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SR 06-14-2022 3M City Council Report City Council Meeting: June 14, 2022 Agenda Item: 3.M 1 of 5 To: Mayor and City Council From: David Martin, Director, City Planning Subject: Approval of Second Modification to Professional Services Agreement with HR&A for 6th Cycle (2021-2029) Housing Element Recommended Action Staff recommends that the City Council authorize the City Manager to negotiate and execute a second modification to agreement #108300 (formerly #10830) in the amount of $89,000 and extend the term for one additional year, with HR&A Advisors Inc to Provide Additional Financial Analyses in Support of the City’s Housing Element. This will result in a four-year amended agreement with a new total amount not to exceed $418,900, with future year funding contingent on Council budget approval. Summary On October 12, 2021, the City Council adopted the 6th Cycle (2021-2029) Housing Element. On February 8, 2022, the California Department of Housing and Community Development (HCD) determined that although Santa Monica’s adopted 6th Cycle (2021- 2029) Housing Element Update meets many statutory requirements, further revision is necessary in order to comply with all aspects of State Housing Element law (Attachment A). At the time that HCD’s comments on the adopted Housing Element were received, the Planning Commission was holding public hearings on changes to zoning and adopted land use plans that were intended to implement the Housing Element. As a result of HCD’s determination, rezoning work has been put on hold until staff can determine what further revisions are necessary to bring the City’s Housing Element into compliance with State Housing Element law and receive approval from HCD. Rezoning is necessary to demonstrate to HCD that the City can accommodate its Regional Housing Needs Assessment (“RHNA”) allocation of 8,895 units between 2021 3.M Packet Pg. 1140 2 of 5 and 2029 with a buffer to address net loss of units. Rezoning efforts include establishing development standards that must be both feasible and sufficient for the City to accommodate the RHNA as required by HCD. HR&A advisors has provided financial feasibility analysis and modeling of potential changes to development standards and project requirements which was used to inform the rezoning programs included in the 6th Cycle Housing Element. HCD’s comments require further revisions to the Housing Element and expanded analysis to establish feasible development standards that can accommodate the RHNA plus a buffer. A modification to the agreement of $89,900 is required to prepare additional analysis for the Housing Element as necessary to comply with State law. Background The RHNA is mandated by State Housing Law as part of the periodic process of updating local housing elements of the General Plan. The RHNA quantifies the need for housing within each jurisdiction during specified planning periods. For the 6th Cycle planning period of 2021-2029, Santa Monica’s RHNA allocation is 8,895 units, of which 69% must be affordable. On March 26, 2019, Council authorized an agreement with HR&A Advisors, Inc. to provide financial feasibility analysis of potential affordable housing requirements and minimum density. On November 12, 2019, Council authorized the acceptance of SB2 grant funds in the amount of $310,000 from the State of California Department of Housing and Community Development and a first contract modification in the amount of $179,000 with HR&A Advisors, Inc. for additional analysis related to housing production in the context of the 6th Cycle Housing Element. HR&A’s amended contract provided for a range of economic analyses, typical housing prototype modeling based on revised standards, and policy and program evaluation necessary to inform the preparation of the 6th Cycle Housing Element. During the City’s reorganization Contract #10830 expired before the scope of work was completed and a new contract was executed for the remaining balance with contract #108300. 3.M Packet Pg. 1141 3 of 5 On October 12, 2021, City Council adopted the 6th Cycle (2021-2029) Housing Element and certified the associated 6th Cycle Housing Element EIR. Following Council adoption, City staff submitted the adopted 6th Cycle Housing Element to HCD on November 10, 2021 for a 90-day review period and certification. On February 8, 2022, the City received HCD’s review letter stating that additional changes are required to the adopted Housing Element to comply with State housing law. Contractor Selection HR&A Advisors, Inc. was selected on March 21, 2019 to provide the following: • Update Financial Feasibility Analysis on the Downtown Community Plan (DCP) • Explore Revised Development Standards and Incentives for Housing Projects on Boulevards and in the Bergamot Area Plan • Multi-Unit Districts Affordable Housing Fee and Density Study This recommended award was made as an exception to the competitive bidding process pursuant to Section 2.24.80(d). Competition does not exist because HR&A has completed extensive feasibility analysis related to evaluating the feasibility of the City’s development standards, project requirements and fees including ongoing work on the Affordable Housing Production Program (AHPP) and Housing Element, as well as financial feasibility on the Downtown Community Plan, and 2015 Zoning Ordinance. Therefore, HR&A has the unique ability or capability to complete the abovementioned studies related to the Housing Element. Completing a competitive procurement process is highly unlikely to produce cost-competitive proposals from other sources, given HR&A’s experience and knowledge with preparing modeling for the City. Discussion The 6th Cycle Housing Element includes key rezoning programs that are necessary to accommodate the affordable allocation in the RHNA including Programs 1F and 1J. Program 1F (rezoning of Downtown) commits the City to modifying the heights and floor area ratios (FARs) in the Downtown Community Plan area to ensure they are set at levels that can support the minimum AHPP requirements and to support feasible 3.M Packet Pg. 1142 4 of 5 housing projects. Similarly, Program 1J (rezoning of mixed-use areas outside of Downtown) commits the City to amending the Zoning Ordinance, LUCE, and the Bergamot Area Plan (BAP) to increase FAR and height standards to levels that can support feasible housing projects. The City’s assumptions of feasibility and the City’s Suitable Sites Inventory (SSI), a tool used to demonstrate capacity, are based on the results of a feasibility analysis prepared by HR&A dated June 9, 2021. As stated in the 6th Cycle Housing Element, the feasible FARs for housing projects in the Downtown range from a minimum 2.75 to 4.0 with heights ranging from 55 feet to 84 feet and the feasible FARs for housing projects in the remaining areas of the City range from a minimum 2.75 to 3.25 with heights ranging from 55 feet to 65 feet. On February 8, 2022, the City received HCD’s review letter stating that additional changes are required to the adopted Housing Element to comply with State housing law. Further changes to the development standards in Programs 1F and 1J as well as other programs in the 2021-2029 6th Cycle Housing Element would require additional analysis, including financial feasibility testing. A second modification to the agreement would expand HR&A’s scope of work to conduct further analysis of additional changes to the Housing Element in response to HCD’s comments. Furthermore, this second modification to the agreement would extend the terms of the contract to October 30, 2023. Past Council Actions Meeting Date Description 03/26/2019 Council approved a contract with HR&A Advisors, Inc to provide empirical testing of prototypical private developments to help increase the City’s supply of affordable housing 06/11/2019 Council adopted a resolution authorizing application for, and receipt of, SB2 grant funds in an amount not to exceed $310,000 from the California Housing and Community Development Department (HCD) 11/12/2019 Council authorized the City to accept the SB2 grant in the amount of $310,000 and to authorize the City Manager to negotiate and execute a first modification with HR&A in the amount of $179,000 for further prototype testing in support of the 6th Cycle Housing Element 10/12/21 Council adopted the 2021-2029 6th Cycle Housing Element 3.M Packet Pg. 1143 5 of 5 Financial Impacts and Budget Actions Staff seeks authority to approve funding from the Miscellaneous Grants Fund to increase the amount of the agreement with HR&A Advisors Inc. Funds are included in the FY 2021-22 Adopted Budget in the Community Development Department. Contract Modification Request Amount Agreement # Current Authorized Amount FY 2021-22 Modified Request Amount Account # Total Revised Contract Amount 10830/108300 $179,000 $89,900 20700002.556420 $268,900 10830/108300 $150,000 $ 01700001.552010 $150,000 TOTAL $418,900 Prepared By: Rachel Kwok, Environmental Planner Approved Forwarded to Council Attachments: A. March 26, 2019 Council Staff Report B. June 11, 2019 Council Staff Report C. November 12, 2019 Council Staff Report D. 00 EXECUTED CONTRACT #108300 HR&A E. 00 EXECUTED_PSA_&_Scope-_First_Mod_HR&A_108300 F. HR&A Oaks Initiative_06-10-22 G. Written Comments 3.M Packet Pg. 1144 City Council Report City Council Meeting: March 26, 2019 Agenda Item: 7.B 1 of 24 To: Mayor and City Council From: David Martin, Director, City Planning Subject: Introduction and First Reading of an Ordinance for Proposed Amendments to the Affordable Housing Production Program Recommended Action Staff recommends that the City Council: 1) Review and discuss the information contained in this report regarding the City’s regulatory and policy framework to support housing production, as well as affordable housing production trends, including units in the Extremely Low Income (ELI) category. 2) Authorize the City Manager to negotiate and execute an agreement with HR&A Advisors, Inc., a California-based company, for financial feasibility analysis of potential affordable housing requirements and minimum density requirements for the Planning and Community Development and Housing and Economic Development Departments. This recommended award is for a total amount not to exceed $150,000 with future year funding contingent on Council budget approval. 3) Consider introduction and first reading of an ordinance amending the text of the Municipal Code to temporarily remove the option for providing ELI units to satisfy a project’s Affordable Housing Production Program obligation pursuant to SMMC Chapter 9.64 and specify that 100% Affordable Housing Projects that are owned and operated by non-profit housing providers and financed with tax credits may be exempt from certain provisions of the Affordable Housing Production Program (SMMC Chapter 9.64), subject to certain conditions (Attachment “A”) Executive Summary Affordable housing is the City’s highest housing priority, and is the focus of City programs, subsidies and other efforts to minimize the affordability gap in Santa Monica. This report presents information on the use of the Affordable Housing Production Program (AHPP) to support the long-term housing needs in Santa Monica, and to maintain economic diversity within the city. It focuses on two aspects of the AHPP: 1) The use of the Extremely Low Income inclusionary option to satisfy a development’s affordable housing obligation, and 3.M.a Packet Pg. 1145 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 2 of 24 2) Development of 100% affordable housing projects owned and operated by non- profit housing providers outside of the requirements of the City’s AHPP using financial assistance through the California Tax Credit Allocation Committee. Extremely Low Income Option Most of this report focuses on the production of units targeted to lower income households earning no more than 30 percent of the area median income (“AMI”), commonly referred to as “extremely low-income” (ELI). Based on evidence of local housing needs, this income category was added to the AHPP in 2013 as an option for a development to satisfy its onsite affordable housing obligation by restricting five percent of the total units built for ELI households for Tier 1 projects, and seven and a half percent for a Tier 2 housing project. In the past ten years, nearly 160 units at the ELI income category have been approved, including several projects that predate the formal introduction of this income category into the AHPP. While the creation of units deed-restricted to the ELI level helps to realize SCAG’s Regional Housing Needs Allocation and the City’s own Quantified Objectives, there is a concern that the recent methodology for creating the units (i.e., through the existing AHPP “menu of options”) is counterproductive to meeting the overall Proposition R mandate for 30 percent of all housing to be affordable. This report contains data on the use of the 5 percent option since its adoption in 2013, as well as a preliminary evaluation of its impact on the City meeting its Proposition R targets. The information presented in this report is intended to support the City Council’s direction to prepare amendments to the AHPP to temporarily remove the 5 percent option by providing background on the past half-decade of housing policy, as well as information about affordable housing production trends, including units in the ELI category. Should the Council decide to temporarily remove the 5 percent option, Attachment A presents the ordinance language to effect this change to SMMC Section 9.64.050. California Tax Credit Allocation Committee Financial Assistance 3.M.a Packet Pg. 1146 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 3 of 24 Also included in this report is a brief discussion of a financial tool that supports 100% affordable housing development. The California Tax Credit Allocation Committee (TCAC) provides financial assistance to housing developers and presents additional affordable housing opportunities distinct from the City’s AHPP through TCAC’s own regulations that include affordability levels, maximum rents, minimum unit sizes and other amenities. TCAC-funded projects that are also funded by the City are currently not required to use the City’s housing waiting lists. An ordinance to modify SMMC Section 9.64.030 is included in Attachment A that would allow affordable housing developments by nonprofit TCAC recipients that are not City- funded to be exempt from AHPP requirements provided they select households from the City-developed list of income-qualified households and do not compete with City- funded projects also seeking TCAC financial assistance. 3.M.a Packet Pg. 1147 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 4 of 24 PART 1: EXTREMELY LOW INCOME OPTION Background Santa Monica has an extensive history that prioritizes affordable housing to preserve and promote a diverse and sustainable community. Residents have affirmed this priority in local voter-approved initiatives, such as Proposition R (1990), requiring that 30 percent of all new multifamily housing be affordable, and Proposition I (1998), authorizing the City to participate financially in creating affordable housing equal to one- half of one percent of the housing stock annually (approximately 250 residences). City Council has further facilitated affordable housing through adoption of land use incentives and administrative funding guidelines to streamline affordable housing production and preservation, based on a policy foundation supporting affordable housing in the General Plan Land Use and Housing Elements. The Land Use Element also identifies affordable housing as a primary community benefit in new development. The Affordable Housing Production Program (AHPP) requires developers of multi-family housing to contribute to affordable housing production through a flexible framework to help the City meet its affordable housing goals. Finally, City Council has approved a local preference policy that prioritizes affordable housing opportunities for Santa Monica residents and workers. Changes to the Zoning Ordinance and AHPP (2013) In recent years, California’s ongoing housing crisis has underlined the need for local jurisdictions to revisit their regulatory frameworks governing housing production. In Santa Monica, the discussion has been particularly dynamic, as the community and decision-makers have wrestled with a variety of local, regional and State-level factors that contribute to production, affordability, and equity. From time to time, changes to the rules and regulations related to housing are effected in response to these factors. With the dissolution of the Redevelopment Agency in 2012, the City lost its primary funding source for affordable housing. In 2012-2013, Council led a host of public discussions on the ability for the City to continue to meet the needs of Santa Monica residents. Out of those discussions arose a focus on providing for those whose 3.M.a Packet Pg. 1148 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 5 of 24 household income levels were below the traditional very-low income threshold established by HUD.  