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06-30-15 Searchable packetCITY OF CUPERTINO AGENDA Tuesday, June 30, 2015 10350 Torre Avenue, Council Chamber CITY COUNCIL 6:45 PM Special Meeting - Study Session NOTICE AND CALL FOR A SPECIAL MEETING OF THE CUPERTINO CITY COUNCIL NOTICE IS HEREBY GIVEN that a special meeting of the Cupertino City Council is hereby called for Tuesday, June 30, 2015, commencing at 6:45 p.m. in Community Hall Council Chamber, 10350 Torre Avenue, Cupertino, California. Said special meeting shall be for the purpose of conducting business on the subject matters listed below under the heading, “Special Meeting." SPECIAL MEETING PLEDGE OF ALLEGIANCE - 6:45 PM Community Hall Council Chamber, 10350 Torre Avenue ROLL CALL STUDY SESSION 1.Subject: Study Session on policy for processing General Plan Amendment applications Recommended Action: Conduct study session and comment on the proposed procedures for processing General Plan amendment applications (Attachment A) Description: Application No(s).: CP-2015-02, Applicant(s): City of Cupertino, Location: citywide, Policy for processing General Plan Amendment applications Staff Report A - Proposed procedures for Processing General Plan Amendment applications B - May 19 2015 City Council Staff Report C - White Paper on Development Management Programs dated May 8 2015 D - Supplemental White Paper on specific Development Management Programs dated June 24 2015 E - Comparison of Current and Proposed Procedures for Processing General Plan Amendment applications ORAL COMMUNICATIONS Page 1 CITY OF CUPERTINO 1 June 30, 2015City Council AGENDA This portion of the meeting is reserved for persons wishing to address the council on any matter not on the agenda. Speakers are limited to three (3) minutes. In most cases, State law will prohibit the council from making any decisions with respect to a matter not listed on the agenda. ADJOURNMENT Page 2 CITY OF CUPERTINO 2 June 30, 2015City Council AGENDA The City of Cupertino has adopted the provisions of Code of Civil Procedure §1094.6; litigation challenging a final decision of the City Council must be brought within 90 days after a decision is announced unless a shorter time is required by State or Federal law. Prior to seeking judicial review of any adjudicatory (quasi-judicial) decision, interested persons must file a petition for reconsideration within ten calendar days of the date the City Clerk mails notice of the City’s decision. Reconsideration petitions must comply with the requirements of Cupertino Municipal Code §2.08.096. Contact the City Clerk’s office for more information or go to http://www.cupertino.org/index.aspx?page=125 for a reconsideration petition form. In compliance with the Americans with Disabilities Act (ADA), anyone who is planning to attend the next City Council meeting who is visually or hearing impaired or has any disability that needs special assistance should call the City Clerk's Office at 408-777-3223, 48 hours in advance of the Council meeting to arrange for assistance. Upon request, in advance, by a person with a disability, City Council meeting agendas and writings distributed for the meeting that are public records will be made available in the appropriate alternative format. Also upon request, in advance, an assistive listening device can be made available for use during the meeting. Any writings or documents provided to a majority of the Cupertino City Council after publication of the packet will be made available for public inspection in the City Clerk’s Office located at City Hall, 10300 Torre Avenue, during normal business hours and in Council packet archives linked from the agenda/minutes page on the Cupertino web site. Members of the public are entitled to address the City Council concerning any item that is described in the notice or agenda for this meeting, before or during consideration of that item. If you wish to address the Council on any issue that is on this agenda, please complete a speaker request card located in front of the Council, and deliver it to the Clerk prior to discussion of the item. When you are called, proceed to the podium and the Mayor will recognize you. If you wish to address the City Council on any other item not on the agenda, you may do so by during the public comment portion of the meeting following the same procedure described above. Please limit your comments to three (3) minutes or less. Page 3 CITY OF CUPERTINO 3 CITY OF CUPERTINO Legislation Details (With Text) File #: Version:115-0920 Name: Status:Type:Study Session Agenda Ready File created:In control:6/2/2015 City Council On agenda:Final action:6/30/2015 Title:Subject: Study Session on policy for processing General Plan Amendment applications Sponsors: Indexes: Code sections: Attachments:Staff Report A - Proposed procedures for Processing General Plan Amendment applications B - May 19 2015 City Council Staff Report C - White Paper on Development Management Programs dated May 8 2015 D - Supplemental White Paper on specific Development Management Programs dated June 24 2015 E - Comparison of Current and Proposed Procedures for Processing General Plan Amendment Action ByDate Action ResultVer. City Council6/30/20151 Subject: Study Session on policy for processing General Plan Amendment applications ConductstudysessionandcommentontheproposedproceduresforprocessingGeneralPlan amendment applications (Attachment A) Description:ApplicationNo(s).:CP-2015-02,Applicant(s):CityofCupertino,Location: citywide, Policy for processing General Plan Amendment applications CITY OF CUPERTINO Printed on 6/24/2015Page 1 of 1 powered by Legistar™4 COMMUNITY DEVELOPMENT DEPARTMENT CITY HALL 10 10300 TORRE AVENUE • CUPERTINO, CA 95014-3255 TELEPHONE: (408) 777-3308 www.cupertino.org CITY COUNCIL STAFF REPORT Meeting: June 30, 2015 SUBJECT Study Session on Policy for Processing General Plan Amendment Applications. RECOMMENDED ACTION Recommend that the City Council conduct a study session and comment on the proposed procedures for processing General Plan amendment applications (Attachment A). DESCRIPTION Application No.: CP-2015-02 Applicant: City of Cupertino Property Location: City-wide BACKGROUND On May 19, 2015, the City Council reviewed the Final 2014-2022 Housing Element, the General Plan for potential changes to development allocations for commercial, office and hotel uses, building heights and building planes, and the proposed policy for establishing procedures for processing General Plan Amendment (GPA) applications (Attachment B). At that meeting the Council provided the following direction on the proposed policy to establish procedures for processing General Plan Amendment applications:  Directed staff to present additional details on other programs that require community benefits such as the Cities of Mountain View and Morgan Hill.  Deferred the decision on the policy for approximately 90 days.  Placed new GPA applications on hold until a decision is made on the policy. DISCUSSION This report focuses on the following issues:  Comparison of incentive zoning, growth allocation and land use regulation models that allow for community benefits in various cities;  A description of the recommended policy on processing GPAs; and  A comparison of current GPA process vs the recommended process. 5 CP-2015-02 June 30, 2015 Comparison and Conclusions from Study of Incentive Zoning, Growth Allocation and Land use Regulation Models that allow for Community Benefits A white paper prepared for the Council meeting on May 19, 2015, provided the pros and cons of various incentive zoning, growth allocation and land use regulation models and provided general guidance on developing a policy that addressed Cupertino’s concerns and particular needs for managing growth (Attachment C). Upon reviewing the pros and cons for the different programs administered by the various cities, staff recommended a policy for processing applications for GPAs, which was presented at the May 19 City Council meeting (Attachment A). Per further direction from the City Council at the May 19, 2015 meeting, a follow up white paper has been prepared that includes a more detailed discussion of programs implemented by the Cities of Berkeley, Santa Monica, San Diego, Mountain View and Morgan Hill (see Attachment D). Table 1 provides a comparison summary of the different types of models studied on different aspects of the programs including:  Whether the growth is built in to the General Plan and the Zoning Code;  Types of Community Benefits received/expected in exchange for incentives offered;  Discretion in project review; and  Challenges and ease of administration of the program. Table 1: Comparison of Programs that have Community Benefit component Growth Built in to General Plan and Zoning Code? Community Benefits Discretion in project review Administration Formulaic Zoning Incentive Programs (e.g. City of San Diego Downtown Community Plan) Yes Predefined Minimal  Minimal Discretionary CBIZ Programs (e.g. City of Berkeley Downtown Area Plan) Yes Negotiated Moderate  Protracted negotiation  Lack of transparency  Lack of consistency Growth Allocation Metering Programs (e.g. Cities of Morgan Hill, Brentwood, Livermore, Mountain View) Yes Competition based Moderate  Less flexible  Cumbersome involving detailed criteria, scoring and checklists Land Use Regulation No Could be structured to be competition based Maximum except Housing Element projects  Transparent  Allows project preview  Applicant to offer appropriate voluntary community amenities. 6 CP-2015-02 June 30, 2015 The following is a summary of conclusions based on the review of the various Community Benefit Incentive Zoning (CBIZ) models, Growth Allocation models and the consideration of land use regulation as a community benefit model: 1. Formulaic zoning incentive programs (e.g., City of San Diego Downtown Community Plan) provide less discretion since the development incentives and community benefits are predetermined and codified by zoning. 2. Discretionary zoning incentive programs (e.g., City of Berkeley Downtown Area Plan) require protracted negotiation and discussion before the City can determine that a project applicant’s offer of “substantial community benefits” warrants granting of a bonus in height or floor area ratio. Also, the lack of specific criteria can lead to lack of transparency, difficulty in administering the program and lack of consistency between projects. A discretionary CBIZ program also would require updates to the zoning code. 3. Metering residential development annually (e.g., Morgan Hill, Brentwood, Livermore) would require changes to the recently adopted Housing Element and additional HCD review. The City also would need to ensure that any metering program would still allow its housing obligations to be met. Even if the process is implemented only for non-residential development, the program provides little flexibility and is cumbersome to administer. Such a program would require a process that involves detailed criteria, scoring, and a specific checklist of community benefits, as well as deadlines for processing and building of development. 4. A development cap or metering approach establishes a supply constraint which may support a competitive process. When market demand exceeds supply, projects may be required to showcase community benefits in order to be considered for processing. The Mountain View and Morgan Hill case studies offer good examples of this type of process. In both cities, competition for project entitlements has generated substantial public benefits from new development, but the programs are labor intensive for City Staff to implement and the success of the competition is highly dependent on market conditions. In addition, these processes introduce additional investment risk for development investors active in the community, due to increased uncertainty about project approval. 5. Growth allocation programs implement growth planned in the General Plan, and can achieve community benefits. However, while these programs work well in years in which there are projects competing for development, in years during which there are fewer projects competing community benefits offered are not as significant. 6. A process that provides procedures for General Plan Amendments can provide the most flexibility, because development assumptions are not already built in and cities have discretion to amend their General Plans, except with respect to legal requirements for Housing Elements. This approach would provide the ability for the City to review a 7 CP-2015-02 June 30, 2015 development proposal and determine if it meets the goals and quality of life standards of the City, such as through the provision of community amenities. If multiple proposals for general plan amendments are submitted, based on the case studies examined here, it seems likely to increase the community amenities offered by project proponents, particularly when economic conditions are strong. In considering options to address growth, manage development, and respond to the community concerns, the following should be achieved by any program implemented:  Ability to achieve goals of General Plan  Ease of implementation  Desire for flexibility versus specific requirements (as in a General Plan or zoning)  Ensure a diverse and vital economic base  Ensure the City can meet its housing obligations  Ability to achieve orderly development of the City through a managed process  Ensure that additional development can achieve/improve facility/service and quality of life standards for the community The recommended procedures for processing of General Plan amendment applications achieves the above goals and also ensures a greater level of transparency and public input. The discussion below provides a brief discussion of the current procedures and additional details on the recommended procedures. In addition, see Attachment E for a summary flowchart showing a comparison of the current and proposed procedure. Current Procedure for Processing General Plan Amendment Applications Currently, GPA applications are processed as they are received. Project review is completed concurrently to ensure that other aspects of the General Plan and zoning regulations are met by the project. If a Development Agreement is sought by the applicant, one is negotiated at this time, including any items that are offered by the applicant as community benefits. Environmental review for the proposed project is processed concurrent with project review. Upon completion of the environmental and project review, public hearings are scheduled with the Planning Commission and City Council for a final decision on the environmental review, project, proposed General Plan Amendments and Development Agreement, if any. Public input notification is provided through neighborhood noticing, legal notices for meetings and site signage. Public input is sought through neighborhood meetings and at hearings at the Planning Commission and City Council. However, since each application is processed separately, neither the Council nor the public have a chance to get a preliminary look at the applications before they are processed. 8 CP-2015-02 June 30, 2015 Therefore, the current process is not as transparent, does not allow comparison of applications, received and being processed, in a given year, does not consider issues such as early public input, achievement of key City goals, and time and resource requirements, prior to processing these applications. Additionally, since each application is reviewed separately and applicants do not compete for authorization with other projects, there is no incentive for the applicant to offer community amenities. Proposed Procedure for Processing General Plan Amendments Applications Under the proposed procedure, GPA applications would not be processed as they were received. Instead the following process would be applied:  All GPA applications would have to be submitted by a certain date every year in order to be considered for processing that year.  The GPA applications would be scheduled for a Council meeting once a year, at which the Council would authorize applications for processing.  Public input would be sought by sending a city-wide postcard and providing project information on the City website.  Project information would include conceptual plans, community amenities, General Plan amendments sought and other features proposed by applicants.  