NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY AND. RESIDENTIAL NEXUS STUDY

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1 CITY COUNCIL CONSENT CALENDAR JANUARY 20, 2015 SUBJECT: INITIATED BY: NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY AND. RESIDENTIAL NEXUS STUDY DEPARTMENT OF HUMAN SERVICES AND RENT STABILIZATION (Elizabeth Savage, Director) qm/ ~ (Peter Noonan, AICP CEP, Rent Stabilization & Housing Manager) (Andi Lovano, Project Development Administrator) STATEMENT ON THE SUBJECT: The City Council will receive the "Non-Residential Jobs-Housing Nexus Study" and the "Residential Nexus Study" reports prepared for the City of West Hollywood by Keyser Marston Associates (KMA). RECOMMENDATION: Receive and file. BACKGROUND ANALYSIS: The City has historically imposed a housing fee on both residential and non-residential development. The non-residential fee is an impact fee; the residential fee is not. The analysis below will explain the purpose of the two studies in regards to both fees. The City's Existing Residential Housing fee The City of West Hollywood's Affordable Housing Ordinance (WHMC Chapter 19.22), like most inclusionary zoning schemes found throughout the state, regulates land use by establishing development standards that require new residential developments (and certain common interest developments) to include low and moderate income units. The purpose is to ensure that future residential development accommodates existing and projected needs for affordable housing and also to ensure that the affordable housing units are integrated with market rate housing and located near public and commercial services. lnclusionary zoning seeks to achieve diversity in housing opportunities and to encourage the production of housing units to accommodate disabled and senior residents, both of which often comprise lower, fixed-income households (WHMC ). Under the City's ordinance, developers of residential projects with more than 10 units must make a specified number of units available to low and moderate income households. To help ensure the viability of inclusive development, the ordinance offers developers density bonuses and concessions. Density bonuses can be up to 35% and may result in more market rate units than would otherwise be permitted in the zone AGENDA ITEM- 2. L

2 Nexus Study January 20, 2015 Page 2 of 7 (WHMC (0)). Concessions allow for deviations from otherwise-applicable development standards in order to accommodate additional units and reduce overall costs. Available concessions include an additional story, reduction of setbacks, reduction in required open space, and others (WHMC (E)). Developers of residential projects with 10 or fewer units may choose to pay a fee in-lieu of providing the required affordable housing units on site (WHMC (A)). The in-lieu fee is intended to provide a source of funds sufficient to facilitate the production of affordable units that the developer would otherwise provide as part of the project. The fee is calculated in compliance with a fee schedule established by the City Council, and the funds are placed into the City's Affordable Housing Trust Fund to be used exclusively for projects that have a minimum of 60-percent of the dwelling units affordable to low- and moderate-income households, with at least 20-percent of the units available to low-income households. Only tax-exempt nonprofit corporations seeking to create or preserve affordable housing are eligible to apply for funding from the City's Trust Fund. The funds may be used for predevelopment costs, land or air rights acquisition, administrative costs, gap financing, or to lower the interest rate of construction loans or permanent financing (WHMC (E)). The creation and preservation of affordable housing for lower income households is a legitimate governmental purpose (Santa Monica Beach, Ltd. V. Superior Court (1999) 19 Cal.4th 952, 970; Gov't Code 65583, subd. (c)(2)). Indeed, the state Housing Element Law requires all communities "to use the powers vested in them to facilitate the improvement and development of housing to make adequate provision for the housing needs of all economic segments of the community." (Gov't Code 65580, subd. (d)). The City of West Hollywood is a dense, urban environment; home to a large number of hospitality and retail businesses with employees on the lower end of the wage spectrum. The City also has a significant population of seniors and disabled persons on fixed incomes. All of these factors contribute to an increasing need for affordable housing, and a keen interest on the part of the City to ensure this important need is met. By encouraging and incentivizing the development of affordable housing units, the City's Affordable Housing Ordinance substantially advances this legitimate governmental interest (Home Builders Association of Northern California v. City of Napa (2001) 90 Cal.App.4th 188, ).. It has been alleged in various lawsuits around the State challenging housing in-lieu fees that the City's affordable housing in-lieu fee is subject to the so-called "Nol/an/Dolan" test-viz., that the City must establish ( 1) that its affordable housing in-lieu fee is reasonably related to adverse public impacts attributable to the proposed development, and (2) that the amount of the in-lieu fee is roughly proportional to the actual cost of providing the affordable housing necessary to address the impacts attributable to the proposed development. 1 However, that precise argument was rejected by the California 1 This so-called "Nol/an/Dolan" test is a staple in regulatory takings jurisprudence that gets its name from two U.S. Supreme Court decisions. In Nol/an v. California Coastal Commission (1987) 483 U.S. 825, the Court required that ad hoc conditions on individual development have an "essential nexus" to the stated purpose of the condition. Writing for the majority in Nol/an, Justice Scalia famously dubbed the Coastal Commission's demand for a public easement in exchange for a development permit an "out-and-out plan of extortion." A few years later in Dolan v. City of Tigard (1994) 512 U.S. 374, the Court held that any such requirements must be "roughly proportional" to the impact of the development based on an "individualized determination."

3 Nexus Study January 20, 2015 Page 3 of 7 Court of Appeal when considering a home builders association's challenge to the City of Napa's inclusionary zoning ordinance (Home Builders Association of Northern California v. City of Napa (2001) 90 Cal.App.4th 188). In Home Builders, the court held that the No/Ian/Dolan test was not appropriate in the context of development fees made generally applicable through legislation because the risk of "extortionate" use of the police power to exact unconstitutional conditions is simply not present as it can be when a local government is considering placing ad hoc conditions on an individual development application (Id. at 197). The California Supreme Court is in accord (Ehrlich v. City of Culver City (1996) 12 Cal.4th 854, 876; Santa Monica Beach, Ltd. V. Superior Court (1999) 19 Cal.4th 952, 966). In other words, because the affordable housing in-lieu fee (an optional fee to begin with) is the product of generally applicable legislation it cannot reasonably be likened to a project-specific condition forced upon a developer in the midst of trying to secure project entitlements. The requirement that developers of new residential units include an affordable housing component is not a development "exaction" intended to mitigate impacts caused by the development. Rather, the affordable housing requirement is more akin to traditional land use regulations imposing minimum setbacks, landscaping requirements, building material requirements, design requirements, etc. As articulated above, the purpose is to ensure that future housing development contributes to the attainment of the housing goals set forth in the City's General Plan by increasing the production of residential units affordable to low and moderate income households. The in-lieu fee is not an obligation on the developer that is independent of the primary inclusionary obligation. Consequently, as previously explained, neither the affordable housing (inclusionary) requirement or the optional in-lieu fee is subject to the more exacting scrutiny of the No/Ian/Dolan test. Rather, it need only be rationally related to the City's goals. The City's in-lieu fee is reasonably related in its intended use because it is earmarked for development of the affordable units foregone by the developer's election not to include them in the development. The fee is reasonably related in amount because it is related to the cost of developing the units elsewhere in the City. 2 All of the above notwithstanding, the legal status of housing in-lieu fees remains uncertain because the California Supreme Court has yet to rule in any of the currently pending cases challenging fees in severa1 citie8 around the State. Consequently, it is prudent for the City to protect itself against the contingency that the Court may rule contrary to the City's view and hold that such fees must be able to survive a nexus analysis by preparing a study that provides an alternative foundation for the City to establish a residential affordable housing impact fee. The City's Existing Non-Residential Housing Fee The City also imposes a fee on non-residential development. Developers of nonresidential projects (retail, office and hotel) of more than 10,000 square feet of net new gross floor area are responsible for paying the non-residential affordable housing impact fee (WHMC ). Under the City's current fee schedule, the non-residential 2 The amount of the fee is established by resolution of the City Council and revised periodically. The amount of the fee is based on the subsidy required to produce the affordable units within the City. See Attachment 3 for the current fee schedule and requirements.

4 Nexus Study January 20, 2015 Page 4of 7 impact fee is $2.85 per square foot. The number of development projects required to pay the commercial fee is limited because of the 10,000 net new square foot threshold. Since 2002, there have been 16 projects that were required to pay the non-residential impact fee. The nexus study that supported the initial establishment of the non-residential impact fee was performed in May, The attached non-residential nexus study provides an updated analysis of the nexus for the non-residential affordable housing impact fee. Going forward, KMA's Non-Residential Jobs-Housing Nexus Study will serve as the basis for the City Council to maintain or adjust the existing affordable housing impact fee for non-residential developments. The Purpose of the Nexus Studies The purpose of the Non-Residential Jobs-Housing Nexus Study and the Residential Nexus Study (Attachments 1 and 2, respectively) is to quantify and document the linkage between new development and the added demand for affordable housing. All new development has a potential to generate a new need for affordable housing. Residential development has this effect by bringing new residents into the City, who in turn increase local demand for services such as shopping and dining. New nonresidential development also generates a need for more affordable housing in the community by creating new restaurant, office, retail and hotel jobs. A percentage of the workers in these jobs will be of lower income households seeking affordable housing in proximity to the jobs. Nexus studies are complex, taking several factors into consideration when quantifying the linkage between new development and the increased need for affordable housing. The studies are designed with this high-level of complexity to ensure that fees the City imposes as a result of the studies' findings are updated (in the case of the nonresidential fee) and legally defensible in the event that the City's longstanding legal justification for its residential in-lieu fees is judicially invalidated. The nexus study ensures these. fees are adequate to address the. generated need for affordable housing. KMA was chosen to perform the nexus studies through a competitive Request for Proposals process. KMA has over 25 years of experience in performing nexus analyses. As a result of the nexus study, the City will convert the existing in-lieu fee to an affordable housing impact fee for residential projects. The affordable housing impact.fee would apply to projects with 10 or fewer units, which is how the in-lieu fee applies riow. Additionally, the in-lieu fee now also applies to apartment projects that do not receive a density bonus or financial incentive. The affordable housing impact fee amount has not yet been established. KMA's Residential Nexus Study will serve as the basis to establish the affordable housing impact fee for residential developments. Non-Residential Jobs-Housing Nexus Study The Non-Residential analysis evaluated four prototypes of commercial development that have occurred in West Hollywood in recent years: office, freestanding retail, ground

5 Nexus Study January 20, 2015 Page 5 of 7 floor retail, and hotel. KMA used a model to estimate the total number of new employees in the building types and the estimated employee household income. The analysis estimated the number of extremely-low-, very-low-, low-, and moderate-income households expected to be employees in the prototype buildings and the associated affordability gap for providing housing to these households. The final step was to translate these factors into the total costs of assistance required to make affordable housing available in West Hollywood for these new employee households. Report Findings Based on the analyses performed, KMA found the following maximum supportable nonresidential affordable housing impact fee: Maximum Supportable Non-Residential Affordable Housing Impact Fee Per Square Foot of Building Area Office Freestanding Retail Ground Floor Retail Hotel Maximum Nexus Cost $ $ $ $79.90 This -is the maximum supportable non-residential affordable housing impact fee, but not the recommended amount. KMA recommended that the City's current fee be increased to $8.00 per square foot of building area (currently $2.85). The recommended fee increase is substantially less than the nexus study findings due to the following added considerations: The current West Hollywood impact fee, Impact fees being charged by other jurisdictions in California including the Cities of Santa Monica, Los Angeles, and San Diego, among others, 3 The strong real estate market in West Hollywood, The effect of higher fees on development decisions and West Hollywood's ability to attract new development. The survey of surrounding cities indicates that local housing impact fees range from $0.20 to $ A fee of $8.00 would be within this range. Residential Nexus Study The Residential Nexus Study analysis evaluated three prototypes of residential development that have occurred in West Hollywood in recent years: small condominium projects, medium rental projects, and large rental projects. Based on the residential type, the household income of the new residents was estimated. KMA used a model to link household income of new City residents moving into new developments and employment growth. It is expected that as new residential development occurs, new businesses will locate and. existing businesses will expand to meet the increased demand for goods and services from the new residents. The analysis then estimated the number of new extremely-low-, very-low-, low-, and moderate-income households that would be employed as a result of businesses meeting the new demand. The final 3 For more information, see Appendix G, "Nexus Fee Survey," of the Non-Residential Jobs-Housing Nexus Study.

6 Nexus Study January 20, 2015 Page 6 of 7 step was to translate these factors into the total cost of assistance required to make affordable housing available in West Hollywood for these new employee households. Report Findings Based on the analysis performed, KMA found the following maximum supportable residential affordable housing impact fee: Maximum Supportable Residential Affordable Housing Impact Fee Per Square Foot of Building Area Small Condo Project Medium Rental Project Large Rental Project Maximum Supportable Impact Fees $33.00 $40.30 $47.20 Although the study findings indicate that the City's fee could be set at a higher rate, KMA recommended that the current fee rate remain on the in-lieu fee schedule, which as of the completion of the study was $24.84 per square foot for residential projects. The fee is updated annually by the change in the Consumer Price Index, and is currently set at $25.67 for fiscal year This fee is supported by all three residential prototypes and was supported by an in-lieu fee analysis prepared by KMA for the City in April, Community Feedback and Next Steps On October 2, 2014, the reports were presented to the Planning Commission's Long Range Planning Projects Subcommittee and on October 17, 2014, the reports were provided to the full Planning Commission. Although the Planning Commission's purview does not include approval of new fees, staff provided the nexus studies because the studies relate to development within the City. The studies have also been shared with the Chamber of Commerce. The Long Range Planning Projects Subcommittee discussed the density of West Hollywood and the option of creating a tiered system for non-residential fees based on development type or development area to address the different impacts. The Subcommittee asked if the consultant had evaluated applying an impact fee to projects smaller than 10,000 square feet. Ten thousand has been the minimum threshold since the non-residential fee was created in It was not part of the consultant's scope to re-evaluate this threshold. Other jurisdictions apply similar thresholds for non-residential development. 4 4 For more information, see Appendix G, "Nexus Fee Survey," of the Non-Residential Jobs-Housing Nexus Study.

7 Nexus Study January 20, 2015 Page 7 of 7 CONFORMANCE WITH VISION 2020 AND THE GOALS OF THE WEST HOLLYWOOD GENERAL PLAN: This item is consistent with the Primary Strategic Goal of Affordable Housing. This item is also consistent with the following goals of the 2035 West Hollywood General Plan: H-1: Provide affordable rental housing. H-3: Encourage a diverse housing stock to address the needs of all socioeconomic segments of the community. H-4: Provide for adequate opportunities for new construction of housing. H-5: Provide for a government environment that facilitates housing development and preservation. EVALUATION: At this time, staff is not providing a recommendation to adjust fees. The reports are provided to the City Council in anticipation of maintaining or adjusting the impact fees in May, 2015, when the City's fee schedule is regularly updated. ENVIRONMENTAL SUSTAINABILITY AND HEAL TH IMPACTS One of the reasons for a jurisdiction to impose impact fees is to have funds to locate affordable housing close to employment. A lack of availability of affordable housing near jobs requires workers to have longer commutes, which can increase traffic and affect residents' quality of life and environment. A key goal of the City's inclusionary housing program is to improve the quality of life for community members and maintain the health and well-being of low- and moderateincome residents. In addition, the study aligns with the City's 2013 Community Study recommendations of "supporting households living below the poverty line", and "identifying innovations for aging in place". OFFICE OF PRIMARY RESPONSIBILITY: Department of Human Services & Rent Stabilization, Rent Stabilization & Housing Division. FISCAL IMPACT: None. ATTACHMENTS: 1. Non-Residential Jobs-Housing Nexus Study 2. Residential Nexus Study 3. Current Affordable Housing Fees

8 Attachment 1 Non-Residential Jobs-Housing Nexus Study

9 KEYSER MARSTON ASSOCIATES NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Prepared for: City of West Hollywood Prepared by: Keyser Marston Associates, Inc. August 2014

10 TABLE OF CONTENTS I. EXECUTIVE SUMMARY... 1 A. Non-Residential Jobs-Housing Nexus Study... 1 B. Building Types and Affordability Levels... 1 C. Maximum Nexus Costs... 2 D. Recommended Non-Residential Affordable Housing Impact Fees... 2 II. INTRODUCTION AND OVERVIEW... 2 A. Benefits of Affordable Housing to Commercial Development B. Analysis Organization C. Data Sources and Qualifications... 4 Ill. THE NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY... 4 A. The Nexus Concept... 4 B. Jobs Housing Nexus Analysis... 9 C. Maximum Nexus Costs IV. RECOMMENDED NON-RESIDENTIAL AFFORDABLE HOUSING IMPACT FEES A. Fee-Setting Context B. Recommended Fee Levels C. Potential Indices for Annual Updates to Non-Residential Affordable Housing Impact Fees V. ADDENDUM: FACTORS RELATING TO THE NEXUS CONCEPT A. Addressing the Housing Needs of a New Population versus the Existing Population B. Substitution Factor...: C. Indirect Employment and Multiplier Effects D. Changes in Labor Force Participation E. Commuting F. Non-Duplication G. Economic Cycles... 25

11 APPENDICES Appendix A: Appendix B: Appendix C: Appendix D: Appendix E: Appendix F: Appendix G: Appendix H: Non-Residential Jobs-Housing Nexus Study Tables Office Land Use Tables Freestanding Retail Land Use Tables Ground Floor Retail Land Use Tables Hotel Land Use Tables Affordability Gap Analyses Nexus Fee Survey Non-Duplication: Residential Affordable Housing Impact Fee and the Non Residential Affordable Housing Impact Fee

12 I. EXECUTIVE SUMMARY The following report summarizes an analysis of the linkages between non-residential development in West Hollywood and the demand for additional affordable housing. The analysis, which demonstrates support for a "Non-Residential Affordable Housing Impact Fee", has been prepared by Keyser Marston Associates, Inc. (KMA) for the City of West Hollywood (City) in accordance with a contractual agreement, which resulted from the City's Request for Proposal process. A. Non-Residential Jobs-Housing Nexus Study The purpose of a nexus analysis is to quantify and document the linkages among the construction of new office, retai.1 and hotel projects, the employees that work in them, and the increased demand for affordable housing. Since the jobs in these types of projects cover a range in compensation levels, and the households of the workers range in size, housing needs are generated at all affordability levels. This analysis quantifies the need for affordable housing created by each type of workplace building. This analysis is conducted to meet the requirements imposed by several United States Supreme Court decisions, and by California Government Code Section et seq., which is sometimes referred to as "the Mitigation Fee Act". These analyses are commonly referred to as linkage or nexus analyses. B. Building Types and Affordability Levels This analysis evaluates a cross section of commercial development types that have occurred in West Hollywood in recent years, and that are expected to be built in the near term future. For the purposes of the analysis, the following building types were identified: Office Freestanding Retail Ground Floor Retail Hotel The household income categories addressed in the analysis are the same as those in the Residential Nexus Study also being prepared by KMA at this time. These income levels include: Extremely Low Income, Very Low Income, Low Income and Moderate Income. Keyser Marston Associates, Inc WH Page 1 August 25, 2014

