Loading...
Development Impact Fee Study 2015-08-05 ColganCity of Encinitas Impact Fee Study Report Final Draft:August 5, 2015 Prepared by: Colgan Consulting Corporation 3323 Watt Avenue # 131 Sacramento, CA 95821 www.colgan-consulting.com City of Encinitas -Impact Fee Study Table of Contents August 5, 2015 Colgan Consulting Corporation Page i Table of Contents Executive Summary ES-1 Organization of the Report ES-1 Future Development ES-1 Impact Fee Analysis ES-1 Impact Fee Summary ES-3 Recovery of Administrative and Study Costs ES-4 Chapter 1.Introduction 1-1 Purpose 1-1 Legal Framework for Impact Fees 1-1 Impact Fee Calculation Methodology 1-6 Facilities Addressed in This Study 1-8 Chapter 2. Development Data 2-1 Population Growth 2-1 Study Area and Time Frame 2-1 Development Types 2-2 Demand Variables 2-2 Development Data 2-3 Growth Potential 2-5 Chapter 3. Park In-Lieu and Impact Fees 3-1 Demand Variable 3-1 Service Area 3-1 Methodology 3-1 Level of Service 3-1 Existing Parks 3-2 Acres per 1,000 Population 3-4 Per-Capita Cost 3-4 In-Lieu and Impact Fees per Unit of Development 3-6 Projected Revenue 3-8 Relationship to Existing In-Lieu and Impact Fees 3-9 Nexus Summary 3-9 City of Encinitas -Impact Fee Study Table of Contents August 5, 2015 Colgan Consulting Corporation Page ii Table of Contents (continued) Chapter 4. Open Space and Trails Impact Fees 4-1 Demand Variable 4-1 Service Area 4-1 Methodology 4-1 Level of Service 4-1 Existing Open Space 4-2 Existing Levels of Service 4-2 Per-Capita Cost 4-2 Impact Fees per Unit of Development 4-3 Projected Revenue 4-4 Relationship to Existing In-Lieu Impact Fees 4-5 Nexus Summary 4-5 Chapter 5. Fire Protection Impact Fees 5-1 Demand Variable 5-1 Service Area 5-2 Level of Service 5-2 Methodology 5-2 Asset Valuation 5-3 Asset Value per Capita 5-4 Impact Fees per Unit of Development 5-5 Projected Revenue 5-6 Relationship to Existing In-Lieu Impact Fees 5-7 Nexus Summary 5-7 Chapter 6.Implementation 6-1 Adoption 6-1 Administration 6-2 Training and Public Information 6-7 Recovery of Administrative and Study Costs 6-7 City of Encinitas -Impact Fee Study Executive Summary August 5, 2015 Colgan Consulting Corporation Page ES-1 Executive Summary The City of Encinitas has retained Colgan Consulting Corporation to prepare this study to analyze the impact of development on certain capital facilities and to calculate impact fees based on that analysis. The methods used in this study are intended to satisfy all legal requirements of the U. S. Constitution, the California Constitution, the California Mitigation Fee Act (Govt.Code Sections 66000 et seq.), and, where applicable, the Quimby Act (Govt. Code Section 66477). Organization of the Report Chapter 1 of this report provides an overview of impact fees. It discusses legal require- ments for establishing and imposing such fees, as well as methods used in this study to calculate the fees. Chapter 2 contains information on existing and future development in the study area that is used in the impact fee analysis. Chapters 3 through 5 analyze the impacts of development on specific facility types,and calculate impact fees for the following types of facilities: Chapter 3. Park Land and Improvements Chapter 4. Open Space and Trails Chapter 5.Fire Protection Chapter 6 discusses implementation of the impact fee program including legal require- ments and procedures for implementing the impact fee program under California law. Future Development Forecasts of future development used in this study are based on population and em- ployment data from the San Diego Association of Governments (SANDAG). The popu- lation forecast indicates a 5.3% increase in population between 2015 and 2035,from 61,816 to 65,087.The employment forecast is for a 7.1% increase during that period, from 26,581 to 28,467. Impact Fee Analysis Each type of facility addressed in this report is analyzed individually. In each case, the relationship between development and the need for facilities is quantified in a way that allows the impact of development on facility needs to be measured. Impact fees calcu- lated in this report are based on the cost of facilities needed to mitigate those impacts. Impact fees calculated in this study are summarized in Table ES.1 later in this Executive Summary. Impact fees are based on capital costs only. The following paragraphs briefly discuss factors considered in the analysis of each facility type. City of Encinitas -Impact Fee Study Executive Summary August 5, 2015 Colgan Consulting Corporation Page ES-2 Park Land and Improvements.Impact and in-lieu fees for park land acquisition and impact fees for park improvement calculated in this report are based on ratios of park acreage to population. Fees in lieu of park land acquisition for residential subdivisions are governed by the Quimby Act. Those fees are based on a ratio of 3.0 acres of park land per thousand resi- dents as provided in the Act. Park land acquisition fees for non-subdivision residential projects are based on the existing ratio of City-owned park acres per thousand residents in Encinitas.Impact fees for park improvements are based on the existing ratio of devel- oped park acres per thousand residents. Per-capita costs are calculated using those ratios and the estimated cost per acre for park land or improvements, and the per-capita fees are converted into fees per unit of devel- opment by development type based on population-per-dwelling unit factors.Because park land acquisition and development fees are based on population, they apply only to residential development. Park in-lieu and impact fees are summarized in Table ES.1. Open Space Land Acquisition and Trail Development.Impact fees for open space land acquisition and trail improvement calculated in this report are based on existing ratios of open space acres to population and miles of improved trails to population. Per- capita costs are calculated using those ratios and estimated costs per acre for open space land acquisition and per mile for trail development. Per capita fees are converted into fees per unit of development by development type based on population-per-dwelling unit factors. Because open space land acquisition and trail development impact fees are based on population, they apply only to residential development. Impact fees for open space land acquisition and trail development are summarized in Table ES.1. Fire Protection Facilities and Equipment.The fire protection impact fees calculated in this report are based on the cost of maintaining the existing level of service defined as the value of fire protection facilities and equipment per capita of functional population. The per-capita value used in the impact fee calculations is defined as the current value of the City’s fire protection facilities and equipment divided by the current functional pop- ulation of the City. Functional population includes both residents of the City (represent- ing the impacts of residential development) and employees of businesses in the City (representing the impacts of non-residential development). For reasons explained in Chapter 5, the resident and employee components of the functional population are weighted equally. Per capita values are converted into fees per unit of development based on the number of residents or employees per unit of development by development type. The fire pro- tection impact fees can be used to acquire additional fire protection assets to increase the City’s capacity to serve additional development.The fire protection impact fees are summarized in Table ES.1. City of Encinitas -Impact Fee Study Executive Summary August 5, 2015 Colgan Consulting Corporation Page ES-3 Impact Fee Summary Table ES.1 summarizes impact fees calculated in this report,as impact fees per unit of development by development type. This study calculates two park land fees. One fee would be charged to projects involving a subdivision, and the other would be charged to projects not involving a subdivision. No development project would be charged both fees.Table ES.1 shows only the park land fee for subdivisions, which is higher.The park land fees for non-subdivision pro- jects are shown in Table 3.7 in Chapter 3. Table ES.2, below shows the City’s existing impact fees of the types addressed in this report. Table ES.3 on the next page shows the difference between the existing impact fees shown in Table ES.2 and the fees calculated in this report, shown in Table ES.1. Table ES.1: Summary of Impact Fees Calculated in This Report Development Dev Park Land Park Open Space Trail Fire Total Type Units 1 Subdivision Improvem't Land Developm't Protection Fees Residential - Single-Family DU 6,792.00$3,959.27$438.32$168.43$674.56$12,032.58$ Residential Multi-Family DU 4,536.00$2,644.18$292.73$112.48$450.50$8,035.89$ Residential - Mobile Home Park DU 4,320.00$2,518.26$278.79$107.13$429.05$7,653.23$ Residential - Accessory Unit DU No Fee 2,518.26$278.79$107.13$429.05$3,333.23$ Office-Professional KSF No Fee No Fee No Fee No Fee 741.30$741.30$ Commercial KSF No Fee No Fee No Fee No Fee 626.89$626.89$ Industrial-Light KSF No Fee No Fee No Fee No Fee 262.20$262.20$ Hotel/Motel Room No Fee No Fee No Fee No Fee 183.54$183.54$ 1 Units of development. DU = dwelling unit; KSF = 1,000 gross square feet of building area; Room = guest room or suite Table ES.2: Summary of Existing Fees Development Dev Park Land Park Open Space Trail Fire Total Type Units 1 Subdivision Improvem't Land Developm't Protection Fees Residential - Single-Family DU 6,720.00$2,500.00$423.00$108.00$582.00$10,333.00$ Residential Multi-Family DU 5,040.00$1,875.00$317.00$81.00$436.00$7,749.00$ Residential - Mobile Home Park DU 4,560.00$1,697.00$287.00$73.00$395.00$7,012.00$ Residential - Accessory Unit DU New Development Type Office-Professional KSF No Fee No Fee No Fee No Fee 728.00$728.00$ Commercial KSF No Fee No Fee No Fee No Fee 416.00$416.00$ Industrial-Light KSF No Fee No Fee No Fee No Fee 520.00$520.00$ Hotel/Motel Room New Development Type 1 Units of development. DU = dwelling unit; KSF = 1,000 gross square feet of building area; Room = guest room or suite City of Encinitas -Impact Fee Study Executive Summary August 5, 2015 Colgan Consulting Corporation Page ES-4 Recovery of Administrative and Study Costs It is common practice for cities in California to add a 2% administrative charge to impact fees to cover the cost of administering the impact fee program and periodically updating the fees. Table ES.4 shows the amounts of the impact fees calculated in this report after a 2% administrative charge has been added. If the City Council chooses to include the administrative charge, the fees should be adopted as shown in Table ES.4 Table ES.3: Difference Between Existing Fees and Fees Calculated in This Report Development Dev Park Land Park Open Space Trail Fire Total Type Units 1 Subdivision Improvem't Land Developm't Protection Fees Residential - Single-Family DU 72.00$1,459.27$15.32$60.43$92.56$1,699.58$ Residential Multi-Family DU (504.00)$769.18$(24.27)$31.48$14.50$286.89$ Residential - Mobile Home Park DU (240.00)$821.26$(8.21)$34.13$34.05$641.23$ Residential - Accessory Unit DU New Development Type Office-Professional KSF No Fee No Fee No Fee No Fee 13.30$13.30$ Commercial KSF No Fee No Fee No Fee No Fee 210.89$210.89$ Industrial-Light KSF No Fee No Fee No Fee No Fee (257.80)$(257.80)$ Hotel/Motel Room New Development Type 1 Units of development. DU = dwelling unit; KSF = 1,000 gross square feet of building area; Room = guest room or suite Table ES.4: Summary of Impact Fees Calculated in This Report, Including 2% Administrative Charge Development Dev Park Land Park Open Space Trail Fire Total Type Units 1 Subdivision Improvem't Land Developm't Protection Fees Residential - Single-Family DU 6,927.84$4,038.46$447.09$171.79$688.05$12,273.23$ Residential Multi-Family DU 4,626.72$2,697.06$298.59$114.73$459.51$8,196.61$ Residential - Mobile Home Park DU 4,406.40$2,568.63$284.37$109.27$437.63$7,806.30$ Residential - Accessory Unit DU No Fee 2,568.63$284.37$109.27$437.63$3,399.90$ Office-Professional KSF No Fee No Fee No Fee No Fee 756.13$756.13$ Commercial KSF No Fee No Fee No Fee No Fee 639.43$639.43$ Industrial-Light KSF No Fee No Fee No Fee No Fee 267.44$267.44$ Hotel/Motel Room No Fee No Fee No Fee No Fee 187.21$187.21$ 1 Units of development. DU = dwelling unit; KSF = 1,000 gross square feet of building area; Room = guest room or suite City of Encinitas –Impact Fee Study Introduction August 5,2015 Colgan Consulting Corporation Page 1-1 Chapter 1 Introduction Purpose The purpose of this study is to analyze the impacts of development on certain public facilities and to calculate development impact fees based on that analysis. This report documents the data and methodologies used in the study. The methods used to calculate impact fees in this study are intended to satisfy all legal requirements governing such fees, including provisions of the U. S. Consti- tution, the California Constitution,the California Mitigation Fee Act (Govern- ment Code Sections 66000 et seq.), and,where applicable,the Quimby Act (Gov- ernment Code Section 66477). Legal