Honorable Mayor and Members of the City Council. Submitted by: Michael J. Caplan, Economic Development Manager

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Office of the City Manager CONSENT CALENDAR May 3, 2011 To: From: Honorable Mayor and Members of the City Council Phil Kamlarz, City Manager Submitted by: Michael J.

1 Office of the City Manager CONSENT CALENDAR May 3, 2011 To: From: Honorable Mayor and Members of the City Council Phil Kamlarz, City Manager Submitted by: Michael J. Caplan, Economic Development Manager Subject: Status of Housing and Child Care Mitigation Fees RECOMMENDATION Adopt a Resolution: 1) Accepting the attached report on fees collected under the City s requirements that large scale office, retail, industrial, and/or other commercial projects offset their impacts on affordable housing and childcare (hereafter affordable housing and affordable childcare mitigation programs ); 2) Making findings required by California Government Code Section (d) with regard to unexpended portions of the affordable housing and affordable child care mitigation fees; 3) Finding that large office, retail, industrial and/or commercial projects continue to create new demand for affordable housing and child care that developers should be required to offset or mitigate; and 4) Directing staff to conduct studies to update the fees and other relevant aspects of the Resolutions that imposed these requirements in FISCAL IMPACTS OF RECOMMENDATION Compliance with California Government Code Section 66001(d) will ensure that unexpended affordable housing and childcare services mitigations fees may be spent as intended. Studies on fee rates conducted by staff will likely suggest adjustments to the current fee structure and could impact revenues for account no , targeted to affordable housing, and account no , targeted to affordable child care. CURRENT SITUATION AND ITS EFFECTS This report is designed to report to the Council on the City of Berkeley s affordable housing mitigation program and its affordable childcare mitigation program. It is also intended to bring them into compliance with Government Code Sections et seq.. These code sections set forth a number of requirements that local agencies must follow if they are to exact fees from developers to defray the cost of constructing facilities or providing services that reduce the impact of development projects on local communities. Requirements include ensuring that funds collected must be spent solely for the purpose for which the fee was collected (Section 66006(a); making information available 2180 Milvia Street, Berkeley, CA Tel: (510) TDD: (510) Fax: (510) manager@cityofberkeley.info Website:

2 Status of Housing and Child Care Mitigation Fees CONSENT CALENDAR May 3, 2011 to the public for each separate fund (Section 66006(b); and, for funds that remain unexpended in the account after the fifth anniversary of the first deposit into the account, making certain findings intended to show that the improvements for which the funds were exacted can be completed (Section 66001(d). The affordable housing mitigation program was established by Resolution No. 56,912- N.S. (Attachment 3) approved on April 20, It imposed fees on office, retail, industrial and/or other commercial new construction in which the net additional, newly constructed gross floor area is over 7,500 square feet. For office and retail new construction, the fees were $4.00 per square foot of new floor area; for industrial the fee was $2.00 per square foot of new floor area. Fees were also applied to any office, retail/and/or other non-industrial commercial change of use where the net gross floor area undergoing a change of use is over 7,500 square feet. The business owner was only required to pay when the change represented an intensification of use : i.e., increased the number of employees on the site. For such intensifications, the applicant was required to pay a fee for each new employee. (See Section 4.2.) Finally, fees were also imposed on the reoccupation of buildings that had been vacant for more than 3 years on the same basis as for intensifications of use : i.e., a fee per net additional employee. (Section 4.3) Resolution No. 56,913-N.S. (Attachment 4), also approved on April 20, 1993, established an affordable childcare mitigation program that also imposed fees on new construction, changes of use and reoccupation of vacant buildings using the same size standards as the affordable housing mitigation Resolution. These fees were to be used for implementation of services, not new construction. The rates per square foot for new construction and the rates per net additional employee for intensifications of use and reoccupation of vacant buildings were one quarter of those for affordable housing. As shown in the attached Mitigation Summary, page 3 (Attachment 2), fees collected to date have been collected and spent for intended purposes. The affordable housing mitigation program has collected $1,462,567 in fees since it was established in 1993, with payments of $328,882 pending for a total of $1,791,450. In the same period, the affordable child Care program collected $624,942, with $97,533 still pending for a total of $722,475. The fees have made, and continue to make, important contributions to the Housing Trust Fund and to subsidizing affordable child care. Housing and Child Care Mitigation fees that have been collected and not yet spent will be leveraged with other state and federal development and supportive services funding sources as they become available. These include HOME, Community Development Block Grant (CDBG), Community Services Block Grant (CSBG), Housing for Persons With Aids (HOPWA), Affordable Housing Program (AHP), Multifamily Housing Program (MHP), Mental Health Services Act (MHSA), Capital Magnet Program, and the proposed National Housing Trust Fund Program, Shelter +Care and Project Based Section 8 Funding. Page 2

