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BACKGROUND The City's development impact fees were established pursuant to AB 1600 (California Government Code Section 66000 et. Seq.). AB 1600 requires cities to justify and account for development fees that they enact as a condition of approval on new development. The justification, or nexus requirement, requires cities to do the following: 1. Identify the purpose of the fee; 2. Identify the use or specific project to which the fee will be applied; 3. Determine how there is a reasonable relationship between the fee's use and type of development project on which the fee is imposed; and 4. Determine how there is a reasonable relationship between the need for the public improvement and the type of development project on which the fee is imposed. The nexus is based on the premise that new and existing development should each pay for its pro rata share of public improvement costs. Because residents, business and their employees create the need for and benefit from the availability of public services and infrastructure improvements, new development should pay its share of public facilities/improvements impacted by development. Most of the City's current development impact fees were last restructured in 1998 or 20 years ago. The methodology for establishing the City's development impact fees established in 1998 included reviewing: (1) the City's 1996 General Plan; (2) projects planned in the City's Public Facilities Master Plan; (3) required park land to meet the community's needs; (4) 1998 land values; and (5) 1998 construction cost estimates. At the time these fees were adopted, staff had recommended that the fees be periodically reviewed to reflect inflation and changes in the City's General Plan. Inflation adjustments have been occurring. The contract with EPS resulted in an update of four of the City's development impact fees based on the City's current General Plan. It identified capital projects that will mitigate the impact of future development, quantified their estimated costs, and set forth an equitable allocation of those costs to future development. City staff and EPS presented the draft report to City Council, the Economic Vitality Committee, a public workshop and the Planning Commission. There were several questions and concerns raised in those venues that required EPS to conduct additional research and change variables in their fee models. As a result, EPS exceeded the current $145,070 budget. In addition, EPS may be required to make further revisions before finalizing the development impact fee reports as well as attend additional City Council meetings. Staff is bringing a proposed development impact fee schedule to City Council at the September 4, 2018 Council meeting for review and discussion with the goal of bringing development impact fee schedule to the September 18, 2018 Council meeting for adoption. DISCUSSION The City entered into an original agreement with EPS on October 20, 2015 and entered into two amendments that twice extended the expiration date and increased the budget by $10,000. However, EPS under-estimated the amount of hours required to attend public meetings, conduct follow-up research and to re-run their fee models such that they have spent more than anticipated. In addition, there are additional City Council Page 2 of 3