The URL can be used to link to this page

CC Exhibit 05-05-15 Item No. 8 Nexus Study Housing Mitigation Fees and Procedural Manual Updates 3 CC 5-5- 15 Item #8 CITY COUNCIL PRESENTATION NEXUS STUDY, BELOW MARKET RATE (BMR) HOUSING MITIGATION FEES AND PROCEDURAL MANUAL UPDATE May 5, 2015 BACKGROUND Nexus Study Update 1St Nexus Commissioned Study and updated fees Commissioned adopted gyp} .. 1St Housing Nexus Study V1' Mitigation update Program Commissioned Adopted Part of General Plan Housing Element 1 CHALLENGES TO AFFORDABLE HOUSING • Recent and pending court rulings — Palmer/Sixth Street Properties v. City of Los Angeles - State Law prohibits rent control - Cities may require affordable housing only if they provide financial or regulatory incentives - CBIA vs. City of San Jose - Assertion by CBIA that for sale, inclusionary housing requirements must be supported by a nexus study • Elimination of Redevelopment Agencies • Reduction of Federal Funds to support programs NEXUS STUDIES • Nexus analyses demonstrate and quantify linkages between newly constructed buildings and the demand for additional affordable units. • Residential Newly constructed units-> new households-> new expenditures on goods and services 4 new jobs,a share of which are low paying-> new lower income households-> new demand for affordable units • Non-Residential New buildings->new jobs-> occupation -> income 4 new lower income households new demand for affordable units 2 FEE RECOMMENDATION FACTORS — Findings of the nexus analysis — Fee levels and on-site requirements below the maximum levels established. — Policy objectives of the Housing Element. — Requirements in neighboring jurisdictions — Staying competitive with neighboring cities. — Setting a fee high enough to support meaningful affordable housing projects and programs. — For residential rental projects,since the Palmer court case precludes the City from requiring on-site units, the fee is proposed to be high enough to mitigate the impact of rental development and support the construction of affordable units. — Setting a fee low enough to not discourage development. RESIDENTIAL OWNERSHIP 1-6 UNITS PROPOSED FEE PER SQ. FT. Q a z � ` d � � � � � � ��ix�� i !^ E t t �1 ¢r ¢¢ ! Kk8 S s`•• ,;. ,•.se �� .»„ ,.az..... $< ,�,°�. b: .°e ..; -- ,,. x, *$3.W *$3.D0: $3 Q0 i , 13 $30.10" $35.60 $33.80 $42.50 *$15 00 50%" 46% ^ 59%Jif 16.50 ^ $20.00 20"00 ami 3 ¢348 < B e c' atPy1 g��c 50% 46% 59%: 470/6 ' ^BMR fees NOT required if BMR units provided t Not applicable to demolition and rebuild of or additions to existing single family residences 'To be adjusted annually with Consumer Price Index(CPI) 3 r •Y RESIDENTIAL OWNERSHIP 7+ UNITS PROPOSED OBLIGATIONS (NO CHANGE) i I < D• ,6 � S i o / 1• / t e11^ / e R•r 1 � 6. " 6 <t • 1 e e <tt te<s a a o t r. 36% . 28% , 24% ,209 < e 15/0 15% 15% ° 15 0 t a 1• e •s 15% 15% 1501. 15% *Maximum inclusionary housing percentage supported.Lowest percentage of all ownership prototypes RESIDENTIAL RENTAL PROPOSED MITIGATION FEE PER SQ. FT. f- 3.00,,3 00 *$3 00 1/ $33 80 - $42.50 } 09 *$25�00 �•• re Ilt 59% 59%o e 1 t t o "$2p 00 � ie 20.00 t r59% 47% t BMR fees NOT required if BMR units provided *To be adjusted annually with Consumer Price Index(CPI) 4 L ' NON-RESIDENTIAL DEVELOPMENT PROPOSED MITIGATION FEE PER SQ. FT. y; F r -,,*$6.00 J 'x$6.00 $129.05 $49.15: $222.32 fi. .Yi0_1 K,ems' $2000 10 *$10.00 $10 00 '@'° ` 4 ` ag ai<�ns 15%,,: 20% 4% r. ,j �?tt € *$20.00 15.00 *$10.00 S x 15% 31%r a *To he adjusted annually with Consumer Price Index(CPI) HOUSING MITIGATION PROGRAM PROCEDURAL MANUAL • Procedural Manual establishes — Affordable housing requirements — Procedures for implementation • Update adds clarity to manual for ease of use • Changes include: — Improved description for: — Fractional BMR in-lieu fee calculation — Maximum BMR sales price calculation — Permitted use of BMR fees — Adding scenario examples for calculating BMR fees — Removal of redundancy and streamlining the document 5 ' s NEXUS STUDY UPDATES • Minor changes made to draft nexus study reports to add clarity including: — Adding an exhibit to show what a 3% and 7% of sales price fee would equate to for ownership units — Adding language to clarify how maximum inclusionary housing percentages are established — Adding the word "commercial'to the retail category PUBLIC OUTREACH • Updates throughout Housing Element • Meetings with local housing update process organizations • Updates throughout Consolidated • E-mail notifications to private and Plan update process non-profit affordable housing • Presentation to CUSD and FHUSD developers, non-profit public service • Joint presentation with City of providers and housing organizations Sunnyvale to SVLG • E-mail notifications to persons signed up through www.cupertinogpa.org • Updates to SILVAR website • Presentations and updates to • E-mail and written notifications to Cupertino Chamber of Commerce General Plan and Housing Element • Presentations to SCC Regional property owners Housing Working Group • Notices in newspaper 6 HOUSING COMMISSION COMMENTS • Housing Commission: Public Comment: — Encourage and incentivize higher — Support from affordable density residential housing-has a housing advocates higher probability to generate — Opposition from CBIA and more affordable housing SILVAR to update of fees — Non-residential development, — Support for increased housing particularly retail development, mitigation fees but asking to generates highest amount of reduce housing mitigation fee lower paying jobs-should ideally for higher density housing pay more mitigation fees developments PUBLIC COMMENTS ADDITIONAL WRITTEN • Concerns about perceived reduction in housing mitigation fees • Support for recommended housing mitigation fees from non-profit housing developers and service providers including Mid-Pen, Charities Housing, Law Foundation • Concerns about nexus study methodology and recommended fee levels from CBIA • Concerns about final Housing Element (to be heard by Council on May 19, 2015) not reflecting new housing mitigation fees • Support for charging max. fees allowed for residential and office and staff recommended fees for retail/commercial uses (desk item) 7 TIMING OF FEES • Effective 60 days after adoption by the City Council • If fees adopted on May 5, 2015, effective on July 6, 2015 NEXT STEPS • Conforming changes to fee schedule will be made • Fees will be adjusted annually for CPI • Fees will be deposited to the BMR AHF (not the City's General Fund) • Funds will be used in accordance with allowed uses • City has ability to issue an annual RFP to solicit projects for acquisition, rehabilitation and/or development of affordable housing units 8 v RECOMMENDATION Housing Commission recommends that the City Council adopt: — Proposed housing mitigation fees per draft Resolution 15-036 — Updated BMR Housing Mitigation Program Procedural Manual per draft Resolution 15-037 RESIDENTIAL OWNERSHIP SUMMARY OF REQUIREMENTS By JURISDICTION O, .� �,...� .�� a ,a � � p�•F', 4' 4 . _ 1 6 units 3 OOJsq ft 7+]zM S,-,l5 E• Suspended Penduig Litigation Suspended Pending Lahgatron Il `1°'MIR + � � 1U+units 10°I°as BMR units 3 9 units 3%of sales price' "',.8+urufs 7%:6f sales price: 8+units-,12.5%-6f units ` 2+xuuts' 24; is o Attached Attache $27 00/sq ft d 3 5°lo as BMR+$18 SQIsq ft Detached $26.00/sqDetached 4 5°I°as BMR+$17 50Js6 ft 7.5%b sa1espace 5+units 15%as BMR units tom., b ° 117 19,units 10°lo as BMl2 uluts 5 9 units;Shdrng scale bJw;1 3%of sales price x 20+units Br as BMR orals 9 v RESIDENTIAL RENTAL FEE COMPARISON BY JURISDICTION x -, a B 11 w1 Nexus study in process $17.'0Olsct ff... $17.00/sq.ft: . Nexus studY m rocess ffin P $17.00/sq.ft. $17.50/sq.ft w/ti subdivision map $27OA4.ft with`subdivison ma NON-RESIDENTIAL DEVELOPMENT IMPACT FEES BY JURISDICTION W W, It'll, ,� C~LiYrent Prn used $6.00. None x$15.19.. "' $25.00 $19.31 None ',0.74 $15.00.,. * $6 00 " None $S 24 $2 60 $19 31 None None $7 50 , m7a0.7'77 ® ML $6.00 • None $8 24 $25.00:. $19:31 None .$9.74:: $15.00- .f f : ,,u' PMP) $3.00 E H $6 00 None $8 24 $2 60 $19.31 None :.None $7 50 *The Sunnyvale City Council intends to adopt fees at these levels by July 2015. 