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CITY OF SAN MATEO
Agenda Report
City Hall
330 W. 20th Avenue
San Mateo CA 94403
www.cityofsanmateo.org
Agenda Number: 23 Section Name: {{section.name}} File ID: {{item.tracking_number}} TO: City Council
FROM: Alex Khojikian, City Manager
PREPARED BY: Finance Department
MEETING DATE: December 9, 2024
SUBJECT:
Receipt and Use of Development Impact Fees, In-Lieu Fees, and Wastewater Capacity Charges – Annual Report RECOMMENDATION:
Adopt a Resolution to make findings and accept the annual report on receipt and use of development impact fees, in-lieu fees, and wastewater capacity charges for the year ended June 30, 2024.
BACKGROUND:
Development Impact Fees
The City of San Mateo assesses the following development impact fees – Wastewater Treatment Plant Phase II Expansion Fee, Transportation Improvement Fee, and Park Impact Fee.
Local governments often charge fees as a condition of approval for development projects to fund public improvements in order to compensate for the demands that the developments have on public resources. These fees are commonly known as development impact fees. In 1989, the State Legislature passed Assembly Bill 1600 (AB 1600), which added Sections 66000 et seq. to the California Government Code, commonly known as the Mitigation Fee Act. Government Code Section 66006 requires that the City make available to the public the following information regarding development impact fees within 180 days after the end of each fiscal year:
1. A brief description of the type of fee.
2. The amount of the fee.
3. The fee’s beginning and ending balances for the fiscal year.
4. Total fees collected and the interest earned, if applicable.
5. Identification of each public improvement on which impact fees were expended and the amount of expenditure on each improvement, including the total percentage of the cost of the public improvement that was funded with impact fees.
6. Identification and timeline of public improvements any unexpended fees will be used for. a. This information is listed in Exhibit A to the Resolution. Exhibit A shows the five-year plan for public improvement projects and their anticipated expenditures related to the Mitigation Fee Act and Quimby Act.
Specific details on each of the projects listed in Exhibit A can be found in the five-year capital improvement program section in the City’s 2024-25 budget, which was adopted by City Council on June 17, 2024.
7. Description and uses for transfers or loans of fees, if applicable.
8. Amounts of any refunds and allocations.
Further, the Mitigation Fee Act requires that findings describing the continuing need for impact fees be made every five years specifying the intended use of any unexpended impact fees, regardless of whether the fees are committed or uncommitted. If findings are not presented as scheduled, the City may be subjected to go through a refunding procedure.
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The City is opting to make such findings every year.
In-Lieu Fees In-lieu fees are fees that are collected by the City instead of requiring developers to provide or construct specified improvements or amenities with their projects. The City of San Mateo assesses five in-lieu fees – Parking In-Lieu Fee, Art in Public Places Fee, Tree Replacement Fee, Below Market Rate Housing Fee, and Park In-Lieu Fee.
Park In-Lieu Fees are assessed pursuant to the Quimby Act under Government Code Section 66477. The other in-lieu fees do not have statutory reporting requirements but are included in this report for informational purposes. In an abundance of caution, and based on recent caselaw, this report and resolution include the same reporting requirements and findings for in-lieu fees that apply to impact fees. Under the Quimby Act, local governments may require the dedication of land for parks or the payment of fees in-lieu of land dedication as a condition of subdivision map approval. While park in-lieu fees are exempt from the reporting requirements included in the Mitigation Fee Act, these fees have separate Quimby Act reporting requirements, specifically:
1. The City must develop a schedule specifying the use of land or fees to develop park or recreational facilities to serve the residents of the subdivision.
2. Any Quimby fees collected must be committed within five years after the payment of the fees or the issuance of building permits on one-half of the lots created by the subdivision, whichever occurs later.
3. If not committed, the fees shall be distributed and paid to the record owners of the subdivision in the same proportion that the size of the lot bears to the total area of lots within the subdivision (Gov. Code section 66477(a)(6)).
