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BACKGROUND In August of 2002, the City Council approved PUD -18 for the development of 363 housing units on the Busch property by Ponderosa Homes. This PUD included the development of a 172 -unit senior apartment project now called the Gardens at Ironwood. As part of Council's review of this PUD, it determined that inclusionary zoning requirements for the entire 363 -unit development could be met with 87 affordable units included in the senior apartment project. However, subsequent to this approval, the developer requested, and the Council approved, a change to the unit mix of the apartment project resulting in an additional 51 affordable units. As a result of this change, the Gardens at Ironwood was approved with 138 affordable units representing 38% of the total units developed on the Busch Road site. As part of the developer's request to modify the unit mix, it requested it be granted 51 IUC's as outlined in the City Inclusionary Zoning Ordinance (IZO). The request was consistent with the IZO since the 138 units provided were /are in excess of the 87 required affordable units. At its meeting of March 7 2006, the City Council finalized its approval of Ponderosa's request. Prior to taking action on this request, the City Council adopted Inclusionary Unit Credit Guidelines (Attachment 2) establishing how and when IUC's may be used. In general, IUC's, which are permitted as part of the IZO, are affordable housing credits acquired from a development that exceeds affordability requirements that may be applied to another development that does not meet IZO requirements. As an example if project "A" is a 100 unit multi family development, in accordance with the IZO, it is required to provide fifteen (15% of the total units) affordable units. If the project provides twenty -five affordable units, the developer may request that ten units be used to offset affordability at another development. Therefore, if project "B" is a 50 unit multi family development that is required to have eight affordable units, the developer could use its ten ICU's to meet all of the affordability requirements on project "B" even though the development would be 100% market rate. The basic concept of IUC's is that in the end, the City is assured of meeting IZO affordable units targets regardless of whether they are in one or two developments. Section 1 (G) of the guidelines, which are included as Attachment 3, establishes five years as the term for use of IUC's subject to an extension approved by the City Council. To date, IUC's have only been approved on the Ponderosa development. As part of the City Council's approval of the IUC's for the Ponderosa development, considerable time was spent determining the period of time during which the credits could be used. This effort was necessary because use of the IUC's on the Busch Road site could not be considered until the Pleasanton Unified School District (PUSD) made a decision on whether it would exercise an option granted to it from Ponderosa Homes to develop a 23.1 -acre site on the Busch property for school facilities. Terms for exercising its option on the 23.1 -acre site, and Ponderosa's subsequent decisions /actions, were spelled out in an Option Agreement with the PUSD and Ponderosa Homes. In the end, the City Council determined that the IUC's term would be tied to the date that the School District exercised its option. The PUSD eventually decided that it would not develop the site and Ponderosa regained full control of it on March 27, 2007. As a result of the Page 2 of 4