South Pasadena City Council
July 20, 2022

South Pasadena Municipal Code section 2.99-29 addresses professional services as follows:
(12) Professional and Contractual Services. Contracts for services of specially trained and professional persons or businesses shall be exempt from bidding. If possible, quotes from three qualified vendors shall be obtained prior to the award of a contract. If the contract is equal to or below twenty-five thousand dollars, the contract shall require the approval of, and be executed by, the city manager. All contracts exceeding twenty-five thousand dollars must be approved by the city council
Staff is currently evaluating the proposals to determine the most qualified consultant to assist the City in amending its current exclusive refuse service agreement. This review shall be completed prior to the July 20, 2022 City Council meeting, and a recommendation will be posted as an amendment to this report.

The scope of work for the consulting services includes reviewing documents, analyzing contracts, reviewing rates and fees, evaluating other City agreements, providing recommendations, assisting in negotiations, analyzing cost-benefits, calculating and deriving regulatory requirements, developing agreement language, attending negotiations sessions, attending/presenting at City Council meetings, and other related tasks.

Fiscal Impact
The Public Works Environmental Services Professional Services Account No. 101- 6010-6015-8020-000 contains $75,000 appropriated for services related to the implementation of the Climate Action Plan and Green Action Plan, and state, county, and local mandates such as Organic Waste Recycling requirements. The sufficiency of this budget will be evaluated when staff finalize the negotiated fee with the selected Consultant. Any costs above the available funds in the Environmental Services Professional Services Account will need to be appropriated from the General Fund.

Attachment:

1. Draft Professional Services Agreement- To Be Posted as an Additional Document before the July 20, 2022 City Council meeting
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ATTACHMENT 1
Request for Proposals
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City of South Pasadena

CITY OF SOUTH PASADENA

REQUEST FOR PROPOSALS (RFP)

REFUSE & WASTE CONSULTANT SERVICES
FY 2022-2023
JUNE 20, 2022

CITY OF SOUTH PASADENA

PUBLIC WORKS DEPARTMENT
1414 MISSION STREET
SOUTH PASADENA, CALIFORNIA 91030
PROPOSALS DUE: JULY 8, 2022, AT 5:00 PM
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City of South Pasadena Refuse & Waste Consultant Services

I. INTRODUCTION
The City of South Pasadena, Public Works Department is seeking proposals from qualified professional services firms experienced in refuse and waste/wastehauling consultant services.

II. CITY PROFILE
The City of South Pasadena (City) is located approximately six miles northeast of downtown Los Angeles, on the west side of the San Gabriel Valley between the cities of Pasadena, San Marino, Los Angeles, and Alhambra. Founded in 1874 by Indiana Colony, the City encompasses 3.44 square miles and was incorporated as a General Law city of the State of California on March 2, 1888. With a population of approximately 26,000, the City is known for its beautiful, historically significant homes on tree-lined streets, for its excellent public schools, and for a small-town atmosphere in the midst of greater Los Angeles.

The City provides a full range of services, including police and fire protection; public infrastructure, street, traffic signal, and lighting maintenance; sewer and water utility services; refuse collection; public improvements; recreational, library, cultural events, and parks; and planning and community development services.

III. BACKGROUND / PROJECT DESCRIPTION
The City of South Pasadena’s Public Works Department is inviting qualified consultants to submit a proposal for professional services to assist the City in amending its current exclusive refuse service agreement, and assist the City in negotiating rates with its current exclusive refuse wastehauler, considering desired service adjustments and regulatory requirements, such as SB 1383. The City has an exclusive refuse service agreement with Arakelian Enterprises, Inc. dba Athens Services to manage refuse, recycling and street sweeping service.

IV. SCOPE OF SERVICES
The scope of work that firms will include as a minimum in the proposal shall consist of, but not be limited to, the following tasks. The proposers are encouraged to add to these tasks as deemed necessary. All tasks shall be completed within six (6) weeks of the project’s notice to proceed. (1) Receive and review from the City, pertinent project related information for the City’s existing Exclusive Refuse Service Agreement, including the contract, amendment, contractual rate increases, municipal code and ordinances, and documents related to contract negotiations. Documents provided that are related to contract negotiations may be confidential in nature, and the consultant is required to control and store these documents as required by the City.
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City of South Pasadena Refuse & Waste Consultant Services

(2) Analyze the City’s existing exclusive refuse service agreement and amendment. Review current and proposed contract terms and conditions, and identify opportunities to enhance or expand services considering cost-benefit.
(3) Review City’s current rate calculation, franchise and related fees, annual increase methodology and compare to current industry best practices. (4) Evaluate refuse service agreements with at least four (4) Southern California cities, preferably in Los Angeles County, that utilize South Pasadena’s current exclusive refuse wastehauler. The identified cities shall be comparable to South Pasadena based on the type of services provided, similar population, demographics, and geographical considerations.

Compare South Pasadena’s existing services, rates, and fees, as well as proposed services, rates, and fees with those cities. The comparison between South Pasadena and the identified cities shall be developed for similar level of services with franchise, adjusting values as necessary to account for varying factors; e.g. regional variations in tipping fees.

The comparison between South Pasadena and the identified cities jurisdictions shall consider service offerings, exclusions, rate calculation, franchise and related fees, and annual increase methodology.
(5) Provide a recommendation on modifications to the City’s service offerings, exclusions, rate calculation, franchise and related fees, and annual increase methodology based on the comparison between South Pasadena and the identified cities jurisdictions. Any other relevant variables should be taken into account and incorporated in the analysis. (6) Utilize the above analysis to assist the City in negotiating revised services and rates with the City’s current exclusive refuse service wastehauler that incorporate regulatory requirements, e.g. AB 341, AB 1826, AB 1594, & SB 1383, and any modifications introduced by the City and the wastehauler in the negotiations. (7) Assist the City in analyzing the cost-benefit of proposed revised rates from the City’s current exclusive refuse services wastehauler, considering factors such as: modified service offerings, modified agreement terms, conversion to sustainable vehicles, provision of receptacles, regulatory requirements, and other factors as identified. Rate calculation methodologies shall be simplified to the extent possible, and structured to modify rates annually according to changes in the specific consumer price index (CPI) and changes in organics and recycling costs.
(8) Under SB 1383 requirements, calculate the quantity of organic products the City must purchase, and evaluate the current use of applicable recycled organic waste products in the City and by the City’s current exclusive refuse wastehauler (e.g. compost, renewable fuel for transportation, etc.). Identify the gap between current use and the procurement targets, provide the procurement ratio for each type of organic waste product, and determine the most feasible combination of purchases to achieve compliance. Provide recommendations on how to achieve compliance with the procurement requirements. 28 - 6
City of South Pasadena Refuse & Waste Consultant Services

(9) Recommend modifications to services based on current industry practices, findings from the evaluation of comparable cities, and negotiations with the City’s current exclusive refuse wastehauler. Provide an estimate of fair rates and fees for the current and proposed levels of residential and commercial services. Compare recommended fees with current fees for all sectors/services and show percent change for each service. Include organics collection service and minimize abrupt rate changes, where feasible, for any single sector or service. Include the impacts of compliance with AB 341, AB 1826, AB 1594 and SB 1383 mandates on customer costs and revenue streams.
(10) Develop proposed performance clauses to be used in an amended exclusive refuse services agreement, and proposed rate structures that add SB 1383 organics diversion and related services, including waste characterization, outreach/education, monitoring, data management, reporting, and SB 1383 procurement requirement provision. (11) Assist in two (2) onsite rate negotiation sessions with the City’s current exclusive refuse wastehauler. An hourly rate cost quote shall be provided for one or more additional onsite or teleconference negotiation meetings.
(12) Meet with City Council in up to two (2) evening study sessions and/or City Council meeting to present information and explain findings.
(13) Consultant shall be responsible for providing all equipment, personnel, materials, and resources necessary to accurately perform all deliverables described herein. Consultant shall comply with all standard government accounting practices and industry best practices.

V. TERM OF AGREEMENT
The term of the agreement shall be until December 31, 2022.

VI. PROPOSAL REQUIREMENTS
The proposal must include the following information:

1. COVER LETTER: Include the name, address, telephone number, and email address of the consulting firm. The name and email address of the firm's authorized contract signatory. The name, email address, and telephone number of the firm's individual consultant proposed to be assigned to the City.

2. BACKGROUND: Describe your firm's background, experience, and project qualifications in providing the requested services. Include a list of agencies or consulting firms to which you have provided similar services.

3. STAFF'S EXPERIENCE & AVAILABILITY: Provide resumes describing the qualifications of the staff that will be available and working on this project. Provide a list of 28 - 7
City of South Pasadena Refuse & Waste Consultant Services

similar projects and clients that your proposed Project Manager and Project Engineer have completed work for in the past 5 years.

4. SUB-CONSULTANT’S EXPERIENCE & AVAILABILITY: Provide a list of all proposed sub consultants that will be available and working on these projects, their background and qualifications, and degree of involvement.

5. PROJECT CONTROLS: Describe your firm’s ability to control costs and provide accurate and timely invoices; to monitor and stay within budget, to monitor schedule and review times and describe the techniques used to complete tasks within the proposed time frames.

6. REFERENCES: Provide a minimum of three (3) references the City may contact concerning your performance on other similar tasks/projects, preferably in the Southern California area.

Include a brief description of the work provided for each reference. The references should include the start date of the contract and the date of completion for each contract.

6. ACCEPTANCE STATEMENT: Submit a signed statement that the firm accepts all the terms and conditions outlined in the City's standard professional services agreement (attached) and can meet all insurance requirements made part of the agreement unless otherwise stated in the proposal exceptions.

7. PROPOSAL EXCEPTIONS: The proposer must identify any and all exceptions to the terms and conditions in the RFP process (inclusive of the standard professional services agreement, insurance, etc.) and identify the firm's proposed specific changes for consideration by the City. By submitting a proposal, your firm acknowledges and accepts all terms and conditions in this RFP process, including all addendum, amendments, or supplements; unless otherwise explicitly stated in the exceptions.

8. FEE PROPOSAL/SCHEDULE: Submit in a separate sealed envelope for the tasks involved, indexed per task. Provide an hourly rate fee schedule applicable to all staff proposed. Also, include overtime hourly rates, mileage costs and pricing for any additional billing requirements (such as production fees, etc.), if applicable.

VII. EVALUATION OF PROPOSALS
To be considered responsive, proposers must respond to this solicitation according to the requirements, specifications, commercial terms, and provisions as described and set forth herein.

Proposals must embrace a concept that the successful proposer will satisfy all of the objectives and service specifications most cost-effectively and efficiently possible as outlined in this document. The City reserves the right to make such alterations, deviations, additions to or deletions, or in any combination to the proposed RFP. The City may award the tasks in any combination.

All proposals will be reviewed based on the firm's ability to provide services that meet the requirements outlined in this RFP, as well as the company's responsiveness, qualifications, past experience, and fee. The City reserves the right to make such investigations, as it deems 28 - 8
City of South Pasadena Refuse & Waste Consultant Services

necessary to determine the proposer's ability to provide services meeting a satisfactory level of performance in accordance with the City's requirements.

By submitting a proposal, each proposer represents and warrants the following:
 All terms and conditions as presented in this RFP process are acknowledged and accepted, unless otherwise explicitly stated in the proposal;
 The proposer has not in any manner sought collusion to secure any improper advantage over any other person submitting a proposal; and
 The proposer has not, and will not, offer any City employee any gratuity, discount, or offer of employment connected with the award of a contract by City.

Interviews and presentations by one, several, or all of the proposers may be requested by the City if deemed necessary to understand and compare the proposer's capabilities and qualifications fully. The adequacy, depth, and clarity of the proposal will influence its evaluation to a considerable degree.

VIII. SUBMISSION PROCEDURES
A. RFP QUESTIONS
All questions regarding this RFP shall be submitted by 5:00 PM on July 1, 2022, to the Online Q&A Section on Plant Bids. The City reserves the right to respond to any or none of the questions, depending on their merit.

B. CONTRACT AWARD SCHEDULE
The tentative schedule for consultant selection and agreement award is provided below. The City reserves the right to make changes to the schedule, as deemed beneficial to the City's interest.

RFP Issuance: June 20, 2022
Proposals Due: July 8, 2022
Consultant Interview (if any) To Be Determined
Agreement Award To Be Determined
C. PROPOSAL SUBMISSION
All proposals must be submitted no later than 5:00 PM on July 8, 2022. Proposals received after the deadline will not be considered.

Proposals shall be submitted electronically to Planet Bids. Submit all fees and cost proposals in an electronically sealed envelope on Planet Bids. A link to the Planet Bids system is available on the City’s website at the following location:
https://www.southpasadenaca.gov/government/city-clerk/request-for-proposals 28 - 9
City of South Pasadena Refuse & Waste Consultant Services

The submittal package shall include all required information and documents as stated herein.

Submission of a proposal shall constitute acknowledgment and acceptance of all terms and conditions contained in this RFP, including all exhibits, attachments, and any amendments or addendum issued by the City.

IX. ATTACHMENTS
A. Sample Professional Services Agreement
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ATTACHMENT 2
Professional Services Agreement
To be submitted as an Additional Document
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City Council
Agenda Report
DATE: July 20, 2022
FROM: Armine Chaparyan, City Manager ~
PREPARED BY: Tamara Binns, Assistant to the City Manager Shannon Robledo, Police Lieutenant
ITEM NO.

