Agenda packet — Santa Cruz City Council, March 10, 2026 (part 2 of 2)

Policy Background
Those experiencing or at risk of homelessness are the most vulnerable in our community• Housing Element Objective 1.2e: Adopt a Coral Street Overlay to provide homeless services and related residential use standards for Coral Street area. • Housing Element Objective 3.3f: Amend zoning
ordinance to comply with state law for temporary housing zoning and regulations • Coral Street Visioning Report: rezone visioning report subject sites to allow for envisioned temporary housing and supporting uses

16.65 State Law: Zoning for Temporary Housing Capacity
• 2023 unsheltered population• Site capacity: 1 bed/200 sq. ft. buildable area• Sites must meet specified criteria to qualify for rezoning

16.66

Page 19 of 21 ends

Coral Street Visioning Report
• Envisioned a variety of buildings from one-room
pallet shelters to eight story buildings
• Envisioned uses:
• Temporary housing• Permanent supportive housing• Affordable housing• Wraparound supportive services: mail services, job training, behavioral health programs, etc. • Commercial uses

16.67 16.68
Temporary Housing Regulation Updates
• Temporary housing includes not just emergency
shelters, but also navigation centers, bridge housing, and respite or recuperative care • Make existing standards objective• Eliminate standards no longer allowed• Eliminate standards to provide additional flexibility

16.69

Page 19 of 21 ends

Planning Commission Recommendation
• Decrease building height from 8 stories and 85
feet to 5 stories and 60 feet
• Does not change total potential building floor
area
• Shorter, wider buildings = less parking,
landscaping, outdoor community space
• Decreased development flexibility

16.70 March 24
City Council 2nd
reading
Spring 2026
CA Coastal
Commission
Next Steps

16.71 Recommendation
Motion to: 1) Introduce for publication an ordinance amending Chapter 24.10, Chapter 24.12, Part 17, and Chapter 24.22 of the Santa Cruz Municipal Code (SCMC) to add a new overlay district and update standards for temporary and affordable housing; 2) Introduce for publication an ordinance amending the Local Coastal Program (LCP) Implementation Plan (IP), amending Section 24.10.1510 of the Municipal Code related to use permit requirements within the General Industrial zoning district; 3) Adopt a finding that the proposed amendments are exempt from environmental review under Public Resources Code Section 21080.085 and California Environmental Quality Act (CEQA) Guidelines Section 15061(b)(3); and 4) Approve the update to the City Council Industrial Land Use Preservation Policy.

16.72 CITY COUNCIL

AGENDA REPORT
DATE: 03/05/2026
AGENDA OF: 03/10/2026
DEPARTMENT:

SUBJECT:

Community Development
Amend Municipal Code Chapter 24.16 Related to Affordable Housing Incentives and Fees, and Adopt Separate Council Policies Related to Development Review Fee Deferrals and Waivers (CD)
LOCATION: Citywide
RECOMMENDATION: Motion to:
1) Pass for publication an ordinance approving the proposed amendments to City of Santa Cruz Municipal Code (SCMC) Chapter 24, Sections: 24.16.035, 24.16.300, and 24.16.310; 2) Adopt a resolution approving the City Council Development Review Fee Deferral Policy for 100 Percent Affordable Housing Developments; and
3) Adopt a resolution approving the City Council Development Review Fee Waiver Policy for Projects on City-Owned Land.

BACKGROUND: In December 2023, City Council unanimously approved the City’s 2023- 2031 Housing Element. Numerous objectives make up the implementation of the Housing Element, including Objective 2.2b: Update the City’s ordinance related to fee waivers for affordable units to provide more clarity and to streamline the approval process. The Housing Element notes this objective has a target achievement date of January 2026.

In September 2024, Senate Bill (SB) 937 (Wiener) was enacted, amending Government Code §66007. This bill establishes when local agencies may collect development-related impact fees and charges imposed on residential development projects to fund public improvements or facilities. The law stipulates that impact fees generally shall not be collected until the date of final inspection or the issuance of a certificate of occupancy – or, if applicable, the first temporary certificate of occupancy – for residential development, regardless of other provisions.

In March 2025, City Council directed staff to develop a policy to waive or reduce application and permit fees for third-party partners investing in improvements to City-owned infrastructure.

17.1 The City Council emphasized that the policy should be consistent with State legislation and support projects that provide clear public benefit. Staff were directed to propose a framework that ensures transparency, equity, and alignment with the City’s strategic goals. This was prompted by the City Council’s decision to waive land use application and building permit fees for the Museum of Natural History improvement project in 2025 and to establish a clear process to guide waivers and reductions in the future.

In response to the Housing Element Objective, State law, and City Council direction, staff worked with relevant City departments to propose ordinance amendments and policies that defer or waive City development review fees. The proposed fee waiver ordinance amendments, accompanying fee deferral resolution and policy, and fee waiver resolution and policy are attached.

DISCUSSION: The proposed amendments and policies allow the City to either defer development review fees or, in limited circumstances, waive some fees altogether. Development review fees are incurred to help cover the City cost of City review development applications, unlike impact fees which seek to cover the cost of impacts to infrastructure from development projects. To defer or waive certain City fees can play a critical role in the viability of development proposals, especially for affordable housing developers and non-profits. The proposed changes seek to balance the City’s public welfare and affordable housing objectives with financial sustainability.

In response to Housing Element Objective 2.2b, State law changes, and City Council direction, staff undertook the following three initiatives:

1. Fee waiver ordinance amendments and accompanying fee deferral policy proposal for 100 percent affordable housing development projects,

2. Compliance with Senate Bill 937 (already implemented as a procedural change but included in this report as background), and

3. Fee waiver policy proposal for specified projects on City-owned land.

Fee Waiver Ordinance Amendments and Fee Deferral Policy Proposal Staff propose an update to the fee waiver ordinance (SCMC §24.16 and associated Sections

24.16.035, 24.16.300, and 24.16.310) and a new accompanying fee deferral policy. The proposed code amendments implement Objective 2.2b of the Housing Element and provide needed improvements to the function and clarity of this section. The proposed amended section would address only fee deferrals and move the fee waiver process out of the code to become a City Council-adopted policy with different eligibility criteria. The proposed SCMC amendments specify that the City will offer fee deferrals for 100 percent affordable housing developments. To accompany these amendments, staff propose a City Council-adopted fee deferral policy for affordable housing outlining fees applicable for deferral, deferral terms, and interest structure.

The proposed fee waiver ordinance amendments and accompanying fee deferral policy were developed in close coordination across City departments, including Community Development, Economic Development, Finance, Fire, Parks and Recreation, Police, Public Works, and Water.

