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PCD :AA:AS F:\CityPlan n ing\Share\COU NC I L \STRPT\2006\CH I LDCARE March 28.doc
Council Mtg: March 28, 2006 Santa Monica, California
TO: Mayor and Councilmembers
FROM: City Staff
SUBJECT: Discussion of Analysis and Recommendation to the City Council
Regarding a Child Care Linkage Program and Developer Cultural Arts
Requirements.
INTRODUCTION
The City Council directed staff to undertake analyses to assess the impacts that new
development has on child care and the arts. In 2003, the economic consulting firm,
Keyser Marston was contracted to prepare these analyses, with the intent that if impacts
were identified, the consultant would develop a recommendation for fee ordinances or
other developer requirements to off-set the impacts of new development on child care
and arts. Keyser Marston's reports, The Child Care Linkage Program and Developer
Cu/tural Arts Requirements, are included in Attachments D and E respectively.
In October 2005 the Child Care Task Force, Arts Commission and Public Art Committee
reviewed the two studies and these comments were incorporated into the
recommendations presented to Planning Commission in December. The Planning
Commission reviewed the studies and unanimously supported the staff
recommendations with several additional comments that are discussed under PlanninQ
Commission Policy Discussion later in this report.
1
SA
llPR 1 1 'OMi
This staff report recommends that the City Council receive input, discuss the consultant
reports and staff recommendations and give staff direction regarding ordinances to
implement a Childcare Linkage Fee and Developer Cultural Arts Requirement.
BACKGROUND
Beginning in 1981 the City demonstrated its commitment to meeting the child care
needs of resident and nonresident workers with the inclusion of child care in the multi
use Development Agreement for the Colorado Place I & II in the office district. The City
has continued these efforts in six subsequent Development Agreements. When the
Council adopted the Child Care Master Plan and Child Care Policy in 1991, the City set
forth a policy and framework to address the existing shortage in child care facilities for
resident and non-resident full time workers. The document sets forth a goal that the
City integrate the child care needs of those who live or work in the community into the
City's land use planning process.
Similarly, the 1992 Cultural Arts Master Plan and its 1996 update identified the need to
off-set development impacts to community cultural resources as the City becomes more
built-out. The City has a history of supporting culture and arts in relation to new
construction via the City's Public Percent for Art Program which was enacted in 1986
requiring that one percent of public projects be set aside for on-site art. Since 1981, the
City has also negotiated at least seven development agreements that have included a
public art requirement. The requirement has been satisfied by both the provision of on-
site art and payment of a fee in lieu of installing on-site art.
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The City Council continues to recognize the importance of child care, and arts and
culture in the City. The Council directed staff to undertake analyses to assess the
impacts that new development has on these resources, and potentially develop fee
ordinances or other developer requirements to off-set the impacts of new development
on child care and arts in the City.
In 2003 the City contracted with Keyser Marston Associates, a consulting firm
specializing in real estate and urban economics with significant experience in preparing
nexus analyses and advising cities on fee programs, to conduct both the nexus
analyses, and, if deemed appropriate, assist in the development of fee programs for
both child care and arts. For the arts component of the projects, Keyser Marston was
assisted by Carol Goldstein, a consultant with substantial experience in cultural and
public art planning.
Early in the scoping process with the consultant, it became apparent that the City
Council's parallel direction for child care and art would require different analyses for
each subject. A number of cities have undertaken a nexus analysis to establish the
connection between new development and the need for child care and the
establishment of an appropriate child care fee. Therefore, the key task identified for the
child care analysis was the development of an appropriate fee based on child care
demand and facility costs.
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In contrast, in establishing an art fee, most cities impose a Percent for Art or Art in
Public Places requirement rather than undertake a detailed nexus analysis. The fee
imposed is typically one percent of the total building valuation. In Ehrlich v. City of
Culver City, 1996, the California Supreme Court upheld an art in public places
ordinance. This ordinance mandated that a developer of a project of specified size
either pay a fee to the city art fund (1 % of the total project valuation) or contribute an
approved work of art of an equivalent value. In this case, the Supreme Court
determined that this type of fee was not a development exaction, but was more akin to a
traditional aesthetic land use regulation like other design and landscape requirements
imposed by cities. The extent to which this decision can be relied upon to support the
use of these art fees for a wide range of purposes is unclear, although it is not an
uncommon practice among cities.
To best respond to the Council's direction, two separate studies were prepared.
. The Child Care Linkage Program report analyzes and identifies a mitigation fee
responding to increased demand caused by new development. The fee is
determined on a per square foot basis or, in some cases, the option to develop
child care on-site.
. The Developer Cultural Arts Requirements report evaluates other cities'
mechanisms for off-setting the effects of new development on the culture and
aesthetics of the City, and recommends a similar program but one tailored
specifically to the needs of Santa Monica. The developer contribution is based on
a percent of building permit valuation to be met either through installation of art
on site or via the payment of an in-lieu fee.
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ANAL YSIS
Child Care Linkaqe Proqram Report
In creating the data framework for the Consultant's report, City Planning and Human
Services staff worked closely with the Santa Monica Child Care and Early Education
Task Force. In developing the analysis framework, staff and the Task Force determined
that:
1) The study should address the needs of employers and employees as well as
residents.
2) The 2000 Census shows a declining trend in very young children in Santa
Monica, but a well documented growth in employment. However, because much
of the current development in Santa Monica is residential, the report should
include an analysis of residential data and identify a potential fee even though
Santa Monica may choose not to proceed with a residential fee at this time.
3) The consultant should survey several Westside centers to determine an average
cost of developing child care in Santa Monica and its vicinity. A number of
scenarios should be considered, including one with land that is donated, and one
with shared parking solutions which reduce land costs. In order to accurately
evaluate the cost of developing child care the study should look at land value
both as part of the total project cost, and separately. A pro-forma development
cost for a child care center in Santa Monica should be prepared, using several
different assumptions with respect to site acquisition cost. Ultimately, the
consultant developed three child care center cost scenarios; (1) a construction
cost that does not include land acquisition, (2) a project cost using 2005 land
values assuming the necessity of land acquisition, and (3) an average of the two.
4) The consultant should use Santa Monica standards for employment density and
also track construction history with employment growth. The study found the
number of employees per square foot per building was comparable with national
averages.
The methodology for determining a per square foot cost relates demand (number of
applicable children) to facility costs. The report concludes:
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. For every 1,000 employees, there is a need for an equivalent of 35.68 child care
spaces in a center near the work place.
. For every 100 households, there would be a need for an equivalent of .003
spaces in a child care center near the work place and 0.9 spaces in a family
child care home.
. Based on data from recently developed child care centers in the west Los
Angeles area, a fair evaluation of cost per child care space is $18,500 without
land acquisition and $55,400 with land acquisition.
Translating these findings into a per square foot amount for newly constructed
commercial buildings and per unit amounts results in the following figures:
Use Without Land With Land Average
Office 2.64 7.91 5.27
Retail 1.89 5.65 3.77
Hotel 1.32 3.95 2.64
Residential/Unit 56.00 166.00 111.00
Keyser Marston recommends setting the fee in relation to other project mitigation fees
already charged by the City. In addition, as most previous centers have been built on
donated or institutional land, and there are limited opportunities remaining for donated
sites, the consultant recommends developing an ordinance which uses the average
between the project costs with and without land as a conservative maximum fee level.
Staff recommends:
· That a fee on new residential construction not be included at this time. Because
the 2000 census shows a downward trend in the number of young children
residing in Santa Monica, the projected amount of mitigation fee per unit is very
low. Staff is aware that as the public process for the updated Land Use Element
moves forward, there appears to be a desire to create land use regulation that
will encourage the development of housing for families, providing potential to
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reverse the trend. When the 2010 Census is complete, City decision-makers may
wish to re-evaluate the need for a residential fee if the census shows an increase
in the number of young children in the City. If trends change, the framework for
determining the fee will have already been established.
. The fee be set in the vicinity of the average cost per square foot as noted above,
. Thresholds be consistent with the current development review threshold of 7,500
square feet.
. Use of fee money should be as flexible as possible and include the potential for
repair and renovation of existing facilities to accommodate additional children.
. Use of an escalator formula so that the fee increases with inflation.
. Developer fees would be collected at the time of building permit issuance, and
held in a separate account to be dispersed for the specific uses as designated by
the detailed criteria approved at the time of the ordinance adoption.
In crafting a recommendation, staff considered an alternative approach based on a
lower fee structure consistent with fees applied in other communities. In researching this
option, staff recognized that a lower fee structure would not reflect the true cost of
development and result in a significant shortfall between development impact and the
mitigation.
Developer Cultural Arts Requirement Report
The City of Santa Monica has a longstanding and extensive history of adopting
regulations, programs and policies which regulate aesthetics of both public and private
development and promote the arts and cultural enrichment of the City. In 1974, the City
adopted Santa Monica Municipal Code Chapter 9.32 which established standards and
guidelines for the review of the aesthetic qualities of new development. As stated in
Section 9.32.010, the purpose of this ordinance is in part, "to promote the public health,
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safety, and general welfare by establishing [procedures and regulations] ... to preserve
existing areas of natural beauty [or] cultural importance; to assure that buildings,
structures, signs or other developments are in good taste, good design, harmonious
with surrounding developments and in general contribute to the preservation of Santa
Monica's reputation as a place of beauty, spaciousness and quality...." The City has
adopted numerous other comprehensive plans and development guidelines which
directly promote the City's overall aesthetic and cultural interests and values.
The cultural identity of Santa Monica is partly defined by the built environment and the
land use policies that allow for a unique mix of cultural resources. This cultural identity is
a key component of the City's economic vitality which benefits both from the creative
businesses which locate here and from visitors who come to enjoy this creative
environment. As development and revitalization of properties take place within the City,
land values rise, and cultural and artistic venues and environments can rarely compete
for more land in an era of dramatically escalating land costs. The opportunities for
creative and artistic resources become diminished, and the City's physical environment
is impacted.
In light of these circumstances, Council directed staff to analyze the potential for
establishing a program that would require private developers to contribute to the arts
and cultural enrichment of the City. Among other factors, such a program would be
based on the recognition that development of cultural and artistic assets should be
supported, in part, by developers whose projects reduce the potential to provide these
resources, and be an appropriate aesthetic condition imposed on new development.
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The impacts of new projects that continue to build out the urban environment can, in
part, be mitigated by the provision of public art and other cultural resources.
Other Jurisdictions and Analysis of Developer Requirement Programs:
Since the requirement to provide either art or a cash equivalent is similar to traditional
land use design regulations it is not considered a development exaction. Most cities in
California that include a developer fee related to arts and culture choose to implement a
"Percent for Art" program. The most prevalent program requires the developer to make
a contribution equal to 1 % of the project building permit valuation with either on-site art,
or an in-lieu payment to an established trust fund. The consultant's report notes seven
California cities that use their in-lieu fees for programs, performing arts, and other non-
capital expenditures.
Overview of Arts and Culture in Santa Monica:
The City has a Cultural Arts Masterplan that was adopted in 1996. In 2005, the Cultural
Affairs Division received Council direction to prepare a new Cultural Master Plan. In
May, 2005 the City undertook a cultural planning visioning process which consisted of
two facilitated community meetings and a comprehensive written survey. Each visioning
session was attended by approximately 35 people and approximately 100 surveys were
completed. The intent of both the survey and the sessions were to inform the public that
the City was embarking on the cultural planning process and to explore community
priorities for the arts. One of the themes that emerged from the initial 2005 visioning
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process was a cultural arts requirement that could maintain the outstanding quality of
culture and arts in the City
The creation of a new Master Plan will ultimately update the goals in light of the
achievement of earlier goals, changing priorities, and the new Land Use Element. As
part of the Cultural Master Plan process the City will survey both workers and residents
to establish use patterns and unmet needs for cultural resources. This data in
conjunction with related use projections will clarify the community cultural needs and
priorities.
Framework for a Developer Supported Cultural Arts Requirements for Santa Monica:
The consultant's report recommends, and staff concurs, that the City implement a
Percent for Art Program with:
. A percentage of building permit valuation greater than the 1 % standard used by
many other cities,
. A substantial incentive for participation in an in-lieu fund by reducing the percent
contribution if payment is made instead of providing on-site art,
. Establishment of a square foot threshold, below which projects are exempt,
. Administration by the City's Cultural Affairs Division for review and approval by
the Arts Commission and the Public Art Committee, although additional staffing
would be necessary to implement this type of program.
A percentage greater than 1 % is justified due to two factors.
1) On average approximately 35 percent of the costs for on-site art requirements
is devoted to indirect costs such as transportation, installation, consultant
services, and insurance. One percent of a five million dollar project would
result in a $50,000 arts contribution with likely budget of $32,500 for artist's
fee and fabrication. It is difficult to create high quality site-specific works of art
of the high standard expected in Santa Monica with a design and fabrication
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budget of less than $50,000. Some cities are proposing a higher percent to
reflect these issues. As an example, the City of San Diego has raised the
percentage for City projects to 2% in order to allow for a higher quality of art
project; and
2) In Santa Monica, building permit valuation typically represents 50% or less of
the project cost. Much of the remaining 50% of the total cost represents land
acquisition. Because of the high land value, and in order to be commensurate
with other jurisdictions for which the building permit represents a greater
percent of the physical project cost, the City could consider a higher
percentage.
The consultant recommends a discount of 25-50% for payment to the in-lieu fund for
several reasons:
. The project developer does not realize the re-sale value of installed art if the
developer chooses to contribute to the fund rather than place art on-site.
. Implementation and administration costs of evaluating the quality and
appropriateness of a number of developer proposed art works would be
considerably higher than administering a fund overseen by the Public Art
Committee and Arts Commission.
Staff proposes the following framework for the program:
. A percentage contribution of 2% for on-site art and 1 % for an in-lieu contribution.
The 2% on-site option reflects the appropriate percentage of building permit
valuation in relation to entire project cost (including land) to achieve a high quality
art product.
The 1 % discount for the in-lieu contribution is intended to both reflect the reduced
value to the developer if the art is located off-site, and would also offer the City
flexibility in meeting identified community and cultural needs.
· 7,500 square foot threshold for commercial projects, and to exempt residential
projects of less than five units, but include all projects five units and above,
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. An administrative process that places Arts Commission review in advance of
Architectural Review Board or Planning Commission review.
. Use of funds for the development and expansion of community cultural resources
not limited to visual art, including development of new cultural facilities, grants to
support existing programs and venues, repair and maintenance of existing works
of art, and other uses as deemed appropriate.
In crafting the recommendations staff considered a number of alternative ways of
structuring such a requirement, including using the same percent ratio between onsite
art and the in-lieu option. However, in analyzing each of the alternatives in light of both
the results of existing programs and the specific circumstances in Santa Monica, staff
believes this approach is the most appropriate for the following key reasons:
. Ensuring that developers allocate adequate funding for high quality cultural and
artistic elements that significantly enhance the public realm.
. Encouraging developers that are not committed to developing site-specific artistic
or cultural components of their projects to contribute to established community
cultural priorities by providing a significant discount for the in-lieu option. Santa
Monica is a small city where the contribution to the fund (or funds) could clearly
be tied to specific civic projects of a significant scale with city-wide value.
. Balancing the higher staff costs associated with administering the on-site
requirement with the more limited staff impact of managing the fund(s).
. Allowing for the flexibility and community specific nature that are the hallmarks of
such requirements in other cities that are acknowledged to have successful
programs.
Public Input Prior to PlanninQ Commission MeetinQ:
Prior to the Planning Commission hearing staff, met with the Child Care Task Force,
and the Arts Commission and Public Arts Committee in order to include their
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commentary on the consultant's reports in the presentation to the Planning
Commission.
Child Care and Early Education Task Force Discussion:
City Planning and Human Services Division Staff met with the Child Care and Early
Education Task Force Policy Workgroup on October 10, 2005. The Task Force
discussed the following issues:
. Fee- The Committee supported the concept and methodology presented in the
consultant report. The group recognized that many of the existing Child Care
Centers in the City were not required to buy their land, but were concerned that
in the future, as the City continues to develop, institutional and donated land will
become less available and land purchase will become more necessary. The Task
Force has submitted a letter in support of the proposed program. (Attachment A)
. Thresholds- The Committee supported the recommendations on a fee for
commercial development and the proposed threshold of 7500 square feet to be
consistent with the Development Review Standards.
. Residential fee-The Committee did not want to recommend that a child care fee
be placed on residential development given the very small amount that would be
collected.
. The Committee wanted to consider tying the fee to a Consumer Price Index
escalator similar to the process for the existing Office Mitigation fee in order to
ensure that the fee will remain valid in relation to inflation and other changing
costs.
. A key goal expressed by the Committee was the importance of being able to use
the fee to maintain, remodel and rehabilitate existing facilities. This goal is
equally important as creating new facilities.
. The Committee supported exploring the potential for uSing the fees towards
subsidizing enrollment for low income families.
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Arts Commission and Public Arts Committee Discussion:
The consultants made a presentation at a special joint meeting of the Arts Commission
and its Public Art Committee on October 17, 2005, The Arts Commission
recommended approval of the recommendations presented in the consultant's report.
The Arts Commission's Public Art Committee voted separately on a similar motion and
also recommended approval.
The group was in agreement that 1 % was the appropriate amount for the in lieu fee, but
was divided on the issue of what specific percentage should be recommended for on-
site art. In addition, based on the discussion of the Child Care Linkage fee
recommendations, there was some concern that the percent for arts requirement should
not be applied to residential buildings. However, the consultant explained that the
requirements were different in concept, and that the large amount of multi-unit
residential construction in the City has a clear relationship to the city's overall aesthetic.
It is therefore appropriate to apply a percent fee to multi-family residential construction.
In addition, the Commission reiterated a long held concern regarding the need for
funding to support cultural projects and initiatives that go beyond the visual arts, and its
desire to see this requirement address that need.
PlanninQ Commission Policv Discussion
The Planning Commission discussed the two reports at its December 7, 2005 meeting.
There were a number of public speakers who spoke in support of the concepts
presented for both the Child Care Linkage Program and the Developer Cultural Arts
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Requirements. There were no speakers in opposition. The Planning Commission
unanimously approved staff's recommendations with these specific additional
recommendations:
1) For the Child Care Linkage Program the Planning Commission recommended:
. Inclusion of a fee of $111.00 per unit for residential construction as the
average between values with and without land as noted in the
Consultant's report. The Planning Commission decided to recommend to
Council that the fee include residential construction in order to fully
support child care for Santa Monica residents, despite the likelihood of a
minimal amount to be collected, with the intent that if the trend changes in
the direction of more young children residents, the process will already
have been established. Staff recognizes the validity of this approach, but
based on the input from the Child Care Task Force, as well as concerns
about the potential costs for administrating a program with minimal return,
maintains the original position of not including the residential fee at this
time.
· The Planning Commission recommended that staff evaluate the
appropriate escalation formula in the same manner as the Affordable
Housing Production Program fee escalator.
· The Planning Commission deferred the discussion of use of the fee
money to the City Attorney's analysis of what is permitted under the
statute,
. The Commission asked for additional information regarding the current
child care vacancy rate to be included in the presentation to Council. Staff
has done additional research based on a LA County Office of Child Care
2004 Child Care Needs Assessment (released in January 2006) and a
City of Santa Monica survey conducted by phone in January 2006.
The LA County survey uses 2004 data, and is based on a set of
assumptions such as population data and estimated use of care by type of
infants and preschool and the report states that estimating need or
demand is difficult because families use child care and development
services for a variety of reasons. The LA County data shows the City of
Santa Monica zip codes meet 21 percent of the need for infant care and
98 percent of the need for preschool care.
The staff phone survey conducted in January 2006 uses current raw data
from existing wait lists and arrives at a slightly different
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conclusion. Consistent with the commitment to meet the need of working
families, staff focused the survey on centers that serve infants and are
open full day.
While the surveys use different types of data, they show a clear demand
for the types of child care that serve working families. Of the 47 centers,
only 7 serve infants. These centers had 367 children on waitlists for 177
spaces. Discounting by 50% for the likelihood of having a child on more
than one list, this data can be interpreted to show that 49% of the infant
need is being met.
There are 27 centers that are open full day. 23 of these centers responded
to staff's request for information. For 1064 preschool spaces there are a
total number 434 children on the waitlists. Using the same discount, this
data can be interpreted to show that 83% of the need for pre-schoolers is
being met.
2) For the Developer Cultural Arts Requirement, the Planning Commission
recommended:
. The Planning Commission concurred with the staff recommendation for a
2.0% of building permit valuation contribution for on-site art work because of
high land value and recognition that building permit valuation in Santa Monica
may actually represent less of the total project cost than in other cities, and
that the expectation for high quality art requires a commensurate design and
fabrication budget. Staff supports the Planning Commission's concept of a
higher percentage for the in-lieu fee, while recognizing the benefit of allowing
for a significant incentive to provide an in-lieu contribution.
The Planning Commission also recommended inclusion of an incentive for
developing on-site art by using the development standards in the Zoning
Ordinance to allow incentives such as reduced set-backs or increased height,
or considering exceptional architecture in return for on-site art. The Planning
Commission recommended that these incentives be built into the on-going
Zoning Ordinance update. It has been staff's position that because of the
difficulty and expense of regulating the quality of art for private developers, it
would be preferable to provide a significant incentive for in-lieu contributions.
However, as noted by the Planning Commission, certain projects with a
significant aesthetic impact that included art in the overall concept and design
could make an important contribution to the built environment. Staff believes it
would be appropriate to build in incentives that could be applied to projects of
significant size and presence rather than promote incentives for all levels of
development, and that such an approach could be considered within the
context of the Zoning Ordinance update.
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. The Planning Commission recommended that the administrative process be
flexible so that the order of approvals- Arts Commission, Public Art
Committee, Planning Commission and Architectural Review Board can
remain flexible to address the needs and priorities of a specific project. Staff
agrees with the concept of flexibility, but a specific order of approval that can
vary by type or size of project where necessary would have to be codified.
. The Planning Commission concurred with staff's suggestion that the
appropriate range of uses of in-lieu funds remain open for further analysis
and discussion, and specific categories be outlined for Council
consideration. Potential categories to be considered for in-lieu funds
proposed by staff are;
. A pre-approved list of high priority community cultural projects as
established through the Cultural Master Plan process
. Funding of new and renovation of existing cultural facilities,
. Contribution to City festivals and events,
. Designation of fee to contribute to pre-approved public art works or
events,
. Conservation of existing works of public art,
. Funding of new City cultural programs, and
. Grants to cultural organizations.
The Planning Commission also voted to include subsidized artist's housing as one of
the approved uses for monies collected in the in-lieu fund.
The Planning Commission expressed the importance of monitoring the in-lieu process
to ensure that there is an appropriate relationship between new development and the
art project funded via the fee. Staff believes it would be appropriate to establish a
process to tie the uses of in-lieu funds to the priorities defined in the Community Cultural
Plan, such as establishment of specific cultural districts. The use data developed during
the Cultural Planning process will clarify the appropriate mechanisms. The Planning
Commission especially wanted to note in their recommendation to Council that the
process for evaluating both on-site art and potential in lieu fund projects be designed to
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maintain Santa Monica's high standards of artistic and aesthetic value, and be
evaluated for public accessibility.
