O2470City Council Meeting: October 14, 2014 Santa Monica, California
ORDINANCE NUMBER 2470 (CCS)
(City Council Series)
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
SANTA MONICA ADDING CHAPTER 9.74 TO THE SANTA MONICA MUNICIPAL
CODE ESTABLISHING THE AFFORDABLE HOUSING COMMERCIAL LINKAGE FEE
PROGRAM, THE AFFORDABLE HOUSING COMMERCIAL LINKAGE FEE, AND
ESTABLISHING AN ADJUSTMENT AND WAIVER PROVISION
WHEREAS, new commercial development (creative office space, hotel, retail and
entertainment, medical, industrial /light manufacturing, institutional, and hospitals)
creates a variety of new jobs with varied degrees of compensation for workers in
commercial developments; and
WHEREAS, the addition of new workers in these new commercial developments
generates housing demands for households at extremely low, very low, low, and
moderate incomes; and
WHEREAS, due to housing and market conditions, new market -rate
development projects in the City have provided a disproportionate quantity of housing
units that are not affordable to all income groups creating an unbalanced housing stock;
and
WHEREAS, funds for construction, expansion or improvement of affordable
housing, including Federal and State housing finance and subsidy programs, are not
available to accommodate the needs caused by development projects which will
promote an inadequate supply of affordable housing stock within the City; and
WHEREAS, there is a low vacancy rate for housing affordable to persons of
extremely low, very low, low, and moderate income households; and
WHEREAS, Los Angeles County is the least affordable real estate market in the
country; and
WHEREAS, the City's existing rental housing stock is quickly becoming
unaffordable to very low and low income households; and
WHEREAS, due to the Costa - Hawkins Act, 63.3% of the controlled rental units
for which the Santa Monica Rent Control Board has registered rents have rented at
market rates; and
WHEREAS, since 1999, the median monthly rents for these units have increased
from $800 to $1,250 for studio /efficiency units, from $1000 to $1900 for one - bedroom
units, from $1400 to $2525 for two- bedroom units and from $1800 to $3201 for three or
more bedroom units; and
WHEREAS, due to these factors, workers of very low, low, and moderate income
are experiencing increasing difficulty in locating and maintaining adequate, safe, and
sanitary affordable housing within the City or even near the City; and
2
WHEREAS, the failure to provide adequate affordable housing for lower -wage
workers can force these workers to live in less than adequate housing within the City,
pay a significantly disproportionate share of their incomes to live in adequate housing
within the City, or commute ever - increasing distances to their jobs from housing located
outside the City; and
WHEREAS, the lack of affordable housing has detrimental impacts on traffic,
transit, and related air quality impacts and the demands placed on the regional
transportation infrastructure; and
WHEREAS, commercial uses in the City benefit from the availability of housing
close to their employees; and
WHEREAS, a Commercial (Non - Residential) Nexus Study & Linkage Fee
Analysis was prepared by Rosenow Spevacek Group, Inc. in July 2013 to analyze the
relationship between commercial development, job creation, and the demand for
affordable housing ( "Nexus Study "); and
WHEREAS, the Nexus Study demonstrates the reasonable relationship between
the purpose of the affordable housing fee, the fee amount, the revenue generated, and
the impacts of commercial development that the proposed use of that revenue is
intended to address; and
WHEREAS, more specifically, the Nexus Study documents the linkage between
new and expanded commercial development, the net number of new employees and
employee households generated by businesses occupying these land use buildings,
and the housing demands of these households; and
WHEREAS; as detailed, new housing affordable to persons identified in the
Nexus Study is not now being added to the supply in sufficient quantity to meet the
needs of the new employee households associated with new or expanded commercial
development; and
WHEREAS, the Nexus Study quantifies the cost mitigation associated with
developing affordable housing units based on the identified need resulting from
employees generated by new commercial development; and
WHEREAS, the City Council is imposing the fee established by this Ordinance in
order to partially close the this gap by using the fee to provide for increased affordable
housing; and
WHEREAS, the Santa Monica Municipal Code does not currently establish an
adequate mechanism to account for the impact that commercial development has on
increasing the need for affordable housing; and
WHEREAS, requiring commercial developers to assist in the production of
affordable housing is also consistent with the City's long- standing commitment to
achieve and maintain a suitable living environment including decent housing for all
economic levels; and
C!
