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SR-02-26-2013-7ECity u cil Report City of Santa Monica" City Council Meeting: February 26, 2013 Agenda Item: F- To: Mayor and City Council From: David Martin, Planning and Community Development Director Subject: Introduction and first reading of an ordinance to establish a Transportation Impact Fee. Recommended Action Staff recommends that the City Council introduce for first reading the attached ordinance that creates a Transportation Impact Fee (TIF) to facilitate developer contributions to transportation network improvements and achieve no net new trips in the afternoon peak hour. Executive. Summary During preparation of the Land Use and Circulation Element (LUCE), which was adopted in July 2010, Council directed staff to pursue the creation of a transportation impact fee on new development as one of the means to achieve the transportation goals of the LUCE. The transportation impact fee is anticipated to generate $50 -60 million over the next 20 years; it would partially fund the anticipated $134 million in costs associated with improvements to the bicycle, walking, transportation demand management, parking, transit, and auto networks necessitated by new development. The fee would be charged when land use changes increase the amount of auto trips, and would not be charged if land use changes result in fewer auto trips. Council discussed the proposed impact fee in a study session on August 28, 2012 and directed staff to return with an ordinance, as well as information regarding financial analysis of such a fee, and concerns raised by the business community during the study session. Background Transportation improvements are consistently identified as a top priority for Santa Monicans and the adopted LUCE outlined a comprehensive approach for providing greater transportation choice. 1. A central tenet is the commitment to no net increase in vehicle trips during the evening peak hour with a Santa Monica origin or destination. The City is working to expand travel choices to encourage a shift of new and some existing trips from single - occupancy vehicles to other, more sustainable modes of travel, including transit, bicycling, walking, and shared rides in order to achieve the no net new trips goal. Strategic transportation investments are key to creating more travel choices for both residents and visitors. The LUCE included a specific recommendation to create and implement a transportation impact fee. A nexus study based on the citywide Travel Demand Model was initiated in early 2009 to support a transportation -based development impact fee. The proposed Transportation Impact Fee incorporates the policy and project priorities from the adopted LUCE and feedback received at the August 28, 2012 hearing to address community priorities for access, mobility and pro- active congestion management in Santa Monica. Impact fees, contributions and taxes are something that the City Council has adopted through the Municipal Code over time to ensure that community values are reflected in new development. Adopted fees include affordable housing, parks, arts, and childcare. The Council has recently requested the evaluation of an update to the open space fees, and affordable housing fees for non - residential development, which will be presented in Spring 2013. Such fees are subject to additional negotiation in current and future development agreements. Discussion The City of Santa Monica is continually investing in the citywide transportation network to meet changing demands, maintenance and safety standards. Past investments have optimized auto flow by upgrading traffic signal technology, added critical bike facilities including the Santa Monica Bike Center, ensured an internationally recognized Big Blue Bus transit system and made it easier for pedestrians to cross the street through 2 enhancements such as median refuge islands and curb extensions. Continued investment is needed for autos, transit, walking and cycling to achieve community goals for livability, access, and no net new trips. The LUCE assumes that new land uses and development will participate in the completion of transportation systems necessary to serve future demand. Cities throughout California increasingly rely on impact fees justified by nexus studies to ensure that the costs of infrastructure and services necessary to support new development are not born disproportionately by existing residents, businesses and /or property owners. The City has prepared a Transportation Impact Fee nexus study (Attachment 'A) that outlines the purpose, rationale, and structure of a proposed transportation impact fee for new development including a detailed description of the projects and programs to be funded by the potential fee revenues. The study: • Establishes the need for the fee by forecasting future traffic conditions that would result from future development without the transportation improvements and trip reduction strategies contained in the LUCE; resulting in failure to achieve the no net new trips goal. • Identifies a capital projects list based on LUCE transportation action items and programs and the LUCE FEIR (e.g. sidewalks, car - sharing, bike facilities, bus stops and mobility centers) that does not duplicate costs associated with developer or employer TDM programs or improvements required for project mitigations. • Estimates the total cost of construction for the capital project list, including project administration, design and contingency at approximately $134 million based on conceptual project costs. • Assesses multi -modal transportation impact by development type (multi - family residential, retail, etc.) as measured by PM peak hour vehicle trip generation and accounting for differences based on location and mix of land uses. • Identifies a maximum potential fee by development type (using square footage or residential unit count) proportional to the multi -modal transportation impact of that use, with the goal of accounting for 74 percent of the new trips (26 percent of new trips are attributed to regional pass- through and cannot be assessed to new development). K • Presents a reduced fee that would recover approximately one -half of the allowable capital project costs based on a review of comparable transportation impact fees from other Southern California communities. The study meets the requirements of state law by demonstrating the reasonable relationship between the proposed fee and the projected transportation impacts of development that the fee - funded transportation projects and programs are intended to address. In doing so, the fee ensures that new development would pay towards the costs of providing transportation infrastructure necessary to implement No Net New Trips and the sustainable transportation policies and goals of the LUCE. Nexus Study Using the methodology that follows, transportation fees are allocated proportionally based on trip generation rates (trip generation rates by land use category are listed in Figure 5 -3 of the Nexus Study). The maximum legally justifiable Transportation Impact Fee based on the project costs and trips attributable to new development are shown in Figure 3. While these are the maximum justifiable fees, a lower, more reasonable level of 60% of the maximum is proposed to be more consistent with other jurisdictions. 19 Figure 1: Maximum Potential and Proposed Impact Fee by Land Use Land Use Category Maximum Impact Fee (per sq. ft. or dwelling unit) Area 1 Proposed Impact Fee (per sq. ft. or dwelling unit) Area 1 Maximum Impact Fee (per sq. ft. or dwelling unit) Area 2 Proposed Impact Fee (per sq. ft. or dwelling unit) Area 2 Residential (dwelling unit) Single Family $12,540 $7,600 $12,870 $7,800 Multi - Family $4,290 $2,600 $5,445 $3,300 Non - Residential (sq. ft.) Retail $34.65 $21.00 $49.67 $30.10 Office $16.01 $9.70 $17.82 $10.80 Medical Office $46.37 $28.10 $49.17 $29.80 Hospital NA NA $24.26 $14.70 Lodging $5.94 $3.60 $5.94 $3.60 Industrial $1.98 $1.20 $2.15 $1.30 The nexus study and proposed multimodal transportation impact fees both start with the data from the City's travel demand forecast model and therefore are carefully calibrated to account for PM peak hour vehicle trip generation typical for Santa Monica. The model accounts for differences based on location (especially proximity to transit), mix of land uses, and type of uses, and uses a horizon year of 2030, consistent with the LUCE and the LUCE FEIR.. The model enables the City to more accurately predict trip - making characteristics including trip length, mode and generation factors, and to account for conditions such as proximity to transit and locally serving retail, both of which have been demonstrated through empirical research to be inversely correlated with vehicle trip generation. For these studies, both vehicle trip generation rates for comparable land uses as well as the fee per dwelling unit and square foot are tailored for two different areas in the City of Santa Monica: • Area 1 includes Downtown Santa Monica, the Special Office District, and Bergamot Transit Village. Vehicle trip generation rates in these districts account for their accessibility by transit and the presence of a diversity of complementary land uses and activities, both of which tend to reduce vehicle travel demand. 5 • Area 2 includes all remaining areas of the City of Santa Monica. Figure 2: Santa Monica: Transportation Impact Fee Areas 1 & 2, and Half -Mile Walk Shed to Expo Light Rail Stations SANTA MONICA TRANSPORTATION IMPACT FEE AREA TYPES The package of capital projects in the nexus study is designed explicitly to address projected land use changes and to help achieve the goal of no net increase in PM peak hour vehicle trips through 2030. The determination of capital projects which may be funded by the transportation impact fee is based on the policies and actions identified in the Land Use and Circulation Element, which were used in the trip generation modeling conducted as part of the LUCE EIR. Improvements identified include projects such as creating a path for bicycles from the Expo Light Rail Station at 17th Street to Santa Monica College, enhancing crosswalks along major boulevards, and real time information for travelers. Part of the development of the model was identifying the expanded improvements for walking, cycling and transit. The improvement cost estimate for capital projects is approximately $93 million based on a conceptual definition of each project scope. This estimate was based on cost 0 k ' i / 2 J - = /�� 7 i� r / Legend Expo Phase II \ 1 / J._._� / w v- 1 a _ ° I— a a s g' ," / J >7 _ I �\a a _ 3 Stations Santa Monica Transit Mall Area Type 1 V b a,# y ''i7' Area Type 2 Area Type 3 � Freeway 1 \�' _ fill Bt(BBtS city of Santa Monica � I1 I gA n aw *ea nu — � i 1 � r e i — - F�JJi- fr�f1�(�IhI��R1i��l ©� OS The package of capital projects in the nexus study is designed explicitly to address projected land use changes and to help achieve the goal of no net increase in PM peak hour vehicle trips through 2030. The determination of capital projects which may be funded by the transportation impact fee is based on the policies and actions identified in the Land Use and Circulation Element, which were used in the trip generation modeling conducted as part of the LUCE EIR. Improvements identified include projects such as creating a path for bicycles from the Expo Light Rail Station at 17th Street to Santa Monica College, enhancing crosswalks along major boulevards, and real time information for travelers. Part of the development of the model was identifying the expanded improvements for walking, cycling and transit. The improvement cost estimate for capital projects is approximately $93 million based on a conceptual definition of each project scope. This estimate was based on cost 0 estimates for similar projects recently completed or in the planning stages in Santa Monica. Figure 3 summarizes total project costs by project category; an itemized list can be found in Figure 4 -2 of the nexus study. Legal constraints, limit project costs to primarily capital costs, excluding most City operating costs from the project list. Also included are the cost for a project management position to oversee these capitals projects and a fee administration position to oversee this separate set of responsibilities. Lastly, a 10 percent design and engineering fee is added onto the subtotal of physical improvements, and a 35 percent contingency cost per industry standard.' With these additional costs, the total capital projects list totals approximately $134.3 million. Figure 3: Summary of Project Costs Over 20 Year Per! A summary of transportation impact fees for select Southern California peer cities follows. Each jurisdiction and administrative area has its own set of exemption and Caltrans Project Development Procedures Manual specifies including a contingency of between 30% and 50% as part of the project cost estimation phase. Caltrans Project Development Procedures Manual, Chapter 20 pg. 11. 2 Project Management covers the annual salary cost of one staff person to oversee capital projects for a 20 -year period. 3 Fee Administration covers the annual salary cost of one staff person to oversee the administration of the fee for a 20 -year period. ^ A 10% engineering and design fee is added on to the subtotal of physical improvements only. - 5 A 35% contingency fee is added on to the subtotal of physical improvements only. 7 Bicycle Actions $33,708,781 Pedestrian Actions $25,024,000 TDM Actions $6,127,075 Transit Actions $10,177,750 Auto Network Actions $11,594,000 Project Management $3,000,000 Fee Administration $3,000,000 Subtotal $92,631,606 Engineering /Design4 $9,263,161 Contingency5 $32,421,062 Total $134,315,829 A summary of transportation impact fees for select Southern California peer cities follows. Each jurisdiction and administrative area has its own set of exemption and Caltrans Project Development Procedures Manual specifies including a contingency of between 30% and 50% as part of the project cost estimation phase. Caltrans Project Development Procedures Manual, Chapter 20 pg. 11. 2 Project Management covers the annual salary cost of one staff person to oversee capital projects for a 20 -year period. 3 Fee Administration covers the annual salary cost of one staff person to oversee the administration of the fee for a 20 -year period. ^ A 10% engineering and design fee is added on to the subtotal of physical improvements only. - 5 A 35% contingency fee is added on to the subtotal of physical improvements only. 7 criteria for what size and type of projects are subject to the fee. Staff has confirmed that indeed fees are paid in all of these locations. Most of the fees have been in place since they were first adopted in the 1980s. The City of Los Angeles is updating its Mobility Element, and as such a nexus study for an updated transportation impact fee is anticipated to include higher rates and fewer exceptions. Regardless, the Santa Monica real estate market is unique compared to each of these areas, as evidenced by the recent interest in development activity. f:3 Figure 4: Transportation Impact Fee for Select Los Angeles Area Peers Los Angeles EI Segundo Santa Monica er Warner West ** Coastal City Culver City Zone 1 Zone 2 Zone Average proposed Proposed Center* to Corridor* West * 3 Zone 1 Zone 2 Retail (per $23,882 $7,087 $46,683 $12,706 $1,000 $9,615 $391 $431 $12,298 $21,000 $30,1000 1,000 sq. ft.) Office (per $10,632 $6,450 $22,194 $11,547 $1,000 $3,820 $155 $171 $6,645 $9,700 $10,800 1,000 sq. ft.) Industrial (per $3,109 $2,740 $6,888 $5,754 $1,000 $2,513 $102 $113 $2,824 $1,200 $1,300 1,000 sq. ft.) Single - family Exempt Exempt Exempt Exempt n/a n/a $105 $116 $926 $7,600 $7,800 (per unit) Multi- family $2,673 Exempt Exempt Exempt n/a n/a $63 $69 $1,340 $2,600 $3,300 (per unit) Given that the cost estimate for capital projects is almost $134.3 million, the $50 -60 million in revenue generated by the transportation impact fee would cover approximately 37 -45% of the cost of all capital projects. The remainder of the total project cost is expected to be covered by regional, state and federal grants, City General Fund, and other sources. The Fee may provide a local match for a grant. Historically transportation improvements have been financed entirely by outside and City General Fund sources, and the fee would be a new revenue source for funding these additional transportation improvements. Establishing a Transportation Impact Fee would not obligate the City to complete the projects listed in Figure 2 if other revenue sources are insufficient to fill the gap in funding between fee revenues and total project costs. Individual projects will be brought to Council for appropriation of available funds prior to the construction of each project. Proposed Transportation Impact Fee The nexus study recommends the impact fees by land use, as illustrated in Figure 1. A complete list of sub - categories of the land uses is included as Figure 5 -1 of the study. Broad land use categories are considered the best practice for this type of fee, as similar land uses are included in a single type, allowing for flexibility and simplicity for both landowners and City administration. For example, it is generally not known which exact.type of use will be included in the first floor of a new mixed use building at the outset, and the payment of one fee allows the space to be either as retail or a restaurant. The payment of the initial fee also allows the space to change from retail to restaurant and then back to retail over time. The proposed transportation impact fee is intended to capture projects that result in changes from one type of land use category to a land use category with a greater trip generation rate, such as from office to medical office or office to retail. Consistent with other impact fees in the Municipal Code, development agreements would not be subject to the ordinance; staff intends to use the fees that the project would be subject to as a guideline for the transportation contribution amount acceptable under the terms of 10 negotiated agreements for future development agreements and development agreements currently being negotiated. Recent development agreements approved by Council include contributions similar to those recommended in the Transportation Impact Fee. The Fee is based on net changes so that properties receive full credit for those trips already being generated by uses on the site. Because the City of Santa Monica is largely urbanized with limited vacant land, and the LUCE preserved the prevailing patterns of residential neighborhoods and commercial boulevards, the LUCE FEIR projected land use changes are primarily near the future Expo light rail stations and along the transit -rich commercial boulevards. New housing units as part of mixed -use projects represent the greatest proportion, with associated service and retail uses at the ground floor. Some creative arts and office uses are projected near the future Expo light rail stations and a modest net increase in citywide hotel use. Industrial land uses were projected to decrease during the 20 -year projection period. Study Session Follow Up Comments and concerns were raised by a range of interested parties in advance of and during the August 28, 2012 Study Session. The following items have been specifically analyzed since the Study Session and the recommendations herein are included in the proposed ordinance. Financial Analysis: Would the adoption of the Transportation Impact Fee render new construction infeasible in Santa Monica? Financial feasibility analyses for prototypical new development scenarios were completed by HR &A Advisors in order to understand the effect of the TIF on common development types (Attachment B). The scenarios studied a variety of development prototypes for the Downtown area and the Wilshire and Pico Boulevard corridors with a focus on mixed -use residential /retail development. An office /retail scenario was also studied for the Downtown area. The square footage and unit counts were derived from site calculations and validated by comparison to mixed use residential /retail development projects that have been 11 commonly proposed or constructed throughout the City. Some key assumptions in the development scenarios were: • A minimum 10% on -site affordable housing • A mix of unit sizes with significant studio /1 BR units (640sf gross average unit size) • Credit given for TIF fees for existing commercial square footage between 3,000 to 15,000 square feet depending on location and size of prototype • Minimum ground floor height of 15 feet, with upper levels calculated at 10.5 for residential and 13 feet for commercial uses • Land value derived through a residual land value analysis The analysis was completed for the scenarios "with TIF" and "without TIF" in order to understand the impact of the TIF on the financial feasibility of the project. The analysis indicates that the proposed TIF reduces developer profit by an amount roughly equal to the net TIF amount (the amount to be charged for the new building less the credit for the uses already on the site), but this has a relatively small impact on residual land values, what a developer could afford to pay for land and earn a market - responsive return, and returns on total development cost. The return on development cost was the metric used to measure financial feasibility, which ranged from 6.3 -8 percent "with TIF" and 6.3- 8.1 percent "without TIF". As demonstrated by the study, this causes a very minor change in return on total development cost (0 -0.1 percent). The analysis indicates that returns on total development cost are lower than might be anticipated elsewhere in the nation, however the results can be qualified by an increased likelihood of positive return on investment in the Santa Monica real estate market. The analysis does not account for additional profit that is anticipated by rent associated with the occupation of the building by tenants. • Cumulative Impact of Fees: What are the cumulative impacts of City fees? The analysis completed by HR &A included all existing fees that would be charged for the prototypes analyzed. While staff anticipates asking the Council to act on potential housing and parks fees, the scope of these fees has not yet been determined and are best judged when details of those fees are available. The potential housing fee is evaluating affordable housing demand generated by commercial development, and the parks fee is evaluating demand for parks which is generated largely by residential development with commercial development generating demand for parks at a lesser rate. Based on the financial feasibility modeling that was completed for the TIF and results that indicate developer profit is reduced by roughly the same amount as the net TIF, it is expected that any additional fees would affect developer profit in the same manner. In sum, the financial feasibility analysis for the TIF does indicate that even with the TIF there remains room in developer profit for additional fees. 12 • Other Exemptions: Should additional exemptions be included? Staff recommends that the following uses be exempt: o Outdoor dining in the public right -of -way o Private K -12 schools o Daycare uses o Publicly- funded and all deed restricted very -low and low income affordable housing units • Conversion of existing non - conforming ground floor to the conforming use of pedestrian oriented retail • Places of worship • City projects • Credit for Existing Structures: Should the TIF fee provide a credit for existing land uses? The proposed TIF includes a credit for existing land uses that are removed. Staff discussed during the Study Session requiring some occupancy during the previous five years to receive a credit for the existing structure. Staff currently recommends that square footage to be demolished shall be credited for the prior use. regardless of duration of occupancy or vacancy preceding the demolition. • Change of Use: Should the transportation impact fee be applied to changes that intensify use? An unintended consequence of the TIF could be to discourage land use change explicitly encouraged in the Land Use and Circulation Element. Specifically, there are locations in the City that have office ground floor uses that would be better suited for pedestrian friendly uses and design. Staff recommends no fee for a change of use converting of a non - conforming ground floor use in commercial zones to conforming pedestrian- oriented uses. The fee would only apply to a change of use in an existing structure, and would not influence the credits and new fees associated with the removal of an existing structure by new construction. Change of use from one type of use to a use generating more trips would be charged the difference between the rates for the higher trip generator and the existing use in all other circumstances; if a change of use does not result in additional trips, no fee would be charged. • Extended Vacancies: Should the transportation impact fee be applied to spaces that have been vacant for an extended period? The initial recommendation was that space that has been vacant for a continuous 12 -month period would trigger the fee when re- occupied. Staff recommended in 13 August 2012 that no fee would be triggered if the space was in continuous use for any 12 -month period over the prior 5 years. Concern was raised about potentially charging the same space a fee multiple times and that the cost of the TIF could burden space already difficult to lease. Staff recommends that the reoccupancy of existing buildings should be exempt from payment of the TIF if there is no change of use. • Neighborhood Serving Uses: If the LUCE encourages neighborhood and local, serving uses, should these uses be charged the same rate as other retail? The trip generation rates upon which the TIF is based are on trip rates for the existing mix of retail uses in Santa Monica. The mix ranges from national retailers, to local serving uses such as nail salons and dry cleaners and small restaurants and stores. Differentiating between different types of retail would be administratively prohibitive, making the both the calculation of the fee difficult as well as the process of changing tenants and changes of use burdensome on staff and applicants alike. Thus staff is recommending that general and neighborhood serving uses will be charged a single rate. • Auto Related Uses: Should the changing nature of dealerships and the LUCE's encouragement of urban format dealerships justify an auto - related rate? Auto related uses include a range of services including sales and display areas, trip intensive auto repair, and relatively low trip generators such as auto storage. Reflecting the range of trip generating characteristics, staff recommends splitting the uses into two rate categories reflecting different trip generating characteristics of each. The recommendation is to charge /credit sales, display and storage the industrial rate regardless of whether the activity occurs in a structure or outdoors and charge /credit service areas at the retail rate reflecting its more trip intensive nature. Proposed Ordinance Other notable elements of the transportation impact fee ordinance (Attachment C) include: • Fee Amount: Establishes the Transportation Impact Fee on a per square foot basis as described. For mixed -use projects, separate fees are determined per use and the total fee shall be the sum for all uses in the building. • Timing of fee amount and payment: The fee amount is calculated and must be paid prior to issuance of a building permit, except for residential uses where state law requires payment at certificate of occupancy. 