HomeMy WebLinkAboutStaff Report 4.A 07/02/2018DATE: July 2, 2018
TO: Honorable Mayor and Members of the City Council through City Manager
FROM: Sue Caste cci, Housing Administrator
SUBJECT: Adoption of a Resolution Increasing Inclusionary Housing In Lieu Fees Payable
As Required by Program 4.3 in the City of Petaluma's General Plan 2025, 2015-
2023 Housing Element As Adopted by Resolution No. 2014-190 N.C.S. and
Replacing the Housing In Lieu Fees Set by Resolution No. 2003-241 N.C.S.; and
Adoption of a Resolution Increasing the Commercial Development Housing
Linkage Fees Pursuant to Petaluma Municipal Code section 19.36.040(C) and
Replacing the Commercial Linkage Fees Set by Resolution No. 2011-071 N.C.S.
RECOMMENDATION
It is recommended that the City Council:
1) Adopt a Resolution Increasing Inclusionary Housing In -Lieu Fees Payable As Required
by Program 4.3 in the City of Petaluma's General Plan 2025, 2015-2023 Housing
Element As Adopted by Resolution No. 2014-190 N.C.S. and Replacing the Housing In
Lieu Fees Set by Resolution No. 2003-241 N.C.S.; and
2) Adopt a Resolution Increasing the Commercial Development Housing Linkage Fees
Pursuant to Petaluma Municipal Code section 19.36.040(C) and Replacing the
Commercial Linkage Fees Set by Resolution No. 2011-071 N.C.S.
BACKGROUND
The affordability of housing in Petaluma has long been of interest to Petaluma City Councils.
City programs have done much to provide housing for every income level, with emphasis on
first-time homebuyers, very -low and low and moderate -income residents, and the homeless, all
when funding was more plentiful.
The California Legislature has recognized that the "availability of housing is of vital statewide
importance."' It also has found that cities "have a responsibility to use the powers vested in them
to facilitate the improvement and development of housing to make adequate provision for the
housing needs of all economic segments of the community. ,2 Accordingly, the state has
legislated both requirements and incentives to facilitate and expedite the construction of
affordable housing, including, but not limited to, through enactment of the density bonus law,
and restrictions on local disapproval of housing projects.
I Gov. Code, 65580(a)
2 Gov. Code, 65580(4)
In 1985, the City of Petaluma formulated and enacted an inclusionary housing policy. The
policy, which is a program of the Housing Element, (a chapter of the City's General Plan), is
simple, flexible, and enforceable.
In addition, the Legislature, through the adoption of the Housing Element law (Gov. Code,
65580, et seq.), requires local governments to adequately plan to meet their existing and
projected housing needs, including their share of the Regional Housing Need Allocation.
(RHNA). The California State Department of Housing and Community Development (HCD) is
required to allocate each region's share of the statewide housing need to regional Councils of
Governments. In Petaluma's case, that is the Association of Bay Area Governments (ABAG).
ABAG has assigned the following RHNA to the City:
Regional Housing Need Allocation — 2015-2023 (as of 4/30/18)
Income Category
Housing Need
Permits issued
Very Low 0-50% of AMI
199
9
Low (51% - 80% of AMI
103
23
Moderate 81%-120% AMI
121
24
Above Moderate (over 120% of
AMI
322
595
TOTAL UNITS
745
651
The City's current inclusionary housing policy located in the 2015-2023 Housing Element,
requires developers of new residential developments to provide affordable housing, and offers
them options as to how they fulfill that requirement: 1) build on-site units or dedicate a portion
of the project site to the City for development of affordable units; 2) pay an in -lieu fee, or 3) use
alternative methods to meet the intent of the inclusionary requirement subject to approval by the
City Council, such as by seeking approval for providing a smaller percentage of on-site units or
for donating a separate parcel of land for development of affordable units.
In 2004, the City Council adopted an ordinance implementing a Commercial Linkage Fee for
nonresidential development within the City of Petaluma. The construction of nonresidential
development is a major factor in attracting new employees to Petaluma but places a strain on an
already impacted housing stock.
Housing affordability was part of Council goal discussion in February 2017. The Council
determined to review housing -related fees to generate funding for affordable housing projects,
and adopted the priority, "Identify and implement programs to increase affordable housing," in
its 2017 and 2018 goals. A task included with this priority is "seek to provide housing for all
income levels.'?
In April, 2017, Economic & Planning Systems (EPS) was retained by the City to update the
City's inclusionary housing in -lieu fee for residential projects and the City's commercial linkage
fee. In addition, EPS was asked to prepare a nexus -based fee study for rental and ownership
housing.
2
EPS presented their draft nexus study to the Council at a workshop on September 25, 2017.
Council directed staff to gather more information to help clarify alternatives for consideration
and City Council direction.
At the March 5, 2018 City Council meeting, staff presented several policy options for Council
consideration which included: 1) increasing the In Lieu fee; 2) increasing the Commercial
Linkage fee; 3) establishing a percentage requirement for on-site inclusionary housing; and 4)
establishing a percentage for the In Lieu fee inclusionaiy requirement.
DISCUSSION
This section will address the changes that the Council directed be made to the Housing In -Lieu
Fee, and the Commercial Linkage Fee at the March 5, 2018 City Council meeting.
In Lieu Fee Amendment
The current in -lieu fees collected by the City in accordance with Program 4.3 of the 2015-2023
Housing Element are inadequate to fund construction of sufficient numbers of affordable housing
units to meet the City's projected housing needs based on our RHNA numbers. Council directed
that the in -lieu fee be increased to a point where it will incentivize developers to provide on-site
affordable units for both homeownership and rental residential developments. After much
discussion, it was the consensus of the Council to increase the in- lieu fee to an amount
calculated at a 20% inclusionary requirement.
Assumes Unit = 2,000 Sq.Ft.