Mitiqation Fee Context
In order for the decision makers to evaluate the total percent costs delegated to the
proposed impact requirements, staff has developed the comparison charts in
Attachment B that show development cost for two sample mixed use projects in the
downtown and beachfront areas.
If the Child Care Linkage fee and Developer Arts Requirement with the in-lieu fee option
are implemented as suggested above:
. For a sample mixed-use condominium and retail project, the
combined Child Care and Arts programs will result in 0.7%, of the
total project cost
. For a sample mixed-use retail and office project the combined
Child Care and Arts programs will result in 1.3% of the total
project cost.
BUDGET/FINANCIAL IMPACT
If these ordinances are adopted, additional revenue will be generated that will be
designated for the development of child care centers and community cultural resources.
RECOMMENDATION
It is recommended that the Council that the City Council receive input, discuss the
consultant reports and the Planning Commission recommendations and give specific
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direction to staff relating to the drafting of two ordinances for a Childcare Linkage
Program and Developer Cultural Arts Requirement.
Attachments:
A. January 18, 2006 letter from the CCTF
B. Fee Comparison Chart
C. Child Care Linkage Program Report
D. Developer Cultural Arts Requirements Survey and Evaluation of Options.
Prepared by: Andy Agle, Interim Director, Planning and Community Development
Barbara Stinchfield, Director, Community and Cultural Services
Karen Ginsberg, Assistant Director, Community and Cultural Services
Amanda Schachter, Planning Manager
Mona Miyasato, Acting Manager, Human Services
Jessica Cusick, Cultural Affairs Manager
Paul Foley, Principal Planner
Julie Taren, Senior Administrative Analyst, Child & Family Resource
Coordinator
Sarah Lejeune, Senior Planner
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ATTACHMENT A
JANUARY 18, 2006 LETTER FROM THE CCTF
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~ANTA MONICA
Child Care & Early Education Task Force
TO:
Honorable Mayor Holbrook and Santa Monica City Council Members
FROM:
Santa Monica Child Care and Early Education Task Force
DATE:
January 18, 2006
SUBJECT: Child Care Linkage Program and Fee Ordinance
The members of the Task Force are very pleased that the Child Care Linkage Fee
Ordinance, or Child Care NEXUS study as we have referred to it in the past, is nearing
completion. As you know, implementation of the Fee Ordinance has been a major goal
of the Task Force for many years. We have urged the City to complete this study since
1999, following the controversial Saint John's development agreement in 1998. The
experience at that time illustrated the critical need for a clear, consistent policy that
could be applied to ensure that funding for high quality child care is included when new
development is considered. New commercial/business development must be a partner
in providing access to high quality child care and early education for those who live or
work in Santa Monica.
At our meeting on Wednesday, January 18, 2006, the Task Force reviewed the staff
report and reiterated our long-standing support for the ordinance setting mitigation fees
for child care and early education. Although the Task Force is not able to comment on
the precise amount of the fees imposed, we strongly support the adoption of the Child
Care Linkage with one caveat. We are united in our conviction that the fee should not
apply to residential development. We request that Council follow staff recommendation
to omit this from the final ordinance.
Once again, thank you for bringing this study and the resulting Child Care Linkage to
the forefront this year.
C.C - 80
~$ OV21
ATTACHMENT B
FEE COMPARISON CHART
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Attachment B (Chart I)
Fee and mitigation costs: Comparison between two sample mixed use projects
* Does not include parking
** Assuming $450 per square foot total project cost
*** Assuming $225 per square foot Building Permit Valuation
Residential and Retail- 42,871 sf* Office and Retail- 80,203 sf*
19 Condo units-30,685 sf Retail-13,129 NRA sf
2 affordable units-3,230 sf (includes 4,350 sf restaurant)
4 retail space-S,956 NRA sf Office- 48,488 NRA sf.
Total Project Cost** $19,291,950 $36,091,3!
Existina Fees
Office Miti2ation fee N/A' $391,m
Affordable Housing fee $800,264
(per 2005 ordinance) -
-
Wastewater $31,402 $60,H
Water Demand Mitigation $10,005 $18,9t
Condominium Tax $19,000
Standard Processing Fees $122,561 $115,0]
Existing Fees $983,262 $585,U
Proposed Requirements
Child Care Linkage Fee
$5.27 Office N/A $255, 5:
$3.77 Retail $33,742 $ 49,4~
$2:64 Hotel N/A NI
Developer Cultural Arts $96,460 $180,4~
Requirement
In-Lieu Contribution
1% of Building Permit Valuation"'**
Additional Cost of $130,202 $485,41
Proposed Requirements
% of Total Project Cost 0.7% 1.3'
Total Existing Fees + Proposed $1,113,464 $1,070,6'
Requirements
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ATTACHMENT C
CHILD CARE LINKAGE PROGRAM REPORT
22
~(
Report
Child Care Linkage
Program
Prepared for:
City of Santa Monica
Prepared by:
Keyser Marston Associates, Inc.
November 2005
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TABLE OF CONTENTS
~
Page
Executive Summary
In'troduction
1
A. Background/Context
B. Process
C. Report, Organization
D. Disclaimers
1
1
1
3
I. Analysis Concept, Parameters, and Methodology
5
A. Overview of the Concept and Methodology
B. Analysis Parameters
5
5
1. Building Types
2. Infants, Toddlers, and Preschool Children Only
5
6
C. Capital Costs Only
'"~,
D. Implication on Use of Fee Monies
E. Other Nexus Concept Issues
F. Standard of Research and Data on Child Care
7
8
8
9
II. The Demand for Child Care Associated with Workplaces
11
A. Demand Analysis - Starting with 1,000 Employees
B. Number of Worker Households Represented
C. Employee Households With Children Needing Child Care
D. How Child Care Needs are Met
11
12
12
13
1. National Studies
2. California Studies
13
14
E. Child Care Demand - 1,000 Employees
F. Demand for Child Care Center Spaces Near the Workplace
15
16
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III. The Demand for Child Care Associated with Residents
19
A. Introduction
19
1. Demand Conclusions Restated
2. Analysis Approaches
19
19
B. A Prototypical Child Care Center in Santa Monica
19
1. Development Space Requirements
2. Land Area Required
3. Development Costs
19
20
21
C. Other West Los Angeles Area Child Care Center Costs
22
1. New Construction
2. Rehabilitation
3. Planned Construction
22
23
23
D. Other Child Care Center Averages (2003)
E. Child Care Center Cost Experience in Other High Cost Areas (2003)
24
24
1. Silicon Valley
2. Downtown Seattle
~%.
24
25
F. Conclusion
G. A Note on Rehabilitation of Child Care Centers
26
27
IV. Building Development and Linkage Costs
31
A. Construction and Job Growth Linkage
B. Jobs and Construction Activity Correlation
C. Employment Density
D. 1,000 Employees and Building Area
E. Child Care Demand and Mitigation Costs Related to Building Area
F. Building Area and Child Care Demand
31
33
35
35
36
37
V. Summary of Linkage Analysis and Conclusions
41
A. Demand Analysis
B. Mitigation Costs Analysis (2005)
41
42
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r. _ ""'.,
"\
VI. Materials to Assist in Designing a Fee Program for Santa Monica 43
A. Overview 43
1. Thresholds and Exemptions 43
B. Other Santa Monica Impact Fees and Total Development Costs 44
1. Other Impact Fees 44
2. Land Costs in Santa Monica 44
C. Child Care linkage Programs in Other Jurisdictions 46
D. Child Care Fee Collection Projection 47
1. Commercial Construction 47
2. Fund Capacity vs. Costs 49
E. Santa Monica Development Agreements - Child Care Provisions 49
F. Recommendations for a Child Care Linkage Fee Program for Santa Monica 50
APPENDICES
Appendix A - Glossary of Child Care and Development Terms
Appendix B - The Demand for Child Care Associated with Residences
Appendix C - Other West Los Angeles Child Care Centers
Appendix 0 - Child Care Programmatic Expenditures of the City
A-1
B-1
C-1
0-1
A. Introduction
B. City Expenditures on Preschool Child Care
C. City Expenditures on School Age Child Care
D. City Scholarship Programs
E. Other Expenditures for Child Care and Youth Services
F. Summary of Linkage Costs Per Residential Unit
0-1
0-1
0-2
0-3
0-5
0-5
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List of Tables
Table 1 - Demand for Child Care
Table 2 - Primary Child Care Arrangements of Employed Parents
Table 3 - Distribution of How Child Care Needs are Met
Table 4 - Child Care Facility Development Cost Summary
Table 5 - Typical Child Care Center Facility Costs (2003)
Table 6 - West Los Angeles Pre-School Child Care Centers Survey
Table 7 - Seattle Child Care Center Cost Analysis (2001)
Table 8 - Estimated Jobs by Building Type
Table 9 - Typical Child Care Center Facility Costs
Table 10 - Correlation Between Jobs and Commercial Building
Table 11 - Commercial Building Activity in Santa Monica
Table 12 - Workplace Buildings Mitigation Costs Per Square Foot (2005)
Table 13 - Child Care Linkage Programs in Other Jurisdictions
Table 14 - Major Projects in Santa Monica: Developer Agreements with Child Care
Obligations
Appendix Table B-1 - Santa Monica Demographic Profile
Appendix Table B-2 - Child Care Demand for Households with Children in Santa Monica
Appendix Table B-3 - Primary Child Care Arrangements of Employed Parents
Appendix Table B-4 - Child Care Demand by Type of Care in Santa Monica Per 100
Households
Appendix Table B-5 - Annual Residential Building Activity in Santa Monica
Appendix Table 0-1 - Programmatic Expenditures for Pre-School Children, per Residential
Unit
Appendix Table 0-2 - Programmatic Expenditures for School-Age Children, per Residential
Unit
Appendix Table D-3 - Number of Children Eligible for Scholarships and Estimate Costs
Appendix Table 0-4 - City Programs for Pre-School and School.Age Children
Appendix Table 0-5 - City Scholarship/Subsidy Program Summary
Appendix Table 0-6 - City Expenditures for Child Care and Other Youth Services
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V' V'
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EXECUTIVE SUMMARY
The City of Santa Monica directed Keyser Marston Associates, Inc. (KMA) to prepare an
analysis of the impacts of new development on child care needs in the City of Santa Monica.
The purpose of the analysis and report is to demonstrate and quantify the nexus between new
development and child care demand as a basis for charging a child care impact fee on new
development in Santa Monica, should the City wish to adopt a child care mitigation program.
The City contracted for the report in June 2002 and the report was largely prepared in 2003 with
portions updated in 2005; KMA believes that none of the earlier information has changed in a
manner that would in any way undermine the conclusions of the analysis.
The objectives of the study were therefore as follows: (1) to assemble data and determine
whether development of new commercial and residential space impacts demand for child care,
(2) to quantify the demand related to newly constructed space, (3) to quantify the costs of
mitigating the demand, or the costs to increase the supply of child care facilities in Santa
Monica, and (4) to provide information to assist the City in selecting an appropriate fee level.
The analysis concludes that construction of commercial space or "Workplace Buildings" (office,
retail and hotel, etc.) does increase the need for child care in the city and that new residential
construction does not. The main body of this report, therefore, addresses development of
commercial space and child care dem~nd, mitigation costs, and fee setting issues. The analysis
for residential development and child care demand is provided in an appendix section in
addition to other supporting material.
Following are the key findings of the analysis.
Nexus Analysis for Workplace Buildings
. The linkages between the construction of workplace buildings in Santa Monica, the
employees who work in them and the demand for care of children while the employees
are at work, have been demonstrated find quantified in the analysis.
. A widely accepted interpretation of the California Governmental Code is that linkage fees
may be used to address capital facilities only, not operational or programmatic costs. As
a result, the linkage analysis quantifies the demand for spaces in child care center
facilities and the cost of developing new child care center spaces.
. Child care centers at or near the workplace meet the child care needs of workers for
infants, toddlers and preschool age children. Thus, the workplace analysis addresses
these age groups only.
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. An analytical approach is to examine a group or "universe" of 1,000 employees. The
demand for child care from a universe of 1,000 employees finds that there are 140.21
children of infant, to~dler and preschool age. The demand for ctlild care spaces near the
place of work is 35.68 spaces per 1,000 employees.
. A survey was conducted of the cost of West Los Angeles area recently developed and
planned child care centers. A cost analysis for a prototypical child care center in Santa
Monica was also prepared. The conclusion from the two approaches is that the cost of
developing a child care center in Santa Monica is at least $35,000 per space on average
in 2003. An update evaluation places the cost of each child care center space in Santa .
Monica at $18,500, excluding land and $55,400 including land.
When employees are converted to workplace building area using standard density averages,
the demand for child care space associated with each square foot of workspace building area
can be quantified. In addition, the cost of mitigation through development of child care'facility
space is also quantified using the updated 2005 costs as follows:
Child Care Center Cost per Sq. Ft. Building Area
Densitv
Office 250 sq. ft.lEmployee
RetaillEntertainment 350 sq. ft.lEmployee
Hotel/Lodging 500 sq. ft.lEmployee
Excluding
Land
$2.64
$1.89
$1.32
Including
Land
$7.91
$5.65
$3.95
Total child care linkage costs are provided with and without land in recognition that some child
care centers may be developed on land either donated or already owned by the City. To reflect
the mix, an average linkage cost for the two assumptions is recommended for establishing the
maximum ceiling. Results are as follows:
Office ............................................... $5.27 per sq. ft.
Retail/Entertainment........................ $3.77 per sq. ft.
Hotel/Lodging .................................. $2.64 per sq. ft.
These are the total child Care nexus or linkage costs and represent the ceiling below which the
City may set fee levels. Keyser Marston Associates does not recommend that these figures be
used for actual fee levels but recommends that the City use these numbers for guidance in
considering fee levels.
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C.C - 95
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Additional Information to Assist in Designing a Fee Program
The following information is provided to assist policy makers.
· The total cost of development of commercial space in Santa Monica might be taken into
account in considering fee levels. The cost (in 2003) to develop retail, office, and hotel
space in Santa Monica was at least $300 to $400 per square foot, due to high land
costs, high density building configurations and parking requirements. The fee amounts
likely to be under consideration for child care will have very little impact on total
development cost and decisions about whether to proceed with projects in Santa
Monica.
· A survey of other jurisdictions with child care impact fees has identified 16 cities or
counties with programs. Most of these jurisdictions are in Northern California, most were
adopted 1.0 or more years ago, and a few fund operating expenses as well as new child
care centers. The highest fee in California is $1.15 per square foot of commercial area
recently adopted in the City of Palm Desert. Fees of $1.00 per square foot have been
adopted in San Francisco, Berkeley, and the City of San Mateo. Seattle has a downtown
bonus program that entails a higher amount, roughly $2 per square foot averaged over
the total building area.
· Fee collection projections have been estimated for informational purposes. If Santa
Monica commercial construction continues at the rate of 100,000 to 150,000 square feet
of per year, a fee in the $2.50 to $3.50 range would generate approximately $250,000 to
$450,000 per year. This revenue would be sufficient to build about 10 new child care
center spaces per year, or a new 75 space child care center once every seven or eight
years. (This estimate does not take into account any potential exemption for small
projects. )
· Over the past 15 years, Santa Monica has included child care requirements in
Development Agreements for six large scale projects. The Development Agreements
were the result of project specific negotiations and do not reflect a child care mitigation
program. The analysis and findings contained in this analysis could be used to apply
more consistent mitigation requirements for large projects in the future.
Nexus Analysis for Residential Units
An analysis was conducted for residential units similar to the analysis for workplace building
space. However, a child care linkage fee on residential construction is not recommended at this
time due to the lack of growth in the number of preschool children (children under age 5) in
Santa Monica, per the 1990 and 2000 U.S. Census.
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An analysis of the child care facility costs associated with each residential unit plus
programmatic costs based on current City expenditures was conducted for informational
purposes. Should the City wish to pursue a linkage program in the future, or use the information
for other purposes such as for the negotiation of development agreements, the findings may be
. useful to the City.
The child care facility linkage cost is quantified, using 2005 costs, in the same manner as with
the workplace buildings. The cost of each child care center facility space, with and without land,
is applied to the conclusion that there is demand for 0.003 child care spaces per residential unit,
Child Care Cost excluding land
Child Care Cost including land
Average
$56 Per Residential Unit
$166 Per Residential Unit
$111 Per Residential Unit
For informational purposes, the program costs per child were calculated. Following are the City
funded program costs allocated to each residential unit in Santa Monica. These costs cover all
children up through high school age.
Child Care and Youth Service Costs
Cost per
Residential Unit
City Assistance to Pre-School, School-age Programs and Scholarships * .
Other City Expenditures for Child Care and Youth Services*
Total Per Residential Unit
$581
$2.640
$3,221
*From 2002103 Budget, City of Santa Monica
KMA Recommendations
· Based on all the factors summarized in this report, KMA suggests maximum fees in the
range of the average for each building type: Office $5.27, Retail $3.77, Hotel $2.64
· KMA does not recommend establishing a fee for new residential construction at this
time.
· For consistency, we recommend the same thresholds as with other standards or impact
fees. The threshold for Development Review is 7,500 square feet. The Housing and Open
Space Fee has lower fees below a 15,000 square foot threshold. The City may wish to
reconsider all thresholds at this time.
Keyser Marston Associates, Inc.
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INTRODUCTION
A. Background/Context
The following report analyzing the linkages between child care demand and new development in
the City of Santa Monica has been prepared by Keyser Marston Associates, Inc. (KMA)
pursuant to Santa Monica City Council direction, and the ensuing contract dated June 26, 2002.
The report was prepared in 2003, with portions updated in 2005. This report covers a range of
topics related to establishing and quantifying relationships between new construction in the City
and the demand for child care, and the costs of mitigating that demand.
The City of Santa Monica has a history of supporting both the supply and quality of child care
within the City. The City has played an active role in funding and assisting various projects,
programs and activities for the children of City residents, and children who attend school in the
City. In 1991 J the City adopted a Child Care Master Plan, which identified the possibility of
exploring the relationship between new development and increased demand for child care
services, and thus the possibility of establishing a development fee that would mitigate the cost
of the increased demand. This report summarizes the work program designed to meet the
Council's objective.
B. Process
The City's Child Care and Early Education Task Force met with KMA personnel several times
over the course of the work program. The Task Force provided direction and generally acted as
a "sounding board" as findings and early recommendations emerged.
KMA ~taff also met extensively with City staff groups from Planning and Human Services
Divisions throughout the work program. In addition, KMA and City staff met with representatives
from the City Attorney's office to discuss legal directives related to impact fees .and California
. .
State Law. This report presents the data, analysis, and professional recommendations resulting
from all of these sources.
C. Report Organization
This document contains the linkage analysis for Workplace Buildings (office, retail, hotel) and a
section providing materials to assist policy makers in deliberating fee levels and other linkage
program terms. Sections I through IV, as described below, contain the analysis and report to
meet the needs of AB1600, as contained in Section 66000 of the California Code.
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The report is divided into five sections as follows:
.
Section 1- outlines the concept and legal framework and summarizes the analysis
parameters and the methodology for conducting the analysis. Major assumptions
underlying the analysis are also provided in this section.
.
Section 11- presents the demand linkages for workplace buildings, starting with a given
universe of employees, the incidence of children in various age groups, a discussion of
how child care needs are met and, finally, the demand for child care center space near
the parent's place of work.
.
Section 1/1 - addresses the costs of mitigating child care demand through adding
physical capacity in new child care centers. This section focuses on the capital cost of
developing new child care centers in -Santa Monica, based on both recent experience
and an examination of the cost components.
.
Section IV- links the findings regarding demand for child care to the findings re~arding
mitigation costs (Section \I with Section III) relative to various types of buildings including
office buildings, retail buildings, and hotels. The conclusion of Section IV provides total
, .
child care linkage costs per square foot of building area (for commercial buildings). This
is the maximum amount that can be charged per square foot to mitigate new child care
facility demands, per this analysis.
.
Section V - is a brief recapitulation of the analysis and conclusions contained in Sections
\I through IV. It provides a summary of the major steps for linking employees to demand
for child care center spaces near the work place to the cost of developing the new
spaces.
.
Section VI - presents some considerations and data to assist policy makers with
decisions about setting fees and designing a linkage program for Santa Monica. Topics
include fee amounts in the context of total development costs, other impact fees in Santa
Monica, potential funding generation, and child care linkage programs in other
jurisdictions. Unlike the prior sections, the material in this section does not address
linkage per se.
An Appendix section provides the residential analysis and other supporting material, including a
glossary of terms used in this report. An Executive Summary precedes the main report
document.
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19305.005\001-Q16.doc. Prepared 2003; Portions Revised 2005
...
D. Disclaimers
The analyses in this report have been prepared using the best and most recent data available.
Secondary sources, such as the U.S. Census 2000 and surveys by the Urban Institute, were
extensively used. Local information from the City of Santa Monica was also utilized whenever it
was available. While KMA believes these sources of data are sufficiently accurate for the
purposes of the analyses, KMA cannot guarantee their complete accuracy. As a result, KMA
assumes no liability for conclusions drawn from these sources.
This report was originally prepared in 2003. Portions have been updated to reflect increases in
land value and other adjustments. KMA believes that none of the earlier information has
changed in a manner that would in any way undermine the conclusion of this analysis.
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SECTION I - ANALYSIS CONCEPT, PARAMETERS AND METHODOLOGY
A. Overview of the Concept and Methodology
This report summarizes the analysis and findings of the linkages between commercial
construction and impacts on child care demand, as well as additional information of interest to
policy makers in designing a linkage program for the City of Santa Monica.
The basic concept is a series of linkages that moves from construction of new buildings to new
employees, new employees to families with children age 5 or under, to the number of children
needing child care, to those with needs that can be met at or near the workplace. The
conclusion of the impact analysis is the need or demand for child care spaces in relation to
building area, or per square foot building area. The cost to mitigate the impact is the cost to
build a child care facility prorated in proportion to the demand generated.
An approach used in this analysis is to analyze a group or "universe" of 1,000 employees that is
applicable to the workers in all types of workplace buildings in the analysis. There is no suitable
database that enables a differentiation as to how the employees in different types of buildings
have different child care needs. The universe of 1,000 workers is selected because it enables
the analysis to quantify children and child care in readily understandable whole numbers, rather
than the very awkwaP'd fractions that an analysis on the per employee level would entail. At the
end of the analysis, the findings are translated to costs per square foot of building area, to
express a "linkage cost" or maximum fee level supported by the analysis.
Using U.S. Census information, a demographic analysis is conducted on the employees to
determine what share have children of preschool age or under and what share of those have
need for child care due to working parents (both parents work if a two-parent household or a
single parent who is working). For the analysis of workers in Santa Monica, the demographic
profile of Los Angeles County is used, since. workers in Santa Monica come from all over the
greater area and are more likely to have a demographic profile similar to the County as a whole
than to the residents of Santa Monica..
B. Analysis Parameters
1. Building Types
The analysis is conducted for three major workplace building types - office, retail and hotel.
These three types are short name versions of broad categories. The key variable in the
definition is similarity of employment density. Office is inclusive of R&D (of the type likely to be
drawn to Santa Monica), and also entertainment industry production space. Employment density
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is assumed similar to the density factors utilized elsewhere in Santa Monica applications, such
as for parking analysis.