14 • Accounting: The ordinance establishes a separate Transportation Impact Fee Reserve Account to be used solely for the purposes of collecting and disbursing the Transportation Impact Fee on projects identified in the nexus study. • Use of Funds: The ordinance establishes the parameters for the disbursement of funds so that they are spent on the uses identified in the Nexus Study. The fees should be spent typically within five years of receipt. • Automatic Annual Fee Adjustment: The fee annually adjusts on July 1, beginning in 2013, by a percentage equal to the appropriate Engineering Construction Cost Index. • Annual report: A required annual report would be submitted for review by the Council. • Fee Revision: The Council may periodically revise the amount of the impact fee or the automatic adjustment by resolution. • Implementation Schedule: The fee applies to all development applications meeting the criteria for applicability that are submitted or determined complete after the effective date.of this Ordinance; the fee would be used as a guideline for transportation contributions for development agreements including pending applications. • Refund of Payment: If a fee is paid but the project is not built, it will not create the impacts upon which the fee is based. If the fees have not been expended, the developer may request a refund and it shall be granted if the fees have not yet been expended. • Calculation of Payment: A credit to the total fee will be applied if a building is to be demolished and sufficient information is made available regarding its prior to use to determine its trip generation characteristics. • Area Type 3: Fee reduction for Housing Projects Near Transit Stations: State law requires a reduced rate for residential projects that meet specific requirements related to proximity to transit, availability of retail and provision of parking. The location is identified as Area Type 3 and housing will be charged the reduced Area Type 1 rate. Legal Considerations The California Legislature passed Assembly Bill (AB) 1600 in 1987, the California Mitigation Fee Act. As defined in AB 1600, a development impact fee is not a tax or special assessment, but rather a fee that must be reasonably related to the cost of the service provided by the local agency for the purpose of defraying all or a portion of the cost of public facilities related to the development project (Gov. Code § 66000(b).) 15 The nexus study and proposed fee is consistent with the Mitigation Fee Act, including the amendment added by AB 3005 in 2008. AB 3005 applies to new housing that meets the specific requirements relating to distance to transit, convenience retail and provision of parking. Housing projects that meet these requirements in Area 3 would be charged the Area 1 residential rate. A more complete analysis is included in the Nexus Study. Commission Action The Planning Commission considered the nexus study and the proposed Transportation Impact Fee at their March 12, 2012 meeting, prior to the August 28, 2012 Council study session. After comments from the public and discussion, the Planning Commission unanimously voted to recommend that the Council adopt the Transportation Impact Fee as proposed with one amendment. The Commission recommended that deed restricted low- and very low- income rental housing units built by a non - profit developer which receives some funding from the City be exempt from the fee. The proposed staff recommendation includes this low- income housing exemption in the ordinance before the Council. In order to recommend the proposed text amendment to the City Council, the Planning Commission found that the amendment is consistent with the City's General Plan and that it promotes public health, safety and general welfare. The proposed amendment is consistent in principle with several of the goals, objectives and policies of the General Plan, and is explicitly called for in one policy, including: • LUCE Goal T19 states that the City should create an integrated transportation and land use program that seeks to limit total peak period vehicle trips with a Santa Monica origin or destination to 2009 levels. • LUCE Policy T19.7 calls for the City to perform nexus study and implement transportation an impact fee to mitigate negative transportation impacts of new development. Alternatives 1. The City Council could modify the Transportation Impact Fee to charge land uses different fees. 2. The City Council could not adopt a Transportation Impact Fee. Should the Council pursue Alternative 1 by charging land uses less, fewer transportation projects would be built as the cost of projects are high and sources of additional funds are increasingly scarce; the Council could chose to charge more but not more than the maximum legally justifiable amount identified in the nexus study. Should Council pursue Alternative 2 and not adopt a Transportation Impact Fee many transportation projects identified in the Land Use and Circulation Element, the Bike Action Plan and emerging Pedestrian Action Plan would lack funding for implementation, jeopardizing the ability to meet the goal of no net new automobile trips in the afternoon peak period. Environmental Analysis The proposed ordinance is not a project pursuant to CEQA Guideline section 15378(b)(4), which excludes from the definition of Project "the creation of government funding mechanisms or other government fiscal activities, which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment." Alternatively, the proposed ordinance is exempt from the provisions of the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3) in that it can been seen with certainty that the proposed ordinance does not have the potential to significantly impact the environment, since the proposed ordinance amendment is a fee that will be levied on projects that will be evaluated in compliance with CEQA on their own merits. Public Outreach The Transportation Impact Fee has been discussed in concept for many years. Some discussion of it has been included in community outreach as part of the community . 17 benefits discussion occurring as part of the zoning ordinance update. In general, members of the community have been supportive of the adoption of such a fee. Additionally, staff has communicated directly with members of the business community since the August 28, 2012 study session. Next Steps Following Council adoption of the ordinance, it would return for a second reading. The ordinance would go into effect 60 days after second reading. Staff would make the administrative changes necessary to implement the fee during that time. M. Financial Impacts and Budget Actions There is no immediate fiscal impact or budget action necessary as a result of the recommended action. If approved, the Transportation Impact Fee is estimated to collect a total of $50 -60 million in revenue over the next 20 years. It is anticipated that fees would begin being collected as early as FY 2012 -13, as non - residential fees would be collected at issuance of building permits for projects. Revenues will be received at account 04267.402050 (TRANSPORTATION IMPACT FEES). Projects to be built using Transportation Impact Fee revenue would be brought to Council for review and expenditure appropriations on an individual basis prior to their construction. Prepared by: Francie Stefan, Strategic and Transportation Planning Manager Approved: t�w IK" David Martin, Director Planning and Community Development Forwarded to Council: RocTGould City Manager Attachments: A. Transportation Impact Fee Nexus Study B. Financial Feasibility Analysis C. Proposed Transportation Impact Fee Ordinance G.7 ATTACHMENT A Transportation Impact Fee Nexus Study ATTACHMENT B Financial Feasibility Analysis ATTACHMENT C Proposed Transportation Impact Fee Ordinance 20 Transportation Impact Fee Nexus Study j Final City of Santa Monica ExecutiveSummary ..................................................................................... ............................... ii 1 Introduction .......................................................................................... ............................1 -1 2 Land Use Projections ............................................................................ ............................2 -1 3. Transportation Effects of New Development ....................................... ............................3 -1 4 Capital Projects and Costs ................................................................... ............................4 -1 5 Recommended Fee Structure and Calculation ...................................... ............................5 -1 FeeStructure ............................................................................................................ ............................... 5 -1 Fee Calculation ........................................................................................................ ............................... 5 -5 Table of Figures Page Figure E -1 Summary of Project Costs over 20 Year Period ................................ ............................... iv FigureE -2 Map of Area land Area 2 ..................................................................... ..............................v Figure E -3 Weekday PM Peak Period Vehicle Trip Generation Rates ................ .............................vi FigureE -4 Maximum Impact Fee by Land Use ........................... ............................... ............................vii Figure E -5 Proposed Impact Fee by Land Use ........................... ............................... ...........................viii Figure2 -1 Projected Land Use Changes ................................................................. ............................2 -2 Figure 3 -1 PM Peak Hour Vehicle Trips Generated in Santa Monica ............... ............................3 -2 Figure3 -2 LOS Summary Table ............................................................................. ............................... 3 -3 Figure 3 -3 Change in Travel Time on North /South Corridors during the AM Peak Hour.......... 3 -6 Figure 3 -4 Change in Travel. Time on North /South Corridors during the PMPM Peak Hour ..... 3 -7 Figure 3 -5 Change in Travel Time on East /West Corridors during the AMAM Peak Hour ....... 3-8 Figure 3 -6 Change in Travel Time on East /West Corridors during the PM Peak Hour ..............3 -9 Figure 4 -1 Summary of Project Costs over 20 Year Period ................................ ............................4 -2 Figure4 -2 Master Capital Project List ...................................................................... ............................4 -1 Figure 5 -1 Land Use Categories ................................................................................ ............................5 -1 Figure5 -2 Map of Area 1 and Area 2 ................................................................ ............................... 5 -4 Figure 5 -3 Trip Generation Rates by Land Use Category ................................ ............................... 5 -5 Figure5 -4 Maximum Impact Fee by Land Use .................................................... ............................... 5 -6 Figure 5 -5 Proposed Impact Fee by Land Use ....................................................... ............................5 -7 Figure 5 -6 Potential Impact Fees Generated by Land Use Category ............... ............................5 -8 Figure 5 -7 AB 3005 Santa Monica Transit Station Walk shed ........................... ...........................5 -10 Nelson\Nygaard Consulting Associates Inc. j i Transportation Impact Fee Nexus Study I Final City of Santa Monica This report defines the purpose, rationale, and structure of a new multimodal transportation impact fee on new development in the City of Santa Monica including a detailed description of the projects and programs to be funded by fee revenues. We provide evidence of the "reasonable relationship," in both intended use and amount, between the proposed fee and the projected transportation impacts of development that the fee - funded transportation projects and programs are intended to address. Purpose of the Transportation Impact Fee The purpose of the Multimodal Transportation Impact Fee is to ensure that new development, projected through the year 2030 in the Environmental Impact Report (EIR) for the Land Use and Circulation Element (LUCE) of the Santa Monica General Plan, pays its fair share of the costs of providing the transportation infrastructure necessary to implement the policies and achieve the goals of the Plan. Transportation is not an end in and of itself, but rather a means of gaining access and maintaining connections to people, places, goods, and services. The transportation policies, projects, and programs called for in the Land Use and Circulation Element (LUCE) of the Santa Monica General Plan are in turn a means for the City to achieve goals for improving public health, economic and community development, equity of access, and environmental sustainability. The Community Vision Statement in the LUCE notes that, "Reducing emphasis on the automobile and bolstering walling and biking is paramount to the Santa Monica community. The modest, targeted growth in housing and commerce must be balanced with specific initiatives to calm traffic and reduce congestion ". The LUCE identifies a number of policies and programs that will encourage walling, biking and transit usage which in turn will help reduce PM peals hour vehicle trips.= Consistent with this vision, a primary goal of the LUCE is to accommodate modest growth and development and improve access and mobility with no net increase in vehicle traffic volumes.3 The adopted metric for evaluating progress towards this goal is the volume of PM peals hour vehicle trips destined to and from City lands. Need for the Fee To confirm the need for the transportation improvements to be funded by the multimodal transportation impact fee and to gstimate the effects of future development on the transportation system, the Santa Monica travel demand forecasting model (TDFM) developed for the LUCE EIR was used to forecast Year 2030 conditions assuming future development patterns anticipated with the LUCE but without the LUCE transportation improvements and trip reduction strategies contained in the LUCE. These forecasts were compared to conditions as forecast in the LUCE EIR with the LUCE land use scenario and the LUCE transportation improvements /trip reduction strategies. The scenario with the LUCE transportation improvements /trip reduction strategies is 1 City of Santa Monica Land Use and Circulation Element, Executive Summary, p.2 2 For a full analysis of the impacts of bicycle, pedestrian, transit, and TDM programs on vehicle trip generation please refer to the Santa Monica LUCE Final EIR 3 This goal is articulated as part of LUCE Framework Element 3: Pro - Active Congestion Management. Santa Monica LUCE, Executive Summary, p. 10 NelsWNygaard Consulting Associates Inc. I ii Transportation Impact Fee Plexus Study I Final City of Santa Monica the same LUCE scenario that was analyzed in detail in the LUCE FIR; the scenario without the LUCE transportation improvements /trip reduction strategies was run for the purposes of the nexus analysis only. If all projected development were to occur without transportation improvements, it is estimated that the number of PM peals hour vehicle trips generated within the City of Santa Monica would increase from approximately 6o,too existing PM peak hour vehicle trips to 64,700 PM peak hour vehicle trips. As discussed in the LUCE FIR, the number of PM peak hour vehicle trips generated within Santa Monica under the LUCE development with transportation improvements and trip reduction strategies scenario is projected to decrease to 59,500, thus achieving the LUCE goal of no net new evening peak period trips generated within Santa Monica. In addition, the impacts of LUCE policies on intersection level of service (LOS) were also analyzed. The City of Santa Monica uses LOS to determine the significance of transportation impacts. The 41 LUCE FIR study intersections were evaluated for the two model runs (one with LUCE transportation improvements and trip reduction strategies and one without transportation improvements and trip reduction strategies). With the LUCE transportation improvements /trip reduction strategies, the number of study intersections projected to operate at LOS E or F during one or both of the AM and PM peak hours at year 2030 is reduced from 14 to 5 intersections. Fee Expenditure Plan The fee expenditure plan for capital projects is part of a larger plan that includes transportation demand management and transportation system management programs, all of which contribute to the goal of achieving no net new PM peals hour vehicle trips, through 2030. Capital projects that expand transportation choices, such as construction of sidewalks, curb extensions, installation of bike racks and bus stops, and signing and striping of new bicycle and transit lanes throughout the City are matched by demand -side measures that can help achieve the no net new PM peak hour vehicle trips goal by reducing vehicle trip generation rates for both new and existing residents, businesses, and property - owners. These include TDM programs, such as carsharing and mobility centers. It is important to note that for programs and policies with an associated operating cost, those costs are not included in the fee expenditure plan and thus will not be covered by the impact fee. This fee will not duplicate costs associated with employer or developer TDM programs, nor transportation improvements required for project mitigations or provided as project benefits. Use of Fee Revenues The package of capital projects to be funded by the impact fee is designed explicitly to address projected growth and to help achieve the goal of no net increase in PM peak hour vehicle trips through 2030. The determination of capital projects which may be funded by the transportation impact fee is based on the policies and actions identified in the Land Use and Circulation Element, which were used in the trip generation modeling conducted as part of the LUCE EIR. The improvement cost estimate for capital projects is approximately $92 million. Figure E -r provides a summary of total project costs by project category. In addition to capital costs, the cost to provide a project management position to oversee these capitals projects is included as well as the cost for a fee administration staff person. Lastly, a ro percent design and engineering fee is added onto the subtotal of physical improvements, as is a 35 percent contingency cost per NelsonlNygaard Consulting Associates Inc. I iii Figure E -2 Map of Area 1 and Area 2 FEHR'�PEERS Legend Area Type 1 Area Type 2 City of Santa Monica Freeway — Streets 0 0.1250.25 0.5 Miles Transportation Impact Fee Nexus Study I Final City of Santa Monica industry standard.4 With these additional costs, the total capital projects list totals approximately $134 million. Haure E -1 Summary of Project Costs over 20 Year Pert tttt!q��, :,_4' >��'��71$11'11' 5f"�4�, Bicycle Actions ,781 Pedestrian Actions ,000 TDM Actions 075 7 Transit Actions ,750 Auto Network Actions ,,000 Project Managements $3,000,000 Fee Administrations $3,000,000 Subtotal $92,631,606 EngineeringlDesign7 $9,263,161 Contingencys $32,421,062 Total $134,315,829 M61 Method for assessing fees in proportion to project impacts The method for assessing multimodal transportation impact fees is carefully calibrated to traffic volumes in Santa Monica to account for the different transportation system impacts (as measured by PM peak hour vehicle trip generation) of each new development project in the city, by accounting for differences based on location (especially proximity to transit), and the type and mix of land uses predicted in 2030, the build out year for the Land Use and Circulation Element. This method is consistent with Assembly Bill 3005 which requires fees to be adjusted based on proximity to transit and locally serving retail, both of which have been demonstrated through empirical research to be inversely correlated with vehicle trip generation. For this study, both vehicle trip generation rates for comparable land uses and the fee per dwelling unit and square foot are different for each of two different areas: • Area 1 includes Downtown Santa Monica, the Special Office District, and Bergamot Transit Village. These districts have lower vehicle trip generation rates due to their accessibility by transit, and the presence of a diversity of complementary land uses and activities, both of which tend to reduce vehicle travel demand. • Area 2 includes all remaining areas of the City of Santa Monica, not included in Area 1. 4 Caltrans Project Development Procedures Manual specifies including a contingency of between 30% and 50% as part of the project cost estimation phase. Caltrans Project Development Procedures Manual, Chapter 20 pg 11. 5 Project Management covers the annual salary cost of one staff person to oversee capital projects for a 20 year period. d Fee Administration covers the annual salary cost of one staff person to oversee the administration of the fee for a 20 year period. 7 A 10% engineering and design fee is added on to the subtotal of physical improvements only. 6 A 35% contingency fee is added on to the subtotal of physical improvements only. NelsonmNygaard Consulting Associates Inc. t iv Transportation Impact Fee Nexus Study i Final City of Santa Monica Figure E -3, below, shows the different vehicle trip generation rates (vehicle trips that begin or end at a location within the City of Santa Monica) per residential unit or per thousand gross square feet during the weekday PM peak hour in Area 1 and Area 2 for eight distinct land use categories. Trip generation rates by land use are based on calibrated PM peak hour rates from the Santa Monica Travel Demand Forecasting Model (TDFM).9 Fiaure E -3 Weekdav PM Peak Period Vehicle Trio Generation Rates The land use categories are comprised of groups of related land uses. Land uses with similar trip generation characteristics are grouped together to simplify nexus fee administration and compliance monitoring. It should be noted that several land use categories that were evaluated as part of the LUCE EIR are not included in the categories above, including fire and police, recreation, and government office, as development of these types of uses are not anticipated to pay the fee since they are uses provided by the City of Santa Monica and the share of these costs associated with these trips will be born directly by the City of Santa Monica. The trips generated by these uses as part of the LUCE EIR are not included in the impact fee analysis and calculation. Fee Structure and Fee Rates The fees have been calculated based on cost estimates of capital improvements, which in combination with trip reduction programs are, required to reduce the additional vehicle trips generated by growth in Santa Monica such that no new net vehicle trips are generated in the PM 9 For a detailed discussion of the trip generation rates established as part of the Santa Monica Travel Demand Forecasting Model refer to Fehr & Peers Santa Monica Travel Demand Forecasting Model Trip Generation Rates report, October 2011. 10 Multi- family zero cars, one car, and two or more cars have been combined, and trip rates have been averaged 'The trip generation rates for Lodging are empirically derived. NelsonlNygaard Consulting Associates Inc. ( vi Residential (dwelling I E�= - � � � ■IIII�� t. t '., morlymcowrow . t 1 ■I, :t 1 , . 11• � . t . 1 � t The land use categories are comprised of groups of related land uses. Land uses with similar trip generation characteristics are grouped together to simplify nexus fee administration and compliance monitoring. It should be noted that several land use categories that were evaluated as part of the LUCE EIR are not included in the categories above, including fire and police, recreation, and government office, as development of these types of uses are not anticipated to pay the fee since they are uses provided by the City of Santa Monica and the share of these costs associated with these trips will be born directly by the City of Santa Monica. The trips generated by these uses as part of the LUCE EIR are not included in the impact fee analysis and calculation. Fee Structure and Fee Rates The fees have been calculated based on cost estimates of capital improvements, which in combination with trip reduction programs are, required to reduce the additional vehicle trips generated by growth in Santa Monica such that no new net vehicle trips are generated in the PM 9 For a detailed discussion of the trip generation rates established as part of the Santa Monica Travel Demand Forecasting Model refer to Fehr & Peers Santa Monica Travel Demand Forecasting Model Trip Generation Rates report, October 2011. 10 Multi- family zero cars, one car, and two or more cars have been combined, and trip rates have been averaged 'The trip generation rates for Lodging are empirically derived. NelsonlNygaard Consulting Associates Inc. ( vi Transportation Impact Fee Nexus Study i Final City of Santa Monica peals hour. Using the trip generation rates shown in Figure E -3, fee rates by land use and area were established that reflect the proportional difference in trips generated by land use and by area. Figure E -4 below shows the maximum level of fees that could be charged in order to fully cover the portion of the cost of capital projects that is associated with by new development within Santa Monica. Output from Santa Monica TDFM found that the average share of the overall incremental growth in traffic that is generated by development within Santa Monica was 74% and the average share that was determined to be the result of growth in regional pass- through traffic was 26 %. This suggests that as much as 74% of the cost of the transportation improvements contained in the LUCE nexus fee program could be fairly attributed to new development within the city. Fiaure E -4 Maximum Imoact Fee by Land Use The fees shown in Figure E -4 represent the maximum fee that could be charged by the City of Santa Monica, 74% of the total cost. The maximum fees were calculated by dividing 74% of the total project cost by the trip generation rate rates in Figure 5 -3 to generate a per unit /square foot maximum rate for each land use in Area r and Area 2. It should be noted that full cost recovery would be inconsistent with the collection of similar fees statewide and may discourage some desired land use change in Santa Monica. Therefore the proposed fee levels have been identified that are comparable with other Southern California communities, and will provide substantial funding for the proposed capital projects. Figure E -5 below shows the proposed impact fee on a per square foot or unit basis by land use. NelsonlNygaard Consulting Associates Inc. I vii � ' �fi It Ot d@kdllln� ilttll) {�er��-it grifuy�lilf� iltl� �Yefa!�tY31V� -..N i111�a�.�l. .,`., ✓ 1�.� -� i of Ili t PTV n Ilia d71aI • The fees shown in Figure E -4 represent the maximum fee that could be charged by the City of Santa Monica, 74% of the total cost. The maximum fees were calculated by dividing 74% of the total project cost by the trip generation rate rates in Figure 5 -3 to generate a per unit /square foot maximum rate for each land use in Area r and Area 2. It should be noted that full cost recovery would be inconsistent with the collection of similar fees statewide and may discourage some desired land use change in Santa Monica. Therefore the proposed fee levels have been identified that are comparable with other Southern California communities, and will provide substantial funding for the proposed capital projects. Figure E -5 below shows the proposed impact fee on a per square foot or unit basis by land use. NelsonlNygaard Consulting Associates Inc. I vii Transportation Impact Fee Nexus Study i Final City of Santa Monica Fiaure E -5 Pr000sed Impact Fee by Land Use r ,: r r littyaexl rea r IgS ,r r ttfr13Ab5 r,e� -. '- '�",� -, r N' .11 :11 n :1i $3,300 Non-Reside r ilil 11 $30.10 By creating a proportional relationship or ranking between the various land use categories, this ensures that land uses with a lower PM peak hour vehicle trip generation rate will be charged a lower fee, while land uses with a higher trip generation rate will be charged a higher fee. Similarly, some land uses in Area 2 will be charged a higher fee due to higher PM peak hour vehicle trip generation rates as compared to the rate for the same land use in Area 1. Based on the land use growth projections described in Chapter 2, a total potential revenue of approximately $6o million could be generated by the proposed Transportation Impact Fee if all predicted development were to occur, which represents 45% of the total project cost. Given that the cost estimate for capital projects is approximately $134 million, the revenue generated by the transportation impact fee will not be sufficient to fully cover the cost of all capital projects. The remaining 55% of the total project cost is expected to be covered by regional, state and federal grants, City General Fund, and other sources, for which the Fee may provide a local match. Legal Considerations Local jurisdictions are authorized to assess impact fees in California by the Mitigation Fee Act (AB 1600,1989, Gov. Code § 66000), while the expenditure of such fee revenues is both supported and limited by legal precedent. Local government authority to regulate land uses, including the exaction of impact fees, derives from the "police power" to protect the public health, safety, and welfare. As defined in AB 1600, a development impact fee is not a tax or special assessment, but rather a fee that must be reasonably related to the cost of the service provided by the local agency for the purpose of defraying all or a portion of the cost of public facilities related to the development project. This report makes all of the required findings of the Mitigation Fee Act that (a) identify the purpose of the fee, (b) identify the use to which the fee is to be put and the facilities (if any) to be financed, (c) determine how there is a reasonable relationship between the fee's use and the type of development project on which the fee is imposed, and (d) determine how there is a reasonable NelsonWygaartl Consulting Associates Inc. I viii Transportation Impact Fee Nexus Study i Final City of Santa Monica relationship between the need for the public facility and the type of development project on which the fee is imposed (Government Code §6600r(a)). In addition to meeting the requirement of AB 1600 the impact fee proposed in this report is also consistent with AB 3005, which was passed by the California State legislature in 20o8. For new fees meeting the requirements listed below, "...the fee, or the portion thereof relating to vehicular traffic impacts, shall be set at a rate that reflects a lower rate of automobile trip generation associated with such housing developments in comparison with housing developments without these characteristics...": r. The housing development is located within one -half mile of a transit station and there is direct access between the housing development and the transit station along a barrier - free, walkable pathway not exceeding one -half mile in length. 