Fee / Sq.Ft. Fee / Unit
Petaluma (Current Fee) $4.51 $9,022
Petaluma (EPS In -Lieu) $10.12 $20,236'
Petaluma (EPS Nexus) $26.00 $52,000
Low Fee $2.07 $4,132
High Fee $17.62 $35,242
Median Fee $5.47 $10,940
The EPS calculated maximum fee for a 20% inclusionary requirement would be $10.12 s.f./ per
unit for both rental and for -sale developments as specified in the Administrative Draft
Memorandum dated September 19, 2017. In Attachment 3, the new In -Lieu Fees are calculated
using the 20% requirement of $10.12 psf. The increase to the in -lieu fee averages approximately
140% from Petaluma's current in -lieu fee.
The in -lieu fee would also be used to calculate any fee balance owed equivalent to fractional
units that result from the 15% onsite calculation. The increase is effective upon its adoption,
except that any residential project or mixed-use application with a residential component that is
deemed complete by the Planning Division prior to September 1, 2018 shall have the option of
paying the affordable housing in lieu fee in effect and otherwise applicable to the project at the
time of payment
Commercial LinkaLe Fee Amendments
As new employment -generating development continues to occur in the City, additional
affordable housing will be required to house a portion of the new lower wage workforce. The
Commercial Linkage Fee is intended to capture a portion of the funds needed to support that
additional housing. The Commercial Linkage Fee Ordinance was revised in 2011 and provides
for an annual escalator based on the latest "Engineering News Record Construction Cost Index —
20 City Average" and went into effect on July 1, 2012. There were no increases to the
Commercial Linkage Fee before 2012. Below are comparisons of the EPS calculated maximum
fee and Sonoma County's current fee.
It was the consensus of the Council to set the fee at the current rate of Sonoma County's
commercial linkage fee as indicated in the table above. The increase will be effective upon its
adoption, except that any residential project or mixed-use application with a residential
component that is deemed complete by the Planning Division prior to September 1, 2018 shall
have the option of paying the affordable housing in lieu fee in effect and otherwise applicable to
the project at the time of payment.
Nature of the Inclusionary Housing In Lieu and Commercial Linkage Fees
In the case of California Building Association v. City of San Jose, (2015) 61 Cal. 4th 435, the
California Supreme Court upheld the City of San Jose's inclusionary ordinance which requires
residential developments in the city that create 20 or more new, additional or modified dwelling
units to make available 15% of the for -sale units at an affordable housing cost as specified in the
ordinance. The court held that adoption of inclusionary ordinances to mitigate the effect of new
market rate housing on affordable housing stock, increase the number of affordable housing
units, and distribute affordable units throughout a community to obtain the benefits of
economically diverse communities is not an exaction if it imposes lawful, non -confiscatory land
use restrictions in the form of price limits.
According to the court, such inclusionary ordinances, to be valid, need only be reasonably
related to the broad general welfare purposes for which they are enacted. The court held that
such ordinances that require development projects to provide a reasonable amount of on-site
affordable units, and offer reasonable alternative means of satisfying the ordinance's
inclusionary objectives, such through payment of in -lieu fees, land dedication, and off-site
rd
Petaluma's Current
Fee/s.f.
EPS Calculated maximum
Fee/s.f.
Sonoma County Current
Fee/s.f.
Office
$2.34
$99.00
$2.75
Retail
$4.03
$167.00
$4.75
Light
hidustrial/Warehouse
$2.41
$62.00
$2.84
It was the consensus of the Council to set the fee at the current rate of Sonoma County's
commercial linkage fee as indicated in the table above. The increase will be effective upon its
adoption, except that any residential project or mixed-use application with a residential
component that is deemed complete by the Planning Division prior to September 1, 2018 shall
have the option of paying the affordable housing in lieu fee in effect and otherwise applicable to
the project at the time of payment.
Nature of the Inclusionary Housing In Lieu and Commercial Linkage Fees
In the case of California Building Association v. City of San Jose, (2015) 61 Cal. 4th 435, the
California Supreme Court upheld the City of San Jose's inclusionary ordinance which requires
residential developments in the city that create 20 or more new, additional or modified dwelling
units to make available 15% of the for -sale units at an affordable housing cost as specified in the
ordinance. The court held that adoption of inclusionary ordinances to mitigate the effect of new
market rate housing on affordable housing stock, increase the number of affordable housing
units, and distribute affordable units throughout a community to obtain the benefits of
economically diverse communities is not an exaction if it imposes lawful, non -confiscatory land
use restrictions in the form of price limits.
According to the court, such inclusionary ordinances, to be valid, need only be reasonably
related to the broad general welfare purposes for which they are enacted. The court held that
such ordinances that require development projects to provide a reasonable amount of on-site
affordable units, and offer reasonable alternative means of satisfying the ordinance's
inclusionary objectives, such through payment of in -lieu fees, land dedication, and off-site
rd
construction, are valid local and use regulations and not,takings. The court also contrast
inclusionary restrictions and fees that impose price controls and other land use restrictions that
serve a broader constitutionally permissible purpose or purposes unrelated to the impact of the
proposed development from development mitigation fees, which are intended to fund needed
public, improvements, the purpose of which is to merely mitigate the effects or impacts of the
developments on which the fees are imposed. Consistent with the holding in California Building
Association, the Petaluma Inclusionary Housing In Lieu Fee and Commercial Linkage Fee are
not exactions or development impact fees intended to fund public improvements pursuant to the
Mitigation Fee Act (Government Code §66000 and following), but rather are part of and
implement the City's land use regulations for creating affordable housing.
Public Comments
The public had an opportunity to comment at the September 27, 2017 City Council workshop
and at the March 5, 2018 City Council meeting on the Housing Fees update. A meeting was also
scheduled to reach out to stakeholders regarding the proposed changes to Petaluma's housing
policies and housing fees. A flyer was sent out to a group of over fifty contacts that have either
developed projects in Petaluma; are currently developing projects in Petaluma, or are housing
advocates. The notice of the community meeting was also published in the Argus Courier on
April 5, 2018. On April 12, 2018, staff, along with the consultants from EPS, hosted a
community workshop to receive public input on the affordable housing policies and fee update.
