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HomeMy WebLinkAbout44 - PH-3 - Proposed 2015 Update to the Park in-Lieu - 6/2/2015CITY COUNCIL AGENDA REPORT MEETING DATE: JUNE 2, 2015 ITEM NUMBER: PFI -3 SUBJECT: PROPOSED 2015 UPDATE TO THE PARK IN -LIEU IMPACT FEES (PARK FEES) DATE: JUNE 2, 2015 PRESENTATION BY: DANIEL INLOES, AICP, ASSOCIATE PLANNER FOR FURTHER INFORMATION CONTACT: DANIEL INLOES (714) 754-5088 daniel.inioes@costamesaca.gov RECOMMENDATION: Identify a methodology for park fee calculations and adopt updated park fees, by adoption of resolution. .- Park Expenditure Costa Mesa Housing Trends: Reduction of Park Fees Single -Family Residence $13,572 Trends: Based on 10 -year Historic Trends in Park Expenditures $11,285 Based on 1 0 -year Historic Trends in Housing D - $18,006 Condominiums - Multi -Family Residence, Owner $13,829 $8,777 $14,005 State Law allows Council to adopt reduced park fees. Apartments less than 50 units - Multi -Family Residence, Renter No Fee $10,598 $14,005 Apartments 50 units or more - Multi -Family Residence, Renter No Fee $10,598 $5,057 BACKGROUND: Project Description The proposal is an update to the City of Costa Mesa's park in -lieu impact fee, ("park fee") based on consultation with David Taussig & Associates and Stanley R. Hoffman Associates. California Government Code Section 66477 authorizes the legislative body of the City to allow the payment of park fees in -lieu of the dedication of land for park and recreation purposes for specified residential projects. These new fees will ensure a fair fee assessment per development type while also reflecting the current cost of parkland acquisition and construction. These new fees will ensure compliance with State law and continue to provide funds used to cover the costs of land acquisition and parkland upgrades which support accessible public park space as population grows. Adoption of updated park fee would replace the current park fee. The proposed park fee varies based on the type of residential development, including new categories for apartments: • Single Family Residences • Multi -family Residences (Owner) • Apartments 50 units or less • Apartments 50 units or more Quimby Act of 1975 The municipal responsibility to set aside parkland and open space for its residence is additionally burdened by future development, and therefore Cities have been authorized since the passage of the 1975 Quimby Act to pass ordinances that require developers to set aside land, donate conservation easements, or pay fees for park acquisition or improvements. While the revenues generated cannot be used for operation and maintenance of park facilities, they may be used to cover the costs of land acquisition and parkland construction for upgrades related to the new parkland demand. Current Park Fees The current park fees were adopted in May of 2005 and only apply to residential projects requiring a subdivision. These fees currently do not apply to apartment projects which are approved without a subdivision map. The City Council approved the park fees for new residential subdivisions at $13,572 for single family homes per unit and $13,829 for multi -family homes per unit. The current park fee only applies to new residential projects as a condition of approval for tentative map or parcel maps. This means that common -interest condominiums, single-family detached and townhome attached subdivisions where included, but not new apartment developments which do not require a subdivision. MW Single Family Residence per Unit $13,572 Multi -Family Residence per Unit $13,829 While this process is fair to the developments that conduct subdivisions by charging them fees calculated as a per-unit cost of park development, this methodology does not capture all types of new residential development within the City. Since these developments also create parkland demand from the new residents, it would be appropriate to apply a park fee. Planning Commission provided feedback on Alternative #1. Subsequent to the Planning Commission meeting, staff further developed Alternative #2 to address some issues that were raised at the meeting. Methodology in Compliance with Municipal Code and State Law Compared to the previous methodology used to calculate park fees, the proposed Park Fee Update has some distinct differences. However, it is important to note that the method being used for this update still correlates with state law AB 1600, the General Plan and the Municipal Code requirements and the park fees structure within Article 5 of Chapter XI of Title 13 of the City's Municipal Code. ANALYSIS - Objectives of Updated Park Fee Program Following are the objectives of the park fees update: • To establish apartment categories. The park fees would apply to all major forms of residential development within the City including apartments. • To update the persons per household factor based on current demographic information. • To update the per—unit-cost per development type. • To update the parkland acquisition cost and construction cost based on historic park funding trends, development trends within the City, and future park acquisition goals. Types of Residential Developments Subject to Park Fee The updated fee program is intended to account for all types of residential development that have an impact on parkland demand within the City. The appropriate mitigation for a parkland impact is payment of in -lieu parkland fees to the City. The new program proposes