AB1600 Report on Development Impact Fees — City Council and Authorities Concurrent, January 30, 2024

BACKGROUND
Cities and counties often charge fees on new development to fund public improvements, public amenities and public services. For example, Traffic Mitigation Fees are used to fund transit facilities, streets, bike lanes and sidewalks. These fees are commonly known as development impact fees (Developer Fees). In 1989, the State Legislature passed Assembly Bill 1600 (AB1600) which added Section 66000, et seq., to the California Government Code. The chapter sets forth a number of requirements that local agencies must follow if they are to collect fees from developers to defray the cost of the construction of public facilities related to development projects. Government Code Sections 66000-66025 apply to developer fees established, increased or imposed on or after January 1, 1989, and generally sets forth four broad requirements:

A local jurisdiction must follow the process set forth in the bill and make certain determinations regarding the purpose and use of the fees and to establish a "nexus" or connection between a development project or class of project and the public improvement being financed with the fee.

The fee revenue must be segregated from the General Fund to prevent commingling of public improvement fees and the General Fund.

If a local jurisdiction has had possession of a developer fee for five years or more and has not committed that money to a project or actually spent that money, then it must make findings describing the continuing need for that money each fiscal year after the five years have expired.

If a local jurisdiction cannot make the findings required under paragraph 3, then the city or county must go through a refund procedure.

The Traffic Mitigation Fee, Sanitary Sewer Outlet Fee, Sanitary Sewer Connection Fee, Sanitary Sewer Conveyance Fee, Storm Drain Fee, Parks Mitigation Fee, Tasman East Specific Plan Infrastructure Impact Fee, Affordable Housing Fees, and Patrick Henry Drive Infrastructure Impact Fee that the City of Santa Clara (City) collects qualify as Development Impact Fees and therefore must comply with the above referenced Government Code Sections. The amount of each of these development impact fees for fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23 is reflected in the City’s Municipal Fee Schedule, previously adopted by the City Council. The adopted City’s Municipal Fee Schedule for fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23 is available at: HYPERLINK "https://www.santaclaraca.gov/home/showpublisheddocument/78108/638053165706570000" https://www.santaclaraca.gov/home/showpublisheddocument/78108/638053165706570000. As required by law, these fees are segregated and accounted for as Special Revenue Funds. Government Code Section 66001 requires the City to make available to the public certain information regarding these fees for each fund within 180 days after the end of each fiscal year. Accordingly, the following report is presented to the City Council for review.

ANALYSIS
Utilizing the first in, first out (FIFO) accounting method – where the initial revenue received is the first expended, staff analyzed the year-end balances for the fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23. This analysis is to identify any portion of the balances that had been outstanding for five or more years. In instances where a balance exceeded the five-year threshold, a thorough review of previously identified projects is initiated to assess whether any developer fees collected require refunding.

Many of the identified projects are already underway, and the City has appropriated funds for these projects as noted in the City’s FY DOCPROPERTY FYDate \* MERGEFORMAT 2022-23 and 2023-24 Biennial Capital Improvement Program Budget Book. The publication can be found on the City’s website and is accessible at the following location: HYPERLINK "https://www.santaclaraca.gov/home/showpublisheddocument/77216/638085057478270000" https://www.santaclaraca.gov/home/showpublisheddocument/77216/638085057478270000. Exhibit A provides a detailed breakdown of the identification of every Capital Project where fees were utilized, along with the corresponding expenditure amounts for each project. This exhibit also specifies the total percentage of the Capital Project cost covered by these fees.

Traffic Mitigation Fee
The Traffic Mitigation Fee is levied to fund improvements or programs to mitigate City traffic impacts that result either directly or indirectly from development projects. To determine the traffic mitigation fees the City conducts a Traffic Impact Fee Nexus study and the most recent report was approved by Council August 21, 2018. The basis of Santa Clara’s traffic mitigation fee, also more commonly known as a traffic impact fee is the number of net new PM peak hour vehicle trips generated by new development. Those additional trips result in the traffic impacts the fee is intended to mitigate. The fee is calculated by dividing the total cost of the improvement projects in the Traffic Mitigation Program by the number of additional PM peak hour trips generated by new development, which results in a “per PM peak hour trip” fee amount. For simplicity of application, this fee is then converted to a fee per square foot, per hotel room, or per dwelling unit, based on the trip generation rates in the latest ITE Trip Generation Manual. The fee is automatically adjusted for inflation annually at the start of each fiscal year, based on the latest Engineering News Record Construction Cost Index.

