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FINANCIAL STATEMENT The City collected $4.3 million in Development Impact fees in FY 2017/18, based on the existing fee methodology. The Development Impact Fee revenues make up a significant portion of the funding sources supporting the City's Capital Improvement Plan (CIP). The monies are used to fund projects that help mitigate the impacts of development on the community such as transportation system improvements, building a new park or park facility and supporting construction of affordable housing. Staff's recommended Development Impact Fees would result in approximately $7 million annually based on the current level of development activity. The estimated revenues collected from the Development Impact fees that result from the 2018 Development Impact Fee study will depend on the fee levels ultimately chosen by City Council. BACKGROUND AB 1600 (California Government Code Section 66000 et. seq.) 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 development should 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. Since the 1980s, the City established several development impact fees to mitigate the impact of new housing and commercial developments on the City's facilities, infrastructure, and available affordable housing. The City's development impact fees were established pursuant to AB 1600. These fees were last restructured in 1998, and include the Public Facilities Fee, Traffic Development Fee, Park Dedication Fee, Water and Sewer Connection Fees', and Affordable Housing Fee. These fees were calculated based on assumptions of: (1) anticipated development at that time, (2) the impact that development would have on the City's facilities and infrastructure, and (3) specific projects and project costs required to mitigate those impacts. The City's current Development Impact Fee schedule is based on the 1998 Development Impact Fee schedule with annual inflation adjustments. 1 Staff will review Water and Sewer Connection Fees in 2019 along with an update to Water and Sewer rates. Page 2 of 18