OCTOBER 18, 2005 IN LIEU AFFORDABLE HOUSING FUND PROGRAM OCTOBER 18, 2005 IN LIEU AFFORDABLE HOUSING FUND PROGRAM OCTOBER 18, 2005 IN LIEU AFFORDABLE HOUSING FUND PROGRAM


TO:HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL

FROM:DIRECTOR OF PLANNING, BUILDING AND CODE ENFORCEMENT

DATE:OCTOBER 18, 2005

SUBJECT:IN LIEU AFFORDABLE HOUSING FUND PROGRAM

Staff Coordinator: Gregory Pfost, AICP, Deputy Planning Director

RECOMMENDATION

That the City Council 1) adopt Resolution No. 2005-__, thereby increasing the amount of the affordable housing in-lieu fee to $201,562 plus a 10% administration fee per affordable housing unit, including an annual inflationary adjustment based on the CPI for Los Angeles County; and 2) initiate a Zone Text Amendment specifying a preference for the construction of new affordable housing units over the payment of an in lieu fee, which would include specific criteria to be used to determine when construction is financially infeasible.

EXECUTIVE SUMMARY

At the September 20, 2005 City Council meeting, the Council conceptually approved an increase to the residential and non-residential affordable housing in-lieu fee to $201,562 plus a 10% administrative fee per affordable housing unit required. At the meeting the Council directed Staff to bring back proposed changes to the Affordable Housing Ordinance to clearly specify a preference for the construction of new affordable housing units over the payment of an in lieu fee, including specific criteria to be used to determine when construction is financially infeasible, and for Staff to bring back a recommended inflation factor index that would be the most appropriate for an affordable housing in lieu fee.

Staff is recommending that the Council adopt the attached Resolution approving the fee increase. The resolution allows the fee to be increased based upon the annual change in Consumer Price Index (CPI) for Los Angeles County. As shown in the attached Resolution, Staff is also recommending that the fee be applied to all projects that have not yet obtained entitlements as of the date of adoption of the attached Resolution.

Since changes to the Affordable Housing Ordinance constitute a Zone Text Amendment, which according to the Government Code and the City's Municipal Code (Chapter 17.68) is first required to be reviewed by the Planning Commission through a public hearing before adopted by the City Council, requested changes to the Affordable Housing Ordinance (Chapter 17.11) will be brought back to the Council at a future meeting (estimated December 2005).

DISCUSSION

At the September 20, 2005 City Council meeting, the Council conceptually approved the Staff recommended increase in the affordable housing in-lieu fee to $201,562 plus a 10% administrative fee per affordable housing unit required. At the meeting, the Council directed Staff to:

    1. bring back proposed changes to the Affordable Housing Ordinance to clearly specify a preference for the construction of new affordable housing units over the payment of an in lieu fee, including specific criteria to be used to determine when construction is financially infeasible; and
    2. bring back a recommended inflation factor index that would be the most appropriate for an affordable housing in lieu fee.
    3. Below, Staff has provided a discussion on each of these directives. Additionally, as discussed below, Staff is requesting that the City Council consider:

    4. the applicability of the fee increase to projects that have already received entitlements; and
    5. Sending a letter to the State concerning housing related issues as requested by Mayor Pro-Tem Wolowicz.

1) Proposed Changes to the Affordable Housing Ordinance

At the September 20th meeting, the Council expressed their concern about the City having to take on the burden of expending in-lieu funds, when the developer of such projects should be responsible for that burden as they have the greatest resources for ensuring that the units are provided for. The Council felt that the existing City's Affordable Housing Ordinance (Chapter 17.11) should be strengthened to clearly specify a preference for the construction of new affordable housing units over the payment of an in lieu fee, and include specific criteria to be used to determine when construction is financially infeasible.

Since changes to Chapter 17.11 constitute a Zone Text Amendment (ZTA), and per the Government Code and the City's Municipal Code (Chapter 17.68) ZTA's are required to be reviewed by the Planning Commission through a public hearing and then adopted by the City Council through public hearing, this item will be brought back to the Council at a future meeting once it has been reviewed by the Planning Commission. Staff estimates that the ZTA will be reviewed by the Planning Commission in November 2005 and introduced to the City Council in December 2005.

