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SR-06-24-2014-3No City Council Report City Sputa Bionics City Council Meeting: June 24, 2014 Agenda Item: 3- N To: Mayor and City Council From: David Martin, Planning and Community Development Director Subject: Agreement with HR &A Advisors, Inc. to Provide Additional Services Regarding Financial Feasibility of Two Proposed New Development Fees Recommended Action Staff recommends that the City Council authorize the City Manager to negotiate and execute a third modification to a sole source Professional Services Agreement No. 9804 (CCS) with HR &A Advisors, Inc. (HR &A), a California -based company, in the amount of $47,273, to conduct financial feasibility testing of two proposed new development fees. This will result in a two -year amended contract with a new total amount not to exceed $145,268 with future year funding contingent on Council approval and budget adoption. Executive Summary In 2012 HR &A was selected from a short list of economic consultants established from a Request for Qualifications to complete a financial feasibility analysis for the proposed Transportation Impact Fee (TIF). The City and HR &A entered into a Professional Services Agreement in the amount of $24,975 for completion of these services. A first modification in April 2013 increased the agreement by $32,900 resulting in a total amount not to exceed $57,875 for related financial feasibility analyses associated with the proposed Parks and Commercial Development/Affordable Housing Linkage Fees. In September 2013, a second modification increased the amount of compensation to allow HR &A to complete the analyses of the proposed Parks and Commercial Development /Affordable Housing Linkage Fees. Staff recommends extending the agreement with HR &A through June 30, 2015 and modifying the scope to allow HR &A to examine additional prototypes for feasibility of two proposed new development fees. This third modification would increase the contract amount by $47,273 resulting in a total agreement amount not to exceed $145,268. Background On September 8, 2009, Council directed staff to pursue the creation of an open space linkage fee on new development to achieve the open space and parks and recreation goals set forth in the LUCE. On December 11, 2012, Council directed staff to establish an affordable housing linkage fee for new commercial development. In accordance with the State Mitigation Fee Act (A131600 et seq.), the City prepared draft nexus studies for these two possible fees for upcoming consideration by the Council. In December, 2012, the City and HR &A entered into a Professional Services Agreement in the amount of $24,975 for financial feasibility analysis of the proposed TIF. In April, 2013, the original agreement was modified in the amount of $32,900 to include related financial feasibility analyses associated with the proposed Parks and Commercial Development /Affordable Housing Linkage Fees. On September 24, 2013, Council approved a second modification with HR &A in the amount of $40,120, increasing the total contract amount to $97,995. The second modification allowed HR &A to complete the financial feasibility analysis related to proposed Parks and Commercial Development /Affordable Housing Linkage Fees. Discussion The scope of the proposed third modification is a continuation of the feasibility analyses that HR &A has been undertaking for the Housing Nexus Study and Parks Nexus Study. HR &A will build upon this work and examine additional prototypes for feasibility of two proposed new development fees. The proposed third modification would increase the contract amount by $47,273 bringing the total contract amount to $145,268. The proposed scope would include the following tasks: K • Work with staff to define four hypothetical building developments based on development standards provided in various zones. The size and mix of uses in these hypothetical prototypes will be the basis for the feasibility analysis. This will include typical building types for Tier 1 and Tier 2 projects in multiple land use designations such as the Mixed -Use Boulevard Low and General Commercial zones; • Run hypothetical developments through an economic model to determine financial feasibility for each of the four new prototypes; • Update the previous Tier 1 and Tier 2 prototypes analyses to account for the current Tier 2 requirements strategy which proposes increased obligations for Open Space, Housing Linkage, and Transportation Impact Fees (TIF) and requirements for increased onsite affordable housing; • Prepare a summary of results; • Prepare additional analysis or refinements, as necessary; • Prepare a memorandum report summarizing the modeling results for all ten Tier 1 and Tier 2 hypothetical prototypes (original six plus four new prototypes); • Review the draft report with City staff and revise if needed; • Participate in one additional Planning Commission hearing; and • Participate in up to two City Council hearings. Contractor /Consultant Selection In December, 2012, HR &A was selected pursuant to SMMC section 2.24.073, which authorized a sole source agreement due to the specialized nature of the services needed. HR &A has over 30 years of experience in economic development and market analysis. Subsequent modifications to the original agreement resulted in a contract amount exceeding $80,000, requiring City Council approval. HR &A was selected from a short list of economic consultants established from a Request for Qualifications (RFQ) process to complete the financial feasibility analysis for the proposed Transportation Impact Fee (TIF). 3 Financial Impacts & Budget Actions The contract modification to be awarded to HR &A is $47,273, for a new contract total of $145,268. Funds are included in the FY 2013 -14 budget in divisions 01264, 01266, and 01501. The contract will be charged to the following accounts: 01264.555060: $8637 01266.555060: $30,000 S010400.589000: 8636 Total: $47,273 Prepared by: Denise Smith, Executive Administrative Assistant Approved: David Martin , Director Planning and Community Development 0 Forwarded to Council: Rod Gould City Manager Reference: Modification to Agreement No. 9804 (CCS)