Framework for Impact Fees This brief summary of the legal framework for development impact fees is in- tended as a general overview. It was not prepared by an attorney, and should not be treated as a legal opinion. U. S. Constitution.Like all land use regulations, development exactions, includ- ing impact fees, are subject to the Fifth Amendment prohibition on taking of pr i- vate property for public use without just compensation. Both state and federal courts have recognized the imposition of impact fees on development as a legit- imate form of land use regulation, provided the fees meet standards intended to protect against “regulatory takings.” A regulatory taking occurs when regula- tions unreasonably deprive landowners of property rights protected by the Co n- stitution. To comply with the Fifth Amendment, development regulations must be shown to substantially advance a legitimate governmental interest, and must not de- prive the owner of all economically viable use of the property.In the case of im- pact fees, the government’s interest is in protecting public health, safety and wel- fare by ensuring that development is not detrimental to the quality and availabil- ity of essential public services provided to the community at large. Legislatively-enacted impact fees that apply to all development in a jurisdiction are not subject to the same level of judicial scrutiny as exactions involving the dedication of land or an interest in land, or a fee imposed as a condition of ap- proval on a single development project. City of Encinitas –Impact Fee Study Introduction August 5,2015 Colgan Consulting Corporation Page 1-2 In those cases,heightened scrutiny applies, and a higher standard must be met. The U. S. Supreme Court has found that a government agency must demonstrate an "essential nexus" between such exactions and the interest being protected (See Nollan v. California Coastal Commission,1987).The agency must also demonstrate that the exaction imposed is "roughly proportional" to the burden created by d e- velopment. (See Dolan v. City of Tigard,1994). Local legislative bodies are accorded considerable discretion by the courts when enacting impact fees that apply broadly to development projects within its juris- diction.But even where heightened scrutiny does not apply, an agency enacting impact fees should take care to demonstrate a nexus and ensure proportionality in the calculation of its fees. California Constitution.The California Constitution grants broad police power to local governments, including the authority to regulate land use and develo p- ment. That police power is the source of authority for local governments in Cali- fornia to impose impact fees on development. Some impact fees have been chal- lenged on grounds that they are special taxes imposed without voter approval in violation of Article XIIIA. However, that objection is valid only if the fees exceed the cost of providing capital facilities needed to serve new development. If that were the case, then the fees would also run afoul of the U. S. Constitution and the Mitigation Fee Act. Articles XIIIC and XIIID, added by Proposition 218 in 1996, require voter a p- proval for some “property-related fees,” but exempt “the imposition of fees or charges as a condition of property development.” The Mitigation Fee Act.California’s impact fee statute originated in Assembly Bill 1600 during the 1987 session of the Legislature, and took effect in January, 1989. AB 1600 added several sections to the Government Code, beginning with Section 66000. Since that time the impact fee statute has been amended from time to time, and in 1997 was officially titled the “Mitigation Fee Act.” Unless otherwise noted, code sections referenced in this report are from the Government Code. The Mitigation Fee Act does not limit the types of capital improvements for which impact fees may be charged. It defines public facilities very broadly to in- clude "public improvements, public services and community amenities." Alt- hough the issue is not specifically addressed in the Mitigation Fee Act, other provisions of the Government Code (see Section 65913.8) prohibit the use of im- pact fees for maintenance or operating costs. Consequently, the fees calculated in this report are based on capital costs only. City of Encinitas –Impact Fee Study Introduction August 5,2015 Colgan Consulting Corporation Page 1-3 The Mitigation Fee Act does not use the term “mitigation fee” except in its off i- cial title. Nor does it use the more common term “impact fee.” The Act simply uses the word “fee,” which is defined as “a monetary exaction, other than a tax or special assessment…that is charged by a local agency to the applicant in con- nection with approval of a development project for the purpose of defraying all or a portion of the cost of public facilities related to the development project ….” To avoid confusion with other types of fees, this report uses the widely-accepted terms “impact fee”and “development impact fee”which both should be under- stood to mean “fee” as defined in the Mitigation Fee Act. The Mitigation Fee Act contains requirements for establishing, increasing and imposing impact fees. They are summarized below. It also contains provisions that govern the collection and expenditure of fees and require annual reports and periodic re-evaluation of impact fee programs. Those administrative require- ments are discussed in the implementation chapter of this report. Required Findings.Section 66001 requires that an agency establishing, increas- ing or imposing impact fees, must make findings to: 1.Identify the purpose of the fee; 2.Identify the use of the fee; and, 3.Determine that there is a reasonable relationship between: a.The use of the fee and the development type on which it is imposed; b.The need for the facility and the type of development on which the fee is imposed; and c.The amount of the fee and the facility cost attributable to the development project.(Applies when fees are imposed on a specific project.) Each of those requirements is discussed in more detail below. Identifying the Purpose of the Fees.The broad purpose of impact fees is to pro- tect public health, safety and general welfare by providing for adequate public facilities. The specific purpose of the fees calculated in this study is to fund con- struction of certain capital improvements that will be needed to mitigate the im- pacts of planned new development on City facilities and to maintain an accepta- ble level of public services as the City grows. This report recommends that findings regarding the purpose of an impact fee should define the purpose broadly,as providing for the funding of adequate public facilities to serve additional development. City of Encinitas –Impact Fee Study Introduction August 5,2015 Colgan Consulting Corporation Page 1-4 Identifying the Use of the Fees.According to Section 66001, if a fee is used to finance public facilities, those facilities must be identified. A capital improve- ment plan may be used for that purpose, but is not mandatory if the facilities are identified in a General Plan, a Specific Plan, or in other public documents.In this case,we recommend that the City Council adopt this report as the public docu- ment that identifies the facilities to be funded by the fees. Reasonable Relationship Requirement.As discussed above, Section 66001 re- quires that, for fees subject to its provisions, a "reasonable relationship" must be demonstrated between: 1.the use of the fee and the type of development on which it is imposed; 2.the need for a public facility and the type of development on which a fee is imposed; and, 3.the amount of the fee and the facility cost attributable to the develo p- ment on which the fee is imposed. These three reasonable relationship requirements,as defined in the statute,mir- ror the nexus and proportionality requirements often cited in court decisions as the standard for defensible impact fees.The term “dual rational nexus” is often used to characterize the standard used by courts in evaluat ing the legitimacy of impact fees. The “duality” of the nexus refers to (1) an impact or need created by a development project subject to impact fees, and (2)a benefit to the project from the expenditure of the fees. Although proportionality is reasonably implied in the dual rational nexus formu- lation,it was explicitly required by the Supreme Court in the Dolan case, and we prefer to list it as the third element of a complete nexus. Demonstrating an Impact.All new development in a community creates addi- tional demands on some, or all, public facilities provided by local government. If the supply of facilities is not increased to satisfy the additional demand, the qual- ity or availability of public services for the entire community will deteriorate. Impact fees may be used to recover the cost of development -related facilities, but only to the extent that the need for facilities is occasioned by the development project subject to the fees. The Nollan decision reinforced the principle that development exactions may be used only to mitigate impacts created by the development projects upon which they are imposed. In this study, the impact of development on facility needs is analyzed in terms of quantifiable relationships between various types of deve l- opment and the demand for public facilities, based on applicable level-of-service City of Encinitas –Impact Fee Study Introduction August 5,2015 Colgan Consulting Corporation Page 1-5 standards. This report contains all of the information needed to demonstrate this element of the nexus. Demonstrating a Benefit. With respect to the benefit relationship, the most basic requirement is that facilities funded by impact fees be available to serve the de- velopment paying the fees.A sufficient benefit relationship also requires that impact fee revenues be segregated from other funds and expended in a timely manner on the facilities for which the fees were charged.Nothing in the U.S. Constitution or California law requires that facilities paid for with impact fee revenues be available exclusively to developments paying the fees. Procedures for earmarking and expenditure of fee revenues are mandated by the Mitigation Fee Act, as are procedures to ensure that the fees are either expended expeditiously or refunded. Those requirements are intended to ensure that de- velopments benefit from the impact fees they are required to pay. Thus, an ade- quate showing of benefit must address procedural as well as substantive issues. Demonstrating Proportionality. Proportionality in impact fees depends on properly identifying development-related facility costs and calculating the fees in such a way that those costs are allocated in proportion to the facility needs creat- ed by different types and amounts of development.The section on impact fee methodology, below,describes methods used to allocate facility costs and calcu- late impact fees that meet the proportionality standard. Impact Fees for Existing Facilities.Impact fees may be used to recover some or all of the cost of existing facilities, provided those facilities are needed to serve additional development and have the capacity to do so. In other words, it must be possible to show that the fees meet the need and benefit elements of the nexus. Development Agreements and Reimbursement Agreements. The requirements of the Mitigation Fee Act do not apply to fees collected under development agreements (see Govt. Code Section 66000) or reimbursement agreements (see Govt. Code Section 66003). The same is true of fees in lieu of park land dedica- tion imposed under the Quimby Act (see Govt. Code Section 66477). Existing Deficiencies.In 2006,Section 66001(g) was added to the Mitigation Fee Act (by AB 2751)to prohibit impact fees from including costs attributable to ex- isting deficiencies in public facilities. The legislature’s intent in adopting this amendment, as stated in the bill, was to codify the Holdings of Bixel v. Ci ty of Los Angeles (1989), Rohn v. City of Visalia (1989), and Shapell Industries Inc. v. Governing Board (1991). That amendment does not appear to be a substantive change. It is widely understood that other provisions of law make it improper for impact fees to include costs for correcting existing deficiencies. City of Encinitas –Impact Fee Study Introduction August 5,2015 Colgan Consulting Corporation Page 1-6 Impact Fee Calculation Methodology Any one of several legitimate methods may be used to calculate impact fees. The choice of a particular method depends primarily on the service characteristics of, and planning requirements for,the facility type being addressed. Each method has advantages and disadvantages in a particular situation.To some extent they are interchangeable, because they all allocate facility costs in proportion to the needs created by development. Reduced to its simplest terms, the process of calculating impact fees involves two steps: determining the cost of development-related capital improvements, and allocating those costs equitably to various types of development. In practice, though, the