13 C. Maximum Nexus Costs The following table identifies the maximum nexus costs derived from the KMA Non-Residential Jobs-Housing Nexus Study. These nexus costs represent the maximum allowable Non Residential Affordable Housing Impact Fee amounts, rather than the recommended Fees. Maximum Supportable Non-Residential Affordable Housing Impact Fee Use Office Freestanding Retail Ground Floor Retail Hotel Per Square Foot of Building Area $ $ $ $79.90 D. Recommended Non-Residential Affordable Housing Impact Fees KMA recommends that the the Non-Residential Affordable Housing Impact Fee be set at $8.00 per square foot of building area. This represents 5% of the average of the maximum nexus costs generated by the four non-residential uses being evaluated in this analysis. A fee of this amount should not significantly diminish West Hollywood's ability to attract non-residential development to the limited number of available parcels. The recommended Non-Residential Affordable Housing Impact Fee amount does not take into account any other public fees that may be under review by the City. Any changes in other fee levels may impact this recommendation. 11. INTRODUCTION AND OVERVIEW The City currently levies a Non-Residential Affordable Housing Impact Fee on non-residential development, and a "Residential Affordable Housing Impact Fee" on residential development. The affordable housing fees collected from development within West Hollywood are deposited into the "Affordable Housing Trust Fund', which was established in The Affordable Housing Trust Fund is to be used exclusively for projects that restrict at least 60% of the total number of units to low and moderate income households, with at least 20% of the total number of units restricted to low income households. Tax-exempt non-profit corporations seeking to create or preserve affordable housing are eligible to apply for funding from the City's Affordable Housing Trust Fund. The funds may be used for predevelopment costs, land or air rights acquisition, administrative costs, gap financing, or to lower the interest rate of construction loans or permanent financing. Keyser Marston Associates, Inc WH Page 2 August 25, 2014

14 The purpose of this Non-Residential Jobs-Housing Nexus Study is to provide the City with an updated legal basis to levy Non-Residential Affordable Housing Impact Fees on non-residential development. Concurrent with this analysis, KMA is preparing a Residential Nexus Study as part of the revision and update to the City's lnclusionary Housing Ordinance. A. Benefits of Affordable Housing to Commercial Development The primary objective for implementing a Non-Residential Affordable Housing Impact Fee on non-residential development is to increase the amount of affordable housing within West Hollywood. This increase in affordable housing benefits commercial development by strengthening the local jobs-housing balance, which benefits both employers and workers. With a larger and more diverse pool of West Hollywood residents to draw upon, employers will have increased ability to fill job openings. A lack of local affordable housing can result in overcrowded living conditions, or workers that must endure long commutes. Both of these conditions affect a worker's quality of life, which may ultimately force a worker to quit their job. Giving workers access to affordable housing opportunities close to their place of employment can result in greater workplace stability, and less worker turnover for the employer. It has been estimated that it can cost between 15% and 30% of a worker's annual salary to replace that worker. As such, limiting worker turnover with the development of affordable housing can produce meaningful cost savings for employers. B. Analysis Organization The commercial uses that are the subject of this analysis represent a cross section of typical commercial development that has occurred in West Hollywood in recent years and is expected to be built in the near term future. For purposes of the analysis, the following building types were identified: Office Freestanding Retail Ground Floor Retail Hotel The household income categories addressed in the analysis are the same as those in the Residential Nexus Study that is being prepared concurrently with this analysis. These income levels include: Extremely Low Income, Very Low Income, Low Income and Moderate Income. - Keyser Marston Associates, Inc WH Page 3 August 25, 2014

15 C. Data Sources and Qualifications The analyses in this report have been prepared using the best and most recent data available. Local and current data was used whenever possible. Sources such as the 2010 United States Census (Census), the 2012 American Community Survey of the Census and 2013 California Employment Development Department data were used extensively. Other sources and analyses are noted when used in the text and footnotes. While we believe all sources utilized are sufficiently accurate for the purposes of the analyses, we cannot guarantee their accuracy. KMA assumes no liability for information from these and other sources. While we believe all sources utilized are sufficiently accurate for the purposes of the analyses, we cannot guarantee their"accuracy. KMA assumes no liability for information from these and other sources. Ill. THE NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY A. The Nexus Concept Introduction This section outlines the nexus concept and some of the key issues surrounding the linking of new non-residential development to the demand for affordable residential units in West Hollywood. The nexus analysis and discussion focus on the relationships among development growth, employment, income of workers and demand for affordable housing. The analysis connects the new construction of the types of buildings in which there are workers to the need for additional affordable housing. This connection is quantified both in terms of number of units, and the amount of subsidy assistance needed to make the units affordable. The Legal Basis and Context The first jobs-housing linkage programs were adopted in the cities of San Francisco and Boston in the mid-1980s. To support the linkage between commercial development and the demand for affordable housing, the City of San Francisco commissioned an analysis to show the relationships, or what might now be characterized as an early version of a nexus analysis. Since that time there have been several court cases and California statutes that affect what local jurisdictions must demonstrate when imposing impact fees on development projects. The most important United States Supreme Court cases are Nollan v. California Coastal Commission and Dolan v. City of Tigard (Oregon). The rulings on these cases, and others, help clarify what governments must find in the way of the nature of the relationship between the problem to be mitigated and the action contributing to the problem. Here, the problem is the shortage of affordable housing, and the action contributing to the problem is building workspaces that create more jobs and worker households needing affordable housing. Keyser Marston Associates, Inc WH Page 4 August 25, 2014

16 Following the Nollan decision in 1987, the California legislature enacted AB 1600, which requires local agencies proposing an impact fee on a development project to identify the purpose of the fee, the use of the fee, and to determine that there is a reasonable relationship between the fee's use and the development project on which the fee is imposed. The local agency must also demonstrate that there is a reasonable relationship between the fee amount and the cost of mitigating the problem that the fee addresses. Studies by local governments designed to fulfill the requirements of AB 1600 are often referred to as "AB 1600" or "Nexus" studies. One court case that involved housing linkage fees was Commercial Builders of Northern California v. City of Sacramento. The commercial builders of Sacramento sued the City of Sacramento following the City's adoption of a housing linkage fee. Both the United States District Court and the Ninth Circuit Court of Appeals upheld the City of Sacramento, and rejected the builders' petition. The United States Supreme Court denied a petition to hear the case, letting stand the lower court's opinion. Since the Sacramento case in 1991 there have been several additional court rulings reaffirming and clarifying the ability of California cities to adopt impact fees. Notable cases can be described as follows: 1. In 2004, in San Remo Hotel v. the City and County of San Francisco, the court upheld the impact fee levied by the City and County of San Francisco on the conversion of residence hotels to tourist hotels and other uses. The court found that a suitable nexus, or deleterious impact, had been demonstrated. 2. In 2009, in Building Industry Association of Central California v. the City of Patterson, the Court invalidated the City of Patterson's fee because a valid nexus linking the impact of the proposed project to the fee had not been demonstrated. 3. In 2010, a court ruling upheld most of the impact fees levied by the City of Lemoore, in Southern California. Of particular note is the judges' opinion that a "fee" may be "established for a broad class of projects by legislation of general applicability... the fact that specific construction plans are not in place does not render the fee unreasonable." In other words, cities do not have to identify specific affordable housing projects to be constructed at the time of adoption of an impact fee. In summary, the case law at this time appears to be fully supportive of the imposition of jobshousing impact fees. Keyser Marston Associates, Inc WH Page 5 August 25, 2014

17 The Nexus Methodology An overview of the basic nexus concept and methodology is helpful to understand the discussion and concepts presented in this section. This overview consists of a quick "walk through" of the major steps of the analysis. The nexus analysis links new commercial buildings with new workers in the City; these workers demand additional housing in proximity to the jobs, a portion of which needs to be affordable to the workers in lower income households. The methodology utilized in this analysis is a "micro" analysis that examines individual buildings. The micro nexus analysis readily lends itself to quantification that serves as a basis for the nexus cost, or the maximum fee amount for each building type. To illustrate the micro nexus analysis, very simply, we can walk through the major calculations of the analysis. We begin by assuming a prototypical building of a defined size, and then we make the following calculations: 1. We estimate the total number of employees working in the building based on average employment density data. 2. We use occupation and income information for typical job types in the building to calculate how many of those jobs pay compensation at the levels addressed in the nexus analysis. a. Compensation data is provided by the California Employment Development Department, and is specific to Los Angeles County as of b. Worker occupations by building type are derived from the 2013 Occupational Employment Survey prepared by the United States BL!reau of Labor Statistics. 3. We know from the Census that many workers are members of households where more than one person is employed, and there is also a range of household sizes. We use factors derived from the Census to translate the number of workers into households of various sizes represented in each income category. 4. Then, we calculate how many of the Extremely Low, Very Low, Low and Moderate Income households are associated with the building and divide by the building size to arrive at coefficients of housing units per square foot of building area. 5. In the last step, we multiply the identified number of households times the per square foot cost of delivering housing units affordable to these income groups. Keyser Marston Associates, Inc WH Page 6 August 25, 2014

18 The Relationship Between Construction and Job Growth Many factors underlie the reasons for employment gro~h in a given region; these factors are complex, interrelated, and often associated with forces at the national and international levels. The nexus argument does not make the case that the construction of new buildings is solely responsible for employment growth. However, new construction is uniquely important in the equation, first, as one of the factors contributing to growth, and second, as a unique and essential condition precedent to growth. As to the first, construction itself encourages growth. When the state economy is growing, the areas that experience the most rapid growth are those where new construction activity is vigorous and acts as a vital industry. In regions such as Los Angeles, where multiple forces of growth exist, the development industry frequently serves as a proactive force inducing growth to occur, or to be attracted to specific areas, by providing new work spaces, particularly those of a speculative nature. Second, the development of workplace buildings bears a direct relationship to job growth, because job growth does not occur in modern service economies without buildings to house new workers. Unlike other growth factors, new buildings play a unique role in that employment growth cannot occur without them for a sustained period of time. Conversely, it is well established that the inability to construct new workplace buildings will constrain, or even halt, job growth. Discount for Changing Industries The local economy, like that of the United States as a whole, is constantly evolving. In the Los Angeles - Long Beach - Glendale Metropolitan Division (MD) (Los Angeles MD), over the past 20 years, employment in various sectors of the economy has declined. However, jobs lost over the last decade in these declining sectors were replaced by job growth in other industry sectors. Long-term declines in employment experienced in some sectors of the economy mean that some of the jobs created in burgeoning industries are being filled by workers that have been displaced from another industry and who are presumed to already be housed locally. Recognizing that jobs added in the community are not necessarily net new jobs, this step in the analysis makes an adjustment to take these declines, changes and shifts within all sectors of the economy into account. To assist in making the adjustment, KMA reviewed the following information: 1. Monthly data information published by the California Employment Development Department for the Los Angeles County MD for the previous 10- and 20-year periods indicates that the Los Angeles region experienced an approximately 45% decline in industry. The decline was largely focused in the manufacturing sector. Keyser Marston Associates, Inc WH Page 7 August 25, 2014

19 2. Historical data for the Riverside - San Bernardino - Ontario Metropolitan Statistical Area (MSA) and the Santa Ana - Anaheim - Irvine MD, indicates that these areas exhibited similar declines in industry over the past 10 years. 3. The Industry Employment Projections for the Los Angeles MD, published by the California Employment Development Department, projects that the Los Angeles County MD will experience an approximately 2% decline in industry over the 10-year period. 4. State of California data for the previous 10- and 20-year periods indicate that statewide, industry declined by approximately 30% over the last 10 years, and 8% over the last 20 years. The recent large declines in industries can be attributed to effects of the Great Recession from which the greater Southern California region has not yet fully recovered. Therefore, it is KMA's opinion that a longer time period must be considered to accurately reflect the decline in industries. Based on the entirety of the data analyzed, the long-term shifts in employment that have occurred in some sectors of the local economy, and the likelihood of continuing changes in the future, KMA applied a 20% downward adjustment for a decline in industries in this nexus analysis. This represents a mid-point between the historical data for the Los Angeles County MD, and the 10-year projections published by the California Employment Development Department. The impact of the 20% adjustment factor is the effective assumption that one in every five new jobs will be filled by a worker down-sized from a declining industry and who already lives locally. This factor can be considered conservative given that some displaced workers may exit the workforce entirely by retiring rather than seeking a new job in one of the new industries that have entered the community. Other Factors and Assumptions The "Addendum" to this study provides a discussion of the following other nexus concepts: 1. Addressing the housing needs of a new population versus the existing population; 2. Substitution factor, indirect employment and multiplier effects; 3. Changes in labor force participation; 4. Commuting; 5. Non-duplication the Affordable Housing Fees programs; and 6. Economic cycles. Keyser Marston Associates, Inc WH Page 8 August 25, 2014

20 8. Jobs Housing Nexus Analysis This section presents a summary of the analysis of the linkage between four types of workplace buildings, and the estimated number of worker households in the income categories that will, on average, be employed within those buildings. This section should not be read or reproduced without the narrative presented in the previous sections of this study. Analysis Approach and Framework The analysis establishes the jobs housing linkages for individual building types or land use activities. In turn, this is used to quantify the connection between employment growth in West Hollywood and the resulting demand for affordable housing. The analysis approach is to examine the employment associated with the development of workplace building prototypes. Then, through a series of linkage steps, the number of employees is converted to households and housing units by affordability level. The findings are expressed in terms of numbers of households related to building area. In the final step, we convert the numbers of households for an entire building to the number of households per square foot of building area. For ease of understanding, KMA conducts the analysis on prototype buildings that were developed through consultation with City staff. The prototypes are based on recent development activity in West Hollywood. The four prototypes are as follows: Office: Freestanding Retail: Ground Floor Retail: Hotel: 100,000 square foot building 20,000 square foot building 15,000 square foot building 235,000 square foot building The prototypes represent particular examples that are meant to cover a wide variety of building types. Together, the four categories are designed to encompass most new buildings to be constructed by the private sector in West Hollywood. The categories under analysis are: 1. The Office category is designed to represent the range of office tenants locating in West Hollywood, from small professional offices and medical offices to motion picture and video companies. 2. The Freestanding Retail category encompasses the full range of retail categories including automotive uses, restaurants, and entertainment uses. Keyser Marston Associates, Inc WH Page 9 August 25, 2014

21 3. The Ground Floor Retail category represents retail uses that would typically locate on the ground floor of mixed-use buildings, including restaurants and retail uses that serve nearby residents. 4. The Hotel category includes the characteristics of hotels, motels and extended stay hotels. Household Income Limits When workers form households, their incol)'le, either alone or in combination with other workers, produces the household income. In addition, of course, there may be children and/or other household members who are not employed. The nexus analysis estimates demand for affordable housing focusing on the following household income categories: Extremely Low Income Very Low Income Low Income Moderate Income Household income criteria for these affordability categories are based on the Los Angeles County median income (Median) as published by the California Department of Housing and Community Development (HCD). The income categories presented in the following table are applied for most housing programs administered by HCD and by the United States Department of Housing and Urban Development (HUD). For a four-person household, the maximum qualifying income levels for 2014 are: Income Category Extremely Low Income Very Low Income Low Income Moderate Income Percent of Median 0% to 30% of Median Above 30% to 50% of Median Above 50% to 80% of Median Above 80% to 120% of Median Income Range (Four-Person Household) $0 to $25,600 $25,601 to $42, 700 $42, 701 to $68,300 $68,301 to $77,750 Keyser Marston Associates, Inc WH Page 10 August 25, 2014

22 Analysis Steps The analysis is conducted using a model that KMA has developed for application in many jurisdictions for which the firm has conducted similar analyses. The model inputs are comprised of local data to the extent possible, and are fully documented. Tables 1 through 4 in Appendix A summarize the nexus analysis steps for the four building types. Following is a description of each step in the analysis: Step 1 - Estimate of Total New Employees Appendix A - Table 1 estimates the total number of employees who will work in the companies that occupy the building types being analyzed. This is done by dividing the building size by the average square feet of space provided to each employee. As the amount of space allocated to each employee is reduced, the supportable nexus cost is increased. To provide conservative estimates, KMA applied the high end of the square footage range per employee for each type of use. The employment densities used in the analysis can be described as follows: 1. Office at 250 square feet per employee. This figure is in the middle of the currently typical range of 200 to 300 square foot per employee depending on the character of the office activity (corporate headquarters vs. back office, to illustrate extremes). The 250 square feet per employee estimate is conservative given the trend towards shared workspaces and increased telecommuting. The reduction in the number of square feet provided for each employee is ultimately expected to result in more employees in newly constructed buildings.. 2. Freestanding Retail at 500 square feet per employee. This category covers a broad range of uses from high-service restaurants, where employment densities are far greater than average, to retail uses such as furniture stores where employment densities are much lower. Retail employment densities generally range from 250 to 500 square feet per employee depending on the retail use Ground Floor Retail at 375 square feet per employee. This category covers the retail uses that would operate on the ground floor of mixed-use buildings, which will likely be geared towards food preparation and resident services. KMA calculated the weighted employment density average based on 50% general retail space at 500 square feet per employee, and 50% restaurant space at 250 square feet per employee. 1 The employment,density for restaurant employees is based on the 2010 Restaurant Industry Operations Report, and applies to limited-services restaurants. Full-service restaurants will typically include more employees per square foot of building area, which would result in a higher supportable nexus fee. Keyser Marston Associates, Inc WH Page 11 August 25, 2014

23 4. Hotel at 1,000 square feet per employee. This estimate reflects limited-service hotel developments, and is based on recent studies reviewed by KMA. 2 The density factors used in this analysis represent averages, and specific projects may have more or fewer employees than the employment densities assumed in this analysis. As a reflection of the differential impacts created by projects that diverge significantly from the factorsused in this analysis, the City may wish to include a provision in the ordinance that allows for a custom impact fee. That is, projects with much lower employment densities may be allowed to pay a lower impact fee, and projects with much greater employment densities may be required to pay a higher fee. As discussed above, KMA conducted the analysis on prototype buildings. The prototypes facilitate the presentation of the nexus findings, as it allows us to count jobs and housing units in whole numbers that can be readily communicated and understood. At the conclusion of the analysis, the findings are divided by building size to express the linkages per square foot, which are very small fractions of housing units. Step 2 - Adjustment for Changing Industries This step is an adjustment to take into account any declines, changes and shifts within all sectors of the economy and to recognize that new space is not always 100% equivalent to net new employees. As discussed previously, a 20% adjustment is utilized to recognize the longterm shifts in employment occurring in the Los Angeles region and the likelihood of continuing changes to the local economy. This adjustment is presented in Appendix A - Table 1. For demolition of existing structures, the City may wish to provide a credit or offset to the fee when demolition of existing structures occurs as part of a project. Typically, the fee would only be charged against net new space added by a project. Step 3 - Adjustment from Em61oyees to Employee Households This step, as shown in Appendix A - Table 1, converts the number of employees to the number of employee households that will work at or in the building type being analyzed. This step recognizes that there is, on average, more than one worker per household, and thus the number of housing units in demand for new workers must be reduced to reflect this fact. The workers per household characteristic provides the link between the number of employees and the number of households associated with the net new employees. Worker households are defined as those households with one or more persons with work-related income, including the self-employed, as reported in the American Community Survey of the Census. In 2 "Projected Impacts of a Hotel Project within the Regional Center Management Los Angeles (RCMLA) Regional Center." November Full-service hotels will typically include more employees per square foot of building area, which would result in a higher supportable nexus fee. Keyser Marston Associates, Inc WH Page 12 August 25, 2014

