LAW AND LEGISLATION COMMITTEE
Katie Valenzuela, Chair, District 4
Lisa Kaplan, District 1
Eric Guerra, District 6
Rick Jennings, II, District 7
COMMITTEE STAFF
Wendy Klock-Johnson, Assistant City Clerk
Steve Itagaki, Supervising Deputy City Attorney
Consuelo Hernandez, Director of Governmental Affairs
Law and Legislation
Committee
City Hall-Council Chamber
915 I Street, 1st Floor
Published by the Office of the City Clerk
(916) 808-7200
SUPPLEMENTAL MATERIAL
Description of Attached: Attached is supplemental material received after publishing the agenda outlining revisions to the original staff report and the addition of attachment 13 for Discussion Item 5.
For the Meeting of: Tuesday, April 18, 2023, at 1:00 p.m.
Agenda Item:
5. Ordinance Adding Chapter 3.156 to the Sacramento City Code, Relating to Community Benefits Agreements
File ID: 2023-00351
Location: Citywide
Recommendation: 1) Review Ordinance adding chapter 3.156 of the Sacramento City Code, relating to community benefits agreements; and 2) pass a Motion forwarding the Ordinance to City Council for consideration.
Contact: Ellen Sullivan, Senior Development Project Manager, (916) 808-5758, [email protected], Office of Innovation and Economic Development; Leslie Fritzsche, Community Investment Manager, (916) 808-5450, [email protected], Office of Innovation and Economic Development
1 SIWD PROPOSED EDITS
ORDINANCE NO.
Adopted by the Sacramento City Council
Date Adopted
AN ORDINANCE ADDING CHAPTER 3.156 TO THE SACRAMENTO
CITY CODE, RELATING TO COMMUNITY BENEFITS AGREEMENTS
BE IT ENACTED BY THE COUNCIL OF THE CITY OF SACRAMENTO:
SECTION 1.
Chapter 3.156 is hereby added to the Sacramento City Code to read as follows:
Chapter 3.156 COMMUNITY BENEFITS AGREEMENTS
3.156.000 Purpose.
The city is committed to ensuring economic development projects in the City of Sacramento benefit and promote prosperity for all residents without sacrificing the wellbeing of residents within or near the project area.
This ordinance is to establish criteria and procedures for economic development projects that promote transparency and community accountability, mitigate gentrification, prevent displacement, protect residents and small/local businesses, promote inclusion and equitable access to opportunity, and facilitate the production of housing affordable to all income levels.
This chapter shall be known as the “Community Benefits Agreements Ordinance.”
3.156.010 Definitions.
The following definitions apply in this chapter:
“Affordable dwelling unit” means a dwelling unit that (i) will be rented at an affordable rent or sold at an affordable housing price and (ii) will have a regulatory agreement recorded on title, requiring the unit to remain affordable for a period of no less than 5530 years.
“Affordable housing price” means a sales price of a for-sale dwelling unit that requires a low-income household to expend no more than 35% of its income on housing expenses (mortgage principal and interest, taxes, insurance, and assessments). “Affordable rent” means a monthly rent that is set at or below the annual rents established by the California Tax Credit Allocation Committee (CTCAC) for Sacramento Commented [1]: 55 years is the current affordable
housing standard and this should reflect that.
2 County based on the date the project was placed into service and the bedroom size and income level of the regulated unit. does not exceed 2% of median income, adjusted for household size appropriate to the unit, less a reasonable allowance for utilities. “Community benefits agreement” means a written contract between the city and a subsidized party that includes the terms by which the city will provide a development subsidy and the public benefits that the subsidized party must provide in exchange. “Completed project” means a development project for which the city has issued a certificate of occupancy for all structures.
“Development project” means the construction, reconstruction, demolition, or alteration of the size of any structure.