10 CC 5-5- 15 Item ##8 Karen B. Guerin From: Darci Palmer <dpalmer@thecorecompai[IC-).LVIII- Sent: Monday, May 04, 2015 5:41 PM To: City Council Cc: Christopher Valenzuela; Chris Neale Subject: Public Comment on May 5th Council meeting Agenda Item 8 - Attachments: doc01406220150504173855.pdf Members of City Council, Attached please find a public comment letter regarding affordable housing impact fees on Agenda Item 8 for tomorrow's (May 5, 2015) City Council agenda. Regards, Darci Palmer Project Manager CORE affordable 470 South Market Street, San Jose, CA 95113 Phone: 408.292.7841 x42 Fax: 408.292.0339 Cell: 408.455.2673 dpalmer@thecorecompanies.com www.thecorecompanies.co.m 1 t - THE CORE companies Building Better Communities" May 4,2015 Members of the City Council City of Cupertino I0300 Torre Avenue Cupertino, CA 95014-3202 RB: Impact Fees to Support Affordable Housing Dear City Council Members: As the City of Cupertino considers an increase in the affordable housing impact fee to be charged to new market rate housing and new commercial space, we would like to voice general support for the multitude of broad-based strategies and'local-level policies that promote provision of affordable units. Core's mission is to partner with community leaders to develop and construct high quality homes for the Bay Area's workforce and special needs populations. We bring the comprehensive skills, breadth of experience, and relationships to deliver high-quality developments that are sensitive to context and implement community goals. From market-rate townhomes and apartments tailored for Silicon Valley's working families and individuals, to Low Income Housing Tax Credit developments serving very low income seniors, families, formerly homeless veterans, or artists, we make it possible to live in close proximity to healthcare,jobs, transit, shopping, and open space. We understand the challenges municipalities face in facilitating the provision of diverse housing types accessible to the full spectrum of households and income levels of the local economy, especially in this "post-RDA"era. At the State and local level, we believe the most equitable and ultimately the most effective policies are ones that are broad and balanced,and do not cause an inadvertent consequence of inhibiting supply of high-density housing overall. Specifically, we support implementation of a compilation of policies,rather than a"one-fee"strategy. These policies that we support collectively include: (1)Incentives to build affordable units into market rate developments; (2)Manageable commercial development impact fees; (3)Title recording fees as . considered at the State level in AB 1335 (Atkins); (4)Cap-and-Trade program support for affordable and transit-oriented development(Affordable Housing& Sustainable Communities funds); (5) a County-wide parcel tax; and (6)Manageable market rate residential impact fees. All together, these policies show promise in supporting the development of housing that will truly meet the needs of Silicon Valley households. We look forward to partnering with the City of Cupertino in helping to achieve its affordable housing goals, n er , hris Neale Vice President 470 South Market St., San Jose, California 95113 Telephone: 408-292-7841 www.thecorecompanies.com e i Karen B. Guerin From: Laurie Dean <Iddean@aol.com> Sent: Tuesday, May 05, 2015 4:03 PM To: City Council Cc: dolly@dollysandoval.com Subject: Affordable housing in Cupertino Council members, I am out of town right now, but otherwise I would attend tonight's council meeting. I strongly recommend that our city adopt the staff's recommendations regarding affordable housing. As many of us know and have experienced, our children, parents, even friends, can not afford to live in Cupertino. Home and rental costs have become outrageous. I have many friends who have moved to a more affordable area, often to be close to children who have to live elsewhere. I feel it is in the best interest of our community to accommodate those with with other income levels. Just as colleges want to select incoming