DATE:
May 24, 2022
CATEGORY:
Public Hearing
DEPT.:
Public Works and
Community Development
TITLE: East Whisman Precise Plan Development
Impact Fee Nexus Study and East
Whisman Development Impact Fee
RECOMMENDATION
1. Adopt a Resolution of the City Council of the City of Mountain View to Adopt the East Whisman Precise Plan Development Impact Fee Nexus Study, to be read in title only, further reading waived (Attachment 1 to the Council report).
2. Introduce an Ordinance of the City of Mountain View Adding Chapter 47 to the Mountain View City Code Regarding Precise Plan Development Impact Fees and the East Whisman Precise Plan Development Impact Fee, to be read in title only, further reading waived, and set a second reading for June 14, 2022 (Attachment 2 to the Council report).
3. Adopt a Resolution of the City Council of the City of Mountain View Adopting Rates for the East Whisman Precise Plan Development Impact Fee and Amending the City of Mountain View Mast er Fee Schedule to Include Such Fee , to be read in title only, further reading waived (Attachment 3 to the Council report).
4. Authorize the Finance and Administrative Services Director to e stablish the necessary accounts for the new impact fees.
BACKGROUND
In 2019, the City adopted the East Whisman Precise Plan , which established a vision for the 412-acre Precise Plan area . This vision included a light-industrial/office area into a new transit-oriented mixed-use neighborhood, including housing affordable to a range of incomes, new open space and mobility infrastructure, pedestrian-accessible neighborhood commercial uses, sustainability standards, and transportation demand management. A key part of this vision is a network of street improvements that support pedestrian and bicycle access throughout the Precise P lan area , which provide additional transportation capacity without the expense of providing additional vehicular street lanes. These mobility improvements include bicycle lanes,
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cycle tracks , pedestrian crossings, streetscape improvements (landscaping, pedestrian amenities), and grade-separated pedestrian/bicycle crossings of the light rail and S tate Route 237. In addition, the Environmental Impact Report for the Precise Plan identified congestion impacts to local and nearby intersections and necessary water and wastewater infrastructure to serve new development. The Precise Plan also includes a funding program to help pay for these improvements, including the recommended impact fee.
As required by California State law, an impact fee nexus study must be prepared and adopted to establish the legal and policy basis for adopting a new or increased development impact fee. A nexus study establishes a reasonable relationship between new development and the needs and costs of facilities and improvements to serve the development and maximum impact fees per State law. The Nexus Study for the proposed fee , provided in Exhibit 1 to Attachment 1, was prepared by Willdan Financial Services, with technical assistance from Fehr & Peers (transportation consultants).
The Nexus Study presents a maximum allowable fee for all land uses to fund part of the costs of East Whisman Potable Water, Local Transportation, Sewer, and Recycled Water improvements.
The City Council can adopt fees less than the maximum amount supported by the Nexus Study based on policy direction or other considerations, such as regional economic competitive ness.
However, under State law, a jurisdiction cannot adopt fees higher than the maximum amount supported by the Nexus Study. Information on impact fees from surrounding cities is included in this report for reference.
ANALYSIS
Overview
The East Wh isman Precise Plan includes significant residential, office, retail , and hotel growth.
To serve that growth, the Precise Plan identified approximately $ 151.5 million of public infrastructure improvements. The East Whisman Development Impact Fee (EWDIF) is a key funding source that would help pay for these improvements.
Per State law, development impact fees can be used to finance capital facility and infrastructure costs needed to serve new development. These fees cannot be used to pay for the operation and maintenance costs of any facilities or infrastructure. These fees also cannot be used to pay for the cost of remedying existing deficiencies. Improvements that will serve both new development and the existing population and employment are allocated using a fair -share approach based on proportionality.
Any impact fee must be based on a reasonable nexus between the new development and the costs of new facilities and improvements needed to serve such growth and must be supported East Whisman Precise Plan Development Impact Fee Nexus Study and East Whisman Development Impact Fee
May 24, 2022
by specific findings that demonstrate this nexus. Recommended findings are included in the attached resolutions.