24 other words, worker households are distinguished from total households in that the universe of worker households does not include elderly or other households in which members are retired or do not work for other reasons. Student households and unemployed households on public assistance are also excluded from the definition of worker households. The number of workers per household in a given geographic area is a function of household size, labor force participation rate and employment availability, as well as other factors. According to the American Community Survey, the average number of workers per worker household in Los Angeles County was Since workers employed in West Hollywood live all over Los Angeles County and beyond, the County average is used in the analysis. Step 4 - Occupational Distribution of Employees, The occupational breakdown of employees is the first step to arriving at estimated income levels. Using the 2013 National Industry-Specific Occupational Estimates, which is a cross matrix of industries and occupations produced by the Bureau of Labor Statistics, we are able to estimate the occupational composition of employees in the four types of buildings. The occupations that reflect the expected mix of activities in the new buildings are presented in Appendices B - E. 1. The industry mix for office buildings has been tailored to reflect the typical industry base in West Hollywood. These industries represent a mix of professional service activities including business and financial operations, entertainment companies, insurance, architecture and engineering, computer and mathematical, legal, management, health care, and sales. Office and administrative support occupations comprise approximately 26% of all office-related employment. 2. Freestanding retail employment consists predominately of food preparation occupations (39%), and sales related occupations (30%). These two occupation categories together account for 69% of freestanding retail workers. The remaining 31 % of freestanding retail workers are in occupations that include administrative support, transportation, installation and maintenance, and production. This category excludes movie theaters. 3. Ground floor retail employment is dominated by food preparation and serving occupations (46%), and sales related occupations (30%). These two occupation categories together account for 76% of ground floor retail workers. The remaining ground floor retail workers are in occupations that include administrative support, personal care, and production. 4. Hotels employ workers primarily within building and grounds cleaning and maintenance; food preparation and serving related; and administrative support. These employment categories make up 77% of hotel workers. Other hotel occupations include personal care, management, sales, production and maintenance and repair. Keyser Marston Associates, Inc WH Page 13 August 25, 2014

25 Step 4 estimates are presented in Appendix A - Table1 and Appendices B - E. These estimates include both the percentage of total employee households and the number of employee households in the prototype buildings. Step 5 - Estimated Employee Household Income In this step, occupations are translated to incomes based on recent Los Angeles County wage and salary information for the occupations associated with each building type. This step in the analysis calculates the number of employee households that fall into each income category. The following is a summary of the worker compensation levels for the three top occupation groups by building type. The percentages refer to the share of employment within the building in the occupation group. Appendices B - E show the more detailed wage and salary information that were used as the income inputs to the model. Los Angeles County Worker Compensation by Building Type (2013) %of Average Annual Employment Worker Building Type Major Occupation Group in Building Compensation 3 Office Office and administrative support 26% $38,700 Arts, design, entertainment, sports, 11% $88,200 and media Business and financial operations 10%.$76,500 Freestanding Food preparation and serving 39% $21,800 Retail Sales and related occupations 30% $27,800 Office and administrative support 9% $32,400 Ground Floor Food preparation and serving 46% $21,800 Retail Sales and related occupations 28% $27,700 Office and administrative support 8% $31,800 Hotel Building and grounds and cleaning 33% $24,400 and maintenance Food preparation and serving 25% $23,200 Office and administrative support 20% $29,300 Source: California Employment Development Department, 2012 Occupational Employment Statistics Survey, Wages First Quarter Compensation is based on the full-time equivalent of 40 hours per week. Keyser Marston Associates, Inc WH Page 14 August 25, 2014

26 The occupations with the lowest compensation levels are in the Freestanding Retail and Ground Floor Retail building types. Individual employee income information was used to calculate the number of households that fall into these income categories based on the assumption that multiple earner households are, on average, formed of individuals with similar incomes. The model recognizes some households have multiple incomes while others do not. Step 6 - Estimate of Household Size Distribution In this step, household size distribution is input into the model in order to estimate the income and household size combinations that fall within the Extremely Low, Very Low, Low and Moderate Income categories. The household size distribution utilized in the analysis is that of Los Angeles County, since workers employed in West Hollywood are drawn from throughout the County. Step 7 - Estimate of Households that meet HUD Size and Income Criteria For this step the KMA model incorporates a matrix of household size and income to establish probability factors for the two criteria in combination. For each occupational group, a probability factor was calculated for each household income and size level. This step is performed for each occupational category, and multiplied times the number of households. These analyses are presented in Appendix A - Tables 2A - 2D, and summarized in Appendix A - Table 3. Summary by Income Level Appendix A - Table 3 illustrates the results of the analysis for the four income categories and the four prototypical buildings being analyzed in this study. The table presents the estimated number of households in each affordability category, the total number up to 120% of the Median, and the remaining households earning over 120% of Median. Appendix A - Table 3 also presents the percentages of total new worker households that fall into each income category. As indicated, over 90% of Freestanding Retail and 92% of Ground Floor Retail worker households earn less than the 120% of the Median. By contrast, in Office buildings, approximately 48% of worker households earn less than 120% of the Median. Summary by Square Foot Building Area The analysis thus far has worked with prototypical buildings. In this step, the conclusions are translated to a per-square-foot level and expressed as coefficients. These coefficients state the portion of a household, or housing unit, by affordability level for which each square foot of building area is associated (see Appendix A - Table 4). Keyser Marston Associates, Inc WH Page 15 August 25, 2014

27 This is the summary of the affordable housing nexus analysis, or the linkage of buildings to employment growth to housing demand disaggregated by income level. We believe that our analysis provides a conservative approximation (understates at the low end) of the households by income and affordability levels associated with these building types. C. Maximum Nexus Costs This section takes the conclusions from the previous section on the number of households in the Extremely Low, Very Low, Low, and Moderate Income categories associated with each building type, and estimates the total cost of assistance required to make housing affordable. This section puts a cost on the units at each income level to produce the "total affordable housing nexus cost." Affordability Gaps A key component of the analysis is the size of the gap between what households can afford and the cost of producing additional housing in West Hollywood; this is, known as the "affordability gap." The analysis utilizes the same affordability gaps as the Residential Nexus Study, also conducted by KMA. For both analyses, the assumption is that the City will assist in the development of affordable units at development cost levels based on similar development projects and the City's recent experience. KMA conducted a series of affordability gap analyses, which are presented in Appendix F. Based on these analyses, it was determined that the public assistance cost would be lower for rental units than for ownership units at each income level. It is assumed that the Extremely Low Income tier will qualify to receive the 9% Low Income Housing Tax Credit (Tax Credit) that is competitively awarded by the California Tax Credit Allocation Committee. For the Very Low Income tier and the Low Income tier it is assumed that Tax-Exempt Multifamily Bonds and the automatically awarded 4% Tax Credits will be available. The Moderate Income ti.er is structured as an unleveraged rental project. The resulting affordability gaps per unit are presented in the following table: Extremely Low Income (0% to 30% Median) Very Low Income (Above 30% to 50% Median) Low Income (Above 50% to 80% Median) Moderate Income (Above 80% to 120% Median) ($219,100) ($204,500) ($177,200) ($189,100) Keyser Marston Associates, Inc WH. Page 16 August 25, 2014

28 Total Affordable Housing Nexus Costs Previous steps in the nexus analysis estimated the following: 1. The number of Extremely Low, Very Low, Low and Moderate Income households that will be employed in each of the four types of buildings; and 2. The affordability gaps associated with providing housing at the various income levels. The final step in the nexus analysis translates these factors into the estimated cost to fulfill the affordable housing demand created by the prototype developments (Appendix A - Table 5). These results are then converted into the affordability gaps per square foot of building area for the new development of office, freestanding retail, ground floor retail and hotel uses. This is defined as the affordable housing nexus cost, which represents the maximum allowable Non Residential Affordable Housing Impact Fee. Based on the results of the KMA analysis, the maximum fees for the four building types are as follows: Maximum Supportable Non-Residential Affordable Housing Impact Fee Use Office Freestanding Retail Ground Floor Retail Hotel Per Square Foot of Building Area $ $ $ $79.90 The maximum fees identified in the preceding table reflect the low compensation levels of many jobs, coupled with the high cost of developing residential units in West Hollywood. It is important to note, however, that the maximum fee amounts are not the recommended fee levels. Rather, these fee amounts represent the maximum amounts that can be charged under the nexus requirements imposed by the United States Supreme Court and the California Government Code. Conservative Assumptions KMA employed many conservative assumptions in the estimation of the total affordable housing nexus costs. As a result, the total affordable housing nexus costs identified in this study are significantly lower than the amounts that would have been derived if less conservative assumptions had been applied. These conservative assumptions can be summarized as follows: Keyser Marston Associates, Inc WH Page 17 August 25, 2014

29 1. The study only counts employees that are employed in the companies that occupy the new development. The development of new commercial space will also generate indirect jobs from the suppliers to the businesses located in the new workspace buildings, and induced jobs related to the local spending on goods and services by the direct employees. 2. The trend in the development of new office space is for open office floor plans that can accommodate more employees per square foot of building area than the historical ratios used as reference points in this analysis. These increased employee densities can yield upwards of twice as many employees in a given amount of space than the estimates applied in this study. 3. The annual incomes for workers used in this analysis reflect full-time employment based on the California Employment Development Department's convention for reporting compensation information. Of course, many workers work less than full time; therefore, the annual compensation estimates used in the analysis are overstated, especially for retail and hotel uses, which tend to have a high number of part-time employees. 4. The conservative assumptions applied to the affordability gap analysis are: a. The affordability gaps for Extremely Low and Very Low Income households were estimated based on rents that are affordable to households at the top of each income range. If the mid-point of the income ranges had been used, the affordability gaps would have been larger, which would increase the resulting nexus costs. b. The affordability gap analysis for Extremely Low Income households includes the financial benefits provided by the competitively awarded 9% Tax Credit, and the affordability gap analysis for Very Low and Low Income households includes Tax-Exempt Multifamily Bond and 4% Tax Credit financing. The inclusion of these outside leveraging sources reduces the affordability gap that would need to be filled by the city. IV. RECOMMENDED NON-RESIDENTIAL AFFORDABLE HOUSING IMPACT FEES The following sections discuss the methods in which the City could set the Non-Residential Affordable Housing Impact Fees. Keyser Marston Associates, Inc WH. Page 18 August 25, 2014

30 A. Fee-Setting Context The preceding study establishes the maximum fee amounts the City could charge under the nexus requirements imposed by the United States Supreme Court and the California Government Code. Recognizing that the Non-Residential Affordable Housing Impact Fee is not the only tool the City will use to fulfill affordable housing needs, it is KMA's assumption that the City will choose to set the fee at less than the ceiling applied by the nexus test. In KMA's opinion, the fee amounts should be selected based on the following: 1. The strength of the local real estate market for the building types that will pay the fee; 2. The total fees imposed on new development as compared to jurisdictions that are competing for the uses; and 3. The local policy objectives. The following information is provided to assist the City in selecting the fee amounts to be imposed. Fees in Other Jurisdictions Appendix G presents the results of a KMA survey of linkage fees being imposed on nonresidential development in 26 jurisdictions located throughout California. The salient results of the survey can be summarized as follows: 1. In addition to West Hollywood, Santa Monica and San Diego are the only Southern California jurisdictions that currently impose linkage fees on non-residential development: a. Santa Monica has imposed a fee on office development since 1984, and that fee is currently set at $5.11 per square foot for the first 15,000 square feet of building area, and $11.35 per square foot for additional building area. In 2014, Santa Monica undertook a nexus study for a wide range of non-residential uses; that recommended fees at 5% of the maximum allowable fee for projects that meet base zoning requirements, and 5.7% of the maximum allowable fee for projects that receive floor area ratio and height bonuses defined by the City as Tier 2 zoning. The City Council is scheduled to take action on the base zoning fees in September 2014, and the Tier 2 fees in b. The fees imposed by the City of San Diego range from $0.64 to $1.06 per square foot of building area, and were based on a nexus study. 4 The recommended fees range from $3.07 to $11.21 per square foot for base zoning projects, and $3.50 to $12.78 per square foot for Tier 2 projects. Keyser Marston Associates, Inc WH Page 19 August 25, 2014

31 2. The City of Los Angeles recently completed a nexus analysis of non~residential uses, but no impact fees have been set. 3. KMA divided the 26 jurisdictions into high-fee, medium-fee, and low-fee categories. The results can be summarized as follows: a. The three high-fee jurisdictions impose fees ranging from $14.92 and $22.06 per square foot of building area. 5 b. The highest fee charged in the 1 O medium-fee jurisdictions is the City of Santa Monica fee of $11.35 per square foot of office space. c. The 13 low-fee jurisdictions impose fees ranging from $.20 to $4.37 per square foot of building area. Adjusted Fees as a Percentage of the Maximum Fee Amounts The following table outlines potential impact fees set at various percentages of the maximum allowable nexus costs. Maximum Supportable Non-Residential Affordable Housing Impact Fee Per Square Foot of Building Area Freestanding Ground Office Retail Floor Retail Hotel Maximum Nexus Cost $ $ $ $ % of Maximum Nexus Cost $8.26 $8.24 $11.14 $ % of Maximum Nexus Cost $16.52 $16.48 $22.28 $ % of Maximum Nexus Cost $24.78 $24.72 $33.42 $ % of Maximum Nexus Cost $33.04 $32.96 $44.56 $ % of Maximum Nexus Cost $41.30 $41.20 $55.70 $19.98 B. Recommended Fee Levels KMA recommends that the City set the Non-Residential Affordable Housing Impact Fee at $8.00 per square foot of building area. However, it is important to note that this recommendation does not take into account any other fees currently under review by the City. Any changes on other fee levels may impact this recommendation. The factors that KMA considered in recommending this fee level can be described as follows: 5 One of the cities applies a $14.92 per square foot fee to office and R&D development, but imposes a $8.10 per square foot fee to all other commercial and industrial uses. Keyser Marston Associates, Inc WH Page 20 August 25, 2014

32 1. The survey of impact fees being charged by other California communities, that is presented in Appendix G, indicates that a fee of $8.00 per square foot of building area would fall in the medium-fee category for the 26 surveyed jurisdictions. 2. The real estate market in West Hollywood is strong when compared to the Los Angeles region as a whole. 3. A fee of $8.00 per square foot of building area represents the average of the fees supported by the various non-residential uses at 5% of the maximum nexus cost. This Should result in the fee having minimal impact on development decisions, and it should not significantly diminish West Hollywood's ability to attract non-residential development to the limited number of available parcels. 4. The City currently levies a $2.85 per square foot of building area Non-Residential Affordable Housing Impact Fee. Since 2002, the City has levied this fee on 17 nonresidential development projects, which equates to fewer than two projects per year. During this 12-year period, the fee has only generated approximately $2.57 million in revenue. The recommended increase in the fee amount should generate significantly greater revenue to the City. To mitigate the impact created by the recommended fee increase, KMA recommends that the increase be phased in over a two-year period, and that the fee increase not be applied to projects that enter the City's entitlement process before the fee increase is enacted. This will minimize the impact the fee increase will have on pipeline projects. Like any fee of this nature, the ultimate cost will be borne largely by land owners, since the amount developers are willing to pay for land is contingent on what the market will support on the income side of the equation in relation to the development cost side of the equation. Of all the cost components, land is the one that can adjust and be negotiated. But such adjustments take time, so a phased period could be more equitable to the development community. C. Potential Indices tor Annual Updates to Non-Residential Affordable Housing Impact Fees Administrative objectives that should be taken into consideration in selecting an appropriate index for updating the Non-Residential Affordable Housing Impact Fees are as follows: 1. The update methodology should be simple and easily administered; 2. The terms of the update should be clear and objective, not subject to interpretation; and 3. The update should be tied to a readily accessible and neutral third-party published source. Keyser Marston Associates, Inc WH Page 21 August 25, 2014

33 The following table summarizes common indices that could be used to adjust the Non Residential Affordable Housing Impact Fee amounts each year: Index Concept I Description Advantages Disadvantages Building Cost Index Fees go up or down based Very well established May not trend with (BCI) on changes in building changes in development Consistent fee burden is construction costs cost components such as imposed relative to changes land and soft costs Published by"engineering in construction costs News Record (ENR) May not trend with the cost associated with producing Available as a national affordable units average for 20 cities, including Los Angeles Construction Cost Index Also published by ENR Very well established The BCI is likely the more (CCI) and similar to the Building appropriate of the two ENR Consistent fee burden is Cost Index, but with indices since it is more imposed relative to changes different weighting toward closely linked to in construction costs labor costs commercial construction costs Consumer Price Index Published by the United Very well established May not trend with (CPI) States Bureau of Labor commercial construction Tracks with inflation generally Statistics. costs, or the cost to Produced by a neutral produce affordable Available for major government agency housing units metropolitan areas Based on the identified advantages and disadvantages of the three common indices, KMA recommends that the BCI be used to adjust the Non-Residential Affordable Housing Impact Fee each year. V. ADDENDUM: FACTORS RELATING TO THE NEXUS CONCEPT This Addendum provides a discussion of vario_us specific factors and assumptions related to the nexus concept. This discussion supplements the overview provided in the previous sections of the report. A. Addressing the Housing Needs of a New Population versus the Existing Population The City, in its Housing Element, has clearly documented that the housing needs of existing lower income households are not currently being met. The Housing Element states that approximately 45% of all the households in West Hollywood are defined as lower income households. The existing housing shortage, especially at the lowest income levels, is manifested in numerous ways such as residents paying far more than the affordable rent set forth in federal and state guidelines, overcrowding, and other factors that are extensively documented by the Census and other reports. Keyser Marston Associates, Inc WH Page 22 August 25, 2014