calculation of impact fees can become quite complicated because of the many factors involved in defining the relationship between development and the need for facilities. Allocating facility costs to various types and amounts of development is central to all methods of impact fee calculation. Costs are allocated by means of formu- las that quantify the relationship between development and the need for facili- ties. In a cost allocation formula, the impact of development is measured by a “demand variable”such as added population or added vehicle trips,which rep- resents the impacts created by different types and amounts of development. Dif- ferent variables are used in analyzing different types of facilities. Specific de- mand variables used in this study are discussed in more detail in subsequent chapters. The following paragraphs discuss three general approaches to calculating impact fees and how they can be applied. Plan-Based or Improvements-Driven Method.Plan-based impact fee calcula- tions are based on the relationship between a specified set of improvements and a specified increment of development. The improvements are typically identi- fied by a facility plan, while the development is identified by a land use plan that identifies potential development by type and quantity. Facility costs are allocated to various categories of development in proportion to the amount of development and the relative intensity of demand created by each category.To calculate impact fees using this approach, it is necessary to define a timeframe for the analysis, and to determine what facilities will be needed to serve additional development that occurs during that period. Often the timeframe extends to buildout of all development contemplated in the General Plan.Buildout is a hypothetical condition in which undeveloped land encom- passed by the study has been developed to its expected intensity. City of Encinitas –Impact Fee Study Introduction August 5,2015 Colgan Consulting Corporation Page 1-7 With this approach, the total cost of eligible facilities is divided by the total units of additional demand to calculate a cost per unit of demand (e.g. a cost per capita for park improvements, or a cost per vehicle trip for street improvements).Then, the cost per unit of demand is multiplied by the demand per unit of development (e.g.population or vehicle trips per dwelling unit) to arrive at a cost per unit of development. This method is somewhat inflexible in that it is based on the relationship be- tween a particular facility plan and a particular land use plan. If either plan changes significantly, the fees will have to be recalculated. Capacity-Based or Consumption-Driven Method.This method calculates a cost per unit of capacity based on the relationship between total cost and total capac i- ty of a system. It can be applied to any type of development, provided the capac- ity required to serve each increment of development can be estimated and the facility has adequate capacity available to serve the develop ment. Since the cost per unit of demand does not depend on the type or quantity of development to be served, this method is flexible with respect to changing development plans. Under this method, the cost of unused capacity is not allocated to development. Capacity-based fees are most commonly used for water and wastewater systems , where the cost of a system component is divided by the capacity of that compo- nent to derive a unit cost.However, this method can be applied to other types of facilities.To produce a schedule of impact fees based on standardized units of development (e.g. dwelling units or square feet of non-residential building area), the cost per unit of capacity is multiplied by the amount of capacity required to serve a typical unit of development in each of several land use categories. Standard-Based or Incremental Expansion Method.Standard-based fees are cal- culated using a specified relationship or standard that determines the number of service units to be provided for each unit of development. The standard can be established as a matter of policy or it can be based on the level of service being provided to existing development in the study area. Using the standard-based method,costs are defined on a generic unit-cost basis and then applied to development according to a standard that sets the amount of facility space to be provided for each unit of development. Park in-lieu and impact fees are usually calculated this way. The level of service standard for parks is typically stated in terms of acres per thousand residents, and a cost per acre for park land or park improvements can usually be estimated without knowing the exact size or location of a particular park.That information can be used to calculate a cost per capita, and the cost per capita can then be co n- City of Encinitas –Impact Fee Study Introduction August 5,2015 Colgan Consulting Corporation Page 1-8 verted into a cost per unit of development based on the average population per dwelling unit for various types of residential development. This approach is also useful for facilities such as libraries, where it is possible to estimate a generic cost per square foot before a building is actually designed. One advantage of the standard-based method is that a fee can be established without committing to a particular size of facility, and facility size can be adjust- ed based on the amount of development that actually occurs. Buy-In or Recoupment Fees.This type of fee can be calculated using either the plan-based method or the capacity-based method described above. The differ- ence is that this type of fee is intended to recover a portion of the cost of existing facilities rather than facilities which will be built in the future. Buy-in fees are widely used for water and sewer facilities which must be co n- structed before development can occur. But they can also be used for other types of facilities, assuming such facilities are available to serve future development and have the capacity to do so. Facilities Addressed in this Study Impact fees for the following types of facilities are addressed in this report: •Park Land Acquisition and Park Improvements •Open Space and Trails •Fire Protection Facilities and Equipment The next chapter,Chapter 2, contains data on land use and development in the City.The impact fee calculations for individual facility types are presented in separate chapters of this report, beginning with Chapter 3. City of Encinitas –Impact Fee Study Development Data August 5,2015 Colgan Consulting Corporation Page 2 -1 Chapter 2 Development Data This chapter presents development data that will be used to calculate impact fees in subsequent chapters of the report. The information in this chapter forms a basis for establishing levels of service, analyzing facility needs, and allocating the cost of capital facilities between exist- ing and future development and among various types of new development. Population Growth The figure at right graphs the official January 1 population estimates for Encinitas by the California Depart- ment of Finance (DOF)for the years from 2005 through 2015. The apparent large drop in popula- tion from 2009 to 2010 reflects a major correction in DOF estimates of the City’s population following the 2010 Census.DOF substantially overestimated population growth in many California cities between 2000 and 2010. The January 2015 DOF population estimate for Encinitas is 61,518. The January 2005 population estimate used in the City’s 2005 impact fee study was 62,774. Recent estimates indicate the population of Encinitas is growing between 0.5% and 1.0% per year. Study Area and Time Frame The study area for the impact fee analysis is the existing City and its Sphere of Influence (SOI), as delineated in the Encinitas General Plan. The methods used to calculate impact fees in this study are not affected by the rate or timing of development, so it is not necessary to define a specific time frame for the impact fee analysis. Forecasts of population and employment growth used in this study cover the period from 2015 to 2035. However, to the extent that those forecasts are used in the impact fee calculations, it is the amount of growth that is significant, not the timing of that growth. City of Encinitas –Impact Fee Study Development Data August 5,2015 Colgan Consulting Corporation Page 2 -2 In addition, it should be noted that the City is now in the process of preparing an updated Housing Element, which will not be completed until late 2016. The poli- cies adopted in the Housing Element will affect future land use policy as well, so forecasts of future development in Encinitas are subject to change.Forecasts of future development used in this study were provided by SANDAG. Development Types Because it is not possible to forecast exactly the mix of development types that may occur in the future,many of the development types used in this study are fairly broad, especially the non-residential ones.A list of those development types is shown in Table 2.2,later in this chapter. Demand Variables In calculating impact fees, the relationship between facility needs and develop- ment must be quantified in cost allocation formulas. Certain measurable attrib- utes of development (e.g., population) are used as “demand variables”in those formulas to represent the impact of different types of development on the de- mand for particular public services and the facilities supporting them. Demand variables are selected either because they directly measure the service demand created by various types of development, or because they are reason a- bly correlated with that demand. For example, the level-of-service standard for parks in a community is typically defined as a ratio of park acreage to population. As population grows, more parks are needed to maintain the relevant standard. Logically, then,the increase in population related to new residential development is an appropriate yard- stick,or demand variable,for measuring the impacts of development on the need for additional parks. Each demand variable has a specific value for each type of development used in this study.Those values may be referred to as “demand factors.”So to be clear, if the demand variable is population, the demand factor for one single-family dwelling unit would be a number representing the average population per dwelling unit for that type of development. Specific demand variables used in this study are discussed on the next page. Demand factors used in this study (e.g., population per dwelling unit)are based on local conditions.The values of demand factors for each type of development are shown in Table 2.2, later in this chapter. City of Encinitas –Impact Fee Study Development Data August 5,2015 Colgan Consulting Corporation Page 2 -3 Resident Population.Resident population is used to represent the need for facil- ities such as parks, which serve primarily residents of the City, and are not i m- pacted substantially by other types of development.Where the term “popula- tion” is used alone in this report, it refers to resident population. Functional Population.To measure the demand for public facilities such as fire stations that serve both residential and non-residential development,a broader definition of population is needed.This study uses a construct called “functional population”(aka “service population”)to represent the impact of development on those facilities. Functional population is a composite variable made up of both residents (repre- senting residential development)and employees of businesses located in the City (representing non-residential development). It is important to emphasize that in the formulation of a functional population, the number of employees is used as a proxy for all impacts created by businesses in the City, not just those created directly by the employees themselves. The components of a functional population may be weighted to reflect the inten- sity of demand they create for a particular type of facility. In this study, function- al population is used only to calculate impact fees for fire protection facilities. For reasons discussed in Chapter 6, both components of the functional population used to calculate those impact fees have equal weight. Functional population- per-unit factors for all types of development used in this study are shown in Ta- ble 2.2. Development Data Table 2.1 shows current and forecasted population and employment for Encini- tas, based on data from the California Department of Finance and SANDAG.The time horizon for forecasts of future population and employment is 2035. City of Encinitas –Impact Fee Study Development Data August 5,2015 Colgan Consulting Corporation Page 2 -4 The growth in population and employment shown in Table 2.1 will create addi- tional demand for public services and public facilities in Encinitas. The fees cal- culated in subsequent chapters are intended to pay for the capital facilities need- ed to serve that additional demand. Table 2.2 shows estimated population and employment factors per unit of deve l- opment for the development types