Item E-2 San Marcos - In-Lieu Fee Study - FINAL REPORT_05-24-2024 — San Marcos City Council, November 26, 2024

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

Prepared for:

City of San Marcos

Prepared by:

Keyser Marston Associates, Inc.

January 2024

TABLE OF CONTENTS

EXECUTIVE SUMMARY

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

I. Introduction ....................................................................................................................................... 4

II. In-Lieu Fee Financial Analysis ............................................................................................................ 7

III. Potential Fee Level Adjustments ..................................................................................................... 17

IV. Survey of San Diego County Jurisdictions ........................................................................................ 19

V. Limiting Conditions .......................................................................................................................... 21

APPENDICES

Appendix A Summary of Potential In-Lieu Fees

Appendix B Estimate of Affordable Sales Prices and Rents

Appendix C In-Lieu Fee Financial Analysis – For-Sale
Approach 1: On-Site Production

Appendix D In-Lieu Fee Financial Analysis – Rental
Approach 1: On-Site Production

Appendix E In-Lieu Fee Financial Analysis
Approach 2: Off-Site Production

Appendix F Comparison of Affordable Housing Fees, San Diego County

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EXECUTIVE SUMMARY

OVERVIEW

The City of San Marcos (City) is considering a review of the methodology and approach used to determine the City’s inclusionary housing in-lieu fee. In 2000, the City adopted a Citywide Inclusionary Housing Ordinance (Ordinance) in an effort to meet current and anticipated demand for affordable housing in the City. The Ordinance required that fifteen percent of all new residential developments be reserved for lower- to moderate-income households. In response to the Palmer/Sixth Street Properties LP v. City of Los Angeles case, the City amended its inclusionary housing requirements to exempt the construction of new residential projects from the San Marcos Municipal Code (SMMC) Section 20.310.030(f), unless the developer received financial assistance from the City.

Under the City’s current inclusionary housing ordinance, the City may allow for-sale residential developments to pay an in-lieu fee to meet the requirements of the Ordinance. However, the City’s Municipal Code currently provides that an exemption may be available for certain residential development projects, which has prompted the City to amend the Inclusionary Housing Ordinance to remove the exemption for the construction of new residential rental development projects so that SMMC Chapter

20.310 applies to all residential projects. The Municipal Code and Ordinance revisions led to the review of the City's In-Lieu Fee calculation in order to align with industry standards and regional best practices.

The City engaged Keyser Marston Associates, Inc. (KMA) to prepare an Inclusionary Housing In-Lieu Fee Study (Study) to evaluate the potential of updating the inclusionary housing in-lieu fee for the City. As part of this effort, KMA reviewed the current in-lieu fee and impact fee levels charged in local jurisdictions and evaluated a range of approaches to determine appropriate housing in-lieu fee levels for the City. The KMA analysis was substantially completed in Fall 2023 and is based on trends, statistics, and market information available at that time. If adopted by the City Council, the updated fee would then be applied to both for-sale and rental residential developments.

RESIDENTIAL DEVELOPMENT PROTOTYPES

The Study identified five (5) residential prototypes reflective of the types of development projects occurring or anticipated to occur in the City including:

• For-sale single-family detached – Very Low Density
• For-sale single-family detached – Low Density
• Townhomes – Low Medium Density
• Garden apartments with attached garages – Medium High Density Keyser Marston Associates, Inc. Page 2
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• Mixed-use apartments over podium and subterranean parking – Mixed Use 2

For each residential prototype, KMA prepared base case financial pro forma models assuming: (i) 100% of all units are purchased or rented at market prices or rents; and (ii) a potential inclusionary housing set- aside at 5% low income and 10% moderate income.

APPROACH TO IN-LIEU FEE FINANCIAL ANALYSIS

KMA used two approaches to determine possible fee levels: (1) the economic impact on the developer to provide affordable housing on-site; and (2) the funding level required for the City to develop affordable housing in an off-site location.

• Approach 1 – Economic Impact of Including Units On-Site – This approach uses a financial analysis to estimate fee levels that are approximately equivalent to the economic impact to market-rate developments of incorporating inclusionary units on-site.

• Approach #2 – Off-Site Affordability Gap – This approach determines how much the City would need to receive from a market-rate residential developer in order to produce affordable rental housing in an off-site location.

POTENTIAL FEE LEVELS

As presented in Table 1, based on the findings from the two approaches noted above, the City may wish to consider an in-lieu fee in the range of $20,000 to $30,000 per market-rate unit, or between $20.00 and $30.00 per square foot (SF) of market-rate residential living area.

Table 1: Potential Fee Levels
Per Market-Rate Unit $20,000 to $30,000
Per Market-Rate Net SF $20.00 to $30.00

The potential fee levels are expressed on both a per-unit and per-SF basis. A per-SF in-lieu fee, as compared to a flat fee approach, recognizes the various residential unit sizes produced and avoids overly burdening the production of small market-rate units.

In order to mitigate affordable housing impacts -- and fund affordable housing -- over a long term and respond to economic cycles, the City should consider a potential annual escalator that could be used to Keyser Marston Associates, Inc. Page 3
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adjust fee levels over time, such as the Construction Cost Index (CCI) published by the Engineering News- Record (ENR).

POTENTIAL FEE LEVELS IN COMPARISON TO OTHER SAN DIEGO COUNTY JURISDICTIONS

KMA surveyed inclusionary in-lieu fees and affordable housing impact fees in 11 other San Diego County jurisdictions. The survey is summarized in Table 2 in comparison with the potential fee levels for the City.

Table 2: Comparison of Affordable Housing Fees, San Marcos vs. San Diego County Jurisdictions City of San Marcos San Diego County Jurisdictions
(range of findings)
Inclusionary Housing Required
Threshold 1 unit 1 unit - 50 units
% of Affordable Units Required 15% 10% - 20%
In-Lieu Fee Option Available
Available to:
• For-sale single-family units
of one (1) or more units
• Condominiums or
condominium/cooperative
conversions
• Rental developments with
six (6) units or less
In-lieu fee option is available in all
jurisdictions except for projects
with six (6) or more units in the City
of Del Mar and projects located
within the City of San Diego’s
Future Urbanizing Area (FUA)
In-Lieu Fee Amount
Potential Fee Levels:
$20,000 to $30,000/Unit
$20/SF to $30/SF
$500
$12/SF
to
to
$$15,000/Unit
$34/SF

The City’s required threshold for inclusionary housing, percent of affordable units required, and in-lieu fee option for for-sale developments and rental developments with less than six units fall within the range of inclusionary requirements found in other North County jurisdictions . The potential fee levels for the City ($20,000 to $30,000, or a midpoint of $25,000) would exceed other per-unit fees in the County. On a per SF basis, the recommended per-SF fee for the City ($20 to $30 or a midpoint of $25) falls within the range of other surveyed jurisdictions that charge fees on a per-SF basis, particularly cities in the North County.

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INCLUSIONARY HOUSING IN-LIEU FEE STUDY

I. INTRODUCTION

A. Objective

This report presents the economic analysis prepared by Keyser Marston Associates, Inc. (KMA) for the City of San Marcos (City) to evaluate the update of the City’s inclusionary housing in-lieu fee.

B. City of San Marcos Inclusionary Housing Ordinance

As background, in 2000 a Citywide Inclusionary Housing Ordinance (Ordinance) adopted a mandatory inclusionary housing program in an effort to meet current and anticipated demand for affordable housing in the City.

Current statute and case law support the City’s authority to impose an inclusionary requirement for both rental and for-sale residential development. Enactment of Assembly Bill (AB) 1505, effective January 1, 2018, restored the ability of California jurisdictions to implement inclusionary requirements for rental residential developments. The ability to apply inclusionary requirements to rental residential developments had been suspended since a 2009 appeals court decision in Palmer/Sixth Street Properties L.P. v. City of Los Angeles, 175 Cal. App. 4th 1396 (Palmer).

The ability of local jurisdictions to implement inclusionary policies was previously upheld in a 2015 California Supreme Court decision in the California Building Industry Association v. City of San Jose, 61 Cal. 4th 435 (San Jose). The decision in the San Jose case affirmed inclusionary housing requirements as a valid exercise of local jurisdictions’ authority to regulate land use. Like other land use regulations, inclusionary policies must abide by criteria established through case law on regulatory takings, specifically:

1. Requirements must not be “confiscatory”; and

2. Requirements must not deprive property owners of a fair and reasonable return.

The Ordinance requires that 15% of all new residential developments be reserved for lower- to moderate- income households, as follows:

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For-Sale Single-Family Units
Condominiums or
Condominium/Cooperative
Conversions
Rental Units
• Payment of an in-lieu fee for
for-sale single-family projects
of one (1) or more units; or
• Reservation of new or existing
market-rate units for target
households developed on- or
off-site

• Reservation of at least
15% of units reserved for
target households on- or
off-site; or
• Payment of an in-lieu fee
• Payment of an in-lieu fee for
projects of six (6) or less
units; or
• Reservation of at least 15%
of units reserved for target
households

In recent years, the City has only collected in-lieu fee payments from for-sale residential developments.

The in-lieu fee is administered by the City’s Housing Division and is calculated at the time the fee is to be applied.

The City is currently considering a review of the methodology used to determine the City’s inclusionary housing in-lieu fee. As part of this effort, the City requested that KMA review current in-lieu fee and impact fee levels charged in local jurisdictions, evaluate potential methodologies to determine an appropriate fee, and recommend a preferred methodology and fee levels.

C. Methodology

KMA performed the following key work tasks in completing this analysis.

1. Compiled data pertaining to inclusionary housing in-lieu fees and/or affordable housing impact fees currently being charged by other cities in San Diego County.

2. Reviewed market trends data, land values, development cost estimates, and other industry standards for for-sale and rental residential development.

3. Formulated residential development prototypes in coordination with City staff.

4. Prepared pro forma financial models to estimate the residual land value generated by each residential prototype under two scenarios: (a) at 100% market-rate; and (b) an inclusionary requirement of 5% at low income and 10% at moderate income.

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D. Organization of Report

This report is organized into the following key sections:

• Following this Introduction, Section II presents the financial analysis for an affordable housing inclusionary in-lieu fee.

• Section III reviews potential indices that could be used to adjust the fee in the future.

• Section IV presents a survey of affordable housing in-lieu fees in other San Diego jurisdictions.

• Section V presents limiting conditions pertaining to this report.

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II. IN-LIEU FEE FINANCIAL ANALYSIS

A. Residential Development Prototypes

Table II-1 provides a summary of the residential development prototypes identified for the in-lieu fee financial analysis. The prototypes are illustrative of the types of development projects occurring and anticipated to occur in the City. Three (3) new construction for-sale and two (2) new construction rental residential prototypes were identified based on discussion with City staff. While this level of feasibility analysis is useful for conceptual planning purposes, the actual circumstances for individual projects – physical, planning, market, financial, and other factors – will likely vary from the findings presented in this report.

Table II-1: Project Descriptions for Development

FOR-SALE RENTAL
Single- Family Single-Family Townhomes Garden
Apartments
Mixed-Use
Stacked Flats
Zoning Very Low
Density Low Density Low Medium
Density
Medium High
Density Mixed-Use 2
Site Area (Acres) 10.0 Acres 5.0 Acres 3.0 Acres 2.0 Acres 1.0 Acre Density (Units/Acre) 3.7 5.0 16.0 30.0 45.0
Number of Units 37 Units 25 Units 48 Units 60 Units 45 Units Unit Mix 3-4 Bedrooms 3-4 Bedrooms 2-3 Bedrooms 1-3 Bedrooms 1-2 Bedrooms Stories 2 Stories 2 Stories 2 Stories 3 Stories 4 Stories Average Unit Size 3,203 SF 2,620 SF 1,381 SF 1,015 SF 720 SF Parking Type Attached
Garages
Attached
Garages
Attached
Garages
Attached
Garages
Podium/
Subterranean
Retail SF --- --- --- ---- 10,000 SF

B. Projected Market Sales Prices and Rent

KMA surveyed new for-sale and rental developments in the City and surrounding trade area. The purpose of the survey was to derive currently achievable market prices and rental rates for the types of developments likely to be constructed in the City. The base case market-rate sales prices and monthly rent estimates that are used in the financial feasibility analyses are presented in Table II-2.

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Table II-2: Projected Market Prices and Rents

FOR-SALE RENTAL
Single-Family
Very Low
Density
Single-Family
Low Density Townhomes Garden
Apartments
Mixed-Use
Stacked
Flats
Average $/SF $464 $515 $534 $3.02 $4.83
Average Unit Size 3,203 SF 2,620 SF 1,381 SF 1,015 SF 720 SF Average Market
Price/Monthly
Rent
$1,486,000 $1,348,000 $737,000 $3,070 $3,480

C. Affordable Price and Rent Calculation

For the purposes of this financial analysis, the maximum affordable sales prices and rents for the income- restricted units were calculated based on the standards imposed by California Health and Safety Code (H&SC) Section 50052.5 (ownership) and Section 50053 (rental). The detailed calculations are presented in Appendix B; the key assumptions and results are summarized below.

Affordable Sales Price

• The price restrictions were calculated for three different for-sale residential prototypes (single-family very low density, single-family low density, and townhomes).

• The household income information used in the calculations of affordable rent were based on 2023 income statistics for San Diego County as a whole. The household incomes are published annually by the U.S. Department of Housing and Urban Development (HUD).

• The household size appropriate for each unit was based on one additional household person per bedroom, per H&SC Section 50052.5.