17.2 As detailed in the accompanying fee deferral policy, development review fees for 100 percent affordable housing planning applications may be deferred for up to five years. However, if a substantially complete building permit application is submitted fees may continue to be deferred until a certificate of occupancy is issued or for a typical duration of up to five years following issuance of a certificate of occupancy, pursuant to an agreed upon payment plan. For fee deferrals extending beyond the certificate of occupancy, interest will accrue at a rate determined annually by the Finance Director.

All development review fees, including Building, Community Development, Fire, Parks, Police, Public Works, Water and similar fees for 100 percent affordable housing development projects may be eligible for deferral, except those specified below:
 Fees paid to the City that are, in whole or in part, used to cover third party development review costs will be collected in full and will continue to be due at standard times (e.g., permit issuance, permit submittal, etc.).
 Certain impact fees must be deferred until the issuance of a certificate of occupancy, temporary certificate of occupancy, or date of final inspection under SB 937, but such impact fees will not be eligible for deferral beyond the issuance of a certificate of occupancy, temporary certificate of occupancy, or date of final inspection under the proposed policy.
 Other development fees, including but not limited to the Traffic Impact Fee, may be deferred pursuant to separate existing internal policies and procedures.  The Parks and Recreation Facilities Tax and the Quimby Fee will not be eligible for deferral past the issuance of a certificate of occupancy, temporary certificate of occupancy, or date of final inspection under the proposed policy.

Staff engaged with affordable housing developers to better understand the feasibility of a development review fee deferral policy. One of the City’s affordable housing development partners noted that a one- to two-year deferral period following the issuance of a certificate of occupancy would typically be helpful and desirable. They further indicated that a maximum fiveyear deferral would provide additional flexibility if needed. Consistent with this input, the proposed policy allows fee deferrals for a typical duration of up to five years following issuance of a certificate of occupancy to further encourage the development of 100 percent affordable housing developments.

The standards proposed by this policy clarify the process for granting fee deferrals for 100 percent affordable housing and streamline the approval process by allowing staff to qualify applicants for and approve fee deferrals. If an applicant seeks fee waivers, they may still request one from City Council, as is currently the process. Staff believe this update will support the production of affordable housing through expedited fee deferral approvals and added certainty for affordable housing developers.

Compliance with Senate Bill 937
To comply with SB 937, the City now allows the collection of development-related impact fees to be deferred until the date of final inspection, the issuance of a certificate of occupancy, or the issuance of a first temporary certificate of occupancy for residential development projects. State law stipulates that local agencies may structure payments on a pro-rata or lump-sum basis for

17.3 multi-unit projects. Utility connection fees may be collected earlier (if limited to actual connection costs), and school board fees may always be collected earlier. Several other exceptions apply depending on the fee and type of residential development project. It will fall under the purview of each City department to review residential development applications, determine required impact fees, and determine if the impact fees meet eligibility criteria for collection at the time of building permit issuance or at the issuance of a certificate of occupancy.

SB 937 allows qualifying projects – such as 100 percent affordable housing projects – to defer payment of certain development impact fees until a certificate of occupancy is issued. This lessens financial barriers that can constrain housing production because it reduces the need for developers to finance substantial upfront costs with high-interest construction loans. This timing shift can reduce overall project costs and increase the financial viability of affordable housing developments thereby supporting the creation of more affordable housing units and advancing the City’s housing goals. The proposed fee deferral changes build upon this legislation and extend additional benefits to 100 percent affordable housing developments.

Fee Waiver Policy Proposal
The proposed fee waiver policy will establish a consistent process for determining and administering fee waivers for specified projects on City-owned land or buildings. Stemming from City Council direction following the decision to waive land use application and building permit fees for the Museum of Natural History improvement project in 2025, this policy strives to enable the development of City-owned property for public-serving uses or for reasonable use as future City office spaces. Staff will review projects on a discretionary basis to determine eligibility for fee waivers or reductions, based on consistency with the policy. Staff believe this policy will facilitate the development of public-serving development in Santa Cruz while promoting investment in City-owned property and buildings.

Under the proposed policy, fees for development review would be waived for entities proposing development or improvements on City-owned land and to City-owned buildings if staff determine that the improvements are being made to public-serving facilities. In determining whether a facility is public-serving, staff will consider whether a use is readily accessible to and directly benefits the general public at large. Qualifying projects would not be intended for private, exclusive, or restricted use.

Alternatively, if staff determine that the improvements will be City-owned and have reasonable potential to be converted to future City office spaces, then staff can waive fees. In determining whether improvements to a City-owned facility would facilitate future City office uses, staff can consider the length of the entity’s lease, the types of improvements needed to convert the space to office, the need for and viability of City office space at the location in question, or other factors.

The proposed fee waiver policy does not apply to housing developments on City-owned land, including 100 percent affordable housing developments on City-owned land, but the proposed fee deferral policy would apply.

17.4 Under the proposed policy, specified fees for all development review applications, including Building, Community Development, Fire, Public Works, and third-party or pass-through fees will be eligible for waiver, unless they fall into any of the following categories:
 Fees that funnel into an enterprise fund.
 Impact fees or similar fees, such as system development charges, that are used to fund City infrastructure needed to serve the proposed development or improvements.  The Parks and Recreation Facilities Tax and the Quimby Fee.

Similarly, City-led or City-sponsored projects on City-owned land that are being funded through the General Fund would not be charged development review fees. However, fees listed above (enterprise fund fees, impact fees, Parks and Recreation fees, etc.) may still be due and payable.

The approval of fee waivers pursuant to this policy will likely trigger prevailing wage for the development.

The standards put in place by this policy clarify the process for granting fee waivers and streamline their approval by granting staff the ability to qualify applicants for and approve fee waivers. If an applicant is deemed to not qualify for fee waivers under this policy, they may still request one from City Council, as is currently the process.

Planning Commission
Amendments to the Zoning Ordinance are required to be presented at a meeting of the Planning Commission, who then makes a recommendation on the amendments to City Council. The proposed amendments to the Zoning Ordinance are those relating to development review fee deferrals for 100 percent affordable housing developments and were presented to the Planning Commission on February 5, 2026. The Planning Commission unanimously voted to recommend approval of the amendments (4-0, Commissioners Kelley, Polhamus, and Thompson absent).

