Agenda - City of Santa Monica

AGENDA CITY OF SANTA MONICA REGULAR CITY COUNCIL MEETING AGENDA CITY HALL COUNCIL CHAMBERS - 1685 MAIN STREET TUESDAY, SEPTEMBER 23, 2014 (CANCELED REGULAR MEETING OF THE REDEVELOPMENT SUCCESSOR AGENCY)

MEETING BEGINS AT 5:30 P.M. CALL TO ORDER PLEDGE OF ALLEGIANCE ROLL CALL (Please note that Agenda Items may be reordered during the Council meeting at the discretion of the City Council.) 1. CLOSED SESSIONS: 1-A:

Public Employee Evaluation: Title of Employee: City Clerk

1-B:

Conference with Labor Negotiator. City Negotiator: Donna Peter, Director of Human Resources Bargaining Units: Municipal Employees Association (MEA) California Teamsters Local 911 (Teamsters) United Transportation Union (UTU)

1-C:

Conference with Legal Counsel – Existing Litigation – Litigation has been initiated formally pursuant to Government Code Section 54956.9 (d)(1): Express Pipe and Supply v. FAME, City of Santa Monica et al., Los Angeles Superior Court Case Number SC 122 897   Conference with Legal Counsel – Existing Litigation – Litigation has been initiated formally pursuant to Government Code Section 54956.9 (d)(1): Redden et al. v. Kokotakis et al., Los Angeles Superior Court Case Number BC 545 191

1-D:

1-E:

Conference with Legal Counsel – Anticipated Litigation – Anticipate significant exposure to litigation pursuant to Government Code Section 54956.9 (d)(2): 1 case 1

September 23, 2014

1-F:

Conference with Legal Counsel – Existing Litigation – Litigation has been initiated formally pursuant to Government Code Section 54956.9(d)(1): Riel v. City of Santa Monica, United States District Court, Central District, Western Division Case Number 2:14-CV-04692

1-G:

Conference with Legal Counsel – Existing Litigation – Litigation has been initiated formally pursuant to Government Code Section 54956.9(d)(1): Craig R. Miller et al. v. City of Santa Monica, Los Angeles Superior Court Case No. BC 492621

The following is the order of business for items to be heard no earlier than 6:30 p.m. 3. CONSENT CALENDAR: (All items will be considered and approved in one motion unless removed by a Councilmember for discussion.) 3-A:

Approval of minutes of September 9, 2014 City Council meeting.

3-B:

Purchase and Delivery of Seven 60’ Low-Floor Articulated Compressed Natural Gas Powered Buses – recommendation to execute an assignment agreement with San Diego Metropolitan Transit System and New Flyer of America, Inc., to release seven 60’ low-floor articulated Compressed Natural Gas (CNG) powered transit buses from SDMTS contract B0570.02-12 and assign them to the City; to negotiate and execute a contract agreement with New Flyer of America, Inc. to furnish and deliver seven 60’ low-floor articulated CNG-powered transit buses in an amount not to exceed $6,825,464, including base bus, delivery, tax, spare parts and contingency; and to issue a Notice to Proceed (NTP) to New Flyer of America, Inc. to furnish and deliver seven 60’ low-floor articulated, CNG-powered transit buses.

3-C:

Second Modification to Agreement with TransFirst Health and Government Services, Inc. for Credit Card Processing Services – recommendation to authorize the City Manager to negotiate and execute a second modification to contract 9082 (CCS) in the amount of $1,000,000 with TransFirst Health and Government Services, Inc. to continue to provide merchant account processor services for credit card payments related to City fees and services, resulting in a five-year amended contract with a new total not to exceed amount of $7,350,000, with future year funding contingent on City Council budget approval.

3-D:

Reject Proposals for the Design, Manufacture, Delivery and Installation of Catch Basin Connector Pipe Screens Project – recommendation to reject all proposals received on July 3, 2014, for professional and general contracting services, to design, manufacture, deliver and install catch basin connector pipe screens; and direct staff to issue a request for bids (RFB) to obtain the best bidder for general contracting services for sizing, manufacture, delivery, and installation of catch basin connector pipe screens at various catch basins throughout the City.

2

September 23, 2014

3-E:

Agreement with HR&A Advisors, Inc. to Provide Consulting Services in Conjunction with the Civic Auditorium Planning Process and the Civic Working Group – recommendation to authorize the City Manager to negotiate and execute a first modification to Professional Services Agreement No. 2659(CCS) with HR&A Adivsors, Inc. to provide consulting services in conjunction with the planning efforts of the Civic Working Group and will include a full team of specialized sub-consultants, in the amount of $377,665, resulting in a two year amended agreement with a total amount not to exceed $452,695; and authorize budget changes.

3-F:

Award and Modify Agreement for Ride Attendant Services for Older Adults and Persons with a Disability – recommendation to award federal New Freedom funds for “Door Through Door Ride Attendant Services” to WISE & Healthy Aging; and authorize the City Manager to negotiate and execute a second modification to Funding Agreement No. 9875 (CCS) in the amount of $146,544 for ride attendant and outreach services, resulting in a three year agreement for a total amount not to exceed $176,676.

3-G:

2014 Edward Byrne Memorial Justice Assistance Grant – recommendation to authorize the City Manager to accept a grant awarded in the amount of $31,585 from the U.S. Department of Justice Edward Byrne Memorial Justice Assistance Grant for interoperable communications equipment; and authorize budget changes.

3-H:

Public Safety Radio System Maintenance Agreement – recommendation to authorize the City Manager to negotiate and execute a sole source Radio Maintenance Agreement with Motorola Solutions, Inc., for maintenance of the public safety radio system in an amount not to exceed $200,000, with four additional one-year renewal options in a cumulative amount of $800,000 for a total amount not to exceed $1,000,000 over a fiveyear period with future year funding contingent on Council budget approval.

3-I:

Expo Compensation for City-owned Property – recommendation to authorize the City Manager to accept compensation of $44,800 from the Exposition Construction Authority (Expo) for the City’s grant of an easement for 160 square feet of City-owned property located at 1800 Stewart associated with the Exposition Light Rail Transit Project; and dedicate a 950-square foot portion of City-owned property located at 502 Colorado Avenue as public right-of-way to address vehicular and pedestrian access.

REGULAR MEETING OF THE REDEVELOPMENT SUCCESSOR AGENCY ROLL CALL 3-J:

Canceled, no business to consider.

ADJOURNMENT

3

September 23, 2014

7. ORDINANCES: (Public comment is permitted on ordinances for introduction and first reading. No public discussion is permitted on ordinances for second reading and adoption.) 7-A:

Introduction and First Reading of an Ordinance Amending the Anti-Smoking Law to Regulate Electronic Smoking Devices The Same As Traditional Cigarettes.

7-B:

Affordable Housing Commercial Linkage Fee and Parks and Recreation Impact Fee – recommendation that Council introduce for first reading ordinances that create an affordable housing commercial linkage fee and a parks and recreation impact fee to facilitate developer contributions to affordable housing and parks and recreation and achieve Council objectives in those areas.

8. STAFF ADMINISTRATIVE ITEMS: 8-A:

Interim Update On Enforcement Of City’s Tenant Harassment Ordinance, Status Of Law, And Proposed Change In Staffing – update on staff’s prior recommendation that the City Council review and comment on the administration and enforcement of the City’s Tenant Harassment Ordinance and proposed future actions to educate the public, improve investigations and increase compliance with the law and direct staff to return with proposals related to additional staffing.

13. COUNCILMEMBER DISCUSSION ITEMS: 13-A: Appointment to one unscheduled vacancy on the Social Services Commission for a term ending on June 30, 2016. (Continued from September 9, 2014) 13-B: Annual Appointments to the following Boards and Commissions: (Continued from September 9, 2014)

Boards/Commission Airport Commission Architectural Review Board Arts Commission Commission for the Senior Community Commission on the Status of Women Convention and Visitors Bureau Disabilities Commission Downtown Santa Monica, Inc. Housing Commission Landmarks Commission Library Board Personnel Board Planning Commission Recreation & Parks Commission Social Services Commission

No. of Appts. 1 2 2 3 2 3 3 3 2 3 2 1 1 2 2 4

Term Ending 6/30/2018 6/30/2018 6/30/2018 6/30/2018 6/30/2018 6/30/2018 6/30/2018 6/30/2018 6/30/2018 6/30/2018 6/30/2018 6/30/2019 6/30/2018 6/30/2018 6/30/2018 September 23, 2014

13-C: Appointment to one unscheduled vacancy on the Arts Commission for a term ending on June 30, 2015. (Continued from September 9, 2014) 13-D: Appointment to one unscheduled vacancy on the Commission for the Senior Community for a term ending on June 30, 2015. (Continued from September 9, 2014) 13-E: Recommendation to accept Pamela Burton and John Ellis’ resignation from the Architectural Review Board and authorize the City Clerk to publish the vacancy. 13-F: Recommendation to accept Brian Chase’s resignation from the Social Services Commission and authorize the City Clerk to publish the vacancy. 14. PUBLIC INPUT: (Public comment is permitted only on items not on the agenda that are within the subject matter jurisdiction of the City. State law prohibits the City Council from taking any action on items not listed on the agenda, including issues raised under this agenda item.) ADJOURNMENT. Any documents produced by the City and distributed to a majority of the City Council regarding any item on this agenda will be made available at the City Clerk's Counter located at City Hall, 1685 Main Street, Santa Monica, and at the City’s public libraries during normal business hours. Documents are also available at. For a free subscription to City Council Agendas sign up at http://www01.smgov.net/win or call the City Clerk’s Office at (310) 458-8211. Any member of the public unable to attend a meeting but wishing to comment on an item(s) listed on the agenda may submit written comments prior to the meeting by mailing them to: City Clerk, 1685 Main Street, Santa Monica, CA 90401. Comments may also be e-mailed to: [email protected] Si desea comunicarse con alguien en español, llame a nuestra oficina al (310) 458-8211 y pida hablar con Esterlina Lugo. City Hall and the Council Chamber is wheelchair accessible. If you require any special disability related accommodations (i.e. sign language interpreting, access to an amplified sound system, etc.), please contact the City Clerk’s Office at (310) 458-8211 or TDD: (310) 917-6626 at least 3 days prior to the scheduled meeting. This agenda is available in alternate format upon request by calling the City Clerk’s Office. Parking is available in front of City Hall and on Olympic Drive and in the Civic Center Parking Structure (validation free).

5

September 23, 2014

(NOT APPROVED) CITY OF SANTA MONICA CITY COUNCIL MINUTES SEPTEMBER 9, 2014 A regular meeting of the Santa Monica City Council was called to order by Mayor Pro Tem O’Day at 5:33 p.m., on Tuesday, September 9, 2014, at City Council Chambers, 1685 Main Street. Roll Call:

Present:

Absent: Also Present:

Mayor Pro Tem Terry O’Day Councilmember Gleam Davis Councilmember Robert T. Holbrook Councilmember Kevin McKeown Councilmember Tony Vazquez (arrived at 5:36 p.m.) Councilmember Ted Winterer Mayor Pam O’Connor City Manager Rod Gould City Attorney Marsha Jones Moutrie City Clerk Sarah P. Gorman

CONVENE/PLEDGE

On order of the Mayor Pro Tem, the City Council convened at 5:33 p.m., with Mayor O’Connor absent. Councilmember Winterer led the assemblage in the Pledge of Allegiance.

CLOSED SESSIONS

There was no one present for public comment on closed sessions. On order of the Mayor Pro Tem, the City Council recessed at 5:36 p.m., to consider closed sessions and returned at 6:50 p.m., with Mayor O’Connor absent, to report the following: 1-A:

Public Employee Evaluation: Title of Employee: City Clerk

The City Attorney advised this matter was not heard. 1-B: Conference with Legal Counsel – Anticipated Litigation: Anticipate significant exposure to litigation pursuant to Government Code Section 54956.9 (d)(2): 1 case – 402 Colorado The City Attorney advised this matter was heard and no reportable action was taken.

1-C: Conference with Legal Counsel – Existing Litigation – Litigation has been initiated formally pursuant to Government Code Section 54956.9 (d)(1): In re Transient Occupancy Tax Cases, California Supreme Court Case Number S218400 The City Attorney advised this matter was heard and no reportable action was taken. 1-D: Conference with Legal Counsel – Potential Litigation – Consideration of whether to initiate litigation pursuant to Government Code Section 54956.9 (d)(4) – 1 case The City Attorney advised this matter was heard and no reportable action was taken. 1-E: Conference with Legal Counsel – Existing Litigation – Litigation has been initiated formally pursuant to Government Code Section 54956.9 (d)(1): Express Pipe and Supply v. City of Santa Monica et al., Los Angeles Superior Court Case Number SC 122 897 The City Attorney advised this matter was heard and no reportable action was taken. 1-F: Conference with Legal Counsel – Existing Litigation – Litigation has been initiated formally pursuant to Government Code Section 54956.9(d)(1): Riel v. City of Santa Monica, United States District Court, Central District, Western Division Case Number 2:14CV-04692 The City Attorney advised this matter was heard and no reportable action was taken. 1-G: Conference with Labor Negotiator. City Negotiator: Donna Peter, Director of Human Resources Bargaining Units: Municipal Employees Association (MEA) California Teamsters Local 911 (Teamsters) United Transportation Union (UTU) The City Attorney advised this matter was heard and no reportable action was taken. REPORT ON MEETING COMPENSATION

Pursuant to State law, City Clerk Sarah Gorman announced that Council will receive no compensation for meeting as the Redevelopment Successor Agency.

CONSENT CALENDAR:

All items were considered and approved in one motion unless removed by a Councilmember for discussion.

JOINT MEETING There being a Consent Calendar each for the City Council and the Redevelopment Successor Agency, the Council convened to a joint meeting with the Redevelopment Successor Agency at 6:50 p.m., and the two Consent Calendars were heard concurrently, with all members present excepting Mayor O’Connor. Members of the public William Harder, Sr. (donated time by William Harder Jr.), Denise Barton and Christel Andersen commented on various Consent Calendar items. At the request of Councilmember Winterer, Item 3-B was removed from the Consent Calendar. On Item 3-A, City Clerk Gorman noted that an amendment was made to page 9 of the minutes, modifying “Virginia Avenue Park” to “Virginia Avenue Complex.” On Item 3- C, Public Words Director Martin Pastucha noted that the correct not to exceed amount for the total contract is $372,957. Motion by Councilmember Vazquez, seconded by Councilmember Davis, to approve the Consent Calendar except for Item 3-B, reading resolutions by title only and waiving further reading thereof. The motion was approved by the following vote: AYES: Agency/Councilmembers McKeown, Winterer, Holbrook, Davis, Vazquez, Chair Pro Tem/Mayor Pro Tem O’Day NOES: None ABSENT: Chair/Mayor O’Connor MINUTES

3-A: The minutes of the August 26, 2014 City Council meeting were approved. Councilmember McKeown moved that Council accept the testimony regarding Item 3-A as responding to Item 14. The motion was accepted by acclamation.

REED AND OZONE PARK IMPROVEMENTS

3-B: Professional Services Agreement for the Reed and Ozone Parks Improvements Project – recommendation that City Manager negotiate and execute professional services Agreement No. 9966 (CCS) with Katharine Spitz Associates, Inc. to provide design services for the Reed Park and Ozone Park Improvements Project, in an amount not to exceed $116,637, and authorize budget changes, was approved.

Councilmember Winterer advised that he removed this item because he was recused from participating on the item due to a potential financial conflict of interest. BUFFER PARK PROJECT

RECOGNIZED OBLIGATION PAYMENT SCHEDULE

REED AND OZONE PARKS Councilmember Winterer was excused at 7:01 p.m. Councilmember Winterer returned to the meeting at 7:02 p.m.

3-C: Professional Services Agreement Modification for the Buffer Park Project – recommendation that the City Manager negotiate and execute a fourth modification to Professional Services Agreement No. 9639 (CCS) with Mia Lehrer and Associates, to provide additional design services for the Buffer Park Project, in the amount of $50,413, resulting in a two-year amended agreement with a new total not to exceed $372,957, and authorize budget changes, was approved. 3-D: Recognized Obligation Payment Schedule – recommendation that Santa Monica Redevelopment Successor Agency (Agency) adopt Resolution No. 20 (SA) entitled: “A RESOLUTION OF THE SANTA MONICA REDEVELOPMENT SUCCESSOR AGENCY APPROVING AND ADOPTING THE RECOGNIZED OBLIGATION PAYMENT SCHEDULE FOR JANUARY 2015 – JUNE 2015,” approving the Agency’s Draft Recognized Obligation Payment Schedule and Resolution No. 21 (SA) entitled: “A RESOLUTION OF THE SANTA MONICA REDEVELOPMENT SUCCESSOR AGENCY APPROVING AND ADOPTING THE ADMINISTRATIVE BUDGET FOR THE PERIOD JANUARY 2015 – JUNE 2015, INCLUSIVE”, was adopted. 3-B: Professional Services Agreement for the Reed and Ozone Parks Improvements Project – recommendation that City Manager negotiate and execute professional services Agreement No. 9966 (CCS) with Katharine Spitz Associates, Inc. to provide design services for the Reed Park and Ozone Park Improvements Project, in an amount not to exceed $116,637, and authorize budget changes, was approved. Councilmember Winterer advised that he removed this item because he was recused from participating on the item due to a potential financial conflict of interest. Motion by Councilmember Davis, seconded by Councilmember Vazquez, to approve the staff recommendation. The motion was approved by the following vote: AYES:

Councilmembers McKeown, Winterer, Holbrook, Davis, Vazquez, Mayor Pro Tem O’Day NOES: None ABSENT: Mayor O’Connor MOTION TO CONTINUE ITEM 13-B

Motion by Councilmember Winterer, seconded by Councilmember McKeown, to continue Item 13-B to the September 23, 2014 Council

meeting. The motion was approved by acclamation. ADMIN. PROCEEDINGS: BERGAMOT STATION ARTS CENTER

8-A: Bergamot Station Arts Center Policy and Process – recommendation that the City Council affirm or identify modifications to the current vision and plan for the Bergamot Station Arts Center; and if Council affirms the current vision, authorize the City Manager to negotiate and execute Exclusive Negotiating Agreement No.9967 (CCS) with 26Street TOD Partners LLC to implement the vision for the City-owned property located at 2525 Michigan Avenue, home to the Bergamot Station Arts Center, was presented. Member of the public, , Carl Hansen, Elsa Longhauser, Tomi Jean Yaghmai, Amy Coane, Kulapet Yantrasast, Nancy Klein, Vicki Baker, Lynda Dorf, Laura Donnelley (donated time by Lisa Gelber), Suzanne Young, Adrienne White, Joshua Alvarenga, Patrick Scott, Lisel Taylor, Phyllis Green, Edie Kahula-Pereria, Susan Morse, Claire Rudd, Gregory Fischer, Zoe Maetsu, Ray Freedman, Matthew Moore, Asuka Hisa, Marquita Flowers, Anabel Young, Elizabeth Perza, Amelia Hammond, Susan Jain, Julia Canahan, Mark Rios, Mark Motonaca, Michele Sartell, Todd Eriandson, Roger Sherman, Tavi Perttula, Melanie Luthern, Mike Myers, Abby Sher (donated time by Sheila Pinkel), Rose Dosi, Scott Ginsburg, Bruria Finkel, James Jacobsen, Beth Burnes, Kate Johnson, Charles Duncombe, Howard Robinson, Lewis Perkins, Emmanuel Serriano, Ed Horowitz spoke generally in favor of the recommended action. Members of the public Gary Schneider, Alfred Ramos, Rob Vounes, Fred Fisher, Joe Coriarty, John Zinner, Pam Posey, Yossi Govrin, William Turner (donated time by Carol Kleinman), Lois Lambert, Laura Korman (donated time by Deborah Korman), Susan Schomburg (donated time by Richard Cohn), Hannah Sloan, Jeffrey Gordon (donated time by Sean Reid), Robert Berman (donated time by Camey McGilvray), Lia Skidmore (donated time by Mike Salazar), Craig Krull, Emmanuel Galvez, Stacy Dagleish, Laurence Eubank, Jane W. Koehler, Mary Marlow(donated time by Mark Kreher), Diana Gordon (donated time by Lorraine Sanchez), Michael Zakian, Larry Skuce, Greg Reitz, Denise Barton, Nancy Morse, Dr. Daniel Galamba, Jeff Worthe (donated time by Henry Ammer), Gabriella Rosco, Walter Meyer, Andre Thibodeaur, Janel Krulle, Christel Andersen, Zoe Muntaner, Carla Danes, Joan Robey, Jeremy Kidd, and Ann Thanwalla, spoke generally in opposition to the recommended action. Considerable discussion ensued on topics including the scaling of the project, a labor peace agreement, retention of the character of Bergamot, use of adjacent land, formation of a working group and retention of the 1.0 FAR. Motion by Councilmember Vazquez, seconded by Councilmember

McKeown, to authorize staff to move forward to negotiate and execute an Exclusive Negotiating Agreement with the Worthe Real Estate Group and to direct staff to propose process for identifying a working group to review the issues, while not affirming the Preferred Concept. Staff direction was provided. The motion was approved by the following vote: AYES:

Councilmembers McKeown, Winterer, Davis, Vazquez Mayor Pro Tem O’Day NOES: Councilmember Holbrook ABSENT: Mayor O’Connor COUNCILMEMBER DISCUSSION ITEMS: SOCIAL SERVICES COMMISSION

13-A: Appointment to one unscheduled vacancy on the Social Services Commission for a term ending on June 30, 2016, was continued to September 23, 2014.

ANNUAL APPOINTMENTS

13-B: Annual Appointments to the following Commissions was continued to September 23, 2014. Boards/Commission

No. Appts. Airport Commission 1 Architectural Review Board 2 Arts Commission 2 Commission for the Senior 3 Community Commission on the Status of 2 Women Convention and Visitors Bureau 3 Disabilities Commission 3 Downtown Santa Monica, Inc. 3 Housing Commission 2 Landmarks Commission 3 Library Board 2 Personnel Board 1 Planning Commission 1 Recreation & Parks 2 Commission Social Services Commission 2 ARTS COMMISSION

Boards

and

of Term Ending 6/30/2018 6/30/2018 6/30/2018 6/30/2018 6/30/2018 6/30/2018 6/30/2018 6/30/2018 6/30/2018 6/30/2018 6/30/2018 6/30/2019 6/30/2018 6/30/2018 6/30/2018

13-C: Appointment to one unscheduled vacancy on the Arts Commission for a term ending on June 30, 2015, was continued to September 23, 2014.

COMMISSION FOR THE SENIOR COMMUNITY

13-D: Appointment to one unscheduled vacancy on the Commission for the Senior Community for a term ending on June 30, 2015, was continued to September 23, 2014.

GRADES OF GREEN TRASH FREE LUNCH PROGRAM

13-E: Request of Mayor Pro Tem O’Day and Councilmember Winterer to allocate $20,000 of Council discretionary funds to Grades of Green Trash Free Lunch program to enroll three new Santa Monica schools in the two-year program, continue three Santa Monica schools into a second year of the program and initiate yearlong leadership program called Youth Corps, where students are empowered by seeing their green ideas turned into action as they create real change on their school campus, was presented. No members of the public spoke on this item. Motion by Councilmember Winterer, seconded by Councilmember Holbrook, to adopt the requested action. The motion was approved by the following vote: AYES:

Councilmembers McKeown, Winterer, Holbrook, Davis, Vazquez, Mayor Pro Tem O’Day NOES: None ABSENT: Mayor O’Connor ARTS COMMISSION

13-F: Recommendation to accept Tanya Brown Merriman’s resignation from the Arts Commission and authorize the City Clerk to publish the vacancy, was presented. No members of the public spoke on this item. Motion by Councilmember Winterer, seconded by Councilmember Davis, to approve the recommendation with regret. The motion was approved by a unanimous voice vote, with all members present excepting Mayor O’Connor.

ARTS COMMISSION

13-G: Recommendation to accept Joan Robey’s resignation from the Arts Commission and authorize the City Clerk to publish the vacancy, was presented. Motion by Councilmember Davis, seconded by Councilmember McKeown, to approve the recommendation with regret. The motion was approved by a unanimous voice vote, with all members present excepting Mayor O’Connor.

MINIMUM WAGE

13-H: Request of Mayor O'Connor and Councilmember Davis that the Council direct staff to follow and analyze Los Angeles Mayor Eric Garcetti's proposal to raise the minimum wage in the City of Los Angeles. If Los Angeles raises its minimum wage, staff is further directed to analyze the effect that raising the minimum wage in Los Angeles will have on the City of Santa Monica and to place a discussion regarding the possibility of raising the minimum wage in Santa Monica on the Council agenda, was presented. Motion by Councilmember Davis, seconded by Councilmember McKeown, to adopt the requested action. The motion was approved by the following vote: The motion was approved by a unanimous voice vote, with all members present excepting Mayor O’Connor.

Councilmember Holbrook was excused at 12:04 a.m. Mayor Pro Tem O’Day was excused at 12:08 a.m.

13-I: Request of Councilmembers Davis and Winterer that, in anticipation of the expiration of the current contract at this site, the City Manager issue an RFP for children's-oriented activities at the ingress/egress of the Main Street Farmers Market that gives preference to partners in our Buy Local initiative and non-animal activities, such as painting, arts and crafts, gardening, cooking, food preparation and decoration. If the bids do not meet with Council's approval, Council may reserve the entrance to the Main Street market for open space or dining, was presented. Councilmember Davis nominated Councilmember Winterer to serve as Acting Chair in Mayor Pro Tem’s absence. The motion was accepted by acclamation. Members of the public Ira Gottlieb, Marcy Winograd (donated time by Liz Ford), Nazila Mahgerefteh, Lucy Mueller, Colin Wadkin, Danielle Charney, Janet McKeithen, Nicole Phillis, Mike Salazar, Zoe Muntaner, Robin Doyno, Jackie Hirtz, Lisa Chess, Judith Powell, Ruth Olafsdottir, Robert Goldman, Maria Loya, Catherine Eldridge, and Ed Hunsaker spoke generally in favor of the recommended action. Members of the public Stacy Dalgleish, Linde Williston, Chuck Nester, James Angel,Tawni Angel (donated time by Jason Nester), Ana Maria Daisy Demars, and a person identifying himself as “People of California” spoke generally in opposition to the recommended action. Considerable discussion ensued on topics including health, pony treatment, Request For Proposal, and operational issues.

Motion by Councilmember Davis, seconded by Councilmember Winterer, to approve the requested action with the modification to permit staff to reconsider the placement of activities in the farmer’s market. Motion to amend by Councilmember Davis to direct staff to either put out a Request For Proposal or create a pilot educational program. The amendment was friendly to the seconder. Motion to amend by Councilmember Davis to additionally direct staff to look for alternative locations for live animal activities. The amendment was friendly to the seconder. The motion was approved by the following vote: AYES: Councilmembers McKeown, Winterer, Davis, Vazquez NOES: None ABSENT: Councilmember Holbrook, Mayor Pro Tem O’Day, Mayor O’Connor PUBLIC INPUT:

Members of the public Denise Barton, Jeff Michaelson, a person identifying himself as “People of California”, Johnathan Foster, Zoe Muntaner, and Miguel Montalvo commented on various local issues.

ADJOURNMENT

On order of the Acting Chair, the City Council meeting was adjourned at 1:47 a.m. ATTEST:

APPROVED:

Sarah P. Gorman City Clerk

Terry O’Day Mayor Pro Tem

City Council Report City Council Meeting: September 23, 2014 Agenda Item: 3-B To:

Mayor and City Council

From:

Edward F. King, Director of Transit Services

Subject:

Purchase and Delivery of Seven 60’ Low-Floor Articulated Compressed Natural Gas Powered Buses

Recommended Action Staff recommends that the City Council authorize the City Manager to: 1. Execute an assignment agreement with San Diego Metropolitan Transit System (SDMTS) and New Flyer of America, Inc., a Canadian-based company, to release seven 60’ low-floor articulated Compressed Natural Gas (CNG) powered transit buses from SDMTS contract B0570.02-12 and assign them to the City. 2. Negotiate and execute a contract agreement with New Flyer of America, Inc. to furnish and deliver seven 60’ low-floor articulated CNG-powered transit buses in an amount not to exceed $6,825,464, including base bus, delivery, tax, spare parts and contingency. 3. Issue a Notice to Proceed (NTP) to New Flyer of America, Inc. to furnish and deliver seven 60’ low-floor articulated, CNG-powered transit buses. Executive Summary Federal purchasing regulations allow transit properties to procure vehicles and equipment by “piggybacking” on another agency’s purchase. Piggybacking is the post-award use of a contractual process that allows an agency that was not involved in the original competitive procurement to purchase the same supplies/equipment through that original process. Santa Monica’s Big Blue Bus (BBB) would piggyback on SDMTS’ contract agreement B0570.02-12 with New Flyer of America, Inc. to expedite the purchasing process and enable BBB to replace seven vehicles that have reached the end of their useful life. The total amount, not to exceed $6,825,464, would be funded using Federal/State grants and County transit sales tax funds. BBB developed a capital improvement program to replace aging buses as they approach the end of their useful service. The Federal Transit Administration (FTA) guidelines set the useful life of a transit vehicle at 12 years. The purchase of the seven 60’ low-floor articulated CNG-powered transit buses would replace seven 40’ buses that have reached their useful life cycle. The new articulated buses are more reliable and efficient. Seating capacity would increase from 40 seats 1

per bus to 58 seats per bus. These buses would assist in reducing overcrowding on high volume routes. Discussion BBB currently operates 24 NABI buses purchased in 2002. FTA guidelines set the useful life of a transit vehicle at 12 years. BBB has a capital improvement program to replace aging buses as they approach the end of their useful service life. Seven of these 24 buses have been identified for replacement. The replacement of these buses with 60’ articulated buses would increase seating capacity by 126 seats, or 18 seats per bus. This would reduce overcrowding and increase rider comfort.

The breakout of the purchase for seven transit vehicles is: 7 CNG 60’ Buses including Delivery, Warranties and

$

5,722,021

Spare Parts

$

250,000

Contingency (5%)

$

286,101

Tax

$

567,342

TOTAL

$

6,825,464

ADA equipment

Vendor Selection In an effort to fast track the procurement process at a minimum of eight months, staff recommends piggybacking as opposed to issuing a Request for Proposal (RFP). Piggybacking is the post-award use of a contractual process that allows an agency that was not involved in an original competitive procurement to purchase the same supplies/equipment through that original process. Under this procedure, the original purchaser may assign the option for additional units to another agency. Comparing this process to developing and issuing an RFP, BBB sought to obtain the most competitive price as a result of volume discounts afforded by vendors of large orders. Staff also contacted transit agencies that had recently purchased buses through these programs and vendors. SDMTS recently purchased 60’ CNG powered buses and had provisions in their contract to release option buses to other agencies. 2

Staff reviewed SDMTS’ 60’ CNG bus procurement to ensure proper requirements and documentation were followed per federal guidelines. Two responses were received: one from New Flyer of America, Inc. and one from NABI, Inc. declining to submit a proposal. SDMTS reviewed the proposal that was submitted by New Flyer, Inc. and a responsive and responsible determination was made. It should be noted that NABI and New Flyer have since merged under the name New Flyer of America, Inc. New Flyer of America, Inc. is the only manufacturer of CNG articulated buses.

SDMTS’ RFP evaluation criteria included, but were not limited to, the following: 1.

Minimum Vehicle Performance Requirements

2.

Projected Operating Cost and Reliability

3.

Technical Support

4.

Warranty and After-Market Parts Support

5.

Proposed Technical Deviations

6.

Maintainability

7.

Manufacturing Process

8.

Project Management

9.

Deviations from Contract Terms and Conditions

10.

Advanced Design Provisions

11.

Emissions

12.

Vehicle Structure

13.

System Safety Provisions

14.

Past Performance, Customer References, and Current Commitments

15.

Qualifications and Financial Stability of the Proposer

BBB staff confirmed that SDMTS’ competitive bid process met the City’s Municipal Code

Section

2.24.080,

Competitive

Bid

Requirements.

All required

federal

certifications have been received by the manufacturer from SDMTS through the competitive bid process. In addition, BBB staff conducted an independent cost estimate using LA County’s regional bus pricing average for 60’ articulated CNG buses and 3

deemed New Flyer’s price to be fair and reasonable. The price per bus is $817,432, including ADA equipment, delivery, and warranties.

New Flyer of America, Inc. is a Canadian-based bus manufacturer with several United States locations including assembly plants in St. Cloud, Minnesota and Crookston, North Dakota and a service center in Ontario, California. New Flyer of America, Inc. has been manufacturing buses for more than 85 years and is the largest producer of transit buses in North America. They are recognized as providing a high quality transit bus to their customers and providing a high level of service after the sale. The base bus would include all major components plus, but not limited to, heating/air conditioning, Advanced Fleet Management System components, the G.E. Mobileview Penta 16 digital security camera system, two ADA wheelchair accessible seating with securement systems, and Recaro seats for operator comfort.

On July 28, 2014, BBB received confirmation that SDMTS would assign seven buses from SDMTS’ contract agreement B0570.02-12 with New Flyer of America, Inc. to the City of Santa Monica at the agreed upon cost and pricing structure of their current contract. Under Municipal Code Section 2.24.080, the SDMTS contract with New Flyer of America, Inc. meets the Code requirements for piggyback purchases. SDMTS’ contract pricing is available to BBB for procurement of 60’ articulated CNG buses specified in the contract document between New Flyer of America, Inc. and SDMTS.

4

Financial Impacts & Budget Actions The contract agreement to be awarded to New Flyer of America Inc. is for an amount not to exceed $6,825,464 (including a 5% Contingency). Funds are available in the FY 2014-15 Capital Improvement Program budget in account C410519.589000.

Prepared by: Getty Modica, Transit Maintenance Officer Approved:

Forwarded to Council:

Edward F. King Director of Transit Services

Rod Gould City Manager

Attachment:

A - BOS Price Cost Analysis

5

ATTACHMENT A

BOS

Bus Operations Subcommittee __________________________ Date:

March 5, 2014

To:

BOS Members

From:

Jane Leonard, BOS Secretary

RE:

FY 2015 Appropriations of FTA Section 5307 – 15% Discretionary Capital and 1% Associated Transit Improvement (ATI) Funds

JL

SECTION 5307 – 15% DISCRETIONARY CAPITAL FUNDS

FY2015 Average Bus Prices As directed by BOS at its January 21, 2014 meeting, a bus price survey was conducted and a draft was presented at the February 18, 2014 meeting for review and further discussion and direction from members. BOS member agencies were requested to submit information on their recent transit vehicle purchases. The following list of average prices by vehicle type has been drawn from the survey results, the CalACT RFP, and/or were adjusted by the Average CPI of 1.5% in the past year, 2013. Proposals for transit vehicle purchase(s) should use these prices: 2015 Average Price Vehicle Type Paratransit Minivan Paratransit Cutaway Van Gasoline Paratransit Cutaway Van CNG 30' Hybrid Gasoline Bus 32' Gasoline Bus 32' CNG Bus 35' CNG Bus 40' CNG Bus 40' LNG Bus 40’ Electric Transit Bus 42' Gas Hybrid Bus 42' Diesel Hybrid Bus 42’ CNG Bus 45' CNG Bus 45' Commuter Bus – Diesel 60' LNG Bus 60' CNG Articulated Bus 60' Gas Hybrid Articulated Bus

(standard inclusions of ADA equipment, delivery and nonADA taxes)

$45,506 $87,102 $118,868 $718,602 $223,464 $451,124 $463,801 $547,163 $490,974 $818,000 $536,966 $627,819 $556,277 $587,085 $649,224 $866,036 $852,424 $961,116

Comments

Vehicle type not surveyed in prior years Does not qualify for funding per AQMD Fleet Rule 1192

Does not qualify for funding per AQMD Fleet Rule 1192

City Council Report City Council Meeting: September 23, 2014 Agenda Item: 3-C To:

Mayor and City Council

From:

Gigi Decavalles-Hughes, Director of Finance

Subject:

Second Modification to Agreement with TransFirst Health Government Services, Inc. for Credit Card Processing Services

and

Recommended Action Staff recommends that the City Council authorize the City Manager to negotiate and execute a second modification to contract 9082 (CCS) in the amount of $1,000,000 with TransFirst Health and Government Services, Inc. (TransFirst), a Kansas-based company, to continue to provide merchant account processor services for credit card payments related to City fees and services. This will result in a five-year amended contract with a new total not to exceed amount of $7,350,000, with future year funding contingent on City Council budget approval. Executive Summary The City requires the services of a merchant account processor in order to accept credit card payments from the public for the majority of City fees and services. As a result of continued increases in use of credit cards as a mode of payment to the City, staff estimates that credit card costs will exceed the current contract authority by approximately $1,000,000 through the end of the contract period. The existing contract with TransFirst expires March 4, 2015. This second modification to the contract will result in a five-year amended contract with a new total not to exceed amount of $7,350,000. Background On January 19, 2010, Council awarded contract no. 9082 (CCS) to TransFirst for credit card processing services related to City fees and services in an amount not to exceed $3,350,000. On March 19, 2013, Council authorized a first modification to the contract in the amount of $3,000,000, which resulted in an amended five-year agreement for a total amount not to exceed $6,350,000. Since the March 2013 estimate, credit card usage has continued to rise with increased use of credit cards for on-street parking meters, as well as the installation of approximately one hundred additional credit card 1

enabled parking meters, the reopening of Parking Structure 6, other new locations accepting credit cards as a mode of payment, and an increase in on-line payment activity.

Discussion In FY 2013-14, the City processed approximately 8.1 million total credit transactions. This translates to approximately $2,200,000 in total credit card processing costs, a 15% increase from FY 2012-13.

The City pays a fee for each credit card transaction

processed. The fees paid for transactions processed by TransFirst are 0.15% of the amount of the transaction plus an interchange fee assessed by the various credit card providers (Visa, Mastercard, Discover). These interchange fees vary based on the type of credit card used and the amount of the transaction, with smaller transactions seeing the highest charges as a percentage of the transaction amount.

Parking-related

transactions, which account for 98% of the total credit card transactions, tend to be small and therefore incur a higher amount of processing fees as a percentage of the actual transaction amount. For example, credit card fees for parking meter transactions average 10% of the amount of the transaction.

The fees for other parking-related

charges average about 5% of the transaction amount. Fees for non parking-related transactions average under 2% of the transaction amount.

In FY 2013-14, parking-related credit card usage increased by 10% over the prior year. Since these are also the most expensive transactions, the increase in credit card fees has continued. Usage for non-parking services increased by 19% over the same time period, particularly from on-line payments. By the end of FY 2013-14, total cumulative credit card expenses had exhausted 90% of the total contract authority.

Staff

recommends increasing the TransFirst contract by an additional $1,000,000 to cover projected credit expenses through March 4, 2015, the expiration date of the current contract. Much of this increase was anticipated in the FY 2014-15 budget for credit card fees, so no budget increase is being requested at this time. Staff will be conducting a request for proposals (RFP) process for credit card processing services later this year and will return to Council with recommendations for a new contract award. 2

Financial Impacts & Budget Actions The contract modification to be awarded to TransFirst Health and Government Services, Inc. is for an amount of $1,000,000. Funds for the modification are available at account 01221.522230 in FY 2014-15. Prepared by: Oscar Santiago, Principal Budget Analyst

Approved:

Forwarded to Council:

Gigi Decavalles-Hughes Director of Finance

Rod Gould City Manager

3

City Council Report City Council Meeting: September 23, 2014 Agenda Item: 3-D To:

Mayor and City Council

From:

Martin Pastucha, Director of Public Works

Subject:

Reject Proposals for the Design, Manufacture, Delivery and Installation of Catch Basin Connector Pipe Screens Project

Recommended Action Staff recommends that the City Council: 1. Reject all proposals received on July 3, 2014, for professional and general contracting services, to design, manufacture, deliver and install catch basin connector pipe screens. 2. Direct staff to issue a request for bids (RFB) to obtain the best bidder for general contracting services for sizing, manufacture, delivery, and installation of catch basin connector pipe screens at various catch basins throughout the City. Executive Summary On July 3, 2014, six proposals were received for the Design, Manufacture, Delivery and Installation of the Catch Basin Connector Pipe Screens Project. The project consists of retrofitting City of Santa Monica and Los Angeles County owned catch basins with connector pipe screens in order to prohibit trash from entering the storm drain system and ultimately discharging to Santa Monica Bay. The public bid was posted as a request for proposal (RFP) for a professional services contract (PSA). After reviewing the six proposals received, staff determined that it would be in the best interest of the City to: 1) reject all proposals, 2) clarify the scope of the project, and 3) issue a new request for bids. Background As part of the effort to meet the debris total maximum daily load (TMDL) requirements developed by the California Regional Water Quality Control Board, Los Angeles Region, the City selected 745 catch basin locations to evaluate for retrofit with a connector pipe screen design that conforms to an approved full capture system. A full capture system as defined by the Regional Water Quality Control Board is described as “any single 1

device or series of devices that traps all particles retained by a 5 millimeter mesh screen and has a design treatment capacity of not less than the peak flow rate resulting from a 1-year, 1-hour storm in the sub-drainage area.” In essence, this device will prevent all particles 5 millimeter or greater from entering the storm drain system. The connector pipe screen installations will comply with this directive. The retrofits would be located in catch basins of the Kenter Canyon, Pico-4th and Pico-Caltrans sub-watersheds. While most of the catch basins are owned by the City, 314 are owned by the Los Angeles County Flood Control District.

Discussion On June 5, 2014 the City issued a Request for Proposal (RFP) for the design, manufacture, delivery and installation of Storm Drain Catch Basin Connector Pipe Screens at various catch basins throughout the City. The RFP was posted on the City’s online bidding site and advertised in the Santa Monica Daily Press in accordance with City Charter and Municipal Code provisions.

On July 3, 2014 staff received six

proposals.

Staff recommends rejecting all six proposals and issuing a new request for bids for a construction contract with an updated scope of work for the following reasons: •

The original scope included the installation of connector pipe screen (CPS) devices in Los Angeles County owned catch basins. This strategy requires the City to pay the County an annual maintenance fee per catch basin or take over maintenance responsibilities of their catch basins. Staff proposes to re-evaluate this strategy and consider other options, such as automatic retractable screens at the curb inlet to the catch basin, to minimize long term maintenance costs.

•

The original scope included the installation of CPS devices in City owned catch basins. This strategy would result in increased maintenance as city forces would have to periodically remove and dispose of debris collected within the catch 2

basins. Staff proposes to analyze the costs and benefits of adding a secondary screen, such as an automatic retractable screen, at the curb inlet to the catch basins to prevent excessive amounts of debris from collecting inside the catch basins and subsequently minimize the additional maintenance required. •

Staff advertised the project as a request for proposal, with the intent of executing a professional services agreement to have the contractor cover design liabilities as faulty design could result in flooding.

However, staff recently obtained

standard design parameters already established by the Los Angeles County Department of Public Works (LACDPW) for the sizing of connector pipe units and determined that these parameters could be used for the sizing of CPS devices in the City’s catch basins. Subsequently, design liabilities are no longer a concern and the scope of work is primarily for sizing and installation/construction. For this scope of work, a professional services agreement would no longer be appropriate and would, instead, require the protections afforded by a public works construction contract.

Rejecting all proposals and issuing a new request for bid would enable staff to evaluate options and finalize a new project scope of work that addresses cost-effectiveness, efficient maintenance and regulatory compliance.

Next Steps Upon approval from Council, the next steps are: •

Notify the six firms of the rejection of proposals – September 2014

•

Issue a new request for bids – October 2014

•

Review bids – November 2014

•

Return to Council with bid award recommendation – January 2015

3

Financial Impacts & Budget Actions There is no immediate fiscal impact or budget action necessary as a result of the recommended action.

Prepared by: Joshua Carvalho, P.E., Civil Engineer Approved:

Forwarded to Council:

Martin Pastucha Director of Public Works

Rod Gould City Manager

4

City Council Report City Council Meeting: September 23, 2014 Agenda Item: 3-E To:

Mayor and City Council

From:

Karen Ginsberg, Community and Cultural Services Director

Subject:

Agreement with HR&A Advisors, Inc. to Provide Consulting Services in Conjunction with the Civic Auditorium Planning Process and the Civic Working Group

Recommended Action Staff recommends that the City Council: 1. Authorize the City Manager to negotiate and execute a first modification to Professional Services Agreement No. 2859 (CCS) with HR&A Advisors, Inc. (HR&A), a New York based company, in the amount of $377,665 to provide consulting services in conjunction with the planning efforts of the Civic Working Group and will include a full team of specialized sub-consultants. This will result in a two year amended agreement with a total amount not to exceed $452,695. 2. Authorize the budget changes as outlined in the Financial Impacts and Budget Actions section of this report. Executive Summary In April 2014 HR&A was selected as the lead consultant for the Civic Auditorium planning process through a competitive process. The City and HR&A entered into a Professional Services Agreement in the amount of $75,030 for completion of the first phase of these planning services through the first community workshop in September, 2014. Staff recommends extending the agreement with HR&A through July 30, 2015 and modifying the scope to allow HR&A to work with the City throughout the planning process including bringing in a full team of specialized sub-consultants to support the Civic Working Group process. This first modification would increase the contract amount by $377,665 resulting in a total agreement amount not to exceed $452,695. Background On June 11, 2013 Council reviewed and commented on recommendations regarding an interim use of the Civic Auditorium, long-term management options, strategies to generate revenue for the renovation, and the concept of the development of a cultural 1

campus with the Civic Auditorium as the hub.

Staff was directed to return with a

recommended structure and criteria for a temporary Civic Working Group (CWG) to provide input on the development of recommendations for the renovation, programming and long-term operation of the Civic.

Council also approved an interim operations

budget and the allocation of funds to implement a community planning process including associated market feasibility and economic analyses of the preferred uses.

At its meeting on August 13, 2013 Council approved the establishment of a nine member Civic Auditorium Working Group (CWG) composed as follows: four members would be individuals who currently serve, or have served, on the City’s Arts, Landmarks, Planning, and Recreation and Parks Commissions; the other five members would be people with broad knowledge of Santa Monica and who possess professional expertise in one or more of a variety of relevant disciplines.

On October 22, 2013, Council appointed nine members to the CWG to one two-year term and tasked them with facilitating community dialogue and developing recommendations regarding the future of the Civic Auditorium as the hub of a mixeduse cultural district.

In June 2014, the City and HR&A entered into a Professional Services Agreement in the amount of $75,030 for completion of the first phase of planning services, through October 31 2014, including the development and production of the first community workshop in September, 2014. The scope of services for Phase I also included review of documents related to the planning history of the Civic Auditorium; preparation of a detailed Project Management Plan for the entire planning process; development of strategies for the three CWG public workshops; a project schedule, management and communication structure and protocols; as well meeting preparation and participation in all CWG regular meetings.

2

Discussion In March 2014, the CWG adopted quarterly goals for the planning process and decided to structure the process around three community workshops. The first workshop will take place on September 27, 2014, from 8:30 am to 1:30 pm at the Civic and will focus on the Civic facility, the site and working assumptions for the planning process. The second workshop will unfold in two parts early in 2015 -- on January 31st and February 1st. Workshop participants will explore alternative uses for the Civic and, using an interactive budgeting tool, they will develop a budget for the uses along with funding sources. This process will address priorities and corresponding tradeoffs. The third community workshop is planned for March 21, 2015 and will focus on developing a set of recommendations to inform the Working Group and the City Council.

The proposed first contract modification would cover the second phase of the work that HR&A has been performing in conjunction with the Civic community planning process. The initial phase will conclude with the completion of the September workshop. The proposed modification would commence in October and include a full team of specialized sub-consultants. The proposed scope of work would include: •

Preparing technical analyses of land uses, site planning, operating models, capital and operating costs and financing options -- the focus of the CWG’s second and third community workshops;

•

Overseeing the work and final deliverables of all HR&A subcontractors;

•

Refining the objectives, programs, and logistics for these workshops in collaboration with City staff and the CWG; and

•

Working with the CWG to formulate specific recommendations to pursue detailed planning, financing, and implementation of a mixed-use cultural district, including preferred uses for the Civic Auditorium and the adjacent parking, for presentation to the City Council by June 2015.

This scope of work would increase the contract amount by $377,665 bringing the total contract amount to $452,695.

3

Contractor/Consultant Selection On December 12, 2013 the City issued a Request for Qualifications (RFQ) for Planning for the Future of the Santa Monica Civic Auditorium in the areas of cultural planning, urban planning, real estate, economic analysis and public/private finance.

The RFQ

was posted on the City’s on-line bidding site in accordance with City Charter and Municipal Code provisions. 875 vendors were notified, 122 vendors downloaded the RFQ. 33 firms responded. The responses were reviewed by a selection panel of staff from Community and Cultural Services, Finance, Housing and Economic Development, Planning and Community Development, and Public Works. Evaluation was based on the following selection criteria, Experience: Relevant and significant experience and expertise in the fields specified; Expertise: Depth and breadth of expertise in the areas of anticipated planning assignments and References. Based on the evaluation process a short list of pre-qualified firms was developed.

Staff recommended HR&A as the best qualified firm to serve as the lead consultant for the Civic Auditorium planning process. HR&A has over three decades of experience working collaboratively with government agencies, private developers, urban designers, engineers and other specialists. The firm provides strategic advisory services for some of the most complex mixed-use projects across North America and abroad. In addition, they have extensive experience with planning for successful and innovative cultural districts, from a comprehensive neighborhood restoration and redevelopment strategy for the Menil museum in Houston, TX, to the Church Street cultural district in Greensboro, N.C., or the district around the Brooklyn Academy of Music in New York City. HR&A also has experience working on planning and development issues in Santa Monica and as such is familiar with the history and context for the Civic Auditorium. HR&A’s scope of services for Phase I included review of documents related to the planning history of the Civic Auditorium; preparation of a detailed Project Management Plan for the entire planning process; development of strategies for the three CWG public workshops; a project schedule, management and communication structure and protocols; as well meeting preparation and participation in all CWG regular meetings. 4

As part of the same RFQ process staff pre-qualified additional firms with diverse expertise in the areas of cultural planning, land use/urban planning, real estate feasibility and analysis, economic analysis, and public/private financing that will be subconsultants. The RFQ covered the entire project, however, due to the timeline of the Civic planning process the City entered into a preliminary contract with HR&A Advisors for an initial phase of the work while a negotiated scope for the entire project was being finalized, including that of the necessary sub-consultants.

Financial Impacts & Budget Actions The professional services agreement modification to be awarded to HR&A is $377,665 for an amended agreement total not to exceed $452,695. The contract will be charged to account 015601.555060. Award of the agreement requires the following budget actions: 1) Release of fund balance from reserve account 1.380231 (Civic Auditorium) of $377,665; and 2) Appropriation of $377,665 to account 015601.555060 (Civic Auditorium – Professional Services). Prepared by: Jessica Cusick, Cultural Affairs Manager Approved:

Forwarded to Council:

Karen Ginsberg, Director Community and Cultural Services

Rod Gould City Manager

5

City Council Report City Council Meeting: September 23, 2014 Agenda Item: 3-F

To:

Mayor and City Council

From:

Karen Ginsberg, Director of Community and Cultural Services

Subject:

Award and Modify Agreement for Ride Attendant Services for Older Adults and Persons with a Disability

Recommended Action Staff recommends that the City Council: 1. Award federal New Freedom funds for “Door Through Door Ride Attendant Services” to WISE & Healthy Aging, a California non-profit corporation; and 2. Authorize the City Manager to negotiate and execute a second modification to Funding Agreement No. 9875 (CCS) in the amount of $146,544 for ride attendant and outreach services, resulting in a three year agreement for a total amount not to exceed $176,676. Executive Summary The City of Santa Monica submitted a successful grant application for Federal Transit Administration (FTA) New Freedom funds available through the Los Angeles County Metropolitan Transportation Authority (LACMTA) in 2012. Effective July 1, 2013 the City entered into a Memorandum of Understanding (MOU) with the LACMTA to provide 36 months of Door Through Door attended ride services for older adults and persons with a disability. In October 2013 the City procured services for Year 1 to be paid for with federal New Freedom funds. Federal funds in the amount of $30,132 were awarded to WISE & Healthy Aging and services began in February 2014 under Funding Agreement No. 9875 (CCS). The current agreement expires on October 31, 2014. In April 2014 the City procured for services for Years 2 and 3 to be paid for with federal new Freedom funds. Staff recommends that Council award additional federal funds in the amount of $146,544 to WISE & Healthy Aging and modify the existing agreement to extend the term through Years 2 and 3 for a total amount of $176,676 in federal New Freedom funds. Background On April 24, 2012, staff presented Council with options for expanding access to transportation for older adults and people with disabilities in Santa Monica. One of 1

those options was the expansion of the pilot Door Through Door attended ride program operated by WISE & Healthy Aging in conjunction with the City’s Dial-A-Ride Program.

Dial-A-Ride is a curb to curb program, but some people with mobility issues need assistance from their door to the curb, and from the curb to the door of their destination. At the April 2012 meeting, Council authorized staff to submit an application to the LACMTA for FTA New Freedom funds to expand the Door Through Door Program. The successful application secured federal funds in the amount of $469,971 over three years to expand available hours for rider assistance, providing 7,800 one-way attended rides.

The City entered into a MOU with LACMTA effective July 1, 2013.

Per federal

procurement guidelines, in October 2013 the City issued a Request for Proposals for ride attendant, outreach services, grant management and oversight for Year 1 only in order to coordinate procurement with the Dial-A-Ride van services. One proposal was received from WISE & Healthy Aging. On February 11, 2014 Council awarded federal New Freedom funds in the amount of $30,132 to implement ride attendant, outreach services, grant management and oversight to WISE & Healthy Aging. Federally-funded services began February 15, 2014 under Funding Agreement No. 9875 (CCS).

Discussion The second contract modification and award of federal funds are necessary to continue providing Door Through Door services for the full three-year term proposed in the application for New Freedom funds outlined in the MOU between the City and the LACMTA. The program is on-track to meet the goal of providing 1,800 rides in Year 1. Federally-funded one-way trips provided from February 2014 through June 2014 total 744 attended rides. In Years 2 and 3, additional 0.5 FTE ride-attendant staffing provided through this contract modification, as well as the procurement of an additional, accessible van funded with New Freedom funds, is projected to provide 3,000 attended rides annually. 2

In the needs assessment process for the City’s 2008 Evaluation of Services for Older Adults in Santa Monica, older adults identified a need for paratransit services enhanced with ride-attendant services. According to the 2010 Census, 20% (17,851) of the City’s total population (89,736) is in the 50 to 64 “boomer” age range and 15% (13,416) is aged 65 and older. Limited mobility and the development of multiple disabilities correlate with increasing age. Sixty-two percent (62%) or 4,228 of our seniors age 75 and older have at least one disability while 41% (2,811) have two disabilities. This is the target population for the services provided through the second contract modification. The added capacity to provide attended rides through the existing Dial-A-Ride program will meet the needs of Santa Monica’s older adults as they age in the community and experience more mobility issues.

Vendor Selection In April 2014, the City published a Request for Proposals (RFP) for ride attendant, outreach services, grant management and oversight as proposed for Years 2 and 3 in the application for New Freedom funds outlined in the MOU between the City and the LACMTA. The RFP was posted the City’s online bidding website, and notices were advertised in the Santa Monica Daily Press in accordance with City Charter and Municipal code provisions.

There were over 400 vendors notified and 13 vendors

downloaded the RFP. One proposal was received by the deadline of May 15, 2014. City staff reviewed the proposal based on price, experience, access, outreach and compliance with federal requirements. Based on these criteria, WISE & Healthy Aging is recommended as the best vendor to provide ride attendant, outreach services, grant management and oversight in accordance with the MOU between the City and the LACMTA. Financial Impacts & Budget Actions The contract modification to be awarded to WISE & Healthy Aging is $146,544, for an amended contract total not to exceed $176,676. Funds in the amount of $42,315 are included in the FY 2014-15 budget in division 262; the contract will be charged to 3

account 202627.563160. Funds in the amount of $104,229 will be requested in the FY 2015-17 biennial budget for account 202627.563160 and are contingent upon Council approval and budget adoption. Prepared by: Stacy Rowe, Senior Program Analyst Approved:

Forwarded to Council:

Karen Ginsberg Director Community and Cultural Services

Rod Gould City Manager

4

City Council Report City Council Meeting: September 23, 2014 Agenda Item: 3-G To:

Mayor and City Council

From:

Jacqueline Seabrooks, Chief of Police

Subject:

2014 Edward Byrne Memorial Justice Assistance Grant

Recommended Action Staff recommends that the City Council: 1. Authorize the City Manager to accept a grant awarded in the amount of $31,585 from the U.S. Department of Justice (DOJ) Edward Byrne Memorial Justice Assistance Grant for interoperable communications equipment. 2. Authorize budget changes as outlined in the Financial Impacts and Budget Actions section of this report. Executive Summary The City of Santa Monica Police Department has been awarded a grant of $31,585 under the 2014 Justice Assistance Grant (JAG) Program, which is administered by the U.S. Department of Justice. Funds must be utilized by the end of the grant period, September 30, 2017. No local match is required. The Police Department’s approved project allows funds to be used on costs associated with interoperable communications equipment. This technology and communications equipment is necessary to support interagency coordination and communication, thereby enhancing public safety services. Background The JAG program is a formula grant that provides critical funding necessary to support a range of program areas including law enforcement; prosecution and courts; prevention and education; corrections and community corrections; drug treatment; planning, evaluation, and technology improvement; and crime victim and witness programs. Formula allocations are awarded by the DOJ to states and then local jurisdictions based on Part I violent crime statistics. The 2014 JAG program provides the City of Santa Monica with a direct allocation determined by population and Part I violent crime statistics. Santa Monica has been the recipient of JAG grant funds 1

annually for the past ten years. Past projects have included funding for overtime for police department participation in anti-crime control operations; funding for certified crime lab services; and funding for DNA forensic testing.

Discussion In 2014 the grant funds would pay for interoperable radio communications equipment. The radio equipment purchased through this grant would meet all of the grant requirements for interoperable communications and would be a critical component for effective interagency deployment during large-scale events and incidents.

To meet the grant conditions, the applicant must provide a 30-day period for public comment on the proposed use of the funds.

The City of Santa Monica met this

condition by issuing a public service announcement from June 7, 2014 through July 6, 2014. The announcement was posted on the Police Department website. No responses were received in opposition to the use of the JAG Program funds.

Financial Impacts & Budget Actions Award of a $31,585 grant from the U.S. Department of Justice for interoperable communications equipment requires the following FY 2014-15 budget changes: 1. Establish revenue budget at account 20304.403636 in the amount of $31,585. 2. Appropriate the following expenditures to reflect receipt of the U.S. Department of Justice Edward Byrne Memorial Justice Assistance Grant: $31,585 at account 20304.578842.

Prepared by: Nicole Dibling-Moore, Senior Administrative Analyst Approved:

Forwarded to Council:

Jacqueline Seabrooks Chief of Police

Rod Gould City Manager 2

City Council Report City Council Meeting: September 23, 2014 Agenda Item: 3-H To:

Mayor and City Council

From:

Jory Wolf, Chief Information Officer

Subject:

Public Safety Radio System Maintenance Agreement

Recommended Action Staff recommends that the City Council authorize the City Manager to negotiate and execute a sole source Radio Maintenance Agreement with Motorola Solutions, Inc., an Illinois-based company, for maintenance of the public safety radio system in an amount not to exceed $200,000, with four additional one-year renewal options in a cumulative amount of $800,000, for a total amount not to exceed $1,000,000 over a five-year period with future year funding contingent on Council budget approval. Executive Summary The Police Department and Fire Department operate public safety radio systems manufactured by Motorola, Solutions, Inc. The systems are interoperable and share infrastructure equipment located at the Public Safety Facility and at remote locations throughout the City. The Police Department utilizes a proprietary form of voice encryption technology developed by Motorola Solutions, Inc. Support for the system and replacement parts and equipment compatible with the system are available only from Motorola Solutions, Inc. Motorola Solutions, Inc. has provided maintenance and support of the public safety radio system since 1998. Staff seeks the authority to enter into a new maintenance agreement with Motorola Solutions, Inc. in an amount not to exceed $1,000,000 over a five-year period. Background On August 14, 2007, Council authorized a contract with Motorola, Inc. in an amount not to exceed $495,660 for maintenance of the public safety radio system for a period of four years, through June 30, 2011.

On July 12, 2011, Council authorized a contract with Motorola, Inc. in an amount not to exceed $369,777 for maintenance of the public safety radio system for a period of four years, through June 30, 2015.

The City opted to not renew the contract for the final

year in order to negotiate new terms and conditions. 1

Discussion Between July 2011 and June 2014, Motorola ceased providing support for approximately 85% of the Police Department’s portable and mobile radio equipment and the microwave equipment that is part of the system’s infrastructure, because it is obsolete. The portable and mobile radio equipment that is no longer supported under the existing contract is either being repaired on a time and materials basis, or is being replaced on an as-needed basis with authorization provided by Council on June 11, 2013. As a result of Motorola no longer maintaining the obsolete equipment, the City opted to not renew the final year. The City has opted to seek a new contract with terms and conditions specific to new equipment utilized by the Police and Fire departments and future equipment that is purchased from Motorola. The new contract would continue to provide comprehensive coverage of supported equipment, more frequent preventative maintenance services, and options to add equipment that may be purchased in the future. The additional costs include coverage for equipment that may be purchased in the future but would only be expended if the equipment is purchased.

Vendor Selection The equipment purchased from Motorola, Inc. utilizes a proprietary form of encryption technology developed by and available only from Motorola, Inc.

This encryption

technology is utilized by the Police Department in order to ensure secure communications. The utilization of this encryption technology on licensed frequencies is authorized by the Federal Communications Commission. Support for the system and replacement equipment and parts are available only from Motorola Solutions, Inc. Therefore, this sole source maintenance agreement is necessary in order to ensure ongoing support for the public safety radio system.

2

Financial Impacts & Budget Actions The Radio System Maintenance Agreement to be awarded to Motorola Solutions, Inc. is $1,000,000. Funds in the amount of $150,000 are included in the FY 2014-15 budget at account 01304.533580 and funds in the amount of $50,000 are available in the FY 2014-15 budget in division 312, and the contract amount will be charged to account 01312.533580. Future year funding is contingent upon Council approval for budget adoption.

Prepared by: Eric Uller, Lead Public Safety Systems Analyst Approved:

Forwarded to Council:

Jory Wolf Chief Information Officer

Rod Gould City Manager

3

City Council Report City Council Meeting: September 23, 2014 Agenda Item: 3-I To:

Mayor and City Council

From:

Andy Agle, Director of Housing and Economic Development

Subject:

Expo Compensation for City-owned property

Recommended Action Staff recommends that the City Council authorize the City Manager to: 1. accept compensation of $44,800 from the Exposition Construction Authority (Expo) for the City’s grant of an easement for 160 square feet of City-owned property located at 1800 Stewart associated with the Exposition Light Rail Transit project; and 2. dedicate a 950-square foot portion of City-owned property located at 502 Colorado Avenue as public right-of-way to address vehicular and pedestrian access. Executive Summary To accommodate the alignment and improvements for the new Exposition Light Rail Transit lines, Expo needs to compensate the City for granting an easement for 160 square feet of City property at 1800 Stewart. Based on comparable land values, City staff and Expo staff have mutually agreed to recommend a total price of $44,800 as compensation. Additionally, the City determined that a dedicated right-turn lane from northbound Fifth Street onto eastbound Colorado Avenue was needed to address traffic circulation in the area. To implement this roadway improvement, the City needs to dedicate a 950-square foot portion of the City-owned property located at 502 Colorado Avenue as public right-of-way. Background Phase 2 of the Exposition Light Rail Transit (EXPO LRT) line will connect Downtown Los Angeles to Downtown Santa Monica with three stations in Santa Monica: Olympic Boulevard/26th Street Station (at Bergamot Arts Center); Colorado Avenue/17th Street Station (at Memorial Park); and the Downtown Terminus Station (at Colorado Avenue/4th Street). Phase 1 of the EXPO LRT line connecting Downtown Los Angeles and Culver City opened in April 2012. Phase 2, extending from Culver City to Santa Monica, is scheduled to open in 2016. 1

The City acquired the nine-acre parcel located at 2525 Michigan Avenue/2715 Exposition Boulevard/1800 Stewart Street from Southern Pacific Transportation Company in 1989. The western portion of the site is approximately 5.4 acres and is leased to Bergamot Station, Ltd.

This entity manages the Bergamot Station Arts

Center, a complex comprised of over 30 art galleries, creative businesses, and a non-profit theater company. The eastern portion of the City-owned property covering 1800 Stewart Street is approximately four acres and is leased to Agensys, Inc. under a long-term ground lease.

The City-owned site at 502 Colorado Avenue consists of 44 low-income apartments. The City leases the property to Community Corporation of Santa Monica (CCSM) under a long-term ground lease in which the City does not receive any lease revenue since it is an affordable housing development.

Discussion In order to implement pedestrian safety measures, a pedestrian arm and emergency swing gate needs to be built at the EXPO Light Rail crossing adjacent to 1800 Stewart Street (Attachment A, Property Impact Statement).

At 502 Colorado Avenue, 950 square feet of land is needed to widen the corner radius and provide a lane for cars turning from northbound Fifth Street to eastbound Colorado Avenue. This modification will help cars avoid running directly into oncoming trains (Attachment B, Property Impact Statement).

In order to accommodate the proposed EXPO LRT improvements, Expo and its design-builder, Skanska-Rados, have determined that an easement on City-owned land is needed to install Expo’s pedestrian safety gate at 1800 Stewart and a dedication of the City’s property as right-of-way is needed to reconfigure the roadway at 502 Colorado.

2

The City and Expo evaluated comparable land values to determine the value of the 1800 Stewart easement. City staff and Expo staff have exchanged valuation analysis, reviewed the data and have mutually agreed on a land value of $280 per square foot which totals $44,800 for the 160-square foot easement area to be recorded on the City property at 1800 Stewart. Since the improvements on Colorado will remain a City right-of-way property, no compensation is being requested from Expo. Financial Impacts & Budget Actions Compensation

from

Accepting compensation

the

Exposition

requires

Construction

increasing

41642.401801 in the amount of $44,800.

the

Authority

revenue

budget

at

$44,800. account

Revenues will be deposited in account

41642.401801. Prepared by: Erika Cavicante, Sr. Development Analyst

Approved:

Forwarded to Council:

Andy Agle, Director Housing and Economic Development

Rod Gould City Manager

Attachments: Attachment A: 1800 Stewart Property Impact Statement Attachment B: 502 Colorado Property Impact Statement

3

is

Attachment A

Attachment B

City Council Report City Council Meeting: September 23, 2014 Agenda Item: 7-A To:

Mayor and City Council

From:

Marsha Jones Moutrie, City Attorney

Subject:

Introduction and First Reading of an Ordinance Amending the AntiSmoking Law to Regulate Electronic Smoking Devices The Same As Traditional Cigarettes

Recommended Action Staff recommends that the City Council introduce for first reading the attached proposed ordinance which would include electronic smoking devices within the definition of “smoke” and “smoking” for purposes of the City’s anti-smoking laws. Executive Summary The proposed ordinance would make two changes to the City’s anti-smoking laws as Council directed. First, it would include electronic smoking devices within the definition of smoking for all places where smoking is regulated in the City, including the new location of vaping lounges. The two existing vaping lounges in Santa Monica would be exempted from this rule. Second, it would add electronic smoking devices to the definition of tobacco products for purposes of the City’s tobacco retailer licensing law. Background On June 24, 2014, Council directed staff to prepare an ordinance to add the use of electronic smoking devices to the definition of smoking under the City’s anti-smoking laws; to add vaping lounges to the places where smoking is prohibited while exempting the two existing vaping lounges in the City; to include electronic smoking devices within the definition of tobacco products under the City’s tobacco retailer licensing laws; and to review other issues related to electronic smoking devices for possible regulation.

Discussion The attached proposed ordinance brings electronic smoking devices within the definition of smoking for purposes of the City’s restrictions on smoking in specified locations. It also adds a new location where smoking – which would now include “vaping” – is 1

prohibited: vaping lounges. As Council requested, the two local businesses which were licensed as vaping lounges as of June 24, 2014, are exempted from the new restriction. These are Fix Vapor at 2909 Main Street and Vapor Delight at 1855 Lincoln Boulevard (Any successor businesses to at those addresses would not be exempted). It was necessary to add vaping lounges as a restricted location because California state law permits smoking in tobacco shops and lounges by exempting them from the statewide ban on smoking at indoor workplaces.

The ordinance also requires that minors be excluded from the two exempted vaping lounges pursuant to Council’s request. Council could also consider a more general rule prohibiting minors from entering e-cigarette shops at all. However, staff recommends against such a rule since various types of retail stores such as chain pharmacies sell electronic smoking devices: it would be difficult to define which businesses would have to exclude minors. If the act of vaping is allowed only in the two grandparented lounges, and they cannot admit minors, as proposed, that may provide sufficient protection to children from the undesired influence of electronic smoking devices.

Other issues under consideration Council directed staff to consider three additional issues in the context of regulating electronic smoking devices: proximity to schools, ventilation, and potential proliferation of vaping lounges.

1)

Proximity to schools

Staff shares Council’s concern over the potential for vaping lounges being located close to schools where children might inappropriately be influenced by them. However, under the proposed ordinance the only two grandparented businesses at which vaping would be allowed are both located a substantial distance from any schools. If Council wanted to prohibit the location of any vaping stores (whether or not the act of vaping is allowed there) within, for example, 500 or 1,000 feet of any school, staff recommends addressing the subject when Council next revisits the zoning code. In any event, such a 2

rule would be problematic since, as noted above, many general retail stores sell electronic smoking devices. Also, there is no current rule in local or state law about the location of stores that sell cigarettes.

2)

Ventilation

The proposed ordinance requires that, in order to allow the use of electronic smoking devices, the two exempted businesses must have “appropriate ventilation so as not to interfere with neighboring occupants.” This standard is intentionally general since to date, the state Occupational Safety and Health Administration has not adopted standards for ventilation to regulate the spread of second-hand smoke. Council could consider removing the ventilation requirement since there is no similar requirement for tobacco lounges under state law; and since studies show that vapor from electronic smoking devices is less harmful than cigarette smoke.

3)

Proliferation of vaping lounges

Council expressed concern about the possible proliferation of vaping lounges in the City, given the trend of greatly increasing popularity of electronic smoking devices. Presumably the prohibition against the use of such devices in all but the two grandparented businesses, would allay this concern. If Council determines in the future that businesses selling electronic smoking devices have proliferated excessively, it could consider a restrictive ordinance at that time, based on the facts.

Alternatives Council could consider various alternatives to the proposed ordinance as described in more detail above.

