.0% of all costs $77.16 $16,806,512 Total Costs $592 $128,849,923
RESIDUAL LAND VALUE ($149.64) ($32,592,000)
Per Acre ($6,518,400)
Assumption
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Table 3b - Improved Scenario
Class A Office/R&D Pro Forma
Milpitas Employment Lands, EPS #211034
Item Per Bldg. Sq.Ft. Total
DEVELOPMENT PROGRAM
Gross Land Area (acres) 5.0
Gross Leasable Area 1.00 F.A.R. 217,800
Efficiency Ratio 90%
Elevation 5 stories
Net Area 196,020
Parking Spaces 2.3 parking space per 1,000 sq.ft.
Structured/Podium Parking 50% of parking spaces 249
Surface Parking 50% of parking spaces 249
Total Parking Spaces 498
REVENUE ASSUMPTIONS
Gross Revenue (FSG) (1) $57.50 /net sq. ft./yr. $51.75 $11,271,150 (less) Operating Expenses 25.0% ($12.94) ($2,817,788)
(less) Commissions 2.5% ($1.29) ($281,779)
(less) Vacancy Rate 5.0% ($2.59) ($563,558)
Subtotal, Annual Net Operating Income $34.93 $7,608,026 Capitalized Value (2) 6.00% cap rate $564.72 $122,996,424
DEVELOPMENT COSTS
Direct Costs
Building Construction Cost $295.00 /GLA sq. ft. $295.00 $64,251,000 Parking Cost/Site Work $40,000 /structured space $45.73 $9,960,000 Parking Cost/Site Work $5,000 /surface space $5.72 $1,245,000 Total Direct Costs $346.45 $75,456,000
Indirect Costs
Tenant Improvements $30.00 /net sq. ft. $27.00 $5,880,600 Legal, Insurance & Inspections 3.0% of direct costs $10.39 $2,263,680 Architecture & Engineering 7.0% of direct costs $24.25 $5,281,920 Commercial Housing Linkage Fee (3) $4.00 /net sq. ft. $3.60 $784,080 TADIF Fee $0.00 /net sq. ft. $0.00 $0
Other Permits & Fees (4) 3.0% of direct costs $10.39 $2,263,680 General & Administrative 2.5% of direct costs $8.66 $1,886,400 Financing Costs 5.0% of direct costs $17.32 $3,772,800
Total Indirect Costs 29.3% of direct costs $101.62 $22,133,160 Subtotal, Direct and Indirect Costs $448.07 $97,589,160 Contingency (% of direct and indirect costs) 5.0% of direct and indirect costs $22.40 $4,879,458 Profit Margin (% of direct and indirect costs) (5) 15.0% of all costs $70.57 $15,370,293 Total Costs $541 $117,838,911
RESIDUAL LAND VALUE $23.68 $5,158,000
Per Acre $1,031,600
Assumption
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Table 4 - Baseline Scenario
Light Industrial Pro Forma
Milpitas Employment Lands, EPS #211034
Item Per Bldg. Sq.Ft. Total
DEVELOPMENT PROGRAM
Gross Land Area (acres) 5.0
Gross Leasable Area 0.50 F.A.R. 108,900
Efficiency Ratio 90%
Elevation 3 stories
Net Area 98,010
Parking Spaces 0.5 parking space per 1,000 sq.ft.
Structured/Podium Parking 0% of parking spaces 0
Surface Parking 100% of parking spaces 58
Total Parking Spaces 58
REVENUE ASSUMPTIONS
Gross Revenue (NNN) (1) $35.00 /net sq. ft./yr. $31.50 $3,430,350 (less) Operating Expenses 5.0% ($1.58) ($171,518)
(less) Commissions 2.5% ($0.79) ($85,759)
(less) Vacancy Rate 5.0% ($1.58) ($171,518)
Subtotal, Annual Net Operating Income $27.56 $3,001,556 Capitalized Value (2) 6.00% cap rate $445.59 $48,525,159
DEVELOPMENT COSTS
Direct Costs
Building Construction Cost $195.00 /GLA sq. ft. $195.00 $21,235,500 Parking Cost/Site Work $40,000 /structured space $0.00 $0 Parking Cost/Site Work $5,000 /surface space $2.66 $290,000 Total Direct Costs $197.66 $21,525,500
Indirect Costs
Tenant Improvements $20.00 /net sq. ft. $18.00 $1,960,200 Legal, Insurance & Inspections 3.0% of direct costs $5.93 $645,765 Architecture & Engineering 7.0% of direct costs $13.84 $1,506,785 Commercial Housing Linkage Fee (3) $4.00 /net sq. ft. $3.60 $392,040 TADIF Fee $0.00 /net sq. ft. $0.00 $0
Other Permits & Fees (4) 3.0% of direct costs $5.93 $645,765 General & Administrative 2.5% of direct costs $4.94 $538,138 Financing Costs 5.0% of direct costs $9.88 $1,076,275
Total Indirect Costs 31.4% of direct costs $62.12 $6,764,968 Subtotal, Direct and Indirect Costs $259.78 $28,290,468 Contingency (% of direct and indirect costs) 5.0% of direct and indirect costs $12.99 $1,414,523 Profit Margin (% of direct and indirect costs) (5) 15.0% of all costs $40.92 $4,455,749 Total Costs $314 $34,160,740
RESIDUAL LAND VALUE $131.90 $14,364,000
Per Acre $2,872,800
Assumption
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Table 5 - Baseline Scenario
Warehouse/ Distribution Pro Forma
Milpitas Employment Lands, EPS #211034
Item Per Bldg. Sq.Ft. Total
DEVELOPMENT PROGRAM
Gross Land Area (acres) 5.0
Gross Leasable Area 0.40 F.A.R. 87,120
Efficiency Ratio 90%
Elevation 1 story
Net Area 78,408
Parking Spaces 0.5 parking space per 1,000 sq.ft.
