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for number of units, inclusionary set-asides, rental rates, costs, inclusionary fee, and interest rates, and outputs for average annual Return On Investment (ROI) for the developer. • Inclusionary For-Sale Proforma— a financial feasibility analysis for developing market rate forsale homes in Yreka with an affordable inclusionary set-aside. It includes variable inputs for number of units, inclusionary set-asides, home sale prices, costs, inclusionary fee, interest rates, and homebuyer insurance and tax rates, and output for Return On Investment (ROI) for the developer.
Market Analysis
Below is a description of the tabs that make up the Market Analysis Excel file.
Incomes: This tab shows a breakdown of the number of households by income category within the City of Yreka, as estimated by the U.S. Census 2019-2023 American Community Survey. It also shows the median and mean income as of 2023. This helps to understand the demand for housing at various affordability levels.
HUD Rents: This tab shows HUD rent levels for Fair Market Rents, and affordable rents for households earning 65% of Area Median Income (AMI) and 50% of Area Median Income (AMI). The Fair Market Rent (FMR) is HUD’s estimate of market rents for Siskiyou County for 2025. FMR is used by HUD to set contract levels for landlords participating in its Section 8 rental assistance program. The affordable rent levels are based on income levels by household size where the household is paying 30% of income to rent. The income level rents were set as of June 1, 2024.
Rent Survey: This tab shows a survey of units listed for rent on Craigslist, Cornerstone, and Zillow. These websites were researched March 14-16, 2025 in the geographic areas of portions of Siskiyou County (Yreka, Mt. Shasta, Weed, Fort Jones), and Josephine County (Grants Pass) and Jackson County (Talent, Medford, Central Point, White City, Eagle Point, Gold Hill) in Southern Oregon. A total of 62 units were surveyed, including 7 studios, 17 one-bedrooms, 25 two-bedrooms, and 13 three-bedrooms. Average monthly rents for all units surveyed ranged from $1,066 for one-bedrooms to $1,520 for threebedrooms. Average monthly rents per square foot ranged from $1.20 for three-bedrooms to $2.77 for studios. There were 14 units surveyed that were within the City of Yreka. For these units, average rents ranged from $975 for one-bedrooms to $1,567 for three-bedrooms, and rent per square foot ranged from $1.32 for three-bedrooms to $2.73 for studios.
Home Prices: Existing home sales and listings were surveyed on Cornerstone, Heritage Homes, and MLS Listings for portions of Siskiyou County (Yreka, Montague, Week, Grenada, Etna, Hornbrook, Fort Jones).
This survey included 12 homes sold between April 12, 2023 and February 8, 2025, and 12 homes listed for sale between April 26, 2024 and March 10, 2025. Average sale prices for all homes were $210,400 and $167.38 per square foot for two-bedrooms, $280,133 and $179.60 per square foot for three-bedrooms, and $381,333 and $200.92 per square foot for four-bedrooms. New construction home sale listings were also surveyed, all of which were located in the Southern Oregon cities of Medford, Eagle Point, Ashland, Talent, and White City. A total of 12 new home sale listings were surveyed as posted by seven different homebuilders (Hayden, Holt, Crystale, KDA, Suncrest, Harmony Modern, and Lori Magel) and researched April 7-8, 2025. Average sale prices for the new construction homes were $452,633 and $368.88 per Yreka City Council Agenda
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square foot for two-bedrooms, $442,153 and $285.49 per square foot for three-bedrooms, and $519,990 and $288.08 per square foot for four-bedrooms.
MF Sales: Multi-family residential property listings were surveyed in order to gauge the market for reselling a developed apartment complex in the Return On Investment (ROI) analysis in the Inclusionary Rental Proforma. A total of 12 listings were surveyed as posted on LoopNet and researched on April 9-10, 2025. The listing addresses were located in the cities of Yreka, Medford, Crescent City, Brookings, Redding, Los Molinos, Arcata, Garberville, Roseburg, Willows, and Oroville. The average price per unit of the listings was $123,627, the average price per square foot was $191.34, and the average capitalization rate was 6.60% The capitalization rate is the property’s annual net operating income divided by its listing price.
Land Values: Vacant land listings were surveyed in order to understand the market for property acquisition in the Inclusionary Rental Proforma and the Inclusionary For-Sale Proforma. A total of 14 listings were surveyed for properties located in Yreka, Medford, Central Point, and Grants Pass, which were listed between July 13, 2023 and March 17, 2025. Properties located in Medford, Central Point, and Grants Pass have much higher prices on a per acre basis than properties in Yreka. The most recent comparable for a rental multi-family project in Yreka is the property purchased by Danco on Deer Creek Way, which is zoned Multi-family R-3-12, is just under 45 acres, and is in contract to be purchased at $33,993 per acre. The most recent comparable for a for-sale single-family project zoned R-1 in Yreka is 13 Shasta Ave., which is 2.6 acres and listed for $21,154 per acre on January 29, 2025.
Costs: This tab shows development costs for single-family homes and affordable multi-family apartments.
Rows 1-14 show estimated single-family home construction costs per square foot for different house types in various California cities. Data sources included Home Builder Digest, HomeGuide, Home Advisor, Today’s Homeowner, and Stellar Estimates. Rows 15-28 show estimated development costs for affordable multifamily rental projects, with data collected from Siskiyou County for Siskiyou Crossroads and Mountain Townhomes, Danco for Placer Street, and the California Tax Credit Allocation Committee (CTCAC) for Cascade Apartments, Elders’ Place, Center of Hope Apts II, and Yurok Homes #4. The surveyed projects are in development or have completed construction in the past year. The Hard Cost/Unit and Hard Cost/SF columns show the costs of construction, including general contractor overhead, profit, and general conditions. The average Hard Cost per square foot for all surveyed projects was $510. If the average is more heavily weighted to Siskiyou Crossroads, which is the best available comparable for an affordable apartment complex developed in Yreka, the average Hard Cost per square foot is $482. Hard Costs for a market rate apartment complex that is not required to pay State Prevailing Wages was estimated by taking 80% of the $482 figure to calculate $386 per square foot.
Financing: This tab shows the most interest rates as of April 16, 2025 for projecting permanent and construction loan interest rates in the Inclusionary Rental and For-Sale Proformas. Lenders tie their loan rates to different instruments such as those listed in Rows 1-7. Loan terms for commitments to affordable multifamily projects currently in development are shown in Rows 22-40.
