TO: COMMUNITY AND ECONOMIC FROM: Jon Cicirelli
DEVELOPMENT COMMITTEE Director
SUBJECT: FEE STUDY UPDATE: PARKLAND DATE: August 8, 2022
DEDICATION AND PARK IMPACT
ORDINANCE
Approved Date
RECOMMENDATION
Accept the report from the Department of Parks, Recreation and Neighborhoods Services (Department) efforts to complete a development impact Fee Study related to the City’s Parkland Dedication (PDO) and Park Impact (PIO) ordinances (San José Municipal Code Chapters 19.38 and 14.25).
OUTCOME
This memorandum provides an informational update on a Fee Study currently being conducted by the Department. Acceptance of this report does not result in any direct action associated with the Fee Study or this memorandum.
EXECUTIVE SUMMARY
The Department is in the process of studying potential changes to the development impact fee program that supports creating City owned parks, trails, and community centers. This memorandum provides a status report regarding work done to date to comprehensively analyze the Department’s “park” impact fee in response to direction received from the City Council,1 direction from the Community and Economic Development Committee,2 and the City’s efforts to create a Development Fee Framework3. A completed Fee Study and associated staff report is expected to be available for review this winter.
1 May 23, 2022, Housing Crisis Work Plan Prioritized Items Status Report https://sanjose.legistar.com/View.ashx?M=F&ID=10895133&GUID=CA3F22E5-BE82-4DE5-A739-8E0B8DAEB030 and March 2, 2021, Parkland Fee Credits for Deed Restricted Moderate-Income Housing Units:
https://sanjose.legistar.com/View.ashx?M=M&ID=844349&GUID=EB2DF900-3FF3-4AED-A17F-8837CE40E9C8. 2 February 22, 2021, Fee Study Work Plan: Parkland Dedication and Park Impact Ordinance. https://sanjose.legistar.com/View.ashx?M=M&ID=832137&GUID=E6ADFF8C-E657-49C8-94AE-067558AD4997, and February 28, 2022, Fee Study Work Plan: Parkland Dedication and Park Impact Ordinance:
https://sanjose.legistar.com/View.ashx?M=F&ID=10539619&GUID=CCAF1A41-3D5B-4F86-A480-E60B07F27791 3 June 27, 2022, Development Fee Framework Status Report, Community and Economic Development Committee:
https://sanjose.legistar.com/View.ashx?M=F&ID=10993987&GUID=928477B8-62C7-45CB-8AB6-61609FCC288D 8/11/22
CED AGENDA: 8/22/22
FILE: CC 22-191
ITEM: d(3)
COMMUNITY AND ECONOMIC DEVELOPMENT COMMITTEE
August 8, 2022
Subject: PDO/PIO Fee Study
2 BACKGROUND
Residential projects in San José are required to satisfy a parkland obligation under the PDO and PIO that is equivalent to providing three acres of land for every 1,000 new residents added to the community as a result of the development. Residential projects can comply with this obligation by:
• Dedicating land to the City of San José, or
• Paying a development park impact in-lieu fee, or
• Designing and constructing improvements to existing or new parks, trails, and community centers, or
• Completing a combination of the above.
The Department is studying potential changes to the development impact in-lieu fee program portion of this obligation. This program provides the second highest source of funding that supports the creation, or improvement, of new and existing parks, trails, and community centers.
Department staff hired a consultant, DTA Finance, to complete a Fee Study. The purpose of the Fee Study is to comprehensively analyze how park impact in-lieu fees4 associated with the City’s PDO and PIO 5 are assessed. On February 22, 20216
, and February 28, 20227, the Community
and Economic Development Committee accepted a work plan and status report from Department staff related to steps needed to complete this study8
. The completed Fee Study and associated
staff report are expected be provided to this Committee this winter.
To date the Fee Study has evaluated:
• A formula to appropriately size the impact fee to maintain the City’s levels of service for existing and future residents through the year 2040;
• The cost to design and construct new parks, trails, and community centers; and • Changing the ways land values are mapped and assessed to estimate the cost to buy one acre of land.