• Maximum monthly ownership housing payments were calculated as equal to 1/12 x 30% x 70% Area Median Income (AMI) for low income households and 1/12 x 35% x 110% AMI for moderate income households, adjusted for household size.

• Housing-related costs reflecting the specifics of each residential prototype and current lending industry underwriting criteria were determined as follows:

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o Utility expenses were based on the County of San Diego utility allowance schedule, effective January 1, 2024, and the assumption that the homeowner’s utility costs are comprised of electric heat, electric cooking, electric water heater, other basic electric services, water and sewer, and trash.

o Homeowner Association (HOA) dues, reflecting an allowance for structure insurance, maintenance, and reserves.

o Property taxes, assuming a typical City tax rate of 1.15% of assessed value.

o CFD Special Tax of $926 per unit reflecting CFD No. 2001-01-San Marcos Fire Protection District; CFD No. 2011-01-Congestion Management; and CFD No. 98-01 Improvement Area No. 1-Police Only.

o Supportable mortgage, assuming a 30-year loan; 4.68% interest rate (the average interest rate for a 30-year loan between 2018 and 2023); and a 10.0% down payment.

Affordable Rent

• The household size appropriate for each unit was based on one additional household person per bedroom, per H&SC Section 50053.

• Maximum monthly rental housing payment for low income units is calculated as equal to 1/12 x 30% x 60% AMI (adjusted for household size), less adjustments for certain tenant-paid utilities.

• Maximum monthly rental housing payment for moderate income units is calculated as equal to 1/12 x 30% x 110% AMI (adjusted for household size), less adjustments for certain tenant-paid utilities.

• Utility expenses were based on the County of San Diego utility allowance schedule, effective January 1, 2024, and the assumption that the tenant’s utility costs are comprised of electric cooking, electric water heating, electric heating, and other basic electric services.

The resulting average affordable sales prices and rents for each of the residential prototypes are presented in Table II-3.

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Table II-3: Affordable Sales Prices and Rents

FOR-SALE RENTAL

Single-Family
Very Low Density
Single-Family
Low Density Townhomes Garden
Apartments
Mixed-Use
Stacked Flats
Affordable Sales Price (1) Affordable Monthly Rent (2)
Low
Income $197,000 $197,000 $194,000 $1,250 $1,250
Moderate
Income $512,000 $508,000 $486,000 $2,569 (3) $2,517 (3) (1) Reflects average affordable sales price (weighted) for two-, three-, and/or four-bedroom units at low and moderate income.
(2) Reflects average affordable rent (weighted) for one-, two-, and/or, three -bedroom units at low and moderate income.
(3) Reflects the lesser of market rent vs. affordable rent.

D. Economic Impact of Potential Fee Levels

The KMA analysis estimates the economic impact of the potential fee levels on project feasibility. The economic impact of the in-lieu fees was measured against residual land value. Residual land value is defined as the maximum land value supported by a proposed development. It is calculated by estimating the total value upon completion (or total available funding sources) and subtracting the estimated total development costs (other than land acquisition costs) required to develop the project.

Specifically, the residual land value for each residential prototype is derived from the following calculation.

Exhibit II-1: Residual Land Value Calculation

E. Approach 1: Economic Impact of Incorporating Affordable Housing On-Site

To estimate the economic impact of incorporating inclusionary housing requirements on-site, KMA prepared financial pro forma models for each residential development prototype. Appendic C provides the detailed pro forma analyses prepared by KMA for each of the for-sale development prototypes.

Appendix C is organized as follows:

Total Value at
Completion
Estimated
Development
Costs
(excluding land)
Residual
Land Value = -
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Appendix C – On-Site Production – For-Sale
Table 1 Prototype Project Descriptions
Table 2 Development Costs
Table 3 Gross Sales Proceeds and Residual Land Value – Single-Family – Very Low Density
Table 4 Gross Sales Proceeds and Residual Land Value – Single-Family – Low Density
Table 5 Gross Sales Proceeds and Residual Land Value – Townhomes

Appendix D provides the detailed pro forma analyses prepared by KMA for each of the rental development prototypes. Appendix D is organized as follows:

Appendix D – On-Site Production – Rental
Table 1 Prototype Project Descriptions
Table 2 Development Costs
Table 3 Net Operating Income – Garden Apartments
Table 4 Net Operating Income – Mixed-Use Stacked Flats
Table 5 Residual Land Value – Garden Apartments
Table 6 Residual Land Value – Mixed-Use Stacked Flats

The financial pro forma models estimate the residual land value for: (1) a base case consisting of a 100% market-rate development; and (2) a development that complies with an inclusionary requirement, i.e., 5% at low income and 10% at moderate income. The base case residual land value outcome can then be measured against the residual land value that is generated when the 5% low/10% moderate income requirement is imposed. The economic impact of incorporating the City’s existing inclusionary requirement on-site is summarized in Table II-4.

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Table II-4: Economic Impact of Incorporating Affordable Housing On-Site FOR-SALE RENTAL Average

Single-
Family
Very Low
Density
Single-
Family
Low Density
Townhomes Garden
Apartments
Mixed-Use
Stacked Flats

Residual Land Value Per Unit
100% Market-Rate $309,000 $257,000 $116,000 $74,000 $31,000 $157,000 85% Market-Rate /
15% Affordable $155,000 $90,000 $74,000 $24,000 ($16,000) $65,000 Economic Impact of Incorporating Affordable Housing On-Site Per Market-Rate
Unit ($154,000) ($167,000) ($42,000) ($50,000) ($47,000) ($92,000) Per Market-Rate
Net SF ($48) ($64) ($30) ($49) ($65) ($51)

As shown in Table II-4, the economic impacts to a developer of including 5% low income and 10% moderate income units on-site are estimated to range from $42,000 to $167,000 per market-rate unit, or $30 to $65 per SF of market-rate residential living area.

F. Approach 2: Funding Level Required to Implement Inclusionary Housing Production in an Off-Site Location

KMA also prepared estimates of the affordability gaps associated with developing affordable housing in an off-site location. The purpose of this financial analysis was to estimate the funding gap that would be required for either a market-rate residential developer or the City to create the targeted inclusionary housing production in a separate off-site location.

Low Income

As detailed in Appendix E, the analysis assumed off-site affordable housing projects affordable to low income households to be rental apartments, in two prototype development scenarios: (i) stacked-flat apartments over podium parking on a 3.0-acre site; and (ii) mixed-use stacked-flat apartments over podium/subterranean parking on a 2.0-acre site. For each off-site affordable housing development prototype, KMA estimated the development costs, operating budget, and anticipated funding sources.

The KMA analysis modeled both affordable housing development prototypes under two financing alternatives, the 9% and 4% Low Income Housing Tax Credit (Tax Credit) programs. The outcome of the analysis indicates that a developer would find it more economically beneficial to pursue 4% Tax Credits Keyser Marston Associates, Inc. Page 13
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when developing an affordable housing project in an off-site location. As such, the following key assumptions were used to estimate a potential in-lieu fee based on implementing inclusionary housing production in an off-site location:

• Affordable housing development prototypes financed with 4% Tax Credits.

• Total development costs for both development prototypes, excluding acquisition, estimated to average $764,000 per unit. The development budget was assumed to include the payment of prevailing wages due to the requirements of other State funding sources assumed in the analysis.

• Acquisition costs of $50,000 per unit based on a survey of residential land sales in the North County trade area.

• Monthly rents at an average of 50% AMI in order to competitively apply for Tax Credits.

The resulting stabilized average annual net operating income generated by the affordable units is shown in Table II-5 (allow for rounding).

Table II-5: Off-Site Affordable Units – Average Net Operating Income per Unit per Year (1) Stacked Flats over
Podium Parking
Mixed-Use
Stacked Flats
Average Monthly Rent, 2023 $1,000 $1,000
Effective Gross Income (2) $12,100 $12,100
(Less) Operating Expenses (3) ($9,200) ($9,200)
Net Operating Income $2,900 $2,900
(1) Reflects net operating income per unit assuming each affordable housing development prototype is financed with 4% Low Income Housing Tax Credits.
(2) Reflects rental income; other income such as laundry and vending; and a vacancy factor of 5.0%. (3) Includes payroll, management fees, administration, utilities, maintenance, insurance, tenant services, property assessments, CFD special taxes, and replacement reserves.

Funding sources available for the affordable units are assumed to include a combination of first mortgage debt, Tax Credit equity investment, State funding sources, and deferred developer fee/General Partner equity contribution. These potential funding sources are itemized in Table II-6.

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Table II-6: Off-Site Affordable Units – Sources of Funds per Unit (1) Stacked Flats over
Podium Parking
Mixed-Use
Stacked Flats
Supportable Permanent Loan $31,000 $68,000
Tax Credit Equity Investment (2) $427,000 $455,000
Other State Funding Sources $100,000 $100,000
Deferred Developer Fee/General Partner Equity $62,000 $68,000 Total Sources of Funds $620,000 $690,000
(1) Reflects sources of funds per unit assuming each affordable housing development prototype is financed with 4% Low Income Housing Tax Credits.
(2) Includes State and Federal tax credit equity investment.

As shown in Table II-7, the affordability gap for a low income affordable unit is estimated to average $159,000 per affordable unit. These figures are calculated as the difference between total development costs, acquisition costs, and total funding sources.

Table II-7: Off-Site Affordable Units – Average Affordability Gap per Unit (1) Stacked Flats over
Podium Parking
Mixed-Use
Stacked Flats Average
Total Sources of Funds $620,000 $690,000 $655,000
(Less) Total Development Costs ($727,000) ($801,000) ($764,000) (Less) Acquisition Costs ($50,000) ($50,000) ($50,000)
Affordability Gap per Affordable Unit ($157,000) ($161,000) ($159,000) (1) Reflects affordability gap per unit assuming each affordable housing development prototype is financed with 4% Low Income Housing Tax Credits.

As shown above, KMA estimates that an affordable rental unit has an estimated average financing gap of $159,000. In other words, for the market-rate developer or City to facilitate creation of off-site low income units, it would need to contribute $159,000 per unit. As shown in Table II-8, assuming a 5% low income inclusionary requirement, the required number of off-site low income units is calculated against the total number of market-rate units approved plus the inclusionary units produced off-site. This equates to $8,000 per market-rate unit developed (i.e., $159,000 ÷ 95% x 5%).

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Table II-8: Estimate of Funding Gap for Off-Site Units - Low Income Affordability Gap per Off-Site Affordable Unit $159,000 Per Market-Rate Unit
$8,000 @ 5% Low Income Inclusionary Set-Aside

Moderate Income

KMA also prepared an estimate of the affordability gap associated with developing moderate income affordable housing in an off-site location. Using the same framework and assumptions described above, KMA estimates the average financing gap required to develop a moderate income unit in an off-site location is $209,000 per affordable rental unit. As shown in Table II-9, this figure is calculated as the affordability gap outcome assuming 100% of units at moderate income plus a land acquisition cost estimate of $50,000 per unit.

Table II-9: Off-Site Affordable Units – Affordability Gap per Unit - Moderate Income Residual Land Value per Affordable Unit ($159,000)
(Less) Land Acquisition Costs ($50,000)
Affordability Gap per Affordable Unit ($209,000)

Assuming a 10% moderate income inclusionary requirement, the required number of off-site moderate income units is calculated against the total number of market-rate units approved plus the inclusionary units produced off-site. As shown in Table II-10, this equates to $22,000 per market-rate unit developed (i.e., $209,000 ÷ 90% x 10%).

Table II-10: Estimate of Funding Gap for Off-Site Units - Moderate Income Affordability Gap per Off-Site Affordable Unit $209,000 Per Market-Rate Unit
$22,000 @ 10% Moderate Income Inclusionary Set-Aside

Funding Gap for Affordable Housing Off-Site

The funding gap outcome for off-site inclusionary housing can be expressed on both a per-unit basis and per-SF basis relative to the market-rate residential development. KMA estimates that the City would need to receive an average in-lieu fee of $30,000 per market-rate unit. On a per SF basis, the City would need to Keyser Marston Associates, Inc. Page 16
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receive a fee ranging between $9 and $42, depending on the market-rate prototype, or an average of $23 per SF living area, as shown in Table II-11.

Table II-11: Funding Level Required to Create Affordable Housing Off-Site

FOR-SALE RENTAL
Average
Single-
Family
Very Low
Density
Single-
Family
Low
Density
Townhomes Garden
Apartments
Mixed-Use
Stacked Flats
Per Market-Rate Unit
Low Income ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) Moderate Income ($22,000) ($22,000) ($22,000) ($22,000) ($22,000) ($22,000) Total Market Rate Unit ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) Per Market-Rate Net SF ($9) ($11) ($22) ($30) ($42) ($23)

G. Potential In-Lieu Fees

As summarized in Table II-12, in view of Approaches 1 and 2 above, the City may wish to consider an in- lieu fee of $20,000 to $30,000 per market-rate unit, or between $20 and $30 per SF of market-rate residential living area.

Table II-12: Potential Fee Levels – 5% Low Income / 10% Moderate Income Approach to Setting Fee Levels Potential
Fee Levels Approach 1:

On-Site Production
Approach 2:

Off-Site Production
Per Market-Rate Unit Average: $92,000 $30,000 $20,000 - $30,000 Per Market-Rate Net SF Average: $51 Average: $23 $20.00 - $30.00

This potential fee range is based on the off-site production approach, rather than the on-site production approach. As shown in the table, the on-site production approach results in a much higher in-lieu fee that could present a feasibility challenge for some market-rate projects. It should be noted that using the off- site production approach as the benchmark results in a per-unit in-lieu fee that is higher than existing per- unit fees found in other areas of the County. On a per-SF basis, the potential fee falls toward the higher end of the range of comparable per-SF fees found in other areas of the County. Refer to Section IV and Appendix F for further detail.