Home Price Determination: This tab shows how market sale prices used in the Inclusionary For-Sale Proforma were determined. The columns B, D, and F show the average square feet, price per square foot, and sale price, by unit size, from the survey of new construction sale price listings in the Home Prices tab.
The columns C, E, and G show the projected square feet, price per square foot, and sale price by unit size for the Yreka market.
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Rent Determination: This tab shows how market rents used in the Inclusionary Rental Proforma were determined. The columns B-D show the averages by unit size of the HUD FMR, the survey of all units as listed in the Rent Survey tab, and the survey of Yreka-only units as listed in the Rent Survey tab. For the 0- bedroom studios, there were only seven total units surveyed so the HUD FMR of $924 was used. For onebedrooms, there was a small survey of just three Yreka units, so the average of HUD FMR and the all-units survey was used. For the two-bedrooms, there was a small survey of just two Yreka units, so the average of HUD FMR and the-all units survey was used. For three-bedrooms, the average of HUD FMR, all-units survey, and the Yreka-only units survey, was used.
Inclusionary Rental Proforma
The Inclusionary Rental Proforma is a financial feasibility analysis for developing market rate rental housing in Yreka with an affordable inclusionary set-aside. It includes the following tabs as described below: Inputs & Outputs, Summary, Sources & Uses, Unit Mix & Rents, Cashflow, and Fees.
Inputs & Outputs
This tab includes variable inputs to the proforma as highlighted in grey. Each of these inputs affects the outputs that are highlighted in blue. Below is a list and brief description of the inputs:
• Total Units: The mix of unit types is calculated by formula based on the Total Units, with 40% of Total Units one-bedroom, 40% two-bedroom, and 20% three-bedroom. • LI 60% AMI Set-aside: This is the percentage of Total Units that are set aside for an inclusionary requirement of restricting rents to levels affordable to Low Income (LI) Households who are earning 60% of the Area Median Income (AMI) for Siskiyou County. A Moderate Income 80%- 120% AMI set-aside was not considered because market rents are lower than what is affordable to households at these income levels.
• VLI 50% AMI Set-aside: This is the percentage of Total Units that are set aside for an inclusionary requirement of restricting rents to levels affordable to Very Low Income (VLI) Households who are earning 50% of the Area Median Income (AMI) for Siskiyou County. • Percent of Market Rents: This is the percent of Market Rents as determined in the Market Analysis Rent Determination tab described above. The Baseline Model in the proforma shows this at 120%, assuming a mark-up for new construction units, as the market survey included existing and older units.
• Percent of Market Hard Costs: This is the percent of Hard Costs as determined in the Market Analysis Costs tab described above. The Baseline Model in the proforma shows this at 100%. • Percent of Market Operating Costs: This is the percent of Operating Costs as determined in the Market Analysis Costs tab described above for affordable rent-restricted projects. The Baseline Model in the proforma shows this at 80% since market rate projects typically have lower operating costs than rent-restricted affordable housing projects.
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• Inclusionary In-lieu Fee: This is the fee charged per required affordable set-aside unit if the project does not build its affordable inclusionary set-aside on-site. • Site Characteristics: This includes Site Acreage, Density, Site Zoning, and Land Price per acre. • Permanent Loan Terms: These are loan terms as determined by the Market Analysis Financing tab as described above.
• Construction Loan Terms: These are loan terms as determined by the Market Analysis Financing tab as described above.
• Capitalization Rate: This is the rate for determining sale price of the property after Years 5, 10, 15, and 20 of operations. The Sale Price is calculated by dividing the Net Operating Income by the Capitalization Rate.
The Outputs are the Average Annual Return on Investment (ROI) for the developer/owner if the property is sold in Years 5, 10, 15, and 20. The ROI is calculated using the following formula:
(Accumulated Cash Flow + Projected Sale Price - Mortgage Repayment) Divided by
(Owner Equity – 1.00)
Divided by
(Number of Years of Operation)
It is assumed that the developer/owner will need to realize close to a 5% average annual ROI by Year 20 to make the project financially feasible.
Sources & Uses
The Sources & Uses tab lists the capital development sources and costs necessary to build the project.
Development Sources are shown on Rows 8-13. The two permanent sources shown are a Permanent Loan and Owner Equity. The permanent loan is calculated by underwriting the principal amount at what is affordable in Year 1 of operations with a 1.20 Debt Coverage Ratio (DCR). The DCR is the Net Operating Income divided by Debt Service. Owner Equity fills in the remainder of sources needed to cover the Development Costs. Owner Equity is available to cover costs during the Predevelopment, Construction, and Permanent phases of development, while the Permanent Loan is only available to fund the project after occupancy is achieved during the Permanent phase. The Construction Loan is sized at a 90% Loan to Value ratio, calculated by taking 90% of the Hard Costs in cell H29, and covers most of the construction period costs.
Development Costs are shown starting in Rows 21-76. These costs are informed by the Market Analysis Costs tab and the Inputs & Outputs tab. The building type is assumed to be wood frame on a concrete slab on grade in walk-up style two-story buildings and a pitched composition shingle roof, with no interior improved circulation. It assumes that there will be a 2,100 square foot clubhouse and 840 square feet for maintenance and storage. The Permit & Impact Fees rates were provided by the City of Yreka, as shown Yreka City Council Agenda
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in the Fees tab. Other costs use standard rules of thumb that are typical for multi-family new construction budgets. Total development costs per unit is estimated at $433,032.
Unit Mix & Rents
This tab shows the number of units, rents, and income by unit type and affordability level. The unit mix is tied to inputs from the Inputs & Outputs tab. The Household Income levels needed to afford the rents shown are listed in Column L, which assume payment of 30% of household income toward rent and utility allowance per HUD standards. The Annual Income figure in cell K22 is linked to the income shown in Year 1 of the Cashflow tab.
Cashflow
This tab shows income and expenses for project operations in Years 1-20. Assumptions for the spreadsheet are listed in Rows 6-12, including the Vacancy Rate; the annual escalation rates for Restricted Rents, Market Rents, Expenses, and Taxes; and the Mortgage Interest Rate. The Restricted and Market Rents are linked to the Unit Mix & Rents tab. The Operating Expenses are linked to the Inputs & Outputs tab. The Property Taxes are assumed at 1.1% of the tax assessed value (20% of Total Development Costs shown in the Sources & Uses). Replacement Reserve deposits are set at $300 per unit per year, which is a multi-family development standard. Net Operating Income is calculated by subtracting Total Expense from Total Income. Debt service is calculated by dividing Net Operating Income by the standard underwriting DCR of 1.20 in Year 1. Cash Flow is calculated by subtracting Debt Service from Net Operating Income. The ROI calculation in Years 5, 10, 15, and 20 is shown in Rows 43-48.