On February 28, 2012 (Attachment G), Council held a study session to consider a variety of issues related to housing in Santa Monica. At the study session, staff presented data from the City’s affordable housing waiting list showing that the vast majority (95%) of Santa Monica residents and workers on the list were at extremely low- or very low-income levels.  On December 11, 2012 (Attachment H), Council directed staff to amend the AHPP to include opportunities for extremely low-income households to address the approximately 3,000 ELI households who lived or worked in Santa Monica at that time.  On February 26, 2013 (Attachment I), Council directed staff to consult with the Legal Aid Foundation of Los Angeles (LAFLA) and return with a draft ordinance amending the AHPP rent limit standards to achieve greater affordability.  On June 25, 2013 (Attachment J), Council introduced for first reading Ordinance No. 2429 (CCS) to revise household income eligibility levels and rent limits for the AHPP, and to add an option for developers to provide affordable housing to households earning no more than 30 percent AMI to satisfy AHPP obligations. The subsequent amendments to the AHPP approved by Council in 2013 revised the City’s household income eligibility levels to match income levels published annually by HUD and/or HCD, and added the 30 percent of AMI category referred to as “extremely low-income1” to the menu of options that satisfy a development’s inclusionary affordable housing requirement. This significant addition to the AHPP was designed to create a financial incentive to stimulate the development of such units. Henceforth, outside of the 1 30% Income Household means a household whose gross income does not exceed the 30% income limits applicable to the Los Angeles-Long Beach Primary Metropolitan Statistical Area, adjusted for household size, as published and periodically updated by Housing and Urban Development (HUD) 3.M.a Packet Pg. 1149 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 6 of 24 areas governed by the Downtown Community Plan, applicants undertaking Tier 1 and Tier 2 projects currently may select from a menu of options to develop at least: Option Tier 1 Tier 2 (Requires 50% more than Tier 1) 1 5% of the total units of the project for 30% income households at affordable rent2; or 7.5% of the total units of the project for 30% income households at affordable rent; 2 10% of the total units of the project for 50% income households at affordable rent; or 15% of the total units of the project for 50% income households at affordable rent; or 3 20% of the total units of the project for 80% income households at affordable rent; or 30% of the total units of the project for 80% income households at affordable rent; 4 100% of the total units of a project for moderate income households at affordable rent. Not Applicable Proposition R Compliance (1994-Present) The production of multifamily affordable housing in Santa Monica is regulated by the voter-approved Proposition R, which requires that:  Thirty percent of all multifamily housing completed in each fiscal year be affordable for and occupied by low- and moderate-income households; and  At least one-half of the total affordable housing completed be affordable for and occupied by low-income households. The most recently published Annual Report (FY 16/17) discussing the City’s compliance with Proposition R illustrates a downward trend in affordable housing production, citing just 13 percent of multifamily housing completed during that time is affordable to low- and moderate-income households. This is consistent with the low production numbers from the previous two fiscal years (FY 14/15, and FY 15/16) when 19 percent of new multifamily housing was affordable to low- and moderate-income households. 2 The 5% option was added to Chapter 9.64 in 2013 by Ordinance 2429 (CCS) 3.M.a Packet Pg. 1150 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 7 of 24 Cumulative Proposition R Achievements3 Affordable New Multifamily Residences Completed Annually FY 94/95 through FY 16/17 One of the main factors affecting the number and percentage of affordable residences being constructed is the loss of funding from the Redevelopment Agency. Historically, a 3 Annual Affordable Housing Report on Propositions R and I, April 2018 3.M.a Packet Pg. 1151 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 8 of 24 significant portion of the Proposition R affordable housing mandate has been fulfilled by nonprofit developers who use City-subsidized loans to create affordable housing. The largest funding source for such loans was the Redevelopment Agency. Since the demise of the Redevelopment Agency in 2012, Santa Monica voters approved measures GS and GSH in 2016, which provides approximately half of the amount of funding that was available through the former Redevelopment Agency. In addition, Council has directed that all repayment of loans from the former Redevelopment Agency to the City be dedicated to affordable housing. Despite a failure to achieve Proposition R requirements annually over the past three fiscal years, the City continues to exceed the minimum Proposition R requirement cumulatively, adding up the developments that have been completed over the past 23 years. Subsequent Shifts in Housing Policy (2017) Since the most recent changes were made to the AHPP, local, regional and national economic factors have shifted once again, leading to a widely-recognized state-wide housing crisis and a renewed discussion on local housing production policy, both market-rate and affordable. The City has been proactive in its efforts to use adopted policy as a lever for incentivizing new housing production in targeted areas, such as Downtown, and for increasing the supply of affordable housing. These measures have been implemented at the same time that the City has witnessed a decrease in the overall amount of affordable housing produced on an annual basis, as previously mentioned. Downtown Community Plan The adoption of the Downtown Community Plan (DCP) in 2017 established a new methodology for housing production that includes permit streamlining, and floor area and height incentives for qualified housing projects. Downtown development is also subject to higher affordable housing requirements than citywide, and must provide a set percentage of units (on-site or off-site) that are deed-restricted to each income level identified in the AHPP. 3.M.a Packet Pg. 1152 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 9 of 24 This approach differs from the Zoning Ordinance in three important ways: 1. The affordable housing methodology in the DCP removes developer selection of income categories at the Tier 2 level, and instead establishes a 20 percent base requirement for a project’s total affordable housing contribution based on the project’s height. 2. The DCP does not provide the developer a financial incentive to profit from a higher market-to-affordable ratio based on developer selection of income levels. For example, a Tier 2 mixed-use housing project of 100 units that has selected the Zoning Ordinance’s ELI option will generate only 8 deed-restricted units, and 92 market-rate units. In the DCP, that same project would provide a minimum of 20 deed-restricted units, and 80 market-rate units. 3. The required affordable housing units produced in a project by the DCP must be distributed across the four income levels recognized by the AHPP based on the following percentages: a. 20% Extremely Low-Income b. 20% Very Low-Income c. 30% Low-Income d. 30% Moderate-Income The increased affordability requirements in the DCP are expected to play a critical role in helping the City meet the requirements of Proposition R. Amending the AHPP to require a broader array of affordability levels could also assist in Proposition R compliance. A forthcoming Council Information Item on the impact of DCP housing policy on production will be issued in March 2019. Suggested Changes to the AHPP (2018) Based on the DCP’s new approach to creating equity among income levels, new conversations have sprung up to evaluate the existing Zoning Ordinance methodology in order to identify potential improvements that balance supply with demand, and aid in 3.M.a Packet Pg. 1153 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 10 of 24 reversing the downward trend in affordable housing production identified in the past several Proposition R compliance reports. These discussions have been fueled by the perception that the financial incentive to allow a development to deed-restrict a low number of units for extremely-low income households has perhaps been too successful, and has ultimately impacted the City’s ability to meet annual Proposition R targets. This, coupled with the loss of Redevelopment, has placed an even heavier burden on the City to make up the production of remaining affordable units using limited financial and regulatory resources. In light of this concern, the Housing Commission discussed on November 15, 2018 modifying affordable housing requirements outside of the Downtown Community Plan area, and opined on the possibility of suspending the extremely low-income option until a full review of the AHPP could be conducted through an updated economic feasibility study. The feasibility study is a work effort currently in the scoping phase being led in partnership by the Planning and Community Development and Housing and Economic Development departments, which will provide analysis on the potential to modify the AHPP so that it addresses a broader range of needs, including supporting Prop. R and Regional Housing Needs Assessment compliance. The scope and timeframe for the upcoming feasibility study is discussed later in this report. As an interim measure, Council directed staff on December 18, 2018 to prepare amendments to the Affordable Housing Production Plan disallowing the current option for developers to provide fewer extremely low-income units until the feasibility study can be completed. Discussion Santa Monica is a desirable place to live and work, making the demand for housing far greater than the existing supply. Based on significantly higher than average rent and home ownership values, as well as the housing policy described earlier in this report, the City continues to receive proposals to create new housing. Because of these conditions, the City has been fortunate to routinely meet the Regional Housing Needs Assessment (RHNA) housing production targets established by the Southern California 3.M.a Packet Pg. 1154 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 11 of 24 Association of Governments (SCAG) as well as the City’s own “Quantified Objectives” for housing production outlined in the adopted 2014-2021 Housing Element. The City’s mixed-use higher-density commercial districts provide a wide range of housing opportunities, and current pipeline projects indicate that the City will continue to attract new market-rate housing development that is capable of contributing to the creation of new affordable units at a variety of income levels. Affordable Housing Production (2014-Present) Since 2014, the cumulative amount of affordable residences completed (final building permits) has met the City’s minimum requirement of 30 percent. Multifamily developments completed between 2014 and 2018 produced 1,001 residences, of which 402 (40 percent) were affordable to low-and moderate-income households. Of those affordable units, 95 percent were affordable to low-income households. The City has met both Proposition R requirements that 30 percent of all multifamily housing be affordable to low- and moderate-income households and that at least one-half of the total affordable housing be affordable for and occupied by low-income households. However, pipeline projects indicate that future production will fall short of this mark. Multifamily developments currently in construction will produce just 13 percent affordable units (95 of 759 total), and multifamily developments with planning approval will produce just 10 percent affordable units (133 of 1,384 total). For projects in construction and with planning approval, over 90 percent of all affordable units will be affordable to low-income households. Pending projects are those that have been submitted but have not received planning approval yet. Affordable residences represent 22 percent of all pending projects (366 of 1,651 total), which includes five large 100 percent affordable housing developments. The following table summarizes this information. 3.M.a Packet Pg. 1155 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 12 of 24 2014-2018 Affordable Housing Production Program Summary Development Stage Total Residences Affordable Residences Percent Affordable Completed 1,001 402 40% In Construction 759 95 13% Planning Approval 1,384 133 10% Pending 1,651 366 22% TOTAL: 4,795 996 21% Developments Completed Attachment B indicates that 46 developments totaling 1,001 residences were completed between 2014 and 2018. A total of 402 of these residences (40 percent) were affordable to low- and moderate-income households. These projects received planning approvals between 2000 and 2015 and include six 100 percent affordable housing developments. Developments in Construction Attachment C lists active building permits to illustrate the number of multifamily residences in construction as of January 2019. There are active building permits for 759 residences in 21 new multifamily developments. These developments will provide 95 residences affordable to low- and moderate-income households representing 13 percent of multifamily residences in construction. These active building permits received planning approvals between 2006 and 2018 and do not include any 100 percent affordable housing development. Developments with Planning Approval (not in construction) Attachment D identifies 38 multifamily developments containing 1,384 residences that have received planning approval but have not been issued building permits yet. A total of 133 of these residences will be affordable to low- and moderate-income households, representing just 10 percent of all residences at the planning approval stage. These projects received planning approvals between 2008 and 2018 and two of these developments are 100 percent affordable housing developments. Looking at just the 14 multifamily developments that received planning approval in 2018, 16 percent of the residences (98 of 604 units) were affordable to low- and 3.M.a Packet Pg. 1156 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 13 of 24 moderate-income households. Seven of these 14 developments provided only extremely low-income units (and market rate), representing eight to nine percent of the units in each development. Multifamily Residences (Units) with Planning Approvals in 20184 Developments Submitted Since 2013 (Approved, In Construction, Completed) Considering all multifamily developments that were submitted and received planning approvals since the changes to the AHPP policy in 2013, which also includes completed projects and projects in construction, residences affordable to low- and moderate- income households make up 16 percent of all residences (199 of 1,283). More than one-third of all affordable units approved since 2013 have been in the extremely low- income category (74 of 199). Excluding the three large 100 percent affordable housing developments developed by Community Corps of Santa Monica (CCSM), the remaining multifamily market developments include just 8 percent of residences that are affordable to low- and moderate-income households. 