The Commission discussed the proposal to codify development review fee deferrals in the Zoning Ordinance and remove language related to fee waivers. Commissioners expressed concern that removing fee waiver language could make it difficult for developers to locate information on waivers for affordable housing developments. After some discussion, no amendments were made to the staff recommendation by the Commission. Staff further considered the Commission’s concerns and continues to recommend the ordinance amendments as originally proposed and attached to this Agenda Report. However, staff did add one clarification to the proposed fee deferral policy to specify that fee waivers would remain available through appeal to City Council, consistent with the current process.

Next Steps
Should City Council approve the proposed amendments and policies, the proposed ordinance will proceed to a second City Council reading on March 24, 2026. If approved at the second reading, the changes would take effect 30 days later.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION:

Staff has determined that the subject action is not a “project” under Public Resources Code section 21065 and CEQA Guidelines section 15378(b)(2) [general policy and procedure making]

17.5 and (b)(4) [government fiscal activities which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment]. This finding is also covered under CEQA Guidelines Section 15061(b)(3) [common sense exemption].

HEALTH IN ALL POLICIES (HiAP): In 2019, the City adopted a Health in All Policies strategy to eliminate inequities in health and well-being and attain equity for all residents. The proposed ordinance amendments and fee deferral policy further the City’s Health in All Policies strategy, as they facilitate the creation of affordable housing and promote more equitable access to housing for those who need it the most. In addition, the proposed fee waiver policy supports the development of public-serving facilities, thereby increasing access to such facilities and promoting health, well-being, and equity in the city.

FISCAL IMPACT:

1. The recommendation in this report impacts the General Fund: Yes

2. This recommendation requires a budget adjustment: No

3. The recommendation creates an on-going expenditure commitment: No FISCAL IMPACT DESCRIPTION: The ordinance amendments and policies proposed in this report are anticipated to result in limited short-term fiscal impacts to the General Fund, with minimal fiscal impacts over the long term.

The net fiscal impacts of deferring development review fees for 100 percent affordable housing development projects are not fully known at this time, as they would depend on the scale and number of eligible development projects that are approved for fee deferrals. Fee deferrals would impact the General Fund in the short-term by delaying the receipt of revenue, but are anticipated to be negligible, if any, in the long-term, as the City would recoup deferred fees at the issuance of a first temporary certificate of occupancy, or within five years after the issuance of a certificate of occupancy. As currently codified, the City’s fee waiver ordinance (SCMC §24.16 and associated Sections 24.16.035, 24.16.300 and 24.16.310) offers fee waivers to specified affordable housing developments. The proposed ordinance amendments and accompanying fee deferral policy provide for the City to offer staff approved fee deferrals for 100 percent affordable housing development projects, putting in place a streamlined approval process that shifts the timing of fee collection. As such, staff anticipates minimal fiscal impacts on the General Fund, alignment with the City’s long-term fiscal sustainability goals, and continued support for affordable housing development in the City as a result of these fee deferral updates.

Waiving development review fees for specified projects on City-owned land, as proposed in the fee waiver policy, will have a negative short-term fiscal impact on the General Fund. However, as the anticipated number of projects eligible for fee waivers is small, and not all fees are eligible for waiver, staff anticipates that the fiscal impact on the General Fund will be limited.

Furthermore, because these waivers are intended to facilitate the development of public-serving facilities and support investment in City-owned infrastructure, they are expected to yield net long-term benefits to the City.

17.6 Prepared By:

Akana Jayewardene
Senior Planner
Matt VanHua, AICP
Principal Planner
Submitted By:

Lee Butler, LEED AP, AICP
Director of Community
Development
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. PROPOSED MUNICIPAL CODE AMENDMENTS TO SECTIONS 24.16.035, 24.16.300, AND 24.16.310 - TRACK CHANGES.DOCX

2. PROPOSED MUNICIPAL CODE AMENDMENTS TO SECTIONS 24.16.035, 24.16.300, AND 24.16.310 - CLEAN.DOCX

3. RESOLUTION ADOPTING DEVELOPMENT REVIEW FEE DEFERRAL POLICY FOR 100 PERCENT AFFORDABLE HOUSING DEVELOPMENTS. DOCX

4. RESOLUTION ADOPTING DEVELOPMENT REVIEW FEE WAIVER POLICY FOR PROJECTS ON CITY-OWNED LAND.DOCX

5. PLANNING COMMISSION REPORT OF MEETING AGENDA FEBRUARY 5, 2026.PDF

17.7 24.16.035 INCENTIVES FOR COMPLIANCE WITH INCLUSIONARY HOUSING REQUIREMENTS.

The following incentives may be available for the provision of inclusionary units:

1. Fee waiversdeferrals may be granted pursuant to Part 4 of this chapter.

2. A residential development may satisfy its inclusionary housing requirements through any of the alternative compliance methods available in Section 24.16.030 in lieu of providing inclusionary units on site.

3. The interior amenities and square footage of the inclusionary units may be reduced below those required for the market rate units, as provided in Section 24.16.025(4).

4. Residential developments in which all dwelling units are offered for rent, inclusionary units are provided within the development, no subdivision map has been recorded, and no density bonus under Part 3 of this chapter has been requested are eligible for the following additional incentive:
a. Aa twenty-seven and one-half percent “city rental housing bonus.” (Ord. 2018-18 § 1 (part), 2018: Ord. 2018-13 § 1 (part), 2018: Ord. 2006-16 § 2 (part), 2006) Part 4: FEE WAIVERSDEFERRALS FOR AFFORDABLE UNITS

24.16.300 UNITS ELIGIBLE FOR FEE WAIVERS-DEFERRALS.
a. The Ccity may grant the waivers deferrals of specified development review fees the following development fees if the waivers deferrals will assist in providing residential units affordable to low or very-low income households as part of a 100 percent affordable housing project. For purposes of this section, a 100 percent affordable housing projects has all units, other than up to three manager’s units, deed restricted to provide affordable rents to low or very-low income households., excluding units developed as inclusionary units for low income households under Chapter Part 1, Inclusionary Housing Requirements or replacement housing units provided under Chapter 24.08.1360, Replacement Housing Requirements.::

Fees eligible for deferral are outlined in the City Council Development Review Fee Deferral Policy for 100 Percent Affordable Housing Developments.

1. Sewer and water connection fees for units affordable to low and very low income households.

2. Planning application and planning plan check fees for projects that are one hundred percent affordable to low and very-low income households.

3. Building permit and plan check fees for units affordable to very-low income households.

17.8 4. Park land and open space dedication in-lieu fee for units affordable to very low income households.