“Development subsidy” means the city’s expenditure of public funds or loss of revenue to subsidize a development project in the city, in a cumulative amount equal to or greater than the threshold amount, in the form of bonds, grants, below-market-rate loans, loan guarantees, fee waivers, land price subsidies, tax abatements, tax exemptions, land transfers for less than market-rate value, tax increment financing, or any other economic assistance, and tax credits, whether approved by the city in a single act or multiple acts. It also includes assistance that financially improves the development project from the City of Sacramento including but not limited to: property transferred to or encumbered by the project or developer at less than market value; rezoning; favorable terms arising out of General Plan Area Specific Plans, or updates thereto; and creation of any Enhanced Infrastructure Financing Districts or Joint Powers Authority. “Development subsidy” does not include: (i) an expenditure or loss in any amount as part of a public project, as defined in section 3.60.010; (ii) a development project being carried out by a nonprofit corporation formed under the Nonprofit Public Benefit Corporation Law (Cal. Corp. Code §5110 et seq.); (iii) the disposal or acquisition of land under California Government Code section 37364; (iv) an expenditure or loss for the development of housing where at least 2550% of the dwelling units are affordable dwelling units; or for the development of mixed-use projects where at least 25% of the dwelling units are affordable dwelling units and where the total square footage of the commercial space does not exceed 200,000k square feet after subtracting the square footage of the residential space from the total square footage of the project;(v) the sale or lease of land under the Surplus Land Act, unless the sale or lease of land is for non affordable housing purposes (Cal. Gov. Code §54220 et seq.). “Dwelling unit” has the same meaning as in section 17.108.050. “Low-income household” means a household whose income does not exceed 80% of median income, adjusted for family size.
“Local area” means Sacramento, Yolo, Placer, El Dorado, Amador, San Joaquin, Sutter, Yuba, Nevada, and Sierra counties.
Commented [2]: This is not a standard of affordability
that is recognized or used by affordable housing
developers. Based on SIWD’s research and
discussions with statewide housing experts, the low
income housing tax credit standards are the most
common standards used for affordable housing
development. Using an unknown standard is likely to
get in the way of the creating of affordable housing
because it is likely such housing will need multiple
sources to be built and developers will need to be able to meet the normal industry standards of those
sources.
Commented [3]: The settlement agreement refers to
economic subsidies defined in Cal. Gov Code section
53083. The definition used for a development subsidy
here must, at a minimum, capture all of the investments listed in that section.
Commented [4]: The City's proposed standard is too
narrow and leaves out important City investments. It
should expressly include tax increment financing and
EIFDs. It also should include assistance/incentives that confer a measurable value to developers. City provided
incentives like rezoning have a measurable value as
evidenced by other communities who calculate land
value capture from government actions. SIWD's
proposed changes provide that.
Commented [5]: The threshold amount is the
kickstarter for applicability of the Ordinance as a proxy to prospective impact. The corporate structure of the
entity is not relevant and this would potentially mean
excluding very large entities e.g. hospital systems who are sometimes organized as nonprofits receiving a very
large public investment.
Commented [6]: In order to ensure the ordinance does
not inadvertently create barriers to the production of
affordable housing, SIWD proposes that projects with
at least 25% rather than 50% affordable units be
exempted and also proposes a method to address
mixed-use projects.
Commented [7]: This exemption is too broad. The City
should not exclude the sale or lease of public land for non affordable housing purposes.
3 “Median income” means the median income applicable to Sacramento County, as published and annually updated by the United States Department of Housing and Urban Development pursuant to section 8 of the United States Housing Act of 1937. “Oversight committee” means a public oversight committee guided by an inclusive, comprehensive, community driven process charged with overseeing the development, negotiation, implementation, and oversight of community benefit agreements under this chapter and comprised of the following: i) one or more low-income City residents; ii) a coalition of residents and community groups; iii) community benefit organizations and/or nonprofits with expertise in housing, transportation, and workforce development; iv) a youth or local school representative; v) a labor or union representative; and v) a representative of the Race Equity Council and/or Racial Equity Alliance or their successor entities.
“Priority order” means priority is given from highest to lowest to: residents of the city living within a three-mile radius of the project or displaced from that radius within the last 5 years; economically disadvantaged residents of the city; residents of the City, residents of Sacramento County, outside of the city; and residents of Yolo, Placer, El Dorado, Amador, San Joaquin, Sutter, Yuba, Nevada, and Sierra counties.
“Subsidized party” means a person or entity who is or will be the direct beneficiary of a development subsidy and its successors in interest.