Structured/Podium Parking 0% of parking spaces 0
Surface Parking 100% of parking spaces 46
Total Parking Spaces 46
REVENUE ASSUMPTIONS
Gross Revenue (NNN) (1) $21.00 /net sq. ft./yr. $18.90 $1,646,568 (less) Operating Expenses 5.0% ($0.95) ($82,328)
(less) Commissions 2.5% ($0.47) ($41,164)
(less) Vacancy Rate 5.0% ($0.95) ($82,328)
Subtotal, Annual Net Operating Income $16.54 $1,440,747 Capitalized Value (2) 5.75% cap rate $278.98 $24,304,775
DEVELOPMENT COSTS
Direct Costs
Building Construction Cost $85.00 /GLA sq. ft. $85.00 $7,405,200 Parking Cost/Site Work $40,000 /structured space $0.00 $0 Parking Cost/Site Work $5,000 /surface space $2.64 $230,000 Total Direct Costs $87.64 $7,635,200
Indirect Costs
Tenant Improvements $20.00 /net sq. ft. $18.00 $1,568,160 Legal, Insurance & Inspections 3.0% of direct costs $2.63 $229,056 Architecture & Engineering 7.0% of direct costs $6.13 $534,464 Commercial Housing Linkage Fee (3) $4.00 /net sq. ft. $3.60 $313,632 TADIF Fee $0.00 /net sq. ft. $0.00 $0
Other Permits & Fees (4) 2.5% of direct costs $2.19 $190,880 General & Administrative 2.5% of direct costs $2.19 $190,880 Financing Costs 3.0% of direct costs $2.63 $229,056
Total Indirect Costs 42.6% of direct costs $37.38 $3,256,128 Subtotal, Direct and Indirect Costs $125.02 $10,891,328 Contingency (% of direct and indirect costs) 5.0% of direct and indirect costs $6.25 $544,566 Profit Margin (% of direct and indirect costs) (5) 15.0% of all costs $19.69 $1,715,384 Total Costs $151 $13,151,279
RESIDUAL LAND VALUE $128.02 $11,153,000
Per Acre $2,230,600
Assumption
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Table 6
Residential Rental (Midrise) - Baseline Scenario
Milpitas Employment Lands, EPS #211034
Item Total
DEVELOPMENT PROGRAM
Land Area 2 acres 87,120
Total Units 180 units
Elevation 7 stories
Total Building Area 1,200 per unit 216,000
Percent On-Site BMR 15%
Net Residential Unit Area 80% 172,800
Podium Parking Spaces 1.20 parking space per unit 216
REVENUE ASSUMPTIONS
Gross Rental Revenue
Market Rate (1) $3.75 /nsf per month $6,609,600
Affordable (80% of AMI) $2.76 /nsf per month $858,470
(less) Vacancy 5.0% -$373,404
(less) Operating Expenses (Residential) (2) 26.5% -$1,979,039 (less) Capital Reserves $0.50 /nsf -$86,400
Residential NOI $5,029,228
Effective Capitalized Value (3) 4.25% cap rate $118,334,782 (less Cost of Sale) 3.0% of capitalized value -$3,550,043 Net Value $114,784,738
DEVELOPMENT COSTS
Direct Costs
Building Construction Cost $260 /gsf $56,160,000
Site Work $10 /land sq.ft. $871,200
Total Direct Costs $57,031,200
Parking Construction Cost $40,000 per space $8,640,000
Direct Cost (including Parking) $65,671,200
Indirect Costs
Soft Costs (4) 15.0% of DPC $9,850,680
TADIF Fee $40,487 per unit $7,287,660
Other Development Fees (5) 2.5% of DPC $1,641,780
Carrying and Financing Cost 5.0% of DPC $3,283,560
Total Indirect Costs 33.6% of DPC $22,063,680
Total Direct and Indirect Costs $87,734,880
Contingency (% of direct and indirect costs) 5.0% of direct and indirect costs $4,386,744 Profit Margin (% of direct and indirect costs) (6) 15.0% of direct and indirect costs $13,160,232 Total Costs $105,281,856
RESIDUAL LAND VALUE $9,503,000
Per Acre $4,752,000
Assumption
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Table 7a - Baseline Scenario
Residential Rental (Highrise)
Milpitas Employment Lands, EPS #211034
Item Total
DEVELOPMENT PROGRAM
Land Area 2 acres 87,120
Total Units 360 units
Elevation 12 stories
Total Building Area 1,200 per unit 432,000
Percent On-Site BMR 15%
Net Residential Unit Area 80% 345,600
Podium Parking Spaces 1.20 parking space per unit 432
REVENUE ASSUMPTIONS
Gross Rental Revenue
Market Rate (1) $3.75 /nsf per month $13,219,200
Affordable (80% of AMI) $2.76 /nsf per month $1,716,941 (less) Vacancy 5.0% -$746,807
(less) Operating Expenses (Residential) 26.5% -$3,958,077 (less) Capital Reserves $0.50 /nsf -$172,800
Residential NOI $10,058,456
Effective Capitalized Value (2) 4.25% cap rate $236,669,563 (less Cost of Sale) 3.0% of capitalized value -$7,100,087 Net Value $229,569,477
DEVELOPMENT COSTS
Direct Costs
Building Construction Cost $300 /gsf $129,600,000
Site Work $10 /land sq.ft. $871,200
Total Direct Costs $130,471,200
Parking Construction Cost $40,000 per space $17,280,000 Direct Cost (including Parking) $147,751,200
Indirect Costs
Soft Costs (3) 15.0% of DPC $22,162,680
TADIF Fee $40,487 per unit $14,575,320
Other Development Fees (4) 2.5% of DPC $3,693,780
Carrying and Financing Cost 5.0% of DPC $7,387,560
Total Indirect Costs 32.4% of DPC $47,819,340
Total Direct and Indirect Costs $195,570,540
Contingency (% of direct and indirect costs) 5.0% of direct and indirect costs $9,778,527 Profit Margin (% of direct and indirect costs) (5) 15.0% of direct and indirect costs $29,335,581 Total Costs $234,684,648
RESIDUAL LAND VALUE ($5,115,000)
Per Acre ($2,558,000)
Assumption
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Table 7b - Improved Scenario
Residential Rental (Highrise)
Milpitas Employment Lands, EPS #211034
Item Total
DEVELOPMENT PROGRAM
Land Area 2 acres 87,120
Total Units 360 units
Elevation 12 stories
Total Building Area 1,200 per unit 432,000
Percent On-Site BMR 15%
Net Residential Unit Area 80% 345,600
Podium Parking Spaces 1.20 parking space per unit 432
REVENUE ASSUMPTIONS
Gross Rental Revenue
Market Rate (1) $3.90 /nsf per month $13,747,968
Affordable (80% of AMI) $2.76 /nsf per month $1,716,941 (less) Vacancy 5.0% -$773,245
(less) Operating Expenses (Residential) 26.5% -$4,098,201 (less) Capital Reserves $0.50 /nsf -$172,800
Residential NOI $10,420,663
Effective Capitalized Value (2) 4.25% cap rate $245,192,059 (less Cost of Sale) 3.0% of capitalized value -$7,355,762 Net Value $237,836,298
DEVELOPMENT COSTS
Direct Costs
Building Construction Cost $300 /gsf $129,600,000
Site Work $10 /land sq.ft. $871,200
Total Direct Costs $130,471,200
Parking Construction Cost $40,000 per space $17,280,000 Direct Cost (including Parking) $147,751,200
Indirect Costs
Soft Costs (3) 15.0% of DPC $22,162,680
TADIF Fee $40,487 per unit $14,575,320
Other Development Fees (4) 2.5% of DPC $3,693,780
Carrying and Financing Cost 5.0% of DPC $7,387,560
Total Indirect Costs 32.4% of DPC $47,819,340
Total Direct and Indirect Costs $195,570,540
Contingency (% of direct and indirect costs) 5.0% of direct and indirect costs $9,778,527 Profit Margin (% of direct and indirect costs) (5) 15.0% of direct and indirect costs $29,335,581 Total Costs $234,684,648
RESIDUAL LAND VALUE $3,152,000
Per Acre $1,576,000
Assumption
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APPENDIX F:
Innovation District Scenarios
161
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Area Acres BPRD1 Allowed Uses Scenario 1 Scenario 2 Scenario 3 Scenario 4 Existing TASP Area
Great Mall Adjacent
Area A 2.7 BPRD‐R Non‐Resi. Commercial/Retail (55%) + Vacant (45%) Commercial/Retail Class A Office (60%) + Housing (40%) Class A Office Area B 14.7 Non‐Resi.
Area B1 (Stratford) 3.6 BPRD‐H Non‐Resi. Assembly ‐ School Commercial/Retail Class A Office Class A Office Area B2 (Lightwave) 4.3 BPRD‐R Non‐Resi. Class B Office Class A Office/R&D Class A Office (60%) + Housing (40%) Class A Office Area B3 (Marriott Hotel) 3.2 BPRD‐H Non‐Resi. Hotel Commercial/Retail Hotel Hotel Area B4 (Marriott Hotel) 3.6 BPRD‐H Non‐Resi. Hotel Class A Office Hotel Hotel Subtotal 17.4
East TASP
Area C 3.3 BPRD‐H Resi + Non‐Resi. Industrial (46%) + Warehouse/Distribution (54%) Commercial/Retail Class A Office Class A Office Area D 4.8 BPRD‐H Resi Industrial (77%) + Warehouse/Distribution (23%) Commercial/Retail Class A Office Class A Office Area E 2.2 BPRD‐R Resi Warehouse/Distribution Commercial/Retail Class A Office (60%) + Housing (40%) Class A Office Subtotal 10.3
Total Existing TASP Area 27.7
Additional Metro SP Employment Area
North of Montague Expressway
Area F 4.5 BPRD‐H Non‐Resi. Warehouse/Distribution Hotel Class A Office/R&D Class A Office/R&D Area G 5.4 BPRD‐H Non‐Resi. Class B Office Commercial/Retail Class A Office/R&D Class A Office/R&D Area H 7.0 BPRD‐L Non‐Resi. Assembly ‐ Church Warehouse Industrial Class A Office/R&D Subtotal 16.9
South of Montague Expressway
Area I 13.4 BPRD‐H Non‐Resi. Industrial (20%) + Warehouse/Distribution (80%) Commercial/Retail (77%) + Open Space (23%) Class A Office/R&D (77%) + Open Space (23%) Class A Office (77%) + Open Space (23%) Area J 2.0 BPRD‐L Non‐Resi. Warehouse/Distribution Warehouse Industrial Class A Office/R&D Area K 5.6 BPRD‐L Non‐Resi. Warehouse/Distribution Warehouse Industrial Class A Office/R&D Area L 1.0 BPRD‐L Non‐Resi. Industrial Warehouse Industrial Class A Office/R&D Area M 4.2 BPRD‐L Non‐Resi. Warehouse/Distribution Warehouse Industrial Class A Office/R&D Area N 3.6 BPRD‐L Non‐Resi. Vacant Warehouse Industrial Class A Office/R&D
29.8 Total Add'l Empl. Lands 46.68
TOTAL INNOVATION DISTRICT 74.38
(1) BPRD‐L: 1.0‐2.5 FAR. Allows for lower density office, R&D, warehouses, hotels, and industrial. Office‐supportive commercial retail uses are conditionally permitted.
