HomeMy WebLinkAboutStaff Report 4.F 10/21/2019Agenda Item #4.F
October 21, 2019
Honorable Mayor and Members of the City Council through City Manager
Tiffany Robbe, Senior Planner
Heather Hines, Planning Manager
SUBJECT: Resolution Approving Alternative Compliance with Inclusionary Housing
Requirements Pursuant to Implementing Zoning Ordinance Section 3.040 for the
Haystack Pacifica Project
RECOMMENDATION
It is recommended that the City Council adopt a resolution approving Alternative Compliance with
inclusionary housing requirements pursuant to Implementing Zoning Ordinance (IZO) Section
3.040 for the Haystack Pacifica Project to allow an alternative mixture of units by income levels
and authorizing that the 15% onsite inclusionary units be available to low-income households.
BACKGROUND
In 2018 the City Council amended the General Plan to modify Housing Element program 4.3 to
require 15% onsite inclusionary housing for residential development of five or more units and
require affordability restrictions for 55 years for rental developments. This modification was in
response to AB 1505 and sought to increase production of affordable housing units in the City to
provide essential housing for all Petaluma residents.
Also in 2018, the City Council adopted IZO Section 3.040 to codify and implement revised
Housing Element program 4.3. IZO Section 3.040 requires that homeownership and rental projects
consisting of five or more units provide 15% of project units as onsite inclusionary housing.
Additionally, Section 3.040 specifies income thresholds for both rental and ownership projects,
requiring that 7.5% of rental projects be made affordable to very -low-income households and 7.5%
be made affordable to low-income households.
Both the revised Inclusionary Housing Program and the Inclusionary Housing requirements added
to the IZO provide for alternative compliance to satisfy a project's inclusionary housing
requirement at the sole discretion of the City Council. IZO Section 3.040.D.3 specifically
identifies an alternative mixture of units by income level as a potential way of satisfying a project's
inclusionary housing requirement through alternative compliance.
When the Council approved amendments to the IZO to add Section 3.040 they adopted an
effectiveness clause that allowed residential development that was deemed complete prior to
January 1, 2019 to be processed under the previous inclusionary housing provisions. The Haystack
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Pacifica Project was deemed completed on March 12, 2019 and therefore is subject to the
inclusionary requirements as adopted in 2018.
On May 28, 2019 the Planning Commission
approved Resolution No. 2019-09 approving Site
Plan and Architectural Review (SPAR) and
associated SmartCode Warrants for the Haystack
Pacifica Project. The approved project includes
construction of 178 multi -family units,
approximately 24,855 square feet of ground floor
commercial and additional tenant amenity areas
in the block bordered by East Washington,
Copeland, Weller, and East D Street (Figure 1).
The approved project includes construction of the
Transverse Street and frontage improvements on Figure 1: Project Location
all sides. Additionally, the approved project
includes 15% onsite inclusionary housing to be distributed throughout the project and to include a
mixture of unit types to match the overall make up of the project (2 studios, 9 1 -bedrooms, 14 2 -
bedrooms, and 2 3 -bedrooms).
Figure 2: First Floor Building Plan
Figure 3: Copeland Street Elevation
Page 2
Figure 4: Weller Street Elevation
PROJECT DESCRIPTION
Pacifica Companies submitted a request for alternative compliance consistent with IZO Section
3.040.1) and proposing an alternative mix of units by income to allow all onsite inclusionary units
(estimated as 27 units based on current 178 -unit count) to be available to low-income households.
The justification for this request as outlined in the applicant's materials (Attachment 2) is to reduce
ongoing project costs associated with increasing construction costs, development impact fees,
infrastructure improvements, and onsite inclusionary requirements. As proposed, alternative
compliance would only impact the income mix, allowing all 15% of the units to be available to
low-income households instead of splitting between 7.5% to low and 7.5% to very -low as is
required for rental projects.
DISCUSSION
Given the City's expressed desire for affordable housing and the Project's location near the
SMART station, the Haystack Pacifica project design, refined over years of community and City
review, had long included the proposal to provide 15% of its units at a rate affordable to low-
income households. According to the applicant, the Project's financials were based on providing
the 27 onsite inclusionary units at the 80% area median income (AMI) rate.
Because the Project was not deemed complete until March 2019 it is subject to the current
inclusionary housing requirements as outlined in IZO Section 3.040. Subsection 3.040.D. provides
for Alternative Compliance in how a project satisfies the required inclusionary housing at the sole
discretion of the City Council. The IZO outlines several examples of ways to a project's
inclusionary housing requirement through alternative compliance, including "alternative mixture
of units by income levels".
