REPORT TO COUNCIL
SUBJECT
Title
Action on a Resolution Establishing the Average Per-Acre Land Values and Park Development Costs to be Used in the Calculation of Parkland In-Lieu Fees for New Residential Development for the FY 2025-26 Municipal Fee Schedule
Report
COUNCIL PILLAR
Enhance Community Sports, Recreational and Arts Assets
Enhance Community Engagement and Transparency
Deliver and Enhance High Quality Efficient Services and Infrastructure
BACKGROUND
City Code Chapter 17.35 “Park and Recreational Land” requires new residential developments to provide developed park and recreational land and/or pay a fee in-lieu of developed parkland dedication (“In-Lieu Fees”) pursuant to the Quimby Act (“Quimby”) and/or the Mitigation Fee Act (“MFA”). This enables the City to maintain its existing level of service at the same rate of 2.6 acres to 3.0 acres of parkland and recreational amenities per 1,000 residents.
Parkland dedication in-lieu fees are reviewed annually and are considered a part of the Municipal Fee Schedule update. There are three primary cost components upon which in-lieu fees are calculated:
1) the average cost to purchase land for parks in Santa Clara, as determined by an annual land evaluation appraisal; and
2) the average cost per capita to develop the land into a useable park facility based on the 2019 Parks and Recreation Facility Condition Assessment indexed to the Department of General Services California Construction Cost Index (CCCI); and
3) the administration cost of the program, including the review of residential development plans for compliance with the park ordinance and the tracking of in-lieu fees (currently set at 2% of total fees collected).
The methodology for the calculation of the In-Lieu Fees is explained in the Park & Recreation Facilities Development Impact Fee Study (Nexus Study) updated August 27, 2019 (Attachment 1).
The purpose of this report is to:
1) share the findings of the 2024 land valuation report; and
2) recommend a 2.3% adjustment to the park improvement value in accordance with the latest CCCI figures.
DISCUSSION
Land Valuation - Average Cost per Acre
The cost to purchase land for parks is based on an annual land valuation study. The appraisal report is completed by an appraiser in accordance with City Code Section 17.35.040 and the Supplemental Instructions for the Appraisal of the Fair Market Value of Land approved by the City Council on June 7, 2016 (Attachment 2).
The appraisal report has a valuation date of December 31 to account for the full calendar year (January 1 to December 31) of data for property transactions and provides an objective assessment of the average value of an acre of land for each of the three residential ZIP Code areas of the City (95050, 95051, and 95054).
On March 1, 2025, the City’s consultant, Frank Schmidt & Associates, completed the annual land valuation study with a valuation date of December 31, 2024 (Attachment 3). Table 1 below provides the 2024 valuation for the City’s three residential zip code areas, along with prior years’ values for comparison. Noteworthy in the table below is that the average land value per acre dropped in all three zip codes in comparison to the 2023 Land Valuation Appraisal Report.
|
Table 1 Average Land Value per Acre |
|
Area |
12-31-24 |
12-31-23 |
% Chg (2023 to 2024) |
12-31-22 |
12-31-21 |
12-31-20 |
12-31-19 |
12-31-17 |
|
95050 |
$5.180M |
$5.455M |
-5.0% |
$5.500M |
$5.715M |
$4.720M |
$4.385M |
$3.738M |
|
95051 |
$5.340M |
$5.650M |
-5.5% |
$5.840M |
$6.000M |
$5.120M |
$4.630M |
$3.993M |
|
95054 |
$5.000M |
$5.255M |
-4.9% |
$5.240M |
$5.495M |
$4.830M |
$4.495M |
$4.035M |
The 2024 Annual Land Valuation appraisal report was posted on the City’s website. The two-week comment period was open from March 4, 2025, through March 18, 2025. Members of the public and development community were invited to review the report and to provide questions and comments to the Director of Parks & Recreation. No comments were received during the official comment period.
Park Improvement Value - Average Cost Per Capita
The cost of constructing the park improvements (landscape, furnishings, buildings, etc.) is based on the average cost per capita for the City’s existing park system improvements. This is to ensure a fair and equitable distribution of costs to be recovered for the development of park assets and features to serve the new residents at the same standard as existing residents.
The last update to the park improvement value took place on October 29, 2024, under Resolution No. 24-9383 (Attachment 4). In 2023, the Council adopted Resolution No. 23-9220 (Attachment 5), which established a methodology for annually updating the park improvement value. Under the methodology, annual updates correspond to the changes (increases or decreases) in the Department of General Services California Construction Cost Index (CCCI) for the previous calendar year as reported by the Real Estate Services Division for the Bay Area. Such annual increases and decreases are limited to no more than a change of 10% of the base value, and in no case can the increased or decreased base value be more than 100% cost recovery.
Accordingly, park development costs are reviewed and updated annually to account for the changes in construction costs (escalation/inflation) and the average value of park assets across the existing park system in accordance with Resolution No. 23-9220 (Attachment 5).