Public comments on the Housing policy and Fee update received to date are included in
Attachment #4
FINANCIAL IMPACTS
Financial Impacts beyond the staff time required to prepare this report and providing public
notice are undetermined. The in -lieu fee increase will add additional revenue to the In Lieu
Housing Fund if all future developments do not include on-site units in their proposal.
According to the nexus study by EPS, as specified in the Administrative Draft Memorandum
dated September 19, 2017, the increase in the commercial linkage fee could generate additional
revenue of approximately $1,400,000 if all commercially zoned parcels were developed in
Petaluma.
ATTACHMENTS
1. Resolution Increasing Inclusionary Housing In Lieu Fees Payable As Required by
Program 4.3 in the City of Petaluma's General Plan 2025, 2015-2023 Housing Element
2. Exhibit A to Resolution Increasing In -Lieu fees
3. Resolution Increasing the Commercial Development Housing Linkage Fees Pursuant to
Petaluma Municipal Code section 19.36.040(C)
4. Public Comments
Items listed below are large in volume and are not attached to this report, but may be
viewed at the following links:
5
ATTACHMENT #1
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PETALUMA
INCREASING INCLUSIONARY HOUSING IN LIEU FEES PAYABLE AS REQUIRED
BY PROGRAM 4.3 IN THE CITY OF PETALUMA'S GENERAL PLAN 2025,2015-2023
HOUSING ELEMENT AS ADOPTED BY RESOLUTION NO. 2014-190 N.C.S. AND
REPLACING THE HOUSING IN LIEU FEES SET BY RESOLUTION NO. 2003-241
N.C.S.
WHEREAS, on December 6, 1982, by Resolution no. 9620 N.C.S., the City Council
adopted the Housing Element of the Petaluma General Plan ("1982 Housing Element") setting
forth the goals, polices and implementation programs to achieve an adequate supply of housing
for all groups; and
WHEREAS, Program 2 of the policies for implementing the 1982 Housing Element
provided for requiring developers of residential developments with 16 or more units to achieve
adequate housing supply for all groups by one of several methods, including an lieu fee related to
the cost of providing housing to write down land costs or acquire housing for low and moderate -
income housing in Petaluma; and
WHEREAS, on August 20, 1984, by adoption of Resolution no. 84-199 N.C.S., the City
Council established a schedule of in lieu fees to implement Program 2 of the 1982 Housing
Element; and
WHEREAS, on December 16, 2002, by Resolution no. 2002-198 N.C.S. the City
Council adopted the Housing Element of the Petaluma General Plan ("2002 Housing Element")
setting the goals, policies and implementation programs to achieve an adequate supply of
housing units and programs for all groups; and
WHEREAS, Program 4.4 of the 2002 Housing Element provided for requiring
residential projects of five or more units to contribute to the provision of below-market rate
housing by providing affordable units on site, dedicating a portion of the project site, making an
in -lieu payment to the City's housing fund, or using alternative methods; and
WHEREAS, on December 1, 2003, by Resolution No. 2003-241 N.C.S., the City
Council established an in -lieu fee schedule for those developers who chose to make an in- lieu;
payment into the City's housing fund; and
7
WHEREAS, on May 19, 2008, the City Council approved Resolution No. 2008-085
N.C.S., adopting the City of Petaluma General Plan 2025 ("General Plan"), which contained the
City's then -existing housing element; and
WHEREAS, on June 15, 2009, the City Council approved Resolution No. 2009-094
N.C.S., adopting the Petaluma 2009-2014 Housing Element; and
WHEREAS, on December 1, 2014, the City Council approved Resolution No. 2014-190
N.C.S., adopting the Petaluma 2015-2023 Housing Element; and
WHEREAS, on January 23, 2015, the state Housing and Community Development
Department ("HCD") approved the 2015-2023 Housing Element as approved by the City
Council; and
WHEREAS, on November 2, 2015 the City Council approved Resolution No. 2015-171
N.C.S., adopting a First Amendment to the 2015-2023 Housing Element Program 4.3 to ensure
consistency between the City's Housing Element and the holding in Palmer/Sixth Street
Properties, L.P. v. City of Los Angeles, (2009) 175 CA 41h 1396, which held that the Costa -
Hawkins Act, Civil Code section 1954.53(a), prohibits local agencies from requiring on-site
inclusionary housing in rental housing developments; and
WHEREAS, recent amendments to the state Planning and Zoning Law, which is codified
in Government Code section 65000 and following ("Planning Law") pursuant to AB -1505,
which took effect January 1, 2018 and is codified in Government Code sections 65850 and
65850.1, permit cities to adopt ordinances requiring inclusion of affordable residential units for
moderate, low, very low, and extremely low income households in rental housing developments,
and require that such ordinances provide alternate means of compliance that may include, but are
not limited to, in -lieu fees, land dedication, off-site construction, or acquisition and rehabilitation
of existing units, and grant HCD the authority to review certain such ordinances that require
more than 15 percent of the total number of units in a residential rental development to be
affordable to households earning 80 percent or less of area median income; and
WHEREAS, the 2015-2023 Housing Element as amended identifies and analyzes
existing and projected housing needs and states goals and policies, and quantifies objectives and
special programs for the reservation, improvement and development of housing in the City from
2015 through 2023; and
WHEREAS, Policy 4.2 of the 2015-2023 Housing Element currently provides for
assigning a share of the responsibility for providing affordable housing to the developers of
market -rate housing and non-residential projects; and
WHEREAS, Program 4.3 of the 2015-2023 Housing Element currently provides for
continuing to require residential projects of five or more units to contribute to provision of
below-market rate housing by: dedicating 15% of the units on-site or a portion of the project site
or property to the City or a non-profit organization for use as affordable housing; encouraging
developers of projects within a half -mile radius of the planned Sonoma Marin Area Rail Transit
District ("SMART") stations to provide at least 15 percent of the units in a rental housing project
at rents affordable to very low and low income households for a minimum period of 30 years;
requiring developers of for sale projects within a half -mile radius of the planned SMART
stations to provide at least 15% of the units at prices affordable to low and moderate income
households for a minimum period of 30 years; or by making an in lieu payment to the City's
