Development Impact
Fee Waivers
CITY COUNCIL STUDY SESSION
APRIL 9, 2024
1 ALAN ALTON
CHIEF FINANCIAL OFFICER
GABE OSBURN , DIRECTOR
PLANNING AND ECONOMIC DEVELOPMENT
Issue
▪ Request from community to waive all development fees for a three-to-five-year period for Affordable Housing Projects ▪ An attempt to ease the financial burden of those projects and spur Affordable Housing development
▪ The request seeks to pay for the fee waiver by using excess reserves in the special revenue funds, specifically the Community Facilities Fee fund and Park Development Fee
funds
2 Development Impact Fee Basics
▪ Development Impact Fees are charged to new developments to defray the cost of public facilities and improvements related to the new development.
▪ The most common fees: Capital Facilities Fees (CFF); Park Development Impact Fees; Water/Wastewater Demand Fees;
Housing Impact Fees; and Commercial Linkage Fees
3 Development Impact Fee Study
Current CFF and Park fees are based on a nexus fee study adopted by the Council on May 22, 2018
▪Study updated nexus analysis
▪Create program guidance on the use of CFF
▪Used a market-based development forecast over a
reasonable planning horizon to address under funded capital plans
▪Evaluated financial feasibility of implementing fee
4 Development Impact Fee Study
Eligible Use of CFF funds
▪Capital projects only
▪Specific infrastructure or facility types
▪Upgrade or expansion only
▪Developer reimbursement
▪Fee administration
5 Fee Study Expenditure
Categories and Allocations
Development Impact Fee Study
Eligible Use of Park funds
▪Park and recreation facilities only
▪Upgrade or expansion only
▪Developer reimbursement
▪Fee administration
6 Fee Study Expenditure
Categories
Northwest Quadrant
Northeast Quadrant
Southwest Quadrant
Southeast Quadrant
Development Impact Fee Study
Assembly Bill 602
After January 1, 2022, local agency conducting an impact fee must follow specific standards and practices:
1. Impact fee study must be adopted
2. Study must identify and justify level of service
3. Studies adopted after July 1, 2022 must calculate housing development fees proportionately to the square footage.
4. Studies should be updated every 8 years, from the period beginning on January 1, 2022
7 Impact Fee Study – Time of Payment
▪ Jurisdiction often collect at the time of building permit issuance ▪ Fee deferral – collection beyond published payment date ▪ CFF currently collected at time of final inspection
▪ Park fee collected at time of building permit issuance or deferred on “Incentive Eligible Projects” to close of escrow on permanent financing
▪ Affordable housing under contract with the City eligible for fee payment 2 years from published payment date.
8 Affordable Housing Types
▪ Deed restricted vs. affordable by design
▪ Inclusionary affordable housing
▪ Residential or mixed-use development must pay housing impact fee or incorporate on- site allocated units with 55-year affordability agreement ▪ Percentage of affordable units varies based on development type ▪ 100% affordable projects
▪ All units under contract, excluding management units
▪ Existing service fee reductions apply at 60% AMI
▪Affordable by Design
▪ Units are not subject to affordability agreement
▪ Generally smaller units with lower construction costs 9 Process
10 All Impact Fee
Revenue Collected
During Fiscal Year
Available Funds
Calculated During
Year-end Close
Available Funds Made
Available For CIP
Programming
Council Adopts CIP
Budget at June
Budget Adoption
Types of Projects
▪ CFF typically funds Road and Intersection, Bike and
Pedestrian, Storm Drain, and Public Safety/Fire projects. • US-101 Bicycle/Pedestrian Overcrossing: $2.5M over three years • Sonoma Avenue Rehabilitation between Farmers Avenue and Hahman Drive: $1.8M over three years
• Fountaingrove Parkway/Hopper Avenue Fire-Related Recovery Projects:
$2.6M over two years
• Fire Station improvements (Training Center improvements, South Santa Rosa FS, Temporary Fire Station 5): $3.9M over five years 11 Types of Projects
▪ Park Development Impact Fees are used to acquire and
develop park land
▪ CFF is typically supplemental funding; Park Fees and Grants are typically sole funding for park development
• Lower Colgan Creek Park: $3.9M PDI allocated
• Finley Aquatic Center: $4M PDI allocated
• Fremont Park: $3.8M PDI allocated
