Title
Public Hearing to Consider a Recommendation to Approve Willdan Financial’s City of Alameda Park and Recreation Facilities Impact Fee Update and Nexus Study; and
Introduction of Ordinance Amending Alameda Municipal Code Chapter XXVII, Section 27-3 (Citywide Development Fees) to Re-Adopt Pre-Existing Park and Recreation Facilities Impact Fee. [Continued from March 20, 2018. Being continued again to June 19, 2018.] (City Manager)
Body
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Public Hearing to Consider a Recommendation to Approving Willdan Financial’s City of Alameda Park and Recreation Facilities Impact Fee Update and Nexus Study; and
Introduction of Ordinance Amending Alameda Municipal Code Chapter XXVII, Section 27-3 (Citywide Development Fees) to Re-Adopt Pre-Existing Park and Recreation Facilities Impact Fee. (City Manager)
BACKGROUND
Like most California cities, the City of Alameda imposes impact fees on new development to help fund the cost of capital improvements that will be necessary to serve growth resulting from such development. These fees are collected at the time a building permit is applied for, and are typically paid by developers, builders, or property owners seeking to develop their property. Development impact fees are a method by which new development pays its “fair share” of the costs for needed public capital facilities.
In July 2014, the City Council adopted Ordinance No. 3098, which comprehensively updated the City’s Development Impact Fee (“DIF”) program. This program includes four categories of fees on new development to pay for public improvements:
1) Public safety facilities (e.g. police and fire);
2) General public facilities;
3) Transportation facilities; and
4) Parks and recreation improvements.
These four categories all apply to future new development within the City outside of Alameda Point. (Ordinance No. 3098 also set forth a separate development fee to be imposed on new development within Alameda Point, which will not be impacted by this ordinance amendment.) To support its adoption of Ordinance No. 3098, City retained a consultant, Willdan Financial Services, to prepare a Development Impact Fee Update and Nexus Study (“the 2014 Nexus Study”). The 2014 Nexus Study presented an analysis of new development’s “fair share” of future public facilities needed to serve new development and calculated the maximum justified impact fee amounts to be charged.
Litigation was filed (by petitioner Boatworks, LLC) challenging portions of Ordinance No. 3098. On December 1, 2016, the Superior Court of California, County of Alameda, issued a decision finding that the 2014 Nexus Study did not adequately justify the parks and recreation component of the DIF. On January 31, 2017, the court issued its final judgment ordering the City to excise and vacate those portions of Ordinance No. 3098 “that concern or purport to authorize development impact fees for parks and recreation.” The City has appealed this judgment, and its appeal is currently pending before the First District Court of Appeal.
In the meantime, City staff with the aid of consultants, and outside litigation counsel have collaborated to prepare a revised nexus study to address the legal issues identified in the trial court’s decision. That work leads to this proposed City Council action.
DISCUSSION
The City retained Willdan Financial Services (Willdan) to prepare a revised impact fee nexus analysis that calculates the appropriate parks and recreation development impact fees and remedies taking into consideration the the legal flaws identified by the court. Willdan’s revised nexus analysis is set forth in the City of Alameda Park and Recreation Facilities Impact Fee Update and Nexus Study dated December 28, 2017 (“2017 Nexus Study”), attached hereto as Exhibit 1. The City also retained a separate consulting firm, Seifel Consulting, Inc., to peer review Willdan’s analysis and to assist with the preparation of the 2017 Nexus Study. The City’s outside legal counsel who is defending the City’s DIF in the pending litigation, Jarvis, Fay, Doporto & Gibson, LLP, also participated in the drafting of the 2017 Nexus Study to ensure that it complies with legal requirements and with the court’s decision.
The 2017 Nexus Study demonstrates that, even after remedying the legal flaws in the 2014 Nexus Study identified in the trial court’s decision, the DIF amounts currently collected by the City for park and recreation improvements are reasonable. The Executive Summary to the 2017 Nexus Study summarizes its analysis, and Appendix A to the 2017 Nexus Study sets forth a detailed explanation of the differences between the two studies and the changes made by the City to address the court’s concerns.
One major difference between the two studies is that the 2017 Nexus Study now uses two different alternative methods for calculating the parks and recreation development fee, both of which are frequently used by local communities in California. The 2017 Nexus Study presents the analysis under each of these methods and describes the updated information that is used to calculate the fee under each method. In summary, the two methods and technical data used in the 2017 Nexus Study are as follows:
• Existing standard method. This method is similar to the nexus analysis approach used in the 2014 Nexus Study, but the approach has been revised to incorporate current information on the City’s existing park and recreational facilities as of 2017, and to address flaws in the 2014 Nexus Study identified by the court. The existing standard method calculates the “maximum justified” fee level assuming the City provides additional parks and recreation facilities to serve future residents at the same service level standard that the City currently provides to existing City residents in 2017. As the fee amount is calculated based on the existing level of service, the amount of the fee does not depend on the estimated cost of future park and recreation facilities that the City intends to develop. Chapter 2 of the 2017 Nexus Study presents the information and analysis used to calculate fees based on the existing standard method.
• System standard method. This method is an alternative approach that performs the nexus analysis based on the City’s future system of parks and recreational facilities rather than what currently exists in 2017. The system standard method calculates the maximum justified fee level assuming the City provides additional facilities to serve new development based on a future system of park and recreation facilities that the City plans to have in place by 2040. As the fee amount is calculated based on the future system of park and recreation facilities, the amount of the fee is based on the planned 2040 inventory of park and recreation facilities, excluding any facility that the City expects to replace or phase out of service by 2040. Chapter 3 of the 2017 Nexus Study presents the information and analysis used to calculate fees based on the system standard method.
