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HomeMy WebLinkAbout07.27.2020 SP Minutes @3:30MINUTES x„S�,� SPECIAL MEETING BUDGET STANDING COMMITTEE cAIIFOR�IA OF THE CITY OF SOUTH SAN FRANCISCO P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, California 94083 MONDAY, JULY 27, 2020 3:30 p.m. Teleconference via Zoom Housing Standing Committee conducted this meeting in accordance with California GovernorNewsom's Executive Orders N-25-20 and N-29-20 and COVID- 19 pandemic protocols. Call to Order. Roll Call. AGENDA REVIEW No changes REMOTE PUBLIC COMMENTS Remote Public Comments Received Time: 3:30 p.m. PRESENT: Councilmember Nicolas and Vice Mayor Addiego. Members of the public wishing to participate were encouraged to submit public comments in writing in advance of the meeting to all-cc@ssfnet 1:30 p.m. on Monday, July 27, 2020. The comments were distributed to the Committee Members, uploaded to the website for public viewing, and are part of the record. Assistant City Clerk Avila read into the record the following comment: Russell Lee, please revisit the budget and consider permanently reallocating funds from the police department. We rely on them too much for our feeling of safety that critical comment of them or moved for substantial policy change. Explore other options for safety and let's please have an open discussion about them. I've worked with you, the city council, directly and adjacently for the past three years. Your unresponsiveness and lack of will to further understand why there are asks to reduce police funding is making me lose hope in you as an institution, as politicians, and as individuals I personally know. Please reconsider. Vice Mayor Addiego instructed staff to follow up with Mr. Lee regarding his comment. MATTERS FOR CONSIDERATION 2. Motion to approve the Minutes for the meeting of May 18, 2020. MOTION - Councilmember Nicolas Second -Vice Mayor Addiego to approve the minutes from the meeting of May 18, 2020. The motion carried unanimously. 3. Report regarding proposed amendments to Development Impact Fees. (Janet Salisbury, Director of Finance) Heather Enders, Management Analyst II, presented the report regarding the proposed amendments to Development Impact Fees. She gave a brief overview of the proposed fee changes: • Repeal East of 101 Traffic Impact Fee and Bike and Ped Impact Fee • Replace with a new City -Wide Transportation Impact Fee • New Library Impact Fee • Update Childcare Impact Fee • Update Public Safety Impact Fees • New Parking In -Lieu Fee • Other Impact Fees not studied o Oyster Point Interchange o Sewer Impact Fee o E101 Sewer Impact Fee Management Analyst Enders stated that the City currently had a list of transportation improvement projects with costs estimated at $688,000,000 which include active South City project recommendations focusing on bicycle and pedestrian improvements, multimodal projects East of 101 project area and mobility 2020 projects for arterial improvements. The fund balance for the East of 101 Traffic Impact Fee was $24,250,000 at the end of Fiscal Year 2019- 2020. Of that, approximately $22,500,000 had been earmarked for projects in the next two years. Staff will bring back qualifying projects for Council direction to spend the remaining $1,750,000. The current fund balance for the Bicycle and Pedestrian Impact Fee was $63,538. Mobility 2020 currently included approximately $512,000,000 of unfunded projects. By approving the proposed citywide Transportation Impact Fee in place of the East of 101 Traffic and Bicycle and Pedestrian Impact Fees, the City would be in a better position to fund priority projects to ease traffic congestion and improve multi -modal transportation throughout the entire City. The new Transportation Impact Fee would supersede the existing East of 101 Traffic Impact Fee and the Bicycle and Pedestrian Impact Fee. The action by City Council would include legislation to rescind the existing fees. Money that has already been collected pursuant to the two existing fees would remain in the restricted funds that were created for those fees and eligible for the permissible uses for each fee. The new fee is broader but encompasses projects eligible for funding by the two existing fees. With this new fee, the City would continue to accumulate funds for the types of projects intended to be funded by the existing fees. Management Analyst Enders stated that the Library Fee was newly proposed and had not been previously studied. Matrix worked with City staff to calculate a library impact fee for new development to pay their proportionate share of replacing and rehabilitating library materials and facilities. The purpose of the newly proposed fee was to expand existing library branches and acquire additional space and collection items to continue providing the existing level of service to the community. The Library has detailed SPECIAL BUDGET STANDING COMMITTEE MEETING JULY 27, 2020 MINUTES PAGE 2 capital improvement plans that outline the utilization of the proposed fee revenue to ensure there was appropriate expansion of library facilities, including technology within the library, to meet community goals and objectives. The City would need additional library space and collection materials as its population grows. Management Analyst Enders advised that the Childcare Impact Fee was developed and implemented in 2001 to help mitigate the impact