Impact Fee Nexus & Economic Feasibility Study

Transcription

1 Impact Fee Nexus & Economic Feasibility Study Stakeholder Working Group December 10, 2015 Urban Economics

2 Agenda Follow Up From Last Meeting Proposals Presentation Proposals Discussion Wrap Up 1

3 Oakland Impact Fee Stakeholder Working Group December 10, 2015 FOLLOW UP FROM LAST MEETING 2

4 Oakland Impact Fee Stakeholder Working Group December 10, 2015 PROPOSALS SUMMARY 3

5 Fee Proposals: Multi- Family Zone 1 Based on Timing of Payment (Building Permit) $25,000 TBD TBD TBD TBD TBD TBD $20,000 $15,000 $10,000 $5,000 $ Nov. 12 Proposal Nov. 19 Proposal City Staff Proposal Dec. 7 Proposal Note: The Nov. 12 proposal set fee levels in 2016, 2017, and 2018 at time of completed planning application, but the fee is not paid until building permit approximately 2 years later (2018, 2019, and 2020). 4

6 Fee Proposals Summary for Dec. 10, 2015 Working Group Meeting Total Impact Fee for Multi- Family Housing in Zone 1 Schedule of Fee Amounts (per unit) Prior to 7/1/2016 7/1/2016-6/30/2017 7/1/2017-6/30/2018 7/1/2018-6/30/2019 7/1/2019-6/30/2020 7/1/2020-6/30/2021 Nov. 12 Proposal $ - $ 5,000 $ 10,000 $ 20,000 $ 20,000 $ 20,000 Nov. 19 Proposal $ - $ 20,000 $ 24,000 $ 24,000 TBD TBD City Staff Proposal $ - $ 5,710 $ 10,710 $ 20,710 TBD TBD Dec. 7 Proposal $ - $ 5,000 $ 10,000 $ 20,528 TBD TBD Timing of Fee Payments Assuming Payment at Building Permit (per unit) Timing for Building Permit: Nov. 12 Proposal Nov. 19 Proposal City Staff Proposal Dec. 7 Proposal Prior to 7/1/2016 7/1/2016-6/30/2017 7/1/2017-6/30/2018 7/1/2018-6/30/2019 7/1/2019-7/1/2020 7/1/2020-7/1/2021 $ - $ - $ - $ 5,000 $ 10,000 $ 20,000 $ - $ 20,000 $ 24,000 $ 24,000 TBD TBD $ - $ 5,710 $ 10,710 $ 20,710 TBD TBD $ - $ - $ - $ 5,000 $ 10,000 $ 20,528

7 MEMORANDUM TO: Members of the City of Oakland Impact Fee Stakeholder Working Group FROM: Angela Robinson Piñon DATE: December 7, 2015 RE: Recommendations for Residential Development Impact Fees in Zone 1 I have prepared several recommendations for consideration by the Working Group. The views expressed are my own, but are tempered by comments and proposals put forth at past meetings. Thank you for your time and I look forward to hearing your feedback. Timing: All fees shall be assessed concurrently. Each of the fees reflect a current and ongoing need for the City and its residents, and they should be exacted concurrently. Target Fee Levels: In Fee Zone 1, it is recommend that the fee be 31% of the maximum average impact fees allowable by law. The thirty-one percent figure was selected to achieve an aggregate fee that was consistent with the $20,000- $24,000 fee range for multi-family dwellings that has been proposed by various parties during Working Group meetings. If the maximum fee is revised, it is requested that this percentage of the maximum shall re-evaluated accordingly. On November 5, 2015 (and revised on November 30, 2015) six maximum legal fees were presented by the Project Team for affordable housing. Three fees were calculated for multi-family dwellings; two for detached single-family dwellings; and one for attached single-family dwellings (townhomes). The average maximum affordable housing fees for each category were as follows: $48,976 (single-family attached); $58,281 (single-family detached); and $41,954 (multi-family). The combined maximum impact fee, including fees for capital improvements and transportation, was over $60,000. Please see Table 1 below. Table 1: Maximum Fees, Fee Zone 1 Fee Categories Dwelling Type Affordable Capital Maximum Proposed Fee Transportation Housing Improvements Fee (31% of Max) Single Family - Attached $48,976 $16,151 $17,925 $83,052 $25,746 Single Family - Detached $58,281 $16,151 $17,925 $92,357 $28,631 Multi-Family $41,954 $11,629 $12,636 $66,219 $20,528 It had been discussed at previous meetings that 60% of the fee be allocated to affordable housing, with the remainder split evenly between the other fee categories. In comparison, Table 2 summarizes my fee recommendations for Fee Zone 1 based on 31% of the maximum allowable impact fees in each category. Table 2: Total Fees at Year 3, Fee Zone 1 Fee Categories Dwelling Type Affordable Capital Housing Improvements Transportation Total Single Family - Attached $15,448 $5,149 $5,149 $25,746 Single Family - Detached $17,179 $5,726 $5,726 $28,631 Multi-Family $12,317 $4,106 $4,106 $20,528 Percent of Total 60% 20% 20% 100% Fee Determination: The fee shall be based upon the submission date of a deemed complete application to the City s Building Department as verified by City staff. Building permit applications submitted after July 1, 2016 shall be subject to the applicable fee. Projects subject to development agreements are exempt from the fee. Phasing of Fees: Fees shall be phased in over three years: $5,000 (after 7/1/2016); $10,000 (after 7/1/2017); and threshold in year 3 (after 7/1/2018). In the years prior to reaching the maximum fee, it is proposed that the individual fees be allocated in proportion to their total. Table 3 summarizes this recommendation.

