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HomeMy WebLinkAboutAgenda Packet - CC - 2019.03.18City Council City of Burlingame Meeting Agenda - Final BURLINGAME CITY HALL 501 PRIMROSE ROAD BURLINGAME, CA 94010 Council Chambers6:15 PMMonday, March 18, 2019 STUDY SESSION - 6:15 p.m. - Council Chambers Update on Negotiations Regarding Burlingame Aquatic Center Construction Projecta. Staff ReportAttachments: Note: Public comment is permitted on all action items as noted on the agenda below and in the non-agenda public comment provided for in item 7. Speakers are asked to fill out a "request to speak" card located on the table by the door and hand it to staff, although the provision of a name, address or other identifying information is optional. Speakers are limited to three minutes each; the Mayor may adjust the time limit in light of the number of anticipated speakers. All votes are unanimous unless separately noted for the record. 1. CALL TO ORDER - 7:00 p.m. - Council Chambers 2. PLEDGE OF ALLEGIANCE TO THE FLAG 3. ROLL CALL 4. REPORT OUT FROM CLOSED SESSION 5. UPCOMING EVENTS 6. PRESENTATIONS 7. PUBLIC COMMENTS, NON-AGENDA Members of the public may speak about any item not on the agenda. Members of the public wishing to suggest an item for a future Council agenda may do so during this public comment period. The Ralph M . Brown Act (the State local agency open meeting law) prohibits the City Council from acting on any matter that is not on the agenda. 8. APPROVAL OF CONSENT CALENDAR Consent calendar items are usually approved in a single motion, unless pulled for separate discussion . Any member of the public wishing to comment on an item listed here may do so by submitting a speaker slip for that item in advance of the Council’s consideration of the consent calendar. Page 1 City of Burlingame Printed on 3/14/2019 March 18, 2019City Council Meeting Agenda - Final Approval of City Council Meeting Minutes for March 4, 2019a. Meeting MinutesAttachments: City Council Appointment of Rosalie O ’Mahony to Represent the City of Burlingame on the Boards of the Bay Area Water Conservation Agency and the Bay Area Regional Water Financing Authority b. Staff Report BAWSCA Appointment Letter Attachments: 9. PUBLIC HEARINGS (Public Comment) Public Hearing and Introduction of an Ordinance Establishing Residential Impact Fees on New Residential Development to Support Workforce Housing a. Staff Report November 14, 2018 City Council Minutes February 11, 2019 Planning Commission Minutes Ordinance Resolution - Area Standard Wages Seifel Consulting Report SAMCAR Letter - June 27, 2018 Residential Overview - March 2019 Attachments: Introduction of an Ordinance Amending Municipal Code Section 10.55.030 Regarding Promulgation of Park Rules b. Staff Report Proposed Ordinance Attachments: 10. STAFF REPORTS AND COMMUNICATIONS (Public Comment) Consideration of Appointment to the Planning Commissiona. Staff ReportAttachments: 11. COUNCIL COMMITTEE AND ACTIVITIES REPORTS AND ANNOUNCEMENTS Councilmembers report on committees and activities and make announcements. Mayor Colson's Committee Reporta. Committee ReportAttachments: Vice Mayor Beach's Committee Reportb. Committee ReportAttachments: Page 2 City of Burlingame Printed on 3/14/2019 March 18, 2019City Council Meeting Agenda - Final 12. FUTURE AGENDA ITEMS 13. ACKNOWLEDGMENTS The agendas, packets, and meeting minutes for the Planning Commission, Traffic, Safety & Parking Commission, Beautification Commission, Parks & Recreation Commission, and Library Board of Trustees are available online at www.burlingame.org. 14. ADJOURNMENT Notice: Any attendees wishing accommodations for disabilities please contact the City Clerk at (650)558-7203 at least 24 hours before the meeting. A copy of the Agenda Packet is available for public review at the City Clerk's office, City Hall, 501 Primrose Road, from 8:00 a.m. to 5:00 p.m. before the meeting and at the meeting. Visit the City's website at www.burlingame.org. Agendas and minutes are available at this site. NEXT CITY COUNCIL MEETING - Next regular City Council Meeting Monday, April 1, 2019 VIEW REGULAR COUNCIL MEETING ONLINE AT www.burlingame.org/video Any writings or documents provided to a majority of the City Council regarding any item on this agenda will be made available for public inspection at the Water Office counter at City Hall at 501 Primrose Road during normal business hours. Page 3 City of Burlingame Printed on 3/14/2019 1 STAFF REPORT AGENDA NO: STUDY MEETING DATE: March 18, 2019 To: Honorable Mayor and City Council Date: March 18, 2019 From: Lisa K. Goldman, City Manager – (650) 558-7243 Subject: Update on Negotiations Regarding Burlingame Aquatic Center Construction Project RECOMMENDATION Receive an update on the negotiations between the City and the San Mateo Union High School District (SMUHSD) regarding the Burlingame Aquatic Center construction project. BACKGROUND In November 1997, the City and the San Mateo Union High School District (the District) entered into an agreement to jointly fund the construction and ongoing repair, improvements, and operations of a new 25-yard pool at Burlingame High School. The agreement included terms regarding scheduling of the facility, maintenance, record keeping, and the distribution of costs. In August 1999, after an anonymous donor agreed to provide funding to upgrade the 25-yard pool facility into a 50-meter pool, the City and the District approved a first amendment to the original agreement. The amended agreement expanded the hours that the facility (the Burlingame Aquatic Center) could be open and made various other changes. The total project cost $2,676,695, with the anonymous donor paying $1,210,000, the City paying $1,166,695, and the District paying $300,000. Between the time the pool opened (2000) and 2011, the City operated the community programs at the pool, including recreational swimming, lap swimming, swim lessons, and fitness classes, and managed the scheduling. In 2011, the City contracted with the Burlingame Aquatic Club (BAC) to operate these programs on the City’s behalf. BAC was already managing competitive programs in adult and youth swimming and water polo at the pool. DISCUSSION In 2016, the City and the District approved a new pool agreement that extends the term by three years, to January 1, 2026, and covers how maintenance and operating expenses are split (the City pays 78%, while the District pays 22%), and how capital expenses are split (50-50 basis). The new agreement also includes language related to when the City has exclusive use of the pool and when the pool is to be shared with the District, and when the pool can be closed for annual maintenance and where BAC is to be relocated during closure periods. The new agreement includes as an exhibit a 2015 District-commissioned Aquatic Design Group facility audit of the aquatic center. The Update on Negotiations with SMUHSD for Pool Construction Project March 18, 2019 2 intent of the audit was to help the City and District jointly develop a capital replacement program. Among the items included in the five-year timeframe were removal and replacement of the pool deck and drainage and removal and replacement of the pool finish in the competition pool. Last year, the District undertook the renovation of the aquatic center; the project included removal and replacement of the deck, removal and replacement of the pool finish, and the replacement of the interior lights with LED fixtures. The entire project, which was to begin June 1 and be completed by September 21, had a projected budget of $1,902,659, with the City’s share $951,330. (The City originally budgeted $600,000 for its share of the project, prior to the bidding and approval of the construction contract.) Due to a variety of factors, including the need to re-bid the project and delays getting approvals from the Department of the State Architect, which approves school construction projects, demolition of the deck actually began on July 2. In July, District staff notified City staff that the pool shell contained problems related to rebar and waterproofing, and that there were additional problems with the light fixtures and electrical work. The cost to make the repairs to the electrical exceeded the Public Contract Code limits that the District must follow, and the repair work needed to be formally bid, delaying any progress on the pool. Throughout August, the contractor uncovered additional problems with corrosion of the rebar at various locations, such as the lights, stairs, and floor inlets, and improper concrete coverage in many areas. (Per State Code, concrete coverage should extend at least three inches between the soil and the rebar to maintain structural integrity and at least three inches between the rebar and the pool shell to prevent water intrusion and subsequent corrosion. The current coverage is about one each on either side.) In early September, the District requested that its pool engineer produce an existing conditions report that highlighted the various challenges with the pool. The report, completed later in September, concluded that the pool shell is compromised and should be replaced, rather than repaired. City staff and District staff met on September 28 to discuss options for moving forward, including repair of the pool, at an estimated cost of $2,538,406 (with the City’s share 50%, or $1,269,203), or replacement. At that time, City staff was under the impression that the estimated cost of replacement was $4,988,452. At the District’s Board meeting of October 11, the District staff recommended that the District pursue the replacement option given the many uncertainties associated with the repair option. In particular, the staff and the District’s engineers and consultants are concerned that there will be additional maintenance costs and significant pool downtime as the pool shell steel continues to erode, and the new plaster dislodges. In addition, the engineers and consultants believe that the pool will need to be replaced in 10-15 years, at an estimated cost of $11.9 million in ten years, or $19.2 million in 15 years. This cost will be on top of the $2.54 million spent now to bring the pool back online. Under the replacement option, in contrast, the consultants and engineers believe that the life of the pool shell will be extended to 50 years, and the new shell will require less maintenance than the repaired shell. The District Board did not make a decision at the October 11 Board meeting and, instead, asked staff to come back with additional information. At the October 25 Board meeting, the District Board approved proceeding with the New Pool Project and hiring an architect. Update on Negotiations with SMUHSD for Pool Construction Project March 18, 2019 3 In November, the City Manager met with the Council’s pool subcommittee (then-Mayor Brownrigg and then-Vice Mayor Colson) to discuss the City’s proposed terms for a new agreement, and the City Council discussed the proposed terms at a study session on November 19. The City proposed contributing $2.5 million toward the $4,988,452 cost, with $1 million paid as bills come due, and $1.5 million paid in the future, $150,000 per year for ten years. The City also proposed a long-term lease, and a 50-50 split on operating expenditures for the first three years, followed by a re- evaluation of the split based on actual BAC usage as it will take some time for BAC to rebuild its programs. The City also wanted an opportunity to evaluate how the locker room building can be rebuilt to improve the locker rooms and make space to accommodate transgender pool users and employees. On December 13, the SMUHSD Board met to receive an update on the pool and discuss the City’s proposal. Just prior to the District’s Board meeting, as the City Manager and the School Superintendent were discussing the City’s proposal and the Superintendent’s upcoming presentation to his Board, the Superintendent informed the City Manager that the estimated cost of the pool reconstruction project was not $4,988,452, which was the figure described as “Total Project Cost” on an October District slide, but $6,430,108. Apparently, the Total Project Cost figure did not include the estimates of the costs to date ($851,655), or the contract termination fee ($108,000). The other cost not included in the Total Project Cost figure was $482,001 for mechanical room upgrades. The cost has continued to change since October; the estimate presented to the District Board in February was just under $6.5 million. At the December 13 Board meeting, which then-Mayor Brownrigg, the City Manager, and the Parks and Recreation Director attended, the District Board rejected the City’s earlier offer but did not come to a consensus on what they expected the City to contribute. In early February, Mayor Colson, Councilmember Brownrigg, the City Manager, and the Parks and Recreation Director met with the School Superintendent and the School Board’s newly appointed subcommittee (President Greg Land and Clerk of the Board Robert Griffin) to develop a new term sheet. Unfortunately, the School Board did not agree to that term sheet at their meeting on February 21, though they did eventually come to consensus on some of the items, including the City’s new offer of a $2.7 million contribution toward the capital costs. The City Manager and School Superintendent have continued to work on the term sheet since the February Board meeting. The latest iteration, which has not yet been considered by the School Board or the City Council, includes the following terms: Payment: $2.7 million total, with $1,269,203 (less anything the City has paid so far toward the repair project) paid in 2019. This amount is the City’s half of the Option 1 repair only costs. For cash flow purposes, the remainder of the funds would be paid after the City completes the new Community Center, but no later than June 2023. The Superintendent included the following language in the draft term sheet: “The City’s contribution of $2.7 million shall be divided such that $1,000,000 is for the cost of the deck, $250,000 is for the mechanical room cost, and $1,450,000 is for the new pool shell. Note - the reason for this division is that it corresponds to roughly the Update on Negotiations with SMUHSD for Pool Construction Project March 18, 2019 4 same proportion of the cost of the components of the reconstruction as the city is contributing, in total.” Term: The term of the agreement will be extended from January 1, 2026 to January 1, 2040. After January 1, 2035, either party can give the other party five years’ notice that it does not intend to negotiate a continuation of the agreement. If SMUHSD ends the agreement, it must reimburse the City for the City’s unamortized contribution to the cost of the components of the BHS Pool replacement. If the City ends the agreement, it shall be eligible for reimbursement on the components it has paid for as identified in payment section above. The schedule for amortization of the components shall be based on the following expected lifespans: Mechanical Room 16 years Pool Shell 50 years Pool Deck 27.5 years Locker Room Facility: In order to comply with the Americans with Disabilities Act and other current standards, the City or the School District may wish to make further improvements to the Aquatic Center or its environs. If so, both parties commit to working with the other with the goal of improving the facility for all users. Operating Expenses: The City’s share of maintenance and operations expenses will be changed from 78% prior to the pool shutdown in 2018 to 50%. The change will be implemented the week after the Notice of Completion is filed for the new BHS replacement project and will remain in place for one full year. After the one-year period, the pool usage formula will be reviewed and revised based usage. An nual Pool Maintenance Closure and Usage Allocation: The language in the existing agreement would remain in place, allowing BAC exclusive use of the pool at certain times of the day, and shared use in the early mornings, weekday afternoons, and Saturday mornings except during high school competition times (water polo games and swim meets). FISCAL IMPACT The total cost to the City is unknown at this time and will depend on the final negotiated agreement. Agenda Item 8a Meeting Date: 03/18/19 Burlingame City Council March 4, 2019 Unapproved Minutes 1 BURLINGAME CITY COUNCIL Unapproved Minutes Regular Meeting on March 4, 2019 1. CALL TO ORDER A duly noticed regular meeting of the Burlingame City Council was held on the above date in the City Hall Council Chambers. 2. PLEDGE OF ALLEGIANCE TO THE FLAG The pledge of allegiance was led by Beautification Commissioner Anne Hinkle. 3. ROLL CALL MEMBERS PRESENT: Beach, Brownrigg, Colson, Keighran, Ortiz MEMBERS ABSENT: None 4. CLOSED SESSION a. CONFERENCE WITH LABOR NEGOTIATORS (GOVERNMENT CODE SECTION 54957.6) CITY DESIGNATED REPRESENTATIVES: TIMOTHY L. DAVIS, HR DIRECTOR SONYA M. MORRISON, CITY MANAGER LISA K. GOLDMAN, CITY ATTORNEY KATHLEEN KANE, FINANCE DIRECTOR CAROL AUGUSTINE EMPLOYEE ORGANIZATIONS: AFSCME MAINTENANCE AND ADMINISTRATIVE UNITS, DEPARTMENT HEADS AND UNREPRESENTED City Attorney Kane reported that direction was given but no reportable action was taken. 5. UPCOMING EVENTS Mayor Colson reviewed the upcoming events taking place in the city. Agenda Item 8a Meeting Date: 03/18/19 Burlingame City Council March 4, 2019 Unapproved Minutes 2 6. PRESENTATIONS a. PRESENTATION BY THE BURLINGAME NEIGHBORHOOD NETWORK (“BNN”) Burlingame Neighborhood Network (“BNN”) representative Holly Daley provided the City Council with an update. Ms. Daley explained that BNN was formed to help citizens in the first 96 hours after an incident or disaster. She stated that the organization’s mission is to “Strengthen City resiliency by encouraging neighbors to connect with one another, become informed, and be prepared to support one another during emergencies.” She noted that previously citizens were reliant on government agencies during an emergency and that the new model requires community action, resiliency, and preparedness. Ms. Daley reviewed the work that BNN has done to increase the City’s resiliency. This includes: citywide drills, quarterly events, community outreach, developing new blocks, emergency communications plan, and partnerships with the City, CCFD, BPD, and other agencies. Ms. Daley reviewed BNN’s 2018 highlights: • Organized and ran citywide emergency exercise • Produced quarterly events and workshops • Launched emergency cache program • Tested emergency communications plan • Police radio distribution Ms. Daley thanked the City Council for funding 20 caches and the police radio donation. She explained that the caches provide immediate access to incident command setup materials, first aid supplies, and safety tools. Ms. Daley discussed the 6th annual citywide emergency exercise. She reviewed the benefits of the drill including: • Blocks learn to organize into response groups • Use cache tools and base materials • Encourage more groups to qualify for caches • Inspire participants to take more training Ms. Daley discussed the growth of BNN: • 22% increase in BNN newsletter subscribers • 53% increase in drill groups • 27% increase in drill participants Ms. Daley discussed BNN’s emergency communications plan. The plan’s purpose is to allow residents to communicate during disasters even when normal means of communication are down. She showed a map that depicts the escalation of communications through the community. Additionally, she showed another Agenda Item 8a Meeting Date: 03/18/19 Burlingame City Council March 4, 2019 Unapproved Minutes 3 map that depicts the different neighborhoods in the city, the public schools that act as command posts for emergency communication, and the location of caches and HAM radios. Ms. Daley discussed BNN’s future plans: • Organize and run 7th Annual Citywide Emergency Exercise on October 12, 2019 • Host quarterly community events • Increase cache distribution • Promote HAM and resiliency training • Complete buildout Councilmember Brownrigg thanked BNN for their hard work. He stated that after the Paradise Fire, citizens asked him about how they would know which way to evacuate Burlingame in an emergency. Ms. Daley stated that BNN is working with CHP and BPD on this matter. She noted that individuals can prepare themselves for a potential emergency by always having gas in their car, knowing the back roads, and having an emergency bag ready to go. Councilmember Keighran stated that the County has the SMC opt in program for emergency warning. However, there is legislation at the State level that the County is supporting that is an opt out option. She stated that the County is also working on connecting a map of evacuation routes to the SMC alert. Additionally, the County is supporting legislation that would ensure that the emergency alert is available in multiple languages. Vice Mayor Beach asked if there is a demand for additional caches. Ms. Daley stated that BNN put qualifications in place for neighborhoods to obtain a cache. She stated that blocks were asked to qualify by participating in two drills and holding two recent neighborhood activities. She added that BNN has distributed ten caches. Mayor Colson asked if BNN is organized as a 501(c)(3) and if they can take donations. Ms. Daley stated that they currently are not a 501(c)(3). Mayor Colson strongly encouraged BNN to become a 501(c)(3) explaining that it would be wise for the organization’s sustainability. b. PRESENTATION BY HOME FOR ALL Home for All representative Peggy Jensen thanked the City for their hard work on the initiative. She explained that Home for All identified three areas of the housing issue that needed work in San Mateo County: land, funding, and community support. She stated that the City of Burlingame led the way for community support. She stated that the City’s courage to go first helped Home for All when working with the three other pilot cities. Agenda Item 8a Meeting Date: 03/18/19 Burlingame City Council March 4, 2019 Unapproved Minutes 4 Ms. Jensen stated that because City staff and Councilmembers talked with their colleagues in other cities, Home for All received interested from other cities in utilizing the community conversation approach. She noted that Brisbane, San Mateo, Pacifica, Hillsborough, and Foster City will all be utilizing this approach in 2019. Councilmember Keighran thanked Home for All for their collaborative approach to the issue in order to move the County in the right direction. Councilmember Brownrigg stated that the Home for All process was transformative for the City. He noted that for over 50 years the City has grown at a rate of one quarter of one percent a year. However, in January the Council approved a General Plan that imagines growing the City’s population by 20% in 10 years. He stated that he believed the City was able to approve this plan through the help of the Home for All initiative. 7. PUBLIC COMMENT Burlingame resident Mike Dunham discussed the Millbrae tasing incident and the San Mateo County study session on Tasers. He asked that the Council reconsider whether Burlingame Police Department should have Tasers. 8. CONSENT CALENDAR Mayor Colson asked the Councilmembers and the public if they wished to remove any item from the Consent Calendar. Councilmember Brownrigg pulled item 8a. Councilmember Ortiz made a motion to approve 8b, 8c, 8d, and 8e; seconded by Councilmember Keighran. The motion passed unanimously by voice vote, 5-0. a. ADOPTION OF CITY COUNCIL MEETING MINUTES FEBRUARY 19, 2019 Councilmember Brownrigg stated that on page 4 of the meeting minutes, he had asked Mr. Yakel (SFO’s Public Information Officer) if the airport’s ADP could include improvements to the barriers that prevent back-blast from the takeoff. He noted that Councilmember Ortiz is a member on the SFO Roundtable Committee and has been working on the issue of back-blast. He asked that the meeting minutes reflect that he also suggested to Mr. Yakel that if it was agreed that the back-blast was an issue that should be undertaken, that it would be good to add it to the ADP and the EIR. Councilmember Brownrigg stated that since the February 19, 2019 meeting, he was informed that the TOT rate at the airport hotels is 10%. He noted that this is more competitive than the City’s rate and was curious about who sets the SFO rate. He asked staff to find out who sets the TOT rate for the airport and if they would be interested in moving it to 12% to match Burlingame’s rate. Agenda Item 8a Meeting Date: 03/18/19 Burlingame City Council March 4, 2019 Unapproved Minutes 5 Councilmember Keighran made a motion to adopt the City Council Meeting Minutes for February 19, 2019 as amended by Councilmember Brownrigg; seconded by Councilmember Beach. The motion passed unanimously by voice vote, 5-0. b. ADOPTION OF A RESOLUTION APPROVING THE TENTATIVE AND FINAL SUBDIVISION MAP (PM 17-03), RESUBDIVISION OF LOT 12, BLOCK 50, MAP OF EASTON ADDITION NO. 4 SUBDIVISION AT 1431 EL CAMINO REAL DPW Murtuza requested Council adopt Resolution Number 020-2019. c. ADOPTION OF A RESOLUTION APPROVING THE TENTATIVE AND FINAL SUBDIVISION MAP (PM 18-05), LOT MERGER AND RESUBDIVISION OF LOTS L, M. AND N, BLOCK 6, MAP OF BURLINGAME LAND COMPANY NO. 2 SUBDIVISION AT 619-625 CALIFORNIA DRIVE DPW Murtuza requested Council adopt Resolution Number 021-2019. d. ADOPTION OF A RESOLUTION ACCEPTING THE CALIFORNIA DRIVE COMPLETE STREETS PROJECT BY CHRISP COMPANY, CITY PROJECT NO. 84540 DPW Murtuza requested Council adopt Resolution Number 022-2019. e. ADOPTION OF A RESOLUTION AWARDING A CONSTRUCTION CONTRACT TO CASEY CONSTRUCTION, INC., FOR THE EASTON ADDITION AND CITY-WIDE NEIGHBORHOOD SEWER REHABILITATION PROJECT, PHASE 4, CITY PROJECT NO. 84192 AND ADOPTION OF A RESOLUTION APPROVING A PROFESSIONAL SERVICES AGREEMENT WITH BELLECCI & ASSOCIATES FOR COSNTRUCTION MANAGEMENT SERVICES RELATED TO THE PROJECT DPW Murtuza requested Council adopt Resolution Number 023-2019 and Resolution Number 024-2019. 9. PUBLIC HEARINGS a. PUBLIC HEARING AND INTRODUCTION OF AN ORDINANCE ESTABLISHING RESIDENTIAL IMPACT FEES ON NEW RESIDENTIAL DEVELOPMENT TO SUPPORT WORKFORCE HOUSING CDD Gardiner stated that affordable housing impact fees are used to support and build new homes for lower- income residents. The fees can be charged to developers of new residential projects and used for land purchase, construction costs, or site rehabilitation related to providing workforce housing. CDD Gardiner stated that in 2017, the Council adopted commercial linkage fees for new commercial development in Burlingame. The fees were established to address the linkage between new jobs developed Agenda Item 8a Meeting Date: 03/18/19 Burlingame City Council March 4, 2019 Unapproved Minutes 6 by commercial development and an increased demand for workforce housing. He explained that the residential impact fees are similar as they address the impact of new residential development on the increase of local employment and the corresponding demand on workforce housing. CDD Gardiner stated that the proposed residential impact fees have been evaluated through two studies. The first was a nexus study prepared as part of a countywide effort in 2015. The second was a Burlingame- commissioned study conducted by Seifel Consulting to update the earlier nexus study. The Seifel report was also undertaken to provide guidance on a policy approach that would allow onsite workforce housing to be included in new residential development, as an alternative to the fees. CDD Gardiner reviewed the proposed residential impact fees that are described in the chart below: Impact Fee – Per Square Foot Base With Prevailing/ Area Wage Rental Multifamily – 11 units and above Up to 50 du/ac $17.00 / sq ft $14.00 / sq ft 51-70 du/ac $20.00 / sq ft $17.00 / sq ft 71 du/ac and above $30.00 / sq ft $25.00 / sq ft For Sale Multifamily (Condominiums) – 7 units and above $35.00 / sq ft $30.00 / sq ft Notes: 1. Rental Multifamily with total of 10 units or fewer are exempt. 2. For Sale Multifamily (Condominiums) with total of 6 units or fewer are exempt. 