City of Calistoga Staff Report 6 TO: FROM: Honorable Mayor and City Council Lynn Goldberg, Planning and Building Director DATE: February 7, 2017 SUBJECT: Development Impact Fee Reductions for Accessory Dwelling Units APPROVAL FOR FORWARDING Dylan Feik, City Manager 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 ISSUE: Consideration of a reduction in development impact fees for accessory dwelling units RECOMMENDATION: Adopt resolution BACKGROUND: At the beginning of 2015, the City Council revised the Standardized Use Table for the Resource Management System to reduce water and wastewater usage figures for accessory dwelling units (ADUs), because the Zoning Code limits them to one bedroom and 750 square feet of floor area, resulting in lower water demand and wastewater generation. The reduced water and sewer connection fees for ADUs now total approximately $22,000, compared to an approximate cost of $40,000 for a one- to three-bedroom single-family dwelling unit. Recent state legislation 1 that took effect on January 1, 2017 is intended to further reduce barriers that affect the development of ADUs. When an ADU is created through the conversion of space within an existing structure (such as a single-family dwelling or free-standing garage) in a single-family zoning district, the City is now prohibited from requiring the installation of a new or separate utility connection between the ADU and the utility, or imposing a related connection fee. There is no provision in the legislation for the City to be reimbursed this lost revenue. 1 SB 1069 and AB 2299, codified in Govt. Code Section 65852.2 (in part)
City Council Staff Report Development Impact Fee Revisions for ADUs February 7, 2017 Page 2 of 4 18 19 20 21 22 23 24 25 26 27 28 29 30 During the Council s consideration of Municipal Code amendments related to this legislation at its December 6, 2016 meeting, the Council also indicated its support for reducing the development impact fees charged for any ADU, based on the assumption that its smaller household generates lower demands on City services. DISCUSSION Reduced development impact fees The following proposed impact fee reductions are based on an assumed average ADU household size of 1.5 persons, compared to an average of 2.7 persons in a singlefamily dwelling. Under the new state law, water and wastewater connection fees are not charged when current buildings are retrofitted to include a new ADU. However, the City does still charge connection fees when new construction occurs (such as a detached ADU). Total impact fees for an ADU would be reduced by approximately $10,000 for brand new units, or by $32,000 for converting existing units. Current and Proposed ADU Fees Impact Fee Current Proposed New Construction Proposed Conversion of Existing Sq. Ft. City Administrative $2,772.37 $1,538.67 $1,538.67 Cultural/Recreational $6,400.02 $3,552.01 $3,552.01 Fire $2,335.59 $1,296.25 $1,296.25 Police $620.74 $344.51 $344.51 Transportation $10,178.28 $5,648.95 $5,648.95 Impact fee total $22,307.00 $12,380.39 $12,380.39 Connection fees total $22,000.00 $22,000.00 $0.00 Grand total $44,307.00 $34,380.39 $12,380.39 31 32 33 34 35 36 37 38 39 40 41 42 Payment plans for connection fees (for newly-constructed ADUs) Several councilmembers expressed support for allowing ADU water and wastewater connection fees to be paid over time or deferred. During the recession, the City allowed several new businesses to pay their connection fees (plus interest) over a number of years through monthly payments. This program proved to be problematic for City staff. A Payment Plan Agreement had to be recorded for each property, followed by recordation of a Notice of Release when the payments were completed. The Administrative Services Department was required to process the monthly payments (depositing them into separate accounts), send reminders for delinquent payments, and calculate and assess penalty fees. It is likely that similar problems would be encountered if a similar arrangement was allowed for the payment of ADU connection fees. Furthermore, the city would not be
City Council Staff Report Development Impact Fee Revisions for ADUs February 7, 2017 Page 3 of 4 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 assured that it was benefiting from this arrangement through the actual addition of affordable rentals to its housing stock; the ADUs could be used as guest houses or unauthorized vacation rentals. Therefore, staff does not support deferring fees and believes that the $28,000 fee reduction resulting from the combined reduction in utility connection and development impact fees provides a reasonable financial incentive for ADU development. ALTERNATIVES: Staff also considered the following methods of minimizing the financial impact on property owners that develop an ADU. 1. Allow payment of the connection fees for a non-exempt ADU to be deferred for a period (e.g., 10 years) without requiring monthly payments. This approach is not recommended because no revenue would accrue to the water and wastewater funds during the deferment period. Furthermore, due to the new state law, these funds will be negatively impacted by the City s inability to assess connection fees of $22,000 per ADU that is created within existing structures. 2. Subsidize (all or part of) the fees through the City s Affordable Housing Fund without requiring any repayment by the property owner. This approach is not recommended because in order to avoid a gift of public funds, a property with an ADU would have to be deed restricted to require that: 1) the ADU is actually rented (as opposed to being occupied for free by a family member or used as a guest unit), 2) the tenant is an income-qualified household, 3) an affordable rent is charged, and 4) the owner pay the Housing Authority s annual monitoring fee. Furthermore, if the entire $34,000 fee amount (connection plus impact fees) is subsidized for a number of ADUs, the limited Affordable Housing Fund could be significantly depleted while adding only a few affordable units to the housing stock. This funding could be used instead to leverage housing that benefits more households without the extensive effort of deed restricting and monitoring these units. Additionally, it is likely that the market rent for most ADUs will be affordable to low- and moderate-income households, assuming a housing expenditure equal to 30% of monthly income: Monthly rent @ 30% of income Household size Low-income Moderate-income One person $1,224 $1,807 Two persons $1,399 $2,066