The retail categories are more broadly inclusive of restaurants, bars and entertainment facilities,
including cinemas and other commercial entertainment venues. Retail density is generally more
varied than office density, and covers the spectrum from high volume small eating outlets to
furniture stores where employment density is far less. The 350 square foot average per
employee is an average of this broad spectrum.
Hotel categories cover the range of lodging types, including resorts. The major employment
density variable with hotels is the service level. Given the high room rate structure of the Santa
Monica hotel market, most newly developed facilities will have a high service level, probably
higher than the one employee per room average used in the analysis. In applying a fee program
to hotel space, the City has the option of treating all space within the hotel equally or of
separating out retail, restaurant and office areas for different fee levels.
2. Infants, Toddlers and Preschool Children Only
The analysis must focus on the child care services relevant to the various building types
addressed. For workplace buildings, including office buildings, retail projects and hotels or other
lodging, the relevant child care is related to employees who need child care while at work. For
purposes of this program, this means child care at or near the workplace (as opposed to near
home). Essentially, this limits the universe to child care for infants, toddlers and preschool
children; child care at (or near) the workplace is usually no longer a viable option once the child
is in school, unless the school is close by. Most workers enroll their children in school in their
home community or near their place of residence.
It is known that some workers in Santa Monica do enroll their children in Santa Monica schools
despite living in another jurisdiction. From a conceptual standpoint, these children and the cost
of mitigating their demands on the before and after school facilities and programs in Santa
Monica schools could be included in the analysis. KMA and City staff agreed not to include them
due to the following considerations:
· If the children of non-resident workers in Santa Monica were included in the analysis, it
would be necessary to assemble data on children enrolled in Santa Monica schools, by
age and grade level, who are there because their parents work in Santa Monica (as
opposed to living outside the City and selecting Santa Monica schools for some other
reason).
· Of the children enrolled in Santa Monica schools who meet the above criteria, it would
be necessary to sort for (or identify the share of) children whose parents work in
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commercial buildings as opposed to governmental or other types of structures not
included in the analysis.
· Of the children who meet the above criteria, the analysis would then need to quantify all
non-resident workers in commercial structures who enroll their children in Santa Monica
schools as a share of all workers in these buildings. KMA believes this would be a very,
very small share.
· Of those children quantified from the previous step, the analysis would apply the cost of
increasing the capacity of facilities used to accommodate the before and after school
programs.
· The result of the analysis would be a very small addition to the total linkage cost
conclusion.
In addition to the technical requirements of including school age children in the analysis as
summarized above, there may be policy issues as well. For example, if the school related
linkage cost were included in the analysis, then the City would be obligated to expend a portion
of linkage fee monies on school related facilities at some point. This could dilute limited
resources for building new child care centers.
C. Capital Costs Only
The child care linkage program being explored for the City of Santa Monica is an impact fee
program, with possible alternatives to paying a fee. As such, the program will need to meet the
requirements of the Mitigation Fee Act, AS 1600 as written into California Government Code,
Section 66000 and following. The generally accepted interpretation of the Code language is that
impact fees in California can be levied to fund capital projects only. This means that only the
costs of developing child care facilities may be used in determining impact fee amount. Also,
collected funds may only be used for capital development.
Some jurisdictions have interpreted the law to allow other types of costs, such as programmatic
costs, to be part of a linkage program. Examples include operating subsidies for child care
centers, programs to assist lower income households in affording child care (such as Santa
Monica's "scholarship" programs), programs to improve the compensation and benefits of child
care workers, and so forth. It would be desirable to include these costs in a child care linkage
program, but a broader interpretation of the law would be required. Appendix 0 presents an
analysis of residential linkage that includes programmatic expenditures.
In summary, this analysis focuses on demand for new child care facility space and the costs of
providing new space.
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D. Implications on Use of Fee Monies
The calculation of impact mitigations and design of fee programs must be consistent with the
expenditure of collected fee revenues. If the City designs the impact fee based on demand for
child care facilities, the City can only spend impact fee revenues on increasing the supply of
child care facilities.
Furthermore, impact fees generated by the development of new workplace buildings (fees on
new construction) must be spent to mitigate child care demands associated with workplace
buildings. This translates to increasing the supply of child care facilities for people who work in
Santa Monica. Such facilities probably need not be restricted exclusively to workers, any more
than existing child care centers are restricted to residents.
E. Other Nexus Concept Issues
The nexus analysis yields a causal connection between the construction of new buildings and
the need for additional child care, a connection that is quantified in terms of the number of child
care spaces and the associated child care facility costs.
The analysis and the nexus established by the analysis do not address existing child care
shortages; the analysis addresses only new demands for child care associated with the
construction of new workplace building area and new residences.
The analysis should not be construed to suggest that development is the only cause of child
care supply problems; nor should it be construed to suggest that the development community
should bear the full cost of addressing child care facility supply. An ordinance that implements
the linkage program by levying a fee would be one component of a comprehensive program to
address child care needs in Santa Monica.
There are several fun.damental concepts and assumptions that are important underpinnings to
the nexus concept and methodology. Following is a brief summary of these concepts and key
assumptions.
· The relationship between construction and job growth in Santa Monica and the Los
Angeles region is fundamental to the workplace buildings nexus. While employment
growth does not occur due to any single cause or generator, construction of new
workspaces does playa critical role in enabling growth to occur. Construction
encourages growth, particularly in conjunction with the political and regulatory
environment. Finally the provision of workplace buildings is a condition precedent to job
growth and therefore bears a unique relationship to growth.
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C.C - 105
· The analysis assumes that new child care facilities are not being added to the supply in
sufficient quantities to meet new needs. Surveys conducted by the City confirm that
shortages are prevalent.
· The nexus analysis counts only "direct" employees, or employees that work within a
building. Office, retail and hotel buildings are all serviced by a range of additional
employees such as janitorial, security services, window washers, landscape
maintenance personnel, etc. These employees are not counted in the analysis nor are
indirect impacts on employment, such as rnight result from purchase of supplies, or food
for a restaurant, etc. To be conservative, no multipliers or recognition of the multiplier
effect of new developments is accounted for in the analysis. Construction employment is
also not factored into the analysis.
F. Standard of Research and D~ta on Child Care
Child care as a concern of society and government has only come to the forefront in recent
decades and many child care advocates would argue it is not yet enough at the forefront. The
State has a licensing program, the federal government recognizes child care expenditures in the
form of tax credits on personal income tax returns, and there are a number of federal, State and
local assistance programs. On the non-governmental side there are a number of child care
research and advocacy organizations working to advance child care. In addition, there are the
child care provider associations, both for profit and non-profit. These entities all make valuable
contributions to the data and "literature"'on the state of child care in the U.S. today. However, in
contrast to housing or employment where the federal government has played an active role for
well over half a century, the state of child care data in the form of widely accepted governmental
surveys is limited and lags far behind. As a result, U.S. Census data had to be supplemented by
research findings from non-profit research institutes and other organizations. KMA believes the
data used in this analysis is sufficiently reliable for the purposes for which it is used.
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.... ~
SECTION II - THE DEMAND FOR CHILD CARE ASSOCIATED WITH WORKPLACES
Placing child care centers in workplace locations such as downtowns, in business parks and
other employment centers is still a pioneering concept in the United States. The vast majority of
child care centers are located in residential areas or near residential neighborhoods. However,
experience and in depth surveys have borne out that parents generally prefer work located child
care solutions for infants, toddlers, and preschool children when they are available, affordable
and of comparable quality to other child care center alternatives. In fact, there are significant
benefits to all parties. including:
· Child and the Family - More time with the child during the commute and at break time;
less. time required than taking a child to a center elsewhere.
· Employer,... Better morale; enhances recruitment among employees; decreases
absenteeism, tardiness, and turnover.
· Developer - A marketing advantage to enhance project attraction vis-a-vis the
competition; improves leasing.
· Community - Improves the image of the community as a good place for families and
business together.
· Traffic Reduction and Air Quality Improvement - Studies have found that, on average,
families drive fewer miles if they can take their children to child care at work than if they
use child care centers elsewhere.
Because of these benefits, many of the child care facilities located near workplaces have been
built voluntarily by the private sector. Some firms with large numbers of employees provide child
care centers to accommodate worker needs and enhance workforce attraction. Developers of
large projects for multiple tenants sometimes add child care centers to attract tenants and add
value to their projects.
A. Demand Analysis - Starting with 1,000 Employees
The methodology used in this analysis quantifies the demand for child care associated with a
universe of workers. For ease of analysis and understanding, a universe of 1,000 workers was
used. A universe of this size avoids having to describe children and child care needs in terms of
tiny fractions carried out to four to five decimal places. .
The major source of data is the U.S. Census 2000. Since workers in Santa Monica are drawn
from all over the Los Angeles area, Los Angeles County population characteristics are deemed
more appropriate than the characteristics of Santa Monica residents. Because the U.S. Census
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provides only limited information on how families meet their child care needs, other national
surveys are utilized as documented throughout.
B. Number of Worker Households Represented
The first step translates the number of employees or workers to worker households. This step
recognizes that most households have more than one worker. Double counting of two-parent
households is therefore avoided.
The factor of 1.44 workers per worker household was determined from the Census by taking the
number of workers living in Los Angeles County and dividing them by the number of worker
households in Los Angeles County. Worker households factor out or eliminate households
comprised of retired or elderly people, households comprised of students, households of people
on public assistance, and other types of households that do not contain workers.
Conclusion: The universe of 1,000 employees is reduced to 694.11 employee households.
(1,000 divided by 1.44 = 694.11)
C. Employee Households with Children Needing Child Care
The next three steps calculate the number of children needing child care. The calculations are
shown in Table 1 and described below.
Table 1
Demand for Child Care
Per 1,000 Employees or Per 694.11 Employee Households
Ages 0-2
Total
Step 1. Employee Households with Children in Age Categories
Factor
Number
13.56%
94.11
Step 2. Employee Households Needing Child Care
(Parent(s) work)
Factor
Number
56.47%
53.14
Step 3. Children Needing Child Care
(Adjusts for more than one child in age group)
Factor 1.27
Number e7.51
1 Five year old children from the Census data are distributed at 50% to the 3-5 year age group.
Source: U.S. Census, Los Angeles County 2000
Ages 3-5'
12.83%
89.07 183.18
68.45%
60.97 114.11
1.19
72.70 140.21
Step 1: The first step is based on the incidence of worker households having children in each of
the preschool age groups. Half of the five year olds are included in the age 3-5 preschool group
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and half are assumed to be enrolled in kindergarten and no longer a candidate for child care
near the parent's workplace. The age 0 to 2 group actually covers three years: under age 1, age
1, and age 2, or the infant and toddler groups. The age 3 to 5 group covers only two and a half
years since only half of the five year olds are counted. This assumption is from the Urban
Institute, Assessing the New Federalism series, discussed below.
Step 2: The second step factors out the share of the households with children that have all
parents working. These are both two-parent households with both parents working and single
parent households with one parent working. As to be expected, the percent increases as
children get older. These are households with children needing child care.
Step 3: The last step adjusts for the fact that some of these households with children needing
child care include more than one child per age group who needs child care.
Conclusion: From the universe of 1,000 workers, there is a demand for child care for 140.21
children.
D. How Child Care Needs Are Met
The next steps in the analysis address how child care needs are met. For this portion of the
analysis, the U.S. Census does not provide adequate information. To obtain the best and most
recent surveys on this question, KMA conducted a literature search and consulted organizations
concerned with the analysis of child care needs.
1. National Studies
On a national level, the best data for this analysis purpose appears to be assembled by the
Urban Institute, Assessing the New Federalism series. One publication in particular, entitled
Primary Child Care Arrangements of Employed Parents: Findings from the 1999 Survey of
America's Families, Occasional Paper Number 59, May 2002 was the best source for this
purpose. The surveys in this series draw from a large national scope and have been updated
periodically since the early 1990's. Some special report~ in the series have focused on specific
age groups; other surveys have tracked differences among states.
Table 2 presents key findings of interest from the above survey. Figures are provided for both
the national average, and for California. In California, use of child care centers appears to be
lower than the national average. The differences are believed to be a function of availability,
affordability and to some extent cultural differences. The two columns on the right refer to above
and below 200% Federal Poverty Level (FPL), which for a family of four is an extremely low
income level by California standards.
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. ...
Table 2
Primary Child Care Arrangements of Employed Parents
CA - Below CA - Above
U.S. CA 200% FPL * 200% FPL*
Parent 27% 31% 45% 25%
Relative 27% 27% 25% 28%
Child Care Center 28% 22% 17% 24%
Family Child Care Home 14% 13% 10% 15%
Nanny/Other 4% 7% 3% 8%
*Federal Poverty Level is approximately $18,400 for a family of four, 200% is $36,800 per year.
Source: Urban Institute, Primary Child Care Arrangements of Employed Parents: Findings from the 1999
Survey of America's Families, Occasional Paper Number 59, May 2002.
The most notable finding is that more than half of all families use either ~. parent or a relative to
meet their child care needs. Since the survey is of families with working parents, the solution for
many families is for parents to either work different shifts or hours, or to take a child to work.
Use of relatives to tend for children is a solution for another very large proportion of families as
well. Nationally, the two arrangements combined represent 54%, and 58% in California.
The U.S. Census has done some surveys on child care,. such as the Who's Minding the Kids?
Child Care Arrangements, Spring 1997 (p. 70-86), but this study covers all child care
arrangements used. by parents and does not single out the primary arrangement. As a result it is
not possible to identify the primary arrangements among working parents and to sort out a
useful distribution of among child care options based on Census information.
2. California Studies
A few studies in California have. addressed the question of how child care needs are met and
have found similar results to the national stud.ies. One report prepared by the UCLA Center for
Healthier Children, Families and Communities, entitled Public Opinion on Child Care and Early
Childhood Education, California 2001, prepared for the California Children and Families
Commission, found that approximately 26% of children 0 to 5 years were in child care centers.
Selected findings from this report include:
· The primary child care arrangement varies by parent education, parent ethnicity, family
income, and children's age.
· Children in families with higher incomes or whose parents have greater educational
attainment are more likely than other children to be in center-based care/preschool. For
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example, the primary arrangement is a private preschool or center for 33% of children in
families with household income of $75,000 or above and for 13% of children when the
household income is below $75,000.
· Younger children are more likely than older children to be cared for by their parents or to
be in home-based arrangements. This is particularly true of infants. Older children, ages
3 to 5, are more likely to be in center-based care.
· Meeting child care needs sometimes varies byethnicity. For example, a larger
percentage of Hispanic children (24%) than non-Hispanic children (16%) are cared for
by a relative.
The report covers a number of topics related to parental attitudes toward. child care
arrangements, importance of learning activities offered, affordability and government assistance
availability and so forth. As an overview statement, the report findings contribute to the general
recognition that center-based care offers a better learning environment than most alternatives
but that affordability is a major obstacle.
E. Child Care Demand - 1,000 Employees
Drawing from the findings of the above surveys, national figures are utilized as a conservative
estimate of demand among the child care arrangements for persons working in Santa Monica.
The estimates are conservative in the sense that it is likely that the percent who would use child
care centers were they available and affordable is understated. Were child care centers
available and affordable, the literature strongly suggests that a large share of those who use
parents and relatives would use child care centers and Family Child Care Homes. Needless to
say, nanny and baby sitter arrangements are typically least affordable to most workers.
Table 3 indicates, by age level, the distribution of child care arrangements for the universe of
1,000 employees in Santa Monica. The first line in the table is drawn from Table 1, Demand for
Child Care.
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. "
Table 3
Distribution of How Child Care Needs are Met
Ages 0-2 Ages 3-5
Children Needing Child Care (Table 1) 67.51 72.70
How Child Care Needs Will Be Met
Parent/Relative 54.00% 35.00%
Child Care Center 22.00% 45.00%
Family Child Care Home 17.00% 14.00%
Other 7.00% 6.00%
100.00% 100.00%
Child Care Center
Factor 22.00% 45.00%
Number 14.85 32.72
Total
140.21
47.57
Sources: US Census 2000; Urban Institute Primary Child Care Arrangements of Employed Parents:
Findings from the 1999 Survey of America's Families, Occasional Paper Number 59. May 2002.
Conclusion: The demand for child care spaces in child care centers associated with a universe
of 1,000 employees is 14.85 infant and toddler spaces and 32.72 preschool spaces, or a total of
47.57 spaces in child care centers.
F. Demand for Child Care Center Spaces near the Workplace
The last step in the analysis is an allocation of the child care center space demand to two
generic locations - near place of work or near place of residence.
There is limited availability of good survey information to enable a split between demand for
home based or work based child care. Current experience is a poor guide because there is so
little work based child care available.
The UCLA study referenced earlier contained a helpful finding on this question.
· "Relatively few parents say they use employer based child care arrangements [because
so few are available]. However, about 76% of parents report that they would be either
very likely or somewhat likely to use a child care service offered at their place of work,
and 62% say they would use it on a regular basis."
This finding is from a survey of parents using all types of child care arrangements, not of those
using only child care centers. Thus, the p~rcent of those using child care centers who would
prefer them at place of work would presumably be far higher. However, there is another
distinction in that "employer based" implies at the workplace location (as opposed to near the
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workplace as is the analysis focus here) and may imply for some, an employer role in cost
contribution.
Other surveys confirm a high level of preference for child care located near the workplace for
the preschool child, for reasons indicated at the beginning of this section. Most of the surveys
and research on this subject do not conclude with quantified distribution of demand. Based on
the available information, KMA utilized a 75% share of the demand for child care centers to be
located.at or near the workplace.
Age 0-2
Age 3-5
Total
Child Care Center Spaces Demanded (Table 3)
Share Near Place of Work @ 75% of Demand
Sources: us Census, Urban Institute, Keyser Marston Associates.
14.85
11.14
32.72
24.54
47.57
35.68
Conclusion: From the universe of 1,000 employees, 140.21 children need child care. Of all
children needing child care, the demand for spaces in child care centers is 47.57. As shown in
the lines above, 75% of the demand for child care center space is for a center located at or near
the place of work or 35. 68 spaces.
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.SECTION III - CHILD CARE CENTER FACILITY COSTS
A. Introduction
In this section, KMA presents an analysis of the cost of child care center facilities. It is recalled
that in Section I, we established that the prevalent interpretation of the California Code is that
linkage fee programs may only address capital or facility costs. In Section I, KMA also clarified
that the linkage for workplace buildings to child care must address demand for the preschool
child only, or child care centers near the place of work for the children of employees. As such,
_ the facility cost linkage for workplace buildings is for child care center facilities, or cost per child
care center space.
1. Demand Conclusions Restated
In Section II, KMA quantified the demand for spaces in child care centers associated with a
universe of 1,000 employees. KMA concluded that there was a demand for approximately 36
children in child care centers near the workplace. In this section, KMA quantifies the cost to
develop each of these spaces, and, in that way, determines the cost to mitigate the child care
impacts generated by new workplace development.
2. Analysis Approaches
Two different approaches are utilized to determine the costs of child care centers. The first
approach is to examine the costs of developing child care centers by analyzing the component
parts - building shell, equipment, land, etc. The second approach is to examine the cost
experience of other recently developed West Los Angeles area child care centers. Further
confirmation is made by looking at the costs of child care center development in other high cost
areas.
The information in this section was assembled with the assistance of City of Santa Monica staff
and the Child Care and Early Education Task Force. Survey and analysis results were
presented to the Task Force and a number of adjustments were made per staff and Task Force
input.
B. A Prototypical Child Care Center in Santa Monica
1. Development Space Requirements
To be licensed, child care facilities must meet minimum space requirements mandated by the
State of California. These requirements, which differ by age of child, are briefly summarized
below:
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· Building Space
. Infants and toddlers (ages 0-2) - 35 square feet plus an allowance of 15 square feet
for bathroom and circulation space per child plus 15 square feet to allow for sleeping
area, or 65 square feet per child.
. Preschool and school age (ages 3 to 12) - 35 square feet per child plus an
allowance of 15 square feet for bathrooms and circulation space.
· Outdoor play area - 75 square feet per child; 50 square feet for infants and toddlers.
Child care center operators agree that these are minimum space requirements and do not
provide adequate space for a high quality child care center. The minimum requirement provides
insufficient space for different simultaneous activities and for necessary administrative functions
and other needs to be accommodated. As a result most child care centers are built to a slightly
higher standard as the charts at the end of this section demonstrate. According to child care
education experts, a good amount is 100 square feet per thild. For the purpose of this analysis,
the City of Santa Monica chose 70 square feet per child as an appropriate figure, and clarified
that the figure does not reflect a city policy Or standard for other applications.
2. Land Area Required
City of Santa Monica Zoning Code was used by City staff to determine the site size required for
a child care center of an average workable size. Site coverage and parking requirements are
particularly influential in determining total site needs.
Since Santa Monica land parcels are predominantly 7,500 square feet, or multiples of that size,
total parcel size for a child care center was selected accordingly. A 15,000 square foot site
would accommodate a 65-space child care center per City standards for parking and drop-off
spaces and other site coverage requirements. A prototype of a 65-space child care center was
selected for the analysis, which at 70 square feet per child is a 4,550 square foot center (65
children x 70 sq. ft. per child = 4,550 square feet).
The size of the land parcel and land cost estimate are for nexus analysis purposes. It is
anticipated that centers may well be built on smaller parcels and have solutions for parking and
drop-off spaces other than surface spaces. The prototypical child care center analyzed is a one-
story building configuration with outdoor play areas and surface parking. To confirm these costs
compared to costs for other more urban configurations, information on other prototypes was
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assembled and compared. (See end of this section.) It is important to note that the total site
cost is the key assumption, not the per square foot land area cost.1
At the time the analysis was prepared in 2003, a land cost of $80 per square foot was used, or
the lower end of the range at that time. The 2003 figures in the inset Table 4 applied to a 15,000
square foot site area for a total of $1.2 Million. See footnote below.
3. Development Costs
The main components and unit costs are shown in Table 4.
Table 4
Child Care Facility Development Cost Summary (2003)
PSF Bldg. Area Bldg. Area Total
Building Shell $170/SF 4,550 SF $773,500
Furnishings, Equipment and Indirects $70/SF 4,550 SF $318,500
Site (Land and Parking) $264/SF 4.550 SF $1.200.000
Total $500/SF 4,550 SF (Bldg.) $2,292,000
Source: Keyser Marston Associates' survey of West Los Angeles child care center construction costs, City of Santa
Monica. .
The furnishings, equipment and indirects category covers a range of costs including indoor
furnishings and fixtures, outdoor play structures, start-up costs, design and engineering, fees
and hook-ups, and financing.
The costs per child care space (for the 65-space center as calculated in 2003) are as follows:
Development costs excluding land
Development costs including land
$16,800
$35,260
1 Since the initial preparation of this analysis in 2003, land costs have increased in Santa Monica. In 2005 the probable cost per
square foot range is $125-$400, depending on location, At $160 per square foot, or double the $80 per square foot cost used in the
initial analysis, the site cost would be $2.4 million or more than twice the rest of the project. More likely an altemative site solution
would be found, using shared or structured parking and/or shared play area and other cost savings, keeping site costs less than
$2.4 million. For reference, however, if the site cost were $2.4 million, the total project cost would becume $3.5 milliun, instead of
the $2.3 million indicated in Table 4 above.