students from various backgrounds and income levels, we must also, to avoid becoming stagnant and monotoned. Laurie Dean Sent from my Tad i cc slrlis # s Rl INA Calculation and I lousi. :n9 Mitigation Fees RHNA References • 2007-2014 RHNA performance : http : // www. abao . ca. gov/fiIes/ RHNAProgress2007 2.014 032715 . p.df • 2014 RHNA methodology : hittp ://www. abag . ca. gov/ plan.ninQjhousing:needs/pdfs`/ RHNA Methodology Technical ' Documentation . �df • 2014 RHNA Spreadsheet: http ,,//www. abag . ca. aov/ plan n i ng/housi na needs/odfs/ Final RHNA Methodology Mode-l . xl:sx Factors Contributing to BMR Allocation • RHNA is a way at regional level to achieve state requirement. • There . are a lot of factors that determine a city's RHNA including the quota for BMR • Two major factors • Past RHNA performance • Income distribution Past R1 INA Performance • Those jurisdictions that have permitted less of their past RHNA numbers will receive a higher RHNA allocation for this period. • The factor is based on the total number of very low- and low-income units permitted. The factor is adjusted by the rank of the total number of permits issued for very low- and low-income units from 1999-2006 Bay Area Progress in Meeting 2007-2014 Regional Housing Need Allocation (RHNA)as of 3/27/15 Very Low(0-50%AMI) Low(50-80%AMI) Moderate(80-120%AMI) Above Moderate(120%+AMI) Total Percent Percent Percent Percent Percent SANTA CLARA Permits of RHNA Permits of RHNA Permits of RHNA Permits of RHNA Permits of RHNA COUNTY RHNA Issued Met RHNA Issued Met RHNA Issued Met RHNA Issued Met RHNA Issued Met Campbell 1991 32: :. .16% 122 300 246% 158 67 .42% 413 149 . 36% 892 548 61% Cupertino 341 38 .11% 2291 31 14% 2431 58 24% 3571 615 , 172% 1,1701 742 63% Factor Scores i Permits Issued Ranked County Jurisdicti®n Permits Issued Adjustment .. ..... ............................... 1 Santa Clara Campbell 37 57% ......................................................................................................................................................................................................................................................o... Santa Clara ':Cupertino 48 46% t. naSW 00001st-Implaw, m l Nexus Analysis versus Housing Commission Recommendations Nexus Maxi- Proposed Current Per- HC Recommenda- mum Justified centage of Max. tion Percentage of Max Residential Single Fam- $30.10 $15.00 10% 50% ily Small Lot $35.60 $16.50 8% -46% Lower Density Attached $33.80 $20.00 9% 59% Higher Density At- $42.50 $20.00 7% 47% tached Office/R&D/Industrial $129.05 $20.00 5% 15% Hotel $49.15 $15.00 12% 31% Retail/Restaurant $222.32 $10.00 3% 4% All dollar amounts are per square foot Grace Schmidt From: Randy Shingai <randyshingai@gmail.com> Sent: Tuesday, May 05, 2015 9:28 PM To: City Clerk Cc: City Council; better-cupertino-work-group@googlegroups.com Subject: Fwd: Government Code 65588(a) should trump use of Government Code 65583.2(c)(3) (B) Dear City Clerk, Here is the e-mail that Councilman Paul referenced, that he would like put on the record. thank you, Randy Shingai ---------- Forwarded message ---------- From: Randy Shingai<randyshingaigginail.com> Date: Mon, Dec 1, 2014 at 11:48 AM Subject: Government Code 65588(a) should trump use of Government Code 65583.2(c)(3)(B) To: City Council <citycouncil9ccupertino.org>, City Clerk<cityclerk&cupertino.org>, "dapaulc,darcypaul.org" <dapaulQcdarcypaul.org>, Savita Vaidhyanathan<savita4councilggmail.com> Cc: "better-cup ertino-work-gro]jpggoolg egroups.com" <better-cupei-tino-work- roup 000glegroups.com> Dear Sirs: This is regarding the draft Housing Element for 2014-2022 that was made available for the December 2, 2014 Regular Council Meeting, and follows up an earlier email. Here is Government Code 65588(a): 65588. (a) Each local government shall review its housing element as frequently as appropriate to evaluate all of the following: (1) The appropriateness of the housing goals, objectives, and policies in contributing to the attainment of the state housing goal. (2) The effectiveness of the housing element