Fees
Calculation of Planning, Building, and Impact Fees is shown in the Fees tab. The Fees are linked to the Permit & Impact Fees section under Development Costs in the Sources & Uses tab.
Summary
Key facts and budget totals for the project are shown in the Summary tab, including costs and sources totals per unit, per square foot, and by percent of Total Development Costs.
Feasibility Analysis
Four different scenarios with associated Inputs were analyzed to determine the feasibility of developing a market rate multi-family rental project with affordable inclusionary requirements. These scenarios included:
• No Inclusionary— 100% market rate units with no affordable units. • 10% VLI Set-aside— 90% market rate units and 10% VLI units affordable to 50% AMI households
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• 10% LI Set-aside— 90% market rate units and 10% LI units affordable to 60% AMI households • Inclusionary In-lieu Fee- Payment of a fee of $100,000 per unit in-lieu of setting aside any affordable units on-site
For all scenarios, the following Inputs remained the same.
Total Units 50
Percent of Market Rate Rents 120%
Percent of Market Hard Costs 100%
Percent of Affordable Hsg Op Costs 80%
Site Acreage 4.00
Density 12.50 units per acre
Site Zoning R-3-12
Land Purchase Price $50,000 per acre
Permanent Loan Interest Rate 6.50%
Construction Loan Interest Rate 7.00%
Capitalization Rate 7.00%
No Inclusionary Scenario
In this scenario, all units were set at market rate rents with no affordable inclusionary requirement and no inclusionary in-lieu fee. The average annual ROI for this scenario is 1.21% with a $2.9 million net profit in Year 15, and 4.52% with a $14.2 million net profit in Year 20. An average annual ROI of at least 5.0% is considered an advantageous return in comparison to some other investments. 10% VLI Set-aside Scenario
This scenario sets aside 10% of units as rent restricted affordable to households earning 50% of AMI. The average annual ROI for this scenario is 0.45% with a $1.1 million net profit in Year 15, and 3.58% with a $11.5 million net profit in Year 20. If a density bonus is granted to a project with the 10% VLI Set-aside that increases density from 12.5 units per acre to 25 units per acre, the average annual ROI is 0.51% with a $1.2 million net profit in Year 15, and 3.65% with a $11.6 million net profit in Year 20. Waiving impact fees (estimated at $1,559,593 for the project and $31,192 per unit) in addition to granting a density bonus would increase the average annual ROI to 1.37% with a $2.9 million net profit in Year 15, and
4.69% with a $13.3 million net profit in Year 20.
10% LI Set-aside Scenario
This scenario sets aside 10% of units as rent restricted affordable to households earning 60% of AMI. The average annual ROI for this scenario is 0.59% with a $1.4 million net profit in Year 15, and 3.74% with a $11.9 million net profit in Year 20. If a density bonus is granted to a project with the 10% LI Set-aside that increases density from 12.5 units per acre to 25 units per acre, the average annual ROI is 0.65% with a $1.5 million net profit in Year 15, and 3.81% with a $12.0 million net profit in Year 20. Waiving impact Yreka City Council Agenda
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fees in addition to granting a density bonus would increase the average annual ROI to 1.54% with a $3.3 million net profit in Year 15, and 4.88% with a $13.7 million net profit in Year 20.
Inclusionary In-lieu Fee Scenario
This scenario shows a $100,000 per unit inclusionary in-lieu fee in place of the units required to meet the 10% VLI or 10% LI set-aside. For example, if 10% of units were required to be set-aside for LI units, the inlieu fee would be $500,000 for a 50-unit project (50 x 0.10 x $100,000). The average annual ROI for this scenario is 0.94% with a $2.3 million net profit in Year 15, and 4.20% with a $13.6 million net profit in Year 20. If a density bonus is granted to a project with a $100,000 per unit in-lieu fee that increases density from 12.5 units per acre to 25 units per acre, the average annual ROI is 1.00% with a $2.4 million net profit in Year 15, and 4.27% with a $13.8 million net profit in Year 20. Waiving impact fees in addition to granting a density bonus would increase the average annual ROI to 1.91% with a $4.1 million net profit in Year 15, and 5.36% with a $15.5 million net profit in Year 20.
Recommendation
The table below compares the average annual ROIs for each of the four scenarios described above.
No Inclusionary
Scenario
10% VLI Set-aside
Scenario
10% LI Set-aside
Scenario
Inclusionary Inlieu Fee Scenario
LI 60% AMI Set-aside 0% 0% 10% 0%
VLI 50% AMI Set-aside 0% 10% 0% 0%
Inclusionary In-lieu Fee $0 $0 $0 $100,000
Density Bonus? No Yes Yes Yes
Waive Impact Fees? No Yes Yes Yes
Average Annual ROI (Year 5) -13.68% -13.46% -13.30% -13.11% Average Annual ROI (Year 10) -3.32% -3.15% -2.99% -2.72% Average Annual ROI (Year 15) 1.21% 1.37% 1.54% 1.91%
Average Annual ROI (Year 20) 4.52% 4.69% 4.88% 5.36%
The achievable market rents in Yreka make it challenging for a rental multi-family project to pencil, given rising financing and construction costs. Due to these constraints only the Inclusionary In-lieu Fee Scenario exceeds 5% average annual ROI in Year 20 at 5.36%, with the 10% LI Set-aside Scenario close to 5% average annual ROI in Year 20 at 4.88%. The No Inclusionary Scenario without a density bonus or impact fee waiver, and the 10% VLI Set-aside Scenario, do not appear to be financially feasible. In order to give developers the opportunity to achieve a reasonable profit and provide for implementation flexibility, it is recommended that the inclusionary policy offer the following options to rental housing developers for compliance:
1. Set aside 10% of units as LI affordable 60% AMI units if a density bonus and waiver of impact fees are granted; or
2. Pay an in-lieu fee of $100,000 per required affordable set-aside unit if a density bonus and waiver of impact fees are granted.