housing fund; or by using alternative methods to meet the intent of the inclusionary requirement,
subject to approval by the City Council; and
WHEREAS, the City has 2,161 housing units in various stages of development but only
75 of the units are affordable in accordance with the City's inclusionary housing requirements;
and
WHEREAS, in -lieu fees collected by the City in accordance with Program 4.3 of the
2015-2023 Housing Element are insufficient to fund construction of sufficient numbers of
affordable housing units to meet the City's projected housing needs; and
WHEREAS, the City contracted with Economic and Planning Systems ("EPS") to
complete studies ("EPS Studies") to identify funds the City could lawfully recover from
inclusionary housing in lieu fees and to provide information and analysis in support of potential
updates to the City's affordable housing fees; and,
WHEREAS, at a City Council workshop on September 25, 2017, EPS gave an
Affordable Housing Fees presentation ("Presentation"), presented an administrative draft
memorandum ("Memorandum"), and a draft Ownership Inclusionary Housing In Lieu Fee
report, a draft Nexus -Based Affordable Housing Fee Analysis for Ownership Housing report, a
draft Nexus -Based Affordable Housing Fee Analysis for Rental Housing report, and a draft
Commercial Linkage Fee Nexus Study report all dated August 29, 2017 and all referred to as the
"Reports," and
WHEREAS, the Presentation, Memorandum and the Reports detailed a gap between
market prices of housing in the City and prices affordable to very low, low, and moderate -
income households, and included a proposed per square foot in lieu fee for rental and ownership
projects based on the affordability gap; and
WHEREAS, the City Council hereby approves the Presentation, Memorandum and the
Reports, which are by this reference hereby made a part of this resolution; and
WHEREAS, it is the desire of the City Council to approve an inclusionary housing
ordinance in accordance with the authority in AB -1505 to require on-site inclusionary housing
units as part of residential housing development projects, both homeownership and rental, in the
City to mitigate the effect of new market rate housing on the .City's stock of affordable housing,
we
to increase the number of affordable units in the city, and to distribute the affordable units
throughout the city to obtain the benefits of economically diverse communities and generally to
ensure the provision of affordable housing to help address the City's Regional Housing Need
Allocation and the acute housing crisis in Sonoma County, and to provide for alterative means
of compliance as AB -1505 requires; and
WHEREAS, it is the desire of the City Council to increase the City's Inclusionary
Housing In -Lieu fee in accordance the EPS Presentation, the Memorandum, and the Reports, to
apply to developers of residential housing that the Council permits to make a payment in -lieu of
providing affordable housing on site to more closely approach developers' fair -share
responsibility toward contributing to implementing the City's 2015-2023 Housing Element
policies and programs; and
WHEREAS, in accordance with the holding of the California Supreme Court in
California Building Association v. City of San Jose, (2015) 61 Cal. 4" 435, where a city adopts
an inclusionary ordinance to mitigate the effect of new market rate housing on the City's stock of
affordable housing, to increase the number of affordable units in the city, and to distribute the
affordable units throughout the city to obtain the benefits of economically diverse communities,
such an ordinance is not an exaction, if it imposes lawful, non -confiscatory land use restrictions
in the form of price limits; and
WHEREAS, under California Building Association, inclusionary ordinances, to be valid,
need only be reasonably related to the broad general welfare purposes for which they are
enacted, and such inclusionary housing ordinances that require residential projects to provide a
reasonable amount of on-site affordable units, and offer reasonable alternative means of
satisfying the ordinance's inclusionary objectives, such as payment of in -lieu fees, land
dedication, and off-site construction are valid local land use regulations and not takings; and
WHEREAS, the City Council finds that this resolution and the inclusionary housing in -
lieu, fee it establishes is a valid local land use regulation and does not effect a taking in
accordance with California Building Association; and
WHEREAS, this resolution and the inclusionary housing in -lieu fee it establishes is
exempt from environmental review under the general rule in Section 15061(b)(3) of the
California Environmental Quality Act ("CEQA") Guidelines because CEQA applies only to
projects that have the potential for causing a significant effect on the environment, and it can be
seen with certainty that there is no possibility that this resolution and the inclusionary housing in -
lieu fee it establishes creates changes in the physical environment, or results in any changes to
the General Plan or Implementing Zoning Ordinance land use policies, and any development that
10
occurs in the future subject to such standards will undergo an independent analysis pursuant to
the requirements of CEQA; and
WHEREAS, this resolution and the inclusionary housing in -lieu fee it establishes is
statutorily exempt pursuant to Section 15283 of the CEQA Guidelines because this resolution
and the inclusionary housing in lieu fee reflect determinations by the City regarding the need to
adequately provide for the City's share of regional housing needs pursuant to Government Code
section 65584; and
NOW THEREFORE, BE IT RESOLVED by the City Council of the City of Petaluma
as follows:
1. The above recitals are hereby declared to be true and correct and are incorporated into
this resolution as findings of the City Council of the City of Petaluma.
2. The in lieu inclusionary housing fee schedule attached to and hereby made a part of
this resolution as Exhibit A shall apply to payments to the City's housing fund which
the City Council permits developers to make in lieu of provision of on-site affordable
housing in accordance with Policy 4.2 and Program 4.3 of the 2015-2023 Housing
Element.
3. In lieu fees authorized pursuant to this resolution shall be paid and collected on behalf
of the City at the time escrow closes on purchase of for -sale residential units, and at
the time of issuance of a certificate of occupancy for rental units.
4. The in lieu inclusionary housing fees established pursuant to Resolution no. 2003-241
and any other previously -enacted in lieu inclusionary housing fees are hereby
repealed on the date this resolution takes effect.
