REPORT TO PARKS & RECREATION COMMISSION
SUBJECT
Title
Review and Make Recommendations to City Council regarding the Land Valuation Appraisal Report Dated December 31, 2023, Park Development Costs Proposed to be Used in the Calculation of Parkland In-Lieu Fees for New Residential Development for FY 2024/25, and Proposed Occupant Density Data Updates
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 in recent years have been brought forward as part of the Municipal Fee Schedule update. There are three primary cost components upon which in-lieu fees are calculated as follows:
(a) the average cost to purchase land for parks in Santa Clara as determined by an annual land evaluation appraisal;
(b) 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
(c) the cost to administer the program, including the review of residential development plans for compliance with the ordinance (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). This year’s review of In-Lieu Fees was delayed due to workload issues as well as a desire to update the housing density information with the latest U.S. Census Bureau data in accordance with the Park and Recreational Land Ordinance. The latest U.S. Census Bureau data was issued in September 2024 and has been incorporated into this report.
The purpose of this report is to: 1) share the findings of the 2023 land valuation report; 2) recommend adjustments to density figures for single and multi-family developments based on the September 2024 U.S. Census Bureau American Community Survey; 3) recommend a 9.4% adjustment to the park improvement value in accordance with the latest CCCI figures; and 4) solicit comments from the Commission and public regarding the proposed adjustments to the In-Lieu Fees with a recommendation that both Quimby and MFA fees become effective simultaneously, in accordance with state law, sixty (60) days following Council adoption and remain in effect for the remainder of the fiscal year 2024/25.
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). 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 by email.
On March 1, 2024, the City’s consultant, Frank Schmidt & Associates, completed the annual land valuation study with a valuation date of December 31, 2023 (Attachment 3). Table 1 below provides the 2023 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 |
12-31-23 |
12-31-22 |
% Chg |
12-31-21 |
12-31-20 |
12-31-19 |
12-31-17 |
|
95050 |
$5.455M |
$5.500M |
-0.8% |
$5.715M |
$4.720M |
$4.385M |
$3.738M |
|
95051 |
$5.650M |
$5.840M |
-3.3% |
$6.000M |
$5.120M |
$4.630M |
$3.993M |
|
95054 |
$5.255M |
$5.240M |
+0.3% |
$5.495M |
$4.830M |
$4.495M |
$4.035M |
As noted in the table above, the average land value per acre dropped in two of the three zip codes with a slight increase in 95054 in comparison to the 2022 Land Valuation Appraisal Report.
The 2023 Annual Land Valuation appraisal report is posted on the City website. The two-week comment period was open from October 1, 2024 through October 15, 2024. 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 to construct the park improvements (landscape, furnishings, buildings, etc.), is based on the average cost per capita for the City’s existing park system improvements to assure a fair and equitable distribution of costs to be recovered for development of park assets and features to serve the new residents at the same standard as existing residents.
On April 18, 2023, the City Council adopted Resolution No. 23-9220 (Attachment 4) setting the annual changes in the park improvement value used in the calculation of In- Lieu Fees to correspond to the changes, (increases or decreases), in the Department of General Services California Construction Cost Index for the previous calendar year as reported by the Real Estate Services Division for the Bay Area. However, such annual increases and decreases shall be limited to no more than a change of 10% of the base value, and in no case shall the increased or decreased base value be more than 100% cost recovery.
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.
From 2018 to 2023, construction costs have increased 39.8%, based on the Department of General Services California Construction Cost Index (CCCI) reported by the Real Estate Services Division (Table 2 below).
|
Table 2 Park Improvements/Construction Cost Escalation 2017-23 |
|
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
|
- |
+1.3% |
+3.6% |
+2.8% |
+13.4% |
+9.3% |
+9.4% |
|
$3,471 |
$3,516 |
$3,643 |
$3,745 |
$4,246 |
$4,641 |
$5,077 |
In accordance with Council’s adopted policy, it is recommended that the current park improvement value of $3,818 be adjusted in 2024 by the 2023 CCCI value of 9.4% to $4,177.
Updated Census Information
Chapter 17.35 of the City Code defines average density as “the average number of persons per household, as established by City Council resolution, in accordance with the most recent available Federal Census data”. In September 2024, the U.S. Census Bureau released updated information which changed the average density for single-family developments in Santa Clara from 2.98 to 2.84 and for multi-family density projects from 2.40 to 1.92. The new average density figures have been incorporated into the calculations for the proposed 2024 Park In-Lieu Fees.