3

Financial Impacts & Budget Actions The proposed ordinance would restrict the locations where electronic smoking devices can be consumed and it might result in modestly increased enforcement activity in locations where smoking is already prohibited. Adopting this ordinance will result in marginal additional costs for outreach and communication. The City Attorney’s Office, and any other departments conducting outreach, will cover these costs within existing budgets. Prepared by: Adam Radinsky, Head, Consumer Protection Unit

Approved:

Forwarded to Council:

Marsha Jones Moutrie City Attorney

Rod Gould City Manager

Attachment A: Proposed Ordinance

4

ATTACHMENT A City Council Meeting: September 23, 2014

Santa Monica, California

ORDINANCE NUMBER _________ (CCS) (City Council Series)

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA AMENDING CHAPTERS 4.44 AND 4.45 OF THE SANTA MONICA MUNICIPAL CODE ON SMOKING TO REGULATE ELECTRONIC SMOKING DEVICES SIMILARLY TO TOBACCO PRODUCTS

WHEREAS, during the past several years the popularity of electronic smoking devices including electronic cigarettes or “e-cigarettes” in this country has grown exponentially, especially among young people; and WHEREAS, Santa Monica has been at the forefront of adopting and enforcing laws to protect people from involuntary exposure to the dangers of secondhand smoke; and WHEREAS, electronic smoking devices are used in the same manner as conventional tobacco products and operate by heating a liquid chemical solution typically made up of propylene glycol or glycerin, nicotine, and flavored chemicals, with the user exhaling a smoke-like vapor similar in appearance to the exhaled smoke from cigarettes; and WHEREAS, the use of electronic smoking devices in smoke-free locations may increase the social acceptability and appeal of smoking, particularly for youth,

1

undermining the progress that has been made over the years in discouraging smoking; and WHEREAS, e-cigarettes are widely believed to be a “gateway” to cigarette use, especially among youth, since they contribute to nicotine addiction and glamorize smoking; and WHEREAS, nicotine is a highly addictive neurotoxin and is included in the Proposition 65 list of Chemicals Known to the State to Cause Cancer or Reproductive Toxicity and is known to cause birth defects and is particularly dangerous for vulnerable populations including children, pregnant women and people with cardiovascular conditions; and WHEREAS, numerous studies have shown the potential health risks from the vapor of e-cigarettes, including a significant increase in airway resistance among users and cell mutations similar to those caused by cigarette smoke; and WHEREAS, a 2013 study found a total of 22 different elements in the vapors of electronic smoking devices, three of which appear on the U.S. Food and Drug Administration’s (FDA) list of harmful and potentially harmful chemicals; and WHEREAS, the U.S. Centers for Disease Control recently reported a sharp rise in emergency calls to poison centers due to exposure to toxic e-cigarette liquids contemporaneous with the rise in e-cigarette use, with such calls rising from around one per month in 2010, to 215 per month in 2014; and

2

WHEREAS, e-cigarette manufacturers have not submitted clinical studies about the safety or efficacy of the devices to the FDA, so consumers have no way of knowing what types or concentrations of potentially harmful chemicals they are inhaling and exhaling when they consume them or are exposed to them; and WHEREAS, e-cigarettes have not been scientifically proven to be safe for users or persons exposed to their vapor; and WHEREAS, the marketing and advertising of e-cigarettes in television, radio, online and print advertisements is expanding rapidly with no restrictions or regulation, with much of the advertising directed at children; and WHEREAS, e-cigarettes appear visually similar to traditional cigarettes from even a short distance, leading to confusion of the two and giving the visual impression that smoking is again allowed in locations where smoking is banned, thus hampering public and private enforcement of no-smoking laws; and WHEREAS, the scientific evidence to date does not support the claim that ecigarettes are an effective smoking cessation tool, but rather indicates that e-cigarette users actually have significantly lower odds of quitting smoking cigarettes, by more than 30 percent; and WHEREAS, California state law prohibits the sale of electronic smoking devices to minors; and WHEREAS, the City’s tobacco retailer licensing law is intended to aid efforts to prevent illegal sales of tobacco products to minors; and

3

WHEREAS, more than 45 California cities, the cities of New York, Chicago, Washington, D.C. and Boston, and at least five states have regulated e-cigarettes the same as traditional tobacco products; and WHEREAS, in order to protect the health, welfare and safety of its residents and visitors by protecting them from exposure to the byproducts of electronic smoking devices, facilitating uniform enforcement of smoke-free air laws, reducing the potential for re-normalizing smoking where tobacco use is prohibited, and protecting youth from observing behavior that could encourage them to smoke, the City has decided to legislatively prohibit the use of electronic smoking devices in all areas where the smoking of tobacco products is currently prohibited and to include electronic smoking devices in its tobacco retailer licensing law; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES HEREBY ORDAIN AS FOLLOWS:

SECTION 1. Section 4.44.010 of the Santa Monica Municipal Code is hereby amended to read as follows: Section 4.44.010 Definitions. The following words and phrases, as used in this Chapter or in any other applicable law regulating smoking, shall have the following meanings: (a)

Dining Area. A non-residential location where food or

beverages are served by a business or routinely consumed by

4

customers. This includes, but is not limited to, restaurant or bar seating areas and patios. (b)

Electronic smoking device. An electronic or battery-

operated device that delivers vapor for inhalation. The term includes every variation and type of such devices including electronic cigarettes, electronic cigars, electronic cigarillos, electronic pipes, electronic hookahs or any other similar product. (b)(c)

Multi-Unit Common Area. Any indoor or outdoor area at a

multi-unit residential property (which include rental properties and condominiums) that is accessible to and usable by the occupant of more than one unit, including, but not limited to, halls, walkways, lobbies, laundry rooms, common cooking areas, outdoor dining areas, patios, play areas, swimming pools, gardens, and parking lots. The term also includes all outdoor areas that are within twentyfive feet of any door, window or vent at a multi-unit residential property, including private-use balconies, porches, decks, and patios, and regardless of whether or not the included area is located on the same property. (c)(d)

Santa Monica Pier. The Santa Monica Pier, consisting of

both the Newcomb Pier and the Municipal Pier, protruding from the Santa Monica State Beach at the southwesterly terminus of

5

Colorado Avenue, and extending for approximately two thousand one hundred thirty-five feet into the Santa Monica Bay. (d)(e) Service Area. A place where people use or wait for services provided by a private or government entity. This includes, but is not limited to, bus stops, ATM lines, information kiosks and theater lines. (e)(f)

Smoke or Smoking. The carrying or holding of a lighted or

activated pipe, cigar, cigarette, electronic smoking device, or any other lighted or activated smoking product or equipment used to burn any tobacco products, weed, plant, or any other combustible substance. Smoking includes emitting or exhaling the fumes or vapor of any pipe, cigar, cigarette, electronic smoking device, or any other lighted smoking equipment used for burning any tobacco product, weed, plant, or any other combustible substance. SECTION 2. Section 4.44.020 of the Santa Monica Municipal Code is hereby amended to read as follows: Section 4.44.020 Prohibitions. (a)

Smoking in Specific Locations. It is unlawful to smoke in the

following places: (1) Any elevator; (2) Any public park;

6

(3) Any public beach; (4) Anywhere on the Santa Monica Pier; (5) Any outdoor service area; (6)

Inside any public building (as that term is defined in

Government Code Section 7596); (7) Any outdoor dining area; (8) Within twenty feet of the entrance, exit or open window of any building open to the public; (9) The Third Street Promenade; (10) Any farmers’ market; (11) The property of any public library; (12) Any hotel for which an occupancy permit is issued on or after February 9, 2012. (13) Any “vaping lounge” or other business that sells electronic smoking devices; except that electronic smoking devices may be used at the two such businesses that were locally licensed as such lounges in Santa Monica as of June 24, 2014; provided there is appropriate ventilation so as not to interfere with neighboring occupants and provided no minors are allowed in the businesses.

7

(b)

Disposal of Smoking Waste. No person shall dispose of any

cigarette, cigar or tobacco, or any part of a cigarette or cigar, in any place where smoking is prohibited under this Chapter, except in a designated waste disposal container. (c)

Liability of Businesses. No business owner, operator or

manager shall knowingly or intentionally allow smoking in an outdoor dining area that is under his, her or its control. This law does not require the physical ejection of any person from the business or the taking of steps to prevent smoking under circumstances that would involve a significant risk of physical harm. (d)

Posting of Signs. Every business that owns or controls an

outdoor dining area covered under subsection (a)(7) shall post one or more prominent signs in conspicuous locations to apprise users of the prohibition of smoking in that outdoor dining area. Multiple signs must be provided as needed for larger areas to ensure that signs are readily visible to all users of the area. (e) Enforcement and Penalties. (1)

Infraction. A violation of this Section is an infraction and shall

be punished by a fine of one hundred dollars for the first violation; two hundred dollars for a second violation within one year; and five hundred dollars for a third and subsequent violations within one year.

8

(2) Nonexclusive Remedies and Penalties. Punishment under this Section shall not preclude punishment pursuant to Health and Safety Code Section 13002, Penal Code Section 374.4, or any other law proscribing the act of littering. Nothing in this Section shall preclude any person from seeking any other remedies, penalties or procedures provided by law. SECTION 3. Section 4.45.020 of the Santa Monica Municipal Code is hereby amended to read as follows: Section 4.45.020 Definitions. The following words and phrases, as used in this Chapter, shall have the following meanings: (a)

“Electronic smoking device” means an electronic or

battery-operated device that delivers vapor for inhalation. The term includes every variation and type of such devices including electronic cigarettes, electronic cigars, electronic cigarillos, electronic pipes, electronic hookahs or any other similar product. (a)(b) “Person” means any natural person, partnership, cooperative association, corporation, personal representative, receiver, trustee, assignee, or any other legal entity. (b)(c) “Proprietor” means a person with an ownership or managerial interest in a business covered by this Chapter. An ownership

9

interest shall be deemed to exist when a person has a ten percent or greater interest in the stock, assets, or income of a business other than the sole interest of security for debt. A managerial interest shall be deemed to exist when a person can or does have or share ultimate control over the day-to-day operations of a business. (c) (d) “Tobacco product” means any substance containing tobacco leaf, including, but not limited to, cigarettes, cigars, pipe tobacco, hookah tobacco, snuff, chewing tobacco, dipping tobacco or bidis; and any electronic smoking device. (e) “Tobacco retailer” means any person who sells, offers for sale or sample, advertises or otherwise promotes, or does or offers to exchange for any form of consideration, in public view, any tobacco products. SECTION 4. Any provision of the Santa Monica Municipal Code or appendices thereto inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to that extent necessary to effect the provisions of this Ordinance. SECTION 5.

If any section, subsection, sentence, clause, or phrase of this

Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would

10

have passed this Ordinance and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any portion of the ordinance would be subsequently declared invalid or unconstitutional. SECTION 6. The Mayor shall sign and the City Clerk shall attest to the passage of this Ordinance. The City Clerk shall cause the same to be published once in the official newspaper within 15 days after its adoption. effective 30 days from its adoption.

APPROVED AS TO FORM:

_________________________ MARSHA JONES MOUTRIE City Attorney

11

This Ordinance shall become

City Council Report City Council Meeting: September 23, 2014 Agenda Item: 7-B To:

Mayor and City Council

From:

Andy Agle, Director of Housing and Economic Development Karen Ginsberg, Director of Community and Cultural Services

Subject:

Affordable Housing Commercial Linkage Fee and Parks and Recreation Impact Fee

Recommended Action Staff recommends that the City Council introduce for first reading the attached ordinances that create an affordable housing commercial linkage fee and a parks and recreation impact fee to facilitate developer contributions to affordable housing and parks and recreation and achieve Council objectives in those areas. Executive Summary Council has directed staff to further study both an affordable housing commercial linkage fee and a parks and recreation impact fee to mitigate the impacts of development on affordable housing and parks and recreation needs. Consultants conducted nexus analyses to assess how new commercial development increases the need for affordable housing and how new development increases the need for parks and recreation facilities, and determined the maximum allowable fees that could be charged to mitigate those impacts. A financial feasibility analysis was also conducted to evaluate the financial feasibility implications of the two proposed fees on new development. As a result of this analysis, staff recommends that Council introduce for first reading two ordinances that would establish the following fees for new development: • an affordable housing commercial linkage fee ranging from $3.07 to $11.21 per square foot, depending on the type of commercial use, and •

a parks and recreation impact fee of $4,138 to $7,636 per residential unit and $1.27 to $3.11 per square foot of nonresidential development, depending on the land use.

The proposed impact fees are not projected to generate the level of revenues to become primary funding sources for affordable housing or parks and recreation, but would supplement other funding sources. Any development subject to these new fees would not be subject to the existing Parks and Recreation Facilities Tax or the Housing and Parks in-lieu fee currently in the Municipal Code.

1

Background On December 11, 2012, Council provided direction to staff to study an affordable housing commercial linkage fee and, on September 8, 2009, Council directed staff to pursue a parks and recreation impact fee. Affordable Housing Commercial Linkage Fee The Municipal Code currently contains two mechanisms that support affordable housing development. The Affordable Housing Production Program (AHPP) requires developers of market-rate multi-family housing developments to contribute to affordable housing production to help meet the City’s affordable housing needs (SMMC section 9.56, adopted July 21, 1998). The AHPP would not be changed by implementing the new fee, which would only apply to commercial development. The Housing and Parks in-lieu fee (SMMC Section 9.04.10.12, adopted April, 1986) applies to general office development over 15,000 square feet (or 10,000 square foot additions to existing development). The current fee is $5.15 per square foot for the first 15,000 square feet of applicable development and $11.45 per square foot above that. However, the fee does not apply to creative office or other commercial development, and due to its limited applicability, has generated very modest funding for affordable housing. In fact, the Housing and Parks In-Lieu Fee has not generated any revenue at all for housing or parks in four of the last five years. In the one revenue-generating year, $123,785 in revenue was generated and was split between housing and parks. Any new development subject to the new affordable housing commercial linkage fee would not be subject to this existing fee. On February 28, 2012, Council held a study session to consider a variety of issues related to affordable housing in Santa Monica. At the study session, Council indicated its support for preparation of a nexus study to establish a linkage fee for commercial development that would help address the demand it creates for new affordable housing. The nexus study was designed to analyze the relationship between commercial development,

job

creation,

and

the 2

demand

for

affordable

housing.

On December 11, 2012, Council directed staff to prepare an ordinance for Council consideration which would establish an affordable housing linkage fee for commercial development. Parks and Recreation Impact Fee The Municipal Code currently contains two fee mechanisms that support park and recreation improvements. The first is the Parks and Recreation Facilities Tax (SMMC Section 6.80, adopted July 1973). It establishes a Parks and Recreation Facilities Fund to support the acquisition, improvement, and expansion of public park, playground, and recreation facilities.

The tax requires that each new dwelling unit be assessed a

one-time fixed fee of $200, but exempts units built for senior housing and persons with disabilities. The $200 amount of the tax has never been adjusted since adoption of the ordinance. The second mechanism is the Housing and Parks in-lieu fee (SMMC section 9.04.10.12, adopted April, 1986) which, as previously described, applies to general office development over 15,000 square feet or 10,000-square foot additions to existing office development, and has generated extremely modest revenues in recent years. Any new development subject to the new parks and recreation impact fee would not be subject to either the Parks and Recreation Facilities Tax or the Housing and Parks in-lieu fee. On July 1, 1997, Council approved the Parks and Recreation Master Plan. The Open Space Element which was prepared simultaneously was finalized and adopted on July 24, 2001. Since adoption, these documents have guided City investments in a broad range of parks, open space, and recreation facilities. The financing and implementation section of the Master Plan states that “Funding sources should equitably share the burden among all park and recreation facility users. Everyone who lives, works in, and visits the City of Santa Monica benefits from amenities offered by the parks, beaches, and various recreational facilities. 3

Therefore, funding used to implement the Master Plan should come from all users of parks and recreation facilities to the extent possible”. On May 12, 2009 and August 31, 2009, both the Planning Commission and the Recreation and Parks Commission recommended to Council that the fees for parks be re-examined. On September 8, 2009, Council subsequently directed staff to pursue the creation of an open space linkage fee that would consider both residential and commercial development. Discussion Proposed Affordable Housing Commercial Linkage Fee Following Council’s direction on February 28, 2012 to prepare a nexus study to establish a commercial linkage fee to help mitigate the impacts on affordable housing, the Rosenow Spevacek Group, Inc. (RSG), a consulting firm that has prepared similar studies throughout California, completed a nexus study and fee analysis for Santa Monica (Attachment A). The nexus study was designed to analyze the relationship between commercial development, job creation by job type and salary range, and the demand for affordable housing. A linkage fee is designed to assess the financing gap associated with building affordable housing to meet the needs of workers related to specific commercial uses. On December 11, 2012, Council directed staff to prepare an ordinance for Council consideration which would establish an affordable housing linkage fee for commercial development. The proposed affordable housing/commercial linkage fee would help mitigate the impacts of commercial development on affordable housing. The fee would be based on the need for affordable housing development that is generated when various types of commercial developments are built (creative office space, hotel, retail and entertainment, medical, industrial/light manufacturing, institutional, and hospitals). The variety of jobs and varied degrees of compensation for workers in commercial use developments generates housing demands for households at extremely low, very low, low, and moderate incomes. 4

In studying the potential linkage fee, RSG completed the following analysis: 1. Forecasted what percentage of households associated with workers in new commercial developments would seek housing in Santa Monica (roughly one-third). 2. Analyzed the employment density and wage levels associated with various commercial uses to determine the number of lower-income employees per square foot. 3. Estimated the development funding gap associated with the cost of building affordable housing to serve the housing needs of the lower-income worker households (the gap between the cost of developing an affordable housing unit and the projected revenue the unit can generate). 4. Based on the three factors above, calculated a per-square-foot cost that could be paid by new development to provide affordable housing gap financing to serve the housing needs of new, lower-income worker households. The full development cost to address the affordable housing needs of new worker households varies widely based on the type of commercial development, the targeted affordability of the housing, and affordable housing funding mechanisms. The RSG study identified development costs averaging approximately $535 per square foot, depending on these factors. Based on their analysis, RSG determined that the maximum allowable fee that could be charged to cover the full cost of new affordable housing development would range from $61.43 to $224.11 per square foot, depending on the type of commercial use, as outlined in Table 5-2 of the Nexus Study in Attachment A and summarized in Table 1 below.

In setting housing linkage fees, most jurisdictions establish a financially feasible percentage of the full cost to be captured from new development, given comprehensive consideration of other development fees and their collective impact on the financial feasibility of new development. Therefore, staff recommends that the fee be adopted at five percent of the maximum allowable amount. Fee amounts would range from $3.07 to $11.21 per square foot, depending on the type of commercial use, as outlined in Table 5-2 of the Nexus Study in Attachment A and summarized in Table 1 below.

5

The proposed ordinance would provide a credit for existing commercial land uses that are retained or rebuilt as commercial. The proposed fee would exempt places of worship, City projects, day care centers, private K-12 schools, square footage used for outdoor dining in the public right-of-way, and any commercial component of multi-family rental housing developed by nonprofit housing providers that meet certain criteria as defined in the proposed ordinance. Table 1: Proposed Affordable Housing Commercial Linkage Fee LAND USE

MAXIMUM FEE (per sf)

PROPOSED FEE (per sf)

Office

$224.11

$11.21

Hospital

$123.02

$6.15

Hotel

$61.43

$3.07

Retail

$195.07

$9.75

Industrial

$150.52

$7.53

Institutional

$204.55

$10.23

Creative Office

$191.74

$9.59

Medical Office

$137.78

$6.89

Proposed Parks and Recreation Impact Fee Economic & Planning Systems, Inc., a consulting firm that has prepared similar studies throughout California, completed a parks and recreation nexus study and fee analysis for Santa Monica (Attachment B). The study meets the requirements of state law by demonstrating the reasonable relationship between the proposed fees and the projected impacts of development on parks and recreation needs. Existing and forecasted (2010 to 2030) demographic and economic and visitor information was used to define baseline conditions and help determine current service standards. Population growth estimates were based on information provided in the Land Use Circulation Element (LUCE) and its Environmental Impact Report (EIR). Forecasts of future population and employment growth were used as the basis for determining the associated growth in the parks service population (i.e. who will use parks) and the corresponding future need for parks capital projects and facilities to be funded in part by the fee. 6

The study established the current replacement value for all City parks and recreation facilities of $378.6 million and 131.4 acres as a baseline. It set a service standard for use of the parks based upon population and acreage of 1.19 acres per 1,000 people. By examining projected development and determining the associated growth in residents, workers and hotel guests, the study concluded that the projected increase in development would result in a 9.1 percent (10,123 resident equivalents) increase in demand for parks and recreation facilities. Using the factors described above, the study determined that the City would need to increase park land by 12 acres to maintain the existing service standard. The study estimated the costs of new park facilities, including land acquisition at $126 million to meet the demand generated by the new users. In order to distribute the proposed fee in a manner that acknowledges the predominant use of parks by residents, the study developed resident equivalency levels with one non-resident employee having an equivalent demand as 0.2 residents, and one overnight visitor having an equivalent demand to that of 0.15 residents. Using these resident equivalency levels, the study estimated the distribution of the new service population by land use as being 78 percent residential and 22 percent non-residential (office, medical, retail, hotel, and institutional) and set the maximum justifiable fees as shown in Table 2 below. The study also examined comparable fees in other jurisdictions (Table 13, Attachment B) and determined that if Santa Monica were to charge the maximum justifiable fee, the fees would exceed all other jurisdictions that were surveyed. Similar to housing linkage fees, in setting parks linkage fees, most jurisdictions establish a financially feasible percentage of the full cost to be captured from new development considering other development fees that are charged and the overall impact on the financial feasibility of new development. With this in mind, staff recommends that the parks and recreation impact fee be adopted at 25 percent of the maximum justifiable fee, and that any new development subject to the new fee not be subject to either the Parks and Recreation Facilities Tax or the Housing & Parks in-lieu fee. The proposed ordinance includes a credit for existing units and square footage that is removed. It also 7

proposes to exempt places of worship, City projects, day care centers, private K-12 schools, square footage used for outdoor dining in the public right-of-way, affordable housing deed restricted to very low-income and low-income households, and multi-family rental housing developed by nonprofit housing providers that meet certain criteria as defined in the proposed ordinance. Table 2: Proposed Parks and Recreation Impact Fee LAND USE

MAXIMUM FEE

PROPOSED FEE

FEE BASIS

Single Family

$30,543

$7,636

per unit

Multi-Family (Studio/1 Bed)

$16,554

$4,138

per unit

Multi-Family (2 + bed)

$26,661

$6,665

per unit

Office/Creative Office

$9.24

$2.31

per sq. Ft.

Medical Office/Hospital

$5.08

$1.27

per sq. Ft.

Retail

$5.98

$1.49

per sq. Ft.

Hotel

$12.45

$3.11

per sq. Ft.

Industrial

$5.18

$1.30

per sq. Ft.

Residential

Nonresidential

Feasibility Analysis HR&A Advisors, Inc. (HR&A) evaluated fourteen prototype development scenarios, including the Transportation Impact Fee (TIF) and all other applicable City fees, as well as the proposed affordable housing commercial linkage fee and the parks and recreation development impact fee. The study produced findings regarding financial feasibility implications of the two proposed fees for seven developments. The analysis also considered adjustments to the base fees for versions of those same developments that exceed baseline zoning standards to assist the Planning Commission, and eventually the Council, in their consideration of the forthcoming Zoning Ordinance update. The prototypes that were studied initially included one all-commercial (retail/office) prototype in Downtown and two prototypes on Wilshire Boulevard, including one all-commercial (retail/office) and one mixed-use retail/residential (Attachment C). 8

HR&A conducted further analysis in response to the Planning Commission’s request at its May 14, 2014 meeting to examine four additional mixed-use retail/residential prototypes, all on smaller sites (15,000 sq. ft.) and with mostly smaller buildings (27,000 to 40,000 sq. ft.). These included three mixed-use residential/retail prototypes in the Mixed-Use Boulevard Low (Santa Monica Boulevard and Pico) and General Commercial (Lincoln south of I-10) designations, and one Downtown mixed-use retail/residential prototype (see Attachment D). The supplemental analysis also examined the impacts of designating 10 percent of the housing as affordable to very low-income households (at 50 percent of area median income) compared to the initial analysis which assumed five percent of the housing would be designated as affordable to extremely low-income households (30 percent of area median income).

All scenarios studied in both sets of analyses included key

assumptions regarding a fee credit for existing square footage and land value derived through a residual-land-value analysis. The square footage and unit counts were derived in coordination with City planning staff and based on mixed-use developments that have been recently proposed or constructed in Santa Monica. HR&A’s analysis measured the feasibility of the prototypes using the same three thresholds that were used in the analysis for the Transportation Impact Fee: •

Up to a 20 percent change in residual land value after addition of the new fees;

•

minimum 10 percent developer profit margin and up to 15 percent change in profit margin after addition of the new fees; and

•

minimum return on total development cost of 0.75 to 1.00 over the weighted average cap rate for the prototype and a change in return on cost up to 0.02 with the fees.

HR&A determined that the parks and recreation impact fee could be set at 25 percent of the maximum justifiable fee amount without rendering any of the prototypes infeasible, which corresponds with staff’s recommendation. HR&A also determined that the affordable housing linkage fee could be set at 4.5 percent of the maximum justifiable fee amount, which is slightly lower than staff’s recommendation of setting the fee at 9

five percent of the maximum. Staff believes that applying five percent of the maximum fee amount is warranted because the difference on per-square-foot basis is very small and

highly

unlikely

to

cause

a

feasible

project

to

become

infeasible.

The recommendation also reflects the high priority the City places on affordable housing. Proposed Ordinances Notable elements of the affordable housing commercial linkage fee ordinance (Attachment E) include: •

Definitions and Applicability of Fee: Fee applies to developments that have a commercial component and a gross new or additional floor area of 1,000 square feet or more, including changes in use that increase the demand for affordable housing. The ordinance exempts certain nonprofit or governmental uses from the fee, exempts commercial portions of 100 percent affordable-housing developments, and exempts re-occupancy of existing square footage if there is no change in use. The ordinance defines various types of commercial land use.

•

Fee Amounts: Establishes the affordable housing commercial linkage fee on a per-square-foot basis as outlined in Table 1 above for various types of commercial uses. Credit is given for existing commercial uses on the property according to the per-square-foot fee value assigned to the commercial use that existed on the site previously.

•

Timing of fee amount and payment: The fee amount is calculated and must be paid prior to issuance of a building permit.

Notable elements of the parks and recreation development impact fee ordinance (Attachment F) include: •

Definitions and Applicability of Fee: Fee applies to developments that have a gross new or additional floor area of 1,000 square feet or more, including changes in use that increase demands on the parks and recreation system, as well as residential development which adds dwelling units. The ordinance exempts certain nonprofit or governmental uses from the fee and exempts re-occupancy of existing square footage if there is no change in use. The ordinance defines various types of commercial land use.

•

Fee Amounts: Establishes the parks and recreation impact fee on a per-square-foot basis as outlined in Table 2 for single-family and multi-family residential uses and various types of commercial uses. Credit is given for existing uses on the property 10

according to the per-square-foot fee value assigned to the type of use that existed on the site previously. •

Timing of fee amount and payment: The fee amount is calculated and must be paid prior to issuance of a building permit, except for residential uses where state law requires payment before final inspection or the issuance of a certificate of occupancy, whichever comes first.

Notable elements of both fee ordinances (Attachments E and F) include: •

Accounting: The ordinances establish separate reserve accounts for each fee, to be used solely for the purposes of collecting and disbursing each fee.

•

Use of Funds: The ordinances establish the parameters for the disbursement of funds so that affordable housing commercial linkage fee revenues are used solely for the production or preservation of affordable housing and parks and recreation impact fee revenues are used solely for the acquisition and development of open space, parkland, and recreation facilities to meet demand generated by new development per the needs identified in each fee’s Nexus Study.

•

Automatic Annual Fee Adjustment: The fees adjust annually on July 1, beginning in 2015, by a percentage equal to the appropriate Engineering Construction Cost Index.

•

Fee Revision: The Council may periodically revise the amount of the fees or the automatic adjustment by resolution.

•

Implementation Schedule: The fees apply to all development applications meeting the criteria for applicability that are submitted or determined complete after the effective date of the Ordinances.

•

Refund of Payment: If a fee is paid but the corresponding project is not built, an applicant may request a refund, which shall be granted if the fees have not yet been expended.

Legal Considerations The California Legislature passed Assembly Bill (AB) 1600 in 1987, the California Mitigation Fee Act. As defined in AB 1600, a development impact fee is not a tax or special assessment, but rather a fee that is charged by a local agency in connection 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 (Gov. Code § 66000(b) ). The Parks & Recreation Development Impact Fee study and proposed fees comply with the Mitigation Fee Act, including the amendment added by AB 3005 in 2008. If the fees 11

are adopted, annual reports would be submitted to Council providing specific information about the receipt and use of such fees as required by the Mitigation Fee Act. California courts have not required affordable housing in-lieu fees to meet the legal requirements of the California Mitigation Fee Act. For example, in Home Builders Ass'n v. City of Napa (2001) 90 Cal.App.4th 188,Action Apartment Ass’n v. City of Santa Monica (2008) 166 Cal.App.4th 456, the appellate court identified the requirement to provide affordable housing as traditional land use legislation. In Building Industry Ass'n of Cent. California v. City of Patterson (2009) 171 Cal.App.4th 886, however, a different court of appeal found that while the in lieu affordable housing fee under review in that case was not subject to the Mitigation Fee Act, it was subject to the reasonable relationship test set forth in San Remo Hotel L.P. v. City And County of San Francisco (2002) 27 Cal.4th 643, 670 ("San Remo"). Therefore, for the purposes of this linkage fee, the Commercial Nexus Study & Linkage Fee analysis has been undertaken to clearly demonstrate the relationship of the fee to its proposed expenditures.

Commission Action On November 20, 2012, a presentation on the affordable housing commercial linkage fee nexus study was made to the Housing Commission. The Housing Commission unanimously adopted a motion supporting the creation of the fee. The Housing Commission recommended that 18 to 20 percent of the maximum justifiable fee be adopted. Staff recommends adopting the fee at five percent of the maximum justifiable amount due to more recent information gleaned through the feasibility analysis outlined above. Staff has kept the Housing Commission updated on the results of the feasibility analysis and on staff’s recommendation to Council. The Commission is supportive of establishing the fee at the highest feasible level.

12

On July 18, 2013 a presentation on the nexus study was made to the Recreation and Parks Commission.

The Recreation and Parks Commission adopted a motion in

support of staff’s recommended fee levels. On May 14, 2014 and August 13, 2014, presentations on proposed fees were made to the Planning Commission in the context of the Commission’s discussion of the community benefits portion of the Zoning Ordinance update. At the May 14, 2014 meeting, the Planning Commission requested analysis of additional prototypes to study some smaller prototypes, a wider variety of prototypes, and prototypes more comparable to recently approved and pending projects. At the second meeting, when presented with additional analysis indicating that fees are not anticipated to render any potential developments infeasible, including the additional prototypes analyzed, the Planning Commission recommended moving forward with the fee structures proposed for the affordable housing commercial linkage fee and parks and recreation impact fee. Recommendations regarding the community benefits system and tiered fee levels will be forthcoming as part of the Zoning Ordinance update. Alternatives 1. The City Council could modify the affordable housing commercial linkage fee or the parks and recreation impact fee in order to charge different fees. 2. The City Council could choose to not adopt an affordable housing commercial linkage fee nor a parks and recreation impact fee. If Council pursues Alternative 1 by charging lower fees, fewer affordable housing developments and parks and recreation facilities would be built and fewer of the impacts of new development would be mitigated. The Council could choose to charge higher fees, though not more than the maximum legally justifiable amount identified in the nexus studies. If Council pursues Alternative 2, affordable housing and parks and recreation impacts from new development would not be addressed, jeopardizing City goals in these areas.

13

Environmental Analysis The proposed ordinance is not a project pursuant to CEQA Guideline section 15378(b)(4), which excludes from the definition of Project "the creation of government funding mechanisms or other government fiscal activities, which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment." Alternatively, the proposed ordinance is exempt from the provisions of the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3) in that it can been seen with certainty that the proposed ordinance does not have the potential to significantly impact the environment, since the proposed ordinance amendment is a fee that will be levied on projects that will be evaluated in compliance with CEQA on their own merits. Public Outreach Both the affordable housing commercial linkage fee and the parks and recreation impact fee have been discussed in concept for many years. Discussion of the fees has recently been included in community outreach as part of the community benefits discussion occurring in regards to the Zoning Ordinance update. In general, members of the community have been supportive of the adoption of such fees. Additionally, staff has communicated directly with members of the business community and Downtown Santa Monica, Inc. regarding the proposed fees. Notice of the proposed fees was published in the Santa Monica Daily Press on September 12, 2014 and September 18, 2014. Copies of the nexus studies and financial feasibility analysis were made available at that time at the City Clerk’s Office and on the City’s web site. Next Steps If adopted on second reading, the ordinances would go into effect 60 days thereafter, giving staff sufficient time to make administrative changes necessary to implement the fees.

14

Financial Impacts & Budget Actions There is no immediate fiscal impact or budget action necessary as a result of the recommended action.

If approved, collection of the fees would commence in

FY 2014-15. Revenues would be received at accounts 04264.408690 (AFFORDABLE HOUSING COMMERCIAL FEES) and 04501.408710 (PARKS AND REC IMPACT FEES). Revenues will depend on the volume and nature of new development, and revenue projections would be included in future year budgets as warranted. Funding for park and recreation projects and for affordable housing development loans would be included in future-year budgets. Prepared by:

Sarah Johnson, Principal Administrative Analyst Melissa Spagnuolo, Senior Administrative Analyst

Approved:

Forwarded to Council:

Andy Agle, Director Housing and Economic Development

Rod Gould City Manager

Karen Ginsberg, Director Community and Cultural Services

Attachments: A. Commercial (Non-Residential) Nexus Study and Linkage Fee Analysis B. Parks and Recreation Development Impact Fee Study C. HR&A Memo Estimating Financial Feasibility of Tier 2 vs. Tier 1 Development Fees D. HR&A Memo – Proposed New Development Fees Analysis Update E. Proposed Affordable Housing Commercial Linkage Fee Ordinance F. Proposed Parks and Recreation Impact Fee Ordinance

15

Attachment A

Commercial (Non-Residential) Nexus Study & Linkage Fee Analysis

CITY OF SANTA MONICA

July 25, 2013

ROSENOW SPEVACEK GROUP, INC.

1

ROSENOW SPEVACEK GROUP, INC.

2

COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

TABLE OF CONTENTS INTRODUCTION ................................................................................................................................1 Background ....................................................................................................................................2 Affordability Levels ..........................................................................................................................3 Summary of Findings ......................................................................................................................4 Report Organization ........................................................................................................................6 Data Sources ..................................................................................................................................6 SECTION 1: NEX US CONCEPT AND ASS UMPTIONS ........................................................................7 Legal Background ...........................................................................................................................7 Non-Residential Nexus Study Methodology ......................................................................................8 The Relationship Between Job Growth and Population Growth ........................................................ 11 The Relationship Between Non-Residential Development and Job Growt h ....................................... 11 Housing Needs of New Population vs. Existing Housing Need ......................................................... 12 Substitution Factor ........................................................................................................................ 12 Employment Multipliers ................................................................................................................. 12 Discount for Changing Industries ................................................................................................... 13 SECTION 2: LOCAL ECONOMI C INPUTS AND ADJUSTMENTS ...................................................... 14 Building P rototypes ....................................................................................................................... 14 Employee Density ......................................................................................................................... 14 Occupational Distribution by Building Prototype .............................................................................. 16 Employee Compens ation............................................................................................................... 18 Employment Patterns (Industry Change Factor) .............................................................................. 18 Unemployment ............................................................................................................................. 19 Commute Patterns ........................................................................................................................ 20 SECTION 3: MICRO ECONOMIC JOBS HOUSI NG ANALYSIS ......................................................... 21 Approach...................................................................................................................................... 21 Step 1:

Establish Building Prototypes ...................................................................................... 21

Step 2:

Estimate Total New Employees ................................................................................... 21

Step 3:

Adjustments for Market Conditions ............................................................................... 22

Step 4:

Adjustment from Employees to Employee Households .................................................. 23

Step 5:

Occupational Distribution of Employees ....................................................................... 23

Step 6:

Estimate Distribution of Employee Wages .................................................................... 26

Step 7:

Estimate Household Income Category Distribution ........................................................ 26

Step 8:

Estimate New Hous eholds that Meet Income Criteria .................................................... 27

Step 9:

Calculat e Worker Hous eholds Income Categories and Adjust for Commute Patterns ...... 27

Summary ...................................................................................................................................... 28

3

i

COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica SECTION 4: AFFORDABLE HOUSING COSTS ................................................................................ 30 Introduction .................................................................................................................................. 30 Affordable Housing Cost ................................................................................................................ 30 Rent al Apartments Valuation ........................................................................................................ 32 Affordable Housing Development Funding Gap............................................................................... 32 SECTION 5: FEE ANALYSIS AND RECOMMENDATIONS ................................................................ 35 Approach and Methodology ........................................................................................................... 35 Rent al Apartment Projects ............................................................................................................. 36 Mitigated Development Funding Gap.............................................................................................. 36 Impact Linkage Fee Calculation ..................................................................................................... 37 Impact Linkage Fee Consideration ................................................................................................. 37 ATTACHMENTS .............................................................................................................................. 40 Attachment 1: Occupational Categories and Wage Data .................................................................. 41 Attachment 2: Affordable Housing P roduct Type Pro Formas ........................................................... 52 Attachment 3: Linkage Fee Alternatives .......................................................................................... 62

4

ii

COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica INTRODUCTION This Commercial (Non-Residential) Nexus Study (“Nexus Study”) and Linkage Fee Analysis (collectively referred to as the “Report”) has been prepared by the Rosenow Spevacek Group (“RSG”) for the City of Santa Monica (“City”) to analyze the affordable housing needs created by the development of nonresidential buildings in the City. The primary goal of this Nexus Study is to demonstrate the “reasonable relationship” between the purpose of the affordable housing fee, the fee amount, the revenue generated, and the impacts of 1 commercial development that the proposed use of that revenue is intended to address. The Nexus Study identifies the linkages between new non-residential land uses, the net number of new employees and employee households generated by businesses occupying these land use buildings, and the need for affordable housing units for these new employees. The Linkage Fee Analysis quantifies the cost mitigation associated with developing affordable housing units based on the identified need resulting from employees generated by new commercial development. Factors examined by the Nexus Study include the variety of jobs and varied degrees of compensation for workers in new non-residential buildings which in turn creates a demand for housing at all affordability levels. The Nexus Study quantifies the housing needs of new employees by income category within a variety of land use categories. The Nexus Study examines eight types of non-residential land uses, as identified in the City’s 2010 Land Use and Circulation Element (LUCE) that are anticipated to be built over the next twenty years; they include office, hospital, hotel, retail, industrial, institutional, creative, and medical office. Each land use type results in a different mix of employment and income affordability levels due to the density of jobs, the type of jobs, and the corresponding employee compensation. The Nexus Study identifies the net number of new employee households living in the City, by affordability level, generated by the development of each of the land use types cited above. The resulting number of net new households indicates the number of housing units needed by income category. The affordable housing impact linkage fee is then ascertained based upon the cost to mitigate the affordable housing need generated by such development based on the development funding gaps associated with producing affordable housing units for each income category. This Nexus Study and Linkage Fee Analysis has been prepared to satisfy the requirements of reasonable relationship test set forth in San Remo, as well as to inform the decision makers as to the impacts associated with new non-residential development.

1

California courts have not required affordable housing in-lieu fees to meet the legal requirements of the California Mitigation Fee Act (AB 1600, 1987, Gov. Code § 66000 et seq.). For example, in Action Apartment Ass’n v. City of Santa Monica (2008) 166 Cal.App.4th 456, the appellate court identified the requirement to provide affordable housing as traditional land use legislation. In Building Industry Ass'n of Cent. California v. City of Patterson (2009) 171 Cal.App.4th 886, however, a different court of appeal found that while the in lieu affordable housing fee under review in that case was not subject to the Mitigation Fee Act, it was subject to the reasonable relationship test set forth in San Remo Hotel L.P. v. City And County of San Francisco (2002) 27 Cal.4th 643, 670 ("San Remo"). Therefore, for the purposes of this linkage fee, this analysis has been provided to clearly demonstrate the relationship of the fee to its proposed expenditures.

1

5

COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Background The City Santa Monica adopted an Affordable Housing Production Program (AHPP) Ordinance to assist in the production of affordable housing units in the community. The AHPP is applicable to new market rate multifamily residential units constructed in the City. For program consistency purposes, the requirements and provisions under the AHPP, as amended June 11, 2013, are used in determining the income groups incorporated in this Study for purposes of identifying new employment segmented by income category, calculating affordable housing costs and the corresponding supportable linkage fee amounts. The following is a summary of the requirements and provisions set forth in the AHPP Ordinance. •

The AHPP is applicable Citywide to each new multifamily project involving the construction of two or more market rate units. Market rate projects include but are not limited to apartments, condominiums, townhouses or the multifamily residential component of a mixed use project.

•

Projects exempt from the AHPP include designated landmark buildings or contributing structures to an adopted Historic District retained or preserved on-site as part of a multifamily project, multifamily rental housing projects to be developed by a nonprofit housing provider receiving financial assistance through a City housing trust fund program, non-residential projects, and projects for which a development application was determined complete prior to May 25, 2006.

•

Multifamily requirement a. b.

ownership projects of four or more units may satisfy the affordable housing by one of the following options: Providing the affordable units on-site; or Providing the affordable units off-site.

In addition to the options established above, all other multifamily projects may also choose one of the following options: a. Paying an affordable housing fee; or b. Acquiring land for affordable housing. •

For ownership projects of not more than fifteen units in multifamily residential districts at least: 1) twenty percent (20%) of the total units must be designated as ownership units for moderateincome households; or 2) twenty percent (20%) of the total units must be designated as rental units for low-income households.

•

For ownership projects of sixteen or more units in multifamily residential districts at least: 1) twenty-five percent (25%) of the total units must be designated for moderate-income households as ownership units; or 2) twenty-five percent (25%) of the total units must be designated for lowincome households as rental units.

•

For all other multifamily projects that elect to develop the affordable units on-site at least: 1) five percent (5%) of the total units for extremely low-income households; 2) ten percent (10%) of the total units for very low-income households; 3) twenty percent (20%) for low-income households; or 4) one hundred percent (100%) for the total units for moderate-income households.

2

6

COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica •

The AHPP requires the deposit of any payment made pursuant to the AHPP to an affordable housing reserve account separate from the General Fund to be used only for the development of very low- and low-income housing, administrative costs related to the production of housing, and monitoring and evaluation of the Affordable Housing Production Program.

Affordability Levels The City’s Land Use and Circulation Element of the General Plan provides data regarding the need for affordable housing in the City. The City’s affordable housing needs are largely defined by the Regional Housing Needs Assessment (RHNA) promulgated by the Southern California Association of Governments (SCAG), which allocates the regional housing demand, by income category, to local jurisdictions as targets to be addressed in their respective Housing Elements. Santa Monica’s fifth cycle RHNA for the period January 2014 through October 2021 reflects a total need for 1,674 new residential housing units, which include an allocation of 25.5% for very low income households, 16.1% for low income households, 17.0% for moderate income households, and 41.5% for above moderate income households. The maximum income level for lower and moderate income households, as defined in the California Health and Safety Code and as promulgated by the Housing and Community Development Department (“HCD”) is 120% of the area median income (“AMI”). The LUCE showed that 60% of the households in the City make less then 120% AMI, and identified that 72% of the City’s households are renters, which is the highest proportion of renter households among all Los Angeles County cities. Moreover, the LUCE indicates that 35% of renter households of the very low2 and low-income households within the City are overpaying for housing . The federal Housing and Urban Development Department’s (“HUD”) threshold for overpayment is when households spend more than 30% of their gross monthly income on rent or mortgage payments. Overpayment is a critical issue, because it leaves households with insufficient funds for other necessities, such as food, health care, clothing, and utilities. Extremely low-, very low- and low-income households are not the only households in the City who are affected by the City’s high housing costs. The City’s affordable housing needs can be demonstrated through review of the following information. The 2012 U.S. Census American Community Survey data placed the median household income in Santa Monica at $68,842 ($5,737 per month). Based on Apartments.com and Craig’s List data for August 2012 of new and existing apartments in the City, the median monthly rent for a one-bedroom apartment is $2,339, increasing to $3,546 for a two-bedroom apartment. This data indicates that a household would need to make approximately $7,796 per month to afford a median priced one-bedroom apartment within the City, or $11,820 per month to afford a median priced two-bedroom apartment. These rents represent approximately 136% and 206% of the $68,842 ($5,737 per month) median income respectively. According to the LA Times/DataQuick data, in August 2012 the median price for ownership condominiums in the City ranged between $470,000 and $775,000, with an average of $668,200. Based upon these prices, the estimated monthly housing cost, including principal and interest (based upon 80 percent financing loan), taxes, insurance, and HOA fees would be about $4,435. Therefore, in order to 2

As defined by State HCD, extremely low- and very low-income households generally earn not more than 30% and 50% of area median income respectively; low-income households earn not more than 160% of the very low-income limits for high cost areas such as Los Angeles County, where the limit reflects about 105% of the area median income; and moderate-income households earn not more than 120% of the area median income.

3

7

COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica afford a median priced condominium in the City, the wage earner in a single earner household would need to make approximately $14,785 per month to conform to the 30% housing cost target. The minimum wage in the State of California is $8 per hour (or $16,640 per year), which is less than 18% of what is needed to rent a one-bedroom apartment in the City. This means that a full-time dual income household, where both workers make minimum wage, would not be able to afford to rent a median priced apartment within the City. It is expected that a portion of the new workers including lower income households working at low-wage jobs in new non-residential land uses developed in the City would seek housing within the City. However, due to a short supply of affordable units, many households would either be forced to live outside of the City (in which they work), or spend a large portion of their income on housing, or live in substandard conditions. The California Health and Safety Code (H&SC) provides a general definition of low and moderate income limits and identifies the calculation of the respective affordable housing costs and rents for each income category. Pursuant to the Health and Safety Code, HCD establishes and publishes annually the Qualifying Income Limits by income category adjusted for household size. The income limits and affordable housing cost criteria under the Health and Safety Code are widely used and generally applicable for various affordable housing programs implemented in local jurisdictions including those by redevelopment agencies and projects using redevelopment housing set-aside funds, those by housing authorities, and those under density bonus programs. The City’s AHPP Ordinance, as amended, adopted the same criteria as identified under the Health and Safety Code. Accordingly, this Nexus Study uses the H&SC and AHPP income limits and rents criteria. The income category limits are generally defined as follows: Extremely Low-Income Very Low-Income Low-Income Moderate-Income

households households households households

earning earning earning earning

30% or less of the area median income; 50% or less of the area median income; 80% or less of the area median income; and 120% or less of the area median income.

As footnoted above, however, Los Angeles County is identified as a high housing cost area by HCD and HUD, which results in the household income limits for the lower income categories exceeding the percentage of area median incomes identified above. The Nexus Study will identify the affordable housing need, by income category, generated by the development of new non-residential buildings in the City, including office, hospital, hotel, retail, industrial, institutional, creative, and medical office uses. Such buildings will house new jobs, many of which will be low paying, thus generating the need for housing affordable for those wage earner households. Summary of Findings The following provides a summary of the Nexus Study findings, which are detailed in Sections 1 through 3, and the Linkage Fee Analysis, as detailed in Sections 4 and 5 of this Report. The City’s LUCE estimates that approximately 3.49 million square feet of non-residential development will occur during the twenty year period from 2010 to 2030. Based on the City’s LUCE data analysis derived from the Los Angeles Unified School District 2008 School Fee Justification Study, which is used to identify employee density, it is estimated that new non-residential development in the City will create a total of about 6,918 net new worker jobs after adjustment for market factors. Further, based on a combination of data from the 2002 Economic Census and the 2012 American Community Survey, it is projected that the estimated 4

8

COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica employment growth will result in about 6,122 new worker households, of which its is conservatively estimated that approximately 2,082 households (34%) may live in the City. An analysis of data for the Los Angeles County MSD provided in the OES Occupational Employment and Wage Estimates, the BLS Occupation and Wage Survey, and from the California Economic Development Department identifies that a substantial portion (69.7%) of the new worker households generated by the development of various new non-residential land uses would require housing affordable at the extremely low-, very low-, low-, and moderate-income levels (refer to Table 3-9). The following is a summary of the future affordable housing need for 1,451 units in the City generated by non-residential development, which is broken down as follows: 216 687 424 124

(15.0%) Extremely Low-Income Households (47.3%) Very Low-Income Households ( 29.2%) Low-Income Households (8.5%) Moderate Income Households

This Report also provides an analysis of the housing impact linkage fee associated with the affordable housing need generated by the non-residential development in the City. The linkage fee analysis (refer to Sections 4 and 5) translates the affordable housing need generated by each of the land use building prototypes (refer to Sections 1 through 3). This was done by adjusting the affordable housing need into square feet and multiplying that need by the cost to produce housing affordable in each of the income categories. Table I-1 below summarizes the maximum supportable impact fee on a square foot basis for each of the building prototypes, as well as a range of recommended reduced impact fees for the City’s consideration. The recommended reduced fee levels are meant to avoid adverse economic impacts on the developers of new non-residential projects in the City. As discussed in Section 5 of the Linkage Analysis, the final impact linkage fee is recommended at between 5% and 25% of the maximum supportable fee established by the Non-Residential Nexus Study for each of the identified land uses. Table I-1, shown below, demonstrates the range of impact fees per land use. Per Square Foot Non-Residential Impact Fees1 Santa Monica Linkage Fee Analysis

Table I-1

Office Full Impact Fee

Impact Fee Options (per Square Foot)

5% 10% 15% 20% 25%

Hospital

Hotel

Retail

Industrial Institutional

Creative

Medical Office

$224.11

$123.02

$61.43

$195.07

$150.52

$204.55

$191.74

$137.78

$11.21 $22.41 $33.62 $44.82 $56.03

$6.15 $12.30 $18.45 $24.60 $30.76

$3.07 $6.14 $9.21 $12.29 $15.36

$9.75 $19.51 $29.26 $39.01 $48.77

$7.53 $15.05 $22.58 $30.10 $37.63

$10.23 $20.45 $30.68 $40.91 $51.14

$9.59 $19.17 $28.76 $38.35 $47.93

$6.89 $13.78 $20.67 $27.56 $34.45

Source: Table 5-2

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Report Organization This Report contains five sections, as follows: Section 1 – Nexus Concept and Assumptions: This section presents a summary of the linkage concept and some of the key issues surrounding nexus analyses for jobs and housing. Section 2 – Local Economic Inputs and Adjustments: This section provides an overview of the economic conditions in and around the City, including those key to the Non-Residential Nexus Study. Section 3 – Micro Economic Jobs Housing Analysis: This section describes the analysis which was performed, linking jobs and housing relationships to the land uses and building prototypes examined. Section 4 – Affordable Housing Costs: This section examines the cost to produce affordable housing units in the City. This analysis was used to associate a cost with the need for affordable units, as identified in Section 3. Section 5 – Fee Analysis and Recommendations: This section combines the information from the analyses in Sections 3 and 4 to formulate the maximum non-residential affordable housing impact fees for the City. This section also adjusts and provides recommendations regarding the final fee levels, in order to provide reduced economic impact to developers of non-residential property in the City. Data Sources RSG has prepared this Report using the most current and verifiable data available. Sources used include the US Census (“Census”), California Economic Development Department (“CEDD”), Department of Labor - Bureau of Labor Statistics (“BLS”), California Department of Housing and Community Development, the Southern California Association of Governments (“SCAG”), and First American Title MetroScan Information Service. The Census, CEDD, and BLS data and materials are widely used for demographic and econometric analyses including nexus studies prepared for a large number of jurisdictions in California. In addition, at the direction of City staff, employee density factors used in the LUCE were used as a basis for determining the estimated total new jobs resulting from the development of each land use type. RSG believes that these data sources are deemed to be reliable and believed to provide accurate and relevant information for this analysis. Nonetheless, RSG cannot guarantee their accuracy and assumes no liability for information from these sources or others.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica SECTION 1: NEXUS CONCEPT AND ASSUMPTIONS Section 1 outlines the nexus concept and the assumptions used in the analysis. The analysis is centered on the linkages between population growth, non-residential development, employment, employee wages, and the demand for housing. The analysis connects the development of certain new non-residential land use building types, employees who will work in those building types, and the generated need for affordable housing. The model utilizes data from a number of sources including the BLS, CEDD, Census including the 2012 U.S. Census American Community Survey (ACS), HCD, and SCAG. In addition, conservative assumptions were used in order to not overstate the affordable housing need generated. Legal Background The first inclusionary housing ordinances were adopted in the early 1970’s. In analyzing initial challenges to them, courts characterized affordable housing and in lieu fee ordinances as traditional land use and zoning regulation, and not as exactions or impacts fees. The traditional land use ordinance position has been most clearly adopted by the New Jersey Supreme Court in Southern Burlington County NAACP v. Township of Mount Laurel, (N.J. 1983) 456 A.2d 390. In 1990, in Holmdel Builders Ass'n v. Township of Holmdel, (N.J. 1990) 583 A.2d 277, the New Jersey Supreme Court revisited the issue while reviewing the constitutionality of affordable housing fees required by several New Jersey cities. The court explained that "inclusionary-zoning devices," including inclusionary in-lieu fees, are land use ordinances that bear a "real and substantial relationship to the regulation of land" because they are specifically designed to help create affordable housing and will therefore affect "the nature and extent of the uses of land and of buildings. . . " Id. at 286-87. The court held that inclusionary in-lieu fees are not exactions similar to impact fees, because the affordable housing requirements are not based on the impact of a project, but rather on the "the relationship that . . . development has on both the need for lower-income residential development and on the opportunity and capacity of municipalities to meet that need . . ." Id. at 288. In Home Builders Ass'n v. City of Napa, 90 Cal.App.4th 188 (2001), the first published California case regarding inclusionary zoning, the City of Napa argued that its inclusionary ordinance was a land use ordinance that merely regulated the use of a small part of a development, and that inclusionary in-lieu fees were not impact fees because the underlying inclusionary requirement was not a monetary exaction, but rather a land use control, and fees were paid only at the election of the developer. In rejecting plaintiff's claims that the City's ordinance was an invalid exaction under Nollan v. California Coastal Commission, 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1994), the Court of Appeals treated Napa's inclusionary zoning ordinance as "economic legislation that is generally applicable to all development in City." Id. at 197. In Action Apartment Ass’n v. City of Santa Monica, 166 Cal.App.4th 456 (2008), the Court similarly considered the City's inclusionary housing ordinance a traditional land use or zoning legislation and not an exaction. No California court has treated a generally applicable inclusionary housing ordinance as imposing an impermissible per se exaction or required in-lieu affordable housing fees to meet the legal requirements of the California Mitigation Fee Act. In Building Industry Ass'n of Cent. California v. City of Patterson ("Patterson ") (2009) 171 Cal.App.4th 886, however, the Court of Appeal applied the "reasonable relationship" test to an inclusionary affordable housing in-lieu fee, assuming that it was a generally applicable impact fee and without ever considering (at least in the published opinion) whether the underlying requirement was an exaction or a land use requirement. Nonetheless, the language in 7

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Patterson characterizes the in-lieu fee under review as not substantively different from the in-lieu housing fee reviewed in San Remo, and subject to the requirement that there be a reasonable relationship between the amount of the fee and the "deleterious public impact of the development." 27 Cal.4th 643, 670-71. This study has been provided to satisfy the requirements of San Remo. Non-Residential Nexus Study Methodology The following discussion provides an overview of the general concepts and methodology used in the NonResidential Nexus Study. The analysis links the construction of new non-residential land uses to a net increase of new workers in the City. These new workers will need housing within a reasonable distance of their jobs, some of which will be in the City. The compensation levels paid to some of these workers will result in them needing housing which is affordable at the extremely low-, very low-, low-, or moderateincome levels. Briefly summarized in Figure 1-1 below are the basic analytical steps utilized to conduct the Nexus Study. A more detailed description of the methodology associated with each step is provided in Section 3, the Micro Economic Jobs Housing Analysis.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

Nexus Analysis Process

Figure 1-1

Step 1: Establish Building Prototypes The analysis is conducted based on individual non-residential land use building types for the land uses identified in the City’s LUCE. For analysis purposes, prototypical 100,000 square feet of building area for each of the land use types identified in the LUCE was analyzed. The analysis of individual building types is based on general conditions within the City, as identified by City staff. Step 2: Estimate Total New Employees Estimate the number of new permanent direct employees which will be generated by the construction of the eight new non-residential land use building types. Employee density factors

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica were used to estimate the number of employees in each land use type. The employee density factors used in the Nexus Study are detailed in Section 2 of this Report. Step 3: Adjustments for Market Conditions This step incorporates into the analysis any changes in the local economy (including increases in unemployment) and the type of jobs and industries which make up the region. Specifically, declines and/or other shifts in the local economy can affect how new non-residential space is occupied. The result of these market condition adjustments is a reduction in the number of employees generated from the development of new non-residential land uses. Step 4: Adjustment from Employees to Employee Households This step adjusts the number of employees/workers to account for households in which there is more than one wage earner. In order to adjust for this consideration, a ratio of 1.13 workers per worker households is used in this analysis based on City Census data. Step 5: Occupational Distribution of Employees Job types are then associated with the land use prototypes to produce a distribution of employees by occupation. To do so, NAICS industry sectors were correlated to jobs depending on the likelihood that the industries would be housed in each building type. Next, the NAICS industry sectors are linked to OES occupation categories. This step is important because it links building types with occupational categories. Occupational categories are then linked to wage data addressed in the next step. Step 6: Estimate Distribution of Employee Wages Occupational data generated in Step 5, is combined with wage and salary information from the County (based upon NAICS and CEDD data) to estimate the distribution of employee wages. Employee wages were then converted to household wages using the employees per household ratio used in Step 4. Step 7: Estimate Household Income Category Distribution The results from Steps 5 and 6 allow the estimated number of employee households from the previous step to be categorized into household size (number of persons) by income, based on City Census data. This step is important because it allows the households created to have income and size associated with them. Step 8: Estimate the Households that Meet Income Criteria The previous step distributed households into size and income categories. The households are then allocated to specific income categories (extremely low-, very low-, low-, moderate- and above moderate-income households) per the income limits identified under the H&SC and the AHPP. Once the households have been placed into their respective income categories, it is possible to show the number of housing units required to meet the needs of the extremely low-, very low-, low-, and moderate-income households generated by the construction of each of the building prototypes.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Step 9: Adjust for Commute Patterns This step adjusts the total number of households by the percentage of employees/workers who currently live in the City. This step reduced the number of new households needing housing by approximately 66%. This adjustment is necessary since not all of the new employees generated by new non-residential buildings will live in the City. The adjustment reflects a combination of data from the 2012 Economic Census and the 2012 American Communities Survey data, which indicates that approximately 34% of the workers in Santa Monica also live in the City. The 34% factor reflects a reasonable and conservative estimate based on empirical data, while it may be a greater percentage subject to net increases in availability of housing units in the City. Step 10: Calculate Total Affordable Housing Needs Created by Non-Residential Buildings This final step adjusts the worker household per 100,000 square feet of building to calculate the total new worker households by income category that would live in the City pursuant to the LUCE land use development projections. The resulting total new worker households living in the City serve to reflect the total number of affordable housing units, by income category which is attributable to the total estimated non-residential land use types, if the City’s land use projections are fulfilled. The Relationship Between Job Growth and Population Growth The linkage analysis assesses the growth in extremely low-, very low-, low-, and moderate-income households within the City generated by new development, and subsequent lack of affordable housing units available to these new households. A major contributing factor for population growth in most communities is job growth. Households would not arrive or stay in the community if jobs were not available in or near the area to support them. This trend is typically long term since economic cycles and other factors including the availability of housing units can result in population growth without jobs. For these reasons, this analysis is specifically designed to address the long term linkage between the development of new non-residential land uses, job growth, and the resulting need for housing affordable to very low-, low-, and moderate-income households. The Relationship Between Non-Residential Development and Job Growth If population growth is in part driven by job growth, then what is the source of employment growth? Many factors contribute to the growth in employment in different areas. These factors tend to be interrelated and associated with outside forces. A major contributing factor is the development of new non-residential land uses, which will house jobs. The rationale behind a non-residential nexus study is that the construction of these new buildings is largely, but not solely, responsible for growth. Nonetheless, in the City of Santa Monica, new non-residential construction is an important factor contributing to population growth, while it is also an essential condition that precedes growth. As mentioned, new construction itself encourages population growth. This relationship was most recently seen during the ten year period 1995 through 2005, when construction activities in California were one of the main drivers of a thriving economy. In many regions including Los Angeles County, the development industry frequently serves as a proactive force inducing growth to occur, especially with projects of a speculative nature.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Lastly, new non-residential construction in particular encourages job growth because it precedes population growth. Job growth would not occur in our modern service economies without buildings to house new workers. In fact, the inability to develop new workspace will often constrain or even halt job growth in an area. Housing Needs of New Population vs. Existing Housing Need The Housing Element for the City, the City Inclusionary Housing Annual Report, and other materials indicate that while the housing needs of the existing lower-income households in the City are generally being met in accordance with the City’s RHNA distribution, future activities to ensure affordable housing may be hampered by diminished funding availability. Moreover, many existing households, especially those at the lowest income levels, overpay for housing (payment of more than 30% of income for rent, as set forth in federal and state guidelines), live in overcrowded conditions, or cannot live in the City and must live and commute from less expensive locations. This Nexus Study does not address the housing needs of the existing population or the needs resulting from new residential construction, which was addressed in the 2005 Update Nexus Between New Market Rate Multifamily Developments in the City of Santa Monica and the Need for Affordable Housing. While new employment associated with residential development may result in some minor overlap with the new jobs resulting from new non-residential development, for a number of reasons, including but not limited to, building vacancy/under utilization, unemployment, under employment and part time employment factors, it is deemed to be very minor and would not generally induce a significant level of new commercial or other non-residential development. Accordingly, this Nexus Study focuses solely on documenting and quantifying the housing needs of net new households generated by new non-residential buildings. Substitution Factor Any new building in the City may be occupied either partially or entirely by workers or firms relocating from elsewhere. When a business relocates to a new building, there is a space in an existing building that is vacated. In turn, the vacated building will likely be filled by a combination of newcomers in the City or existing workers. Somewhere in this cycle, new jobs will be added to the region. The net effect is that new buildings accommodate new employees, although not necessarily inside of the new buildings themselves. Employment Multipliers The Non-Residential Nexus Study does not address the concept of multipliers. Multipliers refer to the concept that the income generated by certain types of jobs recycles through the economy, resulting in additional jobs. This Nexus Study omits such multiplier effects, because they are largely accounted for in the City’s Residential Nexus Study, which measures the impact of new household spending on the need for affordable housing units. The assumption in the Residential Nexus Study is that the associated new jobs may be largely employed within existing businesses and buildings (or assist in generating the need for new buildings, as discussed under “Substitution Factor”), and occupy new housing units. These new households themselves, and their need for affordable housing, are addressed in the Non-Residential Nexus Study. Their household spending and the need it generates for affordable housing (through the generation of new jobs) was analyzed in the Residential Nexus Study.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Discount for Changing Industries It is general practice in the preparation of a nexus analysis to examine the major sectors of the local economy and determine if there are long term trends in employment suggesting either decline or restructuring. In the case of long-term decline of one or more industries or sectors, it is appropriate to recognize that all new jobs may not be net new jobs. An analysis of the major sectors of the local economy and their recent trends was performed for this analysis and can be found in Section 2 of this Report.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica SECTION 2: LOCAL ECONOMIC INPUTS AND ADJUSTMENTS This section examines some of the key local factors that affect the nexus analysis. These items include market characteristics such as land use types, employee densities, occupational distribution per building type, and compensation levels. This section also examines several key adjustments which must be made in the nexus analysis, including those relating to changing industries and employment trends, unemployment, and commuter patterns. Employment patterns and trends were determined by analyzing statistics reported in the North American Industry Classification System (“NAICS”) report and the annual Occupational Employment Statistics Survey (“OES”) from the BLS. Industries listed in the NAICS data were matched to building types and OES occupation categories providing the basis for determining the jobs created by new non-residential developments. Recent historical trends of employment were determined by analyzing the last five years of OES statistics. Building Prototypes The nexus analysis is centered on the linkages between population growth, new development, employment, employee salary, and the demand for housing. Non-residential development generally induces job growth, which results in the demand for housing including an increased need for affordable housing in the City. The first step in the analysis is to identify what types of non-residential land uses have recently been developed in the City or are likely to be developed in the future. Specifically, eight non-residential land uses, as identified in the City’s LUCE, and corresponding building types were chosen for the analysis, including: 1. 2. 3. 4. 5. 6. 7. 8.

Office Hospital Hotel (Hospitality) Retail & Entertainment Industrial/Light Manufacturing Institutional Creative/Post Production Medical Office

Employee Density After identification of land use building prototypes, the next step in the analysis is to estimate the number of employees who would work in such buildings. For ease of analysis and presentation, a prototypical 100,000 square feet of building area was examined for each of the land use types. Each land use type has different employment densities as the demand for space is related to the level and type of employment. Employment densities measure the average amount of space that each employee occupies. The use of employment densities were used to estimate the number of employees for each land use type. The employment densities used in this Nexus Study reflect the employee density factors used in the LUCE. Densities are shown as the number of gross square feet occupied per employee. Identification of the employee density is derived from factoring the estimated median employee per acre, which is divided by the median floor area ratio (FAR) for the particular land use building types

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica adjusted for building efficiency. The following provides the employee densities used for each of the eight land use building prototypes. Office – 275 square feet per employee: Average employee office density in urban areas is usually within the 200 to 300 square feet per employee range, however, these averages typically include high rise office buildings, which are much more efficient than low-rise offices more commonly found in suburban areas such as in Santa Monica. Additionally, the density can also vary depending on the type of office activity, for example, corporate headquarters versus officesupport activities. Hospital – 560 square feet per employee: The average hospital and medical employee density is very similar to office uses. This category includes a variety of uses, from in-patient facilities where densities are lower, to out-patient facilities where densities are greater because beds and living facilities are not present. Hotel (Hospitality) – 1,500 square feet per employee: Hospitality employee densities can vary greatly depending on the type of hotels present in a geographic area. For example, a City or area with a larger percentage of full-service hotels will have a greater employee density than an area with mostly limited-service hotels. This is because full-service hotels include additional facilities such as restaurants, spas, or retail, and also require a greater level of customer service, thus increasing the number of employees. According to the LUCE, approximately 40 percent of the City’s hotel inventory are full-service or luxury hotels. The City anticipates both luxury and limited-service or budget-friendly hotels to be constructed due the City’s beachfront proximity and excellent regional access; an average employee density for these types of hotels was used. Retail & Entertainment – 425 square feet per employee: This category covers many different uses, including restaurants, big box retail centers, smaller neighborhood-serving retail centers, and street-front retail, which is typically found in downtown areas. The City is primarily served by shopper-good retail such as specialty clothing retail and convenience goods such as supermarkets and drugstores. According to the LUCE, the City is underserved by major drugstores and anticipates increased development in the future. Industrial / Light Manufacturing– 500 square feet per employee: This category includes a variety of uses, including light industrial, manufacturing, fabricating, business incubator space, emerging technology, and research and development. Institutional – 300 square feet per employee: This category covers a wide variety of buildings that serve the needs of the community including government, education, and cultural facilities. Creative / Post-Production – 275 square feet per employee: This category includes entertainment services, post-production industry related to motion pictures and television, and other information-related occupations. Uses include film and music production, art galleries and 3 studios, and record production and studios . Medical Office – 500 square feet per employee: This category includes out-patient services.

3

As defined by the 2010 LUCE and BLS.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

Occupational Distribution by Land Use Types This segment of the analysis involves allocation of jobs by occupation in the land use prototypes. For this portion of the analysis BLS data on the distribution of different occupational categories was used to estimate the occupational distribution in each of the land use prototypes. The North American Industry Classification System groups establishments into industries based on the activity in which they are primarily engaged at a national level. Establishments that do similar things in similar ways are classified together. The NAICS reports employment distributions for the 22 industry 4 sectors shown in Table 2-1 at the national level . The percentages shown in Table 2-1 represent the distribution of the major occupational categories within each building prototype. For example, within an office building, 20.3% of the workers are categorized as being within “office and administrative support occupations” whereas 5.6% are categorized as “computer and mathematical science” occupations. The BLS provides statistics that correlate NAICS industry sectors to Occupation Employment Survey occupation categories at a metropolitan statistical level (MSD). The distributions of occupations within land use types are used in the Non-Residential Nexus Study to associate the employment generated from new buildings to occupations and annual incomes.

4

This distribution uses national level data as local NAICS data is not readily available.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Distribution of Occupations by Building Type (National Level) Santa Monica Non-Residential Nexus Study Occupation Category Management occupations Business and financial operations occupations Computer and mathematical science occupations Architecture and engineering occupations Life, physical, and social science occupations Community and social services occupations Legal occupations Education, training, and library occupations Arts, design, entertainment, sports, and media occupations Healthcare practitioners and technical occupations Healthcare support occupations Protective service occupations Food preparation and serving related occupations Building and grounds cleaning and maintenance occupations Personal care and service occupations Sales and related occupations Office and administrative support occupations Farming, fishing, and forestry occupations Construction and extraction occupations Installation, maintenance, and repair occupations Production occupations Transportation and material moving occupations

Table 2-1

Office

Hospital

Hotel

Retail

Industrial

Institutional

Creative

Medical Office

6.6% 8.2% 5.6% 3.0% 1.1% 1.6% 1.4% 14.8% 2.4% 1.4% 0.8% 1.8% 1.4% 4.7% 2.6% 7.8% 20.3% 0.1% 0.9% 3.4% 4.8% 5.5%

3.4% 2.2% 1.0% 0.2% 0.4% 3.9% 0.1% 1.8% 0.3% 24.3% 14.1% 3.2% 2.4% 8.4% 6.2% 2.1% 17.4% 0.0% 0.7% 1.3% 3.2% 3.3%

2.7% 1.6% 0.8% 0.3% 0.1% 0.1% 0.1% 0.0% 0.5% 0.8% 0.6% 4.2% 47.2% 11.7% 3.3% 4.4% 10.7% 0.0% 0.8% 1.7% 3.9% 4.5%

3.4% 3.7% 1.5% 0.2% 0.0% 0.1% 0.2% 0.1% 0.8% 1.5% 0.4% 2.1% 22.2% 6.0% 3.2% 23.2% 17.4% 0.1% 0.5% 4.9% 3.2% 5.3%

5.9% 6.8% 6.6% 5.2% 1.2% 0.1% 2.2% 0.1% 2.0% 1.1% 0.6% 2.6% 0.3% 6.0% 0.4% 4.7% 17.1% 0.0% 13.2% 4.2% 13.3% 6.3%

5.1% 6.9% 3.7% 2.0% 1.4% 2.8% 1.5% 12.4% 1.7% 10.6% 5.7% 4.5% 2.3% 4.7% 4.3% 3.2% 19.4% 0.1% 1.2% 2.2% 1.8% 2.7%

7.2% 6.8% 16.3% 1.6% 0.1% 0.0% 0.3% 0.6% 17.0% 0.0% 0.0% 0.1% 1.7% 0.5% 2.0% 12.9% 19.2% 0.0% 0.2% 10.4% 1.6% 1.5%

3.4% 2.2% 1.0% 0.2% 0.4% 3.9% 0.1% 1.8% 0.3% 24.3% 14.1% 3.2% 2.4% 8.4% 6.2% 2.1% 17.4% 0.0% 0.7% 1.3% 3.2% 3.3%

Note: This table is derived from the OES Occupational Employment and Wage Estimates "National 3-digit NAICS Industry-Specific Estimates" dataset Source: U.S. Bureau of Labor Statistics (2012)

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Employee Compensation An important component of the analysis is the compensation paid to employees in the new nonresidential land uses. Since compensation can vary greatly for similar jobs, depending on what geographic region that job is located in, it is important to use local data when estimating the wages of the new employees. For this analysis the occupational data previously shown in Table 2-1 is combined with wage and salary information from the BLS Occupation Wage Survey for the Los Angeles/Long Beach/Glendale Metropolitan Statistical District and from the CEDD, as shown in Attachment 1. The wage and salary information in Attachment 1 was used to calculate the income related to specific occupations. The OES occupational categories are the same as those used by the CEDD. The distribution of jobs within the occupational categories was estimated to be the same as the distribution with the MSD, of which the City of Santa Monica is a part. Employment Patterns (Industry Change Factor) During the past four years, the national and regional economies have experienced a significant decline not seen since the Great Depression. Since 2007, a large number of job losses in certain occupation groups were mitigated only in part by gains in other occupation groups, while the growth for all occupations remained fairly flat at less than 1%. The chart on the following page identifies the percent change of all the major occupational groups listed by the OES from 2007-08 through 2011-12 for the Los Angeles County MSD. Since 2007, the region experienced substantial losses in management, protective services, construction, extraction, installation, maintenance and repair occupations. On the bright side, the region experienced substantial gains in the business and financial, computer and mathematical, community and social service, and health care occupations. The other occupation groups experienced modest gains, in part due to shifting occupational choices. During the period from 2011 to 2012, the California EDD reported the largest year over increases for the leisure and hospitality employment sector including accommodation and food services, arts, entertainment and recreation occupations for the Los Angeles Metropolitan Statistical Division. Increases were also reported for the professional and business services sector, 55% of which was in the administrative and support services occupation, with gains also occurring in the professional, scientific, technical and management occupations. The information and government sectors both experienced declines in employment levels. The growth in some occupations, along with the steep decline in others, suggests that future new employment generated by new non-residential land uses will be in some part taken by existing workers changing from one occupation category to another. To account for this, a conservative 10% reduction was applied, identified herein as the Industry Change Factor, for jobs generated by the construction of new non-residential buildings.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

Unemployment New employment generated by the development of new non-residential land uses will also be taken, in part, by unemployed workers. From 2000 to 2007, the unemployment rate in the City averaged 4.8%, while during the period from 2008 to 2010, the City’s unemployment rate increased to a high of 10.4%, but is beginning to decline, as shown in Table 2-2. The declining rates during the past three years reflect improvements in the economy, with the national unemployment rate dropping to 7.3% during the second quarter of 2013. Since the Nexus Study analyzes the impacts of future development, it was assumed that the unemployment rate will again return to the historical average of approximately 4.8% sometime in the future. The current unemployment rate, however, may serve to reduce the number of new jobs created by new non-residential buildings and taken by new workers moving to the area. For this reason, the number of new workers generated by the development of new non-residential land uses was adjusted downward by 7% to account for existing unemployed (and underemployed) workers who would hypothetically take some of the new jobs in these land uses (Unemployment Factor). The key assumption for this adjustment is that the existing unemployed workers already have housing and would not need new housing units.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

Historical Unemployment Rates (Santa Monica) Santa Monica Non-Residential Nexus Study

Table 2-2 Unemployment Rate

Year 2000 2001 2002 2003 2004 2005 2006 2007 Pre-Recession Average

4.4% 4.6% 5.5% 5.7% 5.3% 4.4% 3.9% 4.1% 4.8%

2008 2009 2010 2011 2012 20131

6.1% 9.6% 10.4% 10.1% 9.0% 7.6%

Note: The State data varies slightly from the data presented in the City of Santa Monica Comprehensive Annual Report (June 30, 2011) 1

Preliminary May 2013 figure, published June 21, 2013 Source: State of California Employment Development Department, Historical Unemployment Rates (Labor Force).