4 Source: Planning and Community Development Permit Tracking 3.M.a Packet Pg. 1157 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 14 of 24 Affordable Units in Approved Multifamily Developments Submitted Since 20135 Pending Developments Attachment E shows the 27 pending multifamily developments containing 1,651 residences that have been submitted but have not yet received planning approvals. A total of 366 of these residences are proposed to be affordable to low- and moderate- income households, representing 22 percent of all proposed residences. Five of these developments are 100 percent affordable housing developments (three of which are off- site affordable units from market-rate developments), which represent 231 units, or 63 percent of all the proposed affordable residences. Planning Commission Comments The Planning Commission held a study session on this topic on February 20, 2019. During that meeting, staff presented information described in this report and attachments, as well as a snapshot of the City’s progress in realizing the housing production targets established by the following:  SCAG Regional Housing Needs Allocation (2013-2021) (Attachment E) 5 Source: Planning and Community Development Permit Tracking 3.M.a Packet Pg. 1158 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 15 of 24  Housing Element Quantified Objectives (2014-2021) (Attachment E)  City of Santa Monica Proposition R (1990) As demonstrated by the housing production data, the City is on track to meet both the RHNA and Quantified Objective targets for ELI, VLI and Above Moderate; however, production has fallen short in the categories of Low Income and Moderate Income. Approved and pending housing projects are not anticipated to contribute enough units in these income categories to realize the targets. Similarly, preliminary data indicates that annual Proposition R compliance will be difficult to achieve during FY18/19, but some recovery is anticipated in future years based on the success of the City’s effort to support affordable housing production through its Housing Trust Fund program, which is successfully generating a range of affordable units through non-profit development 100% affordable housing projects. Based on this information, as well as an appreciation of other housing-related work efforts scheduled for 2019, such as the AHPP Feasibility Study, the DCP Housing Report, Housing Incentives for the Boulevards and Bergamot, and solutions to Corporate or “Medium Term” Housing, the 6 person Planning Commission was evenly split over the issue of temporarily removing the 5 percent ELI option from the AHPP. Commissioners in Support of Removing the 5 Percent ELI Option Those in favor of temporarily removing the 5 percent option cited data demonstrating that ELI needs have been met and already exceeded, and that more attention should be focused on the production of low- and moderate-income units during the time remaining in both the RHNA and Housing Element cycles. Commissioners in Opposition to Removing the 5 Percent ELI Option Those in opposition to removing the 5 percent ELI option argued for the continued production of housing under the current regulatory framework, and viewed changes to the AHPP as premature pending a more comprehensive assessment of the entire affordable housing production program. This will commence in spring, pending Council 3.M.a Packet Pg. 1159 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 16 of 24 budget authorization. Some commissioners made a case for expediting the upcoming feasibility study, as well as the effort to bring forward information regarding possible incentives for the Boulevards and Bergamot. Agreement on Pipeline Project Exemption Despite the split vote on removal of the 5 percent ELI option, the Planning Commission unanimously passed a separate motion to recommend that pipeline projects be categorically exempt from any regulatory action taken by Council on this subject. The Planning Commission did not clarify what defines a “pipeline” project. Housing Commission Comments The Housing Commission held a public meeting on February 21, 2019 to discuss, among other items, use of the ELI option in development. Mirroring the recommendations of several Planning Commissioners, the Housing Commission majority voted to 1) temporarily remove the 5 percent option until a financial feasibility study can be completed to evaluate potential modifications to the AHPP; 2) defer final consideration of other amendments to the AHPP (regarding exempting nonprofit- developed affordable housing) until after the financial feasibility is completed and reviewed, and 3) to expedite the financial feasibility study. Ordinance to Implement Proposed Temporary Elimination of ELI Option from AHPP The proposed ordinance in Attachment A provides for a temporary elimination of the ELI option to allow the feasibility study to be completed and reviewed. The elimination would apply to projects with an application that has been determined complete on or after March 26, 2019. Those projects would not be allowed to select Extremely Low Income from the AHPP’s “menu of options”, but would otherwise be permitted to choose from any other income level currently available. 3.M.a Packet Pg. 1160 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 17 of 24 Future Analysis and Efforts on Housing Production Downtown Community Plan Housing Report Information Item (March 2019) Staff recently issued a monitoring report for the DCP that evaluates the influence of DCP housing policy and requirements on housing production. This review of data from the past one and a half years since DCP adoption provides information that may be informative to the related analytical efforts mentioned below, specifically regarding how the unique project requirements for affordable housing production Downtown are working, or are producing unintended consequences such as the emergence of six new Tier 1 SRO projects that avoid entirely the DCP’s affordability requirements. This report also provides an insight into the urban design implications of the affordable housing requirements Downtown, as well the fulfillment of desired community benefits that are associated with Tier 2 and Tier 3 projects. Feasibility Study to Evaluate Citywide AHPP Program (Spring-Summer 2019) The upcoming financial feasibility study is intended to inform decision-makers with the results of empirical testing of prototypical private developments to establish the financially-feasible limits of modified affordable housing requirements, in addition to testing a minimum density concept for R2 multi-family lots to help increase the City’s supply of affordable housing. More specifically, the feasibility study will evaluate whether affordable housing requirements associated with broader affordability levels, unit mixes, and percentage requirements can be supported financially by private developers of future Tier 2 developments outside of the Downtown area. A similar feasibility analysis was completed for the inclusionary requirements in the DCP. Staff estimates that this work will take between 6-8 months to complete and review with the Planning Commission, Housing Commission and City Council. Housing Incentives: Boulevards and Bergamot Plan Area (Spring-Summer 2019) During the same timeframe as the AHPP Feasibility Study, staff will work to identify means to stimulate more housing production on the city’s Boulevards and in the Bergamot Plan area, where housing development has been relatively anemic over the past half decade. This process will consider a variety of tools including project streamlining, floor area and height incentives, and other features to direct multifamily 3.M.a Packet Pg. 1161 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 18 of 24 housing production away from the residential neighborhoods to areas identified by the Land Use and Circulation Element. PART 2: CALIFORNIA TAX CREDIT ALLOCATION COMMITTEE (TCAC) FINANCING Background SMMC Section 9.64.030 defines the applicability of the AHPP to certain project types. The ordinance currently provides that a multi-family rental housing project that will be developed by a nonprofit housing provider receiving financial assistance through one of the City’s housing trust fund programs and secured by a regulatory agreement with the City for a minimum period of 55 years shall be exempt from the City’s Affordable Housing Production Program (AHPP). This standard is intended to differentiate nonprofit affordable housing developments from inclusionary housing obligations resulting from market-rate developments. This standard is also intended to help ensure that City funds invested in affordable housing can be maximized, including leveraging non-city funds. Nonprofit housing providers have identified an opportunity to increase the total amount of affordable housing that can be produced through the AHPP by partnering with market rate developers to leverage tax credits for offsite inclusionary housing. However, under the existing AHPP ordinance, only projects that will be developed with “financial assistance through one of the City’s housing trust fund programs” can be exempt from the AHPP requirements. Community Corporation of Santa Monica (“CCSM”), a non- profit housing provider who has developed affordable housing throughout Santa Monica, has therefore proposed an amendment to the AHPP ordinance that would extend certain provisions of the AHPP exemption to 100% affordable housing projects owned and operated by nonprofit housing providers that finance the development of these projects with tax credits. The proposed exemption to the AHPP requirements would be subject to the following conditions: (i) compliance with Section 9.64.110 of the AHPP (which would require the developer to select tenant applicants from the City developed waiting list); 3.M.a Packet Pg. 1162 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 19 of 24 (ii) compliance with the then-current California Tax Credit Allocation Committee Regulations (“TCAC Regulations”), including the minimum unit size requirements in Cal. Code Regs. tit. 4, § 10325(g)(1)(B); (iii) ensuring that the project’s affordability obligations will be secured by a regulatory agreement, memorandum of agreement, or recorded covenant in form approved by the City Attorney, for a minimum period of fifty-five years; and (iv) ensuring that the project does not compete with a City-funded Tax Credit project in the same category and round of competition, as reasonably determined by the City Manager. If approved, this exemption would allow these 100% affordable housing projects to comply with TCAC Regulations, instead of AHPP requirements, except that tenant applicants would be selected from the City-developed list. TCAC regulations apply different affordability levels, maximum rents, minimum unit sizes, and amenities from AHPP standards. For example, the TCAC maximum rent levels are higher than AHPP maximum rents, which enhances the underwriting of these projects for tax credit equity investors and commercial lenders, and facilitates layered financing for larger affordable housing projects than would otherwise be feasible in the absence of tax credit financing. A comparison of TCAC and AHPP rents are set forth in the table, below: AHPP vs TCAC Rent Limits (2018) Unit Type Extremely Low Very Low Low Moderate AHPP 0-Bdrm $364 $606 $728 $1,334 TCAC $509 $848 $1,018 n/a AHPP 1-Bdrm $416 $693 $832 $1,525 TCAC $545 $909 $1,091 n/a AHPP 2-Bdrm $468 $780 $936 $1,715 TCAC $654 $1,091 $1,309 n/a AHPP 3-Bdrm $520 $866 $1,040 $1,906 TCAC $756 $1,260 $1,512 n/a 3.M.a Packet Pg. 1163 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 20 of 24 3.M.a Packet Pg. 1164 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 21 of 24 AHPP vs TCAC Minimum Unit Sizes AHPP in Blue Unit Type Minimum Square Footage 0-Bdrm 500 200 1-Bdrm 600 450 2-Bdrm 850 700 3-Bdrm 1,080 900 Discussion Attachment A presents a clarified description of the applicability of the AHPP for certain project types. The attached ordinance accomplishes the following:  Adds to the current exemption for projects developed with financial assistance through one of the City’s housing trust fund programs from the AHPP requirements by further exempting multi-family rental housing projects developed by a nonprofit housing provider receiving financial assistance through the California Tax Credit Allocation Committee from the AHPP requirements so long as the project is a 100% Affordable Housing Project as defined by the Santa Monica Municipal Code.  Multi-family project applicants would be required to select households from the City-developed list of income-qualified households or equivalent priority list approved by the City.  Applicants would be required to comply with then-current California Tax Credit Allocation Committee Regulations, including the minimum unit size requirements.  The project’s affordability obligations would be secured by a regulatory agreement, memorandum of agreement, or recorded covenant in form approved by the City Attorney, for a minimum period of fifty-five years. 3.M.a Packet Pg. 1165 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 22 of 24 Planning Commission Comments This issue was first raised as part of the latest round of Zoning Ordinance updates. On February 20, the Planning Commission recommended that the City Council approve an amendment consistent with the language presented to the Commission, which did not require to use the City’s housing waiting list and did not prohibit the projects from competing with City-funded projects for financial assistance from TCAC. Housing Commission Comments The City’s Housing Commission, upon reviewing the proposed modification to this language, made the following recommendations: 1) Recommends against adopting the text amendment permanently until an economic analysis is completed to ensure that the off-site inclusionary requirements reflect the additional opportunity associated with tax-credit leveraging. 2) Supports adopting the text amendment on an interim basis to enable a currently proposed inclusionary / market-rate arrangement if the developer can demonstrate to Council that the proposed developments are beneficial in terms of the number of inclusionary apartments that will be created. 3) If the proposed text amendment is adopted, it should make explicit that prospective residents of tax-credit funded inclusionary housing will come from the City list, as they do for other inclusionary housing. Next Steps on Financial Feasibility Study Vendor Selection for AHPP Feasibility Study Staff recommends HR&A Advisors, Inc. to provide financial feasibility analysis of potential affordable housing requirements and minimum density. This recommended award is made as an exception to the competitive bidding process pursuant to Section 2.24.80(d). Competition does not exist because HR&A has completed extensive feasibility analysis related to the AHPP, including the recent Downtown Community Plan, and therefore has the unique ability or capability to complete the study. Completing a competitive procurement process is highly unlikely to produce cost- 3.M.a Packet Pg. 1166 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 23 of 24 competitive proposals from other sources, given HR&A’s experience and knowledge with preparing modeling for the AHPP. Financial Impacts and Budget Actions Staff seeks authority to award an agreement with HR&A Advisors, Inc. for financial feasibility analysis of potential affordable housing requirements and minimum density requirements. Staff will seek grant funding from the California Department of Housing and Community Development’s to fund the agreement in whole or in part. To ensure that the study can commence immediately, the Housing and Economic Development Department will advance the funds from an existing account. Agreement Request Amount FY 2019-19 Budget Housing and Economic Development Department Account # Total Agreement Amount $150,000 01160001.552010 $150,000 Future funding is contingent on Council budget approval. Prepared By: Peter James, Principal Planner Approved Forwarded to Council Attachments: A. Ordinance to Temporarily Remove ELI Option B. Developments Completed C. Developments in Construction D. Developments with Planning Approval 3.M.a Packet Pg. 1167 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 24 of 24 E. Pending Developments F. RHNA and Quantified Objectives Progress G. February 28, 2012 Council Study Session on Housing (Web Link) H. December 11, 2012 Direction to Staff to Add ELI Option (Web Link) I. February 26, 2013 Direction to Staff to Amend Rent Limit Standards (Web Link) J. June 25, 2013 Ordinance Adopted to Include ELI Option (Web Link) K. Written Comments L. Powerpoint presentation 3.M.a Packet Pg. 1168 Attachment: March 26, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) City Council Report City Council Meeting: June 11, 2019 Agenda Item: 3.F 1 of 4 To: Mayor and City Council From: David Martin, Director, City Planning Subject: Adoption of SB2 Housing Grant Resolution Recommended Action Staff recommends that the City Council: 1. Adopt the attached resolution authorizing the application for grant funds in the amount of $310,000 from the State of California Department of Housing and Community Development 2. Authorize the City Manager to execute all necessary documents to apply for the grant, and if awarded, accept and administer the grant, including any renewals. 