REPORT TO COUNCIL
SUBJECT
Title
Action on a Resolution Establishing the Average Per-Acre Land Values in order to set the Parkland In-Lieu Fees for FY2022/23 for New Residential Development
Report
COUNCIL PILLAR
Enhance Community Sports, Recreational and Arts Assets
BACKGROUND
In July 2014, the City Council adopted Ordinance No.1928 which added Chapter 17.35 “Park and Recreational Land” to the Santa Clara City Code (Code) that requires new residential developments to provide developed park and recreational land and/or pay a fee in-lieu of dedication (“In-Lieu Fees”) pursuant to the Quimby Act (“Quimby”) and/or the Mitigation Fee Act (“MFA”). The Code requires that land values be used in the calculation of the In-Lieu Fees. The City completes its annual land valuation study in accordance with City Code Section 17.35.040 and Supplemental Instructions approved by Council June 7, 2016. The appraisal reports have a valuation date of December 31 (full calendar year January 1 to December 31) and include the average value of an acre of land for each of the three residential ZIP Code areas of the City (95050, 95051, and 95054). The land valuation report is posted on the City website for a two-week public comment period and persons interested in this subject are notified. The purpose of this memorandum is to share the findings of the land valuation report and recommend corresponding updates to the Parkland In-Lieu Fee Schedule for FY2022/23.
DISCUSSION
In March 2022, the City of Santa Clara completed its annual land valuation study by Frank Schmidt & Associates with a valuation date of December 31, 2021 (Attachment 1). Table 1 below provides the 2021 valuation for the City’s three residential zip code areas along with prior years’ values for comparison.
|
Table 1 Average Land Value per Acre |
|
Area |
12-31-2021 |
12-31-2020 |
% Diff |
12-31-2019 |
12-31-2017 |
12-31-2016 |
|
95050 |
$5,715,000 |
$4,720,000 |
21.0% |
$4,385,000 |
$3,738,000 |
$3,315,000 |
|
95051 |
$6,000,000 |
$5,120,000 |
17.2% |
$4,630,000 |
$3,993,000 |
$3,583,000 |
|
95054 |
$5,495,000 |
$4,830,000 |
13.8% |
$4,495,000 |
$4,035,000 |
$3,669,000 |
|
Note: Land valuation portion of In-lieu Fees were not raised in 2018 and 2019. |
Proposed Fees
This report proposes to establish the average per-acre land values (Attachment 2) in order to set the Parkland In-Lieu Fee Schedule for FY2022/23. The proposed Parkland In-Lieu Fees have been incorporated into the Municipal Fee Schedule and will be considered during the Public Hearing for the approval of the Municipal Fee Schedule, RTC-22-99. The proposed fees are in conformance with Council Resolution No.19-8769 (Attachment 3) adopted on October 29, 2019 which directed staff to “phase in the park improvement cost increase of $2,664 (from $807 to 3,471) per capita over a four-year period increasing 25% ($666) per year and continue to adjust the land valuation (increase/decrease) fee component each year based on the annual land appraisal at 100% cost recovery.” The Council, at the time, also directed staff to evaluate the effects of the policy and the potential use of a cost escalation factor.
The prior Council policy of using the 2017 land valuation data for a two-year period and the “phase in” of the 2018 park improvement values resulted in an estimated net loss/reduction of Park In-Lieu Fees in the amount of approximately $4,583,000, based on actual projects. It is important to note that while the increase in park improvement value was phased in over a four-year period, construction costs continued to increase an additional 21.1% (22.3% compounded) over the same four-year period (2018-2021) based on the State of California, Department of General Services Construction Cost Index reported by the Real Estate Services Division. Council had asked staff to review the use of a cost escalation factor and its potential effect on the park construction value used by the City in the calculation of the park in lieu fees. Had a cost escalation factor been implemented, the park improvement/construction value now used would be $4,246 per capita in today’s dollars, or an additional $775.49 per capita. Staff is not recommending implementation of a cost escalation factor at this time, but simply providing the information as a point of reference for Council policy consideration. Staff will revisit the issue annually.
|
Table 2 Park Improvements/Construction Cost Escalation 2018 - 2021 |
|
|
2018 |
2019 |
2020 |
2021 |
|
|
+1.3% |
+3.6% |
+2.8% |
+13.4% |
|
$3,471 |
$3,516 |
$3,643 |
$3745 |
$4,246 |
The proposed In-Lieu Fees are calculated based on the 2021 average cost of land ($5.715 million per acre in 95050, $6.000 million per acre in 95051, and $5.495 million per acre in 95054), and 100% of the 2018 per capita cost for park construction/ improvements ($3,471). If adopted, the In-Lieu Fees would increase between 15.4% and 21.6% depending upon the area of Santa Clara, the housing type (single family/multifamily), and whether the residential project is subject to Quimby or MFA. Table 3 below provides a comparison of the current and proposed fees.