Staff is also considering changes to a credit program that can reduce the amount of the fee to be paid. The Department received Council and Committee direction to study the potential for a “parkland” commercial fee. This work is in progress and will be discussed in future reports. 4 Parkland Fee Schedule, Resolution No.: https://records.sanjoseca.gov/Resolutions/78474.pdf 5 Chapter 19.38- Parkland Dedication and Chapter14.25 Park Impact ordinances:
https://library.municode.com/ca/san_jose/codes/code_of_ordinances 6 Item 4. February 22, 2021, Community and Economic Development Committee agenda:
https://sanjose.legistar.com/View.ashx?M=A&ID=832137&GUID=E6ADFF8C-E657-49C8-94AE-067558AD4997 7 Item (d) 2 February 28, 2022, Community and Economic Development Committee agenda:
https://sanjose.legistar.com/View.ashx?M=A&ID=921798&GUID=F9113323-413A-4EC9-8A47-0BFD09AB93DD 8 Fees that Support Parkland Development City webpage: https://www.sanjoseca.gov/yourgovernment/departments-offices/parks-recreation-neighborhood-services/general-information/parkland-dedicationand-park-impact-ordinance
COMMUNITY AND ECONOMIC DEVELOPMENT COMMITTEE
August 8, 2022
Subject: PDO/PIO Fee Study
3 The Department has not adjusted the “parks” development impact fee for residential projects since 2017 due to economic conditions related to the cost of building new housing and due to housing construction slowing down during COVID-19 restrictions. The outcome of the Fee Study will inform a future staff recommendation for the City Council to consider raising the fees to meet the current cost to buy, design and build new public parks.
Each of these topics are analyzed below. The results of this initial analysis are preliminary in nature and do not reflect a staff recommendation. All numbers shown are not final and are anticipated to change as data sets are finalized. The purpose of sharing this information is to be transparent, informative, and to receive input to inform the study.
ANALYSIS
Maintaining Level of Service
New State law (AB 602 effective January 1, 2022) require fee studies to evaluate existing levels of service provision and to describe what is needed to maintain those levels of service to legally justify setting fee rates.
Per DTA Finance in coordination with data provided by staff, the City’s current park system provides every 1,000 people with:
• 3.12 acres of neighborhood, community, and regional parkland o This does not include any publicly accessible school lands, golf courses, and regional open space lands owned and operated by other agencies because they are facilities that are not owned and operated by the City and/or are generally not 100% publicly accessible.
• 0.06 miles of trails (approximately 63 miles total)
• 546 square feet of community center space
To account for population growth and to ensure existing and future residents receive this same level of service in 2040, the City needs to provide for every 1,000 people, an additional:
• 893 developed acres of parkland (or approximately 50 acres of land per year) • 17 miles of trail, and
• 156,075 square feet of Community Center space
Cost to Construct a One Acre Park
Staff evaluated 11 planned or constructed park projects and is actively working on expanding this analysis to ensure costs align with real world conditions (Attachment 1, Estimated Cost to Construct a Park). Construction costs to build a park range between under $1 million dollars to $6.1 million dollars per acre, depending on whether a park is designed as a traditional suburban park or an urban park. Generally, smaller more urban parks cost more to build per acre than larger parks with expansive turf areas due to high costs for hardscaped areas (i.e., plazas, seating
COMMUNITY AND ECONOMIC DEVELOPMENT COMMITTEE
August 8, 2022
Subject: PDO/PIO Fee Study
4 areas, etc.). This does not include the cost to buy the land, or the costs related to designing the park, or City staff time to review and oversee construction. Staff is actively expanding this research and analysis. Once additional research is completed, the potential fee structure will be updated.
Land Valuation and Cost to Buy One Acre of Land
The cost to buy land varies across the city, depending on location. Current costs to buy land were determined by real estate software (CoStar) to evaluate data of actual sales of vacant land (not estimated values) of undeveloped land parcels throughout San José. The average cost to purchase one-acre of land ranges from $1.15 million in Edenvale to $8.25 million downtown. Table 1 below shows the range of prices for areas in San José as of June 2022. This is an early analysis and values have already changed. Current market conditions will be accounted for in a final Fee Study and prior to any staff recommendations.
Table 1. Estimated Land Values* to Purchase One Acre of Vacant Land ** as of June 2022 Table 1. Estimated Land Values* to Purchase
One Acre of Vacant Land ** as of June 2022
Almaden $1,259,599
Alum Rock $2,210,117
Alviso $2,220,359
Berryessa $2,054,601
Cambrian-Pioneer $2,568,837
Central $8,253,010
Edenvale $1,150,106
Evergreen $1,612,926
North $2,107,554
South $2,663,921
West Valley $4,368,423
Willow Glen $5,602,795
*Source: DTA Finance draft Memoranda dated October 6, 2021, updated May, and June 2022
**Table 1. Estimated Land Values to Purchase One Acre of Vacant Land shows the range of vacant land values set by using the geographic boundaries set by the Development Fee Framework Map 9. Data from land sales that occurred within these areas during the last five years (2017 – 2022) was collected and analyzed to calculate these price points.