SUBJECT: Approval of Mobile Crisis Pilot Program Agreement Letter Recommendation
It is recommended that the City Council approve the San Gabriel Valley Council of Government (SGVCOG) Mobile Crisis Pilot Program Agreement Letter, in coordination with the adopted 2022 Legislative Platform.

Background
On July 13, 2021, the Los Angeles County Board of Supervisors (BOS) approved the Fiscal Year (FY) 2021-2022 Measure H Funding Recommendations. These recommendations included funding to be allocated to each subregion in Los Angeles based on the 2020 point-in-time (PIT) homeless count. In our subregion, the San Gabriel Valley Council of Governments (SGVCOG), is scheduled to receive a total of $3.525 million to support programs in the San Gabriel Valley for the period of January 2022 to June 2023, and all funding must be expended by June 30, 2023.

In the Summer of 2021, SGVCOG conducted outreach to its member agencies to identify the region's biggest priorities and gaps in the homeless services system. One of the gaps identified was the need for a more immediate response to those experiencing a crisis. Currently, in many communities, law enforcement is the first responder for persons experiencing homelessness and mental health crises. In August 2021, the SGVCOG Board allocated funding to establish a mobile crisis response program in the San Gabriel Valley to provide an alternative response for law enforcement. The program's intent is to establish a regional or a sub-regional program that can maximize the reach of funding and services.

In the Fall of 2021, the SGVCOG released an application to identify which cities might be interested in participating in a regional Mobile Crisis Response Pilot Program. This Program would establish alternative mobile crisis teams to respond to non-violent service calls, including persons experiencing homelessness and those experiencing a mental health crisis. This approach alleviates the burden on law enforcement to respond to these types of calls, and provides social service and mental health professionals to more appropriately respond to these calls for service.

Mobile Crisis Pilot Program
July 20, 2022

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To identify participating cities, cities were asked to submit data indicating the volume and type of calls for which the cities might be seeking an alternative response and informed that additional funding may be required from the cities for participation. Given the short turnaround for expending the funds, cities were also informed that buy-in from the City, including community members, City Council, and law enforcement was required, to participate in the pilot program. Based on responses from the cities, SGVCOG staff determined that it was most appropriate to move forward with a pilot program to establish and evaluate the future of this effort.

Discussion
Given the City’s strong interest and engagement in launching the program, South Pasadena was included as a participating city in the pilot program. Over the last several months, City staff has participated in a working group to establish the parameters of the initial pilot program. The initial pilot program will include one mobile crisis team consisting of the following two members: a mental health clinician and a peer support specialist. The mobile crisis team for the pilot team will be provided by Los Angeles Centers for Alcohol and Drug Abuse (LACADA) in a contract managed by the SGVCOG.

The Mobile Crisis Team will serve the participating cohort cities, at this time initially responding to calls relating to homelessness and mental health emergencies:
• City of South Pasadena
• City of San Marino
• City of Arcadia
An additional mobile crisis team will provide services in the City of Montebello, supplementing the Montebello Community Assistance Program (MCAP).

The pilot program will launch in July 2022 with limited hours in the three cohort cities, and will co-respond with law enforcement. This will allow the participating cities to establish a strong program foundation, build trust, and collect data to inform program expansion. The teams will operate out of a retrofitted van that will be used for transport and to provide a space to serve clients. Service call data collection began in June 2022 to help inform the program design and deployment schedules. In this pilot phase, the primary purpose is to collect data, evaluate the resources needed, and establish strong connections with local service providers. Call data will also help to establish how the mobile crisis teams should expand as the program advances.

Two critical components of the pilot program launch are data collection and service connection. As part of its contract with the SGVCOG, LACADA will be required to collect data on the services provided, which will be an essential component of the program evaluation. In coordination with the SGVCOG and the participating cities, the program will establish key program metrics and will ensure that data is being collected and shared to evaluate these program metrics. In addition, while the mobile crisis teams 29 - 2
Mobile Crisis Pilot Program
July 20, 2022

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will be focused on responding to emergencies, another critical component is connecting these clients to more appropriate on-going services, including those provided by the Los Angeles Homeless Services Authority (LAHSA), Union Station Homeless Services (USHS), the Los Angeles County Department of Health Services (DHS), the Los Angeles County Department of Mental Health (DMH), and other local organizations and entities that are critical participants in the homeless services system. LACADA is already an active participant in the County’s coordinated entry system (CES), and the County’s mental health and substance use disorder (SUD) systems, so it will be wellpositioned to maximize these linkages. The City has already hosted several convenings of homeless services providers and other stakeholders to help build engagement and connections between the upcoming mobile response program. It is expected that this coordination will continue as the program roll-out advances.

There is no cost to the City to participate in this program, which will run from July 2022 to May 2023.

Analysis
Since September 2020, the South Pasadena Police Department has worked closely with the SGVCOG in researching a Mobile Crisis Intervention Service Team. One of the critical issues identified through regional coordination and collaboration was the need for an alternative crisis response option and immediate resource response for people experiencing mental health, substance abuse, and homelessness.

City Leaders, City Staff, and members of the police department have hosted and attended SGVCOG Mobile Crisis Intervention Service Team meetings. They have been part of the SGVCOG's Request for Proposal (RFP) Committee, the SGVCOG Steering Committee, and the SGVCOG Implementation Team. The City and Mayor Cacciotti have also been assisting the SGVCOG with seeking future funding beyond Measure H for the Mobile Crisis Intervention Team, including California State Senator Anthony Portantino regarding local funding opportunities, and writing support letters for congressional funding to the US. Senate.

Although most of the responses will require a co-response, the program alleviates the burden placed on Police and Fire/EMS to manage crises derived from emotional distress, substance abuse, and homelessness. The program is not designed to replace Police and Fire. The program is designed to better assist all members of our community and those who visit the City of South Pasadena.

The Mobile Crisis Pilot Program is an integral part of the adopted 2021-2026 Strategic Plan. The purpose of the Strategic Plan is to provide the City with a guiding document, setting priorities for the next five years. The Strategic Plan considers the city’s needs while balancing available resources and utilizing best practices to deliver services. The First Quarter 2021-2026 Strategic Plan Update approved by Council on May 18, 2022 includes Item 5e Homeless Initiatives to work with the SGVCOG on a Mental Health/Crisis Intervention Program.
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Mobile Crisis Pilot Program
July 20, 2022

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5e. Homeless
Initiatives
(3f combined with
5e)
• Continue
working with
the SGVCOG
on region-wide
solutions
• Participate in
Mental
Health/Crisis
Intervention
Program
(CAHOOTS
model)
• Expand working
relationship
with community
partners and
Union Station
FY 21-22 Police/Community
Development
The SGVCOG anticipates a
June 2022 start date for the
pilot project.

The Mobile Crisis Pilot Program elements are also included in Section 3 of the Resolution 7750 Condemning the City’s History as a Sundown Town and Past Practices of Institutionalized Racism. The City’s commitment to protect and support all residents regardless of housing or mental health status is affirmed in Section 3. • Section 3. The City will evaluate policies, procedures, ordinances, programs, goals, and mission to foster an unbiased environment where no person or group is subject to discrimination, harassment, or disproportionate economic harm on the basis of race, ancestry, national, origin, color, religion, sex or sexual orientation.

The City has also created a Social Services and Mental Health Task Force which meets quarterly to discuss and support service programs available to our residents and community. The Social Services and Mental Health Task Force partners consist of local faith-based groups, community partners, Council of Governments, housing and homeless resources, and the Department of Mental Health. The Mobile Crisis Pilot Program has been an integral part of the quarterly discussions with support from local agencies and groups. Additional stakeholders and providers continue to be identified and included in these meetings.

The Pilot Program will provide for 40 hours of service shared between San Marino, Arcadia, and South Pasadena on a weekly basis.

City Day of the Week Number of Hours
Arcadia Friday 10 hours
San Marino Monday 5 hours
South Pasadena Thursday 10 hours
Available to all participating cities Rotating as needed 15 hours 29 - 4
Mobile Crisis Pilot Program
July 20, 2022

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The SGVCOG agreement letter is scheduled to go Council in the three pilot cohort cities between July 13 – July 20. The letter’s terms fall within guidelines of the City’s adopted 2022 Legislative Platform, approved by Council on April 6, 2022.

Pilot Program Implementation
The Pilot phase will launch as a co-response model to build confidence and competence. It will focus on data for future program expansion. The pilot phase will include program education for city staff and the public. As a shared service, the cities of South Pasadena, San Marino, and Arcadia will involve a co-response with LACADA staff and law enforcement or fire/EMS as needed for a mental health crisis or assisting with calls involving the un-housed. The Mobile Crisis Service Team will comprise a Mental Health Clinician and a Peer Support Specialist.

Steps for a Co-Response:

1. Calls for service received by dispatch, 911 will triage the situation, and if Mobile Crisis Team is needed, Police will have a co-response.

2. Dispatch will contact Mobile Crisis Team via phone to deploy.

3. Mental Health Officer and Mental Health Team respond to the call with Police Statistics from South Pasadena Police Department computer aided dispatch system from January 1, 2019-January 14, 2022 recorded 44 calls in the two year period where a subject was transported to an area medical facility and placed on a Welfare and Institutions (WIC) 5150 hold. The chart below details the police time spent and time of occurrence:

January 1, 2019 – January 12, 2022 Call for Mental Health Service from South Pasadena Computer Aided Dispatch System
Number of calls 44
Total time on calls 4,634 minutes (105 Hours)
Average call time 105 Minutes (1 Hour and 45 Minutes)
The co-response cuts down on officer time by allowing officers to hand over individuals for care, allowing officers to remain within City limits, instead of transporting to County Mental Health facilities (Sylmar, Irwindale, and Los Angeles). While individuals are being transported by the mental health team, the receive immediate care. The average transport time to a County mental health facility is 90 minutes roundtrip for South Pasadena Police personnel. The pilot co-response program will provide immediate care to the individual in crisis, by social service and mental health providers. 29 - 5
Mobile Crisis Pilot Program
July 20, 2022

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Fiscal Impact
There is no cost to the City to participate in the Pilot Program at this time. The SGVCOG has no program funding allocated for the next fiscal year 2022-2023, but the SGVCOG continues to actively seek county, state, and federal funds for the program.

The City Council approved the Fiscal Year 2021-2022 budget which included $200,000 to be set aside from the Police Department budget for a Mobile Crisis Intervention Team. The $200,000 allocation from the Police Department budget for social services has not yet been utilized and has carried over to the current fiscal year 2022-2023, and there is no anticipation of Police Department staffing overtime being the program will consist of 10 hours per week during the pilot phase.

Attachment: San Gabriel Valley Council of Governments Mobile Pilot Program Agreement Letter

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ATTACHMENT
San Gabriel Valley Council of Governments Mobile
Pilot Program Agreement Letter
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REGIONAL HOMELESSNESS, MENTAL HEALTH & CRISIS RESPONSE PILOT

PROGRAM LETTER AGREEMENT
July 20, 2022
Arminé Chaparyan
City Manager
City of South Pasadena
1414 Mission Street
South Pasadena, CA 91030
RE: Letter Agreement for South Pasadena’s Participation in SGVCOG’s Homeless, Mental Health and Crisis Response Pilot Program Dear Ms. Chaparyan,
This letter is in response to the City of South Pasadena’s (“City”) request to participate in the following San Gabriel Valley Council of Governments’ (“SGVCOG”) Homeless, Mental Health and Crisis Response Pilot Program (“Program”), in which non-violent 911 calls related to behavioral health and homelessness are diverted to a two-member Mobile Crisis Team (“MCT”) consisting of a Clinician and a Peer Support Specialist or Substance Use Disorder Counselor. The initial pilot phase will launch as a co-response model.

The SGVCOG approves the City’s request and will therefore authorize services to the City throughout the duration of the Program. Through participation in this Program, the City will receive the homeless and mental health related services as described above.