used in this study. Table 2.1: Encinitas Population and Employment - 2015-2035 Resident %%Unweighted Year 1 Population 2 Change Employees 3 Change Func Pop 4 2015 61,518 26,581 88,099 2035 65,087 5.8%28,467 7.1%93,554 1 Estimates and forecasts are for January 1 of each year 2 2015 estimate from 2015 DOF E-5 report, 2035 forecast provided by SANDAG 3 2015 estimate interpolated from 2010 and 2020 SANDAG data; 2035 forecast provided by SANDAG; 4 Unweighted functional population = population + employees. Table 2.2: Population/Employment per Unit of Development Land Use Gen Plan Dev Pop/Empl Category Code Unit 1 per Unit 2 Residential - Single-Family Detached R - R-8 DU 2.83 Residential Multi-Family R11 - R25 DU 1.89 Residential - Mobile Home Park MHP DU 1.80 Residential - Accessory Unit N/A DU 1.80 Office-Professional OP KSF 3.11 Commercial LC/GC/VSC KSF 2.63 Industrial-Light LI KSF 1.10 Hotel/Motel Room 0.77 1 Units of development. DU = dwelling unit; KSF = 1,000 square feet of building area; Room = guest room or suite 2 Population per unit of development for residential categories (except accessory units) based on 2013 3-Year American Community Survey data from the U.S. Census Bureau; accessory units assumed to have the same- population per unit as mobile homes; employees per unit of development for non-residential classifications based on data from SCAG employment density study prepared by the Natelson Company, Inc. City of Encinitas –Impact Fee Study Development Data August 5,2015 Colgan Consulting Corporation Page 2 -5 Growth Potential The 2035 forecasts in Table 2.1 indicate that the City’s population will increase by approximately 5.8%and employment in the City will increase approximately 7.1%over the next 20 years.The impact fees calculated in this report are intended to mitigate the impacts of that development. City of Encinitas -Impact Fee Study Park Land and Improvements August 5,2015 Colgan Consulting Corporation Page 3-1 Chapter 3 Park In-Lieu and Impact Fees This chapter calculates impact fees for park land acquisition and park improve- ments, as well as fees in lieu of park land dedication for residential subdivisions under the Quimby Act. Fees in lieu of park land dedication for residential subdivisions are calculated in this chapter based on the standard of 3.0 acres per 1,000 reside nts specified in the Quimby Act. Impact fees for park land acquisition from non-subdivision projects are based on the existing ratio of City-owned park acres per 1,000 residents. Demand Variable A demand variable is an attribute of development that is used to represent the impact of development on a particular type of facility. The need for parks is al- most universally defined in terms of population, and resident population is used in this chapter as the demand variable in the calculation of park impact fees and Quimby Act fees in lieu of park land dedication. (See Chapter 2 for a general dis- cussion of demand variables and demand factors.) Because the impact of development on the need for parks is created by added resident population, impact fees for those facilities will apply to new residential development, but not to non-residential development. Service Area The park land and improvements addressed in this chapter serve the entire City, so impact fees for those facilities will apply to all new residential development in the City. Methodology The method used to calculate in-lieu and impact fees in this chapter is the stand- ard-based method discussed in Chapter 1. The standards used as the basis for the fee calculations in this chapter are discussed below. Level of Service The level of service standard used to calculate in-lieu fees in this chapter is the minimum of 3.0 acres per 1,000 residents as specified in the Quimby Act. As e x- plained in more detail later in this chapter, the standards used to calculate im- pact fees are the existing ratios of City-owned park acres and improved park per 1,000 residents. City of Encinitas -Impact Fee Study Park Land and Improvements August 5,2015 Colgan Consulting Corporation Page 3-2 Existing Parks Table 3.1 on the next page lists all of the City’s parks and beach facilities, along with their total acreage and improved acreage. Some state-owned beaches are leased to the City and have been improved by the City, which is why total im- proved acreage exceeds the acreage of City-owned park land in Table 3.1. Although various classifications are shown for parks in Table 3.1, they can all be considered either neighborhood or community parks with respect to the Quimby Act. City of Encinitas -Impact Fee Study Park Land and Improvements August 5,2015 Colgan Consulting Corporation Page 3-3 Table 3.1: Existing Parks and Park Sites Facility City-Owned City-Improved Name Type Acreage 1 Acreage 1 "E" Street Viewpoint 0.05 0.05 "H" Street Viewpoint 0.10 0.10 "I" Street Viewpoint 0.18 0.18 "J" Street Viewpoint 0.58 0.58 Rosetta Viewpoint 0.05 0.05 N. El Portal Viewpoint 0.05 0.05 San Elijo Bluffs Viewpoint 0.30 0.00 Subtotal Viewpoints 1.31 1.01 Leucadia Roadside Mini-park 0.17 0.17 Mildred MacPherson Mini-park 0.95 0.95 Wiro Mini-park 1.02 1.02 Subtotal Mini-parks 2.14 2.14 Hawk View Park Neighborhood 4.39 3.39 Encinitas Viewpoint Neighborhood 2.41 2.41 Glen Park Neighborhood 4.45 4.45 Leucadia Oaks Park Neighborhood 2.49 2.49 Las Verdes Park Neighborhood 4.92 4.92 Scott Valley Park Neighborhood 2.00 2.00 Orpheus Park Neighborhood 2.64 2.64 Sun Vista Park Neighborhood 4.17 4.17 Standard Pacfic Park Neighborhood 3.14 0.00 Cottonwood Creek Park Neighborhood 17.96 7.86 Subtotal Neighorhood Parks 48.57 34.33 Cardiff Sports Park Community 10.84 10.84 Ecke Sports Park Community 9.29 9.29 Encinitas Community Park Community 43.88 43.88 Leo Mullen Sports Park Community 5.84 5.84 Oakcrest Park Community 21.20 21.20 Subtotal Community Parks 91.05 91.05 Little Oaks Equestrian Special Use 1.57 1.57 Mtn Vista Trail Off-Leash Special Use 8.29 8.29 Subtotal Special Use Parks 9.86 9.86 Leucadia State Beach Beach/Access 0.00 16.57 Beacon's Beach/Access 2 Beach/Access 0.00 Incl in LSB Grandview Beach/Access 2 Beach/Access 0.00 Incl in LSB "D" St. Beach/Access Beach/Access 0.38 0.38 Encinitas Beach Beach/Access 2.81 2.81 Moonlight State Beach 2 Beach/Access 0.00 14.33 MLB Play Area/Overlook 2 Beach/Access 0.00 Incl in MSB Stonesteps Beach/Access Beach/Access 9.47 9.47 Swami's Beach Access Beach/Access 1.62 1.62 Subtotal Beach/Beach Access 14.28 45.18 Total 167.21 183.57 1 Acreage from the April 2014 Parks and Recreation Department Inventory of Parks, Beaches and Trails 2 Land owned by State Parks and leased to the City. City of Encinitas -Impact Fee Study Park Land and Improvements August 5,2015 Colgan Consulting Corporation Page 3-4 Acres per 1,000 Population Table 3.2 shows 2015 acres per 1,000 population for City-owned park acreage and City-improved park acreage.Those ratios represent the existing level of service in the City and will be used to calculate park impact fees in this chapter . In Table 3.2, acres of City-owned and City-improved park land are adjusted for outstanding debt so that they reflect the City’s existing equity in those assets. That adjustment deducts acreage equivalent in value to the present value of out- standing debt issued for land acquisition and improvements at Encinitas Com- munity Park. Per-Capita Cost Park Land Acquisition for Subdivisions.The Quimby Act specifies a standard of 3.0 acres per 1,000 residents for park land dedication or fees in-lieu of dedica- tion for residential subdivisions.The in-lieu fee is assessed as part of the subdivi- sion approval process. Table 3.3 on the next page calculates the acres per capita that would be used to determine the amount of land to be dedicated by a development project. It also calculates the cost per capita on which a fee in lieu of park land dedication would be based.The City has the option of requiring land dedication or payment of the in-lieu fee, except for subdivisions of 50 units or less, which may not be required to dedicate land. Table 3.2: Acres per 1,000 Population Existing Ac Deduct Net 2015 Acres per Category Acres 1 for Debt 2 Acres 3 Population 4 1,000 Pop 5 City-Owned Park Land 167.21 21.26 145.95 61,518 2.37 City-Improved Park Land 183.57 16.45 167.12 61,518 2.72 1 See Table 3.1 2 Acres deducted to adjust for outstanding debt on park land and improvements; deduction based on per-acre costs shown in the following tables, and on the present value of future debt service payments discounted at 2.5% per year ($17.01M for land and $7.4M for improvements) 3 Net acres = existing acres - acres deducted to adjust for outstanding debt 4 See Table 2.1 5 Acres per 1,000 population = net acres / (2015 population/1000) City of Encinitas -Impact Fee Study Park Land and Improvements August 5,2015 Colgan Consulting Corporation Page 3-5 The cost per capita from Table 3.3 serves as the basis for the calculation of in-lieu fees per unit for residential subdivisions later in this chapter. Park Land Acquisition for Residential Development with No Subdivision.In- lieu fees under the Quimby Act do not apply to residential development that does not involve a subdivision or parcel map. This study calculates a park land impact fee that could be applied to such projects if the City chooses. That fee would only apply to development that does not involves a subdivision on exist- ing parcels that have not previously been subject to a Quimby Act in-lieu fee. The amount of this fee is based on the existing ratio of City-owned park acres to population, which is less than the 3.0 acres per 1,000 population used to calculate the Quimby Act in-lieu fees. Table 3.4 shows the estimated cost per capita for park land based on the ratio of City owned park land to population from Table 3.2, using the same estimated cost per acre as the in-lieu fee calculations in Table 3.3. Table 3.3: Per-Capita Cost - Park Land (Subdivisions) Acres per Acres per Cost per Cost per 1,000 Pop 1 Capita 2 Acre 3 Capita 4 3.00 0.003 $800,000 $2,400.00 1 Acres per 1,000 population specified in the Quimby Act 2 Acres per capita = acres per 1,000 / 1,000 3 Estimated cost for acquiring park land in Encinitas 4 Cost per capita = acres per capita X cost per acre Table 3.4: Per-Capita Cost - Park Land (No Subdivision) Acres per Acres per Cost per Cost per 1,000 Pop 1 Capita 2 Acre 3 Capita 4 2.37 0.00237 $800,000 $1,897.94 1 Acres of existing City-owned park land per 1,000 population; see Table 3.2 2 Acres per capita = acres per 1,000 / 1,000 3 Estimated average cost to acquire park land in Encinitas 4 Cost per capita = acres per capita X cost per acre City of Encinitas -Impact Fee Study Park Land and Improvements August 5,2015 Colgan Consulting Corporation Page 3-6 The per-capita value from Table 3.4 is used to calculate of park land impact fees for residential development not involving a subdivision later in this chapter. Park Improvements.The park land in-lieu fee and park land impact fee are based only on the cost of acquiring additional park land, and do not include the cost of park improvements.This chapter also calculates a park improvement im- pact fee based on the existing ratio of improved park acreage to population from Table 3.2.This fee is intended to apply to all residential development in Encini- tas,in addition to the park land in-lieu or impact fees. Table 3.5 shows the estimated per capita cost of park improvements based on the existing ratio of City-improved park acres to population.The cost per-capita from Table 3.5 is used to calculate park improvement impact fees later in this chapter. In-Lieu and Impact Fees per Unit of Development Table 3.6 on the next page shows the calculation of park land in-lieu fees per unit of development for residential subdivisions under the Quimby Act.No fees are shown for accessory units in Table 3.6 because such units do not involve a subdi- vision of land. Table 3.5: Per Capita Cost - Park Improvements Acres per Acres per Cost per Cost per 1,000 Pop 1 Capita 2 Acre 3 Capita 4 2.72 0.00272 $515,000 $1,399.04 1 Acres per 1,000 population; see Table 3.2 2 Acres per capita = acres per 1,000 / 1,000 3 Estimated average cost per acre for park improvements; actual cost for Encinitas Community park improvements was $559,480 per acre based on total cost of $24,550,000 for EIR, design and construction on 43.88 acres; estimated average improvement cost for other parks = $500,000 per acre 4 Cost per capita = acres per capita X cost per acre City of Encinitas -Impact Fee Study Park Land and Improvements August 5,2015 Colgan Consulting Corporation Page 3-7 Table 3.7 shows the calculation of park land impact fees per unit of development for residential development not involving a subdivision or a parcel map. This fee would not apply to any property which has previously paid park land in-lieu fees.No fees are shown for accessory units in Table 3.7 because,in most cases,park land in lieu fees would have been paid when the property was origi- nally developed. Table 3.8 on the next page shows the calculation of park improvement impact fees per unit of development for all residential development. Table 3.6: Fees