8 Table 3: Phase in of Fees over 3 Years, Fee Zone 1 Fee Categories Year Dwelling Type Affordable Capital Housing Improvements Transportation Total Single Family - Attached $3,000 $1,000 $1,000 $ 5,000 Year 1 Single Family - Detached $3,000 $1,000 $1,000 $ 5,000 Multi-family $3,000 $1,000 $1,000 $ 5,000 Single Family - Attached $6,000 $2,000 $2,000 $ 10,000 Year 2 Single Family - Detached $6,000 $2,000 $2,000 $ 10,000 Multi-family $6,000 $2,000 $2,000 $ 10,000 Single Family - Attached $15,448 $5,149 $5,149 $ 25,746 Year 3 Single Family - Detached $17,179 $5,726 $5,726 $ 28,631 Multi-family $12,317 $4,106 $4,106 $ 20,528 Percent of Total 60% 20% 20% 100% Grouping of Fees: Parks and recreation facilities fees shall be disaggregated from Capital Improvement Fees. It is requested that the Project Team tabulate the land and building square footage attributable to parks and recreational facilities, libraries, fire stations, and police stations. Facilities which support a variety City departments and administrative functions, such as City Hall and 150 and 250 Frank Ogawa Plaza, may be grouped into a single category. This shall provide the basis of the any recommendation sent by this Working Group to the City Council. Option 1: A separate Parks and Recreation Facilities Fee Option 2: A Community Facilities Fee Parks and Libraries combined Option 3: A City policy that the allocation of the Capital Facilities Fees shall be proportional Documentation of Efforts: Within one year of Ordinance adoption, it is recommended that the City present, a Long-Range Capital Improvement Plan which describes and prioritizes City owned facilities for improvement, expansion, acquisition or development. The City shall include in its annual report completed pursuant to Government Code subsection 66006(b)(1) its receipt and disbursement of funds collected under the Mitigation Fee Act with respect to the implementation of the City s Long-Range Capital Improvement Plan. Administrative Costs: Above the calculated maximum fee amounts, the Mitigation Fee Act allows local jurisdictions to include a component fee that recovers its estimated reasonable costs for administering the impact fee program. Administration includes the collection and management of fee proceeds, the ongoing reporting requirements prescribed by the Mitigation Fee Act, and the cost of periodic updates to the underlying nexus analyses justifying fees. It is unclear, from the information presented to date, that the City has considered the administrative costs of administering these fees; therefore, I recommend that the City consider adding an administrative fee or surcharge to the maximum fees shown in Table 3. OSCAR Element Implementation: The City s Open Space, Conservation and Recreation Element (OSCAR) was adopted in Twenty years later, the Element contains several relevant policies and actions that have yet to be implemented. If implemented these actions would help facilitate equitable distribution of parks and recreational facilities throughout the City. In particular, I recommend that the City act on the following: Prepare a Citywide Park Plan (Action REC-1.5.1) Provide analysis that supports the adoption of a Quimby Act Fee (Action REC ) Fee Allocation: Section 66001(g) of the Mitigation Fee Act states that fees may include the costs attributable to the increased demand for public facilities reasonably related to the development project in order to (1) refurbish existing facilities to maintain the existing level of service or (2) achieve an adopted level of service that is consistent with the general plan. It is requested that the Council reference this section when adopting a resolution or Ordinance establishing the fee, and clarify which of the two policies it shall implement.