From 2023 to 2024, the CCCI value increased by 2.3% (Table 2 below). Under the Council’s adopted policy, it is recommended that the current park improvement value of $4,177 be adjusted by the 2024 CCCI value of 2.3%, increasing it to $4,273.
|
Table 2 Park Improvement Value (Cost per Capita)/Construction Cost Escalation 2023-2025 |
|
Year |
2023 |
2024 PI Value |
2024 |
2025 PI Value |
|
CCCI |
+9.4% |
$4,177 |
+2.3% |
$4,273 |
|
Park Improvement Value |
$3,818 |
|
$4,177 |
|
Credit for Qualified Private Recreational Amenities
New residential developments may propose and receive a credit of 50% of the land value for eligible private recreation amenities against In-Lieu Fees due. This acknowledges that eligible private amenities within a new residential development have some public value, insofar as they partially reduce the impact on the existing public park system. Such amenities for active recreation include, but are not limited to, pools, gymnasiums/fitness areas, community rooms, picnic facilities, playgrounds, off-leash dog areas, large turf areas, sport courts, or community gardens. Each residential project application is evaluated for size, shape, location, utility/demand, among other criteria, to assure that the facilities proposed are appropriate and acceptable for reducing demand on existing public parkland. Eligible affordable housing and senior housing projects receive a 15% credit toward the parkland dedication requirement or fees due in-lieu of parkland dedication.
Use of In-Lieu Fees
The City deposits In-Lieu Fees received into separate accounts specified for either Quimby or MFA. During the development of the City’s Capital Improvement Program budget, In-Lieu Fees are allocated to Capital Improvement Program projects with allowable uses of the funds that may include acquisition of parkland and development of neighborhood and community parks, and under certain conditions for Quimby, the rehabilitation of existing park facilities. In-Lieu Fees cannot be used for on-going maintenance.
Spending and Reporting Requirements
The amounts of fees received and allocated are reported on an annual basis in the City’s Adopted Budget document.
Proposed Fees for FY 2025/26
The changes in average land value per acre, as shown in Table 1, results in a reduction in park in-lieu fees as follows:
|
Zip Code |
Quimby |
Current |
Revised |
Change |
|
95050 |
Single Family |
$59,507 |
$57,394 |
-$2,113 |
|
|
Multi Family |
$40,230 |
$38,802 |
-$1,428 |
|
95051 |
Single Family |
$61,201 |
$58,785 |
-$2,416 |
|
|
Multi Family |
$41,375 |
$39,741 |
-$1,634 |
|
95054 |
Single Family |
$57,769 |
$55,830 |
-$1,939 |
|
|
Multi Family |
$39,055 |
$37,744 |
-$1,311 |
|
Zip Code |
Mitigation Fee Act (MFA) |
Current |
Revised |
Change |
|
95050 |
Single Family |
$53,186 |
$51,392 |
-$1,794 |
|
|
Multi Family |
$35,956 |
$34,744 |
-$1,212 |
|
95051 |
Single Family |
$54,655 |
$52,597 |
-$2,058 |
|
|
Multi Family |
$36,949 |
$35,558 |
-$1,391 |
|
95054 |
Single Family |
$51,679 |
$50,036 |
-$1,643 |
|
|
Multi Family |
$34,938 |
$33,827 |
-$1,111 |
To further illustrate how in-lieu fees are calculated, the worksheets used by staff have been updated and are attached to this report (Attachment 6). Please note that there are separate worksheets for each of the three City of Santa Clara zip codes, type of development (Single or Multi-Family), and regulatory program (Quimby or MFA).
Fee Implementation
In conformance with state law, a proposed Resolution has been drafted to provide the required findings for Quimby and MFA (Attachment 7). Under state law, fees subject to Quimby may take effect immediately after adoption and fees subject to MFA may take effect no sooner than 60 days after adoption. The fees set forth in the proposed Resolution, for both Quimby and MFA-based fees, will take effect on July 1, 2025 which satisfies the MFA’s 60-day delay requirement.
This information was presented to the Parks & Recreation Commission (Commission) at its regular meeting on March 10, 2025, to seek input from the Commission and the public regarding the proposed changes. There were no public comments. The Commission made the following recommendations:
1) That the City Council accept the Land Valuation Appraisal Report dated December 31, 2024, as presented; and
2) That the City Council adopt the proposed adjustment of 2.3% to the Park Improvement Value in alignment with the State of California, Department of General Services Construction Cost Index (CCCI) and prior Council direction.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to California Code of Regulations Title 14 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
There is no impact on the General Fund for consideration of this item. 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 (single family versus multifamily), the amount of public parkland dedicated, and the amount of financial credit developers receive (50% of the land value for eligible on-site private recreation amenities, and/or 15% credit toward the fees due in-lieu of parkland dedication for eligible affordable housing and senior housing projects).
Since the exact number and type of residential building permits issued 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.
When the In-Lieu Fee Policy is set at 100% cost recovery, the City 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. Without sufficient parkland and facilities, there is increased demand on existing facilities, which causes competition for access, additional wear, more frequent repair, and higher maintenance and capital replacement costs.
If fees are set at less than 100% cost recovery, additional General Fund resources will be needed to bridge the funding gap. Within this scenario, the City will need to identify other funding sources for acquisition, development and redevelopment of parkland to maintain adequate/current park system standards of 2.6 to 3.0 acres per 1,000 residents.
COORDINATION
This report has been coordinated with the Finance Department, the City Attorney’s Office, and the City Manager’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 or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
Adopt a Resolution in accordance with Santa Clara City Code Chapter 17.35 establishing the average per-acre land values and park development costs to be used in the setting of parkland in-lieu fees for residential development.
Staff
Prepared by: Gina Saporito, Staff Analyst
Reviewed by: Damon Sparacino, Director of Parks & Recreation
Approved by: Jovan Grogan, City Manager
ATTACHMENTS
1. Nexus Study
2. Supplemental Instructions for the Appraisal of the Fair Market Value of Land
3. 2024 Land Valuation Appraisal
4. Resolution No. 24-9383
5. Resolution No. 23-9220
6. Draft Park In-Lieu Fee Schedule Worksheets
7. Draft Resolution Establishing Land Values and Improvement Costs