3 Status of Housing and Child Care Mitigation Fees CONSENT CALENDAR May 3, 2011 Section 6 of Resolution No. 56,912-N.S. required that it be completely reviewed and updated two (2) years from adoption and then every five years to keep pace with changing market, socio-economic, and funding conditions. Unfortunately, this has not been done and is therefore long overdue. Any revision to this Resolution and/or recommendation for new fee rates should take into consideration not only the increased cost of producing affordable housing and child care but also other changes in the bases for calculations that established the fee levels and documented in two nexus studies completed in The basic relationship between development and the need for these two basic services remains valid, i.e., as new development adds to the employment base of the City there will be increased need for affordable housing and childcare services. But it is important to note that some of the parameters of the calculation such as the estimated density of employment and the proportion of workers who can be expected to want to live in Berkeley may have changed. The recommended new fee levels will also have to take into account their impact on the feasibility of doing development in Berkeley. It will be important to avoid punitive rates for the housing and child care fees that would make development in Berkeley less feasible than in other nearby cities. The study of new fee levels for the housing and child care mitigation programs should therefore include a comparison of all existing and proposed developer fees in Berkeley with those in other nearby cities. BACKGROUND In the early1980s, some large cities such as Boston and San Francisco created jobs/housing linkage programs that imposed fees on new industrial, commercial and office developments to offset the impact that new employment has on housing needs within a community. The principle that local government could require residential developers to offset the school or park/recreational impacts of their developments through impact fees was well-established. The new linkage fees extended this idea to require developers of new commercial space to offset or mitigate the affordable housing or child care needs that could be shown to be created by the new employees who would work in the newly-constructed workspace. Court decisions required that local governments conduct an analysis, usually called a nexus study, to demonstrate the need for any new developer fee and determine an appropriate amount to be charged that is reasonably proportional to the development s impact. The City of Berkeley completed its nexus studies for the housing and childcare mitigation fees in 1988 but it was not until April 20, 1993, that the City Council approved an Ordinance enabling mitigation fees and the two Resolutions that established the fees themselves. 1 Documentation of Linkage Between Commercial and Industrial Development in Berkeley and Need for Low and Very-Low Income Housing in Berkeley, and Documentation of Linkage Between Commercial and Industrial Development in Berkeley and the Need for Affordable Child Care in Berkeley both prepared by Bill Lambert and Dave Fogarty, City of Berkeley Office of Economic Development, December Page 3