9 Oakland Impact Fee Stakeholder Working Group December 10, 2015 CITY STAFF PROPOSAL 5

10 Economic Considerations Scenario for rent increases (nominal $): Average 7.6% per year over next 5 years Compares to 13.5% per year for past 5 years Payment of fees facilitated by rent increases over next 5 years First: to enhance existing project feasibility Then: To support payment of new fees +16% real rent increase; +44% nominal $ increase City staff proposal ( ) Schedule for phase- in is important Proposed phase- in may be aggressive Requires higher rent increases in first 3 years Limits increases in land values until after target fees reached 6

11 18% Annual Percentage Change in Monthly Rent (nominal dollars), San Francisco and Oakland Recent Trends and 5- year Oakland Projection (Case D) San Francisco actual trend Oakland trend and projection Linear (Oakland trend and projection) 16% 14% 12% 10% 8% 6% 4% 2% 0% Trend for Last Five Years Rent for apartments in buildings with 50+ units (Source: RealFacts) Projection for Next Five Years Rent for new mid- rise apartments in Zone 1 (Source: HEG)

12 Year- over- Year Change in Monthly Rent Per Unit (nominal dollars) Oakland Trend Oakland Projection Case C (Nov. 19 Proposal) Oakland Projection Case A (Nov. 12 Proposal) Projection Case D (City Staff Proposal) Oakland Projection Case B (option to Case A) $450 $400 $350 $300 $250 $200 $150 $100 $50 $ Trend for Last Five Years Rent for apartments in buildings with 50+ units (Source: RealFacts) Projection for Next Five Years Rent for new mid- rise apartments in Zone 1 (Source: HEG)

13 Testing Fee Option for Multi-Family Housing Development: Scenario D and Proposal Oakland Prototype H-4 Development: Mid-Rise, Rental Apartments Type III construction on Type I podium 5-6 floors over podium; 1 pkg space/du Average Unit Size: 825 sf Density: 200 units/acre Location: Downtown/Jack London/Broadway Valdez/parts of North Oakland (fee zone 1) Total Development Costs without Land (2015): $467,000 per unit Land Costs (2015): $32,700 per unit Year Mid-Year Rent Assumption (2015 $) Fee Return/a/ Land Rent in Future $ Real Growth Monthly per unit Monthly per sf unit Potential Fee Return: IRR Prior Yr Bldg. Permit Land Residual per unit Target: 15% per unit % Land Cost 2015 Annual Increase Monthly Per Unit Rent per sf unit 2015 Base Case $3,080 $ % $6,075 19% $3,080 $ % $3,250 $ % $26,160 80% +11.5% $3,430 $4.16 $5, % $20,650 63% $10, % $15,800 48% $20, % $6,160 19% % $3,400 $ % $43, % +9.5% $3,755 $4.55 $5, % 2016 $38, % $10, % $33, % $20, % $23,900 73% % $3,485 $ % $54, % +7.5% $4,020 $4.87 $5, % 2017 $48, % $10, % 2017 $43, % $20, % $34, % % $3,540 $ % $60, % +5.5% $4,240 $5.14 $5, % 2018 $55, % $10, % 2018 $50, % $20, % 2018 $40, % % $3,575 $ % $64, % +5% $4,450 $5.40 $5, % 2019 $59, % $10, % 2019 $54, % $20, % 2019 $44, % 5 years out +16.1% real growth +44% nominal $ growth /a/ Results identify increase in return as rents increase over and above costs. Costs including land are assumed to remain at levels shown for the Base Case mid-2015 Hausrath Economics Group Draft for Discussion Purposes Only; Subject to Change December 10, 2015