in attainment of the community's housing goals and objectives. (3) The progress of the city, county, or city and county in implementation of the housing element.. I believe the use of Government Code 65583.2(c)(3)(B) is inconsistent with Government Code 65588(a) because it can be demonstrated that the use of 65583.2(c)(3)(B) produces consistently erroneous results within the City of Cupertino. The City of Cupertino uses Government Code 65583.2(c)(3)(B)to project that high- density housing will produce only lower income housing within the City of Cupertino. Recent and past history has shown that high density housing rarely produces lower income housing units within the City of Cupertino. While the City is allowed to use Government Code 65583.2(c)(3)(B) to calculate the number of units that can be used to fulfill its share of the regional housing need for lower income housing, the City is not required to use 65583.2(c)(3)(B). Cupertino can instead use a more conventional approach. That is the approach described in 65583.2(c)(3)(A). i Here is Government Code 65583.2(c)(3): (3) For the number of units calculated to accommodate its share of the regional housing need for lower income households pursuant to paragraph (2) , a city or county shall do either of the following: (A) Provide an analysis demonstrating how the adopted densities accommodate this need. The analysis shall include, but is not limited to, factors such as market demand, financial feasibility, or information based on development project experience within a zone or zones that provide housing for lower income households. (B) The following densities shall be deemed appropriate to accommodate housing for lower income households: (i) For incorporated cities within nonmetropolitan counties and for nonmetropolitan counties that have micropolitan areas: sites allowing at least 15 units per acre. (ii) For unincorporated areas in all nonmetropolitan counties not included in clause (i) : sites allowing at least 10 units per acre. (iii) For suburban jurisdictions: site's allowing at least 20 units per acre. . (iv) For jurisdictions in metropolitan counties: sites allowing at least 30 units per acre. The City of Cupertino used 65583.2(c)(3)(B) to estimate the number of lower income housing units that would be produced by its inventory of suitable sites for housing in its 2007-20014 Housing Element. According to Table 7.2 in the draft Housing Element Technical Report for 2014-2022, the City achieved 7.3% of its Very Low and 10% of its Low income RHNA goals for the preceding 2007-2014 RHNA period, while at the same time achieving 164% of its Above Moderate income RHNA goals up through 2013. So it's fair to say that there has been a systematic overestimation of Very Low and Low income housing unit production and a systematic underestimation of Above Moderate income housing unit production. I believe the use of 65583.2(c)(3)(B) is responsible for this. In the draft Housing Element Technical Report for 2014-2022, Tables 5.1 and 5-2 inventory a total of 1,389 possible housing units that can be constructed on 6 sites. Every one of these units are projected to have an Affordability Level of Very Low or Low. If these projections are even half correct and these sites are all developed in the 2014-2022 time frame, then the City of Cupertino should easily meet its Very Low and Low income RHNA goals for 2014-2022. However, any reasonable person would doubt that this is going to happen. You have an obligation to follow Government Code 65588(a),because if it can be demonstrated that you were aware of a problem, and that you did nothing to correct it, it might have legal implications. For instance, some housing advocacy group might decide to sue the City for not meeting its RHNA goals for lower income housing. They might argue that the City selected an estimation method that allowed the City to shirk its responsibility to provide lower cost housing. Why is this important? Because if the City knows that there will be a shortfall in the number of lower cost housing, it can start to plan mitigation measures