Commute Patterns This section provides a brief summary of commute trends and relationships. The major relationship of interest in a nexus analysis is the share of jobs within the City that are held by residents of the City. There is no empirical data available to identify the number of new employees in the City who would choose to live in the City. One source of information, however, regarding commute relationships and patterns is the U.S. Census data, which according to the 2011 American Community Survey data for the City, reflected that 34% of Santa Monica residents responded that they currently lived in the same city as where they worked (Santa Monica). Based on this data and data from the 2002 Economic Census, it is conservatively estimated that a similar number of the new workers in Santa Monica would choose to live in the City if housing were reasonably available. It is important to recognize, however, that the above relationship does not necessarily represent the demand for housing in the City, but it does reflect the historical data regarding housing availability and occupancy in the City. It should also be noted that even if housing were available and affordable, it is unlikely that 100% of people would live and work in the same city. The choice of where one lives depends on many additional factors such as spouse employment, schools, style of housing, types of amenities, local services, family and social networks, and so on. For the nexus analysis, as reflected by data identified above, it is projected that 34% of the worker households in the new non-residential buildings would live in the City. 20

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica SECTION 3: MICRO ECONOMIC JOBS HOUSING ANALYSIS This section details the analysis performed to establish the linkage between the construction of different types of non-residential land uses and the need for affordable housing in the City. Unlike the analyses used for the LUCE Environmental Impact Report (EIR) and the Transportation Impact Fee (TIF), which are based on vehicle trip generation factors, the non-residential development linkage is based on the net number of jobs directly resulting from the development of new non-residential uses. The analysis computes the number of new jobs estimated to be housed in the land use building types and the income categories in which the new workers would typically fall. This section uses data and information from previous sections, and should not be considered a separate document. Approach The micro economic jobs housing analysis establishes the linkage between the construction of new nonresidential buildings and an increased need for affordable housing. The linkage is identified for each land use land use building type. This section will connect employment growth in the City that results from the development of non-residential buildings and the need for affordable housing. The analysis starts with a prototypical 100,000 square feet of building area for each land use building type. Through the series of steps enumerated below, the total number of workers in each land use type are calculated and then converted to worker households whose incomes are then estimated. Based on each household’s income, they are placed into the subject income categories (either extremely low-, very low-, low-, moderate-incomes) and their need for affordable housing is established. Step 1: Establish Building Prototypes As discussed in Section 2, the analysis begins with an identification of what types of non-residential land uses have recently been constructed or may be constructed in the future in the City. This analysis is conducted based on individual non-residential building types for the land uses identified in the City’s LUCE. For analysis purposes, prototypical 100,000 square feet of building area for each of the land use types included were analyzed. Step 2: Estimate Total New Employees The next step in the nexus analysis is to estimate the number of new direct permanent employees that would work in each of the eight prototypical non-residential land uses identified in Section 2. The detailed calculation of new employment is shown in Table 3-1. Employee density factors were used to estimate the number of employees in each of the buildings. These factors were based on statistics for Santa Monica per the LUCE. Employee densities are shown as the amount of building square feet occupied per employee, which are then used to estimate the total number of new direct permanent employees who will work in each of the prototype buildings. For example, it is estimated that the employee density factor for new office buildings is 275 square feet per employee (refer to Section 2 for details regarding employee densities for each land use). Using this factor, the 100,000 square feet of building area for the office land use type would house 363.6 employees.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Employee Households Generated by Product Type (Per 100,000 Square Feet) Santa Monica Non-Residential Nexus Study

Prototypical Building Size (SF) Building Square Feet per New Employee Employees per 100,000 SF Building

Table 3-1

Office

Hospital

Hotel

Retail

Industrial

Institutional

Creative

Medical Office

100,000 275 363.6

100,000 560 178.6

100,000 1,500 66.7

100,000 425 235.3

100,000 500 200.0

100,000 300 333.3

100,000 275 363.6

100,000 500 200.0

Source: City of Santa Monica; refer to Section 2 for employee density details by land use.

Step 3: Adjustments for Market Conditions Adjustments to the total number of new direct permanent employees for each 100,000 square feet of building type are then made to reflect changes in the local economy, including unemployment and changing industries. Specifically, declines and/or other shifts in the local economy can affect how new non-residential buildings are occupied. The adjustments included the following: •

An adjustment is made for changing industries taking into account any declines, changes, or shifts within specific sectors of the local economy, recognizing that new space is not always 100% equivalent to net new employees. From 2005 through 2007, economic production grew rapidly, at the end of 2008 and through 2011 economic growth stalled and sharply declined. Even with the recent decline, however, certain occupation groups achieved substantial gains in employment. The growth in some occupations, along with the steep decline in others, suggests that future new employment generated by new non-residential buildings will be in some part taken by existing workers changing from one occupation category to another. To account for this, a conservative 10% industry change factor reduction was applied to jobs generated by the construction of new non-residential buildings. Detailed information regarding industry changes is provided in Section 2.

•

An additional adjustment is made for unemployment. From 2000 to 2007, the unemployment rate in the City averaged 4.8%, as detailed in Section 2. From 2008 to 2010 the unemployment rate increased to 10.4% due to the economic recession. More recently, the unemployment rate has dropped to 7.6% and is expected to continue to decline reflecting the improving economy. The current unemployment rate will serve to reduce the number of new jobs created by new nonresidential buildings and then taken by new workers moving to the area. For this reason the number of new workers generated by the development of new non-residential buildings was adjusted down by 7% to account for existing unemployed workers who would hypothetically take some of the new jobs in these buildings. Detailed information regarding local and regional unemployment is provided in Section 2. A 7% unemployment adjustment factor is applied for this analysis.

These two adjustments, when combined, account for an 17% reduction in the total number of new direct permanent employees within the non-residential land use prototypes. It is not anticipated that these jobs will not materialize, but instead will be taken by existing residents in the City or surrounding area, that are either unemployed or may lose their job because they work in a declining industry. One of the key assumptions used to make these adjustments is that the existing workers already have housing and would not need new housing units.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Employee Households Generated by Product Type (Per 100,000 Square Feet) Santa Monica Non-Residential Nexus Study

Prototypical Building Size (SF) Building Square Feet per New Employee Employees per 100,000 SF Building Industry Change Factor (decrease of) 1 Unemployment Factor (decrease of) Employees Generated 1

Table 3-2

Office

Hospital

Hotel

Retail

Industrial

Institutional

Creative

Medical Office

100,000 275 363.6 10% 7% 301.8

100,000 560 178.6 10% 7% 148.2

100,000 1,500 66.7 10% 7% 55.3

100,000 425 235.3 10% 7% 195.3

100,000 500 200.0 10% 7% 166.0

100,000 300 333.3 10% 7% 276.7

100,000 275 363.6 10% 7% 301.8

100,000 500 200.0 10% 7% 166.0

The Industry Change Factor adjusts for future changes from one occupation to another by existing employees.

Source: 2010 US Census; Bureau of Labor Statistics; City of Santa Monica; refer to Section 2 for employee density details by land use.

Step 4: Adjustment from Employees to Employee Households This step converts the number of employees/workers created into the number of employee households created. To estimate the number of workers per household in the City, Census data was gathered for the number of households and the number of individuals in the labor force. Using these datasets it is estimated that there are 1.13 workers per household in the City. The modified employee density numbers from Step 3 are adjusted by a factor of 1.13 to identify the number of new worker households. Employee Households Generated by Product Type (Per 100,000 Square Feet) Santa Monica Non-Residential Nexus Study

Prototypical Building Size (SF) Building Square Feet per New Employee Employees per 100,000 SF Building Industry Change Factor (decrease of) 1 Unemployment Factor (decrease of) Employees Generated Employees per Household2 Employee Households Generated 1

Table 3-3

Office

Hospital

Hotel

Retail

Industrial

Institutional

Creative

Medical Office

100,000 275 363.6 10% 7% 301.8 1.13 266.1

100,000 560 178.6 10% 7% 148.2 1.13 130.7

100,000 1,500 66.7 10% 7% 55.3 1.13 48.8

100,000 425 235.3 10% 7% 195.3 1.13 172.2

100,000 500 200.0 10% 7% 166.0 1.13 146.4

100,000 300 333.3 10% 7% 276.7 1.13 243.9

100,000 275 363.6 10% 7% 301.8 1.13 266.1

100,000 500 200.0 10% 7% 166.0 1.13 146.4

The Industry Change Factor adjusts for future changes from one occupation to another by existing employees.

2

According to the 2000 US Census, there were approxiamtely 1.13 workers per household. Worker households generated are therefore total employees divided by workers per household.

Source: 2010 US Census; Bureau of Labor Statistics; City of Santa Monica; refer to Section 2 for employee density details by land use.

Step 5: Occupational Distribution of Employees The new worker households created is then associated with occupations and land use types. Utilizing BLS NAICS codes with the land use types and linking industry sectors to OES occupation categories the analysis estimates the occupational composition of employees in the different building types. The occupational mix for each building type is designed to be consistent with the use categories described in the City Zoning Code. This step is important because it links land use building types with occupation categories, and occupational categories can be linked to wages in the next step. The occupations that reflect the expected mix of activities in the new non-residential land uses are shown in Section 2, Table 21 at a national level. 

Office building uses typically reflect a wide range of professional occupations. As summarized in Table 2-1, office and administrative support occupations represent the largest percentage of office related employment at 20.3%, education, training, and library occupations represent the next highest percentage at 14.8%, with Business and financial operations occupations third at 8.2%. Sales and related occupations, and management occupations are also two of the higher

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica occupational categories for office buildings, representing 7.8% and 6.6% of the employees respectively. 

Hospital and medical office building uses occupation distributions are the same and, as expected, typically house a large amount of healthcare workers. However, the employees also work in other occupations, such as office and administrative support, and cleaning and maintenance operations. Healthcare practitioners and technical occupations represent the highest percentage of employees at 24.3%, office and administrative support occupations at are also high at 17.4%,as well as healthcare support occupations at 14.1%.



Hotels typically employ workers from three main occupational categories. These occupational categories include food preparation and serving related occupations at 47.2%, building and grounds cleaning and maintenance occupations at 11.7%, and office and administrative support occupations at 10.7%. Together these three occupational categories make up 69.6% of hotel workers.



Retail and entertainment uses (restaurants and movie theaters) typically employ workers from three main occupational categories. They include food preparation and serving related occupations at 22.2%, sales and related occupations at 23.2%, and office and administrative support occupations at 17.4%. Together these three occupational categories make up 62.8% of retail and entertainment use workers.



Industrial / Light Manufacturing buildings employees are dispersed somewhat more broadly but the higher distributions occur in three occupation categories. These categories include office and administrative support at 17.1%, construction and extraction at 13.2%, and production occupations at 13.3%. Many other occupational categories account for more than 24% of the employees, including management, business and financial, computer and mathematical, architecture and engineering, building and grounds cleaning and maintenance, and transportation occupations.



Institutional buildings employees are also more broadly dispersed with the highest distribution occurring in the office and administrative support occupations at 19.4%, followed by education, training and library occupations at 12.4%, and healthcare practitioners and technical occupations at 10.6%.



Creative building employees reflect the highest distribution naturally occurring in the arts, design, entertainment, sports, and media occupations at 17.0% and the computer and mathematical science occupations at 16.3%, reflecting a combined 33.3%. Office and administrative support occupations, however, has the highest distribution at 19.2%, while sales and related occupations comprise 12.9% of the distribution.

Table 3-4 identifies the total net number of new direct permanent employee households by occupation (adjusted for unemployment, changing industries, and multiple wage earner households) for each of the hypothetical 100,000 square feet of building area applying the distribution of occupations by land use building type at a national level. In the next step correlates these employee occupations with the wages associated with each occupational category and grouped by income level.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Employee Households Generated by Product Type (Per 100,000 Square Feet) (Santa Monica) Santa Monica Non-Residential Nexus Study

Prototypical Building Size (SF) Building Square Feet per New Employee Employees per 100,000 SF Building Industry Change Factor (decrease of) 1 Unemployment Factor (decrease of) Employees Generated Employees per Household2 Employee Households Generated Occupation Categories 3, 4 Management occupations Business and financial operations occupations Computer and mathematical science occupations Architecture and engineering occupations Life, physical, and social science occupations Community and social services occupations Legal occupations Education, training, and library occupations Arts, design, entertainment, sports, and media occupations Healthcare practitioners and technical occupations Healthcare support occupations Protective service occupations Food preparation and serving related occupations Building and grounds cleaning and maintenance occupations Personal care and service occupations Sales and related occupations Office and administrative support occupations Farming, fishing, and forestry occupations Construction and extraction occupations Installation, maintenance, and repair occupations Production occupations Transportation and material moving occupations

Table 3-4

Office

Hospital

Hotel

Retail

Industrial

Institutional

Creative

Medical Office

100,000 275 363.6 10% 7% 301.8 1.13 266.1

100,000 560 178.6 10% 7% 148.2 1.13 130.7

100,000 1,500 66.7 10% 7% 55.3 1.13 48.8

100,000 425 235.3 10% 7% 195.3 1.13 172.2

100,000 500 200.0 10% 7% 166.0 1.13 146.4

100,000 300 333.3 10% 7% 276.7 1.13 243.9

100,000 275 363.6 10% 7% 301.8 1.13 266.1

100,000 500 200.0 10% 7% 166.0 1.13 146.4

17.6 21.7 14.9 7.9 2.9 4.3 3.7 39.5 6.4 3.6 2.0 4.9 3.6 12.6 7.0 20.7 54.0 0.3 2.3 9.1 12.8 14.5

4.4 2.8 1.3 0.3 0.6 5.1 0.1 2.4 0.4 31.7 18.4 4.2 3.1 11.0 8.2 2.7 22.7 0.0 0.9 1.7 4.2 4.3

1.3 0.8 0.4 0.1 0.0 0.0 0.1 0.0 0.3 0.4 0.3 2.1 23.0 5.7 1.6 2.2 5.2 0.0 0.4 0.8 1.9 2.2

5.9 6.4 2.6 0.4 0.1 0.1 0.3 0.2 1.4 2.6 0.8 3.7 38.2 10.3 5.5 39.9 30.0 0.1 0.9 8.4 5.5 9.1

8.7 10.0 9.7 7.7 1.8 0.1 3.2 0.2 2.9 1.7 0.8 3.8 0.4 8.8 0.6 6.9 25.1 0.1 19.3 6.2 19.4 9.2

12.4 16.7 9.0 4.8 3.4 6.8 3.5 30.2 4.1 25.8 13.9 10.9 5.6 11.6 10.5 7.8 47.3 0.1 3.0 5.5 4.4 6.5

19.0 18.1 43.5 4.3 0.2 0.0 0.8 1.6 45.1 0.1 0.0 0.4 4.4 1.3 5.3 34.4 51.1 0.0 0.5 27.7 4.3 4.0

5.0 3.2 1.5 0.3 0.6 5.7 0.2 2.7 0.4 35.5 20.6 4.7 3.5 12.4 9.1 3.1 25.4 0.0 1.0 1.9 4.7 4.9

1 The Industry Change Factor adjusts for future changes from one occupation to another by existing employees. 2 According to the US Census, there were approximately 1.13 workers per household. Worker households generated are therefore total employees divided by workers per household. 3 Occupation categories defined by the Occupational Employment Statistics Survey (OES) of the Bureau of Labor Statistics 4 The Bureau of Labor Statistics segregated employment into different industries (NAICS) and these have been matched with OES Occupation Categories and respective building types. Source: 2010 US Census; Bureau of Labor Statistics; City of Santa Monica; and California Department of Housing and Community Development

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Step 6: Estimate Distribution of Employee Wages In Step Six, the occupational data from Step Five is combined with wage and salary information for Los 5 Angeles County from the NAICS and CEDD. The wage and salary information summarized in Table 3-5 was used to calculate the incomes related to specific occupations at a local level. The OES occupational categories and jobs are the same as those used by the CEDD. The distribution of jobs within the category was estimated to be the same as the distribution within the Los Angeles-Long Beach-Glendale MSD, of which the City is a part. Mean incomes for each job type were taken from the NAICS and CEDD for Los Angeles County, that were then converted from an in individual employee/worker to household wages using the employees per household ratio (1.13) and used to estimate the number of very low-, lowand moderate-income households in each occupational category in Step 7. OES Occupation Categories with CEDD Wage Data for Los Angeles-Long Beach-Glendale MSD Santa Monica Non-Residential Nexus Study

Total Employees in MSD

OES Occupation Category All Occupations Management Occupations Business and Financial Operations Occupations Computer and Mathematical Occupations Architecture and Engineering Occupations Life, Physical, and Social Science Occupations Community and Social Service Occupations Legal Occupations Education, Training, and Library Occupations Arts, Design, Entertainment, Sports, and Media Occupations Healthcare Practitioners and Technical Occupations Healthcare Support Occupations Protective Service Occupations Food Preparation and Serving Related Occupations Building and Grounds Cleaning and Maintenance Occupations Personal Care and Service Occupations Sales and Related Occupations Office and Administrative Support Occupations Farming, Fishing, and Forestry Occupations Construction and Extraction Occupations Installation, Maintenance, and Repair Occupations Production Occupations Transportation and Material Moving Occupations

3,871,190 213,120 210,760 95,740 71,400 33,220 63,000 38,440 235,550 143,960 199,510 99,780 109,500 336,370 102,110 88,320 398,300 696,120 2,840 89,830 116,370 249,130 277,830

% of Employees in Specific Occupations of Each Major Category 5.5% 5.4% 2.5% 1.8% 0.9% 1.6% 1.0% 6.1% 3.7% 5.2% 2.6% 2.8% 8.7% 2.6% 2.3% 10.3% 18.0% 0.1% 2.3% 3.0% 6.4% 7.2%

Table 3-5

Mean Annual Wage $52,130 $122,930 $74,910 $84,710 $91,630 $75,830 $50,790 $124,160 $59,360 $87,920 $85,170 $30,710 $49,370 $21,750 $26,660 $27,690 $40,440 $37,530 $26,990 $54,090 $48,490 $31,800 $33,710

Sources: 2010 US Census; Bureau of Labor Statistics; and California Department of Housing and Community Development

Step 7: Estimate Household Income Category Distribution The individual wage data was used to estimate the number of households that fall into the very low-, low-, and moderate-income categories by assuming that individuals in multiple-earner households, on average, earn a similar wage. The same ratio of workers-per-household used in Step Three, was used to adjust the wage data for individual employees to that of households. Households of more than one person were conservatively estimated to, on average, have more than one worker. 5

More detailed wage data is identified in Attachment 1.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica After adjusting individual employee income to household income, those households were placed in income categories based on the 2013 AHPP income limits. Household size distribution is based on Census data for the City. After households have been distributed into size categories they now have income and size associated with them. These two sets of data allow the households to be distributed into the AHPP income categories, which are categorized by household size and income. Table 3-6 reflects the 2013 qualifying household income limits for the City as established in the AHPP. 2013 Income Limits by Household Size (Santa Monica) Santa Monica Non-Residential Nexus Study Income Category Extremely Low Income Very Low Income Low Income Moderate Income

1 $17,950 $29,900 $47,850 $54,450

2 $20,500 $34,200 $54,650 $62,200

3 $23,050 $38,450 $61,500 $70,000

Table 3-6 Household Size 4 5 $25,600 $27,650 $42,700 $46,150 $68,300 $73,800 $77,750 $83,950

6 $29,700 $49,550 $79,250 $90,200

7 $31,750 $52,950 $84,700 $96,400

Source: California Department of Housing and Community Development 2013 Income Limits

Step 8: Estimate New Households that Meet Income Criteria This step allocates the new worker households created into specific income categories (extremely low,very low-, low-, and moderate-incomes) pursuant to the City’s AHPP 2013 income categories as indicated in Table 3-6. Households falling at or below the income limits were placed in their corresponding income category. After all worker households were placed into their respective income categories, totals were generated for each income category. Table 3-7 summarizes the total number of new worker households by land use type and income category, before an adjustment for employee commuters is made. Generated Need for Affordable Housing - Before Adjusting for Commuters Santa Monica Non-Residential Nexus Study Household Income Categories Extremely Low Income Very Low Income Low Income Moderate Income Total Affordable Need Generated Over-Moderate Income Total Employee Households

Table 3-7

Office

Hospital

Hotel

Retail

16.7 84.5 57.5 20.3 179.0 87.1 266.1

10.5 53.1 26.7 5.4 95.7 35.0 130.7

17.4 20.8 5.3 0.9 44.3 4.4 48.8

38.6 70.8 30.1 6.7 146.2 26.0 172.2

Industrial Institutional 16.7 55.3 36.1 9.4 117.5 28.8 146.4

14.7 79.4 51.8 17.0 162.9 81.1 243.9

Creative

Medical Office

13.8 61.0 59.9 20.1 154.8 111.3 266.1

11.8 59.5 29.9 6.0 107.1 39.2 146.4

Note: Refer to Attachment 1 for detailed wage data by occupation type. Sources: US Census Bureau; Bureau of Labor Statistics; California Department of Housing and Community Development; and City of Santa Monica

Step 9: Calculate Worker Households Income Categories and Adjust for Commute Patterns This step adjusts the total number of worker households needing affordable housing by the percentage of current workers in the City who may also live in the City. This adjustment is made because, as discussed in Section 2, not all of the new employees in new non-residential buildings will live in the City. This adjustment is reflected in Table 3-8, which shows the total number of new worker households, by income category and building type that would live in the City. This also reflects the number of affordable housing units needed to accommodate the new employment in the City that results from the non-residential land types.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Generated Need for Affordable Housing - After Adjusting for Commuters Santa Monica Non-Residential Nexus Study % of Santa Monica Employees with Jobs inside City limits

34%

Household Income Categories

Table 3-8

Office

Hospital

Hotel

Retail

5.7 28.9 19.6 7.0 61.2 29.8 91.0

3.6 18.1 9.1 1.8 32.7 12.0 44.7

5.9 7.1 1.8 0.3 15.2 1.5 16.7

13.2 24.2 10.3 2.3 50.0 8.9 58.9

Extremely Low Income Very Low Income Low Income Moderate Income Total Affordable Need Generated Over-Moderate Income Total Employee Households

Industrial Institutional 5.7 18.9 12.3 3.2 40.2 9.9 50.0

5.0 27.1 17.7 5.8 55.7 27.7 83.4

Creative

Medical Office

4.7 20.9 20.5 6.9 52.9 38.0 91.0

4.0 20.3 10.2 2.1 36.6 13.4 50.0

Note: Refer to Attachment 1 for detailed wage data by occupation type. Sources: US Census Bureau; Bureau of Labor Statistics; California Department of Housing and Community Development; and City of Santa Monica

Step 10 – Calculate Total Affordable Housing Needs Created by Non-Residential Buildings The final step in the analysis adjusts the worker household per 100,000 square feet of land use building area to calculate the total worker households, by income category, that would live in the City based on anticipated City growth. This is reflected in Table 3-9, which multiplies the factors identified in Table 3-8 by the total estimated square feet for the non-residential building types to be developed during the period 2010 to 2030, as identified in the LUCE. The resulting total net new worker households living in the City serves to reflect the total number of affordable housing units, by income category, which is attributable to the total estimated non-residential building types if the City were to be built-out as envisioned in the LUCE. Total Projected Affordable Housing Need (2010-2030) Santa Monica Non-Residential Nexus Study

Estimated 2010 LUCE Net Change Extremely Low Income Very Low Income Low Income Moderate Income Total Affordable Need Generated Over-Moderate Income Total Employee Households

Table 3-9

Office

Hospital

Hotel

Retail

Industrial

Institutional

Creative

Medical Office

448,980

763,123

628,578

566,803

0

196,029

699,709

187,327

Total 3,490,549

25.6 129.7 88.2 31.2 274.7 133.7 408.4

27.4 138.5 69.6 14.1 249.5 91.4 340.9

37.3 44.8 11.4 1.9 95.3 9.5 104.8

74.8 137.1 58.4 13.0 283.2 50.5 333.6

0.0 0.0 0.0 0.0 0.0 0.0 0.0

9.8 53.2 34.7 11.4 109.2 54.3 163.5

33.1 146.0 143.2 48.1 370.3 266.2 636.5

7.5 38.1 19.1 3.9 68.6 25.1 93.7

215.5 687.3 424.5 123.5 1450.8 630.8 2,081.6

1

As discussed in this Report, the Income Limits for Los Angeles County are unique in that lower income is equal to median income.

Sources: City of Santa Monica Land Use and Circulation Element (LUCE, 2010), US Census Bureau; Bureau of Labor Statistics; and California Department of Housing and Community Development; and City of Santa Monica

Summary As summarized in Table 3-9, the total development of 3.49 million square feet of non-residential buildings to be developed during the period 2010-2030 would generate about 2,082 new worker households living in the City; 1,451 of those households would earn less than 120% of the area median income, of which 1,327 would be lower-income (extremely low-, very low- and low-incomes). For non-residential buildings, the highest new worker household generating land use building type is creative, followed by hospital and medical offices, followed by office, then retail buildings. The net new worker household data for each building type shown in Table 3-9 is summarized as follows:

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica 1.

The development of 950,450 square feet of hospital and medical buildings would generate a total of 434.6 worker households living in the City; 318.1 of those households would earn less than 120% AMI, of which 300.1 would be lower-income.

2.

Similarly, the development of 448,980 square feet of office buildings would generate a total of 408.4 new worker households living in the City; 274.7 of those worker households would earn less than 120% of the area median income, of which 243.5 would be lower-income.

3.

The estimated 566,803 square feet of retail development would generate 333.6 worker households living in the City; 283.2 of those worker households would earn less than 120% AMI, of which 270.2 would be lower-income.

4.

The estimated 699,709 square feet of creative buildings would generate 636.5 worker households living in the City; 370.3 of those worker households would earn less than 120% AMI, of which 322.2 would be lower-income, reflecting the lowest percentage (50.6%) of lower income households of any land use building type.

5.

In contrast, the development of 628,578 square feet of hotel buildings would generate 104.8 worker households; 95.3 of those worker households would earning less than 120% AMI, of which 93.4 would be lower-income, reflecting the highest percentage (89.1%) of lower income households of any building type.

6.

The development of 196,029 square feet of institutional buildings would generate a total of 163.5 new worker households living in the City; 109.2 of those households would earn less than 120% of the area median income, of which 97.8 would be lower-income.

Since the Industrial land use category is not expected to grow, there is no net employment generation reflected for the land use.. The data presented in the tables above are used in Section 5 to produce to total supportable per square foot impact linkage fees for each building type.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica SECTION 4: AFFORDABLE HOUSING COSTS The Non-Residential Nexus Study as presented in Sections 1 – 3 demonstrated the demand generated for new affordable housing units in the City as a result of the development of eight prototypical nonresidential buildings identified in the LUCE. This demand is presented in terms of worker households which in turn generate the need for new housing units. In order to translate this need into an appropriate impact fee, the cost to develop affordable housing units in the City must be calculated. Discussions with City staff along with a review of currently proposed and recently completed projects in the City indicate that multifamily rental housing units (apartments) rather than ownership housing units (townhomes or condominiums) will be primarily developed in the City and will be the primary residential option for new worker households of very low-, low-, and moderate-incomes. Therefore, the following analysis is based on costs associated with rental housing units. A prototypical apartment development with a density of 50 dwelling units per acre was created to estimate the cost to develop affordable units in the City. The impact linkage fees calculated in Section 5 use the estimated development cost to identify the funding gap associated with the construction of a rental product. Introduction Affordable housing costs are generally a function of the Qualifying Income Limits and the Area Median Income adjusted for family size appropriate to the unit. As discussed previously, the City’s AHPP defines qualifying annual income limits and establishes the maximum allowable monthly rents per income category adjusted for household size appropriate for the unit. A summary of the AHPP 2013 Qualifying Income Limits is provided in Table 3-6. The calculation of affordable housing rents is based on the allowable limitation by income category of a household, adjusted for family size, multiplied by the area median income adjusted for that household size. Affordable Housing Cost Affordable housing cost for rental units is established annually for the AHPP to reflect the affordable housing cost, including an allowance for utilities, in terms of the maximum affordable monthly rent per income category adjusted for household size as a percentage of the gross AMI allowing for the deduction of an allowance for utilities. The AHPP calculation of affordable rent is as follows: •

For extremely low-income households, the product of 30% times 30% of the AMI adjusted for family size appropriate for the unit.

•

For very low-income households, the product of 30% times 50% of the AMI adjusted for family size appropriate for the unit.

•

For low-income households, the product of 30% times 60% of the AMI adjusted for family size appropriate for the unit.

•

For moderate-income households, the product of 30% times 100% of the AMI adjusted for family size appropriate for the unit.

The AHPP 2013 maximum affordable gross monthly rent, before deducting an allowance for utilities, for each income category by unit size is summarized in Table 4-1.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

2013 Maximum Monthly Affordable Rents Santa Monica Linkage Fee Analysis Extremely Low Maximum Allowable Very-Low Maximum Unit Type Rent Allowable Rent Studio 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom

$340 $389 $437 $486 $525

$567 $648 $729 $810 $875

Table 4-1

Low Maximum Allowable Rent

Moderate Maximum Allowable Rent

$680 $778 $875 $972 $1,050

$1,247 $1,426 $1,603 $1,782 $1,925

Based on California Department of Housing and Community Development 2013 Income Limits

Rental Apartments Valuation The valuation of rental apartment units is a function of the annual gross income of a unit reduced by vacancies and operating expenses to determine the net operating income (“NOI”). The industry practice in establishing the value of rental units is to apply a reasonable market capitalization rate to the NOI to identify the value based on the ability to achieve a comparable investment rate to similar properties. Since vacancies and operating costs are generally spread evenly across all units in a project, it is fairly easy to determine the NOI potential of a unit based on comparable market vacancy factors and operating costs. A lender’s underwriting standards would generally use a 5% vacancy factor. Comparable annual operating expenses (excluding real estate taxes) for an affordable rental unit are approximately $5,600 per unit. The exclusion of real estate taxes for affordable apartments is deemed reasonable under the assumption that most affordable apartment projects are constructed in conjunction with non-profit housing developers and receive exemptions from property taxes. In estimating the value of rental apartment projects, it is useful to use a weighted average basis reflecting the blended rents, mix of bedrooms and unit sizes in a project based on similar affordable rental apartments in the area. In Santa Monica, the bedroom size-unit mix for market-rate and affordable rental apartment projects is fairly similar. For purposes of this analysis for a typical 50 unit affordable apartment development, a mix of 25% studio units, 25% one-bedroom, 25% two-bedroom and 25% three-bedroom units of 500, 600, 850, and 1,080 square feet respectively is used, with the weighted average unit size of about 758 square feet. The affordable net monthly rent, after deducting an allowance for utilities, for each unit size and income category is used to determine the weighted average rent for each income category, as follows: • • • •

For For For For

extremely low-income units the weighted monthly rent is $351 ($0.46 /s.f.) very low-income units the weighted monthly rent is $626 ($0.83 /s.f.). low-income units the weighted monthly rent is $764 ($1.01 /s.f.). moderate-income units the weighted monthly rent is $1,452 ($1.92 /s.f.).

The market value gap reflects the difference between the capitalized value of the affordable unit and estimated cost to develop the unit, which will generally closely approximate the costs of constructing market rate units in the area. A key distinction between the market value gap and the development

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica funding gap is that the capitalized value of the market rate unit may exceed the actual development cost of the unit, due to the market forces of supply and demand which may serve to increase prices above the cost to produce or replace the unit. Use of the capitalization approach to identify the value of incomerestricted affordable units is problematic in that the selection of the appropriate capitalization rate is impeded by investor perception of risks associated with the long-term rent restrictions which may not keep pace with inflating operating costs. Tables 4-2 and 4-3 reflect the calculation of the capitalized values and the respective market value gap for affordable rental units under the City’s AHPP. 2013 Monthly Affordable Rents Market Capitalization (per Unit) Santa Monica Linkage Fee Analysis Extremely LowIncome Gross Income

1

$5,895

Less 5% Vacancy

Table 4-2

Very LowIncome

LowIncome

ModerateIncome

$7,514

$9,167

$17,428

($295)

($376)

($458)

($871)

Less Operating Costs

($5,600)

($5,600)

($5,600)

($5,600)

Net Operating Income

$0

$1,539

$3,108

$10,956

Capitalized Value @ 5.5% Rate

$0

$27,973

$56,512

$199,207

1

Extremely Low-Income category gross income does not exceed operating costs. Therefore, the gross income amount includes an additional $140/month rent subsidy to cover operating costs, which could be comprised of CDBG or funds allocation. HOME

Rental Apartment Market Valuation Gap (per Unit) Santa Monica Linkage Fee Analysis

Unit Value2 Construction Cost2,3 Allocated Land Cost2

Table 4-3

Extremely LowIncome1 $0 ($274,391) ($130,000)

Very LowIncome $27,973 ($274,454) ($130,000)

LowIncome $56,512 ($274,519) ($130,000)

ModerateIncome $199,207 ($274,844) ($130,000)

($454,640)

($376,481)

($348,007)

($205,637)

Market Valuation Gap 1

Unit Value for Extremely Low Income category is zero due to the fact that the gross rent revenue does not exceed estimated operating costs. The Market Valuation Gap referenced reflects the inclusion of an additional rental subsidy ($140) amortized at 2%, which equates to an increase of $50,249.

2

Refer to Attachment 2 for calculations

3

Based on a 6.0% Loan and 6.5% construction interest.

Note: Allocated Land Cost based on $149.22 per square foot divided by the assumed 50 units per acre density.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

Affordable Housing Development Funding Gap The development funding gap is more useful in reflecting the subsidy or assistance amounts needed to create affordable housing units for multifamily rental units. Calculation of the development funding gap analysis reflects the difference between the total cost of developing the unit and the amortized value of the net operating income of the unit, as reflected by the maximum supportable loan amount and the capitalized value of excess cash flow. Two steps are used to illustrate the incremental increases in the funding gap associated with affordable housing units including the calculation of the construction funding gap and calculation of the development funding gap that reflects the inclusion of the land cost. The major cost components for affordable housing units are similar to those for market rate units in terms of unit-cost, with the exception perhaps for somewhat smaller unit sizes, slightly lower quality materials and finishes, and a lower developer fee. For this analysis, the estimated development costs were based on independent construction cost data obtained from Marshall and Swift Valuation Services, which is a national comprehensive database that is updated monthly and serves the development and insurance industries. Since a nexus analysis should address the lower end of the housing market to reflect affordability, this analysis focuses on rental apartments (see Attachment 2 for multifamily rental housing pro forma). For affordable rental apartments, the construction funding gap is reflected by the difference between the direct construction cost of the unit and the amortized value of the affordable unit’s projected net operating income. The construction funding gap amount is increased for the allocated land cost to reflect the total development funding gap associated with producing the affordable units. The weighted average development funding gaps for an affordable rental unit by income level are summarized in Table 4-4. Rental Apartment Development Funding Gap (per Unit) Santa Monica Linkage Fee Analysis

Amortized NOI1 Construction Cost1, 2 Allocated Land Cost1 Development Funding Gap

Table 4-4

Extremely-Low Income $0 ($274,391) ($130,000)

Very-Low Income $22,244 ($274,454) ($130,000)

Low Income $44,938 ($274,519) ($130,000)

Moderate Income $158,406 ($274,844) ($130,000)

($454,640)

($382,210)

($359,582)

($246,438)

1

Amortized NOI for Extremely Low Income category is zero due to the fact that the gross rent revenue does not exceed estimated operating costs. The Development Funding Gap referenced reflects the inclusion of an additional rental subsidy ($140) amortized at 2%, which equates to an increase of $50,249.

2

Refer to Attachment 2 for calculations

3

Based on a 6.0% Loan and 6.5% construction interest.

Note: Allocated Land Cost based on $149.22 per square foot divided by the assumed 50 units per acre density.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica The development funding gap amounts shown in Table 4-4 were used in conjunction with the affordable housing need calculated by the nexus analysis in Section 3, to determine the applicable impact linkage fees for new non-residential buildings, as discussed in Section 5.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica SECTION 5: FEE ANALYSIS AND RECOMMENDATIONS The Affordable Housing Impact Linkage Fee (“Linkage Fee”) for non-residential projects in the City reflects the financial equivalent needed to develop housing units affordable to extremely low-, very low-, low- and moderate-income persons and families in accordance with the quantified housing needs generated by the development of non-residential projects, as shown in the Non-Residential Nexus Study. The estimated funding deficit or “gap” amount reflects the cost associated with developing housing units affordable to extremely low-, very low-, low-, and moderate-income households. The estimated funding gap is determined based on the difference between the total allowable housing cost, as reflected by the amortized value of the operating income for each income category, and the estimated cost to develop the affordable housing unit. Approach and Methodology The methodology for identifying the full financial equivalent of producing affordable housing units reflects the assumption that the impact is reflected by the total funding gap associated with the cost of producing the required affordable housing unit(s). The following summarizes the methodology used for identifying the development funding gap and the corresponding impact fee amounts. 1.

Identification of the current affordable housing costs in accordance with the requirements under the H&SC and the AHPP, which provides the methodology for calculating affordable housing costs for rental units.

2.

Determination of the total rent revenue, with deductions for utilities, based on the maximum net rent limits per each income category.

3.

Preparation of development financial including pro forma cost analysis for a prototypical rental apartment (50 dwelling units/acre) on a weighted unit basis using comparable market building prototypes and unit sizes to estimate direct and indirect construction costs, financing costs, base developer fee, and estimated land costs, to identify the total estimated development costs. A detailed development financial pro forma for the prototypical rental apartment complex is included as Attachment 2.

4.

Calculation of the net operating income reflecting the difference between the total annual net rent revenues less the annual operating expenses, which is use to establish the amortized value or maximum loan amounts that may be derived for each income category.

5.

The difference between the total estimated development cost and the full amortized value of the net operating income per unit reflects the affordable development funding gap associated with the affordable rent for each income category.

6.

The weighted average development funding gap for each income category is then multiplied by the income category’s proportion of the total affordable units generated, as reflected in the NonResidential Nexus Study (Section 3).

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Rental Apartment Projects The median market rental rates for apartments within the City were reviewed to identify the market rental rate based on unit sizes and median rents. The data was used to identify the median market rent as $1,470 per month, while the corresponding weighted affordable housing rent is $351 for extremely lowincome unts, $626 for very low-income units and $764 for low-income units. As identified in Section 4, current market conditions and construction cost estimates for a prototypical 50-unit apartment development would result in development funding deficits for affordable apartment units as follows (refer to Table 4-4): Extremely Low-Income Unit

$454,640

Very Low-Income Unit

$382,210

Low-Income Unit

$359,582

Moderate-Income Unit

$246,438

As footnoted, the weighted extremely low-income rent at $351is not sufficient to fund the annual operating expenses for the unit and must therefore rely on an additional monthly rent subsidy of $140 per unit. The rent subsidy amount is amortized a 2% for 30 years to identify present value, which is added to the cost in order to identify the total gap funding amount for the extremely low-income units (see Attachment 2). The indicated development funding deficits reflect the financial impacts associated with producing the affordable rental units without the benefit of tax credits to leverage the project, which would also reflect the 100% impact fee amount necessary for the City to produce an affordable unit for each income category. Affordable rental apartment projects often receive financial assistance from local, State, and Federal funding sources including 4% or 9% low income housing tax credit equity to reduce the funding deficits to make the development more financially feasible. The future availability of such assistance, however, cannot be assured. Accordingly, the funding gap analysis uses the 100% funding gap amount as the basis for determining the impact fee amounts. Table 5-1 identifies the development funding deficits for affordable rental units. Apartment Unit Gap Summary1 Santa Monica Linkage Fee Analysis

Construction Funding Gap2 :

Table 5-1

Extremely LowIncome Unit

Very Low-Income Unit

Low-Income Unit

Moderate-Income Unit

($274,391)

($252,210)

($229,582)

($116,438)

(excludes land cost allocation)

Total per unit construction cost 3 :

$274,577

2

Development Funding Gap :

($454,640)

($382,210)

($359,582)

($246,438)

(includes land cost allocation)

Total per unit development cost

3

:

$404,577

1

Apartment development assumption based on 50 du/ac density with market mix reflecting 25% Studio, 25% 1 BR units, 25% 2 BR units, and 25% 3 BR units.

2

Development assumptions based on a 6.0% loan and 6.5% construction interest.

3

Weighted cost per unit for all income categories.

Source: Refer to Attachment 2

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Impact Linkage Fee Calculation As indicated above, the recommended methodology for identifying a maximum impact fee amount reflects the assumption that the Linkage Fee should reflect the amount necessary to fund 100% of the cost to develop the affordable unit(s); that is the full production cost of the affordable unit. The funding gap is translated into a per square foot fee by utilizing the unit need per 100,000 square foot by income category. The financial impacts associated with the affordable housing units are determined by multiplying the development funding gap by the affordable housing generated need as identified in Table 3-8 of the Nexus Study (shown below). Generated Need for Affordable Housing - After Adjusting for Commuters Santa Monica Non-Residential Nexus Study % of Santa Monica Employees with Jobs inside City limits

34%

Household Income Categories Extremely Low Income Very Low Income Low Income Moderate Income Total Affordable Need Generated Over-Moderate Income Total Employee Households

Table 3-8

Office

Hospital

Hotel

Retail

5.7 28.9 19.6 7.0 61.2 29.8 91.0

3.6 18.1 9.1 1.8 32.7 12.0 44.7

5.9 7.1 1.8 0.3 15.2 1.5 16.7

13.2 24.2 10.3 2.3 50.0 8.9 58.9

Industrial Institutional 5.7 18.9 12.3 3.2 40.2 9.9 50.0

5.0 27.1 17.7 5.8 55.7 27.7 83.4

Creative

Medical Office

4.7 20.9 20.5 6.9 52.9 38.0 91.0

4.0 20.3 10.2 2.1 36.6 13.4 50.0

Note: Refer to Attachment 1 for detailed wage data by occupation type. Sources: US Census Bureau; Bureau of Labor Statistics; California Department of Housing and Community Development; and City of Santa Monica

The Linkage Fee for each land use type on a per square foot basis is derived by multiplying the gap funding amount times the number of households indentified in Table 3-8 for each building type, with the sum divided by 100,000 based on the 100,000 square foot building prototype. For example, the per square foot linkage fee for extremely low-income units without any financial assistance for the office building type is calculated as follows: $454,640 (Gap) X 5.7 (Households) = $2,591,448 / 100,000 square feet = $25.91

The impact fee for each income group and land use type is calculated as illustrated above, with the sum of the impact fees for each income group within each land use type identifying the full impact fee associated with each land use type. Table 5-2 identifies the full impact fee per square foot as a result of the construction of non-residential development for the three scenarios identified above. Table 5-2 also provides reduced impact fee alternatives of between 5% and 25%, as found in other communities to mitigate the cost impacts to future non-residential development in the City. The reduced impact fee considerations are addressed below.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Per Square Foot Non-Residential Impact Fees without LIHTC Mitigated Funding Santa Monica Linkage Fee Analysis Development Funding Gap Extremely Low Income Very Low Income Low Income Moderate Income Full Impact Fee

Impact Fee Options (per Square Foot)

$454,640 $382,210 $359,582 $246,438

5% 10% 15% 20% 25%

Office

Hospital

Table 5-2

Hotel

Retail

Industrial Institutional

Creative

Medical Office

Average

$25.91 $110.44 $70.63 $17.13 $224.11

$16.35 $69.36 $32.77 $4.54 $123.02

$26.99 $27.21 $6.51 $0.73 $61.43

$59.96 $92.44 $37.03 $5.64 $195.07

$25.91 $72.31 $44.36 $7.94 $150.52

$22.80 $103.76 $63.65 $14.34 $204.55

$21.48 $79.72 $73.59 $16.94 $191.74

$18.31 $77.68 $36.71 $5.09 $137.78

$27.21 $79.12 $45.66 $9.04 $161.03

$11.21 $22.41 $33.62 $44.82 $56.03

$6.15 $12.30 $18.45 $24.60 $30.76

$3.07 $6.14 $9.21 $12.29 $15.36

$9.75 $19.51 $29.26 $39.01 $48.77

$7.53 $15.05 $22.58 $30.10 $37.63

$10.23 $20.45 $30.68 $40.91 $51.14

$9.59 $19.17 $28.76 $38.35 $47.93

$6.89 $13.78 $20.67 $27.56 $34.45

$8.05 $16.10 $24.15 $32.21 $40.26

Sources: Tables 3-8 and 5-1

Impact Linkage Fee Consideration For comparison purposes, a survey of similar jurisdictions’ non-residential impact linkage fees was conducted, with the result summarized in Table 5-5. There is a wide range in the linkage fee amounts imputed, which nevertheless reflect a fairly substantial reduction from the full cost associated with the affordable housing funding gap. In the immediate area, the City of Los Angeles has recently completed a nexus study and linkage fee analysis using a similar approach and methodology as this Report. While still pending review and action, the Los Angeles linkage fee alternatives appear to be similar as those evaluated herein, reflecting a range for consideration from the lower-end range to the higher-end range as identified and discussed below. The full financial impacts associated with the demand generated by non-residential uses in Santa Monica are very substantial, with the full added costs very likely to impede future development in the City. Accordingly, reduced fee levels were evaluated, which are meant to avoid adverse economic impacts on the developers of new non-residential projects in the City. A range of reduced fee amounts of between 5% and 25% were evaluated for comparison to other jurisdictions, as well as to identify to potential cost impacts to the construction of the various building types (see Attachment 3). The low-, mid-, and highrange fee amounts at 5%, 10% and 15% respectively, generally reflect the range of fees imputed in other jurisdictions, with San Francisco being highest at the mid-range. The fee schedule range under review in the City of Los Angeles ($5.69 to $18.09 at the reduced 15% level) is slightly lower than the reduced 10% level reflected in this Report primarily due to the lower affordable housing funding gap requirements in the City, which result from a combination of lower cost building types, lower land costs, and no prevailing wage impacts.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Non-Residential Linkage Fees for California Jurisdictions Santa Monica Linkage Fee Analysis Jurisdiction 3

Berkeley Culver City4 Cupertino5 Hollywood (City of Los Angeles)6 Oakland7 Palo Alto8 Pasadena4 Pleasanton San Diego (City)6, 9 San Francisco (City & County)10, 11 San Luis Obispo (County)12 Santa Barbara4 Sonoma (County)13 Walnut Creek14 West Hollywood15

Table 5-5

Population1 Region 115,716 39,210 59,620 3,863,839 399,326 66,368 140,020 71,871 1,326,238 825,811 272,177 89,681 490,423 65,684 34,853

Year Adopted

Bay Area Southern California Bay Area Southern California Bay Area Bay Area Southern California Northern California Southern California Bay Area Coastal California Coastal California Northern California Bay Area Southern California

1993 n/a 1993 n/a 2002 1984 n/a Unknown 1990 1996 2008 n/a 2005 2005 1986

Office Fee2 Retail Fee2 Blended Fee2 n/a None n/a None n/a n/a None n/a $1.06 $22.83 $2.25 None $2.40 n/a n/a

n/a None n/a None n/a n/a None n/a $0.64 $21.30 $3.24 None $4.15 n/a n/a

$4.00 None $5.56 None $4.74 $18.44 None $2.83 n/a n/a None None None $5.00 $2.85

1

Population projections from California Department of Finance as of January 1, 2013. $/square foot of new development. 3 Fee by land use. Industrial - $2.00. 7,500 square-foot threshold. 4 City staff indicated there is currently no discussion regarding the adoption of a fee. 5 Fees by land use. Office/Industrial/Hotel/Retail/R&D - $5.56, Planned Industrial Park - $2.79. 6 Under review. 7 25,000 square-foot exemption. 8 Certain uses exempt, including churches, colleges and universities, commercial recreation, hospitals and convalescent facilities, private clubs, lodges, fraternal organizations, private educational facilities, retail uses smaller than 1,500 square feet, hazardous materials storage, and on site childcare. 9 Fees by land use. Hotel - $0.64, Research & Development - $0.80, Manufacturing - $0.64, Warehouse - $0.27. 10 Fees by land use. Entertainment - $21.30, Hotel - $17.10, PDR - $17.95, R&D - $15.21, Small Enterprise/Workspace - $17.95. 11 25,000 square-foot threshold. 12 Fees by land use. Hotel - $3.40, Industrial - $1.35, Commercial Greenhouses - $0.07, Other Non-Residential - $2.97. 13 Fees by land use. Commercial Hotels - $2.40, Industrial/warehousing/agricultural processing - $2.48, excludes first 2,000 square feet of building floor area. 14 1,000 square-foot exemption. 15 10,000 square-foot threshold. 2

Sources: California Department of Finance, City fee schedules, and phone calls with jurisdictions conducted in July 2013.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica ATTACHMENTS

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Attachment 1: Occupational Categories and Wage Data

41

45

COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

42

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

45

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

46

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

47

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

48

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

49

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

50

54

COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

51

55

COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Attachment 2: Affordable Housing Product Type Pro Forma

52

56

COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica FINANCIAL SUMMARY FOR RENTAL UNITS 50 DU/AC MAX DENSITY SANTA MONICA DEVELOPMENT SITE Project Programming Summary

Moderate-Income Units

Acres Est. Density (d.u./acre) Wt. Avg. Unit Size Total Units I.

0.30 50 758 15

Low-Income Units

Very Low-Income Units

Extremely Low-Income Units

0.28 50 758 14

0.22 50 758 11

0.20 50 758 10

Total 1.00 50.0 758 50

Acres Density Avg. Size Units

Revenue Wt. Avg. Rent Est. Annual Gross Rent Revenue Vacancy Loss Real Estate Taxes Operating Expenses Net Operating Income Available for Debt Service Monthly Debt Service Max. Loan Amount

5% 1.00%

1.15

6.00%

$1,452 $261,416 ($13,071) $0 ($84,000) $164,345

17,427.75 per unit ($871) ($5,600) $10,956

$764 $128,331 ($6,417) $0 ($78,400) $43,514

9,166.50 per unit ($458) ($5,600) $3,108

$626 $82,657 ($4,133) $0 ($61,600) $16,924

$1,539

$491 $58,947 ($2,947) $0 ($56,000) $0

$22,244

7,514.25 per unit ($376) ($5,600)

$142,909

$37,839

$14,716

$0

$11,909 $1,986,336

$3,153 $525,931

$1,226 $204,548

$0 $0

$158,406

$44,938

1

5,894.74 per unit ($295) ($5,600) $0

$3,334 $531,351 ($26,568) $0 ($280,000) $224,784

$5,600

$195,464 $16,289 $2,716,815

$0

30

Capitalized Project Value II.

5.5%

$2,988,099 $199,207 / Unit

$791,172 $56,512 / Unit

$307,708 $27,973 / Unit

$0 $0 / Unit

$4,086,978

Costs Directs Site Work Residential Building Garage/Parking Structure @ 1.7 per unit Construction Contingency General Conditions Insurance & Bonds Contractor Fee Total Directs Indirects A&E Fees City Fees & Permits Taxes A&D Loan Fees Construction Interest (16 mos.) Sales & Marketing Builder G&A / Mgmt. Soft Contingency Total Indirects

8.0% 4.0% 2.0% 6.0%

7.0% Allow 1.1% 2.0% 6.5% 3.5% 1.0% 4.0%

Subtotal Costs Builder Profit Total Construction Costs

8.0%

Construction Funding Surplus (Deficit) Allocated Land Cost / Sq.Ft.

$ Per Bldg SF 14.52 144.12 98.41

$154,000 $1,528,410 $796,372

$ Per Bldg SF 14.52 144.12 98.41

$121,000 $1,200,893 $625,721

$ Per Bldg SF 14.52 144.12 98.41

$110,000 $1,091,721 $568,837

$ Per Bldg SF 14.52 144.12 98.41

$550,000 $5,458,606 $2,844,184

Cost Per Unit 11,000 109,172 56,884

$212,467 $106,233 $53,117 $159,350 $3,187,005

18.70 9.35 4.67 14.02 280.48

52.5%

$198,303 $99,151 $49,576 $148,727 $2,974,538

18.70 9.35 4.67 14.02 280.48

52.5%

$155,809 $77,905 $38,952 $116,857 $2,337,137

18.70 9.35 4.67 14.02 280.48

52.5%

$141,645 $70,822 $35,411 $106,233 $2,124,670

18.70 9.35 4.67 14.02 280.48

52.5%

$708,223 $354,112 $177,056 $531,167 $10,623,349

14,164 7,082 3,541 10,623 $212,467

$185,909 $120,000 $29,640 $63,740 $165,724 $9,150 $31,870 $24,241 $630,274

16.36 10.56 2.61 5.61 14.59 0.81 2.80 2.13 55.47

10.4%

$173,515 $112,000 $27,664 $59,491 $154,676 $4,492 $29,745 $22,463 $584,046

16.36 10.56 2.61 5.61 14.59 0.42 2.80 2.12 55.07

10.3%

$136,333 $88,000 $21,736 $46,743 $121,531 $2,893 $23,371 $17,624 $458,231

16.36 10.56 2.61 5.61 14.59 0.35 2.80 2.12 54.99

10.3%

$123,939 $80,000 $19,760 $42,493 $110,483 $2,063 $21,247 $15,999 $415,985

16.36 10.56 2.61 5.61 14.59 0.27 2.80 2.11 54.92

10.3%

$619,695 $400,000 $98,800 $212,467 $552,414 $18,597 $106,233 $80,328 $2,088,536

12,394 8,000 1,976 4,249 11,048 372 2,125 1,607 $41,771

$3,817,278

335.95

$3,558,583

335.56

$2,795,368

335.48

$2,540,654

335.40

$12,711,884

$254,238

$305,382 $4,122,661

26.88 362.83

$284,687 $3,843,270

26.84 362.40

$223,629 $3,018,998

26.84 362.32

$203,252 $2,743,907

26.83 362.23

$1,016,951 $13,728,835

$20,339 $274,577

($1,746,572) $149.22

Total Development Costs

$1,950,000 $6,072,661

Development Funding Surplus (Deficit) Capitalized Excess Cash Flow

$165,000 $1,637,582 $853,255

($3,696,572) 5.5%

$389,752

($116,438)

171.62

Per Unit 32.1%

534.45

Per SF

($246,438)

Per Unit

($3,214,143) $1,820,000 $5,663,270 ($5,034,143)

($229,582)

171.62

Per Unit 32.1%

534.02

Per SF

($359,582)

Per Unit

$103,196

($2,774,314) $1,430,000 $4,448,998 ($4,204,314) $40,136

($252,210)

171.62

Per Unit 32.1%

533.93

Per SF

($382,210)

Per Unit

($2,743,907) $1,300,000 $4,043,907 ($4,043,907)

($274,391)

Per Unit

171.62

32.1%

533.85

Per SF

($454,640)

Per Unit 2

($10,478,935)

($209,579)

$6,500,000

$130,000

$20,228,835

$404,577

($16,978,935)

($339,579)

$0

Footnotes: 1

This amount includes an additional $140/month rent subsidy, which could be comprised of CDBG or HOME funds allocation.

2

The per unit amount referenced reflects the inclusion of an additional rental subsidy ($140) amortized at 2%, which equates to an increase of $50,249.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

Market Rate Apartments Studio 1 Bedroom 2 Bedrooms 3 Bedrooms

Market Unit Mix

Average Unit Size

Median Market Rent

EL Income Rent

VL Income Rent

Low Income Rent

Moderate Income Rent

25% 25% 25% 25%

500 600 850 1,080

n.a. $2,339 $3,546 $4,409

$290 $330 $371 $412

$517 $589 $663 $736

$630 $719 $809 $898

$1,197 $1,367 $1,537 $1,708

758

n.a.

$351

$626

$764

$1,452

Wt.Avg.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

Multiple Residential Dwelling Units

50 d.u./ac Condos/Apts

4- 5 Stories Podium Construction w/ elevators and fire sprinklers Building Quality

Bldg. Class

Base

Sprinklers

Elevators

Excellent D $120.77 $1.91 $2.17 * Good D $88.95 $1.91 $2.17 * Average D $65.24 $1.91 $2.17 Fair D $56.48 $1.91 $2.17 * Base costs assumes 9' and under ceilings, buildings with elevators and fire sprinklers.

Cost/SF

Adjusted

$124.85 $93.03 $69.32 $60.56

$187.11 $139.43 $103.89 $90.76

Cost Adjustments 1.210 Local Multiplier 1.050 Current Cost Multiplier 0.983 Flr. Area Multiplier 1.200 Prevailing Wage

Sec. 12 Pg. 41

Appliance Allowance Per Unit Notes:

Low

Average

Good

Excellent

$1,309

$2,211

$3,557

$5,590

Class "D" Construction reflects wood or steel studs in bearing walls, full or partial open wood or steel frame , primarily combustible construction; wood or steel floor joists or concrete slab on grade; wood or steel deck; and, almost any material except bearing or curtain walls of solid masonry or concrete. Generally combustible construction. "Good" Type Class D Building Quality reflects good stucco or siding, some brick or stone trim, good roof; good plaster or drywall, painted, hardwood, vinyl composition, carpet; good lighting, one bath per bedroom; package A.C. bedroom; and, package A.C.

Source : Marshall & Swift Valuation Service - Calculator Method / Multiple Residences

1c.

Below Grade Parking Structure w/ 3 - 5 Story Podium Development Over Building

Average Parking Average Parking

Bldg. Class

Base

Fire-Proof

Sprinklers

Courtyard Deck

Cost/SF

Adjusted

A-B CDS

$54.63 $35.37

$5.45 $5.45

$1.91 $1.91

$2.24 $2.24

$64.23 $44.97

$98.41 $68.90

1.210 1.050 1.005 1.200

Cost Adjustments Local Multiplier Current Cost Multiplier

4th Story Prevailing Wage

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica

CLASS OF CONSTRUCTION INDICATORS Class A

B

C

D

S

Frame Structural Steel Columns and beams,fireproofed with masonry, concrete, plaster, or other noncombustible material. Reinforced concrete columns and beams. Fire-resistant construction.

Masonry or concrete load-bearing walls with or without pilasters. Masonry, concrete or curtain walls with full or partial open sttel, wood or concrete frame. Wood or steel studs in bearing wall, full or partial open wood or steel frame, primarily combustible construction. Metal bents, columns, girders, purlins, and girts without fireproofing, incombustible construction.

Floor Concrete or concrete on steel deck, fireproofed.

Roof Formed concrete, precast slabs, concrete or gypsum on steel deck, fireproofed.

Concrete or concrete on steel deck, fireproofed.

Formed concrete, precast slabs, concrete or gypsum on steel deck, fireproofed.

Wood or concrete plank on wood or steel floor joists, or concrete slab on grade.

Wood or steel joists with wood or steel deck. Concrete plank.

Wood or steel floor joists or concrete slab on grade.

Wood or steel joists with wood or steel deck.

Wood or steel deck on steel floor joists, or concrete slab on grade.

Steel or wood deck on steel joists.

Walls Nonbearing curtain walls, masonry, concrete, metal and glass panels, stone, stell studs and masonry, tile or stucco, etc. Nonbearing curtain walls, masonry, concrete, metals and glass panels, stone, steel studs and masonry, tile or stucco, etc. Brick, concrete block, or tile masonry, tilt-up, formed concrete, nonbearing curtain walls.

Almost any material except bearing or curtain walls of solid masonry or concrete. Generally combustible construction. Metal skin or sandwich panels. Generally incombustible.

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COMMERCIAL NEXUS STUDY AND LINKAGE FEE ANALYSIS City of Santa Monica Attachment 3: Linkage Fee Alternatives

Buiding Type Office R&D Gov/Instutional Hotel Medical Offices Hospitals Out Patient/Surgery Centers Light Ind / Manufacturing Restaurants Fast Food Drug Stores Retail Stores Neighborhood Retail Super Markets Mega Whse Stores

Buiding Type Office R&D / Ceative Gov/Instutional Hotel Medical Offices Hospitals Out Patient/Surgery Centers Light Ind / Manufacturing Restaurants Fast Food Drug Stores Retail Stores Neighborhood Retail Super Markets Mega Whse Stores

Direct Total Construction Construction Cost* Cost** $299.00 $148.00 $251.00 $262.00 $323.00 $529.00 $418.00 $91.00 $314.00 $259.00 $162.00 $202.00 $119.00 $135.00 $69.00

$695.35 $344.19 $583.72 $609.30 $751.16 $1,230.23 $972.09 $211.63 $730.23 $602.33 $376.74 $469.77 $276.74 $313.95 $160.47

Analysis of Full Impact Fee 100% Fee % Direct % Total $115.05 $115.05 $24.66 $65.21 $134.10 $141.53 $134.10 $45.43 $96.54 $96.54 $96.54 $96.54 $96.54 $96.54 $96.54

38.5% 77.7% 9.8% 24.9% 41.5% 26.8% 32.1% 49.9% 30.7% 37.3% 59.6% 47.8% 81.1% 71.5% 139.9%

16.5% 33.4% 4.2% 10.7% 17.9% 11.5% 13.8% 21.5% 13.2% 16.0% 25.6% 20.6% 34.9% 30.7% 60.2%

Analysis of Reduced Impact Fee 15% Fee % Direct % Total $17.26 $17.26 $3.70 $9.78 $20.12 $21.23 $20.12 $6.81 $14.48 $14.48 $14.48 $14.48 $14.48 $14.48 $14.48

5.8% 11.7% 1.5% 3.7% 6.2% 4.0% 4.8% 7.5% 4.6% 5.6% 8.9% 7.2% 12.2% 10.7% 21.0%

2.5% 5.0% 0.6% 1.6% 2.7% 1.7% 2.1% 3.2% 2.0% 2.4% 3.8% 3.1% 5.2% 4.6% 9.0%

Analysis of Reduced Impact Fee 5% Fee % Direct % Total $5.75 $5.75 $1.23 $3.26 $6.71 $7.08 $6.71 $2.27 $4.83 $4.83 $4.83 $4.83 $4.83 $4.83 $4.83

1.9% 3.9% 0.5% 1.2% 2.1% 1.3% 1.6% 2.5% 1.5% 1.9% 3.0% 2.4% 4.1% 3.6% 7.0%

0.8% 1.7% 0.2% 0.5% 0.9% 0.6% 0.7% 1.1% 0.7% 0.8% 1.3% 1.0% 1.7% 1.5% 3.0%

Analysis of Reduced Impact Fee 10% Fee % Direct % Total $11.51 $11.51 $2.47 $6.52 $13.41 $14.15 $13.41 $4.54 $9.65 $9.65 $9.65 $9.65 $9.65 $9.65 $9.65

3.8% 7.8% 1.0% 2.5% 4.2% 2.7% 3.2% 5.0% 3.1% 3.7% 6.0% 4.8% 8.1% 7.2% 14.0%

1.7% 3.3% 0.4% 1.1% 1.8% 1.2% 1.4% 2.1% 1.3% 1.6% 2.6% 2.1% 3.5% 3.1% 6.0%

The 5% fees reflect the lower end range more closely approximating the broader experience in other cities.

The 10% fees reflect a mid range that would result in a nominal increase to total construction costs.

Analysis of Reduced Impact Fee 20% Fee % Direct % Total

Analysis of Reduced Impact Fee 25% Fee % Direct % Total

$23.01 $23.01 $4.93 $13.04 $26.82 $28.31 $26.82 $9.09 $19.31 $19.31 $19.31 $19.31 $19.31 $19.31 $19.31

7.7% 15.5% 2.0% 5.0% 8.3% 5.4% 6.4% 10.0% 6.1% 7.5% 11.9% 9.6% 16.2% 14.3% 28.0%

3.3% 6.7% 0.8% 2.1% 3.6% 2.3% 2.8% 4.3% 2.6% 3.2% 5.1% 4.1% 7.0% 6.1% 12.0%

$28.76 $28.76 $6.17 $16.30 $33.53 $35.38 $33.53 $11.36 $24.14 $24.14 $24.14 $24.14 $24.14 $24.14 $24.14

9.6% 19.4% 2.5% 6.2% 10.4% 6.7% 8.0% 12.5% 7.7% 9.3% 14.9% 11.9% 20.3% 17.9% 35.0%

4.1% 8.4% 1.1% 2.7% 4.5% 2.9% 3.4% 5.4% 3.3% 4.0% 6.4% 5.1% 8.7% 7.7% 15.0%

The 15% fees reflect the higher end range approximating the San Francisco fee schedule. * Direct constuction cost dervied from Marshall & Swift Valuation Service data. ** Total Construction Cost exludes land cost and assumes direct cost to reflect about 43% of the total construction cost. Note: Linkage Fee alternatives in tables are expressed as a percent increase to Direct Construction and Total Construction Costs.

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Attachment B

Report

Parks and Recreation Development Impact Fee Study

Prepared for: City of Santa Monica

Prepared by: Economic & Planning Systems, Inc.

August 2013

EPS #121077

1

Table of Contents

1.

INTRODUCTION, RESULTS, AND RECOMMENDATIONS ......................................................... 1 Report Background and Legal Context ......................................................................... 1 Maximum and Recommended Fee Schedules ................................................................ 2 Methodology, Assumptions, and Sources...................................................................... 4 Fee Program Implementation and Administration .......................................................... 5 Report Organization .................................................................................................. 7

2.

POLICY AND FINANCING CONTEXT .............................................................................. 8 Parks and Recreation Master Plan ............................................................................... 8 Parks and Recreation Funding..................................................................................... 9

3.

MITIGATION FEE ACT NEXUS FINDINGS...................................................................... 11

4.

DEVELOPMENT FORECAST AND NEW PARKS DEMAND ....................................................... 12 Existing and Forecast Demographic and Employment Growth ....................................... 12 Service Population and New Parks Demand ................................................................ 15

5.

PARKS AND RECREATION FACILITIES AND COSTS ........................................................... 19 Parkland ................................................................................................................ 19 Parks and Recreation Capital Facilities ....................................................................... 20

6.

DEVELOPMENT IMPACT FEE CALCULATIONS BY LAND USE ................................................. 22 Cost Allocation by Land Use ..................................................................................... 22 Maximum Fee Estimates .......................................................................................... 23

7.

PARKS AND RECREATION FEE COMPARISONS ................................................................ 26 Context ................................................................................................................. 26 Fee Comparisons .................................................................................................... 27

2

List of Tables Table 1

Maximum and Recommended Development Impact Fees ....................................... 3

Table 2

Baseline and Projected Growth in Housing and Resident Population ....................... 13

Table 3

Employment and Projected Growth in Nonresidential Uses.................................... 14

Table 4

Hotel Development and Projected Growth .......................................................... 15

Table 5

Baseline and 2030 Projected Service Population .................................................. 16

Table 6

Estimated Required Parkland Investment to Serve New Growth ............................ 19

Table 7

Cost Estimates of Existing City Parks & Recreation Facilities ................................. 20

Table 8

Total Parks Fee Program Costs .......................................................................... 21

Table 9

Distribution of New Service Population by Land Use Category ............................... 22

Table 10

Fair-Share Cost Allocation by Land Use Fee Category........................................... 23

Table 11

Estimated Maximum Parks Fee per Unit ............................................................. 24

Table 12

Maximum Development Impact Fee Estimates with Administrative Costs ............... 25

Table 13

Comparison of Park Fees .................................................................................. 28

3

1.

INTRODUCTION, RESULTS, AND RECOMMENDATIONS

This Development Impact Fee Report provides the City of Santa Monica (the City) with the necessary technical documentation to support the adoption of a Citywide Development Impact Fee Program to fund parks and recreation capital facilities, including land acquisition, parks improvements, and facilities. It has been prepared by Economic & Planning Systems, Inc. (EPS) under the management of the Community & Cultural Services Department, the Planning and Community Development Department, and the City Attorney’s office. The new parks and recreation development impact fee schedule is intended to replace the City’s current Parks and Recreation Facilities Tax as well as the parks component of the Housing and Parks In-Lieu Fee.

Report Background and Legal Context The City of Santa Monica’s current tax and fee schedule includes two one-time charges on new development that support parks and recreation improvements - a flat one-time $200 per residential unit Parks and Recreational Facilities Tax (Santa Monica Municipal Code Section 6.8) and, as of July 2013, a $5.11 per square foot Housing and Parks In-Lieu Fee (Santa Monica Municipal Code Section 9.04.10.12) on general office only, that is adjusted monthly using an inflation index. The $5.11 per square foot fee applies to the first 15,000 square feet of general office development and increases to $11.35 per square foot for additional development above this size. About half of the revenues from the Housing and Parks in-lieu fee are available to fund parks and recreation improvements. Together, these charges provide only modest revenues to the City due to the low tax on residential development, relative to most cities with parks and recreation fees, and the limited number of general office uses that pay the mitigation fee. The establishment of a new set of parks and recreational capital facilities fees has become prudent in light of: (1) the limited revenues being generated by existing parks funding sources, (2) the loss of other sources of potential capital improvement funding (e.g., redevelopment), (3) the City’s ongoing commitment to expanding and improving its parks and recreational amenities, and, (4) the increasing number of California jurisdictions that are successfully generating parks and recreation capital facilities revenues through development impact fees under the Mitigation Fee Act and/or parkland in-lieu fees under the Quimby Act. The Mitigation Fee Act (AB1600 et seq.) allows the City of Santa Monica to adopt parks and recreation development impact fees on new development to fund the associated, additional costs of providing parks and recreation capital facilities. Unlike Quimby Act parkland in-lieu fees, an alternative form of parks and recreation development fees, the Mitigation Fee Act allows for fees to be charged to all new development that increases the need for capital facilities.1 As a result, the Mitigation Fee Act is the preferred statutory authority for establishing the new parks and recreation development impact fee schedule in the City of Santa Monica.

1

Quimby Act fees under the Subdivision Map Act can only be charged on new, subdivided residential development. In other words, the Quimby Act fees would not apply to apartment development or any nonresidential development, a substantial portion of forecasted future development in the City.

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Parks and Recreation Development Impact Fee Study Report 08/01/13

This Report provides the necessary technical analysis to support a schedule of fees to be established by an Impact Fee Ordinance and Resolution. The Mitigation Fee Act allows the City to adopt, by Resolution, the Parks and Recreation Fee Schedule consistent with the supporting technical analysis and findings provided in this Report. The Resolution approach to setting the fee allows periodic adjustments of the fee amount as may be necessary over time, without amending the enabling Ordinance. The technical analysis in this Report estimates the parks and recreation fee schedule that will fund new development’s “fair share” contribution to future City investments in parks and recreation capital facilities. The key requirements of the Mitigation Fee Act that determine the structure, scope, and amount of the proposed Fee Program are as follows: 

Collected for Capital Facility and Infrastructure Improvements. Development impact fee revenue can be collected and used to cover the cost of capital facilities and infrastructure required to serve new development and growth in the City. However, impact fee revenue cannot be used to cover the operation and maintenance costs of these or any other facilities and infrastructure.



Cannot Fund Existing Needs. Impact fee revenue cannot be collected or used to cover deficiencies in existing City capital equipment and facilities. The portion of capital costs required to meet the needs of the City’s existing population must be funded through other sources. Capital facility investments that increase service standards for existing and new development must be split on a “fair share” basis according to the proportion attributable to each.



Must Be Based on a Rational Nexus. An impact fee must be based on a reasonable nexus, or connection, between new growth and development and the need for a new facility or improvement. As such, an impact fee must be supported by specific findings that explain or demonstrate this nexus. In addition, the impact fee amount must be structured such that the revenue generated does not exceed the cost of providing the facility or improvement for which the fee is imposed.

The City can choose to charge parks and recreation development impact fees below the maximum, supportable fee schedule. Such downward adjustments in the fee schedule, if selected, are typically based on policy considerations related to considerations of development feasibility, fee levels in peer cities, or the unique characteristics of individual development types, such as affordable housing.

Maximum and Recommended Fee Schedules Table 1 shows the City’s maximum supportable parks and recreation fee schedule as well as the recommended fee schedule. The maximum fee schedule is based on the nexus findings and technical analysis contained in this Report and represents the maximum parks and recreation fees the City could charge consistent with the Mitigation Fee Act. The recommended fee schedule reflects a downward adjustment based on considerations of the parks and recreation fees charged in others cities and development feasibility analysis conducted for the City. The new parks and recreation development impact fees will apply to new residential and nonresidential development to fund a share of future parks and recreation capital facilities investments in the City. The fee estimates include a 2 percent fee program administration fee,

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Parks and Recreation Development Impact Fee Study Report 08/01/13

consistent with other Mitigation Fee Act program administrative costs in many other California jurisdictions.2

Table 1

Maximum and Recommended Development Impact Fees1

Fee Categories

Residential (Average) Single Family Units Multi Family Units (Studio/1 bedroom) Multi Family Units (2+ bedrooms)

Persons/ Household

Estimated Maximum Fee

Recommended Fee 2

1.667

$20,238

$5,060

per Dwelling Unit

2.515 1.363 2.196

$30,543 $16,554 $26,661

$7,636 $4,138 $6,665

per Dwelling Unit per Dwelling Unit per Dwelling Unit

$9.24 $5.08 $5.98 $12.45 $5.18

$2.31 $1.27 $1.49 $3.11 $1.30

Nonresidential Office/ Creative Space Medical Office/ Hospital Retail Hotel Industrial

per Sq. Ft. per Sq. Ft. per Sq. Ft. per Sq. Ft. per Sq. Ft.

[1] Includes fee program implementation and administrative costs. [2] Recommended fees include a discount of 75 percent across the board. The City will determine whether to remove this discount over time. Sources: City of Santa Monica; Economic & Planning Systems, Inc.

As shown in Table 1, the maximum parks and recreation development impact fees are $20,238 per average residential unit, ranging from $16,554 to $30,543 depending on the estimated occupancy densities for different housing product types and between $5.08 per square foot and $12.45 per square foot for nonresidential uses. Under the maximum fee schedule, new development would generate new revenues capable of funding sufficient parks and recreation improvements and land acquisition to maintain the current service standard in the City. The maximum parks and recreation development impact fee levels are particularly driven by the substantial investments that would be required to acquire additional land for parks in the City with land acquisition costs accounting for about 72.6 percent of the maximum fee level.

2

The 2 percent administration cost is designed to cover the costs of preparation of the development impact fee as well as the required reporting, auditing, collection and other annual administrative costs involved in overseeing the program. Development impact fee programs throughout California have applied similar administrative charges.