4 Status of Housing and Child Care Mitigation Fees CONSENT CALENDAR May 3, 2011 Of the 14 developments in the attached Mitigation Summary, most were initiated in the 1990s and the early part of the last decade. Retail, office and industrial development that actually added net new space has been relatively infrequent in Berkeley. Development that occurs on the site of formerly existing retail or office space is not subject to fees unless it adds more new space and more employment than what formerly existed. In addition, from the mid-1990s until recently, most new retail development in Berkeley occurred in mixed-use (housing over retail) buildings. The affordable housing mitigation Resolution (Section 4.A.1) allows developers the option of supplying new affordable housing themselves either on-site or off-site. Mixed-use developers generally supplied affordable housing on-site because they were already subject to the inclusionary requirement. In some cases they did owe the child care fee. Office and industrial development in Berkeley has been on a modest scale compared to other East Bay cities as may be seen from the table below: Office and Industrial Buildings in Completed in East Bay Cities Since Total # Total Office Total # Total Industrial Total # Total SF Office SF Industrial SF Richmond , ,183, ,997,497 Emeryville 6 1,248, , ,342,858 Berkeley , , ,546 Alameda 31 1,624, , ,454,234 Oakland 20 2,912, ,946, ,858,466 San Leandro 3 182, ,261, ,444,370 Hayward ,399, ,399,629 Union City ,625, ,625,322 Development fees can continue to make an important contribution to financing affordable housing and child care in Berkeley as long as they are set at a reasonable level that does not make development here infeasible and simply push it into surrounding communities. 2 Table courtesy of Mr. Jack DePuy, Senior Research Analyst, CB Richard Ellis, Oakland Office, March 7, The data is derived from CB Richard Ellis databases. Page 4

5 Status of Housing and Child Care Mitigation Fees CONSENT CALENDAR May 3, 2011 RATIONALE FOR RECOMMENDATION Council members have asked staff to report on the housing and child care mitigation requirements. ALTERNATIVE ACTIONS CONSIDERED None. CONTACT PERSON Michael J. Caplan, Economic Development Manager, Attachments: 1: Resolution 2: Mitigation Summary: Active Cases, Payments Due or Pending (3/2011) 3: Resolution No. 56,912-N.S. 4: Resolution No. 56,913-N.S. Page 5

6 RESOLUTION NO. ##,###-N.S. DIRECTING STAFF TO UPDATE THE CITY S REQUIREMENTS THAT APPLICANTS FOR LARGE SCALE OFFICE, RETAIL, INDUSTRIAL, AND/OR OTHER COMMERCIAL DEVELOPMENT PROJECTS OFFSET THEIR PROJECTS IMPACTS ON AFFORDABLE HOUSING AND CHILD CARE WHEREAS, on April 20, 1993, the City Council approved Resolution No. 65,912-N.S. establishing a requirement that applicants for large scale office, retail, industrial, and/or other commercial development projects offset their projects impacts on affordable housing ( hereafter called the Affordable Housing Mitigation Program); and WHEREAS, also on April 20, 1993, the City Council approved Resolution No. 65,913- N.S. establishing a requirement that applicants for large scale office, retail, industrial, and/or other commercial development projects offset their projects impacts on affordable child care (hereafter called the Affordable Child Care Mitigation Program); and WHEREAS, the City had previously conducted studies (hereafter the Nexus Studies ) that documented the need for such mitigation programs and recommended rates to be charged to developer applicants (Documentation of Linkage Between Commercial and Industrial Development in Berkeley and Need for Low and Very-Low Income Housing in Berkeley and Documentation of Linkage Between Commercial and Industrial Development in Berkeley and the Need for Affordable Child Care in Berkeley); and WHEREAS, the City Council had also approved Ordinance No N.S. authorizing the imposition of mitigations and fees as conditions for the approval of development projects; and WHEREAS, the Housing and Child Care Mitigation Programs have now operated successfully for eighteen years, generating $1,791,450 in revenue for affordable housing deposited in account no and $722,475 in revenue for affordable child care deposited in account no ; and WHEREAS, the developer fees for affordable housing in account no contains an unexpended balance of $64,868 and the developer fees for affordable childcare in account no contains an unexpended balance of $145,631; and WHEREAS, the developer fees generated through these mitigation programs are leveraged with other state and federal development sources as they become available to facilitate project implementation. NOW THEREFORE, BE IT RESOLVED by the Council of the City of Berkeley that it accepts the Council Report dated May 3, 2011, entitled Status of Housing and Child Care Mitigation Fees, including the appended Mitigation Summary.