WHEREAS, this municipal commitment conforms with State and Federal policies
and is an important goal of the City's current Housing Element and its Consolidated
Plan; and
WHEREAS, Objective 2.0 of the City's 2013 -2021 Housing Element provides
that the City should develop new affordable housing financial programs, in part, through
the adoption of new local impact fees, including commercial development impact fees,
based on the recommendations of appropriate nexus studies; and
WHEREAS, this program will benefit the City as a whole since each development
which contributes to affordable housing through the payment of this fee assists in
augmenting the City's housing mix, helps to increase the supply of housing for all
economic segments of the community, and addresses the affordable housing need
generated by the development, thereby supporting a balanced community which is
beneficial to the public health, safety, and welfare of the City.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA
DOES HEREBY ORDAIN AS FOLLOWS:
SECTION 1. Santa Monica Municipal Code Chapter 9.74 is hereby added to the
Santa Monica Municipal Code to read as follows:
0
Chapter 9.74
Affordable Housing Commercial Linkage Fee Program
9.74.010 Purpose and Findings.
(a) The purpose of this Chapter is to facilitate the development
and availability of housing affordable to a broad range of households with
varying income levels within the City. As detailed in the findings supporting
the ordinance codified in this Chapter, the requirements of this Chapter
are based on a number of factors including, but not limited to, the City's
long- standing commitment to economic diversity; the serious need for
affordable housing as reflected in local, State, and Federal housing
regulations and policies; the demand for affordable housing created by
commercial development; and the impact that the lack of affordable
housing production has on the health, safety, and welfare of the City's
residents including its impacts on traffic, transit and related air quality
impacts, and the demands placed on the regional transportation
infrastructure. Imposing a fee that is reasonably related to the burdens
created by new commercial development on the City's need for affordable
housing will enable the City to fund development of affordable housing
units that will contribute to addressing these impacts and fulfilling these
goals.
(b) The City has prepared a Commercial Nexus Study and
Linkage Fee Analysis. 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
9
projects on which the fees are imposed, and between the amount of the
fees and the cost of the affordable housing units or portion of the units
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 project 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.
9.74.020 Applicability of Chapter.
(a) The regulations, requirements and provisions of this Chapter
and Council resolutions adopted pursuant hereto shall apply to any
commercial portion of any new Project for which a development
application was determined complete or an application for change(s) in
existing use(s) was made on or after the effective date of this Ordinance.
Any project subject to the provisions of this Chapter shall not be required
to comply with Part 9.04.10.12 of the Santa Monica Municipal Code,
Project Mitigation Measures.
(b) Notwithstanding the above, the following projects or portions of
projects as specified thereof shall not be subject to the requirements of this
Chapter:
(1) places of worship;
(2) City projects;
VA
(3) day care centers;
(4) private K -12 schools;
(5) commercial portions of multi - family rental housing projects developed
by 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 project meeting the requirements of Santa Monica Municipal
Code Section 9.04.02.030.025 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.
If a development is exempt from the fee at initial construction, but later
converts to a commercial development subject to this Ordinance, the converted
square footage will be deemed net new commercial square footage and the
housing impact fee shall be paid prior to final approval of a building permit.
9.74.030 Definitions.
For the purpose of this Chapter, the following terms shall be
defined as follows:
(a) "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.
(b) "Nexus Study" shall mean the Commercial Nexus Study and
Linkage Fee Analysis prepared by Rosenow, Spevacek Group, Inc., dated
July 2013.