Linkage Fees
Linkage fees are exactions for social needs indirectly related to development projects. The City of San Mateo assesses two linkage fees – Child Care Development Fee and Affordable Housing Commercial Linkage Fee. While these are linkage fees, they are included in this report with reporting requirements under the Mitigation Fee Act for informational purposes and to make sure that information is available in the event that a court rules in the future that linkage fees are subject to the reporting requirements of the Mitigation Fee Act.
Wastewater Capacity Charges
Under the Mitigation Fee Act, water or wastewater capacity charges must be deposited in a separate capital facilities fund and not comingled with other funds, and the City can only spend the funds for the purpose for which the charge was collected.
Government Code Section 66013(d) requires that the City make available to the public the following information regarding wastewater capacity charges within 180 days after the end of each fiscal year:
1. A description of the charges.
2. The charges’ beginning and ending balances for the fiscal year.
3. Total charges collected and the interest earned, if applicable, during the fiscal year.
4. Identification of all the following:
a. Each public improvement on which charges were expended and the amount of the expenditure for each improvement, including the percentage of the total cost of the public improvement that was funded with those charges if more than one source of funding was used. b. Each public improvement on which charges were expended that was completed during that fiscal year. c. Each public improvement that is anticipated to be undertaken in the following fiscal year.
5. A description of each interfund transfer or loan made from the capital facilities fund. The information provided, in the case of an interfund transfer, shall identify the public improvements on which the transferred moneys are, or will be, expended. The information, in the case of an interfund loan, shall include the date on which the loan will be repaid, and the rate of interest that the fund will receive on the loan.
This report complies with requirements of the Mitigation Fee Act and the Quimby Act outlined above.
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Analysis
Development Impact Fees
Wastewater Treatment Plant Phase II Expansion Fee
In April 2005, construction began to increase capacity of the wastewater treatment plant, and construction was substantially completed in the spring of 2009. Funds from the Sewer Enterprise Fund were used to pay for the expansion project. Under a Joint Powers Agreement (JPA), the treatment plant is partially owned by the Estero Municipal Improvement District (Foster City). Based on San Mateo’s share of the treatment plant and based on the total projected cost attributable to development based on the 2005 expansion study, the amount that is to be recovered through development fees is $3.52 million in total.
The Wastewater Treatment Plant Phase II Expansion Fee is imposed on all development that results in a change of use and that adds more sewage to the City’s sewage treatment system. The fee took effect on July 1, 2006 and will continue to be charged until $3.52 million is collected. Funds collected are transferred annually to the fund balance of the Sewer Enterprise Fund as a repayment to the Fund for the expansion cost.
The following table shows collections in 2023-24, as well as collections to date.
Wastewater Treatment Plant Expansion Impact Fee 2023-24 Beginning Balance $ -
Fees Collected $ 319,391
Interest Income / (Expense) $ - Transfer to Sewer Enterprise Fund $ (319,391)
Ending Balance $ -
Collections to Date
Total Developer Fees Collected as of 2023-24 $ 3,183,701 Total Developer Fees Needed $ 3,520,000
Percent (%) Collected 90%
Transportation Improvement Fee
San Mateo Municipal Code Chapter 27.13 establishes a transportation improvement fee for new development to fund City-wide traffic improvements to mitigate the cumulative impacts of new development and to accommodate future development. The fee is charged as shown in the 2023-24 Comprehensive Fee Schedule:
Residential
Single-family Per dwelling unit $7,355.62
Multi-family Per dwelling unit $3,714.85
Commercial and Industrial
Retail Per 1,000 sq. ft. $29,704.70
Office Per 1,000 sq. ft. $8,960.80
Industrial Per 1,000 sq. ft. $4,915.50 Hotel Per Room $4,677.96
Institution Per 1,000 sq. ft. $3,821.86
The following table shows activities in 2023-24.