The City can utilize either the existing standard or the system standard method in setting the amount of the Park and Recreation Facilities Impact Fee, as there is no preferred standard method for calculating impact fees in California. The courts have recognized that local agencies have broad discretion in deciding what method to use, subject only to the requirement that the fee calculation method be “reasonable.”
However, in this case, the 2017 Nexus Study demonstrates that the two different methods produce very similar results. As shown below in Table E.1 (copied from the 2017 Nexus Study), the fee results under each method used in the 2017 study are similar, and they are also similar to the City’s current fee levels for park and recreation facilities after taking into account allowable annual adjustments for inflation from 2014 to 2017.
Table E.1 presents and compares the fee levels that were calculated based on the 2014 Nexus Study with the fee levels calculated based on this 2017 Parks Nexus Study, as described below:
• The first column of Table E.1 identifies the 2014 Maximum Justified fee level for the Park and Recreation Facilities Impact Fee component of the DIF, as presented in the 2014 Nexus Study.
• The second column identifies the actual 2014 Adopted fee level for the Park and Recreation Facilities component of the DIF, as adopted by the City Council in Ordinance No. 3098 in 2014. (This reflects a lower single family fee as the City Council adopted a lower fee than the 2014 Nexus Study concluded was the maximum justified fee level for single family homes.)
• The third column identifies the City’s current 2014 Adopted (Adjusted to 2017 Dollars) fee level for the Park and Recreation Facilities component of the DIF, increased from 2014 levels based on the annual allowable adjustment for inflation in the DIF program.
• The fourth column identifies the Existing Standard 2017 Maximum Justified fee level as calculated in the 2017 Parks Nexus Study using the existing standard method for the Parks and Recreation Facilities Impact Fee.
• The fifth column identifies the System Standard 2017 Maximum Justified fee level as calculated in 2017 Parks Nexus Study using the system standard method for the Parks and Recreation Facilities Impact Fee.
The comparison of the fee calculations shown in Table E.1 demonstrates that the City’s existing Park and Recreation Impact Fee schedule is reasonable because the City’s current fee levels are remarkably similar to the fee calculation results under each method used in the 2017 Parks Nexus Study. Furthermore, the City’s currently adopted fee for single family is lower than the maximum justified fee levels under any of the impact fee methodologies, and the calculated fee amounts for multifamily are within 2% of each other.
In conclusion, the 2017 Nexus Study provides the necessary findings for the City to adopt updated fee levels, and the City could utilize either method (existing standard or system standard) to update the Park and Recreation Impact Fee schedule. However, staff is recommending that the City Council simply re-adopt the City’s current fee amounts ($12,377 per single family unit and $9,822 per multifamily unit, which reflect what was originally adopted by the City in 2014, adjusted to 2017 dollars) since both amounts are less than the maximum justified fee levels calculated using the System Standard methodology for the Parks and Recreation Facilities Impact Fee, as shown above in Table E.1.***
FINANCIAL IMPACT
Adoption of the proposed ordinance will have no direct financial impact on the City, as it will simply leave in place the development fee amounts the City is currently collecting. In the event that the City’s pending appeal of the judgment is not successful, adoption of this ordinance is expected to help preserve and leave in place the City’s existing DIF program.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
Guiding Policies 2.4.q, 2.5.zzz, 2.7.f and 2.8.i of the City’s General Plan Land Use Element “[r]equire that all new development pay appropriate development impact fees.”
ENVIRONMENTAL REVIEW
This project is statutorily exempt under California Environmental Quality Act Guidelines section 15273 (a)(1) “Rates, Tolls, Fares and Charges.”
RECOMMENDATION
Hold a Public Hearing and recommend City Council take action to:
(1) Approve Willdan Financial’s City of Alameda Park and Recreation Facilities Impact Fee Update and Nexus Study; and
(2) Introduce Ordinance Amending Alameda Municipal Code Chapter XXVII, Section 27-3 (Citywide Development Fees) to Re-Adopt Pre-Existing Park and Recreation Facilities Impact Fee.
Respectfully submitted,
Jill Keimach, City Manager
Financial Impact section reviewed,
Edwin Gato, Acting Finance Director
Exhibit:
1. Nexus Study
*** Of note, the City’s currently adopted fee for single family is lower than the maximum justified fee levels under any of the impact fee methodologies. Furthermore, the “system standard” methodology in the 2017 Nexus Study more than justifies the multifamily fee that the City is already charging. Although the “existing standard” methodology calculation indicates a slightly lesser fee for multifamily when compared to the City’s currently adopted fee, it is reasonable for the City to maintain the multifamily fee at its current level as the difference is minimal (would represent a small reduction of approximately one half of one percent or $53) and given the conservative nature of the analysis employed in the 2017 Nexus Study, particularly for land valuation. As described in Appendix C of the 2017 Nexus Study, the 2017 Nexus Study uses a conservative estimate of land value at $2 million per acre and does not assign any land value ($0/per acre) to much of the land currently owned by the City, including approximately 20 acres of land for the Jean Sweeney Park which the City acquired for $1 million only after significant additional litigation expense.