per Unit - Park Land In-Lieu Fee (Subdivisions) Development Dev Pop per Cost per Fee per Type Units 1 Unit 2 Capita 3 Unit 4 Residential - Single-Family Detached DU 2.83 2,400.00$6,792.00$ Residential Multi-Family DU 1.89 2,400.00$4,536.00$ Residential - Mobile Home Park DU 1.80 2,400.00$4,320.00$ Residential - Accessory Unit DU 1.80 N/A N/A 1 Units of development. DU = dwelling unit 2 Population per unit of development; see Table 2.2 3 Cost per capita; see Table 3.3 4 Fee per unit of development = population per unit X cost per capita Table 3.7: Fees per Unit- Park Land Impact Fee (No Subdivision) Development Dev Pop per Cost per Fee per Type Units 1 Unit 2 Capita 3 Unit 4 Residential - Single-Family Detached DU 2.83 1,897.94$5,371.16$ Residential Multi-Family DU 1.89 1,897.94$3,587.10$ Residential - Mobile Home Park DU 1.80 1,897.94$3,416.28$ Residential - Accessory Unit DU 1.80 N/A N/A 1 Units of development. DU = dwelling unit 2 Population per unit of development; see Table 2.2 3 Cost per capita; see Table 3.4 4 Fee per unit of development = population per unit X cost per capita City of Encinitas -Impact Fee Study Park Land and Improvements August 5,2015 Colgan Consulting Corporation Page 3-8 Projected Revenue Revenue is not projected here for the park land in-lieu and park land impact fees calculated in this chapter,because that projection would depend on what per- centage of future residential development occurs in subdivisions. There appears to be no reliable way to forecast that share. Table 3.9 shows projected revenue from park improvement impact fees calculat- ed in this chapter.Potential revenue is projected by applying the fee per-capita cost from Table 3.5 to forecasted population increase in the study area from 2015 to 2035. The fees calculated in this chapter are shown in current dollars.Normally such fees should be indexed or adjusted periodically to keep pace with changes in the costs on which the fees are based.However, we are not aware of any index that could be applied either to land costs in Encinitas or to park improvement costs. The City may wish to re-evaluate the costs used in the fee calculations periodical- ly and make adjustments if updated cost information is available. Table 3.8: Fees per Unit - Park Improvement Impact Fee Development Dev Pop per Cost per Fee per Type Units 1 Unit 2 Capita 3 Unit 4 Residential - Single-Family Detached DU 2.83 1,399.04$3,959.27$ Residential Multi-Family DU 1.89 1,399.04$2,644.18$ Residential - Mobile Home Park DU 1.80 1,399.04$2,518.26$ Residential - Accessory Unit DU 1.80 1,399.04$2,518.26$ 1 Units of development. DU = dwelling unit 2 Population per unit of development; see Table 2.2 3 Cost per capita; see Table 3.5 4 Fee per unit of development = population per unit X cost per capita Table 3.9: Projected Revenue - Park Improvement Impact Fee Added Cost per Projected Population 1 Capita 2 Revenue 3 3,569 $1,399.04 $4,993,174 1 Added population: 2015-2035; See Table 2.2. 2 See Table 3.5 3 Projected revenue = added population X cost per capita City of Encinitas -Impact Fee Study Park Land and Improvements August 5,2015 Colgan Consulting Corporation Page 3-9 Relationship to Existing In-Lieu/Impact Fees On a per-capita basis, the in-lieu (Quimby) fees calculated in this report are iden- tical to the existing fees.Per-unit in-lieu fees may be slightly higher or lower based on minor changes in the average population per dwelling unit since the previous impact fee study in 2005. Per capita, the park land impact fees for non-subdivisions projects calculated in this report are about 4% lower than the existing fees, and per unit fees are all modestly lower. Per capita, the park improvement impact fees calculated in this report are ap- proximately 56%higher than the existing fees, largely due to a major increase in the existing ratio of improved park land to population since 2005, due to the con- struction of Encinitas Community Park.Per-unit fees are proportionately higher. Nexus Summary As discussed in Chapter 1 of this report,Section 66001 of the Mitigation Fee Act requires that an agency establishing, increasing or imposing impact fees, must make findings to: 1.Identify the purpose of the fee; 2.Identify the use of the fee; and, 3.Determine that there is a reasonable relationship between: a.The use of the fee and the development type on which it is imposed; b.The need for the facility and the type of development on which the fee is imposed; and c.The amount of the fee and the facility cost attributable to the devel- opment project. Satisfying those requirements also ensures that the fees meet the “rational nexus” and “rough proportionality”standards enunciated in leading court decisions bearing on impact fees and other exactions.(For more detail, see “Legal Frame- work for Impact Fees” in Chapter 1.) The following paragraphs explain how the impact fees calculated in this chapter satisfy those requirements. Purpose of the Fee.The purpose of the park land in-lieu and impact fees, and the park improvement impact fees,is to mitigate the impact of new development on the need for parks in the City. City of Encinitas -Impact Fee Study Park Land and Improvements August 5,2015 Colgan Consulting Corporation Page 3-10 Use of the Fee.The park land in lieu/impact fees and the park improvement im- pact fees will be used to acquire land and construct park improvements to miti- gate the impacts of new development.As provided by the Mitigation Fee Act, revenue from impact fees may also be used for temporary loans from one impact fee fund or account to another. Reasonable Relationship between the Use of the Fee and the Development Type on Which It Is Imposed.The parks being funded by the park land in- lieu/impact fees and the park improvement impact fees are needed to serve ad- ditional population related to new residential development. These fees will be imposed only on residential development, which accommodates growth in the City’s resident population. Reasonable Relationship between the Need for the Facilities and the Type of Development on Which the Fee Is Imposed.New residential development ac- commodates growth in the City’s population, and that growth would reduce the level of service to all residents of the City if additional parks were not provided. The fees calculated in this chapter will provide funding for additional parks needed to serve additional residential development. Reasonable Relationship between the Amount of the Fee and the Facility Cost Attributable to the Development Project.The amount of park land acquisition in-lieu/impact fees and the park improvement impact fees charged to a devel- opment project will depend on the number and type of dwelling units in that project. The fees per dwelling unit calculated in this chapter for each type of residential development are based on the average population per dwelling unit for that type of dwelling in the City. Thus, the fee charged to a development project reflects the number of additional residents expected to be added to the City’s popu lation due to construction of the project. City of Encinitas -Impact Fee Study Open Space and Trails Impact Fees August 5, 2015 Colgan Consulting Corporation Page 4-1 Chapter 4 Open Space and Trails Impact Fees This chapter calculates impact fees for open space land acquisition and trails de- velopment in Encinitas. The City currently owns over 86 acres of dedicated open space land and has de- veloped more than 40 miles of multi-purpose trails. Demand Variable A demand variable is an attribute of development that is used to represent the impact of development on a particular type of facility. The need for open space and trails is commonly defined in terms of population, and resident population is used in this chapter as the demand variable in calculating impact fees for open space and trails. (See Chapter 2 for a general discussion of demand variables and demand factors.) Because the impact of development on the need for open space and trails is cre- ated by added resident population, impact fees for those facilities will apply to new residential development, but not to commercial, office or industrial devel- opment. Service Area The open space and trails addressed in this chapter serve the entire City, so im- pact fees for those facilities will apply to all new residential development in the City. Methodology The method used to calculate impact fees for open space and trails is the stan d- ard-based method described in Chapter 1. The standard used as the basis for the fee calculations in this chapter is the existing level of service discussed in the next section.The fees calculated in this chapter are based on the cost of maintaining the existing level of service as the City’s population increases due to new deve l- opment. Level of Service The level-of-service standard used to calculate impact fees for open space land acquisition is the City’s existing open space acreage per capita as shown in Table 4.2 on the next page. The level-of-service standard used to calculate impact fees City of Encinitas -Impact Fee Study Open Space and Trails Impact Fees August 5, 2015 Colgan Consulting Corporation Page 4-2 for trails development is the City’s existing mileage of improved trails per capita also shown in Table 4.2. Existing Open Space The City currently owns three open space sites, as shown in Table 4.1.The most recent acquisition of open space land by the City occurred in 2003. Existing Levels of Service Table 4.2 calculates the existing levels of service for open space land and trails in Encinitas. Those calculations use the existing acres of open space land and exis t- ing miles of trails, divided by the 2015 population from Table 2.1 in Chapter 2. Per-Capita Cost Table 4.3 on the next page calculates the per-capita cost of maintaining the exist- ing level of service as the City’s population grows due to new development. Table 4.1: Existing Open Space Sites Open Space City-Owned Site Acreage 1 Barelman Property 17.63 Snedeker Property 7.74 Indian Head Canyon 61.25 Total 86.62 1 Acreage provided by the City of Encinitas Parks and Recreation Department Table 4.2: Existing Levels of Service Existing 2015 Acres/Miles Category Units Units 1 Population 2 per Capita 3 City-Owned Open Space Acres 86.62 61,518 0.001408 Existing Trails Miles 40.50 61,518 0.000658 1 See Table 4.1 for existing open space acres; existing miles of improved trails from the April 2014 Parks and Recreation Department inventory 2 See Table 2.1 3 Acres of open space and miles of improved trails per capita = existing units / 2015 population City of Encinitas -Impact Fee Study Open Space and Trails Impact Fees August 5, 2015 Colgan Consulting Corporation Page 4-3 The estimated cost per acre for open space land is based on the 2003 purchase price for the Snedeker open space site by the City. The estimated cost for trail improvements assumes an average width of 7 feet, with half of the trail mileage surfaced with decomposed granite. The remainder would be bladed dirt trails. The per-capita cost from Table 4.3 will serve as the basis for the open space and trails impact fees calculated in the following section. Fees per Unit of Development Table 4.4 shows the calculation of impact fees per unit of development by devel- opment type for open space land acquisition. As discussed earlier, those fees will apply only to residential development. Table 4.5 on the next page shows the calculation of impact fees per unit of devel- opment by development type for trails development. Like the open space fees, those fees will apply only to residential development. Table 4.3: Per-Capita Cost - Open Space and Trails Fee Acres/Miles Est Cost Cost per Component Units per Capita 1 per Unit 2 Capita 3 Open Space Land Acres 0.001408 $110,000 154.88$ Trail Development Miles 0.000658 $90,400 59.51$ 1 See Table 4.2 2 Estimated cost per unit for open space land acquisition and trails development for land and trails similar to existing 3 Cost per capita = acres or miles per capita X estimated cost per unit Table 4.4: Fees per Unit - Open Space Land Acquisition Development Dev Pop per Cost per Fee per Type Units 1 Unit 2 Capita 3 Unit 4 Residential - Single-Family Detached DU 2.83 154.88$438.32$ Residential Multi-Family DU 1.89 154.88$292.73$ Residential - Mobile Home Park DU 1.80 154.88$278.79$ Residential - Accessory Unit DU 1.80 154.88$278.79$ 1 Units of development. DU = dwelling unit 2 Population per unit of development; see Table 2.2 3 Cost per capita; see Table 4.3 4 Fee per unit of development = population per unit X cost per capita City of Encinitas -Impact Fee Study Open Space and Trails Impact Fees August 5, 2015 Colgan Consulting Corporation Page 4-4 Projected Revenue Table 4.6 shows projected revenue from open space impact fees calculated in this chapter.Potential revenue is projected by applying the per-capita cost from Ta- ble 4.3 to the forecasted population increase in the study area from 2015 to 2035. Revenue from the open space land acquisition impact fees will be used, if possi- ble,to acquire additional open space land in the City. However, availability of additional open space