(c) 'Project' shall mean any development having a commercial
use component and 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 affordable housing. 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
(d) "Affordable Housing Commercial Linkage Fee" shall mean a
fee paid to the City by an applicant pursuant to Section 9.74.040 of this
Chapter in connection with approval of a project, to contribute to the
creation of affordable housing production or preservation to offset
additional need for affordable housing generated by new commercial
development.
9.74.040 Affordable Housing Mitigation Requirement.
Except as provided in Section 9.74.050, the developer of a Project
shall pay an affordable housing commercial linkage fee in accordance with
the following:
(a) Affordable Housing Commercial Linkage Fee. Fees shall be
computed as follows:
9
I . All non - residential portions of a Project shall pay the
following based on the gross square footage of each use included in the
proposed Project:
(A) Retail: $9.75 square foot.
(B) Office: $11.21 per square foot.
(C) Hotel /Lodging: $3.07 per square foot.
(D) Hospital: $6.15 per square foot.
(E) Industrial: $7.53 per square foot.
(F) Institutional: $10.23 per square foot.
(G) Creative Office: $9.59 per square foot.
(H) Medical Office: $6.89 per square foot.
2. The land use categories identified in subsections (A) — (H),
above, shall have the following meanings:
(A) Retail shall include: animal kennels and veterinary hospitals,
auto repair, car wash, retail and wholesale construction - related materials,
nurseries and garden centers, entertainment and recreational facilities,
gas stations, art galleries, nightclubs and bars, Personal services, Post-
secondary educational facility, private studio, restaurants — fast food and
cafes, restaurants — sit down, retail durable goods, retail food and
markets, retail mixed, and retail non -food.
(B) Office shall include: financial institutions and office, and
general office.
10
(C) Hotel /Lodging shall include: hotels, motels and other
overnight accommodations.
(D) Hospital shall include: full service hospitals.
(E) 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.
(F) Institutional shall include: educational and cultural facilities.
(G) Creative Office shall include: offices, production spaces and
work spaces of establishments that are in the business of the
development of creative property, including but not limited to, advertising,
architectural services, broadcasting, communications, computer software
design, entertainment, engineering, graphic design, interior design,
internet content, landscape design, and similar uses.
(H) Medical Office shall include: Medical office, including
medical clinics, and offices for medical professionals.
3. The amount of legally permitted non - residential square
footage to be demolished in an existing building or structure, or to be
removed from an outdoor area used as part of a service station or for auto
dealer sales, display and inventory storage, as a part of a Project shall be
a credit in the calculation of the Affordable Housing Commercial Linkage
Fee. Outdoor area used as part of a gas station shall not include
setbacks, landscaping, parking and other paved areas used solely for
11
access and circulation. Credit shall be applied on a per square foot basis
according to per square foot fee assigned to the type of commercial use
that existed on the site prior to the new Project application submittal.
(b) Timing of Fee Payment.
1. 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 project shall pay
the fees in effect on the date the application for the vesting tentative map
is deemed complete, as automatically adjusted.
2. No building permit for any Project shall be issued unless the
fees have been paid.
9.74.050 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
adjusted or waived based on a showing that applying the requirements of
this Chapter would effectuate an unconstitutional taking of property or
otherwise have an unconstitutional application to the property.
(b) To receive an adjustment or waiver, the applicant must submit
an application to the City Manager or her /his designee, at the time the
applicant files a discretionary project application, or if no such application
is required, a building permit application. The applicant shall bear the
burden of presenting substantial evidence to support the request and set
IF
forth in detail the factual and legal basis for the claim, including all
supporting technical documentation.
(c) The City Manager or her /his designee, shall render a written
decision within ninety days after a complete application is filed. The City
Manager's or designee's decision may be appealed to the City Council 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 9.04.20.24.050 of this Code or any
successor thereto.
(d) If the City Manager or her /his designee, or City Council on
appeal, upon legal advice provided by or at the behest of the City
Attorney, determines that applying the requirements of this Chapter would
effectuate an unconstitutional taking of property or otherwise have an
unconstitutional application to the property, the affordable housing fee
requirements shall be adjusted or waived to reduce the obligations under
this Chapter to the extent necessary to avoid an unconstitutional result. If
the City Manager or her /his designee, or City Council on appeal,
determines that no violation of the United States or California
Constitutions would occur through application of this Chapter, the
requirements of this Chapter remain fully applicable
(f) If an adjustment or waiver is granted, any change in use
from the approved project shall invalidate the adjustment or waiver.