In addition to the reduction in appraised land values, it should be noted that the use of updated census information contributed to fee decreases in every area of the City with decreases in single family developments ranging from $1,619 to $3,658 for Quimby regulated projects and $1,338 to $3,103 for MFA projects. A similar decrease will occur for multi-family developments with Quimby-regulated projects declining between $8,777 and $10,860 and MFA projects declining between $7,760 and $9,568 based on zip code. It will be important to continue to monitor the impact of changes in density of housing development and the correlating impact on park in-lieu fees.
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, in so far 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 projects with allowable uses of the funds that may include: acquisition of parkland and development of neighborhood and community parks, and for Quimby, under certain conditions, 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 FY2024/25
The changes in average land value per acre as shown in Table 1, coupled with updated housing density information from the census data when applied to the fee calculation worksheet, result in a reduction in park in-lieu fees as follows:
|
Quimby Current Revised |
Change |
|
95050 |
Single Family |
61,759 |
59,507 |
-2,252 |
|
|
Multi Family |
49,738 |
40,230 |
-9,508 |
|
95051 |
Single Family |
64,859 |
61,201 |
-3,658 |
|
|
Multi Family |
52,235 |
41,375 |
-10,860 |
|
95054 |
Single Family |
59,388 |
57,769 |
-1,619 |
|
|
Multi Family |
47,829 |
39,055 |
-8,774 |
|
Mitigation Fee Act (MFA) |
Change |
|
95050 |
Single Family |
55,072 |
53,186 |
-1,886 |
|
|
Multi Family |
44,353 |
35,956 |
-8,397 |
|
95051 |
Single Family |
57,758 |
54,655 |
-3,103 |
|
|
Multi Family |
46,517 |
36,949 |
-9,568 |
|
95054 |
Single Family |
53,017 |
51,679 |
-1,338 |
|
|
Multi Family |
42,698 |
34,938 |
-7,760 |
To further illustrate how in-lieu fees are calculated, the worksheets used by staff have been updated and are attached to this report. (Attachment 5) Please note 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).
Next Steps
The purpose of this item is to seek input from the Commission and the public regarding the proposed changes. A summary of the comments, questions and responses will then be provided to City Council.
In-Lieu Fees will be proposed in the form of a draft Resolution for consideration by the City Council at a public hearing. The anticipated date of the Public Hearing is November 12, 2024. Prior Council resolutions and other related information is provided on the City’s website Park Impact Fees <https://www.santaclaraca.gov/our-city/departments-g-z/parks-recreation/park-impact-fees%20.> page.
Fee Implementation
In conformance with State law, the proposed Resolution will provide the required findings of MFA and Quimby. In addition, according to State Law, development impact fees may only take effect 60 days after adoption of the fee. Therefore, it is recommended that the 2024 in-lieu fees for both Quimby and MFA projects become effective 60 days following the adoption of the Parkland In-Lieu Fee Resolution and remain in effective for the remainder of FY 2024/25.
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
There is no impact to the General Fund for Commission 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 (multifamily versus single family), 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 eligible affordable housing and senior housing projects receive a 15% credit toward the fees due in-lieu of parkland dedication). 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, now that the In-Lieu Fee Policy is set at 100% cost recovery, the In-Lieu Fee program should 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 funding sources 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.
PUBLIC CONTACT
Public contact was made by posting the Commission 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
It is recommended that the Commission solicit input from the public and provide
recommendations to the City Council on the following:
a. The Land Valuation Appraisal Report dated December 31, 2023;
b. The proposed adjustment in the single-family housing density factor from 2.98 to 2.84 in alignment with updated 2024 U.S. Census Bureau American Community Survey data;
c. The proposed adjustment in the multi-family housing density factor from 2.40 to 1.92 in alignment with updated 2024 U.S. Census Bureau American Community Survey data; and
d. The proposed adjustment of 9.4% to the Park Improvement Value in alignment with the State of California, Department of General Services Construction Cost Index (CCCI) and prior Council direction.
Staff
Prepared by: Gina Saporito, Staff Analyst
Approved by: Cynthia Bojorquez, Acting Director of Parks & Recreation/Assistant City Manager
ATTACHMENTS
1. Nexus Study
2. Supplemental Instructions for the Appraisal of the Fair Market Value of Land
3. 2023 Land Valuation Appraisal
4. Resolution No. 23-9220
5. Draft Park In-Lieu Fee Schedule Worksheets