land in the City is uncertain, and the revenue from these fees alone will almost certainly be inadequate to purchase additional open space even if such land should become available. If it proves impossible to spend the fees on land acquisition, the City may choose to spend them to improve the accessibility or usability of existing open space sites in the City, including improvement of additional trails or other amenities within open space sites. Table 4.5: Fees per Unit - Trail Development Development Dev Pop per Cost per Fee per Type Units 1 Unit 2 Capita 3 Unit 4 Residential - Single-Family Detached DU 2.83 59.51$168.43$ Residential Multi-Family DU 1.89 59.51$112.48$ Residential - Mobile Home Park DU 1.80 59.51$107.13$ Residential - Accessory Unit DU 1.80 59.51$107.13$ 1 Units of development. DU = dwelling unit 2 Population per unit of development; see Table 2.2 3 Cost per capita; see Table 4.3 4 Fee per unit of development = population per unit X cost per capita Table 4.6: Projected Revenue - Open Space Impact Fees Added Cost per Projected Population 1 Capita 2 Revenue 3 3,569 $154.88 $552,767 1 Added population: 2015-2035; See Table 2.1 2 See Table 4.3 3 Projected revenue = added population X cost per capita City of Encinitas -Impact Fee Study Open Space and Trails Impact Fees August 5, 2015 Colgan Consulting Corporation Page 4-5 Table 4.7 shows projected revenue from trails development impact fees calculat- ed in this chapter.Potential revenue is projected by applying the per capita cost from Table 4.3 to forecasted population increase in the study area from 2015 to 2035. The fees calculated in this chapter are shown in current dollars.Normally such fees should be indexed or adjusted periodically to keep pace with changes in f a- cility costs.That process is appropriate for the trails improvement impact fees. However, in the absence of an active market for open space land in the City,ad- justing the estimated cost of open space land acquisition may prove impractical. Relationship to Existing Impact Fees The open space and trails development impact fees calculated in this chapter represent increases of approximately 3% and 5% respectively over the amount of the existing fees. The existing fees were calculated in 2005. Nexus Summary As discussed in Chapter 1 of this report,Section 66001 of the Mitigation Fee Act requires that an agency establishing, increasing or imposing impact fees, must make findings to: 1.Identify the purpose of the fee; 2.Identify the use of the fee; and, 3.Determine that there is a reasonable relationship between: a.The use of the fee and the development type on which it is imposed; b.The need for the facility and the type of development on which the fee is imposed; and c.The amount of the fee and the facility cost attributable to the devel- opment project. Table 4.7: Projected Revenue - Trail Impact Fees Added Cost per Projected Population 1 Capita 2 Revenue 3 3,569 $59.51 $212,391 1 Added population: 2015-2035; See Table 2.2. 2 See Table 4.3 3 Projected revenue = added population X cost per capita City of Encinitas -Impact Fee Study Open Space and Trails Impact Fees August 5, 2015 Colgan Consulting Corporation Page 4-6 Satisfying those requirements also ensures that the fees meet the “rational nexus” and “rough proportionality”standards enunciated in leading court decisions bearing on impact fees and other exactions.(For more detail, see “Legal Frame- work for Impact Fees” in Chapter 1.) The following paragraphs explain how the impact fees calculated in this chapter satisfy those requirements. Purpose of the Fee.The purpose of the open space and trails development im- pact fees is to mitigate the impact of new development on the need for those amenities in the City. Use of the Fee.The open space and trails development impact fees will be used to pay for additional open space and trails to mitigate the demand created by new development, or if it is not feasible to acquire additional open space, the open space fees may be used to improve access to, or usability of, existing open space.As provided by the Mitigation Fee Act,revenue from the open space and trails fees may also be used for temporary loans from one impact fee fund or ac- count to another. Reasonable Relationship between the Use of the Fee and the Development Type on Which It Is Imposed.The amenities to be funded by the open space and trails development impact fees are intended to serve residents of the City. The open space and trails development impact fees will be imposed only on residen- tial development, which accommodates growth in the City’s population. Reasonable Relationship between the Need for the Facilities and the Type of Development on Which the Fee Is Imposed.New residential development ac- commodates growth in the City’s population, and that growth would reduce the level of service to all residents of the City unless additional open space and trails are provided. The open space and trails development impact fees are intended to provide funding to acquire additional open space and improve more trails. Reasonable Relationship between the Amount of the Fee and the Facility Cost Attributable to the Development Project.The amount of the open space and trails development impact fees charged to a development project will depend on the number and type of dwelling units in that project.The fee per dwelling unit calculated in this chapter for each type of residential development is based on the average population per dwelling unit for that type of dwelling in the City. Thus, the fee charged to a development project reflects the number of additional resi- dents expected to be added to the City’s population due to construction of the project. City of Encinitas -Impact Fee Study Fire Protection Impact Fees August 5,2015 Colgan Consulting Corporation Page 5-1 Chapter 5 Fire Protection Impact Fees This chapter calculates impact fees for fire protection facilities and equipment in the City of Encinitas.The Encinitas Fire Department currently operates six fire stations. The City owns five of those stations stations and leases space for Station No. 6, which serves a less urbanized portion of the City and houses only a brush engine. Three of the five existing City-owned fire stations have been constructed since 2001.Stations No. 1 and No. 4 are of a much older vintage and may be replaced in the future because of outdated locations, inadequate sites and/or obsolete structures. Station No. 6 may also be relocated to a permanent site and structure at some point, but there are no plans to do so in the near future. Demand Variable A demand variable is an attribute of development that is used to represent the impact of development on a particular type of facility.The other types of facili- ties addressed in this study are intended to serve residents of the City, and the impact of development on those facilities is measured by population, i.e.,the in- crease in resident population related to new residential development. But fire protection facilities and equipment serve both residential and non- residential development, so population growth alone would not reflect the im- pacts of non-residential development on the need for fire protection services. The demand variable used to calculate fire protection impact fees is “functional population,”which includes both residents of the City and employees of busi- nesses located in the City. The employee component of functional population is intended as a proxy for all of the impacts of non-residential development, not just the impacts created by the employees themselves.(See Chapter 2 for a gen- eral discussion of demand variables and demand factors.) One question that must be answered when using functional population to calcu- late impact fees is, on average, how much impact is created by an employee compared with a resident of the City? Employees are often assigned a lower weight than residents, using the logic that residents are likely to spend more time in the City than non-resident employees. However, in analyzing the distribution of 2014 incidents reported by the Encini- tas Fire and Marine Safety Department, Colgan Consulting concluded that, in order for impact fees to approximate the same 70-30 split between residential City of Encinitas -Impact Fee Study Fire Protection Impact Fees August 5,2015 Colgan Consulting Corporation Page 5-2 and non-residential demand reflected in that distribution, employees and resi- dents should be weighted equally in the functional population used to calculate impact fees in this chapter. Service Area The fire protection facilities and equipment addressed in this chapter serve the entire City, so impact fees for those facilities will apply to all new residential de- velopment in the City. Level of Service The impact fee calculations in this chapter are based on the cost of maintaining the existing level of service for fire protection as the City grows. That level of service is defined here as the relationship between the existing functional popu- lation and the value of existing fire protection capital assets,as explained in the next section. Methodology Quite often impact fees for fire protection facilities and equipment are calculated using the plan-based method discussed in Chapter 1. To use that approach here, we would have to have better information than is currently available on plans for future fire station improvements and more reliable projections of future devel- opment in the City over the long term. Plans for possible replacement and/or relocation of Stations No. 1 and No. 4, and decisions about the future of Station No. 6, are still under consideration. In addi- tion,preparation of the City’s new Housing Element could result in some chang- es in if future development plans. Consequently, impact fees for fire protection facilities and equipment are calcu- lated in this study using the standard-based approach, which is also discussed in Chapter 1. That approach bases impact fees on the cost of maintaining a certain level of service, which in this case is the existing level of service. For purposes of the impact fee calculations, the existing level of service is defined in terms of the relationship between the City’s existing functional population and the value of existing fire protection facilities and equipment. That relationship can be stated as the per-capita value of the City’s existing fire protection assets, as shown in Table 5.3 later in this section. City of Encinitas -Impact Fee Study Fire Protection Impact Fees August 5,2015 Colgan Consulting Corporation Page 5-3 Asset Valuation Table 5.1 shows the current values of the City’s existing fire stations, which are taken from a recent appraisal. The current values of existing fire suppression apparatus and Fire Department vehicles are shown in Table 5.2 on the next page.Values are based on depreciat- ed replacement cost. Some units of the City’s existing fire suppression apparatus were acquired through lease-purchase arrangements for which ongoing payments are due. At the bottom of Table 5.2 is an adjustment to reflect the present value of those fu- ture lease payments. That adjustment reduces the total value of the assets listed in Table 5.2. Table 5.1: Existing Fire Station Valuation Fire Construction Building Site Current Asset Stations Date Square Feet Acreage Value 1 Station No. 1 1955 0.23 685,000$ Station No. 2 2012 6,330 2.15 6,370,000$ Station No. 3 2009 7,256 1.57 7,700,000$ Station No. 4 1978 0.55 1,855,000$ Station No. 5 2001 7,000 1.00 5,150,000$ Totals 21,760,000$ 1 Valuations from appraisal by Robert Backer & Associates dated September 26, 2014 City of Encinitas -Impact Fee Study Fire Protection Impact Fees August 5,2015 Colgan Consulting Corporation Page 5-4 Asset Value Per Capita Table 5.3 on the next page calculates the per-capita value of the City’s existing fire protection assets, using the costs from Tables 5.1 and 5.2, and the estimated 2015 functional population from Table 2.1 in Chapter 2. It should be noted that the value of fire protection assets used in the impact fee calculations is reduced in Table 5.3 by 7.5% to exclude the value of assets serving current demand created by public facilities, beaches, parks and open space. Table 5.2: Existing Fire & Marine Safety Apparatus and Vehicles Model Year Make Type Useful Life 1 Replacement Cost 2 Current Asset Value 3 2002 Am. La France Structural Engine 15 560,000$112,000$ 2003 Am. La France Structural Engine 15 560,000$149,333$ 2004 Am. La France Structural Engine 15 560,000$186,667$ 2011 Pierce-Arrow Structural Engine 15 603,400$482,720$ 2013 Pierce-Arrow Structural Engine 15 559,600$522,293$ 1997 Navistar Brush Engine 15 249,700$37,455$ 2002 Masterbody Brush Engine 15 249,700$49,940$ 2011 Pierce-Arrow Aerial Ladder Truck 15 1,124,000$899,200$ 2001 Ford Explorer SUV 7 25,000$3,750$ 2002 Ford Explorer SUV 7 25,000$3,750$ 2002 Ford Explorer SUV 7 25,000$3,750$ 2003 Ford Expedition SUV 5 32,000$4,800$ 2007 Chev Tahoe SUV 5 35,000$5,250$ 2007 Chev Suburban SUV 5 43,000$6,450$ 2004 Ford F350 Truck 5 35,000$5,250$ 2010 Ford F150 4x4 Truck 5 35,000$7,000$ 2010 Ford F150 4x4 Truck 5 