2. Convenience retail uses, including A store that sells food, are located within one -half mile of the housing development. 3. The housing development provides either the minimum number of parking spaces required by the local ordinance, or no more than one onsite parking space for zero to two bedroom units, and two onsite parking spaces for three or more bedroom units, whichever is less. NelsonlNygaard Consulting Associates Inc. I ix Transportation Impact Fee Nexus Study I Final City of Santa Monica Cities throughout California frequently rely on impact fees to ensure that the costs of infrastructure and services necessary to support new development are paid by the development and not born disproportionately by existing residents, businesses and /or property - owners. Santa Monica already has an impact fee; since December 20o6, the City of Santa Monica has levied a Child Care Linkage Program Impact Fee on the majority of new commercial and multiunit residential developments in proportion to the demand they generate for additional child care services in the City. The recently adopted LUCE establishes a citywide goal of No Net New PM Peale Hour trips either starting or ending in the City of Santa Monica. Meeting the goal will require that as the City evolves and changes that it focus on the right kind of development, in the right locations, coordinated with the right management tools and careful public investment. New development must do more to reduce its own trips, including making the City more walkable, bikeable and transit friendly. As one step toward that goal, LUCE policy T19.7 states "perform a nexus study and implement a transportation impact fee to mitigate negative transportation impacts of new development." This impact fee would enable new development to pay its fair share of the costs of providing needed transportation infrastructure and services in the City. This report describes the purpose, rationale, and structure of a new multimodal transportation impact fee on new development in the City of Santa Monica. We provide evidence of the reasonable relationship, both in intended use and amount, between the proposed fee and the projected transportation impacts of development that the fee - funded transportation projects and programs are intended to address. This report is intended to satisfy the requirements of the California Mitigation Fee Act (AB 1600, 1987, Gov. Code § 66000), and is consistent with legislative precedent, as necessary to permit expenditure of fee revenue on the specific transportation projects and programs identified as necessary to implement the land use and circulation policies of the General Plan. California Mitigation Fee Act — All 1600 In 1987 the California Legislature passed Assembly Bill (AB) 1600, the California Mitigation Fee Act. As defined in AB 1600, a development impact fee is not a tax or special assessment, but rather a fee that must be reasonably related to the cost of the service provided by the local agency for the purpose of defraying all or a portion of the cost of public facilities related to the development project (Gov. Code § 66000(b).) NelsonlNygaard Consulting Associates Inc. 1 -1 Transportation Impact Fee Plexus Study I Final City of Santa Monica The California Mitigation Fee Act12 established a statewide procedure for exacting development impact fees. This legislation requires the City Council to make certain findings in order to establish a fee. These findings must: • Identify the purpose of the fee • Identify the use to which the fee is to be put and the facilities (if any) to be financed • Determine how there is a reasonable relationship between the fee's use and the type of development project on which the fee is imposed • 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 (Government code §6600l(a)). This report serves to meet the above described items. California AB 3005 In 2008, the California State Legislature adopted AB 3005 (Gov. Code § 6546o.1). This bill requires local agencies that impose transportation impact fees on housing developments in order to mitigate vehicular traffic impacts, to reduce the impact fees for housing developments that satisfy all of the following characteristics: • The housing development is located within one -half mile of a transit station and there is direct access between the housing development and the transit station along a barrier - free, walkable pathway not exceeding one -half mile in length. • Convenience retail uses, including a store that sells food, are located within one -half mile of the housing development. • The housing development provides either the minimum number of parking spaces required by the local ordinance, or no more than one onsite parldng space for zero to two bedroom units, and two onsite parking spaces for three or more bedroom units, whichever is less. The reasoning behind this bill is that developments satisfying these characteristics tend to generate fewer private vehicle trips and more transit and other non -auto trips. The exact reduction in impact fees is not set; rather, the bill states that impact fees will be set at a rate that reflects a lower rate of automobile trip generation associated with such housing developments in comparison with housing developments without these characteristics, unless the local agency adopts findings after a public hearing establishing that the housing development, even with these characteristics, would not generate fewer automobile trips than a housing development without those characteristics. AB 3005 does not apply to fees already adopted for housing developments located within areas covered by capital improvement plans for traffic facilities prior to January r, 2oog. This legislation is consistent with existing city policy and Chapter 5 describes in greater detail how the proposed impact fee structure will ensure compliance with AB 30053005• Land Use and Circulation Element (LUCE) of the Santa Monica General Plan The adopted Santa Monica LUCE provides the framework necessary to integrate land use and transportation to reduce vehicle trips, encourage walking, bicycling and transit use, and to create 12 Government Code Section 66000 Er seq. Nelson \Nygaard Consulting Associates Inc. 11-2 Transportation Impact Fee Plexus Study I Final City of Santa Monica active pedestrian - oriented neighborhoods that allow people to meet their daily needs locally and with a variety of mobility choices. The LUCE recognizes the crucial role that transportation plays in reducing greenhouse gases and achieving the community's sustainability goals. The LUCE proposes the creation of a complete multi -modal transportation system that builds upon the City's major investment in transit including the Expo Light Rail. The LUCE identifies local strategies that manage trips, treating the entire City as an integrated transportation management system with aggressive requirements for trip reduction, hansit enhancements, pedestrian and bike improvements, and shared parking. Transportation demand management (TDM) programs that reduce automobile travel demand and incentivize alternative modes such as carpool, vanpools, and shuttles, walling, bicycling, and shared parking are all encouraged. Pro- active demand management for new automobile trips will be implemented in concert with strategies for large existing employers such as schools, hospitals, and other large institutions. The LUCE serves as the basis for creating the nexus between new development and impact fees, and it helps define the capital project list that will be funded by the impact fee. The LUCE clearly identifies the establishment of fees as a tool to manage vehicle trips and increase alternative transportation options for Santa Monica residents. The LUCE states that "New projects will be required to minimize the trips they generate and contribute fees to mitigate their new trips. To achieve the No Net New Trips goal, developers cannot be expected to have every project generate zero hips by itself. Rather, developers will pay mitigation fees that will fund capital improvement projects citywide, such that the net impact of each development project ultimately is zero. Fees will be used for improvements that benefit the City's transportation system overall, such as additional buses to increase frequency, improved walking routes and new bike lanes." 13 Purpose of the Transportation Impact Fee The purpose of the Transportation Impact Fee is to ensure that new development pays its fair share of the costs of providing the transportation infrastructure necessary to implement the no net increase in vehicle trips originating or ending within the City during the PM peak hour goal of the Plan. By supporting this goal, it also supports LUCE goals of reducing vehicle trips and promoting walking, bicycling, carpooling, and use of public transit, in order to accommodate some desired growth and development. Use of the Transportation Impact Fee The LUCE contains a list of transportation policies, projects, and programs that are necessary to accommodate projected growth with no net increase in PM peak hour vehicle trips through 2030. More specifically these new trips must be offset through the development of new transportation infrastructure providing alternatives to automobile travel, including public transit, bicycling, ridesharing, and walking. The package of capital improvements projects to be funded by the fee includes completion of the sidewalk network, and enhanced pedestrian crossings along major boulevards, striping and signage of new bike lanes, bike paths, and bike boulevards, and installation of new bus pads, bus benches and transit only lanes. 13 Santa Monica Land Use and Circulation Element p. 4.0 -12 NelsonlNygaard Consulting Associates Inc. 11-3 Transportation Impact Fee Nexus Study I Final City of Santa Monica Each of the specific projects included in the fee expenditure plan has been evaluated and selected based on its cost - effectiveness in reducing PM peak hour vehicle trips. The impact of implementing the entire package of projects and programs was modeled as part of the LUCE FIR, and determined to be sufficient to achieve the goal of no net increase in PM peals hour vehicle trips through 2030. It must be noted that the capital projects that will be funded by the proposed Transportation Impact Pee are not intended to fully offset the projected transportation effects of development as developers will also undertake separate measures such transportation demand management programs and localized mitigation measures to help offset the transportation effects of new development. The proposed impact fee will not fully cover the cost of the capital projects and additional funding must be identified to implement many of the projects and programs identified herein, with a substantial share of that funding generated by existing residents, businesses, and /or transportation system users. The fee revenue will also likely be used as a local match for regional, state and federal grants, City General Fund, and other sources, allowing the City to fully fund the projects necessary to meet its trip reduction goals without relying upon the fee revenue alone. Outline of this Report This report describes the methodology used to establish and calculate transportation impact fee rates that vary by land use, estimates total fee proceeds and provides recommendations for fee implementation as follows: • Chapter 2 provides the land use projections used to estimate vehicle trip generation and set fee rates, including the type and amount of land uses through 2030. • Chapter 3 describes the methodology and findings of an analysis of the transportation demand created by projected development and the criteria used for determining the related impacts. • Chapter 4 identifies and provides costs for the specific list of projects and programs to be funded by the transportation impact fee. Criteria for project and program inclusion on the list is described as well identification of projects considered, but not included. • Chapter 5 details the structure of the fee, which will vary based on the different projected vehicle trip generation rates of a variety of land use categories. After defining the different categories of land uses used for fee assessment, and specifying any uses that are to be exempt from the fee, this chapter defines the trip generation rates and associated fee rates for each land use category. The chapter concludes with a projection of the total impact fee revenue expected to be generated, and a discussion of options for funding the remaining cost of all of the projects and programs identified in this study. NelsonlNygaard Consulting Associates Inc. 1 -4 Transportation Impact Fee Nexus Study I Final City of Santa Monica i i. 1 x I M 5 r As part of the EIR process for the Land Use and Circulation Element (LUCE), the City of Santa Monica projected potential net new development that could occur through 203o based on the polices of the LUCE. These projections represent the potential amount of future development; however, actual development may occur at lower levels and varying proportions. Almost all of the land in the City of Santa Monica is developed, with existing uses including established residential neighborhoods, commercial mixed -use corridors, parks, schools, and other community serving facilities, and public services and utilities. Opportunities for new uses are limited and are primarily confined to the redevelopment of existing properties. In order to minimize the disruption of established residential neighborhoods and to link housing and commercial uses to transit opportunities for new land uses according to the LUCE FEIR, the new development "would be focused in areas around planned transit stations, along the future Exposition light rail line, and at nodes along primary commercial and transit corridors in the City ". iq These transit and commercial corridors are along the Wilshire, Santa Monica, and Pico Boulevards, in Downtown Santa Monica, and in the vicinity of the proposed Exposition Line rail stations, including Bergamot Station and Memorial Park Stations. Housing with ground floor retail and services are focused on the corridors, with a mix of housing and employment at the stations. The LUCE FEIR states that, "Compared to today, the modest land use changes allowed under the proposed LUCE could result in a net increase of residential units (emphasizing affordable and workforce housing), retail space, local- serving office uses, creative arts spaces, medical space, hotel space, and recreational space". 15 The time horizon for these changes is 2030. Land use projections are included in this study for the purpose of estimating the proposed impact fee. As shown in Table 2 -1 of the LUCE FEIR, the projected net change in land uses includes approximately: 14 Santa Monica LUCE FEIR p. 2 -3 15 Santa Monica LUCE FEIR p. 2 -3 NelsonlNygaard Consulting Associates Inc. 12-1 Transportation Impact Fee Nexus Study i Final City of Santa Monica Fiaure 2 -1 Proiected Land Use Chanaes 16 Does not account for open space that may be created through open space and community benefit requirements of the proposed LUCE Nelson\Nygaard Consulting Associates Inc. 12-2 w @cGnJ G!k1i1G1% > uGiiyittl? 1 1' 111':1 - • 111 I G" 1' 1' • �i . 1' 111 G G't �� :�� I 1 ' 111 iG IG iG� I ItG 16 Does not account for open space that may be created through open space and community benefit requirements of the proposed LUCE Nelson\Nygaard Consulting Associates Inc. 12-2 Transportation Impact Fee Plexus Study I Final City of Santa Monica ;F k- This chapter identifies the anticipated effects of new development on the city's transportation system, which a Transportation Impact Fee (TIF) could be used to mitigate. Effects of New Development To confirm the need for the transportation improvements and trip reduction strategies to be funded by the transportation impact fee, the Santa Monica Travel Demand Forecasting Model (TDFM) was used to estimate the effects of future development on the transportation system. Using the TDFM, year 2030 transportation conditions were forecast assuming future development patterns anticipated with the LUCE land use scenario but without the transportation improvements /trip reduction strategies contained in the LUCE. This forecast was compared to conditions as forecast in the LUCE EIR with the combined LUCE land use scenario and the LUCE transportation improvements /trip reduction strategies which is the same LUCE scenario that was analyzed in detail in the LUCE FIR. As shown in Figure 3 -1, using the Santa Monica TDFM, there are currently approximately 6o,roo existing PM peals hour vehicle trips generated within the City of Santa Monica. As discussed in the LUCE EIR, the number of PM peak hour vehicle trips generated within Santa Monica under the LUCE land use scenario with transportation improvements and trip reduction strategies is projected to decrease to 59,500, thus achieving the LUCE goal of no net new evening peak period vehicle trips generated within Santa Monica. However, the model estimates that if the development projected by the LUCE occurred without the implementation of LUCE transportation improvements /trip reduction strategies, the number of PM peals hour vehicle trips would increase to 64,700, thus violating this basic objective of the LUCE transportation policy. NelsonlNygaard Consulting Associates Inc. 3 -1 Transportation Impact Fee Nexus Study I Final City of Santa Monica Figure 3.1 PM Peak Hour Vehicle Trips Generated in Santa Monica 70,000 60,000 50,000 a0,00o 30,000 20,000 10,000 LUCEwithout Improvements LUCE �ExlsVng The impacts of LUCE policies on intersection level of service (LOS) were also analyzed. The City of Santa Monica uses LOS to determine the significance of transportation impacts. The 41 LUCE EIR study intersections were evaluated for the two model runs (one assuming future development patterns anticipated with the LUCE land use scenario but without the transportation improvements /trip reduction strategies contained in the LUCE and one with conditions as forecast in the LUCE EIR with the combined LUCE land use scenario and the LUCE transportation improvements /trip reduction strategies). With the LUCE transportation improvements and trip reduction strategies, the study intersections that are projected to operate at LOS E or F during one or both of the AM and PM peak hours at year 2030 is reduced from 14 to 5 (Figure 3 -2). Without the LUCE transportation improvements and trip reduction strategies, 14 of the 41 LUCE EIR intersections are projected to operate at LOS E or F during one or both of the AM and PM peak hours. Currently one intersection operates at LOS F during both the AM peak hour and two intersections operate at LOS F during the PM peals hour. NelsonlNygaard Consulting Associates Inc. 13-2 Transportation Impact Fee Nexus Study I Final City of Santa Monica Figure 3 -2 LOS Summary Table `Tii2tjilYt y (Y .:;. z S {{ 3t ; {t SsNt, { {ty� { }tfi t5ur}s }t t t t 1 } #.�> Sf Y� } } i a {j t k: } to I i i{ t }7 (�J.r'�tE }Y ii f siU +. (.. t'. S \ t\ ai t i ?yt�� E, *;t ;:t }�* t }� ) { it\ k It t, y175 aiati j, i 3 •}(p\i EtYU 1 5 *rka Vt r 1{ " Y{ t 41, iti 4a i it i tti 4pt�5 yt�lk#6k1C ltti� FYI {e£I 4EY Mill t afi#3�t�itl$2' i tit} }.F,+Yke3tii.Y4$ }9i33lii bu�ill{ 3ti${ Slt. �} L, a} t�} 1t�ttt .Ulit�it \teiA��1{41rt+t�l141jfii 1 t YXfltH }4 kU4'id4tt.Si.LiSSI�t �4} };;t4ki�S,n�'il.h1 xY{SSki�r 1' ri ti")t7hbstRiUi�.i'a'it}.:atS�V {! 4 {iv:a�biY tlt:�,i.1?3 iJ P.Se. �ec�'F;ry 2;1 i lax & \iVRAYlt��j�` ° � • • • • • • • • Ave t • ® ®® Ocean Ave Coast Second St & Wilshire Blvd Second St & Santa Monica • Fourth St & Wilshire Blvd ® Fourth •• r• : • ®� ®® •• ®� Fourth ® • i ' i' �® ®� Fourth St & 1-10 Wb Off-Ramp ®® NelsonWygaarcl Consulting Associates Inc. 13-3 Transpoilation Impact Fee Nexus Study I Final City of Santa Monica "1Y /�h5t raiiia tqt tR# r4r:�t � (C3`••3 }i t'$t\ ii 4.34 {.f.; igY tit £ t }3 � a:`\ Street Imes £ L . X - 'x }i,rv*si z $l:.t., livlii 1,},:.R ' � i2� is }14iiX y`ifltt }S�4 �ds3t i t i \l� i 1 42#1 f }:: t })t t�l {4iJ i� 2R.. 4'a Y i k ki t f �Yt£ Eif33itl }}1111jt4ilt`ti(fr}��}N,,�� j"t� 17i }Y)n1 } } } 1 1 \i Yl\ 1Y�5}i Y -i Y tr arufe�ssl�i{ u` yr3i. tr,} H:? 1Jtn`. 4�},' s' tib' a��tl?�} w.. Yr vD, asrztnY�vr } }\ �D0j 2,.�: � .J�Sk}��:ft3a1}1k.:.,tdf�2t }1Y }i l`r IVYU { .L ,tli xYbt(4,.a96 l 1 toe t \ t \ '\ti 1► }:.. i . ,f �S`.tt}�l�{,yi.�L5i2$eN ti ff r 1 �.# 3i1t #kltt... satlilv } a e►� �k Yi i3 1�`ern \. SWtar {lit .ut1.. 4 a�..�,.asfiti4, hk�1}:;t 1 afl, L: ai�w.) iAll �Y »Rws#Y{�i}�S{1lai�i�Sl��Ri�h�� Twentieth St & Pico Blvd 0.944 C 122.3-M Twenty-Third St & Ocean Park Blvd MM Cloverfield Blvd &Santa Monica Blvd ® ' ' •Blvd Olympic Blvd Cloverfield Blvd & 1-10 WB Off Ramp MEN �IEM--M FT11=1 =111491 170-Hill .1 NelsonlNygaard Consulting Associates Inc. 13-4 Transportation impact Fee Plexus Study I Final City of Santa Monica NelsonWygaard Consulting Associates Inc. 3 -5 Transportation Impact Fee Nexus Study I Final City of Santa Monica Additional performance metrics, such as travel times on major corridors during the AM and PM peals hours, support the finding that traffic conditions in Santa Monica would be worse without the implementation of transportation improvements and trip reduction strategies. Similar, to the decline in intersection LOS and the increase PM peak hour vehicle trips, travel times on major transportation corridors in the City would increase without the implementation of LUCE transportation improvements /trip reduction strategies. Figure 3 -4, Figure 3 -5, and Figure 3 -6 show that on each of the analyzed corridors, travel times are projected to be materially slower when LUCE land use scenarios are not coupled with LUCE transportation improvements /trip reduction strategies. Figure 3 -3 Change in Travel Time on North /South Corridors during the AM Peak Hour 320 300 80 60 40 20 0 -20 Ocean /Neilson - Main 4th Lincoln /Rh 20th cloverfleld /23rd 26th p LUCE w/o Imp. Northbound LILUCE Northbound MLUCEw /o Imp. Southbound mWCESouthbound NelsonlNygaard Consulting Associates Inc. 13-6 Transportation Impact Fee Nexus Study I Final City of Santa Monica Figure 3 -4 Change in Travel Time on North /South Corridors during the PMPM Peak Hour 140 120 100 so 60 40 20 0 -20 Ocean /Neilson Main 4th Lincoln /7th 20th [lwerfield /23rd - 26th Id LUCE w/o imp. Northbound O LUCE Northbound ©LUCE w/o imp. South bound m LUCE Southbound NelsonWygaard Consulting Associates Inc. 3 -7 Figure M 140 120 100 80 60 e 6 40 C) 2 O u vi 20 0 -20 Transportation Impact Fee Nexus Study I Final City of Santa Monica Change in Travel Time on East/West Corridors during the AMAM Peak Hour San Vicente Montana Wilshire Santa Monica Olympic I -101'CH Plco Ocean Park MWCE w/o Imp. Eastbound 11 LUCE Eastbound 0 LUCE w/o Imp. Westbound EILUCEWestbound NelsonWygaard Consulting Associates Inc. 13 -8 Transportation Impact Fee !Nexus Study I Final City of Santa Monica Figure 3 -6 Change in Travel Time on EastlWest Corridors during the PM Peak Hour 140 120 100 so 60 40 20 0 -20 .5 San Vicente Montana Wilshire Santa Monica Olympic 1.10 PCH Pico Ocean Park ©LUCE w/o Imp. Eastbound t7 LUCE Eastbound ®LUCEw /o Imp. Westbound mLUCEWestbound Nexus for the Transportation Impact Fee The adopted Santa Monica LUCE provides the framework necessary to integrate land use and transportation to reduce vehicle trips, encourage walking, bicycling and transit use, and to create active pedestrian- oriented neighborhoods that allow people to meet their daily needs locally and with a variety of mobility choices. The LUCE recognizes the crucial role that transportation plays in reducing greenhouse gases and achieving the community's sustainability goals. The LUCE proposes the creation of a complete multi -modal transportation system that builds upon the City's major investment in transit including the Expo Light Rail. The LUCE identifies local strategies that manage trips, treating the entire City as an integrated transportation management system with aggressive requirements for trip reduction, transit enhancements, pedestrian and bike improvements, and shared parking. Transportation demand management (TDM) programs that reduce automobile travel demand and incentivize alternative modes such as carpool, vanpools, and shuttles, walking, bicycling, and shared parking are all encouraged. Pro- active demand management for new automobile trips will be implemented in concert with strategies for large existing employers such as schools, hospitals, and other large institutions. The LUCE establishes the goal of achieving no net new PMPM peak hour vehicle trips. A primary strategy of the LUCE in order to achieve this goal is vehicle trip reduction. Achieving the level of automobile trip reduction anticipated in the LUCE EIR for both new development and existing development generated within the City requires both provision of improvements to the alternate modal networks citywide (bicycle, walk, transit) as well as measures to be implemented by individual developments and employers in accordance with the TDM requirements of the LUCE NelsonlNygaard Consulting Associates Inc. 13-9 23 12 1 13 i if is 1 13 11 8 8 B B B 1 0 2. 