Key details and responsibilities of each agency are outlined below. ● Anticipated Start Date: July 2022
● Anticipated Completion Date: May 31, 2023
● SGVCOG Responsibilities:
o Undertake procurement and execute a contract with Los Angeles Centers for Alcohol and Drug Abuse (L.A. CADA) to implement the Program. o Manage, make eligible payments, and administer L.A. CADA’s contract to ensure the Program is being implemented as contemplated under this MOA. o Manage the operating budget for the Program.
o Provide any updated point-of-contact to serve as the SGVCOG’s Project Manager with name, title, and contact information.
o Respond to and address City concerns regarding service provider performance.
o Coordinate conference calls and/or meetings with City as necessary. o Hold monthly check-in meetings with City’s Project Manager to support information sharing.
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o Gather data from City related to homeless, mental health, and crisis calls for service and utilize/interpret the data to enhance program effectiveness. o Provide City with monthly reports illustrating program effectiveness to include quantitative data analysis and performance metrics. o The SGVCOG reserves the right to withdraw Program services from the City should the City not perform its responsibilities and/or provide the required resources to support the Program.
o SGVCOG agrees to defend, indemnify, and hold free and harmless the City, its elected officials, officers, agents, employees, and volunteers, at SGVCOG’s sole expense, from and against any and all claims, actions, suits, or other legal proceedings brought against the City, its elected officials, officers, agents, employees, and volunteers arising out of or relating to the acts or omissions of SGVCOG in connection with this Letter Agreement.
● City Responsibilities:
o Maintain membership in the SGVCOG during the entire term of this MOA. o Participate in monthly Homeless Working Group meetings. o Provide any updated point-of-contact to serve as the City’s Project Manager with name, title, and contact information.
▪ Project Manager will serve as a liaison to help integrate the Program into the City’s emergency response network.
o Be willing to discuss changes and/or modifications to existing processes to integrate the MCT.
o Partner with SGVCOG and L.A. CADA to implement the Program. o Actively participate and utilize the Program services. o Provide feedback and raise issues to the SGVCOG on the implementation and iteration of the Program.
o Attend and participate in regular Program check-in meetings. o Identify any existing City services to help coordinate care. o Respond to requests for data and information, review materials, and provide input to the SGVCOG and its selected service provider(s) to support the implementation of the Program.
o Provide a physical workspace location for the Mobile Crisis Team members. o Provide storage space for the MCT van to be stationed during and outside of service hours when needed.
o The City reserves the right to withdraw from the Program should the SGVCOG and/or the service provider do not fulfill their duties and responsibilities.
o City agrees to defend, indemnify, and hold free and harmless the SGVCOG, its elected and appointed boards, officials, officers, agents, employees, members, and volunteers, at City’s sole expense, from and against any and all claims, actions, suits, or other legal proceedings brought against the SGVCOG, its elected and appointed boards, officials, officers, agents, employee members, and volunteers arising out of or relating to the acts or omissions of City in connection with this Letter Agreement. 29 - 9
Should you have any questions regarding this Program, please contact Caitlin Sims at [email protected].

Sincerely,
Marisa Creter
Executive Director
ACKNOWLEDGED AND ACCEPTED:

City of South Pasadena
_______________________________ ___________________
Arminé Chaparyan Date
South Pasadena City Manager
Cc: Tamara Binns, City of South Pasadena Assistant to the City Manager Cc: Lt. Shannon Rebledo, City of South Pasadena Police Department Cc: Caitlin Sims, SGVCOG Principal Management Analyst
Cc: Samuel Pedersen, SGVCOG Management Analyst
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DATE:

FROM:

City Council
Agenda Report
July 20, 2022
Armine Chaparyan, City Manager -A0
ITEM NO.

PREPARED BY: Angelica Frausto-Lupo, Community Development Director Elizabeth Bar-El, AICP, Interim Deputy Director, COD
SUBJECT: Discussion of Housing Element Letter From the State Department of Housing and Community Development (HCD)
And Possible Direction to Staff on Strategies
Recommendation
It is recommended that the City Council:

1. Review HCD's July 8, 2022, letter reviewing South Pasadena's 2nd Draft Housing Element (Attachment 1 ); and,

2. Provide direction regarding strategies to address HCD's comments.

Background
The City of South Pasadena submitted a draft and subsequent draft of the 6th Cycle (2021- 2029) Housing Element to the State Department of Housing and Community Development (HCD) for compliance/certification review. In response to informal comments received from HCD during the HCD review period, staff provided a letter to HCD with additional revisions and explanations and posted such for public access on June 29, 2022. The subsequent draft sought to address all issues that were included in the response letter from HCD to the initial draft.

On July 8, 2022, HCD sent a response letter to the subsequent draft (Attachment 1 ). HCD accepted several revisions as fully responsive. However, HCD has additional comments noting that several areas still require additional information and analysis in order to obtain certification. In some cases, HCD's directions will require additional clarification from HCD to enable the City to address their comments. Staff has already reached out to HCD to coordinate such meeting. The letter does provide information now on certain concerns that were previously not made clear in the earlier comment letter.

Analysis
Key Review Comments to Address
61h Cycle RHNA
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Housing Element Strategy Direction
July 20, 2022

As one of the oldest incorporated cities in the Los Angeles area, South Pasadena is largely built-out with only a small number of vacant parcels available for new construction.

Nevertheless, the parameters used by Southern California Association of Governments (SCAG) to determine the 6th Cycle Regional Housing Needs Allocation (RHNA) for all cities resulted in higher RHNA allocations for cities with transit access and proximity to regional employment centers. South Pasadena was identified for a higher number of housing units --2,067 units-- in the 6th Cycle RHNA. By contrast, 123 units (5 affordable) were built over the past eight years during the 5th Cycle, when that RHNA was 63 units total, 38 affordable. SCAG denied the City’s appeal during the RHNA process and recent case law has settled the legal question regarding any ability for cities to seek legal intervention outside of the administrative appeal process. Accordingly, the issue of the number of units (2,067 units) required to be accommodated by the City in the 6th Cycle revision to the Housing Element is fixed.

Sites Inventory
The Sites Inventory is an important feature in achieving a compliant housing element given the city’s size and RHNA. The inventory is comprised of two parts to identify sites meeting state criteria as suitable sites for development: sites available for moderate and above-moderate housing development; and sites available for potential affordable housing development. Notably, the City is not required to develop these sites, but rather, identify sites that are adequately zoned to allow for the development of the number of both affordable housing and moderate/above moderate housing units in the RHNA.

Over the past two years, PlaceWorks, in coordination with Planning staff, has conducted an exhaustive analysis of vacant properties and non-vacant properties that have potential for housing development under the current zoning code or that will have such potential under the revised General Plan, Downtown Specific Plan, and changes to the zoning code. Staff and consultants have attempted to obtain as much information as possible from property owners over the past two years through direct and written communication to property owners. More recently, staff redoubled this effort to contact property owners of sites that were questioned by HCD or by public comment. Not all property owners were responsive, though this effort yielded confirmation of the interest in developing some sites and removal of others when owners indicated disinterest in developing their property within the 6th Cycle. Recently housing applications were received on identified sites with unit requests lower than the number of units projected under the draft housing element.

Such sites therefore are required to be redefined based on the project characteristics, impacting the inventory composition.

While some vacant parcels identified in the southwest part of the city are legal parcels, with R1 zoning recorded for many years, roads in that area have not yet been developed.

While owners of these parcels have the legal right to construct a home on their properties, as with any development, there would be associated infrastructure development required.

Some of these sites were included on the sites inventory, but have been questioned by HCD due to the cost of development of such infrastructure. Based on further discussion with HCD, these sites with infrastructure development constraints will need to be 30 - 2
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removed. This will reduce the “surplus” in the number of units for the moderate/abovemoderate inventory. This proposed action was indicated in the City’s June 29 letter to HCD, but the short turnaround time following receipt of HCD’s informal comments did not allow staff to develop a specific list. At this time, staff is working through the July 8 letter to determine the full effect on the Inventory of sites to be removed or adjusted and how locations for these units will be otherwise identified.

Accessory Dwelling Units (ADUs)
ADUs comprise a small but important part of the number of units to address the RHNA.

State law does not require that the City identify specific properties with potential for ADUs, but rather requires a forecast of the reasonable number of ADUs anticipated based on trends. A “safe harbor” formula can be used, which looks back at an average of past years of ADU development to calculate the number of units HCD will accept as reasonably likely to be developed. For South Pasadena, that formula yields 81 (roughly 10 per year) ADUs, based on past development trends. The safe harbor formula calculation averages past years that include three years that preceded the ADU ordinance. As few ADUs were built prior to the ADU ordinance, such formula is not in the City’s best interest when compared to the City’s actual ADU development trends. By contrast, development since 2021 has been more robust: in 2021, 19 ADUs received building permits; and, as of June 1, 2022, Building & Safety has issued 29 permits for ADUs. It is anticipated that for 2022 the number will easily exceed the forecast provided in the housing element.

The ADU projection analysis in the subsequent draft, modified by additional language in the June 29th letter to HCD, is extensive. Cities are allowed to use other methodology supported by local conditions to propose inclusion of a higher number of ADUs, and there are examples of other certified housing elements that have exceeded the safe harbor.

The steep increase in ADU permits since adoption of the revised ordinances is a verified local condition that justifies a higher number than the safe harbor, and is an important component of the City’s approach to RHNA compliance. The draft housing element (as revised based on the informal comments) included an appendix with a formula that yields 297 ADUs over the next eight years (building up over the next two years to average roughly 37 per year). Additionally, 9 ADUs constructed between July 1, 2021 and December 31, 2021 count toward achievement of the RHNA target.

Discussions with HCD indicated that the City appeared to be on the right track in terms of its approach to including ADUs for RHNA compliance. The July 8 letter states that “HCD is supportive of regional affordability analysis” and the City will need clarification of their request to address their prior finding on ADU affordability to “also address public comments” (from one member of the public). The City will need to clarify this comment, as multiple housing elements in the SCAG region using this formula have been certified without question.
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Suitability of Non-vacant Sites
On page 4 of the letter, HCD requests “an analysis of how given land use constraints such as height limits and the inclusionary zoning requirements may make development infeasible on sites.” (Emphasis added).
• Inclusionary Housing Ordinance
On April 7, 2021, the South Pasadena City Council adopted an inclusionary housing ordinance (SPMC 36.375) that now applies to all multi-family projects with three or more residential units. The ordinance requires that 20% of units, calculated from the allowable base density, be provided as deed-restricted, affordable units for qualified Very Low, Low or Moderate-income residents. The ordinance was developed with significant Planning Commission input, including virtual public meetings and a Commission sub-committee that worked intensively with staff. It is an important component of South Pasadena’s plan for affordable housing development.

The State recognized the benefits of such ordinances by adopting AB1505 (effective January 1, 2018), which authorizes the legislative body of any city or county to adopt an inclusionary housing ordinance that includes residential rental units affordable to lowerand moderate-income households. The legislative findings on AB1505 stated:
“Inclusionary housing ordinances have provided quality affordable housing to over 80,000 Californians, including the production of an estimated 30,000 units of affordable housing in the last decade alone. Since the 1970s, over 170 jurisdictions have enacted inclusionary housing ordinances to meet their affordable housing needs.” Cities within the region that have required inclusionary housing for decades, such as West Hollywood and Santa Monica, have achieved significant inventories of affordable units over time that have enabled them to comply with their RHNA allocations.

Despite this general encouragement of inclusionary housing as an important affordable housing production tool, HCD has stated its concern that the IHO may serve as a constraint to development. In order to confirm that the City’s ordinance does not constrain the feasibility of constructing housing in the City, especially in light of high inflation and an increase in construction costs since its adoption, in May 2022, the Council authorized a consultant (Economic Planning Systems (EPS)), to conduct a feasibility analysis study.

This study has now been completed, and confirms that the City’s inclusionary requirement is feasible (Attachment 2). A full discussion of the study is scheduled to be held at the July 26 Planning Commission special meeting.
• Citywide Height Limit
HCD has identified the citywide 45-foot height limit as a potential constraint to development. HCD has indicated that the City should address the citywide height limit as a constraint to achieving the density needed on sites identified to address the RHNA.

Additional information regarding the history of the 1980 citizen-sponsored measure opposed to a significant commercial development was provided to HCD to demonstrate 30 - 4
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that the City had not previously used such measure as a way to prevent housing development. City staff additionally provided description of the interaction between state density bonus law which would allow for minor deviations above 45 feet and this Cityimposed height limit. Nevertheless, HCD has identified this requirement as an impediment to development which must receive further analysis by the City to prove that development goals can achieve the RHNA. Unfortunately, it is unlikely that such analysis can be completed to the satisfaction of HCD to prove development will likely take place over the next 8-years with such height limit in place.

This issue was identified by staff in 2020 as a potential impediment to development and brought to council on July 15, 2020 (Attachment 3). The Council considered placing a measure on the ballot to reconsider the 45-foot height limit. At that time, the draft RHNA had been released but not finalized and the City was planning to appeal its allocation.

Staff had not yet fully analyzed the opportunities for establishing an inventory of sites to comply with the RHNA. Members of the public provided comments both in favor and opposed to this action. Most importantly, there had not been input from HCD on the height limit being a potential impediment to development of sites and achieving the City’s RHNA. Ultimately, a split Council did not have a majority to initiate the ballot measure.

Strategies in Place
The Council has previously identified that new strategies are needed to address this significantly increased State mandate and to make South Pasadena affordable to a wider spectrum of the population. The Council recognized this need by commissioning a report and holding a study session on tools for developing affordable housing on March 21, 2018.

As an outcome, Council directed staff to begin a process to propose an inclusionary housing ordinance and to explore the role of accessory dwelling units (ADUs) for creating more housing units with greater affordability. Council’s direction was followed up with the Planning Department’s “housing initiatives” effort, which in 2021 culminated with adoption of the City’s first inclusionary housing ordinance and two ADU ordinance amendments, which now provide clear standards and processes for ADUs on both historic and nonhistoric properties. Both of these tools are producing results, particularly the ADU ordinance, and will be instrumental for housing production in the upcoming RHNA period.

Housing applications are also expected to increase with adoption of the General Plan update and the Downtown Specific Plan (DTSP), which will significantly enhance housing opportunities. The DTSP in particular contains several key non-vacant inventory sites that will have new incentives for housing, particularly density and height bonuses and parking reductions associated with the provision of affordable housing. Immediately following its adoption as a specific plan, provisions would allow applications for housing on sites within the DTSP that may be approved ministerially, whether mixed-use or 100% residential.

Other areas in the General Plan, such as the Ostrich Farm and commercial centers, will require follow-up with zoning amendments in order to implement the policies and allow permit approval. Revision of these documents to ensure consistency with the housing 30 - 5
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element is nearly complete, and staff expects to release them for public review and discussion by mid-August.