5. If any section, subsection, sentence, clause, phrase or word of this resolution is for
any reason held to be unconstitutional, unlawful, or otherwise invalid by a court of
competent jurisdiction or preempted by state legislation, such decision or legislation
shall not affect the validity of the remaining portions of this resolution. The City
Council of the City of Petaluma hereby declares that it would have passed and
adopted this resolution and each and all provisions thereof irrespective of the fact that
any one or more of said provisions be declared unconstitutional, unlawful, or
otherwise invalid.
6. This resolution shall become effective upon its adoption, except that any residential
project or mixed-use application with a residential component that is deemed
complete by the Planning Division prior to September 1, 2018 shall have the option
of paying the affordable housing in lieu fee in effect and otherwise applicable to the
project at the time of payment.
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ATTACHMENT #2
EXHIBIT A
IN LIEU HOUSING FEES (5 units or more -based on square footage) see Tables below:
Sq. Ft
Fee
Sq. Ft
Fee
Sq. Ft
Fee
Sq. Ft.
Fee
Sq. Ft
Fee
640
$6,477
960
$9,715
1280
$12,954
1600
$16,192
1920
$19,430
650
$6,578
970
$9,816
1290'
$13,055
1610,; '
$16,293
1930
$19,532
660
$6,679
980
$9,918
1300
$13,156
1620;
$16,394
1940
$19,633
670
$6,780
990
$10,019
1310
$13,257
1630
$16,496
1950
$19,734
680
$6,882
1000
$10,120
1320
$13,358
1640
$16,597
1960
$19,835
690
$6,983
1010
$10,221
1330'
$13,460
1650
$16,698
1970
$19,936
700
$7,084
1020
$10,322
1340
$13,561
1660
$16,799
1980
$20,038
710
$7,185
1030
$10,424
1350
$13,662
1670
$16,900
1990
$20,139
720
$7,286
1040
$10,525
1360
$13,763
1680
$17,002
2000
$20,240
730
$7,388
1050
$10,626
1370
$13,864
1690
$17,103
2010
$20,341
740
$7,489
1060
$10,727
1380
$13,966
1700'
$17,204
2020
$20,442
750
$7,590
1070
$10,828
1390'
$14,067
1710
$17,305
2030
$20,544
760
$7,691
1080
$10,930
1400
$14,168
1720
$17,406
2040
$20,645
770
$7,792
1090
$11,031
1410.
$14,269
1730
$17,508
2050.
$20,746
780
$7,894.
1100
$11,132
1420'
$14,370
1740'
$17,609
2060
$20,847
790
$7,995
1110
$11,233
1430`
$14,472
1750 "
$17,710
2070
$20,948
800'
$8,096
1120
$11,334
1440'
$14,573
1760'
$1.7,811
2080
$21,050
810
$8,197
1130
$11,436
1450
$14,674
1770
$17,912
2090
$21,151
820',
$8,298
1140
$11,537
1460-
$14,775
1780
$18,014
2100
$21,252
830
$8,400
1150
$11,638
1470
$14,876
1790
$18,115
2110
$21,353
840
$8,501
1160
$11,739
1480
$14,978
1800'
$18,216
2120
$21,454
850
$8,602
1170
$11,840
1490'
$15,079
1810
$18,317
2130
$21,556
860'
$8,703
1180
$11,942
1500;,
$15,180
1820
$18,418
2140
$21,657
870
$8,804
1190'
$12,043
1510
$15,281
1830
$18,520
2150
$21,758
880'
$8,906
1200
$12,144
1520;
$15,382
1840'?
$18,621
2160
$21,859
890'
$9,007
1210
$12,245
1530'
$15,484
1850'
$18,722
2170
$21,960
900
$9,108
1220
$12,346
1540,
$15,585
-1860
$18,823
2180
$22,062
910
$9,209
1230
$12,448
1550'
$15,686
1870
$18,924
2190
$22,163
920
$9,310
1240
$12,549
1560,
$15,787
1880
$19,026
2200
$22,264
930
$9,412
1250
$12,650
1570
$15,888
1890
$19,127
2210
$22,365
940'
$9,513
1260
$12,751
1580
$15,990
1900
$19,228
2220
$22,466
950
$9,614
1270
$12,852
1590,
$16,091
1910'
$19,329 1
2230 1
$22,568
12
Sq. Ft
Fee
Sq. Ft
Fee
Sq. Ft
Fee
Sq. Ft.
Fee
Sq. Ft
Fee
2240
$22,669
2560
$25,907
2880
$29,146
3200
$32,384
3520
$35,622
2250
$22,770
2570
$26,008
2890
$29,247
3210'
$32,485
3530
$35,724
2260
$22,871
2580
$26,110
2900'
$29,348
3220
$32,586
3540
$35,825
2270
$22,972
2590'
$26,211
2910
$29,449
3230
$32,688
3550
$35,926
2280
$23,074
2600
$26,312
2920
$29,550
3240
$32,789
3560
$36,027
2290
$23,175
2610
$26,413
2930
$29,652
3250
$32,890
3570
$36,128
2300
$23,276
2620
$26,514
2940
$29,753
3260
$32,991
3580
$36,230
2310`
$23,377
2630
$26,616
2950
$29,854
3270
$33,092
3590
$36,331
2320
$23,478
2640
$26,717
2960
$29,955
3280
$33,194
3600
$36,432
2330
$23,580
2650
$26,818
2970
$30,056
3290'
$33,295
3610
$36,533
2340 `
$23,681
2660
$26,919
2980
$30,158
3300
$33,396
3620
$36,634
2350'
$23,782
2670
$27,020
2990'
$30,259
3310
$33,497
3630
$36,736
2360 `
$23,883
2680'
$27,122
3000 i
$30,360
3320
$33,598
3640
$36,837
2370
$23,984
2690
$27,223
3010
$30,461
3330
$33,700
3650
$36,938
2380
$24,086
2700
$27,324
3020
$30,562
3340
$33,801
3660
$37,039
2390
$24,187
2710
$27,425
3030:
$30,664
3350 -
$33,902
3670
$37,140
2400
$24,288
2720
$27,526
3040.