6 6 1 6 6 2� ' 2 4 4 1 1 5 0 0 0 0 0 - -1 0 0 San Vicente Montana Wilshire Santa Monica Olympic 1.10 PCH Pico Ocean Park ©LUCE w/o Imp. Eastbound t7 LUCE Eastbound ®LUCEw /o Imp. Westbound mLUCEWestbound Nexus for the Transportation Impact Fee The adopted Santa Monica LUCE provides the framework necessary to integrate land use and transportation to reduce vehicle trips, encourage walking, bicycling and transit use, and to create active pedestrian- oriented neighborhoods that allow people to meet their daily needs locally and with a variety of mobility choices. The LUCE recognizes the crucial role that transportation plays in reducing greenhouse gases and achieving the community's sustainability goals. The LUCE proposes the creation of a complete multi -modal transportation system that builds upon the City's major investment in transit including the Expo Light Rail. The LUCE identifies local strategies that manage trips, treating the entire City as an integrated transportation management system with aggressive requirements for trip reduction, transit enhancements, pedestrian and bike improvements, and shared parking. Transportation demand management (TDM) programs that reduce automobile travel demand and incentivize alternative modes such as carpool, vanpools, and shuttles, walking, bicycling, and shared parking are all encouraged. Pro- active demand management for new automobile trips will be implemented in concert with strategies for large existing employers such as schools, hospitals, and other large institutions. The LUCE establishes the goal of achieving no net new PMPM peak hour vehicle trips. A primary strategy of the LUCE in order to achieve this goal is vehicle trip reduction. Achieving the level of automobile trip reduction anticipated in the LUCE EIR for both new development and existing development generated within the City requires both provision of improvements to the alternate modal networks citywide (bicycle, walk, transit) as well as measures to be implemented by individual developments and employers in accordance with the TDM requirements of the LUCE NelsonlNygaard Consulting Associates Inc. 13-9 Transportation Impact Fee Nexus Study I Final City of Santa Monica as implemented through updates to the Cit/s TDM ordinance; project mitigations may also be required in compliance with the requirements of the California Environmental Quality Act. The transportation improvements to be funded in part by the multimodal transportation impact fee include a series of improvements to the transit, bicycle and pedestrian systems. Developers would be required to pay these fees in support of the modal improvements and would separately be required to implement their own project - specific TDM programs. Reasons for this include the following: • The LUCE calls for a comprehensive response to transportation, and the TDFM model shows that the LUCE policies can achieve the desired results if all elements are implemented. The impact fee covers one element of this system — capital costs of improvement to the transportation system so that it supports biking, walking and transit at the level needed to get no net trips. Other elements (such as TDM programs for existing employers and stronger requirements on employees of new developments, and project- specific mitigations) are also required and were assumed in the modeling but are complementary to and not duplicative of the capital improvements in the fee program. Both elements, multimodal system improvements implemented by the City and individual trip reduction measures implemented by developers and employers, are necessary in order to achieve the trip reduction goals embodied in the LUCE. Each element is in support of the other. • It is common, even in traditional highway- capacity -based trip fees, for developers to pay trip fees that support cumulative area -wide improvements and yet also pay to implement their own project- specific TDM programs and localized improvements. • The bicycle /pedestrian improvements supported by the trip fee help with the first mile /last mile for the presumed transit effectiveness for the new development. Establishment of Reasonable Relationship The Santa Monica TDFM was used to establish the reasonable relationship between the Transportation Impact Fee and that portion of the LUCE transportation system improvements which could be attributed to new development in the City. This analysis focused specifically on the projected intersection conditions using the LUCE land use development scenario, both with and without the LUCE transportation improvements /trip reduction strategies, since intersection LOS is the metric used by the City to determine the significance of transportation impacts. First, Santa Monica- generated traffic was differentiated from regional pass- through traffic. Then a test was performed to demonstrate that transportation improvements and trip reduction strategies were being directed at future impacts rather than existing deficiencies. The resulting share is the proportion of improvements to the transportation system in Santa Monica that can be properly attributed to new development in Santa Monica. Santa Monica - Generated Traffic Versus Regional Pass - Through Traffic The Santa Monica TDFM was used to identify how much of the traffic growth at the intersections projected to operate at LOS E or F during one or both peak hours without the LUCE transportation improvements /trip reduction strategies is the result of development in Santa Monica and how much is projected to be the result of growth in regional pass- through traffic. At these intersections, the average share of the overall incremental growth in traffic that is generated by development within Santa Monica was 74% and the average share that was determined to be the result of growth in regional pass- through traffic was 26 %. This suggests that as much as 74% of the cost of the transportation improvements contained in the LUCE nexus fee program could be fairly attributed to new development within the city. NelsonlNygaard Consulting Associates Inc. 3 -10 Transportation Impact Fee Plexus Study I Final City of Santa Monica Some of the improvements in the fee program (such as the Advanced Traffic Management System and widening the 4th Street bridge) will address both regionally - generated and Santa Monica - generated traffic increases. Others (such as specific bicycle and pedestrian improvements to help support reduced vehicle tripmaldng) are directed more at trips generated locally within Santa Monica. For these latter improvements, the share attributable to development in Santa Monica could be closer to loo %. For purposes of the fair share calculation the Nexus Study relies on the 74% of trips generated within Santa Monica. Existing Versus Future Deficiencies To assess the possibility that new transportation improvements and trip reduction strategies were addressing existing deficiencies rather than future deficiencies, a simple test was performed. If the LOS at study intersections were poor under existing conditions and improved under future conditions with transportation improvements and trip reduction strategies, then a portion of the LUCE transportation improvements and trip reduction strategies might be addressing an existing condition at these locations rather than solely a future condition. The results of the test did not suggest that this was occurring. The five LUCE study intersections operating at LOS E or F under existing conditions were reviewed, and all five locations have the same LOS under existing and future conditions. Effects Not Mitigated The mitigation program proposed by this report is designed to mitigate the citywide effects of automobile trips associated with new development within the City of Santa Monica. A primary objective of the LUCE is to coordinate land use and transportation planning and emphasize non- motorized tripmaldng in order to achieve the goal of no net new PM peals hour vehicle trips generated within the City. Nevertheless, development projects can generate an increase in traffic at intersections immediately surrounding the projects and on the streets directly feeding the projects. These localized effects can occur even though the citywide effects of increased trips are mitigated by the proposed program. Localized development impacts will continue to be mitigated through site specific exactions or conditions tied to project -based traffic studies, in compliance with the requirements of the California Environmental Quality Act. NelsonVygaard Consulting Associates Inc. 13 -11 Transportation Impact Fee Nexus Study I Final City of Santa Monica This chapter documents the transportation improvements included in the multimodal transportation impact fee (TIF) capital project list and their corresponding costs. The TIF Master Capital Project List was selected based on the inclusion criteria described below and refined based on funding need. The eligible TIF capital project list includes the capital cost portion of projects that are assumed to be funded, in full or in part, by TIF revenue. Project Inclusion Criteria The package of capital projects to be funded by the impact fee is designed explicitly to address projected growth and to help achieve the goal of no net increase in PM peals hour vehicle trips through 2030. The determination of capital projects that may be funded by the transportation impact fee is based on the policies and actions identified in the Land Use and Circulation Element, which were used in the trip generation modeling conducted as part of the LUCE FIR. The package of projects includes capital improvement projects, such as completion of the sidewalk network, and enhanced pedestrian crossings along major boulevards, striping and signage of new bike lanes, bike paths, and bike boulevards, and installation of new bus pads, bus benches, and transit -only lanes. The bicycle pathway projects listed in the Master Capital Project List were identified in the adopted Santa Monica Bike Action Plan and were developed in response to the policies and actions identified in the LUCE. It is important to note that only capital costs and fee administration costs have been included, and operating and maintenance costs were not included. In addition, projects with no associated capital costs and only operating and maintenance costs were not included. List of Projects The improvement cost estimate for capital projects is approximately $92 million. Figure 4 -1 provides a summary of total project costs by project category. In addition to capital costs, the cost to provide a project management position to oversee these capitals projects is included as well as the cost for a fee administration staff person. Lastly, a in percent engineering and design fee is added onto the subtotal of physical improvements as is a 35 percent contingency cost per industry standard.17 With these additional costs, the total capital projects list totals approximately $134 million. It should be noted that an escalation factor to account for inflation has not been included however this will be addressed in the City of Santa Monica's TIF ordinance. 17 Caltrans Project Development Procedures Manual specifies including a contingency of between 30% and 50% as part of the project cost estimation phase. Caltrans Project Development Procedures Manual, Chapter 20 pg 11. NelsonlNygaard Consulting Associates Inc. 14-1 Transportation Impact Fee Nexus Study i Final City of Santa Monica Fiaure 4 -1 Summary of Proiect Costs over 20 Year Period 44 r`dl4q B 1, 9 A B tIr9V YP:tt ��yt,l� }:. ..It . B .IiV 1 Bicycle Actions $33,708,781 Pedestrian Actions $25,024,000 TDM Actions $6,127,075 Transit Actions $10,177,750 Auto Network Actions $11,594,000 Project Management1e $3,000,000 Fee Administration t9 $3,000,000 Subtotal $92,631,606 Engineering /Design20 $9,263,161 Contingency21 $32,421,062 Total $134,315,829 For a complete list and description of the capital projects and their associated costs please refer to Figure 4 -2. 19 Project Management covers the annual salary cost of one staff person to oversee capital projects for a 20 year period. 19 Fee Administration covers the annual salary cost of one staff person to oversee the administration of the fee for a 20 year period. 20 A 10% engineering and design fee is added on to the subtotal of physical improvements only. 21 A 35% contingency fee is added on to the subtotal of physical improvements only. Caltrans Project Development Procedures Manual specifies including a contingency of between 30% and 50% as part of the project cost estimation phase. Caltrans Project Development Procedures Manual, Chapter 20 pg 11., NelsonlNygaard Consulting Associates Inc. 14-2 Transportation Impact Fee Nexus Study I Final City of Santa Monica Master Ca i tal Pro "ect List oBicyc'le ects San Vicente Bikeway Ocean Avenue to 26th St. Bike path, buffered bike lanes $6,000,000 Washington Avenue Ocean Avenue to Arizona Ave. Neighborhood greenway, Neighborhood Greenway shared lane markings, traffic circles $500,000 California Avenue Bikeway Ocean Avenue to 1T4 Street. Buffered bike lanes $10,000 Arizona Avenue Bikeway Ocean Avenue to 26th Street. Buffered bike lanes, traffic circles $250,000 Nebraska Avenue Bikeway 26th Street to Centinela Avenue. Buffered bike lanes $5,000 Michigan Avenue Neighborhood Greenway Marvin Braude Bike Trail to Appian Way. Bike Path $150,000 Michigan Avenue Neighborhood Bergamot Station parking lot to Stewart Street. Shared use Greenway path. $250,000 Barnard Way to Centinela Avenue. Buffered bike lanes, Pearl Street Bikeway neighborhood traffic circles, Intersection refuge. $350,000 Ocean Park Boulevard Bikeway Barnard Way to Main Street. Buffered bike lanes. $3,000 Lincoln Boulevard to Cloverfield Boulevard. Buffered bike Ocean Park Boulevard Bikeway lanes, bike lanes. $30,000 Cloverfield Boulevard to Centinela Avenue. Buffered bike Ocean Park Boulevard Bikeway lanes, raised median extension. $100,000 Ashland Avenue Neighborhood Barnard Way to Douglas Loop. Shared use path, shared lane Greenway markings. $65,000 Marine /Navy /Ozone /Dewey /Airport Lincoln Boulevard to Dewey Street closure. Shared use path, Bikeway shared lane markings $750,000 Virginia Avenue Shared Lane Markings Stewart Street to Dorchester Tunnel. Shared lane markings. $2,000 North City Limit to south city limit. Bike path, stair troughs Marvin Braude Bike Trail (partnering with LA County /City of LA) $4,800,000 3rd Street Bikeway Pico Boulevard to South City Limit. Bike path. $200,000 Michigan Avenue to south city limit. Bike /pedestrian bridge, 6th Street 17th Street Bikeway neighborhood greenway, bike path /cycle track. $8,000,000 17th Street Bikeway Pico Boulevard to Pearl Street. Side path /bike path. $750,000 20th Street Bikeway Wilshire Avenue to Pico Boulevard. Buffered bike lanes. $275,000 24th Street Neighborhood 26th Street to Broadway. Neighborhood greenway, curb Greenway ramps, intersection enhancements, crossing treatments $150,000 North City limit to Exposition Bike Path. Buffered bike lanes 26th Street Bikeway (green). $700,000 NelsonlNygaard Consulting Associates Inc. 14-1 Transportation Impact Fee Nexus Study I Final City of Santa Monica Bike Action Plan 5 Year Implementation Plan22 Bikeways and greenways. $1,330,511 Bicycle Transit Centers See TDM Bikesharing See TDM $4,268,000 Bike Racks Install 3,350 bicycle racks throughout the City $670,000 Countdown Indicators Install 948 countdown indicators throughout the City $948,000 Bike Detectors Install bike detectors at 130 intersections $5,200,000 Bike Boxes Install approximately 220,000 square feet of bike boxes $2,220,270 Subtotal $33,708,781 Pedestrian Projects Enhanced Pedestrian Crossings Improvements include decorative concrete crosswalks, along Major Boulevards pedestrian signals, audible pedestrian devices, pedestrian push buttons, and tree grates. $4,268,000 Complete Sidewalk Network Complete gaps in the sidewalk network. $1,121,000 Pedestrian Network Improvements Improvements include curb ramps, sidewalk extensions, curb and gutter extensions, and traffic signal relocations resulting from curb extensions. $19,635,000 4th Street Bridge See Auto Network Subtotal $25,024,000 TDM Bicycle Transit Centers Two, 150 space bike - transit centers that offer bicycle parking, bike rentals, bike repair shops, lockers, showers and transit . information and amenities. $4,000,000 Bikesharing Provide public bicycle rental in "pods" located at 10.localions throughout the city. $9,570,075 Carsharing Provide start-up funds for capital expenses to a third party operator to run carsharing program in the city. $50,000 Mobility Centers Provide start-up materials such as computers and furniture for mobility centers located in each TDM district.. Mobility centers will serve as a one -stop shopping center for residents, employees, and visitors to get information on travel options. $120,000 Real -time Wayfinding Create a comprehensive multi -modal wayfinding system for the City that includes trip planning tools, real -time traveler information systems, dynamic signage, and static signage for bicyclists and pedestrians. $1,000,000 22 These improvements are listed in more detail on page 4 -15 of the Santa Monica Bicycle Action Plan NelsonlNygaard Consulting Associates Inc. 4 -2 Transportation Impact Fee Nexus Study I Final City of Santa Monica Subtotal Transit $6,127,075 Transit Amenities In consultation with Big Blue Bus, provide improvements to transit facilities including benches, secure bike parking, trash receptacles, wider sidewalks, concrete bus pads, changeable message signs, landscaping, and shelters, with a focus on Lincoln Blvd, intersection of Lincoln and Pico Boulevards, Wilshire and 14th Activity Center, and adjacent to new developments. $500,000 Real Time Information Incorporate real -time information systems so that passengers will know when their bus is expected to arrive. Such technologies include online applications and changeable message signs at major bus stops. Expand the existing transit stop improvement program, including real -time bus arrival displays and schedule information. $512,750 Reliability and Speed To the extent practical and based on funding availability, Enhancements eliminate transit delay and improve transit reliability on regional and connecting transit streets through physical and policy improvements. Such improvements may include: • Queue -jump lanes • Transit -only Janes • Bus bulb outs • Automated bus tracking • Signal prioritization at all intersections along these streets (Covered under Advanced Traffic Management System) $9,165,000 Subtotal $10,177,750 Auto Network Advanced Traffic Management Implement an Advanced Traffic Management System. System $2,000,000 40, Street Bridge Widen the 0, Street bridge including widening of the east and west side sidewalks, lighting, landscaping art and landscaping, aligning 1 -10 on and off ramps, extending off ramp west of 4th Street, and a ramp connection to 5t^ Street. $9,594,000 Subtotal $11,594,000 TOTAL $92,631,606 NelsonlNygaard Consulting Associates Inc. 14 -3 Transportation Impact Fee Nexus Study I Final City of Santa Monica Projects Considered but Not Included When reviewing the policies and actions identified in the Land Use and Circulation Element, which were used in the trip generation modeling conducted as part of the LUCE FIR to compile a list of capital projects for the TIF Master Capital Project List, a number of applicable projects were considered but not included for several reasons. First, policies and programs identified in the LUCE that only had an operating or maintenance cost component were not included. Examples include the creation of Transportation Management Organizations, the development of a transit pass program for new development, and the development of pedestrian design guidelines for encouraging walking. Second, policies and programs that would not contribute to a reduction in peals hour vehicle trips were not included., NelsonlNygaard Consulting Associates Inc. 14-4 Transportation Impact Fee Nexus Study I Final City of Santa Monica Chapter 5 provides an in -depth discussion of the transportation impact fee (TIF) structure and fee rates by land use for new development in Santa Monica. This fee will only apply to new development and changes to existing development which generate additional vehicle trips. The fee structure is based on vehicle trip generation by land use from Santa Monica's Travel Demand Forecasting Model (TDFM). Land use categories are comprised of groups of related land uses. Land uses with similar trip generation characteristics are grouped together to simplify nexus fee administration and compliance monitoring. Figure 5 -1 below identifies the land use categories that are grouped in each of the major land use categories used for this analysis. 5 -I Latta use LateaoriesLB Single - Family Residential Single Family (R01) Congregate Care - Non - senior (R06) Congregate Care - Seniors (R07) Multi- Family Residential Multi Familv (R021 Animal kennels & veterinary hospitals (C01) Auto Repair (101) Auto sales - new & used (CO2) Car wash (103) Community meeting facilities & community centers (includes non - residential adult care facilities) (P02) Construction- related materials (retaillwholesale) and nurseries, garden centers (104) Entertainment & Recreational Facilities (C05) Gas station (C07) Library (P06) Museums, aquariums, & Art Galleries (Cl Nightclubs and bars (C10) Personal Services (C14) Post- secondary educational facility (P10) Pre- schoollChild daycare (P11) Private studio (P13) Retail Restaurants - Fast Food & Cafes (C15) ]J For further detail on the land uses shown in Figure 5 -7 please refer to the City of Santa Monica zoning code and the land use code provided in parenthesis. Nelson \Nygaard Consulting Associates Inc. 5 -1 Transportation Impact Fee Nexus Study I Final City of Santa Monica The land uses shown in Figure 5 -1 represent the land use categories identified by the City of Sana Monica, thus if new land uses are introduced the City will need to determine which of the primary land use categories is most appropriate based on the type of land use and trip generation characteristics of that land use. It should be noted that several land use categories that were evaluated as part of the LUCE EIR are not included in the categories above, including fire and police, recreation, affordable housing and government office, as development of these types of uses are not anticipated to pay the fee since they are uses required by or explicitly encouraged by the City of Santa Monica. Trip generation rates by land use are based on calibrated PM peak hour rates from the Santa Monica TDFM and reflect trip generation expected from developments that comply with all LUCE development standards and policies. 24 Trip generation rates from the TDFM model have taken into account the effects of density, diversity, design, and destinations associated with the built environment as well as the effects of transportation demand management policies identified in the LUCE. Two sets of trip generation rates were established for each land use category based on what area of the city development occurs in. This method is consistent with Assembly Bill 3005 which requires fees to be adjusted based on proximity to transit and locally serving retail, both of which have been demonstrated through empirical research to be inversely correlated with vehicle trip generation. 24 With the exception of lodging all rates are from the Santa Monica Travel Demand Forecasting Model. For a detailed discussion of the trip generation rates established as part of the Santa Monica Travel Demand Forecasting Model refer to Fehr & Peers Santa Monica Travel Demand Forecasting Model Trip Generation Rates report, October 2011. The trip . generation rates for Lodging are from the 710. Wilshire Transportation Study, May 2011. NelsonlNygaard Consulting Associates Inc. 5 -2 Restaurants - Sit -down (C16) Retail Durable goods (C17) Retail Food, Markets (C18) Retail Mixed (C19) Retail Non -Food C20 Creative office (105) Financial institutions & offices (C06) Office Office, General (C11) Office, Medical, including medical clinics, and offices for medical Medical Office professionals (not hospital space) (C12) Hospital Hospital (full- service, not including medical clinics) (P05) Lodging Hotels, motels and other overnight accommodations (C08) Auto Inventory Storage (surface or structured) (102) City maintenance facilities & bus yards (P01) Heavy industrial, manufacturing (106) Light industrial (107) Utilities (108) Warehouse, self- storage (109) Industrial Wholesale distribution /shipping (110) The land uses shown in Figure 5 -1 represent the land use categories identified by the City of Sana Monica, thus if new land uses are introduced the City will need to determine which of the primary land use categories is most appropriate based on the type of land use and trip generation characteristics of that land use. It should be noted that several land use categories that were evaluated as part of the LUCE EIR are not included in the categories above, including fire and police, recreation, affordable housing and government office, as development of these types of uses are not anticipated to pay the fee since they are uses required by or explicitly encouraged by the City of Santa Monica. Trip generation rates by land use are based on calibrated PM peak hour rates from the Santa Monica TDFM and reflect trip generation expected from developments that comply with all LUCE development standards and policies. 24 Trip generation rates from the TDFM model have taken into account the effects of density, diversity, design, and destinations associated with the built environment as well as the effects of transportation demand management policies identified in the LUCE. Two sets of trip generation rates were established for each land use category based on what area of the city development occurs in. This method is consistent with Assembly Bill 3005 which requires fees to be adjusted based on proximity to transit and locally serving retail, both of which have been demonstrated through empirical research to be inversely correlated with vehicle trip generation. 24 With the exception of lodging all rates are from the Santa Monica Travel Demand Forecasting Model. For a detailed discussion of the trip generation rates established as part of the Santa Monica Travel Demand Forecasting Model refer to Fehr & Peers Santa Monica Travel Demand Forecasting Model Trip Generation Rates report, October 2011. The trip . generation rates for Lodging are from the 710. Wilshire Transportation Study, May 2011. NelsonlNygaard Consulting Associates Inc. 5 -2 Transportation Impact Fee Nexus Study I Final City of Santa Monica Area r represents Downtown, the Special Office District, and the Bergamot Transit Village area which has lower trip generation rates than Area 2 due to factors such as density, proximity to transit services, and mix of uses (Figure 5-2). NelsonWygaard Consulting Associates Inc. 15-3 Figure 5.2 Map of Area 1 and Area 2 FEHRt PEERS LAM • �r.// Iii , .� ..,, �I , _ . ♦ .��.� IMF Pik *.,'y I A NONNI via 11 ■iii =. PEOR, � �; :.�-- .��:__��► ;�� / ..��IUlll►ll►111►Ill�iirii� �'!� - - FEHRt PEERS Transportation Impact Fee Nexus Study I Final City of Santa Monica Area 2 represents the rest of the city. Figure 5 -3 below shows the proposed land use categories and the PM peak hour vehicle trip generation rates. It should be noted that not all land uses have lower trip generation rates in Area 1 as compared to Area 2. FEE CALCULATION The fees have been calculated based on cost estimates of capital improvements, which in combination with trip reduction programs, required to reduce the additional vehicle hips generated by growth in Santa Monica such that no new net vehicle hips are generated in the PM peals hour. Using the trip generation rates shown in Figure 5 -3, fee rates by land use and area were established that reflect the proportional difference in trips generated by land use and by area. Figure 5 -4 below shows the maximum level of fees that could be charged in order to fully cover the portion of the cost of capital projects that is associated with that is generated by new development within Santa Monica. Output from Santa Monica TDFM found that the average share of the overall incremental growth in traffic that is generated by development within Santa Monica was 74% and the average share that was determined to be the result of growth in regional pass - through traffic was 26 %. This suggests that as much as 74% of the cost of the transportation improvements contained in the LUCE nexus fee program could be fairly attributed to new development within the city. ]S Multi - family zero cars, one car, and two or more cars . have been combined, and trip rates have been averaged NelsonlNygaard Consulting Associates Inc. 15-5 Transportation Impact Fee Nexus Study I Final City of Santa Monica Fioure 5-4 Maximum lmoact Fee bv Land Use The fees shown in Figure 5-4 represent the maximum fee that could be charged by the City of Santa Monica capturing 74% of the total project cost. The maximum fees were calculated by dividing 74% of the total project cost by the trip generation rate rates in Figure 5-3 to generate a per unit/square foot maximum rate for each land use in Area 1 and Area 2. However, fall cost recovery was deemed inconsistent with the collection of similar fees statewide and it would be anticipated to have a deleterious effect on some desired land use change in Santa Monica. The proposed fee levels are comparable with other Southern California communities, are expected to be acceptable to the community, and will provide substantial funding for the proposed capital projects. The trip generation rates shown in Figure 5-3 reflect the proportional difference in trips generated by land use and by area. Figure 5-5 below shows the proposed impact fee on a per square foot or dwelling unit basis by land use. For example, in Area 1 retail land uses have a per square footage fee that is approximately more than twice that for office land uses in this same area due to the fact that the trip generation rate for retail land uses is approximately 116% greater than the trip generation rate for office land uses during the PM peak hour (Figure 5-5). For some land uses the fee per square foot is greater in Area 2 than Area 1 due to the fact that the higher densities and transit service levels in Area 1 result in lower vehicle trip generation rates in Area 1 than in Area 2. Nelson\Nygaard Consulting Associates Inc. 15-6 Non-Residential (sq. ft.) The fees shown in Figure 5-4 represent the maximum fee that could be charged by the City of Santa Monica capturing 74% of the total project cost. The maximum fees were calculated by dividing 74% of the total project cost by the trip generation rate rates in Figure 5-3 to generate a per unit/square foot maximum rate for each land use in Area 1 and Area 2. However, fall cost recovery was deemed inconsistent with the collection of similar fees statewide and it would be anticipated to have a deleterious effect on some desired land use change in Santa Monica. The proposed fee levels are comparable with other Southern California communities, are expected to be acceptable to the community, and will provide substantial funding for the proposed capital projects. The trip generation rates shown in Figure 5-3 reflect the proportional difference in trips generated by land use and by area. Figure 5-5 below shows the proposed impact fee on a per square foot or dwelling unit basis by land use. For example, in Area 1 retail land uses have a per square footage fee that is approximately more than twice that for office land uses in this same area due to the fact that the trip generation rate for retail land uses is approximately 116% greater than the trip generation rate for office land uses during the PM peak hour (Figure 5-5). For some land uses the fee per square foot is greater in Area 2 than Area 1 due to the fact that the higher densities and transit service levels in Area 1 result in lower vehicle trip generation rates in Area 1 than in Area 2. Nelson\Nygaard Consulting Associates Inc. 15-6 Transportation Impact Fee Plexus Study i Final City of Santa Monica Figure 5 -5 Proposed Impact Fee by Land Use This ensures that land uses with a lower PM peak hour vehicle trip generation rate will be charged a proportionately lower fee, while land uses with a higher trip generation rate will be charged a proportionately higher fee. Similarly, some land uses in Area z will be charged a higher fee due to higher PM peals hour vehicle trip generation rates as compared to the rate for the same land use in Area r. Based on the land use projections shown in Chapter z, Figure 2 -1, and using the fees shown in Figure 5 -5, total potential revenue of approximately $6o million could be generated by the impact fee (Figure 5 -6). Industrial land use shows a negative fee generation to reflect the magnitude of credit being taken for existing land uses that are anticipated to be converted to other land uses as development occurs. Since land uses generate fees at different rates, the net fee is the difference between new and existing fees. For example, any individual project will be charged for the net change in land use, meaning that the fee will be calculated by taking the net difference between the fee that would be charged for the existing land use that is being removed and the fee for the proposed land use. NelsonlNygaard Consulting Associates Inc. 15-7 '��AM U .'