BPRD‐H: 1.0‐2.5 FAR. Allows for higher density office, R&D, commercial/retail, and hotels.
BPRD‐R: 1.0‐5.0 FAR. Minimum of 1.0 FAR of office and R&D. Additional residential is allowed up to 5.0 FAR total. Allows office, R&D, commercial/retail, hotels, and residential. 162
Item # 2.
T ECHNICAL M EMORANDUM
To: Daniel Degu, City of Milpitas
From: Economic & Planning Systems, Inc.
Subject: Fiscal Benefits of Employment Lands Study Phase 1:
Narrative Summary of Conclusions
Date: October 25, 2021
The City of Milpitas (City) engaged Economic & Planning Systems, Inc. (EPS) to prepare a Fiscal Benefits of Employment Lands Study (Study).
The Study will guide City policy towards a fiscally resilient future based on protection and preservation of employment lands, the expansion and attraction of innovative and competitive businesses, and the evolution of the City’s new Innovation District. The Innovation District, located within the Milpitas Metro Specific Plan (MMSP), provides a vital economic development opportunity to support the City fiscally and economically.
The overall study is divided into two phases, with Phase 1 including the Fiscal Impact Analysis, the Occupation and Wage Analysis, the Residual Land Value Analysis, and the Innovation District Development Scenarios Analysis. Phase 2 will include the development of the Innovation District Framework Plan, a set of potential City policies and actions to help support the evolution and development of the Innovation District.
This memorandum provides a narrative summary of conclusions from these analyses with detailed table sets included in the Appendices. The Phase 1 memorandum, that informs the Phase 2 work, is organized as follows:
Summary of Findings. Summarizes the key findings from the different technical components of the Phase 1 Study.
Fiscal Impact Analysis. Provides a summary of findings concerning the impacts of existing land uses and future development on the City’s General Fund.
Employment Density, Occupational, and Wage Analysis. Estimates the expected number of jobs and wages generated associated with the development and occupancy of different nonresidential developments. 163
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Innovation District Development Scenarios Analysis. Estimates the different levels of development, jobs, salaries, and net fiscal impacts based on the buildout of different Innovation District land use scenarios.
Summary of Findings
Phase 1 of the Fiscal Benefits of Employment Lands Study provides broad insights into the role and importance of employment lands in Milpitas as well as the opportunities and challenges associated with the creation of a new Innovation District as part of MMSP.1 The overall findings of the Phase 1 work are as follows:
1. Employment lands play a critical economic and fiscal role in supporting essential and critical City services.
2. Cultivation of an Innovation District as a key component of MMSP and City economic development efforts would provide new, expansive benefits to the City.
3. There are challenges to spurring the development of the Innovation District and the City will need to play a proactive role in generating incentives to catalyze the Innovation District.
A more detailed summary of key findings from Phase 1 are provided below:
The successful development of an Innovation District would bring a broad range of substantial benefits (see Innovation District Scenarios Analysis section). The City’s new Innovation District has the potential to accommodate millions of square feet of new Office and Research & Development (R&D) development as well as supportive Hotel and other nonresidential uses. The impacts of the successful development of the Innovation District are estimated in this memorandum and include:
‐ Substantial net revenues to the City’s General Fund.
‐ Accommodation of a range of new professional, scientific, and technology businesses bringing thousands of high-quality jobs.
‐ The broader transformation of the Transit Area Specific Plan (TASP)/MMSP area into a vital mixed-use transit-oriented area.
The City’s current employment lands make substantial and positive net fiscal contributions to the City’s budget. Analysis of the broad set of existing land uses in the 1 This memorandum refers to a range of different geographic areas, including (1) the Transit Area Specific Plan (TASP) area—the planning area of the 2008 Specific Plan; (2) the Milpitas Metro Specific Plan (MMSP) area—the updated/adjusted Specific Plan area that incorporates additional lands to the east of the TASP that form part of the envisioned Innovation District. The proposed Innovation District also is defined geographically in two ways, including a broader Innovation District area as well as a core set of parcels that form the basis of much of the technical analysis in this memorandum. Maps showing these different areas are included in Appendix A. 164
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Although wages in Milpitas tend not to be as strong as Mountain View, Sunnyvale, and Santa Clara today, full buildout of the Innovation District would accommodate high-quality new jobs and wages for residents in the long term. The strongest annual wages by land use/development types in Milpitas are associated with Class A Office/R&D and Class A Office uses. The lowest annual wages by land use/development types in Milpitas are associated with Hotel, Retail, and Warehouse/Distribution uses. On average, all types of new development in the City are expected to provide positive fiscal contributions to the City, though to varying degrees. The higher property values of new development will generally allow them to make fiscally positive contributions to the City. New hotel development will continue to be the fiscally strongest use, though new Class A Office, Class A Office/R&D, and Retail generate significant fiscal positives. New multi-family residential, Class B office, industrial, and warehouse/distribution uses all generate positive but smaller fiscal impacts. New residential development in the TASP also makes additional contributions towards public services through the payment of the Communities Facilities District (CFD) special tax (see Fiscal Impact Analysis section (new uses)).
The MMSP is intended to support the incremental redevelopment of the identified area into a vital Innovation District. The Innovation District area currently includes a broad range of uses, ranging from public storage to light industrial to hotel uses. With the recent opening of the multi-modal Milpitas Transit Station Center (VTA/BART) and new policies, investments, and improvements, an incremental evolution of these uses is sought towards a more dense, transit-oriented set of employment and supporting uses located near residential development.
There are a broad range of development challenges to achieving the Innovation District vision including the economics of Class A Office/R&D development (see Residual Land Value Analysis section). For jurisdictions throughout the U.S., there are a broad range of development challenges that arise when supporting area transformation. As a result, progress often occurs incrementally and over time. For the Milpitas Innovation District, key challenges include the lack of large and vacant sites, competition for Class A Office/R&D uses among Silicon Valley communities, the high costs of building and parking development associated with Class A Office/R&D uses, high market demand for residential development, the economics of existing uses and competition with other lower-intensity uses (e.g. storage; warehouse/ distribution), and the current lack of connectivity and sense of place/amenities.
City actions can help spur the evolution and development of the Innovation District.
It will be important for the City to consider the full range of actions to support the goals of the Innovation District, particularly preserving and protecting its employment lands and incentivizing the development of a premier Innovation District. These include a broad range of policies, investments, funding mechanisms, outreach, and partnership pursuit. This is the 165
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Phase 2 of the Study will take a closer look at the Innovation District, combining existing conditions, case studies, and Phase 1 findings, to develop a set of potential policies and actions to support Innovation District implementation.
Fiscal Impact Analysis
A fiscal impact analysis estimates the impact of different land uses on both the City’s General Fund revenues and expenditures. By comparing the revenue and expenditure impacts, it is possible to determine whether particular land uses are expected to have positive or negative impacts on the City’s General Fund. This analysis examines the fiscal impacts of both existing land uses and potential future developments. Appendix B and Appendix C provide the full fiscal impact analysis table set for existing land uses and future land uses, respectively.