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III. POTENTIAL FEE LEVEL ADJUSTMENTS

Some jurisdictions apply an automatic adjustment to their in-lieu fee on an annual basis. This provision ensures that the fees charged will adjust annually to reflect changes in housing production costs. A review of potential indices that could be used to adjust the fee in the future is presented in Table III-1.

Table III-1: Potential Indices for Fee Level Adjustment Index Concept / Description Advantages Disadvantages
#1

Building Cost
Index (BCI)
Fees go up or down based on
building construction costs.

Published by Engineering News
Record (ENR).

Available at national average and
for 20 cities (not Vista or San
Diego; Los Angeles is nearest city
available).

Very well established.

Consistent fee burden
over time relative to
construction costs.

May not trend with changes
in non-construction
development costs (land,
other soft costs).

May not trend with cost to
produce affordable units.

Only addresses cost side of
the equation.
#2

Construction
Costs Index
(CCI)
Also published by ENR and
similar to Building Cost Index but
with different weighting of labor
and material cost categories.

Same as above.

Same as above.
#3

Consumer Price
Index (CPI)
Published by the U.S. Bureau of
Labor Statistics. Available for
major metro areas including San
Diego.

Very well established.

Generally tracks with
inflation.

Produced by neutral
governmental agency.

May not trend with:

- Construction costs
(consistent fee burden)

- Cost to produce
affordable units
(consistent ability to
mitigate impacts)

As shown in Table III-2, between 2000 and 2023, the average annual growth rate for the various indices ranged between 3.02% and 3.73%. Had the annual growth rates from these indices been applied to the City’s estimated in-lieu fee in 2000 of $4,8751 per market-rate rental unit, the in-lieu fees would have increased to between $9,655 and $11,315 per market-rate rental unit today. These outcomes are lower than the potential fee range of $20,000 to $30,000 per market-rate unit identified in this Study.

1 In-lieu fee estimated for the calendar year 2000, based on the City’s current formula used to establishing the in-lieu fee. Source: Resolution No. 2000-5417.

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Table III-2: Average Annual Growth Rate Applied to 2000 In-Lieu Fee Levels Building Cost
Index (BCI)
Construction Cost
Index (CCI)
Consumer Price
Index (CPI)
Estimated In-Lieu Fee, 2000 (1) $4,875 $4,875 $4,875
Average Annual Growth Rate,
2000-2023 3.73% 3.40% 3.02%
Estimated In-Lieu Fee, 2023 $11,315 $10,524 $9,655
(1) Source: Resolution No. 2000-5417.

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IV. SURVEY OF SAN DIEGO COUNTY JURISDICTIONS

KMA conducted a survey of inclusionary in-lieu fees and affordable housing impact fees in other San Diego County communities. The survey is summarized in Exhibits IV-1 and IV-2, in comparison with potential fee levels for the City of San Marcos on a per-unit and per-SF basis, respectively. Further information on each jurisdiction’s inclusionary program and fee levels is presented in Appendix F. Inclusionary housing programs and in-lieu fees vary widely throughout the County in terms of fee levels and threshold requirements for the payment of in-lieu fees. Key factors for these variations appear to relate to local housing market conditions, real estate development trends, State-mandated affordable housing obligations, and policy direction from public officials.

* Reflects mid-point of range of fee levels recommended in this Study. ** Fee effective January 1, 2024-December 31, 2024. Beginning January 1, 2025, fee will be adjusted annually based on ENR CCI index.

$25.00
20% Low
15% Low or
20% Very Low
15% Low
10% Low
5% Low/
10% Moderate
5% Low/
4% Moderate
Exhibit IV-1: San Marcos Potential Fee Levels vs. San Diego County Jurisdictions – Per Unit

$7,000
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
Coronado Poway San Marcos*
In-Lieu Fee - Per Unit
$500
$25,000
Exhibit IV-2: San Marcos Potential Fee Levels vs. San Diego County Jurisdictions - Per SF

$16.00
$34.00
$20.00 $20.00
$25.00 $26.56
$16.00
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
Carlsbad Del Mar Encinitas Oceanside ** San Diego Solana Beach Vista San Marcos* In-Lieu Fee - Per SF
$25.00
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As shown in the above exhibits, the recommended per-unit fee for the City ($20,000 to $30,000, or a midpoint of $25,000) would exceed other per-unit fees in the County. On a per SF basis, the recommended per-SF fee for the City ($20 to $30 or a midpoint of $25) falls within the range of other surveyed jurisdictions that charge fees on a per-SF basis, particularly North County cities.

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V. LIMITING CONDITIONS

1. The analysis contained in this document is based, in part, on data from secondary sources such as state and local government, planning agencies, real estate brokers, and other third parties. While KMA believes that these sources are reliable, we cannot guarantee their accuracy.

2. The analysis assumes that neither the local nor national economy will experience a major recession. If an unforeseen change occurs in the economy, the conclusions contained herein may no longer be valid.

3. The findings are based on economic rather than political considerations. Therefore, they should be construed neither as a representation nor opinion that government approvals for development can be secured.

4. Development opportunities are assumed to be achievable during the specified time frame. A change in development schedule requires that the conclusions contained herein be reviewed for validity.

5. The analysis, opinions, recommendations, and conclusions of this document are KMA's informed judgment based on market and economic conditions as of the date of this report. Due to the volatility of market conditions and complex dynamics influencing the economic conditions of the building and development industry, conclusions and recommended actions contained herein should not be relied upon as sole input for final business decisions regarding current and future development and planning.

6. Any estimates of development costs, capitalization rates, income and/or expense projections are based on the best available project-specific data as well as the experiences of similar projects. They are not intended to be projections of the future for the specific project. No warranty or representation is made that any of the estimates or projections will actually materialize.

7. KMA is not advising or recommending any action be taken by City of San Marcos with respect to any prospective, new, or existing municipal financial products or issuance of municipal securities (including with respect to the structure, timing, terms, and other similar matters concerning such financial products or issues).

8. KMA is not acting as a Municipal Advisor to the City of San Marcos and does not assume any fiduciary duty hereunder, including, without limitation, a fiduciary duty to the City of San Marcos pursuant to Section 15B of the Exchange Act with respect to the services provided hereunder and any information and material contained in KMA’s work product.

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9. The City of San Marcos shall discuss any such information and material contained in KMA’s work product with any and all internal and/or external advisors and experts, including its own municipal advisors, that it deems appropriate before acting on the information and material.

Appendix A Summary of Potential In-Lieu Fees
Appendix B Estimate of Affordable Sales Prices and Rents Appendix C In-Lieu Fee Financial Analysis - For-Sale
Approach 1: On-Site Production
Appendix D In-Lieu Fee Financial Analysis - Rental
Approach 1: On-Site Production
Appendix E In-Lieu Fee Financial Analysis - Rental
Approach 2: Off-Site Production
Appendix F Comparison of Affordable Housing Fees, San Diego County

APPENDICES

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APPENDIX A
Summary of Potential In-Lieu Fees

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ON-SITE PRODUCTION
TABLE A-1
ESTIMATE OF POTENTIAL IN-LIEU FEE - APPROACH 1: ECONOMIC IMPACT OF INCORPORATING AFFORDABLE HOUSING ON-SITE

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
A
I. Residual Land Value - Per Unit
100% Market-Rate $309,000 $257,000 $116,000 $74,000 $31,000 $157,000 5% LOW INCOME / 10% MODERATE INCOME
II. Residual Land Value - Per Unit
85% Market-Rate / 15% Affordable $155,000 $90,000 $74,000 $24,000 ($16,000) $65,000 III. Economic Impact of Affordable Housing On-Site
Per Market-Rate Unit ($154,000) ($167,000) ($42,000) ($50,000) ($47,000) ($92,000) % Change (1) -49.8% -65.0% -36.2% -67.6% -151.6% -58.6% Per Market-Rate Net SF ($48) ($64) ($30) ($49) ($65) ($51) Per SF Site Area ($13) ($19) ($15) ($34) ($49) ($26)
(1) Reflects the % change in residual land value resulting from incorporating 15% of units on-site for affordable housing.

E
Single-Family
Very Low Density
AverageSingle-Family
Low Density
Townhomes
Low Medium Density
Mixed-Use
Stacked Flats
Mixed Use 2
B C
Garden Apartments
w/Attached Garages
Medium High Density

FOR-SALE RENTAL
D
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OFF-SITE PRODUCTION
TABLE A-2
ESTIMATE OF POTENTIAL IN-LIEU FEE - APPROACH 2: FUNDING LEVEL REQUIRED FOR INCLUSIONARY HOUSING PRODUCTION OFF-SITE

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
C D
I. Affordability Gap
A. Residual Land Value per Affordable Unit (1) ($109,000) ($109,000) ($109,000) ($109,000) ($109,000) ($109,000) B. Acquisition Costs (2) ($50,000) ($50,000) ($50,000) ($50,000) ($50,000) ($50,000) C. Affordability Gap per Affordable Unit ($159,000) ($159,000) ($159,000) ($159,000) ($159,000) ($159,000) II. Funding Required for Inclusionary Housing Production Off-Site Affordability Gap per Market-Rate Unit @ 5.0% (3) ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) III. Affordability Gap
A. Residual Land Value per Affordable Unit (4) ($159,000) ($159,000) ($159,000) ($159,000) ($159,000) ($159,000) B. Acquisition Costs (2) ($50,000) ($50,000) ($50,000) ($50,000) ($50,000) ($50,000) C. Affordability Gap per Affordable Unit ($209,000) ($209,000) ($209,000) ($209,000) ($209,000) ($209,000) IV. Funding Required for Inclusionary Housing Production Off-Site Affordability Gap per Market-Rate Unit @ 10.0% (5) ($22,000) ($22,000) ($22,000) ($22,000) ($22,000) ($22,000) V. Economic Impact of Off-Site Inclusionary Housing
Per Market-Rate Unit (II + IV) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) Per Market-Rate Net SF ($9) ($11) ($22) ($30) ($42) ($23) Per SF Site Area ($3) ($3) ($11) ($21) ($31) ($14)
VI. Residual Land Value Per Unit - 100% Market-Rate (Table A-1) $309,000 $257,000 $116,000 $74,000 $31,000 $157,000 % Change (6) -9.7% -11.7% -25.9% -40.5% -96.8% -19.1%
(1) Assumes off-site compliance for Low Income units would be met through the development of a Low Income Housing Tax Credit project with a combination of Extremely Low, Very Low, and Low Income units. Reflects average residual land land value for 100% affordable stacked flats over podium parking and mixed-use units over podium/subterranean parking financed with 9% and 4% tax credits. (2) KMA estimate based on Countywide survey of residential land sales. (3) Assumes inclusionary requirement applied to total number of market-rate units approved [i.e., (gap ÷ 95%) x 5%]. (4) Reflects average residual land value for stacked flats over podium parking and mixed-use units over podium/subterranean parking assuming 100% of units at moderate income. (5) Assumes inclusionary requirement applied to total number of market-rate units approved [i.e., (gap ÷ 90%) x 10%]. (6) Reflects the economic impact of producing affordable housing units off-site relative to residual land value at 100% market-rate. 10% MODERATE
A B E
5% LOW
Single Family
Low Density
Mixed-Use
Stacked Flats
Mixed-Use 2
Single Famly
Very Low Density

FOR-SALE RENTAL
AverageTownhomes
Low Medium
Density
Garden Apartments
Medium High Density
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APPENDIX B
Estimate of Affordable Sales Prices and Rents

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TABLE B-1

RESTRICTED PRICES - SINGLE-FAMILY HOMES/TOWNHOMES - LOW INCOME

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
Number of Bedrooms 1 2 3 4
I. Percent of AMI 70% 70% 70% 70%
Assumed Family Size (1) 2.0 3.0 4.0 5.0
II. Household Income (2) $65,415 $73,570 $81,760 $88,305 Income Allocation to Housing 30% 30% 30% 30%
Amount Available for Housing $19,625 $22,071 $24,528 $26,492 III. HOA Fees (3) $175 /Mo. $2,100 $200 /Mo. $2,400 $225 /Mo. $2,700 $250 /Mo. $3,000 Utilities (4) $375 /Mo. $4,500 $491 /Mo. $5,892 $635 /Mo. $7,620 $779 /Mo. $9,348 Annual Taxes (5) 1.15% $2,070 1.15% $2,197 1.15% $2,266 1.15% $2,254 CFD Special Taxes (6) $926 $926 $926 $926
IV. Available for Mortgage $10,028 $10,656 $11,016 $10,963 V. Interest Rate (7) 4.68% 4.68% 4.68% 4.68%
Down Payment 10.0% 10.0% 10.0% 10.0%
VI. Supportable Mortgage $161,506 $171,620 $177,418 $176,565 Add: Down Payment $18,000 $19,100 $19,700 $19,600
VII. Maximum Unit Price (Rounded) $180,000 $191,000 $197,000 $196,000 (1) As assigned by California Redevelopment Law.
(2) State of California Department of Housing and Community Development (HCD) 2023 income limits. (3) Allowance for structure insurance, maintenance, and reserves. (4) See Table B-6.
(5) Based on affordable unit price. Property tax assessment may be based on market value of actual unit. (6)
(7) Reflects average national 30-year fixed mortgage interest rate between 2018 and 2023 per Bankrate.com, effective December 15, 2023.

Source: State of California Department of Housing and Community Development, San Diego County Department of Housing and Community Development, California Redevelopment Law H&SC § 50052.5.