The proposed fees are necessary to pay for four different types of improvements: transportation, potable water, recycled water, and sewer. The recommended fees for each of the different improvement types are included in Attachment 3 and the total is summarized in Table 1, below.
Table 1—Recommended East Whisman Development Impact Fees
Land Use Total Recommended Fee Notes
Office/R&D $10.75 per square foot
Retail $18.16 per square foot Neighborhood commercial
uses, with recorded
restrictions, are exempt
Hotel $6,567 per room
Residential
Studio Units
1-Bedroom Units
2-Bedroom Units
3-Bedroom Units
Per Additional Bedroom
$2,888 per unit
$3,356 per unit
$5,155 per unit
$6,223 per unit
$864 per unit
Affordable units are exempt
Relationship to Other Fees and Requirements
The City has a range of existing fees and requirements on development Citywide as well as those specific to the East Whisman Precise Plan area, including Affordable Housing, Park Land, Transportation, Sewer and Water Capacity Charges , Community Benefits, and others . The following items summarize the relationship of the proposed EWDIF to other fees and requirements.
• Citywide Affordable Housing and Parkland—There is no overlap between the proposed EWDIF and these requirements since the EWDIF will not be used for affordable housing or park land.
• Citywide Transportation Impact Fee (TIF)—The City adopted the TIF in 2018. This fee is for Citywide multi -modal transportation improvements to implement the Multi -Modal Improvement Plan , which brings the City in to compliance with the Santa Clara Valley Transportation Authority’s (VTA’s) Congestion Management Program. There is no overlap between the EWDIF and the TIF because the EWDIF explicitly excluded improvements that were included in the Multi-Modal Improvement Plan.
East Whisman Precise Plan Development Impact Fee Nexus Study and East Whisman Development Impact Fee
May 24, 2022
• Citywide Sewer and Water Capacity Charges—The City adopted Sewer and Water Capacity Charges in 2014. The fee is based on the share of infrastructure cost attributed to the additional demand development placed on the water and sewer systems. Developments ”buy in” for their proportionate share of capacity needed in the City’s existing water and sewer system facilities and assets. Future growth is not considered in the c harges; therefore, there is no overlap between the EWDIF and the charges.
• East Whisman Community Benefits —The East Whisman Precise Plan includes a Community Benefit s program, which requires projects that apply for and receive Bonus Floor Area Ratio ( FAR) to provide additional funds to support improvements in the area.
Community Benefits are another resource that is anticipated to help fill the funding gap for the Precise Plan’s improvements.
• Frontage Improvements, New Streets , Street Easements, and Public Access Easement Dedications—The Precise Plan includes a range of mobility requirements on new development to help build out the multi -modal vision for the area, including frontage improvements, new streets , street dedication for widened sidewalks , and public access easement dedication for public paths through block s. The proposed EWDIF does not include any of these improvements since new development is required to construct them on their frontage or site through project conditions of approval.
Projects Included
Transportation Improvements
The Precise Plan identifies transportation improvements necessary to serve growth in East Whisman. These improvements include:
• Grade-separated pedestrian/bicycle crossing of State Route 237 from Ferguson Dr ive to Ravendale Drive between Central Expressway and Middlefield Road.
• Grade-separated pedestrian/bicycle crossing of the VTA Light Rail tracks near the terminus of Maude Avenue.
• Midblock pedestrian crosswalks.
• Bicycle lanes, buffered bicycle lanes, and cycle-tracks (protected bikeways).
• Pedestrian streetscape improvements and wayfinding.
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• Improvements to Level of Service (LOS) -deficient intersections identified in the East Whisman Precise Plan Environmental Impact Report.
A map of the Precise Plan transportation improvements is shown in Figure 1. A full list can be found on Page 17 of Exhibit 1 to Attachment 1. The Nexus Study does not include any projects that are being constructed through development requirements; therefore, not all projects shown in the Precise Plan are included in the Nexus Study.
