CITY COUNCIL AGENDA PACKET WORKSHOP

there would be a much narrower range of facilities and projects to which fees could be applied. If the inclusionary rate were substantially decreased, so too may be affordable housing production. 3. Taking “across the board” reductions to the maximum fee rates. While a relatively simple and straightforward approach, this does not allow the City Council to calibrate fees or the inclusionary rate in a more fine-grained way toward meeting specific policy or economic development goals. 4. Make targeted reductions in different fee categories or for different land use categories to better align to policy or economic development goals. RECOMMENDATIONS Considering the above and the preliminary findings of EPS’ analysis, staff’s initial recommendations reflect somewhat of a hybrid of the approaches outlined above, designed to balance the City’s multiple objectives. 1) Set Sewer and Water Connection Fees at, or close to, the Maximum. The City’s water and sewer connection fees have not been updated since 1992 and 2008 respectively, and the existing fees fall well short of the amounts that need to be charged to allow for necessary capacity improvements to be made. However, because the overall increased costs, in dollar terms, are relatively modest, and maintaining the capacity of the water and sewer system to accommodate new growth (i.e., deliver potable water and accommodate sewer flows) is a critical need, staff recommends that setting connection fees at the higher rates supported by the study be prioritized. 2) Do not increase inclusionary housing rates and consider equalizing rates to 15% across all project types. Staff does not recommend increasing the inclusionary rate for single-family projects, and in fact it may be appropriate to reduce the rate from 20% to 15%, to equalize it with the multi-family rate, and set the in-lieu fee accordingly. Even at the current inclusionary rate, the costs to provide on-site affordable housing units in single-family projects are extremely high due to the discrepancy between affordable sales prices and market-rate sales prices. As such, achieving inclusionary units at the 20% rate, or charging an in-lieu fee calibrated to the 20% rate is unlikely to be feasible except in very limited circumstances. If the City Council wishes to retain the fee at the current 20% rate, then affordability levels may need to be adjusted upward, and the in-lieu fee may need to be set at a rate that is substantially lower than the maximum for projects to remain feasible. Retaining the existing 20% rate would also impede the ability to raise the amounts of capital facilities and traffic impact fees, since it also greatly increases cumulative development costs. Finally, it is noted that State law provides streamlining and “by-right” provisions for projects with a minimum of 20% affordability – this will mean that projects qualify for streamlining simply by meeting the City’s inclusionary requirements.