3. Rental projects that convert to condominiums within 10 years of completion of construction would be subject to the fee differential as a condition of conversion. CDD Gardiner stated that during the November 2018 Council meeting, the Council provided direction to offer an “in-lieu” option. This option would allow developers to choose between providing affordable units onsite or paying the impact fee. He noted that on the surface, this is similar to inclusionary housing, which the City previously utilized. However, the “in-lieu” option is different from inclusionary housing because the legal framework is based on impacts as opposed to being a fixed requirement. CDD Gardiner stated that the proposed “in-lieu” option focuses on moderate income units. He stated that the Seifel report made it clear that profit margins for residential projects in Burlingame could accommodate moderate income but couldn’t accommodate low to very low. He noted that from a policy standpoint the Council also wanted units to address the “missing middle”. CDD Gardiner outlined the proposed “in-lieu” option • Rental Multifamily – 10% of the units affordable to Moderate Income households (80-120% AMI) for a period of 55 years • For Sale Multifamily (Condominium) – 10% of the units affordable to Above-Moderate Income households (120% - 150% AMI, with the price set at the 135% AMI) for a period of 55 years Agenda Item 8a Meeting Date: 03/18/19 Burlingame City Council March 4, 2019 Unapproved Minutes 7 CDD Gardiner stated that the residential impact fees will be used to support a variety of workforce programs. He explained that this could include leveraging fees to close financing gaps on affordable housing projects or used for emergency rental support. Vice Mayor Beach stated that the November meeting was a great discussion. She asked if the proposed ordinance is adopted, what will the process be to evaluate how the market is responding to the impact fees. She asked if the Council would receive quarterly or annual check-ins so that they could make tweaks to the ordinance if needed. CDD Gardiner stated that an annual check-in makes sense. He stated that it could be tied in with the Annual Housing Element Report. Councilmember Brownrigg asked if a developer utilized the State density bonus would the developer be charged residential impact fees on the density bonus affordable units. CDD Gardiner replied in the negative. He stated that the way to look at the density bonus is that it can help tip the scale towards making the affordable onsite units financially work. Councilmember Brownrigg stated that he didn’t think that the City should charge a fee on the density bonus units but thought the language in the ordinance was ambiguous on that topic and that it should be explicit. Mayor Colson added that the density bonus units don’t count towards the “in-lieu” option. She stated that she believed this was a detail that should be added in the policy. City Attorney Kane explained that the residential impact fees are being imposed because market rate housing creates demand for workforce housing. She stated that if the developer is providing workforce housing in the form of below market rate units as part of the envelope of the project, then it has met the need that is created by the market rate units. She added that the number of affordable units needed to be at least equal to the number set forth in the “in-lieu” option. She stated that the State density bonus could provide different benefits to the developer than what is captured in the City’s “in-lieu” option. She added that in talking to the developers, those who wish to utilize the State density bonus are looking at the moderate income units. Councilmember Brownrigg stated that his concern is that a developer shouldn’t be able to count one affordable unit for two different bonuses (“in-lieu” option and State density bonus). CDD Gardiner stated that legal precedence indicates that a developer can double count a unit. Mayor Colson stated that she is okay with the double count because it encourages affordable units. She noted that while the City’s “in-lieu” option focuses on moderate income units, much of the State density bonus focuses on low income units. Councilmember Brownrigg asked if the Mayor felt that because the State was incentivizing low income units through the density bonus that there probably would be double counting of a unit under both programs. Mayor Colson replied in the affirmative. Agenda Item 8a Meeting Date: 03/18/19 Burlingame City Council March 4, 2019 Unapproved Minutes 8 Councilmember Brownrigg asked that staff include SAMCAR’s letter that stipulates that the City can do “in- lieu” units in the proposed ordinance staff report. City Attorney Kane stated that staff would attach the letter to the agenda packet when the item is brought back. Councilmember Brownrigg stated that he appreciates his colleagues leaning into the “in-lieu” option. He stated that the cost to build an affordable unit is currently between $600,000 and $700,000 a door. He noted the proposed ordinance provides for an affordable way for public money to build units. Vice Mayor Beach stated that one of Ms. Seifel’s points is that the State density bonus incentivizes units for the low to very low income. She noted that the report also stated that the profit margin in Burlingame would not be large enough for developers to build the “in-lieu” units for low to very low income. Instead, because of the cost of land and construction in the area, utilizing the “in-lieu” option to incentivize moderate income levels was the City’s best choice. She added that another tool that the City could utilize in the future to obtain more affordable units would be to reduce parking requirements in exchange for units. Mayor Colson asked about the proposed ordinance’s definition concerning the uses of the impact fee funds. She stated that it seemed to be specifically about building housing. She explained that previously the City Council discussed utilizing the funds for “flex support” such as emergency rental support. She explained that she believed “flex support” to be one of the most important uses of the funds. She stated that studies have shown that if you assist people in paying their rent for a month or two, those individuals will be able to stay in their units for another five years. She added that there is current legislation that is looking at instituting “flex support” as a way to mitigate homelessness. City Manager Goldman stated that staff will be obtaining the services of a consultant to come up with a universe of options for how the impact fees could be used. City Attorney Kane stated that the language Mayor Colson was referencing is provision 25.82.100 of the proposed ordinance. She stated that this provision focuses on housing versus individual households. She explained that she believed the ordinance was drafted in a way that is broad enough in terms of the mandate to cover an array of policies. However, she stated that if the Council wants to make “flex support” explicit in the ordinance that this could be done. She added that if Council directs staff to make this change, it should also be made clear that if money goes to individuals in the form of rent support, it is with the objective of preserving affordable housing. Mayor Colson stated that she agreed with City Attorney Kane. Councilmember Keighran stated the she would be interested in utilizing the funds to preserve existing rental units. Councilmember Brownrigg concurred with Mayor Colson and thought “flex support” should be explicitly stated in the ordinance as an acceptable use of the funds. Agenda Item 8a Meeting Date: 03/18/19 Burlingame City Council March 4, 2019 Unapproved Minutes 9 Mayor Colson stated pursuant to the ordinance rental units that are converted to condominiums within ten years of completion of construction would be subject to the fee differential as a condition of conversion. She asked if the fee differential is the differential on year one or on the year of conversion. City Attorney Kane stated that staff hadn’t anticipated this scenario (when the fees are increased between the two situations). She added that the idea behind this was to disincentivize cloaking and uncloaking. Mayor Colson stated that she believed the fee should be based on the year of conversion minus what was paid at time of application. Councilmember Keighran stated that as of now you can’t convert rentals to condominiums unless you have more than 20 units. CDD Gardiner replied in the affirmative. Councilmember Keighran stated most projects wouldn’t meet the criteria for conversion because of the open space requirement for condominiums. CDD Gardiner replied in the affirmative. He noted that Mayor Colson’s scenario would occur where a rental unit project is built utilizing a condominium map. Councilmember Brownrigg and Councilmember Ortiz concurred with Mayor Colson’s suggestion of basing the fee differential on year of conversion minus what was paid. Vice Mayor Beach raised the issue of the scenario where the fees have decreased. Mayor Colson stated that pursuant to the ordinance, the condominium “in-lieu” option must be kept affordable for 55 years. She stated that she didn’t mind a 55-year covenant on a multi-family residential building. However, when dealing with for sale condominiums, the 55-year covenant would create a situation where the individual holding the property at the 55-year mark would receive a windfall when selling the property. She stated that she believed that covenant should run in perpetuity. City Attorney Kane stated that she would need to do further research to see if it is possible to have an affordability restriction in perpetuity. She noted that when researching the topic, the covenants all ran for 55-years. Councilmember Keighran discussed the upkeep and maintenance of condominiums and stated that she felt comfortable with a 55-year covenant. Mayor Colson opened the public hearing. No one spoke. Councilmember Brownrigg stated that as a former Planning Commissioner, he would suggest that when developers avail themselves of the “in-lieu” option or the State density bonus, staff clearly define what the Commission has discretion over. Councilmember Ortiz stated that he feels the Council has arrived at an ordinance that will encourage affordable housing in the community. He voiced his concurrence with Vice Mayor Beach that there should be annual check-ins to evaluate the success of the ordinance. Agenda Item 8a Meeting Date: 03/18/19 Burlingame City Council March 4, 2019 Unapproved Minutes 10 As a result of the changes that the Council suggested, the ordinance was not introduced and will need to be brought back to Council for a public hearing. 10. STAFF REPORTS AND COMMUNICATIONS a. HOUSING ELEMENT ANNUAL PROGRESS REPORT (APR) ON THE IMPLEMENTATION OF THE HOUSING ELEMENT OF THE GENERAL PLAN CDD Gardiner stated that California law requires that each jurisdiction prepare a Housing Element as part of its General Plan. This is to ensure that all jurisdictions are planning for their projected housing demand. The City’s Housing Element was adopted in January 2015, and the City is currently starting its fourth year of the 2015-2023 planning period. Previously, the reporting was limited to just the number of building permits issued for net new housing units during a calendar year. However, this year and going forward, there will be more detailed reports including the housing development applications submitted, building permit activity for new construction, completed units, entitlements, and building permits issued for new housing units. CDD Gardiner stated that in 2018, the City issued building permits for 300 net new housing units. He noted that the Summerhill development comprised 290 units, and the remaining 10 were accessory dwelling units. Additionally, in 2018, the City approved 282 net new units that have been entitled but not yet issued building permits. He stated that this includes 123 affordable units at the Village at Burlingame. CDD Gardiner stated that Burlingame’s share of the Regional Housing Needs Allocation (“RHNA”) in this cycle is 863 units. Therefore, the City is on track to achieve its RHNA in terms of total number of units built. He added that the Village at Burlingame project is the first time the City has been able to address units needed in the low and very low-income categories. CDD Gardiner stated that there are multiple projects that have been proposed and submitted for entitlements that are currently under review and therefore don’t show up in the report. He noted that the applications in progress could result in up to 611 net new units. Councilmember Brownrigg asked if he was correct that there are 132 units at Village and not 123. CDD Gardiner replied in the affirmative. Mayor Colson discussed her work on the Housing and Community Development Commission. She noted that the Commission works with very low income housing. She explained that this is a hard category for the City to address as it doesn’t quality as an underserved community in order to receive federal grants. Therefore, she stated that Councilmember Keighran’s previous suggestion of utilizing residential impact fees to preserve existing housing stock could help with ensuring housing for the low and very low income categories. She added that there is work being done at the State and Federal level to ease restrictions in the Bay Area concerning tax benefits for developers. She asked that staff keep track of this legislation so that the Council could support it. Mayor Colson opened the item up for public comment. Agenda Item 8a Meeting Date: 03/18/19 Burlingame City Council March 4, 2019 Unapproved Minutes 11 Burlingame resident Mike Dunham discussed the RHNA numbers and his concern that RHNA goals will become more ambitious and the City will struggle to keep up with the demand. Mayor Colson closed public comment. Councilmember Brownrigg stated that the challenge the City has to acknowledge is that most of the land in the City is privately owned. He added that the reason that the units in the Village project can be so affordable is because it is City owned land and the City is working with the developer. He stated that the cost of building affordable housing on privately owned land is prohibitive to the creation of the affordable housing. Councilmember Ortiz stated that the Council has come a long way in terms of affordable housing and is very much focused on the low and very low income levels. He explained that the City will continue to focus on this matter and on finding solutions to assist at the low and very low income levels. Mayor Colson noted that there is a structural problem in how low income housing tax credits are allocated, and cities like Burlingame haven’t always been given a fair share. Therefore, she stated that the City should push for more Section 8 housing vouchers and ensure that landlords will accept them. She stated that the City also needs to work with the County and the State on this issue. Councilmember Brownrigg made a motion to accept the Housing Element Annual Progress Report; seconded by Councilmember Ortiz. The motion passed unanimously by voice vote, 5-0. b. CONSIDERATION AND ADOPTION OF A RESOLUTION APPROVING A DEBT MANAGEMENT POLICY FOR THE CITY OF BURLINGAME Finance Director Augustine stated that Senate Bill 1029 entitled “California Debt and Investment Advisory Commission Accountability Reports” requires municipalities to update their debt management policies. SB 1029 mandates tracking of state and local government borrowing and spending of bond proceeds in an effort to increase transparency and improve public knowledge. She explained that a debt management policy does the following: • Establishes the parameters for issuing debt and managing the debt portfolio • Provides guidance regarding: purposes for which debt may be issued, types and amounts of permissible debt, and method of sale • Demonstrates a commitment to long-term financial planning Finance Director Augustine explained that SB 1029 has five main requirements. The first requirement is to outline the purposes for which the debt proceeds may be used. She noted that for the City, this will be capital improvements, capital assets, and project needs, if: • Included in the CIP, • Debt not to exceed useful life of the asset, Agenda Item 8a Meeting Date: 03/18/19 Burlingame City Council March 4, 2019 Unapproved Minutes 12 • Most cost-effective funding available, and • Fiscally prudent Finance Director Augustine stated that the second requirement is to outline the types of debt that may be issued. The City’s proposed policy states that the following types of debt may be issued: general obligation, lease revenue bonds, revenue bonds (enterprise), pension obligation bonds, refunding bonds, and other. Finance Director Augustine stated that the third requirement is to outline the relation of the debt to, and integration with, the issuer’s capital improvement program or budget, if applicable. The primary purpose of this is to obtain long-term capital assets that should be: • Included in the CIP program, • Are necessary for high quality public services, and • Spread the cost to current and future beneficiaries. • Additionally, the debt must be sustainable over the life of the capital asset. Finance Director Augustine stated that the fourth requirement is to outline the policy goals related to the issuer’s planning goals and objectives. She stated that the policy goals for the City are: • Maintain cost effective access to capital markets • Balance capital demands through alternate financing mechanisms • Maintain moderate debt levels • Ensure timely and accurate payment • Maintain complete financial disclosure • Ensure compliance with laws regulating debt Finance Director Augustine stated that the fifth requirement is to outline the internal control procedures that the issuer has implemented, or will implement, to ensure that the proceeds of the proposed debt issuance will be directed to the intended use. She explained that the proposed policy outlines four internal control procedures: • File Continuing Disclosure Annual Report with State and with Electronic Municipal Market Access • Verify that expenditures are for intended use • Report change in scope of financed project • Report material event Councilmember Ortiz stated that on page 2 of the proposed policy, the list of acceptable uses and conditions wouldn’t allow for a pension obligation bond. However, he stated that the proposed policy lists pension obligation bonds as an acceptable type of debt. Finance Director Augustine stated that acceptable uses only cover capital improvement projects. She explained that she would correct the language so that pension obligation bonds are included. Councilmember Brownrigg asked if he was correct that the debt management policy was a housekeeping matter to ensure a strong bond rating. Finance Director Augustine replied in the affirmative. Agenda Item 8a Meeting Date: 03/18/19 Burlingame City Council March 4, 2019 Unapproved Minutes 13 Councilmember Brownrigg stated that he read the policy as a taxpayer and not as a Councilmember. He explained that as a taxpayer he would like the City and school districts to coordinate bond offerings and recognize the taxpayer’s total burden. He added that the City has to acknowledge that the community has raised real concerns about the equity of Prop 13 over time. He explained that he believed the debt policy should bear in mind that there is a growing sense that it is unfair that newcomers are paying much more than older residents. Mayor Colson stated that on page three of the policy under acceptable uses, it says acquisition of a capital asset with a useful life of three or more years. She noted that then on a later page it says all capital assets with a useful life of less than five years shall be funded on a pay as you go basis. She explained that she was confused if capital asset was three or five years. Finance Director Augustine replied that it is five years and that she would correct the earlier reference. Mayor C olson stated that on page 10 of the policy under compensation for services it states: “compensation for the bond counsel, underwriter’s counsel, financial advisors and other financial services will be as low as possible, given desired qualification levels, and consistent with industry standards.” She noted that this language insinuates that the City takes the low bid. However, she didn’t believe that this is always in the City’s best interests. Therefore, she stated that the language should be amended to state: “will be as low as possible, balanced by the given desired qualification levels and consistent with industry standards.” Mayor Colson stated that page six the policy discusses derivatives as a way to manage interest rate risk and cost. She noted that the utilization of derivatives in the past was one of the ways that investors and pension funds got in trouble. She explained that Wall Street changes derivative structures constantly, and therefore if the City doesn’t fully understand them, then they shouldn’t be used. She added that at some point if the City did want to use derivatives, they could hire a third party for assistance. Councilmember Ortiz stated that he believed that derivatives should be left as an option for the City. Councilmember Brownrigg stated that he thought it could be in the policy as an option with the recommendation to staff that prior to utilizing derivatives that a third party expert be brought in for assistance. Mayor Colson and Vice Mayor Beach agreed with Councilmember Brownrigg’s suggestion. Councilmember Ortiz stated that he didn’t believe it was very common to use derivatives. He asked if the City had ever done anything in this area. Finance Director Augustine replied in the negative. Mayor Colson opened the item up for public comment. No one spoke. Councilmember Brownrigg made a motion to adopt Resolution Number 025-2019; seconded by Councilmember Ortiz. The motion passed unanimously by voice vote, 5-0. Agenda Item 8a Meeting Date: 03/18/19 Burlingame City Council March 4, 2019 Unapproved Minutes 14 11. COUNCIL COMMITTEE AND ACTIVITIES REPORTS AND ANNOUNCEMENTS a. MAYOR COLSON’S COMMITTEE REPORT b. VICE MAYOR BEACH’S COMMITTEE REPORT 12. FUTURE AGENDA ITEMS Councilmember Brownrigg asked the staff to track SB 330. 13. ACKNOWLEDGEMENTS The agendas, packets, and meeting minutes for the Planning Commission, Traffic, Parking & Safety Commission, Beautification Commission, Parks and Recreation Commission and Library Board of Trustees are available online at www.burlingame.org. 14. ADJOURNMENT Mayor Colson adjourned meeting at 9:17 p.m. Respectfully submitted, Meaghan Hassel-Shearer City Clerk 1 STAFF REPORT AGENDA NO: 8b MEETING DATE: March 18, 2019 To: Honorable Mayor and City Council Date: March 18, 2019 From: Syed Murtuza, Director of Public Works – (650) 558-7230 Subject: City Council Appointment of Rosalie O’Mahony to Represent the City of Burlingame on the Boards of the Bay Area Water Conservation Agency and the Bay Area Regional Water Financing Authority RECOMMENDATION Staff recommends that the City Council appoint Rosalie O’Mahony to represent the City of Burlingame on the Bay Area Water Conservation Agency (BAWSCA) and the Bay Area Regional Water Financing Authority (RFA) Boards. BACKGROUND Former Mayor and Councilmember Rosalie O’Mahony has been representing the City of Burlingame as a founding member and director of the BAWSCA and RFA boards since their establishment in 2004. She served as the Board Chair from 2004 to 2008 and also has served on Board Policy Committees for several years. Her four-year terms on both boards will expire on June 30, 2019. The enabling acts of both the BAWSCA and RFA boards allow the City to reappoint the Director for an unlimited number of terms or to appoint a new Director at the end of each term. The appointment will be for a four-year term through June 2023. DISCUSSION To serve as a Director on both boards, the appointee must be a resident of the City and a registered voter in the City but need not be a City Councilmember. The appointment must be made at a public meeting by an action of the full City Council. The Council may re-appoint Director O’Mahony to continue representing Burlingame at the BAWSCA and RFA boards for the next term. Alternatively, the Council may appoint a current Councilmember as the new director for both boards. By re-appointing Director O’Mahony, the City would be able to take advantage of her vast knowledge and experience in dealing with regional water supply issues and her familiarity with BAWSCA policies, the San Francisco Public Utilities Commission, regulatory agencies, and legislators. Alternatively, having a Councilmember represent the City on the boards will provide the stature of an elected member of the governing body on the boards. Council Appointment of Rosalie O’Mahony to the Boards of BAWSCA and RFA March 18, 2019 2 Attached is a letter from Nicole Sandkulla, Chief Executive Officer of BAWSCA, regarding the matter. FISCAL IMPACT None. Exhibit: • BAWSCA Appointment Letter 1 STAFF REPORT AGENDA NO: 9a MEETING DATE: March 18, 2019 To: Honorable Mayor and City Council Date: March 18, 2019 From: Kathleen Kane, City Attorney – (650) 558-7204 Kevin Gardiner, Community Development Director – (650) 558-7253 Subject: Public Hearing and Introduction of an Ordinance Establishing Residential Impact Fees on New Residential Development to Support Workforce Housing RECOMMENDATION Staff recommends that the City Council consider an ordinance establishing Residential Impact Fees for new residential developments to support workforce housing in the city. In order to do so, the Council should: A. Receive the staff report and ask any questions of staff. B. Request that the City Clerk read the title of the proposed ordinance. C. By motion, waive further reading and introduce the ordinance. D. Conduct a public hearing. E. Following the public hearing, discuss the ordinance and determine whether to bring it back for second reading and adoption. If the Council is in favor of the ordinance, direct the City Clerk to publish a summary of the ordinance at least five days before its proposed adoption. BACKGROUND Affordable housing impact fees are used to support and build new homes for lower-income residents. The fees can be charged to developers of new residential projects and used for land purchase, construction costs, or site rehabilitation related to providing workforce housing. Jurisdictions may tailor the fees so they meet local needs. The fees can be adjusted for a wide variety of reasons, so long as they are not arbitrary or capricious, and so long as the fees for all projects remain below the legal maximum. As part of the San Mateo County “21 Elements” multi-jurisdictional effort, a Residential Impact Fee Nexus Study was prepared for the City of Burlingame, together with a Commercial Linkage Fee Nexus Study. These studies describe and quantify how the development of homes, offices, and commercial space creates a need for housing, particularly for very low-, low- and moderate-income residents. The maximum impact fees that can be legally charged were calculated by estimating the number of new worker households associated with new development. A final analysis was then completed that considered factors like local conditions and the fees of neighboring jurisdictions to Residential Impact Fees Ordinance March 18, 2019 2 determine a potential range of impact fees. These studies enable the City Council to consider the adoption of commercial linkage and/or residential impact fees that would be used to provide affordable housing. On June 19, 2017, the City Council adopted an ordinance establishing commercial linkage fees for new commercial development in Burlingame. The adopted fees are $7.00 per square foot for new retail development, $12.00 per square foot for new hotel development, $18.00 per square foot for office projects of 50,000 square feet or less, and $25.00 per square foot for office greater than 50,000 square feet. For developers who utilize prevailing wages or area standard wages, the fees are $5.00 per square foot for new retail development, $10.00 per square foot for new hotel development, $15.00 per square foot for office of 50,000 square feet or less, and $20.00 per square foot for office greater than 50,000 square feet. Over time, these fees will provide a dedicated source of funding for programs supporting workforce housing in Burlingame. On February 12, 2018, the City Council considered the establishment of residential impact fees that would apply to new residential development in Burlingame. The City Council directed staff to further study potential fee levels and structures, consider an on-site “in-lieu” option for providing affordable units within development projects, and obtain input from housing developers and other stakeholders. Following direction from the City Council, staff engaged Seifel Consulting Inc. to prepare an analysis on options for residential impact fees. A key focus of the Seifel Consulting work program was to develop recommendations related to the potential adoption of new fees on residential development and the best strategies to incentivize the on-site provision of affordable housing within new development as part of the City’s housing program. Seifel Consulting subsequently prepared a memorandum reflecting findings of the analysis and input from the City Council (attached). On November 14, 2018, the City Council held a special meeting to review the Seifel Consulting report and provide direction on establishing residential impact fees (November 14, 2018 City Council Meeting Minutes attached). On February 11, 2019, the Planning Commission held a public hearing to review the residential impact fees analysis, proposed ordinance, and accompanying area standard wage resolution. The Commission provided a recommendation to the City Council to approve the ordinance and resolution as proposed (February 11, 2019 Planning Commission Meeting Minutes Excerpt attached). On March 4, 2019, the City Council considered a draft ordinance establishing residential impact fees. Councilmembers suggested the following changes to the ordinance: • Clarification that units provided through State Density Bonus provisions are not subject to residential impact fees; • Clarification that impact fees may be utilized to support a variety of housing programs that benefit the workforce, including “flex support” to provide emergency assistance to workforce households experiencing unanticipated short-term income disruptions, as well as preservation of existing affordable rental housing stock; • Clarification that if a project converts from rental to condominium ownership within ten years of Residential Impact Fees Ordinance March 18, 2019 3 construction, the applicable fee differential shall be based on the fee structure in place at the time of conversion to condominiums, minus the fees originally submitted at the time of construction. The ordinance is being introduced with these changes incorporated. Additional details are provided in the discussion below. In addition, there was a request to include with the staff report a letter sent to the City Council from the San Mateo County Association of Realtors (SAMCAR) regarding residential impact fees. The letter, dated June 27, 2018, is included as an attachment. DISCUSSION Housing Need: For years, housing development in Burlingame and San Mateo County has not kept up with the thousands of new jobs added, and the problem has gotten worse in recent years. Between 2010 and 2016, San Mateo County added 79,000 new jobs, but only 4,941 new homes of all types. The resulting jobs-housing gap ratio was 1 to 16. In other words, only one new housing unit was built for every 16 new jobs created. This jobs-housing gap drives up the cost of housing for homebuyers and renters alike, produces congestion and long commutes for workers, and forces friends and family members to move away because they can no longer afford to live in Burlingame or San Mateo County. A significant number of new jobs pay wages that are not sufficient to cover local housing costs. This includes jobs generated by new development. The region’s driving economic sectors are increasingly split between high-wage jobs in industries such as professional and technical services, and low-wage jobs in hospitality, childcare, retail, and others. Those in the low-wage workforce increasingly commute into the area from long distances, which results in increased traffic in the region and ultimately limits the pool of employees for local businesses. For a worker earning minimum wage, the cost of gas and bridge tolls together with long commute times make it difficult (if not infeasible) to justify employment in a low wage local job. Local service businesses have reported difficulty hiring and retaining employees, even when offering wages well above minimum wage. The City of Burlingame has been proactive in addressing the supply aspect of the housing situation through the encouragement and approval of significant numbers of new housing units. The Burlingame Downtown Specific Plan, together with the 2015 Housing Element and recently adopted General Plan Update, have emphasized the construction of new housing units to address the increased demand for housing units near employment in Burlingame and San Mateo County. Per the City’s most recent Residential Projects Overview document (attached), 645 units have been approved, and an additional 644 units are currently under review by the Planning Commission, for a total of 1,289 units. Of these, 243 would be priced below market rate for households in the Moderate, Median, Low, or Very Low income categories.1 Looking to the future, the General Plan 1 By government definition, “Moderate-Income” means a household with an income that is 120% of the “Area Median Income” (AMI), “Low-income” means a household with an income that is 80% of AMI, “Very-Low Income” means a household with an income that is 50% of AMI, and “Extremely-Low Income” means a household with an income at 30% of AMI. In 2018 (the most recent year data is available), the San Mateo County AMI was $82,900 for a single-person household, $94,700 for a two-person household, and Residential Impact Fees Ordinance March 18, 2019 4 Update has had a strong emphasis on promoting housing production, with increased residential densities and the addition of new housing areas in the northern portion of the city. Legal and Policy Context: Impact fees are charges imposed by jurisdictions that can be used to support and build new development. Since the 1970s, California cities have used impact fees to reduce costs paid by the public for items like roads, parks, schools, water, and sewer. The money generated by housing impact fees is placed into a fund to help pay for new affordable housing. Fees can be set per square foot, per unit, or by some other measure, and can only be applied to new development projects. Before being adopted, jurisdictions must show that there is a connection, or nexus, between the impacts of development and the fees charged. A nexus study assesses the connection between new development and the need for new affordable housing. This is accomplished by calculating the number, type, and salaries of jobs that will result from a new development. The study then establishes the maximum impact fee that can legally be charged to a developer for each type of development being studied. Residential developments include townhomes, condominiums, and apartments. The logic behind impact fee nexus studies is that residents of new housing spend money on goods and services like landscaping, childcare, and restaurants. Many of the workers providing these services and working at these new businesses earn lower wages, and cannot afford to buy or rent a home at market-rate. Nexus studies calculate the maximum fees that would be necessary to bridge the difference between what these new worker households can afford to pay, and the cost of developing housing units to accommodate them. While a nexus study will inform a jurisdiction about the maximum amount it can legally charge as an impact fee, the maximum fee level may not be appropriate given local housing market conditions, existing fee levels in the region, or the jurisdiction’s current fee structure. A feasibility study considers these conditions and recommends a more appropriate range of fees that does not unduly burden or lessen the profitability of new development. The study prepared by Seifel Consulting evaluates the feasibility of residential impact fees on both rental and for-sale development, utilizing recently obtained market data. Proposed Fee Structure: At the November 14th City Council meeting, the Council provided direction for a tiered fee structure, with tiers based on residential density and whether a project is rental or for sale. The Planning Commission concurred with this fee structure in its recommendation for approval to the City Council. As demonstrated in the Seifel Consulting study, rental projects have a significantly lower developer margin/return compared to for sale projects: therefore, the feasibility of a rental project is more sensitive to variables in cost such as impact fees. Likewise, the feasibility of a lower density project is more sensitive to fees than a higher density project because the fixed costs are distributed over fewer units. $118,400 for a household of four. Residential Impact Fees Ordinance March 18, 2019 5 Table 1 summarizes the fee structure proposed by the City Council at its November 14th meeting, and further recommended by the Planning Commission: TABLE 1: PROPOSED RESIDENTIAL IMPACT FEE STRUCTURE Impact Fee – Per Square Foot Base With Prevailing / Area Wage Rental Multifamily – 11 units and above Up to 50 du/ac $17.00 / sq ft $14.00 / sq ft 51-70 du/ac $20.00 / sq ft $17.00 / sq ft 71 du/ac and above $30.00 / sq ft $25.00 / sq ft For Sale Multifamily (Condominiums) – 7 units and above $35.00 / sq ft $30.00 / sq ft Notes: 1. Rental Multifamily with total of 10 units or fewer are exempt. 