to attach not only parkland fees as conditions of approval for subdivisions but conditions of approval to any proposed residential development planning application as additional development fees, including apartment projects. This modification will increase the scope of projects included within the list of potential development projects charged the fees. Residential Development Subject to Park Fees ImpactResidential Projects subject To Park Impact Fees Residential Projects Exempt from park • New common -interest condominium 0 Conversion of apartments to • New single-family "detached" subdivisions condominiums without changing the unit • New townhouse "attached" subdivisions count. • New condominiums in mixed-use 0 Granny units and accessory apartments developments 0 Single-family home remodels or additions • New condo conversions increasing units 0 Multi -family remodels or additions • New apartments* 'Note: A new category for Apartments is being proposed in the Updated Park Impact Fee Program Eligible Expenditures for the Park Fee The fees will be used only for the purpose of developing new or rehabilitating existing neighborhood or community parks or other locations with higher park need that meet the State Law requirements. Park fees collected will be committed to parkland developments that are in accordance with a parkland development schedule and the Park Master Plan when it is adopted. Small residential developments with an addition of five or less may not be subject to this fee. The value of land dedicated or park improvements conducted by the developer shall be deducted from the cost of the overall fee. New Methodology to be Adopted State law requires that new parkland impact fees be adopted and that the fee schedule be set pursuant to Council resolution. The general methodology for calculating park fees is described in the Quimby Act, but AB 1600 also allows Cities to adopt their own methodology by ordinance. Within Article 5 of Chapter XI of Title 13 of the City's Municipal Code the procedures for obtaining park land dedications or assessing and collecting park fees are established. Because this section strictly applies to new residential subdivisions and not apartments, an ordinance is required to be adopted to allow application of park fees to rental projects. Therefore, regardless if the residential project is owner- or renter -occupied, the City will acquire or improve new park land to fulfill the park and recreational needs of the new residents, through land dedications or land acquisition or improvement of park land through the park fees. PROPOSED ALTERNATIVES FOR PARK FEES The following summary table provides alternatives for Council to consider in the adoption of new park fees: BACKGROUND: CALCULATION OF PARK FEES ALTERNATIVE #1: Park Fees Based on Historic Park Fee Expenditures David Taussig & Associates and Stanley Hoffman were contracted by the City to assist in the park fee update process. In consult with these subject matter experts, staff considered several factors when calculating parkland impact fees. The following section provides a brief overview of how these variables were identified and how the proposed park fee is calculated. Alternative #1 — Park Fee Methodology Based on Park Fee Expenditure Trends Over the past 10 years Cost per Acre =390,000+.2238(2,500,000) =949,500 949500 cost 4.26 acre 2.79 people $11,285.19 per unit 1 acre 1000 people 1 unit win 949500 cost 4.26 acre 2.17 people $8,777.37 per unit 1 acre 1000 people 1 unit .. 949500 cost 4.26 acre 2.62 people $10,597.56 per unit 1 acre 1000 people 1 unit Methodology for Per Unit Cost • Park land -to -population ratio established by 2000 General Plan. General Plan Policy 0SR-1A. 1 establishes the park land -to -population ratio of 4.26 acres per 1,000 people. Any adjustment to this rate requires a General Plan amendment. • Population density standard based on the US Census. Since the last update, demographic trends resulted in changes in the average household size of the various types of residential units within the City. According to the data gathered by Stanley Hoffman & Associates from the 2013 ACS 5 -year estimates from the US Census, there are; 2.79 people per unit for single family houses, 2.17 people per unit for owner -occupied multi- family dwelling units, and 2.62 people per unit for renter -occupied multi -family dwelling units. Peoole Per Household by Dwelline T Single Family 19,861 55,491 2.79 Multi -Family Owner 1,138 2,469 2.17 Multi -Family Renter 18,349 48,125 2.62 The development incorporated within the Single Family dwelling type includes all residential developments of detached single family homes and attached single family townhomes. The Multi -Family Owner dwelling type includes all residential developments which are multi -family developments created for the purpose to sell each dwelling independently such as; condominiums, duplexes, triplexes, quadplexs, and 5 or more multi -family developments. The Multi -Family Renter dwelling type includes all residential developments which are apartments. • Park land acquisition & construction costs based on 2014 study by David Taussig & Associates. Pursuant to the Quimby Act and the Municipal Code, an appraisal determined the fair market value of park land acquisition and construction. David Taussig & Associates conducted a study of over 8 previous developments within the local area to ascertain the current cost of acquisition and construction of