The Council would consider the following criteria when deciding whether or not to authorize GPA applications: o General Plan goals achieved by the project; o Quality of architectural and site design; o Fiscal impacts of the project; o Affordable housing provided by the project; o General Plan amendments (and/or other variances) sought by the project; and o Voluntary community amenities provided by the project  The Council decision would authorize the applicant to submit an application for the GPA. It would not guarantee approval of projects. Projects authorized to proceed, would then be processed as they are currently. Council’s final decision on each project would be made after reviewing all aspects of the proposal including site and architectural design, environmental review, public input, etc.  If multiple GPA projects were authorized for processing, each project would be reviewed and staff would ensure that they were brought for Council review in a manner that would not exceed four GPAs per calendar year. Projects could also be bundled together as needed so as not to exceed four per year.  Projects not authorized in the current annual period would have to re-apply, potentially with changes, for consideration during a subsequent annual period. 9 CP-2015-02 June 30, 2015 An annual review and authorization process would ensure:  Transparency – the public would get a chance to review the projects and provide input before the applications were authorized for processing. In addition, this would give the public notification on which projects would be processed and allow them to be informed on each project.  Early Input – the Council meeting would enable the applicant and staff to consider comments from the Council and the public as the project was reviewed.  Voluntary Community Amenities – the annual process would allow projects to compete. As noted in the review of programs in other cities including Morgan Hill and Mountain View, such a process would incentivize applicants to shape their applications and offer voluntary community amenities to increase their chances for being considered for processing. Staff therefore recommends that the Council adopt the new procedures on processing of General Plan amendment applications either via resolution or by ordinance. Policy or Ordinance The procedures for processing General Plan amendments could either be adopted by resolution or by ordinance. Adopting it as a resolution would make it an official Council policy and could be amended through a subsequent resolution. Adopting the procedures as an ordinance would make it part of the City’s Municipal Code and could be amended via an ordinance amendment. Depending on direction provided by the City Council, staff can prepare either for presentation at a future public hearing. PUBLIC NOTICING, OUTREACH AND COMMENTS City Council Study Session– June 30, 2015 The following table summarizes the noticing for this meeting: Notice Agenda  Courtesy email sent to all interested parties signed up through the project website  Newspaper Display Ad (at least 10 days prior to hearing)  City's official notice bulletin board (6 days prior to the hearing)  City of Cupertino’s website (6 days prior to the hearing)  Project website (5 days prior to hearing) NEXT STEPS If the Council adopts the policy, a deadline for the first annual review of applications will be established and the policy will be implemented for all applications received thereafter. If 10 CP-2015-02 June 30, 2015 the Council prefers an ordinance approach, staff will follow the process for ordinance amendments. If the Council decides not to adopt the policy for authorization of General Plan amendment applications, the City would continue with the current procedure of processing General Plan amendment applications as they are submitted. _____________________________________ Prepared by: Piu Ghosh, Senior Planner Reviewed by: Aarti Shrivastava, Assistant City Manager Approved for Submission by: David Brandt, City Manager Attachments: A - Proposed procedures for Processing General Plan Amendment applications B - May 19, 2015 City Council Staff Report C - White Paper on Development Management Programs dated May 8, 2015 D - Supplemental White Paper on specific Development Management programs dated June 24, 2015 E - Flowchart comparing the current and proposed procedure for processing General Plan amendment applications 11 1 PROCEDURES FOR PROCESSING OF GENERAL PLAN AMENDMENT APPLICATIONS Adopted by the City Council _____________, 2015 1. Background/Goals Like many communities throughout the State, Cupertino is concerned about balancing the benefits of economic development with the effects of rapid growth. The impacts of such growth can overwhelm the City’s ability to accommodate it and affect the quality of life in the community. The goal is to create a procedure for the consideration of future General Plan amendments that will encourage orderly development of the City and ensure that facility/service and quality of life standards can be met for the community. These procedures only address amendments requested by private parties. The City may initiate General Plan amendments when it deems necessary, such as, to conform to State law or to ensure consistency within the General Plan. 2. Procedure a. The Council will consider the timing and processing of General Plan amendments once every year. b. In order to be considered for processing, applicants would be required to apply for authorization to process a General Plan amendment by a designated date each year. c. In the quarter following the due date (generally), the Council will hold a publicly noticed meeting to preliminarily review the list of proposed General Plan amendments. d. Noticing – City-wide noticing and public meeting requirements. e. Each application will be preliminarily evaluated for the following: (i) General Plan goals achieved by the project including, but not limited to, the following: (1) Site and Architectural design and neighborhood compatibility (2) Brief description of net fiscal impacts (sales tax, transit occupancy tax or other revenue provided by the project) including a diverse economic base (3) The provision of affordable housing (4) Sustainability (ii) List of General Plan amendments (and any other zoning amendments or variances) requested. (iii) A list of voluntary community amenities, as defined in Section 3, if any. (iv) Staff time and resources required to process the project. 12 2 f. Based on the above evaluation the Council will consider which projects, if any, will be authorized to proceed with a General Plan amendment application. The decision does not in any way presume approval of the amendment or project. It only authorizes staff to process the application, but the City retains its discretion to consider the application in accordance with all applicable laws, including the California Environmental Quality Act (“CEQA”) and the City’s zoning laws and ordinances. Consideration of the application will be in accordance with the City’s Municipal Code and regulations. g. Staff will begin processing the General Plan amendment applications per Council direction. A project that applies for processing should be in substantial compliance with the project authorized by Council. h. Applicants whose proposals were not authorized for processing will have to apply for the next cycle to be considered. 3. Voluntary Community Amenities. For purposes of this policy, voluntary community amenities are defined as facilities, land and/or funding contributions to ensure that any development with a General Plan amendment application enhances the quality of life in the City. a. School resources b. Public open space, such as parks and trails. c. Public facilities and utilities, such as library, community center or utility systems. d. Transportation facilities with an emphasis on city-wide bicycle, pedestrian and transit improvements, such as community shuttles, pedestrian and bicycle bridges, transit center/stations, etc.). 4. Preliminary Review Requirements: a. Preliminary documents that would be typically required for the type of application that is requested, such as site plans, preliminary landscape plans, elevations, cross sections, preliminary grading plans and proposed materials. b. A description, including graphics, of the General Plan amendment(s) and land use approvals required, if any. The description should include diagrammatic information as necessary to clearly explain the request. c. An explanation of how the proposed project meets the overall goals of the General Plan and the benefits/impacts of the project to the community and its quality of life. d. A brief summary of net fiscal impacts. e. To the extent the proposed project includes voluntary community amenities of a type typically memorialized in a development agreement, the applicant should include a Term Sheet explaining the proposed terms. The Term Sheet will be memorialized in a Development Agreement as part of the project, if approved. 13 COMMUNITY DEVELOPMENT DEPARTMENT CITY HALL 10 10300 TORRE AVENUE • CUPERTINO, CA 95014-3255 TELEPHONE: (408) 777-3308 www.cupertino.org CITY COUNCIL STAFF REPORT Meeting: May 19, 2015 SUBJECT Item 7B: General Plan Amendment to consider changes to citywide development allocations for office, commercial, and hotel uses, building planes, height limits. RECOMMENDED ACTION Recommend that the City Council conduct a public hearing and take the following actions: 1. Make no further amendments to the General Plan (Community Vision 2040) adopted on December 4, 2014 (GPA-2013-01); and 2. Adopt Resolution No. 15-043 adopting a policy establishing procedures for authorization of General Plan amendments (Attachment B1). DESCRIPTION Application No.: GPA-2013-01 (EA-2013-03) Applicant: City of Cupertino Property Location: City-wide BACKGROUND On August 21, 2012, the City Council directed staff to prepare draft General Plan amendments to replenish office and hotel allocations; inform the Vallco Shopping District Specific Plan; consolidate individual requests from property owners; and address State law, and text clean-up. In addition, in November 2013, a State-mandated update of the Housing Element of the General Plan was initiated. The Housing Element Update was combined with the General Plan Amendment process so that the City and community could fully evaluate and discuss issues in one comprehensive outreach and planning process. Please see the staff report for Item 7A. for additional detail on the 2014-2022 Housing Element. The General Plan Amendment and Housing Element Update process has involved over 21 months of extensive community discussions and input provided during 27 public meetings, workshops, online comment surveys, and study sessions and hearings with the 14 GPA-2013-01 May 19, 2015 Housing Commission, Planning Commission and City Council. For a detailed listing of the public input meetings leading up to the December 2, 2014 Council meeting and for recommendations previously made, please refer to the December 2, 2014 City Council staff report (Attachment B.2.) Copies of the staff reports from past study sessions and public hearings are available on the project website at www.cupertinogpa.org and at www.cupertino.org/records. On December 4, 2014, the City Council reviewed three General Plan alternatives (Alternatives A, B and C – See Attachment B.3), including various Housing Element sites, and made the following decisions:  Authorized staff to send the Draft Housing Element to HCD with amendments to the priority Housing Element sites for HCD’s review (See Staff Report for Item 7A for details.)  Adopted Community Vision 2040, the City’s updated General Plan (available online at: www.cupertino.org/gp),  Authorized processing of a Specific Plan for the Vallco Shopping District as follows: o Development allocation of a minimum of 600,000 square feet of retail, up to 2 million square feet of office, 389 units in the Housing Element with building heights, building planes and setbacks to be decided in the Specific Plan.  Deferred the decision on the following General Plan items to a meeting in 2015 after receiving community input: o Development allocations for commercial, office and hotel uses, building heights and building planes, o Community Benefit program, and o Site-specific land use designation amendments and associated re-zoning for two properties – PG&E site located at 10900 N. Blaney Avenue and the Mirapath property located at 10950 N. Blaney Avenue. The Council also directed staff to conduct more community input on the proposed Geneal Plan amendments and research community benefit programs. The December 2, 2014 City Council staff report (Attachment B.2) provides a detailed discussion on the issues listed above. DISCUSSION Community Workshop & Survey In order to gather additional input on key issues related to the General Plan, the City hosted a community workshop and made an online survey available to the public. 15 GPA-2013-01 May 19, 2015 The workshop was conducted on February 4, 2015 and included over 80 participants. Attendees at the workshop gathered in small groups and discussed what they considered to be appropriate building forms and heights (including building planes) within different Special Areas, nodes and gateways in the city. The groups also provided input on whether or not the City should establish a community benefits program, and the types of benefits that should be required if a program were to be created. Attachment B.4 provides a summary of the feedback from the workshop. Additionally, an online survey was made available to the public using an outreach platform called Peak Democracy, also used by other local agencies. The online survey consisted of two parts. The first part of the survey focused on building heights at the Special Areas, gateways and nodes. The second part focused on building planes and community benefits. Responses from participants who registered on the Peak Democracy platform are called “on forum” responses. Registration ensures that each response is from a discrete participant and is not a multiple response from the same source. There were 382 on forum responses for Part A of the survey and 300 on-forum responses for Part B of the survey. The on forum responses of the results for Parts A and B of the survey are briefly summarized below (Attachment B.5 provides a detailed report):  Over 80% of respondents stated that they were Cupertino residents.  Over 55% of the respondents stated they do not want to see an increase in building heights for six of the seven areas identified.  Over 50% of the respondents stated they do not want to see a change to the existing 1.5:1 building plane requirement along the south side of Homestead Road (between Linnet Lane and Swallow Drive) and the north side of Stevens Creek Boulevard (between Perimeter Road and Tantau Avenue).  Over 65% of respondents think a community benefits program would be beneficial, but do not think ground floor retail should be required as part of a Community Benefits Program.  The average priorities were ranked as follows but there was support for amenities in all the categories: o Parks/Recreation o Transportation enhancements (sidewalks, bike lanes, etc.) o Community services (e.g. teen center, library branch, etc.) o In-lieu fee to City (e.g. contribution towards school improvements or affordable housing) 16 GPA-2013-01 May 19, 2015 Peak Democracy also allows participants that do not want to register to provide feedback. However, since it is difficult to ascertain whether the feedback is from discrete individuals or repeat responses from the same individuals, these are summarized separately as “off forum” responses. 429 off forum responses were received for Part A and 182 off forum responses for Part B of the survey. These are provided separately in Attachment B.6. Research on Community Benefits and Growth Allocation programs The Council also directed staff to research implementation of a community benefits program for projects that required additional development above a base height. Extensive research was conducted into development models tied to community benefits in various communities (see Attachment B.7 for a white paper about Development Management). These included three basic approaches:  Community Benefit Incentive Zoning (CBIZ) Programs - In these programs, the zoning allows additional development or height based on community amenities provided by a project. These range from formulaic approaches where projects are given additional development (floor area or height) if they provide items based on objective criteria and requirements such as green buildings, traffic reduction programs, etc. (e.g. Santa Monica and San Diego), to discretionary, non-formulaic models where maximum heights or development allocation may be set out in the General Plan but are not tied to a pre-determined checklist and the community amenities would be negotiated through a development agreement (e.g. Palo Alto and Berkeley).  