3. Authorize budget changes as outlined in the Financial Impacts and Budget Actions section of this report, in the event that the grant is awarded. Summary Santa Monica has an extensive history that prioritizes a range of housing types (including affordable housing) to preserve and promote a diverse and sustainable community. This report seeks authorization to submit an application for grant funds to the State of California Department of Housing and Community Development for an amount of up to $310,000. The grant would be used to analyze incentives or changes to project requirements to stimulate housing production, which may include permit streamlining, height and floor area adjustments, fee reductions and modifications to affordable housing requirements in the Downtown and Citywide. Additionally, the grant funds could be used to study policies, programs and ordinances to protect and support tenants currently living in the city’s existing housing stock. This analysis would be used to propose changes to City housing policy and regulations, and may involve implementation through the citywide Zoning Ordinance and/or specific and area plans. The State’s grant program is available to local jurisdictions, and is offered specifically for the purpose of providing funding and technical assistance to help cities prepare, adopt, and implement plans and process improvements that streamline housing approvals and 3.M.b Packet Pg. 1169 Attachment: June 11, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 2 of 4 accelerate housing production. Per HCD guidelines, grant funds may be subject to repayment if the plan or process improvement developed with grant funds is not ultimately adopted. Discussion In recent years, California’s ongoing housing shortage has underlined the need for local jurisdictions to revisit their regulatory frameworks governing housing production. In Santa Monica, the discussion has been particularly dynamic, as the community and decision-makers have wrestled with a variety of local, regional and State-level factors that contribute to production, affordability, and equity. From time to time, the City has made changes to rules and regulations related to housing in response to these factors. Two recent examples include the adoption of the Downtown Community Plan’s distinct project requirements for affordable housing, and the recent removal of the Extremely Low Income option from the list of options to satisfy the affordable housing obligation citywide. Further, on March 26th 2019 the Council authorized an expenditure to fund a feasibility study to analyze potential changes to the centerpiece of the City’s inclusionary housing framework, the Affordable Housing Production Program. In 2017, Governor Brown signed a 15-bill housing package aimed at addressing the state’s housing shortage and high housing costs. This package included the Building Homes and Jobs Act (SB2, 2017), which established a $75 recording fee on real estate documents to increase the supply of affordable homes in California. Through the subsequent SB2 grant program, $123M in funds collected from this fee have been set aside to provide funding and technical assistance to all local governments in California to help cities and counties prepare, adopt, and implement plans and process improvements that streamline housing approvals and accelerate housing production. This grant program is meant to facilitate planning activities that will foster an adequate supply of homes affordable to Californians at all income levels. Staff is preparing a grant application for submittal to the State’s Housing and Community Development department to fund a range of economic analyses, physical prototype modeling and policy and program evaluation that will better inform policy 3.M.b Packet Pg. 1170 Attachment: June 11, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 3 of 4 discussions about housing production in Santa Monica. This grant opportunity can provide the City with objective market information and prototype analysis to potentially adjust existing standards, regulations and project requirements as they pertain to promoting development that is consistent with Santa Monica’s priorities and adopted plans. This multi-pronged effort would be an opportunity for the City to look at the mechanics behind housing production and conservation more holistically, and to tie together the various internal and external factors that contribute to or prevent feasibility and implementation. If awarded, staff anticipates returning to Council with a recommendation to amend an existing contract with HR&A Advisors previously authorized by Council to study modified AHPP requirements so that additional analysis could be conducted on barriers and incentives to housing production across the board. Additional sub-consultants to perform physical modeling, policy and program review as it relates to housing conservation and tenant protections, and creation of revised standards may also be necessary. The maximum grant amount provided by SB2 for a jurisdiction of Santa Monica’s size is $310,000. The outcomes of the analytical study may include the following eligible activities: 1. Updates to general plans, community plans, specific plans, local planning initiatives related to implementation of sustainable communities strategies, or local coastal plans; 2. Updates to zoning ordinances; 3. Environmental analyses that eliminate the need for project-specific review; and 4. Local process improvements that improve and expedite local planning. The SB2 program will not initially utilize a competitive process to award funds. Funds will be available to eligible applicants upon request (“over the counter”) for an eight- month over-the-counter period, commencing from the date of the NOFA, which was released in late March 2019. 3.M.b Packet Pg. 1171 Attachment: June 11, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 4 of 4 Financial Impacts and Budget Actions Staff seeks authority to apply for a grant of up to $310,000 from the State of California Housing and Community Development Department. If awarded, staff recommends the following budget changes to the miscellaneous grants fund. FY 2019-2020 Grant Budget Changes Establish Revenue Budget Appropriate Funds Account Number(s) Amount Account Number(s) Amount TBD $310,000 TBD $310,000 Total $310,000 Total $310,000 If awarded, the grant would, upon Council approval, augment economic analysis being conducted by HR&A Advisors on the feasibility of modifying the citywide Affordable Housing Production Program (AHPP). This increase in scope to analyze development standards, fee structures, permit streamlining and other mechanics of housing production would necessitate a contract modification. Additional, but separate, analysis on preserving existing housing stock would require a separate contract with qualified housing policy professionals. Per HCD guidelines, grant funds may be subject to repayment if the plan or process developed using grant funds is not ultimately adopted. If renewals are awarded, budget changes will be included in subsequent year budgets, contingent on Council budget approval. Prepared By: Peter James, Principal Planner Approved Forwarded to Council Attachments: A. Reso - PCD - SB2 Grant Funds - 06.11.2019 B. Written Comments 3.M.b Packet Pg. 1172 Attachment: June 11, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) City Council Report City Council Meeting: November 12, 2019 Agenda Item: 3.I 1 of 11 To: Mayor and City Council From: David Martin, Director, City Planning Subject: Senate Bill 2 Budget Grant Authorization and First Modification of Agreement for Financial Feasibility Analysis Recommended Action Staff recommends that the City Council: 1. Authorize the City Manager to accept a grant awarded in the amount of $310,000 from the California Department of Housing and Community Development (HCD) SB2 Building Homes and Jobs Act for housing production related planning studies and implementation activities, and to accept all grant renewals. 2. Authorize the City Manager to execute all necessary documents to accept the grant and all grant renewals. 3. Authorize budget changes as outlined in the Financial Impacts and Budget Action section of this report. 4. Authorize the City Manager to negotiate and execute a first modification to agreement #10830 (CCS) in the amount of $179,000 with HR&A Advisors, Inc, a California based company, for expanded financial feasibility analysis and physical modeling of potential changes to development standards and project requirements. This will result in an amended agreement with a new total amount not to exceed $329,000, with future year funding contingent on Council budget approval. Executive Summary The State of California adopted Senate Bill No. 2 (SB2): the Building Homes and Jobs Act in 2017 to encourage the development of housing of various types in the face of a statewide housing shortage. As part of its adoption, the state started the SB2 grant program to provide funding and technical assistance to help cities prepare, adopt, and implement plans and process improvements that streamline housing approvals and accelerate housing production. In September 2019, the California Department of Housing and Community Development (HCD) awarded the City a total of $310,000. This report seeks authorization to accept the awarded grants and execute all necessary documents associated with the grant. 3.M.c Packet Pg. 1173 Attachment: November 12, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 2 of 11 Grant funds would fund a range of economic analyses, physical prototype modeling around revised standards, and policy and program evaluation to provide the City with objective market information and prototype analysis to potentially adjust existing standards, regulations and project requirements as they pertain to facilitating housing production that is consistent with Santa Monica’s priorities and adopted plans. This work would also help staff plan for and address forthcoming requirements from HCD and the Southern California Association of Governments (SCAG) in the context of the 6th Cycle Housing Element. There is no local match requirement for the SB2 grant program; however, per HCD guidelines, grant funds may be subject to repayment if the plan or process improvement developed with grant funds is not ultimately adopted. Background In recent years, California’s ongoing housing shortage has underlined the need for local jurisdictions to revisit their regulatory frameworks governing housing production. In Santa Monica, where the development of housing, especially affordable housing has been a long-standing priority, the community and decision-makers have wrestled with a variety of local, regional and State-level factors that contribute to production, affordability, and equity. From time to time, the City has made changes to rules and regulations related to housing in response to these factors. Two recent examples include the adoption of the Downtown Community Plan’s distinct project requirements for affordable housing, and the recent removal of the Extremely Low Income option from the list of options to satisfy the affordable housing obligation citywide. Further, on March 26, 2019, the Council authorized an expenditure to fund a feasibility study to analyze potential changes to the centerpiece of the City’s inclusionary housing framework, the Affordable Housing Production Program. In 2017, Governor Brown signed a 15-bill housing package aimed at addressing the state’s housing shortage and high housing costs. This package included the Building Homes and Jobs Act (SB2, 2017), which established a $75 recording fee on real estate documents to increase the supply of affordable homes in California. Through the 3.M.c Packet Pg. 1174 Attachment: November 12, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 3 of 11 subsequent SB2 grant program, $123M in funds collected from this fee have been set aside to provide funding and technical assistance to all local governments in California to help cities and counties prepare, adopt, and implement plans and process improvements that streamline housing approvals and accelerate housing production. On June 11, 2019, Council authorized the application for SB2 grant funds in the amount of $310,000 from the State of California Department of Housing and Community Development. At that meeting, staff reported that the grant would be used to analyze incentives or changes to project requirements to stimulate housing production, which may include permit streamlining, height and floor area adjustments, fee reductions and modifications to affordable housing requirements in the Downtown and Citywide. Additionally, the grant funds could be used to study policies, programs and ordinances to protect and support tenants currently living in the city’s existing housing stock. This analysis would be used to propose changes to City housing policy and regulations, and may involve implementation through the citywide Zoning Ordinance and/or specific and area plans. Council discussed budget authorization for the grant funds, if successful, but did not vote to authorize expenditure of the funds due to concerns about the need to study Downtown’s project requirements. Discussion The City of Santa Monica submitted a successful SB2 grant application to HCD and was awarded a total of $310,000 in September of this year. Pursuant to the project description in the grant application, the funds are scoped for the following purposes, which conform to the State’s planning priorities: 1. Update Financial Feasibility Analysis on the Downtown Community Plan (DCP) Downtown Santa Monica is where much of future mixed-use housing development is likely to occur. A recent monitoring report indicated that since Plan adoption, very few, if any, new housing projects have been submitted despite process incentives that expedite entitlements for housing projects. The proposed analysis would seek to provide decision-makers with an updated financial feasibility analysis on DCP project requirements to better inform the 3.M.c Packet Pg. 1175 Attachment: November 12, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 4 of 11 regulatory framework that guides housing production in the City’s job-rich and transit-oriented center. 2. Explore Revised Development Standards and Incentives for Housing Projects on Boulevards and in the Bergamot Area Plan The 2013-2021 Housing Element identified potential for over 2,700 units on the City’s major boulevards and over 1,000 units in the districts governed by the 2013 Bergamot Area Plan. This housing is not being produced as anticipated as less than a third of those potential housing units has been built or is under construction in these areas. This project would require physical modeling and financial feasibility analysis to identify the “tipping point” at which a housing developer will be incentivized to produce a housing development. Factors for evaluation/modification may include development standards such as height, floor area, and parking requirements, streamlined entitlement processes, and reduced permit and development fees for qualified housing projects. 3. Multi-Unit Districts Affordable Housing Fee and Density Study In Santa Monica’s Multi-Unit Districts (R2, R3, and R4) in recent years, developers often build below the allowable density, with replacement projects often resulting in a net loss of units citywide. This project contemplates two potential changes to the City’s existing zoning ordinance: 1) Evaluating the overall feasibility of residential development in the multi-unit districts and the associated municipal requirements in order to make recommendations on standards and incentives to support the City’s goals for housing production for a variety of income levels. 2) Based on the evaluation, explore “minimum density” standards in the multi-family districts to support the City’s housing production goals. 4. Protect Existing Tenants from Displacement * The City has many policies and programs on housing affordability, access, and tenant rights. These include rent control rules, tenant protections, housing assistance, and other housing stabilization measures. These are administered by 3.M.c Packet Pg. 1176 Attachment: November 12, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 5 of 11 several City departments, making it difficult to easily locate information. This anti- displacement project will result in a website and marketing materials with information about these programs by topic (not department). A communications campaign will reach tenants to assist them in situations that may threaten their tenancies. *Note: SB2 guidelines allow for only 10% of grant award to be used for purposes of protecting existing housing stock. $31,000 is the maximum that can be awarded. 5. Enhancements to City of Santa Monica Electronic Permitting Software The City has instituted digital Building permit applications, yet some important and time-consuming Planning entitlements are not yet on this system. This project would enhance the City’s permit application software for the additional Planning applications, which will then be managed electronically. This process integration will improve efficiency by allowing applicants to submit online instead of at City Hall and will streamline the review process by allowing simultaneous review from multiple reviewers. 6. Illustrated Housing Development Process Guidebooks The City currently lacks user-friendly materials to assist applicants proposing housing developments. The proposed guidebooks for Accessory Dwelling Units and Multi-family Housing will provide clear, concise and updated information on City housing policies, processes and development standards supported by graphics including architectural drawings that will illustrate the development and design standards. 