“Threshold amount” means $103,000,000 in aggregate development subsidy, as adjusted in section 3.156.040 or $100,000 in aggregate development subsidy if the usable square footage of the development project is more than 200,000 square feet. “Very low-income household” means a household whose income does not exceed 50% area-median income, adjusted for family size.
3.156.020 Community benefits agreement - required.
A. A subsidized party shall enter into a community benefits agreement as a condition of receiving a development subsidy.
B. The community benefits agreement must include the terms required under section 3.156.030 and any other terms required by the city or agreed upon by the city and the subsidized party.
C. The city council may only approve a development subsidy if it approves a community benefits agreement at the same time.
3.156.030 Community benefits agreement – terms.
Commented [8]: This threshold is too high. It does not
comply with the settlement agreement and SIWD has
not agreed to this amount. It is exceedingly uncommon
for the City to invest this much. And setting it this high leaves both the community and the City in the lurch for large projects that will have a significant impact on the neighborhood/surrounding area. SIWD proposes
reducing it to $3 million and including the proposed
alternate kickstarter for a lower public investment
threshold when the size of the project is large.
4 A. Except as provided in subsection C, each community benefits agreement must include the following terms:
1. To the extent permitted by law, a term requiring the subsidized party and its contractors, subcontractors (not including suppliers), and tenants to employ residents of the local area in priority order to:
a. Perform work on the development project for which the city is providing the development subsidy;
b. Perform work to improve, maintain, and repair the completed project; and
c. Work in businesses located in the completed project.
The community benefits agreement must include a target that at least 35% of the new employment be filled by local residents within a 3 mile radius of the completed project with priority given to low-income households.
2. A term requiring the subsidized party and its contractors and subcontractors to comply with California’s prevailing wage law (Cal. Labor Code §1770 et seq.) in connection with the development project.
3. A term requiring new employment positions by tenants and owners of the project that are not included in a collective bargaining agreement with any employer will be subject to labor peace.
4. A term requiring a childcare support plan to address the childcare needs of the impact area as defined in the community benefits agreement and those employed by owners and tenants in the completed project.
5. A term specifying a clearly identifiable class of persons who will be third- party beneficiaries under the community benefits agreement. At a minimum, residents of the impact area of the project shall be included as one of the third-party beneficiaries. The impact area for the development project must be identified in the community benefits agreement in consultation with the community and the Oversight Committee.
6. A term requiring the subsidized party to pay a portion of the cost to monitor implementation of the community benefits agreement.
7. A term specifying what data the subsidized party must collect, retain, and report to the city and the community to permit monitoring of the implementation of the community benefits agreement.
3.8. A term specifying the remedies for breach of the community benefits including but not limited to damages, specific performance, injunctive relief, clawback Commented [9]: There should be at least certain
classes of people that are always third party
beneficiaries if the City is not permitting a community signatory. It should, at a minimum, include residents of the impact area. It could also include CBOs serving
residents of the impact area, local businesses in the
impact area, etc.
5 of any or all city-provided benefits, revocation of land transfers or land sales, debarment provisions and proportionate penalties and fees.
4. A term requiring the following indemnity language: “The subsidized party shall defend, indemnify, and hold harmless the city, its officers, employees, and agents from and against all claims, actions, losses, damages, liability, costs and expenses of every type and description, including, but not limited to, attorney fees, to which any or all of them may be subjected by reason of, or resulting from, directly or indirectly, in whole or in part, the community benefits agreement.”
5.9. Terms requiring the subsidized party to:
a. Provide small and local businesses with support, such as technical assistance, increased access to capital, or resources for building improvements; b. Provide anti-displacement funding. Commercial and mixed use projects shall provide a fee, in addition to the standard linkage fee, equal to no less than 1% of the project’s budget, to a City administered anti-displacement fund. The funding must be used to implement anti-displacement strategies as determined by the community, such as those intended to create stable tenancies, create paths to home ownership, provide secure employment opportunities, enable small businesses to grow, or to finance development of new affordable housing in the impact area of the project as defined by the community benefits agreement. Anti-displacement strategies must demonstrate they will have a measurable impact on keeping renters and owners in their homes Implement anti-displacement strategies, such as those intended to create stable tenancies, create paths to home ownership, provide secure employment opportunities, or enable small businesses to grow; c. Provide affordable dwelling units; and. At least 25 percent of any residential units in a residential project or mixed use project shall be reserved for and affordable to very-low income households including households of various sizes, ages and abilities.