KMA estimate, includes CFD No. 2001-01-San Marcos Fire Protection District; CFD No. 2011-01-Congestion Management; and CFD No. 98-01 Improvement Area No. 1-Police Only.

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TABLE B-2

RESTRICTED PRICES - SINGLE-FAMILY HOMES/TOWNHOMES - MODERATE INCOME

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
Number of Bedrooms 1 2 3 4
I. Percent of AMI 110% 110% 110% 110%
Assumed Family Size (1) 2.0 3.0 4.0 5.0
II. Household Income (2) $102,795 $115,610 $128,480 $138,765 Income Allocation to Housing 35% 35% 35% 35%
Amount Available for Housing $35,978 $40,464 $44,968 $48,568 III. HOA Fees (3) $175 /Mo. $2,100 $200 /Mo. $2,400 $225 /Mo. $2,700 $250 /Mo. $3,000 Utilities (4) $375 /Mo. $4,500 $491 /Mo. $5,892 $635 /Mo. $7,620 $779 /Mo. $9,348 Annual Taxes (5) 1.15% $4,853 1.15% $5,336 1.15% $5,750 1.15% $6,026 CFD Special Taxes (6) $926 $926 $926 $926
IV. Available for Mortgage $23,599 $25,909 $27,972 $29,268 V. Interest Rate (7) 4.68% 4.68% 4.68% 4.68%
Down Payment 10.0% 10.0% 10.0% 10.0%
VI. Supportable Mortgage $380,064 $417,270 $450,487 $471,355 Add: Down Payment $42,200 $46,400 $50,000 $52,400
VII. Maximum Unit Price (Rounded) $422,000 $464,000 $500,000 $524,000 (1) As assigned by California Redevelopment Law.
(2) State of California Department of Housing and Community Development (HCD) 2023 income limits. (3) Allowance for structure insurance, maintenance, and reserves. (4) See Table B-6.
(5) Based on affordable unit price. Property tax assessment may be based on market value of actual unit. (6)
(7) Reflects average national 30-year fixed mortgage interest rate between 2018 and 2023 per Bankrate.com effective December 15, 2023.

Source: State of California Department of Housing and Community Development, San Diego County Department of Housing and Community Development, California Redevelopment Law H&SC § 50052.5.

KMA estimate, includes CFD No. 2001-01-San Marcos Fire Protection District; CFD No. 2011-01-Congestion Management; and CFD No. 98-01 Improvement Area No. 1-Police Only.

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TABLE B-3
ESTIMATE OF AFFORDABLE RENTS - 50% AMI, 2023

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
Number of Bedrooms 1 2 3
A. City of San Marcos
Percent of AMI 50% 50% 50%
Assumed Family Size 2.0 3.0 4.0
Household Income (1) $46,725 $52,550 $58,400
Income Allocation to Housing 30% 30% 30%
Monthly Housing Cost $1,168 $1,314 $1,460
(Less) Utility Allowance (2) ($198) ($272) ($349)
Maximum Monthly Rent $970 $1,042 $1,111
B. Low Income Housing Tax Credit (LIHTC) Program
Percent of AMI 50% 50% 50%
Assumed Family Size 1.5 3.0 4.5
Household Income (3) $51,700 $62,050 $71,675
Income Allocation to Housing 30% 30% 30%
Monthly Housing Cost (4) $1,292 $1,551 $1,791
(Less) Utility Allowance (2) ($198) ($272) ($349)
Maximum Monthly Rent $1,094 $1,279 $1,442
C. Maximum Monthly Rent $970 $1,042 $1,111
(1) State of California Department of Housing and Community Development (HCD) 2023 income limits. (2) Reflects County of San Diego utility allowances, as of January 1, 2024.

Monthly Utility One Two Three
Electric Heating $47 $63 $74
Electric Cooking $18 $26 $35
Other Electric $83 $115 $147
Electric Water Heating $50 $68 $93
Total $198 $272 $349
(3) California Tax Credit Allocation Committee 2023 maximum income levels for projects placed in service on or after May 15, 2023. (4) California Tax Credit Allocation Committee 2023 maximum rents for projects placed in service on or after May 15, 2023.

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TABLE B-4
ESTIMATE OF AFFORDABLE RENTS - 60% AMI, 2022

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
Number of Bedrooms 1 2 3
A. City of San Marcos
Percent of AMI 60% 60% 60%
Assumed Family Size 2.0 3.0 4.0
Household Income (1) $56,070 $63,060 $70,080
Income Allocation to Housing 30% 30% 30%
Monthly Housing Cost $1,402 $1,577 $1,752
(Less) Utility Allowance (2) ($198) ($272) ($349)
B. Maximum Monthly Rent $1,204 $1,305 $1,403
(1) State of California Department of Housing and Community Development (HCD) 2023 income limits. (2) Reflects County of San Diego utility allowances, as of January 1, 2024.

Monthly Utility One Two Three
Electric Heating $47 $63 $74
Electric Cooking $18 $26 $35
Other Electric $83 $115 $147
Electric Water Heating $50 $68 $93
Total $198 $272 $349
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TABLE B-5
ESTIMATE OF AFFORDABLE RENTS - 110% AMI, 2023

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
Number of Bedrooms 1 2 3
A. City of San Marcos
Percent of AMI 110% 110% 110%
Assumed Family Size 2.0 3.0 4.0
Household Income (1) $102,795 $115,610 $128,480
Income Allocation to Housing 30% 30% 30%
Monthly Housing Cost $2,570 $2,890 $3,212
(Less) Utility Allowance (2) ($198) ($272) ($349)
B. Maximum Monthly Rent $2,372 $2,618 $2,863
(1) State of California Department of Housing and Community Development (HCD) 2023 income limits. (2) Reflects County of San Diego utility allowances, as of January 1, 2024.

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TABLE B-6

UTILITY ALLOWANCES - FOR-SALE UNITS - TOWNHOMES/SINGLE-FAMILY HOMES

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
A. Utilities (Annual) (1)
Number of Bedrooms 1 2 3 4
Electric Heat $47 $63 $74 $83
Electric Cooking $18 $26 $35 $47
Electric Water Heater $50 $68 $93 $116
Other Electric $83 $115 $147 $181
Water $101 $143 $210 $276
Sewer $38 $38 $38 $38
Trash $38 $38 $38 $38
Total Utilities $375 $491 $635 $779
B. Total Annual Utilities $4,500 $5,892 $7,620 $9,348
(1) Source: Housing Authority of the County of San Diego 2024 Utility Allowance Schedule, effective January 1, 2024.

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APPENDIX C
In-Lieu Fee Financial Analysis
Approach 1: On-Site Production - For-Sale

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ON-SITE PRODUCTION
FOR-SALETABLE C-1

PROTOTYPE PROJECT DESCRIPTIONS

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
I. Site Area 10.0 Acres 5.0 Acres 3.0 Acres
II. Gross Building Area (GBA)
Residential Area 118,500 SF 100% 65,500 SF 100% 66,300 SF 99% Common Area (1) 0 SF 0% 0 SF 0% 1,000 SF 1%
Total GBA - Residential 118,500 SF 100% 65,500 SF 100% 67,300 SF 100% III. Number of Units 37 Units 25 Units 48 Units
IV. Unit Mix # of Units Unit Size # of Units Unit Size # of Units Unit Size One Bedroom 0 Units 0% - 0 Units 0% - 0 Units 0% - Two Bedroom 0 Units 0% - 0 Units 0% - 19 Units 40% 1,200 SF Three Bedroom 22 Units 60% 3,000 SF 15 Units 60% 2,500 SF 29 Units 60% 1,500 SF Four Bedroom 15 Units 40% 3,500 SF 10 Units 40% 2,800 SF 0 Units 0% - Total/Average 37 Units 100% 3,203 SF 25 Units 100% 2,620 SF 48 Units 100% 1,381 SF V. Density 3.7 Units/Acre 5.0 Units/Acre 16.0 Units/Acre VI. Construction Type Type V Type V Type V
VII. Stories 2 Stories 2 Stories 2 Stories
VIII. Approximate Lot Size 10,000 SF 7,500 SF
IX. Parking
Type
Spaces - Residential 74 Spaces 50 Spaces 96 Spaces
Ratio (2) 2.0 Spaces/Unit 2.0 Spaces/Unit 2.0 Spaces/Unit (1) Reflects common area for community amenities.
(2) Source: San Marcos Municipal Code, Chapter 20.340.

Attached Garages Attached GaragesAttached Garages
---
Single-Family
Low Density
Townhomes
Low Medium Density
Single Family
Very Low Density
A B C
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ON-SITE PRODUCTION
FOR-SALETABLE C-2

DEVELOPMENT COSTS

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
Total Per Unit Comments Total Per Unit Comments Total Per Unit Comments I. Direct Costs
Off-Site Improvements (1) $1,089,000 $29,000 $2.50 Per SF Site $1,089,000 $44,000 $5.00 Per SF Site $980,000 $20,000 $7.50 Per SF Site On-Site Improvements/Landscaping (1) $4,356,000 $118,000 $10 Per SF Site $2,178,000 $87,000 $10 Per SF Site $1,634,000 $34,000 $12.50 Per SF Site Parking $0 $0 Included Below $0 $0 Included Below $0 $0 Included Below Shell Construction - Residential $17,775,000 $480,000 $150 Per SF GBA $11,463,000 $459,000 $175 Per SF GBA $13,460,000 $280,000 $200 Per SF GBA FF&E/Amenities $740,000 $20,000 Allowance $375,000 $15,000 Allowance $480,000 $10,000 Allowance Contingency $1,198,000 $32,000 5.0% of Above Directs $755,000 $30,000 5.0% of Above Directs $828,000 $17,000 5.0% of Above Directs Total Direct Costs $25,158,000 $680,000 $212 Per SF GBA $15,860,000 $634,000 $242 Per SF GBA $17,382,000 $362,000 $258 Per SF GBA II. Indirect Costs
Architecture & Engineering $1,761,000 $48,000 7.0% of Directs $1,110,000 $44,000 7.0% of Directs $1,217,000 $25,000 7.0% of Directs Permits & Fees (2) $2,223,000 $60,000 $19 Per SF GBA $1,395,000 $56,000 $21 Per SF GBA $1,747,000 $36,000 $26 Per SF GBA Legal & Accounting $377,000 $10,000 1.5% of Directs $238,000 $10,000 1.5% of Directs $261,000 $5,000 1.5% of Directs Taxes & Insurance $1,649,000 $45,000 3.0% of Market Value $1,011,000 $40,000 3.0% of Market Value $1,062,000 $22,000 3.0% of Market Value Developer Fee $1,006,000 $27,000 4.0% of Directs $634,000 $25,000 4.0% of Directs $695,000 $14,000 4.0% of Directs Marketing/Sales $1,649,000 $45,000 3.0% of Market Value $1,011,000 $40,000 3.0% of Market Value $1,062,000 $22,000 3.0% of Market Value Contingency $433,000 $12,000 5.0% of Above Indirects $270,000 $11,000 5.0% of Above Indirects $302,000 $6,000 5.0% of Above Indirects Total Indirect Costs $9,098,000 $246,000 36.2% of Directs $5,669,000 $227,000 35.7% of Directs $6,346,000 $132,000 36.5% of Directs III. Financing Costs (3) $2,138,000 $58,000 8.5% of Directs $1,348,000 $54,000 8.5% of Directs $1,477,000 $31,000 8.5% of Directs IV. Development Costs (4) $36,394,000 $984,000 $307 Per SF GBA $22,877,000 $915,000 $349 Per SF GBA $25,205,000 $525,000 $375 Per SF GBA (1) Estimated allowance; not verified by KMA or the City of San Marcos. (2) KMA estimate, includes building fees, fire fees, public facilities fees, Regional Transportation Congestion Improvement Program (RTCP) fees, capacity fees, and San Marcos Unified School District fees. (3) Includes loan fees, interest during construction, and interest lease-up. (4) Excludes acquisition costs.

Single Family
Very Low Density
B C
Single Family
Low Density
Townhomes
Low Medium Density
A
Prepared by: Keyser Marston Associates, Inc.

Filename: City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;lag

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ON-SITE PRODUCTION
FOR-SALETABLE C-3

GROSS SALES PROCEEDS AND RESIDUAL LAND VALUE

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
I. Gross Sales Proceeds
# Units $/SF Price/Unit Total # Units $/SF Price/Unit Total A. Market-Rate
Three Bedroom 3,000 SF 22 $475 $1,425,000 $31,350,000 19 $475 $1,425,000 $27,075,000 Four Bedroom 3,500 SF 15 $450 $1,575,000 $23,625,000 12 $450 $1,575,000 $18,900,000 Subtotal/Average 3,203 SF 37 $464 $1,486,000 $54,975,000 31 $463 $1,483,000 $45,975,000 B. Affordable - Low (1)(2)
Three Bedroom 3,000 SF 0 $0 $0 $0 1 $66 $197,000 $197,000 Four Bedroom 3,500 SF 0 $0 $0 $0 1 $56 $196,000 $196,000 Subtotal/Average 3,250 SF 0 $0 $0 $0 2 $61 $197,000 $393,000 C. Affordable - Moderate (1)(3)
Three Bedroom 3,000 SF 0 $0 $0 $0 2 $167 $500,000 $1,000,000 Four Bedroom 3,500 SF 0 $0 $0 $0 2 $150 $524,000 $1,048,000 Subtotal/Average 3,250 SF 0 $0 $0 $0 4 $158 $512,000 $2,048,000 D. Total/Average 3,203 SF 37 $464 $1,486,000 $54,975,000 37 $409 $1,309,000 $48,416,000 II. Total Gross Sales Proceeds
(Less) Cost of Sale 3.0% of Value ($1,649,000) 3.0% of Value ($1,452,000) (Less) Target Developer Profit 10.0% of Value ($5,498,000) 10.0% of Value ($4,842,000) III. Total Net Sales Procees $47,828,000 $42,122,000
(Less) Development Costs (4) ($36,394,000) ($36,394,000) IV. Residual Land Value $11,434,000 $5,728,000
Per Unit $309,000 $155,000
Per SF Site Area $26 $13
(1) Affordable sales prices based on State of California Department of Housing and Community Development (HCD) 2023 income limits. (2) Reflect maximum ownership housing payment at 30% of 70% AMI, see Table B-1. (3) Reflect maximum ownership housing payment at 35% of 110% AMI, see Table B-2. (4) See Table C-2.