7. Innovative Affordable Housing Financing Tools to Increase Production The high cost of land in Santa Monica makes deed-restricted affordable residences very expensive, and limited funding is a primary barrier to creating more units. This project will look at how innovative financing tools like a regional housing trust fund and infrastructure financing plans are used elsewhere and 3.M.c Packet Pg. 1177 Attachment: November 12, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 6 of 11 how the City can best leverage these tools to enhance the production of affordable housing. The above analytical activities will be complemented by a robust public engagement platform, which is accounted for in the budget developed for each activity described in the SB2 grant application. Grant funds must be used by FY 21/22, and are subject to potential repayment if no implementation actions result from grant-funded activities. Interface with Other Housing-Related Activities (Local, Regional and State) 2019 has seen a tremendous focus on housing policy at local, regional and State levels owing to the widely-acknowledged and highly visible housing crisis. PCD and other departments have worked collaboratively to track State legislative actions aimed at increasing housing production, as well as regional discussions that are largely dominated by the emerging Regional Housing Needs Assessment 6th Cycle allocation. Interdepartmental staff has also been active in addressing local housing policy issues at the request of the City’s Housing Commission and City Council. SB2 presents an opportunity to address the changing landscape of housing policy in California by exploring changes to existing standards and project requirements; however, staff notes that the work contemplated by the SB2 scope may not be adequate to address the totality of the required policy shift. Below are brief descriptions of the most pertinent issues developing in the housing landscape. A. State Legislation of Key Interest to Santa Monica A multitude of housing bills were signed by Governor Newsom that alters existing housing policy that govern processing of housing projects, rent control and rent caps, density bonuses, accessory dwelling units, and community investment. Key highlights relevant to Santa Monica include: State Housing Bills Status Description 3.M.c Packet Pg. 1178 Attachment: November 12, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 7 of 11 FASTER APPROVALS Approved SB330: Faster approvals for housing and zoning changes. Time-limited, Statewide ban on (A) downzoning, (B) moratoriums on housing development, (C) non- objective design standards, and (D) limit on number of permits issued. Approved AB1485: Incentives and faster approvals for moderate-income housing built with prevailing (union) wage labor. Approved AB1763: 80% density bonus for affordable housing. Approved AB101: By-right approval for homeless shelters. AB101 also includes $650 million in grants for cities and counties to address homelessness issues. It also includes $250 million for local governments and regional bodies to measure housing needs and develop plans for providing more housing. TENANT PROTECTIONS Approved AB1110: Longer notice require for rent increases. 60 days for under 10%, 90 days for 10-15%, 120 days for 15%+ Approved AB1482: Statewide limit to annual rent increases. Statewide Just Cause limits to evidence. ACCESSORY DWELLING UNITS Approved SB13, AB68, and AB881: Further removes barriers to ADU productions FUNDING Vetoed SB5: Creates new local funding agencies for affordable housing, infrastructure and community investment. Approved AB857: Allows cities to create Public Banks. B. 6TH Cycle Housing Element and Regional Housing Needs Assessment The Regional Housing Needs Assessment (RHNA) is mandated by State Housing Law as part of the periodic process of updating local housing elements of the General Plan. The RHNA quantifies the need for housing within each jurisdiction during specified planning periods. SCAG is in the process of 3.M.c Packet Pg. 1179 Attachment: November 12, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 8 of 11 developing the 6th cycle RHNA allocation plan which will cover the planning period October 2021 through October 2029. The final methodology is anticipated to be adopted by the Regional Council in January/February 2020, followed by an appeal period and final planned for adoption by SCAG in October 2020. SCAG has made a tool available online that allows cities to have an understanding of the possible allocation range in scenarios that are currently being proposed. According to the tool, Santa Monica’s RHNA allocation is estimated to be approximately 4,800 units, which is substantially higher than in previous cycles (the 5th Cycle allocation was 1674 units) owing to the new requirement to address “existing housing need” (unmet existing demand) as well as “projected need” (based on a forecast of future population growth). In parallel with the development of the RHNA, changes to state law (Government Code section 65583.2, Residential land inventory; definitions; inventory element; suitability for regional housing needs; densities) affect what may be counted as a suitable housing site to accommodate the RHNA in the Housing Element. Additionally, HCD has signaled that jurisdictions that do not meet their Housing Elements numbers would be subject to more severe consequences than in the past, including ineligibility for transportation and housing funding. C. Local Housing-Policy Related Efforts Interdepartmental staff are engaged in addressing local housing demand through a variety of measures that have been authorized recently by the Council. These efforts primarily relate to the Affordable Housing Production program, but bear influence on market-rate development across the city. • Removal of the Extremely Low Income Option. On March 26, 2019 Council authorized a modification to the zoning ordinance to temporarily remove the option for providing extremely low-income (ELI) units to satisfy a project’s Affordable Housing Production Program obligation pursuant to SMMC Chapter 9.64. This action was taken due to a perception that an overuse of this option was placing an undue burden on the City to fund 3.M.c Packet Pg. 1180 Attachment: November 12, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 9 of 11 affordable units to meet the voter-approved Proposition R target of 30% of all multifamily housing completed each fiscal year that must be affordable and occupied by low- and moderate-income households; and at least one- half of the total affordable housing completed be affordable for and occupied by low-income households. Council extended the temporary removal through November 2020 at its October 22, 2019 meeting. • Affordable Housing Production Program Financial Feasibility Study. At its March 26, 2019 meeting, Council also authorized a contract with HR&A Advisors for financial feasibility analysis of potential modified affordable housing requirements for future Tier 2 mixed-use developments similar to those which were adopted in the DCP. Work on this effort is underway and is based on Council’s direction to only study existing development parameters. In the face of forthcoming adjustments to Santa Monica’s RHNA allocation, as well as a slew of State bills aimed at increasing housing production through potential upzoning activities and by-right approvals, questions have arisen as to the utility of this effort that uses existing development parameters. Vendor Selection Staff recommends HR&A Advisors, Inc. to provide financial feasibility analysis of: • Update Financial Feasibility Analysis on the Downtown Community Plan (DCP) • Explore Revised Development Standards and Incentives for Housing Projects on Boulevards and in the Bergamot Area Plan • Multi-Unit Districts Affordable Housing Fee and Minimum Density Study This recommended award is made as an exception to the competitive bidding process pursuant to Section 2.24.80(d). Competition does not exist because HR&A has 3.M.c Packet Pg. 1181 Attachment: November 12, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 10 of 11 completed extensive feasibility analysis related to evaluating the feasibility of the City’s development standards, project requirements and fees including ongoing work on the AHPP, as well as financial feasibility on the recent Downtown Community Plan and 2015 Zoning Ordinance. Therefore, HR&A has the unique ability or capability to complete the abovementioned studies related to the SB2 grant. Completing a competitive procurement process is highly unlikely to produce cost-competitive proposals from other sources, given HR&A’s experience and knowledge with preparing modeling for the City. Future advertising and vendor selection for the remaining SB2- related activities will be forthcoming in the coming months as staff puts together a workplan and a process for engaging the community on these substantive issues. Financial Impacts and Budget Actions Staff seeks authority to accept a grant awarded in the amount of $310,000 from the California Department of Housing and Community Development (HCD) SB2 Building Homes and Jobs Act for housing production related planning studies and implementation activities. Award of the SB2 grant totaling $310,000 requires the following FY 19/20 budget changes. FY 2019-2020 Grant Budget Changes Establish Revenue Budget Appropriate Funds Account Number(s) Amount Account Number(s) Amount 20700002.405570 $310,000 20700002.556420 $310,000 Total $310,000 Total $310,000 Future year funding is contingent on Council budget approval. Staff seeks authority to approve a portion of the funding from the SB2 Grant to increase the amount of agreement #10830 with HR&A Advisors for expanded feasibility analysis and physical modeling services. Agreement Modification Request Agreement # Current Authorized Amount FY 2019-20 Modified Request Amount Account # Total Revised Contract Amount 10830 150,000 01160001.552010 150,000 3.M.c Packet Pg. 1182 Attachment: November 12, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) 11 of 11 179,000 20700002.556420 179,000 TOTAL 329,000 Prepared By: Peter James, Principal Planner Approved Forwarded to Council Attachments: A. June 11, 2019 Council Meeting (Web Link) B. RHNA Proposed Methodology (Web Link) 3.M.c Packet Pg. 1183 Attachment: November 12, 2019 Council Staff Report (5128 : Second Modification to HR&A contract) - 1 -   Contract No. 108300 (CCS) PROFESSIONAL SERVICES AGREEMENT This Professional Services Agreement (“Agreement”), entered into as of _________________(“Execution Date”), by and between the City of Santa Monica (“City”) and HR&A Advisors, Inc. (“HR&A”), is made with reference to the following: RECITALS: A. The City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of the City. B. HR&A is qualified to do business, and is doing business, in the State of California. HR&A represents it has the background, knowledge, experience and expertise necessary to provide the services set forth in this Agreement. C. The City and HR&A now desire to enter into an agreement for HR&A to provide professional services to the City. NOW, THEREFORE, it is mutually agreed by and between the undersigned parties as follows: TERMS AND CONDITIONS 1. Term. This Agreement begins on the Execution Date and terminates on June 30, 2022, unless sooner terminated in accordance with Section 14. 2. HR&A Services. HR&A will perform all of the services (“Services”) described in Exhibit A, Scope of Services. HR&A will complete the Services in accordance with Exhibit B, Budget. 3. City Services. The City agrees to: 3.1 Make available to HR&A any currently existing documents, data or information required for the performance of the Services. 3.2 Designate a representative authorized to act on behalf of City. 3.3 Promptly examine and render findings on all documents submitted for staff review by HR&A. 4. Compensation. The City will compensate HR&A for the Services performed in an amount not to exceed $219,000.00, as set forth in Exhibit B. 5. Invoices. HR&A will invoice the City for the Services in accordance with Exhibit B and the City will pay any undisputed amount within 30 days of receipt. 6. Notices. All notices, demands, requests or approvals to be given under this Agreement, must be in writing and will be deemed served when delivered personally, DocuSign Envelope ID: E40D9E3E-2795-4CBE-85C6-23137938095E 11/23/2020 3.M.d Packet Pg. 1184 Attachment: 00 EXECUTED CONTRACT #108300 HR&A (5128 : Second Modification to HR&A contract) - 2 -   by email, or on the third business day after deposit in the United States mail, postage prepaid, registered or certified, addressed as follows: 6.1 All notices, demands, requests or approvals to the City: City Planning Division City of Santa Monica 1685 Main Street, Mail Stop 28 Santa Monica, California 90401 Attention: Rachel Kwok Re: Contract No. 108300 (CCS) with a copy to: Santa Monica City Attorney’s Office 1685 Main Street, Third Floor Santa Monica, California 90401 Attention: City Attorney Re: Contract No. 108300 (CCS) 6.2 All notices, demands, requests or approvals to HR&A: HR&A 700 South Flower Street, Suite 2995 Los Angeles, California, USA Attention: Paul J. Silvern, Vice President psilvern@hraadvisors.com Re: Contract No. 108300 (CSS) 7. Independent Parties. Both parties to this Agreement will be acting in an independent capacity and not as agents, employees, partners, or joint venturers of one another. Neither the City nor its officers or employees will have any control over the conduct of HR&A or any of HR&A’s agents, employees, or subconsultants, except as otherwise provided in this Agreement. 8. Integrated Contract. This Agreement represents the full and complete understanding of every kind or nature whatsoever between the parties. Any preliminary negotiations and agreements of any kind or nature are merged into this Agreement. No oral agreement or implied covenant may be held to vary the provisions of this Agreement. This Agreement may be modified only by written agreement signed by City and HR&A, and approved as to form by the City Attorney. 9. Insurance. Prior to commencing work, HR&A must procure, maintain and pay for insurance against claims for injuries to persons or damage to property that may arise from or in connection with the performance of the Services by HR&A or HR&A’s agents, representatives, employees or subconsultants for the duration of this DocuSign Envelope ID: E40D9E3E-2795-4CBE-85C6-23137938095E 3.M.d Packet Pg. 1185 Attachment: 00 EXECUTED CONTRACT #108300 HR&A (5128 : Second Modification to HR&A contract) - 3 -   Agreement. HR&A must obtain insurance that, at a minimum, meets the requirements for insurance set forth in Exhibit C, Insurance Requirements and Verifications. 10. Defense and Indemnification. 10.1 Indemnification. As to HR&A’s Services produced under this Agreement, HR&A agrees to defend, indemnify, protect, and hold harmless the City, its agents, officers, boards and commissions, and employees (collectively, “City”) from and against any and all liability, claims, demands, damages, or costs, including but not limited to attorney’s fees, or payments for injury to any person or property (collectively, “Losses”) caused or claimed to be caused by the acts, errors and/or omissions of HR&A, or HR&A’s employees, agents, officers, and subconsultants. HR&A’s responsibilities under this Section 10.1 include liability arising from, connected with, caused by, or claimed to be caused by the active or passive negligent acts or omissions of the City, which may be in combination with the acts or omissions of HR&A, its employees, agents or officers, or subconsultants; provided, however, that HR&A’s duty to defend, indemnify, protect and hold harmless shall not include any Losses arising from the sole negligence or willful misconduct of the City. Notwithstanding HR&A’s obligation to defend City hereunder, City has the right to conduct its own defense and seek reimbursement for reasonable costs of defense from HR&A, if City chooses to do so. 10.2 Enforcement Costs. HR&A agrees to pay any and all costs the City incurs enforcing the indemnity, defense and hold harmless provisions set forth in Section 10.1. 11. Prohibition Against Transfers. 11.1 HR&A may not assign, hypothecate, or transfer this Agreement or any interest therein directly or indirectly, by operation of law or otherwise without the prior written consent of City. Any attempt to do so without the City’s consent will be null and void, and any assignee, hypothecatee or transferee acquires no right or interest by reason of such attempted assignment, hypothecation or transfer. 11.2 The sale, assignment, transfer or other disposition of any of the issued and outstanding capital stock of HR&A or of any general partner or joint venturer or syndicate member of HR&A, if a partnership or joint venture or syndicate exists, which results in changing the control of HR&A, will be construed as an assignment of this Agreement. Control means 50% or more of the voting power of the corporation. DocuSign Envelope ID: E40D9E3E-2795-4CBE-85C6-23137938095E 3.M.d Packet Pg. 1186 Attachment: 00 EXECUTED CONTRACT #108300 HR&A (5128 : Second Modification to HR&A contract) - 4 -   12. Permits and Licenses. HR&A, at its sole expense, must obtain and maintain during the term of this Agreement all required business and professional permits, licenses and certificates. 13. Waiver. A waiver of any breach of this Agreement may not be deemed a waiver of any subsequent breach of the same or any other term, covenant, or condition of this Agreement. 14. Default and Termination. 