of new development upon the need for future childcare spaces. The City had annually increased these fees per the original resolution in 2001 and the municipal code in 2002 to help account for increased construction costs. The current fund balance for the Childcare Impact Fee was $5,527,397. Revenues raised by the fee were used to establish new childcare spaces. Methods for creating new childcare spaces included: building new facilities; expanding existing facilities; leasing existing commercial space or partnering with the School District; and establishing new family childcare homes and expanding spaces at existing family childcare homes. Management Analyst Enders stated that the Public Safety Impact Fee was adopted by City Council in 2012. At the time, the nexus study identified the need for new and expanded public safety facilities and equipment to support new development throughout the City. The current Fee included an annual inflation adjustment and a 2% administrative fee. The fund balance for the Public Safety Impact Fee was $1,404,106. While not fully encumbered, $103,275 of that had been earmarked this fiscal year for routine handgun replacements and another $1,000,000 was earmarked for the completion of the new Police Station. The Police and Fire Departments serve residents, employees, and visitors to South San Francisco. Future development would result in the need for an expanded public safety infrastructure. Vice Mayor Addiego inquired about Fire Department expenses for facility improvements that had not occurred yet. Management Analyst Enders advised that the Development Impact Fees were for future developments. She continued by stating some of the line items were for replacement of equipment that the department knew would not last and would need to be replaced. Management Analyst Enders stated Parking In -Lieu Fee included both impact fees and in -lieu fees, which the City had not typically used. Adoption of a Parking In -Lieu Fee would be a prudent step for the City to manage the downtown parking needs. Many cities on the Peninsula have such a fee. With this fee in place, when a developer seeks a parking reduction, they may choose to pay a fee per space, subject to City review. The fees collected can pay or be bonded against for myriad parking/traffic-related improvements, including, but not limited to, parking garage construction, traffic improvements, parking management system, etc. Moreover, this fee can be enticing to developers as well, in that they would not be required to construct the required number of parking spaces for their project at a cost that likely exceeds the in -lieu fee. The City could require other conditions in return, such as a reduced parking ratio or require that the developer allow a certain percentage of spaces be available to the general public to use during specific hours. Also, choosing a "soft spot" for this in -lieu fee would be key, in that, the City should not charge the full cost of construction for a space, but a slightly lower fee that would encourage the developer to choose to pay the in -lieu fee instead. The proposed fee would be set at a level to match approximately what it would cost to build parking spaces in a multilevel garage in South San Francisco. The City recently conducted an internal analysis to review the cost of constructing parking spaces and based upon that analysis, the average cost per parking space was calculated at $79,910. Matrix Consulting Group also conducted a surveyed of other cities in the region, which revealed that the average in -lieu fee was approximately $56,216. Accordingly, staff is recommending that the in -lieu fee be set at approximately 60% of the average cost for South San Francisco, i.e., approximately $50,000 per parking space. This amount is consistent with the SPECIAL BUDGET STANDING COMMITTEE MEETING JULY 27, 2020 MINUTES PAGE 3 jurisdictional average and should promote use of the in -lieu fee by project developers. The fee revenue could be used at the City's discretion either to help fund the construction of public parking in the Downtown or City of South San Francisco could be used at the City's discretion either to help fund the construction of public parking in the Downtown or to fund other projects or services to address parking needs in the Downtown. Councilmember Nicolas asked whether the developer would be required to maintain a minimum amount of parking spaces. Management Analyst Enders advised that the developer would either need to build into that development the required number of parking spaces or pay the in -lieu fee. She added that in certain cases, they would be able to do a combination of both. Alex Greenwood, Economic Community and Development Director, clarified that if the zoning of a project required 100 parking spaces the developer just doesn't get to indiscriminately say they just want to build 50 parking spaces. The developer would need to present to the City and make their case that they could adequately park their project with something less than what is required by the zoning. That would then need to be passed by Staff and reviewed and approved by the Planning Commission. The in -lieu fee would allow the City to be compensated for the spaces. Councilmember Nicolas inquired whether the City would only charge $50,000 for the in -lieu fee if construction costs exceed $50,000 to build the parking space. Mike