Growth Allocation Programs – These are programs that meter development to allow infrastructure improvements to keep up with development. These programs are adopted by cities of Morgan Hill, Brentwood, and Livermore. In each case, growth is already planned in the General Plan and it requires a meticulous and time- consuming process to score developments based on pre-determined objective criteria, decide which ones are allowed to proceed and then review them.  Land Use Regulation - A community benefit model in Vancouver, Canada, was also briefly reviewed, that required the payment of specific dollar amounts for projects that were approved for rezoning. However, that program is not legally feasible. The white paper also notes that cities can implement, and control, growth and development through their General Plans, Specific Plans and zoning. In California, State Planning and Zoning Law allows the local legislative bodies the authority to establish their own procedures for the processing of amendments to its General Plan. Cities can also implement additional nexus fees (such as community facilities fees, transportation impact fees, utility impact fees, etc.) and additional design review guidelines to address the impacts of development. Cities can also enter into 17 GPA-2013-01 May 19, 2015 negotiated Development Agreements with developers, which allow for developers to obtain vested rights and for the City to negotiate desired community amenities to address the impacts of development. The following is a summary of pros and cons of the models based on the review of the various Community Benefit Incentive Zoning (CBIZ) and Growth Allocation models:  Requiring community benefits (or in-lieu payments for community benefits) as an absolute condition of development, may constitute an exaction under California law, and thus the City may need to demonstrate a proportional relationship between the community benefit payment and the impact of the project.  Formulaic zoning incentive programs (e.g., City of San Diego Downtown Community Plan) provide very little discretion since the development incentives and community benefits are predetermined and codified by zoning.  Discretionary zoning incentive programs (e.g., City of Berkeley Downtown Area Plan) require protracted negotiation and discussion before the City can determine that a project applicants offer of “substantial community benefits” warrants granting of a bonus in height or floor area ratio. Also, the lack of specific criteria can lead to lack of transparency, difficulty in administering the program and lack of consistency between projects. A discretionary CBIZ program would also require updates to the City’s zoning code.  Metering residential development annually (e.g., Morgan Hill, Brentwood, Livermore, etc.) would require changes to the Housing Element and is not advisable given the May 31, 2015 deadline for its adoption. The City would also need to ensure that any metering program would still allow its housing obligations to be met. Even if the process is implemented only for non-residential development, the program provides much less flexibility and is cumbersome to administer since it involves detailed criteria, scoring, a specific checklist of community benefits and deadlines for processing and building of development.  A metering approach can create a competitive process where projects can showcase community benefits in order to be considered for processing. Morgan Hill is a good example of this process. A newer example is the City of Mountain View, where proposals for a limited amount of development are being reviewed along with a community benefit approach in the North Bayshore area.  Growth allocation metering programs require an additional amount of planned growth in the General Plan (e.g. Brentwood and Morgan Hill). However, these programs can work well in years in which there are projects competing for development, since the quality of site plans and community benefits would be high. In years where there are fewer projects competing for an allocation that is 18 GPA-2013-01 May 19, 2015 built-into the zoning or General Plan, quality of the development and/or community amenities may not be of the same quality as in competitive years.  A process that provides procedures for General Plan amendments can provide the most flexibility since development assumptions are not already built in and cities have more discretion about amending General Plans, except with respect to legal requirements for Housing Element sites. Staff Recommendation Related to the General Plan The community survey and community input indicated the following concerns and wishes:  Concern about additional growth and heights being built into the General Plan.  There continues to be interest in community benefits/amenities being provided by development to improve transportation and transit, parks, facilities and schools.  Staggering or metering growth instead of allowing it all at one time.  There is a preference to see more detail about projects before any changes to the General Plan are contemplated.  That the process should be more transparent and provide more information up front. Based on Council direction, community input and research on community benefit models, staff is recommending that:  No changes be made to Community Vision 2040 adopted in December 4, 2014 including: o No increase in existing General Plan building heights and building planes, o No increase in residential, commercial, office or hotel development allocations, or o No change in land use designations to any property.  Council adopt a procedure to review General Plan amendments and authorize staff to process a limited number of General Plan amendments using a specific set of criteria (See Attachment B.1 for a description of the policy). The process is described in greater detail below. Proposed Process for Authorization of General Plan Amendments The recommended approach would establish clear community expectations that in order to be considered for General Plan amendments, projects would have to make a specific project proposal including a detailed description of voluntary community amenities offered, if any. This process would not apply to City-initiated General Plan amendments (such as the Housing Element, etc.). 19 GPA-2013-01 May 19, 2015 The process would work as follows:  The Council will consider the timing and processing of General Plan amendments once every year.  As part of the annual cycle for applications, projects would provide conceptual plans for a brief preliminary review (site plan, project plans, elevations, perspectives, project description, etc.), the General Plan amendment(s) requested and a term sheet with a list of voluntary community amenities to be provided, if any.  The list of voluntary community amenities could include: support for (i) school resources, (ii) Public open space, such as parks and trails (e.g. land and/or improvements, (iii) Public facilities and utilities, such as library, community center or utility, and (iv) transportation facilities with an emphasis on city-wide bicycle, pedestrian and transit improvements, such as community shuttles, pedestrian and bicycle bridges, transit center/stations, etc.  Each cycle, staff would conduct a preliminary review of the proposed projects using the following criteria. o General Plan goals achieved by the project including, but not limited to, the following:  Site and Architectural design and neighborhood compatibility,  Brief description of net fiscal impacts (revenue such as sales tax, transit occupancy tax or other revenue, a diverse economic base, etc.),  The provision of affordable housing,  Sustainability. o List of General Plan amendments (and any other zoning amendments or variances) requested. o A list of voluntary community amenities as discussed above. o Staff time and resources required to process the project.  The process would include city-wide notification.  The Council would conduct a public meeting, take public input and make the final decision on which projects would be authorized for processing of a General Plan amendment(s).  Only projects that were authorized by the Council for processing of a General Plan amendment(s) would move forward for environmental and entitlement review. The subsequent project applications would have to be substantially similar to the project authorized by the Council in order to move forward for processing. 20 GPA-2013-01 May 19, 2015  Projects that were not authorized for the annual round would have to re-apply for the next annual round in order to be considered for processing. This would allow them to modify their project for the next cycle. In addition to achieving both Council and community goals, the process would also have the following benefits:  It would allow the City to manage the process of General Plan amendments in a more orderly manner (General law cities, such as Cupertino, are only allowed four General Plan amendments every year),  It would create a more competitive process when compared to the current ad hoc approach to processing applications as they come in,  It would allow applicants to showcase their projects and their voluntary community amenity program to the Council and the community,  The Council, public and staff would have a better preview of projects before the Council made a decision on which projects would be processed.  It would create an upfront and transparent process before projects were authorized to move forward for processing. The Council decision would only authorize staff and other resources for processing of the projects. It would not guarantee approval of projects. Each project would be reviewed in a manner similar to the City’s project review process including a review of environmental impacts per the California Environmental Quality Act (CEQA), adherence to applicable codes and laws, etc. ENVIRONMENTAL IMPACT REPORT (EIR) Pursuant to the California Environmental Quality Act (CEQA), this General Plan Amendment is considered a project that must be reviewed for potential environmental impacts. The environmental review was completed along with the Housing Element project. The Draft Environmental Impact Report (EIR) for the two projects was made available for public review and comment for a 45-day period ending on August 1, 2014. As required by CEQA, subsequently, a Response to Comments document (RTC), to respond to comments received regarding the adequacy of the Draft EIR, including corrections necessary to the Draft EIR, was prepared. The Final EIR, comprising of the RTC document and the Draft EIR was certified by the City Council on December 4, 2014. No actions related to environmental review are required by the City Council. 21 GPA-2013-01 May 19, 2015 PUBLIC NOTICING, OUTREACH AND COMMENTS City Council – May 19, 2015 The following table summarizes the noticing for this meeting: Notice Agenda  Courtesy email sent to all interested parties signed up through the project website  Newspaper Display Ad (at least 10 days prior to hearing)  Newspaper Display Ad (at least 10 days prior to hearing)  City's official notice bulletin board (6 days prior to the hearing)  City of Cupertino’s website (6 days prior to the hearing)  Project website (5 days prior to hearing) The complete list of public outreach meetings leading up to the December 2, 2014 City Council meeting is provided in the December 2, 2014 Staff Report (Attachment B.2) In addition to the public input collected at the February 4, 2015 workshop and the online survey, public comments have been sent by members of the public. These have been compiled into Attachment B.8. NEXT STEPS Community Vision 2040 Clean-up Edits As part of General Plan Amendment process, the Santa Clara Valley Water District (SCVWD) recommended minor edits to certain General Plan policies and strategies. Due to the lateness of their comments, their recommendations could not be incorporated into Community Vision 2040 in time for the December 2014 adoption. Should the Council wish to incorporate these changes, they can be brought back to the City Council in conjunction with a future General Plan amendment. Staff Recommendation Summary If Council adopts the staff recommendation:  There will be no changes to the General Plan – Community Vision 2040, except for adoption of the 2014-2022 Housing Element.  The final General Plan including text, maps and graphics will be formatted and prepared for posting online and printing.  As noted earlier in this report, staff will not make General Plan clean-up edits suggested by the Santa Clara Valley Water District. Instead they will be brought for Council consideration in conjunction with a future General Plan amendment. 22 GPA-2013-01 May 19, 2015  Applications for General Plan amendments will have to follow the newly adopted Council policy and will require authorization from the Council for processing. General Plan Fee Since this will conclude the General Plan Amendment process, staff will compile the cost of the preparation of the General Plan and EIR and bring back a General Plan fee for the Council’s consideration in June 2015. The fee will be charged on a square foot basis for projects that will tier off the General Plan EIR. Projects that paid into the General Plan process will not have to pay the fee. ALTERNATIVES FOR COUNCIL CONSIDERATION General Plan Amendment Project Components If the Council wishes staff to process amendments to the General Plan in specific areas, it can provide direction to staff to bring back the specific amendments to be heard at a future public hearing after Planning Commission consideration. Attachment B.2 provides a detailed description of issues that were presented for Council consideration at the December 2, 2014 public hearing on the General Plan amendment. These are briefly listed below:  Development allocations  Building heights/building planes  Land use designation and zoning changes for the PG&E site at 10900 N. Blaney Avenue and the Mirapath site at 10950 N. Blaney Avenue. While staff does not recommend bringing the application for PG&E back for the City Council’s consideration, staff recommends that the Mirapath site be brought back for consideration at a later date. Default Process for General Plan Amendment Applications If the Council does not wish to authorize the policy for authorization of General Plan amendment applications, the City would continue with the current process of taking in General Plan amendment applications as they came in. While this process continues to involve the community on a project-by-project basis, it would not have the same benefits as the proposed process where all the applications and voluntary community amenities programs could be preliminarily reviewed at the same time on an annual basis. _____________________________________ Prepared by: Piu Ghosh, Senior Planner Reviewed by: Aarti Shrivastava, Assistant City Manager Approved for Submission by: David Brandt, City Manager 23 GPA-2013-01 May 19, 2015 Attachments: B.1. Resolution No. 15-043 adopting a policy for Procedures for Authorization of General Plan Amendment applications B.2. December 2, 2014 City Council Staff Report B.3. Concept Alternative Maps (Alternatives A, B and C) B.4. February 4, 2015 Workshop Feedback Summary B.5. Peak Democracy Survey On Forum Responses Summary (Part A and B) B.6. Peak Democracy Survey Off Forum Responses Summary (Part A and B) B.7. White Paper on Development Management Programs B.8. Public Comments 24 DEVELOPMENT MANAGEMENT OVERVIEW Prepared for the City of Cupertino By: Economic & Planning Systems and Burke, Williams & Sorensen, LLP May 8, 2015 25 1 OAK #4824-1644-4195 v4 DEVELOPMENT MANAGEMENT OVERVIEW Like many communities throughout the State, Cupertino is concerned about balancing the benefits of economic development with the effects of rapid growth. The impacts of such growth can overwhelm the City’s ability to accommodate it and affect the quality of life in the community. The City Council directed staff to evaluate ways to balance these issues, including a potential implementation of a community benefits program for development projects. The purpose of this overview is to address the steps that have been taken to review various methods to address growth, quality of life, and to provide a summary of the reviewed approaches, as well as their benefits and constraints. History of Process • General Plan On December 4, 2014, Cupertino’s City Council adopted an amended General Plan titled Community Vision 2040. The amended plan reflects community input, regulatory changes, best practices, and the desire to achieve community‐building, sustainability, economic, and fiscal objectives. The City Council continued the considerations related to development heights, development allocations, and the potential for a Community Benefits Program until 2015. • Community Benefits In early 2015, the City engaged Economic & Planning Systems (EPS) to provide information regarding the advantages and disadvantages based on a variety of existing Community Benefit Incentive Zoning (CBIZ) programs in California and to assist with discussions regarding a potential program in Cupertino. • Additional Programs Analyzed During this research on CBIZ programs, various alternative options to address growth and quality of life were considered, including growth allocations programs and regulation through General Plan land use designations and zoning. Assessment of Community Concerns The main areas of concern regarding development in the City that have been addressed throughout this process revolve around the following: • Impacts on schools and lack of school resources, such as facilities, land and funding; • Impacts on and lack of public facilities and utilities, such as libraries, a community center and utility systems; • Impacts on and lack of public open space, parks and trails; and • Impacts on transportation network, including inadequacy of city-wide bicycle, pedestrian, transit improvements and facilities. 