2. For Sale Multifamily (Condominiums) with total of 6 units or fewer are exempt. 3. Rental projects that convert to condominiums within 10 years of completion of construction would be subject to the fee differential as a condition of conversion. The fee differential shall be based on the fee structure in place at the time of conversion to condominiums, minus the fees originally submitted at the time of construction. In-Lieu Option: Developers would have an “in-lieu” option where the developer could choose to provide an affordable unit or units on site in lieu of submitting the impact fee. Whether a developer would choose an on-site option would depend on a number of factors such as the amount of the impact fee, the size of the development, the comparable cost of underwriting the affordable units for the designated time period and affordability level, and whether the ownership of the development is expected to be retained or sold at completion of construction. For example, a developer building apartments that it intends to own and manage for an extended time frame may have a different perspective and make a different choice than a developer building condominiums to be sold at completion of construction. At the November 14th City Council meeting, the Council provided direction for in-lieu options for both rental and for sale projects: • Rental Multifamily – 10% of the units affordable to Moderate Income households (80% - 120% AMI) for a period of 55 years • For Sale Multifamily (Condominiums) – 10% of the units affordable to Above-Moderate Income households (120% - 150% AMI, with the price set at the 135% AMI level) for a period of 55 years Changes Since the March 4, 2019 City Council Meeting: On March 4, 2019, the City Council opened a public hearing to introduce an ordinance establishing residential impact fees. The following changes have been made to the ordinance in response to Council direction: State Density Bonus Clarification. Section 25.82.050 has been revised to clarify that affordable units provided through State Density Bonus provisions are not subject to residential impact fees. Residential Impact Fees Ordinance March 18, 2019 6 Use of Affordable Housing Funds. Section 25.82.100 has been revised to reflect a range of potential housing programs that benefit the workforce, as follows: (a) Purpose and Limitations. Monies deposited in the fund shall be used to increase, and improve, and/or protect the supply of housing affordable to moderate-, low-, very low-, and extremely low-income households. Such purpose may include but not be limited to the construction of new affordable units, includes the purchase of affordability covenants or similar initiatives whose purpose is to preserve existing affordable housing that may otherwise be lost due to market conditions, and support to workforce households experiencing unanticipated short-term income disruptions. Monies may also be used to cover reasonable administrative or related expenses associated with the administration of this chapter. Conversion from Rental to Condominium Ownership. Section 25.82.030(c) has been revised to specify that if a project converts from rental to condominium ownership within ten years of construction, the applicable fee differential shall be based on the fee structure in place at the time of conversion to condominiums, minus the fees originally submitted at the time of construction. Status/Progress Report: At the March 4th City Council meeting, Councilmembers expressed interest in having a progress report of the residential impact fee program after one or two years. Staff suggests that the status of both the residential impact fee and commercial linkage fee programs be included in the Housing Element Annual Progress Report (APR). The State requires the City Council to review the APR before April 1st of each year prior to it being submitted to the California Department of Housing and Community Development (HCD) and the Governor's Office of Planning and Research. FISCAL IMPACT Estimating potential fees anticipated to be collected depends on a number of variables, including the residential densities, sizes of units (since the fees are typically based on square feet, not number of units), and the sliding scale of the fees themselves. The proposed ordinance would also provide discounts for projects paying prevailing construction wages, similar to the model the City adopted for commercial linkage fees. Furthermore, if an in-lieu option is offered, the impact fees collected would be lower depending on how many units are built with projects. Upon adoption, residential impact fees will apply to new residential projects that have not had applications deemed complete as of the effective date of the ordinance implementing the fee. In the near term (within the next five years), staff estimates that there could be potentially 400 to 600 new units that have been discussed in conjunction with the update of the General Plan, based on property owner input, and factoring the residential densities proposed in the Draft General Plan. Over the course of the General Plan, up to 2,951 units are projected through the year 2040. Table 2 below provides rough estimates of the range of potential fees that could be collected, working with the assumption that applications for 400 to 600 new units may be contemplated in the near term (approximately 5 years). For purposes of the estimate, the assumption is an average unit size of 850 square feet. The estimate provides a range of potential fees based on: Residential Impact Fees Ordinance March 18, 2019 7 • Lowest fee - $14.00/sq ft for a rental project 50 units/acre or less with prevailing/area wage • Medium/Average fee - $23.50/sq ft based on an average of all fee levels • High fee - $30.00/sq ft based on prevalence of higher density rental projects and/or for sale/condominium projects TABLE 2: ESTIMATE OF POTENTIAL NEAR-TERM HOUSING IMPACT FEES Units Floor Area (assuming 850 sf/unit) Housing Impact Fees – Low ($14.00/sf) Housing Impact Fees – Medium/Average ($23.50/sf) Housing Impact Fees – High ($30.00/sf) 400 340,000 $4,760,000 $7,990,000 $10,200,000 600 510,000 $7,140,000 $11,985,000 $15,300,000 Table 3 below includes three scenarios that adjust for the in-lieu option, whereby some or most projects would choose to provide an affordable unit or units on site in lieu of submitting the impact fee. These scenarios are hypothetical, as it is not possible to forecast what proportion of new projects would choose the in-lieu option; the scenarios are presented for informational purposes. This table was first presented in the staff report for the March 4th City Council meeting, and has subsequently been expanded to include the number of on-site units that would be produced in each scenario. TABLE 3: ESTIMATES OF POTENTIAL NEAR-TERM HOUSING IMPACT FEES Units Number of On-Site Affordable Units Provided Through In- Lieu Option Housing Impact Fees Low ($14.00/sf) Housing Impact Fees Medium / Average ($23.50/sf) Housing Impact Fees High ($30.00/sf) 400 Units 25% projects utilize in-lieu option 10 $3,570,000 $5,992,500 $7,650,000 50% projects utilize in-lieu option 20 $2,380,000 $3,995,000 $5,100,000 75% projects utilize in-lieu option 30 $1,190,000 $1,997,500 $2,550,000 600 Units 25% projects utilize in-lieu option 15 $5,355,000 $8,988,750 $11,475,000 50% projects utilize in-lieu option 30 $3,570,000 $5,992,500 $7,650,000 75% projects utilize in-lieu option 45 $1,785,000 $2,996,250 $3,825,000 Exhibits: • City Council Meeting Minutes – November 14, 2018 • Planning Commission Meeting Minutes Excerpt – February 11, 2019 Residential Impact Fees Ordinance March 18, 2019 8 • Proposed Ordinance • Proposed Resolution – Area Standard Wage Policy • “Financial Analysis of Proposed Affordable Housing Program, City of Burlingame” – Seifel Consulting • San Mateo County Association of Realtors (SAMCAR) Letter – June 27, 2018 • Residential Applications Overview – March 2019 Burlingame City Council November 14, 2018 Approved Minutes 1 BURLINGAME CITY COUNCIL Approved Minutes Residential Impact Fee Study Session on November 14, 2018 1. CALL TO ORDER A duly noticed regular meeting of the Burlingame City Council was held on the above date in the City Hall Council Chambers. 2. PLEDGE OF ALLEGIANCE TO THE FLAG The pledge of allegiance was led by Community Development Director Kevin Gardiner 3. ROLL CALL MEMBERS PRESENT: Beach, Brownrigg, Colson, Keighran, Ortiz MEMBERS ABSENT: None 4. PUBLIC COMMENT There was no public comment. 5. STAFF REPORTS AND COMMUNICATIONS a. DISCUSSION OF RESIDENTIAL IMPACT FEES Mayor Brownrigg noted that the Council’s discussion on residential impact fees was an important part of the General Plan. He asked that the Council come to a decision so that the residential impact fees would be in place prior to the adoption of the updated General Plan. He added that it is important that affordable housing be an outcome of the General Plan. CDD Gardiner stated that in 2017, the City Council adopted an ordinance establishing commercial linkage fees for new commercial development in Burlingame. These fees were established to account for the impact that new commercial development has on housing for the workforce. CDD Gardiner stated that in February 2018, the City Council considered establishing residential impact fees. The Council asked staff to look at the economics of an onsite in-lieu option as an alternative to impact fees. Burlingame City Council November 14, 2018 Approved Minutes 2 The City’s consultant, Libby Seifel, stated that the purpose of the study her firm conducted was to determine how best to encourage developers to build affordable housing in lieu of paying fees. She noted that the cost of construction and land has made it more difficult to deliver housing in the Bay Area. Ms. Seifel stated that predevelopment is the most difficult part of the process. This is because at this stage in the project, capital is most expensive and requires significant returns to attract investment. For development to move forward, the cost has to be lower than the value of the development in order to provide a developer margin of return. Councilmember Keighran stated that the margin could be affected by the construction timeline. She noted that the construction timeline can often extend past its original date, which causes an increase in construction costs. Ms. Seifel replied in the affirmative. Ms. Seifel reviewed development costs. She stated that soft costs like environmental review, land issues, and parking are unpredictable. She explained that what a developer pays for the construction depends on the type of project. Two to five story developments are the least expensive, with eight stories and above being the most expensive because of the need for below-grade parking and reinforced structures. Ms. Seifel explained that generally the cost of parking increases dramatically the further below grade a project goes. She noted that it is much more cost effective to build parking on a podium above grade. Ms. Seifel discussed land acquisition costs. She explained that land value is determined by either the sales price, negotiated purchase based on appraised value, or residual land value analysis based on new development potential. She stated that from a property owner’s perspective, the value of the land is based on revenues generated. She added that the value of land in Burlingame ranges from $6.8 million to $16 million per acre. She stated that for this analysis, her team chose a conservative range of $200-260 per square foot (approximately $9 million per acre). Ms. Seifel explained that her team studied three typical development types: 1. Multifamily apartments on a 3-acre site (density range of 50-120 du/acre) Ms. Seifel explained that they looked at a 3-acre site with 150 units and at alternative densities of 210 and 360 units. She stated that in order to obtain institutional capital, the project usually needs to be more than 200 units. She explained that her team studied requiring 10% to 15% affordable housing as the in-lieu of fees option. Her team also looked at the effects of a project being done at 100% market rate. She noted that in Burlingame, the average unit size is 850 net square feet, and the market rate is approximately $3,750/month. She added that the parking ratio is 1.45 spaces per unit. Therefore, a project with 150 units would have 220 parking spaces. 2. Condominiums on a .5 acre site (50 du/acre) Ms. Seifel explained that for condominiums, her team studied a .5 acre site with 25 units, with the onsite option requiring 10% to 15% affordable. She noted that the average unit size was 1,000 net square feet, with an average sales price of $940,000, and a parking ratio of 2 spaces per unit. Burlingame City Council November 14, 2018 Approved Minutes 3 3. Single family attached homes on a 1.7 acre site (18 du/acre) Ms. Seifel explained that for single family attached developments, her team studied a 1.7 acre site with 31 units. The average unit size was 1,500 net square feet, average sales price is approximately $1.63 million, and the parking ratio is 2 spaces per unit. Ms. Seifel reviewed the housing fees in other San Mateo County jurisdictions. She stated that the middle range of fees is $15 to $25 per square foot for housing fees. She noted that the higher end of fees for apartments is $35 per square foot, and the lower end is $10 per square foot. She explained that her team reviewed the feasibility of the City adopting $10, $15, and $20 per square foot fees for apartments. Mayor Brownrigg stated that many of the cities in San Mateo County have inclusionary housing. He asked if other cities were giving developers the option of fees or onsite affordable housing. Ms. Seifel explained that because of the decision in Palmer/Sixth Street Properties L.P. v. City of Los Angeles, many jurisdictions were no longer able to have inclusionary housing over both rental and for sale. Therefore, many jurisdictions went through a nexus process and adopted a fee for their residential rental program. The impact fee could apply for rental and for sale, or just for rental. She noted that some jurisdictions had inclusionary housing requirements that have been in place for a long time, with the option of paying a fee in lieu of providing housing. CDD Gardiner added that jurisdictions that have both fees and inclusionary housing requirements often have tiered fees. For example, in Redwood City, the developer pays a fee for projects up to 20 units; if the project is more than 20 units, the developer must provide inclusionary housing. Councilmember Keighran asked if there are any cities that have a tiered fee system. Ms. Seifel responded that every city is unique. She explained that usually there is a threshold below which inclusionary housing does not apply. Councilmember Keighran asked about property values in Burlingame compared to other Peninsula cities. Ms. Seifel explained that her team didn’t obtain the best sample size of land transactions. She added that many of the commercial land owners have owned their property for a long time, thereby invoking Prop 13. She noted that for these land owners, there needs to be an incentive to sell. Ms. Seifel discussed apartment development feasibility at alternative housing fee levels. She stated that if there is a feasibility gap at the $15 impact fee level, it will get exacerbated if the fee is increased. She explained that the reason the 120 unit per acre project is penciling is because the developer is able to amortize the $10 million cost across more units. Ms. Seifel stated that in order to get to the density that is needed in Burlingame, the City will need to look at decreasing parking requirements. Ms. Seifel showed a slide that depicted developers’ return on costs for an apartment building. She explained that return on cost is how the developers are measuring their supportable project costs. She noted that the slide shows that the 50 dwelling units per acre or 70 units per acre aren’t penciling. However, if the density is increased to 120 dwelling units per acre, developers are able to obtain a return on costs and pay housing impact fees. Burlingame City Council November 14, 2018 Approved Minutes 4 Mayor Brownrigg stated that 120 dwelling units per acre is a seven story building. Ms. Seifel stated that with a tighter parking configuration, it could be six stories. Mayor Brownrigg stated that seven stories is approximately 75 feet and asked if the City would run into FAA limits in any areas of the city. CDD Gardiner replied in the negative and stated that the FAA height limit at the Bayfront is 160 feet, and at El Camino Real it is 130 feet. Ms. Seifel reviewed condominium development feasibility and single family attached developments at alternative housing fee levels. She stated that the fee is a relatively small piece of the total price, and there is little to no feasibility gap. Councilmember Beach asked Ms. Seifel to discuss how the State Density Bonus program impacted her findings. Ms. Seifel explained that under the 35% Density Bonus, a site that had been zoned for 50 dwelling units per acre could be increased to approximately 70 dwelling units per acre. She explained that when her team did this analysis, they assumed that every unit would be paying the fee regardless of whether or not it was density bonus. She added that if the developer chose the inclusionary housing in lieu of the fee, it would be on the base number of units, not the density bonus. Ms. Seifel reviewed a chart of the 2018 household income levels in San Mateo County. She explained that a studio unit is assumed to have a one-person household, a one bedroom unit is assumed to have a two-person household, and a two bedroom is assumed to have a three-person household. She stated that this is a standard that a lot of communities adopted. She pointed out that what the chart is saying is that a typical family of four earns $118,000. She explained that low income is typically 80% of the median income. However, on the chart 80% of median income for a family of four is $117,000. The reason for this is that the cost of housing has increased, and HUD has set the low income threshold to correspond with the housing costs and incomes. Therefore, low income levels have increased. Ms. Seifel stated that her team reviewed what households at various levels of income can afford to pay for rent. She explained that a household at 80% AMI can afford $2400 per month. Someone at 60% AMI can afford approximately $1700 per month. However, she stated that the average market rent in Burlingame is $3,750 per month. Ms. Seifel explained that every time developers have to provide affordable housing, they have to figure out how to make up the gap between market rate and affordable. Ms. Seifel stated that in reviewing the market value of an apartment unit, for 50% AMI, the restricted value is $275,000 while the market rate is $700,000. Therefore, it creates a gap of $425,000. She noted that the higher the AMI percentage, the smaller the gap. Mayor Brownrigg stated that if a project with 100 units was asked to build 15% affordable, the cost would be spread out over the entire project. Therefore, the gap would be smaller. Ms. Seifel replied in the affirmative. Ms. Seifel reviewed a chart that showed the apartment affordability gap at alternative onsite requirements. She stated that if the requirement was 10% of the units affordable at 110% AMI, it would equate to a fee of $20 per square foot. If 10% of the units were affordable at 50% AMI, it equates to approximately $50 per square foot. She noted that this analysis was undertaken because Council asked how the City can incentivize developers to build onsite rather than pay a fee. She added that developers typically prefer to pay the fee. Burlingame City Council November 14, 2018 Approved Minutes 5 Ms. Seifel stated that condominiums and single family homes can afford impact fees but not necessarily onsite housing. Ms. Seifel stated that after reviewing different scenarios, the main takeaway is that with increased density, the fees are more feasible because the costs are spread across more units. Additionally, if the City wants to incentivize onsite housing, it should be no more than a 10% requirement. Ms. Seifel reviewed the key findings from the apartment analysis: 1. Apartment rents are not keeping pace with construction and land cost increases 2. Depending on project costs, apartment projects do not yield sufficient returns to attract capital (feasibility gap) 3. Burlingame has a significant apartment affordability gap (gap between market rents and affordable rents) 4. Higher density alternatives are more feasible as cost of land can be spread across more units 5. 10% onsite affordable housing requirements focused on moderate income households (80% to 120% AMI) are most feasible and best correlate to housing fee levels between $15 to $25 per square foot. Ms. Seifel next reviewed the key findings from the for-sale analysis: 1. Housing prices have been increasing rapidly, but most buyers need significant cash or “trade-up” value in homes to afford new units 2. For-sale developments are more financially feasible than apartments given high price points 3. Housing fees at $25 per square foot on for-sale units can likely be supported by new development 4. For-sale housing affordability gap is significant particularly for large single family attached units 5. 10% onsite affordable housing requirements focused on households between 100% and 135% AMI are most feasible and best correlate to housing fee levels of about $25 per square foot. Ms. Seifel stated that the potential strategies to encourage onsite affordable housing are: 1. Develop a more streamlined and predictable process for land use and design review 2. Allow more housing units to be built in a development to encourage onsite units a. Density bonus and height modifications b. Incentives and concessions c. Allow smaller affordable unit sizes, especially for ownership d. Smaller parking space dimensions e. Significant parking reductions for residential and retail, especially near transit and public parking 3. Limit the total cost of City imposed permit, processing, and development impact fees to levels that are close to current levels 4. Provide developers with certainty regarding how much these fees will increase annually until building permits are pulled (e.g. link future increases to published inflationary indices). Councilmember Beach stated that one of the suggestions is to look at parking requirements near transit. She asked if the City was to loosen parking requirements in parts of the city would this be an added incentive for a developer to create affordable units onsite. Ms. Seifel explained that the parking ratio impacts how many units can be built under a city’s height limits. Therefore, by loosening the parking requirement, the developer would be able to build more units (potentially affordable housing) and also decrease construction costs and type. Burlingame City Council November 14, 2018 Approved Minutes 6 Councilmember Keighran asked if in Ms. Seifel’s experience, projects built close to transportation corridors require fewer parking spaces. Ms. Seifel responded in the affirmative. Mayor Brownrigg asked Ms. Seifel to talk about the State Density Bonus. Ms. Seifel explained that the California State Density Bonus allows developers to provide a certain amount of affordable housing in exchange for additional density. She added that the additional density must be onsite and includes special provisions for land dedication and senior housing. She explained that if a developer has 100 units, and 11 units are affordable to 50% AMI (very low income), the developer is eligible for a state density bonus of 35%. In this example, that would be an additional 35 units. Mayor Brownrigg asked if it was a by-right bonus entitlement. Ms. Seifel responded in the affirmative. Ms. Seifel stated that developers are mostly using the bonus for the very low income units. She explained that the requirement for low income is that 20% of the units must be affordable to 60% AMI for rental and 70% for owner. She added that for moderate income it is 40% of the units must be affordable to 110% AMI. Mayor Brownrigg asked if a city also created an incentive program for very low income units, can the developer use the same units for both State and local incentives. Ms. Seifel stated that if the developer provides units onsite that meet the requirements, they get the state density bonus. The city could do a density bonus that is above the state requirement. Mayor Brownrigg opened the item up for public comment. Burlingame resident Mario Muzzi discussed his concern about residential impact fees and how they might diminish a developer’s ability to build housing. Burlingame resident Vince Muzzi discussed his concern about residential impact fees and the updated General Plan. Housing for all Burlingame member Mike Denham stated that more housing needed to be created in Burlingame and asked that it be made a priority. Mayor Brownrigg closed public comment. Councilmember Keighran stated that there are good points made on all sides of this topic. She explained that part of the issue is that a developer may have something in mind that pencils out, but when it comes before the Planning Commission, it is remodeled and loses a few units. She suggested that because the General Plan is being updated, the City should focus on higher densities outside of the established communities. Councilmember Ortiz stated that he was thinking the City should have a tiered system for impact fees based on density, with different schedules for apartments, condominiums, and single attached homes. Burlingame City Council November 14, 2018 Approved Minutes 7 Mayor Brownrigg stated that the Council should go product by product for the conversation. He added that he was struggling with making decisions about condominiums versus apartments because it’s just a different ownership type. Vice Mayor Colson stated that the City has three projects (Bayswater, Summerhill, and Douglas) which all voluntarily included inclusionary housing. CDD Gardiner stated that typically the reason they’ve seen the projects come in with affordable units is not for the density bonus but for the concessions. He explained that the reason that projects are voluntarily including 10% at moderate income is because pursuant to State Density Bonus, this qualifies the project for a concession, such as additional height. Mayor Brownrigg stated that each of the projects had about 10% dedicated to moderate income. CDD Gardiner replied in the affirmative and added that it was done to obtain a concession. Vice Mayor Colson stated that the market is the best indicator of what the market can bear. She suggested that Council focus on the missing middle, 10% of units at 80% to 120% AMI. Ms. Seifel stated that if the Council is trying to stay in the $20-25 per square foot range, they would be looking at 10% at 80% to 110% AMI. Councilmember Ortiz stated that previously the Council had discussed creating a fee structure as to encourage building inclusionary housing. Mayor Brownrigg stated that if the City charges $30, it is a break-even point for the developer. If the City charges $40 per square foot, it begins to incentivize the creation of onsite units. Ms. Seifel replied in the affirmative, with the caveat that her team didn’t find that it was feasible to charge $40 per square foot. She explained that $40 per square foot was barely feasible at 70 dwelling units per acre and wasn’t feasible at 50 dwelling units per acre. Mayor Brownrigg stated that 50 dwelling units per acre doesn’t work in any of Ms. Seifel’s charts. Councilmember Keighran stated that this is making the assumption that the Mayor is focusing on an area of Burlingame that has higher density. Mayor Brownrigg stated that this is a good question, whether the City is focusing on certain areas of Burlingame or the city as a whole. Councilmember Ortiz stated that this report articulates the need to set up a tiered system based on density. He noted that he wasn’t in favor of charging no fee at the lower end of the density. Councilmember Beach stated that affordability isn’t happening on its own, and therefore this is one way the City can help. She noted that on page 27 of the staff report, the takeaway is that a fee of $20-$25 per square foot should be focused on higher density rental developments of 100 units per acre or more. She stated that this is a decent place to start. She added that the City should also consider the value of obtaining fees instead of inclusionary housing. She explained that the fees could be used to assist nonprofits to build housing for low to very low income. Burlingame City Council November 14, 2018 Approved Minutes 8 Councilmember Beach stated that she agreed that higher density makes sense near transit in the northern part of Burlingame. Vice Mayor Colson stated that in working with Home for All, she has learned that Measure K funds, federal funds, and state funds are being utilized for affordable housing projects. Therefore, the City’s fees would be gap fillers. She noted that the City fees could be used to leverage state or federal funding. However, the City fees won’t be the panacea that others might think they will be. She stated that Home for All has been focused on low income to very low income. She noted that when talking to HEART, it is clear that assistance for the middle is missing. Vice Mayor Colson discussed the possibility of creating a toggle around parking. She suggested reducing parking requirements if the developer includes affordable housing. City Attorney Kane stated that some of the parking incentives are built into the State Density Bonus. Therefore, the City could amplify the benefits. Councilmember Keighran suggested that Council start with where they know impact fees work, which is 90- 120 unit projects. She added that she liked giving developers the choice of either