A
Unit Size
Single Family - Very Low Density
100% @ Market-Rate 85% @ Market-Rate/15% @ Affordable
Prepared by: Keyser Marston Associates, Inc.

Filename: City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;lag

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ON-SITE PRODUCTION
FOR-SALETABLE C-4

GROSS SALES PROCEEDS AND RESIDUAL LAND VALUE

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
I. Gross Sales Proceeds
# Units $/SF Price/Unit Total # Units $/SF Price/Unit Total A. Market-Rate
Three Bedroom 2,500 SF 15 $525 $1,313,000 $19,695,000 12 $525 $1,313,000 $15,756,000 Four Bedroom 2,800 SF 10 $500 $1,400,000 $14,000,000 8 $500 $1,400,000 $11,200,000 Subtotal/Average 2,620 SF 25 $515 $1,348,000 $33,695,000 20 $515 $1,348,000 $26,956,000 B. Affordable - Low (1)(2)
Three Bedroom 2,500 SF 0 $0 $0 $0 1 $79 $197,000 $197,000 Four Bedroom 2,800 SF 0 $0 $0 $0 1 $70 $196,000 $196,000 Subtotal/Average 2,650 SF 0 $0 $0 $0 2 $74 $197,000 $393,000 C. Affordable - Moderate (1)(3)
Three Bedroom 2,500 SF 0 $0 $0 $0 2 $200 $500,000 $1,000,000 Four Bedroom 2,800 SF 0 $0 $0 $0 1 $187 $524,000 $524,000 Subtotal/Average 2,600 SF 0 $0 $0 $0 3 $195 $508,000 $1,524,000 D. Total/Average 2,620 SF 25 $515 $1,348,000 $33,695,000 25 $441 $1,155,000 $28,873,000 II. Total Gross Sales Proceeds
(Less) Cost of Sale 3.0% of Value ($1,011,000) 3.0% of Value ($866,000) (Less) Target Developer Profit 10.0% of Value ($3,370,000) 10.0% of Value ($2,887,000) III. Total Net Sales Procees $29,314,000 $25,120,000
(Less) Development Costs (4) ($22,877,000) ($22,877,000) IV. Residual Land Value $6,437,000 $2,243,000
Per Unit $257,000 $90,000
Per SF Site Area $30 $10
(1) Affordable sales prices based on State of California Department of Housing and Community Development (HCD) 2023 income limits. (2) Reflect maximum ownership housing payment at 30% of 70% AMI, see Table B-1. (3) Reflect maximum ownership housing payment at 35% of 110% AMI, see Table B-2.

Unit Size
B
Single Family - Low Density
100% @ Market-Rate 85% @ Market-Rate/15% @ Affordable
Prepared by: Keyser Marston Associates, Inc.

Filename: City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;lag

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ON-SITE PRODUCTION
FOR-SALETABLE C-5

GROSS SALES PROCEEDS AND RESIDUAL LAND VALUE

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
I. Gross Sales Proceeds
# Units $/SF Price/Unit Total # Units $/SF Price/Unit Total A. Market-Rate
Two Bedroom 1,200 SF 19 $550 $660,000 $12,540,000 16 $550 $660,000 $10,560,000 Three Bedroom 1,500 SF 29 $525 $788,000 $22,852,000 25 $525 $788,000 $19,700,000 Subtotal/Average 1,381 SF 48 $534 $737,000 $35,392,000 41 $534 $738,000 $30,260,000 B. Affordable - Low (1)(2)
Two Bedroom 1,200 SF 0 $0 $0 $0 1 $159 $191,000 $191,000 Three Bedroom 1,500 SF 0 $0 $0 $0 1 $131 $197,000 $197,000 Subtotal/Average 1,350 SF 0 $0 $0 $0 2 $144 $194,000 $388,000 C. Affordable - Moderate (1)(3)
Two Bedroom 1,200 SF 0 $0 $0 $0 2 $387 $464,000 $928,000 Three Bedroom 1,500 SF 0 $0 $0 $0 3 $333 $500,000 $1,500,000 Subtotal/Average 1,380 SF 0 $0 $0 $0 5 $352 $486,000 $2,428,000 D. Total/Average 1,381 SF 48 $534 $737,000 $35,392,000 48 $499 $689,000 $33,076,000 II. Total Gross Sales Proceeds
(Less) Cost of Sale 3.0% of Value ($1,062,000) 3.0% of Value ($992,000) (Less) Target Developer Profit 10.0% of Value ($3,539,000) 10.0% of Value ($3,308,000) III. Total Net Sales Procees $30,791,000 $28,776,000
(Less) Development Costs (4) ($25,205,000) ($25,205,000) IV. Residual Land Value $5,586,000 $3,571,000
Per Unit $116,000 $74,000
Per SF Site Area $43 $27
(1) Affordable sales prices based on State of California Department of Housing and Community Development (HCD) 2023 income limits. (2) Reflect maximum ownership housing payment at 30% of 70% AMI, see Table B-1. (3) Reflect maximum ownership housing payment at 35% of 110% AMI, see Table B-2.

Unit Size
C
Townhomes - Low Medium Density
100% @ Market-Rate 85% @ Market-Rate/15% @ Affordable
Prepared by: Keyser Marston Associates, Inc.

Filename: City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;lag

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APPENDIX D
In-Lieu Fee Financial Analysis
Approach 1: On-Site Production - Rental

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ON-SITE PRODUCTION
RENTALTABLE D-1

PROTOTYPE PROJECT DESCRIPTIONS

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
I. Site Area 2.0 Acres 1.0 Acre
II. Gross Building Area (GBA)
A. Residential Area 60,900 SF 98% 32,400 SF 82%
Amenities 1,500 SF 2% 1,000 SF 3%
Circulation/Common Area 0 SF 0% 5,894 SF 15%
Total GBA - Residential 62,400 SF 100% 39,294 SF 100%
B. Retail/Restaurant - 10,000 SF
C. Total GBA 62,400 SF 49,294 SF
-
III. Number of Units 60 Units 45 Units
IV. Unit Mix # of Units Unit Size # of Units Unit Size
One Bedroom 18 Units 30% 750 SF 18 Units 40% 600 SF
Two Bedroom 36 Units 60% 1,100 SF 27 Units 60% 800 SF
Three Bedroom 6 Units 10% 1,300 SF 0 Units 0% -
Total/Average 60 Units 100% 1,015 SF 45 Units 100% 720 SF V. Density 30.0 Units/Acre 45.0 Units/Acre
VI. Construction Type Type V Type V
VII. Stories 3 Stories 4 Stories
VIII. Parking
Type
Spaces - Residential 111 Spaces 81 Spaces
Ratio (1) 1.85 Spaces/Unit 1.80 Spaces/Unit
Spaces - Retail 57 Spaces
Ratio (1) 1.0 Space/175 SF (2)
(1) Source: San Marcos Municipal Code, Chapter 20.340.
(2) Reflects average minimum required parking for merchandise sales (1 space/250 gross floor area) and restaurant (1 space/100 gross floor area).

Attached Garages Podium/Subterranean
D E
Garden Apartments w/Attached Garages
Medium High Density
Mixed-Used Stacked Flats
Mixed-Use 2
Prepared by: Keyser Marston Associates, Inc.

Filename: City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;lag

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ON-SITE PRODUCTION
RENTALTABLE D-2

DEVELOPMENT COSTS

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
Total Per Unit Comments Total Per Unit Comments
I. Direct Costs
Off-Site Improvements (1) $436,000 $7,000 $5 Per SF Site $218,000 $5,000 $5 Per SF Site On-Site Improvements/Landscaping (1) $1,307,000 $22,000 $15 Per SF Site $436,000 $10,000 $10 Per SF Site Parking $0 $0 Included Below $5,520,000 $123,000 $40,000 Per Space Shell Construction - Residential $14,040,000 $234,000 $225 Per SF GBA $11,788,000 $262,000 $300 Per SF GBA-Residential Shell Construction - Retail $0 $0 $0 Per SF GBA $2,000,000 $44,000 $200 Per SF GBA-Retail Tenant Improvements $0 $0 $0 Per SF GBA $500,000 $11,000 $50 Per SF GBA-Retail FF&E/Amenities $450,000 $7,500 Allowance $225,000 $5,000 Allowance Contingency $812,000 $14,000 5.0% of Above Directs $1,034,000 $23,000 5.0% of Above Directs Total Direct Costs $17,045,000 $284,000 $273 Per SF GBA $21,721,000 $483,000 $441 Per SF GBA II. Indirect Costs
Architecture & Engineering $852,000 $14,000 5.0% of Directs $1,086,000 $24,000 5.0% of Directs Permits & Fees (2) $2,001,000 $33,000 $32 Per SF GBA $1,524,000 $34,000 $31 Per SF GBA Legal & Accounting $256,000 $4,000 1.5% of Directs $326,000 $7,000 1.5% of Directs Taxes & Insurance $256,000 $4,000 1.5% of Directs $326,000 $7,000 1.5% of Directs Developer Fee $682,000 $11,000 4.0% of Directs $869,000 $19,000 4.0% of Directs Marketing/Lease-Up $300,000 $5,000 1.8% of Directs $225,000 $5,000 1.0% of Directs Contingency $217,000 $4,000 5.0% of Above Indirects $218,000 $5,000 5.0% of Above Indirects Total Indirect Costs $4,564,000 $76,000 26.8% of Directs $4,574,000 $102,000 21.1% of Directs III. Financing Costs (3) $2,045,000 $34,000 12.0% of Directs $2,607,000 $54,000 12.0% of Directs IV. Development Costs (4) $23,654,000 $394,000 $379 Per SF GBA $28,902,000 $642,000 $586 Per SF GBA (1) Estimated allowance; not verified by KMA or the City of San Marcos. (2) KMA estimate, includes building fees, fire fees, public facilities fees, Regional Transportation Congestion Improvement Program (RTCP) fees, capacity fees, and San Marcos Unified School District fees. (3) Includes loan fees, interest during construction, and interest lease-up. (4) Excludes acquisition costs.

D E
Garden Apartments with Attached Garages
Medium High Density
Mixed-Use Stacked Flats
Mixed-Use 2
Prepared by: Keyser Marston Associates, Inc.

Filename: City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;lag

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ON-SITE PRODUCTION
RENTALTABLE D-3

NET OPERATING INCOME - GARDEN APARTMENTS WITH ATTACHED GARAGES

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
I. Gross Scheduled Income (GSI)
# Units $/SF $/Month Annual # Units $/SF $/Month Annual A. Market-Rate
One Bedroom 750 SF 18 $3.25 $2,440 $527,000 15 $3.25 $2,440 $439,000 Two Bedroom 1,100 SF 36 $3.00 $3,300 $1,426,000 31 $3.00 $3,300 $1,228,000 Three Bedroom 1,300 SF 6 $2.75 $3,580 $258,000 5 $2.75 $3,580 $215,000 Subtotal/Average 1,015 SF 60 $3.02 $3,070 $2,211,000 51 $3.03 $3,080 $1,882,000 B. Low Income (1)(2)
One Bedroom 750 SF -- -- -- -- 1 $1.61 $1,204 $14,000
Two Bedroom 1,100 SF -- -- -- -- 2 $1.19 $1,305 $31,000 Three Bedroom 1,300 SF -- -- -- -- 0 $1.08 $1,403 $0
Subtotal/Average 983 SF -- -- -- -- 3 $1.27 $1,250 $45,000 C. Moderate Income (1)(3)
One Bedroom 750 SF -- -- -- -- 2 $3.16 $2,372 (4) $57,000 Two Bedroom 1,100 SF -- -- -- -- 3 $2.38 $2,618 (4) $94,000 Three Bedroom 1,300 SF -- -- -- -- 1 $2.20 $2,863 (4) $34,000 Subtotal/Average 1,017 SF -- -- -- -- 6 $2.53 $2,569 $185,000 D. Total/Average 1,015 SF 60 $3.05 $3,100 $2,211,000 60 $2.89 $2,933 $2,112,000 Add: Other Income $100 /Unit/Month $72,000 $100 /Unit/Month $72,000 E. Total Gross Scheduled Income (GSI) $2,283,000 $2,184,000 II. Effective Gross Income
(Less) Vacancy 5.0% of GSI ($114,000) 5.0% of GSI ($109,000) Effective Gross Income (EGI) $2,169,000 $2,075,000
III. Operating Expenses
(Less) Operating Expenses $6,000 /Unit/Year ($360,000) $6,000 /Unit/Year ($360,000) (Less) Property Taxes/Assessments (5) $6,200 /Unit/Year ($371,000) $5,850 /Unit/Year ($351,000) (Less) CFD Special Taxes $841 /Unit ($50,000) $841 /Unit ($50,000) (Less) Replacement Reserves $250 /Unit/Year ($15,000) $250 /Unit/Year ($15,000) Total Operating Expenses $13,283 /Unit/Year ($796,000) $12,933 /Unit/Year ($776,000)

36.7% of EGI 37.4% of EGI
IV. Net Operating Income (NOI) $1,373,000 $1,299,000
(1) Affordable rents based on State of California Department of Housing and Community Development (HCD) 2023 income limits. (2) Affordable rents reflect 30% monthly income at 60% AMI, see Table B-4. (3) Affordable rents reflect 30% monthly income at 110% AMI, see Table B-5. (4) Reflects the lesser of market rent vs. affordable rents. (5) Based on capitalized income approach; assumes a 4.25% capitalization rate and a 1.15% tax rate.