5. Parking deficiency fee for units affordable to very-low income households.

6. Fire fees for those units affordable to very-low income households. (Ord. 2006-24 § 1, 2006: Ord. 93-51 § 6, 1993).

24.16.310 PROCEDURE FOR WAIVER DEFERRAL OF FEES.

A fee waiver deferral supplemental application shall be submitted at the time an planning application for a 100 percent affordable housing project with affordable units is submitted to the Ccity. The fee deferral supplemental application may be submitted with the building plan check application if no planning permit fees are applicable or requested for deferral. (Ord. 93-51 § 6, 1993).

17.9 ORDINANCE NO. 2026-XX

AN ORDINANCE OF THE CITY OF SANTA CRUZ AMENDING SANTA CRUZ MUNICIPAL CODE CHAPTER 24.16 – AFFORDABLE HOUSING PROVISIONS, INCLUDING: SECTION 24.16.035 – INCENTIVES FOR COMPLIANCE WITH INCLUSIONARY HOUSING REQUIREMENTS, SECTION 24.16.300 – UNITS ELIGIBLE FOR FEE WAIVERS, AND SECTION 24.16.310 – PROCEDURE FOR WAIVER OF FEES WHEREAS, the City Council unanimously adopted the City of Santa Cruz 2023-2031 Housing Element (“Housing Element”) on December 12, 2023; and WHEREAS, the Housing Element includes Objective 2.2b, which states: Update the City’s ordinance related to fee waivers for affordable units to provide more clarity and to streamline the approval process; and
WHEREAS, these ordinance amendments aim to support affordable housing development and achieve the City’s Regional Housing Needs Allocation targets by removing financial barriers at critical stages of project development, while maintaining timely collection of development review fees in accordance with established agreements; and WHEREAS, these ordinance amendments align with recent State legislation deferring development impact fees for specified projects in order to aid the production of affordable housing in California; and
WHEREAS, these ordinance amendments seek to balance the City’s affordable housing objectives with long-term financial sustainability goals; and WHEREAS, these ordinance amendments seek to clarify the process for granting fee deferrals by establishing a consistent, transparent procedure for applicants; and WHEREAS, at its February 5, 2026 meeting, the City Planning Commission reviewed the these amendments and found that the public necessity, the general community welfare, and good zoning practice will be served and furthered; and that the proposed amendments are in general conformance with the principles, policies, and land use designations set forth in the General Plan, Local Coastal Plan and any adopted area or specific plan as proposed to be amended; and WHEREAS, at its February 5, 2026 meeting, the City Planning Commission passed a motion that recommended the City Council approve the determination that the ordinance amendments are not a “project” under Public Resources Code section 21065 and California Environmental Quality Act Guidelines section 15378(b)(2), (4), and 15061(b)(3) and approve the ordinance amendments to Title 24 of the Santa Cruz Municipal Code (4-0-3, Commissioners Kelley, Polhamus, and Thompson absent).

NOW THEREFORE BE IT ORDAINED by the City Council of the City of Santa Cruz as follows:

17.10 Section 1. Section 24.16.035 of the Santa Cruz Municipal Code regarding Incentives for Compliance with Inclusionary Housing Requirements is amended to read as follows:

24.16.035 INCENTIVES FOR COMPLIANCE WITH INCLUSIONARY HOUSING REQUIREMENTS.

The following incentives may be available for the provision of inclusionary units:

1. Fee deferrals may be granted pursuant to Part 4 of this chapter.

3. The interior amenities and square footage of the inclusionary units may be reduced below those required for the market rate units, as provided in Section 24.16.025(4).

4. Residential developments in which all dwelling units are offered for rent, inclusionary units are provided within the development, no subdivision map has been recorded, and no density bonus under Part 3 of this chapter has been requested are eligible for a twenty-seven and one-half percent “city rental housing bonus.”
Section 2. Chapter 24.16 Part 4 of the Santa Cruz Municipal Code regarding Fee Waivers for Affordable Units is renamed to Fee Deferrals for Affordable Units and amended to read as follows:

Part 4: FEE DEFERRALS FOR AFFORDABLE UNITS
Section 3. Section 24.16.300 of the Santa Cruz Municipal Code regarding Units Eligible for Fee Waivers is renamed to Units Eligible for Fee Deferrals and amended to read as follows:

24.16.300 UNITS ELIGIBLE FOR FEE DEFERRALS.
a. The City may grant the deferral of specified development review fees if the deferrals will assist in providing residential units affordable to low or very-low income households as part of a 100 percent affordable housing project. For purposes of this section, a 100 percent affordable housing projects has all units, other than up to three manager’s units, deed restricted to provide affordable rents to low or very-low income households.

Fees eligible for deferral are outlined in the City Council Development Review Fee Deferral Policy for 100 Percent Affordable Housing Developments.

Section 4. Section 24.16.310 of the Santa Cruz Municipal Code regarding Procedure for Waiver of Fees is renamed to Procedure for Deferral of Fees and amended to read as follows:

17.11 24.16.310 PROCEDURE FOR DEFERRAL OF FEES.

A fee deferral supplemental application shall be submitted at the time a planning application for a 100 percent affordable housing project is submitted to the City. The fee deferral supplemental application may be submitted with the building plan check application if no planning permit fees are applicable or requested for deferral.

Section 5. This ordinance shall take effect and be in full force thirty (30) days after final adoption.

PASSED FOR PUBLICATION this 10th day of March 2026, by the following vote:

AYES:

NOES:

ABSENT:

DISQUALIFIED:

APPROVED: _____________________________
Fred Keeley, Mayor

ATTEST: _________________________________
Bonnie Bush, City Clerk Administrator
PASSED FOR FINAL ADOPTION this XX day of XX 2026, by the following vote:

AYES:

NOES:

ABSENT:

DISQUALIFIED:

APPROVED: _____________________________
Fred Keeley, Mayor
ATTEST: _________________________________
Bonnie Bush, City Clerk Administrator
This is to certify that the above and
foregoing document is the original
of Ordinance No. 2026-XX and
that it has been published or

17.12 posted in accordance with the
Charter of the City of Santa Cruz.
______________________________
Bonnie Bush, City Clerk Administrator

17.13 RESOLUTION NO. NS-XX,XXX

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CRUZ ADOPTING THE DEVELOPMENT REVIEW FEE DEFERRAL POLICY FOR 100 PERCENT

AFFORDABLE HOUSING DEVELOPMENTS
WHEREAS, this policy supports Housing Element Objective 2.2b: Update the City’s ordinance related to fee waivers for affordable units to provide more clarity and to streamline the approval process, adopted unanimously by the City Council; and WHEREAS, this policy aims to support affordable housing development and achieve the City’s Regional Housing Needs Allocation targets by removing financial barriers at critical stages of project development, while maintaining timely collection of development review fees in accordance with established agreements; and
WHEREAS, this policy aligns with recent State legislation deferring development impact fees for specified projects in order to aid the production of affordable housing in California; and WHEREAS, this policy seeks to balance the City’s affordable housing objectives with long-term financial sustainability goals; and
WHEREAS, this policy seeks to clarify the process for granting fee deferrals by establishing a consistent, transparent procedure for applicants; and WHEREAS, the Planning Commission on February 5, 2026, considered amendments to the Zoning Ordinance related to the Development Review Fee Deferral Policy for 100 Percent Affordable Housing Developments at a regular Planning Commission hearing and recommended that City Council approve the staff recommendation; and WHEREAS, the City Council on March 10, 2026, considered the Development Review Fee Deferral Policy for 100 Percent Affordable Housing Developments at a regular City Council hearing and now finds that the public necessity, the general community welfare, and good zoning practice shall be served and furthered through the proposed policy and that this policy is in general conformance with the principles, policies, and land use designation set forth in the General Plan.

NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Santa Cruz hereby adopts the Development Review Fee Deferral Policy for 100 Percent Affordable Housing Developments as noted in Exhibit "A," attached hereto and made a part of hereof.

PASSED AND ADOPTED this 10th day of March 2026 by the following vote:

AYES:

NOES:

17.14 RESOLUTION NO. NS-XX,XXX
2 ABSENT:

DISQUALIFIED:

APPROVED: ______________________________
Fred Keeley, Mayor
ATTEST: _________________________________
Bonnie Bush, City Clerk Administrator

17.15 RESOLUTION NO. NS-30,XXX

EXHIBIT A

CITY COUNCIL DEVELOPMENT REVIEW FEE DEFERRAL
POLICY FOR 100 PERCENT AFFORDABLE HOUSING

DEVELOPMENTS
DATE: 03/10/2026
The following development review fee deferral policy for 100 percent affordable housing development projects accompanies Municipal Code Chapter 24.16 – Affordable Housing Provisions, including: Section 24.16.035 – Incentives for Compliance with Inclusionary Housing Requirements, Section 24.16.300 – Units Eligible for Fee Deferrals, and Section 24.16.310 – Procedure for Deferral of Fees.

Under this policy, development review fees for 100 percent affordable housing planning applications may be deferred for a maximum of five years, unless a substantially complete building permit application is submitted, in which case fee deferrals may continue until a certificate of occupancy is issued or for a typical duration of up to five years following issuance of a certificate of occupancy, pursuant to an agreed upon payment plan, as approved by staff. The determination of eligibility for fee deferrals shall be made by the Director of Community Development or their designee, and any payment plan shall be approved by the Director of Finance or their designee.

For fee deferrals extending beyond the certificate of occupancy, interest will accrue at a rate determined annually by the Finance Director.

All development review fees, including Building, Fire, Community Development, Parks, Police, Public Works, Water, and similar fees for 100 percent affordable housing development projects may be eligible for deferral, unless specified below:
 Fees paid to the City that are, in whole or in part, used to cover third party development review costs will be collected in full and will continue to be due at standard times (e.g., permit issuance, permit submittal, etc.).
 Certain impact fees must be deferred until the issuance of a certificate of occupancy, temporary certificate of occupancy, or final inspection under SB 937. In compliance with SB 937, codified under Government Code Section 66007, the City now allows deferring the collection of development-related impact fees, but such impact fees will not be eligible for deferral beyond the issuance of a certificate of occupancy, temporary certificate of occupancy, or final inspection under the proposed policy.  Certain other development fees, including but not limited to the Traffic Impact Fee, may be deferred pursuant to separate existing internal policies and procedures.

17.16  The City Parks and Recreation Facilities Tax and the Quimby Fee will not be eligible for deferral past the issuance of a certificate of occupancy, temporary certificate of occupancy, or date of final inspection under the proposed policy.

Applicants seeking the aforementioned development review fee deferrals shall submit a supplemental fee deferral application concurrently with the submission of a 100 percent affordable housing planning application to the City. The fee deferral supplemental application may be submitted with the building plan check application if no planning permit fees are applicable or requested for deferral. If the requested fee deferrals are approved, the applicant shall enter into a fee deferral agreement and payment plan with the City in accordance with internal Finance policies and the City’s current standard procedures.

This policy clarifies the process for granting fee deferrals and streamlines their approval by granting staff the ability to qualify applicants for and approve fee deferrals for 100 percent affordable housing developments. Applicants seeking fee waivers may still request them from City Council, consistent with the current process.

17.17 RESOLUTION NO. NS-30,XXX

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CRUZ ADOPTING

THE DEVELOPMENT REVIEW FEE WAIVER POLICY FOR PROJECTS ON

CITY-OWNED LAND
WHEREAS, on March 25, 2025, the City Council of the City of Santa Cruz directed staff to develop a policy allowing for the waiver or reduction of application and permit fees for thirdparty partners investing in improvements to City-owned infrastructure; and WHEREAS, staff were tasked with proposing a framework that ensures transparency, equity, and alignment with the City’s strategic goals; and WHEREAS, this policy supports Housing Element Objective 2.2b: Update the City’s ordinance related to fee waivers for affordable units to provide more clarity and to streamline the approval process, adopted unanimously by the City Council; and WHEREAS, this policy seeks to balance the City’s public welfare objectives by encouraging public-serving development on City-owned land and investment in City-owned infrastructure with long-term financial sustainability goals; and WHEREAS, this policy seeks to clarify the process for granting fee waivers by establishing a consistent, transparent procedure for applicants; and WHEREAS, the City Council on March 10, 2026, considered the Development Review Fee Waiver Policy for Projects on City-owned Land at a regular City Council hearing and now finds that the public necessity, the general community welfare, and good zoning practice shall be served and furthered through the proposed policy and that this policy is in general conformance with the principles, policies, and land use designation set forth in the General Plan.

NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of Santa Cruz hereby adopts the Development Review Fee Waiver Policy for Projects on City-owned Land as noted in Exhibit "A," attached hereto and made a part of hereof.

17.18 PASSED AND ADOPTED this 10th day of March 2026 by the following vote:

AYES:

NOES:

ABSENT:

DISQUALIFIED:

APPROVED: ______________________________
Fred Keeley, Mayor
ATTEST: _________________________________
Bonnie Bush, City Clerk Administrator

17.19 RESOLUTION NO. NS-XX,XXX

EXHIBIT A

CITY COUNCIL DEVELOPMENT REVIEW

FEE WAIVER POLICY FOR PROJECTS ON

CITY-OWNED LAND
COUNCIL ADOPTION DATE: 03/10/2026
This fee waiver policy will establish a consistent process for determining and administering fee waivers for specified projects on City-owned land or buildings. Stemming from Council direction following the decision to waive land use application and building permit fees for the Museum of Natural History improvement project in 2025, this policy seeks to facilitate the development of public-serving development in Santa Cruz and enable investment in City-owned property and buildings. Projects will be reviewed on a discretionary basis by staff to determine eligibility for fee waivers or reductions, based on consistency with the policy.