fees or onsite housing. She explained that the fees could be utilized to preserve the existing units, and in return owners would be required to keep rent at a certain level for a certain number of years. Mayor Brownrigg stated that he agreed with Councilmember Keighran. Mayor Brownrigg stated that what he has heard is that while it is unusual to have tiered residential impact fees, his colleagues believe this is the best option. He suggested that the fee for 50 dwelling units and below is $20 per square foot. Councilmember Beach stated that she didn’t believe a 50 unit or below project would pencil if the fee was $20 per square foot. Councilmember Ortiz stated that he thought the fee for 50 dwelling units or below should be $18 per square foot, and decreased to $15 for prevailing wage. He added that for 69 dwelling units to 51 dwelling units, it should be $20 per square foot, and decreased to $17 for prevailing wage. Mayor Brownrigg stated that at some point he wanted to see the fee become a little bit more of a bite so that developers were encouraged to create onsite affordable housing. Councilmember Ortiz explained that the balance to that is that the City wants to encourage people to build. Mayor Brownrigg suggested that for 70 dwelling units and more, the fee should be $30 per square foot. Mayor Brownrigg stated that what he was hearing from his colleagues is that the program should incentivize the middle, which is 80% to 120% AMI. He noted that HUD’s statement that an individual who makes median income or less in California is low income was a staggering acknowledgment of the problem. Burlingame City Council November 14, 2018 Approved Minutes 9 Councilmember Beach stated that from Ms. Seifel’s analysis, the highest the fees can go for the project to pencil out is $25. She suggested instead of higher fees, the City create a lower parking requirement within a certain radius of a fixed transit station. Mayor Brownrigg asked if State Density Bonus included a parking incentive. CDD Gardiner replied in the affirmative. He added that if the City’s fee structure is such that it tilts towards developers using the State Density Bonus, thereby obtaining decreased parking and other concessions, then the State Density Bonus might help the City get more onsite units. Mayor Brownrigg asked if the City should lower parking ratios throughout the city and not use them as incentives. Councilmember Beach stated that the important thing about using lower parking ratios as incentives is that the City can use it as a way to obtain affordable housing. Ms. Seifel stated that under State Density Bonus, a developer only gets the parking concession if they are at the 35% density bonus threshold, meaning that the developer has 11% of their units going to very low income AMI. However, she explained that this doesn’t mean that the City couldn’t have a local parking benefit. Additionally, she noted that non-profits have done a lot of research that shows that affordable units do not require as much parking. She explained that under State Density Bonus law, if a project is 100% affordable, the parking requirement is .5 spaces per unit. For mixed income, the requirement is .5 spaces per bedroom. Therefore, the City could create an incentive that for affordable housing units, the developer is only required to provide .5 spaces per unit. Councilmember Ortiz suggested that if the idea is to incentivize inclusionary housing, then the City could give developers the option of either paying the fee or building 10% affordable to middle income with a parking variance. Vice Mayor Colson stated that the Council has set a range of between 80% and 120% AMI to focus on, which means that everyone will build to 120%. Therefore, maybe the parking incentive is the incentive to build for 80% AMI. Mayor Brownrigg asked if it was feasible for staff to administer Vice Mayor Colson’s suggestion. CDD Gardiner explained that staff will be contracting a housing provider to administer the program. Vice Mayor Colson stated that if a developer chooses to build onsite, then the requirement should be that those units must stay affordable for at least 55 years. The Council agreed. Mayor Brownrigg stated that if a project has only 10 units, with 5 units being affordable to 80% AMI, then the savings in decreased parking requirement would only be 2 spaces. City Attorney Kane stated that this was one of the incentives that Ms. Seifel posed which is that the lower parking ratio could apply to the whole project. Mayor Brownrigg suggested that if the developer does 10% affordable, the City waives the fees, and if the developer does 15% to 20% affordable, then the parking ratio changes. Burlingame City Council November 14, 2018 Approved Minutes 10 Ms. Seifel noted that the 80% AMI is very close to the 100% AMI. Therefore, it is important to maintain a range as it actually limits who can qualify for those units. She stated that it is normal to set the affordability level at somewhere in the middle of the range. Vice Mayor Colson stated that she liked the Mayor’s suggestion of getting the parking concession if the developer goes above the 10%. Councilmember Beach asked if it would make more sense to offer the parking variance at a larger percentage of affordability or for deeper levels of affordability. Ms. Seifel replied that she hasn’t run the numbers on the difference. Councilmember Beach stated that parking requirements are changing, and the City needs to lean in to decreasing parking requirements. Mayor Brownrigg stated that this is the reason for not making the parking an incentive and instead changing the ratio citywide. Mayor Brownrigg reopened public comment. Burlingame resident Vince Muzzi suggested having Ms. Seifel come up with five scenarios that work, and then the Council can choose from that. Mayor Brownrigg closed public comment. Vice Mayor Colson suggested that the Council bifurcate this process and start with percentages and fees. Then take a second look with more data about the parking incentive. Councilmember Keighran stated that it depends on the timeframe, as she wanted to ensure that the parameters were in place prior to the General Plan being adopted. Councilmember Ortiz stated that he believed the Council has enough information to come up with the first layer, which is the fees, and then later add parking. Mayor Brownrigg stated that he wanted to stipulate that the Council was talking about the area within a half mile of rail (BART and Caltrain). He asked if the General Plan has parking ratios. CDD Gardiner replied in the negative but stated that staff is creating parking ratios to go with the interim zoning. Mayor Brownrigg asked what the timing is for the interim zoning. City Attorney Kane stated that interim zoning will go with the adoption of the General Plan. She added that cities don’t get in trouble for lessening requirements; they get in trouble for increasing requirements. She explained that the Council could come to a decision about fees and add the caveat that they plan on discussing decreasing parking ratios at a later date. Mayor Brownrigg stated that the reason to make a decision at the meeting is that if the General Plan is adopted prior to adoption of the impact fees, there could be projects moving forward without residential Burlingame City Council November 14, 2018 Approved Minutes 11 impact fees. City Attorney Kane stated that in looking at the calendar, the residential impact fees will lag a little behind adoption of the General Plan. Mayor Brownrigg stated that for apartments the suggested residential impact fees based on Council discussion were: Units per acre Fee Fee with Prevailing Wage Up to 50 units $18 per square foot $15 per square foot Up to 70 units $20 per square foot $17 per square foot Above 70 units $30 per square foot $25 per square foot The Council agreed that the requirement was either pay the fee or provide 10% affordable onsite. Councilmember Ortiz stated that the $30 fee is a big jump. He stated that he would be more comfortable with above 70 units being $28, and $25 with prevailing wage. Councilmember Keighran stated that she was more concerned with the up to 50 units. She believed it was too high. Vice Mayor Colson stated that other cities have a minimum project size for residential impact fees. She suggested exempting projects with under ten units. The Council agreed that rental projects with 10 units and below would be exempt from residential impact fees. Vice Mayor Colson asked if Councilmember Keighran would be comfortable with the 11-50 dwelling units at $18 per square foot, or $15 per square foot with prevailing wage. Councilmember Keighran stated that there wasn’t much of a difference in the fees between the first tier and second tier, so she wondered if the first tier should be lowered by a dollar or two. She suggested $16 per square foot, and $13 per square foot with prevailing wage. Councilmember Ortiz stated that it was too low. The Council agreed that the tiers should be as follows: Units per acre Fee Fee with Prevailing Wage 11 to 50 units $17 per square foot $14 per square foot Up to 70 units $20 per square foot $17 per square foot Above 70 units $30 per square foot $25 per square foot Ms. Seifel stated that their analysis was stating that $25 per square foot was feasible at 120 dwelling units per acre, not $30 per square foot at 70 dwelling units per acre. Mayor Brownrigg stated that Council is giving developers a way to waive the fee by doing the 10% onsite. Burlingame City Council November 14, 2018 Approved Minutes 12 Vice Mayor Colson noted that there are extraneous factors that make construction costs cheaper or more expensive and are beyond the control of the Council. Mayor Brownrigg next directed his colleagues to discuss impact fees for single family homes and condominiums. Councilmember Ortiz stated that his suggestion was that single family attached and condominiums should have a fee of $22 per square foot. Councilmember Beach stated that she believed that the developers for single family attached could afford $25 per square foot. She added that this is what they will probably choose because they can’t afford to offer 10% inclusionary housing. She stated that realistically, they will be getting fees from single family attached and condo developments. Mayor Brownrigg stated that fees ranging from $15 to $25 per square foot are doable for condominium developments. Ms. Seifel replied in the affirmative. Mayor Brownrigg asked if the City could charge $35 per square foot. Ms. Seifel stated that she didn’t look at this, and it would depend on the price of land. Vice Mayor Colson stated that a complaint that the City receives is that there are no entry level homes to purchase in Burlingame. Therefore, she would increase the fees because the margin of return is still pretty high. She explained that this is an area where the City should incentivize construction. Mayor Brownrigg stated that the economics are clear that the developer will just pay the fee. He added that he was worried that the fees for condos would incentivize developers to build condos over apartments. Vice Mayor Colson asked if incentivizing developers to build condos over apartments was bad or good. Councilmember Keighran stated that 52% of the City’s housing stock is apartments. Vice Mayor Colson stated that she had no problem incentivizing entry level condos. Mayor Brownrigg stated that he would want a percentage of the condos to be affordable. Vice Mayor Colson stated that then the City has to have a higher impact fee. Ms. Seifel stated that for condominiums, the policy choice the City has is to allow not just moderate income units but also 120% to 150% to provide more of an incentive. She stated that this is meeting another part of the missing middle. Mayor Brownrigg stated Ms. Seifel’s slide concerning the Condominium Affordability Gap stated that the fee could be set at $40 to $50 per square foot to encourage onsite housing. Burlingame City Council November 14, 2018 Approved Minutes 13 Vice Mayor Colson asked how her colleagues felt about not charging a fee for projects with 10 condos or less. Councilmember Beach asked if it is a lot more profitable to have the condos, or is it the same as the apartments. Vice Mayor Colson stated that you had to look at it not from the fee generation view point but from trying to add in needed housing stock. Ms. Seifel suggested that the Council might set a threshold by which the City states that if units are delivered to the market close to 120% AMI (approximately $700,000), there wouldn’t be a fee. However, once the developer decides to build to the market, then the fee is triggered. Therefore, it isn’t just based on the size but also on your price point. City Attorney Kane stated that she worried about staff’s ability to track Ms. Seifel’s suggestion. Councilmember Beach asked Ms. Seifel if it would be reasonable to set a $35 per square foot fee for condos but allow it to be in a range of 135% to 150% AMI. Ms. Seifel stated that the range should be 100% to 150% AMI. Vice Mayor Colson discussed condo projects that are rented. She stated that she didn’t want the developer to build them under the auspices of being condos to avoid the residential impact fees of apartments. Councilmember Beach asked how the City could control this. Vice Mayor Colson stated that you charge higher fees for condominiums. Mayor Brownrigg stated that he thought the fee should be $35 per square foot above a certain number of units. Councilmember Ortiz thought $35 was way too high. He added that he didn’t see any reason to exempt any number of condos from the fee. Mayor Brownrigg asked if a developer could tell staff that they are building apartments and then once built, sell them as condos. CDD Gardiner replied in the negative, stating that condos have a condo map associated with them. City Attorney Kane stated that her experience at the Planning Commission is that most of the condo projects are small: 5 to 10 units. CDD Gardiner agreed. Mayor Brownrigg stated that he thought the City should exempt projects with fewer than 10 condos from the fee. Councilmember Ortiz stated that he didn’t think that any number of condos should be exempted. Burlingame City Council November 14, 2018 Approved Minutes 14 Councilmember Beach agreed with Councilmember Ortiz. Councilmember Keighran and Vice Mayor Colson believed that fewer than 10 should be exempt. Mayor Brownrigg asked if he was correct that the City used to discourage condo conversions. CDD Gardiner replied in the affirmative and explained that it was done to preserve rental housing. Mayor Brownrigg asked if this ordinance was still on the books. CDD Gardiner replied in the affirmative. Mayor Brownrigg stated that if this ordinance was still on the books, then it seems to him that the City Council should not exempt smaller condo projects from the residential impact fees. Vice Mayor Colson stated that she believed that the City might want to revisit this policy. She stated that the City is going to be adding 2,000 to 3,000 multi-family units and very few ownership opportunities. Therefore, allowing older housing stock to convert to ownership is a good thing. Councilmember Keighran stated she would be open to relooking at this ordinance. Mayor Brownrigg suggested a compromise where the first five condo units are exempt from fees. Vice Mayor Colson suggested going to six. Councilmember Beach stated that the market shows that they can bear the fee, and while she leans towards no, she would compromise. Mayor Brownrigg asked if the Council wanted to give condos an in lieu of fee option. City Attorney Kane stated her understanding was that there was an in-lieu option of 10% up to 150% AMI. Council agreed. Vice Mayor Colson stated that the fee should be higher if the AMI is higher. Ms. Seifel stated that the average should be lower than 150% AMI, but it has to be expressed as a range. City Attorney Kane stated that because one or two units will be made in a project, that becomes the range. Ms. Seifel stated that a household can qualify that earns 120-150% AMI, but the affordable price is set at 135% AMI. Councilmember Beach stated that she agreed that 135% AMI would be the target. Mayor Brownrigg stated that he was curious how much money the City would be leaving on the table. He asked what the square footage is that Ms. Seifel assumed for the condos. Ms. Seifel replied 1,000 square feet. Burlingame City Council November 14, 2018 Approved Minutes 15 Mayor Brownrigg stated that the impact fee at $35 per square foot would be $35,000 a unit. Therefore, the City would be giving up $120,000 to $150,000 for one affordable unit. He wondered if it was worth it or if the City should not allow developers to avoid the fee. Councilmember Keighran stated that currently there isn’t an option for entry level buying, and therefore it would be good to create affordable housing. Councilmember Ortiz stated that the more affordable units that get built, the better, and therefore he would prefer the units over the money. Mayor Brownrigg stated that what he was hearing is that the City would set the fee at $35 per square foot, and if the developer builds 10% of their units targeting 135% AMI, the fee is waived. Vice Mayor Colson stated that if a developer builds apartments and within ten years converts them to condos, they have to pay the condominium fee. Mayor Brownrigg stated that he liked the Vice Mayor’s suggestion. CDD Gardiner suggested that the fee be tied to the map. He explained that if it was a condominium map, whether or not they rented them, the condo fee would be charged. Therefore, the only projects that would have the apartment fees would be the ones that don’t have condominium maps. City Attorney Kane stated that for administration purposes, CDD Gardiner’s suggestion was sound. Mayor Brownrigg suggested that staff use Council’s discussion on condos to propose a similar scheme for townhouses. CDD Gardiner asked if the Council had a prevailing wage discount for condos. Mayor Brownrigg stated that it should be $30 per square foot. Vice Mayor Colson stated that the residential impact fees would help with the middle. However, she noted that low and very low income would be addressed in other ways such as ADUs and the Lots F and N project. Mayor Brownrigg added that the State Density Bonus would assist low and very low income. Councilmember Beach discussed public versus private land and if there is a difference in how they should be treated. She stated for example what happens if the school district decided to build units. She also asked about the timing of the fees. Mayor Brownrigg asked if the Council had to address institutional land now. CDD Gardiner stated that he would look into it. Burlingame City Council November 14, 2018 Approved Minutes 16 Vice Mayor Colson stated that with the Peninsula Healthcare District project, the City should talk about how to treat their land. Additionally, she stated if the City is doing a project where they are contributing the land, would the City be able to waive the fee. City Attorney Kane stated that the City’s default is that the impact fees are a universal policy. She noted that there are certain procedural steps that need to occur prior to applying fees to a project. Mayor Brownrigg thanked staff and colleagues for their time. 5. ADJOURNMENT Mayor Brownrigg adjourned meeting at 10:07 p.m. Respectfully submitted, /s/ Meaghan Hassel-Shearer City Clerk BURLINGAME CITY HALL 501 PRIMROSE ROAD BURLINGAME, CA 94010 City of Burlingame Meeting Minutes Planning Commission 7:00 PM Council ChambersMonday, February 11, 2019 b.Consideration of an Ordinance Adopting Residential Impact Fees for New Residential Development Staff Report Residential Impact Fee Ordinance - Exhibit A Seifel Consulting Report Proposed Resolution - Residential Impact Fees Proposed Resolution - Prevailing Wages Public Notice Attachments: Community Development Director Gardiner provided an overview of the staff report. Questions of staff: >In Figure 1-1 in the Seifel financial analysis, why is the maximum justifiable fee per square foot $85.00 when the unit fee is much lower? (Gardiner: The analysis indicates a maximum fee based on the demand for additional workforce housing, however that maximum fee may be higher than what the market can support.)(Kane: It is a dilution factor, in that the higher occupancy housing has a greater impact on the jobs balance than lower occupancy housing such as single family homes. It can be counterintuitive.) >What is the difference between base impact fee and impact fee with prevailing /area wage? (Gardiner: A discount is applied to projects that utilize prevailing wage labor and enter into a prevailing wage agreement. It is meant to encourage the use of prevailing wage labor, but also recognize that prevailing wages has a benefit on the workforce. Therefore there is a tie-in in justifying the discount.) >The fees would only apply to projects with applications deemed complete upon the effective date of the ordinance. What establishes the effective date of the ordinance? (Kane: The ordinance will go forward to the City Council with two readings. Since it is a development impact fee, it would become effective 60 days after final adoption by the City Council.) >How was the threshold of 11 units for the rental multifamily and 7 for the condominiums determined? (Gardiner: There was discussion among the Council to determine a threshold for small projects for each development type. In particular, they would be smaller projects that would have a harder time absorbing the impact fees.)(Kane: The thinking was also that smaller projects would have less impact on neighborhoods, so the Council did not want to risk disincentivizing small projects. The fees would apply where there were greater economies of scale that could absorb the fees more easily.) >Is the 55 year affordability period a common timeframe? (Kane: It reflects structure in State Law, as well as tax credit financing. There are a lot of things that hinge off of a 55-year covenant.) >Can the Planning Commission provide additional input on items to include in the ordinance? (Gardiner: Yes, the overall structure of the fees has been set by the City Council, but the Planning Commission is welcome to make suggestions that will be forwarded to the Council.) Chair Gaul opened the public hearing. Public Comments: Page 1City of Burlingame Printed on 2/24/2019 February 11, 2019Planning Commission Meeting Minutes There were no public comments. Chair Gaul closed the public hearing. Commission Discussion: >On the last page of the Seifel report, likes the list of Policy Considerations to Encourage Onsite Affordable Housing. In particular likes the suggestion of developing a more predictable and streamlined process for land use approval and design review in order to reduce the time and risk associated with infill development. This seems like it would be beneficial to provide to developers, a means to outline more of what to anticipate from the dais. In advance of a presentation to the Planning Commission a lot of time goes into developing plans, and even something as simple as materials could be clarified. Perhaps a "pre-presentation " before coming to design review. There could be a list of acceptable materials, window specifications, landscaping, sizes of decks, etc. There could be a collection of general findings made in recently approved projects. It could also be done at the staff level. >Report references a preference for providing on -site units. From the report, it appears the only densities where that is economical is at the highest densities of 120 units per acre or more. Where would that be? Would that be the Rollins Road Mixed Use area? (Gardiner: The highest densities under the new General Plan are in the North El Camino Real area, near the Millbrae Caltrain /BART station. Downtown also allows high densities. The Rollins Road area has a slightly lower density, but an additional variable is when projects utilize State Density provisions, which can change the economics and make the lower densities more viable as well. There is currently a proposal in the Rollins Road area at around 90 units per acre, and it has affordable units consistent with the specifications in the ordinance so presumably pencils out. The economics of each project will vary, but generally the higher -density projects are more able to absorb the cost and spread them ) >Shares the desire to encourage below -market units rather than the fees. It will take a while to build up the fees, and when considering the cost of land and construction it will not go very far. Whatever the City can do to encourage building the units rather than collect the fees would be worthwhile. >Has been a proponent of getting the fees program in place. It is a place to start, and is necessary for addressing housing issues. Supports the ordinance as proposed. >The ordinance is responsibly written, with the intent of maintaining a healthy mix of socioeconomic households in the population. >The ordinance also has an option for appeal; if someone wants to build a project and the requirements would hinder that, they can make their case. Commissioner Loftis made a motion, seconded by Commissioner Sargent, to recommend to the City Council that the ordinance and resolution be approved as proposed. The motion carried by the following vote: Aye:Sargent, Loftis, Kelly, Gaul, and Tse5 - Absent:Comaroto, and Terrones2 - Page 2City of Burlingame Printed on 2/24/2019 ORDINANCE NO. __________ ORDINANCE OF THE CITY OF BURLINGAME ADDING CHAPTER 25.82 TO THE BURLINGAME MUNICIPAL CODE ESTABLISHING RESIDENTIAL IMPACT FEES FOR NEW RESIDENTIAL DEVELOPMENTS IN THE CITY The City Council of the City of Burlingame ordains as follows: Division 1. Legislative Findings WHEREAS, California Government Code Section 65580(d) states that all cities have a responsibility to use the powers vested in them to facilitate the improvement and development of housing and to make adequate provision for the housing needs of all economic segments of the community; and WHEREAS, the provision of safe and stable housing for households at all income levels is essential for the public welfare of the city. The current shortage of affordable housing has caused many lower- and middle-wage workers to commute longer distances from less expensive areas resulting in increased traffic in the City, and has also caused local residents’ housing costs to increase due to high levels of demand for existing housing resulting in a severe housing cost burden for many residents; and WHEREAS, the City's 2015-2023 Housing Element states that it is the City's policy to establish programs to provide direct financial and technical assistance to facilitate the development of affordable workforce housing. The City can achieve its goal of assisting in the development of new housing that is affordable at all income levels only if adequate funding is available to support the development of such housing; and WHEREAS, to ensure that future development projects mitigate their impact on the need for affordable housing in Burlingame, and to ensure that any adopted residential impact fees do not exceed the actual affordable housing impacts attributable to the development projects on which the fees relate, the City agreed to participate in the preparation of a nexus study through the countywide 21 Elements collaboration project; and WHEREAS, in order to meet the needs of Burlingame’s workforce, dwelling units will need to house a variety of household types, incomes, and age groups; and WHEREAS, the City has received and considered a Residential Impact Fee Nexus Study (the “Nexus Study”), dated November 2015, prepared by Strategic Economics and Vernazza Wolfe Associates, Inc.; and 2 WHEREAS, the Nexus Study uses widely used, appropriate methodology to determine the maximum amount needed to fully mitigate the burdens created by residential development on the need for affordable housing; and WHEREAS, the findings provided in the Nexus Study have been further supported in the Financial Analysis of Proposed Affordable Housing Program (the “Financial Analysis”), dated November 2018, prepared by Seifel Consulting, Inc.; and WHEREAS, to ensure that development projects remain economically feasible, the residential impact fees specified in the Residential Impact Fee Ordinance codified in this chapter are lower than the maximum amount needed to fully mitigate the burdens created by new development on the need for affordable housing as determined in the Nexus Study and Financial Analysis; and WHEREAS, the Residential Impact Fee Ordinance codified in this chapter will substantially advance the City's legitimate interest in providing additional housing affordable to all income levels in the city by providing funds for the development of housing affordable to very low, low, and moderate income households; and WHEREAS, the City has determined that the Residential Impact Fee should be administered consistent with the requirements applicable to fees for public facilities in California Government Code Section 66000 et seq., commonly referred to as the “Mitigation Fee Act,” without determining that it is required to do so; and WHEREAS, at least ten days prior to the date this ordinance is being heard, data was made available to the public indicating the amount of cost, or estimated cost, required to provide the service for which the fee or service charge is levied and the revenue sources anticipated to provide the service, including general fund revenues, in accordance with Government Code Section 66019; and WHEREAS, at least fourteen days prior to the date this ordinance is being heard, notice was provided to any persons or organizations who had requested notice, in accordance with Government Code Section 66019; and WHEREAS, notice of the hearing on the proposed fees was published in a newspaper of general circulation in the manner set forth in Government Code Section 6062a as required by Government Code Section 66018; and WHEREAS, the Planning Commission of the City of Burlingame, after proceedings duly and regularly held and noticed as provided by law, did on February 11, 2019 review and consider the staff report and all other written materials and testimony presented at said hearing, and recommended to the City Council that it adopt the Residential Impact Fee Ordinance; WHEREAS, the City Council of the City of Burlingame, after proceedings duly and regularly held and noticed as provided by law, did on March 4, 2019 review and consider the Planning Commission’s recommendation, the staff report and all other written materials and 3 testimony presented at said hearing and gave direction for certain amendments and clarifications; and WHEREAS, a revised draft ordinance was submitted to the City Council of the City of Burlingame, which, after proceedings duly and regularly held and noticed as provided by law, did on March 18, 2019 review and consider the Planning Commission’s recommendation, the staff report and all other written materials and testimony presented at said hearing; and WHEREAS, based on the findings above, the City desires to further the public health, safety and welfare by requiring residential development projects in Burlingame to mitigate their impact on the need for affordable housing in the city; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF BURLINGAME ORDAINS AS FOLLOWS: Division 2. Section 1: Chapter 25.82 is added to the Burlingame Municipal Code as follows: Chapter 25.82 RESIDENTIAL IMPACT FEES 25.82.010 Purpose. 25.82.020 Def initions. 25.82.030 Residential impact fees. 25.82.040 Fee payment. 25.82.050 State Density Bonus. 25.82.060 Exemptions. 25.82.070 Alternatives. 25.82.080 Affordable housing plan and agreement. 25.82.090 Standards for development. 25.82.100 Affordable housing fund. 25.82.110 Administrative relief/appeal. 25.82.120 Enforcement. 