East Whisman Precise Plan Development Impact Fee Nexus Study and East Whisman Development Impact Fee
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Figure 1: Transportation Improvements in the Precise Plan
East Whisman Precise Plan Development Impact Fee Nexus Study and East Whisman Development Impact Fee
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Transportation improvements are allocated to new development in various ways. The Nexus Study allocates the responsibility of improvements as follows:
• For nonvehicular improvements, the responsibility of the improvements is allocated to new development based on the share of trips generated by that development (38.9%).1
• For vehicular-intersection improvements that address an LOS deficiency, the responsibility is based on the proportion of new trips through that intersection.
Vehicle Miles Travelled (VMT) is not an input in the study. This is because VMT is a measure of regional impacts to infrastructure, while the projects are improvements serving local trips.
Water/Wastewater Improvements
The Precise Plan and Precise Plan EIR identify water and wastewater improvements necessary to serve new development in East Whisman. These improvements include upsizing various pipes in the area.
These improvements are allocated as follows:
• If an improvement is necessary to correct an existing deficiency, then the Nexus Study does not allocate any responsibility to new development.
• If only a portion of the improvement is necessary to correct an existing deficiency, while new development increases the extent of necessary improvements, then the Nexus Study apportions the latter responsibility to new development.
Recycled Water Study
On March 22, the City Council reviewed the Recycled Water Feasibility Study Update , which analyzed options , including expanding the City’s recycled water system to East Whisman (Attachment 4—March 22, 2022 , Recycled Water Council Report ). Council supported staff recommendations for the future expansion o f the recycled water system to East Whisman , via Shoreline Boulevard and Middlefield Road , and a second recycled water storage reservoir at a future neighborhood park in the East Whisman area. This direction has been integrated into the cost estimates use d for the Nexus Study , with cost -shares divided between existing and new development.
1 Net new office was assumed to generate fewer trips than existing office, based on the new TDM and monitoring requirements that apply to new development.
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Growth Studied
The East Whisman Precise Plan EIR studied the growth shown in Table 2. These growth amounts were used in the Nexus Study.
Table 2—Growth Studied in the Precise Plan
Fee Baseline (2017) Cumulative Precise Plan Change
Office Square Feet (1,000s) 6,443 8,896 2,453
Retail Square Feet (1,000s) 54 154 100
Hotel Rooms 0 200 200
Residential Units 1 5,070 5,069
Several recent developments are part of the new Precise Plan’s growth. Table 3 lists those projects and whether they will be subject to the fee. Two recently -approved projects with executed development agreements (DA) agreed to pay the fee as a DA term , up to a specified amount. These DAs require payment at the lesser of the fee or an amount specified in the DA (which is greater than the fee in both cases). Therefore, these developments will pay the nexus fee. State law provides exemptions for certain residential projects in the pipeline before the fee is enacted. Nonresidential projects under review will be subject to the fee.
Table 3—East Whisman Pipeline Developments
Address Description Status Notes
Pipeline Projects Paying the Fee
700 East Middlefield Road Office Phase I Constructed,
Phase II Approved
Development Agreement
465 Fairchild Drive/600
Ellis Street
Office Approved Development Agreement
189 North Bernardo
Avenue
Office Under Review
Middlefield Park Master
Plan
Mixed-Use Under Review
500 Ellis Street Office and
Hotel
Under Review
Pipeline Projects Not Paying the Fee
400 Logue Avenue Residential Approved Per staff’s recommenda- tion to exempt approved
projects
320 Logue Avenue Residential Under Review State law exemption East Whisman Precise Plan Development Impact Fee Nexus Study and East Whisman Development Impact Fee
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The two pipeline projects not paying the fee are residential projects that would demolish office space. This uncollected fee income is estimated at $1.57 million if the City Council adopts the staff recommendation (including exemption of affordable units).
Staff recommends that projects approved prior to the introduction of the Ordinance (May 24, 2022) be exempt from the fee, except for those projects that agreed to pay the fee or its equivalent through a negotiated Development Agreement. This is included in the draft Ordinance (Attachment 2). In addition, as noted above, some additional residential projects may be exempt under State law if they submit preliminary applications before the ordinance is effective.