35,000$7,000$ 2011 Ford Ranger Truck 5 55,000$22,000$ 2011 Ford Ranger Truck 5 55,000$22,000$ Total 2,530,608$ Adjustment for Outstanding Apparatus Lease-Purchase Payments 4 (1,588,580)$ Adjusted Total Asset Value 942,028$ 1 Estimated useful life of equipment for depreciation 2 Estimated replacement cost in 2015 dollars including equipment 3 Current asset value = depreciated replacement cost using straight line depreciation over the useful life of the equipment; minimum residual value = 15% of replacement cost 4 The adjustment is based on future lease-purchase payments for apparatus acquired in 2011, 2012 and 2013, discounted at 2.5% per year. City of Encinitas -Impact Fee Study Fire Protection Impact Fees August 5,2015 Colgan Consulting Corporation Page 5-5 In Table 5.3, the private development share of the current value of the City’s fire protection assets is divided by the estimated 2015 functional population.The re- sulting per-capita asset value represents the existing level of service in terms of the relationship between the City’s current functional population and the value of existing fire protection assets. The per-capita asset value from Table 5.3 is used in the next section to calculate impact fees per unit of development by development type Impact Fees per Unit of Development Table 5.4 on the next page shows the calculation of fire protection impact fees per unit of development by development type. Those fees are calculated using the per-capita asset value from Table 5.3 and the functional population per unit from Table 2.2. Table 5.3: Asset Value per Capita - Fire Stations, Apparatus and Vehicles Fee Current Asset Private Dev 2015 Asset Value Component Value 1 Share 2 Func Pop 3 per Capita 4 Fire Stations 21,760,000$20,128,000$88,099 228.47$ Apparatus and Vehicles 942,028$871,376$88,099 9.89$ Total 22,702,028$20,999,376$88,099 238.36$ 1 Current Asset Value; see Tables 5.1 and 5.2 2 Private development share of current asset value reflects a 7.5% reduction to exclude the cost of assets serving public facilities, beaches, parks and open space, based on analysis of 2014 incidents reported by the Encinitas Fire and Marine Safety Department 3 2015 functional population (see Table 2.1) 4 Asset value per capita = current asset value / functional population City of Encinitas -Impact Fee Study Fire Protection Impact Fees August 5,2015 Colgan Consulting Corporation Page 5-6 Projected Revenue Table 5.5 shows projected revenue from fire protection impact fees calculated in this chapter.Potential revenue is projected by applying the asset value per capi- ta from Table 5.3 to forecasted future functional population increase from 2015 to 2035. Revenue from impact fees calculated in this chapter can be used for future fire station improvements and acquisition of fire suppression apparatus. The fees calculated in this chapter are shown in current dollars.Unlike the other impact fees calculated in this study, we do not recommend annual adjustments Table 5.4: Fees per Unit - Fire Protection Facilities/Equipment Development Dev Func Pop Asset Value Impact Fee Type Unit 1 per Unit 2 per Capita 3 per Unit 4 Residential - Single-Family Detached DU 2.83 238.36$674.56$ Residential Multi-Family DU 1.89 238.36$450.50$ Residential - Mobile Home Park DU 1.80 238.36$429.05$ Residential - Accessory Unit DU 1.80 238.36$429.05$ Office-Professional KSF 3.11 238.36$741.30$ Commercial KSF 2.63 238.36$626.89$ Industrial-Light KSF 1.10 238.36$262.20$ Hotel/Motel Room 0.77 238.36$183.54$ 1 Units of development. DU = dwelling unit; KSF = 1,000 square feet of building area; Room = guest room or suite 2 Functional population per unit (see Table 2.2) 3 Asset value per capita; see Table 5.3 4 Impact fee per unit of development = functional population per unit X asset value per capita Table 5.5: Projected Revenue - Fire Protection Impact Fees Added Functional Asset Value Projected Population 1 per Capita 2 Revenue 3 5,455 $238.36 $1,300,254 1 Added functional population from 2015 to 2035 2 See Table 5.3 3 Projected revenue = added functional population X assset value per capita City of Encinitas -Impact Fee Study Fire Protection Impact Fees August 5,2015 Colgan Consulting Corporation Page 5-7 in the fire protection impact fees. Those fees are based on the relationship between the value of fire protection assets and the City’s functional population, and the impact fees are intended to maintain that relationship. However, it would be appropriate to update the impact fee calculations in the event major new fire protection assets are acquired by the City Relationship to Existing Impact Fees On a per-capita basis, the impact fees calculated in this study are about 14% higher than the existing fees. However,impact fees calculated in this chapter for some types of development are higher than the existing fees, while some are lower.Impact fees for single family residential development and commercial de- velopment are higher than existing fees, while fees for light industrial uses are lower. Some other fees have changed very little. Those changes are primarily due to updated information on the number of residents and employees per unit of development since the existing fees were calculated in 2005. Nexus Summary As discussed in Chapter 1 of this report,Section 66001 of the Mitigation Fee Act requires that an agency establishing, increasing or imposing impact fees, must make findings to: 1.Identify the purpose of the fee; 2.Identify the use of the fee; and, 3.Determine that there is a reasonable relationship between: a.The use of the fee and the development type on which it is imposed; b.The need for the facility and the type of development on which the fee is imposed; and c.The amount of the fee and the facility cost attributable to the devel- opment project. Satisfying those requirements also ensures that the fees meet the “rational nexus” and “rough proportionality”standards enunciated in leading court decisions bearing on impact fees and other exactions.(For more detail, see “Legal Frame- work for Impact Fees” in Chapter 1.) The following paragraphs explain how the fire protection impact fees calculated in this chapter satisfy those requirements. City of Encinitas -Impact Fee Study Fire Protection Impact Fees August 5,2015 Colgan Consulting Corporation Page 5-8 Purpose of the Fee.The purpose of the fire protection impact fees is to mitigate the impact of new development on the need for fire protection facilities and equipment in the City. Use of the Fee.The fire protection impact fees will be used to pay for additional fire protection assets needed to maintain the existing level of service for fire pr o- tection in the City.As provided by the Mitigation Fee Act,those fees may also,be used for temporary loans from one impact fee fund or account to another. Reasonable Relationship between the Use of the Fee and the Development Type on Which It Is Imposed.The City provides fire protection to all develop- ment in the City. The facilities and equipment funded by the fire protection im- pact fee will support an increase in the City’s capacity to serve additional devel- opment in the City. Reasonable Relationship between the Need for the Facilities and the Type of Development on Which the Fee Is Imposed.All new development creates an incremental increase in the demand for fire protection services.The fire protec- tion impact fees are based on the impact of each type of new development, as measured by its associated increase in functional population. Reasonable Relationship between the Amount of the Fee and the Facility Cost Attributable to the Development Project.The fire protection impact fees are based on the cost of maintaining the existing level of service for fire protection as the City grows. That level of service is defined in this study as the relationship between functional population and the value of fire protection assets.The amount of the impact fee charged to a development project depends on the in- crease in functional population associated with that project.The fee charged to a particular project reflects the increase in functional population associated with that project. City of Encinitas –Impact Fee Study Introduction August 5 2015 Colgan Consulting Corporation Page 6-1 Chapter 6 Implementation This chapter of the report contains recommendations for adoption and administration of a development impact fee program based on this study, and for the interpretation and application of impact fees recommended herein. Statutory requirements for the adoption and administration of fees imposed as a condi- tion of development approval are found in the Mitigation Fee Act (Government Code Sections 66000 et seq.).For implementation of fees in lieu of park land dedication, see the Quimby Act (Government Code Section 66477). Adoption The form in which development impact fees are enacted, whether by ordinance or reso- lution, should be determined by the City Attorney.Ordinarily, it is desirable that specif- ic fee amounts be set by resolution to facilitate periodic adjustments. Procedures for adoption of fees subject to the Mitigation Fee Act, including notice and public hearing requirements, are specified in Government Code Sections 66016 and 66018.It should be noted that Section 66018 refers to Government Code Section 6062a, which requires that the public hearing notice be published at least twice during the 10- day notice period. Government Code Section 66017 provides that fees subject to the Mit- igation Fee Act do not become effective until 60 days after final action by the governing body. Actions establishing or increasing fees subject to the Mitigation Act require certain find- ings, as set forth in Government Code Section 66001 and discussed below and in Chap- ter 1 of this report. Establishment of Fees. Pursuant to the Mitigation Fee Act (Section 66001(a)), when the City establishes fees to be imposed as a condition of development approval,it must make findings to: 1.Identify the purpose of the fee; 2.Identify the use of the fee; and 3.Determine how there is a reasonable relationship between: a.The use of the fee and the type of development project on which it is imposed; b.The need for the facility and the type of development project on which the fee is imposed City of Encinitas –Impact Fee Study Introduction August 5 2015 Colgan Consulting Corporation Page 6-2 Examples of findings that could be used for impact fees calculated in this study are shown below.The specific language of such findings should be reviewed and approved by the City Attorney.A more complete discussion of the nexus for each fee can be found in individual chapters of this report where impact fees are calculated. Finding: Purpose of the Fee.The City Council finds that the purpose of the im- pact fees hereby enacted is to prevent new development from reducing the quali- ty and availability of public services provided to residents of the City by requir- ing new development to contribute to the cost of additional capital assets needed to serve additional development. Finding: Use of the Fee.The City Council finds that revenue from the impact fees hereby enacted will be used to construct public facilities and pay for other capital assets needed to serve new development. Those public facilities and oth- er assets are identified in the 2015 Impact Fee Study prepared by Colgan Con- sulting Corporation.1 Finding: Reasonable Relationship:Based on analysis presented in the 2015 Impact Fee Study prepared by Colgan Consulting Corporation, the City Council finds that there is a reasonable relationship between: a.The use of the fees and the types of development projects on which they are imposed; and, b.The need for facilities and the types of development projects on which the fees are imposed. Administration The California Mitigation Fee Act (Government Code Sections 66000 et seq.) mandates procedures for administration of impact fee programs, including collection and account- ing,reporting, and refunds. References to code sections in the following paragraphs pertain to the California Government Code. Imposition of Fees. Pursuant to the Mitigation Fee Act (Section 66001(a)), when the City imposes an impact fee upon a specific development project, it must make essential- ly the same findings adopted upon establishment of the fees to: 1.Identify the purpose of the fee; 2.Identify the use of the fee; and 3.Determine how there is a reasonable relationship between: 1 According to Gov’t Code Section 66001 (a) (2), the use of the fee may be specified in a capital improvement plan, the General Plan, or other public documents that identify the public facilities for which the fee is charged. The findings recommended here identify this impact fee study as the source of that information. City of Encinitas –Impact Fee Study Introduction August 5 2015 Colgan Consulting Corporation Page 6-3 a.The use of the fee and the type of development project on which it is imposed; b.The need for the facility and the type of development project on which the fee is imposed Per Section 66001 (b), at the time when an impact fee is imposed on a specific develop- ment project,the City