City Council Staff Report Development Impact Fee Revisions for ADUs February 7, 2017 Page 4 of 4 75 76 77 78 79 80 81 82 83 CONSISTENCY WITH COUNCIL GOALS AND OBJECTIVES: Promoting the development of ADUs would help to achieve Goal 7, Objective 2 of the City Council s goals and objectives for Fiscal Year 2016-17, which calls for expanding housing opportunities, including workforce housing. FISCAL IMPACTS: The water and wastewater operating enterprise funds will receive less revenue due to the ADU connection fee exemptions dictated by the new state law. City funding would be required to subsidize part or all of an ADU s fees under Alternative #2 above. Lower levels of development impact fees would be collected if reduced fees are adopted for ADUs. ATTACHMENTS: 1. Draft resolution 2. Resolution No. 2015-029 3. Resolution No. 2014-110
ATTACHMENT 1 RESOLUTION NO. 2017-XXX RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CALISTOGA PROHIBITING THE ASSESSMENT OF CONNECTION FEES FOR WATER AND SEWER SERVICE FOR CERTAIN ACCESSORY DWELLING UNITS, AND ADOPTING DEVELOPMENT IMPACT FEES FOR ALL ACCESSORY DWELLING UNITS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 WHEREAS, on March 17, 2015, the City Council adopted Resolution 2015-029, which revised the Standardized Use Table to add demand figures for second dwelling units on the City's water and wastewater treatment systems that are used to determine connection fees; and WHEREAS, recent state legislation (SB 1069 and AB 2299) as codified in Govt. Code Section 65852.2(f)(2) now prohibits the City from considering certain accessory dwelling units (formerly known as second dwelling units) as new residential uses for the purposes of calculating local agency connection fees or capacity charges for utilities if the unit is created within a single-family residential zone and if the unit is contained within the existing space of a single-family residence or accessory structure; and WHEREAS, on December 2, 2014, the City Council adopted Resolution 2014-110, which adopted a Schedule of Development Impact Fees that included fees for single-family dwellings but not for accessory dwelling units; and WHEREAS, the fees for single-family dwellings were based on an average household size of 2.7 persons and accessory dwelling units are limited by the Calistoga Municipal Code to one bedroom and 750 square feet in size, resulting in an estimated average household size of 1.5 persons; and WHEREAS, the households occupying accessory dwelling units therefore have a lesser demand for the City s administrative, cultural/recreational, fire, police and transportation facilities; and WHEREAS, very few accessory dwelling units have been constructed in Calistoga, and possible developers of such units have identified the City s fees as one of the greatest impediments to their development as potentially-affordable housing; and WHEREAS, Housing Element Action 1.2-2 calls for the City to consider reducing the development impact fees for second [accessory] dwelling units in order to encourage their construction; and WHEREAS, the City Council considered the reduced development impact fees for accessory dwelling units at a regular meeting on January 17, 2017, and during its review, considered the public record, including the staff report, findings, and any written materials and testimony presented by the public; and WHEREAS, the proposed fee revisions are exempt from the California Environmental Quality Act (CEQA) under Section 15061(b)(3) of the CEQA Guidelines, the general rule exemption, because it can be seen with certainty that there is no possibility that the action in question may have a significant effect on the environment.
Resolution No. 2017-XXX Accessory Dwelling Unit Connection and Impact Fees Page 2 of 2 35 36 37 38 39 40 41 42 43 44 45 NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Calistoga that the use figures for second dwelling units shown in the Standardized Use Table for Resource Management System as adopted by Resolution 2015-029, shall not be applied to accessory dwelling units created within the space of a one-family residence or an accessory structure that legally existed on January 1, 2017. NOW, THEREFORE, BE IT FURTHER RESOLVED by the City Council of the City of Calistoga that the following development impact fees shall be added to the Schedule of Development Impact Fees and Nonresidential Development Housing Linkage Fees adopted by Resolution 2014-110 for all accessory dwelling units, including units created within the space of a one-family residence or an accessory structure that legally existed on January 1, 2017: Development Impact Fees for Accessory Dwelling Units City Administrative $1,538.67 Cultural/Recreational $3,552.01 Fire $1,296.25 Police $344.51 Transportation $5,648.95 PASSED AND ADOPTED by the City Council at a duly-noticed regular meeting held the 7th day of February, 2017, by the following vote: AYES: NOES: ABSTAIN: ABSENT: ATTEST: CHRIS CANNING, Mayor MELISSA VELASQUEZ, Deputy City Clerk