$30,765
3360
$34,003
3680
$37,242
2410'
$24,389
2730
$27,628
3050
$30,866
3370!
$34,104
3690
$37,343
2420
$24,490
2740
$27,729
3060
$30,967
3380
$34,206
3700
$37,444
2430
$24,592
2750
$27,830
3070
$31,068
3390
$34,307
3710
$37,545
2440'
$24,693
2760'
$27,931
'3080
$31,170
3400
$34,408
3720
$37,646
2450
$24,794
2770 '
$28,032
3090_`
$31,271
3410
$34,509
3730
$37,748
2460
$24,895
2780
$28,134
3100
$31,372
3420
$34,610
3740
$37,849
2470'
$24,996
2790'
$28,235
3110;1
$31,473
3430
$34,712
3750
$37,950
2480
$25,098
2800
$28,336
3120
$31,574
3440
$34,813
3760
$38,051
2490
$25,199
2810
$28,437
3130`
$31,676
3450 `
$34,914
3770
$38,152
2500
$25,300
2820
$28,538
3140
$31,777
3460
$35,015
3780
$38,254
2510
$25,401
2830'
$28,640
3150
$31,878
3470
$35,116
3790
$38,355
2520
$25,502
2840
$28,741
3160
$31,979
3480
.$35,218
3800
$38,456
2530
$25,604
2850
$28,842
3170'
$32,080
3490 i
$35,319
3810
$38,557
2540
$25,705
2860
$28,943
3180
$32,182
3500 %
$35,420
3820
$38,658
2550
$25,806 1
2870'
$29,044
3190`
$32,283
3510
$35,521 1
3830
$38,760
13
ATTACHMENT #3
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PETALUMA
INCREASING COMMERCIAL DEVELOPMENT HOUSING LINKAGE FEES FOR
NONRESIDENTIAL DEVELOPMENT PROJECTS PURSUANT TO PETALUMA
MUNICIPAL CODE SECTION 19.36.040(C) AND REPLACING THE COMMERCIAL
LINKAGE FEES SET BY RESOLUTION NO. 2011-071 N.C.S.
WHEREAS, on December 15, 2003, the City Council adopted Ordinance No. 2171
N.C.S. implementing a commercial linkage fee for nonresidential projects to mitigate the impact
of nonresidential development on the need for affordable housing; and
WHEREAS, on May 2, 2011 the City Council adopted Ordinance No. 2403 .amending
the commercial linkage fee to ensure that it continues to make an adequate financial contribution
from new and expanded nonresidential development to the City's affordable housing programs;
and
WHEREAS, the City's commercial linkage fee program, which is currently codified in
Chapter 19.36 entitled "Commercial Development Housing Linkage Fee" ("Housing Linkage
Fee") of the Petaluma Municipal Code; and
WHEREAS, the Housing Linkage Fee chapter in the Municipal Code provides in
Section 19.36.010 that the purpose of the chapter is to implement the goals and objectives of the
general plan housing element of the City; mitigate housing impacts caused by new, changed and
expanded nonresidential development in the City, and provide affordable housing to people who
earn between 80 and 100 percent of area median income; and
WHEREAS, the Housing Linkage Fee chapter includes in Section 19.36.020 various
findings of the City Council, including findings that the purposes of the chapter include
establishing a feasible means by which developers of nonresidential development projects assist
in increasing the supply of low and moderate income housing and increasing the supply of
housing in proximity to employment centers, and that the chapter is intended to create a rational
relationship between the amount of housing need created by the land use and the size of the fee,
taking into account the effect of such fee requirements on providing affordable housing
opportunities and the economic feasibility of imposing such requirements; and
WHEREAS, the Housing Linkage Fee chapter in Section 19.36.040 provides that
Housing Linkage Fees shall be established from time to time by resolution of the City Council,
and that such fees shall be adjusted annually using the Engineering News Record Construction
Cost Index 20 City Average; and
14
WHEREAS, the Housing Linkage Fee chapter in Section 19.36.050 provides that
developers of projects subject to Housing Linkage Fees may apply to receive a credit against the
fees or a portion thereof if they provide affordable housing through some other means agreeable
to the City; and
WHEREAS, on May 19, 2008, the City Council approved Resolution No. 2008-085
N.C.S., adopting the City of Petaluma General Plan 2025 ("General Plan"), which contained the
City's then -existing housing element; and
WHEREAS, on June 15, 2009, the City Council approved Resolution No. 2009-094
N.C.S., adopting the Petaluma 2009-2014 Housing Element; and
WHEREAS, on December 1, 2014, the City Council approved Resolution No. 2014-190
N.C.S., adopting the Petaluma 2015-2023 Housing Element; and
WHEREAS, on January 23, 2015, the state Housing and Community Development
Department ("HCD") approved the 2015-2023 Housing Element as approved by the City
Council; and
WHEREAS, on November 2, 2015 the City Council approved Resolution No. 2015-171
N.C.S., adopting a First Amendment to the 2015-2023 Housing Element Program 4.3 to ensure
consistency between the City's Housing Element and the holding in Palmer/Sixth Street
Properties, L.P. v. City of Los Angeles, (2009) 175 CA 0 1396, which held that the Costa -
Hawkins Act, Civil Code section 1954.53(a), prohibits local agencies from requiring ori -site
inclusionary housing in rental housing developments; and .
WHEREAS, recent amendments to the state Planning and Zoning Law, which is codified
in Government Code section 65000 and following ("Planning Law") pursuant to AB -1505,
which took effect January 1, 2018 and is codified in Government Code sections 65850 and
65850.1, permit cities to adopt ordinances requiring inclusion of affordable residential units for
moderate, low, very low, and extremely low income households in rental housing developments,
and require that such ordinances provide alternate means of compliance that may include, but are
not limited to, in -lieu fees, land dedication, off-site construction, or acquisition and rehabilitation
of existing units, and grant HCD the authority to review certain such ordinances that require
more than 15 percent of the total number of units in a residential rental development to be
affordable to households earning 80 percent or less of area median income; and.