25.82.010 Purpose. The purpose of this chapter is to: (a) Encourage the development and availability of housing affordable to a broad range of households with varying income levels within the city as mandated by State law, including California Government Code Section 65580 and related provisions. (b) Offset the demand for affordable housing that is created by new development and mitigate environmental and other impacts that accompany new residential development by protecting the economic diversity of the City’s housing stock; reducing traffic, transit and related 4 air quality impacts; promoting jobs/housing balance; and reducing the demands placed on transportation infrastructure in the region. (c) Promote the City’s policy to provide an adequate number of affordable housing units to the city’s housing stock in proportion to the existing or projected need in the community, as identified by the Housing Element. (d) Support the Housing Element goal of providing housing opportunities for those who work in Burlingame. (e) Support the Housing Element goal of achieving increased affordability of housing. (f) Support the Housing Element policy of developing of a variety of housing types that are affordable to very low and extremely low income households. (g) Support the Housing Element goal of preserving residential character by encouraging maintenance, improvement and rehabilitation of the City’s neighborhoods and housing stock. 25.82.020 Definitions. As used in this chapter, the following terms shall have the f ollowing meanings: (a) "Administrator" means the Community Development Director of the City or other person designated by the City Manager. (b) “Affordable housing fund” means a separate fund or account designated by the City to maintain and account for all monies received pursuant to this Chapter. (c) “Affordable ownership cost” means the sales price of a for-sale affordable unit resulting in projected average monthly housing payments, during the first calendar year of a household's occupancy, including interest, principal, mortgage insurance, property taxes, homeowners insurance, homeowners' association dues, if any, and a reasonable allowance for utilities, property maintenance, and repairs, not exceeding the sales prices specified by Section 50052.5 of the California Health and Safety Code and California Code of Regulations Title 25, Sections 6910-6924, as they may be amended from time to time. (d) “Affordable rent” means the total monthly housing expenses for an affordable rental unit not exceeding the rents specified by Section 50053 of the California Health and Safety Code and California Code of Regulations Title 25, Sections 6910-6924, as they may be amended from time to time. As used in this Chapter, "affordable rent" shall include the total of monthly payments by the tenant for all of the following: (1) use and occupancy of the rental unit and land and all facilities associated with the rental unit, including but not limited to parking, bicycle storage, storage lockers, and use of all common areas; (2) any additional separately charged fees or service charges assessed by the owner, other than security deposits; (3) an allowance for utilities paid by the tenant as established by the San Mateo County Housing 5 Authority, including garbage collection, sewer, water, electricity, gas, and other heating, cooking. and refrigeration fuel, but not telephone service or cable N; and (4) any other interest, taxes, fees or charges for use of the land or affordable unit or associated facilities and assessed by a public or private entity other than the owner, and paid by the tenant. (e) “Affordable unit” means a dwelling unit which a builder proposes as an alternative to payment of the residential impact fee, as defined in this Chapter and which is required to be rented at a rate affordable to very low, low or moderate income households, or sold at an affordable ownership cost to very low, low or moderate income households. (f) "Builder" (may also be referred to as developer) means any person, firm, partnership, association, joint venture, corporation, or any entity or combination of entities which seeks City approvals for all or part of a residential development project. (g) "Building permit" includes f ull structural building permits as well as partial permits such as f oundation-only permits. (h) “Decision-making body” means the City staff person or body authorized to approve or deny an application for a planning or building permit for a residential development project. (i) "First approval" means the f irst discretionary approval to occur with respect to a residential development project, or, for residential development projects not requiring a discretionary approval, the issuance of a building permit. (j) "For-sale unit" means a residential dwelling unit that may be sold individually in conformance with the Subdivision Map Act. For-sale units also include units that are converted from rental units to for-sale units. (k) “Low income households" means households with incomes no greater than the maximum income for low income households, as published annually by the County of San Mateo for each household size, based on United States Department of Housing and Urban Development (HUD) and the California Department of Housing and Community Development (HCD) income limits for San Mateo County, unless stated otherwise in this chapter. (l) “Market rate unit" means a new dwelling unit in a residential development project that is not an affordable unit. (m) "Median income" means the median income applicable to San Mateo County, as published annually by the County of San Mateo for each household size, based on median income data for San Mateo County published by the United States Department of Housing and Urban Development (HUD) and the California Department of Housing and Community Development (HCD), unless stated otherwise in this chapter. (n) "Moderate income households" means households with incomes no greater than the maximum income for moderate income households, as published annually by the County of San Mateo for each household size, based on United States Department of Housing 6 and Urban Development (HUD) and the California Department of Housing and Community Development (HCD) income limits for San Mateo County, unless stated otherwise in this chapter. (o) "Planning permit" means any discretionary approval of a development project, including but not limited to a comprehensive or specif ic plan adoption or amendment, rezoning, tentative map, parcel map, conditional use permit, variances, or architectural review. (p) "Rental unit" means a dwelling unit that is intended to be offered for rent or lease and that cannot be sold individually in conformance with the Subdivision Map Act. (q) "Residential development project" means an application for a planning permit or building permit at one location to create one or more additional dwelling units, convert nonresidential uses to dwelling units, subdivide a parcel to create one or more separately transferable parcels intended for residential development, or implement a condominium conversion, including development constructed at one time as well as in phases. “One location” includes all adjacent parcels of land under common ownership or control, the property lines of which are contiguous at any point, or the property lines of which are separated only by a public or private street, road, or other public or private right-of-way, or separated only by the lands owned or controlled by the builder. (r) “Residential floor area” means all horizontal areas of the several floors of such buildings measured from the exterior faces or exterior walls or from the center line of party walls separating two (2) buildings, minus the horizontal areas of such buildings used exclusively for covered porches, patios, or other outdoor space, amenities and common space, parking, elevators, stairwells or stairs between floors, hallways, and between-unit circulation. (s) "Very low income households" means households with incomes no greater than the maximum income for very low income households, as published annually by the County of San Mateo for each household size, based on United States Department of Housing and Urban Development (HUD) and the California Department of Housing and Community Development (HCD) income limits for San Mateo County, unless stated otherwise in this chapter. 25.82.030 Residential Impact Fees. (a) Initial fees shall be imposed on new residential development projects as follows: Impact Fee – Per Square Foot Base With Prevailing / Area Wage Rental Multifamily – 11 units and above Up to 50 du/ac $17.00 / sq ft $14.00 / sq ft 51-70 du/ac $20.00 / sq ft $17.00 / sq ft 71 du/ac and above $30.00 / sq ft $25.00 / sq ft For Sale Multifamily (Condominiums) – 7 units and above $35.00 / sq ft $30.00 / sq ft 7 (b) Fees shall be based on the calculation of the residential floor area as defined in this chapter, and shall include a credit for existing uses. The Council may amend these fees through the public hearing process for the City’s Master Fee Schedule. Residential impact fees shall not exceed the cost of mitigating the impact of the residential development projects on the need for affordable housing in the city. (c) Rental projects that convert to condominiums within 10 years of completion of construction would be subject to the fee differential between rental and for sale units as a condition of conversion. The fee differential shall be based on the fee structure in place at the time of conversion to condominiums, minus the fees originally submitted at the time of construction. 25.82.040 Fee payment. Any residential impact fee shall be paid in f ull prior to the issuance of the first building permit for the residential development project subject to the f ee or at a time otherwise specified by Council resolution. The fee shall be calculated based on the fee schedule in effect at the time the building permit is issued. 25.82.050 State Density Bonus. For residential development projects that are granted a density bonus pursuant to California Government Code Section 65915, et seq. (the “State Density Bonus Law”), the residential impact fee shall apply to all market-rate units, including any additional market-rate units provided under the State Density Bonus Law. The residential impact fee shall not apply to affordable units provided under the State Density Bonus Law. The required residential impact fee shall be reduced to the extent that any affordable units mitigate the market rate units’ impact on the need for affordable housing in the City. The Community Development Director may issue guidelines from time to time regarding the calculation of any fee reduction. 25.82.060 Exemptions. (a) The following residential development projects are exempt from the provisions of this chapter: (1) Rental Multifamily projects with a total of ten (10) units or fewer. (2) For Sale Multifamily (Condominiums) with a total of six (6) units or fewer. (3) Projects that have established a vested right not to be subject to this chapter. (4) Applications under review by the Planning Commission or Community Development Department that had been deemed complete at the time of adoption of the residential impact fees provided for in this Chapter. (b) The City Council may elect to waive payment of the residential impact fee if it finds that: (1) the residential development project is dedicated to a public use owned and 8 operated by other public agencies or a nonprofit public benefit corporation; and (2) the benefits to the community provided by such public use exceed those that would be provided by the payment of the residential impact fee. If the City Council elects to waive residential impact fees pursuant to this provision, the public use of the site shall be guaranteed by a recorded document in a form acceptable to the City Attorney. (c) The City Council by resolution may adopt additional exemptions from time to time. 25.82.070 Alternatives. (a) Alternatives available to projects requiring an impact fee. As an alternative to compliance with the impact fee requirements included in this Article, developers of residential projects may propose to mitigate the affordable housing impacts of such development through the construction of affordable units on site or through an alternative mitigation program proposed by the developer, such as the provision of off-site affordable units, donation of land for the construction of affordable units, or purchase of existing units for conversion to affordable units. Any such alternative must include a guarantee of affordability for a period of 55 years. The Planning Commission may approve the provision of affordable units on site, consistent with the requirements set forth in Paragraph (b), as part of its review of the project. For all other alternatives, the Community Development Director shall analyze the proposal and provide advice to the City Council which, in its sole discretion, shall determine whether the proposed alternative is sufficient to meet the objectives of this Chapter. (b) The provision of on site affordable units in lieu of payment of residential impact fees shall be allowed as of right, provided the project meets the following criteria: (1) If a Rental Multifamily project provides ten percent (10%) of the units on site to be affordable to moderate income households (in this instance 80% - 120% AMI) for a period of 55 years, the impacts of residential development on the need for affordable housing shall be deemed mitigated. (2) If a For Sale Multifamily (Townhome/Condominium) project provides ten percent (10%) of the units on site to be affordable to above-moderate income households (in this instance 120% - 150% AMI, with the price set at the 135% AMI level) for a period of 55 years, the impacts of residential development on the need for affordable housing shall be deemed mitigated. (3) Any affordable rental or for-sale units proposed as an alternative to the payment of the residential impact fee shall be subject to the requirements described in Chapter 25.82.070. (c) Approval of off-site affordable units. If a developer proposes off-site affordable units or any other alternative in the affordable housing plan required under Chapter 25.82.080 (Affordable housing plan and agreement), the City Council may, in its sole discretion, approve such a proposal if it finds the proposal meets all of the following conditions: 9 (1) Financing or a viable financing plan, which may include public funding sources, is in place for the proposed affordable housing units; and (2) The proposed location is suitable for the proposed affordable housing, is consistent with the Housing Element, general plan, and zoning, and will not cause residential segregation; and (3) The proposed units will be maintained as affordable for a period of 55 years. (d) Other alternatives. The City Council may consider an alternative mitigation program proposed by the developer, such as donation of land for the construction of affordable units, purchase of existing units for conversion to affordable units or alternatives to Section 25.82.090 (Standards for development). (e) Agreement with City for financing. If the City enters into a financing agreement with the applicant, the parties may agree to alter the requirements of Section 25.82.090 (Standards for development). 25.82.080 Affordable housing plan and agreement. (a) If the builder seeks an alternative to the payment of the residential impact fee pursuant to Section 25.82.070 (Alternatives), the application for the first approval of a residential development project for which the alternative is sought shall include an "affordable housing plan" that describes how the alternative will comply with the provisions of this Chapter. No affordable housing plan is required if the builder proposes only to pay the residential impact fee. (1) Residential development projects requesting an alternative to payment of the residential impact fee require that an affordable housing plan be submitted in conformance with this Chapter prior to the application being deemed complete. (2) The affordable housing plan shall be processed concurrently with all other permits required for the residential development project. Before approving the affordable housing plan, the decision- making body shall find that the affordable housing plan conforms to this Chapter. A condition shall be attached to the first approval of any residential development project to require recordation of an affordable housing agreement, as described in this subsection, prior to the approval of any final or parcel map or building permit for the residential development project. (3) The approved affordable housing plan may be amended prior to issuance of any building permit for the residential development project. A request for a minor modification of an approved affordable housing plan may be granted by the Community Development Director if the modification is substantially in compliance with the original affordable housing plan and conditions of approval. Other modifications to the affordable housing plan shall be processed in the same manner as the original plan. 10 (4) If required to ensure compliance with the approved affordable housing plan, affordable housing agreements acceptable to the Community Development Director or designee shall be recorded against the residential development project prior to or concurrently with and as a condition of approval of any final or parcel map, or issuance of any building permit, whichever occurs first. The affordable housing agreement shall specify the number, type, location, size, and phasing of all affordable units, provisions for income certification and screening of potential purchasers or renters of units, and resale control mechanisms, including the financing of ongoing administrative and monitoring costs, consistent with the approved affordable housing plan, as determined by the Community Development Director r designee. (b) After approval of the application, applicant shall enter into a regulatory agreement with the City. The terms of this agreement shall be approved as to form by the City Attorney’s Office, and reviewed and revised as appropriate by the reviewing City official. This agreement shall be on a form provided by the City, and shall include the following terms: (1) The affordability of very low, lower, and moderate income housing shall be assured in a manner consistent with this chapter. (2) An equity sharing agreement pursuant to Government Code Section 65915(c)(2). (3) The location, dwelling unit sizes, rental cost, and number of bedrooms of the affordable units. (4) A description of any bonuses and incentives, if any, provided by the City. (5) Any other terms as required to ensure implementation and compliance with this section, and as applicable sections of State Density Bonus law. 25.82.090 Standards for development. (a) All affordable units provided pursuant to Chapter 25.82.070 shall meet the following standards: (1) The required affordable dwelling units shall be constructed concurrently with market-rate units unless both the final decision-making authority of the City and developer agree within the affordable housing agreement to an alternative schedule for development. (2) The exterior design and construction of the affordable dwelling units shall be consistent with the exterior design and construction of the total project development, and be consistent with any affordable residential development standards that may be prepared by the City. (3) The affordable units shall have the same amenities as the market rate units, including the same access to and enjoyment of common open space, parking, storage, and other facilities in the residential development, provided at an affordable rent as defined in Chapter 25.82.020 or at affordable ownership cost as defined in Chapter 25.82.020. 11 Developers are strictly prohibited from discriminating against tenants or owners of affordable units in granting access to and full enjoyment of any community amenities available to other tenants or owners outside of their individual units. (4) A regulatory agreement, as described in Section 25.82.080 (Affordable housing plan and agreement), shall be made a condition of the discretionary permits for all developments pursuant to this chapter. The regulatory agreement shall be recorded as a restriction on the development. 25.82.100 Affordable housing fund. (a) Special Revenue Fund. A fund for the deposit of fees established under this chapter shall be established and may also receive monies for housing from other sources. (b) Purpose and Limitations. Monies deposited in the fund shall be used to increase, improve, and/or protect the supply of housing affordable to moderate-, low-, very low-, and extremely low-income households. Such purpose may include but not be limited to the construction of new affordable units, the purchase of affordability covenants or similar initiatives whose purpose is to preserve existing affordable housing that may otherwise be lost due to market conditions, and support to workforce households experiencing unanticipated short-term income disruptions. Monies may also be used to cover reasonable administrative or related expenses associated with the administration of this chapter. (c) Administration. The fund shall be administered by the Administrator, who may develop procedures to implement the purposes of the fund consistent with the requirements of this chapter and subject to any adopted budget of the City and generally applicable accounting and procurement processes. (d) Expenditures. Fund monies shall be used in accordance with the City’s Housing Element, or subsequent plans adopted by the City Council to maintain or increase the quantity, quality, and variety of affordable housing units or assist other governmental entities, private organizations or individuals to do so. Permissible uses include, but are not limited to, land acquisition, debt service, parcel assemblage, gap financing, housing rehabilitation, grants, unit acquisition, new construction, and other pursuits associated with providing affordable housing. The fund may be used for the benefit of both rental and owner-occupied housing. 25.82.110 Administrative Relief/Appeal. (a) The builder of a project subject to this chapter may request that the requirements of this chapter be waived or modified by the City Council, based upon the absence of any reasonable relationship or nexus between the impacts of the development and either the amount of the fee charged or the type of facilities to be financed. (b) The application shall be made in writing and filed with the Community Development Director not later than: 12 (1) Twenty (20) days prior to the public hearing before the Planning Commission on the development project application under this title, or (2) If no hearing before the Planning Commission is required by this title, at the time of the filing of the application for a development permit. (3) The application shall state in detail the factual basis for the claim of waiver, reduction, or adjustment. (c) The City Council shall consider the application at a public hearing held within sixty (60) days after the filing of the fee adjustment application. If a reduction, adjustment or waiver is granted, any change in use within the development project shall invalidate the waiver, adjustment or reduction of the fee. The decision of the City Council is final. 25.82.120 Enforcement. (a) Payment of the residential linkage fee is the obligation of the builder of a residential development project. The City may institute any appropriate legal actions or proceedings necessary to ensure compliance herewith, including, but not limited to, actions to revoke, deny, or suspend any permit or development approval. (b) The City Attorney shall be authorized to enforce the provisions of this chapter and all below market rate housing agreements, regulatory agreements, and all other covenants or restrictions placed on affordable units, by civil action and any other proceeding or method permitted by law. (c) Failure of any official or agency to fulfill the requirements of this chapter shall not excuse any builder or owner from the requirements of this chapter. No permit, license, map, or other approval or entitlement for a commercial development project shall be issued, including without limitation a final inspection or certificate of occupancy, until all applicable requirements of this chapter have been satisfied. (d) The remedies provided for in this chapter shall be cumulative and not exclusive and shall not preclude the City from any other remedy or relief to which it otherwise would be entitled under law or equity. Division 3. If any section, subsection, sentence, clause or phrase of this Ordinance is for any reason held to be invalid, such decision shall not affect the validity of the remaining portions of this Ordinance. The Council hereby declares that it would have adopted the Ordinance and each section, subsection, sentence, clause or phrase thereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid. Division 4. 13 This Ordinance is exempt from the California Environmental Quality Act (CEQA) per State CEQA Guidelines Section 15378(b)(4), which indicates that administrative actions that do not result in physical changes to the environment are not considered “projects” requiring review. The proposed Ordinance is also exempt per Section 15305 (Minor Alterations in Land Use Limitations), which is a categorical exemption that applies to code amendments that will not have any significant environmental effects. Division 5. This ordinance, or a summary as applicable, shall be published as required by law and shall become effective 60-days thereafter. ____________________________________ Donna Colson, Mayor I, Meaghan Hassel-Shearer, City Clerk of the City of Burlingame, certify that the foregoing ordinance was introduced at a regular meeting of the City Council held on the ______day of _________________ 2019 and adopted thereafter at a regular meeting of the City Council held on the ______ day of _________________ 2019, by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ___________________________________ Meaghan Hassel-Shearer, City Clerk RESOLUTION NO. __________ 1 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BURLINGAME ESTABLISHING AN AREA STANDARD WAGE POLICY FOR NEW RESIDENTIAL DEVELOPMENTS SUBJECT TO THE IMPOSITION OF IMPACT FEES UNDER CHAPTER 25.82 OF THE MUNICIPAL CODE WHEREAS, California Government Code Section 65580(d) states that all cities have a responsibility to use the powers vested in them to facilitate the improvement and development of housing and to make adequate provision for the housing needs of all economic segments of the community; and WHEREAS, the City Council of the City of Burlingame has determined that the development of an area standard wage policy, in addition to the City's commitment to enforcing prevailing wage requirements as to public works projects, as such projects are defined in California Labor Code Section 1720 et seq., is necessary to protect local job opportunities and to increase wages of workers and residents in the city; and WHEREAS, the Council has adopted a residential impact fee ordinance (Municipal Code Section 25.82) that authorizes the imposition of residential impact fees for certain residential development projects to mitigate the impact of such projects on the need for affordable housing in the city (the "Residential Impact Fee Ordinance"); and WHEREAS, in connection with its Residential Impact Fee Ordinance, the City has received and considered reports from the Residential Impact Fee Nexus Study dated November 2015, prepared by Strategic Economics and Vernazza Wolfe Associates, Inc.; and WHEREAS, the Nexus Study demonstrates that new residential development projects create a need for affordable housing in the city by creating many jobs paying such low wages that workers cannot afford market rate housing in the city; and WHEREAS, the findings provided in the Nexus Study have been further supported in the Financial Analysis of Proposed Affordable Housing Program (the “Financial Analysis”), dated November 2018, prepared by Seifel Consulting, Inc.; and WHEREAS, the City has determined that the payment by residential development projects of "Area Standard Wages," which shall be defined as the general prevailing wage determinations for San Mateo County as made by the State of California Director of the Department of Industrial Relations, will increase certain households' ability to afford housing in the city, thereby reducing the impact of those residential development projects on the need for affordable housing in the city; and WHEREAS, in recognition of the reduced impact of projects paying Area Standard Wages, the Planning Commission recommends that the City Council adopt an Area Standard Wage Policy that will reduce the Residential Impact Fee for all residential development projects RESOLUTION NO. __________ 2 that voluntarily enter into an agreement with the City to pay Area Standard Wages consistent with this Resolution; and WHEREAS, the staff report accompanying this Resolution and referenced documents have been presented to and considered by the City Council in support of the findings and approvals set forth in this Resolution; are hereby incorporated by reference to this Resolution; and, together with the above recitals any public testimony received, form the evidentiary basis and establish the analytical route for reaching the ultimate findings and conclusions contained in this Resolution. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Burlingame as follows: 1. The foregoing recitals are true and correct and incorporated into this Resolution by this reference. 2. The provisions of this Resolution shall apply to all residential development projects, as such terms are defined in the Residential Impact Fee Ordinance, where the developer voluntarily enters into an "Area Standard Wage Participation Agreement" (an “Agreement”) with the City. The Agreement shall apply to construction of the development project and related public works that are within the customary jurisdiction of the construction trades and crafts, whether performed on or off-site, but need not include off-site work performed by materialmen, as defined under California law. 3. Upon execution of an Agreement that conforms to the requirements of this Resolution, initial fees shall be imposed on new residential development projects as follows: With Prevailing / Area Wage Rental Multifamily – 11 units and above Up to 50 du/ac $14.00 51-70 du/ac $17.00 71 du/ac and above $25.00 For Sale Multifamily (Condominiums) – 7 units and above $30.00 If the developer commits a material breach of such Agreement, the difference in residential impact fees between the adopted fees and the reduced amount under this Resolution shall become due and payable to the City, in addition to all other remedies set forth herein. 4. All employees performing construction work for a project subject to an Agreement shall be paid not less than the Area Standard Wage or the highest prevailing rate of per diem wages as determined and published by the California Department of Industrial Relations subject to California Labor Code Section 1733 from the commencement of construction until the issuance of the latter of either a final certificate of occupancy or a final RESOLUTION NO. __________ 3 inspection. Nothing in this Resolution shall be construed to prohibit payment of more than Area Standard Wages. 5. The Agreement shall apply to the employees of any employer, including the developer, any general contractor or subcontractor, or other contractor engaged in construction including their successors or assignees (collectively, the "employer"), but it shall not apply to supervisory or managerial personnel or to persons employed in the rental, operation, or maintenance of the residential development project. 