The City is also already implementing State housing law that allows residential properties to include an ADU and a junior ADU (JADU), doubling or tripling the capacity of singlefamily properties. Also, on single-family properties, SB9 allows property owners to build a second residential unit or sub-divide the lot to build units under separate ownership, although the State’s de facto method to analyze the track record within the jurisdiction is too new to effectively evaluate the potential for SB9 units as part of the sites inventory.

These State-mandated changes to the land use development environment support the State’s goal of increasing housing with higher density in established urban areas that can provide better transportation and concentration of services. South Pasadena has a large amount of land area in single-family zones (R1/RE), most of which are developed with one unit, but it has not been established that SB9 units will be a significant source of additional units in South Pasadena.

Issues in HCD Review Letter Needing Additional Review
Staff has identified several comments from HCD with direction to South Pasadena that appear to require a level of analysis and revision that is different from what has been expected of other cities that have received housing element certification. The City will need clarification from HCD to address these issues. Some examples are:
• Zoning Code Amendments: HCD has asked the City to provide specific language for zoning code amendments to accommodate housing construction in compliance with housing element objectives. It is not customary that this is required, and is not identified where State law requires this to be included in a housing element. The draft housing element does include Program 3a to rezone for RHNA capacity by October 15, 2022.
• AFFH: The 2nd Public Review Draft analyzed identified sites relative to groups of socio-economic characteristics as part of its analysis of Affirmatively Furthering Fair Housing (AFFH). The additional language provided detailed descriptions of how these sites would provide access for lower-income groups to amenities available in the community. The City reviewed its programs and believed they were consistent with this analysis and would promote inclusion. In response, HCD has added that the City should “address any isolation of the regional housing need allocation (RHNA) and formulate appropriate policies and programs to foster more inclusive communities.” The meaning of HCD’s comment is unclear, and this is a comment that the City’s consultants have not seen applied to other housing elements with similar approaches to addressing AFFH.
• Owner interest: Although Appendix A provides a summary of owner interest for low-income RHNA inventory properties, HCD has specified that the City must 30 - 6
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receive “concrete evidence of owner interest” for certain sites, a standard that is not typical of its review of other cities.

Strategies for Consideration:

In order to move forward toward a compliant housing element, staff suggests that the Council consider the following strategies to attain Housing Element certification and compliance:
• Continue to reach out to HCD to resolve outstanding issues and achieve conditional approval of a draft for adoption. Invite HCD to come to South Pasadena to discuss issue on-site.
• Modify zoning limits to accommodate more housing to address HCD concerns. • Continue to fine-tune the inventory to ensure properties that will be acceptable to HCD for certification.
• Explore legislative action that may assist the City to comply with the challenges of the RHNA.
• Moving forward with the most important housing initiatives, including the GP/DTSP, to adopt standards that encourage more housing. Follow up with rezoning for properties with housing potential that are not in the DTSP, such as the Ostrich Farm area and commercial centers.
• Provide direction on whether to amend the Zoning Code’s inclusionary housing requirements at this time.

Fiscal Impact
This information item does not have any direct fiscal impact. Based on tonight’s City Council direction, as appropriate, staff will bring back a more specific cost estimate with a matching appropriation request.

Attachments:

1. HCD Letter dated July 8, 2022

2. EPS Inclusionary Housing Ordinance Feasibility Study Memo

3. July 15, 2020 Staff Report
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ATTACHMENT 1
HCD Letter dated July 8, 2022
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STATE OF CALIFORNIA - BUSINESS, CONSUMER SERVICES AND HOUSING AGENCY GAVIN NEWSOM, Governor

DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT

DIVISION OF HOUSING POLICY DEVELOPMENT
2020 W. El Camino Avenue, Suite 500
Sacramento, CA 95833
(916) 263-2911 / FAX (916) 263-7453
www.hcd.ca.gov
July 8, 2022
Angelica Frausto-Lupo, Director
Community Development Department
City of South Pasadena
1414 Mission Street
South Pasadena, CA 91030
Dear Angelica Frausto-Lupo:

RE: City of South Pasadena’s 6th Cycle (2021-2029) Revised Draft Housing Element
Thank you for submitting the City of South Pasadena’s (City) revised draft housing element received for review on May 11, 2022 along with revisions made available to the public on June 29, 2022. Pursuant to Government Code section 65585, subdivision (b), the California Department of Housing and Community Development (HCD) is reporting the results of its review. Our review was facilitated by a conversation on June 22, 2022 with you, Elizabeth Bar-El, Interim Long Range Planning Principal Planner, Matt Chang, Planning Manager, Andrew L. Jared, City Attorney and your consultant team. In addition, HCD considered comments from Active San Gabriel Valley, Californians for Homeownership and Josh Albrekston pursuant to Government Code section 65585, subdivision (c).

The revised draft element addresses many statutory requirements described in HCD’s December 21, 2021 review; however, revisions will be necessary to comply with State Housing Element Law (Article 10.6 of the Gov. Code). The enclosed Appendix describes the revisions needed to comply with State Housing Element Law.

As a reminder, the City’s 6th cycle housing element was due October 15, 2021. As of today, the City has not completed the housing element process for the 6th cycle. The City’s 5th cycle housing element no longer satisfies statutory requirements. HCD encourages the City to revise the element as described above, adopt, and submit to HCD to regain housing element compliance.

For your information, pursuant to Assembly Bill 1398 (Chapter 358, Statutes of 2021), as the City failed to adopt a compliant housing element within 120 days of the statutory deadline (October 15, 2021), Program 3.a (Rezone and Redesignate Sites) and related programs must be completed no later than one year from the statutory deadline.

Otherwise, the local government’s housing element will no longer comply with State 30 - 9
Angelica Frausto-Lupo, Director

Housing Element Law, and HCD may revoke its finding of substantial compliance pursuant to Government Code section 65585, subdivision (i). Please be aware, if the City fails to adopt a compliant housing element within one year from the statutory deadline, the element cannot be found in substantial compliance until rezones to accommodate a shortfall of sites pursuant to Government Code section 65583, subdivision (c),paragraph (1), subparagraph (A) and Government Code section 65583.2, subdivision (c) are completed.

Several federal, state, and regional funding programs consider housing element compliance as an eligibility or ranking criteria. For example, the CalTrans Senate Bill (SB) 1 Sustainable Communities grant; the Strategic Growth Council and HCD’s Affordable Housing and Sustainable Communities programs; and HCD’s Permanent Local Housing Allocation consider housing element compliance and/or annual reporting requirements pursuant to Government Code section 65400. With a compliant housing element, the City will meet housing element requirements for these and other funding sources.

HCD appreciates the hard work and dedication of you and the rest of the City’s housing element team during the review. We are committed to assist the City in addressing all statutory requirements of State Housing Element Law. If you have any questions or need assistance, please contact Connor Finney at [email protected].

Sincerely,
Paul McDougall
Senior Program Manager
Enclosure
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City of South Pasadena’s 6th Cycle Draft Housing Element Page 1 July 8, 2022

APPENDIX

CITY OF SOUTH PASADENA
The following changes are necessary to bring the City’s housing element into compliance with Article 10.6 of the Government Code. Accompanying each recommended change, we cite the supporting section of the Government Code.

Housing element technical assistance information is available on HCD’s website at http://www.hcd.ca.gov/community-development/housing-element/housing-element-memos.shtml.

Among other resources, the housing element section contains HCD’s latest technical assistance tool, Building Blocks for Effective Housing Elements (Building Blocks), available at http://www.hcd.ca.gov/community-development/building-blocks/index.shtml and includes the Government Code addressing State Housing Element Law and other resources.

A. Housing Needs, Resources, and Constraints

1. Affirmatively further[ing] fair housing in accordance with Chapter 15 (commencing with Section 8899.50) of Division 1 of Title 2…shall include an assessment of fair housing in the jurisdiction. (Gov. Code, § 65583, subd. (c)(10)(A).) Identified Sites and Affirmatively Furthering Fair Housing (AFFH): The element includes some discussion of sites relative to groups of socio-economic characteristics. For example, the element notes the proportion of sites to accommodate housing for above moderate-income households in a group where less than 10 percent of the households are below the poverty line. However, as noted in the prior review, the element must still analyze the location and impact of sites by all income groups. For example, the element could evaluate the number of units by income group by census tract or neighborhood.

This analysis should also specifically address sites by all income groups by income in addition to poverty. Based on this analysis, the element should then address any isolation of the regional housing need allocation (RHNA) and formulate appropriate policies and programs to foster more inclusive communities.

Local Data and Knowledge: While the element now includes some discussion of historical development patterns and racial exclusion for significant portion of the 20th century, it should include additional discussion of land use practices including zoning, growth controls, height initiatives and any other practices that affect housing choices since the latter half of the 20th century. This information should complement the discussion of the socio-economic patterns within the City and the City relative to the region and based on a complete analysis, the element should formulate appropriate policies and programs to combat past patterns and impacts on inclusive communities.

Contributing Factors to Fair Housing Issues: The element should re-assess and prioritize contributing factors based upon a complete analysis.

Goals, Actions, Metrics, and Milestones: The element must be revised to add or modify goals and actions based on the outcomes of a complete analysis. Goals and actions must 30 - 11
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specifically respond to the analysis and to the identified and prioritized contributing factors to fair housing issues and must be significant and meaningful enough to overcome identified patterns and trends. Actions must have specific commitment, metrics, milestones and geographic targeting and must address housing mobility enhancement, new housing choices and affordability in high opportunity areas, place-based strategies for community preservation and revitalization and displacement protection.

2. An inventory of land suitable and available for residential development, including vacant sites and sites having realistic and demonstrated potential for redevelopment during the planning period to meet the locality’s housing need for a designated income level, and an analysis of the relationship of zoning and public facilities and services to these sites. (Gov.

Code, § 65583, subd. (a)(3).)
Realistic Capacity: As found in the prior review, due to recent legislation (SB 9), the element assumes 100 percent of larger (greater than 0.2 acres) vacant sites will double in capacity and should support these assumptions. In response, the element states the City has received a fair amount of interest but has not received any SB 9 related applications.

There is no discussion of what a fair amount of interest means or whether that interest is related to the assumptions of larger vacant sites. As a result, the element should still include information to support this assumption. For example, the City could survey owners or rescale assumptions with enhanced policies and programs, including monitoring and alternative actions, to encourage development consistent with recent legislation.

Suitability of Nonvacant Sites: As found in the prior review, the element must include additional discussion of recent experience in redevelopment and either remove sites or include additional analysis on the extent existing uses impeded additional development. In response, the element does not remove sites and added little to no discussion of existing uses. In addition, HCD has considered significant comments indicating that existing uses impede additional development on many sites, including those noted in the prior review.

The element must address HCD’s prior finding as well as public comments regarding the extent existing uses impede additional development. For example, Sites 3, 5, 6, 8, 10 should include specific information, such as concrete evidence of owner interest, as well as analysis on how given land use constraints such as height limits and the inclusionary zoning requirements may make development infeasible on sites. For site 9, the element should include evidence development is cleared by Edison. Additional sites warranting evidence the uses will likely discontinue include sites 2, 13, 14, 17, 18, 19, 20, 21, 22, 23, and 24. In some cases, some sites, have had recent renovations, plans on future renovations, new businesses with new leases, healthy and necessary businesses such as grocery stores and malls that serve large populations with busy parking lots. The element should include information addresses these uses and how redevelopment is likely in the planning period.

In addition, because the housing element relies upon nonvacant sites to accommodate more than 50 percent of the RHNA for lower-income households, it must demonstrate existing uses are not an impediment to additional residential development and will likely discontinue in the planning period. (Gov. Code, § 65583.2, subd. (g)(2).) Absent findings (e.g., adoption resolution) based on substantial evidence, the existing uses will be 30 - 12
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presumed to impede additional residential development and will not be utilized toward demonstrating adequate sites to accommodate the RHNA.

Small Sites: Sites smaller than half an acre are deemed inadequate to accommodate housing for lower-income households unless it is demonstrated, with sufficient evidence, that sites are suitable to accommodate housing for lower-income households. While the City’s response document includes some discussion of small sites and common ownership, this information should be incorporated into the element and programs should be modified as necessary to address the additional discussion.

City-owned Sites: While the element now includes a program to facilitate development on City-owned sites and coordinate with property owners, it should still discuss whether existing uses impede additional development and any known conditions that preclude development in the planning period. In addition, the housing element must include a description of whether there are any plans to dispose of the properties during the planning period and how the jurisdiction will comply with the Surplus Land Act Article 8 (commencing with Section 54220) of Chapter 5 of Part 1 of Division 2 of Title 5.

Environmental Constraints: As discussed in our previous letter, the element notes many parcels are impacted by environmental constraints and sensitivities and generally describes a few environmental conditions in some detail, such as slopes, within the City. However, the element must relate those conditions to identified sites and describe any other known environmental or other conditions that could impact housing development on identified sites in the planning period. For example, the analysis on sites on steep slopes should include trends and examples of homes being built on these sites as well as why these sites have not been redeveloped.

Accessory Dwelling Units (ADUs): As noted in the prior, the element should either adjust projections downward based actual on the average number of ADU permitted since 2018 (approximately 10 units per year) or include additional analysis and policies and programs.