d. If the development project will result in the demolition of existing affordable dwelling units or units occupied by low-income households, those units shall be replaced by like units on a one for one basis on site or within one half mile of the completed project within 5 years.
e. Undertake transportation projects or initiatives, such as those that enhance community connectivity, improve transportation options, or promote motor-vehicle-traffic-reducing measures. Provided transportation funding commensurate with the size, budget, and scale of the project and its anticipated impact to a City administered active transportation fund. The funding must be used to address unmet community-identified transportation needs within the impact area of the project as defined by the community benefits agreement, along the Commented [10]: This indemnification clause is too
broad and would indemnify the City from liability for its own duties and obligations under a CBA. A tailored
indemnification clause can be negotiated at the time of the specific CBA.
Commented [11]: SIWD has encouraged the City over
the last year to provide specific minimum benefits to
create certainty for both developers and the community
and to ensure that the community gets meaningful
benefits for its large $10 million investment of public funds. The City has been disinclined to create such
specifics. SIWD proposes here some more protective
guidelines that adjust with the scale of the project for the benefits to be included.
6 High Injury Network (HIN), or in an area meeting the criteria of “equitable investment” as defined by the city’s Transportation Priorities Plan. The funding must be used for projects that provide: equitable access to multi-modal mobility options to jobs, essential services, and opportunity; address existing safety concerns, and barriers to mobility; reduction of vehicle miles traveled, criteria pollutant, and greenhouse gasses. The fees shall not be used for roadway capacity expansion, interchange expansion, or parking facilities.
B. In addition to the terms in subsection A, the city may require a community benefits agreement to include terms that require project-specific community benefits that it finds are warranted under the circumstances.
C. The city council may approve a community benefits agreement that does not include any term under subsection A.5 that it expressly finds is not warranted under the circumstances.
3.156.040 Adjustment of threshold amount.
A. During the years 2023 through 2027, the threshold amount is $103,000,000 or $100,000 if the usable square footage of the development project is more than 200,000 square feet.
B. Every 60 months beginning on January 1, 2028, the threshold amount shall be adjusted automatically to take into consideration inflation by a factor equal to the percentage increase, if any, in the construction cost index for San Francisco (based on 201913 U.S. average = 100) during the 60 months ending on the preceding September 1 as published by Engineer News Record/McGraw-Hill Construction Weekly, or any substitute index that the city council adopts by resolution. The city manager or the city manager’s designee shall calculate the adjustment, if any, to the threshold amount and shall advise the city clerk of the amended threshold amount.
3.156.050 Community input.
The city manager shall seek the input of the community that is or will be affected by the development project when developing the terms of, and evaluating the subsidized party’s performance under, the community benefits agreement as provided by this chapter and the policies and procedures to be adopted pursuant to and consistent with section 3.156.060.
Residents of the impact area, neighborhood associations in the impact area, representatives of a coalition of residents and community groups that are working together in the impact area such as Sacramento Investment Without Displacement, community benefit organizations or nonprofits with expertise in housing, Commented [12]: This exception will swallow the rule.
A wide open exemption clause is not necessary. In the
event a future specific project truly requires an
exemption, the Council can use its legislative power at that time.
7 transportation, and workforce development, community benefit organizations serving the impact area, labor representatives, small business representatives, youth representatives, members of the Racial Equity Council and/or Racial Equity Alliance, and other relevant community partners must be directly involved in negotiating community benefits agreements with the subsidized party.
3.156.060 Policies and procedures.
A. The city manager shall may adopt policies and procedures to implement and enforce the provisions of this chapter, including, but not limited to, policies and procedures on accessible and comprehensive community engagement processes, direct community involvement in negotiation of community benefits agreements, stipends for residents participating in the negotiations of community benefits agreements, community benefits and protections, the identification and selection of members of the Oversight Committee as well as its role and procedures, metrics and monitoring, annual data collection and reporting, and enforcement.
B. The policies and procedures must incorporate a robust, inclusive, culturally relevant community engagement process and ensure that community members living within the impact area, community benefit organizations serving the impact area, labor representatives, small business representatives, youth representatives, and other relevant community partners are parties to the development and negotiation of community benefits agreements.