Methodology
The City’s General Fund is a key City fund where a broad range of revenues are deposited and from which expenditures on key public services are made. A number of taxes and other public revenues accrue to the City’s General Fund, including property taxes, sales taxes, and transient occupancy taxes, among others. The General Fund also provides all or a significant proportion of funding for a range of important public services, including police, fire, and public works, among others.
In this analysis, two planning-level fiscal impact analyses are conducted, including (1) estimated fiscal impacts of existing land uses; and (2) estimated fiscal impacts of potential new developments/land uses. The results for existing uses provide insights into the relative fiscal contributions of existing land uses. The results for future uses provide insights into how different land use policies and development types could affect the City’s fiscal situation.
Existing Land Uses
The City of Milpitas 2020-2021 Adopted Budget and Financial Plan provides information on the City’s General Fund revenues and expenditures by category. A range of information was used to distribute these revenues and expenditures between different land uses. Building inventory by land use was a key piece of information. On the revenue side, additional information sources included existing assessed values by land use that supported the estimates of property taxes by land use and taxable sales information by land use that supported the estimates of sales and use tax by land use.
On the expenditure side, an average per service population approach was used. Under this approach, all General Fund expenditures are distributed between residents and workers. Because they are, on average, present in the City for less time, a single worker is given half the weighting of a single resident.2 It is then possible to combine the City’s budget information on existing 2 Service population is a measure that combines both residents and workers, reflecting the fact that they both demand/use City services. Workers are given a partial weighting as they are in the city for a smaller proportion of their time. Because different land uses bring different levels of new service population to the city, different land uses have different public service expenditure impacts. 166
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New Land Uses
The fiscal impacts of new land uses are estimated using a similar approach with some important differences. For new land uses it is helpful to specify the nature of the new land uses assessed; the land uses/development prototypes considered in this analysis are further described below. In addition, new development will typically have substantially higher assessed values based on their new development value. This requires specific assumptions concerning the development value of different land uses. On the expenditure side, the same service population approach is used. In other words, each new resident or worker is assumed to require the same level of General Fund expenditures as existing residents and workers. As a result, based on information on persons per household and workers per square foot, it is possible to derive General Fund expenditures by land use type.
Impacts of Existing Uses
Land Uses and Approach
Milpitas has a broad range of existing land use types located in different employment areas in the city. The analysis provides planning-level land use-specific conclusions on the net General Fund fiscal impact of existing land uses. The existing land uses in the city of Milpitas are categorized as follows:
1. Single-Family Residential. Including detached and attached units up to and including triplexes.
2. Multifamily Residential. Including apartment houses with 5 or more units, condominiums, and generic multifamily dwellings.
3. Office. Including professional buildings and commercial offices.
4. Industrial: Broad industrial category including manufacturing, warehousing and distribution, R&D facilities, and similarly intensive uses.
5. Retail. Including all shopping establishments and service stations.
6. Hotel. Including all hotel uses.
7. Other Uses. Including everything not captured in above categories. Exemplary uses include hospitals, vacant land, civic uses, parking lots, and other. 167
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Estimated fiscal impacts by land use are shown in Table 1 and show estimated General Fund revenues, expenditures, and the net fiscal impact associated with each existing land use category.
These results reflect Fiscal Year 2020/21 collective, average impacts of the different existing land use categories.3 Each actual existing development has a differential impact based on the timing of its development and project specifics. The impacts of new development are discussed in the next section.
Key conclusions from Table 1 are as follows:
Residential. Existing residential uses, both single-family and multifamily, indicate the largest fiscal deficits with General Fund revenues covering about 50 percent of General Fund expenditures. This is true even with the attribution of sales and use tax revenues from resident spending to residential uses. This is a common finding for existing residential land uses in California cities.
Office. Existing office uses also generate a net fiscal deficit for the City’s General Fund. This is primarily a reflection of the age of the office building stock (average age of office buildings in Milpitas is over 30 years) that limits the property tax revenue generation. Industrial. The city has a large base of industrial development that varies in specific use type. Overall, existing industrial uses generate a net fiscal positive impact for the City’s General Fund. An important reason for this outcome is the substantial sales and use tax revenues (business-to-business taxes) generated by many industrial uses. Retail. As is common under the State of California’s tax system, retail uses provide a substantial positive fiscal impact to the City’s General Fund. The Great Mall is a key driver of this contribution with additional contributions from retail establishments throughout the city.
Dependence on retail uses and their associated sales tax generation is a common theme for many California cities.
Hotel. Similar to retail uses, hotel uses and their associated transient occupancy taxes also bring a substantial positive fiscal impacts to the City. These revenues can fluctuate substantially with economic conditions.4
As with most California cities, the pandemic-related recession brought challenges to the City of Milpitas, with the primary generators of fiscal revenues (retail and hotel uses) being especially affected by social-distancing guidelines and stay-at-home orders. 3 The analysis distributes the large majority of General Fund revenues and expenditures. Only exceptions are items that are unrelated to land use/development (e.g., transfers in). 4 More recent information than the City’s 2020-2021 Adopted Budget indicates a substantial reduction in Transient Occupancy Tax revenues associated with the pandemic. 168
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Technical Memorandum October 25, 2021
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Annual General Fund Impacts Family1 Family1 Office Industrial Retail Hotel Uses Total2 General Fund Revenues
Property Tax $14,774,099 $6,671,212 $544,022 $6,251,994 $1,931,997 $627,253 $941,356 $31,741,933Property Tax In‐Lieu of VLF $3,696,107 $1,668,969 $136,100 $1,564,091 $483,337 $156,923 $235,503 $7,941,031 Sales Taxes $3,752,701 $1,076,926 $822,258 $6,950,982 $15,514,270 $34,669 $220,146 $28,371,951 Real Estate Transfer Tax $370,582 $167,335 $13,646 $156,820 $48,461 $15,734 $23,612 $796,190 Business License Tax $0 $0 $54,661 $199,016 $32,036 $14,356 $65,582 $365,650 Motor Vehicle In‐Lieu $26,708 $7,665 $0 $0 $0 $0 $647 $35,020 Other Taxes $397,290 $175,000 $68,307 $355,836 $80,496 $30,089 $89,841 $1,196,860 Franchise Fees $3,221,727 $924,550 $192,907 $702,353 $113,058 $50,663 $309,528 $5,514,787Transient Occupancy Tax $0 $0 $0 $0 $0 $13,452,683 $0 $13,452,683 Licenses, Permits, and Fines $5,787,719 $1,660,922 $346,551 $1,261,752 $203,105 $91,015 $556,055 $9,907,120 Total Revenues $27,933,537 $10,508,610 $1,974,045 $15,522,917 $17,842,927 $14,286,373 $2,116,925 $90,185,334 31% 12% 2% 17% 20% 16% 2% 100%
General Fund Expenditures
General Government $2,511,645 $720,775 $150,390 $547,551 $88,140 $39,497 $241,306 $4,299,304Economic Development $534,026 $153,251 $31,976 $116,420 $18,740 $8,398 $51,307 $914,118 Building Safety & Housing $4,032,635 $1,157,260 $241,462 $879,135 $141,515 $63,415 $387,436 $6,902,858 Engineering $1,367,502 $392,437 $81,882 $298,122 $47,989 $21,505 $131,383 $2,340,819Finance $2,545,109 $730,379 $152,393 $554,847 $89,314 $40,023 $244,521 $4,356,586Fire $16,252,557 $4,664,053 $973,154 $3,543,140 $570,341 $255,581 $1,561,465 $27,820,292Human Resources $1,227,784 $352,341 $73,516 $267,663 $43,086 $19,308 $117,959 $2,101,657Information Technology $2,174,120 $623,915 $130,180 $473,969 $76,295 $34,189 $208,879 $3,721,547 Planning $579,456 $166,289 $34,696 $126,324 $20,334 $9,112 $55,671 $991,883Police $21,940,150 $6,296,242 $1,313,710 $4,783,064 $769,932 $345,021 $2,107,901 $37,556,020Public Works $5,348,454 $1,534,865 $320,249 $1,165,990 $187,690 $84,107 $513,853 $9,155,209Recreation & Community Services $1,905,131 $546,722 $114,074 $415,328 $66,856 $29,959 $183,036 $3,261,106 Total Expenditures $60,418,568 $17,338,528 $3,617,682 $13,171,555 $2,120,232 $950,116 $5,804,717 $103,421,399 58% 17% 3% 13% 2% 1% 6% 100%
Annual Net Impact on General Fund ($32,485,031) ($6,829,918) ($1,643,637) $2,351,362 $15,722,695 $13,336,257 ($3,687,792) ($13,236,065) Source: Economic & Planning Systems
[1] Residential developments in the TASP/CFD area pay an additional annual CFD special tax toward the provision of public services throughout the TASP. These revenues do not flow into the City's General Fund and therefore are omitted from this table. [2] Despite the negative total annual General Fund impact displayed, the City's General Fund does balance as required by State law. The negative value shown is due to the omission of certain budget items not affected by existing land uses as considered in this analysis. 169
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Land Uses and Approach
To estimate the fiscal impacts of potential new developments on the City’s General Fund, City staff and EPS considered nine (9) development prototypes across a range of land uses. These prototypes were selected as they represent development types that might be considered for development within the Innovation District and the broader MMPS. The prototypes examined are as follows:
1. Mid-Rise Multifamily Residential. Apartment building of 7 stories in height with a density of about 90 Dwelling Units per Acre.