14.1 If HR&A fails or refuses to perform any of the provisions of this Agreement, and if the default is not cured within a period of five days after the City’s written notice of default specifying the nature of the default, City may immediately terminate this Agreement by written notice to HR&A. 14.2 The City has the option, at its sole discretion and without cause, of terminating this Agreement by giving ten days’ written notice to HR&A. Upon termination of this Agreement, City will pay HR&A any compensation earned and unpaid up to the effective date of termination. 15. Compliance with Law. HR&A must comply with all laws of the State of California and the United States, and all ordinances, rules, and regulations enacted or issued by City. 16. Discrimination. HR&A may not discriminate in the provision of services hereunder because of race, color, religion, national origin, ancestry, sex, age, sexual orientation, marital status, AIDS or disability. 17. Nuisance. HR&A may not maintain, commit, or permit the maintenance or commission of any nuisance in connection with the performance of services under this Agreement. 18. Records. 18.1 HR&A must maintain complete and accurate records with respect to costs, expenses, receipts and other such information required by the City for any services provided where compensation is on the basis of hourly rates, subconsultant costs, or other direct costs. HR&A must keep the records, together with supporting documents, separate from other documents and records and maintain them for a period of three years after receipt of final payment. 18.2 HR&A must maintain records in sufficient detail to permit an evaluation of the Services and in accordance with generally accepted accounting principles. HR&A must clearly identify all records and make them readily accessible to the City. At the City’s request, HR&A must provide records in an electronic format and, if necessary, access to any proprietary software to view such electronic records. DocuSign Envelope ID: E40D9E3E-2795-4CBE-85C6-23137938095E 3.M.d Packet Pg. 1187 Attachment: 00 EXECUTED CONTRACT #108300 HR&A (5128 : Second Modification to HR&A contract) - 5 -   18.3 HR&A must allow the City to have free access to HR&A’s books and records and to inspect all work, data, documents, proceedings and activities related to this Agreement. The City has the right to examine or audit HR&A’s records, and HR&A agrees to cooperate with any examination or audit of its records. If a City audit discloses an error of 5% or more in information reported by HR&A, HR&A agrees to pay the cost of the City’s audit computed on the basis of four times the direct payroll of the audit staff completing the audit and audit report. 19. Work Product; Reports. 19.1 Any work product prepared or caused to be prepared by HR&A or any subconsultant for this Agreement will be the exclusive property of City. No work product given to or prepared by HR&A or any subconsultant pursuant to this Agreement may be made available to any individual or organization by HR&A without prior written approval by City. 19.2 At the City’s request, HR&A must furnish reports concerning the status of the Services. 20. Standard of Care. HR&A agrees to provide all Services, including services performed by any subconsultant, in a manner consistent with the level of care and skill ordinarily exercised by members of HR&A’s profession currently practicing in the same locality under similar conditions. 21. Subconsultants. 21.1 If HR&A proposes to have any subconsultant perform any part of the Services, HR&A must submit a request for approval in writing, describing the scope of work to be subcontracted, the name of the proposed subconsultant, and the total price or hourly rates used in preparing an estimated cost for the subconsultant’s services. The City, in its sole discretion, may grant or deny the request. 21.2 HR&A will be responsible for the quality of any subconsultant’s work. Every subcontract or agreement of any kind entered into between HR&A and any subconsultant (or between any subconsultant and others) must contain the following provision: This agreement is consistent with all terms and conditions of the Agreement No. 108300 (CCS) entered into between the City of Santa Monica and HR&A on^^___________. 22. Governing Law. The laws of the State of California, without regard to any choice of law provisions, will govern this Agreement. 23. Venue and Jurisdiction. The City and HR&A agree that the Services will take place in Los Angeles County. Any litigation arising out of this Agreement may only be DocuSign Envelope ID: E40D9E3E-2795-4CBE-85C6-23137938095E 11/23/2020 3.M.d Packet Pg. 1188 Attachment: 00 EXECUTED CONTRACT #108300 HR&A (5128 : Second Modification to HR&A contract) - 6 -  brought in either the United States District Court, Central District of California, or the Superior Court of California, County of Los Angeles, West District, as appropriate. The parties agree that venue exists in either court, and each party expressly waives any right to transfer to another venue. The parties further agree that either court will have personal jurisdiction over the parties to this Agreement. 24. Survival of Provisions and Obligations. Any provision of this Agreement, which by its nature must be exercised after termination of this Agreement, will survive termination and remain effective for a reasonable time. Any obligation that accrued prior to termination of this Agreement will survive termination of this Agreement. 25. Exhibits. The following exhibits are incorporated by reference into this Agreement as though fully set forth herein. Exhibit A Scope of Services Exhibit B Budget Exhibit C Insurance Requirements In witness whereof, the parties have caused this Agreement to be executed the day and year first above written. ATTEST: ______________________________ DENISE ANDERSON-WARREN City Clerk APPROVED AS TO FORM: ______________________________ LANE DILG City Attorney CITY OF SANTA MONICA, a municipal corporation By: ______________________________ RICK COLE City Manager ABC Corporation #VENDOR By: ________________________________ DocuSign Envelope ID: E40D9E3E-2795-4CBE-85C6-23137938095E George Cardona Interim City Attorney 11/19/2020 Paul J. Silvern, Vice President HR&A Advisors, Inc. Paul J. Silvern 11/19/2020 11/23/2020 Lane Dilg Interim City ManagerCity Clerk Denise Anderson-Warren 11/30/2020 3.M.d Packet Pg. 1189 Attachment: 00 EXECUTED CONTRACT #108300 HR&A (5128 : Second Modification to HR&A contract) Exhibit A Scope of Services DocuSign Envelope ID: E40D9E3E-2795-4CBE-85C6-23137938095E 3.M.d Packet Pg. 1190 Attachment: 00 EXECUTED CONTRACT #108300 HR&A (5128 : Second Modification to HR&A contract) New York | Dallas | Los Angeles | Raleigh | Washington DC Revised: October 21, 2020 via email to: jing.yeo@smgov.net Jing Yeo Planning Manager Community Development Dept. City Hall, Room 212 1685 Main Street Santa Monica, CA 90404 Re: Proposal to Update 2019 AHPP Analysis and Analyze New Prototypes in Additional Commercial Areas Dear Jing: Per your request, HR&A Advisors, Inc. (HR&A) is pleased to provide this proposal to provide additional prototype testing to determine whether increased development standards and/or new affordable housing requirements (i.e., in terms of percentages, unit mix and affordability levels) can accelerate development of mixed-income housing. This effort will include updating feasibility analysis for 14 prototypes from our previous analysis, modelling 14 new prototypes in additional commercial areas, and updating real estate market and construction cost assumptions for selected market areas. Similar to previous analysis completed by HR&A, the assignment involves empirical testing of prototypical private developments to establish the financially-feasible limits of modified affordable housing requirements and development fees, utilizing static pro forma financial feasibility Excel models to test the developer investment return implications of revised affordable housing requirements on prototypical developments. The assignment is also similar to a financial feasibility analysis that we are currently completing for the Los Angeles City Planning Department, wherein our analytic model was re-designed to evaluate the development capacity (in terms of incremental stories or FAR) that would be required to support Transit- Oriented Communities affordability percentages and income levels in Downtown Los Angeles. Our proposed approach to the new assignment will build on these prior efforts. PROPOSED SCOPE OF WORK HR&A will undertake the following tasks in a generally sequential order: Task 1. Kick-off Meeting and Discussion About Modeling Assumptions. HR&A will meet with City staff to discuss various elements of the analysis, obtain certain data and clarify certain modeling assumptions. These include, but are not necessarily limited to the following:  Confirm the general objectives for performing this analysis and review the scope and schedule for completing it;  Confirm communication protocols between HR&A and the City staff team, including the City Attorney’s office;  Confirm the 24 prototypical mixed-use development scenarios for Bergamot, Boulevards, Lincoln, Downtown, General Commercial - Santa Monica Boulevard and Neighborhood Commercial (see Task 2 for the list of prototypes to be confirmed), including a range of flexibility in terms of changes to existing Tier structures, FAR, or height; DocuSign Envelope ID: E40D9E3E-2795-4CBE-85C6-23137938095E 3.M.d Packet Pg. 1191 Attachment: 00 EXECUTED CONTRACT #108300 HR&A (5128 : Second Modification to HR&A contract) HR&A Advisors, Inc. Proposal re: Santa Monica Community Benefit Fee Structures | 2  Confirm that HR&A will first test each prototype with the exact affordable housing requirements in the Zoning Code (i.e., base case) and then a set of requirements (i.e., household income levels, minimum unit sizes and affordable unit mix) provided by City staff;  Confirm that HR&A should use FY 2020-21 City development impact fee, permit charges and other fee schedules for development costs, and obtain the applicable schedules of all such fees, including recently approved standards for Tier 2 and Tier 3 developments;  Obtain the most current AHPP household income, maximum rent and maximum sale price schedule; and  Discuss what types of City land use permits and environmental documentation should be assumed for each prototype (if different), and their related average approval schedules and costs; and  Discuss alternative means to improve construction cost estimates for the prototypes. Deliverables: Meeting agenda and meeting summary memo. Task 2. Develop the Specifications of All Development Prototypes. Based on the results of the above meeting, HR&A will collaborate with City Planning staff to prepare a general profile for each of 24 prototypical development scenarios, including total site area (if different from 15,000 s.f. for the Boulevards), acceptable range of gross building floor area, total net floor area and related building efficiency factors, net floor area by land use, acceptable range of total building height and number of stories, average unit sizes for both market rate and affordable units, dwelling unit counts by type, parking counts and number of subterranean levels, among other modeling assumptions. This analysis will vary from our previous analyses, assuming concurrence from City staff, wherein we will design our model to test incremental development capacity (in terms of additional floors/FAR of multifamily housing and additional floors of subterranean parking) within a reasonable set of parameters (i.e., setbacks, construction type, etc.). These specifications should reflect all recent changes to development standards approved by the City Council. This will allow HR&A to rapidly and incrementally test additional development capacity required to support certain affordable housing requirements while maintaining acceptable developer profit margin to incentivize development. Analyze a total of 24 prototypes including:  Bergamot Area Plan – Mixed-Use CD and Bergamot Transit Village  Boulevards – Mixes Use Boulevard – Wilshire and Mixed-Use Boulevard Low - Santa Monica  General Commercial – Lincoln  R2/R3 Zones  Downtown – Transit Adjacent and Neighborhood Village  General Commercial – Santa Monica Boulevard  Neighborhood Commercial Deliverable: Final specification of physical characteristics and related assumptions for all prototypes. Task 3. Update Current Real Estate Market Conditions for the Most Sensitive Financial Feasibility Modeling Assumptions. This includes updating relevant assumptions used in prior related HR&A financial feasibility modeling to pre- COVID-19 conditions, specifically for up to 5 submarkets (potentially including Downtown, the Boulevards, Bergamot, Ocean Park, and Montana). In doing so HR&A will utilize a variety of third-party data sources available to HR&A, including Co-star, Reis, quarterly real estate market surveys prepared by several real estate brokerages and other real estate services that include either Santa Monica-specific or more general Westside rents, absorption and vacancy data, operating expenses, income capitalization rates, and project financing terms and pricing. Optional Task 12 below addresses various sensitivities that HR&A can run to demonstrate the potential impact of long-term impacts of the COVID-19 pandemic. DocuSign Envelope ID: E40D9E3E-2795-4CBE-85C6-23137938095E 3.M.d Packet Pg. 1192 Attachment: 00 EXECUTED CONTRACT #108300 HR&A (5128 : Second Modification to HR&A contract) HR&A Advisors, Inc. Proposal re: Santa Monica Community Benefit Fee Structures | 3 HR&A will consult with local developers and architects to confirm the development cost assumptions during the course of the analytic process, as described in Task 10. HR&A can subcontract with an independent professional construction cost estimator to provide assumptions about above-grade and below grade hard construction costs for each prototype if required. To support this work, City staff will supply HR&A with an updated inventory of recent multi-family projects that have been completed or still have active applications under review during the past five years, as applicable to all prototypes. Deliverable: The assumptions derived from this Task will be incorporated into the deliverables for Task 4. Task 4. Prepare Financial Feasibility Pro Forma Models for Each Prototype. HR&A will first prepare two base case financial feasibility models for each retail/apartment prototype assuming the Tier 2 affordable housing options most frequently used by developers (i.e., first at 7.5% of the units affordable to 30% income households; then 15% affordable to 50% income households; each using the unit mix by bedrooms per unit and other requirements specified in the Zoning Code). HR&A will then prepare an analysis case for each prototype using a new set of affordable housing requirements determined through discussion with City staff. These feasibility models (both base cases and analysis case) will resemble the type of Excel workbook pro formas prepared by HR&A for previous analyses of this type. Central to this analysis are the feasibility thresholds employed. Again, building on previous work of this type, HR&A will use two different, but related measures, both of which would have to be met for the results to be considered “financially feasible.” These are: 1) Return on Total Development Cost1, which is calculated as Net Operating Income divided by Total Development Cost, the result of which should be at least one to two percentage points above the weighted average of the income capitalization rates for each land use in the prototype; and 2) Developer Profit Margin, which is calculated as Capitalized Project Value minus Total Development Cost, the result of which should be at least equal to 10 percent of net Capitalized Project Value. The pro forma models will be designed in a way that will make it relatively easy to test the implications of changing the key elements of a set of assumed affordable housing standards (i.e., percentage requirements by income level and unit mix), should any of the initial analysis cases prove to be financially infeasible. But HR&A will not make any such changes until the feasibility results for the base cases and initial analysis cases have been reported to City staff. Deliverable: Pro forma model results for each prototype and associated affordable housing assumptions. Task 5. Document 100% Affordable Housing Opportunities and Constraints. HR&A will review and document development standards applicable to 100% affordable housing projects across the City, and will engage non-profit affordable housing developers to determine the impact of development standards on the feasibility of affordable housing projects. Because 100% affordable housing projects, which are typically funded through the use of Low-Income Housing Tax Credits (“LIHTC”) and other sources, are not well-suited to conventional financial feasibility pro forma analysis, HR&A will develop a list of opportunities and constraints for affordable housing projects Citywide and within individual zoning districts. This documentation will be focused on the impact of development standards and physical location on the availability of land, pursuit of funding/financing, and other relevant criteria. These findings will be summarized in the deliverable associated with Task 6. 