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Fee comparisons with other cities indicate that at these maximum levels, the City would be adopting parks and recreation fees at the highest end of the spectrum for California jurisdictions on both future residential and nonresidential development.3 In addition, development feasibility analysis conducted by HR&A has indicated that the collective increases in transportation, parks and recreation, and affordable housing fees will pose feasibility challenges to new development if adopted at the maximum, allowable levels. As a result, the recommended parks and recreation development impact fee schedule is below the maximum fee level. Specifically, a substantial reduction of the maximum fee (75 percent) is recommended that results in overall recommended fee levels at 25 percent of the maximum level. This reduction seeks to balance the importance of investments in parks and recreation facilities to maintaining quality of life in the City with the cost burdens new fees place on new development. As shown in Table 1, the recommended fee level is an average of $5,060 per residential unit, ranging from $4,138 to $7,636 per unit. For nonresidential development, the recommended fee level ranges from $1.27 per square foot (medical office/hospital development) to $3.11 per square foot (hotel development).

Methodology, Assumptions, and Sources The results of this study are based on a variety of assumptions and sources. Details on the methodology, assumptions, and sources are described in detail in Chapters 4, 5, and 6. Selected underlying assumptions and sources are summarized below: 

Policy Framework. The 1997 Parks and Recreation Master Plan and the associated General Plan Open Space Element outlined a series of strategies and potential investments to provide for a substantial expansion in parks and recreation facilities in the City in the 2000 to 2020 timeframe. The Master Plan provides policy support for the establishment of new parks and recreation fees. The Master Plan recognized the need for major investments and envisioned contributions from a range of financing sources and from all types of park users. At this time, the Master Plan has not been updated for the 2010 to 2030 period (though it continues to guide investment strategies). In addition, no specific parks and recreation facilities or parkland standards have been formally adopted.



New Development Contribution. Because the City has not established a list of required parks and recreation improvements for the 2010 to 2030 period, the current levels of provision of parks and recreation facilities and parkland by the City were used as the basis for determining the fair share contribution of new development. Specifically, the current replacement value of all City parks and recreation facilities was estimated along with the current number of City park acres. These current values and acres were converted into “per service population” metrics. For example, the City’s existing parkland of 131.4 acres was divided by the estimated service population to obtain an existing level of service of 1.19 acres per 1,000 service population. This existing standard could then be applied to the

3

See Chapter 7 for detailed information on fee comparisons. Fee comparisons considered one-time fees/taxes specifically for parks and recreation facilities and parkland in other cities. In other words, comparisons included consideration of Quimby Act in-lieu parkland fees and one-time special taxes for parks and recreation capital purposes.

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forecasted service population growth to help determine the fair share contribution of new development and the associated fee levels. 

Growth and Development. The impact fee calculations are based on estimates of new and existing development, population, employment, and overnight visitors for the 2010 to 2030 period. Some of these estimates relied on estimates of persons per household, square feet per employee, and overnight visitorship per hotel room. These estimates relied on a number of sources including the Land Use and Circulation Element (LUCE) and its EIR, Census 2010, the Census American Community Survey, and California Department of Finance. The LUCE was the key source for estimates of new development in the City.



Park Demand and Cost Allocation. Capital costs were allocated to new development as well as between different new land uses based, in part, on relative levels of demand. Service population was used as the measure of demand, with equivalencies established between residents, employees, and overnight visitors based on studies of other jurisdictions. This resulted in estimates of one employee as the equivalent of 0.2 residents and one overnight visitor as the equivalent of 0.15 residents. Costs were then allocated appropriately using these relative demand factors and the relevant estimates of existing and future growth and development.



Current Parks and Recreation Facilities Replacement Costs. City staff inventoried its full set of parks and recreation facilities. Subsequently, City staff developed planning-level estimates of 2013 per square foot facilities values.



Current Parkland and Value. A list of current City parks and recreation areas along with the associated acreage was developed by City staff. EPS interviewed City staff and reviewed information on recent land acquisition purchases to determine a planning-level estimate of per acre land value.



Fee Comparisons. Parks and recreation fee comparisons were based on a review of fee schedules in a range of different cities. Fee comparisons are useful for general, comparison purposes to inform City decisions concerning fee levels. As discussed in Chapter 7, fee comparisons do not always capture the complete funding picture and, due to frequent refinements and revisions, fee schedules are constantly changing.

Fee Program Implementation and Administration The Mitigation Fee Act includes a series of reporting requirements designed to ensure that development impact fee revenues are properly accounted for, used appropriately, and that, where funds are ultimately not used, are reimbursed. In addition, jurisdictions adopting fee programs should determine their preferred approach to updating the fee schedule and whether they intend to allow for exemptions, credits, and reimbursements (under any additional circumstances). The following fee program implementation and administration parameters are recommended for the City of Santa Monica’s new parks and recreation development fee. Credits, Reimbursement, and Exemptions

Under certain and limited circumstances, as determined by the City, the Impact Fee Resolution could allow developers subject to the fee to obtain credits, reimbursements, or exemptions. In cases of redevelopment, the demolition of space should provide a fee credit in a similar manner

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to the City’s recently adopted transportation impact fee. In other words, the gross fee obligation should be calculated based on the scale of the proposed new development, with a fee credit to be applied for existing square footage to be removed (or retained) using the applicable fee for the existing square footage (land uses). All other fee credits and/or reimbursements should not be allowed by right but rather should be subject to review by City staff and Council to ensure that such credits or reimbursements are warranted and appropriate. Potential examples where fee credits and reimbursements might be considered include: (1) cases where the City would prefer on-site dedication of parkland and associated park improvements rather than fee payments, or, (2) cases where a Development Agreement specifically envisions extraordinary, direct investments in parks and recreation facilities of equal to or greater value to the City than the applicable parks and recreation fees. Exemptions where the City elects not to impose fees for certain categories of development, such as affordable development are also an option, though alternative funding sources to offset a loss in fee revenue would need to be provided. Securing Supplemental Funding

The maximum, supportable development impact fee is set to cover the parks and recreation facilities investments that will maintain citywide capital facilities standards as new growth occurs. To the extent that the City’s goals envision an overall increase in parks and recreation facilities and parkland standards, supplemental funding will be required to cover these service-level increasing investments. In addition, to the extent that exemptions are provided for particular types of development, supplemental funding will be required to make up for this lost funding. For the City of Santa Monica, any required supplemental funding (i.e., funding not from new development) is most likely to be provided by State and federal grant funding and/or the City’s General Fund, though could also come from a number of other sources. Annual Review and Periodic Study Update

The Mitigation Fee Act/AB 1600 (at Gov. C. §§ 66001(c), 66006(b)(1)) stipulates that each local agency that requires payment of a fee make specific information available to the public annually within 180 days of the last day of the fiscal year. This information includes the following:        

A description of the type of fee in the account The amount of the fee The beginning and ending balance of the fund The amount of fees collected and interest earned Identification of the improvements constructed The total cost of the improvements constructed The fees expended to construct the improvement The percentage of total costs funded by the fee

For the purposes of the new parks and recreation fee, a single account should be established into which all fee revenues are placed. Because of the dynamic nature of growth and capital equipment requirements, the City should monitor inventory activity, the need for improvements, and the adequacy of the fee revenues and other available funding. To the extent, particular issues are identified, adjustments to the fee program may be required.

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Without particular issues requiring immediate attention, it is recommended that the Impact Fee Ordinance allows for an automatic annual adjustment to the fees based on the percent change in the appropriate Construction Cost Index as published by Engineering News Record for the preceding 12 months period. Over time, development forecasts may be revised, new policy documents and associated goals for parks and recreation capital improvements might be adopted (e.g., through revised Mater Plan), costs will change and evolve, and new information on the sources of park demand (e.g., through intercept surveys) may become available, making periodic technical updates prudent. Costs associated with this monitoring, reporting, and updating effort are included in the parks and recreation development impact fee schedule and are assumed to add 2 percent to fee program capital costs. Surplus Funds

The Mitigation Fee Act/AB 1600 also requires that if any portion of a fee remains unexpended or uncommitted in an account for five years or more after deposit of the fee, the City Council shall make findings once each year: (1) to identify the purpose to which the fee is to be put, (2) to demonstrate a reasonable relationship between the fee and the purpose for which it was charged, (3) to identify all sources and amounts of funding anticipated to complete financing of incomplete improvements, and (4) to designate the approximate dates on which the funding identified in (3) is expected to be deposited into the appropriate fund (§66001(d)). If adequate funding has been collected for planned improvements, an approximate date must be specified as to when the cost of the improvement will be incurred. If the findings show no need for the unspent funds, or if the conditions discussed above are not met, and the administrative costs of the refund do not exceed the refund itself, the local agency that has collected the funds must refund them (Gov. C §66001(e)(f)).

Report Organization Following this chapter, Chapter 2 provides the policy and financing context to the establishment of a new parks and recreation development impact fee in the City of Santa Monica and Chapter 3 provides the required nexus findings under the Mitigation Fee Act. Chapter 4 describes the existing and future development and associated demographic, economic, and visitor information. It also describes the applied measures of relative demand by land use for parks and recreation facilities. Chapter 5 estimates the new parks and recreation facilities and land costs that could be allocated to new development and Chapter 6 estimates the maximum, supportable fees under the Mitigation Fee Act. Chapter 7 provides information on parks and recreation fees charged in other California jurisdictions to inform the City’s policy decision concerning the appropriate fee schedule for adoption.

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2.

POLICY AND FINANCING CONTEXT

Parks and Recreation Master Plan With substantial community input, the City of Santa Monica completed its Parks and Recreation Master Plan in March 1997. The purpose of the Master Plan was “to guide the improvement of the City’s parks and recreational facilities over the next twenty years.” The Master Plan was based on the (General Plan) Open Space Element the draft of which was prepared simultaneously and outlines specific actions to help implement Open Space objectives and policies. The final Open Space Element was adopted in 2001. The Parks and Recreation Master Plan has helped guide City investments in a broad range of parks, open space, and recreation facilities. The Master Plan builds on and complements the City’s long history of park development as well as the recreational assets represented by the beach, additional State recreation lands, and school district investments. The Master Plan called for the “largest expansion of the park and recreational system in the history of the city”, including the goal of adding tens of acres of new parks and thereby increasing the parks inventory by as much as 50 percent. The Master Plan vision and goals were captured in a broad array of Parks and Open Space strategies and Recreation Program strategies.

Financing Principles and Strategies The financing and implementation section of the Master Plan included a number of project consultant recommendations for financing capital and operating costs associated with the proposed facilities and improvements. The City indicated that the financing strategies would be refined in the context of short and long-term budget processes. For example, the Parks and Recreation Master Plan states: “Funding sources should equitably share the burden among all park and recreation facility users. Everyone who lives and works in and visits the City of Santa Monica benefits from amenities offered by the parks, beaches, and various recreational facilities. Therefore, funding used to implement the Master Plan should come from all users of parks and recreation facilities to the extent possible”.

Capital Facilities and Financing Sources The Master Plan included a broad array of proposed capital facilities and improvements, envisioned for the 2000 to 2020 period, along with preliminary cost estimates. The preliminary cost estimates were for over $100 million in improvements in 1997 dollar terms. Improvement categories included capital improvements in existing parks throughout the City as well as the development of new parks and recreational facilities in the Civic Center, at the beach, and at schools. The acquisition of additional parkland was also envisioned along with investments in aquatic facilities. New ball fields, courts, and other recreational amenities are envisioned along with new park buildings of a variety of types (community center, gymnasium, etc.).

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The financing and implementation chapter also identified a broad array of potential funding sources for parks and recreational capital facilities. Unrestricted funding sources (to parks) and competitive sources identified included General Fund Capital Improvement Program Funds, Tax Increment funds, Transient Occupancy Tax funds and Civic Development Funds (Civic Center only), and Community Development Block Grants. Dedicated capital funding sources, by contrast were limited to, the existing park impact fee and tax, with the Beach Fund noted as a potential source once maintenance costs were covered. The need for additional capital funding from Citywide Community Facilities District or General Obligation Bond financing was viewed as likely to accomplish the Master Plan goals in the preferred timeline.

Parks and Recreation Funding As the City continues to move forward in achieving the Master Plan vision and responding to the new and changing needs of the community, the need for new parks and recreation funding continues. With multiple demands on unrestricted sources of City funding (General Fund Capital Improvement Program, transient occupancy taxes etc.) and the loss of other important sources of capital improvement revenue (tax increment funding), parks and recreation funding cannot rely solely on unrestricted funding sources. The City’s Municipal Code does currently place two “parks and recreation fees” on new development to fund parks and recreation capital facilities: 

Parks and Recreation Facilities Tax (SMMC Section 6.8, adopted July 1973).4 The City collects a dwelling unit/parks and recreation facilities tax of $200 per unit for its Parks and Recreation Fund. The fee was set at a flat, non-increasing level and was at the same rate at the time of the adoption of the Master Plan (1997).



Housing and Parks In-Lieu Fee (SMMC Section 9.04.10.12, adopted April 1986). General office development (including medical office, but excluding creative office) pays a Housing and Parks In-Lieu Fee associated with a Parks Mitigation Fund. In-lieu payments satisfy the Project Mitigation Measures of the 1984 Land Use and Circulation Element of the General Plan. In-lieu fees are paid by new general office developments of over 15,000 square feet of new construction or 10,000 square feet of additions to existing development. In-lieu fees are updated monthly based upon the most current available Consumer Price Index (CPI) figure. As of July 2013, the In-Lieu Fee was set at $5.11 per square foot for the first 15,000 square feet and $11.35 per square foot for additional square footage above this amount.

These sources have, however, only generated modest funding for a variety of reasons. For residential development, the fee is low and its value continues to erode with inflation over time. For nonresidential development, only one sub-category of development (general office) is required to pay the fee and the fee revenues are split between parks and housing purposes. In addition, the definitions of general office (that pays the fee) relative to creative office (that does not) has created implementation challenges and has reduced fee collection as the modern workforce occupying new office space is increasingly viewed as creative.

4

SMMC = Santa Monica Municipal Code

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In the context of the need for additional funding to continue to implement the Parks and Recreation Master Plan and to meet the parks and recreational needs of a growing service population (residents, employees, and visitors), the City identified a Parks and Recreation Development Impact Fee as a potential source of direct funding for future parks and recreation capital facilities needs. The purpose of the fee, consistent with legal requirements (see below), is to provide a direct funding source from new residential and commercial development for the upgrade and/or expansion of parks and recreational facilities needed to accommodate additional occupants of the new developments. The adoption of a parks and recreation development impact fee (as described in Chapter 7) is common practice among California jurisdictions, though the parameters of the fee program can vary widely. The recommended parks and recreation development impact fee, if adopted, would replace one existing fee and a portion of the existing In-Lieu fee devoted to parks.

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3.

MITIGATION FEE ACT NEXUS FINDINGS

This chapter describes the necessary "nexus" between new development in Santa Monica and the proposed capital facilities investments, as required under the Mitigation Fee Act - Government Code Section 66000 (AB1600). The new parks and recreation development impact fees will cover up to the investments in parks and recreation facilities, improvements, and land acquisitions required to maintain existing levels of capital facilities service in the City - the “fair share” contribution of new development. Nexus findings address: (1) the purpose of the fee and a related description of the facility for which fee revenue will be used, (2) the specific use of fee revenue, 3) the relationship between the facility and the type of development, (4) the relationship between the need for the facility and the type of development, and (5) the relationship between the amount of the fee and the proportionality of cost specifically attributable to new development. The subsections below describe the nexus findings for the Parks and Recreation Development Impact Fee. Purpose

The fee will ensure an expansion in parks and recreation capital facilities in the City of Santa Monica as new growth occurs. Use of Fee

Fee revenue will be used for a broad range of parks and recreation capital facilities investments, including the acquisition of land for parks, the improvement of existing and new parkland, and development of new parks and recreation facilities. Relationship

New development in the City of Santa Monica will increase the demand for and use of parks and recreation facilities. Fee revenue will be used to help fund new parks and recreation facilities in response to the increased demand. Need

Each new development project – residential and nonresidential - will generate incremental, new demand and use of the City’s parks and recreation facilities by new residents, workers, and/or visitors. New revenues to fund investments in additional parks and recreation capital improvements are necessary to maintain parks and recreation capital facilities service standards. Proportionality

The maximum, supportable parks and recreation fee schedule was based on a parks and recreation capital facilities cost estimate derived by applying the proportionate increase in service population associated with new development to the existing service standard/value of parks and recreation capital facilities. As a result, the fee program cost estimates are directly proportional to the relative increase in new development.

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4.

DEVELOPMENT FORECAST AND NEW PARKS DEMAND

This chapter describes existing and projected future development in the City of Santa Monica and estimates the associated demographic and economic growth that support the park and recreation development impact fee calculations. Forecasts of population and employment growth rely on the growth projections of dwelling units and nonresidential building space developed for the City’s 2010 Land Use and Circulation Element (LUCE) Final EIR (EIR). The chapter also estimates and describes the City’s existing and new park and recreation service population (level of demand) associated with residents, employees, and hotel guests, which is the basis for determining the cost share allocatable to new development as well as allocating fee program costs between residential and nonresidential land uses. Existing (2010) and forecasted (2010 to 2030) demographic, economic, and visitorship information are used for the following primary purposes in the fee calculation: 

Estimates of existing development and associated, population, employment, and average overnight visitor levels are used to define baseline conditions and help determine current service standards;



Estimates related to population, employment, and visitor density (e.g., persons per household, square feet per employee, hotel guests per occupied room) are used to estimate population growth associated with the City’s LUCE EIR’s projected increase of 4,955 units, employment growth associated with the projected net increase of 3.1 million building square feet of employment type land uses, and average daily overnight visitor levels associated with the projected increase of about 2,100 rooms.



Forecasts of future population and employment growth in the City are the basis for determining associated growth in the parks service population and thus the future need for park capital facilities which can be funded by the fee.

Existing and Forecast Demographic and Employment Growth Residential Development and Population Growth According to Census 2010, the City had a total population of 89,736 and an inventory of 50,912 dwelling units. With a household population of 87,551 and 46,917 occupied units, the City has an average household size (persons per occupied unit) of 1.866 persons per household, with multifamily units and single-family units averaging 1.667 and 2.515, respectively.5 With respect to occupancy, a comparison of total units to occupied units suggests that the City had a vacancy rate of 7.8 percent. However, excluding units counted vacant by nature of their use such as second homes occupied only seasonally, the City’s core residential vacancy rate was 4.4 percent.

5

Average household sizes for single-family and multifamily units based on American Community Survey data from 2007 to 2011.

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The LUCE EIR forecasts an increase of 4,955 units to the City’s inventory of housing units by 2030 of which only four units would be single-family units. The other 4,951 units or 99.9 percent would be composed of multifamily units.6 To forecast the growth in household population corresponding to this increase in dwelling units, EPS conservatively applies the 4.4 percent vacancy rate and estimates that of the 4,955 total new units, 4,737 units will be occupied on average. Based on an average household size of 1.667 (the current estimate for persons per household in multifamily developments), the new occupied units will result in population growth of 7,895 by 2030. Compared to the 2010 (baseline) population, this represents an 8.8 percent growth in the City’s population as shown in Table 2.

Table 2

Baseline and Projected Growth in Housing and Resident Population Housing Units Total

Conditions

Population

Occupied

Total

in Households

Avg. HH Size 1

(Households)

Baseline (2010 Census) Projected Growth

3

Buildout (2030 Projection) % Change (2010-2030)

50,912

46,917

89,736

87,551

1.866

4,955

4,737

7,895

7,895

1.667

55,867

51,654

97,631

95,446

9.7%

8.8%

[1] Average household (HH) size measures the average number of persons in occupied units only. Baseline HH size is based on all units citywide. Because future units are projected to be almost 100% multifamily units, the HH size used to estimate future population is based on the current HH size in multifamily units. [2] Baseline employment data and projected growth are from the City's 2010 LUCE Final EIR. [3] Projected growth in housing units from the City of Santa Monica LUCE Final EIR, 2010. Estimate of 4,737 occupied units assumes a vacancy of 4.4% based on 2010 census data. Population growth was estimated by applying the 1.667 persons per household to the occupied housing unit projections. Source: Santa Monica LUCE Final EIR, April 2010; Census 2010; and Economic & Planning Systems.

Nonresidential Development and Job Growth The City’s LUCE EIR forecast that the City’s inventory of nonresidential building space related to employment uses will increase from 28.2 million to 31.3 million square feet by 2030, a net increase of 3.1 million building square feet. This net increase is based on a gross increase of 3.5 million square feet of nonresidential uses including office, retail, medical office, hospital, hotel, institutional and a projected reduction of about 380,000 in industrial space. Using employee density assumptions for each land use, the LUCE EIR forecast net employment growth of 7,724 jobs associated with new nonresidential development as shown in Table 3.

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Page 4.10-12 Santa Monica LUCE FEIR, Volume 1.

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Table 3

Employment and Projected Growth in Nonresidential Uses New Bldg. Sq. Ft.

Sq. Ft. per Employee

Office

448,980

275

1,633

Retail

566,803

425

1,334

Creative/Post-Production

699,709

275

2,544

Medical Office

187,327

500

375

Hospital

763,123

500

1,526

Hotel (Employees)

626,578

1,500

418

Institutional

196,029

300

653

Educational

0

300

0

Employment Uses

Projected Growth (Gross) Industrial Projected Growth (Net)

3,488,549

Employment Growth

8,483

(379,137)

500

3,109,412

(758) 7,724

Baseline Employment Projected Growth (Gross) 1

100,949

Buildout (2030 Projection)

109,432

8,483

% Change (2010-2030)

8.4%

[1] The fee analysis excludes industrial space for purposes of showing gross new sq. ft. upon which the fee would be assessed. To the extent that a project includes new sq. ft. that replaces existing industrial sq. ft. such a project would be eligible for fee credits. Source: Santa Monica LUCE EIR, 2010.

Hotel Development and Overnight Visitor Growth In addition to employment growth, hotel development will increase the City’s visitors. With an estimated inventory of 3,700 hotel rooms and occupancy rates over 80 percent, the City maintains an overnight visitor population (hotel guests) of over 6,000, about 7 percent of the City’s resident population. New hotel development will generate new out-of-town overnight visitors, increasing the City’s service population. Table 4 shows the current hotel development and EPS’s estimate of the associated overnight visitor population. Based on the City’s LUCE EIR projected growth in hotel square feet of 626,600, EPS estimates an increase of 3,540 in the associated, average visitor population by 2030. This estimate is based on the assumption that average occupancy rates and occupants per room will remain consistent over the planning period.

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Table 4

Hotel Development and Projected Growth

Item Description

Hotel Sq. Ft. Hotel Rooms 1

Baseline 2010

Buildout 2030

2010-2030 Net Growth

1,108,000 3,712

1,734,578 5,811

626,578 2,099

Occupancy Rate (2012) Estimate of Occupied Rooms

84.3% 3,129

84.3% 4,899

1,770

Avg. Persons/Room Estimated Guest Population

2.0 6,258

2.0 9,798

3,539

[1] Projected hotel rooms derived by dividing projected total hotel square feet by average hotel room size of approx. 298 sq. ft.; average room size calculated using citywide hotel sq. ft. data from the LUCE EIR and hotel room inventory data from the Santa Monica Convention and Visitors Bureau. Source: Santa Monica 2010 LUCE EIR; PKF Consulting; Santa Monica Convention & Visitors Bureau; and Economic & Planning Systems.

Service Population and New Parks Demand The City’s existing resident population, employment, and visitor population related to hotels form the basis for determining its baseline level of demand (service population) and inform the estimate of current service standards for parks and recreation facilities. Building on the existing and forecast estimates of population, employment, and visitors—the key drivers of parks and recreation demand—described in the previous section, this section estimates the existing service population and shows how growth in residents, employees, and hotel guests will increase the service population and generate new demand for parks and recreation facilities. Studies have shown that the degree or extent to which the three groups of park users (residents, employees, and visitors) utilize parks is different; residents in general use parks at a higher level than nonresident users. Therefore, to derive a comprehensive service population that combines all parks users, residents, employees, and hotel guests, we need to express the demand generated by each group on an equivalent basis. Table 5 summarizes the service population estimates by user group under existing conditions and projected growth. As shown, the City is estimated to have a baseline parks-related service population of 110,865 that is forecast to increase by 10,123 or 9.1 percent by 2030. The following sections describe the methodology and assumptions used to determine residenceequivalency factors for each of the three user groups.

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Table 5

Baseline and 2030 Projected Service Population Population/ Employment 2010 2030

Park User Group Formula:

Residents

a

b

Estimated Service Population 2010 2030 Growth % Growth

c

d = a*c

e = b*c

f =e-d

g=f /d

89,736

97,631

1.00

89,736

97,631

7,895

8.8%

6,258

9,798

0.15

939

1,470

531

56.6%

100,949 109,432

0.20

20,190

21,886

1,697

8.4%

110,865

120,987

10,123

9.1%

Hotel Guests 1 Employees 2

Residence Equivalency Factors

Total Service Population

[1] Demand equivlency factor is based on a review of available visitor park use studies for cities throughout the U.S. The percent of visitors indicating usage of parks in the City was assumed to be a reasonable indication of the use equivalency relative to residents. The proportionate use by vistors varied considerably, though it tended to fall in the 10 to 30% range for cities with a broad inventory of parks. The results from a 2007 study for the San Diego Convention & Visitors Bureau that specifically measured the share of overnight visitors that visited a park and recreation destination during their stay in the City was viewed as most comparable and was used as the basis of the resident-equivalency assumption for Santa Monica. [2] Demand equivalency factor reflects the equivalency assumptions assumed in parks and recreation fee studies for the cities of San Francisco and Palo Alto. These studies relied on Park User Intercept Surveys to measure park usage of non- resident employees relative to residents. Other studies showed higher resident-equivalency factors for employees, while others did not attribute any demand for employees. If park user surveys are conducted in the future in the City of Santa Monica, the equivalency factors would be updated. Source: Santa Monica LUCE FEIR, April 2010; Census 2010; and Economic & Planning Systems.

Residents – Relative Demand and Service Population For purposes of this study, demand equivalency is measured relative to park demand by residents. Because residents, on average, typically demonstrate the highest levels of use of public parks and recreation facilities, one resident is assigned a residence-equivalency factor of 1.0. This means that the existing and future growth in the service population related to City’s residents is equal to the existing and future growth in resident population, i.e., represents a baseline service population of 89,736 and growth of 7,895.

Employees - Relative Demand and Service Population Demand factors for other users, employees and hotel guests, would ideally be estimated by surveying the City’s park users and determining the usage of employees and hotel guests relative to residents. In the absence of such primary data, results from surveys conducted in other cities were considered. There is a limited amount of research measuring aggregate City park use by employees relative to residents. Relevant studies were identified for the cities of Glendale, Los Angeles, Redwood City, and Palo Alto, California, and Eugene, Oregon, several of which specifically informed parks and recreation development impact fee studies (Glendale, Redwood City, and Palo Alto). Other cities, such as San Francisco, made assumptions concerning employee-resident equivalency based on studies conducted elsewhere (in this case in Arizona).

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And some cities ignored workers’ use/demand for parks and recreation facilities and tied all demand to residential development. Applying results from other cities poses challenges for a number of reasons, including differences in the amount of parks, differences in the proximity of parks to employment areas, and differences in the propensity of the local workforce to access park amenities. Of the cities reviewed, the conclusions from the Palo Alto, Glendale, Redwood City, and San Francisco were considered most relevant based on the clarity of their data for impact fee purposes as well as their California location, general employment characteristics and scale, and availability of parks. Results from the Palo Alto study showed a resident-equivalency factor of 0.2 for an employee. This means that the demand for parks generated by 1 employee was equivalent to one-fifth the demand generated by a resident. The estimate was based on the number of employees using parks relative to total employment in the City compared to the number of residents using parks relative to the city’s total population. The San Francisco study assumed a similar residentequivalency factor of 0.2. A similar methodology was used in the Redwood City study which determined a resident-equivalency factor of 0.5 per employee, while the City of Glendale identified a residency-equivalency factor of 0.45 per employee. Given this broad range of equivalency factors of between 0.2 and 0.5 and the exclusive focus by some fee programs on residential development, EPS has assumed a 0.2 resident-equivalency factor for Santa Monica employees for the purposes of this study. With existing employment of 100,949 employees and gross employment growth of 8,483, the estimated factor of 0.2 implies a baseline service population of 20,190 and projected growth of 1,697 in the service population associated with the City’s employment land uses.

Hotel Guests - Relative Demand and Service Population Research on hotel guests’ use of a city’s parks is also limited. The Santa Monica Convention and Visitors’ Bureau conducts an annual survey of visitors to the City which among other things asks which destinations the respondents visit during their stay in Santa Monica. However, the results do not include visits to city parks among the identified destinations. Therefore, it was not possible to isolate from the results, how likely hotel guests were to visit city parks relative to other destinations/attractions during their stay. Data on visits to Santa Monica Pier, Santa Monica Beach, and Pacific Park (on the Pier) was reported but is not applicable to this study because these parks and recreation amenities are not part of the City’s inventory of park facilities. The Trust for Public Land recently summarized the findings of a range of studies on the propensity of visitors to use local parks and recreation facilities. Reported results from park use studies at City parks from a diverse set of cities across several States (Delaware, Washington, Colorado, California, and Pennsylvania) indicated that between 5 percent (Wilmington, Delaware) and 40 percent (Philadelphia) of overnight visitors (for all purposes) visited the local parks. On average, about 20 percent of overnight visitors who spent time in parks had come specifically for the park amenities. Visitor studies in several cities—San Diego, Denver, and Seattle—indicated, directly or indirectly, that between 15 and 25 percent of overnight visitors spent time in parks in these cities.

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The results from studies conducted for the San Diego Convention and Visitors’ Bureau and the California Travel and Tourism Commission provided the most meaningful results for application to this study. The San Diego study estimated the number of overnight visitors that visited parks in the City. About 20 percent of overnight visitors were found to spend time in the City’s parks (including its beaches), with 5 percent in San Diego to visit the parks as their primary reason and the remaining 15 percent of overnight visitors visited a park in the City, incidental to their visit.7 While San Diego is different from Santa Monica in many respects, amongst the available studies of park use by visitors, we believe that as major Southern California tourist destinations, San Diego provides the best current indicator of the likelihood for overnight visitors in Santa Monica to visit a park. Based on the above discussion, this analysis assigned a resident-equivalency factor of 0.15 to hotel guests/overnight visitors. As a result, overnight visitors represent an estimated baseline service population of 939 and a projected growth of 531 between 2010 and 2030.

7

Visitors whose primary purpose of travel was to visit a park (not incidental) most likely visit major attractions such as Balboa Park in San Diego or Santa Monica Beach in Santa Monica. By looking only at incidental visits, we discount the share of visits to major attractions that are not representative of a regular city park.

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5.

PARKS AND RECREATION FACILITIES AND COSTS

This chapter estimates the supportable level of parks and recreation capital facilities costs funding that can be charged to new development under the new fee schedule, consistent with the Mitigation Fee Act. The capital facilities cost allocation is based on existing service standards and is divided into two primary components, for purposes of analysis, investments in parkland acquisition and investment in parks and recreation improvements and facilities.

Parkland Existing Parkland and Current Ratio According to data provided by the City’s Community and Cultural Services Department, the City’s inventory of parks includes 29 community and neighborhood parks, a swim center, and a community garden on approximately 131.4 acres of parkland. This total does not include park acreage under joint-use with school districts and the State Beach. Including these two park resources, the park acreage within the City and accessible to residents totals 392 acres. Based on the 131.4 acres of City parkland alone, the existing service standard is 1.19 acres per 1,000 service population (resident-equivalents), as shown in Table 6.

Table 6

Estimated Required Parkland Investment to Serve New Growth

Item Description

Amount

Citywide Park Acres

131.4

Baseline Demand for Parks (resident-equivalents)

110,865

Existing Parkland Standard (Acres per 1,000 resident-equivalents) 2010-30 Growth in Parks Demand

1.19 10,123

Required Parkland Acquisition for New Development (Acres) Cost per Acre1

12.0 $7,623,000

Total Parkland Acquisition Cost

$91,476,000

[1] Land cost of $175 per sq.ft. is based on a review of a number of recent appraisals conducted for properties in the City of Santa Monica. Source: City of Santa Monica; and Economic & Planning Systems.

New Parkland and Estimated Cost Required to Serve New Development To maintain the existing service standard, the City will need to increase parkland by 12.0 acres based on the projected growth in service population of 10,123. To identify planning-level estimates of land acquisition costs, EPS interviewed City staff and reviewed recent valuation

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appraisals for properties in the City. The area of focus was the area bounded by Lincoln Boulevard (west), Wilshire Boulevard (north), Centinela Avenue (east), and the Santa Monica Freeway (south). This is the general area where future parkland acquisitions are most likely to occur, as indicated by City staff. Based on these appraisals, EPS estimated an average land cost of $175 per square foot or $7,623,000 per acre. As shown in Table 6, based on the projected need for 12.0 acres and the per-acre land cost estimate, the total cost to acquire new parkland to serve new development is approximately $91.5 million.

Parks and Recreation Capital Facilities Existing Facilities and Estimated Value City staff developed inventory estimates of different City parks improvement by square footage and associated planning-level estimates of current park improvement costs. Currently, the City has over 5.7 million square feet of improved park area on 131.4 acres containing a wide range of improvements and facilities including baseball fields, soccer fields, dog parks, basketball courts, tennis courts, children’s playgrounds, a skate park, a swim center, and community rooms. Other facilities include accessory buildings such as maintenance facilities, and amenities such as parking lots, restrooms, bathrooms and kitchens. Table 7 shows a summary of inventory and replacement value for each facility type. As shown in the table, the City’s inventory of park facilities has a total estimated value of $378.6 million based on replacement cost.

Table 7

Cost Estimates of Existing City Parks & Recreation Facilities

General Improvement

Total Sq. Ft.

Courts Dog Parks Fields - Baseball Fields - Soccer Community Gardens Park Parking Lots Park Buildings Parks Park - Botanical Gardens Playground Skatepark Swimming Pool Facility Total Existing Park & Recreation Facilities

271,500 113,700 701,100 135,000 36,400 475,125 127,200 3,346,253 375,894 160,600 26,000 52,300 5,821,072

Cost per Sq. Ft.

$160 $25 $29 $12 $13 $8 $378 $55 $117 $55 $35 $388

Total Cost

$43,440,000 $2,842,500 $20,331,900 $1,620,000 $473,200 $3,801,000 $48,081,600 $184,043,915 $43,979,598 $8,833,000 $910,000 $20,292,400 $378,649,113

Source: City of Santa Monica

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Required Growth in Facilities and Cost Allocation to New Development In order to continue providing parks and recreation services at standards currently provided to existing residents, the city’s inventory of parks and recreation facilities will need to be increased at a rate corresponding to the growth in demand generated by new development. As shown in Table 5, demand for park and recreation services as measured by service population is forecast to grow by 9.1 percent during the planning period. Based on the current estimated value of $378.6 million, a 9.1 percent expansion of the existing inventory of facilities to accommodate future demand from new development would cost an estimated $34.6 million, as shown in Table 8. This represents the fair share contribution required from new development to address the impact of increased demand on park improvements (excluding parkland) and maintain existing service standards.

Total Costs Associated with New Development Table 8 also shows the total estimated investment in parks and recreation capital facilities (park improvements and parkland) required to maintain existing standards of service. As shown, this totals $126 million in 2013 dollars, including $35 million in parks improvements (27 percent) and $91 million (73 percent) in land acquisition costs. This is the maximum, supportable fee-funded cost for inclusion in the development impact fee program.

Table 8

Total Parks Fee Program Costs Estimated Costs

Program Cost Items

Capital Facilities/Improvements Value of Existing Parks & Recreation Facilities Projected Increase in Parks Demand Park Facility Improvements to Serve New Growth

$378,649,113 9.1% $34,573,315

Land Acquisition Required Parkland Acquisition to Serve New Growth

$91,476,000

Total Parks Fee Program Costs

$126,049,315

Source: City of Santa Monica; and Economic & Planning Systems.

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6.

DEVELOPMENT IMPACT FEE CALCULATIONS BY LAND USE

The maximum, supportable parks and recreation development impact fee schedule was determined based on the development forecasts and relative parks demand by land use identified in Chapter 4 and new development’s fair share contribution to future parks and recreation capital facilities estimated in Chapter 5. This chapter describes the technical steps in estimating the maximum fee schedule.

Cost Allocation by Land Use Total fee program costs are allocated to each land use category based on the contribution of each land use to the total increase in parks demand as measured by service population. Table 9 shows the total service population increase of 10,123 associated with new development and the relative distribution of resident-equivalents by fee category (detailed calculations of service population by land use are shown in Table A-1 in Appendix A). For fee purposes, nonresidential land use categories with similar employment densities (and hence fee levels) were combined to simplify fee program implementation and administration. Specifically, office and creative/post-production uses were combined as were medical office and hospital uses. For overnight lodgings, resident-equivalent calculations combine service population associated with both guests and employees.

Table 9

Distribution of New Service Population by Land Use Category

Fee Categories

ResidentEquivalents1

Residential

7,895

78%

835 380 267 614 131

8% 4% 3% 6% 1%

10,123

100%

Nonresidential Office & Creative/Post-Production Medical Office/ Hospital Retail Hotel2 Institutional Total

% of Total

[1] See Table A-1 for calculation of resident-equivalents by residential and employment uses. [2] Resident-equivalents based on guests and employees. Source: City of Santa Monica; and Economic & Planning Systems.

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As shown in Table 9, residential land uses are expected to account for 78 percent of the projected increase in parks demand. Among the 22 percent of new parks demand associated with nonresidential uses, office and creative/post-production uses account for 8 percent, medical office/hospital uses account for 4 percent, and hotels/overnight lodging for 6 percent. Retail uses account for about 3 percent of expected future parks demand and institutional uses (public uses) for about 1 percent. As shown in Table 10, total fee program costs are allocated to each land use category based on these relative contributions to new park demand.

Table 10 Fair-Share Cost Allocation by Land Use Fee Category

Land Use Fee Categories

Cost Allocation

Capital Improvements

Land Acquisition

Total Costs

Residential

78%

$26,965,743

$71,347,463

$98,313,206

Nonresidential Office & Creative/Post-Production Medical Office/ Hospital Retail Hotel Institutional Subtotal Nonresidential

8% 4% 3% 6% 1% 22%

$2,853,268 $1,298,471 $910,995 $2,098,492 $446,346 $7,607,572

$7,549,336 $3,435,566 $2,410,362 $5,552,306 $1,180,968 $20,128,537

$10,402,604 $4,734,036 $3,321,357 $7,650,797 $1,627,314 $27,736,109

100%

$34,573,315

$91,476,000

$126,049,315

Total Fee Program Costs

Source: City of Santa Monica; and Economic & Planning Systems.

Maximum Fee Estimates The maximum, new parks and recreation development impact fee schedule was derived from the above cost allocations by land use category and the forecast of new development. Specifically, costs allocated to the residential land use category were divided by the projected number of new units to estimate the maximum fee per residential unit, while costs allocated to nonresidential uses were divided by the projected new building square feet for the respective land use category to estimate the maximum fee per square foot. As shown in Table 11, the maximum, supportable fees range from $16,554 to $30,543 per residential unit and between $5.08 and $12.45 for future nonresidential development. This is the fee schedule that under the current development forecasts would result in the generation of $126 million in fee revenues (2013 dollar terms) between 2010 and 2030.

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Table 11 Estimated Maximum Parks Fee per Unit

Fee Categories

Residential Uses Single Family Units Multi Family Units (Studio/1 bedroom) Multi Family Units (2+ bedrooms) Subtotal/Average Residential Employment Uses Office & Creative/Post-Production Medical Office/ Hospital Retail Hotel Institutional Subtotal Nonresidential

Costs per Unit Capital Land Improvements Acquistion

New Growth

Units 1

per Unit

4,955

$8,213 $4,451 $7,169 $5,442

Sq. Ft.

per sq. ft.

1,148,689 950,450 566,803 626,578 196,029 3,488,549

$2.48 $1.37 $1.61 $3.35 $2.28

Total Cost

per Unit

per Unit

$21,731 $11,778 $18,969 $14,399

$29,944 $16,229 $26,138 $19,841

per sq. ft.

per sq. ft.

$6.57 $3.61 $4.25 $8.86 $6.02

$9.06 $4.98 $5.86 $12.21 $8.30

[1] The LUCE EIR does not provide breakdowns of future residential units by type as shown here. The differences in fee levels by unit type are based on relative differences in persons per household. Source: Santa Monica LUCE Final EIR 2010; Economic & Planning Systems.

The costs of establishing, monitoring, reporting, and updating the fee program can be included in the development impact fee schedule. Actual funding requirements for these functions will vary by year, though are typically estimated at about 2 percent of fee program capital facilities costs in other fee programs throughout California. In addition, because institutional uses are primarily public uses, they will not be charged a fee, with the loss of fee revenues being made up from other funding sources. A fee for industrial development is also shown (set at the same rate as medical office/hospital) based on its similar assumed square feet per employee. The City expects a net loss in industrial development in the City, though the fee level is shown to support estimates of fee credits in cases of redevelopment of industrial space. Table 12 shows the resulting maximum fee schedule with administrative costs added and institutional uses removed.

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Table 12 Maximum Development Impact Fee Estimates with Administrative Costs Estimated Fee 1

Fee Categories

Residential (Average) Single Family Units Multi Family Units (Studio/1 bedroom) Multi Family Units (2+ bedrooms)

$20,238

per Unit

$30,543 $16,554 $26,661

per Unit per Unit per Unit

Nonresidential Office/ Creative Medical Office/ Hospital Retail Hotel Industrial2

$9.24 $5.08 $5.98 $12.45 $5.18

per Sq. Ft. per Sq. Ft. per Sq. Ft. per Sq. Ft. per Sq. Ft.

[1] Administrative costs estimated to add 2% to fee program cost (and fees). [2] Set equal to hospital because of similar employee generation rates per sq. ft. Sources: City of Santa Monica; Economic & Planning Systems, Inc.

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7.

PARKS AND RECREATION FEE COMPARISONS

This chapter compares both the maximum, supportable development impact fees with the park fees (including Quimby Act park in-lieu fees and parks and recreation development impact fees) adopted in selected Los Angeles/Orange County and San Francisco Bay Area communities. The purpose of this comparison is to inform City policy decisions concerning the adoption of a new parks and recreation fee schedule. It also compares the maximum parks and recreation fees – see Table 1 - with the fees in these other communities.

Context As new Statewide referenda and legislation have limited the funding sources for and increased the difficulty of establishing local financing tools to fund capital facilities, Quimby Act park in-lieu fees and Mitigation Fee Act development impacts have become increasing important sources of parks and recreation funding in jurisdictions throughout California. Fee comparisons can provide helpful context to City policymakers in understanding how others are using these fees to fund parks and recreation facilities. In comparing fee schedules, there are, however, several important considerations to bear in mind: 

Other Sources of Capital Facilities Funding from New Development. A number of California cities still rely, in part or predominantly on other sources of parks and recreation facilities funding from new development, meaning that parks and recreation fee comparisons do not always tell the full story concerning the relative contributions of new development. In particular, some cities impose exactions on new development through conditions of approval of development entitlements. In these cases, developers privately set aside parkland and construct improvements and facilities which are dedicated to the City. These investments can be substantial though do not show up in a formal development fee schedule.8 It should also be noted that some cities have Quimby Act dedication requirements, but do not provide an in-lieu fee alternative.



Differing Development Values. Different California cities command very different values of new development based on both the demand for new development and the supply constraints on new development. Cities with higher development values will, on average, be able to carry a higher fee burden than those with lower development values, limiting the utility of absolute fee level comparisons without a broader value context. Furthermore, differences in parks and recreation fees, especially Quimby Act fees or the components of Mitigation Fees associated with land acquisitions, will directly reflect differences in development values/market strength as these fees are directly tied to land values.

8

Another example is the establishment of financing districts, such as assessment districts or Community Facilities Districts (CFDs), can result in ongoing revenue streams from new development that can be used to issue bonds to fund parks and recreation capital facilities.

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

Differing City Priorities and Discounts. Different parks and recreation fee levels may indicate different City priorities. For example, some cities may place a higher priority on investments in parks and recreation facilities relative to other cities. A number of cities do reduce their fees below the maximum, supportable fee levels, often in reference to fees charged at other cities or concerns about impacts on development feasibility. In some cases, the reductions relative to the maximum fee levels are phased-out over time, in some cases they are maintained through time, and, in some cases, they are in exchange for the provision of other public benefits.

Fee Comparisons Table 13 compares the one-time fees on new development for parks and recreation facilities and land (Quimby Act, Mitigation Fee Act, and other) for selected jurisdictions. Table B-1 in Appendix B provides additional detail on the fee programs, including the uses of the fee revenues, the year the fee was established, and the effective date of the fee currently shown. Fees for particular product types (single family residential, multifamily (condominium), multifamily (apartment), and office development) are shown. The Quimby Act allows cities to charge parkland fees on subdivided residential development (single family and condominium development) based on the standard of three acres per 1,000 residents (and, in select cases, up to five acres per 1,000 residents). As a result, many cities solely adopt Quimby Act fees. For the City of Santa Monica, where much of the future development is expected to be multifamily rental development and non-residential development, the Quimby Act would be of more limited use and, furthermore, would result in fees on subdivided residential development substantially above those under the Mitigation Fee Act approach. The fee program information in Table 13 combined with a closer look at the nexus studies and enabling ordinances and resolutions associated with some of the fees established under the Mitigation Fee Act indicate the following: 

City of Santa Monica parks and recreation fees for multifamily development would be at the highest end of the range among cities surveyed if adopted at the maximum, supportable level. At the maximum level of between $16,500 and $26,700 per multifamily unit, the City of Santa Monica fee level would charge among the highest fees among those cities surveyed for condominium and multifamily development. The City of Santa Monica fee level would be above the base fee in the City of Pasadena for one-bedroom condominium and apartment multifamily development ($16,400 per unit). It should be noted, however, that the City of Pasadena fee schedule includes a range of exemptions and discounts with discounts of up to 30 percent in market rate unit fees (fee reduced to $11,500 per unit for one-bedroom units) if all required inclusionary units are developed on-site. Other discounts include potential 35 to 50 percent fee discounts on workforce housing and a flat $756 per unit for the following housing types: low or moderate income units, skilled nursing units, student housing residences, among others.

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Table 13 Comparison of Park Fees* Single Family

Cities

Unit Assumptions:

1,800 sq.ft., 3 bdrms

Multifamily (Condo)

Multifamily (Rental)

850 sq.ft., 1 bdrm

850 sq.ft., 1 bdrm

Office

Type of Fee

per sq. ft.

Los Angeles/ Orange Counties Beverly Hills

$12,780

$6,035

$6,035

$7.10

Special Tax

$6,370

$6,370

$6,370

$3.26

Mitigation/Quimby

$4,613

$3,563

$3,563

n/a

Mitigation

$1,817

$1,817

n/a

n/a

Quimby**

Newport Beach

$26,125

$26,125

n/a

n/a

Quimby**

Pasadena

$20,981

$16,428

$16,428

n/a

Mitigation

Redondo Beach

$4,500

$4,500

n/a

n/a

Quimby**

West Hollywood

$5,380

$5,380

n/a

n/a

Quimby**

Los Angeles 3

$3,216

$3,216

$200

n/a

Quimby/Special Tax

Palo Alto4

$10,410

$3,446

$3,446

$4.42

Fremont

$29,093

$19,668

$19,668

Fairfield

$10,409

$7,091

$7,091

n/a

Livermore

$13,334

$7,950

$7,950

$2.42

Mitigation

Concord5

$11,470

$9,914

$9,914

n/a

Quimby**

Glendale1 Long Beach 2

Manhattan Beach 2

San Francisco Bay Area Mitigation

n/a Mitigation/ Quimby Act Mitigation/Special Tax

* Fee data from review of Cities' fee information and schedules posted online and interviews with City staff. ** Applicable to residential developments that require the preparation of a subdivision map. Typically, apartment projects do not require a subdivision map and thus may not be subject to quimby fees. [1] Current fee will expire on 11/30/2013, adopted fee level effective 12/1/2013 is $10,500/unit and $4.89/ office sq. ft. [2] Multifamily rental projects are exempt from Park fees in Manhattan Beach. In Newport Beach, the in-lieu fee only applies to new residential subdivisions. [3] Includes a construction tax of $200/unit for impact mitigation purposes. Quimby portion is $3,016/unit. [4] Multifamily units over 900 sq.ft. are charged $6,814/unit. For residential subdivisions of 50 units or more, parkland dedication in-lieu fees of $52,909/SFR [5] Fee nexus is Quimby based, but fees are applicable to all residential development, including subdivisions and individual permit approvals. Source: Various California cities; Economic & Planning Systems, Inc.

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

Compared to the relatively small sample of the surveyed cities that charge parks and recreation fees, the maximum City of Santa Monica parks and recreation fees would be the highest relative to the cities surveyed. The maximum fees of $9.24 per square foot for office/creative space would be higher than office fees for the surveyed cities charging such fees (identified range of between $2.42 per square foot and $7.10 per square foot for office development in other cities). This includes the City of Beverly Hills and the City of Palo Alto.



The hotel fee appears to be relatively unique and, at its maximum level, particularly high relative to the other cities surveyed. A number of cities with parks and recreation development fees do not establish a unique hotel fee. In cases where such hotel fees are applied they are often applied at a general commercial rate or are derived based on employment generation alone. As described in this report, the use of employment generation alone as the driver of hotel-related demand would miss the substantive use and demand for parks from overnight visitors. In accounting for estimated overnight visitors and their estimated propensity to use parks and recreation amenities, this fee study appropriately ties the hotel fee level with service demand. The maximum fee recommended fee of $12.45 per square foot would the highest nonresidential development fees among all cities surveyed. It should, however, be noted that many hotel developments are subject to Development Agreements that may require exactions that will not be shown in formal development fee schedules.

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Attachment C

 

MEMORANDUM   To:

Karen Ginsberg, Andy Agle and David Martin

From:

Paul J. Silvern and Remy Monteko

Date:

April 24, 2014

Re:

Estimates of Financially Feasible Tier 2 vs. Tier 1 Development Fees

Cc:

Barry Rosenbaum, Esq. and Alan Seltzer, Esq.

Per your request, HR&A Advisors, Inc. (HR&A) has estimated the incremental increase in certain development fees that could be charged to Tier 2 development projects in excess of the fees that would apply to a Tier 1 project on the same site. The estimates include incremental increases in the City’s adopted Transportation Impact Fee (TIF), plus the proposed new parks and recreation fee and affordable housing impact “linkage” fee. The estimates are based on a financial feasibility analysis that had been completed for the new parks and recreation and affordable housing linkage fees as applicable to six prototypical Tier 1 and Tier 2 developments, but prior to a decision to utilize a fixed fee schedule for those new fees, plus an increase in the TIF, for Tier 2 developments, as part of the pending Zoning Code update. Accordingly, we utilized the upper limit of financially feasible cumulative net new parks and recreation and affordable housing linkage fees for the six prototypes, as determined by our completed work, to estimate of how the fees total could be allocated between the three types of fees, assuming the same percentage increase for all three fees between Tier 1 and Tier 2 prototypes. Table 1 summarizes the resulting estimates. It shows that, according to the financial feasibility thresholds utilized in our completed analysis, a uniform 14 percent increase for all three fees for Tier 2 prototypes would be feasible. Table 1 includes information about the physical characteristics of the six prototypes utilized in the analysis, and the resulting net amounts for each fee, as well as the cumulative total of all three fees. It also expresses the net fees (individually and cumulatively) as percentages of total development cost and dollars per square foot.

HR&A Advisors, Inc. | Los Angeles | New York | Washington, D.C. 1

Table 1 Estimated Net Development Fees, Tier 1 vs. Tier 2, for Six Prototypical Developments in the City of Santa Monica Downtown Commercial Tier 1 Tier 2

Wilshire Commercial Tier 1 Tier 2 Gross Floor Area Net Floor Area 1st Floor Retail Upper Floor Office Residential # Residential Units # Market Rate # Affordable Total Development Cost Tier 2 Fees Factor

Wilshire Mixed-Use Tier 1 Tier 2

39,000 33,750 20,800 12,950 $20,765,062 1.00

57,750 50,625 20,800 29,825 $31,515,848 1.14

45,111 39,250 18,000 21,250 $29,519,207 1.00

76,222 67,250 18,000 49,250 $50,107,651 1.14

40,125 33,750 4,400 29,350 40 38 2 $20,815,283 1.00

59,521 50,625 4,400 46,225 64 59 5 $30,844,815 1.14

Net TIF Fees Amount Amount % x Total Development Cost $ per Gross Square Foot $ per Net Square Foot

$427,315 2.1% $10.96 $12.66

$632,341 2.0% $10.95 $12.49

$347,875 1.2% $7.71 $8.86

$657,885 1.3% $8.63 $9.78

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

Net Parks & Rec Fee Amount Amount % x Total Development Cost $ per Gross Square Foot $ per Net Square Foot

$44,192 0.2% $1.13 $1.31

$88,044 0.3% $1.52 $1.74

$59,179 0.2% $1.31 $1.51

$133,006 0.3% $1.74 $1.98

$177,343 0.9% $4.42 $5.25

$297,316 1.0% $5.00 $5.87

Net Linkage Fee Amount Amount % x Total Development Cost $ per Gross Square Foot $ per Net Square Foot

$214,432 1.0% $5.50 $6.35

$405,884 1.3% $7.03 $8.02

$273,558 0.9% $6.06 $6.97

$595,871 1.2% $7.82 $8.86

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

Total All 3 Net Fees Amount Amount % x Total Development Cost $ per Gross Square Foot $ per Net Square Foot

$685,939 3.3% $17.59 $20.32

$1,126,269 3.6% $19.50 $22.25

$680,612 2.3% $15.09 $17.34

$1,386,762 2.8% $18.19 $20.62

$177,343 0.9% $4.42 $5.25

$297,316 1.0% $5.00 $5.87

Prepared b y: HR&A Advisors, Inc.

The details of the fee calculations are shown in Table 2. It is important to note that “net fee” amounts reflect a fee credit for existing retail assumed at each site. The TIF fee credit for existing retail in the Wilshire mixed-use prototypes cancels out the TIF at both Tier levels. Similarly, for the affordable housing linkage fee, which applies only to the ground floor retail in the Wilshire mixed-use prototypes, the fee credit cancels out the linkage fee. The parks and recreation fees are based on 25 percent of the maximum justifiable fee, per the nexus study on which the fee is based, and the affordable housing linkage fee is based on 4.5 percent of the maximum justifiable fee according to its nexus study. These percentages of the maximum justifiable fees were determined in the course of our completed analysis of those fees, as discussed below.

HR&A ADVISORS, INC.

Tier 1 vs. Tier 2 Development Fees| 2

  2

Table 2 Calculation Detail for Estimated TIF/New Parks & Recreation and Affordable Housing Linkage Fees, Tier 1 vs. Tier 2, for Six Prototypical Developments in the City of Santa Monica

Prototype Name Location

Commercial Wilshire

Commercial Wilshire

LUCE Tier Land Area Gross Bldg. Area (SF) Residential Units

Commercial Downtown

Commercial Downtown 2

Mixed Use Wilshire

Mixed Use Wilshire

2                    22,500                    59,521                             64

                     22,500                      39,000                             ‐

                        22,500                         57,750                                ‐

                     22,500                      45,111                            ‐

              22,500               76,222                      ‐

1                22,500                40,125                        40 38

59

                            ‐                             ‐                             ‐

                               ‐                                ‐                                ‐

                           ‐                            ‐                            ‐

                     ‐                      ‐                      ‐

                       13                        13                        12

                            20                             20                             19

                            ‐                             ‐                             ‐                      20,800                      12,950                             ‐

                               ‐                                ‐                                ‐                         20,800                         29,825                                ‐

                           ‐                            ‐                            ‐                      18,000                      21,250                            ‐

                     ‐                      ‐                      ‐               18,000               49,250                      ‐

                         1                          1                29,350                  4,400                      ‐                      ‐

                              2                               3                    46,225                       4,400                           ‐                           ‐

                            ‐                             ‐                             ‐                             ‐

                        14,912                                ‐                                ‐                                ‐

                           ‐                            ‐                            ‐                            ‐

              28,000                      ‐                      ‐                      ‐

                     ‐                      ‐                      ‐                      ‐

                     22,500

                        22,500

                     22,500

              22,500

               22,500

                          1.00

                             1.14

                         1.00

                   1.14

                   1.00

                        1.14

$                          ‐ $                          ‐ $                          ‐ $                          ‐ $                 626,080

$                            ‐ $                            ‐ $                            ‐ $                            ‐ $                   626,080

$                         ‐ $                         ‐ $                         ‐ $                378,000

$                  ‐ $                  ‐ $                  ‐ $         378,000 $                  ‐ $         516,135

$                   ‐ $            98,800 $                   ‐ $                   ‐ $          132,440 $                   ‐

$                 139,860

$                   344,886

$

-

$

-

$

-

$                        ‐ $               205,033 $                        ‐ $                        ‐ $               132,440 $                        ‐ $                        ‐

$

$

$

-

$

-

$

-

$

1

2

1

Market Rate Studios 1-BR 2-BR Affordable 1-BR 2-BR Residential (Net Leasable SF) Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) Floor Area Attributable to Tier 2 Office Residential Total Units Market Rate Units Studios 1-BR 2-BR Affordable Units 1-BR 2-BR Assumed Existing Retail Floor Area 1.14

Fee Factor TIF Fees2

   Market Rate‐Area 1    Market Rate‐Area 2    Affordable    Retail‐Area 1    Retail‐Area 2    Office‐Area 1    Office‐Area 2    Hotel‐Area 1 & 2

$2,600 $3,300 $0.00 $21.00 $30.10 $9.70 $10.80 $3.60

per unit per unit per unit x leasable area x leasable area x leasable area x leasable area x leasable area

Subtotal

$21.00 x leasable area $30.10 x leasable area

Less: Fee on Existing SF Area 1 Less: Fee on Existing SF Area 2 NET TIF Fee

$ -

-

$                 765,940

$                   970,966

$

(338,625)

$

(338,625)

$

$

427,315

$

632,341

$

206,125

$                584,125

$         894,135

$

$

(236,250) 347,875

$ $

                   16,605                             24                             22                               8                               7                               7                               2                               1                               1                    22,500

-

$          231,240

$               337,473

$

$

(236,250) 657,885

$

(338,625) -

$

(338,625) -

Proposed Parks/Recreation Fee 25% x Maximum Fees Assumptions Market Rate Housing 0-1 BRs 2+ BRs Affordable Housing Retail Office Hotel

25% 25% 25% 25% 25% 25% 25%

$16,554

per unit

$26,661

per unit

$0

per unit

$5.98 x leasable area $9.24 x leasable area $12.52 x leasable area

$                          ‐ $                          ‐ $                          ‐ $                   31,096 $                   29,915

$                            ‐ $                            ‐ $                            ‐ $                      31,096 $                      73,767

$

-

$

$

61,011

$

104,863

$5.98 x leasable area

$

(16,819)

$

$9.24 x leasable area

$

-

$

$

44,192

$

Subtotal Fee

-

$                         ‐ $                         ‐ $                         ‐ $                  26,910 $                  49,088

$                  ‐ $                  ‐ $                  ‐ $            26,910 $         122,915

$

-

$

$

75,998

$

149,825

-

(16,819)

$

(16,819)

$

-

$

-

$

88,044

$

59,179

$

$          107,601 $            79,983 $                   ‐ $               6,578 $                   ‐ $

-

$

194,162

(16,819)

$

-

$

$               174,319 $               133,238 $                        ‐ $                   6,578 $                        ‐ $

-

$

314,135

(16,819)

$

(16,819)

-

$

Less: Fee on Existing SF Retail Office

25% 25%

Net Fee

133,006

$

177,343

$

297,316

Proposed Affordable Housing Linkage Fee 4.5% x Maximum Fees Retail Office

4.5% 4.5% 4.5%

Assumptions $195.07 x leasable area

$                 182,586 $                 130,600

$                   182,586 $                   322,052

$                158,007 $                214,305

$         158,007 $         536,618

$            38,624 $                   ‐

$                 38,624 $                        ‐

$

313,186

$

504,638

$

372,312

$

694,625

$

38,624

$

38,624

$195.07 x leasable area

$

(98,754)

$

(98,754)

$

(98,754)

$

(98,754)

$

(98,754)

$

(98,754)

$224.11 x leasable area

$ $

214,432

$ $

405,884

$ $

273,558

$ $

595,871

$ $

-

$ $

-

$224.11 x leasable area

Subtotal Fee Less: Fee on Existing SF Retail Office Net Fee

4.5% 4.5%

Combined New Fees with 14% Increase for Tier 2 Total Development Cost Fees PSF Fee as % Dev Cost Maximum Fee Amounts per Completed HR&A Analysis Total Development Cost Fees PSF Fee as % Dev Cost

$ $ $ $ $ $

685,939 20,765,062 17.59 3.3% 685,939 20,765,062 17.59 3.3%

$ $ $

1,126,269 31,515,848 19.50 3.6% 1,141,524 31,531,103 19.77 3.6%

$ $ $

$ $ $ $ $ $

680,612 29,519,207 15.09 2.3% 680,612 29,519,207 15.09 2.3%

$ 1,386,762 $ 50,107,651 $ 18.19 2.8% $ 1,386,762 $ 50,107,651 $ 18.19 2.8%

$ 177,343 $ 20,815,283 $ 4.42 0.9% $ 177,343 $ 20,815,283 $ 4.42 0.9%

$ $ $ $ $ $

297,316 30,844,815 5.00 1.0% 314,802 30,862,301 5.29 1.0%

Prepared by: HR&A Advisors, Inc.

  HR&A ADVISORS, INC.

Tier 1 vs. Tier 2 Development Fees| 3

  3

The modeling approach on which the completed analysis for the proposed parks and recreation and affordable housing linkage fees are based, and hence the estimated fees presented in this memo, is the same approach used by HR&A to analyze the feasibility of the adopted TIF. As in the TIF analysis, computer models were prepared to simulate the financial feasibility implications of developing and operating each development prototype after construction completion, without and with the two new fees. The development cost profile for the prototypes includes, in addition to all the usual hard costs, soft costs and construction financing, all of the typical current public fee requirements, including other City planning and construction fees, fees for child care, the arts, open space, the new TIF, and the Santa Monica-Malibu Unified School District’s school facilities fee, as applicable. For the mixed-use prototypes with housing, the City’s affordable housing requirements were addressed by including five percent of residential units at Extremely LowIncome rents in the Tier 1 prototype, and 7.5 percent in the Tier 2 prototype. For the no new fees scenarios, the analysis assumes that the current Parks and Recreation Facilities Tax and Housing and Parks Mitigation Fees would continue to apply, as well as the adopted TIF. One feasibility model takes the form of a “residual land value” analysis, in which the cost for land that a developer could afford to pay in order to earn a market-responsive return on investment is derived, rather than assumed. This model is then used to measure the cumulative impact of the new fees on the amount that a developer could theoretically afford to pay for land. We then use the derived land values in a second feasibility model to test the resulting return on total development cost and developer profit margin, again without and with the two proposed new fees. HR&A derived maximum allowable fee amounts based on analysis that systematically tested each of the prototypes with different levels of the two fees (i.e., different percentages of the maximum justified fees per the nexus studies) using multiple financial feasibility metrics, such as change in residual land value, developer profit, and return on total development cost, after the addition of the proposed new fees, individually and cumulatively. The resulting fees (25 percent of the maximum justifiable fee for the parks and recreation fee and 4.5 percent for the affordable housing linkage fee) reflect levels at which financial feasibility for each of the prototypes was pushed to the limit of specified feasibility thresholds.1 Appendix A includes the summary sheets for all four models in the completed analysis that form the basis for the conclusions about uniform increases in Tier 2 fees as shown in Table 1 (i.e., residual land value with neither of the proposed new fees; return on total development cost with neither of the proposed new fees; residual land value with both of the proposed new fees; return on total development cost with both of the proposed new fees). We conclude, therefore, that the new parks and recreation and affordable housing linkage fees, if adopted at the percentages of the maximum justifiable fee amounts utilized in our analysis, and                                                              These thresholds, which were also used in the TIF analysis, include: (1) up to a 20% change in residual land value after addition of the new fees; (2) 10% developer profit margin and up to a 15% change in profit margin after addition of the new fees); and (3) return on total development cost of 0.75-1.00 over the weighted average cap rate for the prototype and a change in return on cost up to 0.02 with the fees.

1

HR&A ADVISORS, INC.

Tier 1 vs. Tier 2 Development Fees| 4

  4

the estimated Tier 2 versus Tier 1 increases as presented in this memo, could be absorbed by developers of projects like the prototypes analyzed, and result in financially feasible projects. These results are sensitive to all of the assumptions used in the analyses described in this memo. Changes in some of these assumptions, particularly leasable floor areas, hard construction costs, rents and income capitalization rates, or the assumed new fee credits for replacement of existing retail uses, could alter these results. All dollar amounts presented in this memo and the underlying proposed new fees analysis are stated in 2014 dollars, without inflation. We are available to answer any questions that you may have about the estimates presented in this memo.

HR&A ADVISORS, INC.

Tier 1 vs. Tier 2 Development Fees| 5

  5

Appendix A: Summary Sheets for Four Models Testing the Feasibility of Proposed New Development Fees

HR&A ADVISORS, INC.

Tier 1 vs. Tier 2 Development Fees| 6

  6

Residual Land Value Results Summary - Tier 1 & 2 Development Prototypes (No Add'l Fees) Program Summary (see App. A) Prototype Name Location LUCE Tier Permit Requirement # Parcels Bldg. Height (Feet) Stories (#) Site Area (SF) Gross Bldg. Area (SF) Floor Area Ratio (FAR) - Gross Area Floor Area Ratio (FAR) - Net Area Net Leasable Areas Residential (SF) Market Rate Units Affordable Units Total Units Retail (SF) Office (SF) Hotel (SF) Development Costs (see App. B&C&D) Land Costs Hard Costs Soft Costs Net Parks/Recreation Fee Net Affordable Housing Linkage Fee TIF Fee Other City Costs (see App. E) Other Soft Costs Financing Costs Total Development Cost per GSF Net Operating Income (NOI) (see App. E) Residential-Market Rate Effective Gross Income Less: Operating Expenses Net Operating Income Residential-Affordable Effective Gross Income Less: Operating Expenses Net Operating Income Retail Effective Gross Income Less: Operating Expenses Net Operating Income Office Effective Gross Income Less: Operating Expenses Net Operating Income Total Net Operating Income Project Component Values (see App. F) Residential-Market Rate NOI Cap Rate Value Residential-Affordable NOI Cap Rate Value Retail NOI Cap Rate Value Office NOI Cap Rate Value Total Project Value Residual Land Value Estimate Total Project Value Less: Developer Profit Less: Total Development Cost Residual Land Value Total Per SF Land Area Within Market Range?

Commercial Wilshire

Commercial Wilshire

1

Commercial Downtown

2

Commercial Downtown

1

Mixed Use Wilshire

2

Mixed Use Wilshire

1

2

3 32 2 22,500 39,000 1.73 1.50

3 50 3 22,500 57,750 2.57 2.25

3 32 2 22,500 45,111 2.00 1.74

3 60 4 22,500 76,222 3.39 2.99

3 32 2 22,500 40,125 1.78 1.50

3 50 4 22,500 59,521 2.65 2.25

20,800 12,950 -

20,800 29,825 -

18,000 21,250 -

18,000 49,250 -

29,350 38 2 40 4,400 -

46,225 59 5 64 4,400 -

see Residual Value $ 11,878,402 $ 1,475,198 $ $ $ 427,315 $ 408,948 0 $ 1,198,345 $ 15,388,208 $395

see Residual Value $ 18,522,996 $ 2,297,571 $ $ $ 609,565 $ 806,571 0 $ 1,865,920 $ 24,102,623 $417

see Residual Value $ 14,115,638 $ 1,747,108 $ $ $ 347,875 $ 536,303 0 $ 1,686,335 $ 18,433,259 $409

$ $ $

-

$ $ $

-

$ $ $

$ $ $

-

$ $ $

-

$ $ $

see Residual Value $ 25,226,136 $ 3,118,269 $ $ $ 619,475 $ 1,125,402 0 $ 2,601,954 $ 32,691,236 $429

see Residual Value $ 7,730,679 $ 1,125,843 $ $ $ $ 321,058 0 $ 852,004 $ 10,029,584 $250

see Residual Value 12,072,482 1,754,787 543,004 0 $ 1,315,581 $ 15,685,854 $264

-

$ $ $

-

$ $ $

1,322,014 (266,000) 1,056,014

$ $ $

2,058,361 (413,000) 1,645,361

-

$ $ $

-

$ $ $

9,510 (14,000) (4,490)

$ $ $

24,053 (35,000) (10,947)

200,640 (6,019) 194,621

$ $ $

200,640 (6,019) 194,621

$ $ $ $ $ $

$ $ $

948,480 (28,454) 920,026

$ $ $

948,480 (28,454) 920,026

$ $ $

1,077,300 (32,319) 1,044,981

$ $ $

1,077,300 (32,319) 1,044,981

$ $ $

$ $ $

649,201 (19,476) 581,930

$ $ $

1,492,873 (44,786) 1,339,160

$ $ $

1,197,285 (35,919) 1,083,561

$ $ $

2,776,584 (83,298) 2,512,111

$ $ $

$

2,259,186

$

2,128,542

$

3,557,092

$

1,246,145

$

1,829,035

5.30% -

$

1,056,014 5.30% 19,924,792

$

1,645,361 5.30% 31,044,547

5.30% -

$

(4,490) 5.30% (84,717)

$

1,044,981 6.60% 15,833,045

$

194,621 6.60% 2,948,803

$

6.40% -

$

$

$ $ $ $ $ $ $ $

1,501,956

5.30% -

$

5.30% -

$

920,026 6.60% 13,939,788 581,930 6.40% 9,092,656

5.30% -

$

5.30% -

$

920,026 6.60% 13,939,788

$

1,339,160 6.40% 20,924,375

$

$

$

$ $ $ $

5.30% -

$

5.30% -

$

1,044,981 6.60% 15,833,045

$

1,083,561 6.40% 16,930,641

$ $

2,512,111 6.40% 39,251,734

$

$

$

$

$

$

$

$

$

$

$

$

-

$ $ $

$

$

$

$

-

(10,947) 5.30% (206,547) 194,621 6.60% 2,948,803 6.40% -

$

23,032,444

$

34,864,163

$

32,763,686

$

55,084,779

$

22,788,878

$

33,786,803

$ $ $

23,032,444 (2,879,056) (15,388,208)

$ $ $

34,864,163 (4,358,020) (24,102,623)

$ $ $

32,763,686 (4,095,461) (18,433,259)

$ $ $

55,084,779 (6,885,597) (32,691,236)

$ $ $

22,788,878 (2,848,610) (10,029,584)

$ $ $

33,786,803 (4,223,350) (15,685,854)

$

4,765,180 $212 Marginal

$

6,403,520 $285 Yes

$

10,234,966 $455 Yes

$

15,507,946 $689 Yes

$

9,910,684 $440 Yes

$

13,877,599 $617 Yes

7

Page 1 of 8

HR&A Advisors, Inc. Test Tier 1&2 RLV No Feesv3.xlsx/Summary 4-24-14

Return on Cost Results Summary - Tier 1 & 2 Prototypes (No Add'l Fees) Program Summary (see App. A) Prototype Name Location LUCE Tier Permit Requirement # Parcels Bldg. Height (Feet) Stories (#) Site Area (SF) Gross Bldg. Area (SF) Floor Area Ratio (FAR) - Gross Area Floor Area Ratio (FAR) - Net Area Net Leasable Areas Residential (SF) Market Rate Units Affordable Units Total Units Retail (SF) Office (SF) Hotel (SF) Development Costs (see App. B&C&D) Land Costs Hard Costs Soft Costs Net Parks/Recreation Fee Net Affordable Housing Linkage Fee Net TIF Fee Other City Costs (see App. E) Other Soft Costs Financing Costs Total Development Cost per GSF Net Operating Income (NOI) (see App. E) Residential-Market Rate Effective Gross Income Less: Operating Expenses Net Operating Income Residential-Affordable Effective Gross Income Less: Operating Expenses Net Operating Income Retail Effective Gross Income Less: Operating Expenses Net Operating Income Office Effective Gross Income Less: Operating Expenses Net Operating Income Hotel Effective Gross Income Less: Operating Expenses Net Operating Income Total Net Operating Income Project Component Values (see App. F) Residential-Market Rate NOI Cap Rate Value Residential-Affordable NOI Cap Rate Value Retail NOI Cap Rate Value Office NOI Cap Rate Value Hotel NOI Cap Rate Value Total Project Value Developer Returns Developer Profit Total Project Value Less: Total Development Cost Profit % of Value Feasible? Return on Total Development Cost NOI Total Development Cost Return on Cost Feasible?