sooner rather than latter. The other reason is that the systematic underestimation of the number of Above Moderate income units produced result in more overall housing units being produced. Please make this part of the public record for the December 2, 2014 Regular Council Meeting. Thank You, 2 Kirsten Squarda From: Xiaowen Wang <xiaowenw@gmail.com> Sent: Monday, May 04, 2015 11:06 PM To: City Clerk; City Council;City of Cupertino Planning Dept.; Cupertino City Manager's Office; Rebecca Tolentino Subject: What does ABAG intend to do with RHNA and how we should decide housing mitigation fee? Attachments: Housing_impact_fee_RHNA.pdf Dear City Councils, I am writing to offer my study on RHNA regarding how BMR housing quota is allocated for RHNA. Since RHNA is the policy of ABAG to achieve state required HCD, I think we should look at its philosophy when determine the housing mitigation fee which is our city's policy to achieve RHNA. Please find the attached slides that summarize my discovery. In particular, I want to point out an issue in the mitigation fee Nexus Study. The study only consider the different income category housing need for different type of employment, namely office and retail. However, if we look at the RHNA allocation, we would find that the RHNA allocation is not promotional to the housing need. The RHNA allocations for different income categories highly depend on the comparison between the regional distribution and the city's income distribution. The goal of RHNA is to even out the income discrepancies among cities. Cupertino has way more high income households than average and way less low income households than average. This result in we go disproportional RHNA allocation compared to city's household income distribution. Base on this formula, we actually could afford to build much more retail without change our RHNA allocation of BMR. On the other hand, building more office would not increase our RHNA allocations of market rate housing. This actually means that ABAG expect more high income workers in Cupertino to live in other cities which could potential make our city's traffic worse. Based on this analysis, I would urge councils to charge more mitigation fee on office while charge less on retail. Thanks for your consideration and I would like this letter to be part of record for tomorrow's hearing. Sincerely, Xiaowen Wang RHNA Calculation and Housing Mitigation Fees RHNA References • 2007-2014 RHNA performance: htt www.abag.ca.gov/files/ RHNAProgress2007 2014 032715. rpdf • 2014 RHNA methodology: http://www.abag.ca.�ov/ planning/housingneeds/pdfs/ RHNA Methodology Technical Documentation.pdf • 2014 RHNA Spreadsheet: http-//www.abag.ca. - plannIngZhousingneedsZPdfs/ Final RHNA Methodology Model .xlsx Factors Contributing to BMR Allocation • RHNA is a way at regional level to achieve state requirement. • There are a lot of factors that determine a city's RHNA including the quota for BMR • Two major factors • Past RHNA performance • Income distribution Past RHNA P • Those jurisdictions that have permitted less of their past RHNA numbers will receive a higher RHNA allocation for this period. • The factor is based on the total number of very low- and low-income units permitted. The factor is adjusted by the rank of the total number of permits issued for very low- and low-income units from 1999-2006 Bay Area Progress in Meeting 2007-2014 Regional Housing Need Allocation(RHNA)as of 3/27/15 Very tour(0-50%AMI) tow(SO-SO%AMQ Moderate(80-120%AM I) Above Moderate(120%.AMil Total Percent Percent Percent Percent Percent SANTA CLARA Permits of RHNA Permits of RHNA Permits of RHNA Permits of RHNA Permits of RHNA COUNTY RHNA Issued Met RHNA Issued Met RHNA Issued Met RHNA Issued Met RHNA Issued MM Campn,d 195, 32. 16;; 122 300246E lib 67 42`l� 413. 149' 36'X 89) 548 61`,e Cupert�r.o 341: 38, 11''. 2291 31 147; 2431 591 247. 