1 Assuming rental projects only. Analysis for condo scenarios will require additional budget depending on the scope. DocuSign Envelope ID: E40D9E3E-2795-4CBE-85C6-23137938095E 3.M.d Packet Pg. 1193 Attachment: 00 EXECUTED CONTRACT #108300 HR&A (5128 : Second Modification to HR&A contract) HR&A Advisors, Inc. Proposal re: Santa Monica Community Benefit Fee Structures | 4 Task 6. Preliminary Results Briefing. At the end of the preceding task, HR&A will prepare a presentation-style briefing summary to support a discussion meeting with City staff. The purposes of this meeting are to report on: (1) the degree to which the prototypes are financially feasible; (2) the degree to which any new affordable housing requirements appear to be feasible; (3) if not, what adjustments to the modeling should be pursued to achieve financial feasibility, and in what order of policy priority (i.e., percentages of affordable units, affordability level and unit mix). Deliverable: Briefing book summarizing pro forma modeling approach, assumptions and preliminary results. Task 7. (Optional) Allowance for Further Feasibility Testing. This is an as-needed task for any further sensitivity testing that may be required, should the initial analysis case results indicate that modifications of new affordable housing requirements or development standards would be needed to achieve financial feasibility for one or more of the prototypes. A general schedule and budget allowance are included for this task, but it may require augmentation if more than one round of sensitivity testing is required. Deliverable: Additional pro forma model results, as needed. Task 8. (Optional) Revised Results Briefing. This is another as-needed task for summarizing and discussing the results with City staff about any needed sensitivity testing as described above. Deliverable: Updated briefing book summarizing any additional pro forma modeling. Task 9. Memorandum Report. Once the analysis has been finalized and all questions and issues of concern to City staff have been addressed, HR&A will prepare a memorandum report describing the analysis approach, assumptions, findings and conclusions. The memorandum will include a concise executive summary, a narrative explanation of approach and key assumptions, and conclusions. It will also include attachments with the output from the financial feasibility models. The memorandum will be prepared first in draft for review and comment by the City staff project team, and then put into final form after considering any comments on the draft. HR&A acknowledges that all preliminary and revised analysis, internal briefings and other communications with City staff will be treated as strictly confidential, and possibly subject to attorney-client privilege, until City staff approves public release of the Final Memorandum Report. Deliverables: Draft and Final Memorandum Report. Task 10. Stakeholder Briefings. This task consists of: up to two roundtable briefings with developers (including non-profits), architects and property owners, which may be convened by the Santa Monica Area Chamber of Commerce, to provide input on key assumptions and to review HR&A’s draft findings, conclusions and recommendations; and up to two meetings with other local stakeholders to be determined in coordination with City staff, also to review HR&A’s draft findings, conclusions and recommendations. The specific schedule and format for these meetings will be determined after consultation with City staff but are intended to occur before Task 10 (Public Presentations). Deliverables: Meeting presentation briefing materials and meeting results summary memos. Task 11. Public Presentations. This task is an allowance for HR&A to appear at public meetings to present and discuss the results of this analysis. For budgeting purposes, the schedule and budget assume two meetings with the Housing DocuSign Envelope ID: E40D9E3E-2795-4CBE-85C6-23137938095E 3.M.d Packet Pg. 1194 Attachment: 00 EXECUTED CONTRACT #108300 HR&A (5128 : Second Modification to HR&A contract) HR&A Advisors, Inc. Proposal re: Santa Monica Community Benefit Fee Structures | 5 Commission, two with the Planning Commission and two with the City Council, including time to prepare materials for the meetings, contribute to relevant sections of staff reports and PowerPoint presentations, and participate in the meetings. The schedule for these meetings will be determined in consultation with City staff, but it is intended that one set of public meetings will occur prior to Task 8 (Memorandum Report) and one after Task 9 (Stakeholder Briefings). Deliverables: HR&A presentation briefing materials and, as needed, written comments on companion City staff presentation. Task 12. (Optional) COVID-19 Updates Because our modeling will not yet account for the full near-term impacts of COVID-19 on the real estate market, we can update our analysis at a later date once the longer-term impacts are clear, or run subsequent sensitivity models. This task would assess the impact of various changes to real estate revenues, financing costs and construction costs on supportable levels of affordable housing. PROPOSED STAFFING AND SCHEDULE All the work described above will be prepared by qualified HR&A professional staff working under the direct supervision of Paul J. Silvern, Vice President. This includes Thomas Jansen, a Principal (as Project Manager), Ada Peng, a Senior Analyst and Jenna Gray, a Research Analyst. Subject to further discussion with City staff, subsequent decisions about whether multiple rounds of sensitivity testing may be required, and assuming timely City staff input during the progress of the work, HR&A will complete the above-described tasks on approximately the following schedule, including overlaps between individual tasks to the degree possible, but also allowing for the further feasibility testing and related discussion tasks, if needed: Task Cumulative Time Task 1. Kick-off Meeting Week 1 Task 2. Specify 24 Prototypes Week 4 Task 3. Update Market Assumptions Week 6 Task 4. Base Case & Initial Analysis Case Feasibility Models Week 9 Task 5. Document 100% Affordable Housing Opportunities & Constraints Week 9 Task 6. Preliminary Results Briefing & Meeting Week 10 Task 7. Allowance for Further Feasibility Testing Week 12 Task 8. Allowance for Revised Results Briefing Week 14 Task 9. Draft & Final Memorandum Report To Be Determined Task 10. Stakeholder Briefings To Be Determined Task 11. Presentations to Commissions & City Council To Be Determined Task 12. COIVD-19 Updates To Be Determined PROPOSED BUDGET Based on our experience with comparable projects, and taking into account certain economies available from our previous related assignments for the City, we estimate that the completion of the above scope of work will require a budget of $219,000.00, excluding customary reimbursable expenses (which we expect to be limited). This total is allocated among individual tasks approximately as follows. DocuSign Envelope ID: E40D9E3E-2795-4CBE-85C6-23137938095E 3.M.d Packet Pg. 1195 Attachment: 00 EXECUTED CONTRACT #108300 HR&A (5128 : Second Modification to HR&A contract) HR&A Advisors, Inc. Proposal re: Santa Monica Community Benefit Fee Structures | 6 Task Cost Task 1. Kick-off Meeting $4,000 Task 2. Specify 24 Prototypes $26,000 Task 3. Update Market Assumptions $24,000 Task 4. Base Case & Initial Analysis Case Feasibility Models $50,000 Task 5. Document 100% A.H Opportunities & Constraints $5,000 Task 6. Preliminary Results Briefing & Meeting $8,000 Task 7. Allowance for Further Feasibility Testing $24,000 Task 8. Allowance for Revised Results Briefing $8,000 Task 9. Draft & Final Memorandum Report $12,000 Task 10. Stakeholder Briefings $8,000 Task 11. Presentations to Commissions & City Council $20,000 Task 12. COVID-19 Updates $15,000 Subtotal Fees $204,000 Contingency $15,000 Total $219,000 The proposed budget includes a roughly 7.5 percent contingency, based on our experience that these kinds of analyses frequently require mid-term changes in assumptions that require additional work beyond the original scope of the assignment. Customary expenses should be limited to third party data acquisition and local travel to meetings; these are charged at their direct cost to HR&A without mark-up. Any additional services that may be requested can be provided on a time and materials basis, per the hourly rate schedules shown in Attachment A to this proposal letter, or on a mutually agreeable fixed fee basis, as City staff may prefer. We propose to invoice the City on a monthly basis for the percentage of each task completed during the prior month. ********************** We hope you find the foregoing proposal responsive to the City’s needs. Once finalized, we assume City staff will prepare a standard City professional services contract using this proposal letter to define the scope of work, schedule and compensation. We are very familiar with the City contract, and related City contract requirements, and take no exceptions to their terms or conditions. We can be available to discuss this proposal with you and your colleagues as needed to clarify any issues or discuss any amendments that may be required. We look forward to the possibility of working with you and the other members of the City project team on this assignment. Sincerely, PAUL J. SILVERN, Vice President Attachment A: 2020 HR&A Hourly Rate Schedule for Public Sector and Non-Profit Clients DocuSign Envelope ID: E40D9E3E-2795-4CBE-85C6-23137938095E 3.M.d Packet Pg. 1196 Attachment: 00 EXECUTED CONTRACT #108300 HR&A (5128 : Second Modification to HR&A contract) HR&A Advisors, Inc. Proposal re: Santa Monica Community Benefit Fee Structures | 7 Attachment A HR&A Advisors, Inc. 2020 Hourly Rate Schedule for Public Sector & Non-Profit Clients Hourly rates for HR&A staff are as follows: Personnel Hourly Rate Chair / Vice Chair $ 535 Partner $ 395 Principal $ 350 Director $ 315 Senior Analyst $ 240 Analyst $ 190 Research Analyst $ 150 Admin $ 105 HR&A bills for customary out-of-pocket expenses (e.g., travel costs, mass reproduction, specialized graphics, long-distance telephone, messenger and overnight delivery) at their direct cost to HR&A without mark-up. Depositions, mediations, arbitration hearing or trial testimony hours are billed at time and one-half. DocuSign Envelope ID: E40D9E3E-2795-4CBE-85C6-23137938095E 3.M.d Packet Pg. 1197 Attachment: 00 EXECUTED CONTRACT #108300 HR&A (5128 : Second Modification to HR&A contract) Exhibit B Budget DocuSign Envelope ID: E40D9E3E-2795-4CBE-85C6-23137938095E 3.M.d Packet Pg. 1198 Attachment: 00 EXECUTED CONTRACT #108300 HR&A (5128 : Second Modification to HR&A contract) Exhibit C Insurance Requirements and Verifications Consultant shall procure and maintain for the duration of the Agreement insurance against claims for injuries to persons or damages to property that may arise from or in connection with the performance of the work hereunder by the Consultant, its agents, representatives, employees or subcontractors. Minimum Scope and Limits of Insurance Coverage shall be at least as broad as: 1. Commercial General Liability (CGL): Insurance Services Office Form CG 00 01 covering CGL on an “occurrence” basis, including products and completed operations, property damage, bodily injury and personal and advertising injury, with limits of no less than $1,000,000 per occurrence. If a general aggregate limit applies, either the general aggregate limit shall apply separately to this project/location (Insurance Services Office Form CG 25 04) or the general aggregate limit shall be twice the required occurrence limit. 2. Automobile Liability: Insurance Services Office Form CA 00 01 covering Code 1 (any auto), or if Consultant has no owned autos, Code 8 (hired) and Code 9 (non-owned), with limits of no less than $1,000,000 per accident for bodily injury and property damage. 3. Workers’ Compensation: Workers’ Compensation insurance as required by the State of California, with Statutory Limits and Employers’ Liability Insurance with limits of no less than $1,000,000 per accident for bodily injury or disease (see footnote #1). 4. Professional Liability: Insurance appropriate to the Consultant’s profession with limits of no less than $1,000,000 per occurrence or claim/$2,000,000 in the annual aggregate. If the Consultant maintains broader coverage or higher limits than the minimums shown above, the City of Santa Monica requires and shall be entitled to any broader coverage and higher limits maintained by the Contractor. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to the City of Santa Monica. Other Insurance Provisions 1. The insurance policies are to contain, or be endorsed to contain, the following provisions: a. Additional Insured Status: The City of Santa Monica, its officers, officials, employees and volunteers are to be covered as additional insureds on the CGL DocuSign Envelope ID: E40D9E3E-2795-4CBE-85C6-23137938095E 3.M.d Packet Pg. 1199 Attachment: 00 EXECUTED CONTRACT #108300 HR&A (5128 : Second Modification to HR&A contract) policy with respect to liability arising out of work or operations performed by or on behalf of Consultant including materials, parts, or equipment furnished in connection with such work or operations. CGL coverage can be provided in the form of an endorsement to the Consultant’s insurance (at least as broad as Insurance Services Office Form CG 20 10 11 85, or if not available, through the addition of a combination of (1) CG 20 10, CG 20 26, CG 20 33, or CG 20 38 and (2) CG 20 37). b. Primary Coverage: For any claims related to this Agreement, the Consultant’s insurance shall be primary coverage at least as broad as Insurance Services Offices Form CG 20 01 04 13 as respects the City of Santa Monica, its officers, officials, employees and volunteers. Any insurance or self-insurance maintained by the City of Santa Monica, its officers, officials, employees or volunteers shall be in excess of the Consultant’s insurance and shall not contribute with it. c. Notice of Cancellation: Each insurance policy required herein shall state that coverage shall not be cancelled except after notice has been given to the City of Santa Monica. d. Waiver of Subrogation: Consultant hereby grants to the City of Santa Monica a waiver of any right of subrogation which any insurer of said Consultant may acquire against the City of Santa Monica by virtue of payment of any loss. Consultant agrees to obtain any endorsement that may be necessary to affect this waiver of subrogation, but this provision applies regardless of whether or not the City of Santa Monica has received a waiver of subrogation endorsement from the insurer. Self-Insured Retentions Self-insured retentions must be declared to and approved by the City of Santa Monica. The City of Santa Monica may require the Consultant to purchase coverage with a lower retention or provide satisfactory proof of ability to pay losses and related investigations, claim administration, and defense expenses within the retention. The policy language shall provide, or be endorsed to provide, that the self-insured retention may be satisfied by either the named insured or City of Santa Monica. Acceptability of Insurers Insurance is to be placed with insurers authorized to conduct business in California with a current A.M. Best rating of no less than A:VII, unless otherwise acceptable to the City of Santa Monica. Claims Made Policies 1. If the Professional Liability policy provides “claims made” coverage: DocuSign Envelope ID: E40D9E3E-2795-4CBE-85C6-23137938095E 3.M.d Packet Pg. 1200 Attachment: 00 EXECUTED CONTRACT #108300 HR&A (5128 : Second Modification to HR&A contract) a. The Retroactive Date must be shown and must be before the date of this Agreement or the start of work. b. The insurance must be maintained, and evidence of insurance must be provided for at least 5 years after completion of work. c. If the policy is cancelled or not renewed, and not replaced with another “claims made” policy form with a Retroactive Date prior to the effective Agreement date, the Consultant must purchase “extended reporting” coverage for a minimum of 5 years after completion of work. Verification of Coverage Consultant shall furnish the City of Santa Monica with original certificates and amendatory endorsements (or copies of the applicable policy language effecting coverage provided by this clause). All certificates and endorsements are to be received and approved by the City of Santa Monica before work commences. However, failure to obtain required documents prior to the work beginning shall not waive the Consultant’s obligation to provide them. The City of Santa Monica reserves the right to require complete, certified copies of all required insurance policies, including the endorsements required herein, at any time. Failure to Maintain Insurance Coverage If Consultant, for any reason, fails to maintain insurance coverage which is required pursuant to this Agreement, the same shall be deemed a material breach of contract. The City of Santa Monica, at its sole option, may terminate this Agreement and obtain damages from the Consultant resulting from said breach. Subcontractors Consultant shall require and verify that all subcontractors maintain insurance meeting all the requirements stated herein. All exceptions must be approved in writing by the Risk Manager. Footnotes # 1: Workers’ Compensation insurance coverage is not required if the Consultant does not have employees. The Consultant must, however, execute the City’s Workers’ Compensation Coverage Exemption Declaration Form. DocuSign Envelope ID: E40D9E3E-2795-4CBE-85C6-23137938095E 3.M.d Packet Pg. 1201 Attachment: 00 EXECUTED CONTRACT #108300 HR&A (5128 : Second Modification to HR&A contract) 1 FIRST MODIFICATION OF AGREEMENT NO. 108300 (CCS) This First Modification of Agreement Number 108300 (CCS) (“First Modification”), entered into as of _________________(“Execution Date”), by and between the City of Santa Monica, a municipal corporation (“City”), and HR&A Advisors, Inc (“HR&A”) is made with reference to the following: RECITALS A. On or about November 23, 2020, the City and HR&A entered into Agreement Number 108300 (CCS) for professional services to support drafting and approval of the pending Housing Element Update (“Original Agreement”). B. The City and HR&A desire to modify the Original Agreement to extend the con- tract term, include additional services to be performed by HR&A, and increase the contract price to pay for those additional services. TERMS AND CONDITIONS Now, therefore, the undersigned parties do hereby mutually agree to modify the Origi- nal Agreement as follows: 1. Section 1 of the Original Agreement entitled “Term” shall be deleted in its entirety and replaced with the following paragraph: Term. This Agreement begins on the Execution Date and terminates on June 30, 2022, unless terminated earlier as set forth in the Original Agreement or extended by the parties in writing. 