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SR-407-000-05 (4) e t/tJr~t7t?~ - ~ · ~-A JAti 1 .j - , CA:RMM:JSH:jhord2ds City Council Meeting 1-14-86 Santa Monica, California STAFF REPORT TO: Mayor and City Council FROM: City Attorney SUBJECT: Ordinance Establishing In-Lieu Fee Option For Certain Programs of the Housing Element and Land Use and Circulation Elements At its meeting on March 26, 1985, the city Council directed the City Attorney to prepare an ordinance providing for fees in lieu of on-site inclusionary housing units for small-scale residential projects. In addition, on November 12, 1985, the City council directed the City Attorney to prepare an ordinance providing fees in lieu of project mitigation measures under the Land Use and circulation Element of the General Plan. In response to this direction, the accompanying ordinance was prepared and presented to the City Council for consideration at its November 26, 1985, meeting. At its meeting on November 26, 1985, the City Council continued consideration of the ordinance to its first meeting in January, 1986. At the present time I the City has been enforcing these General Plan obligations by requiring the actual construction of units or dedication of park lands in the specific manner detailed in the General Plan elements. (In connection with office development mi tigation measures under the Land Use and Circulation Elements, the planning commission has authorized - 1 - ?-A JAN 1 4 19S:i e e developers to contract with non-profit corporations to satisfy the mitigation measures.) No mechanism currently exists for satisfying these requirements by payment of fees to the city. The amount of the in-lieu fees for inclusionary housing has been calculated by the community and Economic Development Department. The fee was calculated by determining the current market costs for land and construction necessary for development of affordable residential housing units. The ability of households to pay for this housing was based upon a standard methodology which uses specific HUD income categories and assumes that such households could pay at least 25% of their gross household income for housing. This ability to make a monthly payment was amortized over a thirty year term to correspond to typical long-term financing loans. The in-lieu fee represents the difference between the current value of this projected ability to pay and the actual costs of constructing the housing. Program 12 of the Housing Element provides that the inclusionary housing program should provide housing that is affordable to households from 0% to 120% of median income ranges. The proposed in-lieu fee was calculated on the basis of providing housing affordable to households at 100% of median income. This figure was selected because it is a reasonable midpoint for developing a blend of housing Which would be affordable across the low to moderate income spectrum. The amount and method of payment of the in-lieu fees for office development is based precisely on the terms and conditions - 2 - e e set forth in the Land Use and Circulation Elements,which permits office developers to satisfy the project mitigation program by payment of in-lieu fees. The following is a section by section analysis of the proposed ordinance: $ection 1. This section provides that market-rate housing projects of between 3 and 9 units may satisfy Program 12 of the Housing Element by paying a specific in-lieu fee. The amount of the fee is $62,292.00 for projects of 3-5 units and $124,585 for projects of 6-9 units. The amount of the fee must be adjusted for inflation by the percentage change in the CPI between the date of the adoption of this ordinance and the date of payment. The payment is due in full prior to the issuance of a Certificate of Occupancy for the project. Payment must be secured by delivering an irrevocable letter of credit to the city before a building permit is issued. section 2. This section provides that new office developments which are SUbject to the project Mitigation Program of the Land Use Element may provide a fee in-lieu of the housing and park obligations. The fee is based on a formula set forth in the Land Use Element which is calculated based upon $2.25 for the first 15,000 square feet of net rentable square footage and $5.00 for the remainder of the net rentable square footage.The fee is based upon land and construction cost estimates as of the date the Land Use Element was adopted in October, 1984. As a result, - 3 - e e these fees must be adjusted by inflation to reflect intervening changes in costs. At least 25% of the fee is due prior to the certificate of Occupancy with the balance due in equal annual installments within 3 years of the issuance of the Certificate of Occupancy. The fee must be secured by an irrevocable letter of credit which must be filed with the city before a building permit will issue for the project. Section 3, 4 and 5. These sections are standard provisions in all ordinances adopted by the City. RECOMMENDATION It is respectfully recommended that the attached ordinance be introduced for first reading. PREPARED BY: Robert M. Myers, city Attorney Jonathan S. Horne, Deputy city Attorney - 4 - e e CA:RMM:JSH:jhord2d City Council Meeting 1-14-86 Santa Monica, California ORDINANCE NUMBER (City Council Series) AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA ESTABLISHING IN-LIEU FEES FOR COMPLIANCE WITH CERTAIN PROGRAMS OF THE HOUSING ELEMENT AND LAND USE AND CIRCULATION ELEMENTS THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES ORDAIN AS FOLLOWS: SECTION 1. In-Lieu Fees For Inclusionary Housinq. (a) Whenever the City requires as a condition of approval of a market-rate housing development of