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Transportation Improvement Fee 2023-24
Beginning Balance $ 315,704
Fees Collected $ 773,139
Interest Income / (Expense) $ 14,509
Expenditures $ (1,046,931)
Reclassification of Prior Years $ - Ending Balance $ 56,421
2023-24
Transportation Improvement Fee Total Expended Impact Fees Used % of Total Project Expenditures:
460037 El Camino at Highway 92 Landscape Improvements $ 66,235 $ 66,235 100% 460049 Poplar/Humboldt Signal Modify-Left Turn $ 23,295 $ 23,295 100% 466600 Citywide Traffic Calming $ 238,294 $ 198,464 83% 462202 Rail Corridor Grade Separation $ 186,802 $ 186,802 100% 46R008 Railroad Ave Wall Enhancement $ 572,135 $ 572,135 100% Total Expenditures: $ 1,086,762 $ 1,046,931 96% The total ending balance as of the end of fiscal year was $56,421. The fund balance and continued collection of the Transportation Improvement Fee will be utilized to fund the project(s) listed in Exhibit A.
Park Impact Fee
Under San Mateo Municipal Code Chapter 13.05, a park impact fee is imposed on the construction of new residential units to accommodate the increased demand on park and recreation facilities. The fee is charged as shown in the 2023-24 Comprehensive Fee Schedule:
Per residential unit type:
Single family $29,598 per unit
Multi-family 2-4 units $27,172 per unit
Multi-family 5+ units $20,476 per unit
Mobile homes $17,564 per unit
The following table shows activities in 2023-24.
Park Impact Fee 2023-24
Beginning Balance $ 3,464,158
Fees Collected $ -
Interest Income / (Expense) $ 133,357
Expenditures $ -
Ending Balance $ 3,597,515
The total ending balance as of the end of fiscal year was $3,597,515. The fund balance and continued collection of the Park Impact Fee will be utilized to fund the project(s) listed in Exhibit A.
The Council is asked to make the following findings regarding development impact fees collected but not expended – these findings are detailed in the proposed resolution:
1. Development impact fees are collected to mitigate direct and indirect impacts from development.
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2. These funds are expended in a timely manner to fund continued improvements to public facilities related to the increased demand on the facilities resulting from development.
3. There is a reasonable relationship between these impact fees and their purpose.
4. These impact fees continue to be required to fund applicable improvements, and as such, these fees will continue to be collected for utilization solely for their intended purpose.
In-Lieu Fees
Parking In-Lieu Fee
San Mateo Municipal Code Chapter 11.62 establishes a parking in-lieu fee for new development to fund for additional parking in downtown San Mateo. Applicants for planning approval within the Central Parking Improvement District may pay a fee in lieu of providing required parking on the property site in accordance with Title 27 of the municipal code. As shown in the 2023-24 Comprehensive Fee Schedule, the fee is $61,796.59 per space.
Do we want to
The following table shows activities in 2023-24.
Parking In-Lieu Fee 2023-24
Beginning Balance $ 5,996,149
Fees Collected $ -
Interest Income / (Expense) $ 170,527
Expenditures $ (1,841,108)
Prior Year Adjustment $ (515,658)
Ending Balance $ 3,809,910
The total ending balance as of the end of fiscal year was $3,809,910. The fund balance and continued collection of the Parking In-Lieu Fee will be utilized to fund the project(s) listed in Exhibit A.
Art in Public Places Fee
San Mateo Municipal Code Chapter 23.60 establishes a fee on developers in-lieu of placing approved artwork as part of a new development to balance the community’s physical growth and revitalization with its cultural and artistic resources.
The fee is applicable to commercial and multi-family residential projects exceeding three million dollars in building permit valuation, which is computed using the latest building valuation data as set forth by the International Conference of Building Officials (ICBO) unless, in the opinion of the Building Official, a different valuation measure should be used. As shown in the 2023-24 Comprehensive Fee Schedule, the fee is charged 1.19 percent of total building valuation.
The following table shows activities in 2023-24.
