Development
Impact Fees
Finance Committee
May 28, 2025
Overview
01 02 03
04 05 06
Background &
Approach Fee Categories
Market
Feasibility
Methodology
Recommendations Considerations &
Examples
2 Background &
Approach
3 Background
& Approach • Mitigation Fee Act: nexus between
development impacts & fees
• Recent legislation (e.g., AB 602):
square footage & service levelsbased fees
• Consultant: NBS
Defensible Fees
• Comprehensively review
development impact fees (DIF)
• Evaluate opportunities to fund
key infrastructure & facilities
that support future growth
while ensuring market feasibility
for development
Market Feasibility
Maximize Revenue Facilitate Development
• Financial Impact: development
feasibility by product type
• Market Conditions: assess today’s
market & compare to similar cities
• Consultant: Bay Area Economics
• Fund Infrastructure: necessary to
serve new development
• Evaluate New Fees: consider
planned capital needs
• Constraints: Lessen or remove
governmental constraints to new
development per adopted 2023-
2031 Housing Element
4 Fee Categories
5 Fee Categories
Park Development Fees
Park Land Acquisition
Park Improvement
Quimby Act in-lieu (new)
DFSI* (Streets & Signals)
Interchange Fees
Utility Undergrounding
*Pending Plan Updates
Community & Recreation Centers
Library Facilities & Materials
Fire Protection Facilities
Police Facilities
General Government Facilities
RE-EVALUATED EVALUATED NOT RE-EVALUATED
6 Methodology
7 Nexus / Justification:
• Impact fees can only fund facilities necessary to serve new development • Impact fees must be proportional to the impact created by a development project Methodology
Development Impact Cost Allocation Approach:
• Cost of planned facilities divided by projected demand from new development • Evaluated fees based on maintaining existing level of service, ensuring infrastructure expansion aligns proportionately with development demands • Fees calculated so new development pay its fair share of an integrated system of facilities
8 Feasibility Analysis
• Analyzed 10 development prototypes
• Assessed development feasibility in current market conditions • Utilized pro forma models to project development costs, income, & net residual land values for different prototypes
• Residual land value — projected value after covering all development costs Market Feasibility
Development Types
• Non-Residential: Office, retail, hotel, industrial/warehouse, & medical clinic • Residential: Multifamily rentals, senior living, for-sale townhomes, accessory dwelling units (ADUs), & 100% affordable multifamily rental units 9 Market Feasibility
10 Residential
• For-Sale Townhomes: Feasible under favorable conditions • Market-Rate Multifamily Rentals: Feasibility challenges due to high development costs, stagnant rental rates, & rising financing costs
• Affordable Multifamily Rentals: Strong feasibility challenges with or without impact fees due to significant financing gaps typical in affordable housing Market Feasibility
• Office, Retail, Hotel, & Medical Office Developments: face financial feasibility challenges in current market even with no City impact fees or fee increase • Industrial developments: marginally feasible in current market New development may still occur if lower-than-typical land or construction costs (e.g. non-residential development projects with identified tenants) 11 Residential Fee Caps: Limit residential fees to 7–10% of total development costs to remain competitive with regional markets • Current development fees (impact, user, regulatory) range from ~8-11% of total development costs
• Evaluated residential impact fees could add approximately 3–4.9% to total development costs for evaluated
prototypes, which could impact development feasibility
Market Feasibility - Recommendation
12 Considerations
13 Development Trends
14 0
50 100
150
200
250
300
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Units Constructed
2015-2025
Very-Low Income Low-Income Moderate Income Above Moderate Income Centro Callan
Park In-Lieu Fee Revenue Trends
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 2025
Park In-Lieu Fee Revenue
FY15 – FY25
Centro Callan
15 Benefits of Residential Development
On e -Time
Re ve n ue Th rough
Pe rmit s & DIF
Dive rs e
Hous in g
Ch oic e s
Mult iplie r
Effe ct
Inc re a s e d
Property
Ta xe s
Considerations
16 High impact fees reduce development feasibility
Reduced development = fewer fees/revenue
Considerations
Cannot accurately
predict level of new
development or
Impact Fee revenue
Impact Fees only for new
facilities or major capital
projects – not ongoing
maintenance
One- time, highly
regulated revenue
vs.