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Scenarios were also run for different numbers of total units in the Inclusionary Rental Proforma. As shown above, the 50-unit scenario with a 10% LI set-aside requirement has an Average Annual ROI in Year 20 of
4.88%, which is just under the target of 5.00%. A scenario of 40 units with a 10% LI set-aside brings an Average Annual ROI in Year 20 of 4.69%, and with 30 units it is 4.64%. Due to the limited financial feasibility of a project with fewer than 50 units and an inclusionary set-aside, it is recommended that the inclusionary requirement is only applied to projects with 50 or more rental units. Another option is to require a reduced 5% LI set-aside for projects with 30-49 units, in which case the Year 20 Average Annual ROI would range from 4.79% to 5.09%.
Inclusionary For-Sale Proforma
The Inclusionary For-Sale Proforma is a financial feasibility analysis for developing market rate for-sale homes in Yreka with an affordable inclusionary set-aside. It includes the following tabs as described below: Inputs & Outputs, Summary, Construction Costs, Sources & Uses, Sales, and Fees.
Inputs & Outputs
This tab includes variable Inputs to the proforma as highlighted in grey. Each of these Inputs affects the Outputs that are highlighted in blue. Below is a list and brief description of the inputs:
• Total Units: The mix of unit types is calculated by formula based on the Total Units with 20% of Total Units two-bedroom, 60% three-bedroom, and 20% four-bedroom. A total of 50 units is used in the Baseline Model of the proforma.
• MI 100% AMI Set-aside: This is the percentage of Total Units that are set aside for an inclusionary requirement of restricting sale prices to levels affordable to Median Income (MI) Households who are earning 100% of the Area Median Income (AMI) for Siskiyou County. • LI 80% AMI Set-aside: This is the percentage of Total Units that are set aside for an inclusionary requirement of restricting sale prices to levels affordable to Low Income (LI) Households who are earning 80% of the Area Median Income (AMI) for Siskiyou County. • Percent of Market Price: This is the percent of Market Prices as determined in the Market Analysis Sale Price Determination tab. The Baseline Model in the proforma shows this at 100% since comparable units surveyed were also new construction homes. • Percent of Market Hard Costs: This is the percent of Hard Costs based on per square foot costs researched and listed in the Costs tab of the Market Analysis. The Baseline Model in the proforma shows this at 100%. The per square foot cost of $200.00 was used as estimated for a low end basic builder-grade home in California by Stellar Estimates. It is higher than the estimated cost to build a house in Redding ($170.50) according to HomeAdvisor as of 2024. It is also the midpoint between the estimated cost to build a cost-efficient custom home ($157.50) and a mid-range custom home ($250.00), in Sacramento according to Home Builder Digest as of 2024. The higher estimate of $200.00 accounts for increases in costs over the past year.
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• Subdivision Infrastructure: This is the percent of unit construction Hard Costs allocated to infrastructure to support the subdivision, such as streets, sidewalks, curb and gutter, water, sewer, and landscaping. The Baseline Model shows this at 10% of Hard Costs. • Inclusionary In-lieu Fee: This is the fee charged per required set-aside unit if the project does not build its inclusionary set-aside on-site.
• Site Characteristics: This includes Site Acreage, Density, Site Zoning, and Land Purchase Price per acre.
• Mortgage Terms: These are loan terms as determined by the Market Analysis Financing tab. • Construction Loan Terms: These are loan terms as determined by the Market Analysis Financing tab.
• Home Insurance Rate: This is the percentage of the mortgage amount that is estimated as the monthly home insurance payment.
• Property Tax Rate: This is the percentage of the mortgage amount that is estimated as the monthly property tax payment.
• Mortgage Insurance Rate: This is the percentage of the mortgage amount that is estimated as the monthly mortgage insurance payment, applicable only to the Low Income and Moderate Income affordable home sales.
The Output is the Return on Investment (ROI) for the developer/owner after all the homes are sold. The ROI is calculated using the following formula:
(Total Income from Sales – Owner Equity)
Divided by
(Owner Equity)
It is assumed that the developer/owner will need to realize at least a 5% ROI to make the project financially feasible.
Construction Costs
This tab shows costs of construction using the Hard Cost Per Square Foot and Subdivision Infrastructure Inputs from the Inputs & Outputs tab.
Sources & Uses
The Sources & Uses tab lists the capital development sources and costs necessary to develop the project.
Development Sources are shown on Rows 8-12. The only permanent source shown is Owner Equity.
Owner Equity is available to cover costs during the Predevelopment, Construction, and Permanent phases Yreka City Council Agenda
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of development. The Construction Loan covers most of the construction period costs and is sized at a 90% Loan to Value ratio, calculated by taking 90% of the Hard Costs in cell H29.
Development Costs are shown on Rows 21-75. These costs are informed by the Market Analysis Costs tab and the Inputs & Outputs tab. The home building type is assumed to be single-story wood frame on a concrete slab on grade with pitched composition shingle roof. The Permit & Impact Fees rates were provided by the City of Yreka, as shown in the Fees tab. Other costs use standard rules of thumb that are typical for single-family new construction budgets. The total development cost per unit is estimated to be $418,299 without inclusionary in-lieu fees of $500,000 for five inclusionary units, and $429,299 with the inclusionary in-lieu fees of $500,000.
Sales
This tab calculates sale prices based on income for the LI and MI units. It calculates incomes based on sale prices for the market rate units. A housing payment ratio of 35% of income was used for all sale price and income calculations. The interest rate, amortization term, insurance, property taxes, mortgage insurance, and mortgage payment are linked to Inputs on the Inputs & Outputs tab. For Down Payment, 5% of the mortgage payment is assumed for the LI and MI units, and a 20% of the mortgage payment is assumed for the Market Rate units. Based on the calculated sales prices and unit mix, the income from sales to the developer were calculated in Rows 26-35. The ROI based on the sales income is calculated in Rows 37-39.
Fees
Calculation of Planning, Building, and Impact Fees is shown in the Fees tab. The Fees are linked to the Permit & Impact Fees section under Development Costs in the Sources & Uses tab.
Summary
Key facts and budget totals for the project are shown in the Summary tab, including costs and sources totals per unit, per square foot, and by percent of Total Development Costs.