14 DRAFT FOR DISCUSSION PURPOSES SUBJECT TO CHANGE Impact Fee Stakeholder Working Group Meeting, December 10, 2015 Draft City Staff Impact Fee Proposal Based on the above considerations, a Draft City Staff Proposal has been identified. Key points of the Draft City Staff Proposal are: The fee amount is determined at the building permit application. Any project that applies for a building permit prior to July 1, 2016 is exempt from paying the impact fee, this includes projects that had extensions given to them by the City Council in December The impact fee is paid during the building permit process, although it is yet to be determined when the fee could be paid during the course of the permit process. Some options for payment are at initial application stage, at building permit issuance, and/or certificate of occupancy (percentages could be paid at different stages, or it could all be paid at one of the stages, or other variations are possible). By allowing for impact fee payment in a phased approach or payment at certificate of occupancy of the building permit process would benefit economic feasibility by reducing the carrying cost time frame.

15 DRAFT FOR DISCUSSION PURPOSES SUBJECT TO CHANGE Residential Impact Fees (Draft City Staff Proposal) Key points of the Draft City Staff Proposal for Multi-family Residential Units in Zone 1 shown in Table 1 below are: The fee amount is determined at building permit application. Any project that applies for a building permit prior to July 1, 2016 is exempt from paying the impact fee, this includes projects that had extensions given to them by the City Council in December Any project that applies for a building permit from July 1, 2016 through June 30, 2017 will pay $5,710 per unit during the building permit process. Any project that applies for a building permit from July 1, 2017 through June 30, 2018 will pay $10,710 per unit during the building permit process. Any project that applies for a building permit from July 1, 2018 through June 30, 2019 will pay $20,710 per unit during the building permit process. The above impact fees are the total impact fees that would be charged during those years. They include a $710 transportation impact fee and the large majority will go to an affordable housing impact fee. No capital improvement impact fees are included for multi-family residential units in Zone 1 in the years listed above. Starting on July 1, 2019 an additional, yet to be determined, fee will be added to the total fee amount for a capital improvement impact fee and an increase in the transportation impact fee. Table 1: Draft City Staff Proposal Residential Impact Fees Draft City Staff Proposed Residential Impact Fees (Fee is Per Unit) The Date is Based on When the Applicant Applies for Building Permit Housing Use Type Fee Category 7/1/16 6/30/17 7/1/17 6/30/18 7/1/18 6/30/19 (target fee) Multi-family, Affordable Hsg. $5,000 $10,000 $20,000 Zone 1 Capital Imp.* $0 $0 $0* Transportation $710 $710 $710 Total $5,710 $10,710 $20,710 Single-family, Zone 1 Townhome, Zone 1 Affordable Hsg. $5,500 $13,000 $20,000 Capital Imp. $1,000 $1,000 $4,000 Transportation $1,000 $1,000 $1,000 Total $7,500 $15,000 $25,000 Affordable Hsg. $5,500 $10,000 $17,000 Capital Imp. $1,000 $1,000 $3,000 Transportation $1,000 $1,000 $1,000 Total $7,500 $12,000 $21,000 *An impact fee, yet to be determined, for Capital Improvements will start in July 1, 2019.