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If 2005 land cost at $160 per square foot is used and a 10% escalation in other costs, then total
costs per child care space are as follows:
Development costs excluding land
Development costs including land
$18,500
$55,400
Conclusion: It costs approximately $18,500, excluding land, per child care space to develop a
new child care center in Santa Monica. Total cost including land is $55,400 per child care center
space. Table 5, at the end of this section, presents a more detailed summary of development
costs.
c. Other West Los Angeles Area Child Care Center Costs
Table 6, at the end of this section, summarizes the development cost experience of other West
Los Angeles child care centers. City staff identified the- child care centers, varying in .
construction type and timing, to be included in the survey. Some of the surveyed centers are
new construction developments, others are rehabilitation projects and one is currently in the
planning process.
With the exception of the project in the planning stage, each center in the survey became
operational between 1998 and 2002. Excluding land costs, the development costs per child care
space range from $8,330 to $39,250. Cost differences are due to varying circumstances and
year constructed. A summary of each case study follows:
1. New Construction
Les Enfants Inc. Preschool in Santa Monica has an enrollment of 72 children (28 infant, 18
toddler, and 26 preschool). The stand-alone building was constructed on a vacant lot in 1998 at
$600,000, or $8,330 per child care space, excluding land. The school director did not provide
the land purchase price due to confidentiality. The outdoor play area is approximately 5,000 sq.
ft., or.70 sq. ft. per child. In addition to the outdoor play area, 5,000 square feet is dedicated to
parking. The parking ratio is one space per seven children.
The Westside Children's Center (WCC) in Culver City has spaces for 100 children. It was
developed in 2002 for $3,925,300, or $39,250 per child care space. The WCC is part of a larger
facility and the first of two development phases. The indoor area is 11,650 square feet, or 115
square feet per child, excluding meeting space, additional building and storage space. The
outdoor play area is approximately 15,000 sq. ft., or 150 sq. ft. per child. The parking ratio
equals one space per four children.
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In 1995, WCC purchased the 2.7-acre site for $1 million during an economic downturn. The land
was owned by the City of Los Angeles and zoned industrial. Office and child care uses equally
share the site.
2. Rehabilitation
New Path Montessori School is located in a 1929 single-family home, which was rehabilitated in
2001. The school has spaces for 30 toddlers (2-6 years old). The school includes 1 ,200 square
feet of indoor space, or 40 square feet per child. Outdoor space is 1,400 square feet, 50 square
feet per child. The parking ratio equals one space per ten children.
The acquisition and rehabilitation cost was $557,700, or $18,600 per child care space. Land
costs account for $327,900 ofthe total costs. Rehabilitation costs were $229,800, or $190 per
building square foot. The school director notes that rehabilitation costs exceeded original
estimates due to implementation.
Saint Joseph Infant Toddler Development Center was purchased and rehabilitated by Venice
Community Housing Corporation in 1999 for $498,700, or $21,700 per child care space,
excluding land. The Center is located in a two-story building and has spaces for 23 children (6
infants (up to 18 months) and 17 toddlers (18 thru 36 months). The Center includes 1,570
square feet of indoor play area, or 70 square feet per child. The outdoor play area is
approximately 900 square feet, or 40 square feet per child. The parking ratio is one space per
23 children.
Saint John's Health Center, Santa Monica Family YMCA and Smart Start centers were targeted
to be part of the survey. However, due to the nature of these facilities, the data could not be
organized in a way that was parallel to the other centers.
3. Planned Construction
The UCLA Campus Center is currently in the planning stages. However, preliminary estimates
were provided for the survey. The Center will have spaces for 84 children (12 infants, 12
toddlers and 60 preschool). The construction costs are currently estimated to be $2.1 million or
$25,000 per child.
The Center will have 5,000 square feet of indoor space and 7,500 square feet of outdoor space
(60 square feet and 90 square feet per child, respectively). The development plan includes
renovation of a 1,600 square foot existing child care facility to be used as a conference room
and kitchen. There will be a few drop-off parking spaces but staff parking is to be located off-site
elsewhere on campus.
A major private donation will pay construction costs. The university is providing the property.
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l;:;,;
See Appendix C for more information on each case study.
D. Other Child Care Center Averages (2003)
On a per square foot measure, total costs for the five examples show a broad range from $120 per
square foot to over $460 per square foot. However, if the survey's lowest and highest costs are
eliminated, the costs for the remaining three projects are in the range of $350 per square foot and
the average construction cost per child care space, excluding land, is approximately $16,670.
Considering the differences in time and the expectation that most new child care centers will
likely be new construction, the $16,800 analysis for current costs, excluding land, is supported
by the experience in other West Side centers as a good average for new facilities.
.
The survey did not enable KMA to identify useful cost experience for land for new facilities in
Santa Monica. Land costs were only provided for three of the case studies. The WCC land
purchase had special circumstances that would not be applicable to a land purchase today.
While New Path and Saint Joseph reported land costs, these centers are both rehabilitation
projects where purchase costs included existing improvements. Therefore, as discussed in the
previous section, a conservative estimate for residential land in Santa Monica in 2003 was $80
per square foot, or a total site cost of $1.2 million for a child care center for 65 children. (It is
noted that child care centers built on sites costing more than $80 per square foot would likely
resolve parking needs in some other manner, such as sharing parking with some other use,
above grade or underground structures, etc.) With other solutions, the $1.2 million estimate for
land for the 65-space center (or nearly $18,000 per child care space) was deemed a suitable
land cost assumption for purposes of this analysis.
E. Child Care Center Cost Experience in Other High Cost Areas (2003)
As a cross check against the West Los Angeles Area experience, KMA assembled some
information on the cost of child care centers in other high cost areas, both suburban in character
and more center city urban. The two comparison areas are Silicon Valley in northern California
and downtown Seattle, Washington.
1. Silicon Valley
Silicon Valley was selected as a comparable area due to very high land, costs and generalized
density of development akin to the western Los Angeles area. Several useful pieces of
information were assembled that help confirm the Santa Monica cost range.
· The City of San Jose has a program to assist with the development of child care centers.
A consultant hired by the city advised that the city should plan on child care centers
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costing $16,000 per space, excluding land and parking. This appears to include an
allowance for at least some equipment, furnishing and indirect costs.
· The City of Menlo Park has been seeking to redevelop a parcel in its civic center
complex with a large child care facility to accommodate both preschool and after school
programs. A design and project development team reported back to City Council to get
authorization to seek construction bids. The estimated cost for the total 180-space
project is $6,600,000. This figure computes to $34,178 per space or $439 per square
foot building area. Since the city already owns the land, there is no land cost included,
although there is significant site work needed.
· In late 2003, KMA conducted a survey of child care center development cost experience
in the San Mateo-Peninsula area for the purposes of a child care linkage program in the
City of Santa Mateo. Good data on four centers was assembled and it was concluded
that total costs per space averaged at least $25,000 per space.
2. Downtown Seattle
In 2001, KMA conducted a child care linkage analysis.for the City of Seattle and assembled
information on the cost of child care centers in that downtown. At the time, there was one child
care center that had been developed within a high-rise office building, the Washington Mutual
Tower which was completed in 1988. The child care center was built for 23 infants and toddlers
and no preschoolers due to the difficulty of the outdoor play area component. The development
cost at that time was $525,000 or $22,800 per space. This cost did not include outdoor play
area (some was added. later). Nor did it include land cost. Only one dedicated parking space
was built.
Other downtown child care centers not in high-rise buildings had similar development costs,
particularly after adjustments for time of development and other differences.
For the Seattle program KMA undertook a prototypical child care center cost analysis similar to
the Santa Monica analysis presented here. The major cost components and conclusion are
shown in Table 7.
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,. ""'.t
Table 7
Seattle Child Care Center Cost Analysis (2001)
Per SF
Per Child
Care Space
Total for 60 Child
Care Spaces
Land (per square foot building area)
Building Shell
Furnishings, Equipment and Indirects
$30
$165
$148
$2,250
$12,375
$11.100
$135,000
$742,500
$666.000
Total
$343
$25,725
$1,543,500
Source: Keyser Marston Associates.
Several clarifications and comparisons are appropriate.
· The Seattle prototype included no parking or drop-off spaces.
· Land costs were prorated in a building and intentionally stated at the low end. Land cost
per child care space was $2,250 in Seattle; the Santa Monica costs are much higher.
· Each of the 12 parking or drop-off spaces in Santa Monica costs an average of $28,266
in land costs. Were these 12 spaces in a parking structure instead, the cost of the
structure including a land allocation and all indirect costs, would be roughly the same as
the $28,000 per parking space.
· The Seattle prototype assumed 75 square feet per child care space compared to the 70
square feet per space assumption for Santa Monica.
· The estimate for furnishings, equipment and indirect costs was substantially higher in
Seattle. This was a result of more detailed data on these costs in other child care
centers in downtown Seattle.
F. Conclusion
After reviewing the rather wide range of cost experience in developing child care centers,
particularly as it relates to all the costs beyond construction of the building shell, one can
conclude that state-of-the-art cost estimating for child care centers is still in the formative stage.
There appear to be few standards and little consistency with regard to what is counted, what is
necessary, and how much should be allowed for such things as equipment and start-up costs. It
is also evident that many child care facilities are built on land already owned and therefore land
cost is frequently left out of the equation.
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The recommendation from this analysis and survey is that $35,000 per sp~ce in Santa Monica
is a good planning number for the purposes of a mitigation program. The cost per space
excluding land at $16,800 clearly is at the low end, and there are at least three examples where
costs are double that excluding land (West Los Angeles, UCLA, and Menlo Park). On the other
hand the assumption of $18,460 per child care space for land (to meet the standards of the
Santa Monica zoning code with respect to parking and drop-off spaces) is substantial and
assumes no variance from the code to accommodate a child care center. Even if parking were
accommodated in a structure or other more dense solutions to the child care building and
outdoor areas were employed and some code variance was permitted, KMA believes that it
would be difficult to reduce the "all inclusive" cost of a child care center in Santa Monica below
$35,000 per space.
The update for late 2005 presents revised conclusions as discussed in Section B, as follows:
Development cost excluding land, per child care space
Development cost including land, per child care space
$18,500
$55,400
G. A Note on Rehabilitation of Child Care Centers
The survey of recently developed West Los Angeles area child care centers found a number of
them were rehabilitations of existing buildings. These costs per space again ranged widely and
were highly inconsistent with respect to what was counted and not counted. Rarely does the
cost or value of the existing structure and land get included in the calculation. Since the City of
Santa Monica does not own or identify buildings with rehabilitation potential for child care
centers, it was not appropriate to use rehabilitation as an option to mitigate new demands.
A child care linkage ordinance, if adopted, will provide for alternatives to paying any fee to
mitigate child care demand. The alternatives would include the construction of new child care
facilities and the rehabilitation of existing structures, subject to certain standards and
acceptability to the City. In other words, if a developer chooses to meet a child care linkage
obligation through rehabilitating an existing structure and can do so at less cost, the developer
could be welcome to do so.
t,
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TABLE 5
TYPICAL CHILD CARE CENTER FACILITY COSTS (2003)
CHILD CARE LINKAGE PROGRAM
CITY OF SANTA MONICA
Number of Children:
Size of Facility
Indoor Space @
Outdoor Space @
Total
Cost of Facility
Building shell @
Furnishing, equipment@
(includes indirects)
Land required:
Building pad
Parking 1
Facility Parking @ 9 spaces
Drop-off Parking @ 3 spaces
Outdoor play area
Total land required @ 93% coverage
Land cost @ $80 sq. ft. x 15,000 sq.ft.
Total development cost
Cost per sq. ft. child care facility
Cost per child care space
Including Land
Excluding Land
65
70 sq. ft. per child
80sq. ft. per child
$170/sf
$70/sf
4,550 sq. ft.
5,200 sq. ft.
9,750sq. ft.
4,550 sq. ft.
4,550 sq. ft.
4,550 sq. ft.
3,190 sq. ft.
1,050 sq. ft.
5,200sq. ft.
13,990sq. ft.
15,000sq. ft.
$773',500
$318,500
$1,200,000
$2,292,000
$500
$35,260
$16,800
1 City provided parking space requirements. Assumes one parking space per 500 sQ. ft. gross building area and
assumes one parking space requires 350 sq. ft.
Keyser Marston Associates, Inc.
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19305.005\001-016.doc, Prepared 2003; Portions Revised 2005
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Keyser Marston Associates, Inc.
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19305.005\001-G16.doc, Prepared 2003; Portions Revised 2005
C.C - 127
SECTION IV - BUILDING DEVELOPMENT AND LINKAGE COSTS
This section combines the findings of the demand analysis (Section II) with the findings of the
child care center development cost analysis (Section III) to establish linkage costs. This section
first addresses the linkages between workplace building construction and job growth. The
historic relationship between the construction of workplace buildings and job growth is examined
both in general and for different types of workplace buildings to the extent data availability
allows. The three types of workplace buildings that are the subject of this analysis are: office (or
office/R&D/), retail and entertainment, and hotel and other lodging. This analysis allows us to
link buildings to jobs to employees and child care demand impacts on a per square foot level.
In parts D and E of this section, the conclusions with respect to the child care demand impacts
and the costs of mitigating the child care impact are joined together. The result is a
quantification of child care impacts associated with workplace building construction per square
foot and the costs of mitigation per square foot. The conclusions of the analysis represent the
maximum charge for mitigation, or maximum impact fee level supported by this analysis. The
City may design impact fees or other type linkage requirements at any level below those
established by this analysis.
A. Construction and Job Growth Linkage
The first link in the chain of linkages joining the construction of workplace buildings and child
care demand is that between building construction and job growth. If the impact fee is levied on
a building at the time of construction, the underlying assumption is that the addition of building
space will result in more jobs in Santa Monica. (See Section I for more on the underlying
concept and ancillary assumptions.)
To confirm tne relationship, KMA assembled available information on job growth and workplace.
building construction in Santa Monica. For the job growth/building analysis, City staff provided
Santa Monica job data for 1995-2000, based on State Employment Development Department
(EDD) reports. Job data of this detail are not available for Santa Monica prior to 1995. Data was
supplemented with information from the economics page located in Section 6 of the City's web
site. The web site refers users to the California State University Long Beach Office of Economic
Research 3rd Annual Santa Monica Economic Forecast Presentation (November 2001).
The jobs data series provided by the City appears to be the only data available at the city level.
The.data series is based on payroll forms prepared by companies and submitted to the EDD.
This data source has the following limitations:
· The self-employed and business owners operating as a sole owner, rather than a
corporation. without payroll deductions are excluded. Contract workers are also
excluded.
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· The information is based on where the payments are reported from; e.g., if all Burger
King employees are paid through Burger King headquarters, then their statistics would
show up in the Burger Kihg headquarters location. The reciprocal is also true; if a
corporation is headquartered in Santa Monica payroll information would be provided for
the entire company, regardless of whether jobs are located in Santa Monica.
· The data is organized by major Standard Industrial Classification (SIC). This
classification system does not neatly match to building type for many categories. Office
is particularly problematic since office jobs are a large portion of the services, the finance
insurance and real estate "industry", and, in a place like Santa Monica, many
manufacturing firms have office functions there, not production activities.
Table 8
Number of Jobs in Santa Monica by Major Industry
1995 2000 Change
Agriculture 266 546 280
Mining
Construction 1,688 1,832 145
. Manufacturing 2,241 3,083 843
Transportation/Utilities 1,352 1,735 383
Wholesale Trade 2,205 2,127 (78)
Retail Trade 13,994 17 ,328 3,334
FIRE 5,127 5,561 434
Services 28,276 34,859 6,583
Public Administration 4,956 5,974 1,018
Confidential11 ) 2.305 1.039 (1.266)
Total 62,410 74,084 11,675
{1>,-0 protect employee identity, specific job type is not available for these jobs.
Source: City of Santa Monica.
To convert jobs by industry to jobs by building type, KMA utilized a cross matrix of percentage
relationships to estimate the share of jobs in office type buildings. For retail and hotel jobs
discrete industries subsets could be used. The estimate of jobs by building type for the three
types of buildings under analysis is shown in Table 9.
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r. .
Table 9
Estimated Jobs by Building Type
Building Type(1) 1995 2000 Change
Office (Estimated) 17,162 19,928 2,766
Hotel 1,317 2,571 1,254
Retail 13.994 17.328 3.334
Total 32,474 39,827 7,354
(1)Suilding types reflect major non-residential uses represented in the Child Care Nexus analysis. Jobs for a specific
building type are comprised of related SIC employment codes. Data is not available on a more detailed level.
Source: City of Santa Monica, Keyser Marston Associates.
The City also provided KMA with annual construction activity for the same time period. The
information is from building permits and therefore should lead to job growth. For this analysis, it
was assumed that on average jobs would occupy new buildings approximately a year after
permitting.
During the 1995-1999 period, approximately 1.12 million square feet of commercial
development activity was reported (see Table 10). The information does not break down
building types further than "hotel" and "other-commerciaL" Further, no hotel development
activity was reported for this time period, despite the growth in hotel jobs. The City of Santa
Monica issued building permits in the late 1980s for three hotels constructed in the early 1990s.
These new hotels are likely responsible for the growth in the number of hotel jobs in the mid to
late 1990s, as hotels typically take a few years to achieve stable operations and would continue
to expand employment during this period.
B. Jobs, and Construction Activity Correlation
Because the data do not identify individual building types, the analysis illustrates the general
correlation between jobs and building. Table 10 presents the relationships found from
comparing the new jobs to the new space over the 1995 to 2000 time period.
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~, ,
Table 10
Correlation Between Jobs and Commercial Building
New Jobs Building (SF)
(1995-2000) (1995-1999) SF per Employee
Hotel 1,254 0 0
Other Commercial 10.421 1.116.118 107
Total/Average 11,675 1.116,188 96
Source: City of Santa Monica; Keyser Marston Associates.
The data shows that there is indeed a correlation between employment and workplace building
activity in Santa Monica for the five-year period. In other words, as new workplace buildings
were developed during this period, new jobs were also created.
The relationship between employee and square feet of building area can be expressed as a
density factor. As shown above, Santa Monica gained 11,675 jobs and 1.12 million square feet
of nonresidential building area was developed between 1995 and 1999. The average density
factor during this period would calculate to one employee per 96 square feet.
The time series reflects a period of vigorous economic expansion only. As such, there probably
was considerable job growth in existing buildings. Busy restaurants employ more staff than
more idle ones. With a longer time series one would expect to see the very high density levels
found here (or low number of square feet per employee) come down substantially.
Unfortunately, KMA was unable to obtain the same series information for the 1990 to 1995
period.
However, figures on total job growth and construction activity in Santa Monica over the decade
are available. The Cal State Long Beach Office of Economic Research reported the job figures,
supplied by the City. These figures indicate total non-farm employment in Santa Monica as
follows:
1991
1995
2000
51,000 (approx.)
62,140
75,500
These figures show that Santa Monica experienced substantial growth during the early half of
the decade despite the recession in the region and the State as a whole over the period.
According to this series job growth over the decade was 24,500 jobs.
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C.C-131
r,
Total commercial construction activity in Santa Monica over the period from 1990 through 2000,
according to the City, was 1,636,812 square feet, or 148,802 per year on average. (See Table
12, at the end of this section, for annual figures.)
The density of new jobs in new buildings from the whole decade computes to 67 square feet per
job (1,636,808/24,500 = 67). Again this suggests much job growth was occurring in existing
structures. Other adjustments that might be made with more complete data include elimination
of government jobs and others not housed in the analysis categories, jobs that occurred in
additions and remodels to existing structures, etc.
c. Employment Density
The available employment data series does not provide an adequate level of detail particularly
as relates to individual "building types. In addition, the unusually vigorous growth during the time
period resulted in substantial employment growth, some of which was occurring in existing
buildings. Therefore, given these limitations, KMA believes it is appropriate to use standard
employment density factors for workplace buildings instead.
These relationships are based on surveys, some national, some local, for a wide range of
conditions collected over many years. Appropriate factors were selected for Santa Monica
conditions and were discussed with staff. If the City uses such factors in other applications
(such as parking standards), the factors utilized are: 250 square feet per employee for office
buildings, 350 square feet per retail worker and one hotel employee per hotel room, or per 500
square feet of hotel building area. The density factors are all notably less dense than the data
on job growth and building construction during the late 1990s in Santa Monica would suggest.
D. 1,000 Employees and Building Area
Employment density factors allow one to move back and forth between numbers of employees
. and building area for various types of workspace buildings. Returning to the universe of 1,000
employees, the following building sizes result:
1,000 Employees Related to Building Size
Office
Retail/Entertainment
Hotel/Lodging
250 sq. ft.lemployee
350 sq. ft.lemployee
500 sq. ft.lemployee
250,000 sq. ft.
350,000 sq. ft.
500,000 sq: ft.
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E. Child Care Demand and Mitigation Costs Related to Building Area
At this juncture, it is possible to link workplace building area with number of employees, with
child care demand and the costs of mitigating child care demand. Table 12 summarizes the
sequence of steps and the results of the analysis, using the updated 2005 figures with and
without land.
Table 12
Workplace Buildings Mitigation Costs Per Square Foot (2005)
Child Care Center Spaces in Demand per 1,000 Employees
(End of Section II)
35.68
Cost of Child Care Facilities per Space
(End of Section III)
Excludina Land
$18,500
Includina Land
$55,400
Cost of Child Care Center Spaces for 1,000 Employees
$660,100
$1,976,700
Cost of Child Care Center Space per Employee
$660
$1977
Child Care Center Cost per Sq. Ft. Building Area
Office
Retail/Entertainment
Hotel/Lodging
250 sq. ft./Employee
350 sq. ft./Employee
500 sq. ft./Employee
$2.64
$1.89
$1.32
$7.91
$5.65
$3.95
Source: Keyser Marston Associates
Total child care linkage costs are provided with and without land. in recognition that some child
care centers may be developed on land either donated or already owned by the City. To reflect
the mix, an average linkage cost for the two assumptions is recommended for establishing the
maximum ceiling. Results are as follows
Office
Retail/Entertainment
Hotel/Lodging
$5.27
$3.77
$2.64
These are the total child care linkage costs for workplace buildings and child care center
facilities. These costs, also referred to as total nexus costs, represent the legal ceiling for
potential fees supported by this analysis. These are not recommended fee levels. The City may
set fees at any level below these nexus costs. Section VI of the report provides additional
IIlcaterial:i for C1:s:si:sting in 3eleoting foo lovole.
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C.C - 133
F. Building Area and Child Care Demand
The relationships between employees, child care demand and building area have other
potentially useful applications beyond the setting of fee maximums. KMA recommends that the
City offer a build option as an alternative to paying fees. In addition, the City may wish to require
the construction of a child care center for a very large project.
For example, if the City determines that a minimal optimal size child care center is 75 children, it
is possible to determine how large the project needs to be to warrant 75 child care spaces.
75 spaces/35.68 spaces (per 1,000 employees) = 2.102 times
Office:
Retail:
Hotel:
250,000 sq. ft. x 2.102 = 525,500 sq. ft.
350,000 sq. ft. x 2.102 = 735,700 sq. ft.
500,000 sq. ft. x 2.102 = 1,051,000 sq. ft. (2,102 rooms)
In other words, this analysis uses relationships that suggest that an office project of 525,500
square feet would generate demand for a child care center for 75 children. For the same size
child care center, a retail and/or entertainment project would need to be 737,700 square feet, or
a hotel of a little over 2,000 rooms.