9 City of San José Inclusionary Housing Programs: https://www.sanjoseca.gov/yourgovernment/departments/housing/developers/inclusionary-ordinance-housing-impact-fee
COMMUNITY AND ECONOMIC DEVELOPMENT COMMITTEE
August 8, 2022
Subject: PDO/PIO Fee Study
5 Citywide Average Cost to Buy Land
Vacant land inventories throughout the City were also considered to create a citywide average cost estimate. It costs approximately $4,562,881 to buy one acre of vacant land when all lands are considered.
Calculating Fees
Fees are calculated by determining the amount of land needed, based on the standard of providing three acres per 1,000 residents (now and in the future), and then multiplying this acreage by the cost to buy and develop the land. The cost to buy land is informed by geography.
The cost to design and build is then added into the equation.
Existing Methodology to Assess Land Values and Possible Fee Rates The Department currently uses real estate Multiple Listing Service10 districts to set land values and calculate the fees. The Department seeks to create a new methodology to assess land values based on more modern practices. For comparison purposes, Map 1 shows the Multiple Listing districts in San José. This is map is used to assess the cost to purchase land in each service district area. Table 2 (below) shows the City’s current parkland in-lieu fee schedule for each Multiple Service Level district and the fee for the most common housing types. It’s important to highlight that the fees shown in Table 2 are reflective of 2017 land costs (since the Department has not adjusted the land values or fee amounts since then). Also, the current program does not account for the cost to design and build new parks. It only accounts for what it costs to buy land using 2017 land value estimates.
10 https://www.nar.realtor/nar-doj-settlement/multiple-listing-service-mls-what-is-it
COMMUNITY AND ECONOMIC DEVELOPMENT COMMITTEE
August 8, 2022
Subject: PDO/PIO Fee Study
6 Map 1. San José’s Multiple Listing districts
Table 2. Existing Parkland In-Lieu Fees for Single Family, Multi-Family, and High-Rise Residential Units
MLS
Zone Area Covered
Cost per
Square
Foot
Primary Housing Types and Fees per
Unit1
Single-Family Multi-Family
(5+ Units) Highrise
1 & 2 Santa Teresa $ 34.00 $ 14,700 $ 10,400
3 Evergreen $ 43.00 $ 18,600 $ 13,100
4 Alum Rock $ 30.00 $ 13,000 $ 9,200
5 & 6 Berryessa $ 45.00 $ 19,500 $ 13,800
7A Alviso (North of 237) $ 26.00 $ 11,200 $ 8,000
7B North San José (South of
237)
$ 136.00 $ 58,800 $ 41,600
8 Santa Clara $ 37.00 $ 16,000 $ 11,300
9 Downtown $ 74.00 $ 32,000 $ 22,600 $ 14,600
10 Willow Glen $ 68.00 $ 29,400 $ 20,800
11 South San José $ 30.00 $ 13,000 $ 9,200
12 Blossom Valley $ 34.00 $ 14,700 $ 10,400
COMMUNITY AND ECONOMIC DEVELOPMENT COMMITTEE
August 8, 2022
Subject: PDO/PIO Fee Study
7 13 Almaden Valley $ 40.00 $ 17,300 $ 12,200
14 & 16 Cambrian $ 35.00 $ 15,100 $ 10,700
15 Campbell $ 65.00 $ 27,300 $ 19,300
17 & 18 Cupertino $ 63.00 $ 27,300 $ 19,300
Proposed New Methodologies to Assess Land Values
Staff is considering two new geographic (mapping) approaches to establish land values that form the base of the fee: 1) a citywide fee; and, 2) a fee set by the geographic areas used to create the City’s Development Fee Framework map.
Map 2. Citywide Fee Scenario (below) shows what the per unit fee could be for any residential development anywhere in the city. This fee would be calculated by adding all vacant land values across the city, and then dividing by the number of these properties to get a per-unit cost to purchase. Costs to improve the land are then added to that number.
Map 3. Development Fee Framework Map Fee Scenario shows the range of vacant land values using the geographic boundaries set by the City’s Development Fee Framework map11. This is the same map the Housing Department uses to calculate Inclusionary Housing fees. This map identifies different housing markets and identifies communities within the City. Vacant land values in each area were analyzed to determine the price point for those areas.