��'•y:� "- �a.,�T.�,.r"�;.�.., '- T�A�r"� '..v: • .. ..__S'm�<�v�.°'Y`ld 1 I I 1�t tit i 1�t tt Non-Residential 1 Retail Office Medical Office ulr 1 1.1 ■, IQ1 ' �_ 811111 This ensures that land uses with a lower PM peak hour vehicle trip generation rate will be charged a proportionately lower fee, while land uses with a higher trip generation rate will be charged a proportionately higher fee. Similarly, some land uses in Area z will be charged a higher fee due to higher PM peals hour vehicle trip generation rates as compared to the rate for the same land use in Area r. Based on the land use projections shown in Chapter z, Figure 2 -1, and using the fees shown in Figure 5 -5, total potential revenue of approximately $6o million could be generated by the impact fee (Figure 5 -6). Industrial land use shows a negative fee generation to reflect the magnitude of credit being taken for existing land uses that are anticipated to be converted to other land uses as development occurs. Since land uses generate fees at different rates, the net fee is the difference between new and existing fees. For example, any individual project will be charged for the net change in land use, meaning that the fee will be calculated by taking the net difference between the fee that would be charged for the existing land use that is being removed and the fee for the proposed land use. NelsonlNygaard Consulting Associates Inc. 15-7 Transportation Import Fee Nexus Study i Final City of Santa Monica Fiaure 5 -6 Potential Impact Fees Generated by Land Use Cateaor Given that the cost estimate for capital projects is approximately $134 million, the revenue generated by the transportation impact fee will not be sufficient to fully cover the cost of all capital projects. The remaining 55% of the total project cost is expected to be covered by regional, state and federal grants, City General Fund, and other sources, including developers' public benefit contributions for transportation above the standard fee amount, for which the fee may provide a local match. Fee Reduction for Housing within a Half -Mile of Transit Stations The proposed nexus fee is consistent with the Mitigation Fee Act, including the amendment added by AB 3005 in 20o8. This amendment applies to new housing that meets the following requirements: 1. The housing development is located within one -half mile of a transit station and there is direct access between the housing development and the transit station along a barrier - free, walkable pathway not exceeding one -half mile in length. 2. Convenience retail uses, including a store that sells food, are located within one -half mile of the housing development. 3. The housing development provides either the minimum number of parking spaces required by the local ordinance, or no more than one onsite parking space for zero to two bedroom units, and two onsite parking spaces for three or more bedroom units, whichever is less. The amendment uses the following definitions: Transit station: "a rail or light -rail station, ferry terminal, bus hub, or bus transfer station... includes planned transit stations otherwise meeting this definition whose construction is programmed to be completed prior to the scheduled completion and occupancy of the housing development." Nelso0ygaard Consulting Associates Inc, 15 -8 drt rritpg es - WO `9i�p -w�."3 ✓" s" /"- �r��-3�i✓^...""- ..._�... Y '� yam{ .(jJj�^.. °""'.. -E:r" ''J' w- S'.^'✓ fY`..' _r"_er.-" �+/ -Mi'? r1.� -"."' RIEN 'y .r. 3� r ■� �� •t pit ..t t�� .. I.�t Medical Office i off .. I tIr I Itt .I I ItI Given that the cost estimate for capital projects is approximately $134 million, the revenue generated by the transportation impact fee will not be sufficient to fully cover the cost of all capital projects. The remaining 55% of the total project cost is expected to be covered by regional, state and federal grants, City General Fund, and other sources, including developers' public benefit contributions for transportation above the standard fee amount, for which the fee may provide a local match. Fee Reduction for Housing within a Half -Mile of Transit Stations The proposed nexus fee is consistent with the Mitigation Fee Act, including the amendment added by AB 3005 in 20o8. This amendment applies to new housing that meets the following requirements: 1. The housing development is located within one -half mile of a transit station and there is direct access between the housing development and the transit station along a barrier - free, walkable pathway not exceeding one -half mile in length. 2. Convenience retail uses, including a store that sells food, are located within one -half mile of the housing development. 3. The housing development provides either the minimum number of parking spaces required by the local ordinance, or no more than one onsite parking space for zero to two bedroom units, and two onsite parking spaces for three or more bedroom units, whichever is less. The amendment uses the following definitions: Transit station: "a rail or light -rail station, ferry terminal, bus hub, or bus transfer station... includes planned transit stations otherwise meeting this definition whose construction is programmed to be completed prior to the scheduled completion and occupancy of the housing development." Nelso0ygaard Consulting Associates Inc, 15 -8 Transportation Impact Fee Nexus Study I Final City of Santa Monica • Bus hub: "an intersection of three or more bus routes, with a minimum route headway of 10 minutes during peak hours." • Bus transfer station: "an arrival, departure, or transfer point for the area's intercity, intraregional, or interregional bus service having permanent investment in multiple bus docking facilities, ticketing services, and passenger shelters." For new housing that meets these requirements, "...the fee, or the portion thereof relating to vehicular traffic impacts, shall be set at a rate that reflects a lower rate of automobile trip generation associated with such housing developments in comparison with housing developments without these characteristics..." In Santa Monica, qualifying transit stations include the Santa Monica Transit Mall on Santa Monica Boulevard and Broadway between 2nd Street and 4th Street, and Expo Phase 2 stations at Colorado & 4th, Colorado & 17th, and Olympic & 26th. The ridership catchment area of the Exposition & Bundy station also includes land within the City of Santa Monica. Figure 5 -7 shows half -mile walksheds from these five locations. The Santa Monica Travel Demand Forecasting Model (TDFM) and the proposed nexus fee currently include lower trip generation rates for Downtown Santa Monica, the Special Office District, and Bergamot Transit Village (referred to as Area 1) compared to the rest of the City (referred to as Area 2). These lower fees reflect the reduced trip generation of residences near transit and would be automatically applied to development within Area 1, consistent with the intent of AB 3005. It should be noted that Memorial Park was not included in Area 1, as under existing conditions, it does not exhibit the same type of reduced auto use travel behavior as seen in Downtown Santa Monica and Bergamot Transit Village. However, housing in Memorial Park located within the half -mile walkshed of the Exposition Line will be charged Area Type 1 impact fee rates due to AB 3005. As shown in Figure 5 -7, the half -mile walkshed specified in AB 3005 would also encompass certain residential areas in Area 2. Therefore, the residential fees established for Area 1 would be used to charge reduced fees for qualifying housing in Area 2 as specified in AB 3005. The trip fee revenue estimate in this study conservatively assumes that all eligible housing in Area 2 would apply for this reduction and meet the specified requirements. Residential fees for Area 1 were applied to all planned housing development within the half -mile walkshed around transit stations as shown in Figure 5 -7. NelsonlNygaard Consulting Associates Inc. 15-9 Figure 5.7 AB 3005 Santa Monica Transit Station Walkshed Legend FEHR � PEERS City of Santa Monica Freeway Streets 0 0.1250.25 0.5 Miles i ■ -67 \ , _ is H& Analyze. Advise. Act. 2800 26th Street, Suite 325, Santa Monica, CA 90405 T; 310 - 581 -0900 1 F: 310 - 581-0910 1 www.hraadb4sars.com MEMORANDUM To: Beth Rolandson, AICP, Principal Transportation Planner City of Santa Monica From: Paul J. Silvern Date: February 20, 2013 Re: Development Analysis of Proposed Transportation Impact Fees At your request, HR &A Advisors, Inc. (HR &A) has completed an analysis of the impacts that a proposed schedule of new Transportation Impact Fees (TIF) would have on the financial performance of five prototypical development projects in the City of Santa Monica ( "City "). After first summarizing the results of our analysis, we provide further information about how the feasibility analysis was prepared. Several Attachments to this memo provide additional calculation details. HR &A is a national economic development, real estate advisory and public policy consulting firm with extensive experience analyzing the financial feasibility of many kinds of new development and the impact of proposed public policy initiatives on new development. We have, for example, assisted the City in peer- reviewing financial feasibility analyses prepared by developers for a number of Development Agreement applications. Previously, we tested the financial feasibility of other City fee proposals, including the density bonus program adopted by the City pursuant to SB 1818 and the base unit fee associated with the City's Affordable Housing Production Program. Overview and Summary Based on a nexus study prepared by the Nelson\Nygaard transportation consulting firm ( "Nexus Study "), the City proposes to enact a new. TIF that would fund 37 -45 percent of the estimated $134 million total cost of certain capital improvements required to mitigate the impacts of new development on the citywide traffic and circulation system, and to help provide alternatives to single- occupant auto use, in order to fulfill the goals and objectives of the Land Use and Circulation Elements Update (LUCE) adopted by the City in 2010. According to the Nexus Study, the 37 -45 percent share of the total cost would be allocated to net new development in the City, and certain changes of uses that result in net additional vehicle trips, on a per- square foot by land use and per dwelling unit basis, as derived from each land use's PM peak hour vehicle trip characteristics and project location within one of two geographic zones within the City. In the course of the City Planning Commission and City Council review of the proposed TIF, questions have been raised by members of the public about the impact the TIF would have on the financial feasibility of new development. This analysis addresses this particular issue by measuring and assessing the differential financial feasibility impacts of the TIF on prototypical mixed -use HP&A Advisors, Ine. I Los Angelcs 1 How York 1 Wushingtrn, D.C. developments that were identified by City staff as representative of the kinds of developments likely to be proposed in the City in future years and would be subject to the TIF. Accordingly, HR &A formulated development programs and prepared financial feasibility models for five prototype developments in locations consistent with LUCE policies to direct future development away from residential neighborhoods and instead toward transit -rich traffic corridors and Expo Light Rail stations — i.e., three prototypes in the downtown area of the City, one on Wilshire Boulevard and one on Pico Boulevard. The prototypes are based on general relationships between assumed site sizes, allowable floor area ratios, typical use characteristics, typical building articulation requirements, parking requirements and other physical parameters, but are not based on specific architectural designs. The feasibility models were developed to simulate the financial implications of developing and operating each prototype after construction completion, with and without the TIF that would apply in each case as currently proposed. The development cost profile for the prototypes includes all of the typical public fee requirements, including fees for childcare, the arts, open space and affordable housing (for office uses only), the recreational unit tax on new dwelling units, and the Santa Monica - Malibu Unified School District's school facilities fee. For the four prototypes with housing, the City's affordable housing requirements were addressed by including 10 percent of the market rate units at prices affordable to very low- income households. One feasibility model takes the form of a "residual land value" analysis, in which the cost for land that a developer can afford to pay in order to earn a market - responsive return on investment is derived, instead of assumed. This model is used to measure the impact of the TIF on the amount that a developer could theoretically afford to pay for land. We then use the derived land values in a second feasibility model to test the resulting return on total development cost and developer profit margin, again with and without the proposed TIF. Table 1 (on the following page) shows that the proposed TIF reduces developer profit by an amount roughly equal to the amount of each prototype's net TIF amount, but this has a relatively small impact on residual land value and return on total development cost for the prototypes studied. This is because the net TIF, which falls within a range of about $46,000 to $489,000 depending on the prototype (and including a credit assumed for existing retail use on each site), represents a relatively small share of both (1) total development cost for each prototype (which ranges between about $18 million and $32 million), and (2) completed prototype project values (which range between about $26 million and $43 million). More specifically, Table 1 shows that the TIF has the following feasibility impacts on the five prototypes: • Reduces residual land values between about $3 and $24 per square foot (or between 1 % and 8 %). • Causes very minor changes in return on total development cost (0 % -1 %). • Reduces developer profit by amounts within a range of about $50,000 (smaller downtown site with upper -story residential) to $531,000 (downtown site with upper story office), or about 2%-11 %. These results are sensitive to all of the assumptions used in the analyses. Changes in some of these assumptions, particularly leasable floor areas, hard construction cost rents, and cap rates, or to a lesser degree the assumed TIF credit for existing uses, would alter these results. All dollar amounts presented in this analysis are stated in 2013 dollars, without inflation. HR<'- A ADvisoes, ]ric, TIF Development Analysis 1 '2 Table 1 Summary of the Five Development Prototypes and Analysis Results, Withand Withoutthe Net TIF $ 725,655 Prototype Name DowntownMXD -1 DowntownMXD -2 DowntownMXD -3 WilshireMXD 539,400 PicoMxD # Parcels Reduction for Existing Retail 3 (236,250) 2 (157,500) 2 (157,500) 3 (338,625) 6 Bldg. Height (Feet) NET TIF Fee 70 489,405 60 45,900 71 106,100 60 200,775 47 Stories ( #) Residual Land Value Analysis With TIF 5 5 6 5 4 Site Area (SF) Total Project Value 22,500 43,314,647. 15,000 26,169,150 15,000 30,616,367 22,500 29,449,846 45,000 Gross Bldg. Area (SF) Less: Developer Profit 78,750 (5,414,331) 52,500 (3,271,144) 60,000 (3,827,046) 61,875 (3,681,231) 85,865 Net Leasable Areas Less: Total Development Cost 68,985 (31,679,665) 44,150 (17,815,550) 51,225 (20,912,049) 52,250 73,400 Residential (SF) Residual Land Value With TIF - 41,150 46,225 40,250 58,400 Market Rate Units Total - 6,220,652 54 5,082,456 61 5,877,272 54 4,701,894 74 Affordable Units - 5 6 5 7 Total Units - 59 67 59 81 Retail (SF) 5,000 3,000 5,000 12,000 15,000 Office (SF) - 63,985 - - - - TIF Fees Market Rate Resid -Area 1 $ - $ 140,400. $ 158,600 Market Rate Resid -Area 2 $ - $ - $ - $ 178,200 $ 244,200 Affordable Residential $ - $ - $ - $ - $ - Retail -Area 1 $ 105,000 $ 63,000 $ 105,000 $ - $ - Retail-Area 2 $ - $ - $ - $ 361,200 $ 451,500 Office -Area 1 $ 620,655 $ - $ - $ - $ - O(fce -Area 2 $ - $ - $ - $ - $ - Subtotal $ 725,655 $ 203,400 $ 263,600 $ 539,400 $ 695,700 Reduction for Existing Retail $ (236,250) $ (157,500) $ (157,500) $ (338,625) $ (409,000) NET TIF Fee $ 489,405 $ 45,900 $ 106,100 $ 200,775 $ 286,700 Residual Land Value Analysis With TIF Total Project Value $ 43,314,647. $ 26,169,150 $ 30,616,367 $ 29,449,846 $ 37,060,123 Less: Developer Profit $ (5,414,331) $ (3,271,144) $ (3,827,046) $ (3,681,231) $ (4,632,515) Less: Total Development Cost $ (31,679,665) $ (17,815,550) $ (20,912,049) $(21,066,721) $(27,564,828) Residual Land Value With TIF Total $ 6,220,652 $ 5,082,456 $ 5,877,272 $ 4,701,894 $ 4,862,780 Total Project Value $ 43,314,647 $ 26,169,150 $ 30,616,367 $ 29,449,846 $ 37,060,123 Less: Total Development Cost' $ (38,793,498) $ (23,223,036) $ (27,225,899) $(26,250,327) $(33,008,270) Profit $ 4,521,150 $ 2,946,114 $ 3,390,468 $ 3,199,519 $ 4,051,853 Return on Total DevalopmentCost 8.0% 6.3% 6.3% 6.5% 6.5% ' Includes estimated land value and associated financing costs based on Residual Land Value analysis. Source: HR &AAdvisors, Inc. HR &A ALvisoks, INC. TIF Development Analysis 1 3 As noted above, the proposed TIF's relatively modest financial feasibility impacts as presented in this analysis are due in part to the scale of the prototypes assumed, which are generally consistent with recently approved developments and those that are now in the development approvals pipeline. The relative impact on smaller new development could be of a different scale, depending on project particulars and the amount of TIF credits for existing uses. Description of the Five Development Prototypes After consultation with City's Planning and Community Development Department staff, five prototypical development scenarios were identified for testing TIF feasibility. These are: • A five -story mixed -use development in the downtown area situated on three standard land parcels, comprised of 5,000 s.f. of ground floor retail and about 64,000 s.f. of commercial office space on the upper floors. • A five -story mixed -use development in the downtown area situated on two standard land parcels, comprised of 3,000 s.f. of ground floor retail and 59 market -rate and affordable apartments on the upper floors. • A six -story mixed -use development in The downtown area situated on two standard land parcels, comprised of 5,000 s.f. of ground floor retail and 67 market -rate and affordable apartments on the upper floors. • A five -story mixed -use development in the Wilshire Mixed -Use Boulevard District situated on three standard land parcels, comprised of 12,000 s.f. of ground floor retail and 59 market -rate and affordable apartments on the upper floors. • A four -story mixed -use development in the Pico Boulevard Mixed -Use Boulevard -Low District situated on a one -acre site, comprised of 15,000 s.f. of ground floor retail and 81 market -rate and affordable apartments on the upper floors. All of the prototypes assume on -site parking as currently required by the City's Zoning Code, and in most cases the parking is assumed to be subterranean. For the four prototypes with housing, the City's affordable housing requirements were addressed by including 10 percent of the market rate units at prices affordable to very low- income households. Table 2 provides a summary of the physical parameters for each prototype. tR &^ ADVIsoPs, IraC, TIF Development Analysis 1 4 Site Area (SF) 22,500 Table 2 15,000 22,500 45,000 Gross Bldg. Area (SF) Summary of the Five Development Prototypes 60,000 61,875 Prototype Name DowntownMXD -1 DowntownMXD -2 DowntownMXD3 WilshireMXD PicoMXD Location Downtown Downtown Downtown Wilshire Bled Pico Bled LUCEArea Downtown District Downtown District Downtown District Mixed -Use Bled Nixed -Use Bled -Low LUCE Tier TBD TBD TBD 3 3 Discretionary Approvals Track DA DR - DA DA DA # Parcels 3 2 2 3 6 Bldg. Height (Feet) 70 60 71 60 47 Stores ( #) 5 5 6 5 4 Site Area (SF) 22,500 15,000 15,000 22,500 45,000 Gross Bldg. Area (SF) 78,750 - 52,500 60,000 61,875 85,865 Floor Area Ratios (FAR) Gross Floor Area 3.50 3.50 4.00 2.75 1.91 Net Leasable Floor Area 3.07 2.94 3.42 2.32 1.63 Net Leasable Areas 68,985 44,150 51,225 52,250 73,400 Residential (SF) - 41,150 46,225 40,250 58,400 Market Rate Units 54 61 54 74 Affordable Units - 5 6 5 7 Total Units - 59 67 59 81 Retail (SF) ,5,000 3,000 5,000 12,000 15,000 Office (SF) 63,985 - - - - Source: HR&AAdeisors, Inc. These prototypes are not intended to represent all types of future development, but rather future developments that are likely, based on LUCE development standards, information from emerging drafts of new Specific Plans, and new development applications that have been filed with the City since the LUCE was adopted. The prototypes do not exactly match any specific proposed development. Rather, they are general approximations of developments, based on a set of physical assumptions. The residential unit mix assumed in each case with residential units is based on assumed average unit sizes by number of bedrooms per unit, and in each case assumes that 10 percent of the number of market rate units are included at prices affordable to very low- income households, and deed - restricted as such, as required by City regulations. The Financial Feasibility Models Financial feasibility simulation models were then developed for each prototype to test their financial performance, before and after the cost associated with the proposed TIF. Two related models were developed to test different measures of financial feasibility. The first is a "residual land value" model, which derives what a developer could theoretically afford to pay for land, based on estimates of the development costs, the capitalized value of the net operating income resulting from completed construction and an allowance for developer profit. Residual land value analysis was then prepared for each prototype before and after the addition of the TIF in order to measure the TIF's impact on the change in implied land value. The second model has the same basic form as the residual land value model, but instead of deriving land value, it utilizes the calculated value from the residual land value model, to test the impact on the change in total development cost and developer profit margin resulting from the cost of the proposed TIF. The models include separate sets of calculations for development costs, HR &,4 ADVISORS, INC. - TIF Development Analysis 1 5 stabilized net operating income, completed project value, from which residual land value and return on total development cost are derived, before and after including the TIF. The following sections summarize the key components and assumptions that were utilized in the financial feasibility models. The model results are included in Attachment B (residual land values) and Attachment C (developer profit and return on total development cost). Development Costs The total development cost for each prototype includes direct or "hard" construction costs, "soft costs" (e.g., professional fees and City permits, among others) and financing costs. Table 3 summarizes the development costs for each prototype without the assumed TIF; the TIF amounts are discussed below. Key assumptions for each development cost component are noted below, and all of the calculation details are provided in the Attachments to this memo. Hard Costs. HR &A assumed Type IIIB construction (i.e., wood frame over concrete podium retail) for the three downtown prototypes and Type V construction (i.e., wood frame) for the Wilshire and Pico Boulevard prototypes. Costs per square foot for shell and core construction were derived from the Marshall & Swift Commercial Cost Estimator software, with Los Angeles -area values as of the first quarter of 2013. Because the Marshall &'Swift results include allowances for some costs other than building construction (i.e., for design fees) that we account for separately as soft costs, the Marshall & Swift values were adjusted to 80 percent of the calculated result. The Type IIIB results fall within a range of $170 -$195 per square foot, and the results for the two Type V construction prototypes range from $181-$182 per square foot. The details of the Marshall & Swift calculations are included in Attachment A. Parking, as currently required by the City's Zoning Code, was assumed for each prototype. For the three downtown prototypes and the Wilshire Boulevard prototype, 100 percent subterranean parking was assumed at a cost of $30,000 per space for the first two levels and $35,000 per space for a third or fourth level, as required, based on various data sources, including information developed for recent City parking management studies. Some surface parking is assumed for the Pico Boulevard prototype ($5,000 per space), and the balance is assumed as subterranean. HR &A ADVISORS, Inc. TIF Development Analysis 1 6 Table 3 Total Development Costs for the Five Development Prototypes Prototype Name DowntownWO -1 DowntownMXD -2 DowntownMXD -3 WilshireMXD PicoMXD #Parcels 3 2 2 3 6 Bldg. Height (Feet) 70 60 71 60 47 Stories ( #) 5 5 6 5 4 Gross Square Feet(GSF) 78,750 52,500 60,000 61,875 85,865 Land Costs see RLV results see RLV results see RLV results - see RLV tesults see RLV results Hard Costs $ 24,843,832 $ 14,360,000 $ 16,810,000 $16,877,750 $ 21,837,722 Soft Costs TIF (not included) $ - $ - $ - $ - $ - Other City Costs $ 1,642,153 $ 531,453 $ 630,781 $ 630,781 $ 1,029,185 Other Soft Costs $ 3,077,234 $ 1,970,085 $ 2,296,035 $ 2,279,185 $ 3,006,828 Financing Costs $ 2,739,682 $ 1,581,630 $ 1,835,971 $ 1,839,718 $ 2,386,736 Total DevelopmentCost $ 31,148,547 $ 17,765,738 $ 20,795,203 $20,848,832 $ 27,261,214 per GSF . $ 396 $ 338 $ 347 $ 337 $ 317 Source: HR&AAdvisors, Inc. Hard Costs. HR &A assumed Type IIIB construction (i.e., wood frame over concrete podium retail) for the three downtown prototypes and Type V construction (i.e., wood frame) for the Wilshire and Pico Boulevard prototypes. Costs per square foot for shell and core construction were derived from the Marshall & Swift Commercial Cost Estimator software, with Los Angeles -area values as of the first quarter of 2013. Because the Marshall &'Swift results include allowances for some costs other than building construction (i.e., for design fees) that we account for separately as soft costs, the Marshall & Swift values were adjusted to 80 percent of the