DATE: NOVEMBER 15, 2022
DEPARTMENT: OFFICE OF THE CITY ATTORNEY
COMMUNITY DEVELOPMENT DEPARTMENT
FROM: CHRISTOPHER A. CALLIHAN, CITY ATTORNEY
MEGAN HUNTER, COMMUNITY DEVELOPMENT DIRECTOR
TITLE: INCLUSIONARY HOUSING ORDINANCE AMENDMENT TO DOWNTOWN EXEMPTION [SALINAS MUNICIPAL CODE SECTION 17-8(d)] RECOMMENDED MOTION:
A motion to adopt an Ordinance amending Chapter 17 (Housing), Article III (Inclusionary Housing Requirements), Section 17-8(d) of the Salinas Municipal Code to eliminate an exemption for any new residential construction projects in the downtown area (Central City Overlay District), but to allow an exemption for adaptive reuse projects.
EXECUTIVE SUMMARY:
On September 13, 2022, Community Development Department staff presented an Administrative Report to the City Council on the Inclusionary Housing Ordinance and the Downtown Area Exemption (“Downtown Exemption”). During this meeting, Council members Barrera and Rocha requested that the Downtown Exemption be brought back to the City Council for further discussion. On October 18, 2022, after lengthy discussion, the City Council recommended that the Downtown Exemption be amended to only include adaptive reuse projects because the conversion of older, in some cases historic, buildings is costly and risky, and these buildings are more likely to remain underutilized and vacant. Staff is returning to Council with the requested revision to the Inclusionary Housing Ordinance for consideration.
BACKGROUND:
On May 1, 2003, the City engaged BAE to update the study and to provide additional information regarding options for increasing the required percentage of affordable units within new residential development. In 2005, the City updated and adopted Ordinance No. 2451. Unfortunately, the new ordinance coupled with the 2008 Great Recession had a chilling effect on housing production and not a single inclusionary unit was built under the 2005 Ordinance.
As part of the City’s 2015-23 General Plan Housing Element update, the City Council authorized direction under “Action H-8: Inclusionary Housing” to update the existing Ordinance along with a nexus study. The City was anxious to update the Ordinance in anticipation of the entitlement processes for the West Area and Central Area Specific Plans, which were well underway. To ensure stakeholder engagement, the City Council approved the selection of the Technical Advisory Committee (TAC) to serve as the recommendation committee regarding the ordinance update. The TAC began meeting in December of 2014 and after fifteen (15) working group meetings, the amended ordinance was introduced to City Council on May 16, 2017, and subsequently adopted on June 6, 2017.
The Downtown Vibrancy Plan (“DVP”) was being developed at the same time that the Inclusionary Housing Ordinance was undergoing an update. As a result, the DVP specifically calls for an exemption to the Inclusionary Housing Ordinance for the Downtown. Before considering exempting the Downtown from the Inclusionary Housing Ordinance, the City decided to conduct a Housing Target Market Analysis (“HTMA”) to determine if it was warranted. The 2017 Housing Target Market Analysis recommended an exemption based upon significant risks to downtown residential development and the untested market potential.
DISCUSSION:
When the Inclusionary Housing Ordinance was updated in 2017, it included a Downtown Exemption. At that time, the Council supported the exemption in recognition of the number of inclusionary units already in the Downtown (Central City Overlay District) and the findings of the 2017 HTMA Study. The Council decided not to establish a time for the expiration of the exemption because of the guidance in the Housing Element, which recommended that the Inclusionary Housing Ordinance be re-evaluated every five years.
It was anticipated that the Inclusionary Housing Ordinance Update would begin in 2022. Unfortunately, due to limited capacity, this update was postponed so staff could prioritize its pandemic response including implementation of Project Roomkey, Project Homekey, and the Emergency Rental Assistance Program (ERAP). Staff is responsible for administering grants totaling over $59 million this year alone and ensuring the phase out of significant CARES Act Funding this fiscal year.