parkland. The cost to acquire an acre of land within the City of Costa Mesa is estimated at $2,500,000.00 per acre. Whereas the cost of construction or upgrades on existing park space is estimated at $390,000.00. The total cost of acquiring and constructing park space would be $2,890,000.00 per acre. Park Fee Expenditures in the Past 10 Years Years 2005 — 2015 Fairview, stairs and signage 2010 $488,550 2.00 $488,549.73 Fairview, constructed wetlands 2013 $5,589,220 45.00 $5,589,220.33 Joann Street Bicycle Trail 2011 $1,262,934 2.00 $1,262,934.40 Wilson Park, picnic shelter 2014 $45,000 0.05 $45,000.00 Del Mesa Park, new picnic shelter 2014 $45,000 0.05 $45,000.00 Brentwood Park 2011 $3,262,581 1.20 Brentwood Park Upgrades 2011 $315,734 1.20 $315,733.60 Volcom Skate Park Dev 2006 $1,761,429 1.25 $1,761,428.57 Angels Playground 2008 $1,869,232 2.00 $1,869,231.73 Lions Park/Davis Field Baseball 2011 $526,223 2.50 $526,222.66 Bark Park 2008 $208,914 2.00 $208,914.13 Shalimar Park, new playground 2014 $120,000 0.16 $120,000.00 $3,262,580.52 Total $15,494,816 59.41 $12,232,235.15 $3,262,580.52 The City has used a majority of its budget on park upgrades as opposed to acquisition. This is due to the following: • There is very little open space available; • The market rate for developed lots is high; • Most projects are infill or redevelopment which means upgrades to existing parks might better serve the public. The City's 12 projects funded by park fee funded in the last ten years are listed in the table above. Total expenditures within those ten years were $15,494,816.00. If the City strictly acquired and upgraded land equally within those ten years than 5.36 acres of land could have been acquired and developed. However due to the lack of land and priority to upgrading existing parks only 1.2 acres of land was acquired. This represents 22.38% of the 5.36 possible acres the City could have acquired. Since these issues are still salient and will continue to influence park fee fund expenditures in the future expecting residential developers to cover an equal proportion of land acquisition to construction is impractical and not in suite with expectations which it must be as mandated by the Quimby Act. Therefore, having a cost per acre which includes the full cost of construction and only 22.38% of land acquisition is the most justifiable approach. This comes out to $949,500.00 per acre. Average Units Developed Per Year Based on Actual Units Developed aver the last 15 years_ 7 9 units urns 47 � units6 ■ ■ ■ I. t■■■� Single f=amily Housing Condominium Apartments 2000 & _ 2001 • 20D2 + + _ 20D3 • 20D4 • • _ 20D5 • • 20D6 • • • 2DD7 • 2006 # # 2009 & • • 2010 • 2011 + W12 • • W13 + 2014 • • i Total 712 94 1187 3596 5% W% Source: CAR and UOF data rram 2040 to 2x15. ALTERNATIVE #2: Park Fee Methodology based on Historic Costa Mesa Housing Trends Previous park expenditures were hampered by only receiving funds from 40% of the overall units developed in the last 15 years and therefore limited the potential projects that could be developed by this fund. This is shown in the infographic above. This graphic also shows that if apartments are paying park fees in the future the potential fund overall will grow and perhaps will be sufficient for more opportunities for acquisition in the future. Since we do have a goal of 4.26 acres of land per 1,000 people and there are already some potential locations being study for future land acquisition an alternative proposed park fee is provided. While this is still a weighted fee since charging the full cost of acquisition would result in park fees above 30,000 dollars and would make development too costly in the City. Evidence of this being a fee that high would be the highest fee by far in Orange County. The City supports the growth of further residential development to provide to a variety of dwelling units to help meet the current housing demand. This alternative proposes increasing the weighting of the cost of acquisition to 45% for single family residences and multi -family projects. This provides further funding for park upgrades and acquisition but does not raise the fee much higher than the existing fees. As for apartments, the alternative created takes into consideration that Park Fees have never been charged against apartments and that stimulating specific types of apartment development is beneficial to the City and the future tenants. Currently the City of Costa Mesa has multiple luxury apartment developments at various stages of the planning process. This is a far contrast to the previous 15 years which only witnessed 3 apartment developments in total. Supporting these types of developments and recognizing that they provide a long list of common amenities on site was incorporated into this calculation. Some of these projects are listed below. Blue Sol (Occupied) Symphony Apartments Wyndham East Baker Street Anton Midrise Residential Azulon (Occupied) Apartment Proiects 421 Bernard Street 113 585 and 595 Anton Boulevard 393 3350 Avenue of the Arts 283 125 Baker Street 240 580Anton Boulevard 250 1500 Mesa Verde Drive 230 To further ensure that this park fee addresses the types of developments the City is interested in supporting the calculated fee will only be applied to apartment projects building 50 units or more. Any project developing less than 50 units will be charged the multi -family fee (or Condominium fee). The Zoning Code already recognizes 50 units as a threshold