TO: CITY COUNCIL
VIA: CITY ADMINISTRATOR
Placentia City Council
FROM: DIRECTOR OF DEVELOPMENT SERVICES
DATE: APRIL 19, 2022
SUBJECT: ANNUAL UPDATE REGARDING CITYWIDE DEVELOPMENT IMPACT FEES,
TRANSIT ORIENTED DEVELOPMENT PACKINGHOUSE DISTRICT
DEVELOPMENT IMPACT FEES, AND RESIDENTIAL AFFORDABLE HOUSING
IMPACT FEES FOR COST RECOVERY
FISCAL
IMPACT: These Development Impact Fees are established for cost recovery or statutory purposes only. There is no immediate fiscal impact associated with the recommended actions. The adoption of revised development impact fees and residential affordable housing impact fees will not have an immediate impact on revenues to the City until effective 60 days subsequent to adoption. This update essentially adjusts the fees commensurate with the Construction Cost Index (CCI), and therefore, does not provide unanticipated revenue, rather adjusts revenue commensurate with CCI.
SUMMARY:
The City's Development Impact Fees program ("DIF") was first established in the early 1970's when much of the City was undeveloped. The City's costs for infrastructure have significantly increased over that period of time; however, the City's DIFs were not updated regularly to adequately cover said infrastructure costs, thus requiring the General Fund to subsidize infrastructure improvements or, in some cases, the improvements that are not conducted by a developer. In addition, in April 2017, the City Council approved the Transit -Oriented Development ("TOD") Packinghouse District Plan which will result in impacts to City services that the new development will create and identifies mitigation measures and costs associated with mitigating those impacts. Furthermore, since the inception of the DIF program, the City has adopted a State certified Housing Element, which outlines goals, one of which is to provide more affordable housing opportunities to its residents.
In 2017, to address the aforementioned lack of infrastructure funding citywide, within the TOD District, and lack of funds related to implementing the required Housing Element citywide, the City prepared new development impact fee nexus studies ("Studies") for the purpose of updating DIFs.
The result was an update to the existing citywide DIF program, creating a TOD DIF program, and creating a Housing Impact Fee program (collectively, "DIFs"). The studies analyzed the impacts created by new development on City operations and infrastructure needs and calculated the cost
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and method of apportionment of those fees and impacts across needed mitigation measures.
Those fees are then utilized to construct improvements throughout the City to mitigate development impacts on the community. The affordable housing fee was created for the purpose of collecting new developer -paid housing impact fees to be used to provide additional affordable housing opportunities in the community. Collectively, the DIF program that is currently in place was adopted by City Council in October 2017, implemented by Ordinance Nos. 0-2017-09 (TOD DIFs), 0-2017-10 (citywide DIFs), 0-2017-11 (Housing Impact Fee) and became effective in December 2017.
In 2021, City Council adopted an update to the DIF program, largely resulting in adjustments to the 2017 DIFs, increasing each fee by Construction Cost Index ("CCI") as recommended by the three (3) 2017 studies. In 2021, City Council also codified how annual updates to the DIFs will occur, to be adjusted by CCI annually.
RECOMMENDATION:
It is recommended that the City Council take the following actions:
1. Open the public hearing concerning the Citywide Development Impact Fee Schedule, the Transit -Oriented Development (TOD) Packing House Development Impact Fee Schedule, and the Residential Affordable Housing Impact Fee Schedule; and
2. Receive the staff report, consider all public testimony, ask questions of Staff; and
3. Close the public hearing; and
4. Find that the recommended actions are exempt from CEQA pursuant to Sections 15378(b)(4), 15061(b)(3), and 15273 of the CEQA Guidelines, Section 21065 of the Public Resources Code, and the City of Placentia Local Guidelines for implementing CEQA; and
5. Adopt Resolution No. R-2022-21, a Resolution of the City Council of the City of Placentia, California, approving updated Development Impact Fees to financially mitigate impacts to parks and recreational facilities, sewer facilities, transportation infrastructure, storm drain facilities, and public safety, and Quimby in -lieu fees; and
6. Adopt Resolution No. R-2022-22, a Resolution of the City Council of the City of Placentia, California, approving updated Development Impact Fees to finance mitigation of impacts to sewer facilities, traffic and transportation infrastructure, and streetscape infrastructure in the Transit Oriented Development area; and
7. Adopt Resolution No. R-2022-23, a Resolution of the City Council of the City of Placentia, California, approving updated Citywide Residential Affordable Housing Impact Fees for residential developments.
City Council Agenda
April 19, 2022
BACKGROUND:
DIFs are a commonly used method of collecting a proportional share of funds from new development for infrastructure improvements and/or other public facilities capital improvements that would be needed as a result of the new development. These fees are seen as paying for the aforementioned future required infrastructure costs as opposed to the General Fund and are therefore seen as cost recovery in nature. With rare exceptions, DIFs are one-time funds restricted to funding capital costs for new facilities or upgrades to existing facilities and are not used for annual operations and/or maintenance. Impact fees may only be imposed on new development, and the fee proceeds must be expended on improvements needed as a result of the new development.
Pursuant to the Mitigation Fee Act ("Act"), California Government Code Section 66000, et seq. (also known as AB 1600), adoption of impact fees requires documentation of the "nexus" between the fees being charged, the impacts of new development, the benefit of the facilities needed to mitigate such impacts, and the proportional cost allocation among different fee categories. Impact fee programs must be adopted by the City Council via an ordinance, however, once the program is adopted, the fees could potentially be automatically updated via City Council resolution. Impact fees are imposed either jurisdiction -wide or in a relatively large area anticipating significant amounts of new development, such as a specific plan area or community plan area. In Placentia, we have both citywide (includes affordable housing) impact fees and TOD District specific impact fees.