The following table summarizes the activity for the Traffic Mitigation Fund from fiscal year DOCPROPERTY PYDate \* MERGEFORMAT 2018-19 through fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23.

LINK Excel.Sheet.12 "\\\\VSRVFSPROD01\\dept\\finance\\account\\Accounting\\Accounting Information Requests\\AB1600\\FY22-23\\AB1600 YE report\\AB1600 Tables for Year end Report .xlsx" "1 F525 Traffic!R5C1:R12C23" \a \p \* MERGEFORMAT During the fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23, the City collected $1,092,092 in traffic mitigation fees, gained $177,957 in interest, and expended $795,155 on various projects. The accumulative amount of the Traffic Impact Fee available at the end of fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23 is $11,413,512 with $4,609,189 being held for over five years. Exhibit A identifies the projects that will make use of all unspent fees held over five years.

There is no impact on City resources since all qualified impact fees held by the City for over five years are either spent or committed, thus eliminating the need to refund any fees to developers according to Government Code Sections 66000 and subsequent section.

Sanitary Sewer Outlet Fee
The Sanitary Sewer Outlet Fee is collected from developers to construct public sanitary sewer facilities. City Council passed Ordinance 1778 on December 3, 2002 which created the sanitary sewer outlet charge which is used for the acquisition, construction, reconstruction, maintenance, and operation of off-site sewerage facilities, and to repay principal and interest on bonds issued for the construction and reconstruction of such sewerage facilities. The fee shall automatically adjust for inflation annually at the start of each fiscal year, based on the latest Engineering News Record Construction Cost Index.

The following table summarizes the activity for the Sanitary Sewer Outlet Fees from fiscal year DOCPROPERTY PYDate \* MERGEFORMAT 2018-19 through fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23.

LINK Excel.Sheet.12 "\\\\VSRVFSPROD01\\dept\\finance\\account\\Accounting\\Accounting Information Requests\\AB1600\\FY22-23\\AB1600 YE report\\AB1600 Tables for Year end Report .xlsx" "2 SewerOutlet56240!R5C1:R13C26" \a \p \* MERGEFORMAT The amount of developer fees collected in the fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23 was $798,692, with an additional $1,972 generated in interest, and no project expenditures were incurred. The remaining balance in the Sanitary Sewer Outlet Fee Fund at the end of fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23 is $131,522.

There is no impact on City resources since all qualified impact fees collected by the City have been spent, thus eliminating the need to refund any fees to developers according to Government Code Sections 66000-66003.

Sanitary Sewer Connection Fee
The Sanitary Sewer Connection Fee was adopted to improve and expand the sewer collection system. City Council passed Ordinance 1428 on August 25, 1981 which created the sanitary sewer connection charge which is charged whenever a property is initially connected or requires an addition of a new connection to the sanitary sewer system. The fee is charged based on type of dwelling unit for residential (single family, duplex, condominium, etc.) and non-residential which charges based on connection size. The fee shall automatically adjust for inflation annually at the start of each fiscal year, based on the latest Engineering News Record Construction Cost Index.

The following table summarizes activity for the Sanitary Sewer Connection Fee from fiscal year DOCPROPERTY PYDate \* MERGEFORMAT 2018-19 through fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23.

LINK Excel.Sheet.12 "\\\\VSRVFSPROD01\\dept\\finance\\account\\Accounting\\Accounting Information Requests\\AB1600\\FY22-23\\AB1600 YE report\\AB1600 Tables for Year end Report .xlsx" "3 SewerConnect56200!R5C1:R13C26" \a \p In the fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23, the City collected $2,610,881 in developer fees and spent $13,852,060 in construction project. A construction refund of $1,286,090 was received from the City of San Jose for a joint project and this was account separately under the Refunded Expenditures line. As of June 30, 2023, the accumulative deficit in the Sanitary Sewer Connection Fee is negative $155,854,844. To address the deficit in capital projects funded by Sanitary Sewer Connection Fee, transfers were made within the Sewer Enterprise Fund.

