City Council
Report
City Council Meeting: November 15, 2022
Agenda Item: 5.F
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To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department, Financial Operations Subject: Annual Reporting of Development Impact Fees
Recommended Action
Staff recommends that the City Council review and accept the FY 2021-22 Annual Reporting of Development Impact Fees per the Mitigation Fee Act (Government Code 66000-66025) and the FY 2021-22 Child Care Linkage Fee Report per SMMC Chapter
9.65. Summary
Santa Monica collects Council authorized fees from developments to offset increased demands on public improvements, public services, and community amenities, including child care, transportation, parks, affordable housing, and water conservation. The City has also used these funds to meet the City’s match requirement when seeking grant funding that further offsets costs for City projects.
This report transmits the attached Development Impact Fees Report on the status of funds collected from the City’s development impact fees, including investments made in the last year, that qualify to be reported under the Mitigation Fee Act (Government Code sections 66000-66025) (Attachment A). This Annual Report also provides the required annual reporting for the Child Care Linkage Fee per SMMC section 9.65.090.
Government Code 66001(d) requires the City Council to make findings every five years after a development fee is established. None of the City’s development impact fees are subject to the five-year findings requirement this year. 2 of 9
Discussion
In 1987, Assembly Bill 1600 (AB1600), also known as the California Mitigation Fee Act, codified the legal and procedural parameters for charging development impact fees as set forth in Government Code sections 66000-66025. A development impact fee is a monetary exaction, other than a tax or special assessment, that an applicant of an approved development project pays to defray all or a portion of the costs of public facilities related to the project. The Mitigation Fee Act defines “public facilities” broadly to include public improvements, public services, and community amenities.
At the time that a development fee is established, the purpose of the fee and its anticipated use must be clearly identified. Per Government Code section 66006, collection of these fees requires separate funds or accounts to avoid commingling and requires that information be reported within 180 days after fiscal year-end.
The City publicly posted the annual Mitigation Fee Act Report, as required by AB1600, on October 28, 2022 for the following fees: Child Care Linkage Fee, Transportation Impact Fee, Parks and Recreation Impact Fee, Affordable Housing Commercial Linkage Fee, and Water Demand Mitigation Fee. Per Government Code section 66001, the City must also report and make findings on unexpended and expended fee amounts, whether committed or uncommitted, for the fifth fiscal year following the first deposit and every five years thereafter. This year, there were no fees subject to the five-year findings requirement.
Staff continues to monitor development projects and revenue collected to ensure that fees are accounted for and expended in accordance with the purposes for which they were collected as required by law. It can take several years to accumulate sufficient funds to implement the relatively high-cost projects the City's development impact fees are eligible to fund. The following is a summary of each development fee, the current balance, and a description of how funds are being spent:
1. Child Care Linkage Fee – This fee is intended to address the increased demand for child care triggered by the development of commercial projects 3 of 9
adding floor area of at least 7,500 square feet or multi-family residential projects.
Developers can satisfy the ordinance requirements by either paying a fee or by agreeing to participate in the construction or establishment of one or more child care facilities. Fees are computed annually on July 1, increasing by a percentage equal to the Engineering Construction Cost Index as published by Engineering News Record. Child Care Linkage Fees (CCLF) shall be paid by the final inspection date and prior to the issuance of the Certificate of Occupancy.
SMMC section 9.65.070 specifies that funds collected in the Child Care Linkage Fee Reserve Account shall be expended only on the construction and establishment of child care facilities within the City of Santa Monica, including, but not limited to, expenditures for land acquisition, planning, legal advice, engineering, design, construction and equipment, as well as any administrative costs incurred by the City to administer the reserve account. Eligible expenditures shall not include ongoing operating expenses and general maintenance of child care facilities.
FY 2021-22 Fee Activity
FY 2021-22 Child Care Linkage Fee
Beginning
Balance
Fees
Collected
Interest
Earned Expenditures
Ending
Balance
$92,255 $676,866 $523 $0 $769,644
In previous years, the balance of the Child Care Linkage Fee (CCLF) fund reserve account was fully expended on construction of the Santa Monica Early Childhood Lab School, which was completed in Spring 2021 and created 106 new child care slots in Santa Monica, including 38 for infants/toddlers, and 68 for preschool-aged children. Though there are no current commitments using this funding, staff continue to seek eligible projects for use of CCLF funds in which additional child care slots are created.