D
Garden Apartments with Attached Garages
Unit Size
100% @ Market-Rate 85% @ Market-Rate/15% @ Affordable
Prepared by: Keyser Marston Associates, Inc.

Filename: City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;lag

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ON-SITE PRODUCTION
RENTALTABLE D-4

NET OPERATING INCOME - MIXED-USE STACKED FLATS

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
I. Net Operating Income - Residential
A. Gross Scheduled Income # Units $/SF $/Month Annual # Units $/SF $/Month Annual Market-Rate
One Bedroom 600 SF 18 $5.00 $3,000 $648,000 15 $5.00 $3,000 $540,000 Two Bedroom 800 SF 27 $4.75 $3,800 $1,231,000 23 $4.75 $3,800 $1,049,000 Three Bedroom 0 SF 0 $0.00 $0 $0 0 $0.00 $0 $0
Subtotal/Average 720 SF 45 $4.83 $3,480 $1,879,000 38 $4.83 $3,480 $1,589,000 Low Income (1)(2)
One Bedroom 600 SF -- -- -- -- 1 $2.01 $1,204 $14,000
Two Bedroom 800 SF -- -- -- -- 1 $1.63 $1,305 $16,000
Three Bedroom 0 SF -- -- -- -- 0 $0.00 $1,403 $0
Subtotal/Average 700 SF -- -- -- -- 2 $1.79 $1,250 $30,000 Moderate Income (1)(3)
One Bedroom 600 SF -- -- -- -- 2 $3.95 $2,372 (4) $57,000 Two Bedroom 800 SF -- -- -- -- 3 $3.27 $2,618 (4) $94,000 Three Bedroom 0 SF -- -- -- -- 0 $0.00 $0 $0
Subtotal/Average 720 SF -- -- -- -- 5 $3.50 $2,517 $151,000 Total/Average 720 SF 45 $4.86 $3,500 $1,879,000 45 $4.55 $3,278 $1,770,000 Add: Other Income $150 /Unit/Month $81,000 $100 /Unit/Month $54,000 Total Gross Scheduled Income (GSI) $1,960,000 $1,824,000 B. Effective Gross Income
(Less) Vacancy 5.0% of GSI ($98,000) 5.0% of GSI ($91,000) Effective Gross Income (EGI) $1,862,000 $1,733,000
C. Operating Expenses
(Less) Operating Expenses $6,500 /Unit/Year ($293,000) $6,500 /Unit/Year ($293,000) (Less) Property Taxes/Assessments (5) $8,889 /Unit/Year ($400,000) $8,289 /Unit/Year ($373,000) (Less) CFD Special Taxes $841 /Unit/Year ($38,000) $841 /Unit/Year ($38,000) (Less) Replacement Reserves $250 /Unit/Year ($11,000) $250 /Unit/Year ($11,000) Total Operating Expenses $16,489 /Unit/Year ($742,000) $15,889 /Unit/Year ($715,000)

39.8% of EGI 41.3% of EGI
D. Net Operating Income (NOI) - Residential $1,120,000 $1,018,000 II. Net Operating Income - Retail
A. Gross Scheduled Income 10,000 SF $3.50 /SF NNN $420,000 10,000 SF $3.50 /SF NNN $420,000 B. (Less) Vacancy 10.0% of GSI ($42,000) 10.0% of GSI ($42,000) C. Effective Gross Income $378,000 $378,000
D. (Less) Unreimbursed Operating Expenses 5.0% of EGI ($19,000) 5.0% of EGI ($19,000) E. Net Operating Income (NOI) - Retail $359,000 $359,000 III. Total Net Operating Income (I + II) $1,479,000 $1,377,000 (1) Affordable rents based on State of California Department of Housing and Community Development (HCD) 2023 income limits. (2) Affordable rents reflect 30% monthly income at 60% AMI, see Table B-4. (3) Affordable rents reflect 30% monthly income at 110% AMI, see Table B-5. (4) Reflects the lesser of market rent vs. affordable rents. (5) Based on capitalized income approach; assumes a 4.25% capitalization rate and a 1.15% tax rate.

Unit Size
E
Mixed-Use Stacked Flats
100% @ Market-Rate 85% @ Market-Rate/15% @ Affordable
Prepared by: Keyser Marston Associates, Inc.

Filename: City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;lag

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ON-SITE PRODUCTION
RENTAL
TABLE D-5

RESIDUAL LAND VALUE - GARDEN APARTMENTS WITH ATTACHED GARAGES

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
I. Capitalized Value Upon Completion
Stabilized Net Operating Income $1,373,000 $1,299,000
Capitalization Rate @ 4.25% 4.25%
Capitalized Value Upon Completion $538,000 /Unit $32,306,000 $255,000 /Unit $30,565,000 (Less) Cost of Sale 3.0% of Value ($969,000) 3.0% of Value ($917,000) (Less) Target Developer Profit 10.0% of Value ($3,231,000) 10.0% of Value ($3,057,000) II. Net Sales Proceeds $28,106,000 $26,591,000
(Less) Development Costs (1) ($23,654,000) ($23,654,000) III. Residual Land Value $4,452,000 $2,937,000
Per Unit $74,000 $24,000
Per SF Site $51 $34
(1) See Table D-2.

Garden Apartments with Attached Garages
100% @ Market-Rate 85% @ Market Rate /
15% @ Affordable
D
Prepared by: Keyser Marston Associates, Inc.

Filename:City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;lag

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ON-SITE PRODUCTION
RENTAL
TABLE D-6

RESIDUAL LAND VALUE - MIXED-USE STACKED FLATS

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
I. Capitalized Value Upon Completion
Stabilized Net Operating Income $1,479,000 $1,377,000
Capitalization Rate @ 4.25% 4.25%
Capitalized Value Upon Completion $580,000 /Unit $34,800,000 $270,000 /Unit $32,400,000 (Less) Cost of Sale 3.0% of Value ($1,044,000) 3.0% of Value ($972,000) (Less) Target Developer Profit 10.0% of Value ($3,480,000) 10.0% of Value ($3,240,000) II. Net Sales Proceeds $30,276,000 $28,188,000
(Less) Development Costs (1) ($28,902,000) ($28,902,000) III. Residual Land Value $1,374,000 ($714,000)
Per Unit $31,000 ($16,000)
Per SF Site $32 ($16)
(1) See Table D-2.

E
Mixed-Use Stacked Flats
100% @ Market-Rate 85% @ Market Rate /
15% @ Affordable
Prepared by: Keyser Marston Associates, Inc.

Filename:City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;lag

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APPENDIX E
In-Lieu Fee Financial Analysis
Approach 2: Off-Site Production

Page 47 ends

OFF-SITE PRODUCTION
RENTALTABLE E-1

PROTOTYPE PROJECT DESCRIPTION

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
I. Site Area 3.00 Acres 2.00 Acres
II. Gross Building Area (GBA)
A. Residential
Net Rentable Area 74,700 SF 84% 68,175 SF 84%
Amenities 1,000 SF 1% 1,000 SF 1%
Circulation/Common Area 13,359 SF 15% 12,207 SF 15%
Total GBA - Residential 89,059 SF 100% 81,382 SF 100%
B. Retail/Restaurant 7,500 SF
C. Total GBA 89,059 SF 88,882 SF
III. Number of Units 90 Units 90 Units
IV. Unit Mix # of Units Unit Size # of Units Unit Size
One Bedroom 27 Units 30% 700 SF 27 Units 30% 600 SF
Two Bedroom 53 Units 59% 850 SF 53 Units 59% 800 SF
Three Bedroom 9 Units 10% 1,100 SF 9 Units 10% 975 SF
Manager (Two Bedroom) 1 Unit 1% 850 SF 1 Unit 1% 800 SF Total/Average 90 Units 100% 830 SF 90 Units 100% 758 SF V. Affordability Mix
50% AMI (1) 89 Units 99% 89 Units 99%
Manager 1 Units 1% 1 Units 1%
Total/Av 90 Units 100% 90 Units 100%
VI. Density 30.0 Units/Acre 45.0 Units/Acre
VII. Construction Type Type V Type V
VIII. Stories 3 Stories 4 Stories
IX. FAR 0.68 FAR 1.88 FAR
X. Parking
Type
Spaces - Residential 153 Spaces 153 Spaces
Ratio (2) 1.70 Spaces/Unit 1.70 Spaces/Unit
Spaces - Retail 1.0 Space/175 SF (3)
Ratio (2) 43 Spaces
(1) Assumes range of affordability from 30% AMI to 60% AMI, with average affordability at 50% AMI. (2) Source: San Marcos Municipal Code, Chapter 20.340. (3) Reflects average minimum required parking for merchandise sales (1 space/250 gross floor area) and restaurant (1 space/100 gross floor area).

F
Stacked Flats over Podium Parking
---
Podium
G
Mixed-Use Stacked Flats
Podium/Subterranean
Prepared by: Keyser Marston Associates, Inc.

Filename: City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;lag

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RENTALTABLE E-2

DEVELOPMENT COSTS

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
Total Per Unit Comments Total Per Unit Comments Total Per Unit Comments Total Per Unit Comments I. Direct Costs
Off-Site Improvements (1) $653,000 $7,000 $5 Per SF Site $653,000 $7,000 $5 Per SF Site $436,000 $5,000 $5 Per SF Site $436,000 $5,000 $5 Per SF Site On-Site Improvements/Landscaping (1) $1,960,000 $22,000 $15 Per SF Site $1,960,000 $22,000 $15 Per SF Site $1,307,000 $15,000 $15 Per SF Site $1,307,000 $15,000 $15 Per SF Site Parking $4,590,000 $51,000 $30,000 Per Space $4,590,000 $51,000 $30,000 Per Space $7,840,000 $87,000 $40,000 Per Space $7,840,000 $87,000 $40,000 Per Space Shell Construction - Residential $28,944,000 $322,000 $325 Per SF GBA $28,944,000 $322,000 $325 Per SF GBA $28,484,000 $316,000 $350 Per SF GBA $28,484,000 $316,000 $350 Per SF GBA Shell Construction - Retail $0 $0 $0 Per SF GBA $0 $0 $0 Per SF GBA $1,875,000 $21,000 $250 Per SF GBA $1,875,000 $21,000 $250 Per SF GBA Tenant Improvements $0 $0 $0 Per SF GBA $0 $0 $0 Per SF GBA $375,000 $4,000 $50 Per SF GBA $375,000 $4,000 $50 Per SF GBA FF&E/Amenities $450,000 $5,000 $5 Per SF GBA $450,000 $5,000 $5 Per SF GBA $450,000 $5,000 $5 Per SF GBA $450,000 $5,000 $5 Per SF GBA Subtotal $36,597,000 $407,000 $411 Per SF GBA $36,597,000 $407,000 $411 Per SF GBA $40,767,000 $453,000 $459 Per SF GBA $40,767,000 $453,000 $459 Per SF GBA Add: Prevailing Wages $0 $0 0.0% of Directs $5,490,000 $61,000 15.0% of Directs $0 $0 0.0% of Directs $6,115,000 $68,000 15.0% of Directs Contingency $1,830,000 $20,000 5.0% of Directs $2,104,000 $23,000 5.0% of Directs $2,038,000 $23,000 5.0% of Directs $2,344,000 $26,000 5.0% of Directs Total Direct Costs $38,427,000 $427,000 $431 Per SF GBA $44,191,000 $491,000 $496 Per SF GBA $42,805,000 $476,000 $482 Per SF GBA $49,226,000 $547,000 $554 Per SF GBA II. Indirect Costs
Architecture & Engineering $1,921,000 $21,000 5.0% of Directs $2,210,000 $25,000 5.0% of Directs $2,140,000 $24,000 5.0% of Directs $2,461,000 $27,000 5.0% of Directs Permits & Fees (2) $2,996,000 $33,000 $34 Per SF GBA $2,996,000 $33,000 $34 Per SF GBA $2,976,000 $33,000 $33 Per SF GBA $2,976,000 $33,000 $33 Per SF GBA Legal & Accounting $576,000 $6,000 1.5% of Directs $663,000 $7,000 1.5% of Directs $642,000 $7,000 1.5% of Directs $738,000 $8,000 1.5% of Directs Taxes & Insurance $576,000 $6,000 1.5% of Directs $663,000 $7,000 1.5% of Directs $642,000 $7,000 1.5% of Directs $738,000 $8,000 1.5% of Directs Developer Fee $2,200,000 $24,000 5.7% of Directs $8,075,000 $90,000 18.3% of Directs $2,200,000 $24,000 5.1% of Directs $8,600,000 $96,000 17.5% of Directs Marketing/Lease-Up $225,000 $2,500 $3 Per SF GBA $225,000 $2,500 $3 Per SF GBA $225,000 $2,500 $3 Per SF GBA $225,000 $2,500 $3 Per SF GBA Contingency $425,000 $5,000 5.0% of Indirects $742,000 $8,000 5.0% of Indirects $441,000 $5,000 5.0% of Indirects $787,000 $9,000 5.0% of Indirects Total Indirect Costs $8,919,000 $99,000 23.2% of Directs $15,574,000 $173,000 35.2% of Directs $9,266,000 $103,000 21.6% of Directs $16,525,000 $184,000 33.6% of Directs III. Financing Costs
Loan Fees $479,000 $5,000 1.2% of Directs $2,043,000 $23,000 4.6% of Directs $601,000 $7,000 1.4% of Directs $2,176,000 $24,000 4.4% of Directs Interest During Construction $1,286,000 $14,000 3.3% of Directs $1,915,000 $21,000 4.3% of Directs $1,724,000 $19,000 4.0% of Directs $2,380,000 $26,000 4.8% of Directs Title/Recording/Escrow $45,000 $500 0.1% of Directs $45,000 $500 0.1% of Directs $45,000 $500 0.1% of Directs $45,000 $500 0.1% of Directs Interest During Lease-Up $714,000 $8,000 1.9% of Directs $1,064,000 $12,000 2.4% of Directs $821,000 $9,000 1.9% of Directs $1,133,000 $13,000 2.3% of Directs TCAC/Syndication Fees $250,000 $3,000 0.7% of Directs $243,000 $3,000 0.5% of Directs $259,000 $3,000 0.6% of Directs $251,000 $3,000 0.5% of Directs Operating Lease-Up/Reserves $341,000 $4,000 0.9% of Directs $340,000 $4,000 0.8% of Directs $399,000 $4,000 0.9% of Directs $398,000 $4,000 0.8% of Directs Total Financing Costs $3,115,000 $35,000 8.1% of Directs $5,650,000 $63,000 12.8% of Directs $3,849,000 $43,000 9.0% of Directs $6,383,000 $71,000 13.0% of Directs IV. Development Costs (3) $50,461,000 $561,000 $567 Per SF GBA $65,415,000 $727,000 $735 Per SF GBA $55,920,000 $621,000 $629 Per SF GBA $72,134,000 $801,000 $812 Per SF GBA (1) Estimated allowance; not verified by KMA or the City of San Marcos. (2) KMA estimate, includes building fees, fire fees, public facilities fees, Regional Transportation Congestion Improvement Program (RTCP) fees, capacity fees, and San Marcos Unified School District fees. (3) Excludes acquisition costs.

