1 City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Planning and Development Services
Meeting Date: December 15, 2025
Report #:2510-5385
TITLE
Approval of Professional Services Contract Number C26194283 with Keyser Marston Associates, Inc. in the Amount Not-to-Exceed $371,415 to Conduct Development Impact and In-Lieu Fee Study. CEQA Status: Exempt Under CEQA Guidelines Sections 15061(b)(2) and (b)(3).
RECOMMENDATION
Staff recommends that the City Council approve and authorize the City Manager or their designee to execute Contract No. C26194283 (Attachment A) with Keyser Marston Associates, Inc. to conduct development impact and in-lieu fee study for a term of three years and a total not-to-exceed $371,415, including $337,650 for basic services and $33,765 for additional services.
BACKGROUND
Under the Mitigation Fee Act (Assembly Bill [AB] 1600), cities can charge new development for its relative share of the cost to fund the acquisition of land and improvements to public facilities. These fees are established based on the nexus between impacts caused by new development and the improvements needed to mitigate those impacts that would be funded by the established fee.
AB 602 requires nexus studies to be updated every eight years beginning January 1, 2022.1 Palo Alto’s certified Housing Element Program 2.1B also requires the City to initiate a study to update the City’s nexus and feasibility study for residential and commercial housing impact fees by December 31, 2025. In addition, Housing Element Program 3.1B requires the City to prepare feasibility studies to analyze the implications of development impact fees for housing production. To comply with these policies in a timely manner, the City seeks to update all impact and related in-lieu fees citywide, including conducting policy research and providing key program recommendations. A detailed scope of work is provided in Exhibit A to Attachment A, but generally, this effort would include the preparation of an AB 602 compliant nexus study to 1 https://legiscan.com/CA/text/AB602/id/2434861
2 update development impact and in lieu- fees for parks, community center, library, general government, citywide transportation, public safety, parkland, and public art. This effort will include market/peer benchmarking, and pro forma feasibility testing of residential prototypes, with policy/implementation recommendations and stakeholder outreach.
ANALYSIS
The development of nexus and feasibility studies require specialized technical expertise that is not readily available on staff.
Solicitation Process
On May 21, 2025, the City released a Request for Proposals (RFP194283) to solicit proposals from qualified consulting firms to conduct a Development Impact and In-Lieu Fee Nexus and Feasibility Study. Four complete proposals were received ahead of the July 11, 2025, deadline for submission. In August 2025, an executive and senior leadership team from the City of Palo Alto’s Planning and Development Services Department, Administrative Services Department, Public Works Department, and City Attorney’s Office, conducted a series of interviews and scored each team’s responses to select the City’s preferred consultant for this work. Proposals were evaluated using required and optional criteria established in the solicitation. Required criteria included: quality and completeness of the proposal; quality and performance characteristics of the proposed solution; experience with similar scope and complexity; proposed cost; financial condition and stability; ability to meet specified timelines; and compliance with applicable laws, regulations, and City policies. Optional criteria included: prior performance for government agencies and capacity to provide ongoing services or support.
Table 1: Summary of Request for Proposals
Proposal Description Conduct a development impact and in-lieu fee nexus and feasibility study
Proposed Length of the Project 12-18 months
Number of Vendors Notified 3633
Number of Proposal Packages
Downloaded
33 Total Days to Respond 51 days
Pre-Proposal Meeting and Date N/A
Number of Proposals Received 4
Proposed Price Range $124,500-$348,725
Public Link to Solicitation https://procurement.opengov.com/portal/palo-alto- ca/projects/171914/document?section=1580270
3 On September 4, 2025, the City notified Keyser Marston Associates (KMA) of its intent to award the firm a contract for the services described in the RFP. Proposals were evaluated using the required criteria established in the solicitation, including proposal quality and completeness, the quality and performance characteristics of the proposed solution, experience with similar scope and complexity, proposed cost, financial stability, ability to meet specified timelines, and compliance with applicable laws and City policies. KMA’s overall performance placed it highest after all evaluation components were completed, supported by stronger results in proposal quality, proposed solution, relevant experience, and prior government performance while fully meeting compliance requirements. Its strong interview performance, including the clarity and completeness of its responses to questions, further strengthened its final ranking. KMA and its sub-consultant NBS Government Financial Group are well known for their work in this area and bring extensive experience in housing-related legislation, inclusionary housing programs, feasibility analysis, housing impact fee studies, and state law requirements for development impact fees. Together, they offer a comprehensive and complementary approach that will support the City in recommending a fee structure that offsets development impacts while preserving the feasibility of housing production.
Implementation of the attached recommended contract will position the City to meet upcoming Housing Element and AB 602 deadlines and will provide the City with a strong legal basis for the collection of development impact fees going forward. The feasibility study component of the scope will also provide policy and decisionmakers with critical information related to the short and long-term effects of impact and in-lieu fees on housing development in Palo Alto.
FISCAL/RESOURCE IMPACT
Funding was originally included in the FY 2025 budget for this work but the contract was not able to be completed before the end of FY 2025. Therefore, the City Council unanimously reappropriated necessary fundings from FY 2025 to FY 2026 on October 6, 2025 through CMR 2506-49003 as part of the annual reappropriation process.
STAKEHOLDER ENGAGEMENT
Consideration of this consent calendar item was included in the publicly posted agenda for the December 8, 2025, City Council meeting. Task C, Part 2 of the attached contract will also include stakeholder engagement in the form of virtual stakeholder meetings and the updated nexus and feasibility studies are expected to be considered by Council as part of one or more public hearings.
3https://cityofpaloalto.primegov.com/meetings/ItemWithTemplateType?id=8738&meetingTemplateType=2&com piledMeetingDocumentId=17069
4 ENVIRONMENTAL REVIEW
The recommendation in this report does not constitute a project requiring review under the California Environmental Quality Act (CEQA).
ATTACHMENTS
Attachment A: Draft Contract with Keyser Marston Associates for Development Impact and In- Lieu Fee Study
APPROVED BY:
Jonathan Lait, Planning and Development Services Director