3571 61SI 172% 1,170, 7421 63 Factor Scores RHNA Performance(Very Low Low) Permits Issued Ranked ! County iwkdctkm Permits Issued Adjustment t Santa Clara Campbell i 37 S7% Santa Clara Cupertino 48 46%i. We need to boost implementation of low income housing units Distribution ncome • For the income allocation,each jurisdiction is given 175%of the difference between its household income distribution and the region-wide household income distribution(shown above).This income allocation method gives jurisu have a relatively higher proportion of households in a certain income category a smaller allocation of housing units in that same category.Conversely,jurisdictions that have a lower proportion of households in an income category would receive a larger allocation of housing units in that same category. Income Category Percent Regional Housing Need Very low income 4.8% 46,680 v� -- --� Low income 15.4% 28,940--{i Moderate income 17.8% _ _ 33,420 Above Moderate 2. 78,950 Total 100. _ _187,990 sr - Reg.onel Income Dnwbution. •fYx ssaYto. ttt-iia l 2014.2022 RHNA 2s% isx -- ld% ux. Income Distribution Regional Total by Inc— 46.bW. 28.940 31,6201 -749501 Income Shah: 175% �\ Eeistinil Income Allocation 'Adjusted Income'd7sbtb — Mbcatwn br1rincome MMA Vae L— .Yr1 Atte Y.rylw Ia. W/ I •ttl �• Yery le. tw ss•N.sa • fA•.— Moo 514M 834M fed•t" 64M $34M as-law tls4n0 •MK SleDs 21 12M isx -ux 7s: -w tttf -- — _-.. cuu�•*.+n t.c. --i _- _ � flx 19% 22111-- loft« i5a- 1�.: ,w i.Ysf • Our city has opposite trend of income distribution than the regional income distribution,therefore we got more BMR allocation. • Increasing low income job(more retails)does not lead to more quota on BMR. Recommendations • Charge maximal mitigation fee for housing • Charge maximal mitigation fee for office is Adopt the recommendation of staff on mitigation fee for retail NON-RESIDENTIAL NEXUS STUDY - Page 18 Conservative Assumptions In establishing the maximum impact fee, many conservative assumptions were employed in the analysis that result in a cost to mitigate affordable housing needs that may be considerably understated. These conservative assumptions include: • Only direct employees are counted in the analysis. Many indirect employees are also associated with each new workspace. Indirect employees in an office building, for example, include security, delivery personnel, building cleaning and maintenance personnel, and a whole range of others. Hotels do have many of these workers on staff, but hotels also "contract out" a number of services that are not taken into account in the analysis. In addition, there are `induced' employment effects when the direct employees spend their earnings in the local economy. It would certainly be appropriate to include the affordable housing demand generated by the indirect and induced jobs in this nexus analysis. For simplicity, however, and because the results using only direct employees are significantly higher than the fee levels under consideration by the City, we limit it to direct employees only. • Annual incomes for workers reflect full time employment based upon EDD's convention for reporting the compensation information. In fact, many workers work less than full time; therefore, annual compensations used in the analysis are probably overstated, especially for Retail / Restaurant and hotel, which tend to have a high number of part time employees. • Affordability gaps are based upon the assumption that federal and state tax credit financing will be available, when in fact federal tax credits are greatly oversubscribed. In addition, a conservative estimate of total development costs for ownership units is used. Both assumptions reduce the affordability gap that needs to be filled if affordable units are to be made available. In summary, many less conservative assumptions could be made that would justify a much higher maximum linkage fee. 2015-05-05 Agenda Item 8 — Mitigation Fees NON-RESIDENTIAL NEXUS STUDY — Page 7 Too high! Should bc- g 150-200 sf/employee The employment density estis are consistent with those assumed in the City's most recent General Plan. • Office — 300 square feet per employee. This represents an average of a range that includes corporate headquarters, industrial space, research & development space, high tech space, and