F G
Stacked Flats over Podium Parking
9% Tax Credits 4% Tax Credits
Mixed-Use Stacked Flats
9% Tax Credits 4% Tax Credits
100% Affordable
Prepared by: Keyser Marston Associates, Inc.

Filename: City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;lag

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RENTALTABLE E-3

NET OPERATING INCOME

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
I. Gross Scheduled Income (GSI) # Units $/SF $/Month (1) Annual $/SF $/Month (1) Annual One Bedroom @ 50% AMI (2) 27 700 SF $1.39 $970 $314,000 $1.39 $970 $314,000 Two Bedroom @ 50% AMI (2) 53 850 SF $1.23 $1,042 $663,000 $1.23 $1,042 $663,000 Two Bedroom @ Manager 1 850 SF $0.00 $0 $0 $0.00 $0 $0
Three Bedroom @ 50% AMI (2) 9 1,100 SF $1.01 $1,111 $120,000 $0.00 $1,111 $120,000 Total/Average 90 830 SF $1.20 $1,000 $1,097,000 $1.20 $1,000 $1,097,000 Add: Other Income $50 /Unit/Month $54,000 $50 /Unit/Month $54,000 Total Gross Scheduled Income (GSI) $1,151,000 $1,151,000 II. Effective Gross Income
(Less) Vacancy 5.0% of GSI ($58,000) 5.0% of GSI ($58,000) Effective Gross Income (EGI) $1,093,000 $1,093,000
III. Operating Expenses
(Less) Operating Expenses $7,000 /Unit/Year ($630,000) $7,000 /Unit/Year ($630,000) (Less) Tenant Services $200 /Unit/Year ($18,000) $500 /Unit/Year ($45,000) (Less) Property Taxes/Assessments (3) $222 /Unit/Year ($20,000) $222 /Unit/Year ($20,000) (Less) CFD Special Taxes $841 /Unit/Year ($76,000) $841 /Unit/Year ($76,000) (Less) Replacement Reserves $250 /Unit/Year ($23,000) $500 /Unit/Year ($45,000) (Less) Monitoring Fee $150 /Unit/Year ($14,000) $150 /Unit/Year ($14,000) Total Operating Expenses $8,678 /Unit/Year ($781,000) $9,222 /Unit/Year ($830,000)

71.5% of EGI 75.9% of EGI
IV. Net Operating Income (NOI) $312,000 $263,000
V. (Less) Debt Service - Other State Funding Source (4) 0.00% of Loan $0 0.42% of Loan ($38,000) VI. NOI after Debt Service for State Funding Source $312,000 $225,000 (1)
(2) Assumes monthly rents at an average of 50% AMI in order to competitively apply for Tax Credits, see Table B-3 for calculation of affordable rents at 50% AMI. (3) Reflects special assessments only. Assumes project will qualify for tax-exempt status. (4) Reflects competitive State funding source, e.g., AHSC, MIP, MHP, IIG, etc.

F
Based on the lower of State of California Department of Housing and Community Development (HCD) 2023 income limits or California Tax Credit Allocation Committee 2023 maximum income and rent levels for projects placed in service on or after May 15, 2023. 100% Affordable
Stacked Flats over Podium Parking
9% Tax Credits 4% Tax Credits
Unit Size
Prepared by: Keyser Marston Associates, Inc.

Filename: City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;lag

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RENTALTABLE E-4

NET OPERATING INCOME

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
I. Net Operating Income - Residential
A. Gross Scheduled Income # Units $/SF $/Month (1) Annual $/SF $/Month (1) Annual One Bedroom @ 50% AMI (2) 27 600 SF $1.62 $970 $314,000 $1.62 $970 $314,000 Two Bedroom @ 50% AMI (2) 53 800 SF $1.30 $1,042 $663,000 $1.30 $1,042 $663,000 Two Bedroom @ Manager 1 800 SF $0.00 $0 $0 $0.00 $0 $0
Three Bedroom @ 50% AMI (2) 9 975 SF $1.14 $1,111 $120,000 $0.00 $1,111 $120,000 Total/Average 90 758 SF $1.32 $1,000 $1,097,000 $1.32 $1,000 $1,097,000 Add: Other Income $50 /Unit/Month $54,000 $50 /Unit/Month $54,000 Total Gross Scheduled Income (GSI) $1,151,000 $1,151,000 B. Effective Gross Income
(Less) Vacancy 5.0% of GSI ($58,000) 5.0% of GSI ($58,000) Effective Gross Income (EGI) $1,093,000 $1,093,000
C. Operating Expenses
(Less) Operating Expenses $7,000 /Unit/Year ($630,000) $7,000 /Unit/Year ($630,000) (Less) Tenant Services $200 /Unit/Year ($18,000) $500 /Unit/Year ($45,000) (Less) Property Taxes/Assessments (3) $222 /Unit/Year ($20,000) $222 /Unit/Year ($20,000) (Less) CFD Special Taxes $841 /Unit/Year ($76,000) $841 /Unit/Year ($76,000) (Less) Replacement Reserves $250 /Unit/Year ($23,000) $500 /Unit/Year ($45,000) (Less) Monitoring Fee $150 /Unit/Year ($14,000) $150 /Unit/Year ($14,000) Total Operating Expenses $8,678 /Unit/Year ($781,000) $9,222 /Unit/Year ($830,000)

71.5% of EGI 75.9% of EGI
D. Net Operating Income (NOI) $312,000 $263,000
E. (Less) Debt Service - Other State Funding Source (4) 0.00% of Loan $0 0.42% of Loan ($38,000) F. NOI after Debt Service for State Funding Source $312,000 $225,000 G
100% Affordable
Mixed-Use Stacked Flats
9% Tax Credits 4% Tax Credits
Unit Size
Prepared by: Keyser Marston Associates, Inc.

Filename: City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;ejr

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RENTALTABLE E-4

NET OPERATING INCOME

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
G
100% Affordable
Mixed-Use Stacked Flats
9% Tax Credits 4% Tax Credits
II. Net Operating Income - Retail
A. Gross Scheduled Income 7,500 SF $3.50 /SF NNN $315,000 $3.50 /SF NNN $315,000 B. (Less) Vacancy 10.0% of GSI ($32,000) 10.0% of GSI ($32,000) C. Effective Gross Income $283,000 $283,000
D. (Less Unreimbursed Operating Expenses 5.0% of EGI ($14,000) 5.0% of EGI ($14,000) E. Net Operating Income (NOI) - Retail $269,000 $269,000 III. Total Net Operating Income (I + II) $581,000 $494,000 (1)
(2) Assumes monthly rents at an average of 50% AMI in order to competitively apply for Tax Credits, see Table B-3 for calculation of affordable rents at 50% AMI. (3) Reflects special assessments only. Assumes project will qualify for tax-exempt status. (4) Reflects competitive State funding source, e.g., AHSC, MIP, MHP, IIG, etc.

Based on the lower of State of California Department of Housing and Community Development (HCD) 2023 income limits or California Tax Credit Allocation Committee 2023 maximum income and rent levels for projects placed in service on or after May 15, 2023.

Prepared by: Keyser Marston Associates, Inc.

Filename: City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;ejr

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RENTAL
TABLE E-5

RESIDUAL LAND VALUE

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
I. Sources of Funds Total Per Unit Total Per Unit
Supportable Permanent Loan (1) $3,535,000 $39,000 $2,777,000 $31,000 Tax Credit Equity Investment-Federal (2) $22,498,000 $250,000 $28,968,000 $322,000 Tax Credit Equity Investment-State (2) $7,415,000 $82,000 $9,463,000 $105,000 Other State Funding Source (3) $0 $0 $9,000,000 $100,000 Deferred Developer Fee (4) $0 $0 $5,575,000 $62,000
General Partner Equity Contribution (4) $0 $0 $0 $0
Total Sources of Funds $33,448,000 $372,000 $55,783,000 $620,000 II. (Less) Development Costs excluding Land ($50,461,000) ($561,000) ($65,415,000) ($727,000) III. Residual Land Value ($17,013,000) ($189,000) ($9,632,000) ($107,000) 100% Affordable
Stacked Flats over Podium Parking
9% Tax Credits 4% Tax Credits
F
Prepared by: Keyser Marston Associates, Inc.

Filename: City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;lag

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RENTAL
TABLE E-6

RESIDUAL LAND VALUE

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
I. Sources of Funds Total Per Unit Total Per Unit
Supportable Permanent Loan (1) $6,587,000 $73,000 $6,098,000 $68,000 Tax Credit Equity Investment-Federal (2) $22,498,000 $250,000 $30,849,000 $343,000 Tax Credit Equity Investment-State (2) $7,893,000 $88,000 $10,078,000 $112,000 Other State Funding Source (3) $0 $0 $9,000,000 $100,000 Deferred Developer Fee (4) $0 $0 $6,100,000 $68,000
General Partner Equity Contribution (4) $0 $0 $0 $0
Total Sources of Funds $36,978,000 $411,000 $62,125,000 $690,000 II. (Less) Development Costs excluding Land ($55,920,000) ($621,000) ($72,134,000) ($801,000) III. Residual Land Value ($18,942,000) ($210,000) ($10,009,000) ($111,000) 100% Affordable
Mixed-Use Stacked Flats
9% Tax Credits 4% Tax Credits
G
Prepared by: Keyser Marston Associates, Inc.

Filename: City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;lag

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RENTAL
TABLES E-5 AND E-6 (CONT'D.)

RESIDUAL LAND VALUE

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
(1) Supportable Permanent Loan
NOI $312,000 $225,000 $581,000 $494,000
Interest Rate 7.00% 6.25% 7.00% 6.25%
Term (years) 35 35 35 35
Debt Coverage Ratio 1.15 1.15 1.15 1.15
Annual Debt Service $271,000 $195,652 $505,000 $429,565 Supportable Permanent Loan $3,535,000 $2,777,000 $6,587,000 $6,098,000 (2) Low Income Housing Tax Credits
A. Federal
Estimate of Eligible Basis:

Total Development Costs $50,461,000 $65,415,000 $55,920,000 $72,134,000 (Less) Ineligible Costs 4% ($1,948,000) 5% ($3,504,000) 8% ($4,283,000) 9% ($6,203,000) Eligible Basis $48,513,000 $61,911,000 $51,637,000 $65,931,000 Tax Credit Proceeds:

Maximum Eligible Basis $48,513,000 $61,911,000 $51,637,000 $65,931,000 (Less) Voluntary Credit Adjustment 40.0% ($19,405,000) 0.0% $0 40.0% ($20,655,000) 0.0% $0 Total Requested Unadjusted Basis $29,108,000 $61,911,000 $30,982,000 $65,931,000 Impacted Bonus Factor 130% $37,840,000 130% $80,484,300 130% $40,277,000 130% $85,710,300 Tax Credit Qualified Units/Applicable Factor 100% $37,840,000 100% $80,484,300 100% $40,277,000 100% $85,710,300 Tax Credit Rate 9.00% $3,406,000 4.00% $3,219,000 9.00% $3,625,000 4.00% $3,428,000 Maximum Annual Tax Credits $2,500,000 N/A $2,500,000 N/A Total Tax Credits @ 10 $25,000,000 10 $32,190,000 10 $25,000,000 10 $34,280,000 Limited Partner Share 99.99% $24,998,000 99.99% $32,186,781 99.99% $24,998,000 99.99% $34,276,572 Tax Credit Equity Investment @ 90.0% $22,498,000 90.0% $28,968,000 90.0% $22,498,000 90.0% $30,849,000 F G
Stacked Flats over Podium Parking
9% Tax Credits 4% Tax Credits
Mixed-Use Stacked Flats
9% Tax Credits 4% Tax Credits
100% Affordable
Prepared by: Keyser Marston Associates, Inc.