26 2 OAK #4824-1644-4195 v4 Community Benefit Incentive Zoning California cities have a long history of exacting community benefits through a variety of mechanisms, including fees, conditions of approval, and development agreements. More recently, Community Benefit Incentive Zoning (CBIZ) programs have offered an alternative approach. CBIZ programs are structured around an exchange in which municipalities offer optional increases in development potential in return for public assets (or funds) desired by the community. The incentive must be above what normally would be allowed and the public benefit must be beyond what otherwise would be required. Because these programs are optional, development outcomes vary based on the degree of participation in the plan. That is, some developments may not take advantage of the incentive while others do. The optional nature of the program creates increased uncertainty regarding the final urban form that ultimately will be achieved. The magnitude of the community benefit sought must be equal to or less than the value of the incentive offered. In order for community benefits to be achieved, the public sector must create value through the provision of an incentive (commonly increased development density). CBIZ programs are founded on the concept of “value capture.” CBIZ programs must be carefully tailored to be attractive to project proponents and simultaneously achieve quality of life goals of the community. Program design and development should evaluate the range of potential development outcomes, including the built form and magnitude of expected community benefits, to ensure that the exchange of development rights for community benefits is desirable. The Concept of Value Capture Cities and government agencies create value with investments in public facilities and services (e.g., transit, sewer upgrades) as well as through changes to the zoning code that increase the value of land. Typically, when the public sector creates value in these ways, landowners enjoy a financial gain in the form of higher land value, realized when they sell or develop their land. This increase in land value is an unearned financial benefit that accrues to the private sector, though it is generated (and commonly paid for) by tax-payer funded public entities. The term “value capture” reflects the situation in which the public sector reclaims some of the “unearned” value created for the private sector by public sector activities. The State of California’s Affordable Housing Density Bonus Law is an example of a value capture program. Under this law, developers are granted additional density allocations in return for the development of affordable housing units. If the public sector seeks to extract more value than is created, it is unlikely that project proponents will use the program. Since the value of development incentives varies with market conditions, development incentives may be very valuable in a strong market but of lesser or no value in a weak market. Therefore, CBIZ programs respond to market conditions or anticipate that the program will not be used during periods of market weakness. CBIZ requires a healthy real estate market with sufficient market value to support the incentives. For example, in order for a CBIZ program that seeks to capture value from an upzoning to be successful, there must be market demand to support the higher-density, higher-cost real estate products that are made available through the zoning change. Currently, Cupertino has strong residential and commercial real estate markets and is a viable candidate for CBIZ in this regard. 27 3 OAK #4824-1644-4195 v4 CBIZ Program Basics Literature on the topic of CBIZ programs establishes two primary types of programs, including “negotiation-based” and “plan-based” programs. Negotiated community benefits may occur in the context of a Development Agreement or not. Plan-based programs are “formulaic” (the term used here) and typically are implemented in a “ministerial” fashion, without discretion. Negotiation-Based CBIZ Program Under a negotiated approach, the development incentive and associated community benefits package are jointly agreed upon between the municipality and the project proponent. That is, the CBIZ does not define fixed relationships between incentives and required community benefits. Negotiated programs are relatively costly to administer, perceived by the community as opaque processes and may be viewed as risky by the development community. However, these programs offer the flexibility to increase or reduce community benefit requirements to reflect changing market conditions. The primary advantage of negotiation-based programs is that the potential for the community benefits requirement may be crafted to reflect the economics of the proposed project and the current real estate market, while the disadvantage is the negotiation process is commonly highly labor intensive and, therefore, may not be practical for smaller projects. Formulaic (Plan-Based) CBIZ Program Under a formulaic (plan-based) approach, specific development incentives are made available in return for the provision of commensurate pre-defined community benefits. The principal advantages of a formulaic approach are the reduction of project risk, for both the development community and the municipality, through program certainty and lower program costs. The key disadvantages are that the program cannot respond to unique project challenges or fast- changing market conditions. Case Studies EPS studied CBIZ programs in San Diego, Emeryville, Santa Monica, and Berkeley. The table below offers a high-level overview of these programs. The following section details the program in Santa Monica, which seeks to incorporate elements of the formulaic and negotiated approaches to CBIZ. 28 4 OAK #4824-1644-4195 v4 Overview of Case Study Programs City of Santa Monica As part of the City of Santa Monica’s most recent General Plan Update, a community outreach process explored the question “what makes a livable city?”. Responses led urban planners to land use standards that could maintain the City’s unique attributes, improve neighborhood livability, and provide affordable housing. Santa Monica’s Land Use and Circulation Element (LUCE) update, adopted in 2010, reflects a six-year community input process and provides for community benefits though a unique “tiered” approach. With the LUCE in place, the City has begun implementation steps, including the preparation of an updated Zoning Ordinance. The Santa Monica Community Benefits Program was adopted as part of the LUCE in 2010. The Plan establishes a three-tier system in which a base tier of development (Tier I) is allowed as of right and approval is “ministerial” (non-discretionary) while higher “bonus” levels of development require the provision of community benefits and approval is discretionary. Per the LUCE, in most of the commercial areas, the maximum base height for a project without community benefits is 32 feet (typically 2 stories). Development above this Tier I level requires community benefits. The LUCE calls for projects seeking development above the base level to be sorted into two tiers (Tier II and Tier III). Tier II projects must provide community benefits that will be considered through a discretionary permit or Development Agreement (DA) process. Tier III projects require additional community benefits to be negotiated in a DA. Santa Monica’s five priority categories of Community Benefits include: 1. Trip reduction and traffic management; 2. Affordable and workforce housing; CBIZ Design City of San Diego City of Emeryville City of Santa Monica City of Berkeley Basic Method Formulaic Formulaic Formulaic & Negotiated Negotiated Determination of Community Benefit Predetermined exchanges and charges Point system for project elements Formulaic program under development; Negotiated incentives by Development Agreement Negotiated by Zoning Adjustments Board Key Incentive Type FAR Bonus Height, FAR, and DU/Acre FAR Bonus Height 29 5 OAK #4824-1644-4195 v4 3. Community physical improvements (e.g., streets, open space, neighborhood retail); 4. Social/cultural facilities; and 5. Historic preservation. Santa Monica has not fully implemented the LUCE. Today, projects that seek to develop at levels above the base entitlement must pursue a DA with the City. City staff is seeking to fully implement the Community Benefits Program with the updated City Zoning Ordinance, which is currently under development. The revised Zoning Ordinance will detail the community benefit requirements that allow additional density for Tier II projects. While the Planning Commission had considered a points system for Tier II projects, Santa Monica anticipated that this approach would be challenging to implement and has not been adopted. The City also explored the potential to charge certain impact fees and require affordable housing from Tier II projects. These requirements likely would have taken advantage of nexus studies that justify maximum fee levels. As community benefits may constitute an exaction under California Law, the City seeks to demonstrate a proportional relationship between the community benefit payment and the impact of the project.1 Alternatively, Tier II projects could have had the option provide on- site amenities that satisfy Tier II requirements. Currently, Santa Monica relies heavily on the use of DA to negotiate optimal community benefits. While the DA process is highly flexible and allows for a diverse range of potential benefits, these agreements commonly are time consuming and thus expensive to implement. Despite this, the market potential for development in Santa Monica is exceptionally strong and as of 2012, 24 DAs had been approved or were pending since the adoption of the LUCE in 2010. While developer interest in pursuing projects above base zoning in exchange for community benefits is strong, the City is seeking to curtail the number of projects that come through a DA process due to the burden on City staff. Benefits and Constraints CBIZ programs allow additional development, whether in the form of height or floor area ratio, and do not regulate the pace or ability to develop. Therefore, while they may address the impacts of a proposed project and the provision of community benefits to address those impacts, CBIZ programs allow such development through the implementation of zoning ordinances. Basically, in exchange for addressing the areas of community concern noted, the City would be allowing increased height or other development above the base zoning. Formulaic CBIZ programs provide clear guidelines for applicants in terms of the additional development they can achieve. However, such programs provide very little discretion since the additional bonuses are structured in the zoning ordinance. Negotiated programs, on the other hand, can be very difficult to administer and they do not provide the certainty to developers that is inherent in a formulaic program. 1 See Planning Commission Report: Zoning Ordinance Update: Implementing Tier 2 Community Benefits, April 3, 2013. 30 6 OAK #4824-1644-4195 v4 Growth Management Programs Growth management is a tool that has been used by California cities for over 40 years. Growth management systems regulate the amount of development that can take place in any given period of time. For example, growth management systems may include a population or housing cap or a commercial square footage cap. Some programs operate as a “competition,” whereby developers seek to obtain development allocations through an application process conducted on a set basis, typically once or twice a year. Generally, applicants will be required to obtain growth allocations in order to proceed with development. The City of Morgan Hill has adopted such an approach, which is described in more detail below and is currently being implemented. A number of other California cities have adopted competitive growth allocation programs, which were later eliminated or suspended. The City of Brentwood implemented a competitive growth management program for residential projects, the RGMP, for a number of years during its greatest periods of growth. The RGMP was suspended in 2011 due to the recession. In 2005, the City of Ventura eliminated its development cap and competitive process as established by its Residential Growth Management Program. Further, some cities limit growth, but do not require a competition for allocation. For example, the City of Livermore has set a cap on residential units every three years, with numbers ranging from 140 to 700 units. The City of Petaluma, the first city in California to adopt a residential growth management system in the early 1970s, also has a maximum allotment of units, but no competitive process. While the City of Cupertino currently sets city-wide development allocations over its General Plan horizon, it does not currently have a competitive or metering process in place. Case Study - City of Morgan Hill The City of Morgan Hill’s Residential Development Control System (RDCS) issues allotments to developers who wish to build residential units in the City through a competition process. The City has used this system since 1977 prior to the implementation of the Regional Housing Needs Allocation (RHNA) process by Housing Element Law. The impetus of the RDCS was to address the impacts of intense growth at a time when the infrastructure was not prepared to absorb the growth. The population growth in the City impacted the ability of the City to provide sewage treatment, water and other necessary municipal services. The RDCS was initially adopted by ballot measure and has been modified over the years to meet the City’s needs and address exemptions. The competition is based on an evaluation system that utilizes a series of standards and criteria set forth in the Morgan Hill Municipal Code. Morgan Hill’s General Plan describes the RDCS in the following way, with allowances for small development projects:2 2 Morgan Hill’s General Plan, http://www.morganhill.ca.gov/DocumentCenter/Home/View/1148 31 7 OAK #4824-1644-4195 v4 This system shall provide for awards of development allotments based on the number of points scored for all development proposals biennial competition, or outside of a competition but based on requiring projects to achieve a minimum point score . . . . The point scale used shall take into account the impact of the proposed development on the following public facilities and services: water supply system, sanitary sewer and treatment plant, drainage and runoff, fire and police protection, traffic and other municipal services. Proposed developments shall be awarded points for provision of schools, and related facilities, open space, orderly and contiguous development, public facilities, parks and trails, low-income and moderate income housing and housing for the elderly, and diversity of housing types; and for quality of architectural design and site design. Small residential developments provide special benefits to the City by encouraging local developers, providing design variety, and promoting utilization of smaller lots. These developments do not impose as high a burden on municipal services as do larger projects, because their demands are incremental and they tend to be infill developments. Such small developments may be unable to compete with larger developments in terms of the levels of amenities provided. In order to treat small developments in a manner reflecting their benefits to the community, the Residential Development Control System shall be designed to provide for small development through appropriate means selected by the City Council, such as a separate small project competition and a more streamlined and less costly process. The process takes places on an annual or biannual basis and developers who wish to build housing units are required to compete for the ability to obtain a development allocation. The process begins by dividing projects into various categories for the competition, such as “small” projects, multi-family housing and open market. Each year, Morgan Hill determines the number of units available in each category and then evaluates projects according to a set of objective standards and criteria in 14 separate categories. Morgan Hill’s Municipal Code provides the specifics of the city’s point system and specific guidelines for how to earn points in various categories, such as schools, open space, public facilities, parks and livable communities. Generally, projects with the highest number of points receive a building allocation. Thereafter, the project applicant applies for the land use entitlements required to proceed with the proposed project. All projects that receive RDCS allotments must enter into a Development Agreement. Traditionally, Morgan Hill received more requests for allotments than the required allocations. However, more recently, most projects were able to receive allocations. In addition to the time required to process requests for allocations, Morgan Hill must also continue to monitor the projects to ensure compliance with the RDCS program. 