2. Section 2 of the Original Agreement entitled “HR&A Services” shall be modified by adding the following paragraph: Additional Services. HR&A will perform all of the additional services (“Additional Services”) described in Exhibit A-1, Scope of Services and Budget. HR&A will complete the Additional Services in accordance with Exhibit A-1. 3. Section 4 of the Original Agreement entitled “Compensation” shall be modified by adding the following paragraph: Compensation. The City will compensate HR&A for the Additional Services in an amount not to exceed $39,900.00, as set forth in Exhibit A-1. The total contract price for services pursuant to the Original Agreement and this First Modification shall not exceed $258,900.00. 4. Exhibit A-1 is attached hereto and incorporated herein by this reference. DocuSign Envelope ID: C2B2F9C2-38F8-400B-ABC8-B4117AA919C5 8/10/2021 3.M.e Packet Pg. 1202 Attachment: 00 EXECUTED_PSA_&_Scope-_First_Mod_HR&A_108300 (5128 : Second Modification to HR&A contract) 2 5. Except as expressly modified by this First Modification, all other terms and condi- tions of the Original Agreement shall be and remain in full force and effect. IN WITNESS WHEREOF, the parties have executed this First Modification as of the date and year first written above. ATTEST: ______________________________ DENISE ANDERSON-WARREN City Clerk APPROVED AS TO FORM: ______________________________ LANE DILG City Attorney CITY OF SANTA MONICA, a municipal corporation By: ______________________________ RICK COLE City Manager HR&A Corporation #VENDOR By: _______________________________ DocuSign Envelope ID: C2B2F9C2-38F8-400B-ABC8-B4117AA919C5 Interim City Attorney George S. Cardona 8/10/2021 HR&A Advisors, Inc. Paul J. Silvern, Vice President 8/10/2021 Paul J. Silvern 8/10/2021 John Jalili Interim City Manager 9/7/2021 City Clerk Denise Anderson-Warren 3.M.e Packet Pg. 1203 Attachment: 00 EXECUTED_PSA_&_Scope-_First_Mod_HR&A_108300 (5128 : Second Modification to HR&A contract) 3 Exhibit A-1 Scope of Services and Budget DocuSign Envelope ID: C2B2F9C2-38F8-400B-ABC8-B4117AA919C5 3.M.e Packet Pg. 1204 Attachment: 00 EXECUTED_PSA_&_Scope-_First_Mod_HR&A_108300 (5128 : Second Modification to HR&A contract) New York | Dallas | Los Angeles | Raleigh | Washington DC June 7, 2021 via email to: jing.yeo@smgov.net Jing Yeo Planning Manager Community Development Dept. City Hall, Room 212 1685 Main Street Santa Monica, CA 90404 Re: Additional Services for Housing Element Update Support Dear Jing: Per your request, HR&A Advisors, Inc. (HR&A) is pleased to provide a scope and budget for additional services under Professional Services Agreement #108300 (CCS) entered into as of November 23rd, 2020, by and between the City of Santa Monica (City) and HR&A, to support drafting and approval of the pending Housing Element Update. The additional services include feasibility testing to determine whether increased development standards and/or new affordable housing requirements (i.e., in terms of percentages, unit mix and affordability levels) can accelerate development of mixed-income housing in R-1 neighborhoods. HR&A has already engaged John Kaliski Architects (JKA), Danielian Associates, and MGAC as subconsultants using our contingency as originally budgeted. We are requesting budget authorization to provide this additional support, along with preparation for and participation in additional public meetings. The following sections of this letter present HR&A’s proposed additional services and updated budget to support the City’s Housing Element update. PROPOSED ADDITIONAL SERVICES Task 13: R-1 Diagrams (Reimbursement to JKA and Danielian Associates - $9,900) HR&A will engage John Kaliski Architects and Danielian Architects to develop alternative diagrams illustrating massing prototypes on typical City of Santa Monica R1 parcels of 7,500 Sq. Ft. in size and illustrating the immediate neighborhood context. The development programs for each of the alternatives will be based on program and zoning constraint information developed collaboratively between City staff and HR&A. Deliverables: R-1 diagrams and zoning analysis based on eight development scenarios Task 14: Additional Public Meeting Support This task is an allowance for HR&A to prepare for and participate in public meetings to present and discuss the results of HR&A analysis for the Housing Element Update. For budgeting purposes, the schedule and budget assume two meetings with the Housing Commission, two with the Planning Commission and one with the City Council, including time to prepare materials for the meetings, contribute to relevant sections of staff reports and PowerPoint presentations, and participate in the meetings. The schedule for these meetings will be determined in consultation with City staff. Deliverables: HR&A presentation briefing materials and, as needed, written comments on companion City staff presentation. DocuSign Envelope ID: C2B2F9C2-38F8-400B-ABC8-B4117AA919C5 3.M.e Packet Pg. 1205 Attachment: 00 EXECUTED_PSA_&_Scope-_First_Mod_HR&A_108300 (5128 : Second Modification to HR&A contract) HR&A Advisors, Inc. Proposal re: Santa Monica AHPP Update and Housing Element Support | 2 PROPOSED REVISED BUDGET HR&A will complete the additional services with a revised contract total amount of $258,900 allocated by task approximately as follows: TASKS BUDGET TASK 1: KICK-OFF MEETING 4,000 TASK 2: SPECIFY 24 PROTOTYPES 26,000 TASK 3: UPDATE MARKET ASSUMPTIONS 24,000 TASK 4: BASE CASE AND INITIAL ANALYSIS CASE FEASIBILITY MODELS 50,000 TASK 5: DOCUMENT 100% A.H OPPORTUNITIES AND CONSTRAINTS 5,000 TASK 6: PRELIMINARY RESULTS BRIEFING AND MEETING 8,000 TASK 7: ALLOWANCE FOR FURTHER FEASIBILITY TESTING 24,000 TASK 8: ALLOWANCE FOR REVISED RESULTS BRIEFING 8,000 TASK 9: DRAFT AND FINAL MEMORANDUM REPORT. 12,000 TASK 10: STAKEHOLDER BRIEFINGS 8,000 TASK 11: PRESENTATIONS TO COMMISSIONS & CITY COUNCIL 20,000 TASK 12: COVID-19 UPDATES 15,000 CONTINGENCY (SUBCONTRACTOR SERVICES) 15,000 TOTAL: $219,000 ADDITIONAL SERVICES: TASK 13: R -1 DIAGRAMS 9,900 TASK 14: ADDITIONAL PUBLIC MEETING SUPPORT 30,000 REVISED TOTAL: $258,900 ********************** We hope you find the foregoing proposal responsive to the City’s needs. Once finalized, we assume City staff will amend our existing contract with the revised scope of work and compensation. We can be available to discuss this proposal with you and your colleagues as needed to clarify any issues or discuss any changes that may be required. Sincerely, PAUL J. SILVERN, Vice President DocuSign Envelope ID: C2B2F9C2-38F8-400B-ABC8-B4117AA919C5 3.M.e Packet Pg. 1206 Attachment: 00 EXECUTED_PSA_&_Scope-_First_Mod_HR&A_108300 (5128 : Second Modification to HR&A contract) Please attach additional pages if more space is required.  CITY OF SANTA MONICA OAKS INITIATIVE NOTICE NOTICE TO APPLICANTS, BIDDERS, PROPOSERS AND OTHERS SEEKING DISCRETIONARY PERMITS, CONTRACTS, OR OTHER BENEFITS FROM THE CITY OF SANTA MONICA Santa Monica’s voters adopted a City Charter amendment commonly known as the Oaks Initiative. The Oaks Initiative requires the City to provide this notice and information about the Initiative’s requirements. You may obtain a full copy of the Initiative’s text from the City Clerk. This information is required by City Charter Article XXII—Taxpayer Protection. It prohibits a public official from receiving, and a person or entity from conferring, specified personal benefits or campaign advantages from a person or entity after the official votes, or otherwise takes official action, to award a “public benefit” to that person or entity. The prohibition applies within and outside of the geographical boundaries of Santa Monica. All persons or entities applying or receiving public benefits from the City of Santa Monica shall provide the names of trustees, directors, partners, and officers, and names of persons with more than a 10% equity, participation or revenue interest. An exception exists for persons serving in those capacities as volunteers, without compensation, for organizations exempt from income taxes under Section 501(c)(3), (4), or (6), of the Internal Revenue Code. However, this exception does not apply if the organization is a political committee or controls political committees. Examples of a “public benefit” include public contracts to provide goods or services worth more than $25,000 or a land use approval worth more than $25,000 over a 12-month period. In order to facilitate compliance with the requirements of the Oaks Initiative, the City compiles and maintains certain information. That information includes the name of any person or persons who is seeking a “public benefit.” If the “public benefit” is sought by an entity, rather than an individual person, the information includes the name of every person who is: (a) trustee, (b) director, (c) partner, (d) officer, or has (e) more than a ten percent interest in the entity. Therefore, if you are seeking a “public benefit” covered by the Oaks Initiative, you must supply that information on the Oaks Initiative Disclosure Form. This information must be updated and supplied every 12 months. 3.M.f Packet Pg. 1207 Attachment: HR&A Oaks Initiative_06-10-22 (5128 : Second Modification to HR&A contract) Please attach additional pages if more space is required.  CITY OF SANTA MONICA OAKS INITIATIVE DISCLOSURE FORM In order to facilitate compliance with the requirements of the Oaks Initiative, the City compiles and maintains certain information. That information includes the name of any person or persons who is seeking a “public benefit.” If the “public benefit” is sought by an entity, rather than an individual person, the information includes the name of every person who is: (a) trustee, (b) director, (c) partner, (d) officer, or has (e) more than a ten percent interest in the entity. Public benefits include: 1. Personal services contracts in excess of $25,000 over any 12-month period; 2. Sale of material, equipment or supplies to the City in excess of $25,000 over a 12-month period; 3. Purchase, sale or lease of real property to or from the City in excess of $25,000 over a 12- month period; 4. Non-competitive franchise awards with gross revenue of $50,000 or more in any 12-month period; 5. Land use variance, special use permit, or other exception to an established land use plan, where the decision has a value in excess of $25,000; 6. Tax “abatement, exception, or benefit” of a value in excess of $5,000 in any 12-month period; or 7. Payment of “cash or specie” of a net value to the recipient of $10,000 in any 12-month period. Name(s) of persons or entities receiving public benefit: Name(s) of trustees, directors, partners, and officers: Name(s) of persons with more than a 10% equity, participation, or revenue interest: Prepared by: ____________________________Title: __________________________ Signature: ______________________________________ Date: ________________ Email: ____________________________________ Phone: ____________________ 3.M.f Packet Pg. 1208 Attachment: HR&A Oaks Initiative_06-10-22 (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 1 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1209 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 2 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1210 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 3 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1211 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 4 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1212 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 5 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1213 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 6 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1214 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 7 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1215 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 8 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1216 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 9 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1217 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 10 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1218 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 11 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1219 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 12 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1220 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 13 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1221 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 14 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1222 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 15 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1223 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 16 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1224 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 17 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1225 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 18 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1226 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 19 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1227 Attachment: Written Comments (5128 : Second Modification to HR&A contract) Item 3.M 06/14/22 20 of 20 Item 3.M 06/14/22 3.M.g Packet Pg. 1228 Attachment: Written Comments (5128 : Second Modification to HR&A contract) 1 May 10, 2022 (NOT APPROVED) CITY OF SANTA MONICA CITY COUNCIL MINUTES MAY 10, 2022 A regular meeting of the Santa Monica City Council was called to order by Mayor Himmelrich at 5:32 p.m., on Tuesday, May 10, 2022, via teleconference pursuant to Assembly Bill No. 361 signed by, Governor Gavin Newsome at City Council Chambers, 1685 Main Street, Santa Monica, CA. Roll Call: Present: Mayor Sue Himmelrich (attended via phone) Mayor Pro Tem Kristin McCowan Councilmember Phil Brock Councilmember Gleam Davis Councilmember Lana Negrete Councilmember Oscar de la Torre Absent: Councilmember Christine Parra Also Present: City Manager David White Interim City Attorney Joseph Lawrence City Clerk Denise Anderson-Warren CONVENE/PLEDGE On order of the Mayor Pro Tem, the City Council convened at 5:32 p.m., with all members present, with Mayor Himmelrich, and Councilmember Parra absent. Councilmember Negrete led the assemblage in the Pledge of Allegiance. CLOSED SESSIONS There was no one present for public comment on closed sessions. On order of the Mayor Pro Tem, the City Council recessed at 5:36 p.m., to consider closed sessions and returned at 8:00 p.m., with all members present, except Councilmember Parra, to report the following: 1.A. Conference with Labor Negotiator: Government Code Section 54957.6 -- Agency Designated Representatives: City Manager David White and Chief People Officer Lori Gentles; Bargaining Units: ATA- Administrative Team Associates; IBT-California Teamsters Local 911; FEMA-Santa Monica Fire Executive Management Association; FIRE- Santa Monica Firefighters Local 1109 IAFF; MEA-Municipal Employees Association; AFSCME Local 4819, Management Team Association; PALSSU-Public Attorneys’ Legal Support Staff Union; PAU- Public Attorneys Union; POA-Santa Monica Police Officer Association; SMART TD-The International Association of Sheet Metal, Air, Rail, and Transportation Division, Local 1785; STA- 3.N Packet Pg. 1229 Minutes Acceptance: Minutes of May 10, 2022 5:30 PM (CONSENT CALENDAR)