Futrell, City Manager stated the City adopted a policy informally to revisit the fees every three years. Councilmember Nicolas asked whether the City could add a CPI or inflation to the in -lieu fee so the City wouldn't have to wait to revise the fees every three years. City Attorney Woodruff anticipated that setting the in -lieu fee amount, the City could apply a standard inflationary adjuster but the three year cycle would be a more substantial review. Nell Selander, Economic and Community Development Deputy Director, stated that based on the results of the Draft Development Impact Fee Report, staff engaged the City's on-call economic development consultant, Century Urban, to perform a feasibility analysis on two development prototypes - research and development (R&D) and multi -family, rental housing. The purpose of conducting a feasibility analysis was to roughly gauge whether or not the new, increased fees preclude new projects by increasing the cost of development beyond what the market can bear. What this analysis determined was that while higher fees - such as those recommended by staff - can likely be accommodated by a prototypical R&D development, they may make some residential projects more infeasible. Deputy Director Selander advised that Century Urban studied a 150,000 square foot prototype R&D development, using pre-COVID construction costs and rents. Although staff believed economic conditions to be quite different now than they were prior to the pandemic, there was no reasonable way to assess what the current market conditions do to project feasibility. Staff believed it was reasonable to continue with the pre-COVID assumptions, as R&D development activity in South San Francisco has not fallen off since the start of the pandemic. A common metric for determining a project's feasibility was calculating its stabilized return on cost. Return on cost is calculated by estimating the annual pro -forma net operating income and dividing it by the estimated total project development cost. The return on cost a project targets is dictated by the project's perceived risks including the uncertainty of project costs, future rents, duration of construction, and economic conditions upon completion. Based on research into typical returns on cost for active R&D projects in South San Francisco, Century Urban determined the prototype R&D development would likely be feasible if its return on cost fell between 6.5% and 7.0%. Assuming the City's existing fees, the prototype's return on cost is 7.14%. This was above the feasible range, meaning this development would be very likely to proceed. When the City's fees are adjusted to the levels recommended by staff, the return on cost decreases to 6.77%, still well within the range of SPECIAL BUDGET STANDING COMMITTEE MEETING JULY 27, 2020 MINUTES PAGE 4 feasibility. What this indicates is that the R&D development pipeline is unlikely to be greatly impacted by the increase in fees. City Manager Futrell stated he met with ECD staff and asked if they could project the next five years for the developments in the pipeline to give Council a ballpark on how much it would raise. He concluded it might help to determine a policy decision on how much money get placed in affordable housing versus traffic. Deputy Director Selander gave a ballpark estimate on office R&D for building permits would generate around $86,000,000. At the current levels, $18,000,000 for traffic and $45,000,000 for housing. At the recommended levels, $87,000,000 for traffic and $45,000,000 for housing. City Manager Futrell advised for residential, staff was proposing the opportunity for affordable housing a developer could come to Council and Council would have the power to waive the fees for affordable housing. He added that the school fee could not be waived. Vice Mayor Addiego inquired why staff couldn't make further modifications to hotel numbers. He didn't anticipate an immediate impact due to the economy but would rather be prepared in the event of a change. Vice Mayor Addiego added hotels could sometimes be a burden to the Police Department with cities such as South San Francisco between the parking lot break-ins and domestic violence occurring in the rooms. Management Analyst Enders advised that the Shape SSF General Plan was still in progress and believed staff would need to revisit all the fees once the General Plan had been finalized and approved by Council. Deputy Director Selander added staff could come back to Council or Budget Standing Committee with more information on hotels and take a more detailed look at the hotel fees during and prior to COVID-19. City Manager Futrell stated the next step would be to come back to the Budget Standing Committee or have a study session for Council on August 12, 2020 at 6:00 p.m. prior to the regular meeting. Vice Mayor Addiego found having staff trying to present the report via the Zoom platform challenging with all of the technical difficulties and suggested time for him and Councilmember Nicolas to go over the materials after the meeting. He recommended additional time to go over the materials before he felt comfortable recommending anything to the full Council. City Manager Futrell requested feedback from the Budget Standing Committee on R&D fees being heavy on traffic and keeping the affordable housing fees the same. He also requested feedback on the residential going from $27,000 a door to $31,000 a door and asked whether the Budget Standing Committee was comfortable with that. Vice Mayor Addiego stated there were time when he thought transportation was something that could be solved in a big way especially with technology. He did not believe South San Francisco had the capacity to solve the housing dilemma and believed it should be a discussion the entire Council should have. Vice Mayor Addiego stated he was more inclined to place the big money where it could make an immediate impact which would be transportation. 