Feasibility Analysis
Four different scenarios with associated Inputs were analyzed to determine the feasibility of developing a market rate single-family for-sale project with affordable inclusionary requirements. These scenarios included:
• No Inclusionary— 100% market rate units with no affordable units. • 10% LI Set-aside— 90% market rate units and 10% LI units affordable to 80% AMI households • 10% LI and 10% MI Set-aside— 90% market rate units and 10% MI units affordable to 100% AMI households
• Inclusionary In-lieu Fee- Payment of a fee of $100,000 per unit in-lieu of setting aside any affordable units on-site
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For all scenarios, the following Inputs remained the same.
Total Units 50
Percent of Market Price 100%
Percent of Market Hard Costs 100%
Subdivision Infrastructure Percent of
Hard Costs 10%
Site Acreage 5.00
Density 10.00 units per acre
Site Zoning R-2
Land Purchase Price $20,000 per acre
Mortgage Interest Rate 7.00%
Construction Loan Interest Rate 7.00%
Home Insurance Rate Percent of
Mortgage Amount 0.40%
Property Tax Rate Percent of Mortgage
Amount 1.20%
Mortgage Insurance Rate Percent of
Mortgage Amount 0.75%
No Inclusionary Scenario
In this scenario, all units were set at market rate rents with no affordable inclusionary requirement and no inclusionary in-lieu fee. The ROI for this scenario is 8.15% with a $1,705,067 net profit. 10% MI Set-aside Scenario
This scenario sets aside 10% of units as rent restricted affordable to households earning 100% of AMI.
The ROI for this scenario is 5.51% with a $1,152,067 net profit. If a density bonus is granted to a project with the 10% LI set-aside that increases density from 10 units per acre to 20 units per acre, the ROI is
5.80% with a with a $1,209,067 net profit. Waiving impact fees in addition to granting a density bonus, estimated at $1,713,801 for the project and $34,276 per unit, would increase the ROI to 16.32% with a $3,096,122 net profit.
10% LI and 10% MI Set-aside Scenario
This scenario sets aside 10% of units as rent restricted affordable to households earning 100% of AMI.
The ROI for this scenario is 1.22% with a $255,067 net profit. If a density bonus is granted to a project with the 10% MI set-aside that increases density from 10 units per acre to 20 units per acre, the ROI is
1.51% with a with a $313,942 net profit. Waiving impact fees in addition to granting a density bonus would increase the ROI to 11.59% with a $2,199,122 net profit.
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Inclusionary In-lieu Fee Scenario
This scenario shows a $100,000 per unit inclusionary in-lieu fee in place of the units required to meet the 10% LI or MI set-aside. For example, if 10% of units were required to be set-aside for MI units, the in-lieu fee would be $500,000 for a 50-unit project (50 x 0.10 x $100,000). The ROI for this scenario is 5.38% with a $1,155,067 net profit.
Recommendation
The table below compares the ROIs for each of the four scenarios described above.
No Inclusionary
Scenario
10% MI Set-aside
Scenario
10% LI and 10%
MI Set-aside
Scenario
Inclusionary Inlieu Fee Scenario
LI 80% AMI Set-aside 0% 0% 10% 0%
MI 100% AMI Set-aside 0% 10% 10% 0%
Inclusionary In-lieu Fee $0 $0 $0 $100,000
Density Bonus? No No Yes No
Waive Impact Fees? No No Yes No
ROI 8.15% 5.51% 11.59% 5.38%
It is recommended that inclusionary policy offer the following options to for-sale housing developers for compliance:
1. Set aside 10% of units as MI affordable 100% AMI units;
2. Set aside 10% of units as LI affordable 80% AMI units and set aside 10% of units as MI affordable 100% AMI units, if a density bonus is granted and impact fees are waived; or
3. Pay an in-lieu fee of $100,000 per required affordable set-aside unit.
This flexibility would help account for site and building constraint differences across the City, while ensuring that development of for-sale market rate housing contributes to the affordable housing supply.
Scenarios were also run for different numbers of total units in the Inclusionary Rental Proforma. As shown above, the 50-unit scenario with a 10% LI and 10% MI set-aside requirement, with density bonus and waived impact fees, has an ROI of 11.58%, which is above the target of 5.00%. The same affordability mix scenario with 40 units brings an ROI of 10.64%, and with 30 units it is 9.64%. Due to the limited financial feasibility of a project with fewer than 30 units and an inclusionary set-aside, it is recommended that the inclusionary requirement is only applied to for-sale projects with 30 or more units.
Yreka City Council Agenda
August 5, 2025
Inclusionary Housing and Commercial Linkage Fee Policy Analysis Inclusionary Housing Policy Analysis 15
Recommendations
Based on the findings of this Inclusionary Housing Analysis, the following policy structures are recommended:
Housing Type Affordability Set-Aside In-lieu Fee Minimum Total Units Rental
10% of total units at Low
Income (LI) 60% AMI with
density bonus and waived
impact fees
$100,000 per affordable setaside unit with density bonus and waived impact fees
50 For-Sale
10% of total units at Median
Income (MI) 100% AMI; or 10%
of total units at Low Income (MI)
80% AMI and 10% of total units
at Median Income (LI) 100% AMI
with density bonus and waived
impact fees
$100,000 per affordable setaside unit 30
Other recommended elements of the inclusionary housing policy include:
• Minimum rent restriction term of 20 years from certificate of occupancy; • Affordable units should have the same design standards, features, and access to amenities as market rate units; and
• Affordable units should be built on the same schedule as market rate units.
Implementation of the policy structures recommended above are projected to maximize affordable housing production while maintaining financial incentive for developers to build housing in Yreka. The option of payment of the in-lieu fee in place of building the affordable units provides the flexibility for varying site and economic conditions at the time a developer applies for a permit. The inclusionary setaside would only apply to projects with the minimum number of total units shown. This will help maintain project financial viability by not placing these burdens on smaller projects with lower profit and overhead.
Over the past five years, the City of Yreka has not issued any building permits for any new market-rate multifamily complexes or single-family subdivisions of 50 units or more. All but two of the currently operating 11 larger multifamily rental complexes are rent-restricted affordable. However, the City anticipates that 373 market-rate units will be built in the next few years. This includes 291 multifamily units on 16.3 acres at Payne Lane and South Oregon Street, and 82 units in single-family homes and duplexes on a 5.6-acre block bounded by Laurence Lane on the south, Sunrise Way on the west, Turre Street on the north, and South Oregon Street on the east .