Commercial Wilshire

$ $ $ $ $ $ $ $ $ $

Commercial Wilshire

1

Commercial Downtown

2

Commercial Downtown

1

Mixed Use Wilshire

2

Mixed Use Wilshire

1

2

3 32 2 22,500 39,000 1.73 1.50

3 50 3 22,500 57,750 2.57 2.25

3 32 2 22,500 45,111 2.00 1.74

3 60 4 22,500 76,222 3.39 2.99

3 32 2 22,500 40,125 1.78 1.50

3 50 4 22,500 59,521 2.65 2.25

20,800 12,950 -

20,800 29,825 -

18,000 21,250 -

18,000 49,250 -

29,350 38 2 40 4,400 -

46,225 59 5 64 4,400 76,250

4,765,180 11,878,402 1,475,198 427,315 408,948 1,525,356 20,480,399 $525

$ $ $ $ $ $ $ $ $ $

6,403,520 18,522,996 2,297,571 609,565 806,571 2,305,361 30,945,584 $536

$ $ $ $ $ $ $ $ $ $

10,234,966 14,115,638 1,747,108 347,875 536,303 2,171,078 29,152,968 $646

$ $ $ $ $ $ $ $ $ $

15,507,946 25,226,136 3,118,261 619,475 1,125,126 3,666,167 49,263,111 $646

$ $ $ $ $ $ $ $ $ $

9,910,684 7,730,679 1,125,834 320,782 1,532,105 20,620,084 $514

$ $ $ $ $ $ $ $ $ $

13,877,599 12,072,482 1,754,787 543,004 2,267,931 30,515,803 $513

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

1,322,014 (266,000) 1,056,014

$ $ $

2,058,361 (413,000) 1,645,361

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

9,510 (14,000) (4,490)

$ $ $

24,053 (35,000) (10,947)

200,640 (6,019) 194,621

$ $ $

200,640 (6,019) 194,621

$ $ $

948,480 (28,454) 920,026

$ $ $

948,480 (28,454) 920,026

$ $ $

1,077,300 (32,319) 1,044,981

$ $ $

1,077,300 (32,319) 1,044,981

$ $ $

$ $ $

649,201 (67,271) 581,930

$ $ $

1,492,873 (153,713) 1,339,160

$ $ $

1,197,285 (113,724) 1,083,561

$ $ $

2,776,584 (264,473) 2,512,111

$ $ $

$ $ $ $

2,259,186

$ $ $ $

2,128,542

$ $ $ $

3,557,092

$ $ $ $

1,246,145

$ $ $ $

1,829,035

5.30% -

$

1,056,014 5.30% 19,924,792

$

1,645,361 5.30% 31,044,547

5.30% -

$

(4,490) 5.30% (84,717)

$

1,044,981 6.60% 15,833,045

$

194,621 6.60% 2,948,803

$

2,512,111 6.40% 39,251,734

$

6.40% -

$

7.90% 55,084,779

$

7.90% 22,788,878

$

$ $ $ $

1,501,956

$

5.30% -

$

5.30% -

$

920,026 6.60% 13,939,788

$

581,930 6.40% 9,092,656

$

7.90% 23,032,444

$

$ $ $

23,032,444 (20,480,399) 2,552,045 11.1% Yes

$ $

1,501,956 (20,480,399) 7.33%

$ $ $ $ $ $ $ $ $ $

Yes

5.30% -

$

5.30% -

$

920,026 6.60% 13,939,788

$

1,339,160 6.40% 20,924,375

$

7.90% 34,864,163

$

$ $ $

34,864,163 (30,945,584) 3,918,579 11.2% Yes

$ $

2,259,186 (30,945,584) 7.30%

$

$

$

$

$ $

$ $ $

-

5.30% -

$

5.30% -

$

1,044,981 6.60% 15,833,045

$

1,083,561 6.40% 16,930,641

$

7.90% 32,763,686

$

$ $ $

32,763,686 (29,152,968) 3,610,718 11.0% Yes

$ $ $

55,084,779 (49,263,111) 5,821,668 10.6% Yes

$ $ $

22,788,878 (20,620,084) 2,168,794 9.5% Yes

$ $ $

33,786,803 (30,515,803) 3,271,000 9.7% Yes

$ $

2,128,542 (29,152,968) 7.30%

$ $

3,557,092 (49,263,111) 7.22%

$ $

1,246,145 (20,620,084) 6.04%

$ $

1,829,035 (30,515,803) 5.99%

$

$

$

$

$ $

Yes

Yes

8

-

Page 1 of 8

$

$

$

$

$ $

Yes

$

$

$

$

$ $

Marginal

$

$

$

$

$ $

(10,947) 5.30% (206,547) 194,621 6.60% 2,948,803 6.40% 7.90% 33,786,803

Marginal

HR&A Advisors, Inc. Test Tier 1 & 2 ROC No Feesv3.xlsx/Summary 4-24-2014

Residual Land Value Results Summary - Tier 1 & 2 (With Add'l Fees) Program Summary (see App. A) Prototype Name Location LUCE Tier Permit Requirement # Parcels Bldg. Height (Feet) Stories (#) Site Area (SF) Gross Bldg. Area (SF) Floor Area Ratio (FAR) - Gross Area Floor Area Ratio (FAR) - Net Area Net Leasable Areas Residential (SF) Market Rate Units Affordable Units Total Units Retail (SF) Office (SF) Hotel (SF) Development Costs (see App. B&C&D) Land Costs Hard Costs Soft Costs Net Parks/Recreation Fee Net Affordable Housing Linkage Fee TIF Fees Other City Costs (see App. E) Other Soft Costs Financing Costs Total Development Cost per GSF Net Operating Income (NOI) (see App. E) Residential-Market Rate Effective Gross Income Less: Operating Expenses Net Operating Income Residential-Affordable Effective Gross Income Less: Operating Expenses Net Operating Income Retail Effective Gross Income Less: Operating Expenses Net Operating Income Office Effective Gross Income Less: Operating Expenses Net Operating Income Total Net Operating Income Project Component Values (see App. F) Residential-Market Rate NOI Cap Rate Value Residential-Affordable NOI Cap Rate Value Retail NOI Cap Rate Value Office NOI Cap Rate Value Total Project Value Residual Land Value Estimate Total Project Value Less: Developer Profit Less: Total Development Cost Residual Land Value Total Per SF Land Area Residual Land Value No Fees Change in Residual Land Value Percent Change in Residual Land Value Within Market Range?

Commercial Wilshire

Commercial Wilshire

1

Commercial Downtown

2

Commercial Downtown

1

Mixed Use Wilshire

2

Mixed Use Wilshire

1

2

3 32 2 22,500 39,000 1.73 1.50

3 50 3 22,500 57,750 2.57 2.25

3 32 2 22,500 45,111 2.00 1.74

3 60 4 22,500 76,222 3.39 2.99

3 32 2 22,500 40,125 1.78 1.50

3 50 4 22,500 59,521 2.65 2.25

20,800 12,950 -

20,800 29,825 -

18,000 21,250 -

18,000 49,250 -

29,350 38 2 40 4,400 -

46,225 59 5 64 4,400 -

see Residual Value $ 11,878,402 $ $ 214,432 $ 44,192 $ 427,315 $ 408,948 $ 1,482,957 $ 1,216,626 $ 15,672,872 $402

see Residual Value $ 18,522,996 $ $ 437,787 $ 94,172 $ 609,565 $ 806,571 $ 2,313,530 $ 1,903,520 $ 24,688,141 $428

see Residual Value $ 14,115,638 $ $ 273,558 $ 59,179 $ 347,875 $ 536,303 $ 1,757,091 $ 1,709,854 $ 18,799,498 $417

$ $ $

-

$ $ $

-

$ $ $

$ $ $

-

$ $ $

-

$ $ $

see Residual Value $ 25,226,136 $ $ 627,953 $ 139,334 $ 619,475 $ 1,125,402 $ 3,141,288 $ 2,656,189 $ 33,535,777 $440

see Residual Value $ 7,730,679 $ $ $ 177,343 $ $ 321,058 $ 1,131,163 $ 864,539 $ 10,224,782 $255

$ $ $ $ $ $ $ $ $

see Residual Value 12,072,482 314,802 543,004 1,764,231 1,337,833 16,032,352 $269

-

$ $ $

-

$ $ $

1,322,014 (266,000) 1,056,014

$ $ $

2,058,361 (413,000) 1,645,361

-

$ $ $

-

$ $ $

9,510 (14,000) (4,490)

$ $ $

24,053 (35,000) (10,947)

200,640 (6,019) 194,621

$ $ $

200,640 (6,019) 194,621

$ $ $

948,480 (28,454) 920,026

$ $ $

948,480 (28,454) 920,026

$ $ $

1,077,300 (32,319) 1,044,981

$ $ $

1,077,300 (32,319) 1,044,981

$ $ $

$ $ $

649,201 (19,476) 581,930

$ $ $

1,492,873 (44,786) 1,339,160

$ $ $

1,197,285 (35,919) 1,083,561

$ $ $

2,776,584 (83,298) 2,512,111

$ $ $

$

2,259,186

$

2,128,542

$

3,557,092

$

1,246,145

$

1,829,035

5.30% -

$

1,056,014 5.30% 19,924,792

$

1,645,361 5.30% 31,044,547

5.30% -

$

(4,490) 5.30% (84,717)

$

1,044,981 6.60% 15,833,045

$

194,621 6.60% 2,948,803

$

6.40% -

$

$

$ $ $ $ $ $ $ $

1,501,956

5.30% -

$

5.30% -

$

920,026 6.60% 13,939,788 581,930 6.40% 9,092,656

5.30% -

$

5.30% -

$

920,026 6.60% 13,939,788

$

1,339,160 6.40% 20,924,375

$

$

$

$ $ $ $

5.30% -

$

5.30% -

$

1,044,981 6.60% 15,833,045

$

1,083,561 6.40% 16,930,641

$ $

2,512,111 6.40% 39,251,734

$

$

$

$

$

$

$

$

$

$

$

$

-

$ $ $

$

$

$

$

-

(10,947) 5.30% (206,547) 194,621 6.60% 2,948,803 6.40% -

$

23,032,444

$

34,864,163

$

32,763,686

$

55,084,779

$

22,788,878

$

33,786,803

$ $ $

23,032,444 (2,879,056) (15,672,872)

$ $ $

34,864,163 (4,358,020) (24,688,141)

$ $ $

32,763,686 (4,095,461) (18,799,498)

$ $ $

55,084,779 (6,885,597) (33,535,777)

$ $ $

22,788,878 (2,848,610) (10,224,782)

$ $ $

33,786,803 (4,223,350) (16,032,352)

$

4,480,516 $199 $4,765,180 -$284,664 -6.0% Yes

$

5,818,002 $259 $6,403,520 -$585,518 -9.1% Yes

$

9,868,727 $439 $10,234,966 -$366,239 -3.6% Yes

$

14,663,405 $652 $15,507,946 -$844,541 -5.4% Yes

$

9,715,486 $432 $9,910,684 -$195,198 -2.0% Yes

$

13,531,101 $601 $13,877,599 -$346,498 -2.5% Yes

9

Page 1 of 8

HR&A Advisors, Inc. Test Tier 1 & 2 RLV With Feesv3.xlsx/Summary 4-24-2014

Return on Cost Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Program Summary (see App. A) Prototype Name Location LUCE Tier Permit Requirement # Parcels Bldg. Height (Feet) Stories (#) Site Area (SF) Gross Bldg. Area (SF) Floor Area Ratio (FAR) - Gross Area Floor Area Ratio (FAR) - Net Area Net Leasable Areas Residential (SF) Market Rate Units Affordable Units Total Units Retail (SF) Office (SF) Hotel (SF) Development Costs (see App. B&C&D) Land Costs Hard Costs Soft Costs Net Parks/Recreation Fee Net Affordable Housing Linkage Fee TIF Fee Other City Costs (see App. E) Other Soft Costs Financing Costs Total Development Cost per GSF Net Operating Income (NOI) (see App. E) Residential-Market Rate Effective Gross Income Less: Operating Expenses Net Operating Income Residential-Affordable Effective Gross Income Less: Operating Expenses Net Operating Income Retail Effective Gross Income Less: Operating Expenses Net Operating Income Office Effective Gross Income Less: Operating Expenses Net Operating Income Hotel Effective Gross Income Less: Operating Expenses Net Operating Income Total Net Operating Income Project Component Values (see App. F) Residential-Market Rate NOI Cap Rate Value Residential-Affordable NOI Cap Rate Value Retail NOI Cap Rate Value Office NOI Cap Rate Value Hotel NOI Cap Rate Value Total Project Value Developer Returns Developer Profit Total Project Value Less: Total Development Cost Profit % of Value Profit No Fees Change in Profit Feasible? Return on Total Development Cost NOI Total Development Cost Return on Cost Return on Cost No Fees Change in Return on Cost Feasible?

Commercial Wilshire

$ $ $ $ $ $ $ $ $ $

Commercial Wilshire

1

Commercial Downtown

2

Commercial Downtown

1

Mixed Use Wilshire

2

Mixed Use Wilshire

1

2

3 32 2 22,500 39,000 1.73 1.50

3 50 3 22,500 57,750 2.57 2.25

3 32 2 22,500 45,111 2.00 1.74

3 60 4 22,500 76,222 3.39 2.99

3 32 2 22,500 40,125 1.78 1.50

3 50 4 22,500 59,521 2.65 2.25

20,800 12,950 -

20,800 29,825 -

18,000 21,250 -

18,000 49,250 -

29,350 38 2 40 4,400 -

46,225 59 5 64 4,400 76,250

4,765,180 11,878,402 1,482,957 44,192 214,432 427,315 408,948 1,543,636 20,765,062 $532

$ $ $ $ $ $ $ $ $ $

6,403,520 18,522,996 2,313,530 94,172 437,787 609,565 806,571 2,342,962 31,531,103 $546

$ $ $ $ $ $ $ $ $ $

10,234,966 14,115,638 1,757,091 59,179 273,558 347,875 536,303 2,194,597 29,519,207 $654

$ $ $ $ $ $ $ $ $ $

15,507,946 25,226,136 3,141,279 139,334 627,953 619,475 1,125,126 3,720,402 50,107,651 $657

$ $ $ $ $ $ $ $ $ $

9,910,684 7,730,679 1,131,155 177,343 320,782 1,544,640 20,815,283 $519

$ $ $ $ $ $ $ $ $ $

13,877,599 12,072,482 1,764,231 314,802 543,004 2,290,183 30,862,301 $519

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

1,322,014 (266,000) 1,056,014

$ $ $

2,058,361 (413,000) 1,645,361

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

9,510 (14,000) (4,490)

$ $ $

24,053 (35,000) (10,947)

200,640 (6,019) 194,621

$ $ $

200,640 (6,019) 194,621

$ $ $

948,480 (28,454) 920,026

$ $ $

948,480 (28,454) 920,026

$ $ $

1,077,300 (32,319) 1,044,981

$ $ $

1,077,300 (32,319) 1,044,981

$ $ $

$ $ $

649,201 (67,271) 581,930

$ $ $

1,492,873 (153,713) 1,339,160

$ $ $

1,197,285 (113,724) 1,083,561

$ $ $

2,776,584 (264,473) 2,512,111

$ $ $

$ $ $ $

2,259,186

$ $ $ $

2,128,542

$ $ $ $

3,557,092

$ $ $ $

1,246,145

$ $ $ $

1,829,035

5.30% -

$

1,056,014 5.30% 19,924,792

$

1,645,361 5.30% 31,044,547

5.30% -

$

(4,490) 5.30% (84,717)

$

1,044,981 6.60% 15,833,045

$

194,621 6.60% 2,948,803

$

2,512,111 6.40% 39,251,734

$

6.40% -

$

7.90% 55,084,779

$

7.90% 22,788,878

$

55,084,779 (50,107,651) 4,977,128 9.0% 5,821,668 -14.5% Yes

$ $ $

22,788,878 (20,815,283) 1,973,595 8.7% 2,168,794 -9.0% Marginal

$ $ $

3,557,092 (50,107,651) 7.10% 7.22% -0.12%

$ $

1,246,145 (20,815,283) 5.99% 6.04% -0.06%

$ $

$ $ $ $

1,501,956

$

5.30% -

$

5.30% -

$

920,026 6.60% 13,939,788

$

581,930 6.40% 9,092,656

$

7.90% 23,032,444

$

23,032,444 (20,765,062) 2,267,382 9.8% 2,552,045 -11.2% Yes

$ $ $

1,501,956 (20,765,062) 7.23% 7.33% -0.10%

$ $

$ $ $ $ $ $ $ $ $ $

$ $ $ $

$ $

Yes

5.30% -

$

5.30% -

$

920,026 6.60% 13,939,788

$

1,339,160 6.40% 20,924,375

$

7.90% 34,864,163

$

34,864,163 (31,531,103) 3,333,060 9.6% 3,918,579 -14.9% Yes

$ $ $

2,259,186 (31,531,103) 7.16% 7.30% -0.14%

$ $

$

$

$

$

$ $

$

5.30% -

$

5.30% -

$

1,044,981 6.60% 15,833,045

$

1,083,561 6.40% 16,930,641

$

7.90% 32,763,686

$

32,763,686 (29,519,207) 3,244,479 9.9% 3,610,718 -10.1% Yes

$ $ $

2,128,542 (29,519,207) 7.21% 7.30% -0.09%

$ $

$

$

$

$

$ $

$

Yes

Yes

10

Page 1 of 8

$

$

$

$

$ $

$

Yes

$

$

$

$

$ $

$

-

Marginal

$ $ $

$

$

$

$

$ $

$

-

(10,947) 5.30% (206,547) 194,621 6.60% 2,948,803 6.40% 7.90% 33,786,803

33,786,803 (30,862,301) 2,924,502 8.7% 3,271,000 -10.6% Marginal 1,829,035 (30,862,301) 5.93% 5.99% -0.07% Marginal

HR&A Advisors, Inc. Test Tier 1 & 2 ROC With Fees for memo.xlsx/Summary 4-24-2014

Attachment D

 

MEMORANDUM   To:

David Martin, Karen Ginsberg & Andy Agle

From:

Paul J. Silvern and Remy Monteko

Date:

July 29, 2014

Re:

Proposed New Development Fees Analysis Update

Cc:

Barry Rosenbaum, Esq. & Alan Selzer, Esq.

In response to discussion at the Planning Commission’s (“Commission”) meeting on May 14, 2014, we have completed an update to the analysis of the financial feasibility of the proposed new Parks & Recreation Fee and Affordable Housing Linkage Fee, including increases for potential new fees (and the Transportation Impact Fee) for Tier 2 projects, for the development prototypes presented to the Commission at that hearing, as well as for new mixed-use retail/residential prototypes, as requested by the Commission. As also requested by the Commission, we prepared a sensitivity analysis for one of the new mixed-use prototypes to test the implications of assuming that the required affordable housing is provided for 50 percent income households, rather than 30 percent income households, as had been assumed in previous modeling work. This memorandum summarizes the analysis update results for the previously presented prototypes, the additional prototypes and the affordable housing sensitivity analysis. The memo also includes a general summary of the modeling approach. A series of attachments are included, which present the modeling output that is summarized in the memo. Analysis Update Summary and Conclusions Our analysis update included the following tasks: 

We updated the residual land value and return on cost/developer profit margin models for three pairs of Tier 1 and Tier 2 (six total) prototypes (four mixed-use commercial and two mixed-use retail/residential), as presented to the Planning Commission on May14. The revised analysis now reflects the actual proposed Tier 2 fee increase approach, rather than an imputed estimate of the higher Tier 2 fees. This set of six prototypes includes two Tier1/Tier 2 pairs with commercial uses only (one on Wilshire Boulevard and one in the Downtown) and one mixed-use pair with retail and residential uses on Wilshire. All of these prototypes are on larger 22,500 s.f. sites, and all buildings are about 39,000 or more gross square feet.



We then prepared modeling analysis for four new pairs of smaller Tier 1 and Tier 2 prototypes (8 total), which include three pairs of Boulevard Low mixed-use retail/residential prototypes and one additional pair of Downtown mixed-use retail/residential prototypes, all on smaller

HR&A Advisors, Inc. | Los Angeles | New York | Washington, D.C. 1

15,000 s.f. sites, and all but one of which with smaller buildings of 27,000-40,000 square feet of gross floor area. 

We also prepared a sensitivity test on the new Downtown mixed-use retail/residential prototypes to assess the implications of assuming 50 percent income units (i.e., 10% at Tier 1 and 15% at Tier 2) in lieu of 30 percent income units (i.e., 5% at Tier 1 and 7.5% at Tier 2), as assumed in all of the other modeling work.

In preparing these analyses, we utilized the same modeling approach (i.e., residual land value models without and with new fees; return on cost/developer profit margin models without and with new fees), as in all of our prior work on this subject (and before that, on the financial feasibility implications of the Transportation Impact Fee (TIF)). For the new prototypes, we maintained the same basic assumptions as were used for the six prototypes previously presented to the Commission, except where new assumptions were required for the specific characteristics of the new prototypes (e.g., construction costs for smaller developments; commercial rents and apartment rents for the boulevards). Key conclusions we draw from the analysis update include the following: 

The previously estimated 1.14 fees increase factor for Tier 2 is still the maximum that enables the six prototypes previously presented to the Commission to remain financially feasible, according to the benchmarks we have used throughout this analysis process. The limiting feasibility factor is primarily the all-commercial profile of most of these prototypes. But the 1.14 Tier 2 factor is also feasible for the eight new mixed-use retail/residential prototypes.



For the all-commercial prototypes previously presented to the Commission, the cumulative impact of the Tier 2 fees with a 1.14 factor increase is between about $15 and $20 per gross square foot, or about 2.3% to 3.6% of total development cost. The cumulative impact of the Tier 2 fees for the previously presented mixed-use retail/residential prototype on Wilshire is much less (i.e., $4-$5 per square foot and about 1% of total development cost), due to fee credits for assumed existing retail.



For the eight new mixed-use retail/residential prototypes, the TIF, under Tier 1 and Tier 2 with a 1.14 factor increase, is fully offset by the credit for assumed existing retail on each site.



For the new mixed-use retail/residential prototypes, the proposed new Affordable Housing Linkage Fee is also fully offset, under Tier 1 and Tier 2 with a 1.14 factor increase, because: 1) the fee only applies to a very modest amount of ground floor retail in each prototype; and 2) the credit for assumed existing retail exceeds the fee amount applicable to retail space in each prototype.



Due to the fee credit for existing retail, only the proposed new Parks & Recreation fee has any impact on the new mixed-use retail/residential prototypes.



Therefore, the cumulative new fees for the new Tier 1 and Tier 2 mixed-use retail/residential prototypes represent only about 0.3% to 1.5% of total development cost, assuming the Tier 2 increase is set at the 1.14 level that was derived from the six larger prototypes previously presented to the Commission, most with much more commercial space.



Because of the effects of the fees credit for assumed existing retail, it would be technically possible to raise the Tier 2 increase factor above 1.14 for the new mixed-use retail/residential prototypes and still achieve financially feasible results. But to do so would require a complex

HR&A ADVISORS, INC.

New Fees Analysis Update| 2

  2

Tier 2 fee schedule that varies by street, project type and project scale, which could be difficult to administer. 

For the new Downtown mixed-use retail/residential prototype, changing the assumed affordable housing to 50 percent income units, from 30 percent income units as previously assumed, and using the 1.14 Tier 2 factor, causes only a marginal change in the financial feasibility results for that prototype. But it should be noted that the applicable difference in the number of affordable units involved is very small (i.e., a Tier 2 net increase of +4 affordable units when going from 30 percent income units to 50 percent income units, and a corresponding reduction of four market rate units).

Updated Results for Previously Presented Mixed-Use Prototypes Table 1 summarizes the updated fee results and feasibility conclusions for the six prototypes presented to the Commission in May. As noted above, these are primarily all-commercial prototypes on larger sites. Table 1 shows that, as previously reported to the Commission, according to the financial feasibility thresholds utilized in our analysis, a uniform 14 percent increase for all three fees for Tier 2 prototypes would be financially feasible. Table 1 includes information about the physical characteristics of the six prototypes utilized in the analysis, and the resulting net amounts for each fee, as well as the cumulative total of all three fees. It also expresses the net fees (individually and cumulatively) as percentages of total development cost and dollars per gross and net square foot. Finally, Table 1 summarizes the degree to which the cumulative incremental additional net fees cost affects the financial feasibility of each prototype. All six of these prototypes are either feasible or marginally feasible at the Tier 1 and Tier 2 levels. As noted in our memorandum report for the May 14, 2014 Commission meeting, it is important to note that “net fee” amounts shown in Table 1 (and in the subsequent Tables) reflect a fee credit for existing retail assumed at each site. The TIF fee credit for existing retail in the Wilshire mixed-use prototypes cancels out the TIF at both Tier levels. Similarly, for the proposed new Affordable Housing Linkage Fee, which applies only to the ground floor retail in the Wilshire mixed-use prototypes, the fee credit cancels out the Linkage Fee. Calculation details and other modeling results for these prototypes are included in Attachment A.

HR&A ADVISORS, INC.

New Fees Analysis Update| 3

  3

Table 1 Estimated Net Development Fees and Feasibility Results for 6 Prototypical Projects in the City of Santa Monica

Land Area Gross Bldg. Area (SF) Net Leasable Area (NSF) 1st Floor Retail Upper Floor Office Residential # Residential Units # Market Rate Units # Affordable Units Total Development Cost (w/land) Tier 2 Fees Factor Net TIF Fees Amount % x Total Development Cost $ per Gross SF $ per Net SF Net Parks & Rec Fees Amount % x Total Development Cost $ per Gross SF $ per Net SF Net Afford. Hsg. Fees Amount % x Total Development Cost $ per Gross SF $ per Net SF Cumulative New Net Fees Amount % x Total Development Cost $ per Gross SF $ per Net SF Resulting Residual Land Value $/Land SF Change % Change Feasible?

Wilshire Mixed-Use Commercial Tier 1 Tier 2 22,500 22,500 39,000 57,750 33,750 50,625 12,950 29,825 20,800 20,800 $20,675,062 $31,336,235 1.00 1.14

Wilshire Mixed-Use Retail/Residential Tier 1 Tier 2 22,500 22,500 40,125 59,521 33,750 50,625 4,400 4,400 29,350 46,225 40 64 38 59 2 5 $20,806,477 $30,842,884 1.00 1.14

$427,315 2.1% $10.96 $12.66

$632,112 2.0% $10.95 $12.49

$347,875 1.2% $7.71 $8.86

$657,499 1.3% $8.63 $9.78

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$44,192 0.2% $1.13 $1.31

$87,995 0.3% $1.52 $1.74

$59,179 0.2% $1.31 $1.51

$132,914 0.3% $1.74 $1.98

$177,343 0.9% $4.42 $5.25

$297,162 1.0% $4.99 $5.87

$214,432 1.0% $5.50 $6.35

$405,670 1.3% $7.02 $8.01

$273,558 0.9% $6.06 $6.97

$595,470 1.2% $7.81 $8.85

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$685,939 3.3% $17.59 $20.32

$1,125,777 3.6% $19.49 $22.24

$680,612 2.3% $15.09 $17.34

$1,385,882 2.8% $18.18 $20.61

$177,343 0.9% $4.42 $5.25

$297,162 1.0% $4.99 $5.87

$199 ($13) -6.0%

$267 ($17) -6.1%

$442 ($13) -2.8%

$670 ($19) -2.8% YES

$432 ($8) -1.9% YES

$603 ($14) -1.9%

10.1% -8.1%

9.8% -7.4% YES

8.7% -8.6% MARGINAL

8.7% -10.0% MARGINAL

7.23% (0.07)

7.16% (0.06) YES

5.99% (0.05) MARGINAL

5.93% (0.06) MARGINAL

YES

YES

Resulting Developer Profit Margin % x Project Value 9.8% % Change -11.2% Feasible? MARGINAL Resulting Return on Total Cost % x Total Development Cost Change (percentage points) Feasible?

Downtown Mixed-Use Commercial Tier 1 Tier 2 22,500 22,500 45,111 76,222 39,250 67,250 21,250 49,250 18,000 18,000 $29,444,361 $49,696,524 1.00 1.14

10.1% -10.0% YES

7.23% (0.10) YES

YES

YES

7.21% (0.90) YES

YES

YES

1

"Net" Fee Amount = Fee per land use NSF minus credit for fee applicable to assumed existing development on each site (i.e., retail on one-half of each site). Prepared by: HR&A Advisors, Inc.

HR&A ADVISORS, INC.

New Fees Analysis Update| 4

  4

Results for Eight New Mixed-Use Retail/Residential Prototypes Table 2 summarizes the fee results and feasibility conclusions for the six new prototypes on Pico, Santa Monica and South Lincoln Boulevards, and in the Downtown area. As noted above, these are all mixed-use retail/residential prototypes on smaller sites. Table 2 also shows that, according to the financial feasibility thresholds utilized in our analysis, a uniform 14 percent increase for all three fees for Tier 2 prototypes would be financially feasible. Once again, Table 2 includes information about the physical characteristics of the new prototypes, and the resulting net amounts for each fee, as well as the cumulative total of all three fees. It also expresses the net fees (individually and cumulatively) as percentages of total development cost and dollars per square foot. It also expresses the net fees (individually and cumulatively) as percentages of total development cost and dollars per gross and net square foot. Finally, Table 2 summarizes the degree to which the cumulative incremental additional net fees affects the feasibility of each prototype. All eight prototypes are also either feasible or marginally feasible at the Tier 1 and Tier 2 levels.1 As noted above with respect to the Wilshire Boulevard mixed-use retail/residential prototype, the fee credits for assumed existing retail cancel out the TIF fees that would otherwise apply, and the Linkage Fee that would otherwise apply to the ground floor retail space in each of the new mixeduse retail/residential prototypes. As a result of credit for assumed existing retail, the Tier 2 increase factor for these prototypes could conceivably be increased above 1.14 and still fall within feasibility thresholds used in the analysis. This is because, as a practical matter, a change to a higher factor would apply only to the proposed Parks and Recreation Fee for the incremental increase in the number of Tier 2 market rate units. Calculation details and other modeling results for these prototypes are included in Attachment B.

                                                             1 The fact that several of these prototypes are deemed marginally feasible from a return on total development cost perspective is a function of their being marginally feasible in the base case with no new development fees. The incremental addition of the fees has a negligible impact on the feasibility metrics.

HR&A ADVISORS, INC.

New Fees Analysis Update| 5

  5

Table 2 Estimated Net Development Fees and Feasibility Results for 8 Prototypical Mixed-Use Retail/Residential Projects in the City of Santa Monica

Land Area Gross Bldg. Area (SF) Net Leasable Area (NSF) 1st Floor Retail Residential # Residential Units # Market Rate Units # Affordable Units Total Development Cost (w/land) Tier 2 Fees Factor Net TIF Fees Amount % x Total Development Cost $ per Gross SF $ per Net SF Net Parks & Rec Fees Amount % x Total Development Cost $ per Gross SF $ per Net SF Net Afford. Hsg. Fees Amount % x Total Development Cost $ per Gross SF $ per Net SF Cumulative New Net Fees Amount % x Total Development Cost $ per Gross SF $ per Net SF Resulting Residual Land Value $/Land SF Change % Change Feasible?

Pico Blvd. Mixed-Use Retail/Residential Tier 1 Tier 2 15,000 15,000 27,247 31,557 22,500 26,250 3,000 3,000 19,500 23,250 24 29 23 27 1 2 $8,742,118 $10,266,227 1.00 1.14

So. Lincoln Blvd. Mixed-Use Retail/Residential Tier 1 Tier 2 15,000 15,000 27,247 35,868 22,500 30,000 3,000 3,000 19,500 27,000 24 34 1 31 25 3 $9,331,457 $12,078,960 1.00 1.14

Downtown Mixed-Use Retail/Residential Tier 1 Tier 2 15,000 15,000 40,140 61,117 33,750 52,000 4,000 4,000 29,750 48,000 37 61 35 56 2 5 $20,990,596 $30,888,927 1.00 1.14

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$106,145 1.2% $3.90 $4.72

$146,624 1.4% $4.65 $5.59

$106,145 1.0% $3.90 $4.72

$112,141 1.0% $3.74 $4.85

$106,145 1.1% $3.90 $4.72

$190,337 1.6% $5.31 $6.34

174074 0.8% $4.34 $5.16

391244 1.3% $6.40 $7.52

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$106,145 1.2% $3.90 $4.72

$146,624 1.4% $4.65 $5.59

$106,145 1.0% $3.90 $4.72

$112,141 1.0% $3.74 $4.85

$106,145 1.1% $3.90 $4.72

$190,337 1.6% $5.31 $6.34

$174,074 0.8% $4.34 $5.16

$391,244 1.3% $6.40 $7.52

$100 -$8 -7.0% YES

$124 -$11 -8.3% YES

$211 -$8 -3.5% YES

$181 -$8 -4.2% YES

$139 -$8 -5.1% YES

$173 -$14 -7.3% YES

$688 -$14 -2.0%

$551 -$35 -5.9%

11.3% -9.5% YES

11.0% -11.3% YES

11.5% -7.9% YES

11.5% -8.1% YES

11.4% -8.9% YES

11.0% -12.4% YES

6.14% (0.08) MARGINAL

6.09% (0.10) MARGINAL

6.17% (0.07) MARGINAL

6.21% (0.09) YES

6.23% (0.08) YES

6.14% (0.11) MARGINAL

Resulting Developer Profit Margin % x Project Value % Change Feasible? Resulting Return on Total Cost % x Total Development Cost Change (percentage points) Feasible?

S.M. Blvd. Mixed-Use Retail/Residential Tier 1 Tier 2 15,000 15,000 27,247 29,973 22,500 23,145 3,000 3,000 19,500 20,145 24 26 23 24 1 2 $10,412,141 $10,743,272 1.00 1.14

YES

YES

11.6% -7.1%

11.0% -12.0% YES

6.21% (0.06)

6.10% (0.10) MARGINAL

YES

YES

1

"Net" Fee Amount = Fee per land use NSF minus credit for fee applicable to assumed existing development on each site (i.e., retail on one-half of each site). Prepared by: HR&A Advisors, Inc.

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Results for the New Downtown Prototype Assuming 50 Percent Income Units Table 3 summarizes the fee results and financial feasibility conclusions for the new Downtown mixed-use retail/residential prototype if it were assumed that the required affordable units were to be reserved for 50 percent income households (i.e., 10% for Tier 1 and 15% for Tier 2) instead of 30 percent income households (i.e., 5% for Tier 1 and 7.5% for Tier 2). As noted above, there is only a slight difference in fee amounts, due to small changes in the mix of market rate and affordable units. The financial feasibility results are also affected by small changes in net operating income, due to the differences between 50 percent income unit rents and 30 percent income rents, but applied again to very small differences in the numbers of those respective units in these prototypes. Overall, there is no difference in the conclusion as to financial feasibility when assuming 50 percent income units for this prototype. Calculation details and model results are included in Attachment C.

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Table 3 Estimated Net Development Fees and Feasibility Results for a Downtown Mixed-Use Retail/Residential Prototype, With 30% Income Affordable Units vs. 50% Income Affordable Units

Land Area Gross Bldg. Area (SF) Net Leasable Area (NSF) 1st Floor Retail Residential # Residential Units # Market Rate Units # Affordable Units Total Development Cost (w/land) Tier 2 Fees Factor Net TIF Fees Amount % x Total Development Cost $ per Gross SF $ per Net SF Net Parks & Rec Fees Amount % x Total Development Cost $ per Gross SF $ per Net SF Net Afford. Hsg. Fees Amount % x Total Development Cost $ per Gross SF $ per Net SF Cumulative New Net Fees Amount % x Total Development Cost $ per Gross SF $ per Net SF Resulting Residual Land Value $/Land SF Change % Change Feasible?

With 30% Income With 50% Income Affordable Units Affordable Units Tier 1 Tier 2 Tier 1 Tier 2 15,000 15,000 15,000 15,000 40,140 61,117 40,140 61,117 33,750 52,000 33,750 52,000 4,000 4,000 4,000 4,000 29,750 48,000 29,750 48,000 37 61 37 61 35 56 33 52 2 5 4 9 $20,990,596 $30,888,927 $19,608,972 $29,075,166 1.00 1.14 1.00 1.14 $0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$174,074 0.8% $4.34 $5.16

$391,244 1.3% $6.40 $7.52

$159,132 0.8% $3.96 $4.72

$338,095 1.2% $5.53 $6.50

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$0 0.0% $0.00 $0.00

$174,074 0.8% $4.34 $5.16

$391,244 1.3% $6.40 $7.52

$159,132 0.8% $3.96 $4.72

$338,095 1.2% $5.53 $6.50

$688 -$14 -2.0% YES

$551 -$35 -5.9% YES

$605 -$11 -1.8% YES

$454 -$26 -5.5% YES

Resulting Developer Profit Margin % x Project Value % Change Feasible?

11.6% -7.1% YES

11.0% -12.0% YES

11.7% -6.3% YES

11.4% -9.1% YES

Resulting Return on Total Cost % x Total Development Cost Change (percentage points) Feasible?

6.21% (0.06) YES

6.10% (0.10) MARGINAL

6.24% (0.05) YES

6.14% (0.08) MARGINAL

1 "Net" Fee Amount = Fee per land use NSF minus credit for fee applicable to assumed existing development on each site (i.e., retail on one-half of each site).

Prepared by: HR&A Advisors, Inc.

HR&A ADVISORS, INC.

New Fees Analysis Update| 8

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Summary of Feasibility Modeling Approach The modeling approach on which the above results are based is the same approach used by HR&A in all previous iterations of the analysis of the proposed new fees, as well as the financial feasibility analysis for the adopted TIF. As in the TIF analysis, computer models were prepared to simulate the financial feasibility implications of developing and operating each development prototype after construction completion, without and with the two new fees. The development cost profile for the prototypes includes, in addition to all the usual hard costs, soft costs and construction financing costs, all of the typical current public fee requirements, including other City planning and construction fees, fees for child care, the arts, open space, the new TIF, and the Santa Monica-Malibu Unified School District’s school facilities fee, as applicable. For the mixed-use retail/residential prototypes, the City’s affordable housing requirements were addressed by including five percent of residential units for 30 percent income households in the Tier 1 prototypes, and 7.5 percent in the Tier 2 prototypes, except for the sensitivity test reported above where alternative assumptions were made for 50 percent income units. For the no new-fees scenarios, the analysis assumes that the current Parks and Recreation Facilities Tax and Housing and Parks Mitigation Fees would continue to apply, as well as the adopted TIF (and including its allowable credit for assumed existing retail). One feasibility model takes the form of a “residual land value” analysis, in which the cost for land that a developer could afford to pay in order to earn a market-responsive return on investment is derived, rather than assumed. This model is then used to measure the cumulative impact of the new fees on the residual land value. We then use the derived land values in a second feasibility model to test the resulting return on total development cost and developer profit margin, again without and with the two proposed new fees. In preparing this analysis we utilized the same real estate industry metrics in assessing the financial feasibility of the proposed new fees as we used in the TIF analysis. In our view, it is not sufficient to look at only one of these metrics, because they each measure a different set of financial relationships. Rather, all three metrics should be considered together to assess feasibility. To recap, the three feasibility metrics are: 





Change in Residual Land Value (RLV). As with the TIF, we started the analysis by not assuming a particular land cost for each prototype, but instead derived the cost that an informed developer could afford to pay for land and still earn a market-responsive return on completion of each prototype. We then compared the change in the baseline RLV with the new RLV after adding the cost of the proposed new fees. In general, it is our experience that a change in residual land value up to about 20 percent would not render a development project infeasible (i.e., that is the upper end of a reduction that could be successfully accommodated through negotiations between a land seller and a developer). Change in Developer Profit Margin. As with the TIF, this analysis is performed in a Return on Cost spreadsheet model separate from the RLV model. We import the baseline RLV model into the Return on Cost model, and then calculate developer profit (i.e., (completed project value – total development cost) / completed project value). We compare the profit margin resulting from the base case with no new fees with calculations that include the proposed new fees and derive both the dollar differences and the percentage change. In our experience a reduction in developer profit of more than 15 percent would tend to render a development infeasible. In addition, we check the resulting with-fees profit margin as a percent of total project value. In our experience, this value should be at least 10 percent. Change in Return on Total Development Cost. This metric is calculated in the Return on Cost model using the baseline RLV. It is calculated as (Net Operating Income / Total Development

HR&A ADVISORS, INC.

New Fees Analysis Update| 9

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Cost). We first calculate the Return on Cost for the base case version of each prototype without the proposed new fees, and then compared that result with analysis that includes the new fees. In our experience, a change in Return on Cost of more than 0.2 percentage points would tend to indicate that a prototype is infeasible, because it would lower the margin between the return on cost and the assumed income capitalization (or “cap”) rate to an unacceptable degree. For this analysis we assume that the return on cost margin over the weighted average cap rate for each prototype needs to be at least in the 0.75-1.00 range. As we have noted on numerous occasions in conducting real estate feasibility analysis of proposed changes in City fees, land use policies or proposed development projects, there are rarely any bright-line thresholds for determining financial feasibility in the real estate industry, in our experience. That is because of differences in the levels of experience, investment objectives and access to capital among developers working in the City, all of which can be affected by a particular position in the real estate market cycle for one or more land uses. There will always be some developers who require higher, or accept lower, financial feasibility thresholds to proceed with a project, or who have a particular sensitivity to one feasibility metric (or a different metric than employed in this analysis) above all others. However, lines must be drawn somewhere in conducting the kind of analysis presented in this memo. We believe that for this analysis, as with the TIF analysis, we have used reasonable feasibility metrics and established reasonable thresholds for each metric to support decision making by the City Council. HR&A derived maximum proposed new fee amounts based on prior analysis that systematically tested each of the prototypes with different levels of the two fees (i.e., different percentages of the maximum justified fees per the nexus studies), individually and cumulatively, using the same financial feasibility metrics noted above. The resulting fees (25 percent of the maximum justifiable fee for the parks and recreation fee and 4.5 percent for the affordable housing linkage fee) reflect levels at which financial feasibility for each of the prototypes was pushed to the limit of specified feasibility thresholds. This analysis was then adapted to test the maximum increase to the proposed new fees and the TIF that could be applied to the net increase in dwelling units and commercial floor area in Tier 2 versions of Tier 1 prototypes, and still fit within the feasibility thresholds utilized in the analysis. General Conclusions We conclude from the above-described analysis that the proposed new Parks and Recreation Fees and Affordable Housing Linkage Fees, if adopted at the percentages of the maximum justifiable fee amounts utilized in our analysis, and the estimated Tier 2 versus Tier 1 increases of 1.14, could be absorbed by developers of projects like the prototypes analyzed, and result in financially feasible projects. These results are sensitive to all of the assumptions used in the analyses described in this memo. Changes in some of these assumptions, particularly leasable floor areas, hard construction costs, rents and income capitalization rates, or the assumed new fee credits for replacement of existing retail uses, could alter the analysis results and conclusions based on those results All dollar amounts presented in this memo and the underlying proposed new fees analysis are stated in 2014 dollars, without inflation. Attachment A (updated analysis of the previous six prototypes) includes the details of the net fee calculations, and feasibility model results supporting the information in Table 1. Attachment B (analysis of the eight new mixed-use retail/residential prototypes) presents similar information supporting the information in Table 2. Attachment C presents support for the information presented HR&A ADVISORS, INC.

New Fees Analysis Update| 10

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in Table 3 regarding a different assumption about the household income level assumed for the affordable units in each prototype. We are available to answer any questions that you or members of the Planning Commission may have about any of the information presented in this memo.

HR&A ADVISORS, INC.

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Attachments A. Updated analysis results for 6 prototypes previously presented to the Planning Commission: 1. Residual Land Value Impacts With Fees 2. Return on Cost/Development Profit Margin Impacts With Fees B. Updated analysis results for 8 new prototypes: 1. Residual Land Value Impacts With Fees 2. Return on Cost/Development Profit Margin Impacts With Fees C. Sensitivity test for Downtown mixed-use retail/residential prototype assuming 50% income units: 1. Residual Land Value Impacts With Fees 2. Return on Cost/Development Profit Margin Impacts With Fees

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ATTACHMENT A Updated analysis results for 6 prototypes previously presented to the Planning Commission: 1. Residual Land Value Impacts With Fees 2. Return on Cost/Development Profit Margin Impacts With Fees

13

Residual Land Value Results Summary - Tier 1 & 2 (With Add'l Fees) Program Summary (see App. A) Mixed-Use Commercial Wilshire

Prototype Name Location LUCE Tier Permit Requirement # Parcels Bldg. Height (Feet) Stories (#) Site Area (SF) Gross Bldg. Area (SF) Floor Area Ratio (FAR) - Gross Area Floor Area Ratio (FAR) - Net Area Net Leasable Areas Residential (SF) Market Rate Units Affordable Units Total Units Retail (SF) Office (SF) Hotel (SF) Development Costs (see App. B&C&D) Land Costs Hard Costs Soft Costs Net Parks/Recreation Fee Net Affordable Housing Linkage Fee TIF Fees Other City Costs (see App. E) Other Soft Costs Financing Costs Total Development Cost per GSF

Mixed-Use Commercial Wilshire

Mixed-Use Commercial Downtown

1

2

Mixed-Use Commercial Downtown

Mixed-Use Retail/Residential Wilshire

1

2

Mixed-Use Retail/Residential Wilshire 1

2

3 32 2 22,500 39,000 1.73 1.50

3 50 3 22,500 57,750 2.57 2.25

3 32 2 22,500 45,111 2.00 1.74

3 60 4 22,500 76,222 3.39 2.99

3 32 2 22,500 40,125 1.78 1.50

3 50 4 22,500 59,521 2.65 2.25

20,800 12,950 -

20,800 29,825 -

18,000 21,250 -

18,000 49,250 -

29,350 38 2 40 4,400 -

46,225 59 5 64 4,400 -

see Residual Value $ 11,878,402 $ $ 44,192 $ 214,432 $ 427,315 $ 408,948 $ 1,482,957 $ 1,216,626 $ 15,672,872 $402

see Residual Value $ 18,522,996 $ $ 87,995 $ 405,670 $ 632,112 $ 645,275 $ 2,308,219 $ 1,891,007 $ 24,493,274 $424

see Residual Value $ 14,115,638 $ $ 59,179 $ 273,558 $ 347,875 $ 468,303 $ 1,755,051 $ 1,705,047 $ 18,724,651 $415

$ $ $

-

$ $ $

-

$ $ $

$ $ $

-

$ $ $

-

$ $ $

see Residual Value $ 25,226,136 $ $ 132,914 $ 595,470 $ 657,499 $ 752,762 $ 3,130,082 $ 2,629,787 $ 33,124,649 $435

see Residual Value $ 7,730,679 $ $ 177,343 $ $ $ 313,058 $ 1,130,923 $ 863,973 $ 10,215,976 $255

$ $ $ $ $ $ $ $ $

see Residual Value 12,072,482 297,162 530,204 1,763,318 1,335,680 15,998,845 $269

-

$ $ $

-

$ $ $

1,322,014 (266,000) 1,056,014

$ $ $

2,058,361 (413,000) 1,645,361

-

$ $ $

-

$ $ $

9,510 (14,000) (4,490)

$ $ $

24,053 (35,000) (10,947)

200,640 (6,019) 194,621

$ $ $

200,640 (6,019) 194,621

Net Operating Income (NOI) (see App. E) Residential-Market Rate Effective Gross Income Less: Operating Expenses Net Operating Income Residential-Affordable Effective Gross Income Less: Operating Expenses Net Operating Income Retail Effective Gross Income Less: Operating Expenses Net Operating Income Office Effective Gross Income Less: Operating Expenses Net Operating Income

$ $ $

948,480 (28,454) 920,026

$ $ $

948,480 (28,454) 920,026

$ $ $

1,077,300 (32,319) 1,044,981

$ $ $

1,077,300 (32,319) 1,044,981

$ $ $

$ $ $

649,201 (19,476) 581,930

$ $ $

1,492,873 (44,786) 1,339,160

$ $ $

1,197,285 (35,919) 1,083,561

$ $ $

2,776,584 (83,298) 2,512,111

$ $ $

Total Net Operating Income

$

$

2,259,186

$

2,128,542

$

3,557,092

$

1,246,145

$

1,829,035

5.30% -

$

1,056,014 5.30% 19,924,792

$

1,645,361 5.30% 31,044,547

5.30% -

$

(4,490) 5.30% (84,717)

$

1,044,981 6.60% 15,833,045

$

194,621 6.60% 2,948,803

$

$

6.40% -

$

Project Component Values (see App. F) Residential-Market Rate NOI Cap Rate Value Residential-Affordable NOI Cap Rate Value Retail NOI Cap Rate Value Office NOI Cap Rate Value Total Project Value Residual Land Value Estimate Total Project Value Less: Developer Profit Less: Total Development Cost Residual Land Value Total Per SF Land Area Residual Land Value No Fees Change in Residual Land Value Per SF Land Area Percent Change in Residual Land Value Feasible?

$ $ $ $ $ $ $

1,501,956

5.30% -

$

5.30% -

$

920,026 6.60% 13,939,788

$

581,930 6.40% 9,092,656

$

$

$

$

5.30% -

$

5.30% -

$

920,026 6.60% 13,939,788

$

$

$

$

$

5.30% -

$

5.30% -

$

1,044,981 6.60% 15,833,045

$

$

$

$

$

$

$

$

-

$ $ $

$

$

$

-

(10,947) 5.30% (206,547) 194,621 6.60% 2,948,803

$

1,339,160 6.40% 20,924,375

$

1,083,561 6.40% 16,930,641

$

2,512,111 6.40% 39,251,734

$

23,032,444

$

34,864,163

$

32,763,686

$

55,084,779

$

22,788,878

$

33,786,803

$ $ $

23,032,444 (2,879,056) (15,672,872)

$ $ $

34,864,163 (4,358,020) (24,493,274)

$ $ $

32,763,686 (4,095,461) (18,724,651)

$ $ $

55,084,779 (6,885,597) (33,124,649)

$ $ $

22,788,878 (2,848,610) (10,215,976)

$ $ $

33,786,803 (4,223,350) (15,998,845)

$

4,480,516 $199 $4,765,180 -$284,664 -$12.65 -6.0% Yes

$

6,012,869 $267 $6,403,520 -$390,651 -$17.36 -6.1% Yes

$

9,943,574 $442 $10,234,966 -$291,392 -$12.95 -2.8% Yes

$

15,074,533 $670 $15,507,946 -$433,413 -$19.26 -2.8% Yes

$

9,724,292 $432 $9,910,684 -$186,392 -$8.28 -1.9% Yes

$

13,564,608 $603 $13,877,599 -$312,992 -$13.91 -2.3% Yes

$

14

Page 1 of 8

$

$

6.40% -

HR&A Advisors, Inc. Summer_Test Tier 1 & 2 RLV With Feesv1/Summary 7-24-2014

Appendix A Physical Parameters

Prototype Name Location LUCE Area LUCE Tier Permit Requirement # Parcels Bldg. Height (Feet) Stories (#) Land Area (SF) 1 Gross Bldg. Area (SF) 1 Floor Area Ratio (FAR)-Gross Area Floor Area Ratio (FAR)-Net Area 2 Net Leasable Areas (SF) 3 Residential Retail Office Hotel # Hotel Rooms Residential Unit Mix Office SF Retail SF Hotel SF Residential SF-Target Estimate Units (based on avg. unit size) Market Rate Studio 1-BR (SF) 2-BR (SF) Studio 1-BR (# units) 2-BR (#units) Subtotal (# units) 4 Affordable 1-BR (SF) 2-BR (SF) 1-BR (# units) 2-BR (#units) Subtotal (# units) Total Units Parking Residential 5 Market Rate (wtd. avg. per unit) Affordable (avg. per unit) Subtotal Spaces (#) Retail Spaces/1,000 SF Subtotal Spaces (#) Office Spaces/1,000 SF Subtotal Spaces (#) Hotel Spaces/Guest Room Subtotal Spaces (#) Total Spaces Number Gross Area/Space (SF)-Surface Gross Area/Space (SF)-Subt. Total Parking Area (SF) # Surface # Subt. Levels Total Spaces/Levels 1-2 Spaces/Levels 3-5 Construction Period (months)

Mixed-Use Commercial Wilshire

Mixed-Use Commercial Wilshire

Mixed-Use Commercial Downtown

1

Mixed-Use Commercial Downtown

2

1

Mixed-Use Retail/Residential Wilshire

Mixed-Use Retail/Residential Wilshire

2

1

-

3 60 4 22,500 76,222 3.39 2.99 67,250 18,000 49,250 -

3 32 2 22,500 40,125 1.78 1.50 33,750 29,350 4,400 -

2 DA 3 50 4 22,500 59,521 2.65 2.25 50,625 46,225 4,400 -

29,825 20,800 -

21,250 18,000 -

49,250 18,000 -

4,400 29,350 40

4,400 46,225 64

-

-

-

-

475 700 1,000 13 13 12 38

475 700 1,000 20 20 19 59

-

-

-

-

600 1,000 1 1 2 40

600 1,000 2 3 5 64

3.3 69

3.3 69

3.3 59

3.3 59

1.49 1.00 59 2 3.3 15

1.49 1.00 93 5 3.3 15

3.3 43

3.3 98

3.3 70

3.3 163

3.3 -

3.3 -

0.75 -

0.75 -

0.75 -

0.75 -

0.75 -

0.75 -

112 300 350 39,200 1.7 112 -

167 300 350 58,450 2.6 111 56

129 300 350 45,150 2.0 129 -

222 300 350 77,700 3.5 111 111

18

18

18

18

3 32 2 22,500 39,000 1.73 1.50 33,750 20,800 12,950 -

3 50 3 22,500 57,750 2.57 2.25 50,625 20,800 29,825 -

3 32 2 22,500 45,111 2.00 1.74 39,250 18,000 21,250

12,950 20,800 -

74 300 350 25,900 1.2 77 (3) 18

108 300 350 37,800 1.7 112 (4) 18

1

Per guidance provided by City Planning staff, based on recent development applications; emerging Downtown Specific Plan information; and 2010 LUCE. Per HR&A, based on net-to-gross floor area assumptions (90% for retail; 87% for office and 85% for residential), and translation of total gross floor area to gross floor area per-floor, based on: (1) street wall for first three floors; (2) assumed setbacks above 3rd floor. 3 Based on unit mix and net leasable floor area by unit type, per City Planning Staff and HR&A. 4 Assumes 5% of Tier 1 and 7.5% of Tier 2 units for 30% income households. 5 Assumes 1.0 spaces/studio; 1.5 spaces/1-BR unit; and 2.0 spaces/2-BR unit. 2

15 Page 2 of 8

HR&A Advisors, Inc. Summer_Test Tier 1 & 2 RLV With Feesv1/A-Program 7-24-2014

Appendix A Physical Parameters (con'd)

Prototype Name Location Gross Floor Area by Story Site Area Total Gross Bldg. Area Total Floors Floor 1 Floor 2 Floor 3 Floor 4 Floor 5 Floor 6 Total Gross Floor Area FAR-Gross Area Net Floor Area by Story Floor 1 Floor 2 Floor 3 Floor 4 Floor 5 Floor 6 Total Net/Gross Floor Area Overall

Mixed-Use Commercial Wilshire

22,500 39,000 2 23,111 14,389 39,000 1.73

20,800 12,950 33,750 86.5%

Mixed-Use Commercial Wilshire

Mixed-Use Commercial Downtown

22,500 57,750 3 23,111 16,569 16,570 -

Mixed-Use Commercial Downtown

Mixed-Use Retail/Residential Wilshire

Mixed-Use Retail/Residential Wilshire

57,750

22,500 45,111 2 20,000 23,611 45,111

22,500 76,222 4 20,000 23,611 21,111 10,000 76,222

22,500 40,125 2 19,625 19,000 40,125

57,606

2.57

2.00

3.39

1.78

2.65

20,800 14,912 14,913 50,625 87.7%

18,000 21,250 39,250 87.0%

16 Page 3 of 8

18,000 21,250 19,000 9,000 67,250 88.2%

17,220 16,530 33,750 90.0%

22,500 59,521 4 17,710 19,310 9,544 9,543

17,220 16,800 8,303 8,302 50,625 87.9%

HR&A Advisors, Inc. Summer_Test Tier 1 & 2 RLV With Feesv1/A-Program 7-24-2014

Appendix B Development Costs1

Assumptions

Prototype Name Location Land Area Gross Bldg. Area (SF) Net Leasable Areas (SF) Residential Retail Office Hotel Hotel Rooms Subterranean Parking (spaces) 1-2 Levels 3-5 Levels Land Cost Hard Cost Construction Type Building Construction/GSF2 Demo/On-Site Improvements Off-Site Improvements Building Core & Shell Retail Tenant Improvements Office Tenant Improvements Hotel FF&E Subterranean Parking Surface 1-2 Levels 3-4 Levels Contingency

Total Development Cost per GSF 1 2

Mixed-Use Commercial Downtown 22,500 45,111

Mixed-Use Commercial Downtown 22,500 76,222

20,800 12,950 112 112 -

20,800 29,825 167 111 56

18,000 21,250 129 129 -

18,000 49,250 222 111 111

see Residual Value

see Residual Value

see Residual Value

see Residual Value

Mixed-Use Retail/Residential Wilshire 22,500 40,125

Mixed-Use Retail/Residential Wilshire 22,500 59,521

29,350 4,400 74 77 (3) see Residual Value

46,225 4,400 108 112 (4) see Residual Value

$35 $30 $25,000

$ $ $ $ $ $

V $167 337,500 100,000 6,507,540 728,000 388,500 -

$ $ $ $ $ $

V $181 337,500 100,000 10,461,990 728,000 894,750 -

$ $ $ $ $ $

V $177 337,500 100,000 7,997,729 630,000 637,500 -

$ $ $ $ $ $

V $190 337,500 100,000 14,495,900 630,000 1,477,500 -

$ $ $ $ $ $

V $116 337,500 100,000 4,636,845 154,000 -

$5,000 $30,000 $35,000 4%

per Space per Space per Space x Subtotal Hard Costs

$ $ $ $

3,360,000 456,862

$ $ $ $

3,340,000 1,948,333 712,423

$ $ $ $

3,870,000 542,909

$ $ $ $

3,330,000 3,885,000 970,236

$ $ $ $

2,310,000 (105,000) 297,334

$ $ $ $

$

11,878,402

$

18,522,996

$

14,115,638

$

25,226,136

$

7,730,679

$

12,072,482

6%

See App. D See App. D See App. C See App. C Allowances x Hard Costs

$ $ $ $ $ $

214,432 44,192 427,315 408,948 712,704

$ $ $ $ $ $

405,670 87,995 632,112 645,275 1,111,380

$ $ $ $ $ $

273,558 59,179 347,875 468,303 846,938

$ $ $ $ $ $

595,470 132,914 657,499 752,762 1,513,568

# $ # $ # $ $ $ $

177,343 313,058 463,841

$ $ $ $ $ $

297,162 530,204 724,349

$7.50 $3.00 1% 1% $4.00 3% 3%

x Net Leasable SF x Net Leasable SF x Hard Costs x Hard Costs x Net Leasable SF x Hard Costs x Subtotal Soft Costs

$ $ $ $ $ $ $ $

101,250 118,784 118,784 356,352 75,083 2,577,844

$ $ $ $ $ $ $ $

151,875 185,230 185,230 555,690 118,814 4,079,271

$ $ $ $ $ $ $ $

117,750 141,156 141,156 423,469 84,582 2,903,966

$ $ $ $ $ $ $ $

201,750 252,261 252,261 756,784 153,458 5,268,726

$ $ $ $ $ $ $ $

220,125 13,200 77,307 77,307 231,920 47,223 1,621,324

$ $ $ $ $ $ $ $

346,688 13,200 120,725 120,725 362,174 75,457 2,590,683

$

14,456,246

$

22,602,267

$

17,019,604

$

30,494,862

$

9,352,003

$

14,663,165

$ $

775,216 216,844

$ $

1,212,047 339,034

$ $

912,676 255,294

$ $

1,635,287 457,423

$ $

501,501 140,280

$ $

786,312 219,947

$ $

224,566 1,216,626

$ $

339,926 1,891,007

$ $

537,077 1,705,047

$ $

537,077 2,629,787

$ $

222,192 863,973

$ $

329,421 1,335,680

$ $

15,672,872 401.87

$ $

24,493,274 424.13

$ $

18,724,651 415.08

$ $

33,124,649 434.58

$ $

10,215,976 254.60

$ $

15,998,845 268.79

Subtotal Hard + Softs Costs Financing Costs Loan Term (months) Average Loan Balance Construction Loan Interest Rate Construction Loan Interest Construction Loan Fees Capitalized Project Value Permanent Loan Percent x Value Permanent Loan Fees Subtotal Financing Costs

Mixed-Use Commercial Wilshire 22,500 57,750

Varies per Land Area Allowance Varies x Net Leasable SF x Net Leasable SF x Rooms

$15 $100,000

Subtotal Hard Costs Soft Costs Net Parks/Recreation Fee Net Affordable Housing Linkage Fee Net TIF Fee Other City Permits & Fees Misc. Community Benefits Cost A&E/Other Professionals Marketing/Leasing Commissions Residential Retail/Office Legal & Accounting Taxes & Insurance Pre-Opening Expenses Developer Fee Contingency Subtotal Soft Costs

Mixed-Use Commercial Wilshire 22,500 39,000

$ $ $ $

V $131 337,500 $100,000 7,796,656 154,000 3,360,000 (140,000) 464,326

18 65.00% 5.50% 1.50% per App. E 65.00% 1.50%

Hard + Soft + Financing

Per HR&A review of market data and financial feasibility peer reviews of recent developments. 80% x calculated values, per Marshall & Swift Commercial Cost Estimator, 3rd Quarter, 2013; HR&A Advisors, Inc., to account for certain hard costs and soft costs accounted for separately.

17

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HR&A Advisors, Inc. Summer_Test Tier 1 & 2 RLV With Feesv1/B-Dev Costs 7-24-2014

Appendix C Proposed New Fees, Existing City Fees & Permit Costs

Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studios 1-BR 2-BR Affordable 1-BR 2-BR Residential (Net Leasable SF) Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) New Affordable Hsg. Linkage Fee1 1 New Parks Fee 2 TIF Fees Planning Permits3 Development Review Development Agreement Multiple Permit Fee Architectural Review Board Coastal Zone Concept Review CEQA Categorical Exemption Negative Declaration EIR Subtotal Other Requirements3 Mitigation Fee on Office Space Recreational Unit Tax Arts Fee New Residential/Commercial Tenant Improvements Child Care Fee Market Rate Residential Retail Office Hotel School Facilities Fee Residential Commercial Subtotal Bldg./Construction Permits 3 Plan Check Residential 4+ stories Commercial 10K SF/4 stories Mechanical Electrical Plumbing Building Permits/Inspections Multi-family 4+ Stories Commercial 1-Story Commercial 4+ stories Tenant Improvements 10K SF Geotechnical Reports Subtotal Utility Fees4 Water Meter 5 Fireline Meter 5 Wastewater Capital Facilities Studio/1-BR Units 2-BR Units Commercial Subtotal per GSF 1 2 3 4 5

Mixed-Use Commercial Wilshire 22,500 39,000

Assumptions

Mixed-Use Commercial Wilshire 22,500 57,750

Mixed-Use Commercial Downtown 22,500 45,111

Mixed-Use Commercial Downtown 22,500 76,222

-

-

-

-

20,800 12,950 -

20,800 29,825 -

18,000 21,250 -

18,000 49,250 -

Mixed-Use Retail/Residential Wilshire 22,500 40,125

Mixed-Use Retail/Residential Wilshire 22,500 59,521

13 13 12

20 20 19

1 1 29,350 4,400 -

2 3 46,225 4,400 -

N/A N/A

N/A N/A

$ $ $

214,432 44,192 427,315

$ $ $

405,670 87,995 632,112

$ $ $

273,558 59,179 347,875

$ $ $

595,470 132,914 657,499

$ $ $

177,343 -

$ $ $

297,162 -

$15,568 $25,000 $1,684 $1,684 $276

per project per project per project per project per project

$ $ $ $ $

1,544 276

$ $ $ $ $

1,684 1,684 276

$ $ $ $ $

1,684 1,684 276

$ $ $ $ $

1,684 1,684 276

$ $ $ $ $

1,684 1,684 276

$ $ $ $ $

1,544 276

$14,622 $25,445 $200,000

per project per project per project

$ $ $ $

14,622 16,442

$ $ $ $

14,622 18,266

$ $ $ $

14,622 18,266

$ $ $ $

14,622 18,266

$ $ $ $

14,622 18,266

$ $ $ $

14,622 16,442

$10.88 $200

x leasable area >15K x units

$ $

-

$ $

-

$ $

-

$ $

-

$ $

-

$ $

-

1.00% 1.00%

x $200/SF x $50/SF

$ $

78,000 16,875

$ $

115,500 25,313

$ $

90,222 19,625

$ $

152,444 33,625

$ $

80,250 2,200

$ $

119,042 2,200

$133.48 $4.53 $6.34 $3.18

per unit x leasable area x leasable area x leasable area

$ $ $ $

94,224 82,103 -

$ $ $ $

94,224 189,091 -

$ $ $ $

81,540 134,725 -

$ $ $ $

81,540 312,245 -

$ $ $ $

5,072 19,932 -

$ $ $ $

7,875 19,932 -

$3.20 $0.51

x leasable area x leasable area

$ $ $

17,213 288,415

$ $ $

25,819 449,947

$ $ $

20,018 346,130

$ $ $

34,298 614,152

$ $ $

93,920 2,244 203,618

$ $ $

147,920 2,244 299,213

$0.9127 $1.2790 $1.3621 $727 $727 $727

x leasable area x leasable area x leasable area per project per project per project

$

$1.0236 $0.7782 $1.3581 $0.3490 $0.2732 $2,481

x leasable area x leasable area x leasable area x leasable area x leasable area per project

$3,837 $18,195 $1,168 $1,557 $779

$26,603 $727 $727 $727

$

$ $ $ $ $ $ $

16,187 7,259 3,538 55,768

$ $ $ $ $ $ $

16,187 40,505 7,259 8,148 115,594

3/4" meter per project 4" meter per project

$ $

3,837 18,195

$ $

per unit per unit per 1,000 leasable SF

$ $ $ $

26,291 48,323 $10.49 #

$ $ $ $

$

$26,603 $14,711 $727 $727 $727

$

$23,022 $727 $727 $727

$

$ $ $ $ $ $ $

14,008 6,282 5,806 51,299

3,837 18,195

$ $

39,437 61,469 $11.17

$ $ $ $

$

$12,790 $727 $727 $727

$

$ $ $ $ $ $ $

14,008 3,490 13,455 45,924

$ $ $ $ $ $ $

3,424 1,536 12,769

$ $ $ $ $ $ $

47,316 3,424.08 1,536 102,275

3,837 18,195

$ $

3,837 18,195

$ $

3,837 18,195

$ $

3,837 18,195

30,576 52,608 $10.38

$ $ $ $

52,388 74,420 $9.88

$ $ $ $

32,704 20,241 3,428 78,405 $7.80

$ $ $ $

52,560 34,254 3,428 112,274 $8.91

$

$

$5,628 $727 $727 $727

$ $

42,190 $5,628 $727 $727 $727

See Appendix D for calculation details. Per new Ordinance No. 2420 (CCS), adopted March 12, 2013. Assumes TIF credit for existing retail on 50% of site area. Per City staff/nexus study recommendations. Assumes fee credits for existing retail on 50% of site area. Per FY 2013-14 City fee schedules. Includes meter and capital facilities charges.

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HR&A Advisors, Inc. Summer_Test Tier 1 & 2 RLV With Feesv1/C-City Cost Detail 7-24-2014

Proposed TIF/New Parks/Recreation and Afforable Housing Linkage Fees Mixed-Use Commercial Wilshire

Prototype Name Location

LUCE Tier Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studios 1-BR 2-BR Affordable 1-BR 2-BR Residential (Net Leasable SF) Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) Floor Area Attributable to Tier 2 Office Residential Total Units Market Rate Units Studios 1-BR 2-BR Affordable Units 1-BR 2-BR Assumed Existing Retail (50% x site area SF) Fee Factor TIF Fees2

$0.00

$21.00 $30.10 $9.70 $10.80 $3.60

Subtotal Less: Fee on 50% Existing Retail SF Area 1 Less: Fee on 50% Existing Retail SF Area 1 NET TIF Fee

$ $ $ $ $ $ $ $

2 22,500 76,222 -

-

-

-

-

20,800 12,950 -

20,800 29,825 -

18,000 21,250 -

-

14,912 -

-

11,250

11,250

626,080 139,860 -

$                765,940 $21.00 $30.10

x leasable area x leasable area

Mixed-Use Retail/Residential Wilshire

1 22,500 45,111 -

                            1.14   per unit per unit per unit x leasable area x leasable area x leasable area x leasable area x leasable area

Mixed-Use Commercial Downtown

2 22,500 57,750 -

11,250

$2,600 $3,300

Mixed-Use Commercial Downtown

1 22,500 39,000 -

1.14

   Market Rate‐Area 1    Market Rate‐Area 2    Affordable    Retail‐Area 1    Retail‐Area 2    Office‐Area 1    Office‐Area 2    Hotel‐Area 1 & 2

Mixed-Use Commercial Wilshire

$ $ $ $ $ $ $ $

626,080 344,657 -

Mixed-Use Retail/Residential Wilshire

1

22,500 59,521 64

13 13 12

20 20 19

18,000 49,250 -

1 1 29,350 4,400 -

2 3 46,225 4,400 -

28,000 -

-

11,250

11,250

                   1.14 $ $ $ $ $ $ $

378,000 206,125 -

$ $ $ $ $ $ $

2

22,500 40,125 40

378,000 515,749 -

16,605 24 22 8 7 7 2 1 1 11,250

                            1.14   $ $ $ $ $ $ $ $

125,400 132,440 -

$ $ $ $ $ $ $ $

208,691 132,440 -

$                   970,737

$                584,125

$         893,749

$                      257,840

$                   341,131

(236,250) 347,875

$ $ $

(236,250) 657,499

$ $

(338,625) -

$ $

$ $

(338,625) 427,315

$ $

(338,625) 632,112

$ $ $

(338,625) -

Proposed Parks/Recreation Fee 25% x Maximum Fees Assumptions Market Rate Housing 0-1 BRs 2+ BRs Affordable Housing Retail Office Hotel Subtotal Fee Less: Fee on Existing Retail SF Retail Office Net Fee

25% 25% 25% 25% 25% 25%

$16,554 $26,661 $0 $5.98 $9.24 $12.52

per unit per unit per unit x leasable area x leasable area x leasable area

$ $ $ $ $ $ $

31,096 29,915 61,011

$ $ $ $ $ $ $

31,096 73,718 104,814

$ $ $ $ $ $ $

26,910 49,088 75,998

$ $ $ $ $ $ $

26,910 122,823 149,733

$ $ $ $ $ $ $

107,601 79,983 6,578 194,162

$ $ $ $ $ $ $

25% 25%

$5.98 $9.24

x leasable area x leasable area

$ $ $

(16,819) 44,192

$ $ $

(16,819) 87,995

$ $ $

(16,819) 59,179

$ $ $

(16,819) 132,914

$ $ $

(16,819) 177,343

$ $ $

(16,819) 297,162

$ $ $

182,586 130,600 313,186

$ $ $

182,586 321,838 504,424

$ $ $

158,007 214,305 372,312

$ $ $

158,007 536,217 694,224

$ $ $

38,624 38,624

$ $ $

38,624 38,624

$ $ $

(98,754) 214,432

$ $ $

(98,754) 405,670

$ $ $

(98,754) 273,558

$ $ $

(98,754) 595,470

$ $ $

(98,754) -

$ $ $

(98,754) -

$ $ $

685,939 17.59 20,474,415 3.4%

$ $ $

1,125,777 19.49 30,847,408 3.6%

$ $ $

680,612 15.09 29,101,273 2.3%

$ 1,385,882 $ 18.18 $ 48,995,000 2.8%

$ $ $

177,343 4.42 20,584,772 0.9%

$ $ $

297,162 4.99 30,485,115 1.0%

Proposed Affordable Housing Linkage Fee 4.5% x Maximum Fees 4.5% Retail 4.5% Office 4.5% Subtotal Fee Less: Fee on Existing Retail SF Retail 4.5% Office 4.5% Net Fee Combined New Fees Fees Per GSF Total Development Cost Fee as % Dev Cost

Assumptions $195.07 x leasable area $224.11 x leasable area

$195.07 x leasable area $224.11 x leasable area

19

Page 6 of 8

174,231 133,171.70 6,578 313,981

HR&A Advisors, Inc. Summer_Test Tier 1 & 2 RLV With Feesv1/D- Fee Analysis 7-24-2014

Appendix E Net Operating Income Mixed-Use Commercial Wilshire 22,500 39,000 20,800 12,950 112 69 43 0

Mixed-Use Commercial Wilshire 22,500 57,750 20,800 29,825 167 69 98 0

Mixed-Use Commercial Downtown 22,500 45,111 18,000 21,250 129 59 70 0

Mixed-Use Commercial Downtown 22,500 76,222 18,000 49,250 222 59 163 0

Mixed-Use Retail/Residential Wilshire 22,500 40,125 40 38 13 13 12 2 1 1 4,400 74 59 15 0

Mixed-Use Retail/Residential Wilshire 22,500 59,521 64 59 20 20 19 5 2 3 4,400 108 93 15 0

Net Operating Income

$ $ $ $ $ $ $

$0 $2,945 $3,800 -

$ $ $ $ $ $ $

$0 $2,945 $3,800 -

$ $ $ $ $ $ $

$0 $3,100 $4,000 -

$ $ $ $ $ $ $

$0 $3,100 $4,000 -

$ $ $ $ $ $ $

$2,043 $2,945 $3,800 1,325,328 66,266 1,391,594 (69,580) 1,322,014 (266,000) 1,056,014

$ $ $ $ $ $ $

$2,043 $2,945 $3,800 2,063,520 103,176 2,166,696 (108,335) 2,058,361 (413,000) 1,645,361

For-Rent Residential - Affordable (30% Income)3 1-BR Rent/Unit/Month 2-BR Rent/Unit/Month Units Income/Year Other Income 1.0% Gross Income Less: Vacancy & Collection Loss 5.0% Effective Gross Income (EGI) 1 Less: Operating Expenses (inc. reserve) $ 7,000 Net Operating Income

$ $ $ $ $ $ $ $ $

-

$ $ $ $ $ $ $ $ $

-

$ $ $ $ $ $ $ $ $

-

$ $ $ $ $ $ $ $ $

-

$ $ $ $ $ $ $ $ $

389 437 9,912 99 10,011 (501) 9,510 (14,000) (4,490)

$ $ $ $ $ $ $ $ $

389 437 25,068 251 25,319 (1,266) 24,053 (35,000) (10,947)

4.00 211,200 (10,560) 200,640 (6,019) 194,621

$ $ $ $ $ $

4.00 211,200 (10,560) 200,640 (6,019) 194,621

Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studio 1-BR 2-BR Affordable 1-BR 2-BR Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) Parking Spaces Residential Retail Office Hotel For-Rent Residential- Market Rate1 Studio Rent/Unit/Month 1-BR Rent/Unit/Month 2-BR Rent/Unit/Month Units Income/Year Other Income Gross Income Less: Vacancy & Collection Loss Effective Gross Income (EGI) Less: Operating Expenses (incl. reserve) 1

Retail2 Average Rent/SF/Month (NNN) Gross Rental Income/Year Less: Vacancy & Collection Loss Effective Gross Income (EGI) Less: Unreimbursed Operating Expenses Net Operating Income Office2 Average Rent/SF/Month (NNN) Gross Rental Income/Year Parking Income4 Less: Vacancy & Collection Loss Effective Gross Income (EGI) Less: Unreimbursed Operating Expenses Less: Parking Expense Net Operating Income

Total Net Operating Income

1 2 3 4

Assumptions

Varies Varies Varies 5.0%

x Units Income

5.0%

x Gross Income

$ 7,000

x Unit

x Units Income x Gross Income x Unit

Varies 5.0%

x Gross Income

3.0%

x EGI

$2,223 Wtd. Avg./Space/Yr. 5.0% x Gross Income 3.0% 50.0%

x EGI x Parking Income

$ $ $ $ $ $

4.00 998,400 (49,920) 948,480 (28,454) 920,026

$ $ $ $ $ $

4.00 998,400 (49,920) 948,480 (28,454) 920,026

$ $ $ $ $ $

5.25 1,134,000 (56,700) 1,077,300 (32,319) 1,044,981

$ $ $ $ $ $

5.25 1,134,000 (56,700) 1,077,300 (32,319) 1,044,981

$ $ $ $ $ $

$ $ $ $ $ $ $ $

3.75 582,750 95,589 (29,138) 649,201 (19,476) (47,795) 581,930

$ $ $ $ $ $ $ $

3.75 1,342,125 217,854 (67,106) 1,492,873 (44,786) (108,927) 1,339,160

$ $ $ $ $ $ $ $

4.30 1,096,500 155,610 (54,825) 1,197,285 (35,919) (77,805) 1,083,561

$ $ $ $ $ $ $ $

4.30 2,541,300 362,349 (127,065) 2,776,584 (83,298) (181,175) 2,512,111

$ $ $ $ $ $ $ $

$

1,501,956

$

2,259,186

$

2,128,542

$

3,557,092

$

-

1,246,145

$ $ $ $ $ $ $ $

$

-

1,829,035

Institute of Real Estate Management annual operating cost data for apartment buildings in Los Angeles County Per HR&A review of market data and financial feasibility peer reviews of recent developments. Assumes Wilshire residential rents = 95% x downtown. Per City's rent schedule and HR&A assumptions. Assumes $200/month reserved (10% of supply); $165/month unreserved (85%); and $500/month daily use (5%).

