City Council
Report
City Council Meeting: December 12, 2023
Agenda Item: 5.B
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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 and Adoption of Transportation Impact Fee Resolution
Recommended Action
Staff recommends that the City Council:
1. Review and accept the FY 2022-23 Annual Reporting of Development Impact Fees per the Mitigation Fee Act (Government Code 66000-66025) and the FY 2022-23 Child Care Linkage Fee Report per SMMC Chapter 9.65;
2. Approve and adopt the proposed resolution making the necessary five-year findings for the Transportation Impact Fee; and
3. Adopt a finding of no possibility of significant effect pursuant to Section 15061(b)(3) (Common Sense Exemption) of the California Environmental Quality Act (CEQA) Guidelines.
Summary
Santa Monica collects Council authorized fees from developers to fund investments in child care, transportation, parks, affordable housing, and water conservation. The City also uses 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 2 of 9
after a development fee is established. Only the Transportation Impact Fee is due to be reported this year under the five-year requirement. Staff is requesting that the City Council approve and adopt the proposed resolution making the necessary findings for the Transportation Impact Fee.
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 impact 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 November 15, 2023 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 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, only the Transportation Impact Fee is subject to the five-year reporting.
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 3 of 9
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 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 childcare 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 childcare facilities.
FY 2022-23 Fee Activity
FY 2022-23 Child Care Linkage Fee
Beginning
Balance Fees Collected Interest Earned Expenditures Ending Balance $769,644 $655,413 $8,623 $0 $1,433,680
In 2021, 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 created 106 new child care slots in Santa Monica, including 38 for infants/toddlers, and 68 for preschool-aged children. Future programs may include loans or grants for those looking to develop new, licensed childcare in Santa Monica.
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2. Transportation Impact Fee (TIF) – This fee is collected on eligible new development and changes in land use that result in increased trip generation.
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.
Funds collected are used to fund transportation improvements, such as sidewalks, pedestrian crossing improvements, traffic signal upgrades, transit, and bicycle facilities, per 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 resulting from use of these fees. Grant matching was assumed in the fee calculation and nexus study supporting the development of the TIF.
FY 2022-23 Fee Activity
FY 2022-23 Transportation Impact Fee
Beginning
Balance Fees Collected
Interest
Earned Expenditures
Ending
Balance
$11,418,765 $2,270,504 $35,560 $1,917,592 $11,807,237
In FY 2022-23, $1,917,592 was expended on capital improvement 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 to implement Vision Zero improvements associated with the following projects:
• 4th St Enhancements – Expo Linkages, Phase 2: $433,343 • Michigan Ave Greenway / 20th St Bike Connection: $7,647 5 of 9
• Pico Blvd / SMC Pedestrian Safety Improvements: $752,693 • Multimodal Signal Detection: $24,548
• Stewart and Pennsylvania Safety Enhancement Project: $21,485 • Project Management Support: $26,187
• Safe Routes at Four Schools: $290,702
• Safe Streets for 17th Street and Michigan Avenue: $197,250 • Construction Management Services: $163,737
State law requires that TIF funds 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.
3. Parks and Recreation 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 per SMMC Chapter 9.67.
FY 2022-23 Fee Activity
FY 2022-23 Parks and Recreation Impact Fee
Beginning
Balance
Fees
Collected
Interest
Earned Expenditures
Ending
Balance
$4,037,185 $2,551,908 $42,907 $246,410 $6,385,590
In FY 2022-23, a total $246,410 was expended. Of the total, $150,210 was spent on playground safety upgrades; $440 on the basketball court at Marine Park; $50,680 was used on the Citywide Park Condition Assessment; $75 was spent on Douglas Park for the Notice of Exemption Fee; $42 was spent on labor 6 of 9
compliance review to begin construction at Beach Park #1; and one project, the expansion of the Community Gardens at Marine Park, was completed and partially funded at 80% with parks and recreation impact fees in the amount of $44,963.
Included in the FY 2023-25 Adopted Budget, a total $664,700 was allocated to the reconstruction of two basketball courts at Marine Park ($414,700) and to address needed repairs and deferred maintenance in parks ($250,000), as per the Park Condition Assessment, a project that identifies and prioritizes parks and playground safety enhancements. Work on the basketball courts is expected to start and finish in Summer 2024. Construction of repairs and maintenance will start after the Park Condition Assessment is complete, which started in the Spring of 2023 and is scheduled to be completed in Summer 2024.
Staff continues to evaluate potential park-based projects, such as repairs and construction to essential equipment and infrastructure to maintain access to open spaces. Staff also actively utilize this funding to meet local match requirements when applying for grants. This enables the City to maximize available funding for priority projects. Projects are prioritized based on health and safety criteria and presented to Council as part of the proposed Capital Improvement Program budget. Staff anticipates that $4.9 million in available funding would be used for future projects at Memorial Park and Clover Park and would be set aside for annual park improvements, the Park and Recreation Master Plan, implementation of emergency projects identified by the Park Condition Assessment, the conversion of the Santa Monica Airport to a ”Great Park”, possible pickleball expansion projects, and local match requirements when applying for grants, and to support ongoing playground safety upgrades.
4. Affordable Housing Commercial Linkage (AHCL) Fee – To offset the additional need for affordable housing generated by new commercial development, the City adopted the AHCL fee, per SMMC Chapter 9.68 on June 23, 2015 to contribute 7 of 9
to the creation of affordable housing production and preservation. The City utilizes this funding for the production and preservation of affordable housing by issuing loans to nonprofits for the acquisition of property, new construction, or rehabilitation of existing buildings within the City. In FY 2022-23, no fees were disbursed.
FY 2022-23 Fee Activity
FY 2022-23 Affordable Housing Commercial Linkage Fee
Beginning
Balance
Fees
Collected
Interest
Earned Expenditures
Ending
Balance
$1,284,476 $1,023,326 $14,432 $0 $2,322,234
AHCL fees are one of several funding sources deposited into the Citywide Housing Trust Fund. As affordable housing projects are identified and reviewed by staff, these funds are considered for use as part of each project’s funding mix.
The available funding included in this report has not yet been dedicated to a specific property acquisition, rehabilitation, or new development. However, there are affordable housing developments in the pipeline that could utilize this funding. Final funding mixes for these developments will be decided as development proposals are refined and financial feasibility determined. As of November 2023, the City is tentatively planning on committing $1.7M of these funds to address cost increases at the 1342 Berkeley project. This project would create 13 affordable housing residences primarily targeted to young adults 18-24 years old.
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 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 8 of 9
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 2022-23 Fee Activity
FY 2022-23 Water Demand Mitigation Fee
Beginning
Balance
Fees
Collected
Interest
Earned Expenditures
Ending
Balance
$320,894 $0 $0 $552 $320,342
In FY 2022-23, $552 was expended on the Recycled Water Main Expansion Project.
Staff anticipates using the available balance of $320,342 to complete the Recycled Water Main Expansion 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 report is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3) (Common Sense Exemption) of the CEQA Guidelines, which states that CEQA does not apply, “where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment.” This report is administrative in nature, and no action is being undertaken. Therefore, it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment.
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, Assistant City Treasurer Approved Forwarded to Council
Attachments:
A. Attachment A - FY 2022-23 Development Impact Fees Report (AB 1600) B. 121223 (001) - Resolution Adopting Five-year Findings for TIF