In-lieu fees could be deposited in a City housing trust fund account that can earn interest. Those funds can then be committed to a 100% affordable project. For example, a developer may pay a $500,000 inlieu fee instead of building five affordable units within a 50-unit project. The $500,000 could then be committed to a 100% affordable housing project in which all of the units are restricted to affordable rents to Low Income households for 55 years. The housing trust funds could leverage other non-local funds such as Low Income Housing Tax Credits, state and federal loans and grants, to provide financing and subsidize the rents to affordable levels. In this way, in-lieu fees may produce more affordable housing Yreka City Council Agenda
August 5, 2025
Inclusionary Housing and Commercial Linkage Fee Policy Analysis Inclusionary Housing Policy Analysis 16
than building affordable units within a market-rate development. The drawback of the in-lieu fee is that the affordable units are in a separate project from the market-rate development, rather than having those units integrated within the market-rate development.
Selection of the basic policy requirements and exceptions as listed in the table above is a starting point to creating an Inclusionary Housing Policy. After these key requirements and exceptions are selected, other considerations for application of the policy are listed below. • Should there be a waiver or exception process to consider modifications to the inclusionary requirement for unique circumstances?
• Should the City offer development incentives for projects with an inclusionary requirement, such as density increases, waivers of development standards, expedited permit processing, and/or waiver, reduction, or deferral of development impact fees? • Should developers have the option of dedicating land to affordable housing instead of building affordable units?
Yreka City Council Agenda
August 5, 2025
Inclusionary Housing and Commercial Linkage Fee Policy Analysis Commercial Linkage Fee Policy Analysis 17
Commercial Linkage Fee Policy
Background
Commercial Linkage Fees are charged on new construction of commercial properties as a strategy to fund the development of affordable housing. They are typically assessed on a per square foot basis on the improvements. The “linkage” between the commercial development and affordable housing is the demand that the development will place on the housing market by attracting workers that will need a place to live. In order to demonstrate this relationship, legal precedent has required that a nexus study is completed by jurisdictions that propose to establish a commercial linkage fee policy. The nexus study determines the extent to which new commercial development contributes to the need for affordable housing, and the results of the nexus study are used to determine the amount of the fee.
Survey of Commercial Linkage Fee Policies
Commercial Linkage Fee policies of the following inland jurisdictions were reviewed:
Elk Grove, California— suburban city south of Sacramento with a population of 187,985. The City of Elk Grove charges a residential Affordable Housing Fee of $6,396 per new single-family unit, and $3,837 per new multi-family unit. The Affordable Housing Fee charges per square foot of new construction improvements at $1.05 for commercial/retail, $3.11 for hotels, $1.19 for manufacturing, and $1.28 for warehouses.
Mammoth Lakes, California— rural city in the Sierra Nevada mountains just southeast of Yosemite National Park with a tourism-based economy and a population of 7,191. The City of Mammoth Lakes charges a Housing Impact Mitigation Fee of $5,700 per new residential unit, and for new construction of improvements at $3,700 per room for lodging, $2.00 per square foot for retail, and office, and $1.00 per square foot for light industrial.
Medford, Oregon— southern Oregon city with population of 85,824 that lies 50 miles north of Yreka. Medford charges a Construction Excise Tax of 0.33% of the total improvement valuation of all building permits (commercial, residential, and industrial), and uses these funds to support the development of affordable housing, including down payment assistance programs for Low Income households.
Palm Desert— city in southeast California located 122 miles east of Los Angeles with a population of 51,163 that has a large retirement community and strong tourism economic base. Palm Desert charges a Low Income Housing Mitigation Fee per square foot of new construction improvements, at $1.00 for commercial, $0.50 for office, and $0.33 for industrial, as well as $1,000 per resort hotel room, and $620 per non-resort hotel room.
Placer County— county stretching across the Sacramento suburbs, the Sierra Nevada foothills, and the west shore of Lake Tahoe, with a population of 404,739. Placer County charges an Employee Accommodation Fee on commercial development in the Sierra Nevada and Lake Tahoe areas in the easternmost portion of the county. The purpose of the fee is to support the Affordable Housing Ordinance requirement that 10% of new private housing development units are affordable to Moderate and Low Incomes (earning less than 120% of the area median Yreka City Council Agenda
August 5, 2025
Inclusionary Housing and Commercial Linkage Fee Policy Analysis Commercial Linkage Fee Policy Analysis 18
income). The fee is $2.69 per net building area square foot charged to all new non-residential development. New market-rate residential development with more than seven units is required to set aside 10% of units as affordable to Moderate and Low Income households or pay the fee.
There are some exceptions for residential projects in designated transit priority and infill areas, and certain mixed-use projects.
Note: Population figures used above are from the 2020 U.S. Decennial Census.
The table below summarizes the range of per square foot fees for the commercial linkage fees reviewed above.
Fee Type Low High
Commercial (psf) $1.00 $2.00
Office (psf) $0.50 $2.00
Industrial/Manufacturing (psf) $0.33 $1.19
Warehouse (psf) $1.28 $1.28
Hotel (psf) $1.28 $3.11
Residential (per unit) $3,837 $6,396
Hotel (per room) $620 $3,700
Note: psf is per square foot
Commercial Development Market Demand
Data on building permits issued by the City of Yreka for commercial construction over the past five years was reviewed in order to assess market demand. In the past five years, there have been three new construction and two building expansion commercial permits issued in the City as listed below. In addition, the City expects that there will be a 29,244 square foot expansion of a truck stop at 717 Montague Road in the summer of 2026.
Owner New Construction
or Expansion Building Type Address
Date of
Permit
Issuance
Square
Feet (SF)
Siskiyou Central Credit
Union New Construction Bank branch 1420 Fairlane Rd. 12/15/2020 11,730 Splash & Dash New Construction Car wash 1902 Fort Jones Rd. 1/19/2022 8,861 Arby’s New Construction Restaurant 1813 Fort Jones Rd. 1/14/22 2,364 Fairchild Medical
Clinic Expansion Hospital 444 Bruce St. 11/6/24 33,939
Pfeiffer/Norcal Expansion Office 1967 Oregon St. In process 18,000 Total 74,894
Yreka City Council Agenda
August 5, 2025
Inclusionary Housing and Commercial Linkage Fee Policy Analysis Commercial Linkage Fee Policy Analysis 19
Feasibility Analysis
The most comparable Commercial Linkage Fee policy to Yreka is Mammoth Lakes, which is a rural city with a population of 7,191 that adopted their policy in 2015. The City of Yreka has a population of about 7,827. Mammoth Lakes has a fee of $2.00 per square foot for retail and office, and $1.00 per square foot for industrial.