C. The policies and procedures must include a transparent accountability process that includes the Oversight Committee that is guided by an inclusive, community-driven process.
D. The policies and procedures must be developed in consultation with residents, neighborhood associations, representatives of a coalition of residents and community groups that are working together such as Sacramento Investment Without Displacement, community benefit organizations or nonprofits with expertise in housing, transportation, and workforce development, the Racial Equity Council and/or Racial Equity Alliance, and other relevant community partners.
3.156.070 Enforcement.
An Enforcement Committee shall be established to monitor development projects subject to a community benefits agreement under this chapter.
A. The Enforcement Committee shall be comprised of, at minimum, the following individuals:
Commented [13]: Community oversight is required
and essential. The current draft is not enough to
comply with the settlement agreement. SIWD
recognizes some details are appropriate for guidelines, but the ordinance should both mandate that policies
and procedures be adopted and provide strong
requirements and guidance to ensure community
engagement is strong AND that the community is a
party to the negotiations to ensure meaningful benefits are included.
Commented [14]: The model below is based on the
Detroit model and to a lesser extent, the St. Petersburg model. The intent is to create mandatory community
enforcement mechanisms and transparent
accountability processes. Both are necessary to protect the community and comply with the settlement
agreement.
8 i. City Attorney for the City of Sacramento or their designee; ii. A representative from the Planning and Development Department; iii. A representative from the Office of Diversity & Equity;
In addition to the members of the Enforcement Committee as identified in this section, the Planning Director may require that other departments participate in the Enforcement Committee as needed.
B. The Enforcement Committee shall provide an annual compliance report to the City Council and the Oversight Committee for the time period identified in the community benefits agreement.
C. The Planning Director shall facilitate at least 2 meetings per calendar year between the Oversight Committee and the Developer to discuss the status of the completed projects for the time period identified in the community benefits agreement. The meetings must be at least 14 days after the compliance data is provided to the Oversight Committee.
D. The Oversight Committee shall review any allegations of violations of the community benefits agreement provided to it by the community, and may report violations to the Enforcement Committee in writing.
E. Upon receipt of written notification of allegations of violation from the Oversight Committee, the Enforcement Committee shall investigate such allegations and shall present their written findings to the Oversight Committee based upon the following:
a. Whether the Developer is in compliance with the community benefits provision; and
b. How the community benefits agreement will be enforced or how violations will be mitigated.
F. The findings of the Enforcement Committee shall be presented to the Oversight Committee no later than 21 days from the date the violations were reported to the Enforcement Committee, unless there is a documented and exceptional need for additional time that is reported to City Council and the Oversight Committee within the original 21-day time frame.
9 G. If the Oversight Committee disagrees with the findings of the Enforcement Committee or determines that the Enforcement Committee is not diligently pursuing the enforcement or mitigation steps outlined in its findings, the Oversight Committee may send notice to the Enforcement Committee, and the Enforcement Committee shall have 14 days from receipt of notice to respond to the concerns outlined.
H. If the Oversight Committee is not satisfied with the Enforcement Committee’s response, the Oversight Committee may petition the City Clerk and request that City Council schedule a hearing with opportunity for both the Enforcement Committee and the Oversight Committee to present information related to the alleged violations of the community benefits agreement and any enforcement or mitigation efforts that have occurred.
I. If City Council elects to hold a hearing, or based upon the written information submitted, City Council shall determine whether the Enforcement Committee has made reasonable efforts to ensure that the Developer has complied with the community benefits agreement.
J. If the City Council determines that the Enforcement Committee has made reasonable efforts, City Council shall notify the Oversight Committee and the Enforcement Committee of their findings.
K. If City Council finds that the Enforcement Committee has not made reasonable efforts or findings, City Council shall make a specific finding to the Enforcement Committee on the steps that need to be taken to comply with the Community Benefits Provision.
L. The Enforcement Committee shall provide City Council and the Oversight Committee monthly updates on compliance actions until City Council adopts a resolution declaring that the Developer is in compliance with the community benefits agreement or has taken adequate steps to mitigate violations.
M. City Council may hold additional hearings related to enforcement of the community benefits agreement as needed.