The numbers shown on the maps are not proposed fees. The scenarios simply show what the fees could be if the cost to buy land and the cost to design and build something on the land are considered at today’s prices. Since the department has not regularly adjusted the fees to match the price to buy land since 2017, the potential per unit cost increase is significant. The fees shown on both maps are the cost per unit. These will eventually be converted to a per square foot rate to align with the Development Fee Framework. Note that the Citywide Fee Scenario average (Map 2) is $63,579 per unit and the City Development Fee Framework Fee Scenario (Map 3) produces a range from a low of $37,176 per unit (in Edenvale), to a high of $92,128 per unit (Central San José/Downtown). This averages to $51,534 per unit. 11 Community and Economic Development Committee, February 21, 2021, Item (d)3: View.ashx (legistar.com)
COMMUNITY AND ECONOMIC DEVELOPMENT COMMITTEE
August 8, 2022
Subject: PDO/PIO Fee Study
8 Map 2. Citywide Fee Scenario (cost per unit)
Map 3. Development Fee Framework Map Fee Scenario (cost per unit)
COMMUNITY AND ECONOMIC DEVELOPMENT COMMITTEE
August 8, 2022
Subject: PDO/PIO Fee Study
9 Modernizing the Credit Program
Housing developers can apply for credits that may lower the fee. These credits can be combined which can potentially lower the fee as much as 50% - 75% of the gross parkland obligation.
Generally, most projects receive 20% - 30% in private recreation credits (described below).
Often this is combined with affordable housing credits, which are 50% off each low income and some moderate-income affordable units and can further lower the fees for the entire development by an additional 15% - 50% (depending on the number of qualifying units). Table 3 lists the types of available credits, the amount of credit allowed to be applied, and the general frequency with which the credit is given.
Table 3. Credits that Lower “Park” Fees
Types of Credit Potential Amount
of Credit
Frequency with
which the Credit is
Generally Given
Existing Housing Units – this refers
to housing that sits on development
site before any design or construction
begins.
Credit is given per
housing type. For
example, if there is a
single-family house
on the site, credit is
given for that
housing type.
Rare. Most new
development does not
occur on sites with
existing residential
units.
Low and some Moderate-Income
Affordable Housing Units
“Lower income households” are
households whose incomes are
between 0% - 80% of the Average
Median Income (AMI). “Moderate
income housing” is defined as
households/families that earn
between 80% - 120% of the AMI.
All qualifying low-income housing
receive this credit. Moderate income
housing units that are provided to
meet Housing policies receive this
credit.
50% discount per
qualifying unit
Common. Many
projects include some
affordable housing
units.
Recreational Stormwater Facilities
are large physical site features
designed to manage and clean
stormwater [rainwater]. To get
credit, a stormwater feature must
allow recreational uses.
Land value based on
square footage
Very rare. Generally,
stormwater treatment
facilities are not
designed to allow
recreational activity.
COMMUNITY AND ECONOMIC DEVELOPMENT COMMITTEE
August 8, 2022
Subject: PDO/PIO Fee Study
10 Private Recreation Amenities are
onsite privately owned and
maintained amenities that provide a
recreational benefit. The majority of
these are interior and for the use of
the residents. Examples include
pools, spas, fitness areas, picnic
areas, etc.
Two features can be public: a plaza
or a garden. Credit given is
dependent on the public being able
to access these features.
Up to 50% of the
gross obligation
Very common. Most
projects receive
between 20% - 30%
in credits by including
amenities for
residents.
Changes to Private Recreation Credits
Credits for existing housing units, affordable housing credits, and recreational stormwater facilities are intended to remain as listed above. Department staff is studying changes to the Private Recreation Amenities program.
Private Recreation Amenities are privately owned and maintained on site features that are intended to have “park-like” or “community center-like” benefits. In other words, credit is provided for these amenities because they generally provide an experience like that of being in a park or community center. Most qualifying amenities are for the sole use of residents, not the public, with the exception of a public plaza or garden. Housing developers can receive up to 50% off the total fee obligation by providing these features.
Staff is considering eliminating credits for interior amenities that are not available to the public.
In other words, the fee would not be discounted for private swimming pools, interior picnic areas, and gym rooms etc. This would increase the amount of fees due; however, staff is also studying the feasibility offering up to 50% in fee credits for providing Privately Owned Park Space (POPS),
12 as an alternative.
A POPS is a privately owned and maintained space that is legally required to be accessible to the public. Examples of recreational features that could be included in this space are bocce ball courts, gaming tables, or outdoor fitness equipment. To further incentivize including these spaces as part of a new housing project, credit could also be provided for the cost of construction. This addition would encourage high quality design and materials and good programming.
Credit could be provided on per square foot basis if a minimum of two public recreational features are provided at the street level. Credit for a POPS could be capped at 50% of the fee.