Art in Public Places Fee 2023-24
Beginning Balance $ 1,023,017
Fees Collected $ -
Interest Income / (Expense) $ 30,583
Expenditures $ (306,377)
Prior Year Adjustment $ 14,760
Ending Balance $ 761,983
The total ending balance as of the end of fiscal year was $761,983. The fund balance and continued collection of the Art in Public Places Fee will be utilized to fund the project(s) listed in Exhibit A.
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Tree Replacement Fee
San Mateo Municipal Code Chapter 27.71 establishes a fee on all development requiring approval of a planning application, except for Single-Family Dwelling Design Review (SFDDR) applications, for the removal of existing trees on development sites. The fee is imposed if the trees to be removed are not made up with replacement trees on-site.
Under San Mateo Municipal Code Chapter 13.35, the City may also impose a fee on any person or entity for removing trees that encroach on City streets. The fee is imposed if the tree(s) to be removed are not replanted with a like tree satisfying City requirements. The fee is to be used by the City for plantings on public land.
As shown in the 2023-24 Comprehensive Fee Schedule, effective January 1, 2024, the fee charged is as follows:
Tree Replacement Cost
24 inch Box Tree $784 per tree
15 gallon Tree $490 per tree
36 inch Box Tree $1,550 per tree
48 inch Box Tree $3,130 per tree
The following table shows activities in 2023-24.
Tree Replacement Fee 2023-24
Beginning Balance $ 1,178,727
Fees Collected $ 201,997
Interest Income / (Expense) $ 7,426
Expenditures $ (171,987)
Prior Year Adjustment $ (83,820)
Ending Balance $ 1,132,343
2023-24
Tree Replacement Fee Total Expended In-Lieu Fees Used % of Total Project Expenditures:
610008 Tree Planting - Parks Division $ 171,987 $ 171,987 100% Total Expenditures: $ 171,987 $ 171,987 100% The total ending balance as of the end of fiscal year was $1,132,343. The fund balance and continued collection of the Tree Replacement Fee will be utilized to fund the project(s) listed in Exhibit A.
Below Market Rate Housing Fee
The Below Market Rate Housing Fee, which became effective January 1, 2010 pursuant to City Council Resolution No. 121 (2008), is collected from developers in lieu of constructing affordable housing units onsite as required under the City’s Below Market Rate program. The fee applies to developments that contain fewer than 11 residential units, and to fractional unit requirements of less than .5 for developments that contain 11 or more units. The fee is charged as shown in the 2023-24 Comprehensive Fee Schedule:
A. Fractional required units for projects
consisting of 11 or more residential units
1. Rental 0.1 housing unit $33,452
0.2 housing unit $66,903
0.3 housing unit $100,355
0.4 housing unit $133,807
2. Owner 0.1 housing unit $30,701
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0.2 housing unit $61,401
0.3 housing unit $92,102
0.4 housing unit $122,802
B. Requirement for projects less than 11 units
1. Rental 5 unit project $167,259
6 unit project $200,710
7 unit project $234,162
8 unit project $267,614
9 unit project $301,065
10 unit project $334,517
2. Owner 5 unit project $153,503
6 unit project $184,203
7 unit project $214,904
8 unit project $245,604
9 unit project $276,305
10 unit project $307,005
The following table shows activities in 2023-24.
Below Market Rate Housing Fee 2023-24
Beginning Balance $ 254,281
Fees Collected $ -
Interest Income / (Expense) $ -
Expenditures $ -
Ending Balance $ 254,281
The total ending balance as of the end of the fiscal year was $254,281. A public improvement project is not currently identified in the five-year plan. The Below Market Rate Housing Fee will continue to be collected to build its fund balance, and potential housing related projects will be identified as the fund balance reaches to an appropriate level.