calculated result. The Type IIIB results fall within a range of $170 -$195 per square foot, and the results for the two Type V construction prototypes range from $181-$182 per square foot. The details of the Marshall & Swift calculations are included in Attachment A. Parking, as currently required by the City's Zoning Code, was assumed for each prototype. For the three downtown prototypes and the Wilshire Boulevard prototype, 100 percent subterranean parking was assumed at a cost of $30,000 per space for the first two levels and $35,000 per space for a third or fourth level, as required, based on various data sources, including information developed for recent City parking management studies. Some surface parking is assumed for the Pico Boulevard prototype ($5,000 per space), and the balance is assumed as subterranean. HR &A ADVISORS, Inc. TIF Development Analysis 1 6 Other elements of hard cost include demolition /site improvement ($15 /sf of land area), off -site improvements ($100,000 allowance), retail ($35 /sf) and office ($30 /sf) tenant improvements, and a contingency (3% of the subtotal of the other hard costs). All of the hard cost calculations for each prototype are included in Appendix A to Attachment B (residual land values) and Attachment C (developer profit and return on total development cost). Soft Costs. These include architectural, engineering and related professional fees (6% of total hard costs); marketing /leasing commission fees for commercial space ($7.50 /net leasable sf) and apartments ($3.00 /net leasable sf); legal and accounting costs (1 % of total hard costs); taxes and insurance (1 % of total hard costs); a developer's project management fee (3% of total hard costs) and a soft cost contingency (3% of the subtotal of all other soft costs). Soft costs also include a variety of City planning, building permit and other construction - related permits and utility connection fees. Special effort was made to detail these costs, including all other applicable public fees, such as fees for child care, the arts, open space and affordable housing (for office uses only), the recreational unit tax on new dwelling units, and the Santa Monica - Malibu Unified School District's school facilities fee. Planning - related fees are based on assumptions about the discretionary approval process applicable to each prototype (as determined by City staff)' and the City's current fee schedule. Construction- related permits and utility connection fees were also based on the City's current fee schedule and fee formulas as applicable to each prototype. These calculations are shown in Appendix C to Attachment B (residual land values) and Attachment C (developer profit and return on total development cost). The proposed TIF is included among the City fees, using the amounts per square foot by land use, or per dwelling unit, and zone area from the Nexus Study. As proposed in the Nexus Study, we assumed that each prototype's TIF would be reduced by a credit for existing on -site uses to be demolished. For the three downtown and the Wilshire Boulevard prototypes we assumed that half the site area was occupied by retail floor area, and applied the relevant TIF rate to calculate the credit. For the one -acre Pico Boulevard prototype, we assumed 10,000 sf of retail and 10,000 sf of existing office to calculate the TIF credit. The TIF calculations are shown in Table 4, and are also included in Appendix C to Attachment B (residual land values) and Attachment C (developer profit and return on total development cost). For the four prototypes that are assumed to require a Development Agreement, no dollar amounts were assumed for "public benefits," due to the wide variability of such requirements and their associated costs. H R&A At?vlsoks, INc. TIF Development Analysis 1 7 Table 4 TIFAmounts for the Five Development Prototypes Prototype Name DowntownMXD -1 DowntownMXD -2 DowntownMXD -3 WlshireMXD PicoMXD # Parcels 3 2 2 3 6 Bldg. Height (Feet) 70 60 71 60 47 Stories ( #) 5 5 6 5 4 Net Leasable Areas 68,985 44,150 51,225 52,250 73,400 Residential (SF) - 41,150 46,225 40,250 58,400 Market Rate Units - 54 61 54 74 Affordable Units - 5 6 5 7 Total Units - 59 67 59 81 Retail (SF) 5,000 3,000 5,000 - 12,000 15,000 Office (SF) 63,985 - - - - Market Rate - Area 1 $2,600 per unit $ - $ 140,400 $ 158,600 Market Rate - Area 2 $3,300 per unit $ - $ - $ - $ 178,200 $ 244,200 Affordable $0.00 per unit $ - $ - $ - $ - $ - Retail -Area 1 $21.00 xleasable area $ 105,000 $ 63,000 $ 105,000 $ - $ - Retail -Area 2 $30.10 xleasable area $ - $ - $ - $ 361,200 $ 451,500 Office -Area 1 $9.70 xleasable area $ 620,655 $ - $ - $ - $ - Office -Area 2 $10.80 xleasable area $ - $ $ - $ - $ - Subtotal $ 725,655 $ 203,400 $ 263,600 $ 539,400 $ 695,700 Reduction for EAsting Retail Allowance $ (236,250) $ (157,500) $ (157,500) $ (338,625) $ (409,000) NET TIF Fee $ 489,405 $ 45,900 $ 106,100 $ 200,775 $ 286,700 Source: HRBAAdvsors, Inc. Financing Costs. For each prototype we assumed an 18 -month construction period, an interest -only construction loan equal to hard and soft costs, an interest rate of 5.5 percent, an average outstanding loan balance of 65 percent, and a 2.0 percent construction loan fee. For the permanent loan fee we assumed a loan equal to 65 percent of the hard and soft costs and a 2.0 percent loan fee. Stabilized Annual Net Operating Income (NOI) The next set of model calculations concern annual net operating income (i.e., revenues minus costs) once construction is completed and the commercial and residential space is leased. The calculations involve assumptions about average monthly rents and other miscellaneous income, stabilized occupancy rate (or conversely, vacancy rate), and monthly operating expenses. The NOI results for each prototype are summarized in Table 5. Calculation details are shown in Appendix D to Attachment B (residual land values) and Attachment C (developer profit and return on total development cost). HR &A ADVISOIS, INC. TIF Development Analysis 1 8 Table 5 Annual Net Operating Income (NOI) Results for the Five Development Prototypes Prototype Name DowntownWD -1 DowntownWD -2 DowntownWD -3 WilshlreWD PIcoMXD # Parcels 3 2 2 3 6 Bldg. Height (Feet) 70 60 71 60 47 Stories ( #) 5 5 6 5 4 Residential - Market Rate Effective Gross Income $ - $ 1,925,973 $ 2,151,607 $ 1,799,103 $ 2,311,802 Less: Operating E>penses $ - $ (674,091) $ (753,062) $ (629,686) $ (809,131) Net Operating Income $ - $ 1,251,882 $ 1,398,545 $ 1,169,417 $ 1,502,671 Residential-Affordable Effective Gross Income $ - $ 52,849 $ 64,524 $. 52,849 $ 74,357' Less: Operating E )penses $ - $ (18,497) $ (22,583) $ (18,497) $ (26,025) Net Operating Income $ - $ 34,352 $ 41,941 $ 34,352 $ 48,332 Retail Effective Gross Income $ 285,000 $ 171,000 $ 285,000 $ 513,000 $ 598,500 Less: Operating E>yenses $ (8,550) $ (5,130) $ (8,550) $ (15,390) $ (17,955) Net Operating Income $ 276,450 $ 165,870 $ 276,450 $ 497,610 $ 580,545 Office Effective Gross Income $ 2,917,716 $ - $ - $ - $ - Less: Operating Expenses $ (87,531) $ - $ - $ - $ - NetOperatinglncome $ 2,830,185 $ - $ - $ - $ - Total Net Operating Income $ 3,106,635 $ 1,452,104 $ 1,716,936 $ 1,701,379 $ 2,131,548 Source: HR&APdAsors,lnc. Rents. Retail, office and apartment rent assumptions were derived from a combination of market research conducted for the City as part of the Downtown Specific Plan, development project applicant feasibility analyses submitted to the City, and HR &A's familiarity with the City's rent profile. No independent market research was conducted specifically for this analysis. Commercial office rent; which applied only in the case of one downtown prototype, was assumed to average $4.00 /sf /month. Ground floor retail rents were assumed at $5.00 /sf /month for the three downtown prototypes, $3.75 for the Wilshire prototype and $3.50 for the Pico prototype. Assumed apartments rents vary by unit size, location and whether market rate or affordable. The monthly rent assumptions for market -rate studio units ranged from $2,150 in the downtown prototypes to $1,828 for the Pico prototype. For market rate 1 -BR units, rents range from $3,100 in the downtown prototypes to $2,635 for the Pico prototype. For market rate 2 -BR units, rents range from $4,000 in the downtown prototypes to $3,400 for the Pico prototype. Only 1 -BR and 2 -BR affordable units are assumed, at the maximum rent allowed by the City for very low - income, deed - restricted units ($854 /month and $1,014 /month, respectively). All prototypes with residential also assume miscellaneous income from tenant services equal to five percent of gross income. Effective gross income for all prototypes assumed 95 percent occupancy. Operating Expenses. Retail and office leases are assumed to be triple -net, in which nearly all operating expenses are passed through to tenants. We assume unreimbursed operating expenses HR&A ADVISORS, liar TIF Development Analysis 1 9 equal to three percent of effective gross income. Apartment operating expenses assume 35 percent of effective gross income. Completed Prototype Values The next component of the analysis includes estimating the sale value of each prototype at stabilization. This is calculated by dividing the stabilized net operating income for each prototype by the income capitalization rates (or "cap rate') that apply to each land use. The assumed cap rates are derived from quarterly data published by the Real Estate Research Corporation for the Los Angeles metro area for the third quarter of 2012 (i.e., 5.4% for market rate apartments, 6.9% of retail and 7.2% for office). We further assume that the cap rate for the affordable units is 5.9 percent to account for somewhat higher perceived developer risk in managing these units. The capitalized value results are discussed further below. Calculation details are shown in Appendix E to Attachment B (residual land values) and Attachment C (developer profit and return on total development cost). Residual Land Values As noted above, the first test of the TIF financial feasibility impacts was to assess the effect on land value. This required deriving the "residual land value" from the preceding analysis. This is accomplished by subtracting total development cost, plus an allowance for developer profit (12.5% of capitalized project value) from capitalized project value, before and after including the TIF. The results are summarized in Table 6 and calculation details are also included in Appendix D to Attachment B (residual land values) and Attachment C (developer profit and return on total development cost). Source: HRMAdl isors, Inc. This analysis shows that before adding the TIF, residual land values for the downtown prototypes range from about $300 -$400 per square foot of land area, about $219 on Wilshire Boulevard and $115 on Pico Boulevard. The incremental cost of the net TIF would reduce the land values HR &A ADVISORS, INC. TIF Development Analysis ; 10 Table 6 Residual Land Value Results for the Five Development Prototypes, With and Without the Net TIF Prototype Name DowntownkMD -1 DowntownNMD -2 DowntownWD -3 WilshlrekM Picokm # Parcels 3 2 2 3 6 Land Area 22,500 15,000 15,000 22,500 45,000 Bldg. Height (Feet) 70 60 71 60 47 Stories ( #) 5 5 6 5 4 Total Project Value $ 43,314,647 $ 26,169,150 $ 30,616,367 $ 29,449,846 $ 37,060,123 Less: Developer Profit $ (5,414,331) $ (3,271,144) $ (3,827,046) $ (3,681,231) $ (4,632,515) Less: Total Development Cost $ (31,679,665) $ (17,815,550) $ (20,912,049) $ (21,066,721)- $ (27,564,828) Residual Land Value With TIF Total $ 6,220,652 $ 5,082,456 $ 5,877,272 $ 4,701,894 $ 4,862,780 Per SF Land Area $ 276.47 $. 338.83 $ 391.82 $ 208.97 $ 108.06 Source: HRMAdl isors, Inc. This analysis shows that before adding the TIF, residual land values for the downtown prototypes range from about $300 -$400 per square foot of land area, about $219 on Wilshire Boulevard and $115 on Pico Boulevard. The incremental cost of the net TIF would reduce the land values HR &A ADVISORS, INC. TIF Development Analysis ; 10 applicable to the prototypes by about $3 /sf to $24 /sf in the downtown, about $10 /sf on Wilshire Boulevard and about $6.75/sf on Pico Boulevard, all of which are less than an eight percent reduction from the no -TIF baseline. Return on Total Development Cost The final part of the analysis involved testing the developer's profit margin and return on total development cost, assuming a developer would pay for the land associated with each prototype at the price derived from the residual land value analysis, and once again, before and after adding the TIF. Developer profit margin is calculated as the difference between total project value and total development cost. Return on total development cost is calculated as stabilized annual Net Operating Income divided by total development cost. The results are summarized in Table 7 and calculation details are also included in Appendix D to Attachment B (residual land values) and Attachment C (developer profit and return on total development cost). Source: HR&A Advisors, Inc. This analysis shows that before adding the TIF, return on total development cost ranges from 6.3 to 8.1 percent for the downtown prototypes, and is 6.5 percent for both the Wilshire Boulevard and Pico Boulevard prototypes. The incremental net cost of the TIF would reduce developer profit by amounts similar to the amount of the TIF (i.e., within a range of about $50,000 for the five - story downtown prototype to about $531,000 for the office /retail prototype), or in percentage terms, within an overall range of 1.7 to 10.5 percent. The addition of the net TIF amount would only have an impact on the return on total development cost metric for the downtown office /retail prototype, and then only an inconsequential change from 8.1 percent to 8.0 percent. HRwA ADVISORS, INC. TIF Development Analysis 111 Table 7 Developer Profit Margins Return on Cost Results for the Five Development Prototypes, With and Without the Net TIF Prototype Name DowntownWD -1 DowntownWD -2 DowntownhVD -3 WilshireMXD PicoMXO # Parcels 3 2 2 3 6 Bldg. Height (Feet) 70 60 71 60 47 Stories ( #) - 5 5 6 5 4 Profit Margin & Return on Cost With TIF Total Project Value $ 43,314,647 $ 26,169,150 $ 30,616,367 $ 29,449,846 $ 37,060,123 Less: Total Development Cost $ (38,793,498) $ (23,191,840) $ (27,189,996) $ (26,221,730) $ (32,968,586) Profit $ 4,521,150 $ 2,977,310 $ 3,426,371 $ 3,228,116 $ 4,091,537 Return on Total Development Cost 8.0% 6.3% 6.3% 6.5% 6.5% Source: HR&A Advisors, Inc. This analysis shows that before adding the TIF, return on total development cost ranges from 6.3 to 8.1 percent for the downtown prototypes, and is 6.5 percent for both the Wilshire Boulevard and Pico Boulevard prototypes. The incremental net cost of the TIF would reduce developer profit by amounts similar to the amount of the TIF (i.e., within a range of about $50,000 for the five - story downtown prototype to about $531,000 for the office /retail prototype), or in percentage terms, within an overall range of 1.7 to 10.5 percent. The addition of the net TIF amount would only have an impact on the return on total development cost metric for the downtown office /retail prototype, and then only an inconsequential change from 8.1 percent to 8.0 percent. HRwA ADVISORS, INC. TIF Development Analysis 111 Attachment A Marshall & Swift Hard Cost Calculations Attachment B Residual Land Value Model Results Attachment C Developer Profit Margin and Total Return on Development Cost Model Results Attachment A Marshall & Swift Hard Cost Calculations DOWNTOWNMXD -1 Retail Gross Total Cost Total Cost Per Land Use Type Bldg. SF Stories Factor (2013$) SF (2013 $) DOWNTOWNMXD -1 Retail 5,708 Class A - Community Shell - Good $68.01 PSF - Class A - Community Core - Excellent $103.43 PSF Height Increase 0.0% Above Three Stories Sprinklers -. Excellent $3.92 PSF Total' $1,035,049 $181.34 Reduction to Hard Costs 20% $207,010 Total Hard Costs $828,039 $145.07 Office 73,042 Class A - Office Shell - Good $115.60 PSF Class A - Office Core - Good $76.60 PSF Height Increase 5 1.0% Above Three Stories Sprinklers - Excellent $3.07 PSF Total' $15,728,252 $215.33 Reduction to Hard Costs 20% $3,145,650 Total Hard Costs $12,582,602 $172.26 Cost Factor 0.99 11/1/2012 Location Factor 1.21 Los Angeles Perimeter Factor - Retail 0.88 Perimeter Factor - Office 0.93 GRAND TOTAL 78,750 $16,763,302 $212.87 Reduction to Hard Costs 20% $3,352,660 GRAND TOTAL HARD COSTS $13,410,641 $170.29 1 Per Marshall & Swift these costs include: contractors overhead and profit, utility connections, normal site preparation including grading and finish, sales taxes, interest on construction financing, pemit fees, and average architects and engineers fees. Source: Marshall & Swift Commercial Cost Estimator, 1 st Quarter, 2013; HR&A Advisors, Inc. HR&A Advisors, Inc. Construction Cost Estimates v3 (Class D) DOWNTOWNMXD -1 02 -20 -2013 fflffl�Mes Construction Cost Estimates Gross Total Cost Total Cost Per Land Use Type Bldg. SF Stories Factor (2013$) SF (2013 $) DOWNTOWNMXD -2 Residential - 49,006 Class D - Apartment Shell - Excellent $109.48 PSF Class D - Apartment Core - Excellent $107.51 PSF Height Increase 5 1.0% Above Three Stories Sprinklers - Excellent $2.57 PSF Total' $12,029,320 $245.47 Reduction to Hard Costs 20% $2,405,864 Total Hard Costs $9,623,456 $196.37 Retail 3,494 Class A - Community Shell - Good $68.01 PSF Class A - Community Core - Excellent $103.43 PSF Height Increase 0.0% Above Three Stories Sprinklers - Excellent $3.92 PSF Total' $640,096 $183.19 Reduction to Hard Costs 20% $128,019 Total Hard Costs $512,077 $146.55 Cost Factor 0.99 11/1/2012 Location Factor 1.21 Los Angeles Perimeter Factor - Residential - 0.94 Perimeter Factor - Retail 0.89 GRAND TOTAL 52,500 $12,669,416 $241.32 Reduction to Hard Costs 20% $2,533,883 GRAND TOTAL HARD COSTS $10,135,533. $193.06 ' Per Marshall & Swift these costs include: contractor's overhead and profit, utility connections, normal site preparation including grading and finish, sales taxes, interest on construction financing, pemit fees, and average architects' and engineers' fees. Source: Marshall & Swift Commercial Cost Estimator, 1 st Quarter, 2013; HR&A Advisors, Inc. HR &A Advisors, Inc. Construction Cost Estimates—v3 (Class D) DOWNTOWNMXD-2 02 -20 -2013 DOWNTOWNMXD -3 Residential 54,141 Gross Class D - Apartment Shell - Excellent Total Cost Total Cost Per Land Use Type Bldg. SF Stories Factor (2013$) SF (2013 $) DOWNTOWNMXD -3 Residential 54,141 Class D - Apartment Shell - Excellent $109.48 PSF Class D - Apartment Core - Excellent $107.51 PSF Height Increase 6 1.5% Above Three Stories Sprinklers - Excellent $2.57 PSF Total' $13,498,375 $249.32 Reduction to Hard Costs 20% $2,699,675 Total Hard Costs $10,798,700 $199.46 Retail 5,859 Class A - Community Shell - Good $68.01 PSF Class A - Community Core - Excellent $103.43 PSF Height Increase 0.0% Above Three Stories Sprinklers - Excellent $3.92 PSF Total' $1,134,743 $193.66 Reduction to Hard Costs 20% $226,949 Total Hard Costs $907,794 $154.93 Cost Factor 0.99 11/1/2012 Location Factor 1.21 Los Angeles Perimeter Factor - Residential 0.95 Perimeter Factor - Retail 0.94 GRAND TOTAL 60,000 $14,633,118 - $243.89 Reduction to Hard Costs 20% $2,926,624 GRAND TOTAL HARD COSTS $11,706,494 $195.11 ' Per Marshall& Swift these costs include: contractor's overhead and profit, utility connections, normal site preparation including grading and finish, sales taxes, interest on construction financing, pemit fees, and average architects' and engineers fees. Source: Marshall & Swift Commercial Cost Estimator, 1 st Quarter, 2013; HR&A Advisors, Inc. HR &A Advisors, Inc. Construction Cost Estimates—v3 (Class D) DOWNTOWNMXD -3 02 -20 -2013 ��!pes C."ction Cost Estimates Gross Total Cost Total Cost Per Land Use Type Bldg. SF Stories Factor (2013$) SF (2013 $) WILSHIREMXD Residential 47,316 Class D - Apartment Shell - Excellent .$109.48 PSF Class D - Apartment Core - Excellent $107.51 PSF _ Height Increase 5 1.0% Above Three Stories Sprinklers - Excellent $2.57 PSF Total' $11,390,971 $240.74 Reduction to Hard Costs 20% $2,278,194 Total Hard Costs $9,112,777 $192.59 Retail 14,559 Class A - Community Shell - Good $68.01 PSF Class A - Community Core - Excellent $103.43 PSF Height Increase 0.0% Above Three Stories Sprinklers - Excellent $3.92 PSF Total' $2,667,009 $183.19 Reduction to Hard Costs 20% $533,402 Total Hard Costs $2,133,607 $146.55 Cost Factor 0.99 11/1/2012 Location Factor 1.21 Los Angeles Perimeter Factor - Residential 0.92 Perimeter Factor - Retail 0.89 GRAND TOTAL 61,875 $14,057,980 $227.20 Reduction to Hard Costs 20% $2,811,596' GRAND TOTAL HARD COSTS $11,246,384 $181.76 Per Marshall & Swift these costs include: contractor's overhead and profit, utility connections, normal site preparation including grading and finish, sales taxes, interest on construction financing, pemit fees, and average architects' and engineers fees. Source: Marshall & Swift Commercial Cost Estimator, 1st Quarter, 2013; HR &A Advisors, Inc. HR&A Advisors, Inc. Construction Cost Estimates Y3 (Class D) WILSHIREMXD 02 -20 -2013 ' Per Marshall & Swift these costs include: contractor's overhead and profit, utility connections, normal site preparation including grading and finish, sales taxes, interest on construction financing, pemit fees, and average architects' and engineers fees. Source: Marshall & Swift Commercial Cost Estimator, 1 st Quarter, 2013; HRBA Advisors, Inc. HR &A Advisors, Inc. Construction Cost Estimates v3 (Class D) PICOMXD 02 -20 -2013 Gross Total Cost Total Cost Per Land Use Type Bldg. SF Stories Factor (2013$) SF (2013 $) PICOMXD Residential 68,583 Class D - Apartment Shell - Excellent $109.48 PSF Class D - Apartment Core - Excellent $107.51 PSF Height Increase 4 0.5% Above Three Stories Sprinklers - Excellent $2.57 PSF Total' $16,303,521 $237.72 Reduction to Hard Costs 20% $3,260,704 Total Hard Costs - $13,042,817 $190.18 Retail 17,282 Class A - Community Shell - Good $68.01 PSF Class A - Community Core - Excellent $103.43 PSF Height Increase 0.0% Above Three Stories Sprinklers - Excellent $3.92 PSF Total' $3,116,257 $180.31 Reduction to Hard Costs 20% $623,251 Total Hard Costs $2,493,006 $144.25 Cost Factor 0.99 11/1/2012 Location Factor 1.21 Los Angeles Perimeter Factor - Residential 0.91 Perimeter Factor - Retail - 0.88 GRAND TOTAL - 85,865 $19,419,778 $226.17 Reduction to Hard Costs 20% $3,883,956 GRAND TOTAL HARD COSTS $15,535,822 $180.93 ' Per Marshall & Swift these costs include: contractor's overhead and profit, utility connections, normal site preparation including grading and finish, sales taxes, interest on construction financing, pemit fees, and average architects' and engineers fees. Source: Marshall & Swift Commercial Cost Estimator, 1 st Quarter, 2013; HRBA Advisors, Inc. HR &A Advisors, Inc. Construction Cost Estimates v3 (Class D) PICOMXD 02 -20 -2013 Attachment B Residual Land Value Model Results Pmileged& Confidential Draft Work Product -Not for Public Dtstdbub "on Residual Land Value Results Summary -WITH TIF Program Summary (see App. A) Prototype Name Downt.MXD -1 DowntownIAM2 DowntowelaXD-3 WilshireMXD PicoMXD Location Downtown Downtown Downtown Vdlshire Blvd Pico Blvd LUCE Tier TBD TBD TBD 3 3 Peril Requirement DA DR DA DA DA # Parcels 3 2 2 3 6 Bldg. Height (Feet) 70 W 71 60 47 stories (#) 5 5 6 5 4 Site Area (SF) 22,500 15,000 15,000 22,500 45,000 Gross Bldg. Area (BE) 78,750 52,500 60,000 61,875 85,865 Floor Area Ratio(FAR) - Gross Area 3.50 350 4A0 275 1.91 Floor Area Ratio(FAR) - Net Area 3C7 2.94 3.42 232 1.63 Net Leasable Areas Residential (SF) - 41,150 46,225 40,250 58,400 Mallet Rate Units - 54 61 54 74 Affordable Units - 5 6 5 7 Total Units - 59 67 59 81 Retail (SF) 5,000 3,000 5'0W _ 12,000 15,000 _Office (SF) 63985 $ 1,398,545 $ 1,169,417 Development Costs (see App. B &C) 1,502,671 Resdengal- Affordable Land Costs see Residual Value see Residual Value see Residue l Value see Resitlual Value see Residual Value Hand Costs $ 24,843,832 $ 14,36D,000 $ . 16,811,450 $ 16,877,750 $ 21,837,722 Soft Costs 64524 $ 52,849 $ 74,357 Other City Costs (see App E) $ 1,642,153 $ 531,453 $ 630,781 $ 630,781 $ 1,026,378 Other Soil Costs $ 3,091,916 $ 1,971,462 $ 2,299,384 $ 2,285,209 $ 3,011,0% Financing Costs $ 2,]]6,795 $ 1585.110 $ 1.844.136 $ 1.854944 $ 2,407,952 Total Development Cost $ 37679,665 $ 17,815,550 $ 20,912,049 $ 21,D66,721 $ 27,564,828 per GSF $ 402 $ 339 $ 349 $ 340 $ 321 Net Operating Income (NOI) (see App. D) Residential- Market Rate Effective Gross Income $ - $ 1,925,973 $ 2,151,607 $ 1,799,103 $ 2,311,802 Less: Operating Expenses $ $ (6]4.0911 $ (753062) $ (629686) $ (809131) Net Operating Income $ - $ 1,251,882 $ 1,398,545 $ 1,169,417 $ 1,502,671 Resdengal- Affordable Effective Gross Income $ - $ 52,849 $ 64524 $ 52,849 $ 74,357 Less: Operating Expenses S $ (18.4971 $ (22583) $ (18497 ) $ (260251 Net Operating Income $ $ 34,352 $ 41,941 $ 34,352 $ 48,332 Retail Effective Gross Income $ 285,000 $ 171,000 $ 285,000 $ 513,000 $ 598,5)0 Less: Operating Expenses $ (35501 $ (5,130) $ (8550) $ (15,390) $ (17,9551 Net Operating Income $ 276,450 $ 165,870 $ 276,450 $ 497,610 $ 580,545 Office Effective Gross Income $ 2,917,716 $ - $ - $ - $ Less: Operating Expenses $ (87,531) $ $ $ $ Net Operating Income $ 2,830,185 $ - $ - $ - $ - TotalNetOperatingIncome $ 3.106635 $ 1,452.104 $ 1716936 $ 1,701,379 $ 2,131,648 Project Component Values (see App. E) Residential - Market Rate NOI $ - $ 1,251 682 $ 1,398,545 $ 1,169,417 $ 1,502,671 Cap Rate 6A0% 5.40% 540% SAO% 5A0% Value $ - $ 23183,000 $ 25,898,981 $ 21,655,870 $ 27,827,241 Residential Affordable NOI $ - $ 34,352 $ 41,941 $ 34,352 $ 48,332 Cap Rate 590% 5.90% 5.90% 5.90% 5.90% Value $ - $ 582,237 $ 710,864 $ 582,237 $ 819,186 Retail N01 $ 276,450 $ 165,870 $ 276,450 $ 497,610 $ 580,545 Cap Rate 6.90% 6.90% 690% 690% 6.90% Value $ 4,006,522 $ 2,403,913 $ 4,006,522 $ 7211,739 $ 8,413,696 Office NOI $ 2,830,185 $ - $ - $ - $ - Cap Rate 7.20% 7.20% 720% T20% 720% Value 5 39,308,125 $ - $ - $ - $ - Total PmaclValue $ 43,314,647 $ 26,169,150 $ 30,616367 $ 29,449.646 $ 37,060123 Residual Land Value Estimate Total Project Value $ 43,314,647 $ 26,169,150 $ 30,616,367 $ 29,449,846 $ 37,060,123 Less: DeveloperProfit $ (5,414,331) $ (3,271,144) $ (3,827,046) $ (3,681,231) $ (4,632,515) Less: Total Development Cost $' (31,679,665) $ (17,815,5507 $ (20912049) $ (21,066,721) $ (27,564,828) Residual Land Value Total $ 6,220,652 $ 5,082,456 $ 5,877,272 $ 4,701,894 $ 4,862,780 Per SF Land Area $276A7 $338.83 $38182 $2D8.W $108.06 HR&AAdvisors, Inc. With TIF RLV_v3 02- 19- 201315ummary Page 1 of 7 02 -20 -2013 Appendix A Physical Parameters Prototype Name DowntovmMXD -I DowntownMXD -2 DovmtownMXD -3 WilshireMXD PicoMXD Location Downtown Downtown Downtown Wilshire Blvd Pico Blvd LUCE Area Downtown District Downtown District Downtown District Mixed -Use Blvd. Mixed -Use Blvd. Low LUCE Tier TRIO TBD TBD 3 3 Peril Requirement DA DR DA DA DA # Parcels 3 2 2 3 6 Bldg. Height (Feel) 70 60 71 60 47 Stories ( #) 5 5 6 5 4 Land Area (SF) 22,500 15,000 15,000 22,500 45,000 Gross Bldg. Area (SF)' 78,750 52,500 60,000 61,875 85,865 Floor Area Ratio (FAR)-Gross Area' 3.50 3.50 4.00 2.75 1.91 Floor Area Ratio (FAR)-Net Area 3.07 2.94 3.42 2.32 1.63 Net Leasable Areas (SF)' 68,985 44,150 51,225 52,250 73,400 Residential' - 41,150 46,225 40,250 58,400 Retail 5,000 3,000 5,000 12,000 15,000 Office 63,985 - - - - Residential Unit Mix Market Rate Studio - 475 475 475 475 1- BR(SF) - 700 700 700 700 2- BR(SF) - 1,000 1,000 1,000 1,000 Studio - 22 25 22 26 1 -BR( #units) - 16 20 19 23 2 -BR ( #units) 16 16 13 25 Subtotal if units) - 54 61 54 74 Affordable° i- BR (SF) - 600 600 600 600 600 2- BR(SF) 850 850 850 850 850 1 -BR( #units) - 3 3 3 4 2 -SR ( #units) 2 3 2 3 Subtotal (# units) - 5 6 - 5 7 Total Units 59 67 59 81 Parking Residential Market Rate (wtd. avg. per unit)' - 1.44 1.43 1.42 1.49 Affordable (avg. per unit) - 1.00 1.00 1.00 1.00 Subtotal Spaces ( #) - 83 93 82 117 Retail - 5 6 5 7 Spaces /1,000 SF 3.3 3.3 3.3 3.3 3.3 Subtotal Spaces ( #) 17 10 17 40 50 Office Spaces/1,000 SF 3.3 3.3 3.3 3.3 3.3 Subtotal Spaces ( #) 211 - - - Total Spaces Number - 228 93 110 122 167 Gross Ama /Space(SF)- Surface 300 300 300 300 300 Gross Area/Space(SF) -Subt. 350 350 350 350 350 Total Parking Area (SF) 79,800 32,550 38,500 42,700 56,450 # Surface - - - - 53 # Subt. Levels Total 3.5 2.2 2.6 1.9 0.9 Spaces /Levels 1 -2 114 93 86 122 114 Spaces/Levels 3 -4 114 - 24 - - Construction Period (months) 18 18 18 18 18 ' Per guidance provided by City Planning staff, based on recent development applications; emerging Downtown Speck Plan information; and LUCE 2010. 2 Per HR &A, based on net -lo -gross floor area assumptions (90% for retail; 87% for office and 85% for residential), and translation of total gross floor area to gross floor area per - floor, based on: (1) street wall for first three Floors; (2) assumed setbacks above 3rd floor. ' Based on unit mix and net leasable floor area by unit type, per HR &A. " Assumes 10% for very low - income households. 