Although staff had not yet initiated the evaluation of the Inclusionary Housing Ordinance, City Council requested that staff submit an Administrative Report on this Ordinance and the Downtown Exemption. On September 13th, staff presented the requested report to City Council. On October 18, 2022, after a lengthy discussion, City Council directed staff to amend the Ordinance to apply only to adaptive reuse residential development in the Downtown (Central City Overlay District). The exemption would no longer apply to new residential construction in the Downtown.
The proposed amendment would modify Section 17-8(d) of the Salinas Municipal Code, as follows:
This article shall not apply to any of the following:
…
Residential developments Adaptive reuse projects as defined by Section 37-50.015 in the Zoning Code that are located in the downtown area (Central City Overlay District). unless the city council by resolution determines that, based on market conditions, the provisions of this article will be applied in the downtown area.
The “downtown area” is defined at Section 17-7(l) of the Salinas Municipal Code, as follows:
(l) ‘Downtown Area’ means the area within the boundaries of the Central City Overlay District as defined per Zoning Code [section] 37-40.300.” For reference, the map provided in Zoning Code Section 37-40.300 is provided below. To be clear, the downtown exemption applies to all areas within the area outlined in the bolded black line. The Downtown Core Area (shaded in grey) is within the boundaries of the downtown exemption.
Based on the Council’s interest in evaluating the Downtown Exemption, the City contracted with Economic and Planning Solutions to update the HTMA Study. The Study identified existing barriers to residential development especially for Adaptive Reuse Projects. Recognizing that the conversion of older, in some cases historic, buildings is costly, City Council passed an Adaptive Reuse Ordinance in 2018. The Adaptive Reuse Ordinance relaxes or eliminates identified development standards to incentivize the conversion of older, underutilized commercial buildings to residential use in the Central City Overlay District. Even with these incentives only 69 units have been permitted; 300 Main Street (Bruhn Building) with 19 units and 301 Main (Rabobank Building) with 50 units. A Site Plan for 123 W. Alisal (The Californian Building) with 40 units was approved but expired as the applicants found the proposed project financially infeasible. During the October 18th meeting, City Council recognized the additional risks and costs associated with Adaptive Reuse Projects and recommended that this exemption be retained to ensure future projects are economically viable.
CEQA CONSIDERATION:
The adoption of this Ordinance is “Not a Project” as defined by the California Environmental Quality Act (CEQA) Section 15378. In addition, CEQA Guidelines Section 15061 includes the general rule that CEQA applies only to activities which have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. Because the proposed action and this matter have no potential to cause any effect on the environment, or because it falls within a category of activities excluded as projects pursuant to CEQA Guidelines section 15378, this matter is not a project. Any subsequent discretionary projects resulting from this action will be assessed for CEQA applicability.
STRATEGIC PLAN INITIATIVE:
The Inclusionary Housing Ordinance and Guidelines support the City Council’s Strategic Plan 2022-2025 Goals and Strategies including Economic Development, Housing/Affordable Housing, and Effective and Culturally Responsive Government.
DEPARTMENTAL COORDINATION:
Implementation of the Inclusionary Ordinance is coordinated and supported by multiple Divisions and Departments including, the Housing Division, Current Planning Division, Advanced Planning & Project Implementation Division of the Community Development Department; Permit Services; Economic Development; Public Works; the City Attorney’s Office; and City Administration.
FISCAL AND SUSTAINABILITY IMPACT:
To provide the necessary data for City Council to consider elimination of the Downtown Inclusionary Housing Ordinance Exemption, a contract with EPS, Inc. at a not to exceed amount of $24,990, was executed to update the Housing Target Market Analysis. It is anticipated that consultant costs for a future update of the Inclusionary Housing Ordinance including Legal Counsel will be approximately $100,000. Upon completion of a consultant RFP process, Community Development Department staff will return to request a budget augmentation.
ATTACHMENTS:
Inclusionary Housing Ordinance (IHO) Amendment to Downtown Exemption IHO Amendment to Downtown Exemption Powerpoint
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