IZO Section 3.040.E.6. specifies that "in considering requests from a developer for alternative
compliance to creating inclusionary housing units the City Council's consideration will include
whether creating inclusionary affordable units would render the overall project financially
infeasible under then current economic conditions". While Pacifica Companies did not opt to
provide detailed project financial information as part of their request, the submittal materials
(Attachment 2) indicate that providing half of the onsite inclusionary housing units at the very
low-income level would compound other increasing costs and potentially render the project
financially infeasible. Attachment 2 notes that providing the affordable units at the income level
split specified by the IZO would create a $100,000 annual project shortfall, and that shortfall along
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with the rising costs of construction, development impact fees, and significant infrastructure
requirements conditioned on the project make the project infeasible.
It is recommended that the City Council approve the request for alternative compliance based on
the following findings:
• The Project has long been forward -thinking, compliant with City planning and zoning
requirements, and committed to providing 15% affordable housing onsite. The project was
designed to include 15% affordable housing onsite when previous inclusionary housing
requirements allowed payment of in -lieu fee which would have been notably less expensive
for the developer.
• Consistent with the reasoning for adopting the effectiveness clause that allowed project's
deemed complete prior to January 1, 2019 to be processed under the previous inclusionary
housing provisions, the Haystack Pacifica project had been in process for considerable
amount of time with a significant commitment of both time and finances by the applicant
to engage in community outreach and redesign efforts.
• The Project is compliant with Housing Element Program 4.3 as amended on November 19,
2018, in that it provides 15% onsite inclusionary with affordability restrictions of 55 years.
• With approval of Alternative Compliance by the City Council the Project is consistent with
IZO Section 3.040, including provision of 15% affordable housing units on-site distributed
throughout the Project with a unit mix that mirror the mix in the larger Project (2 studios,
9 1 -bedrooms, 14 2 -bedrooms, and 2 3 -bedrooms), and with duration of the affordability
covenants to be at least 55 years.
• Petaluma's Regional Housing Need Allocation for the 2015-2023 cycle indicates 103 low
income units available at 51 % to 80% of average median income and as of June 30, 2019
only 18 permits had been issued for low income units, representing a significant unmet
need within the low-income category.
Regional Housing Need Allocation 2015-2023
Income Category
New Units Needed
Permits Issued
% Met
Very Low
199
9
5%
0 - 50% AMI
Low
103
18
17%
51 - 80% AMI
Moderate
121
76
63%
81 - 120% AMI
Above Moderate
322
704
219%
> 120% AMI
TOTAL
745
807
• The project site is one of the three "catalyst" sites within the City and determined to
"present the best opportunity for transforming the Station Area, meeting the goals of the
General Plan and the CPSP and the community's vision" (Station Area Master Plan). The
SAMP envisions transformation of the Station Area via development and redevelopment
of the area toward pedestrian -oriented, livable, mixed-use environments that support transit
ridership. The SAMP states that alternative solutions may be necessary to spur
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development on catalyst sites in the short term and specifically SAMP recommends
consideration of measures to increase project profitability and probability of financing.
ENVIRONMENTAL REVIEW
The Project has been reviewed under the provisions of the California Environmental Quality Act
(CEQA) Guidelines. An Environmental Checklist for Streamlined Review (CEQA Analysis) was
prepared as part of the Haystack Pacifica Project review. It found that the project is eligible for
several CEQA Exemptions set forth in the CEQA Guidelines including the Community Plan
Exemption (15183), Consistency with Program Environmental Impact Report (EIR) (15168), and
a Class 32 Infill Exemption (15532). In addition, the Project is exempt from CEQA in accordance
with California Government Code Section 65457, projects that are consistent with a Specific Plan
EIR. Authorizing alternative compliance by allowing an alternative mixture of units by income
levels will not in and of itself institute a material change in the environment; therefore, pursuant
to §15061(b)(3) (Review for Exemption, General Rule) of the CEQA Guidelines, there is no
possibility that the study may have a significant effect on the environment.
FINANCIAL IMPACTS
The costs associated with processing this request for Alternative Compliance request is billed on
a time and materials basis to the project's cost recovery account.
ATTACHMENTS
Attachment 1.
Resolution approving Inclusionary Housing Alternative Compliance
Attachment 2.
Pacifica's Statement dated September 23, 2019
Attachment 3.
IZO Section 3.040 — Inclusionary Housing
Attachment 4.