In response, the element continues similar projections, but revisions made available note some more recent trends. The element should be updated and projections should be scaled based on the recent trends. In addition, the City’s records differ from HCD’s ADU records and should be reconciled and, while HCD is supportive of regional affordability analysis, the element should also address public comments regarding HCD’s prior finding on ADU affordability.

Electronic Sites Inventory: For your information, pursuant to Government Code section 65583.3, the City must submit an electronic sites inventory with its adopted housing element. The City must utilize standards, forms, and definitions adopted by HCD. This is especially important for determining sites that have been utilized in multiple planning periods and are subject to by-right provisions. Please see HCD’s housing element webpage at https://www.hcd.ca.gov/community-development/housingelement/index.shtml#element for a copy of the form and instructions. The City can reach out to HCD at [email protected] for technical assistance.

3. An analysis of potential and actual governmental constraints upon the maintenance, 30 - 13
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improvement, or development of housing for all income levels, including the types of housing identified in paragraph (1) of subdivision (c), and for persons with disabilities as identified in the analysis pursuant to paragraph (7), including land use controls, building codes and their enforcement, site improvements, fees and other exactions required of developers, and local processing and permit procedures... (Gov. Code, § 65583, subd. (a)(5).)
Land-Use Controls: The prior review found the element must analyze, among other things multifamily parking garages, heights and open space and must address how development standards will facilitate achieving maximum allowable densities under the proposed overlay zones. In response, the element now identifies these standards but contains little to no analysis as described in the prior review. The revisions made available June 29, 2022, state these standards will be revised as part of Program 3.A but the program contains ambiguous commitment and generally states the standards “may” need revising. The element must include specific analysis as part of the housing element update and revise programs with specific commitments to address identified constraints, including heights. The City should engage the development community as part of this analysis. Please see HCD’s prior review for additional information.

Processing and Permit Procedures: While the element now lists approval findings for various procedures, it must analyze these findings for impacts on housing cost, timing and approval certainty and include specific commitment to address identified constraints.

Other Local Ordinances: While the element now describes the inclusionary housing requirement and local height initiative, it generally does not analyze the impacts on housing cost, supply and ability to achieve maximum densities, including densities proposed as part of this housing element. For example, the analysis of the inclusionary requirement should, among other items, address the 20 percent requirement and cost impacts, 10 unit threshold, in lieu fees and cost of a comparable unit and how the inclusionary relates to State Density Bonus Law. The City should engage the development community as part of this analysis. Please see HCD’s prior review for additional information.

B. Housing Programs

1. Identify actions that will be taken to make sites available during the planning period with appropriate zoning and development standards and with services and facilities to accommodate that portion of the city’s or county’s share of the regional housing need for each income level that could not be accommodated on sites identified in the inventory completed pursuant to paragraph (3) of subdivision (a) without rezoning... (Gov. Code, § 65583, subd. (c)(1).)
As noted in Finding A2, the element does not include a complete site analysis, therefore, the adequacy of sites and zoning were not established. Based on the results of a complete sites inventory and analysis, the City may need to add or revise programs to address a shortfall of sites or zoning available to encourage a variety of housing types. In addition, the element should be revised as follows:
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• Program 3.b (Mixed-use Development): As noted in the prior review, the Program should be revised with additional incentives or other strategies based on a complete analysis of nonvacant sites and realistic capacity assumptions. • Program 3.d (Enable Parcel Assemblage): The Program should be modified based on a complete analysis of small sites. In addition, the program should consider additional incentives and more frequent review and revision. • Program 3.f (ADU): While the program commits to review regulations in December 2023, it should commit to an earlier timeframe if comments are received from HCD on the City’s recently amended ordinance.

2. Address and, where appropriate and legally possible, remove governmental and nongovernmental constraints to the maintenance, improvement, and development of housing, including housing for all income levels and housing for persons with disabilities.

The program shall remove constraints to, and provide reasonable accommodations for housing designed for, intended for occupancy by, or with supportive services for, persons with disabilities. (Gov. Code, § 65583, subd. (c)(3).)
As noted in Finding A3, the element requires a complete analysis of potential governmental and nongovernmental constraints. Depending upon the results of that analysis, the City may need to revise or add programs and address and remove or mitigate any identified constraints.

3. Promote and affirmatively further fair housing opportunities and promote housing throughout the community or communities for all persons regardless of race, religion, sex, marital status, ancestry, national origin, color, familial status, or disability, and other characteristics... (Gov. Code, § 65583, subd. (c)(5).)
As noted in Finding A1, the element requires a complete analysis of AFFH Depending upon the results of that analysis, the City must revise or add programs.

C. Quantified Objectives
Establish the number of housing units, by income level, that can be constructed, rehabilitated, and conserved over a five-year time frame. (Gov. Code, § 65583, subd. (b) (1 & 2).)
The prior review found the element could consider conservation objectives beyond 5 units in the planning period. In response, the City adjusted its target to 20 units. HCD encourages the City to target a higher impact for the 8 year planning period. 30 - 15
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D. Public Participation
Local governments shall make a diligent effort to achieve public participation of all economic segments of the community in the development of the Housing Element, and the element shall describe this effort. (Gov. Code, § 65583, subd.(c)(8).) While the element describes comments and generally addresses comments, in some cases, comments do not appear incorporated into the housing element. The element should reevaluate these comments and new comments received and incorporate those comments where appropriate. For example, HCD has considered many comments on identified sites as well as implementation of key mobility strategies such as the bike master plan that should be addressed and incorporated into the element.

In addition, public participation in the development, adoption and implementation of the housing element is essential to effective housing planning. During the housing element revision process, the City must continue to engage the community, including organizations that represent lower-income and special needs households, by making information regularly available while considering and incorporating comments where appropriate. 30 - 16
ATTACHMENT 2
EPS Inclusionary Housing Ordinance
Feasibility Study Memo
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D RAFT M EMORANDUM
In troduction
The City of South Pasadena (City) adopted an inclusionary housing ordinance (IHO) in May 2021. The ordinance requires that a minimum of 20 percent of the total number of dwelling units in a residential or mixed-use development consisting of more than two units be provided at below-market-rate (BMR) prices affordable to Very-Low, Low, and/or Moderate-Income households, based on income standards established by the State of California’s Department of Housing and Community
Development (HCD). The ordinance allows, under certain
circumstances, for development projects to pay an in-lieu fee as an alternative to providing required units. These circumstances include any for-sale project, which can pay an in-lieu fee instead of building on-site affordable units; as well as some rental projects, which have the option to pay an in-lieu fee for any fractional affordable units required.

The City engaged Economic & Planning Systems, Inc. (EPS) to analyze the impacts of the inclusionary requirements on the financial feasibility of building new market-rate housing in South Pasadena. EPS reviewed a range of for-sale and rental housing prototypes representative of likely new development in the City to assess whether each prototype would be able to achieve standard development return metrics with the inclusion of required affordable units. The analysis included consideration of development incentives available to projects with affordable units, specifically incentives offered under California’s State Density Bonus law. As detailed in this memorandum, when these incentives are incorporated into the prototype development program, new residential projects are financially feasible even with the addition of the inclusionary requirements.

To: Angelica Frausto-Lupo and Liz Bar-El, City of South Pasadena
From: Julie Cooper, Thomas Gonzales, and Darin Smith
Subject: South Pasadena Inclusionary Housing Ordinance
Feasibility Analysis; EPS #214034
Date: July 13, 2022
The Economics of Land Use
Economic & Planning Systems, Inc.
800 Wilshire Boulevard
Suite 410
Los Angeles, CA 90017
213 489 3838 tel
Oakland
Sacramento
Denver
Los Angeles
www.epsys.com
30 - 18
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Economic & Planning Systems, Inc. (EPS) Z:\Shared\Projects\LA\214000s\214034_South Pasadena IHP In-Lieu Fee\Report\214034 S Pasadena IHO Feasibility Analysis Memo_DRAFT REVISED.docx It is important to note that the feasibility analyses contained in this memorandum are based on generic prototypes meant to represent a typical or average development project. A developer’s choice to ultimately pursue a residential development project in South Pasadena will be site-specific and depend on many factors that are impacted by regional market forces. While our analysis accounts for some of these factors, the cost and revenue expectations for a particular project will vary based on the size, location, layout, condition, and history of a specific project site, as well as the capabilities, business goals, and proposed project design characteristics of a specific developer. Most developer investment decisions are also strongly impacted by anticipated project timeline, and this analysis does not estimate the length of time needed to complete a project in South Pasadena, nor does it account for the impacts of time value of money over the course of a project.

Key Findings

1. Under the City’s inclusionary housing policy, multifamily rental and for-sale condominium products that utilize the development incentives under the State Density Bonus law are likely to be financially feasible. Rental and for-sale prototype midrise projects of 55 to 70 units per acre that meet the City’s inclusionary housing requirements are able to utilize the State’s density bonus law, which allows projects with on-site affordable housing units to build additional market rate units beyond what is otherwise allowable under local zoning. With the use of this incentive, these projects are expected to meet standard development return thresholds.

2. For-sale townhome projects are financially feasible even with the incorporation of required affordable units. Based on strong market pricing, new for-sale townhome developments are expected to meet standard development return thresholds for feasibility, even when incorporating the City’s requirement to include 20 percent of units affordable to Moderate-Income households.

Financial Feasibility Analysis
Methodology
EPS analyzed four generic prototypes that reflect rental and ownership residential products representative of likely future development projects in South Pasadena. The assessment of financial feasibility for each prototype involved calculating financial return metrics for the prototype and comparing them against typical industry target thresholds.

The relevant return metrics are based on comparing total project revenues, including the combined value of all market-rate and affordable units, to total project development costs. EPS assumptions for prototype revenues, costs, and return metrics used in this analysis are detailed in the following sections.

Housing projects in California that incorporates affordable housing units may also be eligible to take advantage of additional incentives under the State Density Bonus Law, based on the proportion of affordable units relative to market-rate units. The Law allows 30 - 19
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Z:\Shared\Projects\LA\214000s\214034_South Pasadena IHP In-Lieu Fee\Report\214034 S Pasadena IHO Feasibility Analysis Memo_DRAFT REVISED.docx Economic & Planning Systems, Inc. (EPS) a project to be built at a higher density than what is allowed by local zoning. Given the proportion of required affordable units mandated by the City’s ordinance, any project complying with South Pasadena’s inclusionary requirements would be eligible for a density bonus. Therefore, EPS’s analysis included assessing the feasibility of scenarios incorporating these incentives.

Product Prototypes
The prototype residential projects used in the feasibility analysis were informed by EPS research of the City’s housing market. Research included review of recent developments and proposed projects, discussions with developers active in the City, and discussions with City staff.

The characteristics for the prototype development products are summarized in Table 1.

Prototypes 1 and 2 represent owner-occupied, for-sale housing projects, while Prototypes 3 and 4 represent renter-occupied, multifamily apartment projects.

To create a more general and simplified analysis, each prototype project is assumed to comprise a single unit type. Prototype 1 includes 3-bedroom townhomes at 1,650 square feet with attached, 350-square-foot garage. Prototype 2 includes two-bedroom, 1,200- square-foot condominium units with two parking spaces per unit provided on-site.

Prototypes 3 and 4 include two-bedroom, 1,000-square-foot rental units with one parking space per unit provided on-site. The prototype projects range in size from ten to 50 units, and in density from 20 units per acre to 70 units per acre.

The unit types for each prototype are meant to represent average unit sizes, with the resulting analysis demonstrating feasibility for an average residential project. The findings of this analysis assume that the unique unit mix of any particular project will, in aggregate, conform to these average unit sizes. However, as stated earlier, each specific project will have its own cost and revenue factors that may be impacted in part by its unit mix.

Table 1 Market-Rate Housing Development Prototype Characteristics Prototype Product Type Construction Type Unit Count Density Unit Size Unit Sq. Ft. Parking Type 1 For-Sale Townhome 10 20 units/acre 3 Bedroom 1,650 sq. ft. Attached garage 2 For-Sale 4-Story Wood Frame
Condominium Bulding 50 55 units/acre 2 Bedroom 1,200 sq. ft. 2 spaces per unit (structured) 3 Rental 4-Story Wood Frame
Apartment Building 30 55 units/acre 2 Bedroom 1,000 sq. ft. 1 space per unit (structured) 4 Rental 5-Story Wood Frame
Apartment Building 40 70 units/acre 2 Bedroom 1,000 sq. ft. 1 space per unit (structured) 30 - 20
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Economic & Planning Systems, Inc. (EPS) Z:\Shared\Projects\LA\214000s\214034_South Pasadena IHP In-Lieu Fee\Report\214034 S Pasadena IHO Feasibility Analysis Memo_DRAFT REVISED.docx The feasibility analysis assumes that each of the prototype projects will meet the City’s inclusionary housing requirements, which are outlined in Table 2. The unit count of each project was selected such that none of the prototypes result in fractional affordable units required, for simplicity of analysis. In addition, the analysis did not assess the feasibility impacts of the City's inclusionary requirements on rental projects of ten or fewer units, which are distinct from the requirements for projects with more than ten units (see Table 2). However, EPS estimates that the relative per-unit cost of meeting the required levels of affordability would be equal to or lower for these smaller projects relative to larger projects. This is because smaller projects are required to include affordable units at rents that are equal to or greater than larger projects (for example, projects with 10 units may provide one of their inclusionary units at rents affordable to Moderate-Income households, which is not an option for larger projects). Therefore, the smaller projects are likely to be at least as feasible as the larger projects analyzed, assuming all other development cost and revenue assumptions are held constant.

