City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Administrative Services
Meeting Date: February 5, 2024
Report #:2308-1858
TITLE
Review and Acceptance of Annual Report on Development Impact Fees for Fiscal Year 2023 and Adoption of a Resolution Making Statutory Findings for Certain Funds. CEQA status - Not a Project.
RECOMMENDATION
Staff recommends that the City Council review and accept the Annual Report on Development Impact Fees for the period ending June 30, 2023 (Attachment A) and adopt the resolution making statutory findings for certain development impact fee funds (Attachment B).
EXECUTIVE SUMMARY
This report contains information on the City of Palo Alto’s Development Impact Fees for the Fiscal Year (FY) 2022-23. This report meets the annual reporting requirements in Government Code section 66006.
BACKGROUND
Local agencies commonly impose fees on development projects to help offset the costs of funding the public facilities impacted by those developments. These fees are known as development impact fees. State law (Government Code section 66000 et seq. or “the Mitigation Fee Act”) requires local agencies that impose development impact fees to prepare an annual report providing specific information about those fees.
Within 180 days after the close of the fiscal year, the agency that collected the fees must make available to the public the following information regarding each fund or account:
Brief description of the type of fee in the fund.
Amount of the fee.
Beginning and ending balance in the fund.
Amount of fees collected, and interest earned.
Identification of each public improvement on which fees were expended and the amount of the expenditure on each improvement, including the total percentage of the cost of the public improvement that was funded with fees.
Identification of an approximate date by which the construction of a public improvement will commence, if the local agency determines that sufficient funds have been collected to complete financing on an incomplete public improvement. Description of each interfund transfer or loan made from the account or fund, including the public improvement on which the loaned funds will be expended, and in the case of an interfund loan, the date on which the loan will be repaid and the rate of interest that the account or fund will receive on the loan.
Amount of any refunds made due to inability to expend fees within the required time frame.
The Mitigation Fee Act further requires that the City Council review the annual report at its first regularly scheduled public meeting not less than 15 days after the information is made available to the public.
In addition to the annual reporting requirement, the Mitigation Fee Act requires, for the fifth fiscal year following the first deposit into the fund and every five years thereafter, that the City Council make findings with respect to any portion of the fee(s) remaining unexpended, whether committed or uncommitted. The findings must:
Identify the purpose to which the fee is to be put;
Demonstrate a nexus between the fee and the purpose for which it was originally charged; and
Identify all sources and amounts of funding anticipated to complete financing of incomplete improvements
Designate the approximate dates on which the anticipated funding is expected to be deposited into the fund.
If the agency no longer needs the funds for the purposes collected, or if the agency fails to make required findings, or to perform certain administrative tasks prescribed, the agency may be required to undertake a refunding process as set forth in the statute.
ANALYSIS
Annual Report (Government Code section 66006)
The annual report for FY 2023 is included as Attachment A. Staff published the report on the City’s website on December 29, 2023. The report contains the statutorily required information for the following fees:
Stanford Research Park/El Camino Real traffic impact fees (PAMC Ch. 16.45): Fee for new nonresidential development in the Stanford Research Park/El Camino Real Service Commercial zone, to fund capacity improvements at eight intersections. The City ceased collecting effective fiscal year 2020.
San Antonio/West Bayshore Area traffic impact fees (PAMC Ch. 16.46): Fee for new nonresidential development in the San Antonio/West Bayshore area to fund capacity improvements at four intersections. The City ceased collecting effective fiscal year 2020. Housing impact fees imposed on commercial developments (PAMC Ch. 16.65): Fee on commercial and industrial development to contribute to offset the demand that new jobs create for low income and moderate-income in the City.