Other ways of expressing the relationship are as follows:
· Office: 1 child care space per 7,007 sq. ft. building area or 0.000143 child care space
per square foot building area.
· Retail: 1 child care space per 9,809 sq. ft. building area or 0.000102 child care space per
square foot building area
· Hotel: 1 child care space per 14,013 sq. ft. or 0.000071 child care space per square foot
building area
Another application relates child care center space to project area space. It is recalled that tRe
average child care center is 70 sq. ft. of building area p~r child. If the 75-space child care center
is for an office building of 525,500 sq. ft., the child care center size requirement is 5,250 sq. ft.
(75 x 70 sq. ft. per space) or roughly 1 % added to the building area. For the three building
types, the ratios are as follows:
Office - 1 %
Retail- 0.7%
Hotel - 0.5%
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v., ;"T\
C.C - 135
In summary, child care center demand conclusions can be used to relate child care center
space to commercial projects for other purposes, such as negotiating Development
Agreements.
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19305.005\001-016.doc, Prepared 2003; Portions Revised 2005
TABLE 11
COMMERCIAL BUILDING ACTIVITY IN SANTA MONICA
CHILD CARE LINKAGE PROGRAM
CITY OF SANTA MONICA
ANNUAL COMMERCIAL BUILDING ACTIVITY (SQUARE FEET)1
All Other
Hotel Commercial Total
1990 0 90,000 90,000
1991 0 224,359 224,359
1992 0 10,904 10,904
1993 0 10,652 10,652
1994 0 91,522 91,522
1995 0 92,881 92,881
1996 0 15,192 15,192
1997 0 27,031 27,031
1998 0 400,198 400,198
1999 0 580,816 580,816
2000 39,381 53,872 93,253
2001 0 67,209 67,209
2002 Q 54.553 54.553
Total 39,381 1,719,189 1,758,570
1990-1999
Total 0 1,543,555 1,543,555
Average 0 154,355 154,355
1995-2000
Total 39,381 1 ,169,990 1,209,371
Average 6,564 194,998 201,562
1990-2002
Total 39,381 1,719,189 1,758,570
Average 3.029 132,245 135,275
1 Data provided by City staff on March 10,2003 and is based on building permit activity. Includes large projects subject to
development agreements.
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SECTION V - SUMMARY OF LINKAGE ANALYSIS AND CONCLUSIONS
Section V summarizes the child care linkage fee analysis described in Sections I-IV. Those
sections explain the multi-step analysis undertaken to quantify the demand for child care by
employees in Santa Monica and the costs to mitigate child care demand, in terms of the
provision of new child care center spaces. The analysis is conducted for a "universe" of 1,000
employees for ease of understanding and avoidance of awkward fractions associated with an
analysis on the per employee or per household level. The findings of the demand analysis and
linkage costs are summarized below.
A. Demand Analysis
The demand analysis estimates the number of children who require child care for a given
universe of 1,000 employees. Demographic information is drawn from the U.S. Census 2000
series for the County of Los Angeles, since workers in Santa Monica come from the larger area.
· From a universe of 1,000 employees, there are 694.11 employee households, reflecting
the fact that most households contain more than ~ne worker or employee.
· In the 694.11 employee households, there are 183.18 children age five and under
(actually half of all five year olds).
· Of the 183.18 children age five and under, 140.21 need child care due to the situation
that all parents in the home are working. .
· Of the 104.21 children needing child care, the demand for spaces in child care center
facilities is 47.57 spaces (14.85 infant and toddler spaces and 32.72 pre-school spaces),
based on national surveys for children of these age groups.
· National surveys suggest that 75% of demand for child care center space for preschool
children is for centers located near the parent's workplace. As a result, the demand for
spaces in child care centers located near the workplace is 35.68 spaces (11.14 infant
and toddler spaces and 24.54 preschool spaces).
The conclusion of the demand analysis is that for 1,000 employees, the demand for spaces in
child care centers near the workplace is 35.68 spaces.
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B. Mitigation Costs Analysis (2005)
The mitigation costs analysis estimates the cost of providing new child care spaces in Santa
Monica and then translates these costs into total linkage costs.
· A prototypical child care center and its development cost in Santa Monica was analyzed.
In addition, cost experience was drawn from a survey of other West Los Angeles Area
child care centers. The finding is that the cost to develop a new child care center in
Santa Monica in 2005 is approximately $18,500 per space without land, or $55,400 with
land or, averaged together, $36,950.
· The total mitigation cost for 1,000 employees is calculated by multiplying the number of
child care center spaces in demand (35.68) by the cost of development per child care
center space:
.35.68 x $36,950 = $1,318,380 for 1,000 employees
The mitigation cost allocated to each of the 1,000 employees is $1,318.
· Further analysis relates the per-employee cost to building space based on density of
employment. Since density varies by type of building and the activity within it, there are
different density factors for each of the three building types:
Office
Retail
Hotel
250 sq. ft. per employee
350 sq. ft. per employee
500 sq. ft. per employee
When the cost per employee is divided by the number of square feet per employee, the
result is a cost per square foot of building area as follows:
Office $5.27 per sq. ft. ($1,318 + 250)
Retail $3.77 per sq. ft. ($1,318 + 350)
Hotel $2.64 per sq. ft. ($1,318 + 500)
These costs per square foot express the cost to mitigate the demand for space in child
care centers through the construction of new child care center spaces in Santa Monica.
These are the total linkage costs and represent a ceiling below which fees may be set.
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SECTION VI - MATERIALS TO ASSIST IN DESIGNING A FEE PROGRAM FOR SANTA
MONICA
A. Overview
This section provides information to assist policy makers in selecting an appropriate Child Care
Impact Fe~ level and mitigation program for Santa Monica. As indicated at the end of the
previous sections, the linkage analysis establishes maximum supportable fee levels.
Recognizing a variety of City objectives, policy makers may set the fee or other obligations at
any level below the maximum.
The conclusions of the analysis on child care linkage costs for three types of commercial
projects discussed in Section V are restated below. These are the maximums below which fee
levels may be considered for different buildings:
Office - $5.27 per square foot .
Retail/Entertainment - $3.77 per square foot
Hotel - $2.64 per square foot
1. Thresholds and Exemptions
Be.fore evaluating alternative fee levels, it is helpful to recognize that a linkage fee program and
governing ordinance may contain features to address specific concerns and policy objectives.
The most important features are minimum size thresholds and exemptions.
A minimum size threshold sets a project size over which fees are in effect and exempts or
reduces fees on smaller projects. Very large cities with high fee structures (multiple fees at
substantial levels) tend to set thresholds at the 25,000,50,000 or even 100,000 square foot
level. Smaller cities typically establish thre!)holds at 10,000 or 25,000 square feet. Some
programs have no thresholds. For consistency, Santa Monica may want to consider a threshold
that is the same as for other development standards or fees. The Development Review
threshold is currently 7,500 square feet. The Housing and Open Space Fee reduces the fee for
the first 15,000 sq. ft.
A number of policy objectives can be accomplished through the minimum thresholds. If there
are older commercial areas for which small-scale infill is a City objective. a minimum threshold
will avoid or reduce the cost for small projects. If mixed-use projects are being strongly
encouraged, again a minimum would benefit many such projects.
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.~
',.: P!
Exernptions of several sorts can also be added to the program. Specific geographic areas are
sometimes identified as warranting special treatment by the City or specific building types may
be exempted.
Finally, it should be.noted that the ordinance will likely contain a provision to address demolition
of existing structures, recognizing that the prior structure had child care impacts and the
replacement structure should only address net new impacts. Similarly, when very low
employment density type structures are renovated for newer higher employment density
activities, adjustments are in order. The classic example is the warehouse that is renovated for
an office or film production activity.
B. Other Santa Monica Impact Fees and Total Development Costs
Policy makers usually wish to consider the design and level of a new fee in the context of
existing fees already in place and in the context of total development costs within the
jurisdiction. This section briefly summarizes Santa Monica impact fees and development costs,
particularly land, within the city and evaluates the relationships.
1. Other Impact Fees
The City of Santa Monica was one of the first in the State to adopt a jobs housing or affordable
housing impact fee and also an. open space impact fee. These were adopted in 1984 and have
been adjusted periodically since then using a Consumer Price Index. The fees apply to office
projects only. The fee level is quoted as a single fee and, as of the date of report preparation
(2005), is as follows:
· $4.37 per square foot for the first 15,000 square feet; and
· $9.72 per square foot in excess of 15,000 square feet.
In addition, the City has a "tee" schedule to cover a broad range of planning and processing
services associated with the. development process. These are not impact fees per se, but are
noted because they are reportedly high relative to other cities and do add to the costs of
development in Santa Monica.
A child care fee would be an impact fee similar to the affordable housing and open space fee
and in addition to the levels noted above.
2. Land Costs in Santa Monica
A brief discussion of land costs in Santa Monica as a key compon~nt of total development costs
is relevant because, in theory, land value adjusts downward to reflect the added cost burden
imposed by the City. Most development costs, such as hard construction costs, and most
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- indirect and financing costs are relatively fixed, or not subject to adjustment as a result of local
policies. Land value is the variable in the development equation that adjusts to reflect the
income capacity of market forces, given the fixed costs of development. Rents and building
values generally act independent of costs of development. They are driven by the market
attraction of the location and the strength of the regional economy. If costs are increased as a
result of a local fee, land values are theoretically decreased by a corresponding amount.
The relationship between the fee cost and the land value is a function of the project density or
Floor Area Ratio (FAR). With an FAR of 1:1, the building area square footage is equal to the site
area. A building with an FAR of 2:1 is a building with twice the floor area as the parcel size,
meaning the fee impact theoretically is doubled in its diminution of land value. Most commercial
or mixed-use projects in Santa Monica are developed to an FAR in excess of 1 : 1. (Usually
parking is kept out of the equation - impact fees are not charged on structured parking square
footage and parking is not counted in the FAR.)
The word "theoretically" is dispersed throughout the discussion. In the real world, other forces,
most particularly market demand, drive land values far more powerfully than do fees. Land
values have escalated substantially since the mid-1990s and despite the recession in office
markets, land values have not come down in locations such as Santa Monica.
To obtain an overview of values in Santa Monica, KMA considered several sources. KMA
obtained data on 15 land purchase transactions! which have occurred since late 1999. These
transactions covered all areas or zip codes of the City. In addition, KMA talked with the City
about general conditions and trends. From this limited investigation, KMA concludes that land
values are predominantly over $100 per square foot and in some locations over $200 per
square foot. The low end of the range for properties without significant problems is around $80
per square foot. (2003)
At $100 per square foot each dollar of impact fee is a 1 % impact on land val.ue at a 1:1 FAR and
2%.at a 2:1 FAR. Areas with a development potential of higher than 2:1 FAR due to zoning have
land values considerably over the $100 average used in the example. As a result, the impact of
each dollar of fee is probably no greater than 2% of land value at any location in Santa Monica.
Finally, as an observation, Santa Monica may be a city with a high fee structure (both impact
fees and processing fees), but it is also a city with a very high land value structure. There is no
evidence that the fee structure thus far has had a depressing impact on land values. It is likely
that the development community views other difficulties in pursuing development projects in
Santa Monica, such as limited land, as being more significant and more costly than the fees.
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3. Total Development Costs
Total development costs for all types of projects in Santa Monica are higher than in most other
portions of the metropolitan area for a combination of reasons.
· The land cost structure reflecting the high desirability of virtually all locations in Santa
Monica and the strong market conditions and income capacity resulting there from.
· High construction costs resulting from most projects being built at urban type densities
on sites of constrained size. Staging areas for construction are also minimal, adding to
costs.
· Parking requirements, which in combination with the density and land costs, means
virtually all parking is now located in structures of one sort or another, often
subterranean.
As a result of these factors, it is virtually impossible to complete a development project for less
than $300 per square foot "all inclusive." This cost is inclusive of land, construction, site costs,
and all indirect costs including financing in 2003. Average development costs "all inclusive"
generally fell in the $300 to $400 per square foot range.
In the context of total development costs, each dollar of impact fee has a minor impact - under
0.35%.
To restate KMA's conclusion on land values: market pressures have a far greater impact on
land values than fees in the Santa Monica real estate market. According to the Housing
Element, land costs escalated 31% to 56% during the 1997 to 1999 period alone, and land
costs have continued to rise since that time. A child care fee would not be of a magnitude to
significantly alter land values in Santa Monica.
C. Child Care linkage Programs in Other Jurisdictions
It is always of interest to decision makers to know what other cities and counties have in place
in the way of similar programs. KMA assembled information on child care linkage programs in
California and elsewhere, following a search using the internet, the California League of Cities,
and other sources such as a State Housing and Community Development publication entitled
Pay to Play.
The chart, Table 13 at the end of this section (updated for 2005), summarizes the major
provisions of ordinances in 15 California jurisdictions plus a specific plan area. Some of the
main points of interest are:
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· All of the jurisdictions with the exception of West Hollywood and Palm Desert are in
northern California.
· The highest fee level in California on non-residential construction is in Palm Desert, at
$1.15 per sq. ft. for office space, adopted in 2005. San Francisco, Berkeley and San
Mateo all have fees of $1 per sq. ft. The next highest is Martinez at $0.85, followed by
West Hollywood at $0.65. All others are lower yet.
· Many programs have a parallel charge on residential construction.
· A few programs also fund operating expenses and subsidies for lower income families.
· Most programs have thresholds and exemptions of some sort.
· Seattle has a recently adGpted a child care linkage program which only applies to the
downtown area, and only to large hotels and office projects. The charge is $3.25 per
square foot on the bonus area (above a base FAR) or equivalent to $1.50 to $2.00 if
applied over the total building area.
KMA is familiar with several jurisdictions that are considering adding a child care linkage
program and of those that ha~e them now, some will be doing an update within the next few
years. None of the programs have been challenged in court, to KMA's knowledge.
D. Child Care Fee Collection Projection
Policy makers and planners like to have information on the approximate amount of funding a
program will generate, given certain assumptions. This can be done by examining the annual
level of construction activity and projecting it forward to determine funding for each dollar of fee.
1. Commercial Construction
Santa Monica is a built-out city without a substantial amount of construction activity, residential
or non-residential. City staff assembled data on commercial construction every year since 1990
(Table 11). This information was presented in Section IV. Commercial construction averages for
various timeframes since 1990 are as follows:
Non-Residential
1995-2000
1990-1999
1990-2002
201,562 sq. ft.lyr.
154,562 sq. ft.lyr.
135,275 sq. ft.lyr.
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For purposes of looking forward, generally the longer timeframe provides a more useful
- average. The 1990s decade was a particularly good decade for projection purposes because
during the first half of the decade the economy was in recession and the second half of the
decade was a period a vigorous expansion. Since 2000, the office market has been in
recession, so for purposes of projection, KMA believes 150,000 sq. ft. per year is a good
average.
In Santa Monica very large projects are typically negotiated with the City and become subject to
Development Agreements. Of the approximately 1,760,000 sq. ft. developed since 1990, over
700,000 of it was in Development Agreement projects. Without these projects, the average
activity would drop to around 77,000 sq. ft. per year. For projection purposes, KMA would argue
that much of this actNity probably would have happened in other projects and further, looking
ahead, Santa Monica will probably have at least one or two large Development Agreement
projects per decade on average.
KMA recommends a projection range of 100,000 to 150,000 per square foot per year. From
there one can examine the amount generated for every dollar of fee, or say, a $1, $3 and $5 per
square foot fee range.
$1 Fee
$3 Fee
$5 Fee
100,000 sq. ft. per year
150,000 sq. ft. per year
$100,000
$150,000
$300,000
$450,000
$500,000
$750,000
Working from the mid ranges of both fees and construction activity, KMA brackets the proceeds
from the program at roughly $250,000 to $450,000 per year.
The above projection range implies two major conditions:
· That the fee will be applied to all commercial type construction - office, , retail,
entertainment, hotel, etc. This is not consistent with the current housing and open space
fee.
· That the fee program will not include exemptions or reductions for smaller projects.
Again, the City's other impact fee programs do include reductions.
2. Fund Capacity vs. Costs
On an order of magnitude level, it is helpful to look at the probable linkage program fund in light
of linked child care costs, or in this case, child care center facility costs. It was established that
the average cost per child care center space is $36,950 on average. (2005)
~,
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If an adopted linkage program generates $250,000 to $450,000 per year, then roughly ten new
child care center spaces could be developed each year. Or, if the desired size of a child care
center is 75 children, the City could fund development of a new center every seven or eight
years.
E. Santa Monica Development Agreements - Child Care Provisions
The City of Santa Monica has negotiated with the developers of large projects over the past 20
years for child care payments or other provisions as part of the condition of approval for the
project. Commencing with the Colorado Place agreement in 1981, the City has worked out child
care mitigations on seven large scale projects.
The chart at the end of this section (Table 14) summarizes the seven agreements. It appears
that four agreements have called for the provision of a child care centers of varying sizes:
· National Medical Enterprises (now MTV) project - 60 child care spaces
· Colorado Place - a 2,000 sq. ft. child care center (about 28 spaces)
· Water Garden- 3,500 sq. ft. initially, 7,000 sq. ft. by later phase (about 100 child care
spaces)
· Saint John's Hospital Expansion - a center for 49 children of which 21 must be
.infantsltoddlers
In addition, the Rand Corporation agreement calls for an expenditure of $500,000 toward a child
care center.
Most of the agreements specify that the project will give first preference to employees and/or
tenants. A second priority for enrollment is City residents. The Water Garden and Saint John's
require that a portion of spaces (10% and 25% respectively) be made available to the children
of lower income families.
These development agreements represent individual negotiations independent of a City policy
or program to guide consistency of requirement. As such, they provide little guidance for future
development agreements other than the precedent for requiring a child care mitigation in
concept.
F. Recommendations for a Child Care Linkage Fee Program for Santa Monica
Drawing from the findings of the linkage analyses and from the materials in this section of the
report, the following findings listed below are offered as a guide:
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C.C - 146
· The maximum child care fee levels supported by the linkage analysis are as follows:
Office - $5.27 per square foot
Retail/Entertainment - $3.77 per square foot
Hotel - $2.64 per square foot
· The fee levied by the City should be under the maximum amount supported by the
analysis. KMA always recommends a margin to allow for minor changes in conditions,
different findings from new surveys, or other adjustments that might invite challenges to
the fee level. With a margin, challenges are discouraged.
· Based on the high land value structure in Santa Monica and high costs of development,
fees at virtually any level below the maximums established by the linkage analysis will
have only a negligible impact on development costs and land values and will not
significantly alter development attraction in Santa Monica.
· Given the low volume of commercial development activity in terms of new square
footage added each year, fees should be at least $2.00 per square foot in order to
accumulate enough funds to follow through on the purpose of the fee - to increase the
supply of child care center spaces in Santa Monica.
· For consistency, the City may wish to use the 7,500 sq. ft threshold for Development
Review or the 15,000 sq. ft threshold for the office Mitigation Fee. Alternatively, the City
may wish to reevaluate all thresholds in light of the average size of projects processed
through the City and consider a different level to capture more activity.
· KMA recommends that the Child Care Fee be applied to all commercial projects and that
the City reevaluate expanding its Office Mitigation Fee to similarly include retail and hotel
type projects. Retail and hotel projects are notably intensive in very low paying jobs.
· KMA recommends that the ordinance include a provision for building child care center
spaces as an alternative to paying a fee. The build option could include contributing to a
child care center being developed by other sponsors, profit and/or non-profit.
Rehabilitation of existing buildings for child care centers should also be permitted within
such an option. The build option should be in similar proportion to the linkage finding as
the fee is to the linkage maximum.
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19305.005\001-016.doc, Prepared 2003; Portions Revised 2005
C.C - 147
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APPENDICES A, S, C, 0
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APPENDIX A
GLOSSARY OF CHILD CARE AND DEVELOPMENT TERMS
AlE (also A&E) - Architect/Engineer. Common abbreviation for the architects and engineers
(including mechanical, electrical, structural and civil engineering consultants).
Building Coverage - See Floor Area Ratio.
Building Permit - The local government's demonstration that it has reviewed development
.plans for compliance ~ith local codes and given permission for construction to proceed.
California Education Code - Sections of the California Education Code pertain to child .care
and development programs serving children part day or full day. Specifically, Section 8208
address programs that offer a full range of services for children from infancy through age 13, for
any pc;trt of a day, by a pUblic or private agency, in centers and family child care homes. Section
8263 clarifies child eligibility for state subsidized child care and development services.
Capital Cost - Money spent to improve a property and enhance its value over an extended
period of time (as opposed to a repair).
Capitalization Rate - A discount rate (expressec! as a percentage) used to determine the
present value of a stream of future income (or expenditures). For instance, to establish a
reasonable purchase price for a given investment property, investors, lenders and appraisers
may utilize a capitalization rate to discount a stream of future rental income.
A capitalization rate was utilized in the Child Care Linkage Fee Analysis for th~ purpose of
estimating a one-time charge to address the impacts of new development over the life of a
building. As such KMA capitalized the City's annual child care and youth expenditures at a rate
of 10%. This rate is within the finance industry's acceptable range.
CCR - California Code of Regulations.
Child Care Center - Any child care facility of any capacity, other than a family child care home,
in which less than 24 hour per day non-medical care and supervision are provided to children in
a group setting in accordance with CCR, Title 22, Section 101152. In Santa Monica, the Santa
Monica-Malibu School District (SMMUSD) runs full time and part-time centers for pre-schoolers
(Child Care in Santa Monica, September 2000.)
Child Care Linkage Fee - A linkage fee to mitigate the impacts on child care demand
associated with building development and new workers or residents.
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Construction Cost - The cost of constructing the building, including all direct costs of
construction, plus contractor's profit and general conditions.
Child Care Recreation, Enrichment, Sports Together (CREST) - Eight after-school programs
jointly administered by The Santa Monica-Malibu School District and the City of Santa Monica
for school age youth.
Development Agreement - A legal contract between a public agency and a developer that
includes conditions and terms for the development of a project.
Development Cost - The sum of all costs for planning, administration, site acquisition,
relocation, demolition, construction, tenant improvement allowance and equipment, all financing
related costs, on.,site streets and utilities, a contingency allowance, insurance premium, any off-
site costs required, any initial operating deficit, and all other costs necessary to develop the
project.
Direct Costs -- Costs directly related to the construction of a project, including site acquisition,
demolition, construction, tenant improvements, landscaping, etc.
Employee Density Factor - A measure of the average building space occupied by a single
employee. Calculated by dividing the total building area by the total number of employees
employed in the building.
Family Child Care Homes (FCCH) - Child care facilities operating out of individuals' homes.
They are categorized as either small (serving up to 8 children) or large (serving between 9 and
14 children. FCCHs can serve a combination of pre-schoolers (including infants) and school age
children.
Floor Area Ratio (FAR) - A comparison of the total area of a building with the total area of the
land upon which it stf!lnds. Maximum or minimum FARs may be established by local zoning
codes.
Federal Poverty level - A minimum income level below which a household is officially
considered to lack adequate means for subsistence and to be living in poverty. The U.S.
Department of Health and Human Services annually updates the poverty guidelines by the
Consumer Price Index.
Housing Element - One of the mandatory elements of a General Plan of a City or County, the
Housing Element identifies the needs and present options for the production of housing in
acommunity .
