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PROPOSED SCOPE OF SERVICES As reflected in the proposed work program below, EPS has developed a robust technical and analytical framework to address the affordable housing policy issues raised by the City's RFP. As described further herein, the proposed scope of work can be refined based on City input to ensure the final work product supports the City's decisions regarding affordable housing policy, including legal, economic, and political considerations. Task 1: Review of Existing Lower Income Housing Fees Task 1.11 Attend Project Initiation Meeting EPS will attend a project initiation work session with City staff and refine the technical work • program as necessary. It is recommended that the project team (EPS and City staff) engage the City Attorney or other legal advisors at this time to gain their Input and assure their comfort with the proposed approach. During the kick-off work session, the group will discuss the history of the current fee program, the successes and challenges of its implementation to date, and potential approaches to amending its current requirements, including the alternate fee study methodology proposed by the Housing Commission in 2002. In addition, EPS will discuss the methodologies EPS has used in recent assignments for other jurisdictions, as well as data requirements because the City may maintain or have access to data that is directly relevant to the proposed nexus analysis. Communication protocol, data requirements, and the schedule for project deliverables can be confirmed at this project initiation meeting. Task 1.2: Recommend Alterations to the Current Methodology While representing"cutting edge"technical analysis at the time, EPS is aware that our work from 1990 may not meet current legal or industry standards for affordable housing fees. Moreover, some of the specific aspects of the City's current program came from deliberations among stakeholders represented on an Affordable Housing Task Force (Task Force) and do not necessarily represent technically-derived recommendations. Specific items we would propose to revisit include the following, without limitation: • Calculation of the financing gap to produce affordable units -The previous study based the development subsidy on the difference between market rate rents and income- restricted affordable rents. This approach may be appropriate if the City intended to pay market-rate apartment operators the difference each month, similar to a Section 8 program, and wished to establish a fund for such long-term subsidy. However, most communities use affordable housing fees to subsidize the construction of affordable units by non-profit builders. EPS's more recent work calculates the financing gap as the difference between development costs (construction, financing, etc.) and the capitalized value of an affordable unit's net operating income. • Calculation of the affordable housing demand factors - The previous study applied the financing gap to the number of units required to meet affordable housing goals throughout Economic&Planning Systems,Inc. 3 nnvronosenun000su]„Imes,A"onwi,ispc,f_ool 712.d,c