20

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HR&A Advisors, Inc. Summer_Test Tier 1 & 2 RLV With Feesv1/E-Net Ops Income 7-24-2014

Appendix F Residual Land Values

Project Value Residential-Market Rate Net Operating Income Cap Rate1 Value Residential-Affordable Net Operating Income Cap Rate1 Value Retail Net Operating Income Cap Rate1 Value Office Net Operating Income Cap Rate1 Value Total Project Value Residual Land Value Estimate Total Project Value Less: Developer Profit 2 Less: Total Development Cost Residual Land Value Total Per SF Land Area 1 2

Mixed-Use Commercial Wilshire 22,500 39,000

Assumptions

Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studio 1-BR 2-BR Affordable 1-BR 2-BR Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF)

Mixed-Use Commercial Wilshire 22,500 57,750

Mixed-Use Commercial Downtown 22,500 45,111

Mixed-Use Commercial Downtown 22,500 76,222

-

-

-

-

20,800 12,950 -

20,800 29,825 -

18,000 21,250 -

18,000 49,250 -

Mixed-Use Retail/Residential Wilshire 22,500 40,125

Mixed-Use Retail/Residential Wilshire 22,500 59,521

13 13 12

20 20 19

1 1 4,400 -

2 3 4,400 -

From App, E

$

-

$

-

$

-

$

-

$

1,056,014

$

1,645,361

NOI/Cap Rate

$

-

$

-

$

-

$

-

$

19,924,792

$

31,044,547

5.30%

From App, E

$

-

$

-

$

-

$

-

$

(4,490)

$

(10,947)

NOI/Cap Rate

$

-

$

-

$

-

$

-

$

(84,717)

$

(206,547)

From App, E

$

920,026

$

920,026

$

1,044,981

$

1,044,981

$

194,621

$

194,621

NOI/Cap Rate

$

13,939,788

$

13,939,788

$

15,833,045

$

15,833,045

$

2,948,803

$

2,948,803

From App, E

$

581,930

$

1,339,160

$

1,083,561

$

2,512,111

$

NOI/Cap Rate

$ $

9,092,656 23,032,444

$ $

20,924,375 34,864,163

$ $

16,930,641 32,763,686

$ $

39,251,734 55,084,779

$ $

22,788,878

$ $

33,786,803

From above x Total Project Value From App, B

$ $ $

23,032,444 (2,879,056) (15,672,872)

$ $ $

34,864,163 (4,358,020) (24,493,274)

$ $ $

32,763,686 (4,095,461) (18,724,651)

$ $ $

55,084,779 (6,885,597) (33,124,649)

$ $ $

22,788,878 (2,848,610) (10,215,976)

$ $ $

33,786,803 (4,223,350) (15,998,845)

$ $

4,480,516 199.13

$ $

6,012,869 267.24

$ $

9,943,574 441.94

$ $

15,074,533 669.98

$ $

9,724,292 432.19

$ $

13,564,608 602.87

5.30%

6.60%

-

$

-

6.40%

12.50%

`

Per Real Estate Research Corp., Real Estate Report, 3rd Quarter 2013, Los Angeles Area data. 10-15% typical, per HR&A.

21

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HR&A Advisors, Inc. Summer_Test Tier 1 & 2 RLV With Feesv1/F-Residual Values 7-24-2014

Return on Cost/Developer Profit Margin Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Program Summary (see App. A) Mixed-Use Commercial Wilshire

Prototype Name Location LUCE Tier Permit Requirement # Parcels Bldg. Height (Feet) Stories (#) Site Area (SF) Gross Bldg. Area (SF) Floor Area Ratio (FAR) - Gross Area Floor Area Ratio (FAR) - Net Area Net Leasable Areas Residential (SF) Market Rate Units Affordable Units Total Units Retail (SF) Office (SF) Hotel (SF) Development Costs (see App. B&C&D) Land Costs Hard Costs Soft Costs Net Parks/Recreation Fee Net Affordable Housing Linkage Fee TIF Fee Other City Costs (see App. E) Other Soft Costs Financing Costs Total Development Cost per GSF Net Operating Income (NOI) (see App. E) Residential-Market Rate Effective Gross Income Less: Operating Expenses Net Operating Income Residential-Affordable Effective Gross Income Less: Operating Expenses Net Operating Income Retail Effective Gross Income Less: Operating Expenses Net Operating Income Office Effective Gross Income Less: Operating Expenses Net Operating Income Hotel Effective Gross Income Less: Operating Expenses Net Operating Income Total Net Operating Income Project Component Values (see App. F) Residential-Market Rate NOI Cap Rate Value Residential-Affordable NOI Cap Rate Value Retail NOI Cap Rate Value Office NOI Cap Rate Value Hotel NOI Cap Rate Value Total Project Value Developer Returns Developer Profit Total Project Value Less: Total Development Cost Profit % of Value Profit No Fees Change in Profit Feasible? Return on Total Development Cost NOI Total Development Cost Return on Cost Return on Cost No Fees Change in Return on Cost Feasible?

$ $ $ $ $ $ $ $ $ $

Mixed-Use Commercial Wilshire 1

2

1

2

Mixed-Use Retail/Residential Wilshire 1

3 32 2 22,500 39,000 1.73 1.50

3 50 3 22,500 57,750 2.57 2.25

3 32 2 22,500 45,111 2.00 1.74

3 60 4 22,500 76,222 3.39 2.99

3 32 2 22,500 40,125 1.78 1.50

3 50 4 22,500 59,521 2.65 2.25

20,800 12,950 -

20,800 29,825 -

18,000 21,250 -

18,000 49,250 -

29,350 38 2 40 4,400 -

46,225 59 5 64 4,400 76,250

4,765,180 11,878,402 1,482,957 44,192 214,432 427,315 408,948 1,543,636 20,765,062 $532

$ $ $ $ $ $ $ $ $ $

Mixed-Use Commercial Downtown

6,403,520 18,522,996 2,308,219 87,995 405,670 632,112 645,275 2,330,448 31,336,235 $543

$ $ $ $ $ $ $ $ $ $

Mixed-Use Commercial Downtown

10,234,966 14,115,638 1,755,051 59,179 273,558 347,875 468,303 2,189,791 29,444,361 $653

$ $ $ $ $ $ $ $ $ $

15,507,946 25,226,136 3,130,074 132,914 595,470 657,499 752,486 3,694,000 49,696,524 $652

Mixed-Use Retail/Residential Wilshire 2

$ $ $ $ $ $ $ $ $ $

9,910,684 7,730,679 1,130,915 177,343 312,782 1,544,074 20,806,477 $519

$ $ $ $ $ $ $ $ $ $

13,877,599 12,072,482 1,763,702 297,162 543,004 2,288,935 30,842,884 $518

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

1,322,014 (266,000) 1,056,014

$ $ $

2,058,361 (413,000) 1,645,361

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

9,510 (14,000) (4,490)

$ $ $

24,053 (35,000) (10,947)

200,640 (6,019) 194,621

$ $ $

200,640 (6,019) 194,621

$ $ $

948,480 (28,454) 920,026

$ $ $

948,480 (28,454) 920,026

$ $ $

1,077,300 (32,319) 1,044,981

$ $ $

1,077,300 (32,319) 1,044,981

$ $ $

$ $ $

649,201 (67,271) 581,930

$ $ $

1,492,873 (153,713) 1,339,160

$ $ $

1,197,285 (113,724) 1,083,561

$ $ $

2,776,584 (264,473) 2,512,111

$ $ $

$ $ $ $

2,259,186

$ $ $ $

2,128,542

$ $ $ $

3,557,092

$ $ $ $

1,246,145

$ $ $ $

1,829,035

5.30% -

$

1,056,014 5.30% 19,924,792

$

1,645,361 5.30% 31,044,547

5.30% -

$

(4,490) 5.30% (84,717)

$

1,044,981 6.60% 15,833,045

$

194,621 6.60% 2,948,803

$

2,512,111 6.40% 39,251,734

$

6.40% -

$

7.90% 55,084,779

$

7.90% 22,788,878

$

55,084,779 (49,696,524) 5,388,255 9.8% 5,821,668 -7.4% Marginal

$ $ $

22,788,878 (20,806,477) 1,982,401 8.7% 2,168,794 -8.6% Marginal

$ $ $

3,557,092 (49,696,524) 7.16% 7.22% -0.06%

$ $

1,246,145 (20,806,477) 5.99% 6.04% -0.05%

$ $

$ $ $ $

1,501,956

$

5.30% -

$

5.30% -

$

920,026 6.60% 13,939,788

$

581,930 6.40% 9,092,656

$

7.90% 23,032,444

$

23,032,444 (20,765,062) 2,267,382 9.8% 2,552,045 -11.2% Marginal

$ $ $

1,501,956 (20,765,062) 7.23% 7.33% -0.10%

$ $

$ $ $ $ $ $ $ $ $ $

$ $ $ $

$ $

Yes

5.30% -

$

5.30% -

$

920,026 6.60% 13,939,788

$

1,339,160 6.40% 20,924,375

$

7.90% 34,864,163

$

34,864,163 (31,336,235) 3,527,928 10.1% 3,918,579 -10.0% Yes

$ $ $

2,259,186 (31,336,235) 7.21% 7.30% -0.09%

$ $

$

$

$

$

$ $

$

5.30% -

$

5.30% -

$

1,044,981 6.60% 15,833,045

$

1,083,561 6.40% 16,930,641

$

7.90% 32,763,686

$

32,763,686 (29,444,361) 3,319,325 10.1% 3,610,718 -8.1% Marginal

$ $ $

2,128,542 (29,444,361) 7.23% 7.30% -0.07%

$ $

$

$

$

$

$ $

$

Yes

Yes

22

Page 1 of 8

$

$

$

$

$ $

$

Yes

$

$

$

$

$ $

$

-

Marginal

$ $ $

$

$

$

-

(10,947) 5.30% (206,547) 194,621 6.60% 2,948,803 6.40% -

$

$ $

$

7.90% 33,786,803

33,786,803 (30,842,884) 2,943,919 8.7% 3,271,000 -10.0% Marginal 1,829,035 (30,842,884) 5.93% 5.99% -0.06% Marginal

HR&A Advisors, Inc. Summer_Test Tier 1 & 2 ROC With Feesv1/Summary 7-24-2014

Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Appendix A Physical Parameters

Prototype Name Location LUCE Area LUCE Tier Permit Requirement # Parcels Bldg. Height (Feet) Stories (#) Land Area (SF) 1 Gross Bldg. Area (SF) 1 Floor Area Ratio (FAR)-Gross Area Floor Area Ratio (FAR)-Net Area Net Leasable Areas (SF) 2 Residential Retail Office Hotel # Hotel Rooms Residential Unit Mix Market Rate Studio 1-BR (SF) 2-BR (SF) Studio 1-BR (# units) 2-BR (#units) Subtotal (# units) 3 Affordable 1-BR (SF) 2-BR (SF) 1-BR (# units) 2-BR (#units) Subtotal (# units) Total Units Parking Residential 4 Market Rate (wtd. avg. per unit) Affordable (avg. per unit) Subtotal Spaces (#) Retail Spaces/1,000 SF Subtotal Spaces (#) Office Spaces/1,000 SF Subtotal Spaces (#) Total Spaces Number Gross Area/Space (SF)-Surface Gross Area/Space (SF)-Subt. Total Parking Area (SF) # Surface # Subt. Levels Total Spaces/Levels 1-2 Spaces/Levels 3-4 Construction Period (months)

Mixed-Use Commercial Wilshire

Mixed-Use Commercial Wilshire

Mixed-Use Commercial Downtown

Mixed-Use Commercial Downtown

Mixed-Use Retail/Residential Wilshire

Mixed-Use Retail/Residential Wilshire

1

2

1

2

1

2

3 32 2 22,500 39,000 1.73 1.50 33,750 20,800 12,950 -

3 50 3 22,500 57,750 2.57 2.25 50,625 20,800 29,825 -

3 32 2 22,500 45,111 2.00 1.74 39,250 18,000 21,250 -

3 60 4 22,500 76,222 3.39 2.99 67,250 18,000 49,250 -

3 32 2 22,500 40,125 1.78 1.50 33,750 29,350 4,400 -

3 50 4 22,500 59,521 2.65 2.25 50,625 46,225 4,400 -

-

-

-

-

475 700 1,000 13 13 12 38

475 700 1,000 20 20 19 59

-

-

-

-

600 1,000 1 1 2 40

600 1,000 2 3 5 64

3.3 69

3.3 69

3.3 59

3.3 59

1.49 1.00 59 2 3.3 15

1.49 1.00 93 5 3.3 15

3.3 43

3.3 98

3.3 70

3.3 163

3.3 -

3.3 -

112 300 350 39,200 1.7 112 -

167 300 350 58,450 2.6 111 56

129 300 350 45,150 2.0 129 -

222 300 350 77,700 3.5 111 111

18

18

18

18

74 300 350 25,900 1.2 77 (3) 18

108 300 350 37,800 1.7 112 (4) 18

1

Per guidance provided by City Planning staff, based on recent development applications; emerging Downtown Specific Plan information; and 2010 LUCE. 2 Based on unit mix and net leasable floor area by unit type, per City Planning Staff and HR&A. 3 Assumes 5% of Tier 1 and 7.5% of Tier 2 units for 30% income households. 4 Assumes 1.0 spaces/studio; 1.5 spaces/1-BR unit; and 2.0 spaces/2-BR unit.

23

Page 2 of 8

HR&A Advisors, Inc. Summer_Test Tier 1 & 2 ROC With Feesv1/A-Program 7-24-2014

Appendix A Physical Parameters (con'd)

Prototype Name Location Gross Floor Area by Story Site Area Total Gross Bldg. Area Total Floors Floor 1 Floor 2 Floor 3 Floor 4 Floor 5 Floor 6 Total Gross Floor Area FAR-Gross Area Net Floor Area by Story Floor 1 Floor 2 Floor 3 Floor 4 Floor 5 Floor 6 Total Net/Gross Floor Area Overall

Mixed-Use Commercial Wilshire

Mixed-Use Commercial Wilshire

22,500 39,000 2 23,111 14,389 39,000

22,500 57,750 3 23,111 16,569 16,570 -

1.73

20,800 12,950 33,750 86.5%

Mixed-Use Commercial Downtown

Mixed-Use Commercial Downtown

Mixed-Use Retail/Residential Wilshire

57,750

22,500 45,111 2 20,000 23,611 45,111

22,500 76,222 4 20,000 23,611 21,111 10,000 76,222

22,500 40,125 2 19,625 19,000 40,125

2.57

2.00

3.39

1.78

20,800 14,912 14,913 50,625 87.7%

18,000 21,250 39,250 87.0%

24

Page 3 of 8

18,000 21,250 19,000 9,000 67,250 88.2%

17,220 16,530 33,750 90.0%

Mixed-Use Retail/Residential Wilshire

22,500 59,521 4 19,625 19,310 9,544 9,543 59,521 2.65

17,220 16,800 8,303 8,302 50,625 85.1%

HR&A Advisors, Inc. Summer_Test Tier 1 & 2 ROC With Feesv1/A-Program 7-24-2014

Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Appeindix B Development Costs1

Assumptions

Prototype Name Location Land Area Gross Bldg. Area (SF) Net Leasable Areas (SF) Residential Retail Office Hotel Hotel Rooms Subterranean Parking (spaces) 1-2 Levels 3-4 Levels Land Cost Hard Cost Construction Type Building Construction/GSF2 Demo/On-Site Improvements Off-Site Improvements Building Core & Shell Retail Tenant Improvements Office Tenant Improvements Hotel FF&E Subterranean Parking Surface 1-2 Levels 3-4 Levels Contingency Subtotal Hard Costs Soft Costs Net Parks/Recreation Fee Net Affordable Housing Linkage Fee Net TIF Fee Other City Permits & Fees Misc. Community Benefits Cost A&E/Other Professionals Marketing/Leasing Commissions Residential Retail/Office Legal & Accounting Taxes & Insurance Pre-Opening Expenses Developer Fee Contingency Subtotal Soft Costs

Total Development Cost per GSF 1 2

Mixed-Use Commercial Wilshire 22,500 57,750

Mixed-Use Commercial Downtown 22,500 45,111

Mixed-Use Commercial Downtown 22,500 76,222

20,800 12,950 112 112 -

20,800 29,825 167 111 56

18,000 21,250 129 129 -

18,000 49,250 222 111 111

Mixed-Use Retail/Residential Wilshire 22,500 40,125

Mixed-Use Retail/Residential Wilshire 22,500 59,521

29,350 4,400 74 77 (3)

$

4,765,180

$

6,403,520

$

10,234,966

$

15,507,946

$

9,910,684

$ $ $ $ $ $

V $167 337,500 100,000 6,507,540 728,000 388,500 -

$ $ $ $ $ $

V $181 337,500 100,000 10,461,990 728,000 894,750 -

$ $ $ $ $ $

V $177 337,500 100,000 7,997,729 630,000 637,500 -

$ $ $ $ $ $

V $190 337,500 100,000 14,495,900 630,000 1,477,500 -

$ $ $ $ $ $

V $116 337,500 100,000 4,636,845 154,000 -

46,225 4,400 108 112 (4) $

13,877,599

V $131 337,500 $100,000 7,796,656 154,000

$35 $30 $25,000

Varies per Land Area Allowance Varies x Net Leasable SF x Net Leasable SF x Rooms

$5,000 $30,000 $35,000 4%

per Space per Space per Space x Subtotal Hard Costs

$ $ $ $ $

3,360,000 456,862 11,878,402

$ $ $ $ $

3,340,000 1,948,333 712,423 18,522,996

$ $ $ $ $

3,870,000 542,909 14,115,638

$ $ $ $ $

3,330,000 3,885,000 970,236 25,226,136

$ $ $ $ $

2,310,000 (105,000) 297,334 7,730,679

$ $ $ $ $

6%

See App. D See App. D See App. C See App. C Allowances x Hard Costs

$ $ $ $ $ $

44,192 214,432 427,315 408,948 712,704

$ $ $ $ $ $

87,995 405,670 632,112 645,275 1,111,380

$ $ $ $ $ $

59,179 273,558 347,875 468,303 846,938

$ $ $ $ $ $

132,914 595,470 657,499 752,486 1,513,568

$ $ $ $ $ $

177,343 312,782 463,841

$ $ $ $ $ $

297,162 543,004 724,349

$7.50 $3.00 1% 1% $4.00 3% 3%

x Net Leasable SF x Net Leasable SF x Hard Costs x Hard Costs x Net Leasable SF x Hard Costs x Subtotal Soft Costs

$ $ $ $ $ $ $ $

101,250 118,784 118,784 356,352 75,083 2,577,844

$ $ $ $ $ $ $ $

151,875 185,230 185,230 555,690 118,814 4,079,271

$ $ $ $ $ $ $ $

117,750 141,156 141,156 423,469 84,582 2,903,966

$ $ $ $ $ $ $ $

201,750 252,261 252,261 756,784 153,450 5,268,442

$ $ $ $ $ $ $ $

220,125 13,200 77,307 77,307 231,920 47,215 1,621,040

$ $ $ $ $ $ $ $

346,688 13,200 120,725 120,725 362,174 75,841 2,603,867

$

19,221,426

$

29,005,787

$

27,254,570

$

46,002,524

# $

19,262,403

$

28,553,949

$ $

1,030,749 288,321

$ $

1,555,435 435,087

$ $

1,461,526 408,819

$ $

2,466,885 690,038

$ $

1,032,946 288,936

$ $

1,531,205 428,309

$ $

224,566 1,543,636

$ $

339,926 2,330,448

$ $

319,446 2,189,791

$ $

537,077 3,694,000

# $ $

222,192 1,544,074

$ $

329,421 2,288,935

$ $

20,765,062 532.44

$ $

31,336,235 542.62

$ $

29,444,361 652.71

$ $

49,696,524 652.00

# $ $

20,806,477 518.54

$ $

30,842,884 518.18

$15 $100,000

Subtotal Hard + Softs Costs Financing Costs Loan Term (months) Average Loan Balance Construction Loan Interest Rate Construction Loan Interest Construction Loan Fees Capitalized Project Value Permanent Loan Percent x Value Permanent Loan Fees Subtotal Financing Costs

Mixed-Use Commercial Wilshire 22,500 39,000

$ $ $ $

3,360,000 (140,000) 464,326 12,072,482

18 65.00% 5.50% 1.50% per App. E 65.00% 1.50%

Hard + Soft + Financing

Per HR&A review of market data and financial feasibility peer reviews of recent developments. 80% x calculated values, per Marshall & Swift Commercial Cost Estimator, 3rd Quarter, 2013; HR&A Advisors, Inc., to account for certain hard costs and soft costs accounted for separately.

25

Page 4 of 8

HR&A Advisors, Inc. Summer_Test Tier 1 & 2 ROC With Feesv1/B-Dev Costs 7-24-2014

Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Appendix C Proposed New Fees, Existing City Fees & Permit Costs

Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studios 1-BR 2-BR Affordable 1-BR 2-BR Residential (Net Leasable SF) Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) New Affordable Hsg. Linkage Fee1 1 New Parks Fee 2 TIF Fees Planning Permits3 Development Review Development Agreement Multiple Permit Fee Architectural Review Board Coastal Zone Concept Review CEQA Categorical Exemption Negative Declaration EIR Subtotal Other Requirements3 Mitigation Fee on Office Space Recreational Unit Tax Arts Fee New Residential/Commercial Tenant Improvements Child Care Fee Market Rate Residential Retail Office Hotel School Facilities Fee Residential Commercial Subtotal Bldg./Construction Permits3 Plan Check Apartments Commercial 10K SF/4 stories Mechanical Electrical Plumbing Building Permits/Inspections Apartments Commercial 1-Story Commercial 4+ stories Tenant Improvements 10K SF Geotechnical Reports Subtotal Utility Fees4 Water Meter 5 Fireline Meter 5 Wastewater Capital Facilities Studio/1-BR Units 2-BR Units Commercial Subtotal per GSF 1 2 3 4 5

Mixed-Use Commercial Wilshire 22,500 39,000

Assumptions

Mixed-Use Commercial Wilshire 22,500 57,750

-

Mixed-Use Commercial Downtown 22,500 45,111

-

$ $ $

20,800 29,825 405,670 87,995 632,112

Mixed-Use Commercial Downtown 22,500 76,222

-

Mixed-Use Retail/Residential Wilshire 22,500 59,521

13 13 12

20 20 19

$ $ $

2 3 46,225 4,400 297,162 -

-

N/A N/A

N/A N/A

$ $ $

20,800 12,950 214,432 44,192 427,315

$15,568 $25,000 $1,684 $1,684 $276

per project per project per project per project per project

$ $ $ $ $

1,544 276

$ $ $ $ $

1,684 1,684 276

$ $ $ $ $

1,684 1,684 276

$ $ $ $ $

1,684 1,684 -

$ $ $ $ $

1,684 1,684 -

$ $ $ $ $

1,544 276

$14,622 $25,445 $200,000

per project per project per project

$ $ $ $

14,622 16,442

$ $ $ $

14,622 18,266

$ $ $ $

14,622 18,266

$ $ $ $

14,622 17,990

$ $ $ $

14,622 17,990

$ $ $ $

14,622 16,442

$10.88 $200

x leasable area >15K x units

$ $

-

$ $

-

$ $

-

$ $

-

$ $

-

$ $

12,800

1.00% 0.01

x $200/SF x $50/SF

$ $

78,000 16,875

$ $

115,500 25,313

$ $

90,222 19,625

$ $

152,444 33,625

$ $

80,250 2,200

$ $

119,042 2,200

$133.48 $4.53 $6.34 3.18

per unit x leasable area x leasable area x leasable area

$ $ $ $

94,224 82,103 -

$ $ $ $

94,224 189,091 -

$ $ $ $

81,540 134,725 -

$ $ $ $

81,540 312,245 -

$ $ $ $

5,072 19,932 -

$ $ $ $

7,875 19,932 -

$3.20 0.51

x leasable area x leasable area

$ $ $

17,213 288,415

$ $ $

25,819 449,947

$ $ $

20,018 346,130

$ $ $

34,298 614,152

$ $ $

93,920 2,244 203,618

$ $ $

147,920 2,244 312,013

$0.9127 $1.2790 $1.3621 $727 $727 $727

x leasable area x leasable area x leasable area per project per project per project

$

$1.0236 $0.7782 $1.3581 $0.3490 $0.2732 $2,481

x leasable area x leasable area x leasable area x leasable area x leasable area per project

$3,837 $18,195 $1,168 $1,557 $779

$26,603 $727 $727 $727

$

$ $ $ $ $ $ $

16,187 7,259 3,538 55,768

$ $ $ $ $ $ $

16,187 40,505 7,259 8,148 115,594

3/4" meter per project 4" meter per project

$ $

3,837 18,195

$ $

per unit per unit per 1,000 leasable SF

$ $ $ $

26,291 48,323 $3.53 #

$ $ $ $

$

$26,603 $14,711 $727 $727 $727

$ $ $

18,000 21,250 273,558 59,179 347,875

Mixed-Use Retail/Residential Wilshire 22,500 40,125

$

$ $ $

18,000 49,250 595,470 132,914 657,499

$ $ $

1 1 29,350 4,400 177,343 -

$23,022 $727 $727 $727

$

$ $ $ $ $ $ $

14,008 6,282 5,806 51,299

3,837 18,195

$ $

39,437 61,469 $3.83

$ $ $ $

$

$12,790 $727 $727 $727

$

$ $ $ $ $ $ $

14,008 3,490 13,455 45,924

$ $ $ $ $ $ $

3,424 1,536 12,769

$ $ $ $ $ $ $

47,316 3,424.08 1,536 102,275

3,837 18,195

$ $

3,837 18,195

$ $

3,837 18,195

$ $

3,837 18,195

30,576 52,608 $3.15

$ $ $ $

52,388 74,420 $2.26

$ $ $ $

32,704 20,241 3,428 78,405 $2.78

$ $ $ $

52,560 34,254 3,428 112,274 $3.92

$

$

$5,628 $727 $727 $727

$ $

42,190 $5,628 $727 $727 $727

See Appendix D for calculation details. Per new Ordinance No. 2420 (CCS), adopted March 12, 2013. Assumes TIF credit for existing retail on 50% of site area. Per City staff/nexus study recommendations. Assumes fee credits for existing retail on 50% of site area. Per FY 2013-14 City fee schedules. Includes meter and capital facilities charges.

26

Page 5 of 8

HR&A Advisors, Inc. Summer_Test Tier 1 & 2 ROC With Feesv1/C-City Cost Detail 7-24-2014

Appendix D Proposed TIF/New Parks/Recreation and Afforable Housing Linkage Fees Mixed-Use Commercial Wilshire

Prototype Name Location

LUCE Tier Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studios 1-BR 2-BR Affordable 1-BR 2-BR Residential (Net Leasable SF) Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) Floor Area Attributable to Tier 2 Office Residential Total Units Market Rate Units Studios 1-BR 2-BR Affordable Units 1-BR 2-BR Assumed Existing Retail (50% x site area)

Mixed-Use Commercial Wilshire

$2,600 $3,300

per unit per unit $0.00 per unit $21.00 x leasable area $30.10 x leasable area $9.70 x leasable area $10.80 x leasable area $3.60 x leasable area

Subtotal Less: Fee on 50% Existing Retail SF Area 1 Less: Fee on 50% Existing Retail SF Area 2 NET TIF Fee

$ $ $ $ $ $ $ $

x leasable area x leasable area

13 13 12

20 20 19

18,000 49,250 -

1 1 29,350 4,400 -

2 3 46,225 4,400 -

28,000 -

-

11,250

11,250

-

-

-

-

20,800 12,950 -

20,800 29,825 -

18,000 21,250 -

-

14,912 -

-

11,250

11,250

$               765,940 $21.00 $30.10

2 22,500 59,521 64

2 22,500 76,222 -

626,080 139,860 -

$ $ $ $ $ $ $ $

626,080 344,657 -

                  1.14 $ $ $ $ $ $ $

378,000 206,125 -

$ $ $ $ $ $ $

Mixed-Use Retail/Residential Wilshire

1

1 22,500 45,111 -

                           1.14

Mixed-Use Retail/Residential Wilshire 22,500 40,125 40

2 22,500 57,750 -

1.14

   Market Rate‐Area 1    Market Rate‐Area 2    Affordable    Retail‐Area 1    Retail‐Area 2    Office‐Area 1    Office‐Area 2    Hotel‐Area 1 & 2

Mixed-Use Commercial Downtown

1 22,500 39,000 -

11,250

Fee Factor 2 TIF Fees

Mixed-Use Commercial Downtown

378,000 515,749 -

16,605 24 22 8 7 7 2 1 1 11,250

                           1.14 $ $ $ $ $ $ $ $

125,400 132,440 -

$ $ $ $ $ $ $ $

208,691 132,440 -

$                  970,737

$              584,125

$        893,749

$                 257,840

$                  341,131

(236,250) 347,875

$ $ $

(236,250) 657,499

$ $

(338,625) -

$ $

(338,625) -

$ $

(338,625) 427,315

$ $

(338,625) 632,112

$ $ $

25% 25% 25%

$16,554 per unit $26,661 per unit $0 per unit $5.98 x leasable area $9.24 x leasable area $12.52 x leasable area

$ $ $ $ $ $ $

31,096 29,915 61,011

$ $ $ $ $ $ $

31,096 73,718 104,814

$ $ $ $ $ $ $

26,910 49,088 75,998

$ $ $ $ $ $ $

26,910 122,823 149,733

$ $ $ $ $ $ $

107,601 79,983 6,578 194,162

$ $ $ $ $ $ $

174,231 133,172 6,578 313,981

25% 25%

$5.98 x leasable area $9.24 x leasable area

$ $ $

(16,819) 44,192

$ $ $

(16,819) 87,995

$ $ $

(16,819) 59,179

$ $ $

(16,819) 132,914

$ $ $

(16,819) 177,343

$ $ $

(16,819) 297,162

$ $ $

182,586 130,600 313,186

$ $ $

182,586 321,838 504,424

$ $ $

158,007 214,305 372,312

$ $ $

158,007 536,217 694,224

$ $ $

38,624 38,624

$ $ $

38,624 38,624

$ $ $

(98,754) 214,432

$ $ $

(98,754) 405,670

$ $ $

(98,754) 273,558

$ $ $

(98,754) 595,470

$ $ $

(98,754) -

$ $ $

(98,754) -

$ $ $

685,939 17.59 20,474,415 3.4%

$ $ $

1,125,777 19.49 30,847,408 3.6%

$ $ $

680,612 15.09 29,101,273 2.3%

$ 1,385,882 $ 18.18 $ 48,995,000 2.8%

$ $ $

177,343 4.42 20,584,772 0.9%

$ $ $

297,162 4.99 30,485,115 1.0%

Proposed Parks/Recreation Fee 25% x Maximum Fees Assumptions Market Rate Housing 0-1 BRs 2+ BRs Affordable Housing Retail Office Hotel Subtotal Fee Less: Fee on Existing Retail SF Retail Office Net Fee

25% 25% 25%

Proposed Affordable Housing Linkage Fee 4.5% x Maximum Fees 4.5% Retail 4.5% Office 4.5% Subtotal Fee Less: Fee on Existing Retail SF Retail 4.5% Office 4.5% Net Fee Combined New Fees with Tier 2 Bump Fees Per GSF Total Development Cost Fee as % Dev Cost

Assumptions $195.07 x leasable area $224.11 x leasable area

$195.07 x leasable area $224.11 x leasable area

27

Page 6 of 8

HR&A Advisors, Inc. Summer_Test Tier 1 & 2 ROC With Feesv1/D- Fee Analysis 7-24-2014

Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Appendix E Net Operating Income

Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studio 1-BR 2-BR Affordable 1-BR 2-BR Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) Parking Spaces Residential Retail Office Hotel For-Rent Residential- Market Rate1 Studio Rent/Unit/Month 1-BR Rent/Unit/Month 2-BR Rent/Unit/Month Units Income/Year Other Income Gross Income Less: Vacancy & Collection Loss Effective Gross Income (EGI) Less: Operating Expenses (incl. reserve) Net Operating Income

Varies Varies Varies

$

5.0%

x Units Income

5.0%

x Gross Income

7,000

For-Rent Residential - Affordable (30% Income)2 1-BR Rent/Unit/Month 2-BR Rent/Unit/Month Units Income/Year Other Income 1.0% Gross Income Less: Vacancy & Collection Loss 5.0% Effective Gross Income (EGI) Less: Operating Expenses (inc. reserve) $ 7,000 Net Operating Income Retail1 Average Rent/SF/Month (NNN) Gross Rental Income/Year Less: Vacancy & Collection Loss Effective Gross Income (EGI) Less: Unreimbursed Operating Expenses Net Operating Income Office1 Average Rent/SF/Month (NNN) Gross Rental Income/Year 3 Parking Income Less: Vacancy & Collection Loss Effective Gross Income (EGI) Less: Unreimbursed Operating Expenses Less: Parking Expense Net Operating Income Total Net Operating Income

1 2 3

Mixed-Use Commercial Wilshire 22,500 39,000 20,800 12,950 112 69 43 -

Assumptions

x EGI

x Units Income x Gross Income x EGI

Varies 5.0%

x Gross Income

3.0%

x EGI

$2,223 Wtd. Avg./Space/Yr. 5.0% x Gross Income 3.0% 50.0%

x EGI x Parking Income

$ $ $ $ $ $ $

$0 $2,945 $3,800 -

$ $ $ $ $ $ $ $ $

-

Mixed-Use Commercial Wilshire 22,500 57,750 20,800 29,825 167 69 98 -

$ $ $ $ $ $ $

$0 $2,945 $3,800 -

$ $ $ $ $ $ $ $ $

-

Mixed-Use Commercial Downtown 22,500 45,111 18,000 21,250 129 59 70 -

$ $ $ $ $ $ $

$0 $3,100 $4,000 -

$ $ $ $ $ $ $ $ $

-

Mixed-Use Commercial Downtown 22,500 76,222 18,000 49,250 222 59 163 -

$ $ $ $ $ $ $

$0 $3,100 $4,000 -

$ $ $ $ $ $ $ $ $

-

Mixed-Use Retail/Residential Wilshire 22,500 40,125 40 38 13 13 12 2 1 1 4,400 74 59 15 -

Mixed-Use Retail/Residential Wilshire 22,500 59,521 64 59 20 20 19 5 2 3 4,400 108 93 15 -

$ $ $ $ $ $ $

$2,043 $2,945 $3,800 1,325,328 66,266 1,391,594 (69,580) 1,322,014 (266,000) 1,056,014

$ $ $ $ $ $ $

$2,043 $2,945 $3,800 2,063,520 103,176 2,166,696 (108,335) 2,058,361 (413,000) 1,645,361

$ $ $ $ $ $ $ $ $

389 437 9,912 99 10,011 (501) 9,510 (14,000) (4,490)

$ $ $ $ $ $ $ $ $

389 437 25,068 251 25,319 (1,266) 24,053 (35,000) (10,947)

4.00 211,200 (10,560) 200,640 (6,019) 194,621

$ $ $ $ $ $

4.00 211,200 (10,560) 200,640 (6,019) 194,621

$ $ $ $ $ $

4.00 998,400 (49,920) 948,480 (28,454) 920,026

$ $ $ $ $ $

4.00 998,400 (49,920) 948,480 (28,454) 920,026

$ $ $ $ $ $

5.25 1,134,000 (56,700) 1,077,300 (32,319) 1,044,981

$ $ $ $ $ $

5.25 1,134,000 (56,700) 1,077,300 (32,319) 1,044,981

$ $ $ $ $ $

$ $ $ $ $ $ $ $

3.75 582,750 95,589 (29,138) 649,201 (19,476) (47,795) 581,930

$ $ $ $ $ $ $ $

3.75 1,342,125 217,854 (67,106) 1,492,873 (44,786) (108,927) 1,339,160

$ $ $ $ $ $ $ $

4.30 1,096,500 155,610 (54,825) 1,197,285 (35,919) (77,805) 1,083,561

$ $ $ $ $ $ $ $

4.30 2,541,300 362,349 (127,065) 2,776,584 (83,298) (181,175) 2,512,111

$ $ $ $ $ $ $ $

$

1,501,956

$

2,259,186

$

2,128,542

$

3,557,092

$

1,246,145

$ $ $ $ $ $ $ $ $

1,829,035

Per HR&A review of market data and financial feasibility peer reviews of recent developments. Assumes Wilshire residential rents = 95% x downtown. Per City's rent schedule and HR&A assumptions. Assumes $200/month reserved (10% of supply); $165/month unreserved (85%); and $500/month daily use (5%).

28

Page 7 of 8

HR&A Advisors, Inc. Summer_Test Tier 1 & 2 ROC With Feesv1/E-Net Ops Income 7-24-2014

Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Appendix F Return on Cost/Developer Proifit Margin

Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studio 1-BR 2-BR Affordable 1-BR 2-BR Retail (Net Leasable SF) Office (Net Leasable SF) Project Value Residential-Market Rate Net Operating Income 1 Cap Rate Value Residential-Affordable Net Operating Income 1 Cap Rate Value Retail Net Operating Income 1 Cap Rate Value Office Net Operating Income 1 Cap Rate Value Hotel Net Operating Income 1 Cap Rate Value

Mixed-Use Commercial Wilshire 22,500 39,000

Assumptions

Mixed-Use Commercial Wilshire 22,500 57,750

Mixed-Use Commercial Downtown 22,500 45,111

Mixed-Use Commercial Downtown 22,500 76,222

-

-

-

-

20,800 12,950

20,800 29,825

18,000 21,250

18,000 49,250

Mixed-Use Retail/Residential Wilshire 22,500 40,125

Mixed-Use Retail/Residential Wilshire 22,500 59,521

475 13 12

475 20 19

1 1 4,400 -

2 3 4,400 -

From App, E

$

-

$

-

$

-

$

-

$

1,056,014

$

1,645,361

NOI/Cap Rate

$

-

$

-

$

-

$

-

$

19,924,792

$

31,044,547

From App, E

$

-

$

-

$

-

$

-

$

(4,490)

$

(10,947)

NOI/Cap Rate

$

-

$

-

$

-

$

-

$

(84,717)

$

(206,547)

From App, E

$

920,026

$

920,026

$

1,044,981

$

1,044,981

$

194,621

$

194,621

NOI/Cap Rate

$

13,939,788

$

13,939,788

$

15,833,045

$

15,833,045

$

2,948,803

$

2,948,803

5.30%

5.30%

6.60%

From App, E

$

581,930

$

1,339,160

$

1,083,561

$

2,512,111

$

-

$

-

NOI/Cap Rate

$

9,092,656

$

20,924,375

$

16,930,641

$

39,251,734

$

-

$

-

6.40%

Total Project Value

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

23,032,444

$

34,864,163

$

32,763,686

$

55,084,779

$

22,788,878

$

33,786,803

Developer Returns Developer Profit Total Project Value Less: Total Development Cost Profit % of Value

From above From App. B

$ $ $

23,032,444 (20,765,062) 2,267,382 9.8%

$ $ $

34,864,163 (31,336,235) 3,527,928 10.1%

$ $ $

32,763,686 (29,444,361) 3,319,325 10.1%

$ $ $

55,084,779 (49,696,524) 5,388,255 9.8%

$ $ $

22,788,878 (20,806,477) 1,982,401 8.7%

$ $ $

33,786,803 (30,842,884) 2,943,919 8.7%

Return on Total Development Cost NOI Total Development Cost Return on Cost

From App. E From App. B

$ $

1,501,956 (20,765,062) 7.23%

$ $

2,259,186 (31,336,235) 7.21%

$ $

2,128,542 (29,444,361) 7.23%

$ $

3,557,092 (49,696,524) 7.16%

$ $

1,246,145 (20,806,477) 5.99%

$ $

1,829,035 (30,842,884) 5.93%

1

Per Real Estate Research Corp., Real Estate Report, 3rd Quarter 2013, Los Angeles Area data.

29

Page 8 of 8

HR&A Advisors, Inc. Summer_Test Tier 1 & 2 ROC With Feesv1/F-Return on Cos 7-24-2014

ATTACHMENT B Analysis results for 8 new mixed-use prototypes: 1. Residual Land Value Impacts With Fees 2. Return on Cost/Development Profit Margin Impacts With Fees

30

Residual Land Value Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Program Summary (see App. A)

Prototype Name Location LUCE Tier Permit Requirement # Parcels Bldg. Height (Feet) Stories (#) Site Area (SF) Gross Bldg. Area (SF) Floor Area Ratio (FAR) - Gross Area Floor Area Ratio (FAR) - Net Area Net Leasable Areas Residential (SF) Market Rate Units Affordable Units Total Units Retail (SF) Office (SF) Hotel (SF) Development Costs (see App. B&C&D) Land Costs Hard Costs Soft Costs Net Parks/Recreation Fee Net Affordable Housing Linkage Fee TIF Fee Other City Costs (see App. E) Other Soft Costs Financing Costs Total Development Cost per GSF

Mixed-Use Retail/Residential Pico Blvd. 1

Mixed-Use Retail/Residential Pico 2

Mixed-Use Retail/Residential SM Blvd. 1

Mixed-Use Retail/Residential SM Blvd. 2

Mixed-Use Retail/Residential Downtown 2

36 2 15,000 27,247 1.82 1.50

36 3 15,000 29,973 2.00 1.66

36 2 15,000 27,247 1.82 1.50

36 3 15,000 35,868 2.39 2.00

39 3 15,000 40,140 2.68 2.25

60 6 15,000 61,117 4.07 3.46

19,500 23 1 24 3,000 -

23,250 27 2 29 3,000 -

19,500 23 1 24 3,000 -

21,045 24 2 26 3,855 -

19,500 23 1 24 3,000 -

27,000 31 3 34 3,000 -

29,750 35 2 37 4,000 -

48,000 56 5 61 4,000 -

see Residual Value $ 5,421,664

see Residual Value $ 6,236,091

see Residual Value $ 5,421,664

see Residual Value $ 5,997,183

see Residual Value $ 5,421,664

$

see Residual Value 6,988,119

see Residual Value $ 7,865,126

$

$ $ $ $ $ $ $

106,145 253,488 784,972 546,720 7,112,989 $261

$ $ $ $ $ $ $

146,624 304,479 908,958 633,766 8,229,918 $261

$ $ $ $ $ $ $

106,145 253,488 784,972 568,945 7,135,214 $262

$ $ $ $ $ $ $

112,141 301,464 866,374 617,730 7,894,892 $263

$ $ $ $ $ $ $

106,145 253,488 784,972 553,287 7,119,556 $261

$ $ $ $ $ $ $

190,337 339,124 1,025,483 718,528 9,261,591 $258

$ $ $ $ $ $ $

174,074 17,500 361,067 1,149,877 888,126 10,455,770 $260

$ $ $ $ $ $ $

391,244 79,744 544,972 2,339,942 1,735,422 22,093,114 $361

$ $ $

628,425 (161,000) 467,425

$ $ $

747,377 (189,000) 558,377

$ $ $

712,215 (161,000) 551,215

$ $ $

712,215 (161,000) 551,215

$ $ $

628,425 (161,000) 467,425

$ $ $

849,721 (217,000) 632,721

$ $ $

1,328,670 (252,000) 1,076,670

$ $ $

2,055,847 (392,000) 1,663,847

$ $ $

4,479 (7,000) (2,521)

$ $ $

9,510 (14,000) (4,490)

$ $ $

4,479 (7,000) (2,521)

$ $ $

9,510 (14,000) (4,490)

$ $ $

4,479 (7,000) (2,521)

$ $ $

13,990 (21,000) (7,010)

$ $ $

9,510 (14,000) (4,490)

$ $ $

24,053 (35,000) (10,947)

123,930 (3,718) 120,212

$ $ $

119,700 (3,591) 116,109

$ $ $

119,700 (3,591) 116,109

$ $ $

239,400 (7,182) 232,218

$ $ $

239,400 (7,182) 232,218

73,872 (2,216) 71,656

$ $ $

73,872 (2,216) 71,656

$ $ $

96,444 (2,893) 93,551

$ $ $

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

Total Net Operating Income

$

536,560

$

$

467,425 5.3% 8,819,340

$

(2,521) 5.30% (47,566)

$

71,656 6.60% 1,085,697

$

6.40% -

$

Residual Land Value Estimate Total Project Value Less: Developer Profit Less: Total Development Cost Residual Land Value Total Per SF Land Area Residual Land Value No Fees Change in Residual Land Value Per SF Land Area Percent Change in Residual Land Value Within Market Range?

Mixed-Use Retail/Residential Downtown 1

36 3 15,000 31,557 2.10 1.75

$ $ $

Total Project Value

Mixed-Use Retail/Residential So. Lincoln Blvd. 2

36 2 15,000 27,247 1.82 1.50

Net Operating Income (NOI) (see App. E) Residential-Market Rate Effective Gross Income Less: Operating Expenses Net Operating Income Residential-Affordable Effective Gross Income Less: Operating Expenses Net Operating Income Retail Effective Gross Income Less: Operating Expenses Net Operating Income Office Effective Gross Income Less: Operating Expenses Net Operating Income

Project Component Values (see App. F) Residential-Market Rate NOI Cap Rate Value Residential-Affordable NOI Cap Rate Value Retail NOI Cap Rate Value Office NOI Cap Rate Value

Mixed-Use Retail/Residential So. Lincoln Blvd. 1

$ $ $ $ $ $ $

$

$

$

$

625,543

$

558,377 5.3% 10,535,415

$

(4,490) 5.30% (84,717)

$

71,656 6.60% 1,085,697

$

6.40% -

$

$

$

$

$

642,245

$

551,215 5.3% 10,400,283

$

(2,521) 5.30% (47,566)

$

93,551 6.60% 1,417,439

$

6.40% -

$

$

$

$

$

666,937

$ $ $

-

$ $ $

$

581,013

$

551,215 5.3% 10,400,283

$

467,425 5.3% 8,819,340

$

(4,490) 5.30% (84,717)

$

(2,521) 5.30% (47,566)

$

120,212 6.60% 1,821,394

$

116,109 6.60% 1,759,227

$

6.40% -

$

6.40% -

$

$

$

$

$

$

$

$

$

741,820

$ $ $

-

$ $ $

see Residual Value 17,001,790

-

$

1,304,398

$

1,885,118

632,721 5.3% 11,938,132

$

1,076,670 5.3% 20,314,528

$

1,663,847 5.3% 31,393,340

(7,010) 5.30% (132,264)

$

(4,490) 5.30% (84,717)

$

116,109 6.60% 1,759,227

$

232,218 6.60% 3,518,455

$

6.40% -

$

6.40% -

$

$

$

$

$

$

$

$

$

(10,947) 5.30% (206,547) 232,218 6.60% 3,518,455 6.40% -

$

9,857,471

$

11,536,395

$

11,770,156

$

12,136,960

$

10,531,001

$

13,565,095

$

23,748,266

$

34,705,247

$ $ $

9,857,471 (1,232,184) (7,112,989)

$ $ $

11,536,395 (1,442,049) (8,229,918)

$ $ $

11,770,156 (1,471,270) (7,135,214)

$ $ $

12,136,960 (1,517,120) (7,894,892)

$ $ $

10,531,001 (1,316,375) (7,119,556)

$ $ $

13,565,095 (1,695,637) (9,261,591)

$ $ $

23,748,266 (2,968,533) (10,455,770)

$ $ $

34,705,247 (4,338,156) (22,093,114)

$ $

1,512,298 101 $1,620,139 (107,841) (7.19) -6.7% Yes

$ $

1,864,428 124 $2,026,217 (161,790) (10.79) -8.0% Yes

$ $

3,163,672 211 $3,271,513 (107,841) (7.19) -3.3% Yes

$ $

2,724,948 182 $2,839,169 (114,221) (7.61) -4.0% Yes

$ $

2,095,070 140 $2,202,911 (107,841) (7.19) -4.9% Yes

$ $

2,607,867 174 $2,806,178 (198,310) (13.22) -7.1% Yes

$ $

10,323,963 688 $10,522,754 (198,791) (13.25) -1.9% Yes

$ $

8,273,977 552 $8,778,677 (504,699) (33.65) -5.7% Yes

$ $

$ $

$ $

$ $

31

Page 1 of 8

$ $

$ $

$ $

$ $

HR&A Advisors, Inc. Summer_New Tier 1&2 RLV WITH Feesv1/Summary 7-24-14

RLV Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Appendix A Physical Parameters Prototype Name Location LUCE Area LUCE Tier Permit Requirement # Parcels Bldg. Height (Feet) Stories (#) Land Area (SF) 1 Gross Bldg. Area (SF) Floor Area Ratio (FAR)-Gross Area1 Floor Area Ratio (FAR)-Net Area Net Leasable Areas (SF)2 Residential3 Retail Office Hotel # Hotel Rooms Residential Unit Mix Office SF Retail SF Hotel SF Residential SF-Target Estimate Units (based on avg. unit size) Market Rate Studio 1-BR (SF) 2-BR (SF) Studio 1-BR (# units) 2-BR (#units) Subtotal (# units) Affordable4 1-BR (SF) 2-BR (SF) 1-BR (# units) 2-BR (#units) Subtotal (# units) Total Units Parking Residential Market Rate (wtd. avg. per unit) 5 Affordable (avg. per unit) Subtotal Spaces (#) Retail Spaces/1,000 SF Subtotal Spaces (#) Office Spaces/1,000 SF Subtotal Spaces (#) Hotel Spaces/Guest Room Subtotal Spaces (#) Total Spaces Number Gross Area/Space (SF)-Surface Gross Area/Space (SF)-Subt. Total Parking Area (SF) # Surface # Subt. Levels Total Spaces/Levels 1-2 Spaces/Levels 3-5 Construction Period (months)

Mixed-Use Retail/Residential Pico Blvd.

Mixed-Use Retail/Residential Pico

Mixed-Use Retail/Residential SM Blvd.

1

2

1

Mixed-Use Retail/Residential SM Blvd.

Mixed-Use Retail/Residential So. Lincoln Blvd.

Mixed-Use Retail/Residential So. Lincoln Blvd.

2

1

36 2 15,000 27,247 1.82 1.50 22,500 19,500 3,000 -

36 3 15,000 35,868 2.39 2.00 30,000 27,000 3,000 -

39 3 15,000 40,140 2.68 2.25 33,750 29,750 4,000 -

60 6 15,000 61,117 4.07 3.46 51,955 48,000 4,000 -

2

Mixed-Use Retail/Residential Downtown 1

Mixed-Use Retail/Residential Downtown 2

36 2 15,000 27,247 1.82 1.50 22,500 19,500 3,000 -

36 3 15,000 31,557 2.10 1.75 26,250 23,250 3,000 -

36 2 15,000 27,247 1.82 1.50 22,500 19,500 3,000 -

36 3 15,000 29,973 2.00 1.66 24,900 21,045 3,855 -

3,000 19,500 24

3,000 23,250 29

3,000 19,500 24

3,855 21,045 26

3,000 19,500 24

3,000 27,000 34

4,000 29,750 37

4,000 47,955 60

475 700 1,000 8 8 7 23

475 700 1,000 9 9 9 27

475 700 1,000 8 8 7 23

475 700 1,000 8 8 7 24

475 700 1,000 8 8 7 23

475 700 1,000 11 10 10 31

475 700 1,000 12 12 12 35

475 700 1,000 19 19 18 56

600 1,000 1 1 24

600 1,000 1 1 2 29

600 1,000 1 1 24

600 1,000 1 1 2 26

600 1,000 1 1 24

600 1,000 2 1 3 34

600 1,000 1 1 2 37

600 1,000 2 3 5 61

1.48 1.00 35

1.50 1.00 43

1.48 1.00 35

1.48 1.00 38

1.48 1.00 35

1.48 1.00 49

1.50 1.00 55

1.49 1.00 88

3.3 10

3.3 10

3.3 10

3.3 13

3.3 10

3.3 10

3.3 13

3.3 13

3.3 -

3.3 -

3.3 -

3.3 -

3.3 -

3.3 -

3.3 -

3.3 -

0.75 -

0.75 -

0.75 -

0.75 -

0.75 -

0.75 -

0.75 -

0.75 -

45 300 350 15,750 1.1 45 -

53 300 350 18,550 1.2 53 -

45 300 350 15,750 1.1 45 -

51 300 350 17,850 1.2 51 -

45 300 350 15,750 1.1 45 -

59 300 350 20,650 1.4 59 -

68 300 350 23,800 1.6 68 -

101 300 350 35,350 2.4 101 -

18

18

18

18

18

18

18

18

1

Per guidance provided by City Planning staff, based on recent development applications; emerging Downtown Specific Plan information; and 2010 LUCE. 2 Per HR&A, based on net-to-gross floor area assumptions (90% for retail and 87% for for residential), and translation of total gross floor area to gross floor area per-floor, based on: (1) street wall for first three floors; (2) assumed setbacks above 3rd floor. 3 Based on unit mix and net leasable floor area by unit type, per City Planning Staff and HR&A. 4 Assumes 5% of Tier 1 and 7.5% of Tier 2 units for 30% income households. 5 Assumes 1.0 spaces/studio; 1.5 spaces/1-BR unit; and 2.0 spaces/2-BR unit.

32

Page 2 of 8

HR&A Advisors, Inc. Summer_New Tier 1&2 RLV WITH Feesv1/A-Program 7-24-14

Appendix A Physical Parameters (con'd)

Prototype Name Location Gross Floor Area by Story Site Area Total Gross Bldg. Area Total Floors Floor 1 Floor 2 Floor 3 Floor 4 Floor 5 Floor 6 Total Gross Floor Area FAR-Gross Area Net Floor Area by Story Floor 1 Floor 2 Floor 3 Floor 4 Floor 5 Floor 6 Total Net/Gross Floor Area Overall

Mixed-Use Retail/Residential Pico Blvd.

Mixed-Use Retail/Residential Pico

Mixed-Use Retail/Residential SM Blvd.

Mixed-Use Retail/Residential SM Blvd.

Mixed-Use Retail/Residential So. Lincoln Blvd.

Mixed-Use Retail/Residential So. Lincoln Blvd.

Mixed-Use Retail/Residential Downtown

Mixed-Use Retail/Residential Downtown

15,000 27,247 2 11,379 14,368 27,247

15,000 31,557 3 11,379 11,494 7,184 31,557

15,000 27,247 2 11,379 14,368 27,247

15,000 29,973 3 9,622 9,425 9,425 29,973

15,000 27,247 2 11,379 14,368 27,247

15,000 35,868 3 11,379 13,793 9,195 35,868

15,000 40,140 3 12,490 12,989 13,161 40,140

15,000 61,117 6 8,180 10,977 11,149 11,149 9,540 8,621 61,117

1.82

2.10

1.82

2.00

1.82

2.39

2.68

4.07

10,000 12,500 22,500 82.6%

10,000 10,000 6,250 26,250 83.2%

10,000 12,500 22,500 82.6%

8,500 8,200 8,200 24,900 83.1%

33

Page 3 of 8

10,000 12,500 22,500 90.0%

10,000 12,000 8,000 30,000 83.6%

11,000 11,300 11,450 33,750 90.0%

7,205 9,550 9,700 9,700 8,300 7,500 51,955 85.0%

HR&A Advisors, Inc. Summer_New Tier 1&2 RLV WITH Feesv1/A-Program 7-24-14

RLV Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Appendix B Development Costs 1

Assumptions

Prototype Name Location Land Area Gross Bldg. Area (SF) Net Leasable Areas (SF) Residential Retail Office Hotel Hotel Rooms Subterranean Parking (spaces) 1-2 Levels 3-5 Levels

Mixed-Use Retail/Residential Pico Blvd. 15,000 27,247

Mixed-Use Retail/Residential Pico 15,000 31,557

Mixed-Use Retail/Residential SM Blvd. 15,000 27,247

Mixed-Use Retail/Residential SM Blvd. 15,000 29,973

Mixed-Use Retail/Residential So. Lincoln Blvd. 15,000 27,247

Mixed-Use Retail/Residential So. Lincoln Blvd. 15,000 35,868

Mixed-Use Retail/Residential Downtown 15,000 40,140

Mixed-Use Retail/Residential Downtown 15,000 61,117

19,500 3,000 45 45 -

23,250 3,000 53 53 -

19,500 3,000 45 45 -

21,045 3,855 51 51 -

19,500 3,000 45 45 -

27,000 3,000 59 59 -

29,750 4,000 68 68 -

48,000 4,000 101 101 -

see Residual Value

see Residual Value

see Residual Value

see Residual Value

see Residual Value

see Residual Value

see Residual Value

Land Cost Hard Cost Construction Type Building Construction/GSF2 Demo/On-Site Improvements Off-Site Improvements Building Core & Shell Retail Tenant Improvements Office Tenant Improvements Hotel FF&E Subterranean Parking Surface 1-2 Levels 3-4 Levels Contingency Subtotal Hard Costs Soft Costs Net Parks/Recreation Fee Net Affordable Housing Linkage Fee Net TIF Fee Other City Permits & Fees Misc. Community Benefits Cost A&E/Other Professionals Marketing/Leasing Commissions Residential Retail/Office Legal & Accounting Taxes & Insurance Pre-Opening Expenses Developer Fee Contingency Subtotal Soft Costs

Varies per Land Area Allowance Varies $35 x Net Leasable SF $30 x Net Leasable SF $25,000 x Rooms

$15 $100,000

Total Development Cost per GSF 1 2

$ $ $ $ $ $

V $126 225,000 100,000 3,433,138 105,000 -

$ $ $ $ $ $

V $126 225,000 100,000 3,976,241 105,000 -

$ $ $ $ $ $

V $126 225,000 100,000 3,433,138 105,000 -

$ $ $ $ $ $

V $126 225,000 100,000 3,776,597 134,925 # # # #

$ $ $ $ $ $

V $126 225,000 100,000 3,433,138 105,000 -

$ $ $ $ $

1,350,000 208,526 5,421,664

$ $ $ $ $

1,770,000 268,774 6,988,119

$ $ $ $

V $126 225,000 $100,000 4,519,345 105,000 # # # #

$ $ $ $ $ $

V $126 225,000 100,000 5,057,621 140,000 -

$

$ $ $ $ $

2,040,000 302,505 7,865,126

$ $ $ $ $

3,030,000 653,915 17,001,790

$ $ $ $

IIIb $210 225,000 100,000 12,852,875 140,000 -

$5,000 $30,000 $35,000 4%

per Space per Space per Space x Subtotal Hard Costs

$ $ $ $ $

1,350,000 208,526 5,421,664

$ $ $ $ $

1,590,000 239,850 6,236,091

$ $ $ $ $

1,350,000 208,526 5,421,664

$ $ $ $ $

1,530,000 230,661 5,997,183

6%

See App. D See App. D See App. C See App. C Allowances x Hard Costs

$ $ $ $ $ $

106,145 253,488 325,300

$ $ $ $ $ $

146,624 304,479 374,165

$ $ $ $ $ $

106,145 253,488 325,300

$ $ $ $ $ $

112,141 301,464 359,831

$ $ $ $ $ $

106,145 253,488 325,300

$ $ $ $ $ $

190,337 339,124 419,287

$ $ $ $ $ $

174,074 17,500 361,067 471,908

$ $ $ $ $ $

391,244 79,744 544,972 1,020,107

$7.50 $3.00 1% 1% $4.00 3% 3%

x Net Leasable SF x Net Leasable SF x Hard Costs x Hard Costs x Net Leasable SF x Hard Costs x Subtotal Soft Costs

$ $ $ $ $ $ $ $

146,250 9,000 54,217 54,217 162,650 33,338 1,144,605

$ $ $ $ $ $ $ $

174,375 9,000 62,361 62,361 187,083 39,613 1,360,061

$ $ $ $ $ $ $ $

146,250 9,000 54,217 54,217 162,650 33,338 1,144,605

$ $ $ $ $ $ $ $

157,838 11,565 59,972 59,972 179,915 37,281 1,279,979

$ $ $ $ $ $ $ $

146,250 9,000 54,217 54,217 162,650 33,338 1,144,605

$ $ $ $ $ $ $ $

202,500 9,000 69,881 69,881 209,644 45,290 1,554,944

$ $ $ $ $ $ $ $

223,125 12,000 78,651 78,651 235,954 49,588 1,702,518

$ $ $ $ $ $ $ $

360,000 12,000 170,018 170,018 510,054 97,745 3,355,902

$

6,566,269

$

7,596,152

$

6,566,269

$

7,277,162

$

6,566,269

$

8,543,063

$

9,567,644

$

20,357,692

$ $

352,116 98,494

$ $

407,344 113,942

$ $

352,116 98,494

$ $

390,238 109,157

$ $

352,116 98,494

$ $

458,122 128,146

$ $

513,065 143,515

$ $

1,091,681 305,365

$ $

96,110 546,720

$ $

112,480 633,766

$ $

118,335 568,945

$ $

118,335 617,730

$ $

102,677 553,287

$ $

132,260 718,528

$ $

231,546 888,126

$ $

338,376 1,735,422

$ $

7,112,989 261.05

$ $

8,229,918 260.79

$ $

7,135,214 261.87

$ $

7,894,892 263.40

$ $

7,119,556 261.30

$ $

9,261,591 258.21

$ $

10,455,770 260.48

$ $

22,093,114 361.49

Subtotal Hard + Softs Costs Financing Costs Loan Term (months) Average Loan Balance Construction Loan Interest Rate Construction Loan Interest Construction Loan Fees Capitalized Project Value Permanent Loan Percent x Value Permanent Loan Fees Subtotal Financing Costs

see Residual Value

18 65.00% 5.50% 1.50% per App. E 65.00% 1.50%

Hard + Soft + Financing

Per HR&A review of market data and financial feasibility peer reviews of recent developments. 80% x calculated values, per Marshall & Swift Commercial Cost Estimator, 3rd Quarter, 2013; HR&A Advisors, Inc., to account for certain hard costs and soft costs accounted for separately.

