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• City of Pleasanton Lower Income Housing Fee Study Proposal September 1 S, 2012 In this task, EPS will document the current and recommended changes to the fee calculations, including quantitative illustrations as appropriate as well as text reflecting the theory and implementation implications accompanying each recommendation. Following City staff review of the draft document, EPS proposes to conduct one (1) targeted stakeholder meeting (to be organized by City staff) to discuss the merits of these alternative approaches. We believe it is • important to conduct these discussions in advance of updating the fee calculations, so that • consensus can be sought on the theory without being swayed by the resulting maximum fee amounts. Task 2: Calculate Residential and C/O/I Lower Income Housing Fees The Task 2 work effort describes the completion of nexus studies to support the revised Lower Income Housing Fees. Task 2.1: Calculate Nexus-Based Impacts for Ownership Housing If To meet the most conservative interpretations of the Patterson case, EPS will provide analysis of the nexus between development of for-sale market-rate housing and the demand for affordable housing units. The process involves three general steps, as described below. Step 1: Compute Demand for Affordable Housing Generated by Market Rate ijnits The first step is to estimate the impact that the addition of market-rate housing has on job creation and household formation. Using data regarding consumer expenditure patterns and wage levels for specific types of business, EPS will estimate the demand for local goods and services generated by the addition of market-rate housing and its occupants, convert that demand to a number for local jobs and worker households, and estimate the number of those worker households who cannot afford to pay market-rate housing prices. These figures are driven by the incomes of the households occupying the market-rate housing--the higher the cost of the housing, the higher the occupants' income, and the more spending and job creation is tt expected. EPS will calculate impacts for a range of home prices to Illustrate these effects. Step 2: Affordability Gap Analysis The second step is to determine whether and how much subsidy is required to provide new housing units for worker households of various income levels (e.g., moderate, low, and very low). Determination of a required subsidy amount involves an estimation of the costs of development (construction, land, fees, required financial returns, etc.), as well as an estimation of the prices at which the units are affordable to income-qualified households. EPS will provide detailed Initial assumptions and calculations to City staff for review and comment and make adjustments as appropriate. With assistance from the City to identify appropriate participants (for-profit and nonprofit developers, etc.), EPS will conduct conversations with these stakeholders to review the assumptions and calculations on which the impact fees are based. Following these initial discussions and further consultation with City staff, EPS will make adjustments to the assumptions and calculations as may be appropriate. Based on calculations in this step, if the development costs are higher than the allowable prices, a subsidy or financing gap is identified and quantified. Economic& Planning Systems, Inc. 5 .c1PI0,M.zi.1,2101105\u1„+Peesamumu,iumrt11"nn.m,