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Impact Fee - Charge levied on developers by local government to pay for the cost of providing
public facilities necessitated by a given development or to otherwise lessen the negative impact
of development upon the public. Also referred to as an exaction or governmental fee.
Indirect Costs -Costs not directly related to construction, e.g., leasing and brokerage
commissions, marketing costs, design and other professional service costs, property taxes
during construction, development management and governmental fees and financing costs (e.g.
Joan points, interest expense). Also known as "soft costs."
Infant - Children from birth to two years (CCR, Title 22, Section 101152). However, for
purposes of their programs, Santa Monica recognizes infants as children from birth to one year.
Licensed Child Care - Child care programs in a center or provider's home which follow state
regulations for staff-to-child ratios, education standards, program structure and facilities.
Programs are regulated by the Department of Community Care Licensing in the California
Department of Social Services (CCR, Title 22, Section 10152) or administered under the State
Department of Education under Title 5 of the CCF.
Mitigation Fee Act, AB 1600 - Legislation that amended California Government Code, Section
66000, requiring that local goyemment demonstrate a linkage between the amount of a fee, the
fee's purpose, and the type of development on which the fee imposed.
P.S.F. - Per Square Foot
Pre-school Programs - In Santa Monica, pre-school programs serve children from two to five
years. Includes subsets of children of different ages with different state regulations associated
with them. (Child Care in Santa Monica, September 2000)
Pre-schooler - According to the Health and Safety Code, pre-school children are children who
are not infants, toddlers, or school age (Section 1597.059).
Project Cost - See Development Cost.
Rehabilitation - The improvement. alteration, modernization or modification of an existing
structure to make it safe, sanitary and decent and/or to bring it up to Building Code Standards.
Santa Monica Programmatic Costs/Santa Monica Scholarship Programs - Funds available
to help lower and moderate income households residing in Santa Monica to meet their child
care needs (Connections for Children Program and The Growing Place).
School Age Children - Children of kindergarten age through grade five. (Child Care in Santa
Monica, September 2000).
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loddler - A child between the ages of 18 months and 30 months (CCR, Title 22, Section
101152).
Total Development Costs - See Development Costs.
Universe of Employees - A grouping of individual employees for analysis purposes. In this
analysis the "universe" of employees is comprised of 1,000 employees.
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APPENDIX B . THE DEMAND FOR CHILD CARE ASSOCIATED WITH RESIDENCES
This appendix provides an analysis of the linkage between residential development and child
cafe demand, similar to the analysis provided in Section /I of the main report on workplace
building construction and child care demand. This analysis is in the appendix because KMA
recommends that the City not proceed with a child care impact fee on residential development
at this time.
A. Santa Monica Residents - Demographic Profile and Growth
A first step before embarking on the residential demand analysis is to review the demographic
profile of Santa Monica residents. The data source is the U.S. Census 2000 series for the Gity
of Santa Monica. Santa- Monica demographic characteristics are appropriate for describing
households and the propensity to have children in them, whereas for workplace buildings one
could look to the characteristics of the greater Los Angeles area because only a small share of
~
those who work in Santa Monica also live there. Santa Monica characteristics are notably
different from the largef Los Angeles area. Some of the highlights presented in Appendix Table
B-1, at the end of this section, are:
· Only 16.8% of Santa Monica households contain children under age 18. (This may be
compared to over 41% for Los Angeles County.)
· Fewer than 5% of Santa Monica households contain children of preschool age.
· Santa Monica did not experience growth in population or households over the 1990 to
2000 decade.
· Overall the number of children under age 18 in Santa Monica grew slightly over the
decade, by about 5% (from 11,977 to 12,314).
· . Santa Monica had fewer children under age 5 in the year 2000 than it did ten years
earlier.
These statistics may be restated without the figures as follows:
· Santa Monica is a city with far fewer children on average compared to the larger Los
Angeles area.
· There is no significant growth in the number of children and an actual decrease in the
number of very young children (age 0-5).
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A description of the dernand analysis associated with households is provided in the next pages.
B. 100 Households - Children Needing Child Care
Like the workplace analysis, which utilizes a universe of 1,000 employees, the residential
analysis works from a universe of 100 households in Santa Monica. Again, this approach is
used to avoid having to describe children and child care demand in terms of fractional children
carried to four or five decimal places.
Using Census findings, KMA developed factors to quantify the number of children by age group
as relates to the type of child care service needed, for 100 households or 100 residential units
(the difference between households and residential units being only a minor vacancy
adjustment). Unlike the analysis of children of employees which is limited to preschool children,
an analysis for residents can addJess children of all age levels for which the City provides care
or assists with services for its residents.
The table below summarizes the incidence of children by age level and of children needing child
care by virtue of parents being employed (two-parent households with both parents working and
single-parent households with the single parent working). The last step adjusts for more than
one child within the age group.
Appendix Table B-2 .
Child Care Demand for Households with Children in Santa Monica
Per 100 Households
Ho~seholds bv Aae of Children
~ 3 and 4 ~ 6-12 13-17 Total
Households with Children
(Age 17 and under)
Factor
Number
Households Needing Child Care
(Parent(s) Employed)
2.99%
2.99
1.73%
1.73
0.91%
0.91
6.13%
6.13
5.06% 16.83%
5.06 16.83
Factor 62.37% 62.37% 62.37% 73.00% 61.75%
Number 1.87 1.08 0.57 4.47 3.13 11.12
Children in Employed Households Needing Child Care
(Adjusts for more than one child in age group)
Factor 1.09 1.06 1.03 1.06 1.11
Number 2.03 1.14 0.59 4.73 3.46 11.95
Source: US Census, City of Santa Monica, 2000.
The conclusion is that for every 100 households, slightly under 12 children will have working
parents and need child care or youth services, recognizing that "care" may not be an
appropriate term for children over age 12.
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C. How Child Care Needs are Met
The same national surveys and sources were consulted for this portion of the analysis as in
Section II of the main report. Since there are no suitable surveys that allowed KMA to judge how
the residents of Santa Monica might meet their child care needs in a different manner from the
Country or State as a whole, KMA relied on the Urban Institute and UCLA surveys. Appendix
Table B-3 restates from Section ".the distribution of arrangements for child care by age of child:
Appendix Table B-3
Primary Child Care Arrangements of Employed Parents
Age of Children
0-2 3 and 4 ~
Per 100 Households
Parent/Relative 54% 35% 38%
Child Care Center 22% 45% 40%
Family Child Care Home 17% 14% 11%
Before and After School N/A N/A 8%
Other 7% 6% 3%
100% 100% 100%
Source: Urban Institute, Primary Child Care Arrangements of Employed Parents: Findings
from the 1999 Survey of America's Families, Occasional Paper Number 59, May 2002.
For the purposes of this analysis and the City programs, the child care solutions of greatest
interest are Child Care Centers and Family Child Care Home (FCCH) arrangements. The
following findings from national surVeys provide confirmation that demand for these two
arrangements is probably higher in Santa Monica than for the State or County as awhole.
· Use of parents and relatives as a solution to child care decreases as household income
increases. Based on the high income level in Los Angeles County compared to the U.S.
as a whole, KMA estimates that far fewer families in Santa Monica use parents and
relatives as a solution than the percentages indicated above.
· Use of center-based child care arrangements increases as household income increases.
· Use of "other" arrangements, which includes nannies and babysitters, is most expensive
and, as would be expected, increases with household income.
As a result of the generally accepted findings from multiple surveys, it is likely that the use of
parental and relatives arrangements are far fewer and "other" arrangements far greater than the
average, but that the use of child care centers and FCCH's are probably akin to the national and
State average, or higher.
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Based on the above, KMA estimates the child care demand associated with 100 households in
Santa Monica, as shown in Table B-4.
Table B-4
Child Care Demand by Type of Care in Santa Monica Per 100 Households
0-2
Age of Children
3 and 4
~
Total
Children in Employed Households
Needing Child Care (Table B-2)
2.03
1.14
0.59
3.76
Child Care Center
Factor
Number
22.00% 45.00% 40.00%
0.45 0.51 0.24
17.00% 14.00% 11.00%
0.35 0.16 0.06
7.00% 6.00% 3.00%
0.14 0.07 0.02
1.20
Family Child Care Home
Factor
Number
0.57
Other
Factor
Number
0.22
Sources: U.S. Census, Urban Institute, Primary Child Care Arrangements of Employed Parents:
Findings from the 1999 Survey of America's Families, Occasional Paper Number 59, May 2002.
The conclusion of the above is that a universe of 100 households in Santa Monica is associated
with the demand for 1.2 child care center spaces and 0.6 spaces in Fami/y Child Care Homes.
D. Demand for Child Care Spaces Near Home
In Section II of the main report, KMA made an allocation of a Child Care Center to two generic
locations - near place of work and near place of residence. The allocation for the preschool
child was 75% near place of work, 25% near place of residence, based on findings from parent
attitude surveys and other evidence.
At this point, to complete the analysis for demand for child care center spaces near homes in
Santa Monica, KMA applied the 25% to the 1.2 children per 100 households.
· The conclusion is 0.3 child care center spaces per 100 households, or 0.003 per
household.
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E. Child Care Center Demand and Mitigation Costs
The cost to provide the 0.003 child care center space for each household in Santa Monica can
be estimated following the cost analysis and methodology presented in the Report.
The conclusion of the survey and analysis (and 2005 update) for the cost of development of
child care centers in- Santa Monica is $18,500 per space excluding land and $55,400 per space
including land. Applying the cost per child care center space to the 0.003 spaces per household
results in a cost per household as follows:
Mitigation cost per household/residential unit, excluding land $56
Mitigation cost per household/residential unit, including land $166
Average $111
F. Households and Residential Construction Correlation
The profile of Santa Monica demographics from the 1990 and 2000 U.S. Census, presented as
the beginning of this section found that:
· The number of households actually decreased over the period, going from 44,860 to
44,497 households over the decade.
· The number of children under the age of five decreased from 4,048 to 3,448.
Over the same time period, residential building permits issued by the City of Santa Monica
indicate that over 2,600 new residential units were added (Appendix Table B-5). With these two
data series there is no correlation between new residential construction and growth in
households and increased child care demand.
There are a number of possible explanations for these two seemingly contradictory sets of data.
Among the possible explanations:
· Household size is decreasing on average.
· The rate of children growing up in Santa Monica and exceeding age 18 is occurring
faster than the rate of new households with young children.
· The rate of residential unit demolition and units lost to consolidation of existing units are
considerable.
Finally, it is possible that the Census is inaccurate or has undercounted in some manner.
However, the U.S. Census is the mostly widely accepted body of data on such topics. If the City
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were to challenge the Census information, substantial data and analysis would be required,
Until such time, the Census must be viewed as the authoritative source.
Without the ability to make the case that each new residential unit equates to new demand for
child care in Santa Monica, the linkage between new residential construction and child care
demand cannot be supported at this time.
Should the U.S. Census in 2010 produce data indicating growth in the number of small children,
then the City could add a residential component to a Child Care Impact Fee program.
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APPENDIX TABLE B~1
SANTA MONICA DEMOGRAPHIC PROFILE
CHILD CARE LINKAGE PROGRAM
CITY OF SANTA MONICA
1990 2000
Population 86,90
Housing Units 47,75
Households 44,86
Households w/Children Under Age 18
Number of Households 7,171
% of All Households 16.02'l'<
Children Under 18 in Santa Monica by Age Range
Under 5 340A 28'l'<
5-9 260 29%
10 - 14 24% 28%
15 -17 160lc 15DA
100DA 100%
Total Number Under 18 11,977 12,31.11
Approximate Share of Households with Pre-School Children 4.90oA 4.70%
Approximate Share of Households with School Age Children 10AooA 12.60DA
Number of Children per Household with Children Under 18 1.70 1.64
Los Anaeles County
Households with Children Under 18 as % of All Households
41.30%
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APPENDIX TABLE B-5
ANNUAL RESIDENTIAL BUILDING ACTIVITY IN SANTA MONICA
COMMERCIAL BUILDING ACTIVITY IN SANTA MONICA
CITY OF SANTA MONICA
Assumptions:
YEAR
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
SINGLE-FAMILY
UNITS
MULlT-FAMILY TOTAL UNITS
UNITS (SF + MF)
237 308
219 339
187 218
110 122
29 39
60 66
172 195
280 308
762 808
240 276
405 460
196 239
71
120
31
12
10
6
23
28
46
36
55
43
1990-2001
Total (rounded) 480 2,900 3,380
Annual Average 40 242 282
(12 year period)
1995/2001
Total (rounded) 240 2,120 2,350
Annual Average 34 303 336
(7 year period)
Sources: Construction Industry Research Board, KMA
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APPENDIX C
OTHER WEST LOS ANGELES CHILD CARE CENTERS
Les Enfants, Inc. Pre-School
2702 Virginia Avenue, Santa Monica
(310) 315-0058
Developer
· Page Construction
_ Building Type
· New construction
· Stand alone center built in 1998
Size of Facility
· Total = 10,000 square feet
· Indoor space = 5,000 square feet
· Outdoor space = 5,000 square feet
Child Care Slots
· Infant = 28
· Toddler = 18
· Preschool (age 3 to kindergarten) = 26
Costs
· Land: N/A
· Construction (building shell): $120 per square foot
· Tenant Improvements, Fixtures, .outdoor Play Area, etc.: $16,000
· Furnishings and Equipment: $5,000
· Start up Costs: $1,700 for licensing, fire inspections, training, curriculum, and losses
until facility is running at capacity
Parking Requirements
· 5,000 square feet dedicated to parking
Source
· Nancy Behravesh, Director, Les Enfants, Inc.
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,. I
Wests ide Children's Center (WCC)
12120 Wagner Street, Culver City
(310) 397-4200
Developer
· WCC
Building type
· New construction
· Stand alone and expansion of existing facility 2002
Size of Facility
· Total = 26,650 square feet
· Indoor space = 11,650 square feet
· Outdoor space = 15,000 square feet
Child Care Slots
· Infant = 0
· Toddler (18 - 34 months) = 48
· Preschool (age 35 months to kindergarten) = 52
Costs
· Land: Land purchase at $1 million in 1995 when values were depressed. Industrial
zoned land owned by the City of Los Angeles.
· Construction (building shell): Total development costs were $2.2 million or $190 per
square foot.
· Tenant improvements, fixtures, outdoor play area, etc.: $344,000 or $30 per square
foot.
· Furnishings and equipment: $87,000
· Start up costs: $107,000, including curriculum materials & equipment.
Parking Requirements
· A new structured parking area will be provided to serve the site. There are 10 drop-
off spaces.
Other
· Child care facility is part of the new Child Development and Neighborhood Center.
The new building enables WCC to more than double its on-site child care services to
lower income families, including subsidized infant care program.
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· The project also includes a large community meeting room and a professional
kitchen.
Source
· Douglas Chin, WCC
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New Path Montessori School
'962 20th Street, Santa Monica
(310) 450-2477
Building Type
· Rehabilitated - 2001
· Single-family home in residential area
Size of Facility
· Total = 2,400 square feet
· Indoor spa~e = 1 ,200 square feet
· Outdoor space = 1 ,400 square feet
Child Care Slots
· Infant = 0
· Toddler = see below
· Preschool (age 2 to kindergarten> = 30
Costs
· Land: $328,000
· Construction (building shell): $125 per square foot
. Tenant Improvements, Fixtures, Outdoor Play Area, etc.: $35,000
· Furnishings and Equipment: NA
· Start up costs: $200 for licensing
Parking Requirements
· Three drop off spaces and staff parking spaces provided. 12' property in alley
Source
· Chandra Jayasekara (Ira), New Path
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Saint Joseph Infant Toddler Development Center
718 Rose Avenue, Venice
(310) 396-6468
Developer
· Venice Community Housing Corporation, Owner
Building type
· Rehabilitated - 1999
· Two-story low-rise office building
Size of Facility
· Total = 2,470 square feet
· Indoor space = 1,570 square feet
· Outdoor space = 900 square feet
Child care slots
· Infant = 6
· Toddler = 17
· Preschool (age 3 to kindergarten) = 0
Costs
· Land: $114,900
· Construction (building shell): $161 per building square foot
· Tenant Improvements, Fixtures, Outdoor Play Area, etc.: above
· Furnishings and Equipment $32,000
· Start up Costs: $10,600 for licensing, training, curriculum, family recruitment
Parking Requirements
· Two spaces
Other
· Mostly funded with public grants
Source
· Judy Alexander, Saint Joseph Center, (310) 396-6468
· Lori Zimmerman, Venice Community Housing Corporation, (310) 399-4100
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UCLA Campus Child Care Center
UCLA Campus
(310) 206-1861
Developer
· UCLA Capital Programs
Building Type
· Planning - Expected 2003
· New stand alone center
· Renovation of existing structure (approx 1,000 square feet) for new administration
area (lobby, kitchen and conference room).
Size of Facility
· Total = 12,000 square feet
· Indoor space = 5,000 square feet
· Outdoor space = 7,500 square feet
Child Care Slots
· Infant = 12
· Toddler = 12
· Preschool (age 3 to kindergarten) = 60
Costs
· Land: University donation
· Construction (building shell): Only provided "Total Cost Allin" amount equal to $2.1
million or $420 per building square foot
· Tenant Improvements, Fixtures, Outdoor Play Area, etc.: Above
· Furnishings and Equipment Above
· Start up Costs: Above
Parking Requirements
· Parking provided for staff on-campus but not attached to facility
Other
· Major private donation for construction
Source
· Gay Macdonald, (310) 206-1861
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APPENDIX D- CHILD CARE PROGRAMMATIC EXPENDITURES OF THE CITY
A. Introduction
In this section, KMA summarizes the expenditures made by the City of Santa Monica for various
child care programs and youth services and links them to residential units. They are linked to
residential units, and not workplace buildings, because the services and programs are available
to residents if not exclusively, certainly primarily.
As indicated in the Report introduction, a narrow, but widely accepted, interpretation of the
Mitigation Fee Act, AB 1600 as written into California Government Code, Section 66000 (Code)
is that linkage fee type programs may only address capital or facility costs. Since the
expenditures examined in this section are all programmatic costs, they are not eligible for
linkage fee purposes. As such, this material is summarized for added information only.
For purposes of this exploration, KMA utilized expenditure information for one year (Fiscal Year
(FY) 2002/03 Budget). Should the City elect to proceed with any use of the information, it is
recommended that additional data for more years be assembled. Average annual City
expenditures should reflect data from at least three to five years would to provide a more solid
foundation for any purported average.
Given the limitations for proceeding with programmatic expenditures, and the fact that a
residential impact fee is not recommended at this time, the information and methodology
presented in this section are intended as illustrative only.
B. City Expenditures on Preschool Child Care
The City of Santa Monica responds to community needs through direct service provision or
contracts with community agencies through the City's Community Development (CD) Program.
The CD Program awards funding to Connections for Children (CFC) and The Growing Place for
child care scholarships to low and moderate-income Sallta Monica families. CFC prioritizes their
subsidies for the Santa Monica Child Care and Family Support Program to families of children
from infants through preschool and The Growing Place'is a child care center that serves families
with children from three months through preschool.
Both these programs receive funding for their operations and scholarships. In FY 2002/03, CFC
received $122,025 and The Growing Place $171,000 for operational costs. This excludes the
amount of funding for their award of scholarships. In order to determine the costs of the program
per residential unit in Santa Monica, it wa.s necessary to apply the City. expenditure on general
progrRm operations to all children of appropriate age in the City and ultimately all households
and housing units. Another methodology, which would end with the same result, is to identify the
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expenditure per household in the program and then establish the rate of participation among
those eligible. This analysis is summarized in Appendix Table D-1 below. Appendix Table D-4,
at the end of this section, presents the figures from the City Budget divided into the two
components.
Appendix Table D-1
Programmatic Expenditures for Preschool Children, per Residential Unit
Total Cost of Programs
Connection Program excluding Scholarship Program
The Growing Place excluding Scholarship Program
$122,025/Year
$171,000/Year
Total
$293,025/Year
-
Total Number Eligible Children in Santa Monica
Ages 0-4 plus 50% of Age 5
3,773
Cost per Eligible Child in Santa Monica
$77.66/Year
Rate of Eligible Children per Household
(Number of eligible children divided by all households in
Santa Monica - 44,497)
8.48%
Cost per Residential Unit
Cost per Residential Unit (8.48% x $77.66)*
Cost Capitalized @ 10%
$6.59/Year
$66
*Afternatively, $293,025 costs divided by 44,497 households = $6.59
The conclusion is that the cost of the program per household or residential unit (the difference
being a very small vacancy factor) in Santa Monica is $6.59 per year, or capitalized at 10% to
address the long term.
C. City Expenditures on School Age Child Care
The City of Santa Monica's program for school age children is called the CREST program. The
program serves 4th and 5th grade students, or for this study's purposes children age 9 and 10
years old. Outside of the scholarship component, the City contributed $851,968 per the FY
2002/03 Budget (see Appendix Table 0-4). .
A similar methodology for determining the cost per residential unit as was employed with the
preschool programs is utilized.
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Appendix Table D-2
Programmatic Expenditures for School-Age Children, per Residential Unit
Total Cost Program
CREST Program excluding Scholarship Portion
$851,968/year
Total Number Eligible Children in Santa Monica
(4th and 5th graders or 9 and 10 year olds)
1,596
Cost per Eligible Child in Santa Monica
$534/year
Rate of Eligible Children per Household
(Number of Eligible Children Divided by All Households in
Santa Monica - 44,497)
3.60%
Cost per Residential Unit
Cost per Residential Unit (3.6% x $534)
Cost Capitalized @ 10%
$19.22/year
$192
The conclusion is that the City spends $19.22 per residential unit per year on this program. The
annual cost capitalized is $192.
D. City Scholarship Programs
As mentioned, the CD Program provides funding to the CFC and The Growing Place for
programs that assist low and moderate-income households with cost of child care. In FY
2002/03, the annual amount available per child averages $5,900 for CFC and The Growing
Place and $1,170 for the older children in the CREST Program.
For FY 2002/03, CFC awarded 79 children scholarships from 60 households. The Santa Monica
Child Care and Support Program awarded approximately 70% of the scholarship families up to
the 75% of the state median income and the remaining from families that exceeded the state
median income. The Growing Place awarded scholarships to families attending Marine Park
Child Development Center based on a variety of criteria including family income and need. They
do not use a standardized formula or the state median income as criteria. The CREST program
has developed its own fee schedule and wnl scholarship families above 80% of the state median
income depending on family size. The scholarship averages were derived from total
expenditures and total recipients. (See Appendix Table D-5, at the end of this section.)
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The scholarship programs are available to resident families who meet their child care needs by
placing their children in child care centers or family child center homes (not to pay for relatives
care, nannies or babysitters). To ascertain the share of children needing child care who meet
their needs in this manner, KMA relies on the percentages presented in the Report Section /I
addressing how families meet their child care needs.
To estimate how many qualifying households there would be per 100 residential units, one can
look to the City's rate of affordable housing production as a share of total units. For the
purposes at hand, one can therefore look to housing production for units affordable to up to 80%
of median income households, which is consistent with the maximum income level of families
who typically receive child care scholarships.