32 8 OAK #4824-1644-4195 v4 While it appears that the RDCS has served Morgan Hill well, the administration has been time intensive and has required a significant amount of staff time. Morgan Hill is currently in the midst of its Morgan Hill 2035 project and is considering how to streamline and improve the system “to be more efficient, effective, and sustainable while maintaining its most important benefits: a population cap, pace of development; high quality development; and contribution toward community amenities.”3 Benefits and Constraints Growth allocation programs with a competitive process provide benefits to the public and ensure a good pace of development. However, they are administratively burdensome as they require a great deal of staff time to implement. Further, if proposed development is less than the annual allocation, there is no ability to review the various applications to consider the potential benefits of high quality development or community amenities. A complicated growth allocation system can also discourage developers that are not familiar with the system or City processes. Where growth allocation programs set a cap on the number of residential units, they must be consistent with a city’s Housing Element and may also draw more scrutiny if they are challenged in court. Lastly, once the criteria and standards in the program are established, it may be difficult to encourage flexibility and to respond to changing market conditions or City desires or trends. The fact that a number of cities have either eliminated or suspended previously adopted growth allocation programs and that Morgan Hill is looking at other approaches is indicative of the inherent difficulties in implementing such a program. Land Use Regulation Growth and development have traditionally been regulated through land use designations and zoning. Cities implement and control growth and development through their General Plans, Specific Plans and zoning and can address impacts of development through development impact fees and city regulations, such as enhanced design review regulations. Cities also enter into negotiated Development Agreements with developers, which allow for developers to obtain vested rights and for the City to negotiate desired community amenities to address the impacts of development. Although not located in the United States, the City of Vancouver, British Columbia, Canada, has adopted a community benefits program that combines the city’s ability to rezone development sites with community benefits. In Vancouver, developers are required to provide Community Amenity Contributions, or CACs, when the City Council grants development rights through rezoning. CACs are in-kind or cash contributions that are used to fund community centers, libraries, parks and other community spaces. Such a program, however, would not be workable under California law. In California, State Planning and Zoning Law allows the local legislative bodies the authority to establish their own procedures for the processing of amendments to its General Plan. General Law cities, such as Cupertino, are limited to four (4) General Plan Amendments each year; however, cities may dictate the method used to process/evaluate any amendments. 3 See City Council Staff Report, Morgan Hill 2035: RDCS Update, April 1, 2015. 33 9 OAK #4824-1644-4195 v4 In addition to reviewing projects for General Plan consistency and quality of life goals, cities can also implement additional nexus fees (such as community facilities fees, transportation impact fees, utility impact fees, etc.) and additional design review guidelines to address the impacts of development. Conclusion The following is a summary of pros and cons of the models based on the review of the various Community Benefit Incentive Zoning (CBIZ) and Growth Allocation models: 1. Requiring community benefits (or in-lieu payments for community benefits) as an absolute condition of development, may constitute an exaction under California law, and thus the City may need to demonstrate a proportional relationship between the community benefit payment and the impact of the project. 2. Formulaic zoning incentive programs (e.g., City of San Diego Downtown Community Plan) provide very little discretion since the development incentives and community benefits are predetermined and codified by zoning. 3. Discretionary zoning incentive programs (e.g., City of Berkeley Downtown Area Plan) require protracted negotiation and discussion before the City can determine that a project applicants offer of “substantial community benefits” warrants granting of a bonus in height or floor area ratio. Also, the lack of specific criteria can lead to lack of transparency, difficulty in administering the program and lack of consistency between projects. A discretionary CBIZ program also would require updates to the City’s zoning code. 4. Metering residential development annually (e.g., Morgan Hill, Brentwood, Livermore, etc.) would require changes to the Housing Element and is not advisable given the May 31, 2015 deadline for its adoption. The City would also need to ensure that any metering program would still allow its housing obligations to be met. Even if the process is implemented only for non-residential development, the program provides much less flexibility and is cumbersome to administer since it involves detailed criteria, scoring, a specific checklist of community benefits and deadlines for processing and building of development. 5. A metering approach can create a competitive process where projects can showcase community benefits in order to be considered for processing. Morgan Hill is a good example of this process. A newer example is the City of Mountain View, where proposals for a limited amount of development are being reviewed along with a community benefit approach in the North Bayshore area. 6. Growth allocation metering programs require an additional amount of planned growth in the General Plan (e.g. Brentwood and Morgan Hill.) However, these programs can work well in years in which there are projects competing for development since the quality of site plans and community benefits is high. In years where there are fewer projects competing for an allocation that is built-into the zoning or General Plan, quality of the development and/or community amenities may not be of the same quality as in competitive years. 34 10 OAK #4824-1644-4195 v4 7. A process that provides procedures for General Plan amendments can provide the most flexibility since development assumptions are not already built in and cities have more discretion about amending General Plans, except with respect to legal requirements for Housing Elements. In considering its options to address growth, manage development and respond to the community concerns, Cupertino should consider implementing a program that achieves the following: • Ability to achieve goals of General Plan • Ease of implementation • Desire for flexibility versus specific requirements (as in a General Plan or zoning) • Ensure a diverse and vital economic base • Ensure the City can meet its housing obligations • Ability to achieve orderly development of the City through a managed process. Ensure that additional development can achieve/improve facility/service and quality of life standards for the community 35 DEVELOPMENT MANAGEMENT OVERVIEW Prepared for the City of Cupertino By: Economic & Planning Systems and Burke, Williams & Sorensen, LLP June 24, 2015 36 Table of Contents INTRODUCTION ............................................................................................................. 1 COMMUNITY BENEFIT INCENTIVE ZONING............................................................................... 2 CITY OF SAN DIEGO CASE STUDY ....................................................................................... 4 CITY OF EMERYVILLE CASE STUDY ....................................................................................... 7 CITY OF BERKELEY CASE STUDY ........................................................................................ 10 CITY OF SANTA MONICA CASE STUDY ................................................................................. 11 CITY OF MOUNTAIN VIEW CASE STUDY ............................................................................... 12 GROWTH ALLOCATION PROGRAMS ..................................................................................... 16 CITY OF MORGAN HILL CASE STUDY .................................................................................. 16 CONCLUSIONS ............................................................................................................ 20 37 Development Management Overview June 24, 2015 1 Introduction Like many communities throughout the State, Cupertino is concerned about balancing the benefits of economic development with the effects of rapid growth. Impacts from growth can overwhelm a City’s infrastructure and affect quality of life in the community. The City Council directed staff to evaluate ways to balance these issues, including a potential implementation of a community benefits program for development projects. The purpose of this overview is to present various methods to address growth, quality of life, and to provide a summary of development management approaches, including assessment of their benefits and constraints. History of Process • General Plan On December 4, 2014, Cupertino’s City Council adopted an amended General Plan titled Community Vision 2040. The amended plan reflects community input, regulatory changes, best practices, and the desire to achieve community‐building, sustainability, economic, and fiscal objectives. However, the City Council continued the considerations related to development heights, development allocations, and the potential for a Community Benefits Program until 2015. In May 2015, the City council voted to maintain current development allocations but also authorized staff to continue to study and collect public input on approaches to processing General Plan Amendments. • Community Benefit Incentive Zoning In early 2015, the City engaged Economic & Planning Systems, Inc. (EPS) to provide information regarding the advantages and disadvantages of incentive zoning based on study of a variety of existing Community Benefit Incentive Zoning (CBIZ) programs in California and to assist with discussions regarding a potential program in Cupertino. • Growth Management The City, with support from Burke, Williams, & Sorensen, LLP (BWS), also considered various alternative options to address growth and quality of life, including growth allocation programs and regulations implemented through General Plan land use designations and zoning. Summary of Development Management The CBIZ and Growth Management programs studied reviewed for this study use a range of approaches to achieving community benefit contributions from new real estate development projects. In general, the programs generate community benefits using three principal approaches. 1. The program offers increased development potential (e.g., a density bonus) in return for a cash payment from the project developer; 2. The program offers increased development potential in return for project modifications and/or community improvements (e.g., affordable housing, parkland, green building features) provided by the developer; and 38 Development Management Overview June 24, 2015 2 3. The program establishes a competition through which project proponents commit to providing community benefits in hopes of being selected as one of a limited number of project proponents to be allowed to submit a development application and seek entitlement. Assessment of Community Concerns Residents and other stakeholders in Cupertino indicated throughout the General Plan and Development Management processes that the main areas of concern regarding development in the City are the following: • Impacts on schools, such as facilities, land, and funding; • Impacts on public facilities and utilities, such as libraries, community centers and utility systems; • Impacts on public open space, parks and trails; and • Impacts on transportation networks, including roadway congestion and transit capacity. Community Benefit Incentive Zoning California cities have a long history of obtaining community benefits from real estate development through a variety of mechanisms, including fees, conditions of approval, and development agreements. Community Benefit Incentive Zoning (CBIZ) programs offer an alternative approach. CBIZ programs are structured around an exchange in which municipalities offer optional increases in development potential in return for public assets (or funds) desired by the community. The development incentive must be above what normally would be allowed and the public benefit must be beyond what otherwise would be required. Because these programs are optional, development outcomes vary based on the degree of participation in the plan. That is, some developments may not take advantage of the incentive while others will. The optional nature of the program creates increased uncertainty regarding the final urban form that ultimately will be achieved. Additionally, the magnitude of the community benefit sought/expected must be equal to or less than the value of the incentive offered. In order to receive community benefits, the public sector creates value through the provision of an incentive (commonly increased development density). CBIZ programs are founded on the concept of “value capture.” CBIZ programs must be carefully tailored to be attractive to project proponents and simultaneously achieve quality of life goals of the community. Program design and development should evaluate the range of potential development outcomes, including the built form and magnitude of expected community benefits, to ensure that the exchange of development rights for community benefits is desirable. The Concept of Value Capture Cities and government agencies create real estate value with investments in public facilities and services (e.g., transit and utilities upgrades) as well as through changes to zoning code that increase the value of land. Typically, when the public sector creates value in these ways, landowners enjoy a financial gain in the form of higher land value, which is realized when they sell or develop their land. This increase in land value is an unearned financial benefit that accrues to the private sector, though it is generated (and commonly paid for) by tax-payer funded public entities. The term “value capture” reflects the situation in which the public sector reclaims some 39 Development Management