for large developments (Sec 13-87 (5)) and 50 units allows for a development of sufficient size to supply the amenities incorporated into the estimate of this recommended Park Fee. The table below shows the data and conditions gathered to develop the alternative apartment park fee. In place of a person per household average each bedroom type apartment unit is assessed its own average person per unit type and each of those averages are weighted by the percent share those types of units have in an average apartment complex within the City. To account for the common space amenities these types of developments have the alternative reduces the weighting by half from 22.38% to 11.19%. The resulting apartment park fee is $5,056.61. Data lysed to Calculate the $5,056.61 Park Fee for Apartments M 1.2 ANG PEOPLE PER STUDIO -k # # 2.1 AVG PEOPLE PER 2 BEDROOOM UNIT iRmienilues - Par kAcquisition Weighted at 50% Less � I1 a aI101AOY1D,1:4I? 1021M71911:1 SO UNITS OR MORE 3 Bedroom 4% 3.2 AVG PEOPLE PER 3 BEDROOM UNIT *I 15 AVG PEOPLE PER 1 BEQRDOM UNrr Source: Percent Share calculated from data collected on 60 apartment complexes with S0 un its or more within the City of Costa Mesa: Data from Costar. Average peopl a per u nit type gathered from case study of recent a partment d evelopment in the City with less tha n 1 percent vacs ncy a nd more tha n 100 units: BI ue Sol. This proposed park fee would meet the proportionately requirement from Quimby, support our General Plan goals, and better represent the current goals for future park acquisition and housing growth. COMPARISON OF PARK FEES IN OTHER OC CITIES The following table indicates park impact fees of other Orange County cities. Because cities vary in their approach to calculating park impact fees, and demographic and housing characteristics also differ from city to city, the following table is provided for reference purposes only and is not intended to be a direct comparison. City Park Fee (Per Unit) City of Laguna Beach $4,580 City of Santa Ana Varies; up to $4,823 City of Seal Beach $5,000 to $10,000 City of Anaheim $5,388 to $6,936 City of Garden Grove $5,500 City of Tustin $5,931 to $6,386 City of San Clemente $6,823 City of Newport Beach Varies; $6,894 to $26,125 City of Brea $6,945 City of Fountain Valley $7,421 City of Laguna Hills $7,700 City of Orange $8,894 City of Seal Beach $10,000 City of Huntington Beach No Subdivision: Detached $11,540 Attached $8,576 Subdivision: Detached $17,857 Attached $13,385 City of San Juan Capistrano $11,600 City of Irvine Fee varies based on acreage value of land to be dedicated. May be as low as $1,150 per acre of land dedication. City of Costa Mesa $13,572 to $13,879 Automatic Adjustment of Park Fee based on Consumer Price Index Every Year The current park fees have not been adjusted for ten years. The consultants propose that the park fee be increased on July 1st of each year, starting July 1, 2016, based on the change to the Los Angeles — Riverside -Orange County Consumer Price Index in comparison to the previous calendar year. New Park Fees to be applied for Pending Entitlement Projects State law requires that the new fees shall not go into effect until after 60 days of Council adoption of the resolution. Park fees may be applied to all pending projects, including rental projects. Staff recommends that the new park impact fees shall apply to any live/work or residential development project which meets any of the following criteria on or before the effective date of this resolution: (1) any pending and future live/work or residential development project which has not received final and effective entitlement approvals; and/or (2) any previously approved live/work or residential development project which is currently in plancheck where building permit(s) are still pending and have not been issued; and/or (3) any previously -approved live/work or residential development project which has expired on or before the effective date of this resolution. Unless the park fees are reduced, the new park fees do not apply to projects under previously - approved and valid vesting tentative tract maps. POLICY IMPLICATIONS OF UPDATED PARK FEE The most significant change is that the updated park fee program would create new fees for apartment projects. This is justified to address the nexus between a project's impacts and the exactions necessary to provide its future residents and current residents with the same level of parkland accessibility. The decrease in per unit cost to single family and multi -family owner residential developments can be justified based on the current and projected parkland upgrades and acquisitions in the future do to the City's remaining open space, cost of land, and accessibility to park land. Adding New Park Fee for Apartments Failure to add fees for apartments may result in deficient parkland for future park demand. All newly developed apartment complexes are adding a significant amount of population to the City. This increase in potential park use without increasing the funds to improve or add to the City's park land stock will diminish park accessibility for all residents. Impacts to the rents attached to these new apartments must also be viewed in light of other budget considerations. However, if the goal of Council is to have new development "pay its own way", then the park fees should be expanded to account for the cost of acquiring new park land to support the new residents' of apartments and