Park In-Lieu Fee
San Mateo Municipal Code Chapter 26.64 establishes a park in-lieu fee on subdivisions in residential planning application projects. Pursuant to the authority of the Subdivision Map Act, and in conformity with the parks and recreation element of the General Plan, the fee is imposed as a condition of final approval of a subdivision or parcel map for park and recreation facilities to serve the subdivision. The fee is charged as shown in the 2023-24 Comprehensive Fee Schedule:
Per residential unit type:
Single family $29,598 per unit
Multi-family 2-4 units $27,172 per unit
Multi-family 5+ units $20,476 per unit
Mobile homes $17,564 per unit
The following table shows activities in 2023-24.
Park In-Lieu Fee 2023-24
Beginning Balance $ 9,048,433
Fees Collected $ 7,317,560
Interest Income / (Expense) $ 595,755
Expenditures $ (890,257)
Ending Balance $ 16,071,491
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The total ending balance as of the end of the fiscal year was $16,071,491. The fund balance and continued collection of the Park In-Lieu Fee will be utilized to fund the project(s) listed in Exhibit A.
Linkage Fees
Child Care Development Fee
The Child Care Development Fee, which became effective on July 1, 2004 pursuant to City Council Resolution No. 34 (2004), is collected to mitigate the impact of new development on the need for child care facilities. The fee is charged as shown in the 2023-24 Comprehensive Fee Schedule:
Per Dwelling unit:
Single-family $4,677.29
Multi-family $3,373.46
Per Sq. Ft.:
Retail $0.39
Office
Industrial
$0.67
$0.22
Hotel $0.14
The following table shows activities in 2023-24.
Child Care Development Fee 2023-24
Beginning Balance $ 2,206,953
Fees Collected $ 9,548
Interest Income / (Expense) $ 71,251
Expenditures $ (430,000)
Prior Year Adjustment $ 4,469
Ending Balance $ 1,862,221
2023-24
Child Care Development Fee Total Expended In-Lieu Fees Used % of Total Project Expenditures:
310600 Child Care Facilities $ 430,000 $ 430,000 100% Total Expenditures: $ 430,000 $ 430,000 100% The total ending balance as of the end of the fiscal year was $1,862,221. The fund balance and continued collection of the Child Care Development Fee will be utilized to fund the project(s) listed in Exhibit A.
Affordable Housing Commercial Linkage Fee
San Mateo Municipal Code Chapter 23.61 establishes an Affordable Housing Commercial Linkage Fee to mitigate the impact that new commercial and office developments have on the demand for affordable housing in the City. The fee is imposed on commercial and office projects over 5,000 sq. ft. and is charged as shown in the 2023-24 Comprehensive Fee Schedule:
Hotels Per square foot $13.11
Retail, restaurants, and services Per square foot $ 6.55 Office, research & development uses, and medical offices Per square foot $32.76
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The fee does not apply to public use developments such as hospitals, nonprofit and government facilities, as well as churches, schools, and child care centers. Developers who enter written agreements to pay area standard wages to all construction workers on the project are entitled to a 25 percent reduction of the fee. Additionally, developers may provide construction of affordable housing units in lieu of the fee payment. The following table shows activities in 2023-24.
Affordable Housing Commercial Linkage Fee 2023-24
Beginning Balance $ 3,245,851
Fees Collected $ -
Interest Income / (Expense) $ 164,327
Miscellaneous items $ (5,084)
Expenditures $ -
Ending Balance $ 3,405,094
The total ending balance as of the end of fiscal year was $3,405,094. The fund balance and continued collection of the Affordable Housing Commercial Linkage Fee will be utilized to fund the project(s) listed in Exhibit A.
Capacity Charges
Wastewater Capacity Charge
San Mateo Municipal Code Chapter 7.38.065 establishes a capacity charge for sewer improvements. The fee is imposed on all new development to recover a proportionate share of costs for existing and future wastewater system facilities and assets from new or expanded connections to the City’s wastewater systems. The applicable wastewater capacity charge is determined by use, wastewater flow, and wastewater strength loadings, and became effective on January 15, 2022.
Under state law, this capacity charge has similar reporting requirements as for impact fees.