34 It is important to understand that this nexus study does not address the housing needs of the existing population. Rather, the study focuses exclusively on documenting and quantifying the housing needs of new households where an employee works in a new workplace building. Local analyses of housing conditions indicate that new housing affordable to lower income households is not being added to the supply in sufficient quantity to meet the needs of new employee households. If significant numbers of units were being added to the supply to accommodate the Extremely Low to Moderate Income groups, or if residential units in West Hollywood were experiencing higher than typical long-term vacancy levels, particularly in affordable units, then the need for new units would be questionable. B. Substitution Factor Any given new workplace buildings in West Hollywood may be occupied partly, or even perhaps totally, by employees relocating from elsewhere in the city. Buildings are often leased entirely to firms relocating from other buildings in the same jurisdiction. However, when a firm relocates to a new building from elsewhere in the region, a vacant space is created that will ultimately be, occupied by another firm. In turn, that building may be filled with some combination of newcomers to the area and existing workers. Somewhere _in the chain there are jobs new to the region. The net effect is that new buildings accommodate new employees, although not necessarily inside of the new buildings themselves. C. Indirect Employment and Multiplier Effects The multiplier effect refers to the concept that the income generated by a new job recycles through the economy and results in additional jobs. The total number of jobs generated is broken down into three categories - direct, indirect and induced. In the case of the nexus analysis, the direct jobs are those located in the new workspace buildings that would be subject to the linkage fee. Multiplier effects encompass indirect and induced employment. Indirect jobs are generated by suppliers to the businesses located in the new workspace buildings. Finally, induced jobs are generated by local spending on goods and services by the employees in the new businesses. Multiplier effects vary by industry. Industries that draw heavily on a network of local suppliers tend to generate larger multiplier effects. Industries that are labor intensive also tend to have larger multiplier effects as a result of the induced effects of employee spending. Theoretically, a jobs-housing nexus analysis could consider multiplier effects. However, the potential for double counting exists to the extent indirect and induced jobs are added in other new buildings in jurisdictions that have jobs housing linkage fees. KMA chooses to omit the multiplier effects (the indirect and induced employment impacts) to avoid potential double counting. Keyser Marston Associates, Inc WH Page 23 August 25, 2014

35 In addition, the nexus analysis addresses direct "inside" employment only. In the case of an office building, for example, direct employment covers the various managerial, professional and clerical people that work in the building; it does not include the security guards, the delivery services, the landscape maintenance workers, and many others that are associated with the normal functioning of an office building. By confining the analysis to the "inside" direct employees, the demand for affordable housing created by lower fncome workers associated with each type of building, a more conservative perspective on the demand for affordable housing created by the development of new workplaces is provided. If these factors were included, the maximum allowable Non-Residential Affordable Housing Impact Fee would be higher than the amount estimated in this report. D. Changes in Labor Force Participation In the 1960s through the 1980s, there were significant increases in labor force participation, primarily among women. As a result, some of the new workers were entering the labor force and already had local housing. This acts to reduce the demand for housing associated with job growth. In earlier nexus analyses prepared by KMA, we would adjust the analysis to account for this factor. However, increases in participation rates by women have stabilized, and even declined slightly, while labor force participation rates for men have been on a downward trajectory since As such, an adjustment for increase in labor force participation is no longer warranted in a nexus analysis. E. Commuting Workers in West Hollywood commute from locations throughout the Los Angeles region. Nexus analyses sometimes make a downward adjustment to reflect the fact that an assumed portion of housing needs will be satisfied by other jurisdictions. Such an adjustment is not required for nexus purposes; all housing demand generated by a project may be included in the nexus. No adjustment for commuting has been reflected in the study. F. Non-Duplication The City is considering adopting a Residential Affordable Housing Impact Fee supported by a nexus analysis that applies a similar analytical framework to this Non-Residential Jobs-Housing Nexus Study. Under certain circumstances the two analyses could count the impact created by some of the same jobs. To reflect this, KMA analyzed the potential double counting of jobs, which is presented in Appendix H. This analysis concludes that no double counting would occur if the Residential Affordable Housing Impact Fee and the Non-Residential Affordable Housing Impact Fee programs are implemented at the levels currently under consideration by the City. Keyser Marston Associates, Inc WH Page 24 August 25, 2014

36 G. Economic Cycles A nexus analysis of this nature is intended to support the imposition of a one-time fee that addresses the impacts generated over the 40+ year life of a project. Short-term conditions, such as a recession or a vigorous boom period, are not appropriate bases for estimating impacts over the life of a building. These cycles can produce impacts that are higher or lower on a temporary basis. Development of new workspace buildings tends to be minimal during a recession, and generally remains minimal until conditions improve or there is confidence that improved conditions are imminent. To the limited extent that new workspace buildings are built during a recession, housing impacts from these new buildings may not be fully experienced immediately. New buildings delivered during a recession can sometimes sit vacant for a period after completion. Even if new buildings are immediately occupied, the net absorption of space can still be zero or negative if other buildings are vacated in the process. Jobs added may also be filled in part by unemployed or underemployed workers who are already housed locally. As the economy recovers, firms will begin to expand and hire again filling unoccupied space as unemployment is reduced. New space delivered during the recession still adds to the total supply of employment space in the region. Though the jobs are not realized immediately, as the economy recovers and vacant space is filled, this new employment space absorbs or accommodates job growth. Although there may be a delay in time, the fundamental relationship between new buildings, added jobs, and housing needs remains over the long term. In contrast, during a vigorous economic boom period, conditions exist in which elevated impacts are experienced on a temporary basis. As an example, compression of employment densities can occur as firms add employees while making do with existing space. Compressed employment densities mean more jobs are added for a given amount of building area. Boom periods also tend to go hand-in-hand with rising development costs and increasing home prices. These factors can bring market rate housing out of reach from a larger percentage of the workforce and increase the cost of delivering affordable units. The preceding Non-Residential Jobs-Housing Nexus study is based on current conditions in the market place. These conditions include the fact that limited land is available for new development, and that as a result infill development and recycling of existing underutilized properties will dominate the workplace development in West Hollywood. Keyser Marston Associates, Inc WH Page 25 August 25, 2014

37 APPENDIX A NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY TABLES

38 APPENDIX A - TABLE 1 NET NEW HOUSEHOLDS AND OCCUP.ATION DISTRIBUTION BY BUILDING TYPE NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Step 1 - Estimate of Number of Employees Size of Prototypical Building (Square Feet) OFFICE 100,000 FREESTANDING GROUND RETAIL FLOOR RETAIL HOTEL 20,000 15, ,000 Employee Density Factor (employees per 1,000 Square Feet) Number of Employees Step 2 - Number of Employees after Changing Industries Adjustment (20%) Step 3 -Adjustment for Number of Households (1.75) Step 4 - Occupation Distribution 1 Management Occupations Business and Financial Operations Computer and Mathematical Architecture and Engineering Life, Physical, and Social Science Community and Social Services Legal Education, Training, and Library Arts, Design, Entertainment, Sports, and Medi< Healthcare Practitioners and Technical Healthcare Support Protective Service Food Preparation and Serving Related Building and Grounds Cleaning and Main!. Personal Care and Service Sales and Related Office and Administrative Support Farming, Fishing, and Forestry Construction and Extraction Installation, Maintenance, and Repair Production Transportation and Material Moving Totals Management Occupations Business and Financial Operations Computer and Mathematical Architecture and Engineering Life, Physical, and Social Science Community and Social Services Legal Education, Training, and Library Arts. Design, Entertainment, Sports, and Media Healthcare Practitioners and Technical Healthcare Support Protective Service Food Preparation and Serving Related Building and Grounds Cleaning and Maint. Personal Care and Service Sales and Related Office and Administrative Support Farming, Fishing, and Forestry Construction and Extraction Installation, Maintenance, and Repair Production Transportation and Material Moving Totals Notes: See Appendices B through E for more information on how the percentages were derived 6.4% 10.1% 5.2% 2.6% 0.7% 0.3% 3.0% 0.2% 10.9% 6.2% 3.2% 4.2% 0.4% 4.7% 0.7% 6.4% 25.9% 0.0% 1.0% 2.2% 2.9% 2.8% 100.0% % 2.0% 4.5% 0.6% 0.4% 1.5% 0.1% 0.1% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.3% 0.4% 0.3% 1.9% 2.1% 0.0% 0.3% 0.4% 0.4% 0.3% 0.2% 1.6% 38.8% 45.9% 24.5% 0.6% 0.6% 32.5% 2.9% 3.1% 4.0% 30.4% 28.7% 2.1% 8.8% 8.1% 19.9% 0.0% 0.0% 0.0% 0.1% 0.1% 0.1% 4.2% 0.7% 5.0% 2.6% 3.0% 2.1% 5.7% 4.0% ~ 100.0% 100.0% 100.0% , Prepared by: Keyser Marston Associates, Inc. Filename: App A_Non-Res Nexus_ : 1 Househ~lds: trb

39 APPENDIX A TABLE 2A ESTIMATE OF QUALIFYING HOUSEHOLDS BY INCOME LEVEL NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Analysis for Households Earning up to 30% of Median FREESTANDING GROUND FLOOR OFFICE RETAIL RETAIL HOTEL Prototypical Building Size (Square Feet) 100,000 20,000 15, ,000 Step 5, 6, & 7 - Households Earning up to 30% of Median 1 Management Business and Financial Operation.s 0.05 Computer and Mathematical Architecture and Engineering Life, Physical and Social Science Community and Social Services Legal Education Training and Library Arts, Design, Entertainment, Sports, and Media 0.03 Healthcare Practitioners and Technical Healthcare Support 0.27 Protective Service 1.14 Food Preparation and Serving Related Building Grounds and Maintenance Personal Care and Service Sales and Related Office and Admin Farm, Fishing, and Forestry Construction and Extraction Installation Maintenance and Repair Production Transportation and Material Moving HH earning up to 30% of Median - major occupations HH earning up to 30% of Median - all other occupations Total Households Earning up to 30% of Median Notes: 1 See Appendices B through E for additional information on Major Occupation Categories. Prepared by: Keyser Marston Associates:lnc. Filename: App A_Non-Res Nexus_B 2514; 2A 30% Hhlds; trb

40 APPENDIX A -TABLE 2B ESTIMATE OF QUALIFYING HOUSEHOLDS BY INCOME LEVEL NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Analysis for Households Earning Above 30% to 50% of Median OFFICE FREESTANDING RETAIL GROUND FLOOR RETAIL HOTEL Prototypical Building Size (Square Feet) 100,000 20,000 15, ,000 Step 5, 6, & 7 - Households Earning Above 30% to 50% of Median 1 Management Business and Financial Operations 0.35 Computer and Mathematical 0.13 Architecture and Engineering Life, Physical and Social Science Community and Social Services Legal 0.14 Education Training and Library Arts, Design, Entertainment, Sports, and Media 0.96 Healthcare Practitioners and Technical Healthcare Support 1.81 Protective Service 3.04 Food Preparation and Serving Related Building Grounds and Maintenance Personal Care and Service Sales and Related Office and Admin Farm, Fishing, and Forestry Construction and Extraction Installation Maintenance and Repair Production Transportation and Material Moving HH earning Above 30% to 50% of Median - major occupations HH earning Above 30% to 50% of Median - all other occupations Total Households Earning Above 30% to 50% of Median Notes: 1 See Appendices B through E for additional information on Major Occupation Categories. Prepared by: Keyser Marston Associates, Inc. Filename: App A_Non-Res Nexus_8 2514; 2B 50% Hhlds; 8/25/2014; dd

41 APPENDIX A - TABLE 2C ESTIMATE OF QUALIFYING HOUSEHOLDS BY INCOME LEVEL NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Analysis for Households Earning Above 50% to 80% of Median OFFICE FREESTANDING RETAIL GROUND FLOOR RETAIL HOTEL Prototypical Building Size (Square Feet) 100,000 20,000 15, ,000 Step 5, 6, & 7 - Households Earning Above 50% to 80% of Median 1 Management Business and Financial Operations 2.74 Computer and Mathematical 0.89 Architecture and Engineering Life, Physical and Social Science Community and Social Services Legal 0.47 Education Training and Library Arts, Design, Entertainment, Sports, and Media 3.41 Healthcare Practitioners and Technical Healthcare Support 2.15 Protective Service 2.47 Food Preparation and Serving Related Building Grounds and Maintenance Personal Care and Service Sales and Related 2.83 Office and Admin Farm, Fishing, and Forestry Construction and Extraction Installation Maintenance and Repair Production Transportation and Material Moving HH earning Above 50% to 80% of Median - major occupations HH earning Above 50% to 80% of Median - all other occupations Total Households Earning Above 50% to 80% of Median Notes: 1 See Appendices B through E for additional information on Major Occupation Categories. Prepared by: Keyser Marston Associates, Inc. Fi.lename: App A_Non-Res Nexus_8 2514; 2C 80% Hhlds; 8/25/2014; dd

42 APPENDIX A-TABLE 2D 1 ESTIMATE OF QUALIFYING HOUSEHOLDS BY INCOME LEVEL NON-RESIDENTIAL.: JOBS-HOUSING NEXUS STUDY Analysis for Households Earning Above 80% to 120% of Median OFFICE FREESTANDING RETAIL GROUND FLOOR RETAIL HOTEL Prototypical Building Size (Sq4are Feet) 100,000 20,000 15, ,000 Step 5, 6, & 7 - Households Earning Above 80% to 120% of Median 1 Management Business and Financial Operations 1.30 Computer and Mathematical 0.52 Architecture and Engineering Life, Physical and Social Science Community and Social Services Legal 0.20 Education Training and Library Arts, Design, Entertainment, Sports, and Media Healthcare Practitioners and Technical Healthcare Support 0.47 Protective Service 0.51 Food Preparation and Serving Related Building Grounds and Maintenance Personal Care and Service Sales and Related Office and Admin Farm, Fishing, and Forestry Construction and Extraction Installation Maintenance and Repair Production Transportation and Material Moving HH earning Above 80% to 120% of Median - major occupations HH earning Above 80% to 120% of Median - all other occupations Total Households Earning Above 80% to 120% of Median Notes: 1 See Appendices B through E for additional information on Major Occupation Categories. Prepared by: Keyser Marston Associates, Inc. Filename: App A_Non-Res Nexus_ ; % Hhlds; 8/25/2014; dd

43 APPENDIX A -TABLE 3 WORKER HOUSEHOLDS BY AFFORDABILITY LEVEL NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY FREESTANDING GROUND FLOOR OFFICE RETAIL RETAIL HOTEL Prototypical Building Size (Square Feet) 100,000 20,000 15, ,000 NUMBER OF HOUSEHOLDS BY INCOME TIER 1 Up to 30% Median Income Above 30% to 50% Median Income Above 50% to 80% Median Income Above 80% to 120% Median Income Subtotal to 120% Median Above 120% of Median Total New Worker Households PERCENTAGE OF HOUSEHOLDS BY INCOME TIER Up to 30% Median Income 3.5% 22.8% 24.3% 19.7% Above 30% to 50% Median Income 14.7% 34.2% 34.7% 34.4% Above 50% to 80% Median Income 22.6% 29.9% 29.6% 29.6% Above 80% to 120% Median Income 6.8% 3.9% 3.4% 4.8% Subtotal to 120% Median 47.5% 90.9% 92.0% 88.5% Above 120% of Median 52.5% 9.1% 8.0% 11.5% Notes: See Appendices B through E on compensation levels. Total 100% 100% 100% 100% Prepared by: Keyser Marston Associates, Inc. Filename: App A_Non-Res Nexus_ ; 3 Affordability; trb

44 APPENDIX A - TABLE 4 HOUSING DEMAND NEXUS FACTORS PER SQ.FT. OF BUILDING AREA NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Number of Housing Units per Square Foot of Building Area 1 FREESTANDING GROUND FLOOR OFFICE RETAIL RETAIL HOTEL Up to 30% Median Income Above 30% to 50% Median Income , Above 50% to 80% Median Income Above 80% to 120% Median Income Total Notes: Calculated by dividing number of households in Table 3 by the square footage of each prototypical building to convert to households per 1 square foot of building area. Prepared by: Keyser Marston Associates, Inc. Filename: App A_Non-Res Nexus_8 2514; 4 Demand; trb

45 APPENDIX A - TABLE 5 TOTAL AFFORDABLE HOUSING NEXUS COST NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Nexus Cost Per Square Foot of Building Area 1 INCOME CATEGORY Affordability Gap OFFICE FREESTANDING GROUND FLOOR RETAIL RETAIL HOTEL Up to 30% Median Income $219,100 2 $14.00 $45.60 $64.70 $19.70 Above 30% to 50% Median Income $204,500 $54.90 $63.90 $86.40 $32.10 Above 50% to 80% Median Income $177,200 $73.00 $48.50 $63.80 $24.00 Above 80% to 120% Median Income $189,100 $23.30 $6.80 $7.90 $4.10 Total $ $ $ $79.90 Notes: Calculated by multiplying housing demand factors per square foot of building area from Table 4 times the affordability gap. Figures are rounded to the nearest $0.10. Assumes rental units. Represents the remaining affordability gap after 9% tax credits. 3 Assumes rental units. Represents the remaining affordability gap after 4% tax credits. Affordability gap based on rental units, and is computed based on rents affordable to the top of the income tier at 60% Median. 5 Affordability gap for moderate income households based on rental units rented at 110% Median. Prepared by: Keyser Marston Associates, Inc. Filename: App A_Non-Res Nexus_8 2514; 5 Model Summary; trb

46 APPENDIX B OFFICE LAND USE TABLES NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY

47 APPENDIX B-TABLE NATIONAL OFFICE WORKER DISTRIBUTION BY OCCUPATION NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Major Occupations (3% or more) Management Occupations Business and Financial Operations Occupations Computer and Mathematical Occupations Legal Occupations Arts, Design, Entertainment, Sports, and Media Occupations Healthcare Practitioners and Technical Occupations Healthcare Support Occupations Protective Service Occupations Building and Grounds Cleaning and Maintenance Occupations Sales and Related Occupations Office and Administrative Support Occupations All Other Office Occupations INDUSTRY TOTAL 2013 National Office Industry Occupation Distribution 1,761, % 2,802, % 1,445, % 834, % 3,016, % 1,709, % 898, % 1,176, % 1,304, % 1,770, % 7,162, % % 27,676, % Source: Bureau of Labor Statistics; California Employment Development Department Prepared by: Keyser Marston Associates, Inc. Filena.'.11e: App B_Office_8 2514; Major Occupations Matrix; trb