If the City of Yreka had implemented a Commercial Linkage Fee policy for commercial new construction and building expansion similar to Mammoth Lakes five years ago, it would have generated $208,276 over the past five years. This would subsidize the construction of about 3-4 units of affordable rental housing, if the City funds leverage about $470,000-$520,000 per unit with other federal and state funds. This is a typical financing structure for affordable rental projects that secure federal Low Income Housing Tax Credits.
Recommendations
It is recommended that the City explore a Commercial Linkage Fee policy similar to Mammoth Lakes, charging $2.00 per square foot for commercial and office new construction and building expansion, and $1.00 per square foot for industrial new construction and building expansion. It is projected that the fee will generate $200,000-$300,000 in funding for affordable housing over the next five years, or $40,000 to $60,000 per year. If the City decides to develop a Commercial Linkage Fee policy, the next step would be to complete a Nexus Study to determine the extent to which new commercial development contributes to the need for affordable housing, and calculate the appropriate amount of the fee.
Yreka City Council Agenda
August 5, 2025
Inclusionary Housing and Commercial Linkage Fee Policy Analysis End Notes 20
End Notes
1 2025 State Income Limits. State of California Department of Housing and Community Development, April 23, 2025. 2 Inclusionary Housing in the United States. Wang and Balachandran, Grounded Solutions Network, 2021. 3 Meeting California’s Housing Needs: Best Practices for Inclusionary Housing. Local Government Commission, California Rural Legal Assistance Foundation, Western Center on Law and Poverty, November 2018. 4 2023-2031 City of Yreka Housing Element Update. PlanWest Partners and City of Yreka, February 7, 2023.
Yreka City Council Agenda
August 5, 2025
To: YrekaCity Council
From: John Elsnab, Interim City Manager
Prepared by: Andrew L. Jared, City Attorney
Agenda title: Discussion/Possible Action to Approve Resolution of a Municipal Tax Sharing Agreement Regarding Annexation of 3.2 acres within the County (APN 014-430-120) (Evans-Wilmarth Annexation).
Meeting date: August 5, 2025
Discussion:
In the fall of 2023, an application was submitted to the Siskiyou County Local Agency Formation Commission (LAFCO) by Rick Evans to increase the size of a parcel within the City of Yreka from 2.12 acres by adding approximately 3.2 acres from a second parcel in the unincorporated area of the County through the annexation process into the City of Yreka. The annexation application starts a statutory process for the City and County to negotiate and potential exchange tax revenue for the proposed area to be annexed. As part of this process, the county auditor was required to notify the City and County of the amount of property tax revenue subject to negotiation and exchange between the agencies, and the two agencies negotiate the sharing of current and future tax revenue.
LAFCO cannot proceed with processing the property owner’s application to annex the unincorporated land into the City, unless the City and County reach agreement on the wany in which the following will be shared between the City and County: 1) the Siskiyou County General Fund portion of the base property tax, 2) the South Yreka Fire Protection District portion of the base property tax, and 3) the annual tax increment. The Siskiyou County General Fund portion and the South Yreka Fire Protection District portions will stay static after annexation, however, the increment portion will increase over time based on increased property values due to reassessment and future development.
After thorough negotiations by the County and City through the statutory procedure governing tax sharing procedures, the County has proposed the attached Municipal Tax Sharing Agreement for this parcel whereby the County shall retain 100% of the General Fund portion of the Base Property Tax Revenues, that City shall be allocated the South Yreka Fire Protection District’s portion of the Base Property Tax Revenue, and the Incremental Property Tax Revenues available for allocation shall be allocated 50% to City and 50% to County. (See Ex. A, “Municipal Tax Sharing Agreement Between The County Of Siskiyou And The City Of Yreka Regarding The Distribution Of Taxes Upon Annexation Of Real Property To The City”, to Attachment 1, “(DRAFT) Resolution No. 2025-30 Resolution of the City Council of the City of Yreka Approving A Municipal Tax Yreka City Council Agenda
August 5, 2025
Sharing Agreement Between The County Of Siskiyou And The City Of Yreka Upon Annexation Of Real Property at APN 014-430-120 (Evans)”.) The County has approved the proposal in the attached resolution. The attached resolution deals only with the tax allocation issues associated with the annexation application and allows the applicant to proceed with the LAFCO process. Approval of this resolution does not bind the City as to any action regarding the Evans Annexation application.
Approval of this resolution does not bind the City or County as to any future annexation application. The City and County have expressed an interest through the negotiation process to further discuss some of the difficult issues that face both jurisdictions.
Fiscal Impact:
Minimal with this action. The nature of the proposed annexation and development potential of the three acres at issue have a minimal effect on the General Fund expenses. The resolution does not obligate the City as to any other parcel.
Recommendation and Requested Action:
That the Council approve the attached resolution to approve the Municipal Tax Sharing Agreement Between The County Of Siskiyou And The City Of Yreka Regarding The Distribution Of Taxes Upon Annexation Of Real Property To The City (Ex. 1 to Att. A).
Attachment:
A. (Draft) Resolution No. 2025-30 Resolution of City Council of the City of Yreka Approving a Municipal Tax Sharing Agreement Between the County of Siskiyou and the City of Yreka Upon Annexation of Real Property at APN 014-430-120 (Evans) Yreka City Council Agenda
August 5, 2025
RESOLUTION NO. 2025-30
RESOLUTION OF CITY COUNCIL OF THE CITY OF YREKA
APPROVING A MUNICIPAL TAX SHARING AGREEMENT
BETWEEN THE COUNTY OF SISKIYOU AND THE CITY OF YREKA
UPON ANNEXATION OF REAL PROPERTY AT APN 014-430-120 (EVANS) WHEREAS, an application was submitted to the Siskiyou County Local Agency Formation Commission (LAFCO) by Rick Evans to annex an approximate 3.2 acre parcel (APN 014-430-120) presently in the unincorporated area of the County into the City of Yreka (LAF-23-01);
WHEREAS, Section 99 of the California Revenue and Taxation Code requires that prior to LAFCO certifying an application for annexation of property into a city’s incorporated territory, the city and county affected by such annexation must agree upon an exchange of property taxes;
WHEREAS, Revenue and Taxation Code section 99 establishes the procedures governing the how the agencies proceed with coming to agreement but not computation of tax revenue between the parties; and
WHEREAS, the City and County have proceeded through the process under Revenue and Taxation 99 to negotiate the allocation of tax revenue as to this application.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Yreka, Siskiyou County, California, hereby approves the “Municipal Tax Sharing Agreement Between The County Of Siskiyou And The City Of Yreka Regarding The Distribution Of Taxes Upon Annexation Of Real Property To The City”, attached hereto as Exhibit 1, for the annexation of APN 014-430-120.