2. Transportation Impact Fee (TIF) – This fee is collected on eligible new development and changes in land use that result in increased trip generation. It is 4 of 9
used to fund transportation improvements, such as sidewalks, pedestrian crossing improvements, traffic signal upgrades, transit, and bicycle facilities. See SMMC Chapter 9.66. Funds are frequently leveraged as grant match for projects such as Safe Streets for 17th Street and implementation of the Wilshire Boulevard Safety Study recommendations. Grant projects have longer delivery times but increase the number and size of improvements possible from the fees.
Grant matching was assumed in the fee calculation and nexus study supporting the development of the TIF.
The fees are based on residential units or commercial square footage and are charged prior to issuance of building permits, unless State law requires the City to accept later fee payment. The TIF is based upon the costs associated with transportation improvements and the amount of new auto trips that can be attributed to land use changes.
FY 2021-22 Fee Activity
FY 2021-22 Transportation Impact Fee
Beginning
Balance
Fees
Collected
Interest
Earned Expenditures
Ending
Balance
$10,608,232 $1,712,857 $27,045 $929,368 $11,418,766
In FY 2021-22, $717,366 of TIF funds were expended on Vision Zero and Mobility Project Delivery, including tools to analyze crash reports to determine safety countermeasures, project design, right of way, required studies, prevailing wage monitoring, utility coordination, and construction documents to implement Vision Zero improvements associated with the following projects:
• Multimodal Signal Detection: $447,297
• Ocean / California Intersection Modification: $153,660 • Michigan Ave Greenway / 20th St Bike Connection: $39,473 • 17th Street / SMC / Expo Bike Connection: $36,593
• Stewart and Pennsylvania Safety Enhancement Project: $22,018 • Project management Support: $12,954
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• Pico Blvd / SMC Pedestrian Safety Improvements: $4,507 • Olympic Boulevard and 26th Street – First / Last Mile Improvements: $393 • 4th St Enhancements – Expo Linkages, Phase 2: $241
• Downtown Wayfinding: $230
Additionally in FY 2021-22, $212,002 of TIF funds were spent on implementation of the Pedestrian Improvements at Four Schools project. Crossing improvements included bulb-outs, high-visibility beacons and signage, and traffic striping at Franklin Elementary School, Will Rogers Learning Community, Lincoln Middle School and John Adams Middle School.
In FY 2022-23, approximately $4.1 million of TIF funds will be programmed to implement various roadway safety measures in conjunction with the Annual Repaving project, including Phase 1 implementation of the Wilshire Boulevard Safety Study recommendations, enhancements to the Broadway protected bikeway, and upgrades to Priority Vision Zero intersections. In FY 2023-24, approximately $3.2 million will be programmed to planning and/or construction of various protected bikeways including extending the Broadway protected bikeway, Stewart Street, and the priority projects identified in the Bike Action Plan Amendment. Finally, funds are reserved annually for the salary of the construction manager position responsible for overseeing these projects.
State law requires TIF funds to be used for the delivery of physical improvements. These projects require significant time for project delivery because of local design, outreach and procurement steps and State and Federal grant funding approval processes. TIF funds are pre-committed to projects for an extended time as a result, and funds need to be held available for upcoming grant match commitments. Staff anticipates using portions of the fund balance to support longer-term projects identified in the TIF nexus study such as bike facilities, sidewalks, and safe crossings. This information along with additional project and expenditure information is available in Attachment A. 6 of 9
3. Parks and Recreation Development Impact Fee – This fee is collected from new residential and commercial development for the upgrade and/or expansion of parks and recreation facilities needed to accommodate additional occupants. See SMMC Chapter 9.67.
FY 2021-22 Fee Activity
FY 2021-22 Parks and Recreation Development Impact Fee
Beginning
Balance
as restated
Fees
Collected
Interest
Earned Expenditures
Ending
Balance
$3,018,857 $1,952,613 $10,497 $944,782 $4,037,185
In FY 2021-22, $944,782 in fees were expended. $782,625 was spent on playground safety upgrades and $39,899 on the basketball court at Marine Park. $92,759 was used to repurpose the petanque courts in Palisades Park. In FY 2021-22, two projects were completed and fully funded with parks and recreation impact fees: $14,920 was used to resurface two Reed Park tennis courts and $14,579 was used to purchase picnic tables for Beach Park #1.
