City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Administrative Services
Meeting Date: January 13, 2025
Report #:2409-3457
TITLE
Review and Acceptance of Annual Report on Development Impact Fees for Fiscal Year 2024 and Adoption of a Resolution Making Statutory Findings for all Development Impact and In-Lieu Fee 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, 2024, and adopt the resolution making statutory findings for all development impact and in-lieu fee funds (Attachment B).
EXECUTIVE SUMMARY
This report contains the annual report on the City of Palo Alto’s Development Impact Fees for the Fiscal Year (FY) 2024. This report meets the annual reporting requirements in Government Code section 66006 and 66013. This report also contains a resolution making the finding required by Government Code section 66001.
BACKGROUND
Development Impact Fees
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. The City assesses 12 development impact 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, if applicable. Identification of each public improvement on which (Attachment):
oFees were expended
oAmount of the expenditure on each improvement
oTotal 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 requires that the City Council review the annual report at its first regularly scheduled public meeting no less than 15 days after the information is made available to the public. Staff published the report on the City’s website on December 27, 2024.
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 for which they were collected, or if it fails to make required findings or perform certain prescribed administrative tasks, it may be required to initiate a refunding process as outlined in the statute. The City has chosen to make these findings on an annual basis.
In-Lieu and Other Development-Related Fees
In-lieu fees provide developers with an alternative means of satisfying the City’s requirement to provide or construct certain improvements or amenities as part of their projects. While In-lieu fees do not have statutory reporting requirements, they are included in this report in the interest of transparency. These fees include the Parkland Dedication Fee/Quimby Act fee imposed under Government Code section 66477, the Residential Housing In-Lieu Fee, the Public Art In-Lieu Fee, and the water and wastewater connection and capacity fees imposed under Government Code section 66013.
ANALYSIS
Development Impact Fees
The annual report for FY 2024 is included as Attachment A. Staff published the report on the City’s website on December 27, 2024. 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 this fee 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 this fee effective fiscal year 2020.
Housing impact fees imposed on commercial developments (PAMC Ch. 16.65): Fee on commercial and industrial development to offset the demand that new jobs create for low income and moderate-income housing in the City by supporting below-market rate housing at various levels of affordability.
General Government facilities: (PAMH Ch. 16.58) – Fee on residential and non-residential development to fund improvements to those facilities used by the City to provide basic governmental services and public facilities maintenance services, exclusive of public safety.
Parks, Community Centers, and Libraries impact fees (PAMC Ch. 16.58): Fee on new residential and non-residential development to provide funds for improvements to community facilities including parks, community centers, libraries. 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 streetscape improvements designed to increase pedestrian and bicyclist safety in the corridor.
Citywide Transportation impact fees (PAMC Ch 16.59): Fee on development in all parts of the City to fund transportation enhancements, or public facilities and programs to reduce congestion.
New Public Safety facilities (PAMH Ch. 16.58): Fee on residential and non-residential development to fund the construction, acquisition, and/or upgrade of 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 to fund the cost of public parking facilities to serve non-residential development projects that do not provide adequate new off-street parking spaces to satisfy the requirements of the zoning code.
Development Impact Fee Five-Year Findings (Government Code section 660001) The City has elected to conduct an annual review of findings for all development impact fees. The proposed findings are presented in Attachment B, and the unexpended balances as of June 30,2024 for each fund are outlined below:
The Stanford Research Park/ El Camino Fund is $1,275,357. The San Antonio/West Bayshore Fund is $427,121.
The Commercial Housing Impact Fee Fund is $4,207,369.
The General Government Facilities Fund is $191,973.
The Community Facilities-Park Development Fee Fund is $2,384,330. The Community Facilities- Community Center Development Fee Fund is $970,142. The Community Facilities- Library Development Fee Fund is $617,837. The Residential Housing Impact Fee Fund is $1,155,034. The Charleston-Arastradero Corridor Pedestrian & Bicyclist Safety Fee Fund is $17,253. The Citywide Transportation Fund is $1,883,518.
The Public Safety Facility Fee Fund is $151,288.
The University Avenue Parking In-Lieu Fund is $15,189,652.
In addition to development fee funds that are required to be reported under AB 1600, the following funds are reported for information purposes only and are not required to be reported under AB 1600:
Residential housing in-lieu fees (PAMC Ch. 16.65): Fee on residential ownership developments in-lieu of providing required below-market rate to low-and moderate- income households.
Parkland Dedication (CA Government Code Section 66477-Quimby Act): Fees on parkland dedication imposed on new residential and non-residential development. 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 construction 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 public art for private developments.
Water and Wastewater Collection (California Government Code Section 66013):
Connection and Capacity fees charged to developers that are adding load to the water and sewer systems effective July 1,2005.
FISCAL/RESOURCE IMPACT
There is no direct fiscal impact associated with the review and acceptance of the annual report.
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 make the findings contained in Attachment B, the development fees described therein might be required to be refunded. This would have a potential fiscal impact of up to $28,470,873.
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, the Planning and Development Services Department, the Office of Transportation, Public Works, Library, and the Community 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: Development Impact Fees FY 2024 and Use of Fees Summary
Attachment B: Resolution Making Findings Regarding the Continuing Need for Unexpended Development Impact Fees
APPROVED BY:
Lauren Lai, Administrative Services Director