2. High-Rise Multifamily Residential. Apartment building of 12 stories in height with a density of about 180 Dwelling Units per Acre.
3. Class A Office. A 5- to 8-story office building with high-quality finishes, amenities, and systems.
4. Class B Office. A 3-story office building with mid-quality finishes, amenities, and systems.
5. Class A Office/R&D. A 4- to 5-story commercial building with more flexible space that can accommodate both office and R&D uses.
6. Light Industrial. A 1- to 3-story building intended for production, processing, and assembly activities that do not generate noise, odors, or fumes to the degree a heavy industrial use would.
7. Warehouse/Distribution.5 A 1-story building intended for warehousing and logistic uses.
8. Retail. A traditional 1-story commercial building with substantial parking and a low Floor Area Ratio intended for on-site retail sales.
9. Hotel. A 210-room hotel with 650 gross square feet (sq. ft.) per room.
Fiscal impacts for the new prototype developments were derived using the same general methodology as for existing uses, with the major difference arising in the assessed value assumptions.6 For new uses, development values/assessed values are based on recent market 5 Warehouse and distribution uses include logistics/fulfillment centers. 6 Assessed value represents the basis on which property owners pay their property taxes. For existing developments, County Assessor records provide information on actual assessed values. For new development, the assessment is set at the sales price or property value of the new development. For for-sale properties, new development will be assessed at its sale price. For new income (rental) properties, the assessed value of the new property will be estimated by the Santa Clara County Assessor’s Office on either a capitalized value or total cost basis (see next footnote). 170
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Results
As shown in Table 2, on a per-acre basis, the new development prototypes all cover their estimated costs and nonresidential uses generally provide greater annual fiscal surpluses to the City’s General Fund. Hotel uses provide the greatest fiscal impact at $826,580 per acre, though as experienced during the pandemic, these revenues sources are subject to fluctuation with economic conditions. After Hotels uses, Class A Office ($85,406), Retail ($63,925), and Class A Office/R&D ($51,222) uses provided the next highest fiscal impact per acre. The next set of uses in order of positive fiscal impact per acre include, High-Rise Residential ($28,115), Light Industrial ($22,648), Class B Office ($14,299), Warehouse and Distribution ($13,527), and MidRise Residential ($9,153). The higher development values and associated property tax generation by new development are a key driver of the improved fiscal results. Employment uses often generate higher fiscal surpluses as opposed to residential uses, due to their lower service population generation and subsequently lower impact on General Fund expenditures.
It is important to note that these results represent planning-level averages and individual developments will vary from these results based on project specifics and market timing. Over time, when properties do not turnover (are not sold), property tax revenue generation for all building types often declines gradually due to Proposition 13 limits on assessed value increases through time. The CFD special taxes paid by new residential development in the TASP are not included in this table but are discussed below (these revenues do not flow directly into the City’s General Fund but they do support the provision of public services in the TASP).8 Key conclusions from Table 2 are as follows:
Residential. New mid-rise development prototypes—a predominant recent development type in the TASP—are expected to generate sufficient General Fund revenues annually (about $333,000) to cover the new General Fund expenditures (about $315,000) with a positive fiscal surplus of about $18,000 or $9,000 per acre. New high-residential development prototypes (a product type that is yet to be developed in the city high-rise residential) are also expected to generate a positive fiscal surplus of about $56,000 for the prototype, equivalent to $28,000 per acre, with higher General Fund revenue and expenditure impacts than new mid-rise development. The significant property tax revenues generated by new 7 Development values (and hence assessed values of new development) were estimated using a capitalized value approach driven by market rent/lease rate information and capitalized rates. Rents and associated values were developed using 2019 data to avoid the impact of the pandemic-induced market downturn. Capitalized values were developed as part of the Residual Land Value Analysis section. A glossary of terms is provided in Appendix D. 8 The Transit Area Specific Plan (TASP) is the 2008 document that sets forth the vision, design guidelines, and policies for the City to redevelop the area surrounding the now opened Milpitas BART station. The new Milpitas Metro Specific Plan represents an update to this document. 171
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Property Tax $191,702 $397,211 $352,556 $59,768 $199,254 $78,611 $39,374 $68,201 $126,707 Property Tax In‐Lieu of VLF $47,959 $99,372 $88,201 $14,952 $49,848 $19,666 $9,850 $17,062 $31,699 Sales Taxes $28,005 $57,993 $156,730 $31,010 $91,922 $40,181 $25,964 $254,244 $801 Real Estate Transfer Tax $5,207 $10,788 $4,788 $812 $2,706 $1,068 $535 $926 $1,721 Business License Tax $0 $0 $10,032 $2,006 $5,016 $1,505 $463 $1,191 $614 Motor Vehicle In‐Lieu $218 $437 $0 $0 $0 $0 $0 $0 $0
Other Taxes $5,425 $11,225 $14,820 $2,818 $7,722 $2,572 $998 $2,118 $2,335Franchise Fees $21,341 $42,681 $57,382 $11,476 $28,691 $8,607 $2,648 $6,814 $3,513Transient Occupancy Tax $0 $0 $0 $0 $0 $0 $0 $0 $1,916,250Licenses, Permits, and Fines $38,338 $76,675 $103,086 $20,617 $51,543 $15,463 $4,758 $12,241 $6,311 Total Revenues $332,770 $685,158 $772,774 $140,642 $428,980 $165,101 $83,592 $360,681 $2,087,616 per Acre $166,385 $342,579 $154,555 $28,128 $85,796 $33,020 $16,718 $72,136 $835,046 General Fund Expenditures
General Government $3,217 $6,433 $3,537 $707 $1,768 $530 $163 $420 $217Economic Development $1,368 $2,736 $1,504 $301 $752 $226 $69 $179 $92Building Safety & Housing $10,329 $20,658 $11,357 $2,271 $5,678 $1,703 $524 $1,349 $695 Engineering $3,503 $7,005 $3,851 $770 $1,926 $578 $178 $457 $236Finance $3,260 $6,519 $3,584 $717 $1,792 $538 $165 $426 $219Fire $104,073 $208,146 $114,425 $22,885 $57,212 $17,164 $5,281 $13,588 $7,005Human Resources $1,572 $3,145 $1,729 $346 $864 $259 $80 $205 $106Information Technology $2,784 $5,569 $3,061 $612 $1,531 $459 $141 $364 $187Planning $1,484 $2,968 $1,632 $326 $816 $245 $75 $194 $100Police $140,493 $280,986 $154,468 $30,894 $77,234 $23,170 $7,129 $18,343 $9,456Public Works $34,249 $68,497 $37,655 $7,531 $18,828 $5,648 $1,738 $4,472 $2,305Recreation & Community Services $8,133 $16,266 $8,942 $1,788 $4,471 $1,341 $413 $1,062 $547 Total Expenditures $314,464 $628,929 $345,743 $69,149 $172,872 $51,861 $15,957 $41,057 $21,166 per Acre $157,232 $314,464 $69,149 $13,830 $34,574 $10,372 $3,191 $8,211 $8,466 Annual Net Impact on
General Fund $18,305 $56,229 $427,031 $71,493 $256,109 $113,239 $67,635 $319,624 $2,066,450 per Acre $9,153 $28,115 $85,406 $14,299 $51,222 $22,648 $13,527 $63,925 $826,580 Source: Economic & Planning Systems
[1] The current CFD special tax rate is about $650 per unit annually. As a result, mid‐rise residential developments (see prototypes above) in the TASP/CFD area generate a significant additional annual $117,000 in tax revenue per acre of development and high‐rise developments an additional $234,000 per acre. The City uses these revenue streams to support additional public safety services in the TASP.