The fee is charged as shown in the 2023-24 Comprehensive Fee Schedule:
Residential
a. Single-family Per Dwelling Unit $11,023.71
b. Multi-family
i. Studio & 1 bedroom Per Dwelling Unit $5,511.30
ii. 2 bedroom Per Dwelling Unit $9,186.24
iii. 3+ bedroom Per Dwelling Unit $11,023.71
c. Hotels or motels Per Room/Apartment $5,511.30
d. Board or lodging houses Per Bedroom $5,511.30
e. Accessory Dwelling Unit Per Square Foot $5.51
Commercial/Institutional
a. Meter size of up to 3/4 inch
i. Class B Per Meter $11,023.71
ii. Class C Per Meter $11,808.20
iii. Class D Per Meter $13,005.31
b. Meter size of 1 inch
i. Class B Per Meter $18,372.48
ii. Class C Per Meter $19,679.61
iii. Class D Per Meter $21,675.52
c. Meter size of 1 inch and 1/2 inch
i. Class B Per Meter $36,744.95
ii. Class C Per Meter $39,360.32
iii. Class D Per Meter $43,351.03
d. Meter size of 2 inches
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i. Class B Per Meter $58,791.26
ii. Class C Per Meter $62,975.63
iii. Class D Per Meter $69,361.65
e. Meter size of 3 inches
i. Class B Per Meter $110,233.75
ii. Class C Per Meter $118,079.85
iii. Class D Per Meter $130,052.00
f. Meter size of 4 inches
i. Class B Per Meter $183,722.55
ii. Class C Per Meter $196,799.38
iii. Class D Per Meter $216,754.06
g. Meter size of 6 inches
i. Class B Per Meter $367,445.11
ii. Class C Per Meter $393,599.86
iii. Class D Per Meter $433,508.12
h. Meter size of 8 inches
i. Class B Per Meter $587,911.51
ii. Class C Per Meter $629,759.56
iii. Class D Per Meter $693,613.21
Industrial
a. Flow Per Gallon Per Day $85.33
b. Biological Oxygen Demand (BOD) Per Pound Per Day $2,061.40 c. Suspended Solids (SS) Per Pound Per Day $1,858.73 The following table shows activities in 2023-24.
Wastewater Capacity Charge 2023-24
Beginning Balance $ 271,339
Fees Collected $ 970,595
Interest Income / (Expense) $ 38,700
Expenditures $ (1,280,634)
Ending Balance $ -
2023-24
Wastewater Capacity Charge Total Expended Impact Fees Used % of Total Project Expenditures:
46S003 Basins 2&3 Collection System Improvements $ 14,760,638 $ 1,280,634 8.7% Total Expenditures: $ 14,760,638 $ 1,280,634 8.7% South Trunk Area Sewer Improvement Fees were replaced by the Wastewater Capacity Charges effective January 15, 2022.
However, some development projects entitled prior to this date had included a condition of approval (COA) requiring payment of the South Trunk Area Sewer Improvement Fees. In fiscal year 2023-24, the City received payments from these projects, and the funds were deposited to the wastewater capacity charge fund balance. These funds have been spent on capital improvement projects to increase the City’s wastewater collection and treatment capacity.
There is no interfund transfer or loan made from these charges collected.
The fund balance and continued collection of the Wastewater Capacity Charges will be utilized to fund the project(s) listed in Exhibit A.
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BUDGET IMPACT:
There is no budget impact resulting from this report.
ENVIRONMENTAL DETERMINATION:
This report is not a project subject to CEQA, because it is an organizational or administrative activity that will not result in direct or indirect physical changes in the environment. (CEQA Guidelines Section 15378(b)(5).)
NOTICE PROVIDED
All meeting noticing requirements were met.
ATTACHMENTS
Att 1 - Proposed Resolution - Exhibit A, Public Improvement Project Expenditures Related to the Mitigation Fee Act and Quimby Act Five-Year Plan
STAFF CONTACT
Karen Huang, Finance Director
[email protected]
(650) 522-7110