In 2017, the City prepared development impact fee nexus studies for the purpose of updating DIFs pursuant to California Government Code Section 66000. Three different nexus studies were completed in 2017 and were utilized respectively to adopt the current citywide DIFs, the housing impact fee, and the TOD DIFs. The DIF program that is currently in place was adopted by City Council in October 2017, implemented by Ordinance Nos. 0-2017-09 (TOD DIFs), 0-2017-10 (Citywide DIFs), 0-2017-11 (Housing Impact Fee) and became effective in December 2017.
Although the 2017 DIF update was comprehensive in nature, the City did not update the DIFs between 2017 and 2020. The 2021 DIF update adjusted the fees commensurate with the CCI from December 2017 to February 2021. In updating the DIFs in 2021, City Council adopted an Ordinance codifying how annual updates to the DIFs will occur. The Municipal Code now states that the annual fee adjustment shall be based on April to April Construction Cost Index for Los Angeles as published by the Engineering News -Record for the preceding 12 months (April to April), with the exception of the 2022 fee update which shall be based on February 2021 to April 2022 Construction Cost Index for Los Angeles as published by the Engineering News -Record.
Therefore, this year's annual update is based on the CCI change from February 2021 to April 2022, and subsequent years will be based on April to April CCI change.
DISCUSSION:
Update to Development Impact Fees
The existing Citywide DIFs include the following:
City Council Agenda
April 19, 2022
• Citywide Public Safety Impact Fee Program
• Citywide Park and Recreation Impact Fee Program
• Citywide Quimby Land Dedication and In -Lieu Fee Program • Sewer Impact Fee Program
• Traffic Impact Fee Program
• Storm Drainage Impact Fee Program
The existing residential Affordable Housing Impact Fee includes:
• A Residential Affordable Housing Impact Fee ("RAHIF") requiring developers to pay a fee to mitigate the additional demand for affordable housing that is created by proposed market rate residential development.
The existing TOD DIFs include the following:
• TOD Traffic Impact Fee
• TOD Sewer Impact Fee
• TOD Streetscape Infrastructure Impact Fee
As previously stated, all three of the existing DIF programs included nexus studies to justify each respective DIF. Each of the three studies recommended that CCI be utilized as the metric for future DIF increases. The Municipal Code (adopted in 2017) specifically states that the Citywide and TOD DIFs be adjusted annually commensurate with changes in construction costs. The Residential Affordable Housing Impact Fee study recommended CCI as a metric to be utilized for annual adjustments. As previously stated, this method of recurring annual updates was codified in the Municipal Code in 2021. This year's update will adjust the fees commensurate with the CCI for Los Angeles as published by the Engineering News -Record from February 2021 to April 2022, effective 60 days after adoption, as follows:
Date CCI
February 2021 12091.22
April 2022 13698.12
The delta calculation between April 2022 CCI and February 2021 CCI is expressed as (13698.12 - 12091.22 = 1606.90). 1606.90 / 12091.22 = 0.1328, rounded to 13.3%. As such, Staff has prepared three resolutions to update the DIFs, one each for the existing Citywide DIFs, TOD DIFs, and for the residential Affordable Housing Impact Fee. The rates for all DIFs have been increased by 13.3%.
City Council Agenda
April 19, 2022
Other Updates
In 2021, the Storm Drain Acreage Fees for Area G in the southeast portion of the City were adjusted to a certain amount (not using CCI) due to a recent legal Settlement Agreement. Staff has been advised by the City Attorney to keep Storm Drain acreage fees for Area G at the same rate as adjusted and adopted in 2021 until the end of 2027. Development that occurs in Area G between the effective date of the 2021 update and December 31, 2027 will be subject to the adjusted fee adopted by City Council in 2021 pursuant to the settlement agreement.
On March 2, 2021, as part of the 2021 DIF update, City Council directed Staff to begin a review of the Public Safety Impact Fee to update said fee in accordance with the operation and planning of the new Placentia Fire and Life Safety Department. The City is working with SCI Consulting Group to address this fee and to address the TOD Sewer Impact Fee. It is anticipated that a single -purpose Citywide DIF will be proposed for the Placentia Fire and Life Safety Department, and that the TOD Sewer Impact Fee will be adjusted or repurposed to address other impacts within the TOD District. Since the consultant and Staff are continuing to work on these two specific fees, Staff prepared the balance of the annual DIF update for City Council consideration.
FISCAL IMPACT:
There is no immediate fiscal impact associated with the recommended actions. DIFs are a commonly used cost recovery method of collecting a proportional share of funds from new development for infrastructure improvements and/or other public facilities capital improvements that would be needed as a result of the new development. These fees are seen as paying for necessary infrastructure costs as opposed to the General Fund and are therefore seen as cost recovery in nature. The adoption of revised Development Impact Fees and Residential Affordable Housing Impact Fees will not have an immediate impact on revenues to the City until effective 60 days subsequent to adoption. This update essentially adjusts the fees commensurate with the Construction Cost Index (CCI), and therefore, does not provide unanticipated revenue, rather it adjusts revenue commensurate with CCI for the period between the 2021 effective date and present.
Prepared by: Reviewed and approved:
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Josep -M. Lambert Jennifer Lampman
Director of Development Services Director of Finance
City Council Agenda
April 19, 2022
Reviewed and approved:
Damien . Arrula
City Administrator
Attachments,
1. Resolution No. R-2022-21 - Approving updated Citywide Development Impact Fees
2. Resolution No. R-2022-22 - Approving updated Transit Oriented Development Packinghouse District Development Impact Fees
3. Resolution No. R-2022-23 - Approving updated Residential Affordable Housing Impact Fees
4. Engineering News -Record City Cost Index Los Angeles April 2022