2) Proposed Inflation Factor Index for the In-lieu Fee

At the September 20th meeting, the Council requested that Staff include a recommended inflation factor index that would be the most appropriate for an affordable housing in lieu fee. Staff recommends that the In-lieu fee be adjusted annually to reflect the annual change in the Consumer Price Index (CPI) as of January of each year for Los Angeles County following a duly noticed public hearing conducted by the City Council. Staff chose to use CPI as it is a measure of the average change over time in the prices paid by consumers for fixed market-based goods and services, including shelter. Staff chose to use the annual change as of January of each year as this timeframe will allow Staff time to include potential changes to the City's In-lieu Fee Fund into the City's budget.

3) Applicability of In-lieu Fee Increase to Existing Entitled Projects

The only project that currently has entitlements, is required to include an affordable housing component per Chapter 17.11, and has not yet provided or reached an agreement with the City pertaining to its affordable housing component, is the Long Point Resort.

Prior to its approval, a discussion of the Long Point Resort's obligations towards providing affordable housing units in compliance with Chapter 17.11 was included in an August 28, 2002 Staff Report to the City Council. In that report, it was estimated that by using the existing non-residential in-lieu fee amount of $13,313 per affordable unit required, the 700 employee resort would require an in-lieu fee amount of $931,910 (700 employees/10 employees per unit required = 70 units required x $13,313 per unit required = $931,910).

Although the approved Long Point Resort project did not include a condition stating the exact in-lieu fee amount to be provided, it did include the following condition, "Prior to the issuance of any Certificate of Occupancy, the applicant shall pay the affordable housing fee required in accordance with the RPVMC." Accordingly, if the $201,562 fee were approved, the Long Point Resort would be required to pay an in-lieu fee of $15,520,274 (70 units required x $201,562 per unit required = $14,109,340 + $1,410,934 administrative fee = $15,520,274). Obviously this would have serious financial repercussions to the project and would be inconsistent with previous direction given by the City regarding the Developer's obligation towards providing affordable housing. Therefore, Staff is recommending that the Council include a provision in the attached fee resolution (as currently shown) applying the new in-lieu fee only to projects that have not yet obtained entitlements that have not expired. This would allow the Long Point Resort to pay their in-lieu fee based upon the current fee structure accounting to $931,910.

4) Sending a Letter to the State Concerning Affordable Housing

During past Council meetings, Mayor Pro Tem Wolowicz had requested that Staff prepare a letter to the State Legislature expressing concerns with current housing legislation and its applicability to communities such as Rancho Palos Verdes. Staff apologizes for not providing this draft letter for Council review at past meetings. For the reasons stated below, Staff does not believe that a letter may be appropriate at this time. However, if the Council feels the need to still send a letter at this time, Staff requests that the Council provide additional direction as to the content of such letter.

Except for residential development projects within redevelopment project areas and residential developers requesting a density bonus, the State of California does not require cities to have an inclusionary housing program that requires developers of residential and non-residential developments to provide for affordable housing units, such as the City's Ordinance (Chapter 17.11). In 1997, under the advice of the City's Housing Consultant, the City of Rancho Palos Verdes included an Affordable Housing section (Chapter 17.11) in the revised Development Code. The City included this section to help address the needs of affordable housing as identified in the City's General Plan Housing Element, which at that time was not certified by the California Department of Housing and Community Development (HCD), and therefore, according to the State, not in compliance with State Housing Law. At that time, the City was also concerned about pending State legislation aimed at cities with non-certified Housing Elements. In 2001, the updated Housing Element was certified by HCD for the first time since the City incorporated. The Housing Element was certified partly for the actions taken by the City Council in adopting and implementing the Affordable Housing section of the Development Code.

Over the past few years, there has continued to be legislation proposed at addressing cities' non-compliance with State Housing Law. Based upon the "Housing Crisis" within the State of California, Staff believes that sooner or later such legislation will be enacted, with the potential of posing penalties on those cities that are not incompliance with State Housing Law. As such, although it is an option, Staff feels that the City's Inclusionary Housing Ordinance serves an important need for the City.