Maximum Supportable Fees
The Nexus Study identifies total maximum supportable fees as shown in Table 4. The Nexus Study outlines how the total cost of the projects was developed and the amount of the cost that can be allocated to the new development. Impact fees cannot fund costs associated with remedying existing deficiencies in public facilities but may includ e the costs attributable to the increased demand for public facilities reasonably related to the development project. This means that the development impact fee levied against parcels in the East Whisman Precise Plan Area cannot fund the share of infrastructure improvements needed to serve existing development or new development that is not subject to the fee. The City Council could adopt the maximum fee amounts or could adopt lower fees depending on other Council policy considerations. However, fees higher than the Nexus Study supports for each type of land use cannot be adopted. Any fee adopted lower than what is shown in the table will require additional funding from other City and/or outside sources to fund all the identified projects.
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Table 4—Maximum Supportable Fees
Allocation of Cost for Existing and New Development
Based on the maximum supportable fees, the following Table 5 outlines the costs assigned to existing development and new development based on their share of the cost of the improvements in the East Whisman Nexus Study.
Table 5—Cost-Share Based on Maximum Supportable Fee Revenue
No. Development Type Share
1 Existing Development $96,806,000
2 Pipeline Exempt Projects $1,569,000
3 Total Existing and Pipeline Projects $98,376,000
4 New Development
a Office $25,850,000
b Hotel $1,288,000
c Market-rate Residential $19,047,000
d Affordable Residential $5,154,000
e Retail $1,778,000
f Governmental/Nonprofit Minimal
5 Total New Development $53,117,000
6 Total Cost of Nexus Study Improvements $151,493,000
Note: Pipeline Projects are current estimates noted in Table 3. Additional residential projects may be exempted per State law as discussed earlier. Totals may not add due to rounding.
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As shown in the table , up to approximately $ 53.1 million or 35% of the Nexus Study improvements can be funded by charging impact fees per the current estimates. The balance of $98.4 million to fund the improvements will have to come from other funding sources, which will be discussed later in this report.
Comparison with Other Cities
Impact fees levied in other South Bay-specific or precise plan areas similar to East Whisman were reviewed and compared to the maximum supportable fees in Table 4. This analysis is summarized in Table 6, which shows an estimate of total impact fees and an estimate of the fees as a percent of market value. The full analysis is provided in Attachment 5.
Table 6—Comparison of Fees for Specific Project Types
to Those in Other Cities (in Millions)
No. City/Area 340-unit Apartment,
plus 5K SF Retail
262-Unit
Condominium
218K SF
Office
1 East Whisman, without Fees $22.6 (6.7%) $17.2 (3.8%) $8.5 (3.0%) 2 East Whisman, with Fees $24.4 (7.3%) $18.7 (4.2%) $10.1 (3.6%) 3 North Bayshore $22.6 (6.7%) $17.2 (3.8%) $20.5 (7.2%) 4 Sunnyvale (Tasman Crossing,
Fair Oaks Junction, Peery Park)
$21.9 (6.4%) $19.0 (5.0%) $6.4 (2.8%)
5 Santa Clara (Lawrence Station
Area Plan)
$12.6 (4.4%) $9.5 (2.5%) $3.3 (2.6%)
6 Milpitas (Transit Area Specific
Plan)
$4.3 (1.4%) $0.6 (0.2%) $9.1 (12.9%)
7 Fremont (Warm Springs
Community Plan)
$11.5 (5.1%) $9.0 (2.8%) $3.1 (4.7%)
Note: All cells show an estimate of the total impact fee obligation in millions, followed by an estimate d percent of project market value in parentheses. Impact fees include Capital and Fire Facilities, Transportation, Parks, Affordable Housing (Commercial Linkage), Water, Sewer, Storm Drain, and Public Art.
The table shows that the City of Mountain View already has the highest fees on apartments among the areas studied. This is largely due to the Park Land Dedication Fee, which is the highest single fee identified. Adding the EWDIF would further increase these fees. However, the Precise Plan’s Jobs-Housing Linkage requirement is intended to help address these additional costs by requiring office projects to help construct residential projects.
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Office uses would have higher fees than other areas studied (except North Bayshore) but a commensurate fee obligation as a percentage of market value. This is due to th e significantly higher value of office in Mountain View compared to areas like Fremont and Milpitas.