6. The initial Area Standard Wage for each of the employer's employees shall be the published wage rate as of the date the employee commences work on the residential development project. The employer shall be responsible for checking on a quarterly basis whether the Area Standard Wage has been adjusted. In the event that the Area Standard Wage has been adjusted, the employer shall pay such adjusted Area Standard Wage; provided, however, that in no event shall the employer pay less than the initial Area Standard Wage. 7. The employer shall keep an accurate payroll record as specified in California Labor Code Section 1776(a). Certified copies of the payroll records shall be available for inspection at all reasonable hours at a local office of the employer. Copies of the Area Standard Wage Participation Agreement and the records granting the permits authorizing the residential development project shall be provided upon request of a City representative. Any employee, his or her designee, or the public may also request copies of the payroll records from the City. The addresses and social security numbers of the employees may be masked or deleted so as to prevent disclosure in copies furnished to the public. The failure of an employer to comply with the requirements of this section shall create a presumption that Area Standard Wages have not been paid. 8. Nothing in this Resolution shall prevent the employment of any number of properly registered apprentices, as defined in Chapter 4, Division 3 of the California Labor Code. Every such apprentice shall be paid not less than the Area Standard Wage paid to apprentices under the regulations of the crafts or trade at which he or she is employed and shall be employed only at the work of the craft or trade to which he or she is registered. The employment and training of each apprentice shall be in accordance with the provisions of the apprenticeship standards and apprentice agreements under which he or she is in training. 9. The provisions of this Resolution shall be incorporated into the Agreement for all residential development projects where the developer voluntarily agrees to enter into an Agreement. The developer shall also cause the provisions of this requirement to be incorporated into each contract and subcontract which would be subject to this requirement. In the event the provisions are not so incorporated, the developer shall be liable to the worker in any action or proceeding for the difference between the Area Standard Wage rate required to be paid and the amount actually paid to the worker, including costs and attorney fees, as if the developer were the actual employer. RESOLUTION NO. __________ 4 10. The Community Development Director, or his or her designee, shall maintain for public inspection the current Area Standard Wages. All bid specifications and contracts subject to the provisions of this Resolution shall reference the obligations imposed under this Resolution. A copy of the applicable wage rates together with a copy of a "Notice to Employees," which notice shall be prepared by the developer and approved by City staff, shall be given to any employer subject to the provisions of this Resolution, and all such employers shall post a copy of the Area Standard Wages applicable to the work to be done at the job site in a prominent, visible place readily accessible to the workers employed in the construction of the improvements. 11. No laborer or employee to whom the wage, salary, or other labor standards of this Resolution are applicable shall be discharged or in any other manner discriminated against by the employer because such employee has filed any complaint or instituted, or caused to be instituted, any proceeding or has testified or is about to testify in any proceeding under or relating to the provisions of this Resolution. 12. In the event of a breach of this Resolution or an Area Standard Wage Participation Agreement, the employer shall be liable to the employee for any unpaid wages overtime wages, and benefits established by this Resolution. 13. In the event of failure to pay any employee, laborer, or mechanic (including any apprentice, trainee, or helper) employed in the construction of a residential development project subject to this Resolution all or part of the wages required by this Resolution, the developer shall, upon written demand of the Community Development Director, withhold or cause to be withheld from any moneys payable on account of work performed by a contractor an amount as may be considered necessary to pay laborers and mechanics employed by such contractor or subcontractor the full amount of wages, overtime wages, and benefits required by these labor standards after providing 10-days written notice of such intent to the contractor or subcontractor who has failed to pay the applicable Area Standard Wages to any worker. The developer shall, after such written notice to the contractor, disburse such amounts withheld for and on account of the contractor to the respective employees to whom they are due. If the employee cannot be found to satisfy the unpaid wages, unpaid overtime wages, and benefits, all such sums shall be remitted to the City's general fund, including a credit for applicable accrued penalties. 14. Nothing in this Resolution shall preclude enforcement by the California Division of Labor Standards Enforcement for any matter over which the Division has jurisdiction. 15. The Community Development Director shall have the authority to issue guidelines, rules or regulations from time to time in furtherance of this Resolution. RESOLUTION NO. __________ 5 16. Adoption of this Resolution is exempt from the California Environmental Quality Act (CEQA) because the adoption of this Resolution is not a project, in that it is related to a government funding mechanism which does not involve any commitment to any specific project (CEQA Guidelines Section 15378(b)(4)), and because it can be seen with certainty that there is no possibility that the Area Standard Wages provisions may have a significant effect on the environment, in that this Resolution contains no provisions modifying the physical design, development, or construction of residences or residential structures (CEQA Guidelines Section 15061(b)(3)). 17. This Resolution shall take effect only if the Residential Impact Fee Ordinance is adopted and effective. _______________________________________ Donna Colson, Mayor I, Meaghan Hassel-Shearer, City Clerk of the City of Burlingame, certify that the foregoing resolution was adopted at a regular meeting of the City Council held on the ____ day of _____________, 2019 by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ________________________________________ Meaghan Hassel-Shearer, City Clerk Financial Analysis of Proposed Affordable Housing Program City of Burlingame For many years, new housing development in the Bay Area has not kept pace with the growing demand for housing. This is particularly true of San Mateo County, where strong economic growth has intensified housing demand, leading to rapid increases in home prices and rents. As a result, many local residents and workers are not able to afford housing in the County and the City of Burlingame. The local jurisdictions within San Mateo County commissioned a coordinated set of residential nexus studies to help mitigate the impacts that new residential development has on the provision of affordable housing. Strategic Economics and Vernazza Wolfe Associates prepared the City of Burlingame Residential Impact Fee Nexus Study in 2015 (Nexus Study) as part of this countywide effort. The Nexus Study evaluated development revenues (rents and sales prices), development costs and potential housing impact fees for the three most typical types of development in the City of Burlingame— single family attached, condominiums and apartments. The Nexus Study also performed a financial feasibility analysis of these three housing prototypes in order to develop recommendations regarding the feasible range of fees per square foot of residential development that the City could consider adopting. In general, the recommended fee levels in the Nexus Study for Burlingame range from $25 to $50 per square foot, while the maximum justified fee amounts according to the Nexus Study for Burlingame range from $50 to $85 per square foot, as shown below in Figure I-1 from the Nexus Study. The City of Burlingame asked Seifel Consulting Inc. (Seifel) to prepare an updated financial analysis to help the City evaluate the potential adoption of new impact fees on residential development and the best strategies to incentivize the onsite provision of affordable housing within new development as part of the City’s affordable housing program. This report summarizes the findings from Seifel’s financial analysis, which was initially presented to the City Council in July 2018. This report is organized into the following sections, which are accompanied by tables and charts as further described below: A. Summary of Findings ....................................................................................................................... 2 B. Infill Development Challenges and Opportunities ........................................................................... 3 C. Current Development Conditions in the City of Burlingame ........................................................... 7 D. Financial Analysis of Housing Fee Alternatives ........................................................................... 12 E. Financial Analysis of Onsite Affordable Housing Provision ........................................................ 17 F. Financial Feasibility of Onsite Affordable Housing Provision ..................................................... 24 G. Conclusion ...................................................................................................................................... 27 DRAFT—FOR INTERNAL REVIEW ONLY Page 2 A. Summary of Findings This report presents the key financial considerations associated with achieving new residential development in the City of Burlingame and an updated development feasibility analysis to help the City evaluate how to incentivize the onsite provision of affordable housing within new development as part of its affordable housing program, which is proposed to include the adoption of housing fees on new residential development. The report concludes with potential policies that the City may want to consider implementing in order to encourage the provision of onsite affordable housing. As rents and prices have continued to increase, the difference between the cost of housing and what many households can afford to pay for housing has increased, leading to a widening “affordability gap” for new housing. In order for new development to be financially feasible when including onsite affordable housing units, the cost of providing new affordable housing must be able to be factored into the total costs of developing housing while still leaving sufficient developer margin or return to allow development to go forward. Developing infill housing development in Bay Area cities like Burlingame is typically challenging and risky to undertake given the uncertainties of the development process, and is costly due to the broad range of development cost factors discussed in this report. For example, land prices and construction costs (including parking) have risen rapidly in recent years, significantly affecting development feasibility for new housing, particularly for multifamily apartments where apartment rents have not been increasing as fast as construction costs. Depending on the total development costs associated with new apartments, rental units may not yield sufficient returns to attract capital (creating a development feasibility gap). Higher density alternatives, however, are more feasible when land values are significantly less on a per unit basis, providing greater opportunities for developers to pay for public requirements such as affordable housing. Onsite affordable housing requirements that are focused on moderate income households (earning between 80% and 120% of Areawide Median Income) are more financially feasible and best correlate to citywide housing fee levels ranging from $15 to $25 per square foot on residential development. (This range of fee levels was tested in this financial analysis based on guidance from City staff, and takes into account housing fee levels in surrounding cities.) Housing prices in the Bay Area have been increasing rapidly, and most buyers need significant cash or “trade-up” value in homes to afford new units, making it much more difficult for first-time homebuyers to purchase a new home. Constructing for-sale housing units is typically more financially feasible in Burlingame as compared to constructing apartments given the high prices for new homes. However, the affordability gap for new homes is significant, particularly for large single family attached units (townhomes). The financial analysis indicates that housing fees at $25/SF can be supported by new ownership development, and onsite affordable housing requirements focused on households between 110% and 135% AMI are financially feasible, assuming reasonable land and construction costs. This analysis finds that the City of Burlingame may want to consider providing an onsite housing development alternative to the payment of housing fees that is primarily focused on addressing the housing needs of households earning between 80% and 135% Areawide Median Income and that requires the provision of 10 percent of total units as affordable housing units. For apartments, the provision of onsite housing is best accomplished with projects that provide a higher range of densities and have parking requirements similar to what is allowed in State Density Bonus Law for mixed income developments. For single family attached units, allowing affordable housing units to be a smaller size than what is typically built in single family attached developments significantly enhances the ability of developers to provide onsite housing units at affordable sales prices while maintaining development feasibility. DRAFT—FOR INTERNAL REVIEW ONLY Page 3 B. Infill Development Challenges and Opportunities As described by the Urban Land Institute, the infill development process is complex and challenging but provides significant opportunities to create vibrant mixed-use neighborhoods.1 As demand for urban living continues to increase, developers are increasingly undertaking new housing development that replaces or intensifies existing uses, often as part of mixed-use developments with housing above ground- floor retail or other commercial uses. In order to develop new infill housing, developers must prepare a proposed residential development program, undertake a series of technical analyses, refine the development program based on input from a broad variety of stakeholders, and secure government approvals prior to starting construction. This pre- development period is typically the most risky phase of development, and developers typically need to raise private investor capital (equity) to fund pre-development costs. Given the high risks associated with new development not occurring or not occurring as planned, developers must be able to generate sufficient returns or profit to attract private equity commensurate with these risks. Private equity must also be raised during the construction and the sales or lease-up period, as private lenders typically require a 35% to 40% equity contribution for infill housing projects. Throughout the predevelopment process, and most importantly prior to initiating construction, a developer must be able to demonstrate to its private capital sources (private investors and lenders) that there is sufficient developer margin (return) to take into account potential risks and to repay capital at specified levels of return. In most capital structures, the priority of capital repayment is as follows: 1) construction and permanent lenders, 2) private investors who typically receive a preferred return and a share of profits that are generated by the development and 3) the developer.2 Figure B-1 below illustrates the development feasibility framework for new development, which shows the typical costs of development, the supportable project costs based on a target return, and the projected developer margin (or return) after taking into account all development costs. Figure B-1 Development Feasibility Framework Per Residential Unit 1 https://urbanland.uli.org/development-business/making-infill-work-floridas-urban-cores/ 2 The developer is often allowed to receive a reimbursement for developer project management and overhead costs to manage the development process out of the construction loan proceeds. $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 Developer Margin Government Fees Other Soft Costs Construction Financing Parking Construction Hard Construction Cost Demolition and Site Improvements Land Developer Margin Project Costs Supportable Project Costs Project Value DRAFT—FOR INTERNAL REVIEW ONLY Page 4 Figure B-2 illustrates the typical development costs associated with infill development, which include the direct costs of new development (demolition costs, site improvement, parking, and building hard construction) and the indirect costs of new development (also known as soft costs, which include government fees, architecture and engineering, construction financing, and other soft costs). Figure B-2 Typical Development Costs for Infill Development Building construction costs are the most significant cost component to developing housing. Residential building costs increase based on the type of construction, with wood-frame development (referred to as “Type V” construction) being the least expensive, and concrete/steel, fire-resistive development (referred to as “Type I” construction) being the most expensive on a per square foot basis. Most of the new residential development in Burlingame is Type V wood-frame construction built over a concrete podium slab with parking below, or underground parking. Parking costs are a major contributor to residential construction costs as the costs of constructing a parking space within a building can range from $40,000 to $70,000 per space depending on the location of the parking and the site conditions, as shown in Figure B-3. (For example, the cost of building underground parking is higher in locations that require significant environmental remediation and/or have high water tables.) Requiring substantial amounts of ground floor retail space and associated parking also significantly increases costs. Figure B-3 Typical Parking Construction Cost Per Space Land Demolition and Site Improvements Hard Construction Cost Parking Construction Construction Financing Other Soft Costs Government Fees Developer Margin $0 $20,000 $40,000 $60,000 $80,000 Surface With Carport Above Grade Podium Structure Partially Below Grade Structure Below Grade Structure, 1 Level Below Grade Structure, 2+ Levels Mechanical Lift Parking (Podium) DRAFT—FOR INTERNAL REVIEW ONLY Page 5 Residential construction costs have increased significantly since 2015 due to rapid increases in material costs (including lumber, concrete and steel) and robust demand for construction labor and subcontractors. Some construction experts report that construction costs on the Peninsula have annually increased between 10% and 15% over the past two to three years. Land costs are also a major contributor to development costs, and they vary widely for infill development. Land costs are determined by the marketplace based on the price at which property owners are willing to sell their property and what developers can afford to pay for land after taking into account all non-land related development costs including a sufficient allowance for developer margin or return. This “residual” value of land for future residential uses (often referred to as “residual land value”) must exceed the property’s value given its current use. Figure B-4 below illustrates how developers typically calculate residual land value to determine how much they can afford to pay for property acquisition. Figure B-4 Residual Land Value Per Residential Unit Since most infill sites in Burlingame that might be developed as housing have existing buildings generating rental income, the developer must typically pay an amount that is significantly higher than the existing property value based on this rental income to incentivize the owner to sell. Some property owners require developers to purchase property outright, while others are willing to allow developers to pay for the opportunity to develop property in the future by entering into an option to purchase property. Typically, land purchase options provide for a certain period of time during which a developer can undertake pre-development activities, and option payments typically increase over time, particularly if performance milestones are not met. At some point, most property owners require developers to purchase property outright or let the option expire if the pre-development process extends for a long time. In summary, developing residential infill development is costly in cities like Burlingame and others on the Peninsula due to the following cost factors: • Expensive property acquisition costs, particularly in areas of high demand such as Burlingame. • Significant environmental mitigation and remediation costs. $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 Developer Margin Government Fees Other Soft Costs Construction Financing Parking Construction Hard Construction Cost Demolition and Site Improvements Land Developer Margin Project Costs (except land) Residual Land Value Project Value DRAFT—FOR INTERNAL REVIEW ONLY Page 6 • Public infrastructure and facility upgrades to accommodate new development. • Complex governmental approval process that can take a long time to complete and can result in significant modifications to the development program and architectural design from what is originally proposed. • Public fees for municipal costs related to land use planning, application processing, permits and public infrastructure/facilities (development impact fees). • Higher cost of capital and investor return thresholds as projects take longer and often have unique project components that are more difficult to underwrite. • Expensive construction costs due to the inclusion of structured parking (particularly underground parking) and the vertical integration of multiple uses with different design and construction requirements. These development costs have rapidly increased in the Bay Area since 2015, making it much more difficult for residential infill development to be financially feasible than what was analyzed and reported in the Nexus Study. Based on discussions with real estate professionals, infill development in the Bay Area is likely going to continue to be challenging to undertake for the following reasons: • Despite the fact that the United States has experienced a very long economic expansion since the last recession, the Federal Reserve continues to think that the United States is still in a period of moderate economic expansion.3 • Interest rates have been at historic lows but are anticipated to continue to increase over time as evidenced by the recent interest rate increases by the Federal Reserve. • Capitalization rates, which are used to measure property values, tend to increase over time as interest rates increase. As cap rates increase, underwriters typically lower their expectation of future property values.4 • Construction costs are anticipated to continue to increase given the high demand for construction, particularly given the rebuilding activity after the recent fires in California. • Housing supply in the Bay Area is not keeping pace with demand. For example, in high employment growth, Bayside areas like San Mateo and Santa Clara counties, only one housing unit was built for every 15 jobs created between 2011 to 2015, according to the Metropolitan Transportation Commission.5 • Due to high housing demand, the housing affordability gap has widened for many households in the Bay Area. • Apartment rent growth has flattened on the Peninsula, in part due to the housing affordability crisis, as many households cannot afford to pay higher market rate apartment rents. • While moderate economic expansion is projected in the near term, an economic recession will likely emerge sometime in the next few years based on historical experience, which will significantly affect future housing development conditions. 3 https://www.federalreserve.gov/newsevents/speech/powell20180406a.htm 4 A capitalization rate is equal to the ratio of a property’s net operating income to its purchase price or value. Low cap rates mean that properties are perceived by the market place to have a high value in relationship to their income producing potential. 5 https://www.planbayarea.org/sites/default/files/san_francisco_cma_board_presentation.pdf DRAFT—FOR INTERNAL REVIEW ONLY Page 7 C. Current Development Conditions in the City of Burlingame As described earlier, the Nexus Study evaluated development conditions in the City of Burlingame for the purpose of developing housing fee recommendations. The first step in the financial analysis was to review the Nexus Study in order to understand the core development assumptions and methodologies used in the Nexus Study for the three most typical types of development in the City of Burlingame—apartments, condominiums and single family attached units (townhomes). City staff provided a variety of information and input regarding recent residential development in Burlingame for each of these residential types, including residential densities and development programs. Seifel also collaborated with The Concord Group to assemble residential market data for Burlingame and surrounding cities for the three housing types. Seifel interviewed developers undertaking projects in Burlingame and nearby cities in order to gather recent data regarding local development conditions, residential unit sizes, residential revenues, development costs and land prices. In consultation with City staff, Seifel has evaluated the same three housing types and parcel sizes as previously analyzed in the Nexus Study, but the development characteristics for each prototype have been modified to reflect recent development experience in the City of Burlingame as follows: • Multifamily apartments on a 3-acre site– three apartment scenarios have been analyzed at densities of 50, 70 and 120 dwelling units per acre (dua) • Condominiums on a .5-acre site– one condominium (condo) scenario at 50 dua • Single family attached (SFA) homes on a 1.7-acre site– one SFA scenario at 18 dua Table C-1 below summarizes the key characteristics of each residential prototype. Table C-1 Summary of Development Characteristics for Residential Prototypes Building Characteristics Apartments (50 dua) Apartments (70 dua) Apartments (120 dua)Condominiums Single Family Attached (For Sale) Building Type Wood-Frame Wood-Frame Wood-Frame Wood-Frame Wood-Frame Total Residential Units 150 210 360 25 31 Residential Net Square Feet (NSF)127,500 174,300 288,000 25,000 46,500 Average Unit Size (NSF)850 830 800 1,000 1,500 Parking Type Podium Podium Podium Underground Tuck-Under Efficiency Factor a 70%70%70%80%85% Residential Gross Square Footage (GSF)182,143 249,000 411,429 31,250 54,706 Floor Area Ratio (FAR) b 1.4 1.9 3.1 1.4 0.7 Land Area (SF)130,680 130,680 130,680 21,780 74,052 Land Area (Acres)3.00 3.00 3.00 0.50 1.70 Units per Acre 50 70 120 50 18 Notes: (a) Ratio of residential net square footage to residential gross square footage (b) Floor area ratio (FAR) measures density by dividing residential gross building area by total site area Source: The Concord Group, Seifel Consulting Inc. DRAFT—FOR INTERNAL REVIEW ONLY Page 8 1. Development Revenues Revenues from new residential development are generated from the following sources: • Rental revenues, which are generated by the monthly rental of apartments, and the associated market value of an apartment unit, based on this rental income.6 • Sale of residential units, either from the sale of single family attached homes or condominiums. The Concord Group (TCG) assembled residential market data for the three housing product types for the City of Burlingame and surrounding cities in the northern part of San Mateo County as of May 2018. TCG gathered residential market data on apartments and for-sale communities in these areas to inform their analysis. Table C-2 below summarizes the anticipated revenues to be generated by the residential prototypes based on the residential market analysis prepared by TCG, which has been adjusted to reflect the typical unit mix being developed in Burlingame. (The supporting market data and analysis prepared by TCG is included in Appendix 1.) Table C-2 Summary of Residential Revenues for Residential Prototypes 6 The value of an apartment unit is based on standard appraisal valuation technique using capitalized net operating income (net operating income divided by an assumed cap rate for apartments). Prototype Residential Net Square Feet (NSF) Unit Sales Price/ Monthy Rent Apartments (50 dua) Type V Wood Frame Average 850 $3,734 50 units per acre Total 127,500 Podium Apartments (70 dua) Type V Wood Frame Average 830 $3,651 70 units per acre Total 174,300 Podium Apartments (120 dua) Type V Wood Frame Average 800 $3,569 120 units per acre Total 288,000 Podium Condominiums Average 1,000 $939,000 Type V Wood Frame Total 25,000 50 units per acre Underground Single Family Attached (For Sale) Type V Wood Frame Average 1,500 $1,632,000 18 units per acre Total 46,500 Tuck-Under Source: The Concord Group, Seifel Consulting Inc. DRAFT—FOR INTERNAL REVIEW ONLY Page 9 a. Apartment Rents and Values Monthly market rents for new apartments in Burlingame are anticipated to range between $2,300 for studios to about $4,600 for three-bedroom units. Based on a typical mix of units, average market rents for an apartment building with a typical 800-850 square feet average unit size are estimated to range from approximately $3,600 to $3,700 per month. The potential value of an apartment unit is estimated by capitalizing the annual net operating income using a 4.25% capitalization rate (cap rate) for residential apartments and deducting sales-related expenses in order to project net apartment revenues for the financial analysis. Net operating income (NOI) is equal to project revenues less a 5 percent vacancy allowance less operating expenses (including property taxes). As described earlier, current cap rates are at historically low levels, and this low, 4.25% cap rate reflects the robust market conditions for housing on the Peninsula. Sales expenses are assumed at 3% of value and include sales/brokerage fees, title/recording fees and other sales related expenses. b. Condominium and Single Family Attached Sales Prices Sales prices for condominiums and single family attached units vary based on location, unit size, building amenities, and whether or not units have a view premium, among other factors. Sales prices for each housing prototype are based on anticipated sales value per net square foot (NSF) for a typical new development of comparable height, target market and unit size in developments located in or near Burlingame. As the average size of units, design features and amenities typically differ between condominium and single family attached developments, the projected market pricing takes this into account. Condominium market sales prices typically range from $900 to $1,000/NSF, and the average price for condominium units has been assumed to be about $939,000. Single family attached units are typically higher priced, ranging from $1,000 to $1,100/NSF, and the average price for these units is projected to be about $1.63 million. (These sales prices are assumed to include the cost of parking.) 