General Plan Housing Element Program 4.3
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ATTACHMENT 1
RESOLUTION OF THE CITY OF PETALUMA CITY COUNCIL RESOLUTION
APPROVING ALTERNATIVE COMPLIANCE WITH INCLUSIONARY HOUSING
REQUIREMENTS PURSUANT TO IMPLEMENTING ZONING ORDINANCE
SECTION 3.040 FOR THE HAYSTACK PACIFICA MIXED USE PROJECT
LOCATED AT 215 WELLER STREET
APN: 007-143-003, 004, 007, 014, and 015
FILE NO. PLMA-16-0001
WHEREAS, in January 2016 Pacifica Companies filed an application requesting Site Plan
and Architectural Review and associated SmartCode Warrants for the Haystack Pacifica project,
including 178 dwelling units, approximately 24,855 square feet of ground floor commercial, and
additional tenant amenity areas located at 215 Weller Street Assessor's Parcel Numbers 007-143-
003, 004, 007, 014, and 015 (the "Project"); and
WHEREAS, at the time the application was submitted the City's inclusionary housing
policy encouraged onsite inclusionary housing within '/Z mile of the SMART station but allowed
payment of in -lieu fee to satisfy inclusionary requirements.
WHEREAS, since early in the entitlement process, Pacifica Companies agreed to provide
15% of the total multi -family units as on-site affordable housing units (27 units); and
WHEREAS, in 2018 in response to AB 1505 the City amended the General Plan to
revised housing element program 4.3 to require 15% onsite inclusionary housing for residential
development of five or more units and require affordability restrictions for 55 years for rental
developments; and
WHEREAS, housing element program 4.3 provides that developers may fulfill their
inclusionary requirement subject to approval by the city council using alternative methods; and
WHEREAS, also in 2018, to implement the updated housing element program 4.3, the
City adopted a Zoning Text Amendment to codify inclusionary housing requirements for all
residential projects of five units or more to provide a minimum of 15% onsite affordable units and
specifying that for rental projects said 15% onsite affordable units must be split between very -low
and low-income; and
WHEREAS, as adopted, IZO Section 3.040.1) provides for alternative compliance as
other ways to satisfy a project's inclusionary housing requirement and provides for review of
alternative compliance on a project by project basis at the sole discretion of the City Council; and
WHEREAS, IZO Section 3.040.D.3. specifically identifies an alternative mixture of
units by income level as a potential way of satisfying a project's inclusionary housing requirement
through alternative compliance; and
WHEREAS, when IZO Section 3.040 was adopted by the City Council there was an
effectiveness clause that allowed residential development that was deemed complete prior to
January 1, 2019 to be processed under the previous inclusionary housing provisions which allowed
ATTACHMENT 1
payment of housing in lieu fees instead of construction of onsite units; and
WHEREAS, the Haystack Pacifica project was deemed complete on March 9, 2019; and
WHEREAS, the Haystack Pacifica project is subject to the inclusionary requirements as
laid out in IZO Section 3.040; and
WHEREAS, at a duly notice public hearing on May 28, 2019 the Planning Commission
approved Resolution No. 2019-09 approving Site Plan and Architectural Review and associated
warrants for the Haystack Pacifica project, and including the provision of 15% onsite inclusionary
housing; and
WHEREAS, on September 24, 2019 Pacifica Companies submitted a request for
Alternative Compliance to inclusionary housing requirements pursuant to IZO Section 3.040.1),
specifically requesting an alternative mixture of units by income level to provide 15% onsite
inclusionary at the low-income level; and
WHEREAS, the City Council considered Pacifica Companies' request to satisfy the
city's inclusionary housing requirement through Alternative Compliance at their regular meeting
on October 21, 2019 and considered the staff report dated October 21, 2019; and
NOW THEREFORE, BE IT RESOLVED that the City Council approves an alternative
mixture of units by income level to allow all 15% of onsite inclusionary housing to be provided to
low income households as Alternative Compliance to satisfy the inclusionary housing requirement
for the Haystack Pacifica Projects and adopts the following findings:
1. The foregoing recitals are true and correct and incorporated herein by reference.
2. The project is consistent with Housing Element Program 4.3 in that the project provides 15%
of the units onsite for use as affordable housing with affordability restrictions for 55 years
for rental development.
3. Implementing Zoning Ordinance Section 3.040 outlines the city's inclusionary housing
requirements and Subsection 3.040.1) provides for Alternative Compliance at the sole
discretion of the City Council. An alternative mixture of units by income level is explicitly
listed to meet alternative compliance.
4. With approval of Alternative Compliance by the City Council the Project is consistent with
IZO Section 3.040, including provision of 15% affordable housing units on-site distributed
throughout the Project with a unit mix that mirror the mix in the larger Project (2 studios, 9
1 -bedrooms, 14 2 -bedrooms, and 2 3 -bedrooms), and with duration of the affordability
covenants to be at least 55 years.