13
9.74.060 Fee Revenue Account.
Pursuant to Government Code Section 66006, the Affordable
Housing Commercial Linkage Fee Reserve Account is hereby established.
The fees paid to the City pursuant to the provisions of this Chapter shall
be deposited into the Affordable Housing Commercial Linkage Fee
Reserve Account and used solely for the purpose described in this
Chapter. All monies deposited into the Reserve 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.
9.74.070 Distribution of Affordable Housing Commercial
Linkage Fee Funds.
All monies and interest earnings in the Affordable Housing
Commercial Linkage Fee Reserve Account shall be expended solely on
the production or preservation of affordable housing to help fulfill the need
identified in the Nexus Study to increase the supply of housing affordable
to worker households of extremely low, very low, low, or moderate
income, or such other report as may be prepared from time to time to
document the reasonable fair share of the costs to mitigate the increased
need for affordable housing that is created by new commercial
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 fund the production of affordable housing pursuant to this
im
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, or issuing loans to
nonprofit affordable housing developers to acquire land and /or to
rehabilitate existing buildings or build new developments to increase the
supply of affordable housing units.
(b) Costs of issuance or debt service associated with bonds,
notes or other security instruments issued to fund affordable housing
needs identified.
(c) Reimbursement for administrative costs incurred by the City
in establishing or maintaining the Affordable Housing Commercial Linkage
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.
No portion of the Affordable Housing Commercial Linkage Fee
Reserve Account may be diverted to other purposes by way of loan or
otherwise.
9.74.080 Periodic Review and Adjustment of Affordable
Housing Commercial Linkage Fees.
To account for inflation in affordable housing development costs,
the fee imposed by this ordinance shall be adjusted automatically on July
1 of each fiscal year, beginning on July 1, 2015, by a percentage equal to
the appropriate Construction Cost Index as published by Engineering
15
News Record, or its successor publication, for the preceding twelve (12)
months.
(a) If an affordable housing commercial linkage fee is collected
on a Project and the permit for that Project later expires, is vacated or
voided before commencement of construction, the developer shall, upon
request, be entitled to a refund of the unexpended housing commercial
linkage 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 submitted in writing to the Planning and Community
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 Affordable Housing Commercial Linkage Fee Reserve Account shall
be accounted for or may be refunded as provided by state law.
9.74.100 Fee revision by resolution.
The amount of the affordable housing commercial linkage fee and
the formula for the automatic annual adjustment established by this
Chapter may be reviewed and revised periodically by resolution of the City
Council. This Chapter shall be considered enabling and directive in this
regard.
UP
9.74.110 Regulations.
The City Manager, 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.
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. 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 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 4. 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.
`rl
SECTION 5. 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 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. This Ordinance shall become
effective 60 days from its adoption.
APPROVED AS TO FORM:
*M=X JO E
MT 1E
City Attorney
W.
Approved and adopted this 14th day of October, 2014.
1
am O'Connor, Mayor
State of California )
County of Los Angeles ) ss.
City of Santa Monica )
I, Sarah P. Gorman, City Clerk of the City of Santa Monica, do hereby certify that
the foregoing Ordinance No. 2470 (CCS) had its introduction on September 23,
2014, and was adopted at the Santa Monica City Council meeting held on
October 14, 2014, by the following vote:
Ayes: Councilmembers: Davis, Holbrook, Vazquez, Winterer
Mayor O'Connor, Mayor Pro Tern O'Day
Noes: Councilmembers: McKeown
Absent: Councilmembers: None
A summary of Ordinance No. 2470 (CCS) was duly published pursuant to
California Government Code Section 40806 .
ATTEST:
Sarah P. Gorman, City Clerk