5 Assumes 1.0 spaces /studio: 1.5 spaces /1 -BR unit; and 2.0 spaces /2 -BR unit. ' HR&A Advisors, Inc.. Wth TIF RLV_Jd_02- 19- 2013/A- Program Page 2 of 7 02 -20 -2013 Appendix A Physical Parameters (cori Prototype Name DowntownMXD -t DowntownMXD -2 DowntownMXD -3 WilshireMXD PlcoMXD Location Downtown Downtown Downtown Wilshire Blvd Pico Blvd Gross Floor Area by Stery Site Area 22,500 15,000 15,000 22,500 45,000 Total Gross Bldg. Area 78,750 52,500 60,000 61,875 85,865 Total Floors 5 5 - 6 5 4 Floor 1 15,750 10,500 10,500 13,500 22,500 Floor 18,000 12,000 12,000 13,500 22,500 Floor 18,000 12,000 12,000 12,375 22,500 Floor 13,500 9,000 9,000 11,250 18,365 Floors 13,500 9,000 9,000 11,250 Floor 6 7,500 Total Gross Floor Area 78,750 52,500 60,000 61,875 85,865 FAR -Gross Area 3.50 3.50 4.00 2.75 1.91 Net Floor Area by Story - Floors 14,175 9,450 9,450 12,150 20,250 Floor 15,660 10,200 10,200 11,475 - 19,125 Floor 15,660 10,200 10,200 10,519 19,125 Floor 11,745 7,650 7,650 - 9,563 15,610 Floor - 11,745 7,650 7,650 9,563 Floor 6 -. 6,375 - Total 68,985 45,150 51,525 53,269 74,110 Net/Gross Floor Area Overall 87.6% 86.0% 85.9% 86.1% 86.3% Residential Units Mix Office SF 63,985 - - - - Retail SF 5,000 3,000 5,000 12,000 15,000 Residential SF- Target - 42,150 46,525 41,269 59,110 Residential SF- Calculated - 41,150 46,225 40,250 58,400 Estimate Units (based on avg. unit size) 58 64 57 82 Market (target) 0 54 60 50 73 Studio - 22 25 22 26 1 -BR - 16 20 19 23 2 -BR - 16 16 13 25 Subtotal 54 61 54 74 Affordable D O ©O 7 1 -BR - 3 - 3 .3 4 2 -BR - 2 3 2 3 Subtotal - 5 6 5 7 TOTAL Units - 59 67 59 81 Unit Sizes Studio- Market 475 475 475 475 i -BR- Market 700 700 700 700 2 -BR- Market 1,000 1,000 1,000 1,000 1 -BR- Affordable 600 600 600 600 2- BR- Affordable 850 850 850 850 Net Rentable Area Studio-Market 10,450 11,875 10,450 12,350 1 -BR- Market 11,200 14,000 13,300 16,100 2 -BR- Markel 16,000 16,000 13,000 25,000 1- BR- Affordable 1,800 1,800 1,800 2,400 2- BR- Affordable .1,700 2,550 1,700 2,550 Total 41,150 46,225 40,250 58,400 HRBA Advisors, Inc.. WIh TIF RLV_v3_02- 19- 20131A- Program Page 3 of 7 02- 20-2013 Appendix B Development Costs, Prototype Name Location Landaee Gross Bldg. Area (SF) Net Leasable Areas (SF) Resldentinl Retail Office Subterranean Parking (spaces) 1 -2 Levels 3 4 Levels Hard Cost Construction Type Building ConstructionlGSF° Demo)On -Gee Improvements Ogsile lmpmvemenk Building Care & Shot Retail Tenant Improvements Office Tenant Improvements Subterranean Parking Surface 1 -2 Levels 3d Levels Daodng.s, Colonel Hard Cash San Costs Assumothare OowntownM %D -1 Downlovell Downtorwr Downlovm Dmmmwn Dreard n 22,500 15,000 15,000 ]8,]50 52,500 60,000 - 41,150 46,225 51000 3,000 5,00 61.985 228 93 110 114 93 86 114 24 see Residual Value see Residual Value see Residual Value WlshlreMXD Picots %0 Wichire Bivtl Pico Rlvd 22,500 45,000 61.875 85,665 40,250 58,900 12.000 15.000 122 16] 122 114 see Residual Value see Residual Value Mae. Communally Benefits COst Allowances HIS D16 $ - IIIB V $ Varies 6% $170 $193 1,490,630 $195 $182 $15 per Land Nea $ 1,181,250 $ ]8],500 $ 900,000 $ 928,125 $100,000 amwance 6 100,000 $ 100,000 4 100,000 $ 100,000 It 308,625 Vanes $ 13,387,500 $ 10,132,500 4 11,700,000 $ 11,261,250 $35 x Net Leasable 8F $ 175,000 $ 105,000 $ 175,000 $ 420,000 $30 x Net Leasable 8F $ 1,919.550 $ - It - $ $5.000 per Space $ - $ - It $ 168,]]8 $ - $30 000 per Space $ 3,420,000 $ 2,790,ODO It 2,571,300 $ 3.660 000 $35,000 per Space $ 3,990,000 $ It 850150 $ - 4% x Subtotal Hard Casts It 670,532 $ 445,01DO $ 615_00 $ 508,375 3,036,265 $ 3,116,765 It 24,643,832 $ 14,360,000 $ 16,811450 $ 16,8]],750 Mae. Communally Benefits COst Allowances $ - $ - $ - $ A&FJONer Professionals 6% x Hard Caere $ 1,490,630 $ 861,600 $ 1,008,687 $ 1,012,6115 McMeSnyLeasing Cobblestone Residential - $7.50 x Net Hercules 9F $ - It 308,625 It 346,688 $ 301,875 Ret ff(Afire $3.00 x Net Leasable $F $ 20,955 $ 9,000 $ 15,000 $ 36,000 Legal &Aceoun5ng 1% x Hard Costs $ 248,438 $ 143,600 $ 16,115 $ 168,]]8 Taxes &Increases 1% x Hard Costs $ 248,438 $ 143,600 $ 1681115 $ 168,]]8 Developer Fee 3% x Hand Caere $ 745,315 $ 430,800 $ 504,344 $ 506,333 Canlingenry 3% x Subtotal Soft Costs $. 152,140 § 74237 $ 08,435 $ 90780 Subtotal Soft Costs $ 5,223,474 $ 2548 015 $ 3,036,265 $ 3,116,765 Subtotal Hard+ So%s Costs $ 30,067,306 $ 16,908,815 $ 49,847,715 $ 19.994,515 Financing Costs Loon Term(momh5) 18 Average Loen Balance 65,00% Construction Loan Interest Rate 550% ConsWCtion Lee. Interest It 1,612,359 $ 906,735 $ 1,064,334 $ 1,072,206 Construction Lean Fees 2.00% $ 601,346 $ 338,176 $ 396,954 $ 399,890 CapOalized Project Value per App.E Permanent Lean Percent x Value 65.00% Permanent Loan Fees 2.00% $ 563,090 $ 340,199 $ 382,846 $ 382,848 Subtotal Favors, Code $ 2.776,795 $ 1,505,110 $ 1,844,136 $ 1,854,944 Total Development Cost Hard + Soft + Financing $ 31,679,665 $ 1TA15,559 S 20,912,049 $ 21,006,721 per GCF $ 402.28 $ 33984 $ 346.53 $ 340.47 PerPer HRnandal feaslbllily peer mviewsoOecenl tlevelopmenls. x 80 %x colmlaled values, per Marshall & Svne Commercial Cast EsSmatm. let Otr. 2013, for Los Angeles area, to account for random hard costs and soft costs accounted foraepamtely. V $181 $ 1,267,976 $ 100,OOD $ 15,541565 $ 525,000 $ 265,000 $ 3,420,000 S $ 698,162 $ 21,83],]22 $ 1.310,263 $ 438,000 $ 45,000 $ 218,3]] $ 218,877 $ 655,132 $ 125,947 $ 4.324.174 $ 26,161,896 $ 1,402,932 $ 523,238 $ 481,]82 $ 240],952 $ 27,564,826 $ 321.03 HR&A Advisors Inc.. Wabftft` �-1 ISBDn COAs Page 4 of 02- 282013 Appendix C TIF and Other City Fee & Permit Costs Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studios 1 -BR 2 -BR Moraines 1 -BR 2 -BR Residential (Net Leasable SF) Nobel (Net Leasable SF) Oihce(Net Leasable SF) Assumptions DOwntownMXD -1 DowntownMXD -2 DowntownMXDJ MishireMXD Pa.Mx0 Downtown Downtown Downtown W4lshius Blvd Pico Blvd 22,500 15,000 15,000 22,500 45,000 ]8,]50 52,500 60,000 61,875 05,665 - 22 25 22 26 - 16 '20 19. 23 Multiple Permit Fee 16 16 13 25 1,544 3 3 3 4 Architectural Review Board 2 3 2 3 - - 41,150 46,225 40,250 50,400 5,000 3,000 5,000 12,00D 15,000 63,985 - - - - Planning Permits Development Review $14,276 per project $ - $ 14276 $ - $ - $ - Development Agreement $25000 per project $ 25,000 $ - $ 25,000 5 25,000 $ 25,000 Multiple Permit Fee $1,544 per project $ 1,544 $ 1,544 $ 1,544 $ 1,544 $ 1,544 Architectural Review Board $1,544 per project $ - $ 1,544 $ 1,544 $ 1,544 $ 1,544 Coastal Zone Concept Review $276 per project $ 276 $ 276 $ 276 $ - $ - CEOA Categorical Exemption $13,873 per project $ - $13,873 $13,073 $13,873 $ - Negative Ded.ation $21,912 par project 5 - $ - $ - $ - $ - EIR $260,000 perproject $ 20D,000 $ $ $ $ 200,000 Subtotal S 226,020 $ 31,513 $ 42,237 $ 41,961 $ 228,088 Other Requirements New Affordable Hag. Linkage Fee NIA N/A $ - $ - $ - $ - S New Parks Fee NIA NIA $ - $ - $ - $ - $ - MiligalionFeeoaOfice Space $10.88 x leasable area N 5K $ 532,957 $ - $ - $ - $ - Recromional Unit Tax $200 xunits $ 1 - $ 11,800 $ 13,400 $ 11,800 $ 16,200 Ads Fee 1.00% xhand at $ 248,438 $ 143,600 $ 168,115 $ 168,]]8 $ 218,3]] Child Care Fee Markel Rate Residential $130.48 perunit $ - $ 7,046 $ 7,959 $ 7,046 $ 9,656 Retail $4.43 xleasable area $ 22,150 $ 13,290 $ 2$150 $ 53,160 $ 66,450 own. $6.20 xleasable area S 396 .707 $ - $ - $ - $ - School Facilities Fee - Residential $120 xleasable area S - $ 131,680 $ 147,920 $ 128,000 $ 186,880 Commercial $0.51 xleasable area $ 35,182 $ 1.530 $ 2.550 $ 6120 $ 7650 Subtotal $ 1,235,434 $ 300,946 $ 362,094 $ 3]5,]04 $ 505,213 Bldg. /Construction Permits° Plan Check Residential 4a stones $0.8439 xleasable area $ - $ 34,726 $ 39,009 $ 33,967 $ 49,284 Commercial <101( SF $1.0600 xleasable area $5,300 $3,180 $5,300 $10,6OD $15,900 Commercial >1 OK SF /4 stones $0.3170 xleasable area $ 20,203 E $ $634 $1,585 Mechanical $486 per project $486 $486 $486 $486 $486 Eleclncal $486 per project $486 $486 $486 $485 $486 Plumbing $246 per project $246 $246 $246 $246 $246 Building Pennitannspections Muli-family 4a Stones $1.0605 xleasable area $ - $ 43,640 $ 49,022 $ 42,685 $ 61,933 Commercial l -Story $0.]]16 xleasable area $ 3,858 $ 2,315 $ 3,850 $ 9,259 $ 11,574 Commemial 44 stones $0.8102 xleasable area $ 51,641 $ - $ - $ - $ - Tenant Improvements <10K SF $0.3490 xleasable area $ 1,745 $ 1,047 $ 1,745 $ 3,490 $ 5,235 Tenant improvements N OK SF $0.2756 xleasable area $ 17,634 $ - $ - $ 551 $ 1,378 Geotechnical Reports $2,508 per project $ 2.508 $ 2,50B $ - $ 2.508 $ 2.500 Subtotal S 104,387 $ 80,634 $ 100,152 $ 104,812 $ 15'615 Utility Fees Water Meters $3,]4] 314" star per project $ 3,947 $ 3,]4] $ 3,747 $ 3,747 $ 3,747 Finales Meter' $10,026 C area., per project $ 18,026 $ 16,026 $ 16,026 $ 18,026 $ 18,026 Mul.water C.Rfal Facilities Studioll -BR Calls $1,160 per aril $ - $ 50,224 $ 59,568 $ 53,728 $ 65,400 2 B Units $1,557 per antl $ - $ 20,026 $ 29,583 $ 23,355 $ 43,596 Commemial $779 per 1,000 leasable SF $ 53.739 $ 2337 $ Stars s 9.340 $ 11,685 Sublets[ $ 75,512 $ 102,360 $ 114,819 $ 108,204 $ 142,462 Per current City slafflcensuitanl recommendations. Assumes TIF credit for existing retail on 60% ofDowntown &Wilshire sites; 10,ODD SF existing retail and 10,000 SF exasling office .sourced for Pice sile. Par FY 2012 -13 City fee schedules 3 Includes maser and capital fadlilies charges. HR&A A"., Inc. Valk TIF RLV_0 02- 19- 2013IC -0M1y Cast Delal 02- 262013 Page 5 of 7 Appendix D Net Operating Incomes Prototype Name Fearsomeness Dmentown100-0 Oownt..MXO -2 DowntownMXO -3 WlsbimMXO PicoMXD Location OmmlOVm Based n Downtown WIsbire BWtl Five Blvd Land Area 22,500 15,000 15,000 22,500 45,000 Gross Bldg. Ama (6F) 78,750 52,500 60,000 61,875 05,865 Residential Units Market Rate Studio - 22 25 22 26 1 -BR - 16 2D 19 23 2 -BR - 16 16 13 25 Attainable 1 -BR 3 3 3 4 2 D 2 3 2 3 Retail (Not Leasable SF) 5,000 3,000 5,000 12,000 15.000 Office 1Net Leasable SF) 63,985 - - - - For -Rent Residential -Market Rate' SNtllc RenWniDManN Vanes $2,150 $2,150 $2,150 $2043 $1,828 1 -BR RenWnXIMOnM Vanes $3,1D0 $3,100 $3,100 $2,945 $2,635 2 -DR RenikhaVa N Varies $4,000 $4,000 $4,000 $3,000 $3,400 Urge lnromeRear $ - $ 1,930,800 $ 2,157,000 $ 1,803612 $ 2,3p,596 Other Income 5.0% Jage Income $ $ 96,540 $ 107.050 $ 90,181 $ 115,080 Gross Income $ - $ 2,027,340 $ 2,264,850 IS 1,893,793 $ 2,433,476 Less: Vacancy BC.11- 1-LOss 5.0% xGross Income $ $ (101367) $ 11132431 $ (996901 $ (1216741 Effective Gross lnoome(EGID $ - $ 1,925,973 $ 2,151.607 $ 1,799,103 $ 2,311.002 Less: 0peroAn9 Ex,mses 35.0% aEGI $ $ 1676091.00) $ (753062.00) $ I6L9686.001 $ 1009131001 Net Opembri, Income $ - $ 1,251,862 $ 1,398,545 $ 1,169 <17 $ 1,502,671 For -Rent Residential - Affordable IVLf 1 -BR RenWaidA.ntA $ B54 $ 854 $ 054 $ 054 $ 854 2 -BR ReusUsUMOnih $ LD14 $ 1,014 $ 1,014 $ 1,014 $ 1,014 Units lnvomeHear $ - $ 55,080 $ 67,248 $ 55,090 $ 77,496 Other lnvome 1.0% xUnt6lncomen 5 $ 551 $ 672 $ 551 $ 775 Grass Income $ - $ 55,631 $ 67,920 $. 55,631 $ 78,271 Less: VanncyBColleNon Loss 5.0% xGroas Income $ $ (2 ,7821 $ (3,3961 $ (27821 $ (3914) Eges4ve Gross Income(EGB $ - $ 52,849 S 64,524 $ 52,849 $ 74,357 Less: OpeaSng Expenses 35.0% xFBI $ $ (18.497) S (22,583) $ (18,4971 S 126,025) Net OpeaSng income $ - $ 34,352 $ 41,941 $ 34,352 S 48,332 Retail' Average RenOSFOonM(NNN) Varies $ 5.00 $ 5.00 It 500 $ 3.75 $ 3.50 Gros Rental lnvomelyam $ 300,000 $ 100,000 $ 300,000 $ 540,000 $ 630,11D0 Less: Vecincy B Collection Lass 5.0% S (15,0001 $ (910001 $ (15,0001 $ (27,0001 S (31,5001 EReds, Gross Income(EGI) S 285,000 $ 171,000 S 205,000 $ 513,000 IS 598,500 Less: Umeimbursed Orange, Expenses 3.0% zEGI S (8,5501 $ 15,1301 $ (8.5501 $ 115,390) $ (17.955) Net Operating Income It 276,450 $ 165,8ID $ 276,450 $ 497,610 $ 58).545 Offiee Average RamUSF/Monib INNN) S 4.00 $ CAB $ 6.00 $ 375 $ 3.00 Grass Forest lncomeNcer S 3,071280 $ - 3 - $ - $ - LesaVacamyB Collecting Less 5.0% $ (153,5641 $ $ $ $ ERemse Gross Income(EGD $ 2,917,716 $ - $ - $ - $ - Less :UmnandumedOpea6ngExpenses 30% xEGI $ (875311 $ 3 It $ Net OpeaSng Income $ 2,830,185 $ Total Net 0,.m ing].came $ 31106$35 If 1.652,104 $ 1,716,936 $ 11701.379 $ 211311518 Per HRBAemeiew of market data and financial feasibnily peer e views abettnt developments. Assumes Wlsbire residential tells= 95 %x dome wq Pico =85 %. Downtown office and sparlmenbenb assume some view premiums at fine upper abdes. ' Per C0✓s rentecbedule and HRM assumptions. HReA AeNbr4lnc. Bass TIF RLV' 02, I issm I31O -that Ops lncwne Page 6 of 7 ..'1 Apparatus Residual Land Values Promise, Name Assumptions DuwntomM%D.t DowntownM %D -2 DowntownM%Od lihishrekl %D Picots %0 LOvalum - Downtown Downtown Downtown Wish!. 01W Pico O1W Lad AMa 22,500 15,060 15,000 22,500 45,000 Gross Oklg. Area (SF) 76.750 52,500 60,000 61,875 85,865 Restlemial Units Markel Rate Studio - 22 25 22 26 1 -BR - - 16 20 19 23 2 -BR - - 16 18 13 25 1 -BR 3 3 3 4 2 BR - 2 3 2 3 Retail (Net Leasable 6F) 5,000 3,970 5,000 12.000 15,000 ORm Met Leasable SF) 63,985 - - - - Project Value Readentia4Madel Rate Net Opeding Income From App,D $ - It 1,251,082 $ 1,390.545 $ 1,169,417 Is 1,602dull Cap Rate l 540% Was NOIICap Rate S - $ 23.183.000 $ 25,890,981 $ 21.655,070 $ 27,027241 Raddenlia4AffoNabls Net Operating Income From AM.D $ - It 34,352 $ 41,941 $ 34,352 $ 46,332 Cep Rate 5.90% Value NOVCap Rate $ - $ 582.237 $ 710,864 $ 592,237 $ 810.166 Retell Net Operating lemma From App,D $ 276,450 S 165,070 $ 276,450 $ 497,610 $ 600,545 Cep Rate 6.90% Value NO9CaPRale $ 4,006,522 $ 2,403.913 $ 4,006,522 $ 7,211,739 $ 0.413,696 ORIm Net Operagn9 income From App, D $ 2,830,185 $ - S - $ - $ - Cap Rate' T20% Value NO9Cap Rate $ 39,308,125 S - $ $ - $ - TolalProjectValne $ 43,314,647 $ 26,169,150 $ 30,616,367 $ 29,41 $ 37,060,123 Residual Land Value Eatlmam Total Pulled Value From above $ 43,314,647 $ 26,169,150 S 30,616,367 $ 29,449,846 S 37,W0,123 Less: Developer Profit' 12.50% nToDi Pm7atl Value $ (5,414,331) $ (3,271,144) $ (3.827,046) $ (3,881,231) $ (4,632,515) Less: Tatm Development Cast From App.B $ 1316796651 $ (17,815550) $ (20912049) $ (21.0667211 S 127564020) Resident Land Value Total $ 6,220,652 $ 5.082,456 $ 5,677,272 S 4,701,894 $ 4,862,780 Per6FL,md Abm $ 276.47 $ 338.83 $ 391.62 $ 200.97 $ 108.06 Pm RealPm Rexl E�U�Real Estate Reo M3N Ouaner 2012. Los Angeles Area tlala. 2 10-15% typical, per HRM, HRBAAtlnmrs, Inc. Web TIF RLV_J!_U I 9& 013E- aesusual Values Page 7 of 7 02- 20.2013 Attachment C Developer Profit Margin and Total Return on Development Cost Model Results Privileged 8 Confidential Draft Work Product - Not for Public Distribution Developer Profit and Return on Total Development Cost Results Summary - With TIF Program Summary (see App. A) Prototype Name DOVmt.MXD -i Down1ownMXD -2 DomtomMXD -3 WilshireMXD PicoMXD Location Downtown Downtown Downtown W lshire Blvd Pico Blvd LUCE Tier TBD TBD TBD 3 3 Penult Requirement DA DR DA DA DA #Parcels 3 2 2 3 6 Bldg. Height (Feet) 70 W 71 60 47 Stories (#) '5 5 6 5 4 Site Area (SF) 22,500 15,000 15,000 22,500 45,000 Gross Bldg. Area (SF) 78,750 52,500 60,000 61,875 85,865 Floor Area Road(FAR) - Gross Area 3.50 3.50 4.00 175 191 Floor Area ReQd(FAR) - Net Area 3.07 2.94 342 132 1.63 Net Leasable Areas $ 3,091,916 $ 1,971,462 $ Residential ISE) - 41,150 46,225 40,250 58,400 Mallet Rate Units - - 54 61 54 74 Affordable Units - 5 6 5 7 Total Units - 59 67 59 81 Retail (SF) 5,000 3,000 5,000 12,000 15,000 Development Costs (see App. BBC) Land Costs (per No THE RLV analysis) $ 6,751,769 $ 5,132,268 $ 5,994,118 $ 4,919,783 $ 5,166,394 Hard Costs $ 24,843,832 $ 14,360,000 $ 16,810,000 $ 16,877,750 $ 21,837,722 Solt Costs Net TIT (see App. E) E 489,405 S 45,900 S 106;100. E _2011776 $ - 286,700_ Other City Costs (see App. E) $ 1,642,153 $ 531,453 $ 630,781 $ 630,781 $ 1,026,378 Other Soft Costs $ 3,091,916 $ 1,971,462 $ 2,299,218 $ 2,285,209 $ 3,011,096 Financing Costs $ 3273894 $ 1,962.974 $ 2285,334 $ 2,217,163 $ 2.781 Total Development Cost $ 38,793,498 $ 23,223,036 $ 27,225,899 $ 26,250,327 $ 33,008,270 per GSF $ 493 $ 442 $ 454 $ 424 $ 384 Net Operating Income (N01)(see App. D) Residential - Market Rate Elective Gross Income $ - $ 1,925,973 $ 2,151,607 $ 1,799,103 $ 2,311,802 Less: Operating Expenses $ $ (674091) $ 053,0621 $ (629686) $ (809131) Net OpemUng income $ - $ 1,251,882 $ 1,398,545 $ 1,169,417 $ 1,502,671 Residential Affordable - EffectiveGrosslncome $ - $ 52,849 $ 64,524 $ 52,849 $ 74,357 Less: Operating Expenses $ $ (1849]1 $ (22,583) $ (18497) $ (26025) Net Operating Income $ - $ 34,352 $ 41,941 $ 34,352 $ 48,332 Retail Effective Gross income $ 285,000 $ 171,000 $ 285,000 $ 513,000 $ 598,500 Less: Operating Expenses $ (8550) $ (5.130) $ (8,550) $ (15,390) $ (17955) Net Operating Income $ 276,450 $ 165,870 $ 276,450 $ 497,610- $ 580,545 Office Effective Gross income $ 2,917,716. $ - $ - 5 - $ - Less: DIP erafingExpenses $ (87531) $ - $ - $ - $ - Net Operating Income $ 2,830,185 $ - $ - $ - $ Total Net Operating income $ 3,105,635 $ 1,452,104 $ 1,716,9W $ 1,701,379 $ 2137 548 Project Component Values (see App. E) Residential Marvin Rate NOI $ $ 1,251 882 $ 1,398,545 $ 1,169,417 $ 1,502,671 Cap Rate 5.40% 5.40% 5.40% 5.40% 5.40% Value $ - $ 23,183,000 $ 25,898,981 $ 21,655,870 $ 27,827,241 Residential-Affordable N01 $ - $ 34,352 $ 41,941 $ 34,352 $ 48,332 Cap Rate 5.90% 5.90% 5.90% 590% 5.90% Value $ - $ 51 $ 710,864 $ 562,237 $ 819,186 Retail Not $ 276,450 $ 165870 $ 276,450 $ 497,610 $ 58645 Cap Rate 6.90% 6.90% 6.90% 690% 6.90% Value $ 4,006,522 $ 2,403,913 $ 4,006,522 $ 7,211,739 $ 8,413,696 Office NOI $ - 2,830,185 $ - $ - $ - $ - Cap Rate 9.20% 720% 7.20% 7.20% 7.20% Value $ 39,308,125 $ - $ - $ - $ - TrialPmlectVelue $ 43314647 $ 26169150 $ 30616357 $ 29449846 $ 37.60,123 Developer Returns (see App. E) Profit Margin Total Project Value $ 43,314,647 $ 26,169,150 $ 30,616,367 $ 29,449,846 $ 37,060,123 Less: Total Development Cost $ (38793498) $ (23.223.036) $ (27225,899) $ (26,25D,327) $ (33008.270) Profit $ 4,521,150 $ 2,946,114 $ 3,390,468 $ 3,199,519 $ 4,051,853 Return on Total Development Cost 8.0% 6.3% 6.3% 6.5% 6.5% HR&A Adoc.o, Inc. RMh TIF Return on Cosl_W 02 -19- 2013 /Summery Page 1 of 7 02- 20.2013 Appendix A Physical Parameters Prototype Name DowntownMXD -1 DowntownMXD -2 DowntownMXD -3 WilshireMXD PlcoMXD Location Downtown Downtown Downtown Wilshire Blvd Pico Blvd LUCE Area Downtown District Downtown District - Downtown District Mixed -Use Blvd. Mixed -Use Blvd. Low LUCE Tier TBD TBD TBD 3 3 Permit Requirement DA DR DA DA DA # Parcels 3 2 2 3 6 Bldg. Height (Feet) 70 60 71 60 47 Stories ( #) 5 5 6 5 4 Land Area (SF) - 22,500 15,000 15,000 22,500 45,000 Gross Bldg. Area (SF)' 78,750 52,500 60,000 61,875 85,865 Floor Area Ratio (FAR) -Gross Area' 3.50 3.50 4.00 2.75 1.91 Floor Area Ratio (FAR) -Net Area 3.07 2.94 3.42 2.32 1.63 Net Leasable Areas (SF� 68,985 44,150 51,225 52,250 - 73,400 Residential' - 41,150 46,225 40,250 58,400 Retail 5,000 3,000 5,000 12,000 15,000 Office 63,985 - - - - Residential Unit Mix Market Rate Studio - 475 475 475 475 1 -BR (SF) - 700 700 _ 700 700 2 -BR (SF) - 1,000 1,000 1,000 1,000 Studio - 22 25 22 - 26 1-BR( #units) - 16 20 19 23 2 -BR ( #units) 16 16 13 25 Subtotal (# units) - 54 61 54 74 Affordable4 1- BR(SF) 600 600 600 600 600 2- BR(SF) 850 850 850 850 850 1 -BR (# units) - 3 3 3 4 2 -BR ( #units) 2 3 2 3 Subtotal (# units) - 5 6 5 7 Total Units - 59 67 59 81 Parking Residential Markel Rate (wld. avg. per units - 1.44 1.43 1.42 1.49 Affordable (avg. per unit) - 1.00 1.00 1.00 1.00 Subtotal Spaces ( #) - 83 93 82 117 Retail - 5 6 5 7 Spaces /1,000 SF 3.3 3.3 33 3.3 3.3 Subtotal Spaces ( #) 17 10 17 40 50 Office Spaces /1,000 SF 3.3 3.3 3.3 3.3 3.3 Subtotal Spaces hh 211 - - - - Total Spaces Number 228 93 110 122 167 Gross Area/Space (SF)-Surface 300 300 300 300 300 Gross Area/Space(SF) -SUbt. 350 350 350 350 350 Total Parking Area (SF) 79,800 32,550 38,500 42,700 58,450 #Surface - - - - 53 # SubL Levels Total 3.5 2.2 2.6 1.9 0.9 Spaces /Levels 1 -2 114 93 86 122 114 Spaces /Levels 3-4. 114 - 24 - - Construction Period (months) 18 18 18 18 18 ' Per guidance provided by City Planning staff, based on recent development applications; emerging Downtown Specific Plan information; and LUCE 2010. 3 Per HRBA, based on net -to -gross floor area assumptions (90% for retail; 87% for office and 85% for residential), and translation of total gross floor area to gross floor area per - floor, based on: (1) street wall for first three floors; (2) assumed setbacks above 3rd floor. a Based on unit mix and net leasable floor area by unit type, per HRBA. ° Assumes 10% for very low - income households. 5 Assumes 1.0 spaces /studio; 1.5 spaces /i -BR unit; and 2.0 spaces /2 -BR unit. HRBA Advisors, Inc.. Wth TIF Relum on Cost _v3_02- 19-2013/A- Program Page 2 of 7 02 -20 -2013 Appendix A Physical Parameters (con'd) Prototype Name DowntownMXD -1 DowntOWnMXD.2 DOWntownMXD3 WilshireMXD PicoMXD Location Downtown Downtown Downtown Wilshire Blvd Pico Blvd Gross Floor Area by Story Site Area 22,500 15,000 15,000 22,500 45,000 Total Gross Bldg. Area 78,750 52,500 60,000 61,875 85,865 Total Floors 5 5 6 5 4 Floor 1 15,750 10,500 10,500 13,500 22,500 Floor 18,000 12,000 12,000 13,500 22,500 Floor 18,000 12,000 12,000 12,375 22,500 Floor 13,500 9,000 9,000 11,250 18,365 Floor 13,500 9,000 9,000 11,250 Floor 6 7,500 Total Gross Floor Area 78,750 52,500 60,000 61,875 85,865 FAR -Gross 3.50 - 3.50 4.00 2.75 1.91 Net Floor Area by Story Floor - 14,175 9,450 9,450 12,150 20,250 Floor 15,660 10,200 10,200 11,475 19,125 Floor 15,660 10,200 10,200 10,519 19,125 Floor 11,745 7,650 7,650 9,563 15,610 Floor 11,745 7,650 7,650 9,563 Floor 6 6,375 Total 68,985 45,150 51,525 53,269 74,110 Net/Gross Floor Area Overall 87.6% 86.0% 85.9% 86.1% 86.3% Residential Units Mix Office SF 63,985 - - - - Retail SF 5,000 3,000 5,000 12,000 15,000 Residential SF- Target - 42,150 46,525 - 41,269 59,110 Residential SF- Calculated (see below) - 41,150 46,225 40,250 58,400 Estimate Units (based on avg. unit size) 58 64 57 82 Market (target) 0 54 60 50 73 Studio - 22 25 22 26 1 -BR - 16 20 19 23 2 -BR - 16 16 13 25 Subtotal 54 61 54 74 Affordable 0 0 © 0 0 1 -BR - 3 3 3 4 2 -BR - 2 3 2 3 Subtotal - 5 6 5 7 TOTAL Units - 59 67 59 81 Unit Sizes Studio- Market 475 475 475 475 1- BR- Markel 700 700 700 700 2- BR- Market 1,000 1,000 1,000 1,000 1- BR- Affordable - 600 600 600 600 2- BR- Affordable 850 850 850 850 Net Rentable Area Studio - Market 10,450 11,875 10,450 12,350 1 -BR- Market 11,200 14,000 13,300 16,100 2- BR- Market 16,000 16,000 13,000 25,000 1- BR- Affordable 1,800 1,800 1,800 2,400 2- BR- Affordable 1,700 2,550 1,700 2,550 Total 41,150 46,225 40,250 58,400 HRSA Advisors, Inc.. W1th TIF Return on Cost _v3_02- 19- 2013/A- Program Page 3 of 7 - 02 -20 -2013 AppenallcB Development Costs' Pro101ype Name Assumed- DowntownM%Od DmmHomnM %04 DowntownMxOJ WlshmeM %0 PicoM %D Located Downtown D.t. Dawnlown wichire Blvd Pico Blvd Land ken 22,500 15,000 15,000 22,500 45,000 Sm$$ Bldg. Ner(SF) 78,750 52,500 60,000 61,875- 85,865 Net Leasable Area$(SF) Residential - 41,150 46,225 40,250 58,400 Retel 5,00 3,000 5,000 12,000 15,000 019ce 63,985 Sublenanern Parking (spaces) 229 93 110 122 167 1 -2 Levels 114 93 06 122 114 34 Levels 114 - 24 - - Land Cost leer NO TIF RAN analysis) $ 6,751,769 $ 5,132,268 5 5,994,110 $ 4,919,793 $ 5,166,394 Hard Cost Construction Type HIS HIM IIIB V V Building COnslrucnce](3 a Vm irs $170 $193 $195 $182 $181 DemolOnSile Improvements $15 per Land Area $ 1,101,250 $ 787,500 $ 900,000 5 928,125 $ 1,287,975 o1FSite lmptovement, $100,000 Allowance $ 100,000 $ 100,000 $ 1001000 S 100.000 $ 100,000 Building Core S Shell Versa $ 13,387,500 $ 10,132,500 $ 11,700,000 $ 11,261 .250 $ 15,541,565 Retail Tenant Improvements $35 ar Net Leasable SF $ 175,000 $ 105,000 $ 175,000 $ 420,000 $ 525,000 Off,. Tenant Improvements $30 xNat Leasable SF $ 1,919,550 $ - $ - $ - $ - Subtenanean Broken, Surface $5,000 per Space $ $ $ - $ - $ 265,000 1- 2LeveIs $30,000 per Spme $ 3.420,000 $ 2.790000 4 2,580000 1; 3,650,000 $ 3,420.000 3i Levels $35,000 per Space $ 3,990,000 $ - $ 840,000 $ $ Cen6n9s., 4% x Boastful Hard Cos% $ 670,532 5 445,000 It 515,000 it 509375 $ 698,182 Spacial Hard Cash $ 24,643,832 5 14,360,000 $ 16,910,000 $ 16 877,750 $ 21,837,722 soft Casts Net TIFFee _. _ Sam $ 489405 $ 45.900 bf 106,100 $ $ '200.715_ 5 288,700_ OWm, CR, Parmis &Faces See A,,.0 $ 1,642,153 $ 531,453 $ 630,781 $ 630,781 $ 1,026,375 Miss Creardearrift, Base%Cost Allow $ - $ S - $ - $ - ME101aerProfessionals 6% xHrud OOSk If 1,490,630 $ 961,600 If 1,008,600 $ 1,012,665 $ 1,310,263 Mark.14,11 wain, Commissions Reslden5a1 ILIM x Net Leasable SF $ - $ 308,625 $ 346,688 $ 301,875 $ 438,000 Retai /Ofice $3.00 aNet Leasable SF $ 206,955 $ 9,000 $ 15,000 $ 36,000 $ 45,000 Legal 8 An ... n6n9 1% x Hard Coals $ 248,438 $ 143,600 S 168,100 $ 168,778 $ 218,377 Taxes B Insurance 1% x Hard Can% $ 248,438 $ 143,600 $ 168,100 $ 168,778 $ 218,377 Developer Fee 3% x Hard Costs S 745,316 $ 430,800 $ 504,300 $ 506.333 $ 655,132 Cost.", 3% x Subtotal Soft Caere $ 162,140 $ 74237 $ 88,430 $ 90,780 $ 126,947 Subtotal SOR Comb $ 5,223,474 $ 2,548,815 S 3.036,099 $ 3,116,765 $ 4324,174 Subt..l Land♦ Hard a Sohs Costs $ 35,819,075 $ 22.Ul.083 $ 25,840,217 $ 24,914,298 $ 31,328,290 Financing Casts Loan Term bronNS) 18 Amses, Loan Balance 65.00% Contracts. Loan Interest Rate sm% Courtmes aLoan Interest $ 1,974,423 $ 1,101,953 If 1,385,682 $ 1326,029 $ 1,679,980 ConsWcten Less Fees 2D0% $ 736.381 $ 440,822 If 516,604 $ 498,286 $ 626,566 Capitalized Prated Value per App.E Permanent Loan Percent x Value 6B00% Permanent Loan Fees 2.00% If 563,090 $ 340,199 $ 382,848 $ 382,848 $ 451,762 Subtotal Financing Costs $ 3,273,894 $ 1,962,974 $ 2,285,334 $ 2,217,163 $ 2,768328 Total Development Cost Hard+ Soft Flnandn9 If 38,791,499 $ 23,223,036 $ 27,225,899, $ 26,20,327 $ 33,008,270 per GSF $ 492,62 $ 44234 $ 453.76 $ 424.25 $ 38442 Per HRM review of market data and finandal feasibility peer reviews of recent developments. r 60 %x calculated values, per Marshall& Saft Commercial Cost com a ct, f sl St. 2013, for Los Angeles cone, to eccauntfor e.pain hand corn. antl softcos6 awounted for sepmafar, HRSAAtlnsuz. Inc.. NM1IM1 TIF RaNrn on to$f_� 32- 1320139 -0ev Cts. Page 4 of 7 02- 232pta Appendix C TIF and Other City Fee 8, Permit Costs Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studios I -BR 2 -BR Affordable LBR 2 -BR Residential (Net Leasable SF) Retail (Net Leasable SF) Office (Net Leasable SF) Assumollans DmortowmMxD -1 DowntownMx6 -2 Downtmo.MKDJ Whshm,MXD Pi..M %D Downtown Downtown Downtown Wilshire Blvd Pico Blvd 22,500 15,000 15,000 22,500 45,000 78,750 52,500 60,000 61,876 85,865 - 22 25 22 26 - - 16 20 19 23 - 16 16 13 25 $ 1,544 3 3 3 4 Architectural Review Board 2 3 2 3 - 41,150 46.225 40,250 58,400 5,000 3,000 5,000 12,001) 15,000 63,985 $ 276 $ - - Planning Permits' Development Review $14,276 per project $ - $ 14,276 $ - $ - $ - EuvelopmentAgreement $25,000 per project $ - 25,000 $ - $ 25,000 $ 25,000 $ 25,000 Multiple Permit Fee $1,544 perproject S 1,544 $ 1,544 $ 1,544 $ 1,544 $ 1,544 Architectural Review Board $1,544 per project $ - $ - 1,544 $ 1,544 $ 1,544 $ 1,544 Coastal Zone Concept Review $276 per pmject $ 276 $ 276 $ 276 $ - $ - CEQA Calegobcal Exemption $13,873 per Project $ - $13,873 $13,873 $13873 ti - Negative Deciarelam $21,912 per project $ - $ - $ - S - $ - FIR $200,000 par prcj.rt $ 200,000 $ - $ - $- - $ 20D.000 Subtotal $ 220,820 $ 31,513 $ 42,237 $ 41,961 $ 228,088 Other Requirements' New Affordable fix, Linkage Fee NIA NIA $ - S - $ - S - $ - New Parks Fee NIA WA It - $ - S - $ - $ - MltigallonFeeonORCeSpace $10.88 x leasable area >15K $ 532,957 $ - $ - S - $ - Recrealin al Unit Tax $200 xunits $ - $ 11,800 $ 13,400 $ 11,800 $ 16,200 Ads Fee 1.00% x hard cost $ 248,438 $ 143,600 $ 168,100 $ 168,110 $ 218,311 Child Care Fee Market Rate Residential $130.48 per unit $ - $ 7,046 $ 7,959 $ 1,046 $ 9,656 Retail $4.43 xleasable area $ 22,150 $ 13,290 $ 22,150 $ 53,160 $ 66,450 office $6.20 xleasable area $ 396,707 $ - $ - $ - $ - School Faulities Fee Residential $3.20 xleasable area $ - S 131,690 $ 147,920 S 128,800 $ IW,BB0 Commersial $0.51 xleasable area $ 36,182 $ 1,530 $ 2,550 $ 6,120 $ 7,650 Subtotal $ 1,235,434 $ 308,846 3 362,079 $ 375,704 S 505,213 Bld,lCma trmtion Permits' Plan Check Residential 4. Mcrae $0.8439 xleasable area $ - $ 34,126 $ 39,009 $ 33,967 $ 49,284 Commmetal 10K SF $1.0600 xleasaMa area $5,300 $3,180 $5,300 $10,600 315,90E Commercial > 10K SF14 stones $0.3170 xleasable area $ 20,283 $ - $ - $634 S156E Mechanical $406 per Project $486 $486 $486 $486 $48E Electrical $486 per project $486 $486 $486 $486 $48E Plumbing $246 per project $246 $246 $246 $246 $24E Building Pastrmilaeria'clions MuN -famfty 4+ Stories $1.0605 xleasable area $ - $ 43,640 S 49,022 $ 42,685 S 61,933 Commercial IStory $0.7716 xleasable area $ 3,858 $ 2,315 $ 3,BSB $ 9,259 $ 11,574 Commemial 4, stores $0.8102 xleasable area $ $1841 $ - $ - $ - $ - Talent Improvements Q0KSF 50.349D xleasable area $ 1,745 $ 1,047 $ 1,745 $ 3,490 $ 5,235 Tenant lmprevemeMS >10K SF $0.27% xleasable area $ 17,634 $ - $ - $ 561 $ 1,378 Geolechnical Repeals $2,508 per project $ 2,508 $ 2,508 $ - $ 2,508 $ 2,508 Subtotal $ 104,387 $ 88,634 $ 100,152 $ 104,912 $ 150,615 Utility Fees' Water Melee $3,747 3I4" meter par project $ 3,747 $ 3,747 $ 3,747 $ 3,747 $ 3,747 Fileline Melee $18,026 V meter perproject $ 18,026 $ 18,026 $ 18,026 $ 18,026 $ 18,026 Wastewater Capital Facilities Siudiml -BR Units $1,168 pin-unit $ - $ 50,224 $ 59,560 $ 53,728 $ 65,408 2 -BR Units $1,557 per unit $ - $ 28,026 $ 29,583 $ 23,355 $ 43,596 Commemlet $779 per 1,0DD leasable SF $ 53,739 S 2,337 S 3895 S 9,348 $ 11,685 Subtotal $ 75,512 $ 102,360 11 114,819 $ 108,204 $ 142,462 Per current City sta8loonsuhant recommendations. Assumes TIF crad,tf.r existing retail on 60% of Downtown 8 Wlshim sites; 10,000 SF exislin9 retail and 10,000 SF existing office rimed for Pico site. per FY 2012 -13 City fee schedules s Includes rec erand capilot facilhies charges. HRBAAdwsmv, Inc. WIh IF Rom. on Cost v3 02- 19- 201310 "Cast Detail 02- 262013 Page 5 of Appendix D Net Operating Income Protclype Name Assumptions OowntownM %D -1 08wntomM %D -2 DovmtownM %0 -3 Wilehi.MXD PinMXD Location Downtown Do.