is also required to make a finding to determine how there is a rea- sonable relationship between: c.The amount of the fee and the facility cost attributable to the development project on which it is imposed. In addition, Section 66006 (f)provides that a local agency, at the time it imposes a fee for public improvements on a specific development project, "... shall identify the public im- provement that the fee will be used to finance." In this case, the fees will be used to f i- nance public facilities, infrastructure, and other development-related capital expendi- tures identified in the 2013 Development Impact Fee Study prepared by Colgan Consult- ing Corporation. Section 66020 (d)(1)requires that the City, at the time it imposes an impact fee provide a written statement of the amount of the fee and written notice of a 90-day period during which the imposition of the fee can be protested. Failure to protest imposition of the fee during that period may deprive the fee payer of the right to subsequent legal challenge. Section 66022 (a)provides a separate procedure for challenging the establishment of an impact fee. Such challenges must be filed within 120 days of enactment. The City should develop procedures for imposing fees that satisfy those requirements for findings and notice. Collection of Fees.Section 66007 (a), provides that a local agency shall not require pay- ment of fees by developers of residential projects prior to the date of final inspection, or issuance of a certificate of occupancy, whichever occurs first. However, "utility service fees" (not defined) may be collected upon application for utility service. In a residential development project of more than one dwelling unit,Section 66007 (a) allows the agency to choose to collect fees either for individual units or for phases upon final inspection, or for the entire project upon final inspection of the first dwelling unit completed. Section 66007 (b) provides two exceptions when the local agency may require the pay- ment of fees from developers of residential projects at an earlier time: (1) when the local agency determines that the fees “will be collected for public improvements or facilities for which an account has been established and funds appropriated and for which the local agency has adopted a proposed construction schedule or plan prior to final inspec- tion or issuance of the certificate of occupancy”or (2) the fees are “to reimburse the local agency for expenditures previously made.” City of Encinitas –Impact Fee Study Introduction August 5 2015 Colgan Consulting Corporation Page 6-4 Statutory restrictions on the time at which fees may be collected do not apply to non- residential development. In cases where the fees are not collected upon issuance of building permits, Sections 66007 (c) (1) and (2) provide that the city may require the property owner to execute a contract to pay the fee, and to record that contract as a lien against the property until the fees are paid. Earmarking and Expenditure of Fee Revenue.Section 66006 (a)mandates that fees be deposited “with other fees for the improvement” in a separate capital facilities account or fund in a manner to avoid any commingling of the fees with other revenues and funds of the local agency,except for temporary investments and expend those fees sole- ly for the purpose for which the fee was collected.Section 66006 (a) also requires that interest earned on the fee revenues be placed in the capital account and used for the same purpose. The language of the law is not clear as to whether depositing fees "with other fees for the improvement" refers to a specific capital improvement or a class of improvements (e.g., street improvements). We are not aware of any city that has interpreted that language to mean that funds must be segregated by individual projects. As a practical matter, that approach is unworkable because it would mean that no pay- as-you-go project could be constructed until all benefiting development had paid the fees. Common practice is to maintain separate funds or accounts for impact fee reve- nues by facility category (i.e., streets, park improvements), but not for individual pro- jects. We recommend that approach. It is important that fee revenue be expended so as to provide a reasonable benefit to the development projects from which the fees are collected. Some fees in this report were calculated without knowing the specific locations of all facilities to be funded by the fees. The City should exercise caution in expending such fees to ensure that facilities are located in such as way as to serve the development projects from which the fees were collected. Impact Fee Exemptions, Reductions, and Waivers. In the event that a development project is found to have no impact on facilities for which impact fees are charged, such project must be exempted from the fees. If a project has characteristics that indicate its impacts on a particular public facility or infrastructure system will be significantly and permanently smaller than the average impact used to calculate impact fees in this study, the fees should be reduced accordin g- ly.Per Section 66001 (b), there must be a reasonable relationship between the amount of the fee and the cost of the public facility attributable to the development on which the fee is imposed. The fee reduction is required if the fee is not proportional to the impact of the development on relevant public facilities. City of Encinitas –Impact Fee Study Introduction August 5 2015 Colgan Consulting Corporation Page 6-5 In some cases, the City may desire to voluntarily waive or reduce impact fees that would otherwise apply to a project, as a way of promoting goals such as affordable housing or economic development. Such a waiver or reduction may not result in increased costs to other development projects, and are allowable only if the City offsets the lost revenue from other fund sources. Credit for Improvements Provided by Developers. If the City requires a developer, as a condition of project approval, to dedicate land or construct facilities or improvements for which impact fees are charged, the impact fee imposed on that development project for that type of facility must be adjusted to reflect a credit for such dedication or con- struction. In the event that a developer voluntarily offers to dedicate land,or construct facilities or improvements in lieu of paying impact fees, the City may accept or reject such offers, and may negotiate the terms under which such an offer would be accepted. Credit for Existing Development.If a project involves replacement, redevelopment or intensification of previously existing development, impact fees should be applied only to the portion of the project which represents a net increase in demand for relevant City facilities, applying the measure of demand used in this study to calculate that particular impact fee. Reporting.Section 66006 (b) (1)requires that once each year, within 180 days of the close of the fiscal year, the local agency must make available to the public the following information for each separate account established to receive impact fee revenues: 1.A brief description of the type of fee in the account or fund; 2.The amount of the fee; 3.The beginning and ending balance of the account or fund; 4.The amount of the fees collected and interest earned; 5.Identification of each public improvement on which fees were expended and the amount of the expenditures on each improvement, including the percent- age of the cost of the public improvement that was funded with fees; 6.Identification of the approximate date by which the construction of a public improvement will commence, if the City determines sufficient funds have been collected to complete financing of an incomplete public improvement; 7.A description of each inter-fund transfer or loan made from the account or fund, including interest rates, repayment dates, and a description of the im- provement on which the transfer or loan will be expended; 8.The amount of any refunds or allocations made pursuant to Section 66001, par- agraphs (e) and (f). City of Encinitas –Impact Fee Study Introduction August 5 2015 Colgan Consulting Corporation Page 6-6 That information must be reviewed by the City Council at its next regularly scheduled public meeting, but not less than 15 days after the statements are made public , per Sec- tion 66006 (b) (2). Refunds. Prior to 1996, a local agency collecting impact fees was required to expend or commit impact fee revenue within five years,or make findings to justify a continued need for the money. Otherwise, those funds had to be refunded. SB 1693, adopted in 1996 as an amendment to the Mitigation Fee Act,changed that requirement in material ways. Now, Section 66001 (d)requires that, for the fifth fiscal year following the first deposit of any impact fee revenue into an account or fund as required by Section 66006 (b), and every five years thereafter, the local agency shall make all of the following findings for any fee revenue that remains unexpended, whether committed or uncommitted: 1.Identify the purpose to which the fee will be put; 2.Demonstrate the reasonable relationship between the fee and the purpose for which it is charged; 3.Identify all sources and amounts of funding anticipated to complete financ- ing of incomplete improvements for which impact fees are to be used; 4.Designate the approximate dates on which the funding necessary to com- plete financing of those improvements will be deposited into the appropri- ate account or fund. Those findings are to be made in conjunction with the annual reports discussed above. If such findings are not made as required by Section 66001, the local agency could be re- quired to refund the moneys in the account or fund, per Section 66001 (d). Once the agency determines that sufficient funds have been collected to complete an in- complete improvement for which impact fee revenue is to be used, it must, within 180 days of that determination, identify an approximate date by which construction of the public improvement will be commenced (Section 66001 (e)). If the agency fails to com- ply with that requirement, it must refund impact fee revenue in the account according to procedures specified in Section 66001 (d). Annual Update of the Capital Improvement Plan. Section 66002 (b)provides that if a local agency adopts a capital improvement plan to identify the use of impact fees, that plan must be adopted and annually updated by a resolution of the governing body at a noticed public hearing. The alternative, per Section 66001 (a) (2)is to identify improve- ments by applicable general or specific plans or in other public documents. In most cases, the CIP identifies projects for a limited number of years and may not in- clude all improvements needed to serve future development covered by the impact fee study.We recommend that this development impact fee study be identified by the City Council as the public document on which the use of the fees is based. City of Encinitas –Impact Fee Study Introduction August 5 2015 Colgan Consulting Corporation Page 6-7 Indexing of Impact Fees.Where impact fees calculated in this report are based on cur- rent costs, those costs should, if possible,be adjusted at least annually to account for in- flation.That adjustment is intended to account for future escalation in costs for land and construction.We recommend the Engineering News Record Building Cost Index as the primary basis for indexing construction costs.Where land costs make up a significant portion of the costs covered by a fee, land costs should be adjusted relative to changes in local land prices. Training and Public Information Effective administration of an impact fee program requires considerable preparation and training. It is important that those responsible for collecting the fees, and for explaining them to the public, understand both the details of the fee program and its supporting rationale. Before fees are imposed, a staff training workshop is highly desirable if more than a handful of employees will be involved in collecting or accounting for fees. It is also useful to pay close attention to handouts that provide information to the public regarding impact fees. Impact fees should be clearly distinguished from other fees, such as user fees for application processing, and the purpose and use of particular impact fees should be made clear. Finally, anyone who is responsible for accounting, capital budgeting, or project man- agement for projects involving impact fees must be fully aware of the restrictions placed on the expenditure of impact fee revenues. The fees recommended in this report are tied to specific improvements and cost estimates. Fees must be expended accordingly and the City must be able to show that funds have been properly expended. Recovery of Administrative and Study Costs Colgan Consulting recommends that the City add an administrative charge to the fees calculated in this report to cover the cost of administration and periodic fee updates. The nature of that administrative charge is discussed in the Executive Summary.