2. Development Costs Development cost assumptions were developed based on a review of the prior Nexus Study assumptions and interviews with real estate professionals who are actively developing residential projects in the Peninsula. Development costs vary from project to project but generally consist of three major cost categories: land, direct costs to improve and construct buildings (also known as hard costs) and indirect costs that are required to prepare for development (also known as soft costs). a. Land Costs As described earlier, most residential infill sites in Burlingame have existing buildings that generate rental income. Given this, developers must typically purchase property at prices that are significantly higher than the existing property value based on this rental income to incentivize the owner to sell while maintaining development feasibility. Property values in the City of Burlingame (and the Peninsula) vary widely depending on the existing use of the property and the future use of the property. Based on a review of market data compiled by TCG and interviews with developers, land values are assumed to range from $200 to $260 per square foot of land, or about $8.7 million to $11.3 million per acre. However, land costs may be much higher than this level, particularly when a developer is purchasing a commercial property that achieves high retail and office rents such as in downtown Burlingame. DRAFT—FOR INTERNAL REVIEW ONLY Page 10 For residential development, developers evaluate how much they can afford to pay for land based on the supportable residual land value per unit under alternative development programs assuming the ultimate value of the development is sufficient to support development costs and achieve sufficient developer margin or return thresholds to attract private capital. Developments that can achieve higher numbers of dwelling units per acre (du/ac) can spread the cost of land over a greater number of housing units, which typically improves development feasibility. b. Direct Costs (Hard Costs) Direct costs include all of the hard construction costs that are associated with new development. • Demolition and site improvement costs include all of the costs that are required to ready the site for development, including the demolition of existing structures, completion of the environmental remediation work and the provision of public and private pathways and landscaped areas of the project. • Building hard construction costs include the construction costs related to residential, parking and any ground floor retail uses. Residential hard construction costs are based on wood-frame construction over podium or below-grade parking. All of the hard construction costs include costs related to general conditions plus general contractor (GC) overhead, profit, insurance and other GC costs. No additional hard cost contingency factor was assumed in this analysis. c. Indirect Costs (Soft Costs) Indirect costs include all of the soft costs that are associated with new development. These include government fees for planning, permitting and development impact fees, construction financing and other soft costs, such as professional services (architectural design, engineering, environmental studies, market analysis, legal, marketing, etcetera). City staff provided estimates of the potential government fees that would need to be paid for each prototype to cover fees charged by the City, local School Districts and other public agencies. Developers use construction loans to finance a large share of the development costs during construction. The construction financing assumptions take into account today’s low-interest rate environment for construction loans and relatively conservative equity requirements. Other soft costs are based on representative percentages of hard construction costs based on a review of pro formas, interviews with real estate professionals and the prior Nexus Study. Table C-3 below summarizes the projected development costs associated with each residential prototype based on these assumptions. DRAFT—FOR INTERNAL REVIEW ONLY Page 11 Table C-3 Summary of Development Cost Assumptions for Residential Prototypes 3. Developer Return Metrics Developers, lenders and investors evaluate and measure returns in several ways. Based on input from real estate developers, equity investors and lenders, development returns are based on two key measures typically used by the real estate community: Developer Margin (or Return) and Yield on Cost. a. Developer Margin or Return Developer margin or return is equal to the difference between net potential revenues and total development costs (before consideration of developer return or profit). As described earlier, a developer will not proceed to build a project unless the project generates sufficient developer margin or return to warrant the risk and to attract the private capital investment needed to undertake the project. Developers and investors use different target return on cost (ROC) thresholds depending on the level of complexity of the project, construction types, construction schedule, sales/rental absorption timeline, potential equity sources including the use of tax credits. Projects with longer timelines have higher risk and as a result require a higher return on cost. The lowest return threshold for mixed income apartments is based on the allowable developer fee (or return) according to the relevant tax credit regulations used by the California Tax Credit Allocation Committee to implement Federal and State tax credit laws. These regulations allow a maximum developer fee for new construction 4% Low Income Housing Tax Credit projects that is equal to 15% of the project’s unadjusted eligible basis, which is approximately 14% of total development costs. (The unadjusted eligible basis excludes land acquisition costs and a portion of other project costs.) Market rate return (ROC) to attract private capital investment for market rate developments typically range from 15% to 25% on total development cost depending on the complexity, size and time frame for development, as well as whether the development is an apartment development, a for-sale condominium or a single family attached development. Development Costs Apartments (50 dua) Apartments (70 dua) Apartments (120 dua)Condominiums Single Family Attached (For Sale) Direct Costs a Buliding and Site Improvement Costs per Unit $382,000 $357,000 $347,000 $438,000 $675,000 Indirect Costs b Permits & Fees (Excl. Housing) c per Unit $18,500 $18,500 $18,500 $26,700 $27,800 Other Soft Costs % of Direct Costs 16%15%15%20%20% Financing Costs Loan to Cost Ratio (LTC)% of Dev't Costs 65%65%65%65%65% Loan Interest Rate 5.0%5.0%5.0%5.0%5.0% Construction/ Absorption Period in months 27 29 35 22 20 Outstanding Balance (Utilization Rate)% of Dev't Costs 60%60%60%60%60% Loan Fees % of Loan Amount 1.5%1.5%1.5%1.5%1.5% Note: Development costs are based on review of similar project pro formas in the Bay Area and interviews with developers, construction experts, other real estate professionals, and City staff. (a) Direct costs include site work, building construction, and parking costs of $60,000 per space for underground parking and $45,000 per space for podium parking. (b) Other soft costs include architectural and engineering fees (typically ranging from 5% for larger projects to 7% of direct costs for smaller projects), taxes, insurance, legal & accounting, developer project management and overhead, sales and marketing and other consultant services. The higher allowance of indirect costs for ownership housing is attributable to higher cost of sales, marketing and insurance costs. These costs depend on the size, complexity and time frame of the project, and these percentage estimates assume a streamlined design and approval process. (c) Permits & fees were calculated by the City based on recent experience with similar projects and exclude proposed housing fees. Source: Development pro forma data on comparable projects, interviews with real estate professionals, City of Burlingame, Seifel Consulting, Inc. DRAFT—FOR INTERNAL REVIEW ONLY Page 12 b. Yield on Cost (also known as Return on Cost for Apartments) The most important feasibility return metric for apartment developments is called Return on Cost or Yield on Cost (YOC). YOC is measured based on Net Operating Income (NOI) divided by development costs. (NOI is equal to project revenues less vacancy allowance less operating expenses.) Another important feasibility metric is the calculation of supportable project costs, which is calculated by dividing NOI by the YOC. If supportable project costs exceed total development costs (before consideration of developer return/profit), then the project is financially feasible. While institutional investors and pension funds have typically underwritten projects to a YOC of between 5.5% to 6% in the Bay Area, recent trends indicate that some capital sources have accepted lower rates of return between 5% to 5.25% for residential development in high demand areas along the Peninsula. Based on these recent trends, the target YOC for apartments is assumed at 5.25% for this analysis, which means that apartment developments that achieve a 5.25% YOC are assumed to be financially feasible, while those below this threshold may not be able to attract the necessary capital to move forward, particularly if the YOC is well below a 5.0% YOC. YOC thresholds are expected to increase in the future as interest rates, cap rates and the cost of capital increases. D. Financial Analysis of Housing Fee Alternatives As described earlier, the City of Burlingame and all of the local jurisdictions within San Mateo County commissioned a coordinated set of residential nexus studies to help mitigate the impacts of new residential development on the provision of affordable housing. The City of Burlingame’s Nexus Study recommended a range of housing fee levels from $25 to $50 per square foot, while the maximum justified fee amounts according to the Nexus Study ranged from $50 to $85 per square foot. Other cities in San Mateo County have already adopted housing fees that are significantly lower than the maximum justified nexus amounts. Based on a recent survey of other jurisdictions in San Mateo County summarized by City staff, adopted housing fees ranged from $15 to $34 per square foot, with median fee levels at $21 per square foot, as shown below in Table D-1. DRAFT—FOR INTERNAL REVIEW ONLY Page 13 Table D-1 Summary of Housing Fee Levels of Other San Mateo County Jurisdictions While housing fees could potentially be charged at higher levels in the City of Burlingame than other cities, this financial analysis evaluated alternative housing fee levels at $15, $20 and $25 per square foot (SF), reflective of the typical fee level ranges of other jurisdictions in San Mateo County.7 7 This analysis assumes that housing fees would be calculated on a residential net square foot basis, which is typical fee framework, though some cities do calculate fees on a gross square foot basis. Townhomes Condominiums Apartments Per SF Per SF Per SF Atherton Belmont $20.00 $20.00 $20.00 2017 Jurisdiction Date Fee Adopted None Colma $15.00 $15.00 $15.00 2016 Daly City $18.00 $22.00 $25.00 2014 East Palo Alto 1 $23.00 $23.00 $33.71 2014 Foster City None2 Menlo Park None2 Pacifica Portola Valley Redwood City 4 $25.00 $20.00 $20.00 2015 San Bruno $25.00 $25.00 $25.00 2016 San Carlos 5 $20.59 $20.59 $21.00 2010 San Mateo City San Mateo County6 $12.50 $12.50 $10.00 2016 South San Francisco None2 None3 None2 None2 LOWEST $12.50 $12.50 $10.00 AVERAGE $19.89 $19.76 $21.21 MEDIAN $20.30 $20.30 $20.50 HIGHEST $25.00 $25.00 $33.71 2 No Housing Impact Fee adopted, but Inclusionary Housing requires Below Market Rate units in new developments. Some municipalities allow on-site Below Market Rate units to be satisfied with in-lieu fees. 3 Has inclusionary fee triggered by subdivisions. 5 Sliding scale: fees vary based on number of units, up to $42.20/sf for largest projects. Also assesses fee on single family additions. 6 $5.00/sf for first 2,500 sf, $12.50 per each square foot over 2,500 sf. Only applies to projects with 4 or fewer units; projects with 5 units or more are subject to the Inclusionary Housing Ordinance rather than fees. 1 Townhome and condo fee increases to $44.00/sf for projects with structured parking. Apartment fee increases to $44.72/sf for projects outside Ravenswood Business District. 4 Fee applies to projects with between 5 and 19 units. Projects with 20 units or greater are required to provide Inclusionary units rather than fees. Projects with 4 or fewer units are not subject to fees or inclusionary requirements. DRAFT—FOR INTERNAL REVIEW ONLY Page 14 1. Financial Analysis of Apartments at Varying Housing Fee Levels The first step in the financial analysis was to analyze the potential financial impact from the adoption of housing fees ranging from $15 to $25/SF on apartments, as apartments have the potential to produce the greatest number of new housing units in Burlingame. Figure D-1 shows the effect on development feasibility of three potential housing levels on three apartment prototypes representing the range of densities currently being developed or proposed in Burlingame. The housing fee is shown as a red bar in Figure D-1, and the light blue bar represents all of the other development costs (except the housing fee). The green bar shows the calculated developer margin or return, which represents the difference between the project value and total development costs. The feasibility gap is displayed as a checkerboard, which indicates that the development value is not high enough to provide sufficient developer margin/return. Only the apartment development at 120/dua remains financially feasible with these proposed fee levels (does not have a significant feasibility gap). Figure D-1 Apartment Development Feasibility at Alternative Housing Fee Levels $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 50 dua 70 dua 120 dua 50 dua 70 dua 120 dua 50 dua 70 dua 120 dua Feasibility Gap Developer Margin/ Return Housing Fee Other Development Costs Housing Fee @ $25/SF Housing Fee @ $20SF Housing Fee @ $15/SF DRAFT—FOR INTERNAL REVIEW ONLY Page 15 The financial analysis also analyzes each housing fee scenario using the most common return metric for apartments of YOC (assumed at 5.25%). As shown in Figure D-2, the financial analysis indicates that apartments developed at 120 dua—with lower average land costs per unit—are financially feasible at housing fees of $15/SF and $20/SF while slightly below the feasibility threshold at $25/SF. However, apartment developments at densities of 50 dua and 70 dua not financially feasible under any of the proposed fee levels based on the development cost assumptions assumed for this analysis, which include relatively high land costs per unit. Figure D-2 Financial Feasibility of Apartments at Alternative Housing Fee Levels 2. Financial Analysis of Condominium and Single Family Attached at Varying Housing Fee Levels A similar financial analysis was done for the two for-sale housing prototypes: condominium and single family attached. Figure D-3 shows the effect on development feasibility of three potential housing fee levels on a condominium unit, while Figure D-4 shows the effect on development feasibility on a single family attached unit. As these graphs illustrate, new condominium and single family attached housing is feasible at all of the proposed fee levels of $15/SF, $20/SF and $25/SF. 4.0% 4.5% 5.0% 5.5% 6.0% 50 dua 70 dua 120 dua 50 dua 70 dua 120 dua 50 dua 70 dua 120 dua Housing Fee at $25/SF Housing Fee at $20/SF Housing Fee at $15/SF Target Return or Yield on Cost DRAFT—FOR INTERNAL REVIEW ONLY Page 16 Figure D-3 Condominium Development Feasibility at Alternative Housing Fee Levels Figure D-4 Single Family Attached Development Feasibility at Alternative Housing Fee Levels $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 Housing Fee at $25/SF Housing Fee at $20/SF Housing Fee at $15/SF Feasibility Gap Developer Margin/Return Housing Fee Other Development Costs $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 Housing Fee at $25/SF Housing Fee at $20/SF Housing Fee at $15/SF Feasibility Gap Developer Margin/Return Housing Fee Other Development Costs DRAFT—FOR INTERNAL REVIEW ONLY Page 17 E. Financial Analysis of Onsite Affordable Housing Provision The next step in the financial analysis is to understand the potential financial trade-offs to a developer from including affordable housing units within new market rate development versus paying a housing fee. As one of the City’s key housing goals is to incentivize the onsite provision of affordable housing within new development rather than collect housing fees, this section evaluates the potential financial effects of providing affordable housing onsite to households at various income levels. An affordability gap analysis is used to measure the difference or gap between what households at different income levels can afford to pay for housing and the cost of renting or purchasing housing, which is then factored into project costs. 1. Household Income levels The California Department of Housing and Community Development (HCD) publishes areawide median income (AMI) levels calculated annually by the US Department of Housing and Urban Development (HUD) for various household income thresholds and different household sizes in San Mateo County: • Very Low Income (also referred to as VLI) means a household whose income is 50% or below AMI, adjusted for household size. • Low Income household (also referred to as LI) means a household whose income is above 50% up to 80% AMI. In recent years, HUD has adjusted the LI limits in high-housing cost areas in a way that exceeds these percentages in San Mateo, San Francisco and Marin counties.8 • Moderate Income household (also referred to as MOD) means a household whose income is above 80% up to 120% AMI. • Above Moderate Income (also referred to as Above MOD) means a household whose income is above 120% AMI. This analysis focuses on Above MOD households up to 150% AMI. Figure E-1 below shows the various household income levels that correspond to different housing types by bedroom size and household size. For example, a one-person, very low income household at or below 50% AMI that occupies a studio (0 Bedroom) unit has a household income threshold of $51,350. Table E-1 2018 Household Income Levels Corresponding to Housing Types by Bedroom Size San Mateo County 8 https://www.mercurynews.com/2018/06/25/the-eye-popping-definition-of-what-is-low-income-in-the-bay-area-increases-again/ Hosehold Income Level Bedroom Size (Persons per Household) Percent Income Category of Areawide 0 Bedroom Median Income (1) Bedroom Size (Persons per Household) 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom (2)(3)(4)(5) Very Low 50%$51,350 Low 60%$61,650 Low 70%$71,950 Low 80%$82,200 Moderate (Median)100%$82,900 Moderate 110%$91,200 Moderate 120%$99,450 Above Moderate 135%$111,900 Above Moderate 150%$124,350 Source: California Department of Housing and Community Development, HUD $58,650 $66,000 $73,300 $79,200 $70,400 $79,250 $88,000 $95,050 $82,200 $92,500 $102,700 $110,950 $93,950 $105,700 $117,400 $126,800 $94,700 $106,550 $118,400 $127,850 $104,200 $117,250 $130,250 $140,650 $113,700 $127,900 $142,100 $153,450 $127,850 $143,850 $159,850 $172,600 $142,050 $159,850 $177,600 $191,800 Source: California Department of Housing and Community Development, HUD DRAFT—FOR INTERNAL REVIEW ONLY Page 18 2. Affordability Gap for Apartment Developments Utilizing the San Mateo County data on household income levels, Seifel analyzed the housing affordability gaps between market rate and below market rate (BMR) apartments that are considered affordable to households at specific AMI levels according to State standards. The analysis was conducted for all of the housing prototypes, but focuses first on the affordability gap for apartments. Figure E-1 below shows the market rate rent and affordable rent at various target AMI levels for a typical apartment unit, which averages between one to two bedrooms in size based on recent developments.9 As it illustrates, market rents are about $3,700 for the lower density apartment prototypes while a typical very low income household at 50% AMI (at a typical household size of 2 to 3 persons) can only afford to pay about $1,500 per month in rent (net of a standard utility allowance). This translates to an affordability gap of about $2,200 per month, which is the difference between projected market rents and what a very low income household can afford based on a standard of 30% of income toward housing costs. Likewise, a moderate income household at 100% AMI can afford to pay about $2,400 per month in rent, resulting in an affordability gap of about $1,300 per month in rent. Households would need to earn about 155% of AMI to be able to afford projected market rents.10 Figure E-1 Projected Monthly Rent for Typical New Apartment in Burlingame and Rental Affordability Gap Seifel performed a similar set of calculations to measure the difference or affordability gap between the value of an apartment unit assuming market rate rents and the value assuming BMR rents affordable to households at specific AMI levels. Typical vacancy and operating expense assumptions are used to calculate net operating income (NOI) at alternative rent levels, and the resulting NOI is divided by the 9 The affordability gap is calculated based on the weighted average distribution of units and corresponding household sizes for both apartment and for-sale prototypes. 10 The State affordability standard for rental housing is based on 30% of income toward housing for the following household income levels: very low income at 50% AMI, low income at 60% AMI and moderate income at 110% AMI. The affordability standard of 30% of income for rental housing is used for all AMI levels in this analysis. $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 50% AMI 60% AMI 80% AMI 100% AMI 110% AMI Market Rate Affordable Housing Cost Rental Affordability Gap Market Rate Housing Rent DRAFT—FOR INTERNAL REVIEW ONLY Page 19 4.25% cap rate to project values at each target AMI level. Figure E-2 below shows the affordability gap based on apartment values at different household income levels, indicating a difference in value of about $400,000 between the value for a market rate apartment and the value if the apartment were rented at BMR rents affordable to a very low income household. Figure E-2 Value of a New Apartment in Burlingame and Affordability Gap in Value Utilizing the San Mateo County data on household income levels, Seifel also analyzed the housing affordability gaps between market rate and below market rate sales prices for condominium and single family attached units that would be affordable at specific AMI levels. Figure E-3 on the next page shows the market sales price and affordable price at various target AMI levels for a typical condominium unit, which averages about two bedrooms in size based on recent developments. As it illustrates, market prices for new condominiums are projected to be about $939,000 while a moderate income household at 100% AMI (at a typical household size of about 3 persons) can only afford to pay about $360,000, which translates to an affordability gap of about $580,000, which is the difference between projected market sales price and what a moderate income household at 100% AMI can afford based on a standard of 30% of income toward housing costs.11 Figure E-4 on the next page likewise shows the market sales price and affordable price at various target AMI levels for a typical single family attached unit, which also averages about two bedrooms in size based on recent developments. As it illustrates, market prices for new single family attached units are projected to be about $1.63 million while a moderate income household at 100% AMI (at a typical household size of about 3 persons) can only afford to pay about $360,000, which translates to an affordability gap of about $1.27 million.12 11 The State affordability standard for ownership housing for a moderate income household is based on 35% of income toward housing for households at 110% AMI, and this 35% of income standard is applied to all AMI levels at 110% AMI and above for ownership housing. The 30% of income standard is applied to all AMI levels below 110% AMI for ownership housing in this analysis. 12 Ibid. $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 50% AMI 60% AMI 80% AMI 100% AMI 110% AMI Market Rate Value at Restricted Rent Affordability Gap Market Rate Apartment Value DRAFT—FOR INTERNAL REVIEW ONLY Page 20 Figure E-3 Affordability Gap for Condominium Unit in Burlingame at Various AMI Levels Figure E-4 Affordability Gap for Single Family Attached Unit in Burlingame at Various AMI Levels $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 80% AMI 100% AMI 120% AMI 135% AMI 150% AMI Market Rate Affordable Housing Cost Affordability Gap Market Rate Condominium Value $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 80% AMI 100% AMI 120% AMI 135% AMI 150% AMI Market Rate Affordable Housing Cost Affordability Gap Market Rate Single Family Attached Value DRAFT—FOR INTERNAL REVIEW ONLY Page 21 3. Financial Effect of Alternative Onsite Apartment Requirements Based on discussions with City staff, Seifel evaluated the financial effect of alternative affordable housing policy options on development feasibility for apartments by comparing how much it would cost to provide varying percentages of affordable housing units at different target household AMI levels. Given the significant affordability gaps for apartments, Seifel performed sensitivity analysis related to the following onsite affordable housing compliance options for apartments: • Percentage of affordable units to be provided onsite– 10% and 15% • Target household income levels– Very low income (50% AMI), low income (60% and 80% AMI) and moderate income (100% and 110% AMI) As one of the key City policy objectives is to incentivize the provision of onsite affordable housing instead of the payment of housing fees, this analysis calculates the potential cost to the developer of providing housing onsite on a per residential net square foot basis for a typical apartment. For example, one scenario analyzed the potential cost to a developer of providing a mixed income apartment development with 15% of units rented at BMR rents that are affordable to very low income households at 50% AMI, which translates to a cost of about $75/NSF in contrast to a cost of about $45/NSF for moderate income households at 100% AMI. Figure E-5 illustrates the potential financial effect of providing affordable apartments at alternative onsite requirements within these compliance options. Figure E-5 Affordability Gap at Alternative Onsite Affordable Housing Requirements on Apartments $0 /NSF $25 /NSF $50 /NSF $75 /NSF $100 /NSF Very Low Income (50% AMI) Low Income (60% AMI) Low Income (80% AMI) Moderate Income (100% AMI) Moderate Income (110% AMI) Very Low Income (50% AMI) Low Income (60% AMI) Low Income (80% AMI) Moderate Income (100% AMI) Moderate Income (110% AMI) 10% Affordable 15% Affordable DRAFT—FOR INTERNAL REVIEW ONLY Page 22 4. Financial Effect of Alternative Onsite Ownership Requirements Figure E-6 similarly illustrates the potential financial effect of providing onsite affordable housing within condominium developments given alternative onsite requirements. Given the significant affordability gaps for both of the for-sale housing prototypes, Seifel performed sensitivity analysis on the following onsite affordable housing compliance options for condominiums and single family attached units: • Percentage of affordable units to be provided onsite– 10% and 15% • Target household income levels–Low income (80% AMI), moderate income (100% and 120% AMI) and above moderate income (135% and 150% AMI) As an example, one scenario analyzed the potential cost to a developer of providing a mixed income condo development with 15% of units sold at prices that are affordable to moderate income households at 100% AMI, which translates to a cost of about $85/NSF in contrast to a cost of about $30/NSF for units priced to be affordable at 150% AMI, which is closest to the proposed housing fee level of $25/NSF. Figure E-6 Affordability Gap at Alternative Onsite Affordable Housing Requirements on Condominium Units Figure E-7a similarly illustrates the potential financial effect of providing onsite affordable housing within single family attached developments given alternative onsite requirements. Given the significant affordability gaps for single family attached units, an alternative scenario was tested that assumed smaller onsite affordable units (1,200 NSF versus the typical average size of 1,500 NSF), which substantially lowered the potential cost to a developer of providing a mixed income single family development. As shown in Figure E-7b, even when smaller units are assumed, the cost of providing 15% of units at prices that are affordable to moderate income households at 100% AMI translated to a cost of about $130/NSF while the cost of providing units to above moderate income households at 150% AMI was about $90/NSF. $0 /NSF $25 /NSF $50 /NSF $75 /NSF $100 /NSF Low Income (80% AMI) Moderate Income (100% AMI) Moderate Income (120% AMI) Moderate Income (135% AMI) Moderate Income (150% AMI) Low Income (80% AMI) Moderate Income (100% AMI) Moderate Income (120% AMI) Moderate Income (135% AMI) Moderate Income (150% AMI) 10% Affordable 15% Affordable DRAFT—FOR INTERNAL REVIEW ONLY Page 23 Figure E-7a Affordability Gap at Alternative Onsite Affordable Housing Requirements on Single Family Attached Units (1,500 NSF/Unit) Figure E-7b Affordability Gap at Alternative Onsite Affordable Housing Requirements on Smaller Single Family Attached Units (1,200 NSF/Unit) $0 /NSF $50 /NSF $100 /NSF $150 /NSF $200 /NSF Low Income (80% AMI) Moderate Income (100% AMI) Moderate Income (120% AMI) Moderate Income (135% AMI) Moderate Income (150% AMI) Low Income (80% AMI) Moderate Income (100% AMI) Moderate Income (120% AMI) Moderate Income (135% AMI) Moderate Income (150% AMI) 10% Affordable 15% Affordable $0 /NSF $50 /NSF $100 /NSF $150 /NSF $200 /NSF Low Income (80% AMI) Moderate Income (100% AMI) Moderate Income (120% AMI) Moderate Income (135% AMI) Moderate Income (150% AMI) Low Income (80% AMI) Moderate Income (100% AMI) Moderate Income (120% AMI) Moderate Income (135% AMI) Moderate Income (150% AMI) 10% Affordable 15% Affordable DRAFT—FOR INTERNAL REVIEW ONLY Page 24 F. Financial Feasibility of Onsite Affordable Housing Provision The next step in the financial analysis is to understand how the inclusion of affordable housing units within new market rate development will likely affect development feasibility of housing in Burlingame, as one of the City’s key housing goals is to incentivize the onsite provision of affordable housing within new development rather than through the payment of housing fees. Given the significant cost of providing affordable units onsite, this section focuses on testing onsite requirements at 10% of total housing units. Apartment prototypes are tested based on three potential onsite housing compliance scenarios: • Scenario 1– 10% of units at 100% AMI • Scenario 2– 10% at 110% AMI • Scenario 3– 5% at 80% AMI and 5% at 110% AMI Ownership prototypes are tested based on three alternative onsite housing compliance scenarios: • Scenario 1– 10% at 110% AMI • Scenario 2– 7% of units at 110% AMI and 3% at 135% AMI • Scenario 3– 5% of units at 110% AMI and 5% at 135% AMI 1. Feasibility of Alternative Onsite Apartment Requirements As Figure F-1a indicates, development feasibility is improved by allowing developers to provide units onsite that are affordable to moderate income households and by requiring an onsite housing requirement of 10% instead of 15% as additional rental income would be generated. However, only the highest density scenario at 120 dua is feasible under any of the scenarios that are tested. Figure F-1a Apartment Development Feasibility Under Alternative Onsite Affordable Housing Requirements $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 50 dua 70 dua 120 dua 50 dua 70 dua 120 dua 50 dua 70 dua 120 dua Feasibility Gap Developer Margin/Return Housing Fee Other Development Costs Scenario 1 (10% @100% AMI) Scenario 2 (10% @110% AMI) Scenario 3 (5% @80% AMI & 5% @110% AMI) DRAFT—FOR INTERNAL REVIEW ONLY Page 25 Figure F-1b shows development feasibility based on the most common return metric for apartments of YOC (assumed at 5.25%). The feasibility analysis indicates that apartments developed at 120 du/acre are financially feasible under all affordability scenarios, as shown in Figure E-7. However, apartment developments at densities of 50 du/acre and 70 du/acre are not financially feasible under any of the affordability scenarios based on the development cost assumptions assumed for this analysis. Figure F-1b Apartment Feasibility Based on YOC Under Alternative Onsite Affordable Housing Requirements 2. Feasibility of Alternative Onsite Ownership Requirements Figures F-2 and F-3 similarly illustrate how development feasibility improves by allowing developers to provide units onsite that are affordable to moderate income and above moderate income households at 135% AMI. As these figures illustrate, condominium developments will likely be feasible with a 10% onsite affordable housing requirement that is focused on moderate income households with an option to provide housing that is affordable to above moderate income households under a high development cost scenario. In contrast, single family attached housing does have a feasibility gap under the three potential onsite housing scenarios, but this gap would be significantly reduced if affordable housing units could be provided at smaller unit sizes, such as 1,200 square feet as tested earlier. 