WHEREAS, the 2015-2023 Housing Element as amended identifies and analyzes
existing and projected housing needs and states goals and policies, and quantifies objectives and
special programs for the reservation, improvement and development of housing in the City from
2015 through 2023; and
15
WHEREAS, Policy 4.2 of the 2015-2023 Housing Element currently provides for
assigning a share of the responsibility for providing affordable housing to the developers of
market -rate housing and non-residential projects; and
WHEREAS, Program 4.3 of the 2015-2023 Housing Element currently provides for
continuing to require residential projects of five or more units to contribute to provision of
below-market rate housing by: dedicating 15% of the units on-site or a portion of the project site
or property to the City or a non-profit organization for use as affordable housing; encouraging
developers of projects within a half -mile radius of the planned Sonoma Marin Area Rail Transit
District ("SMART") stations to provide at least 15 percent of the units in a rental housing project
at rents affordable to very low and low income households for a minimum period of 30 years;
requiring developers of for sale projects within a half -mile radius of the planned SMART
stations to provide at least 15% of the units at prices affordable to low and moderate income
households for a minimum period of 30 years; or by making an in lieu payment to the City's
housing fund; or by using alternative methods to meet the intent of the inclusionary requirement,
subject to approval by the City Council; and
WHEREAS, the City has 2,161 housing units in various stages of development but only
75 of the units are affordable in accordance with the City's inclusionary housing requirements;
and
WHEREAS, in -lieu fees collected by the City in accordance with Program 4.3 of the
2015-2023 Housing Element are insufficient to fund construction of sufficient numbers of
affordable housing units to meet the City's projected housing needs; and
WHEREAS, the City contracted with Economic and Planning Systems (EPS) to
complete studies ("EPS Studies") to identify funds the City could lawfully recover from
inclusionary housing in lieu fees and to provide information and analysis in support of potential
updates to the City's affordable housing fees; and,
WHEREAS, at a City Council workshop on September 25, 2017, EPS gave an
Affordable Housing Fees presentation ("Presentation"), presented an administrative draft
memorandum ("Memorandum"), and a draft Ownership Inclusionary Housing In Lieu Fee
report, a draft Nexus -Based Affordable Housing Fee Analysis for Ownership Housing report, a
draft Nexus -Based Affordable Housing Fee Analysis for Rental Housing report, and a draft
Commercial Linkage Fee Nexus Study report all dated August 29, 2017 and all referred to as the
"Reports," and
WHEREAS, the Presentation, Memorandum and the Reports, detailed a gap between
market prices of housing in the City and prices affordable to very low, low, and moderate -
income households, and included a proposed per square foot in lieu fee for rental and ownership
projects based on the affordability gap; and
16
WHEREAS, the City Council hereby approves the Presentation, Memorandum and the
Reports, which are by this reference hereby made a part of this resolution; and
WHEREAS, the City Council desires to adopt updated Commercial Linkage Fees for
nonresidential development projects as authorized by section 19.36.040(C) of the Municipal
Code such that the fees do not exceed the amounts needed to mitigate the actual affordable
housing impacts attributable to the nonresidential development projects to which the fees relate,
as determined by the EPS report, and so that such projects increase the supply of low and
moderate income housing and housing in proximity to employment centers in the City; and
WHEREAS, in accordance with the holding of the California Supreme Court in
California Building Association v. City of San Jose, (2015) 61 Cal. 4th 435, where a city adopts
an inclusionary ordinance to mitigate the effects of development on the City's stock of affordable
housing, and to increase the number of affordable units in the city, and to distribute the
affordable units throughout the city to obtain the benefits of economically diverse communities,
such an ordinance is a valid local land use regulation and not a taking if it is reasonably related to
the broad general welfare purposes for which it is enacted, and offers reasonable alternative
means of satisfying the ordinance's inclusionary objectives; and
WHEREAS, the City Council finds that this resolution and the Housing Linkage fee it
establishes is a valid local land use regulation and does not effect a taking in accordance with
California Building Association; and
WHEREAS, this resolution and the Housing Linkage Fees it establishes are exempt from
environmental review under the general rule Section 150610)(3) of the California
Environmental Quality Act ("CEQA") Guidelines because CEQA applies only to projects that
have the potential for causing a significant effect on the environment, and it can be seen with
certainty that there is no possibility that this resolution and the Housing Linkage Fees it
establishes creates changes in the physical environment, or results in any changes to the General
Plan or Implementing Zoning Ordinance land use policies, and any development that occurs in
the future subject to such standards will undergo an independent analysis pursuant to the
requirements of CEQA; and
WHEREAS, this resolution and the inclusionary Housing Linkage Fees it establishes is
statutorily exempt pursuant to Section 15283 of the CEQA Guidelines because this resolution
and the Housing Linkage Fees reflect determinations by the City regarding the need to
adequately provide for the City's share of regional housing needs pursuant to Government Code
section 65584;
17
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Petaluma
as follows:
1. The above recitals are hereby declared to be true and correct and are incorporated into
the resolution as findings of the City Council of the City of Petaluma.
2. The following Housing Linkage Fees shall apply to non-residential projects subject to
this resolution in accordance with Policy 4.2 and Program 4.3 of the 2015-2023
Housing Element:
3. Housing Linkage Fees authorized pursuant to this resolution shall be paid and
collected on behalf of the City at the time of issuance of a certificate of occupancy.
4. The Housing Linkage Fees established pursuant to Resolution No. 2011-071 N.C.S.
and any other previously -enacted commercial development Housing Linkage Fees are
hereby repealed on the date this resolution takes effect.