During the Mid-Year FY 2021-22 budget process, $150,000 of Parks and Recreation Development Impact Fees were allocated to a Park Condition Assessment, a project that identifies and prioritizes parks and playground safety enhancements. Staff will request City Council award the RFP and negotiate and enter into an agreement. This work is expected to start in Winter 2022 with completion expected in Summer 2023. Additionally, during the City’s FY 2022-24 CIP Biennial Budget, Parks and Recreation Development Impact Fees were allocated to two projects: $486,300 was allocated to the Douglas Park Playground Reconstruction project, expected to begin construction in Spring 2024 with expected completion in Summer 2024; and $191,600 was allocated to the Beach Park #1 Playground Equipment Replacement project, expected to begin construction in Summer 2023 with completion expected in Fall 2023. 7 of 9
Staff continues to identify potential park-based CIP projects, such as repairs and construction to essential equipment and infrastructure to maintain access to open spaces. Staff also intend to utilize this funding to meet the local match requirements when applying for grants. This would allow the City to maximize available funding for priority projects. Projects would be prioritized based on health and safety criteria and presented to Council as part of the proposed CIP budget.
4. Affordable Housing Commercial Linkage (AHCL) Fee – The City adopted SMMC Chapter 9.68 on June 23, 2015 to contribute to the creation of affordable housing production and preservation to offset the additional need for affordable housing generated by new commercial development. The City utilizes this funding for the production and preservation of affordable housing by issuing loans for the acquisition of property, new construction, or rehabilitation of existing buildings within the City. In FY 2021-22, no fees were disbursed.
FY 2021-22 Fee Activity
FY 2021-22 Affordable Housing Commercial Linkage Fee
Beginning
Balance
Fees
Collected
Interest
Earned Expenditures
Ending
Balance
$538,826 $742,931 $2,719 $0 $1,284,476
AHCL fees are just one of several funding sources that make up the City’s Housing Trust Fund (HTF). As affordable housing projects are identified and reviewed by staff, these funds will be considered for use as part of each project’s funding mix. The funding shown in this report has not yet been dedicated to a specific project. However, there are affordable housing projects in development that could utilize this funding. Final funding mixes for these projects will be decided as projects go through the vetting process.
5. Water Demand Mitigation Fee – On March 19, 1991, the City Council adopted Resolution 8196 (CCS) which established a one-time fee to mitigate the total daily water consumption rate projected for new development (Water 8 of 9
Demand Mitigation Fee). The Water Demand Mitigation Fee was set at $3.00 for each gallon of daily water demand that must be mitigated. The Water Demand Mitigation Fee is required when: a new single-family residence is constructed or there is an addition of 50% or more to existing square footage; for construction of a new multi-family building or addition of new units; for construction of a new non-residential building or whenever there is a change of use, change or addition to new plumbing fixtures, addition of restaurant seating, or addition of square footage. On July 1, 2017, the Water Neutrality Fee replaced the Water Demand Mitigation Fee.
FY 2021-22 Fee Activity
FY 2021-22 Water Demand Mitigation Fee
Beginning
Balance
Fees
Collected
Interest
Earned Expenditures
Ending
Balance
$414,219 $0 $0 $93,325 $320,894
• In FY 2021-22, $54,175 of Water Demand Mitigation Fees were expended on the Recycled Water Main Expansion Project and $39,150 were expended on the SWIP Injection Well. At the end of FY 2021-22, a balance of $320,894 was available. Staff anticipates using the balance to complete the Exploratory Well – SM11i project.
This is not a close out of the developer fee. The City will continue to collect Water Demand Mitigation revenues for permit applications submitted prior to July 1, 2017 and will continue to report on it until all funds are expended.
Environmental Review
This is not a project for the purpose of CEQA.
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action necessary as a result of the recommended action.
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Prepared By: Stephanie Manglaras, Financial Operations Manager Approved Forwarded to Council
Attachments:
A. March 19, 1991 Staff Report Weblink
B. December 5, 2006 Staff Report Weblink
C. March 12, 2013 Staff Report Weblink
D. October 14, 2014 Staff Report Weblink
E. June 23, 2015 Staff Report Weblink
F. November 27, 2018 Staff Report Weblink
G. June 25, 2019 Staff Report Weblink
H. May 5, 2020 Staff Report Weblink
I. AB1600 FY21-22 REPORT rev2