5. Petaluma's Regional Housing Need Allocation for the 2015-2023 cycle indicates 103 low
income units available at 51% to 80% of average median income and as of June 30, 2019
only 18 permits had been issued for low income units, representing a significant unmet need
within the low-income category.
1-2
ATTACHMENT 1
6. The Haystack Pacifica project site is identified as one of the three Catalyst sites within the
City and determined to "present the best opportunity for transforming the Station Area,
meeting the goals of the General Plan and the CPSP and the community's vision" (Station
Area Master Plan). The SAMP envisions transformation of the Station Area via development
and redevelopment of the area toward pedestrian -oriented, livable, mixed-use environments
that support transit ridership.
7. The Station Area Master Plan states that alternative solutions may be necessary to spur
development on the Catalyst sites in the short term and specifically recommends
consideration of measures to increase project profitability and probability of financing.
8. Haystack Pacifica has identified a financial shortfall for the approved project due to project
costs associated with increasing construction costs, development impact fees, infrastructure
requirements, and onsite inclusionary housing. The requested alternative compliance to the
prescribed income mix for onsite inclusionary would reduce ongoing project costs by
approximately $100,000 per year and is anticipated to enable build out of the Haystack
Pacifica project including the inclusionary units.
1-3
Attachment 2
PA
CIF'Kik
O M P A M I E S
Shaping real estate globally... since 1978
September 24, 2019
City of Petaluma
11 English Street
Petaluma, CA 94952
RE: HAYSTACK PROJECT
Honorable Mayor and Members of the City Council,
We at Pacifica Companies are requesting an alternative compliance for the inclusionary housing aspect
of our project.
We would like to start the conversation as to why our project is requesting alternative compliance for
Ordinance NO. 2663. We acquired this property in 2012, with the intent and commitment to supply
affordable housing in our project. We proposed suppling 15% of the project (27 units) at 80% AMI. This
was discussed and agreed upon with the Housing Administrator as early as 2016 with the first submittal
to the Planning Department.
Unfortunately, our plans were not deemed complete until March of 2019. With the new Ordinance we
will be required to provide 50% at 50% AMI and 50% at 80% AMI, leaving us an unforeseen shortfall of
over $100,000 annually. This along with the rising cost of construction, development impact fees, and
the infrastructure upgrade requirements as conditioned for this project, are making this project
infeasible.
We are requesting City Council allow us to supply inclusionary housing for our project at the original
proposal of the 15% affordable units (27 units) at 80% AMI.
We thank you for your time and your consideration.
Sincerely,
Abbie Hawkins
l
Attachment 3
Implementing Zoning Ordinance Excerpt
Section 3.040 — Inclusionary Housing
This section shall govern inclusionary housing as part of residential development pursuant to Housing Element Policy 4.2 and
associated Program 4.3.
A. Applicability. The provisions of this section shall apply to all residential projects of five or more units, including
residential components of mixed-use projects.
B. Requirements. All residential projects of five or more units shall comply with the following requirements:
1. Location. Unless otherwise permitted in accordance with this section, inclusionary housing units shall be
provided on the site of the residential development.
2. Quantity. The number of onsite inclusionary housing units shall be equal to or greater than 15 percent
of the total number of residential units or lots in the residential project.
3. Income Levels. The following income restrictions shall apply based on the ownership structure of the
residential project.
a. Inclusionary housing units in a rental project shall be made affordable to very low and low
income households as follows: 7.5% of the total number of residential units or lots in the
residential project shall be affordable to very low income households and 7.5% of the total
number of residential units or lots in the residential project shall be affordable to low income
households.
b. Inclusionary housing units in an ownership project shall be made affordable to low and
moderate income households as follows: 7.5% of the total number of residential units or lots in
the residential project shall be affordable to low income households and 7.5% of the total
number of residential units or lots in the residential project shall be affordable to moderate
income households.
4. Duration. Affordable units required pursuant to this section shall be made subject to affordability
covenants that are binding on owners of the units and their successors for a duration of at least 55 years
in the case of rental projects and for a duration of at least 45 years in the case of ownership projects.
5. Fractional Units. In determining the number of inclusionary units required to be provided pursuant to this
section, fractional units shall be rounded up to the nearest whole integer. For fractions less than 0.5 the
number shall be rounded down and the fractional unit shall be paid by applicable in -lieu fee. For
fractions 0.5 or greater, the number shall be rounded up to the nearest whole integer to provide onsite
units. For example, in the case of a 20 unit residential rental project, provision (13)(3)(a) would require
making 7.5% or 1.5 of the units affordable to very low income households, and 7.5% or 1.5 of the units
affordable to low income households. In this example, the inclusionary unit obligation for the project
would be rounded up to 2 units affordable to very low income households and 2 units affordable to low
income households.