48 APPENDIX 8-TABLE 2 AVERAGE ANNUAL COMPENSATION, 2013 OFFICE WORKER OCCUPATIONS NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Occupation Avg. Compensation 2 % of Total Occupation Group 3 %oftotal Office Workers Page 1 of4 Management Occupations Chief Executives "$215, % 0.3% General and Operations Managers $131, % 2.0% Marketing Managers $135, % 0.3% Sales Managers $126, % 0.3% Administrative Services Managers $100, % 0.3% Computer and Information Systems Managers $137, % 0.5% Financial Managers $144, % 0.8% Property, Real Estate, and Community Association Managers $74, % 0.5% Managers, All Other $122, % 0.3% All Other Management Occupations (Avg. All Categories) ~124, % 1.1% Weighted Mean Annual Wage $129, % 6.4%- Business and Financial Operations Occupations Claims Adjusters, Examiners, and Investigators $64, % 0.4% Human Resources Specialists $67, % 0.6% Management Analysts $88, % 1.2% Market Research Analysts and Marketing Specialists $67, % 0.8% Business Operations Specialists, All Other $75, % 1.0% Accountants and Auditors $76, % 2.8% Financial Analysts $108, % 0.4% Loan Officers $91, % 0.5% Tax Preparers $43, % 0.3% All Other Business and Financial Operations (Avg. All Categories) $75, % 2.1% Weighted Mean Annual Wage $76, % 10.1% Computer and Mathematical Occupations Computer Systems Analysts $92, % 0.7% Computer Programmers $84, % 0.5% Software Developers, Applications Software Developers, Systems Software Web Developers Database Administrators Network and Computer Systems Administrators Computer Network Architects Computer User Support Specialists Computer Network Support Specialists Computer Occupations, All Other $94,500 $115,500 $64,300 $87,700 $81,600 $91,700 $52,300 $67,200 $74, % 9.1% 5.0% 3.1% 10.1% 3.8% 13.0% 3.9% 3.1% 1.0% 0.5% 0.3% 0.2% 0.5% 0.2% 0.7% 0.2% 0.2% All Other Computer and Mathematical Occupations (Avg. All Categories) $85, % 0.4% Weighted Mean Annual Wage $84,4() % 5.2% Sources: Bureau of Labor Statistics; California Employment Development Department Comepensation Data for Los Angeles County Prepared by: Keyser Marston Associates, Inc. Filename: App B_Office_ ; Compensation; trb

49 APPENDIX B -TABLE 2 AVERAGE ANNUAL COMPENSATION, 2013 OFFICE WORKER OCCUPATIONS NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY % of Total o/ooftotal Occupation Avg. Compensation 2 Occupation Group 3 Office Workers Page 2of4 Legal Occupations Lawyers Paralegals and Legal Assistants Title Examiners, Abstractors, and Searchers All Other Legal Occupations (Avg. All Categories) $164,400 $60,400 $53,400 ~125, % 31.3% 5.4% 3.3% 1.8% 0.9% 0.2% 0.1% Weighted Mean Annual Wage $124, % 3.0% Arts, Design, Entertainment, Sports, and Media Occupations Multimedia Artists and Animators Graphic Designers Actors Producers and Directors Public Relations Specialists Media and Communication Workers, All Other Audio and Video Equipment Technicians Camera Operators, Television, Video, and Motion Picture Film and Video Editors All Other Arts, Design, Entertainment, Sports, and Media (Avg. All Categories) $90,900 $58,600 $54,600 $139,400 $76,300 $66,700 $55,500 $77,200 $96,900 $ % 5.2% 16.7% 18.4% 3.4% 5.6% 4.2% 3.6% 7.6% 29.7% 0.6% 0.6% 1.8% 2.0% 0.4% 0.6% 0.5% 0.4% 0.8% 3.2% Weighted Mean Annual Wage $88, % 10.9% Healthcare Practitioners and Technical Occupations Dentists, General Family and General Practitioners Physicians and Surgeons, All Other Physical Therapists Registered Nurses Nurse Practitioners Dental Hygienists Veterinary Technologists and Technicians Licensed Practical and Licensed Vocational Nurses Medical Records and Health Information Technicians All Other Healthcare and Technical Occupations (Avg. All Categories) $122,400 $192,800 $199,700 $89,600 $88,200 $90,700 $100,100 $37,700 $51,000 $40,400 $86, % 4.6% 8.1% 3.4% 15.3% 3.2% 10.2% 3.4% 7.0% 3.4% 36.4% 0.3% 0.3% 0.5% 0.2% 0.9% 0.2% 0.6% 0.2% 0.4% 0.2% 2.2% Weighted Mean Annual Wage $98, % 6.2% Sources: Bureau of Labor Statistics; California Employment Development Department Comepensation Data for Los Angeles County Prepared by: Keyser Marston Associates, Inc. Filename: App B_Office_B 25 14; Compensation; trb

50 APPENDIX B-TABLE 2 AVERAGE ANNUAL COMPENSATION, 2013 OFFICE WORKER OCCUPATIONS NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Occupation Avg. Compensation 2 % of Total Occupation Group 3 % of Total Office Workers Page 3of4 Healthcare Support Occupations Nursing Assistants $28, % 0.2% Dental Assistants $35, % 1.0% Medical Assistants $33, % 1.3% Medical Transcriptionists Veterinary Assistants and Laboratory Animal Caretakers $49,300 $29, % 4_go/o 0.1% 0.2% All Other Healthcare Support Occupations (Avg. All Categories) $31, % 0.5% Weighted Mean Annual Wage $33, % 3.2% Protective Service Occupations First-Line Supervisors of Protective Service Workers, All Other $49, % 0.2% Security Guards $26, % 3.9% All Other Protective Service Occupations (Avg. All Categories) $50 5.6% 0.2% Weighted Mean Annual Wage $28, % 4.2% Building and Grounds Cleaning and Maintenance Occupations First-Line Supervisors of Housekeeping and Janitorial Workers $41, % 0.2% First-Line Supervisors of Landscaping, Lawn Service, and Groundskeeping Worker $50, % 0.1% Janitors and Cleaners, Except Maids and Housekeeping Cleaners $26, % 2.4% Maids and Housekeeping Cleaners $23, % 0.4% Landscaping and Groundskeeping Workers $28, % 1.3% All Other Building and Grounds Cleaning and Maintenance Occupations (Avg. All C $27, % 0.3% Weighted Mean Annual Wage $27, % 4.7% Sa/es and Related Occupations First-Line Supervisors of Non-Retail Sales Workers $71, % 0.3% Counter and Rental Clerks $28, % 0.4% Advertising Sales Agents $74, % 0.7% Insurance Sales Agents $67, % 0.8% Securities, Commodities, and Financial Services Sales Agents Travel Agents $113,200 $37, % 4.0% 0.6% 0.3% Sales Representatives, Services, All Other $64, % 1.2% Sales Representatives, Wholesale and Manufacturing, Except Technical and Scien $65, % 0.3% Real Estate Sales Agents $53, % 0.5% Telemarketers $25, % 0.4% All Other Sales and Related Occupations (Avg. All Categories) $ % 0.9% Weighted Mean Annual Wage $61, % 6.4% Sources: Bureau of Labor Statistics; California Employment Development Department Comepensation Data for Los Angeles County Prepared by: Keyser Marston Associates, Inc. Filename: App B_Office_B 25 14; Compensation; trb

51 APPENDIX B TABLE 2 AVERAGE ANNUAL COMPENSATION, 2013 OFFICE WORKER OCCUPATIONS NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY WEST HOLL YW.OOD, CALIFORNIA % of Total % of Total Occupation Avg. Compensation 2 Occupation Group 3 Office Workers Page 4of4 Office and Administrative Support Occupations First-Line Supervisors of Office and Administrative Support Workers $58, % 1.8% Billing and Posting Clerks $37, % 1.0% Bookkeeping, Accounting, and Auditing Clerks $41, % 2.1% Tellers $26, % 1.4% Customer Service Representatives $38, % 3.2% Receptionists and Information Clerks $28, % 1.8% Executive Secretaries and Executive Administrative Assistants $57, % 1.0% Legal Secretaries $53, % 0.9% Medical Secretaries $36, % 1.0% Secretaries and Administrative Assistants, Except Legal, Medical, and Executive $38, % 2.6% Office Clerks, General $30, % 3.4% All Other Office and Administrative Support Occupations (Avg. All Categories) $38, % 5.6% Weighted Mean Annual Wage $38, % 25.9% Weighted Average Annual Wage - All Occupations $67, % 1 Including occupations representing 3% or more of the major occupation group. 2 The methodology utilized by the California Employment Development Department (EDD) assumes that hourly paid employees are employed full-time. Annual compensation is calculated by EDD by multiplying hourly wages by 40 hours per work week by 52 weeks. 3 Occupation percentages are based on the 2013 National Industry - Specific Occupational Employment survey compiled by the Bureau of Labor Statistics. Wages are based on the 2012 Occupational Employment Survey data applicable to Los Angeles County updated by the California Employment Development Department to 2013 wage levels. Sources: Bureau of Labor Statistics; California Employment Development Department Comepensation Data for Los Angeles County Prepared by: Keyser Marston Associates, Inc. Filename: App B_Office_ ; Compensation; trb

52 APPENDIX C FREESTANDING RETAIL LAND USE TABLES NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY

53 APPENDIX C - TABLE NATIONAL FREESTANDING RETAIL WORKER DISTRIBUTION BY OCCUPATION NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Major Occupations (2% or more) Management Occupations Food Preparation and Serving Related Occupations Personal Care and Service Occupations Sales and Related Occupations Office and Administrative Support Occupations Installation, Maintenance, and Repair Occupations Production Occupations Transportation and Material Moving Occupations All Other FREESTANDING RETAIL Occupations INDUSTRY TOTAL 2013 National FREESTANDING RETAIL Occupation Distribution 593, % 10, 152, % 761, % 7,958, % 2,302, % 1,089, % 687, % 1,490, % % 26,187, % Source: Bureau of Labor Statistics; California Employment Development Department Prepared by: Keyser Marston Associates, Inc. Filename: App C_Freestanding Retail_8_25_ 14; Major Occupations Matrix; trb

54 APPENDIX B-TABLE 2 AVERAGE ANNUAL COMPENSATION, 2013 FREESTANDING RETAIL WORKER OCCUPATIONS NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Occupation Avg. Compensation 2 % of Total Occupation Group 3 %oftotal Retail Workers Page 1 of3 Management Occupations General and Operations Managers Sales Managers Food Service Managers All Other Management Occupations (Avg. All Categories) Weighted Mean Annual Wage $131,400 $126,700 $52,000 ~124,200 $109, % 11.6% 26.4% 11.1% 100.0% 1.2% 0.3% 0.6% 0.3% 2.3% Food Preparation and Serving Related Occupations First-Line Supervisors of Food Preparation and Serving Workers Cooks, Fast Food Cooks, Restaurant Food Preparation Workers Bartenders Combined Food Preparation and Serving Workers, Including Fast Food Counter Attendants, Cafeteria, Food Concession, and Coffee Shop Waiters and Waitresses Dining Room and Cafeteria Attendants and Bartender Helpers Dishwashers Hosts and Hostesses, Restaurant, Lounge, and Coffee Shop All Other Food Preparation and Serving Related Occupations (Avg. All Categories) Weighted Mean Annual Wage $30,800 $19,100 $23,400 $20,000 $23,200 $20,300 $21,700 $21,900 $20,400 $19,500 $20,200 $22,000 $21, % 5.2% 9.8% 6.4% 3.8%. 28.3% 3.2% 21.7% 3.1% 4.2% 3.4% 3.7% 100.0% 2.8% 2.0% 3.8% 2.5% 1.5% 11.0% 1.3% 8.4% 1.2% 1.6% 1.3% 1.4% 38.8% Personal Care and Service Occupations First-Line Supervisors of Personal Service Workers Nonfarm Animal Caretakers Funeral Attendants Morticians, Undertakers, and Funeral Directors Hairdressers, Hairstylists, and Cosmetologists Manicurists and Pedicurists Skincare Specialists Personal Care and Service Workers, All Other All Other Personal Care and Service Occupations (Avg. All Categories) Weighted Mean Annual Wage $45,700 $23,600 $29,200 $54,700 $30,300 $20,400 $32,800 $26,800 $28,000 $28, % 22.1% 3.9% 2.8% 39.2% 8.4% 3.1% 2.0% 14.5% 100.0% 0.1% 0.6% 0.1% 0.1% 1.1% 0.2% 0.1% 0.1% 0.4% 2.9% Sources: Bureau of Labor Statistics; California Employment Development Department Comepensation Data for Alameda County Prepared by: Keyser Marston Associates, Inc. Filename: App C_Freestanding Retail_8_25_14; Compensation; trb

55 APPENDIX B-TABLE 2 AVERAGE ANNUAL COMPENSATION, 2013 FREESTANDING RETAIL WORKER OCCUPATIONS NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY % of Total % of Total Occupation Avg. Compensation 2 Occupation Group 3 Retail Workers Page 2of3 Sales and Related Occupations First-Line Supervisors of Retail Sales Workers Cashiers Counter and Rental Clerks Retail Salespersons All Other Sales and Related Occupations (Avg. All Categories) $44,500 $22,700 $28,600 $25,800 $40, % 30.9% 2.7% 50.3% 4.3% 3.6% 9.4% 0.8% 15.3% 1.3% Weighted Mean Annual Wage $27, o/o 30.4% Office and Administrative Support Occupations First-Line Supervisors of Office and Administrative Support Workers Bookkeeping, Accounting, and Auditing Clerks Customer Service Representatives Receptionists and Information Clerks Shipping, Receiving, and Traffic Clerks Stock Clerks and Order Fillers Secretaries and Administrative Assistants, Except Legal, Medical, and Executive Office Clerks, General All Other Office and Administrative Support Occupations (Avg. All Categories) $58,900 $41,000 $38,100 $28,900 $30,000 $25,400 $38,200 $30,800 $ % 7.9% 10.8% 4.0% 5.2% 43.0% 4.6% 10.6% 8.4% 0.5% 0.7% 1.0% 0.3% 0.5% 3.8% 0.4% 0.9% 0.7% Weighted Mean Annual Wage $32, % 8.8% Installation, Maintenance, and Repair Occupations First-Line Supervisors of Mechanics, Installers, and Repairers Computer, Automated Teller, and Office Machine Repairers Automotive Body and Related Repairers Automotive Service Technicians and Mechanics Bus and Truck Mechanics and Diesel Engine Specialists Tire Repairers and Changers Maintenance and Repair Workers, General Helpers--lnstallation, Maintenance, and Repair Workers All Other Installation, Maintenance, and Repair Occupations (Avg. All Categories) $72,600 $45,100 $40,900 $39,300 $53,900 $33,100 $40,500 $31,800 $ % 3.4% 12.3% 45.5% 2.8% 6.3% 4.6% 3.3% 13.4% 0.4% 0.1% 0.5% 1.9% 0.1% 0.3% 0.2% 0.1% 0.6% Weighted Mean Annual Wage $43, % 4.2% Production Occupations First-Line Supervisors of Production and Operating Workers Bakers Butchers and Meat Cutters Meat, Poultry, and Fish Cutters and Trimmers Laundry and Dry-Cleaning Workers Pressers, Textile, Garment, and Related Materials Tailors, Dressmakers, and Custom Sewers Painters, Transportation Equipment Photographic Process Workers and Processing Machine Operators $56,600 $26,100 $27,200 $21,900 $22,000 $21,900 $30,600 $38,700 $37, % 12.8% 18.8% 4.3% 20.4% 8.3% 2.3% 4.4% 2.6% 0.2% 0.3% 0.5% 0.1% 0.5% 0.2% 0.1% 0.1% 0.1% All Other Production Occupations (Avg. All Categories) $ %. 0.5% Weighted Mean Annual Wage $29, % 2.6% Sources: Bureau of Labor Statistics; California Employment Development Department Comepensation Data for Alameda County Prepared by: Keyser Marston Associates, Inc. Filename: App C_Freestanding Retai1_8_25_ 14; Compensation; trb

56 APPENDIX B-TABLE 2 AVERAGE ANNUAL COMPENSATION, 2013 FREESTANDING RETAIL WORKER OCCUPATIONS NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Occupation Avg. Compensation 2 lo of Total Occupation Group 3 % of Total Retail Workers Page 3of3 Transportation and Material Moving Occupations Driver/Sales Workers Heavy and Tractor-Trailer Truck Drivers Light Truck or Delivery Services Drivers Parking Lot Attendants Automotive and Watercraft Service Attendants Cleaners of Vehicles and Equipment Laborers and Freight, Stock, and Material Movers, Hand Packers and Packagers, Hand All Other Transportation and Material Moving Occupations (Avg. All Categories) Weighted Mean Annual Wage $29,200 $42,200 $34,600 $21,300 $24,500 $22,800 $26,700 $21,600 $34,300 $27, % 2.1% 13.1% 13.0% 4.7% 14.3% 18.0% 11.4% 9.4% 100.0% 0.8% 0.1% 0.7% 0.7% 0.3% 0.8% 1.0% 0.6% 0.5% 5.7% Weighted Average Annual Wage -All Occupations $28, % 1 Including occupations representing 2% or more of the major occupation group. 2 The methodology utilized by the California Employment Development Department (EDD) assumes that hourly paid employees are employed full-time. Annual compensation is calculated by EDD by multiplying hourly wages by 40 hours per work week by 52 weeks. 3 Occupation percentages are based on the 2013 National Industry- Specific Occupational Employment survey compiled by the Bureau of Labor Statistics. Wages are based on the 2012 Occupational Employment Survey data applicable to Los Angeles County updated by the California Employment Development Department to 2013 wage levels. 4 Wages estimated using 2012 OES data applicatable to Orange County because Los Angeles County data was not available. Sources: Bureau of Labor Statistics; California Employment Development Department Comepensation Data for Alameda County Prepared by: Keyser Marston Associates, Inc. Filename: App C_Freestanding Retail_8_25_ 14; Compensation; trb

57 APPENDIX D GROUND FLOOR RETAIL LAND USE TABLES NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY

58 APPENDIX D TABLE NATIONAL GROUND FLOOR RETAIL WORKER DISTRIBUTION BY OCCUPATION NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Major Occupations (2% or more) Management Occupations Healthcare Practitioners and Technical Occupations Food Preparation and Serving Related Occupations Personal Care and Service Occupations Sales and Related Occupations Office and Administrative Support Occupations Production Occupations Transportation and Material Moving Occupations All Other GROUND FLOOR RETAIL Occupations INDUSTRY TOTAL 2013 National GROUND FLOOR RETAIL Occupation Distribution 424, % 436, % 9,627, % 647, % 6,008, % 1,705, % 626, % 846, % % 20,967, % Source: Bureau of Labor Statistics; California Employment Development Department Prepared by: Keyser Marston Associates, Inc. Filename: App D_Ground Floor Retail_ ; Major Occupations Matrix; trb