Potential Fee Exemptions and Reductions
The City Council may choose to adopt fees lower than the maximum supportable fees in Table 4.
This could be based on the regional competitiveness analysis, above, or it could be based on the development feasibility of desired land uses. However, lowered fees would result in lost income to the City for funding the improvements , which would need to be supplemente d from other sources.
Staff recommends the following fee reductions, which are reflected in the Ordinance (Attachment 2):
• Affordable Housing—Affordable housing is a significant cost on market -rate development and often requires subsidy from the City. Most other fees exempt affordable housing. If affordable housing is exempted from this fee, it could result in lost income of approximately $5.15 million.
• Neighborhood Commercial Uses —Most retail and similar neighborhood -serving uses are important to the Plan’s goals to create a complete, walkable neighborhood. Developers do not often volunteer to provide these uses since they generally do not support project feasibility. The Precise Plan i ncludes several incentives for including neighborhood commercial uses, such as exemption from FAR. Adopting the full fee could negate those incentives. If neighborhood commercial uses are exempted from the fee, it could result in lost income of approximately $1.78 million.2
• Government and Nonprofit—Nonprofit and public-serving uses are given similar incentives in the Precise Plan and help contribute to the range of services available in the area. It is uncertain how much this exemption would result i n lost income, but it is expected to be marginal.
These recommendations will result in increasing the def icit from the cost share estimated for new development by $6.93 million. As discussed below, expected funding sources will not be enough to reach the cost of improvements. Staff, therefore, recommends only providing the
2 Retail is in the recommended fee schedule in Attachment 3. This is because some developers may choose not to record a restriction on the property limiting the space to neighborhood commercial uses, there may be some retail uses that are not neighborhood-serving, and development replacing retail would be entitled to subtract this amount from their fee obligation.
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exceptions for affordable housing, neighborhood commercial retail, and government/nonprofit uses as described, above, and not reducing the fee amounts.
Other Funding Sources
The nexus can only support new development bearing a portion of the cost of the Precise Plan’s improvements. Of the roughly $ 151.5 million of necessary improvements, the EWDIF can only generate a maximum of 35% or roughly $53.1 million.3 If the City Council also chooses to exempt affordable housing, neighborhood commercial retail (and similar uses) , and nonprofits, the EWDIF can only generate a maximum of $4 6.2 million or about 30.5% of the total costs of improvements. The remaining $105.3 million must be funded from other sources.
These other funding sources include:
• East Whisman Precise Plan C ommunity Benefits—Projects in East Whisman that request Bonus FAR provide Community Benefits, as defined in the Precise Plan, through payment or providing the benefits themselves in lieu of payment based on the parameters in the Precise Plan. Based on a review of approved and pending projects under review, over the remaining build-out of the Precise Plan, approximately $30 million in Community Benefits is expected if all the Community Benefits are paid as fees to the City. The City could elect to use Community Benefits funds to further defray the cost of the infrastructure improvements. However, t he East Whisman Precise Plan allows the developer to choose the Community Benefits for their project from a list that includes other categories, such as affordable housing, support for small businesses, or public art . Additionally, the Council could choose to use the Community Benefits towards other qualifying purposes. Therefore, the actual amount available for infrastructure funding could be far less than the estimate.
• Increased Revenue from Development—As the East Whisman Precise Plan Area redevelops, the City would receive additional revenue in the form of increased property taxes, sales tax, transient occu pancy tax , etc. Some of the unfunded cost of the infrastructure improvements could be filled with this funding ; h owever, some of these funds would be offset by the need for other services , such as Police, Fire, and Community Services.
• City Capital Improvement Program (CIP) funding, including the unrestricted funds (Construction/Conveyance Tax and CIP Reserve), enterprise funds (Water and Wastewater), and General Fund —Transportation Reserve (funded from Measure P Business License Tax). There are many other competing Citywide needs for these funding
3 This is the $54.7 million fee revenue on Page 7 of the Nexus Study, minus the $1.57 million from development projects that will be exempt from the fee.
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sources, and it is not known how much of this funding could be made available to cover the $105.3 million needed over the next 20 years. CIP funding for these improvements would be determined through the five-year CIP planning process.