There is no impact on City resources since all qualified impact fees held by the City have been spent, thus eliminating the need to refund any fees to developers according to Government Code Sections 66000-66003.

Sanitary Sewer Conveyance Fee
The Sewer Conveyance Fee was approved by City Council in June 2007 and is intended to mitigate development impacts to the City’s sanitary sewer conveyance system resulting from increases in the sanitary sewer discharges. The amount of Sanitary Sewer Conveyance Fee is based directly on the potential sewer discharge volumes of the proposed land uses. The fee was based on a Sanitary Sewer Capacity Assessment Report 2006, and subsequent update in 2016. The basis of Santa Clara’s sewer conveyance fee is sewer flow rate generated by the new development. The fee is calculated by dividing the total cost of the capacity improvement projects in the Sanitary Sewer Master Plan or its predecessor reports by the total projected sanitary sewer flow rate generated by future developments, which results in a “per gallon per day (GPD)” fee amount. The per GPD fee multiplied by the estimated sanitary sewer flow rate (GPD) generated by a new development is the sanitary sewer conveyance fee for that new development.

The following table summarizes the activity for the Sanitary Sewer Conveyance Fees from fiscal year DOCPROPERTY PYDate \* MERGEFORMAT 2018-19 through fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23.

LINK Excel.Sheet.12 "\\\\VSRVFSPROD01\\dept\\finance\\account\\Accounting\\Accounting Information Requests\\AB1600\\FY22-23\\AB1600 YE report\\AB1600 Tables for Year end Report .xlsx" "4 SewerConveyance56270!R5C1:R14C26" \a \p \* MERGEFORMAT The developer fees of $9,053,180 along with interest income of $811,032 were partly offset by expenditures of $619,904 in fiscal year 2022-23. The net change yielded a current balance of $54,098,272, out of which $17,952,660 has been held for over five years. Exhibit A outlines the projects that will make use of all unspent fees held over five years.

Storm Drain Fee
The Storm Drain Fee is levied to mitigate City storm drainage that results either directly or indirectly from development projects. The Storm Drain Outlet Fee is codified in the Santa Clara City Code Section 17.15.220 Sanitary Sewer and Storm Drains and was created for the purpose of defraying the estimated costs of constructing planned drainage facilities for removal of surface and storm waters from local drainage areas. The fee is charged based on the amount of acreage being developed with a project. The fee shall automatically adjust for inflation annually at the start of each fiscal year, based on the latest Engineering News Record Construction Cost Index.

The following table summarizes the activity for the Storm Drain Fees from fiscal year DOCPROPERTY PYDate \* MERGEFORMAT 2018-19 through fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23.

LINK Excel.Sheet.12 "\\\\VSRVFSPROD01\\dept\\finance\\account\\Accounting\\Accounting Information Requests\\AB1600\\FY22-23\\AB1600 YE report\\AB1600 Tables for Year end Report .xlsx" "5 Storm 56290!R5C1:R12C21" \a \p \* MERGEFORMAT In the fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23, the City collected $4,352 in developer fees and earned $6,506 from interest. The accumulative amount of the Storm Drain Fees available at the end of fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23 is $433,968 with $232,461 being held for over five years. Exhibit A identifies the projects that will make use of all unspent fees held over five years.

Parks Mitigation Fee
The Parks Mitigation Fee was adopted in the fiscal year 2014-15 and went into effect in the fiscal year 2016-17. Fees received can be used to acquire public parkland and/or make necessary park improvements according to the restrictions of the Mitigation Fee Act and help the City to address its park, recreation and open space needs. The City completed a Parks & Recreation Facilities Development Impact Fee Study in 2014 and in 2019 that were reviewed and approved by the City Council after community and stakeholder public comment hearings. These reports provide the necessary findings required by the Mitigation Fee Act and Quimby Act for the adoption of the fees by Council resolution contained in the Municipal Fee Schedule. These reports provide the facility cost and land acquisition cost data and analysis and describe the methodology for calculation of the fees.