59 APPENDIX D - TABLE 2 AVERAGE ANNUAL COMPENSATION, 2013 GROUND FLOOR RETAIL WORKER OCCUPATIONS NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Occupation Avg. Compensation 2 %oftotal Occupation Group 3 % of Total Retail Workers Page 1 of2 Management Occupations General and Operations Managers $131, % 1.0% Sales Managers $126, % 0.2% Food Service Managers $52, % 0.7% All Other Management Occupations (Avg. All Categories) ~124, % 0.2% Weighted Mean Annual Wage $102, % 2.0% Healthcare Practitioners and Technical Occupations Pharmacists $123, % 0.7% Pharmacy Technicians $37, % 1.1% Opticians, Dispensing $34, % 0.1% All Other Healthcare Practitioners and Technical Occupations (Avg. All Categories) $86, % 0.1% Weighted Mean Annual Wage $70, % 2.1% Food Preparation and Serving Related Occupations First-Line Supervisors of Food Preparation and Serving Workers $30, % 3.3% Cooks, Fast Food $19, % 2.4% Cooks, Restaurant $23, % 4.5% Food Preparation Workers $20, % 2.9% Bartenders $23, % 1.7% Combined Food Preparation and Serving Workers, Including Fast Food $20, % 13.0% Counter Attendants, Cafeteria, Food Concession, and Coffee Shop $21, % 1.5% Waiters and Waitresses $21, % 10.0% Dining Room and Cafeteria Attendants and Bartender Helpers $20, % -1.4% Dishwashers $19, % 1.9% Hosts and Hostesses, Restaurant, Lounge, and Coffee Shop $20, % 1.6% All Other Food Preparation and Serving Related Occupations (Avg. All Categories) $ % 1.7% Weighted Mean Annual Wage $21, % 45.9% Personal Care and Service Occupations First-Line Supervisors of Personal Service Workers $45, % 0.1% Nonfarm Animal Caretakers $23, % 0.8% Hairdressers, Hairstylists, and Cosmetologists $30, % 1.4% Manicurists and Pedicurists $20, % 0.3% Shampooers $20, % 0.1% Skincare Specialists $32, % 0.1% Fitness Trainers and Aerobics Instructors $48, % 0.1% Personal Care and Service Workers, All Other $26, % 0.1% All Other Personal Care and Service Occupations (Avg. All Categories) $28, % 0.2% Weighted Mean Annual Wage $28, % 3.1% Sources: Bureau of Labor Statistics; California Employment Development Department Comepensation Data for Los Angeles County Prepared by: Keyser Marston Associates, Inc. Filename: App D_Ground Floor Retail_ ; Compensation; trb

60 APPENDIX D-TABLE 2 AVERAGE ANNUAL COMPENSATION, 2013 GROUND FLOOR RETAIL WORKER OCCUPATIONS NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY % of Total % of Total Occupation Avg. Compensation 2 Occupation Group 3 Retail Workers Page 2of2 Sales and Related Occupations First-Line Supervisors of Retail Sales Workers Cashiers Retail Salespersons All Other Sales and Related Occupations (Avg. All Categories) Weighted Mean Annual Wage $44,500 $22,700 $25,800 $40,700 $27, % 33.5% 49.8% 4.2% 100.0% 3.6% 9.6% 14.3% 1.2% 28.7% Office and Administrative Support Occupations First-Line Supervisors of Office and Administrative Support Workers Bookkeeping, Accounting, and Auditing Clerks Customer Service Representatives Receptionists and Information Clerks Shipping, Receiving, and Traffic Clerks Stock Clerks and Order Fillers Secretaries and Administrative Assistants, Except Legal, Medical, and Executive Office Clerks, General All Other Office and Administrative Support Occupations (Avg. All Categories) Weighted Mean Annual Wage $58,900 $41,000 $38,100 $28,900 $30,000 $25,400 $38,200 $30,800 $ $31, % 6.9% 11.7% 4.1% 4.9% 49.9% 2.9% 7.6% 6.4% 100.0% 0.5% 0.6% 1.0% 0.3% 0.4% 4.1% 0.2% 0.6% 0.5% 8.1% Production Occupations First-Line Supervisors of Production and Operating Workers Bakers Butchers and Meat Cutters Meat, Poultry, and Fish Cutters and Trimmers Laundry and Dry-Cleaning Workers Pressers, Textile, Garment, and Related Materials Tailors, Dressmakers, and Custom Sewers Photographic Process Workers and Processing Machine Operators All Other Production Occupations (Avg. All Categories) $56,600 $26,100 $27,200 $21,900 $22,000 $21,900 $30,600 $37,600 $ %. 13.4% 20.2% 4.6% 21.2% 8.7% 2.2% 3.6% 19.9% 0.2% 0.4% 0.6% 0.1% 0.6% 0.3% 0.1% 0.1% 0.6% Weighted Mean Annual Wage $28, % 3.0% Sources: Bureau of Labor Statistics; California Employment Development Department Comepensation Data for Los Angeles County Prepared by: Keyser Marston Associates, Inc. Filename: App D_Ground Floor Retail_B 25 14; Compensation; trb

61 APPENDIX D-TABLE 2 AVERAGE ANNUAL COMPENSATION, 2013 GROUND FLOOR RETAIL WORKER OCCUPATIONS NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Occupation Avg. Compensation 2 % oftotal Occupation Group 3 % of Total Retail Workers Page 3of3 Transportation and Material Moving Occupations Driver/Sales Workers Light Truck or Delivery Services Drivers Parking Lot Attendants Laborers and Freight, Stock, and Material Movers, Hand Packers and Packagers, Hand All Other Transportation and Material Moving Occupations (Avg. All Categories) Weighted Mean Annual Wage $29,200 $34,600 $21,300 $26,700 $21,600 $34,300 $26, % 12.5% 21.0% 15.8% 19.8% 9.2% 100.0% 0.9% 0.5% 0.8% 0.6% 0.8% 0.4% 4.0% Weighted Average Annual Wage -All Occupations $28, % 1 Including occupations representing 2% or more of the major occupation group. 2 The methodology utilized by the California Employment Development Department (EDD) assumes that hourly paid employees are employed full-time. Annual compensation is calculated by EDD by multiplying hourly wages by 40 hours per work week by 52 weeks. 3 Occupation percentages are based on the 2013 National Industry - Specific Occupational Employment survey compiled by the Bureau of Labor Statistics. Wages are based on the 2012 Occupational Employment Survey data applicable to Los Angeles County updated by the California Employment Development Department to 2013 wage levels. Sources: Bureau of Labor Statistics; California Employment Development Department Comepensation Data for Los Angeles County Prepared by: Keyser Marston Associates, Inc.. Filename: App D_Ground Floor Retail_B 25 14; Compensation; trb

62 APPENDIX E HOTEL LAND USE TABLES NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY

63 APPENDIX E -TABLE NATIONAL HOTEL WORKER DISTRIBUTION BY OCCUPATION NON-RESIDENTIAL JOBS-HOUSING NEXUS ANALYSIS Major Occupations (2% or more) Management Occupations Food Preparation and Serving Related Occupations Building and Grounds Cleaning and Maintenance Occupations Personal Care and Service Occupations Sales and Related Occupations Office and Administrative Support Occupations Installation, Maintenance, and Repair Occupations Production Occupations All Other Hotel Related Occupations INDUSTRY TOTAL 2013 National Hotel Occupation Distribution (1) 68, % 373, % 495, % 60, % 32, % 303, % 76, % 31, % 80, % 1,523, % Notes (1) Excludes casino hotels Source: Bureau of Labor Statistics Prepared by: Keyser Marston Associates, Inc. Filename: App E_Hotel_B 2514;Major Occupations Matrix; trb

64 APPENDIX E TABLE 2 AVERAGE ANNUAL COMPENSATION, 2013 HOTEL WORKER OCCUPATIONS NON-RESIDENTIAL JOBS-HOUSING NEXUS ANALYSIS Occuoation Avg. Compensation 2 % of Total Occupation Group 3 % of Total Hotel Workers Page 1 of2 Management Occupations General and Operations Managers Sales Managers Administrative Services Managers Financial Managers Human Resources Managers Food Service Managers Lodging Managers $131,400 $126,700 $100,600 $144,500 $117,900 $52,000 $58, % 9.3% 3.9% 4.3% 2.1% 11.2% 39.7% 1.0% 0.4% 0.2% 0.2% 0.1% 0.5% 1.8% All Other Management Occupations (Avg. All Categories) Weighted Mean Annual Wage ~124,200 $91, % 100.0% 0.3% 4.5% Food Preparation and Serving Related Occupations Chefs and Head Cooks First-Line Supervisors of Food Preparation and Serving Workers Cooks, Restaurant Food Preparation Workers $48,100 $30,800 $23,400 $20 2.8% 5.2% 13.4% 3.4% 0.7% 1.3% 3.3% 0.8% Bartenders $23, % 1.9% Combined Food Preparation and Serving Workers, Including Fast Food Counter Attendants, Cafeteria, Food Concession, and Coffee Shop Waiters and Waitresses Food Servers, Nonrestaurant Dining Room and Cafeteria Attendants and Bartender Helpers Dishwashers Hosts and Hostesses, Restaurant, Lounge, and Coffee Shop $20,300 $21,700 $21,900 $25,800 $20,400 $19,500 $20, % 2.0% 29.7% 8.4% 10.0% 6.7% 3.6% 0.9% 0.5% 7.3% 2.1% 2.5% 1.6% 0.9% All Other Food Preparation and Serving Occupations (Avg. All Categories) Weighted Mean Annual Wage $ $23, % 100.0% 0.8% 24.5% Building and Grounds Cleaning and Maintenance Occupations First-Line Supervisors of Housekeeping and Janitorial Workers Janitors and Cleaners, Except Maids and Housekeeping Cleaners Maids and Housekeeping Cleaners Landscaping and Groundskeeping Workers All Other Building and Grounds Occupations (Avg. All Categories) Weighted Mean Annual Wage $41,800 $26, 100 $23,100 $28,200 $27,000 $24, % 8.8% 82.6% 2.4% 0.5% 100.0% 1.9% 2.9% 26.9% 0.8% 0.1% 32.5% Personal Care and Service Occupations First-Line Supervisors of Personal Service Workers Amusement and Recreation Attendants Locker Room, Coatroom, and Dressing Room Attendants Skincare Specialists $45,700 $24,200 $22,300 $32, % 14.3% 3.5% 2.0% 0.2% 0.6% 0.1% 0.1% Baggage Porters and Bellhops $23, % 1.4% Concierges $29, % 0.8% Fitness Trainers and Aerobics Instructors $48, % 0.1% Recreation Workers Personal Care and Service Workers, All Other $25,700 $26, % 3.4% 0.4% 0.1% All Other Personal Care and Service Occupations (Avg. All Categories) $28, % 0.2% Weighted Mean Annual Wage $27, % 4.0% Sources: Bureau of Labor Statistics; California Employment Development Department Comepensation Data for Los Angeles County Prepared by: Keyser Marston Associates, Inc. Filename: App E_Hotel_S 25 14;Compensation; trb

65 APPENDIX E - TABLE 2 AVERAGE ANNUAL COMPENSATION, 2013 HOTEL WORKER OCCUPATIONS NON-RESIDENTIAL JOBS-HOUSING NEXUS ANALYSIS Occupation Avg. Compensation 2 % of Total Occupation Group 3 % of Total Hotel Workers Page2of2 Sales and Related Occupations First-Line Supervisors of Retail Sales Workers First-Line Supervisors of Non-Retail Sales Workers Cashiers Counter and Rental Clerks Retail Salespersons Sales Representatives, Services, All Other All Other Sales and Related Occupations (Avg. All Categories) Weighted Mean Annual Wage $44,500 $71,700 $22,700 $28,600 $25,800 $64,100 $ $45, % 3.0% 26.6% 2.3% 12.0% 46.4% 5.8% 100.0% 0.1% 0.1% 0.6% 0.0% 0.3% 1.0% 0.1% 2.1% Office and Administrative Support Occupations First-Line Supervisors of Office and Administrative Support Workers Bookkeeping, Accounting, and Auditing Clerks Hotel, Motel, and Resort Desk Clerks Reservation and Transportation Ticket Agents and Travel Clerks Secretaries and Administrative Assistants, Except Legal, Medical, and Executive Office Clerks, General All Other Office and Administrative Support Occupations (Avg. All Categories) Weighted Mean Annual Wage $58,900 $41,000 $23,800 $36,100 $38,200 $30,800 $ $29, % 5.3% 71.7% 2.2% 2.2% 2.2% 9.0% 100.0% 1.5% 1.1% 14.3% 0.4% 0.4% 0.4% 1.8% 19.9% Installation, Maintenance, and Repair Occupations First-Line Supervisors of Mechanics, Installers, and Repairers Maintenance and Repair Workers, General All Other Installation, Maint., and Repair Occupations (Avg. All Categories) Weighted Mean Annual Wage $72,600 $40,500 $ $47, % 89.7% 10.3% 100.0% 0.4% 4.5% 0.5% 5.0% Production Occupations First-Line Supervisors of Production and Operating Workers Bakers Laundry and Dry-Cleaning Workers Stationary Engineers and Boiler Operators All Other Production Occupations (Avg. All Categories) Weighted Mean Annual Wage $56,600 $26,100 $22,000 $63,300 $ $24, % 6.9% 85.7% 2.8% 2.2% 100.0% 0.1% 0.1% 1.8% 0.1% 0.0% 2.1% Weighted Average Annual Wage -All Occupations $30, % 1 Including occupations representing 2% or more of the major occupation group. 2 The methodology utilized by the California Employment Development Department (EDD) assumes that hourly paid employees are employed full-time. Annual compensation is calculated by EDD by multiplying hourly wages by 40 hours per work week by 52 weeks. 3 Occupation percentages are based on the 2013 National Industry- Specific Occupational Employment survey compiled by the Bureau of Labor Statistics. Wages are based on the 2012 Occupational Employment Survey data applicable to Los Angeles County updated by the California Employment Development Department to 2013 wage levels. Sources: Bureau of Labor Statistics; California Employment Development Department Comepensation Data for Los Angeles County Prepared by: Keyser Marston Associates, Inc. Filename: App E_Hotel_S 25 14;Compensation; trb

66 APPENDIX F AFFORDABILITY GAP ANALYSIS NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY

67 A key component of the nexus analysis is quantifying the size of the gap between the amount households can afford to spend on housing, and the cost of producing new housing in West Hollywood. This is known as the "affordability gap." In a nexus study, the affordability gap is the amount of subsidy dollars required to bridge the difference between total development costs and the value supported by the affordable units. KMA performed a series of proforma analyses to estimate the affordability gap at each income level. AFFORDABILITY GAP SCENARIOS In estimating the affordability gap, there is a need to match a household at each income level with the typical unit type and financial structure for which that income level would be developed. It is important to factor in any outside funding sources that may be available to assist in the development at these income levels. Based on KMA's experience with affordable housing projects in West Hollywood, as well as throughout the Los Angeles region, KMA estimated the affordability gaps for each income level based on the following financing scenarios: Extremely Low Income Units (0% to 30% of Median) The affordability gap for the Extremely Low Income units was estimated assuming that the units would be financed in part with 9% Tax Credits awarded by the California Tax Credit Allocation Committee (TCAC). The 9% Tax Credit Program is an extremely competitive program that requires deep affordability in affordable rental projects; however, it is one of the largest outside funding sources available to local affordable housing projects. Very-Low Income Units (Above 30% to 50% of Median) KMA assumed that a project targeted to households at 50% of the Median would not be competitive for an award of 9% Tax Credits. Instead, KMA assumed that the units would obtain Tax-Exempt Multifamily Bonds coupled with the automatically awarded 4% Tax Credits. Low Income Units (Above 50% to 80% of Median) KMA analyzed two scenarios to estimate the affordability gap associated with Low Income units: 1. The first scenario assumes that the affordable rents would be restricted 60% of the Median, which would qualify the units to receive Tax-Exempt Multifamily Bonds and 4% Tax Credits 2. The second scenario calculated the affordable rents based on 80% of the Median. 1 Under this income scenario, the project would not qualify for Tax-Exempt Bond or Tax Credit financing. 1 TCAC does not publish an 80% income level. For this category, KMA calculated the income at 80% of the Median published by TCAC. Keyser Marston Associates, Inc _F Page2 August 25, 2014

68 Moderate Income Units (Above 80% to 120% of Median) KMA analyzed two scenarios to estimate the affordability gap for the Moderate Income units: 1. The first scenario assumes that the affordable units would be structured as a rental project with rents calculated based on 110% of the Median. 2 Moderate income rental housing does not qualify for Tax-Exempt Bond or Tax Credit financing. 2. The second scenario assumes that the project would be structured as an ownership project with the affordable sales price derived from income at 110% of the Median. KMA set the unit size at two bedrooms. SCOPES OF DEVELOPMENT Rental Scenarios KMA applied the following scope of development to the rental affordability gap scenarios: 1. The site size is estimated at 0.47 acres. 2. The project includes the following components: a. 5,000 square feet of ground floor retail space; b. 48 apartment units; and c. One level of subterranean parking and a partial level of at-grade podium parking. 3. The project's floor area ratio (FAR) is 2.4:1. 4. KMA utilized TCAC's minimum unit sizes of: a. 500 square feet for one-bedroom units; b. 750 square feet for two-bedroom units; and c. 1,000 square feet for three-bedroom units. 5. TCAC requires at least 30% of the U!lits to be three-bedroom units, which equates to 15 units in this analysis. Ownership Scenario KMA applied the following scope of development for the rental affordability gap scenarios: 2 TCAC does not publish a 110% income level. For this category, KMA calculated the income at 110% of the Median published by TCAC. Keyser Marston Associates, Inc _F Page 3 August 25, 2014

69 1. The site size is estimated at 0.21 acres. 2. The project includes 10 condominium units, which equates to a density of 47 units per acre. 3. Ba;sed on an analysis of recent condominium projects constructed in West Hollywood, KMA set the unit size at two bedrooms. 4. The project is served by one level of subterranean parking. TOTAL DEVELOPMENT COSTS For the purposes of the affordability gap analyses, KMA prepared an estimate of total development costs based on the scope of development of similar projects being developed in West Hollywood and in the surrounding areas. As noted above, the rental scenarios assume the construction of a 48-unit apartment project, while the ownership scenario assumes the construction of a 10-unit condominium project. KMA estimated the total development costs for a rental project and an ownership project as follows: Rental Scenarios Ownership Scenario Land Acquisition Costs $4,665,000 $2,136,000 Total Direct Costs 9,644,000 2,893,000 Total Indirect Costs 2,438, ,000 Total Financing Costs 1,911, ,000 Total Development Costs $18,658,000 $6,377,000 Per Unit $388,700 $637,700 As a crosscheck, KMA reviewed information for the development costs of recent City-assisted affordable projects, which consist solely of rental projects. These rental projects had average costs of $428,000 per unit, which is 10% higher than the estimates applied in the KMA affordability gap analysis. The conservative estimate of development costs applied in this analysis will result in a lower supportable nexus amount. Keyser Marston Associates, Inc _F Page4 August 25, 2014