• Grants—There are also various local (e.g., VTA Measure B), State, and Federal competitive grants that could be used to help fund these infrastructure improvements, particularly for the active transportation projects. The local matches that could be provided by the EWDIF may help make the City’s grant applications more competitive.
Outreach and Public Comment
On February 28, 2022, the City held an outreach meeting to share the draft methodology with key stakeholders, including property owners, development applicants, and the Building Industry Association. While the draft fee was not shared at the meeting, detailed documentation of the methodology was shared in order to elicit feedback. Most of the discussion at the meeting was responding to technical questions.
One stakeholder, Google, provided a detailed letter after the meeting (Attachment 6—Google Letter). Many of the comments were questions about the proposed methodology while others provided insight that was incorporated into the study to clarify items.
Pursuant to State law, the study was posted on April 22, 2022, over 30 days before adoption, and a notice was sent to individuals who had signed up to be notified , and to property owners and addresses in the East Whisman Precise Plan area.
During the public review period of the Nexus Study, staff met with representatives of Google and Lendlease (the development team of the Middlefield Park Master Plan) and discussed some of their questions about the Study. The discussion included:
• Calculations of costs and allocations of key improvements, such as the Ellis Street/Fairchild Drive Interchange.
• Confirmation of land-use trip calculations.
• Whether the fee could be adjusted based on VMT.
Staff did not change any of the methodology based on this discussion but did add language to the draft Nexus Study to clarify the inputs discussed.
East Whisman Precise Plan Development Impact Fee Nexus Study and East Whisman Development Impact Fee
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Staff Recommendation
Based on the findings in Attachment 1, staff recommends that the City Council approve the East Whisman Precise Plan Development Impact Fee Nexus Study (Attachment 1), adopt the proposed Ordinance for the fee (Attachment 2) , and adopt the fee itself (Attachment 3). The recommended Draft Ordinance includes fee exemptions for affordable hou sing, neighborhood commercial retail (and similar uses), and government/nonprofit uses.
FISCAL IMPACT
The East Whisman Precise Plan include s approximately $ 151.5 million in new public infrastructure improvements. The recommended fee charges the maximum amount for all uses and exempts the uses that are encouraged and incentivized in the East Whisman Precise Plan.
The recommended fee is expected to help pay for approximately $ 46.2 million (30.5%) of that amount. The Nexus Study infrastructure projects will be funded through the five-year CIP using the EWDIF, community benefits as they are made available, existing CIP funding sources, and grants.
CONCLUSION
Staff recommends the City Council adopt the EWDIF, as described in this report.
ALTERNATIVES
1. Do not adopt the EWDIF.
2. Do not exempt affordable housing, neighborhood commercial retail (and similar uses), or government/nonprofit uses from the fee.
3. Reduce the fees for any of the land uses by a percentage amount.
4. Provide other direction.
East Whisman Precise Plan Development Impact Fee Nexus Study and East Whisman Development Impact Fee
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PUBLIC NOTICING
Agenda posting and notices of this meeting, including a summary of the proposed fee and costs in accordance with State law, were sent to all East Whisman property owners and addresses , in addition to those on the East Whi sman Precise Plan interested partie s mailing list, and to interested parties requesting a notice of any action regarding fees. The notices were sent at least 30 days in advance of the meeting, as required by Government Code Sections 66016 and 66019.
Notice of the Council hearing was also published twice as required by Government Code Section 66018. The Nexus Study was made public at least 30 days in advance of the meeting.
Prepared by:
Eric Anderson
Advanced Planning Manager
Renee Gunn
Senior Civil Engineer
Approved by:
Dawn S. Cameron
Public Works Director
Aarti Shrivastava
Assistant City Manager/
Community Development Director
Kimbra McCarthy
City Manager
EA-RG/TS/4/CAM
899-05-24-22CR
201626
Attachments: 1. Resolution Adopting Nexus Study
2. Ordinance Adding Chapter 47
3. Resolution Adopting Fee Rates
4. March 22, 2022 Recycled Water Council Report
5. Comparison of Fees Across Jurisdictions
6. Google Letter