Overview June 24, 2015 3 of this unearned value created for the private sector by public sector activities. The State of California’s Affordable Housing Density Bonus Law is an example of a value capture program. Under this State law, developers are granted additional density allocations in return for their development of affordable housing units, a policy goal for the State. If the public sector seeks/expects to collect more value than is created, in the form of community benefits, it is unlikely that project proponents will use the program. Since the value of development incentives varies with market conditions, development incentives may be very valuable in a strong market but of lesser or no value in a weak market. Therefore, CBIZ programs respond to market conditions or anticipate that the program will not be used during periods of market weakness. CBIZ requires a healthy real estate market with sufficient market value to support the incentives. For example, in order for a CBIZ program that seeks to capture value from an incentive (such as increased density or greater development potential) to be successful, there must be market demand to support the higher-density, higher-cost real estate products that are made available through the zoning change. Currently, Cupertino has strong residential and commercial real estate markets and is a viable candidate for CBIZ in this regard. CBIZ Program Basics Literature on the topic of CBIZ programs establishes two primary types of programs, including “negotiation-based” and “plan-based” programs. Negotiated community benefits may occur in the context of a Development Agreement or other negotiation process. Plan-based programs are “formulaic” (the term used here) and typically are implemented in a “ministerial” fashion, without discretion. Negotiation-Based CBIZ Program Under a negotiated approach, the development incentive and associated community benefits package are jointly agreed upon between the municipality and the project proponent. That is, the CBIZ program does not define fixed relationships between incentives and required community benefits. Negotiated programs are relatively costly to administer, may be perceived by the community as opaque processes, and may be viewed as risky by the development community. However, these programs offer the flexibility to increase or reduce community benefit requirements to reflect changing market conditions. The primary advantage of negotiation-based programs is that the potential for the community benefits requirement may be crafted to reflect the economics of the proposed project and the current real estate market, while the disadvantage is that the negotiation process can be labor intensive and may not be practical (particularly for smaller projects). Formulaic (Plan-Based) CBIZ Program Under a formulaic approach, specific development incentives are made available in return for the provision of commensurate pre-defined community benefits. The principal advantage of a formulaic approach is the reduction of project risk, for both the development community and the municipality and community, due to program certainty and lower program administration costs. The key disadvantage is that the program cannot respond to unique project challenges or fast- changing market conditions. 40 Development Management Overview June 24, 2015 4 City of San Diego Case Study In 2006, the City of San Diego adopted its Downtown Community Plan. The primary goals of the Plan are to increase development intensity in the downtown area and to provide new community amenities. To this end, the City developed a density bonus program in conjunction with the plan. CBIZ Plan Description The City of San Diego offers a formulaic, plan-based CBIZ with clearly defined incentives. The program allows additional density bonuses (greater FAR) and/or regulatory exemptions in exchange for specific voluntary community benefits or predetermined cash payments. The plan includes a menu of potential options that offer a variety of ways in which projects may achieve greater density through the provision of community benefits. The Plan defines the following bonus options: • Retail along active streets - exempts retail/commercial and public uses on the ground floor from FAR calculations on designated Main Streets and Commercial Streets; • Historical Resources – excludes the gross floor area of a historic structure from FAR calculations if the character of the structure is rehabilitated; • Affordable housing – offers a FAR bonus (applied to the residential component of a project) for projects meeting on-site affordable housing requirements (bonus varies with the type of affordable housing being built); • Parks and Public Infrastructure – offers a “FAR Payment Bonus Program” under which, depending on a site's location, developers can choose to purchase density allowances up to additional 5.0 FAR over base zoning; and • Specific Amenities and Improvements – offers increases in FAR in exchange for the provision of improvements or amenities (urban open spaces, green roofs, family units, right-of-way improvements, and employment uses). There also is a component of the program that consists of a Transfer of Development Rights Program for Parks and Historical Resources in which the Plan determines eligible “sending” sites and “receiving” sites for development rights. The Plan calls for a “TDR Bank” or other mechanisms to facilitate transfers. Figure 1 below illustrates the magnitude of combined incentives (bonus FAR) that may be pursued within San Diego’s Downtown Community Plan area. Figure 2 provides a summary of the incentive program, including both the benefit requirement and the associated incentive provided by the San Diego program. 41 Development Management Overview June 24, 2015 5 Figure 1 Map of Bonus FAR Provisions Source: San Diego Municipal Code 42 Development Management Overview June 24, 2015 6 Figure 2 Community Benefit Incentives Source: City of San Diego Plan Efficacy Under the San Diego plan (as of 2012), 13 out of 18 eligible projects had used at least one of the FAR bonus options. Five of the projects elected to use the affordable housing density bonus leading to 141 new affordable units in the downtown. Three projects built 3-bedroom units creating 87 new units total.1 The popularity of eco roofs prompted staff to increase benefits 1 Statistics from City of San Diego Public Benefit/ Development Amenity Maximum FAR Bonus (addition to base FAR)Notes Affordable Housing Formulaic In compliance with State Density Bonus Law Urban Open Space 10% of site 0.5 20% of site 1.0 Three-Bedroom Units 50% of residential GSF 0.5 80% of GSF residential 1.0 Eco Roofs 1.0 To receive max bonus roof must be accessible to residents Public Parking Formulaic 1 square foot of parking earns 1 square foot bonus development entitlement FAR Payment Bonus Program 5.0 Set in 2007 at $15/sf and updat ed annually based on CPI; funds parks, open space, and right of way acquisitions Green Building 2.0 Performance path (allows applicants to demonstrate level of sustainability) and prescriptive path (select from a menu of green building options) Must meet Downtown Design Guidelines and be open to the general public between the hours of 6 AM and 10 PM everyday 10% of units with a minimum of five three- bedroom dwelling units 43 Development Management Overview June 24, 2015 7 requirements in the 2012 program amendments (i.e., the bonus FAR of 1.0 for an eco-roof, has been amended to 0.5 to 1.0 FAR depending on whether the eco-roof is accessible to residents). A recent update to the Plan has increased the maximum FAR available through the bonus payment program. City of Emeryville Case Study The City of Emeryville’s City Council adopted an updated General Plan in October 2009. The new Plan introduces a CBIZ program which offers height and density increases in return for community amenities. CBIZ Plan Description The City of Emeryville’s formulaic “Bonus for Community Amenities” program allows developers to participate in a voluntary points-based bonus system in which bonus development capacity is exchanged for community benefits. Intensity, height, and density bonuses are permitted after developers provide certain community amenities, including family-friendly housing, green architecture, and public open space. The Emeryville General Plan notes that the bonuses are “discretionary and contingent on excellence in design.” The program gives points for specific elements that are public benefits. Public benefits sought by the program include public open space, sustainable design, alternative energy, water efficiency, energy efficiency, public improvements, utility undergrounding, transportation demand management, family-friendly housing, neighborhood centers, support for small businesses, public art, public parking, bike stations, significant structures, EV charging stations, concealed mechanical equipment, universal design features, and other “flexible” public benefits. The points system for the community benefit elements is based on cost, desirability, quantity, and importance to the community. Points are redeemed for additional FAR, building height, and density. The bonus FAR increment is capped by zoning district. The FAR bonus is calculated by multiplying (1) the total number of points divided by the maximum number of points by (2) the maximum allowed FAR bonus increment, as follows: (Number of Points/Maximum Points) x Bonus FAR Increment = Bonus FAR Amount To qualify for a bonus, the public benefits provided must be significant and clearly beyond what otherwise would be required by City code provisions, conditions of approval, and/or environmental review mitigation measures. Development bonuses are in addition to any density bonuses for affordable housing. Figure 3 summarizes the points that may be awarded to a project for specific community benefits defined by the Emeryville program. 44 Development Management Overview June 24, 2015 8 Figure 3 Summary of Emeryville Development Bonus Point System Source: Emeryville Zoning Ordinance Plan Efficacy The relatively new CBIZ program in Emeryville has been used successfully by one project, and another project is currently under review by City staff. During 2013, the City’s Planning Commission approved a mixed-use project that exceeded base zoning allowances. This project sought residential density that exceeded the base by 11 dwelling units per acre, a commercial FAR that exceeded the base by 0.24, and height that exceeded the base by 20 feet. Given the zoning and bonus program parameters, the project needed to achieve a community benefits score of 100 (the height sought was 100 percent of that allowed with community benefits). The project application successfully included commercial space that met the “Neighborhood Centers” criteria (35 points), provided sufficient “Energy Efficiency” upgrades (35 points), and featured reuse of a “Significant Structure” (35 points), earning the project a total of 105 points. The proposed community benefits were included as conditions of approval. Public Benefit/ Development Amenity Maximum Bonus Points Public Open Space 50 Sustainable Design 35 Alternative Energy 50 Water Efficency 35 Energy Efficiency 35 Public Improvements 50 Utility Undergrounding 50 Transportation Demand Manageme 35 Family Friendly Housing 50 Neighborhood Centers 35 Small Businesses 35 Public Art 20 Public Parking 35 Bike Station 35 Significant Structures 35 Electric Vehicle Charging Stations 35 Mechanical Equipment 20 Universal Design 50 Flexible Public Benefit N/A 45 Development Management Overview June 24, 2015 9 City of Berkeley Case Study The City of Berkeley initiated its Downtown Area Plan effort in 2005. In early 2012, after six years of effort and nearly two hundred public meetings, the City Council adopted the current Downtown Area Plan (DAP). The DAP includes the provision that all new buildings must provide significant public benefits and that buildings over 75 feet must provide additional, significant community benefits. CBIZ Plan Description The DAP, through a negotiation-based CBIZ program, allows seven buildings to be built in the downtown area that exceed 75 feet, and these projects must provide significant community benefits beyond those that would otherwise be required. Three buildings up to 180 feet in height may be located in the “Core Area” and an additional four buildings up to 120 feet may be located in the “Core” and “Outer Core.” Figure 4 presents the land use map for Downtown Berkeley. The community benefits package required for projects over 75 feet might include affordable housing, supportive social services, green building features, open space, transportation demand features, job training, and/or employment opportunities. The applicable public benefit requirements are to be included as conditions of approval and the owner shall enter into a written agreement that is binding on all successors in interest. The DAP also calls for establishment of a voluntary “Green Pathway” development review process that would provide a streamlined permit process for buildings that provide extraordinary public benefits. Plan Efficacy To date, not one building over 75 feet in height has completed the Berkeley CBIZ program application process. The Residences at Berkeley Plaza (2211 Harold Way) is the first project over 75 feet to request approval under the DAP (it is potentially one of the three buildings that may be built to 180 feet in height). The project applicant submitted Documentation of Project Significant Community Benefits for the City of Berkeley on October 20, 2014, offering community benefits including a Project Labor Agreement, retention of an existing cinema, transportation demand management features, and privately-owned public open space. The City’s Zoning Adjustments Board (ZAB) has met twice to hear public comments and to discuss the proposal. The ZAB’s initial comments suggest that the proposed community benefits package is unsatisfactory and that additional meetings and negotiations will be necessary for the applicant to secure approval. Given concerns voiced by the ZAB, Berkeley’s City Council is currently reviewing the proposed community benefit package offered by the project. 46 Development Management Overview June 24, 2015 10 Figure 4 DAP Land Use Map Source: Berkeley Downtown Area Plan City of Santa Monica Case Study As part of the City of Santa Monica’s most recent General Plan Update, a community outreach process explored the question “what makes a livable city?” Responses led urban planners to land use standards that could maintain the City’s unique attributes, improve neighborhood livability, and provide affordable housing. Santa Monica’s Land Use and Circulation Element (LUCE) update, adopted in 2010, reflects a six-year community input process and provides for community benefits though a unique “tiered” approach, which is a blend of formulaic and negotiation-based approaches (i.e., modest incentives are likely to be offered in exchange for the payment of higher existing nexus-based fees and affordable housing while significant incentives require negotiation) . With the LUCE in place, the City has begun implementation steps, including adoption of an updated Zoning Ordinance. CBIZ Plan Description The Santa Monica Community Benefits Program was adopted as part of the LUCE in 2010. The Plan establishes a three-tier system in which a base tier of development (Tier I) is allowed as of right and approval is “ministerial” (non-discretionary) while higher “bonus” levels of development require the provision of community benefits and approval is discretionary. 