70 AFFORDABLE RENTS I SALES PRICE Affordable rent levels and sales prices are a function of the income level for which the unit is aimed to be affordable. The affordable rents and sales prices assumed in the analysis are as follows: 3 One- Two- Three- Bedroom Bedroom Bedroom Units Units Units Extremely Low Income: 30% Median $415 $499 $554 Very-Low Income: 50% Median $721 $866 $978 Low Income Rents@ 60% Median $874 $1,050 $1,190 80% Median $1, 179 $1,416 $1,614 Moderate Income Rents@ 110% Median $1,539 $1,638 $1,966 Sales 110% Median NA $174,400 NA Affordability Gap Estimates The affordability gaps for the rental scenarios are equal to the total development costs less the available outside funding sources for the Tax Credit projects, the supportable private investment for the unleveraged rental scenarios, or the affordable sales revenue for the ownership scenario. The affordability gaps are estimated as follows: Affordability Gap Extremely Low Income: 30% Median Very-Low Income: 50% Median ($219,100) ($204,500) Low Income 60% Median 80% Median ($177,200) ($200,400) Moderate Income Rents@ 110% Median Sales 110% Median ($189, 100) ($484,000) 3 The estimated affordable rents are net of an allowable utility allowance. Keyser Marston Associates, Inc _F Page 5 August 25, 2014

71 The affordability gaps represent the mitigation cost to the City per affordable unit, by income level. They are entered into the nexus analysis to calculate the maximum supportable Affordable Housing impact Fees. As discussed previously, KMA estimated the affordability gaps for the Low Income units and the Moderate income units under two alternative scenarios. To be conservative, KMA utilized the lower affordability gap amount for each of these income levels in the nexus analysis, which results in a lower supportable nexus fee. The affordability gaps applied in the KMA analysis are as follows: Affordability Gap Extremely Low Income: Rents@ 30% Median Very-Low Income: 50% Median Low Income: 60% Median Moderate Income: 110% Median ($219, 100) ($204,500) ($177,200) ($189,100) Keyser Marston Associates, Inc _F Page6 August 25, 2014

72 SUMMARY TABLE AFFORDABILITY GAPS NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Per Unit Per Square Foot of Gross Residential Area I. 30% TCAC MEDIAN ($219,100) ($241) II. Ill. IV. 50% TCAC MEDIAN 60% TCAC MEDIAN 80% TCAC MED.IAN ($204,500) ($225) ($177,200) ($195) ($200,400) ($221) V. RENTS@ 110% TCAC MEDIAN ($189, 100) ($208) VI. AFFORDABLE PRICES@110% TAX CREDIT MEDIAN ($484,000) ($372) Prepared by: Keyser Marston Associates, Inc. File name: Affordability Gap Analyses_8_25_ 14; Sum; trb

73 APPENDIX F - EXHIBIT 1 ESTIMATED DEVELOPMENT COSTS RENTAL AFFORDABILITY GAP SCENARIOS NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Prepared by: Keyser Marston Associates, Inc. File name: Affordability Gap Analyses_8_25_ 14; Nexus Rental_ TDC; trb

74 APPENDIX F - EXHIBIT 1 - TABLE 1 ESTIMATED DEVELOPMENT COSTS RENTAL AFFORDABILITY GAP SCENARIOS NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY I. Land Acquisition Costs 20,281 Sf Land $230 /Sf Land $4,665,000 II. Direct Costs Site Improvement Costs 20,281 Sf Land Parking Spaces 2 Above-Ground 17 Spaces 1st-Level Subterranean 61 Spaces Building Costs Residential 43,604 Sf Res GBA Retail 5,000 Sf Retail GBA Tenant Improvements - Retail 5,000 Sf Retail GBA Contractor Costs 20% Other Direct Costs 0 $20 /Sf Land $406,000 $15,000 /Space 255,000 $30,000 /Space 1,830,000 $110 /Sf Res GBA 4,796,000 $120 /Sf Retail GBA 600,000 $30 /Sf Retail GBA 150,000 1,607,000 Total Direct Costs 48,604 Sf GBA $198 /SfGBA $9,644,000 Ill. Indirect Costs Arch, Eng, & Consulting Permits & Fees/Impact Fees Taxes, Ins, Legal & Acctg Development Management Soft Cost Contingency Allowance 7.00% Direct Costs 48,604 Sf GBA 3.00% Direct Costs 4.00% Direct Costs 5.00% Other Indirect Costs $675,000 $2 /Sf GBA 972, , , ,000 Total Indirect Costs $2,438,000 IV. Financing Costs Land Carrying Costs Interest During Construction Financing Fees Construction Loan Permanent Loan $4,665,000 Financed $13,993,000 Financed $13,993,000 Financed $9,095,000 Financed 5.50% Interest $449, % Interest 885, Points 350, Points 227,000 Total Financing Costs $1,911,000 v.!total Development Costs 48 Units $388,700 /Unit $18,658,ooo I Estimated based on a survey of recent land sales for mixed-use development 2 The parking count is based on the assumption that the project applies for and receives a SB1818 density bonus. 3 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 4 Based on an 18-month construction period and a 3-month absorption period with a 100% average outstanding balance. 5 Based on an 18-month construction period with a 60% average outstanding balance and a 3-month absorption period with a 100% average outstanding balance. Prepared by: Keyser Marston Associates, Inc. File name: Affordability Gap Analyses_8_25_ 14; Nexus Rental_ TDC; trb

75 APPENDIX F - EXHIBIT 2 RENTAL AFFORDABILITY GAP SCENARIOS 30% TCAC MEDIAN 9% TAX CREDIT SCENARIO NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Prepared by: Keyser Marston Associates, Inc. File name: Affordability Gap Analyses_8_25_14; Nexus_30% AMI; trb

76 APPENDIX F EXHIBIT 2 -TABLE 1 ESTIMATED NET OPERATING INCOME 30% TCAC MEDIAN 9% TAX CREDIT SCENARIO NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY NET OPERATING INCOME: RESIDENTIAL COMPONENT I. 30% TCAC MEDIAN One-Bedroom Units Two-Bedroom Units Three-Bedroom Units 14 Units 17 Units 17 Units $415 /Unit/Month $499 /Unit/Month $554 /Unit/Month $69, , ,000 Gross Rent Income Laundry and Miscellaneous Income 48 Units $10 /Unit/Month $284,500 5,800 Gross Residential Income (Less) Vacancy and Collection 5% Gross Residential Income $290,300 (14,500) Effective Gross Residential Income $275,800 II. Residential Operating Expenses 48 Units $6,000 /Unit/Year $288,000 Ill. I Residential Net Operating Income ($12,200>1 NET OPERATING INCOME: RETAIL COMPONENT IV. Income Market Rate Retail Space CAM Reimbursements 5,000 Sf Retail GBA 5,000 Sf Retail GBA $36.00 /Sf/Year $1 /Sf/Year $180,000 50,000 Gross Retail Income (Less) Vacancy and Collection 5% Gross Retail Income $230,000 (11,500) Effective Gross Retail Income $218,500 V. Retail Operating Expenses CAM Expenses Management Fee 5,000 Sf Retail GBA $1 /Sf/Year 3% Effective Gross Income $50,000 6,600 Retail Operating Expenses $56,600 VI.!Retail Net Operating Income $161,900 I VII.!Total Net Operating Income $149,100 I The affordable rents are based on 2014 rents published by TCAC and assume the deduction of the Los Angeles County Housing Authority utility allowance as of 7/1/ Assumes the project will apply for a property tax exemption accorded to non-profit housing organizations for units rented to households earning less than 80% of the Area Median Income. Prepared by: Keyser Marston Associates, Inc. File name: Affordability Gap Analyses_8_25_ 14; Nexus_30% AMI; trb

77 APPENDIX F EXHIBIT 2 -TABLE 2 ESTIMATED AFFORDABILITY GAP 30% TCAC MEDIAN 9% TAX CREDIT SCENARIO NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY I. Available Outside Funding Sources A. PermanentLoan Net Operating Income Income Available for Mortgage Interest Rate Total Permanent Loan B. Tax Credit Equity $149,700 NOi (See Table 2) 1.20 OCR 7.0% Interest $124, 750 Debt Service 7.98% Mortgage Constant $1,563,000 $8,075,000 Total Outside Funding Sources $9,638,000 II. Affordability Gap Calculation Total Outside Funding Sources Less: Total Development Costs Additional Developer Fee $9,638,000 (18,658,000) (1,499,000) Total Affordability Gap 48 Units 43,604 Sf Res GBA ($219,100) /Unit ($241) /Sf ($10,519,000) Assumes a 30-year amortization period. Assumes a 7. 70% tax credit rate, a 130% difficult to develop premium, a $1.00 tax credit equity rate, and that the Project's eligible tax credit basis is voluntarily reduced by 30% to provide for a competetive 9% tax credit project. 3 Equal to the $1,885,000 maximum amount allowed by the tax credit qualified allocation plan minus the $386,000 Developer Fee included in the Total Development Costs. Prepared by: Keyser Marston Associates, Inc. File name: Affordability Gap Analyses_8_25_ 14; Nexus_30% AMI; trb

78 APPENDIX F - EXHIBIT 3 RENTAL AFFORDABILITY GAP SCENARIOS 50% TCAC MEDIAN 4% TAX CREDIT SCENARIO NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Prepared by: Keyser Marston Associates, Inc. File name: Affordability Gap Analyses_8_25_ 14; Nexus_50% AMI; trb

79 APPENDIX F - EXHIBIT 3 - TABLE 1 ESTIMATED NET OPERATING INCOME 50% TCAC MEDIAN 4% TAX CREDIT SCENARIO NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY NET OPERATING INCOME: RESIDENTIAL COMPONENT I. 50% TCAC MEDIAN One-Bedroom Units Two-Bedroom Units Three-Bedroom Units 14 Units 17 Units 17 Units $721 /Unit/Month $866 /Unit/Month $978 /Unit/Month $121, , ,500 Gross Rent Income Laundry and Miscellaneous Income 48 Units $10 /Unit/Month $497,300 5,800 Gross Residential Income (Less) Vacancy and Collection 5% Gross Residential Income $503,100 (25,200) Effective Gross Residential Income $477,900 II. Residential Operating Expenses 48 Units $6,000 /Unit/Year $288,000 Ill. I Residential Net Operating Income $189,900 I NET OPERATING INCOME: RETAIL COMPONENT IV. Income Market Rate Retail Space CAM Reimbursements 5,000 Sf Retail GSA 5,000 Sf Retail GSA $36.00 /Sf/Year $1 /Sf/Year $180,000 50,000 Gross Retail Income (Less) Vacancy and Collection 5% Gross Retail Income $230,000. (11,500) Effective Gross Retail Income $218,500 v. Retail O~erating Ex~enses CAM Expenses Management Fee 5,000 Sf Retail GSA $1 /Sf/Year 3% Effective Gross Income $50,000 6,600 Retail Operating Expenses $56,600 VI.!Retail Net Operating Income $161,900 I VII.!Total Net Operating Income $351,800 I The affordable rents are based on 2014 rents published by TCAC and assume the deduction of the Los Angeles County Housing Authority utility allowance as of 7/1/2013. Assumes the project will apply for a property tax exemption accorded to non-profit housing organizations for units rented to households earning less than 80% of the Area Median Income. Prepared by: Keyser Marston Associates, Inc. File name: Affordability Gap Analyses_8_25_ 14; Nexus_50% AMI; trb

80 APPENDIX F- EXHIBIT 3 -TABLE 2 ESTIMATED AFFORDABILITY GAP 50% TCAC MEDIAN 4% TAX CREDIT SCENARIO NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY I. Available Outside Funding Sources A. Tax:Exempt Bond Financing Net Operating Income Income Available for Mortgage Interest Rate Total Tax-Exempt Bond Financing B. Tax Credit Equity $351,800 NOi (See Table 2) 1.20 DCR 5.0% Interest $293, 167 Debt Service 6.44% Mortgage Constant $4,551,000 $5,790,000 Total Outside Funding Sources $10,341,000 II. Affordability Gap Calculation Total Outside Funding Sources Less: Total Development Costs Additional Developer Fee 3 $10,341,000 (18,658,000) (1,499,000) Total Affordability Gap 48 Units 43,604 Sf Res GBA ($204,500) /Unit ($225) /Sf ($9,816,000) Assumes a 30-year amortization period. 2 Assumes a 3.36% tax credit rate, a 130% difficult-to-develop premium, and a $1.00 tax credit equity rate. Equal to the $1,885,000 maximum amount allowed by the tax credit qualified allocation plan minus the $386,000 Developer Fee included in the Total Development Costs. Prepared by: Keyser Marston Associates, Inc. File name: Affordability Gap Analyses_8_25_ 14; Nexus_50% AMI; trb

81 APPENDIX F - EXHIBIT 4 RENTAL AFFORDABILITY GAP SCENARIOS 60% TCAC MEDIAN 4% TAX CREDIT SCENARIO NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Prepared by: Keyser Marston Associates, Inc. File name: Affordability Gap Analyses_8_25_14; Nexus_60% AMI; trb

82 APPENDIX F EXHIBIT 4-TABLE 1 ESTIMATED NET OPERATING INCOME 60% TCAC MEDIAN 4% TAX CREDIT SCENARIO NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY NET OPERATING INCOME: RESIDENTIAL COMPONENT I. 60% TCAC MEDIAN One-Bedroom Units Two-Bedroom Units Three-Bedroom Units 14 Units 17 Units 17 Units $874 /Unit/Month $1,050 /Unit/Month $1, 190 /Unit/Month $146, , ,800 Gross Rent Income Laundry and Miscellaneous Income 48 Units $1 O /Unit/Month $603,800 5,800 Gross Residential Income (Less) Vacancy and Collection 5% Gross Residential Income $609,600 (30,500) Effective Gross Residential Income II. Residential Operating Expenses 2 48 Units $6,000 /Unit/Year $579,100 $288,000 Ill.!Residential Net Operating Income $291,100 I NET OPERATING INCOME: RETAIL COMPONENT IV. Income Market Rate Retail Space CAM Reimbursements 5,000 Sf Retail GBA 5,000 Sf Retail GBA $36.00 /Sf/Year $1 /Sf/Year $180,000 50,000 Gross Retail Income (Less) Vacancy and Collection 5% Gross Retail Income $230,000 (11,500) Effective Gross Retail Income $218,500 V. Retail Operating Expenses CAM Expenses Management Fee 5,000 Sf Retail GBA $1 /Sf/Year 3% Effective Gross Income $50,000 6,600 Retail Operating Expenses $56,600 VI.!Retail Net Operating Income $161,900 I VII.!Total Net Operating Income $453,ooo I The affordable rents are based on 2014 rents published by TCAC and assume the deduction of the Los Angeles County Housing Authority utility allowance as of 7/1 /2013. Assumes the project will apply for a property tax exemption accorded to non-profit housing organizations for units rented to households earning less than 80% of the Area Median Income. Prepared by: Keyser Marston Associates, Inc. File name: Affordability Gap Analyses_8_25_14; Nexus_60% AMI; trb

83 APPENDIX F- EXHIBIT 4-TABLE 2 ESTIMATED AFFORDABILITY GAP 60% TCAC MEDIAN 4% TAX CREDIT SCENARIO NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY I. Available Outside Funding Sources A. Tax-Exempt Bond Financing Net Operating Income Income Available for Mortgage Interest Rate Total Tax-Exempt Bond Financing $453,000 NOi (See Table 2) 1.20 DCR 5.0% Interest $377,500 Debt Service 6.44% Mortgage Constant $5,860,000 B. Tax Credit Equity 2 $5,790,000 Total Outside Funding Sources $11,650,000 II. Affordability Gap Calculation Total Outside Funding Sources Less: Total Development Costs Additional Developer Fee $11,650,000 (18,658,000) (1,499,000) Total Affordability Gap 48 Units 43,604 Sf Res GBA ($177,200) /Unit ($195) /Sf ($8,507,000) Assumes a 30-year amortization period. Assumes a 3.36% tax credit rate, a 130% difficult-to-develop premium, and a $1.00 tax credit equity rate. 3 Equal to the $1,885,000 maximum amount allowed by the tax credit qualified allocation plan minus the $386,000 Developer Fee included in the Total Development Costs. Prepared by: Keyser Marston Associates, Inc. File name: Affordability Gap Analyses_8_25_ 14; Nexus_60% AMI; trb

84 APPENDIX F - EXHIBIT 5 RENTAL AFFORDABILITY GAP SCENARIOS 80% TCAC MEDIAN UNLEVERAGED SCENARIO NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Prepared by: Keyser. Marston Associates, Inc. File name: Affordability Gap Analyses_8_25_14; Nexus_80% AMI; trb

85 APPENDIX F EXHIBIT 5 TABLE 1 ESTIMATED NET OPERATING INCOME 80% TCAC MEDIAN UNLEVERAGED SCENARIO NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY NET OPERATING INCOME: RESIDENTIAL COMPONENT I. 80% TCAC MEDIAN One-Bedroom Units Two-Bedroom Units Three-Bedroom Units 14 Units 17 Units 17 Units $1, 179 /UniUMonth $1,416 /UniUMonth $1,614 /UniUMonth $198, , ,300 Gross Rent Income Laundry and Miscellaneous Income 48 Units $10 /UniUMonth $816,300 5,800 Gross Residential Income (Less) Vacancy and Collection 5% Gross Residential Income $822,100 (41,100) Effective Gross Residential Income $781,000 II. Residential Operating Expenses 48 Units $6,000 /Unit/Year $288,000 Ill. I Residential Net Operating Income $493,ooo I NET OPERATING INCOME: RETAIL COMPONENT IV. Income Market Rate Retail Space CAM Reimbursements 5,000 Sf Retail GBA 5,000 Sf Retail GBA $36.00 /Sf/Year $1 /Sf/Year $180,000 50,000 Gross Retail Income (Less) Vacancy and Collection 5% Gross Retail Income $230,000 (11,500) Effective Gross Retail Income $218,500 V. Retail Operating Expenses CAM Expenses Management Fee 5,000 Sf Retail GBA $1 /Sf/Year 3% Effective Gross Income $50,000 6,600 Retail Operating Expenses $56,600 VI. I Retail Net Operating Income s161,9oo I VII.!Total Net Operating Income $654,900 I The affordable rents are based on 2014 rents published by TCAC and assume the deduction of the Los Angeles County Housing Authority utility allowance as of 7/1/ Assumes the project will apply for a property tax exemption accorded to non-profit housing organizations for units rented to households earning less than 80% of the Area Median Income. Prepared by: Keyser Marston Associates, Inc. File name: Affordability Gap Analyses_8_25_14; Nexus_80% AMI; trb

86 APPENDIX F EXHIBIT 5 TABLE 2 ESTIMATED AFFORDABILITY GAP 80% TCAC MEDIAN UNLEVERAGED SCENARIO NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY I. Supportable Private Investment Net Operating Income Threshold Stabilized Return $654, % Total Supportable Private Investment $9,037,000 II. Affordability Gap Calculation Total Supportable Private Investment (Less) Total Development Costs $9,037,000 (18,658,000) Total Affordability Gap 48 Units 43,604 Sf Res GBA ($200,400) /Unit ($221) /Sf ($9,621,000) Based on a weighted average of a 7.0% threshold return for the residential component, and an 8.0% threshold return for the commercial component. Prepared by: Keyser Marston Associates, Inc. File name: Affordability Gap Analyses_8_25_ 14; Nexus_80% AMI; trb I