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Light Industrial and Warehouse/Distribution Uses. Light Industrial uses and Warehouse/Distribution uses are both estimated to generate positive annual net fiscal impacts. Their expected revenue generation is sufficient to cover their relatively modest costs, though the lower density nature of these developments means modest per acre fiscal positives. On a per acre basis, light industrial uses generate a fiscal surplus of $23,000 per acre and warehouse and distribution uses about $14,000 per acre. Hotel and Retail Uses. As is typical under the State of California’s system of public finance, new hotel uses and retail generate strong fiscal surpluses to the City’s General Fund. Hotel uses, with their strong transient occupancy taxes (TOT) and more modest public service demands, generate the highest fiscal surplus estimated. For Milpitas and the hotel development prototype evaluated (210 hotel rooms on 2.5 gross acres), the fiscal surplus is estimated at about $825,000 per acre. New retail uses also generate a positive fiscal surplus due to their strong sales and use tax generation. For Milpitas and the relatively low density retail development prototype evaluated (0.3 FAR, one-story development on 5 gross acres), the fiscal surplus of about $320,000 is spread across a broader land area resulting in a fiscal surplus of about $63,000 per acre.9
CFD/TASP Residential Development. The above results for existing and new land uses are expressed strictly in terms of the fiscal impacts of the various land uses on the City’s General Fund and exclude the role of the TASP’s CFD. For existing and any future residential development inside the TASP, developments pay an additional annual payment towards the provision of public services through a CFD special tax.10 This CFD was formed by the City to support the provision of additional public services for residential uses in the TASP, including police, fire, and storm protection services. The current CFD special tax rate is about $650 per 9 Because of e-commerce and other factors, retail uses are generally re-positioning and/or contracting in California cities so substantial new retail developments are expected to be relatively infrequent.
Smaller, new retail development are occurring on the ground floor of mixed uses buildings typically with residential and office on the higher floors and with structured parking sharing the ground floor with the retail areas.
10 Milpitas’ Community Facilities District (CFD) 2008-1 was formed in 2008 under the authority of the Mello-Roos Community Facilities Act of 1982.
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Employment Density and O ccupation/Wage Analysis
Different types of new workforce development accommodate different types of industries and different numbers of jobs/workers with different average wages/salaries. The sections below provide estimates of the expected employment densities and salaries/wages for selected land uses/development types.
Methodology
There are a range of data sources available that provide information or estimates of employment density (number of jobs per 1,000 square feet of a particular building type) as well as on wage levels by occupation. For employment density, information is often reported at a regional or statewide level. EPS reviewed multiple data sources to determine estimates of the average number of workers per building square foot and the average square feet required per worker. For the wage analysis, the first step was to obtain U.S. Census Bureau information on wages by industry sector by city. A connection was then made between the land use/development types being evaluated and the typical industry sectors occupying those building. It was then possible to estimate average wages of jobs in different building types in different cities. Because wage information by city is imperfect and due to the regional nature of employment markets, an average of the four cities evaluated was calculated to provide a planning-level estimate of future wages by building type.
Employment Density
The relationship between new development (building square feet) and the expected number of new workers accommodated is typically expressed as a jobs or employment density on a jobs per 1,000 square feet basis. Table 3 shows the average expected jobs densities for different types of workplace development. EPS reviewed available data from CoStar in terms of jobs by building square feet for different uses in a range of Silicon Valley cities, reviewed information in different brokerage reports, project-specific information for recent developments where available, and other industry reports.11 There is not sufficient variation between cities or data available to draw distinctions between the same land uses in different cities in Santa Clara County.
11 CoStar Group, Inc. provides a web-based tool that collects data and analytics on commercial real estate industry sales and market trends.
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Retail and Hotel employment densities often vary depending on the type of retail and hotel, though on average employment densities for retail developments are expected to be about 400 square feet per worker (2.5 workers per 1,000 square feet) and for hotel developments about 1,300 square feet per worker (typically about 0.5 workers per hotel room).
Land use
Sq. Ft./
Employee
Workers / 1,000
Sq. Ft.
Light Industrial 500 2.0 Retail 400 2.5 Warehouse and Distribution 1,300 0.8 Class A Office 225 4.4 Class A Office/R&D 300 3.3 Class B Office 300 3.3 Hotel 1,300 0.5 Source: CoStar, Cushman & Wakefield, U.S. Bureau of
Labor Statistics, Moody’s, EPS prior project work.
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Different land use/development types typically accommodate businesses from specific sets of industry sectors. U.S. Census Bureau information (American Community Surveys and associated applications) provide average wages by industry sector by city. EPS first linked different land use/development types to different industry sectors based on typically observed tenant profiles.
Average wages for each of these industry sectors (or set of industry sectors) were then identified for the city of Milpitas and three other Santa Clara County cities – Sunnyvale, Santa Clara, and Mountain View, shown in Table 4.
Table 4. Industries and Annual Wages by Land Use/Development Type Where development types typically accommodate multiple industry sectors with different wages, an average wage was calculated based on the cities’ current mix of those industry types.
Because there is typically a regional market for jobs and because of the potential for outliers/anomalies in individual cites, a four-city average wage was developed by land use/development type.
Land Use/Development Type Milpitas Santa Clara Sunnyvale Mountain
View Primary Industry Sectors
Office/Industrial
Class A Office $121,500 $112,400 $120,900 $130,500 Information; Professional; Management Class A Office/R&D $122,100 $120,600 $135,700 $145,900 Professional; Scientific; Technical Class B Office $78,200 $88,300 $55,300 $80,500 Finance; Insurance; Real Estate Light Industrial $89,500 $120,600 $135,600 $120,600 Manufacturing Warehouse/Distribution [1] $39,300 $43,600 $75,200 ‐ Transportation and Warehousing Retail/Hotel
Retail $34,000 $31,300 $41,100 $51,000 Retail Trade
Hotel $33,900 $21,700 $23,600 $25,800 Accommodation and Food Services [1] Mountain View has a low number of warehouse/distribution jobs, therefore skewing the salary data. For this reason, an average salary is not used in this category as it does not provide a representative comparison.
Source: 2019 1‐Year ACS Estimates, Table S2413; U.S. Census Bureau, OnTheMap Application and LEHD Origin‐Destination Employment Statistics. 176
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Table 5. Industries and Annual Wages by Land Use/Development Type As shown in Table 5, jobs in Class A Office, Class A Office/R&D, and Light Industrial Uses (especially manufacturing sector) provide the highest average wages. Class B Office jobs accommodate a broader range of industries with, on average, more modest wages.
Warehouse/distribution, retail, and hotel jobs provide relatively lower wages.12 Residual Land Value Analysis
Residual land value is a method for calculating the value of development land. A Residual Land Value Analysis provides important insights on the feasibility of different land uses/development types under current/recent market conditions and City policies. It also provides a tool to explore the extent to which the prospects for development improve as market conditions improve and/or as City policies are adjusted.
In this analysis, EPS conducted residual land value analysis on a set of potential Innovation District and MMSP area development prototypes in partnership with City staff. An initial residual land value analysis was conducted under recent market conditions and, where development prototypes were infeasible, under a potential, alternative set of conditions where market conditions were improved and/or City policies adjusted. The residual land value analyses provide important insights (as summarized further below) in terms of the level of change that may be required to support certain land uses. Appendix E provides the full residual land value table set. 12 Jobs in Warehouse/Distribution include jobs in e-commerce fulfillment centers, such as Amazon.