Filename: City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;lag

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OFF-SITE PRODUCTION
RENTAL
TABLES E-5 AND E-6 (CONT'D.)

RESIDUAL LAND VALUE

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
F G
Stacked Flats over Podium Parking
9% Tax Credits 4% Tax Credits
Mixed-Use Stacked Flats
9% Tax Credits 4% Tax Credits
100% Affordable
B. State
Unadjusted Eligible Basis $48,513,000 $61,911,000 $51,637,000 $65,931,000 Requested Eligible Basis 60.0% $29,108,000 60.0% $37,147,000 60.0% $30,982,000 60.0% $39,559,000 Tax Credit Factor 30.0% $8,732,000 30.0% $11,144,000 30.0% $9,295,000 30.0% $11,868,000 Limited Partner Share 99.9% $8,723,000 99.9% $11,133,000 99.9% $9,286,000 99.9% $11,856,000 Tax Credit Equity @ 85.0% $7,415,000 85.0% $9,463,000 85.0% $7,893,000 85.0% $10,078,000 (3) Other State Funding Source
Total Loan $0 $9,000,000 $0 $9,000,000
Annual Debt Service 0.00% $0 0.42% $38,000 0.00% $0 0.42% $38,000 (4) Estimate of Deferred Developer Fee
Eligible Basis $48,513,000 $61,911,000 $51,637,000 $65,931,000 (Less) Developer Fee ($2,200,000) ($8,075,000) ($2,200,000) ($8,600,000) Unadjusted Eligible Basis $46,313,000 $53,836,000 $49,437,000 $57,331,000 Total Developer Fee 4.8% $2,200,000 15.0% $8,075,000 4.5% $2,200,000 15.0% $8,600,000 Developer Overhead Fee $2,200,000 $8,075,000 $2,200,000 $8,600,000 (Less) Deferred Developer Fee 0.00% $0 69.0% ($5,575,000) 0.00% $0 70.9% ($6,100,000) Upfront Developer Fee $2,200,000 $2,500,000 $2,200,000 $2,500,000 Prepared by: Keyser Marston Associates, Inc.

Filename: City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;lag

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RENTALTABLE E-7
OFF-SITE AFFORDABLE PROTOTYPES - 100% MODERATE

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
I. Project Description
Site Area 3.00 Acres 2.00 Acres
Gross Building Area - Residential 89,059 SF 81,382 SF
Gross Building Area - Retail 7,500 SF
Number of Units 90 Units 90 Units
Number of Spaces 153 Spaces 196 Spaces
II. Development Costs Total Comments Total Comments
A. Direct Costs
Off-Site Improvements $653,000 $5 Per SF Site $436,000 $5 Per SF Site On-Site Improvements/Landscaping $1,960,000 $15 Per SF Site $1,307,000 $15 Per SF Site Parking $4,590,000 $30,000 Per Space $7,840,000 $40,000 Per Space Shell Construction - Residential $28,944,000 $325 Per SF GBA $28,484,000 $350 Per SF GBA Shell Construction - Retail $0 $0 Per SF GBA $1,875,000 $250 Per SF GBA Tenant Improvements $0 $0 Per SF GBA $375,000 $50 Per SF GBA FF&E/Amenities $450,000 $5,000 Per Unit $450,000 $5,000 Per Unit Subtotal $36,597,000 $411 Per SF GBA $40,767,000 $459 Per SF GBA Add: Prevailing Wages $0 0.0% of Directs $0 0.0% of Directs Contingency $1,830,000 5.0% of Directs $2,038,000 5.0% of Directs Total Direct Costs $38,427,000 $431 Per SF GBA $42,805,000 $482 Per SF GBA $427,000 Per Unit $476,000 Per Unit
B. Indirect Costs
Architecture & Engineering $1,921,000 5.0% of Directs $2,140,000 5.0% of Directs Permits & Fees $2,996,000 $34 Per SF GBA $2,976,000 $33 Per SF GBA Legal & Accounting $576,000 1.5% of Directs $642,000 1.5% of Directs Taxes & Insurance $576,000 1.5% of Directs $642,000 1.5% of Directs Developer Fee $1,537,000 4.0% of Directs $1,712,000 4.0% of Directs Marketing/Lease-Up $225,000 $2,500 Per Unit $225,000 $2,500 Per Unit Contingency $392,000 5.0% of Indirects $417,000 5.0% of Indirects Total Indirect Costs $8,223,000 21.4% of Directs $8,754,000 20.5% of Directs C. Financing Costs $4,611,000 12.0% of Directs $5,137,000 12.0% of Directs D. Development Costs $51,261,000 $576 Per SF GBA $56,696,000 $638 Per SF GBA $570,000 Per Unit $630,000 Per Unit
Stacked Flats over Podium Mixed-Use Stacked Flats
100% Moderate
Prepared by: Keyser Marston Associates, Inc.

Filename i:\City of San Marcos_In-Lieu Fee Study_Prototype Models_v2;1/25/2024;lag

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RENTALTABLE E-7
OFF-SITE AFFORDABLE PROTOTYPES - 100% MODERATE

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
Stacked Flats over Podium Mixed-Use Stacked Flats
100% Moderate
III. Net Operating Income - 100% Moderate
A. Gross Scheduled Income
One Bedroom 700 SF 27 $3.39 $2,372 $769,000 600 SF 27 $3.95 $2,372 $769,000 Two Bedroom 850 SF 54 $3.08 $2,618 $1,696,000 800 SF 54 $3.27 $2,618 $1,696,000 Three Bedroom 1,100 SF 9 $2.60 $2,863 $309,000 975 SF 9 $2.94 $2,863 $309,000 Total 830 SF 90 $3.09 $2,569 $2,774,000 758 SF 90 $3.39 $2,569 $2,774,000 B. Add: Other Income $100 /Unit/Month $108,000 $150 /Unit/Month $162,000 Total Gross Scheduled Income (GSI) $2,882,000 $2,936,000 (Less) Vacancy 5.0% of GSI ($144,000) 5.0% of GSI ($147,000) Effective Gross Income (EGI) $2,738,000 $2,789,000
C. (Less) Operating Expenses $5,000 /Unit/Year ($450,000) $5,000 /Unit/Year ($450,000) (Less) Property Taxes/Assessments $5,356 /Unit/Year ($482,000) $5,478 /Unit/Year ($493,000) (Less) Replacement Reserves $250 /Unit/Year ($23,000) $250 /Unit/Year ($23,000) Total Operating Expenses 34.9% of EGI ($955,000) 34.6% of EGI ($966,000) D. Net Operating Income - Residential $1,783,000 $1,823,000 E. Gross Scheduled Income - Retail 7,500 SF $3.50 $315,000 (Less) Vacancy 10.0% of GSI ($32,000)
Effective Gross Income $283,000
F. (Less Unreimbursed Operating Expenses 5.0% of EGI ($14,000) G. Net Operating Income - Retail $269,000
H. Total Net Operating Income $1,783,000 $2,092,000
IV. Residual Land Value - 100% Moderate
A. Net Operating Income $1,783,000 $2,092,000
Capitalized Value @ 4.25% $41,953,000 4.25% $49,224,000 (Less) Cost of Sale 3.0% of Value ($1,259,000) 3.0% of Value ($1,477,000) (Less) Targe Profit 10.0% of Value ($4,195,000) 10.0% of Value ($4,922,000) Net Sales Proceeds $36,499,000 $42,825,000
B. (Less) Development Costs ($51,261,000) ($56,696,000) C. Residual Land Value - 100% Moderate ($14,762,000) ($13,871,000) Per Unit ($164,000) ($154,000)
Per SF Site Area ($113) ($159)
Prepared by: Keyser Marston Associates, Inc.

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APPENDIX F
Comparison of Affordable Housing Fees
San Diego County

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TABLE F-1

COMPARISON OF AFFORDABLE HOUSING FEES, SAN DIEGO COUNTY

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
Rental For-Sale Project Size
Threshold
% Affordable
Units Required Fee Option Project Size Threshold Fee Type Amount Per
Market-Rate Unit or
Market-Rate SF
Carlsbad 1993 Yes Yes 7 units 15% @ Low Income Yes In-Lieu Fee $16/SF Chula Vista (1) 1981 Yes Yes 50 units 10% Yes In-Lieu Fee varies by project Coronado 1983 Yes Yes 2 units Rental Yes In-Lieu Fee $7,000/Unit 20% @ Low Income
For-Sale Yes In-Lieu Fee $7,000/Unit
20% @ Moderate Income
Del Mar 2006 Yes Yes 2 - 5 units 1 rental unit @ Low Income Yes In-Lieu Fee $34/SF 6 - 9 units 1 rental unit @ Low Income None None None None 10 - 19 units None None None None
20 -29 units None None None None
30+ units None None None None
Updated
1993
Updated
2015
20% rental units @ Low
Income (at least 2 units @
Very Low Income and 2 units
at Extremely Low Income)
City
Inclusionary Production Requirement Affordable Housing Fee Available to
projects up to 6 units
Available to
projects of all sizes;
< 50 units exempt
(5% Low Income
5% Moderate Income)
Year
Adopted
Available to
projects of all sizes
Available to
projects of all sizes
Available to
projects up to 5 units
20% rental units @ Low
Income (at least 1 unit @ Very
Low Income)
20% rental units @ Low
Income (at least 1 unit @ Very
Low Income and 1 unit at
Extremely Low Income)
Prepared by: Keyser Marston Associates, Inc.

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TABLE F-1

COMPARISON OF AFFORDABLE HOUSING FEES, SAN DIEGO COUNTY

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
Rental For-Sale Project Size
Threshold
% Affordable
Units Required Fee Option Project Size Threshold Fee Type Amount Per
Market-Rate Unit or
Market-Rate SF
City
Inclusionary Production Requirement Affordable Housing Fee Year
Adopted
Encinitas 1987 Yes Yes 7 units 15% @ Very Low Income Yes In-Lieu Fee $20/SF or 20% Low Income
Updated
2019
Escondido None None None None None None
Oceanside Yes Yes 10 units (2) Rental Yes In-Lieu Fee $20/SF (3) 15% @ Low Income (2)
For-Sale Yes In-Lieu Fee $20/SF (3)
15% @ Low or
Moderate Income (2)
Poway Yes Yes 1 unit Rental Yes In-Lieu Fee $500/unit (4) 15% @ Very Low Income
For-Sale Yes In-Lieu Fee $500/unit (4)
15% @ Low Income or
20% @ Moderate Income
San Diego (5) 2003 Yes Yes 10 units Rental Yes In-Lieu Fee $25/SF Outside FUA 10% @ 60% AMI
For-Sale Yes In-Lieu Fee $25/SF
10% @ 100% AMI or
15% @ 120% AMI
San Diego
Inside FUA 1992 Yes Yes 2 units 20% @ 65% AMI or less None None None None Updated
2014
Updated
2020
Available to
projects up to 6 units and
fractional units
No
Requirement
No
Requirement
Available to
projects of all sizes
Available to
projects of all sizes
Available to projects
of all sizes
Available to projects
of all sizes
Available to projects of all sizes;
<10 units exempt
Available to projects of all sizes;
<10 units exempt
Prepared by: Keyser Marston Associates, Inc.

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TABLE F-1

COMPARISON OF AFFORDABLE HOUSING FEES, SAN DIEGO COUNTY

INCLUSIONARY HOUSING IN-LIEU FEE STUDY

CITY OF SAN MARCOS
Rental For-Sale Project Size
Threshold
% Affordable
Units Required Fee Option Project Size Threshold Fee Type Amount Per
Market-Rate Unit or
Market-Rate SF
City
Inclusionary Production Requirement Affordable Housing Fee Year
Adopted
Solana Beach Yes Yes 5 units 15% @ Very Low or Yes Impact Fee $26.56 Low Income
Vista Yes Yes 20 units 5% @ Low Yes In-Lieu Fee $16/SF
4% @ Moderate
(1) Excludes area of City of Chula Vista west of I-805 identified as "Area of Low/Moderate Income Concentration". (2) Reflects proposed revisions to the City's inclusionary housing ordinance, pending approval by the City Council on January 24, 2024. (3) In-lieu fee effective January 1, 2024 - December 31, 2024. Beginning January 1, 2025 and every calendar year thereafter the fee will be administratively adjusted based on the ENR CCI index. (4) City of Poway base fee varies by zoning, with a maximum total of $500 per unit for all projects. (5) Applies to development located outside of the City of San Diego's North City Future Urbanizing Area (FUA). Reflects ordinance approved by the San Diego City Council December 11, 2019, effective July 1, 2020. Inclusionary housing requirements to be phased in over five (5) years. In-lieu fee of $25 per SF reflects fee beginning July 1, 2024.

Available to all projects where
calculation of required
affordable units results in a
fractional unit less than 0.5
Available to projects of all sizes;
<20 units exempt
Partial affordable units subject
to the payment of an in-lieu fee
in proportion to the partial unit
Prepared by: Keyser Marston Associates, Inc.

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San Marcos City CouncilNovember 26, 2024

San Marcos City Council
November 26, 2024