According to the recently adopted Housing Element, there were 1,167 units built in the City from
1988 through 1997 of which 395 units, or 34%, were affordable to low and very low income
households (below 80% of median income) (Housing Element Section V-2). At the time of the
Housing Element preparation, looking forward from January 1998, there were 467 out of 2,553
units proposed or in the "pipeline" that met the same income definitions, or 18%. Merging the
two periods, the City averaged 23% of its annual housing production affordable units to this
income range.
If the 23% average is applied to 1 00 ~esidential units, we find the following:
Appendix Table 0-3
Number of Children Eligible for Scholarships and Estimated Costs
Per 100 Residential Units
Children Needing Child Care (Appendix C, Table B-2)
Children with Child Care Needs Met by Other Than Parent
or Relatives
Number
Children Qualifying for Scholarship Subsidy @ 23%
Cost of Scholarship/Subsidy
Per Child - Annual (see Appendix Table D-5)
Cost per 100 Units
Cost per Unit
Cost Capitalized @ 10%
Aae 0-5 Aae 6-12 Ism!!
3.76 4.73 8.49
55% 36% 45%
2.07 1.70 3.77
0.47 0.39 .0.86
$5,900 $1,170
$2,770 $456 $3,226/year
$32.26/year
$323
In summary, when the cost of the scholarship program is allocated to each residential unit, the
annual cost is $32 per year, which capitalized at 10% yields a capital cost of $323.
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E. Other Expenditures for Child Care and Youth Services
City staff assisted with the preparation of materials on City expenditures for other child care
related programs and youth services. Conceptually these expenditures are the same as child
care programs in that they are available to the children and youth of resident families in Santa
Monica. Staff therefore screened the budgets of City departments and extracted the programs
for children and youth and the amount budgeted for FY 2002/03. This procedure led to an
assembly of City department programs, which include the Human Services Division,
Environmental and Public Works, Police, Library, Fire, Resource Management, SMMUSD, City
Manger, Community and Culture, Community Programs and the Blue Bus.
Appendix Table D-6 at the end of this section contains the listing of programs and amounts in
the proposed budget. The program list does not include the expenditures for the preschool or
other programs presented thus far in this analysis. All programs on the list are additional
programs; there is no double counting. The finding is that the City's proposed budget contained
programs for children and yout~ totaling $11,751,914 or nearly $12 million.
At the time of the 2000 U.S. Census, the City of Santa Monica had 12,815 children under age
18 residing in it. The total expenditure divided by the number of children is nearly $1,000 for
each child per year, or $917 per year to be more precise.
The total City expenditures divided by the number of households yields $264 per household,
which capitalized at 10% is $2,640 per residential unit.
F. Summary of Costs Per Residential Unit
As previously described, there are limitations to residential linkage in Santa Monica due to the
lack of growth in the number of young children in the City. In addition there is the requirement of
a liberal interpretation of the Code to do a linkage program using operational or program type
costs. Finally, figures here are drawn from a single budget year. For these reasons, KMA
emphasizes that the analysis is illustrative only.
The following summarizes the total child care program and youth services expenditures
amounts per residential unit. The result of adding together all the pieces is:
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Cost Der Unit
City Preschool Programs
City School Age Program (CREST)
City Scholarship/Subsidy Program
Other City Expenditures for Child Care and Youth Services
$66
$192
$323
$2.640
Total Per Residential Unit
$3,221
In summary, the total child care programmatic costs, including youth services for children up
through age 17, is $3,221 per residential unit in Santa Monica.
M
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19305.oo5\001-016.doc, Prepared 2003; Portions Revised 2005
t" (,'i'
Jable D-4
CITY PROGRAMS FOR PRE-SCHOOL AND SCHOOL AGE CHILDREN
CHILD CARE LINKAGE PROGRAM
CITY OF SANTA MONICA
Annual Balancel
Annual Subsidiesl Program
Proaram & Budaet Cateaorv Youth Budaet 1 Scholarships2 Cost
I. Community and Cultural Services Department
A. Human Services Division
Community Development Program Grantees
Connections for Children -$753,740 $590,136 $163,604
The Growing Place $246,000 $65,986 $180,014
B. Direct Services Programs
CREST -
Child Care Component Only $846,570 $0 $846,570
Scholarships $605,501 $520.2003 $0
2
City of Santa Monica. Proposed FY 2002-03 Youth Budget
City of Santa Monica, Subsidy Information FY 2001-02 provided by City staff. See Table B-5
3 Assumes difference is attrtbuted to other non,youth scholarship programs itemized in budget.
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Table D-6
CITY EXPENDITURES FOR CHILD CARE AND OTHER YOUTH SERVICES.
CITY OF SANTA MONICA
PROPOSED FY 2002-03 YOUTH BUDGET
(non school based programs and funding levels are in italic)
DRAFT
Santa Monica-Malibu Unified School District
Annual Operating Grant
Grad Nite Subsidy
$3,000,000
8,100
City Manager
KidScape/Family Guide Publicati9n
22,000
Community and Cultural Services Department
Capital Improvements Program
Skate Park
572,000
Cultural Arts Division
Non-School funding and programs
School Linked Funding and Programs
55,590
177,500
Community Programs Division
Youth Classes and Programs
Miles Playhouse
School Playground Community Use Access Program
Therapeutic Programs
69,574
167,756
168,912
25,888
Event Facilities
Fee Waivers for Parking and'Rental to School District
29,200
Human Services Division
Community Development Program Grantees
Boys and Girls Club of Santa Monica (Skate Park)
Computer Access Center
Dispute Resolution Services: (Youth and Family Program)
EI Nido Family Center (Edison/WiII Rogers Elementary)
Family Service of Santa Monica (McKinley, Muir ElementarylSAPID)
Family Service of Santa Monica: Agency Based Services
Growing Place: Mentor Program
Jewish Family Service of Santa Monica (Santa Monica High School)
Ocean Park Community Center: Sojourn Services
Santa Monica-Malibu Unified School District: Enlace Familiar
25,420
11,583
48,175
110,085
137,760
57,605
10,250
26,138
47,300
62,360
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Santa Monica-Malibu Unified School District: Santa Monica High School Alliance
Saint John's Child and Family Center (John Adams/Lincoln/Olympic)
St. Joseph Center: Family Self Sufficiency
WISE: Senior Services: RSVP/America Reads
Woodcraft Rangers: Pico Neighbomood Youth and Family Center
Direct Service Programs
Aquatics
Middle School sports Leagues
CREST (Childcare, Recreation, Enrichment, Sports Together)
Recreation (Playground Access)
Enrichment
Sports
Police Activities League
Virginia Avenue Park: Youth and Families Programs
Environmental Public Works Manaaement
School Related Programs
Non-School Related Programs
Fire Department: Fire Safety Proarams
Library Services
School Based
Youth and Families Services
Police Department
School-Based Services
Youth and Family Services
Resource Manaaement Department
Bia Blue Bus
TOTAL
"'Excludes: Connections Program
CREST Child Care
City Employee Child Care Subsidies
Growing Place: Marine Park Child Development Center
All Scholarship/Subsidy Programs
..
308,013
175,705
161,875
30,750
318,000
859,822
126,807
73,281
131,412
262,796
444,625
.421,435
68,500
38,500
31,500
355,000
1,514,730
457,053
1,106,414
12,000
20,500
$11,751,914
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19305.005\001-016.doc, Prepared 2003; Portions Rev ~ed 2005
ATTACHMENT D
DEVELOPER CULTURAL ARTS REQUIREMENTS SURVEY
AND
EVALUATION OF OPTIONS
23
Surnmary and Recommendations
Report
Developer Cultural Arts
Requirement
Survey and Evaluation of
Options
.
,
Prepared for: City of Santa Monica
Prepared by: Keyser Marston ASsociates,
Inc.
Carol Goldstein
November 2005
c.c - 185
"".'
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,I.
,'..... .J''''ot
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TABLE OF CONTENTS
-::;: Page
A. Introduction 1
B. Survey of Requirements in Other Jurisdictions 3
C. Analysis of Developer Arts Requirements and Recommendations 9
D. Key Features of a Recommended Requirement Program 13
E. Work Program for the City/lmplementation Planning Needs 19
F. Estimate of Annual Value of Art and, In-Lieu Payments from the Requirement 25
G. Disclaimers 31
C.C-187
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A. INTRODUCTION
In recognition that much of the identity of Santa Monica is defined by the built environment,
urban design and land use aesthetic, the City Council directed staff to analyze the potential for
requiring a developer contribution to the arts and cultural enrichment of.the City. The City has
both a Public Percent. for Art Program and a long history of including arts contributions in
negotiated development agreements
The City contracted with Keyser Marston Associates, Inc. in March 2003' to collect and analyze
information and to explore measures for obligating private development to make a contribution
. to arts and culture in Santa Monica.
lhis Summary and Recommendations Report provides a condensed version of tasks pr.esented
in the Background Report - a Survey of Arts Requirements in Other Jurisdictions, including an
overview of programs in Santa Monica, and an Analysis of Developer Requirement Programs.
This Summary Report also provides reCommendations on the basic structure of a Developer
Cultural Arts Requirement for Santa Monica, on key provisions of the requirement program, and
a work progra~ for the City for completing the policy framework and program guidelines and
procedures necessary for implementing the Developer Requirement.
kMA was assisted by Carol Goldstein, a subcontractqr with a national practice in planning and
development consulting related to the arts. Carol Goldstein conducted a survey of developer
arts requirements in other jurisdictions in the summer of 2003. The survey and analysis
description, as contained in the Background Report, was prepared in October 2003. Portions
were updated. in summer 2005 when the Summary and Recommemdations Report was
prepared. KMA and Carol Goldstein believe that none of the earlier information has changed in
a manner that would in any way alter the conclusions of this report.
The City specifically requested that the study analyze opportunities for enacting a linkage fee,
similar to other linkage or impact fees in Santa Monica, that would obligate new d~velopment to
pay a fee to support arts and cultu.re. KMA was selected to prepare this study based on the
firm's extensive experience with linkage and impact analysis.
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B. SURVEY OF REQUI~EMENTS IN.OTHER'JURISDICTIONS
....
In the summer of 2003 Carol Goldstein, subconsultant to KMA, undertook an extensive survey
of developer arts requirerpents.. in other jurisdictions. The purpose of the survey was to learn
what has been done elsewhere and to assemble possible ideas for a program in Santa Monica.
A specific charge of the :suOiey was to determine whether any jurisdictions in California (or
elsewhere) have adopted an arts linkage or impact fee, 'includin~ preparation of the requisite
nexus analysis:
Survey Scope and M,ethodology
The survey was conducted in multiple steps to cover a broad range of jurisdictions in California.
Jurisdictions were selected based on the consultants' prior knowledge of their program, or if the
'. , . I
jurisdiction was deemed a likely candidate to have a creative or more comprehensive program.
Since providing a variety of findings was a goal, s19lected cities in other states were also added.
Altogether over 40 jurisdictions were contacted.
The primary information sO,urce was telephone interviews with city arts coordinators or other
staff, supplemented by online sections of city code and o~her material, and items sent to Carol
Goldstein upon request. A list of questions asked is provided in the Background Report. A copy
. '. .
of the assembled materials is b~ing provided to City staff.
The chart following this section (page 8 of the Summary Report) summarizes the key provisions
from selected cities. in the survey. It contains information on seven programs of particular
interest to Santa 'Monica. (See Background Report for a more complete summary).
General Findings
Following are findings regarding how the requirement is applied to private development projects:
. The most prevalent type of program is one that requires the developer to expend 1 % of
building permit valuation on art and/or make an in lieu payment. The vast majority of
programs follow this model.
. Most qeveloper art requirements cover the entire city (or county); some are limited to
downtowns or other sub-areas. A number of redevelopment areas have special provisions,
particularly in the case of redevelopment agency assistance to a project.
. Most programs make use of thresholds, or building permit valuation levels that affect
how the project is treated. Many have a form of minimum threshold, below which
projects are exempt from any requirement, either on-site or in lieu. Some programs have
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maximum amounts required irrespective of project valuation. Step-up or graduated
percentages and other features are also utilized in some instances.
· Building types subject to the requirement vary somewhat. The most prevalent is
commercial (office, retail, and hotel). Multi-family is also common. Some jurisdictions
make the requirement of virtually all construction, including industrial, single family
residential, additions and remodels.
· Exemptions for certain types of projects, for policy reasons, are common. Examples
include affordable housing, churches and schools, and cultural buildings.
. Most programs allow transportation of the art, art consultants, installation costs, and
other art-related costs that are not specifically fabrication or design to count toward the
required amount of expenditure.
Off-Site and In-Lieu Features Findings
· Most, but not all, developer arts' requirement programs allow either off-site compliance
and/or in-lieu cash payment as an alternative to on..:site art.
· Some programs inch,Jde performing art and other cultural options in the program, both
on-site and off-site. Examples are Cathedral City, Dana Point, West Hollywood, Tempe
, .
(Arizona), Pasadena, and Los Angeles.
· A fe~ programs, such as that of the .Los Angeles Community Redevelopment Agency,
require in lieu payments in addition to on-site art, if projects are of a certain size.
I
· .As for .eligible uses of in-lieu fund monies, many ordinances are vague. Almost half the
cities clearly restrict funds to the purchase of physical, permanent art. Cathedral City,
Palm Springs, Long Beach, Los Angeles, Pasadena, Santa Fe Springs, Sedona
(Arizona), Tempe (Arizona), and. West Hollywood clearly allow the use of funds for a far
broader definition of arts and cultural programming. These uses have included
temporary art installations.(West Hollywood) and children's concert series (Tempe),
among others.
· Some cities specify that a certain share of in-lieu funds may be spent on performing arts.
For example, Culver City stipulates that up to 25% of in-lieu funds may be allocated to
performing arts.
· In a few cases, redevelopment agencies have policies and the ability to spend in-lieu
funds for such things as artist workshops. It must be noted, however, that redevelopment
agencies under California law have more broad and flexible powers than cities have.
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Impact Fees and Nexus Studies
.. Three California cities were identified that have completed nexus studies and have
programs with elements consistent with linkage or impact fees. These cities are Long
Beach, Los Angeles and Newark, a small city in the San Francisco area.
· A number of cities expressly state that their programs are not fees subject to nexus
study support requirements.
· All the cities that have these "fee~ type programs have companion regulations that are
keyed to 1 % of building permit valuation to set the amount of the "fee" or some other
upper limit. As.. a result, these programs are probably not purely f~ programs (neither
the programs nor their supporting nexus studies have been challenged in court).
Section C discusses structure and legal framework.
Overview of Santa Monica City Spending on Arts and Culture
An overview of how the City of Santa Monica currently assists arts and culture was prepared to
provide orientation and context for the evaluation of measures requiring a private sector
develoPf3r role.
For the overview, material was drawn from the following:
.
Cultural Arts Master Plan Update, prepared for the Cultural Affairs Division by AMS
Planning and Research, July 1996. (The 1996 Master Plan 'Update)
.
City of Santa Monica Cultural Arts Master Plan, AMS Planning and Research, August
1992. (The 1992 Master .Plan)
Fiscal Year (FY) 2002/03 City of Santa-Monica Budget for Cultural Affairs Division. The
Budget for FY 2005/06 has been added as a recent update.
.
The City's Cultural Affairs Division is responsible for overseeing Santa Monica's efforts to
support arts and culture. The Division has a staff and budget within the City's administrative
structure, and is responsible for a range of programs for the City.
Cultural Affairs Division Goals
The City's goals with respect to cultural arts and the Division's responsibilities were articulated
in the 1996 Master Plan Update, as follows:
· Marketing and Promotion of Arts and Cultural EvelJts
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- ....... ~
· Expanding Arts Programmil)g in the CitX
. Improving and ~~pporting Art Education
. Assessing Facilities for Visual and Performance Art and Emphasizing Cultural Uses in
New City Buildings
. Providing Funding and Support Services for Arts Organizations
· Improving the Organizational Structure of the Cultural Affairs Division
. I
~.J'~ I .
It is understood that the 'City is ~mbarking on a program to prepare a new Cultural Master Plan,
which could result in a revision of these goals. One goai that ha~ emerged from discussions with
staff and input frompubli~ outreach visioning sessions, c~>nducted in 2005, is for a Cultural Arts
Requirement that can 'maintain the outstanding quality ,level of the cultural arts in Santa Monica.
Cultural Affairs Division Programs
The programs administered, by the Cultural Affairs Division ar~:
· Public Percent for Art Program - This program designates that one percent of the total
budget of all eligible City capital improvement projects be allocated to the Public Art
Program.
. The Art Bank, a porJ;able artwork collection
. Grant Making to loCal .cultural'organizations
· T echnieal Assistance to 10c;alcultural organizations and artists
· Santa Monica Festival, an annual event
. Additional Efforts, such as research projects
· Miles Playhouse .
Cultural Affairs Division Expenditures
The .Cultural Affairs Division lias an annual budget for various program areas. In FY 2002103,
the Cultural Affairs Division administered the following:
Programs and related
Public Percent for Art Program
Staffing
Total
~397 ,570
$380,402
$215.600
$993,572
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The Budget for FY 2005/06 provides for the following:
Programs and grants
Public Percent for Art Program
Staffing (no net new FTE positions)
Total
$530,000
$352,000
$439.000
$1,321,000
Virtually all expenditures are for the various programs. None are for buildings or facilities.
Prorated to the population of Santa Monica, the expenditure level computed to about $11.83 per
capita in 2002/03. The 2005/06 figures compute to $15.73 per capita (population estimated at
, 84,000).
The City makes additional expenditures related to cultural arts that are administered under other
departments and budgets. To illustrate a broader accounting of expenditures, we can look to a
study prepared for the City of l,..ong Beach. The Long Beach study summarized expenditures
and included such items as services from the Fire Department for parades, library purchases of
arts and cultural related books, parks and recreation expenses for events, convention and visitor
bureau expens~s, and even a portion of the General Fund overhead budget. Using this very
broad accounting, it was found that Long Beach spent $11.25 per capita. Were Santa Monica to
use a similar approach, it would be found to spend far more than Long Beach or most all cities
on a per capita basis. .
Summary Overvie,w of Santa Monica Programs
The City of S~nta Monica defines arts and culture broadly to encompass a wide range of visual,
performing, and other cultural arts activities; venues and facilities; education programs; and
support for artists of wide ranging disciplines. The City already administers an array of programs
in support of culture and arts, with an annual budget of almost $1 million. The Cultural Affairs
Division within the City is an infrastructure already in place for taking on the expanded role of
administering a private Developer Cultural Arts Requi~ement, although such a role will have
significant impacts on staffing, depending on the design of the program.
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c. ANALYSIS OF DEVELOPER ARTS REQUIREMENTS AND RECOMMENDATIONS
In this portion of the assignment, KMA analyzed the various developer arts requirements and
organized them into categories according to their probable legal framework. A continuum was
devised that moves from programs that simply require on-site art only, to those with off-site and
in-lieu choices, to those that have a mandatory payment component akin to an impact fee.
Four levels were identified:
. Level 1 : Art on-site - usually based on % building permit valuation
. Level 2: Art on-site or off-site or an in-lieu payment
. Level 3: Payment of an in-lieu amount in addition to art on-site
. Level 4: Payment of a fee as the requirement
Level 1 : Art On-Site
This type of program, the oldest model and often called an Art in Public Places Ordinance,
requires private ,developers to provide art on-site in a location accessible to the public. The art is
purchased by the developer, owned by the developer, and maintained as part of the project.
In the Level 1 format there is no off-site or in-lieu option. The program in area, Orange County is
. one of the earliest, adopted in 1974, and has produced a great number of art works of which the
city is very proud. Other Level 1 cities in the Carol Goldstein survey include San Francisco and
Sunnyvale. In the interest of variety, others of this model were not researched for the survey,
but many mo~ are believed to exist. .
Until 1996 there was some question as to whether an art requirement of this type is subject to
the requirements of the California Mitigation Fee Act (see later discussion). The question was
answered by the California Supreme Court in Ehrlich v. Culver City when the Court held that
nexus type scrutiny need not be applied to the Art in Public Places Ordinance. The court said
that such aesthetic control has long been held to be a valid exercise of a city's traditional police
power and "does not amount to a taking merely because it might incidentally restrict a use,
diminish the value, or impose a cost in connection with the property."
Most programs that have this type of reqUirement use 1 % or less, exceptions being Laguna
Beach, which uses 1.25% for the in-lieu program, and the San Jose Redevelopment Agency,
which in projects with Agency assistance, requires 2%. 0
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Level 2: Art On-Site 2! Art O~-Si~e 2! an In-Lieu Payment
,I.
...
Level 2 introduces the off-site option and the option to make an in-lieu payment of an equivalent
or lesser amount. A key feature of this structure is choice.
Most of the cities in the Carol J30ldstein survey have some version of a Level 2 program, with
choices for off-site pl~ceri.ent of art or culture and/or a cash payment choice.
., ,'\ot. .j,"",..
The Culver City ordinance that was addressed in the Ehrlich cas~ had an in-lieu fee option. The
Court noted, "The requirement to provide art or a cash eq~ivalent thereof is more akin to
traditional land use regulations imposing minimal building setbacks, parking and lighting
conditions, landscaping, requirements", etc. In KMA's opinion, the in-lieu aspect is not subject to
any higher level of scrutiny than the base on~site provision.
The Culver City program also includes a cu~tural compon,entallowing a percent of funds to be
used for non-capital purposes. The court did not address this component.
City use of in-lieu fee money is sometimes specified 'as being the same as the on-site permitted
art (and culture). Sometimes c;i~ies declare their intended use of in lieu funds for items that
appear to bear little relatio~ship to the.on-site compon~nt.
Level 3: Payment of an In-Lieu Amount in Addition to Art On-Site
There are a couple of examples of this prototype where the payment is mandatory, thereby
raising the question of whether it is really "in-lieu." If not in-lieu, then the key issue is whether
the fee is subject ~o the Mitigation Fee Act. There has been no legal precedent established.
There are several programs using this model- Los Ange~s, Long Beach, Pasadena, and
some smaller cities.
Level 4: Payment of a Fee for Arts
This model clearly would be subject to the Mitigation Fee Act and its amendments (California
Government Code Section 66000 through 66025). The act lists specific requirements that must
be found for linking any impacts from a development project and the amount of a fee as a
condition of approval of the project. Briefly, the local agency must, among other things, do the
following according to Section 66001:
. "Determine how there is a reasonable relationship between the fee's use and the type of
development project on which th~ fee is imposed."
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. "Determine how there is a reasonable relationship between the need for the public
facility and the type of development project on which the fee is imposed."
. "Determine how there is a reasonable relationship betWeen the amount of the fee and
the cost of the public facility or portion of the public facility attributable the development
on which the fe~ is imposed.;'
In addition, there are other provisions such as an accounting of other sources of funding for the
facility, and certain accounting procedures for the fees and funds into which they are deposited.
Another provision of the Code of particular relevance to Santa Monica for application to cultural
arts is the Code references to "facility" and "facility costs". While "facility" may be loosely
interpreted to include many types of art and arts venues, facility costs are clearly distinguished
from operations, maintenance and program costs, which are prohibited by the California Code,
per most interpretations.
In summary, even if all the nexus requirements were satisfied, an impact fee under this section
of the Code limits the City to "facilities" in the expenditure of its fee revenues.