47 Development Management Overview June 24, 2015 11 In most of the commercial areas, the maximum base height for a project without community benefits is 32 feet (typically 2 stories). Development above this Tier I level requires community benefits. The LUCE calls for projects seeking development above the base level to be sorted into two tiers (Tier II and Tier III). Tier II projects must provide community benefits that will be considered through a discretionary permit or Development Agreement (DA) process. Tier III projects require additional community benefits to be negotiated in a DA. Santa Monica’s five priority categories of Community Benefits are: 1. Trip reduction and traffic management; 2. Affordable and workforce housing; 3. Community physical improvements (e.g., streets, open space, neighborhood retail); 4. Social/cultural facilities; and 5. Historic preservation. Santa Monica’s approach to administering the community benefits program has evolved from that originally envisioned by the LUCE. In recent years, projects that sought to develop at levels above the base entitlement needed to pursue a DA with the City. Through revisions to the LUCE, the City now is seeking to require Tier II projects to pay higher existing nexus-based fees and provide affordable housing. These additional fees likely will take advantage of nexus studies that justify the maximum fee levels. As community benefits may constitute an exaction under California Law, the City seeks to demonstrate a proportional relationship between the community benefit payment and the impact of the project.2 While the Planning Commission had considered a points system for Tier II projects, Santa Monica anticipated that this approach would be too challenging to implement. Plan Efficacy In recent years, Santa Monica has relied heavily on the use of DAs to negotiate optimal community benefits. While the DA process is highly flexible and allows for a diverse range of potential benefits, these agreements commonly are time consuming and expensive to implement. Despite this, the market potential for development in Santa Monica is exceptionally strong and as of 2012, 24 DAs had been approved or were pending since the adoption of the LUCE in 2010. While developer interest in pursuing projects above base zoning in exchange for community benefits is strong, the City is seeking to curtail the number of projects that come through a DA process due to the time and cost burden for the City. City of Mountain View Case Study Mountain View’s City Council adopted the North Bayshore Precise Plan in December 2014. This plan established a CBIZ program in each of the Plan Area’s four “Character Areas.” The Plan also capped total non-residential net new development in the Plan Area at 3.3 million square feet. 2 See Planning Commission Report: Zoning Ordinance Update: Implementing Tier 2 Community Benefits, April 3, 2013. 48 Development Management Overview June 24, 2015 12 Due to the constraint on development potential created by the development cap, the CBIZ program ultimately evolved into a commercial development allocation process. CBIZ Plan Description The City of Mountain View General Plan recognizes incentive zoning as a strategy to procure desired community benefits. In accordance with this strategy, the North Bayshore Precise Plan offers a formulaic CBIZ program with bonus FAR available in exchange for specific categories of community benefits, including transportation improvements, green buildings, and public benefit or district-improvement projects. Each Character Area is governed by a tiered bonus FAR program in which a base FAR is allowed for all development, while higher tiers of bonus FAR may be earned through the provision of approved community benefits (up to a maximum FAR). Figure 5 presents the details of the tiered CBIZ system in place in North Bayshore. Based on the North Bayshore area’s transportation capacity and other planning considerations, the Precise Plan also established a cap on net new non- residential development (office, R&D office, industrial, service, and retail uses) in the plan area. With a strong economy creating intense localized demand for workspace, technology firms including Google and LinkedIn sought to expand in the highly desirable North Bayshore area. The Plan’s development cap constrained supply which resulted in a shortage of office space development potential within North Bayshore. As the Precise Plan process evolved, planning staff recognized that demand for office space would outstrip maximum allowable supply. In response, staff established “Precise Plan Bonus FAR Review Guidelines,” which require applicants seeking bonus FAR to submit community benefit proposals for consideration in the commercial FAR allocation process (see text box at right). The guidelines established criteria for community benefit proposals and set a due date for submittals. With this approach, North Bayshore Bonus FAR Review Guidelines Qualifying Criteria • Consistency with Precise Plan vision and guiding priciples • Effect on trip cap and roadway performance • Habitat enhancements • Small business preservation • Non-auto transportation improvements • Enhanced community benefits • District-wide improvements • Project phasing • Impact on staff resources • Quality of application materials 49 Development Management Overview June 24, 2015 13 Figure 5 North Bayshore Precise Plan Bonus FAR Program Source: City of Mountain View North Bayshore Precise Plan FAR Gateway Character Area1 Core Character Area2 General Character Area Edge Character Area Base FAR 1.0 0.45 0.45 0.45 Maximum FAR 2.35 1.5 1.0 0.65 Tier 1 Bonus FARUp to 0.50 Up to 0.30 Up to 0.30 Up to 0.20 Benefits Public benefit or district-improvement project, focusing on transportation LEED Platinum or alternative green building standard; public benefit or district improvement project focusing on transportation LEED Platinum or alternative green building standard; public benefit or district improvement project focusing on transportation LEED Platinum or alternative green building standard; public benefit or district improvement project focusing on transportation Tier 2 Bonus FAR Up to 0.50 Up to 0.25 Up to 0.25 Benefits Higher-performing green building; zero net green building; public benefit or district improvement Higher-performing green building; zero net green building; public benefit or district improvement Higher-performing green building; zero net green building; public benefit or district improvement Tier 3 Bonus FAR Up to 0.35 Up to 0.25 Benefits Higher-performing green building; zero net green building; public benefit or district improvement Higher-performing green building; zero net green building; transfer of development; public benefit or district improvement Tier 4 Bonus FAR Up to 0.25 Benefits Transfer of Development (1) Applicants can only request one green building Bonus FAR above 1.5 FAR (2) Applicants can only request one green building Bonus FAR above 0.75 FAR 50 Development Management Overview June 24, 2015 14 the City created a competition for the limited amount of office development allocation in North Bayshore. In response, applicants sought to propose desirable projects with significant community benefits that would score well against the evaluation criteria. When the submittals were in, the total square footage proposed far exceeded the cap on non- residential development. As a first step in the Bonus FAR Review process, City staff preliminarily evaluated each proposal based on the Precise Plan guidelines. Applicants providing sufficient community benefits were approved to be included in the commercial allocation process conducted by the City Council. Through the allocation process, the Council approved 1.4 million square feet of LinkedIn’s requested 1.6 million square feet, 515,000 square feet of Google’s 2.5 million requested square feet (enough for one piece of its envisioned four-part campus), and the full development requests from Broadreach Capital Partners and Rees Properties for smaller projects. The City Council made the allocation decisions based on the criteria in the Bonus FAR Review Guidelines. A particular community benefit noted by council, but not explicit in the criteria, was the economic diversity that would be supported by the LinkedIn proposal (as compared with a Google expansion, since that firm already is the top employer in the City). The Council’s allocation decisions allow selected projects to move forward with formal development plans for review and approval (i.e., allocations are not guarantees of project entitlement). Plan Efficacy Mountain View’s North Bayshore commercial allocation process resulted in a tremendous response from private sector project proponents. Due to the competitive nature of the process, applicants devised creative community benefit plans and offered extensive benefits, above what likely would have offered outside of a competitive process. From an economic perspective, it is notable that the competitive process allowed project proponents to make their own proposals based on their willingness to pay (i.e., the market determined the value of community benefits achievable). While the North Bayshore community benefits strategy was highly beneficial for the City of Mountain View, the success is attributable to a “perfect storm” of unique local market conditions and a hot economy. In addition, the process was not without a cost. A City staff representative indicates that the process was very burdensome because the pooling of applications created a high volume of proposal review activity over a very brief time period. However, the staff member also indicated that the process was “exciting” and the City is very pleased with the outcome. While the City will continue to use the tiered Bonus FAR policy structure in future plan, it is uncertain whether the success of the North Bayshore Bonus FAR Program in replicable. 51 Development Management Overview June 24, 2015 15 Growth Allocation Programs Growth management is a tool that has been used by California cities for over 40 years. Some growth management ordinances are related directly to a lack of inadequate infrastructure, such as limited sewer capacity, water constraints or school overcrowding, while others are adopted to maintain quality of life, stemming from factors such as open space and low population density. While growth management may be broadly used to refer to any tool a local government may employ to manage growth, such as urban limit lines, general plan designations or zoning, this section focuses on growth allocation systems that regulate the amount of development that can take place in any given period of time, such as programs that adopt a housing cap or a commercial square footage cap. A number of cities in California have adopted growth allocation programs that include housing or commercial caps. The City of Petaluma, the first city in California to adopt a residential growth management system in the early 1970s, has a maximum annual allotment of units. In addition, the City of Livermore has set a cap on residential units every three years, with numbers ranging from 140 to 700 units. In these cities, development applications are reviewed on a first-come, first-served basis. Other cities have implemented growth allocation programs that operate as a “competition,” whereby developers seek to obtain development allocations through an application process conducted on a fixed schedule, typically once a year. Generally, applicants will be required to obtain growth allocations in order to proceed with development. The City of Morgan Hill adopted such an approach in 1977 through a citizens’ initiative. The program is still being implemented and is described in more detail below. A few California cities have adopted competitive growth allocation programs, which were later eliminated or suspended. For example, the City of Brentwood implemented a competitive growth management program for residential projects (the RGMP) for a number of years during its greatest periods of growth. The RGMP was suspended in 2011 due to the recession. Similarly, in 2005, the City of Ventura eliminated its development cap and competitive process. Cities that adopt programs with housing caps now have to comply with state regulations adopted in 1980, which require an ordinance that limits the number of residential building permits allowed to show that “such ordinance is necessary for the protection of the public health, safety, or welfare of the populations of such city . . . .” (Evidence Code section 669.5.) In addition, state law requires cities to adopt Housing Elements to provide for growth consistent with its Regional Housing Needs Allocation (RHNA) requirements. Therefore, cities have greater constraints than when growth allocation programs were originally adopted. While the City of Cupertino currently sets city-wide development allocations over its General Plan horizon, it does not currently have a competitive or metering process in place. To assist Cupertino with evaluation of potential growth management approaches, the section below reviews the City of Morgan Hill’s current growth management program. City of Morgan Hill Case Study The City of Morgan Hill’s Residential Development Control System (RDCS) relies on a competitive process to issue allotments to developers who wish to build residential units in the City. The City has used this system since 1977, prior to the implementation of the RHNA process by Housing 52 Development Management Overview June 24, 2015 16 Element Law or the requirement for public health and safety findings when limiting residential permits. The impetus of the RDCS was to address the impacts of intense growth at a time when the infrastructure was not prepared to absorb the growth. During this period, population growth in the City was impacting the ability of the City to provide sewage treatment, water and other necessary municipal services. The RDCS was initially adopted by ballot measure and has been modified through ballot measures over the years to meet the City’s needs and address exemptions. The City has also adopted implementing ordinances and policies. The competition is based on an evaluation system that utilizes a series of standards and criteria set forth in the Morgan Hill Municipal Code. Morgan Hill’s General Plan describes the RDCS in the following way, with allowances for small development projects:3 “This system shall provide for awards of development allotments based on the number of points scored for all development proposals biennial competition, or outside of a competition but based on requiring projects to achieve a minimum point score . . . . The point scale used shall take into account the impact of the proposed development on the following public facilities and services: water supply system, sanitary sewer and treatment plant, drainage and runoff, fire and police protection, traffic and other municipal services. Proposed developments shall be awarded points for provision of schools, and related facilities, open space, orderly and contiguous development, public facilities, parks and trails, low-income and moderate income housing and housing for the elderly, and diversity of housing types; and for quality of architectural design and site design. Small residential developments provide special benefits to the City by encouraging local developers, providing design variety, and promoting utilization of smaller lots. These developments do not impose as high a burden on municipal services as do larger projects, because their demands are incremental and they tend to be infill developments. Such small developments may be unable to compete with larger developments in terms of the levels of amenities provided. In order to treat small developments in a manner reflecting their benefits to the community, the Residential Development Control System shall be designed to provide for small development through appropriate means selected by the City Council, such as a separate small project competition and a more streamlined and less costly process.” The process takes places on an annual or biennial basis and developers who wish to build housing units are required to compete for the ability to obtain a development allocation. The process begins by dividing projects into categories for purposes of the competition, including “small” projects (7 to 15 units), multi-family housing, senior housing, and open market (more than 15 units). Each year, the City Council of Morgan Hill determines the total number of allotments available for the next available competition, based upon a formula that calculates the number of units 3 Morgan Hill’s General Plan, http://www.morganhill.ca.gov/DocumentCenter/Home/View/1148 53 Development Management Overview June 24, 2015 17 available in the population cap divided by the number of years left in the RDCS.4 The total number of allotments is then divided into the competition categories. City staff then evaluates projects according to a set of objective standards and criteria in 14 separate categories: (1) schools; (2) open space; (3) orderly and contiguous; (4) public facilities; (5) parks and paths; (6) housing needs; (7) housing types; (8) quality of construction; (9) lot layout and orientation; (10) circulation efficiency; (11) safety and security; (12) landscaping; (13) natural and environmental; and (14) livable communities. Morgan Hill’s Municipal Code provides the specifics of the City’s point system, which grants the highest number of points for the categories of schools, open space and housing types. Morgan Hill’s Municipal Code has been amended to implement the RDCS originally adopted by ballot measure. It sets forth specific and detailed guidelines for how points are earned in each category. For example Section 18.78.210 sets forth the following standards and criteria for obtaining points with respect to schools: “18.78.210 - Schools. A. The provision of school facilities and amenities as attested by agreement with the Morgan Hill Unified School District (MHUSD) to the extent such consideration is not in conflict with state law. (twenty-five points) B. Standard and Criteria: 1. Sixteen points will be awarded for the payment of the district-adopted developer fees as provided by the Leroy F. Greene School Facilities Act of 1998. Full market value credit will be applied to a direct payment to the School District, for donated land, construction, or other services provided by a developer or project property owner that relate to provision of school facilities. 