Table 2 Affordable Housing Required by Development Type per South Pasadena IHO Revenue Assumptions
Affordable Housing Revenue Assumptions
Both rental and for-sale values for affordable units are based on maximum housing costs affordable to households at various household income levels. Income levels in the County of Los Angeles are set by the California Department of Housing and Community Development (HCD) on an annual basis, which are in turn based on income limits published by the U.S. Department of Housing and Urban Development (HUD). Table 3 shows the 2022 maximum incomes for three- and four-person households in each income Development Project Type Inclusionary Requirement [1] Type of Units Provided For Rent, 3-4 Units Fractional Fee Rental
For Rent, 5-9 Units 1 Low-Income Unit + Fractional Fee Rental For Rent, 10 Units 2 Low-Income Units, OR
1 Very-Low Income + 1 Moderate Income Unit Rental
Rental Project with 11+ Units [2]
10% Very-Low Income Units
+ 10% Low-Income Units
+ Fractional In-Lieu Fee (if applicable)
Rental
For-Sale Project [3]
20% Moderate-Income For-Sale Units
OR Match Rental Project Requirements
OR Pay In-Lieu Fee
Either For-Sale or Rental
Source : South Pasadena Ordinance No. 2355, Inclusionary Housing Requirements. [ ] y q g
households. Fractional units must be rounded up or paid via in-lieu fee. [1] All projects that ow e a fee on fractional units have the option to "round up" and provide a unit on-site. [3] Fractional units must be rounded up or paid via in-lieu fee for Moderate-income units. 30 - 21
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Z:\Shared\Projects\LA\214000s\214034_South Pasadena IHP In-Lieu Fee\Report\214034 S Pasadena IHO Feasibility Analysis Memo_DRAFT REVISED.docx Economic & Planning Systems, Inc. (EPS) group. This analysis assumes a two-bedroom unit is occupied by a three-person household and a three-bedroom unit is occupied by a four-person household.1 Table 3 2022 Annual Household Income Limits for Los Angeles County The Area Median Income (AMI) in Los Angeles County is $82,000 for a family of three and $91,100 for a family of four. For the Low and Very-Low Income groups, the maximum incomes are adjusted upwards from their corresponding percent of AMI. HUD makes these adjustments to Low and Very-Low Income categories in counties with relatively high housing costs and/or relatively high or low household incomes. HUD does not apply these adjustments to the Moderate-Income category.

Based on these income limits, EPS calculated the maximum spending towards housing costs affordable at each income level, which is summarized in Table 4. Consistent with the City’s ordinance, the analysis assumes that households spend 30 percent of their gross annual income on total housing costs. For rental units, housing costs include rent and utilities, and spending on utilities is subtracted from spending on total housing costs to determine the maximum rent that a household can pay in a year.2 For for-sale units, housing costs include mortgage and interest payments, insurance, property taxes, and Homeowners Association (HOA) fees. To calculate the maximum affordable sale price for these units, EPS subtracted insurance, property taxes, and HOA fees from spending on total housing costs to estimate affordable monthly mortgage and interest payments. This calculation is detailed in Table 5.

Maximum incomes and associated affordable housing costs are shown for Low-Income or Very-Low Income households of three occupants, which correspond to the rental unit prototypes, and for Moderate-Income households of three and four occupants, which correspond to the for-sale unit prototypes. For for-sale units, EPS used a maximum income level of 110 percent of AMI to calculate housing costs for Moderate-Income Households. Using income levels somewhat below the top of the income range (120 percent of AMI) is common practice in calculating affordable rents and sale prices, as it 1 Based on California Health and Safety Code Section 50052.5. 2 The utility allowance for a two-bedroom unit is based on a schedule published by the Los Angeles County Development Authority (LACDA) (https://www.lacda.org/docs/librariesprovider25/publicdocuments/utility-allowance/ua-2021.pdf?sfvrsn=47bb66bc_4) Income Group and Definition
2022 Maximum Income
3-Person Household
2022 Maximum Income
4-Person Household
Very Low >30% to ≤50% AMI + HUD adjustment [1] $53,600 $59,550 Low >50% to ≤80% AMI + HUD adjustment [1] $85,800 $95,300 Median (Base) >80% to ≤100% AMI $82,000 $91,100
Moderate >100% AMI to ≤120% AMI $98,350 $109,300
HUD Adjustment Factor for Very Low & Low Income Groups 130.8% 130.8% [1] HUD applies adjustments to the amounts based on unusually high or low family income, uneven housing-cost-to income relationship, or other reasons.

Source: Los Angeles County, California Housing and Community Development (HCD). 30 - 22
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Economic & Planning Systems, Inc. (EPS) Z:\Shared\Projects\LA\214000s\214034_South Pasadena IHP In-Lieu Fee\Report\214034 S Pasadena IHO Feasibility Analysis Memo_DRAFT REVISED.docx sets the housing cost at a level that is truly affordable (e.g. is 30 percent or less of household income) for more eligible households.

Table 4 also shows the unadjusted maximum affordable housing costs and associated rents (without the HUD adjustment factor) for Very-Low Income households. As detailed further below, these unadjusted rent levels must be incorporated into projects that are utilizing the State Density Bonus.

Table 4 Maximum Affordable Spending on Housing in Los Angeles County Income Category &
Household (HH) Size % of AMI
Unadjusted
Maximum
Annual HH
Income
Adjusted
Maximum
Annual HH
Income [1]
Total Max
Annual
Spending on
Housing [2]
Monthly
Spending on
Other Housing
Costs [3]
Maximum
Monthly Rent
or Mortgage
Payment [4]
Rental Units
Very Low, 3-Person HH (unadjusted) 50% $41,000 n/a $12,300 $229 $796 Very Low, 3-Person HH 50% $41,000 $53,600 $16,080 $229 $1,111 Low, 3-Person HH 80% $65,600 $85,800 $25,740 $229 $1,916 For-Sale Units
Moderate, 3-Person HH 110% $90,200 $90,200 $27,060 $760 $1,495 Moderate, 4 Person HH 110% $100,210 $100,210 $30,063 $810 $1,695 [2] Assumes a housing cost to income ratio of 30 percent.

Sources: Los Angeles County Community Development Authority; California Housing and Community Development; Economic & Planning Systems [1] HUD adjusts the maximum incomes for very-low and low -income households in Los Angeles County up by 130%. This type of adjustment is made in counties w ith unusually high or low household incomes, uneven housing cost-to-income ratios, or other considerations. [3] For rental units, other housing costs include utility expenditures consistent w ith the Los Angeles County Community Development Authority limits for a 2-bedroom unit (assumes use of electricity for heating and cooking). Utility costs effective July 2021. For for-sale units, other housing costs include insurance, taxes, and HOA fees. The assumptions are based on the applicable prototypes and are show n on Table 5. [4] Maximum income available to pay for rent or mortgage after allow ance for other housing costs. 30 - 23
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Z:\Shared\Projects\LA\214000s\214034_South Pasadena IHP In-Lieu Fee\Report\214034 S Pasadena IHO Feasibility Analysis Memo_DRAFT REVISED.docx Economic & Planning Systems, Inc. (EPS) Table 5 Sale Value Estimate for Prototype For-Sale Affordable Housing Units Townhome with
Attached Garage
4-Story Wood
Frame Bulding
Prototype Unit Assumptions
Number of Bedrooms 3 2
Number of Persons per Unit [1] 4 3
Maximum Supported Home Price
Maximum Household Income [2] $100,210 $90,200
Maximum Monthly Spending on Housing [3] $2,505 $2,255
Other Housing Costs
Insurance $125 $125
Taxes [4] $385 $335
HOA Fee $300 $300
Maximum Monthly Mortgage Payment (after Other Housing Costs) $1,695 $1,495 Mortgage Terms
Down Payment 10% 10%
Interest Rate (annual) 4.00% 4.00%
Loan Term (months) 360 360
Total Supportable Unit Value [5] $395,000 $348,000
Input Assumptions
Moderate Income
(110% AMI)
[1] For this analysis, EPS has assumed an average unit for income-qualified worker households would be either 2 or 3 bedrooms. State law (Health and Safety Code Section 50052.5) indicates that a 2-bedroom unit should be assumed to be occupied by a 3-person household, and a 3-bedroom unit should be assumed to be occupied by a 4-person household. [2] Based on 2022 income limits for Los Angeles County. [3] Assumes housing costs to be 30% of gross household income. Maximum monthly payment for affordable units is inclusive of mortgage payment, insurance, and taxes.
[4] Taxes equal to approximately 1.1% of sale price.
[5] The total supportable unit value is equivalent to the down payment plus total mortgage amount, assuming a mortgage with terms for interest rate, term, and payment as shown in table.

Sources: Los Angeles County; California Housing and Community Development; and Economic & Planning Systems 30 - 24
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Economic & Planning Systems, Inc. (EPS) Z:\Shared\Projects\LA\214000s\214034_South Pasadena IHP In-Lieu Fee\Report\214034 S Pasadena IHO Feasibility Analysis Memo_DRAFT REVISED.docx Market-Rate Housing Revenue Assumptions
EPS used the following assumptions for determining the value of market-rate housing units:
• Market Rate Sale Prices - For the 1,650-square-foot townhome prototype, the estimated sale value is $860 per square foot, or $1,419,000 per unit. For the 1,200- square-foot condominium prototype, the estimated sale value is $800 per square foot, or $960,000 per unit. These values are based on EPS’ review of data on home sales in South Pasadena.
• Market-Rate Rents – The rent for newly constructed, market-rate two-bedroom units is assumed to be $3,900, based on EPS research and input from local developers about recent underwriting assumptions.
• Operating Costs (for Rental Units) – The analysis assumes that multifamily rental apartment operators incur annual operating costs of $12,000 per unit. This amount is inclusive of the cost of management, maintenance, common utilities (those not paid by tenants), as well as property tax and insurance. The operating cost estimate is based on data collected by CoStar on operating expenses and taxes for newlyconstructed residential projects built in communities proximate to South Pasadena.

Development Cost Assumptions
EPS used the following assumptions for determining the development costs associated with the prototype projects:
• Land Costs – EPS estimated a land acquisition cost of $3.3M per acre for Prototype 1 (for-sale townhomes) and $4.75M per acre for Protypes 2, 3, and 4 (for-sale condominium and multifamily rental apartment product types). These costs are based on data from recent land transactions in South Pasadena. The difference in land cost assumptions reflects the relatively lower value of land on which local zoning rules allow fewer units per acre to be developed.
• Direct Costs - EPS estimated per square foot direct costs (including material and labor) of $300 for Prototype 1 (for-sale townhomes) and $350 for Protypes 2, 3, and 4 (for-sale condominium and multifamily rental apartment product types). These costs were based on interviews with housing developers both within South Pasadena and the larger Los Angeles region, as well as data from Rider Levett Bucknall’s (RLB) Construction Cost Indicator for the Los Angeles region. • Indirect Costs - Indirect or “soft” costs include architecture, entitlement, fees, marketing, financing, and related costs. EPS assumed indirect costs would be equal to 18 percent of direct costs for all prototypes. This assumption was based on examples of project financial pro formas provided by area developers.

As stated earlier, these assumptions are representative of a typical or average project; the actual costs for a given project will vary by location and project design characteristics.
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Z:\Shared\Projects\LA\214000s\214034_South Pasadena IHP In-Lieu Fee\Report\214034 S Pasadena IHO Feasibility Analysis Memo_DRAFT REVISED.docx Economic & Planning Systems, Inc. (EPS) Return Metrics and Feasibility Thresholds
This analysis measured the threshold of feasibility using two standard return metrics used by real estate developers. These return metrics relate to the value of the investment in pursuing the project, and inform a developer’s decision whether or not to pursue:
• For for-sale housing projects, the feasibility threshold is based on the return metric of “profit margin,” calculated as the percentage by which total project value exceeds total project cost. Based on EPS research and experience, the analysis assumes that developers in the greater Los Angeles region will require a 15 percent or higher profit margin on for-sale development projects. So any project attaining a profit margin at or above 15 percent would be considered feasible.
• For rental housing projects, the feasibility threshold is based on the return metric of “yield on cost,” calculated by dividing the annual net operating income (NOI) by the total costs of development. Based on EPS research and experience, the analysis assumes that developers in the greater Los Angeles region will require a yield on cost near to or exceeding 5.0 percent.

As stated earlier, these return metrics do not account for the time value of money and are not based on any assumption regarding project timeline.

Feasibility Findings
EPS used the revenue and cost assumptions detailed above to develop financial pro forma models for each prototype project. The pro forma models were constructed to assess the return metrics achieved for each project under the City’s inclusionary housing requirements and identify the feasibility implications of the requirements.

Analysis of Base Prototypes
EPS first assessed the feasibility of the prototype projects with the inclusion of the required affordable units, but without incorporating any potential development incentives.

The analysis for the for-sale prototypes are shown in Table 6, while the analysis for the rental prototypes are shown in Table 7.

As shown, the for-sale townhome prototype returns a profit margin of 39.1 percent, which is well above the typical target return of 15 percent. The for-sale, four-story condominium prototype returns a profit margin of 11.4 percent, which is below the target return of 15 percent and therefore would not be considered feasible.