87 APPENDIX F - EXHIBIT 6 RENTAL AFFORDABILITY GAP SCENARIOS RENTS@ 110% TCAC MEDIAN UNLEVERAGED SCENARIO NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY Prepared by: Keyser Marston Associates, Inc. File name: Affordability Gap Analyses_8_25_ 14; Nexus_ 110% AMI; trb

88 APPENDIX F- EXHIBIT 6-TABLE 1 ESTIMATED NET OPERATING INCOME RENTS@ 110% TCAC MEDIAN UNLEVERAGED SCENARIO NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY NET OPERATING INCOME: RESIDENTIAL COMPONENT I. Rent@ 110% TCAC MEDIAN One-Bedroom Units Two-Bedroom Units Three-Bedroom Units 14 Units 17 Units 17 Units $1,539 /UniUMonth $1,638 /UniUMonth $1,966 /UniUMonth $258, , ,100 Gross Rent Income Laundry and Miscellaneous Income 48 Units $10 /UniUMonth $993,900 5,800 Gross Residential Income (Less) Vacancy and Collection 5% Gross Residential Income $999,700 (50,000) Effective Gross Residential Income $949,700 II. Residential Operating Expenses General Operating Expenses Property Taxes 48 Units 48 Units $6,000 /UniUYear $2,720 /UniUYear $288, ,700 Total Residential Operating Expenses $418,700 Ill.!Residential Net Operating Income NET OPERATING INCOME: RETAIL COMPONENT $531,000 I IV. Income Market Rate Retail Space CAM Reimbursements 5,000 Sf Retail GBA 5,000 Sf Retail GBA $36.00 /Sf/Year $1 /Sf/Year $180,000 50,000 Gross Retail Income (Less) Vacancy and Collection 5% Gross Retail Income $230,000 (11,500) Effective Gross Retail Income $218,500 v. Retail Operating Expenses CAM Expenses Management Fee 5,000 Sf Retail GBA $1 /Sf/Year 3% Effective Gross Income $50,000 6,600 Retail Operating Expenses $56,600 VI. I Retail Net Operating Income $161,900 I VII.!Total Net Operating Income $692,900 I The affordable rents are based on 2014 rents published by TCAC and assume the deduction of the Los Angeles County Housing Authority utility allowance as of 7/1/2013. The residential property tax expense is estimated based on the residential NOi capitalized at a 5.0% rate, and a 1.23% property tax rate. Prepared by: Keyser Marston Associates, Inc. File name: Affordability Gap Analyses_8_25_ 14; Nexus_ 110% AMI; trb

89 APPENDIX F- EXHIBIT 6-TABLE 2 ESTIMATED AFFORDABILITY GAP RENTS@ 110% TCAC MEDIAN UNLEVERAGED SCENARIO NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY I. Supportable Private Investment Net Operating Income Threshold Stabilized Return $692, % Total Supportable Private Investment $9,579,000 II. Affordability Gap Calculation Total Supportable Private Investment (Less) Total Development Costs $9,579,000 (18,658,000) Total Affordability Gap 48 Units 43,604 Sf Res GBA ($189,100) /Unit ($208) /Sf ($9,079,000) Based on a weighted average of a 7.0% threshold return for the residential component, and an 8.0% threshold return for the commercial component. Prepared by: Keyser Marston Associates, Inc. File name: Affordability Gap Analyses_8_25_ 14; Nexus_ 110% AMI; trb

90 APPENDIX G NEXUS FEE SURVEY NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY

91 APPENDIXG COMPARISON OF JOBS HOUSING LINKAGE FEE PROGRAMS NON-RESIDENTIAL NEXUS STUDY Yr. Adopted Thresholds & Jurisdiction /Updated Current Fee Levels per SF Exemptions HIGH FEE JURISDICTIONS City and County of San 1981 Office $22.06 Exempt: freestanding retail < Francisco Updated fees Hotel $ ,000 SF; grocery< 75,000 in 2002, 07. Retail & Entertainment $20.58 Increase by 25,000 gsf or R&D $14.70 more of any combinatjon of Integrated PDR $17.34 entertainment, hotel, Small Enterprise Workspace Integrated PDR, office, $17.34 research and development, retail, and/or Small Enterprise Workspace. City of Palo Alto 1984 Nonresidential Development Churches; colleges and Updated in $18.44 universities; commercial March 2002 recreation; hospitals, convalescent facilities; private clubs, lodges, fraternal organizations, private educational facilities, day care and nursery school,. Retail/Rest. $5.40 Warehouse $1.94. Hotel/Motel $1,745/room public facilities are exempt MEDIUM FEE JURISDICTIONS County of Marin 2003 Office/R&D $7.19 No minimum threshold. Manufacturing $3.74 City of St. Helena 2004 Office $4.11 Small childcare facilities, Yes, subject to Comm./Retail $5.21 churches, non-profits, City Council. Hotel $3.80 vineyards, and public facilities approval. ~own of Corte Madera 2001 Winery/Industrial $1.26 are exempt. Office $4.79 No minimum threshold. R&D lab $3.20 N/A Light Industrial $2. 79 Warehouse $0.40. Retail $8.38. Restaurant $4.39 Hotel $1.20 Com Services $1.20 Health Club/Rec $2.00 Training facility/school $2.39 City of Santa Monica 1984 Office only 15,000 SF exemption for new Updated fees $5.11 per square foot for first construction. 10,000 SF in ,000 square feet exemption for additions. $11.35 per square foot in excess of 15,000 square feet Build Option/ Market Other Strength Comments Yes, may Very Fee is adjusted contribute land Substantial annually based on the for housing. construction cost increases. Yes Very Fee is adjusted Substantial annually based on City of Menlo Park 1998 Office & R&D $ ,000 gross SF threshold All other commercial and Churches, private clubs, Yes, preferred. May provide Very Substantial Fee is adjusted annually based on industrial $8.10. lodges; fraternal orgs, public facilities and projects with few or no employees are exempt. housing on- or off-site. CPI. Yes, preferred. Substantial Substantial Substantial CPI. Yes Very Includes fee for open Substantial space as well. Fees adjusted monthly based on CPI. No comprehensive update since adoption. Note: This chart has been assembled to present an overview, and as a result, terms are simplified. For use other than general comparison, please consult the code and staff of the jurisdiction. Keyser Marston Associates, Inc. Page 1 August 25, 2014

92 APPENDIXG COMPARISON OF JOBS HOUSING LINKAGE FEE PROGRAMS NON-RESIDENTIAL NEXUS STUDY Yr. Adopted Thresholds & Jurisdiction /Updated Current Fee Levels per SF Exemptions City of Sunnyvale Industrial & Office $9.27 Applies only to the portion of Updated in the project that is in excess of allowable FAR (typically Under review. 0.35:1). City of Mountain View Updated Office/High Tech/Industrial Fee is 50% on building area 2002 $1 under thresholds: Hotel/Retail/Entertainment Office <10,000 SF $2.47 Hotel <25,000 SF Retail <25,000 SF Build Option/ Market Other Strength Comments N/A Very Substantial Yes Very Fee is adjusted Substantial annually based on CPI. City of Walnut Creek 2005 Office, retail, hotel and First 500 SF no fee applied. medical $5.00 City of Oakland 2002 Office/ Warehouse $ ,000 SF exemption City of Cupertino 1993 Office/Industrial/Hotel/Retail/ No minimum threshold. R&D: $5.56. Planned Industrial Park Zones: $2.53 City of Berkeley All Commercial $4.00 7,500 SF threshold.. Industrial $2.00 LOW FEE JURISDICTIONS City of Napa 1999 Office $1.00 No minimum threshold. Hotel $1.40. Retail $0.80 Non-profits are exempt Industrial & Wine Pdn & small Warehouse $0.50 Warehouse (30-100K) $0.30 Warehouse (100K+) $0.20 County of Napa Updated 2004 Office $2.00 No minimum threshold Hotel $3.00 Retail $2.00 Non-profits are exempt. Industrial $1.00 City of Petaluma 2003 Warehouse $0.80 Commercial $2.08 Schools and churches. Industrial $2.15 exempt County of Sonoma 2005 Retail $3.59 Office $2.52 First 2,000 SF exempt. Hotel $2.52 Retail $4.37 Non-profits, redevelopment Industrial $2.61 areas exempt R&D Ag Processing $2.61 Yes Very Reviewed every five Substantial years. Yes - Can build Moderate Fee due in 3 units equal to installments. Fee total eligible SF adjusted with an times.0004 annual escalator tied to residential construction cost increases. N/A Very Fee is adjusted Substantial annually based on CPI. Yes Substantial Fee has not changed since 1993; may negotiate fee downward based on hardship or reduced impact. Units or land Moderate/ Fee has not changed dedication; on a Substantial since case by case basis. Units or land Moderate/ dedication; on a Substantial case by case basis. NA Moderate/ Fee adjusted annually Substantial by ENR construction cost index. Yes. Program Moderate Fee adjusted annually specifies by ENR construction number of units cost index. per 1,000 SF. Note: This chart has been assembled to present an overview, and as a result, terms are simplified. For use other than general comparison, please consult the code and staff of the jurisdiction. Keyser Marston Associates, Inc. Page2 August 25, 2014

93 APPENDIXG COMPARISON OF JOBS HOUSING LINKAGE FEE PROGRAMS NON-RESIDENTIAL NEXUS STUDY. Retail $3.59 Non-profits exempt. City of Cotati Commercial $2.08 First 2,000 SF exempt Industrial $2.15. Retail $1.84 Warehouse $0.63. Hotel/Motel $g31 per room City of Alameda 1989 Office $3.63 No minimum threshold City of Pleasanton. Commercial, Office & No minimum threshold Industrial $2.57 City of Sacramento 1g99 Office $1.99 No minimum threshold Most recent Hotel $1.89 update R&D $1.69 Mortuary, parking lots, Commercial $1.59. garages, RV Storage,. Manufacturing $1.25 Christmas tree lots, B&Bs, mini-storage, alcholoic Warehouse/Office $0.72 Warehouse $0.54 beveragesales, reverse vending machines, mobile recycling, and small recyclable collection facilities. City of San Diego 1990 Office $1.06 No minimum threshold Fees reduced. Hotel $0.64 in 1996 R&D $0.80 Development by government Retail $0.64 entities. No exempted uses. In 2013 the. Manufacturing $0.64 Does exclude some City Council Warehouse $0.27 geographic areas (Enterprise voted to Zones). restore the original fee basis, but rescinded the change in 2014 City of Livermore Retail $0.90 No minimum threshold Service Retail $0.678 Office $0.579 Hotel $442 per room Manufacturing $0.27 Warehouse $0.08 Business Park $0.574 Heavy Industrial $0.2 Light Industrial $0.18 Church; private or public schools. City of Folsom 2002 Office, Retail, Light Industrial, No minimum threshold Heavy Industrial and Manufacturing $1.20 Up to 200,000 SF, 100% of fee; 200, ,000 SF, Select nonprofits, small childcare centers, churches, mini storage, parking 75% of fee; 250, ,000 garages, private schools, etc. SF, 50% of fee; 300,000 SF and up, 25% of fee Yes. Program Moderate Fee adjusted annually specifies by ENR construction number of units per 1,000 SF cost index. Yes. Program Moderate Fee may be adjusted specifies # of by CPI. units per 100,000 SF N/A Moderate Fee adjusted annually. Pay20% fee Moderate North Natomas area plus build at has a separate fee reduced nexus. structure. (Not meaningful given the amount of the fee. Can dedicate Substantial land or air rights in lieu of fee Yes; negotiated on a case-bycase basis. Moderate Yes Moderate/ Fee is adjusted Provide new or Substanital annually based on rehab housing construction cost affordable to index. very low and low income households. Also, land dedication Note: This chart has been assembled to present an overview, and as a result, terms are simplified. For use other than general comparison, please consult the code and staff of the jurisdiction. Keyser Marston Associates, Inc. Page 3 August 25, 2014

94 APPENDIXG COMPARISON OF JOBS HOUSING LINKAGE F,EE PROGRAMS NON-RESIDENTIAL NEXUS STUDY County of Sacramento 1989 Office $0.97 No minimum threshold City of Elk Grove Hotel $0.92 R&D $0.82 Commerical $0.77 Manufacturing $0.61 Indoor Recreational Centers $0.50 Service uses operated by nonprofits Warehouse $ Inherited I $30 flat fee plus: No minimum threshold from County Office $0.97 when. Hotel $0.92 Membership organizations incorporated R&D $0.82 (chruches, nonprofits, Commerical $0.77 etc.),mini-storage, car Manufacturing $0.61 storage, marinas, car. washes, private parking Indoor Recreational Centers $0.50 garages and agricultural uses Warehouse $0.26 exempt. Pay 20% fee plus build at reduced nexus. (Not meaningful given the amount of the fee. Pay 20% fee plus build at reduced nexus. (Not meaningful given the amount of the fee. Moderate Moderate Note: This chart has been assembled to present an overview, and as a result, terms are simplified. For use other than general comparison, please consult the code and staff of the jurisdiction. Keyser Marston Associates, Inc. Page 4 August 25, 2014

95 APPENDIX H NON-DUPLICATION: RESIDENTIAL AFFORDABLE HOUSING IMPACT FEE ANDTHE NON-RESIDENTIAL AFFORDABLE HOUSING IMPACT FEE NON-RESIDENTIAL JOBS-HOUSING NEXUS STUDY

96 BACKGROUND STATEMENT The City is currently considering establishing impact fees on non-residential and residential construction to help mitigate the impacts of the new buildings on the demand for affordable housing West Hollywood. KMA conducted both a Non-Residential Jobs-Housing Nexus Study and a Residential Nexus Study; in this appendix, KMA conducts an 'overlap analysis' to determine whether any double counting of impacts is possible., To briefly summarize the Non-Residential Jobs-Housing Nexus Study, the analysis begins by estimating the number of jobs that will be located in new workplace buildings such as office buildings, retail spaces and hotels. The nexus analysis then identifies the compensation structure ofthe new jobs depending on the building type, the income of the new worker households, and the housing affordability level of the new worker households. Based on these analyses, estimates are made of the number of new workers that will fall within the Extremely Low, Very Low, Low and Moderate Income ranges. In the Residential Nexus Analysis, the logic begins with the households renting or buying new market-rate homes. The purchasing power of those households generates new jobs in the local economy. The nexus analysis quantifies the jobs created by the spending of the new households, and then identifies the compensation structure of the new jobs, the income of the new worker households, and the housing affordability level of the new worker households. These analyses provide estimates of the number of new households within the Extremely Low, Very Low, Low and Moderate Income categories. Some of the jobs that are counted in the Non-Residential Jobs-Housing Nexus Study are also counted in the Residential Nexus Study. The overlap potential exists in jobs generated by the expenditures of West Hollywood residents, such as expenditures for food, personal services, restaurant meals and entertainment. However, many jobs counted in the Residential Nexus Study are not addressed in the Non-Residential Jobs-Housing Nexus Study at all. For example, school and government employees are counted in the Residential Nexus Study, but are not counted in the Non-Residential Jobs-Housing Nexus Study, which is limited to private sector office buildings, retail/restaurant, and hotel projects. Theoretically, there is a set of conditions in which 100% of the jobs counted for purposes of the Non-Residential Jobs-Housing Nexus Study are also counted for purposes of the Residential Nexus Study. For example, a small retail store or restaurant might be located on the ground floor of a new apartment building and entirely dependent upon customers from the apartments in ttie floors above. The commercial space on the ground floor pays the Non-Residential Affordable Housing Impact Fee, and the apartments would pay the Residential Affordable Housing Impact Fee. In this special case, the two programs mitigate the affordable housing demand of the very same workers. The combined requirements of the two programs to fund construction of affordable units must not exceed 100% of the demand for.affordable units generated by employees in the new commercial space. Keyser Marston Associates, Inc _App H Page 1 August 25, 2014

97 Complete overlap between jobs counted in the Non-Residential Nexus Analysis and jobs counted in the Residential Nexus Analysis could occur only in a very narrow set of circumstances. The following analysis demonstrates that the combined mitigation requirements do not exceed the nexus even if every job counted in the Residential Nexus Analysis is also counted in the Non-Residential Nexus Analysis. NON-RESIDENTIAL REQUIREMENT AS A PERCENT OF THE NEXUS The Non-Residential Jobs-Housing Nexus Study estimates the maximum mitigation amount supported by the jobs created in new workplace development. For the purposes of this overlap analysis, we are assuming a fee of $8.00 per square foot for non-residential development. If the City ultimately selects a higher fee level, the overlap analysis should be rerun at the higher fee level. Total Nexus Amount Illustrative Fee Percent of Nexus Office $ $ % Freestanding Retail $ $ % Ground Floor Retail $ $ % Hotel $79.90 $ % The conclusion is that a fee level of $8.00 per square foot represents 4.8% to 10.0% of the nexus cost. So, the Residential Affordable Housing Impact Fee at $8.00 mitigates less than 10% of the demand for affordable units generated by the development of new workplace space. RESIDENTIAL AFFORDABLE HOUSING IMPACT FEE AS A PERCENT OF NEXUS Based on a Residential Nexus Analysis, a $24.84 per square foot of gross living area Residential Affordable Housing Impact Fee is being recommended for new residential development in West Hollywood. The table below compares the recommended Fee amount to the maximum nexus costs for each product type that was tested. Proposed Residential Affordable Housing Impact Fee as a Percentage of the Maximum Nexus Amount Factors Small Condominium Project Medium Rental Project Large Rental Project Maximum Nexus Amount $33.00 $40.30 $47.20 Proposed Residential Affordable Housing Impact Fee $24.84 $24.84 $24.84 In-Lieu Fee as a Percentage of the Nexus 75% 62% 53% Keyser Marston Associates, Inc _App H Page2 August 25, 2014

98 As shown in the preceding table, based on the results of the Residential Nexus Study, the proposed Residential Affordable Housing Impact Fee is equal to 53% to 75% of the maximum nexus amount. NON-RESIDENTIAL PLUS RESIDENTIAL AFFORDABLE HOUSING IMPACT FEES A Non-Residential Affordable Housing Impact Fee set at $8.00 per square foot of nonresidential area represents_ 4.8% to 10.0% of the supported nexus, and a Residential Affordable Housing Impact Fee of $24.84 per square foot of residential area is estimated to equal 53% to 75% of the supported nexus amount. Therefore, the combined affordable housing mitigations would not exceed the nexus even if there were 100% overlap in the jobs cour:ited in the two nexus analyses. Keyser Marston Associates, Inc _App H Page 3 August 25, 2014

99 Attachment 2 Residential Nexus Study

100 KEYSER MARSTON ASSOCIATES RESIDENTIAL NEXUS STUDY Prepared for: City of West Hollywood Prepared by: Keyser Marston Associates, Inc. August2014