Since inclusionary housing (as adopted through Chapter 17.11) is not mandated by the State, Staff does not feel it would be appropriate for the City to send a letter addressing the impracticality of applying it in communities such as ours. It is important to note that based upon the State's "Housing Crisis", there are many organizations currently working on the best way to address the affordable housing concerns expressed by Mayor Pro Tem Wolowicz, including the League of California Cities and the American Planning Association.

In lieu of writing a letter at this time, what may be more appropriate, as has been done in the past by Staff and the Council, is to send letters of concern during the time when the State and SCAG begin the next Regional Housing Needs Assessment (RHNA) process, or during any time when and if state legislators propose legislation that negatively affects the City in regards to housing requirements. As has been done in the past, Staff will continue to keep the Council aware of the RHNA process and any pending housing legislation with potential negative impacts upon the City.

Nevertheless, if the Council feels that a letter should be written at this time, then Staff respectfully requests that the Council provide more detailed direction as to what exactly such a letter would include and Staff will draft the letter for Council's consideration at their next meeting.

FISCAL IMPACT

Increasing the amount of the In-lieu Fee may increase the In-lieu Fund balance if future residential developers request and are approved by the Council to pay an in-lieu fee. Additionally, it may increase if future non-residential developers pay a fee in -lieu of building housing as part of the project. Furthermore, if the Council elects not to include a provision that would allow existing entitled projects to utilize the prior in-lieu fee, then the in-lieu fee amount expected from the Long Point Resort project would increase significantly.

Respectfully submitted:

Joel Rojas, AICP

Director of Planning, Building

and Code Enforcement

Reviewed,

Les Evans

City Manager

ATTACHMENTS

Resolution No. 2005-__

RESOLUTION NO. 2005-

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES, RESCINDING RESOLUTIONS NOS. 97-48 AND 99-28, AND THEREBY ADOPTING AN INCREASED AFFORDABLE HOUSING IN-LIEU FEE FOR RESIDENTIAL AND NON-RESIDENTIAL DEVELOPMENT PROJECTS, PURSUANT TO SECTIONS 17.11.050 AND 17.11.140 OF THE RANCHO PALOS VERDES MUNICIPAL CODE

WHEREAS, the City of Rancho Palos Verdes General Plan Housing Element includes goals, policies and programs to address the affordable housing needs of the City; and,

WHEREAS, on March 18, 1997 the City Council adopted Ordinance No. 320, which adopted amendments to Titles 16 and 17 of the City of Rancho Palos Verdes Municipal Code, including Section 17.11.050, which allows in-lieu fees to be provided as an alternative to affordable housing units in residential development projects, and Section 17.11.140 which, requires developers of certain commercial developments to pay a residential impact fee to provide for affordable housing in the City; and,

WHEREAS, pursuant to Government Code Section 66018, the specific fees to be charged for services must be adopted by the City Council by Resolution, after providing notice and holding a public hearing; and,

WHEREAS, notice of the public hearing regarding an increase of the aforementioned fees has been provided pursuant to Government Code Section 66016(a) and 6062(a);

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES DOES HEREBY FIND, DETERMINE, AND RESOLVE AS FOLLOWS:

Section 1: Establishment and increase of an in-lieu affordable housing fee is consistent with the City of Rancho Palos Verdes General Plan, as the General Plan Housing Element lists the use of the City's Affordable Housing In-Lieu Fund as one of the funding sources for implementation of various programs within the City’s Housing Element.

Section 2: Establishment of an in-lieu affordable housing fee is consistent with the City of Rancho Palos Verdes Development Code, as Chapter 17.11 states: "In order to provide housing affordable to all segments of the community and preserve and maintain low and moderate income housing opportunities…consistent with the goals of the City's adopted general plan housing element and state law, this chapter further specifies procedures under which applicants for…new residential projects, shall be required to provide for housing affordable to very low, low and moderate income households". Further, Development Code Section 17.11.050 states: "Upon City Council approval, in-lieu fees may be provided as an alternative to units required pursuant to Sections 17.11.040 or 17.11.130 of this chapter. The fee per affordable unit to be provided shall be established by City Council resolution".