On the rental side, the four-story rental prototype returns a yield on cost of 4.7 percent, and the five-story prototype returns a yield on cost of 4.9 percent. Both yields are below the target of 5.0 percent and therefore would not be considered feasible. 30 - 26
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Economic & Planning Systems, Inc. (EPS) Z:\Shared\Projects\LA\214000s\214034_South Pasadena IHP In-Lieu Fee\Report\214034 S Pasadena IHO Feasibility Analysis Memo_DRAFT REVISED.docx Table 6 Feasibility Analysis of IHO Ordinance for Prototype For-Sale Developments Townhome with
attached Garage
4-Story Wood
Frame Building
Development Program Assumptions
Acreage 0.50 0.91
Density/Acre 20 55
Base Unit Count 10 50
Total Required Affordable Units 2 10
Gross Unit Size 2,000 1,412
Net Unit Size [1] 1,650 1,200
Number of Bedrooms 3 2
Parking Spaces/Unit [2] 350 SF Attached Garage 2.00
Cost Assumptions
Land/Acre [3] $3,300,000 $4,750,000
Land Value (rounded) $1,650,000 $4,318,000
Land/Unit $165,000 $86,360
Direct Costs
Construction Costs/SF [4] $300 $350
Direct Construction Costs/Unit (rounded) $600,000 $494,118 Basement Garage Parking Construction Cost/Unit $35,000 /space $70,000 Subtotal, Direct Costs/Unit $600,000 $564,118
Indirect Costs/Unit (rounded) [5] 18% of direct costs $108,000 $101,500 Total Cost/Unit (rounded) $873,000 $751,978
Project Value
Affordable For Sale Value per Unit [6] per unit $395,000 $348,000 Market Rate For Sale Value per Unit [7] $1,419,000 $960,000 Total Project Value $12,142,000 $41,880,000
Total Project Cost $8,730,000 $37,598,882
Profit Margin [8] 39.1% 11.4%
Input Assumptions
[6] See unit value estimate for for-sale affordable housing on Table 5. [7] Based on similar property sales in South Pasadena July 2021 - June 2022 found on Zillow. [8] Profit Margin is how much Total Project Value exceeds Total Project Cost and is a typical return metric used for for-sale developments.

Sources: Los Angeles County; California HCD; Zillow; Rider Levett Bucknall; and Economic & Planning Systems [5] Includes estimated costs for architecture and engineering; entitlement and fees; project management; appraisal and market study; marketing, commissions, and general administration; financing and charges; insurance; developer fee and contingency. [4] Costs based on EPS estimate and latest Construction Cost Index data for the Los Angeles area from Rider Levett Bucknall. [3] Land value assumptions based on data from CoStar and local developers for projects of similar density. [2] Parking assumptions in line with data from similar properties sold in South Pasadena July 2021 - June 2022 found on Zillow.

For Sale Property
[1] Gross Unit Size includes garage for townhomes and common areas for 4-story Wood Frame Building (assumed efficiency ratio of 30 - 27
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Z:\Shared\Projects\LA\214000s\214034_South Pasadena IHP In-Lieu Fee\Report\214034 S Pasadena IHO Feasibility Analysis Memo_DRAFT REVISED.docx Economic & Planning Systems, Inc. (EPS) Table 7 Feasibility Analysis of IHO Ordinance for Prototype Rental Developments Development Program Assumptions
Acreage 0.55 0.57
Density/Acre 55 70
Base Unit Count 30 40
Very-Low Income (VLI) Units 3 4
Low-Income (LI) Units 3 4
Total Required Affordable Units 6 8
Gross Unit Size [1] 1,176 1,176
Net Unit Size 1,000 1,000
Number of Bedrooms 2 2
Parking Spaces/Unit [2] 1.00 1.00
Cost Assumptions
Land/Acre [3] $4,750,000 $4,750,000
Land Value (rounded) $2,591,000 $2,714,000
Land/Unit $86,367 $67,850
Direct Costs
Construction Costs/SF $350 $350
Direct Construction Costs/Unit (rounded) [4] $411,800 $411,800 Basement Garage Parking Construction Cost/Unit $35,000 /space $35,000 $35,000 Subtotal, Direct Costs/Unit $446,800 $446,800
Indirect Costs/Unit (rounded) [5] 18% of direct costs $80,400 $80,400 Total Cost/Unit (rounded) $613,567 $595,050
Project Value
Revenue per Year per VLI Unit [6] $13,332 $13,332
Revenue per Year per LI Unit [6] $22,992 $22,992
Affordable Revenue per Year $108,972 $145,296
MR Revenue per Year [7] $3,900 /mo per unit $1,123,200 $1,497,600 Operating Costs [8] $12,000 /year per unit ($360,000) ($480,000) Total NOI $872,172 $1,162,896
Total Project Cost $18,407,000 $23,802,000
Yield on Cost [11] 4.7% 4.9%
For Rent Property
4-5 Stories
Woodframe Multifamily Building
with Garage Parking
[1] Gross Unit Size includes common areas for 4-story Wood Frame Building (assumed efficiency ratio of 85%).

Input Assumptions
[3] Land value assumption based on data from CoStar and local developers for projects of similar density. [2] Parking assumption is consistent with the City's density bonus requirements for projects including affordable housing units. [4] Costs based on EPS estimate and latest Construction Cost Index data for the Los Angeles area from Rider Levett Bucknall. [9] Yield on cost is calculated as NOI divided by total development costs, and is a typical return metric used for rental real estate projects.

Sources: Los Angeles County; California HCD; CoStar; CBRE; Rider Levett Bucknall; and Economic & Planning Systems [8] Reflective of newly-constructed properties in communities proximate to South Pasadena, as reported by CoStar. Inclusive of management, maintenance, common utility, and property tax costs. [7] Based on CoStar data for similar 2BR apartments located in South Pasadena. [6] See affordable rents assumptions on Table 4.
[5] Includes estimated costs for architecture and engineering; entitlement and fees; project management; appraisal and market study; marketing, commissions, and general administration; financing and charges; insurance; developer fee and contingency. 30 - 28
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While three of the prototype projects are not considered feasible under the base scenario, developers will have the option to utilize incentives available under the State Density Bonus Law, which are available for any project in the state that incorporates affordable housing according to specific criteria. Therefore, EPS also considered the feasibility of the prototype projects under the assumption that each project incorporates these incentives – specifically, including additional “bonus” market-rate units. These are units that can be developed beyond the allowable maximum density for a particular site. The townhome prototype was excluded from this analysis since it was already deemed feasible under the base scenario.

Table 8 shows the feasibility analysis for the four-story, for-sale condominium prototype.

Since this prototype includes 20 percent of its units at prices affordable to ModerateIncome households, it would qualify for a density bonus of 15 percent, or eight additional market-rate units. With these additional units, the profit margin for the prototype project would increase from 11.4 percent to 15.5 percent, which is above the typical target return of 15 percent and therefore meets the feasibility threshold under this analysis.

Table 9 shows the analysis for the two rental prototypes. In order for these projects to qualify for a density bonus, the affordable units would have to be made affordable at the unadjusted income levels discussed previously.3 Additionally, the State Density Bonus Law only allows projects to take a bonus for affordable units in a single affordability category (e.g. either for the Low-Income units or the Very-Low Income units). Therefore, EPS assumed that a developer in South Pasadena would provide the required Very-Low Income units at the lower, unadjusted level of affordability, as the available bonus is greater than if the Low-Income units were provided at the unadjusted level of affordability. Under this scenario, the Low-Income units would be rented at the higher, adjusted levels of affordability. By providing the required ten percent of Very-Low Income units at the lower unadjusted rents, the prototype projects would qualify for a 32.5 percent density bonus. This equates to nine additional market-rate units for the fourstory prototype and 13 additional market-rate units for the five-story prototype.

With the addition of the “bonus” market-rate units, the yield on cost for the two rental projects increases to 5.1 percent for the four-story project and 5.2 percent for the fivestory project. These yields are greater than the 5.0 percent target and therefore meet the feasibility threshold under this analysis.
3 Under State law, in determining eligibility for the state density bonus, the HUD adjustment factor for Low-Income and Very-Low Income limits is not applied.
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Draft Memorandum: South Pasadena Inclusionary Housing Feasibility Analysis July 13, 2022
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Z:\Shared\Projects\LA\214000s\214034_South Pasadena IHP In-Lieu Fee\Report\214034 S Pasadena IHO Feasibility Analysis Memo_DRAFT REVISED.docx Economic & Planning Systems, Inc. (EPS) Table 8 Feasibility Analysis for Prototype Rental Developments with State Density Bonus 4-Story Wood
Frame Building
Development Program Assumptions
Acreage 0.91
Density/Acre 55
Base Unit Count 50
Total Required Affordable Units 10
% Units Moderate Income (For-Sale) 20.0%
State Density Bonus [1] 15.0%
Density Bonus Units 8
Total Built Units 58
Gross Unit Size 1,412
Net Unit Size [1] 1,200
Number of Bedrooms 2
Parking Spaces/Unit [2] 2.00
Cost Assumptions
Land/Acre [3] $4,750,000
Land Value (rounded) $4,318,000
Land/Unit $74,448
Direct Costs
Construction Costs/SF [4] $350
Direct Construction Costs/Unit (rounded) $494,118
Basement Garage Parking Construction Cost/Unit $35,000 /space $70,000 Subtotal, Direct Costs/Unit $564,118
Indirect Costs/Unit (rounded) [5] 18% of direct costs $101,500 Total Cost/Unit (rounded) $740,066
Project Value
Affordable For Sale Value per Unit [6] per unit $348,000 Market Rate For Sale Value per Unit [7] $960,000
Total Project Value $49,560,000
Total Project Cost $42,923,824
Profit Margin [8] 15.5%
[7] Based on similar property sales in South Pasadena July 2021 - June 2022 found on Zillow. [8] Profit Margin is how much Total Project Value exceeds Total Project Cost and is a typical return metric used for for-sale developments.

Sources: Los Angeles County; California HCD; Zillow; Rider Levett Bucknall; and Economic & Planning Systems [6] See unit value estimate for for-sale affordable housing on Table 5. [5] Includes estimated costs for architecture and engineering; entitlement and fees; project management; appraisal and market study; marketing, commissions, and general administration; financing and charges; insurance; developer fee and contingency.
[4] Costs based on EPS estimate and latest Construction Cost Index data for the Los Angeles area from Rider Levett Bucknall.
[3] Land value assumptions based on data from CoStar and local developers for projects of similar density. [2] Parking assumptions in line with data from similar properties sold in South Pasadena July 2021 - June 2022 found on Zillow.

For Sale Property
Input Assumptions
[1] Gross Unit Size includes garage for townhomes and common areas for 4-story Wood Frame Building (assumed efficiency ratio of 85%).
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Draft Memorandum: South Pasadena Inclusionary Housing Feasibility Analysis July 13, 2022
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Economic & Planning Systems, Inc. (EPS) Z:\Shared\Projects\LA\214000s\214034_South Pasadena IHP In-Lieu Fee\Report\214034 S Pasadena IHO Feasibility Analysis Memo_DRAFT REVISED.docx Table 9 Feasibility Analysis for Prototype Rental Developments with State Density Bonus Development Program Assumptions
Acreage 0.55 0.57
Base Density/Acre 55 70
Base Unit Count 30 40
Unadjusted Very-Low Income (VLI) Units [1] 3 4
Low-Income (LI) Units 3 4
Total Required Affordable Units 6 8
% Units Very-Low Income 10.0% 10.0%
State Density Bonus [2] 32.5% 32.5%
Density Bonus Units 9 13
Total Built Units 39 53
Gross Unit Size 1,176 1,176
Net Unit Size [3] 1,000 1,000
Number of Bedrooms 2 2
Parking Spaces/Unit [4] 1.00 1.00
Cost Assumptions
Land/Acre [5] $4,750,000 $4,750,000
Land Value (rounded) $2,591,000 $2,714,000
Land/Unit $66,436 $51,208
Direct Costs
Construction Costs/SF [6] $350 $350
Direct Construction Costs/Unit (rounded) $411,800 $411,800 Basement Garage Parking Construction Cost/Unit $35,000 /space $35,000 $35,000 Subtotal, Direct Costs/Unit $446,800 $446,800
Indirect Costs/Unit (rounded) [7] 18% of direct costs $80,400 $80,400 Total Cost/Unit (rounded) $593,636 $578,408
Project Value
Revenue per Year per Unadjusted VLI Unit [8] $9,552 $9,552 Revenue per Year per LI Unit [8] $22,992 $22,992
Affordable Revenue per Year $97,632 $130,176
MR Revenue per Year [9] $3,900 /mo per unit $1,544,400 $2,106,000 Operating Costs [10] $12,000 /year per unit ($468,000) ($636,000) Total NOI $1,174,032 $1,600,176
Total Project Cost $23,151,800 $30,655,600
Yield on Cost [11] 5.1% 5.2%
[1] State Density Bonus Law requires that qualifying units be set at unadjusted income affordability levels. [9] Based on CoStar data for similar 2BR apartments located in South Pasadena. [10] Reflective of newly-constructed properties in communities proximate to South Pasadena, as reported by CoStar. Inclusive of management, maintenance, common utility, and property tax costs. [11] Yield on cost is calculated as NOI divided by total development costs, and is a typical return metric used for rental real estate Sources: Los Angeles County; California HCD; CoStar; CBRE; Rider Levett Bucknall; and Economic & Planning Systems [8] See affordable rents assumptions on Table 4.
[7] Includes estimated costs for architecture and engineering; entitlement and fees; project management; appraisal and market study; marketing, commissions, and general administration; financing and charges; insurance; developer fee and contingency. [6] Costs based on EPS estimate and latest Construction Cost Index data for the Los Angeles area from Rider Levett Bucknall. [5] Land value assumption based on data from CoStar and local developers for projects of similar density. [4] Parking assumption is consistent with the City's density bonus requirements for projects including affordable housing units.