7 BE IT FURTHER RESOLVED that, in compliance with Government Code Section (d), the City Council of the City of Berkeley finds that with regard to the unexpended balance of account no the purpose continues to be to support affordable housing projects that apply to the City s Housing Trust Fund and with regard to the unexpended balance of account no the purpose continues to be to support affordable child care projects that apply to the City s Child Care Fund. BE IT FURTHER RESOLVED that the Council of the City of Berkeley finds that large office, retail, industrial and/or commercial projects continue to create new demand for affordable housing and child care in Berkeley and that developers should continue to be required to offset or mitigate these impacts. BE IT FURTHER RESOLVED that the affordable housing and affordable child care projects supported by the mitigation funds referenced above include other sources of funding that differ for each project but that mitigation funds are not awarded until City staff is satisfied that the projects can be completed. BE IT FURTHER RESOLVED that future deposits of mitigation funds into appropriate accounts will be made as projects are awarded funds and according to annual funding cycles. BE IT FURTHER RESOLVED that the Council of the City of Berkeley directs staff to conduct studies to update the fees and other relevant aspects of the Resolutions that imposed these requirements, including re-examining the calculations in the Nexus Studies that justified the fees.

8 Attachment 2 Mitigation Summary - Active Cases, Payments Due or Pending (3/2011) Housing Payments Child Care Payments Payments Required Date Amount Balance Proj. Required Date Amount Balance Proj. Project Address/Status Due At: Payments Paid Paid Due # Payments Paid Paid Due # Durkee 2/15/1996 $11,851 8/22/96 $11, Completed 2/15/1997 $11,851 3/5/97 $11,851 MR # /15/1998 $11,851 5/13/98 $11,851 2/15/1999 $11,851 5/18/99 $11,851 2/15/2000 $11,851 9/21/00 $11,851 2/15/2001 $11,851 3/19/01 $11,851 2/15/2002 $11,851 2/21/02 $11,851 2/15/2003 $11,851 3/17/03 $11,851 2/15/2004 $11,851 6/24/04 $11,851 2/15/2005 $11,851 3/15/05 $11,851 Totals $118,510 $118,510 $ Seventh St. BldgPerm. $14,050 3/14/02 $14, (Activspace) OccupPer. $14,050 2/11/03 $14,050 $7,050 2/11/03 $7,050 Completed Totals $28,100 $28,100 $0 $7,050 $7,050 $ Seventh St. BldgPerm. $20,000 10/98 $20, Completed OccupPer. $20,000 11/99 $20,000 1st Anniv. $20,000 2/21/01 $20,000 2nd Anniv. $20,000 8/27/02 $20,000 3rd Anniv. $20,000 2/26/04 $20,000 Totals $100,000 $100,000 $ Fourth St. OccupPer. $52,264 6/12/01 $52, $13,066 6/12/01 $13, Completed 1st Anniv. $52,264 7/3/02 $52,264 $13,066 7/3/02 $13,066 2nd Anniv. $62,247 4/16/04 $62,247 $13,066 4/16/04 $13,066 Totals $166,775 $166,775 $0 $39,198 $39,198 $ Fourth St. BldgPerm. $11,860 8/31/00 $11, Completed OccupPer. $11,860 12/17/01 $11,860 $4,942 12/17/01 $4,942 1st Anniv. $11,860 7/3/02 $11,860 $4,942 7/3/02 $4,942 2nd Anniv. $12,631 12/17/02 $12,631 $4,941 12/17/02 $4,941 3rd Anniv. $13,452 12/23/04 $13,452 Totals $61,663 $61,663 $0 $14,825 $14,825 $0 801 Grayson St./Bayer Phase 1 - Bldg 80 BldgPerm. $50,446 11/15/00 $50, Completed OccupPer. $50,446 12/11/01 $50,446 $17,069 12/11/01 $17,069 MR st Anniv. $50,446 12/24/02 $50,446 $17,069 12/24/02 $17,069 2nd Anniv. $17,069 12/29/03 $17,069 Totals $151,338 $151,338 $0 $51,207 $51,207 $0 Phase 1- Bldg 81/Bayer BldgPerm. $18,160 3/20/2003 $18, completed OccupPer. $18,160 12/24/ $6,145 5/11/05 $6,145 MR st Anniv. $18,160 5/11/ $6,145 5/11/05 $6,145 2nd Anniv. $6,145 5/11/05 $6,145 Totals $54,480 $54,480 $0 $18,435 $18,435 $ Durant Ave. BldgPerm. $29,435 8/23/01 $29, Completed OccupPer. MR # st Anniv. Buddist Church of Am No Childcare rqd Totals $29,435 $29,435 $0 $0 $0 $ Eastshore BldgPerm. $9,700 8/30/2003 $9,700 Completed/MR OccupPer. $9,700 8/30/2003 $9,700 $4,889 8/30/03 $4,889 Use Permit Totals $19,400 $19,400 $0 $4,889 $4,889 $ Solano BldgPerm. 8/8/02 $22,