medical offices. • Hotel — 2,000 square feet per employee. The General Plan estimate is 0.3 employees per room. Based on recent hotel projects, KMA assumes an average room size at 600 square feet per room, which at 0.3 employees per room results in an average of about 2,000 square feet per employee. The 2,000 square feet per employee average covers a range from higher service hotels to minimal service extended stay hotels. • Retail/Restaurant — 450 square feet per employee. This reflects a mix of retail and restaurant space. Restaurant space typically has a higher employment density, while retail space ranges widely depending on the type of retail. NON-RESIDENTIAL NEXUS STUDY — Page 8 According to the 2011 -2013 ACS, the number of workers per worker household in Santa Clara County was 1 .72, including full- and part-time workers. The total number of jobs created is divided by to determine the number of new households. This is a conservative estimate because it excludes all non-worker households. If the average number of workers in all households was used, it would have produced a greater demand for housing units. The Maximum Supported impact Fees for the three building types are as fo!!ovis in Exhibit b: Exhibit 6: Maximum Supported Impact Fees Per Sq. Ft. of Building Area Land Use lmpacf Fees per Sq F,, Off,ce S 12,9_05 psf Hotel $49.15 psf Commercial / RetaIl / Restaurant S222.32 psf The results of the analyses are neavily driven by the density of employees within buildings in combination with the occupational make-up of the workers in the buildings Retail has bath high employment density and a high proportion of low paying}obs. Exhibit 17: KMA Recommended Fee Levels Land Use Recommended Fee Office/ R&D/ Industnal $20.00 to $30.00 ps` Hti�tel S 10.00 to S 35,00 Ps` Retail ./ Restaurant. _S1 0-0 0 to $15.00 pa Table 4: Propt sed Non-Re_,1de11tial Fee as Percent of M.ixllllti111 Non-residential uses Office`R&D' Industrial Hotel Retail COIIIllIrI'ildl Nexus AnaIN-sis \lay. Fee ,129.05/sq.ft. 549.15/sq. ft. 5222.32/sq. tt. Proposed Fee '$20.00/sq. ft. *S10.00/sq. ft. *$10.00/sq.ft. Proposed Fee as of Nlay. 15°o 2000 4°0 Housing Commission (HC) 4$20.00/sq.ftE -5.1 .00`sq. ft. =S10.00;sq. ft. Reconinielldatioll HC Recommended Fee as 1 �S°° 31^° °o °o of Max. ` To be adjusted rtrrrm,71ly :pith Consioner Price Index(CPI). *! ASK: Use the max KMA recommended fees except for Retail/Restaurant OFFICE/R&D/INDUSTRIAL $30 psf HOTEL $15 psf Gr ��- RETAIL / RESTAURANT $10 psf — we are loosing etail RESIDENTIAL $25 psf The Maximum Supported Impact Fees for the three .wilding types are as follows in Exhibit e: Exhibit 6: Maximum Supported Impact Fees Per Sq. Ft. of Building Area Land Use fmpact Fees per Sq. Ft. Office S129.05 psf Hotel $49. 15 psf Commercial / Retail / Resta:Irant $222.32 psf ho.e: Nexus finduNs are rot ,-ecce ..rnended fee levels. wee Nor-Residential Jobs--jousing Nexus Analysis for deta:11. The results of the analysis are heavily driven by the density of employees within buildings in combination with the occupational make-up of the workers in the buildings. Retail has both high employment density and a high proportion of low paying jobs. Exhibit 17: KINIIA Recommetidecl Fee Levels Lard Use F..eeommended Fee Office/ R&D! I ndusth-al $2-0.00 to $30.00 psf H ote I $ 10.00 to $ 15 .00 psf Retail / Restaurant. $ 10.00 to $ 15.00 psf Exhibit 5: Maximum Supported Impact Fees Larger Smaller Lower Higher Single Single Small Lot SF/ Condo- Density Density Family To►vnhome minium Family (SF) Apar7ment Apar7ment Horne Per Market Rate Unit $118.100 584;200 $65.900 $52;600 $42.300 S53,100 Per Square Foot` $30.60 $30.10 $35.60 $35.10 S33.80 542.50 Excludes garage space for single family units. Unit sizes for condominiums and apartments are based on gross building area, and include an allowance for common areas. Exhibit 12: KMA Recommendations for Rental Units Requirement Recommendation Impact Fee Level $20 to $30 per square foot Exhibit 11 : KMA Recommendations for Ownership Units Requirement Recommendation Impact Fee Level $15 to S25 per square foot