For Rent Property
4-5 Stories
Woodframe Multifamily Building
with Garage Parking
Input Assumptions
[2] Per State Density Bonus Law (California Government Code Sections 65915 – 65918). [3] Gross Unit Size includes common areas for 4-story Wood Frame Building (assumed efficiency ratio of 85%). 30 - 31
ATTACHMENT 3
July 15, 2020 Staff Report
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City Council
Agenda Report ITEM NO. _15_
DATE: July 15, 2020
FROM: Stephanie DeWolfe, City Manager
PREPARED BY: Joanna Hankamer, Planning & Community Development Director Lucy Demirjian, Assistant to the City Manager
SUBJECT: Consideration of Ballot Measures for the November 3, 2020 General Municipal Election
Recommendation
It is recommended that the City Council consider three ballot measures for the General Municipal Election on Tuesday, November 3, 2020: 1) Renewal of the Utility Users’ Tax, 2) Increase of building height limits in specified areas, and 3) Transient Occupancy Tax for short term rentals, hotels and lodging; and advise staff which potential ballot measures to prepare for the November 3, 2020 General Municipal Election.

Executive Summary
With the economic uncertainties resulting from the COVID-19 pandemic, the City will face significant financial challenges in the coming years. Additionally, the City’s UUT is set to expire on June 30, 2022 furthering the impacts to the City’s budget. As the City explores ways to manage its resources in the midst of a pandemic, this revenue source continues to be critical to delivery of core city services, including public safety, fire and paramedic services, youth and senior services, library and maintenance of streets and parks. The renewal of the UUT is essential to the City’s financial sustainability and to preserve critical core services.

Additionally, the City must take time-sensitive steps this fall toward adopting a Housing Element with a combination of policy tools to meet its state-mandated Regional Housing Needs Assessment (RHNA) obligations. The City is legally required to accommodate 2,062 new housing units within the next eight years and must adopt a Housing Element demonstrating such policies by October 2021. The City’s housing consultant is currently working with staff to determine how many new housing units can be accommodated within the regulations proposed in the draft General Plan (GP) and Downtown Specific Plan (DTSP). If the total of 2,062 units cannot be accommodated within those regulations, which it appears they cannot, the City will have to adopt new regulations that allow for the balance of the units required to meet RHNA.

Staff will be exploring all planning tools for accommodating extra units to bring the City into compliance with State law. The ability to allow a height increase in certain areas where it may be appropriate is one of only a few tools available to satisfy the RHNA requirement; precluding the use of this tool will limit the City’s ability to avoid other less desirable alternatives. 30 - 33
Consideration of Ballot Measures for November 3, 2020 Election July 15, 2020

Timing is critical in providing the community and City Council with options to accommodate these additional housing units. A limited height increase ballot measure should be designed and considered, among other housing-production tools, to meet RHNA requirements. Staff will be conducting community outreach the week of July 14 and will hold a Special Meeting of the Planning Commission July 21, 2020 to receive feedback from the community and commission regarding the Sites Analysis and preferences for where and how the 45’ limit could be modified specifically to address the RHNA obligations.

Based on feedback from community and Planning Commissioners, staff will make a recommendation to City Council on August 5th regarding a potential height limit increase and its expected effectiveness toward meeting the City’s RHNA obligation. August 5th is the deadline for City Council to place a ballot measure on the ballot for the November 3, 2020 election and is therefore the last opportunity for the City to consider a targeted height increase as one of the tools available to help the City meet its current RHNA obligations.

Lastly, a non-competing ballot measure for consideration is the Transient Occupancy Tax (TOT), which is charged for hotel rooms and other short term rentals. Prior to the Covid-19 outbreak, the City and other neighboring cities saw an increase in demand for short term rentals with the proliferation of platforms such as Airbnb, VRBO, Home-Away and FlipKey. Although the City currently prohibits short term rentals, there is an opportunity to regulate them in order to provide homeowners the ability to rent them for additional income. The TOT is typically 12-14% of the rent charged to transient guests, and would apply to both short term rentals, should they be legalized, and hotel rooms. There are currently no hotels in the City, so if passed by the voters, this tax would impact any future hotels should one be approved in South Pasadena. If short term rentals were to be permitted in the future, an ordinance change and public hearing at both the Planning Commission and City Council would be required.

Discussion/Analysis
Utility Users Tax
The City’s Utility Users Tax (UUT) is the second largest revenue source ($3.4 million) or 12% of the General Fund. The UUT will sunset in 2022 unless renewed by voters on the ballot in 2020. The loss of these dollars, combined with the continuing loss in revenue from the pandemic, would disable the City. If revenues remain at current levels in future years and are compounded by the loss of the UUT, total loss to the City would be more than 23% of the City’s operating budget. With more than 50% of the annual budget allocated to fire and paramedic services and public safety, the remaining budget would not be sufficient for the City to comply with State mandates for core operations such as finance, planning, and public works.

Residents of South Pasadena currently pay a UUT for water, gas, electricity, telephone and cable television service. The current rate is 7.5%. The UUT is a general tax, where revenues are paid into the City's General Fund. General Fund revenues are budgeted by the City Council annually for general City services, such as police and fire protection, 9-1-1 emergency response, paramedics, parks, libraries, youth and senior programs and street maintenance and repairs. 30 - 34
Consideration of Ballot Measures for November 3, 2020 Election July 15, 2020

UUT is a locally controlled tax, with 100% of the tax revenue retained by the City. Property taxes, in comparison, are controlled by the County and only 24% of what is collected from South Pasadena is received by the City. UUT tax revenue can also be used to support all government programs, it is not restricted to particular uses.

The City of South Pasadena is one of fewer than 25% of California cities that provide a full range of municipal services within their boundaries, including police, fire, library, streets, and parks and recreation. UUT revenue helps the City pay for local services rather than rely on other agencies to provide these services.

In placing the measure on the ballot, the Council must also determine if the tax should be renewed for a specific time frame, such as seven or ten years, or if it should remain in place until the voters choose to repeal it. Experience from other agencies indicates that voters prefer tax measures that remain in place with voter control, rather than short term sunset dates that require ongoing ballot measures. Further, the Council can consider an increase to the tax rate above the current 7.5%. In other cities, the UUT rate is as high as 10%. For each 0.5% increase in tax rate, approximately $225,000 would be generated to the General Fund.

Building Height Limits
In 1983, a voter initiative established that no commercial, office, manufacturing, or residential building in South Pasadena shall exceed a height of 45 feet, and no Conditional Use Permit or Variance shall be granted to exceed 45 feet. The current Zoning Code states that Residential Estates, Residential Single Family, and Residential Medium Density properties cannot exceed 35 feet. Residential High Density and Commercial properties cannot exceed 45 feet. Currently, the only way to exceed the local height limits is through the California State Density Bonus Law which allows up to a 35 percent increase in density, including the height to accommodate such density, depending on the amount of affordable housing that is provided.

The California State Density Bonus Law has been effective in incentivizing the production of more affordable units within the state, but the law limits a local jurisdiction’s ability to regulate the design of such projects. Alternatively, South Pasadena may want to incentivize housing development through strategically located and modest height limit increases, possibly associated with an Inclusionary Housing Policy, to compete with the use of a State Density Bonus and therefore maintain local control over the design of larger housing projects. However, in order to change the height restriction established by the 1983 voter initiative, even if for a minimal height increase in a limited area of the City, the City would need to place a measure on the ballot, and the measure would need to pass with a majority of votes.

In accordance with State law, the City is required to update its Housing Element of the General Plan every eight years with new housing units that must be planned for within the city. For the 6th Cycle of the Regional Housing Needs Assessment (RHNA), the State and Southern California Association of Governments allocated 2,062 housing units to the City of South Pasadena; and while the number of required units may still be revised downward due to budgetary and political pressures from cities like South Pasadena, the decrease is not anticipated to be much. The new RHNA allocation is significantly higher than previous years (over 3,000 30 - 35
Consideration of Ballot Measures for November 3, 2020 Election July 15, 2020

percent increase from the previous RHNA allocation) and accommodating over 2,000 units will be the greatest challenge for the Housing Element Update planning effort. The current 6th cycle of the Housing Element Update is due by October 15, 2021.

The City kicked off the Housing Element Update with two public workshops (May 30 and June 2), and engaged the community in discussions of how to accommodate over 2,000 statemandated housing units, and introduced numerous strategies including concentrating new housing units in limited areas, and/or spreading the units across the city. It is recommended to consider a minimal height increase in certain areas of the city – restricted to residential uses only and resulting in buildings only one or two stories higher than what is currently allowed – in order to meet the RHNA requirement. Proposed new height limits and locations would be specified in the ballot language, making it clear what voters are voting for or against.

Transient Occupancy Tax
Commonly known as a “bed tax” or “hotel tax,” a Transient Occupancy Tax (TOT) is a tax of 12-14% of the rent charged to transient guests (staying less than 30 days); a TOT would also be applicable to properties rented through home sharing services like Airbnb—a use which is presently prohibited in South Pasadena. A TOT would need to be placed on the ballot for approval by residents. TOTs are levied by most cities including Pasadena and Los Angeles.

Approval of a TOT would not constitute approval or legalization of short-term rentals, such as Airbnb.

Last year, in anticipation of community conversation regarding potential revenue enhancement measures, staff assembled a list of frequently discussed options. During the months of March and April 2019, seven meetings were held with residents and three with staff to present the budget forecast and obtain feedback on potential solutions. The options presented to residents included land use considerations and potential new taxes.

The survey queried response to a sales tax measure (Measure A), which was later polled and ultimately placed on the November 2019 ballot. Among the other options presented to the community, development of a small hotel and implementation of a TOT scored the highest, with over 83% support. The revenue to the City from a hotel would include sales tax on restaurant and bar services, plus the revenue from the hotel tax (or bed tax). Although it is unclear how the economy will recover after the crisis and what the market will look like to attract interested development, establishing a hotel tax would better prepare the city should these opportunities arise.

Furthermore, the bed tax could also be applied to short-term rentals of housing units for durations less than 30-days. The legalization and taxation of short-term rentals was another popular new revenue option in the 2019 budget survey, with 71% support. Short-term rentals are currently prohibited in South Pasadena, however as with most cities who chose to prohibit them, they proliferate anyway. Rather than enforce against them, many cities have chosen instead to regulate and tax them, allowing potential negative impacts to be mitigated through Zoning Code requirements, as well as generating revenue to the city. Staff has estimated there may be more than 50 sites in South Pasadena based on a search of just one site like AirBnB. Although due to 30 - 36
Consideration of Ballot Measures for November 3, 2020 Election July 15, 2020

the immediate crisis these activities have decreased, the ability to legally rent rooms on a shortterm basis is desirable for many property owners who could benefit from the additional income during difficult economic times. It is difficult to estimate annual revenue from the TOT without knowing how the hospitality industry will recover. If a hotel were to be developed in the future, the hotel tax could generate close to an additional $1 million, depending on the room rate and number of rooms, once rates and occupancy reach peak.

Background
The November 3, 2020 special municipal election for the City of South Pasadena will be a consolidated election with the County of Los Angeles. The City Council must call and give notice to the regular municipal election for the purposes of placing a sales tax measure on the ballot. The deadline to add a measure to the ballot is August 7; the City Council has a scheduled meeting on August 5.

Alternatives
The Council could choose to defer placing the TOT measure on a subsequent ballot since there is currently no pressing need. However, the other two items are time sensitive. The next General Municipal Election is scheduled for November 2022, which would be too late for the height limit to be factored in the Housing Element due in October of 2021. Further, the UUT will expire on June 20, 2022, several months prior to the next election.

Next Steps

1. With City Council direction, staff will work with the City Attorney’s office to draft a resolution with language for the applicable ballot measure for adoption at the next City Council meeting, August 5, 2020.

2. Once the resolution is adopted, staff will forward fully executed copies to the Los Angeles County Registrar of Voters.

3. The Notice of Election will be published in the South Pasadena Review along with the required languages of Korean, Spanish, and Chinese in The Korea Times, La Opinion, and World Journal.

4. If the voters approve the measure, staff will bring back ordinances to clean up the municipal code related to the elected city clerk office.

Legal Review
The City Attorney has reviewed this item.

Fiscal Impact
The Los Angeles County Registrar-Recorder/County Clerk will provide a cost estimate for the election, which is contingent upon the number of measures from participating jurisdictions.

The elections budget, account number 101-1020-1022-8170, does include funds for the purpose of the General Municipal Election on November 3, 2020 in the proposed FY 2020-21 budget.

Environmental Analysis
This item is exempt from any California Environmental Quality Act (CEQA) analysis. 30 - 37
Consideration of Ballot Measures for November 3, 2020 Election July 15, 2020

Public Notification of Agenda Item
The public was made aware that this item was to be considered this evening by virtue of its inclusion on the legally publicly noticed agenda, posting of the same agenda and reports on the City’s website and/or notice in the South Pasadena Review and/or the Pasadena Star-News. 30 - 38