The parks and recreation facilities fees use an existing inventory demand standard translated into facility costs per capita to determine new development’s fair share of planned facility costs. A cost standard provides a reasonable method for converting disparate types of facilities, in this case parkland and special use recreational facilities, into a single measure of demand (capital cost per capita). New residential development would fund the expansion of facilities at the same rate that existing residential development has provided facilities to date. The City uses the existing ratio of developed parkland per 1,000 residents. In 2010 the standard was 2.45. The current standard is 2.60. (Quimby Act allows 3.0 acres/1,000 resident Standard).

The calculation tables are provided in the in-Lieu Fee Resolution adopted by Council and posted on the City website and incorporated into the Municipal Fee Schedule. Based on the date the resident developer’s Project application is deemed complete, the total parkland due can be calculated, the developed parkland dedicated, and credits deducted for eligible on-site recreational amenities.

The following table summarizes the activity for the Parks Mitigation Fee from fiscal year DOCPROPERTY PYDate \* MERGEFORMAT 2018-19 through fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23.

LINK Excel.Sheet.12 "\\\\VSRVFSPROD01\\dept\\finance\\account\\Accounting\\Accounting Information Requests\\AB1600\\FY22-23\\AB1600 YE report\\Report WIP\\AB1600 Tables for Year end Report .xlsx" "6 532 Parks 56230!R5C1:R11C23" \a \p \* MERGEFORMAT During the fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23, the City collected $36,637,032 in Park Mitigation fees, earned $577,716 in interest, and incurred expenditures $12,226,455 in various projects. The balance of the Parks Mitigation Fee as of June 30, 2023 is $45,670,527 with no fees being held for over five years.

Tasman East Specific Plan Infrastructure Impact Fee
On November 13, 2018, the City Council adopted the Tasman East Specific Plan to guide the transition of an underutilized 45-acre industrial neighborhood east of the Great America Transit Center into a pedestrian-friendly, transit-oriented development, providing for the addition of 4,500 new residential units, 100,000 square feet of retail, and 10 acres of open space near transit and jobs. In coordination with developers within the Specific Plan area, the City established an Infrastructure Impact Fee for the Specific Plan area to create an equitable distribution of area-wide and common public infrastructure costs for all residential developments within the Specific Plan and to finance capital facility and infrastructure costs to serve these developments.

Ordinance No. 2026 Adding Subsection 17.15.350 to Chapter 15 of Title 17 of the Santa Clara City Code Regarding the Tasman East Specific Plan Infrastructure Impact Fee was adopted on November 17, 2020.

The following table summarizes the activity for the Tasman East Specific Plan Infrastructure Impact Fee from fiscal year DOCPROPERTY PYDate \* MERGEFORMAT 2018-19 through fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23.

LINK Excel.Sheet.12 "\\\\VSRVFSPROD01\\dept\\finance\\account\\Accounting\\Accounting Information Requests\\AB1600\\FY22-23\\AB1600 YE report\\Report WIP\\AB1600 Tables for Year end Report .xlsx" "8.541 TESP 56265!R5C1:R11C21" \a \p \* MERGEFORMAT In the fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23, the City received $4,411,858 in developer fees, earned $75,296 in interest and incurred expenditure of $1,786,418 in projects. The accumulative balance of the Tasman East Specific Plan Infrastructure Impact Fees at the end of fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23 is $5,960,739 with no fees being held for over five years.

Affordable Housing Fee
The Affordable Housing Fee was adopted to mitigate the impacts of new market-rate housing development and non-residential development on the need for affordable housing, in addition to assisting in meeting the City’s share of the region’s housing need and implementing the goals, policies and actions specified in the Housing Element of the general plan. City Council passed Ordinance 1974 on December 5, 2017 which established the affordable housing fee applicable to residential and nonresidential projects and to encourage the development of rental housing and as well as smaller units that may be more affordable by design. The fee established are significantly lower than the amount needed to fully mitigate the impacts of the new for-sale and rental resident projects and non-residential project on the need for affordable housing. The fees shall automatically adjust for inflation annually using the Engineering News Record McGraw-Hill Construction Weekly Building Index for San Francisco.

The following table summarizes the activity for the Affordable Housing Fee from fiscal year DOCPROPERTY PYDate \* MERGEFORMAT 2018-19 through fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23.