ongoing revenue from
new development
17 Examples
Maple Lane Development (former Manor Bowl)
o 39 Units
o Property Tax: +$65,489/year ongoing
Centro Callan Development (former CVS)
o 197 Units
o Property Tax: +$38,288/year ongoing
18 Recommendations
19 Re
-evaluate fees as market conditions change
• Balance infrastructure funding with market feasibility • Revise Park Facilities Impact Fee • Market conditions not supportive of new DIFs • Prioritize improvements to existing parks (75%) vs. acquiring new land (25%)
• Consider new Public Art Program • Create new Fee Waiver Program • Affordable Housing • ADUs Recommendations
20 Current and Proposed Park Fees
Unit Size Park Land
Acquisition
Park
Improvements Total
<550 sf 1,513 4,539 6,052
550-750 sf 1,891 5,674 7,565
751 - 1,150 sf 2,900 8,700 11,600
1,151-1,650 sf 4,035 12,105 16,140
1,651-1,950 sf 5,170 15,509 20,679
>1,950 sf 6,431 19,292 25,723
Unit Type Park Land
Acquisition
Park
Improvements Total
Single-Family 17,670 3,009 20,679
Multi-Family 15,444 2,630 18,074
Special Unit 7,723 1,315 9,038
ADU > 750 sf 6,693 1,140 7,833
Current Proposed
21 Sample Project Comparison
0 1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
497-Unit MF
Avg Unit 462 sf
197-Unit MF
Avg Unit 652 sf
180-Unit MF
Avg Unit 943 sf
39-Unit MF
Avg Unit 1,913 sf
18-Unit SF
Avg Unit 2,065 sf
Current Fee Proposed Fee Alameda Hayward Dublin
22 Sample Project Comparison
Type Avg sf /
Unit Units Current Fee Proposed Fee Variance Alameda Hayward Dublin MF 943 180 3,253,320 2,401,790 (851,530) 1,271,340 1,447,178 2,697,677 SF 2,065 18 372,222 463,008 90,786 174,024 472,086 590,631 MF 462 497 8,982,778 2,602,528 (6,380,250) 3,510,311 2,195,155 3,528,247 MF 1,913 39 704,886 942,660 237,774 275,457 934,389 1,185,362 MF 652 197 3,560,578 1,600,857 (1,959,721) 1,391,411 1,307,800 2,039,450 23 Program details would be developed after receiving Council direction • Public Art Master Plan calls for
establishing an art obligation
for private development
projects
• Opportunity to establish a new
art requirement without
negatively affecting
development feasibility
Public Art Program
Art In Lieu Fee
Public Art Program could include optional
in-lieu fee that could be used to fund art in
public locations
Requirement set as a
percent of construction
value – typically 1%
24 Fee Waiver
Program
01 02
03 04
50-100% park impact fee waivers reductions for qualified development types of and 100% waivers for Traffic Impacts Hayward
100% waivers of affordable housing fee, transportation
development fee, and waivers on a case-by-case basis
Ple a s a nt on
Up to 100% waiver on all fees where projects are at or below 80% of area median income, with a 55-year restriction
San Ramon
Tiered waiver reductions for qualified development types of park impact fees and fee reductions of Traffic Impact Fees varying on location
Re dwood Cit y
05 100% waivers on certain taxes, 50% reduction on the Park Impact Fee
San J ose
• Feasibility Challenges: Substantial
financing gaps for affordable housing in
current market, even without impact fees.
• Recommendations: BAE recommends
exploring impact fee waiver program for
affordable housing, which could help
reduce financing gaps and make projects
more feasible.
25 • Current Fees:
• Multi-Unit: $18,074 / unit
• Single-Unit Fee: $20,679 / unit
• Proposed Fee Waiver:
• Non-Profit Affordable Development: 100% of Park Impact Fees • For-Profit Affordable Development or Inclusionary Units: 50% of Park Impact Fees
Proposed Fee Waiver Program
Accessory Dwelling Units (ADUs)
• Current Fees
• <750 sf: No Fees per State Law
• >750 sf: Fees proportional to main unit
• Proposed Fee Waiver: 100% of Park Impact Fees and DFSI (Streets & Signals) Affordable Housing Developments
26 Staff is seeking Finance Committee feedback on the proposal to proceed with:
Commit t e e Input
Updated Park Development
Impact Fees Public Art Program Fee Waiver Program
27