[. Downtown Misbirs Blvd Pic, Blvd Land Area 22,500 15,000 15,000 12,560 45,000 Gmss Bid,. Area (SF) 70,750 52,500 60,000 61,875 85,885 Residential Unit Markel Rate Sudlo - 22 25 22 26 1 -BR - 16 20 19 23 2 -BR - 16 16 13 25 Affordable 1 -BR 3 3 3 4 2 -BR 2 3 2 3 Reail(Net Leasable SF) 5,000 3.000 5,000 12,000 15,000 Once (Net Leasable SF) 63,985 - - - - FmAesml Residentia1- Mod0st Rita Studio RenWniUMOnth Vades $2,150 $2,150 $2.150 $2,043 $1,828 1 S RenWnNMenth Vades $3,100 S3,f00 $3,100 $2,945 $2,835 2 S RenWnNMenOt Vades $4,000 $4,000 $4,000 $3,800 $3,400 Unit lncomeNcer $ - $ 1,930,800 $ 2,157,000 $ 1,803,612 $ 2,317,596 Other income 5.0% xUnits lnmme $ $ 96.540 $ 107,850 $ 90,181 $ 116,880 Gress Immune $ - $ 2,027,340 $ 2,264,850 $ 1,893,793 $ 2,433,476 Less: Vacancy B C011eNOn LOSS 5.0% xGross Income $ S 110136]) $ 11132431 $ (94,690) $ (1216]41 Elfenve Gress Income(EGIB $ - $ 1,925,973 $ 2,151,607 $ 1,799,103 $ 2,311,002 Less: Operating Espouses 350% xEGI $ $ (674.091.00) $ (75306200) $ 1629.686O0) $ (009.131.001 Net Operating Income $ - $ 1,251,882 $ 1,398545 $ 1,169,417 $ 1,502,671 For -Rent Residential - Amendable (VLQ 1 -BR RenWnNMOnm 5 054 $ 854 $ 854 $ 854 $ $54 2 -BR RomMUMManth $ 1,014 -$ 1,014 $ 1,014 $ 1,014 $ 1.014 Units lncomeHear $ - $ 55,080 $ 67,248 $ 55,080 $ ]].496 Me, Inman 1.1]% x Unds lncame S $ 551 $ $72 $ 551 S 775 Gmss Income S - $ 55,631 $ 67,920 $ 55,631 $ ]0,2]1 Less: Vacancy B Collection LOSS 5.0% x Gross Income S $ (2.7821 $ 133961 $ (2.782 $ (3,9141 EmeNVe Grass lnmme(EGN $ - 5 52,849 $ 64,524 $ 52, 849 $ 74,357 Less: Operating Expenses 350% x EGI $ $ (18,497 $ (22.5831 $ (18.49]) $ (26025) Net 0pemOm Income $ - $ M,352 $ 41,941 $ 34,352 $ 40,332 Retail' Average Ren05F /MOnN(NNN) Vades $ 5.00 $ 5.00 $ BAD $ 3.75 S 3.50 Gross Rental lncomeNcer $ 300,000 $ 180,000 $ 300,000 $ 540,000 S 630000 Less: Vacancy BC011e som LOSS 5.0% $ (150001 _$ (910001 $ (15,000) $ (27.00 $ (3L500) Effective Gress inmme(EGi) $ 265,000 $ 171,000 $ 285,000 $ 613.000 $ 590,500 Less : Wmimbmsed Operating Expenses 30% xEGI $ 18.5501 $ (51301 $ 1815501 $ (15.3901 $ 11]955) Net Opma5n9 Income $ 276,450 $ 165,870 $ 276,450 $ 497,610 $ 580,545 owes Avemme Reni/SF /MonN(NNN) $ 4.00 $ 400 $ 100 $ 3.75 $ 300 Gross Rentpnmme7Year $ 3,071,280 $ - $ - $ - $ Less: Vacancy B C011ecfion LOSS 5.0% It (153564) $ $ $ S Elmelis"awn lncome(EGI) $ 2,91],]16 $ - $ - Less:UnwraffeoedCemengEspouses 3.0% sLet $ (87.5311 $ $ $ 5 Net Operating Income $ 2,030,105 $ - $ - It Total Net Operating Income $ 3.106,635 $ 1,452,104 $ 4,716,936 $ 1,]01.3]9 S 2,131,548 r Per HRMmvmw ofeemet data and financial feasibility peer rewem oOecenl development. Assumes Volshire residential rents =95 %x dewelewer; Plm =85 %. Downtown office and apartment rent assume some view premiums at me upper stores. 2 Per Cilys rent schedule and HR6A assumptions. HRM Ptivlwmlrc. ViM iIF Rehm pn Cos[ 02f 9ID 13mNe1 Ops Income P8086 of 02AA13 Appendix E Developer Profit S Retum on Cost Prototype Nang Assumptions DovmtovmMXD -1 Do emsnMXD -2 Dosmad TMXD-3 WBSMraWD PicoMXD Location Domatovm O.nt.n D.M. w1W.BIW Ple, BIW Land Men 22.500 15,000 15,000 22,500 45,000 Gress Bic, Mo.(SF) ]6,]50 52,500 60,000 61,875 85,855 Resgemial Un85 Ma6mt Rate Sandte - 22 25 22 26 TBR - 16 20 19 23 2 -BR - 16 16 13 25 AgoNable 1 -BR - - 3 3 3 4 2 -6R 2 3 2 3 Retail (Nei Leasable SF) 5,000 3,000 5.000 12,000 15,000 Office (Net Leasable $9 63,985 - - - - Project Value ResidentiaWmxot Rate Net Operating income From App,D $ - $ 1,251,852 $ 1,396,545 $ 1,169,417 $ 1,502,671 Cap Rate 5AO% Value NOIICap Rate $ - It 23,103,000 $ 25,898,901 $ 21,655,870 $ 2],02],241 foNable RNetNet O paemll iing Income From App,D $ $ 34,352 $ 41,941 $ 34.352 $ 48,332 Cap Rate - 5.90% Value NOIICep Rate $ - $ 502,237 $ ]ID,80 $ 582,837 $ 019,186 Retail Net Operating Income From App.O $ 278,450 $ 185,870 $ 2 76,450 $ 497,610 $ 500,545 Cap Rate 6.90% Value NOIICep Rete $ 4,006,522 $ 2,403,913 $ 4,000,522 $ ]$11,]39 $ 8,413,696 O Net Operaling lnmmo Nst From App,D $ 2,030,185 5 - $ - $ - $ - CapRale 7,20% Value NOIICap Rale $ 39,30,125 5 - 5 - $ $ - Total PrOjedValue $ 43 314,69] $ 26,169,150 5 30,818,367 $ 29,449,846 $ 37,060,123 Developer Retoms DeveloperPmM Total Probed Vnlue Fromabove $ 43,314,647 $ 26,169,150 $ 30,616,367 5 29,449,846 $ 37,060,123 Less: Total Ceaelopmenl Cost From App B $ (36793490) $ (232230361 $ (27,225.8981 $ (26,250.32]1 $ (330002]0) Profit In 4,521,150 $ 2,046,114 $ 3,390,468 $ 3,199,519 5 4,D51,853 %of Value 10.4% 11.3% 11.1% 109% 10.8% Return on T01al Development Cost NOI From App.D S 3,108,635 $ 1,452,10 $ 1,716,938 $ 1,]01,3]9 S 2,131,548 Total Development Coat Fmm App.B $ 36,793,496 $ 23,223,036 $ 27.225.889 $ 26,250,327 $ 33,008,270 Return on Cost 8.0% 6.3% 6.3% 6.5% 6.5% Per Real Estate Research Carp.. Real Estate Raw 3NOu rb,0012, tes Mmelss Area data ' 10.15 %Iypical,,rx HR6A. XRBA Advisors, Inc. WMTIF ReNmon COSI_Ji_02- 1&20131 stamOn sot Peon 7 of] R2- 20.2013 City Council Meeting 2 -26 -13 Santa Monica, California ORDINANCE NUMBER (CCS) (City Council Series) AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA ADDING CHAPTER 9.73 TO THE SANTA MONICA MUNICIPAL CODE ESTABLISHING THE TRANSPORTATION IMPACT FEE PROGRAM, THE TRANSPORTATION IMPACT FEE, AND ESTABLISHING AN ADJUSTMENT AND WAIVER PROVISION WHEREAS, the City of Santa Monica is a small, dense, older, coastal city in a prime location, which consists of eight square miles, bordered on one side by the Pacific Ocean and on three sides by the City of Los Angeles; and WHEREAS, the combination of a scenic oceanside location, excellent climate, and the ready availability of urban facilities, services and entertainment make Santa Monica an extremely desirable place to live, work or visit; and WHEREAS, approximately 89,000 people live in the City, on weekdays there are about 300,000 present in the City, and on weekends and holidays the number of persons in the City soars to between 500,000 and 1 million; and WHEREAS, because of the numbers of people who live in, commute to and from, and visit the City, the provision of an adequate transportation infrastructure is essential to the City's success; and 1 WHEREAS, the City has adopted a Land Use & Circulation Element (LUCE) of its General Plan for the purpose of ensuring adequate circulation thereby preserving and enhancing quality of life within the City; and WHEREAS, objectives of the LUCE include no net new automobile PM peak hour trips; and WHEREAS, continued new development which does not contribute toward the cost of new transportation infrastructure will only serve to further exacerbate the negative effects of increased vehicle travel; and WHEREAS, the LUCE Goal T1 calls for designing and managing Santa Monica's streets to support comprehensive public health and safety; and WHEREAS, LUCE Goal T19 states that the City should create an integrated transportation and land use program that seeks to limit total peak period vehicle trips with a Santa Monica origin or destination to 2009 levels; and WHEREAS, LUCE Policy T19.7 calls for the City to perform a nexus study and implement transportation impact fee to mitigate negative transportation impacts of new development; and WHEREAS, LUCE action items explicitly encourage the use of impact fees for pedestrian improvements, bicycle improvements, to support the Big Blue Bus and more broadly to achieve the alternative transportation choices and reduce greenhouse gas emissions; and 17 WHEREAS, LUCE calls for the creation of a Pedestrian Action Plan that provides a framework for prioritizing investments in pedestrian improvements and this plan is currently in development; and WHEREAS, the Bicycle Action Plan identifies a comprehensive 5 -year and 20 -year bicycle network; and WHEREAS, it is anticipated that new development will continue to occur in the City of Santa Monica; and WHEREAS, it is appropriate for new land uses to pay for improvements to the transportation network proportionally to the number of PM peak hour trips their development contributes to the total number of trips. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES HEREBY ORDAIN AS FOLLOWS: SECTION 1. Chapter 9.73 is hereby added to the Municipal Code to read as follows: Chapter 9.73 Transportation Impact Fee Program 9.73.010 Findings and Purpose. (a) The purpose of this Chapter is to implement the goals, obiectives and policies of the City of Santa Monica's Land Use & Circulation Element ( "LUCE ") and, particularly, the City's goal of no net new automobile PM peak hour trips occurring when new development is 3 constructed within the City limits. Imposing a fee that is reasonably related to the burdens created by new development on the City's surface transportation system will enable the City to construct the required capital improvements that will contribute to fulfilling this goal. (b) The City has prepared a Transportation Impact Fee Nexus Study. It shows, and the City Council finds that there is a reasonable relationship between the purpose for which the fees established by this Ordinance are to be used and the type of development projects on which the fees are imposed, and between the amount of the fees and the cost of the transportation facilities or portion of the facilities attributable to the development on which the fees are imposed. (c) It is the intent of the City Council that the fee required by this Chapter shall be supplementary to any conditions imposed upon a development pro.iect pursuant to other provisions of the Municipal Code, the City Charter, the Subdivision Map Act, the California Environmental Quality Act, other state and local laws, which may authorize the imposition of project specific conditions on development. 9.73.020 Applicability of Chapter. (a) The regulations, requirements and provisions of this Chapter and Council resolutions adopted pursuant hereto shall apply to all new Projects for 0 which a development application was deemed complete or an application for changes in existing uses was made on or after the effective date of this Ordinance. (b) Notwithstanding the above, the following projects, square footage and affordable residential units shall not be subject to the requirements of this Chapter: (1) places of worship; (2) City proiects; (3) day care centers; (4) private K -12 schools; (5) multi - family rental housing proiects developed bV a nonprofit housing provider if the developer is receiving financial assistance through a public agency, so long as the multi - family rental housing project is an affordable housing proiect meeting the requirements of Santa Monica Municipal Code Section 9.04.02.030.065 and the project's affordable housing obligations will be secured by a regulatory agreement memorandum of agreement, or recorded covenant with a public agency for a minimum period of fifty -five years; (6) re- occupancy of square footage in an existing building or structure if there is no change of use; (7) square footage used for outdoor dining in the public right of way; and (8) affordable housing units deed restricted to very-low income and low income households. 9.73.030 Definitions. For the purpose of this Chapter, the following terms shall be defined as follows: (a) "Area 1" shall mean the area bounded in the west by Washington Avenue from 7th Street to 5th Street and from Ocean Avenue to 2nd Street and Idaho Avenue from 2nd Street to 5th Street, in the north by 5th Street from Idaho Avenue to Washington Avenue and from Highway 10 to Civic Center Drive, 7th Street from to Washington Avenue to Colorado Avenue, and 6th Street from Colorado Ave to Highway 10, in the east by Colorado Avenue from 7th Street to 6th Street, Highway 10 from 6th Street to 5th Street and Civic Center Drive from 5th Street to Ocean Avenue, and in the South by 2nd Street from Idaho Avenue to Washington Avenue and Ocean Avenue from Washington Avenue to Civic Center Drive and, the area bounded in the west by Broadway from 20th Street to 26th Street and Colorado Avenue from 26th Street to Stewart Street, in the north by 26th Street from Broadway to Colorado Avenue and from Stewart Street from Colorado Avenue to Exposition Boulevard, in the east by Exposition Boulevard from Stewart Street to Cloverfield Boulevard and Olympic Boulevard from Cloverfield Boulevard to 20th Street, and in the South by 20th Street from Broadway to Olympic Boulevard. M (b) "Area 2" shall mean any remaining area within the City boundary that are not included in Area 1. (c) Area 3 shall mean a half mile walk -shed from a transit station within the City boundary. SANTA MONICA TRANSPORTATION IMPACT FEE AREA TYPES (d) "City Projects" shall mean City public works projects and City community facilities (e.g. libraries, public parking structures, recycling centers, and community centers), not including public /private partnerships. (e) "Housing Development Project" shall mean a development project with common ownership and financing consisting of residential use or mixed use where not less than fifty (50) percent of the floorspace is for residential use as provided in Government Code Section 66005.1(c) and its successor statutes. (f) "Nexus Study" shall mean the Transportation Impact Fee Nexus Study prepared by Nelson /Nygaard Consulting Associates Inc, dated April 2012. (g) "Project' shall mean any development having a gross new or additional floor area of one thousand square feet or more or that changes an existing use to a different use that increases the demand for transportation infrastructure, or residential development of improved or unimproved land which adds dwelling units. Gross floor area for the purposes of this definition shall be the same as Section 9.04.02.030.315, or any successor legislation, but shall exclude parking area. Where the requirements of this Chapter have been adjusted or waived for a project pursuant to Section 9.73.050 hereof, subsequent changes in use, project remodels or tenant improvements that increase trip generation shall constitute a project as defined herein. (h) "Transit Station" means a rail or light -rail station, ferry terminal bus hub, or bus transfer station, and includes planned transit stations otherwise meeting this definition whose construction is f3 programmed to be completed prior to the scheduled completion and occupancy of the housing development. "Transportation Impact Fee" shall mean a fee paid to the City by an applicant pursuant to Section 9.73.040 of this Chapter in connection with approval of a project, to contribute to the creation of transportation improvements to offset additional vehicle trips generated by new development to achieve No Net New Trips consistent with the goals, obiectives and policies of the City's Land Use & Circulation Element "L( UCE "). 9.73.040 Transportation Mitigation Requirement. Except as provided in Section 9.73.050, the developer of a Proiect shall pay a transportation impact fee in accordance with the following: (a) Transportation Impact Fee. Fees shall be computed as follows: For Single Family residential development proiects that result in the addition of a dwelling unit: (A) $7,600 per multi - family dwelling unit in Area 1. (B) $7,800 per multi - family dwelling unit in Area 2. For Multi - Family residential development proiects that result in the addition of a dwelling unit: (A) $2,600 per multi - family dwelling unit in Area 1. (B) $3,300 per multi- familV dwelling unit in Area 2. (C) $2,600 per multi- familV dwelling unit in Area 3 for Housing Development Projects that satisfy the requirements of subsection 6 (i), (ii), and (iii) of this subsection. 3. All non - residential projects shall pay the following based on the gross square footage of the proposed project: (A) Retail: i. $21 per square foot in Area 1. ii. $30.10 per square foot in Area 2. (B) Office: i. $9.70 per square foot in Area 1. ii. $10.80 per square foot in Area 2. (C) Medical Office: i. $28.10 per square foot in Area 1. ii. $29.80 per square foot in Area 2. (D) Hospital: i. Not applicable. ii. $14.70 per square foot in Area 2. (E) Lodging: i. $3.60 per square foot in Area 1. ii. $3.60 per square foot in Area 2. 10 (F) Industrial: i. $1.20 per square foot in Area 1. ii. $1.30 per square foot in Area 2. (G) Auto Sales & DisplaV Areas: i. $1.20 per square foot in Area 1. ii. $1.30 per square foot in Area 2. 4. The land use categories identified in subsections (i) — (vi), above, shall have the following meanings: (A) Single Family Residential shall include Single FamilV. (B) Multi- FamilV Residential shall include Congregate Care- Non Senior, Congregate Care — Seniors, and Multi Family. (C) Retail shall include: Animal kennels and veterinary hospitals, Auto Repair, Car wash, Community meeting facilities, community centers and non - residential adult care facilities, Retail and wholesale construction - related materials, nurseries and garden centers. Entertainment and recreational facilities. Gas station Library Museums, aquariums and art galleries, Nightclubs and bars Personal services, Post - secondary educational facility, Pre- school /child day care, Private studio, Restaurants — fast food and cafes, Restaurants — sit down, Retail durable goods, Retail food and markets, Retail mixed, and Retail non -food. 11 (D) Office shall include: Creative office, Financial institutions and office, and General office. (E) Medical office shall include: Medical office, including medical clinics, and offices for medical professionals. (F) Hospital shall include: Full service hospitals. (G) Lodging shall include: Hotels, motels and other overnight accommodations. (H) Industrial shall include: Surface or structured auto inventory storage, City maintenance facilities and bus yards, Heavy industrial and manufacturing Light industrial, Utilities, Warehouse and self - storage, and Wholesale distribution and shipping. 5. For mixed residential /nonresidential development, the sum of the fee required for each component as set forth above in subdivisions (a)(2) and (a)(3) of this subsection. 6. Housing Development Projects within Area 3 that meet the following characteristics shall pay a Transportation Impact Fee of $2,600 per multi - family dwelling unit: (A) The housing development is located within one -half mile of a transit station and there is direct access between the housing development and the transit station along a barrier -free walkable pathway not exceeding one -half mile in length, and 12 (B) Convenience retail uses, including a store that sells food, are located within one -half mile of the housing development, (C) The housing development provides either the minimum number of parking spaces required by the Municipal Code, or no more than one onsite parking space for zero to two bedroom units, and two onsite parking spaces for three or more bedroom units, whichever is less. 7. The amount of square footage to be demolished in an existing building or structure as part of a Protect shall be a credit in the calculation of the Transportation Impact Fee. (b) Timing of Fee Payment. The Project applicant shall pay fees according to the schedule of fees in place on the date the fees are paid, except that the applicant for a vesting tentative map for a development protect shall paV the fees, as automatically adjusted, in effect on the date the application for the vesting tentative map is deemed complete. 2. No building permit for any Project shall be issued unless the fees have been paid or, if state law requires the City to accept later fee Payment, a contract to Pay the fees has been executed with the City, in which case no final inspection shall be approved until the fees have been 13 paid. If a residential development project contains more than one dwelling unit and is approved for development in phases, the developer shall pay the fees in installments based on the phasing of the residential development project. Each fee installment shall be paid at the time when the first dwelling unit within each phase of development has received its final inspection. 3. For all Projects subject to this Chapter, the CitV may require the payment of fees at an earlier time if the fees will be collected for public improvements or facilities for which an account has been established and funds appropriated and for which the CitV has a proposed construction schedule or plan prior to final inspection, or the fees are to reimburse the City for expenditures previously made. 9.73.050 Fee Adjustments and Waivers. (a) A developer of any Project subject to the fee described in Section 9.73.040 (a) may request that the requirements of this Chapter be adiusted or waived for the conversion of non - conforming ground floor uses in commercial zones to conforming pedestrian- oriented uses (b) To receive an adiustment or waiver, the developer must submit an application to the Planning and Community Development Director, or his or her designee, at the time the developer files a discretionary protect application or, if no discretionary application is 14 required, a building permit application. The developer shall bear the burden of presenting a preponderance of the evidence to support the request and set forth in detail the factual and legal basis for the claim, including all supporting technical documentation. (c) The Director of Planning and Community Development or his or her designee shall render a written decision within ninety (90) days after a complete application is filed. The Director's decision may be appealed to the Planning Commission bV the Protect applicant if such appeal is filed within fourteen consecutive calendar days from the date that the decision is made in the manner provided in Part 9.04.20.24, Sections 9.04.20.24.010 through 9.04.20.24.040 of this Code. The decision of the Planning Commission shall be final. (d) If an adjustment or waiver is granted, any change in use from the approved protect shall invalidate the adjustment or waiver. 9.73.060 Fee Revenue Account. Pursuant to Government Code Section 66006, the Transportation Impact Fee Reserve Account is hereby established. The fees paid to the City pursuant to the provisions of this Chapter shall be deposited into the Transportation Impact Fee Reserve Account and used solely for the purpose described in this Chapter. All monies deposited into the Reserve 15 Account shall be held separate and apart from other City funds. All interest or other earnings on the unexpended balance in the Reserve Account shall be credited to the Reserve Account. 9.73.070 Distribution of Transportation Impact Fee Funds. All monies and interest earnings in the Transportation Impact Fee Reserve Account shall be expended on the construction and related design and administration costs of constructing transportation improvements identified in the Nexus Study, or such other report as may be prepared from time to time to document the reasonable fair share of the costs to mitigate the transportation impacts of new development. Such expenditures may include but are not necessarily limited to the following: (a) Reimbursement for all direct and indirect costs incurred by the City to construct transportation improvements pursuant to this Chapter, including but not limited to the cost of land and right -of -way acquisition, planning legal advice, engineering design, construction, construction management materials and equipment. (b) Costs of issuance or debt service associated with bonds, notes or other security instruments issued to fund transportation improvements identified. 16 (c) Reimbursement for administrative costs incurred by the City in establishing or maintaining the Transportation Impact Fee Reserve Account required by this Chapter, including but not limited to the cost of studies to establish the requisite nexus between the fee amount and the use of fee proceeds and yearly accounting and reports. 9.73.080 Periodic Review and Adjustment of Transportation Impact Fees. To account for inflation in transportation infrastructure construction costs, the fee imposed by this ordinance shall be adjusted automatically on July 1 of each fiscal year; beginning on July 1, 2013, by a percentage equal to the appropriate Engineering Construction Cost Index as Published by Engineering News Record, or its successor publication, for the preceding twelve (12) months. 9.73.090 Fee Refunds. (a) If a transportation impact fee is collected on a Project and the permit for that Protect later expires, is vacated or voided before commencement of construction, the developer shall, upon request, be entitled to a refund of the unexpended transportation impact fee paid, less a portion of the fee sufficient to cover costs of collection, accounting for and administration of the fee paid. Any request for a refund shall be 17 submitted in writing to the Planning and CommunitV Development Director within one year of the date that the permit expires or is vacated or voided. Failure to timely submit a request for refund shall constitute a waiver of any right to a refund. (b) Fees collected pursuant to this Chapter which remain unexpended or uncommitted for five or more fiscal years after deposit into the Transportation Impact Fee Reserve Account may be refunded as Provided by state law. 9.73.100 Fee revision by resolution. The amount of the transportation impact fees and the formula for the automatic annual adjustment established by this Chapter may be reviewed and revised periodically bV resolution of the City Council. This Chapter shall be considered enabling and directive in this regard. 9.73.110 Regulations. The Planning and Community Development Director, or her /his designee, is authorized to adopt written administrative regulations or guidelines that are consistent with and that further the terms and requirements set forth within this Chapter. WR SECTION 2. This Ordinance shall apply to all development applications meeting the criteria for applicability as defined herein determined complete after the effective date of this Ordinance. SECTION 3. Any provision of the Santa Monica Municipal Code or appendices thereto inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to that extent necessary to effect the provisions of this Ordinance. SECTION 4. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed this Ordinance and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any portion of the ordinance would be subsequently declared invalid or unconstitutional. SECTION 5. The Council finds, that the adoption of this ordinance is not a project pursuant to CEQA Guideline section 15378(b)(4), which excludes from the definition of Project "the creation of government funding mechanisms or other government fiscal activities, which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment." Alternatively, the proposed ordinance is exempt from the provisions of the California Environmental Quality Act (CEQA) pursuant to W Section 15061(b)(3) in that it can been seen with certainty that the proposed ordinance does not have the potential to significantly impact the environment, since the proposed ordinance amendment is a fee that will be levied on projects that will be evaluated in compliance with CEQA on their own merits. SECTION 6. The Mayor shall sign and the City Clerk shall attest to the passage of this Ordinance. The City Clerk shall cause the same to be published once in the official newspaper within 15 days after its adoption. Pursuant to California Government Code section 66017(a), this Ordinance shall become effective 60 days after its adoption. APPROVED AS TO FORM: 20