PASSED, APPROVED AND ADOPTED by the City Council of the City of Yreka in a meeting thereof held on August 5, 2025, by the following:
VOTE
Ayes:
Nays:
Absent:
Signature: ____________________________________ Date: ___________ Colleen Baker, Mayor, City of Yreka
ATTEST
Signature: ____________________________________ Date: ___________ Cyndy Prohaska, City Clerk, City of Yreka
Yreka City Council Agenda
August 5, 2025
1 MUNICIPAL TAX SHARING AGREEMENT BETWEEN
THE COUNTY OF SISKIYOU AND THE CITY OF YREKA
REGARDING THE DISTRIBUTION OF TAXES UPON
ANNEXATION OF REAL PROPERTY TO THE CITY
THIS AGREEMENT is made by and between the COUNTY OF SISKIYOU (“County”) and the CITY OF YREKA (“City”) on the __day of ___________, 2025.
WHEREAS, an application for the annexation of private property located within the County to the City of Yreka, referred to as the Evans-Wilmarth Annexation (LAF-23-01) has been filed by the owner of such land; and
WHEREAS, this project would consist of annexing 3.2 acres of property within the County (APN 014-430-120) to an existing parcel in the City of Yreka (APN 062-202-150), thereby increasing the existing City of Yreka parcel to five acres; and
WHEREAS, Section 99 of the California Revenue and Taxation Code requires that prior to LAFCO certifying an application for annexation of property into a city’s incorporated territory, the city and county affected by such annexation must agree upon an exchange of property taxes; and
WHEREAS, County and City are willing to provide for such an exchange of property taxes and other revenue related to the Evans Property; and
WHEREAS, the City and County recognize the importance of the City’s and County’s services and maintaining adequate service levels to the annexed property; and WHEREAS, the County will continue to provide a variety of county-wide services to the residents of the annexed property including jails, juvenile detention, district attorney, public defender, probation, child support services, health and human services, elections, recording, assessor, environmental health, and agricultural services, and County requires sufficient revenues to maintain existing service levels; and
WHEREAS, as a matter of policy, the County seeks for tax sharing agreements to be consistent with Siskiyou County Resolution 25-83.
NOW, THEREFORE the County and City agree as follows:
1. Definitions.
A. The Annexation Area shall mean the 3.2 acres of property within the County (APN 014-430-120) proposed to be annexed to the City as further described in Exhibit A, attached hereto and incorporated herein by reference.
B. Base Property Tax Revenues shall mean the amount of property tax based upon the ad valorem property tax imposed pursuant to Article 13A, Section 1 of the State Ex. 1
Yreka City Council Agenda
August 5, 2025
2 Constitution, for the fiscal year immediately preceding the year in which the annexation is proposed that accrues to the County General Fund and South Yreka Fire Protection District. For the FY 2023-2024 that amount is approximately $40.26 for the 3.2 acres of APN 014-430-120.
C. Incremental Property Tax Revenues shall mean the amount of property tax revenues accruing to each Affected Agency attributable to the annual tax increment increase in assessed valuation in each fiscal year after the annexation is completed.
D. Affected Agency shall mean each local agency whose service area or service responsibility would be altered by the jurisdiction change. The Affected Agencies within the Annexation Area are the City, South Yreka Fire Protection District, and the County.
2. Affected Property Tax Funds.
The County Auditor has notified the City and County pursuant to Revenue and Taxation Code section 99, subdivision (b)(3), that, of the 1% ad valorem property tax imposed pursuant to Article 13A, section 1 of the State Constitution, the property tax revenue which is subject to negotiated exchange consists of 1) the Siskiyou County General Fund portion, which is approximately $14.38, and 2) the South Yreka Fire Protection District portion, which is approximately $2.29.
3. Affected Tax Rate Area.
The Affected Tax Rate Area which includes all Base Property Tax Revenue or Incremental Property Tax Revenue available for allocation and distribution, which are the Siskiyou County General Fund and South Yreka Fire Protection District portions, is: 123-004 and 007-000.
4. Entities Not Subject to Allocation or Distribution Under this Agreement.
There are other agencies who share in the affected tax rate area, 007-000, but are not subject to this tax sharing agreement. These entities are identified in Exhibit B of this agreement.
5. Allocation of Future Property Taxes.
Based on mutual agreement of the parties, on or after the annexation date:
A. County shall retain 100% of the General Fund portion of the Base Property Tax Revenues.
B. The City shall be allocated the South Yreka Fire Protection District’s portion of the Base Property Tax Revenue.
C. The Incremental Property Tax Revenues available for allocation (the Siskiyou County General Fund and South Yreka Fire Protection District portion) shall be allocated 50% to the City and 50% to the County.
Yreka City Council Agenda
August 5, 2025
3 6. Exchange by County Auditor.
County and City agree that all of the exchanges of property tax revenue required by this Agreement shall be made by the County Auditor.
7. Commencement of Exchange.
The allocations of Base Property Tax Revenue and Incremental Property Tax Revenue set forth in Section 4 shall commence July 1, following the effective date of the annexation.
8. Modification.
This Agreement may be modified or amended only by a writing duly authorized and executed by both the City and County.
IN WITNESS WHEREOF, County and City have authorized the execution of this Agreement and authorized the Mayor and the Board Chair, respectively, to sign.
COUNTY OF SISKIYOU
_____________________________________
Nancy Ogren, Chair
Board of Supervisors
ATTEST:
________________________
Laura Bynum, County Clerk
CITY OF YREKA
_________________________________
Colleen Baker, Mayor
ATTEST:
__________________________________
Cynthia Prohaska, City Clerk
Yreka City Council Agenda
August 5, 2025