5. If any section, subsection, sentence, clause, phrase or word of this resolution is for
any reason held to be unconstitutional, unlawful, or otherwise invalid by a court of
competent jurisdiction or preempted by state legislation, such decision or legislation
shall not affect the validity of the remaining portions of this resolution. The City
Council of the City of Petaluma hereby declares that it would have passed and
adopted this resolution and each and all provisions thereof irrespective of the fact that
any one or more of said provisions be declared unconstitutional, unlawful, or
otherwise invalid.
6. This resolution shall become effective upon its adoption, except that any non-
residential project or mixed use application with a non-residential component that is
deemed complete by the Planning Division prior to September 1, 2018 shall have the
option of paying the Housing Linkage Fees in effect and otherwise applicable to the
project at the time of payment.
18
Office/Commercial
Retail
Industrial
$2.75/ s.f.
$4.75/s.f.
$2.84/s.f.
3. Housing Linkage Fees authorized pursuant to this resolution shall be paid and
collected on behalf of the City at the time of issuance of a certificate of occupancy.
4. The Housing Linkage Fees established pursuant to Resolution No. 2011-071 N.C.S.
and any other previously -enacted commercial development Housing Linkage Fees are
hereby repealed on the date this resolution takes effect.
5. If any section, subsection, sentence, clause, phrase or word of this resolution is for
any reason held to be unconstitutional, unlawful, or otherwise invalid by a court of
competent jurisdiction or preempted by state legislation, such decision or legislation
shall not affect the validity of the remaining portions of this resolution. The City
Council of the City of Petaluma hereby declares that it would have passed and
adopted this resolution and each and all provisions thereof irrespective of the fact that
any one or more of said provisions be declared unconstitutional, unlawful, or
otherwise invalid.
6. This resolution shall become effective upon its adoption, except that any non-
residential project or mixed use application with a non-residential component that is
deemed complete by the Planning Division prior to September 1, 2018 shall have the
option of paying the Housing Linkage Fees in effect and otherwise applicable to the
project at the time of payment.
18
ATTACHMENT #4
PUBLIC COMMENTS:
September 27, 2017 Workshop:
Letter from Basin Street (attached)
People who spoke during Public Comment period:
1. Sean Flannery of Basin Street Properties — Any fee increase will make it more
unaffordable and discourage investment in housing. It will also discourage development
in the City.
2. George Baker — Architect since 1982. Afforeable housing is a crisis in Petaluma and the
free market is not working. 20% inclusionary requirement for on-site and 34% for
paying an in lieu fee. The nexus study is pretty thorough but it is implementing too low
of a fee which is only kicking the can down the road.
3. Gabriela Orantes — Supports 24% inclusionary requirement. Economic Development
report for 2017 stated that 60% of Petaluma residents make less than $100,000, so a
$2,200 — 1 bed apartment or even more for a 2 bedroom apartment is out of range for
households with 2 minimum income average earners who make less than $65,000. There
is a lack of availability of affordable rentals.
4. Cynthia Clarkson - Thank you for making this a priority and agrees about the 24%
requirement for on-site and off site. She is a Hospice nurse and they are losing staff who
can't afford to live in Petaluma. If we don't do anything about affordable housing, we
will lose our young people and we should increase fees on development.
March 5, 2018 City Council meeting:
No public comments
April 12 Community Workshop:
No public comments. Many questions on the process.
19
Document Received After Agenda Distribution - Agenda Item # 1.A
BASINSTREET
PRO P r R T 1 r 5
tel 707 795 - 4477
fax 707 795 - 6283
September 25, 2017
City of Petaluma
11 English Street
Petaluma, CA .94952
Re: City Council Workshop to Discuss Housing Fees Update and the Impact Fee
Nexus Study
Dean Mayor Glass and Members of the City Council:
We are writing to express serious concerns about the'suggestion in the staff report for the
above workshop that the City of Petaluma consider dramatically increasing current
housing impact fees even though current fees are consistent with other jurisdictions in
Sonoma County.
Initially, we note that the prior impact fee study that was relied upon looked at all of the
City impact fees together against the backdrop of the General Plan. The total impact fees
for a single family residential unit in Petaluma, excluding the affordable housing impact
fee, currently exceeds $41,000. Similarly, the total impact fees for a multi -family unit in
Petaluma, excluding the affordable housing impact fee, exceeds $28,000.
Similarly, the EPS report compares housing fees in Petaluma to housing fees in other
jurisdictions without comparing overall impact fee rates. While helpful, such a
comparison does not give the decision makers any information on how total impact fees
in Petaluma compare with the other jurisdictions. Such information is crucial in
determining whether Petaluma's impact fee structure as a whole is competitive with the
other jurisdictions' impact fee structures. Lastly, it should be recognized that the "high"
fee recommended as a starting point in the staff report is from outside Petaluma (Walnut
Creek), and is a significant outlier that skews the average rates reflected in'the EPS
report,
From a market perspective, the housing market is finally back on its feet after many years
of stagnation: Raising fees at this time runs a serious risk of making
1383 N. MoDowell Blvd„ Suite 220
Petaluma, CA 94954
W W W.BASIN-STREFT.COM
20
September 25, 2017
Page BASINSTREET
P R 0 P E RTJ E S
marginal housing projects infeasible, including previously approved projects for which
owners and lenders have relied upon the existing impact fee structure. While providing
more affordable housing is a laudable goal, reducing new housing product coming to the
market by increasing fees is not the answer. Such risks are acknowledged in the EPS
report and supporting documentation. EPS recommends no increase in the commercial
linkage fee, and, at most, "marginally higher fees" with respect to rental/for-sale housing
(see Attachment #2, "Administrative Draft Memorandum", Key Finding #2).
As one of the founding board members of the Housing Land Trust of Sonoma County, I
know that affordable housing is an important issue involving many complex factors. We
ask that you take your time in addressing this important issue, and that you take into
account the suppressive nature that raising fees has on the construction of new homes in
Petaluma.
Thank you for your consideration.
Sincerely,
Paul Andronico
Legal Counsel
21