Council Direction, March 24, 2025
MOTION: Councilmember O’Hara moved, seconded by Vice Mayor Kalantari-Johnson, to: Direct staff to develop a Council policy (or, if applicable, an ordinance) that allows for the waiver or reduction of application and permit fees for third-party partners investing in improvements to City-owned infrastructure. This policy should be consistent with State legislation and support projects that provide clear public benefit. Staff should return within four months with a proposed framework that ensures transparency, equity, and alignment with the City’s strategic goals.

Under the proposed policy, fees for development review would be waived for entities proposing development or improvements on City-owned land and to City-owned buildings if staff determine that the improvements are being made to public-serving facilities. In determining whether a facility is public-serving, staff will consider whether a use is readily accessible to and directly benefiting the general public. Qualifying projects would not be intended for private, exclusive, or restricted use.

17.20 Fee waivers do not apply to housing developments on City-owned land, including 100 percent affordable housing developments on City-owned land, but the City Council Development Review Fee Deferral Policy for 100 Percent Affordable Housing Developments would apply.

Under the proposed policy, specified fees for all development review applications, including Building, Community Development, Fire, Public Works, and third-party or pass-through fees will be eligible for waiver, unless they fall into any of the following categories:
 Enterprise fund fees.
 Impact fees or similar fees, such as system development charges, that are used to fund City infrastructure needed to serve the proposed development or improvements.  The Parks and Recreation Facilities Tax and the Quimby Fee.

The approval of fee waivers pursuant to this policy will likely trigger prevailing wage for the development.

17.21 PLANNING COMMISSION

AGENDA REPORT
DATE: 01/30/2026
AGENDA OF: 02/05/2026
ITEM NO: FP26-0003: Proposal to amend Municipal Code Chapter 24.16 – Affordable Housing Provisions, including: Section 24.16.035 – Incentives for Compliance with Inclusionary Housing Requirements, Section

24.16.300 – Units Eligible for Fee Waivers, and Section 24.16.310 – Procedure for Waiver of Fees.

RECOMMENDATION: Motion to recommend that the City Council:
1) Approve the proposed amendments to City of Santa Cruz Municipal Code (SCMC) Chapter 24 Sections: 24.16.035, 24.16.300, and 24.16.310; and
2) Acknowledge the determination that the proposed amendments are not a “project” under CEQA pursuant to Public Resources Code section 21065 and CEQA Guidelines Sections 15378(b)(2), (4) and 15061(b)(3).

BACKGROUND: In December 2023, City Council unanimously approved the City’s 2023- 2031 Housing Element. Numerous objectives make up the implementation of the Housing Element including Objective 2.2b: Update the City’s ordinance related to fee waivers for affordable units to provide more clarity and to streamline the approval process. The Housing Element notes this objective has a target achievement date of January 2026.

Related to these two items, in March 2025, City Council directed staff to develop a policy allowing for the waiver or reduction of application and permit fees for third-party partners investing in improvements to City-owned infrastructure. The City Council emphasized that the policy should be consistent with State legislation and support projects that provide clear public benefit. Staff were tasked with proposing a framework that ensures transparency, equity, and

17.22 alignment with the City’s strategic goals. This direction was prompted by the City Council’s decision to waive land use application and building permit fees for the Museum of Natural History improvement project in 2025 and from a desire to establish a clear process to guide waivers and reductions for similar projects in the future.

In response to the aforementioned Housing Element Objective, State law, and City Council direction, staff worked closely with relevant City departments to develop and propose ordinance amendments and policies related to City development review fee deferrals and waivers. These proposed ordinance amendments are before Planning Commission for consideration and are attached. Accompanying the proposed amendments is a fee deferral policy, attached as an informational item. Finally, the proposed fee waiver policy for City Council consideration is also detailed in the discussion below for additional context.

DISCUSSION: The proposed amendments and policies either defer City development review fees to a later date or, in more limited circumstances, waive some fees altogether. Development review fees are fees that are incurred to cover the cost of City review of development applications and can be considered differently than impact fees which seek to cover the cost of impacts of development projects on infrastructure and services. The deferral and waiver of certain City fees can play a critical role in the viability of a given development proposal, especially for affordable housing developers and non-profits. The proposed changes seek to balance the City’s public welfare and affordable housing objectives with long-term financial sustainability.

In response to Housing Element Objective 2.2b, State Law changes, and City Council direction detailed in the background section of this report, staff undertook the following three initiatives:

1. Fee waiver ordinance amendments and accompanying fee deferral policy proposal for 100 percent affordable housing development projects (fee waiver ordinance amendments are included in the staff recommendation, and the accompanying policy for City Council consideration is attached as an informational item).

2. Compliance with Senate Bill 937 (an implemented procedural change included in this report as background).

3. Fee waiver policy proposal for specified projects on City-owned land (this item is for City Council consideration, but additional details are provided in this section for context).

Fee Waiver Ordinance Amendments and Fee Deferral Policy Proposal Staff propose to update the existing fee waiver ordinance (SCMC §24.16 and associated Sections

24.16.035, 24.16.300 and 24.16.310) and also establish an accompanying fee deferral policy. The proposed code amendments implement Objective 2.2b of the Housing Element and provide needed improvements to the function and clarity of this section. Currently this section relates to fee waivers, but staff propose to amend this section to cover only fee deferrals and move the fee waiver process out of the code altogether, living as City Council-adopted fee waiver policy with different eligibility criteria. The SCMC amendments specify that the City will offer fee deferrals for 100 percent affordable housing developments. To accompany these amendments, staff propose a City Council-adopted fee deferral policy for affordable housing that will detail which fees are applicable for deferral, terms of deferral, and interest structure. The proposed

17.23 accompanying fee deferral policy is included as an informational item and does not require comment at this time; however, staff welcome any input by the Commission.

The proposed fee waiver ordinance amendments and accompanying fee deferral policy were developed in close coordination with numerous City departments, including Finance, Fire, Economic Development, Parks and Recreation, Community Development, Police, Public Works and Water.