0.04 0.045 0.05 0.055 0.06 50 dua 70 dua 120 dua 50 dua 70 dua 120 dua 50 dua 70 dua 120 dua Scenario 1 (10% @100% AMI) Scenario 2 (10% @110% AMI) Scenario 3 (5% @80% AMI & 5% @110% AMI) Target Return or Yield on Cost DRAFT—FOR INTERNAL REVIEW ONLY Page 26 Figure F-2 Condominium Feasibility Under Alternative Onsite Housing Requirements Figure F-3 Single Family Attached Feasibility Under Alternative Onsite Housing Requirements $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 Scenario A (10% @110% AMI) Scenario B (7% @110% AMI & 3% @135% AMI) Scenario C (5% @110% AMI & 5% @135% AMI) Feasibility Gap Developer Margin/Return Other Development Costs $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 Scenario A (10% @110% AMI) Scenario B (7% @110% AMI & 3% @135% AMI) Scenario C (5% @110% AMI & 5% @135% AMI) Feasibility Gap Developer Margin/Return Other Development Costs DRAFT—FOR INTERNAL REVIEW ONLY Page 27 G. Conclusion As development costs have increased over the past few years, developers are finding it increasingly difficult to develop new housing in the City of Burlingame, and the City must carefully consider how best to implement its affordable housing programs in order to continually encourage new residential development to occur. As rents and prices have continued to increase, the difference between the cost of housing and what many households can afford to pay for housing has increased, leading to a widening “affordability gap” for new housing. In order for new development to be financially feasible when including onsite affordable housing units, the cost of providing new affordable housing must be able to be factored into the total costs of developing housing while still leaving sufficient developer margin or return to allow development to go forward. Given the complexities of finding qualified households and assuring continued affordability of onsite affordable housing units, developers typically prefer to pay a housing fee rather than build housing units onsite unless the cost of providing units onsite is less than paying the fee. 1. Key Findings from Apartment Analysis • Apartment rents are not increasing as fast as construction costs, making it more difficult for apartments to be financially feasible. • Depending on total development costs associated with new apartments, rental units may not yield sufficient returns to attract capital (creating a development feasibility gap). • Higher density apartment developments are more financially feasible when land values can be spread among a greater number of units, providing greater opportunities for developers to pay for public requirements such as affordable housing. • The financial analysis indicates that housing fees at higher fee levels (between $20–$25/SF) should be focused on higher density rental developments of 100 dwelling units per acre or more. • Onsite affordable housing requirements of 10% of total units focused on moderate income households (between 80% and 120% AMI) are more financially feasible and best correlate to housing fee levels between $15 and $25/SF. 2. Key Findings from Analysis of Condominium and Single Family Attached Units • Housing prices have been increasing rapidly, and most buyers need significant cash or “trade-up” value in homes to afford new units, making it much more difficult for first-time homebuyers to purchase a new home. • For-sale developments are more financially feasible than apartments given high price points, but the housing affordability gap is much greater, particularly for large units. • The financial analysis indicates that housing fees at $25/SF can be supported by new ownership development in Burlingame. • Allowing affordable housing units to be a smaller size, particularly for single family attached units, enhances financial feasibility and thus encourages the provision of housing onsite. • Onsite affordable housing requirements of 10% of total units focused on households between 110% and 135% AMI are financially feasible for ownership housing assuming reasonable development costs. DRAFT—FOR INTERNAL REVIEW ONLY Page 28 3. Policy Considerations to Encourage Onsite Affordable Housing Based on the financial analysis shown in this report, input from real estate professionals active in San Mateo County and best practices from other cities, the City may want to consider the following policies to encourage the provision of onsite affordable housing in Burlingame, as these policies will enhance financial feasibility for new housing development: • Develop a more predictable and streamlined process for land use approval and design review in order to reduce the time and risk associated with infill development. • Allow more housing units to be built, along with incentives and concessions similar to what is allowed under State Density Bonus Law, when developers provide onsite affordable housing. • Allow smaller sized units to be dedicated as affordable housing (especially for ownership, single family attached units) so long as they meet the minimum size standards of the California Tax Credit Allocation Committee and are not below a certain threshold requirement established by the City (such as cannot be smaller than 70% to 75% of the average square footage for a similar unit type).13 • While the bedroom mix of the affordable units should be proportionate to the bedroom mix of market rate units, potentially allow a different unit mix if it furthers other City goals. • Encourage the dispersion of affordable housing units throughout new development but allow developments with higher heights to evenly distribute units throughout the first five floors (or 60% of all floors), which will allow upper floors to be rented or sold at higher prices. • Allow reductions in citywide parking standards for residential and retail (with respect to parking stall size and parking ratios), especially near transit and public parking. • Limit the total cost of City imposed permit, processing and development impact fees to levels that are close to current levels and provide developers with certainty regarding how much these fees will increase annually until building permits are pulled. (For example, link future increases in fee amounts after initial development application to published inflationary indices.) In conclusion, this analysis indicates that the City of Burlingame can achieve its housing goal to encourage the onsite provision of housing to address the City’s affordable housing needs by carefully crafting its housing fee program to incentivize the provision of housing onsite through the establishment of varying fee levels for apartment and ownership housing, and by implementing some or all of the housing policy options discussed above. 13 As of July 2018, the minimum unit sizes for the California Tax Credit Allocation Committee are: 450 square feet for a one- bedroom, 700 square feet for a two-bedroom and 900 square feet for a three-bedroom unit, although access requirements for persons with disabilities may lead to slightly larger unit size requirements. SAMCAR SAN MATEO COUNTY ASSOCIATION of REALTORS' June 27,2Ot8 City Council of Burlingame 501 Primrose Road Burlingame, CA 94010 Subject: Creation of Affordable Housing in Burlingame Dear Mayor and City Councilmembers, The San Mateo County Association of REALTORS@ (SAMCAR), wishes to share with you the following perspectives on the housing shortage in San Mateo County and the City of Burlingame, and the means by which we support addressing the shortage of housing. First, we appreciate that the City Council supports creating additional housing units of all varieties in the City of Burlingame. Ultimately, we believe that high home prices are fundamentally a problem of under-supply. lncreased supply will help moderate rent and sales price increases and cause them to decline over time. Second, we appreciate that the Council has not proceeded down a path of having government control home sale prices or rents, which we believe is ill-advised and cou nter-prod uctive policy. Paradoxically measures of this type have proven to increase the price of housing. lt also would violate the clear intent of Measure T, a measure passed in 1988 by Burlingame voters prohibiting rent control and reiterated by the clear rejection of Measure R in the 2016 General Election. SAMCAR continues to seek unanimous agreement with Burlingame City Council regarding housing policy as we did with Measure T in 1988 and Measure R in 2016. We welcome the opportunity to work with the Council to develop policles to help solve our housing shortage. The creation of affordable housing units in new construction is allowable under Measure T. Measure T does not preclude the City Councilfrom enacting housing impact fees, nor dbes Measure T prohibit the City from enacting regulations that require new developments to contain a certain number of affordable units in lieu of paying such fees on new construction lnclusionary zoning requirements clearly increase the cost of new housing. we recommend the following approaches to mitigate the negative effect of inclusionary zoning on much needed new housing. 85o Woodside Way . 5an Mateo, California 94401 . (650) 696-8200 , fax (650) 342-7iog . www.samcar.org 1)Density Bonus Zoning: in effect, increasing "units" density for subject properties in the same percentage as the affordable housing percentage. (example: 15% affordable housing requirement = automatic 15% increase in allowable units density) Re-Zoning Commercial, School or Public Property to high density Residentlal Usage Designated certain re-zoned properties as designated affordable housing sites. lncreasing Zoning Densities Overall, especially for multiple housing zoned parcels. lncreasing building height limits to allow increased density necessary for affordable housing. Encourage smaller units, with more units per project. Encouraging and advocating for Accessory Dwelling Units (ADUs). Encourage and advocate adding ADU units to commercial properties. Further, SAMCAR does not believe Measure T infringes on the ability of the City to regulate short-term housing units (Airbnb, VRBO etc.), as they appear to be commercial business ventures. Sincerely, Gina Zari Government Affairs Director San Mateo County Association of REALTORS@ CC: Lisa Goldman, City Manager 2 3 4 5 6 7 8 We wish it to be known that SAMCAR does not intend to block or litigate such policies as enumerated h erein. ln sum, we support the City Council's efforts to increase housing stock in Burlingame, and we support the Council acting in the best interests of our City and our community to ensure that Burlingame remains a vibrant, safe, and economically diverse community. We believe that Measure T and common sense affordable housing policies, with development incentives to spread the cost over increased density, can co-exist and indeed are mutually supportive. Residential Applications Overview March 2019 Approved Projects The following projects have received approval and are in various stages of construction: Address Units BMR Units Status Notes Information Page Planning Approval Building Permit Submitted Building Permit Issued Under Construction 1008-1028 Carolan Avenue (SummerHill) 290 29 Includes 29 Moderate Income units (120% AMI) for 25 years www.burlingame.org/summerhill 1491-93 Oak Grove Avenue 10 www.burlingame.org/1491-93oakgrove 1509 El Camino Real 11 1 Includes 1 Moderate Income unit (120% AMI) for 10 years www.burlingame.org/1509elcaminoreal 1128-32 Douglas Avenue 27 2 Includes 2 Moderate Income units (110% AMI) for 25 years www.burlingame.org/1128-32douglas 920 Bayswater Avenue 128 13 Includes 13 Moderate Income units (120% AMI) for 30 years www.burlingame.org/920bayswater 1431 El Camino Real 6 www.burlingame.org/1431elcaminoreal 21 Park Road 7 www.burlingame.org/21park 1433 Floribunda Avenue 8 www.burlingame.org/1433floribunda 619-625 California Drive Live/Work 26 www.burlingame.org/619-25california The Village at Burlingame (Lot F Affordable Housing) 132 132 Workforce: 6 units 50% AMI, 60 units at 60% AMI, 12 units at 110% AMI. Senior: 6 units @ 50% AMI, 48 units at 60% AMI. www.burlingame.org/villageatburlingame TOTAL 645 177 RESIDENTIAL APPLICATIONS OVERVIEW – MARCH 2019 | 2 Proposed Projects The following projects have applications that have been submitted for review, but have not yet been acted on by the Planning Commission: Address Units BMR Units Status Notes Information Page Plans Under Review PC Study Session CEQA PC Action City Council 556 El Camino Real 21 1/25/16 2/24/14 7/24/17 5/29/18 www.burlingame.org/556elcaminoreal 1214 Donnelly Avenue 14 10/9/18 www.burlingame.org/1214donnelly 220 Park Road (former post office) 128 13 Mixed use with 128 residential units, 18,000 sq ft ground floor commercial www.burlingame.org/220park 1457 El Camino Real 9 2/11/19 123-125 Primrose Road 14 1095 Rollins Road 150 15 1/28/19 128 Lorton Avenue 19 tbd Density Bonus application. Affordability component to be determined. 509-511 California Drive 24 1 Adrian Court 265 38 Includes 38 Low Income units (80% AMI) for 55 years 1346 El Camino Real 4 TOTAL 648 66 Key to Application Status: Plans Under Review – Application has been submitted and plans are being reviewed by staff. Planning Commission study session will be scheduled onc e plan check comments have been addressed. PC Study Session – Planning Commission study session to review proposed design and identify environmental issues to be studied. No action (appro val) in this meeting. CEQA – Environmental review in compliance with California Environmental Quality Act (CEQA). PC Action – Planning Commission public hearing to consider action (approval) of the application. City Council – City Council hearing if application includes a General Plan/Zoning Amendment, if the Planning Commission decision is appealed , or if the application is called up by a councilmember. RESIDENTIAL APPLICATIONS OVERVIEW – MARCH 2019 | 3 Preliminary Projects The following projects have been variously presented to the public in conceptual form, but either have not been formally submitted for review, or in the instance of the Peninsula Wellness Community is a master plan with development projects to be submitted at later dates. Estimated unit counts should be considered very tentative and subject to change if and when a development application is submitted. Address Estimated Units Status Information Page Peninsula Wellness Community Master Plan up to 400 On hold while applicant revises planning and development program. www.burlingame.org/masterplan TOTAL up to 400 1 STAFF REPORT AGENDA NO: 9b MEETING DATE: March 18, 2019 To: Honorable Mayor and City Council Date: March 18, 2019 From: Kathleen Kane, City Attorney – (650) 558-7204 Subject: Introduction of an Ordinance Amending Municipal Code Section 10.55.030 Regarding Promulgation of Park Rules RECOMMENDATION Staff recommends that the City Council consider the introduction of an ordinance amending Section 10.55.030 of the Burlingame Municipal Code to streamline the process for promulgating rules and regulations in City parks. In order to do so, the Council should: A. Receive the staff report and ask any questions of staff. B. Request that the City Clerk read the title of the proposed ordinance. C. By motion, waive further reading and introduce the ordinance. D. Conduct a public hearing. E. Following the public hearing, discuss the ordinance and determine whether to bring it back for second reading and adoption. If the Council is in favor of the ordinance, direct the City Clerk to publish a summary of the ordinance at least five days before its proposed adoption. BACKGROUND Chapter 10.55 of the Municipal Code governs conduct and rule enforcement in City parks. In particular, Sections 10.55.010-10.55.028 set forth a series of rules regarding appropriate park use. Existing Section 10.55.030 allows the Parks and Recreation Commission to propose rules for Council review. The existing section sets forth a number of types of possible rules, although the section also states that the list is not exclusive. DISCUSSION The proposed ordinance presented to Council with this report is designed to streamline the rule- making process. The existing procedure involves hearings at the Commission and Council. Scheduling and noticing both meetings can take two or more months, while conditions in City parks can change quickly. For example, if a park area adjacent to the small child play structure is being used increasingly by skateboarders or drone pilots, the process for issuing a new, local rule requiring a setback from the play structure could take a few months to complete. Rules on that scale are not necessarily important for Council to consider, relative to the policy issues on the Council’s agenda, though they are important to implement on the ground for the safety and well- being of park users. Parks Rules Ordinance March 18, 2019 2 The proposed ordinance empowers the Director of Parks and Recreation to propose rules for the Parks and Recreation Commission to review and adopt. Council is given notice of that review in advance, so that there is time to read the staff report at the Commission level and listen to the item if it would be useful to do so. Council members then have the opportunity to call up any action by the Commission for review. Similarly, the Director has the opportunity to seek Council review if the Commission either refuses to approve a proposed rule or modifies it in such a way that its usefulness has been eroded. The list of rules that may be issued has been deleted from the original ordinance as well. It was intended to be illustrative rather than exclusive. However, in context, it could create some confusion as to the appropriate scope of the rule making process. The proposed ordinance, instead, states that any rule issued under the new provisions must be consistent with existing rules already embodied in Chapter 10.55. FISCAL IMPACT There is no impact on the City General Fund. Exhibit: • Proposed Ordinance ORDINANCE NO. ____ AN ORDINANCE OF THE CITY OF BURLINGAME AMENDING SECTION 10.55.030 OF THE MUNICIPAL CODE REGARDING THE PROMULGATION OF RULES AND REGULATIONS FOR CITY PARKS WHEREAS, Sections 10.55.010-10.55.028 of the Burlingame Municipal Code contain numerous rules and regulations affecting conduct in City Parks; and WHEREAS, Section 10.55.030 provides that additional rules and regulations may be proposed by the Parks and Recreation Commission for approval by Council; and WHEREAS, usage patterns and new issues can arise quickly in the City Parks; and WHEREAS, the existing procedure for promulgating new rules requires significant time and process, which can be inconsistent with the changing needs of the parks; and WHEREAS, the procedure can be streamlined without losing important oversight by elected and appointed officials; and NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF BURLINGAME DOES ORDAIN AS FOLLOWS: DIVISION 1: Section 1: Burlingame Municipal Code Section 10.55.030 is amended as follows: Existing Section 10.55.030 is deleted and replaced with the following: “10.55.030 Additional Rules and Regulations. In addition to the general rules and regulations contained in this chapter, the director of parks and recreation may propose and submit to the parks and recreation commission for approval, rules and regulations governing the administration, operation, use and maintenance of each park and recreational area, provided that such rules and regulations are consistent with the provisions of this chapter. The approval of such rules and regulations shall be acted on at a duly noticed public meeting of the commission, and council shall be provided notice by the director of parks and recreation of the upcoming commission agenda item. If the commission declines to approve or modifies proposed rules or regulations, the director of parks and recreation may seek review by the council by notifying the city clerk in writing within ten calendar days of the commission’s action. Additionally, any member of the city council who wishes to do so may call up the commission’s action for review by notifying the city clerk in writing within ten calendar days of the commission’s action. If no such review has been initiated, the rules and regulations as approved by the commission shall go into effect on the eleventh day following the commission’s action.” DIVISION 2: If any section, subsection, sentence, clause or phrase of this Ordinance is for any reason held to be invalid, such decision shall not affect the validity of the remaining portions of this Ordinance. The Council declares that it would have adopted the Ordinance and each section, subsection, sentence, clause or phrase thereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid. DIVISION 3: This Ordinance shall be published in a newspaper of general circulation in accordance with California Government Code Section 36933, published, and circulated in the City of Burlingame, and shall be in full force and effect thirty (30) days after its final passage. _________________________________ Donna Colson, Mayor I, Meaghan Hassel-Shearer, City Clerk of the City of Burlingame, certify that the foregoing ordinance was introduced at a public hearing at a regular meeting of the City Council held on the 18th day of March, 2019, and adopted thereafter at a regular meeting of the City Council held on the ______ day of ___________ 2019, by the following vote: AYES: Councilmembers: NOES: Councilmembers: ABSENT: Councilmembers: __________________________________ Meaghan Hassel-Shearer, City Clerk 1 STAFF REPORT AGENDA NO: 10a MEETING DATE: March 18, 2019 To: Honorable Mayor and City Council Date: March 18, 2019 From: Ana Maria Silva, Executive Assistant – (650) 558-7204 Subject: Consideration of Appointment to the Planning Commission RECOMMENDATION Staff recommends that the City Council make appointment to fill one impending vacancy on the Planning Commission or take other action. BACKGROUND The vacancy is due to the expiring term of Commissioner Michael Gaul. The vacancy was publicized, and notification letters were sent to past Commission applicants. Two applications were received as of the deadline of March 1, 2019. The following two applicants were interviewed by Council on March 12, 2019: Michael Gaul and Steve Pariani. The appointee terms will be for four years, ending on April 7, 2023. 1 Memorandum AGENDA NO: 11a MEETING DATE: March 18, 2019 To: City Council Date: March 18, 2019 From: Mayor Donna Colson Subject: Committee Report Monday, March 4, 2019 • Meeting with Alexandra Carter from Congresswoman Jackie Speier’s office. • Provided review and update of the business goals for Burlingame • Update on our housing work including General Plan, Linkage Fee Implementation Plan, Home Sharing, and update on the new construction and permitting. Tuesday, March 5, 2019 • Community Center Meeting reviewing exterior materials and landscaping. Wednesday, March 6, 2019 • Meeting County Treasurer - Sandie Arnott Thursday, March 7, 2019 • Arbor Day in Washington Park - Tree planting • Opening remarks and closing at the Speak and Lead with Pride youth speech contest for high school students on the Peninsula Friday, March 8, 2019 • Meeting on Retail Summit - Now called Burlingame Talks Shop • Identified panelists and now coordinating asks...panel will be set up Monday March 11, 2019 PCE Executive Committee Meeting Reach Codes • Tuesday, March 19 - Reach Codes Building Electrification and EV Infrastructure for San Mateo and Santa Clara Counties = 11:30 - 2:00 PM • Targeting January 2020 for Codes to Take Effect • By end of the month each municipality can apply for a $10,000 grant from PCE - one pager, Council passes a resolution (PCE will give the language to us) or City Manager Colson Committee Report March 18, 2019 2 agrees and they can apply for the one grant. Do not have adopted the reach codes to get the grant. Merced Meeting • Meet with Chamber of Commerce and Merced Supervisor who will champion the work to develop a new CCA for their area. • Heading down on March 21 for another trip in Los Banos and working with a few local political leaders Legislative Ad-Hoc • Going through the bills with those that are interested • CALCCA - April 2 and April 3 going to talk to different offices in Sacramento to explain CCA and programatic benefits. Data Management - • Looking at load management • Direct Access - PUC has opened up to bring in 4,000 GWH to bring in more direct access and we are discussing with our large customers to make sure we are competitive. Moody’s Rating Agency • We are continuing to work on this rating Issued Marketing RFP • Received proposals and will develop a marketing ad hoc committee Staffing • Currently 3 positions open and on the website. Currently, 18 going to 21 with an office capacity of about 27. Potential Changes to JPA Agreement - to appoint citizens as Alternate Board Members • Revised to consider two ex-officio board members who would be non-voting Multi-Unit Dwelling (MUD) Lower Power Pilot Project - 50% of the residents live in MUD and how do we work to get EV charging into these facilities. 90% of these apartments in San Mateo are 50 years or older. Very expensive to EV Level 2 charger - $30K to bring in one charging station. Marketing and incentives to people live in SFD = Ride and Drive - charge at home. • December $16 million approval PCE to do EV charging - 50% need access to power in the county to charge vehicles. Goal is 3,600 charging stations. • Apartments are so old they have no power to add in the Level 1 and Level 2 chargers. They can do an extension cord type model Level 1 that will charge 3-4 miles per hour. 1 Memorandum AGENDA NO: 11b MEETING DATE: March 18, 2019 To: City Council Date: March 18, 2019 From: Vice Mayor Emily Beach Subject: Committee Report Thursday, 2/28/19 CalMod Local Policy Maker’s Group; and visit to Lincoln Elementary School Student Council • Received Caltrain Business Plan update – no significant progress or new info to report • Update from California High Speed Rail Authority o HSR is on track and proceeding with Environmental process. Targeting draft EIR completion by December 2019 and FINAL EIR approved for San Jose to SF section by November 2020. o Unfortunately, key community workshops and outreach on the Peninsula regarding locations for passing tracks and future Peninsula HSR maintenance facility will take place this coming July/August 2019. LPMG members pushed back on this due to many people on vacation in the summer months, but HSR needs to keep the process moving for an important Board action in September in order to comply with grants. Passing tracks planned at Millbrae Transit Hub and extend partially over North Burlingame boarder along California Drive until they can quickly merge back into 2-track blended system through Burlingame. o Despite Governor Newsom’s January remarks, they believe the Governor has clarified his support for the HSR project and intention to ensure HSR federal grants are in compliance. Friday, 3/1/19 SMCTA/C/CAG Managed Lane Ad Hoc Subcommittee • Subcommittee approved JPA structure, and has recommended: o approval of JPA draft o shared/equal governance between C/CAG and SMCTA with a JPA (3 C/CAG members, 3 TA members.) JPA will have authority to set toll policy and deploy revenues. o Shared/equal executive authority o Explore hiring staff member employed by JPA to “quarterback” the project (perhaps technical expert, TBD.) o Further discussions about where other staff functions will reside: whether staff will be outsourced to various C/CAG member cities (C/CAG model) or streamlined through SMCTA staff (paid for by JPA) for oversight of construction project. o Ad hoc committee intends to come up with joint recommendation at 3/22 meeting following March board meetings. Beach Committee Report March 18, 2019 2 Monday, 3/4/19 City Council Meeting Wednesday, 3/6/19 Constituent / Stakeholder Meetings, topics included: • Burlingame Avenue downtown vibrancy; possible zoning amendments to respond to current market conditions during zoning update • El Camino Real Task Force recommendations Thursday, 3/7/19 Arbor Day, US 101 Managed Lane SMCTA Meeting, SMCTA Monthly Meeting • Mayor Colson, Director Glomstad, Commissioner Kirchner and Jennifer Pfaff did a great job with their Arbor Day remarks! • SMCTA highlights included discussion of ad hoc committee, and support to streamline operational staff functions for consistent technical and fiduciary oversight from SMCTA. SMCTA may front as much as $88 million to make this project possible. • Received presentation about extensive public outreach campaign that will begin this spring as SMCTA embarks on it’s 5-year strategic plan in conjunction with Measure W strategic implementation plan. Friday, 3/8/19, US 101 Managed Lane Groundbreaking Ceremony & El Camino Real Task Force Ad Hoc Subcommittee Meeting • Terrific remarks by Sen. Hill, Sen. Beall, Assemblymember Mullin, SMCTA and C/CAG Chairs, SAMCEDA. • ECR TF met to discuss upcoming meeting at Caltrans Headquarters on 3/19. Monday, 3/11/19 League of California Cities Peninsula Division Planning Meeting for 3/20 Quarterly Event • Met with planning committee for 3/20 League Peninsula Division quarterly luncheon (I’m chairing the event) • Format will include presentation from League staff housing expert Jason Rhine, followed by small-group (8-person) breakout tables to discuss key elements of housing legislation, impact on cities, and where compromises might be found. • Excited to report that staff members from offices of Sen. Hill, Sen. Weiner, Sen. Beall, Assem. Mullin, Assem. Berman, Assem. Low have registered to attend and listen to this discussion. Tuesday, 3/12/19, Meetings with Coast Side stakeholders; Planning Commission Interviews • Met with Councilmember/stakeholders from Half Moon Bay & Pacifica to discuss transportation needs for these communities related to SMCTA; took extensive tour of Pacifica to understand geography of housing and transit challenges. Wednesday, 3/13/19, Economic Development Subcommittee Meeting, Constituent Meeting, and Council Budget Session • Economic Development Committee Meeting, discussed: o upcoming Shop Local campaign following 4/17 retail summit with committee and BID stakeholders/leaders from Broadway and Downtown BIDs and Chamber of Commerce President/CEO. o retailer challenges in our community. Encouraged participation at upcoming community meeting. Beach Committee Report March 18, 2019 3 o possibility of enforcement mechanisms for vacant window standards/recommendations ED Subcommittee implemented last year. • Constituent Meeting o Focused on changing nature of retail; possible zoning changes in commercial districts