34

Page 4 of 8

HR&A Advisors, Inc. Summer_New Tier 1&2 RLV WITH Feesv1/B-Dev Costs 7-24-14

RLV Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Appendix C Proposed New Fees, Existing City Fees & Permit Costs

Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studios 1-BR 2-BR Affordable 1-BR 2-BR Residential (Net Leasable SF) Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) New Affordable Hsg. Linkage Fee1 New Parks Fee1 TIF Fees2

Assumptions

N/A N/A

N/A N/A

Subtotal Planning Permits3 Development Review Development Agreement Multiple Permit Fee Architectural Review Board Coastal Zone Concept Review CEQA Categorical Exemption Negative Declaration EIR

$15,568 $106,145 $0 $0 $276 $14,622 $25,445 $200,000

per project per project per project

Mixed-Use Retail/Residentia SM Blvd. 15,000 29,973

Mixed-Use Retail/Residentia So. Lincoln Blvd. 15,000 27,247

Mixed-Use Retail/Residentia So. Lincoln Blvd. 15,000 35,868

Mixed-Use Retail/Residentia Downtown 15,000 40,140

Mixed-Use Retail/Residentia Downtown 15,000 61,117

8 8 7

9 9 9

8 8 7

8 8 7

8 8 7

11 10 10

12 12 12

19 19 18

1 19,500 3,000 -

1 1 23,250 3,000 -

1 19,500 3,000 -

1 1 21,045 3,855 -

1 19,500 3,000 -

2 1 27,000 3,000 -

1 1 29,750 4,000 -

2 3 48,000 4,000 -

$ $ $

106,145 -

$ $ $

146,624 -

$ $ $

106,145 -

$ $ $

112,141 -

$ $ $

106,145 -

$ $ $

190,337 -

$ $ $

174,074 17,500

$ $ $

391,244 79,744

$

106,145

$

146,624

$

106,145

$

112,141

$

106,145

$

190,337

$

191,574

$

470,988

-

$ $ $ $ $

15,568 -

$ $ $ $ $

-

$ $ $ $ $

15,568 -

$ $ $ $ $

-

$ $ $ $ $

15,568 -

$ $ $ $ $

-

$ $ $ $ $

15,568 -

$ $ $

14,622 -

$ $ $

14,622 -

$ $ $

14,622 -

$ $ $

14,622 -

$ $ $

14,622 -

$ $ $

14,622 -

$ $ $

14,622 -

$ $ $

14,622 -

$

14,622

$

30,190

$

14,622

$

30,190

$

14,622

$

30,190

$

14,622

$

30,190

-

x leasable area >15K x units

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

1.00% 1.00%

x $200/SF x $50/SF

$ $

54,494 1,500

$ $

63,115 1,500

$ $

54,494 1,500

$ $

59,946 1,928

$ $

54,494 1,500

$ $

71,736 1,500

$ $

80,280 2,000

$ $

122,234 2,000

$133.48 $4.53 $6.34 $3.18

per unit x leasable area x leasable area x leasable area

$ $ $ $

3,070 13,590 -

$ $ $ $

3,604 13,590 -

$ $ $ $

3,070 13,590 -

$ $ $ $

3,070 17,463 -

$ $ $ $

3,070 13,590 -

$ $ $ $

4,138 13,590 -

$ $ $ $

4,805 18,120 -

$ $ $ $

7,475 18,120 -

$3.20 $0.51

x leasable area x leasable area

$ $

62,400 1,530

$ $

74,400 1,530

$ $

62,400 1,530

$ $

67,344 1,966

$ $

62,400 1,530

$ $

86,400 1,530

$ $

95,200 2,040

$ $

153,600 2,040

$

136,584

$

157,739

$

136,584

$

151,716

$

136,584

$

178,894

$

202,445

$

305,469

$0.9127 $1.2790 $1.3621 $727 $727 $727

x leasable area x leasable area x leasable area per project per project per project

$

$1.0236 $0.7782 $1.3581 $0.3490 $0.2732 $2,481

x leasable area x leasable area x leasable area x leasable area x leasable area per project

$ $ $ $ $ $

19,960 2,335 1,047 -

$ $ $ $ $ $

23,799 2,335 1,047 -

$ $ $ $ $ $

19,960 2,335 1,047 -

$ $ $ $ $ $

21,542 3,000 3,490 -

$ $ $ $ $ $

19,960 2,335 1,047 -

$ $ $ $ $ $

27,637 2,335 1,047 -

$ $ $ $ $ $

30,452 3,113 1,396 -

$ $ $ $ $ $

49,133 3,113 1,396 -

$

47,158

$

54,419

$

47,158

$

62,211

$

47,158

$

61,680

$

69,411

$

104,749

Subtotal Utility Fees4 Water Meter5 Fireline Meter5 Wastewater Capital Facilities Studio/1-BR Units 2-BR Units Commercial

Mixed-Use Retail/Residentia SM Blvd. 15,000 27,247

$10.88 $200

Subtotal Bldg./Construction Permits3 Plan Check Residential Apartments Commercial 10K SF/4 stories Mechanical Electrical Plumbing Building Permits/Inspections Residential Apartments Commercial 1-Story Commercial 4+ stories Tenant Improvements 10K SF Geotechnical Reports

Mixed-Use Retail/Residentia Pico 15,000 31,557

per project $ $0 # $ $0 # $ $0 # $ per project $

Subtotal Other Requirements3 Mitigation Fee on Office Space Recreational Unit Tax Arts Fee New Residential/Commercial Tenant Improvements Child Care Fee Market Rate Residential Retail Office Hotel School Facilities Fee Residential Commercial

Mixed-Use Retail/Residentia Pico Blvd. 15,000 27,247

$

17,798 $3,837 $727 $727 $727

$ $

21,220 $3,837 $727 $727 $727

$

17,798 $3,837 $727 $727 $727

$

$ $

19,208 $12,790 $727 $727 $727

$ $

17,798 $3,837 $727 $727 $727

$ $

24,643 $3,837 $727 $727 $727

$ $

27,153 $5,116 $727 $727 $727

$ $

43,810 $5,116 $727 $727 $727

$3,837 $18,195

3/4" meter per project 4" meter per project

$ $

3,837 18,195

$ $

3,837 18,195

$ $

3,837 18,195

$ $

3,837 18,195

$ $

3,837 18,195

$ $

3,837 18,195

$ $

3,837 18,195

$ $

3,837 18,195

$1,168 $1,557 $779

per unit per unit per 1,000 leasable SF

$ $ $

19,856 10,899 2,337

$ $ $

22,192 15,570 2,337

$ $ $

19,856 10,899 2,337

$ $ $

19,856 12,456 3,003

$ $ $

19,856 10,899 2,337

$ $ $

26,864 17,127 2,337

$ $ $

29,200 20,241 3,116

$ $ $

46,720 32,697 3,116

55,124

$

62,131

$

55,124

$

57,347

$

55,124

$

68,360

$

74,589

$

104,565

451,103 $14.29

$

359,633 $13.20

$

413,605 $13.80

$

359,633 $13.20

$

529,461 $14.76

$

552,641 $13.77

$

1,015,960 $16.62

Subtotal

$

TOTAL per GSF

$

359,633 $ $13.20 #

1

See Appendix D for calculation details. Per new Ordinance No. 2420 (CCS), adopted March 12, 2013. Assumes TIF credit for existing retail on 50% of Downtown & Wilshire sites; 10,000 SF existing retail and 10,000 SF existing office assumed for Pico site. 3 Per City staff/nexus study recommendations. Assumes fee credits for existing retail on 50% of Downtown & Wilshire sites; 10,000 SF existing retail and 10,000 SF existing office assumed for Pico site. 4 Per FY 2013-14 City fee schedules. 5 Includes meter and capital facilities charges. 2

35

Page 5 of 8

HR&A Advisors, Inc. Summer_New Tier 1&2 RLV WITH Feesv1/C-City Cost Detail 7-24-14

RLV Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Appendix D Proposed TIF/New Parks/Recreation and Afforable Housing Linkage Fees Mixed-Use Retail/Residentia Pico Blvd. 1 15,000 27,247 24 23 8 8 7 1 1 19,500 3,000 -

Prototype Name Location

LUCE Tier Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studios 1-BR 2-BR Affordable 1-BR 2-BR Residential (Net Leasable SF) Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) Floor Area Attributable to Tier 2 Office Residential (units) Total Units

Mixed-Use Retail/Residentia Pico 2 15,000 31,557 29 27 9 9 9 2 1 1 23,250 3,000 -

-

Studios 1-BR 2-BR Affordable Units 1-BR 2-BR

-

Fee Factor TIF Fees2

$2,600 $3,300 $21.00 $30.10 $9.70 $10.80 $3.60

Subtotal Less: Fee on Existing Retail SF Area 1 Less: Fee on Existing Retail SF Area 2 NET TIF Fee

$21.00 $30.10

x leasable area x leasable area

$ $ $ $ $ $ $ $

-

-

2 2

-

1

1

-

-

-

-

7,500

7,500

7,500

7,500

$ $ $ $ $ $ $ $

90,948 90,300 -

1

                            1.14 $ $ $ $ $ $

75,900 90,300 -

$

-

$ $ $ $ $ $ $

79,662 116,036 -

Mixed-Use Retail/Residentia Downtown 1 15,000 40,140 37 35 12 12 12 2 1 1 29,750 4,000 -

-

-

-

-

75,900 90,300 -

Mixed-Use Retail/Residentia So. Lincoln Blvd. 2 15,000 35,868 34 31 11 10 10 3 2 1 27,000 3,000 -

2

                           1.14 per unit per unit per unit x leasable area x leasable area x leasable area x leasable area x leasable area

$0.00

-

Mixed-Use Retail/Residentia So. Lincoln Blvd. 1 15,000 27,247 24 23 8 8 7 1 1 19,500 3,000 -

7,500

1.14

   Market Rate‐Area 1    Market Rate‐Area 2    Affordable    Retail‐Area 1    Retail‐Area 2    Office‐Area 1    Office‐Area 2    Hotel‐Area 1 & 2

Mixed-Use Retail/Residentia SM Blvd. 2 15,000 29,973 26 24 8 8 7 2 1 1 21,045 3,855 -

5

-

Assumed Existing Retail Floor Area (50% x site area SF)

Mixed-Use Retail/Residentia SM Blvd. 1 15,000 27,247 24 23 8 8 7 1 1 19,500 3,000 -

-

75,900 90,300 -

24

3 3 2

7 7 7

1 1

-

7,500

$ $ $ $ $ $ $ $

-

10

105,996 90,300 -

$                166,200

$                 181,248

$                 166,200

$                  195,698

$                  166,200

$                196,296

$ $

(225,750) -

$ $

(225,750) -

$ $

(225,750) -

$ $

(225,750) -

$ $

(225,750) -

$ $

(225,750) -

$ $ $ $ $ $

66,216 46,657 4,485 -

$ $ $ $ $ $

93,365 59,987 4,485 -

$ $ $ $ $ $

66,216 46,657 4,485 -

$ $ $ $ $ $

70,934 46,657 5,763 -

$ $ $ $ $ $

66,216 46,657 4,485 -

$ $ $ $ $ $

$

117,358

$

157,837

$

117,358

$

123,354

$

117,358

(11,213) 106,145

$ $ $

(11,213) 146,624

$ $ $

(11,213) 106,145

$ $ $

(11,213) 112,141

$ $ $

(11,213) 106,145

$ $ $

26,334 26,334

$ $ $

26,334 26,334

$ $ $

26,334 26,334

$ $ $

33,840 33,840

$ $ $

$ $ $

(65,836) -

$ $ $

(65,836) -

$ $ $

(65,836) -

$ $ $

(65,836) -

$ $ $

106,145 3.90 20,474,415 0.5%

$ $ $

146,624 4.65 30,847,408 0.5%

$ $ $

106,145 3.90 29,101,273 0.4%

$ $ $

112,141 3.74 48,995,000 0.2%

2 1 7,500

7,500

                          1.14 $ $ $ $ $ $ $ $

Mixed-Use Retail/Residentia Downtown 2 15,000 61,117 61 56 19 19 18 5 2 3 48,000 4,000 -

                           1.14 $ $ $ $ $ $ $ $

91,000 84,000 -

$ $ $ $ $ $ $ $

153,244 84,000 -

$                   175,000

$                 237,244

$

(157,500)

$

(157,500)

$

17,500

$

79,744

115,216 81,849 4,485 -

$ $ $ $ $ $

99,324 79,983 5,980 -

$ $ $ $ $ $

223,313 173,163 5,980 -

$

201,550

$

185,287

$

402,457

$ $ $

(11,213) 190,337

$ $ $

(11,213) 174,074

$ $ $

(11,213) 391,244

26,334 26,334

$ $ $

26,334 26,334

$ $ $

35,113 35,113

$ $ $

35,113 35,113

$ $ $

(65,836) -

$ $ $

(65,836) -

$ $ $

(65,836) -

$ $ $

(65,836) -

$ $ $

106,145 3.90 20,584,772 0.5%

$ $ $

190,337 5.31 30,485,115 0.6%

$ $ $

191,574 4.77 20,584,772 0.9%

$ $ $

470,988 7.71 30,485,115 1.5%

Proposed Parks/Recreation Fee 25% x Maximum Fees Assumptions Market Rate Housing 0-1 BRs 2+ BRs Affordable Housing Retail Office Hotel Subtotal Fee Less: Fee on Existing Retail SF Retail Office Net Fee

25% 25% 25% 25% 25% 25%

$16,554 $26,661 $0 $5.98 $9.24 $12.52

25% 25%

$5.98 $9.24

per unit per unit per unit x leasable area x leasable area x leasable area

x leasable area $ x leasable area $ $

Proposed Affordable Housing Linkage Fee 4.5% x Maximum Fees Assumptions 4.5% Retail 4.5% $195.07 x leasable area Office 4.5% $224.11 x leasable area Subtotal Fee Less: Fee on Existing Retail SF Retail 4.5% $195.07 x leasable area Office 4.5% $224.11 x leasable area Net Fee Combined Fees Fees Per GSF Total Development Cost Fee as % Dev Cost

36

Page 6 of 8

HR&A Advisors, Inc. Summer_New Tier 1&2 RLV WITH Feesv1/D- Fee Analysis 7-24-14

RLV Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Appendix E Net Operating Income

Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studio 1-BR 2-BR Affordable 1-BR 2-BR Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) Parking Spaces Residential Retail Office Hotel For-Rent Residential- Market Rate1 Studio Rent/Unit/Month 1-BR Rent/Unit/Month 2-BR Rent/Unit/Month Units Income/Year Other Income Gross Income Less: Vacancy & Collection Loss Effective Gross Income (EGI) Less: Operating Expenses (incl. reserve)1

Mixed-Use Retail/Residentia Pico Blvd. 15,000 27,247 24 23 8 8 7 1 1 3,000 45 35 10 -

Assumptions

Varies Varies Varies

Mixed-Use Retail/Residentia Pico 15,000 31,557 29 27 9 9 9 2 1 1 3,000 53 43 10 -

Mixed-Use Retail/Residentia SM Blvd. 15,000 27,247 24 23 8 8 7 1 1 3,000 45 35 10 -

Mixed-Use Retail/Residentia SM Blvd. 15,000 29,973 25 23 8 8 7 2 1 1 3,855 51 38 13 -

Mixed-Use Retail/Residentia So. Lincoln Blvd. 15,000 27,247 24 23 8 8 7 1 1 3,000 45 35 10 -

Mixed-Use Retail/Residentia So. Lincoln Blvd. 15,000 35,868 34 31 11 10 10 3 2 1 3,000 59 49 10 -

Mixed-Use Retail/Residentia Downtown 15,000 40,140 38 36 12 12 12 2 1 1 4,000 68 55 13 -

Mixed-Use Retail/Residentia Downtown 15,000 61,117 61 56 19 19 18 5 2 3 4,000 101 88 13 -

5.0% x Units Income

$ $

$1,613 $2,325 $3,000 630,000 31,500

$ $

$1,613 $2,325 $3,000 749,250 37,463

$ $

$1,828 $2,635 $3,400 714,000 35,700

$ $

$1,828 $2,635 $3,400 714,000 35,700

$ $

$1,613 $2,325 $3,000 630,000 31,500

$ $

$1,613 $2,325 $3,000 851,850 42,593

$ $

$2,150 $3,100 $4,000 1,332,000 66,600

$ $

$2,150 $3,100 $4,000 2,061,000 103,050

5.0%

x Gross Income

$ $

661,500 (33,075)

$ $

786,713 (39,336)

$ $

749,700 (37,485)

$ $

749,700 (37,485)

$ $

661,500 (33,075)

$ $

894,443 (44,722)

$ $

1,398,600 (69,930)

$ $

2,164,050 (108,203)

x Unit

$ $

628,425 (161,000.00)

$ $

747,377 (189,000.00)

$ $

712,215 (161,000.00)

$ $

712,215 (161,000.00)

$ $

628,425 (161,000)

$ $

849,721 (217,000)

$ $

1,328,670 (252,000)

$ $

2,055,847 (392,000)

$ 7,000

Net Operating Income

$

467,425

$

558,377

$

551,215

$

551,215

$

467,425

$

632,721

$

1,076,670

$

1,663,847

For-Rent Residential - Affordable (30% Incomes3 1-BR Rent/Unit/Month 2-BR Rent/Unit/Month Units Income/Year Other Income 1.0%

x Units Income

$ $ $ $

389 437 4,668 47

$ $ $ $

389 437 9,912 99

$ $ $ $

389 437 4,668 47

$ $ $ $

389 437 9,912 99

$ $ $ $

389 437 4,668 47

$ $ $ $

389 437 14,580 146

$ $ $ $

389 437 9,912 99

$ $ $ $

389 437 25,068 251

x Gross Income

$ $

4,715 (236)

$ $

10,011 (501)

$ $

4,715 (236)

$ $

10,011 (501)

$ $

4,715 (236)

$ $

14,726 (736)

$ $

10,011 (501)

$ $

25,319 (1,266)

x Unit

$ $

4,479 (7,000)

$ $

9,510 (14,000)

$ $

4,479 (7,000)

$ $

9,510 (14,000)

$ $

4,479 (7,000)

$ $

13,990 (21,000)

$ $

9,510 (14,000)

$ $

24,053 (35,000)

$

(2,521)

$

(4,490)

$

(2,521)

$

(4,490)

$

(2,521)

$

(7,010)

$

(4,490)

$

(10,947)

$ $ $

2.16 77,760 (3,888)

$ $ $

2.16 77,760 (3,888)

$ $ $

2.82 101,520 (5,076)

$ $ $

2.82 130,453 (6,523)

$ $ $

3.50 126,000 (6,300)

$ $ $

3.50 126,000 (6,300)

$ $ $

5.25 252,000 (12,600)

$ $ $

5.25 252,000 (12,600)

$ $ $

73,872 (2,216) 71,656

$ $ $

73,872 (2,216) 71,656

$ $ $

96,444 (2,893) 93,551

$ $ $

123,930 (3,718) 120,212

$ $ $

119,700 (3,591) 116,109

$ $ $

119,700 (3,591) 116,109

$ $ $

239,400 (7,182) 232,218

$ $ $

239,400 (7,182) 232,218

$ $ $ $

-

$ $ $ $

-

$ $ $ $

-

$ $ $ $

-

$ $ $ $

-

$ $ $ $

-

$ $ $ $

-

$ $ $ $

-

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

-

Net Operating Income

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Total Net Operating Income

$

Gross Income Less: Vacancy & Collection Loss Effective Gross Income (EGI) Less: Operating Expenses (inc. reserve)1

5.0% $ 7,000

Net Operating Income Retail2 Average Rent/SF/Month (NNN) Gross Rental Income/Year Less: Vacancy & Collection Loss Effective Gross Income (EGI) Less: Unreimbursed Operating Expenses Net Operating Income Office2 Average Rent/SF/Month (NNN) Gross Rental Income/Year Parking Income4 Less: Vacancy & Collection Loss Effective Gross Income (EGI) Less: Unreimbursed Operating Expenses Less: Parking Expense

Varies 5.0%

x Gross Income

3.0%

x EGI

$0 Wtd. Avg./Space/Yr. 5.0% x Gross Income 3.0% 50.0%

x EGI x Parking Income

536,560

$

625,543

$

642,245

$

666,937

$

581,013

$

741,820

$

1,304,398

$

1,885,118

1

Institute of Real Estate Management annual operating cost data for apartment buildings in Los Angeles County Per HR&A review of market data and financial feasibility peer reviews of recent developments. Assumes Wilshire residential rents = 95% x downtown; Pico = 85%. Downtown office and apartment rents assume some view premiums at the upper stories. Hotel is assumed to be a mid-scale, limited service product. 3 Per City's rent schedule and HR&A assumptions. 4 Assumes $200/month reserved (10% of supply); $165/month unreserved (85%); and $500/month daily use (5%). 2

37

Page 7 of 8

HR&A Advisors, Inc. Summer_New Tier 1&2 RLV WITH Feesv1/E-Net Ops Income 7-24-14

RLV Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Appendix F Residual Land Values

Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studio 1-BR 2-BR Affordable 1-BR 2-BR Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF)

Assumptions

Project Value Residential-Market Rate Net Operating Income Cap Rate1 Value Residential-Affordable Net Operating Income Cap Rate1 Value Retail Net Operating Income Cap Rate1 Value Office Net Operating Income Cap Rate1 Value Total Project Value Residual Land Value Estimate Total Project Value Less: Developer Profit2 Less: Total Development Cost Residual Land Value Total Per SF Land Area 1 2

From App, E

Mixed-Use Retail/Residential Pico Blvd. 15,000 27,247

Mixed-Use Retail/Residential Pico 15,000 31,557

Mixed-Use Retail/Residential SM Blvd. 15,000 27,247

Mixed-Use Retail/Residential SM Blvd. 15,000 29,973

Mixed-Use Retail/Residential So. Lincoln Blvd. 15,000 27,247

Mixed-Use Retail/Residential So. Lincoln Blvd. 15,000 35,868

Mixed-Use Retail/Residential Downtown 15,000 40,140

Mixed-Use Retail/Residential Downtown 15,000 61,117

8 8 7

9 9 9

8 8 7

8 8 7

8 8 7

11 10 10

12 12 12

19 19 18

1 3,000 -

1 1 3,000 -

1 3,000 -

1 1 3,855 -

1 3,000 -

2 1 3,000 -

1 1 4,000 -

2 3 4,000 -

$

467,425

$

558,377

$

551,215

$

551,215

$

467,425

$

632,721

$

1,076,670

$

1,663,847

NOI/Cap Rate $

8,819,340

$

10,535,415

$

10,400,283

$

10,400,283

$

8,819,340

$

11,938,132

$

20,314,528

$

31,393,340

5.30%

$

(2,521)

$

(4,490)

$

(2,521)

$

(4,490)

$

(2,521)

$

(7,010)

$

(4,490)

$

(10,947)

NOI/Cap Rate $

From App, E

(47,566)

$

(84,717)

$

(47,566)

$

(84,717)

$

(47,566)

$

(132,264)

$

(84,717)

$

(206,547)

5.30%

$

71,656

$

71,656

$

93,551

$

120,212

$

116,109

$

116,109

$

232,218

$

232,218

6.60%

NOI/Cap Rate $

From App, E

1,085,697

$

1,085,697

$

1,417,439

$

1,821,394

$

1,759,227

$

1,759,227

$

3,518,455

$

3,518,455

6.40%

NOI/Cap Rate $ $

From App, E

12.50% `

$

From above $ x Total Project Value $ From App, B $ $ $

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

9,857,471

$ $

11,536,395

$ $

11,770,156

$ $

12,136,960

$ $

10,531,001

$ $

13,565,095

$ $

23,748,266

$ $

34,705,247

9,857,471 (1,232,184) (7,112,989)

$ $ $

11,536,395 (1,442,049) (8,229,918)

$ $ $

11,770,156 (1,471,270) (7,135,214)

$ $ $

12,136,960 (1,517,120) (7,894,892)

$ $ $

10,531,001 (1,316,375) (7,119,556)

$ $ $

13,565,095 (1,695,637) (9,261,591)

$ $ $

23,748,266 (2,968,533) (10,455,770)

$ $ $

34,705,247 (4,338,156) (22,093,114)

1,512,298 101

$ $

1,864,428 124

$ $

3,163,672 211

$ $

2,724,948 182

$ $

2,095,070 140

$ $

2,607,867 174

$ $

10,323,963 688

$ $

8,273,977 552

Per Real Estate Research Corp.,Real Estate Report, 3rd Quarter 2013, Los Angeles Area data. 10-15% typical, per HR&A.

38

Page 8 of 8

HR&A Advisors, Inc. Summer_New Tier 1&2 RLV WITH Feesv1/F-Residual Values 7-24-14

Return on Cost/Developer Profit Margin Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Program Summary (see App. A) Prototype Name Location LUCE Tier Permit Requirement # Parcels Bldg. Height (Feet) Stories (#) Site Area (SF) Gross Bldg. Area (SF) Floor Area Ratio (FAR) - Gross Area Floor Area Ratio (FAR) - Net Area Net Leasable Areas Residential (SF) Market Rate Units Affordable Units Total Units Retail (SF) Office (SF) Hotel (SF) Development Costs (see App. B&C&D) Land Costs Hard Costs Soft Costs Net Parks/Recreation Fee Net Affordable Housing Linkage Fee TIF Fee Other City Costs (see App. E) Other Soft Costs Financing Costs Total Development Cost per GSF Net Operating Income (NOI) (see App. E) Residential-Market Rate Effective Gross Income Less: Operating Expenses Net Operating Income Residential-Affordable Effective Gross Income Less: Operating Expenses Net Operating Income Retail Effective Gross Income Less: Operating Expenses Net Operating Income Office Effective Gross Income Less: Operating Expenses Net Operating Income Total Net Operating Income Project Component Values (see App. F) Residential-Market Rate NOI Cap Rate Value Residential-Affordable NOI Cap Rate Value Retail NOI Cap Rate Value Office NOI Cap Rate Value Total Project Value Developer Returns Developer Profit Total Project Value Less: Total Development Cost Profit % of Value Profit No Fees Change in Profit Feasible? Return on Total Development Cost NOI Total Development Cost Return on Cost Return on Cost No Fees Change in Return on Cost Feasible?

Mixed-Use Retail/Residential Pico Blvd. 1

Mixed-Use Retail/Residential Pico Blvd. 2

Mixed-Use Retail/Residential SM Blvd. 1

Mixed-Use Retail/Residential SM Blvd. 2

Mixed-Use Retail/Residential So. Lincoln Blvd. 1

Mixed-Use Retail/Residential So. Lincoln Blvd. 2

Mixed-Use Retail/Residential Downtown 1

Mixed-Use Retail/Residential Downtown 2

36 2 15,000 27,247 1.82 1.50

36 3 15,000 31,557 2.10 1.75

36 2 15,000 27,247 1.82 1.50

36 3 15,000 29,973 2.00 1.66

36 2 15,000 27,247 1.82 1.50

36 3 15,000 35,868 2.39 2.00

39 3 15,000 40,140 2.68 2.25

60 6 15,000 61,117 4.07 3.46

19,500 23 1 24 3,000 -

23,250 27 2 29 3,000 -

19,500 23 1 24 3,000 -

21,045 24 2 26 3,855 -

19,500 23 1 24 3,000 -

27,000 31 3 34 3,000 -

29,750 35 2 37 4,000 -

48,000 56 5 61 4,000 -

$ $

1,620,139 5,421,664

$ $

2,026,217 6,236,091

$ $

3,271,513 5,421,664

$ $

2,839,169 5,997,183

$ $

2,202,911 5,421,664

$ $

2,806,178 6,988,119

$ $

10,522,754 7,865,126

$ $

8,778,677 17,001,790

$ $ $ $ $ $ $

106,145 261,656 785,217 547,297 8,742,118 $321

$ $ $ $ $ $ $

146,624 313,647 909,233 634,414 10,266,227 $325

$ $ $ $ $ $ $

106,145 261,656 785,217 565,946 10,412,141 $382

$ $ $ $ $ $ $

112,141 309,832 866,625 618,322 10,743,272 $358

$ $ $ $ $ $ $

106,145 261,656 785,217 553,864 9,331,457 $342

$ $ $ $ $ $ $

190,337 349,292 1,025,788 719,246 12,078,960 $337

$ $ $ $ $ $ $

174,074 17,500 372,035 1,150,206 888,901 20,990,596 $523

$ $ $ $ $ $ $

391,244 79,744 560,540 2,340,409 1,736,523 30,888,927 $505

$ $ $

628,425 (161,000) 467,425

$ $ $

747,377 (189,000) 558,377

$ $ $

712,215 (161,000) 551,215

$ $ $

712,215 (161,000) 551,215

$ $ $

628,425 (161,000) 467,425

$ $ $

849,721 (217,000) 632,721

$ $ $

1,328,670 (252,000) 1,076,670

$ $ $

2,055,847 (392,000) 1,663,847

$ $ $

4,479 (7,000) (2,521)

$ $ $

9,510 (14,000) (4,490)

$ $ $

4,479 (7,000) (2,521)

$ $ $

9,510 (14,000) (4,490)

$ $ $

4,479 (7,000) (2,521)

$ $ $

13,990 (21,000) (7,010)

$ $ $

9,510 (14,000) (4,490)

$ $ $

24,053 (35,000) (10,947)

$ $ $

73,872 (2,216) 71,656

$ $ $

73,872 (2,216) 71,656

$ $ $

96,444 (2,893) 93,551

$ $ $

123,930 (3,718) 120,212

$ $ $

119,700 (3,591) 116,109

$ $ $

119,700 (3,591) 116,109

$ $ $

239,400 (7,182) 232,218

$ $ $

239,400 (7,182) 232,218

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

$

536,560

$

$

467,425 5.30% 8,819,340

$

(2,521) 5.30% (47,566)

$

71,656 6.60% 1,085,697

$

6.40% -

$

$ $ $ $ $ $ $

$

$

$

$

625,543

$

558,377 5.30% 10,535,415

$

(4,490) 5.30% (84,717)

$

71,656 6.60% 1,085,697

$

6.40% -

$

$

$

$

$

642,245

$

551,215 5.30% 10,400,283

$

(2,521) 5.30% (47,566)

$

93,551 6.60% 1,417,439

$

6.40% -

$

$

$

$

$

666,937

$ $ $

-

$ $ $

$

581,013

$

551,215 5.30% 10,400,283

$

467,425 5.30% 8,819,340

$

(4,490) 5.30% (84,717)

$

(2,521) 5.30% (47,566)

$

120,212 6.60% 1,821,394

$

116,109 6.60% 1,759,227

$

6.40% -

$

6.40% -

$

$

$

$

$

$

$

$

741,820

$ $ $

-

$ $ $

-

$

1,304,398

$

1,885,118

632,721 5.30% 11,938,132

$

1,076,670 5.30% 20,314,528

$

1,663,847 5.30% 31,393,340

(7,010) 5.30% (132,264)

$

(4,490) 5.30% (84,717)

$

116,109 6.60% 1,759,227

$

232,218 6.60% 3,518,455

$

6.40% -

$

6.40% -

$

$

$

$

$

$

$

$

$

$

(10,947) 5.30% (206,547) 232,218 6.60% 3,518,455 6.40% -

$

9,857,471

$

11,536,395

$

11,770,156

$

12,136,960

$

10,531,001

$

13,565,095

$

23,748,266

$

34,705,248

$ $ $

9,857,471 (8,742,118) 1,115,353 11.3% 1,232,184 -9.5% Yes

$ $ $

11,536,395 (10,266,227) 1,270,168 11.0% 1,431,554 -11.3% Yes

$ $ $

11,770,156 (10,412,141) 1,358,015 11.5% 1,474,846 -7.9% Yes

$ $ $

12,136,960 (10,743,272) 1,393,688 11.5% 1,517,120 -8.1% Yes

$ $ $

10,531,001 (9,331,457) 1,199,544 11.4% 1,316,375 -8.9% Yes

$ $ $

13,565,095 (12,078,960) 1,486,135 11.0% 1,695,637 -12.4% Yes

$ $ $

23,748,266 (20,990,596) 2,757,670 11.6% 2,968,533 -7.1% Yes

$ $ $

34,705,248 (30,888,927) 3,816,321 11.0% 4,334,730 -12.0% Yes

536,560 8,742,118 6.14% 6.22% -0.08%

$ $

625,543 10,266,227 6.09% 6.19% -0.10%

$ $

642,245 10,412,141 6.17% 6.24% -0.07%

$ $

666,937 10,743,272 6.21% 6.28% -0.07%

$ $

581,013 9,331,457 6.23% 6.31% -0.08%

$ $

$

$ $

Marginal

$

Marginal

$

$

Marginal

Marginal

39

Page 1 of 8

$

Yes

$

741,820 12,078,960 6.14% 6.25% -0.11% Yes

$

$ $

1,304,398 20,990,596 6.21% 6.27% -0.06% Marginal

$

$ $

1,885,118 30,888,927 6.10% 6.19% -0.09% Marginal

HR&A Advisors, Inc. Summer_New Tier 1&2 ROC WITH Feesv1/Summary 7-24-14

Appendix A Physical Parameters

Prototype Name Location LUCE Area LUCE Tier Permit Requirement # Parcels Bldg. Height (Feet) Stories (#) Land Area (SF) 1 Gross Bldg. Area (SF) Floor Area Ratio (FAR)-Gross Area1 Floor Area Ratio (FAR)-Net Area Net Leasable Areas (SF)2 Residential3 Retail Office Hotel # Hotel Rooms Residential Unit Mix Office SF Retail SF Hotel SF Residential SF-Target Estimate Units (based on avg. unit size) Market Rate Studio 1-BR (SF) 2-BR (SF) Studio 1-BR (# units) 2-BR (#units) Subtotal (# units) Affordable4 1-BR (SF) 2-BR (SF) 1-BR (# units) 2-BR (#units) Subtotal (# units) Total Units Parking Residential Market Rate (wtd. avg. per unit) 5 Affordable (avg. per unit) Subtotal Spaces (#) Retail Spaces/1,000 SF Subtotal Spaces (#) Office Spaces/1,000 SF Subtotal Spaces (#) Hotel Spaces/Guest Room Subtotal Spaces (#) Total Spaces Number Gross Area/Space (SF)-Surface Gross Area/Space (SF)-Subt. Total Parking Area (SF) # Surface # Subt. Levels Total Spaces/Levels 1-2 Spaces/Levels 3-5 Construction Period (months)

Mixed-Use Retail/Residential Pico Blvd.

Mixed-Use Retail/Residential Pico Blvd.

Mixed-Use Retail/Residential SM Blvd.

1

2

1

Mixed-Use Retail/Residential SM Blvd.

Mixed-Use Retail/Residential So. Lincoln Blvd.

Mixed-Use Retail/Residential So. Lincoln Blvd.

2

1

36 2 15,000 27,247 1.82 1.50 22,500 19,500 3,000 -

36 3 15,000 35,868 2.39 2.00 30,000 27,000 3,000 -

39 3 15,000 40,140 2.68 2.25 33,750 29,750 4,000 -

60 6 15,000 61,117 4.07 3.46 51,955 48,000 4,000 -

2

Mixed-Use Retail/Residential Downtown 1

Mixed-Use Retail/Residential Downtown 2

36 2 15,000 27,247 1.82 1.50 22,500 19,500 3,000 -

36 3 15,000 31,557 2.10 1.75 26,250 23,250 3,000 -

36 2 15,000 27,247 1.82 1.50 22,500 19,500 3,000 -

36 3 15,000 29,973 2.00 1.66 24,900 21,045 3,855 -

3,000 19,500 24

3,000 23,250 29

3,000 19,500 24

3,855 21,045 26

3,000 19,500 24

3,000 27,000 34

4,000 29,750 37

4,000 47,955 60

-

-

-

-

475 700 1,000 11 10 10 31

475 700 1,000 12 12 12 35

475 700 1,000 19 19 18 56

8 8 7 23

9 9 9 27

8 8 7 23

8 8 7 24

475 700 1,000 8 8 7 23

600 1,000 1 1 24

600 1,000 1 1 2 29

600 1,000 1 1 24

600 1,000 1 1 2 26

600 1,000 1 1 24

600 1,000 2 1 3 34

600 1,000 1 1 2 37

600 1,000 2 3 5 61

1.48 1.00 35

1.50 1.00 43

1.48 1.00 35

1.48 1.00 38

1.48 1.00 35

1.48 1.00 49

1.50 1.00 55

1.49 1.00 88

3.3 10

3.3 10

3.3 10

3.3 13

3.3 10

3.3 10

3.3 13

3.3 13

3.3 -

3.3 -

3.3 -

3.3 -

3.3 -

3.3 -

3.3 -

3.3 -

0.75 -

0.75 -

0.75 -

0.75 -

0.75 -

0.75 -

0.75 -

0.75 -

45 300 350 15,750 1.1 45 -

53 300 350 18,550 1.2 53 -

45 300 350 15,750 1.1 45 -

51 300 350 17,850 1.2 51 -

45 300 350 15,750 1.1 45 -

59 300 350 20,650 1.4 59 -

68 300 350 23,800 1.6 68 -

101 300 350 35,350 2.4 101 -

18

18

18

18

18

18

18

18

1

Per guidance provided by City Planning staff, based on recent development applications; emerging Downtown Specific Plan information; and 2010 LUCE. 2 Per HR&A, based on net-to-gross floor area assumptions (90% for retail and 87% for for residential), and translation of total gross floor area to gross floor area per-floor, based on: (1) street wall for first three floors; (2) assumed setbacks above 3rd floor. 3 Based on unit mix and net leasable floor area by unit type, per City Planning Staff and HR&A. 4 Assumes 5% for Tier 1 and 7.5% for Tier 2 units for 30% income households. 5 Assumes 1.0 spaces/studio; 1.5 spaces/1-BR unit; and 2.0 spaces/2-BR unit.

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HR&A Advisors, Inc. Summer_New Tier 1&2 ROC WITH Feesv1/A-Program 7-24-14

Appendix A Physical Parameters (con'd)

Prototype Name Location Gross Floor Area by Story Site Area Total Gross Bldg. Area Total Floors Floor 1 Floor 2 Floor 3 Floor 4 Floor 5 Floor 6 Total Gross Floor Area FAR-Gross Area Net Floor Area by Story Floor 1 Floor 2 Floor 3 Floor 4 Floor 5 Floor 6 Total Net/Gross Floor Area Overall

Mixed-Use Retail/Residential Pico Blvd.

Mixed-Use Mixed-Use Mixed-Use Retail/Residential 0 Retail/Residential 0 Retail/Residential Pico Blvd. 0 SM Blvd. 0 SM Blvd.

Mixed-Use Retail/Residential So. Lincoln Blvd.

Mixed-Use Retail/Residential So. Lincoln Blvd.

Mixed-Use Retail/Residential Downtown

Mixed-Use Retail/Residential Downtown

15,000 27,247 2 11,379 14,368 27,247

15,000 31,557 3 11,379 11,494 7,184 31,557

15,000 27,247 2 11,379 14,368 27,247

15,000 29,973 3 9,622 9,425 9,425 29,973

15,000 27,247 2 11,379 14,368 27,247

15,000 35,868 3 11,379 13,793 9,195 35,868

15,000 40,140 3 12,490 12,989 13,161 40,140

15,000 61,117 6 8,180 10,977 11,149 11,149 9,540 8,621 61,117

1.82

2.10

1.82

2.00

1.82

2.39

2.68

4.07

10,000 12,500 22,500 82.6%

10,000 10,000 6,250 26,250 83.2%

10,000 12,500 22,500 82.6%

8,500 8,200 8,200 24,900 83.1%

41

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10,000 12,500 22,500 90.0%

10,000 12,000 8,000 30,000 83.6%

11,000 11,300 11,450 33,750 90.0%

7,205 9,550 9,700 9,700 8,300 7,500 51,955 85.0%

HR&A Advisors, Inc. Summer_New Tier 1&2 ROC WITH Feesv1/A-Program 7-24-14

Appendix B 1 Development Costs

Assumptions

Prototype Name Location Land Area Gross Bldg. Area (SF) Net Leasable Areas (SF) Residential Retail Office Hotel Hotel Rooms Subterranean Parking (spaces) 1-2 Levels 3-5 Levels Land Cost Hard Cost Construction Type Building Construction/GSF 2 Demo/On-Site Improvements Off-Site Improvements Building Core & Shell Retail Tenant Improvements Office Tenant Improvements Hotel FF&E Subterranean Parking Surface 1-2 Levels 3-4 Levels Contingency Subtotal Hard Costs Soft Costs Net Parks/Recreation Fee Net Affordable Housing Linkage Fee Net TIF Fee Other City Permits & Fees Misc. Community Benefits Cost A&E/Other Professionals Marketing/Leasing Commissions Residential Retail/Office Legal & Accounting Taxes & Insurance Pre-Opening Expenses Developer Fee Contingency Subtotal Soft Costs

$15 $100,000 $35 $30 $25,000

Varies per Land Area Allowance Varies x Net Leasable SF x Net Leasable SF x Rooms

Total Development Cost per GSF 1 2

Mixed-Use Retail/Residential Pico Blvd. 15,000 31,557

Mixed-Use Retail/Residential SM Blvd. 15,000 27,247

Mixed-Use Retail/Residential SM Blvd. 15,000 29,973

Mixed-Use Retail/Residential So. Lincoln Blvd. 15,000 27,247

Mixed-Use Retail/Residential So. Lincoln Blvd. 15,000 35,868

Mixed-Use Retail/Residential Downtown 15,000 40,140

Mixed-Use Retail/Residential Downtown 15,000 61,117

19,500 3,000 45 45 -

23,250 3,000 53 53 -

19,500 3,000 45 45 -

21,045 3,855 51 51 -

19,500 3,000 45 45 -

27,000 3,000 59 59 -

29,750 4,000 68 68 -

48,000 4,000 101 101 -

$

1,620,139

$

2,026,217

$

2,202,911

$ $ $ $ $ $

V $126 225,000 100,000 3,433,138 105,000 -

$ $ $ $ $ $

V $126 # 225,000 $ 100,000 $ 3,976,241 $ 105,000 $ $ $

$

3,271,513

V $126 # 225,000 $ 100,000 $ 3,433,138 $ 105,000 $ $ $

$

2,839,169

V $126 225,000 100,000 3,776,597 134,925 -

$ $ $ $ $ $

V $126 225,000 100,000 3,433,138 105,000 -

$

$

$ $ $

2,806,178

$

V $126 225,000 $100,000 4,519,345 105,000 -

10,522,754

$

8,778,677

$ $ $ $ $ $

V $126 225,000 100,000 5,057,621 140,000 -

$ $ $ $

IIIb $210 225,000 100,000 12,852,875 140,000

$ $ $ $ $

2,040,000 302,505 7,865,126

$ $ $ $ $

3,030,000 653,915 17,001,790

$ $ $ $ $ $

174,074 17,500 372,035 471,908

$ $ $ $ $ $

391,244 79,744 560,540 1,020,107

$

-

$5,000 $30,000 $35,000 4%

per Space per Space per Space x Subtotal Hard Costs

$ $ $ $ $

1,350,000 208,526 5,421,664

$ $ $ $ $

1,590,000 239,850 6,236,091

$ $ $ $ $

1,350,000 208,526 5,421,664

$ $ $ $ $

1,530,000 230,661 5,997,183

$ $ $ $ $

1,350,000 208,526 5,421,664

$ $ $ $ $

1,770,000 268,774 6,988,119

6%

See App. D See App. D See App. C See App. C Allowances x Hard Costs

$ $ $ $ $ $

106,145 261,656 325,300

$ $ $ $ $ $

146,624 313,647 374,165

$ $ $ $ $ $

106,145 261,656 325,300

$ $ $ $ $ $

112,141 309,832 359,831

# $ # $ # $ $ $ $

106,145 261,656 325,300

$ $ $ $ $ $

190,337 349,292 419,287

$7.50 $3.00 1% 1% $4.00 3% 3%

x Net Leasable SF x Net Leasable SF x Hard Costs x Hard Costs x Net Leasable SF x Hard Costs x Subtotal Soft Costs

$ $ $ $ $ $ $ $

146,250 9,000 54,217 54,217 162,650 33,583 1,153,018

$ $ $ $ $ $ $ $

174,375 9,000 62,361 62,361 187,083 39,888 1,369,504

$ $ $ $ $ $ $ $

146,250 9,000 54,217 54,217 162,650 33,583 1,153,018

$ $ $ $ $ $ $ $

157,838 11,565 59,972 59,972 179,915 37,532 1,288,598

$ $ $ $ $ $ $ $

146,250 9,000 54,217 54,217 162,650 33,583 1,153,018

$ $ $ $ $ $ $ $

202,500 9,000 69,881 69,881 209,644 45,595 1,565,417

$ $ $ $ $ $ $ $

223,125 12,000 78,651 78,651 235,954 49,917 1,713,815

$ $ $ $ $ $ $ $

360,000 12,000 170,018 170,018 510,054 98,212 3,371,937

$

6,574,682

$

7,605,595

$

6,574,682

$

7,285,781

$

6,574,682

$

8,553,536

$

9,578,941

$

20,373,727

$ $

352,567 98,620

$ $

407,850 114,084

$ $

352,567 98,620

$ $

390,700 109,287

$ $

352,567 98,620

$ $

458,683 128,303

$ $

513,671 143,684

$ $

1,092,541 305,606

$ $

96,110 547,297

$ $

112,480 634,414

$ $

114,759 565,946

$ $

118,335 618,322

# $ $

102,677 553,864

$ $

132,260 719,246

# $ $

231,546 888,901

$ $

338,376 1,736,523

$ $

8,742,118 320.85

$ $

10,266,227 325.32

$ $

10,412,141 382.14

$ $

10,743,272 358.43

# $ $

9,331,457 342.47

$ $

12,078,960 336.76

# $ $

20,990,596 522.94

$ $

30,888,927 505.41

Subtotal Hard + Softs Costs Financing Costs Loan Term (months) Average Loan Balance Construction Loan Interest Rate Construction Loan Interest Construction Loan Fees Capitalized Project Value Permanent Loan Percent x Value Permanent Loan Fees Subtotal Financing Costs

Mixed-Use Retail/Residential Pico Blvd. 15,000 27,247

# # # #

18 65.00% 5.50% 1.50% per App. E 65.00% 1.50%

Hard + Soft + Financing

Per HR&A review of market data and financial feasibility peer reviews of recent developments. 80% x calculated values, per Marshall & Swift Commercial Cost Estimator, 3rd Quarter, 2013; HR&A Advisors, Inc., to account for certain hard costs and soft costs accounted for separately.

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Appendix C Proposed New Fees, Existing City Fees & Permit Costs

Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studios 1-BR 2-BR Affordable 1-BR 2-BR Residential (Net Leasable SF) Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) New Affordable Hsg. Linkage Fee1 New Parks Fee1 TIF Fees2 Planning Permits3 Development Review Development Agreement Multiple Permit Fee Architectural Review Board Coastal Zone Concept Review CEQA Categorical Exemption Negative Declaration EIR Subtotal Other Requirements3 Mitigation Fee on Office Space Recreational Unit Tax Arts Fee New Residential/Commercial Tenant Improvements Child Care Fee Market Rate Residential Retail Office Hotel School Facilities Fee Residential Commercial Subtotal Bldg./Construction Permits3 Plan Check Residential Apartments Commercial 10K SF/4 stories Mechanical Electrical Plumbing Building Permits/Inspections Residential Apartments Commercial 1-Story Commercial 4+ stories Tenant Improvements 10K SF Geotechnical Reports Subtotal Utility Fees4 Water Meter 5 Fireline Meter5 Wastewater Capital Facilities Studio/1-BR Units 2-BR Units Commercial Subtotal TOTAL per GSF

Assumptions

Mixed-Use Retail/Residential Pico Blvd. 15,000 27,247

Mixed-Use Retail/Residential Pico Blvd. 15,000 31,557

Mixed-Use Retail/Residential SM Blvd. 15,000 27,247

Mixed-Use Retail/Residential SM Blvd. 15,000 29,973

Mixed-Use Retail/Residential So. Lincoln Blvd. 15,000 27,247

Mixed-Use Retail/Residential So. Lincoln Blvd. 15,000 35,868

Mixed-Use Retail/Residential Downtown 15,000 40,140

Mixed-Use Retail/Residential Downtown 15,000 61,117

8 8 7

9 9 9

8 8 7

8 8 7

8 8 7

11 10 10

12 12 12

19 19 18

1 19,500 3,000 -

1 1 23,250 3,000 -

1 19,500 3,000 -

1 1 21,045 3,855 -

1 19,500 3,000 -

2 1 27,000 3,000 -

1 1 29,750 4,000 -

2 3 48,000 4,000 -

N/A N/A

N/A N/A

$ $ $

106,145 -

# $ # $ # $

146,624 -

$15,568 $25,000 $1,684 $1,684 $276

per project per project per project per project per project

$ $ $ $ $

1,684 1,684 -

$ $ $ $ $

15,568 1,684 1,684 -

# # # #

$14,622 $25,445 $200,000

per project per project per project

$ $ $ $

14,622 17,990

# $ $ $ $

14,622 33,558

$10.88 $200

x leasable area >15K x units

$ $

4,800

# $ $

5,800

# $ $

4,800

# $ $

5,000

# $ $

4,800

# $ $

6,800

# $ $

7,600

# $ $

12,200

1.00% 1.00%

x $200/SF x $50/SF

$ $

54,494 1,500

# $ # $

63,115 1,500

# $ # $

54,494 1,500

# $ # $

59,946 1,928

# $ # $

54,494 1,500

# $ # $

71,736 1,500

# $ # $

80,280 2,000

# $ # $

122,234 2,000

$133.48 $4.53 $6.34 $3.18

per unit x leasable area x leasable area x leasable area

$ $ $ $

3,070 13,590 -

$ $ $ $

3,604 13,590 -

$ $ $ $

3,070 13,590 -

$ $ $ $

3,070 17,463 -

$ $ $ $

3,070 13,590 -

$ $ $ $

4,138 13,590 -

$ $ $ $

4,805 18,120 -

$ $ $ $

7,475 18,120 -

$3.20 $0.51

x leasable area x leasable area

$ $ $

62,400 1,530 141,384

$ $ $

74,400 1,530 163,539

$ $ $

62,400 1,530 141,384

$ $ $

67,344 1,966 156,716

$ $ $

62,400 1,530 141,384

$ $ $

86,400 1,530 185,694

$ $ $

95,200 2,040 210,045

$ $ $

153,600 2,040 317,669

$0.9127 $1.2790 $1.3621 $727 $727 $727

x leasable area x leasable area x leasable area per project per project per project

$

$1.0236 $0.7782 $1.3581 $0.3490 $0.2732 $2,481

x leasable area x leasable area x leasable area x leasable area x leasable area per project

$3,837 $18,195 $1,168 $1,557 $779

# # # #

17,798 $3,837 $727 $727 $727

# $

$ $ $ $ $ $ $

19,960 2,335 1,047 47,158

3/4" meter per project 4" meter per project

$ $

per unit per unit per 1,000 leasable SF

$ $ $ $

$

$

# $ # $ # $

106,145 -

$ $ $ $ $

1,684 1,684 -

# $ $ $ $

14,622 17,990

# $ # $ # $

112,141 -

$ $ $ $ $

15,568 1,684 1,684 -

# # # #

# $ $ $ $

14,622 33,558

# # # #

21,220 # $ $3,837 ## $ $727 $727 $727

17,798 $3,837 $727 $727 $727

# $

# $ # $ $ $ # $ $ $

23,799 2,335 1,047 54,419

# $ # $ $ $ # $ # $ $

19,960 2,335 1,047 47,158

3,837 18,195

$ $

3,837 18,195

$ $

19,856 10,899 2,337 55,124

# $ # $ $ $

22,192 15,570 2,337 62,131

# $ # $ $ $

$

261,656 # $ $9.60 ##

313,647 # $ $9.94 ##

# $ # $ # $

106,145 -

$ $ $ $ $

1,684 1,684 -

# $ $ $ $

14,622 17,990

19,208 $12,790 $727 $727 $727

# $

# $ # $ $ $ # $ $ $

21,542 3,000 3,490 62,211

3,837 18,195

$ $

19,856 10,899 2,337 55,124

# $ # $ $ $

# $

261,656 # $ $9.60 ##

# $ # $ # $

190,337 -

$ $ $ $ $

15,568 1,684 1,684 -

# # # #

$ $ $ $ $

1,684 1,684 -

# $ $ $ $

14,622 33,558

# $ $ $ $

14,622 17,990

# # # #

# $ # $ # $

# $ 174,074 # $ 17,500 ## $

$ $ $ $ $

15,568 1,684 1,684 -

# $ $ $ $

14,622 33,558

# # # #

17,798 # $ $3,837 $0 $ $727 $727 $727

24,643 $3,837 $727 $727 $727

# $

# $ # $ # $ $ # $ # $ $

19,960 2,335 1,047 47,158

# $ # $ # $ $ # $ # $ $

27,637 2,335 1,047 61,680

# $ # $ # $ $ # $ # $ $

30,452 3,113 1,396 69,411

# $ # $ # $ $ # $ # $ $

49,133 3,113 1,396 104,749

3,837 18,195

$ $

3,837 18,195

$ $

3,837 18,195

$ $

3,837 18,195

$ $

3,837 18,195

19,856 12,456 3,003 57,347

# $ # $ $ $

19,856 10,899 2,337 55,124

# $ # $ $ $

26,864 17,127 2,337 68,360

# $ # $ $ $

29,200 20,241 3,116 74,589

# $ # $ $ $

46,720 32,697 3,116 104,565

$

309,832 # $ $10.34 ##

261,656 # $ $9.60 ##

$

349,292 # $ $9.74 ##

27,153 $5,116 $727 $727 $727

391,244 79,744

# $ $0 $ ## ## ##

372,035 # $ $9.27 ##

43,810 $5,116 $727 $727 $727

560,540 $9.17

1

See Appendix D for calculation details. Per new Ordinance No. 2420 (CCS), adopted March 12, 2013. Assumes TIF credit for existing retail on 50% of Downtown & Wilshire sites; 10,000 SF existing retail and 10,000 SF existing office assumed for Pico site. Per City staff/nexus study recommendations. Assumes fee credits for existing retail on 50% of Downtown & Wilshire sites; 10,000 SF existing retail and 10,000 SF existing office assumed for Pico site. 4 Per FY 2013-14 City fee schedules. 5 Includes meter and capital facilities charges. 2

3

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HR&A Advisors, Inc. Summer_New Tier 1&2 ROC WITH Feesv1/C-City Cost Detail 7-10-14

Appendix D Proposed TIF/New Parks/Recreation and Afforable Housing Linkage Fees Mixed-Use Retail/Residentia 0 Pico Blvd. 0 1 0 15,000 27,247 24 23 8 8 7 1 1 19,500 3,000 -

Prototype Name Location

LUCE Tier Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studios 1-BR 2-BR Affordable 1-BR 2-BR Residential (Net Leasable SF) Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) Floor Area Attributable to Tier 2 Office Residential (units) Total Units

Mixed-Use Retail/Residentia 0 Pico Blvd. 0 2 0 15,000 31,557 29 27 9 9 9 2 1 1 23,250 3,000 -

-

Studios 1-BR 2-BR Affordable Units 1-BR 2-BR

-

Fee Factor TIF Fees2

per unit per unit $0.00 per unit $21.00 x leasable area $30.10 x leasable area $9.70 x leasable area $10.80 x leasable area $3.60 x leasable area $21.00 $30.10

x leasable area x leasable area

$ $ $ $ $ $ $ $

-

-

2 2

-

1

1

-

-

-

-

7,500

7,500

7,500

7,500

$ $ $ $ $ $ $ $

90,948 90,300 -

1

                            1.14 $ $ $ $ $ $

75,900 90,300 -

$ $ $ $ $ $

$

-

$

79,662 116,036 -

Mixed-Use Retail/Residentia 0 Downtown 0 1 0 15,000 40,140 37 35 12 12 12 2 1 1 29,750 4,000 -

-

-

-

-

75,900 90,300 -

Mixed-Use Retail/Residentia So. Lincoln Blvd. 2 15,000 35,868 34 31 11 10 10 3 2 1 27,000 3,000 -

2

                            1.14

$2,600 $3,300

Subtotal Less: Fee on Existing Retail SF Area 1 Less: Fee on Existing Retail SF Area 2 NET TIF Fee

-

Mixed-Use Retail/Residentia 0 So. Lincoln Blvd. 0 1 0 15,000 27,247 24 23 8 8 7 1 1 19,500 3,000 -

7,500

1.14

   Market Rate‐Area 1    Market Rate‐Area 2    Affordable    Retail‐Area 1    Retail‐Area 2    Office‐Area 1    Office‐Area 2    Hotel‐Area 1 & 2

Mixed-Use Retail/Residentia 0 SM Blvd. 0 2 0 15,000 29,973 26 24 8 8 7 2 1 1 21,045 3,855 -

5

-

Assumed Existing Retail Floor Area (50% x site area SF)

Mixed-Use Retail/Residentia 0 SM Blvd. 0 1 0 15,000 27,247 24 23 8 8 7 1 1 19,500 3,000 -

-

75,900 90,300 -

24

3 3 2

7 7 7

1 1

-

7,500

$ $ $ $ $ $ $ $

-

10

105,996 90,300 -

2 1 7,500

7,500

                            1.14 $ $ $ $ $ $ $ $

Mixed-Use Retail/Residentia Downtown 2 15,000 61,117 61 56 19 19 18 5 2 3 48,000 4,000 -

                            1.14 $ $ $ $ $ $ $ $

91,000 84,000 -

$                  175,000

$ $ $ $ $ $ $ $

153,244 84,000 -

$                  166,200

$                  181,248

$                  166,200

$                  195,698

$                  166,200

$                  196,296

$

(157,500) # $

$ $

(225,750) -

$ $

(225,750) -

$ $

(225,750) -

$ $

(225,750) -

$ $

(225,750) -

$ $

(225,750) -

$                  237,244

$

17,500 # $

$ $ $ $ $ $

66,216 46,657 4,485 -

$ $ $ $ $ $

93,365 59,987 4,485 -

$ $ $ $ $ $

66,216 46,657 4,485 -

$ $ $ $ $ $

70,934 46,657 5,763 -

$ $ $ $ $ $

66,216 46,657 4,485 -

$ $ $ $ $ $

115,216 81,849 4,485 -

$ $ $ $ $ $

99,324 79,983 5,980 -

$ $ $ $ $ $

223,313 173,163 5,980 -

$

117,358

$

157,837

$

117,358

$

123,354

$

117,358

$

201,550

$

185,287

$

402,457

(11,213) 106,145

$ $ $

(11,213) 146,624

$ $ $

(11,213) 106,145

$ $ $

(11,213) 112,141

$ $ $

(11,213) 106,145

$ $ $

(11,213) 190,337

$ $ $

(11,213) 174,074

$ $ $

(11,213) 391,244

$ $ $

26,334 26,334

$ $ $

26,334 26,334

$ $ $

26,334 26,334

$ $ $

33,840 33,840

$ $ $

26,334 26,334

$ $ $

26,334 26,334

$ $ $

35,113 35,113

$ $ $

35,113 35,113

$ $ $

(65,836) -

$ $ $

(65,836) -

$ $ $

(65,836) -

$ $ $

(65,836) -

$ $ $

(65,836) -

$ $ $

(65,836) -

$ $ $

(65,836) -

$ $ $

(65,836) -

$ $ $

106,145 3.90 20,474,415 0.5%

$ $ $

146,624 4.65 30,847,408 0.5%

$ $ $

106,145 3.90 29,101,273 0.4%

$ $ $

112,141 3.74 48,995,000 0.2%

$ $ $

106,145 3.90 20,584,772 0.5%

$ $ $

190,337 5.31 30,485,115 0.6%

$ $ $

191,574 4.77 20,584,772 0.9%

$ $ $

470,988 7.71 30,485,115 1.5%

(157,500) 79,744

Proposed Parks/Recreation Fee 25% x Maximum Fees Assumptions Market Rate Housing 0-1 BRs 2+ BRs Affordable Housing Retail Office Hotel Subtotal Fee Less: Fee on Existing Retail SF Retail Office Net Fee

25% 25% 25% 25% 25% 25%

$16,554 $26,661 $0 $5.98 $9.24 $12.52

25% 25%

$5.98 $9.24

per unit per unit per unit x leasable area x leasable area x leasable area

x leasable area $ x leasable area $ $

Proposed Affordable Housing Linkage Fee 4.5% x Maximum Fees Assumptions 4.5% Retail 4.5% $195.07 x leasable area Office 4.5% $224.11 x leasable area Subtotal Fee Less: Fee on Existing Retail SF Retail 4.5% $195.07 x leasable area Office 4.5% $224.11 x leasable area Net Fee Combined Fees Fees Per GSF Total Development Cost Fee as % Dev Cost

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HR&A Advisors, Inc. Summer_New Tier 1&2 ROC WITH Feesv1/D- Fee Analysis 7-24-14

Appendix E Net Operating Income

Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studio 1-BR 2-BR Affordable 1-BR 2-BR Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) Parking Spaces Residential Retail Office Hotel For-Rent Residential- Market Rate1 Studio Rent/Unit/Month 1-BR Rent/Unit/Month 2-BR Rent/Unit/Month Units Income/Year Other Income Gross Income Less: Vacancy & Collection Loss Effective Gross Income (EGI) Less: Operating Expenses (incl. reserve)1

Mixed-Use Retail/Residentia Pico Blvd. 15,000 27,247 24 23 8 8 7 1 1 3,000 45 35 10 -

Assumptions

Varies Varies Varies 5.0% 5.0% $ 7,000

Mixed-Use Retail/Residentia Pico Blvd. 15,000 31,557 29 27 9 9 9 2 1 1 3,000 53 43 10 -

Mixed-Use Retail/Residentia SM Blvd. 15,000 27,247 24 23 8 8 7 1 1 3,000 45 35 10 -

Mixed-Use Retail/Residentia SM Blvd. 15,000 29,973 25 23 8 8 7 2 1 1 3,855 51 38 13 -

Mixed-Use Retail/Residentia So. Lincoln Blvd. 15,000 27,247 24 23 8 8 7 1 1 3,000 45 35 10 -

Mixed-Use Retail/Residentia So. Lincoln Blvd. 15,000 35,868 34 31 11 10 10 3 2 1 3,000 59 49 10 -

Mixed-Use Retail/Residentia Downtown 15,000 40,140 38 36 12 12 12 2 1 1 4,000 68 55 13 -

Mixed-Use Retail/Residentia Downtown 15,000 61,117 61 56 19 19 18 5 2 3 4,000 101 88 13 -

x Units Income

$ $

$1,613 $2,325 $3,000 630,000 31,500

$ $

$1,613 $2,325 $3,000 749,250 37,463

$ $

$1,828 $2,635 $3,400 714,000 35,700

$ $

$1,828 $2,635 $3,400 714,000 35,700

$ $

$1,613 $2,325 $3,000 630,000 31,500

$ $

$1,613 $2,325 $3,000 851,850 42,593

$ $

$2,150 $3,100 $4,000 1,332,000 66,600

$ $

$2,150 $3,100 $4,000 2,061,000 103,050

x Gross Income

$ $

661,500 (33,075)

$ $

786,713 (39,336)

$ $

749,700 (37,485)

$ $

749,700 (37,485)

$ $

661,500 (33,075)

$ $

894,443 (44,722)

$ $

1,398,600 (69,930)

$ $

2,164,050 (108,203)

x Unit

$ $

628,425 (161,000.00)

$ $

747,377 (189,000.00)

$ $

712,215 (161,000.00)

$ $

712,215 (161,000.00)

$ $

628,425 (161,000)

$ $

849,721 (217,000)

$ $

1,328,670 (252,000)

$ $

2,055,847 (392,000)

Net Operating Income

$

467,425

$

558,377

$

551,215

$

551,215

$

467,425

$

632,721

$

1,076,670

$

1,663,847

For-Rent Residential - Affordable (30% incomes3 1-BR Rent/Unit/Month 2-BR Rent/Unit/Month Units Income/Year Other Income 1.0%

x Units Income

$ $ $ $

389 437 4,668 47

$ $ $ $

389 437 9,912 99

$ $ $ $

389 437 4,668 47

$ $ $ $

389 437 9,912 99

$ $ $ $

389 437 4,668 47

$ $ $ $

389 437 14,580 146

$ $ $ $

389 437 9,912 99

$ $ $ $

389 437 25,068 251

x Gross Income

$ $

4,715 (236)

$ $

10,011 (501)

$ $

4,715 (236)

$ $

10,011 (501)

$ $

4,715 (236)

$ $

14,726 (736)

$ $

10,011 (501)

$ $

25,319 (1,266)

x Unit

$ $

4,479 (7,000)

$ $

9,510 (14,000)

$ $

4,479 (7,000)

$ $

9,510 (14,000)

$ $

4,479 (7,000)

$ $

13,990 (21,000)

$ $

9,510 (14,000)

$ $

24,053 (35,000)

$

(2,521)

$

(4,490)

$

(2,521)

$

(4,490)

$

(2,521)

$

(7,010)

$

(4,490)

$

(10,947)

$ $ $

2.16 77,760 (3,888)

$ $ $

2.16 77,760 (3,888)

$ $ $

2.82 101,520 (5,076)

$ $ $

2.82 130,453 (6,523)

$ $ $

3.50 126,000 (6,300)

$ $ $

3.50 126,000 (6,300)

$ $ $

5.25 252,000 (12,600)

$ $ $

5.25 252,000 (12,600)

$ $ $

73,872 (2,216) 71,656

$ $ $

73,872 (2,216) 71,656

$ $ $

96,444 (2,893) 93,551

$ $ $

123,930 (3,718) 120,212

$ $ $

119,700 (3,591) 116,109

$ $ $

119,700 (3,591) 116,109

$ $ $

239,400 (7,182) 232,218

$ $ $

239,400 (7,182) 232,218

$ $ $ $

-

$ $ $ $

-

$ $ $ $

-

$ $ $ $

-

$ $ $ $

-

$ $ $ $

-

$ $ $ $

-

$ $ $ $

-

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

-

$ $ $

-

Net Operating Income

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

Total Net Operating Income

$

Gross Income Less: Vacancy & Collection Loss Effective Gross Income (EGI) Less: Operating Expenses (inc. reserve)1

5.0% $ 7,000

Net Operating Income Retail2 Average Rent/SF/Month (NNN) Gross Rental Income/Year Less: Vacancy & Collection Loss Effective Gross Income (EGI) Less: Unreimbursed Operating Expenses Net Operating Income Office2 Average Rent/SF/Month (NNN) Gross Rental Income/Year Parking Income4 Less: Vacancy & Collection Loss Effective Gross Income (EGI) Less: Unreimbursed Operating Expenses Less: Parking Expense

Varies 5.0%

x Gross Income

3.0%

x EGI

$0 Wtd. Avg./Space/Yr. 5.0% x Gross Income 3.0% 50.0%

x EGI x Parking Income

536,560

$

625,543

$

642,245

$

666,937

$

581,013

$

741,820

$

1,304,398

$

1,885,118

1

Institute of Real Estate Management annual operating cost data for apartment buildings in Los Angeles County Per HR&A review of market data and financial feasibility peer reviews of recent developments. Assumes Wilshire residential rents = 95% x downtown; Pico = 85%. Downtown office and apartment rents assume some view premiums at the upper stories. Hotel is assumed to be a mid-scale, limited service product. 3 Per City's rent schedule and HR&A assumptions. 4 Assumes $200/month reserved (10% of supply); $165/month unreserved (85%); and $500/month daily use (5%). 2

45

Page 7 of 8

HR&A Advisors, Inc. Summer_New Tier 1&2 ROC WITH Feesv1/E-Net Ops Income 7-24-14

Appendix F Return on Cost/Developer Profit Margin

Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studio 1-BR 2-BR Affordable 1-BR 2-BR Retail (Net Leasable SF) Office (Net Leasable SF) Project Value Residential-Market Rate Net Operating Income Cap Rate1 Value Residential-Affordable Net Operating Income Cap Rate1 Value Retail Net Operating Income Cap Rate1 Value Office Net Operating Income Cap Rate1 Value Hotel Net Operating Income Cap Rate1 Value

Assumptions

1

Mixed-Use Retail/Residentia SM Blvd. 15,000 27,247

Mixed-Use Retail/Residentia SM Blvd. 15,000 29,973

Mixed-Use Retail/Residentia So. Lincoln Blvd. 15,000 27,247

Mixed-Use Retail/Residentia So. Lincoln Blvd. 15,000 35,868

Mixed-Use Retail/Residentia Downtown 15,000 40,140

Mixed-Use Retail/Residentia Downtown 15,000 61,117

8 8 7

9 9 9

8 8 7

8 8 7

8 8 7

11 10 10

12 12 12

19 19 18

1 3,000 -

1 1 3,000 -

1 3,000 -

1 1 3,855 -

1 3,000 -

2 1 3,000 -

1 1 4,000 -

2 3 4,000 -

$

467,425

$

558,377

$

551,215

$

551,215

$

467,425

$

632,721

$

1,076,670

$

1,663,847

NOI/Cap Rate $

8,819,340

$

10,535,415

$

10,400,283

$

10,400,283

$

8,819,340

$

11,938,132

$

20,314,528

$

31,393,340

$

(2,521)

$

(4,490)

$

(2,521)

$

(4,490)

$

(2,521)

$

(7,010)

$

(4,490)

$

(10,947)

NOI/Cap Rate $

(47,566)

$

(84,717)

$

(47,566)

$

(84,717)

$

(47,566)

$

(132,264)

$

(84,717)

$

(206,547)

$

71,656

$

71,656

$

93,551

$

120,212

$

116,109

$

116,109

$

232,218

$

232,218

NOI/Cap Rate $

1,085,697

$

1,085,697

$

1,417,439

$

1,821,394

$

1,759,227

$

1,759,227

$

3,518,455

$

3,518,455

From App, E

From App, E 5.30%

From App, E 6.60%

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

NOI/Cap Rate $

From App, E

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

6.40%

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

9,857,471

$

11,536,395

$

-

$

11,770,156

$

12,136,960

$

10,531,001

$

13,565,095

$

23,748,266

$

34,705,248

From above $ From App. B $

9,857,471 (8,742,118)

$ $

11,536,395 (10,266,227)

$ $

11,770,156 (10,412,141)

$ $

12,136,960 (10,743,272)

$ $

10,531,001 (9,331,457)

$ $

13,565,095 (12,078,960)

$ $

23,748,266 (20,990,596)

$ $

34,705,248 (30,888,927)

$

1,115,353 11.3%

$

1,270,168 11.0%

$

1,358,015 11.5%

$

1,393,688 11.5%

$

1,199,544 11.4%

$

1,486,135 11.0%

$

2,757,670 11.6%

$

3,816,321 11.0%

1,304,398 $ (20,990,596) $ 6.21% #

1,885,118 (30,888,927) 6.10%

Profit % of Value Return on Total Development Cost NOI Total Development Cost Return on Cost

Mixed-Use Retail/Residentia Pico Blvd. 15,000 31,557

5.30%

Total Project Value Developer Returns Developer Profit Total Project Value Less: Total Development Cos

Mixed-Use Retail/Residentia Pico Blvd. 15,000 27,247

From App. E From App. B

$ $

536,560 $ (8,742,118) $ 6.14% #

625,543 $ (10,266,227) $ 6.09% #

642,245 $ (10,412,141) $ 6.17% #

666,937 $ (10,743,272) $ 6.21% #

581,013 $ (9,331,457) $ 6.23% #

741,820 $ (12,078,960) $ 6.14% #

Per Real Estate Research Corp.,Real Estate Report, 3rd Quarter 2013, Los Angeles Area data.

46

Page 8 of 8

HR&A Advisors, Inc. Summer_New Tier 1&2 ROC WITH Feesv1/F-Return on Cost 7-24-14

ATTACHMENT C Sensitivity test for new Downtown mixed-use retail/residential prototype assuming 50% income units: 1. Residual Land Value Impacts With Fees 2. Return on Cost/Development Profit Margin Impacts With Fees

47

Residual Land Value Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Program Summary (see App. A) Prototype Name Location LUCE Tier Permit Requirement # Parcels Bldg. Height (Feet) Stories (#) Site Area (SF) Gross Bldg. Area (SF) Floor Area Ratio (FAR) - Gross Area Floor Area Ratio (FAR) - Net Area Net Leasable Areas Residential (SF) Market Rate Units Affordable Units Total Units Retail (SF) Office (SF) Hotel (SF) Development Costs (see App. B&C&D) Land Costs Hard Costs Soft Costs Net Parks/Recreation Fee Net Affordable Housing Linkage Fee TIF Fee Other City Costs (see App. E) Other Soft Costs Financing Costs

With 50% Income Units Mixed-Use Mixed-Use Retail/Residential Retail/Residential Downtown Downtown 1 2

39 3 15,000 40,140 2.68 2.25

60 6 15,000 61,117 4.07 3.46

29,750 33 4 37 4,000 -

48,000 52 9 61 4,000 -

see Residual Value $ 7,833,926

$

see Residual Value 16,939,390

$ $ $ $ $ $

159,132 359,499 1,145,322 868,340

$ $ $ $ $ $

372,163 544,438 2,329,891 1,705,052

$

10,366,219 $258

$

21,890,934 $358

$ $

1,217,947 (231,000)

$ $

1,908,018 (364,000)

Net Operating Income Residential-Affordable Effective Gross Income Less: Operating Expenses

$

986,947

$

1,544,018

$ $

31,709 (28,000)

$ $

70,880 (63,000)

Net Operating Income Retail Effective Gross Income Less: Operating Expenses

$

3,709

$

7,880

$ $

239,400 (7,182)

$ $

239,400 (7,182)

Net Operating Income Office Effective Gross Income Less: Operating Expenses

$

232,218

$

232,218

Total Development Cost per GSF Net Operating Income (NOI) (see App. E) Residential-Market Rate Effective Gross Income Less: Operating Expenses

Net Operating Income Total Net Operating Income Project Component Values (see App. F) Residential-Market Rate NOI Cap Rate Value Residential-Affordable NOI Cap Rate Value Retail NOI Cap Rate Value Office NOI Cap Rate Value

$ $

-

$ $

-

$

-

$

-

$

1,222,874

$

1,784,116

$

986,947 5.3% 18,621,642

$

1,544,018 5.3% 29,132,415

3,709 5.30% 69,981

$

232,218 6.60% 3,518,455

$

$ $ $ $ $

$

$

$

22,210,078

$

32,799,549

Residual Land Value Estimate Total Project Value Less: Developer Profit Less: Total Development Cost

$ $ $

22,210,078 (2,776,260) (10,366,219)

$ $ $

32,799,549 (4,099,944) (21,890,934)

$ $

9,067,599 605 $9,230,901 (163,302) (11) -1.8% Yes

$ $

6,808,671 454 $7,204,595 (395,924) (26) -5.5% Yes

$ $

$

232,218 6.60% 3,518,455

Total Project Value

$

6.40% -

$

7,880 5.30% 148,679

6.40% -

Residual Land Value Total Per SF Land Area Residual Land Value No Fees Change in Residual Land Value Per SF Land Area Percent Change in Residual Land Value Within Market Range?

$

$

$ $

48 Page 1 of 8

HR&A Advisors, Inc. DT TEST Summer_New Tier 1&2 RLV WITH Feesv1/Summary 7-24-14

RLV Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Appendix A Physical Parameters

Prototype Name Location LUCE Area LUCE Tier Permit Requirement # Parcels Bldg. Height (Feet) Stories (#) Land Area (SF) 1 Gross Bldg. Area (SF) Floor Area Ratio (FAR)-Gross Area1 Floor Area Ratio (FAR)-Net Area Net Leasable Areas (SF)2 Residential3 Retail Office Hotel # Hotel Rooms Residential Unit Mix Office SF Retail SF Hotel SF Residential SF-Target Estimate Units (based on avg. unit size) Market Rate Studio 1-BR (SF) 2-BR (SF) Studio 1-BR (# units) 2-BR (#units) Subtotal (# units) Affordable4 1-BR (SF) 2-BR (SF) 1-BR (# units) 2-BR (#units) Subtotal (# units) Total Units Parking Residential Market Rate (wtd. avg. per unit) 5 Affordable (avg. per unit) Subtotal Spaces (#) Retail Spaces/1,000 SF Subtotal Spaces (#) Office Spaces/1,000 SF Subtotal Spaces (#) Hotel Spaces/Guest Room Subtotal Spaces (#) Total Spaces Number Gross Area/Space (SF)-Surface Gross Area/Space (SF)-Subt. Total Parking Area (SF) # Surface # Subt. Levels Total Spaces/Levels 1-2 Spaces/Levels 3-5 Construction Period (months)

With 50% Income Units Mixed-Use Mixed-Use Retail/Residential Retail/Residential Downtown Downtown 1

2

39 3 15,000 40,140 2.68 2.25 33,750 29,750 4,000 -

60 6 15,000 61,117 4.07 3.46 51,955 48,000 4,000 -

4,000 29,750 37

4,000 47,955 60

475 700 1,000 11 11 11 33

475 700 1,000 18 17 17 52

600 1,000 2 2 4 37

600 1,000 5 4 9 61

1.50 1.00 54

1.49 1.00 86

3.3 13

3.3 13

3.3 -

3.3 -

0.75 -

0.75 -

67 300 350 23,450 1.6 67 -

99 300 350 34,650 2.3 99 -

18

18

1

Per guidance provided by City Planning staff, based on recent development applications; emerging Downtown Specific Plan information; and 2010 LUCE. 2 Per HR&A, based on net-to-gross floor area assumptions (90% for retail and 87% for residential), and translation of total gross floor area to gross floor area per floor, based on street wall for first three floors. 3 Based on unit mix and net leasable floor area by unit type, per City Planning/HR&A. 4 Assumes 10% of Tier 1 and 15% of Tier 2 units for 50% income households. 5 Assumes 1.0 spaces/studio; 1.5 spaces/1-BR unit; and 2.0 spaces/2-BR unit.

49

Page 2 of 8

HR&A Advisors, Inc. DT TEST Summer_New Tier 1&2 RLV WITH Feesv1/A-Program 7-24-14

Appendix A Physical Parameters (con'd)

Prototype Name Location Gross Floor Area by Story Site Area Total Gross Bldg. Area Total Floors Floor 1 Floor 2 Floor 3 Floor 4 Floor 5 Floor 6 Total Gross Floor Area FAR-Gross Area Net Floor Area by Story Floor 1 Floor 2 Floor 3 Floor 4 Floor 5 Floor 6 Total Net/Gross Floor Area Overall

With 50% Income Units Mixed-Use Mixed-Use Retail/Residential Retail/Residential Downtown Downtown

15,000 40,140 3 12,490 12,989 13,161 40,140

15,000 61,117 6 8,180 10,977 11,149 11,149 9,540 8,621 61,117

2.68

4.07

11,000 11,300 11,450 33,750 90.0%

7,205 9,550 9,700 9,700 8,300 7,500 51,955 85.0%

50

Page 3 of 8

HR&A Advisors, Inc. DT TEST Summer_New Tier 1&2 RLV WITH Feesv1/A-Program 7-24-14

RLV Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Appendix B Development Costs1 With 50% Income Units Mixed-Use Mixed-Use Retail/Residential Retail/Residential Downtown Downtown 15,000 15,000 40,140 61,117

Prototype Name Location Land Area Gross Bldg. Area (SF) Net Leasable Areas (SF) Residential Retail Office Hotel Hotel Rooms Subterranean Parking (spaces) 1-2 Levels 3-5 Levels

29,750 4,000 67 67 see Residual Value

Land Cost Hard Cost Construction Type Building Construction/GSF 2 Demo/On-Site Improvements Off-Site Improvements Building Core & Shell Retail Tenant Improvements Office Tenant Improvements Hotel FF&E Subterranean Parking Surface 1-2 Levels 3-4 Levels Contingency Subtotal Hard Costs

48,000 4,000 99 99 -

$ $ $ $ $

2,010,000 301,305 7,833,926

$ $ $ $ $ $

$ $ $ $

IIIb $210 225,000 100,000 12,852,875 140,000

$ $ $ $ $

-

-

$ $ $ $ $

2,970,000 651,515 16,939,390

159,132 359,499 470,036

$ $ $ $ $ $

372,163 544,438 1,016,363

$ $ $ $ $ $ $ $

223,125 12,000 78,339 78,339 235,018 48,465 1,663,953

$ $ $ $ $ $ $ $

360,000 12,000 169,394 169,394 508,182 94,558 3,246,492

Subtotal Hard + Softs Costs

$

9,497,879

$

20,185,882

Financing Costs Loan Term (months) Average Loan Balance Construction Loan Interest Rate Construction Loan Interest Construction Loan Fees Capitalized Project Value Permanent Loan Percent x Value Permanent Loan Fees Subtotal Financing Costs

$ $

509,324 142,468

$ $

1,082,468 302,788

$ $

216,548 868,340

$ $

319,796 1,705,052

Total Development Cost per GSF

$ $

10,366,219 258.25

$ $

21,890,934 358.18

Soft Costs Net Parks/Recreation Fee Net Affordable Housing Linkage Fee Net TIF Fee Other City Permits & Fees Misc. Community Benefits Cost A&E/Other Professionals Marketing/Leasing Commissions Residential Retail/Office Legal & Accounting Taxes & Insurance Pre-Opening Expenses Developer Fee Contingency Subtotal Soft Costs

# # # #

$ $ $ $ $ $

V $126 225,000 100,000 5,057,621 140,000 -

see Residual Value

1

Per HR&A review of market data and financial feasibility peer reviews of recent developments. 80% x calculated values, per Marshall & Swift Commercial Cost Estimator, 3rd Quarter, 2013; HR&A Advisors, Inc., to account for certain hard costs and soft costs accounted for separately.