9 Completed OccupPer. $8,430 8/8/02 $8,430 Built 3 units in lieu of fees 1st Anniv. $8,430 $8,430 Apply Housing to Childcare Totals $0 $0 $0 $16,860 $16,860 $0 & Refund Balance 2101 Milvia St. OccupPer $2,300 6/24/03 $2, Completed Totals $2,300 $2,300 $ th St BldgPerm. $9,374 2/18/09 $9,374 $4,687 2/18/09 $4,687 Completed 2/9/09 OccupPer. $9,374 2/9/10 $9,374 $4,687 3/10/10 $4,687 MR st Anniv. $9,674 2/9/11 $4, th St LLC Steven Block Totals $28,422 $18,748 $9,674 $14,061 $9,374 $4, Heinz St BldgPerm. $53,034 $53,034 $106,068 Completed 5/29/09 OccupPer. $53,034 5/29/09 $53,034 $53,034 $13,259 5/29/09 $13,259 $13,259 MR st Anniv. $53,034 10/31/09 $53,034 $0 $13,259 10/31/09 $13,259 $0 920 Heinz Ave, LP Glenn Yasuda Totals $159,102 $159,102 $0 $26,518 $26,518 $0 700 University Ave/Essex BldgPerm. $0 $0 $0 Completed OccupPer. $0 $0 $0 $9,995 6/30/10 $9,995 $0 MR st Anniv. $0 $0 $0 $0 $0 $0 Essex Berkeley St-4th User Permit Totals $0 $0 $0 $9,995 $9,995 $0 Totals $798,715 $620,865 $9,674 $273,274 $309,166 $4,687

10 Closed/paid in full Notes Active Mitigation Cases: 1. Project numbers are the last four digits of the budget codes, which are: ' xx for housing and xx for childcare. 2. Active cases are all projects where a building permit has been issued. 3. Summary, All Mitigation Payments: Housing Child Care Total Paid, Closed Cases $1,452,893 Total Paid, Closed Cases $620,255 Total Outstanding, Active Cases $9,674 Total Outstanding, Active Cases $4,687 Total Paid to Date $1,462,567 Total Paid to Date $624,942 Pending Payments, Active Cases $9,674 Pending Payments, Active Cases $4,687 Pending Payments, Use Permit $319,208 Pending Payments, Use Permit $92,846 Total Pending $328,882 Total Pending $97,533 Total, All Housing $1,791,450 Total, All Child Care $722, Deliquent Payments: Housing: $9,674 Child Care: $26, This table includes all cases that had outstanding payments as of the start of the fiscal year.

Honorable Mayor and Members of the City Council. Submitted by: Jane Micallef, Director, Department of Health, Housing & Community Services

Office of the City Manager ACTION CALENDAR October 16, 2012 To: From: Honorable Mayor and Members of the City Council Christine Daniel, City Manager Submitted by: Jane Micallef, Director, Department of