2. Up to six additional points may be awarded to a project where: At the time of application submittal or applicant commits as part of the first year of the first phase of the current application, a safe walking route exists or will be provided between the project site and existing or planned MHUSD schools, or charter school licensed by the MHUSD, the Santa Clara County Board of Education or the State Department of Education. A safe route is defined as continuous sidewalks and/or paved pedestrian pathways cross walks and traffic signals at designated street intersections between the project and a school site. . . . . 3. Up to six additional points may be awarded to a project which: a. Provides off-site pedestrian safety improvements or traffic safety improvements, including adjacent related roadway improvements near a MHUSD school. Any proposed pedestrian and traffic safety improvements cannot be redundant of improvements committed to in other categories. The cost of the 4 Growth Management, Morgan Hill 2035, Existing Conditions White Papers, City of Morgan Hill, May 16, 2013. 54 Development Management Overview June 24, 2015 18 improvements must be valued at eight hundred twenty-five dollars per point per unit. The pedestrian improvements and traffic safety improvements must be made to an elementary school within three-quarters of a mile (straight line distance) of the edge of project site or the same improvements can be made to a middle or high school within the City's Urban Service Area (USA). (up to two points for safety improvements in proximity to a school and up to four points for safety improvements on roadways serving schools within the City's USA) . . . .” With respect to schools, applicants will receive more points if they agree to provide safe routes to school or other pedestrian or traffic safety improvements. Because all projects are required to pay development impact fees, the payment of these fees does not differentiate the applicant pool. Other categories are treated similarly. Applicants receive more points if they provide a greater number of desired improvements. The Planning Commission then considers all projects that have submitted applications, typically in one meeting, and projects with the highest number of points receive building allocations. Thereafter, the project applicant is allowed to apply for the land use entitlements required to proceed with the proposed project. All projects that receive RDCS allotments must enter into a Development Agreement. There also is an appeals process to the City Council for those entities who disagree with the Planning Commission’s determination. Historically, Morgan Hill has received more requests for allotments than the City has available. However, more recently, most projects have been able to receive allocations. In addition to the time required to process requests for allocations, Morgan Hill also must continue to monitor the projects to ensure compliance with the RDCS program. While it appears that the RDCS has served Morgan Hill well, the administration has been time intensive and has required a significant amount of staff time. Morgan Hill currently is in the midst of its Morgan Hill 2035 project and is considering how to streamline and improve the system “to be more efficient, effective, and sustainable while maintaining its most important benefits: a population cap, pace of development; high quality development; and contribution toward community amenities.”5 Benefits and Constraints Growth allocation programs with a competitive process provide benefits to the public and ensure a good pace of development. However, they are administratively burdensome as they require a great deal of staff time to implement. Further, if proposed development is less than the annual allocation, there will be less competition for required allocations and fewer points will be required for a project to move forward. A complicated growth allocation system also may discourage developers that are not familiar with the system or City processes from filing applications. Where growth allocation programs set a cap on the number of residential units, they must be consistent with a city’s Housing Element and also may draw more scrutiny if they are challenged in court. 5 See City Council Staff Report, Morgan Hill 2035: RDCS Update, April 1, 2015. 55 Development Management Overview June 24, 2015 19 Lastly, once the criteria and standards in the program are established, it may be difficult to encourage flexibility and to respond to changing market conditions or City desires or trends. The fact that a number of cities have either eliminated or suspended previously adopted growth allocation programs and that Morgan Hill is looking at other approaches is indicative of the inherent difficulties in implementing such a program. Land Use Regulation Growth and development have traditionally been regulated through land use designations and zoning. Cities implement and control growth and development through their General Plans, Specific Plans and zoning, and can address impacts of development through development impact fees and city regulations, such as enhanced design review regulations.6 Cities also enter into negotiated Development Agreements with developers, which allow for developers to obtain vested rights and for the City to negotiate desired community amenities to address the impacts of development. In California, State Planning and Zoning Law allows the legislative bodies of cities and counties to establish their own procedures for the processing of amendments to their General Plans. While General Law cities, such as Cupertino, are limited to four (4) General Plan Amendments each year, cities may dictate the method used to process/evaluate any such amendments. In addition to reviewing projects for General Plan consistency and quality of life goals, cities can also implement additional nexus fees (such as community facilities fees, transportation impact fees, utility impact fees, etc.) and additional design review guidelines to address the impacts of development. Conclusions The following is a summary of conclusions based on the review of the various Community Benefit Incentive Zoning (CBIZ) models, Growth Allocation models, and the consideration of land use regulation as a community benefit model: 1. Formulaic zoning incentive programs (e.g., City of San Diego Downtown Community Plan) provide less discretion since the development incentives and community benefits are predetermined and codified by zoning. 2. Discretionary zoning incentive programs (e.g., City of Berkeley Downtown Area Plan) require protracted negotiation and discussion before the City can determine that a project applicant’s offer of “substantial community benefits” warrants granting of a bonus in height or floor area ratio. Also, the lack of specific criteria can lead to lack of transparency, difficulty in administering the program and lack of consistency between projects. A discretionary CBIZ program also would require updates to the City zoning code. 6 Although not located in the United States, the City of Vancouver, British Columbia, Canada, has adopted a community benefits program that combines the city’s ability to rezone development sites with community benefits. In Vancouver, developers are required to provide Community Amenity Contributions (CACs) when the City Council grants development rights through rezoning. CACs are in- kind or cash contributions that are used to fund community centers, libraries, parks and other community spaces. Such a program, however, would not be workable under California law. 56 Development Management Overview June 24, 2015 20 3. Metering residential development annually (e.g., Morgan Hill, Brentwood, Livermore) would require changes to the recently adopted Housing Element and additional HCD review. The City also would need to ensure that any metering program would still allow its housing obligations to be met. Even if the process is implemented only for non-residential development, the program provides less flexibility and is more cumbersome to administer. Such a program would require a process that involves detailed criteria, scoring, and a specific checklist of community benefits, as well as deadlines for processing and project construction. 4. A development cap or metering approach establishes a supply constraint, which may support a competitive process. When market demand exceeds supply, projects would be required to showcase community benefits in order to be considered for processing. The Mountain View and Morgan Hill case studies offer good examples of this type of process. In both cities, competition for project entitlements has generated substantial public benefits from new development, but the programs are time and labor intensive for City Staff to implement and the success of the competition is highly dependent on market conditions. In addition, these processes introduce additional investment risk for development investors active in the community due to increased uncertainty about project approval. 5. Growth allocation programs implement growth planned in the General Plan, and can achieve community benefits. However, while these programs work well in years in which there are projects competing for development, in years during which there are fewer projects the community benefits offered in order to compete for allocations are not as significant. 6. Though no specific examples have been identified, a process that includes procedures for projects that require General Plan Amendments can provide the most flexibility, because development assumptions are not already built in and cities have discretion to amend their General Plans, except with respect to legal requirements for Housing Elements. This approach would provide the ability for the City to review a development proposal and determine if it meets the goals and quality of life standards of the City, such as through the provision of community amenities. If multiple proposals for general plan amendments are submitted, based on the case studies examined here, it seems likely to increase the community amenities offered by project proponents, particularly when economic conditions are strong. In considering its options to address growth, manage development, and respond to the community concerns, Cupertino should consider implementing a program that achieves the following: • Ability to achieve goals of General Plan • Ease of implementation • Desire for flexibility as opposed to specific requirements (as in a General Plan or zoning) • Ensure a diverse and vital economic base • Ensure the City can meet its housing obligations • Ability to achieve orderly development of the City through a managed process • Ensure that additional development can achieve/improve facility, service and quality of life standards for the community 57 General Plan Amendment (GPA) Process Comparison Application Process * CURRENT PROCESS PROPOSED PROCESS City Council Hearing Final Decision on Project Planning Commission Hearing Public Input City Council Meeting X XX X Application A authorized for Processing * Length of application review process depends on size and complexity of the project Preliminary Submittal Application A City-wide Postcard and Notification Application Authorization and Review Application B Not Authorized for Processing (applicant may reapply next year) Application C authorized for Processing Project and Environmental Review including neighborhood and legal notifications, and public input. Formal Submittal Project Application A Formal Submittal Project Application B Formal Submittal Project Application C Preliminary Submittal Application B Preliminary Submittal Application C Application Process * City Council Hearing Final Decision on Project Planning Commission Hearing Project and Environmental Review including neighborhood and legal notifications, and public input. Application Process * City Council Hearing Final Decision on Project Planning Commission Hearing Project and Environmental Review including neighborhood and legal notifications, and public input. Application Process * City Council Hearing Final Decision on Project Planning Commission Hearing Project and Environmental Review including neighborhood and legal notifications, and public input. Formal Submittal Project Application A Formal Submittal Project Application C Application Process * City Council Hearing Final Decision on Project Planning Commission Hearing Project and Environmental Review including neighborhood and legal notifications, and public input. Process for General Plan Amendment Applications General Plan Amendment Process Comparison Application Process CURRENT PROCESS PROPOSED PROCESS Application B Neighborhood Notifications Legal Notifications City Council Hearing Final Decision on Project Planning Commission Hearing Application Process Project review Environmental review City Council Hearing Final Decision on Project Planning Commission Hearing Application C Application Process Environmental review Application B Application C Public Input City Council Meeting X XX X Application Process Application Process Application A authorized for Processing Application A Project review Environmental review Public Inpute for CEQA Neighborhood Meetings Legal Notifications Public Inpute for CEQA Neighborhood Notifications Neighborhood Meetings Application A City-wide Postcard and Notification Application Authorization and Review Legal Notifications Neighborhood Meetings Planning Commission Hearing Neighborhood Notifications Project review Public Inpute for CEQA Application B Not Authorized for Processing (applicant may reapply next year) Application C authorized for Processing Neighborhood Notifications Legal Notifications Public Inpute for CEQA Neighborhood Meetings City Council Hearing Final Decision on Project Planning Commission Hearing Legal Notifications Neighborhood Meetings City Council Hearing Final Decision on Project Planning Commission Hearing Neighborhood Notifications Public Inpute for CEQA Project review Environmental review Project review Environmental review City Council Hearing Final Decision on Project Authorization to Proceed Process General Plan Amendment Process Comparison Application Process CURRENT PROCESS PROPOSED PROCESS Application B Neighborhood Notifications Legal Notifications City Council Hearing Final Decision on Project Planning Commission Hearing Application Process Project review Environmental review City Council Hearing Final Decision on Project Planning Commission Hearing Application C Application Process Environmental review Application B Application C Public Input City Council Meeting X XX X Application Process Application Process Application A authorized for Processing Application A Project review Environmental review Public Inpute for CEQA Neighborhood Meetings Legal Notifications Public Inpute for CEQA Neighborhood Notifications Neighborhood Meetings Application A City-wide Postcard and Notification Application Authorization and Review Legal Notifications Neighborhood Meetings Planning Commission Hearing Neighborhood Notifications Project review Public Inpute for CEQA Application B Not Authorized for Processing (applicant may reapply next year) Application C authorized for Processing Neighborhood Notifications Legal Notifications Public Inpute for CEQA Neighborhood Meetings City Council Hearing Final Decision on Project Planning Commission Hearing Legal Notifications Neighborhood Meetings City Council Hearing Final Decision on Project Planning Commission Hearing Neighborhood Notifications Public Inpute for CEQA Project review Environmental review Project review Environmental review City Council Hearing Final Decision on Project Authorization to Proceed Process 58