their demand for park and recreation facilities as well. Additional Fee per unit to Apartments may affect new apartment construction. The new park fee will increase the cost to apartment developers and test the elasticity of apartment rents within the City. Since the cost is per unit this may make small apartment's complex economically infeasible and make new apartment developments proposed within the City become exclusively large luxury complex developments. This is currently the existing trend and these types of developments may receive through this update an even greater incentive to provide open space and public amenities to their tenants to decrease park fees. Weighting Acquisition Costs for Fees Decreased fees may positively affect new owner -centric housing construction. This assists the community's desire and Council's goal to increase the supply of ownership housing opportunities and to encourage mixed-use and/or live/work units. All proposed updates to the park fees are extending a future decrease in fees since neither is setting the fees at the true cost of acquisition. This decreases the burden on all types of residential development projects that will be built in the city. 1. At 22.39% • The significant decrease in multi -family owner units may increase mixed-use and condominium development. The over 5,000 dollar decrease in condominiums may facilitate increase development of this type and thereby provide starter locations for new families within the City or at least change the current trend of development from renter - centric development to owner -centric multi -family development. • Decrease in fees may mean decrease in home price. The issue of housing affordability is very salient within the community. Decreased costs, to some degree, may be savings passed to the home buyer. • Large initial park fee for apartment developments may mean a decrease in projects. Since park fees on apartment units is less common a large park fee on these types of development may mean a decrease in future potential apartment projects of all types or an increase passed on to the renter. 2. At 45% for Single Family and Multi -Family The minimal increase but smaller increase to condominium development may incentivize multi -family development within the City.The minimal increase of only a couple hundred dollars in condominiums may facilitate increase development of this type and thereby provide starter locations for new families within the City or at least assist in changing the current trend of development from renter -centric development to owner -centric multi -family development. Providing multi -family housing will also considerably improve jobs to housing ratio that is disproportionate throughout the County. The increase in park fees for all development types would increase the opportunity to acquire land to further improve the quality of life and accessibility of parkland to residence. Setting the park fees so that with 2 average years of development the City may accrue more than enough money to acquire an acre of land allows for further incentive to retain and save park funds for acquisition since smaller park fee collections may result in a timeframe too long for park upgrades to wait and result in park fees being continually expended on necessary or salient upgrades. 3. At 11.19% for Apartments 50 units or above The decrease in apartment park fees for units over 50 will encourage luxury apartment developments and will continue to support subdivisions of smallerlots and proiects. This park fee would continue to ensure that the recent trend of luxury apartments will not be hampered too heavily by the addition of an apartment park fee. Setting this park fee for larger apartment developments will ensure that smaller developments will have no incentive to development apartments rather than condominiums or single family homes. LEGAL REVIEW: The City Attorney's office has approved the attached resolution as to form. ALTERNATIVES: The City Council may select one of the following actions with the Park Fees; • Existing Fees: Keep current park fees; however, Council may wish to add new park fees for apartments as identified in Alt #1 or Alt #2. • Alternative #1: Adopt this alternative based on trends in park fee expenditures. • Alternative #2: Adopt this alternative based on Costa Mesa housing trends. • Alternative #3: Council may reduce (but not increase) any of the park fees. • Continue hearing: Provide direction to staff to research and identify other alternatives. The resolution would be modified to include the selected alternative and park fees. CONCLUSION: The City's park fees have not been updated for over ten years. Council may select a methodology for calculating park fees and adopt new park fees. Important note: Staff recommends that the park fees be updated automatically every year based on the consumer price index and that the new park fees be applied to pending/future development projects that have not received zoning entitlements to date. DANIEL INLOES GARY ARMSTRONG, AICP Associate Planner Deputy CEO/Director of Development Services Attachments: 1. Draft Council Resolution 2. Draft Park Fees Report from David Taussia 3. Demographic Report from Stanley Hoffman Distribution: Director of Economic & Development/Deputy CEO Assistant Development Services Director Sr. Deputy City Attorney Public Services Director City Engineer Transportation Services Manager Fire Protection Analyst Staff (6) File (2)