• Kawana Springs Park: $5M PDI allocated
12 Reserves
▪ Some projects require multiple years to build enough funding for design and construction, resulting in increased reserves ▪ While reserves may grow over time, and have so in the last few years, the funds in those reserves are all assigned to specific projects
▪ Use of the reserves to offset a potential loss of revenue would require the City to eliminate and not proceed with the
desired/needed improvements
13 Proposal
▪ To increase Affordable Housing production in the City, housing advocates have proposed the City waive all Development
Impact Fees for a 3-5-year period on Affordable Housing projects serving residents at 120% AMI and below
▪ Recently, a “Right Size Impact Fee Policy” was shared with the City, which proposed to lower fees on certain Affordable Housing and Affordable by Design projects, but increase fees on single family residential developments to make budget neutral
▪ Staff has not had an opportunity to analyze this proposal 14 Staff Analysis
▪ Staff studied the impacts of lowering impact fees and found the following:
▪Waiving Water/Sewer fees would be problematic due to Prop 218 ▪Waiving impact fees would cut off the revenue stream to pay for public infrastructure projects that are necessary because of the development
▪The revenue lost from this action could not be recovered – these are one-time revenues – and would severely impact the City’s ability to complete these projects
▪There are already funding shortfalls for many eligible projects 15 Impact Fees Collected From Affordable
Housing Projects FY 2012 – FY 2022
▪ Chart shows that of the total Impact
Fees collected, the amount that came
from deed-restricted housing projects
▪ Over the last three years, 41% of Park
Development Fees came from these
Affordable Housing projects
▪ 35% of CFF came from these projects
Fiscal Year Total PDF Collected % of Total CFF Collected % of Total FYE 2012 2,856,353
FYE 2013 2,897,840 135,388 20% 74,646 5% FYE 2014 3,088,849
FYE 2015 4,755,617 446,815 27% 296,491 20% FYE 2016 2,843,859
FYE 2017 5,739,042 264,531 15% 162,594 7% FYE 2018 12,719,932
FYE 2019 7,766,306
FYE 2020 10,812,562
FYE 2021 10,145,637 1,592,502 46% 1,624,355 51% FYE 2022 13,911,411 3,545,888 74% 2,474,299 57% FYE 2023 23,311,097 1,715,905 21% 882,979 13% Total 100,848,504 7,701,029 23% 5,515,364 16% 100% Afforable Projects
16 Impact Fees vs Total Project Cost
▪ Affordable Housing
Projects last 24 Months
▪ Total Development Cost
was $209,007,965
▪ Of the Impact Fees Paid:
▪ CFF was 1.1% of total
project cost
▪ PDF paid was 1.8% of total
project cost
17 P r oj e c t Na me a nd
Addr e ss
# of
Uni t s
# of
Af f or da bl e
Uni t s*
CFF P a i d P a r k P a i d Tot a l P a i d
1 S t Vi nc e nt De P a ul Commons
2400 Mendocino Ave
51 50 $124,067.35 $436,560.00 $560,627.35
2 La ur e l a t P e r e nni a l P a r k
P ha se I I ( 3 5 7 5 M e ndoc i no
P ha se I I )
38 37 $225,302.00 $0.00 $225,302.00
3 S t ony Oa k s Apt s
2542 Old St ony Point Rd 142 15 $841,918.00 $1,378,110.00 $2,220,028.00 4 La ur e l a t P e r e nni a l P a r k
P ha se I ( 3 5 7 5 M e ndoc i no
P ha se I )
94 93 $841,918.00 $1,378,110.00 $2,220,028.00
5 Ca r i t a s Home s P ha se I
340 7t h St
64 63 $0.00 $0.00 $0.00
6 Or c ha r d Commons ( Boy d
S t r e e t )
46 45 $302,518.32 $399,735.00 $702,253.32
7 Li nda Tuni s S e ni or Apt s
615 Acacia Ln 26 25 $176,878.00 $176,878.00
8 S a ge Commons
80 College Ave
54 8 $5,567.80 $22,876.00 $28,443.80
S ubt ot a l 5 15 336 $ 2 , 3 4 1, 2 9 1. 4 7 $ 3 , 7 9 2 , 2 6 9 . 0 0$ 6 , 13 3 , 5 6 0 . 4 7
CFF IMPACT FEES PARK IMPACT FEES TOTAL IMPACT FEE
$22,183,544
$9,485,205
$22,664,674
$ 2 0 9 , 0 0 7 , 9 6 5
$18,573,377
$31,148,808
unknown
$61,258,307
$43,694,050
Compl e t e d Wi t hi n La st 2 4 M ont hs
De v e l opme nt
Cost
Summary
▪ The goal of the Council and housing advocates is to increase housing development in the City
▪ City currently incentivizes Affordable Housing production and housing development in general in the Downtown
▪ Reducing or waiving fee revenue would have a dramatic effect on the City’s ability to build infrastructure projects necessary to serve the developments that are creating the impact
▪ There is no guarantee that additional incentives would increase the amount of Affordable Housing production in the City
18 Questions?
19