4. Report regarding proposed amendments to the Master Fee Schedule for Fiscal Year 2020-2021 (Heather Enders, Management Analyst II) SPECIAL BUDGET STANDING COMMITTEE MEETING JULY 27, 2020 MINUTES PAGE 5 Management Analyst Enders presented the report to the Budget Standing Committee. She stated the last time the City of South San Francisco underwent a comprehensive Cost Allocation Plan and User Fee Study was in Fiscal Year ("FY") 2016-17. Under best business practices, the fee study should be re- examined and updated every three to five years, with the fees related to providing these services "right - sized" with current information. On August 28, 2019, Council adopted a resolution approving a contract with Matrix Consulting Group to conduct a comprehensive user fee analysis with the goal of identifying the actual cost of providing fee -related City services and understanding recovery levels for each fee. In order to determine the full cost of each user fee, extensive data was collected utilizing the FY 2019-20 Budget as well as staff time estimates and service volume data. Below is a summary of the recommended fees by Department: City Clerk: It is important to note that the majority of these fees are set by the State. Total number of proposed fees: 13 — Number of fees with 100% cost recovery: 9 — Number of fees based on other fee calculation: 4 City Manager: Total number of proposed fees: 1 — Number of fees with 100% cost recovery: 1 Finance: Total number of proposed fees: 11 — Number of fees with 100% cost recovery: 11 Library Department: Total number of proposed fees: 27 — Number of fees with 100% cost recovery: 11 — Number of fees less than 100% cost recovery: 5 — Number of fees based on other fee calculation: 11 The industry standard for cost recovery for a Library department is on the lower end at 20-40% levels. Staff requested guidance from the Budget Standing Committee related to charging of late fines. The City of South San Francisco Library is part of the Peninsula Library System, which currently has a policy to charge users for overdue materials. The Peninsula Library System fees are set system -wide. However, each library within the system can elect whether or not to charge the fees based upon the desire of the community in which it operates. The San Mateo County Library System, for example, no longer charges late fees for overdue materials. In FY 2019-20, the department collected an estimated $10,000 in late fees from constituents. While attempting to quantify staff effort in the collection of late fees is imperfect, it is the department's position that the cost of staff time to administer and collect these fines outpace the actual collections. Moreover, studies have shown that late fines can be a significant barrier to library access and drive borrowers away, particularly among individuals with low or fixed incomes. Police Department: Total number of proposed fees: 44 — Number of fees with 100% cost recovery: 38 — Number of fees less than 100% cost recovery: 4 SPECIAL BUDGET STANDING COMMITTEE MEETING JULY 27, 2020 MINUTES PAGE 6 — Number of fees based on other fee calculation: 2 Cab company driver permits were previously discounted in an effort to discourage cab operators from driving without a valid permit. Because of the popularity of ride -share companies such as Uber and Lyfl, which are overseen by the State, the City was seeing less and less permit applications for cab driver permits. Technically, if a cab company was picking up in South San Francisco, they need to hold a permit with the City. Staff recommends 100% cost recovery for this particular fee to right -size a previous discount aimed at incentivizing compliance. With so few applications to process, the need for a discount was no longer needed. Vice Mayor Addiego asked whether the cab company permit was for each cab or each driver and the cost. Management Analyst Enders confirmed the permit was required for each driver at a cost of $243. Vice Mayor Addiego suggested lowering the fee. Sergeant Rudis advised that the $243 was not an annual fee and was good for two years. He stated there were currently less than 12 active cab company permits. Fire Department: Total number of proposed fees: 167 — Number of fees with 100% cost recovery: 149 — Number of fees less than 100% cost recovery: 5 — Number of fees based on other fee calculation: 13 Staff recommends that the City continue to under -recover for Ambulance Transport. The service is a pillar of the community and responds to over 5,100 calls per year. Current cost recovery is 66% and staff recommends a modest increase to recover 81 %. Staff recommends that the Budget Standing Committee recommend to City Council 100% cost recovery for all other Fire services, which is consistent with the industry standard. It is important to note that even if fees are set at