|
Table 3 Proposed In-Lieu Fees |
|
Housing |
Quimby |
MFA |
|
Area |
Type |
Current |
Proposed |
% Diff. |
Current |
Proposed |
% Diff. |
|
95050 |
SF |
$51,567 |
$62,664 |
21.5% |
$45,828 |
$55,716 |
21.6% |
|
|
MULTI |
$41,530 |
$50,468 |
|
$36,908 |
$44,872 |
|
|
95051 |
SF |
$55,214 |
$65,263 |
18.2% |
$48,989 |
$57,968 |
18.3% |
|
|
MULTI |
$44,468 |
$52,561 |
|
$39,454 |
$46,686 |
|
|
95054 |
SF |
$52,570 |
$60,658 |
15.4% |
$46,697 |
$53,977 |
15.6% |
|
|
MULTI |
$42,338 |
$48,852 |
|
$37,609 |
$43,472 |
|
Developer/Appraiser Comments
The Annual Land Valuation appraisal report was posted on the City website for the ten-day review period (April 4, 2022 to April 14, 2022). Members of the public and development community were invited to review and comment.
Fee Implementation
In conformance with State law, the proposed City of Santa Clara 2022/23 Municipal Fee Schedule Resolution, attached to RTC 22-99, provides the required findings and implementation dates of fees for projects subject to Quimby (immediately after adoption of the Parkland In-Lieu Fee Resolution), and projects subject to MFA (no sooner that 60 days after adoption of the Parkland In-Lieu Fee Resolution).
Based on a public hearing date of April 19, 2022 and Council policy direction to implement fees no sooner than the new Fiscal Year on July 1, 2022, the Quimby In-Lieu Fees would apply to new residential housing projects with applications deemed complete on or after July 1, 2022; and, the MFA In-Lieu Fees would apply to new residential projects with applications deemed complete on or after July 1, 2022. For applications deemed complete prior to July 1, 2022, the existing In-Lieu Fees adopted in Resolution No. 21-8970 (Attachment 4) will apply.
Summary
On April 1, 2022, the City of Santa Clara completed its 2021 annual land valuation report with a valuation date of December 31, 2021. The prior land valuation report for 2020 had a valuation date of December 31, 2020. This report follows the established Council approved process and simply updates the land values used in the Parkland In-Lieu Fee calculations to reflect changes in the market. The use of older/lower land values results in City cost recovery of less than 100%, and a financial subsidy for new housing development, and creates a significant challenge for the acquisition and development of new public parkland and recreational amenities. Since several approved Specific Plans such as Lawrence Station, Tasman East, and Patrick Henry Drive, all require less public parkland dedication than the existing City park standards of 2.6 to 3.0 acres per 1,000 residents, setting In-Lieu Fees at 100% cost recovery is essential for mitigating the impact of new residential housing on the City’s existing park system and for providing adequate public parkland at the existing standards as a matter of park access and equity. If not, adequate public parkland will not be present within the highest density neighborhoods within the City. Neighborhood and community parks are essential to the quality of life in Santa Clara.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(4) in that it is a fiscal activity that does not involve commitment to a specific project which may result in potential significant impact on the environment.
FISCAL IMPACT
The actual amount of Parkland In-Lieu Fee revenue collected will vary based on the project application type (Quimby/MFA), the area of the City (Zip codes 95050, 95051, 95054), the density of housing units (multifamily versus single family), the amount of public parkland dedicated, and the amount of financial credit developers receive for eligible on-site private open space and recreation amenities (which can reduce remaining fees due by 50%-65%). Since the exact number and type of new housing units to be built in any particular year is unknown, and the amount of parkland to be dedicated by a particular residential developer is also unknown, the exact amount of In-Lieu Fee revenues cannot be projected at this time.
However, when the In Lieu Fee Policy is set at 100% cost recovery, the In-Lieu Fee program will recover 100% of the costs necessary to provide new residents with developed public parkland and recreational amenities at the same level of service as provided to existing residents. If fees are set at less than 100% cost recovery, additional funds from the General Fund or other sources of capital will be needed to fill the funding gap, or the level of service will decline. Over time, the City will need to identify other funding sources for acquisition and development of new parkland in order to maintain current park system standards of 2.6 to 3.0 acres per 1,000 residents of adequately developed parkland and sufficient recreational facilities. Without sufficient parkland and facilities, there is increased demand on existing, older facilities which causes additional wear, earlier/more frequent repair/renewal, and higher maintenance and capital replacement costs.
COORDINATION
This agreement has been coordinated with the Community Development Department, the Finance Department and the City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
Adopt a Resolution to establish the Average Per-Acre Land Values in order to set the Parkland In-Lieu Fees for FY2022/23 for New Residential Development in accordance with Title 17 (“Development”) Chapter 35 (“Park and Recreational Land”) of the City Code using the December 31, 2021 land valuation report.
Staff
Prepared by: James Teixeira, Director of Parks & Recreation
Approved by: Office of the City Manager
ATTACHMENTS
1. Land Valuation Appraisal Report dated December 31, 2021
2. Resolution - Average Per-Acre Land Values
3. Resolution No. 19-8769
4. Resolution No. 21-8970