Land Use/Development Type Annual Wages Primary Industry Sectors Office/Industrial
Class A Office $135,000 Information; Professional; Management Class A Office/R&D $132,000 Professional; Scientific; Technical Class B Office $77,000 Finance; Insurance; Real Estate
Light Industrial $118,000 Manufacturing
Warehouse/Distribution [1] $51,000 Transportation and Warehousing Retail/Hotel
Retail $47,000 Retail Trade
Hotel $25,000 Accommodation and Food Services
Source: 2019 1‐Year ACS Estimates, Table S2413; U.S. Census Bureau, OnTheMap Application and LEHD Origin‐Destination Employment Statistics.
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Methodology
A residual land value analysis specifically estimates the amount developers could pay for land and still meet a hurdle/basic level of return on their investment. A negative residual land value indicates the project is infeasible and a zero residual land value indicates the project is only feasible if land is available at no cost. Feasible projects on private land will need to cover all costs/return requirements and provide a sufficient land value payment to the existing landowner for them to agree to sell their land. Landowner threshold requirements for their land will depend on a range of factors, including, but not limited to (1) existing land uses, leases, and associated revenues streams; (2) land price expectations, sometimes informed by other recent land sales; and (3) general interest of landowner in selling land.
For each of the development prototypes (see below), the residual land value analyses compared the estimated development value of the development prototype once completed to the estimated development costs and return requirements (excluding any land acquisition costs). As a formula:
Residual Land Value = Project Development Value minus Development Costs (excluding the cost to purchase land)
The following assumptions underlie the residual land value analysis:
Project Development Value. Project development value is driven by:
(1) Estimated lease rates, vacancy rates, operating expenses and resulting Net Operating Income; and
(2) The return on investment a project buyer would be looking for in acquiring the completed project (also known as the capitalization rate).
Market conditions are generally the key factor to project development value and change through time with business and real estate cycles.
Project Development Costs. Project development costs include a broad range of costs. The direct costs of construction primarily depend on material costs and construction labor costs, which are in turn tied to development type and height (that affect materials required and type of labor required). Parking requirements and the type of parking required are also key drivers to direct construction costs. Indirect costs are also substantial and include architecture and engineering costs, tenant improvements costs, legal, insurance, and inspection costs, financing costs, and permit fees, development impact fees, and other regulatory requirements.
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Land Uses/Development Prototypes Evaluated
Seven (7) different development prototypes were created to support the feasibility analysis, including 5 different workspace prototypes and 2 residential prototypes. Four of the workspace prototypes represent development types that the City seeks to attract into the Innovation District. These include Class A Office (5 stories), Class A Office (8 stories), Class A Office/R&D (4-5 stories) and Light Industrial (3 stories) development types. In addition, the warehouse and distribution prototype is a workspace category that, with e-commerce growing, is being developed and proposed in the city of Milpitas and elsewhere and is studied as a point of comparison. The mid-rise residential development prototype has been increasingly common in the TASP area and is important as a point of reference as well as in terms of developer-decision making when offered residential and commercial development opportunities. High-rise residential development was also considered as a use of interest to the City in appropriate, transitproximate locations.
The prototypes examined include:
Class A Office (5-story). A 5-story office building with high-quality finishes, amenities, and systems.
Class A Office (8-story). An 8-story office building with high-quality finishes, amenities, and systems.
Class A Office/R&D. A 4- to 5-story commercial building with more flexible space that can accommodate both Class A Office and R&D uses.
Light Industrial. A 3-story building intended for production, processing, and assembly activities that do not generate noise, odors, or fumes to the degree a heavy industrial use would.
Warehouse/Distribution. A 1-story building intended for logistics, distribution, and warehouse uses.
Mid-Rise Multifamily Residential. Apartment building of 7 stories in height with a density of about 90 Dwelling Units per Acre.
High-Rise Multifamily Residential. Apartment building of 12 stories in height with a density of about 180 Dwelling Units per Acre.
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Table 6 shows results of the residual land value analysis under early 2020 (pre-pandemic) market conditions and policies as described below. It is important to note that individual project residual land values will vary around the estimated planning-level average based on project specifics and costs/revenues at time of development/going to market:
Class A Office and Class A Office/R&D Development. The combination of 2020 market conditions, development costs, and City policies/requirements indicate that new Class A Office development, at both 5 stories and 8 stories, as well as Class A Office/R&D development are not currently feasible. A comparison of estimated development costs to development value indicates a negative residual land value. These results are consistent with the current lack of these types of development in the city of Milpitas. Light Industrial and Warehouse and Distribution Uses. For light industrial and warehouse and distribution developments the current economic picture is more positive. For the prototypes evaluated, development values cover development costs and generate positive residual land values. Under these assumptions, these developments could pay between $2.2 million and $2.8 million per acre for land and still cover their development costs and meet a hurdle rate of return. This development economics picture is also reflected on the ground in the city of Milpitas with recent developments. Warehouse and distribution uses, in particular, have been driven by increasing demand associated with e-commerce, a trend that has strengthened during the pandemic, and directly results in stronger residual land values.
Residential Development.13 Mid-rise residential development also shows robust development economics using pre-COVID impact lease rates. Assuming the post-pandemic recovery continues and brings lease rates back to pre-COVID levels, new midrise residential development will continue to be a strong land use, with estimated residual land values of about $4.75 million per acre. Recent increases in construction costs may erode the residual land values, though it is likely that developers will continue to be willing to pay more for land that is suitable for and allows residential uses than for other uses. High-rise residential comes with higher per square foot construction costs and at the current time does not appear feasible in Milpitas.
13 The baseline/current analyses are based on pre-COVID lease rates/development values. Forecasts indicate that, depending on the land uses, these rates should be achievable by 2023 or sooner. The application of pandemic lease rates would make residual land values lower for most land uses. 180
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Technical Memorandum October 25, 2021
Fiscal Benefits of Employment Lands Study: Phase 1 Page 19 Z:\Shared\Projects\Oakland\211000s\211034_Milpitas Employment Lands\Deliverables\Narrative Summaries\211034_Phase1_Narrative_10.25.21.docx Table 6. Baseline Residual Land Value Results by Development Prototype (Current Market Conditions) Sensitivity Analyses and Results
Sensitivity analysis is a tool used to determine how outcomes and conclusions change as difficult model assumptions are adjusted. In this section, the analysis considers how improvements in market conditions as well as different policy approaches could change the outcomes of the residual land value analysis.
In general, it is expected that, over time, the combination of the new multi-modal Milpitas Transit Center (VTA/BART), the envisioned improvements and connections under the MMSP, broader awareness of opportunities in Milpitas, and the continued pre-eminence of Silicon Valley as a global innovation ecosystem will all result in improved market performance.
The sensitivity analyses looked at the land uses that currently return negative residual land values and potentially improved market conditions over time as potential City policy decisions.
For market conditions, improvements were considered where conditions were similar to those in North San Jose in recent years. North San Jose currently shows substantially stronger conditions for office and office/R&D product types but was chosen due to its proximity to Milpitas and its more recent emergence as a jobs center relative to more established jobs center in Palo Alto and other cities. For policy adjustments, the two key areas of focus were reductions in Transit Area Development Impact Fees (TADIF) on nonresidential development in the Innovation District and the easing of parking requirements in the Innovation District. These policy options were selected as they directly affect the feasibility of these new development types. This analysis is particularly pertinent to the development of the Innovation District Implementation Framework in Phase 2 as it provides some indication of potential City actions.
The results of the sensitivity analyses are shown in Table 7 and described below.