a higher cost recovery, the City's revenue received were based upon the payments made by insurance or MediCal/Medicare fees and reimbursement amounts. Economic and Community Development - Planning: Total number of proposed fees: 59 — Number of fees with 100% cost recovery: 55 — Number of fees less than 100% cost recovery: 4 As part of the Study, it was identified that certain services provided by Planning had a greater than 100% cost recovery while certain services were being under recovered. Economic and Community Development - Housing: Total number of proposed fees: 20 — Number of fees with 100% cost recovery: 4 — Number of fees less than 100% cost recovery: 16 All of the proposed Housing Division Fees were new and designed to recover the cost of processing development applications including affordable housing. Staff's recommendation was to start with 50% cost recovery across the board, with the exception of certain real estate transactions which should be set at 100% cost recovery where the City facilitates the transaction. Economic and Community Development - Building: • Total number of proposed fees: 72 SPECIAL BUDGET STANDING COMMITTEE MEETING JULY 27, 2020 MINUTES PAGE 7 — Number of fees with 100% cost recovery: 66 — Number of fees based on other fee calculation: 6 The Study showed that the current fee schedules in place based upon the fee methodology calculation was resulting in over -cost recovery for certain fees within the Building Division. As a result, the City must right -size the fees collected for services to ensure the City is recovering the industry standard of somewhere between 80% and 100%. It is important to note that the lower absolute dollar amount required now for some of the Building permits was because of operational streamlining that have taken place that necessitates lower staff time to process those permits than in prior years. Staff recommends that the Budget Standing Committee recommend 100% cost recovery for the Building Division to City Council. Public Works - Engineering: Total number of proposed fees: 98 — Number of fees with 100% cost recovery: 88 — Number of fees less than 100% cost recovery: 7 — Number of fees based on other fee calculation: 3 The Engineering Division is recommending 100% cost recovery for the majority of its fees. Exceptions include fees related to sewer lateral permits and the associated fees for video reviews of sewer laterals. Engineering was previously under -recovering for many of the services it provides. The methodology for Engineering's fees had changed slightly as new staff had come on board and began to make process improvements. The Engineering Division previously achieved recovery by accepting deposits from developers and then drawing down from those accounts as the Engineers worked on the projects. In an effort to make the fees more predictable to the end user and to move to a simpler -to -administer flat -based fee, the fees appear to have jumped significantly higher. Much of the optics of this is just right -sizing a history of under -cost recovering from deposit -based accounts. Staff recommends a move to flat -based fees and most fees at 100% cost recovery. Public Works - Water Quality Control: Total number of proposed fees: 28 — Number of fees with 100% cost recovery: 10 — Number of fees less than 100% cost recovery: 3 — Number of fees based on other fee calculation: 15 Fee No. 11.11 (Stormwater Inspection Fee). This was a new fee and some anticipated pushback from the businesses in the service area. This fee would apply to the approximately 200 businesses per year that the Environmental Compliance Program inspects as part of the City's requirements under Section CA of the Municipal Regional Stormwater Permit (MRP). This fee would help to offset the large deficit between Stormwater Program funding and costs to meet all of the MRP requirements. As it is a new fee, staff was recommending a phased approach to implementation. The industry standard cost recovery for a water quality control treatment service was typically between 80-100%. Parks and Recreation: Total number of proposed fees: 165 — Number of fees with 100% cost recovery: 13 — Number of fees less than 100% cost recovery: 136 — Number of fees based on other fee calculation: 16 SPECIAL BUDGET STANDING COMMITTEE MEETING JULY 27, 2020 MINUTES PAGE 8 Parks and Recreation class fees are subject to what the market can bear and the offerings vary by season. Therefore, the fees are usually included in seasonal activity guides to reflect the specific price and offerings for each season. A modest 3% increase across the board was applied over last year's fees in alignment with the 3% increase made to most fees citywide. The recommendation is widely based on the rise of labor costs and parallels the average percentage increase in employee compensation. The industry standard cost recovery for a Parks and Recreation department was between 20-50%. ADJOURNMENT Due to technical difficulties and also to give the Budget Standing Committee additional time to study the material, Vice Mayor Addiego adjourned the meeting at 5:13 p.m. for a date uncertain. Submitted by: Gabriel Ndrigu,beputy City Clerk City of South San Francisco Approved by: 9 6 Mark Addiego, Mayor City of South San Francisco Approved by the Budget Standing Committee: \ / I-� / 2-02� SPECIAL BUDGET STANDING COMMITTEE MEETING JULY 27, 2020 MINUTES PAGE 9