General Government facilities: (PAMH Ch. 16.58) – Fee on residential and non-residential development to fund facilities associated with municipal administration. Parks, Community Centers, and Libraries impact fees (PAMC Ch. 16.58): Fee on new residential and non-residential development to provide community facility funds for parks, community centers, libraries, public safety, and general government. Residential (Rental) impact fees (PAMC Ch. 16.65) Fee on rental residential developments (including mixed use with rental housing) to offset the demand that new market-rate rental housing creates for low and moderate-income housing in the City. Charleston-Arastradero Corridor pedestrian and bicyclist safety fees (PAMC Ch. 16.60):
Fee on new development and re-development within the Charleston-Arastradero Corridor to provide for pedestrian and bicyclist improvements. Citywide Transportation impact fees (PAMC Ch 16.59): Fee on development in all parts of the City to fund transportation projects and programs to reduce congestion. New Public Safety facilities (PAMH Ch. 16.58): Fee on residential and non-residential development to fund police and fire facilities, including fire apparatus and vehicles. University Avenue Parking In-Lieu Fund (PAMC Ch. 16.57): Fees collected from non- residential development within the University Avenue Parking Assessment District, in lieu of providing the required number of parking spaces.
Residential housing in-lieu fees (PAMC Ch. 16.65): Fee on residential developments in-lieu of providing required below-market rate units to low- and moderate-income households.
And in the interest of transparency, the report includes also includes information for the following funds, although the Mitigation Fee Act’s reporting requirements do not apply:
Residential housing in-lieu fees (PAMC Ch. 16.65): Fee on residential developments in-lieu of providing required below-market rate units to low-and moderate-income households. Public Art Fund (PAMC Ch. 16.61): Fees imposed on new commercial developments (including mixed use projects), including new construction, remodels, additions and reconstruction that (i) have a floor area of 10,000 sq. ft. or more, and (ii) have a value of $200,000 or more, exclusive of costs for architecture, design, engineering, and required studies; and all new residential projects of five or more units to fund art for private developments.
Parkland Dedication (CA Government Code Section 66477-Quimby Act): Fees on parkland dedication imposed on new residential and non-residential development. Water and Wastewater Collection (California Government Code Section 66000): Capacity fees charged to developers that are adding load to the water and sewer systems effective July 1,2005.
Five-Year Findings (Government Code section 66001)
Five of the development impact fees imposed by City are due for the additional five-year findings in FY2022-23. These proposed findings are contained in Attachment B. The Stanford Research Park/ El Camino Fund has an unexpended balance of $1,220,842 that was collected prior to FY 2023.
The San Antonio/West Bayshore Fund has an unexpended balance of $407,697 that was collected prior to FY 2023.
The Commercial Housing Impact Fee Fund has an unexpended balance of $2,228,048 that was collected as of FY 2023.
The Citywide Transportation Fund has an unexpended balance of $1,622,961 that was collected as of FY 2023.
The University Avenue Parking In-Lieu Fund has an unexpended balance of $15,664,946 that was collected in FY 2023 and prior.
FISCAL/RESOURCE IMPACT
There is no direct fiscal impact associated with the review and acceptance of the annual report (Attachment A). The various fee funds are reviewed annually for any unallocated or unexpended balances as part of the development of the City’s five-year capital improvement plan.
If the council does not adopt the proposed resolution (Attachment B) making the five-year findings, then City may be required undertake the refund procedures described in Government Code section 66001(e). The total potential refund across the five development impact fees at issue is $21,144,494.
STAKEHOLDER ENGAGEMENT
This report has been prepared by the Accounting Division in Administrative Services and reviewed by partner departments including the City Attorney’s Office and the Planning and Development Services Department.
ENVIRONMENTAL REVIEW
Council action on this item is not a project as defined by the California Environmental Quality Act (CEQA) in that the report and findings required by the Mitigation Fee Act is a government fiscal activity which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. CEQA Guidelines section 15378(b)(4).
ATTACHMENTS
Attachment A: FY 2023 Development Impact Fee Report Use of Fee Summary Attachment B: Resolution of the Council of the City of Palo Alto Accepting the Development Impact Fee Report for the Period Ending June 30, 2023 and Making Findings Regarding the Continuing Need for Development Impact Fees Collected but Not Expended
APPROVED BY:
Kiely Nose, Assistant City Manager/Administrative Services Director