Recommendation for Santa Monica
Based on the survey and analysis, KMA concludes that Santa Monica can meet its goals for a
Developer Cultural Arts Requirement with a well-crafted program with an on-site requirement
and in-lieu payment option (Level 2). . .'
The goals for a Developer Cultural Arts Requirement in Santa Monica, .as we understand them,
,
are:
. To establish a requirement for private sector development to contribute to arts and
culture in Santa Monica, through on:..site provisions or in-lieu payments.
. To structure the program so that arts and cultural contributions are defined broadly,
consistent with City policies and precedents elsewhere. The same applies to the City's
use of in-lieu funds.
. To design the program and implementation procedures in a manner that can prioritize
quality and excellence of the arts and cultural contributions produced over quantity.
. To structure a program that is legally sound and has a high probability of being able to
sustain challenge.
In light of these goals, we believe that Santa Monica can be best served by a creative version of
a program that has both an on-site requirement and in-lieu options, through which payments
may be used to support certain off-site projects via a cultural fund(s). A Level 2 type program
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appears clearly sanctioned by Ehrlich v. Culver City and avoids the nexus support questions.
While facility limitations were riot specifically atjdressed by the Court, the Culver City ordinance
allows for a percentage'of the fee to be used f~r non-capital costs. .Rather than including
elements of a program that are mandatory, and therefore more akin to an impact fee, Santa
Monica can design a program that incorporates incentives and procedures that will allow the
City to meet its multiple ~oals...
I
.. ".... ,J''''tt
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D. KEY FEATURES QF A RECOMMENDED ,REQUIREMENT PRO~RAM
...~. t
The following description is primarily focused on.how the program will require private sector
development projects to contribute to Arts and Culture in Santa Monica. The features described
below are those typically articulated in ordinances and incorporated into City Code..The portions
of the program describi~g ~ cultural arts aspects - the descriptions of what qualifies as
cultural ~rt and process with the City for both on-$ite and in-lieu contributions - are not
cOntained in this section. An outline of what the City might do reg~rding these topics is provided
in the next section, entitled Work Program for Implementation.
All the major features C1e~cribed below would entail policy decisions, ulijmately at the City
Council level.
Percent Requirement
Santa Monica is a location in high demand, as reflected in the high value of its real estate, both
residential and non-residential. The real estate value in the city (within the greater Los Angeles
economy of which it is a part) is due to both the natural and built environment. The aesthetic
and cultural identity of San.t'a Monica is ~videnced in its urban design vision, which also adds
value to its rea,1 estate.
The interrelationship between arts and culture is important to the City's economy. A recent
Official Statement for a bond issuance for the City notes that public art and culture hl;1s helped
"attract and anchor a large and diverse creative sector, enriching the City's cultural and
economic base." Arts and culture are integral!o San~a Monica. A stronger than average
Developer Requirement fat Cultural arts would be consistent with the role cultural arts play in
the community overall.
The vast majority of developer arts requirement programs are at 1% or less. Exceptions include
San Jose which is 2% when there is Redevelopment Agency financial assistance (which means the
Agency may indirectly pay for the 2%) and Laguna Beach which has a base requirement of 1 % but
charges 1.25% for an in'-Iieu payment.
In identifying an appropriate percentage range for Santa Monica, the following additional factors
were taken into account:
.
. Building permit valuation usually represents roughly 50% or less of the total project cost
or value in high land value places like Santa Monica. In addition to the construction cost
on which the permit valuation is based, other project costs include land, site
improvements, design and engineering, financing and an array of other "indirect;' costs.
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C.C - 201
. Furthermore, valuation for permit purposes usually does not reflect total construction costs.
Thus, a 2% requirement for arts would translate to closer to 1 % of total project cost.
.. The actual value of the on-site art or culture will be less than 1 % because other related
costs are typically allowed in the calculation. Related costs include transportation,
installation, consultant services, insurance and other costs associated with the art
placement or cultural event. As a result, to get the expenditure on the artwork itself at 1 % to
produce the quality desired in Santa Monica, the percentage needs to be higher than 1%.
'. Arts and culture are integral to Santa Monica. A strongerthan average Developer
Requirement for Cultural Arts would be consistent with the role cultural arts play in the
community overall.
Based on all the considerations listed above, KMA recommends that Santa Monica consider a
percentage greater than the typical 1% adopted in other jurisdictions. Santa Monica should consider
an on-site requirement in the range of 1.25% to a maximum of 2.0%.
Building Types Subject to the Requirement
Following IS a hierarchy of building types that might be subject to the Developer Cultural Arts
Re.quirement: .
I
Highest Priority
.
Hotels, resorts, and other lodging
Office buildings
Retail and entertainment structures
Multi-family residential projects of 5 or more units
Parking garages
Industrial buildings
.
.
.
.
.
Mid-level Priority/Optional
. Residential structures under 5 units, including single family detached
. All other non-residential structures, such as:
- Schools
- Hospitals
- Other institutions
. Additions over a certain dollar value (or square foot size) to existing structures
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CC - 202
Examples of exemptions, often seen in other ordinances, to be considered for policy reasons:
. Affordable housing projects
. Child care centers
. Places of worship
Off-Site Compliance Incentives
The City has expressed to KMA a desire for a program that includes a significant component for
in-lieu contribution!? to an arts and culture fund. KMA believes that in-lieu contributions in the
form of cash payment can be accomplished through incentives, particularly when coupled with a
base requirement in excess of 1 % of building permit yaluation. ~ecommended incentives might
include:
_ Offering a substantial discount for in.lieu contribution, such as 25% to 50% less than the on- .
site requirement.
The main rationale for the discount is in consideration of the developer or project owner. On-site
art is an asset, owned by the project. If the art is well selected, the art is an inves,tment with
value appreciation potential. Art integrated into a project can add value to a project overall.
When the project is sold, any added value attributable to the at:! is recaptured by the.developer
in the project sale price. If the developer contributes to art through an in-lieu payment ,that will
be used by the City for a project somewhere off site, these benefits are not realized directly by
the project, but by the community overall. To recognize this difference, a lesser requirement for
an in-lieu contribution is recommended.
- Offering an In-lieu Payment Option that Excels in Simplicity
The in-lieu option can be attractive.by offering predictability, speed, and abs.ence of proces~
with the City. These virtues are always desirable to developers and can be translated into dollar
value.
-Offering Good Choices for Fulfillment of the Requirement
,
In addition to offering tl:1e developer the option of making a payment to a City's art and culture
trust fund(s), the City could establish specific project choices to which the applicant could
contribute, in whole or- in part. Specific projects would have the advantage of visibility and near
term horizon results. Furthermore, developers could be given credit and publicity for
contributions. Examples might include a major sculpture or gateway feature at a key street
intersection, a performing arts venue, or sponsorship of a cultural event. The developer co\Jld
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rr _ 'In'l.
have a choice to donate to a specific cultural arts project, in addition to the option of a payment
to a general trust fund(s), recognizing that the cultural arts project will be accessible to both the
occupants of the development project and the public alike.
Without incentives, on-site art would be the preferred option of the developer in most cases.
With incentives to encourage use of the in lieu alternative, the greater community benefrt may
be achieved, despite the lower valuation. This is because, when the administrative and staff
burdens associated with on-site art compliance are taken into account, the lesser burdens
associated with the in lieu program could result in greater value to the community.
Thresholds
The Developer Cultural Arts Requirement should be applicable to all the building types selected,
but the City may wish to incorporate one ,or more thresholds into the program:
. Minimum threshold valuation (or square}oot size) is a featu're of most, but not all,
programs and is an option for Santa Mpnica. Projects under the threshold could be
exempt or have a reduced requirement ~or policy reasons. A frequent reason cited is that
that small projects tend to have high development costs relative to building area.
Administrative efficiency .reasons are also cited for no' collecting on small permit
valuations. The suggested threshold range for Santa Monica is a $10,000 to $100,000
building permit valuation. Alternatively, the City could selec~ a threshold' based on the
square footage of the building. A threshold applied to buildings in other applications of
the City Code can be an efficient option for a city, such' as Santa Monica's 7,500 square
foot level. The City needs to select the specific threshold.
. An art on-site threshold is a different kind of threshold necessary to insure a high level of
quality for on-site art. It fs difficult to achieve quality art below a minimum expenditure. A
threshold placing the building permit valuation ata level that ca.n produce quality art can
be identified. B,elow the threshold developers could be strongly encouraged to make an
in-lieu contribution. For example, if the City determines that $50,000 is the minimum
value of on-site art desirable, then the thre~hold would.be set at $5,000,000 if the
program is at 1 %, or. $2,500,000 if the program is at 2%. Below the threshold, the costs
of the process to both" the developer and the City will provide an incentive to make an in-
lieu contribution, particularly it'coupled with a 25% to 50%,dis~ount for in-lieu
compliance. "'t'- ..,,'
Note: Thresholds could vary by project type. For example, the residential threshold could differ
, from commercial, etc. Also thresholds may be graduated to meet policy objectives.
....
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C.C - 204
Other Miscellaneous Recommendations
A developer cultural arts requirement as described above is not a fee program subject to the
requirements 6f AS 1600 and its amendments. However, certain practices required in AS 1600
type fees are advisable for any program of this type:
. All funds for art and culture should be "trust" funds, held separately from other City funds
and expendable only as prescribed in the enabling ordinance.
. The ordinance should specify the number of years the City can hold funds without
committing them to a specific project. (Note that "commitment" is not the same as
"expenditure". )
Summary
With a sys~em of incentives and choices, we believe that the City of Santa Monica can achieve
its objectives for a Developer Cultural Arts Requirement that results in both significant on-site
cultural art and in-lieu .contributions. A well-crafted ordinance that includes incentives and
creative options can result in vigorous on-site and in-lieu programs to the satisfaction of both
developers and the greater Santa Monica commLinity, contributing to the cultural' fabric of the
City.
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CC - 206
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f$
E. WORK PROGRAM FOR THE CITY/IMPLEMENTATION PLANNING NEEDS
Introduction
The following is an outline of the major policy plans, and compliance specifications, that ideally
would be prepared in advance of the City of Santa Monica adopting and implementing a
Developer Cultural Arts Requirement. It is a suggested work program for the City to both
establish the overall policy framework and det~rmine how implementation is to be
accomplished. The previous section (Section E) summarized recommendations for an enabling
ordinance; much of the recommended material. in Section F provides recommendations for
implementation guidel!nes and procedures.
The Developer Cultural Arts Requirement will have two major components:
. An On-Site arts program enabling developers to fulfill the arts requirement by
incorporating art or culture into the project on site.
o '
. An In-Lieu Program enabling developers to fulfill the arts requirement by contributing to
art or culture through a payment into an arts and culture fund(s). '
Master Plan Policy Framework
The On-Site and In-Lieu options will have some major differences and implementation needs.
Both programs need to be grounded in master plan policy statements.
. A Cultural Master Plan that provides a coordinated vision for all the City's cultural
initiatives, from facilities to programs and services. An adopted master plan is the
collective voice of the cor:nml,anity I establishing shared goals and priorities for the cultural
life of Santa Monica. The City is currently in the process of initiating such a planning .
process.
. A Public Art Master Plan that establishes priorities for the City's public art programs,
both public and private. The On-Site and In-Lieu options should be integrated with the
City's own public art program for public projects. This plan should reference the Cultural
Master Plan and examine in greater detail what specific cultural objectives can be
accomplished through various public art initiatives, including the Developer Cultural Arts
Requirement.
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(' (' _ ')()7
If preparation of two new comprehensive master plans is not feasible in the near term, then an
equivalent policy statement to guide the program in the near term is advised. Both master plans
could readily serve other public purposes, but should be drafted with the proposed Developer
Cultural Arts Requirement as one program that the plans will guide.
Both ma~ter plans will delineate goals, objectives and criteria with respect to quality,
sophistication and professional achievement. Santa Monica will want to set a high threshold of
expectations and accomplishment, innovation and leadership in the same way the City has with
its architecture, urban design, art integrated in City funded structures, and other quality of life
aspects. The document(s) will want to communicate the importance of and commitment to the
program, comparable to the City's commitment to environmental sustainability matters. '
What master plans embody and e~press are not suitable for enabling ordinances.
Implementation or administrative guidelines structure the goals and concepts as practical steps
and must always refer back to the master plan vision for interpretation and refinement. Such
regulatory documents are needed to ensure equitable, efficient and effective program
management.
On-Site Cultural Arts Compliance
This component ofthe Developer Cu!tural Arts Requirement program is about in'corporating art
(or culture) on the site within private development projects.
. ,
In order for the City to implement the program and achieve the goals of the Master Plan(s), it will
be necessary to address the following:
.
Description of acceptable, forms of art or culture on-site. Cla.rification of what might not
,
qualify, such as landscaping. Distinguishing art or culture from architecture (which has
its own separate code aryd vision as expressed through the Architectural Review Board
requirements.) i
.
Description and criteria defining what qualifies as public, public access, etc.
.
Identification of allowable expenses in meeting the percentage requirement. Examples
mightinclude transportation or shipping, installation related.~ts, consultants, lighting,
etc.
.
Method of appraising and verifying value.
.
On-going responsibilities of the owner of the art, including mai?t~nance and potential re-
sale.
.,'
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C.C - 208
. Legal aspects.
. Phased projects and special situations; large projects and Development Agreements.
. Differing requirements for different districts, special districts. etc., if applicable.
. Signage, acknowledgement or crediting standards.
. Removal or replacement issues.
. Pre-selected artists pool. if desirable.
Procedural Aspects for On-Site
The City has i'n place an Arts Commission and a Public Art Committee. With the enhanced role
of administering a Developer Cultural Arts Requirement, it may be desirable to "rethink" these
bodies and possibly modify them for taking on new responsibilities.
. Gommission and committee composition
. . Powers and obligations
. Process for review
. Sequence and interaction with other steps in the entitlement process..such as use
permit, ARB, buUding permit. certificate of occupancy
. Opportunities for Appeal to Council
. Other issues that need to be considered
City Staffing Implications
On-site compliance implies significant staff time ~o explain the program to developers, market
the program, coordinat~ interdepartmental reviews. prepare staff reports for bringing developer
applications forward to the Committee and/or Commission, and serve as community liaison.
In-lieu Payment Compliance
Identification of Options for In-Lieu
. In-Lieu Payment to a General Trust Fund
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The concept is that a trust fund (or multiple trust funds) will receive funds from the program and
expend them on off-site projects in accordance with the Master Plan(s}, or other governing
document{s) that:
. Identify the types of art projects and cultural events ~nd programs that fund monies can
be used for,
. Identify specific projects and programs to be funded,
. Provide estimates of the cost of the art, facilities, programs and cultural events to be
funded,
. Identify/estimate/update anticipated annual revenue and allocation planning, and
. Establish priorities for the expenditure ofthe funds.
. Contribution into Specific Project Funds
. I
I
The City may wish to' establish speci.fic projects to which de.velopers could provide underwriting,
, ,.
sponsorship, passive financial support, overt corporate- citizenship or earmarked contributions.
. .
For example, a key intersection or gateway may be deserving of lar.gesculpture by a weIl-
I
known artist that the City will commission or purchase when sufficient funds have been
. ,
contributed. This could hold appeal to developers because the public will. know the use of the
funds. Furthermore, development projects could be given credit on a plaque or other form of
. ,
recognition if the contribution is of a specific magnitude or more, or represents a certain
percentage (e.g., 10% or more) to the total cost.
, I.
Similarly, construction or expansion of a cultural facility or performing arts venue could be
supported by a discreet capital campaign with levels of giving keyed to recognition levels.
. .
· Contribution toward Specific Cultl:lral Event or Annual Event
The City could establish a fund or discreet funds for specific festivals or events to which
development projects could contribute and receive credit. '". ....~
I
., .
A variation would be for large projects to contribute an amount sufficient to fund a regular or .
annual event fora number of years. This could .insure more certainty for event planning into the
. future. Again, contributors could be given credit in it number of ways.'
j"'"
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. Other Off-Site Choices (or clarification that only predetermined projects/funds are available
to satisfy off-site compliance).
Procedural Aspects for In-Lieu Compliance
. Establishment of Funds to Receive Payment
. Off-Site options to be funded by In-Lieu payments, other than predetermined projects
and funds, that would entail procedures similar to those required for On-Site compliance.
City Staffing Implications
The initial staff labor to set up the in-lieu program would be substantial. However, the on-going
staff labor would be less time-consuming (and different) than working with developers that wish
to accomplish on-site compliance in their projects.
. ,.
",.,.r' .....,'
, "
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F. ESTIMATE OF ANNUAL VALUE OF ART AND IN-LIEU PAYMENTS FROM THE
. REQUIREMENT
The Developer Cultural Arts Requirement will obligate new construction projects to make a
contribution to cultural arts in Santa Monica. The recommended approach is make the amount
of the requirement keyed to building permit valuation, as is the practice of most jurisdictions
throughout California and elsewhere in the United States.'
This section examines building permit valuation history in Santa Monica to provide a basis for
estimating future valuation and the value of the art and culture and/or in-lieu payments that will
be generated as a result of the Requirement.
The recommended percentage contribution is in the range of 1 % to 2%, with the City to decide
upon the exact amount. The program production, or value of the art and culture generated by
the program, is therefore indicated at both 1 % and 2% of projected permit valuation.
Aside from the exact percent selected for the On-Site or In-Lieu requirement, the annual value
of art and culture produced by the Requirement will be affected by:
. 'What building types the Requirement covers (and what will be exempt)
. Whether the Requirement covers additions and/or alterations
. Any discount and other incentives for In-Lieu compliance
. Thresholds, particularly a minimum to exempt small permits
. Economic cycles that will highly affect the level of construction in Santa Monica in any
given year
By making assumptions with respect to all of these factors, estimates of program production in
Santa Monica can be prepared on.8 range basis, to facilitate decisions and planning for the
future program. .
Building Permit Valuation Hist~ry,
Building permit valuation history for the City of Santa. Monica for each year from 1990 throu,gh
2004, in the complete level of detail that is reported to the state and federal government, is
summarized in Tables 3 and 4 following this' Summary Report.
A condensed summation of annual average valuation was prepared by KMA and is presented in
Table 2, on page 28.
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Findings from the summary are:
· Total residential valuation over the 15-year period averaged $62 million per year, and
$81 million per year over the past five years.
· Of the residential valuation. a little over a third is in structures of 5 or mor'e units, another
25% is single family units, and alterations and additions represent over another third.
· Non-residential valuation over the 15-year period and the most recent five years has
been at a similar level of roughly $75 million per year.
· Over half of the non-residential valuation is in alterations and additions.
· A quarter to a third of the non-residential valuation is in new office, hotel and retail
structures.
In our opinion, the unusually high residential construction activity in the last five years has
distorted averages for projection purposes. On the other hand, KMA believes that non-
residential valuations, particularly as relates to office building cpnstruqtion, in the most recent
five years have been lower than what may b~ expected in the f.uture.
I" .
Estimated Building Permit Valuation
KMA's estimates of future valuation that may be subject to the D~veloper Cultural Arts
Requirement in Santa Monica are presented on a range basis. The low range represents the
minimum program recommended - that is a)1 residential structures of five or more units and all
new office. hotel and retail construction. The high range projection includes all residential
construction, including single-family units, and ~1I non-residential construction including such
things as parking garages and other building types that mayor may not be included in the
program.
. ,
The large volume of permit valuation that is in alterations and additions, both residential and
non-residential (roughly $70 million per year combined), presents a particular challenge in
estimating future volume. The KMA recommendation js to include additional building square
footage. Our high range figures therefore include additions (but not interior remodels). estimated
at roughly 50% of the residential and 25% of the non-residential va4uation, per input from the
City's Building Department.
. .
,The summary low range and high range estimates of future annual building permit valuation are
therefore as follows:
.....
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Residential
Structures of 5+ units
All other residential
Subtotal
Non-residential
New office, hotel, and retail
All other non-residential
Subtotal
Grand Total
Annual Average
Low RanGe Valuation
$25 million
None
$25 million
$20 million
None
$20 million
$45 million
Annual Average
HiGh Ranae Valuation
$30 million
$35 million
$65 million
$30 million '
$20 million
$50 million
$115 million
These estimates assume no loss of valuation due to minimum thresholds that might exempt
small valuation permits.
Program Production 'at 1 % and 2%
With the estimates of annual permit valuation, it is possible to quantify what the program at 1 %
of valuation and 2% of valuation would produce. Production is measured as a combination of
the dollar value of art on-site and in-lieu payments, but does not include any assumpti~>n as to a .
discount for in-lieu compliance. .
Program at 1 % of Valuation
Program at 2% of Valuation*
Low RanQe
$450',OOO/year
$900,000/year
HiGh Ranae
$1,150,000/year
$2,300,OOO/year
These estimates "bracket" the range of program production. The specifics of the Developer
Requirement programJNiIl dictate where the value of cultural arts produced by the program ~iU
result within the range.
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.... , ,...
TABLE 2
BUILDING PERMIT VALUATION SUMMARY
DEVELOPER CULTURAL ARTS REQUIREMENT
SURVEY AND EVALUATION OF OPTIONS
CITY OF SANTA MONICA
. Residential Summary
New 5+ Unit Structures
New 3-4 Unit Structures
New 2-Unit Structures
New Single Family
Alterations and Additions
Total Residential
15 Year Average
1990 - 2004
$23,128.200
$1,725,017
$242,486
$14,752,385
$22,497,627
$62.345,715
Non-Residential Summary
New Hotel, Office, and Retail
New Industrial
New Amusement, Parking. Service Stations
Other New Non-Residential
Alterations and Additions
Total Non-Residential
15 Year Average
1990 - 2004
$27,226,672
$355,333
$'7,175,781
$3,187,739
$38,459,806
$76,405.331
% of Total
37.1%
2.8%
0.4%
23.7%
36.1%
100.0%
% of TotaJ
35.6%
0.5%
9.4%
4.2%
50.3%
100.0%
5 Year Average
2000 - 2004
$29,643,269
$2,000,691
$414,900
$21,189;885
$27,555,445
$80;804,191
, 5 Year Average
2000 - 2004
. .$20,123,737
$800,000
$5,341,403
$5,573,830
$42,447,756
$74,286,726
"".r" "","
,'....
% of Total
36.7%
2.5%
0.5%
26.2%
34.1%
100.0%
% of Total
27.1%
1.1%
7.2%
7.5%
57.1%
100.0%
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Page 28
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G. DISCLAIMERS,
KMA is a real estate and urban economics advisory firm, and, as such, has no legal expertise.
As a result, the conclusions, 'opinions, and recommendations provided in this study are drawn
from KMA'sexperience as a practitioner of linkage, including participating in court defense ofa
linkage ordinance. KMA fully expects the City to rely on the Office of the. City Attorney for all
legal determinations rela~ecj,10 any progri:Jm rf!quiring developer cultural arts contributions.
KMA, with Carol Goldstein, has prepared the survey and analysis using the highest profeSSional
standards. KMA believes that all data l:ltilized, including data from the City of Santa Monica, are
sufficiently accurate for the purposes of the'analysis. However, KMA cannot guarantee.the
co'mplete accuracy of any data or survey material and assumes no Iiab~ity for .conclusions
drawn from these sources.
Summary and Recommendations Report - Developer Cultural Arts Requirement
19305.OD6\001-016.doc: 1111012005
Keyser Marston Associates, Inc.
Page 31
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