Credits could be combined with other credits (like affordable housing credits) thereby potentially 12 These are sometimes referred to as Privately Owned Public Open Spaces (POPOS).
COMMUNITY AND ECONOMIC DEVELOPMENT COMMITTEE
August 8, 2022
Subject: PDO/PIO Fee Study
11 lowering the fee due to the City no more than 75% which is consistent with the current credit program.
“Parks” Commercial Impact Fee
The current program only requires residential projects to comply with the PDO/PIO. Staff received direction from the City Council and this Committee to evaluate the feasibility of charging new commercial development a similar park impact fee. This work is currently in progress. Details about this will be shared in later reports.
Feasibility Study
Once a final draft Fee Study is complete, the potential impact fees will be further analyzed with a supplemental Feasibility Study to understand how the proposed fee might affect the cost to build future residential housing projects within current market conditions. The results of the Feasibility Study will be reported on later this year.
CONCLUSION
Staff continues to work on the Fee Study by way of staff and consultant analysis, as well as engaging a community-based Task Force for input. Additional information about the Task Force is in the Public Outreach section of this memo below. Feedback generated by this community working group and additional data analysis will inform final staff recommendations in the report expected to be shared later this winter.
EVALUATION AND FOLLOW-UP
Staff will present a report to the Community and Economic Development Committee in late 2022. A final recommendation to City Council is expected to take place in spring 2023.
CLIMATE SMART SAN JOSÉ
The recommendation in this memo has no effect on Climate Smart San José energy, water, or mobility goals.
COMMUNITY AND ECONOMIC DEVELOPMENT COMMITTEE
August 8, 2022
Subject: PDO/PIO Fee Study
12 PUBLIC OUTREACH
Information is posted on the Department’s Fee Study13 and Task Force14 webpages. Staff holds monthly meetings with a 15-member Task Force. Members were appointed by their Council member to represent their Council District. Additionally, community volunteers from the City’s Developers Roundtable group, Affordable Housing Developers, and Affordable Housing Advocacy groups represent:
• Low and Mid Density Market Rate Residential Development; • High Density and High-Rise Residential Market Rate Development; • Commercial Development;
• Affordable Housing Development; and
• Affordable Housing Advocacy.
Information shared in this report has been shared with the Task Force and presented to the community during a public meeting webinar on May 19, 2022. Additionally, the Department held an initial public webinar on August 26, 2021, and presented the work plan and information during public meetings with the Parks and Recreation Commission (April 7, 2021, and March 2, 2021); the Neighborhoods Commission (January 12, 2022), the Youth Commission (October 25, 2021, the Senior Commission (October 14, 2021), and the Developers Roundtable (August 20, 2021).
All public meetings (except the Developers Roundtable) have been recorded and can be viewed on the City’s Fee Study webpage https://www.sanjoseca.gov/your-government/departmentsoffices/parks-recreation-neighborhood-services/general-information/parkland-dedication-andpark-impact-ordinance. Additionally, written public comments can also be read on this webpage.
COORDINATION
This memo was coordinated with the City Attorney’s Office, the Office of Economic Development and Cultural Affairs (Housing Catalyst), and the Housing Department. 13 Fee Study Webpage: https://www.sanjoseca.gov/your-government/departments-offices/parks-recreationneighborhood-services/general-information/parkland-dedication-and-park-impact-ordinance 14 Task Force Meetings webpage: https://www.sanjoseca.gov/your-government/departments-offices/parksrecreation-neighborhood-services/in-the-works/parkland-dedication-and-park-impact-ordinance-fee-study/taskforce-meetings-agendas-videos-and-minutes
COMMUNITY AND ECONOMIC DEVELOPMENT COMMITTEE
August 8, 2022
Subject: PDO/PIO Fee Study
13 CEQA
Not a Project, File No. PP17-009, Staff Reports, assessments, Annual Reports, and Informational Memos that involve no approvals of any City action.
/s/
JON CICIRELLI
Director of Parks, Recreation
and Neighborhood Services
The principal author of this memorandum is Rebekah Ross, Planner IV. For questions, please contact Rebekah Ross, Planner IV by email at: [email protected].
Attachment:
Attachment 1. Cost to Construct a Park
Attachment 1. Estimated Costs to Construct a Park (based on 2018 – 2022 estimations) Hard Costs are items that are directly associated with construction (i.e., transportation, construction materials, planting materials, infrastructure, etc.).
Soft Costs are expenses related to materials and labor needed to design and administratively support a construction project (i.e., labor, insurance, architectural and engineering fees etc.)