As detailed in the accompanying fee deferral policy, development review fees for 100 percent affordable housing planning applications may be deferred for a maximum of five years, unless a substantially complete building permit application is submitted, in which case fee deferrals may continue until a certificate of occupancy is issued or for a typical duration of up to five years following issuance of a certificate of occupancy, pursuant to an agreed upon payment plan. For fee deferrals extending beyond the certificate of occupancy, interest will accrue at a rate determined annually by the Finance Director.

All development review fees, including Building, Fire, Community Development, Police, Public Works, Water and similar fees for 100 percent housing development projects may be eligible for deferral, except those specified below:
• Fees paid by the City to third parties will continue to be due at standard times (e.g., permit issuance, permit submittal, etc.).
• Certain impact fees must be deferred until the issuance of a certificate of occupancy, temporary certificate of occupancy, or date of final inspection under SB 937, but such impact fees will not be eligible for deferral beyond the issuance of a certificate of occupancy, temporary certificate of occupancy, or date of final inspection under the proposed policy.
• Certain other development fees, including but not limited to the Traffic Impact Fee, may be deferred pursuant to separate existing internal policies and procedures. • The Parks and Recreation Facilities Tax and the Quimby Fee will not be eligible for deferral.

Staff conducted outreach with affordable housing developers to better understand the feasibility of this development review fee deferral policy. In discussion with one of the City’s affordable housing development partners, they noted that a one- to two-year deferral period following the issuance of a certificate of occupancy would typically be helpful and desirable. They further indicated that a maximum five-year deferral would provide additional flexibility if needed.

Consistent with this input, the proposed policy allows fee deferrals for a typical duration of up to five years following issuance of a certificate of occupancy to further encourage the development of 100 percent affordable housing developments.

Compliance with Senate Bill 937
To comply with SB 937, the City now allows deferring the collection of development-related impact fees until the date of final inspection or the issuance of a certificate of occupancy, first temporary certificate of occupancy, or date of final inspection for residential development projects. State law stipulates that local agencies may structure payments on a pro-rata or lump17.24 sum basis for multi-unit projects. Utility connection fees may be collected earlier (if limited to actual connection costs), and school board fees may always be collected earlier. Several other exceptions apply depending on the fee and type of residential development project. It will fall under the purview of each City department to review residential development applications, determine required impact fees, and determine if the impact fees meet eligibility criteria for collection at time of building permit issuance or at time of certificate of occupancy.

Fee Waiver Policy Proposal
The proposed fee waiver policy will establish a consistent process for determining and administering fee waivers for specified projects on City-owned land or buildings. Stemming from City Council direction following the decision to waive land use application and building permit fees for the Museum of Natural History improvement project in 2025, this policy strives to enable the development of City-owned property for public-serving uses or for reasonable use as future City office spaces. Projects will be reviewed on a discretionary basis by staff to determine eligibility for fee waivers or reductions, based on consistency with the policy. Staff believe this policy will facilitate the development of public-serving development in Santa Cruz while promoting investment in City-owned property and buildings.

Under the proposed policy, fees for development review would be waived for entities proposing development or improvements on City-owned land and to City-owned buildings if staff determine that the improvements are being made to public-serving facilities. In determining whether a facility is public-serving, staff will consider whether a use is readily accessible to and directly benefitting the general public at large. Qualifying projects would not be intended for private, exclusive, or restricted use.

Fee waivers do not apply to housing developments on City-owned land, including 100 percent affordable housing developments on City-owned land, but the proposed fee deferral policy would apply.

17.25 Under the proposed policy, specified fees for all development review applications, including Building, Fire, Community Development, Public Works, and third-party or pass-through fees will be eligible for waiver, unless they fall into any of the following categories:
• Fees that funnel into an enterprise fund.
• Impact fees or similar fees, such as system development charges, that are used to fund City infrastructure needed to serve the proposed development or improvements. • The Parks and Recreation Facilities Tax and the Quimby Fee.

The approval of fee waivers pursuant to this policy will likely trigger prevailing wage for the development.

Next Steps
Following action by the Planning Commission, the proposed amendments and policies will proceed to City Council for a first reading on March 10, 2026. Should City Council approve the proposed amendments and policies, they will proceed to a second City Council reading on March 24, 2026. If approved at the second reading, the changes would take effect 30 days later.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: Staff has determined that the subject action is not a “project” under Public Resources Code section 21065 and CEQA Guidelines section 15378(b)(2) [general policy and procedure making] and (b)(4) [government fiscal activities which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment]. This finding is also covered under CEQA Guidelines Section 15061(b)(3).

FINDINGS: Zoning Ordinance Section 24.06.040 requires that prior to making a recommendation for approval of General Plan or Zoning Ordinance amendments to the City Council, the Planning Commission shall make findings that the public necessity, and the general community welfare, and good zoning practice shall be served and furthered; and that the proposed amendment is in general conformance with the principles, policies, and land use designations set forth in the General Plan, Local Coastal Plan, and any adopted area or specific plan.

17.26 The proposed ordinance amendments and policies serve and further public necessity and general community welfare by fulfilling Housing Element Objective 2.2b, which seeks to support the development of affordable housing, streamline the process of receiving fee deferrals for 100 percent affordable housing developments, ensure compliance with state law, and facilitate the development of public-serving facilities on City-owned property through specified fee waivers.

Furthermore, the proposed ordinance amendments and policies are consistent with good zoning practice, as they support the production of affordable housing units and the development of public-serving facilities. The proposed ordinance amendments and policies are in general conformance with the principles, policies, and land use designations set forth in the General Plan, Local Coastal Plan, and any adopted area or specific plan for the same reasons described above. Additionally, the proposed ordinance amendments and policies are consistent with the provisions of California Environmental Quality Act as discussed above.

Submitted By:

Akana Jayewardene
Senior Planner
Approved By:

Matt VanHua, AICP
Principal Planner
ATTACHMENTS:
• DRAFT MUNICIPAL CODE AMENDMENTS TO SECTIONS 24.16.035, 24.16.300, AND

24.16.310 - TRACK CHANGES
• DRAFT CITY COUNCIL DEVELOPMENT REVIEW FEE DEFERRAL POLICY FOR 100 PERCENT AFFORDABLE HOUSING DEVELOPMENTS

17.27 Fee Deferral and
Waiver Policies
Community Development
City Council | March 10, 2026

17.28 Project Context
• Housing Element Objective 2.2b: Update the City’s
ordinance related to fee waivers for affordable units
to provide more clarity and to streamline the approval
process, thereby further removing barriers to
affordable housing production
• Supporting affordable housing development in
Santa Cruz and aligning with recent State laws that
aim to remove barriers to affordable housing through
development fee deferrals
• City Council direction to develop a policy governing
fee waivers for projects on City-owned land
FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.29 1. Fee deferrals for 100% affordable housing
projects
I. Amendments to the City’s fee waiver ordinance (SCMC
§24.16 and associated Sections 24.16.035, 24.16.300 and

24.16.310), and
II. City Council adopted fee deferral policy for 100%
affordable housing developments

2. Fee waivers for public serving projects on Cityowned land I. City Council adopted fee waiver policy for public-serving projects on City-owned land
What is being Proposed:

FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.30 Fee Deferrals Fee Waivers
100% Affordable housing projects Projects on City-owned land which provide clear public benefit
Amendments to the City’s Municipal Code &
Council adopted policy Council adopted policy
FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.31 Why fee deferrals?
FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.32 Development review fees can adversely
impact the feasibility of housing projects –
especially 100% affordable housing projects.

FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.33 Currently, the City may grant fee waivers to
affordable housing projects through a
discretionary City Council appeal process.

However, the existing fee waiver ordinance
does not provide the certainty developers are
looking for.

FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.34 Fee Waiver Ordinance Amendments
SCMC §24.16 and associated Sections 24.16.035, 24.16.300 and 24.16.310 • The current ordinance allows the City to waive
development fees to support housing affordable to
low- and very-low-income households.
• The proposed amendments replace fee waivers with
development review fee deferrals for 100% affordable
housing projects.
• The proposed amendments introduce an
accompanying fee deferral policy that defines eligible
fees, deferral duration, and terms of deferral.

FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.35 How will fee deferrals help?
• Deferring development review fees until Certificate of Occupancy, rather than collecting them at building
permit issuance, can reduce costs by enabling
developers to pay fees with low-cost debt rather than
higher-cost construction loans.
• Allows the City to recuperate costs, keeping in line with fiscal sustainability goals.
• Proposed ordinance amendments will provide clarity,
more certainty, and streamline the approval process.

FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.36 Why fee waivers?
FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.37 Currently, every project seeking fee
waivers appeals to the City Council.

FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.38 In 2025, City Council directed staff to
develop a policy governing fee waivers for
public-serving projects on City-owned land.

Council Direction:
“Direct staff to develop a Council policy (or, if applicable, an ordinance) that allows for the waiver or reduction of application and permit fees for third-party partners investing in improvements to City-owned infrastructure. This policy should be consistent with State legislation and support projects that provide clear public benefit. Staff should return within four months with a proposed framework that ensures transparency, equity, and alignment with the City’s strategic goals.” FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.39 Defining “clear public benefit”
• Projects or improvements that are readily accessible to and directly benefit the general public and are not
intended for private, exclusive, or restricted use; or
• Projects or improvements that are City-owned and
have reasonable potential to be converted to future
City office spaces.

FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.40 Development Review Fee
Waiver Policy
Specified development review
fees, including Building,
Community Development, Fire,
Public Works, and third-party or
pass-through fees will be eligible
for waiver.

Qualifying projects
FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.41 Fees Ineligible for Waiver
Fees that funnel into an
enterprise fund (e.g.

Water fees).

Impact fees or similar
fees, such as system
development charges,
that are used to fund
City infrastructure
needed to serve the
proposed development
or improvements.

The Parks and
Recreation Facilities Tax
and the Quimby Fee.

FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.42 Fee Deferrals Fee Waivers
Eligible projects: 100% Affordable housing
projects
Eligible projects: Projects on City-owned land
which provide clear public benefit
Amendments to the City’s Municipal Code &
Council adopted policy Council adopted policy
Fees eligible for deferral: All development review
fees, including Building, Community Development,
Fire, Parks, Police, Public Works, and Water fees
Fees eligible for waiver: Development review fees,
including Building, Community Development, Fire,
Public Works, and third-party/pass-through fees
Fees ineligible for deferral: Fees paid by the City
to third parties and Impacts Fees (Impact Fees
may be deferred until Certificate of Occupancy
under SB 937)
Fees ineligible for waiver: Enterprise fund fees
(e.g. Water), Impact Fees, Parks & Rec. Facilities
Tax and Quimby Fee
FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.43 March 24
City Council 2nd reading
April 23
Changes take effect
Next
Steps
FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.44 Recommendation
A. Motion to:
1) Approve the proposed amendments to City of Santa Cruz Municipal Code (SCMC) Chapter 24, Sections: 24.16.035, 24.16.300, and 24.16.310; 2) Adopt a resolution approving the City Council Development Review Fee Deferral Policy for 100 Percent Affordable Housing Developments; 3) Adopt a resolution approving the City Council Development Review Fee Waiver Policy for Projects on City-Owned Land; and
4) Acknowledge the determination that the proposed amendments and policies are not a “project” under CEQA pursuant to Public Resources Code section 21065 and CEQA Guidelines Sections 15378(b)(2), (4), and 15061(b)(3).

FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.45 Fee Deferral and
Waiver Policies
Community Development
City Council | March 10, 2026
FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.46 Development Review Fee
Deferral Policy
Development review
fees for 100% affordable
housing may be deferred
for up to five years.

If a building permit
application is submitted,
fee deferrals may
continue until the
issuance of a certificate
of occupancy, or for up
to five years thereafter.

Interest will accrue on
deferrals extending
beyond the certificate of
occupancy at a rate set
annually by the Finance
Director.

FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.47 Fees Eligible for Deferral
All development review
fees for 100% affordable
housing projects may be
deferred, including
Building, Community
Development, Fire,
Parks, Police, Public
Works, and Water fees.

Fees paid by the City to
third parties remain due
at standard times.

The Parks and Rec.

Facilities Tax and
Quimby Fee will not be
eligible for deferral past
issuance of a certificate
of occupancy.

Certain impact fees must
be deferred until the
issuance of a certificate
of occupancy under SB
937 but are not eligible
for deferral beyond that
point under the
proposed policy.

FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.48 The proposed fee waiver policy does not apply to
housing development projects on City-owned land.

The proposed fee deferral policy does applyto 100%
affordable housing projects.

FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.49 SB 937: Procedural Update
State law establishes when local
agencies may collect impact fees related
to residential development projects.

Under State law, impact fees shall not be
collected until the date of final inspection, the
issuance of a certificate of occupancy or
the first temporary certificate of occupancy.

The City is already complying
with SB 937.

The proposed updates would defer
development review fees in addition to
impact fees, as required under SB 937.

FEE DEFERRAL AND WAIVER POLICIES | CITY OF SANTA CRUZ

17.50 17.51

Santa Cruz City CouncilMarch 10, 2026

Santa Cruz City Council
March 10, 2026