C. Inclusionary unit development standards. In addition to other development standards and requirements set forth
in this ordinance and other applicable laws and regulations, all inclusionary housing units shall be consistent with
the following standards:
1. Inclusionary units shall be constructed and occupied concurrently with or prior to the construction and
occupancy of the market rate residential units in the project, unless an alternative schedule based on
extenuating circumstances is adopted as part of the project approval. In phased projects inclusionary
units shall be constructed and occupied in proportion to the number of units in each phase of the project.
2. Inclusionary units shall be distributed throughout the residential project site, to the fullest extent
practicable.
Ordinance No. 2300 N.C.S. 3-1
3. The design, appearance and general quality of the affordable units shall be comparable and compatible
with the design of the market rate units as determined through the Site Plan and Architectural Review
process, provided that all other zoning and building codes are met.
D. Alternative Compliance. At the sole discretion of the City Council, a project's inclusionary housing requirement
may be met through alternative compliance in one of the following ways or a combination thereof:
1. Donation of a portion of the project site or an off-site property to the City or a non-profit organization
deemed acceptable by the City for development of affordable housing; or
2. Payment of a housing in -lieu fee established by the City's adopted fee schedule; or
3. Alternative mixture of units by income levels; or
4. Use of an alternative method, such as provision of a smaller percentage of onsite inclusionary units
coupled with payment of in -lieu fee for the inclusionary units not provided.
E. Submittal Requirements. All applications submitted to the City for development of a residential project of five or
more units or a mixed-use project including a residential component of five or more units shall include the proposed
method of satisfying the requirements of this section. Compliance with the inclusionary housing requirements shall
be reviewed as part of the development review process and presented to the decision making body as part of the
overall project analysis for consistency with both the City's General Plan and this section. Submittal requirements to
demonstrate compliance with this section shall include the following:
1. Total number of residential units in the project
2. Number of onsite inclusionary units
3. Proposed sale price of both market rate and inclusionary units and/or proposed rental price for both
market rate and inclusionary units
4. Location of onsite inclusionary units within the project
5. Size and bedroom count for the proposed inclusionary units
6. Should the applicant wish to request alternative compliance from the City Council, the application shall
include the request and describe the method and details of proposed alternative for compliance. In
considering requests from a developer for alternative compliance to creating inclusionary affordable
units, the City Council's consideration will include whether creating inclusionary affordable units would
render the overall project financially infeasible under then current economic conditions. To that end, the
developer may, at its option and at its own expense, provide its project financial information to an
independent third -party housing/real estate analyst retained by the City to conduct a financial feasibility
analysis. The independent analysis will be conducted utilizing the applicant's data, and any additional
information that may be required of the developer to complete a thorough assessment. The independent
analyst shall employ recognized best practices for the industry and render a detailed recommendation to
the City Council to support its conclusions. Any of the developer's sensitive proprietary information shall
be redacted before making the report public to the extent permitted by law.
Ordinance No. 2300 N.C.S. 3-2
Attachment 4
OTY (1V N.'TALLMA0'J.5.. 0,,,.`".,:. F ..AJS Nfin :Lt"MEf''TI
F'�::)[:c -= Assign a share of the responsibility for providing affordable housing to the developers of
market -rate housing and non-residential projects.
Program:
4.3 Require developers of residential projects, both homeownership and rentals, of five or more
units to provide 15% of the units on-site for use as affordable housing with affordability
restrictions for 45 years for homeownership developments and affordability restrictions for 55
years for rental developments.
Subject to approval by the City Council, developers may fulfill their inclusionary requirement by
one of the following ways:
a. Donate a portion of the project site or property to the City or a non-profit organization for
use as affordable housing.
b. The developer may make an in -lieu payment to the City's Housing Fund in an amount equal to
a 20% inclusionary requirement.
c. Use alternative methods, such as but not limited to, requesting a smaller percentage of on-
site units, and/or donating a separate parcel of land for development of affordable housing
to otherwise satisfy the objectives of the City's inclusionary policies reflected in this program.
Responsibility: City Council, Planning Division, and Housing Division,
Funding: Housing Fund
Schedule: 11/19/18 —1/31/2023 (This program was revised 11/19/18 per resolution by
the City Council)
City of Petaluma Housing Element 4-1