2

Page51 4 of 8

HR&A Advisors, Inc. DT TEST Summer_New Tier 1&2 RLV WITH Feesv1/B-Dev Costs 7-24-14

RLV Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Appendix C Proposed New Fees, Existing City Fees & Permit Costs

Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studios 1-BR 2-BR Affordable 1-BR 2-BR Residential (Net Leasable SF) Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) New Affordable Hsg. Linkage Fee1 New Parks Fee1 TIF Fees2 Subtotal Planning Permits3 Development Review Development Agreement Multiple Permit Fee Architectural Review Board Coastal Zone Concept Review CEQA Categorical Exemption Negative Declaration EIR Subtotal Other Requirements3 Mitigation Fee on Office Space Recreational Unit Tax Arts Fee New Residential/Commercial Tenant Improvements Child Care Fee Market Rate Residential Retail Office Hotel School Facilities Fee Residential Commercial Subtotal Bldg./Construction Permits 3 Plan Check Residential Apartment Commercial 10K SF/4 stories Mechanical Electrical Plumbing Building Permits/Inspections Residential Apartment Commercial 1-Story Commercial 4+ stories Tenant Improvements 10K SF Geotechnical Reports Subtotal Utility Fees4 Water Meter 5 Fireline Meter5 Wastewater Capital Facilities Studio/1-BR Units 2-BR Units Commercial Subtotal TOTAL per GSF

With 50% Income Units Mixed-Use Mixed-Use Retail/Residential Retail/Residential Downtown Downtown 15,000 15,000 40,140 61,117

$ $ $ $

11 11 11

18 17 17

2 2 29,750 4,000 -

5 4 48,000 4,000 -

159,132 159,132

$ $ $ $

372,163 372,163

$ $ $ $ $

-

$ $ $ $ $

15,568 -

$ $ $ $

14,622 14,622

$ $ $ $

14,622 30,190

$ $

-

$ $

-

$ $

80,280 2,000

$ $

122,234 2,000

$ $ $ $

4,405 18,120 -

$ $ $ $

6,941 18,120 -

$ $ $

95,200 2,040 202,045

$ $ $

153,600 2,040 304,935

$

27,153 $5,116 $727 $727 $727

$

$ $ $ $ $ $ $

30,452 3,113 1,396 69,411

$ $ $ $ $ $ $

49,133 3,113 1,396 104,749

$ $

3,837 18,195

$ $

3,837 18,195

$ $ $ $

28,032 20,241 3,116 73,421

$ $ $ $

46,720 32,697 3,116 104,565

$

518,631 $12.92

$

916,601 $15.00

$

$

43,810 $5,116 $727 $727 $727

1

See Appendix D for calculation details. 2 Per new Ordinance No. 2420 (CCS), adopted March 12, 2013. Assumes TIF credit for 50% of site area. 3 Per City staff/nexus study recommendations. Assumes fee credits for existing retail on 50% of site area. 4 Per FY 2013-14 City fee schedules. 5 Includes meter and capital facilities charges.

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Page 5 of 8

HR&A Advisors, Inc. DT TEST Summer_New Tier 1&2 RLV WITH Feesv1/C-City Cost Detail 7-24-14

Proposed TIF/New Parks/Recreation and Afforable Housing Linkage Fees

With 50% Income Units Mixed-Use Retail/Residential Mixed-Use Retail/Residential Downtown Downtown 1 2 15,000 15,000 40,140 61,117 37 61 33 52 11 18 11 17 11 17 4 9 2 5 2 4 29,750 48,000 4,000 4,000 -

Prototype Name Location

LUCE Tier Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studios 1-BR 2-BR Affordable 1-BR 2-BR Residential (Net Leasable SF) Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) Floor Area Attributable to Tier 2 Office Residential (units) Total Units

-

24

Studios 1-BR 2-BR Affordable Units 1-BR 2-BR

7 7 7 -

Assumed Existing Retail Floor Area

2 1

15,000

Fee Factor TIF Fees2

15,000

                                               1.14

1.14

   Market Rate‐Area 1    Market Rate‐Area 2    Affordable    Retail‐Area 1    Retail‐Area 2    Office‐Area 1    Office‐Area 2    Hotel‐Area 1 & 2

$2,600 $3,300

per unit per unit $0.00 per unit $21.00 x leasable area $30.10 x leasable area $9.70 x leasable area $10.80 x leasable area $3.60 x leasable area

$ $ $ $ $ $ $ $

Subtotal Less: Fee on 50% Existing SF Area 1 Less: Fee on 50% Existing SF Area 2 NET TIF Fee

$                 169,800

$                                      226,116

$21.00 $30.10

$

$

x leasable area x leasable area

85,800 84,000 (315,000)

$ $ $ $ $ $ $ $

142,116 84,000 (315,000)

$

-

$

-

$ $ $ $ $ $

91,047 73,318 5,980 -

$ $ $ $ $ $

210,898 166,498 5,980 -

$

170,345

$

383,376

$ $ $

(11,213) 159,132

$ $ $

(11,213) 372,163

$ $ $

35,113 35,113

$ $ $

35,113 35,113

$ $ $

(65,836) -

$ $ $

(65,836) -

$ $ $

159,132 3.96 20,584,772 0.8%

$ $ $

372,163 6.09 30,485,115 1.2%

Proposed Parks/Recreation Fee 25% x Maximum Fees Assumptions Market Rate Housing 0-1 BRs 2+ BRs Affordable Housing Retail Office Hotel Subtotal Fee Less: Fee on 50% Existing SF Retail Office Net Fee

25% 25% 25% 25% 25% 25%

25% 25%

Proposed Affordable Housing Linkage Fee 4.5% x Maximum Fees 4.5% Retail 4.5% Office 4.5% Subtotal Fee Less: Fee on 50% Existing SF Retail 4.5% Office 4.5% Net Fee Combined New Fees Fees Per GSF Total Development Cost Fee as % Dev Cost

$16,554 per unit $26,661 per unit $0 per unit $5.98 x leasable area $9.24 x leasable area $12.52 x leasable area

$5.98 $9.24

x leasable area x leasable area

Assumptions $195.07 x leasable area $224.11 x leasable area

$195.07 x leasable area $224.11 x leasable area

53 Page 6 of 8

HR&A Advisors, Inc. DT TEST Summer_New Tier 1&2 RLV WITH Feesv1/D- Fee Analysis 7-24-14

RLV Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Appendix E Net Operating Income

Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studio 1-BR 2-BR Affordable 1-BR 2-BR Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) Parking Spaces Residential Retail Office Hotel For-Rent Residential- Market Rate 1 Studio Rent/Unit/Month 1-BR Rent/Unit/Month 2-BR Rent/Unit/Month Units Income/Year Other Income Gross Income Less: Vacancy & Collection Loss

With 50% Income Units Mixed-Use Retail/Residential Mixed-Use Retail/Residential Downtown Downtown 15,000 15,000 40,140 61,117 37 61 33 52 11 18 11 17 11 17 4 9 2 5 2 4 4,000 4,000 67 99 54 86 13 13 -

Effective Gross Income (EGI) Less: Operating Expenses (incl. reserve)

1

Net Operating Income

$ $

$2,150 $3,100 $4,000 1,221,000 61,050

$ $

$2,150 $3,100 $4,000 1,912,800 95,640

$ $

1,282,050 (64,103)

$ $

2,008,440 (100,422)

$ $

1,217,947 (231,000)

$ $

1,908,018 (364,000)

$

986,947

$

1,544,018

$ $ $ $

648 729 33,048 330

$ $ $ $

648 729 73,872 739

$ $

33,378 (1,669)

$ $

74,611 (3,731)

$ $

31,709 (28,000)

$ $

70,880 (63,000)

$

3,709

$

7,880

3

For-Rent Residential - Affordable (50% income) 1-BR Rent/Unit/Month 2-BR Rent/Unit/Month Units Income/Year Other Income Gross Income Less: Vacancy & Collection Loss Effective Gross Income (EGI) Less: Operating Expenses (inc. reserve)

1

Net Operating Income 2

Retail Average Rent/SF/Month (NNN) Gross Rental Income/Year Less: Vacancy & Collection Loss

$ $ $

5.25 252,000 (12,600)

$ $ $

5.25 252,000 (12,600)

Effective Gross Income (EGI) Less: Unreimbursed Operating Expenses Net Operating Income

$ $ $

239,400 (7,182) 232,218

$ $ $

239,400 (7,182) 232,218

Office2 Average Rent/SF/Month (NNN) Gross Rental Income/Year Parking Income4 Less: Vacancy & Collection Loss

$ $ $ $

-

$ $ $ $

-

$ $ $

-

$ $ $

-

Net Operating Income

$

-

$

-

Total Net Operating Income

$

Effective Gross Income (EGI) Less: Unreimbursed Operating Expenses Less: Parking Expense

1,222,874

$

1,784,116

1 Institute of Real Estate Management annual operating cost data for apartment buildings in Los Angeles County 2 Per HR&A review of market data and financial feasibility peer reviews of recent developments. 3 Per City's rent schedule and HR&A assumptions. 4 Assumes $200/month reserved (10% of supply); $165/month unreserved (85%); and $500/month daily use (5%).

54 Page 7 of 8

HR&A Advisors, Inc. DT TEST Summer_New Tier 1&2 RLV WITH Feesv1/E-Net Ops Income 7-24-14

RLV Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees Appendix F Residual Land Values With 50% Income Units Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studio 1-BR 2-BR Affordable 1-BR 2-BR Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) Project Value Residential-Market Rate Net Operating Income Cap Rate1 Value Residential-Affordable Net Operating Income Cap Rate1 Value Retail Net Operating Income Cap Rate1 Value Office Net Operating Income Cap Rate1 Value Total Project Value Residual Land Value Estimate Total Project Value Less: Developer Profit2 Less: Total Development Cost Residual Land Value Total Per SF Land Area

Mixed-Use Retail/Residential Downtown 15,000 40,140

Mixed-Use Retail/Residential Downtown 15,000 61,117

11 11 11

18 17 17

2 2 4,000 -

5 4 4,000 -

$

986,947

$

1,544,018

$

18,621,642

$

29,132,415

$

3,709

$

7,880

$

69,981

$

148,679

$

232,218

$

232,218

$

3,518,455

$

3,518,455

$

-

$

-

$ $

22,210,078

$ $

32,799,549

$ $ $

22,210,078 (2,776,260) (10,366,219)

$ $ $

32,799,549 (4,099,944) (21,890,934)

$ $

9,067,599 605

$ $

6,808,671 454

1

Per Real Estate Research Corp., Real Estate Report, 3rd Quarter 2013, Los Angeles Area data. 2 10-15% typical, per HR&A.

HR&A Advisors, Inc. DT TEST Summer_New Tier 1&2 RLV WITH Feesv1/F-Residual Values Page55 8 of 8 7-24-14

Return on Cost/Developer Profit Margin Results Summary - Tier 1 & 2 Development Prototypes (With Add'l Fees) Program Summary (see App. A)

Prototype Name Location LUCE Tier Permit Requirement # Parcels Bldg. Height (Feet) Stories (#) Site Area (SF) Gross Bldg. Area (SF) Floor Area Ratio (FAR) - Gross Area Floor Area Ratio (FAR) - Net Area Net Leasable Areas Residential (SF) Market Rate Units Affordable Units Total Units Retail (SF) Office (SF) Hotel (SF) Development Costs (see App. B&C&D) Land Costs Hard Costs Soft Costs Net Parks/Recreation Fee Net Affordable Housing Linkage Fee TIF Fee Other City Costs (see App. E) Other Soft Costs Financing Costs Total Development Cost per GSF Net Operating Income (NOI) (see App. E) Residential-Market Rate Effective Gross Income Less: Operating Expenses Net Operating Income Residential-Affordable Effective Gross Income Less: Operating Expenses Net Operating Income Retail Effective Gross Income Less: Operating Expenses Net Operating Income Office Effective Gross Income Less: Operating Expenses Net Operating Income Total Net Operating Income Project Component Values (see App. F) Residential-Market Rate NOI Cap Rate Value Residential-Affordable NOI Cap Rate Value Retail NOI Cap Rate Value Office NOI Cap Rate Value Total Project Value Developer Returns Developer Profit Total Project Value Less: Total Development Cost Profit % of Value Profit No Fees Change in Profit Feasible? Return on Total Development Cost NOI Total Development Cost Return on Cost Return on Cost No Fees Change in Return on Cost Feasible?

With 50% Income Units Mixed-Use Mixed-Use Retail/Residential Retail/Residential Downtown Downtown 1 2

39 3 15,000 40,140 2.68 2.25

60 6 15,000 61,117 4.07 3.46

29,750 33 4 37 4,000 -

48,000 52 9 61 4,000 -

$ $

9,230,901 7,833,926

$ $

7,204,595 16,939,390

$ $ $ $ $ $ $

159,132 370,267 1,145,645 869,101 19,608,972 $489

$ $ $ $ $ $ $

338,095 560,006 2,329,336 1,703,744 29,075,166 $476

$ $ $

1,217,947 (231,000) 986,947

$ $ $

1,908,018 (364,000) 1,544,018

$ $ $

31,709 (28,000) 3,709

$ $ $

70,880 (63,000) 7,880

$ $ $

239,400 (7,182) 232,218

$ $ $

239,400 (7,182) 232,218

$ $ $

-

$ $ $

-

$

1,222,874

$

1,784,116

$

986,947 5.30% 18,621,642

$

1,544,018 5.30% 29,132,415

3,709 5.30% 69,981

$

232,218 6.60% 3,518,455

$

6.40% -

$

$ $ $ $ $ $ $

$

$

$

7,880 5.30% 148,679 232,218 6.60% 3,518,455 6.40% -

$

$

22,210,078

$

32,799,549

$ $ $

22,210,078 (19,608,972) 2,601,106 11.7% 2,776,260 -6.3% Yes

$ $ $

32,799,549 (29,075,166) 3,724,383 11.4% 4,096,518 -9.1% Yes

$

$ $

1,222,874 (19,608,972) 6.24% 6.29% -0.06% Yes

$

$ $

1,784,116 (29,075,166) 6.14% 6.22% -0.08% Marginal

56

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HR&A Advisors, Inc. DT TEST Summer_New Tier 1&2 ROC WITH Feesv1/Summary 7-24-14

Appendix A Physical Parameters With 50% Income Units Prototype Name Location LUCE Area LUCE Tier Permit Requirement # Parcels Bldg. Height (Feet) Stories (#) Land Area (SF) 1 Gross Bldg. Area (SF) Floor Area Ratio (FAR)-Gross Area1 Floor Area Ratio (FAR)-Net Area Net Leasable Areas (SF)2 Residential3 Retail Office Hotel # Hotel Rooms Residential Unit Mix Office SF Retail SF Hotel SF Residential SF-Target Estimate Units (based on avg. unit size) Market Rate Studio 1-BR (SF) 2-BR (SF) Studio 1-BR (# units) 2-BR (#units) Subtotal (# units) Affordable 4 1-BR (SF) 2-BR (SF) 1-BR (# units) 2-BR (#units) Subtotal (# units) Total Units Parking Residential Market Rate (wtd. avg. per unit) 5 Affordable (avg. per unit) Subtotal Spaces (#) Retail Spaces/1,000 SF Subtotal Spaces (#) Office Spaces/1,000 SF Subtotal Spaces (#) Hotel Spaces/Guest Room Subtotal Spaces (#) Total Spaces Number Gross Area/Space (SF)-Surface Gross Area/Space (SF)-Subt. Total Parking Area (SF) # Surface # Subt. Levels Total Spaces/Levels 1-2 Spaces/Levels 3-5 Construction Period (months)

Mixed-Use Retail/Residential Downtown

Mixed-Use Retail/Residential Downtown 1

2

39 3 15,000 40,140 2.68 2.25 33,750 29,750 4,000 -

60 6 15,000 61,117 4.07 3.46 51,955 48,000 4,000 -

4,000 29,750 37

4,000 47,955 60

475 700 1,000 11 11 11 33

475 700 1,000 18 17 17 52

600 1,000 2 2 4 37

600 1,000 5 4 9 61

1.50 1.00 54

1.49 1.00 86

3.3 13

3.3 13

3.3 -

3.3 -

0.75 -

0.75 -

67 300 350 23,450 1.6 67 -

99 300 350 34,650 2.3 99 -

18

18

1

Per guidance provided by City Planning staff, based on recent development .applications; emerging Downtown Specific Plan information; and 2010 LUCE. 2 Per HR&A, based on net-to-gross floor area assumptions (90% for retail and 87% for for residential), and translation of total gross floor area to gross floor area per-floor, based on street wall for first three floors. 3 Based on unit mix and net leasable floor area by unit type, per City Planning/HR&A. 4 Assumes 10% of Tier 1 and 15% of Tier 2 units for 50% income households. 5 Assumes 1.0 spaces/studio; 1.5 spaces/1-BR unit; and 2.0 spaces/2-BR unit.

57

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HR&A Advisors, Inc. DT TEST Summer_New Tier 1&2 ROC WITH Feesv1/A-Program 7-24-14

Appendix A Physical Parameters (con'd)

Prototype Name Location Gross Floor Area by Story Site Area Total Gross Bldg. Area Total Floors Floor 1 Floor 2 Floor 3 Floor 4 Floor 5 Floor 6 Total Gross Floor Area FAR-Gross Area Net Floor Area by Story Floor 1 Floor 2 Floor 3 Floor 4 Floor 5 Floor 6 Total Net/Gross Floor Area Overall

With 50% Income Units Mixed-Use Mixed-Use Retail/Residential Retail/Residential Downtown Downtown

15,000 40,140 3 12,490 12,989 13,161 40,140

15,000 61,117 6 8,180 10,977 11,149 11,149 9,540 8,621 61,117

2.68

4.07

11,000 11,300 11,450 33,750 90.0%

7,205 9,550 9,700 9,700 8,300 7,500 51,955 85.0%

58

Page 3 of 8

HR&A Advisors, Inc. DT TEST Summer_New Tier 1&2 ROC WITH Feesv1/A-Program 7-24-14

Appendix B Development Costs1 With 50% Income Units Mixed-Use Mixed-Use Retail/Residential Retail/Residential Downtown Downtown 15,000 15,000 40,140 61,117

Prototype Name Location Land Area Gross Bldg. Area (SF) Net Leasable Areas (SF) Residential Retail Office Hotel Hotel Rooms Subterranean Parking (spaces) 1-2 Levels 3-5 Levels

29,750 4,000 67 67 -

48,000 4,000 99 99 -

$

9,230,901

$ $ $ $ $ $

V $126 225,000 100,000 5,057,621 140,000 -

$

$ $ $ $ $

2,010,000 301,305 7,833,926

$ $ $ $ $

2,970,000 651,515 16,939,390

$ $ $ $ $ $

159,132 370,267 470,036

$ $ $ $ $ $

338,095 560,006 1,016,363

$ $ $ $ $ $ $ $

223,125 12,000 78,339 78,339 235,018 48,788 1,675,044

$ $ $ $ $ $ $ $

360,000 12,000 169,394 169,394 508,182 94,003 3,227,437

Subtotal Hard + Softs Costs

$

9,508,970

$

20,166,827

Financing Costs Loan Term (months) Average Loan Balance Construction Loan Interest Rate Construction Loan Interest Construction Loan Fees Capitalized Project Value Permanent Loan Percent x Value Permanent Loan Fees Subtotal Financing Costs

$ $

509,918 142,635

$ $

1,081,446 302,502

# $ $

216,548 869,101

$-

$ $

319,796 1,703,744

Total Development Cost per GSF

# $ $

19,608,972 488.52

$-

$ $

29,075,166 475.73

Land Cost Hard Cost Construction Type Building Construction/GSF 2 Demo/On-Site Improvements Off-Site Improvements Building Core & Shell Retail Tenant Improvements Office Tenant Improvements Hotel FF&E Subterranean Parking Surface 1-2 Levels 3-4 Levels Contingency Subtotal Hard Costs Soft Costs Net Parks/Recreation Fee Net Affordable Housing Linkage Fee Net TIF Fee Other City Permits & Fees Misc. Community Benefits Cost A&E/Other Professionals Marketing/Leasing Commissions Residential Retail/Office Legal & Accounting Taxes & Insurance Pre-Opening Expenses Developer Fee Contingency Subtotal Soft Costs

# # # #

$

7,204,595

$ $ $ $

IIIb $210 225,000 100,000 12,852,875 140,000 -

1

Per HR&A review of market data and financial feasibility peer reviews of recent developments. 80% x calculated values, per Marshall & Swift Commercial Cost Estimator, 3rd Quarter, 2013; HR&A Advisors, Inc., to account for certain hard costs and soft costs accounted for separately.

2

Page59 4 of 8

HR&A Advisors, Inc. DT TEST Summer_New Tier 1&2 ROC WITH Feesv1/B-Dev Costs 7-24-14

Appendix C Proposed New Fees, Existing City Fees & Permit Costs With 50% Income Units Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studios 1-BR 2-BR Affordable 1-BR 2-BR Residential (Net Leasable SF) Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) New Affordable Hsg. Linkage Fee1 New Parks Fee1 TIF Fees2 Planning Permits3 Development Review Development Agreement Multiple Permit Fee Architectural Review Board Coastal Zone Concept Review CEQA Categorical Exemption Negative Declaration EIR Subtotal Other Requirements3 Mitigation Fee on Office Space Recreational Unit Tax Arts Fee New Residential/Commercial Tenant Improvements Child Care Fee Market Rate Residential Retail Office Hotel School Facilities Fee Residential Commercial Subtotal Bldg./Construction Permits 3 Plan Check Residential Apartment Commercial 10K SF/4 stories Mechanical Electrical Plumbing Building Permits/Inspections Residential Apartment Commercial 1-Story Commercial 4+ stories Tenant Improvements 10K SF Geotechnical Reports Subtotal Utility Fees4 Water Meter 5 Fireline Meter5 Wastewater Capital Facilities Studio/1-BR Units 2-BR Units Commercial Subtotal TOTAL per GSF

Mixed-Use Retail/Residential Downtown 15,000 40,140

Mixed-Use Retail/Residential Downtown 15,000 61,117

11 11 11

18 17 17

2 2 29,750 4,000 -

5 4 48,000 4,000 -

$ $ $

159,132 -

$ $ $

338,095 -

$ $ $ $ $

1,684 1,684 -

$ $ $ $ $

15,568 1,684 1,684 -

$ $ $ $

14,622 17,990

$ $ $ $

14,622 33,558

$ $

7,400

$ $

12,200

$ $

80,280 2,000

$ $

122,234 2,000

$ $ $ $

4,405 18,120 -

$ $ $ $

6,941 18,120 -

$ $ $

95,200 2,040 209,445

$ $ $

153,600 2,040 317,135

$

27,153 $5,116 $727 $727 $727

$

$ $ $ $ $ $ $

30,452 3,113 1,396 69,411

$ $ $ $ $ $ $

49,133 3,113 1,396 104,749

$ $

3,837 18,195

$ $

3,837 18,195

$ $ $ $

28,032 20,241 3,116 73,421

$ $ $ $

46,720 32,697 3,116 104,565

$

370,267 $9.22

$

560,006 $9.16

$

$

43,810 $5,116 $727 $727 $727

1

See Appendix D for calculation details. Per new Ordinance No. 2420 (CCS), adopted March 12, 2013. Assumes TIF credit for existing retail on 50% of site area. 3 Per City staff/nexus study recommendations. Assumes fee credits for existing retail on 50% ofsite area. 4 Per FY 2013-14 City fee schedules. 5 Includes meter and capital facilities charges. 2

60

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HR&A Advisors, Inc. DT TEST Summer_New Tier 1&2 ROC WITH Feesv1/C-City Cost Detail 7-24-14

Appendix D Proposed TIF/New Parks/Recreation and Afforable Housing Linkage Fees With 50% Income Units Mixed-Use Retail/Residential Downtown 1 15,000 40,140 37 33 11 11 11 4 2 2 29,750 4,000 -

Prototype Name Location

LUCE Tier Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studios 1-BR 2-BR Affordable 1-BR 2-BR Residential (Net Leasable SF) Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) Floor Area Attributable to Tier 2 Office Residential (units) Total Units

Mixed-Use Retail/Residential Downtown 2 15,000 61,117 61 52 18 17 17 9 5 4 48,000 4,000 -

-

24

Studios 1-BR 2-BR Affordable Units 1-BR 2-BR

5 5 5 -

Assumed Existing Retail Floor Area Fee Factor TIF Fees2

15,000

$2,600 $3,300

Subtotal Less: Fee on Existing SF Area 1 Less: Fee on Existing SF Area 2 NET TIF Fee

15,000

                                1.14

1.14

   Market Rate‐Area 1    Market Rate‐Area 2    Affordable    Retail‐Area 1    Retail‐Area 2    Office‐Area 1    Office‐Area 2    Hotel‐Area 1 & 2

5 4

per unit per unit $0.00 per unit $21.00 x leasable area $30.10 x leasable area $9.70 x leasable area $10.80 x leasable area $3.60 x leasable area

$ $ $ $ $ $ $ $

$                   169,800

$                       226,116

$21.00 $30.10

$

$

x leasable area x leasable area

85,800 84,000 (315,000)

$ $ $ $ $ $ $ $

142,116 84,000 (315,000)

$

-

$

-

$ $ $ $ $ $

91,047 73,318 5,980 -

$ $ $ $ $ $

192,026 151,301 5,980 -

$

170,345

$

349,308

$ $ $

(11,213) 159,132

$ $ $

(11,213) 338,095

$ $ $

35,113 35,113

$ $ $

35,113 35,113

$ $ $

(65,836) -

$ $ $

(65,836) -

$ $ $

159,132 3.96 20,584,772 0.8%

$ $ $

338,095 5.53 30,485,115 1.1%

Proposed Parks/Recreation Fee 25% x Maximum Fees Assumptions Market Rate Housing 0-1 BRs 2+ BRs Affordable Housing Retail Office Hotel Subtotal Fee Less: Fee on Existing SF Retail Office Net Fee

25% 25% 25% 25% 25% 25%

25% 25%

$16,554 per unit $26,661 per unit $0 per unit $5.98 x leasable area $9.24 x leasable area $12.52 x leasable area

$5.98 $9.24

x leasable area x leasable area

Proposed Affordable Housing Linkage Fee 4.5% x Maximum Fees 4.5% Assumptions Retail 4.5% $195.07 x leasable area Office 4.5% $224.11 x leasable area Subtotal Fee Less: Fee on Existing SF Retail 4.5% $195.07 x leasable area Office 4.5% $224.11 x leasable area Net Fee Combined New Fees Fees Per GSF Total Development Cost Fee as % Dev Cost

61 Page 6 of 8

HR&A Advisors, Inc. DT TEST Summer_New Tier 1&2 ROC WITH Feesv1/D- Fee Analysis 7-24-14

Appendix E Net Operating Income

Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studio 1-BR 2-BR Affordable 1-BR 2-BR Retail (Net Leasable SF) Office (Net Leasable SF) Hotel (Net Leasable SF) Parking Spaces Residential Retail Office Hotel For-Rent Residential- Market Rate 1 Studio Rent/Unit/Month 1-BR Rent/Unit/Month 2-BR Rent/Unit/Month Units Income/Year Other Income Gross Income Less: Vacancy & Collection Loss

With 50% Income Units Mixed-Use Mixed-Use Retail/Residential Retail/Residential Downtown Downtown 15,000 15,000 40,140 61,117 37 61 33 52 11 18 11 17 11 17 4 9 2 5 2 4 4,000 4,000 67 99 54 86 13 13 -

$ $

$2,150 $3,100 $4,000 1,221,000 61,050

$ $

$2,150 $3,100 $4,000 1,912,800 95,640

$ $

1,282,050 (64,103)

$ $

2,008,440 (100,422)

$ $

1,217,947 (231,000)

$ $

1,908,018 (364,000)

$

986,947

$

1,544,018

$ $ $ $

648 729 33,048 330

$ $ $ $

648 729 73,872 739

$ $

33,378 (1,669)

$ $

74,611 (3,731)

$ $

31,709 (28,000)

$ $

70,880 (63,000)

Net Operating Income

$

3,709

$

7,880

Retail2 Average Rent/SF/Month (NNN) Gross Rental Income/Year Less: Vacancy & Collection Loss

$ $ $

5.25 252,000 (12,600)

$ $ $

5.25 252,000 (12,600)

Effective Gross Income (EGI) Less: Unreimbursed Operating Expenses Net Operating Income

$ $ $

239,400 (7,182) 232,218

$ $ $

239,400 (7,182) 232,218

Office2 Average Rent/SF/Month (NNN) Gross Rental Income/Year Parking Income4 Less: Vacancy & Collection Loss

$ $ $ $

-

$ $ $ $

-

$ $ $

-

$ $ $

-

Net Operating Income

$

-

$

-

Total Net Operating Income

$

Effective Gross Income (EGI) Less: Operating Expenses (incl. reserve)

1

Net Operating Income 3

For-Rent Residential - Affordable (50% income) 1-BR Rent/Unit/Month 2-BR Rent/Unit/Month Units Income/Year Other Income Gross Income Less: Vacancy & Collection Loss Effective Gross Income (EGI) Less: Operating Expenses (inc. reserve)

1

Effective Gross Income (EGI) Less: Unreimbursed Operating Expenses Less: Parking Expense

1,222,874

$

1,784,116

1 Institute of Real Estate Management annual operating cost data for apartment buildings in Los Angeles County 2 Per HR&A review of market data and financial feasibility peer reviews of recent developments. 3 Per City's rent schedule and HR&A assumptions. 4 Assumes $200/month reserved (10% of supply); $165/month unreserved (85%); and $500/month daily use (5%).

62 Page 7 of 8

HR&A Advisors, Inc. DT TEST Summer_New Tier 1&2 ROC WITH Feesv1/E-Net Ops Income 7-24-14

Appendix F Return on Cost/Developer Profit Margin With 50% Income Units

Prototype Name Location Land Area Gross Bldg. Area (SF) Residential Units Market Rate Studio 1-BR 2-BR Affordable 1-BR 2-BR Retail (Net Leasable SF) Office (Net Leasable SF) Project Value Residential-Market Rate Net Operating Income 1 Cap Rate Value Residential-Affordable Net Operating Income 1 Cap Rate Value Retail Net Operating Income 1 Cap Rate Value Office Net Operating Income 1 Cap Rate Value Hotel Net Operating Income 1 Cap Rate Value Total Project Value Developer Returns Developer Profit Total Project Value Less: Total Development Cost Profit % of Value Return on Total Development Cost NOI Total Development Cost Return on Cost

Mixed-Use Retail/Residential Downtown 15,000 40,140

Mixed-Use Retail/Residential Downtown 15,000 61,117

11 11 11

18 17 17

2 2 4,000 -

5 4 4,000 -

$

986,947

$

1,544,018

$

18,621,642

$

29,132,415

$

3,709

$

7,880

$

69,981

$

148,679

$

232,218

$

232,218

$

3,518,455

$

3,518,455

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

22,210,078

$

32,799,549

$ $ $

22,210,078 (19,608,972) 2,601,106 11.7%

$ $ $

32,799,549 (29,075,166) 3,724,383 11.4%

$ $

1,222,874 (19,608,972) 6.24%

$ $

1,784,116 (29,075,166) 6.14%

1

Per Real Estate Research Corp., Real Estate Report, 3rd Quarter 2013, Los Angeles Area data. HR&A Advisors, Inc. DT TEST Summer_New Tier 1&2 ROC WITH Feesv1/F-Return on Cost Page63 8 of 8 7-24-14

City Council Meeting: September 23, 2014

Santa Monica, California

ORDINANCE NUMBER _________ (CCS) (City Council Series)

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA ADDING CHAPTER 9.74 TO THE SANTA MONICA MUNICIPAL CODE ESTABLISHING THE AFFORDABLE HOUSING COMMERCIAL LINKAGE FEE PROGRAM, THE AFFORDABLE HOUSING COMMERCIAL LINKAGE FEE, AND ESTABLISHING AN ADJUSTMENT AND WAIVER PROVISION

WHEREAS, new commercial development (creative office space, hotel, retail and entertainment, medical, industrial/light manufacturing, institutional, and hospitals) creates a variety of new jobs with varied degrees of compensation for workers in commercial developments; and WHEREAS, the addition of new workers in these new commercial developments generates housing demands for households at extremely low, very low, low, and moderate incomes; and WHEREAS,

due

to

housing

and

market

conditions,

new

market-rate

development projects in the City have provided a disproportionate quantity of housing units that are not affordable to all income groups creating an unbalanced housing stock; and

1

WHEREAS, funds for construction, expansion or improvement of affordable housing, including Federal and State housing finance and subsidy programs, are not available to accommodate the needs caused by development projects which will promote an inadequate supply of affordable housing stock within the City; and WHEREAS, there is a low vacancy rate for housing affordable to persons of extremely low, very low, low, and moderate income households; and WHEREAS, Los Angeles County is the least affordable real estate market in the country; and WHEREAS, the City’s existing rental housing stock is quickly becoming unaffordable to very low and low income households; and WHEREAS, due to the Costa-Hawkins Act, 63.3% of the controlled rental units for which the Santa Monica Rent Control Board has registered rents have rented at market rates; and WHEREAS, since 1999, the median monthly rents for these units have increased from $800 to $1,250 for studio/efficiency units, from $1000 to $1900 for one-bedroom units, from $1400 to $2525 for two-bedroom units and from $1800 to $3201 for three or more bedroom units; and WHEREAS, due to these factors, workers of very low, low, and moderate income are experiencing increasing difficulty in locating and maintaining adequate, safe, and sanitary affordable housing within the City or even near the City; and

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WHEREAS, the failure to provide adequate affordable housing for lower-wage workers can force these workers to live in less than adequate housing within the City, pay a significantly disproportionate share of their incomes to live in adequate housing within the City, or commute ever-increasing distances to their jobs from housing located outside the City; and WHEREAS, the lack of affordable housing has detrimental impacts on traffic, transit, and related air quality impacts and the demands placed on the regional transportation infrastructure; and WHEREAS, commercial uses in the City benefit from the availability of housing close to their employees; and WHEREAS, a Commercial (Non-Residential) Nexus Study & Linkage Fee Analysis was prepared by Rosenow Spevacek Group, Inc. in July 2013 to analyze the relationship between commercial development, job creation, and the demand for affordable housing (“Nexus Study”); and WHEREAS, the Nexus Study demonstrates the reasonable relationship between the purpose of the affordable housing fee, the fee amount, the revenue generated, and the impacts of commercial development that the proposed use of that revenue is intended to address; and WHEREAS, more specifically, the Nexus Study documents the linkage between new and expanded commercial development, the net number of new employees and

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employee households generated by businesses occupying these land use buildings, and the housing demands of these households; and WHEREAS; as detailed, new housing affordable to persons identified in the Nexus Study is not now being added to the supply in sufficient quantity to meet the needs of the new employee households associated with new or expanded commercial development; and WHEREAS, the Nexus Study quantifies the cost mitigation associated with developing affordable housing units based on the identified need resulting from employees generated by new commercial development; and WHEREAS, the City Council is imposing the fee established by this Ordinance in order to partially close the this gap by using the fee to provide for increased affordable housing; and WHEREAS, the Santa Monica Municipal Code does not currently establish an adequate mechanism to account for the impact that commercial development has on increasing the need for affordable housing; and WHEREAS, requiring commercial developers to assist in the production of affordable housing is also consistent with the City’s long-standing commitment to achieve and maintain a suitable living environment including decent housing for all economic levels; and

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WHEREAS, this municipal commitment conforms with State and Federal policies and is an important goal of the City’s current Housing Element and its Consolidated Plan; and WHEREAS, Objective 2.C of the City’s 2013-2021 Housing Element provides that the City should develop new affordable housing financial programs, in part, through the adoption of new local impact fees, including commercial development impact fees, based on the recommendations of appropriate nexus studies; and WHEREAS, this program will benefit the City as a whole since each development which contributes to affordable housing through the payment of this fee assists in augmenting the City’s housing mix, helps to increase the supply of housing for all economic segments of the community, and addresses the affordable housing need generated by the development, thereby supporting a balanced community which is beneficial to the public health, safety, and welfare of the City.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES HEREBY ORDAIN AS FOLLOWS: SECTION 1. Santa Monica Municipal Code Chapter 9.74 is hereby added to the Santa Monica Municipal Code to read as follows:

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Chapter 9.74 Affordable Housing Commercial Linkage Fee Program 9.74.010 Purpose and Findings. (a)

The purpose of this Chapter is to facilitate the development

and availability of housing affordable to a broad range of households with varying income levels within the City. As detailed in the findings supporting the ordinance codified in this Chapter, the requirements of this Chapter are based on a number of factors including, but not limited to, the City’s long-standing commitment to economic diversity; the serious need for affordable housing as reflected in local, State, and Federal housing regulations and policies; the demand for affordable housing created by commercial development; and the impact that the lack of affordable housing production has on the health, safety, and welfare of the City’s residents including its impacts on traffic, transit and related air quality impacts, and the demands placed on the regional transportation infrastructure. Imposing a fee that is reasonably related to the burdens created by new commercial development on the City’s need for affordable housing will enable the City to fund development of affordable housing units that will contribute to addressing these impacts and fulfilling these goals. (b)

The City has prepared a Commercial Nexus Study and

Linkage Fee Analysis. It shows, and the City Council finds that there is a reasonable relationship between the purpose for which the fees established by this Ordinance are to be used and the type of development 6

projects on which the fees are imposed, and between the amount of the fees and the cost of the affordable housing units or portion of the units attributable to the development on which the fees are imposed. (c)

It is the intent of the City Council that the fee required by this

Chapter shall be supplementary to any conditions imposed upon a development project pursuant to other provisions of the Municipal Code, the City Charter, the Subdivision Map Act, the California Environmental Quality Act, other state and local laws, which may authorize the imposition of project specific conditions on development. 9.74.020 Applicability of Chapter. (a)

The regulations, requirements and provisions of this Chapter

and Council resolutions adopted pursuant hereto shall apply to any commercial portion of any new Project for which a development application was determined complete or an application for change(s) in existing use(s) was made on or after the effective date of this Ordinance. Any project subject to the provisions of this Chapter shall not be required to comply with Part 9.04.10.12 of the Santa Monica Municipal Code, Project Mitigation Measures. (b)

Notwithstanding the above, the following projects or portions of

projects as specified thereof shall not be subject to the requirements of this Chapter: (1) places of worship; (2) City projects;

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(3) day care centers; (4) private K-12 schools; (5) commercial portions of multi-family rental housing projects developed by a nonprofit housing provider if the developer is receiving financial assistance through a public agency, so long as the multi-family rental housing project is an affordable housing project meeting the requirements of Santa Monica Municipal Code Section 9.04.02.030.025 and the project’s affordable housing obligations will be secured by a regulatory agreement, memorandum of agreement, or recorded covenant with a public agency for a minimum period of fifty-five years; (6) re-occupancy of square footage in an existing building or structure if there is no change of use; (7) square footage used for outdoor dining in the public right of way. If a development is exempt from the fee at initial construction, but later converts to a commercial development subject to this Ordinance, the converted square footage will be deemed net new commercial square footage and the housing impact fee shall be paid prior to final approval of a building permit. 9.74.030 Definitions. For the purpose of this Chapter, the following terms shall be defined as follows: (a)

"City Projects" shall mean City public works projects and City

community facilities (e.g. libraries, public parking structures, recycling centers, and community centers), not including public/private partnerships.

8

(b)

"Nexus Study" shall mean the Commercial Nexus Study and

Linkage Fee Analysis prepared by Rosenow Spevacek Group, Inc., dated July 2013. (c)

“Project” shall mean any development having a commercial

use component and gross new or additional floor area of one thousand square feet or more or that changes an existing use to a different use that increases the demand for affordable housing. Gross floor area for the purposes of this definition shall be the same as Section 9.04.02.030.315, or any successor legislation, but shall exclude parking area. (d)

“Affordable Housing Commercial Linkage Fee” shall mean a

fee paid to the City by an applicant pursuant to Section 9.74.040 of this Chapter in connection with approval of a project, to contribute to the creation of affordable housing production or preservation to offset additional need for affordable housing generated by new commercial development. 9.74.040 Affordable Housing Mitigation Requirement. Except as provided in Section 9.74.050, the developer of a Project shall pay an affordable housing commercial linkage fee in accordance with the following: (a)

Affordable Housing Commercial Linkage Fee. Fees shall be

computed as follows:

9

1.

All non-residential portions of a Project shall pay the

following based on the gross square footage of each use included in the proposed Project: (A)

Retail: $9.75 square foot.

(B)

Office: $11.21 per square foot.

(C)

Hotel/Lodging: $3.07 per square foot.

(D)

Hospital: $6.15 per square foot.

(E)

Industrial: $7.53 per square foot.

(F)

Institutional: $10.23 per square foot.

(G)

Creative Office: $9.59 per square foot.

(H)

Medical Office: $6.89 per square foot.

2.

The land use categories identified in subsections (A) – (H),

above, shall have the following meanings: (A)

Retail shall include: animal kennels and veterinary hospitals,

auto repair, car wash, retail and wholesale construction-related materials, nurseries and garden centers, entertainment and recreational facilities, gas stations, art galleries, nightclubs and bars, Personal services, Postsecondary educational facility, private studio, restaurants – fast food and cafes, restaurants – sit down, retail durable goods, retail food and markets, retail mixed, and retail non-food. (B)

Office shall include: financial institutions and office, and

general office.

10

(C)

Hotel/Lodging shall include: hotels, motels and other

overnight accommodations. (D)

Hospital shall include: full service hospitals.

(E)

Industrial shall include: surface or structured auto inventory

storage, City maintenance facilities and bus yards, heavy industrial and manufacturing, light industrial, utilities, warehouse and self-storage, and wholesale distribution and shipping. (F)

Institutional shall include: educational and cultural facilities.

(G)

Creative Office shall include: offices, production spaces and

work spaces of establishments that are in the business of the development of creative property, including but not limited to, advertising, architectural services, broadcasting, communications, computer software design, entertainment, engineering, graphic design, interior design, internet content, landscape design, and similar uses. (H)

Medical Office shall include: Medical office, including

medical clinics, and offices for medical professionals. 3.

The amount of legally permitted non-residential square

footage to be demolished in an existing building or structure, or to be removed from an outdoor area used as part of a service station or for auto dealer sales, display and inventory storage, as a part of a Project shall be a credit in the calculation of the Affordable Housing Commercial Linkage Fee. Outdoor area used as part of a gas station shall not include setbacks, landscaping, parking and other paved areas used solely for

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access and circulation. Credit shall be applied on a per square foot basis according to per square foot fee assigned to the type of commercial use that existed on the site prior to the new Project application submittal. (b)

Timing of Fee Payment.

1.

The Project applicant shall pay fees according to the

schedule of fees in place on the date the fees are paid, except that the applicant for a vesting tentative map for a development project shall pay the fees in effect on the date the application for the vesting tentative map is deemed complete, as automatically adjusted. 2.

No building permit for any Project shall be issued unless the

fees have been paid. 9.74.050 Fee Adjustments and Waivers. (a)

A developer of any Project subject to the fee described in

Section 9.73.040 (a) may request that the requirements of this Chapter be adjusted or waived based on a showing that applying the requirements of this Chapter would effectuate an unconstitutional taking of property or otherwise have an unconstitutional application to the property. (b) To receive an adjustment or waiver, the applicant must submit an application to the City Manager or her/his designee, at the time the applicant files a discretionary project application, or if no such application is required, a building permit application. The applicant shall bear the burden of presenting substantial evidence to support the request and set

12

forth in detail the factual and legal basis for the claim, including all supporting technical documentation. (c)

The City Manager or her/his designee, shall render a written

decision within ninety days after a complete application is filed. The City Manager’s or designee’s decision may be appealed to the City Council if such appeal is filed within fourteen consecutive calendar days from the date that the decision is made in the manner provided in Part 9.04.20.24, Sections 9.04.20.24.010 through 9.04.20.24.050 of this Code or any successor thereto. (d)

If the City Manager or her/his designee, or City Council on

appeal, upon legal advice provided by or at the behest of the City Attorney, determines that applying the requirements of this Chapter would effectuate an unconstitutional taking of property or otherwise have an unconstitutional application to the property, the affordable housing fee requirements shall be adjusted or waived to reduce the obligations under this Chapter to the extent necessary to avoid an unconstitutional result. If the City Manager or her/his designee, or City Council on appeal, determines that no violation of the United States or California Constitutions would occur through application of this Chapter, the requirements of this Chapter remain fully applicable (f)

If an adjustment or waiver is granted, any change in use

from the approved project shall invalidate the adjustment or waiver.

13

9.74.060 Fee Revenue Account. Pursuant to Government Code Section 66006, the Affordable Housing Commercial Linkage Fee Reserve Account is hereby established. The fees paid to the City pursuant to the provisions of this Chapter shall be deposited into the Affordable Housing Commercial Linkage Fee Reserve Account and used solely for the purpose described in this Chapter. All monies deposited into the Reserve Account shall be held separate and apart from other City funds. All interest or other earnings on the unexpended balance in the Reserve Account shall be credited to the Reserve Account. 9.74.070 Distribution of Affordable Housing Commercial Linkage Fee Funds. All monies and interest earnings in the Affordable Housing Commercial Linkage Fee Reserve Account shall be expended solely on the production or preservation of affordable housing to help fulfill the need identified in the Nexus Study to increase the supply of housing affordable to worker households of extremely low, very low, low, or moderate income, or such other report as may be prepared from time to time to document the reasonable fair share of the costs to mitigate the increased need for affordable housing that is created by new commercial development. Such expenditures may include, but are not necessarily limited to the following: (a)

Reimbursement for all direct and indirect costs incurred by

the City to fund the production of affordable housing pursuant to this 14

Chapter, including but not limited to, the cost of land and right-of-way acquisition, planning, legal advice, engineering, design, construction, construction management, materials and equipment, or issuing loans to nonprofit affordable housing developers to acquire land and/or to rehabilitate existing buildings or build new developments to increase the supply of affordable housing units. (b)

Costs of issuance or debt service associated with bonds,

notes or other security instruments issued to fund affordable housing needs identified. (c)

Reimbursement for administrative costs incurred by the City

in establishing or maintaining the Affordable Housing Commercial Linkage Fee Reserve Account required by this Chapter, including but not limited to the cost of studies to establish the requisite nexus between the fee amount and the use of fee proceeds and yearly accounting and reports. No portion of the Affordable Housing Commercial Linkage Fee Reserve Account may be diverted to other purposes by way of loan or otherwise. 9.74.080 Periodic Review and Adjustment of Affordable Housing Commercial Linkage Fees. To account for inflation in affordable housing development costs, the fee imposed by this ordinance shall be adjusted automatically on July 1 of each fiscal year, beginning on July 1, 2015, by a percentage equal to the appropriate Construction Cost Index as published by Engineering

15

News Record, or its successor publication, for the preceding twelve (12) months. 9.74.090 Fee Refunds. (a)

If an affordable housing commercial linkage fee is collected

on a Project and the permit for that Project later expires, is vacated or voided before commencement of construction, the developer shall, upon request, be entitled to a refund of the unexpended housing commercial linkage fee paid, less a portion of the fee sufficient to cover costs of collection, accounting for and administration of the fee paid. Any request for a refund shall be submitted in writing to the Planning and Community Development Director within one year of the date that the permit expires or is vacated or voided. Failure to timely submit a request for refund shall constitute a waiver of any right to a refund. (b)

Fees collected pursuant to this Chapter which remain

unexpended or uncommitted for five or more fiscal years after deposit into the Affordable Housing Commercial Linkage Fee Reserve Account shall be accounted for or may be refunded as provided by state law. 9.74.100 Fee revision by resolution. The amount of the affordable housing commercial linkage fee and the formula for the automatic annual adjustment established by this Chapter may be reviewed and revised periodically by resolution of the City Council. This Chapter shall be considered enabling and directive in this regard.

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9.74.110 Regulations. The City Manager, or her/his designee, is authorized to adopt written administrative regulations or guidelines that are consistent with and that further the terms and requirements set forth within this Chapter. SECTION 2. This Ordinance shall apply to all development applications meeting the criteria for applicability as defined herein determined complete after the effective date of this Ordinance. SECTION 3. The Council finds that the adoption of this ordinance is not a project pursuant to CEQA Guideline section 15378(b)(4), which excludes from the definition of Project "the creation of government funding mechanisms or other government fiscal activities, which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment."

Alternatively, the

proposed ordinance is exempt from the provisions of the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3) in that it can been seen with certainty that the proposed ordinance does not have the potential to significantly impact the environment, since the proposed ordinance amendment is a fee that will be levied on projects that will be evaluated in compliance with CEQA on their own merits. SECTION 4. Any provision of the Santa Monica Municipal Code or appendices thereto inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to that extent necessary to effect the provisions of this Ordinance.

17

SECTION 5. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed this Ordinance and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any portion of the ordinance would be subsequently declared invalid or unconstitutional. SECTION 6. The Mayor shall sign and the City Clerk shall attest to the passage of this Ordinance. The City Clerk shall cause the same to be published once in the official newspaper within 15 days after its adoption. effective 30 days from its adoption.

APPROVED AS TO FORM:

_________________________ MARSHA JONES MOUTRIE City Attorney

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This Ordinance shall become

City Council Meeting: September 23, 2014

Santa Monica, California

ORDINANCE NUMBER _________ (CCS) (City Council Series)

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA ADDING CHAPTER 9.75 TO THE SANTA MONICA MUNICIPAL CODE ESTABLISHING THE PARKS AND RECREATION DEVELOPMENT IMPACT FEE PROGRAM, THE PARKS AND RECREATION DEVELOPMENT IMPACT FEES, AND ESTABLISHING AN ADJUSTMENT AND WAIVER PROVISION WHEREAS, approximately 89,000 people live in the City, on weekdays there are about 300,000 present in the City, and on weekends and holidays the number of persons in the City soars to between 500,000 and 1 million; and WHEREAS, new development will continue to occur in the City of Santa Monica; and WHEREAS, increased population due to this new development will place additional burdens on the city-wide community and recreation facilities; and WHEREAS, to maintain a similar level of service to the population, new facilities are required; and WHEREAS, the City has adopted an Open Space Element of its General Plan and a Parks and Recreation Master Plan (Master Plan) to establish a long-range vision for the future development of parks and open space; and

1

WHEREAS, the Master Plan states that everyone who lives, works in, and visits the City benefits from the parks, beach, recreational facilities, and associated amenities, and funding should come from all parks and recreational facilities users to the extent possible; and WHEREAS, objectives of the Open Space Element include developing, expanding and maintaining a diversified and balanced system of high-quality open space; and WHEREAS, the Open Space Element calls for heightening the sense of nature in the City, including maintaining and expanding the community forest and promoting biodiversity in and expanding city gardens; and WHEREAS, Open Space Element Policy 1.4 states that opportunities should be provided for the enjoyment of open space within every Santa Monica neighborhood; and WHEREAS, Open Space Element Policy 9.1 calls for increasing physical access to parks and open spaces, particularly for youth and persons with disabilities; and WHEREAS, Chapter 3.5 of the Land Use and Circulation Element (“LUCE”) complements the objectives, goals, and policies of the Open Space Element and Master Plan; and

2

WHEREAS, LUCE Goal CE1 calls for the expansion of the amount, quality, diversity, interconnectivity of parks, open spaces and recreational facilities throughout the City; and WHEREAS, these planning documents reflect the City’s commitment to parks and recreation for its citizens; and WHEREAS, to implement these policies, the City intends to require every person who develops or redevelops land in the City to mitigate the impacts of such development or redevelopment by paying fees that will be used to develop parks and recreation facilities; and WHEREAS, a number of existing municipal code sections imposing fees on development for parks improvements are antiquated and no longer reflect the needs of the community; and WHEREAS, a Parks and Recreation Development Impact Fee Study was prepared by Economic and Planning Systems, Inc. in August 2013 to analyze the relationship between new development in the City, the increased demand for and use of parks and recreation facilities, and the amount of fee revenue necessary to fund new parks and recreation facilities in response to the increased demand (“Nexus Study”); and WHEREAS, the Nexus Study used the standard-based method to calculate the fees to maintain the current level of service, i.e., the ratio of the value of existing facilities divided by the current population to arrive at the per capita cost; and

3

WHEREAS, under this approach, the current levels for the provision of parks and recreation facilities and parkland by the City were used as the basis for determining the fair share contribution of new development; and WHEREAS, the maximum, supportable parks and recreation fee schedule was based on a parks and recreation capital facilities cost estimate derived by applying the proportionate increase in service population associated with new development to the existing service standard/value of parks and recreation capital facilities; and WHEREAS, these fees will be used for a broad range of parks and recreation facilities investments, including the acquisition of land for parks, the improvement of existing and new parkland, and development of new parks and recreation facilities; and WHEREAS, the amount of fees collected pursuant to this Ordinance is limited to the cost of these public facilities attributable to new development and the amount of these fees shall not include the cost of facilities attributable to demand generated by existing development; and WHEREAS, other sources of City revenue, including tax revenue will be used for many public purposes and will not be sufficient to offset the burdens on parks and recreation facilities created by new development. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES HEREBY ORDAIN AS FOLLOWS: SECTION 1. Chapter 9.75 is hereby added to the Santa Monica Municipal Code to read as follows:

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Chapter 9.75

Parks and Recreation Development Impact Fee Program 9.75.010 Findings and Purpose. (a)

The purpose of this Chapter is to implement the goals,

objectives and policies of the City of Santa Monica’s Open Space Element and Parks and Recreation Master Plan when new development is constructed within the City limits. Imposing a fee that is reasonably related to the burdens on and increased demand for the City’s parks and recreation facilities created by new development will assist the City in constructing the required capital improvements to support the fulfillment of these goals, objectives and policies. (b)

The City has prepared a Parks and Recreation Development

Impact Fee Nexus Study that demonstrates, and the City Council finds, that there is a reasonable relationship between the purpose for which the fees established by this Ordinance are to be used and the type of development projects on which the fees are imposed, and between the amount of the fees and the cost of the parks and recreation facilities or portion of the facilities attributable to the development on which the fees are imposed. (c)

It is the intent of the City Council that the fee required by this

Chapter shall be supplementary to any conditions imposed upon a development project pursuant to other provisions of the Municipal Code, the City Charter, the Subdivision Map Act, the California Environmental

5

Quality Act, and other state and local laws which may authorize the imposition of project specific conditions on development. 9.75.020 Applicability of Chapter. (a)

The regulations, requirements and provisions of this Chapter and

Council resolutions adopted pursuant hereto shall apply to all new Projects for which a development application was determined complete or an application for change(s) in existing use(s) was made on or after the effective date of this Ordinance. Any project subject to the provisions of this Chapter shall not be required to comply with Chapter 6.80 or Part 9.04.10.12 of the Santa Monica Municipal Code, Project Mitigation Measures. (b)

Notwithstanding the above, the following projects, square footage

and affordable residential units shall not be subject to the requirements of this Chapter: (1) places of worship; (2) City projects; (3) day care centers; (4) private K-12 schools; (5) multi-family rental housing projects developed by a nonprofit housing provider if the developer is receiving financial assistance through a public agency, so long as the multi-family rental housing project is an affordable housing project meeting the requirements of Santa Monica Municipal Code Section 9.04.02.030.025 and the project’s affordable housing obligations will be

6

secured by a regulatory agreement, memorandum of agreement, or recorded covenant with a public agency for a minimum period of fifty-five years; (6) re-occupancy of square footage in an existing building or structure if there is no change of use; (7) square footage used for outdoor dining in the public right of way; and (8) affordable housing units deed restricted to extremely low, very-low income, or low income households. If a development is exempt from the fee at initial construction, but later converts to a development subject to this Ordinance, the converted square footage will be deemed net new square footage and the parks and recreation fee shall be paid prior to final approval of a building permit or, if required by State law, before the date of final inspection or the issuance of a certificate of occupancy, whichever occurs first. 9.75.030 Definitions. For the purpose of this Chapter, the following terms shall be defined as follows: (a)

"City Projects" shall mean City public works projects and City

community facilities (e.g. libraries, public parking structures, recycling centers, and community centers), not including public/private partnerships. (b)

"Nexus Study" shall mean the Parks and Recreation

Development Impact Fee Nexus Study prepared by Economic & Planning Systems, Inc. dated August 2013.

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(c)

“Project” shall mean any development having a gross new or

additional floor area of one thousand square feet or more, or that changes an existing use to a different use that increases the demand on the parks and recreation system, or residential development of improved or unimproved land which adds dwelling units. Gross floor area for the purposes of this definition shall be the same as Section 9.04.02.030.315, or any successor legislation, but shall exclude parking area. (d)

“Parks and Recreation Development Impact Fee” shall

mean a fee paid to the City by an applicant pursuant to Section 9.75.040 of this Chapter in connection with approval of a project to contribute to the acquisition and development of open space, parkland, and recreation facilities to meet demand generated by new development in order to maintain current service levels consistent with the goals, objectives and policies of the City’s Open Space Element and Parks and Recreation Master Plan. 9.75.040 Parks and Recreation Mitigation Requirement. Except as provided in Section 9.75.050, the developer of a Project shall pay a Parks and Recreation Development Impact Fee in accordance with the following: (a)

Parks and Recreation Development Impact Fee. Fees shall

be computed as follows: 1.

For Single Family residential development projects that

result in the addition of a dwelling unit:

8

(A) 2.

$7,636 per single family dwelling unit.

For Multi-Family residential development projects that result

in the addition of a dwelling unit: (A)

$4,138 per studio/one-bedroom multi-family dwelling

unit. (B)

$6,665 per multi-family dwelling unit with two or more

bedrooms. 3.

All non-residential projects shall pay the following based on

the gross square footage of the proposed project:

4.

(A)

Office: $2.31 per square foot.

(B)

Medical Office: $1.27 per square foot.

(C)

Retail: $1.49 per square foot.

(E)

Lodging: $3.11 per square foot.

(F)

Industrial: $1.30 per square foot.

The land use categories identified in subsections (1) – (3),

above, shall have the following meanings: (A)

Single Family Residential shall include Single Family.

(B)

Multi-Family Residential shall include: congregate

care–non senior, congregate care–seniors, and multi–family. (C)

Office

shall

include:

creative

institutions and office, and general office.

9

office,

financial

(D)

Medical office shall include: full service hospitals and

medical offices, including medical clinics, and offices for medical professionals. (E)

Retail shall include: animal kennels and veterinary

hospitals, auto repair, car wash, non-residential adult care facilities, retail and wholesale construction-related materials, nurseries and garden centers, entertainment and recreational facilities, gas stations, and art galleries, nightclubs and bars, Personal services, Post-secondary educational facility, private studio, restaurants – fast food and cafes, restaurants – sit down, retail durable goods, retail food and markets, retail mixed, and retail non-food. (F)

Lodging shall include: hotels, motels and other

overnight accommodations. (G)

Industrial shall include: surface or structured auto

inventory storage, heavy industrial and manufacturing, light industrial, utilities, warehouse and self-storage, and wholesale distribution and shipping. 5.

For mixed residential/nonresidential development, the sum of

the fee required for each component as set forth above in subdivisions (a)(2) and (a)(3) of this subsection. 6.

The amount of legally permitted square footage to be

demolished in an existing building or structure as a part of a Project

10

shall be a credit in the calculation of the Parks and Recreation Development Impact Fee. (b)

Timing of Fee Payment.

1.

The Project applicant shall pay fees according to the

schedule of fees in place on the date the fees are paid, except that the applicant for a vesting tentative map for a development project shall pay the fees in effect on the date the application for the vesting tentative map is deemed complete, as automatically adjusted. 2.

No building permit for any Project shall be issued unless the

fees have been paid, except for residential uses where state law requires payment before final inspection or the issuance of certificate of occupancy, whichever comes first. If state law applies, a contract to pay the fees shall be executed with the City, in which case, no final inspection shall be approved until the fees have been paid.

If a residential

development project contains more than one dwelling unit and is approved for development in phases, the developer shall pay the fees in installments based on the phasing of the residential development project. Each fee installment shall be paid at the time when the first dwelling unit within each phase of development has received its final inspection. 3.

For all Projects subject to this Chapter, the City may require

the payment of fees at an earlier time if the fees will be collected for public improvements or facilities for which an account has been established and

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funds appropriated and for which the City has a proposed construction schedule or plan prior to final inspection, or the fees are to reimburse the City for expenditures previously made. 9.75.050 Fee Adjustments and Waivers. (a)

A developer of any Project subject to the fee described in

Section 9.75.040 may request that the requirements of this Chapter be adjusted or waived based on a showing that applying the requirements of this Chapter would effectuate an unconstitutional taking of property or otherwise have an unconstitutional application to the property. (b) To receive an adjustment or waiver, the applicant must submit an application to the City Manager or her/his designee, at the time the applicant files a discretionary project application, or if no such application is required, a building permit application. The applicant shall bear the burden of presenting substantial evidence to support the request and set forth in detail the factual and legal basis for the claim, including all supporting technical documentation. (c)

The City Manager or her/his designee. shall render a written

decision within ninety days after a complete application is filed. The City Manager’s or designee’s decision may be appealed to the City Council if such appeal is filed within fourteen consecutive calendar days from the date that the decision is made in the manner provided in Part 9.04.20.24, Sections 9.04.20.24.010 through 9.04.20.24.050 of this Code or any successor thereto.

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(d)

If the City Manager or her/his designee, or City Council on

appeal, upon legal advice provided by or at the behest of the City Attorney, determines that applying the requirements of this Chapter would effectuate an unconstitutional taking of property or otherwise have an unconstitutional application to the property, the affordable housing fee requirements shall be adjusted or waived to reduce the obligations under this Chapter to the extent necessary to avoid an unconstitutional result. If the City Manager or her/his designee, or City Council on appeal, determines that no violation of the United States or California Constitutions would occur through application of this Chapter, the requirements of this Chapter remain fully applicable (e)

If an adjustment or waiver is granted, any change in use from

the approved project shall invalidate the adjustment or waiver. 9.75.060 Fee Revenue Account. Pursuant to Government Code Section 66006, the Parks and Recreation Development Impact Fee Reserve Account is hereby established. The fees paid to the City pursuant to the provisions of this Chapter shall be deposited into the Parks and Recreation Development Impact Fee Reserve Account and used solely for the purpose described in this Chapter. All monies deposited into the Reserve Account shall be held separate and apart from other City funds. All interest or other earnings on the unexpended balance in the Reserve Account shall be credited to the Reserve Account.

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9.75.070 Distribution of Parks and Recreation Development Impact Funds. All monies and interest earnings in the Parks and Recreation Development Impact Fee Reserve Account shall be expended solely on the development, design, construction, and administration costs related to the acquisition of land for parks, the improvement of existing and new parkland, and the development of new parks and recreation facilities needed to accommodate additional occupants of new development projects. Such expenditures may include, but are not necessarily limited to the following: (a)

Reimbursement for all direct and indirect costs incurred by

the City to construct parks and recreation improvements pursuant to this Chapter, including but not limited to, the cost of land acquisition, planning, legal

consultation,

engineering,

design,

construction,

construction

management, materials and equipment. (b)

Costs of issuance or debt service associated with bonds,

notes or other security instruments issued to fund parks and recreation improvements as identified. (c)

Reimbursement for administrative costs incurred by the City

in establishing or maintaining the Parks and Recreation Development Impact Fee Reserve Account required by this Chapter, including but not limited to the cost of studies to establish the requisite nexus between the fee amount and the use of fee proceeds and yearly accounting and reports.

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No portion of the Parks and Recreation Impact Fee may be diverted to other purposes by way of loan or otherwise. 9.75.080 Periodic Review and Adjustment of Parks and Recreation Development Impact Fees. To account for inflation in construction costs, the fee imposed by this ordinance shall be adjusted automatically on July 1 of each fiscal year, beginning on July 1, 2015, by a percentage equal to the appropriate Construction Cost Index as published by Engineering News Record, or its successor publication, for the preceding twelve (12) months. 9.75.090 Fee Refunds. (a)

If a Parks and Recreation development impact fee is

collected on a Project and the permit for that Project later expires, is vacated or voided before commencement of construction, the developer shall, upon request, be entitled to a refund of the unexpended Parks and Recreation development impact fee paid, less a portion of the fee sufficient to cover costs of collection, accounting for and administration of the fee paid. Any request for a refund shall be submitted in writing to the Planning and Community Development Director within one year of the date that the permit expires or is vacated or voided. Failure to submit a timely request for refund shall constitute a waiver of any right to a refund. (b)

Fees collected pursuant to this Chapter which remain

unexpended or uncommitted for five or more fiscal years after deposit into

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the Parks and Recreation Development Impact Fee Reserve Account shall be accounted for or may be refunded as provided by state law. 9.75.100 Fee revision by resolution. The amount of the Parks and Recreation development impact fees and the formula for the automatic annual adjustment established by this Chapter may be reviewed and revised periodically by resolution of the City Council. This Chapter shall be considered enabling and directive in this regard. 9.75.110 Regulations. The City Manager, or her/his designee, is authorized to adopt written administrative regulations or guidelines that are consistent with and that further the terms and requirements set forth within this Chapter. SECTION 2. This Ordinance shall apply to all development applications meeting the criteria for applicability as defined herein determined complete after the effective date of this Ordinance. SECTION 3. The Council finds that the adoption of this ordinance is not a project pursuant to CEQA Guideline section 15378(b)(4), which excludes from the definition of Project "the creation of government funding mechanisms or other government fiscal activities, which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment." Alternatively, the proposed ordinance is exempt from the provisions of the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3) in that it can be seen with certainty

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that the proposed ordinance does not have the potential to significantly impact the environment, since the proposed ordinance amendment is a fee that will be levied on projects that will be evaluated in compliance with CEQA on their own merits. SECTION 4. Any provision of the Santa Monica Municipal Code or appendices thereto inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to that extent necessary to effect the provisions of this Ordinance. SECTION 5. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed this Ordinance and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any portion of the ordinance would be subsequently declared invalid or unconstitutional. SECTION 6. The Mayor shall sign and the City Clerk shall attest to the passage of this Ordinance. The City Clerk shall cause the same to be published once in the official newspaper within 15 days after its adoption. effective 30 days from its adoption. APPROVED AS TO FORM:

_________________________ MARSHA JONES MOUTRIE City Attorney

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This Ordinance shall become

City Council Report City Council Meeting: September 23, 2014 Agenda Item: 8-A To:

Mayor and City Council

From:

Marsha Jones Moutrie, City Attorney

Subject:

Interim Update On Enforcement Of City’s Tenant Harassment Ordinance, Status Of Law, And Proposed Change In Staffing

Recommended Action Staff recommends that the City Council review and comment on the administration and enforcement of the City’s Tenant Harassment Ordinance (“THO”) and proposed future actions to educate the public, improve investigations and increase compliance with the law and direct staff to return with proposals related to buyout and relocation offers and additional staffing. Executive Summary This is an interim update on the THO and how the law is administered and enforced by City staff. It addresses some of the specific issues that were raised and discussed at the Council meeting on July 22, 2014, modifications to its investigative protocols in housing cases, and the potential for adding staff resources to assist with such investigations. Background At its meeting on July 22, 2014, Council heard testimony and discussed various issues related to the THO and its enforcement. Council directed staff to address specified areas including possible changes to the law; and to return promptly with an update on these subjects and potential areas for further action. Following the July 22 meeting, members of the Consumer Protection/Fair Housing Unit of the City Attorney's Office conducted further legal research and met separately with representatives of Legal Aid, Rent Control staff, and Rent Control administration to discuss the various issues raised by Council. Legal staff also reviewed and assessed the Unit's work on particular cases described at the July 22 meeting.

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Discussion Handling of Housing complaints Staff's review indicates that at least some of the information provided to Council about particular landlord-tenant disputes and how they were handled by the City Attorney’s Office may have been incomplete or partially inaccurate. And, staff believes that each complaint was handled appropriately based on the law and the available evidence. Nevertheless, the feedback was very useful. It has helped staff identify several ways to improve its work. Specifically, staff has: •

Assessed the adequacy of the Unit's resources; Increased regular meetings between investigative and attorney staff to review all open housing cases and coordinate deadlines and handling of cases;

•

Established protocols for updating all parties of the status of open cases on a regular basis; and

•

Committed to intervening earlier when appropriate in housing cases, especially those with more egregious violations, to help avert and preempt potential evictions and other actions that may result from unlawful behavior by property owners.

Additionally, staff plans to: •

Evaluate new ways to obtain needed evidence in cases where tenants are resistant to making official complaints but it is clear that unlawful behavior by the owner is occurring;

•

Utilize software resources to better manage and monitor open cases on a regular basis; and

•

Continue evaluating any potential for strengthening local laws.

Staff’s experience indicates that the majority of landlords in Santa Monica want to comply with the law. Often housing complaints involve bad blood on both sides, and a lack of communication or understanding of the law – but not true bad faith by the owner.

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In such cases, staff will redouble its efforts to de-polarize the situation, work with the parties to explain the law, and try to resolve the dispute amicably.

Specific legal issues Council identified several areas of landlord-tenant relations where questions have been raised about the adequacy of existing law. Staff's present thinking is as follows:

(1)

Entry into units and privacy rights

A common complaint from tenants is that landlords entered their units without legal justification, or entered legally but then used the opportunity to inspect unrelated areas of the unit to come up with lease violations. The law is fairly specific about the scenarios when an owner may enter a unit. They are limited to these: •

during an emergency;

•

to make necessary or agreed repairs, decorations, alterations, or improvements;

•

to provide necessary or agreed services;

•

to exhibit the unit to prospective or actual purchasers, mortgagees, tenants, workers, or contractors;

•

to make a pre-move-out inspection;

•

when the tenant has abandoned or surrendered the premises; or

•

under a court order.

Thus, an owner may not simply schedule an “inspection” of a unit, without a specific, valid, stated reason. State law gives two such examples of valid reasons: inspections for smoke detector maintenance and for waterbed safety. And, even when a landlord has the right to enter, the right is limited. Owners cannot expand such inspections to gather unrelated evidence against a tenant in a different part of the apartment. If they do, they may violate the tenant’s privacy rights and also abuse their right of access. These actions in turn violate both state law and two different sections of the THO. 3

Staff's current thinking is that the general legal standard in these existing laws is a more powerful tool than an enumeration of specified forms of unlawful entry or privacy violations. Staff plans to increase awareness of the entry and privacy laws through public education and to monitor the results of this effort. Staff will report back to Council on this effort and whether the results suggest that local law should be changed.

(2)

Rent payments

Staff has received many questions and some formal complaints about owners claiming not to have received rent from tenants. Often these cases have arisen when the owner had recently changed the form of rent payment. Under existing law staff can and does pursue legal action against owners who falsely claim not to have received rent, both under THO subsections (f) (influencing or attempting to influence a tenant to vacate a rental housing unit through fraud, intimidation or coercion) and (k) (refusing to acknowledge receipt of a tenant’s lawful rent payment). In cases where there is a genuine misunderstanding, or where tenants have in fact failed to pay their rent, staff works to educate the parties about their responsibilities under the law. Staff will also report back to Council on developments relating to this issue.

(3)

Buyout and relocation offers

It is legal for owners to offer tenants money in exchange for vacating their units. Such offers are illegal, however, when they are accompanied by threats or other harassing behavior designed to intimidate tenants or mislead them about their rights. This type of misconduct is fully covered by existing law under the THO, and staff has used the law to redress such violations.

Staff consulted with Rent Control staff on this issue. Rent Control staff recommends that Council change the law to require all tenant buyout offers to be simultaneously filed with the City, or the Board, similarly to how eviction notices are filed under current law. Such information could be useful to City Attorney staff in its investigation of some tenant harassment cases. Staff will return with proposals for this change. 4

(4)

The malice standard

There was some discussion at the July 22 Council meeting about the possibility of revising the state of mind standard needed for violations of the THO. Currently that standard is “malice,” which is defined in the law as “an intent to vex, annoy, harass or injure another person.” This standard is actually fairly broad. It does not require an intent to do serious harm. Any time an owner intentionally does something to cause distress in a tenant, that owner has the requisite malicious state of mind under the THO. This is also known as acting in bad faith. At present, staff does not believe that changing the required state of mind under the THO would have any effect on staff’s (or the public’s) ability to use the THO to redress wrongful behavior by property owners. Indeed, the malice standard was cited by the Court of Appeal as an important component of the law in upholding it against a constitutional challenge several years ago. Nonetheless, staff will continue its assessment of this issue.

Proposed staffing change Following the direction from Council, staff has assessed the demands of housing investigations and responding to the public’s need for information and assistance; and staff has reviewed its resources and procedures for handling housing cases. Staff believes there could be significant benefit from adding at least a part-time employee who would act as the City Attorney’s main liaison with the public on housing cases and who would assist with the initial investigation of housing questions and complaints. This would free up time and resources for the pursuit of larger investigations by other staff, among other benefits.

Staff anticipates bringing this request back to Council as a proposed mid-year budget adjustment.

Upcoming public education efforts In the coming months staff plans the following educational efforts to increase awareness of the rights and duties under the law: 5

•

Beginning a new series of regular columns in the Santa Monica Daily Press to inform the public about specific legal areas of interest, including the housing issues raised above;

•

Conducting a citywide public forum this fall to address residents’ questions and concerns about housing rights;

•

Compiling and disseminating locally an information sheet that encapsulates the most important housing rights laws; and

•

Continuing to utilize the publicity from existing cases and court results to educate the public and deter wrongdoing.

Financial Impacts & Budget Actions There is no immediate financial impact or budget action necessary. It is estimated that the cost to the City of the new half-time position would be less than $60,000. Staff will provide detailed information about cost as part of the mid-year budget adjustments.

Prepared by: Adam Radinsky, Head, Consumer Protection Unit

Approved:

Forwarded to Council:

Marsha Jones Moutrie City Attorney

Rod Gould City Manager

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