Patrick Henry Drive Infrastructure Impact Fee
On March 22, 2022, the City Council adopted the Patrick Henry Drive Specific Plan (Specific Plan) to guide the transition of an underutilized 74-acre industrial neighborhood bounded by Mission College to the south, Great America Parkway to the east, the Hetch-Hetchy right-of-way to the north, and Calabazas Creek to the west into a pedestrian-friendly, transit-oriented neighborhood. The Specific Plan contemplates two unique land use scenarios per Table 1 below related to proposed residential units and office uses. The Specific Plan also incorporates approximately 310,000 square feet of neighborhood-oriented convenience retail and up to 14 acres of open space which will include a diverse network of public parks, publicly accessible green infrastructure, and private recreational spaces.

Ordinance No. 2046 Adding Subsection 17.15.360 to Chapter 15 of Title 17 of the Santa Clara City Code Regarding the Patrick Henry Drive Specific Plan Infrastructure Impact Fee was adopted on March 22, 2022.

In the fiscal year DOCPROPERTY FYDate \* MERGEFORMAT 2022-23, no activities were conducted for this impact fee.

PUBLIC NOTICE: Public notification was achieved by posting the availability of the report 15 days prior to the meeting, as required by Government Code Section 66006(b)(2).

Attachments:

Exhibit A: Summary of Development Impact Fees
LINK Excel.Sheet.12 "\\\\VSRVFSPROD01\\dept\\finance\\account\\Accounting\\Accounting Information Requests\\AB1600\\FY22-23\\AB1600 YE report\\AB1600 Tables for Year end Report .xlsx" "1A 525 Traffic Exhibit A!R1C1:R57C10" \a \p LINK Excel.Sheet.12 "\\\\VSRVFSPROD01\\dept\\finance\\account\\Accounting\\Accounting Information Requests\\AB1600\\FY22-23\\AB1600 YE report\\AB1600 Tables for Year end Report .xlsx" "2A 594 Outlet Exhibit A !R1C1:R31C10" \a \p LINK Excel.Sheet.12 "\\\\VSRVFSPROD01\\dept\\finance\\account\\Accounting\\Accounting Information Requests\\AB1600\\FY22-23\\AB1600 YE report\\Report WIP\\AB1600 Tables for Year end Report .xlsx" "3A 594 Connection Exhibit A!R1C1:R31C10" \a \p LINK Excel.Sheet.12 "\\\\VSRVFSPROD01\\dept\\finance\\account\\Accounting\\Accounting Information Requests\\AB1600\\FY22-23\\AB1600 YE report\\AB1600 Tables for Year end Report .xlsx" "4A 594 Conveyance Exhibit A!R1C1:R30C10" \a \p LINK Excel.Sheet.12 "\\\\VSRVFSPROD01\\dept\\finance\\account\\Accounting\\Accounting Information Requests\\AB1600\\FY22-23\\AB1600 YE report\\Report WIP\\AB1600 Tables for Year end Report .xlsx" "5A 535 Storm Exhibit A!R1C1:R31C10" \a \p LINK Excel.Sheet.12 "\\\\VSRVFSPROD01\\dept\\finance\\account\\Accounting\\Accounting Information Requests\\AB1600\\FY22-23\\AB1600 YE report\\AB1600 Tables for Year end Report .xlsx" "6A 532 Parks Exhibit A!R1C1:R45C10" \a \p LINK Excel.Sheet.12 "\\\\VSRVFSPROD01\\dept\\finance\\account\\Accounting\\Accounting Information Requests\\AB1600\\FY22-23\\AB1600 YE report\\Report WIP\\AB1600 Tables for Year end Report .xlsx" "8A 541TESP 56265!Print_Area" \a \p LINK Excel.Sheet.12 "\\\\VSRVFSPROD01\\dept\\finance\\account\\Accounting\\Accounting Information Requests\\AB1600\\FY22-23\\AB1600 YE report\\AB1600 Tables for Year end Report .xlsx" "7A 565 affordable!R1C1:R29C10" \a \p AB1600 REPORT ON DEVELOPMENT IMPACT FEES
For Fiscal Year ended June 30, 2023
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City Council and Authorities ConcurrentJanuary 30, 2024

City Council and Authorities Concurrent
January 30, 2024