16 Nonresidential Impact Fees (Draft City Staff Proposal) DRAFT FOR DISCUSSION PURPOSES SUBJECT TO CHANGE There is an existing jobs-housing linkage fee of $5.44 per square foot in Fiscal Year (FY) July 1, 2015 June 30, 2016 on office and warehouse to provide funding for affordable housing. Therefore, new proposed impact fees are for capital improvements and transportation only. For all of the nonresidential uses the proposed impact fees include the minimum amount to cover CEQA transportation cumulative impact mitigations starting in 2016 so developers can pay their fair share of required transportation improvements. For Capital Improvements the fees vary by land use depending on the current economic feasibility for that land use and the phasing in increases as development becomes more feasible. The combined fee was allocated 50 percent to transportation and 50 percent to capital improvements where economically feasible and where the maximum legal amount for the capital improvement fee does not limit the fee amount. Table 2: Draft City Staff Proposal Nonresidential Impact Fees Draft City Staff Proposed Nonresidential Impact Fees (Fee is Per Square Foot) The Date is Based on When the Applicant Applies for Building Permit Use Type Fee Category 7/1/16 6/30/17 7/1/17 6/30/18 7/1/18 6/30/19 7/1/19 6/30/20 7/1/20 + (target fee) Office* Capital Imp. $0.00 $0.00 $1.00 $1.00 $2.00 Transportation $0.85 $0.85 $1.00 $1.00 $2.00 Total $0.85 $0.85 $2.00 $2.00 $4.00 Retail, Freestanding Capital Imp. $0.00 $0.15 $0.25 $0.25 $0.50 Transportation $0.75 $0.75 $0.75 $0.75 $0.75 Total $0.75 $0.90 $1.00 $1.00 $1.25 Retail, Ground Floor Capital Imp. $0.00 $0.00 $0.00 $0.00 $0.00 Transportation $0.75 $0.75 $0.75 $0.75 $0.75 Total $0.75 $0.75 $0.75 $0.75 $0.75 Light Industrial Capital Imp. $0.40 $0.40 $0.75 $0.75 $1.00 Transportation $0.60 $0.60 $0.75 $0.75 $1.00 Total $1.00 $1.00 $1.50 $1.50 $2.00 Warehouse* Capital Imp. $0.65 $0.90 $1.00 $1.00 $1.00 Transportation $0.35 $1.10 $2.00 $3.00 $3.00 Total $1.00 $2.00 $3.00 $4.00 $4.00 Hotel/Motel Capital Imp. $0.10 $0.20 $0.35 $0.35 $0.60 Transportation $0.65 $0.65 $0.65 $0.65 $0.65 Total $0.75 $0.90 $1.00 $1.00 $1.25 Institutional Capital Imp. $2.50 $2.50 $2.50 $2.50 $3.00 Transportation $1.50 $1.50 $2.50 $2.50 $3.00 Total $4.00 $4.00 $5.00 $5.00 $6.00 *Existing jobs-housing linkage fee for affordable housing = $5.44 per square foot for July 1, 2015 June 30, 2016.

17 ESTIMATED 10- Year Impact Fee Revenue City Staff Proposal 60,000,000 50,000,000 40,000,000 30,000,000 $60,800,000 $5,700,000 $12,800,000 Notes: Estimates based on 10,000 housing units 3.6 mil. sq. ft. of commercial/industrial space. Adjustments made for projects with vested rights and development agreements. Amounts could vary substantially depending on pace of development. 20,000,000 10,000,000 - Affordable Housing Capital Improvements Transportation Residential Nonresidential Total Revenue = $79,300,000 9

18 Estimated Allocation of Fee Revenue City Staff Proposal 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Near Term << Longer Term >> 16% 7% 77% WITH Fee Exemptions EXCLUDING Jobs- Housing Linkage Fee 7% 7% 4% 3% 89% 90% WITHOUT Fee Exemptions EXCLUDING Jobs- Housing Linkage Fee WITHOUT Fee Exemptions INCLUDING Jobs- Housing Linkage Fee Affordable Housing Capital Improvements Transportation 10

19 EXAMPLES of Use of Fee Revenue (10- Year Revenue Estimates) Affordable Housing $60,800, very low, low & moderate income units OR 570 very low & low income units Capital Improvements $5,700, acres of park improvements OR 7,500 sq. ft. of additional civic building space (library, recreation center, etc.) Transportation $12,800, complete intersection improvements OR 3.5 miles of complete sidewalk improvements (curb, gutter, street trees, street lighting) 11

20 Oakland Impact Fee Stakeholder Working Group December 10, 2015 PROPOSALS DISCUSSION 12

21 Oakland Impact Fee Stakeholder Working Group December 10, 2015 WRAP UP / QUESTIONS 13