Gross FAR/ Building SF/ Residual Per Acre
Prototype Acres Density Units Costs Value Land Value Land Value Workspace
1 Class A Office (5-Story) 5 1.00 217,800 $157,400,000 $104,700,000 ($52,700,000) ($10,540,000) 2 Class A Office (8-Story) 5 1.50 326,700 $250,000,000 $157,100,000 ($92,900,000) ($18,580,000) 3 Class A Office/R&D 5 1.00 217,800 $128,800,000 $96,300,000 ($32,500,000) ($6,500,000) 4 Light Industrial 5 0.50 108,900 $34,200,000 $48,500,000 $14,300,000 $2,860,000 5 Warehouse & Distribution 5 0.40 87,120 $13,200,000 $24,300,000 $11,100,000 $2,220,000 Residential
6 Mid-Rise Residential 2 90 180 $105,300,000 $114,800,000 $9,500,000 $4,750,000 7 High-Rise Residential 2 180 360 $234,700,000 $229,600,000 ($5,100,000) ($2,550,000) * Costs, value, residual land value, and per acre land values are rounded to the nearest hundred thousands 181
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To test an improved scenario, the analysis: (1) improves development values by about $40 million by increasing the assumed lease rate by about 30 percent to be consistent with top of market rents in North San Jose and by reducing capitalization rates by 50 basis points; (2) decreases development costs by about $19 million through a combination of not charging the TADIF fee (about $8 million) and reducing the parking ratio to 2.4 spaces per 1,000 square feet (about $11 million) as opposed to the current number of spaces required per 1,000 square feet of office of 3.3. The parking cost savings assumes the developer can reduce its parking development without affecting the marketability of the office space.
The 5-story Class A Office development prototype showed a baseline negative residual land value of $52.7 million. The overall effect of these changes results in a residual land value of about $7 million or $1.4 million per acre, a substantial improvement. Some of the potential improvements are policy-driven while others depend on a combination of improvements in the area and evolution of Silicon Valley real estate in a way that supports higher rents in Milpitas.
Under these circumstances, Class A Office development might be feasible though may still struggle to compete to purchase land relative to the land values that residential, light industrial, and warehouse and distribution sources can afford to pay.
Class A Office (8-story)
To test an improved Class A Office (8-story) scenario, the analysis makes the same adjustments as for the 5-Story Class A Office building including (1) improved development values through lease rate increase and capitalization rate reduction; and (2) reduced development costs by not charging the TADIF fee and reducing the parking ratio to 2.4.
The 8-story Class A Office development prototype showed a baseline negative residual land value of $92.9 million. The overall effect of these changes results in a residual land value of about $460,000 or $92,000 per acre, a substantial improvement. Some of the potential improvements Building SF/ Residual Per Acre
Prototype Units Costs Value Land Value Land Value
Class A Office (5-Story)
Baseline 217,800 $157,400,000 $104,700,000 ($52,700,000) ($10,540,000) Improved 217,800 $138,100,000 $145,100,000 $7,000,000 $1,400,000 Class A Office (8-Story)
Baseline 326,700 $250,000,000 $157,100,000 ($92,900,000) ($18,580,000) Improved 326,700 $217,200,000 $217,600,000 $400,000 $80,000 Class A Office/R&D
Baseline 217,800 $128,800,000 $96,300,000 ($32,500,000) ($6,500,000) Improved 217,800 $117,800,000 $123,000,000 $5,200,000 $1,040,000 High-Rise Residential
Baseline 360 $234,700,000 $229,600,000 ($5,100,000) ($2,550,000) Improved 360 $234,700,000 $237,800,000 $3,100,000 $1,550,000 * Costs, value, residual land value, and per acre land values are rounded to the nearest hundred thousands 182
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Under these circumstances, higher density Class A Office development can cover its non-land development cost but does not generate sufficient value to cover land costs as well. As a result, there may be a longer wait (for market rents to go even higher) and/or it might require a joint venture with a public agency that is able to provide land at below market rates.
Class A Office/R&D (5-story)
To test an improved Class A Office/R&D (5-story) scenario, the analysis (1) improves development values by about $27 million by increasing the assumed lease rate by about 30 percent; and (2) decreases development costs by about $9 million by not charging the TADIF fee. No change in parking ratio is modelled as the baseline parking ratio is already relatively low at 2.3 space/1,000 square feet.
The Class A Office/R&D development prototype showed a baseline negative residual land value of $32.5 million. The overall effect of these changes results in a positive residual land value of about $5.2 million or about $1 million per acre. Under these circumstances, Class A Office/R&D development might be feasible though may still struggle to compete to purchase land relative to the land values that residential, light industrial, and warehouse and distribution sources can afford to pay.
High-Rise Residential Development
To test an improved high-rise residential scenario, the analysis improves development values by about $8 million by increasing the assumed lease rate by about 4 percent to be consistent with rents near the top end of the San Jose market.
The high-rise residential development prototype showed a baseline negative residual land value of $5.1 million. The improved development values with the increased lease rates turns the residual land value positive to about $1.6 million per acre. While this positive residual land value is not at the same level as the mid-rise residential development or some industrial uses, it does indicate that if residential lease rates increase faster than development costs in the coming years, high-rise residential development would become feasible in Milpitas.
Innovation District Scenarios Analysis
The vision for the Innovation District is described below:
The Innovation District will be an employment destination with modern office, research and development buildings and flexible space for people to interact through “creative collisions” and an innovative ecosystem. This ecosystem supports a risk-taking environment, facilitates idea generation with experimentation being central to the success of the Innovation District. The City of Milpitas aims to plan for a well-connected Innovation District with proximity to public transit and public infrastructure that supports bike paths, pedestrian scale sidewalks, social gathering places, and high-speed fiber. The growing innovation economy in Milpitas will require local leaders to plan long-term, but with short-term flexibility to shape future growth strategies within the Central Manufacturing Area South’s Innovation District. The vision includes shaping our 183
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The Innovation District Scenarios Analysis considers the potential benefits/impacts of Innovation District development assuming District buildout under four (4) potential Innovation District scenarios.
Methodology
The Innovation District Development Scenarios Analysis applies the Employment Density, Occupation and Wage Analysis, and Fiscal Impact Analysis to the four potential Innovation District scenarios to determine the different economic and fiscal impact analyses associated with each scenario. The City’s Office of Economic Development developed four development scenarios in close collaboration with the Planning Department and the MMSP consultant team. The scenarios incorporate a subset of MMSP parcels that have been identified as part of the Innovation District, and indicates the expected land use of each parcel, as well as the assumed density of development (i.e., Floor-Area-Ratios or residential units/acre).
For each scenario, the potential amount of new development by scenario was estimated. The employment density and wage analysis results were then applied to each development scenario to determine the number of jobs that could be accommodated and the associated estimated wages. In addition, the fiscal impact analysis results were also applied to the development scenarios to estimate the expected net impact on the City’s General Fund under each of the scenarios.
Innovation District Scenarios
The City has identified approximately 74 acres of land as part of the Innovation District. This includes roughly 17 acres of land that are located adjacent to the Great Mall and an additional 57 acres of contiguous land. The 57-acre contiguous area includes about 10 acres on the eastern edge of the current TASP area boundary as well as an additional 47 acres of additional land further to the east on both sides of Montague Expressway, that is being incorporated into the new MMSP area.
City staff indicated different potential land uses for each of the parcels within the Innovation District (see Appendix A and Appendix F). Table 8 shows a summary of the allocation of acres by land use for each of the scenarios. Land uses are divided into two broader categories and specific land use categories, including:
Employment Lands. Class A Office; Class A Office/R&D, Class B Office, Industrial, Hotel, Warehouse/Distribution, and Commercial/Retail.14
Non-Employment Lands. Housing, Open Space, Assembly, and Vacant uses are represented.
14 Warehouse/Distribution uses are included as employments lands as they will generate some jobs, although they are often not viewed as job creators.
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Scenario 1. Represents the existing environment and current land use designations in the Innovation District (ID). Current parcel uses include Warehouse/Distribution (43 percent of ID acres), Assembly (14 percent), Class B Office (13 percent), and Industrial (12 percent). Scenario 2. Scenario where Innovation District (ID) parcels are primarily redeveloped as Retail/Commercial (48 percent of ID acres) with a strong ongoing Warehouse/Distribution component (31 percent).
Scenario 3. Represents a potential Innovation District (ID) with a strong presence of new Class A Office and Class A Office/R&D development (50 percent of ID acres), Light Industrial uses (31 percent), continued Hotel uses, and modest amounts of Housing and Open Space. Scenario 4. Represents a potential Innovation District (ID) with an even stronger presence of new Class A Office and Class A Office/R&D development (87 percent of ID acres) along with continued Hotel uses.