Additionally, "In order to mitigate the impact of local employment generation on the local housing market, consistent with the goals of the City’s adopted general plan housing element and statewide housing goals as declared by the California State Legislature, this chapter specifies procedures under which applicants of new nonresidential development or conversion of existing development to a more intense use, shall be required to make provisions for housing affordable to low and very low income households. Further, Development Code Section 17.11.140 states: "With the exception of development exempted pursuant to Section 17.11.140(B) of this chapter, and except where it has been demonstrated not to be feasible pursuant to Section 17.11.080 of this chapter, developers of commercial development shall pay a residential impact fee to be set by resolution of the City Council. The fee shall be adequate to provide one low or very low income affordable housing unit for each ten employees to be generated by the project. The fee per affordable unit to be provided shall be equal to the difference between the median value of market rate housing and the price affordable to low or very low income households".

Section 3: After reviewing and analyzing various options, as presented in the report to the City Council and considering all other relevant evidence and testimony that was presented at the public hearing, the City Council has established a fee in the amount of $201,653, which is to be paid to the City as an alternative to providing an affordable housing unit, as defined and required by Section 17.11.040 of the Rancho Palos Verdes Municipal Code, and to satisfy the requirements of Section 17.11.140C of the Rancho Palos Verdes Municipal Code.

Section 4: To partially offset the City’s cost of managing any affordable housing program that allocates the in-lieu funds so that affordable housing will be provided in the City, any developer of a project who pays the in lieu fee to the City also shall pay an administrative fee equal to 10% of the in-lieu fee. The 10% administrative fee is a continuation of the administrative fee that was adopted previously in 1997 and 1999 for residential projects (Resolution 97-48) and non-residential projects (Resolution 99-28) in-lieu fees.

Section 5: The in-lieu fee and associated administrative fee required by Section 3 and 4 above shall be paid by the developer of the particular project prior to issuance of a certificate of use and occupancy for the first residence within the development of a residential development project, and prior to issuance of a certificate of use and occupancy for a non-residential development project.

Section 6: The amount of the subject in-lieu fee and associated administrative fee that is due and owing to the City for each affected project shall be verified by the Director of Planning, Building and Code Enforcement, and shall be paid to the City Finance Department.

Section 7: To ensure that the in-lieu affordable housing fee is consistent with the potential changes in rental rates and the cost of providing affordable housing in the City, the in-lieu affordable housing fee shall be adjusted annually based upon the annual change in Consumer Price Index (CPI ) as of January of each year for Los Angeles County, following a duly noticed public hearing conducted by the City Council. Additionally, the in-lieu affordable housing fee shall be reviewed every 5 years from the effective date of this Resolution. However, if such 5-year review is not conducted, the failure to conduct the review shall not prevent the City from collecting the fees that are in effect at that time.

Section 8: This fee increase shall not apply to any development project that has obtained final City approval of its project entitlements prior to the effective date of this Resolution. In such cases where the development project has obtained final City approval of its project entitlements prior to the effective date of this Resolution, for non-residential development projects, the fee shall be $13,313 per affordable unit required plus a 10% administrative fee. For residential development projects, the fee shall be $1.00 per square foot of buildable area plus a 10% administrative fee. In such cases, if the development project's entitlements expire, then any future project on the same property shall comply with the increased fee amount as established above in Sections 3 and 4.

Section 9: City Council Resolution Nos. 97-48 and 99-28 shall be rescinded upon the effective date of this Resolution.

Section 10: Effective Date. This Resolution shall go into effect at 12:00 a.m. on December 19, 2005.

PASSED, APPROVED, AND ADOPTED THE 18th DAY OF OCTOBER 2005.

_________________________________

MAYOR

ATTEST:

_________________________

CITY CLERK

STATE OF CALIFORNIA }

COUNTY OF LOS ANGELES } ss

CITY OF RANCHO PALOS VERDES }

I, Carolynn Petru, City Clerk of the City of Rancho Palos Verdes, do hereby certify that the above Resolution No. 2005-__ was duly and regularly passed and adopted by the said City Council at a regular meeting thereof held on October 18, 2005.

_____________________________

CITY CLERK