between three units and nine units, inclusive, that the development include inclusionary housing units pursuant to Program 12 of the Housing Element of the General Plan, the developer may in lieu of providing such inclusionary housing pay a fee to the city in accordance with the provisions of this Section. (b) The amount of the fee pursuant to this section shall be determined as follows: $62,292.00 for proj ects of 3-5 units and $124,585.00 for projects of 6-9 units. Project size does not include any density bonus provided pursuant to Government Code section 65915. - 1 - e e (c) Any fee pursuant to this section shall be adjusted for inflation by the percentage change in the Consumer Price Index ("CPI") between January, 1986 through the month in which payment is made. For purposes of this section, CPI shall mean the index for Urban Wage Earners and Clerical Workers for the Los Angeles/Long Beach statistical area, as published by the united States Department of Labor, Bureau of Labor Statistics. (d) Any fee pursuant to this section shall be paid in full before a Certificate of Occupancy is issued for the housing project. (e) Any fee required by this section shall be secured by execution of an irrevocable letter of credit in favor of the City or other security acceptable to the City for the total amount of the obligation. The letter of credit or other acceptable security shall be delivered to the City prior to the issuance of a building permit for the development. (f) Any payment made pursuant to this Section shall be deposited in a Reserve Account in the General Fund to be used only for development of low and moderate income housing. (g) This Section shall not apply to any housing development for which an agreement has been executed between the city and developer to provide for the inclusionary unit on-site. SECTION 2. In-Lieu Fees for Office Development. (a) Whenever the city requires as a condition of approval for the development of any general office development, - 2 - - e including medical office buildings, in excess of 15,000 square feet of new construction or 10,000 square feet of additions to existing development, that such development satisfy the Project Mitigation Measures of the Land Use and Circulation Elements of the General Plan, the developer may satisfy this requirement by payment of a lieu fee to the City in accordance with the provisions of this section. (b) The amount of the fee pursuant to this Section shall be determined as follows: $2.25 per square foot for the first 15,000 square feet of net rental square footage and $5.00 per square foot for the remainder of the net rentable square footage. The net rentable square footage of a building shall be the total square footage of the projects minus the exterior and load bearing walls, elevator shafts, stairwells, equipment rooms, and parking. (c) Any fee pursuant to this section shall be adjusted for inflation by the percentage change in the Consumer Price Index ("CPI") between October, 1984 through the month in which payment is made. For purposes of this section, CPI shall mean the index for Urban Wage Earners and Clerical Workers for the Los Angeles/Long Beach statistical area, as published by the United states Department of Labor, Bureau of Labor Statistics. (d) Any payment required by this Section shall be made by payment of at least twenty-five percent (25%) of the total Obligation prior to the issuance of a Certificate of occupany for the development. The balance of the fee is due in equal annual - 3 - e e installments with payment in full no later than three years after the issuance of the Certificate of Occupancy. All payments are subject to the adjustment for inflation as provided in subsection (c) . (e) Any fee required by this section shall be secured by execution of an irrevocable letter of credit or other form of security acceptable to the City in favor of the City for the full amount of the obligation. The letter of credit or other acceptable security shall be delivered to the City prior to the issuance of a building permit for the development. (f) Seventy-two percent of each payment made pursuant to this section shall be deposited in a Reserve Account in the General Fund to be used exclusively to develop low and moderate income housing and twenty-eight percent of each payment made pursuant to this Section shall be deposited in a Reserve Account in the General Fund to be used exclusively for park acquisition and development. (g) This Section shall not apply to any office development for which the City has approved an agreement between the developer and a non-profit corporation to satisfy the project mitigation measures of the Land Use and Circulation Elements. SECTION 3. Inconsistent provisions. Any provision of the Municipal Code or appendices thereto inconsistent with the provisions of this ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to that extent necessary to effect the provisions of this ordinance. - 4 - e - SECTION 4 . Severability. If any section, subsection, sentence, clause, or phrase of this ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of the ordinance. The City council hereby declares that it would have passed this ordinance and each and every section, subsection, sentence, clause or phrase not declared invalid or unconstitutional without regard to whether any portion of the ordinance would be subsequently declared invalid or unconstitutional. SECTION 5. Execution. The Mayor shall sign and the City Clerk shall cause the same to be published once in the official newspaper within 15 days after its adoption. The ordinance shall become effective 30 days from its adoption. APPROVED AS TO FORM: ~'-'~"- ROBERT M. MYERS city Attorney 1) - - 5 -